In a recent ruling, the Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that job work expenses can’t be disallowed in absence of culpable evidence with revenue.
United Foods Private Limited, the assessee is a private limited company carrying on the business of trade of rice and other agro products. The return filed by the assessee was subjected to scrutiny assessment.
The Assessing Officer inter alia made inquiries on the job work expenses incurred by the assessee amounting to Rs.3,02,39,330/. The name and addresses of all contractors rendering the services to the assessee were provided to the Assessing Officer.
The notices under Section 133(6) of the Income Tax Act, 1961 were issued by the Assessing Officer for verification purposes for which the contractors did not respond. The Assessing Officer draw adverse inference on the genuineness of expenses and disallowed job work expenses of Rs.3,02,39,330/- while computing the assessed income of the Assessee. The CIT upheld the same.
It was observed that the assessee claimed to have incurred job work expenses of Rs.3.02 crore which amounts to 1.28 % of the turnover. The payment towards job work charges was paid mainly to four job work contractors situated in Gandhidham, Gujarat. The assessee has successfully demonstrated the incurring of job work expenses based on clinching evidence, both direct and circumstantial.
The Assessing Officer and CIT(A) has rejected the job work expenses claimed by the assessee on the ground that notice issued under Section 133(6) of the Income Tax Act and thereafter summons issued under Section 131 to the contractors have remained uncompiled with, by such contractors.
The Tribunal viewed that the non-compliance of summons served under Section 131 of the Income Tax Act, the assessee has filed formidable evidence to identify the contractors as well as the factum of incurring job work expenses as demonstrated by the income tax returns of the service providers.
A Coram comprising of Shri Pradip Kumar Kedia, Accountant Member & Shri Narender Kumar Choudhry, Judicial Member observed that in the absence of any culpable evidence in possession of revenue, the job work expenses deserve to be allowed, on a standalone basis, as incurred in the ordinary course of business.
While allowing the appeal, the ITAT set aside the order of the CIT(A) and the addition/ disallowance on account job-work charges are reversed and cancelled.
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