ITO, Faridabad V. M/s Superior Road Lines, Faridabad

ITA 3021/DEL/2011

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4482 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 24-04-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 08-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Keywords: Unexplained investment; Business income; Depreciation; Principle of natural justice; Non compliance
• Section: 142(1); 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH 'G', NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOU NTANT MEMBER ITA NOS. 2827 & 2828/DEL/2011 ASSESSMENT YEARS: 2003-04 & 2004-05 M/S SUPERIOR ROADLINES VS. INCOME TAX OFFICER, 16/5, MATHURA ROAD, WARD 1(1), FARIDABAD-121002 FARIDABAD (PAN: AAOFS7696F) (APPELLANT) (RESPONDENT) ITA NOS. 3021 & 3022/DEL/2011 ASSESSMENT YEARS: 2003-04 & 2004-05 ITO, WARD 1(1), VS. M/S SUPERIOR ROADLINES, FARIDABAD, B-BLOCK, 16/5, MATHURA ROAD, NEW CGO COMPLEX NH-IV, FARIDABAD FARIDABAD ASSESSEE BY : NONE DEPARTMENT BY : SH. KAUSHLENDRA TIWARI, SR. DR ORDER PER H.S. SIDHU, JM THE ASSESSEE AND DEPARTMENT HAS FILED CROSS APPEAL S WHICH ARE EMANATE FROM THE RESPECTIVE ORDERS BOTH DATED 25.3 .2011 OF THE LD. CIT(A), FARIDABAD PERTAINING TO A.YRS. 2003-04 & 2004-05. SINCE THE ISSUES INVOLVED IN THESE APPEALS ARE COMMON AND IDE NTICAL, HENCE, THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON 2 ORDER FOR THE SAKE OF CONVENIENCE, BY DEALING WITH APPEALS OF ASSESSEE AND REVENUE FOR THE ASSESSMENT YEAR 2003-04 ONLY. 2. WE ARE DEALING WITH ASSESSEES ITA NO. 2827/DEL/ 2011 (AY 2003- 04) AND REVENUES ITA NO. 3021/DEL/2011 (AY 2003-04 ) WHEREIN THE FOLLOWING IDENTICAL AND COMMON GROUNDS HAVE BEEN R AISED IN ASSESSEES APPEAL. I. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW BY CONFIRMING ADDITIONS OF RS. 5,90,411/- BY APPLYING ESTIMATION OF INCOME @3% ON TRADING IN TYRE AND @2% AS NET INCOME ON TOTAL FREIGHT RECEIPTS, WHEREAS IN THE IMMEDIATE PREVIOUS YEAR, THE TOTAL NET INCOME WAS ASSESSED U/S. 144 @ 1.22% OF TOTAL TURNOVER. II. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW BY NOT ALLOWING PARTNERS INTEREST ON CAPITAL/ REMUNERATION WHILE ESTIMATING THE NET INCOME OF THE FIRM U/S. 145(3) OF THE ACT. III. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, AMEND, MODIFY, DELETE ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING AND ALL THE 3 ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 2.1 IN ANTHER ASSESSEES APPEAL, IDENTICAL ISSUES A RE INVOLVED AND SIMILAR GROUNDS HAVE BEEN RAISED, THE ONLY DIFFEREN CE IS IN THE FIGURES INVOLVED, HENCE, THE GROUNDS ARE NOT REPRODUCED HER E FOR THE SAKE OF BREVITY. 2.2 FOLLOWING COMMON AND IDENTICAL GROUNDS HAVE BEE N RAISED IN THE REVENUES APPEAL FOR AY 2003-04:- I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING VARIOUS ADDITIONS OF RS. 51,69,895/- MADE BY AO UNDER SPECIFIC HEADS POINTING OUT SPECIFIC VIOLATIONS. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITIONS RELYING UPON THE DECISIONS IN THE CASES OF (I) ITAT, DELHI BENCH D NEW DELHI IN ITA NOS. 119, 3378 TO 3381/DEL/2007 IN THE CASE OF SMT. KAUSHALYA GANDHI AND (II) ITAT, DELHI F NEW DELHI IN ITA NOS. 3211 TO 3214/DEL/2007 IN THE CASE OF SMT. RENU MUKHERJEE WHEN THE DEPARTMENT IS FURTHER APPEAL IN BOTH THE CASES BEFORE THE HONBLE 4 PUNJAB AND HARYANA HIGH COURT WHICH IS PENDING. 3. THAT THE APPELLANT CRAVES FOR THE PERMISSION TO ADD, DELETE OR AMEND THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME DECLARING INCOME OF RS. 1,42,700/- WAS FILED BY THE ASSESSEE ON 01.12.2003, WHICH WAS PROCESSED U/S. 143(1) OF THE INCOME TAX ACT, 19 61 (HEREINAFTER REFERRED AS THE ACT) ON 05.08.2004. THE RETURN WAS ACCOMPANIED BY THE AUDIT REPORT IN FORM NO. 3CB/3CD. THE ASSESSEE IS A PARTNERSHIP FIRM CONSTITUTED ON 24.08.2000 HAVING TWO PARTNERS NAMEL Y SHRI NARINDER GANDHI AND SHRI VIJAY GANDHI SHARING 50% PROFIT/LOS S EACH; AND ENGAGED IN THE BUSINESS OF PLYING OF TRUCKS AND TRADING OF TYRES. THE CASE OF THE ASSESSEE WAS SELECTED IN SCRUTINY AND A NOTICE U/S. 143(2) OF THE ACT WAS ISSUED ON 08.10.2004 AND SERVED UPON THE ASSESSEE. IN RESPONSE TO THIS NOTICE, THE COUNSEL OF THE ASSESSEE, ATTENDED AND R EQUESTED FOR ADJOURNMENT, WHICH WAS ACCORDINGLY GRANTED. IN RESP ONSE TO FURTHER NOTICE U/S 142(1) OF THE ACT AND QUESTIONNAIRE DATE D 11.08.2005, THE A.R. OF THE ASSESSEE AGAIN SOUGHT ADJOURNMENT AND THE HEARING WAS ADJOURNED TO 06.09.2005. ON THE ADJOURNED DATE, THE AR OF THE ASSESSEE ATTENDED AND SOUGHT FURTHER ADJOURNMENT, WHICH WAS GRANTED FOR 22.09.2005. AGAIN ADJOURNMENT WAS SOUGHT ON THE GRO UND THAT THE DETAILS AS PER QUESTIONNAIRE WERE UNDER PREPARATION . THE ASSESSEE DID NOT 5 MAKE ANY FURTHER COMPLIANCE ON THE ADJOURNED DATE O F 29.09.2005. THE AO ISSUED NOTICE U/S 142(1) OF THE ACT ON 10.10.200 5 FIXING THE HEARING ON 20.10.2005 CALLING FOR BOOKS OF ACCOUNTS AND COM PLETE INFORMATION AS PER QUESTIONNAIRE DATED 11.08.2005. HOWEVER, NO COM PLIANCE WAS MADE BY THE ASSESSEE. THE NOTICE DATED 27.10.2005 ISSUED AGAIN U/S 142(1) ALSO MET THE SAME FATE. THE AO, THEREFORE, ISSUED P ENALTY NOTICE U/S 271(1)(B) AND NOTICE U/S 142(1) ON 14.11.2005 CLEAR LY STATING THAT FAILURE TO COMPLY WITH THE NOTICE WOULD ENTITLE HIM IN PASS ING THE ORDER EX-PARTE. HOWEVER, THE ASSESSEE AGAIN DID NOT MAKE ANY COMPLI ANCE. IN VIEW OF THE REPEATED NON-COMPLIANCE, THE AO ISSUED SUMMONS IN T HE NAME OF PARTNERS SHRI NARINDER GANDHI AND SHRI VIJAY GANDHI . HOWEVER, THE INSPECTOR SERVED THE SUMMONS ON SHRI VIJAY GANDHI O NLY AS THE OTHER PARTNER SHRI NARINDER GANDHI WAS REPORTED TO HAVE E XPIRED ON 28.05.2003. ON 30.01.2006, SHRI VIJAY GANDHI ATTEND ED THE HEARING AND SUBMITTED THAT ALL THE IMPORTANT DOCUMENTS WERE IN THE CUSTODY /KNOWLEDGE OF SHRI NARINDER GANDHI WHO HAS SINCE EX PIRED. THE AO RECORDED THE STATEMENT OF SHRI VIJAY GANDHI IN WHIC H HE