M/s The Hind Ratan Logistics , Indore V. Income Tax Officer- 5(3), Indore

ITA 11/Ind/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7144 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-10-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 05-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R S AMBEDKAR
• Assessee Lawyers: ADIK BANSAL
• Keywords: Unexplained cash credit; Rejection of books of accounts; Depreciation; Opportunity of being heard; Set aside
• Section: 143(3); 143(2); 145

Judgement Text

THE HIND RATAN LIGISTICS ITANO 11/IND/2018 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO 11/IND/2018 ASSESSMENT YEAR 2014-15 PAN : AAFFT3777N M/S. THE HIND RATAN LOGISTICS, V/S ITO-5(3), TS-47,NEW LOHA MANDI, INDO RE NAVLAKHA MAIN ROAD, INDORE (APPELLANT) (RESPONDENT) REVENUE BY : SHRI R. S. AMBEDKAR, SR.DR ASSESSEE BY : SHRI ADIK BANSAL, CA DATE OF HEARING : 22.10.2019 DATE OF PRONOUNCEMENT : 31.10.2019 O R D E R PER SHRI MANISH BORAD, A.M. THE ABOVE CAPTIONED APPEAL FILED AT THE INSTANCE OF ASSESSEE PERTAINING TO ASSESSMENT YEARS 2014-15 IS DIRECTED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-II (IN SHORT LD.CIT(A)], INDORE THE HIND RATAN LIGISTICS ITANO 11/IND/2018 2 DATED 22.09.2017 WHICH IS ARISING OUT OF THE ORDER U/S 143(3) DATED 30.11.2016 FRAMED BY ITO-5(3), INDORE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRUCK PLYING AND PROVIDI NG TRANSPORT SERVICES. INCOME OF RS.2,32,322/- DECLARED IN THE INCOME TAX RETURN FILED ON 8.10.2014. CASE SELECTED FOR SCRUTINY THRO UGH CASS FOLLOWED BY ISSUING OF NOTICES U/S 143(2) OF THE ACT. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS LD. A.O OBSERVED THAT THERE WERE ADDITIONS TO THE CAPITAL ACCOUNT OF THE PARTNERS. THE SOURCE OF CAPITAL WAS ASKED. ASSESSEE FURNISHED THE REPLY BUT THEY WERE NOT SUFF ICIENT TO CONVINCE THE LD. A.O, THEREFORE HE MADE THE ADDITION OF RS.3 0,50,000/- FOR UNEXPLAINED CAPITAL. LD. A.O. ALSO OBSERVED THAT T HERE IS A MISMATCH IN THE GROSS RECEIPTS SHOWN BY THE ASSESSEE IN THE PRO FIT & LOSS ACCOUNT AS AGAINST THE BOOKING COMMISSION RECEIVED BY THE A SSESSEE. FREIGHT RECEIPTS FROM FIVE TRUCKS OWNED BY THE ASSESSEE WER E ALSO NOT APPEARING IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE WAS S HOW CAUSED. IT FURNISHED THE SUBMISSIONS CONTENDING THAT ONLY THE NET RECEIPTS HAVE BEEN SHOWN. BOOKS OF ACCOUNTS ARE AUDITED. LD. A. O HOWEVER WAS NOT SATISFIED AND HE REJECTED THE BOOKS OF ACCOUNTS OBS ERVING VARIOUS THE HIND RATAN LIGISTICS ITANO 11/IND/2018 3 DEFECTS AND MADE THE ADDITION OF RS.18,94,514/- BY APPLYING THE NOTIONAL PROFIT RATE @5%ON THE GROSS RECEIPTS OF RS .3,78,90,273/-. LD. A.O ALSO MADE ADDITION U/S 44AE OF THE ACT AT RS.3 ,00,000/- TOWARDS THE INCOME OF THE FIVE TRUCKS PLYED DURING THE YEAR . AFTER MAKING ADDITION OF RS.52,44,514/- INCOME ASSESSED AT RS.54 ,76,836/-. 3. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. C IT(A) BUT FAILED TO SUCCEED ON ANY OF THE GROUNDS. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L RAISING FOLLOWING GROUNDS OF APPEAL; 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO ERR ED IN MAKING THE ADDITION OF RS. 30,50,000/- ON ACCOUNT OF UNEXP LAINED CREDIT IN THE CAPITAL ACCOUNT OF THE PARTNERS WITHOUT PROPERLY APP RECIATING THE FACTS THAT THE ASSESSEE HAS OFFERED ALL RELEVANT EXPLANATION FO R THE SAME. THE CIT (A) ALSO ERRED IN MAINTAINING THE ADDITION. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE AO ERRED IN REJECTING BOOKS OF . ACCOUNTS U/S 145 OF THE IT ACT, 1961 AND APPLIED A NOTIONAL PROFIT PERCENTAGE OF 5 ON THE BOOKING COMMISSION OF RS.3,78,90,273/ -, MAKING AN ADDITION OF RS.18,94,514, DESPITE THE FAC T THE BOOKS OF ACCOUNTS ARE DULY MAINTAINED AND AUDITED. THE CIT (A) ALSO ERRED IN MAINTAINING THE ADDITION. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE AO ERRED MAKING AN ADDITION OF RS.3,OO,OOO/- U/S 44AE OF THE IT ACT, 1 961, WITHOUT APPRECIATING THE FACT THAT THE BOOKS OF ACCOUNTS AR E DULY MAINTAINED AND THE HIND RATAN LIGISTICS ITANO 11/IND/2018 4 AUDITED. THE CIT (A) ALSO ERRED IN MAINTAINING THE ADDITION. 4.THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE T HE AO ERRED IN CALCULATING ASSESSED INCOME. INCOME SHOWN IN THE RE TURN OF RS.2,32,322/ - WAS NOT DEDUCTED FROM THE ADDITIONS MADE AS AGE OF PROFIT, AS THE ASSESSMENT ORDER WAS PASSED THROUGH RESTORING THE P ROVISIONS OF SECTION 145 OF THE INCOME TAX ACT. 4. APPELLANT RESERVE HIS RIGHT TO ADD, ALTER OR AMEND ANY GROUNDS OF APPEAL AT THE TIME OF HEARING OR BEFORE. 5. APROPOS TO GROUND NO.1 FOR UNEXPLAINED CREDIT OF RS.30,50,000/- IN THE CAPITAL ACCOUNT OF THE PARTNERS LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PARTNERS WERE HAVING SUFFICIENT FUNDS IN THEIR HANDS AND THE ALLEGED AMOUNT WAS RECEIVED BY THE PARTNERS FROM OUTSTANDING SUNDRY DEBTORS STANDING IN THE INDIVIDUAL BALANCE S HEET OF THE PARTNERS. THESE SUNDRY DEBTORS ARE THE AMOUNT RECEIVABLE AGAI NST LORRY RECEIPTS WHICH ARE DISCOUNTED BY THE PARTNERS, AMOUNT PAID T O THE DRIVERS AND ON THE DUE DATE OF THE LORRY RECEIPTS THESE AMOUNTS WERE TO BE COLLECTED FROM THE PERSONS AVAILING THE TRANSPORT SERVICES. LD. COUNSEL FOR THE ASSESSEE ALSO REFERRED TO THE PAPER BOOK WHEREIN TH E BALANCE SHEET OF BOTH THE PARTNERS ARE PLACED FOR THE PRECEDING FINA NCIAL YEAR AND CURRENT FINANCIAL YEAR TO SUPPORT THE SOURCE OF CAP ITAL INTRODUCED BY THE PARTNERS. THE HIND RATAN LIGISTICS ITANO 11/IND/2018 5 6. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHEM ENTLY ARGUED SUPPORTING THE ORDERS OF BOTH THE LOWER AUTHORITIES AND ALSO SUBMITTED THAT NO SUCH DETAILS OF LORRY RECEIPTS WERE PLACED BEFORE THE LOWER AUTHORITIES. 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THROUGH GROUND NO.1 THE ASSESSEE HAS CH ALLENGED THE FINDING OF LD. CIT(A) CONFIRMING THE ADDITION FOR U NEXPLAINED CREDIT IN THE CAPITAL ACCOUNT OF THE PARTNERS AT RS.30,50,000 /-. IT HAS BEEN SUBMITTED BEFORE US THAT THE PARTNERS NAMELY SHRI P UVINDER PAL RATAN AND SMT. RAVINDER KAUR RATAN IN THEIR INDIVIDUAL CA PACITY ARE EARNING INCOME FROM FINANCE BUSINESS. IN THIS BUSINESS THE Y DISCOUNT THE LORRY RECEIPTS, PAY THE DISCOUNTED AMOUNT TO THE DRIVERS AND ON THE DUE DATE WHICH IS NORMALLY 2 TO 5 DAYS FROM THE DATE OF LORR Y RECEIPTS, RECOVER THE AMOUNT FROM THE PARTY FOR WHICH MATERIAL WAS DELIVE RED. REFERENCE WAS MADE TO THE BALANCE SHEET OF BOTH THE PARTNERS. IN PAPER BOOK PAGE-46 IN THE BALANCE SHEET AS ON 31.3.2013 OF SMT. RAVIND ER KAUR RATAN AND SHRI PUVINDER PAL RATAN THE OUTSTANDING SUNDRY DEBT ORS (BILLS IN HAND) ARE RS. 19,18,250/- AND RS.23,59,479/- RESPECTIVELY . THE ASSESSEES CLAIM IS THAT THE SOURCE OF CAPITAL INTRODUCED DUR ING THE YEAR IS MAJORLY THE HIND RATAN LIGISTICS ITANO 11/IND/2018 6 FROM LIQUIDATING THE OUTSTANDING DEBTORS AS ON 31.3 .2013. 8. WE HOWEVER FIND THAT NO SPECIFIC DETAILS OF THE SUNDRY DEBTORS OUTSTANDING AT THE CLOSE OF THE YEAR 31.3.2013 WERE FILED BEFORE THE LD. A.O NOR ANY JUSTIFICATION WAS GIVEN ABOUT THE NEXUS OF THE CASH DEPOSITED IN THE BANK ACCOUNT OF PARTNERSHIP FIRM W ITH THE AVAILABLE CASH IN HAND WITH THE PARTNERS. 9. IN OUR CONSIDERED VIEW THIS ISSUE NEEDS DETAILED EXAMINATION BY THE LD. A.O AND THEREFORE THE ISSUE RAISED IN GROUN D NO.1 IS SET ASIDE TO THE FILE OF LD. A.O FOR AFRESH EXAMINATION WHICH WILL BE IN THE INTEREST OF BOTH THE PARTIES. ASSESSEE IS ALSO DIRECTED TO FURNISH COMPLETE DETAILS OF SUNDRY DEBTORS OUTSTANDING IN THE BALANCE SHEET OF THE PARTNERS AS ON 31.3.2013 AND 31.3.2014, SAMPLE COPIES OF LORRY RECEIPTS AND ALSO THE CASH FLOW STATEMENT SHOWING THE AMOUNT RECEIVED AGAINST THE EXCHANGE OF LORRY RECEIPTS. NEEDLESS TO MENTION TH AT PROPER OPPORTUNITY OF BEING HEARD SHOULD BE PROVIDED TO THE ASSESSEE. IN THE RESULT GROUND NO.1 IS ALLOWED FOR STATISTICAL PURPOSE. 10. APROPOS GROUND NO.2 RELATING TO REJECTION OF BO OKS OF ACCOUNTS AND APPLICATION OF NOTIONAL PERCENTAGE 5% ON THE BO OKING COMMISSION THE HIND RATAN LIGISTICS ITANO 11/IND/2018 7 OF RS. 3,78,90,273/-, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BOOKS ARE DULY AUDITED U/S 44AB OF THE ACT AND IN T HIS KIND OF BUSINESS USUALLY IN THE PROFIT & LOSS ACCOUNT, THE NET BOOKING COMMISSION AMOUNT IS DISCLOSED. ASSESSEE IS MAINTA INING COMPLETE DETAILS OF REVENUE AND EXPENDITURE OF THE OFFICES R UNNING AT INDORE, LUDHIANA AND PUNE. BOOKING ARE DONE THROUGH LUDHIA NA OFFICE BUT THE REVENUE ARE SHOWN IN THE BOOKS OF RESPECTIVE OFFICE S. ASSESSEE ALSO OWNS FIVE TRUCKS AND INCOME FROM RUNNING OF THESE T RUCKS WERE ALSO DISCLOSED. HE PRAYED THAT THE LOWER AUTHORITIES ER RED IN REJECTING THE BOOKS OF ACCOUNTS AND APPLYING NOTIONAL PROFIT ON T HE GROSS BOOKING COMMISSION DURING THE YEAR. 11. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHE MENTLY ARGUED SUPPORTING THE ORDERS OF BOTH THE LOWER AUTHORITIES . 12. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THROUGH GROUND NO.2 ASSESSEE HAS CHALLE NGED THE ACTION OF LD. A.O OF REJECTING BOOKS OF ACCOUNTS U/S 145 OF T HE ACT AND APPLYING THE NOTIONAL PROFIT RATE OF 5% ON THE BOOKING COMMI SSION OF RS.3,78,90,213/- THEREBY MAKING ADDITION OF RS.18,9 4,514/-. WE OBSERVE THAT THE ASSESSEE VIDE LETTER DATED 3.10.20 16 FILED BEFORE THE THE HIND RATAN LIGISTICS ITANO 11/IND/2018 8 LD. A.O DURING THE COURSE OF ASSESSMENT PROCEEDINGS GAVE DETAILS OF TRUCK WISE REVENUE AND EXPENSES, DETAILS OF STATIO N WISE FREIGHT AND EXPENSES. THIS REPLY IS APPEARING ON PAGE-12 OF IM PUGNED ASSESSMENT ORDER. AS PER THIS REPLY THE GROSS RECEIPTS FROM R UNNING OF FIVE TRUCKS OWNED BY THE ASSESSEE IS RS.66,34,388/- AND AFTER D EDUCTING THE EXPENSES OF RS.61,35,617/- THE NET RECEIPTS HAVE BE EN SHOWN AS RS.4,98,771/-. THIS NET RECEIPT IS BEFORE CLAIMING THE DEPRECIATION ON TRUCKS AT RS.18,32,330/-, WHICH THE ASSESSEE HAS C LAIMED IN THE AUDITED PROFIT & LOSS ACCOUNT. IT MEANS THAT IF TH E DEPRECIATION OF RS.18,32,330/- IS REDUCED FROM THE NET RECEIPTS OF RS.4,98,771/-, THERE IS A GROSS NEGATIVE INCOME FROM RUNNING OF TR UCKS AT RS.13,33,559/-. 13. AS REGARDS THE FREIGHT INCOME, THE GROSS FREIGH T INCOME FROM ALL THE THREE OFFICES STATIONS HAS BEEN SHOWN BY THE ASSESS EE AT RS. 3,78,90,253/- AND AGAINST IT GROSS EXPENSES TOWARDS HAMMALI & CARTAGE, LORRY HIRE, CROSSING FREIGHT, DISCOUNT, LO CAL FREIGHT AND SERVICE TAX IS INCURRED WHICH TOTAL TO RS.3,10,73,573/-, T HUS THERE IS GROSS INCOME OF RS.68,16,680/-. WHEN WE COMPARE THESE DE TAILS WHICH THE ASSESSEE HAS FILED BEFORE THE LD. A.O WITH THE AUDI TED PROFIT & LOSS THE HIND RATAN LIGISTICS ITANO 11/IND/2018 9 ACCOUNT, WE FIND THAT UNDER THE HEAD INCOME THE BOO KING COMMISSION AMOUNT IS SHOWN AT RS.1,00,04,466/-, NO SEPARATE A MOUNT IS SHOWN FOR LORRY RECEIPTS I.E. RECEIPTS FROM THE FIVE TRUC KS OWNED BY THE ASSESSEE. THE NET INCOME BEFORE DISTRIBUTING THE R EMUNERATION TO THE PARTNERS IS AT RS.8,03,738/-. THERE IS NO WHISPER IN THE PROFIT & LOSS ACCOUNT ABOUT THE TOTAL TURNOVER, GROSS RECEIPTS O F THE TRUCKS OWNED BY THE ASSESSEE, LOSS INCURRED IN RUNNING THE TRUCKS. IT HAS BEEN CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE FIGURES HAVE BEEN CONSOLIDATED BUT EVEN IF THEY HAVE CONSOLIDATE D THE DETAILS SHOULD APPEAR IN SCHEDULES ATTACHED TO THE BALANCE SHEET A ND PROFIT & LOSS ACCOUNT. PERUSAL OF THE PAPER BOOK SHOWS THAT NO T AX AUDIT REPORT HAS BEEN FILED, NO SUCH SCHEDULES ARE ATTACHED RELATING TO HEADS APPEARING IN THE PROFIT & LOSS ACCOUNT. EVEN THOUGH THE ASSE SSEE WAS PROVIDED SUFFICIENT OPPORTUNITY BY THE LD. A.O TO GIVE NECES SARY DETAILS BUT THE SAME REMAIN UNFULFILLED AT THE END OF THE ASSESSEE. THEREFORE IN OUR CONSIDERED VIEW LD. A.O HAS RIGHTLY APPLIED PROVISI ONS OF SECTION 145 OF THE ACT AND REJECTED THE BOOK RESULTS SHOWN BY THE ASSESSEE. 14. HOWEVER WITH REGARD TO APPLICATION OF NOTIONAL PROFIT OF PERCENTAGE OF 5% ON THE BOOKING COMMISSION AND MAKING ADDITION FOR THE HIND RATAN LIGISTICS ITANO 11/IND/2018 10 RS.18,94,514/-, IN OUR VIEW NOTIONAL RATE SHOULD HA VE BEEN APPLIED ON THE TOTAL TURNOVER OF THE ASSESSEE WHICH IN THIS CA SE IS RS. 4,45,24,641/- (GROSS RECEIPTS FROM TRUCKS AT RS. 66 ,34,388/- AND GROSS FREIGHT RECEIPT OF RS.37,89,253/-). FURTHER IN OUR CONSIDERED VIEW APPLYING OF 5% PROFIT RATE IS MUCH HIGHER AND THERE FORE IN THE INTEREST OF JUSTICE AND FAIR PLAY WE DIRECT THE LD. A.O TO A PPLY THE NET PROFIT RATE OF 3.5% ON THE GROSS TURNOVER OF RS. 4,45,24,641/-. BY APPLYING NET PROFIT RATE OF 3.5% THE AMOUNT ON NET PROFIT WOULD ARRIVE AT RS. 15,58,362/-. THIS NET PROFIT SHALL BE DEEMED TO HA VE BEEN ARRIVED AFTER CLAIMING ALL THE EXPENSES INCLUDING DEPRECIATION EX CEPT REMUNERATION ALLOWABLE TO PARTNERS. WE ALSO DIRECT THE LD. A.O TO COMPUTE THE REMUNERATION ALLOWABLE TO THE PARTNERS AS PER THE P ROVISIONS OF LAW AND GIVE THE DEDUCTION OF THE SAME AGAINST THE PROFIT C OMPUTED AT RS.15,58,362/-. LD. A.O IS ALSO DIRECTED TO GIVE T HE DEDUCTION OF THE NET PROFIT OF RS. 2,32,322/- WHICH STANDS ALREADY DISCL OSED BY THE ASSESSEE IN THE INCOME TAX RETURN FILED BY IT. THE REMAINING AMOUNT SHALL THE ADDITION SUSTAINED IN THE HANDS OF THE ASSESSEE. FU RTHER OUR THIS DECISION OF ADJUDICATING OF GROUND NO.2 SHALL NOT B E CONSIDERED AS A PRECEDENCE FOR THE SUBSEQUENT YEARS. IN THE RESULT GROUND NO.2 OF THE ASSESSEES APPEAL IS PARTLY ALLOWED. THE HIND RATAN LIGISTICS ITANO 11/IND/2018 11 15. APROPOS GROUND NO.3 RELATING TO ADDITION U/S 44 AE OF THE ACT AT RS.3,00,000/-, WE OBSERVE THAT SINCE WE HAVE ALREAD Y APPLIED NET PROFIT RATE ON THE TOTAL TURNOVER OF THE ASSESSEE INCLUDIN G FREIGHT RECEIPTS FROM RUNNING TRUCKS, MAKING A SEPARATE ADDITION U/S 44AE OF THE ACT IS UNCALLED FOR AND THEREFORE SAME IS DIRECTED TO BE D ELETED. IN THE RESULT GROUND NO.3 OF THE ASSESSEE IS ALLOWED. 16. APROPOS GROUND NO.4 WHEREIN THE ASSESSEE HAS CH ALLENGED THE CALCULATION OF ASSESSED INCOME AND SUBMITTED THAT T HE INCOME DISCLOSED BY THE ASSESSEE AT RS. 2,32,322/- WAS NOT DEDUCTED FROM THE ADDITION, WE FIND FORCE IN THE CONTENTION OF THE A SSESSEE. WHILE ADJUDICATING GROUND NO.2 IN THE PRECEDING PARAS WE HAVE ALREADY GIVEN DIRECTION TO GIVE SET OFF OF THE TOTAL INCOME OF RS . 2,32,322/- SHOWN IN THE INCOME TAX RETURN AND THUS IT TAKES CARE OF ASS ESSEES GROUND NO.4 AND THEREFORE THE SAME STANDS ALLOWED. 17. GROUND NO. 5 WHICH IS GENERAL IN NATURE WHICH D OES NOT NEED ANY ADJUDICATION. 18. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. THE HIND RATAN LIGISTICS ITANO 11/IND/2018 12 THE ORDER PRONOUNCED IN THE OPEN COURT ON 31.10.2 019. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 31 OCTOBER, 2019 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT. REGISTRAR, ITAT