The ITO, Ward-1(3), Veraval V. Shri Khimjibhai Bhimjibhai Sisodiya, Veraval

ITA 187/RJT/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1273 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-04-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 03-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M J CHARANIA
• Assessee Lawyers: RD LALCHANDANI
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE: S H RI ANIL CHATURVEDI , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER [CONDUCTED THROUGH E - COURT AT AHMEDABAD] THE ITO , WARD - 1 (3) , VERAVAL (APPELLANT) VS SHRI KHIMABHAI BHIMABHAI SISODIYA, PROP. OF M/S JAY KHODIYAR TRANSPORT CO., 7 - RAVI COMPLEX, JUNAGADH ROAD, VERAVAL PAN: AFWPS9713D (RESPONDENT) REVENUE BY : S H RI M.J. CHARANIA, D . R. ASSESSEE BY: S H RI R.D. LALCHANDANI , A.R. DATE OF HEARING : 05 - 04 - 2 016 DATE OF PRONOUN CEMENT : 30 - 05 - 2 016 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THI S REVENUE S APPEAL FOR A.Y. 2007 - 08 , AR ISES FROM ORDER OF THE CIT(A) - IV, RAJKOT DATED 22 - 02 - 2011 IN APPEAL NO. CIT(A) - IV / 0 - I T A NO . 187 / RJT /20 11 A SSESSMENT YEAR 200 7 - 08 I.T.A NO. 18 7/RJT /20 11 A.Y. 2007 - 08 PAGE NO ITO VS. SHRI KHIMABHAI BHIMABHAI PROP. OF M/S. JAY KHODIYAR TRANSPORT CO. 2 14 3 /09 - 10, DELETING NET INCOME ADDITION OF RS. 62,41,972/ - MADE BY THE ASSESS ING OFFICER AFTER ESTIMATING NET PROFITS @ 5% OF TOTAL CONTRACT RECEIPTS OF RS. 1 ,2 8 ,8 39,438/ - AS AGAINST THAT DECLARED @ 1.75%, IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THIS ASSESSEE IS A TRANSPORTERS AND SUPPLIER OF CEMENT RAW MATERIAL. HE FILED RETURN ON 31 - 10 - 2007 STATING INCOME OF RS. 3,97,251/ - . THE ASSESSING OFFICER TOOK UP SCRUTINY. HE SOUGHT FOR NECESSARY BILLS/ VOUCHERS ETC ALONG WITH BOOKS OF ACCOUNTS . THE ASSESSEE S REPLY DATED 14 - 12 - 2009 STAT ED DAMAGE OF BOOKS IN FLOODS ON 15 - 07 - 2009. THE ASSESSING OFFICER DISBELIEVED THIS EXPLANATION ON THE GROUND THAT THE SAME WAS NOT REPORTED IN EARLIER HEARINGS ON 08 - 10 - 2009, 23 - 011 - 2009 AND 30 - 11 - 2009. HE PROCEEDED ON THIS REASONING TO O BSERVE INTER ALI A THAT THE ASSESSEE HAD NOT FILED ANY FIR AND NOTICED THAT IT HAD MAINTAINED CASH BOOKS AS PRODUCED FOR VERIFICATION. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE S CASH BOOKS CONTAIN ONLY ONE CONSOLIDATED ENTRY OF LIABILITY TOWARDS TRANSPORT E XPENSE S WITHOUT STATING ANY NAME ETC. THERE WERE O T HER DISCREPANCY ALSO TAKEN COGNIZANCE OF IN TALLYING OF AUDITED ACCOUNTS AND LEDGER BOOKS. HE SOUGHT TO REJECT ASSESSEE S BOOKS. THE ASSESSING AUTHORITY CAME ACROSS ASSESSEE S NET PROFITS @ 3.37% FROM T URNOVER OF RS. 1,45,68,043/ - AS IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR AND THAT VERY TURNOVER HAD INCREASED TO RS. 2,42,33,085/ - WITH THAT PROFIT ALMOST AT THE SAME RATE. THE ASSESSEE HAD FILED ALL BOOKS OF ASSESSMENT YEAR 2009 - 10 ON 30 - 09 - 2009 I.T.A NO. 18 7/RJT /20 11 A.Y. 2007 - 08 PAGE NO ITO VS. SHRI KHIMABHAI BHIMABHAI PROP. OF M/S. JAY KHODIYAR TRANSPORT CO. 3 WHER EAS IN THE IMPUGNED ASSESSMENT YEAR IT CLAIMED LOSS THEREOF DUE TO FLOOD. THE ASSESSING OFFICER REJECTED THE ABOVE STATED BOOK RESULT THEREBY ESTIMATING NET PROFIT @ 5% TO RS. 64,41,972/ - AS TO HAVE DERIVED FROM GROSS BUSINESS RECEIPTS AMOUNTING TO RS. 12 ,88,39,438/ - IN ASSESSMENT ORDER DATED 31 - 12 - 2009. 3. THE ASSESSEE PREFERRED APPEAL. THE CIT(A) ACCEPTS HIS CONTENTIONS AS UNDER: - 3.2. I HAVE CAREFULLY CONSIDERED THE FINDING GIVEN BY THE ASSESSING OFFICER AND THE SUBMISSION OF THE AR OF THE APPELLA NT. IT IS FOUND THAT THE REASON FOR NON - PRODUCTION OF BOOKS OF ACCOUNTS WERE DUE TO THE FACT THAT THE SAME GOT DESTROYED IN FLOOD. IT IS ALSO A FACT THAT FLOOD DID CREATE HAVOC IN VERAVAL DURING THAT PERIOD. HENCE, THE CONTENTION OF THE AR OF THE APPELLANT CANNOT BE DISBELIEVED. THEREFORE, I FIND THAT THE CONTENTION OF THE APPELLANT IS NOT VAGUE AND DODGY. ON THE OTHER HAND, THE ASSESSING OFFICER HAD ESTIMATED THE NET PROFIT OF THE APPELLANT AT 5% OF THE GROSS RECEIPTS. THE ASSESSING OFFICER'S DECISION TO E STIMATE NET PROFIT AT 5% IS NOT SUPPORTED BY EITHER THE PAST PERFORMANCE OF THE APPELLANT OR BASED ON ANY COMPARABLE INSTANCES OF ASSESSEES IN SIMILAR LINE OF BUSINESS, THE CALCULATION OF GROSS BUSINESS RECEIPTS ON PAGE - 6 OF THE ASSESSMENT ORDER MADE BY TH E ASSESSING OFFICER IS ALSO APPARENTLY WRONG AS IN DIFFERENT INCOME HEADS, HE HAS IGNORED THE PART OF THE EXPENSES, THEREBY DISTORTING THE PICTURE OF PROFIT. THE PROFIT ELEMENT OF EACH INCOME HEAD HAD BEEN TAKEN CARE IN THE TRADING ACCOUNT RECEIPT, AND THE REFORE, ABOVE ESTIMATION IS FOUND ERRONEOUS AND HENCE REJECTED. IT IS ALSO FOUND FROM THE APPELLANT'S BALANCE SHEET THAT THERE ARE NO NEW DEPOSITS / LOANS / UNSECURED CREDITORS DURING THE YEAR UNDER CONSIDERATION. THEREFORE, IT WOULD ALSO BE UNFAIR TO HOLD THAT UNRECORDED PROFITS HAVE BEEN PLOUGHED BACK. IT IS ALSO SEEN THAT THE ASSESSING OFFICER HAD ACCEPTED THE APPELLANT'S BOOK RESULTS FOR THE IMMEDIATE PRECEDING AND SUCCEEDING YEAR. THEREFORE, NO SKEPTICISM WAS CAST UPON WITH REGARD TO THE APPELLANT'S TR ADING RESULTS. IT IS ALSO NOTICED FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS NOT REJECTED THE APPELLANT'S BOOK RESULTS, WHILE ESTIMATING THE APPELLANT'S - PROFIT. FURTHER, BEST JUDGMENT AS SESSMENT HAS TO HAVE A I.T.A NO. 18 7/RJT /20 11 A.Y. 2007 - 08 PAGE NO ITO VS. SHRI KHIMABHAI BHIMABHAI PROP. OF M/S. JAY KHODIYAR TRANSPORT CO. 4 BASIS AN D SUCH BA SIS IS EITHER THE PAST RESULT OF THE APPELLANT OR COMPARATIVE TRADING RESULT OF I TS PEERS. IT IS SEEN THAT THE ASSESSING OFFICER HAS FOUND DIFFERENCES IN VARIOUS ACCOUNTS WHILE JUSTIFYING HIS ACTION IN ESTIMATING THE NET PROFIT. HOWEVER, AS CAN BE SEEN FROM THE WRITTEN SUBMISSION OF THE AR OF THE APPELLANT AS FURNISHED SUPRA, THESE DIFFERENCES HAVE BEEN RECONCILED BY THE APPELLANT'. HENCE, IN LIGHT OF THE ABOVE, AND IN THE BEST INTEREST OF JUSTICE, IT WOULD BE FAIR IF THE NET PROFIT AFTER REMUNERATION AND INTEREST ON C AP ITAL IS ESTIMATED AT 2,00,000/ - . THEREFORE, ADDITI ON TO THE EXTENT OF RS 2,00,000/ - IS CONFIRMED AND THE REMAINING ADDITION IS DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 4. THE REVENUE STRONGLY ARGUES IN THE COURSE OF HEARING THAT ASSESSING OFFICER HAD RIGHTY ESTIMATED THE IMPUGNED NET PROFITS @ 5% IN QUESTION TO PRAY FOR RESTORATION OF THE ADDITION IN QUESTION. WE PUT A SPECIFIC QUERY AS TO WHAT HAD BEEN THE ASSES S EE S NET PROFIT RATE IN PRECEDING AND SUCCEEDING ASSESSMENT YEAR S INCE BOTH PARTY AGREE THAT THERE IS NO CHANGE IN HIS BUSINES S PATTERN. LEARNED AUTHORIZED R EPRESENTATIVE REFERS TO ASSESSMENT ORDER DATED 11 - 06 - 2010 FOR ASSESSMENT YEAR 2008 - 09 FORMING PART T O THE CASE FILE SHOWING NET PROFIT @ 1.03% AS DETERMINED EVEN AF TER DATE OF FLOOD (SUPRA). THE REVENUE FAILS TO POINT OUT ANY DISTINCTION ON FACTS INVOLVED IN THE INSTANT CASE VIS - A - V IS IN THOSE ASSESSMENT YEAR 2008 - 09. WE ACCO RDI NGLY FIND NO REASON TO REVIVE THE IMPUGNED NET PROFIT @ 5% AS AGAINST 1.03% IN SUCCEEDIN G ASSESSMENT YEAR. THE REVENUE S SOLE SUBSTANTIVE GROUND FAILS. IT IS MADE CLEAR TO BOTH THE PARTIES THAT OUR INSTANT ADJUD I CATION SHALL NOT FORM PRECEDEN T FOR ANY PRECEDING OR SUCCEEDING ASSESSMENT YEAR. I.T.A NO. 18 7/RJT /20 11 A.Y. 2007 - 08 PAGE NO ITO VS. SHRI KHIMABHAI BHIMABHAI PROP. OF M/S. JAY KHODIYAR TRANSPORT CO. 5 5. THIS REVENUE S APPEAL IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OUR T ON 30 - 05 - 201 6 SD/ - SD/ - (ANIL CHATURVEDI ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 3 0 /05 /2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, RAJKOT