TaxTMI 
TaxTMI 
2026 (9) TMI 1075
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....and in the circumstances of the case, the Tribunal ought to have added 1.53% on the above purchases because 9% G.P was already shown by the assessee bearing in mind that the bench mark was 10.53% G.P of last year? 3. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in disallowing 10% of the total wages of Rs.17,47,638/- when per meter wages this year were lower than last year and the lowest in the industry?" 3. The brief facts of the case are as under: 3.1 The assessee is engaged in the business of manufacturing of Grey Cloth. The assessee filed Return of Income for the year under consideration on 13.09.2005 declaring total income at 'Nil'. The case of the assessee was taken up for scrutiny for the Assessment Year 2005-06. During the course of the assessment proceedings, the Assessing Officer, on verification of the books of account produced by the assessee found that the assessee had made purchases worth Rs. 11,70,790/- from M/s. Laxmi Trading Co., and purchases of Rs. 12,14,514/- from M/s. Nidhi Impex which were doubtful, and therefore, the Assessing Officer asked for confirmation of sales of the said parties from the assesse....
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....t have taken much time to produce the same before the authorities. Similarly, had there been regular maintenance of wages register then the entries would have different in appearance as is not in the case of assessee. The signature of the same recipient differs from time to time. Moreover, it is noticed that the assessee has not affixed revenue stamps from April-04 to July 04 for payments made above Rs.500/- which was compulsory. It clearly shows that the wages register has been prepared now to cater to the need of the assessee. Perhaps, the assessee might have forgotten the fat that the rules were amended somewhere in August,04, of not obtaining signature on revenue stamps for the making payment below Rs.5,000/-. Prior to Aug 04, it was mandatory to obtain signature on payments made above Rs.500/- which was amended to Rs.5000/- from Aug.04. This has happened due to the fact that the assessee has hurriedly prepared the salary register afresh now. Thus, the circumstantial evidences prima facie go against the assessee. In view of the defects pointed out above, there is every possibility of inflating the wages paid during the year under assessment. This can be one of the reas....
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....en found in audit report, which is the final picture of accounts. Two professional auditors stand testimony to the same. The assessing officer's action, to my mind, is right and therefore requires to be upheld Third effective ground relates to 20% disallowances out of total wages debited at Rs.17,47,638/-. The disallowance is Rs. 3,49,528/- The assessing officer's as per his observations, made in para 5 of the order, has held that possible inflation would be around 20% and hence the disallowance. The A.R. has very vehemently argued against this. Comparison of wages, meter vis-à-vis preceding year has been shown to be less. Comparison of wage rates (per meter) with surrounding textile waving have also been given which shows the appellant having incurred the lowest. I have gone through the rival contentions while the assessing officer is talking of possibility of inflation of wages, the A.R. has countered the doubt with plain fact and figures of preceding year as well as of similarly placed parties. To my mind, the A.R.'s plea needs to be allowed to succeed in entirety. Therefore the assessing officer is directed to delete the additi....
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....vided by the assessee to prove the genuineness of the transactions carried out during the course of the business. 4.1 It was further submitted that during the relevant period, there was no bar on issuance of crossed cheques as amended Section 40A(3) of the Act came into effect from 13.07.2006, whereas transactions under dispute took place in the month of January / February, 2005. 4.2 It was, therefore, submitted that the Tribunal has drawn inference and therefore arrived at a conclusion without considering the facts of the case so far as sustaining the addition of 25% of the alleged purchase from both the parties is concerned. It was further submitted that the Tribunal has also not considered the fact that the Assessing Officer has made an addition of 20% of the wages only on the basis of presumption and without assigning any reason, the Tribunal has restored it to 10% without any basis. It was, therefore, submitted that the appeal may be allowed by answering the questions in favour of the assessee. 5. On the other hand, learned Senior Standing Counsel Mr. Karan Sanghani submitted that, admittedly, the assessee did not furnish the confirmation of both the parties though re....
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....sment Order reproduced hereinabove, and therefore, the CIT(Appeals) was justified in holding that there was no legal bar on issuance of cross cheques, and therefore, the assessee had no control over the movement of the cheques issued by it. 6.3 The Assessing Officer has also not disputed the entries in the bank statement nor any further inquiry was made with regard to the genuineness of the transactions when the assessee has provided addresses and copies of all purchase bills containing the central excise registration etc. 6.4 On perusal of the paper book placed on record, it appears that the assessee has ledger account of both the parties along with copies of invoices, which were placed before the Assessing Officer. 7. We are, therefore, of the opinion that the Tribunal was not justified in restoring the order of the Assessing Officer treating 25% of the purchases made from both the parties as income of the assessee. Question No. 1 is, therefore, answered in favour of the assessee and against the revenue and the order of the Tribunal is set aside and of the CIT(Appeals) is restored. 7.1 So far as question No. 2 is concerned, it appears to be an alternative submission o....