ITO 13(2)(2), MUMBAI V. TIME AND SPACE HAULERS, MUMBAI

ITA 1824/MUM/2011

• Counselvise Citation: 182419914 RSA 2011
• Duration Of Justice: 4 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Department
• Bench Allotted: H
• Next Hearing Date: 08-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 04-03-2011
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Keywords: Rejection of books of accounts; Capital asset converted into stock in trade; Depreciation; Additional evidence
• Section: 143(3); 142(1)

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ./I.T.A. NO.1824/M/2011 ( AY: 2007 - 2008 ) INCOME TAX OFFICER, WARD 17(3)(4), 1 ST FLOOR, 123, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 20. / VS. TIMES AND SPACE HAULERS, 213 - 214, PRESTIGE CHAMBERS, 127B, KALYAN STREET, MASJID (E), MUMBAI 400 009. ./ PAN : AAGFM0018E ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI JEETENDRA KUMAR, DR / RESPONDENT BY : SHRI RAKESH JOSHI / DATE OF HEARING : 26 .5 .2015 / DATE OF PRONOUNCEMENT :19 .6 .2015 / O R D E R PER G.S. PANNU, AM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER PASSED BY THE CIT (A) - 24 , MUMBAI DATED 30.12.2010 FOR THE ASSESSMENT YEAR 2007 - 2008 IN THE MATTER OF ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) R.W.S. 145 (2) / 144 OF THE INCOME TAX ACT 1961 (IN SHORT THE ACT), DATED 14.2.2009 . 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN DELETING THE GP ADDITION AND DIRECTING THE AO TO ACCEPT THE PROFIT DECLARED BY THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE AO HAS REJECTED THE BOOKS OF ACCOUNT AS THE ASSESSEE WAS UNABLE TO FURNISH THE BASIC DETAILS BEFORE THE AO AND ALSO DISREGARDING THE FACT THA T CONSEQUENT TO REJECTION OF BOOKS OF ACCOUNTS, THE PROFIT WAS ESTIMATED ON THE BASIS OF COMPARABLES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN RESTRICTING THE DISALLOWANCE OF RS. 16,03,731/ - TO RS. 3,00,0 00/ - WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE FIRM HAD ITSELF DISALLOWED THE AMOUNT OF RS. 16,03,731/ - WHILE COMPUTING THE TOTAL INCOME. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED. 3. BRIEFLY STATED, RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRANSPORTATION OF GOODS THROUGH THEIR OWN AS WELL AS THE HIRED 2 VEHICLES FROM MARKET. ASSESSEE FILED THE RETURN OF INCOME ON 14.11.2007 , DECLARIN G THE TOTAL INCOME OF RS. 12,18,154/ - . INITIALLY, THE RETURN WAS PROCESSED U/S 143(1) ON 24.3.2009 AND DETERMINED A REFUND OF RS. 11,81,072/ - . THEREAFTER, ON THE BASIS OF THE ASSESSEES RECTIFICATION LETTER FOR NON - CREDIT OF TDS, THE REFUND WAS FINALLY D ETERMINED AT RS. 13,22,800/ - . OUT OF THE SAID AMOUNT OF REFUND OF RS. 13,22,800/ - , AN AMOUNT OF RS. 7,05,040/ - WAS ADJUSTED AGAINST THE FBT DEMAND FOR THE ASSESSMENT YEAR 2007 - 2008 AND THE REMAINING REFUND AMOUNT OF RS.6,17,760/ - WAS ISSUED TO THE ASSESSE E. NOTICES U/S 143(2) AND 142(1) WERE ALSO ISSUED ON ASSESSEE AND THE ASSESSEE HAS FURNISHED THE REQUISITE DETAILS CALLED FOR BY THE ASSESSING OFFICER. ACCORDINGLY, ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3) R.W.S 145(2) / 144 OF THE ACT AND T HE ASSESSED INCOME WAS FINALLY DETERMINED AT RS. 1,11,84,125/ - AFTER CLAIMING THE SET - OFF OF PREVIOUS YEARS BROUGHT FORWARD LOSSES. IN THE ASSESSMENT, ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT U/S 145 (2) OF THE ACT BY ESTIMATING THE NET PROFIT RAT E OF THE ASSESSEE @ 2.50% OF THE FREIGHT CHARGES RECEIVED DURING THE YEAR AND PASSED THE ASSESSMENT ORDER ON 14.12.2009. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE CIT (A), I T WAS CONTENDED THAT THE ASSESSING OFFICERS ACTION IN REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE U/S 145(2) AS WELL AS THE ESTIMATING THE NET PROFIT RATE OF 2.50% ARE WITHOUT ANY BASIS. IT WAS FURTHER CONTENDED THAT IN THE ABSENCE OF ANY FINDING OR C ONCLUSION THAT THE BOOKS OF ACCOUNT MAINTAINED BY T HE ASSESSEE ARE NOT CORRECT OR IN COMPLETE, THE SAME COULD NOT BE REJECTED BY THE ASSESSING OFFICER. FOR THIS PROPOSITION, ASSESSEE RELIED ON VARIOUS PRECEDENTS AND SOME OF THEM ARE (I) PANDIT BROS. VS. CI T [1954] 26 ITR 159 (PUNJ.); (II) S. VEERAIAH READIER VS. CIT [1960] 38 ITR 152 (KER.); (III) OMAR SALAY MOHAMED SAITV. CIT [1959] 37 ITR 151 (SC) AND OTHERS. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AT LENGTH BEFORE THE CIT (A), THE ISSUE I NVOLVED IN GROUND NO.1 OF THE INST ANT APPEAL WAS DECIDED IN FAVOUR OF THE ASSESSEE VIDE PARA 3.2 OF THE IMPUGNED ORDER. AGGRIEVED WITH THE SAID DECISION OF THE CIT (A), REVENUE IS IN APPEAL BEFORE US. 5. DURING THE PROCEEDINGS BEFORE US, LD REPRESENTATIVE FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER OF THE CIT (A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. 3 6. ON THE OTHER HAND, LD DR APPEARING FOR THE REVENUE RELIED ON THE ORDER OF THE ASSESSING OFFICER. 7. WE HAVE HEARD BOTH THE PAR TIES AND PER USED THE ORDERS OF THE REVENUE A UTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDER OF THE CIT (A) IN GENERAL AND PARA 3.2 OF THE HIS ORDER IN PARTICULAR, WE FIND THE SAME RELEV ANT IN THIS REGARD. CONSIDERING THE SIGNIFICANCE OF THE SAID PARA 3.2 OF THE CIT (A)S ORDER FOR THE SAKE OF COMPLETENESS OF THE ISSUE UNDER CONSIDERATION, THE SAME IS EXTRACTED AS UNDER: 3.2. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD COUNSEL AND IN THIS CASE, IT IS SEEN THAT THE ACCOUNTS OF THE ASSESSEE ARE AUDITED U/S 44AB OF THE I.T. ACT AND REPORT IN FORM NO.3CD FILED IN WHICH THE AUDITOR HAS NOT QUALIFIED OR MADE ANY MAJOR ADVERSE REMARKS REGARDING THE ACCOUNTS AND THE BOOKS OF ACCOUNT OF THE APP ELLANT AS EXAMINED BY THE AUDITOR AND ON THE BASIS OF WHICH EXAMINATION THE AUDIT REPORT AND FORM NO.3CD HAVE BEEN PREPARED BY THE AUDITOR. IN FACT, THE AUDITOR HAS EXAMINED ALL THE BRANCH BOOKS AS PER COLUMN 9(B) AND (C) OF THE REPORT IN FORM NO.3CD AN D THE ANNEXURE - II TO IT AND IN WHICH THE CASH BOOK LEDGER, PARTY LEDGER AND JOURNAL OF THE HEAD OFFICE AND BRANCHES FROM SL.NO. 2 TO 35 OF THE ANNEXURE ARE MENTIONED THEREBY STATING THAT THE AUDITOR HAS EXAMINED ALL THE BOOKS OF THESE BRANCHES AND NOT FOUND ANYTHING ADVERSE SO AS TO REQUIRE A COMMENT OR QUALIFICATION IN THE REPORT IN FROM NO.3CD. FURTHER, EVEN AS REGARDS THE DEPRECIATION IN COLUMN NO. 14 OF THE REPORT IN FORM NO.3CD, THE AUDITOR HAS GIVEN DETAILS AS PER ANNEXURE - III WHEREIN ALL THE DET AILS OF THE ASSETS AND THE DEPRECIATION AS PER I.T. RULES HAS BEEN GIVEN AND THERE IS NO ADVERSE COMMENT ON THAT. ALL DETAILS RELATING TO THE BLOCK OF ASSETS, RATE OF DEPRECIATION, WDV, ADDITION / DEDUCTIONS ARE COMMENTED UPON IN COLUMN NO.14, BY THE AUDI TOR WITH REFERENCE TO ANNEXURE III. ............ ........... ........... HENCE, SINCE AO COULD NOT PINPOINT ANY PARTICULAR DEFECT IN ANY OF THE ACCOUNTS OR BOOKS OF ACCOUNTS AND DETAILS PRODUCED BEFORE HIM IN THE ABSENCE OF ANY SPECIFIC DEFECT BEING P OINTED OUT IN THE AUDITED ACCOUNTS OR IN THE AUDIT REPORT SUBMITTED IN FORM NO.3CD IT WAS NOT CORRECT TO REJECT THE BOOKS OF ACCOUNTS U/S 145(2) OF I.T. ACT MERELY ON CERTAIN ASSUMPTIONS AND ESTIMATE THE PROFIT OF THE APPELLANT WHEN EVEN THE RESULT AND P ROFIT OF THE APPELLANT ARE PROGRESSIVE AS STATED BY THE APPELLANT AS FOLLOWS : THUS, THIS GROUND OF APPEAL IS ALLOWED AND ACTION OF THE AO IN REJECTING THE BOOKS OF ACCOUNTS IS NEGATED. 8. CONSIDERING THE AB OVE, WE ARE OF THE OPINION THAT, WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE, CIT (A) DISCUSSED THE MATTER AT LENGTH AND ANALYZED THE MATERIAL PLACED BEFORE HIM. IN OUR OPINION, THE DECISION OF THE CIT (A) DOES NOT AY 2004 - 2005 2005 - 2006 2006 - 2007 2007 - 2008 NP 21,22,883/ - 41,42,430/ - 50,99,832/ - 54,79,771/ - TURNOVER 44,33,54,354/ - 54,28,90,339/ - 64,01,84,299/ - 66,81,47,381/ - 4 SUFFER FROM ANY INFIRMITY, AND THEREFORE, IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, ON THIS GROUND ASSESSEE SUCCEEDS. 9. GROUND NO.2 RELATES TO TH E RESTRICTION OF A DISALLOWANCE OF RS. 16,03,731/ - TO RS. 3,00,000/ - . BRIEFLY STATED, RELEVANT FACTS IN TH IS REGARD ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE WAS ASKED TO FURNISH THE REQUISITE DETAILS WITH REGARD TO MAINTENANCE OF ACC OUNTS, DEPRECIATION CHARGE ON TRUCK, PROFITABILITY OF TRUCKS, COMPLIANCE OF TDS AND VOUCHERS FOR TRUCKS HIRED FROM OUTSIDE. NOT BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AS WELL A S THE CLAIM OF THE ASSESSEE AND ESTIMATED THE FREIGHT CHARGES RECEIVED DURING THE YEAR @ 2.50% HYPOTHETICALLY BY CONSIDERING THE NET PROFIT OF THE TWO COMPARABLE CASES I.E., (I) M/S. BALAJI TRANSPORTER AND (II) LALJI & MULJI CO (TRANSPORTER). ASSESSING OFFICER FURTHER HELD THAT THE ASSESSEE HAD NOT SUBMITTED ANY ADDITIONAL EVIDENCE IN SUPPORT OF ITS CLAIM AND THE TAX AUDIT REPORT ON FORM NO.3CB, DATED 29.10.2007 IS RELEVANT IN THIS REGARD, WHEREIN IT WAS CLEARLY STATED THAT SUNDRY DEBTORS AND SUNDRY CRE DITORS ARE SUBJECT TO CONFIRMATION AND RECONCILIATION. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 10. DURING THE PROCEEDINGS BEFORE THE CIT (A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HE DELETED THE ADDITION MADE O N ACCOUNT OF NET PR OFIT @ 2.50%. CIT (A), ON THE ISSUE OF AD - HOC DISALLOWANCE OF RS. 16,03,731/ - , HELD THAT CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE DULY AUDITED U/S 44AB OF THE ACT AND I N THE ABSENCE OF ANY ADVERSE REMARK / NOTE BY THE AUDITOR, THE AFORESAID DISALLOWANCE WAS REDUCED TO RS. 3 LAKHS. AGGRIEVED WITH THE AFORESAID DECISION OF THE CIT (A), REVENUE IS IN APPEAL BEFORE US. 12. DURING THE PROCEEDINGS BEFORE US, LD REPRESENTATIVE FOR THE ASSESSEE RELIED ON THE ORDER OF CIT (A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. 13. ON THE OTHER HAND, LD DR APPEARING FOR THE REVENUE, RELIED ON THE ORDER OF THE ASSESSING OFFICER. HE FURTHER MENTIONED THAT THE ONUS IS ON THE ASSESSEE TO SUBSTANTIATE ITS CLAIM BY FURNISHING THE REQUISITE DETAILS AS REQUIRED BY THE ASSESSING OFFICER. ON FAILURE OF DISCHARGING SUCH ONUS, THE ACTION TAKEN BY THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE U/S 145(2) AND RESORTING TO AD - HOC DISALLOWANCE CANNOT BE FOUND FAULT WITH. 5 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON PERUSAL OF THE CIT (A)S ORDER IN GENERAL AND PARA S 4.4 AND 5.2 OF HIS ORDER IN PARTICULAR ARE RELEVANT IN THIS REGARD. CONSIDERING THE IMPORTANCE OF THE SAID ORDER OF THE CIT (A), WE FIND IT RELEVANT TO EXTRACT THE SAID PARAS FOR THE SAKE OF COMPLETENESS OF THIS ORDER AND THE SAME ARE AS FOLLOWS: 4.4. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD COUNSEL AND IT IS SEEN THAT THE APPELLANT HAS COMPLIED, BY AND LARGE WITH ALL THE REQUIREMENTS OF THE AO AND WHATEVER DETAILS COULD NOT BE SUPPLIED WERE NOT SO FATAL AS TO RESULT IN APPLICATION OF GP RATE @ 2.5% VIS - A - VIS THE DECLARED PROFITS OF THE APPELLANT BASED UPON AUDITED BOOKS OF ACCOUNT AND REPORT IN FORM NO.3CD IN WHICH SPECIFIC DEFECTS COULD BE POINTED OUT BY AO. ALSO, THE RESULTS / PROFITS OF THE APPELLANT ARE PROGRESSIVE AND THEREFORE IN THE ABS ENCE OF SPECIFIC DEFECTS THE ESTIMATION OF PROFIT WAS NOT JUSTIFIED. ALSO, AS STATED BY THE APPELLANT IN DETAILS ABOVE AND CASE LAWS CITED AND RELIED UPON IT IS CLEAR THAT ON THE GIVEN FACTS OF THIS CASE BOTH THE BOOKS OF ACCOUNTS COULD NOT BE REJECTE D AND CONSEQUENTLY THE GP COULD NOT BE ESTIMATED. ACCORDINGLY, THIS GROUND OF APPEAL IS ALLOWED AND THE GP ADDITION MADE @ 2.5% IS HEREBY DELETED, AND AO DIRECTED TO ASSESS THE DECLARED PROFITS OF THE APPELLANT. IN THE RESULT, THIS GROUND OF APPEAL IS AL LOWED. FURTHER, WHILE RESTRICTING THE AD - HOC DISALLOWANCE OF RS. 16,03,731/ - , CIT (A) HAS HELD AS UNDER: 5.2. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD COUNSEL AND LOOKING INTO THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AND THE FACT THAT THE ACCOUNTS ARE AUDITED AND THERE IS NO MAJOR ADVERSE REMARK / NOTE BY THE AUDITOR, REDUCE THE ABOVE TO RS. 3 LAKHS ONLY. HENCE, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 15. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THA T THE CIT (A) HA S RIGHTLY ADJUDICATED THE ISSUE RELATING TO THE GP ADDITION AS WELL AS THE RESTRICTING THE AD - HOC DISALLOWANCE. IN OUR CONSIDERING OPINION, SINCE THERE IS NO INFIRMITY IN THE ORDER OF THE CIT (A) AND THE DECISION TAKEN BY THE CIT (A) IS FAIR AND REASONABLE, THEREFO RE, IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, ON THIS GROUND ASSESSEE SUCCEEDS. 16. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JUNE, 2015. SD/ - SD/ - ( SANJAY GARG ) ( G.S. PANNU ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 19 .6 .2015 . . ./ OKK , SR. PS 6 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI