- (1.) This appeal was admitted by an order of this Court dated 13th July, 2004 on the following substantial questions of law: "i] Whether a particular expenditure could be questioned by the Assessing Officer on the ground of justification and be disbelieved without any enquiry in order to hold the genuineness of a transaction as suspicious without holding any enquiry and giving opportunity to the assessee ? ii] If the answer to the above is in favour of assessee then whether the Tribunal was justified in law in upholding the disallowance of the payment of Rs. 2,84,362/- made by the appellant to M/s. Aditya Associates towards labour charges for the purposes of the appellant's business and its purported findings in that behalf are arbitrary, unreasonable and perverse ?"
(2.) This appeal relates to the assessment year 1996-97 corresponding to previous year 1995-96. The fact of this case is that the appellant before us was and is still carrying on business of manufacturer of barrels and drums of various sizes and descriptions and as such had supplied the same to various reputed companies during the relevant previous years. The petitioner had to do fabrication works for manufacturing drums utilizing the raw materials supplied by the customers under written agreement.
(3.) In the process, manufacturing of the drums by the assessee itself had gone down drastically but manufacturing by way of fabrication with the raw materials supplied by the customers had gone up and thereby gross turn over of the company had gone up. The assessee claimed deduction for payment to the contractor, M/s. Aditya Associates, who supplied labour force which includes skilled ones and who were engaged in fabrication job and an aggregate sum of Rs. 2,84,362/- was paid as such it was shown in the audited account. Deduction of payment of the said sum of Rs. 2,84,362/- was claimed.;