D.C.I.T Cir - 3,Asansol, Asansol V. M/s Sanjay Transport Agency, Burdwan

ITA 830/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4569 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 12-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 16-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINABANDHU NASKAR JCIT SRDR
• Assessee Lawyers: S M SURANA
• Keywords: Depreciation; Search and seizure
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 830 / KOL / 2013 ASSESSMENT YEAR:-2009-10 DCIT, CIRCLE-3, ASANSOL AT PARMAR BUILDING, 54, G.T. ROAD (WEST), ASANSOL-713 304 V/S . M/S SANJAY TRANSPORT AGENCY, 41, N.S.B. ROAD, RANIGANJ-713 347 BURDWAN [ PAN NO.AAVFS 6659 N ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI DINABANDHU NASKAR, JCIT-SR-DR /BY RESPONDENT SHRI S.M. SURANA, ADVOCATE /DATE OF HEARING 12-07-2016 /DATE OF PRONOUNCEMENT 26-08-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-DURGAPUR IN APPEAL NO.262/CIT( A)/ASL/ACIT,CIR- 3/ASL/2011-12 DATED 30.01.2013. ASSESSMENT WAS FRAM ED BY ACIT, CIRCLE-3, ASANSOL U/S 143(3) OF THE INCOME TAX ACT, 1961 (HER EINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 27.12.2011 FOR ASSESSMEN T YEAR 2009-10. THE GROUNDS RAISED BY ASSESSEE PER ITS APPEAL ARE AS UN DER:- 1. THAT THE LD. CIT(A), ASANSOL HAS ERRED IN LAW A ND ON FACTS BY ALLOWING THE RELIEF OF 49,29,534/- DISALLOWED BY THE ASSESSING OFFICER ON ACCOUNT OF SHOWING LOW NET PROFIT PERCENTAGE OV ER TURNOVER; 2. THAT THE LD. CIT(A), ASANSOLHAS ERRED IN LAW AND ON FACTS BY ALLOWING THE RELIEF OF 76,49,136/-, DISALLOWED BY THE ASSESSING OFFICER U/ S. ITA NO. 830/KOL/2013 A.Y. 2009-10 DCIT CIR-3 ASL VS. M/S SANJAY TRANSPOR T AGENCY PAGE 2 40A(2) ON ACCOUNT OF EXCESS PAYMENTS MADE TO RELAT IVES AND ASSOCIATE CONCERNS. SRI S.M. SURANA, LD. AUTHORIZED REPRESENTATIVE APPE ARED ON BEHALF OF ASSESSEE AND SHRI DINABANDHU NASKAR, LD. DEPARTMENT AL REPRESENTATIVE APPEARED ON BEHALF OF REVENUE. 2. THE FIRST ISSUE RAISED BY THE REVENUE IS THAT LD . CIT(A) ERRED IN DELETING ADDITION OF RS.49,29,543/- TO THE TOTAL INCOME OF T HE ASSESSEE. 3. FACTS IN BRIEF ARE THAT ASSESSEE IS A PARTNERSHI P FIRM AND ENGAGED IN CONTRACT BUSINESS OF EARTH CUTTING, COAL RAISING, T RANSPORTING AND ROAD DEVELOPMENT. THE ASSESSEE FOR THE AY 2010-11 HAS SH OWN NET PROFIT PERCENTAGE @2.8% OF THE TURNOVER BUT IT HAS SHOWN N ET PROFIT @ .54% OF THE TURNOVER FOR THE YEAR UNDER CONSIDERATION WHILE THE RE IS NO CHANGE IN THE NATURE OR PLACE OF BUSINESS. THE ASSESSING OFFICER ACCORDINGLY DOUBTED ON THE INCOME DECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. AS PER AO IT SHOULD BE AT LEAST 2.8% OF THE TURNOVER. BESIDES THE AO ALSO OBSERVED THAT ASSESSEE HAS CLAIMED MUCH HIGHER EXPENSES IN THE AY 2010-11 STILL SHOWING HIGHER PERCENTAGE OF PROFIT. ACCORDINGLY, THE ASSES SEE MUST BE HAVING HIGHER PERCENTAGE OF PROFIT IN THE YEAR UNDER CONSIDERATIO N. THE PERCENTAGE OF EXPENSE TO TURNOVER IS 3.93% FOR AY 2009-10 WHEREAS FOR THE AY 2010-11 FOR THE SAME EXPENSES IT IS 4.63% OF TURNOVER. IT MEANS ASSESSEE HAS SHOWN LOWER NET PROFIT I.E. 4.63%- 3.93% = 0.70%. SO TOTA L PROFIT PERCENTAGE SHOULD BE 2.8%+ 0.70% =3.5%. THE ASSESSEE ALSO ITSELF HAS CONFESSED THAT PROFIT IN THIS LINE OF BUSINESS IS 3-4% AND ITS AVERAGE MEANS IS 3.5% OF THE TURNOVER DURING SURVEY. THEREFORE THE NET PROFIT (NP FOR SHO RT) SHOULD