Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCHES “J”, MUMBAI
Before: SHRI G.S. PANNU (AM) & SHRI RAM LAL NEGI (JM)
O R D E R
PER RAM LAL NEGI, JM
This appeal has been filed by the revenue against the order dated 10.08.2016 passed by the Ld. Commissioner of Income Tax (Appeals)-37, Mumbai, for the assessment year 2011-12, whereby the Ld. CIT (A) has allowed the appeal filed by the assessee against assessment order passed u/s 143 (3) of the Income Tax Act, 1961 (for short ‘the Act’).
2. Brief facts of the case are that the assessee firm engaged in the business of manufacturing gold jewellary, filed its return of income for the relevant assessment year declaring the total income of Rs.1,42,20,060/-. Since the case was selected for scrutiny, notice u/s 143(2) of the Act was issued by the AO. In response to the said notice, the authorized representative appeared before the AO and also submitted the details called for and discussed the case from time to time. It was noticed that the assessee had debited an amount of Rs. 2 Assessment Year: 2011-12 1,08,35,609/- (wrongly mentioned Rs. 1,76,69,199/-) as labour charges and most of the payments were made in cash. Accordingly, the assessee was asked as to why provisions of section 40(a)(3) should not be applied and further asked to prove the genuineness of expenses in cash within the meaning of section 37(1) of the Act. In response thereof the assessee made a written submission and contended that since the cash payment made do not exceed Rs. 20,000/- in a day, the provisions of section 43(a)(3) of the Act do not attract. Moreover, the payment is directly related to the business of the assessee, hence the expenses are allowable u/s 37 of the Act. The AO rejecting the contention of the assessee added back the entire amount to the total income of the assessee u/s 37(1) of the Act. The assessee challenged the assessment order before the Ld. CIT (A). The Ld.CIT (A) after hearing the assessee allowed the appeal and directed the AO to delete the addition. The revenue is in appeal against the said order passed by the Ld. CIT (A).
The revenue has preferred this appeal before the Tribunal on the following effective grounds:-
1. “On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the disallowance of Rs. 1,08,35,609/- made in respect of labour charges paid to three parties.
On the facts and in the circumstances of the case and in law, the Ld. CIT (A) failed to appreciate that the assessee had paid a substantial portion of Labour charges in cash and the said payment has not been established to be genuine and laid out wholly and exclusively for purpose of the business of the assessee company”. 4. This appeal was fixed for hearing on 16.04.2018. When the case was called out for hearing none appeared on behalf of the assessee. We noticed that on the last date of hearing, the parties were informed about the date of hearing 3 Assessment Year: 2011-12 on 16.04.2018. Since, the assessee has not turn up despite the notice of the date of hearing, we decided to dispose of the present appeal on the basis of material on record after hearing the Departmental Representative (DR).
Before us, the Ld. Departmental Representative (DR) relying on the assessment order submitted that since the assessee has failed to discharge primary onus of proving the fact that the labour charges were paid wholly and exclusively for the business purposes, the Ld. CIT(A) ought to have confirmed the addition made by the AO. The Ld. CIT(A) has further ignored the fact that the bills submitted by the assessee did not bear CAT/CST Nos. Further the Ld. CIT(A) has failed to appreciate that the assessee had paid a substantial portion of labour charges in cash and the said payment has not been established to be genuine and laid out wholly and exclusively for the purposes of the business of the assessee company. Therefore, the impugned order is liable to be set aside.
We have perused the material on record including the orders passed by the authorities below in the light of the contention of the revenue and the plea taken by the assessee before the authorities below. The Ld. CIT(A) has allowed the appeal of the assessee holding as under:-
From above facts and discussion, it is clear that appellant has furnished sufficient evidence and details of Labour Charges during the course of proceedings and established that he had paid a sum of Rs. 1,08,35,609/-to various contractors. The AO has not given specific finding with respect of the cash payment. The AO failed to appreciate the explanations provided by the Appellant and disallowed the labour charges without any valid reason. The appellant has been regularly following the same method and Department has accepted without any objection in the earlier assessment years. In view of the above, addition on account of labour payment cannot be sustained. The AO is directed to delete the addition.
4 Assessment Year: 2011-12
As pointed out by the Ld. CIT(A) the assessee had engaged M/s Badshsh Enterprises, M/s. Girdhar Enterprises and M/s Suraj Murth for carrying out the manufacturing of jewellary during the year relevant to the assessment year under consideration. As a matter of practice, the contractors used raise monthly bills for labour work done by them and the assessee used to credit the amounts to their respective accounts after deducting the tax at source. The assessee has furnished the details of TDS along with the tax audit report during the assessment proceedings. The assessee has also furnished the copies of accounts duly confirmed by the respective contractors and the copies of bill raised by the contractors. On the basis of the aforesaid facts supported by documentary evidence, the Ld. CIT(A) has concluded that the assessee has paid labour charges to the contractors for manufacturing/making jewellary, which is the main business of the assessee.
The AO has further observed that bills issued by the contractors do not contain VAT/CST and details of movements of goods. On this aspect the Ld. CIT(A) has rightly pointed out that under the provisions of the MVAT Act, 2002, the contractors were not required to obtain registration for rendering services. So far as the movement of goods is concerned since, the contactors were required to make/ manufacture the jewellary within the premises of the assessee, no question of movement of goods does arise.