Shri Anil Kumar Agrawal, Indore V. The Assistant Commissioner of Income Tax Circle 5(1), Indore

ITA 505/IND/2010

• Counselvise Citation: 50522714 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 16-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 23-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: P N DIXIT; S S SHEETAL
• Keywords: Rejection of books of accounts; TDS
• Section: 143(3); 145

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM & SHRI R. C.SHARMA, AM ITA NO.505/INDL/2010 ASSESSMENT YEAR : 2007-08 ANIL KUMAR AGARWAL INDORE PAN ABTPA 231301 ASSTT. COMMR. OF INCOME TAX 5(1), INDORE (APPELLANT) (RESPON DENT APPELLANT BY : S/SHRI P.N. DIXIT & S.S.SHEETAL RESPONDENT BY : SHRI ARUN DEWAN DATE OF HEARING : 12.9.2011 DATE OF PRONOUNCEMENTS : 10.10.2011 ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DA TED 10.5.2010 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE ACT. 2. EVEN THOUGH IN THE GROUNDS OF APPEAL, THE ASSESS EE HAS TAKEN FIVE GROUNDS, BUT DURING THE COURSE OF HEARI NG, THE ONLY GROUND PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE WAS WITH RESPECT TO ADOPTING THE NET PROFIT RATE OF 2.5% ON TRANSPORT RECEIPTS OF RS. 7.80 CRORES AS AGAINST THE RETURNED INCOME OF THE ASSESSEE. 2 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED I N TRANSPORTATION BUSINESS. DURING THE COURSE OF SCRUTINY ASSESSMENT , THE ASSESSING OFFICER OBSERVED THAT ON PERUSAL OF P&L A CCOUNT AND COMPUTATION OF THE ASSESSEE IT WAS SEEN THAT THE AS SESSEE HAS SHOWN HIS TOTAL TURNOVER AT RS. 39,30,401, WHEREAS AS PER HIS ITS CLAIMS, THE TOTAL RECEIPT COMES AT RS. 7,69,94,116. THEREFORE, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY HE HAS NOT SHOWN THE FREIGHT RECEIVED OF RS. 7,69,94,116/- IN THE INCOME SIDE OF HIS PROFIT & LOSS AND HAS SHOWN ONLY COMMISSION OF RS.3 9,30,401/- AS INCOME. IN REPLY TO THE QUERY THE ASSESSEE SUBM ITTED AS UNDER :- 4. THE FREIGHT PAYMENT OF RS. 7,69,94,146/- SHON B Y THE PARTIES FROM WHOM THE FREIGHT WAS RECEIVED ALSO INCLUDES FREIGHT PAYMENT IN RESPECT OF MOTOR TANKER S OWNED BY THE ASSESSEE FOR WHICH NO BOOKS OF ACCOUNT S ARE MAINTAINED AND THE INCOME IS OFFERED WITHIN THE PROVISION OF SECTION 44AE. 5. THE ASSESSEES GROSS RECEIPT FOR COMMISSION/FREI GHT FROM BOTH PROPRIETARY CONCERN AS PER METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE WAS R S. 39,30,401/- WHICH WAS NOT COVERED WITHIN THE PROVISION OF SECTION 44AB. HOWEVER, BOOKS OF ACCOUNTS ARE BEING AUDITED BY A CHARTERED ACCOUNTAN T EVERY YEAR AS PER BUSINESS PRACTICE REGULARLY. II) THE REPLY MADE BY THE ASSESSEE WAS EXAMINED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER OBSERVED T HAT THE 3 ASSESSEE IN ORDER TO AVOID GIVING DIRECT REPLY TO T HE QUERY, THE ASSESSEE HAD TRIED TO GIVE A VAGUE ANSWER WHICH IS NOT TO THE POINT. HERE IT MAY BE POINTED OUT THAT THE RECEIPT S SHOWN BY THE ASSESSEE AT RS. 39,30,401/- I.E. JUST BELOW RS. 40 LACS IS AN INTENTIONAL ACT TO AVOID THE PROVISIONS OF SECTION 44AB AND TO MISUSE THE PROVISIONS OF SECTION 44AE. THE ASSESS EE WAS GIVEN ANOTHER OPPORTUNITY TO PUT FORTH HIS SUBMISSION ON THE ISSUE. THE ASSESSEE THEREAFTER SUBMITTED THAT HE RECOGNIZE S COMMISSION ON FREIGHT PAID TO OTHER IN HIS BOOKS AND DOES NOT RECOGNIZES THE TOTAL AMOUNT OF THE FREIGHT. HOWEVER, THE TOTAL F REIGHT WHICH IS BILLED TO THE CUSTOMERS IS CREDITED TO THE TRUCK OW NER AND ANY PAYMENT MADE TO/ON BEHALF OF THE TRUCK IS DEBITED T O THE TRUCK OWNER ACCOUNT. SIMILARLY THE FREIGHT AMOUNT WHICH I S BILLED TO THE CUSTOMER IS DEBITED TO THEIR ACCOUNT AND SUBSEQ UENT RECEIPT FROM THEM IS CREDITED TO THE ACCOUNT. THE ASSESSEE WAS ASKED TO FURNISH THE FREIGHT RECEIPT AND PAYMENT REGISTER TO WHICH THE ASSESSEE REPLIED THAT NO SUCH REGISTER ARE BEING MA INTAINED BY THE ASSESSEE AS HE RECOGNIZES THE INCOME IN THE BOO KS ON COMMISSION BASIS. (III) THE BOOKS OF ACCOUNTS CALLED BY THE ASSESSEE WERE CHECKED AND THE COPIES OF LEDGER ACCOUNT OF TRUCK OWNERS WE RE CALLED FOR 4 AND EXAMINED. IT WAS NOTICED THAT THE ASSESSEE HAS INDEED CREDITED THE AMOUNT OF FREIGHT IN THE ACCOUNT OF TR UCK AND HAS NOT RECOGNIZED THE AMOUNT AS HIS INCOME. HOWEVER, IT WAS ALSO NOTICED THAT THE ASSESSEE HAS PAID AMOUNT ON ACCOUN T OF SALARY, INSURANCE, REPAIR EXPENSES, LOAN INSTALMENTS, ETC. ON BEHALF OF TRUCK OWNERS IN ADDITION TO FREIGHT PAYMENT TO THE TRUCK OWNER. THIS ACT OF THE ASSESSEE ITSELF ESTABLISHES THE FAC T THAT HE IS NOT MERELY A COMMISSION AGENT FOR THE TRUCK OWNER. (IV) ON THE BASIS OF ABOVE DISCUSSION, IT IS CLEAR THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE NOT RELIABLE AND HE NCE THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 27.10.09, WAS ASKED TO SHOW CAUSE THAT WHY HIS BOOKS OF ACCOUNTS SHOULD NO T BE REJECTED U/S 145 OF THE IT ACT AND 5% OF THE TOTAL RECEIPTS NOT BE TAKEN AS GROSS TOTAL INCOME OF THE ASSESSEE. THE A SSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE HAS SHOWN H IS TURNOVER AT RS. 39,30,401/- DURING THE YEAR CONSIDERING ONLY CO MMISSION RECEIVED AS HIS TURNOVER. THIS ACT OF THE ASSESSEE IS NOT ACCORDING TO THE PRINCIPLES OF ACCOUNTING AS PER AS SESSEES OWN ADMISSION AND AS PER TDS CERTIFICATES HIS RECEIPTS ARE RS. 7,69,94,116/-, WHICH IS THE AMOUNT ON WHICH TDS IS DEDUCTED IN ITS PROFIT AND LOSS ACCOUNT AND SHOULD HAVE GOT HIS BOOKS OF 5 ACCOUNTS AUDITED. THE AMOUNT OF FREIGHT PAID TO TR UCK OWNERS SHOULD HAVE BEEN TREATED AS EXPENSES. 4. AFTER CONSIDERING THE ASSESSEES REPLY THE ASSES SING OFFICER HELD THAT THE ASSESSEE WAS ENGAGED IN OPERATING HEA VY VEHICLES AND THE ACCOUNTS MAINTAINED BY THE ASSESSEE ARE NEI THER COMPLETE NOR CORRECT AND HIS INCOME CANNOT BE DETER MINED ON THE BASIS OF BOOKS OF ACCOUNTS. ACCORDINGLY, THE A SSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS OF THE ASSES SEE. AS REGARDS QUANTIFICATION OF TURNOVER/RECEIPTS, RELIANCE WAS P LACED ON TDS CERTIFICATES SUBMITTED BY THE ASSESSEE. AS PER THE TDS CERTIFICATES SUBMITTED THE FREIGHT CHARGED/BILLED B Y THE ASSESSEE WAS RS. 7,69,94,116/-. IT CANNOT BE RULED OUT THAT THE ASSESSEE ALSO PROVIDES SERVICES TO THOSE ENTITIES WHICH ARE NOT LIABLE TO DEDUCT TDS. CERTAIN PAYMENTS MAY HAVE BEEN RECEIVE D FROM CUSTOMERS WHO HAVE NOT DEDUCTED TDS ON PAYMENTS MAD E TO THE ASSESSEE. CONSIDERING THE ABOVE, THE TURNOVER OF T HE ASSESSEE IS ESTIMATED AT RS. 8,00,00,000/-. LOOKING AT THE FAC T THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF OPERATING OF HEAVY VEHICLES, THE ASSESSING OFFICER APPLIED A NET PROFI T RATE OF 5% TO THE TURNOVER FOR ESTIMATING THE INCOME OF THE ASSES SEE. THE INCOME OF THE ASSESSEE, THEREFORE, WORKED OUT TO RS . 40,00,000 6 (RS. 8,00,00,000 @ 5%). ALL THE EXPENSES LIKE DEPR ECIATION, INTEREST ETC WAS BEING DEEMED TO BE ALLOWED WHILE A RRIVING AT THE ABOVE FIGURE. HOWEVER, SINCE THE GROSS RECEIPTS AR E BEING TAKEN FOR COMPUTING THE INCOME U/S 44AE, AS PROPOSED BY T HE ASSESSEE IS DEEMED TO BE INCLUDED IN ABOVE RS. 40,00,000 AND HENCE THE SAME IS NOT BEING ADDED IN THE TOTAL INCOME OF THE ASSESSEE. 5. BY THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) REDUCED THE NET PROFIT FROM 5% TO 2.5% AFTER HAVING THE FOLLOWING OBSERVATIONS :- A.O.S ACTION IN ESTIMATING THE GROSS RECEIPTS BY INVOKING SECTION 145(3) IS QUITE IN ORDER, THE CHANCES OF UN ACCOUNTED RECEIPTS ARE RELATIVELY LESS HAVING REGARD TO THE N ATURE OF BUSINESS AND ACCOUNTING DONE BY THE APPELLANT WHICH ARE SUPPORTED BY TDS CERTIFICATES. HENCE AGAINST ESTIM ATE OF GROSS RECEIPTS AT RS. 8 CRORE AS MADE BY THE A.O. O N APPELLANTS DISCLOSURE OF SUCH RECEIPTS AT RS.7,69, 94,116/-, THE A.O. IS DIRECTED TO RESTRICT THE ESTIMATE OF TH E GROSS RECEIPTS TO A ROUND FIGURE OF RS. 7,80,00,000/-.. THE ADOPTION OF A NET PROFIT RATE FOR ESTIMATING TH E APPELLANTS INCOME IS JUSTIFIED U/S 145(3), HOWEVER , THE NET PROFIT RATE ADOPTED BY THE A.O. AT 5% IS DEFINITELY ON HIGHER 7 SIDE KEEPING IN VIEW THE COMPETITIVENESS IN THE LIN E OF THE APPELLANTS BUSINESS AND EXPLANATION OFFERED BY THE APPELLANT AND HENCE DESERVES TO BE RESTRICTED TO 2. 5% ON THE ESTIMATED RECEIPTS OF RS. 7,80,00,000/- ON THE FACT S AND CIRCUMSTANCES OF THE CASE. 6. AGAINST THE ABOVE ORDER OF THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS), THE ASSESSEE IS IN FURTHER AP PEAL BEFORE US. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD AND F IND THAT INSPITE OF HAVING TURNOVER OF MORE THAN RS. 40 LACS , THE ASSESSEE HAS NOT GOT ITS BOOKS OF ACCOUNTS AUDITED. EVEN TH E METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE DID NOT DISCLOS E TRUE PICTURE OF THE ASSESSEES BUSINESS. UNDER THESE CIRCUMSTAN CES, THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) WAS JUSTI FIED. HOWEVER, AS AGAINST THE TOTAL RECEIPT OF RS. 7.69 CRORES SHO WN IN THE TDS CERTIFICATE, THE ASSESSING OFFICER HAS ESTIMATED TH E SAME AT RS. 8 CRORES WHICH WAS REDUCED BY THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) TO THE EXTENT OF RS. 7.80 CROR ES. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS AL SO REDUCED THE NET PROFIT TO 2.5% AS AGAINST NET PROFIT RATE OF 5% ESTIMATED BY THE ASSESSING OFFICER. ACCORDINGLY, HE HAS DIRE CTED THE 8 ASSESSING OFFICER TO COMPUTE THE ADDITION BY APPLYI NG THE NET PROFIT RATE OF 2.5% ON THE REDUCED TURNOVER OF RS.7 .80 CRORES. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTA NCES OF THE CASE, AS ELABORATELY DISCUSSED BY THE LOWER AUTHORI TIES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN APPLYING NE T PROFIT RATE OF 2.5% ON THE GROSS RECEIPT OF RS. 7.80 CRORES. N OTHING WAS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE DUR ING THE COURSE OF HEARING BEFORE US TO PERSUADE US TO DEVIATE FROM THE FINDINGS RECORDED BY THE LOWER AUTHORITIES IN THEIR RESPECTI VE ORDERS. ACCORDINGLY, WE UPHOLD THE ORDER PASSED BY THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) WITH REGARD TO THE RATE OF PROFIT AND GROSS RECEIPT ESTIMATED BY HIM. IT IS P ERTINENT TO MENTION HERE THAT NO APPEAL WAS FILED BY THE REVENU E AGAINST THE RELIEF OF MORE THAN 50% GIVEN BY THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) AND EVEN DURING THE COURSE OF HEARING, A SPECIFIC QUERY WAS RAISED BY THE BENCH TO THE LEARN ED DR BUT NOTHING CAME OUT. ACCORDINGLY, THIS ORDER IS PASSE D UNDER THE BELIEF THAT THE REVENUE IS NOT IN APPEAL AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOR RE DUCING THE 9 NET PROFIT RATE FROM 5% TO 2.5% AND REDUCING THE G ROSS RECEIPTS FROM RS. 8 CRORES TO RS. 7.8 CRORES. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED WITH THE ABOVE OBSERVATIONS. SD SD (JOGINDER SINGH) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER OCTOBER 10 , 2011 COPY TO APPELLANT, RESPONDENT, CIT, CIT(A), DR DN/-