Smt. Mamta Sharma, UDAIPUR V. ITO(Hqrs), UDAIPUR

ITA 29/JODH/2014

• Counselvise Citation: 2923314 RSA 2014
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-06-2014
• Assessment Year: misc
• Appeal Filed On: 06-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Keywords: Rejection of books of accounts; Commercial expediency
• Section: 40A(3); 145

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 5 /JODH/201 4 (A.Y. 20 1 0 - 11 ) IT O , WARD - 1 (2) , VS. SMT. MAMTA SHARMA , UDAIPUR. PROP. M/S. SHREEJI FREIGHT CARRIER , 1/ B NEW COLONY, KALAJI GORAJI, UDAIPUR. PAN NO. ASRPS 9035 Q (APPELLANT) (RESPONDENT) ITA NO. 29 /JODH/201 4 (A.Y. 20 1 0 - 11 ) SMT. MAMTA SHARMA, VS. ITO (HQRS.), PROP. M/S. SHREEJI FREIGHT CARRIER, 16, MUMA L TOWER, 1/B NEW COLONY, KALAJI GORAJI, SAHELI MARG, UDAIPUR. UDAIPUR. PAN NO. ASRPS 9035 Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMIT KOTHARI . DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 13 / 0 6 /201 4 . DATE OF PRONOUNCEMENT : 30 /0 7 /201 4 . 2 O R D E R PER N.K. SAINI, A.M THESE CROSS APPEALS BY THE DEPARTMENT AND THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 25/ 1 0/2013 OF L D . CIT(A), UDAIPUR . COMMON ISSUE IS INVOLVED IN THESE APPEALS AND THE APPEALS WERE HEARD TOGETHER, SO THESE ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE . 2 IN THE DEPARTMENTAL APPEAL IN I.T.A.NO. 05/JODH/2014 , T HE ONLY GROUND RAISED , READ AS UNDER : ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN: - 1 . RESTRICTING THE TRADING ADDITION FROM RS. 28,47,569/ - TO RS. 16,77,372/ - BY REDUCING N.P. RATE 8% TO 5% BY APPLYING THE PROVISION S OF SECTION 145(3) OF THE I.T. ACT. DESPITE THE FACT THAT LD. CIT(A) HAS UPHELD THE PROVISION OF SECTION 145(3) IN THE CASE OF ASSESSEE. THAT THE APPELLANT CRAVES TO ADD, AMEND, ALTER, DELETE OR MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. IN ASSESSEES APPEAL IN I.T.A.NO. 29/JODH/2014 , THE FOLLOWING GROUNDS HAVE BEEN RAISED: - 1 . THE LD. CIT(A) ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN UPHOLDING THAT THE ASSESSING OFFICER IS JUSTIFIED IN 3 INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT IN THE CASE OF THE APPELLANT. 2. THE LD. CIT(A) ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN CONFIRMING THE ADDITIONS OF ESTIMATE TRADING PROFIT RS. 16,77,372/ - CALCULATING AT TH E RATE OF NET PROFIT 5% AS AGAINST NET PROFIT RATE OF 0.69% OF TOTAL TRANSPORT RECEIPTS DECLARED BY THE APPELLANT . 3. THE APPELLANT RESERVES THE RIGHT TO ADD TO THE ABOVE GROUNDS OF APPEAL AND/OR TO AMEND, MODIFY AND TO DELETE ANY OF THEM ON OR BEFORE THE HEARING OF APPEAL. 3. FROM THE ABOVE GROUNDS , IT IS GATHERED THAT THE GRIEVANCE OF BOTH THE PARTIES RELATES TO THE DELETION/SUSTENANCE OF ADDITION OUT OF THE ADDITION MADE BY THE ASSESSING OFFICER BY APPLYING THE NET PROFIT RATE. 4. FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSEE WAS ENGAGED IN TRANSPORTATION BUSINESS UNDER THE NAME AND STYLE OF M/S. SHREEJI FREIGHT CARRIER . THE ASSESSEE FILED THE RETURN OF INCOME ON 23/09/2010 SHOWING TAXABLE INCOME OF RS. 2,35,230/ - WHICH WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) . LATER ON CASE WAS SELE C TED FOR SCRUTINY . DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER NO TICED THAT THE ASSESSEE HAD TRANSPORTED CLINKER FROM RABRYIYAWAS TO ROORKIE AND IN RETURN TRA NS PORTED PET - COCK FROM PANIPAT TO RABRIYAWAS AND CEMENT FROM ROORKIE TO DIFFERENT PLACES. THE ASSESSING OFFICER ALSO NOTICED THAT THE 4 ASSESSEE HAD SHOWN THESE GROSS RECEIPTS OF RS. 3,90,06,586/ - AND AFTER CLAIMING THE VARIOUS EXPENDITURE, THE NET PROFIT OF RS. 2,72,957/ - HAD BEEN SHOWN WHICH GAVE NET PROFIT RATE OF 0.69%. HE ALSO OBSERVED THAT THE ASSESSEE HAD CLAIMED ABOUT 97% OF TOTAL RECEIPT AS FREIGHT EXPEN SES. HE ASKED THE ASSESSEE TO FURNISH THE DETAILS OF PAYMENT. IN RESPONSE, THE ASSESSEE FURNISHED THE DETAILS FROM WHICH THE ASSESSING OFFICER NOT I CED THAT ALMOST ALL THE BILLS RAISED WERE ABOVE RS. 20,000/ - AND T HE ASSESSEE HAD MADE PAYMENT BY PREPARING SELF MADE VOUCHERS BELOW RS. 20,000/ - TO THE TRUCK DRIVERS/OWNERS. THE ASSESSING OFFICER ALSO DID NOT ACCEPT THIS PLEA OF THE ASSESSEE THAT NONE OF THE TRANSACTION IS OVER AND ABOVE THE PRESCRIBED LIMIT U/S 40A(3) OF THE ACT BY OBSERVING THAT IF THE TRUC K STARTED FROM ONE DESTINATION TO ANOTHER POINT, HOW THE ASSESSEE WOULD MAKE THE PAYMENT PARTLY IN 2 - 3 DAYS . THE EXPLANATION OF THE ASSESSEE WAS THAT THE STAFF MEMBERS WHO MADE THE PART PAYMENT TO ANY OF THE DRIVER /OWNER/AGENT PREPARE D VOUCHER (SELF MADE) FOR THE INFORMATION TO THE ASSESSEE TO HAVE PROPER CONTROL AND CHECK OVER THE FINANCIAL MATTER. THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS BY APPLYING THE PROVISIONS OF SECTION145(3) OF THE ACT BY OBSERVING THAT THE STATE OF AFFAIRS OF THE ASSESSEE DID NOT GIVE TRUE AND CORRECT PICTURE AND THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ALONG WITH RELEVANT DOCUMENTS 5 WERE NOT RELIABLE. THE ASSESSING OFFICER APPLIED NET PROFIT RATE OF 8% AND WORKED OUT THE INCOME AT RS. 31,20 ,526/ - AS AGAINST THE INCOME SHOWN BY THE ASSESSEE AT RS. 2,72,957/ - . ACCORDINGLY , THE ADDITION OF RS. 28,47,569/ - WAS MADE. 