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2025 (5) TMI 1238 - AT - Income TaxBogus job work charges - Addition on substantive basiswas deleted by the Co-ordinate Bench of the ITAT wherein held the expenses made incurred by Orient Craft Ltd is genuine - HELD THAT - As following order of M/s Orient Crafts 2021 (10) TMI 154 - ITAT DELHI and Trendy Attire (P) Ltd. 2022 (6) TMI 1452 - ITAT DELHI the Co-ordinate Bench under identical circumstances deleted the additions made on protective basis in the case of other job worker Shri Mohinder Kumar Garg. As there is no change in the facts of the present case as also confirmed by the Ld. Sr. DR we find no error in the order of the ld. CIT (A) deleting the additions made int eh hands of the assessee.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in these appeals are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Legitimacy of Job Work Expenses Paid by M/s Orient Craft Ltd. Relevant legal framework and precedents: The Income Tax Act allows disallowance of expenses that are not genuine or are fabricated to suppress income. The burden lies on the Revenue to establish that expenses are bogus. Precedents emphasize that if the expense is genuine and supported by evidence, disallowance is not warranted. Court's interpretation and reasoning: The Assessing Officer (AO) initially treated job work expenses paid to the proprietary concerns of the assessees as bogus, based on the search and seizure operation and the observation that Orient Craft Ltd. had booked bogus expenses to suppress profits. The AO disallowed the entire expenses claimed by the assessees against receipts from Orient Craft Ltd. and made additions on a protective basis. However, the Commissioner of Income Tax (Appeals) [CIT(A)] examined the substantive additions made in the hands of M/s Orient Craft Ltd. and found that the job work expenses paid to the assessees' proprietary concerns were genuine. The CIT(A) relied on the order passed in the case of Orient Craft Ltd., where the bogus nature of these expenses was rejected. The CIT(A) also noted that the coordinate bench of the Tribunal confirmed the genuineness of these expenses in the Orient Craft Ltd. case. Key evidence and findings: The search and seizure operation revealed payments and TDS deductions by Orient Craft Ltd. on job work charges paid to the assessees. The assessees' turnover was substantial, but profits were nominal, raising suspicion. However, the CIT(A) and the coordinate bench found no evidence to prove that the job work expenses were fabricated or bogus. Application of law to facts: Since the substantive additions in the hands of Orient Craft Ltd. were deleted by the CIT(A) and confirmed by the Tribunal, the protective additions in the hands of the assessees could not be sustained. The principle of consistency and mutuality in tax proceedings was applied. Treatment of competing arguments: The Revenue argued that the job work expenses were bogus and made additions on a protective basis in the hands of the assessees. The assessees contended that the expenses were genuine, supported by the findings in the Orient Craft Ltd. case. The Tribunal accepted the latter, relying on the coordinate bench's decision and the CIT(A)'s order. Conclusions: The Tribunal concluded that the job work expenses paid to the proprietary concerns of the assessees were genuine and the additions made on a protective basis were not sustainable. Issue 2: Applicability of Coordinate Bench and CIT(A) Findings to Multiple Assessment Years and Assessees Relevant legal framework and precedents: The principle of judicial consistency mandates that identical facts and issues be decided uniformly. The Tribunal's coordinate bench decisions and the CIT(A) orders are binding precedents for the same facts and issues. Court's interpretation and reasoning: The Tribunal observed that the facts across the assessment years 2010-11, 2011-12, and 2012-13 for both Smt. Hema Sharma and Sh. Harinder Sharma were identical. The CIT(A) had passed a common order for all these years and assessees. The Tribunal applied the findings of the coordinate bench and CIT(A) mutatis mutandis to all appeals. Key evidence and findings: The identical nature of the facts, the common order of the CIT(A), and the consistent findings in the coordinate bench decisions were pivotal. Application of law to facts: The Tribunal applied the principle of judicial discipline and consistency to dismiss the Revenue's appeals across all assessment years and for both assessees. Treatment of competing arguments: The Revenue did not dispute the identical nature of facts but sought to sustain the additions. The Tribunal rejected this on the basis of binding precedents and the CIT(A)'s findings. Conclusions: The Tribunal dismissed the Revenue's appeals for all assessment years and both assessees, affirming the deletion of additions. 3. SIGNIFICANT HOLDINGS The Tribunal held that:
Core principles established include:
Final determinations on each issue were that the Revenue's appeals were dismissed, and the additions on account of job work expenses were deleted for all assessment years and both assessees. The cross objections filed by the assessees were also dismissed as not pressed.
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