RAJESH KUMAR SINGH, Mirzapur V. INCOME TAX OFFICER, Mirzapur

ITA 117/ALLD/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8786 (ITAT-ALLAHABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 02-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Depreciation
• Section: 143(3); 145(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ALLAHABAD SMC BENCH, ALLAHABAD (THROUGH VIRTUAL COURT) BEFORE SHRI.VIJAY PAL RAO, JUDICIAL MEMBER ITA NO.117/ALLD/2017 ASSESSMENT YEAR: 2010-11 RAJESH KUMAR SINGH, CHUNAR, MIRZAPUR, U.P. PAN-BLEPS9707E V. INCOME TAX OFFICER, WARD-III(3), MIRZAPUR, U.P. (APPELLANT) (RESPONDENT) APPELLANT BY: MR. PRAVEEN GODBOLE, CA RESPONDENT BY: MR. A.K. SINGH, SR. DR DATE OF HEARING: 28.07.2021 DATE OF PRONOUNCEMENT: 30.07.2021 O R D E R PER SHRI VIJAY PAL RAO, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 17.02.2017 OF CIT(A) FOR THE ASSESSMENT YEAR 2010-11. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS. 1-THAT IN ANY VIEW OF THE MATTER THE ASSESSMENT MADE ON AN INCOME OF RS. 9,66,650/- VIDE ORDER DATED 28-03-2013 PASSED U/S 143(3) OF THE IT ACT AS AGAINST THE RETURNED INCOME OF RS. 4,23,316/- IS BAD BOTH ON THE FACTS AND IN LAW. THEREFORE, THE INCOME DECLARED BASED ON CLOSED BOOKS OF ACCOUNTS SHOULD HAVE BEEN ACCEPTED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2-THAT IN ANY VIEW OF THE MATTER THE ADDITIONS OF RS. 2,92,147/-IN SINGH TRANSPORTS AS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. C1T(A) BY APPLYING NET PROFIT RATE OF 4.5% AS AGAINST THE NET PROFIT RATE OF 3.96% DISCLOSED BY THE ASSESSEE IS HIGHLY UNJUSTIFIED. 3- THAT IN ANY VIEW OF THE MATTER THE ADDITIONS OF RS. 2,50,907/-IN SINGH TRADERS AS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) BY APPLYING NET PROFIT RATE OF 1% AS AGAINST THE NET PROFIT RATE OF 0.13% DISCLOSED BY THE ASSESSEE IS HIGHLY UNJUSTIFIED. ITA NO.117/ALLD/2017 RAJESH KUMAR SINGH 2 4. THAT IN ANY VIEW OF THE MATTER THE FINDINGS AND OBSERVATIONS OF THE LD. CIT(A) WITH REGARD TO ADDITION OF RS. 2,92,147/- AND RS. 2,50,907/- AS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY, THE LD. CIT(A) ARE INCORRECT AND LIABLE TO BE DELETED. 2. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION AS IT DEPENDS ON THE OUTCOME OF THE SPECIFIC GROUNDS RAISED BY THE ASSESSEE AGAINST THE ADDITIONS MADE BY THE ASSESSING OFFICER. 3. GROUND NO. 2 IS REGARDING THE ADDITION MADE BY THE ASSESSING OFFICER BY ADOPTING NET PROFIT RATE OF 4.5% BEFORE DEPRECIATION ON THE GROSS RECEIPTS OF TRANSPORTATION BUSINESS OF M/S SINGH TRANSPORT. THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER HAS GIVEN THE DETAILS OF TOTAL RECEIPTS AND NET PROFIT BEFORE DEPRECIATION HOWEVER, THE AMOUNT OF DEPRECIATION CONSIDERED BY THE ASSESSING OFFICER AT RS. 4,23,316/- IS INCORRECT FIGURE. HE HAS REFERRED TO THE PROFIT & LOSS ACCOUNT OF SINGH TRANSPORT AGENCY AND SUBMITTED THAT THE ASSESSEE HAS CLAIMED THE DEPRECIATION OF RS. 1,30,744/-. THUS THE COMPUTATION OF THE NET PROFIT BY THE ASSESSING OFFICER IS BASED ON THE INCORRECT DETAILS AND FACTS. HE HAS FURTHER CONTENDED THAT THE COMPARATIVE DETAILS OF THE TRANSPORT BUSINESS CLEARLY SHOWS THE NET PROFIT DECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS IN THE LINE OF PAST HISTORY OF THE ASSESSEE. HE HAS PLEADED THAT THE ADDITION MADE BY THE ASSESSING OFFICER BY ADOPTING NET PROFIT OF 4.8% IS HIGHLY EXCESSIVE AND ARBITRARY AND DESERVES TO BE DELETED. 4. ON THE OTHER HAND, THE LEARNED DR HAS SUBMITTED THAT THE HIGHER AMOUNT OF DEPRECIATION CONSIDERED BY THE ASSESSING OFFICER HAS RESULTED THE HIGHER RATE OF NET PROFIT DECLARED BY THE ASSESSEE BEFORE DEPRECIATION AND THEREFORE, THE SAID MISTAKE OF THE ASSESSING OFFICER IS NOT PREJUDICIAL TO THE INTEREST OF THE ASSESSEE. HE HAS POINTED OUT THAT IF THE CORRECT AMOUNT OF DEPRECIATION IS TAKEN INTO CONSIDERATION THEN THE NET PROFIT DECLARED BY THE ASSESSEE WOULD COME AT A LOWER RATE THAN CONSIDERED BY THE ASSESSING OFFICER. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. ITA NO.117/ALLD/2017 RAJESH KUMAR SINGH 3 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIALS AVAILABLE ON RECORD. THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE INCOME TAX ACT AND THEN PROCEEDED TO ESTIMATE THE INCOME OF THE ASSESSEE. THE ASSESSEE HAS SHOWN THE INCOME FROM TWO SEGMENTS ONE IS BUSINESS OF TRANSPORTATION AND ANOTHER IS THE BUSINESS OF PURCHASE AND SALE OF BRICKS, SANDS AND SUPPLY OF THESE MATERIALS BY USING ITS OWN TRANSPORT. 6. AS REGARDS THE TRANSPORT BUSINESS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS RECEIVED THE TOTAL PAYMENT OF RS. 2,82,21,064/- ON WHICH NET PROFIT BEFORE DEPRECIATION IS DECLARED AT RS. 11,18,906/- WHICH COMES TO 3.96%. THOUGH THE ASSESSING OFFICER HAS CONSIDERED THE NET PROFIT BEFORE DEPRECIATION, HOWEVER, SINCE THE AMOUNT OF DEPRECIATION IS INCORRECT THEREFORE, INSTEAD OF CONSIDERING THE NET PROFIT BEFORE DEPRECIATION, THE NET PROFIT DECLARED BY THE ASSESSEE WOULD BE A PROPER FIGURE TO COMPARE WITH THE REASONABLE NET PROFIT FOR THE PURPOSE OF ESTIMATION OF THE INCOME AFTER REJECTION OF BOOKS OF ACCOUNTS. IT IS SETTLED PROPOSITION OF LAW THAT AFTER REJECTION OF BOOKS OF ACCOUNTS THE ASSESSING OFFICER IS DUTY BOUND TO MAKE BEST JUDGMENT ASSESSMENT BY ESTIMATING THE INCOME OF THE ASSESSEE ON THE BASIS OF SOME REASONABLE AND PROPER CRITERIA AND GUIDANCE. THE PAST HISTORY OF GROSS PROFIT / NET PROFIT DECLARED BY THE ASSESSEE WHICH IS ACCEPTED BY THE DEPARTMENT OR HAS ATTAINED FINALITY IS A REASONABLE OR PROPER GUIDANCE FOR ESTIMATION OF THE INCOME FOR THE CURRENT YEAR. THE COMPARATIVE DETAILS OF THE NET PROFIT DECLARED BY THE ASSESSEE WHICH ARE NOT IN