TaxTMI 
TaxTMI 
2011 (2) TMI 256
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessment year 2004-2005 claiming the following substantial question of law: "Whether on the facts and in the circumstances of the case, the Hon'ble ITAT is right in upholding the order of CIT(A) dated 11.2.2008 thereby deleting the addition of Rs.1,80,40,340/- made by the Assessing Officer on account of disallowance of bogus labour expenses." 2. On 7.2.2011, notice of motion was issued for today to consider the plea whether the matter is liable to be remanded to the Commissioner of Income-tax (Appeals) {in short "the CIT(A)"} for fresh decision. 3. The office has reported that service is complete. However, no one has chosen to appear in Court on behalf of the respondentassessee. 4. The facts, in b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bstantiate the genuineness of the same. The counsel referred to the findings recorded by the assessing officer in the assessment order dated 31.3.2006 in that behalf, which are to the following effect: "The assessee derives income from manufacturing and export of hosiery goods. During the year under assessment, the assessee declared gross profit of Rs. 4.16 crore on export of Rs. 14.95 crore including profit on premium on DEPB and duty drawback amounting to Rs. 1.49 crores thereby giving G.P. rate at 27.83%. Proceeds of exports are found to have been received through banking channels. A perusal of the trading account reveals that the assessee also debited Rs. 2.46 crore on account of fabrication and labour charge comprising of Rs.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ses are involved in the manufacturing activity of a particular item, which may vary from case to case, but still considering that even if the assessee would have involved itself in a number of processes for the manufacturing process as compared to the comparable case, still the claim of labour charges at Rs. 2.3 crore seems to be at too an alarming figure. Therefore, taking into consideration the entirety of the facts and circumstances of the case, in my opinion, the assessee would not have actually incurred labour charges beyond a sum of Rs. 50 lacs for the purpose of making production relatable to the sales/exports of Rs.13.46 crore credited to the trading account. Thus, it is considered fair and reasonable to allow the claim of such labo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the expenses under the head labour charges, in this case, just on the ground that another assessee, namely, Glide Impex having its industrial undertaking at Baddi had claimed labour charges of Rs. 10.38 lacs only against the total export turnover of around Rs. 34 Crores. The A.O. has not referred to trading and manufacturing results of the appellant in the preceding years etc. As explained by the learned counsel, the labour charges claimed by the appellant are fully vouched and paid to identifiable persons/parties. On some of the labour charges paid, TDS is stated to have been deducted and deposited in the Govt. account. Therefore, for making such a disallowance, the AO was required to make further enquiries and bring on record that the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iers are identifiable, therefore, it was held that the Assessing Officer was required to make further inquiries and to bring on record as to how the payments were in-genuine or to the nonexistent parties. On a query from the Bench, as to how the case of M/s. Glide Impact is not applicable, it was explained by the learned counsel for the assessee that firstly, M/s. Glide Impacts is manufacturing different items and secondly, it is fully automatic one, whereas in the case of the assessee, it was claimed that T-shirts are manufactured wherein more and more labour is required and the machinery is also not fully automatic. Even in the assessment order, the learned Assessing Officer has mentioned as under: "No doubt, a number of process....