BHAGWANJI GADA, BHIWANDI v. ITO CEN THANE, MUMBAI

ITA 8434/MUM/2011 | 2003-2004
Pronouncement Date: 28-04-2015 | Result: Allowed

Appeal Details

RSA Number 843419914 RSA 2011
Assessee PAN AAWPG6112B
Bench Mumbai
Appeal Number ITA 8434/MUM/2011
Duration Of Justice 3 year(s) 4 month(s) 16 day(s)
Appellant BHAGWANJI GADA, BHIWANDI
Respondent ITO CEN THANE, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-04-2015
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 28-04-2015
Date Of Final Hearing 28-04-2015
Next Hearing Date 28-04-2015
Assessment Year 2003-2004
Appeal Filed On 12-12-2011
Judgment Text
B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH MUMBAI BEFORE SHRI G.S. PANNU ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA JUDICIAL MEMBER ./ I.T.A. NO.8434 /MUM/2011 ( / ASSESSMENT YEAR : 2003-2004 ./ I.T.A. NO.8435 /MUM/2011 ( / ASSESSMENT YEAR : 2005-2006 BHAGWANJI GADA PROP. BHAGWAN TEXTILES 10/A-1 FLAT NO. 501/502 GOPAL NAGAR KALYAN BIWANDI ROAD BHIWANDI. / VS. THE INCOME TAX OFFICER (CENTRAL) 2 ND FLOOR PAWAR INDUSTRIAL ESTATE EDULJI ROAD CHARAI THANE. ./ PAN : AAWPG6112B ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY BHOOMICA VORA R E SPONDENT BY : SHRI S.J. SINGH CIT - D R / DATE OF HEARING : 28-04-2015 / DATE OF PRONOUNCEMENT : 28-04-2015 [ !' / O R D E R PER G.S. PANNU A.M . : THE CAPTIONED TWO APPEALS RELATE TO THE SAME ASSESE E INVOLVING A COMMON ISSUE THEREFORE THEY HAVE BEEN CLUBBED AND HEARD TOGETHER FOR THE SAKE OF CONVENIENCE AND BREVITY. THE CAPTIONED APPE ALS ARE DIRECTED AGAINST TWO SEPARATE BUT SIMILARLY WORDED ORDERS OF THE LD. CIT(A) DATED 29-7-2011 WHICH IN TURN HAVE ARISEN FROM TWO ORDERS PASSED BY THE A.O. UNDER SECTION 153A READ WITH SECTION 143(3) OF THE INCOME TAX ACT 1961 DATED 30-12-2009 PERTAINING TO ASSESSMENT YEAR 2003-04 AND 2005-06. ITA 8434 & 8435/M/11 2 2. AS THE GROUNDS OF APPEAL SHOW IN BOTH THESE YEAR S A COMMON GRIEVANCE OF THE ASSESSEE IS THAT THE INCOME TAX AU THORITIES HAVE ERRED IN MAKING ADDITION OF RS. 3 84 696/- AND RS. 10 80 194 /- FOR ASSESSMENT YEARS 2003-04 AND 2005-06 RESPECTIVELY ON ACCOUNT OF INFL ATED LABOUR CHARGES. 