Deputy Commissioner of Income Tax,Central Circle--12, New Delhi. Vs. Shri Ashok Nagrath, Shri Ashok Nagrath, 1485/5, Wazir Nagar, Kotla Mubarakpur, New Delhi.
October, 10th 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
`A' : NEW DELHI
DELHI BENCH `A
G.D.AGRAWAL, VICE PRESIDENT AND
BEFORE SHRI G.D.AGRAWAL,
A.D.JAIN, JUDICIAL MEMBER
Assessment Year : 2006-
Deputy Commissioner of Vs. Shri Ashok Nagrath,
Income Tax, 1485/5, Wazir Nagar,
Central Circle- Kotla Mubarakpur,
New Delhi. New Delhi.
Present Address :
Phase-1, Udyog Vihar,
PAN : AACPN8782C.
Appellant by : Shri Pirthi Lal, Sr.DR.
Respondent by : Ms.Ruchi Khurana, Advocate.
G.D.AGRAWAL, VP :
This appeal by the Revenue is directed against the order of
learned CIT(A)-XXVI, New Delhi dated 20th December, 2010 for the AY
2. The only ground raised by the Revenue reads as under:-
"In facts and circumstances of the case, ld.CIT(A) has erred
in law and on facts in deleting the addition of Rs.1865000/-
made by the Assessing Officer on account of labour
charges by holding that the prevalent market practice of
the manner in which the unskilled labour of engaged
cannot be ignored."
3. The facts of the case are that the assessee derives income from
manufacture of beads, necklaces and other hand made items. The
same are being exported. For the year under consideration, the
assessee incurred labour charges of `18,65,000/-. During the course of
assessment proceedings, the Assessing Officer asked the assessee to
produce the labour charges register. The assessee did not produce the
same on the ground that the same was misplaced. Therefore, the
Assessing Officer disallowed the entire labour charges claimed by the
4. On appeal, learned CIT(A) accepted the assessee's claim on the
ground that the assessee's turnover was more than `31 crores and
labour charges were only `18.65 lakhs. The percentage of labour
charges to sales was lesser as compared to the immediately preceding
5. The Revenue, aggrieved with the order of learned CIT(A), is in
appeal before us.
6. We have heard both the sides and perused the material placed
before us. When the assessee has not produced the labour charges
register and other evidences in support of the labour charges claimed
by the assessee, technically, the Assessing Officer was justified in
rejecting the assessee's accounts and in estimating the income of the
assessee under Section 145(3). However, even after the rejection of
books of account, the reasonable claim of the assessee of the
expenses has to be allowed. The comparative position of the year
under appeal and the immediately preceding year is as under:-
A.Y. Export Turnover Net Profit before tax(%) Labour Charges
2005-06 15,67,53,324 6,95,31,502 (44-42) 24,35,000
2006-07 31,00,03,900 15,10,33,978 (48-72) 18,65,000
7. From the above chart, it is evident that in the immediately
preceding year, on the export turnover of `15.67 crores, the labour
charges were `24.35 lakhs. The same was accepted by the Revenue.
The percentage of the labour charges to the sales was 1.55%. During
the year under consideration, though the sales have increased to
`31.00 crores, but, the labour charges have reduced to `18.65 lakhs.
In percentage term, it would be 0.6%. Thus, the percentage of labour
charges to the export turnover has reduced to less than half of the
immediately preceding year which was accepted by the Revenue. In
the above circumstances, in our opinion, even when the assessee's
accounts are to be rejected and income has to be computed to the
best judgment of the Assessing Officer, there would not be any
justification for disallowance of even part of the labour expenses. It
would also not be out of place to mention here that on the export
turnover of `31.00 crores, the net profit disclosed by the assessee is
`15.10 crores which is 48.72%. Even the percentage of net profit is
better as compared to the last year which was 44.42%. When the
assessee has disclosed the net profit percentage of 48.72% of the
sales, in our opinion, even in a best judgment assessment, there would
not be any justification for making any addition, especially when the
percentage of net profit is also better than the preceding year. In view
of the above, we uphold the order of learned CIT(A) and dismiss the
appeal filed by the Revenue.
8. In the result, the appeal of the Revenue is dismissed.
Decision pronounced in the open Court on 5th October, 2012.
JUDICIAL MEMBER VICE PRESIDENT
Dated : 05.10.2012
Copy forwarded to: -
1. Appellant : Deputy Commissioner of Income Tax,
2. Respondent : Shri Ashok Nagrath,
1485/5, Wazir Nagar,
Kotla Mubarakpur,New Delhi.
Present Address :
Phase-1, Udyog Vihar,
5. DR, ITAT