Sandeep Agarwal, Delhi V. Addl. CIT, New Delhi

ITA 1153/DEL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6651 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 3
• Next Hearing Date: 03-11-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 03-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P K MISHRA
• Keywords: Rejection of books of accounts; Opportunity of being heard
• Section: 133(6)

Judgement Text

1 ITA NO. 1153/DEL/2016 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-3, NEW DELHI BEFORE SH. N. K. SAINI, ACCOUNTANT MEMBER ITA NO.1153/DEL/2016 : ASSTT. YEAR : 2007-08 SANDEEP AGARWAL B-3/6, ASHOK VIHAR, PHASE-II DELHI AAKPA5638A VS ADDL. CIT RANGE-19 NEW DELHI ASSESSEE BY : SH. P. K. MISHRA, CA REVENUE BY : SH. ANIL SHARMA, SR. DR DATE OF HEARING : 03.11.2016 DATE OF PRONOUNCEMENT 10 .11.2016 ORDER PER N. K. SAINI, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 29/01/2016 PASSED BY CIT(A)-12, NEW DELHI. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L:- 1. THAT THE ORDER OF LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) IS BAD IN LAW AS WELL AS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS ERRED IN SUSTAINING THE ACTION OF THE ASSESSING OFFICER FOR REJECTION OF BOOKS OF ACCOUNT. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS ERRED IN SUSTAINING THE ACTION OF THE ASSESSING OFFICER FOR ESTIMATION OF GROSS PROFIT BY APPLYING OF G. P RATE @ 2 ITA NO. 1153/DEL/2016 15% AND CONSEQUENTLY SUSTAINING THE ADDITION TO THE TUNE OF RS.9,24,965/. 4. THAT THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUSTAINING THE ADDITION OF RS.5,25,067/- ON ACCOUNT DIFFERENCE IN RECEIPTS SHO WN IN PROFIT & LOSS ACCOUNT AS COMPARED TO RECEIPTS SHOWN IN FORM 26AS IGNORING THE FACT THAT THE ASSESSEE HAS FOLLOWED CASH SYSTEM OF ACCOUNTING. 5. THAT THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTAINING THE AD HOC DISALLOWAN CE @ 10% OUT OF CAR EXPENSES AND TELEPHONE EXPENSES. 6. THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDIC E TO EACH OTHER. 3. GROUND NO. 1 & 6 ARE GENERAL IN NATURE. SO THES E GROUNDS DO NOT REQUIRE ANY COMMENT ON MY PART. GROUND NO. 2 W AS NOT PRESSED, SO IT IS DISMISSED AS NOT PRESSED. 4. VIDE GROUND NO. 3, GRIEVANCE OF THE ASSESSEE RE LATES TO THE SUSTENANCE OF ADDITION MADE BY THE A.O BY ESTIMATIN G THE GROSS PROFIT BY APPLYING GP RATE @ 15%. 5. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THA T THE ASSESSEE FILED THE RETURN OF INCOME ON 30/7/2007 DECLARING A N INCOME OF RS.78,935/- WHICH WAS PROCESSED U/S 143(1) (A) OF T HE INCOME-TAX ACT 1961(HEREINAFTER REFERRED TO AS THE ACT) ON THE RETURNED INCOME. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. DURI NG THE COURSE OF 3 ITA NO. 1153/DEL/2016 ASSESSMENT PROCEEDINGS, THE A.O OBSERVED THAT THE A SSESSEE EITHER INFLATED THE PURCHASES OR BOGUS EXPENSES TO SCALE O F PROFIT MARGIN IN THE BOOKS OF ACCOUNTS AND THAT THE LETTER ISSUED U/S 133(6) OF THE ACT TO THE PARTIES HAD EITHER BEING RECEIVED BACK U NSERVED OR THE PARTIES HAD NOT FURNISHED THEIR CONFIRMATION. HE, THEREFORE, REJECTED THE BOOKS OF ACCOUNTS BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT AND ESTIMATED THE INCOME BY APPLYING THE GP RATE OF 15% AT RS.17,19,648/- WHICH WAS ADDED TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD.CIT(A) AND MADE THE WRITTEN SUBMISSION DATED 10/3/2014 WHICH H AS BEEN INCORPORATED IN PARA 8 OF THE IMPUGNED ORDER. FOR THE COST OF REPETITION THE SAME IS NOT REPRODUCED HEREIN. THE L D.CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE SUSTAIN ED THE ADDITION OF RS.9,24,965/- BY OBSERVING IN PARA 9.1 OF THE IM PUGNED ORDER AS UNDER:- 9.1. I HAVE CONSIDERED THE OBSERVATIONS OF THE AS SESSING OFFICER AND SUBMISSIONS OF THE APPELLANT. GROUND N O. 2(A) TO 2(B) (II) AND GROUND NO. 5 RELATE TO REJECTION OF B OOKS OF ACCOUNT ON FLIMSY GROUNDS AND DETERMINATION OF PROFIT AFTER APPLYING G.P RATE OF 15%. APPELLANT IS ENGAGED IN THE BUSINESS OF TRANSPORTATION UNDER THE NAME & STYLE OF M/S SUVIDH A TRANSPORT CORPORATION. ASSESSING OFFICER HAD EXAMI NED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND CERTAIN DEFECT S WERE FOUND SUCH AS IN THE VOUCHERS, WHICH WERE PRODUCED CORRECTIONS WERE MADE WITH WHITE FLUID AND IN FEW CASES NAME OF BROKERS WERE NOT MENTIONED AND COMPLETE CHALLANS WERE NOT P RODUCED. ASSESSING OFFICER HAD ISSUED NOTICE U/S 133(6) TO LORRY OWNERS IN 102 CASES OUT OF WHICH REPLY WAS RECEIVED IN 17 CASES AND NOTICE IN 83 CASES WERE RECEIVED BACK UNSERVED WITH REMARKS SUCH AS RETURNED BACK. IN ONE CASE, THE REMARKS WERE NO 4 ITA NO. 1153/DEL/2016 TRANSACTION MADE AND IN ANOTHER CASE DENIED. TH E NAME- WISE DETAILS HAVE BEEN REPRODUCED IN PARA 3 OF PAGE 2 OF ASSESSMENT ORDER. ASSESSING OFFICER HELD THAT ASSES SEE HAD BOOKED BOGUS EXPENDITURE AS HE FAILED TO FURNISH AN Y CONFIRMATION OR PRODUCE ANY SINGLE PERSON TO SUPPOR T HIS CLAIM. ASSESSING OFFICER ALSO OBSERVED THAT ASSESSEE WAS NOT ABLE TO RECONCILE THE DIFFERENCE IN ADVANCES, HE REJECTED T HE BOOKS OF ASSESSEE U/S 145(3) AND IN VIEW OF THE INCOMPLETE B OOKS, LOSS DECLARED BY THE ASSESSEE WAS NOT VERIFIABLE FROM TH E RECORDS MAINTAINED AND APPLIED G.P RATE OF 15% AND ACCORDIN GLY MADE AN ADDITION OF RS.17,19,648/-. 6. NOW, THE ASSESSEE IS IN APPEAL. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMI TTED THAT NO SPECIFIC DEFECT WAS POINTED OUT IN THE BOOKS OF ACC OUNTS MAINTAINED IN REGULAR COURSE OF BUSINESS, THEREFORE THE ADDITI ON SUSTAINED WAS NOT JUSTIFIED, ALTERNATIVELY IT WAS STATED THAT THE GP RATE APPLIED BY THE A.O AND SUSTAINED BY THE LD.CIT (A) WAS ON HIGH ER SIDE. IT WAS FURTHER SUBMITTED THAT IN THE PRECEDING YEAR, THE A SSESSEE DECLARED GP RATE OF 7.46% IN THE IDENTICAL FACTS. THEREFORE , AT THE MOST GP RATE AT 7.46% MAY BE APPLIED. 8. IN HIS RIVAL SUBMISSION, THE LD. DR STRONGLY SUP PORTED THE IMPUGNED ORDER AND REITERATED THE OBSERVATIONS MADE BY THE AUTHORITIES BELOW. 9. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD IN THE PRESENT CASE, IT 5 ITA NO. 1153/DEL/2016 IS NOTICED THAT THE A.O APPLIED ESTIMATED GP RATE OF 15% WITHOUT ANY BASIS AND EVEN NO SIMILAR CASE WAS CITED WHEREI N THE SAME RATE OF GP WAS ACHIEVED. THE A.O HAD ALSO NOT DISCUSSED THE PAST HISTORY OF THE ASSESSEE. IN MY OPINION, THE PAST H ISTORY OF THE ASSESSEE IS BEST GUIDE IN SUCH TYPE OF CASES. IN T HE PRESENT CASE, THE ASSESSEE DECLARED GP RATE AT 7.46% IN THE PRECE DING YEAR WHICH WAS ACCEPTED BY THE DEPARTMENT AND NOTHING IS BROUG HT ON RECORD THAT THERE IS ANY MATERIAL CHANGED IN THE FACTS OF THE CASE RELATING TO THIS YEAR VIS-A-VIS THE PRECEDING YEAR. I, THER EFORE, KEEPING IN VIEW, THE FACTS OF THE PRESENT CASE AS DISCUSSED HE REIN ABOVE, SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND DIRECT T HE A.O TO WORK OUT THE INCOME OF THE ASSESSEE BY APPLYING THE GP R ATE OF 7.46% WHICH WAS ACCEPTED BY THE DEPARTMENT IN THE PRECEDI NG YEAR. 10. THE NEXT ISSUE VIDE GROUND NO. 4 RELATES TO THE SUSTENANCE OF ADDITION OF RS.5,25,067/- ON ACCOUNT OF DIFFERENCE AND RECEIPTS SHOWN IN THE PROFIT AND LOSS ACCOUNT AS COMPARED TO THE RECEIPT SHOWN IN FORM NO. 26AS. 11. AS REGARDS TO THIS ISSUE, THE LD. COUNSEL FOR T HE ASSESSEE SUBMITTED THAT THE AFORESAID DIFFERENCE WAS RECONCI LED BY THE ASSESSEE BUT NEITHER THE A.O NOR THE LD.CIT(A) HAD APPRECIATED THE SAME IN RIGHT PERSPECTIVE. IN HIS RIVAL SUBMISSION S, THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 12. AFTER CONSIDERING THE SUBMISSION OF BOTH THE PA RTIES, I DEEM IT APPROPRIATE TO SET ASIDE THIS ISSUE BACK TO THE FIL E OF THE A.O TO 6 ITA NO. 1153/DEL/2016 DECIDE THE SAME AFRESH AFTER CONSIDERING THE RECONC ILIATION STATEMENT FURNISHED BY THE ASSESSEE COPIES OF WHICH ARE PLACED AT PAGE NO. 41 & 42 OF THE ASSESSEES PAPER BOOK. THE A.O IS ALSO DIRECTED TO ALLOW DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 13. THE NEXT ISSUE VIDE GROUND NO. 5 RELATES TO THE SUSTENANCE OF THE ADDITION, OUT OF THE DISALLOWANCE MADE BY THE A .O OUT OF CAR EXPENSES AND TELEPHONE EXPENSES. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE A.O NOTICED THAT THE ASSESSEE DE BITED RS.96,650/- AND RS.1,09,812/- ON ACCOUNT OF CAR EXPENSE AND TEL EPHONE EXPENSES RESPECTIVELY. THE A.O OBSERVED THAT THE ASSESSEE HAD NOT MAINTAINED LOG BOOK TO RECORD THE DAY TO DAY RUNNIN G OF CAR FOR THE BUSINESS. THEREFORE, THE USAGE OF VEHICLES BY THE ASSESSEE AND STAFF MEMBERS FOR THEIR PERSONAL USE COULD NOT BE RULED O UT. HE ALSO OBSERVED THAT THE ASSESSEE HAD NOT PRODUCED TELEPHO NE CALL REGISTER FOR EXAMINATION AND THERE WAS NO DOCUMENTARY EVIDEN CE PRODUCED TO PROVE THE EXCLUSIVE USE OF TELEPHONES FOR BUSINE SS PURPOSES. THEREFORE, THE PERSONAL USE OF TELEPHONE WAS ALSO N OT RULED OUT. THE A.O DISALLOWED 20% OF THE AFORESAID EXPENSES ON ACCOUNT OF PERSONAL USE. BEING AGGRIEVED, THE ASSESSEE CARRIE D THE MATTER TO THE LD.CIT (A) WHO RESTRICTED THE DISALLOWANCE TO 1 /10 TH OF THE AFORESAID EXPENSES. NOW, THE ASSESSEE IS IN APPEAL . 14. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE VEHICLES AND TELEPHONE WERE USED FOR THE BUSINESS PURPOSES O NLY. THEREFORE, 7 ITA NO. 1153/DEL/2016 THE DISALLOWANCE MADE BY THE A.O AND SUSTAINED BY T HE LD.CIT (A) WAS NOT JUSTIFIED. 15. IN HIS RIVAL SUBMISSION, THE LD. DR SUPPORTED T HE ORDER OF THE A.O AND REITERATED THE OBSERVATIONS MADE THEREIN. 16. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN T HE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ASSESSEE HAD NOT MAINT AINED ANY LOG BOOK TO SUBSTANTIATE THE EXCLUSIVE USE OF THE VEHIC LES FOR BUSINESS PURPOSES. IT IS ALSO NOTED FROM THE OBSERVATIONS O F THE LD.CIT(A) IN PARA 11 OF THE IMPUGNED ORDER THAT THE ASSESSEE HAD NOT PROVIDED ANY DETAIL OR EVIDENCE IN SUPPORT OF HIS CLAIM THAT MOBILE PHONES WERE GIVEN TO STAFF & PROPRIETOR FOR THE USE IN TH E BUSINESS. THEREFORE, THE PERSONAL USE OF THE CAR AND TELEPHON E BY THE ASSESSEE AND HIS STAFF CANNOT BE RULED OUT. IN MY OPINION, THE DISALLOWANCE SUSTAINED BY THE LD.CIT (A) TO THE EXT ENT OF 1/10 TH OF TOTAL EXPENSES IS FAIR AND REASONABLE. THEREFORE, NO INTERFERENCE IS CALLED FOR IN THE OBSERVATIONS OF THE LD.CIT (A) ON THIS ISSUE. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. (ORDER PRONOUNCED IN THE COURT ON 10/11/2016) SD/- (N. K. SAINI) ACCOUNTANT M EMBER DATED: 10/11/2016 8 ITA NO. 1153/DEL/2016 *R.NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI DATE INITIAL 1. DRAFT DICTATED ON 03.11.2016 PS 2. DRAFT PLACED BEFORE AUTHOR 04.11.2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 10 .11.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 10.11.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 9 ITA NO. 1153/DEL/2016