DY C.I.T..1(1), RAIPUR (CG) V. M/S BENGAL MAHARASHTRA ROADWAYS, RAIPUR (CG)

ITA 213/BIL/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7766 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 18-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHEETAL SHASHWAT VERMA
• Assessee Lawyers: S R RAO
• Keywords: Unexplained cash credit; Depreciation; Validity of assessment
• Section: 144; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH , RAIPUR BEFORE S HRI N.K. BILLAIYA (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 213 /RPR /20 1 4 ASSESSMENT YEAR: 2010 - 11 THE DY. COMMISSIONER OF INCOME TAX - (1), CENTRAL REVENUE BUILDING, CIVIL LINES, RAIPUR (C.G .) VS. M/S BENGAL MAHARASHTRA ROADWAYS, BAJRANG MARKET, G.E. ROAD TATIBANDH, RAIPUR (C.G.), PAN: AAIFB1121F (APPELLANT) (RESPONDENT) REVENUE BY : MS. SHEETAL SHASHWAT VERMA (DR) ASSESSEE BY : SHRI S.R. RAO (ADVOCATE ) DATE OF HEARING: 08 /03 /201 8 DATE OF PRONOUNCEMENT: 08 / 06 /201 8 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST ORDER DATED 22.07.2014 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (A PPEALS) , RAIPUR , FOR THE A S S ESSMENT YEAR 2010 - 11 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ASSESSMENT ORDER PASSED BY THE AO U/S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE A CT). 2. BRIEF FACTS OF THE CAS E ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 17,35,670/ - . SINCE, THE CASE WAS SELECTED FOR SCRUTINY NOTICES U/S 143 (2) AND 142 (1) WERE ISSUED. IN RESPONSE TO THE SAID NOTICES , THE AUTHORIZED REPRESENTATIVE (AR) APPEARED BEFORE THE AO AND 2 ITA NO. 213 / RPR/2014 ASSESSMENT YEAR: 2010 - 11 SUBMITTED CERTAIN DOCUMENTS . SINCE, THE ASSESSEE HAD SHOWN NET PROFIT OF 1.14% IN THE ASSESSMENT YEAR UNDER CONSIDERATION , T HE ASSESSEE WAS ASKED TO JUSTIFY THE SAME . HOWEVER, THE ASSESSEE DID NOT RESPOND THE SAME ALSO FAILED TO PRODUCE ITS BOOKS OF ACCOUNT AND RELEVANT VOUCHERS DESPITE SEVERAL DATES FIXED FOR THIS PURPOSE . ACCORDINGLY, THE AO COMPLETED THE ASSESSMENT U/S 144 READ WITH SECTION 143 (3) OF THE TAX ACT AND AFTER MAKING ADDITION OF RS. 52,51,975/ - ON ACCOUNT OF DISALLOWANCE OUT OF THE EXPENSES CLAIMED IN P & L ACCOUNT AND ADDITION OF RS. 1,16,437/ - MADE U/S 68 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 71,04,082/ - . THE ASSESSEE CHALLENGED THE ASSESSM ENT ORDER BEFORE THE LD. CIT (A) . THE LD. CIT (A) AFTER HEARING THE ASSESSEE PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND DELETED RS. 49,81,345/ - OUT OF TOTAL ADDITION OF RS. 52,51,975/ - MADE BY THE AO AFTER MAKING DISALLOWANCE FROM THE EXPENSES CLAIMED BY THE ASSESSES. THE LD. CIT (A) FURTHER DELETED THE ADDITION MADE BY THE AO U/S 68 OF THE ACT. 3. AGGRIEVED BY THE IMPUGNED ORDER PASSED BY THE LD. CIT (A), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING EFFECTIVE GROUNDS: - 1. WHETHER IN LAW AND ON FA CTS & CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED IN GIVING RELIEF OF RS. 49,81,345/ - OUT OF ADDITION OF RS. 52,51,975/ - MADE BY THE AO OUT OF VARIOUS EXPENSES AS THE ASSESSEE HAS FAILED TO PRODUCE BOOKS OF ACCOUNTS AND BILLS/VOUCHERS SPECIALL Y WHEN THE LEARNED CIT (A) HAS UPHELD VALIDITY OF ASSESSMENT U/S 144 OF THE IT ACT, 1961? 2. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED IN DELETING THE ADDITION U/S 68 OF THE IT ACT, 1961 OF RS. 1,16,437/ - MADE BY THE AO AS 3 ITA NO. 213 / RPR/2014 ASSESSMENT YEAR: 2010 - 11 UNEXPLAINED CREDIT INTRODUCED IN THE PARTNERS CAPITAL ACCOUNT? 3. THE ORDER OF THE LD. CIT (A) IS ERRONEOUS BOTH IN LAW AND ON FACTS. 4. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE ASSESSMENT ORDER SUBMITTED THAT SINCE, THE ASSESSEE HAS FAILED TO PRODUCE THE BOOKS OF ACCOUNT BEFORE THE AO DESPITE SUFFICIENT OPPORTUNITIES GIVEN BY THE AO, THE LD. CIT(A) HAS WRONGLY GIVEN RELIEF TO THE ASSESSEE. MOREOVER, THE LD. CIT(A) HAS UPHELD THE ASSESSMENT U/S 144 OF THE ACT. UNDER TH ESE CIRCUMSTANCES, THE LD. CIT(A) OUGHT TO HAVE CONFIRMED THE ADDITION MADE BY THE AO. SO FAR AS THE SECOND GROUND OF APPEAL IS CONCERNED THE LD DR SUBMITTED THAT SINCE, THE ASSESSEE HAS FAILED TO EXPLAIN THE CREDIT ENTRIES IN QUESTION, THE LD. CIT(A) HAS WRONGLY DELETED THE ADDITION MADE BY THE AO. 5. ON THE OTHER HAND, T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AS THE AO HAD MADE THE DISALLOWANCES ON AD HOC BASIS WITHOUT AFFORDING EFFECTIVE OPPO RTUNITY OF BEING HEARD TO THE ASSESSEE AND WITHOUT DISCLOSING THE MATERIAL PROPOSED TO BE USED AGAINST THE ASSESSEE. THE AO WAS SUPPOSED TO ESTIMATE THE NP ON THE BASIS OF SOME EVIDENCE EVEN WHILE PASSING ASSESSMENT ORDER U/S 144 OF THE ACT. THE LD. COUNSE L FURTHER CONTENDED THAT THE AUDITOR DID NOT POINT OUT ANY DEFECT IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. IT WAS FURTHER CONTENDED TH AT EVEN IN THE REMAND PROCEEDINGS NO EFFORTS WERE MADE BY THE AO TO VERIFY THE EXPENDITURE ON LORRY HIRE CHARGE S IN THE LIGHT OF THE VOUCHERS CONTAINING REGISTRATION NOS. OF TRUCK S , DATE S AMOUNT S PAID AND DISTANCE COVERED ETC. SINCE, THE AO HAS NOT POINTED OUT ANY EVIDENCE TO REJECT THE NP @ 4 ITA NO. 213 / RPR/2014 ASSESSMENT YEAR: 2010 - 11 1.74% SHOWN BY THE ASSESSEE, THE LD CIT(A) HAS RIGHTLY DIRECTED THE AO TO ADOPT THE SAME RATE BY RELYING ON THE DECISION OF THE CUTTACK BENCH OF THE ITAT RENDERED IN THE CASE OF ASHOK KUMAR MODI VS. ITO, 45 DTR ( CTK ) TRIB 158. AS REGARDS THE SECOND GROUND OF APPEAL THE LD . COUNSEL FOR THE ASSESSEE SUBMITTED THAT CREDITS TO THE PARTNERS ACCOUNT RELATE TO THE RENT RECEIVED BY THEM ARE VERIFIABLE FROM THE RECORDS , THEREFORE THE ADDITION CANNOT BE MADE U/S 68 OF THE ACT. HENCE , THERE IS INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL ON RECORD IN THE LIGHT OF THE RIVAL SUBMISSIONS OF THE PARTIES. THE FIRST GROUND OF APPEAL RELATES TO THE AD HOC DISALLOWANCE MADE BY THE AO OUT OF THE EXPENSES CLAIMED BY THE ASSESSEE. LD CIT(A) HAS RESTRICTED THE ADDITION TO 1.74% ON THE BASIS OF NP SHOWN BY THE ASSESSEE. THE LD. CIT(A) HAS JUSTIFIED THE CLAIM OF THE ASSESSEE OBSERVING AS UNDER: 3.2 I HAVE GONE THROUGH THE OBSERVATIONS OF THE AO AND SUBMISSIONS OF THE APPELLANT. THE APPELLANT COULD NOT MAKE OUT ANY SUSTAINABLE CASE WITH RESPECT TO THE ADDITIONAL GROUND ASSAILING VALIDITY OF MAKING ASSESSMENT U/S 144 OF THE ACT. HENCE, THIS GROUND OF APPEAL IS DISMISSED. THE AUDIT REPORT FILED IN RESPECT OF AUDIT BOOKS OF ACCOUNTS CONDUCTED U/S 44AB OF THE ACT SUBSTANTIATE THAT THE APPELLA NT HAS MAINTAINED BOOKS OF ACCOUNT THAT WERE AUDITED BY CA. THE AO DID NOT RESPOND TO VARIOUS CONTENTIONS RAISED IN THE WRITTEN SUBMISSIONS. SHE DI D NOT OPT TO CALL FOR BOOKS OF ACCOUNT TO VERIFY THE VOUCHERS EVEN DURING THE REMAND STAGE. ADMITTEDLY, THE D ISALLOWANCE S WERE MADE ON AD HOC BASIS. NO REASONS WERE OFFERED FOR ARRIVING AT THE STATED PERCENTAGE OF DISALLOWANCE. UNDER THESE CIRCUMSTANCES, I AM OF THE CONSIDERED OPINION THAT SUCH DISALLOWANCES CANNOT STAND THE TEST OF APPEAL. HOWEVER, THE NP SHOWN BY THE APPELLANT BEFORE 5 ITA NO. 213 / RPR/2014 ASSESSMENT YEAR: 2010 - 11 DEPRECIATION COMES TO 1.74% AND IS SLIGHTLY LOW. THEREFORE, KEEPING IN VIEW THE DECISION OF HONBLE ITAT IN THE CASE OF ASHOK KUMAR MODI (SUPRA), THE AO IS DIRECTED TO ADOPT THE SAME RATE OF NET PROFIT BEFORE DEPRECIATION AND RE - COM PUTE THE ADDITION TO THE RETURNED INCOME. THIS GROUND OF APPEAL IS, THUS, PARTLY ALLOWED. 7. WE NOTICE THAT DURING THE APPELLATE PROCEEDING THE LD. CIT(A) OBTAINED REMAND REPORT FROM THE AO HOWEVER, THE AO DID NOT OPT TO CALL FOR BOOKS OF ACCOUNT TO VERI FY THE VOUCHERS SUBMITTED BY THE ASSESSEE. THE LD. CIT(A) HAS POINTED OUT THAT AUDIT REPORT FILED U/S 44AB OF THE ACT ESTABLISHES THAT THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNT . WE FURTHER NOTICE THAT THE AO HAS NOT POINTED OUT ANY COGENT EVIDENCE TO PR OVE THAT THE VOUCHERS PRODUCED BY THE ASSESSEE ARE EITHER FAKE OR THE AMOUNTS SHOWN THEREIN HAVE BEEN INFLATED. WE FURTHER NOTICE THAT THE LD. CIT(A) HAS BASED HIS FINDINGS OF THE CUTTACK TRIBUNAL IN THE CASE OF ASHOK KUMAR MODI VS. ITO (SUPRA) WHEREIN THE NP FROM TRANSPORTATION BUSINESS INCLUDING DEPRECIATION @ 2% WAS HELD TO BE REASONABLE. HENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) WE THEREFORE, UPH O LD THE FINDINGS OF THE LD. CIT(A) AND DISMISS THIS GROUND OF THE APP EAL OF THE REVENUE. 8. VIDE THE SECOND GROUND OF APPEAL THE REVENUE HAS CHALLENGE D THE ACTION OF THE LD. CIT(A) IN DELET ING THE ADDITION OF RS 1,16,437/ - MADE BY THE AO U/S 68 OF THE ACT. WE HAVE PERUSED THE MATERIAL ON RECORD IN THE LIGHT OF THE RIVAL C ONTENTION OF THE PARTIES. THE LD. CIT(A) HAS DELETED THE ADDITION HOLDING AS UNDER: 5.1 IN THE COURSE OF APPEAL PROCEEDINGS, THE LD. COUNSEL FOR THE APPELLANT HAS CONTENDED THAT CREDITS TO THE PARTNERS CAPITAL ACCOUNTS RELATE TO THE AMOUNT OF RENT RECEIV ED BY THEM, WHICH 6 ITA NO. 213 / RPR/2014 ASSESSMENT YEAR: 2010 - 11 IS VERIFIABLE FROM RECORDS. HENCE, PROVISIONS OF SECTION 68 OF THE ACT ARE NOT APPLICABLE. IN THE REMAND REPORT, ALSO THE AO DID NOT OFFER ANY DISAGREEMENT WITH THE SUBMISSIONS MADE BY THE APPELLANT. IN THIS VIEW OF THE MATTER, ADDITION O F RS. 1,16,437/ - MADE U/S 68 OF THE ACT IS NOT SUSTAINABLE, HENCE DELETED. THIS GROUND OF APPEAL IS ALLOWED. 9. WE NOTICE THAT THE AO HAS NOT SUBMITTED ANY COGENT REASON OR EVIDENCE TO REBUT THE CONTENTION OF THE ASSESSEE THAT SINCE THE CREDITS TO THE PA RTNERS CAPITAL ACCOUNTS RELATE TO THE AMOUNT OF RENT RECEIVED BY THEM, WHICH IS VERIFIABLE FROM RECORDS , THE PROVISIONS OF SECTION 68 OF THE ACT ARE NOT APPLICABLE. FURTHER, T HE LD. CIT(A) HAS POINTED OUT THAT IN THE REMAND REPORT AO DID NOT OFFER ANY DIS AGREEMENT WITH THE SUBMISSIONS MADE BY THE APPELLANT . UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO DISAGREE WITH THE LD. CIT(A). HENCE, WE UPH O LD THE FINDINGS OF THE LD. CIT(A) AND DISMISS THIS GROUND OF APPEAL OF REVENUE. IN THE RESULT, APPEA L FILED BY THE REVENUE FOR A SSESSMENT YEAR 2010 - 2011 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JUNE , 2018 . SD/ - SD/ - ( N.K. BILLAIYA) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER RAIPUR, DATED: 08 / 0 6 / 201 8 ALINDRA, PS 7 ITA NO. 213 / RPR/2014 ASSESSMENT YEAR: 2010 - 11 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , RAIPUR / DR, ITAT, RAIPUR 6. / GUARD FILE . / BY ORDER, //TRUE C OPY// / (DY./ASSTT. REGISTRAR) / PS , RAIPUR / ITAT, RAIPUR