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2020 (7) TMI 459 - AT - Income TaxDisallowance of job work expenses - Allowable business expenses or not? - HELD THAT - Job workers in their statement recorded under section 131(1) have confirmed that they provided services of job work, received charges based on competitive market rate and offered the same for the taxation. CIT (A) further given the finding that the there was no evidence brought by the Revenue suggesting that the amount paid to the job worker returned to the assessee in any manner. On perusal of the details of the job work expenses incurred by the assessee in the earlier years, we find that the expenses for the year under consideration towards the job charges in relation to the sales has reduced significantly. Thus, in our considered view there is a direct relation between the amount of sales viz a viz the job work charges incurred by the assessee, therefore such turnover cannot be achieved without incurring the job work expenses. It is also pertinent to note that, at the time of hearing the learned DR has not brought anything on record contrary to the finding of the learned CIT (A). Thus there cannot be any disallowance of the job work expenses as alleged by the AO. In holding so we find support and guidance from the judgment of Hon ble Gujarat High Court in the case of CIT vs. Avinash M Jhawar 2011 (4) TMI 1514 - GUJARAT HIGH COURT - Decided against revenue. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT - Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited 2020 (5) TMI 359 - ITAT MUMBAI
Issues Involved:
1. Deletion of addition made by the AO of ?10,24,42,002/- on account of disallowance of job work expenses. Issue-wise Detailed Analysis: 1. Deletion of Addition of ?10,24,42,002/- on Account of Disallowance of Job Work Expenses: The Revenue raised the issue that the CIT(A) erred in deleting the addition made by the AO regarding job work expenses. The assessee, a private limited company engaged in the business of agricultural equipment, incurred job work expenses amounting to ?33,67,20,932/-. The AO questioned the genuineness of ?10,24,42,002/- of these expenses, paid to various job workers. AO's Doubts and Observations: - The AO noted that the job workers were maintaining savings accounts in Union Bank of India, with the assessee acting as an introducer. Immediate cash withdrawals after cheque deposits were observed. - Statements under section 131 of the Act from some job workers indicated they were employees of the assessee, lacked sufficient machinery, and had mismatched signatures on various documents. - The AO concluded that the expenses were not genuine and disallowed ?10,24,42,002/-. Assessee's Defense: - The assessee argued that outsourcing is a common practice, leading to increased turnover and reduced job work charges to sales ratio. - Payments were made through account payee cheques after deducting TDS, and job workers filed their income tax returns. - The job workers were registered under relevant acts and maintained regular books of accounts. - The assessee provided substantial documentary evidence, including income tax returns, bills, ledgers, bank statements, and statements under section 131, to support the genuineness of the expenses. CIT(A)'s Findings: - The CIT(A) found that the assessee provided sufficient documentary evidence to substantiate the genuineness of the job work expenses. - Payments were made through account payee cheques, and there was no evidence that any portion of these payments returned to the assessee. - The CIT(A) noted that the AO's basis for disallowance, such as mismatched signatures and job workers operating from the assessee's premises, were adequately addressed by the assessee. - The CIT(A) referenced various judicial precedents, including decisions by the Gujarat High Court and the Ahmedabad Tribunal, which supported the assessee's claim. - The CIT(A) concluded that the job work expenses were bona fide and genuine, and the addition made by the AO was deleted. ITAT's Conclusion: - The ITAT upheld the CIT(A)'s decision, noting that the AO's basis for disallowance was merely suspicion and not supported by conclusive evidence. - The ITAT emphasized the direct evidence provided by the assessee, such as payments through banking channels, TDS deductions, and confirmations from job workers. - The ITAT found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal. Pronouncement Delay Due to COVID-19: - The ITAT acknowledged the delay in pronouncing the order due to the COVID-19 pandemic and the resulting lockdown, referencing a decision by the Mumbai Tribunal in a similar context. - The ITAT extended the time for pronouncing the order beyond the usual 90 days, considering the exceptional circumstances. Final Order: - The appeal of the Revenue was dismissed, and the order was pronounced on 01/06/2020.
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