Shri Kishor Mavji Parmar, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-2(3), RAJKOT-GUJARAT

CO 55/RJT/2011

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8255 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-01-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-01-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 08-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: DM RINDANI
• Keywords: Income from undisclosed sources
• Section: 133A

Judgement Text

: : IN THE INCOME TAX APPELLATE TRIBU N AL : RAJKOT BENCH : RAJKOT . . . . BEFORE SHRI T. K. SHARM A JM AND SHRI D. K. SRIVASTAVA AM ITA NO . 1085 /R J T/201 0 / ASSESSMENT YEAR 200 7 - 08 IT O V. KISHOR MAVJI PARMAR WARD 2(3) PROP. OF M/S. SHIVKRUPA TRANSPORT RAJKOT OPP: JAIHIND WEIGH BRIDGE KUVADVA ROAD, RAJKOT PAN: ACNPP0415D C.O. NO . 55/RJT/2011 / ASSESSMENT YE AR 2007 - 08 KISHOR MAVJI PARMAR V. ITO DATE OF HEARING: 0 2 . 0 1 .2013 DATE OF PRONOUNCEMENT: 11 . 0 1 .2013 FOR THE REVENUE AVINASH KUMAR, DR FOR THE ASSESSEE: D. M. RINDANI , FCA / ORDER . . / D. K. SRIVASTAVA : TH E A PPEAL FILED BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT (A) ON 0 2 - 0 6 - 201 0 , O N THE FOLLOWING GROUNDS: - 1. THE LD. CIT (A - III ) HAS ERRED IN LAW AND ON FACTS IN PARTLY DELETING THE ADDITION MADE OF RS.50,00,000/ - FOR THE AMOUNT CONDI TIONALLY DECLARED BEFORE THE SURVEY PARTY TO THE EXTENT OF RS.49,49,472/ - . 2. ON THE FACTS OF THE CASE, THE CIT (A) - III, RAJKOT OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT (A) MAY BE SET ASIDE AND THAT OF THE AO MAY KINDLY BE RESTORED BACK. 2. THE ASSESSEE HAS ALSO FILED MEMORANDUM OF CROSS OBJECTIONS ON THE FOLLOWING GROUND: THE LEARNED C.I.T. (APPEALS) III, RAJKOT ERRED ON FACTS AND IN LAW IN CONFIRMING ADDITION TO THE EXTENT OF R S.50,528/ - MADE BY THE A.O. ON ACCOUNT OF COMMISSION INCOME. 3 . THE ASSESSEE HAS FILED A S TATEMENT OF F ACTS UNDER HIS SIGNATURE BEFORE THE CIT (A) WHICH READ S AS UNDER: - 2 ITA 1085 /201 0 & CO 55/2011 THAT THE APPELLANT IS AN INDIVIDUAL DOING BUSINESS OF BOOKING TRUCKS ON COMMISSION BASIS. DURING THE YEAR UNDER CONSIDERATION APPELLANT HAS SHOWN GROSS RECEIPTS OF RS.216592451/ - AND AFTER PAYMENT OF LORRY FRIGHT OF RS.214427797/ - GROSS PROFIT WAS SHOWN AT RS.2164654/ - . AFTER MEETING ALL THE EXPENSES NET PROFIT WAS SHOWN AT RS.205993/ - . 2. THAT DURING THE YEAR UNDER CONSIDERATION THERE WAS SURVEY U/S.133A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) OF THE INCOME TAX DEPARTMENT ON 21 - 11 - 2006. THERE WAS INQUIRY OF THE ADFI, GANDHIDHAM ON VARIOUS GINNERS AND IN THAT RESPONSE SURVEY U /S.133A WAS CARRIED OUT IN THE BUSINESS PREMISES OF THE APPELLANT. THE APPELLANT WAS BOOKING THE TRUCKS MAINLY FOR SOUTHERN PART OF INDIA ON TO PAY BASIS. IN THE LR HE MENTIONS ENTIRE TRUCK FREIGHT AND THE RECEIVER PARTY ON RECEIPT OF GOODS MAKES PAYMENT TO THE TRUCK OWNERS/DRIVERS AFTER DEDUCTING MY COMMISSION AS WELL AS TDS ON ENTIRE AMOUNT. THE APPELLANT IS NOT RECEIVING OR PAYING ANY AMOUNT TO ANY OF THE DRIVER OR TRUCK OWNER BUT THE NOTIONAL ENTRY IS PASSED IN THE BOOKS OF ACCOUNTS TO TALLY THE TDS A MOUNT. THUS THE APPELLANT GETS ONLY FIXED COMMISSION ON BOOKING OF TRUCKS. THIS IS PECULIAR METHOD OF ACCOUNTING FOLLOWED IN THIS LINE OF BUSINESS. 3. THAT DURING THE COURSE OF SURVEY PROCEEDINGS THE APPELLANT WAS ASKED TO PRODUCE ALL THE TRUCK DRIVERS/O WNERS AS WELL AS RECEIVERS OF GOODS FOR VERIFICATION AND THE APPELLANT EXPRESSED HIS INABILITY TO PRODUCE THE PERSONS. IT WAS STATED THAT I AM NOT IN A POSITION TO PRODUCE TRUCK DRIVERS SINCE ALL ARE OUT OF GUJARAT AND THE AMOUNT RECEIVED BY ME CANNOT BE PROVED AS THE SAME IS RECEIVED FAR FROM RAJKOT. AND AS SUCH THE APPELLANT HAS UNDER PRESSURE DECLARED UNACCOUNTED INCOME OF A.Y. 2007 - 08 AT RS.5000000/ - WITH A CONDITION THAT IN CASE OF RECONCILIATION THE SAME WILL BE ADJUSTED AGAINST THE INCOME OF CURRE NT YEAR I.E. AY 2007 - 08 . AFTER COMPLETION OF SURVEY AND AFTER OBTAINING DETAILS FROM VARIOUS PARTIES AND COMPILATION OF LRS IT WAS REALIZED THAT THERE WAS WRONG DECLARATION OF UNACCOUNTED INCOME OF RS.5000000/ - ON 21 - 11 - 2006 AND AS SUCH HE SWOONED IN AN A FFIDAVIT ON 25 - 11 - 2006 I.E. WITHIN 4 DAYS OF DECLARATION MADE BEFORE THE SURVEY PARTY. THE ENTIRE DECLARED AMOUNT IS RECONCILED AFTERWARDS AND AS SUCH HE DID NOT DECLARE ANYTHING IN THE RETURN OF INCOME FOR AY 2007 - 08. THIS FACT WAS NARRATED BEFORE THE LE ARNED ASSESSING OFFICER (LD.AO) DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER LD. AO DISBELIEVED THE EXPLANATIONS AND PROCEEDED TO MAKE ADDITION OF RS.5000000/ - WHICH IS DISPUTED IN THIS APPEAL. 4 . THE ASSESSEE IS AN INDIVIDUAL CARRYING ON THE BUS INESS IN THE NAME OF SHIVKRUPA TRANSPORT . HE IS ENGAGE D IN THE BUSINESS OF TRANSPOR T ATION. SURVEY U/S 133A OF THE INCOME - TAX ACT WAS CARRIED OUT AT HIS BUSINESS PREMISES ON 21 - 11 - 2006 DURING WHICH HE STATED AS UNDER: - 3 ITA 1085 /201 0 & CO 55/2011 Q.10 IN REPLY TO QUESTION NO.4 YOU H AVE STATED THAT YOU HAVE INCOME FROM BUSINESS OF COMMISSION. THEN STATE HOW THE ENTRIES ACCOUNT FOR IN YOUR PROFIT AND LOSS ACCOUNT OR BOOKS OF ACCOUNTS. A.10 WHEN, WE PREPARE LR (LORRY RECEIPT) WE DEBIT THE TOTAL AMOUNT AS TO PAY. THE TRUCK DRIVER COLLE CTS IS AMOUNT FROM THE RECEIVER PARTY AND WE GET OUR COMMISSION. WE CREDIT TOTAL AMOUNT IN PROFIT AND LOSS ACCOUNT. AFTER DEDUCTING OUR COMMISSION REMAINING AMOUNT ARE DEBITED TO PROFIT AND LOSS ACCOUNT. Q.11 ON VERIFICATION OF YOUR TDS VOUCHER IT I S SEEN THAT TOTAL AMOUNT OF FREIGHT IS PAID IN YOUR NAME ON WHICH TDS IS MADE. THAT AMOUNT IS CREDITED IN THE BOOKS AS PER REPLY NO.10 WHEREAS THE AMOUNT OF EXPENSE IS DEBITED TO P & L A/C. SO PRODUCE THE EVIDENCES / VOUCHERS OR OTHER RELATED DETAILS AND HOW WILL YOU PROVE THIS EXPENSE IS MADE BY YOU. EXPLAIN THE SAME. A.11 AS WE ARE PREPARING LR FOR TRUCK FREIGHT AS TO PAY WE ARE RECEIVED COMMISSION. THIS AMOUNT RECOVERED BY TRUCK DRIVERS WHICH WE ARE DEBITING IN OUR PROFIT AND LOSS ACCOUNT. OUR ALL THE DRIVERS OF OUT OF GUJARAT AND COLLECTING THE PAYMENT AND AT PRESENT ARE NOT HERE. I AM NOT ABLE TO PRODUCE THE EVIDENCES TODAY SINCE MY ACCOUNTS FOR THE FINANCIAL YEAR 2006 - 07 ARE NOT TALLIED AND THERE IS POSSIBILITY OF ERROR IN IT AND AS SUCH I DECLAR E RS.5000000/ - (RUPEES FIFTY LACS) APPROXIMATELY FOR THE INCOME OF CURRENT YEAR S INCOME. I WILL EXPLAIN THE SAME AFTERWARDS. 5 . THE ASSESSING OFFICER TREATED THE SAID SUM OF RS.50,00,000/ - AS ADDITIONAL INCOME DECLARED BY THE ASSESSEE AT THE TIME OF SU RVEY AND CONSEQUENTLY BROUGHT THE SAME TO THE CHARGE OF INCOME TAX. 6 . ON APPEAL, THE LD. CIT (A) HAS HELD AS UNDER: - 3.3. I HAVE CAREFULLY CONSIDERED THE FINDING GIVEN BY THE ASSESSING OFFICER AND THE SUBMISSION OF THE AR OF THE APPELLANT. THE APPELLAN T IS ENGAGED IN THE BUSINESS OF BOOKING THE TRUCKS ON COMMISSION BASIS SINCE MANY YEARS. THE MODUS OPERANDI OF THE BUSINESS IS THAT THE APPELLANT IS BOOKING TRUCKS OF ANOTHER PARTY ON BEHALF OF THE SENDER AND LORRY RECEIPTS (LR) ARE PREPARED ON TO - PAY BAS IS. THE APPELLANT GETS ABOUT 1% COMMISSION ON THE BOOKING AMOUNT. SINCE THE LR IS PREPARED TO PAY BASIS THE PAYMENT WAS MADE BY RECEIVER PARTY TO THE RESPECTIVE TRUCK DRIVER OR TRUCK OWNER. THE RECEIVER PARTY IS DEDUCTING APPLICABLE TDS OF THE APPELLANT TH OUGH THE PAYMENT IS MADE TO THE RESPECTIVE TRUCK DRIVERS/OWNERS. THE APPELLANT CREDITS ENTIRE AMOUNT IN HIS TRADING ACCOUNT AND IMMEDIATELY ON PAYMENT BY THE RECEIVER PARTY TO THE TRUCK DRIVER/OWNER DEBIT THE AMOUNT AS AN EXPENSE. THE APPELLANT NEVER RECEI VE OR PAY ANY AMOUNT TOWARDS BOOKING (LR) AMOUNT. THIS IS VERY TYPICAL 4 ITA 1085 /201 0 & CO 55/2011 METHOD OF ACCOUNTING WHICH IS NOT NOTIFIED IN ANY OF THE ACCOUNTING STANDARDS. THIS METHOD IS ADOPTED BY AL L THE TRANSPORT COMMISSION AGENT. IT IS ALSO FOUND THAT THE AMOUNT OF RS.505 2764/ - WORKED OUT DURING THE COURSE OF SURVEY ARE LORRY RECEIPTS AND NOT THE INCOME OF THE APPELLANT. APPARENTLY IN A MISTAKEN BELIEF, THE APPELLANT HAS DECLARED THE AMOUNT OF RS.50 LAKHS ON ABOVE LORRY RECEIPTS OF RS.5052764/ - . AS HELD BY THE HON BLE GUJ ARAT HIGH COURT IN THE CASE OF KAILASHBEN MANHARLAL CHOKSHI VS. CIT (2008) 220 CTR (GUJ) 138, THE DECLARATION CAN BE RETRACTED UNLESS THERE ARE COLLABORATIVE EVIDENCE IN SUPPORT OF THE DISCLOSURE. THERE NOTHING HAS BEEN FOUND AGAINST THE APPELLANT TO SHOW THAT IT HAS EARNED INCOME OF RS.50 LAKHS DURING THE YEAR. AS SUCH, THE ASSESSING OFFICER IS NOT RIGHT IN MAKING ADDITION OF RS.50 LAKHS ON THE BASIS OF ADMISSION DURING THE COURSE OF SURVEY PROCEEDINGS AS SAME HAS NOT BEEN FOUND COLLABORATED OR SUPPORTED BY ANY EVIDENCE. HENCE, THE ABOVE ADDITION LACKS OF MERIT AND SAME IS ORDERED TO BE DELETED. AT THE MOST, AS THE APPELLANT IS GETTING 1% COMMISSION ON LORRY RECEIPTS, THE ADDITION TO THE EXTENT OF RS.50528/ - BEING 1% OF RS.5052764/ - CAN BE SUSTAINED. KEEP ING IN VIEW ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, ADDITION TO THE EXTENT OF RS.50528/ - IS CONFIRMED AND REST ADDITION OF RS.4949 472/ - IS HEREBY ORDERED TO BE DELETED. 7 . THE DEPARTMENT IS IN APPEAL AGAINST THE ORDER PASSED BY THE CIT (A) DELETING ADDITION TO THE EXTENT OF RS.49,49,472/ - . 8 . AT THE TIME OF HEARING, THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER PASSED BY THE AO WHILE THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUPPORTED THE ORDER PASSED BY THE CIT (A). 9 . THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS FILED SUMMARY O F SUBMISSIONS WHICH READ AS UNDER: - 1. NO INCRIMINATING MATERIAL SHOWING UNDISCLOSED INCOME WAS FOUND DURING SURVEY. NO SUCH MATERIAL HAS BEEN REFERRED TO IN THE STATEMENT RECORDED DURING SUR VEY. 2. THE REPLY TO Q.NO.11 OF THE STATEMENT DURING SURVEY CLEARLY STATED THAT THE ACCOUNTS WERE NOT TALLIED ON THAT DAY AND THERE WAS POSSIBILITY OF ERROR AND THEREFORE APRX AMOUNT OF RS.50,00,000/ - WAS DECLARED, TO BE EXPLAINED AFTERWARDS. 3. STATEMENT WAS RECORDED AT 4.00 AM. 4. THE AMOUNT SO DECLARED WAS NOT SHOWN IN THE RETURN OF INCOME. NO TAX THEREON WAS PAID. THE SAME HAS ALSO NOT BEEN INCLUDED IN BOOKS OF ACCOUNTS , HENCE THE ASSESSEE HAS NOT ACCEPTED THE SAID AMOUNT AS INCOME. 5. AS EVIDENCED B Y ASSESSMENT HISTORY, ASSESSEE IS A TRANSPORT COMMISSION AGENT, NORMALLY EARNING 1% COMMISSION ON FREIGHT 5 ITA 1085 /201 0 & CO 55/2011 AMOUNT BOOKED ON TO - PAY BASIS. HENCE, RS.50 LACS INCOME WOULD TRANSLATE INTO FREIGHT AMOUNT OF RS.50 CRORES WHICH IS COMPLETELY IMPROBABLE. 6. NO DEF ECTS IN BOOKS ARE NOTED BY THE A.O. 7. THE SO CALLED ADMISSION AND THAT TOO DURING SURVEY AND NOT SEARCH, WITHOUT EVIDENCE CANNOT BE TREATED AS VALID IN LAW AND HENCE THE SAME DESERVES TO BE IGNORED. 8. APPELLANT RELIES ON FOLLOWING CASE LAW: 220 CTR 138 (GUJARAT) 48 TTJ 389 81 TTJ 839 300 ITR 157 BOARD INSTRUCTION DATED 10 TH MARCH, 2003. 10 . WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE HAS FILED A CHART SHOWING GROSS RECEIPTS, EXPENSES, COMMISSION RECEI PTS AND NET PROFITS FOR F.Y. 2002 - 03 TO 2008 - 09. IN F.Y. 2006 - 07 RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAS SHOWN GROSS RECEIPTS AT RS.14,08,21,052/ - , EXPENSES AT RS.13,94,12,463/ - , COMMISSION AT RS.14,08,589/ - AND NET PROFIT AT RS.1,44,724/ - . IN THE IMMEDIATELY PRECEDING FINANCIA L YEAR , I.E. , F.Y. 2005 - 06, THE ASSESSEE HAS SHOWN GROSS RECEIPTS AT RS.21,65,92,451/ - , EXPENSES AT RS.21,44,27,797/ - , COMMISSION AT RS.21,64,654/ - AND NET PROFIT AT RS.2,05,993/ - . THERE IS THUS SHARP DECLINE IN THE AMOUNT OF GROSS RECEIPTS IN THE YEAR UND ER APPEAL AS COMPARED TO THE IMMEDIATELY PRECEDING TWO FINANCIAL YEARS. NO EXPLANATION IN THIS BEHALF IS AVAILABLE ON RECORD. SECONDLY, I T IS NOT KNOWN AS TO WHETHER THE RECEIPTS DECLARED BY THE ASSESSEE AT THE TIME OF SURVEY FOR WHICH LORRY RECEIPTS / EVIDE NCE WERE NOT AVAILABLE AT THE TIME OF SURVEY ARE INCLUDED IN THE GROSS RECEIPTS SHOWN BY THE ASSESSEE IN ITS BOOKS . IT IS NOT EVIDENT ON PERUSAL OF THE ORDER PASSED BY THE CIT (A) AS TO WHETHER THE AFORESAID SUM OF RS.50,00,000/ - WAS INCLUDED IN THE AMOUNT OF GROSS RECEIPTS SHOWN BY THE ASSESSEE IN THE YEAR UNDER APPEAL OR OVER AND ABOVE THE SAID AMOUNT. THIRDLY , I T IS NOT KNOWN AS TO WHETHER THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ARE COMPLETE , CORRECT, VERIFIABLE AND RELIABLE. FACTS AS AVAILABLE O N RECORD ARE NOT SUFFICIENT FOR PROPER ADJUDICATION OF THE ISSUES UNDER APPEAL. IN OUR VIEW, THE ENTIRE MATTER NEEDS TO BE PROPERLY EXAMINED. WE THEREFORE SET ASIDE THE ORDERS PASSED BY THE AO AND THE CIT (A) AND RESTORE THE MATTER TO THE FILE OF THE AO FO R PASSING A FRESH ASSESSMENT ORDER DE NOVO AFTER BRINGING THE FOLLOWING MATERIALS ON RECORD: - ( A ) THE AO SHALL SPECIFY THE PRECISE NATURE OF THE BUSINESS OF ASSESSEE. (B) THE AO SHALL EXAMINE THE BOOKS OF ACCOUNT AND THEREAFTER STATE W HETHER THE BOOKS O F ACCOUNT MAINTAINED BY THE ASSESSEE ARE CORRECT, COMPLETE AND RELIABLE IN TERMS OF SUB - SECTION (3) OF SEC.145. 6 ITA 1085 /201 0 & CO 55/2011 (C) THE AO SHALL VERIFY W HETHER A SUM OF RS.50,00,000/ - DECLARED BY THE ASSESSEE AT THE TIME OF SURVEY IS INCLUDED IN THE AMOUNT OF GROSS REC EIPTS SHOWN BY HIM. (D) THE AO SHALL SPECIFY WHETHER THE ASSESSEE HAS INCURRED ANY EXPENDITURE AGAINST THE AFORESAID SUM OF RS.50 LAKHS DECLARED AT THE TIME OF SURVEY AND, IF SO, THE AMOUNT OF EXPENDITURE INCURRED. (E) THE AO SHALL GO THROUGH THE TDS C ERTIFICATES AND STATE WHETHER ENTIRE AMOUNT SHOWN AS PAID TO THE ASSESSEE IS INCLUDED IN HIS GROSS RECEIPTS. ( F ) THE AO SHALL SPECIFY THE NORMAL RATE OF NET PROFIT IN THIS LINE OF BUSINESS AND APPLY THE SAME IF THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSE SSEE ARE NOT FOUND CORRECT, COMPLETE AND VERIFIABLE. 1 1 . THE AO SHALL BE FREE TO MAKE ANY SUCH INQUIRY AS HE CONSIDERS APPROPRIATE FOR CORRECT ASSESSMENT OF INCOME OF THE ASSESSEE. REASONABLE OPPORTUNITY OF HEARING SHALL BE GIVEN TO THE ASSESSEE. 1 2 . TH E APPEAL FILED BY THE DEPARTMENT AND THE MEMORANDUM OF CROSS - OBJECTIONS FILED BY THE ASSESSEE SHALL BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 11 . 0 1 .201 3 ORDER PRONOUNCED ON 11 . 0 1 - 2013 SD/ - SD/ - ( . . / T. K. SHARMA) ( . . / D. K. SRIVASTAVA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /RAJKOT : 11 - 0 1 - 2013 NVA/ - / COPY OF ORDER FORWARDED TO: - 1. /APPELLANT - THE INCOME - TAX OFFICER, WARD 2(3), RAJKOT 2 / RESPONDENT - SHRI KISHOR MAVJI PARMAR, RAJKOT 3. / CONCERNE D CIT - II, RAJKOT 4. - / CIT (A) - III, RAJKOT 5. , , / DR, ITAT, RAJKOT 6. / GUARD FILE / BY ORDER SENIOR P RIVATE SECRETARY, ITAT, RAJKOT 7 ITA 1085 /201 0 & CO 55/2011 1.DATE OF DICTATION : 0 7 - 0 1 - 2013 2.DATE OF PLACING THE DRAFT. : 08 - 01 - 201 3 3.DATE OF APPROVAL OF DRAFT. : 4.DATE OF RETURN FROM JM : 5.DATE OF PRONOUNCEMENT : 6.DATE OF SENDING TO BENCH CLERK : 7.DATE OF RECEIPT BY BENCH CLERK : 8.DATE OF PLACING IT FOR ENDORSEMENT : 9.DATE OF ENDORSEMENT : 10.DATE OF DISPATCH :