M/s Sri Raghavendra Lorry Service, Vijayawada V. THE Dy. CIT, CIRCLE - 2(1), Vijayawada

CO 10/VIZ/2016

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 2860 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-02-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 18-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C H HEMANTH KUMAR
• Assessee Lawyers: M N M NAIK
• Keywords: Rejection of books of accounts; Depreciation; Additional evidence; Revised return
• Section: 133A; 32; 147; 148; 144; 139

Judgement Text

ITA NOS.35 TO 38/VIZAG/2013 & CO NOS.9 TO 12/VIZAG/ 2016 SRI RAGHAVENDRA LORRY SERVICE, VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NOS.35 TO 38/VIZAG/2013 ( / ASSESSMENT YEARS: 2006-07 TO 2009-10) DY. CIT, CIRCLE - 2(1), VIJAYAWADA VS. SRI RAGHAVENDRA LORRY SERVICES, VIJAYAWADA [ABHFS1240G] ( % / APPELLANT) ( &'% / RESPONDENT) C.O. NOS.9 TO 12/VIZAG/2016 ./I.T.A.NOS.35 TO 38/VIZAG/2013 ( / ASSESSMENT YEARS: 2006-07 TO 2009-10) SRI RAGH AVENDRA LORRY SERVICES, VIJAYAWADA VS. DY. CIT, CIRCLE - 2(1), VIJAYAWADA ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI M.N.M. NAIK, DR / RESPONDENT BY : SHRI C.H. HEMANTH KUMAR, AR / DATE OF HEARING : 07.02.2017 / DATE OF PRONOUNCEMENT : 14.02.2017 ITA NOS.35 TO 38/VIZAG/2013 & CO NOS.9 TO 12/VIZAG/ 2016 SRI RAGHAVENDRA LORRY SERVICE, VIJAYAWADA 2 / O R D E R PER BENCH: THESE FOUR APPEALS FILED BY THE REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DIRECTED AGAINST COMMON O RDER PASSED BY THE CIT(A), VIJAYAWADA DATED 16.11.2012 FOR THE ASSESSM ENT YEARS 2006-07 TO 2009-10. SINCE, THE FACTS ARE IDENTICAL AND ISS UES ARE COMMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED-OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRANSPORT CONTRACT, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEARS 2006-07 TO 2009-10 U/S 139 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE AC T'). A SURVEY OPERATION U/S 133A OF THE ACT, WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 5.2.2010. DURING THE COURSE OF SURVEY OPERATION, THE ASSESSEE DID NOT CHOOSE TO PRODUCE BOOKS OF ACCOUNT S FOR THE ASSESSMENT YEARS 2006-07 TO 2009-10 AND ALSO FOR TH E PERIOD FROM 1.4.2009 TO 5.2.2010. IT WAS FURTHER NOTICED THAT THE ASSESSEE HAS MAINTAINED ONLY KATCHA ACCOUNT BOOKS WHICH WERE IMP OUNDED. DURING POST SURVEY INVESTIGATION, ON CLOSE ANALYSIS OF IMP OUNDED MATERIAL REVEALS THAT THERE EXISTED A CONCEALED INCOME AND T HAT THE RECEIPTS AND PAYMENTS ARE NOT IN TALLY WITH THE BOOKS OF ACCOUNT S. IN VIEW OF SURVEY ITA NOS.35 TO 38/VIZAG/2013 & CO NOS.9 TO 12/VIZAG/ 2016 SRI RAGHAVENDRA LORRY SERVICE, VIJAYAWADA 3 OPERATION CONDUCTED U/S 133A OF THE ACT, WHICH RESU LTED IN IDENTIFICATION OF DEFICIENCIES AND SHORTCOMINGS ON DIFFERENT COUNT S, ACTION U/S 147 OF THE ACT WAS INVOKED BY ISSUANCE OF A NOTICE U/S 148 OF THE ACT, ON 8.2.2010 REQUIRING THE ASSESSEE TO FURNISH RETURN O F INCOME. SINCE, THE ASSESSEE FAILED TO RESPOND TO THE NOTICE ISSUED U/S 148 OF THE ACT, A REMINDER DATED 28.5.2010 HAS BEEN ISSUED DIRECTING IT TO FILE THE RETURN OF INCOME FOR THE ASSESSMENT YEARS 2006-07 TO 2009- 10. IN RESPONSE THERETO, THE ASSESSEE FILED A REPLY DATED 14.6.2010 SEEKING FOR COPIES OF IMPOUNDED MATERIAL. HOWEVER, THE ASSESSEE FILED IT S RETURN OF INCOME IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT ON 30.12. 2010 AND ALSO FILED A SEPARATE LETTER DATED 22.12.2010 CONVEYING ITS OBJE CTIONS FOR PROPOSED RE-OPENING OF THE ASSESSMENT. 3. SUBSEQUENTLY, THE CASE HAS BEEN SELECTED FOR SCR UTINY AND ACCORDINGLY A DETAILED SHOW-CAUSE NOTICE WAS ISSUED . IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE HAS FILED ITS REPLY DATED 22.12.2010 AND SUBMITTED THAT AS PER THE ARRANGEMENT BETWEEN THE F IRM AND PARTNERS & OTHERS, THE TRUCKS ARE OPERATED BY THE FIRM AND ALL THE EXPENDITURE RELATING TO OPERATING OF TRUCK SUCH AS DIESEL, TOLL FEES, LOADING AND UNLOADING CHARGES, DRIVERS BETAS, TYRES, SPARES, ET C. ARE INCURRED BY THE FIRM AND ALSO THE FIRM UNDERTAKES TO PAY MONTHLY IN STALMENT OF TRUCKS OWNED BY THE NON-PARTNER AND IT PAYS A NOMINAL AMOU NT OF ` 1,000/- ITA NOS.35 TO 38/VIZAG/2013 & CO NOS.9 TO 12/VIZAG/ 2016 SRI RAGHAVENDRA LORRY SERVICE, VIJAYAWADA 4 PER TRUCK PER MONTH FOR PARTNERS. THE ASSESSEE FUR THER SUBMITTED THAT IN ADDITION TO THE VEHICLES OWNED BY THE FIRM & PAR TNERS, THE ASSESSEE FIRM ALSO OPERATED TRUCKS OWNED BY OTHERS AS A TRAN SPORT CONTRACTOR AND HENCE, THE PROVISIONS OF SECTION 44AE OF THE ACT CA NNOT BE MADE APPLICABLE, SINCE IT IS OPERATING MORE THAN 10 TRUC KS, THEREFORE ESTIMATING INCOME KEEPING IN VIEW OF THE SAID PROVI SIONS IS INCORRECT. THE ASSESSEE ALSO FILED OBJECTION FOR OTHER ISSUES POINTED OUT BY THE A.O., TO REJECT BOOKS OF ACCOUNTS AND ESTIMATION OF NET PROFIT BY REBUTTING ALL THE ALLEGATIONS OF A.O. AND STATED TH AT IT IS OPERATING WITH A MINIMUM MARGIN AS IT WORKS AS TRANSPORT CONTRACTOR. 4. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF T HE ASSESSEE AND ALSO ANALYSIS OF THE IMPOUNDED MATERIAL, OBSERVED T HAT THE TRADING RESULT DISCLOSED BY THE ASSESSEE ARE NOT AMENABLE FOR VERI FICATION, GOING BY THE FACT THAT THE ASSESSEE DID NOT PRODUCE REGULAR BOOK S OF ACCOUNTS DULY SUPPORTED BY DOCUMENTARY EVIDENCE SUCH AS BILLS/VOU CHERS FOR DIFFERENT ITEMS OF EXPENDITURE SUCH AS DIESEL, DRIVER BETAS, LOADING & UNLOADING CHARGES AND PARTICULARLY OTHER EXPENSES WHICH CONTR IBUTES MAJOR PART OF THE TOTAL EXPENDITURE FOR THE ASSESSMENT YEARS UNDE R REVIEW. THE A.O. FURTHER OBSERVED THAT DURING THE COURSE OF SURVEY O PERATION, THE MANAGING PARTNER DEPOSED AN OATH AT THE TIME OF REC ORDING SWORN DEPOSITION DATED 5.2.2010 TO THE EFFECT THAT THE FR EIGHT RECEIPTS OTHER ITA NOS.35 TO 38/VIZAG/2013 & CO NOS.9 TO 12/VIZAG/ 2016 SRI RAGHAVENDRA LORRY SERVICE, VIJAYAWADA 5 THAN RAASI CEMENTS ARE NOT REFLECTED IN THE BOOKS O F ACCOUNTS. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE FIRM OPTED TO ACCOUNT FOR RECEIPTS AND ALSO EXPENDITURE ON DIFFERENT COUNTS O N THE BASIS OF APPROXIMATE FIGURE WHICH ARE NOT RELIABLE AND AUTHE NTICATED AND GOING BY THIS ANOMALOUS SITUATION AND INHERENT DEFICIENCI ES CONTAINED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE, OPINE D THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE INCOMPLETE AND DOES NOT GIVE TRUE AND CORRECT PROFIT FROM THE BUSINESS. THEREFO RE, REJECTED BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT AND RESORTED TO A RE ASONABLE ESTIMATE OF NET PROFIT AS UPHELD BY THE JUDICIARY IN TERMS OF S ECTION 144 OF THE ACT. ACCORDINGLY, REJECTED BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT AND ESTIMATED NET PROFIT OF 7% ON GROSS RECEIPTS NET OF ALL DEDUCTIONS INCLUDING DEPRECIATION. IN SO FAR AS DEPRECIATION, THE A.O. OBSERVED THAT THE ASSESSEE HAS FAILED TO PROVE THE OWNERSHIP OF A SSETS, WHICH IS MANDATORY FOR CLAIMING DEPRECIATION UNDER THE PROVI SIONS OF SECTION 32 OF THE ACT. SINCE, THE ASSESSEE HAS FAILED TO PROV E THE OWNERSHIP OF ASSETS TO CLAIM DEPRECIATION AND ALSO FACT THAT THE ASSESSEE HAS MADE THIS CLAIM IN THE REVISED RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT, REJECTED DEPRECIATION CLAIM. 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE HAS FILED ITA NOS.35 TO 38/VIZAG/2013 & CO NOS.9 TO 12/VIZAG/ 2016 SRI RAGHAVENDRA LORRY SERVICE, VIJAYAWADA 6 ELABORATE WRITTEN SUBMISSIONS AND SUBMITTED THAT TH E A.O. WAS ERRED IN REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF IN COME. THE ASSESSEE FURTHER CONTENDED THAT NET PROFIT ESTIMATED BY THE A.O. IS PRETTY HIGH WHEN COMPARED TO THE NATURE OF BUSINESS OF THE ASSE SSEE, THAT TOO, THE ASSESSEE BEING A TRANSPORT CONTRACTOR OPERATING TRU CKS BELONGS TO OTHERS WHEREIN IT HAD A VERY LOW PROFIT MARGIN, THEREFORE, THE A.O. WAS ERRED IN ESTIMATING NET PROFIT OF 7% ON GROSS RECEIPTS. IN SO FAR AS DEPRECIATION, THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER O UGHT TO HAVE ALLOWED DEPRECIATION IN ACCORDANCE WITH PROVISIONS OF SECTI ON 32 OF THE ACT, EVEN AFTER ESTIMATION OF NET PROFIT, BECAUSE DEPRECIATIO N IS A STATUTORY CLAIM ON THE VALUE OF THE ASSETS. THE CIT(A), DURING THE COURSE OF APPELLATE PROCEEDINGS FORWARDED ADDITIONAL EVIDENCES FILED BY THE ASSESSEE TO SUBSTANTIATE THE CLAIM OF OWNERSHIP OF ASSETS ALONG WITH WRITTEN SUBMISSIONS TO THE A.O. FOR HIS COMMENTS. THE A.O. VIDE HIS REMAND REPORT REITERATED THE FINDINGS OF THE A.O., IN THE ASSESSMENT ORDER IN SO FAR AS REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATIO N OF NET PROFIT. AS REGARDS CLAIM OF DEPRECIATION, THE A.O. SUBMITTED T HAT SINCE THE ASSESSEE FAILED TO CLAIM DEPRECIATION IN THE ORIGIN AL RETURN, IT CANNOT MAKE ANY FRESH CLAIM TOWARDS DEPRECIATION IN THE RE VISED RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT, AS THE PROCE EDINGS U/S 147 OF THE ACT ARE MEANT FOR TAKING CARE OF ESCAPED INCOME WHI CH IS BENEFICIAL TO ITA NOS.35 TO 38/VIZAG/2013 & CO NOS.9 TO 12/VIZAG/ 2016 SRI RAGHAVENDRA LORRY SERVICE, VIJAYAWADA 7 THE REVENUE AND THE ISSUES RAISED AFRESH CANNOT BE CONSIDERED IN THE RE- ASSESSMENT PROCEEDINGS. THE CIT(A) FORWARDED REMAND REPORT OF THE A.O. TO THE ASSESSEE FOR ITS COMMENTS. THE ASSESSEE VIDE HIS REJOINDER TO REMAND REPORT HAS REBUTTED THE FINDINGS OF THE A .O. IN SO FAR AS REJECTION OF BOOKS OF ACCOUNTS AS WELL AS CLAIM OF DEPRECIATION. 6. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO TAKEN INTO ACCOUNT THE REMAND REPORT AS WELL A S REJOINDER FILED BY THE ASSESSEE, HELD THAT IN PRINCIPLE THERE WAS NO O BJECTION ON ESTIMATION OF INCOME MADE BY THE A.O. FOR ALL THE YEARS PENDIN G FOR ADJUDICATION. IT MAY BE NOTED HERE THAT THE A.O. HAS ESTIMATED IN COME AT 7% ON TOTAL TURNOVER NET OF DEPRECIATION. THE A.R. CONTENDED T HAT DEPRECIATION HAS TO BE ALLOWED ON THE ESTIMATION OF PROFITS. IN THI S CONTEXT, THE A.R. HAS FILED CERTAIN JUDGEMENTS OF APPELLATE AUTHORITIES, WHEREIN THEY HAVE UPHELD ESTIMATION OF NET PROFIT OF 10% ON WHICH DEP RECIATION WAS ALLOWED. THE A.R. RELIED UPON THE DECISION OF ITAT, HYDERABAD A BENCH IN THE CASE OF MUNUMURI KRISHNA MURTHY VS. ACIT CIR CLE-1, VIJAYAWADA, IN ITA NO.898/HYD/1995 DATED 4.12.1996, WHEREIN THE ITAT, HAS DIRECTED ESTIMATION OF INCOME AT 10% OF GROSS RECEI PTS SUBJECT TO ALLOWANCE OF DEPRECIATION. THE ITAT, VISAKHAPATNAM BENCH, IN THE CASE OF ITO WARD-1(3), VIJAYAWADA VS. SRI PADMAVATHI TRA NSPORTS, JAGGAIAHPET IN ITA NO.42/VIZAG/2005 DATED 4.6.2009, DIRECTED THE A.O. ITA NOS.35 TO 38/VIZAG/2013 & CO NOS.9 TO 12/VIZAG/ 2016 SRI RAGHAVENDRA LORRY SERVICE, VIJAYAWADA 8 TO ESTIMATE INCOME FROM TRUCK PLYING AT 10% OF GROS S RECEIPTS SUBJECT TO ALLOWANCE OF DEPRECIATION. THUS, THE LEGAL OPINION IS PREDOMINANTLY IN FAVOUR OF ASSESSEE AND ACCORDINGLY, THE A.O. IS DIR ECTED TO ESTIMATE INCOME AT 10% OF GROSS RECEIPTS SUBJECT TO ALLOWANC E OF DEPRECIATION FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION. AGGR IEVED BY THE CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFORE US. 7. THE LD. D.R. SUBMITTED THAT THE LD. CIT(A) FAILE D TO APPRECIATE THE SETTLED LAW THAT RE-OPENING OF AN ASSESSMENT COULD ONLY BE FOR THE BENEFIT OF THE REVENUE AND IN THE RE-ASSESSMENT PRO CEEDINGS, THE ASSESSEE CANNOT BE ALLOWED TO RAISE A NEW CLAIM OR DEDUCTION NOT CLAIMED EARLIER. THE D.R. FURTHER SUBMITTED THAT T HE LD. CIT(A) OUGHT TO HAVE CONSIDERED THAT THERE WAS NO CLAIM FROM THE AS SESSEE THAT THE ASSETS WERE ENTITLED FOR A DEPRECIATION AS A BENEFI CIAL OWNER OF THOSE VEHICLES AND IN FACT NO DEPRECIATION WAS CLAIMED BY IT. THUS, AS PER THE PRINCIPLE OF DOCTRINE OF ESTOPPELS, THE CLAIM WHICH WAS NOT THERE EARLIER CANNOT BE MADE AFRESH IN THE RETURN FILED IN RESPON SE TO NOTICE U/ 148 OF THE ACT. THE D.R. FURTHER ARGUED THAT THE ASSESSEE FAILED TO PROVE THE OWNERSHIP OF ASSETS EVEN BEFORE THE A.O. BY FILING NECESSARY EVIDENCES AND ACCORDINGLY, THE CIT(A) ERRED IN ALLOWING THE D EPRECIATION WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE HAS NOT PROV ED THE OWNERSHIP OF THE ASSETS EITHER ABSOLUTE OR BENEFICIAL WHICH IS N ECESSARY FOR CLAIMING ITA NOS.35 TO 38/VIZAG/2013 & CO NOS.9 TO 12/VIZAG/ 2016 SRI RAGHAVENDRA LORRY SERVICE, VIJAYAWADA 9 DEPRECIATION U/S 32 OF THE ACT. THE D.R. FURTHER S UBMITTED THAT THE LD. CIT(A) FAILED TO CONSIDER THAT THE RE-ASSESSED INCO ME CANNOT GO BELOW THE RETURNED INCOME AS THE INCOME ASSESSED AFTER GI VING EFFECT TO THE DIRECTIONS OF THE CIT(A) GOES BELOW THE ASSESSED IN COME, WHICH CANNOT BE PERMITTED UNDER LAW. 8. ON THE OTHER HAND, THE LD. A.R. STRONGLY SUPPORT ING THE ORDER OF THE CIT(A) SUBMITTED THAT THE CIT(A) HAS RIGHTLY AL LOWED DEPRECIATION ON ASSETS, AS THE ASSESSEE IS HAVING BENEFICIAL OWNERS HIP OF ASSETS AND ACCORDINGLY IT IS ELIGIBLE TO CLAIM DEPRECIATION U/ S 32 OF THE ACT. THE A.R. FURTHER SUBMITTED THAT DEPRECIATION IS A STATUTORY ALLOWANCE ON THE ASSETS, WHICH ARE PUT TO USE IN THE BUSINESS, THERE FORE, CLAIMING DEPRECIATION ON ASSETS ON WHICH THE ASSESSEE HAS BE NEFICIAL OWNERSHIP IS PERMITTED UNDER LAW. THE CIT(A) AFTER CONSIDERING T HE RELEVANT DETAILS RIGHTLY ALLOWED DEPRECIATION AND HIS ORDER SHOULD B E UPHELD. IN SO FAR AS ESTIMATION OF NET PROFIT, THE A.O. HAD ADOPTED VERY HIGH NET PROFIT WHICH IS QUITE CONTRARY TO THE NET PROFIT IN THIS LINE OF BUSINESS. IN THIS REGARD RELIED UPON CERTAIN JUDICIAL PRECEDENTS AND SUBMITT ED THAT THE APPELLATE AUTHORITIES HAS DIRECTED TO ESTIMATE NET OF 3% OF G ROSS RECEIPTS NET OF ALL DEDUCTIONS INCLUDING DEPRECIATION, THEREFORE, THE S AME RATE OF NET PROFIT MAY BE ADOPTED. ITA NOS.35 TO 38/VIZAG/2013 & CO NOS.9 TO 12/VIZAG/ 2016 SRI RAGHAVENDRA LORRY SERVICE, VIJAYAWADA 10 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. ESTIMATED NET PROFIT OF 7% ON GROSS RECEIPTS N ET OF ALL DEDUCTIONS INCLUDING DEPRECIATION. THE A.O. WAS OF THE OPINIO N THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE NOT AMENABL E FOR VERIFICATION AS THE ASSESSEE HAS NOT MAINTAINED REGULAR BOOKS OF ACCOUNTS ALONG WITH SUPPORTING BILLS AND VOUCHERS. THE A.O. FURTH ER WAS OF THE OPINION THAT THE IMPOUNDED MATERIAL REVEALS THAT THE ASSESS EE HAS NOT ACCOUNTED CERTAIN FREIGHT CHARGES RECEIVED ON RETUR N TRIPS. THE A.O. FURTHER OBSERVED THAT IN THE KATCHA ACCOUNTS MAINTA INED BY THE ASSESSEE, THE ASSESSEE HAS ACCOUNTED EXPENDITURE IN RELATION TO INCOME WHICH IS NOT PART OF REGULAR BOOKS OF ACCOUNTS. TH EREFORE, OPINED THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AR E NOT SUSCEPTIBLE FOR VERIFICATION. IT IS THE CONTENTION OF THE ASSES SEE THAT THE NET PROFIT ESTIMATED BY THE A.O. IS VERY MUCH ON HIGHER SIDE C OMPARED TO THE NATURE OF BUSINESS OF THE ASSESSEE. THE ASSESSEE F URTHER CONTENDED THAT IT IS OPERATING WITH A VERY LOW PROFIT MARGIN, AS IT WORKS AS TRANSPORT CONTRACTOR BY OPERATING TRUCKS OWNED BY OUTSIDERS I N ADDITION TO ITS OWN TRUCKS, THEREFORE THE A.O. WAS INCORRECT IN ADOPTIN G 7% NET PROFIT. THE ASSESSEE FURTHER CONTENDED THAT THE CIT(A) HAS RIGH TLY ALLOWED ITA NOS.35 TO 38/VIZAG/2013 & CO NOS.9 TO 12/VIZAG/ 2016 SRI RAGHAVENDRA LORRY SERVICE, VIJAYAWADA 11 DEPRECIATION ON VEHICLES AS DEPRECIATION IS AN ALLO WABLE DEDUCTION EVEN AFTER ESTIMATION OF NET PROFIT FROM THE BUSINESS. 10. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATE RIALS ON RECORD, WE FIND THAT IMPOUNDED MATERIAL SEIZED DURING SURVE Y REVEALS THAT THE ASSESSEE HAS NOT MAINTAINED REGULAR BOOKS OF ACCOUN TS FOR ALL THE YEARS. THOUGH, THE ASSESSEE HAS MAINTAINED KATCHA BOOKS OF ACCOUNTS, WHICH DOES NOT GIVE TRUE AND CORRECT PROFIT OF THE BUSINE SS AS THE ASSESSEE HAS NOT ACCOUNTED CERTAIN RECEIPTS FROM RETURN TRIPS. T HEREFORE, THE A.O. OPINED THAT TRADING RESULT DISCLOSED BY THE ASSESSE E ARE NOT AMENABLE FOR VERIFICATION GOING BY THE FACT THAT THE ASSESSE E DID NOT PRODUCE REGULAR BOOKS OF ACCOUNTS DULY SUPPORTED BY DOCUMEN TARY EVIDENCE SUCH AS BILLS/VOUCHERS FOR DIFFERENT ITEMS OF EXPENDITUR E SUCH AS DIESEL, DRIVER BETAS, LOADING & UNLOADING CHARGES AND PARTICULARLY OTHER EXPENSES WHICH CONTRIBUTES MAJOR PART OF THE TOTAL EXPENDITU RE FOR THE ASSESSMENT YEAR UNDER REVIEW. THE A.O. FURTHER INFLUENCED FROM THE STATEMENT OF THE MANAGING PARTNER DEPOSED AN OATH AT THE TIME OF RECORDING SWORN DEPOSITION DATED 5.2.2010 TO THE EFFECT THAT THE FR EIGHT RECEIPTS OTHERS THAN RAASI CEMENTS ARE NOT REFLECTED IN THE BOOKS O F ACCOUNTS. THEREFORE, WE ARE OF THE VIEW THAT THE A.O. WAS RIG HT IN REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF NET PROFIT. ITA NOS.35 TO 38/VIZAG/2013 & CO NOS.9 TO 12/VIZAG/ 2016 SRI RAGHAVENDRA LORRY SERVICE, VIJAYAWADA 12 11. HAVING SAID, LET US EXAMINE WHETHER THE A.O. WA S RIGHT IN ESTIMATING 7% NET PROFIT NET OF ALL EXPENSES. THE A .O. HAS ESTIMATED NET PROFIT OF 7% CLEAR OF DEPRECIATION. THE ASSESSEE C LAIMS THAT NET PROFIT ESTIMATED BY THE A.O. IS ON HIGHER SIDE. THOUGH, TH E ASSESSEE CLAIMS THAT NET PROFIT ESTIMATED BY THE A.O. IS ON HIGHER SIDE, FAILS TO BRING ON RECORD ANY COMPARABLE CASES TO SUPPORT THE NET PROF IT DECLARED IN THE RETURNS OF INCOME. IT IS AN ADMITTED FACT THAT THE BOOKS OF ACCOUNTS MAINTAINED ARE NOT SUSCEPTIBLE FOR VERIFICATION. T HE ASSESSEE ALSO FAILS TO OFFER ANY EXPLANATIONS FOR NOT INCLUDING COMPLET E RECEIPTS FROM THE BUSINESS IN THE BOOKS OF ACCOUNTS. UNDER THESE CIR CUMSTANCES, THE A.O. HAS LEFT WITH NO OPTION, ESTIMATED 7% NET PROFIT BA SED ON THE DECISION OF ITAT, HYDERABAD IN THE CASE OF M/S KONDAPALLI TRANS PORT, WHEREIN ITAT HAS UPHELD 7% NET PROFIT CLEAR OF DEPRECIATION. NO DOUBT ESTIMATION OF NET PROFIT IS ONE OF THE METHODS OF DETERMINATION O F INCOME FROM BUSINESS. BUT, BEFORE ESTIMATION OF INCOME A REASON ABLE PERCENTAGE OF NET PROFIT HAS TO BE ADOPTED KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE. IN THIS CASE, THE A.O. H AS ADOPTED 7% NET PROFIT WHICH IS SUPPORTED BY THE DECISION OF ITAT, WHEREAS, THE ASSESSEE HAS RELIED UPON THE DECISION OF ITAT HYDERABAD A BENCH IN THE CASE OF INCOME TAX OFFICER, WARD-1 VS. SRI GUNDAPANENI NAGES WARA RAO, KODAD IN ITA NO.1799/HYD/2013 DATED 29.4.2014, WHEREIN TH E ITAT HAS ITA NOS.35 TO 38/VIZAG/2013 & CO NOS.9 TO 12/VIZAG/ 2016 SRI RAGHAVENDRA LORRY SERVICE, VIJAYAWADA 13 UPHELD ESTIMATION OF NET PROFIT OF 3% NET OF ALL DE DUCTIONS INCLUDING DEPRECIATION. 12. WE FIND THAT THE COORDINATE BENCH OF THIS TRIBU NAL IN THE CASE OF ITO VS. SRI GUNDAPANENI NAGESWARA RAO (SUPRA), UNDE R SIMILAR SET OF FACTS, HAS DIRECTED THE A.O. TO ESTIMATE NET PROFIT OF 3% NET OF ALL DEDUCTIONS INCLUDING DEPRECIATION. THOUGH, THERE AR E DIVERGENT VIEWS FROM THE APPELLATE AUTHORITIES, THE VIEW WHICH IS M ORE BENEFICIAL TO THE ASSESSEE HAS TO BE ADOPTED IN VIEW OF THE SUPREME C OURT, DECISION IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LIMITED (197 3) 88 ITR 192. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT SINCE , THE ASSESSEE HAS NOT PROVED THE OWNERSHIP OF ASSETS TO CLAIM THE DEP RECIATION AND ALSO FACT THAT THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS OF THE CASE CONSIDERED BY THE ITAT IN ITA NO. 1799/HYD/2013 DAT ED 29.4.2014, WE DEEM IT APPROPRIATE TO DIRECT THE A.O. TO ESTIMATE NET PROFIT OF 3% ON GROSS RECEIPTS NET OF ALL DEDUCTIONS INCLUDING DEPR ECIATION. ACCORDINGLY, WE DIRECT THE A.O. TO ESTIMATE NET PROFIT OF 3% ON GROSS CONTRACT RECEIPTS NET OF ALL DEDUCTIONS FOR ALL THE ASSESSME NT YEARS 2006-07 TO 2009-10. 13. THE ASSESSEE HAS FILED CROSS OBJECTIONS IN SUPP ORT OF THE ORDER OF THE CIT(A). THEREFORE, FOR THE REASONS RECORDED IN THE PRECEDING ITA NOS.35 TO 38/VIZAG/2013 & CO NOS.9 TO 12/VIZAG/ 2016 SRI RAGHAVENDRA LORRY SERVICE, VIJAYAWADA 14 PARAGRAPHS, WE DISMISS CROSS OBJECTIONS FILED BY TH E ASSESSEE AS NOT MAINTAINABLE. 14. IN THE RESULT, THE APPEALS FILED BY THE REVENUE IN ITA NOS.35 TO 38/VIZAG/2013 ARE PARTLY ALLOWED AND CROSS OBJECTIONS FILED BY THE ASSESSEE IN CO NOS.9 TO 12/VIZAG/2016 ARE DISMISSED . THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 14 TH FEB17. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 14.02.2017 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DY. CIT, CIRCLE-2(1), VIJAYA WADA 2. / THE RESPONDENT M/S. SRI RAGHAVENDRA LORRY SERV ICE, PLOT NO.74, GURU NANAK COLONY ROAD, CTO COLONY, VIJAYAWADA 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // ASST. REGISTRAR ITAT, VISAKHAPATNAM