TMI Blog2013 (11) TMI 1765X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3. Feeling aggrieved and dissatisfied with the impugned common judgment and order passed by the learned ITAT dated 17.05.2013 in ITA No.359 and 4/Ahd/2008 for the assessment year 2004-05, by which the learned ITAT has dismissed the appeal preferred by the Revenue [ITA No.4/Ahd/2008] and has partly allowed the appeal preferred by the assessee being ITA No.359/Ahd/2008 and reduced the net profit to 7.5% instead of net profit at 8% as adopted by the learned CIT(A), Revenue has preferred the present appeals. 3.1. In Tax Appeal No.1026/2013 which is arising out of the impugned order passed by the learned Tribunal in ITA No.4/Ahd/2008, the Revenue has proposed the following substantial question of law. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT has correct in applying net profit of 7.5% on gross receipt, instead of specify decides on facts on the disallowance unverifiable and inflated labour charges made by the AO? While preferring Tax Appeal No.1027/2013 arising out of the impugned judgment and order passed by the learned ITAT in ITA No.359/Ahd/2008, the Revenue has proposed the following substantial questions of law. (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 On account of Laser expenses 10,00,000 4.2 Feeling aggrieved and dissatisfied with the assessment order making above additions, assessee preferred an appeal before the learned CIT(A) and the learned CIT(A) vide order dated 26.11.2007 partly allowed the said appeal and directed the AO to compute the assessee's income at the rate of 8% of the job receipt as against the income declared by the assessee at 7.13% and other additions were directed to be deleted. 4.3 Feeling aggrieved and dissatisfied with the order passed by the learned CIT(A) deleting the addition of ₹ 1,00,000/- and ₹ 10,000/-made by the AO in respect of diamond tuition expenses and auditorium expenses respectively as well as deleting the addition of ₹ 48,48,440/-and ₹ 1,24,360/- made by the AO in respect of electric power expenses and out of electric bills respectively as well as deleting the addition of ₹ 10,00,000/- made by the AO in respect of laser expenses and auditorium expenses respectively as well as deleting the additions of ₹ 1,50,00,000/- and ₹ 4,22,95,871/- made by the AO in respect of manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been manipulated by the assessee by computing the labour charges. Making above submissions, it is requested to admit/allow the present appeals. 6. Heard Shri Sudhir Mehta, learned counsel appearing on behalf of the appellant. 6.1 So far as the deletion of addition of ₹ 10,00,000/- made by the AO in respect of laser expenses [proposed substantial question No.2[A] in Tax Appeal No.1027/2013] is concerned, while making such deletion, the learned CIT(A) has observed that the laser expenses paid to Ravi Laser and Shri Bhavin Zadafia, the payment to them are reflected in the regular books of account maintained by the assessee and they are supported by the proper bills of the parties. The learned CIT(A) has also observed that the AO has neither noticed any defect in their bills nor the AO has brought on record any comparable cases to show that excessive payments were made which could be hit by mischief of provisions of section 40A(2)(b) of the Act. Making above observations, the learned CIT(A) has directed to deleted the disallowance of ₹ 10,00,000/- made by the AO on estimated basis. The learned ITAT has confirmed the aforesaid deletion by observing in para 12 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) observed in para 8.6 as under: 8.6 I have gone through the submissions of the appellant and perused the record of the Assessing Officer. Discrepancies noted in the quantity of rough and polished diamond are totally illfounded as shortage gets accounted on account of laser cutting which is normal and the lot wise break of the same is reflected in the primary record itself and therefore, the issue does not need much elaboration. And therefore AO's action can not be upheld. The yield is in line of normal trend in the business. Cutting is bound to lead to certain losses in weight. Regarding the allegation of labour inflations it is seen that the appellant has submitted voluminous record relating to receipts of job work, labour expenses, labour register, labour bills, Jangad books, bank statements and confirmation of the labour parties, together with the copies of their individual I.T Returns and allied accounts, including personal attendance before the Assessing Officer. The appellant has maintained regular books of accounts which are found to having been maintained on day-to-day basis, these are audited by the Chartered Accountants and the return is supported by tax audit r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eys or search and seizure operations to find out correct income. The taxpayer is also expected to maintain books of accounts bills and vouchers and various registers basically to substantiate his claim of income. In both cases only taxable income is to be ascertained or substantiated. Blind confirmation of the additions in the present case would mean assessing the appellant at the net profit rate of 32.25% which would be ridiculous in this lien of business where jurisdictional ITAT has held profit between 3% to 6% to be reasonable. Even if, hypothetically, if no books of accounts were kept or produced can such estimation of income be termed as reasonable, is the moot question. The written submissions of the appellant which have been reproduced above and have been carefully gone through by me have substantially taken away the force of the argument of the A. O. If rough diamonds have been received and polished returned and nothing is doubted about the same, surely some job charges will be paid. And the entire payment is through bank and no cash is paid to any party. Whether the rate of job charges is excessive or higher than the prevalent market rate can be examined. But in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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