9911796707
TMI Blog2011 (7) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... he contractors towards godown charges, inward transport, octroi, warpins, sizing, beam setter, dropin charges, weaving, jobber, clipping, folders, outward transport, electricity, mill stores spares, lubricant and hamal charges, which are claimed under the head 'labour charges'. 3. In the assessment year 2005-06 also, the assessee has raised a materially identical ground (i.e ground no. 1), which we must take up together with the above ground of appeal for the assessment year 2004-05 and which is as follows: On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the entire addition of Rs. 20,57,946 made by the learned Assessing Officer in respect of alleged inflated labour charges, without appreciating the fact that the appellant has paid consolidated charges to the contractors towards godown charges, inward transport, octroi, warpins, sizing, beam setter, dropin charges, weaving, jobber, clipping, folders, outward transport, electricity, mill stores spares, lubricant and hamal charges, which are claimed under the head 'labour charges'. 4. The relevant material facts are like this. The assessee is engaged in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has claimed labour charges @ Rs. 6.50 per meter in the name of family members and the employees. When assessee was confronted with this and the Assessing Officer required the assessee to show cause as to why labour charges should not be disallowed, it was submitted by the assessee that "Shri Kalpesh Gada has admitted inflation in job work unknowingly" as "he could not understand the question" and that "in the same matter, Bhagwanji K Gada, who is the main conductor and organizer of the entire business and the family, has strongly rejected the question of inflation of labour charges". It was also submitted that "out of 18 labour contractors, only 2-3 persons have stated adversely and survey team has held this point strongly". It was also submitted that "Entire expenses cannot be disallowed. Reasonable difference we have declared. Amount of Rs. 50,50,000 is substantial to match the real cost of production". It was further submitted that the rate at which contractors are actually paid is Rs. 4 and Rs. 4.50 in the years 2004-05 to 2006-07, and not Rs. 6 as observed by the Assessing Officer, and, in consideration of payment so made, the contractors have rendered proper and sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee has claimed the labour charges @ Rs. 6 per meter, whereas the actual payment has ranged from Rs. 1.5 to Rs. 2 per meter. Keeping in mind the other expenses, the AO has allowed labour charges @ Rs. 3 per meter. This, according to me, is fair enough and I, therefore, hold that the order of the Assessing Officer does not suffer from any infirmity. Accordingly, I uphold the action of the AO and dismiss this ground. 5. The assessee is not satisfied by the stand so taken by the CIT(A) and is in appeal before us. 6. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position. 7. We have noted that even though the CIT(A) has categorically held that the assessee's claim for labour charges payment is bogus inasmuch as the assessee was involved in a systematic inflation of expenses by using bogus bank accounts in the name of certain persons even as these accounts were actually used and operated by the assessee himself, the assessee's limited grievance before us is on the quantum of disallowance and the quantities of production, as also rate at which inflation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit report - subject to correction of mistakes as pointed out by the assessee, and compute the admissible labour charges at Rs. 3 per meter multiplied to the quantities so worked out. We may also mention that learned counsel for the assessee urged us to make adjustment for inflation in the subsequent years, but we are not favourably inclined to this prayer because the statement about labour charges rates was made by the assessee was in 2007, which must be referring to the labour charges rates payable at that point of time, whereas the years before us pertain to earlier period. To sum up, while we confirm the action of the authorities below in principle, we remit the matter to the file of the CIT(A) for the limited purposes of making corrections of quantities and rate difference, if found admissible, in the light of observations made hereinabove. We direct the assessee to fully cooperate in expeditious disposal of the remanded proceedings and make it clear that in the absence of assessee's furnishing the required details and pointing out specific mistakes, if any, in the computations in Tax Audit Report quantitative details and computations in the assessment order, no relief will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities below and decline to interfere in the matter. 11. Ground No. 2 in the assessment year 2005-06 is, subject to the above observations, dismissed. 12. In ground no. 3 in appeal for the assessment year 2006-07, the assessee has raised the following grievance: On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the AO's action in disallowing the expenses amounting to Rs. 1,18,980 by invoking the provisions of Section 40(a)(ia) of the Income Tax Act, 1961. 13. The above ground of appeal relates to a brokerage payment, which has been disallowed under section 40(a)(ia) as tax has not been deducted at source from the same. No specific arguments were advanced in support of this grievance. In any case, having perused the orders of the authorities below on the issue and in the absence of anything to demonstrate infirmity in the stand so taken, we are inclined to confirm the action of the CIT(A) on merits as well. No interference is called for. 14. Ground of appeal no. 3 for the assessment year 2005-06 is thus dismissed. 15. In the result, while appeal for the assessment year 2004-05 is allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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