3. IN BRIEF THE RELEVANT FACTS ARE THAT THE ASSESS EE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE O F GREY CLOTH THROUGH HIS PROPRIETARY CONCERN M/S BHAGWAN TEXTILES. A SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE ACT WAS CARRIED OUT IN THIS CASE ON 12-7-2007. DURING THE COURSE OF SEARCH CERTAIN INCRIMINATING DOCUMENTS/M ATERIAL WAS FOUND AND STATEMENTS WERE ALSO RECORDED. IN THE COURSE OF ASS ESSMENT PROCEEDINGS CARRIED OUT IN TERMS OF SECTION 153A READ WITH SECT ION 143(3) OF THE ACT THE A.O. CONCLUDED THAT THE PAYMENT OF LABOUR CHARGES R ECORDED BY THE ASSESSEE WAS MORE THAN THE ACTUAL RATE OF PAYMENT OF LABOUR CHARGES AND THEREFORE IT WAS INFERRED THAT THE ASSESSEE WAS INFLATING THE LA BOUR CHARGES. FOR A.Y. 2003-04 SUCH ADDITION WAS MADE OF RS. 3 84 696/- AN D IN A.Y. 2005-06 AN ADDITION OF RS. 10 80 194/- HAS BEEN MADE WHICH ST AND CONFIRMED BY THE LD. CIT(A). 4. AT THE TIME OF HEARING THE LD. REPRESENTATIVE O F THE ASSESSEE SUBMITTED THAT SIMILAR ADDITION ON ACCOUNT OF ALLEGED INFLATE D LABOUR CHARGES WAS MADE BY THE ASSESSING AUTHORITY IN OTHER GROUP CONCERN N AMELY B K TEX CORPORATION FOR ASSESSMENT YEARS 2004-05 & 2005-06 WHICH CAME UP BEFORE THE TRIBUNAL AND VIDE ITA NO. 371 & 370/MUM/2011 DA TED 29-7-2011 THE MATTER WAS RESTORED BACK TO THE FILE OF THE LD. CIT (A) FOR ADJUDICATION AFRESH. IN THIS CONTEXT THE FOLLOWING DISCUSSION IN THE OR DERS OF THE TRIBUNAL DATED 29-7-2011 (SUPRA) IS RELEVANT:- WE HAVE NOTED THAT EVEN THOUGH THE CIT(A) HAS CATE GORICALLY HELD THAT ASSESSEE'S CLAIM FOR LABOUR CHARGES PAYMENT IS BOGU S INASMUCH AS THE ASSESSEE WAS INVOLVED IN A SYSTEMATIC INFLATION OF EXPENSES BY USING BOGUS BANK ACCOUNTS IN THE NAME OF CERTAIN PERSONS EVEN AS THESE ACCOUNTS WERE ACTUALLY USED AND OPERATED BY THE ASS ESSEE HIMSELF THE ITA 8434 & 8435/M/11 3 ASSESSEE'S LIMITED GRIEVANCE BEFORE US IS ON THE QU ANTUM OF DISALLOWANCE AND THE QUANTITIES OF PRODUCTION AS A LSO RATE AT WHICH INFLATION OF EXPENSE IS ESTIMATED TO HAVE BEEN DONE ADOPTED FOR THE COMPUTATION OF DISALLOWANCE. LEARNED COUNSEL HAS SI GHTED COPIES OF STOCK REGISTERS WHICH IF ADOPTED FOR BASIS OF COMP UTATION LEAD TO DIFFERENT PRODUCTION FIGURES THAN THE PRODUCTION FI GURES ADOPTED IN THE TAX AUDIT REPORT. LEARNED COUNSEL HAS ALSO SUBMITTE D THAT THE ACTUAL RATE OF PAYMENT OF LABOUR CHARGES IS NOT RS 6.50 PE R METER AS ADOPTED BY THE ASSESSING OFFICER BUT MUCH LESS THAN THAT. W HEN HOWEVER WE ASKED HIM TO IDENTIFY THE BILLS OR EVIDENCES WHICH SUBSTANTIATE THE FACTUAL CONTENTIONS EMBEDDED IN HIS ARGUMENTS TO TH IS EFFECT LEARNED COUNSEL COULD NOT DO THE SAME. IT WAS ALSO POINTED OUT TO THE LEARNED COUNSEL THAT AS NOTED BY THE ASSESSING OFFICER ST OCK RECORDS WERE NOT PRODUCED BEFORE HIM AND THIS FACTUAL OBSERVATION O F THE ASSESSING OFFICER HAS NEITHER BEEN CHALLENGED IN APPEAL BEFOR E THE CIT(A) NOR CONTROVERTED EVEN IN THE STATEMENT OF FACTS ON RECO RD. THE STATEMENT OF THE LEARNED COUNSEL REGARDING AVAILABILITY OF STOCK RECORDS BEFORE THE ASSESSING OFFICER IS THUS NOT BORNE OUT OF THE MATE RIAL ON RECORD AND THEREFORE WE CANNOT PROCEED ON THE BASIS THAT THE STOCK STATEMENTS WERE INDEED PRODUCED BEFORE THE ASSESSING OFFICER. AS THERE WAS NO CONTEMPORANEOUS RECORD OF QUANTITIES WE NEED NOT B E GUIDED BY THE STOCK REGISTERS WHICH WERE NOT AVAILABLE AT THAT PO INT OF TIME. WE MUST THEREFORE UPHOLD THE ACTION OF THE AUTHORITIES IN P RINCIPLE. HAVING SAID THAT WE MUST HOWEVER POINT OUT THAT WHAT IS TO B E DISALLOWED IS THE LABOUR CHARGES PAID IN EXCESS OF RS 3 PER METER - A S IS THE STAND TAKEN BY THE ASSESSING OFFICER HIMSELF AND THEREFORE TH E RIGHT COMPUTATION OF DISALLOWANCE WILL BE BY ADOPTING THE SAID FIGURE OF LABOUR CHARGES RATE IN THE ACTUAL BILL OF LABOUR CHARGES RECEIVED BY THE ASSESSEE. TO THAT EXTENT THE ORDER OF THE CIT(A) REQUIRES TO BE MODIFIED. TO ENABLE THIS COMPUTATION THE ASSESSEE HAS TO FURNISH DETAI LS OF ALL THE LABOUR BILLS ACCOUNTED FOR IN A PARTICULAR YEAR AND PRODU CE THE SAME FOR VERIFICATION AND THE LABOUR CHARGES ALLOWABLE WILL HAVE TO BE COMPUTED BY ADOPTING RS 3 PER METER IN RESPECT OF THE QUANTI TIES FOR WHICH THE BILLS ARE RAISED. IN CASE THE ASSESSEE IS UNABLE TO DO SO OR TO PRODUCE ANY OTHER SOUND BASIS ON WHICH COMPUTATIONS OF PROD UCTION QUANTITIES CAN BE DONE THE CIT(A) WILL BE AT LIBERTY TO ADOPT THE PRODUCTION FIGURES ON THE BASIS OF TAX AUDIT REPORT - SUBJECT TO CORRE CTION OF MISTAKES AS POINTED OUT BY THE ASSESSEE AND COMPUTE THE ADMISS IBLE LABOUR CHARGES AT RS. 3 PER METER MULTIPLIED TO THE QUANTI TIES SO WORKED OUT. WE MAY ALSO MENTION THAT LEARNED COUNSEL FOR THE AS SESSEE URGED US TO MAKE ADJUSTMENT FOR INFLATION IN THE SUBSEQUENT YEA RS BUT WE ARE NOT FAVORABLY INCLINED TO THIS PRAYER BECAUSE THE STATE MENT ABOUT LABOUR CHARGES RATES WAS MADE BY THE ASSESSEE WAS IN 2007 WHICH MUST BE REFERRING TO THE LABOUR CHARGES RATES PAYABLE AT TH AT POINT OF TIME WHEREAS THE YEARS BEFORE US PERTAIN TO EARLIER PERI OD. TO SUM UP WHILE WE CONFIRM THE ACTION OF THE AUTHORITIES BELOW IN P RINCIPLE WE REMIT THE MATTER TO THE FILE OF THE CIT (A) FOR THE LIMITED P URPOSES OF MAKING CORRECTIONS OF QUANTITIES AND RATE DIFFERENCE IF F OUND ADMISSIBLE IN THE ITA 8434 & 8435/M/11 4 LIGHT OF OBSERVATIONS MADE HEREINABOVE. WE DIRECT T HE ASSESSEE TO FULLY COOPERATE IN EXPEDITIOUS DISPOSAL OF THE REMANDED P ROCEEDINGS AND MAKE IT CLEAR THAT IN THE ABSENCE OF ASSESSEE'S FUR NISHING THE REQUIRED DETAILS AND POINTING OUT SPECIFIC MISTAKES IF ANY IN THE COMPUTATIONS IN TAX AUDIT REPORT QUANTITATIVE DETAILS AND COMPUT ATIONS IN THE ASSESSMENT ORDER NO RELIEF WILL BE ADMISSIBLE. WE ALSO DIRECT THE CIT (A) TO GIVE A DUE AND REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE AND TO DEAL WITH ALL HIS CONTENTIONS BY WAY OF A SPEAKI NG ORDER AND IN ACCORDANCE WITH THE LAW. THE MATTER STANDS RESTORED TO THE FILE OF THE CIT(A) WITH THE DIRECTIONS AS ABOVE. 5. IT WAS ALSO POINTED OUT THAT IN THE ASSESSEES O WN CASE FOR A.Y. 2006-07 VIDE ITA NO. 376/MUM/2011 DATED 29-7-2011 THE TRIB UNAL REMANDED THE MATTER BACK TO THE FILE OF LD. CIT(A) FOR ADJUDICAT ION AFRESH ON THE BASIS OF THE DECISION IN THE CASE OF B K TEX CORPORATION (SUPRA) . FOR THE SAID REASONS THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WOULD BE SATISFIED IF THE IMPUGNED GROUNDS ARE RESTORED BACK TO THE FILE OF THE LD. CIT(A) FOR ADJUDICATION AFRESH IN THE LIGHT OF THE DIRECTIONS GIVEN BY THE TRIBUNAL IN THE CASE OF B K TEX CORPORATION (SUPRA) . 6. THE LD. CIT DR APPEARING FOR THE REVENUE HAS N OT OPPOSED THE PRAYER OF THE ASESSEE FOR REMITTING THE MATTER BACK TO THE FILE OF THE LD. CIT(A) IN THE LIGHT OF THE AFORESAID PRECEDENTS. 7. IN VIEW OF THE CONVERGENCE IN THE STAND OF THE R IVAL COUNSELS AND IN THE BACK GROUND OF THE PRECEDENTS CITED ABOVE WE DEEM IT FIT AND PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE LD. CIT( A) TO PASS AN ORDER AFRESH IN THE LIGHT OF THE DIRECTIONS OF THE TRIBUNAL DATED 2 9-07-2011 (SUPRA) IN THE CASE OF B K TEX CORPORATION. NEEDLESS TO SAY THE LD . CIT(A) SHALL AFFORD A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE AND THEREAFTER HE SHALL PASS AN ORDER AFRESH AS PER THE LAW KEEPING IN VIEW THE EARLIER DECISION OF THE TRIBUNAL. 8. IN THE RESULT THE CAPTIONED APPEALS OF THE ASSE SSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ITA 8434 & 8435/M/11 5 8. THE ABOVE DECISION WAS PRONOUNCED IN THE OPEN CO URT IN THE PRESENCE OF BOTH THE PARTIES AT THE CONCLUSION OF THE HEARIN G ON 28-04-2015. SD/- SD/- (AMIT SHUKLA) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER . / MUMBAI ; 0! DATED 28-4-2015 .8../ RK RKRK RK SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 9 () / THE CIT(A) 33 MUMBAI 4. 9 / CIT - 23 MUMBAI 5. <=> 88?@ ?@ . / / DR ITAT MUMBAI B BENCH 6. >BC D / GUARD FILE. ' / BY ORDER < 8 //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) . / / ITAT MUMBAI