DEPOSED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE FIRM WERE IN HIS P OSSESSION AND HE PROMISED TO PRODUCE FOR VERIFICATION ON 31.01.2006 BUT SHRI VIJAY GANDHI DID NEITHER PRODUCE BOOKS OF ACCOUNT NOR ATTENDED T HE PROCEEDINGS. IN RESPONSE TO FURTHER NOTICE DATED 03.02.2006, SHRI V IJAY GANDHI ATTENDED BUT DID NOT PRODUCE BOOKS OF ACCOUNT. KEEPING IN VI EW THE SEQUENCE OF EVENTS AND REPEATED NON-COMPLIANCE, THE AO CONCLUDE D THAT NO BOOKS OF ACCOUNTS OF THE FIRM HAVE NOT BEEN PRODUCED AND PRO CEEDED TO MAKE 6 ASSESSMENT U/ S 144 OF THE ACT. THE AO BEFORE RESOR TING TO THE PROVISION OF SECTION 144, ALSO ALLOWED OPPORTUNITY VIDE SHOW CAUSE LETTER DATED 20.01.2006 MAKING HIS INTENTION CLEAR THAT IN CASE OF NON COMPLIANCE, THE ASSESSMENT SHALL BE FINALIZED ON MERITS. DURING TH E PENDENCY OF PROCEEDINGS THE AO COLLECTED COPY OF ACCOUNT OF ASS ESSEE DIRECTLY FROM CHOLAMANDALAM FINANCE LTD., ASHOKA LEYLAND FINANCE LTD. AND SOME OTHER PARTIES; AND THE COPY OF BANK ACCOUNT OF THE ASSESSEE FROM THE BANK. ON 27.02.2006 I.E. THE DATE FIXED AS PER SHOW CAUSE NOTICE, THE A.R. OF THE ASSESSEE AND SHRI VIJAY GANDHI ATTENDED BUT DID NOT PRODUCE ANY BOOKS OF ACCOUNT. HOWEVER, COPIES OF CERTAIN AC COUNTS LIKE SALES, PURCHASES, FREIGHT CHARGES RECEIVED, PARTNER'S CAPI TAL ACCOUNT AND COPIES OF ACCOUNT WITH CHOLAMANDALAM FINANCE LTD., ASHOKA LEYLAND FINANCE LTD. ETC. WERE FILED. THE AO AGAIN REQUESTED FOR PR ODUCTION OF BOOKS OF ACCOUNT ON 01.3.2006 BUT THE ASSESSEE DID NOT PRODU CE THE SAME. BEFORE PASSING THE ORDER, THE AO ISSUED ANOTHER NOTICE DAT ED 03.03.2006 REQUIRING COMPLIANCE ON 10.03.2006 IN RESPONSE TO W HICH SHRI BHUSHAN CHAUDHARY, ADVOCATE, ATTENDED BUT NO BOOKS OF ACCOU NT OR ANY FURTHER DETAILS WERE PRODUCED STATING THAT THE SAME ARE NOT TRACEABLE. KEEPING IN VIEW THE REPEATED NON COMPLIANCE TO VARIOUS STATUTO RY NOTICES, THE AO FINALIZED THE ASSESSMENT EX-PARTE. THE AO CONCLUDED THAT SINCE THE RETURN OF INCOME WAS FILED ON 01.12.2003 MUCH AFTER THE TI ME WHEN SHRI NARINDER GANDHI EXPIRED IN MAY 2003, THE ASSESSEE W AS. IN POSSESSION OF BOOKS OF ACCOUNT BUT DID NOT PRODUCE DELIBERATELY. SINCE THE ASSESSMENT ORDER HAS BEEN PASSED UJS 144 OF THE ACT, THE AO DI SREGARDED THE STATUS 7 OF ASSESSEE AS FIRM AND ASSESSED IN THE STATUS OF A OP IN VIEW OF THE PROVISION OF SECTION 184(5) OF THE ACT. CONSEQUENTL Y, THE CLAIM OF SALARY OF RS.1,68,000/- PAID TO TWO PARTNERS HAS BEEN DISA LLOWED. ON VERIFICATION OF DEPRECIATION SCHEDULE ATTACHED WITH THE RETURN O F INCOME, THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN VALUE OF TRUCK S AT RS.2,50,15,600/- WHEREAS NO SUCH VALUE WAS SHOWN AS THE OPENING WDV THEREBY LEADING TO INFERENCE THAT ALL THE TRUCKS WE RE PURCHASED DURING THE. YEAR. THE ASSESSEE IN ITS REPLY DATED 27.02.20 06 CLAIMED THAT COPIES OF BILL OF TRUCKS PURCHASED DURING THE YEAR WERE LY ING IN THE CUSTODY TO SHRI NARINDER GANDHI AND ALL THE TRUCKS WERE FINANC ED BY CHOLAMANDALAM