The ITO, Ward-5(3), Morbi V. M/s. J.K. Roadlines, Morbi

ITA 482/RJT/2011

• Counselvise Citation: 48224914 RSA 2011
• Duration Of Justice: 1 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-04-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 21-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K SINGH DR I
• Keywords: Rejection of books of accounts
• Section: 143(3); 68

Judgement Text

' A, IN THE INCOME TAX APPELLATE TRIBU N AL; RAJKOT BENCH, RAJKOT. BEFORE SHRI D . K. TYAGI , JM AND SHRI A. M OHAN ALANKAMONY , AM IT A NO . 482/RJT//2011 I I / ASSESSMENT YEAR 200 8 - 09 ITO, RAJKOT WARD - 5(3), MO RBI ( / APPELLANT) VS. M/S. J K ROADLINES, NEW STATE BANK SOCIETY, RAVAPAR ROAD, MORBI PAN : AAFFJ 5261K ( / RESPONDENT C.O.NO.02/RAJ/2012 IN IT A NO .482/RJT/2011 I I / ASSESSMENT YEAR - 2008 - 09 M/S. J K ROADLINES, MORBI ( / CROSS - OBJECTOR ) VS. ITO, RAJKOT WARD - 5(3), MORBI ( / RESPONDENT 1 / REVENUE BY SHRI M K SINGH, DR I /ASSESSEE BY SHRI KALPESH DOSHI, CA ' / DATE OF HEARING 22.04.2013 ' / DA TE OF PRONOUNCEMENT 26 .04.2013 / ORDER PER BENCH: - THIS APPEAL OF THE REVENUE AND CROSS - OBJECTION BY THE ASSESSEE ARE FILED AGAINST THE ORDE R OF THE LD. CIT(A) - IV, RAJKOT IN APPEAL NO. CIT(A) - IV/ 0193/10 - 11 DATED 20.10.2011 FO R THE ASSESSMENT YE AR 2008 - 09 PASSED U/S. 250 R.W.S 143(3) AND 115 WE(3) OF THE FBT ACT. SINCE APPEAL OF THE REVENUE AND CROSS - OBJECTION S OF THE ASSESSEE ARE WITH RESPECT TO THE SAME ISSUES, FOR THE SAKE OF CONVENIENCE , THEY ARE HEARD TOGETHER AND ARE DECIDED BY THIS CONSO LIDATED ORDER. 2. THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL READ AS UNDER: - 1. THE LD. CIT (A) - IV, RAJKOT HAS ERRED IN LAW BY REDUCING THE N.P. TO 6.31% AS AGAINST 10% ESTIMATED BY THE A.O., WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY TH E A.O. 482/RJT2011 CO 02/RJT/2012 2 2. THE LD. CIT (A) IV, RAJKOT HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.400000/ - OUT OF RS.700000/ - MADE BY A.O. ON ACCOUNT OF UNEXPLAINED LOANS WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORDS BY THE A.O. 3. THE LD. CIT (A) - IV, RAJKOT HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.783536/ - MADE BY THE A.O. ON ACCOUNT OF CASH PAYMENT MADE, WHICH EXCEEDS RS.20000/ - WITHOUT APPRECIATING THE FACTS BROUGHT IN RECORD BY A.O. 4. ON THE FACTS OF THE CASE IN LAW THE L D. CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF A.O. 5. ANY OTHER GROUND THAT THE REVENUE MAY RAISE BEFORE OR DURING THE HEARING PROCEEDINGS BEFORE THE HONBLE ITAT. 6. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT (A) - IV, RAJKOT MAY KINDLY BE SET ASID E AND THAT OF ASSESSING OFFICER BE RESTORED. 3. THE GROUN DS RAISED BY THE ASSESSEE IN ITS CROSS - OBJECTION S ARE AS UNDER : 1. THAT, THE LEARNED CIT (A) HAS WRONGLY CONFIRMED THE REJECTION OF BOOKS OF ACCOUNT U/S 145(3) OF THE I.T. ACT. 2. THAT, THE LEAR NED CIT (A) HAS WRONGLY CONFIRMED THE ESTIMATION OF NET PROFIT AND MADE ADDITION OF RS.8,60,000/ - IN RESPECT OF THE NET PROFIT. 3. THAT, THE LEARNED CIT (A) HAS WRONGLY CONFIRMED THE ADDITION OF RS.3,00,000/ - . U/S 68 OF THE I.T. ACT, 1961. 4. THAT, THE F INDINGS OF LEARNED CIT(A) AS STATED ABOVE ARE NOT JUSTIFIED AND REQUIRED TO BE DELETED. 4. THOUGH THE REVENUE HAS RAISED SIX GROUNDS IN ITS APPEAL, THE FIRST THREE GROUNDS ARE RELEVANT FOR ADJUDICATION WHILE AS GROUND NO.4, 5 & 6 ARE GEN ERAL IN NATURE AN D ARE DISPOSED - OF F AS SUCH. SIMILARLY WITH RESPECT TO CROS S - OBJECTIONS OF THE ASSESSEE GROUND NOS. 1, 2 & 3 ARE RELEVANT WHILE AS GROUND NO.4 IS GENERAL IN NATURE DO NOT SURVIVE FOR ADJUDICATION. 5. THE ASSESSEE IS A FIRM, ENGAGED IN THE BUSINESS OF T RANSPORTATION AND ALSO EARNING INCOME FROM COMMISSION RECEIVED ON ACCOUNT OF TRANSPORTATION , FILED ITS RETURN OF INCOME ON 30.09.2008 DECLARING TOTAL INCOME AT RS.20,080/ - . THE CASE WAS TAKEN UP FOR SCRUTINY AND ORDER U/S. 143 (3) OF THE ACT ON 14.12.20 10, WHEREIN CERTAIN ADDITIONS WERE MADE. 482/RJT2011 CO 02/RJT/2012 3 6. GROUND NO.1 OF THE REVENUES APPEAL , WITH RESPECT TO ADDITION SUSTAINED BY LD CIT (A) ESTIMATING THE GROSS PROFIT RATE 6.31% AGAINST 10% ESTIMATED BY THE AO & GROUND NO.1 OF THE CROSS - OBJECTIONS OF THE ASSESS EE WITH RESPECT TO REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT & GROUND NO.2 OF THE CO OF THE ASSESS FOR ESTIMATING THE NET PROFIT AND SUSTAINING THE ADDITION OF RS.8,60,000/ - : - DURING THE COURSE OF ASSESSMENT PROCEEDING LD AO DIRECTED THE ASSES SEE TO PRODUCE THE DETAILS OF EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT EXCEEDING RS. 1 L AC INCLUDING THE VEHICLE HIRE CHARGES OF R S .1,54,83,712/ - . THOUGH THE ASSESSEE PRODUCED THE BO OKS OF ACCOUNT, LEDGER COPY ETC. , FAILED TO PRODUCE THE RELEVANT DOCU MENTARY EVIDENCE IN SUPPORT OF THE EXPENDITURES CLAIMED. SINCE THE ASSESSEE HAD NOT PRODUCED THE EXTERNAL VOUCHERS AND FURTHER INCURRED CASH EXPENDITURE EXCEEDING RS.20,000/ - THE LD. AO REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE INCOME OF THE ASSESS EE AT 10% OF THE G R O SS RECEIPT OF RS.2,34,75,159/ - WHICH WORKS OUT TO RS.23,47,516/ - AND ADDED TO THE INCOME OF THE ASSESSEE. WHEN THE MATTER CROPPED UP BEFORE THE LD CIT (A), LD. CIT(A) CONFIRMED THE FINDING S OF LD AO WITH RESPECT TO REJECTION OF BOOKS O F ACCOUNTS , HOWEVER, MODIFIED THE ESTIMATED RATE OF GP AT 6.31% OF THE TURNOVER WHICH WAS THE SAME RATE OF GP DECLARED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2007 - 08 . 6.1 LD. DR RELIED ON THE ORDER OF LD AO AND PRAYED THE SAME MAY BE SUSTAINED. LD. AR O N THE OTHER HAND, ARGUED THAT THE ASSESSEE HAS MAINTAINED PROPER BOOKS OF ACCOUNT S, EXTERNAL VOUCHERS AND INTERNAL VOUCHERS WHERE EXTERNAL VOUCHERS WERE NOT AVAILABLE. THE LD AR FURTHER ARGUED STATING THAT THERE WERE NO CASH PAYMENTS EXCEEDING RS.20,000 / - AND ALL SUCH PAYMENTS WERE PAID BY CHEQUE. LD AR FURTHER SUBMITTED THAT THE ASSESSEE HAD MAINTAINED SELF MADE VOUCHERS PROVIDING DETAILS OF THE TRUCKS HIRED BY IT W HICH WAS SUFFICIENT EVIDENCE TO JUSTIFY THE EXPENSES INCURRED BECAUSE THE REVENUE COULD C ONDUCT ENQUIRES IF THE TRANSACTIONS WERE DOUBTED. IT HAS ALSO ARGUED THAT THERE WAS NO BASIS FOR THE REVENUE TO REJECT 482/RJT2011 CO 02/RJT/2012 4 THE BOOKS OF ACCOUNTS AND ARBITRARILY ESTIMATE THE INCOME OF THE ASSESSEE WHICH IS UNJUSTIFIABLE. IT IS THEREFORE PRAYED THAT SUCH ESTI MATION OF INCOME FROM TURNOVER MAY BE DELETED. 6.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIAL S ON RECORD AND PAPER BOOK FILED BY THE ASSESSEE RUNNING FROM 1 TO 12 6 PAGES. IT IS APPARENT FROM THE ORDER OF THE REVENUE THAT THE BOOKS OF ACCOUNTS HAVE BEEN MAINLY REJECTED BECAUSE THE ASSESSEE HAS NOT MAINTAINED THE EXTERNAL EVIDENCE FOR HIRING THE VEHICLE. THE ASSESSEE HAS CONDUCTED ITS ACTIVITY OF TRANSPORTATION BY HIRING THE VEHICLE FROM THE OWNERS OF THE VEHICLES. AS CONTEN DED BY THE ASSESSEE ON MANY OCCASIONS THE OWNERS OF THE VEHICLE MAY NOT ISSUE RECEIPTS FOR PAYMENT RECEIVED BY THEM FOR HIRING OF THE VEHICLES. IN SUCH CASES IT IS A NORMAL PRACTICE TO MAINTAIN SELF - MADE VOUCHERS PROVIDING DETAILS OF THE VEHICLES AND THE OWNER OF THE VEHICLES AND BY OBTAINING THEIR SIGNATURES . IF THE REVENUE HAD ANY SUSPICION ON THE PAYMENTS MADE FOR HIRING OF SUCH VEHICLE, IT IS OPEN F OR THEM TO CONDUCT ENQUIRES BASED ON THE DETAILS PROVIDED BY THE ASSESSEE. SUCH EXERCISE HAS NOT BEEN MADE IN THIS CASE. FURTHER THE LD CIT (A) HAS OBSERVED THAT THE ASSESSEE HAD NOT MADE ANY CASH PAYMENTS EXCEEDING RS.20,000/ - AND MOST OF THE PAYMENTS HAVE BEEN MADE BY CHEQUE. IN SUCH CIRCUMSTANCES, IT IS NOT JUSTIFIABLE TO REJECT THE BOOKS OUT - RIGHTLY . OF - COURSE , IT RAISES ONES EYEBROW WHEN THE PROFIT DECLARED BY THE ASSESSEE IN TRANSPORTATION BUSINESS IS SHOWN AT 0.85% OF TURNOVER. IN THESE CIRCUMSTANCES , IT WAS OPEN FOR THE REVENUE TO FURTHER PROBE INTO THE GENUINENESS OF THE ACCOUNTS AND THE DOCUM ENTS MAINTAINED BY IT. THE ASSESSEE HAD TRIED TO CONVINCINGLY EXPLAIN THE REASONS FOR SUCH LOW PROFIT BY BRINGING OUT THE FACT THAT IT DID NOT OWNED ANY VEHICLE S INSTEAD HIRE OUT VEHICLES FROM THE OPEN MARKET TO FULFILL ITS BUSINESS COMMITMENTS, THUS IT W AS ONLY EARNING COMMISSION FOR TRANSPORTATION. CONSIDERING TH E FACTS AND CIRCUMSTANCES OF THIS CASE, WE DO NOT FIND IT APPROPRIATE TO ESTIMATE THE INCOME AT 6.31% OF THE TURNOVER ARBITRARILY BASED ON PLAIN PRESUMPTIONS AND BY REJECTING THE BOOKS OF ACCO UNT S WITHOUT ANY REASONABLE REASONS . ACCORDINGLY THE GROUND NO.1 RAISED IN THE APPEAL OF THE 482/RJT2011 CO 02/RJT/2012 5 REVENUE IS DISMISSED AND THE GROUND NO S .1 & 2 OF THE CROSS - OBJECTIONS RAISED BY THE ASSESSEE ARE ALLOWED IN ITS FAVOUR. 7. GROUND NO . 2 OF THE REVENUES APPEAL WITH RESPECT TO DELETING THE ADDITION OF RS. 4 LACS OUT OF RS.7 L ACS MADE BY LD AO ON ACCOUNT OF UNEXPLAINED LOANS AND GROUND NO.3 OF ASSESSEES CO WITH RESPECT TO CONFI R MING THE ADDITION OF RS.3 L AC S U/S 68 OF THE ACT : - THE LD AO OBSERVED DURING THE C OURSE OF ASSESSMENT PROCEEDING TH AT THE ASSESSEE HAD OBTAINED UNSECURED LOAN S FROM SHRI K. D. CHAVDA FOR R S .3 LACS & SMT .K. CHAVDA FOR RS.4 LACS. SINCE THE ASSESSEE COULD NOT FURNISH THE ADDRESS AND PAN NUMBER OF THESE PERSONS , THE AMOUNT OF RS.7 LACS WAS ADDED TO THE INCOME OF THE ASSESSEE U/S 68 OF THE ACT. BEFORE THE LD CIT( A) , THE ASSESSEE SUBMITTED DETAILS OF SMT. K. CHAVDA SUCH AS PAN NUMBER, ADDRESS ETC AND THEREFORE LD CIT(A) DELETED THE ADDITION OF RS.4 LACS BEING THE LOAN RECEIVED FROM SMT. K. CHAVDA. WITH RESPECT TO THE LOAN RECEIVED FROM MR. K. D. CHAVDA, THE ASSESSEE EXPLAINED THAT THERE WERE TWO LENDERS VIZ. SMT. MADHUBEN K. CHAVDA, WHO HAD LENT RS.2 LACS AND MR. JITENDRA K. CHAVDA WHO LENT RS.1 LAC. IT WAS FURTHER EXPLAINED THAT THE LOAN RECEIVED FROM THE ABOVE TWO PERSONS WERE WRONGLY DEBITED TO SHRI K. D. CHAVDAS ACCOUNT. THE LD CIT(A) , HOWEVER SUSTAINED THE ADDITION OF RS.3 LACS SINCE THE ASSESSEE HAD NOT SUBMITTED ANY EVIDENCE IN THE FORM OF BANK SLIP , AND THE TAX AUDITOR HAD REPORT ED THAT THE APPELLANT HAD RECEIVED LOAN OF RS.3 LACS FROM MR. BHARATBHAI PRAB HUBHAI BY ACCOUNT PAYEE CHEQUE AND FURTHER THESE TRANSACTIONS WERE NOT CONVINCINGLY EXPLAINED. 7.1 LD DR SUPPORTED T HE ORDER OF THE LD AO AND REQUESTED TO SUSTAIN THE ADDITION O F RS.7 LACS MADE BY THE LD AO. LD AR RELIED ON THE ORDER OF THE LD CIT(A) FOR DELETING THE ADDITION OF RS.4 LACS. HOWEVER, VEHEMENTLY ARGUED THAT THE LD CIT(A) HAD ERRED IN SUSTAINING THE ADDITION OF RS.3 LACS SINCE THE ASSESSEE HAD SUBMITTED ALL THE PA RTICULARS OF THE PERSON S FROM WHOM THE 482/RJT2011 CO 02/RJT/2012 6 ASSESSEE HAD BORROWED RS.2 LACS AND RS.1 LAC AGGREGATING TO RS.3 LACS AND PRAY ED THAT THE SAME MAY ALSO BE DELETED. 7.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIAL S ON RECORD INCLUDING TH E PAPER BOOKS SUBMITTED BY THE APPELLANT. WITH RESPECT TO ADDITION OF RS.4 LACS THE ASSESSE E HAD SUBMITTED THE DETAILS OF LENDER S BEFORE THE LD CIT(A) WHO HAVE EXAMINED THE ISSUE IN DETAILS AND GRANTED R ELIEF TO THE ASSESSEE. IN THESE CIRCUMSTANCES WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LD CIT(A). HOWEVER, WITH RESPECT TO THE ADDITION OF RS.3 LACS SUSTAINED BY THE LD CIT(A) , THE ASSESSEE HAS PRODUCED THE DETAILS OF BOTH THE LENDERS INCLUDING THE PAN NUMBER, ADDRESS ETC I T IS FU RTHER CLAIMED BY THE ASSESSEE THAT THIS AMOUNT OF RS.3 LACS RECEIV ED FROM BOTH THE INDIVIDUALS WERE BY CHEQUE. THEREFORE, IN THE INTEREST OF JUSTICE, WE HEREBY REMIT THIS MATTER BEFORE THE FILE OF LD AO FOR VERIFICATION OF THE CLAIM OF THE ASSESSEE AND TO PASS APPROPRIATE ORDER AS PER LAW AND MERIT. ACCORDINGLY THE 2 ND GROUND OF THE REVENUE FOR DELETING THE ADDITION OF RS.4 LAC IS DISMISSED AND THE 3 RD GROUND RAISED BY THE ASSESSEE IN ITS CO IS ALLOWED FOR STATISTICAL PURPOSE. 8. GROUND NO.3 OF THE REVE NUES APPEAL WITH RESPECT TO DELETING THE ADDITION OF RS.7,83,536/ - MADE BY THE LD AO FOR CASH PAYMENT EXCEEDING RS.20,000/ - : - DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE LD AO THAT THE ASSESSEE HAD MADE CASH PAYMENT EXCEEDING RS.2 0,000/ - IN A SINGLE DAY TO VARIOUS PARTIES FOR THE EXPENSES INCURRED BY IT AGGREGATING TO RS.7,83,536/ - AND THEREBY ATTRACTING THE PROVISION OF SECTION 40A(3)(A) OF THE ACT. HOWEVER, THE ASSESSEE BEFORE THE LD CIT(A) HAD PRODUCED THE RELEVANT DOCUMENTS, B OOKS OF ACCOUNTS, ETC.., AND EXPLAINED THAT THERE WERE NO CASH PAYMENT EXCEEDING RS.20,000/ - AND ALL PAYMENTS OF RS.20,000 OR MORE WERE MADE BY CHEQUE. THE LD CIT(A) AFTER EXAMINING ALL THE MATERIALS PRODUCED BY THE ASSESSEE DELETED THE ADDITIONS MADE B Y THE AO , FINDING THE EXPLANATIONS FURNISHED BY THE ASSESSEE 482/RJT2011 CO 02/RJT/2012 7 IS TO BE CORRECT. AFTER HEARING BOTH THE PARTIES, AND PERUSING THE DETAILED ORDER OF THE LD CIT(A), WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LD CIT(A) ON THIS ISSUE, THEREF ORE THIS GROUND RAISED BY THE REVENUE IS ALSO DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS - OBJECTIONS OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. T HIS O RDER IS PRONOUNCED IN THE O PEN COURT ON THE DA TE MENTIONED HEREINABOVE. SD/ - SD/ - (D .K. TYAGI) ( A.M OHAN ALANKAMONY ) 1 / JUDICIAL MEMBER M, / ACCOUNTANT MEMBER N/ ORDER DATE 26.04.2013 /RAJKOT BT T RJO O / COPY OF ORDER FORWARDED TO: - . / APPELLANT - ITO, RAJKOT WARD - 5(3), MORBI 2. ( / RESPONDENT - M/S. J K ROADLINES, RAVAPAR ROAD, MORBI . A S / CIT - III , RAJKOT 4. S - / CIT (A) - IV, RAJKOT 5. A, ' A, / DR, ITAT, RAJKOT 6. I / GUARD FILE. / BY ORDER , TRUE COPY SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, RAJKOT.