TMI Blog2021 (8) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... ginal of Jangad was not verifiable as the same were not produced and some of the payments from the bankers of the job workers were withdrawn by the accountant of the assessee and for covering such discrepancies the ld CIT(A) restricted the disallowance to the extent of 15% of the total disallowance of labour expenses to meet the end of justice. GP and NP ratio of the assessee is better comparative to other similar business houses. In AY 2012-13, the assessee has shown NP @ 4.27%, however, Thumar Gems has shown NP @ 2.12 %, Jodhani Export @ 3.46% and K.N. Diamond @ 3.22% - we are also of the view that 15% disallowance is reasonable to avoid the possibility of revenue leakage. Hence, we affirm the order of ld CIT(A). Resultantly, the grounds of grounds of appeal raised by the revenue are dismissed. - IT(SS)A No.10/Ahd/2016, ITA No.12/Ahd/2016 - - - Dated:- 26-7-2021 - Shri Pawan Singh, Judicial Member And Dr. Arjun Lal Saini, Accountant Member For the Assessee : Shri Mehul Patel, Advocate For the Revenue : Shri Ritesh Mishra, CIT-DR ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. These two appeals by Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd and seized. The statement of one of the partner of assessee was recorded under section 131 of the Act on 11.10.2011. The assessee while making the statement disclosed that a cashof ₹ 40 lakh was withdrawn on 10.10.2012 from the bank account of nine job works parties as all job work parties and the assessee are maintaining their bank accounts in the same bank i.e. Saraswat Co-Operative Bank Varacha Branch, Surat. Thecash of ₹ 15 lakh was withdrawn from the current bank account of assessee on 07.10.2011, out of which cash of ₹ 13 lakh was seized. 3. On the basis of statement of the partner of assessee, Gordhandas P Rijiya, the Assessing Officer took his view that part of cash of ₹ 13 lakh, out of total cash seized of ₹ 53 lakh belongs to assessee-firm.The Assessing Officer treated the statement of partner as admission and formed his opinion that it is a fit case of issuing notice under section 153C of the Act. Accordingly, the Assessing Officer issued notice under section 153C on 04.09.2013. In response to notice under section 153C, the assessee filed its return of income on 10.10.2013 declaring taxable income of ₹ 6.10 Crore. The Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cket number, and number of pieces, gross weight, net weight, wastage or rate of labour. The Assessing Officer asked all the job works parties to provide the rate of receiving diamonds, nature of rough diamonds, number of pieces, weight, date of delivery of rough diamonds, weight of rough diamonds after job, wastage and job charges. The Assessing Officer further recorded none of the parties could provide required information or details. Therefore, the Assessing Officer suspected the entire job works expenses of those nine parties. The Assessing Officer also noted that most of the persons are either employee of the assessee-firm or related to the partner of the assessee. The rate of job work disclosed by the workers is different than actual work done by them. The assessee claims that expenses of job work were paid through cheques.The Assessing Officer also examined the bank statement of all nine parties. On verification of accounts, the Assessing Officer noted that on crediting cheque amount, 99.90% of the credit amount was withdrawn immediately by cheques. On further investigation the Assessing Officer came to know that all withdrawal are made by Shri Khushal, accountant of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hai Chandpura and Narayanbhai Magtarpa) aggregating ₹ 2.36 crore, was disallowed by taking view that job works of these seven partiers remains unsustainable and not eligible for deduction as business expenses. 7. Aggrieved by the additions the assessee filed appeal before Ld. CIT(A). Before Ld. CIT(A), the assessee filed detailed written submissions. The submission of the assessee are recorded in para. 10.1 of the impugned order. In the written submission, the assessee contended that the books of assessee was accepted in regular assessment years 1998-99 to 2010-11 and no defects were found by the Assessing Officer. The Assessing Officer deputed Inspector under section 133B who examined the job works regarding source of wage payment, rate of labour and outstanding balance during the regular assessment. The assessee maintained Jangads which are affixed with the packets of rough diamonds during the movement of manufacturing stages. The statement of job workers recorded on 15, 17 and on 21 October 2011 wherein they admitted ownership of machineries, maintenance of books of account, rented factory premises and electricity installation. The assessee also stated that job works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-13 1,49,15,95,949 22,38,76,237 1,86,84,477 8.35 8. The assessee also relied on various case laws. The Ld. CIT after considering the material on record, assessment order and the submission of the assessee held that assessee claimed its NP rate is reasonable compared to NP margin with other concerned in similar trade or business. It was also held by the ld. CIT (A) that it is difficult to find out the actual NP margin may be. In most of the concerned having same businesses are comparing from Special Economic Zone (SEZ) during the same year are shown NP with the range of 20% without benefit in the cost of sale or price. The Ld.CIT(A) followed the decision of Tribunal in the case of M/s Ashwin Diamonds vs. Income Tax Officer in ITA No.1145/Ahd/2009 dated 11.05.2012 wherein the disallowance of similar (bogus) job work was upheld to the extent of 10%. The Ld. CIT(A) after considering the other material held that the facts of the present case is little different with the facts of the present assessee because of non-production of basic record and not keeping original Jangads with v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. On the other hand, Ld. AR for the assessee submits that the books of account of the assessee were not rejected by Assessing Officer and no defects in the books of accounts were pointed out by Assessing Officer. The Assessing Officer is not empoweredto disallow the genuine expense without rejecting the books of account. The payment of labour chargers were made by deducting tax at source (TDS) and entire payments were made through cheques. The assessee has debited more than ₹ 20 crore of labour expenses. The labour expenses, which were doubted by the Assessing Officer, were only about 10% of the total labour expense. The assessee has shown taxable income of ₹ 6.10 crore. The assessee has also shown better GP and NP with comparative other comparable business houses which are in the same trade and business. The ld. AR for the assessee further submits that the revenue has filed appeal against the sustaining the disallowance to the extent of 15% of such labour charges job expenses. 12. The learned AR for the assessee submits that the assessee has accepted the order of ld CIT(A) and has paid due tax on the liability of tax on the 15% disallowance of labour expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e making payment to the job works parties. It was also held that the entire claims are not verifiable. The role of the accountant who had allegedly prepared bills of the job workers and withdrawn the amount from the accounts of the Job workers was also examined. The ld CIT(A) find that such bills are signed by the job workers without verifying the details and the payments were withdrawn from the bank by the accountant. None of the worker could produce the original of the bills. The ld CIT(A) after considering the decision of Tribunal in Ashwin Diamonds (supra) held that in the said case the Tribunal restricted the labour and other expanses to the extent of 10%. But keeping in view, the basic difference in facts of the present case that original of Jangad was not verifiable as the same were not produced and some of the payments from the bankers of the job workers were withdrawn by the accountant of the assessee and for covering such discrepancies the ld CIT(A) restricted the disallowance to the extent of 15% of the total disallowance of labour expenses to meet the end of justice. 15. We find that the GP and NP ratio of the assessee is better comparative to other simil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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