ITO 9(2)(3), MUMBAI V. MAHALAXMI TOURISM DEVELOPMENT CO. P. LTD, MUMBAI

ITA 1768/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3487 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 05-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRAKASH L PATHADE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI JOGINDER SINGH , JM AND SHRI SANJAY ARORA , AM ./ I. T.A. NO. 1768/MUM/2013 ( / ASSESSMENT YEAR: 2008 - 09 ) ITO - 9(2)(3), ROOM NO. 225, 2 ND FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 20 / VS. MAHALAXMI TOURISM DEVELOPMENT CO. PVT. LTD. 102, KALPANA, 338 - A, 12 TH ROAD, KHAR WEST, MUMBAI - 40 0 052 ./ ./ PAN/GIR NO. AACCM 6371 K ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI PRAKASH L. PATHADE / RESPONDENT BY : NONE / DATE OF HEAR ING : 16.02.2016 / DATE OF PRONOUNCEMENT : 29 .02.2016 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE REVENU E DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 20 , MUMBAI (CIT(A) FOR SHORT) DAT ED 03.12.2012 , PARTLY ALLOWING THE A SSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.14 4 R/W S. 145(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2008 - 09 VIDE ORDER DATED 27.12.2010. 2. N ONE APPEARED FOR AND ON BEHAL F OF THE ASSESSEE - RESPONDENT WHEN THE REVENUES APPEAL WAS CALLED OUT FOR HEARING , NOR ANY ADJOURNMENT APPLICATION S TANDS RECEIVED. TH E B ENCH OBSERVED COMPLETE NON - REPRESENTATION BY THE ASSESSEE DURING THE 2 ITA NO. 1768/MUM/2013 (A.Y. 2008 - 09) ITO VS. MAHALAXMI TOURISM DEVELOPMENT CO. PVT. LTD. COURSE OF HEARING OF TH E INSTANT APPEAL, I.E., ON EACH OCCASION TO WHICH THE HEARING OF THE APPEAL WAS ADJOURNED. THERE IS ALSO NO POWER OF ATTORNEY/LETTER OF AUTHORITY FAVORING ANY C OUNSEL ON RECORD. RATHER, THE COMMUNICATION OF THE MEMO OF APPEAL , DIS PATCHED BY THE R EGISTR Y ON 24.3.2014 (VIDE REGISTRATI ON NO. 2885 DATED 25.3.2014) , C A ME BACK UN - SERVED, WITH THE POSTAL REMARK L EFT. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) WOULD SUBMIT THAT THE ADDRESS OF COMMUNICATION, WHICH IS THE SAME AS THAT APPEARING IN FORMS 35 AND 36, IS ALSO THAT AVAILABLE ON THE REVENUES RECORD S . UNDER THE CIRCUMSTANCES, IT WAS CONSIDERED PROPER TO PROCEED TO HEAR THE APPEAL EX PARTE QUA THE ASSESSEE - RESPONDENT. 3. THE ONLY ISSUE IN APPEAL IS THE CONFINING OF THE ESTIMAT E OF THE NET PROFIT OF THE ASSESSEES TRANSPORT BUSINESS FROM 2 0% OF THE TURNOVER, AS ESTIMATED BY THE ASSESSING OFFICER (A.O.), TO 6% BY THE LD. CIT(A) (I.E., AS AGAINST THE RETURNED PROFIT OF 1.18% BY THE ASSESSEE, WHO THOUGH IS NOT IN APPEAL). THE SAID ESTIMATION WAS UNDERTAKEN BY THE A.O. AS THE ASSESSEE HAD FAILED TO SUBSTANTIATE ITS CLAIM S PER ITS RETURN IN ANY MANNER. THE LD. DR WOULD BEFORE US RELY ON THE ASSESSMENT ORDER , AND WHO WAS REQUIRED BY THE BENCH TO REA D OUT THE RELEVANT PART OF THE IMPUGNED ORDER. 