AO and CIT(A) rejected the jobwork expenses claimed by the assessee on the ground that the notices issued under Section 133(6) and thereafter summons issued under Section 131 to the Contractors remained uncomplied with.

It is the case of the assessee that since the Contractors are situated at a remote area situated in excess of distance of 500 kms, these witnesses could not be ordered to attend in person before the AO having regard to the Order XVI, rule 19 of CPC, 1908. The right course of action available to the AO was to issue ‘commission’ under Section 131(1)(d) at the nearest place of the situation of the Contractors for personal attendance, enquiry and local investigations. The assessee’s plea is sustainable. The assessee has successfully demonstrated the incurring of job work expenses on the basis of clinching evidences, both direct and circumstantial. No adverse materials to controvert these tell-tale evidences are on record at present. Shorn off the non-compliance of summons served under Section 131, the assessee has filed formidable evidences to identify the contractors as well as the factum of incurring job work expenses as demonstrated by the IT returns of the service providers. TDS has been deducted on such expenses and reflected in the returns of income of the contractors. The increase in turnover, addition of new line of business, i.e., processing of rice and substantial increase in the fixed asset are vital indicators of plausibility of the explanation offered by the assessee in this regard. In the absence of any culpable evidence in possession of Revenue, the job work expenses are allowable on a standalone basis, as incurred in the ordinary course of business. (AY. 2014-15)