2014 (2) TMI 571 - AT - Income Tax

Deletion made on account of disallowance of labour charges Held that - CIT(A) held that book results cannot be regarded as defective on the ground of non- maintenance of quality wise details of diamonds Relying upon M/s. Dhami Brothers Versus ACIT, Cir. 9 Surat 2010 (8) TMI 817 - ITAT AHMEDABAD disallowance has been made mainly on the ground that some other entities are making payment of labour charges at the rate which is lower than that of the assessee - The Assessing Officer himself accepts the fact that diamond labour is paid at different rates for different jobs & the rate varies as per size, weight, quality, etc. of rough the assessee has produced all the relevant evidences in support of the claim of labour charges & therefore no disallowance on presumptive basis should be made if there are no defects in the evidences produced by assessee - there is no basis in restricting the claim of labour charges - there was no infirmity in the order of CIT(A) - Decided against Revenue.

Summary

Issues:
Appeal against deletion of addition of labour charges by CIT(A).

Detailed Analysis:
The appeal was filed by the Revenue against the CIT(A)'s order deleting the addition of Rs 15,22,088 made by the Assessing Officer on account of disallowance of labour charges. The Assessing Officer observed that the assessee paid labour charges at a rate higher than others in the same business. The CIT(A) noted that the gross profit rate for the year was higher than the preceding year, and the assessee provided evidence supporting the labour charges claim. The CIT(A) emphasized that the Assessing Officer did not point out any defects in the evidence produced by the assessee. The Tribunal in the case of the assessee for the earlier year had confirmed the CIT(A)'s order in a similar situation.

The Assessing Officer estimated labour charges at a lower rate and made the addition based on the difference, as the assessee did not provide quantity and quality-wise data of rough diamonds. However, the CIT(A) found the gross profit rate higher for the year under consideration compared to the previous year. The CIT(A) highlighted that the assessee had submitted all relevant evidence supporting the labour charges claim, and no defects were identified by the Assessing Officer. The Tribunal's decision in the preceding year's case of the assessee supported the deletion of the addition, emphasizing that disallowance cannot be solely based on the rates paid by other entities.

The Tribunal upheld the CIT(A)'s decision to delete the addition, stating that the Assessing Officer did not provide any substantial evidence to challenge the CIT(A)'s findings. The Tribunal noted the increase in gross profit rate despite the rise in labour charges, emphasizing that the assessee had produced sufficient evidence to support the claim. The Tribunal also referred to its decision in the earlier year's case of the assessee, where a similar addition was deleted based on similar grounds.

In conclusion, the Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s order to delete the addition of labour charges. The Tribunal found no justifiable reason to interfere with the CIT(A)'s decision, considering the evidence provided by the assessee and the lack of substantial evidence from the Revenue to support the addition.

Order pronounced on Thursday, the 30th of January, 2014 at Ahmedabad.