TaxTMI 
TaxTMI 
2025 (9) TMI 1191
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppellant : Shri Ved Jain, Adv., Shri Ayush Garg, CA, Shri Nikhil Kabra, CA & Ms. Srasthi Agarwal, CA For the Respondent : Shri Om Parkash, Sr.DR ORDER PER MANISH AGARWAL, AM : The captioned appeals are arising from the respective orders of the Ld. Commissioner of Income Tax (Appeals)-23, New Delhi ["Ld.CIT(A)"] for respective assessment orders passed by the Assessing Officer ["AO"] as tabulated hereunder: Sr. Nos. ITA Nos. CIT(A) Order dated Assessment Order dated Assessment Order under section 1-2 ITA No.2696/Del/2023 & C.O.-37/Del/2024 [AY 2014-15] 31.07.2023 08.04.2021 153A r.w.s 143(3) of the Income Tax Act, 1961. 3-4 ITA No.2748/Del/2023 & C.O.No.-38/Del/2024 [AY 2015-16] -do- -do- -do 5-6 ITA No.2279/Del/2023 & C.O.No.-31/Del/2024 [AY 2016-17] 16.05.2023 -do- -do- 7. ITA No.3053/Del/2023 [AY 2017-18] 28.08.2023 -do- -do- 8 ITA No.2944/Del/2023 [AY 2017-18] -do- -do- -do- 9 ITA No.231/Del/2024 [AY 2018-19] 24.11.2023 08.04.2021 -do- 10 ITA No.128/Del/2024 [AY 2018-19] 24.11.2023 -do- -do- 11-12 ITA No.340/Del/2024 & C.O.44/Del/2024 [AY 2013-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e and reduce tax liabilities. The AO discussed the statements and inquiries carried out in respect of these job workers in the assessment order and concluded that these job worker parties are bogus entities in whose names assessee booked bogus expenditure in the shape job charges and accordingly, job charges paid at INR 14,68,33,866/- to these parties was held as bogus and addition of the same was made in the hands of the assessee as bogus job workers charge claimed and total income of the assessee was assessed at INR 16,42,58,770/-. 5. Aggrieved by the said order, assessee filed an appeal before Ld.CIT(A) who after considering the submissions made by the assessee and remand report of the AO, give detailed findings and allowed the appeal of the assessee by deleting the disallowances made by AO of job charges by holding the same as genuine expenses. 6. Aggrieved by the order of Ld.CIT(A), the Revenue is in appeal before the Tribunal by taking following grounds of appeals:- 1. "The Ld. CIT(A) has erred in deleting the disallowance of Rs. 14,68,33,866/- on account of bogus expenses without appreciating the fact that all the activities to maintain the legal shell in resp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he claim of job work charges whereas neither the additional evidence nor the remand report countered the conclusion that the Job workers are merely paid employees additionally lending their names to the assessee. 7. The Ld. CIT(A) has erred in disregarding the fact that the assessee has not provided any conclusive evidence like PAN card or Adhar card to support its contention that the 51 common employeses of the assessee and the Job workers as alleged by the Department were actually different persons with established identities. 8. The appellant craves to add, amend any/all the grounds of appeal before or during the hearing of the appeal." 7. The assessee has also filed cross-objection wherein following grounds of appeal were taken:- 1. "On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the order passed by the learned AO under Section 153A is bad and liable to be quashed as the same....
X X X X Extracts X X X X
X X X X Extracts X X X X
....therefore, he made the submissions on all the grounds together. Ld.CIT DR argued that during the course of search, proprietors of four major job workers namely, M/s Shama Enterprises, M/s ASV Enterprises, M/s ADR Enterprises and M/s Om Enterprises were available at the factory premises of the assessee. He submits that their books of accounts were also found available at factory premises of the assessee. Ld.CIT DR submits that during the course of search and post-search investigation, it was found that proprietors of these job worker firms were employees of the assessee prior to opening of their individual proprietor firm and still they remained employees of the assessee group which was evident from the digital data seized in the form of e-mails. He submits that this clearly established employer / employee relationship between the proprietors of these firms and assessee group. 10. Ld.CIT DR thus, submits that these job work parties were mainly name lenders and submits their bills on the direction of the management of assessee company and in this process, assessee had managed to reduce its profits by increasing the cost of job work charges paid to these parties. Ld.CIT DR submits ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the Remand Report, AO has seriously objected to these additional evidences. He thus submits that the deletion made by Ld.CIT(A) deserves to be restored. He prayed accordingly. 14. On the other hand, Ld.AR for the assessee vehemently supported the orders of Ld. CIT(A) and submits that while alleging the job work charges paid to these parties as bogus, AO had made serious error of fact by ignoring that the entire job work charges paid was disallowed meaning thereby, assessee is engaged in the business of manufacturing/stitching ready-made / pre-ordered and customized garments and such activity is not possible without the help of specialized job workers who stitched the garments from fabric. If no expenditure is incurred towards the stitching how the fabric would take the shape of garment. Ld.AR submits that AO has disallowed the entire job charges claimed by the assessee. He further submits that assessee is renowned and established name in the readymade and fashion garment industry and is having various sales outlets run by skilled staff. The garments are manufactured by taking the services of job workers specialized and having skills to stich designer garments. 