TMI Blog2012 (12) TMI 978X X X X Extracts X X X X X X X X Extracts X X X X ..... s prevailing in the market at Deesa to set the bench mark. This exercise has not been done by the AO or by the CIT(A), which according to us, the revenue authorities should have done to arrive at some definite estimate. In these circumstances, we are of the opinion that in the interest of justice to both the sides, the AO must make enquiries and examine the comparable rates from the third parties at Deesa and then benchmark the average job work rate for the financial year in question and compute the job work charges.We, therefore, set aside the order of the CIT(A) on the issue of addition of ₹ 43,97,624/- with the above direction to the AO, who shall afford adequate and reasonable opportunity to the assessee to present its case. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are that the assessee is in the business of manufacturing and treading of cut and polished diamonds. The assessee has engaged Aakash Diamonds, the only vendor for doing its cutting and polishing of diamonds. 4. Aakash Diamonds operates its facilities at Surat and Deesa. In the year under consideration, the assessee paid job charges to Aakash which amounted to ₹ 9,14,75,525/-, who was doing the job work only for the assessee. 5. In the assessment proceedings, the AO noticed that the assessee and Aakash were related parties and thus the provisions of section 40A(2)(b) would get attracted and the other thing he noticed was that the average labour charges of ₹ 523/- per carat in the last year had increased to ₹ 636/- pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cutting and polishing of diamonds. If the labour charges at Surat were much higher then why was the work not done at Dessa. Why did the appellant give higher charges at the Dessa Branch when the same could have got is done at a lower cost at Surat Branch? They have not given any details of labour charges paid to outside parties and what is the cost of labour from the last to this year. This agreement between the 2 parties as stated earlier was just to benefit each other as it belonged to the same people and the 2 firms had been created so that labour charges could be inflated in the other firm and as admitted by the appellant himself, the labour expenses were excessive, I find that the AO has made a very reasonable disallowance of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2)(b) are attracted. On the issue of justification of addition made by the AO and sustained by the CIT(A), we find from the impugned order that the assessee had, in fact, accepted that some addition could be justified, the question is how much, i.e. ₹ 5,64,000 as admitted by the assessee or ₹ 43,97,629/- as computed by the AO. Since the assessee has accepted to some addition, in the submissions made before the CIT(A), we cannot now, accept that there cannot be any addition. This observation gathers strength from the order of the CIT(A), wherein he observes, they have given no analysis of labour, wages, etc. paid and cost of cutting and polishing of diamonds. . . 12. In our opinion, neither the assessee has provided any compa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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