4. WE HAVE HEARD THE PART Y BEFORE US , AND PER USED THE MATERIAL ON RECORD. THE ASSESSEE HAS DURING THE YEAR, AS STATED BY THE REVENUE AUTHORITIES, UNDERTAKEN ONLY TRANSPORT BUSINESS THE HOTEL BUSINESS BEING UNDER LITIGATION, WITH ITS BUSES BEING HIRED BY PUNE MUNICIPAL CORPORATION (PMC) (TRANSPORT DIVISION TD) AT A FIXED RATE OF RS. 17.99 PER KM (TO THE EXTENT OF 17000 KM PER MONTH PER BUS). THE ASSESSEE FAIL ED TO PRODUCE THE BOOKS OF ACCOUNT, VOUCHERS, ETC. BEFORE THE ASSESSING AUTHORITY , SO THAT THE CORRECTNESS AND COMPLETENESS THEREOF COULD NOT BE VERIFIED . R EJ ECTING THE ASSESSEES BOOK RESULTS , HE ESTIMATED THE ASSESSEES NET PROFIT AT 20% OF THE TURNOVER OF RS.281.19 LACS, I.E., AT RS.56,23,797/ - , INVOKING SECTION 145(3) OF THE ACT . TOWARD THIS, HE COMPARED THE EXPENDITURE INCURRED AND CLAIMED WITH THAT FOR THE IMMEDIATELY PRECEDING YEAR (AY 2007 - 08), VIZ. REPAIR AND MAINTENANCE (RS.50,374/ - ) 3 ITA NO. 1768/MUM/2013 (A.Y. 2008 - 09) ITO VS. MAHALAXMI TOURISM DEVELOPMENT CO. PVT. LTD. AND POWER & FUEL (RS.1.17 LACS), AND N IL FOR THE OTHER HEAD OF EXPENSES , VIZ. PURCHASE, SALARIES, INTER E ST AND OTHER EXPENSES, THE AGGREGATE OF WHICH FOR THE CURRENT YEAR WORK ED TO RS.229.22 LACS). WITHOUT DOUBT, THE ASSESSEE COMPLETELY FAILING TO DISCHARGE THE ONUS THAT LIES ON I T IN SUBST ANT IATING I T S RETURN, THE A.O. REJECTED THE BOOKS OF ACCOUNT, BEING NOT PRODUCED BEFORE HIM (SO THAT THE IR CORRECTNESS OR COMPLETENESS COULD NOT BE VERIFIED ) , AND ESTIMAT ED THE ASSESSEES INCOME FOR THE YEAR, WHICH ASPECT IS NOT IN DISPUTE IN - AS - MUCH AS THE LD. CIT(A) HAS CONFIRMED THE A.O.S ACTION IN THIS REGARD, WITH THE ASSESSEE BEING NOT IN APPEAL. AS REGARDS THE ASS ESSMENT, WE OBSERVE THAT THE LD. CIT(A) HAD RIGHTLY NOTED THAT REGARD FOR THE PURPOSE I S TO BE MADE TO ALL THE RELEVANT FACTS AND CIRCUMSTANCES AS GATHERED OR BORNE OUT BY THE RECORD AND, FURTHER, THAT SOME GUESS WORK IS INHERENT TO THE EXERCISE OF ESTIMAT ION. HE, ACCORDING LY, MODIFYING THE A.OS ESTIMATE OF 20%, FINDING IT TO BE WITHOUT BASIS, APPLIE D THE RATE OF 6% IN - AS - MUCH AS THE AVERAGE FOR THE PRECEDING FOUR YEAR, I.E., A.YS. 2004 - 05 TO 2007 - 08, IS AT 6.10% . IN OUR VIEW, THE A.O.S ESTIMATION CANNOT BE GIVEN CREDENCE TO , BEING AD HOC , WITH NO STATED BASIS. THE VERY FACT T HAT EXPENDITURE STOOD CLAIMED AT A TOTAL O F RS.1.68 LACS UNDER THE S IX PRINCIPAL HEADS OF ACCOUNT (LISTED AT PARA 6 OF THE ASSESSMENT ORDER), AS AGAINST RS.229.22 LACS FOR THE CURREN T YEAR, ONLY SIGNIFIES THE TWO YEARS AS NOT COMPARABLE. THE ASSESSEE, DESPITE SUCH A LOW CLAIM FOR EXPENDITURE, HAS YET DISCLOSED A NET PROFIT O F ONLY 1.24% FOR A.Y. 2007 - 08. AS A CONCO MITANT OF THE RESULT FOR THAT YEAR BEING NOT COMPARABLE, HOW COULD THE NET PROFIT FOR THAT YEAR BE TAKEN INTO ACCOUNT IN ARRIVING AT THE ESTIMATE FOR THE CURRENT YEAR? ON THE OTHER HAND, IF A.YS. 2006 - 07 AND 2007 - 08 ARE COMPARABLE, THE QUESTION OF A DRASTIC DECLINE IN THE NET PROFIT RATE FOR THESE YEARS WOULD NEED TO BE ASCER TAINED , AS ALSO IF THE SAID CONDITIONS AND TO THE EXTENT THEY DO, OBTAIN FOR THE CURRENT YEAR AS WELL. THIS FAL LACY ATTENDS THE IMPUGNED ORDER AS WELL. FURTHER, THE ASSESSEE HAS DISCLOSED A NET PROFIT OF 14.09% AND 18.6 6 % FOR A.YS. 2004 - 05 AND 2005 - 06 RE SPECTIVELY, I.E., THE FIRST TWO OF THE FOUR YEARS FOR WHICH THE AVERAGE HAS BEEN WORKED OUT AND APPLIED FOR THE CURRENT YEAR. THEN, AGAIN , 4 ITA NO. 1768/MUM/2013 (A.Y. 2008 - 09) ITO VS. MAHALAXMI TOURISM DEVELOPMENT CO. PVT. LTD. WHAT IS THE TURNOVER FOR THESE YEARS, WHICH MAY NOT BE RELEVANT IF THE SAME CONTRACT I S CONTINUED , YIELDING THE ASSES SEE A RATE OF RS.17.99 PER KM OR A COMPARABLE RATE . SURELY, NO DISALLOWANCE OF EXPENDITURE ON POWER AND FUEL, BEING SUPPLIED BY PMC, ADJUSTING THE SAME AGAINST BILLS, WOULD BE REQUIRED. AT THE SAME TIME, THE ASSESSEE , AS NOTED BY THE LD. C IT(A) , HAS CLAIME D OFFICE AND ADMINISTRATIVE EXPENDITURE AT RS.174.16 LACS ON A TURNOVER OF RS.281.19 LACS - A SEEMINGLY HIGH PROPORTION , WARRANTING BEING EXAMINED FURTHER. FURTHER, AGAIN, WHAT IS THE GROSS PROFIT FOR THE EARLIER YEARS? WE HAVE ALREADY NOTED THAT UNLESS TH E PR E CEDING YEARS ARE FOUND COMPARABLE, THE NET PROFIT FOR THOSE YEARS CANNOT BE TAKEN INTO ACCOUNT IN RECKONING THE CURRENT YEAR S ESTIMAT E , OR MAY BE REQUIRED TO BE SUITABLY ADJUSTED, I.E., TO MAKE IT COMPARABLE. WE CANNOT , FOR THE REASONS AFORE - STATED, AP PROVE OF THE ESTIMATION BY THE LD. C IT(A) AS WELL. UNDER THE CIRCUMSTANCES , AND IN VIEW OF THE FOREGOING , WE ONLY CONSIDER IT FIT AND PROPER TO RESTORE THE MATTER AS REGARDS ESTIMATION OF THE NET PROFIT FOR THE CURRENT YEAR BACK TO THE FILE OF THE FIRST APPELLATE AUTHORITY , WHO SHALL, IN DOING SO, HAVE REGARD TO OUR FOREGOING OBSERVATIONS, ADDRESSING THE ISSUES ARISING. HE MAY , AT HIS OPTION , SEEK A REPORT FROM THE A.O. (WHO IS ALSO ENTITLED TO APPEAR BEFORE HIM), IN WHICH CASE IT SHALL BE INCUMBENT ON H IM TO MEET THE A.O.S OBSERVATIONS/FINDINGS AS WELL, DECIDING THE MATTER PER A SPEAKING ORDER. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE R EVENUE S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUAR Y 29 , 201 6 SD/ - SD/ - ( JOGINDER SINGH ) (S ANJAY ARORA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 29 . 02 .201 6 5 ITA NO. 1768/MUM/2013 (A.Y. 2008 - 09) ITO VS. MAHALAXMI TOURISM DEVELOPMENT CO. PVT. LTD. . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI