Kailashchandra Maliram Kanodia, ... vs Assessee

आयकर अपीलीय अिधकरण, अिधकरण, अहमदाबाद Ûयायपीठ ''D'', अहमदाबाद ।

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, "D" BENCH सव[ौी ौी जी.

जी.सी.

सी.गुƯा, माननीय उपाÚय¢, उपाÚय¢, एवं एन.

एन.एस.

एस. सैनी, ी, लेखा सदःय के सम¢ ।

BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND N.S. SAINI, ACCOUNTANT MEMBER)

ITA No. & Asstt.Year Appellant Respondent

345/Ahd/2011 Kailashchandra Maliram Kanodia ITO, Ward-2(1) Asstt.Year 2007-08 C/o. Vinit Moonda, 201, Sarap Ahmedabad.

Opp: Navjivan Press, Ashram Road, Ahmedabad.

PAN : ACXPK 8182 E

395/Ahd/2011 ITO, Ward-2(1) Kailashchandra Kanodia Asstt.Year 2007-08 Ahmedabad. Krishna Mansion Kalupur Ghee Basar Kalupur, Ahmedabad 380 001.

346/Ahd/2011 Ajay Kailashchandra Kanodia, HUF ITO, Ward-2(1) Asstt.Year 2007-08 C/o. Vinit Moonda, 201, Sarap Ahmedabad.

Opp: Navjivan Press, Ashram Road, Ahmedabad.

PAN : AADHA 9630 F

393/Ahd/2011 ITO, Ward-2(1) Ajay Kailashchandra Kanodia, Asstt.Year 2007-08 Ahmedabad. HUF Mansion, Kalupur Ghee Basar Kalupur, Ahmedabad 380 001.

347/Ahd/2011 Ajay Kailashchandra Kanodia ITO, Ward-2(1) Asstt.Year 2007-08 C/o. Vinit Moonda, 201, Sarap Ahmedabad. Opp: Navjivan Press, Ashram Road, Ahmedabad. PAN : ACWPK 4700 F

394/Ahd/2011 ITO, Ward-2(1) Ajay Kailashchandra Kanodia, Asstt.Year 2007-08 Ahmedabad. Mansion, Kalupur Ghee Basar Kalupur, Ahmedabad 380 001.

(अपीलाथȸ / Appellant) (ू×यथȸ / Respondent)

िनधा[ǐरती कȧ ओर से/ : Assessee by Shri Vinit Moondra राजःव कȧ ओर से/ : Revenue by Smt.Sonia Kumar, Sr.DR सुनवाई कȧ तारȣख/ : Date of Hearing 2nd December, 2014 ITA No.345/Ahd/2011 &5 Others

घोषणा कȧ तारȣख/ : 09-01-2015 Date of Pronouncement

आदे श / O R D E R

PER G.C. GUPTA, VICE-PRESIDENT: These cross-appeals by the assessees and the Revenue for the Asstt.Year 2007-08 are directed against the orders of the CIT(A). These are being disposed with this consolidated order.

ITA No.345/Ahd/2011 (Assessee's Appeal - Kailashchandra Maliram Kanodia)

2. The only ground of the assessee's appeal is as under:

"1. In his order dated 10/12/2010, the ld.CIT(A) has grossly erred by confirming a disallowance of 2.5% of the jobwork charges claimed by the assessee. In the original order of the ld.AO dated 29/12/2009, the ld.AO had disallowed 25% of the jobwork charges claimed by the assessee of Rs.3,85,42,779/-, due to which the disallowance amounted to Rs.96,35,694/-. During the appeal proceedings, the ld.CIT(A) verified the various submissions given to him, but only reduced the disallowance to 2.5% of the jobwork charges from the original 25% instead of deleting the entire disallowance."

3. Corresponding appeal of the Revenue is ITA No.395/Ahd/2011, in which only ground of the appeal of the Revenue is as under:

"1. The ld.CIT(A) erred in law and on facts in deleting the addition of Rs.86,72,125/- on account of disallowance out of job work charges."

4. The learned counsel for the assessee submitted that the only dispute in this cross-appeal of the assessee and the Revenue is regarding disallowance out of job work charges made by the AO at 25% of the total job work charges and restricted to 2.5% in appeal by the CIT(A). He submitted that the assessee is in appeal against the order of the CIT(A) sustaining the disallowance at 2.5% out of the job work charges and the Revenue is in appeal against reduction of the disallowance from 25% to 2.5% of the job work charges claimed by the

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assessee. He submitted that there is no basis for disallowance to be sustained at 2.5% and the assessee has met each and every so called defect in the account books pointed out by the AO. He submitted that the assessee has cited a number of decisions before the CIT(A) in support of its case that no disallowance whatsoever out of the job work charges was called for. He submitted that in the scrutiny assessment, the disallowance made by the AO in the subsequent assessment years were even less than 2.5%, sustained by the CIT(A) for the relevant assessment in appeal before the Tribunal, and therefore, the disallowance sustained at 2.5% of job work charges should be deleted in full.

5. The learned DR has opposed submissions of the learned counsel for the assessee. She submitted that the AO has pointed out number of defects in the account details submitted by the assessee, and referred to relevant portions of the assessment order in support of the case of the Revenue. She has relied o the order of the AO.

6. We have carefully considered rival submissions and perused the orders of the AO and the CIT(A). We find that the CIT(A) has passed a well reasoned speaking order in this case, while disposing of the appeal of the assessee. He has dealt with each and every defect pointed out by the AO in detail. He has given a finding that the plea of the AO that the assessee could not give a complete address to whom the payment for job work charges were made, was not correct. The assessee has filed all the relevant details with full addresses of the vendors and copies of their bills. The assessee has pleaded before the CIT(A) that all the vendors were from Bhiwandi, Maharashtra and it was not practically possible to obtain confirmatory letters from each of them after the passage of such a long time since the transactions were made. We find that the AO had demanded copies of cheques issued to suppliers, but it was practically not possible to obtain copies of each and every cheque issued to the vendors. We find that the AO could not record any justifiable reason for making -3- ITA No.345/Ahd/2011 &5 Others

disallowance at a higher rate of 25% of the total weaving charges on an estimate basis. We find that CIT(A) has discussed a number of decisions cited at the Bar while deciding the appeal of the assessee. We find that in the line of business of the assessee 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 the direct cost which has to be incurred by the assessee. Purchase of yarn cloth and sale of grey cloth could not be disputed by the Revenue. The CIT(A) has given a finding that the assessee has given copy of list of parties to whom weaving charges were paid in which complete address have been given and has also filed copies of bills of job work expenses containing names and address of such parties. The CIT(A) has also recorded that the AO has not pointed any defect in the purchase bills or sales bills or job work charges bills except saying that complete address of the parties were not given in respect of whom the job work charges were paid. The CIT(A) has recorded in his appellate order that the AO has not made any inquiry at all as can be seen from the assessment order, and when the quantity of sales of cloth and purchase of yarn is accepted by the AO, as he has done in this case he could not disallow the weaving charges at the rate of 25% without bringing some material on record to show that the inflation was so huge. The CIT(A) has further recorded that the AO has brought no material on record to prove that either the parties were bogus or the job charges were inflated to the extent of 25% and in the absence of the same, disallowance made by the AO was not correct. However, the CIT(A) has considered that the turnover of the assessee was Rs.30.37 crores and the GP of the assessee was extremely low at Rs.4,72,252/- and some inflation of expenses in respect of job charges could not be denied in this case. In these facts, he has restricted the disallowance out of job work charges to 2.5% as against 25% disallowed by the AO. We are of the considered view that considering high turnover of the assessee and a very low GP shown by him, the possibility of some inflation in job work charges could not be ruled out. Accordingly, the action of the CIT(A) in restricting the disallowance out of job work charges to 2.5% out of total job

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work charges paid by the assessee by way of estimate as against 25% disallowance made by the AO seems to just and fair, and is accordingly confirmed. In this view of the matter, we see no merit in the grounds of the appeals of the assessee and the Revenue, and they are accordingly dismissed.

ITA No.346/Ahd/2011 (Assessee's appeal - Ajay Kailashchandra Kanodia, HUF)

7. The only ground of the appeal of the assessee is as under:

"1. In his order dated 10/12/2010, the ld.CIT(A) has grossly erred by confirming a disallowance of 2.5% of the jobwork charges claimed by the assessee. In the original order of the ld.AO dated 29/12/2009, the ld.AO had disallowed 25% of the jobwork charges claimed by the assessee of Rs.3,94,07,116/-, due to which the disallowance amounted to Rs.98,51,779/-. During the appeal proceedings, the ld.CIT(A) verified the various submissions given to him, but only reduced the disallowance to 2.5% of the jobwork charges from the original 25% instead of deleting the entire disallowance."

8. Corresponding appeal of the Revenue is ITA No.393/Ahd/2011, in which only ground of the appeal of the Revenue is as under:

"1. The ld.CIT(A) erred in law and on facts in deleting the addition of Rs.88,66,601/- on account of disallowance out of job work charges."

9. Both the parties before us submitted that the issue and facts of the case in this cross-appeal of the assessee and the Revenue are identical with the issue and facts of the case in the case of Kailashchandra Maliram Kanodia for the same Asstt.Year 2007-08 in ITA No.345/Ahd/2011 and 395/Ahd/2011. We have considered rival submissions. In view of our decision in the foregoing paras of this order while disposing of the appeal of the assessee and the Revenue in the case of Shri Kailashchandra Maliram Kanodia for the same Asstt.Year 2007-08, we hold that there is no merit in the grounds of the assessee and the Revenue, and accordingly, both are dismissed.

ITA No.347/Ahd/2011 (Assessee's appeal - Ajay Kailashchandra Kanodia) -5- ITA No.345/Ahd/2011 &5 Others 10. The only ground of the appeal of the assessee is as under:

"1. In his order dated 10/12/2010, the ld.CIT(A) has grossly erred by confirming a disallowance of 2.5% of the jobwork charges claimed by the assessee. In the original order of the ld.AO dated 29/12/2009, the ld.AO had disallowed 25% of the jobwork charges claimed by the assessee of Rs.3,81,84,332/-, due to which the disallowance amounted to Rs.95,46,083/-. During the appeal proceedings, the ld.CIT(A) verified the various submissions given to him, but only reduced the disallowance to 2.5% of the jobwork charges from the original 25% instead of deleting the entire disallowance."

11. Corresponding appeal of the Revenue is ITA No.394/Ahd/2011, in which only ground of the appeal of the Revenue is as under:

"1. The ld.CIT(A) erred in law and on facts in deleting the addition of Rs.85,01,475/- on account of disallowance out of job work charges."

12. Both the parties before us submitted that the issue and facts of the case in this cross-appeal of the assessee and the Revenue are identical with the issue and facts of the case in the case of Kailashchandra Maliram Kanodia for the same Asstt.Year 2007-08 in ITA No.345/Ahd/2011 and 395/Ahd/2011. We have considered rival submissions. In view of our decision in the foregoing paras of this order while disposing of the appeal of the assessee and the Revenue in the case of Shri Kailashchandra Maliram Kanodia for the same Asstt.Year 2007-08, we hold that there is no merit in the grounds of the assessee and the Revenue, and accordingly, both are dismissed.

13. In the result, the appeals of the assessees as well as Revenue are dismissed.

Order pronounced in Open Court on the date mentioned hereinabove.

Sd/- Sd/- एन. एन.एस. (एन एस. सैनी /N.S.SAINI) (जी. जी.सी. सी.गुƯा/G.C. GUPTA) लेखा सदःय /ACCOUNTANT MEMBER उपाÚय¢ /VICE-PRESIDENT

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