Income Tax Officer, Ward-2, BEAWAR V. Shri Man Mohan Mittal, BEAWAR

ITA 764/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3712 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 29-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 31-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI
• Keywords: Rejection of books of accounts; Business income; Depreciation; Source of fund; Set aside
• Section: 69C; 40A(3); 143(3); 40(a)(ia); 246; 144

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,A JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 764/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2014-15 THE ITO, WARD-2, BEAWAR. CUKE VS. SHRI MAN MOHAN MITTAL PROP. AGRA GUJARAT CARGO CARRIERS, 111B, SHIV KRIPA, AJMER ROAD, ADARSH NAGAR, BEAWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGMPM 2152 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT CO NO. 24/JP/2018 (ARISING OUT OF ITA NO. 764/JP/2018) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2014-15 SHRI MAN MOHAN MITTAL PROP. AGRA GUJARAT CARGO CARRIERS, 111B, SHIV KRIPA, AJMER ROAD, ADARSH NAGAR, BEAWAR. CUKE VS. THE ITO, WARD-2, BEAWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGMPM 2152 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI J.C. KULHARI (JCIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI VINOD GUPTA (C.A.) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 04/12/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 28/02/2019 ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 2 VKNS'K@ ORDER PER: SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), BEAWAR DATED 27.03.2018 AND THE CROSS OBJEC TION FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2014-15. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRANSPORTATION IN THE NA ME OF M/S AGRA GUJARAT CARGO CARRIERS. FOR THE YEAR UNDER CONSIDER ATION, THE ASSESSEE FILED HIS RETURN OF INCOME DECLARING TOTAL INCOME O F RS. 4,61,400/- WHICH WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLE TED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT WHEREIN THE INCOME WAS ASSESSED AT RS. 88,46,359/-. THE ASSESSING OFFICER HAS MADE AN ADDITION ON ACCOUNT OF UNDISCLOSED TURNOVER FROM M/ S SHREE CEMENT LTD. AMOUNTING TO RS. 32,86,993/-, THE FREIGHT EXPE NSES AMOUNTING TO RS. 39,96,344/- WERE DISALLOWED U/S 40A(3) OF THE A CT BESIDES 1% OF THE TOTAL FREIGHT EXPENSES AMOUNTING TO RS. 11,01,6 22/- WERE ALSO DISALLOWED. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). THE LD CIT(A), BESIDES GIVING FINDI NG ON MERITS OF THE ADDITIONS MADE BY THE ASSESSING OFFICER, HELD THAT IN VIEW OF VARIOUS DISCREPANCIES FOUND IN THE BOOKS OF ACCOUNTS, THE B OOKS RESULTS OF THE ASSESSEE CANNOT BE ACCEPTED AS TRUE AND CORRECT. AC CORDINGLY, HE REJECTED THE BOOKS OF ACCOUNT U/S 145(3), ESTIMATED NET PROFIT AND MADE AN ADDITION OF RS. 6,28,345/- AND THE BALANCE ADDITION SO MADE ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 3 BY THE ASSESSING OFFICER AMOUNTING TO RS. 77,56,61 4/- WERE DELETED. AGAINST THE SAID FINDINGS OF THE LD. CIT(A) THE REV ENUE IS IN APPEAL BEFORE US AND IN HIS CROSS OBJECTION, THE ASSESSEE HAS OBJECTED TO THE ESTIMATION OF THE NET PROFIT @ 1% AS AGAINST 0.49% DISCLOSED BY THE ASSESSEE IN HIS RETURN OF INCOME. 4. IN GROUND NO. 1 OF REVENUES APPEAL, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN INVOKING THE PROVIS IONS OF SECTION 145(3) OF THE I.T. ACT ON HIS OWN DURING APPELLATE PROCEED INGS AND ALLOWING RELIEF OF RS. 77,56,614/- TO THE ASSESSEE. IN THIS REGARD, THE LD. DR HAS SUBMITTED THAT THE ASSESSING OFFICER HAS MADE SPECI FIC DISALLOWANCES IN THE ASSESSMENT ORDER AND HAS ALSO BROUGHT TO TAX UN DISCLOSED BUSINESS RECEIPT FROM M/S SHREE CEMENT LTD. AND THEREFORE, T HE LD. CIT(A) SHOULD HAVE EXAMINED THE SAID ADDITIONS ON MERITS. HOWEVER, THE LD. CIT(A) HAS REJECTED THE BOOK RESULTS U/S 145(3) OF THE ACT AND INSTEAD OF SPECIFIC DISALLOWANCE MADE BY THE ASSESSING OFFI CER, HE HAS ESTIMATED NET PROFIT BASED ON PAST RESULTS OF THE A SSESSEE. IN THIS REGARD, OUR REFERENCE WAS DRAWN TO THE PROVISIONS O F SECTIONS 145(3) OF THE ACT WHEREIN IT HAS BEEN SPECIFICALLY MENTIONED THAT WHEREAS THE ASSESSING OFFICER IS NOT SATISFIED ABOUT THE CORREC TNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) HAS NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE, OR INCOME HAS NOT BEEN COMPUTED IN ACCORD ANCE WITH THE STANDARDS NOTIFIED UNDER SUB-SECTION (2), THE ASSES SING OFFICER MAY MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SECTIO N 144. IT WAS ACCORDINGLY SUBMITTED BY THE LD DR THAT THE POWER T O REJECT THE BOOKS OF ACCOUNTS IS WITH THE ASSESSING OFFICER AND NOT W ITH THE LD. CIT(A) AND ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 4 THEREFORE, THE LD. CIT (A) HAS EXCEEDED HIS JURISDI CTION BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. IT WAS FUR THER SUBMITTED BY THE LD DR THAT THE BOOK RESULTS CANNOT BE REJECTED FOR THE BENEFIT OF THE ASSESSEE AS IS APPARENT IN THE PRESENT CASE WHEREIN THE LD. CIT(A) AFTER REJECTING THE BOOKS RESULTS HAS ALLOWED THE RELIEF OF RS. 77,56,614/- TO THE ASSESSEE AND HAS SUSTAINED THE ADDITION OF RS. 6,28,345/- ONLY AS AGAINST RS. 83,84,959/- MADE BY THE ASSESSING OFFIC ER. 5. THE LD. DR HAS FURTHER DRAWN OUR REFERENCE TO TH E SPECIFIC FINDINGS OF THE LD. CIT(A) WHEREIN HE HAS INVOKED T HE PROVISIONS OF SECTION 145(3) OF THE ACT AND HAS ESTIMATED THE NET PROFIT. THE SAID FINDINGS ARE CONTAINED AT PARA 5.4 AND WE DEEM IT A PPROPRIATE TO REPRODUCE THE SAME IN VERBATIM AS UNDER:- I HAVE GONE THROUGH THE ASSESSMENT ORDER, STATEMEN T OF FACTS, GROUNDS OF APPEAL AND WRITTEN SUBMISSIONS CAREFULLY . AS WHILE DECIDING GROUND NO. 2, I HAVE ALREADY HELD THAT THE EXPENSES OF RS. 32,86,993/- SHALL ALSO FORM PART OF THE TOTAL EXPENSES CLAIMED IN THE PROFIT & LOSS ACCOUNT, THEREFORE THE TOTAL FREIGHT EXPENSES TO BE CONSIDERED FOR THE PURPOSE OF ANY DI SALLOWANCE WOULD BE RS. 11,74,45,581/- (RS. 11,41,58,588 + RS. 32,86,993). TOTAL RECEIPTS OF THE APPELLANT ALSO WOULD BE RS. 1 1,89,74,259/- (RS. 11,56,87,266+ RS. 32,86,993). IT IS SEEN FROM THE PAGE NO. 20 OF THE ASSESSMENT ORDER THAT NET PROFIT RATE DEC LARED BY THE APPELLANT IN THE A.Y. 2012-13,2013-14, AND 2014-15 ARE AS UNDER:- ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 5 A.Y. NP RATE 2012-13 0.78% 2013-14 0.77% 2014-15 0.49% THE AO HIMSELF HAS GIVEN THE FINDING THAT FREIGHT E XPENSES ARE 98.67% OF THE TOTAL TURNOVER. IN OTHER WORDS, IF 1% OF THE FREIGHT EXPENSES ARE DISALLOWED, THE RATE OF NET PROFIT WOU LD BECOME 94% (1.44%) OF THE RATE OF NET PROFIT DECLARED BY T HE APPELLANT (0.49%). IN VIEW OF THE FACTS DISCUSSED BY THE AO IN THE ASS ESSMENT ORDER AT PAGE NO. 20 AND 21, I AM OF THE CONSIDERED VIEW THAT THE BOOK RESULTS OF THE APPELLANT CANNOT BE ACCEPTED TRUE AN D CORRECT. THEREFORE, THE BOOK RESULTS OF THE APPELLANT HAS TO BE REJECTED BY INVOKING THE PROVISIONS OF SECTION 145(3) AND A REA SONABLE PROFIT HAS TO BE ESTIMATED. THE RAJASTHAN HIGH COURT IN TH E CASE OF CIT UDAIPUR VS . INANI MARBLE PVT. LTD. AND ITAT JAIPUR IN THE CASE OF SANJAY JAIN PROP. MAHAVEER TRANSPORT CO. VS. ACIT C IRCLE-5, JAIPUR (ITA NO. 164/2016 DATED 31.10.2017) HAVE HEL D THAT PROFIT RATE DECLARED IN THE PRECEDING ASSESSMENT YEARS CON STITUTES A GOOD BASIS FOR WORKING OUT THE GROSS PROFIT. THEREFORE, IN VIEW OF THE ABOVE REFERRED DECISIONS OF JURISDICTIONAL HIGH COURT & ITAT, I AM OF THE CONSIDERED VIEW THAT THE RATE OF NET PROFIT DECLARED BY THE APPELLANT IN THE PRECEDI NG ASSESSMENT YEARS WOULD BE THE MOST APPROPRIATE BASIS FOR ESTIM ATING RATE OF NET PROFIT FOR THE ASSESSMENT YEAR UNDER APPEAL. IT IS SEEN THAT IN ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 6 THE IMMEDIATELY TWO PRECEDING ASSESSMENT YEARS ( 2 012-13 & 2013-14), THE APPELLANT HAD DECLARED NET PROFIT @ . 78% AND .77% RESPECTIVELY. THEREFORE, TAKING INTO ACCOUNT A LL THE FACTS OF THE CASE, IN MY VIEW, IT WOULD BE FAIR AND REASONAB LE TO ESTIMATE THE NET PROFIT OF THE APPELLANT @ 1% ON THE TOTAL T URNOVER OF RS. 11,89,74,259/- (RS. 11,56,87,266+ RS. 32,86,993). A CCORDINGLY, THE NET PROFIT OF THE APPELLANT ON THE TOTAL TURNOV ER OF RS. 11,89,74,259/- IS ESTIMATED AT RS. 11,89,743/-. IT IS SEEN THAT THE AO AT PARA 3.12 (PAGE 12) OF THE ASSESSMENT ORDER H AS ALSO MENTIONED THAT PAYMENT MADE TO SHRI HARI PRAKASH SH ARMA WERE ALSO LIABLE TO BE DISALLOWED U/S 40(A)(IA), AS THER E WERE NO TAX DEDUCTED AT SOURCE AS REQUIRED U/S 194C(6). THE APP ELLANT HAS DECLARED NET PROFIT AT RS. 5,61,398/-. THE APPELLAN T RELYING ON THE DECISION OF CO-ORDINATE BENCH OF ITAT, JAIPUR IN TH E CASE OF RAKESH CONSTRUCTION VS. ACIT AND OTHER DECISIONS OF ITAT JAIPUR BENCH HAS CONTENDED THAT ONCE THE NET PROFIT IS EST IMATED BY REJECTING BANK RESULTS U/S 145(3) THEN NO SEPARATE DISALLOWANCE U/S 40(A)(IA) CAN BE MADE. I HAVE GONE THROUGH THE DECISIONS RELIED UPON BY THE APPELLANT. THE CONTENTION OF THE APPELLANT IS FOUND TO BE ACCEPTABLE. HENCE, OUT OF THE TOTAL ADDITIONS/DISALLOWANCE OF RS. 83,84,959/- (RS. 32,8 6,993+ RS. 39,96,344+ RS. 11,01,622), ADDITION OF RS. 6,28,345 (RS. 11,89,743- RS. 5,61,398) IS HEREBY CONFIRMED AND RE MAINING ADDITIONS/DISALLOWANCE OF RS. 77,56,614/- (RS. 83,8 4,959-RS. 6,28,345) ARE HEREBY DELETED. ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 7 6. PER CONTRA, THE LD. AR HAS SUBMITTED THAT IT IS NOT CORRECT ON THE PART OF THE LD. DR TO STATE THAT THE LD. CIT(A) HAS NOT DECIDED THE MATTER RELATING TO VARIOUS DISALLOWANCES ON MERITS. THE LD. CIT(A) HAS EXAMINED EACH OF THE DISALLOWANCE ON MERITS AND FUR THER REFERRING TO THE OVERALL DISCREPANCIES IN THE BOOKS OF ACCOUNTS, WHICH ARE ALSO NOTED BY THE ASSESSING OFFICER, DURING THE COURSE OF APPE LLATE PROCEEDINGS HAS HELD THAT THE BOOK RESULTS SO DECLARED BY THE ASSES SEE CANNOT BE ACCEPTED AND THEREFORE, BY INVOKING HIS POWERS U/S 251 WHICH ARE CO- TERMINOUS WITH THAT OF THE ASSESSING OFFICER, HE HA S REJECTED THE BOOKS RESULTS U/S 145(3) OF THE ACT AND HAS ESTIMATED TH E N.P. IN THE HANDS OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT ONCE THE BOOKS RESULTS ARE REJECTED, ONLY RECOURSE AVAILABLE IS TO ESTIMAT E THE NET PROFIT OF THE ASSESSEE AND THEREFORE, THERE IS NO INFIRMITY IN TH E ORDER OF THE LD. CIT(A). IT WAS FURTHER SUBMITTED THAT GIVEN IN THE PAST HISTORY OF THE ASSESSEE, THE NET PROFIT HAS BEEN ESTIMATED @ 1% AN D IT HAS RESULTED IN RELIEF TO THE ASSESSEE TO THE EXTENT OF RS. 77,56,6 14/-. HOWEVER, THERE WAS ALSO A POSSIBILITY WHERE THE NET PROFIT COULD H AVE BEEN ESTIMATED AT A HIGHER RATE AND THE QUANTUM OF ADDITION SO SUSTAI NED BY THE CIT(A) COULD HAVE BEEN HIGHER GIVEN THE PAST HISTORY OF T HE ASSESSEE. IT WAS ACCORDINGLY SUBMITTED THAT MERELY BECAUSE NET RESUL TS OF ACTION OF THE LD CIT(A) HAS RESULTED IN PARTIAL RELIEF TO THE ASS ESSEE, THE REJECTION OF BOOK RESULTS BY THE LD. CIT(A) BY INVOKING THE PRO VISIONS OF SECTION 145(3) OF THE ACT CANNOT BE SAID TO BE FOR BENEFIT OF THE ASSESSEE AS STATED BY THE LD DR. IT WAS SUBMITTED THAT LOOKIN G AT THE VARIOUS DISCREPANCIES AND FINDINGS BY THE ASSESSING OFFICER AS APPARENT FROM THE ASSESSMENT ORDER, THE LD. CIT(A) HAS INVOKED TH E PROVISIONS OF SECTION 145(3) OF THE ACT. IN THIS REGARD OUR REFER ENCE WAS DRAWN TO THE ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 8 VARIOUS FINDINGS OF THE ASSESSING OFFICER IN THE AS SESSMENT ORDER AS UNDER:- FINDING OF THE AO (A) THUS, CONSIDERING THE ENTIRE FACTS OF THE CASE IT I S RELEVANT FROM THE RECORDS OF THE ASSESSEE THAT THE RECEIPTS OF RS. 32,86,993/- ARE BELONGS TO THE ASSESSEE FOR THE YEA R UNDER CONSIDERATION BUT HE HAS FAILED TO DISCLOSE THESE R ECEIPTS. (REFER FIRST PARA ON PAGE 12) (B) FURTHER, DURING EXAMINATION OF BOOKS OF ACCOUNTS I T IS FOUND THAT ASSESSEE HAS NOT MAINTAINED ANY RECORDS OF FREIGHT EXPENSES, HENCE, THE ARGUMENTS OF THE ASSES SEE THAT PAYMENT WAS MADE TO DRIVERS IS NOT VERIFIABLE, THEREFORE, THE REPLY OF THE ASSESSEE IS WITHOUT ANY BASIS. (REFER LAST PARA ON PAGE 15) (C) ON EXAMINATION OF BOOKS OF ACCOUNTS ON 8.12.2016, FOLLOWING DISCREPANCIES/SHORTCOMINGS WERE NOTICED I N THE BOOKS OF ACCOUNTS, ESPECIALLY IN FREIGHT EXPENSES:- (I) THE ENTIRE FREIGHT EXPENSES WERE CLAIMED IN CASH SHOWING PAYMENT TO TRUCK NUMBERS. BUT NAME AND COMPLETE ADDRESS OF THESE PARTIES ARE NOT MAINTAINED, HENCE, NOT OPEN FOR VERIFICATION. (II) THE ASSESSEE HAS NOT MAINTAINED FREIGHT PAYMENT VOUCHERS/ RECORDS. IN ABSENCE OF PAYMENT VOUCHERS/RECORDS AND RECEIPTS FROM THE PARTIES TO WHOM FREIGHT WAS PAID, THE FREIGHT EXPENSES CLAIMED BY THE ASSESSEE VERIFIABLE FROM BOOKS OF ACCOUNTS O F THE ASSESSEE. (III) THERE IS NO BASIS WITH THE ASSESSEE FOR FREIGHT EXPENSES CLAIMED. THE ASSESSEE COULD NOT EXPLAIN ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 9 THE BASIS OF FREIGHT EXPENSES CLAIMED .(REFER LAST PARA ON PAGE 20) (D) IN VIEW OF ABOVE DISCUSSION THE REPLY OF THE AR OF THE ASSESSEE IS NOT FOUND SATISFACTORY, THE ENTIRE FREI GHT EXPENSES OF RS. 11,41,58,588/- WERE CLAIMED IN CASH , THE ASSESSEE HAS NOT MAINTAINED ANY RECEIPTS FOR SUCH H UGE PAYMENTS. THERE IS NO BASIS WITH THE ASSESSEE FOR C LAIMING THESE FREIGHT EXPENSES AND THE ASSESSEE COULD NOT E XPLAIN THE BASIS OF FREIGHT EXPENSES CLAIMED. THE FREIGHT EXPENSES CLAIMED BY THE ASSESSEE ARE NOT OPEN FOR VERIFICATI ON. THE ASSESSEE HAS CLAIMED FREIGHT EXPENSES AT VERY HIGHE R SIDE I.E. @98.67% OF TOTAL RECEIPTS. BEING SUCH HEAVY AM OUNT OF CASH EXPENSES THE ASSESSEE HAS SURELY INFLATED HIS FREIGHT EXPENSES AND REDUCED HIS PROFIT. (REFER PARA 5.5 ON PAGE 24) 7. IT WAS SUBMITTED BY THE LD AR THAT PERUSAL OF TH E ABOVE FINDINGS OF THE AO SHOWS THAT AO HAVE TIME AND AGAIN POINTED OUT DEFECTS IN THE BOOKS OF ACCOUNTS BY SAYING IT AS NON VERIFIABLE IN SOME OR THE OTHER WAY AND ULTIMATELY HAVE MADE THE ADHOC DISALLOWANCE OF 1% IN FREIGHT EXPENSES. FREIGHT EXPENSES COMPRISES OF 98.67% OF T HE TOTAL RECEIPT. HE ALSO HELD THAT RS. 32,86,993/- IS RECEIPT FROM S HREE CEMENT AGAINST TRANSPORT SERVICES, THEREFORE TAKING A STAND THAT E NTIRE FREIGHT EXPENDITURE IS NOT VERIFIABLE AND COMPLETE RECEIPT HAVE NOT BEEN DISCLOSED ARE IN SUBSTANCE REJECTION OF BOOKS OF AC COUNTS. 8. IT WAS FURTHER SUBMITTED BY THE LD AR THAT A VIG ILANT PERUSAL OF FINDING OF LD. AO SHOWS THAT ALTHOUGH ASSESSING OFF ICER HAS NOT SPECIFICALLY USED THE WORD REJECTED BOOKS OF ACCOU NTS, HOWEVER BOOKS OF ACCOUNTS HAVE BEEN DISBELIEVED IN SO MANY WORDS IN THE ASSESSMENT ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 10 ORDER. FROM THE GENERAL TONE AND TENOR OF THE ASSES SMENT ORDER AND FROM THE REASONS GIVEN BY THE ASSESSING OFFICER, IT IS APPARENT THAT THE ASSESSING OFFICER DISBELIEVES BOOK RESULTS AND DOUB TED CORRECTNESS OF THE EXPENDITURE AS WELL AS RECEIPTS SHOWN IN THE P& L ACCOUNT. 9. IT WAS FURTHER SUBMITTED THAT THE LD AR THAT THE FOREGOING DISCUSSION OF THE FINDING MAKES THE INTENT OF THE L D. AO CLEAR THAT IN SUBSTANCE HE HAS REJECTED THE BOOKS OF ACCOUNTS, AL THOUGH HE HAS NOT EXPRESSLY USED THESE WORDS BUT HIS OBSERVATION IN S UBSTANCE SAYS THAT RESULT SHOWN BY BOOKS OF ACCOUNTS ARE NOT CORRECT A ND ACCEPTABLE. THEREFORE, CIT(A) BY EXPRESSING THOSE FINDING AND A CTION OF LD. AO IN CLEAR TERMS CANNOT BE SAID THAT HE HAS DONE SOMETHI NG NEW IN APPELLATE PROCEEDING. IT IS ONLY A MATTER OF PRESENTATION, NO T MORE THAN THAT, SINCE, IN SUBSTANCE ACTION OF BOTH THE AUTHORITIES ARE COMMUNICATING SAME INFERENCE. 10. IN SUPPORT, THE LD AR PLACED RELIANCE ON THE FO LLOWING DECISIONS: A. ITAT, DELHI IN CASE OF ACIT VS. ADVERT COMMUNICA TION (ITA NO. 3723/DEL/2012 VIDE ORDER DATED 28.08.2015) HAS HELD THAT : THUS, THE POWERS OF THE CIT(A) ARE WIDE ENOUGH TO PROTECT THE INTEREST OF THE REVENUE AS CAN BE OBSERVED BY THE POWERS OF ENHANCEMENT IN THE PROPOSITION OF HON'BLE HIGH COURT IN THE JUDGME NT IN THE CASE OF CIT VS KANPUR COL SYNDICATE 53 ITR 225 (S.C.) WHEREIN S PEAKING FOR THE APEX COURT, THEIR LORDSHIPS HELD THAT WHILE AN APPE AL BY THE ASSESSEE THE CIT(A) HAVE COTERMINOUS POWERS WITH THE ASSESSI NG OFFICER AND HE ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 11 CAN DO WHAT THE ASSESSING OFFICER CAN DO AND DIRECT THE ASSESSING OFFOFFICER OFFICER TO DO WHAT HE HAS FAILED TO DO. 11. LD. DR CONTENDED THAT THE ASSESSING OFFICER HAS NOT REJECTED BOOK RESULTS AND BOOKS OF ACCOUNTS OF THE ASSESSEE AND A LL THAT THE ASSESSING OFFICER HAS DONE IS TO DISALLOW PURCHASES AND ADD B ACK UNCLAIMED LIABILITY (CEASED LIABILITY OF TRADE CREDITORS) WIT HOUT REJECTING THE BOOK RESULTS. BUT ON VIGILANT PERUSAL OF THE ASSESSMENT ORDER WE NOTE THAT, HOWEVER, THE ASSESSING OFFICER HAS NOT REJECTED BOO K RESULTS IN SO MANY WORDS IN THE ASSESSMENT ORDER BUT FROM THE GENERAL TONE AND TENOR OF THE ASSESSMENT ORDER AND FORM THE REASONS GIVEN BY THE ASSESSING OFFICER, IT IS APPARENT THAT THE ASSESSING OFFICER DISBELIEVES BOOK RESULTS WHEN HE DOUBTED CORRECTNESS OF THE PURCHASES AS SHO WN IN THE P&L ACCOUNT AND ALSO AMOUNT DUE TO THE ASSESSEE AS PER BOOKS. WE FURTHER OBSERVE THAT WHEN THE P&L ACCOUNT CONTAINS BOTH THE PURCHASE FIGURE IN THE DEBIT SIDE AND SALES TURNOVER FIGURE ON THE CREDIT SIDE AND ASSESSING OFFICER COMMENCES THE COMPUTATION FROM TH E NET PROFIT FIGURE SHOWN IN THE P&L ACCOUNT BUT WHEN HE VERIFIED THE P URCHASES, HE DISALLOWED SUBSTANTIVE PART THEREOF WITHOUT DISTURB ING THE SALES FIGURE THE LOGICAL INFERENCE WOULD BE THAT THE ASSESSING O FFICER HAS NOT ACCEPTED OR HAS NOT REPOSED CONFIDENCE IN THE BOOKS OF ACCOUNTS. IT IS NOT OPEN OR ALLOWED TO THE CIT(A) TO REJECT THE BOO K RESULTS PARTIALLY AND ACCEPT THEM PARTIALLY. IN THE EVENTUALITY WHEN THE ASSESSING OFFICER DISBELIEVED PURCHASES AND MAJOR PART OF PURCHASES A RE SOUGHT TO BE TREATED AS BOGUS OR DISPROVED AND CONSEQUENTLY PROC EEDS TO MAKE ADDITION US/ 69C OF THE ACT WITHOUT CORRESPONDINGLY ADJUSTING THE SALES FIGURE SPECIALLY WHEN THE LIABILITIES (CREDITORS) R ECORDED IN THE BALANCE ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 12 SHEET ARE ALSO DISBELIEVED AND ADDED BACK AS INCOME , THEN IT WOULD BE A REASONABLE AND LOGICAL INFERENCE THAT THE ASSESSI NG OFFICER HAS REJECTED THE BOOK RESULTS WITHOUT MAKING ANY EXPRES S OBSERVATIONS IN THE ASSESSMENT ORDER. B. JAIPUR BENCH OF ITAT IN THE CASE OF CHOUDHARY & BROTHERS VS. ITO (ITA NO. 583/JP/2009 DATED 30.9.2010) WHEREIN IT IS OBSERVED THAT IF THE AO HAS POINTED OUT SEVERAL DEFECTS IN THE B OOKS OF ACCOUNT AND HAS NOT FOUND THEM RELIABLE TO DEDUCE CORRECT INCOM E OF THE ASSESSEE, REJECTION OF BOOKS WITHIN THE MEANING OF S. 145(3) IS IMPLIED AND THERE IS NO NEED TO MENTION IT SPECIFICALLY IN THE ASSESS MENT ORDER; AO WAS NOT JUSTIFIED IN MAKING DISALLOWANCES OUT OF EXPENS ES AND DEPRECIATION CLAIMED BY THE ASSESSEE; IMPUGNED DISALLOWANCES ARE SET ASIDE AND MATTER IS REMANDED TO THE AO TO ESTIMATE ASSESSEES PROFIT KEEPING IN VIEW THE PAST RESULT. C. JAIPUR BENCH OF ITAT IN THE CASE OF BHAGCHAND CH OUDHARY VS. ACIT (ITA NO. 506/JP/2012 VIDE ORDER DATED 28.11.20 14) WHEREIN LD. A.O. DISALLOWED VARIOUS EXPENSES BY SPECIFYING DEFE CTS IN THE BOOKS OF ACCOUNTS, HOWEVER, WITHOUT SPECIFICALLY INVOKING SE CTION 145(3). IN THAT CASE, LD. CIT(A) HELD THAT A.O. IMPLIEDLY INVOKED S ECTION 145(3) WHILE SPECIFYING THE DEFECTS AND ULTIMATELY INSTEAD OF DI SALLOWANCES, ESTIMATED THE NET PROFIT. HONBLE ITAT ALSO HELD TH AT SECTION 145(3) HAS IMPLIEDLY INVOKED AND ESTIMATE THE NET PROFIT INSTE AD OF DISALLOWANCES. ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 13 11. IT WAS SUBMITTED BY THE LD AR THAT UNDER THE FA CTS AND CIRCUMSTANCES AND CITED CASE LAWS, LD. CIT(A) HAS E NDORSED THE ACTION OF THE LD. AO IN SUBSTANCE BY ESTIMATING NET PROFIT . IN OTHER WORDS, HE HAS ONLY EXPRESSED THE INTENT OF THE LD. AO WHICH O THERWISE HE IMPLIEDLY COMMUNICATED. 12. IT WAS FURTHER SUBMITTED THAT WITHOUT PREJUDICI AL TO ABOVE, A PERUSAL OF THE GROUND RAISED BY THE DEPARTMENT SHOW S THAT THE LD. CIT(A) ACTED BEYOND JURISDICTION. IN THIS REGARD, O UR REFERENCE WAS DRAWN TO POWERS OF CIT(A) WHICH HAVE BEEN DEFINED U NDER SECTION 251 OF THE INCOME TAX ACT, 1961 WHICH READS AS UNDER: (1) IN DISPOSING OF AN APPEAL, THE COMMISSIONER (A PPEALS) SHALL HAVE THE FOLLOWING POWERS (A) IN AN APPEAL AGAINST AN ORDER OF ASSESSMENT, HE MAY CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT; (AA) IN AN APPEAL AGAINST THE ORDER OF ASSESSMENT I N RESPECT OF WHICH THE PROCEEDING BEFORE THE SETTLEMENT COMMISSI ON ABATES UNDER SECTION 245HA, HE MAY, AFTER TAKING INTO CONS IDERATION ALL THE MATERIAL AND OTHER INFORMATION PRODUCED BY THE ASSESSEE BEFORE, OR THE RESULTS OF THE INQUIRY HELD OR EVIDE NCE RECORDED BY, THE SETTLEMENT COMMISSION, IN THE COURSE OF THE PRO CEEDING BEFORE IT AND SUCH OTHER MATERIAL AS MAY BE BROUGHT ON HIS RECORD, CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSES SMENT; (B) IN AN APPEAL AGAINST AN ORDER IMPOSING A PENALT Y, HE MAY CONFIRM OR CANCEL SUCH ORDER OR VARY IT SO AS EITHE R TO ENHANCE OR TO REDUCE THE PENALTY; (C) IN ANY OTHER CASE, HE MAY PASS SUCH ORDERS IN T HE APPEAL AS HE THINKS FIT. ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 14 (2) THE COMMISSIONER (APPEALS) SHALL NOT ENHANCE AN ASSESSMENT OR A PENALTY OR REDUCE THE AMOUNT OF REFUND UNLESS THE APPELLANT HAS HAD A REASONABLE OPPORTUNITY OF SHOWING CAUSE A GAINST SUCH ENHANCEMENT OR REDUCTION. EXPLANATION.IN DISPOSING OF AN APPEAL, THE COMMISS IONER (APPEALS) MAY CONSIDER AND DECIDE ANY MATTER ARISIN G OUT OF THE PROCEEDINGS IN WHICH THE ORDER APPEALED AGAINST WAS PASSED, NOTWITHSTANDING THAT SUCH MATTER WAS NOT RAISED BEF ORE THE COMMISSIONER (APPEALS) BY THE APPELLANT. 13. IT WAS SUBMITTED BY THE LD AR THAT A PERUSAL OF SECTION 251(1)(A) OF THE INCOME TAX ACT SHOWS THAT LD. CIT(A) HAS ENO RMOUS POWERS TO DEAL THE ASSESSMENT ORDER, HE MAY CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT. THE ACTION OF THE LD. CIT(A) IS WEL L WITHIN HIS JURISDICTION, WHICH EMPOWERED HIM TO CONFIRM, REDUC E, ENHANCE OR ANNUL THE ASSESSMENT WHICH INCLUDES INVOCATION OF S ECTION 145(3) WHICH MAY RESULT INTO CONFIRM/REDUCE/ENHANCE OR ANNULMENT OF ASSESSMENT. IT WAS SUBMITTED THAT TIME AND AGAIN, VARIOUS COURTS H AVE HELD THAT POWERS OF CIT(A) ARE CO-TERMINOUS WITH THE POWERS O F AO. RELIANCE IS PLACED ON FOLLOWING CASE LAWS: A. CIT, U.P. VS KANPUR COAL SYNDICATE, (SC) 53 ITR 229: HOWEVER, THE HONBLE SUPREME COURT, HELD IN THE FA VOUR OF THE ASSESSEE AS UNDER: .IF AN APPEAL LIES, S. 31 OF THE ACT DESCRIBES TH E POWERS OF THE APPELLATE ASSISTANT COMMISSIONER IN SUCH AN APPEAL. UNDER S. 31 (3) (A) IN DISPOSING OF SUCH AN APPEAL THE APPELLATE ASSIST ANT COMMISSIONER MAY, IN THE, CASE OF AN ORDER OF ASSESSMENT, CONFIR M, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT; UNDER CL. (B) THEREOF HE M AY SET ASIDE THE ASSESSMENT AND DIRECT THE INCOME-TAX OFFICER TO MAK E A FRESH ASSESSMENT. THE APPELLATE ASSISTANT COMMISSIONER HA S, THEREFORE, PLENARY POWERS IN DISPOSING OF AN APPEAL. THE SCOPE OF HIS POWER IS ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 15 COTERMINOUS WITH THAT OF THE INCOME- TAX OFFICER. H E CAN DO WHAT THE INCOME-TAX OFFICER CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO. IF THE INCOME-TAX OFFICER HAS THE OPTION TO ASSESS ONE OR OTHER OF THE ENTITIES IN THE ALTERNATIVE, THE APPELLATE ASSI STANT COMMISSIONER CAN DIRECT HIM TO DO WHAT HE SHOULD HAVE DONE IN THE CI RCUMSTANCES OF A CASE. WE, THEREFORE, HOLD, AGREEING WITH THE HIGH COURT, THAT THE APPELLATE TRIBUNAL HAS JURISDICTION TO GIVE DIRECTIONS TO THE APPROPRIATE AUTHORITY TO CANCEL THE ASSESSMENT MADE OR THE ASSOCIATION OF PERSONS AND TO GIVE APPROPRIATE DIRECTIONS TO THE AUTHORITY CONCER NED TO MAKE A FRESH ASSESSMENT ON THE MEMBERS OF THAT ASSOCIATION INDIV IDUALLY. THE ANSWER GIVEN BY THE HIGH COURT TO THE QUESTION PROPOUNDED IS CORRECT. IN THE RESULT, THE APPEAL FAILS AND IS DISMISSED WITH COST S. APPEAL DISMISSED. B. JUTE CORPORATION OF INDIA LTD VS CIT AND ANR (SC ) 187 ITR 688: IN THE SAID JUDGMENT, THE HONBLE SUPREME COURT HAD OBSERVED AND HELD AS UNDER: THE QUESTION IS WHETHER THE APPELLATE ASSISTANT CO MMISSIONER WHILE HEARING AN APPEAL UNDER S. 251(1)(A) HAS JURISDICTI ON TO ALLOW THE ASSESSEE TO RAISE AN ADDITIONAL GROUND IN ASSAILING THE ORDER OF THE ASSESSMENT BEFORE IT. THE ACT DOES NOT CONTAIN ANY EXPRESS PROVISION DEBARRING AN ASSESSEE FROM RAISING AN ADDITIONAL GR OUND IN APPEAL AND THERE IS NO PROVISION IN THE ACT PLACING RESTRICTIO N ON THE POWER OF THE APPELLATE AUTHORITY IN ENTERTAINING AN ADDITIONAL G ROUND IN APPEAL. IN THE ABSENCE OF ANY STATUTORY PROVISION GENERAL PRIN CIPLE RELATING TO THE AMPLITUDE OF APPELLATE AUTHORITYS POWER BEING COTE RMINOUS WITH THAT OF THE INITIAL AUTHORITY SHOULD NORMALLY BE APPLICABLE . .THE DECLARATION OF LAW IS CLEAR THAT THE POWER O F THE APPELLATE ASSISTANT COMMISSIONER IS COTERMINOUS WITH THAT OF THE INCOME TAX OFFICER, IF THAT HE SO, THERE APPEARS TO BE NO REAS ON AS TO WHY THE APPELLATE AUTHORITY CANNOT MODIFY THE ASSESSMENT OR DER ON AN ADDITIONAL GROUND EVEN IF NOT RAISED BEFORE THE INC OME TAX OFFICER. NO EXCEPTION COULD BE TAKEN TO THIS VIEW AS THE ACT DO ES NOT PLACE ANY RESTRICTION OR LIMITATION ON THE EXERCISE OF APPELL ATE POWER. EVEN OTHERWISE AN APPELLATE AUTHORITY WHILE HEARING APPE AL AGAINST THE ORDER OF A SUBORDINATE AUTHORITY HAS ALL THE POWERS WHICH THE ORIGINAL ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 16 AUTHORITY MAY HAVE IN DECIDING THE QUESTION BEFORE IT SUBJECT TO THE RESTRICTIONS OR LIMITATIONS IF ANY PRESCRIBED BY TH E STATUTORY PROVISIONS. IN THE ABSENCE OF ANY STATUTORY PROVISION THE APPEL LATE AUTHORITY IS VESTED WITH ALL THE PLENARY POWERS WHICH THE SUBORD INATE AUTHORITY MAY HAVE IN THE MATTER. THERE APPEARS TO BE NO GOOD REA SON AND NONE WAS PLACED BEFORE US TO JUSTIFY CURTAILMENT OF THE POWE R OF THE APPELLATE ASSISTANT COMMISSIONER IN ENTERTAINING AN ADDITIONA L GROUND RAISED BY THE ASSESSEE IN SEEKING MODIFICATION OF THE ORDER O F ASSESSMENT PASSED BY THE INCOME TAX OFFICER. C. IN THE CASE OF COMMISSIONER OF INCOME-TAX V. NIR BHERAM DELURAM [1997] 224 ITR 610 (SC) THE SUPREME COURT AGAIN DIS CUSSED THE POWERS OF CIT(A) U/S 251 OF THE INCOME-TAX ACT, 196 1. THE COURT HELD THAT: IT HAD PREVIOUSLY HELD IN JUTE CORPN. OF INDIA LTD . V. CIT [1991] 187 ITR 688 T THAT THE DECLARATION OF LAW IS CLEAR THAT THE POWER OF THE AAC IS COTERMINOUS WITH THAT OF THE ITO AND IF THAT IS SO, THERE APPEARS TO BE NO REASON AS TO WHY THE APPELLATE AUTHORITY CANNOT MODIFY THE ASSESSMENT ORDER ON AN ADDITIONAL GROUND EVEN IF NO T RAISED BEFORE THE ITO. THE SCOPE OF HIS POWER IS COTERMINOUS WITH THE ITO. HE CAN DO WHAT THE ITO CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO. THE COURT FURTHER HELD THAT HAVING REGARD TO THE AF ORESAID DECISION IT MUST BE HELD THAT THE HIGH COURT WAS IN ERROR IN HO LDING THAT THE APPELLATE POWER CONFERRED ON THE AAC UNDER SECTION 251 WAS CONFINED TO THE MATTER WHICH HAD BEEN CONSIDERED BY THE ITO AND THAT THE AAC EXCEEDED HIS JURISDICTION IN MAKING AN ADDITION OF RS. 2,30,000 ON THE BASIS OF THE OTHER 10 ITEMS OF HUNDIES WHICH HAD NO T BEEN EXPLAINED BY THE ASSESSEE. THEREFORE, EVEN IF IT WAS NOT HELD TH AT THE SUM OF RS. 2,30,000 WAS ADDED BY THE AAC AS NEW SOURCES OF INC OME, NOT CONSIDERED BY THE ITO FROM THE POINT OF VIEW OF ASS ESSABILITY, THE AAC ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 17 HAD JURISDICTION OR POWER TO ADD THE SUM OF RS. 2,3 0,000 IN THE FACTS AND CIRCUMSTANCES IN WHICH HE HAD ADDED THE SAME. A CCORDINGLY, THE APPEAL WAS TO BE ALLOWED. 