Assistant Commissioner of Income Tax-1(2), RAIPUR V. M/s. Jagannath Transport Central Corporation, RAIPUR

ITA 188/BIL/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0525 (ITAT-RAIPUR)
• Duration Of Justice: 4 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 09-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K JAIN
• Assessee Lawyers: R B DOSHI
• Keywords: Rejection of books of accounts; Depreciation
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ ITA NO. 188 /BLPR/2011 / ASSESSMENT YEAR: 2007 - 08 ASSISTANT COMMISSIONER OF INCOME - TAX 1 (1), RAIPUR (C.G.) VS. M /S. JAGANNATH TRANSPORT CORPORATION, KUTCHERY CHOWK, RAIPUR PAN : AACFJ 3511 F / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI D.K. JAIN, DR ASSESSEE BY : SHRI R.B. DOSHI, AR / DATE OF HEARING : 1 3 / 10 /2015 / DATE OF PRONOUNCEMENT: 15 / 10 /201 5 / O R D E R PER SHAMIM YAHYA , ACCOUNTANT MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) , RAIPUR (CG), DATED 17 . 06 .201 1 AND PERTAINS TO ASSESSMENT YEAR 200 7 - 0 8 . 2. THE GROUND OF APPEAL RAISED BY THE REVENUE READ S AS UNDER: - WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO TO THE TUNE OF RS.22,57,821/ - BY ESTIMATING NP @ 4% AGAINST 3.17% SHOWN BY THE ASSESSEE, BY INVOKING PROVISION OF SECTION 145(3). 3. THE A SSESSEE, IN THIS CASE, IS A PARTNERSHIP FIRM DERIVING INCOME FROM THE BUSINESS OF CIVIL CONSTRUCTION WORK. DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE NET PROFIT AT 4%. THE REASONS IN BRIEF OF T HE ASSESSING OFFICER IN THIS REGARD ARE AS UNDER: - ITA NO.188/BLPR/ 2011 ACIT VS. JAGANNATH TRANSPORT CORPORATION AY: 2007 - 08 2 THE A.O. HAS STATED THAT THE NET PROFIT IS REFLECTED AT RS.29,33,015/ - GIVING A NET PROFIT RATE OF 3.17%; THAT THE RATE OF NET PROFIT IS APPARENTLY FOUND LOW; THAT THE APPELLANT CLAIMED HUGE EXPENSES IN THE PROFIT & LOSS A/C UNDER VARIOUS HEADS; THAT MAXIMUM NUMBER OF EXPENSES DEBITED TO CONTRACT A/C AND PROFIT & LOSS A/C IS NOT SUPPORTED BY PROPER BILLS AND VOUCHERS; THAT THE EXPENSES WERE SUPPORTED BY SELF DRAWN VOUCHERS ONLY; THAT PAYMENT HAVE BEEN FOU ND MADE BY OBTAINING ONLY THE SIGNATURES OF THE PAYEES ON THE VOUCHERS; THAT CLAIM S ARE NOT FULLY VERIFIABLE; THAT THE NET PROFIT RATE OF 5% OR ABOVE IS DECLARED BY THE ASSESSEES ASSESSED TO TAX IN THIS REGION; THAT TAKING INTO CONSIDERATION THE FACT THAT THE MAIN WORK EXECUTED BY THE APPELLANT IN THIS CASE IS LAYING OF RAILWAY LINES AND THE SITES OF WORK HAVE ALSO SITUATED AT FAR OF PLACES ON DIFFERENT LOCATIONS REQUIRING MORE ADMINISTRATIVE AND MORE SITE EXPENSES, NET PROFIT IS ESTIMATED AT 4%. 4. UPON ASSESSEES APPEAL, LEARNED CIT(A) OBSERVED THAT BOOKS OF ACCOUNTS AND VOUCHERS WERE PRODUCED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNTS U/S 145 ON THE GROUND THAT CERTAIN EXPENSES ARE BASED ON SELF MADE VOUCHERS AND IN SOME CASES THE EXPENSES HAVE BEEN CLAIMED WITHOUT ANY SUPPORTING VOUCHERS/EVIDENCES. THE LEARNED CIT(A) IN THIS REGARD REFERRED TO HONBLE ALLAHABAD HIGH COURT DECISION IN THE CASE OF NISAR BIRI SIKKA NO.1 VS. CIT, (2008) 174 TAXMAN 51 (ALL.) AND HELD AS UNDER: - 7. I AM OF THE CONSIDERED OPINION THAT, BASED ON THE RATIO AFOREMENTIONED IN THE FACTS OF THE CASE, MERELY BECAUSE THE EXPENSES HAVE BEEN BASED ON SELF MADE VOUCHERS, THE BOOKS OF ACCOUNTS CANNOT BE REJECTED, PARTICULARLY, IF THE PAYMENTS HAVE BEEN MADE TO ILLITERATE PERSONS AND IN CASES WHERE IT IS DIFFICULT TO GET PROPER BILLS. HENCE, THE REJECTION OF BOOKS OF ACCOUNTS BY THE A.O. IS HELD TO BE INCORRECT AND ACCORDINGLY, GROUND NO.1 IS ANSWERED IN FAVOUR OF THE APPELLANT. 5. THEREAFTER , THE LEARNED CIT(A) FURTHER DELETED THE ADDITION OF NET PROFIT RATE AT 4% MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: - ITA NO.188/BLPR/ 2011 ACIT VS. JAGANNATH TRANSPORT CORPORATION AY: 2007 - 08 3 8. AS REGARDS ESTIMATION OF NET PROFIT RATE AT 4%, I FIND FORCE IN THE SUBMISSIONS OF THE APPELLANT THAT THE A.O. HAS NOT BROU GHT ON RECORD ANY COMPARABLE CASE RELIED UPON BY THE A.O. FOR ESTIMATING THE N.P. RATE. THE A.O. OUGHT TO HAVE CONFRONTED THE APPELLANT WITH SUCH COMPARABLE CASES RELIED UPON BY THE A.O. AND GIVEN THE APPELLANT A REASONABLE OPPORTUNITY TO REBUT THE ESTIMAT ION OF THE A.O. HOWEVER, THE A.O. FAILED TO DO SO. I DO FIND FORCE IN THE SUBMISSIONS OF THE APPELLANT THAT THE NATURE OF WORK OF THE APPELLANT CANNOT BE SAID TO BE PURELY OF CIVIL CONSTRUCTION. IN MY VIEW, THE NATURE OF WORK UNDERTAKEN BY THE APPELLANT IS PECULIAR. FROM THE DETAILS SUBMITTED AND AS ADMITTED BY THE A.O. ALSO, I FIND THAT THE WORK OF THE APPELLANT WAS CARRIED OUT IN DIFFERENT LOCATIONS AND THE WORK SITES WERE SCATTERED GEOGRAPHICALLY. I FIND FORCE IN THE SUBMISSIONS OF THE APPELLANT THAT IT IS NOT POSSIBLE TO GET PROPER BILLS IN REMOTE AND DEEP FOREST AREAS. IT IS SEEN THAT THE NET PROFIT RATE DURING THE YEAR UNDER CONSIDERATION WAS HIGHEST IN COMPARISON TO THE NET PROFIT RATE OF PRECEDING TWO YEARS. THE A.O. HAS NOT TAKEN ANY ADVERSE VIE W IN RESPECT OF PROFITS DECLARED BY THE APPELLANT IN THE PAST. I AM OF THE CONSIDERED OPINION THAT THE A.O. FAILED TO SUBSTANTIATE HIS ESTIMATION OF N.P. RATE BY BRINGING ON RECORD ANY COGENT EVIDENCE. THE A.O. DID NOT BRING ON RECORD ANY EVIDENCE TO INDI CATE THAT THE APPELLANT ACTUALLY EARNED MORE INCOME THAN THAT RETURNED BY THE APPELLANT. AS THE N.P. RATE DURING THE YEAR UNDER CONSIDERATION WAS MORE THAN THAT OF PRECEDING YEARS, THE ESTIMATION OF N.P. RATE AT 4% WAS A DEPARTURE FROM THE ACCEPTED POSITI ON OF PAST ASSESSMENT YEARS. HOWEVER, THE A.O. FAILED TO SUBSTANTIATE HIS ESTIMATION OF N.P. RATE AT 4%. 9. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, AS ALSO DECISIONS RELIED UPON BY THE APPELLANT AND THAT CITED ABOVE, THE ADDITION MADE BY THE A.O. BY ESTIMATING THE NET PROFIT RATE AT 4% CANNOT BE SUSTAINED. HENCE, THE ADDITION IS DELETED. 6. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORD. 7. THE LEARNED DEPARTMENTAL REPRE SENTATIVE SUBMITTED THAT THE ASSESSEE HAS NOT MAINTAINED PROPER VOUCHERS; HENCE, THE ASSESSING OFFICER HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNTS. HE FURTHER ITA NO.188/BLPR/ 2011 ACIT VS. JAGANNATH TRANSPORT CORPORATION AY: 2007 - 08 4 SUBMITTED THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ESTIMATE OF 4% OF NET PROFIT IS F ULLY JUSTIFIED. HENCE, HE PLEADED THAT THE ORDER OF THE ASSESSING OFFICER SHOULD BE RESTORED. 8. ON THE OTHER HAND, LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT AS PER COMPARATIVE GP CHART SUBMITTED IN PAGE NO.2 OF THE PAPER - BOOK; TURNOVER, GROSS PROFI T AND NET PROFIT HAVE ALL INCREASED IN THE CURRENT YEAR. NET PROFIT BEFORE INTEREST AND PARTNERS REMUNERATION AND DEPRECIATION IS 5.90%. THE ONLY REASON GIVEN BY THE ASSESSING OFFICER IS MAINTENANCE OF SELF MADE VOUCHERS. FOR THIS PURPOSE THE ASSESSING O FFICER HAS REFERRED TO ONLY RS.3,11,633/ - OUT OF THE TOTAL EXPENDITURE OF RS.9,26,74,785/ - , WHICH IS ONLY 0.34% OF THE TOTAL EXPENDITURE. HE FURTHER SUBMITTED THAT THE CBDT INSTRUCTIONS REGARDING ESTIMATE OF PROFIT HAS TO BE CARRIED OUT ONLY WHEN DETAILED SCRUTINY IS DONE. IN THIS CASE, LEARNED COUNSEL SUBMITTED THAT THE ASSESSING OFFICER HAS NOT MADE ANY DETAILED EXAMINATION. THE LEARNED COUNSEL FURTHER SUBMITTED THAT EVEN SELF MADE VOUCHERS CANNOT BE REJECTED. FOR THIS PROPOSITION, HE REFERRED TO THE CA SE OF UTTAM CHUNA PATHAR UDYOG VS. ITO, 65 ITD 466. THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE ASSESSEES WORK IS GEOGRAPHICALLY SCATTERED AND WORK IS CARRIED OUT IN THE DEEP FOREST AREAS; HENCE, OBTAINING PROPER PRINTED VOUCHERS IS NOT POSSIBLE. FURTHER, LEARNED COUNSEL SUBMITTED THAT THE ASSESSING OFFICER HAS ONLY REFERRED TO SELF MADE VOUCHERS IN RESPECT OF PETTY EXPENSES. FURTHERMORE, THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY BASIS FOR THE 4% RATE ADOPTED BY HIM WHEN IN THE PAST RESULTS WITH LESSER PERCENTAGE WERE ACCEPTED. HENCE, THE LEARNED COUNSEL PLEADED THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. ITA NO.188/BLPR/ 2011 ACIT VS. JAGANNATH TRANSPORT CORPORATION AY: 2007 - 08 5 9. UPON CAREFUL CONSIDERATION, WE FIND THE ASSESSEE IN THIS CASE IS ENGAGED IN THE CONSTRUCTION ACTIVITY. THE AR EA OF ASSESSEES WORK IS SCATTERED AND ALSO IN THE DEEP FOREST. IN SUCH SITUATION, EXPECTING PROPER PRINTED VOUCHERS IN ALL THE CASES OF EXPENDITURE IS NOT JUSTIFIED. MOREOVER, THE ASSESSING OFFICER HAS ONLY REFERRED TO CERTAIN CASES OF PETTY EXPENDITURE AND COME TO THE CONCLUSION THAT, DUE TO AFORESAID REASON, THE BOOKS OF ACCOUNTS HAVE BEEN LIABLE TO BE REJECTED. THIS ACTION OF THE ASSESSING OFFICER IS NOT SUSTAINABLE. FOR THIS PROPOSITION, THE HONBLE ALLAHABAD HIGH COURT DECISION IN THE CASE OF NISAR BIRI SIKKA NO.1 VS. CIT (SUPRA) , REFERRED BY THE LEARNED CIT(A) , IS RELEVANT. FURTHERMORE, WE FIND THAT THE ASSESSING OFFICER HAS HIMSELF ACCEPTED THAT THE ASSESSEES ACTIVITIES ARE IN REMOTE AREAS AND IN DEEP FOREST ; HENCE, THE ASSESSEE IS EXPECTED TO HAV E A LOWER RATE OF NET PROFIT. FURTHERMORE, THE PROFIT RETURNED BY THE ASSESSEE DURING THE CURRENT ASSESSMENT YEAR IS CONSIDERABLY IMPROVED AS COMPARED TO PRECEDING ASSESSMENT YEARS. HENCE, FIRSTLY , WE FIND THAT THE REASONS ATTRIBUTED FOR REJECTION OF BOOKS ARE NOT SUSTAINABLE. SECONDLY, THE RATE OF PROFIT ESTIMATED HAS NO COGENT BASIS. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THERE IS NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A); ACCO RDINGLY, WE UPHOLD THE SAME. 10. IN THE RESULT, THIS APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 1 5 T H OCTOBER, 2015 AT RAIPUR . SD/ - SD/ - (MUKUL KR. SHRAWAT) JUDICIAL MEMBER (SHAMIM YAHYA) ACCOUNTANT MEMBER RAIPUR ; DATED 1 5 / 1 0 /201 5 BIJU T., PS ITA NO.188/BLPR/ 2011 ACIT VS. JAGANNATH TRANSPORT CORPORATION AY: 2007 - 08 6 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, RAIPUR 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, RAIPUR