TMI Blog2013 (5) TMI 1027X X X X Extracts X X X X X X X X Extracts X X X X ..... learned AR of the assessee supported the order of the learned CIT(A). 4. We have considered the rival submissions and perused the materials on record and gone through the orders of the authorities below. We find that this issue was decided by the learned CIT(A) as per Para 4.4 of his order and for sake of ready reference, Para 4.4 of the order of the learned CIT(A) is reproduced herein below: 4.4 I have gone through the submissions of the appellant and perused the record. There is no dispute that the payments made are through account payee cheques and duly reflected in the books of accounts of the appellant. The appellant has arranged for training for his workers through a reputed institution and hire charges paid for the auditorium hall are for conducting the training course. Training is always an ongoing process to update the skills of workers vis-a-vis new technologies for an efficient and smooth production. I am, therefore, in agreement with the appellant that expenditure incurred on training of employees is revenue expenditure, necessarily incurred for the purpose of business and the appellant has lawfully claimed the same as business expenditure u/s. 37 of the I.T. Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r bills of the authority, that the expenses are actually incurred for the business purposes. The payments of bills are in proportion to the premises actually used by the appellant, as in the past, and there is no duplicate claim of the expenditure in either name. The Assessing Officer has also not observed any defects in the maintenance of the books of accounts, nor any expenditure having been claimed without proper bill. There is also no dispute that the entire expenditure relates to business premises and nothing included out of residential bills of the appellant. Considering the totality of the facts and circumstances of the case, there is no justification in disallowing such expenses on ad hoc basis. The Assessing Officer is, therefore, directed to delete the additions of ₹ 48,48,440/- and ₹ 1,24,360/- out of electric power expenses and out of electric expenses respectively. From the above paragraph of the order of the learned CIT(A), we find that a clear finding is given by the learned CIT(A) that the payment of bills are in proportion of the premises actually used by the assessee as in the past and there was no duplicate claim of the expenditure in either name. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and circumstances of the case, the disallowance of ₹ 10 lacs made by the Assessing Officer on estimated basis is deleted. 12. From the assessment order, we find that this disallowance was made by the AO on the basis that the assessee had hired machinery from M/s. Zadaphiya as well as used his own machinery. He has also noted that the partners had not complied with the AO's summons. He further notices that a sum of ₹ 11,25,715/- is outstanding for laser charge in the books of accounts of the assessee as dues payable to Shri Bhavin M. Zadaphiya. He further noted that the assessee had shown laser charges of ₹ 7,36,364/- paid to Shri Bhavin M. Zadaphiya on account of polishing of diamonds but he had made entry in the name of Urvesh M. Zadaphiya. By making these observations, the AO made addition of ₹ 10 lacs out of laser charges paid to Shri Bhavin M. Zadaphiya. The same has been deleted by the learned CIT(A) on the basis that the AO had made lump sum addition without assigning any reason at all. He also noted that Shri Bhavin M. Zadaphiya operated from same premises and he was distant relative of the assessee and it cannot be a valid reason to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is supported by tax audit report u/s. 44AB. The Assessing Officer neither detected any defects/discrepancies in the accounts of the appellant nor any cogent evidence brought on record. The AO has basically reasoned out the disallowance on the basis of small gaps in the statement of actual job workers who do not work directly under the proprietor and hence could not have met him personally. Most of the job workers are organized by a few trusted people who supervise the manufacturing assignments and wage payments on behalf of the proprietor. The AO has also not taken in to consideration the fact that actual production and dispatch of manufactured diamonds has not been adversely commented upon nor any such finding given. The prevalent market rate of wages per carat diamond is also in the same range. The overall profitability of business and net profit ratio is relatively higher than what has been disclosed by the similarly placed parties in the same range of turnover. In cases of Shri Dhanjibhai Bhagwanbhai Patel Vs. DCIT Investigation Cir. 1(1), Surat (ITA No. 780/Ahd./2001) and Bhadiadra Diamonds [IT (SS) No. 16 18/Ahd./1999] 6% is held to be a reasonable G.P. in a regular diamond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mined. But in the case before me no such case is made. AO's main arguments that no prudent person will give the rough diamonds to be polished to outside parties who can not overcome the risk involved in frequent and virtually daily physical movement of precious items, especially when the appellant himself has his own fully secured factory along with the fact that some parties themselves were not knowing the assessee proprietor himself and that Mr. Vanmali was the effective leader of the seven suspect parties by his own admission, can not justify huge addition so made overlooking the income offered to taxation. Nevertheless fact of discrepancies as noted also prove that everything is not perfect with appellants claims of wage payments too. There is certain scope, however meager it may be on account of adequacy of taxable income offered, of possible inflation. In my view it will be reasonable if the income from the business is estimated at 8% of the turnover. The addition made on this point deserves to be deleted. Therefore in the light of facts and circumstances of the case the AO is directed to compute appellants' income at the rate of 8% of the job receipts. 16. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repancies also as noted by the AO. We also find that it is noted by the learned CIT(A) in his order on page 22 that blind confirmation of addition in the present case would mean assessing net profit of 32.25% which would be ridiculous in this line of business wherein the Tribunal in many cases has held profit between 3% to 5% as reasonable. Considering these facts, we decline to interfere in the order of the learned CIT(A) on this issue also in respect of revenue's appeal. 17. At this juncture, we would also like to mention that once the learned CIT(A) has directed the AO to estimate the income of the assessee at 8% of the turnover and we are upholding the estimation of income, may be @ 8% or less, the other grounds of the appeal of the revenue do not survive because once income is assessed on certain percentage of the turnover, no separate addition for disallowance of expenses can be made. Although, we have rejected the other grounds of the appeal of the revenue separately also, but for this reason alone, these grounds do not survive. 18. In the result, the appeal of the revenue dismissed. 19. Now, we take up the appeal of the assessee. 20. Ground No. 1 raised by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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