BHOLANATH R.SHUKLA, MUMBAI V. ACIT CIRCLE-2, THANE

ITA 4505/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3475 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 16-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR RAJEEV HARIT; SATISH CHANDRA RAJORE
• Keywords: Reopening of assessment; Rejection of books of accounts; Business income; Business expenditure; Additional evidence; Difference of opinion; Corroborative evidences; Non compliance; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 40A(3); 143(3); 133A; 153A; 147; 68; 148; 139

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI RAMLAL NEGI ( J M) I.T.A. NO. 4505 /MUM/ 201 8 (ASSESSMENT YEAR 20 09 - 10 ) I.T.A. NO. 4506/MUM/2018 (ASSESSMENT YEAR 2010 - 11) I.T.A. NO. 4507/MUM/2018 (ASSESSMENT YE AR 2011 - 12) I.T.A. NO. 4508/MUM/2018 (ASSESSMENT YEAR 2012 - 13) I.T.A. NO. 4509/MUM/2018 (ASSESSMENT YEAR 2013 - 14) SHRI BHOLANATH R. SHUKLA B - 101, JUPITER APARTMENTS POONAM SAGAR COMPLEX MIRA ROAD MUMBAI - 401 107. V S . ACIT, CIRCLE - 2 ASHAR IT PARTK ROAD NO. 16Z NEHRU NAGAR WAGLE INDUSTRIAL ESTATE, THANE(W) MAHARASHTRA - 400604. ( APPELLANT ) ( RESPONDENT ) I.T.A. NO. 5737/MUM/2018 (ASSESSMENT YEAR 2009 - 10) I.T.A. NO. 5590/MUM/2018 (ASSESSMENT YEAR 2010 - 11) I.T.A. NO. 5591/MUM/2018 (ASSESSMENT YEAR 2011 - 12) I.T.A. NO. 5592/MUM/2018 (ASSESSMENT YEAR 2012 - 13) I.T.A. NO. 5593/MUM/2018 (ASSESSMENT YEAR 2013 - 14) ACIT - 2 5(1) ROOM NO. 402, C - 10 BANDRA KURLA COMPLEX, BANDRA - E MUMBAI - 400 051. V S . SHRI BHOLANATH R. SHUKLA B - 101, JUPITER APARTMENTS POONAM SAGAR COMPLEX MIRA ROAD MUMBAI - 401 107. ( APPELLANT ) ( RESPONDENT ) PAN : ABFPR2174Q ASSESSEE BY SHRI BHARAT KUMAR DEPARTMENT BY DR.RAJEEV HARIT & SHRI SATISH CHANDRA RAJORE DATE OF HEARING 18 . 3 . 201 9 DATE OF PRONOUNCEMENT 2 . 4 . 201 9 O R D E R PE R BENCH : SHRI BHOLANATH R. SHUKLA 2 THESE ARE CROSS APPEALS BY THE REVENUE AND ASSESSEE ARISING OUT OF COMMON ORDER OF LEARNED CIT(A) DATED 5.7.2018 AND PERTAIN TO A.YS. 2009 - 10 TO 2013 - 14. ASSESSEES APPEAL 2. COMMON GROUNDS OF APPEAL FOR A.Y. 2009 - 10 TO A.Y. 2011 - 12 CHALLEN G ING THE VALIDITY OF REOPENING IS AS UNDER : - ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW LEARNED CIT(A) ERRED IN CONFIRMING REOPENING U/S. 148 HOLDING THAT THE REOPENING WAS VALID. 3 . COMMON G ROUNDS FOR ALL THE YEARS ON MERITS IS AS UNDER : - ON THE F ACTS AND CIRCUMSTANCES OF THE CASE AND LAW LEARNED CIT(A) ERRED IN MAKING ESTIMATION OF INCOME ON HIGHER SIDE AS COMPARED TO PROFIT RETURNED BY THE ASSESSEE ENGAGED IN THE SAME BUSINESS. REVENUES APPEAL 4. ONE C OMMON GROUND RAISED IN ALL THE YEARS RELA TES TO RESTRICTING THE ADDITION MADE BY THE ASSESSING OFFICER TO 5% OF THE TURNOVER BY LEARNED CIT(A). 5. FOR A.Y. 2012 - 13 AND A.Y. 2013 - 14 FURT HER GROUND IS RAISED REGARDING DISALLOWANCE FOR CASH EXPENSES . 6. FOR A.Y. 2012 - 13 ON E MORE GROUND RAISED IS REGARDING ADDITION UND ER SECTION 68. 7. BRIEF FACTS O F THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF OPERATING TOLL PLAZAS AND VEHICLE PARKING'S. THE TOLL PLAZAS WERE SITUATED AT GUJARAT, ANDHRA PRADESH, RAJASTHAN FROM WH ICH THE ASSESSEE HAS EARNED SUBSTANTIAL RECEIPTS. D URING ASSESSMENT OF AY 2012 - 13, TH ERE WAS SURVEY ACTION AT THE PREMISE S OF THE ASSESSEE ON 19.03.2015 . THE A.O. THEREAFTER ISSUED NOTICES U/S. 148 ON 30/4/2015 FOR A.YRS 2009 - 10, 2010 - 11 & 2011 - 12 AND THE ASSESSMENTS WERE COMPLETED ON 28.03.2016, WHICH WERE EARLIER COMPLETED U/S 143(3). THE ASSESSMENT FOR AY 2013 - 14 WAS ALSO COMPLETED ON THE SAME DATE BY ASSESSING OFFICER U/S 143(3). THE PARTICULARS OF SHRI BHOLANATH R. SHUKLA 3 RETURN OF INCOME SHOWN BY THE ASSESSEE IN THE ORIGINAL RETURN, THE INCOME ASSESSED U/S 143(3) AND THE INCOME ASSESSED U/S 147 IS SUMMARI ZED AS UNDER: A.Y. SECTION UNDER WHICH THE ORDER PA SSED RETURNED INCOME ASSESSED INCOME U/S 143(3) REASSESSMENT U/S 147 DATE OF ORDER 2009 - 10 143(3) R.W.S 147 9 4,13,900 98,13,900 17,79,34,471 28.03.2016 2010 - 11 DO 1,15,27,910 1,24,70,060 22,36,86,679 28.03.2016 2011 - 12 DO 1,66,32,300 1,76,73,406 20,11,02,880 28.03.2016 2012 - 13 143(3) 2,45,33,573 25,30,26,853 NA 27.03.2015 2013 - 14 143(3) 2,4 8,15,500 34,23,36,617 NA 28.03.2016 8 . SINCE FACTS ARE IDENTICAL WE REFER TO ASSESSING OFFICERS ORDER FOR A.Y. 2009 - 10 FOR THE FACTS LEADING TO THE ADDITION. 9 . IN THIS CASE, A SURVEY ACTION U/S 133A OF THE L T. ACT, 1961 WAS CARRIED OUT ON 19.03 . 20 15 . DURING THE COURSE OF SURVEY ACTION, IT WAS NOTICED THAT THE ASSESSEE HAS NOT MAINTA INED BOOKS OF ACCOUNTS FOR THE A Y. 2014 - 15 ALSO FOR THE EARLIER YEARS. IT WAS FOUND THAT TOTAL RECEIPTS FOR THE F.Y, 2014 - 15 WAS AROUND RS . 300 C RORES BUT APPROXIMATE EXPE NSES FOR THE F.Y, 2014 - 15 IN RESPECT OF ALL. THE TOLL NAKAS AND CAR PARKINGS ARE NOT MORE THAN RS . 1.0 CRORES WHICH COMPRISES SALARY & WAGES, STATIONERY ITEMS, STAFF WELFARE, CONVEYANCE, PETROL & DIESEL, KIRANA ITEMS, TEA, MILK, WATER MILK, NASTA FOR STAFF , MOBILE RECHARGES. ROOM RENT, MEDICAL, EXPENSES, PAPER ROO ETC. BUT THE ASSESSEE HAS FAILED TO PRODUCE RELEVANT BILLS IN SUPPORT OF EXPENSES CLAIMED UNDER THE HEAD PRINTING AND STATIONERY, CONVEYANCE EXPENSES, SUNDRY EXPENSES, VEHICLE EXPENSES AND. SALAR Y & WAGES . DURING SURVEY ACTION, THE STATEMENT OF SHRI RAJESH NAGAR, MANAGER OF THE ASSESSEE, WAS RECORDED, HE STATED THAT THE ASSESSEE HAS BEEN GIVEN CONTRACT BY THE VARIOUS GOVT . , AGENCIES FOR COLLECTION TOLL AT VARIOUS TOLL NAKAS AND ALSO GIVEN CONTRAC T FOR VARIOUS PARKING LOTS AT VARIOUS PLACES IN INDIA. HE FURTHER, STATED THAT EXPENSES UNDER THE HEAD - SALARY & WAGES, PRINTING & STATIONERY, CONVEYANCE, STAFF WELFARE, KIRANA EXPENSES AND OTHER SHRI BHOLANATH R. SHUKLA 4 EXPENSES ARE INCURRED ON DAILY BASIS AT VARIOUS TOLL NAKAS M ANAGED BY THE ASSESSEE AND EXPENSES DETAILS MONTH WISE ARE MAILED TO MAIN ADMINISTRATIVE OFFICE I.E. C - 14/15, DOLPHIN GARDEN, POONAM SAGAR COMPLEX, MIRA ROAD (E). ALSO THE COLLECTION AFTER INCURRING THESE EXPENSES ON DAILY BASIS ARE DEPOSITED INTO THE BANK ACCOUNTS MAINTAINED BY THE PROPRIETARY CONCERN OF THE ASSESSEE I.E. M/S S. S. ENTERPRISES. DURING THE SURVEY ACTION, NO EVIDENCES OF SUCH EXPENSES WERE FOUND NOR PRODUCED BY SHRI RAJESH NAGAR AND EVEN NOT FURNISHED DURING, POST SURVEY PROCEEDINGS, EVEN IN THE STATEMENT RECORDED DURING SURVEY PROCEEDINGS, SHRI RAJESH NAGAR STATED THAT THERE IS NO BASIS TO CLAIM THESE EXPENSES, DURING POST SURVEY PROCEEDINGS, STATEMENT OF SHRI BHOLANATH SHUKLA WAS A LSO RECORDED AND HE HAS CONFIRMED THE STATEMENT GIVEN BY SH R I RAJ E S H NAGAR DURING THE SURVEY ACTION . 1 0 . FOR AY 2009 - 10, THE ASSESSEE HAS CLAIMED EXPENSES IN THE P&L A/C ENCLOSED WITH THE RETURN OF INCOME FILED, UNDER THE HEADS 'SALARY & WAGES, CONVEYANCE, VEHICLE, PRINTING & STATIONERY AND SUNDRY EXPENSES AT RS. 27,09,2 1 , 390/ - , RS. 25,64,814/ - , RS. 9,64,523/ - , RS . 29,20,319/ - AND RS. 46,85,8 17 / - RESPECTIVELY. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE PRODUCED LEDGER ACCOUNTS OF EXPENSES UNDER THE HEADS SALARY, CONVEYANCE, TELEPHONE, SUNDRY EXPENSES AND VEH ICLE EXPENSES BUT DID NOT FILE ANY SUPPORTING BILLS & VOUCHERS FOR CLAIMING THESE EXPENSES. MOREOVER, IT IS SEEN THAT THE ASSESSEE HAS INCURRED ALL THESE EXPENSES IN CASH ONLY BUT NO CASH FLOW STATEMENT WAS FILED BY THE ASSESSEE DURING ASSESSMENT PROCEEDIN GS IN SUPPORT HIS CLAIM THAT THE ASSESSEE HAD SUFFICIENT CASH IN HAND TO INCUR THESE EXPENSES. THE ASSESSING OFFICER OBSERVED THAT D URING THE ASSESSMENT PROCEEDINGS FOR AY 2012 - 13, IT WAS FOUND THAT THE ASSESSEE COULD NOT PRODUCE SUPPORTING BILLS AND ALSO DID NOT FILE CASH FLOW STATEMENT TO JUSTIFY HIS CLAIM OF INCURRING HUGE EXPENSES UNDER VARIOUS HEADS IN CASH AND THE SAME FACTS ARE NOTICED IN THE CASE OF THE ASSESSEE EVEN FOR AY 2009 - 10 AS EVIDENT FROM THE DETAILS AVAILABLE ON RECORD FOR AY 2009 - 10, THE CLAIM OF EXPENSES MADE BY THE ASSESSEE FOR AY 2009 - 10 UNDER VARIOUS HEADS MENTIONED ABOVE ARE NOT GENUINE SHRI BHOLANATH R. SHUKLA 5 BEYOND DOUBT AS CAN BE SEEN FROM THE DETAILS FILED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS, WHICH ARE ON RECORD. 1 1 . THE ASSESSING OFFICE R NOTED THAT IN VIEW OF THE ABOVE FACTUAL FINDING DURING THE COURSE OF SEARCH THE CASE WAS REOPENED. ASSESSING OFFICER OBSERVED THAT D URING THE REASSESSMENT PROCEEDINGS SHRI RAJESH NAGAR, AR OF THE ASSESSEE HAS SUBMITTED MONTH WISE DETAILS OF VARIOUS EXPEN SES. HOWEVER DID NOT FURNISH BILLS, VOUCHERS AND OTHER SUPPORTING EVIDENCES IN SUPPORT OF EXPENSES CLAIMED UNDER VARIOUS HEADS. IN THE PROFIT & L OSS A/C, THE ASSESSEE HAS CLAIMED, EXPENSES UNDER THE HEAD 'SALARY & WAGES AT RS. 27,09,21,390/ - . 1 2 . DURING THE COURSE REASSESSMENT PROCEEDINGS, THE AR WAS ASKED TO FURNISH, DETAILS IN SUPPORT OF THESE EXPENSES SUCH AS NAME & ADDRESSES OF THE PERSONS TO WHOM SALARY W AS PAID AND ALSO FURNISH SALARY/ WAGES REGISTER. THE AR WAS FURTHER ASKED TO FURNISH THE BREAKUP O F SALARY AND WAGES, THE AR DID NOT FILE PAYMENT VOUCHERS UNDER THE HEAD 'SALARY & WAGES CLAIMED TO HAVE BEEN INCURRED AMOUNTING TO RS.27,09,21,390/ - . HE SIMPLY FILED A SUMMARY OF MONTH WISE SALARY & WAGES FROM APRIL, 2012 TO MA.RCH.2013 TOTALING TO RS.27, 09,21,390/ - . THE AR DID NOT FILE NAME OF THE EMPLOYEES LOCATED AT VARIOUS TOLL NAKAS AND EAR PARKING SITES AND ALSO NAMES OF THE PERSONS TO WHOM WAGES HAVE BEEN PAID. 1 3 . IN VIEW OF THE ABOVE, THE ASSESSING OFFICER VIDE THIS OFFICE LETTER DATED 09.03.2016 ASKED TO SHOW CAUSE AS TO WHY DISALLOWANCE OUT OF SALARY & WAGES EXPENSES TO THE EXTENT OF RS. 16,25,52,834 / - OF TOTAL SALARY & WAGES I.E. 60% OF RS, 27,09,21,390/ - AS PER THE LINES OF DISALLOWANCE MADE IN SUCCEEDING YEAR I.E. A.Y, 2012 - 13 SHOULD, NOT BE MADE AND ADDED TO THE TOTAL INCOME FOR THE YEAR UNDER CONSIDERATION . IN RESPONSE TO THE SAME THE ASSESSEE VIDE HIS LETTER DATED 26 . 03 . 2016 SUBMITTED HIS REPLY. THE RELEVANT PORTION OF THE SAME IS REPRODUCED HEREUNDER; 'THE AMOUNT OF SALARY PAID BY US TO TH E EXTENT OF RS. 27,09,21,390/ - DURING THE FINANCIAL YEAR ENDED ON 31 ST MARCH , 2009 IS AIM SUPPORTED WITH THE DETAILED LEDGER AS WELL WITH THE MONTHLY SALARY SHRI BHOLANATH R. SHUKLA 6 REGISTER SUBMITTED BY US FAT - VARIOUS OF TOLL PLAZA AND PARKING MAINTAINED B Y US FROM THE GOVERNMENT AGENCIES DURING THE ABOVE SAID PERIOD. BESIDES THE ABOVE FACTS, WE ALSO STATE THAT THE NAME, NATURE & STYLE OF OUR BUSINESS IS THE SAME AS WAS DURING THE PRECEDING YEARS WITH NO CHANGE. IT HAS ALSO TO BE TAKEN INTO CONSIDERATION THAT MOST OF SUCH EMPLOY EES ARE PROBABLY A TEMPORARY BASIS AND IT IS NOT AN EASY TASK TO FIND SUCH SINCERE STAFF REGULARLY, HENCE WE NEED TO PAY THEM A BIT ON THE HIGHER SIDE, SINCE WORKING HOURS FOR THEM IS ALSO NOT THAN 12 HRS A DAY. IN ADDITION TO THE ABOVE, IT IS FURTHER STA TED THAT THE SALARY REGISTER IS ALREADY SUBMITTED NAMES & ID'S OF EMPLOYEES EMPLOYED BY US DURING THE SAID TENURE. WE ARE READY TO PRODUCE THE NECESSARY EVIDENCE AS MAY BE REQUIRED BY YOU FOR ANY SPECIFIC EMPLOYEE . CONSIDERING THE ABOVE FACTS, EXPLANATION REQUIRED TO BE SUBMITTED IS IN SATISFACTION AND LEAVE NO PLACE OF DISALLOWANCE OF ANY EXPENSES NOR FROM THE SALARY PAID . 1 4 . THE ASSESSEE ALSO EXPLAINED IN HIS REPLY HIERARCHY AND ORGANIZATIONAL STRUCTURE OF THE TOLL PLAZAS AND VEHICLE PARKING AND PLEAD ED THAT ALL THE EXPENSES DEBITED BY HIM IN THE P&L A/C FOR AY 2009 - 10, THE ASSESSEE HAS STATED THAT ALL THE RELEVANT SUPPORTING DETAILS WERE PRODUCED HOWEVER ON VERIFICATION IT IS SEEN THAT THE ASSESSEE HAS SUBMITTED ONLY COPY SALARY REGISTER FOR EMPLOYEES AND SELF MADE VOUCHERS. NO OTHER DETAILS IN SUPPORT OF SUCH HUGE PAYMENT OF SALARY VIZ. ADDRESS OF EMPLOYEES AND THEIR PROOF OF IDENTITY FURNISHED. 1 5 . THE ASSESSING OFFICER OPINED THAT THE CONTENTION PUT FORTH BY THE ASSESSEE DOES NOT SEEM TO BE APPEALI NG AND CONVINCING THEREFORE THE SAME DESERVES TO BE NEGATED. NO DETAILS OF EMPLOYEES WORKING DURING THE PERIOD FROM 01 . 04 . 2008 TO 3 1. 03.2009 AND THEIR IDS ARE PROVIDED DURING THE COURSE OF REASSESSMENT PROCEEDINGS. IN ABSENCE OF VALID DOCU M ENTARY EVIDENCES , THE CLAIM OF EXPENSES MADE IN CASH TO BE ACCEPTED IN TOTO AND ALSO THE AUTHENTICITY AND CORRECTNESS OF SUCH EVIDENCE S IS UNVERIFIABLE. NON - BUSINESS EXPENSES AND INFLATION OF EXPENDITURE IN R EGARDS CANNOT BE RULED OUT SINCE THE WHOLE OF SUCH EXPENSES IS I NCURRED IN CASH . THE QUANTUM OF EXPENSES SHRI BHOLANATH R. SHUKLA 7 INCURRED, FOR THE PURPOSE OF BUSINESS DU TIES IS NOT ASCERTAINABLE TO THE EXTENT OF SUCH UNVERIFIABLE EXPENSES. IN B ACKGROUND , THE EXPENSES TO THE EXTENT CANNOT BE SAID TO HAVE BEEN LAID WHOLLY AND EXCLUSIVELY FOR TH E BUSINESS PURPOSES. FURTHER THE ONUS IS ON ASSESSEE TO PROVE THE GENUINENESS OF THE EXPENSES CLAIMED, IN THE RETURN FILED . MERE FILING OF VOUCHERS WITHOUT SUPPORTING BILLS DOES NOT PROVE THE GENU INENESS OF THE CLAIM OF HAVING INCURRED THE EXPENSES. RELIAN CE IS PLACED ON THE JUDGMENT IN THE CASE OF C1T VS, CHANDRAVILAS HOTEL (GUJARAT) 164 ITR 102 AN D C I T VS. MODI STONE LTD. (DELHI) 203 TAXMAN 123, MOREOVER, IT IS ALSO ASCERTAINED AFTER FIELD ENQUIRY THAT THE ASSESSEE HAS CLAIMED MUCH HIGHER THAN THE SALARY PAYMENT ACTUALLY MADE TO HIS EMPLOYEES. THE ASSESSING OFFICER HELD THAT O N THE BASIS OF THE FACTS THAT EMERGED DURING THE COURSE OF SURVEY ACTION WITH, REGARD TO CLAIM OF SALARY & WAGES EXPENSES AND FINDINGS AFTER FIELD ENQUIRY AND ALSO CONSIDERING THAT TH E ASSESSEE HAS FAILED, TO FURNISH ANY SUPPORTING EVIDENCES, I DISALLOW RS. 16,25,52,834/ - OUT OF RS.27,09,21,390/ - AS PER THE LINES OF DISALLOWANCE MADE IN THE SUBSEQUENT YEAR I.E . AY 2012 - 13 (60% OF TOTAL SALARY & WAGES). THUS, AN A MOUNT OF RS.16,25,52,834/ - (60% OF RS. 27,09,21,390) IS ADDED TO THE INCOME OF THE ASSESSEE. 1 6 . REGARDING OTHER EXPENSES ALSO THE ASSESSING OFFICER OBSERVED THAT D URING THE COURSE OF ASSESSMENT PROCEEDINGS,, THE AR HAS NOT FILED ANY DETAILS WITH RESPEC T TO THE EXPENSES INCURRED UNDER THE HEAD CONVEYANCE, VEHICLE, SUNDRY EXPENSES, TELEPHONE EXPENSES, PRINTING & STATIONERY, STAFF WELFARE AND REPAIR & MAINTENANCE . AS PER TH E FINDINGS OF SURVEY PROCEEDINGS IT IS SEEN THAT THE EXPENSES UNDER THESE HEADS ARE I NCURRED WHOLLY IN CASH. THE TOTAL EXPENDITURE UNDER THESE HEADS ARE AS UNDER: - SR.NO. HEAD OF EXPENSES AMOUNT (RS.) 1 CONVEYANCE EXPENSES 25,64,815 2 VEHICLE EXPENSES 9,64,523 3 SUNDRY EXPENSES 46,85,817 4 PRIN TING & STATIONERY 29,20,319 TOTAL 1,1 1,35,474 SHRI BHOLANATH R. SHUKLA 8 1 7 . THE ASSESSEE VIDE HIS LETTER DATED 26 . 03.2016 CONTENTED THAT I N THE ORDER U/S 143(3) DATED 02.12.2011 VERIFIED THE BOOKS OF ACCOUNTS ALONGWITH VOUCHERS AND THE EXAMINATION OF THE BOOKS HAS BEEN DONE VIS - A - VIS EVIDENCE ON ASSESSMENT RECORD. A L UM P - SUM AD - HOCK DISALLOWANCE IN THE CONVEYANCE EXPENSES, TELEPHONE EXPENSES. SUNDRY EXPENSES AND MOTOR CAR EXPENSES HAD BEEN MADE ON ACCOUNT OF CASH ELEMENT AND FOR PERSONAL USE OF TELEPHONE AND. MOTOR CAR AND SINCE TOTAL DISALLOWANCE FOR SUCH EXPENSES FOR RS . 4 ,00,000 / - HAD ALREADY BEEN, NO ADDITION FURTHER DISALLOWANCE IS AGAIN REQUIRED . 1 8 . THE ASSESSING OFFICER WAS NOT CONVINCED. HE OBSERVED THAT O N VERIFICATION OF THE ABOVE LISTED EXPENSES IT IS OBSERVED THAT THE EXPENSES WERE INCURRED WHOLLY IN C ASH AND IS SUPPORTED BY SELF - MADE VOUCHERS ONLY. NO BILLS WERE PRODUCED FOR VERIFICATION. THAT T HE AUTHENTICITY AR ID CORRECTNESS OF SUCH EXPENSES IS UNVERIFIABLE. THAT N ON - BUSINESS EXPENSES FOR INFLATION OF EXPENDITURE IN THIS REGARD CANNOT BE RULED OUT. T HAT T HE QUANTUM OF EXPENSES INCURRED FOR THE PURPOSE OF BUSINESS ACTIVITIES IS NOT ASCERTAINABLE TO THE EXTENT OF SUCH UNVERIFIABLE EXPENSES AND THEREFORE CANNOT BE SAID TO HAVE BEEN LAID OUT WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES. THAT S INCE, TH E ASSESSED HAS INCURRED THE ABOVE EXPENSES IN CASH, THE GENUINENESS OF THESE EXPENSES CANNOT BE VERIFIED FULLY AS NO SUPPORTING BILLS ARE FILED BY THE AR DURING ASSESSMENT PROCEEDINGS. THAT I T IS SETTLED LAW THAT THE ONUS IS ON THE ASSESSEE TO PROVE THE CL AIMS MADE IN THE RETURN OF INCOME BY FURNISHING DOCUMENTARY EVIDENCES IN ORDER TO SUBSTANTIATE ITS CLAIMS. TH AT THE FACT IS ACCEPTABLE THAT SUCH TYPE OF EXPENDITURES IS INCIDENTAL TO THE BUSINESS, BUT THE QUESTION IS HOW MUCH OF EXPENSES WILL BE REASONABLE FOR THE PURPOSE OF BUSINESS, IN THE ABSENCE OF DETAILS, THE QUANTUM OF EXPENDITURE CANNOT BE ACCEPTED AT THE AMOUNT AS CLAIMED BY THE ASSESSEE. AS PER THE ABOVE MENTIONED DISCREPANCIES AND TO PLUG THE REVENUE 50% OF ABOVE MENTIONED EXPENSES WHICH WORKED O UT TO RS. 55,67,737/ - (50% OF RS. 1 ,11,35,474) IS DISALLOWED AND ADDED TO THE RETURN INCOME OF THE A SS ESS EE. SHRI BHOLANATH R. SHUKLA 9 19 . ON SIMILAR RESUMING THE ASSESSING OFFICER MADE CERTAIN DISALLOWANCES FOR OTHER YEAR. 20. AGAINST THE ABOVE ORDER ASSESSEE APPEALED BEFORE LE ARNED CIT(A) CHALLENGING BOTH THE VALIDITY OF REOPENING AND MERITS. 21. AS REGARDS THE VALIDITY OF REOPENING THE LEARNED CIT(A) REJECTED THE ASSESSEES CONTENTION BY HOLDING AS UNDER : - ' T HE FIRST CONTENTION OF THE APPELLANT IS THAT AS THE ORIGINAL ASSE SSMENTS WERE COMPLETED U/S. 143(3) AND THE A.O. HAS MADE ADDITIONS ON ACCOUNT OF SALARIES & WAGES AND OTHER EXPENSES, THE REOPENING FOR DISALLOWING THE SAME EXPENSES ON HIGHER SIDE IS NOT JUSTIFIED AS THE SAME AMOUNTS TO CHANGE OF OPINION. THIS CONTENTION OF THE APPELLANT CANNOT BE ACCEPTED AS IN SURVEY ACTION IT WAS REVEALED THAT THE APPELLANT IS CLAIMING SUBSTANTIAL EXPENDITURE TOWARDS SALARIES & WAGES AND OTHER EXPENSES WHICH ARE NOT SUPPORTED BY VOUCHERS. THEREFORE THE CHANGE OF OPINION OF THE A.O., REO PENING THE ASSESSMENT IS DUE TO THE FACTS REVEALED IN THE COURSE OF SURVEY ACTION AND HENCE THE CONTENTION RAISED BY THE APPELLANT IS REJECTED. THE SECOND CONTENTION OF THE APPELLANT IS THAT THE A.O. HAS NOT BROUGHT ON RECORD ANY NEW MATERIAL REOPENING TH E ASSESSMENT AND THE REASSESSMENTS WERE COMPLETED ON THE BASIS OF SAME BOOKS OF ACCOUNTS AND VOUCHERS WHICH WERE PRODUCED BEFORE THE ASSESSING OFFICER DURING ORIGINAL ASSESSMENTS. THIS CONTENTION OF THE APPELLANT CANNOT BE ACCEPTED AS THE NEW MATERIAL WAS BROUGHT ON RECORD IN THE FORM OF THE FACTS REVEALED IN SURVEY PROCEEDINGS WHICH ARE MENTIONED IN THE PRECEDING PARAGRAPHS. THIS CONTENTION OF THE APPELLANT IS THEREFORE REJECTED. THE THIRD CONTENTION OF THE APPELLANT IS THAT THE ASSESSMENTS WERE COMPLETE D PRIOR TO 4 YEARS FROM THE END OF THE A.YS. 2009 - 10 & 2010 - 11 AND THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. THIS CONTENTION OF THE APPELLANT IS ALSO REJECTED AS DURING SURVEY ACTION, IT HAS BEEN REVEA LED THAT THE APPELLANT HAS CLAIMED EXPENSES ON ACCOUNT OF SALARIES & WAGES AND OTHER EXPENSES WITHOUT SUPPORTING VOUCHERS. THIS CONTENTION OF THE APPELLANT IS THEREFORE REJECTED. THE ASSESSEE HAS RELIED UPON PLETHORA OF DECISIONS TO CLAIM THAT THE RE - OPEN ING IS INVALID. WITHOUT GOING INTO THE DETAILS OF EACH CASE, THE BASIC CONTENTION OF THE ASSESSEE IS THAT THERE WAS CHANGE OF OPINION OF THE AO AND THERE WAS NO NEW MATERIAL TO JUSTIFY THE REOPENING. BEFORE DISCUSSING VARIOUS CASE LAWS WHICH ARE IN FAVOUR OF THE REVENUE, WHERE THE COURTS HAVE APPROVED REOPENING ON SIMILAR FACTS AS THAT OF THE ASSESSEE, IT IS IMPORTANT TO APPRECIATE THE CIRCUMSTANCES WHICH FORCED THE AO FOR SUCH SHRI BHOLANATH R. SHUKLA 10 REOPENING. IT IS AN UNDISPUTABLE FACT THAT THE BUSINESS DONE BY THE ASSESSEE IS ENTIRELY CASH BASED. NOT ONLY THE RECEIPTS/TOLL COLLECTIONS ARE IN CASH BUT THE MAJORITY OF EXPENSES INCLUDING SALARY AND RELATED EXPENSES ARE IN CASH. THE PURPOSE OF SURVEY WAS TO ASCERTAIN GENUINENESS OF SUCH EXPENSES. THE AO DURING SURVEY PROCEEDINGS IS ABLE TO FIND EVIDENCE OF SUCH INFLATED EXPENSES WHICH ARE NOT SUPPORTED BY PROPER VOUCHERS OR SUPPORTED BY SELF MADE VOUCHERS AND WHICH CANNOT BE CROSS VERIFIED. NOT ONLY THE ACCOUNTANT OF THE ASSESSEE, RAJESH NAGAR WHO HAD APPEARED DURING ORIGINAL ASSESS MENT PROCEEDINGS ADMITTED IN STATEMENT DURING SURVEY THAT THE EXPENSES ARE NOT PROPERLY VOUCHED BUT THE SAME WAS CONFIRMED BY THE ASSESSEE HIMSELF DURING POST SURVEY STATEMENT. THE ASSESSEE DOES NOT PRODUCE THE RELEVANT VOUCHERS FOR OTHER YEARS WHERE THERE IS LIKELIHOOD OF SIMILAR INFLATION DESPITE SPECIFICALLY ASKED BY THE AO. THE ASSESSEE TAKES A PLEA THAT THE BASIC DOCUMENTS ARE MAINTAINED AT RESPECTIVE TOLL PLAZA AND NOT AVAILABLE IN OFFICE. UNDER SUCH CIRCUMSTANCES, WHEN THE AO IS REASONABLE SATISFIED THAT THERE IS INFLATION IN EXPENSES BY SELF MADE VOUCHERS AND THESE FACTS WERE NOT AVAILABL E DURING ORIGINAL PROCEEDINGS, WHEN THE AO HAS MADE ROUTINE ADDITIONS, HE IS LEFT W ITH NO OPTION BUT TO REOPEN THE PROCEEDINGS. THOUGH THE AO IN ORIGINAL ASSESSMENT HA MENTIONED THAT THE BOOKS OF ACCOUNTS WERE PRODUCED BUT HE HAS NOT SPECIFICALLY DISCUSSED THE BASIS OF ROUTINE DISALLOWANCE, WHICH CLEARLY SHOWS THAT IN ORIGINAL ASSESSMENT THE AO HAS NOT INVESTIGATED THE MATTER IN THE LIGHT OF FINDINGS OF SURVEY PROCEED INGS. THE VERY FACT THAT THE ASSESSEE NEVER CHALLENGED REOPENING DURING ASSESSMENT PROCEEDINGS FOR AY 2009 - 10, 2010 - 11 AND 2011 - 12 ITSELF SHOWS THAT THE ASSESSEE HAD NO OBJECTION TO SUCH REOPENING AND HE WAS D THAT THE REOPENING IS JUSTIFIED. SECONDLY THE ASSESS E E IS CONTENDING O N ONE HAND THAT THE BOOKS AND RELEVANT DOCUMENTS ARE NOT AVAILABLE AT THE HEAD OFFICE, TAKE AN ARGUMENT TO CHALLENGED REOPENING WITH THE ASSESSING OFFICER REOPENS ASSESSMENT ON THE SAME LOGIC. THE AO MAY NOT HAVE RESORTED TO REOPENI NG FOR OTHER YEARS, HAD THE ASSESSEE PRODUCED THE DOCUMENTS DURING SURVEY PROCEEDINGS OR EVEN POST SURVEY PROCEEDINGS AND SATISFIED THE AO THAT THE VOUCHERS SUPPORTING THE CASH EXPENSES ARE RELIABLE AND GENUINE, BUT HE DID NOT DO SO. UNDER SUCH CIRCUMSTANC ES THE AO CANNOT JUST SLEEP OVER THE NON COMPLIANCE OF THE ASSESSEE AND THE ONLY OPTION AVAILABLE WITH HIM WAS TO REOPEN THE PROCEEDINGS AND SATISFY HIMSELF BY ASKING THE ASSESSEE TO PRODUCE BASIC DOCUMENTS IN RESPECT OF OTHER YEARS. THE INTENTION OF THE A O DURING THE SURVEY PROCEEDINGS WAS TO COLLECT EVIDENCE IN RESPECT OF ALLEGED INFLATION OF EXPENSES IN RESPECT OF YEAR OF SCRUTINY AND OTHER YEARS. HE CANNOT BE FORCED TO RESTRICT HIMSELF WHEN HE FINDS AN EVIDENCE OF INFLATION OF EXPENSES AND THE ASSES S EE DOES NOT PROVIDE COMPLETE AND CORRECT INFORMATION TO SATISFY HIM. THERE CAN BE DIFFERENT OPINION AS HOW THE ASSESSMENT IS TO BE FRAMED AND PROFITS ESTIMATED WHEN THE BOOKS ARE UNRELIABLE BUT THERE CANNOT BE TWO VIEWS ON REOPENING, AS WITHOUT REOPENING, THE AO WAS NOT IN A POSITION TO VERIFY THE ALLEGATIONS IN OTHER YEARS FOR WHICH THE EVIDENCE WAS FOUND DURING SURVEY SHRI BHOLANATH R. SHUKLA 11 AND ADMITTED BY THE TRUSTED ACCOUNTANT AND THE ASSESSEE HIMSELF/THE ABOVE VIEW IS SUPPORTED BY VARIOUS JUDGMENTS . THEREAFTER LEARNED CIT(A) HAS REFERRED TO FOLLOWING CASE LAWS : - PCIT VS. LAXMIRAJ DISTRIBUTORS (P) LTD. (85 TAXMANN.COM 357) DALMIA (P) LTD. VS. CIT (14 TAXMANN.COM 106) MSK REAL ESTATE PVT. LTD. (2018 TIOL 907) 2 2 . AS REGARDS MERITS OF THE CASE RELATING TO ADHOC DISALLOWANCE E XPENDITURE LEARNED CIT(A) GRANTED PART RELIEF RESTRICTING THE PROFIT ESTIMATE TO 5% OF THE TURNOVER BY HOLDING AS UNDER : - 10. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTICED THAT THE A.O . HAS MADE ADDITIONS ON ACCOUNT OF SALARIES & WAGES AND OTHER EXPENSES ETC. TO THE EXTENT OF 55% TO 67% OF THE EXPENDITURE AND DISALLOWANCE OF OTHER EXPENSES ON VARIOUS HEADS OF EXPENSES WAS TO THE EXTENT OF 45% TO 55% OF THE EXPENSES RESULTING IN ADDITION AS SHOWN IN TABLE ABOVE. THE NET RESULT OF THE ADDITION IS THAT THE NET PROFIT OF THE ASSESSEE HAS INCREASED SUBSTANTIALLY WHICH IS NOT POSSIBLE IN THIS TYPE OF BUSINESS. 10.1. BEFORE THE GROUND OF APPEAL ON ACCOUNT OF ADDITION IN SALARIES AND OTHER EXPE NSES IS DISCUSSED, IT IS IMPORTANT TO KNOW THE BUSINESS MODEL OF TOLL AGENTS. THE ASSESSEE WAS HAVING TOLLS WHICH WERE MAINLY GRANTED BY THE NHAI OR THE STATE GOVERNMENT, WHICH ARE AUCTIONED BY COMPETITIVE BIDDING BY E - TENDER BASIS. THE BIDDER WHICH PAYS T HE HIGHEST LICENCE FEE TO THE GOVERNMENT IS AWARDED THE TENDER. FROM THE DETAILS SUBMITTED BY THE ASSESSEE AND PERUSAL OF THE P & L ACCOUNTS, IT IS SEEN THAT LICENCE FEE OF ABOUT 50% IS PAID TO THE GOVERNMENT. THE ASSESSEE SUBMITTED TENDER DOCUMENTS OF NHA I AND STATE GOVERNMENT TO SHOW THAT THE TENDER DOCUMENTS STIPULATES VARIOUS CONDITIONS ON THE ASSESSEE, WHICH INCLUDE REMITTANCE OF THE AGREED AMOUNT OF LICENSE FEE TO NHAI ON WEEKLY BASIS. THE NHAI ALSO TAKES INTO ACCOUNT THE ANNUAL POTENTIAL COLLECTION A ND THE CATEGORY OF THE VEHICLES WHICH PASS THROUGH THE TOLL BEFORE ISSUING A TENDER. THE TENDER DOCUMENTS ALSO REQUIRE MINIMUM NUMBER OF STAFF WHICH IS TO BE DEPLOYED BY THE TOLL OPERATOR. THE NHAI REQUIRES 109 PERSON ON EACH TOLL, WHICH INCLUDES MINIMUM N UMBER OF PERSONS ON EACH TOLLING BOOTH, SUPERVISORS, SHIFT INCHARGE, PLAZA MANAGER, SECURITY OFFICIALS, BARRIER MAN, ELECTRICIANS, SAFAI KARAMCHARIES. THE TOLLING AGENT HAS TO SUBMIT DETAILS OF SUCH PERSONS AND THE NHAI AUTHORITIES DO REGULAR INSPECTIONS W HETHER SUCH NUMBER HAS BEEN DEPLOYED. IF THE INFORMATION IN THE REQUIRED FORMAT IS NOT SUBMITTED BY THE TOLL AGENT, THERE IS PROVISION OF PENALTY. IT WAS CONFIRMED BY PROJECT DIRECTOR RAJKOT NHAI VIDE LETTER DATED 08.05.2018 SHRI BHOLANATH R. SHUKLA 12 THAT AS PER AGREEMENT THE USER FEE COLLECTION AGENCY HAS TO SUBMIT THE LIST OF PERSONAL (AS PER SCHEDULE IV) OF THE CONTRACT AGREEMENT TO NHAI AND NON COMPLIANCE OF WHICH ATTRACTS PENALTY @ RS. PER MONTH. THIS SHOWS THAT THE TOLL AGENT IS UNDER SCRUTINY OF THE NHAI AND CANNOT BE EXCESSI VE OR ABNORMAL BECA USE OF THE TRANSPARENT COMPETITIVE BIDDING. ALL THE EXPENSES AFTER PAYMENT OF LICENSE FEE ARE TO BE BORNE BY THE TOLL AGENT. FROM PERUSAL OF THE ACCOUNTS, IT IS NOT ICED THAT THE MAJOR EXPE NDITURE OF SUCH BUSINESS IS PAYMENT OF SALARIES A S THE TOLLS ARE MANUALLY MANAGED. THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS SUBMITTED PHOTOGRAPHS OF VARIOUS TOLLS AND MADE AN ATTEMPT TO RECONCILE THE NUMBER OF STAFF WHO WERE REQUIRED TO MANAGE TOLLS IN THE LIGHT OF REQUIREMENT OF NHAI AND THE NUMBER OF BOOTHS IN EACH TOLL. IT WAS ALSO EXPLAINED THAT THE TOLLS OPERATED BY THE ASSESSEE ARE GENERALLY IN THE OUTSKIRTS OF THE CITY AND HAVE TO FACE WRATH OF LOCAL POLITICIANS WHO INSIST UPON KEEPING THEIR WORKERS AND STAFF ON THE ROLL. 10.2. IT HAS ALSO BEEN NOTICED FROM THE SUBMISSION OF THE APPELLANT AND THE ASSESSMENT ORDERS THAT THE APPELLANT HAS MAINTAINED SALARY REGISTERS CONTAINING NAMES OF EMPLOYEES ETC. DETAILS. THE IMPUGNED RECORD SUCH AS BOOKS OF ACCOUNTS, SALARY REGISTERS AND VOUCHERS WERE MAINTAINED BY THE ASSESSEE AT THE SITES OF TOLL PLAZAS WHICH ARE LOCATED AT DIFFERENT PLACES IN DIFFERENT STATES. THEREFORE IT WAS LOGICAL THAT ALL THE REGISTERS WILL NOT BE AVAILABLE AT ONE PLACE AT HEAD OFFICE AND COULD NOT BE FOUND DURING SURVEY. IT IS IN THIS BACK GROUND THAT THE AO WAS HANDICAPPED FROM VERIFYING THE INFLATION OF EXPENSES WHICH HE FOUND DURING SURVEY FOR OTHER YEARS AND FORCED HIM TO REOPEN THE ASSESSMENT FOR OTHER YEARS. EVEN DURING ASSESSMENT, THE ASSESSEE COULD NOT SATISFY THE AO WITH THE COMPLETENESS AND CORRECTNESS OF DOCUMENTATION IN SUPPORT OF EXPENSES CLAIMED WHICH RESULTED IN REJECTION IN BOOKS OF ACCOUNTS. 10.3. THE APPELLANT HAS STATED TO HAVE MAINTAINED BOOKS OF ACCOUNTS IN THE REGULAR COURSE OF BUSINESS AND HAS AUDITE D THE SAME REGULARLY AND HAS ALSO FILED RETURNS OF INCOME U/S. 139 OF THE ACT FOR ALL THE YEARS UNDER APPEAL. IT NEEDS TO BE NOTED THAT THE AUDITED ACCOUNTS ONLY REFLECT AND CONSOLIDATE ALL THE INCOME AND EXPENSES INCURRED DURING THE YEAR. HOWEVER THE BOOK S OF ACCOUNTS CANNOT BE STATED TO BE CORRECT AND COMPLETE TILL THE BASIC DOCUMENTS IN THE FORM OF BILLS AND VOUCHERS ARE CROSS VERIFIABLE, GENUINE AND REASONABLE. THOUGH THE ASSESSEE IS ABLE TO JUSTIFY THE NUMBERS OF EMPLOYEES SHOWN IN THE REGISTER AND AS REQUIRED BY NHAI, AT THE SAME TIME IT IS A FACT THAT THE DOCUMENTATION OF THE ASSESSEE IS NOT UP TO MARK. THE ASSESSEE HAS PUT VARIOUS OTHER EXPENSES LIKE FOOD, TRAVEL, MOBILE RECHARGE, TEA, UNDER THE HEAD SALARIES. THEREFORE FOR ASCERTAINING THE QUANTUM O F EXPENDITURE, THE ASSESSEE IS REQUIRED TO SUBMIT THE EVIDENCE, WHICH HE HAS NOT BEEN ABLE TO DO. IT IS ADMITTED BY THE ASSESSEE THAT THE VOUCHERS ARE NOT MAINTAINED PROPERLY. EVEN THE HANDWRITING AND SIGNATURES IN THE SALARY SHRI BHOLANATH R. SHUKLA 13 REGISTER POINT OUT VARIOUS DIS CREPANCIES. THOUGH THE ASSESSEE HAS EXPLAINED THE JUSTIFICATIONS FOR CASH PAYMENT AS THE TOLLS ARE LOCATED IN RURAL AREAS AND THE PETTY NATURE OF EXPENSES FOR WHICH REGULAR BILLS ARE NOT RECEIVED, AT THE SAME TIME SINCE THE PAYMENTS ARE IN CASH AND VOUCHER S NOT PROPERLY MAINTAINED, HE HAS NOT BEEN ABLE TO SATISFY DURING ASSESSMENT AND APPELLATE PROCEEDINGS ON QUANTUM OF EXPENSES. IF VERIFICATION OF CASH EXPENSES IS NOT POSSIBLE, THERE IS ALWAYS POSSIBILITY OF INFLAT ION OF EXPENSES. IN FACT THE ACCOUNTA NT RA JESH NAGAR DURING SURVEY AND THE A SSESSEE DURING POST SURVEY PROCEEDINGS ADMITTED THAT THE EXPENSES CLA IME D ARE NOT PROPER. 10.4. THE A.O. HAS ALSO DISALLOWED VARIOUS EXPENSES LIKE STATIONERY, STAFF WELFARE, CONVEYANCE, PETROL AND DIESEL, KIRANA ITEMS, PA PER ROLL, WATER, NASTA, MOBILE CHARGES, ROOM RENT AND MEDICAL EXPENSES. THE AO IS OF THE OPINION THAT IMPUGNED EXPENDITURE ON VARIOUS HEADS IS NOT AS THE VOUCHERS FOR EXPENSES WAS NOT PROPERLY MAINTAINED; THE SAID EXPENSES WERE INCURRED IN CASH AND THE IMP UGNED EXPENSES WERE MOSTLY SUPPORTED BY SELF MADE VOUCHERS. ON THE OTHER HAND, IT IS EXPLAINED BY THE ASSESSEE THAT THE SHIFT OF THE EMPLOYEES IS GENERALLY 8 HOURS AND DURING THE PERIOD THEY HAVE TO BE PROVIDED TEA, FOOD ON THE SEAT. IT THEY ARE NOT PROVID ED WITH SUCH FACILITIES, THEY WILL LEAVE THE SEAT AND TIME TAKEN FOR FOOD AND TEA WILL RESULT IN REQUIREMENT OF EXTRA MAN POWER AT EACH BOOTH. IT WAS ALSO EXPLAINED THAT THE STAFF IS GENERALLY PROVIDED ACCOMMODATION AND MEDICAL FACILITIES NEAR THE TOLL SIT E TO AVOID DISRUPTION AT THE TOLL PLAZA. ALL THESE EXPENSES ARE DEBITED UNDER THE HEAD SALARY. 10.5. IN RESPECT OF DISALLOWANCE OF OTHER EXPENSES ON VARIOUS HEADS THE APPELLANT HAS SUBMITTED THAT THE QUANTUM OF THE IMPUGNED EXPENSES INCURRED ON VARIOUS HE ADS IS VERY REASONABLE AS THE SAME IS ONLY 1% TO 2% OF THE TURNOVER. THE ARGUMENT OF THE ASSESSEE IS IMPUGNED EXPENSES HAS BEEN INCURRED IN SMALLER AMOUNT IN REMOTE RURAL AREA BELOW RS. 20,0007 - AND AS PER THE PROVISIONS OF THE INCOME - TAX ACT, THE CASH PAY MENT ON A DAY IS PERMISSIBLE. IN RESPECT OF THE CONTENTION OF THE A.O. THAT THE MOST OF THE VOUCHERS WERE SELF MADE, THE APPELLANT HAS SUBMITTED THAT IN RESPECT OF CONVEYANCE EXPENSES LIKE RIKSHAW, TAXI ETC. TELEPHONE RECHARGE EXPENSES FOR WORKERS AND EMPL OYEE, KIRANA EXPENSES FOR WORKERS AND REPAIRS AND MAINTENANCE EXPENSES INCURRED IN REMOTE RURAL AREA IS BOUND TO BE SUPPORTED BY SELF MADE VOUCHERS DULY SIGNED BY THE PAYEES AS THE SAID PAYEES STAYING IN REMOTE RURAL AREAS CANNOT BE EXPECTED TO PRINT THEIR OWN BILLS AND RECEIPTS. IT IS ALSO PLEADED THAT THE A.O. HAS MADE ADHOC ESTIMATED DISALLOWANCE @ 45% TO 50% OF THE IMPUGNED EXPENSES ON VARIOUS HEADS IS EXCESSIVE & WITHOUT ANY PROPER BASIS. ON GOING THROUGH THE RIVAL CONTENTIONS I AM OF THE OPINION THAT THOUGH THE AO HAS NOT DOUBTED THE PURPOSE AND NATURE OF THE EXPENSES BUT SINCE THE EXPENSES ARE INCURRED IN CASH, THEREFORE HE HAS MADE THE ADDITION MAINLY BECAUSE THE DOCUMENTATION IS NOT PROPER SHRI BHOLANATH R. SHUKLA 14 IN RESPECT OF CASH EXPENSES AND SO QUANTUM OF EXPENSES CLAIM ED BY THE ASSESSEE IS DOUBTFUL. 10.6. THE APPELLANT HAS PLEADED THAT THE A.O. HAS ESTIMATED THE DISALLOWANCE OUT OF SALARIES & WAGES TO THE EXTENT OF 55% TO 67% AND OUT OF VARIOUS OTHER EXPENSES TO THE EXTENT OF 45% TO 50% WHICH IS NOT BASED ON ANY BASIS AND THE SAME APPEARS TO BE EXCESSIVE. HE HAS ALSO STATED THAT AFTER PAYMENT OF LICENSE FEE HE IS REQUIRED TO INCUR THE EXPENDITURE ON RUNNING AND MAINTENANCE OF TOLL PLAZA. WITH THE QUANTUM OF DISALLOWANCE BY THE AO THE NET PROFIT TO THE NET BUSINESS RECEI PTS WOULD BE MORE THAN 60% WH ICH IS NOT POSSIBLE IN THIS TYPE OF BUSINESS WHICH IS HIGH V OLUME WITH LOW PROFIT MARGIN HAS ALSO BEEN NOTICED THAT EITHER DURING SURVEY PROCEEDINGS OR IN POST SURV EY PROCEEDINGS NO UNDISCLOSED INVESTMENT OR EXPENDITURE HAS BE EN BROUGHT ON RECORD TO JUSTIFY THE HUGE ADDITIONS MADE BY THE A.O. FOR THE YEARS UNDER APPEAL. IN SUPPORT OF THE DISALLOWANCE OF SALARIES & WAGES AND OTHER EXPENSES, THE A.O. HAS RELIED ON THE DECISIONS OF CIT VS. CHANDRAVILAS HOTEL (GUJARAT) 164 ITR 102 AND CIT VS. MODI STONE LTD. (DELHI) 203 TAXMAN 123, WHICH ARE DISTINGUISHABLE ON FACTS. THE APPELLANT HAS POINTED OUT IN HIS WRITTEN SUBMISSION REPRODUCED ABOVE, AS TO HOW THE IMPUGNED DECISIONS ARE DISTINGUISHABLE ON FACTS. 10.7. THE A.O. HAS REJECTED TH E BOOK RESULTS BY APPLYING THE PROVISIONS OF SECTION 145(3) OF THE ACT, HOWEVER, THE A.O. HAS NOT ESTIMATED INCOME OF THE APPELLANT ON THE BASIS OF HIS TURNOVER BY APPLYING NET PROFIT PERCENTAGE CONSIDERING THE SAME IN THE CASES OF PERSONS CARRYING ON SIMI LAR BUSINESS. THE A.O. HAS MADE ADDITION MAINLY ON ACCOUNT OF DISALLOWANCE OF SALARIES & WAGES AND OTHER EXPENSES. IT IS SETTLED LAW THAT THE DISALLOWANCE OF EXPENSES OR ESTIMATION OF PROFIT AFTER REJECTION OF BOOKS OF ACCOUNTS SHOULD BE FAIR AND REASONABL E ESTIMATE AND ARBITRARINESS SHOULD BE AVOIDED AND THE ESTIMATE SHOULD NOT BE WILD OR VINDICTIVE. IT HAS BEEN LAID DOWN BY HON'BLE SUPREME COURT IN THE CASE OF BRIJ BHUSHAN LAL PARDUMAN KUMAR VS CIT (1978) 115 ITR 524 (SC) THAT THE AUTHORITY MAKING THE BES T JUDGMENT ASSESSMENT MUST MAKE AN HONEST AND FAIR ESTIMATE OF INCOME OF THE ASSESSEE. FURTHER THE HON'BLE SUPREME COURT, IN THE CASE OF STATE OF KERALA VS C. VELUKUTTY (1966) 60 ITR 239 (SC) HAS LAID DOWN THAT BEST JUDGMENT IS A FACULTY TO DECIDE MATTERS WITH WISDOM TRULY AND LEGALLY; JUDGMENT DOES NOT DEPEND UPON THE ARBITRARY CAPRICE OF A JUDGE BUT SETTLED INVARIABLE PRINCIPLES OF JUSTICES; THOUGH THERE IS AN ELEMENT OF GUESS WORK IN BEST JUDGMENT ASSESSMENT WHICH SHALL NOT BE WILD ONE; THE DEFAULT OF TH E ASSESSEE DOES NOT ENABLE THE ASSESSING AUTHORITY TO FUNCTION CAPRICIOUSLY. FURTHER HON'BLE SUPREME COURT, IN THE CASE OF STATE OF ORISSA VS. MAHARAJA SHRI B.P. SINGH DEO (1970) 76 ITR 690 (SC) HAS LAID DOWN THAT THE MERE FACT THAT THE MATERIAL PLACED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER IS UNRELIABLE DOES NOT EMPOWER THE OFFICER TO MAKE ARBITRARY ORDER. ON SIMILAR FACTS PUNJAB AND HARYANA HIGH COURT IN CASE OF C. B. AGGARWAL SHRI BHOLANATH R. SHUKLA 15 UPHELD THE INVOKING THE SECTION 145(2) AND ASSESSING INCOME ON ESTIMATE B ASIS. HON'BLE SUPREME COURT IN KANCHWALA GEMS 206 CTR 585 SC LAID GUIDELINES ON REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND ALSO HELD THAT IN A BEST JUDGMENT ASSESSMENT THERE IS ALWAYS A CERTAIN DEGREE OF GUESS WORK. NO DOUBT THE AUTHORITIES CONCER NED SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDGMENT ASSESSMENT, AND SHOULD NOT ACT TOTALLY ARBITRARY. IN NATHURAM NATHA LAL (1954) 25 ITR 216 (NAG) AND IN SALEM STEEL 322 ITR 349 , THE APPELLATE AUTHORITIES HELD THAT WH ILE ESTIMATING PROFITS, THE BASIS AND MANNER OF COMPUTATION SHOULD BE DISCLOSED AND THE ORDER SHOULD BE A SPEAKING ONE. HON'BLE COURTS ALSO HELD THAT ANY SPECIAL CIRCUMSTANCES OF THE ASSESSEE, WHICH WARRANT A HIGHER RATE OF PROFITS SHOULD ALSO BE INTO ACCO UNT. 10.8 IT IS ALSO A FACT THAT THE MAJOR EXPENSES ARE IN CASH AND APPELLANT HAS NOT MAI NTAINED PROPER VOUCHERS AND RELEVANT RECORD IN RESPECT OF SALARY AND WAGES AND OTHER EXPENSES. THEREFORE THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED U/S. 145(3) OF THE ACT. THE PROFIT OF THE BUSINESS OF THE APPELLANT SHOULD THEREFORE BE ESTIMATED AT SOME REASONABLE PERCENTAGE OF PROFIT. IN THE CASES OF FOLLOWING ASSESSES, THE PROFIT PERCENTAGE OF TOLL BUSINESS IS AS UNDER: NAME OF THE COMPANY MEP INFRASTRUCTURE DEVELO PERS LTD. SKYLARK INFRA ENGINEERING PVT. LTD. GROSS REVENUE 695.33CRORES 127. 30 CRORES NET PROFIT 43.98 CRORES 10. 08 CRORES NET PROFIT % 1.86% 3.7% THE ASSESSEE HAS SHOWN NET PROFIT PERCENTAGE AS UNDER: A.Y. TURNOVER BUSINESS INCOME AS PER ITR PROFIT % 2009 - 10 53,54,25,236 95,11,704 1.78% 2010 - 11 68,36,22,703 1,16,85,942 1.71% 2011 - 12 66,32,40,266 1,67,85,942 2.53% 2012 - 13 1,13,13,94,064 2,47,08,573 2.18% 2013 - 14 1,13,54,32,143 2,15,95,431 1.90% 10.9. THE AR OF THE APPELLANT HAS ALTERNA TIVELY CLAIMED THAT CONSIDERING THE TOTALITY OF THE FACTS THE PROFIT OF THE APPELLANT MAY BE ESTIMATED @ 3% FOR THE YEARS UNDER APPEAL. HOWEVER, CONSIDERING THE TOTALITY OF THE FACTS AND TO MEET THE ENDS OF JUSTICE, THE PROFIT OF THE APPELLANT'S BUSINESS I S ESTIMATED @ 5% OF THE TURNOVER. THE PROFIT OF THE APPELLANT FOR THE YEARS UNDER APPEAL WORKS OUT AS UNDER: - SHRI BHOLANATH R. SHUKLA 16 A.Y. TURNOVER BUSINESS INCOME AS PER ITR BUSINESS INCOME @5% ADDITION TO BUSINESS INCOME 2009 - 10 53,54,25,236 95,11,704 2,67,71,262 1,72,59 ,558 2010 - 11 68,36,22,703 1,16,85,942 3,41,81,135 2,24,95,193 2011 - 12 66,32,40,266 1,67,85,942 3,31,62,013 1,63,76,071 2012 - 13 1,13,13,94,064 2,47,08,573 5,65,69,703 3,18,61,130 2013 - 14 1,13,54,32,143 2,15,95,431 5,67,71,607 3,51,76,176 THE ADDITIONS MADE BY THE A.O. OUT OF SALARY & WAGES AND OTHER EXPENSES HAS BEEN DELETED AND ADDITION HAS BEEN PARTLY CONFIRMED BY ESTIMATING PROFIT @ 5% OF THE TURNOVER BY UPHOLDING THE REJECTION OF BOOK RESULTS U/S. 145(3) OF THE ACT. THE A.O. IS DIRECTED TO ASSESS B USINESS INCOME OF THE APPELLANT FOR THE YEARS UNDER APPEAL AS ABOVE. 2 3 . FURTHER AS REGARDS DISALLOWANCE U/S. 40A(3) FOR A.Y. 2012 - 13 AND A.Y. 2013 - 14 LEARNED CIT(A) GRANTED RELIEF TO THE ASSESSEE BY OBSERVING AS UNDER : - 12.3. I HAVE CAREFULLY CONSIDERE D THE FACTS OF THE CASE AND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTICED THAT THE IMPUGNED ENTRIES CONSIDERED BY THE A.O. ARE CONSOLIDATED ENTRIES WHICH CONSISTS OF MANY SMALL ENTRIES OF THE PRINTING & STATIONERY AND OTHER EXPENSES INCURRE D AT DIFFERENT SITES OF TOLL PLAZAS, WHICH ARE BELOW RS. 20,000 / - . DURING APPELLATE PROCEEDINGS, THE ASSESSEE EXPLAINED THAT ON 04.03.20 13 THERE ARE TWO ENTRIES OF RS. 3,00,000 EACH, ONE AT SER IAL NO. 1 AND SECOND AT SR. NO. 6. HE SUBMITTED THAT THE ENTRI ES ARE IN RESPECT OF PRINTING AND STATIONERY FOR FOUR DAYS FROM 01.03.2013 TO 04.03.2013 IN RESPECT OF VARIOUS TOLL PLAZAS. THE DETAIL OF THE TOLL PLAZA AND THE EXPENSE VOUCHER WAS SUBMITTED TO SHOW THAT THERE WERE 8 ENTRIES ON 01.03.2013 FOR HEAD OFFICE A ND 7 TOLL PLAZA, 9 ENTRIES FOR 02.03.2013, 6 ENTRIES FOR 03.03.2013 AND 10 ENTRIES FOR 04.03.2013, WHICH WERE CLUBBED TOGETHER AND PUT ON 04.03.2013. HE EXPLAINED THAT EACH EXPENSE HAS AMOUNT LESS THAN RS. 20,000. THE SUPPORTING DOCUMENT IN RESPECT OF RS. 6,00,000 WERE PLACED ON PAGE NO. 373 TO 424 OF THE PAPER BOOK. ON GOING THROUGH THE SUBMISSION OF THE ASSESSEE SUPPORTED WITH DOCUMENTARY EVIDENCE, IT IS APPARENT THAT THE ASSESSEE HAS NOT INCURRED EXPENDITURE IN VIOLATION OF SECTION 40A(3). THE PAYMENTS A RE MADE TO DIFFERENT PERSONS AT DIFFERENT TOLL PLAZAS BUT DUE TO LARGE NUMBER OF ENTRIES ON A PARTICULAR DATE IN RESPECT OF VARIOUS TOLL PLAZAS CLUBBED THE TRANSACTIONS FOR THE SAKE OF CONVENIENCE. THEREFORE THE ADDITION MADE BY THE A.O. IS NOT JUSTIFIED . 2 4 . FURTHER AS THE BOOK RESULTS ARE REJECTED U/S. 145(3) OF THE ACT AND BUSINESS PROFIT HAS BEEN ESTIMATED @ 5% WHICH RESULTED INTO SUBSTANTIAL SHRI BHOLANATH R. SHUKLA 17 ADDITION IN A.Y. 2013 - 14 AND HENCE SEPARATE ADDITION U/S. 40A(3) IS NOT JUSTIFIED. THIS PROPOSITION OF LAW SUPP ORTED BY FOLLOWING DECISIONS: I. ITO VS. SADANANDA SINGHA (2014) 151 ITD 0714 (KOL) II. ARMOUR CHEMICALS LTD. VS. JCIT ( 2007) 17 SOT 0467 (MUM - ITAT) III. SANDEEP MANGLA VS. ITO (2016) 47 CCH 0362 (DEL - TRIB). SIMILAR ORDER WAS PASSED FOR A.Y. 2012 - 13. 25. AS RE GARDS ADDITION OF RS. 50 LAKHS U/S. 68, LEARNED CIT(A) GRANTED PART RELIEF AS UNDER : - 3.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTICED THAT THERE ARE TWO LOANS, ONE OF RS. 40,00,000 FROM RAGHAVENDRA SINGH AND THE OTHER OF RS. 10,00,000 FROM HARIBHAI CHAU DHARY. IN RESPECT OF LOAN FROM RAGHAVENDRA SINGH, THE EVIDENCE FILED BY THE APPELLANT IN SUPPORT OF THE LOAN IS IN THE FORM OF COPY OF CONFIRMATION LETTER, ACKNOWLEDGEMENT OF RETURN, PROFIT & LOSS ACCOUNT AND BALANCE SHEET OF THE LENDER FOR A.Y. 2012 - 13. AS IT WAS ADDITIONAL EVIDENCE WHICH WAS NOT FILED BEFORE THE A.O, THE IMPUGNED EVIDENCE WAS SENT TO THE A.O. FOR HIS REMAND RE PORT VIDE LETTER DATED 12.03.201 3. IN THE SAID LETTER, THE AO WAS ALSO ASKED TO SEND HIS COMMENTS ON THE OBJECTION TAKEN BY THE ASSESSEE ON REOPENING THE ASSESSMENT WITHOUT THERE BEING FRESH MA TER IAL FOR REOPENING (GROUND NO. 1 OF APPEAL). HOWEVER IT WAS SUBMITTED BY THE A O VIDE LETTER DATED 10.05.2018 THAT DUE T O CHANGE IN JURISDICTION, THE UNDERSI G NED IS NOT ABLE TO SEND THE REPORT. IN VIEW OF SUBMISSION OF THE AO THE ISSUE IS DECIDED ON MERITS. THE GROUND OF APPEAL REGARDING REOPENING OF ASSESSMENT HAS ALREADY BEEN DISMISSED AS DISCUSSED ABOVE. REGARDING ADDIT ION OF RS. 50,00,000 U/S 68, THE ASSESSEE HAS SUBMITTED EVIDENCE OF RS. 40,00,000 IN RESPECT OF RAGHUVENDRA KUMAR SINGH REGARDING IDENTITY OF THE CREDITOR BY SUBMITTING CONFIRMATION LETTER, ACKNOWLEDGEMENT OF RETURN, PRO F I T AND LOSS A/C AND BALANCE SHEET, WHEREIN IN THE BOOKS OF THE CREDITOR & AUDITED BALANCE SHEET, THE SAID LOAN IS SHOWN ON THE ASSET SIDE. AS THE ASSESSEE HAS DISCHARGED HIS ONUS REGARDING IDENTITY, CREDITWORTHIN ESS AND GENUINENESS, THEREFORE THE ADDITION OF RS. 40,00,000 / - IS DELETED. 31. IN RE SPECT OF REMAINING LOAN OF RS. 10,00,000 / - THE ASSESSEE COULD NOT FURNISH ANY DOCUMENTARY EVIDENCE. REGARDING PLEA OF THE SHRI BHOLANATH R. SHUKLA 18 ASSESSE E ON TELESCOPING, AFTER CAREFULL Y PERUSING THE SUBMISSION OF THE ASSESSEE, I AM OF THE OPINION THAT THE ADDITION MADE ON ACCOUNT OF DISALLOWANCES OF EXPENSES CANNOT BE GIVEN BENEFIT OF TELESCOPING AGAINST CASH CREDITS SHOWN IN THE BOOKS OF A/C. THE BENEFIT OF TELESCOPING IS NOT ALLOWABLE ON THIS ACCOUNT. THEREFORE ADDITION OF RS. 10,00,000 / - IS CONFIRMED. THE GROUND OF APPEA L IS THEREFORE PARTLY ALLOWED. 26. AGAINS T THE ABOVE BOTH REVENUE AND ASSESSEE ARE IN APPEAL BEFORE US. AS REGARDS VALIDITY OF REOPENING : 2 7 . WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT THE ASSESSEE IN THIS CASE IS ENGAGED IN THE COLLECTION OF TOLL AND PARKING CHARGES THROUGH CONTRACTS AWARDED TO HIM BY VARIOUS GOVERNMENT AGENCIES FOR DIFFERENT PLACES IN INDIA. FOR ALL THE IMPUGNED ASSESSMENT YEARS, THE ASSESSMENTS WERE COMPLETED EARLIER U/S. 143(3) OF THE I.T. ACT. IN THOSE A SSESSMENTS THE ASSESSING OFFICER HAS DULY NOTED THAT THE ASSESSEE IS CLAIMING VARIOUS EXPENDITURES MAINLY IN CASH HENCE ASSESSING OFFICER HAD MADE ADHOC DISALLOWANCE OUT OF THE VARIOUS EXPENSES CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER HAS DULY ENQUIR ED THIS ASPECT AND THEREAFTER HE HAD MADE AN ADHOC DISALLOWANCE. THE ASSESSING OFFICER HAS ALSO NOTED THE PROFIT RATIO OF EARLIER YEARS AND CURRENT YEAR AND THEREAFTER HE HAD MADE THE ASSESSMENT ORDER. 28 . THEREAFTER THERE WAS A SURVEY ACTION UNDER SECTIO N 153A OF THE I.T. ACT CARRIED OUT ON 19.3.2015. DURING THE COURSE OF SURVEY IT WAS NOTED THAT THE ASSESSEE FAILED TO PRODUCE THE RELEVANT SUPPORTING FOR THE EXPENDITURE CLAIMED UNDER DIFFERENT HEADS. IT WAS FURTHER NOTED THAT ABSENCE OF SUPPORTING VOUCHER S WAS DULY ACCEPTED BY THE ACCOUNTANT OF THE COMPANY. IT WAS THEREAFTER ALSO CONFIRMED BY THE PROPRIETOR. IN THESE CIRCUMSTANCES ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE HAS NOT PROPERLY DISCLOSED THE PARTICULARS OF HIS EVIDENCES. THAT HE HAD REASON TO BELIEVE THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS SHRI BHOLANATH R. SHUKLA 19 AND HENCE THERE WAS ESCAPEMENT OF EVIDENCE. HENCE THE ASSESSMENT WAS REOPENED. 29 . IN THE REOPENED ASSESSMENT ALSO THE ASSESSING OFFICER DWE LT ON THE FACT THAT HUGE EXPENDITURES WERE INCURRED. THEY WERE INCURRED IN CASH AND THERE ARE WITHOUT PROPER SUPPORTING VOUCHERS. IN THESE REASSESSMENTS THE ASSESSING OFFICER MADE ADHOC ADDITIONS AGAIN BUT ON MUCH HIGHER SIDE . IN THE SE FACTS THE ASSESSEE C HALLENGED THE REOPENING BEFORE LEARNED CIT(A). THE ASSESSEES CONTENTION WAS THAT THE EARLIER ASSESSMENTS WERE COMPLETED U/S. 143(3). THE ASSESSING OFFICER HAS MADE ADDITIONS ON ACCOUNT OF VARIOUS EXPENSES ON SAME REASONING BUT AT DIFFERENT RA TES. HENCE, I T WAS CLAIMED THIS IS A CHANGE OF OPINION. HENCE IT WAS PLEADED THAT REOPENING WAS NOT JUSTIFIED. LEARNED CIT(A) FOUND THAT IN SURVEY ACTION IT WAS REVEALED THAT THE ASSESSEE IS CLAIMING SUBSTANTIAL EXPENDITURE NOT SUPPORTED BY PROPER VOUCHER S . HENCE HE RE JECTED ASSESSEES PLEA. 30. WE FIND THAT ASSESSEE WAS CLAIMING HUGE EXPENDITURES WHICH WERE INCURRED IN CASH AND WERE NOT SUPPORTED BY PROPER EXTERNAL VOUCHER . THIS WAS DULY KNOWN TO THE ASSESSING OFFICER IN THE EARLIER SCRVITINY ASSESSMENT. IT IS NOT THE CAS E THE POST SURVEY THERE WAS ANY INCREASE IN EXPENDITURE BOOKED. THE ASSESSING OFFICER IN EARLIER ASSESSMENT U/S. 143(3) HAS EXAMINED THIS ASPECT AND ALSO EXAMINED THE PROFIT RATIO OF THE ASSESSEE WHICH WAS FOUND TO BE IN CONSONANCE WITH EARLIER YEARS. THER EAFTER THE ASSESSING OFFICER HAS MADE AN ADHOC DISALLOWANCE OUT OF THE EXPENDITURE. TH US IT WAS KNOWN THAT ASSESSEE WAS ENGAGING INTO HUGE EXPENDITURE IN CASH, WITHOUT SUPPORT ED BY OUTSIDE VOUCHER. NOW IN THE REOPENED ASSESSMENT ON SAME REASONING OF EXPEND ITURE IN CASH WITHOUT PROPER VOUCHER THE ASSESSING OFFICER IS MAKING AGAIN ADHOC DISALLOWANCE BUT ON MUCH HIGHER SIDE. 3 1 . ACCORDINGLY, WE HOLD THAT THIS IS SIMPLY A CASE OF CHANGE OF OPI NION AND IN THESE CIRCUMSTANCES THE REOPENING IS NOT AT ALL JUSTIFIE D. ACCORDINGLY, WE ARE OF THE OPINION THAT THE SAME NEEDS TO BE QUASHED. SHRI BHOLANATH R. SHUKLA 20 3 2 . THE OTHER PLANK ON WHICH REOPENING IS IN DISPUTE IS THAT THE MATERIAL FOUND DURING SURVEY DID NOT HAVE ANY LIVE LINK WITH THE FORMATION OF ASSESSING OFFICERS BELIEF THAT THERE W AS ANY ESCAPEMENT OF INCOME. IN THIS REGARD WE NOTE THAT WHAT THE SURVEY REVEALED THAT ASSESSEE WAS INCURRING EXPENDITURES IN CASH AND WERE DEHORSE OUTSIDE VOUCHER. THESE FACTS WERE ALREADY KNOWN TO THE DEPARTMENT AS IT IS EVIDENT FROM ASSESSMENT ORDER PAS SED U/S. 143(3) EARLIER. I T CANNOT BE SAID THAT ANY NEW INFORMATION HA VING ANY LIVELINK TO THE ASSESSING OFFICER BELIEF THAT THERE IS AN ESCAPEMENT OF INCOME HAS COME TO ASSESSING OFFICERS POSSESSION. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION THE REOPENING IS NOT AT ALL JUSTIFIED AND IS LIABLE TO BE QUASHED. ACCORDINGLY THE REOPENING FOR A.Y. 2009 - 10, 2010 - 11, 2011 - 12 IS QUASHED. 3 3 . AS REGARDS THE MERITS OF THE CASE WE FIND THAT ASSESSING OFFICER HAS NOTED THAT EXPENDITURE CLAIMED BY THE ASSESS EE ARE IN CASH AND THAT THEY ARE NOT SUPPORTED BY OUTSIDE VOUCHERS. SINCE THE MAJORITY EXPENDITURES WERE WITHOUT PROPER OUTSIDE VOUCHERS AND THEY WERE ALSO HUGE IN MAGNITUDE THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS. ONCE HAVING REJECTED THE BOO KS OF ACCOUNT IN THE CIRCUMSTANCES IT WAS NOT OPEN TO THE ASSESSING OFFICER TO MAKE WILD AND ADHOC DISALLOWANCE. THE ASSESSING OFFICER IS MANDATED TO MAKE BES T JUDGMENT. IT IS SETTLED LAW THAT BE ST JUDGEMENT ASSESSMENT CAN NOT BE ARBITRARY. IN THIS REGARD L EARNED CIT(A ) HAS RIGHTLY OBSERVED AS UNDER, WHICH WE ARE REFERRING AT THE COST OF REPETITION . IT IS SETTLED LAW THAT THE DISALLOWANCE OF EXPENSES OR ESTIMATION OF PROFIT AFTER REJECTION OF BOOKS OF ACCOUNTS SHOULD BE FAIR AND REA SONABLE ESTIMATE AND ARBITRARINESS SHOULD BE AVOIDED AND THE ESTIMATE SHOULD NOT BE WILD OR VINDICTIVE. IT HAS BEEN LAID DOWN BY HON'BLE SUPREME COURT IN THE CASE OF BRIJ BHUSHAN LAL PARDUMAN KUMAR VS CIT (1978) 115 ITR 524 (SC) THAT THE AUTHORITY MAKING T HE BEST JUDGMENT ASSESSMENT MUST MAKE AN HONEST AND FAIR ESTIMATE OF INCOME OF THE ASSESSEE. FURTHER THE HON'BLE SUPREME COURT, IN THE CASE OF STATE OF KERALA VS C. VELUKUTTY (1966) 60 ITR 239 (SC) HAS LAID DOWN THAT BEST JUDGMENT IS A FACULTY TO DECIDE MA TTERS WITH WISDOM TRULY AND LEGALLY; JUDGMENT DOES NOT DEPEND UPON THE ARBITRARY CAPRICE OF A JUDGE BUT SETTLED INVARIABLE PRINCIPLES OF JUSTICES; THOUGH THERE IS AN ELEMENT OF GUESS WORK IN BEST JUDGMENT ASSESSMENT WHICH SHALL NOT SHRI BHOLANATH R. SHUKLA 21 BE WILD ONE; THE DEFAULT OF THE ASSESSEE DOES NOT ENABLE THE ASSESSING AUTHORITY TO FUNCTION CAPRICIOUSLY. FURTHER HON'BLE SUPREME COURT, IN THE CASE OF STATE OF ORISSA VS. MAHARAJA SHRI B.P. SINGH DEO (1970) 76 ITR 690 (SC) HAS LAID DOWN THAT THE MERE FACT THAT THE MATERIAL PLAC ED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER IS UNRELIABLE DOES NOT EMPOWER THE OFFICER TO MAKE ARBITRARY ORDER. ON SIMILAR FACTS PUNJAB AND HARYANA HIGH COURT IN CASE OF C. B. AGGARWAL UPHELD THE INVOKING THE SECTION 145(2) AND ASSESSING INCOME ON ESTI MATE BASIS. HON'BLE SUPREME COURT IN KANCHWALA GEMS 206 CTR 585 SC LAID GUIDELINES ON REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND ALSO HELD THAT IN A BEST JUDGMENT ASSESSMENT THERE IS ALWAYS A CERTAIN DEGREE OF GUESS WORK. NO DOUBT THE AUTHORITIES CONCERNED SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDGMENT ASSESSMENT, AND SHOULD NOT ACT TOTALLY ARBITRARY. IN NATHURAM NATHA LAL (1954) 25 ITR 216 (NAG) AND IN SALEM STEEL 322 ITR 349 , THE APPELLATE AUTHORITIES HELD T HAT WHILE ESTIMATING PROFITS, THE BASIS AND MANNER OF COMPUTATION SHOULD BE DISCLOSED AND THE ORDER SHOULD BE A SPEAKING ONE ] . 3 4 . WE NOTE THAT LEARNED CIT(A) HAS FOUND THAT THE ADDITION WAS TO BE LIMITED TO A FAIR ESTIMATE . T HE LEARNED CIT(A) EXAMINED TH E PROFIT RATIO DISCLOSED BY THE ASSESSEE AND THAT IN OTHER UNITS IN THE BUSINESS . THEREAFTER, LEARNED CIT(A) ALSO NOTED THAT IN THE ALTERNATIVE CONTENTION THAT THE ASSESSEE HAS OFFERED 3% PROFIT F O R TAXATION. LEARNED CIT(A) ON CONSIDERATION OF THE OVERALL FACTS MADE AN ESTIMATE OF PROFIT AT THE RATE OF 5% OF THE TURNOVER. 3 5 . NOW IN THIS REGARD ASSESSEE IS IN APPEAL BEFORE US THAT THE ADDITION OF ESTIMATE OF PROFIT MADE BY THE LEARNED CIT(A) IS ON H IGHE R SIDE AND REVENUE HAS ALSO FILED APPEAL AGAINST THE LEARNED CIT(A)S ORDER. 36 . UPON CAREFUL CONSIDERATION WE NOTE THAT THE FACTS AND CIRCUMSTANCES OF THE AVERAGE PROFIT OF THE ASSESSEE FOR THE PERIOD A.Y. 2009 - 10 TO 2013 - 14 IS AS UNDER : - A.Y. PROFIT % 2009 - 10 1.78 2010 - 11 1.71 2011 - 12 2.53 2012 - 13 2.18 2013 - 14 1.90 SHRI BHOLANATH R. SHUKLA 22 T HE AVERAGE OF THE PROFIT OF OTHER TWO UNITS IN THE SAME INDUSTRY ARE 1.86% AND 3.7% RESPECTIVELY . IN THESE CIRCUMSTANCES IN OUR OPINION THE ESTIMATE OF PROFIT AT THE RATE OF 3% OFFERED BY THE ASSESSEE BEFORE LEARNED CIT(A) SERVED THE INTEREST OF JUSTICE. WE ALSO NOTE THAT RATE OF PROFIT IS A MATTER OF FACT AND IT HAS BEEN SO ADMITTED BY THE ASSESSEE BEFORE LEARNED CIT(A). WE DIRECT ACCORDINGLY. 3 7 . AS REGARDS THE DISALLOWANCE ON THE ISSUE OF 40A(3), WE NOTE THAT THESE DISALLOWANCE S HAS BEEN DONE BY THE ASSESSING OFFICER ON THE GROUND THAT THESE EXPENDITURES WERE DONE IN CASH ABOVE RS. 20,000/ - . LEARNED CIT(A) HAS DELETED THE SAME FIRSTLY ON THE GROUND THAT ONGOING THROUGH THE ASSESSEE SUBMISSION WHICH HE HAS FOUND TO BE SUPPORTED W ITH DOCUMENTARY EVIDENCES THAT ASSESSEE HAS NOT INCURRED EXPENDITURE IN VIOLATION OF SECTION 40A(3). AS HE FOUND THAT PAYMENTS ARE MADE TO DIFFERENT PERSONS IN DIFFERENT DATE S A ND DUE TO LARGE NUMBER OF ENTRIES ON A PARTICULAR DATE IN RESPECT OF VARIOUS PA YMENTS THE SAME WERE CLUBBED FOR THE SAKE OF CONVENIENCE. APART THE ABOVE ANOTHER ANVIL ON WHICH LEARNED CIT(A) HAS DELETED THESE ADDITIONS IS ON THE GROUND THAT THE BOOKS HAVE BEEN REJECTED AND PROFIT HAS BEEN ESTIMATED . IN THE SE CIRCUMSTANCES WHEN BOOKS ARE REJECTED AND PROFIT ESTIMATED AT A PARTICULAR RATE NO SEPARATE THE ADDITION U/S. 40A(3) IS JUSTIFIED. FOR THIS PROPOSITION LEARNED CIT(A) HAS PLACED RELIANCE UPON CASE LAWS WHICH ARE GERMANE. ACCORDINGLY, IN THE BACKGROUND OF AFORESAID DISCUSSION AND P RECEDENT WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A). 38 . AS REGARDS DELETION OF ADDITION U/S. 68 OF THE ACT, WE NOTE THAT THE ASSESSING OFFICER HAS MADE THE ADDITION AS NECESSARY EVIDENCES IN THIS REGARD WERE NOT PROVIDED AT THE TIME OF ASSESSMENT. BEFORE LEARNED CIT(A), THE ASSESSEE SUBMITTED CONFIRMATION LETTER, ACKNOWLEDGMENT OF RETURN, PROFIT AND LOSS ACCOUNT AND THE BALANCE SHEET OF THE LENDER . THESE WERE ADDITIONAL EVIDENCES AND THE SAME WERE REMANDED TO THE ASSESSING OFFICER BY LE ARNED CIT(A). BUT LEARNED CIT(A) HAS NOTED THAT THE ASSESSING OFFICER DID NOT PROVIDE THE REMAND REPORT. IN THESE CIRCUMSTANCES, LEARNED CIT(A) RIGHTLY DECIDED THE ISSUE ON MERITS ON THE SUBMISSIONS BEFORE HIM. AS REGARDS THE ADDITION OF RS. SHRI BHOLANATH R. SHUKLA 23 40 LAKHS, LEAR NED CIT(A) HAS NOTED THAT THE IDENTITY OF THE CREDITOR IS ON RECORD . HE NOTED THE SUBMISSION OF CONFIRMATION LETTER, ACKNOWLEDGEMENT OF RETURN, PROFIT AND LOSS ACCOUNT AND THE BALANCE SHEETS . I N THESE CIRCUMSTANCES LEARNED CIT(A) HAS FOUND THAT THE IDENTIT Y, CREDITWORTHINESS AND GENUINENESS OF THE CREDITOR IS ESTABLISHED. HENCE, LEARNED CIT(A) HAS DELETED THE ADDITION. ON THIS ISSUE NOTHING HAS BEEN PRODUCED BEFORE US BY THE REVENUE THAT THE DELETION OF ADDITION BY LEARNED CIT(A) WAS NOT JUSTIFIED. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE WELL REASONED ORDER OF LEARNED CIT(A) . A CCORDINGLY, WE CONFIRM THE SAME. 3 8 . IN THE RESULT, ASSESSEES APPEALS FOR A.Y. 2009 - 10, 2010 - 11 & 2011 - 12 IS ALLOWED, OTHER APPEALS ARE PARTLY ALLOWED AS ABOVE AN D REVENUES APPEALS STAND DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 2 . 5 . 201 9 . SD/ - SD/ - ( RAMLAL NEGI ) (SH A MIM YAHYA ) J U DICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 2 / 5 / 20 1 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( A SSISTANT REGISTRAR) PS ITAT, MUMBAI