15. Ld. AR su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....earch, the books of accounts of the following job workers were found and maintained within the factory premises of the assessee: i. Sharma Enterprises ii. OM Enterprises iii. ADR Enterprises iv. AVS Enterprises v. BD Fashion vi. BD Enterprises vii. RS Enterprises viii. Stich Lab 5. Thereafter, during the course of proceedings, the assessee was asked vide notice dated 19.12.2020 (PB Pg. 288-307) to justify job work expenses claimed by the assessee in the P&L A/c. 6. Thereafter, the assessee vide reply dated 11.02.2021 (PB Pg.383-391) explained that: i. That, the assessee is engaged in the business of manufacturing and marketing of various ready-made garments and the assessee has over the years established a niche for itself in the fashion industry. ii. The employee base of the company includes lower base staff comprising of Office boy/Field Boy. Stores Keeper, store managers etc. who are on payroll of the company. iii. However, the garments manufactured by the assessee involve intricate craftmanship and tailoring which is performed by various job workers specializing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pattern of salary receipt by these employees from these job work parties i.e. in first few months, these employees receive salary from one job work party and then suddenly start receiving salary from any other job work party. ii. In many of the cases same employee had received payment more than once in single month in same bank account. iii. In many of the cases same employee had received payment from more than one in house job work party in same month. iv. In many of the cases same employee had received payment from RPL as well as from in house job work party. 9. Aggrieved by the order passed by the AO, the assessee filed an appeal before CIT(A). 10. During the course of appellate proceedings, the assessee submitted an application under Rule 46A along with the following additional evidences: Details of ESI/PF/LWF deducted and deposited 1701 Copy of salary sheet along with attendance details of the employees for the following months: * April 2015 * May 2015 * June 2015 * July 2015 * August 2015 * September 2015 * October 2015 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ember 2015 * October 2015 * November 2015 * December 2015 * January 2016 * February 2016 * March 2016 4155-4265 4266-4341 4342-4407 4408-4470 4471-4539 4540-4629 4630-4721 4722-4819 4820-4930 4931-5044 5045-5155 5156-5267 Ledger account of Shama Enterprises in the books of assessee 5268-5275 Bills raised by Shama Enterprises on the assessee along with details of lots in which the job work was received from contractor 5276-5302 Copy of Computation of Income of Mr. Mohd. Ayub 5303-5305 Copy of form 26AS of Mr. Mohd. Ayub 5306-5307 Copy of tax audit report 5308-5316 Copy of bank statement of Shama Enterprises 5317-5320 5. M/s RS Enterprises (Prop. Reema Singh) Ledger account of Reema Singh in the books of assessee 5321-5345 Bills raised by Reema Singh on the assessee 5346-5394 6. M/s BD Fashion (Prop. Raja Ram Jha Ledger account of BD Fashion in the books of assessee 5395-5407 Bills raised by BD Fashion on the assessee 5408-5453 7. Stitch Lab (Prop. Mahabat Molla) Ledger account of Mahab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tables referred on page no. 48-50 of the impugned assessment order: 5549.1 * Details of employees alleged to be common between ADR Enterprises and assessee company * Details of employees alleged to be common between ASV Enterprises and assessee company * Details of employees alleged to be common between ADR Enterprises and ASV Enterprises |5550-5553 5554-5560 5561-5565 9. Analysis of data in respect to the allegation made by the Ld. AO on the basis of the table referred on page no. 42-48 of the impugned assessment order: 5565.1 * Copy of relevant salary sheets of the employees alleged to be receiving job work expenses manifold times from the job workers as well as the assessee company 5566-5632 10. Copy of cash ledgers of following job workers: 5633-5635 * ADR Enterprises * Om Enterprises * ASV Enterprises * Shama Enterprises 5636-5639 5640-5643 5644-5647 11. As regards the each observation of the AO, the assessee explained that: A. In many of the cases same employee had received payment from RPL as well as from in house job work party. as per the list prepared by A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r workers/labourers/karigars in cash due to liquidity/cash crunches in the market. iii. However, taking into consideration the fact that the workers/labourers/karigars are day to day earners and not all of them maintain bank account, the only option available with the job workers was to credit their salary/wages in bank account of their friends who were having bank accounts at that time. iv. This sort of transactions were made post demonetisation as well but only for a limited duration of 3-4 months until the bank account of such workers/labourers/karigars could be opened. v. It was only due to this reason that the bank account of some of job workers/workers/labourers/karigars reflected multiple credits from different concerns in the same month. vi. However, no such pattern of credits was observed pre demonetisation which itself justifies the explanation furnished by the assessee. vii. Further, the assessee has submitted a sheet containing details of the respective employees, period of salary and employer who has credited those funds in the bank accounts of the persons pointed out by the AO at page 48 of the assessment order. The support....
X X X X Extracts X X X X
X X X X Extracts X X X X
....statements is placed at below mentioned pages: i. Md. Yusuf Ali (copy enclosed at PB pg. no. 752-760) ii. Jamshed Alam (copy enclosed at PB pg. no. 735-744) iii. Md. Salam (copy enclosed at PB pg. no. 745-751) 17. In these statement these persons have confirmed the following facts: i. At the time of demonetization some of the workers/labourers/karigars employeed under job workers did not have any bank account in their name and because of said reason they had requested to deposit the salary in the bank accounts of friends or kin from the work place. ii. Job workers namely ADR Enterprises, Shama Enterprises, ASV Enterprises and OM Enterprises were independent concerns working for the assessee company on job work basis. iii. Workers/labourers/karigars employed under these job workers used to draw salary in cash before demonetization and through cheque in their respective bank account post demonetization. iv. The Workers/labourens/karigars had worked for ADR Enterprises, Shama Enterprises, ASV Enterprises and OM Enterprises at different points of time depending upon the requirement of the work on rotation basis. Bu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is regard and has not drawn any adverse inference with respect to the genuineness of these payments. The plethora of documentary evidences filed by the appellant, various statements of job worker and of documentary evidences filed by the appellant, various statements of job worker and labourers available on record which were recorded at different stages and independent verifications being made by the AO in this regard during the remand proceedings, substantiates the genuineness of the job work expenses incurred by the appellant. Hence, the disallowance of job work expense made by the AO is hereby deleted. 22. Aggrieved by the order passed by CIT(A), the Revenue is now in appeal before Your Honours. 23. It is to be noted here that survey proceedings were initiated in the case of these job work contractors and nothing adverse was found in the course of their respective assessment proceedings. A copy of the assessment order of each of the Job Work Contractor for AY 2012-13 is placed at PB Pg.448-462. 24. It is pertinent to note here that: i. The business of the assessee of manufacturing and selling readymade garments is such that it requires complex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o. 6 at page no. 174 of the paper book) e) That he has given the detail of salaries/wages being given to these workers/labourers/karigars under his proprietorship concern. (question no. 7 at page no. 174 of the paper book) Sh. Ilyas Khan (proprietor ADR Enterprises), has categorically explained the following facts in his statement dated 06.10.2018(PB Pg. 129-139) under section 131 of the Act a) That he is the proprietor of ADR Enterprises under which he provides manpower in the form of tailors and helpers to the assessee company and also supervises their work. (question no. 10 at page no. 132-133 of the paper book) b) As regard to the day to day operations of his proprietorship concern he has explained that the workers/laborers/karigars of his concern provides stitching, weaving and embroidery services to the assessee company which is being supervised by him. Further, as regards the rate of compensation to his workers/laborers/karigars, he has stated that the same is being decided by the staff of the assessee company. (question no. 13 at page no. 133-134 of the paper book) c) He has given the complete details of number of workers/laboure....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../wages given to each category of workers/laborers/karigars working under his concern as well as the other job work concerns. (question no. 19 at page no. 152-153 of the paper book) Sh. Mohd. Ayub (proprietor Shama Enterprises), has categorically explained the following facts in his statement dated 06.10.2018(PB Pg.112-128) under section 131 of the Act: a) He has acknowledged that he is working for the assessee company under his proprietorship concern Shama Enterprises which has an employee base of around 180 persons (question no. 20 at page no. 121 of the paper book) b) He has explained that the attendance, salary, ESI and PF etc. details pertaining to 180 workers working under him are being maintained at 121 Pace City, Gurgaon. For the purpose of distribution of salary he sits with RP Yadav of the assessee company and disburses the payments into the bank account of respective workers. (question no. 20 at page no. 121 of the paper book) c) He has acknowledged that the total number of workers/labourers/karigars working under Shama Enterprises, ADR Enterprises, ASV Enterprises and Om Enterprises at the premises of the appellant company is 550. (que....
X X X X Extracts X X X X
X X X X Extracts X X X X
....data is not permissible. Reliance is placed on the following judicial pronouncement in this regard * RELIANCE INDUSTRIES LIMITED VERSUS SECURITIES AND EXCHANGE BOARD OF INDIA & ORS., 2022 (8) TMI 423-SUPREME COURT, Dated: -5-8-2022 "The aforesaid principle is often referred to as the 'Cherrypicking principle. 58. In the case at hand, SEBI could not have claimed privilege over certain parts of the documents and to the same time, agreeing to disclose some part. Such selective disclosure cannot be countenanced in law as it clearly amounts to cherrypicking." vii. It is an undisputed fact that the manufacturing activity was not possible without the engagement of job workers. viii. Also, the assessee has submitted ample evidences to substantiate the genuineness of job work charges paid to the job workers. ix. The Ld. AO had only doubted the job work expenses on the observations which have been duly rebutted by the assessee by furnishing ample additional evidences and explanations during the course of remand proceedings. x. Infact, the AO himself has also verified the additional evidences and explanations furnished by the assessee.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y of Leave register maintained as per legal requirement. PB 778-795 is the copy of Month wise PF/ESI deduction and deposit along with sample copy of 2 months challans for each year along with ledger account of PF. PB 800 is the Copy of Licence for registration u/s 6 of the Factory Act and approval of factory building plan. PB 807 is the copy of Pollution certificate from Noida Authorities. PB 826-845 is the copy of Rent Agreement along with complete ledger account of Rent for all the years under consideration. PB 846-857 is the copy of Sample copy of electricity bills in the name of Landlord M/s Grandways Electronics Pvt. Ltd along with ledger account of electricity all respective years. PB 858-865 Copy of invoices raised by M/s Sai Export for the job work charges in the name of the appellant company. PB 866-892 is the Copy of complete Bank statement along with complete bank book for all respective years. PB 893-900 is the copy of ledger account of M/s Sai Exports together with copy of bank book showing that the payments were made through account payee cheques, TDS deducted. PB 901 is the copy of TDS r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 795 is the copy of month wise PF and ESI deduction and deposit and sample copy of two months challan of each year along with ledger account of PF, other evidences of the paper book at pages 800 to 807,826-845, 846-857, 858-865, 866-892, 893-900, 901, 906-907, 902-905, 879-892, 1307-1337, 4730-4755 are of M/s Sai Export and filed the return of income of prior years. All these evidences clearly establish that genuineness of job work charges incurred by the assessee company through M/s Sai Export and therefore the disallowance made in the assessment order and confirmed by CIT (A) is not sustainable even on merit. The adverse observations made by the A.O. in the assessment order have been met by the assessee one by one and paper pages 2969 to 2972 and we have taken ourselves to these adverse observations and response of the assessee and we agree with the Ld. Counsel for the assessee that the adverse observations made by the A.O. are not of substance and misplaced on facts. 27. CIT (A) have mentioned in his order the adverse observations of the A.O. only, which in our opinion are misplaced on facts Contention of CIT (A) that evidence filed by the assessee self-serving document....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the maternal available on record. In the instant case, AO has doubted the payment of job work charges to the five parties made during the year. Sole basis for making such allegation is documents found during the course of search wherein it was observed by the AO that these parties were mere paper firms and assessee was maintaining their books of accounts as well as bank statements. It was also the case of the AO that some of the job workers are getting salary payments directly from the assessee company. The AO concluded that these parties are controlled and operated by the assessee group and payments shown to these parties, is basically nothing but the device developed to claim inflated expenses under the job work expenses. 20. In order to make verification of these facts, we ask the assessee to file year-wise chart of gross profit earned and total payments made to these parties which were disallowed by the AO. On perusal of the said chart, we find that despite of claiming these job work expenses, the assessee has been able to maintain the gross profit level in parity with the preceding Assessment years. We also ask the assessee to file the copies of financial statements with ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s have admitted to have received salary from the appellant company. 16. On perusal of the observations of the AO, there are some important aspects in order to evaluate the genuineness of job work charges, on which the AO is silent in the assessment order. It is noticed that the AO at one place has doubted the utilization of cash being withdrawn from the bank account of the job workers, however, on the other hand there is no adverse remark doubting the presence of in-house job workers and their team of workers/laborers/karigars on the factory premises of the appellant company at the time of search. Why the team of workers/laborers/karigars of job workers was present on the factory premise of the appellant company, when job work receipts of job workers was later withdrawn in the cash and handed over to the appellant company and nothing was paid to workers/laborers/karigars. The AO has also not addressed to the situation that if the cash withdrawn from the bank account of the job worker was misused/misutilized and there is no doubt regarding the services being rendered by the workers/laborers/karigars to the job workers, then how the workers/laborers/karigars employed under j....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r team of karigars/workers under them on the date of the search at the factory premise of the appellant. Further, the appellant has substantiated the presence of the job workers and the workers/karigars/labourers working under them by submitting copy of attendance sheet of employees of the job workers on date of search le.29.05.2018 before the AO. The AO in the assessment order has nowhere. doubted the said attendance sheet submitted by the appellant. This proves that the presence of job workers and their team of karigars/workers at the time of search is not in question. 20. It is also noticed that no discrepancy has been pointed out by the AD or the investigation wing with respect to the quantitative details of material purchased, issued to the job workers, goods received back from job workers after job work, the finished garments dispatched to the stores and the products finally sold to the customers. There is not even a whisper of discrepancy/manipulation of records with respect to any of these limbs of the manufacturing process. 21. Now, another question that arises here is whether the manufacturing activity carried out by the appellant was otherwise possible ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eld runners, retall executives & managers in showrooms, etc. who are not involved in the job work process of the retail garments traded by the assessee company." 24. It is not the case of the AO where the assessee is alleged to have employed its team of karigars/workers on its payroll claiming them to be engaged in the manufacturing acitivites of cutting, weaving, embroidery, tailoring, stitching etc of garments and simultaneously also engaged job workers for the same work. regard, it is further noted from the question no. 16 of the statement of Ram Murti Yadav (proprietor Om Enterprises), wherein he has categorically stated that the employees on the payroll of the appellant company were not engaged in the job work process. Meaning thereby, the role of job workers and their team of karigars/workers under them in manufacturing of readymade garments/job work activities such as cutting, weaving, embroidery, tailoring, stitching etc cannot be questioned. 25. Now, another question that arises here is when the role of job workers and their team of karigars/workers in manufacturing of readymade garments/job work activities is established then how were they compensated/re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....emand report. In these statements Jamshed Alam and Mohd. Salam have stated that they were employed under job workers Shama Enterprises, Om Enterprises, ADR Enterprises and ASV Enterprises at different point of times. It has also been stated that these job work concerns used to work for the appellant company. Further, it has been stated by them that before demonetization they had received salary in cash and post demonetization they had opened their bank account with HDFC Bank and started receiving salary in the same. 28. In view of the above, analysis of the facts, it can be concluded that the appellant has substantiated the genuineness of job work charges paid by it to the job workers and further the utilization of the said job work receipts by the job workers in making salary/wages payments to their team of karigars/workers/labourers employed under them. 29. Now, coming on to the statements of the job workers relied upon by the AO in the assessment order, it is noticed that AO has cherry picked certain portions of the statements of the job workers and utilized the same to portray a picture in the assessment order that the job workers are mainly employees of the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h have been relied upon by the AO in the assessment order and he has not doubted these portion of the statements. 31. Considering the statements in entirety, it is noticed that since these job workers have been working for the appellant company/RPL group from past many years and Initially, at the time when they started their professional carrier with the RPL group, they used to work as the employees of the RPL group. However, as the time passed by and they gained work experience in the RPL group they incorporated their own proprietorship concerns on the suggestion of the management of the RPL group. Since, these job workers belonging to disadvantaged and uneducated section are exclusively working for the appellant company, even after the incorporation of their proprietorship concerns, whatever profit/gain they make out of job work services under the said concerns, they withdraw the same as fixed amount on monthly basis and accordingly, consider the same as salary being drawn by them from the company. However, at the same time, the fact that they are aware of the number of workers/laborers/karigars employed under them, work being assigned to them and the salary being drawn ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the benefit of the appellant company. However, it is noticed that he has not quoted even a single instance of such alleged manipulation. Having access to complete books accounts of the job workers, the AO either in the assessment order or in the remand report has not pointed out even a single expenditure/claim in the books of accounts of these job workers which is not admissible or not genuine, so as to doubt the job work charges given by the appellant company to these job workers. There is not even a single instance of mishandling/misuse of cash withdrawn from the bank accounts of the job workers. 36. It has further been alleged by the AO that the bank accounts of these proprietorship concerns are controlled by the employees of the appellant company who make payments in the name of job work charges to these concerns and subsequently withdraw the said funds from these bank accounts in cash and the said cash withdrawn is handed over to the management of the appellant company. In this regard, it is noticed that the allegation of withdrawal of cash from the current account of job work concerns and handing over the same to the management of the appellant company is merely ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the contentions of the appellant stands verified by the AO in the remand report. In the remand report there is no adverse remark of the AO with respect to the submissions and evidences filed by the appellant in this regard. Accordingly, the said observations of the AO is no more a basis to draw adverse inference against the appellant so as to doubt the genuineness of the job work expenses claimed by it. 38. The AO in the assessment order has also doubted the post demonetization opening of bank accounts in the name of workers/laborers/karigars employed under job workers with the HDFC Bank on the instruction of RPL group. He has alleged that with money transferred via net banking from job work parties current account to these newly opened bank account showing them as wages/salaries, however, the amount in cash was either withdrawn within a same day or within a short span of time. In this regard, it is noticed that the AO has not brought any corroborative material on record to support his observation. It is again the apprehension of the AO that the money transferred to the bank accounts of the workers/laborers/karigars from the bank account of job workers was misused by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppellant company on its factory premises. The job workers are compensated in the form of job work charges which is further utilized by the job workers to pay off salaries/wages/ESI/PF/LWF workers/laborers/karigars working under them. The AO in the remand report has verified the supporting evidences submitted by the appellant in this regard and has not drawn any adverse inference with respect to the genuineness of these payments. The plethora of documentary evidences filed by the appellant, various statements of Job worker and labourers available on record which were recorded at different stages and independent verifications being made by the AO in this regard during the remand proceedings, substantiates the genuineness of the job work expenses incurred by the appellant. Hence, the disallowance of job work expense made by the AO is hereby deleted." 21. As observed above, AO disallowed the entire job charges of INR 14.88 crores which is 9.82 % of the total turnover and if the same is added back to the gross profits, the resultant gross profit would be 55% approximately which is impossible profit rate looking to the past history of the assessee as well as in subsequent assessment y....
X X X X Extracts X X X X
X X X X Extracts X X X X
....AO after thorough verification, made no adverse inference in remand report regarding documents or explanations furnished by the assessee. Rather he acknowledged the evidence filed by the assessee. 8. The job work parties are registered with PF/ESI department however, no enquiry was conducted to verify the labours employed by these parties. 24. The Hon'ble Delhi Tribunal in the case of Orient Craft Ltd. Vs DCIT dt. 24.9.2021 reported in 2021 (10) TMI 154 under similar circumstances where the said party was also engaged in same line of business after considering the details filed made following observations: 26. It is seen from the evidences placed before us and relied upon by Ld. Counsel for the assessee that the job worker M/s Sai Export has raised invoice and payment have been made through account payee cheques and tax having been deducted at source and documents at page 598 to 907 of the paper book establish the existence of the job worker and the job work carried out by M/s Sai Exports. We have also seen the statement of Mr. Mohinder Kumar Garg and Sh. Rajiv Poddar placed at page234 to 255 of the paper book, which also establish the job work done by M/s Sai Ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....de in the written submissions filed by the assessee and to which our attention was drawn clearly establish & mentioned by us above that job work expense claimed by the assessee to have been paid to Mis Sai Exports are quite genuine and established in the result, the grounds of appeal in the appeal of the assessee are allowed& the addition of Rs. 1,29,01,751/- is hereby deleted." 25. We also find force in the arguments of the Ld.AR that since these job work parties are not very literate and could not be able to maintain day-to-day books of accounts and making statutory compliance therefore, in order to help them out and get their best output, assessee arranged the professional which are hired by the it. However, it is not the case of the Revenue the payments to these professionals towards their services rendered to these job work parties was made by the assessee. Therefore, this allegation of the AO is that these job workers are masked job workers and controlled by the assessee cannot be accepted. Further, as observed above, if the payments to these job workers are held to be bogus, there would be a position where the goods manufactured by the assessee, could not be done in the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urn of income was filed on 26.02.2020, declaring NIL income. Thereafter, the notices were issued from time to time and submissions were given by the assessee. The assessee is engaged in the business of manufacturing and retailing of designer garments. During the year under appeal, the assessee has declared loss from the business activity which was claimed as carry forward to subsequent Assessment years. The AO after considering the submissions made, completed the assessment at a total income of INR 19,60,52,160/- by making disallowance of bogus job charges of INR 17,10,52,156/- and further made the addition of INR 2.50 crores being the amount cash deposited in bank Specified Bank notes (SBN) during demonetization period. 31. Aggrieved by the said order, assessee preferred an appeal before Ld. CIT(A) who vide impugned dated 28.08.2023 had allowed part relief wherein disallowance of job charges was deleted however, the addition of INR 2.50 crores on account of cash deposit during demonization period is reduced to INR 2,39,99,886/-. 32. Against the said order, the assessee preferred appeal before the Tribunal wherein following grounds of appeal are taken:- 1. On the fac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ount treating the same as unexplained invoking the provisions of section 68 read with section 115BBE of the Act. (ii) That the abovesaid addition has been confirmed rejecting the detailed submissions and explanations brought on record by the assessee explaining source of cash deposited by the assessee. 8. On the facts and circumstances of the case the learned CIT(A) has erred both on facts and in law in confirming the addition despite the fact that the assessee has been maintaining proper books of accounts and cash sales have been made out of the purchases which have not been doubted and rejected by the AO. 9. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition, despite the fact that the assessee has regularly maintained complete stock records, books of accounts are audited as per law and nothing adverse were pointed out both by the AG as well as CIT(A). 10. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the addition despite the fact that the quantity purchased and sold being completely tallying, the addition made ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1 to 6 raised by the assessee are dismissed. 34. Ground of appeal Nos. 7 to 14 raised by the assessee are with respect to the addition made and confirmed by Ld. CIT(A) to the extent of INR 2,39,99,886/- on account of cash deposited in bank during the period of demonetization as unexplained credits u/s 68 r.w.s. 115BBE of the Act. 35. The AO in the assessment order observed that during the course of search, certain conversations were found between the employees and senior management directing them to stop generating bills from billing software used by the assessee from the date of demonetization. AO further observed that certain e-mails were found dated 19.11.2016 & 18.11.2016 exchanged between employees where the instructions were given to branches to provide the details of cash status to the management with date the on the op of the sheet as "09.11.2016". AO further observed that the assessee has shown sales of INR 8 to 10 Lakhs per day in the normal course of business however, on 08.11.2016, cash sales of INR 2.50 crores was declared as made in old currency i.e. in a single day. Accordingly, AO asked the assessee to explain why the amount of INR 2.50 crores should not be tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....under seizure with the Department. Further, no defect whatsoever was pointed out by the AO in the stock register maintained by the assessee. Ld. AR of the assessee further submits that month-wise details of sales and purchase and cash sales and cash deposit during the previous year and during the year under appeal upto the date of demonetization, copy of VAT returns and service tax returns and every possible details such as details of cash sales were submitted before the AO. The AO has failed to point out any error in the details so submitted by the assessee. It is the submissions of the assessee that no soon the demonetization was announced by the Hon'ble Prime Minster, there was unprecedented surge in customer footfall at all the retail outlets of the assessee as the public was keen to utilize their old currency notes for high-end goods. For the smooth handling of the crowd at such late hours, it was advised to the retail counters to generate bills manually. With respect to the mail dt. 18.11.2016 & 19.11.0216, it is submitted by Ld.AR that immediately after demonetization stores managers were asked to deposit the cash in bank with RBI mandated guidelines and further they were ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ourt- * ITAT Delhi in the case of DCIT. V. Subhash Chand Gupta 2023 (5) TMI 1110, dated- May 25, 2023 wherein it was held that the sales cannot be added u/s 68 unless they are proved as bogus on the basis of some reliable evidences. * ITAT Delhi in the case of M/S Godwin Tourism Pvt. Ltd. V. DCIT 2024 (8) TMI 1173, dated-August 21, 2024, held that 19. Considered the rival submissions and material placed on record, we observed that the assessee has submitted cash book in the Paper Book wherein assessee has received share application money on various dates and received the same by way of cash on verification of the cash book submitted before us. We observed that on various dates, the assessee has maintained sufficient cash which are out of share application money and some bank withdrawals and it is substantiated that sufficient source of cash available with the assessee to make the bank deposit of Rs. 8 facs. After considering the facts on record, we observed that assessee has sufficient cash in hands to make above said dash deposit. Accordingly, additions made by the Assessing Officer is deleted. * In the case of ITO V. M/s J.K. Wood India Pvt Ltd....
X X X X Extracts X X X X
X X X X Extracts X X X X
....there is no case for making the addition uls 68 or tax the same us 1158BE again. This view is also supported by the decision of Hon'ble Delhi High Court in the case of Kailash Jewellery House (Supra) and the Hon'ble Gujarat High Court in the case of Vishal Exports Overseas Ltd. (supra). Hence, we do not see any reason to interfere with the order of the Ld CITIA) and the same is upheld." * ITAT Delhi in the case of M/S. Fine Gujaranwala Jewellers V. ITO, 2023 (3) TMI 1196-ITAT Delhi, dated March 27, 2023, where Hon'ble Tribunal observed that where assessee has filed its submiss evidence on record, then it is the duty of AD to act fairly as a reasonable person and examine the fact of the case submissions and placed in the light evidence available and should not come to a conclusion on the basis of surmises and conjectures Tribunal further held that AO without rejecting the books of accounts cannot come to a conclusion that sales are not genuine, relevant finding are as under- "When the assessee gives any reply or submission or any documents to the Assessing Officer, it is duty of the Assessing Officer to examine the same in the light of the available evi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....RCLE 4 (2) NEW DELHI VERSUS BAWA JEWELLERS PVT. LTD. KIRTI NAGAR, WEST, NEW DELHI. 2023 (7) TMI 494-ITAT DELHI Dated:-9-6-2023 20. In view of the above facts and judicial pronouncement, it is submitted that assessee during the course of assessment proceedings duly explained the source of cash deposit was out of the cash balance available in hand and such cash is generated out of the cash sale made in the regular course of business of assessee. It is also submitted the Ld.AO has not rejected the books of accounts prepared by the assessee. 21. For the year under consideration, the assessee has maintained proper books of accounts duly audited by Chartered Accountants. Copy of Audited Financial Statements along with Tax Audit Report have been annexed at PB pg no. 12-86. 22. The said Books of Accounts have not been rejected by the AO using the power confined to it u/s 145 of the Act. Moreover, no discrepancy has been pointed out by him in books of accounts, thus accepting the financial statements prepared on that basis. It is also submitted that the assessee had been regularly maintaining its stock register and all the transactions regarding purchases....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the consistency of the turnover. The assessee has submitted the details of cash sales/receipts and party wise details of sales above and below Rs 2 lakhs were submitted. Further the Ld AR demonstrated the sample Tax Invoice below Rs. 2 lakhs in the demonetization period and the invoice contains, name and address etc. and the Ld AR referred to the details of deposits made out of the cash sales and the assessee has been consistently maintaining the stock of Rs. 21. 10 crs for the FY 2015-16 and for FY 2016-17 it was maintained at Rs. 17 69crs as per the audited financial statements, further the cash sales are part of the stocks maintained by the assessee which is not disputed. Since the cash sales proceeds/receipts received from the customers are reflected in the Audited Profit & Loss account as income/receipts and again if the cash deposits are added under section 68 of the Act, it will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation The AO has not pointed out any specific adversity but made a generalize additions covering the demonization period, cash deposits and RTGS credits without considering the factual....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... corroborative evidence has been confronted to the assessee by the Ld. AO suggesting any sales made outside his books of accounts. 30. In this regard a reference needs to be made to the provisions of section 68 of the Act. In terms of the said provisions, where any sum it found credited in the books of the assessee, the primary onus is on the assessee to offer bonafide explanations with regard to the sum so credited in the present case under consideration, the assessee submitted a detailed explanation along with relevant explanatory proof that the cash deposits made in the bank account represents the available cash in hand and cash sales made by the assessee during the year under consideration. Accordingly, it can be said that assessee has successfully discharged his primary onus and has duly substantiated the sales made by the assessee and explained the amount in credits appearing in the books of accounts. 31. In view of the above facts there is absolutely no reason for the rejection of the explanation and documentary evidences filed by him on whims and fancies unless something contrary has been brought on record by the Ld. AO. Reliance is placed on the following....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated: March 17, 2023 * MR. ATISH SINGLA VERSUS THE INCOME TAX OFFICER, WARD-43 (7), NEW DELHL, 2022 (4) TMI 451 ITAT DELHI, Dated: April 6, 2022 * THE INCOME TAX OFFICER WARD-2 VS J.K. WOOD INDIA PVT. LTD., ITA No. 1550/Del/2020, ITAT Delhi, Dated-03.01.2024 * JCIT, CENTRAL CIRCLE- 18 VS M/S PARI AGENCIES PVT. LTD., ITA No. 2006/Del/2023, ITAT Delhi, Dated- 14.12.2023 * M/S. RAMA HYGIENIC PRODUCTS PVT. LTD. VERSUS ACIT, CC-14, DELHI AND (VICE-VERSA), 2023 (10) TMI 202, ITAT Delhi, Dated-27.09.2023 * ACIT-3 (1) (1) VERSUS M/S. RAMLAL JEWELLERS PRIVATE LIMITED, MUMBAI, 2023 (9) TMI 673, ITAT Mumbai, Dated- 26.07.2023 No sale can be rejected merely on the ground that sale fo the particular month or period is higher when compared to corresponding pervious period. 34. When assessee has declared the sales backed by corresponding purchases and filed comparative sale for the month April 2016 to November 2016 and corresponding April 2015 to November 2015 and there is no abnormal deviation in sales declared for the month of November 2016 when compared to earlier period. 35 The business of assessee company is retail trade....
X X X X Extracts X X X X
X X X X Extracts X X X X
....discrepancy in stock register maintained by the assessee nor made out a case that the assessee has declared sales without there being any stock in hand. Therefore, in absence of any contrary findings to the effect that the sales declared by the assessee is not backed by any corresponding purchase or supported by stock in hand, in our considered view, simply sales cannot be rejected on the ground that sale for the particular month or period is higher when compared to corresponding previous period in our considered view, there cannot be any reason for uniform sales in all days or month or year. There may be various masons for increase or decrease in sales which depends upon various factors, including festival sales, clearing sales, yearend sales, etc. Therefore, in our considered view the explanation of the assessee that it has received cash from various customers towards sale of jewellery and subsequently the advances have been converted into sales, appears to be bona fide and reasonable. DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -1, COIMBATORE VERSUS MIS. DARPARADISE PVT. LTD., 2024 (8) TMI 741- ITAT CHENNAI, Dated:-21-3-2024 Therefore, in absence of any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....its that during the period of less than four hours, assessee had shown cash sales of more than INR 02 crores which cannot be accepted. Looking to the fact that he is dealing in ready-made garments where customers bought the goods only after fully satisfied about the fitting etc. of the garments and it is not a kirana goods where the goods were picked up without looking further. He further submits that conduct of the assessee in instructing the staff to record sales through manual bills and further instructing to report the cash position to store managers by placing title on top of sheet "as on 09.11.2016" further proves that assessee had tried to introduce its unaccounted cash in the shape of sales in books of accounts. It is further submitted by Ld. CIT DR that assessee has tried to back dating the entries of sales to manage the cash position and under the grab of such cash sales, an attempt was made to explain the unexplained cash. He further placed reliance on the order of Ld.CIT(A) wherein he has followed the order of Co-ordinate Bench of Hyderabad in the case of Vaishnavi Bullion Pvt. Ltd. vs ACIT in ITA No.560 & 561/Hyd/2020 wherein the Co-ordinate Bench has upheld the additi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....trol the stock at various outlets. It was submitted by the assessee that because of search, books of accounts maintained in software was seized by the Department and were available with the AO who has made no effort of making any verification from such seized records of claim of the assessee of cash sales. The assessee's submission was that the invoices as well as stock position were available in seized records, but no effort was made by the AO for making verification which further proved that the AO had proceeded with the pre-conceived motion to make addition of amount of cash deposited during demonetization in SBN in the bank account of the assessee. Once cash sales was accepted and trading results were not doubted nor the provision of section 145(3) were invoked, it could not be said that cash deposited during demonetization out of such cash sales is unexplained money of the assessee and provision of section 68 of the Act cannot be invoked in such circumstances. Further, profit embedded in such sales have already been offered by the assessee and had been accepted by the AO. Therefore, amount of cash utilized out of such cash sales cannot be held as unexplained and its addition a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... facts and in law in confirming the action of the AO despite the fact that the additions made by the AD under 153A r.w.s 143(3) of the Act are bad in law in the absence of any incriminating material being found during the course of the search. 3. On the facts and circumstances of the case, learned CIT (A) has erred, both on facts and in law, in rejecting the contention of assessee that the proceedings initiated under section 153A against the appellant and the assessment framed under section 153A r.w.s 143(3) are in violation of mandatory provisions of Section 153D of the Act and as such the same is bad in eyes of law. The purported approval u/s 1530 of the Act is illegal, bad in law and also without any application of mind. 4. On the facts and circumstances of the case, learned CIT (A) has erred, both on facts and in law, in confirming the action of the AO despite the fact that the assessment order passed is bad in the eyes of law and liable to be quashed as the same was passed in violation of circular no. 19/2019 issued by CBDT which mandates that no order shall be passed without there being Valid Document Identification Number (DIN) quoted in the body of the ord....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Ground of appeal Nos. 1 to 4 raised by the assessee are with respect to the legality of assessment order passed without following the proper procedure and the approval was mechanical given without independent application of mind. Assessee also challenged the order of Ld. CIT(A) passed without DIN. However, during the hearing, Ld.AR for the assessee not pressed these grounds of appeal therefore, Grounds of appeal Nos. 1 to 4 raised by the assessee are dismissed. 49. Ground of appeal Nos. 5 to 7 raised by the assessee are with respect to the disallowance of INR deduction u/s 80JJAA of the Act of INR 32,14,874/- claimed by the assessee. 50. Brief facts leading to these grounds of appeal are that assessee originally filed its return of income on 31.10.2018, declaring total income of INR 9,23,87,300/-. Thereafter, return of income was revised on 31.03.2019 at a total income of INR 4,70,08,030/-. The main reason for revision of return was that there was claim of amortization of expenses on lease hold improvements of INR 4,74,28,909/- which were not claimed in the original return of income filed u/s 139(1) of the Act. Besides this, assessee has claimed further deduction u/s 80JJAA o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at assessee has furnished Form 10DA alongwith revised return of income wherein correct calculation of deduction claimed and necessary Audit Report were filed which have not been considered. Under these circumstances, it is prayed that additional claim of deduction u/s 80JJAA of the Act made by the assessee deserves to be allowed. 54. On the other hand, Ld. CIT DR supports the orders of the lower authorities and submits that assessee has made revised claim of deduction u/s 80JJAA of the Act which is not permissible under the Act therefore lower authorities had rightly disallowed such claim which order deserves to be uphold. 55. Heard the contentions of the parties and perused the material available on record. In the present case, in the original return filed by the assessee, wherein deduction u/s 80JJAA was claimed at INR 45,48,937/- which was upwardly revised in the return filed u/s 139(5) i.e. revised return where deduction was claimed at INR 77,63,811/-. The assessee has filed necessary Audit Report in Form 10DA for claiming additional amount of deduction u/s 80JJAA of the Act. The AO without verifying the additional claim u/s 80JJAA of the Act, dismissed the plea of assess....