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TMI Blog1983 (11) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacturing to keep up the tempo of production. So that the tempo of production may not suffer, he gave an understanding to some of the employees who were to work with the assistance of power to see that the production did not suffer for their own additional investment in time and energy. They were given the understanding that they will be suitably rewarded. It was in pursuit of this understanding that these 131 employees were given various sums totalling at Rs. 2,62,928. The ITO has reproduced the details of the persons as well as the detail of the work done by them along with the details of payment made to them in his order. The ITO not being satisfied with this explanation made further enquiry in the matter. He pointed out to the assessee that assessee had already made a payment of bonus for which he had claimed a deduction of Rs. 34,231. This amount was debited to the profit and loss account of the year and the ITO had no difficulty in accepting the claim for deduction. In the preceding year, the assessee had made a claim of Rs. 36,462 for deduction account of bonus paid to all the employees. The ITO had no difficulty in accepting the claim for deduction. The payment of this su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and not in lieu of bonus paid under the Payment of Bonus Act, 1965. Workers bonus paid as per profit and loss account is Rs. 34,231 as against Rs 36,462 paid in the preceding year. The assessee has been relied upon the decision of the Supreme Court in the case of Hukum Chand Jute Mills Ltd.... The assessee has tried to distinguish between the payment under section 31A of the Payment of Bonus Act and the payment made by the assessee which is claimed to be customary or not contractual. In the case relied upon by the assessee the customary payments of bonus were being made at least since 1962-63 up to 1976.... The source records from which the productivity bonus has been calculated have not been produced for verification. The provisions of section 31A of the Payment of Bonus Act, 1965 are clearly applicable to this case and as the assessee has made payments of normal bonus under the Payment of Bonus Act the claim for productivity bonus is not admissible as it can only be in lieu of bonus paid under the Payment of Bonus Act based on profits." As the disallowance exceeded a sum of Rs. 1 lakh he sent the draft assessment with the objections of the assessee to his IAC under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actors. Simple price rise of the products can account for the increase in value of sales. For example, the following Chart will show the direct relevancy of this arguments : Sl. No. in Name of the Item Sale price as on the list ----------------------------------- 1-1-1976 1-4-1977 1-9-1977 22 WP Housing Tata 45 51 51 30 Front Hub Drum W/Bolt 170 190 190 31 Rear Hub Drum 32214 200 220 220 32 Rear Hub Drum 32215 200 220 220 33 Front Brake Drum Tata 115 130 130 34 Rear Brake 110 120 120 58 Gear Box House Tata 115 125 125 59 Clutch Housing Tata 120 130 130 62 R/S Front 17.25 20 20 63 R/S Front 17.25 20 20 81 Rear Brake Drum 110 120 120 90 WT Gross Gali 60 60 66 128 Helper Bracket 127 135 135 131 R/S Front and Rear 16.25 20 20 147 Rear Brake Drum 110 120 120 148 Front Brake Drum 105 115 115 175 R.S. Rear Hanger 26.25 30 60 186 Rear Spring Pin Dodge 55 60 60 205 R.S. Rear Hanger Dodge 26.25 30 30 211 F.S. Rear Hanger Dodge 12.75 15 15 240 B/S Bracket Tata 22.50 32 32 As shown above the claim of the assessee that the payment is on account of extra wages, is also not considered. Even if it is so, then the amount should have been debited to the manufacturing account and not to profit and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the specification of the job rendered by a workman was collected and his remuneration determined. Another argument which the assessee took in this matter was that the IAC had exceeded his jurisdiction and authority which he was invested with acting under section 144B in respect of a draft assessment submitted to him. He was to issue his direction on the basis of the finding recorded by the ITO and the objections made out by the assessee. If he wanted to strike new lines it was but fair that the assessee should have been confronted with it. The IAC found that payment was not made during the year. This was not the case of the ITO. The ITO had accepted the payment. After the IAC had relied on this fact, it was just and proper that he should have been confronted with this finding before the new findings were relied on to make the disallowance. Moved by these pleas the Commissioner (Appeals) held that the assessee could not be denied the claim for deduction. He also liberally drew on the Supreme Court pronouncement made in the case of Shahzada Nand & Sons v. CIT [1977] 108 ITR 358 where their Lordships taking into note new socio-economic consideration prevalent in the society held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear as to what had led the assessee to undertake this payment of the aforesaid sum to a few of his workers. The assessee had made a payment of bonus which had already been allowed. What was this payment, which was designated as bonus but was claimed otherwise before the assessing authorities. He also referred to the finding of the IAC and in this connection, he stressed on the fact that payment had not been made during the year. If there was any liability created, it was created according to the departmental representative after the close of the accounting year. According to his submissions, the Commissioner (Appeals) has not properly appreciated the facts before reversing the finding of the ITO which had been properly screened by the IAC when he sent the draft assessment for securing his direction under section 144B. On the other hand, the learned counsel for the assessee reiterated his plea. According to him, the IAC had exceeded his authority which he was invested with under section 144B. He has not confined himself to giving directions on a consideration of the finding of the ITO and the objections filed by the assessee. He had struck new lines of investigation and had brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of running the business and was made in connection with their work for which full details had been supplied to ITO a part of which had been incorporated by the ITO in the assessment order. The assessee had been able to establish that the turnover of the year as well as the rate of gross profit registered appreciable improvement in spite of the fact that there were frequent power cuts operative during the period which obviously affected the production in manufacturing industries. It was this fact which had been relied upon by the Commissioner (Appeals) inter alia in reaching a finding that the claim for deduction as business outgoing could not be accordingly supported. When these facts indicated above are considered together, one cannot but hold that payment had been made only in the interest of business by the assessee to 131 employees who were not related to it or to any of its partners. Merely because the assessee had not been able to put forth a cut and dried formula on the basis of which he might have determined the amount payable to the employees will not go to show that payment had not been made for purpose of business. His failure to define the formula will not go to show th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon by the ITO for support. This Bench in several cases including that in the case of Sadana Rubber & Plastic Industries v. ITO [IT Appeal No. 266 (Asr.) of 1979] had explained the purpose and scope of the provision contained in section 144B. It has been held in those cases that the ITO even after the insertion of the new provision in section 144B continues to be the king-pin of the assessment. The IAC does not share with him the legal or executive authority of making the assessment. The sole authority executive and legal remains with the ITO for the purpose of making the assessment, whose order is appealable. The scope of the IAC acting under section 144B is purely advisory to render advice on disputed issues. We would not go in this order to question the authority of the IAC to reach new findings because the assessee has not raised a plea to that effect but we would stress that if the new findings made by the IAC are relied upon by the ITO as appears to be the case in appeal before us where the ITO has incorporated in his order the voluminous directions of the IAC including his fresh findings, it was but reasonable and fair that the new findings should have been confronted to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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