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2015 (3) TMI 893 - MADRAS HIGH COURT

2015 (3) TMI 893 - MADRAS HIGH COURT - TMI - Disallowance of a portion of the weaving charges paid - interest of justice will be served if 10% further relief is granted out of the disallowance of ₹ 2,72,939/- made by the learned Commissioner of Income Tax (Appeals) and confirmed by tribunal - Held that:- Assessing Officer after rejecting the weaving charges as claimed by the assessee, disallowed a sum of ₹ 7,50,000/-. There appears to be no reason or logic behind such disallowance of .....

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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 settlement. That record speaks for itself and justifies the exp .....

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ther relief of 10% with no rational or reason. The entire exercise of the department appears to be on conjectures and surmises. - Decided in favour of assessee. - T.C.(A).No.335 of 2008 - Dated:- 18-3-2015 - R.Sudhakar And R.Karuppiah JJ For the Appellant : Dr.Anita Sumanth For the Respondent : Mr.T.R.Senthil Kumar Judgement (Delivered by R.SUDHAKAR, J.) This appeal is filed by the assessee under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, D&# .....

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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 .....

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ails for closing and opening stock; vouchers for expenses claimed, etc. from the assessee and the assessee filed details on the subsequent hearing date. In the present case, we are concerned only with expenses paid towards weaving charges. 2.4. In the assessment order, it is observed that the assessee is purchasing yarn and pavoo and giving the same for weaving to the weavers. On verification of the vouchers produced for weaving charges paid, it was observed that one person has signed in the vou .....

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picion that the expenses under the head of weaving charges are inflated. The Assessing Officer held that the claim of weaving charges appears 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 settlem .....

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the preceding three years and arrived at the percentage of manufacturing expenses at 9.7%, 9.22% and 9.13% respectively as against the current year's 10.14%. Thereafter, he worked out the average of the three preceding years at 9.35% and the above percentage was recorded as reasonable percentage for allowance of cloth manufacturing expenses during the assessment year in question. Thus, the Commissioner of Income Tax (Appeals) worked out the reasonable cloth manufacturing expenses by adoptin .....

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,939/-. 2.7. Aggrieved by the said order, the assessee pursued the matter before the Tribunal. The Tribunal gave a further relief of 10% out of the disallowance of ₹ 2,72,939/-, in the following manner: 2.3. Against this order of the learned Commissioner of Income Tax (Appeals), Assessee is in appeal before us. The learned counsel of the assessee contended that it is the practice of the trade that weaving charges be paid to one person representing all the weavers. It is also contended that .....

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air. However, in view of increase in turnover, in this regard some flexibility in the said percentage can be granted in this case. Hence, in our opinion, the interest of justice will be served if 10% further relief is granted out of the disallowance of ₹ 2,72,939/- made by the learned Commissioner of Income Tax (Appeals). We accordingly direct the Assessing Officer to grant this relief. 2.8. Calling into question the said order, the assessee has filed this appeal on the question of law ref .....

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Income Tax (Appeals), no disallowance ought to have been made on the manufacturing expenses claimed by the assessee. 5. We find that the Assessing Officer after rejecting the weaving charges as claimed by the assessee, disallowed a sum of ₹ 7,50,000/-. There appears to be no reason or logic behind such disallowance of a sum of ₹ 7,50,000/-, except saying that the vouchers signed by one person on behalf of all the weavers are not acceptable. That has been explained by the assessee and .....

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