Smt Nirmla bai Jain, V. The ACIT 5 (1),

ITA 318/IND/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2757 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-06-2010
• Assessment Year: misc
• Appeal Filed On: 10-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: S S DESHPANDE
• Section: 145

Judgement Text

PAGE 1 OF 5 - I.T.A.NO. 318/IND/2008 SMT. NIRMALA BAI JAIN, INDORE. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : ABJPJ7999K I.T.A.NO.318/IND/2008 A.Y. : 2003-04 SMT. NIRMALA BAI JAIN, ACIT, 211, TRANSPORT NAGAR, VS CIRCLE 5(1), INDORE. INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI S. S. DESHPANDE, C. A. RESPONDENT BY : SMT.APARNA KARAN, SR. DR DATE OF HEARING : 14.06.2010 O R D E R PER V.K. GUPTA, A.M. THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF ORD ER OF THE LD. CIT(A)-II, INDORE, DATED 20.03.2008, FOR THE ASSESS MENT YEAR 2004-05. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE LD. CIT(A)S DECISION IN CONFIRMING THE ACTION OF THE AO IN INVO KING THE PROVISIONS OF SECTION 145 FOR REJECTING THE BOOKS OF ACCOUNT AND ENHANCING THE PROFIT PAGE 2 OF 5 - I.T.A.NO. 318/IND/2008 SMT. NIRMALA BAI JAIN, INDORE. SHOWN BY THE ASSESSEE IN THE TRANSPORTATION BUSINES S CARRIED ON BY THE ASSESSEE. 4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS HAVIN G 9 OWN TRUCKS AND IS ALSO PROVIDING TRANSPORTATION SERVICES TO IT S CUSTOMERS BY HIRING TRUCKS FROM MARKET. IN RESPECT OF ITS OWN TRUCK, TH E ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNT WHEREAS IN RESPECT OF HIRED VEHICLES, THE ASSESSEE IS MAINTAINING REGULAR BOOKS OF ACCOUN T AND SUCH BOOKS OF ACCOUNT HAVE BEEN AUDITED U/S 44AB AS WELL. THE ASS ESSEE IN RESPECT OF OWN VEHICLES DISCLOSED AN INCOME OF RS. 4,16,299/- AND IN RESPECT OF OTHER VEHICLES DECLARED AN INCOME OF RS. 5,05,299/- . THE AO FOUND THAT APPROPRIATION OF RECEIPTS BETWEEN OWN TRUCKS AND HI RED TRUCKS WAS NOT VERIFIABLE AS RELEVANT DOCUMENTARY EVIDENCES WERE N OT PRODUCED. SIMILARLY, THE EXPENSES CLAIMED BY THE ASSESSEE WER E UNVERIFIABLE. ACCORDINGLY, THE AO REJECTED THE BOOKS OF ACCOUNT A ND APPLIED A NET PROFIT RATE OF 2.4 % ON THE GROSS RECEIPTS BESIDES MAINTAINING THE OTHER INCOME SUCH AS BROKERAGE AND SERVICE CHARGES SHOWN BY THE ASSESSEE. THE AO ALSO ADDED INCOME FROM OWNED NINE TRUCKS AT RS. 3,78,000/-. ON APPEAL, THE LD.CIT(A) THOUGH OBSERVED THAT ACTION O F THE AO WAS NOT CORRECT, HOWEVER, HE MAINTAINED THE SAME BESIDES HO LDING THAT THE EXPENSES APPROPRIATED TOWARDS HIRED VEHICLE ALSO IN CLUDED EXPENSES PERTAINING TO OWN VEHICLES, THE INCOME WHEREOF HAD BEEN OFFERED U/S PAGE 3 OF 5 - I.T.A.NO. 318/IND/2008 SMT. NIRMALA BAI JAIN, INDORE. 44AE. HENCE, THE ASSESSEE REDUCED ITS INCOME OF HIR ED VEHICLES. ACCORDINGLY, THE LD.CIT(A) ENHANCED THE INCOME AND DETERMINED THE TOTAL INCOME AT RS. 12,93,663/- INSTEAD OF RS. 12,32,833/ -. IN DOING SO, THE LD.CIT(A) WORKED OUT THE PROPORTION OF EXPENSES ATT RIBUTABLE TO BOTH THE ACTIVITIES IN THE RATIO OF NET RECEIPTS OF BOTH THE BUSINESSES. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. LD.COUNSEL FOR THE ASSESSEE BEFORE US MADE DETAILED SUBMISSIONS AS TO HOW THE ORDER OF LD.CIT(A) WAS NOT CORRECT. F IRSTLY, THE LD. COUNSEL STATED THAT AT ONE PLACE, THE LD.CIT(A) HELD THAT T HE ACTION OF THE AO WAS NOT JUSTIFIED IN MAKING OTHER ADDITIONS AFTER APPLY ING NET PROFIT RATE 2.4 %. HOWEVER, ULTIMATELY, HE SUSTAINED OTHER ADDITIONS I NCLUDING INCOME OF OWNED TRUCKS AT RS. 3,78,000/-. SECONDLY, THE BASIS FOR APPORTIONMENT OF EXPENSES ADOPTED BY THE CIT(A) WAS ALSO NOT CORRECT AS HE COMPARED THE GROSS NET RECEIPTS OF ONE BUSINESS WITH THE NET INC OME OF OWN VEHICLES BUSINESS. THE LD. COUNSEL ALSO DREW OUR ATTENTION TO THE COMPOSITION OF INCOME AT PAGE 30 AND 25 OF THE PAPER BOOK AND THE METHODOLOGY, WHICH COULD BE ADOPTED TO WORK OUT THE PROPER ALLOCATION OF ADMINISTRATIVE/INDIRECT OVERHEADS OVER THE TWO ACTI VITIES. HOWEVER, ON PERUSAL OF THE ITEMS DEBITED IN THE PROFIT AND LOSS ACCOUNT, IT WAS OBSERVED THAT CERTAIN EXPENSES SUCH AS HAMMALI EXPENSES, CLA IMS EXPENSES, INSURANCE EXPENSES, INTEREST ON LOANS OTHER THAN ON O. D. ETC. WERE IN THE PAGE 4 OF 5 - I.T.A.NO. 318/IND/2008 SMT. NIRMALA BAI JAIN, INDORE. NATURE OF DIRECT EXPENSES I.E. SUCH EXPENSES COULD BE CONNECTED WITH ONE OF THE ACTIVITIES OR BOTH THE ACTIVITIES AND THE QU ANTUM THEREOF COULD BE DETERMINED AS THE ASSESSEE HAD MAINTAINED REGULAR B OOKS OF ACCOUNT IN RESPECT OF HIRED VEHICLES AND WHICH WERE ALSO AUDIT ED AND, THEREFORE, SUCH EXERCISE HAD TO BE DONE AND, THEREAFTER, WHATEVER E XPENSES WERE OF THE INDIRECT NATURE OR COMMON OVERHEADS, ONLY SUCH EXPE NSES COULD BE ALLOCATED/APPROPRIATED OVER THE TWO ACTIVITIES IN T HE RATIO OF GROSS RECEIPTS AS REDUCED BY THE DIRECT EXPENSES INCURRED IN RESPE CT OF BOTH THE ACTIVITIES. THE LD. COUNSEL ,IN REPLY TO SUCH QUERY , PREFERRED TO RELY ON THE SUBMISSIONS MADE BY HIM. 6. THE LD. SENIOR D.R. ,ON THE OTHER HAND, STRONGLY S UPPORTED THE ORDER OF THE LD.CIT(A). 7. HAVING CAREFULLY CONSIDERED THE FACTS AND THE FACTS MENTIONED HEREINABOVE, WE RESTORE THIS ISSUE TO THE FILE OF A O TO EXAMINE AND ASCERTAIN THE DIRECT EXPENSES RELATABLE TO BOTH THE ACTIVITIES INDEPENDENTLY AND, ACCORDINGLY, WORK OUT THE NET RECEIPTS OF SUCH ACTIVITIES. THEREAFTER, THE AO SHOULD APPORTION THE REMAINING OVERHEADS I.E . INDIRECT EXPENSES IN THE RATIO OF NET RECEIPTS I.E. GROSS RECEIPTS AS RE DUCED BY THE DIRECT EXPENSES OF EACH ACTIVITIES TO ALLOCATE THE EXPENSE S OVER THE TWO ACTIVITIES AND THE INCOME OF BOTH THE ACTIVITIES SHOULD BE COM PUTED ACCORDINGLY. WE FURTHER HOLD THAT IF AS A CONSEQUENCE OF SUCH EX ERCISE, INCOME FROM PAGE 5 OF 5 - I.T.A.NO. 318/IND/2008 SMT. NIRMALA BAI JAIN, INDORE. OWNED TRUCKS, COME TO A FIGURE WHICH IS LESS THAN T HE MINIMUM AMOUNT SPECIFIED U/S 44AE, THEN, THE MINIMUM AMOUNT SO SPE CIFIED SHALL BE TAKEN AS THE INCOME OF THE ASSESSEE FROM OWNED TRUC KS AS PER THE PROVISIONS OF SECTION 44AE. THE INCOME FROM BROKERA GE/SERVICE CHARGES SHALL BE ASSESSED SEPARATELY AFTER SETTING OFF THE EXPENSES INCURRED IN THE EARNING OF SUCH INCOME AND DEBITED IN THE PROFIT AN D LOSS ACCOUNT. WE FURTHER HOLD THAT THE ASSESSEE SHALL PROVIDE THE NE CESSARY DETAILS/INFORMATION TO THE AO TO COMPLETE THE ASSES SMENT. BEFORE PARTING, WE MAKE IT CLEAR THAT ACTION OF THE AO IN REJECTING THE BOOK RESULT U/S 145 IS UPHELD, IN VIEW OF IMPROPER MAINTENANCE OF BOOK S OF ACCOUNT IN RESPECT OF HIRED VEHICLES BUSINESS ACTIVITIES. 8. THUS, THIS APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 14 TH JUNE, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :14 TH JUNE, 2010. 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