ITO, Rohtak V. Sh. Inderjeet, Rohtak

ITA 4176/DEL/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6574 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 02-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAWAL
• Assessee Lawyers: K L GUGLANI
• Section: 40A(3); 194C; 145

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI , ACCOUNTANT MEMBER I TA NO . 4176/DEL/2012 (ASSESSMENT YEAR: 2009 - 10 ) ITO, WARD - 2, ROHTAK VS. INDERJEET, PROP. M/S. SUPERSALT INDUSTIRES, DLF COLONY, ROHTAK PAN:ACCPJ1150E (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. ROBIN RAWAL, SR. DR RESP ONDENT BY: SH . K.L. GUGLANI, ADV DATE OF HEARING 04/01/2016 DATE OF PRONOUNCEMENT 01 /0 3 /2016 O R D E R PER PRASHANT MAHARISHI , A . M . 1 . THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER DATED 21.05.2012 OF LEARNED COMMISSIONER OF INCOME - TAX (APPEALS), ROHTAK FOR THE ASSESSMENT YEAR 2009 - 10. FOLLOWING GROUNDS OF APPEAL ARE RAISED AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ID. CIT (A) HAS ERRED IN LAW AND FACTS IN REJECTING THE NET PROFIT RATE OF 8% OF TURNOVER APPLIED BY AO INSPITE OF DETAILED FINDINGS OF AO THAT RMC (RAW MATERIAL CONSUMPTION ) FOR THE MONTH OF APRIL IS 52. 64% AS AGAINST FOR THE WHOLE YEAR AT 59.65 % MEANING THEREBY THAT ASSESSEE HAS UNDERSTATED RMC BY 7.01 %; THIS TAKEN BY THE FACT THAT NET PROFIT DECLARED BY ASSESSEE IS 1.03%, THE TOTAL COMES TO 8.04% , THEREFORE, THE NET PROFIT RATE OF 8% OF TURNOVER WAS CORRECTLY APPLIED BY AO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ID. CIT (A) HAS ERRED IN LAW AND FACTS IN REJECTING THAT THE PAYMENTS TO THE TRANSPORTERS FOR TRANSPORTING GOODS FROM ONE BRANCH TO ANOTHER IS NOT COVERED U/S 194C AND AS SU CH THE PROVISIONS OF SECTION 40 ( A)(IA) OF THE ACT IS NOT APPL ICABLE; THE DISALLOWANCE OF RS. 1,74,60,046 / - WAS MADE BY AO U/S 40(A)(IA) OF THE ACT AS THE ASSESSEE FAILED TO FURNISH SUSTAINABLE DOCUMENTARY EVIDENCE DURING ASSESSMENT AS WELL AS REMAND PROCEED INGS. 2 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL CARRYING ON BUSINESS OF MANUFACTURING AND TRADING OF SALT AND RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009 - 10 WAS FILED ON 24.09.2009 SHOWING INCOME OF RS.4 , 84 , 670/ - AND ASSESSMENT WAS MADE AT INCOME OF RS.2,21,30,260/ - . PAGE 2 OF 4 3 . THE GROUND NO.1 IS AGAINST REJECTION OF NET PROFIT BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) AT 1.25% AGAINST 8% ESTIMATED BY AO. THE AO ESTIMATED THE NET PROFIT REJECTING THE BOOKS OF ACCOUNTS FOR THE REASON T HAT THE ASSESSEE FAILED TO MAINTAIN BOOKS OF ACCOUNTS IN THE NORMAL COURSE OF BUSINESS AND ALSO HELD THAT THE ASSESSEE COULD NOT PRODUCE THE DOCUMENTS OF GOODS MOVEMENT FROM RAJASTHAN TO HARYANA IN SPITE OF HAVING THE BILLS OF PURCHASE. THE LEARNED COMMISS IONER OF INCOME - TAX (APPEALS) RESTRICTED THE NET PROFIT OF THE ASSESSEE TO 1.25% AND TO JUSTIFY THIS RATE HE HAS TAKE N AN AVERAGE OF THE NET PROFITS DECLARED BY THE ASSESSEE IN PREVIOUS THREE YEARS. AGAINST THIS REVENUE IS IN APPEAL BEFORE US. 4 . THE LD DR ON THIS GROUND RELIED ON THE ORDERS OF AO , WHEREAS THE LD AR RELIED ON THE ORDERS OF LEARNED COMMISSIONER OF INCOME - TAX (APPEALS). 5 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS DEALT WITH THIS ISSUE AT PAGE.7 OF THE IMPUGNED ORDER AS UNDER: - I HAVE CAREFULLY CONSIDERED THE ISSUE AND THE SUBMISSIONS MADE BY THE AR. THE ASSESSEE HAS NOT MAINTAINED ANY QUANTITATIVE STOCK REGISTER EITHER AT NOVA OR AT PANIPAT. AS ADMITTED BY THE ASSESSEE, SALT IS RECEIV ED AT THE GODOWN AT NOVA FROM THE SUPPLIERS BY TROLLEYS FOR WHICH UNMARKED RECEIPTS ARE ISSUED BY THE ASSESSEE. THE RECEIPT OF SALT AND DISPATCH AFTER PROCESSING IS NOT ENTERED IN ANY STOCK REGISTER. THE PURCHASES ARE ENTERED IN THE LEDGER A/C ONLY AFTER R ECEIPT OF BILLS, WHICH IS 1 - 2 MONTHS AFTER THE RECEIPT OF ACTUAL GOODS. IN THE ABSENCE OF THE STOCK REGISTER, IT IS DIFFICULT TO ASCERTAIN THE VERACITY OF THE CLAIM. THE RMC FOR THE MONTH OF APRIL WORKED OUT BY THE AO OF 52.64% IS MUCH LESS THAN FOR THE WH OLE YEAR OF 59.65%. IN THE ABSENCE OF STOCK REGISTER AND DETAILS OF MOVEMENT OF SALT FROM NOVA TO PANIPAT, IT IS DIFFICULT TO ASCERTAIN THE REAL PROFIT EARNED BY THE ASSESSEE. THE BOOKS OF ACCOUNTS THEREFORE CANNOT BE HELD TO BE COMPLETE. IN VIEW OF THE AB OVE, THE ACTION OF THE AO IN REJECTING THE BOOKS OF ACCOUNTS U/S 145 OF THE ACT IS UPHELD AND THE CASE LAWS RELIED UPON BY THE AR ARE DISTINGUISHABLE ON FACTS. 7.1 IT IS WELL SETTLED LAW, AS PRONOUNCED BY JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS HS IDC LTD. (SUPRA), THAT IGNORING THE PAST HISTORY OF THE FACTS OF THE CASE WHILE ESTIMATING THE INCOME IS NOT JUSTIFIED. IN THE PRESENT CASE, THE AO HAS NOT GIVEN ANY BASIS WHATSOEVER FOR ESTIMATING THE NET PROFIT AT 8% OF THE TURNOVER WHILE THE NET PROFIT DECLARED BY THE ASSESSEE VARIED FROM 0.92% TO 1.8% IN LAST 3 YEARS. FURTHER, NO INSTANCE OF COMPARATIVE CASE HAS BEEN GIVEN BY THE AO WHILE ESTIMATING THE PROFIT AT 8%. IT IS KNOWLEDGE THAT TRADING IN SALT IS A HIGH VOLUME AND HIGH TURNOVER LESS WITH SMALL MARGINS. 7.2 IN VIEW OF THE ABOVE, I WOULD DEEM IT FIT TO ESTIMATE THE NET PROFIT FOR THE YEAR UNDER CONSIDERATION AT THE AVERAGE OF NET PROFIT DECLARED IN THE PREVIOUS 3 YEARS WHICH COMES TO 1.25%. THE PROFIT ESTIMATION THEREFORE COMES TO RS . 7,46,000/ - . TAKING THE NET PROFIT DECLARED BY THE ASSESSEE OF PAGE 3 OF 4 RS. 6,18,769/ - , ADDITION OF RS . 1,27,231/ - IS SUSTAINED AND GROUND OF APPEAL IS PARTLY ALLOWED. 6 . THE LD DR COULD NOT POINT OUT ANY INFIRMITY IN THIS ORDER. WE HAVE ALSO PERUSED THE NET PROFIT RATE SUBMITTE D BY THE ASSESSEE FOR AY 2007 - 08 TO 2009 - 10 OF 0 .92 % , 1.8 % AND 1.03% RESPECTIVELY. PAST HISTORY OF THE ASSESSEES NP RATES IS NOT DISPUTED. T HEREFORE BASED ON THE HISTORY OF THE ASSESSEE THE LD LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS TAKEN NET PROFIT RATIO AT 1.25% ON THE TURNOVER. IN VIEW OF THIS WE CONFIRM THE ORDER OF LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) AND DISMISS GROUND NO .1 OF THE APPEAL OF THE REVENUE. 7 . GROUND NO.2 OF APPEAL IS AGAINST DISALLOWANCE OF RS.1 , 74 , 6 0,0 46/ - APPLYING THE PROVISION OF SECTION 40 (A)( IA) OF THE ACT AS THE ASSESSEE HAS FAILED TO DEDUCT TDS ON THE TRANSPORTATION PAYMENT. THERE IS NO DISPUTE THAT THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE ON FREIGHT INWARD AND FREIGHT OUTWARD PAYMENT MADE BY IT. ON APPEAL BEF ORE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) THE LD AR RAISED SEVERAL CONTENTIONS SUCH AS NON - APPLICABILITY OF SECTION 194C ON THE PAYMENT MADE AND ALSO THAT EACH PAYMENT MADE TO TRANSPORTERS DO NOT EX CEED RS. 20,000/ - EACH AT A TIME. THE LEARNE D COMMISSIONER OF INCOME - TAX (APPEALS) HAS DECIDED THIS ISSUE HOLDING THAT AS THE ASSESSEE HAS NOT ENTERED INTO ANY CONTRACT WITH THE TRANSPORTER BUT HAS DONE PAYMENT ONLY . IT WAS FURTHER STATED THAT THERE IS NO CONTRACT. THEREFORE THE PROVISION OF SECTI ON 194C DOES NOT APPLY. FOR THIS THE LD LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) RELIED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE CIT VS. UNITED RICE LAND LTD 322 ITR 594. IT WAS FURTHER HELD BY HIM THAT WHEN THE BOOKS OF ACCOUNT OF THE ASSESSEE HAS BEEN REJECTED BY APPLYING THE PROVISION OF SECTION 145 OF THE ACT THE PROVISION OF SECTION 40A(IA) CANNOT BE APPLIED. THEREFORE DELETED THE ADDITION. 8 . THE LD DR RELIED ON THE ORDER OF AO AND WHEREAS THE LD AR RELIED ON THE ORDER OF LEARNED COM MISSIONER OF INCOME - TAX (APPEALS). 9 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AND WE ARE OF THE VIEW THAT WHEN THE AO HAS REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE PROFIT DISALLOWANCE 40 (A) (IA ) CANNOT BE MADE. COORDINATE BENCH OF ITAT IN CASE OF M/S. TEJA CONSTRUCTION VS. ACIT 129 TTJ 57 RELYING ON THE DECISION OF PAGE 4 OF 4 HONBLE ANDHRA PRADESH HIGH COURT OF INDWELL CONSTRUCTION VS. CIT 232 ITR 776 (AP) HAS HELD AS UNDER: - THE ABOVE DECISION OF THE ANDHRA PRADESH HIGH COURT HAS BEEN FOLLOWED AND A SIMILAR VIEW HAS BEEN TAKEN BY THE SPECIAL BENCH (KOLKATA) OF THIS TRIBUNAL IN THE CASE OF ITO VS. KENARAM SAHA & SUBHASH SAHA (2008) 116 TTJ (KOL)(SB) 289 : (2008) 8 DTR (KOL)(SB) (TRIB) 124 : (2008) 301 ITR 171(KOL)(SB)(AT), WHEREIN DISALLOWANCE MADE IN TERMS OF S. 40A(3) HAS BEEN DELETED. RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS (SUPRA), BESIDES THE SPECIAL BENCH DEC ISION OF THIS TRIBUNAL NOTED ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE INCOME OF THE ASSESSEE HAVING BEEN DETERMINED BY RESORTING TO ESTIMATION, THERE IS NO SCOPE FOR ANY FURTHER DISALLOWANCE EITHER IN TERMS OF S. 40(A)(IA)/40A(3) OR OTHERWISE. IN T HE LIGHT OF THE ABOVE DISCUSSION, WE UPHOLD THE IMPUGNED ORDER OF THE CIT(A) AND REJECT THE GROUNDS OF THE REVENUE IN THIS APPEAL.' 13. IN THIS VIEW OF THE MATTER, WE ARE UNABLE TO UPHOLD THE ACTION OF CIT(A) IN CONFIRMING THE DISALLOWANCE UNDER S. 40(A)(I A) OF THE IT ACT. THE SAME IS DELETED. 10 . THEREFORE IN VIEW OF THE ABOVE DECISION OF COORDINATE BENCH WE ARE OF THE VIEW THAT ONCE THE BOOKS OF ACCOUNT HAVE BEEN REJECTED THE DISALLOWANCE U/S 40 (A) (IA) CANNOT BE MADE AS THE EXPENDITURE IN SUBJECT IS PERTAINI NG TO DEDUCTION ALLOWABLE OF EXPENDITURE COVERED SECTION 30 TO 38. IN VIEW OF THIS THE GROUND NO .2 OF THE APPEAL IS DISMISSED. 11 . IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 1 / 0 3 /2016 . - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 1 /0 3 / 2016 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI