ACIT, Ghaziabad V. Pradeep Kumar Goel, Ghaziabad

ITA 1093/DEL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69194 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 01-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 02-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHIM SINGH
• Assessee Lawyers: SURESH K GUPTA
• Keywords: Rejection of books of accounts; Depreciation; Principle of natural justice; Reasonable cause; Corroborative evidences; Agreed addition
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F: NEW DELHI) BEFORE SHRI B. C. MEENA, ACCOUNTANT MEMBER AND SHRI C. M. GARG, JUDICIAL MEMBER ITA NO.1093/DEL/ 2012 (ASSESSMENT YEAR :2008-09) ACIT VS. PRADEEP KUMAR GOEL CIRCLE-2 341, APSARA CINEMA COMPLEX, CHIKAMBARPUR GHAZIABAD. GHAZIABAD. PAN: ADDPG0573E ASSESSEE BY : SHRI SURESH K. GUPTA, CA. REVENUE BY :SHRI BHIM SINGH, SR. DR. ORDER PER C. M. GARG, J M: THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)- GHAZIABAD VID E DATED 29.12.2011 IN APPEAL NO- 365/2010-11/GZB FOR THE ASSESSMENT YE AR 2008-09. GROUNDS NO. 3 AND 4 OF THE REVENUE ARE OF GENERAL IN NATURE . REMAINING GROUNDS OF THE REVENUE READ AS UNDER: 1. THAT LD. CIT (A) HAS ERRED IN LAW AND ON FACTS AND CIRCUMSTANCES IN HOLDING THAT THE BASE OF ASSESSMEN T FOR A. Y. 2009-10 CAN BE FOLLOWED IN ASSESSMENT YEAR 2008-09, EVEN WHEN IN ASSESSMENT YEAR 2009-10 THE PROVISIONS OF S ECTION 145(3) WERE NOT RESTORED TO. 2. THAT LD. CIT (A) HAS ERRED IN LAW AND ON FACTS A ND CIRCUMSTANCES OF THE CASE BY RELYING UPON THE NET P ROFIT WORKED ITA NO.1093/DEL/2012 2 OUT IN ASSESSMENT FOR A. Y. 2009-10, WHEN THE FACTS OF THE CASE WERE QUITE DIFFERENT, AND PRINCIPAL OF RES JUDICATA , IS NOT APPLICABLE IN THE INCOME TAX PROCEEDINGS. 2. BRIEFLY STATED TO THE FACTS GIVING RISE TO THIS APPEAL ARE THAT DURING THE ASSESSMENT, THE CASE WAS SELECTED FOR SCRUTINY AND THE NOTICES U/S 143 (2) AND 142(1) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE A CT) WERE SERVED ON THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS, THE AS ESSEE SOUGHT ADJOURNMENT ON MEDICAL GROUNDS WHICH WERE REJECTED BY THE ASSESSING OFFICER AFTER TAKING COMMENTS OF THE DOCTOR. THE AS SESSING OFFICER HOLD THAT THE ASSESSEE DID NOT COOPERATE WITH THE DEPARTMENT AND THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS U/S 145(3) O F THE ACT. THE ASSESSING OFFICER FINALLY HOLD THAT THE COVER UP THE TOTALITY OF EXPENSES WITHOUT SUPPORTING EVIDENCE AND NET PROFIT RATE OF 5% WAS A PPLIED ON THE TOTAL TURN OVER OF THE ASSESSEE AND THE ASSESSING OFFICER FINA LIZED THE ASSESSMENT AT A INCOME OF RS.42,04,320/- AS AGAINST RETURNED INCOME OF RS.12,60,310/-.THE ASSESSEE PREFERRED AN APPEAL BEFORE CIT (A) GHAZIA BAD, WHICH WAS PARTLY ALLOWED BY THE IMPUGNED ORDER BY APPENDING AND CONF IRMING ADDITION AS PER NET PROFIT RATE 2.5% OF THE TURN OVER. 3. NOW THE REVENUE IS BEFORE THIS TRIBUNAL IN THE S ECOND APPEAL WITH THE GROUNDS AS MENTIONED HEREINABOVE. GROUND NO.1 AND 2 ITA NO.1093/DEL/2012 3 4. APROPOS THESE GROUNDS, THE LD. DEPARTMENTAL REPR ESENTATIVE SUBMITTED THAT THE CIT (A) HAS ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCE OF THE CASE IN HOLDING THAT THE CASE A SSESSMENT FOR ASSESSMENT YEAR 2009-10 CAN BE FOLLOWED IN THE ASSESSMENT YEAR 2008-09 EVEN WHEN IN THE ASSESSMENT YEAR 2009-10, THE PROVISIONS OF SECTION 145(3) WERE NOT RESORTED BY THE ASSESSING OFFICER. THE DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT THE CIT (A) HAS ERRED BY RELYING UPO N THE NET PROFIT WORKED OUT IN ASSESSMENT YEAR 2009-10 WHEN THE FACTS OF TH E CASE WERE QUITE DIFFERENT AND PRINCIPLE OF RES-JUDICATA WAS NOT APP LICABLE IN THE INCOME TAX PROCEEDINGS. THE DEPARTMENTAL REPRESENTATIVE VEHEME NTLY CONTENDED THAT THE ASSESSEE DID NOT SUPPORTED AND ATTENDED THE PRO CEEDINGS BEFORE ASSESSING OFFICER AND CIT (A) REDUCED THE N. P. RAT E FROM 5% TO 2.5% WITHOUT ANY BASIS THEREFORE, REDUCTION IN ADDITION MADE BY THE CIT (A) WAS NOT JUSTIFIED. THE DEPARTMENTAL REPRESENTATIVE FINA LLY CONTENDED THAT THE IMPUGNED ORDER MAY SET ASIDE BY RESTORING THAT OF T HE ASSESSING OFFICER. 5. REPLYING TO THE ABOVE, THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS OF THE ASSES SEE WITHOUT ANY REASONABLE CAUSE AND THE ASSESSING OFFICER ADOPTED 5% OF N.P.RATE ON THE BASIS OF SURMISES AND CONJECTURES WITHOUT CONSIDERI NG N.P. RATE OF THE ASSESSEE IN PREVIOUS AND SUBSEQUENT ASSESSMENT YEAR S. THE AR FURTHER ITA NO.1093/DEL/2012 4 CONTENDED THAT THE CIT (A) RIGHTLY CONSIDERED THE N .P. RATE OF OTHER SIMILAR TRANSPORTERS ASSESSEE AS SUITABLE COMPARABLE AND RE DUCED THE N.P. RATE FROM 5% TO 2.5% ON THE JUSTIFIED AND COGENT BASIS. THE A R COMPLETED HIS ARGUMENT WITH THE FINAL SUBMISSION THAT THE APPEAL OF THE REVENUE HAS NO LEGS TO STAND ON THE LEGAL AND FACTUAL GROUNDS THER EFORE, THE SAME MAY BE DISMISSED. 6. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS IN THE LIGHT OF FACTUAL MATRIX OF THE CASE, AT THE OUTSET, WE ARE OF THE OP INION THAT THE ASSESSING OFFICER RIGHTLY REJECTED THE BOOKS OF ACCOUNTS OF T HE ASSESSEE BECAUSE THE ASSESSEE WAS PLAYING HIDE AND SEEK GAME BEFORE THE ASSESSING OFFICER BY PLACING ILLNESS CERTIFICATE ON THE DATE OF HEARING. 7. COMING TO THE NEXT ISSUE TO G.P. RATE, WE OBSERV E THAT THE ASSESSING OFFICER MADE ADDITION WITH FOLLOWING OBSERVATIONS: FROM THE PERUSAL OF THE ABOVE FACTS AND CIRCUMSTAN CES, IT CAN BE EASILY SEEN THAT THE ASSESSEE IS TRYING TO EVADE THE PROCEEDINGS AND IT TOTALLY NON CO-OPERATIVE WITH TH E DEPARTMENT. THE REAL FACT ABOUT HIS HEALTH HAS BEEN DISCLOSED BY THE CONCERNED DOCTOR IN HIS LETTER. ALSO, THE FA CT THAT HE IS NOT BED-RIDDEN IS KNOWN FROM THE INSPECTORS REPORT WHE N ASSESSEE IS FOUND TO BE OUT OF STATION. IT CAN BE SUMMARIZED THAT ASSESSEE HAS ALL THE TIME TO MOVE AROUND AND GO OUT OF STATI ON FOR REASONS BUT KNOWN TO HIM AND THAT HE IS MEDICALLY F IT TO GO OUT OF STATION, BUT HE IS NOT BOTHERED TO ATTEND THE PR OCEEDINGS AND FILE DETAILS AND PRODUCE HIS BOOKS OF ACCOUNT. ALSO AS CAN BE SEEN FROM INSPECTORS REPORT, THERE ARE EMPLOYEES O F THE ASSESSEE REGULARLY ATTENDING TO HIS BUSINESS. AS SU CH, THE ASSESSEE COULD HAVE AUTHORIZED ANY ONE OF HIS EMPLO YEES TO ITA NO.1093/DEL/2012 5 PRODUCE THE BOOKS OF ACCOUNT AND OTHER RECORDS OR H E SIMPLY COULD HAVE TOLD HIS LD. AR TO GO TO HIS BUSINESS PL ACE AND COLLECT THE BOOKS OF ACCOUNT AND OTHER RECORD TO PR ODUCE THE SAME BEFORE THE UNDERSIGNED. HOWEVER, THE ASSESSEE CONVENIENTLY CHOSE NOT TO TAKE ANY OF THESE MEASURE S AND DID NOT CO-OPERATE WITH THE DEPARTMENT. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES, THE BOOKS OF ACCOUNT OF TH E ASSESSEE IS BEING REJECTED AS PER SECTION 145(3) OF THE I. T. A CT, 1961 SO AS TO COVER UP THE TOTALITY OF EXPENSES WITHOUT SUPPOR TING EVIDENCE AND A NET PROFIT RATE OF 5% IS BEING APPLIED ON THE TOTAL TURN OVER OF THE ASSESSEE. PENALTY PROCEEDINGS U/S 271 ( 1) (C) IS ALSO BEING INITIATED ON THIS ISSUE. 8. DURING THE FIRST APPELLATE PROCEEDINGS BEFORE TH E CIT (A) THE ASSESSEE PLACED FOLLOWING SUBMISSIONS: 3. 1 THE COUNCIL OF THE APPELLANT APPEARED BEFORE ID AO ON 15TH DEC 2010 WITH THE MEDICAL CERTIFICATE OF THE A PPELLANT AND REQUESTED FOR THE ADJOURNMENT WHICH HE DENIED. AT T HAT TIME OR AFTERWARD IT WAS NOT INTIMATED TO THE APPELLANT AND HAD NOT GIVEN HIM ANY OPPORTUNITY TO REBUT THE SAME THAT HE WAS GOING TO MAKE BEST JUDGMENTS ASSESSMENT BY APPLYING NET P ROFIT RATE @ 5% OF THE TOTAL TURNOVER. AO HAS NOT GIVEN ANY BA SIS ON THE BASIS OF WHICH THE RATE OF PROFIT HAS BEEN WORKED O UT BY HIM. 3.2 IN THE ABSENCE OF ANY SUSTAINABLE OR CREDIBLE B ASIS ON THE BASIS OF WHICH THE ESTIMATION OF THE PROFIT IS MADE , SUCH ACTION OF THE AO CANNOT BE SUSTAINED AS THE SAME IS AGAINS T THE PRINCIPAL OF NATURAL JUSTICE. HON'BLE ANDHRA PRADES H HIGH COURT IN THE CASE OF S. SARABHAIAH SETTY & SONS VS CIT (9 671) 64 ITR 175 HELD THAT WERE THE ITO DID NOT STATE THE BASIS OF HIS ESTIMATE AND NO OPPORTUNITY WAS GIVEN TO THE ASSESS EE TO REBUT THE BASIS, HIS ORDER WAS LIABLE TO BE SET ASIDE. IN ANOTHER CASE, HON'BLE ANDHRA PRADESH HIGH COUI1 IN YAGGINA VEERARAGHAVULU & MAVULETI _SOMARAJU & CO. VS. CIT ( 1966) 62 ITR 528 HELD THAT WHERE AFTER REJECTING ACCOUNTS OF THE ASSESSEE, AN ESTIMATED OF THE GROSS PROFIT IS FIXED TO THE DETRIMENT OF THE ASSESSEE, THE ASSESSEE IS ENTITLED TO KNOW THE BASIS AND ALSO TO AN OPPORTUNITY TO REBUT THE SAME IN THE PRESENT ITA NO.1093/DEL/2012 6 CASE. THE ASSESSING OFFICER HAS NOT CITED ANY RELEV ANT MATERIAL OR THE COMPARABLE CASE ON THE BASIS OF WHICH THE ES TIMATION OF 5% IS BASED AND HE HAS NOT ALLOWED ANY OPPORTUNITY TO ASSESSEE TO REBUT HIS PROPOSED ACTION OF ESTIMATING THE INCO ME AT 5%. SINCE, THIS BEST JUDGMENT ASSESSMENT HAS NO NEXUS T O THE MATERIAL ON RECORD AND DISCRETION HAS BEEN EXERCISE D ARBITRARILY AND CAPRICIOUSLY AND THEREFORE THE ESTIMATION OF PR OFIT OF THE ASSESSEE IS NOT BASED ON ANY RELEVANT MATERIAL AND THEREFORE, THE ASSESSMENT TO THAT EXTENT IS ARBITRARY VAGUE AND TH EREFORE, SUCH ASSESSMENT IS NOT LEGAL AND REGULAR. (3.3) THE APPELLANT EXPLAINED THE HIS BUSINESS MODU LE THROUGH A LET1ER SUBMITTED ON 09/12/2010 STATING THAT HE DOCS THE TRANSPORTATION OF GOODS BY OWN TRUCKS AS WELL AS BY HIRING TRUCKS FROM THE OUTSIDE. THE AUDITED PROFIT AND LOS S ACCOUNTS FOR THE F.Y. ENDED 31ST MARCH 2008 SUBMITTED BEFORE THE AO CLEARLY SHOWS THAT HIS TRUCK RECEIPTS WERE ONLY OF RS. 58.9 2 LACS (6.81 %) WHERE AS HIS BOOKING RECEIPTS BY HIRING OUTSIDE TRUCKS WERE OF RS. 806.12 LACS (93.19%) A CHART GIVING THE PROF IT DETAILS OF TRUCK RECEIPTS AND BOOKING RECEIPTS FOR THE YEAR IS GIVEN HEREUNDER: 1. TRUCKS ACCOUNTS AMOUNT IN LACS TRUCK INCOME 58.92 LESS: TRUCK EXP. 21.92 (37.20%) LESS; INTT. ON TRUCK LOANS 7.50 NET PROFIT 29.50(50.06%) 2. BOOKING ACCOUNT BOOKING FREIGHT RECEIPTS 806.12 LESS; LORRY HIRE EXP. 741.80 GROSS PROFIT 64.32(7.97%) LESS; INDIRECT EXP. 31.61 NET PROFIT 32.71(4.05%) TOTAL NET PROFIT(A+B) 62.21(7.19%) LESS; DEPRECIATION ON TRUCKS 49.61 NET TOTAL INCOME 12.60 3.4 IT IS WELL KNOWN FACT THAT ONE EARNS MORE PROFI T THROUGH HIS OWN TRUCKS IN COMPARISON WITH THE TRUCKS HIRED FROM OUTSIDE AS SHOWN IN THE ABOVE CHART. IT IS EVIDENT THAT NET EA RNINGS THROUGH ITA NO.1093/DEL/2012 7 OWN TRUCKS (50.06%). IS QUITE GOOD IN COMPARISON TO PROFITS THROUGH BOOKING BY OUTSIDE TRUCKS OF THE ASSESSEE ( 4.05 %). BUT DUE TO THE HIGH VOLUME BUSINESS, THIS BUSINESS KEEP S THE ASESSEE AFLOAT WHEREAS OWN TRUCKS BUSINESS ALTHOUGH GIVING BETTER RETUL1LS, IS NOT VOLUMINOUS AND IS NOT SUFFICIENT T O SUSTAIN THE BUSINESS AS ABOVE AS A WHOLE. 3.5 IN VIEW OF THE ABOVE CHART, IT IS VERY MUCH CLE AR THAT ASSESSEE WAS FUNNING HIS BUSINESS IN TWO PARTS, ONE BY EARNING INCOME FROM OWN TRUCKS AND SECOND BY EARNING INCOME BY DOING BUSINESS THROUGH OUTSIDE TRUCKS AND COMBINED INCOME FROM BOTH THE PARTS ARE RS. 62.21 LACS (7 19%) WHIC H IS ALREADY ABOVE THE 5% AS ESTIMATED BY ID AO. 3.6 THAT THE ESTIMATED INCOME FROM THE BUSINESS TAK EN BY THE ID. AO AT AN EXORBITANT FIGURE OF 5 % NET PROFIT OF THE TOTAL TURNOVER OF THE BUSINESS OF THE CLIENT AND IS WITHO UT ANY BASIS AND INSTEAD OF MAKING THE BEST JUDGEMENT ASSESSMENT , THE ID A.O. HAS FLOUTED THE PRINCIPLES LAID DOWN BY THE HO N'BLE SUPREME COURT IN THE CASE OF DHAKESWARI COTTON MILL S 26 ITR (SC). HE HAS ALSO ACTED AGAINST THE PRINCIPLES OF N ATURAL JUSTICE AS PROPOUNDED BY THE SUPREME COURT IN THE CASE OF KISHINCHAND CHELLARAM V. CIT 125 LTR (SC) 3.7 IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT EST IMATION OF THE ASSESSING OFFICER OF THE NET PROFIT IS DEHORSE THE MATERIAL ON RECORD AND IN FACT, AT GROSS VARIANCE WITH THE INFO RMATION AVAILABLE TO THE ASSESSING OFFICER BY WAY OF PAST A SSESSMENTS AND SUCH ESTIMATES NEED BE KNOCKED OF BEING ARBITRA RY AND CONJECTURES. THE REFERENCE MAY BE HAD TO THE FOLLOW ING JUDGMENTS, WHICH LAY DOWN A PROPOSITION THAT IN THE BEST JUDGMENT ASSESSMENT, THE ASSESSING OFFICER MUST RES TRICT HIMSELF TO THE MATERIAL ON RECORD AND SHOULD NOT BE VINDICTIVE AND ARBITRARY AND THE JUDGMENT SHOULD BE BASED ON S OME RELEVANT MATERIAL ONLY. 1) STATE OF ORISSA-VS-MAHARAJA SHRI B.P. SINGH DEO 76 ITR 690 SC 'THE MERE FACT THAT THE MATERIAL PLACED BY THE ASSE SSE BEFORE THE ASSESSING AUTHORITIES IS UNRELIABLE DOES NOT THOSE AUTHORITIES TO ITA NO.1093/DEL/2012 8 MAKE ARBITRARY ORDER. THE POWER TO LEVY ASSESSMENT ON THE BASIS OF BEST JUDGMENT IS NOT AN ARBITRARY POWER; I T IS AN ASSESSMENT ON THE BASIS OF BEST JUDGMENT. IN OTHER WORDS, THAT ASSESSMENT MUST BE BASED ON SOME RELEVANT MATERIAL. IT IS NOT A POWER THAT CAN BE EXERCISED TLL1DER THE SWEET WILL AND PLEASURE E CONCERNED AUTHORITIES. THE SCOPE OF THAT POWER HA S BEEN EXPLAINED OVER AND OVER AGAIN BY THIS COURT.' (II) COMMISSIONER OF INCOME-TAX.V. LAXMINARAYAN BAD RIDAS 5 ITR 170 PC: 'HE (THE ASSESSING AUTHORITY) MUST NOT ACT DISHONES TLY, OR VINDICTIVELY OR CAPRICIOUSLY BECAUSE HE MUST EXERCI SE JUDGMENT IN THE MATTER. HE MUST MAKE WHAT HE HONESTLY BELIEV ES TO BE A FAIR ESTIMATE OF THE PROPER FIGURE OF ASSESSMENT, A ND FOR THIS PURPOSE HE MUST, THEIR LORDSHIPS THINK, BE ABLE TO TAKE INTO CONSIDERATION LOCAL KNOWLEDGE AND REPUTE IN REGARD TO THE ASSESSEE'S CIRCUMSTANCES, AND HIS OWN KNOWLEDGE OF PREVIOUS RETURNS BY AND ASSESSMENTS OF THE ASSESSEE, AND ALL OTHER MATTERS WHICH HE THINKS WILL ASSIST HIM IN ARRIVING AT A FA IR AND PROPER ESTIMATE; AND THOUGH THERE MUST NECESSARILY BE GUES S-WORK IN THE MATTER, IT MUST BE HONEST GUESS-WORK. IN THAT S ENSE, TOO THE ASSESSMENT MUST BE TO SOME EXTENT ARBITRARY.' IT IS TRUE THAT AS PER THE AO. THE IMPUGNED ORDER I S THE EX PARTE ORDER INVOLVING THE BEST JUDGMENT OF THE AO. IN THE BEST JUDGMENT ASSESSMENT THERE IS ALWAYS AN ELEMENT OF G UESS 'WORK BUT SUCH GUESS WORK SHOULD NOT BE WILD ONE AND IT S HOULD HAVE A REASONABLE NEXUS TO THE AVAILABLE MATERIAL AND TH E CIRCUMSTANCES OF EACH CASE. HON'BLE SUPREME COURT I N -THE CASE OF STATE OF KERALA V. C. VELU KUTTY, 60 ITR 239, HE LD THAT THE ASSESSMENT THROUGH BEST JUDGMENT ASSESSMENT PROVIDE S FOR A SUMMARY METHOD BECAUSE OF DEFAULT OF THE ASSESSEE B UT IT DOES NOT ENABLE THE AO TO FUNCTION CAPRICIOUSLY WITHOUT REGARD TO THE AVAILABLE MATERIAL THE HON'BLE SUPREME COURT IN ANO THER CASE SRIJ SHUSHAN LAI PARDUMAN KUMAR V. CIT, I 15 ITR 52 4, LAID DOWN IN THE ABOVE LAND MARK JUDGMENT THAT THE ASSES SING AUTHORITY MAKING THE BEST JUDGMENT ASSESSMENT MUST MAKE AN HONEST AND FAIR ESTIMATE OF INCOME OF THE ASSESSEE AND THOUGH ARBITRARINESS CANNOT BE AVOIDED IN SUCH AN ESTIMATE D THE SAME ITA NO.1093/DEL/2012 9 MUST NOT BE CAPRICIOUS. EVEN IN THE EX-PARTE ASSESS MENT, THE AO IS REQUIRED TO BE FAIR IN MAKING ESTIMATION OF T HE INCOME TO BE ASSESSED. 3.9 YOUR KIND ATTENTION IS INVITED TO ANOTHER LAND MARK JUDGMENT PASSED IN THE CASE OF CIT VS. LAXMI NARAYA N BADRI DAS, 5 ITR 170 PC WHEREIN IT WAS HELD THAT 'THE OFF ICER IS TO MAKE AN ASSESSMENT TO THE BEST OF HIS JUDGMENT AGAI NST A PERSON WHO IS IN DEFAULT 3.S REGARDS SUPPLYING INFORMATION HE MUST NOT ACT DISHONESTLY OR VINDICTIVELY OR CAPRICIOUSLY . HE MUST MAKE WHAT HE HONESTLY BELIEVES TO BE A FAIR ESTIMA TE OF PROPER FIGURE OF ASSESSMENT, AND FOR THIS PURPOSE HE MUST TAKE INTO CONSIDERATION. LOCAL KNOWLEDGE AND REPUTE IN REGARD TO THE ASSESSEE'S CIRCUMSTANCES AND HIS OWN KNOWLEDGE OF P REVIOUS RETURNS AND ASSESSMENTS OF THE ASSESSEE AND ALL OTH ER MATTERS WHICH HE THINKS WILL ASSIST HIM IN ARRIVING AT A FA IR AND PROPER ESTIMATE. 3.10 THE AUTHORITY MAKING A BEST JUDGMENT ASSESSMEN T MUST MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME OF T HE ASSESSEE AND SHOULD HAVE A REASONABLE NEXUS TO THE AVAILABLE MATERIAL AND THE CIRCUMSTANCES OF THE CASE-BRIJ BHUSHAN LAL PARDUMAN KUMAR V. CIT (1978) 115 ITR 524 (SC). IN MAKING A B EST JUDGMENT ASSESSMENT THE ASSESSING OFFICER DOES NOT POSSESS ABSOLUTE POSSES ABSOLUTE ARBITRARY AUTHORITY TO ASS ESSEE ANY FIGURE HE LIKES. HE SHOULD BE GUIDED BY RULES OF JU STICE EQUITY AND GOOD CONSCIENCE CIT VS. RANICHERRA TEA CO. (19 94) 207 ITR 979 (CAL.) . IT WAS HELD IN THE CASE OF LUXMI T EA CO. VS. DCIT (1992) 42 ITR 642 (CAL.) THAT EVEN IN CASE OF A BEST JUDGMENT ASSESSMENT U/S 144, THE ITO MUST HAVE REGA RD FOR THE PAST RECORD OF THE ASSESSEE. HE CANNOT ACT IN A CAP RICIOUS MANNER WHILE ESTIMATING THE INCOME. THESE PRINCIPLE S ARE WELL SETTLED. 3.11 SOME COMPARABLE CASES ARE REFERRED HERE UNDER: - M/S SEE LOGISTICS SOLUTIONS (P) LTD. A TRANSPORT CO MPANY DOING THE BUSINESS OF TRANSPORTATION OF GOODS BY ROAD BY HIRING TRUCKS FROM MARKET IN THIS CASE ITS ASSESSMENT U/S 1413 (3 ) FOR T HE A. Y. 2008-09 HAS BEEN MADE ON A NET PRO FIT OF 0.26% ON A TOTAL ITA NO.1093/DEL/2012 10 TURNOVER OF RS. 12,34,17.R55/- . COPY OF ORDER AND AUDITED BALANCE SHEET IS ENCLOSED FOR YOUR REFERENCE, M/S RAMA ROADWAYS (P) LTD. A TRANSPORT COMPANY DOIN G THE BUSINESS OF TRANSPORTATION OF GOODS B) ROAD BY HIRI NG TRUCKS FROM MARKET. IN THIS CASE COMPANY HAD FILED ITS INC OME TAX RETURN FOR THE A.V. 2008-09 SHOWING A NET PROFIT OF 0.29% ON A TOTAL TURNOVER OF RS.5,98,79,880/-. A.O. MADE A ASS ESSMENT U/S 143(J) BY ESTIMATING NET PROFIT @ 5% . IN THE APPEA L, C1T(APPEAL) XVIII, NEW DELHI GIVEN A RELIEF TO THE COMPANY AND ITS NET PROFIT FINALIZE @1.17% OF THE TOTAL TUR NOVER BY ENHANCING G.P. RATE FROM 2.94% TO 3.90%. COPY OF OR DER ARE AUDITED BALANCE SHEET ARE ENCLOSED. UNDER THE CIRCUMSTANCES, YOUR HONOR IS URGED TO KIN DLY CONSIDER THE ABOVE AND PASS APPROPRIATE ORDER IN TH E INTEREST OF JUSTICE. AND FOR THIS ACT OF KINDNESS MY CLIENT, AS DUTY BOUND, SHALL EVER PREY.' 9. THE CIT (A) DECIDED THE CONTROVERY OF N.P. RATE WITH FOLLOWING OBSERVATIONS AND FINDINGS: HOWEVER, CONSIDERING THE ENTIRE FACTS AND CIRCUMST ANCES AS MENTIONED BELOW, I AGREE WITH THE APPELLANTS CONTE NTION THAT ASSESSMENT AT 5% WOULD BE EXCESSIVE: (I) ALTHOUGH BOOKS OF ACCOUNTS WERE NOT PRODUCED BU T VARIOUS ACCOUNTS OF RECEIPTS AND EXPENDITURE, DEBTO RS AND CREDITORS, ASSETS ETC WERE FURNISHED DURING ASSESSM ENT PROCEEDINGS. (II) DURING FINALIZATION OF THIS APPELLATE PROCEEDI NGS, I HAVE COME TO KNOW, AND HAS BEEN ADMITTED BY THE APPELLAN T THAT ASSESSMENT FOR A. Y 2009-10 HAS BEEN COMPLETED ON 21.12.2011 WHEREIN THE ASSESSEE AGREED FOR ADDITION OF RS.10,00,000/-, DECLARED N.P, AS PER I. T. RETURN, WAS 1.62 % BUT N. P. GOES UP TO 2.6.% IF AGREED ADDITION AT RS.10, 00,000/- IS INCLUDED AND CONSIDERED. ITA NO.1093/DEL/2012 11 (III) THE ASSESSEE HAS BROUGHT ON RECORD, TWO COMPA RABLE CASES OF TRANSPORTERS IN WHOSE CASE MUCH LESSER N.P HAS BEEN ASSESSED. IN CASE OF M/S SGC LOGISTICS SOLUTIONS (P ) LTD. INCOME FOR ASSESSMENT YEAR 2008-09 HAS BEEN ASSESSE D AT N. P. RATE OF 0.26%. IN CASE OF M/S RAMA ROADYAS (P) L TD., BETTER COMPARABLE CASE TO THE ASSESSEE; INCOME FOR A. Y 20 08-09 HAS BEEN ASSESSEE BY CIT (A) (XVIII), NEW DELHI AT N.P OF 1.17%. (V) FOR THE PRESENT YEAR THE DECLARED N.P IS 1.45% CONSIDERING ALL THE FACTORS ABOVE, I HOLD THAT IT W OULD MEET BOTH ENDS OF JUSTICE IF ASSESSEES INCOME IS ASSESSED FO R THIS YEAR, AT N. P. OF 2.5%. THIS WOULD BE IN/LINE WITH THE AGREE D ADDITION MADE FOR OTHER ASSESSMENT YEARS AND WOULD COVER THE POSSIBLE LEAKAGE FOR REVENUES AND, AT THE SAME TIME, WILL N OT BE EXCESSIVE. 10. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER TOOK N.P. RATE OF 5% WITHOUT ANY BASIS. DURING THE FIRST APPELLATE PROCEEDINGS THE CIT (A) CONSIDERED N.P. R ATE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2009-10 AND ALSO CONSIDERED OTH ER COMPARABLES AND FINALLY HELD THAT THE G.P RATE OF 2.5% MAY BE TAKEN TO MEET ENDS OF JUSTICE. IN THE SITUATION, WE ARE OF THE OPINION THAT THE CI T (A) RIGHTLY TAKEN N.P. RATE OF ASSESSMENT YEAR 2009-10 WHICH WAS ACCEPTED BY TH E BOTH THE PARTIES, AND THE CIT (A) WAS JUSTIFIED IN REDUCING THE N.P. RATE FROM 5% TO 2.5% GIVING A PART RELIEF TO THE ASSESSEE. WE ARE UNABLE TO SEE ANY AMBIGUITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE FINDIN GS OF THE CIT (A). ACCORDINGLY GROUND NO1 AND 2 OF THE REVENUE BEING D EVOID OF THE MERITS AND DISMISSED. ITA NO.1093/DEL/2012 12 THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 08 TH /08/ 2013. SD/- SD/- (B. C. MEENA) (C. M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 08 TH DAY OF AUGUST, 2013 S.SINHA COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT(ITAT), NEW DELHI. AR,ITAT NEW DELHI.