2012 (12) TMI 978

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ts of the case and on the basis of various presumptions and surmises 2. in not appreciating that the said disallowance was made without any adequate basis and without any external comparables. 3. in holding that the appellant had admitted to a portion of the evidence. 4. in not appreciating the appellant's submissions that reasonableness or otherwise had to be viewed by considering the expenses actually incurred by Akash Diamonds and that hence the comparison of rates in Surat and Deesa and other such queries were actually irrelevant in the matter. 5. Without prejudice, the said disallowance is excessive and needs to be substantially reduced." 2. The solitary issue involved is with regard to the disallowance under section 40A(2)(b) .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ted the labour charges at Deesa at Rs. 600/- per carat and added the balance of Rs. 66.38 per carat, which came at Rs. 43,97,624 to the income of the assessee. 6. The assessee approached the CIT(A), who after considering the detailed submissions made before him and the AO, rejected the appeal of the assessee on this issue. The CIT(A) pointed out that,  "This is just an arrangement made between the 2 firms to decrease the liability of taxation of the 2 firms and inflate the expenses. No explanation has been given as to why the labour cost was much more at Dessa than at Surat and subsequently an explanation was offered which was contradictory in nature that the labour cost at Surat was higher than that at Dessa. They have given no ana .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... se places. He further submitted that had the assessee not appointed Aakash as its manufacturing vendor, the assessee would have had to set up its own facility(s), which it had outsourced completely. The AR submitted that whatever expenses had been incurred by Aakash would have had to be borne by the assessee, had the manufacturing were not outsourced. He further submitted that in any case, the job work charges paid to Aakash was fully justified. 10. The DR on the other hand supported the action of the revenue authorities. 11. We have heard the arguments in detail and we find that Mr. Mahesh Bhasali, partner of the assessee firm is also a partner in 75% ratio in Aakash, hence, the assessee and the vendor, i.e. Aakash are associates and pro .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X