ACIT, New Delhi V. Sh. Narinder Gulati, New Delhi

ITA 1694/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58865 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 22-02-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 07-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: GURJEET SINGH
• Keywords: Unexplained expenditure
• Section: 44AD; 69C; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI. BEFORE SHRI A.D. JAIN AND SHRI K.G. BANSAL I.T.A. NO.1694(DEL)/2011 ASSESSMENT YEAR: 2007-08 ASSTT. COMMISSIONER OF INCOME SHRI N ARINDER GULATI, TAX, CIRCLE 19(1), NEW DELHI. VS. B-4/4 , ASHOK VIHAR, PHASE-II, NEW DELHI-110052. PAN: AALPK9775H (APPLICANT) (RESPONDENT) APPELLANT BY : SHRI R.S. NEGI, SR. DR RESPONDENT BY : S HRI GURJEET SINGH, C.A. DATE OF HEARING: 22.02.2012 DATE OF PRONOUNCE MENT: 16.03.2012. ORDER PER K.G. BANSAL : A.M THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED THE RETURN ON 28.10.2007 DECLARING TOTAL INCOME OF RS. 7,65,500 /-. THIS RETURN WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961. THEREAFTER, ASSESSMENT PROCEEDINGS WERE INITIATED BY ISSUING NOTICE U /S 143(2) ON 15.09.2008. A DETAILED QUESTIONNAIRE WAS ALSO ISSUED TO T HE ASSESSEE ON 30.6.2009. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF A TRA NSPORTER AND TRANSPORT- CONTRACTOR. HE HAS SHOWN NET PROFIT @ 3.69% O F THE RECEIPTS AGAINST 3.64% IN THE PRECEDING YEAR. ITA NO. 1694(DEL)/2011 2 2. COMING TO THE SPECIFICS, THE ASSESSEE HAD DEB ITED A SUM OF RS. 1,44,49,497/- AS LORRY-HIRE CHARGES. THE ASSESSE E WAS REQUIRED TO SUBMIT PARTY-WISE BREAK-UP OF THESE CHARGES AND BILLS AND VOUCHERS TO SUPPORT THE EXPENDITURE. IT WAS SUBMITTED THAT LORRIES ARE HIRED ON THE BASIS OF REQUIREMENT OF THE BUSINESS AND THERE ARE A LA RGE NUMBER OF SUCH TRANSACTIONS. THEREFORE, PARTY-WISE BREAK-UP C ANNOT BE MADE OUT. THEREAFTER, THE AO MADE ENQUIRIES U/S 133(6) FRO M ROAD TRANSPORT AUTHORITY, FARIDABAD. A LIST OF THE REGISTRAT ION NUMBER OF SEVEN LORRIES WAS SENT TO HIM WITH A VIEW TO CHECK WHETHER THE VEHICLES WERE LORRIES OR NOT. IT WAS INFORMED THAT ONLY FIVE LORRIES OU T OF THE AFORESAID 7 LORRIES ARE REGISTERED VEHICLES AND ONLY ONE VEHICLE WAS A LORRY. THE DETAILS OF THE VEHICLES HAVE BEEN MENTIONED ON PAGE NO. 3 OF THE ASSESSMENT ORDER. THE AO ALSO MADE ENQUIRIES FROM ROAD TRANSPORT AUTHORITY, NUH, IN RESPECT OF 11 LORRIES. IT WAS FOUND THAT ONLY TWO VEHICLES WERE REGISTERED, OUT OF WHICH ONLY ONE WAS THE LORRY. THE DETAILS OF THESE VEHICLES ARE MENTIONED ON PAGE 4 OF THE ASSESS MENT ORDER. THESE FACTS WERE BROUGHT TO THE NOTICE OF THE ASSESSEE. IT WAS SUBMITTED THAT HE HAS BEEN WORKING MAINLY FOR UTTAR PRADESH COOPERATI VE FEDERATION AND MOST OF THE RECEIPTS ARE FROM THIS FEDERATION. THERE IS NO DISCREPANCY IN RESPECT OF RECEIPTS FROM THIS PARTY. THE EXPEN DITURE HAS BEEN RECORDED IN ITA NO. 1694(DEL)/2011 3 THE BOOKS AND, THEREFORE, IT CANNOT BE SAID TO BE UNEXPLAINED EXPENDITURE COVERED U/S 69C AS SUGGESTED BY THE AO. THERE FORE, IT WAS AGITATED THAT THE BOOK RESULTS MAY BE ACCEPTED. HOWEVER , THE AO DID NOT ACCEPT THE BOOK RESULTS, HE REJECTED THE BOOKS BY INV OKING THE PROVISIONS CONTAINED IN SECTION 145(3) OF THE ACT. THEREAFT ER, HE PROCEEDED TO ESTIMATE THE INCOME. HE ALLOWED 75% OF THE EXPEN DITURE CLAIMED BY THE ASSESSEE AND CONSEQUENTLY MADE A DISALLOWANCE OF RS. 36,12,374/- REPRESENTING 25% OF THE EXPENDITURE DEBITED IN T HE BOOKS. SINCE LORRY CHARGES WERE HELD TO BE BOGUS TO THE AFORESAID EXTENT, 25% OF LOADING AND UNLOADING CHARGES WERE ALSO DISALLOWED, L EADING TO ADDITION OF RS. 14,36,542/-. THUS, THE TOTAL INCOME WAS COMPUTED AT RS. 58,14,420/-. 3. BEFORE THE LD. CIT(APPEALS), A NUMBER OF ARG UMENTS WERE TAKEN. IT WAS SUBMITTED THAT THE NET PROFIT RATIO OF T HIS YEAR IS 3.69% AGAINST 3.64% IN THE IMMEDIATELY PRECEDING YEAR AND 3.3 0% IN ASSESSMENT YEAR 2005-06. THE ASSESSEE HAS BEEN CONDUCTING THE SA ME BUSINESS. THE MAJOR CLIENT IS UTTAR PRADESH COOPERATIVE FEDERATION LTD . THE RECEIPTS FROM THIS PARTY ARE NOT DISPUTED. THE ASSESSEE OWNS ONLY ONE LORRY WHICH IS NOT SUFFICIENT FOR TRANSPORTATION OF THE REQUIRED AM OUNT OF GOODS, THEREFORE, LORRIES ARE ROUTINELY HIRED FROM OTHERS. THE AO HAS VERIFIED LORRY ITA NO. 1694(DEL)/2011 4 REGISTRATION-NUMBER. HOWEVER, SUCH REGISTRATION N UMBER WAS NOT VERIFIED BY THE ASSESSEE AT THE TIME OF TRANSPORTATION OF GOODS. THEREFORE, IT CANNOT BE SAID THAT THE EXPENSES OR PART THEREOF WE RE BOGUS. THE LD. CIT(APPEALS) CONSIDERED THESE FACTS. HE UPHELD THE FINDING THAT THE BOOKS OF ACCOUNT ARE REQUIRED TO BE REJECTED U /S 145(3). HOWEVER, IT WAS ALSO MENTIONED THAT THE PROFIT HAS TO BE E STIMATED ON A FAIR AND REASONABLE BASIS. THE LUMP SUM DISALLOWANCE OF EXPENDITURE UNDER TWO HEADS @ 25% OF THE ACTUAL EXPENDITURE DEBITED IN THE BOOKS WAS ARBITRARY AS IT LEADS TO A NET PROFIT OF 27%, NOT FEASIBLE IN THIS LINE OF BUSINESS. IT WAS SUBMITTED BEFORE HIM THAT THE NET PROFIT IN NO CASE CAN EXCEED 5%. HOWEVER, THE LD. CIT(APPEALS), RE LYING ON THE DECISION IN THE CASE OF CST VS. H.M. ESYGALI ABDULLAH, (19 73) 90 ITR 271, MENTIONED THAT THE PROFIT HAS TO BE ESTIMATED O N A REASONABLE BASIS HAVING REGARD TO ALL FACTS. HE REFERRED TO THE PROVISION CONTAINED IN SECTION 44AD APPLICABLE TO CIVIL CONSTRUCTION OR SUPPLY O F LABOUR FOR CIVIL CONSTRUCTION WHERE TURNOVER DOES NOT EXCEED RS. 4 0.00 LAKH. THIS PROVISION HAS BEEN MADE APPLICABLE TO OTHER BUSI NESSES ALSO WITH EFFECT FROM 01.04.2011. THEREFORE, HE TOOK THIS PROVIS ION INTO ACCOUNT, ALTHOUGH NOT APPLICABLE, TO ESTIMATE PROFIT AT 6% OF TH E GROSS RECEIPTS. ITA NO. 1694(DEL)/2011 5 4. THE REVENUE IS IN APPEAL BEFORE US AGAINST TH IS ORDER. IT MAY BE MENTIONED HERE THAT THE ASSESSEE HAS ACCEPTED TH E IMPUGNED ORDER. 4.1 BEFORE US, THE LD. SENIOR DR REFERRED TO THE FINDINGS OF THE AO AND THE LD. CIT(APPEALS). THE ONLY SUBMISSION MA DE BY HIM IS THAT THE AFORESAID PROVISION PROVIDES FOR PRESUMPTIVE INC OME @ 8% OF THE GROSS RECEIPT AND, THEREFORE, THIS RATE MAY BE APPLIE D IN THE INSTANT CASE ALSO. 4.2 IN REPLY, THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE OWNS ONLY ONE LORRY, WHICH IS NOT SUFFICIENT FOR THE CONDUCT OF THE BUSINESS. THEREFORE, HE HAS BEEN ROUTINELY HIRING LORRIES FROM OTHERS . THE AO HAS NOT DOUBTED THE QUANTUM OF RECEIPTS. HE HAS ALSO NOT DOUBTE D THAT TRANSPORTATION OF THE GOODS HAS ACTUALLY BEEN DONE AS RECORDED I N THE BOOKS. THE AO TOOK A VERY SMALL SAMPLE PERTAINING TO TWO PLACE S FROM HARYANA. HOWEVER, THE BULK OF LORRIES ARE HIRED FROM U TTAR PRADESH. IT IS ADMITTED THAT THERE MAY BE SOME ERRORS IN RECOR DING LORRY NUMBERS. HOWEVER, IT IS ARGUED THAT THE DISALLOWANCE MAD E IS DISPROPORTIONATE TO THE DEFECTS MENTIONED AND THE ESTIMATE IS NOT BA SED ON ANY FACT ON RECORD. THE BOOKS OF ACCOUNT ARE AUDITED AND TUR NOVER HAS ALSO INCREASED ITA NO. 1694(DEL)/2011 6 IN THIS YEAR VIS--VIS LAST YEAR. THEREFORE, THE RATE OF 6% FIXED BY THE LD. CIT(APPEALS) IS REASONABLE. 4.3 IN ORDER TO SUPPORT HIS SUBMISSIONS, RELIANCE HAS BEEN PLACED ON THE DECISION IN THE CASE OF BRIJ BHUSHAN LAL PARDUM AN KUMAR, ETC. VS. CIT, HARYANA, HIMACHAL AND NEW DELHI (1976) 115 ITR 5 24 (S.C.). 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE ADMITTED FACT IN THIS CASE IS THA T THERE ARE DISCREPANCIES IN THE BOOKS OF ACCOUNT BECAUSE OF WHICH THE BOOKS ARE TO BE REJECTED U/S 145(3) OF THE ACT. THE ONLY QUESTION IS REGARDI NG ESTIMATION OF PROFIT. THE AO HAS DISALLOWED 25% OF THE EXPENDITURE IN RESPECT OF LORRY HIRING CHARGES AND LOADING AND UNLOADING CHARGES. THIS DISALLOWANCE HAS BEEN MADE IN A AD-HOC MANNER AND WITHOUT REFERRING TO ANY EVIDENCE ON RECORD. THEREFORE, THE DISALLOWANCE CANNOT BE S USTAINED. ON THE OTHER HAND, THE LD. CIT(APPEALS) ESTIMATED THE PROFIT BY TAKING RECOURSE TO THE PROVISION CONTAINED IN SECTION 44AD. THIS PROVI SION IS NOT APPLICABLE TO THE ASSESSEE AS IT EXISTED EARLIER OR AS IT EXIST S NOW. THE PROVISION PRESUMPTIVELY ESTIMATES THE INCOME AT 8% OF THE R ECEIPTS IN CASE OF A CIVIL CONTRACTOR ETC. THE ASSESSEE IS NOT A CI VIL CONTRACTOR. NONETHELESS, ITA NO. 1694(DEL)/2011 7 THE ASSESSEE HAD ADMITTED BEFORE HIM THAT THE E STIMATION AT 5% OF THE RECEIPT WILL BE REASONABLE. THE LD. CIT(APPEALS) HAS ESTIMATED PROFIT AT 6%. IN ABSENCE OF ANY EVIDENCE ON RECORD FOR ESTIMATING PROFITS, WE ARE OF THE VIEW THAT THE RATE ADOPTED BY THE LD. CI T(APPEALS) IS REASONABLE. IT MAY BE MENTIONED HERE THAT THE DECISION IN THE C ASE OF BRIJ BHUSHAN LAL PARDUMAN KUMAR (SUPRA) IS ON A DIFFERENT ISSUE T HAT THERE IS NO ELEMENT OF PROFIT IN THE CONSUMPTION OF GOODS SUPPLIED B Y THE GOVERNMENT TO A CONTRACTOR AT A FIXED PRICE, THE PROPERTY IN WH ICH REMAINS VESTED FOR ALL TIMES IN THE GOVERNMENT. AS MENTIONED EARLIER, THE PROFIT ESTIMATED BY THE LD. CIT(APPEALS) STANDS ON A BETTER FOOTING THAN THE ESTIMATE MADE BY THE AO. THEREFORE, WE DO NOT SEE ANY REASON T O INTERFERE WITH HIS ORDER. 6. IN THE RESULT, THE APPEAL IS DISMISSED. SD/- SD/- (A.D. JAIN) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:-SHRI NARENDER GULAT I, NEW DELHI. ACIT, CIRCLE 19(1), NEW DELHI. CIT(A) CIT, THE D.R., ITAT, NEW DELHI. ASSISTANT REGISTRAR.