ACIT, New Delhi V. Sh. Madan Raajgarhia, New Delhi

ITA 2312/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81680 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 06-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 16-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL SHARMA SENIOR
• Assessee Lawyers: RAVI GUPTA
• Keywords: Capital asset; Additional evidence
• Section: 40A(3); 133(6); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NOS.2221 & 2312/DEL./2012 (ASSESSMENT YEARS : 2007-08 & 2008-09) ACIT, CIRCLE 22 (1), VS. SHRI MADAN RAAJGARHIA, NEW DELHI. 150-A, TRIBHUWAN COMPLEX, MATHURA ROAD, ISHWAR NAGAR, NEW DELHI 110 065. (PAN : AABPR5922K) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PRAKASH CHAND YADAV, ADVOCATE A ND SHRI RAVI GUPTA, CA REVENUE BY : SHRI SUNIL SHARMA, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : BOTH THESE APPEALS FILED BY THE REVENUE EMANATE FR OM THE ORDER OF CIT (APPEALS)-XXIII, NEW DELHI DATED 27.01.2012. SOME OF THE GROUNDS IN BOTH THE APPEALS ARE COMMON, THEREFORE, BOTH THESE APPEA LS ARE DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE IS AN INDIVIDUAL AND DURING THE REL EVANT PERIOD, ASSESSEE WAS ALSO ENGAGED IN THE BUSINESS OF TRANSPORTATION OF GOODS IN THE NAME OF M/S. SHEEVAM ROADLINES WHICH WAS PROVIDING CARRIER SERVICES TO M/S. GUJARAT AMBUJA CEMENTS LTD., A COMPANY WHICH IS ENG AGED IN THE MANUFACTURING OF CEMENT. THE ASSESSEE HAS ALSO OTH ER SOURCE OF INCOME ITA NO.2221/DEL/2012 ITA NO.2312/DEL/2012 2 WHICH INCLUDES INCOME FROM PETROL PUMP, INCOME FROM PARTNERSHIP CONCERNS, NAMELY, SHARMA BUILDERS, OM CONSTRUCTION, ETC. ETC. SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED FOR PROPRIETORSHIP CONCERN, M/S. SHEEVAM ROADLINES. THE ASSESSING OFFICER MADE AN ADDITION TO THE INCOME OF THE ASSESSEE OF RS.30,08,983/- FOR THE ASSESSMENT YEAR 2007-08 AND RS.27,53,219/- FOR THE ASSESSMENT YEAR 2008-09 ON A CCOUNT OF LOWER RATE OF GROSS PROFIT DECLARED BY THE ASSESSEE. 3. THE GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2007-0 8 READ AS UNDER:- 1. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.30 ,08,983/- MADE BY THE A.O. BY REJECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE I.T. ACT, 1961. 2. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT (A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAS CLEARLY VIOLATED THE PROVISIONS OF SECTION 40A( 3) OF THE ACT AND AT LEAST THE ADDITION TO THAT EXTENT SHOULD HAV E BEEN CONFIRMED. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE O F THE HEARING OF THE APPEAL. ITA NO.2221/DEL/2012 ITA NO.2312/DEL/2012 3 THE GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2008-09 R EAD AS UNDER 1. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.27 ,53,219/- ON ACCOUNT OF AVERAGE PROFIT MARGIN FOR 5 PRECEDING YE ARS FROM A.Y. 2002-03 TO A.Y. 2006-07. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.11 ,12,438/- BY ALLOWING THE CLAIM OF EXEMPTION OF CAPITAL GAIN U/S 54 OF THE I.T. ACT. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE O F THE HEARING OF THE APPEAL. 4. IN THE GROUND NOS.1 & 2 FOR ASSESSMENT YEAR 2007 -08, THE ISSUE IS AGAINST DELETING THE ADDITION OF RS.30,08,983/- BY CIT (A). THE ASSESSING OFFICER MADE THE ADDITION AFTER REJECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE INCOME-TAX ACT, 1961. THE REVENUE HAS ALSO TAK EN A GROUND THAT THERE IS A CLEAR VIOLATION OF SECTION 40A(3) OF THE ACT. ITA NO.2221/DEL/2012 ITA NO.2312/DEL/2012 4 5. THE ASSESSEE WAS ENGAGED IN PROVIDING THE TRANSP ORTATION SERVICES TO M/S. GUJARAT AMBUJA CEMENTS LTD. FOR TRANSPORTING T HE CEMENT. THE TOTAL TRANSPORT CHARGES RECEIVED WERE AT RS.37,88,30,533/ - FOR THE FINANCIAL YEAR 2006-07 RELEVANT TO ASSESSMENT YEAR 2007-08. THE A SSESSING OFFICER ALSO OBSERVED THAT THE PAYMENTS MADE TO THE TRUCK OWNERS WERE IN CASH AND THERE WERE CERTAIN PAYMENTS EXCEEDING RS.20,000/- PER DAY TO ONE PARTY. THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT BY HOLDING THAT ASSESSEE HAS NOT STATED ANY SPECIFIC REASON FOR FALL IN THE NET PROFIT RATIO. ASSESSING OFFICER ALSO OBSERVED THAT THERE ARE CASH PAYMENTS OF MORE THAN RS.20,000/- TO VARIOUS PARTIES; THE ASSESSEE HAS SHOWN MEAGER P ROFIT FROM RUNNING HIS OWN TRUCKS; THE TRANSPORTERS FAILED TO RESPOND TO T HE NOTICES ISSUED U/S 133(6) OF THE ACT; THE ASSESSEE COULD NOT EXPLAIN THE AVER AGE TRANSPORT CHARGES PAID AND RECEIVED AND PRIMARY DOCUMENTS COULD NOT BE VER IFIED; THE TDS CERTIFICATES WERE NOT ISSUED THOUGH TDS WAS DEDUCTE D; THE ASSESSEE HAS CHARGED A FLAT RATE OF RS.15/- PER TON IRRESPECTIVE OF DISTANCES WHEREAS FREIGHT IS NORMALLY CHARGED ON WEIGHT AND DISTANCE AND THE G.R. RECEIPTS DID NOT SHOW THE FREIGHT COST. 6. THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, LD. AR RELIED ON THE ORDER OF THE CIT (A). 7. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE ASSESSEE WAS ENGAGED IN AN EXCLUSIVE DEDICATED TRANSPORT SERVICES TO M/S . GUJARAT AMBUJA CEMENTS LTD. AND FOR THE SAME, AN AGREEMENT DATED 3 1.03.2002 WAS ENTERED ITA NO.2221/DEL/2012 ITA NO.2312/DEL/2012 5 INTO. THE TRANSPORTATION WAS BEING DONE OF CEMENT, CLINKER ETC. ETC. TO VARIOUS DESTINATIONS FROM THE FACTORY PREMISES AT R ABRIYAWAS, RAJASTHAN. THERE WAS AN AGREEMENT TO THIS WORK, THEREFORE, THE RE WAS NO SAY WITH REGARD TO THE RECEIPT OF THE TRANSPORTATION CHARGES ON BEH ALF OF THE ASSESSEE. THE RATES/DESTINATIONS/MATERIAL WERE FIXED BY THE COMPA NY AS PER AGREEMENT. THE ASSESSEE DEPLOYED HIS OWN VEHICLES AND THE BALA NCE BUSINESS WAS CARRIED OUT THROUGH MARKET VEHICLES. THE ASSESSEE H AS ISSUED TDS CERTIFICATES TO VARIOUS TRUCK OWNERS AND SAMPLE TDS CERTIFICATES WERE FILED IN PAPER BOOK, THEREFORE, THE ALLEGATION OF ASSESSI NG OFFICER FOR NOT ISSUING TDS CERTIFICATE IS NOT SUBSTANTIATED. THE DETAILS OF PAYMENTS MADE WERE ALSO FILED BEFORE THE ASSESSING OFFICER. THE GR BOOKS W ERE NOT CONTAINING THE FREIGHT RATES FOR THE REASON THAT THE RATES WERE DE CIDED BY THE COMPANY WHOSE GOODS WERE TRANSPORTED AS PER THE AGREEMENT. THE CIT (A) ADMITTED ADDITIONAL EVIDENCES AND FORWARDED THE SAME TO THE ASSESSING OFFICER FOR EXAMINATION. THESE EVIDENCES WERE CONFIRMATIONS FR OM THE TRANSPORTERS. THE CIT (A) ALSO ASKED THE ASSESSING OFFICER TO COM MENT ON THESE CONFIRMATIONS AND TDS CERTIFICATES IN THE NAME OF T RUCK OWNERS. THE CIT (A) HAS ALSO CONSIDERED THESE CONFIRMATIONS AND HAS ALSO TEST CHECKED THE ACCOUNTS OF THE TRANSPORTERS TO VERIFY THE CLAIM TH AT CASH PAYMENTS FOR INDIVIDUAL TRUCK LOADS DOES NOT EXCEED RS.20,000/- PER DAY. THE REVENUE HAS FAILED TO CONTROVERT THIS FACTUAL FINDING OF CIT (A ). THE ASSESSEE HAS CLAIMED THAT FALL IN THE GROSS PROFIT ON ACCOUNT OF INCREASED COMPETITION IN ITA NO.2221/DEL/2012 ITA NO.2312/DEL/2012 6 THE MARKET HAS NOT BEEN DENIED BY THE REVENUE. WE ALSO LIKE TO MENTION THAT DUE TO INABILITY TO MAKE ADEQUATE PROFITS FROM THE BUSINESS, THE ASSESSEE HAS SHUT DOWN THE TRANSPORT BUSINESS W.E.F. 31.01.2010. THE GROSS PROFIT IN SUBSEQUENT YEAR WAS ALSO IN THE RANGE AS DECLARED I N THE YEAR UNDER CONSIDERATION. WE ALSO GET SUPPORT FROM THE CASE L AWS RELIED UPON BY THE LD. AR FOR UPHOLDING THE ORDER OF CIT (A) ON THIS ISSUE . IN THE CASE OF VINOD KUMAR PRAMOD KUMAR VS. ITO (2000) 66 TTJ 722 (JOD H), THE ITAT HAS HELD THAT MINOR VARIATION IN THE GROSS PROFIT DECLA RED IN THE YEAR UNDER CONSIDERATION AS COMPARED TO PREVIOUS YEARS BY ITSE LF CANNOT JUSTIFY ANY ADDITION. THE RELIANCE WAS ALSO PLACED ON ARJUN SE WING MACHINE CO. VS. ITO (1982) 4 TTJ (JAB.) 5 WHEREIN ITAT UPHELD THA T APPLICATION OF GROSS PROFIT RATE WITHOUT ANY PARTICULAR DEFECT IS NOT JU STIFIED. THE RELIANCE WAS ALSO PLACED ON THE DECISION OF ACIT VS. MEWAR POLYT EX PVT. LTD. (1995) 51 TTJ (JP) 698 FOR THE PROPOSITION THAT IN CHANGED CI RCUMSTANCES, THERE IS NO JUSTIFICATION FOR ESTIMATING HIGHER TURNOVER OR APP LYING HIGHER GROSS PROFIT RATE ON THE BASIS OF PRECEDING ASSESSMENT YEARS. R ELIANCE WAS ALSO PLACED ON MIRACLE MENTHOL DISTILLERY VS. ITO (1993) 46 T TJ (DEL.) 13 - FOR THE PROPOSITION THAT WHERE THE ADDITION HAS BEEN MADE O N ESTIMATING THE GROSS PROFIT RATE DESERVES TO BE DELETED. IT WAS ALSO PL EADED THAT REJECTION OF BOOKS OF ACCOUNT CANNOT BE MERELY MADE ON LOW GROSS PROFI T RATE OR ON ANY SUCH IRREGULARITY. CONSIDERING ALL THESE ASPECTS, WE HO LD THAT THE CIT (A) HAS RIGHTLY DELETED THE ADDITION. ITA NO.2221/DEL/2012 ITA NO.2312/DEL/2012 7 7.1 FACTS OF THE CASE FOR ASSESSMENT YEAR 2008-09 W ERE SAME, THEREFORE, WE ALSO UPHOLD THE ORDER OF CIT (A) FOR DELETING TH E ADDITION FOR ASSESSMENT YEAR 2008-09. THIS ADDITION WAS MADE ON THE BASIS OF AVERAGE GROSS PROFIT RATE FOR PAST 5 YEARS. AS WE HAVE HELD THAT DUE TO NON-PROFITABILITY, THE ASSESSEE HAD CLOSED DOWN THE BUSINESS ON 30.01.2010 AND FOR OTHER REASONS AS SET OUT BY CIT (A), WE UPHOLD HIS ORDER FOR THIS YEAR ALSO. IN THE RESULT, THE GROUND NOS.1 & 2 IN ASSESSMENT YEAR 2007-08 AND GROUND NO.1 IN ASSESSMENT YEAR 2008-09 STAND DISMISSED. 8. IN THE GROUND NO.2 FOR THE ASSESSMENT YEAR 2008- 09, THE ISSUE INVOLVED IS DELETING THE ADDITION OF RS.11,12,438/- U/S 54 OF THE ACT BY ALLOWING THE CLAIM OF EXEMPTION U/S 54 OF THE ACT. 9. IN THE RETURN OF INCOME, THE ASSESSEE HAS COMPUT ED LONG TERM CAPITAL GAIN ON THE SALE OF RESIDENTIAL HOUSE AND CLAIMED E XEMPTION OF RS.11,12,438/- U/S 54 OF THE ACT. AS PER ASSESSING OFFICER, THE PROPERTY WAS SOLD ON 04.06.2007 WHILE NEW PROPERTY WAS PURCHASED ON 24.01.2006 AND IN ABSENCE OF ANY DETAILS, THE ASSESSING OFFICER DISAL LOWED THIS CLAIM. THE CIT (A) HAS DELETED THE ADDITION BY HOLDING AS UNDER :- (11) THE FINAL ISSUE TO BE ADJUDICATED UPON IS OF DISALLOWANCE OF THE EXEMPTION CLAIMED UNDER SECTION 54 AMOUNTING TO RS.11,12,438/-. THE APPELLANT SOLD A RESIDENTIAL HO USE ON 04.06.2007 AND CLAIMED EXEMPTION UNDER SECTION 54 F OR INVESTMENT IN A NEW RESIDENTIAL HOUSE. THE ASSESSIN G OFFICER OBSERVED THAT THE PURCHASE OF THE NEW HOUSE WAS MAD E ON 24.01.2006 I.E. MORE THAN ONE YEAR BEFORE THE DATE OF TRANSFER OF ITA NO.2221/DEL/2012 ITA NO.2312/DEL/2012 8 THE OLD RESIDENTIAL HOUSE. IT IS VERIFIED FROM THE DETAILS SUBMITTED BY THE APPELLANT BEFORE THE ASSESSING OFF ICER ON 28.12.2010 THAT THE APPELLANT HAD MADE INVESTMENTS AS UNDER:- DATE AMOUNT 24.01.2006 RS.15,00,000/- 30.10.2006 RS.19,06,272/- 10.04.2007 RS.23,00,000/- 21.05.2007 RS.09,56,272/- THE APPELLANT ALSO ENCLOSED THE COPY OF SALE DEED O F THE ORIGINAL ASSET, COPY OF APPLICATION FORM FOR NEW RESIDENTIAL HOUSE DATED 24.01.2006, COPIES OF RECEIPTS OF PAYMENTS AND PROO F OF POSSESSION DATED 26.11.2009. IN ADDITION, DURING TH E APPELLATE PROCEEDINGS, THE APPELLANT HAS FILED THE FLAT BUYER 'S AGREEMENT WHICH SHOWS A TOTAL CONSIDERATION OF RS.3,00,62,725 /- FOR THE UNDER CONSTRUCTION APARTMENT NO. C-PH I AT PEARLS G ATEWAY TOWERS, NOIDA. IT IS EVIDENT, THEREFORE, THAT THE A PPELLANT HAS MADE THE ENTIRE PAYMENT FOR PURCHASE OF A NEW RESID ENTIAL HOUSE BETWEEN 24.01.2006 AND 26.11.2009, ON WHICH D ATE WHEN THE APPELLANT HAS RECEIVED POSSESSION OF THE NEW HO USE. AS THE ORIGINAL ASSET WAS SOLD ON 04.06.2007, THE INVESTME NT IN THE NEW RESIDENTIAL HOUSE HAS BEEN MADE WITHIN THE PERI OD OF THREE YEARS FROM THE DATE OF SALE. SECTION 54 REQUIRES TH AT THE APPELLANT SHOULD HAVE CONSTRUCTED THE RESIDENTIAL H OUSE WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER OF THE LONG TERM CAPITAL ASSET, AND THIS CONDITION HAS BEEN MET. THE APPELLANT HAS RELIED ON A NUMBER OF JUDGEMENTS, AS WELL AS CBDT C IRCULAR NO. 672 DATED 16.12.1993 WHICH ARE SQUARELY APPLICA BLE TO THIS ITA NO.2221/DEL/2012 ITA NO.2312/DEL/2012 9 CASE. THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO ALLOW THE CLAIM OF EXEMPTION OF CAPITAL GAINS OF RS.11,12,438 /- UNDER SECTION 54 OF THE INCOME TAX ACT, 1961. 10. AFTER HEARING BOTH THE SIDES, WE HOLD THAT THE PAYMENTS FOR THE PURCHASE OF NEW RESIDENTIAL UNIT WERE DURING THE PE RIOD 24.01.2006 TO 26.11.2009. THE ASSESSEE HAS RECEIVED POSSESSION O F THE NEW HOUSE ON 26.11.2009. THE ORIGINAL ASSET WAS SOLD ON 04.06.2 007. THUS, THE INVESTMENT IN THE NEW RESIDENTIAL HOUSE WAS MADE DU RING THE ALLOWABLE PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER OF THE LONG TERM CAPITAL ASSET. THE RELIANCE WAS ALSO PLACED ON THE CBDTS CIRCULAR NO.672 DATED 16.12.1993. IN VIEW OF THESE FACTS, WE FIND NO FAU LT IN THE ORDER OF THE CIT (A) AND THE SAME IS SUSTAINED ON THIS ISSUE. 12. GROUND NO.3 IN BOTH THE ASSESSMENT YEARS IS GEN ERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION, HENCE, THE SAME IS DISMISSED. 13. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 12 TH DAY OF SEPTEMBER, 2014. SD/- SD/- (A.T. VARKEY) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 12 TH DAY OF SEPTEMBER, 2014 TS ITA NO.2221/DEL/2012 ITA NO.2312/DEL/2012 10 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXIII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR/ITAT