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2016 (8) TMI 161 - GUJARAT HIGH COURT

2016 (8) TMI 161 - GUJARAT HIGH COURT - TMI - Disallowance of job work charges - ITAT upholding the decision of CIT (A) whereby the disallowance has been restricted to 2.5% from 25% - Held that:- The Tribunal, while dismissing the Revenue's appeal, noted that before CIT (Appeals), the assessee had pointed out the relevant details with full addresses of the vendors and copies of their bills. These vendors were from Bhivandi, Maharastra. It was not possible to obtain a confirmatory letter from eac .....

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charges have paid with complete addresses of such persons. He had also filed copies of bills of job work expenses containing details such as names and addresses of the parties. - Thus, the issue was examined by the CIT (Appeals) and the Tribunal on the basis of available materials on record. Such concurrent findings do not call for any interference - Decided against revenue - TAX APPEAL NO. 682 of 2015 TO TAX APPEAL NO. 684 of 2015 With TAX APPEAL NO. 410 of 2015 With TAX APPEAL NO. 411 of .....

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by the Revenue challenging judgement of Income Tax Appellate Tribunal dated 09.01.2015 raising following questions for our consideration: [A] Whether the Appellate Tribunal has substantially erred in upholding the decision of CIT (A) whereby the disallowance has been restricted to 2.5% from 25% in spite of concurring with AO that the job work charges have been inflated? [B] Whether the Appellate Tribunal has substantially erred in upholding the decision of CIT (A) that the assessee had submitte .....

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had filed return of income declaring total income of ₹ 2.42 lacs. The return was taken under scrutiny by the Assessing Officer. He noticed that the assessee had claimed weaving charges of ₹ 3.85 crores. He called upon the assessee to justify such expenditure. On the ground that the assessee failed to do so and that the expenditure was extremely high, the Assessing Officer disallowed 25% thereof or ₹ 96.35 lacs and adding excise duty component to the same, computed the total inc .....

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order in this case, while disposing of the appeal of the assessee. He has dealt with each and every defect pointed out by the AO in detail. He has given a finding that the plea of the AO that the assessee could not give a complete address to whom the payment for job work charges were made, was not correct. The assessee has filed all the relevant details in full addresses of the vendors and copies of their bills. The assessee has pleaded before the CIT(A) that all the vendors were from Bhiwandi, .....

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We find that CIT (A) has discussed a number of decisions cited at the Bar while deciding the appeal of the assessee. We find that in the line of business of the assessee of manufacturing of grey cloth, finished cloth could on not be sold unless it is weaved and processed and the cost of weaving and processing is the direct cost which has to be incurred by the assessee. Purchase of yarn cloth and sale of grey cloth could not be disputed by the Revenue. The CIT(A) has given a finding that the asse .....

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pellate order that the AO has not made any inquiry at all as can be seen from the assessment order, and when the quantity of sales of cloth and purchase of yarn is accepted by the AO, as he has done in this case he could not disallow the weaving charges at the rate of 25% without bringing some material on record to show that the inflation was so huge. The CIT(A) has further recorded that the AO has brought no material on record to prove that either the parties were bogus or the job charges were .....

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ered view that considering high turnover of the assessee and a very low GP shown by him, the possibility of some inflation in job work charges could not be ruled out. Accordingly, the action of the CIT (A) in restricting the disallowance out of job work charges to 2.5% out of total job work charges paid by the assessee by way of estimate as against 25% disallowance made by the AO seems to just and fair, and is accordingly confirmed. In this view of the matter, we see no merit in the ground of th .....

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n the foregoing paras of this order while disposing of the appeal of the assessee and the Revenue in the case of Shri Kailashchandra Maliram Kanodia for the same A.Y. 2007-08, we hold that there is no merit in the grounds of the assessee and the Revenue, and accordingly, both are dismissed. 4. Against the said judgment of the Tribunal, the Revenue has filed the present tax appeal. Assessee's Tax Appeal No. 410 of 2015 came up for admission hearing earlier and was admitted by an order dated 1 .....

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