DISPUTE ARE AS UNDER:- SINGH TRANSPORT AGENCY A.Y. RECEIPTS SHOWN NET PROFIT NP RATE 09-10 2,08,35,640 3,12,597 1.52% 10-11 2,82,81,064 4,23,316 1.49% 11-12 8,44,29,722 8,65,990 1.02% 12-13 7,68,88,281 9,22,659 1.20% ITA NO.117/ALLD/2017 RAJESH KUMAR SINGH 4 7. ONCE THE NET PROFIT DECLARED BY THE ASSESSEE IN THE PRECEDING YEAR IS AVAILABLE AND IS ACCEPTED BY THE REVENUE THEN THE ESTIMATION OF THE INCOME IGNORING THE PAST HISTORY OR ANY OTHER REASONABLE BASIS ON THE PART OF THE ASSESSING OFFICER IS NOT JUSTIFIED. THE ASSESSING OFFICER HAS ADOPTED NET PROFIT RATE OF 4.5% BUT HAS NOT GIVEN ANY BASIS MUCH LESS OF REASONABLE BASIS. THE REJECTION OF BOOKS OF ACCOUNTS WOULD NOT IPSO FACTO RESULTS AN ADDITION TO THE TOTAL INCOME OF THE ASSESSEE IF THE GROSS PROFIT / NET PROFIT DECLARED BY THE ASSESSEE IS EITHER BETTER THEN OR IN THE LINE OF THE PAST HISTORY OR ANY OTHER REASONABLE BASIS BEING THE COMPARABLE RATE OF NET PROFIT / GROSS PROFIT. IN THE CASE IN THE HAND, THE AVERAGE OF THE NET PROFIT DECLARED BY THE ASSESSEE FOR THE PRECEDING THREE YEARS COMES TO 1.34% WHICH CAN BE CONSIDERED AS A REASONABLE AND PROPER GUIDANCE FOR ESTIMATION OF THE INCOME FOR THE YEAR UNDER CONSIDERATION. HENCE THE ADDITION MADE BY THE ASSESSING OFFICER BY APPLYING NET PROFIT RATE OF 4.5% IS HIGHLY ARBITRARY AND NOT JUSTIFIED. ACCORDINGLY, THE ESTIMATION OF THE INCOME OUGHT TO HAVE BEEN MADE BY APPLYING THE NET PROFIT AT 1.34% WHICH IS THE AVERAGE OF THE PRECEDING THREE YEARS OF NET PROFIT DECLARED BY THE ASSESSEE. IT IS CLARIFIED THAT THIS NET PROFIT DECLARED BY THE ASSESSEE SHALL BE AFTER DEPRECIATION AND NOT BEFORE DEPRECIATION AS CONSIDERED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE INCOME IN ABOVE TERMS. 8. GROUND NO. 3 IS REGARDING TRADING ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT OF BRICK TRADING BUSINESS BY ADOPTING NET PROFIT RATE OF 1% AS AGAINST 0.13%. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE DEALS IN PURCHASE OF BRICKS AND SAND WHICH IS SUPPLIED TO M/S J.P. ASSOCIATES THEREFORE, NO CLOSING STOCK IS SHOWN BY THE ASSESSEE. THE ASSESSEE HAS GIVEN THE DETAILS OF PURCHASE OF BRICKS, PURCHASE OF SAND AND TRANSPORT WORK. THE ASSESSING OFFICER THEN PICK UP THE PURCHASE AND SALE OF BRICK ACTIVITY AND ESTIMATED THE PROFIT BY APPLYING NET PROFIT RATE OF 1% ON THE SALE AMOUNT. HENCE, THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS. 2,50,907/- TO THE PROFIT DECLARED BY THE ASSESSEE OF RS. 65,275/-. THE ASSESSEE CHALLENGED THE AMOUNT OF THE ASSESSING OFFICER BEFORE THE CIT(A) BUT NOT SUCCEEDED. ITA NO.117/ALLD/2017 RAJESH KUMAR SINGH 5 9. BEFORE THE TRIBUNAL, THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS EXPLAINED THE REASONS FOR LOW PROFIT IN THE BUSINESS OF PURCHASE AND SALE OF BRICKS AND SANDS DUE TO THE REASON THAT THE TENDER OF SAND WAS AWARDED TO SAND MAFIA AND THEREFORE, THE ASSESSEE HAD TO PURCHASE THE SAND AT AN EXORBITANT RATE WHICH HAS RESULTED IN NET PROFIT. 10. THUS THE LEARNED AR HAS SUBMITTED THAT ONCE THE ASSESSEE HAS EXPLAINED THE REASONS FOR LOW PROFIT IN THE SAID ACTIVITY OF SUPPLY OF SAND AND BRICKS THEN THE ADDITION MADE BY THE ASSESSING OFFICER BY APPLYING NET PROFIT OF 1% ON SALE OF BRICKS IS NOT JUSTIFIED. 11. ON THE OTHER HAND, LEARNED DR HAS SUBMITTED THAT THE ASSESSING OFFICER HAS APPLIED N.P. OF ONLY 1% OF THE SALE OF BRICKS WHICH IS REASONABLE AND PROPER AS NOBODY WOULD DO THE BUSINESS OF TRADING IN THE BRICKS AT LOSS. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE RATE APPLIED BY THE ASSESSING OFFICER IS UNREASONABLE. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 12. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIALS ON RECORD. THE ASSESSEE HAS DECLARED THE NET PROFIT FROM PURCHASE AND SALE OF BRICKS, SANDS AND TRANSPORT CHARGES FOR SUPPLYING OF THE BRICKS AND SANDS TO M/S J.P. ASSOCIATES AT 0.13%. THE ASSESSING OFFICER ACCEPTED THE EXPLANATION OF THE ASSESSEE REGARDING THE EXORBITANT RATE FOR PURCHASE OF SAND DUE TO CONTROL OF THE SAND MAFIA HOWEVER, THE ASSESSING OFFICER HAS ESTIMATED THE NET PROFIT ONLY IN RESPECT OF PURCHASE AND SALE OF BRICKS BY THE ASSESSEE. THE LEARNED AR HAS SUBMITTED THAT THE ASSESSEE HAS ALSO POINTED OUT THAT THE ASSESSEE HAS DONE THIS ACTIVITY OF SUPPLY OF BRICKS AND SAND FOR HIS TRANSPORT BUSINESS. SINCE THE ENTIRE ACTIVITY HAS RESULTED IN NEGLIGIBLE INCOME AND EVEN THE AMOUNT RECEIVED FOR TRANSPORT WORK HAS ALSO NOT GENERATED ANY PROFIT THEN THIS EXPLANATION OF THE ASSESSEE CANNOT BE ACCEPTED FOR DOING THE TRADING ACTIVITY OF BRICKS AND SAND WITHOUT ANY INCOME. IT IS PERTINENT TO ITA NO.117/ALLD/2017 RAJESH KUMAR SINGH 6 NOTE THAT AFTER REJECTION OF BOOKS OF ACCOUNTS THE INCOME OF THE ASSESSEE WAS REQUIRED TO BE ESTIMATED ON SOME REASONABLE BASIS. THE ASSESSEE HAS ALSO NOT BROUGHT ON RECORD ANY PAST HISTORY OF NET PROFIT DECLARED BY THE ASSESSEE AS WELL AS ANY COMPARABLE RATE TO CONTRADICT THE NET PROFIT RATE APPLIED BY THE ASSESSING OFFICER AT 1%. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHEN THE ASSESSEE HAS NOT PRODUCED ANY MATERIAL OR FACTS TO DISPUTE THE REASONABLENESS OF THE NET PROFIT APPLIED BY THE ASSESSING OFFICER @ 1% AFTER REJECTION OF BOOKS OF ACCOUNTS THEN THIS GROUND OF THE ASSESSEES APPEAL IS DE VOID OF ANY MERIT. 13. GROUND NO. 4 IS GENERAL IN NATURE AND STAND DISPOSED OF IN TERMS OF DISPOSAL OF GROUND NO. 2 AND 3. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.07.2021 THROUGH VIDEO CONFERENCING. SD/- [VIJAY PAL RAO] JUDICIAL MEMBER DATED: 30/07/2021 SH COPY FORWARDED TO: 1. APPELLANT RAJESH KUMAR SINGH, 2. RESPONDENT ITO, WARD-III(3), MIRZAPUR 3. CIT(A), ALLAHABAD 4. CIT 5. DR - BY ORDER ASSISTANT REGISTRAR