COMMISSIONER OF INCOME TAX Vs. RAVJIBHAI BECHARBHAI DHAMELIYA

JUDGEMENT

(1.) Challenging the order of the Income-tax Appellate Tribunal dated January 28, 2012, the Revenue has chosen this tax appeal proposing the following questions of law for our consideration under section 260A of the Income-tax Act, 1961 ("the IT Act" for short) :

(2.) The assessee is running two separate proprietary concerns wherein the activities of cutting and polishing the diamond on the job work basis and activity of export of the diamond are being carried out. Survey under section 133A of the Income-tax Act was conducted on September 9, 2004, and the assessee had surrendered undisclosed income of Rs. 2.51 crores in the return of income filed for the assessment year 2005-06 over and above the regular income. During the course of the survey, the statements of 7 subcontractors out of total 12 sub-contractors were recorded. They have stated in their statements that they were employees of M/s. Vraj Diamonds, one of the proprietary concerns.

(3.) The Assessing Officer observed that these deemed sub-contractors in fact, were the employees of the assessee working in the same building and under complete control of the assessee. Rejecting the books of account gross profit was estimated by him at Rs. 2.71 crores (rounded off) 10 per cent. of the total turnover instead of the gross profit. The Assessing Officer considered this to be the bogus outstanding liability invoking the provisions under section 41(1) of the Income-tax Act.