The DCIT, Gandidham Circle, GANDHIDHAM V. Shri Sadashiv P. Shetty, GANDHIDHAM

ITA 198/RJT/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2375 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 13-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M J CHARANIA
• Section: 143(3); 145

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] D CIT, G ANDHIDHAM CIRCLE, GANDHIDHAM - KUTCH , (APPELLANT) VS SHRI SADASHIV P. SHETTY, 107, 1ST FLOOR, RISHABH CORNER, PLOT NO. 93, SECTOR - 8, GANDHIDHAM - KUTCH PAN : AKOPS1154K (RESPONDENT) REVENUE BY : S H RI M.J. CHARANIA, D . R. ASSESSEE BY: WRITTEN SUBMISSION DATE OF HEARING : 13 - 01 - 2 016 DATE OF PRONOUNCEMENT : 20 - 01 - 2 016 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THI S REVENUE S APPEAL FOR A.Y. 2004 - 05 , AR ISES FROM ORDER O F THE CIT(A) - II, RAJKOT DATED 17 - 12 - 2013 IN APPEAL NO. CIT(A) - II / RJT/0091/12 - 13 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ; IN SHORT THE ACT . I T A NO . 198 / RJT /20 14 A SSESSMENT YEAR 2010 - 11 I.T.A NO. 198 /RJT /20 14 A.Y. 2010 - 11 PAGE NO DCIT VS. SHRI SADASHIV P. SHETTY 2 2. THE REVENUE S FIRST SUBSTANTIVE GROUND SEEKS T O RESTORE ADDITION OF RS. 1,18, 8 5 ,304/ - IN THE NATURE OF OUTSTANDING RECEIVABLE AS ON 31 - 03 - 2010 TREATED AS INCOME OF THE IMPUGNED ASSESSMENT YEAR BY THE ASSESSING OFFICER IN ORDER DAT ED 27 - 02 - 2013 AND DELETED IN THE LOWER APPELLATE ORDER. FACTS OF THE CASE ARE IN A NARROW COMPASS. THE ASSESSEE DISCLOSED ITS TURNOVER OF RS. 4,17,12,208/ - IN CASE OF MERIDIAN SHIPPING SERVICES. HE FOLLOWED CASH SYSTEM OF ACCOUNTING. THE DEPARTMENT REJ ECTED THE SAME IN ASSESSMENT YEAR 1997 - 98. THE ASSESSEE FOLLOWED THE VERY SYSTEM FOR NOT OFFERING TH E IMPUGNED SUM OF OUTSTANDING RECEIVABLES TO TAX. THE ASSE SSING OFFICER SOUGHT TO ASSESS THE SAME INTER ALIA BY OBSERVING THAT THE SAME STOOD RECEIVED IN NEXT FINANCIAL YEAR WHICH REVEALS THAT IT S A CASE OF POSTPONEMENT OF RECEIPT. THE ASSESSEE STRONGLY CONTESTED THE SAME. HE SUBMITTED THAT THE ABOVE STATED AMOUNT STOOD O FFERED INCOME AS AND WHEN RELEASES AS PER THE CASH SYSTEM OF ACCOUNTING. HE TERMED IT AS AN INSTANCE OF DOUBLE TAXATION. THE ASSESSING OFFICER REITERATED HIS REASONS IN THE SHOW CAUSE NOTICE AND INVOLVED SECTION 145(3) OF THE ACT RESULTING IN ASSESSMENT OF THE OUTSTANDING RECEIVABLES AS INCOME OF THE IMPUGNED ASSESSMENT YEAR. 3. THE CIT(A) REVERSES ASSESSING OFFICER S ACTION BY OBSERVING AS UNDER: - 3. 2 I HAVE PERUSED THE COPIES OF VARIOUS ORDERS SUBMITTED BY THE AR OF THE APPELLANT, FINDINGS OF THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER AS WELL AS SUBMISSIONS OF THE AR OF THE APPE LLANT. AS STATED ABOVE, THE APPELLANT HAS BEEN FOLLOWING 'CASH' SYSTEM OF ACCOUNTING FOR THE LAST SO MANY ASSESSMENT YEARS WHICH IS EVIDENT FROM THE RECORD AND UNDER THE CASH SYSTEM, ANY RECEIVABLES WHICH WERE I.T.A NO. 198 /RJT /20 14 A.Y. 2010 - 11 PAGE NO DCIT VS. SHRI SADASHIV P. SHETTY 3 ACTUALLY NOT RECEIVED COULD NEITHER BE REFLECT ED IN THE PROFIT & LOSS ACCOUNT NOR NEED TO BE SHOWN AS INCOME. IT HAS ALSO BEEN POINTED OUT THAT SUCH OUTSTANDING RECEIVABLES HAVE ALREADY BEEN BROUGHT TO THE TAX IN THE SUCCEEDING YEAR AND THEREFORE IT WOULD AMOUNT TO DOUBLE TAXATION IF THE SAME ARE BROU GHT TO TAX IN THIS YEAR ALSO. THE HON'BLE ITAT, RAJKOT BENCH, VIDE ITS ORDER IN ITA NO.553/RJT/2012 DATED 14/12/2012 HAS UPHELD THE FINDINGS OF THE LD. CIT(A) ON THE ISSUE OF OUTSTANDING RECEIVABLES BY OBSERVING THAT THOUGH THE APPELLANT HAS BEEN FOLLOWING CASH SYSTEM OF ACCOUNTING, STILL THERE IS NOTHING ON RECORD TO CONCLUSIVELY SAY THAT THERE WAS ANY DELIBERATE ATTEMPT ON THE PART OF THE APPELLANT TO POSTPONE THE RECEIPTS. THE TRIBUNAL ALSO OBSERVED THAT THE PHENOMENON OF RECEIPTS REMAINING OUTSTANDING A T THE END OF THE YEAR AND BEING PAID IN THE FIRST WEEK OF APRIL REGULARLY APPEARS FOR ALL THE ASSESSMENT YEARS. THE A.O. HAS ACCEPTED THE CASH SYSTEM OF ACCOUNTING FOR A.Y. 96 - 97. M OREOVER, IT IS WELL SETTLED PRINCIPLE OF JUDIC IARY THAT A SYSTEM OF ACCOUN TING REGULARLY FOLLOWED FROM YEAR TO YEAR CANNOT BE CHANGED IN A PARTICULAR YEAR IN ISOLATION OF OTHER YEARS. WHILE DECIDING SO, THE ITAT HAS ALSO THE TRIBUNAL ALSO RELIED ON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. ADVANCE CON STRUCTION CO. (143 TAXMAN 61) WHEREIN IT WAS HELD THAT ACCORDING TO SECTION 145 OF THE ACT, INCOME CHARGEABLE UNDER THE HEAD 'PROFITS & GAINS OF BUSINESS OR PROFESSION' SHALL BE COMPUTED IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE APPELLANT. THE ONLY EXCEPTION WHERE THE METHOD EMPLOYED IS SUCH THAT IN THE OPINION OF THE A.O., INCOME CANNOT BE PROPERLY DEDUCED THEREFROM, THEN HE SHALL THEN COMPUTE THE INCOME ON SUCH BASIS AND IN SUCH MANNER AS HE MAY DETERMINE. THE TRIBUNAL VIEWED T HAT THE PROVISION OF S.145, THEREFORE, SPECIFICALLY PROVIDES THAT THE CHOICE OF METHOD OF ACCOUNTING LIES WITH THE ASSESSEE BUT THE ONLY CAVEAT BEING THAT HE HAS TO SHOW THAT THE CHOSEN METHOD HAS BEEN REGULARLY FOLLOWED. ACCORDINGLY, THE HON'BLE ITAT NOTI CED THAT IT HAS BEEN HELD BY CIT(A) THAT THE APPELLANT IS FOLLOWING CASH SYSTEM OF ACCOUNTING IN ACCORDANCE WITH THE ESTABLISHED NORMS - AND THERE IS NOTHING ON RECORD TO SHOW THAT THERE WAS ANY DELIBERATE ATTEMPT ON THE PART OF THE APPELLANT TO POSTPONE THE RECEIPTS. THE OUTSTANDING RECEIVABLES ARE IN THE NORMAL COURSE OF BUSINESS ACTIVITIES. THE HON'BLE ITAT HAS ALSO FOLLOWED ITS DECISION FOR A.Y. 03 - 04 IN APPELLANT'S OWN CASE FOR A.Y. 2005 - 06, VIDE ORDER IN I.TA NO.290/RJT/2008 DATED 24/7/2009. THE FACTS A ND CIRCUMSTANCES OF THE APPELLANT'S CASE ARE IDENTICAL TO THOSE OF A.YS. 03 - 04, 05 - 06, 06 - 07 & 08 - 09 AND THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS OF THE HON'BLE ITAT, I.T.A NO. 198 /RJT /20 14 A.Y. 2010 - 11 PAGE NO DCIT VS. SHRI SADASHIV P. SHETTY 4 RAJKOT BENCH AND MY LEARNED PREDECESSOR IN APPELLANT'S OWN CASE FOR THE PRECEDING YEARS, THE A DDITION MADE OF RS. 1,18,85,304/ - IS HEREBY DIRECTED TO BE DELETED. GROUND NO.2 IS THUS ALLOWED. 4. WE HAVE HEARD BOTH THE PARTIES. RELEVANT FACTS NARRATED IN THE PRECEDING PARAGRAPHS ARE NOT REPEATED FOR THE SAKE OF BREVITY. IT HAS COME ON RECORD THAT A CO - ORDINATE BE N CH OF THE TRIBUNAL IN ASSESSEE S OWN CASE (SUPRA) HAS DELETED IDENTICAL ADDITION OF OUTSTANDING RECEIVABLES MADE IN EARLIER ASSESSMENT YEAR. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT REVENUE S APPEAL AGAINST THE SAME I S PENDING BEFORE THE HON BLE JURISDICTIONAL HIGH COURT . THERE IS NO DISTINCTION ON FACTS OR LAW POINTED. WE OBSERVE IN THESE CIRCUMSTANCES THAT THE CIT(A) HAS RIGHTLY DELETED THE IMPUGNED ADDITION OF OUTSTANDING RECEIVABLE AS IN THE NORMAL COURSE OF BUSI NESS ACTIVITIES. THE REVENUE S SOLE SUBSTANTIVE IS ACCORDINGLY REJECTED 5. THE REVENUE S SECOND SUBSTANTIVE GROUND SEEKS TO RESTORE DIS ALLOWANCE OF NON - VERIFIABLE TRA I LER LABOUR AND PORT EXPENSES OF RS. 5 LACS AS RESTRICTED IN THE LOWER APPELLATE PROCEE DINGS TO 50% THEREOF AS UNDER: - 4.1 1 HAVE PERUSED THE FINDINGS OF THE A. O. AND THE SUBMISSIONS OF THE AR OF THE APPELLANT. THE TURNOVER/GROSS RECEIPTS OF THE APPELLANT ARE RS.4,17,12,208/ - WHEREAS THE TRAILER LABOUR EXPENSES ARE AT RS.27,35,000/ - (I.E. 6.56%) AND PORT LABOUR EXPENSES ARE AT RS. 1,88,915/ - (I.E. 0.45%). THE A.O. MADE ADHOC DISALLOWANCE AT RS.5,00,000/ - AS MOST OF THE EXPENSES UNDER THESE HEADS OF EXPENDITURE WERE INCURRED ON VARIOUS DATES IN CASH ONLY ON THE BASIS OF SELF - MADE VOUCHERS. M OREOVER, THE A.O. NOTICED THAT THERE WAS NO THUMB IMPRESSION OR SIGNATURES WERE MISSING ON PAYMENT VOUCHERS AND NO DETAILS OF WORK CARRIED OUT WERE ALSO SPECIFIED IN BILLS OF I.T.A NO. 198 /RJT /20 14 A.Y. 2010 - 11 PAGE NO DCIT VS. SHRI SADASHIV P. SHETTY 5 EXPENSES. CONSIDERING THESE FACTS AND RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE ITAT, RAJKOT BENCH IN THE APPELLANT'S OWN CASE FOR A.Y. 08 - 09, FIFTY PER CENT OF THE DISALLOWANCE IS CONFIRMED AND REMAINING AMOUNT IS DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 6. THE REVENUE FAILS TO REBUT THE CIT(A) S FIN DINGS HEREIN AS WELL BASED ON TRIBUNAL S EARLIER DECISION FOR RESTRICTING THE IMPUGNED DISALLOWANCE INDICATED IN THE ABOVE EXTRACTED PORTION BY POINTING OUT ANY EXCEPTION THERETO IN THE IMPUGNED ASSESSMENT YEAR AS WELL. THIS GROU ND ALSO MEETS THE SAME FAT E AS THE EARLIER ONE AS PER THE PRINCIPLE OF JUDICIAL CONSISTENCY. 7. THIS REVENUE S APPEAL IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 20 - 01 - 201 6 SD/ - SD/ - (ANIL CHATURVEDI ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 20 /01/2016 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