CIT vs. PUNJAB STAINLESS STEEL INDUSTRIES

$-1 *IN + ITA CIT .. Appellant Through : Ms. Suruchi Aggarwal, Sr. Standing Counsel. VCTSUS IWS. PUNJAB STAINLESS STEEL INDIISTRIES ..... Respondent Through : Sh. Satyen Sethi and Sh. Afta 'I'rana Panda, Advocate CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT TION'BLE MR. JUSTICE R.V.EASWAR ORDER 0t.1t.2012 flre Revenue is in appeal against an order of the ITAT dated 28.02.2012 in ITA l9l0lDell2006. The question of law urged is the corectness of the ITAT's order vrs-a-vrs the allowance permitted to the respondent/assessee, for the claim of expenditure on account of polishing charges paid to artisans. The relevant facts are that for the Assessment Year 2002-03, the assessee's teturn as considered under Section 143(3) of the Act. I'he assessee derived income .from the business of manufacturing and export of SS, Utensils, cutlery etc. It claimed expenditure of Rs. 2,91,85,9821- on account of polishing jobwork charges for the year in question. In support of this, it has provided list of 369 parties/artisans with their addresses, to whom such polishing charges had been paid. At the same time, I01 of the said 369 persons had confirmed that the said payrnents were received. The AO held that polishing charges r.vere paid to the parlies of which confirmations had been obtained and filed, and that in respect of others, the report received was that no such parties existcd. The AO, therefore, THE HIGH COURT OF DELHI AT NEW DELHI 554/2012 t .> 4Y Signing Date:07.09.2024 17:11:16 Certify that the digital and physical file have been compared and the digital data is as per the physical file and no page is missing. Signature Not Verified

i-r allowed 50Yo of clairned expenses and disallowed I{s.1,47,16,0581- by the order dated 31.03.2005. The asscssee appealed to the Commissioner. I'his claim towards the expenditure was allowed in part, by the Commissioner of Income Tax (Appeals) as follows: . "6.7 I have tor:uftully considered the submissions made by the counsel of the appellant. From the rival arguments, both by the reventte and the appellant, one thing certainly emerges that the entire claim made by the appellant on ctccount of polishing expenses did not riot stand the test of .full materiality because the AO's enquiries revectled that bulk of the parties undertaking polishing jobs v,ere not available at the declared ad&'esses. It v'as an acceptable proposition if sonte of the panics could not be found as per the argument of the appellant that because of huntble meang they had out of compulsion shifted to new places and could not stick to the sante residence for a longer time. But the fact has been proved to be othersuise in as much as most of these workers were not traceable at the declared addresses. 6.8 However, I ant in agreement with the argument of the appellant that polishing jobs vtere part and parcel of the maru.tfacturing operation of steel utensils and were undertaken by the appellant. So, the entire claint of the appellant cannot be disbelievedfor absence of the concerned persons at the declared add'esses because the appellant had discharged the primary burden cast on him to make available the identity of such polish v,orkers with addresses and the evidences regarding pcryments on account of polish expenses by u'ay of signed vouchers. 6.9 Further it is noticed that the AO at the fag end of the assessment proceeding informed the appellant vide her letter dated 28.03.2005 that the ntost of the parties were not found at the declared addresses - and the uppellant's explanation v'as sought on the very next date, i.e. on 29.03.2005. The appellant entrusted the job to a junior employee to contact the available heads of the sub groups of the polishers and to obtain the confirntations f"om them. But since the available time was hardly 12 days, the appellant could not produce the confirmation in respect of all the polish workers. It has been also argued that the inspector's report on which the AO has placed reliance u,es never ntade available to the appellant and the appellant could not get any opltortunity to rebut the findings ntade in such report. In any case, in nty view it wcrs intpossible on the part of the appellant to make enquiries about 200 strong parties at far flung places in two days tinte allowed by the AO." I The Commissioner (Appeals) restricted the disallowance Io 15Yo of the claim of

r! t' v' expenses which worked-out to Rs.43,77,8971-. The ITAT rejected the appeals of the Revenue as well as the assessee. It was noticed that such disallowance had been upheld in previous orders for other years and the Tribunal also qu<lted its order dated26.ll.2009, where such 15% disallowance had been upheld. It is contended by the Revenue that the approach of the Tribunal is in serious error of law since it did not take into consideration the fact that the AO had the benefit of perusing the materials as to the genuineness of the claims especially with regard to the genuineness of the aftisans and the payments made to thern. Without proper discussion, CIT(Appeal) deemed it proper to restrict the disallowance originally made, to the extent of 50o/o, to I5Yo. This urueasoned order, the Itevenue contends, was effoneously upheld by the Tribunal. It is also stated that similar claims for expenditure for previous year that was disallowed, had been admitted in other pending matters before the Court. We have considered the arguments and the materials on record. It is evident fiom the previous discussion that the CIT (Appeals) had taken into consideration materials which the AO had also the benefit of; including the Inspector's report vis-i-vis existence of the artisans. The approach of CIT (Appeal) was to partly give the benefit of doubt but at the same time restrict the disallowance and sanction a disallowance to the extent of 15%. This is premised on the fact that the activity in question, i.e. polishing of utensils did take place. That the disallowance in such circumstances should be confined to I5%o or 50Yo can hardly be a question of law which should engage attention of the Court, under Section 260A of the Income Tax Act. The appeal is bereft of merit; it is accordingly dismissed. I t*j-{3t"t- S. RAVINDRA BHAT. J ilU,-,*, . R.V.EASWAR, J NOVEMBER OI,aOL2 'ajk'