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND THE SUBMISSIONS MADE BEFORE HIM HAD B EEN INCORPORATED IN PARA 2.3 OF THE IM P UG N ED ORDER WHICH ARE REPRODUCED VERBATIM AS UNDER: - REJECTION OF BOOKS OF ACCOUNTS : (GROUND NO. 1) THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT INVOKING THE PROVISIONS OF SECTION 145 (3) OF THE ACT ON THE FOLLOWING GROUNDS: SELF MADE VOUCHERS OF TRUCK HIRE EXPENSES. PROVISION OF TRUCK HIRE EXPENSES THE APPELLANT VERY HUMBLY SUBMITS THAT THE PROVISIONS OF SECTION 145(3) OF THE ACT HAVE NO APPLICATION ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND FOR THE VAR IOUS REASONS STATED HEREUNDER: THE APPELLANT VERY HUMBLY SUBMITS THAT HE HAS MAINTAINED CORRECT AND COMPLETE BOOKS OF ACCOUNTS ON MERCANTILE METHOD REGULARLY FOLLOWED BY HIM SINCE LAST SEVERAL YEARS SHOWING THE TRUE AND CORRECT AND TRANSPARENT FINANCIAL RE SULTS AS WELL AS STATE OF AFFAIRS OF THE APPELLANT. ALL TRANSACTIONS OF FREIGHT RECEIPTS AND TRUCK HIRE PAYMENTS ARE FULLY VOUCHED WITH THEIR DOCUMENTARY EVIDENCES AND ARE COMPLETELY SUPPORTED WITH EXTERNAL DOCUMENTARY EVIDENCES. ALL THE EXPENSES ARE ALSO FULLY VOUCHED WITH THEIR DOCUMENTARY EVIDENCES AND ARE SUPPORTED WITH THEIR EXTERNAL DOCUMENTARY EV IDENCES VOUCHERS. 6 THE BOOKS OF THE APPELLANT ARE REQUIRED TO BE AUDITED UNDER SECTION 44AB OF THE ACT. THE TAX AUDITOR HAS NOT POINTED OUT ANY ADVERSE QUALIFICATION IN THE TAX AUDIT REPORT. AN INDEPENDENT QUALIFIED CHARTERED ACCOUNTANT HAS AUDITED THE BOOKS OF ACCOUNTS. HE HAS ALSO REPORTED NO QUALIFICATION WITH REGARD TO THE BOOKS OF ACCOUNTS AND FINANCIAL RESULTS SHOWN BY THEM. THE APPELLANT IS ALSO SU BJECT TO LEVY OF SERVICE TAX APPLICABLE TO TRANSPORT OPERATORS. THE FINANCIAL RESULTS SHOWN BY THESE BOOKS OF ACCOUNTS HAVE BEEN DULY ACCEPTED BY THE ASSESSING AUTHORITIES ACTING UNDER THE SAID ACTS WITHOUT POINTING OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS. THE APPELLANT ALSO MAINTAINS THE TRUCK WISE AND TRIP WISE DETAILS OF FREIGHT INCOME. THE BOOKS OF ACCOUNTS MAINTAINED BY HER SHOW THE TRUE AND CORRECT AND TRANSPARENT FINANCIAL RESULTS AS WELL AS STATE OF AFFAIRS OF THE APPELLANT. THE ASSESSING OFFICER CA N VERY WELL DEDUCE THE TRUE AND CORRECT PROFIT OUT OF THEM AND COMPUTE THE TOTAL INCOME FOR THE PURPOSE OF THE ASSESSMENT UNDER THE PROVISIONS OF THE ACT. IT IS BASIC PRINCIPLE OF LAW THAT WHEN THE ASSESSEE HAS MAINTAINED THE CORRECT AND COMPLETE BOOKS OF ACCOUNTS REFLECTING THE TRUE AND CORRECT FINANCIAL RESULTS AND THE INCOME OF THE APPELLANT CAN BE SATISFACTORILY BE COMPUTED ON THE BASIS OF SUCH ACCOUNTS, THE BOOKS OF ACCOUNTS OR THE MET HOD OF MAINTAINING ACCOUNTS CAN NOT BE REJECTED. OUR VIEWS ARE WELL S UPPORTED BY THE FOLLOWING JUDICIAL DECISION: CIT VS. MODERN THEATRE LTD. (1963) 50 ITR 548 (MAD.) ST. TERESA OIL MILLS VS. STATE OF KERALA (1970) 76 ITR 365(KER.) GOODYEAR INDIA LTD., VS. ITO (2000) 113 TAXMAN 89 (DEL - T) (MAG). THE ASSESSING OFFICER HAS NEITHER POINTED OUT ANY INHERENT OR SPECIFIC DEFECTS IN THE RECEIPTS AND EXPENDITURE INCURRED BY THE APPELLANT IN NOR IMPROPRIETY IN THE METHOD OF ACCOUNTS OR NON - GENUINENESS OF THE ENTRIES MADE IN THE BOOKS OF ACCOUNTS AND, THEREFORE, THE ASSESSING OF FICER IS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. OUR RELIANCE HAS BEEN PLACED BY US ON THE FOLLOWING JUDICIAL DECISIONS FOR THIS PURPOSE: DHAKESWARI COTTON MILLS LTD. VS. CIT 26 ITR 775 (SC) CIT VS, MARGDARSHI CHIT FUND (P) L TD, (1983) 155 ITR 442 (AP) 7 ST. TERESA OIL MILLS VS. STATE OF KERALA (1970) 76 ITR 365 (KER.) ITO VS. SMT. ANSHU JAIN. (2010) 36 SOT 263 (JP - T) THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT ON THE GROUND THAT THE APPELLANT HAS MADE ADVANCE PAYMENTS OF HIRE CHARGES TO THE TRUCK DRIVERS IN CASH BY SELF - MADE VOUCHERS HAVING NO SIGNATURE OF THE RECIPIENT. IT IS VERY RESPECTFULLY FURTHER SUBMITTED THAT THE APPELLANT IS ENGAGED IN TRANSPORTATION BUSINESS HIRING TRUCKS OWNED BY OTHER P ERSONS FOR ITS BUSINESS. THE PAYMENTS OF HIRE CHARGES ARE MADE ON PIECEMEAL BASIS. SOME AMOUNT OF HIRE CHARGES ARE GIVEN BY WAY OF ADVANCE TO THE TRUCK DRIVERS AND THEREAFTER - FINAL PAYMENT IS MADE ON RECEIPT OF ACKNOWLEDGEMENT FOR DELIVERY OF GOODS ON FINA L DESTINATION. THE APPELLANT VERY HUMBLY SUBMITS THAT THE WORK OF TRUCK DRIVING