14. IT WAS FINALLY SUBMITTED BY THE LD AR THAT THE LD CIT(A), HAVING CO-TERMINOUS POWER WITH AO, HAS ACTED WITHIN HIS JU RISDICTION AND HAVE NOT COMMITTED ANY MISTAKE OF FACTS OR LAW, THEREFOR E IT CANNOT BE HELD THAT HE HAS ALLOWED THE RELIEF PERVERSELY. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BROADLY, TWO ISSUES ARISE FOR CONSIDERATION. FIRSTLY, WHETHER THE LD. CIT(A) HAS POWERS TO REJECT THE BOO KS OF ACCOUNTS BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T IN TERMS OF THE POWERS SO GRANTED TO HIM U/S 251 OF THE ACT. SECON DLY, WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THE BO OKS OF ACCOUNTS DESERVES TO BE REJECTED U/S 145(3) OF THE ACT AND P ROFITS TO BE ESTIMATED. 16. REGARDING THE FIRST ISSUE, IT IS SETTLED LEGAL PROPOSITION OF LAW THAT THE SCOPE OF POWERS OF THE LD. CIT(A) IS CO-TERMINO US WITH THAT OF THE ASSESSING OFFICER. HE CAN DO WHAT THE ASSESSING OFF ICER CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO. THEREFOR E, EVEN THOUGH THE LANGUAGE CONTAINED IN SECTION 145(3) OF THE ACT TAL KS ABOUT THE ASSESSING OFFICER HAVING NOT BEEN SATISFIED ABOUT T HE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS AND MAKING THE ASSESSM ENT IN THE MANNER PROVIDED IN SECTION 144 OF THE ACT, GIVEN TH E SETTLED PROPOSITION THAT WHERE THE MATTER RELATING TO CORRECTNESS AND C OMPLETENESS OF THE ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 18 ACCOUNTS OF THE ASSESSEE IS SUBJECT MATTER OF APPEA L BEFORE THE LD. CIT(A) AND THERE ARE GLARING DISCREPENCIES IN THE B OOKS OF ACCOUNTS AND WHICH ARE CLEARLY DISCERNABLE FROM THE ASSESSMENT O RDER, THE LD. CIT(A) IS WELL WITHIN HIS POWERS U/S 251 TO REJECT THE BOO KS OF ACCOUNTS AND ESTIMATE THE NET PROFIT IN THE HANDS OF THE ASSESSE E. IN THE INSTANT CASE, WE HAVE NOTED THAT THE ASSESSING OFFICER HAS HIMSEL F EXAMINED AND GIVEN A FINDING RELATING TO UNDISCLOSED RECEIPTS FR OM SHREE CEMENTS LIMITED AND 98.67% OF FREIGHT EXPENSES NOT SUBJECT TO VERIFICATION. THEREFORE, WHERE THE ASSESSING OFFICER HAS HIMSELF GIVEN A FINDING IN TERMS OF INCOMPLETENESS AND NOT VERIFIABILITY OF MA JORITY OF EXPENSES SO CLAIMED BY THE ASSESSEE, HE HAS HIMSELF CAST A SERI OUS DOUBT ON THE CORRECTNESS AND COMPLETENESS OF THE BOOKS OF ACCOUN TS. THEREFORE, WHEN THE SAID MATTER TRAVELS TO THE LD CIT(A) AND H E LOOKS AT THE SAID FACTS AND FINDINGS OF THE ASSESSING OFFICER WITH A FRESH MIND AND COMES TO A CONCLUSION THAT THE BOOKS OF ACCOUNTS ARE NOT RELIABLE AND HE REJECTS THE BOOKS OF ACCOUNTS BY SPECIFICALLY INVOK ING THE PROVISIONS OF SECTION 145(3), WE DONT SEE AS TO HOW HE HAS EXCEE DED HIS POWERS AND JURISDICTION SO ENSHRINED UPON HIM BY THE LEGISLATU RE U/S 251 OF THE ACT. THE SAID LEGAL PROPOSITION IS LAID DOWN BY THE HON BLE SUPREME COURT IN CASE OF JUTE CORPORATION OF INDIA (SUPRA) AND HAS B EEN CONSISTENTLY FOLLOWED IN SUBSEQUENT RULINGS WHICH HAVE BEEN RELI ED UPON THE LD. AR WHICH SUPPORTS THE CASE OF THE ASSESSEE. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT(A) IS WELL WITHIN HIS POWERS U/S 251 OF THE ACT TO REJECT THE BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT SO LONG AS THE SAID MATTER IS ARISING OUT OF THE ASSESSMENT PR OCEEDINGS BEFORE THE ASSESSING OFFICER AGAINST WHICH APPEAL HAS BEEN PRE FERRED BEFORE THE LD CIT(A). IN THIS REGARD, USEFUL REFERENCE CAN BE DR AWN TO THE DECISION OF ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 19 THE HONBLE RAJASTHAN HIGH COURT IN CASE OF COMMISSIONER OF INCOME-TAX VS. ASSOCIATED GARMENTS MAKERS REPORTED IN 64 TAXMAN 215 WHICH WAS RENDERED IN THE CONTEXT OF POW ERS OF LD CIT(A) TO BRING TO TAX NEW SOURCE OF INCOME BUT WE FIND TH E SAID RULING EQUALLY RELEVANT IN THE INSTANT CASE. IN THE SAID DECISION , THE HONBLE HIGH COURT HAS HELD AS UNDER: 7. APPEALS ARE PROVIDED UNDER SECTION 246 OF THE A CT BEFORE THE AAC AND THE COMMISSIONER (APPEALS). THESE APPEALS A RE BY THE ASSESSEE AGGRIEVED BY THE ORDERS MENTIONED THEREIN. ANY ORDER MADE UNDER SECTION 143(3) IS APPEALABLE AND THE POW ERS OF THE APPELLATE COURT ARE PROVIDED IN SECTION 251 OF THE ACT WHEREIN APPELLATE AUTHORITY HAS POWER TO CONFIRM, REDUCE, E NHANCE OR ANNUL THE ASSESSMENT OR HE MAY SET ASIDE THE ASSESS MENT AND REFER THE CASE BACK TO THE ITO FOR MAKING FRESH ASS ESSMENT IN ACCORDANCE WITH DIRECTIONS GIVEN IN APPEAL AND AFTE R MAKING SUCH FURTHER ENQUIRY AS MAY BE NECESSARY. THESE POWERS A RE, INTER ALIA, MENTIONED IN THE OTHER POWERS. ACCORDING TO S UB-SECTION (2) OF SECTION 251, THE AAC HAS NO POWER TO ENHANCE ASS ESSMENT OR A PENALTY, OR REDUCE THE AMOUNT OR REFUND UNLESS TH E APPELLANT HAS A REASONABLE OPPORTUNITY FOR SHOWING CAUSE AGAI NST SUCH ENHANCEMENT OR REDUCTION. AN EXPLANATION HAS BEEN P ROVIDED ACCORDING TO WHICH THE AAC MAY CONSIDER AND DECIDE ANY MATTER ARISING OUT OF THE PROCEEDINGS IN WHICH THE ORDER A PPEALED AGAINST WAS PASSED, NOTWITHSTANDING THE FACT THAT S UCH MATTER WAS NOT RAISED BEFORE HIM. A PERUSAL OF SECTIONS 24 6 TO 251 OF THE ACT MAKES IT CLEAR THAT ANY QUESTIONS ARISING O UT OF THE ASSESSMENT ORDERS IN AN APPEAL BY THE ASSESSEE CAN BE POSSIBLE ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 20 AND WIDE POWERS ARE GIVEN TO THE APPELLATE AUTHORIT Y, BUT THESE POWERS ARE CIRCUMSCRIBED BY THE ASSESSMENT ORDER IN THE MATTERS ARISING THEREOF OR A MATTER ARISING OUT OF THE PROC EEDINGS. EVEN THE APPELLATE AUTHORITY HAS SUO MOTU POWER TO CONSI DER THE QUESTIONS ARISING THEREOF BUT THERE IS NO PROVISION TO GO BEYOND THE MATTER ARISING OUT OF THE PROCEEDINGS BEFORE TH E ASSESSING AUTHORITY, MORE PARTICULARLY AS SEPARATE PROVISIONS FOR THAT ARE MADE IN THE ACT. THE TRIBUNAL HAS ELABORATELY DISCU SSED THE PROVISIONS OF THE ACT AND THE CASE LAW ON THE SUBJE CT AND HAS RIGHTLY COME TO THE CONCLUSION THAT NEW SOURCES NOT MENTIONED IN THE RETURN OR CONSIDERED BY THE ITO ARE BEYOND THE SCOPE OF POWERS OF THE AAC. THE CASE RELIED ON BY THE LEARNE D COUNSEL FOR THE PETITIONER ABOUT THE POWER OF SETTING ASIDE THE ASSESSMENT ORDER REMANDING THE CASE FOR RE-CONSIDERATION OF TH E WHOLE MATTER INCLUDING THE EVASION BY THE ASSESSEE, IS NO T APPLICABLE TO THE FACTS OF THE PRESENT CASE BECAUSE THE MATTER AR ISING IN THAT CASE WAS ONE WHICH AROSE OUT OF THE PROCEEDINGS BEF ORE THE ITO. THE QUESTION WAS NOT ABOUT NEW AND FRESH MATERIAL F OR THE PURPOSES OF ENHANCEMENT. ON THE CONTRARY, THE CASE IS CLEARLY COVERED BY THE DECISIONS OF THE SUPREME COURT IN CI T V. SHAPOORJI PALLONJI MISTRY'S CASE (SUPRA) WHEREIN IT HAS BEEN HELD THAT, 'IN AN APPEAL FILED BY THE ASSESSEE THE APPEL LATE ASSISTANT COMMISSIONER HAS NO POWER TO ENHANCE THE ASSESSMENT BY DISCOVERING NEW SOURCES OF INCOME NOT MENTIONED IN THE RETURN OF THE ASSESSEE OR CONSIDERED BY THE INCOME-TAX OFFICE R IN THE ORDER APPEALED AGAINST', AND IN THE CASE OF RAI BAHADUR H ARDUTROY MOTILAL CHAMARIA (SUPRA) WHEREIN IT HAS BEEN HELD T HAT, 'IT IS NOT ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 21 THEREFORE OPEN TO THE APPELLATE ASSISTANT COMMISSIO NER TO TRAVEL OUTSIDE THE RECORD, I.E., THE RETURN MADE BY THE AS SESSEE OR THE ASSESSMENT ORDER OF THE INCOME-TAX OFFICER, WITH A VIEW TO FINDING OUT NEW SOURCES OF INCOME AND THE POWER OF ENHANCEMENT UNDER SECTION 31(3) IS RESTRICTED TO TH E SOURCES OF INCOME WHICH HAVE BEEN THE SUBJECT-MATTER OF CONSID ERATION BY THE INCOME-TAX OFFICER FROM THE POINT OF VIEW OF TA XABILITY'. THEIR LORDSHIPS CONSIDERED THE MEANING OF THE WORD 'CONSI DERATION' AND HELD THAT, ' 'CONSIDERATION' DOES NOT MEAN 'INCIDEN TAL' OR 'COLLATERAL' EXAMINATION OF ANY MATTER BY THE INCOM E-TAX OFFICER IN THE PROCESS OF ASSESSMENT. THERE MUST BE SOMETHING IN THE ASSESSMENT ORDER TO SHOW THAT THE INCOME-TAX OFFICE R APPLIED HIS MIND TO THE PARTICULAR SUBJECT-MATTER OR THE PARTIC ULAR SOURCE OF INCOME WITH A VIEW TO ITS TAXABILITY OR TO ITS NON- TAXABILITY AND NOT TO ANY INCIDENTAL CONNECTION'. IN THE INSTANT CASE, THE AAC HAD HIMSELF, AFTER ISSUING NOTICE, CONSIDERED THE NEW M ATERIAL AND HAD GONE INTO NEW SOURCES OF INCOME FOR THE CONSIDERATI ON OF WHICH HE HAD NO JURISDICTION. A PERUSAL OF SECTIONS 246 TO 251 OF THE ACT MAKES I T CLEAR THAT ANY QUESTIONS ARISING OUT OF THE ASSESSMENT ORDERS IN AN APPEAL BY THE ASSESSEE CAN BE POSSIBLE AND WIDE POWERS ARE GIVEN TO THE APPELLATE AUTHORITY, BUT THESE POWERS ARE CIRCUMSCR IBED BY THE ASSESSMENT ORDER IN THE MATTERS ARISING THEREOF OR A MATTER ARISING OUT OF THE PROCEEDINGS. EVEN THE APPELLATE AUTHORITY HAS SUO MOTU POWER TO CONSIDER THE QUESTIONS ARISING TH EREOF BUT THERE IS NO PROVISION TO GO BEYOND THE MATTER ARISI NG OUT OF THE ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 22 PROCEEDINGS BEFORE THE ASSESSING AUTHORITY, MORE PA RTICULARLY AS SEPARATE PROVISIONS FOR THAT ARE MADE IN THE ACT. 17. REGARDING SECOND ISSUE WHETHER IN THE FACTS AN D CIRCUMSTANCES OF THE PRESENT CASE, THE MATTER REQUIRES REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) AND ESTIMATION OF NET PROFITS, WE REFER TO THE VARIOUS FINDINGS OF THE ASSESSING OFFICER WHICH FIND PLACE IN THE AS SESSMENT ORDER. AT PAGE 12 OF THE ASSESSMENT ORDER, THE ASSESSING OFFI CER HAS RECORDED A FINDING THAT THE RECEIPT AMOUNTING TO RS. 32,86,993 /- FROM SHREE CEMENTS LIMITED BELONG TO THE ASSESSEE BUT HE HAS F AILED THESE RECEIPTS. FURTHER, AT PAGE 15 OF THE ASSESSMENT OR DER, THE ASSESSING OFFICER HAS HELD THAT THE ASSESSEE HAS NOT MAINTAIN ED ANY RECORD RELATING TO FREIGHT EXPENSES AND THEREFORE, THE LD. AR SUBMISSION THAT PAYMENTS WERE MADE TO THE TRUCK DRIVER IS NOT VERIF IABLE. FURTHER, WE REFER TO THE DETAILS FINDINGS OF THE AO RELATING TO DISALLOWANCE OF THE FREIGHT EXPENSES WHICH ARE CONTAINED AT PARA 5.1 AN D 5.5 OF THE ASSESSMENT ORDER WHICH IS REPRODUCED AS UNDER:- ISSUE INVOLVED- DISALLOWANCE OF FREIGHT EXPENSES: 5.1 BRIEF FACTS- THE ASSESSEE HAS SUBMITTED A COMPARATIVE CHART OF TURN OVER, GROSS PROFIT AND NET PROFIT AS UNDER: PARTICULARS A.Y. 2012-13 A.Y. 2013-14 A.Y. 2014-1 5 TURNOVER 4,96,71,804 6,32,07,343 11,56,87,266 GROSS PROFIT RS. 9,69,147 10,60,347 15,28,678 NET PROFIT RS. 3,88,159 4,87,118 5,61,398 G.P. RATIO 1.95% 1.67% 1.32% ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 23 N.P. RATIO 00.78% 00.77% 00.49% FROM THE ABOVE TABLE IT IS CLEAR THAT ASSESSEES GP RATIO AND NP RATION IS DECLINING YEAR BY YEAR. ON EXAMINATION OF BOOKS OF ACCOUNTS ON 08.12.2016 F OLLOWING DISCREPANCIES/SHORTCOMINGS WERE NOTICED IN THE BOOK S OF ACCOUNTS, SPECIALLY IN THE FREIGHT EXPENSES:- 1. THE ENTIRE FREIGHT EXPENSES WERE CLAIMED IN CASH SHOWING PAYMENT TO TRUCK NUMBERS. BUT NAME AND COMPLETE ADD RESS OF THESE PARTIES ARE NOT MAINTAINED, HENCE NO OPEN FOR VERIF ICATION. 2. THE ASSESSEE HAS NOT MAINTAINED FREIGHT PAYMENT VOUCHERS/RECORDS. IN ABSENCE OF PAYMENT VOUCHERS/RECORDS AND RECEIPTS FROM THE PARTIES TO WHOM FREIGHT WAS PAID, THE FREIGHT EXPENSES CLAI MED BY THE ASSESSEE IVERIFIABLE FROM THE BOOKS OF ACCOUNTS OF THE ASSES SEE. 3. THERE IS NO BASIS WITH THE ASSESSEE FOR FREIGHT EXPENSES CLAIMED. THE ASSESSEE COULD NOT EXPLAIN THE BASIS OF FREIGHT EXP ENSES CLAIMED. IN VIEW OF THE ABOVE FACTS FREIGHT EXPENSES CLAIME D BY THE ASSESSEE IS NOT OPEN FOR VERIFICATION. THE AR OF TH E ASSESSEE HAS FAILED TO PROVE THE BASIS OF FREIGHT EXPENSES CLAIMED BY T HE ASSESSEE. THE ASSESSEE HAS BOOKED THE FREIGHT EXPENSES WITHOUT A NY BASIS AT HIS OWN WILL. THUS, IT IS CLEAR THAT THE ASSESSEE HAS INFLA TED HIS FREIGHT EXPENSES. THE ASSESSEE COULD NOT OFFER ANY SATISFACTORY REPLY IN THIS REGARD. DURING COURSE OF ASSESSEE PROCEEDINGS THESE DEFECTS/DISCRIPENCIES NOTICED IN THE BOOKS OF ACCOU NTS BROUGHT TO THE NOTICE OF AR OF THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 08.12.2016. FROM THE ABOVE DISCUSSION IT IS CLEAR THAT THE ASS ESSEE HAS CLAIMED FREIGHT EXPENSES AT VERY HIGHER SIDE. THE A SSESSEE HAS CLAIMED FREIGHT EXPENSES TOTAL RS.11,41,58,588/- OUT OF TOT AL FREIGHT RECEIPTS SHOWN AT RS.11,56,87,266/- I.E. @98.67% OF TOTAL RE CEIPTS. BEING SUCH HEAVY AMOUNT OF CASH EXPENSES THE ASSESSEE HAS SURE LY INFLATED HIS ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 24 FREIGHT EXPENSES. BECAUSE, THE ASSESSEE HAS FAILED TO PROVE THE BASIS OF FREIGHT EXPENSES CLAIMED AND HE HAS NOT SUBMITTED A NY DOCUMENTARY EVIDENCE FOR FREIGHT EXPENSES. 5.2- SHOW CAUSE TO ASSESSEE- IN VIEW OF ABOVE FACTS A SHOW CAUSE WAS ISSUED TO AR OF THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 08.12.2016 AS TO WHY FREIGHT EXPENSES CLAIMED BY THE ASSESSEE MAY NOT BE DISALLO WED @1% OF TOTAL FREIGHT EXPENSES CLAIMED AS ASSESSEE HAS NOT MAINTA INED ANY RECORDS OF FREIGHT EXPENSES AND SAME IS PROPOSED TO ADD IN THE TOTAL INCOME OF THE ASSESSEE AS ASSESSEE. 5.3- REPLY OF THE ASSESSEE- THE AR OF THE ASSESSEE FILED REPLY IN THIS REGARD DATED 19.12.2016, RELEVANT EXTRACT OF THE REPLY IS REPROD UCED AS UNDER:- THAT THE ASSESSEE IS DOING BUSINESS OF TRANSPORTA TION SINCE LAST SO MANY YEARS AND MADE TO PAYMENT TO TRUCK DRIVERS/KHA LLASI OF TRUCKS AS THEY BRING THE TRUCK FOR TRANSPORTATION. ASSESSEE U SE THE TRUCK OF DIFFERENT TRUCK OPERATORS FOR THE TRANSPORTATION PU RPOSE AVAILABLE IN NEAR BY AREA ACCORDINGLY ALL THE TRUCK OPERATORS AR E NOT KNOWN OF THE ASSESSEE. AND THEY WILL NOT ACCEPT CHEQUE. ACCORDIN GLY ASSESSEE HAVE TO MADE THE FULL PAYMENT IN CASH AND AS PROOF OF PA YMENT ASSESSE MAINTAINS THE REGISTER OF PAYMENT MADE TO TRUCK DRI VERS/KHALLASIS AND TAKE THEIR SIGNATURES IN IT AS PROOF OF PAYMENT MA DE TO THEM IN CASH. PART PAYMENT IS MADE TO THEM AS ADVANCE BECAUSE THE Y REQUIRED MONEY FOR FUEL, TOLL TAX AND TO MEET WITH OTHER ON THE WAY EXPENSES RELATED TO TRANSPORTATION AND PART PAYMENT HAS BEEN MADE ON RECEIPT CONFIRMATION OF DELIVERY ACCORDINGLY ASSESSEE WILL PAY THE AMOUNT IN CASH TO THEM BECAUSE PAYMENT THROUGH BANKING CHANNE L IS NOT FRUITFUL FOR THEM AS WELL AS NOT PRACTICALLY FACEABLE FOR TH EM. UNFORTUNATELY, THE REGISTER FOR THE YEAR UNDER CONS IDERATION IS MISPLACED ACCORDINGLY THE SAME IS NOT AVAILABLE WITH US AT TH E TIME OF LAST HEARING WITH OTHER BOOKS OF ACCOUNTS. MOREOVER WE ARE MAINT AINING REGULAR ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 25 BOOKS OF ACCOUNTS IN WHICH ALL THE PAYMENT DETAILS ARE ITS SELF MAINTAINED. WHICH HAS BEEN VERIFIED BY YOUR GOOD SE LF ATG THE TIME OF LAST HEARING AS WELL AS WE HAVE SUBMITTED SOME CONF IRMATIONS ALSO OF TRUCK OPERATORS IN WHICH THEY HAVE CONFIRMED THE RE CEIPTS OF FREIGHT FORM US. FURTHER WE ARE TRYING TO GET SOME MORE CON FIRMATION FORM VARIOUS TRUCK OPERATORS WHO DID WORK FOR US DURING THE PERIOD UNDER CONSIDERATION AND WE WILL SUBMIT THE SAME AS SOON A S WE WILL RECEIVE THE SAME. WE ARE TRYING OUR BEST TO FIND THE REGIST ER ALSO AND WE WILL SUBMIT THE SAME BEFORE YOUR GOOD SELF AS SOON AS WE WILL FIND THE SAME SO PLEASE GRAND SOME TIME FOR PRODUCTION OF THE SAI D FREIGHT PAID REGISTERS ACCORDINGLY DISALLOWANCE OF LUMP SUM AMOU NT OF 1% FROM TOTAL FREIGHT EXPENSE IN ABSENCE OF PAYMENT VOUCHER S IS UNJUSTIFIED AND BAS IN LAW BECAUSE WE HAVE MAINTAIN THE REGISTER IN STEAD OF VOUCHERS AS PROOF OF PAYMENT OF FREIGHT AND TAKEN SIGNATURE IN IT OF THE RECEIVER OF THE AMOUNT I.E DRIVER N MOST OF THE CASES.I.E SO RT OF VOUCHER. DUE TO NATURE OF BUSINESS AND TRANSACTION IT IS JUSTIFIED AS WELL AS GOOD IN LAW 5.4 REBUTTAL ON ASSESSEES REPLY- I HAVE CONSIDERED THE SUBMISSIONS OF THE AR OF THE ASSESSEE BUT THE SAME IS NOT FOUND SATISFACTORY, HENCE, NOT ACCE PTABLE. IT IS ADMITTED FACT THAT ASSESSEE HAS CLAIMED ENTIRE FREIGHT EXPEN SES IN CASH. BUT THE ASSESSEE HAS NOT MAINTAINED FREIGHT PAYMENT VOUCHER S OF ANY RECORD OF FREIGHT EXPENSES. AMPLE OPPORTUNITIES WERE PROVIDED TO THE ASSESSEE TO PRODUCE BOOKS OF ACCOUNTS AND FREIGHT EXPENSES VOUCHERS/REC ORDS, BUT THE ASSESSEE HAS FAILED TO PRODUCE FREIGHT EXPENSES VOU CHERS/RECORDS. THE ASSESSEE HAS SUBMITTED REASONS FOR CASH PAYMENT FOR FREIGHT EXPENSES BUT SAME IS NOT ACCEPTABLE BECAUSE AS PER CONFIRMATION FILED BY THE ASSESSEE IT IS FOUND THAT ASSESSEE HAS PAID HUGE CASH TO TRUCK OPERATORS AS SH. UGMA RAM TOTAL RS.1,99,81,606/-, S H. SUKH RAM CHOUDHARY TOTAL AMOUNTS RS.28,39,333/-, SHGAJ RAJ T OTAL AMOUNTS RS.36,21,176/-, SH. DEEP CHAND TOTAL AMOUNTS RS.44, 86,278/-, MUKESHJAT TOTAL AMOUNT RS.32,74,758/-. THE ASSESSEE HAS NO PROPER REPLY FOR MAKING PAYMENTS OF SUCH HUGE CASH TO THES E PERSONS. ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 26 THEREFORE, THE REPLY OF THE ASSESSEE IS NOT SATISFA CTORY. IN THE MATTER THE MOST RELEVANT ISSUE IS, THAT ASSESSEE HAS NOT M AINTAINED ANY RECEIPTS FOR SUCH HUGE CASH PAYMENTS. DURING EXAMINATION OF BOOKS OF ACCOUNTS ASSESSEE W AS ASKED TO PRODUCE ALL THE RECORDS OF FREIGHT EXPENSES. THE AR OF THE ASSESSEE ADMITTED VIDE ORDER SHEET ENTRY DATED 08.12.2016 TH AT NO RECORDS AND VOUCHER ARE MAINTAINED FOR FREIGHT EXPENSES CLAIMED BY THE ASSESSEE. BUT AFTER ISSUING SHOW CAUSE, THE AR SUBMITTED THAT ASSESSEE HAS MAINTAINED REGISTER OF FREIGHT PAYMENT AND SAME IS MISPLACED. THE AR FURTHER SUBMITTED THAT WE ARE TRYING TO FIN D OUT THE REGISTER AND SAME WILL BE SUBMITTED AS SOON AS WE W ILL RECEIVE THE SAME. THE AR REQUESTED FOR TIME FOR PRODUCTION OF R EGISTER, THE REPLY FILED BY THE ASSESSEE IS NOT SATISFACTORY BECAUSE A MPLE OPPORTUNITIES WERE ALREADY PROVIDED TO THE ASSESSEE DURING ASSESS MENT PROCEEDINGS DISCUSSED AS UNDER:- (I) THE ASSESSEE WAS REQUIRED TO PRODUCE BOOKS OF A CCOUNTS AND EXPENDITURE VOUCHERS VIDE NOTICE U/S 142(1)/QUERY L ETTER DATED 26.05.2016 BUT ASSESSEE HAS NOT PRODUCED THE SAME. (II) THE AR OF THE ASSESSEE WAS ASKED TO PRODUCE FR EIGHT EXPENSES BILLS AND RECORDS VIDE ORDER SHEET ENTRY D ATED 26.06.2016. BUT NOT PRODUCED. (III) FINAL OPPORTUNITY LETTER WAS ISSUED TO THE AS SESSEE VIDE LETTER NO.1138 DATED 17.11.2016 IN WHICH POINT NO.4 SPECIF ICALLY ASKED TO PRODUCE BOOKS OF ACCOUNTS, SUPPORTING DOCUMENTS, RE GISTERS, BILL VOUCHERS AND ALL DOCUMENTS RELATED TO FREIGHT PAID EXPENSES. BUT ASSESSEE HAS NOT PRODUCED AS REQUIRED. (IV) VIDE ORDER SHEET ENTRY DATED 02.12.2016 THE AR WAS ASKED TO PRODUCE BOOKS OF ACCOUNTS, BILLS AND VOUCHERS FOR V ERIFICATION. ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 27 THE CASE IS BARRED BY LIMITATION AS ON 31.12.2016 AND AS DISCUSSED AMPLE OPPORTUNITIES WERE ALREADY PROVIDED TO THE ASSESSEE, HOWEVER, FURTHER TIME WAS ALLOWED TO THE ASSESSEE T ILL 23.12.2016 BUT ASSESSEE HAS NOT RETURNED BACK. THUS, REPLY OF THE AR OF THE ASSESSEE IS NOT ACCEPTABLE. 5.5 CONCLUSION IN VIEW OF ABOVE DISCUSSION THE REPLY OF THE AR OF THE ASSESSEE IS NOT FOUND SATISFACTORY, THE ENTIRE FREIGHT EXPENSES OF RS.11,41,58,588/- WERE CLAIMED IN CASH, THE ASSESSEE HAS NOT MAINTAIN ED ANY RECEIPTS FOR SUCH HUGE CASH PAYMENTS. THERE IS NO BASIS WITH THE ASSESSEE FOR CLAIMING THESE FREIGHT EXPENSES AND THE ASSESSEE CO ULD NOT EXPLAIN THE BASIS OF FREIGHT EXPENSES CLAIMED. THE FREIGHT EXPE NSES CLAIMED BY THE ASSESSEE ARE NOT OPEN FOR VERIFICATION. THE ASSESSE E HAS CLAIMED FREIGHT EXPENSES AT VERY HIGHER SIDE I.E @98.67% OF TOTAL R ECEIPTS. BEING SUCH HEAVY AMOUNT OF CASH EXPENSES THE ASSESSEE HAS SURE LY INFLATED HIS FREIGHT EXPENSES AND REDUCED HIS PROFIT. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF CASE, CONSIDERING THE REPLY OF THE ASSESSEE IT WILL BE MOST REASONABLE AN D JUSTIFIED TO DISALLOW THE FREIGHT EXPENSES @1% OF TOTAL FREIGHT EXPENSES CLAIMED. IN THIS CASE DISALLOWANCE U/S 40A(3) OF RS.39,96,344/- HAS ALREADY BEEN MADE IN PARA-4 OF THIS ORDER, HENCE BALANCE FREIGHT EXPE NSES REMAINS TO RS.11,01,62,244/- (RS.11,41,58,588- 39,96,344). THU S IN VIEW OF ABOVE DISCUSSION FREIGHT EXPENSES DISALLOWED TOTAL RS.11, 01,622/- I.E 1% OF RS.11,01,62,244/- AND SAME IS ADDED BACK TO THE TOT AL INCOME OF THE ASSESSEE. 18. IN LIGHT OF ABOVE FINDINGS OF THE AO, WE FIND T HAT THE DISCREPANCIES SO OBSERVED BY THE ASSESSING OFFICER ARE SUFFICIENT ENOUGH TO HOLD THAT THE BOOKS OF ACCOUNTS SO SUBMIT TED BY THE ASSESSEE ARE NOT CORRECT AND COMPLETE AND THE RESUL TS SO DECLARED CANNOT BE ACCEPTED ON FACE VALUE. THE FINDINGS OF THE ASSESSING OFFICER ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 28 THAT RECEIPTS AMOUNTING TO RS 32,86,993 PERTAINING TO THE YEAR HAVE NOT BEEN DISCLOSED RAISES SERIOUS DOUBT ON THE COMPLETE NESS OF THE REPORTED TURNOVER BY THE ASSESSEE. EVEN THE LD CIT( A) HAS DIRECTED TO INCLUDE THE SAID RECEIPTS AS PART OF REPORTED TURNO VER. FURTHER, THE FINDINGS OF THE ASSESSING OFFICER THAT THE ENTIRE F REIGHT EXPENSES OF RS. 11,41,58,588/- WERE CLAIMED IN CASH, THE ASSESSEE HAS NOT MAINTAINED ANY RECEIPTS AND SUPPORTING DOCUMENTATION FOR SUCH HUGE CASH PAYMENTS, THERE IS NO BASIS FOR CLAIMING THESE FRE IGHT EXPENSES, THE FREIGHT EXPENSES ARE NOT VERIFIABLE AND THE FACT TH AT SUCH EXPENSES CONSTITUTES. 98.67% OF THE TOTAL RECEIPTS OF THE AS SESSEE, IN OUR VIEW THESE FINDINGS BY ITSELF TANTAMOUNT TO REJECTION OF BOOK RESULTS OF THE ASSESSEE EVEN THOUGH THE ASSESSING OFFICER HAS NOT SPECIFICALLY INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT. IN SUB STANCE, THE BOOKS RESULTS HAVE BEEN REJECTED BY THE AO AND THEREFORE, AS WE HAVE HELD ABOVE, WHEN THE SAID MATTER TRAVELS TO THE LD CIT(A ) AND HE LOOKS AT THE SAID FACTS AND FINDINGS OF THE ASSESSING OFFICER WI TH A FRESH MIND AND COMES TO A CONCLUSION THAT THE BOOKS OF ACCOUNTS AR E NOT RELIABLE AND HE REJECTS THE BOOKS OF ACCOUNTS BY SPECIFICALLY IN VOKING THE PROVISIONS OF SECTION 145(3), WE DONT SEE AS TO HOW HE HAS EX CEEDED HIS POWERS AND JURISDICTION SO BESTOWED UPON HIM BY THE LEGISL ATURE U/S 251 OF THE ACT. IN OUR CONSIDERED VIEW, THE BOOKS OF ACCOUNTS HAVE BEEN RIGHTLY REJECTED IN THE PRESENT CASE AND WE DONOT SEE ANY I NFIRMITY IN THE SAID FINDINGS OF THE LD CIT(A). WE HAVE ALSO GONE THROUG H THE DECISIONS OF THE COORDINATE BENCHES IN CASE OF CHOUDHARY & BROTH ERS (SUPRA), BHAGCHAND CHOUDHARY (SUPRA) AND ADVERT COMMUNICATIO NS (SUPRA), AND FIND THAT SIMILAR ANALOGY HAS BEEN DRAWN IN THE SAI D DECISIONS AND THUS, THE SAID DECISIONS SUPPORTS THE CASE OF THE ASSESSE E. ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 29 19. ONCE THE BOOKS OF ACCOUNTS AND DECLARED RESULTS HAVE BEEN REJECTED, IT IS A SETTLED LEGAL PROPOSITION THAT TH E AO HAS TO ESTIMATE THE PROFITS IN THE HANDS OF THE ASSESSEE AND THE PAST S ETTLED HISTORY OF THE ASSESSEE PROVIDES A RELIABLE BASIS TO ESTIMATE SUCH PROFITS. IN THE INSTANT CASE, THE AO HAS MADE CERTAIN SPECIFIC DISA LLOWANCES, HOWEVER, THE LD CIT(A) HAS ESTIMATED THE NET PROFITS @ 1% BA SED ON PAST HISTORY OF THE ASSESSEE AS AGAINST 0.79% DECLARED BY THE AS SESSEE. FURTHER, THE LD CIT(A) HAS DIRECTED TO INCLUDE TURNOVER OF R S 32,86,993 RELATING TO SHREE CEMENT LIMITED IN ADDITION TO REPORTED TUR NOVER OF RS 11,56,87,266 AND NET PROFIT @ 1% ON SUCH ADJUSTE D TURNOVER COMES TO RS 11,89,743 AND THUS HAS CONFIRMED THE ADDITION OF RS 6,28,345. WE FIND APPROACH OF THE LD. CIT(A) TO BE IN COMPLIA NCE WITH THE SETTLED LEGAL PROPOSITION AND DONT SEE ANY INFIRMITY IN TH E SAID FINDINGS. THE GROUND NO. 1 OF THE REVENUES APPEAL IS THUS DISMIS SED. 20. IN GROUND NO. 1.1. THE REVENUE HAS CHALLENGED T HE ACTION OF THE LD. CIT(A) IN NOT CONSIDERING THE ADDITION MADE BY THE AO U/S 40(A)(IA) BY OBSERVING THAT NO SEPARATE DISALLOWANCE U/S 40(A )(IA) OF THE ACT CAN BE MADE IN CASE OF REJECTING OF BOOK RESULTS U/S 14 5(3) OF THE ACT. WE FIND THAT THE MATTER IS NO MORE RES INTEGRA. THE COORDINATE BENCHES AS WELL AS HONBLE HIGH COURT HAVE HELD FROM TIME TO T IME THAT ONCE THE BOOK RESULTS ARE REJECTED U/S 145(3) OF THE ACT AND NET PROFIT HAS BEEN ESTIMATED, NO SEPARATE DISALLOWANCE U/S 40(A)(IA) O F THE ACT CAN BE MADE. THE GROUND NO. 1.1 OF THE REVENUES APPEAL IS THUS DISMISSED. 21. IN GROUND NO. 1.2, THE REVENUE HAS CHALLENGED T HE ACTION OF THE LD. CIT(A) IN ALLOWING THE EXPENSES ON THE UNDISCLO SED RECEIPTS OF ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 30 RS. 32,86,993/- WHICH WAS NOT SHOWN IN THE TURNOVER BY THE ASSESSEE. IN THIS REGARD, AS WE HAVE UPHELD THE REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF NET PROFIT ON THE REPORTED TURNOV ER AS WELL AS ON RECEIPTS OF RS 32,86,993, THERE IS NO QUESTION OF S EPARATE ALLOWANCE OF EXPENSES AGAINST THE SAID RECEIPTS. HENCE, SAID GR OUND OF APPEAL IS DISMISSED. 22. IN GROUND 2, THE REVENUE HAS CHALLENGED THE ACT ION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS. 39,96,344/- MADE ON ACCOUNT OF DISALLOWANCE OF FREIGHT EXPENSE U/S 40A(3) OF THE A CT. IN THIS REGARD, WITHOUT GOING INTO THE MERITS OF THE ADDITION, WE F IND THAT ONCE THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED AND ONE OF THE SIGNIFICANT REASONS BEING THE FREIGHT EXPENSES INCURRED IN CASH AND NOT SUBJECT TO VERIFICATION, AND THE NET PROFIT HAVE BEEN ESTIMATE D, NO SEPARATE DISALLOWANCE OF FREIGHT EXPENSES U/S 40A(3) OF THE ACT CAN BE MADE. THE GROUND NO. 2 OF THE REVENUES APPEAL IS THUS DI SMISSED. 23. IN GROUND NO. 3, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN RESTRICTING THE DISALLOWANCE OF FREIGHT E XPENSES UP TO RS. 6,28,345/- BY APPLYING NET PROFIT RATE OF 1% OUT OF TOTAL EXPENSES DISALLOWANCE BY THE AO AT RS. 11,01,622/-. IN THIS REGARD, WE FIND THAT THE LD. CIT(A) HAS NOT RESTRICTED THE DISALLOWANCE OF FREIGHT EXPENSES AT RS. 6,28,345/- RATHER HE HAS ESTIMATED THE NET PROF IT AS A WHOLE AT THE ENTITY LEVEL AND HAS SUSTAINED THE DISALLOWANCE OF RS. 6,28,345/-. FURTHER, ONCE THE BOOKS OF ACCOUNTS HAVE BEEN REJEC TED, THE ASSESSING OFFICER HAS TO ESTIMATE THE PROFITS RATHER THAN LOO KING AT INDIVIDUAL HEAD ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 31 OF EXPENSES. ACCORDINGLY GROUND NO. 3 OF THE REVEN UES APPEAL IS DISMISSED. 24. IN ITS CROSS OBJECTION, THE ASSESSEE HAS CHALLE NGED THE ESTIMATION OF NET PROFIT RATE @ 1% BY THE LD. CIT(A) AS AGAINS T 0.79% REPORTED BY THE ASSESSEE. AS WE HAVE ABOVE, THE LD CIT(A) BY RE LYING ON THE PAST RESULTS OF THE ASSESSEE HAS ESTIMATED THE NET PROFI T @ 1%. THERE IS NO DISPUTE THAT PAST HISTORY SO TAKEN INTO CONSIDERATI ON BY THE LD CIT(A) HAS ATTAINED FINALITY. WE THEREFORE DO NOT SEE ANY JUSTIFIABLE BASIS IN THE SAID OBJECTION SO RAISED BY THE ASSESSEE AS THE COU RTS HAVE HELD FROM TIME TO TIME THAT ONCE THE BOOK RESULTS HAVE BEEN R EJECTED, THE PAST HISTORY OF THE ASSESSEE PROVIDES A RELIABLE BASIS F OR ESTIMATION OF PROFITS. IN THE RESULT, THE CROSS OBJECTION SO RAISED BY THE ASSESSEE IS REJECTED. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE AND C ROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 /02/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:-28/02/2019. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- ITO, WARD-2, BEAWAR. 2. IZR;FKHZ@ THE RESPONDENT- SHRI MAN MOHAN MITTAL, BEAWAR. ITA NO. 764/JP/2018 & CO NO. 24/JP/2018 ITO VS. SHRI MAN MOHAN MITTAL 32 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. ITA NO. 764/JP/2018 & CO NO. 24/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR