ITO, CHURU V. Shri Rahul Kaswan, HUF, RATANGARH

ITA 354/JODH/2010

• Counselvise Citation: 35423314 RSA 2010
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 20-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M N MAURYA
• Keywords: Presumptive income; Depreciation
• Section: 80C

Judgement Text

1 ITA 354-10 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH JODHPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ) ITA NO. 354/JODH/2010 ASSTT. YEAR : 2007-08. THE INCOME-TAX OFFICER, VS. SHRI RAHUL KASWAN HUF , WARD-1, CHURU. SH 7, SARDARSHAHAR ROAD, RATANGARH. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.N. MAURYA RESPONDENT BY : SHRI P.C. PARWAL DATE OF HEARING : 13.12.2011. DATE OF PRONOUNCEMENT : 15.12.2011. ORDER DATED : 15/12/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2007-08. 2. THE DEPARTMENT IS OBJECTING IN NOT CONFIRMING TH E REJECTION OF BOOKS OF ACCOUNT UNDER SECTION 145(3) AND DELETING ENTIRE ADDITION O F RS. 20,38,170/- MADE ON ACCOUNT OF TRADING ADDITION. 3. THE BRIEF FACTS OF THE CASE ARE DISCUSSED BY LD. CIT (A) IN PARA 2.1 TO 2.2 OF HIS ORDER ARE AS UNDER :- 2 2.1. THE FACTS OF THE CASE ARE THAT THE APPELLAN T HUF IS PROPRIETOR OF TWO CONCERNS, NAMELY, M/S. HINDUSTAN TRADING COMPANY AN D M/S. RONIT LOGISTICS. M/S. HINDUSTAN TRADING COMPANY DERIVED I NCOME FROM TRADING OF BAJRI, GRIT, SANDSTONE ETC. AND M/S. RONIT LOGIS TICS DERIVED INCOME FROM TRANSPORTATION AND VEHICLE HIRING. IN THESE CONCER NS, THE ASSESSEE DID THE WORK OF SUPPLY OF MATERIAL AND THE WORK OF TRANSPOR TATION FOR M/S. PUNJ LLOYD LTD. IN M/S. HINDUSTAN TRADING COMPANY ASSESS EE PURCHASED MATERIAL OF RS. 65,03,657/-, INCURRED TRANSPORTATIO N AND LOADING CHARGES OF RS. 14,98,979/- AND DECLARED GROSS PROFIT AT RS. 3, 72,026/- ON SALES OF RS. 81,50,297/- GIVING A GROSS PROFIT RATE OF 4.56%. IN M/S. RONIT LOGISTICS ASSESSEE INCURRED TRANSPORTATION EXPENSES OF RS. 1, 92,77,594/- AND DECLARED INCOME OF RS. 1,88,308/- ON RECEIPT OF RS. 1,98,27,797/- GIVING A NET PROFIT RATE OF 0.96%. 2.2 THE AO WAS OF THE VIEW THAT THE ASSESSEE HAD AD OPTED THE MODUS- OPERANDI OF BIFURCATING THE AMOUNTS RECEIVED FROM T HE SAME CONCERN (M/S. PUNJ LLOYD LTD.) UNDER TWO HEADS, I.E. TRADING AND TRANSPORTATION, WHICH WAS NOTHING BUT A DELIBERATE ATTEMPT TO EVADE TAX. IN THIS REGARD, THE AO FURTHER NOTICED THAT THE PURCHASE BILLS WERE OF SMA LL AMOUNTS, EXPENSES CLAIMED WERE ON SELF MADE VOUCHERS AND, NO AGREEMEN T WITH M/S. PUNJ LLYOD LTD. WAS FURNISHED AND ALSO THAT THE MINUTES OF THE CONTRACT FILED SHOWED THAT WORK DONE WAS OF A CONTRACT NATURE. ACC ORDINGLY, THE AO INVOKED THE PROVISIONS OF SEC. 145(3) AND BY APPLYI NG NP RATE OF 8% ON THE SALES OF RS.81,50,297/- AND TRANSPORT RECEIPT O F RS.1,98,27,797/-, BOTH AGGREGATING TO RS.2,79,78,094/- ASSESSED THE TOTAL INCOME AT RS.22,38,250/-, AS AGAINST THE TOTAL INCOME OF RS.2 ,00,080/- DECLARED BY THE ASSESSEE. 4. IT WAS ARGUED BEFORE LD. CIT (A) THAT THE ASSESS EE CARRIED OUT TWO SEPARATE AND INDEPENDENT ACTIVITY FOR M/S. PUNJ LLOYD LTD. THE F IRST WAS FOR THE SUPPLY OF BAJRI, GRIT AND 3 BALLAST. THIS ACTIVITY CAN NOT BE CONSIDERED AS A C ONTRACT FOR CARRYING OUT A WORK. FURTHER, IN RESPECT OF THAT ACTIVITY, THE ASSESSEE HAD THE C OMPLETE QUANTITATIVE DETAILS OF MATERIAL PURCHASED AND SOLD. THE ASSESSING OFFICER HAD NOT F OUND ANY DISCREPANCY IN SUCH QUANTITATIVE TALLY. IT WAS POINTED OUT THAT, IN RE SPECT OF THAT CONCERN THE ASSESSEE HAD PRODUCED CASH BOOK, LEDGER, BANK BOOK, EXPENSES VOU CHER AND BANK STATEMENT VIDE LETTER DT. 04/11/2008. THE ASSESSING OFFICER AFTER EXAMINI NG THOSE BOOKS, REQUIRED THE ASSESSEE VIDE LETTER DT. 15.01.2009 TO PRODUCE VOUCHERS FOR FREIGHT CHARGES AND LOADING CHARGES. THE SAME WERE ALSO PRODUCED VIDE LETTER 28.01.2009. THE ASSESSING OFFICER AFTER EXAMINING THOSE VOUCHERS HAD NOT FOUND ANY DISCREPA NCY, AS WAS CLEAR FROM THE ORDER SHEET ENTRIES. LD. A/R PLEADED THAT, THEREFORE, IN CASE OF M/S. HINDUSTAN TRADING COMPANY, NO DISCREPANCY, WHATSOEVER, WAS FOUND IN T HE BOOKS OF ACCOUNT AND HENCE, THE APPLICATION OF SEC. 145(3) AND CONSEQUENT ADDITION BY APPLYING NP RATE OF 8% ON SUCH SALES WAS UNJUSTIFIED AND UNCALLED FOR. 4.1. THE LD. A/R FURTHER SUBMITTED THAT THE ASSESSE E, IN THE OTHER CONCERN (M/S. RONIT LOGISTICS) CARRIED OUT THE WORK OF TRANSPORTATION O F FLY ASH FROM KTPS, KOTA TO BIJOLIYA SITE. THE MINUTES AWARDING THIS WORK WERE FILED. F OR CARRYING OUT THAT WORK, THE ASSESSEE ARRANGED THE TRUCKS AND BY KEEPING HIS MARGIN, MADE THE PAYMENT OF TRANSPORTATION CHARGES TO THE DRIVERS. IN RESPECT OF THIS ACTIVIT Y ALSO, THE ASSESSEE PRODUCED BEFORE THE ASSESSING OFFICER, CASH BOOK, LEDGER, BANK BOOK, EX PENSES VOUCHERS AND BANK STATEMENT. HE ALSO FILED BEFORE THE ASSESSING OFFICER SITE WIS E RECEIPT OF TRANSPORTATION CHARGES, VIDE LETTER DT. 15.12.2008. THE PAYMENT FOR TRANSPORTAT ION CHARGES HAD BEEN MADE ON VOUCHERS CONTAINING TRUCK NUMBER AND SIGNATURE OF RECIPIENT. FEW OF THE DRIVERS, AS WAS REQUIRED BY THE ASSESSING OFFICER, WERE ALSO PRODUCED. THUS, WHEN THE ENTIRE RECEIPT AND EXPENSES 4 WERE VERIFIABLE, THERE WAS NO JUSTIFICATION FOR INV OKING SEC. 145(3) AND MAKING CONSEQUENT ADDITION. THE ASSESSING OFFICER HAD APP LIED NP RATE OF 8%. THERE WAS NO BASIS GIVEN FOR APPLYING SUCH RATE. THE ASSESSEE W AS NOT ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. FURTHER, THE RECEIPT OF THE ASSESSEE WAS MORE THAN 40 LACS AND, THEREFORE, PROVISION RELATING TO PRESUMPTIVE TAXATION WAS NOT APPLICABLE. IT WAS ARGUED THAT IN ASSESSEES BUSINESS OF SUPPLY OF MATERIAL, THE ASSES SEE HAD DECLARED GP RATE OF 4.56%, WHICH WAS REASONABLE. SIMILARLY, IN TRANSPORTATION WORK, THE MARGIN OF ASSESSEE WAS ONLY AS ARRANGER OF THE TRUCKS, FOR WHICH HE HAD INCOME OF ONLY RS. 100/- PER TRUCK. THUS, THE INCOME DECLARED BY THE ASSESSEE WAS REASONABLE AND NO ADDITION WAS CALLED FOR. 4.2. THE LD. A/R FURTHER ARGUED THAT WITHOUT PREJUD ICE TO THE ABOVE SUBMISSIONS, THE ASSESSING OFFICER, BY APPLYING THE NP RATE OF 8% AS SESSED THE INCOME OF THE ASSESSEE AT RS. 22,38,250/-. HOWEVER, FROM THAT AMOUNT, THE ASS ESSING OFFICER HAD NOT ALLOWED EVEN THE DEDUCTION U/S 80C CLAIMED AT RS. 70,000/-. HENC E, THE ASSESSING OFFICER BE DIRECTED TO ALLOW DEDUCTION U/S 80C FROM THE INCOME DETERMIN ED. 4.3. FURTHER, LD. AR, ALTERNATIVELY, ARGUED THAT TH E ASSESSEE HAD CLAIMED DEPRECIATION OF RS.1,22,812/- AND INTEREST AND BANK CHARGES OF R S.48,785/- IN M/S. HINDUSTAN TRADING COMPANY. IN CASE OF INCOME OF THIS CONCERN IS ESTIM ATED BY APPLICATION OF NP RATE, THE CLAIM OF DEPRECIATION AND INTEREST AGGREGATING TO R S.1,71,597/- BE SEPARATELY ALLOWED. 5. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, THE LD. CIT (A) WAS SATISFIED THAT ASSESSEE HAS KEPT COMPLETE B OOKS OF ACCOUNT ALONG WITH VOUCHERS WHICH WERE PRODUCED BEFORE ASSESSING OFFICER FOR NE CESSARY TEST CHECK. NO DEFECTS WHATSOEVER WERE POINTED OUT BY THE ASSESSING OFFICE R AND, THEREFORE, HE WAS NOT JUSTIFIED 5 IN REJECTING THE BOOKS OF ACCOUNT BY INVOKING PROVI SIONS OF SECTION 145(3) AND THEREBY MAKING A TRADING ADDITION OF RS. 20,38,170/-. ACCO RDINGLY ENTIRE ADDITION WAS DELETED. 6. THE LD. D/R PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER, SOME PORTION OF THE ORDER OF THE ASSESSING OFFICER WAS READ ALSO. 7. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE PLACED RELIANCE ON THE ORDER OF LD. CIT (A) AND FILED A COPY OF WRITTEN SUBMISSION ALSO. 8. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, WE CONFIRM THAT LD. CIT (A) WAS JUSTIFIED IN ALLOWING THE ISSUES IN FAVOUR OF THE ASSESSEE. FINDING OF LD. CIT (A) IS RECORDED IN PARA 2.7 AT P AGES 4 & 5 OF HIS ORDER ARE AS UNDER :- 2.7 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND SUBMISSIONS OF LD.AR. FROM THE ORDER SHEET ENTRY, IT IS NOTED THAT THE ASSESSEE HAD PRODUCED THE BOOKS OF ACCOUNT ON 4-11-2008, 14-11-2 008, 27-11-2008 AND 15-12-2008. ON EXAMINATION OF THE BOOKS OF ACCOUNT ON VARIOUS DATES, THE AO HAS NOT REFERRED TO ANY DISCREPANCIES THEREIN AS PER THE ORDER SHEET. THEREAFTER, THE AO VIDE HIS LETTER DATED 15-01-2009 HAS RAISED VARIOUS ISSUES WHICH WERE REPLIED TO BY THE ASSESSEE VIDE L ETTER DATED 28-01-2009. IN THE ORDER SHEET ENTRY DATED 28-01-2009 ALSO, AFT ER CONSIDERING THE REPLY GIVEN, THE AO HAS NOT RAISED ANY ISSUE. HOWEVER, IN THE ASSESSMENT ORDER, THE AO HAS REJECTED THE BOOKS OF ACCOUNT U/S 145(3) AND APPLIED NET PROFIT RATE OF 8% ON BOTH, THE RECEIPT FROM SALE OF MATERI AL AND TRANSPORTATION RECEIPT. THUS, I FIND THAT NOWHERE IN THE ORDER SH EET , AFTER CONSIDERING THE REPLY OF THE ASSESSEE DATED 28-01-2009, THE AO HAS STATED ANYTHING ABOUT THE REJECTION OF THE BOOKS OF ACCOUNT AND APPLICATI ON OF THE NET PROFIT RATE. OTHERWISE ALSO, SINCE THE RECEIPT OF THE ASSESSEE I S MORE THAN RS 40 LACS, PROVISION OF S.44AD RELATING TO APPLICATION OF NET PROFIT RATE OF 8%, ARE NOT APPLICABLE. FURTHER, EVEN IF THE ENTIRE WORK CA RRIED OUT BY THE ASSESSEE FIRM FOR M\S PUNJ LLOYED LIMITED IS CONSIDERED TO B E WORK FOR CARRYING 6 OUT A CONTRACT, IN THE ABSENCE OF ANY COMPARABLE CA SE, NET PROFIT RATE OF 8% CANNOT BE APPROVED. THEREFORE, IN ORDER TO VERIFY T HE VERACITY OF THE ASSESSEES CLAIM REGARDING MAINTENANCE OF PROPER BO OKS OF ACCOUNT AND VOUCHERS, I CALLED FOR THE EXPENDITURE VOUCHERS IN RESPECT OF THE PURCHASE OF THE MATERIAL AND PAYMENT OF FREIGHT AND TRANSPOR TATION CHARGES. I NOTED THAT IN RESPECT OF PURCHASE OF MATERIAL IN M/S HIND USTAN TRADING COMPANY, THE SAME IS SUPPORTED BY PROPER BILLS. IN RESPECT OF FREIGHT CHARGES IN THIS FIRM THE VOUCHERS ARE DULY RECEIPTE D BY THE RECEIPT OF THE FREIGHT CHARGES. THE ASSESSEE HAS FILED THE QUANTIT ATIVE DETAILS OF THE MATERIAL PURCHASED OR SOLD. IN THOSE FACTS AND CIRC UMSTANCES, THE TRADING RESULTS DECLARED BY THE ASSESSEE RELATING TO THE SU PPLY OF BAJRI, GRIT OR SAND STONE ETC. CANNOT BE DISTURBED. FURTHER, IN RESPECT OF TRANSPORTATION WORK CARRIED OUT IN M/S RONIT LOGISTICS, THE DISPUTE IS IN RESPECT OF PAYMENT OF TRANSPORTATION EXPENSES, WHICH ARE ON SELF MADE VOU CHERS. I HAVE EXAMINED THOSE SELF MADE VOUCHERS, A FEW COPY OF WH ICH ARE ALSO PLACED ON THE PAPER BOOK FROM WHICH I NOTED IN THE SAID VO UCHERS, THE TRUCK NUMBER AND THE SIGNATURE OF THE RECIPIENT OF THE PA YMENT ARE AVAILABLE. IN ADDITION, IT IS NOTICED THAT FEW DRIVERS WERE ALSO PRODUCED, AS NOTICED BY THE AO IN THE ORDER SHEET DATED 28-01-2009. AO HAS NOT FOUND ANY DISCREPANCIES. THE WORK OF THE ASSESSEE IS ONLY TO WORK AS ARRANGER OF THE TRUCKS FOR PUNJ LIOYED LIMITED. THEREFORE, IN THESE CIRCUMSTANCES, THERE IS NO JUSTIFICATION FOR THE AO TO APPLY PROVISIONS OF S. 145(3) AND IN APPLYING THE NET PROFIT RATE OF 8% ON THE TRANSPORT ATION RECEIPTS. THE ADDITION MADE ON THIS ACCOUNT IS, THEREFORE, DIRECT ED TO BE DELETED. AS A RESULT, THE GROUND OF APPEAL IS ALLOWED. THE ABOVE FINDING OF LD. CIT (A) REMAINED UNCONTROV ERTED. WE FURTHER NOTED THAT ASSESSEE HAD OBTAINED A COPY OF ORDER SHEET WHICH I S PLACED AT PAPER BOOK PAGES 28 & 29 AND FOUND THAT NOWHERE THE ASSESSEE WAS ASKED TO GI VE REASON WHY HIS BOOKS OF ACCOUNT SHOULD NOT BE REJECTED, NEITHER ANY DEFECTS IN MAIN TAINING BOOKS OF ACCOUNT HAVE BEEN 7 POINTED OUT. RATHER IT HAS BEEN SEEN THAT COMPLETE BOOKS OF ACCOUNT ALONG WITH VOUCHERS WERE PRODUCED BEFORE ASSESSING OFFICER AND THIS FAC T HAS BEEN NOTED BY THE ASSESSING OFFICER IN FIRST PARA OF THE ASSESSMENT ORDER. WIT HOUT POINTING OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT, IN OUR VIEW, THE ASSESSING OFFICE R WAS NOT JUSTIFIED IN INVOKING PROVISIONS OF SECTION 145(3). WE FURTHER NOTED THA T LD. CIT (A) HAS OBTAINED ALL THE DETAILS FROM ASSESSEE AND HAS EXAMINED AND FOUND TH AT THEY ARE ALL IN ORDER. SOME OF THE DRIVERS WERE ALSO PRODUCED AND THEIR STATEMENTS WER E RECORDED DURING THE APPELLATE PROCEEDINGS. THIS FACT HAS BEEN NOTED BY LD. CIT (A ) IN HIS FINDING. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE LD. CIT (A) WAS JUSTIFIED IN HOLDING THAT INVOKING OF PROVISIONS OF SECTION 145(3) AND THEREBY MAKING TRADING ADDITION WAS NOT JUSTIFIED. ACCORDINGLY WE CONFIRM HIS FINDING. 9. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMI SSED. 10. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 15 .12.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JODHPUR, COPY FORWARDED TO :- THE ITO, WARD-1, CHURU. SHRI RAHUL KASWAN HUF, RATANGARH. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 354/JODH/2010) BY ORDER, AR ITAT JODHPUR. 8