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M/s S.D. Traders Versus Income Tax Officer 2 (4) , Kanpur

2016 (4) TMI 661 - ITAT LUCKNOW

Disallowance of labour charges - Held that:- Considering particularly the claim that labour charges for more than 8 months are outstanding at the year end and the payment already made in the present year is by way of cash, we feel that some disallowance out of labour charges is justified. We feel that if the preceding year is considered as a guiding factor, the labour charges should be 22.69% of Receipts of ₹ 90.35 Lacs as in that year and as a result, the labour charges for the present ye .....

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e.

Addition of sundry creditors - Held that:- Confirmation is available of only 5 parties having outstanding of ₹ 3,70,20/- and about the remaining parties, it is stated by the assessee that it is not possible for the assessee to trace these creditors since period of nine years has elapsed and many of them have closed their business and others have disposed of their records. But the assessee has not brought even this evidence on record that when and how the amount was paid by t .....

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he order of Ld. CIT(A) on this issue - ITA No.460/LKW/2015 - Dated:- 24-2-2016 - SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER For The Appellant : Shri Abhinav Mehrotra, Advocate For The Respondent : Shri A.K. Singh, CIT DR ORDER PER A. K. GARODIA, A.M. This is an assessee s appeal directed against the order of Ld. CIT (A)-I, Kanpur dated 31.03.2015 for the AY 2006-07. 2. The grounds raised by the assessee are as under: 1. Because on the facts and in the circum .....

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assessed income of the assessee, particularly as (a) The Notice of enhancement dt. 13.09.2015 is barred by limitation and is issued in excess of jurisdiction; AND (b) In the set-aside proceedings, there was no fresh Notice of enhancement, as in any circumstances, being time barred, the same could not have been; issued; AND (c) There is no lawful justification for the proposed enhancement, once books/evidence have been produced, that are regularly maintained by the assessee, the Scope for additio .....

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318, whereas, the same decision is distinguishable on facts and the judgment of the Hon ble Delhi Court, being applicable to the case, has been ignored. 4. Because the Ld. CIT (A) erred to appreciate that in relation to wage payment, proper evidence in the shape of labour register & ledger account of wage payment in the books, was produced and no specific defects were identified and that daily wagers belong to an unorganized sector and hence such evidence is hence acceptable. 5. Because the .....

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ification. The Ld. Commissioner while disallowing the labour charges Creditors relied on the order dt. 14/11/2013, of the Ld CIT (AJ. The Ld. CIT(A) failed to point out any expenditure which was excessive and non for business. 7. That the Ld. Commissioner of Income Tax, Appeals has further erred in law as well as on facts in not appreciating that the Gross Profit Rate was better as compared with the previous year from 3.71% to 4% and thus there was no room for any disallowance out of labour expe .....

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ing liability should have also been accepted unless any contrary is proved on the facts of the case. 10. That in any case addition and disallowance is arbitrary and bad in law and the order of the Ld. CIT Appeals is liable to be quashed. 11. Because the order passed by Ld. CIT (A), on this count is bad in Jaw. 12. The Appellant craves for leave to add/amend the grounds of appeal, with the permission, of the Honble Bench. 3. It was submitted by Ld. AR of the assessee that this is second round of .....

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the order of the Tribunal as well as the order of the Ld. CIT(A) dated 14.11.2014 and restored the matter back to the file of the Ld. CIT(A) for a fresh decision. He submitted that this Judgment of the Hon ble Allahabad High Court is available on pages 53 to 55 of the paper book. He raised a contention that Ld. CIT(A) was not justified in making enhancement of income in the facts of the present case and in support of this contention, he placed reliance on the following judicial pronouncements: .....

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on made by the Ld. CIT(A) by way of enhancement, he reiterated the same contentions which were raised before Ld. CIT(A). 5. Learned DR of the Revenue supported the order of CIT (A). He also submitted that the issue regarding the power of Ld. CIT(A) for making enhancement is covered in favour of the Revenue and against the assessee by the judgment of the Hon ble Allahabad High Court rendered in the case of CIT Vs. Kashi Nath Candiwala (Supra), copy available on pages 82 to 84 of the assessee s pa .....

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with that of the Income Tax Officer and he can do what the Income Tax Officer can do and also direct him to do what he has failed to do. 6. We have considered the rival submissions. In the present case, we have to decide two aspects of the matter. First aspect is this that whether the enhancement made by the Ld. CIT(A) is proper and valid in the eyes of law and the second aspect is the merit of the enhancement made by the Ld. CIT(A). Regarding the first aspect, we find that this issue is covere .....

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AR of the assessee having been rendered in the case of Jute Corpn. of India Ltd. Vs. CIT (Supra), other judgments of different High Courts or of the Tribunal are of no relevance. In the case of CIT Vs. Kashi Nath Candiwala (Supra), it was held by Hon ble Allahabad High Court that the Tribunal was not justified in holding that the CIT has no power of enhancement in respect of an issue which was not te subject matter of the appeal. Respectfully following this judgment of the Hon ble Allahabad Hig .....

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xpenses, but sundry creditors is not reflected therein. Labour charges have gone up from ₹ 22.S2 lakhs to ₹ 23.82 lakhs while job work receipts have gone down from ₹ 1.01 crores to ₹ 90.35 lakhs. Even material purchased has gone down from ₹ 62.93 lakhs to ₹ 49.64 lakhs while there had hardly been any variation in freight & cartage. The appellant has not justified the increase in the labour charges during the year. As regards, the business exigency of the s .....

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the onus has not been discharged by the appellant fully to establish the identity of parties/labourers along with evidence of payment of labour charges as held in the case of CIT Vs S.G. Exports (P&H) 336 ITR 2. In the instant case, the appellant has merely submitted photocopies of ledger account, which are made on 'tally' software alongwith copy of hand written month wise attendance register of labourers. The perusal of the same, indicates some thumb impressions against the cash pa .....

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ch are expended wholly and exclusively for business, are allowable as deduction from the profits of the business of the appellant. The onus was on the appellant to prove the same, which has not been fully discharged. Reliance is placed on landmark judgments in this regard viz. CIT Vs Calcutta Agency Ltd (SC) 19 ITR 191 and Lakshimaratan Cotton Mills Co. Ltd. Vs CIT (SC) 73 ITR 634, wherein Hon'ble Apex Court has held that 'in order to claim that an expenditure falls u/s 37(1), the burden .....

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amp; genuineness of sundry creditors. It is pertinent that the Ld. CIT(A)-II, Kanpur vide order dated 14.11.2013 in the appeal for instant year and in absence of bills and vouchers had disallowed ₹ 15.0 lacs out of total claim of payable sundry creditors included in Sundry Creditors liability shown at ₹ 27,76,180/-. In the present proceedings too, the existence, of sundry creditors as per the balance sheet of the appellant as on 31.03.2006/- is not-proved fully and the liability of p .....

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e others, the copy of ledger account is submitted. However, in case of Mr. Naeem Khan, the ledger account does "hot match as it is in the name of Mr. Naeem Ahmad. Even in these five cases where identity is shown, the creditworthiness of the said persons is not evident from the documents furnished. The appellant was aware of his onus regarding the requirement of details of sundry creditors since the first appeal proceedings started in September 2013, however the complete evidence is not avai .....

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bmission vide letter dated 24.03.2015 as reproduced below: "further, to this we state that It is not possible for us to trace all the sundry creditors since a period of nine years have elapsed and many of them have either closed their business and others have disposed off their record. 4.4.1 In view of the above facts of the case, it is clear that the appellant has not discharged his onus of proving the genuineness, identity and creditworthiness of all the sundry creditors payable except th .....

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stances of the case as discussed above, in absence of substantive evidence, the addition of ₹ 15,00,000/- is sustained during the year. 4.5 Therefore, as discussed above, the income of the appellant is enhanced during the year by ₹ 11.50 lacs and ₹ 15.00 lacs respectively. The Id. AO is hereby directed to give effect to this appeal order and issue notice of demand with proper calculation of interest with copy of the same to this office. 7. From the above paras, it is seen that .....

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rges Payable ₹ 16.25 lacs out of total labour charges claimed ₹ 23.82 Lacs. It means that labour charges for more than 8 months is claimed to be outstanding at the year end and it is not a case of the assessee that such labour charges payable is payable to one or more labour contractor who can afford to grant this huge credit of more than 8 months. Regarding this contention that G.P. rate and N. P. rate of the present year are better in the present year as compared to the preceding o .....

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justified. Now the question is about the quantum of disallowance. We feel that if the preceding year is considered as a guiding factor, the labour charges should be 22.69% of Receipts of ₹ 90.35 Lacs as in that year and as a result, the labour charges for the present year comes to ₹ 20.50 as against claimed by te assessee of ₹ 23.82 Lacs. We have already noted that since this is not a case of the assessee that any assessment of such preceding or succeeding year was completed u/ .....

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sheet of ₹ 27.76 lakh is without including unpaid expenses ₹ 16.64 lakh. Party wise list of such sundry creditors of ₹ 27.76 lakh is available along with the Audited Accounts at page 64 of the paper book and this list includes 34 parties. The assessee submitted a list of confirmation of sundry creditors and as per the same, the list is only of five parties with a balance of ₹ 3,70,20/- and in this list also, PAN is mentioned for two parties only. It is also submitted in t .....

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