DCIT, Jaipur V. SPEEDWAYS CARRIERS P LTD., Jaipur

ITA 360/JPR/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99470 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 05-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA
• Assessee Lawyers: ASHOK HOLANI DHK
• Keywords: Opportunity of being heard; Revenue expenditure

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 360/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 THE DCIT CIRCLE- 3, ROOM NO.218 STATUE CIRCLE-,JAIPUR CUKE VS. M/S. SPEEDWAYS CARRIERS (P) LTD. D-3, DURGA MARG BANI PARK, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAECS 2610 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA, JCIT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI ASHOK HOLANI, LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19/10/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 06/11/2015 VKNS'K@ ORDER PER R.P. TOLANI, JM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-I, JAIPUR DATED 07-01-2013 FOR THE ASSESSME NT YEAR 2007-08 WHEREIN FOLLOWING GROUND HAS BEEN RAISED BY THE RE VENUE. (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN DEL ETING THE ADDITION OF RS. 79,53,586/- ON ACCOUNT OF NET PROFIT RATE A T 6% APPLIED BY THE AO. 2.1 LD. DR RELIED ON THE ORDER OF THE AO AND CONTEN DS THAT LD. CIT(A) HAS AWARDED THE RELIEF WITHOUT APPRECIATING THE FAC TS OF THE CASE THAT ITA NO. 360/JP/2013 DCIT ,CIRCLE-3,JAIPUR VS. M/S. SPEEDWAYS CARRIER ( P) LTD. , JAIPUR . 2 ASSESSEE HAS ADOPTED A WAY TO AVOID SCRUTINY OF BOO KS BY ACCEPTING THE REJECTION OF BOOKS AND GETTING ASSESSED ON THE BASI S OF NP. 2.2 THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE ISSUE IN QUESTION IS COVERED IN FAVOR OF THE ASSESSEE BY ITAT JUDGMEN T DATED 31-05-2011 IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2006 -07. THE ITAT THOUGH UPHELD THE REJECTION OF BOOKS OF ACCOUNT YET HELD T HAT GROSS PROFIT OF THE ASSESSEE WAS MARGINALLY LOW AND NO ADDITION WAS CAL LED FOR BY FOLLOWING OBSERVATION. 6. THE LD. D/R DURING THE APPELLATE PROCEEDINGS O BJECTED THE FINDINGS OF LD. CIT (A). IT WAS SUBMITTED THAT AT ONE HAND THE LD. CIT (A)IS REJECTING BOOKS OF ACCOUNT. HOWEV ER, ON THE OTHER HAND HE IS DELETING ENTIRE ADDITION MADE BY A O WHICH IS CONTRADICTORY ITSELF. 7. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THOUGH TECHNIC ALLY PROVISIONS OF SECTION 145(3) APPLICABLE AS VARIOUS DETAILS WERE NOT FILED. HOWEVER, IT IS NOT NECESSARY THAT W HERE BOOKS OF ACCOUNT ARE REJECTED BY INVOKING PROVISIONS OF S ECTION 145(3) THE SUM ADDITION HAS TO BE MADE. THE BEST J UDGMENT HAS TO BE PASSED WHERE BOOKS OF ACCOUNT ARE REJECTE D KEEPING IN MIND THE PAST HISTORY OF THE CASE. THE A O HAS APPLIED N.P. RATE OF 6% WITHOUT ANY BASIS. THE DECL INE IN G.P. IS ONLY 1.77%AND THERE WERE VARIOUS FACTS WHICH RES ULTED IN DECLINE IN G.P. RATE WHICH ARE DISCUSSED BY LD. CIT (A) IN HIS ORDER. THERE WAS SUBSTANTIAL INCREASE IN DIESEL PRI CES. THERE WAS INCREASED IN SALARY OF DRIVERS AND OTHER MANAGE MENT EXPENDITURE. EVEN THEN THE ASSESSEE HAS SHOWN G.P. RATE 7.39% WHICH IS MARGINALLY ON LOWER SIDE AS COMPARED TO EARLIER YEAR. SINCE THERE WAS SUBSTANTIAL INCREASE D IN DIESEL PRICE AND INCREASE IN SALARY AND TYRES EXPENSES AND ALSO SUBSTANTIAL INCREASED IN TOLL TAX, THEREFORE, IN OU R CONSIDERED VIEW THE LD. CIT (A) WAS CORRECT IN DIRECTING THE A O TO DELETE ITA NO. 360/JP/2013 DCIT ,CIRCLE-3,JAIPUR VS. M/S. SPEEDWAYS CARRIER ( P) LTD. , JAIPUR . 3 THE N.P. RATE ESTIMATED BY HIM AND ACCEPT THE PROFI T/LOSS SHOWN BY ASSESSEE. ACCORDINGLY WE CONFIRM THE FIND INGS OF LD. CIT (A). IN THIS YEAR, LD. AO AFTER REJECTING THE BOOKS OF A CCOUNT HAS ADOPTED THE NET PROFIT RATE AT 6%. THE COMPARATIVE GROSS PROFIT CHART IS AS UNDER:- A.Y. SALES GROSS PROFIT G.P. RATE 2007-08 13,25,59,765.00 93,39,207.87 7.20% 2006-07 5,92,34,651.00 43,81,111.63 7.40% 2005-06 4,48,22,272.20 41,08,376.17 9.17% IT IS PLEADED THAT THE FACTS BEING SAME ITAT JUDGME NT OF THE PRECEDING YEAR MAY BE APPLIED AND GROSS PROFIT RATE BEING MAR GINALLY LOW AS COMPARED TO PRECEDING YEAR ORDER OF LD. CIT(A) MAY E UPHELD. 2.3 THE LD. DR IN THE REJOINDER CONTENDS THAT IN FA CTS IN EVERY YEAR ON THE EFFECTS OF THE BUSINESS AND PROFITABILITY ARE D IFFERENT AND PRINCIPLE OF RES JUDICATA DO NOT APPLY TO THE INCOME TAX PROCEED INGS. ON ONE HAND, THE ASSESSEE ADMITS THAT IT'S BOOKS WHICH IS ENDORSED BY THE LD. CIT(A) ALSO HOWEVER WITHOUT ASSIGNING ANY REASON TO HOLD THE AO S ESTIMATE AS ARBITRARY OR CAPRICIOUS HAS ACCEPTED THE ASSESSEE P ROFITS BASED ON REJECTED BOOKS. ONCE THE BOOKS OF ACCOUNT ARE REJECTED AND E STIMATE IS MADE, THE LAW VESTS THE AO HAS LIBERTY TO ADOPT A REASONABLE ESTIMATE OF INCOME. IT IS SETTLED LAW THAT ESTIMATION OF INCOME AFTER REJE CTION OF BOOKS OF ACCOUNT GENERALLY SHOULD NOT BE INTERFERED WITH BY APPELLAT E AUTHORITY UNLESS IT IS ITA NO. 360/JP/2013 DCIT ,CIRCLE-3,JAIPUR VS. M/S. SPEEDWAYS CARRIER ( P) LTD. , JAIPUR . 4 DEMONSTRATED THAT THE AOS ESTIMATE IS ARBITRARY OR CAPRICIOUS. THE LD. CIT(A) THOUGH HELD THAT ASSESSEE'S BOOKS OF ACCOUNT ARE DEFECTIVE AND ALLOWED THE RELIEF BY SUMMARILY FOLLOWING THE ORDER OF ITAT. 2.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE LD. CIT(A) HAS SUMMARILY D ISMISSED THE ADDITION DESPITE UPHOLDING THE REJECTION OF BOOKS WHICH INCL UDE FOLLOWING SPECIFIC DEFECTS. (1) THE FREIGHT WAS ALWAYS PAID IN CASH TO THE TR UCK DRIVERS MAKING THE VERIFICATION OF RECEIPTS VERY DIFFICULT. (2) THE LUBRICANTS AND CONSUMABLES LIKE TYRES AND LUBRICANTS WERE INDISCRIMINATELY PURCHASED AND CONS UMED MANY TIMES ON CASH AND NO STOCK REGISTER WAS MAINTAINED FOR THESE ITEMS WHICH ARE CLAIMED AS REVENUE EXPENDITURE. (3) THE HUGE EXPENSES INCLUDING REPAIRS CLAIMED TO BE INCURRED BY THE TRUCK DRIVERS ARE NOT SUPPORTED BY BILLS THUS MAKING THE BASIS OF CLAIM AT THE SWEET WILL OF THE ASSESSE E. . 2.5 A PERUSAL OF THESE FINDINGS CLEARLY INDICATE T HAT BOOKS OF ACCOUNT STAND REJECTED WHICH IMPLIES THAT SPECIFIC DEFECTS POINTED OUT BY THE AO ARE ENDORSED, MORE SO IN RESPECT OF CASH PAYMENT H AVE NOT BEEN EXPLAINED AT ALL. NO REASON HAS BEEN GIVEN AS TO WH Y THE ESTIMATE BASED ON NET PROFIT MADE BY THE AO SHOULD BE CONVERTED IN TO A GROSS PROFIT BASED ADDITION WITHOUT GIVING ANY REASON. IN CASE O F TRANSPORT OPERATOR, ITA NO. 360/JP/2013 DCIT ,CIRCLE-3,JAIPUR VS. M/S. SPEEDWAYS CARRIER ( P) LTD. , JAIPUR . 5 THE FACTS OF EVERY YEAR ARE DIFFERENT AND THE ASSES SEE FOR EVERY YEAR CANNOT CLAIM THAT THOUGH ITS BOOKS MAY BE REJECTED BUT THE DECLARED PROFITS SHALL BE ACCEPTED. AS A MATTER OF PRINCIPLE, RES JUDICATA DO NOT APPLY TO INCOME TAX PROCEEDINGS. THE ESTIMATE MADE BY THE AO SHOULD NOT BE GENERALLY INTERFERED WITH UNLESS IT IS DEMONSTRATED THAT THE ESTIMATE IS ARBITRARY OR UNJUSTIFIED OR UNSCIENTIFIC. IN CASE OF SERIES OF A LLEGATIONS ABOUT NON- MAINTENANCE OF SUPPORTING VOUCHERS OF CASH TRANSACT IONS, THE INCOME OF THE ASSESSEE BECOMES INDETERMINABLE IN TERMS OF SEC TION 145(3) OF THE ACT, MAKING PROCESS OF ESTIMATION OF INCOME BECOMES INEVITABLE. THE LD. CIT(A) ADOPTED A PERFUNCTORY APPROACH BY MECHANICAL LY CONVERTING AOS NP BASED ESTIMATION INTO GP BASED ADDITION WI THOUT OBSERVING THE ASSESSEES CLANDESTINE LINE OF ACTION TO GO ON ACCE PTING THE REJECTION OF BOOKS YEAR AFTER YEAR AND GETTING ASSESSED AT DECLA RED PROFITS. THIS METHODOLOGY DEFEATS THE SCHEME OF THE ACT AND MAKIN G THE POWER OF ESTIMATE OTIOSE BY SOMEHOW RELYING EARLIER ITAT ORD ER WITHOUT ASCERTAINING THE PARITY OF FACTS. LD. CIT(A)S ORDE R CONTAINS NO CONVINCING REASON AS TO WHY REASONABLE ESTIMATE OF AO BASED ON ONE OF THE ACCEPTED METHODOLOGY HAS BEEN DRASTICALLY DISTU RBED. 2.6 THE FINDINGS OF THE LD. CIT(A) AS TO NOT UPHOLD ING ESTIMATION OF NET PROFIT RATE AT 6% BY THE AO IS AS UNDER:- ITA NO. 360/JP/2013 DCIT ,CIRCLE-3,JAIPUR VS. M/S. SPEEDWAYS CARRIER ( P) LTD. , JAIPUR . 6 (1) THE BOOKS OF ACCOUNT OF THE APPELLANT WERE REJECTED ON THE SAME GROUNDS IN THE PREVIOUS A SSESSMENT YEAR BY INVOKING THE PROVISIONS OF SECTION 145(3) AND TH IS REJECTION OF BOOKS OF ACCOUNT WAS SUSTAINED BY THE HON'BLE ITAT , JAIPUR VIDE ITS ORDER ITA NO. 400/JP/2010 DATED 31-05-2011. THE A.R. OF THE APPELLANT HAS NOT REBUTTED THE FINDING OF THE HON'B LE ITAT, JAIPUR BY BRINGING ANY NEW EVIDENCE OR ARGUMENTS. THEREFOR E, THE MATTER IS COVERED BY THE FINDING OF THE HON'BLE ITAT, JAI PUR IN ITS OWN CASE AND THE DECISION OF THE AO TO REJECT THE BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 145(3) IS SUSTAI NED. (2) REGARDING ESTIMATION OF N.P./G.P. IT IS SEEN T HAT THE TURNOVER OF THE APPELLANT COMPANY INCREASED FR OM RS. 5,92,34,651/ IN THE IMMEDIATELY PRECEDING ASSESSME NT YEAR TO RS. 13,25,59,765/- DURING THIS ASSESSMENT YEAR WHILE GR OSS PROFIT RATE HAS DECLINED MARGINALLY FROM 7.40% TO 7.20%. IT IS GENERALLY ACCEPTED FACT THAT THE G.P. DECLINES WITH THE INCRE ASE IN TURNOVER . GIVEN THE QUANTUM INCREASE IN THE TURNOVER, THE MAR GINAL DECLINE IN G.P. APPEARS TO BE ACCEPTABLE. GIVEN THE SUBMISSION REGARDING INCREASE IN DIESEL PRICES AND THE SALARY TO THE DRI VERS ETC. DURING THIS ASSESSMENT YEAR, THE DECISION OF THE AO TO ESTIMATE THE N.P. OF THE APPELLANT AT 6% IS NOT UPHELD. 2.7 THE LD. CIT(A) HAS NOT GIVEN ANY REASON TO CON TROVERT THE ESTIMATE OF THE AO TO THE EFFECT THAT IT IS EITHER ARBITRARY OR UNJUSTIFIED. THE ESTIMATE HAS BEEN MADE BY THE AO AFTER GIVING THE A SSESSEE AN OPPORTUNITY OF BEING HEARD. THE DEFECTS FOUND IN IT S BOOKS OF ACCOUNT HAVE BEEN ACCEPTED. IN THESE CIRCUMSTANCES, THE LD. CIT(A) CANNOT INTERFERE WITH THE ESTIMATE MADE BY THE AO WITHOUT ASSIGNING ANY REASON AND MERELY RELYING ON ITAT JUDGMENT IN SUMMARY MANN ER FOR THE ASSESSMENT YEAR 2006-07. IT IS SETTLED LAW THAT EVE RY YEAR OF ASSESSMENT IS ITA NO. 360/JP/2013 DCIT ,CIRCLE-3,JAIPUR VS. M/S. SPEEDWAYS CARRIER ( P) LTD. , JAIPUR . 7 DISTINCT AND SEPARATE AND PRINCIPLE OF RES JUDICATA DO NOT APPLY TO INCOME TAX PROCEEDINGS. 2.8 IN VIEW THEREOF, WE ARE INCLINED TO SET ASIDE T HE MATTER BACK TO THE FILE OF THE LD. CIT(A) TO DECIDE THE SAME AFRESH AN D SUPPORTING HIS ORDER WITH COGENT REASONING ON THE FINDINGS ABOUT THE EST IMATE MADE BY THE AO AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PU RPOSES. 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED FOR STATISTICAL PURPOSES ORDER PRONOUNCED IN THE OPEN COURT ON 06/11/2015. SD/- SD/- FOE FLAG ;KNO VKJ-IH-RKSYKUH (VIKRAM SINGH YADAV) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 06/11/ 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE DCIT, CIRCLE- 6, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- M/S. SPEEDWAYS CARRIERS (P) LTD. , JAIPUR 3. VK;DJ VK;QDRVIHY ) @ CIT(A) 4. VK;DJ VK;QDR@ CIT 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.360/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR