TMI Blog2010 (1) TMI 1182X X X X Extracts X X X X X X X X Extracts X X X X ..... rs viz. Shri Mukeshbhai and Shri Sureshbhai. As regards own labour, the AO observed that the wages register for the month of February, 2006 and March, 2006 were signed by the labourers but did not contain the dates thereof. The AO further observed that the assessee did not have any preliminary record for working out the wages paid to the labourers. It was also observed by the AO that the per piece labour paid by the assessee was ₹ 19,04 as compared to ₹ 18.85 and ₹ 17.55 paid by his job workers viz. Shri Mukeshbhai and Shri Sureshbhai, respectively. As regards jobwork charges paid to contractors the AO observed that the bills were prepared by the assessee himself and on monthly basis however, the AO has not made any disallowance out of the labour charges paid by the assessee to the job workers. Thus, on the basis of comparison of the per piece wage rate paid by the assessee and his job workers, the AO framed an opinion that the wages paid by the assessee to his own labour were excessive and accordingly, the AO made an ad-hoc disallowance of ₹ 10,22,043/- being 10% wages of ₹ 1,02,20,430/-. 4 The assessee filed an appeal before the CIT(A) and submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77.09% 81.29% 75.82% It was also submitted before the CIT(A) that the assessee s factory is located at a remote place at Village Areth, Tal: Mandvi, Dist. Surat and not in the city of Surat and hence, the labour is not readily available at that place which also increases the cost to some extent and hence, is not directly comparable with the other 2 cases who are having factory in Surat. Accordingly, in view of the facts that the book results having improved in the current year as compared to the earlier year, the percentage of labour expenses having decreased in the current year as compared to the earlier year, the percentage of wages paid by the assessee being at par with that paid by his contractors and on considering the remote location of the factory where labour is scarce and hence costly, the assessee pleaded that the ad-hoc disallowance as made by the AO on the allegation that the wages paid are excessive, is erroneous and hence, the same needs to be deleted. Before the CIT(A), the assessee also relied on the direct decision of the Ahmedabad Bench of ITAT in the case of Dhirubhai Becharbhai Dhamelia in IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, I hold that in view of these facts of the case, no ad-hoc disallowance is warranted for out of salary and wages on the ground that it is excessive. Further, in the case of Dhirubhai Becharbhai Dhemelia in ITA No.3188/Ahd/2007, the jurisdictional Ahmedabad Bench of ITAT had deleted the disallowance of labour expenses as made by the AO, by following its own decision in the case of Bharatkumar Ramniklal Mehta ITA No.1296/Ahd/2003 and others, wherein it has held as under: . For the purpose of clarifying the doubt whether the assessee has arbitrarily claimed labour expenses, the best method is to be considered, is his GP rate. The expenses on labour payment is directly related to trading account and if the assessee has claimed any bogus labour expenses, the GP rate is bound to be abnormal, but in the case under consideration we find that the assessee has shown 3.62% GP in comparison to 3.50% which has been accepted by the department in the earlier year. After considering the overall position of the comparative gross profits, we are of the view that no addition is warranted. . Considering all the facts and circumstances of the case and the Tribunals orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by the Revenue stands dismissed. 7 The second ground relates to deletion of the addition of ₹ 8,13,369/- made by the AO on account of diesel expenses. The brief facts of the case are that according to the AO, the assessee had incurred huge expenses on power and fuel and out of the total expenses of ₹ 16,26,729/-, the expenses on amount of diesel is ₹ 11,54,643/-. The AO observed that none of the bills of diesel purchase bear the name of the assessee and the said bills are obtained from different pumps at different villages. The AO concluded that the power and fuel cost of the assessee were high and excessive. The AO accordingly made ad-hoc disallowance of ₹ 8,13,369/- being 50% of total power and fuel expenses amounting ₹ 16,26,729/-. Being aggrieved, the assessee preferred an appeal before the CIT(A). The CIT(A) has dealt with the issue and deleted the ad-hoc disallowance by observing as under:- During the course of appellate proceedings, the appellant submitted that his factory is located at a remote place at Village Areth, Tal. Mandvi, Dist. Surat and not in the city of Surat and hence, the power supply being not consistently available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower and fuel expenses is bogus being not supported by any authentic or genuine bill but he has only pointed out that the said bill does not bear the name of the appellant, in this regard, I agree with the appellant that the petrol / diesel bills generally do not contain the name of the buyer and if the ITO had any doubt as regards the genuineness of the said expenses, he should have made some inquiries for the same. Further, as regards comparison of power and fuel cost of the appellant with the job workers, I am of the opinion that only likes can be compared with likes and in the present case, the appellant is having his factory in a remote village at Areth where, the power supply is not constant whereas, the job workers are having their factory in Surat city and are consuming consistent and cheap electric power. Thus, considering these facts, the power and fuel cost of the appellant is bound to be higher as compared to that of the contractors and therefore, the power and fuel cost of the appellant could not be compared with that of the contractors. Further, as per the decision of the jurisdictional ITAT in the case of Bharatkumar Ramniklal Mehta (supra), the GP rate o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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