FINANCE LTD. AND ASHOKA LEYLAND FINANCE LTD. ALONGW ITH REPLY DATED 26.03.2006, THE ASSESSEE ONLY SUBMITTED A CHART SHO WING THE DETAILS OF BILL NO., REGISTRATION NO. OF TRUCKS WITH THE DATES , NAME OF THE SUPPLIER, BILL AMOUNT, BODY CHARGES, RC CHARGES, AMOUNTS FINA NCED AND MARGIN MONEY AS WELL AS' THE NAME OF THE FINANCER ETC. AS PER THE DETAILS GIVEN IN THE SAID CHART THE AO CONCLUDED THAT THE TOTAL INVE STMENT OF RS.2,50,15,600/- WAS MADE IN THE PURCHASE OF TRUCKS DURING THE FINANCIAL YEAR FROM 2000-01 ONWARDS, BESIDES THE INVESTMENT O F RS.1,09,38,587/- MADE DURING THE YEAR UNDER ASSESSMENT. OUT OF TOTAL INVESTMENT SO MADE DURING THE YEAR, THE AMOUNT OF RS.99,03,193/- WAS F INANCED BY CHOLAMANDALAM FINANCE LTD. AND ASHOKA LEYLAND FINAN CE LTD.; AND THE BALANCE AMOUNT OF RS.10,35,394/- WAS INVESTED BY TH E ASSESSEE AS MARGIN MONEY. SINCE THE ASSESSEE DID NOT PRODUCE BO OKS OF ACCOUNT AND OTHER SUPPORTING DOCUMENTS, THE SAME HAS BEEN TREAT ED BY THE AO AS 8 UNEXPLAINED INVESTMENT IN TRUCKS DURING THE YEAR. T HE ASSESSEE CLAIMED DEPRECIATION OF RS.1,00,06,240/- AS PER THE DEPRECI ATION SCHEDULE OF TRUCKS. ON THE BASIS OF DETAILS OF TRUCKS PROVIDED BY THE ASSESSEE, THE AO WORKED OUT THE ALLOWABLE DEPRECIATION DURING THE F. Y.2000-01 AT RS.3,66,083/- WITH THE RESULTANT CLOSING WDV AT RS. 14,64,335/-. AFTER CONSIDERING THE ADDITIONS MADE DURING THE F.Y.2001- 02, THE TOTAL ALLOWABLE DEPRECIATION OF RS.40,50,591/- WAS WORKED OUT WITH THE CLOSING WDV OF RS.95,49,333/-. ON THE IDENTICAL PATTERN, TH E DEPRECIATION FOR THE YEAR UNDER ASSESSMENT HAS BEEN WORKED OUT AT RS.81, 46,619/-. AFTER CONSIDERING THE ALLOWABLE DEPRECIATION AS ABOVE, TH E AO HAS DISALLOWED EXCESS DEPRECIATION OF RS.18,59,621/-. THE CLAIM OF DEPRECIATION ON FURNITURE AND FIXTURE AT RS.2,322/ - HAS ALSO BEEN DISALLOWED FOR WANT OF DETAILS. IN THE BUSINESS OF TRANSPORT, THE ASSESSEE CLAIMED EXPENDITURE OF RS. 1,47,79,096/ -. AGAINST THE SALARY EXPENDITURE OF RS.19,45,600/-, AN AMOUNT OF RS.4,96,200/- WAS SHOWN OUTSTANDING AS LI ABILITY IN THE BALANCE SHEET. THE ASSESSEE SUBMITTED THAT THE DRIV ERS COULD NOT COLLECT THEIR SALARY DUE TO BEING OUT OF STATION. THE AO, H OWEVER, DID NOT CONSIDER THE EXPLANATION AS PLAUSIBLE AND MADE ADHO C DISALLOWANCE OF RS.5,00,000/- OUT OF VARIOUS EXPENSES CLAIMED IN TH E P&L ACCOUNT FOR WANT OF DETAILS AND EVIDENCES. THE SUNDRY CREDITORS OF RS.10,85,564/- WERE OUTSTANDING AS ON 31.03.2003 AND IN ABSENCE OF ANY DETAILS ON THIS ISSUE, THE ENTIRE AMOUNT HAS BEEN ADDED TO THE INCO ME SINCE THE GENUINENESS OF THE SAME WAS NOT PROVED. THE ASSESSE E WAS ALSO ENGAGED IN THE BUSINESS OF TRADING OF TYRES FROM WHICH GROS S SALES WERE SHOWN AT 9 RS.32,32,590/- AGAINST PURCHASES OF RS.28,05,817/- WITH THE RESULTANT GP OF 7.72%. THERE WAS OBSERVATION IN THE AUDIT REPORT THAT NO DETAILS OF CLOSING STOCK WERE MAINTAINED. THE AO OBTAINED COPY OF ACCOUNT OF PURCHASES FROM GOOD YEAR INDIA LTD. WHICH REVEALED PURCHASES AT RS.17,36,425/ - ONLY, AGAINST WHICH THE ASSESSEE HA D SHOWN TOTAL PURCHASES OF RS.28,05,817/-. THOUGH, THE ASSESSEE S UBMITTED THE DETAILS OF PURCHASE OF TYRES FROM GOOD YEAR INDIA LTD AND M ODI RUBBER LTD., SHOWING PURCHASES OF RS.27,93,635/-. THE AO OBTAINE D A CONFIRMATION IN WHICH NO SALE OF TYRES WAS SHOWN BY MODI RUBBER LTD . TO THE ASSESSEE. HENCE, THE DIFFERENCE OF RS.10,69,392/-, BEING THE AMOUNT OF PURCHASES NOT SUPPORTED BY ANY EVIDENCE, HAS BEEN ADDED BY TH E AO TO THE INCOME OF THE ASSESSEE. BESIDES, THE EXCESS LIABILITY OF R S.23,013/- SHOWN BY THE ASSESSEE AS PAYABLE TO CHOLAMANDALAM FINANCE LTD. A ND THE DIFFERENCE OF RS.17,000/- DUE TO VARIATION IN THE OPENING STOCK O F TYRES WHEN COMPARED WITH THE CLOSING STOCK OF PRECEDING YEAR, HAVE ALSO BEEN ADDED AND COMPLETED THE ASSESSMENT AT RS. 59,03,010/- U/S. 1 44 OF THE I.T. ACT, 1961 VIDE ORDER DATED 20.3.2006. 4. AGAINST THE ASSESSMENT ORDER DATED 20.3.2006, T HE ASSESSEE APPEALED BEFORE THE LD. CIT(A), FARIDABAD, WHO VIDE HIS IMPU GNED ORDER DATED 25.3.2011 HAS PARTLY ALLOWED THE APPEAL OF THE ASSE SSEE. AGGRIEVED WITH THE IMPUGNED ORDER, THE ASSESSEE AS WELL AS REVENU E ARE IN CROSS APPEALS BEFORE THE TRIBUNAL ON SOME OF THE ISSUES MENTIONED IN THEIR RESPECTIVE APPEALS. 10 5. IN THIS CASE, NOTICE OF HEARING TO THE ASSESSEE WAS SENT BY THE REGISTERED AD POST, IN SPITE OF THE SAME, ASSESSEE, NOR ITS AUTHORIZED REPRESENTATIVE APPEARED TO PROSECUTE THE MATTE R IN DISPUTE, NOR FILED ANY APPLICATION FOR ADJOURNMENT. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND T HE ISSUE INVOLVED IN THE PRESENT APPEAL, WE ARE OF THE VIEW THA T NO USEFUL PURPOSE WOULD BE SERVED TO ISSUE NOTICE AGAIN AND A GAIN TO THE ASSESSEE, THEREFORE, WE ARE DECIDING THE PRESENT AP PEAL EXPARTE QUA ASSESSEE, AFTER HEARING THE LD. DR AND PERUSING THE RECORDS. 6. LD. DR RELIED UPON THE ORDER OF THE AO. 7. WE HAVE HEARD LD. DR AND PERUSED THE RECORDS. THE ASSESSEE AND REVENUE HAS CONTESTED THEIR RESPECTIVE ADDITIONS BE FORE US. THE ADMITTED FACT OF THE CASE ARE THAT THE ASSESSEE FAILED TO PR ODUCE THE BOOKS OF ACCOUNT DURING THE COURSE OF ASSESSMENT PROCEEDINGS . THE AO HAS WORKED OUT. THE ALLOWABLE CLAIM OF DEPRECIATION OF RS.81,46,619/- AGAINST THE CLAIM OF RS.1,00,06,240/ - MADE BY THE APPELLAN T. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LEARNED COUNSEL HAS N OT BEEN ABLE TO RECONCILE THE DIFFERENCE. IT IS OBSERVED THAT IN TH E F.Y.2001-02, THE ASSESSEE HAS SHOWN CLOSING WDV OF TRUCKS AT RS.99,2 2,209/- AS ON 31.03.2002 AND THE ADDITIONS MADE DURING THE YEAR U NDER APPEAL WERE TO THE EXTENT OF RS.1,08,17,215/-. THUS, CONSIDERING T HE OPENING WDV AT RS.99,22,209/- AND ADDITIONS MADE DURING THE YEAR, THE TOTAL ELIGIBLE AMOUNT FOR DEPRECIATION WORKS OUT TO RS.2,07,39424/ -, WHICH IS CERTAINLY 11 FAR LESS THAN THE AMOUNT OF RS.2,50,15,600/- SHOWN IN THE DEPRECIATION SCHEDULE AS ON 31.03.2003. THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED U/S. 44AB OF THE ACT. THESE FACTS LEAD TO THE INFERENCE THAT EITHER THE AMOUNT OF RS.2,50,15,600/- IS HYPOTHETICALLY AD OPTED OR THE ASSESSEE HAS NOT FURNISHED THE CORRECT POSITION OF THE TRUCK S PURCHASED DURING THE YEAR. THIS APPEARS TO BE THE ONLY REASON FOR PRODU CTION OF BOOKS OF ACCOUNTS. IRRESPECTIVE OF THE SITUATION WHERE THE B OOKS OF ACCOUNTS ARE NOT PRODUCED OR PRODUCED BUT FOUND TO BE DEFECTIVE, THE AO IS WELL EMPOWERED TO MAKE THE PROVISIONS OF SECTION 145(3) OF THE ACT AND MAKE BEST JUDGEMENT ASSESSMENT. WHILE MAKING THE BEST JU DGMENT ASSESSMENT, THE AO IS REQUIRED TO COMPARE THE RESUL T DECLARED BY THE APPELLANT IN EARLIER YEARS OR THE RESULT SHOWN BY T HE OTHER ASSESSEES IN THE SIMILAR LINE OF BUSINESS. THOUGH THERE IS NO BA R IN LAW TO MAKE ADDITIONS ON SPECIFIC ISSUES BUT SUCH ADDITION IS R EQUIRED TO BE MADE ONLY UPON THE CONCLUSIVE FINDINGS ON THAT PARTICULAR ISS UE. IT IS SEEN THAT THE AO HAS MADE ADDITION OF RS.10,35,394/ - ON ACCOUNT OF UNEXPLAINED INVESTMENT IN TRUCKS DURING THE YEAR ONLY ON THE GR OUND THAT THE INVESTMENT WAS MADE IN CASH AND THE BOOKS OF ACCOUN TS WERE NOT PRODUCED. HOWEVER, THE AO HAS NOT APPRECIATED THE F ACT THAT THE APPELLANT HAD THE AVAILABILITY OF CASH ATLEAST TO T HE EXTENT OF DEPRECIATION OF RS.81,46,619/- ALLOWED BY THE AO. BESIDES, THE A O HAS MADE ADDITION ON ACCOUNT OF UNEXPLAINED PURCHASES OF TYRES TO THE EXTENT OF RS.10,69,392/- AND HAS ALSO MADE ADHOC DISALLOWANCE OF RS.5,00,OOO/- OUT OF EXPENSES. IF SUCH EXPENDITURE IS TREATED AS BOGUS OR UNVERIFIABLE, 12 THAN NO ADDITION CAN BE MADE ON ACCOUNT OF SUNDRY C REDITORS AS THE LIABILITY IN THE FORM OF SUNDRY CREDITORS IS CREATE D BY VIRTUE OF THE EXPENSES AND PURCHASES CLAIMED. HENCE, THE ADDITION OF RS.10,84,564/-- ON ACCOUNT OF UNVERIFIABLE CREDITORS AMOUNTS TO DOU BLE ADDITION. IN THE BUSINESS OF TRADING OF TYRES, IF THE ADDITION OF RS .10,69,392/- ALONE IS CONSIDERED AGAINST THE SALES OF RS.32,32,590J-, THE SAME RESULTS IN THE NET PROFIT RATE OF 33.08% WHICH IS IMPOSSIBLE IN TH E BUSINESS OF TRADING OF TYRES. FURTHER, THE AO HAS ASSESSED THE TOTAL INCOM E AT RS.59,03,010/- ON THE TURNOVER OF FREIGHT RECEIPTS OF RS.2.46 CROR ES AND SALE OF TYRES OF RS.32.32 LACS RESULTING INTO NET PROFIT RATE OF 21. 15%, WHICH IS HIGHLY UNREASONABLE IN ANY BUSINESS OF TRANSPORT OF TRUCKS . 7.1 WE FURTHER FIND THAT HON'BLE SUPREME COURT IN THE CASE OF CIT V. SIMON CARVES (105 ITR 205) HAS HELD THAT TAX AUTHOR ITIES WOULD NOT BE ACTING PROPERLY AND JUDICIALLY IF THEY EXERCISE THE IR POWER IN THE MANNER MOST BENEFICIAL TO THE REVENUE AND CONSEQUENTLY MOS T ADVERSE TO THE ASSESSEE. IT IS SETTLED LAW THAT THE POWERS GIVEN T O THE AO UNDER THE ACT ARE COUPLED WITH A DUTY TO EXERCISE THEM WHEN THE S TATUTORY PROVISIONS WARRANT THEIR EXERCISE. IT HAS ALSO BEEN HELD BY HO N'BLE SUPREME COURT IN THE CASE OF BRIJ BHUSHAN LAL PRADUMAN KUMAR VS. CIT (115 ITR 524) THAT THE BEST JUDGMENT ASSESSMENT SHOULD BE MADE IN ACCO RDANCE WITH FAIR PLAY AND NATURAL JUSTICE. THE ASSESSING OFFICER MUS T NOT ACT VINDICTIVELY OR CAPRICIOUSLY OR WITH A VIEW TO PUNISH THE ASSESSEE FOR NON COMPLIANCE. IN THE CASE OF CIT VS. RANICHERRA TEA COMPANY LTD. (20 7 ITR 979), THE HON'BLE CALCUTTA HIGH COURT HAS HELD THAT IN DISPOS ING OF AN APPEAL FROM 13 AN ASSESSMENT U/S 144, THE FIRST APPELLATE AUTHORIT Y NEED NOT CONFINE ITSELF ONLY TO THE MATERIAL ON RECORD AT THE ASSES SMENT. THE APPELLATE AUTHORITY IS VESTED WITH ALL THE PLENARY POWERS, WH ICH THE SUBORDINATE AUTHORITY HAS IN THE MATTER. THE CBDT, IN THE CIRCU LAR NO. 14(XI-35) OF 1955 DATED APRIL 01, 1955 HAS CONVEYED AS UNDER: 'OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. IT IS ON E OF THEIR DUTIES TO ASSIST A TAXPAYER IN EVERY REASONA BLE WAY PARTICULARLY IN THE MATTER OF CLAIMING AND SECU RING RELIEFS AND IN THIS REGARD THE OFFICER SHOULD TAKE THE INITIATIVE IN GUIDING A TAXPAYERS WHERE PROCEEDING OR OTHER PARTICULARS BEFORE THEM INDICATE THAT SOME RE FUND OR RELIEF IS DUE TO HIM. THIS ATTITUDE IN THE LONG RUN WOULD BENEFIT THE DEPARTMENT; FOR IT WOULD INSPIRE CONFIDENCE IN HIM THAT HE BE SURE OF GETTING SQUARE DEAL FROM THE DEPARTMENT.' 7.2 WE FURTHER FIND THAT IN THE BUSINESS OF TRAD ING IN TYRES, THE AO HAS APPLIED NET PROFIT RATE OF 3% ON SALES. IN THE A.Y. 2001-02, THE AO HAS ESTIMATED THE INCOME FROM THE TRUCKS U/S 44AE OF TH E ACT FOR PLYING OF TWO TRUCKS FOR THREE MONTHS. IN A.Y.2002-03, THE IN COME FROM THE TRANSPORT BUSINESS OF TRUCKS HAS BEEN DETERMINED AT NIL AGAINST THE FREIGHT RECEIPTS OF RS.28,20,378/- AND CLAIM OF DEP RECIATION OF RS.38,92,658/-. THE EXCESS CLAIM OF DEPRECIATION HA S ALSO NOT BEEN 14 ALLOWED TO BE CARRIED FORWARD. THEREFORE, THE INCOM E IN THE A.Y.2001-02 AND 2002-03 HAS BEEN ASSESSED AT 1.72% AND 1.22%, R ESPECTIVELY. IT IS HOWEVER, SEEN THAT THE NET PROFIT RATE OF 1.22% IN A.Y.2002-03 WORKS OUT ONLY IN RESPECT OF ADDITION MADE ON ACCOUNT OF TRAD ING IN TYRES. THE LEARNED COUNSEL HAS RELIED UPON THE CASE OF M/S. SI DDHARTH ROAD CARRIERS, FARIDABAD FOR A.Y.2005-06 IN WHICH THE NET PROFIT F ROM FREIGHT AND FORWARDING RECEIPTS OF RS.5.00 CRORES HAS BEEN SHOW N AT RS.8.93 LACS I.E. 1.78%. IN THE LIGHT OF THE ABOVE FACTUAL POSITION A ND THE JUDICIAL RULINGS CITED SUPRA, WE ARE OF THE CONSIDERED VIEW THAT LD. CIT(A) HAS RIGHTLY HELD THAT THE CASE OF ASSESSEE REQUIRED REJECTION OF BO OK RESULT BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. CONSEQ UENTLY, THE INCOME WAS REQUIRED TO BE DETERMINED BY APPLYING THE NET PROFI T RATE. THEREFORE, IN THE INTEREST OF JUSTICE, IT WAS FAIR AND REASONABLE TO ESTIMATE THE NET PROFIT BY APPLYING THE RATE OF 3.0% ON SALE OF TYRES AS AD OPTED BY THE AO IN EARLIER YEARS AS A MATTER OF CONSISTENCY AND RATE O F 2.0% ON THE FREIGHT RECEIPTS. THE ADOPTED RATE OF 2% AS THE CASE OF M/ S. SIDDHARTH ROAD CARRIERS, FARIDABAD PERTAIN TO A.Y. 2005-06 AND NO T EXACTLY TO THE YEAR UNDER APPEAL AS WELL AS ON THE REASON THAT THE TURN OVER OF THE CASE OF ASSESSEE IS ALMOST HALF OF M/S. SIDDHARTH ROAD CARR IERS, FARIDABAD, FOR WHICH THE NET PROFIT MARGIN IS LIKELY TO BE HIGHER DUE TO LESSER TURNOVER. CONSEQUENTLY, THE INCOME OF RS. 96,977/- IN THE TYR ES BUSINESS IS ESTIMATED BY APPLYING THE RATE OF 3% ON TOTAL SALES OF RS.32.32 LACS AND INCOME OF 4,93,434/- IS ESTIMATED BY APPLYING THE N ET PROFIT RATE OF 2% ON THE, TOTAL FREIGHT RECEIPTS OF RS.246.71 LACS. I N THE CASE OF CIT VS. 15 BANWARI LAL BANSHIDHAR, THE HON'BLE HIGH COURT OF A LLAHABAD (229 ITR 229) HAS HELD THAT WHERE INCOME OF ASSESSEE WAS COM PUTED BY APPLYING GROSS PROFIT RATE AND WHEN NO DEDUCTION WAS CLAIMED OR ALLOWED TO ASSESSEE IN RESPECT OF PURCHASES, NO DISALLOWANCE U NDER SECTION 40A(3), READ WITH RULE 6DD(J), COULD BE MADE. THE HON 'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. AGGARWAL ENGINEE RING CO. (156 TAXMAN 40) HAS HELD THAT ONCE NET PROFIT RATE WAS APPLIED ON CONTRACT RECEIPTS OF ASSESSEE FOR ESTIMATING INCOME FROM CONTRACT WORK, NO FURTHER ADDITION WAS CALLED FOR IN RESPECT OF PURCHASES AND INTRODUC TION OF CASH ETC. THEREFORE, WHEN THE BOOKS OF ACCOUNT ARE REJECTED A ND INCOME IS COMPUTED BY APPLYING THE NET PROFIT RATE, THE SAME BOOKS OF ACCOUNTS CANNOT BE MADE THE BASIS FOR MAKING DISALLOWANCE OF SPECIFIC EXPENSES AND THE CLAIM OF VARIOUS EXPENSES INCLUDING DEPRECI ATION STAND ALLOWED. HENCE, THE ADDITION TO THE EXTENT OFRS.5,90,411/- W AS RIGHTLY CONFIRMED AND THE BALANCE ADDITIONS MADE BY THE AO UNDER SPEC IFIC HEADS WAS RIGHTLY DELETED. WE FURTHER FIND THAT LD. CIT(A) HA S RIGHTLY REITERATED THAT THE ITAT, DELHI BENCH 'D' NEW DELHI IN APPEAL ITA N OS.119, 3378 TO 3381/DEL/2007 IN THE CASE OF SMT. KAUSHALYA GANDHI FOR A.Y.1999-2000 TO 2003-04 AS PER ORDER DATED 31.07.2009 AND ITAT, DELHI BENCH 'F', NEW DELHI IN APPEAL ITA NOS.3211 TO 3214/DEL/2007 I N THE CASE OF SMT. RENU MUKHERJEE FOR A.Y.2000-01 TO 2003-04 AS PER OR DER DATED 29.08.2008 HAVE UPHELD THE APPELLATE ORDERS OF LEAR NED CIT (APPEALS) FARIDABAD, IN WHICH THE NET PROFIT RATE OF 7.5% AND 6.5%, RESPECTIVELY, WAS APPLIED BY THE LD. CIT (APPEALS) AND HUGE ADDIT IONS MADE ON SPECIFIC 16 ISSUES WERE DELETED. KEEPING IN VIEW THE ABOVE DECI SION, ALL THE GROUNDS OF APPEAL ON THE ISSUE OF VARIOUS ADDITIONS AND DIS ALLOWANCES WERE PARTLY ALLOWED, WHICH DOES NOT NEED ANY INTERFERENCE ON O UR PART, THEREFORE, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THE ISSUES IN DISPUTE RAISED BY THE ASSESSEE AS WELL AS REVENUE AND REJECT THE GROUNDS RAISED BY THEM. 8. IN THE RESULT, ALL THE APPEALS FILED BY THE ASS ESSEE AND REVENUE STAND DISMISSED. ORDER PRONOUNCED ON 28/09/2017. SD/- SD/- (PRASHANT MAHARISHI) (H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 28/09/2017 'SRBHATNAGAR' COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES