2016 (11) TMI 1232

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....eals) erred in confirming disallowance of Rs. 605325/- of stitching and washing charges. " 2. The sole ground in this appeal to be decided is as to whether CIT-A was justified in confirming the disallowance made by the AO on account of stitching and washing charges. 3. The assessee is a firm and engaged in manufacturing and trading of readymade garments. The assessee filed its return of income on 26-10-2007 declaring a total income of Rs. 1,76,007/- and under scrutiny notices under section 143(2) and 142(1) of the Act were issued and AR representing the assessee appeared. 4. During the course of scrutiny proceedings, the AO observed that the Assessee debited an amount of Rs. 41,95,619/- and Rs. 4,86,490/- under the head stitching and wa....

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....d entire amount of Rs. 9,30,325/-. 6. In 1st appeal the assesse submitted that the stitching and washing charges were performed by the skilled job workers at their respective residential premises in muffusil areas in Howrah, Hooghly, South 24-Parganas & North 24 Parganas districts and is major part in the manufacturing of readymade garments. Further submitted that the Assessee furnished names and addresses of such job workers to AO and the cost of stitching and washing charges was economised from 36.82% in 2005-06 to 29.66% in 2007-08. It was further submitted that the said expenditure was incurred wholly and exclusively for business and for commercial expediency and was an integral part of the Assessee's business. The assesee challenged t....

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....gh Court in CIT vs Virgin Creations in ITA NO.302 of 2011 dated 23-11-2011. In which it has been held that the amendment brought in finance bill 2010 had retrospective affect regarding deposit on tax deducted or before the due date of filing the return u/s. 139(1) by the assesee and therefore such payments were not disallowable u/s. 40(a)(ia). Therefore, in view of the above facts and circumstances, it is held that the disallowance made by the AO in respect of payment of Rs. 3,25,000/- to M/s. Sticher Co. for violation of sec. 40(a)(ia) is not justified and the same is deleted. However in respect of the remaining cash payments to 13 parties which could not be verified, it is seen that the Appellant has not given any evidence to substantiate....

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....d the transactions can not be doubted. In reply, the Ld.DR submits that all the workers are not ordinary persons and they could have responded to the notices issued by the AO and it is wrong to say that their where abouts are not known to the assesse and there is no ingredient of genuine person. 9. Heard rival submissions and perused the material on record. That according to the AO that all the parties to whom the AO issued letters returned unserved and even the party on whom the TDS was deducted remained untraceble. The AO even disallowed the amounts which were paid to the M/s. Sticher Co. without considering the fact the TDS on such amount was deposited with Government proof of which a certificate to that effect was furnished before the ....