Commissioner Of Income Tax-I, Ludhiana v. M/S Dimple Exports, Ludhiana

ITA No. 213 of 2011 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 213 of 2011 (O&M) Date of Decision: 21.4.2016 Commissioner of Income Tax-I, Ludhiana ....Appellant. Versus M/s Dimple Exports, Ludhiana ...Respondent. 1.Whether the Reporters of the local papers may be allowed to see the judgment?the judgment? 2.To be referred to the Reporters or not? 3.Whether the judgment should be reported in the Digest? CORAM:-HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MRS. JUSTICE RAJ RAHUL GARG. PRESENT: Mr. Rajesh Katoch, Advocate for the appellant. Mr. Rajiv Sharma, Advocate for Mr. S.K. Mukhi, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This order shall dispose of two appeals bearing ITA Nos.213 and 214 of 2011 as according to learned counsel for the appellant,similar questions of law are involved therein. For brevity, the facts arebeing extracted from ITA No. 213 of 2011. 2.ITA No. 213 of 2011 has been filed by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) against theorder dated 25.2.2010 (Annexure A-III) passed by the Income TaxAppellate Tribunal, Chandigarh Bench “A”, Chandigarh (hereinafterreferred to as “the Tribunal”) in ITA No. 532/CHD/2009 for the ITA No. 213 of 2011 assessment year 2001-02. The appeals were admitted by this Courtvide order dated 8.12.2011 for determination of the following substantialquestions of law:- ITA No. 213 of 2011 Whether on the facts and in circumstances of thecase, the finding of the Income Tax Appellate Tribunalin deleting the addition of ` 2,13,71,960/- suffers fromperversity and therefore not sustainable? ITA No. 214 of 2011 (i)Whether on the facts and in circumstances ofthe case, the finding of the Income TaxAppellate Tribunal in deleting the addition of` 3,80,89,424/- suffers from perversity andtherefore not sustainable?the case, the finding of the Income TaxAppellate Tribunal in deleting the addition of` 3,80,89,424/- suffers from perversity andtherefore not sustainable? (ii)Whether on the facts and circumstances of thecase, Hon'ble Income Tax Appellate Tribunal isright in upholding the order of learned CIT(A)dated 27.2.2009 in deleting the addition of` 1,50,000/- made by the Assessing Officer onaccount of unexplained cash credits appearingin the capital account of new partners i.e. Sh.Rakesh Jain (` 50,000/-) and Smt. MeenakshiSoni (` 1,00,000/-) when no confirmation wasfiled by them before Assessing Officer?case, Hon'ble Income Tax Appellate Tribunal isright in upholding the order of learned CIT(A)dated 27.2.2009 in deleting the addition of` 1,50,000/- made by the Assessing Officer onaccount of unexplained cash credits appearingin the capital account of new partners i.e. Sh.Rakesh Jain (` 50,000/-) and Smt. MeenakshiSoni (` 1,00,000/-) when no confirmation wasfiled by them before Assessing Officer? 3.Put shortly, the facts necessary for adjudication of thepresent appeal as narrated therein are that the assessee derived incomefrom manufacturing/export and also trading of hosiery goods. On 3.Put shortly, the facts necessary for adjudication of thepresent appeal as narrated therein are that the assessee derived incomefrom manufacturing/export and also trading of hosiery goods. On 15.10.2003, the search was conducted under Section 132 of the Act.The notice dated 3.10.2005 under Section 153A of the Act was issuedand served on the assessee on 5.10.2005. In response thereto, theassessee filed its return of income on 2.12.2005 for the assessment year2001-02 declaring nil income and claimed deduction under Sections80HHC and 80IB of the Act. During the assessment year in question,the assessee declared gross profit of ` 3,24,97,935/- on export/sales of` 9,20,83,855/- including Duty Draw Back (DDB) of ` 1,18,35,839/-. Theassessee claimed to have paid ` 2,43,71,960/- as labour charges. Theassessee was asked to substantiate labour charges vide order sheetentry dated 10.3.2006 including the names and addresses of the partiesto whom paid but it failed to do so. Accordingly, the Assessing Officervide order dated 31.3.2006 (Annexure A-1) under Section 153A readwith Section 143(3) of the Act allowed only ` 30,00,000/- as labourcharges incurred by the assessee on the basis of the comparable caseof M/s Glide Impex wherein the claim of wages was made at ` 10.38 lacsagainst the total turnover of ` 34 crores for the assessment year 2004-05. The Assessing Officer, thus, disallowed claim of ` 2,13,71,960/- aslabour charges. The Assessing Officer further disallowed deductionunder Section 80IB of the Act on DDB and assessed income at` 1,01,80,650/-. Feeling aggrieved, the assessee filed an appeal beforethe Commissioner of Income Tax (Appeals) [for brevity “the CIT(A)”].The CIT(A) vide order dated 27.2.2009 (Annexure A-II) partly allowed theappeal upholding the disallowance made by the Assessing Officer on theclaim of deduction under Section 80IB of the Act on DDB. Further, theCIT(A) deleted the addition of ` 2,13,71,960/- made by the AssessingOfficer on account of labour charges. Against the order, Annexure A-II, ITA No. 213 of 2011-4- the revenue filed two appeals bearing ITA Nos. 532-533/CHD/2009 forthe assessment years 2001-02 and 2002-03 before the Tribunal. TheTribunal vide a consolidated order dated 25.2.2010 (Annexure A-III)partly allowed the appeal of the revenue by upholding the order of theCIT(A) on the issue of deletion of disallowance of ingenuine labourcharges following its own order dated 28.5.2009 for the assessmentyears 2003-04 and 2004-05 in the case of M/s Dugal Exports. Hence,the present appeals. 4.We have heard learned counsel for the parties. 5.It is not disputed by the learned counsel for the parties thatquestion No. (i) in both the appeals is covered by the decision of thisCourt in ITA No. 624 of 2010 (The Commissioner of Income Tax-III, Ludhiana v. M/s S.G. Exports) decided on 8.2.2011 wherein thequestion has been answered in favour of the revenue and the matter hasbeen remitted to the CIT(A) for decision of the controversy afresh inaccordance with law. Accordingly, question No. (i) in both the appeals isanswered in favour of the revenue and the matter is remitted to the CIT(A) for decision afresh in accordance with law. 6.Adverting to question No.(ii) in ITA No. 214 of 2011, it maybe noticed that the Assessing Officer had made additions of ` 50,000/-and ` 1,00,000/-, respectively on account of cash credits in the capitalaccount of the two partners, namely, Shri Rakesh Jain and Smt.Meenakshi Soni as no specific source was explained. On appeal by theassessee, the CIT(A) deleted the said additions by recording as under:- “I have carefully considered the contention of the ld.counsel for the appellant and perused the relevantrecord. Though the A.O. has made addition on the 6.Adverting to question No.(ii) in ITA No. 214 of 2011, it maybe noticed that the Assessing Officer had made additions of ` 50,000/-and ` 1,00,000/-, respectively on account of cash credits in the capitalaccount of the two partners, namely, Shri Rakesh Jain and Smt.Meenakshi Soni as no specific source was explained. On appeal by theassessee, the CIT(A) deleted the said additions by recording as under:- “I have carefully considered the contention of the ld.counsel for the appellant and perused the relevantrecord. Though the A.O. has made addition on the above ground, as explained by the ld. Counsel, all thethree new partners are assessed to Income Tax.Their Ward No. and PAN were duly given before theA.O. Though in his report dated 20.08.2007 filedduring the assessment proceedings, the A.O. hasmaintained that the identity of these persons was notestablished nor any confirmation was furnished fromany one of them, the fact that these persons havebeen taken as new partners by the appellant andwherein all of them have duly signed the registrationdeed, it is not known how the A.O. can maintain thatthe identity of these persons was not established.Further PAN etc. for these persons have been dulymentioned by the ld. Counsel. Therefore, I do notagree with the A.O. that the identity of these personshas not been established. Further, if at all the sourcesof credits in the hands of these persons were notexplained, action could be taken in the hands of thesepersons only in view of the ratio of the Hon'blejurisdictional High Court in the case of CIT v.Rameshwar Dass Suresh Pal Cheeka 199 Taxation(P&H) 208 CTR (P&H) 459 which has been reliedupon by the ld. Counsel. Keeping in view the entiretyof the facts and circumstances and the legal positionas discussed above, addition made by the A.O. is notsustainable and it is, therefore, deleted.” On further appeal by the revenue, the order of the CIT(A) regarding ITA No. 213 of 2011 deletion of addition of ` 1,50,000/- was upheld. 7.The CIT(A) and the Tribunal on appreciation of material onrecord have deleted the aforesaid additions of ` 1,50,000/- made by theAssessing Officer. Learned counsel for the revenue was not able todemonstrate that the approach of the CIT(A) and the Tribunal waserroneous or perverse or that the findings of fact recorded were basedon misreading or misappreciation of evidence on record. The view of theCIT(A) and the Tribunal is a plausible view and deletion of the aforesaidadditions was justified. Accordingly, the findings on question No. (ii) areaffirmed. 8.In view of the above, both the appeals stand disposed of. (AJAY KUMAR MITTAL)JUDGE April 21, 2016gbs (RAJ RAHUL GARG) JUDGE