The Truck Truck Operator Union, Jaitu V. The Income tax Officer, Faridkot

ITA 577/ASR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8773 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 12-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S KANWAL
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR(SMC). BEFORE SH. A.D. JAIN, JUDICIAL MEMBER ITA NO.577(ASR)/2013 ASSESSMENT YEAR:2009-10 PAN:AABATT0182C THE TRUCK OPERATOR UNION, VS. INCOME TAX OFFICER, JAITU. WARD III(3), FARIDKOT. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. ASHWANI KALIA, CA RESPONDENT BY: SH. S.S. KANWAL, DR DATE OF HEARING: 08/02/2016 DATE OF PRONOUNCEMENT:31/03/2016 ORDER THIS IS THE ASSESSEES APPEAL FOR THE ASSESSMENT YE AR 2009-10, AGAINST THE ORDER DATED 14.06.2013, PASSED BY THE L D. CIT(A), BATHINDA. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT THE AUTHORITIES BELOW HAS ERRED IN LAW AND ON FACTS IN REJECTING THE BOOKS OF ACCOUNT OF THE APPELLANT WIT HOUT POINTING OUT ANY DEFECTS IN REGULAR MAINTAINED AND DULY AUDITED BOOKS OF ACCOUNTS OF THE APPELLANT AND APPL YING THE PROVISION OF SECTION 145(3) OF THE INCOME TAX ACT, 1961. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN APPLYING THE NET PROFIT RATE OF 2% ON THE GROSS RECEIPTS AND CONFIRMING THE ADDITION OF RS.6,05,790/- AGAINST THE DECLARED INCOME OF RS.13,130/-. 3. THAT THE AUTHORITIES BELOW HAS ERRED IN LAW AND ON FACTS IN NOT ACCEPTING THE CLAIM OF THE APPELLANT AS MUTUAL ASSOCIATION AND THE INCOME IS EXEMPTED FROM TAXATIO N ON THE PRINCIPAL OF MUTUALITY. ITA NO.577(ASR)/2013 ASSESSMENT YEAR: 2009-10 2 4. THAT THE RETURNED INCOME OF RS.13,130/- MAY ALSO BE DELETED AS IT HAS BEEN RETURNED UNDER MISTAKE, THE UNION IS A MUTUAL ASSOCIATION, IT CANNOT EARN INCOME FROM ITSE LF. 2. THE ASSESSEE HAS ALSO RAISED THE FOLLOWING ADDIT IONAL GROUND OF APPEAL: THAT THE LD. CIT(A), BATHINDA HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE BOOKS OF ACCOUNT WERE RIGHTLY R EJECTED BY THE AO BY INVOKING THE PROVISIONS OF SECTION 145(3) ON THE GROUND THAT THE ASSESSEE DID NOT PRODUCE ALL THE V OUCHERS FOR EXPENSES NOR ANY EVIDENCE WAS LED TO ESTABLISH THE PAYMENT TO THE TRUCK OPERATORS. 3. THE ADDITIONAL GROUND, AS CONTENDED, HAS ARISEN FROM THE ORDER OF THE LD. CIT(A). IT DOES NOT REQUIRE ANY FRESH EVIDE NCE FOR ADJUDICATION. IT WAS RAISED BY THE ASSESSEE BY WAY OF GROUND NO.1 BE FORE THE LD. CIT(A), AS WELL AS IN THE STATEMENT OF FACTS BEFORE THE LD. CIT(A), AS REPRODUCED AT PAGE 3 OF THE IMPUGNED ORDER. 4. THE LD. DR HAS BEEN UNABLE TO DISPUTE THESE FACT S. THEREFORE, THE ADDITIONAL GROUND IS ADMITTED. 5. APROPOS THE ADDITIONAL GROUND, THE AO, WHILE REJ ECTING THE BOOKS OF ACCOUNT HELD AS FOLLOWS: 2.1 DURING DISCUSSION, THE COUNSEL OF THE ASSESSEE STATED THAT NET RECEIPT OF RS.13,130/- SHOWN IN THE PROFIT & LOSS ACCOUNT ARE AFTER THE DEDUCTING THE DISBURSEMENT OF PAYMENT MADE TO THE TRUCK OPERATORS/ MEMBERS. THE ASSESSEE PRODUCED THE BOOKS OF ACCOUNT SUCH AS RECEIPT BOOK, EXPENDITURE BOOK AND BANK ACCOUNTS AND SOME OF THE EXPENDITURE VOUCHERS WERE PRODUCED IN SUPPORT OF IT S CLAIM FOR DISTRIBUTION OF THE RECEIPT AND PAYMENT BETWEEN THE MEMBERS I.E. TRUCK OWNERS ONLY DETAILED LIST HAS BEEN FURNI SHED FOR MAKING THE PAYMENTS AFTER MAKING THE DEDUCTIONS FOR THE EXPENDITURE MADE FOR THE RUNNING AND MAINTENANCE OF THE TRUCKS AND THE TRUCK OPERATOR UNION. ITA NO.577(ASR)/2013 ASSESSMENT YEAR: 2009-10 3 FURTHER NEITHER ANY VOUCHERS FOR THE EXPENSES CLAIM ED IN THE INCOME & EXPENDITURE ACCOUNT NOR ANY SUPPORTING DOC UMENTS IN SUPPORT OF THE PAYMENT MADE TO THE TRUCK OPERATO R WERE PRODUCED. UNDER THESE CIRCUMSTANCES, THE CLAIM OF T HE ASSESSEE FOR DISBURSEMENT OF RECEIPTS AMONGST THE T RUCK OPERATORS /MEMBERS CANNOT BE HELD AS JUSTIFIED. AS SUCH, I REJECT THE BOOKS OF ACCOUNT AS MAINTAINED BY THE AS SESSEE UNDER SECTION 145(3) OF INCOME TAX ACT AND KEEPING IN VIEW OF THE JUDGMENT OF HONBLE INCOME TAX APPELLANT TRIBUN AL, AMRITSAR BENCH, AMRITSAR IN THE CASE OF THE BATHIND A TRUCK OPERATOR UNION, BATHINDA V/S THE INCOME TAX OFFICER , WARD - 1(3), BATHINDA BY APPLYING NET PROFIT OF 3% ON THE GROSS RECEIPTS. 6. THE LD. CIT(A), UPHELD THE AOS ACTION, OBSERVI NG AS UNDER: IN GROUND NO.1 & 7 OF APPEAL , IT HAS BEEN CONTENDED THAT THE AO WAS NOT JUSTIFIED IN REIECTING THE BOOKS OF ACCO UNT AND APPLY THE PROVISIONS OF SECTION 145(3) OF THE IT AC T, 1961. FROM THE PERUSAL OF ASSESSMENT ORDER IT IS SEEN THA T THE APPELLANT HAD SHOWN GROSS FREIGHT RECEIPTS AT RS.3,02,89,681/- FROM VARIOUS GOVT, AGENCIES AND PR IVATE PARTIES FOR TRANSPORTATION OF GOODS AND AGAINST SUC H RECEIPTS, NET PROFIT OF RS. 13,130/- WAS DISCLOSED. THE AO IN HIS ASSESSMENT ORDER HAS MENTIONED THAT THE ASSESSEE DI D NOT PRODUCE ALL THE VOUCHERS FOR THE EXPENSES CLAIMED I N THE INCOME AND EXPENDITURE ACCOUNT, NOR ANY EVIDENCE HAS BEEN LED TO ESTABLISH THE PAYMENTS HAVING BEEN MADE TO T HE TRUCK OPERATORS AND THUS, IN SUCH, CIRCUMSTANCES, TRUE PR OFITS COULD NOT BE DEDUCED, FROM THE ACCOUNT BOOKS. HE ACCORDIN GLY REJECTED THE BOOK VERSION AND PRESSED INTO SERVICE THE PROVISIONS OF SECTION 145(3) OF THE ACT BECAUSE HE WAS NOT SATISFIED ABOUT THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNT MAINTAINED BY THE ASSESSEE. DURING APPELLATE PROCEEDINGS BEFORE ME, THE LD. A/R OF THE APPELLANT HAS CONTENDED THAT THE AO WAS NOT JUSTIFI ED IN INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T BECAUSE COMPLETE BOOKS OF ACCOUNT WERE PRODUCED ALONGWITH S OME EXPENDITURE VOUCHERS. RELIANCE IN THIS REGARD HAS B EEN PLACED ON THE VARIOUS JUDGMENTS IN THE CASES OF CIT V. PAT IALA DISTT. CO-OP MILK PRODUCERS UNION LIMITED. (2010) 328 ITR 615 (P&H), CIT VS. R.K. RICE MILLS (2009) 319 ITR 173 ( P&H), CIT ITA NO.577(ASR)/2013 ASSESSMENT YEAR: 2009-10 4 VS. OM OVERSEAS (2009) 315 ITR 185 (P&H) AND CIT VS . LUDHIANA STEEL ROLL MILLS (2007) 295 ITR 111 (P&H). AS MENTIONED ABOVE, THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS DID NOT PRODUCE ANY EVIDENCE TO SHOW THE FREIGHT PAYMENTS HAVING BEEN MADE TO THE T RUCK OPERATORS/OWNERS NOR COMPLETE EXPENDITURE VOUCHERS WERE PRODUCED TO SHOW THEIR GENUINENESS, THAT THE SAME W ERE INCURRED WHOLLY, EXCLUSIVELY AND NECESSARILY FOR BU SINESS NEEDS. IN SUCH A SITUATION, THE AO HAD NO OTHER OPT ION BUT TO DETERMINE THE INCOME ON ESTIMATE BASIS BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. THE VARIOU S JUDGMENTS RELIED UPON BY THE LD. A/R OF THE APPELLANT ARE DISTINGUISHABLE ON FACTS. IN THE CASE OF CIT V. PAT IALA DISTT. CO- OP MILK PRODUCERS UNION LIMITED, THE ISSUE INVOLVE D WAS THAT THE ASSESSEE WAS MAINTAINING ITS ACCOUNTS IN ACCORD ANCE WITH A CONSISTENT METHOD AND THE AO HAD NOT POINTED OUT ANY SPECIFIC DEFECT IN THE ACCOUNT BOOKS. FURTHER, IN T HE CASE OF CIT V. R.K. RICE MILLS, THE AO HAD NOT POINTED OUT ANY MISTAKE IN THE BOOKS OF ACCOUNT OR STOCK REGISTER. FURTHERMORE , IN THE CASE OF CIT V. LUDHIANA STEEL ROLL MILLS, THE AO CO ULD NOT POINT OUT ANY DISCREPANCY IN THE ACCOUNT BOOKS IN AS MU CH AS PLAUSIBLE EXPLANATION HAD BEEN TENDERED BY THE ASSE SSEE IN RESPECT OF THE VARIOUS ENTRIES MADE IN THE ACCOUNT BOOKS. ON THE OTHER HAND, IN THE APPEAL BEFORE ME, THE AO HAS SPECIFICALLY MENTIONED THAT NO EVIDENCE OF DISBURSE MENT OF RECEIPTS TO THE TRUCK OPERATORS/OWNERS HAS BEEN FUR NISHED BY THE ASSESSEE IN AS MUCH AS ONLY A FEW EXPENDITURE V OUCHERS WERE PRODUCED AND UNDER SUCH CIRCUMSTANCES, THE AO WAS FULLY JUSTIFIED IN INVOKING THE PROVISIONS OF SECTI ON 145(3) OF THE ACT. THE HBLE HIGH COURT OF DELHI IN THE CASE OF C HETAN DASS LACHHMAN DASS VS. CIT REPORTED AT 255 ITR 197 (DEL. ) HAS HELD THAT BOOKS OF ACCOUNT COULD BE REJECTED WHERE THERE IS NO EVIDENCE IN RESPECT OF CLAIM OF EXPENSES. ACCORDING LY, BOTH THE AFORESAID GROUNDS OF APPEAL CANNOT BE ACCEPTED AND THE ACTION OF THE AO IN REJECTING THE ACCOUNT BOOKS IS HEREBY UPHELD. 7. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE AUTHORITIES BELOW HAVE WRONGLY REJECTED THE ASSESS EES BOOKS OF ACCOUNT WITHOUT POINTING OUT ANY SPECIFIC DEFECTS THEREIN; THAT THE BOOKS OF ACCOUNT HAVE ERRONEOUSLY BEEN REJECTED ON THE GROUN D THAT THE ASSESSEE ITA NO.577(ASR)/2013 ASSESSMENT YEAR: 2009-10 5 DID NOT PRODUCE ALL THE VOUCHERS FOR THE EXPENSES I NCURRED, NOR ANY EVIDENCE WAS LED TO ESTABLISH THE PAYMENTS MADE BY THE ASSESSEE UNION TO THE TRUCK OPERATORS. 8. THE LD. DR, ON THE OTHER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 9. IT IS SEEN THAT THAT THE ASSESSING AUTHORITIES H AVE REJECTED THE BOOKS OF ACCOUNT FOR THE REASON THAT THE ASSESSEE D ID NOT PRODUCE ALL THE VOUCHERS FOR THE EXPENSES, NOR ANY EVIDENCE WAS LED TO ESTABLISH THE PAYMENTS MADE TO THE TRUCK OPERATORS. 10. IN THIS REGARD, IN ITS REPLY (APB 1-2) BEFORE T HE AO, THE ASSESSEE STATED THAT ALL THE FREIGHT COLLECTED BY THE UNION IS CREDITED AND THE AMOUNTS DISTRIBUTED AMONGST THE MEMBERS ARE DEBIT ED AND NO PART OF THE FREIGHT COLLECTED IS KEPT BY THE UNION; THAT TH E UNION DOES NOT HIRE ANY TRUCK OF ITS OWN FOR THE TRANSPORTATION OF THE GOODS AND THE TRANSPORTATION IS DONE BY THE MEMBERS IN THEIR OWN TRUCKS; THAT THE UNION HAS MAINTAINED TRUCK-WISE ACCOUNTS OF THE T RUCK OPERATORS, WHICH COULD BE VERIFIED FROM THE LEDGER MAINTAINED , WHICH WAS BEING PRODUCED BEFORE THE AO; THAT AS THE NUMBER OF TRUCK S WAS APPROXIMATELY 400, IT WAS VERY DIFFICULT TO GIVE TH E DETAILS OF EACH AND EVERY TRUCK. 11. BEFORE THE LD. CIT(A), BY WAY OF WRITTEN SUBMIS SIONS (COPY FILED), THE ASSESSEE STATED THAT ALL THE RECEIPTS FROM THE CONTRACTS ARE DISTRIBUTED AMONGST THE MEMBERS IN ACCORDANCE WITH THE WORK DONE BY ITA NO.577(ASR)/2013 ASSESSMENT YEAR: 2009-10 6 EACH MEMBER WITHOUT ANY DEDUCTION OF ANY SORT; THAT THE COMPLETE RECORD IS KEPT AND WAS PRODUCED BEFORE THE AO; THAT ALL THE PAYMENTS TO THE MEMBERS ARE MADE THROUGH CHEQUES; THAT THE COMP LETE BOOKS OF ACCOUNT ALONGWITH BANK STATEMENTS ARE MAINTAINED AN D WERE PRODUCED BEFORE THE AO; THAT THE UNION COLLECTS RS.100/- PER TRUCK FROM ITS MEMBERS AND THE SAME IS CREDITED TO THE INCOME AND EXPENDITURE ACCOUNT OF THE UNION, TO MEET THE DAY TO DAY WORK ING OF THE UNION; THAT IF ANY NEW MEMBER IS ADMITTED, A NONREFUNDABLE SECU RITY IS COLLECTED FROM THE MEMBER; THAT THIS IS ALSO TAKEN AS RECEIPT AND IS CREDITED TO THE INCOME AND EXPENDITURE ACCOUNT; THAT THE SURPLUS, I F ANY, AFTER MEETING THE DAY TO DAY EXPENSES, IS CREDITED TO THE CAPITAL FUND OF THE UNION; AND THAT IN THE EARLIER YEARS, I.E., ASSESSMENT YEA RS 2006-07 & 2007-08, THE FACTS OF THE CASE WERE THE SAME AND NO ADDITION WAS MADE BY THE AO ON ACCOUNT OF NET PROFIT RATE. 12. NEITHER THE AO, NOR THE LD. CIT(A) HAS CONTROVE RTED THESE SUBMISSIONS MADE BY THE ASSESSEE. THE LEDGER MAINTA INED BY THE ASSESSEE AND THE BANK ACCOUNTS AND STATEMENTS HAVE NOT BEEN DOUBTED. THE EXPENSES OF THE ASSESSEE FOR THE YEAR (APB-43) ARE AS FOLLOWS: LESS EXPENSES TO FREIGHT PAID ON BEHALF TO TRUCK OPERATOR 30,28 9,681.00 TO SALARY PAID 292,800.00 TO TELEPHONE BILLS EXPENSES 11,724.00 TO POWER & FUEL EXPENSES ELECTRIC BILLS EXPENSES 41,629.00 GENERATOR EXPENSES 3 ,390.00 45,019.00 ITA NO.577(ASR)/2013 ASSESSMENT YEAR: 2009-10 7 TO JEEP EXPENSES 88,484.00 TO FRINGE BENEFIT TAX 2,786.00 TO OTHERS EXPENSES PRINTING & STATIONARY EXPENSES 15,141.00 NEWS PAPER EXPENSES 2,726.00 TEA EXPENSES 26,237.00 BANK CHARGES 32,027.00 MISC. EXPENSES 52,301.00 128,432.00 TO AUDIT FEE 10,000.00 TO REPAIR CHARGES 8,090.00 TO TRAVELLING EXPENSES 1,450.00 TO ADVERTISEMENT EXPENSES 33,000.00 TO DEPRECIATION 20,707.00 30,932,173 NET RECEIPTS TRANSFER TO CAPITAL FUND 10,345 13. ALL THE ABOVE EXPENSES ARE SMALL EXPENSES. THE NATURE OF THE ASSESSEE UNION REMAINS UNDISPUTED. THE UNION HAS BEEN FORMED TO FACILITATE THE WORKING OF THE TRUCK OPERATORS, WHIC H DOES NOT HAVE ANY TRUCK OF ITS OWN. THE FREIGHT IS RECEIVED AND I S DISTRIBUTED TO THE TRUCK OPERATORS AS PER THE WORK DONE. 14. ALL THE EXPENSES INCURRED BY THE UNION ARE SMAL L EXPENSES, FOR WHICH, IT IS NOT POSSIBLE TO MAINTAIN VOUCHERS. TH E PAYMENTS WERE MADE THROUGH CHEQUES, THE DETAILS WHEREOF WERE MAINTAINE D AND PRESENTED BEFORE THE TAXING AUTHORITIES. THE FACTUM OF THE AS SESSEE HAVING MADE THE PAYMENTS COULD NOT BE DOUBTED, SINCE THE RESPEC TIVE ACCOUNTS WOULD BE CREDITED AND DEBITED ACCORDINGLY. THE CHEQUE PAY MENTS RENDER ANY OTHER EVIDENCE OF THE PAYMENTS IRRELEVANT AND THE T AXING AUTHORITIES HAVE ERRED IN REJECTING THE ASSESSEES BOOKS ON THI S SCORE ALSO. ITA NO.577(ASR)/2013 ASSESSMENT YEAR: 2009-10 8 15. IN VIEW OF THE ABOVE, FINDING MERIT IN THE ADDI TIONAL GROUND RAISED BY THE ASSESSEE, THE SAME IS ACCEPTED. IT IS HELD THAT THE AO WENT WRONG IN REJECTING THE ASSESSEES BOOKS OF ACCOUNT FOR NO N-MAINTENANCE OF VOUCHERS OF EXPENSES AND ABSENCE OF EVIDENCE REGARD ING PAYMENTS MADE TO THE TRUCK OPERATORS. THE LD. CIT(A) ERRED IN CON FIRMING THE ACTION OF THE AO. TO REITERATE, NO DEFECTS WERE POINTED OUT BY EI THER OF THE AUTHORITIES BELOW IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASS ESSEE. 16. IN VIEW OF THE ABOVE FINDINGS ON THE ADDITIONAL GROUND, THE ADDITION MADE BY APPLYING NET PROFIT RATE ON THE GROSS RECEI PTS OF THE ASSESSEE IS DELETED. ACCORDINGLY, NONE OF THE ORIGINAL GROUNDS RAISED SURVIVES FOR ADJUDICATION, HAVING BEEN RENDERED ACADEMIC IN NATU RE. IT IS HELD ACCORDINGLY. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/03/ 2016. SD/- (A.D. JAIN) JUDICIAL MEMBER DATED: 31/03/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: THE TRUCK OPERATOR UNION, JAITU 2. THE ITO WARD III(3), FARIDKOT. 3. THE CIT(A), BATHINDA. 4. THE CIT, BATHINDA. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.