M/s. Damodar Cargo Movers, Nagpur V. Income Tax Officer Ward -8(1), Nagpur

ITA 181/NAG/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1937 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 16-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHARDA NICHHAL
• Assessee Lawyers: RAJESH V LOYA
• Keywords: Business income
• Section: 143(3); 2

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH , ( E - COURT), MUMBAI , BEFORE SHRI R.K.GUPTA , J M & SHRI RAJENDRA , A M ITA NO. 181 / N AG / 20 10 ( ASSESSMENT YEAR : 200 6 - 0 7 ) M/S DAMODAR CARGO MOVERS, C/O M/S LOYA BAGRI & CO., CHARTERED ACCOUNTANTS, GANDHIBAG, NAGPUR. VS. ITO, WARD - 8(1), NAGPUR PAN/GIR NO. : A AHFM 2639 J ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : MR. RAJESH V. LOYA /REVENUE BY : MR. SHARDA NICHHAL DATE OF HEARING : 2 1 ST JAN ., 201 3 DATE OF PRO NOUNCEMENT : 01/02/ 201 3 O R D E R P ER SHRI R.K.G UPTA, JM : TH E ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE ITAT NAGPUR BENCH, NAGPUR, AGAINST THE ORDER OF LEANED CIT (A) - I I , NAGPUR (MAHARASHTRA) RELATING TO THE ASSESSMENT YEAR 2006 - 07, WHICH HAS BEEN HEARD THROUGH E - COURT, MUMBAI . 2 . GROUNDS NO. 1 & 2 RELATE TO CONFIRMATION OF THE BUSINESS INCOME OF RS.36,31,510/ - BY ESTIMATING THE NET PROFIT RATE AT THE RATE OF 20% OF THE GROSS RECEIPTS. ITA NO . 181 /20 1 0 2 2.1 THE ASSESSEE IS ENGAGED IN THE BUSINESS OF HIRING, LEASING OF TRUCKS. THE ASSESSEE DECLARED ITS INCOME IN VIEW OF THE PROVISION OF SECTION 44AE. THE AO DID NOT ACCEPT THE INCOME DECLARED UNDER SECTION 44AE AS IN HIS VIEW THE ASSESSEE WAS HAVING MORE THAN 10 TRUCKS/GOODS CARRIAGES. THE AO ALSO N OTED THAT THE ASSESSEE CONTRACTED FOR UNLOADING AND STOCKING OF MATERIAL AND IS NOT EXCLUSIVELY DOING THE BUSINESS OF TRANSPORTATION. THE TURN OVER OF THE ASSESSEE WAS RS. 1.82 CRORES DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY, THE AO OBSERVED THAT T HE ASSESSEE WAS REQUIRED TO MAINTAIN BOOKS OF ACCOUNTS AND OBTAIN AUDIT REPORT UNDER SECTION 44AB OF THE ACT. THEREAFTER THE AO REQUIRED TO PRODUCE THE BOOKS OF ACCOUNTS TO VERIFY THE CORRECTNESS OF THE PROFIT. HOWEVER, IT WAS SUBMITTED THAT THE ASSESSEE H AS NOT MAINTAINED ANY BOOKS OF ACCOUNTS. AS PER THE ORDER OF THE AO, THE ASSESSEE HAS NOT PRODUCED ANY BILL OR VOUCHERS. THE AO ALSO NOTED THAT FOR SUBSEQUENT YEAR I.E FOR THE ASSESSMENT YEAR 2007 - 08, ON GROSS RECEIPT OF 10.57 CRORES , THE ASSESSEE HAS SHOW N PROFIT OF RS. 4.82 CRORES OR ODD , WHICH GAVE 45.63 PERCENTAGE OF PROFIT. CONSIDERING ALL THESE FACTS OF THE CASE, THE AO ESTIMATED THE PROFIT BY APPLYING A NET PROFIT RATE OF 20% AND, THUS, AN INCOME OF RS. 36,31, 510/ - WAS COMPUTED BY THE AO AGAINST THE IN COME SHOWN BY THE ASSESSEE IN VIEW OF THE PROVISION OF SECTION 44AE. 2.2 THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT(A) , WHO ALSO CONFIRMED THE AC TION OF THE AO I N RESPECT TO NON - APPLICABILITY OF ITA NO . 181 /20 1 0 3 PROVISION OF SECTION 44AE AND IN REGARD TO ESTI MA TING THE NET PROFIT RATE OF 20% ON THE GROSS RECEIPT. 2.3 AGGRIEVED THEREBY, THE ASSESSEE IS IN APPEAL HERE BEFORE THE TRIBUNAL. 