M/s. RONAK ROADLINE PVT. LTD., MUMBAI V. DCIT CIR. 2(4), MUMBAI

ITA 7736/MUM/2003

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71079 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 14-08-2013
• Assessment Year: 1998-1999
• Appeal Filed On: 05-12-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: MADHUR AGARWAL
• Keywords: Depreciation; Bad and doubtful debts
• Section: 145

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI . , , ! ! ! ! '# $% '# $% '# $% '# $% , ,, , & & & & ' ' ' ' BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 7736/MUM./2003 ( &) * !+* / ASSESSMENT YEAR : 199899 ) RONAK ROADLINES PVT. LTD. 301, JUNE APARTMENT GAOTHAN LANE NO.1 OFF. S.V. ROAD, ANDHERI (W) MUMBAI 400 058 .. ,- / APPELLANT ) V/S DY. COMMISSIONER OF INCOME TAX CIRCLE2(4), MUMBAI .... ./,- / RESPONDENT , . / PERMANENT ACCOUNT NUMBER AAACR1926P &) *1# 2 3 / ASSESSEE BY : MR. MADHUR AGARWAL 4! 2 3 / REVENUE BY : MR. O.P. SINGH )! 2 # / DATE OF HEARING 14.08.2013 $ 5+ 2 # / DATE OF ORDER 06.09.2013 $ $ $ $ / ORDER '# $% '# $% '# $% '# $% , ,, , & & & & 6 6 6 6 / PER AMIT SHUKLA, J.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE, CHALLENGING THE IMPUGNED ORDER DATED 19 TH SEPTEMBER 2003 FOR THE ASSESSMENT YEAR RONAK ROADLINES PVT. LTD. 2 199899, PASSED BY THE LEARNED COMMISSIONER (APPEAL S)VII, MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143( 3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ), VIDE WHICH, FOLLOWING GROUNDS HAVE BEEN RAISED: 1. THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADD ITION OF FREIGHT PAID ON HIRED VEHICLE TO DHARAMPAL SINGH, PHUMAN SING) AND DARSHAN SING) AMOUNTING TO RS.879944/-. ADDRESSES OF THE PARTIES TO WHOM FREIGHT PAID WERE AVAILABLE ON RECORD AND ONUS IS REBUTTED BY TH E DEPARTMENT, FREIGHT PAID IS NOT AN EXPENDITURE BUT COMMISSION ON FREIGHT PAI D IS AN INCOME TO THE APPELLANT, ADDITIONS BASED ON INCORRECT FINDINGS IN A.Y 1995-96 IS BAD IN LAW AS EACH ASSESSMENT YEAR IS SEPARATE. 2. THE LEARNED CIT (A) ERRED IN CONFIRMING ADDITIOF L OF KS.,. 1475571- ON ACCOUNT OF PREVIOUS YEAR EXPENSES WITHOUT CONSIDERI NG THE PREVIOUS YEARS INCOME OF RS. 187604/-. THE LIABILITY FOR PREVIOUS YEAR IS CRYSTALLIZED DURING THE YEAR WHEN ACCOUNTANT OF THE LOAN, CREDITORS ARE RECONCILED. 3. THE LEARNED CIT (A) ERRED IN CONFIRMING ADDITION OF KS. 262651/- ON ACCOUNT OF EXCESSIVE EXPENDITURE. THE WRITTEN SUBMI SSION MADE IS NOT UNDERSTOOD PROPERLY. 2. FACTS IN BRIEF : THE ASSESSEE, IN THE PRESENT CASE, IS ENGAGED IN THE BUSINESS OF TRANSPORTATION OF LIQUEFIED PETROLEUM P RODUCTS AND HAS CARRIED OUT TRANSPORTATION ACTIVITIES FROM ITS OWN TANKERS AND ALSO HIRING THE VEHICLE FROM OPEN MARKET. THE ASSESSING OFFICER NOTED THAT IN THE ASSESSMENT YEAR 199596, IN CONSEQUENCE OF ORDER UNDER SECTION 263, ENQUIRIES WERE CONDUCTED FOR THE FREIGHT PAYMENTS TO THE VARIOUS P ARTIES BY SENDING NOTICES UNDER SECTION 131. HOWEVER, MOST OF THE LETTERS REM AIN UNSERVED AND THE ASSESSEE COULD NOT PRODUCE THESE PERSONS FOR EXAMIN ATION. OWING TO VARIOUS DISCREPANCIES, THE ASSESSEES BOOK RESULTS WERE REJ ECTED AND NET PROFIT RATE WAS ESTIMATED. HE SUBMITTED THAT IN THIS YEAR ALSO, THE FACTS ARE THE SAME. THE GROSS RECEIPTS IN THIS YEAR OF THE ASSESSEE ARE AT ` 1,61,73,657 WHEREAS THE RETURN OF INCOME IS ONLY OF ` 1,10,972 I.E., 0.69% OF THE FREIGHT RECEIPTS. THE FREIGHT PAYMENT SHOWN BY THE ASSESSEE ARE AT ` 95,29,759 AND FROM ITS OWN TANKER, THE ASSESSEE HAS CLAIMED EXPENDITURE OF ` 42,82,750. BASED ON THE SAME ENQUIRY WHICH WAS DONE IN THE ASSESSMENT Y EAR 199596, THE ASSESSING OFFICER MADE FOLLOWING ADDITIONS: RONAK ROADLINES PVT. LTD. 3 (I) FREIGHT PAYMENT MADE TO THREE PERSONS WHICH WAS THE RE IN THE ASSESSMENT YEAR 199596 FOR SUMS AGGREGATING TO ` 8,79,944; (II) THE DISALLOWANCE OF INTEREST EXPENDITURE PERTAINING TO EARLIER YEARS OF ` 1,47,557; AND (III) THE DISALLOWANCE ON ACCOUNT OF BAD DEBT WRITTEN OFF OF SUMS AGGREGATING TO ` 7,93,817 AND ESTIMATED DIS- ALLOWANCE @ 2% AGGREGATING TO ` 2,62,651. THUS, THE ASSESSMENT WAS COMPLETED AT AN INCOME OF ` 21,94,941 INCLUDING THE RETURN OF INCOME FOR ` 1,10,971. 3. THE COMMISSIONER (APPEALS), CONFIRMED THE FIRST ADD ITION OF ` 8,79,944, ON THE BASIS OF THE ORDER PASSED BY THE C OMMISSIONER (APPEALS) IN THE ASSESSMENT 199596 AND FOR THE BALANCE ADDITION , HE HAS JUSTIFIED THE ACTION AND THE REASONING OF THE ASSESSING OFFICER A FTER DISCUSSING EACH AND EVERY ISSUE IN DETAIL. 4. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE TRIBUNAL IN ASSESSEES OWN CASE IN THE ASSESSMENT Y EAR 199596, HAS UPHELD THE REJECTION OF BOOKS OF ACCOUNT AND HAD APPLIED N ET PROFIT OF 8% ON THE GROSS TRANSPORT RECEIPTS AND, THEREAFTER, THE DEPRE CIATION HAS BEEN ALLOWED. ONCE THE ENTIRE BOOK RESULTS HAVE BEEN REJECTED AND THE NET PROFIT RATE HAS BEEN APPLIED, OTHER DISALLOWANCE SHOULD NOT BE MADE . 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE STRONGLY RELIED UPON THE ORDER PASSED BY THE COMMISSIONER (A PPEALS). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. INSOFAR AS THE ADDITION OF ` 8,79,944, IS CONCERNED, THE RONAK ROADLINES PVT. LTD. 4 SAME HAS BEEN MADE ON ACCOUNT OF FREIGHT PAYMENTS M ADE TO THE THREE PERSONS WHICH WERE NOT FOUND TO BE GENUINE IN THE E NQUIRIES CONDUCTED IN THE ASSESSMENT YEAR 199596. IN THIS YEAR WITHOUT A NY INDEPENDENT ENQUIRY, THE ASSESSING OFFICER HAS MADE THE ADDITIO N IN RESPECT OF SAME PERSONS WHICH CANNOT BE HELD TO BE JUSTIFIABLE REAS ONS. THE COMMISSIONER (APPEALS) TOO HAS MAINLY RELIED UPON THE FINDINGS O F THE COMMISSIONER (APPEALS) FOR THE ASSESSMENT YEAR 199596, WHEREIN THE NET PROFIT RATE OF 8% HAS BEEN APPLIED AFTER REJECTING THE BOOKS OF AC COUNT UNDER SECTION 145 AND HAS UPHELD THIS ADDITION ON THIS GROUND ONLY. B E IT AS MAY BE, BEFORE US, THE REJECTION OF THE BOOKS OF ACCOUNT HAS NOT BEEN DISPUTED BY THE LEARNED COUNSEL AND STRONG RELIANCE HAS BEEN PLACED ON THE DECISION OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 199596, WHEREIN 8% OF THE NET PROFIT HAS BEEN APPLIED ON THE TOTAL RECEIPTS. THUS, IN THIS YEAR A LSO, RESPECTFULLY FOLLOWING THE SAME PRECEDENCE, AS BOTH THE AUTHORITIES BELOW HAS ONLY FOLLOWED THE PRECEDENCE OF THE ASSESSMENT YEAR 199596 ONLY, WE UPHOLD THE REJECTION OF THE BOOK RESULTS UNDER SECTION 145 AND DIRECT THE A SSESSING OFFICER TO APPLY NET PROFIT RATE OF 8% AND, THEREAFTER, ALLOW DEPREC IATION AS PERMISSIBLE UNDER THE INCOME TAX RULES, AS HELD BY THE TRIBUNAL IN TH E EARLIER YEARS I.E., ASSESSMENT YEAR 199596. ONCE THE NET PROFIT RATE H AS BEEN ESTIMATED AFTER REJECTION OF BOOK RESULTS ANY ADDITION ON ACCOUNT O F FREIGHT PAYMENT CANNOT BE SUSTAINED SEPARATELY. 7. INSOFAR AS THE ADDITION ON ACCOUNT OF DISALLOWANCE OF BAD DEBTS, IT IS SEEN THAT THE COMMISSIONER (APPEALS) HAS HELD THAT EVEN AFTER 1ST APRIL 1989, THE ASSESSEE HAS TO PROVE / ESTABLISH THAT TH E DEBTS HAS BECOME BAD. SUCH A VIEW OF THE COMMISSIONER (APPEALS) NOW CANNO T BE SUSTAINED IN VIEW OF THE LAW LAID DOWN BY THE HON'BLE SUPREME COURT I N TRF LTD. V/S CIT, [2010] 323 ITR 397 (SC), WHEREIN THE HON'BLE SUPREM E COURT HAS HELD THAT ONCE THE ASSESSEE HAS WRITTEN OFF THE BAD DEBT IN T HE BOOKS OF ACCOUNT, THE SAME HAS TO BE ALLOWED. HOWEVER, IN THE PRESENT CAS E, WE ARE NOT ADJUDICATING THE ISSUE OF BAD DEBTS AS ONCE THE BOO KS OF ACCOUNT HAVE BEEN RONAK ROADLINES PVT. LTD. 5 REJECTED AND NET PROFIT RATE HAS BEEN APPLIED ON TH E TOTAL RECEIPTS, THE OTHER ADDITIONS GET SUBSUMED AND NO SEPARATE ADDITION FOR THE EXPENSES DEBITED IN THE PROFIT & LOSS ACCOUNT CAN BE MADE SEPARATELY. S IMILARLY, THE ADDITION OF ` 1,47,557, ON ACCOUNT OF EARLIER YEARS EXPENSES AND ADHOC DISALLOWANCE OF ` 2,62,651 AND THE OTHER EXPENSES ARE ALSO NOT CALLED FOR. 8. CONSEQUENTLY, WE SET AIDE THE IMPUGNED ORDER PASSED BY THE COMMISSIONER (APPEALS) AND DELETE ALL THE OTHER ADD ITIONS CONFIRMED BY HIM AS THE ASSESSEES INCOME HAS TO BE ESTIMATED BY APP LYING NET PROFIT RATE OF 8% ON THE TOTAL RECEIPTS, SUBJECT TO ALLOWANCE OF D EPRECIATION. HOWEVER, WHILE COMPUTING THE INCOME, THE ASSESSING OFFICER W ILL ENSURE THAT AFTER ALLOWING DEPRECIATION, THE INCOME IF GOES BELOW THE RETURNED INCOME, THEN THE INCOME SHOULD BE ASSESSED AT RETURN OF INCOME O NLYL. THUS, THE GROUND RAISED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED . 9. 1 #7 &) *1# 2 '$ !# 8 ) 4# 9: ; 9. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS P ARTLY ALLOWED. $ 2 5+ < =)7 6 TH SEPTEMBER 2013 2 > ; ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH SEPTEMBER 2013 SD/- . .. . B. RAMAKOTAIAH ACCOUNTANT MEMBER SD/- '# '# '# '# $% $% $% $% & & & & AMIT SHUKLA JUDICIAL MEMBER MUMBAI, =) =) =) =) DATED : 6 TH SEPTEMBER 2013 RONAK ROADLINES PVT. LTD. 6 $ 2 .&#'? @?+# / COPY OF THE ORDER FORWARDED TO : (1) &) *1# / THE ASSESSEE; (2) 4! / THE REVENUE; (3) A () / THE CIT(A); (4) A / THE CIT, MUMBAI CITY CONCERNED; (5) ?!D> .&#&) , , / THE DR, ITAT, MUMBAI; (6) >E* F / GUARD FILE. /?# .&# / TRUE COPY $) / BY ORDER . 4. GH / PRADEEP J. CHOWDHURY !1I &)4 G! / SR. PRIVATE SECRETARY J / 9 4 / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI