VIRAL BHUPATBHAI KAKADIYA,SURAT vs. ITO, WARD-2(3)(4), SURAT, SURAT

At the time of hearing, the Ld. A.R. submitted that the assessee is in the business of cutting and polishing of rough diamond on job work basis. The assessee filed return of income for the year under consideration on 30-06-2008 declaring income at Rs. 1,14,579/-. The case of the assessee was selected u/s. 147. The assessment order was passed on 14-02-2016 treating the entire ledger of Rs. 35,66,642/- as unexplained credit u/s. 68 and added the same on protective basis on the

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee derives income from diamond polishing activities. In A.Y. 2008-09, the HVK group paid an amount of Rs. 35,66,642/- as Labour Charges to the assessee. This fact was confirmed by the parties (HVK) before the Settlement Commission as well. The assessee in fact furnished purchase bills of machineries, details of workers and labour expenses during the assessment proceedings. Therefore, the contention of the assessee that the amount received by the labour contractors for the processing of diamonds under their guidance & supervision were towards expenses for processing of the diamonds as explained and towards their remuneration. The payment shown by the HVK group as made to various labour contractors was actually received by contractors for which they had incurred the expenditures. Thus, the said expenditure cannot be termed as bogus. These are actual receipts for carrying out diamond processing work. Thus, the CIT(A) was not right in confirming the protective addition.

In the result, the appeal of the assessee is allowed.