TMI Blog2015 (3) TMI 893X X X X Extracts X X X X X X X X Extracts X X X X ..... rded by the Tribunal of its order to the effect that it is the practice of the trade that weaving charges be paid to one person representing all the weavers. The law of averages adopted by the Commissioner of Income Tax (Appeals) cannot be held to be justifiable, as in the case on hand books of accounts were properly maintained and produced before the Department. We are surprised to note that in the order of the Commissioner of Income Tax (Appeals), the average manufacturing expenses seems to be fluctuating from year to year. There is marginal increase in the manufacturing expenses every year and such increase cannot be simply brushed aside. We have to take into consideration the revision of wages, in the light to the terms of the wage s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of the case, no portion of the expenditure can be disallowed? 2.1. The facts in a nutshell are as under: The appellant/assessee is a firm engaged in the manufacture and sale of cloth. The assessee filed its return of income admitting total income of ₹ 9,30,130/- on 1.10.2002. The return was processed under Section 143(1) of the Income Tax Act on 15.10.2002. 2.2. The case was taken for scrutiny and notice under Section 143(2) of the Act was issued. The authorized representative of the assessee appeared before the Assessing Officer and produced the books of account, which showed that the assessee is purchasing yarn and giving it to weavers for manufacture of cloth, and according to the learned counsel for the assessee, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears to be on higher side and, therefore, a sum of ₹ 7,50,000/- was disallowed on weaving charges. 2.5. Assailing the said order, the assessee appealed to the Commissioner of Income Tax (Appeals), raising a specific plea as under: The Learned Assessing Officer ought to have appreciated the fact that the payment of Weaving Charges is under the wage settlement made between the Weavers Association and the Sizing Mills Owners' Association. Hence the Weaving Charges have been paid based on these and there is no necessity to inflate any expenses in this regard to the Appellant. Hence the additions made on assumptions by the Learned Assessing Officer is in error. (emphasis supplied) 2.6. On the above plea, the Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is the practice of the trade that weaving charges be paid to one person representing all the weavers. It is also contended that comparing only manufacturing charges is not reasonable and fair and percentage needs to be compared with the increase in turnover also. 2.4. We have heard both the counsels and perused the relevant records. We find that it is admitted that the entire weaving charges paid is backed by payment vouchers signed by only one person whereas actually the payment belonged to various persons. On the facts of the case, comparison by reference to average manufacturing charges can also not be said to be unfair. However, in view of increase in turnover, in this regard some flexibility in the said percentage can be granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de that weaving charges be paid to one person representing all the weavers. 6. As regards the order of the Commissioner of Income Tax (Appeals), though it looks somewhat logical to arrive at expenses on the basis of average, we are not inclined to accept such a procedure because expenses have been incurred and reflected in the books of account and, therefore, the same should be either accepted or rejected on the basis of specified data or parameters. The law of averages adopted by the Commissioner of Income Tax (Appeals) cannot be held to be justifiable, as in the case on hand books of accounts were properly maintained and produced before the Department. We are surprised to note that in the order of the Commissioner of Income Tax (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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