TaxTMI 
TaxTMI 
2020 (7) TMI 459
X X X X Extracts X X X X
X X X X Extracts X X X X
....imited company and engaged in the business of agricultural equipments. The assessee in the year under consideration has incurred jobs work expenses amounting to Rs. 33,67,20,932/- (Rs. 21,48,94,498.00 pertaining to Job work charges +Rs. 12,18,26,434/- pertaining to labour contractors charges). The AO out of such Job work charges conducted the enquiry with respect to certain job worker to whom Job work charges amounting to Rs. 10,24,42,002/- were paid. The details of such parties stand as under: S.No. Name of the Party Nature of work done Amount of job work expenses 1. Viharilal Ramlal Ram Welding Job work 494402 2. Vijay Hirabhai Ram Hydraulic Press Job work 135565 3. Balubha iBorkhetariya Welding Job work 1391831 4. Angadkumar Gupta Welding Job work 1625833 5. Shrilal Chauhan Welding Job work 1706535 6. Faruk M Laheji Material Handling charges 1660404 7. Sanjaygiri Aparnathi Filling & Dubering Job work 1299654 8. Baban Yadav Welding & Press Job work 40252 9. BirendraSinh Plazma Parts Job work 142214 10. Krishna Prasad Huseni Welding & Press Job work ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....imed by the assessee under the head job work charges and accordingly show caused the assessee to justify its stand. The assessee in response to such notice filed a reply dated 19 March 2015 which is summarized as under: i. The outsourcing of certain activities in the manufacturing process is a common business practice. As a result of outsourcing of such job work, the turnover of the assessee has increased from 254.52 crores in assessment year 2011-12 to Rs. 447.75 crores in the year under consideration. The job work charges to sales for the year under consideration has reduced to 4.80% as against 11.43% in the assessment year 2010-11 which resulted increased in the gross profit margin for the year under consideration in comparison to the earlier assessment year. ii. The impugned job work charges have been paid to the parties through account payee cheque and after deducting the tax under the relevant provisions of the Act. Thus the identity of the party cannot be doubted as the payment was made through the banking channel. iii. Most of the job worker's have filed their respective income tax return showing the amount of income received from the assessee.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ention of the assessee by observing that the increase in the turnover, gross profit cannot be the basis to justify that such expenses were genuine. The AO further observed that the documents filed by the assessee in support of his claim towards the job charges are nothing but cooked up story. It is because there is mismatch in the signature of the parties made in the bank account in form viz a viz in the bills raised to the assessee. The AO in support of his contention placed the copy of the bank opening form and the bill in his order. Accordingly, the AO was of the view that all the cheque books of the parties were in the custody of the assessee which was used in showing the bogus bills. In view of the above the AO held that the expenses claimed by the assessee for Rs. 10,24,42,002/- under the head of the job work charges are not genuine. Thus he disallowed the same and added to the total income of the assessee. 4. Aggrieved assessee preferred an appeal to the learned CIT (A). 5. The assessee before the learned CIT (A) submitted that the parties appeared before the AO in response to the notice under section 131 of the Act have admitted the fact that they have signed the b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sign on the bills and that on the account opening form is theres and therefore there is no ground of any other presumption. Even otherwise what is relevant for genuineness of claim of expenditure of jobwork is whether the jobwork parties have provided the services, received payment by account payee cheques, work done has been at competitive market prices and offered such income to tax, which is adequately substantiated by the Appellant Company. There is no evidence anywhere that these concerns gave bogus jobwork bills to the Appellant Company. There is nothing on record to show that any part of the fund given by the Appellant Company to these parties came back to the Appellant Company in any form. Even the statements recorded do not implicate the transactions with the assessee in any way. I find that the assessee has discharged its onus by adducing sufficient evidences. I also find that the job party is assessed to tax and the job charges received by them from the Appellant Company are included in their total job receipts. The job parties who were summoned and whose statement recorded u/s 131 have confirmed to the Assessing Officer that they have done job work for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t Gross profit margin of the Appellant Company has increased from 15.05% in A.Y. 2010-11 to 20.93% In A.Y. 2012-13 which shows increase of 5.88%. For sake of argument, even if the expenditure is considered as bogus, what will happen to Gross profit ? I find that the Appellant's case is covered by decision of Honorable Gujarat high court in the case of CIT 1 vs Avinash M. Jhawar (Tax Appeal no. 229 of 2009) and M.K. Brothers (1986) 52 CTR (Guj) 228. I find that on similar facts the Ahmedabad Tribunal in case of Jhawar International Surat vs Income Tax Officer in ITA No.1938 & 2015/Ahd/2008 has allowed the claim by holding as under:- "We have heard the rival contentions and gone through the facts and circumstances of the case. 'We have also perused the case records including the assessment order as well as the order of the CIT(A). We have also perused the paper book furnished by the assesses. We find that the assesses is an exporter of value added textile fabrics. We further find that the value addition work was got done from this job work party: We further find that the Assessee during the assessment proceedings has furnished following evi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....his is a well recognized practice in large industries * Business expediency was explained during assessment as also to CIT-A * It retained over 900 skilled and unskilled workers by this method as against only 39 supervisors; there were thus no workers on payroll, which itself goes to establish that without contracted workers, production and turnover of any value (not to speak of over Rs. 400 crores) could not have been achieved; thus this also proves that contractors did in fact render services and were present and required * Manufacture of products involves a large number of technical and manual processes; all of which was got done by contractors' workers, as shown in process flow chart and invoices * Without such processes (for which payments are made), production could not have been achieved at all, which establishes need and expediency as also factum of services having been rendered and received * When all technical infrastructure belongs to company and it has its own plant, it is obvious for contracted workers to come and work in company premises; this is no reason for disallowance at all * All contractors who were exam....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cord before us. The issue in the present case relates to the disallowance of the expenses claimed by the assessee under the head job work charges to the tune of Rs. 10,24,42,002/-. The AO was of the view that the impugned expenses are bogus or fictitious in nature and therefore the same was disallowed by him. However the learned CIT (A) was pleased to delete the addition in view of the fact that the transaction was carried out through banking channel, necessary documentary evidences were furnished substantiating genuineness of parties and transaction and furthermore similar expenses were claimed in the earlier years which were accepted by the revenue. From the preceding discussion, we note that the entire basis of making the disallowance by the AO was that job worker has not sufficient equipment and machinery to perform required job, they are providing services from assessee premises and there was the mismatch in the signature of the job workers in the bank opening form and in the bills/invoices raised to the assessee. In our considered view the basis of disallowances by the AO are merely a suspicion and not the conclusive evidences especially in the circumstances where there ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of its claim. The Assessing Officer observing that such cheque payments could have been withdrawn and reverted back to the assessee were not based on evidence. We find no infirmity in the order of the Tribunal. Accordingly, Tax Appeal stands dismissed." In view of the above and after considering the facts in totality, we do not find any infirmity in the order of the learned CIT (A). Hence, we decline to interfere in the order of the learned CIT-A. Hence the ground of appeal of the Revenue is dismissed. 11. Before we part with the issue/appeal as discussed above, it is pertinent to note that the clause (c) of rule 34 of the Appellate Tribunal Rules 1963 requires the bench to make endeavour to pronounce the order within 60 days from the conclusion of the hearing. However the period of 60 days can be extended under exceptional circumstances but the same should not ordinarily be further extended beyond another 30 days. In simple words the total time available to the Bench is of 90 days upon the conclusion of the hearing. However, during the prevailing circumstances where the entire world is facing the unprecedented challenge of Covid 2019 outbreak, resulting ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... March 2020 till 30th April 2020 shall continue further till 15th June 2020". It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus "should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure...". The term 'force majeure' has been defined in Black's Law Dictionary, as 'an event or effect that can be neither anticipated nor controlled' When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an "ordinary" period. 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of....