2.4 LEARNED COUNSEL DID NOT MUCH ARGUE IN RESPECT OF APPLICABILITY OF THE SECTION 44AE, HOWEVER, IT WAS SUBMITTED THAT NET P ROFIT RATE APPLIED BY THE AO, WHICH IS CONFIRMED BY THE LEARNED CIT(A) IS NOT JUSTIFIED. IT WAS FURTHER SUBMITTED THAT IN EARLIER TWO YEARS, THE NP RATE OF 2.42 AND 3.14% HAVE APPLIED BY THE AO HIMSELF. IT WAS ALSO SUBMITTED THAT FOR THE ASSESSMENT YEAR 20 07 - 08, THE NET PROFIT SHOWN BY THE ASSESSEE WAS ACCEPTED. THE ATTENTION OF THE BENCH WAS DRAWN ON A COPY OF THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2007 - 08, WHICH IS PLACED IN THE PAPER BOOK AT PAGE 177. IT WAS FURTHER SUBMITTED THAT A SURVEY WAS CONDUCTE D DURING THE ASSESSMENT YEAR 2008 - 09, WHERE AN ADDITION HAS BEEN MADE BY REJECTING THE BOOKS OF ACCOUNTS ON AN HIGHER INCOME AND THE APPEAL AGAINST THAT ORDER IS PENDING. FOR THE ASSESSMENT YEAR 2005 - 06, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R. W.S. 147, HOWEVER, A LUMPSUM DISALLOWANCE WAS MADE AT RS. 1,00,000/ - AND NO FURTHER ADDITION WAS MADE IN NET PROFIT SHOWN BY THE ASSESSEE. IT WAS ALSO SUBMITTED THAT ASSESSMENT FOR ASSESSMENT YEAR 2005 - 06 WAS REOPENED ON THE BASIS OF SURVEY CONDUCTED ON 14 - 10 - 2008, WHICH FALLS UNDER THE ASSESSMENT YEAR 2008 - 09 . COPY OF THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2004 - 05 , WHICH WAS COMPETED UNDER ITA NO . 181 /20 1 0 4 SECTION 143(3) R.W.S. 147 IS PLACED AT PAGE 167 AND 168 . HERE ALSO AN ADDITION OF RS. 1,00,000/ - ON ACCOUNT OF VARIOUS EXPENSES WAS MADE AND NET PROFIT RATE SHOWN BY THE ASSESSEE WAS ACCEPTED. ACCORDINGLY, IT WAS SUBMITTED THAT ADDITION SHOULD BE MADE ON THE BASIS OF PAST HISTORY AND NOT ON THE BASIS OF THE SUBSEQUENT YEAR I.E. ASSESSMENT YEAR 2008 - 09 WHERE A SURVEY WAS C ONDUCTED AND INCOME OF THE ASSESSEE WAS COMPUTED ON A HIGHER INCOME BY APPLYING NET PROFIT OF 45% OR 50% . IT WAS ALSO SUBMITTED THAT NO ADVERSE MATERIAL WAS FOUND DURING THE COURSE OF THE SURVEY CONDUCTED RELATING TO ASSESSMENT YEAR UNDER CONSIDERATION. T HEREFORE, APPLICATION OF NET PROFIT RATE OF 20% IS EXCESSIVE, WHICH SHOULD BE REDUCED IN LINE OF ASSESSMENT COMPLETED FOR THE ASSESSMENT YEAR 2004 - 05 & 2005 - 06, WHICH ARE THE IMMEDIATELY PRECEDING YEAR. 2.5 ON THE OTHER HAND, LEARNED DR STRONGLY PLACED RE LIANCE ON THE ORDER OF AO AND CIT(A) . IT WAS ALSO SUBMITTED THAT THE ASSESSMENT HAS BEEN COMPLETED PLACING RELIANCE ON THE ORDER OF SUBSEQUENT YEAR I.E. THE ASSESSMENT YEAR 2008 - 09 AND THE AO WAS CORRECT IN APPLYING THE NET PROFIT RATE FOR THE ASSESSMENT Y EAR 2008 - 09. 2.6 . WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. WE HAVE ALSO PERUSED THE MATERIAL ON WHICH OUR ATTENTION WAS DRAWN. AFTER CONSIDERING THE RELEVANT MATERIAL AND TAKING INTO CONSIDERATION THE PAST HISTORY AND THE CASE, WE F OUND THAT THE ASSESSEE DESERVES TO SUCCEED IN THIS GROUND IN PART. WE NOTED THAT FOR ASSESSMENT YEAR ITA NO . 181 /20 1 0 5 2004 - 05 AND 2005 - 06, WHICH ARE REOPENED IN VIEW OF THE PROVISION OF SECTION 14 7 ( A ) . T HE GROSS RECEIPTS FOR THESE TWO YEARS WERE SHOWN AT RS. 1.10 CRORE AND 1.65 CRORES RESPECTIVELY. THE ASSESSMENT WERE COMPLETED ON THE BASIS OF SURVEY CONDUCTED DURING THE ASSESSMENT YEAR 2008 - 09. THE NET PROFIT PERCENTAGE ON THE ASSESSED INCOME COMES TO RS. 2.42% AND 3.14% FOR ASSESSMENT YEAR 2004 - 05 AND 2005 - 06 RESPECTIVELY. FOR THE YEAR UNDER CONSIDERATION, THE GROSS RECEIPTS ARE SHOWN BY THE ASSESSEE AT RS. 1.81 CRORES OR ODD. THE AO HAS