IS PERFORMED BY MOST OF THE ILLITERATE DRIVERS WHO DO NOT KNOW HOW TO READ OR WRITE EXCEPT HIS SIGNATURE AND THEY DO NOT HAVE THEIR PRINTED RECEIPT BOOKS. WHEN THE PAYMENT OF A DVANCE IS MADE TO THE TRUCK DRIVER IT CAN NOT BE EXPECTED THAT THE DRIVER WOULD ISSUE A RECEIPT OR VOUCHER. IN SUCH CIRCUMSTANCES, THE ADVANCES OF TRUCK HIRE CHARGES IS PAID TO THE TRUCK DRIVER WHO DOES NOT ISSUE RECEIPT, THE AMOUNT OF ADVANCE GIVEN TO HIM IS RECORDED DAT E WISE ON THE FACE OF THE GR/BIL TY. THE GR / BILTY CONTAINS THE TRUCK NUMBER AND SIGNATURE OF THE DRIVER WHO RECEIVES THE AMOUNT OF ADVANCE. SUCH PAYMENT OF ADVANCE TO DRIVERS IS FINALLY ADJUSTED WHILE MAKING THE FINAL PAYMENT OF TRUCK HIRE CHARGES. THUS THE RECIPIENT DRIVERS HAVE FINALLY ACKNOWLEDGED EVERY PAYMENT OF ADVANCE AMOUNT MADE TO THEM ON THE GR/CONSIGNMENT NOTE AND THE GENUINENESS OF THE SELF - MADE VOUCHERS CANNOT BE DOUBTED IN ANY CASE. DHAKESWARI COTTON MILLS LTD. VS. CIT 26 ITR 7 75 (SC) CIT VS, MARGDARSHI CHIT FUND (P) LTD, (1983) 155 ITR 442 (AP) ST. TERESA OIL MILLS VS. STATE OF KERALA (1970) 76 ITR 365 (KER.) ITO VS. SMT. ANSHU JAIN (2010) 36 SOT 263 (JP - T) THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLA NT ON THE GROUND THAT THE APPELLANT HAS MADE ADVANCE PAYMENTS OF HIRE CHARGES TO THE TRUCK DRIVERS IN CASH BY SELF - MADE VOUCHERS HAVING NO SIGNATURE OF THE RECIPIENT. IT IS VERY RESPECTFULLY FURTHER SUBMITTED THAT THE APPELLANT IS ENGAGED IN 8 TRANSPORTATION BUSINESS HIRING TRUCKS OWNED BY OTHER PERSONS FOR ITS BUSINESS. THE PAYMENTS OF HIRE CHARGES ARE MADE ON PIECEMEAL BASIS. SOME AMOUNT OF HIRE CHARGES ARE GIVEN BY WAY OF ADVANCE TO THE TRUCK DRIVERS AND THEREAFTER - FINAL PAYMENT IS MADE ON RECEIPT OF ACKNO WLEDGEMENT FOR DELIVERY OF GOODS ON FINAL DESTINATION. THE APPELLANT VERY HUMBLY SUBMITS THAT THE WORK OF TRUCK DRIVING IS PERFORMED BY MOST OF THE ILLITERATE DRIVERS WHO DO NOT KNOW HOW TO READ OR WRITE EXCEPT HIS SIGNATURE AND THEY DO NOT HAVE THEIR PRIN TED RECEIPT BOOKS. WHEN THE PAYMENT OF ADVANCE IS MADE TO THE TRUCK DRIVER IT CAN NOT BE EXPECTED THAT THE DRIVER WOULD ISSUE A RECEIPT OR VOUCHER. IN SUCH CIRCUMSTANCES, THE ADVANCES OF TRUCK HIRE CHARGES IS PAID TO THE TRUCK DRIVER WHO DOES NOT ISSUE RECEIPT, THE AMOUNT OF ADVANCE GIVEN TO HIM IS RECORDED DATE WISE ON THE FACE OF THE GR/BI L TY. THE GR / BILTY CONTAINS THE TRUCK NUMBER AND SIGNATURE OF THE DRIVER WHO RECEIVES THE AMOUNT OF ADVANCE. SUCH PAYMENT OF ADVANCE TO DRIVERS IS FINALLY ADJUSTED W HILE MAKING THE FINAL PAYMENT OF TRUCK HIRE CHARGES. THUS THE RECIPIENT DRIVERS HAVE FINALLY ACKNOWLEDGED EVERY PAYMENT OF ADVANCE AMOUNT MADE TO THEM ON THE GR/CONSIGNMENT NOTE AND THE GENUINENESS OF THE SELF - MADE VOUCHERS CANNOT BE DOUBTED IN ANY CASE. E VEN THE CIVIL COURTS ARE ALSO ACCEPTING THE LEGALITY AND VALIDITY OF SUCH EVIDENCES FOR PAYMENT OF ADVANCE MONEY MADE TO THE TRUCK DRIVERS WITHOUT DOUBTING THEIR GENUINENESS AT ANY STAGE. THE ASSESSING OFFICER HAS ALSO NOT BROUGHT ANY TANGIBLE AND CONCRETE EVIDENCE ON RECORD TO PROVE THE NON - GENUINENESS .OF TRUCK HIRE EXPENSES PAID ON THE BASIS OF SELF - MADE VOUCHERS. IN THE ABSENCE OF ANY TANGIBLE EVIDENCE TO PROVE THE NON - GENUINENESS OF PAYMENT MADE BY SELF - MADE VOUCHERS FOR PAYMENT OF TRANSPORT EXPENSES, THE BOOKS OF ACCOUNTS OF THE APPELLANT CANNOT BE REJECTED. THE ASSESSING OFFICER HAS OBSERVED HAT APPELLANT HAS NOT PRODUCED THE COPIES OF GR/CONSIGNMENT NOTE ON RECORD DURING THE COURSE OF ASSESSMENT FOR VERIFICATION. THE ABOVE OBSERVATION AND/OR FINDINGS GIVEN BY THE ASSESSING OFFICER IN HIS ORDER ARE TOTALLY INCORRECT AND PATENTLY ERRONEOUS. THE APPELLANT HAD PLACED ON RECORD THE GR/CONSIGNMENT NOTE ON RECORD DURING THE COURSE OF ASSESSMENT TO PROVE THE GENUINENESS OF THE PAYMENT MADE BY THE SELF - MADE VOUCHERS TO THE TRUCK DRIVERS (SPECIMEN COPIES OF THE 9 GR MY AND SELF MADE VOUCHERS ARE ENCLOS ED FOR YOUR READY REFERENCE PLEASE). THE ASSESSING OFFICER, WITHOUT CONSIDERING THE CORROBORATING EVIDENCES, ARBITRARILY AND CAPRICIOUSLY REJECTED THE BOOKS OF ACCOUNTS INVOKING THE PROVISIONS OF SECTION 145 (3) OF THE ACT TO MAKE THE FURTHER ADDITION TO T HE RETURNED INCOME OF THE APPELLANT. THE REJECTION OF BOOKS MADE BY THE ASSESSING OFFICER IS, THEREFORE, LIABLE TO BE QUASHED . THE ASSESSING OFFICER HAS OBSERVED THAT THE VOUCHERS FOR EXPENSES WERE PREPARED WITH PENCIL AND THEN OVER WRITTEN BY PEN. THE APP ELLANT VERY HUMBLY SUBMITS THAT OVERWRITING CANNOT BY ITSELF BE THE BASIS OF REJECTION OF BOOKS OF ACCOUNTS UNLESS THESE ARE CORROBORATED WITH SOME OTHER MATERIAL OR EVIDENCES. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL OR EVID ENCE TO CORROBORATE THE OVERWRITING AND, THEREFORE, THE BOOKS OF ACCOUNTS OF THE APPELLANT CANNOT BE REJECTED ON THE GROUND OF OVERWRITING, OUR RELIANCE WAS PLACED ON THE FOLLOWING JUDICIAL DECISION FOR THIS PURPOSE: THE APPELLANT VERY RESPECTFULLY FURTHER SUBMITS THAT WHERE THE ASSESSING OFFICER HAS NOT DOUBTED THE GENUINENESS OF THE TRANSPORTATION WORK DONE AND TOTAL PAYMENT MADE FOR SUCH WORK AS A WHOLE AND THEREFORE, THE GENUINENESS THE SELF MADE VOUCHERS CANNOT BE DOUBTED WHICH ARE FINALLY SIGNED BY T HE DRIVER AND ACKNOWLEDGES THE RECEIPT OF PAYMENT ON THE GR/CONSIGNMENT NOTE. THE VARIOUS FACTS STATED ABOVE OSTENSIBLY PROVES THAT THE PAYMENT MADE BY SELF - MADE VOUCHERS (AS REPRODUCED IN THE ASSESSMENT ORDER ) ARE DULY SUPPORTED WITH THEIR DOCUMENTARY EV IDENCES AND DULY ACKNOWLEDGED BY THE RECIPIENTS AND THE BOOKS OF ACCOUNTS OF THE APPELLANT CANNOT BE REJECTED BY THE ASSESSING OFFICER BASED ON THE GROUND OF NON - GENUINENESS OF SELF - MADE VOUCHERS. OUR RELIANCE HAS BEEN PLACED ON THE FOLLOWING JUDICIAL DECI SION FOR THIS PURPOSE: LEADER TRANSPORT CO. VS. ITO (2010) 6 ITR 229 (AHD - T) THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT THE APPELLANT HAS MADE THE PAYMENT OF HIRE CHARGES IN CASH TO THE TRUCK DRIVERS /TRUCK OPERATORS IN EXCESS OF THE LIMIT OF RS. 20000/ - (RS. 35000/ - IN CASE OF PAYMENT FOR PLYING, HIRING, OR LEASING GOODS CARRIAGE) OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR BY AN ACCOUNT PAYEE BANK DRAFT AND, THEREFORE, THE PROVISIONS OF SECTION 43A(3) OF THE ACT ARE CLEARLY APPLICABLE. SECTION 43 A(3) OF THE ACT PROVIDES THAT WHERE THE ASSESSEE INCURS ANY 10 EXPENDITURE IN RESPECT OF WHICH PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR BY AN ACCOUNT PAYEE BANK DRAFT EXCEEDS THE LIMIT OF RS. 200 00/ - (RS. 35000/ - IN CASE OF PAYMENT FOR PLYING, HIRING, OR LEASING GOODS CARRIAGE), NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. IN THE PRESENT CASE, THE AGGREGATE PAYMENT OF TRUCK HIRE CHARGES (AS REPRODUCED IN ASSESSMENT ORDER) MADE IN C ASH TO THE TRUCK DRIVER/TRUCK OPERATOR IN A DAY, IS BELOW THE LIMITS OF RS. 20000/ - (RS. 35000/ - IN CASE OF PAYMENT FOR PLYING, HIRING, OR LEASING GOODS CARRIAGE) AND, THEREFORE, THE PROVISIONS OF SECTION 40A(3) OF THE ACT HAVE NO APPLICATION. OUR RELIANCE HAS BEEN PLACED ON THE FOLLOWING JUDICIAL DECISION FOR THIS PURPOSE: LEADER TRANSPORT CO. VS. ITO (2010) 6 ITR 229 (AHD - T) THE APPELLANT VERY RESPECTFULLY FURTHER SUBMITS THAT WHERE THE INCOME HAS BEEN ASSESSED BY REJECTING THE BOOKS OF ACCOUNTS OF THE A PPELLANT UNDER SECTION 145 OF THE ACT, THE ASSESSING OFFICER CAN NOT APPLY THE PROVISIONS OF SECTION 40A(3) OF THE ACT OUR RELIANCE HAS BEEN PLACED ON THE FOLLOWING JUDICIAL DECISION FOR THIS PURPOSE: CIT VS. G.K. CONTRACTOR (2009) 19DTR 305 (RAJ.) CIT VS. BANWARILAL BANSHIDHAR (1998) 229 ITR 229 (ALL.) ITO VS. NARDEV KUMAR GUPTA (2013) 22 ITR 273 (JP - T) JAGDISH LA L VS. ITO (2004) 94 TTJ1119 (JODH - T) ITO VS. D. D. HAZARE (1994) 48 ITD 595 (BOM - T) SENZO ENGINEERING (P) LTD, VS. ITO (2007) 18 SOT 577 (MUMBAI - T) THE ASSESSING OFFICER HAS ALSO OBSERVED THAT IF THE TRUCK STARTS FROM ONE DESTINATION TO ANOTHER POINT THEN HOW THE APPELLANT WOULD MAKE THE PAYMENT PARTLY IN 2 - 3 DAYS. THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT THE APPELLANT HAS MADE THE ENTRIES OF ADVANCE GIVEN TO DRIVERS IN ONE SITTING TO AVOID THE IMPACT OF SECTION 40A(3) OF THE ACT. THE OBSERVATION, FINDING AND ALLEGATION MADE BY THE ASSESSING OFFICER IN HIS ORDER AND THE INFERENCES AND CONCLUSION DRAWN BY HIM ARE TOTALLY INCORRECT AND PATENTLY ERRONEOUS BASED ON MERE ASSUMPTION AND PRESUMPTION, SURMISES AND CONJECTURES PURE GUESS AND DOUBTS, HYPOTHETICAL AND IMAGINARY GROUNDS AND WITHOUT ANY EVIDENCE ON RECORD AND THE SAME ARE 11 LIABLE TO BE QUASHED. IT IS RESPECTFULLY SUBMITTED THAT THE APPELLANT HAD MAINTAINED ITS OFFICES/SUB OFFICES AT EVERY PLACE OF ORIGIN (I.E. RABRIYAWAS, ROORAKEE AND PANIPAT) TO TRANSPORT CLINKER AND PET COKE THE APPELLANT HAS MADE THE ADVANCE TO TRUCK DRIVERS FROM EVERY PLACE OF ORIGIN AFTER RECORDING SUCH ADVANCE ON THE GR I CONSIGNMENT NOTE AND IN THE BOOKS OF ACCOUNTS . THUS EVERY PAYMENT OF ADVANCE MADE TO THE TRUCK DRIVERS IS DULY SUPPORTED WITH ITS CORROBORATING EVIDENCE. THE REJECTION OF BOOKS MADE BY THE ASSESSING OFFICER ON THE BASIS OF NON - GENUINENESS OF SE LF - MADE VOUCHERS IS, THEREFORE, LIABLE TO BE QUASHED. THE ASSESSING OFFICER HAS REJECTED THE BOOK OF ACCOUNTS OF THE APPELLANT ON THE GROUND THAT THE APPELLANT HAS MADE THE PROVISION OF OUTSTANDING LIABILITY OF TRUCK HIRE CHARGES OF RS. 9,41,358/ - TO THE H IRED TRUCK OPERATORS AT THE END OF THE YEAR DESPITE OF THE FACT THAT THE APPELLANT WAS HAVING SUFFICIENT AND ADEQUATE FUNDS WITH HER. IT IS VERY RESPECTFULLY SUBMITTED THAT THE APPELLANT HAS MAINTAINED HER BOOKS OF ACCOUNTS ON MERCANTILE METHOD OF ACCOUNTI NG REGULARLY FOLLOWED BY HER SINCE LAST SEVERAL YEARS SHOWING THE TRUE AND CORRECT FINANCIAL RESULTS AS WELL AS STATE OF AFFAIRS OF HER BUSINESS. IT IS WELL - RECOGNIZED PRINCIPLE OF MERCANTILE SYSTEM OF ACCOUNTING THAT ALL ASCERTAINED OUTSTANDING LIABILITY SHOULD BE PROVIDED IN THE BOOKS OF ACCOUNTS AT THE END OF THE YEAR TO DISCLOSE THE TRUE AND CORRECT FINANCIAL RESULTS AS WELL AS STATE OF AFFAIRS OF THE BUSINESS. THERE WAS ASCERTAINED OUTSTANDING LIABILITY OF TRUCK HIRE OF RS. 9.41,358/ - AT THE END OF THE YEAR OF APPEAL. THE APPELLANT HAS CORRECTLY MADE THE PROVISION OF SUCH OUTSTANDING LIABILITY OF TRUCK HIRE OF RS.. 9,41,358/ - AT THE END OF THE YEAR FOLLOWING THE RECOGNIZED PRINCIPLES OF MERCANTILE SYSTEM OF ACCOUNTING TO DISCLOSE THE TRUE AND CORRECT ST ATE OF AFFAIRS OF HER BUSINESS, SUCH OUTSTANDING LIABILITY OF TRUCK HIRE OF RS. 9,41,358 / - HAS BEEN PAID IN THE SUBSEQUENT YEAR AFTER OBTAINING THE SIGNATURE OF THE RECIPIENT . THUS EVERY PAYMENT MADE BY SELF - MADE VOUCHERS (AS REPRODUCED IN THE ASSESSMENT O RDER) ARE DULY SUPPORTED WITH THEIR DOCUMENTARY EVIDENCES AND DULY ACKNOWLEDGED BY THE RECIPIENTS AND, THEREFORE, THE BOOKS OF ACCOUNTS OF THE APPELLANT CANNOT BE REJECTED ON THE GROUND MAKING PROVISION FOR TRUCK HIRE IN THE BOOKS OF ACCOUNTS OF THE APPELL ANT. 12 THE ASSESSING OFFICER HAS OBSERVED THAT THE APPELLANT HAS NOT MADE THE PAYMENT OF OUTSTANDING LIABILITY OF TRUCK HIRE DESPITE OF ADEQUATE FUNDS WITH HER. THE APPELLANT VERY RESPECTFULLY SUBMITS THAT IT IS THE RESPONSIBILITY OF THE APPELLANT IN WHAT MANNER SHE CAN EFFECTIVELY MANAGE HER BUSINESS FUNDS KEEPING IN VIEW THE COMMERCIAL EXPEDIENCY OF HER BUSINESS AFFAIRS. THE ASSESSING OFFICER HAS NO JURISDICTION TO ENQUIRE THE REASONS FROM THE APPELLANT THAT WHY SHE HAS MADE THE PROVISION FOR LIABILITY OF TRUCK HIRE CHARGES IN HER BOOKS OF ACCOUNTS . WITHOUT MAKING PAYMENT OF OUTSTANDING LIABILITY OF TRUCK HIRE OUT OF THE REALIZATION OF THE FREIGHT FROM THE AMBUJA CEMENT LTD. THUS THE APPELLANT HAS CORRECTLY MADE THE PROVISION OF OUTSTANDING LIABILITY OF TR UCK HIRE IN HER BOOKS OF ACCOUNTS, WHICH DOES NOT RENDER THE BOOKS OF ACCOUNTS OF THE APPELLANT AS DEFECTIVE AND LIABLE FOR REJECTION. THE APPELLANT VERY HUMBLY FURTHER SUBMITS THAT IF THE APPELLANT HAS MADE ANY INCORRECT CLAIM OF DEDUCTION OF EXPENSES, TH E ASSESSING OFFICER COULD HAVE MADE THE INDEPENDENT ADDITION OF THEM DESPITE OF REJECTION OF BOOKS OF ACCOUNTS. THE APPELLANT VERY RESPECTFULLY SUBMITS THAT SHE HAS PROPERLY MAINTAINED THE BOOKS OF ACCOUNTS RECORDING THE GENUINE PAYMENT OF TRUCK HIRE EXPEN SES DULY SUPPORTED WITH THEIR EXTERNAL DOCUMENTARY EVIDENCES AND ACKNOWLEDGEMENT OF THE RECIPIENTS. THE APPELLANT VERY RESPECTFULLY FURTHER SUBMITS THAT BOOKS OF ACCOUNTS OF THE APPELLANT HAVE BEEN AUDITED BY THE QUALIFIED AUDITOR AND NO ADVERSE OBSERVATIO NS HAVE BEEN MADE BY THE STATUTORY AUDITOR IN RESPECT OF THE TRUCK HIRE EXPENSES. THE ASSESSING OFFICER CAN VERY WELL DEDUCE THE TRUE AND CORRECT PROFIT OUT OF THEM AND COMPUTE THE TOTAL INCOME FOR THE PURPOSE OF THE ASSESSMENT UNDER THE PROVISIONS OF THE ACT. THE ASSESSING OFFICER HAS ARBITRARILY CAPRICIOUSLY AND VINDICTIVELY REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT INVOKING THE PROVISIONS OF SECTION 145 (3) OF THE ACT AND, THEREFORE, THE REJECTION OF BOOKS MADE BY THE ASSESSING OFFICER IS TOTALLY INCORRECT AND PATENTLY ERRONEOUS AND THE SAME IS LIABLE TO BE QUASHED. THE ASSESSING OFFICER HAS RELIED ON THE JUDGMENT OF HONBLE HIGH COURT OF KERALA IN THE CASE OF MANI & CO., VS. CIT (2002) 256 ITR 373 (KER) INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT AND REJECTING THE BOOKS OF 13 ACCOUNTS OF THE APPELLANT. THE APPELLANT VERY RESPECTFULLY SUBMITS THAT THE FACTS OF THE APPELLANTS CASE ARE CLEARLY DISTINCT AND DISTINGUISHABLE FROM THE FACTS OF THE ABOVE JUDGMENT AND, THEREFORE, THE RATIO OF THE ABO VE JUDGMENT HAS NO APPLICATION ON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. THE APPELLANT HAS PRODUCED THE BOOKS OF ORIGINAL ENTRIES BEFORE THE ASSESSING OFFICER AND HE DULY EXAMINED THE SAME. ALL THE - EXPENSES ARE PROPERLY VOUCHED BY THE QUALIFIED A UDITOR AND DULY SUPPORTED WITH EXTERNA L DOCUMENTARY EVID ENCES . ALL THE DOCUMENTS HAVE BEEN PREPARED AND KEPT ON DAILY BASIS IN THE COURSE OF DAY - TO - DAY BUSINESS ACTIVITIES THE APPELLANT VERY RESPECTFULLY SUBMITS THAT SHE HAS MARINATED CORRECT AND COMPLETE BOOKS OF ACCOUNTS FULLY VOUCHED AND FULLY SUPPORTED WITH THEIR DOCUMENTARY EVIDENCES. THE ASSESSING OFFICER CAN VERY WELL DEDUCE THE TRUE AND CORRECT PROFIT OUT OF THEM AND COMPUTE THE TOTAL INCOME FOR THE PURPOSE OF THE ASSESSMENT UNDER THE PROVISIONS OF THE ACT AND, THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN REJECTING BOOKS OF ACCOUNTS OF THE APPELLANT AND ESTIMATING THE TRADING PROFIT. THE ASSESSING OFFICER HAS OBSERVED THAT THE DOCUMENTS PRODUCED BEFORE HIM APPARENTLY APPEARS TO HAVE BEEN PRE PARED AFRESH AND IT DOES NOT HAVE THE ORIGINAL ENTRIES KEPT IN THE DAY TO DAY BUSINESS ACTIVITIES ON DAILY BASIS AND THE BOOKS OF ACCOUNTS ARE HAVING STRING OF DEFICIENCIES AND TRUE PROFIT CANNOT BE ASCERTAINED. THE OBSERVATION, FINDINGS AND/OR ALLEGATIONS MADE BY THE ASSESSING OFFICER THAT DOCUMENTS PRODUCED BEFORE HIM APPARENTLY APPEARS TO HAVE BEEN PREPARED AFRESH AND IT DOES NOT HAVE THE ORIGINAL ENTRIES KEPT IN THE DAY TO DAY BUSINESS ACTIVITIES ON DAILY BASIS AND THE BOOKS OF ACCOUNTS ARE HAVING STRIN G OF DEFICIENCIES AND TRUE PROFIT CANNOT BE ASCERTAINED ARE TOTALLY INCORRECT AND PATENTLY ERRONEOUS BASED ON MERE ASSUMPTIONS AND PRESUMPTIONS, SURMISES AND CONJECTURES, PURE GUESS,, DOUBTS, SUSPICION, MALAFIDE AND BASED ON IRRELEVANT AND EXTRANEOUS CONSI DERATIONS, HYPOTHETICAL AND IMAGINARY GROUNDS AND THE SAME ARE LIABLE TO QUASHED. IN VIEW OF THE FOREGOING REASONS THE APPELLANT VERY HUMBLY STATES THAT THE ASSESSING OFFICER HAS ARBITRARILY REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT ON HYPOTHETICAL A ND FICTITIOUS GROUNDS AND ESTIMATED THE TRADING 14 PROFIT, THE REJECTION OF BOOKS MADE BY THE ASSESSING OFFICER MAY KINDLY BE QUASHED. ADDITION OF TRADING PROFIT: RS. 28,47,569/ - (GROUND NO. 2) THE APPELLANT IS AUTHORIZED TRANSPORTER OF M/S AMBUJA CEMENT LTD, UNIT RABRIYAWAS, DISTRICT - PALI AND DERIVES HER INCOME FROM TRANSPORTATION BUSINESS. THE APPELLANT HAS MAINLY TRANSPORTED - THE CLINKER FROM ITS FACTORY TO ITS ROORAKEE UNIT AND PET - COKE FROM PANIPAT TO ITS FACTORY DURING THE YEAR UNDER APPEAL. THE APPE LLANT IS NOT HAVING ANY TRUCK WITH HIM. SHE HIRES THE TRUCKS OWNED BY OTHER PERSONS FROM THE OPEN MARKET FOR THE PURPOSE OF TRANSPORTATION OF CLINKER AND PET - COKE. THE APPELLANT VERY HUMBLY SUBMITS THAT SHE HAS MAINTAINED CORRECT AND COMPLETE BOOKS OF ACC OUNTS ON MERCANTILE METHOD REGULARLY FOLLOWED BY HER SINCE LAST SEVERAL YEARS SHOWING THE TRUE AND CORRECT AND TRANSPARENT FINANCIAL RESULTS AS WELL AS STATE OF AFFAIRS OF THE APPELLANT. ALL TRANSACTIONS OF FREIGHT RECEIPTS AND TRUCK HIRE PAYMENTS ARE MAIN TAINED TRUCK WISE AND FULLY VOUCHED WITH THEIR DOCUMENTARY EVIDENCES AND ARE COMPLETELY SUPPORTED WITH EXTERNAL DOCUMENTARY EVIDENCES. THE BOOKS OF THE APPELLANT ARE REQUIRED TO BE AUDITED UNDER SECTION 44AB OF THE ACT. THE TAX AUDITOR HAS NOT POINTED OUT ANY ADVERSE QUALIFICATION IN THE TAX AUDIT REPORT. AN INDEPENDENT QUALIFIED CHARTERED ACCOUNTANT HAS AUDITED THE BOOKS OF ACCOUNTS. HE HAS ALSO REPORTED NO QUALIFICATION WITH REGARD TO THE BOOKS OF ACCOUNTS AND FINANCIAL RESULTS SHOWN BY THEM. THE BOOKS OF ACCOUNTS MAINTAINED BY HIM SHOW THE TRUE AND CORRECT AND TRANSPARENT FINANCIAL RESULTS AS WELL AS STATE OF AFFAIRS OF THE APPELLANT. THE ASSESSING OFFICER CAN VERY WELL DEDUCE THE TRUE AND CORRECT PROFIT OUT OF THEM AND COMPUTE THE TOTAL INCOME FOR THE PU RPOSE OF THE ASSESSMENT UNDER THE PROVISIONS OF THE ACT. DURING THE YEAR UNDER APPEAL, THE APPELLANT HAS CORRECTLY DECLARED THE GROSS PROFIT OF RS.5,48,944/ - AND NET PROFIT OF RS. 2,72,957/ - AGAINST THE TOTAL FREIGHT RECEIPTS OF RS. 3,90,06,586/ - RESULTING T HE GROSS PROFIT RATE OF 1.40% 15 AND NET PROFIT RATE OF 0.69% OF THE TOTAL RECEIPTS. THE APPELLANT HAS DECLARED THE TRUE, CORRECT RATE OF NET PROFIT ARRIVED ON TOTAL RECEIPT OF FREIGHT ON THE BASIS OF BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT ON REGULARLY EMPLOYED SYSTEM OF ACCOUNTING. THE ASSESSING OFFICER HAS NEITHER POINTED OUT ANY INHERENT OR SPECIFIC DEFECTS IN THE RECEIPTS AND EXPENDITURE INCURRED BY THE APPELLANT NOR IMPROPRIETY IN THE METHOD OF ACCOUNTS OR NON - GENUINENESS OF THE ENTRIES MADE IN THE BOOKS OF ACCOUNTS, HOWEVER, THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT ON ARBITRARY, FICTITIOUS, FABRICATED, HYPOTHETICAL, IMAGINARY PRESUMPTIVE GROUNDS INVOKING THE PROVISIONS OF SECTION 145 (3) OF THE ACT. THE ASSESSING OFFICER HAS ESTIMATED THE NET PROFIT OF RS. 31,20,526/ - A P PLYING THE ASSUMED RATE OF 8% OF TOTAL FREIGHT RECEIPTS. THE ASSESSING OFFICER HAS MADE THE ADDITION OF TRADING PROFIT OF RS. 28,47,569/ - (RS. 31,20,526 1 - MINUS RS. 2,72,957/ - ) TO THE RETURNED INCOME OF THE APPELLANT. THE PRESUMED RATE OF NET PROFIT AT 8% OF TOTAL RECEIPT OF FREIGHT BY THE ASSESSING OFFICER IS ARBITRARY, FICTITIOUS, BASED ON MERE ASSUMPTIONS AND PRESUMPTIONS, SURMISES AND CONJECTURES, PURE GUESS, DOUBTS, SUSPICION, MALAFIDE AND BASED ON IRRELEVANT AND EXTRANEOUS CONSIDERATIONS, HYPOTHETICAL AND IMAGINARY GROUNDS AND THE SAME IS LIABLE TO QUASHED. THE ASSESSING OFFICER HAS NOT MENTIONED ANY BASIS AND I OR PARAMETERS FOR SUCH PRESUMPTION MADE BY HIM HE HAS ALSO NOT MENTIONED ANY GROUND O F HIS PRESUMPTION THAT HOW AND IN WHAT MANNER HE HAS ESTIMATED THE NET PROFIT RATE OF 8% OF THE TOTAL RECEIPT OF FREIGHT NEITHER MORE NOR LESS. THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY COGENT AND WORTHWHILE MATERIAL AND I OR CONCRETE EVIDENCE IN SUPPORTS HIS PRESUMPTION FOR ASSUMING RATE OF NET PROFIT AT 8% OF TOTAL RECEIPT OF FREIGHT. THE NET PROFIT RATE OF 8% ESTIMATED BY THE ASSESSING OFFICER IS TOTALLY INCORRECT, PATENTLY ERRONEOUS, ARBITRARY, AND FICTITIOUS, WITHOUT ANY BASIS AND EVIDENCE AN D THE SAME IS LIABLE TO QUASHED. HE HAS ALSO NOT MENTIONED ANY GROUND THAT HOW AND IN WHAT MANNER HE HAS ESTIMATED THE PROFIT OF RS. 28,47,569/ - FOR MAKING THE ADDITION OF TRADING PROFIT TO THE RETURNED INCOME OF THE APPELLANT. THE APPELLANT VERY HUMBLY FU RTHER SUBMITS THAT SHE HAS MAINTAINED CORRECT AND COMPLETE BOOKS OF ACCOUNTS ON MERCANTILE METHOD REGULARLY EMPLOYED 16 BY HER SINCE LAST SEVERAL YEARS SHOWING THE TRUE AND CORRECT PROFIT. FURTHER THERE IS NO MATERIAL BROUGHT ON RECORD TO SHOW THAT THE APPELL ANT HAD NOT DECLARED THE TRUE PROFIT DURING THE YEAR UNDER APPEAL. IN THE ABSENCE OF ANY COGENT AND WORTHWHILE MATERIAL AND/OR CONCRETE EVIDENCE ON RECORD TO PROVE THAT THE APPELLANT HAD NOT DECLARED THE TRUE AND CORRECT PROFIT IN HER BOOKS OF ACCOUNTS, TH E ASSUMED RATE OF 8% NET PROFIT IS LIA B LE TO BE QUASHED. THE ASSESSING OFFICER HAS ADDED THE TRADING PROFIT OF RS. 28,47,569/ - TO THE RETURNED INCOME OF THE APPELLANT SOLELY ON THE BASIS OF PRESUMED RATE OF 8% NET PROFIT OF THE TOTAL FREIGHT RECEIPTS . THUS IT IS OSTENSIBLY CLEAR THAT THE ASSESSING OFFICER HAS MADE THE ADDITION OF TRADING PROFIT OF PROFIT OF RS. 28,47,569 / - TO THE RETURNED INCOME OF THE APPELLANT MERE ON ASSUMPTIONS AND PRESUMPTIONS, SURMISES AND CONJECTURES, PURE GUESS, DOUBTS, SUSPICIO N, MALAFIDE, WITHOUT ANY CONCRETE EVIDENCE ON RECORD AND BASED ON HYPOTHETICAL AND IMAGINARY GROUNDS AND THE ADDITION OF TRADING PROFIT OF RS. 28,47,569/ - MADE BY THE ASSESSING OFFICER IS TOTALLY INCORRECT, PATENTLY ERRONEOUS, ARBITRARY, FICTITIOUS, WITHOU T ANY BASIS AND EVIDENCE AND SAME IS LIABLE TO BE DELETED. IT IS WELL SETTLED POSITION OF LAW THAT THE ASSESSING OFFICER CANNOT MAKE THE ADDITION/DISALLOWANCE OF INCOME/EXPENSES ON MERE ASSUMPTIONS AND PRESUMPTIONS, PURE GUESS, DOUBTS AND SUSPICIONS AND ESTIMATES. OUR RELIANCE HAS BEEN PLACED ON THE FOLLOWING JUDICIAL DECISIONS FOR THIS PURPOSE: DHAKESHWARI COTTON MILLS LTD. VS. CIT (1954) 26 ITR 775 (SC) DHIRAJ LAI GIRDHARI LAI VS. CIT (1954) 26 ITR 726 (SC) LAI CHAND BHAGAT AMBIKA RAM VS. CIT (1959) 37 ITR 288 (SC) OMAR SALAY MOHAMMED SAID VS. CIT (1959) 37 ITR 151 (SC) IT IS VERY RESPECTFULLY FURTHER SUBMITTED THAT THE ADDITION AND/OR DISALLOWANCES OF INCOME MADE ON THE BASIS OF MERE PRESUMPTION OR ESTIMATE, HOWEVER, STRONG AND WELL FOUNDED IT MAY BE, C ANNOT SUSTAIN IN THE EYE OF LAW AND BY ITSELF WOULD NOT TAKE THE PLACE OF EVIDENCE AND CONSTITUTE MATERIAL FOR HOLDING THE VALIDITY OF SUCH ADDITION AND OR DISALLOWANCE. OUR RELIANCE HAS BEEN PLACED ON THE FOLLOWING JUDICIAL DECISION FOR THIS PURPOSE. UMA CHARAN SHAH & BROS. VS. CIT (1959) 37 ITR 271 (SC) THE APPELLANT RESPECTFULLY STATES THAT IN THE PRESENT CASE, THE ADDITION OF 17 TRADING PROFIT OF RS. 28,47,569/ - MADE BY THE ASSESSING OFFICER IS FACTUALLY INCORRECT, PATENTLY ERRONEOUS SOLELY BASED ON THE PRE SUMED RATE OF NET PROFIT FACTUALLY INCORRECT AND PATENTLY ERRONEOUS, THEREFORE, THE ADDITION OF TRADING PROFIT OF RS. 28,47,569/ - MADE BY THE ASSESSING OFFICER IS UNWARRANTED AND UNSUSTAINABLE IN LAW AS WELL AS FACTS OF THE CASE AND THE SAME IS LIABLE TO BE DELETED. FOR THE VARIOUS REASONS STATED ABOVE, THE APPELLANT VERY HUMBLY STATES THAT THE ASSESSING OFFICER HAS MADE THE ADDITION OF TRADING PROFIT OF PROFIT OF RS. 28,47,569/ - TO THE RETURNED INCOME OF THE APPELLANT MERELY ON ASSUMPTIONS AND PRESUMPTIONS, SURMISES AND CONJECTURES, PURE GUESS, DOUBTS, SUSPICION, AND ON HYPOTHETICAL AND IMAGINARY GROUNDS, WITHOUT ANY CONCRETE EVIDENCE ON RECORD AND, THEREFORE, THE ADDITION OF TRADING PROFIT OF RS. 28,47, 569/ - MADE BY THE ASSESSING OFFICER IS LIABLE TO BE DEL ETED.. 6 . THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT MOST OF THE FREIGHT CHARGES WHICH WERE MORE THAN 97% OF THE GROSS TRANSPORTATION RECEIPTS WERE PLACED ON THE SELF MADE BILLS/VOUCHERS EITHER PREPARED BY THE ASSESSEE OR BY THE EMPLOYEES OF THE ASSESSEE AND THAT THE BILL AMOUNT MENTIONED IN GR HAD BEEN PAID IN CASH IN TWO OR THREE INSTALLMENTS AFTER PREPARING SELF MADE VO UCHERS FOR EACH TRIP OF THE TRUCKS THROUGH WHICH THE TRANSPORTATION HAD BEEN MADE BY THE ASSESSEE . THE LD. CIT(A) HELD THAT THE ASSESSING OFFICER WAS JUSTIFIED FOR INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT BY OBSERVING THAT THERE WAS EVERY POSS IBILITY IN CLAIMING THE EXPENDITURE OTHER THAN ACTUALLY INCURRED AS MOST OF THE EXPENSES CLAIMED WERE BASED ON SELF MADE VOUCHERS AS ADMITTED BY THE ASSESSEE. AS REGARDS 18 APPLICATION OF NET PROFIT RATE OF 8% ON DECLARED GROSS TRANSACTION RECEIPTS, THE LD. CIT(A) OBSERVED THAT IT WAS ON HIGHER SIDE BECAUSE OF THE FACT THAT THE ASSESSEE DID NOT OWN ANY TRANSPORTATION VEHICLE OF HER OWN AND THERE WAS NO FIXED RATE OF FREIGHT FOR THE TRUCK HIRED BY HER FOR THE TRANSPORTATION AS SHE HAD NOT ENTERED INTO THE CONTRACT WITH THE TRUCK OWNERS AND THEREFORE, SHE HAD TO HIRE THE TRUCKS FROM THE MARKET CONSIDERING THE URGENCY/BUSINESS EXPEDIENCY AND IN SPECIAL SITUATION, SHE HAD TO PAY HIGHER HIRE CHARGES TO THE TRUCK OWNERS / DRIVERS THAN THE RATE EXISTING IN THE MARKET . LD. CIT(A) ALSO OBSERVED THAT THE ASSESSING OFFICER HAD NOT GIVEN ANY COMPARABLE CASE IN WHICH NET PROFIT OF 8% HAD BEEN DECLARED BY THE ASSESSEE DOING THE SAME BUSINESS AND HAD ALSO NOT MADE ANY COMPARISON WITH THE NET PROFIT RATE DECLARED BY THE ASSESSEE HERSELF IN THE PREVIOUS YEAR AND THEREFORE, IT WAS NOT A CASE OF THE ASSESSING OFFICER THAT THE NET PROFIT DECLARED IN THE YEAR UNDER CONSIDERATION WAS LOW IN COMPARISON TO THE PREVI OUS YEAR. THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO APPLY NET PROFIT RATE OF 5% AS AGAINST 0.6% DECLARED BY THE ASSESSEE . ACCORDINGLY, ADDITION OF RS. 16,77,372/ - WAS SUSTAINED OUT OF THE ADDITION OF RS. 28,47,969/ - . NOW BOTH THE PARTIES ARE IN A PPEAL. 19 7 . LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER DATED 04/03/2013. 8 . IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE ASSESSEE WAS EARNING COMMISSION INCOME ONLY, THEREFORE, THE APPLICATION OF NET PROFIT RATE BY THE ASSESSING OFFICER AND THE LD. CIT(A) WAS NOT JUSTIFIED. IT WAS FU RTHER STATED THAT THE ADDITION SUSTAINED BY THE LD. CIT(A) WAS HIGHLY EXCESSIVE AND ARBITRARY. 9 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, IT IS AN ADMITTED FA CT THAT MOST OF THE FREIGHT EXPENSES WHICH W ERE ABOUT 97% OF THE TO T AL RECEIPTS WERE MADE BY THE ASSESSEE THROUGH SELF MADE VOUCHERS, T HEREFORE, THOSE WERE NOT SUBJECT TO VERIFICATION . IT IS ALSO NOTICED THAT THE ASSESSEE HIMSELF CLAIMED THE FREIGHT EXPENSES OF RS. 3,79,87,332/ - AS AGAINST THE TRANSPORTATION RECEIPTS OF RS. 3,90,06,586/ - . THEREFORE, THIS PLEA OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE EARNED COMMISSION INCOME ONLY, IS NOT ACCEPTABLE. IN THE 20 PRESENT CASE , THE ASSESSING OFFICER POINTED OUT CERTAIN DEFECTS IN THE BOOKS OF ACCOUNTS AND THE EXPENSES WERE NOT FULLY VERIFIABLE. THEREFORE, THE PROVISIONS OF SECTION 145(3) OF THE ACT WERE RIGHTLY INVOKED BY THE ASSESSING O FFICER AND T HE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER FOR REJECTING THE BOOKS OF ACCOUNTS. IT IS WELL SETTLED WHEN THE BOOKS ARE REJECTED, THE ONLY PROPER WAY TO WORK OUT THE BUSINESS PROFIT IS APPLICATION OF REASONABLE GROSS PROFIT/NET PROFIT RATE. IN THE PRESENT CASE , THE ASSESSING OFFICER APPLIED 8% NET PROFIT RATE WITHOUT ANY BASIS OR CITING THE COMPARABLE CASE. THE SAME WAS CONSIDERED BY THE LD. CIT(A) AS EXCESSIVE AND IN TURN, HE CONSIDERED IT FAIR AND REASONABLE TO APPLY NET PROFIT RATE OF 5%. HOWEVER, HE HAD ALSO NOT GIVEN ANY COMPARABLE CASE IN SUPPORT OF HIS ESTIMATE. IN THE PRESENT CASE , NEITHER THE LD. CIT(A) NOR THE ASSESSING OFFICER HAS DISCUSSED THE PAST HISTORY OF THE CASE AND EVEN NOTHING IS AVAILABLE ON RECORD THAT WHAT WAS THE NET PROFIT RATE DECLARED BY THE ASSESSEE IN THE PRECEDING OR SUCCEEDING YEARS. HOWEVER, CONSIDERING THE NATURE OF BUSINESS, THE NET PROFIT RATE OF 5% APPEARS TO BE HIGHLY EXCESSIVE. AT THE SAME TIME, NET PROFIT OF 0.69% WAS NOT ACCEPTED EITHER BY THE ASSESSING OFFICER OR BY THE LD. CIT(A) FOR THE REASON THAT THE EXPENSES CLAIMED BY THE ASSESSEE WERE NOT SUBJECT TO VERIFICATION. WE THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AS 21 DISCUSSED HEREINABOVE AND TO MEET THE ENDS OF JUSTICE, ARE OF THE VIEW THAT THE NET PROFIT OF 2 % TO THE DECLARED GROSS RECEIPTS WOULD MEET THE ENDS OF JUSTICE. ACCORDINGLY , WE MODIFY THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO APPLY NET PROFIT OF 2 % INSTEAD OF 5% SUSTAINED BY THE LD. CIT(A). 10 . IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED AND THAT OF THE ASSESSEE IS PARTLY ALLOWED . ( ORDER PRONOUNCED IN THE COURT ON 30 TH JULY , 201 4) . SD/ - SD/ - ( HARI OM MARATHA ) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 28 TH JULY , 201 4 . VR/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR .