DKI APPAREL PRIVATE LIMITED,AMBERNATH vs. ACIT CIRCLE 1, KALYAN

IN THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI “D” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICAIL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA No.1728/MUM/2026 (AY: 2013-14) DKI Apparel Private Limited, K 6 vs. ACIT Circle 1, 1st Floor, Mohan Plaza, Anand Nagar, Addl Ambernath Indl Wayale Nagar, Khadkpada, Kalyan- Area, Thane-421506. Dombivali-421301. PAN/GIR No: AACCD3517E (Appellant) (Respondent) Assessee by Shri Niraj Sheth, Adv. Revenue by Shri Annavaram Kosuri (SR AR) Date of Hearing 11.05.2026 Date of Pronouncement 15.06.2026 O R D E R PER BIJYANANDA PRUSETH, AM:

This appeal filed by the assessee emanates from the order passed under

section 250 of the Income-tax Act, 1961 (in short, ‘Act’) by the National Faceless

Appeal Centre [in short, ‘CIT(A)’], dated 17.12.2025 for the assessment year

(AY) 2013-14.

“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding disallowance of job work charges of Rs.1,73,86,320/- made by AO. He failed to appreciate that the said disallowance was made by the AO without issuing any show cause notice.

The CIT(A), however, deleted the ad hoc disallowance. The appeal was partly allowed. 5. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The assessee has filed a paper book containing 169 pages which includes submissions and details made before the lower authorities. The Ld. AR submitted that both AO and CIT(A) have failed to arrive at a definite finding that job work charges are excessive or unreasonable. The assessee has demonstrated that per piece production cost of different types of garments is different and even average per piece production cost is more than average per piece production cost worked out by the AO. These workings are not disputed by CIT(A) and therefore, payment of job work charges made to sister concern is neither excessive nor unreasonable. He submitted the once it is accepted that job work charges paid are not excessive or unreasonable, disallowance cannot be made on the presumption that sister concern is making losses, which is factually incorrect. The assessee has paid job work charges to its sister concern in earlier as well as subsequent years, which was accepted by department. The Ld. AR also submitted that no show-cause notice was issued by AO to consider the payment as excessive and unreasonable. The assessee filed additional evidence u/s 46A of the IT Rules, 1962, but the CIT(A) neither record the same nor dealt with the petition for admission of the additional evidence. The assessee was not giving opportunity of being heard through video conference. He submitted that the job charges paid to the sister concern varied from item to item ranging from Rs.8.00 to Rs.23.60 per piece whereas job charges paid to outside party varied from Rs.10.00 to Rs.61.00 per piece. The ld. AR further stated that though the sister concern has made book losses, however after making addition/deduction to the book losses, there is profit of Rs.1,62,25,182/- which is at page 8 of the CIT(A) order. Hence, he requested to set aside the matter to the AO for passing a fresh order in the interest of justice. 6. On the other hand, the Ld. Sr. DR supported the order of lower authorities. He would, however, have no objection if the matter is restored to the file of AO for fresh decision. 7. We have heard both sides and perused the materials on record. We find that the assessee had furnished elaborate details before the lower authorities, which have not been considered to arrive at a proper and logical conclusion before making the disallowance. The observation of CIT(A) that profit has been shifted to the loss making sister concern is also not correct because from the appellate order itself, it is clear that M/s Defiance Kitting Industries ltd. had shown income of Rs.1,62,25,182/- after making various additions and deletions to the book loss. The assessee had also filed additional evidences which have not been referred to nor any finding has been given regarding admission of the additional evidence. No remand report was called from the AO. The assessee was also not given opportunity of being heard through video conference though specific request was made to the CIT(A). In view of these facts, we are of the considered opinion that in the interest of justice, the assessee deserves one more opportunity to argue its case on merit. Both Ld. AR and Ld. Sr. DR have also agreed that the case may be remanded back to the AO for fresh assessment. Therefore, without delving further into the merits of the case, we set aside the order CIT(A) and restore the matter to the file of AO for fresh assessment as per law after giving 4 reasonable opportunity of being heard to the assessee. Accordingly, the ground is allowed for statistical purpose.

Order is pronounced on 15.06.2026.

Sd/- Sd/- (SANDEEP GOSAIN) (BIJYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER *Aniket Chand; Sr. PS MUMBAI Date: 15.06.2026 Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, MUMBAI 6. Guard File

By Order Assistant Registrar ITAT, MUMBAI