SANJAY JAIN, Jaipur V. ACIT, Jaipur

ITA 562/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5330 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 21-08-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA
• Assessee Lawyers: MUKESH KHANDELWAL C A DHK

Judgement Text

ITA NO. 562/JP/2014 SHRI SANJAY JAIN, PROP. M/S. MAHAVEER TRANSPORT CO. VS. ACIT, CIRCLE- 5, JAIPUR 1 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 YADA V, AM VK;DJ VIHY LA-@ ITA NO. 562/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 SHRI SANJAY JAIN PROP. M/S. MAHAVEER TRANSPORT CO. 14, TRANSPORT NAGAR, JAIPUR CUKE VS. THE ACIT CIRCLE- 5 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: ACSPJ 2383 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA, JCIT -DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MUKESH KHANDELWAL, CA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 02/02/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 30 /03/2016 VKNS'K@ ORDER PER R.P. TOLANI, JM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDE R OF THE LD. CIT(A)- II, JAIPUR DATED 25-06-2014 FOR THE ASSESSMENT YEAR 2009-10 WHEREIN FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE . 1. THAT THE LD. CIT(A) HAS ERRED SERIOUSLY ON THE FACTS IN SUSTAINING THE ACTION OF THE LD. AO OF INVOKING THE PROVISIONS OF SECTION 145(3) OF THE I.T. ACT, 1961. 2. THAT THE LD. CIT(A) HAS ERRED FURTHER SERIOUSLY ON FACTS IN SUSTAINING THE APPLICATION OF THE NET PROFIT RATE O F 3.4% ON FREIGHT RECEIPTS, RESULTING INTO AN ADDITION OF RS. 22,42,558/- ITA NO. 562/JP/2014 SHRI SANJAY JAIN, PROP. M/S. MAHAVEER TRANSPORT CO. VS. ACIT, CIRCLE- 5, JAIPUR 2 3. THAT THE LD. CIT(A) HAS ERRED SERIOUSLY ON FACTS AND IN LAW IN NOT FOLLOWING THE EARLIER DECISIONS OF HON'B LE ITAT IN THE CASE OF THE APPELLANT IN RESPECT OF LAST THREE ASSESSMENT YEARS. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A TRANSPORTER OWNING SELF TRUCKS, HIRING OTHER TRUCKS AND EARNING TRANSPORT C OMMISSION. RECORD REVEALS THAT SINCE PAST MANY YEARS THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE REJECTED AND TAXABLE PROFITS ARE ESTIMATED, THERE IS NO RECO RD TO COMPARE ANY YEAR WHERE ASSESSEE BOOKS HAVE BEEN ACCEPTED AS REFLECTI NG TRUE AND CORRECT PROFITS. IN THE IMPUGNED YEAR, THE ASSESSEE DECLARE D TURNOVER OF RS. 15,31,53,579/- AND NET PROFIT RATE OF 1.94% THE REON. FINDING VARIOUS DISCREPANCIES AND DEFICIENCIES IN THE BOOKS OF ACCO UNTS, WHICH WERE NOT MADE GOOD BY THE ASSESSEE, LD. AO REJECTED THE BOOK S OF ACCOUNTS BY OBSERVING THAT THE ASSESSEE HIMSELF HAS ACCEPTED DE FICIENCIES POINTED OUT IN THE BOOKS OF ACCOUNT WHICH INCLUDED THE FREIGHT PAY MENT OF RS. 8,00,21,464/-. MOST OF THE PAYMENTS MADE WERE I N CASH. THE RELEVANT RECORDS WERE NOT PRODUCED BEFORE THE AO AND EVEN CO MPLETE VOUCHERS IN THIS BEHALF WERE NOT MAINTAINED. THE AO OBSERVED TH AT THE NAMES AND ADDRESS OF THE RECIPIENTS OF SUCH CASH TRANSPORTATI ON CHARGES WERE ALSO NOT MAINTAINED. THUS ASSESSEE'S FREIGHT EXPENDITURE ARO UND RS. 1.00 CRORE WAS UNVERIFIABLE. ITA NO. 562/JP/2014 SHRI SANJAY JAIN, PROP. M/S. MAHAVEER TRANSPORT CO. VS. ACIT, CIRCLE- 5, JAIPUR 3 2.2 IN RESPECT OF FREIGHT RECEIPTS OF RS. 7,31,32, 115/- WHICH INCLUDED GROSS RECEIPTS FROM OWN TRUCKS AND COMMISSION/ PROF IT ON PLYING OF TRUCKS OF OTHERS, THE ASSESSEE HAS NOT MAINTAINED ANY TRUCK W ISE DETAILS OF RECEIPT OF AND EXPENDITURE OF OWN TRUCKS AND THE COMMISSION OR PROFIT EARNED ON PLYING OF OTHERS TRUCKS. THE TRIP EXPENSES OF RS. 9 2,01,739/- INCURRED THROUGH DRIVES AS WAY SIDE EXPENSES WERE NOT VOUCHE D AND COULD NOT BE PRODUCED BY THE ASSESSEE. NO LOG BOOK OF TRUCKS WAS MAINTAINED, BESIDES ASSESSEE HAS CLAIMED LOADING AND LOADING CHARGES FO R WHICH NO VOUCHERS WERE MAINTAINED. IN THE ABSENCE OF PROPER RECORDS A ND VOUCHERS, THE AO WAS OF THE VIEW THAT REAL INCOME OF THE ASSESSEE WAS NO T VERIFIABLE. RELYING ON ASSESSEE'S OWN CASE IN PRECEDING YEARS, THE AO AFT ER REJECTING BOOKS OF ACCOUNTS, WORKED OUT THE NET PROFIT RATE OF 3.40% A ND MADE ADDITION ACCORDINGLY. 2.3 AGGRIEVED, THE ASSESSEE IS IN FIRST APPEAL WHER E THE LD. CIT(A) REFERRED TO ITAT ORDERS IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2006- 07, 2007-08 AND 2008-09 AND REJECTED THE ASSESSEE'S PLEA TO ADOPT THE SAME RATE OF NET PROFIT BY HOLDING AS UNDER THAT FACTS WERE DISTINGUISHABLE BY FOLLOWING OBSERVATIONS: 4.3 IN VIEW OF THE ABOVE DEFECTS, THE ACTION OF T HE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT U/S 145(3 ) IS UPHELD. THE COUNSEL OF THE APPELLANT HAS EMPHASIZED THE FACTS O F EARLIER YEARS AND ITA NO. 562/JP/2014 SHRI SANJAY JAIN, PROP. M/S. MAHAVEER TRANSPORT CO. VS. ACIT, CIRCLE- 5, JAIPUR 4 APPLICATION OF NET PROFIT OF 2% AS UPHELD BY HON'BL E ITAT IN A.Y. 2006-07 AND 1.75% IN A.Y. 2007-08 AND 1.19% IN A.Y. 2008-09. HOWEVER, THE FACTS AND CIRCUMSTANCES OF THE CURRENT YEAR UNDERGONE MATERIAL CHANGE. THE POSITION IN THE CURRENT YEAR I S AS UNDER:- (I) IT IS SEEN THAT FREIGHT RECEIPTS HAVE BEEN REDU CED FROM RS. 21.48 CRORES IN A.Y. 2007-08 TO RS. 17.26 CRORES IN A.Y. 2008- 09 TO RS. 15.31 CRORES IN THE CURRENT YEAR. (II) A LARGE PART OF THE EXPENDITURE IN THE FORM OF FREIGHT PAYMENT OF RS. 8 CRORES, REPAIRS AND MAINTENANCE OF RS. 1,05,90,161/- , TRIP EXPENSES OF RS. 92,01,739/- , TYRE EXPENSES OF RS. 59,76,562/- ARE NOT AMENDABLE TO VERIFICATIO N, OUT OF TURNOVER OF RS. 15,31,53,579/- WHICH IS AN EXTREME LY LARGE PERCENTAGE. (III) NO REASONS HAVE BEEN GIVEN FOR DECREASE IN FR EIGHT RECEIPTS THIS YEAR AS COMPARED TO THE PRECEDING YEA R. 4.4 THE ITAT HAS NOT ACCEPTED THE BOOKS RESULTS OF THE APPELLANT IN ANY OF THE EARLIER YEARS. THE ORDERS O F THE APPELLATE AUTHORITIES FOR EARLIER YEARS DO NOT SET ANY PRECED ENT WHICH IS BOUND TO BE FOLLOWED IN SUBSEQUENT YEARS IF THE FACTS AND CIRCUMSTANCES HAVE UNDERGONE A MATERIAL CHANGE. MOREOVER, STRICTLY SPE AKING RES JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS A S EACH ASSESSMENT YEAR BEING A SEPARATE UNIT, WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR. IT WAS HELD BY HON'BLE RAJA STHAN HIGH COURT IN THE CASE OF COSMOPOLITAN EDUCATION SOCIETY VS. CIT (299 ITR 47) THAT EACH ASSESSMENT YEAR IN INCOME TAX PROCEEDINGS IS I NDEPENDENT AND THE PRINCIPLES OF RES JUDICATA DO NOT APPLY TO INCO ME TAX PROCEEDINGS. IT WAS HELD BY HON'BLE KOLKATA HIGH COURT IN THE C ASE OF CIT VS. AVERY INDIA LTD. (255 ITR 485) THAT A DECISION TAKE N IN REGARD TO AN EARLIER ASSESSMENT YEAR DOES NOT OPERATE AS RES JUD ICATA FOR A SUBSEQUENT ASSESSMENT YEAR. THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CWT VS. SMT. KUSUM BADER (185 ITR 70) H ELD THAT THE DECISION ON ONE ISSUE IN RESPECT OF A PARTICULAR A SSESSMENT YEAR CANNOT BE HELD TO BE CONCLUSIVE FOR ANOTHER ASSESSM ENT YEAR. THE PRINCIPLE OF RES JUDICATA WAS THEREFORE, HELD TO BE NOT APPLICABLE. ITA NO. 562/JP/2014 SHRI SANJAY JAIN, PROP. M/S. MAHAVEER TRANSPORT CO. VS. ACIT, CIRCLE- 5, JAIPUR 5 4.5 IN THE CASE OF COMMISSIONER OF SALES TAX, MAD HYA PRADESH VS. H.M. ESUFALI H.M. ABDULALI (90 ITR 271) , THE HON'BLE SUPREME COURT WHILE HOLDING THAT THE ASSESSING OFFI CER WAS THE BEST JUDGE OF THE SITUATION AND THE HIGH COURT COULD NOT SUBSTITUTE ITS BEST JUDGEMENT FOR THAT OF THE ASSESSING AUTHOR ITY, HELD THAT IN THE CASE OF BEST JUDGEMENT ASSESSMENTS, THE COURTS WILL HAVE TO FIRST SEE THE ACCOUNTS MAINTAINED BY THE ASSESSEE WERE RI GHTLY REJECTED AS UNRELIABLE. IF THEY COME TO THE CONCLUSION THAT THE Y WERE RIGHTLY REJECTED, THE NEXT QUESTION THAT ARISES FOR CONSIDE RATION IS WHETHER THE BASIS ADOPTED IN ESTIMATING THE TURNOVER HAS REASO NABLE NEXUS WITH THE ESTIMATE MADE. IF THE BASIS ADOPTED IS HELD TO BE A RELEVANT BASIS EVEN THOUGH THE COURTS MAY THINK THAT IT IS NOT THE MOST APPROPRIATE BASIS, THE ESTIMATE MADE BY THE ASSESSING OFFICER C ANNOT BE DISTURBED. 4.6 IT IS SEEN THAT THE ITAT TOO HAS NOT ACCEPTED THE BOOK RESULTS OF THE APPELLANT AND HAS VARIED THE RA TE OF NET PROFIT FROM YEAR TO YEAR, ON THE BASIS OF FACTS OF THAT YEAR. C ONSIDERING THE FACTS AND CIRCUMSTANCES IN THE PRESENT CASE AND DECISIONS CITED ABOVE, THE ADDITION OF RS. 22,42,558/- MADE BY THE AO IS CONFI RMED. ACCORDINGLY, THIS GROUND OF APPEAL IS DISMISSED . 2.4 THE LD. AR OF THE ASSESSEE CONTENDS THAT IN THE PRECEDING YEARS, ITAT JAIPUR AFTER UPHOLDING REJECTION OF BOOKS OF ACCOUN TS, ESTIMATED THE FOLLOWING RATE OF NET PROFIT IN RESPECTIVE YEAR: A.Y. TURNOVER N.P. RATE DECLARED BY APPELLANT N.P. RATE APPLIED BY AO N.P. RATE DETERMINED BY ITAT 2006-07 20,52,51,992 1.78% 3.40% 2% 2007-08 21,48,63,667 1.48% 3.40% 1.75% 2008-09 17,26,10,403 1.19% 3.40% 1.50% ITA NO. 562/JP/2014 SHRI SANJAY JAIN, PROP. M/S. MAHAVEER TRANSPORT CO. VS. ACIT, CIRCLE- 5, JAIPUR 6 IT IS CONTENDED THAT THE ADDITION RETAINED BY THE L D. CIT(A) IS EXORBITANT AS COMPARED TO PRECEDING YEARS. IT HAS NOT BEEN DISPUT ED THAT THERE IS INCREASE IN THE TURNOVER OF THE TRANSPORTATION CHARGES RECEI VED BY THE ASSESSEE AND THERE BEING THREE ITAT ORDERS IN ASSESSEE'S OWN CAS E, THE AVERAGE NET PROFIT OF THE RESPECTIVE YEARS SHOULD BE ADOPTED. IT IS FU RTHER CONTENDED THAT IT HAS BE HELD BY HON'BLE JURISDICTIONAL HIGH COURT THAT P AST HISTORY OF THE ASSESSEE IS THE BEST GUIDE FOR APPLYING A PARTICULAR RATE WH ILE ASSESSING INCOME IN CASE BOOKS OF ACCOUNT ARE BEING REJECTED. SUCH VIEW WAS HELD IN THE CASE OF CIT VS. SADDRUDDIN HUSSAIN, (2003) 263 ITR 677 AND INAN I MARBLES, 175 TAXMAN 56 BY THE HON'BLE RAJASTHAN HIGH COURT. KEE PING IN VIEW THE SAID JUDGEMENTS THE ADDITION SO MADE BY THE AO MAY KINDL Y BE DELETED. 2.5 THE LD. DR ON THE OTHER HAND CONTENDS THAT:- (I) THE ASSESSEE DELIBERATELY DOES NOT MAINTAIN PR OPER BOOKS OF ACCOUNT AND PROPER RECORDS AND ON OR OTHER REASONS GETS THE BOOKS OF ACCOUNT REJECTED AND NET PROFIT RATE ESTIMATES WHICH SERVES TARGETED PURPOSE TO THE ASSESSEE TO AVOID PROPER SCRUTINY AND DETERMINATION OF TAXABLE PROFITS. SUCH CLANDESTINE PRACTICE OF NOT MAINTAINING PROPER RECO RD FROM YEAR TO YEAR CANNOT BE CLAIMED BY THE ASSESSEE AS A MATTER OF RI GHT, TO BE APPLYING AVERAGE NET PROFIT IN EVERY YEAR. THE INCOME TAX LA W DOES NOT CONTEMPLATE THE ASSESSEE TO BE REWARDED FOR CONTINUING DEFAULT OF REJECTION OF BOOKS OF ITA NO. 562/JP/2014 SHRI SANJAY JAIN, PROP. M/S. MAHAVEER TRANSPORT CO. VS. ACIT, CIRCLE- 5, JAIPUR 7 ACCOUNT INDULGED IN BY HIS OWN LAPSES. THE ASSESSEE MUST BE FOUND TO BE CLEANED HANDED, HE HAS NOT GIVEN ANY PLAUSIBLE EXPL ANATION AS TO WHY AND HOW PROPER RECORD AND BOOKS OF ACCOUNTS WERE NOT MA INTAINED AND AS TO WHY THEY WERE NOT PRODUCED. THUS IN THE ABSENCE OF ANY CLEAR EXPLANATION OF SUFFICIENT CAUSE FOR NOT MAINTAINING OR PRODUCING P ROPER BOOKS OF ACCOUNTS AND RECORD TO ENABLE PROPER ASCERTAINMENT OF TAXABL E PROFITS IN TERMS OF SEC 145, THE CLAIM OF AVERAGE NET PROFIT RATE APPLICATI ON BY THE ASSESSEE IS UNTENABLE. THE ASSESSEE MUST COME CLEAN IN HIS CASE . THE LD. CIT(A) HAS GIVEN LONG LIST OF DISTINGUISHING FEATURE BETWEEN T HIS YEAR AND EARLIER YEARS. THE ASSESSEE HAS NOT CONTROVERTED ANY OF THE DISTIN GUISHING FEATURES POINTED BY LD. CIT(A) IN THIS YEAR AS COMPARED TO OTHERS. C ONSEQUENTLY, EARLIER ORDERS BASED ON PURE FACTS OF EACH YEAR, CANNOT BE HELD AS BINDING JUDICIAL PRECEDENTS AND AVERAGE NET PROFIT CANNOT BE APPLIED IN THIS YEAR. IT IS SETTLED PRINCIPLE OF LAW THAT PRINCIPLES OF RES JUDICATA AR E NOT APPLICABLE AS EACH ASSESSMENT YEAR IS SEPARATE ENTITY OF ASSESSMENT. S INCE THE FACTS ARE HELD TO BE DISTINGUISHABLE IN THIS YEAR, PRINCIPLE OF CONSI STENCY IS ALSO NOT APPLICABLE. THE ASSESSEE HAS FAILED TO DEMONSTRATE THAT DISTINGUISHING FEATURES POINTED OUT BY THE LD. CIT(A) ARE IN ANY W AY ARE UNJUSTIFIED. THE LD. DR THUS RELIED ON THE ORDER OF THE LD. CIT(A). ITA NO. 562/JP/2014 SHRI SANJAY JAIN, PROP. M/S. MAHAVEER TRANSPORT CO. VS. ACIT, CIRCLE- 5, JAIPUR 8 2.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND MERIT IN THE CONTENTIO NS OF THE LD. DR THAT THE ASSESSEE HAS NOT MAINTAINED PROPER RECORDS AND BOOK S OF ACCOUNT. THE ASSESSEE'S NON-EXPLANATION OF HUGE EXPENSES AROUND RS. 1.00 CRORE AND WAYSIDE EXPENSES OF RS. 92,01,739/- CANNOT BE TAKEN LIGHTLY AS THEY ARE INCURRED IN CASH. IT IS THE BURDEN ON THE ASSESSEE TO DEMONSTRATE THAT THE EXPENSES CLAIMED BY HIM ARE CORROBORATED AND REASON S FOR NON-MAINTENANCE OF RECORDS ARE DULY EXPLAINED. IT HAS NOT BEEN DEMO NSTRATED BY THE ASSESSEE THAT DISTINGUISHING FEATURES AS POINTED OUT BY THE LD. CIT(A) IN RESPECT OF EARLIER YEARS AND CURRENT YEAR ARE UNJUSTIFIED. CON SEQUENTLY, THE NATURE OF INFERENCE LEADS TO BELIEVE THAT IN THIS YEAR THE SE VERITY AND NATURE OF DEFECTS IN THE BOOKS OF ACCOUNT ARE DIFFERENT THAN EARLIER YEARS. WE THUS FIND MERIT IN THE CONTENTIONS OF THE LD. DR THAT PRINCIPLES OF RE S JUDICATA DO NOT APPLY TO ITAT PROCEEDINGS AND PRINCIPLES OF CONSISTENCY ARE ALSO NOT APPLICABLE AS FACTS ARE DISTINGUISHABLE. IT IS SETTLED LAW THAT E STIMATE BASED ON BEST JUDGMENT ASSESSMENT DUE TO REJECTION OF BOOKS OF AC COUNTS, SHOULD NOT BE ORDINARILY INTERFERED BY APPELLATE AUTHORITIES, UNL ESS THERE ARE DEMONSTRATIVELY COGENT REASONS TO DO SO. IN THIS CA SE, THE ASSESSEE HAS FAILED TO POINT OUT THAT ORDER OF THE LD. CIT(A) AS TO EST IMATION OF NET PROFIT RATE IS ITA NO. 562/JP/2014 SHRI SANJAY JAIN, PROP. M/S. MAHAVEER TRANSPORT CO. VS. ACIT, CIRCLE- 5, JAIPUR 9 CONTRARY OR EXCESSIVE. IN VIEW THEREOF, WE SEE NO I NFIRMITY IN THE ORDER OF THE LD. CIT(A) WHICH IS UPHELD. THUS THE APPEAL OF THE ASSESSEE IS DISMISSED. 3.0 IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 / 03/2016. 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:- 30 /03/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI SANJAY JAIN, PROP. M/S. MAHAV EER TRANSPORT CO. JAIPUR 2. IZR;FKHZ@ THE RESPONDENT-THE ACIT, CIRCLE- 5, 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.562/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR