TMI Blog2018 (4) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT(A), it cannot be said that the assessee has conclusively proved the genuineness of labour charges. A portion of the expenditure claim may be disallowed in order to take care of revenue leakages. CIT(A) has disallowed 30% of the labour charges paid to the five parties. We notice that the AO has not shown that the labour charges were not incurred at all. It is an admitted fact that the garments cannot be manufactured without incurring labour charges. Hence, disallowance of 30% appears to be on the higher side. Accordingly we modify the order passed by Ld CIT(A) on this issue and direct the AO to restrict the disallowance to 15% of the labour charges paid to the five parties. Disallowance made of purchases made from M/s Harsh Textiles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance made out of labour charges ( c) Disallowance made out of purchases made from M/s Harsh Textiles. 2. We heard the parties and perused the record. The assessee is the proprietor of a concern named M/s Mehta Creation and is engaged in the business of manufacturing of garments. The return of income filed by the assessee was taken up for scrutiny and the AO completed the assessment by making various additions. The Ld CIT(A) granted partial relief to the assessee and still aggrieved, the assessee has filed this appeal before the Tribunal. 3. The first issue relates to the addition made u/s 41(1) of the Act. During the course of assessment proceedings, the AO issued notices u/s 133(6) of the Act to six creditors in order t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt and the balance outstanding in its name has been paid in the succeeding years. Hence we are of the view that the provisions of sec. 41(1) shall not apply to the facts of this issue. Accordingly we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition of ₹ 1,01,867/- relating to M/s Suryalaxmi Garments. 7. The next issue relates to the disallowance made out of labour charges. The AO issued notices u/s 133(6) of the Act to the various persons claimed to have been providing job work to the assessee. Hence the AO disallowed entire labour charges relating to five persons. The Ld CIT(A) restricted the disallowance to 30%, since it was not proved beyond doubt that those persons have really prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restrict the disallowance to 15% of the labour charges paid to the five parties. 10. The last issue relates to the disallowance made of purchases made from M/s Harsh Textiles. The assessee has purchased fabrics to the tune of ₹ 45,25,048/- from M/s Harsh Textiles. In order to verify the genuineness of purchases, the AO issued notice u/s 133(6) of the Act to the above said party, but the same was returned unserved. Hence the AO disallowed 25% of the value of purchases made from M/s Harsh textiles, which worked out to ₹ 11,31,262/-. The Ld CIT(A) upheld the same. 11. The Ld A.R submitted that M/s Harsh Textiles is not declared as Hawala dealer by the Sales tax department. He submitted that the assessee has produced all the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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