ITO, Shahjahanpur V. Smt. Nuzhat Parveen, Shahjahanpur

ITA 718/LKW/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48324 (ITAT-LUCKNOW)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 02-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K B AJAJ
• Keywords: Rejection of books of accounts
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B - BENCH, LUCKNOW. BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT AND SHRI N.K.SAINI, ACCOUNTANT MEMBER I.T.A.NO.718(LKW.)/2010 A.Y. : 2007-08 THE ITO- II, VS. SMT.NUZHAT PARVEEN WIFE AND SHAHJAHANPUR. LEGAL HEIR SALEEM KHAN TARIN BAHADURGANJ, SHAHJAHANPUR. PAN APNPP2309B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.K.BAJAJ, SR.D.R. RESPONDENT BY : NONE O R D E R PER N.K.SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER DATED 23.8.2010 OF THE CIT(A), BAREILLY RELATING TO ASSES SMENT YEAR 2007-08. 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. WHETHER THE CIT (A) WAS JUSTIFIED IN IGNORING T HE FACTS OF THE CASE AND APPLYING THE RATE OF PROFIT AT 3% AS AGAIN ST 8% APPLIED BY THE ASSESSING OFFICER. 2. THAT THE ORDER OF THE CIT (A) MAY BE CANCELLED A ND THE ORDER OF THE ASSESSING OFFICER MAY BE RESTORED. 3. ANY OTHER GROUND MAY BE TAKEN AT THE TIME OF HE ARING OF APPEAL. 3. DURING THE COURSE OF HEARING, NOBODY WAS PRESENT ON BEHALF OF THE 2 ASSESSEE. WE, THEREFORE, PROCEED TO DECIDE THE APPE AL EX PARTE QUA THE ASSESSEE AFTER HEARING THE LD.D.R., ON MERIT. 4. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE AS SESSEE FILED THE RETURN OF INCOME ON 25.10.2007 DECLARING AN INCOME OF RS.3,50 ,520, WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME-TAX ACT,1961 (IN SHORT THE ACT) ON 10.3.2008. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSEE PRODUCED THE BOOKS OF ACCOUNTS IN THE SHAP E OF CASH BOOK AND LEDGER WITH SELF-MADE VOUCHERS. THE AO OBSERVED TH AT THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE AND THE ACCOUNTANT W ERE NOT IN A POSITION TO EXPLAIN THE CLEARING ENTRIES OF BANK ON DIFFERENT DATES. THE AO POINTED OUT CERTAIN DEFECTS IN THE BOOKS OF ACCOUNTS. IT WAS PO INTED OUT THAT IN THE BALANCE SHEET AGAINST LOANS & ADVANCES, THERE WE RE TWO PERSONS, VIZ. SRI KHALIQUR REHMAN WORTH RS.1 LAC AND M/S. STAR I SOLATION (TT) WORTH RS.5 LAC AND ON TEST-CHECK OF ADVANCE PERTAINING TO KHALIQUR REHMAN, IT WAS FOUND THAT FROM THE BANK ACCOUNT OF UBI A/C NO .28240 DATED 19.4.2006, A CHEQUE NO.41141 WORTH RS.1,50,525 HAD BEEN ISSUED WHICH THE ACCOUNTANT AND THE AUTHORISED REPRESENTATIVE ACCEP TED THAT THOUGH THIS CHEQUE OF RS.1,50,000 WAS GIVEN AS ADVANCE TO SHRI KHALIQUR REHMAN BUT IN THE BALANCE SHEET IT DENOTES AT RS.1 LAC ONLY. T HE AO ASKED TO CLARIFY THE SAME AND ALSO THE PURPOSE OF ADVANCE TO BOTH THE AB OVE PARTIES WITH BUSINESS RELATION. THE AO ALSO POINTED OUT THAT THE VOUCHERS PRODUCED WERE SELF-MADE. ACCORDING TO THE AO, THE BOOKS OF ACCOUN TS WERE NEITHER PROPERLY MAINTAINED NOR THE ENTRIES WERE OPEN TO VE RIFICATION THROUGH RELEVANT EVIDENCE. HE, THEREFORE, REQUIRED THE ASSE SSEE TO SHOW CAUSE AS TO WHY THE BOOKS OF ACCOUNTS BE NOT REJECTED AS PROVI DED UNDER THE PROVISIONS OF SECTION 145(3) OF THE ACT. ACCORDING TO THE AO, NO COMPLIANCE WAS MADE 3 BY THE ASSESSEE TO THE ABOVE SHOW CAUSE NOTICE. HE ALSO OBSERVED THAT THE BOOK ENTRIES WERE NOT OPEN TO VERIFICATION INASMUCH AS THE CLEARING ENTRIES OF THE CHEQUES COULD NOT BE EXPLAINED. IT WAS POINTED OUT THAT IN CASH BOOK AT PAGE 5, THERE WAS CLEARING ENTRY WORTH RS.20,000 THROUGH CHEQUE NO.1423 ON 10.4.2006, BUT THE ACCOUNTANT COULD NOT EXPLAIN THE RESPECTIVE ACCOUNT WHERE IT HAD BEEN BOOKED. THE AO POINTED OUT FOLL OWING ENTRIES WHICH DID NOT FIND PLACE IN RESPECTIVE LEDGERS EXCEPT IN CO. UBI A/C 28240: SL. PAGE NO.OF C.B. CHEQUE NO. DATE AMOUNT PAGE NO. DATE 1 08 1434 15.04.06 RS.20,000 15 15.04.06 2 08 1435 15.04.06 RS.1,500 15 15.4.06 3 10 1438 19.04.06 RS.40,000 15 19.04.06 4 14 1450 27.04.06 RS.30,000 16 27.04.06 5 17 1454 02.05.06 RS.40,000 16 02.05.06 6 20 1459 08.05.06 RS.40,000 16 08.05.06 7 21 1460 10.05.06 RS.25,000 16 10.05.06 8 24 1465 15.05.06 RS.30,000 16 15.05.06 9 25 1466 17.05.06 RS.35,000 16 17.05.06 10 27 1470 22.05.06 RS.40,000 16 22.05.06 11 27 1471 22.05.06 RS.25,000 16 22.05.06 4.1 THE AO ALSO POINTED OUT DEFECT RELATING TO LOA NS & ADVANCES BY OBSERVING AS UNDER : NOT ONLY THIS, THE ASSESSEE HAS SHOWN LOANS AND A DVANCE TO KHALIQUAR RAHMAN WORTH RS.1 LAC AND MRS.STAR ISOLAT ION (TT) WORTH RS.5 LAC. WHEN TRIED TO CHECK AND SEE THE ADVANCE T O KHALIQUAR REHMAN, IT REVEALED THAT THROUGH THE BANK A/C OF U. B.I. A/C NO.28240 DATED 19.04.2006 ASSESSEE ISSUED CHEQUE NO.411441 W ORTH RS.1,50,525/- TO SHRI KHALIQUAR RAHMAN, BUT IN BALA NCE SHEET IT FIND/DENOTES RS.1 LAC. WHEN ASKED UPON TO CLARIFY, THE ACCOUNTANT ORALLY STATED THAT SHRI KHALIQUAR RAHMAN MADE CASH RETURN TO THE ASSESSEE WORTH RS.50,000/- HENCE THE REMAINING BALA NCE OF RS. 1 LAC ONLY IS IN BALANCE SHEET. HOWEVER THE ACCOUNTANT CO ULD NOT JUSTIFY ITS CLAIM AS UNDER WHAT CIRCUMSTANCES SHRI KHALIQUAR RA HMAN RETURNED AMONGST THE ALLEGED LOAN OF RS.50,000/- ON THE VERY DAY OF LOAN THROUGH CASH. SINCE IT IS CLEAR VIOLATION OF PROVIS ION OF SECTION 40A(3) NECESSARY PROCEEDINGS U/S. 148 IN THE CASE OF SHRI KHALIQUAR RAHMAN 4 IS TO BE INITIATED TO EXAMINE HIS BANK ACCOUNT OF E NTRIES AND OTHER SIMILAR DEALINGS. 4.2 ACCORDING TO THE AO, THE ASSESSEE WAS NOT IN A POSITION TO JUSTIFY THE ENTRIES IN ITS BOOKS OF THE ACCOUNT THROUGH CORROB ORATIVE EVIDENCES ETC. HE, THEREFORE, REJECTED THE BOOKS OF ACCOUNT BY INVOKIN G THE PROVISIONS OF SECTION 145(3) OF THE ACT. THE AO APPLIED NET PROFI T AT THE RATE OF 8% ON THE GROSS RECEIPTS SHOWN BY THE ASSESSEE AT RS.1,46,92 ,308 FROM TRANSPORT CONTRACT. ACCORDINGLY, NET PROFIT WAS WORKED OUT AT RS.11,75,385 INSTEAD OF RS.4,50,522 SHOWN BY THE ASSESSEE. 5. THE ASSESSEE CARRIED THE MATTER TO THE LD.CIT(A) . THE SUBMISSIONS MADE BEFORE HIM ARE REPRODUCED VERBATIM AS UNDER : THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF A CCOUNTS U/S 145(3) OF THE I.T.ACT, 1961ON THE ALLEGED GROUND OF NOT SUBMITTING ANY WRITTEN EXPLANATION TO JUSTIFY THE ENTRIES IN BOOKS OF ACCOUNTS. THE LEARNED ASSESSING OFFICER HAS NARRATED FEW E NTRIES WHICH DO NOT FIND PLACE IN RESPECTIVE LEDGER EXCEPT IN CO LUMN UBI A/C 28240 SOME OF THEM OF AGAIN NARRATING HERE. SL. PAGE NO.OF C.B. CHEQUE NO. DATE AMOUNT PAGE NO. DATE 1 08 1434 15.04.06 RS.20,000 15 15.04.06 2 08 1435 15.04.06 RS.1,500 15 15.4.06 3 10 1438 19.04.06 RS.40,000 15 19.04.06 4 14 1450 27.04.06 RS.30,000 16 27.04.06 5 17 1454 02.05.06 RS.40,000 16 02.05.06 HOWEVER, WITH DUE RESPECT I WANT TO DRAW KIND ATT ENTION OF YOUR HONOUR TO THE RESPECTIVE LEDGER WHEREIN THESE ENTRIES ARE BOOKED.: 5 SL.NO. CHEQUE NO. DATE AMOUNT PAGE NO. OF LEDGER HEAD OF ACCOUNT 1 1434 25.04.2006 20,000 135 TRUCK 2 1435 15.04.206 1,500 135 3 1438 19.4.206 40,000 135 4 1450 27.04.2006 30,000 135 5 1454 02.05.2006 20,000 135 THESE ARE FEW EXAMPLES WHEREIN THE ENTRIES IN CASH BOOK ARE DEBITED IN RESPECTIVE CASH BOOK AND ARE DEBITED IN RESPECTIVE LEDGER ACCOUNT. ALL THESE EXPLANATIONS WERE PRODUCED BEFORE THE LEA RNED ASSESSING OFFICER DURING THE COURSE OF HEARING. TH E LEANED ASSESSING OFFICER THROUGH ORDER SHEET ENTRY DATED 13.11.2009 REQUIRED TO SUBMIT THE WRITTEN SUBMISSION IN SUPPORT OF ABOVE MENTIONE D FACTS ON 18.11.2009 HAVING AN ADDITIONAL CHARGE OF SHAHJAHA NPUR ON THE DATE FIXED FOR HEARING HE WAS IN LAKHIMPUR. THE PREVIOUS TWO ASSESSMENTS U/S.143(3) OF INCOME TAX ACT,1961 OF A.Y.2005-06, 2006-07 WERE MADE BY THE S AME ASSESSING OFFICER ON BOOKS OF ACCOUNTS MADE ON SAME PATTERN W HEREIN NO DEFECTS WAS POINTED OUT BY THE LEARNED AO AND ALSO THE ADDITIONS MADE IN PREVIOUS TWO ASSESSMENTS BY THE ASSESSING OFFICER WAS OF SUCH AMOUNT THAT NET PROFIT TO CONTRACT RECEIPT CO MES AT 3.15%, THEN HOW ASSESSMENT OF A.Y. 2007-08 CAN BE MADE AT 8% B Y REJECTING THE BOOKS OF ACCOUNTS ON ALLEGED GROUND OF NOT SUBMIT TING ANY WRITTEN EXPLANATION ON DATES FIXED FOR HEARING AND IN A HUR RY OF DISPOSING OF NUMEROUS PENDING CASES WHICH WERE TIME BARRED. THE TAX CALCULATION IS ALSO IN A HURRY. THE POSITIO N OF AN ASSESSING OFFICER IN ASSESSMENT PROCEEDINGS AND OF DOCTOR DURING THE OPERATION ARE SAME ANY HURRY IN DISPOSAL OF CAS E IN LATER CASE CAN CAUSE DEATH AND IN EARLIER CASE CAN RESULT IN VERY HUGE TAX LIABILITY SO IN MY CASE. 5.1 IT WAS FURTHER CONTENDED THAT THE SAME AO MADE THE ASSESSMENTS FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 WITH THE S IMILAR OBSERVATION AND ESTIMATED INCOME FROM THE SAME BUSINESS AT THE RAT E OF 3.15%. IT WAS 6 FURTHER CONTENDED THAT THE AO WAS NOT HAVING ANY FURTHER EVIDENCE IN HIS POSSESSION TO ESTIMATE INCOME OF THIS PERIOD AT SUC H HIGHER RATE. COPIES OF THE ASSESSMENT ORDERS PASSED BY THE AO FOR THE ASSE SSMENT YEARS 2005-06 AND 2006-07 WERE FURNISHED TO THE LD.CIT(A) AND THE CONTENTS OF THOSE HAD BEEN DISCUSSED BY THE LD.CIT(A) AT PAGES 8 TO 11 OF THE IMPUGNED ORDER. FOR THE SAKE OF REPETITION, THE SAME ARE NOT REPRODUCED HEREIN. 6. THE LD.CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT THE FINDINGS OF THE AO REGARDING TH E CONDITION OF BOOKS OF ACCOUNTS, BILLS-VOUCHERS AND BANK STATEMENTS WERE SIMILAR TO THE FINDINGS GIVEN BY THE SAME AO IN THE ASSESSMENT YEARS 2005 -06 AND 2006-07 AND THAT AS A MATTER OF FACT THE AO DID NOT PLACE ON RE CORD ANY INFORMATION WHICH MAY SUBSTANTIATE THE BASIS FOR ESTIMATING INC OME FOR THE YEAR UNDER CONSIDERATION MORE THAN THAT ESTIMATED IN THE IMMED IATE PRECEDING ASSESSMENT YEARS. THE LD.CIT(A) WAS OF THE VIEW TH AT THE AO DID NOT HAVE ANY JUST AND REASONABLE EVIDENCE IN POSSESSION TO A SSESS INCOME AT THE RATE OF 8% OF THE GROSS RECEIPTS. THE LD.CIT(A) WAS OF THE OPINION THAT IT WOULD BE FAIR AND IN THE INTEREST OF JUSTICE TO RESTRICT THE ESTIMATION OF INCOME FROM TRANSPORT BUSINESS AT THE RATE OF 3% OF THE GROSS R ECEIPTS. 7. NOW, THE DEPARTMENT IS IN APPEAL. 8. THE LD.D.R. STRONGLY SUPPORTED THE ORDER OF THE AO AND FURTHER SUBMITTED THAT THE AO POINTED OUT SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS, WHICH THE ASSESSEE WAS NOT IN A POSITION TO EXPLAIN , THEREFORE, THE BOOKS OF ACCOUNTS WERE RIGHTLY REJECTED UNDER SECTION 145(3) OF THE ACT. HE FURTHER SUBMITTED THAT THE NET PROFIT RATE APPLIED BY THE A O WAS REASONABLE AND THE 7 LD.CIT(A) WAS NOT JUSTIFIED IN REDUCING THE NET PRO FIT RATE FROM 8% TO 3% OF GROSS RECEIPTS. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD.D.R . AND GONE THROUGH THE MATERIAL ON THE RECORD IN THE PRESENT CASE, I T IS NOTICED THAT THE AO REJECTED THE BOOKS OF ACCOUNTS BY INVOKING THE PROV ISIONS OF SECTION 145(3) OF THE ACT AND ESTIMATED THE INCOME BY APPLYING THE NET PROFIT RATE OF 8% ON THE GROSS RECEIPTS SHOWN BY THE ASSESSEE FROM TRANS PORT CONTRACT BUSINESS. IN OTHER WORDS, THE AO DID NOT DOUBT THE GROSS RECE IPTS OF THE ASSESSEE FROM TRANSPORT CONTRACT BUSINESS. HOWEVER, HE APPLIED TH E NET PROFIT RATE OF 8%, BUT HAD NOT QUOTED ANY COMPARABLE CASE AND EVEN HA D NOT CONSIDERED THE PAST HISTORY OF THE ASSESSEES CASE WHERE THE LESSE R NET PROFIT RATE WAS APPLIED. IT IS ALSO NOTICED THAT FOR THE ASSESSMEN T YEAR 2006-07, GROSS RECEIPTS OF THE ASSESSEE WERE AT RS.23,00,391 AND T HE NET PROFIT RATE OF 3.15% HAS BEEN APPLIED AS CLAIMED BY THE ASSESSEE BEFORE THE LD. CIT(A), WHO MENTIONED THIS FACT AT PAGE 7 OF THE IMPUGNED ORDE R. THE LD. D.R., DURING THE COURSE OF HEARING, HAS NOT CONTROVERTED THE CO NTENTION OF THE ASSESSEE BEFORE THE LD.CIT(A) THAT THE SAME AO MADE THE ASSE SSMENTS FOR THE ASSESSMENT YEARS 2006-07 AND 2005-06 BY ESTIMATING THE INCOME FROM THE SAME BUSINESS AT THE RATE OF 3.15%. IN THE INSTANT CASE, GROSS RECEIPTS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WERE AT RS.1,46,92,308 AS AGAINST THE GROSS RECEIPTS OF RS.23,00,391 IN THE IMMEDIAT ELY PRECEDING YEAR. THEREFORE, THERE IS TREMENDOUS INCREASE IN THE GROS S RECEIPTS, WHICH MAY HAVE RESULTED IN LESSER PROFIT MARGIN. IN THAT VIE W OF THE MATTER, WE ARE OF THE VIEW THAT THE LD.CIT(A) WAS JUSTIFIED IN RESTRI CTING THE ESTIMATE OF INCOME FROM TRANSPORT BUSINESS AT THE RATE OF 3% OF GROSS RECEIPTS, PARTICULARLY WHEN THE AO HAD NOT GIVEN ANY BASIS FO R APPLYING THE NET PROFIT RATE OF 8% AND THE NET PROFIT RATE ACCEPTED BY THE AO FOR THE EARLIER YEAR ON 8 THE LESSER RECEIPTS WAS @ 3.15%. WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LD.CIT(A). ACCORDINGLY, TH E IMPUGNED ORDER PASSED BY THE LD.CIT(A) IS UPHELD. 10. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 8.4.11. SD. SD. (H.L.KARWA) (N.K.SAINI) VICE PRESIDENT ACCOUNTANT MEMBER APRIL 8TH ,2011. COPY TO THE : 1. APPELLANT 2. RESPONDENT 3. CIT(A) (4) CIT 5.DR. A.R.,ITAT, LUCKNOW. SRIVASTAVA.