APPLIED 20% AS NP RATE. NO COGENT REASONING HAS BEEN GIVEN WHILE APPLYING A NET PROFIT RATE OF 20% AND NOT CONSIDERING THE PAST HISTORY OF T HE CASE. THEREFORE, WE FEEL THAT THE NP RATE APPLIED BY THE AO, WHICH IS CONFIRMED BY THE LEARNED CIT(A) IS ON HIGHER SIDE. THEREFORE, WE FEEL THAT IF THE NP RATE OF 4% IS APPLIED ON THE GROSS RECEIPTS, THAT WILL MEET THE END OF JUSTICE AS WE ARE APPLYING THIS NP RATE AFTER TAKING INTO CONSIDERATION THE PAST HISTORY. IT IS SETTLED POSITION OF LAW THAT THE PAST HISTORY IS THE BEST GUIDE TO FOLLOW IF THERE IS NO BOOKS OF ACCOUNTS OR OTHER MATERIAL AVAILABLE. ACCORDINGLY, WE DIRECT THE AO TO RECOMPUTED THE PRO FIT BY APPLYING 4% NET PROFIT RATE INSTEAD OF 20% APPLIED BY HIM ORIGINALLY. WE ORDER ACCORDINGLY. 3 . GROUND NO. 3 IS AGAINST CHARGING OF INTEREST UNDER SECTION 234 - B, WHICH IS CONSEQUENTIAL IN NATURE. THE AO IS ALSO DIRECTED TO ALLOW CONSEQUENTIAL RELIEF TO THE ASSESSEE. ITA NO . 181 /20 1 0 6 4 . REMAINING GROUND I.E. GROUND NO. 4 IS AGAINST NOT ALLOWING INTEREST ON CAPITAL OF PARTNERS AND REMUNERATION TO THE PARTNERS AS PER PARTNERSHIP DEED . 4.1 THE AO DID NOT ALLOW THE INTEREST ON CAPITAL AND REMUNERATION TO THE PARTNERS IN S PITE OF THE FACT THAT INTEREST AND REMUNERATION TO THE PARTNERS HAVE BEEN PROVIDE IN THE PARTNERSHIP DEED ITSELF. THE AO DID NOT ALLOW THE CLAIM AS THE SAME WAS NOT MADE IN THE RETURN AND THERE WAS NO EVIDENCE FOR PAYING INTEREST AS WELL AS SALARY AS NO B OOKS OF ACCOUNTS WERE MAINTAINED. LEARNED CIT(A) HAS CONFIRMED THE ACTION OF THE AO. 4.2 AFTER CONSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ON RECORD, WE FOUND THAT THE ASSESSEE DESERVES TO SUCCEED ON THIS ISSUE. THE INTEREST AND REMUNERATION HAS BEEN PROVIDED IN THE PARTNERSHIP DEED. THE INCOME OF THE ASSESSEE HAS BEEN ESTIMATED BY APPLYING A NET PROFIT RATE, THEREFORE, AS PER THE CLAUSES OF THE PARTNERSHIP DEED, INTEREST AND REMUNERATION TO THE PARTNER IS TO BE ALLOWED. AN ENTRY IN THE BOOKS OF A CCOUNTS IS NOT DECISIVE BUT THE DECISIVE IS AS TO WHETHER ANY INTEREST OR REMUNERATION HAS BEEN PAID OR NOT BY THE ASSESSEE. THE CLAIM IN THE RETURN WAS NOT MADE FOR THE SIMPLE REASON THAT THE ASSESSEE FILED RETURN DECLARING INCOME UNDER SECTION 44AE. NOW , THE AO HAS NOT ACCEPTED THE APPLICABILITY OF PROVISION OF SECTION 44AE AS HE PROCEEDED TO COMPUTE THE INCOME BY APPLYING THE NP RATE. WE HAVE CONFIRMED THE APPLICATION OF NP RATE, THEREFORE, IN OUR CONSIDERED VIEW, INTEREST AND REMUNERATION TO THE PARTN ER IS ALLOWABLE. IT IS ALSO A ITA NO . 181 /20 1 0 7 MATER OF FACT THAT SIMILAR CLAIM WAS ALLOWED BY THE AO HIMSELF WHILE COMPLETING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2005 - 06. IN VIEW OF THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE DIRECT THE AO TO ALLOW THE INTEREST AND R EMUNERATION TO THE PARTN ER . 5 . IN THE RESULT , APPEAL OF THE ASSESSEE IS ALLOWED IN PART . ORDER PRONOUNCED IN THE E - COURT ON THIS 1 ST DAY OF FEB , 201 3 . - 201 3 SD/ - SD/ - ( ) ( RAJENDRA ) ( ) ( R.K.GUPTA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 0 1 / 0 2 / 201 3 . /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI / NAGPUR . 4. / CIT 5. / DR, ITAT, MUMBAI / NAGPUR . 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( DY./ASSTT. REGISTRAR) / ITAT, MUMBAI