2016 (8) TMI 161 - HC - Income Tax

Disallowance of job work charges - ITAT upholding the decision of CIT (A) whereby the disallowance has been restricted to 2.5% from 25% - Held that - The Tribunal, while dismissing the Revenue s appeal, noted that before CIT (Appeals), the assessee had pointed out the relevant details with full addresses of the vendors and copies of their bills. These vendors were from Bhivandi, Maharastra. It was not possible to obtain a confirmatory letter from each of them after long passage of time. The Tribunal noted that the Assessing Officer had not recorded any justifiable reason for making such disallowance on estimate basis. The Tribunal was of the opinion that in the line of the business namely of manufacturing of grey cloth, finished cloth could not be sold unless it is weaved and processed and the cost of weaving and processing is direct cost which has to be incurred by the assessee. The assessee had supplied the list of parties to whom weaving charges have paid with complete addresses of such persons. He had also filed copies of bills of job work expenses containing details such as names and addresses of the parties. Thus, the issue was examined by the CIT (Appeals) and the Tribunal on the basis of available materials on record. Such concurrent findings do not call for any interference - Decided against revenue

Summary

Issues:
Cross tax appeals filed by assessee and Revenue involving similar issues.

Analysis:
1. The appeals concern the disallowance of job work charges claimed by the assessee. The Assessing Officer disallowed 25% of the claimed expenditure due to lack of justification, resulting in an increased total income. The CIT (Appeals) partially upheld the disallowance, limiting it to 2.5%. The Tribunal dismissed both appeals, emphasizing that the CIT (A) had provided detailed reasoning and considered the lack of evidence for the disallowance. The Tribunal noted that the AO did not have justifiable reasons for the high disallowance and that the assessee had submitted relevant details with full addresses of vendors and bills, which the AO failed to acknowledge. The Tribunal also highlighted the direct cost nature of weaving and processing in the business, supporting the limited disallowance.

2. The Tribunal dismissed the assessee's appeal as well, stating that the issues and facts were identical to another case for the same assessment year. The Tribunal found no merit in the grounds presented by both parties, leading to the dismissal of the appeals. The Tribunal's decision was based on the analysis and outcome of a similar case involving the same issues and facts.

3. Upon review, the High Court found no errors in the Tribunal's judgment. The Court concurred with the Tribunal's assessment that the disallowance was adequately examined by the CIT (A) and the Tribunal based on the available evidence. The Court agreed that the concurrent findings did not warrant any intervention. The Court also upheld the limited disallowance decision made by the lower authorities, affirming the dismissal of all tax appeals.

In conclusion, the High Court upheld the Tribunal's decision to dismiss both the assessee's and Revenue's appeals, emphasizing the thorough examination of the disallowance issue by the lower authorities and the absence of errors warranting intervention.