BE RS. 54,78,307/- (15,65,22,962 * 3.5%) AND PROFIT ALREAD Y SHOWN IS OF RS. 8,48,773.00. ACCORDINGLY, THE LESS PROFIT SHOWN BY THE ASSESSEE IS OF RS. 49,29,534/- (RS. 54,78,307.00 -8,48,773.00) WHICH W AS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO. 830/KOL/2013 A.Y. 2009-10 DCIT CIR-3 ASL VS. M/S SANJAY TRANSPOR T AGENCY PAGE 3 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. C IT(A) WHO HAS DELETED THE ADDITION MADE BY THE AO BY OBSERVING THAT THE A O HAS NOWHERE SHOWN ANY DISSATISFACTION ABOUT THE BOOKS AND ALSO NOT RE JECTED ANY BOOKS OF ACCOUNTS. WITHOUT ANY DEFECT IN THE BOOKS OF ACCOUN TS TURNOVER OR INCOME CANNOT BE ESTIMATED. THE PERCENTAGE OF PROFIT IS ES TIMATED @ 3.5% IS JUST A FIGURE OF AVERAGE OF 3% TO 4% AS STATED BY THE PART NER OF THE ASSESSEE. NO LOGICAL BASIS OF ADOPTION OF THIS PERCENTAGE IS MEN TIONED ANYWHERE. NO DEFINITE CONCLUSION CAN BE ARRIVED FROM AO ORDER. T HERE IS NO SPECIFIC MATERIAL FOUND DURING THE SURVEY OF THE ASSESSEE WITH REGARD TO THE UNDISCLOSED INCOME. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE CAME IN APPEAL BEFORE US 5. BEFORE US LD. DR SUBMITTED THAT THE ASSESSEE IN HIS STATEMENT HAS ACCEPTED THAT THE MARGIN OF PROFIT IN THE AFORESAID LINE OF BUSINESS IS BETWEEN THE RANGES OF 3 TO 4%. ACCORDINGLY THE PROFIT DECLA RED AT THE RATE OF .54% IS UNDER STATED. THE LD. DR ALSO RELIED IN THE JUDGMEN T OF HONBLE HIGH COURT OF MADRAS IN THE CASE OF B. KISHORE KUMAR VS. DCIT 52 TAXMANN.COM 449 WITH REGARD TO THE STATEMENT GIVEN BY THE ASSESSEE. SECTION 69A, READ WITH SECTIONS 143, 153, 153A OF THE INCOME-TAX ACT, 1961 - UNEXPLAINED MONEYS (ADMISSION IN SWORN STATEMENT) - ASSESSMENT YEARS 2001-02 TO 2007-08 - ASSESSING OFFICER MADE ADDITIO NS AS UNDISCLOSED INCOME ON BASIS OF SWORN STATEMENTS OF ASSESSEE DUR ING SEARCH AND SEIZURE - ASSESSEE MADE OUT AN ISSUE THAT SUBMISSIONS OF CERT AIN MATERIALS BY HIM WERE NOT CONSIDERED BY ASSESSING OFFICER - HOWEVER ASSESSEE HIMSELF STATED IN SWORN STATEMENT THAT HE HAD SEPARATE BUSINESS IN COME WHICH WAS NOT INCLUDED IN HIS RETURNS AND OUTSTANDING LOANS WERE TO BE RECOVERED WITH INTEREST, HENCE THAT WAS A CLEAR ADMISSION AND THER E WAS NO NECESSITY TO SCRUTINIZE DOCUMENTS - WHETHER THEREFORE ASSESSING OFFICER WAS JUSTIFIED IN BRINGING TO TAX UNDISCLOSED INCOME - HELD, YES [PAR AS 5,6 & 7] [IN FAVOUR OF REVENUE] THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AO . ON THE OTHER HAND THE LD. AR SUBMITTED THAT IF THE DEPRECIATION AND INTER EST ELEMENT IS REDUCED THEN THE PROFIT IS HIGHER THAN THE RATE ESTIMATED BY THE AO. THE AO FAILED TO BRING ANY DEFECT IN THE BOOKS OF ACCOUNTS. THE LD. AR VEH EMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A). ITA NO. 830/KOL/2013 A.Y. 2009-10 DCIT CIR-3 ASL VS. M/S SANJAY TRANSPOR T AGENCY PAGE 4 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING D ISCUSSION WE FIND THAT THE AO HAS MADE THE ADDITION ON THE GROUND THAT THE ASS ESSEE HAS DECLARED LESS PROFIT IN COMPARISON TO THE AY 2010-11. HOWEVER THE LD. CIT GRANTED THE RELIEF TO THE ASSESSEE AS THE AO FAILED TO BRING ANY DEFEC T IN THE BOOKS. IN THE INSTANT CASE THE AO HAS MADE ADDITION ON HIS SURMIS E. IT IS WELL SETTLED PROPOSITION OF THE LAW THAT FOR MAKING ANY ADDITION TO THE TOTAL INCOME OF ASSESSEE THERE HAS TO BE COGENT EVIDENCE. IN THE AB SENCE OF THE SAME THE ADDITION SHALL NOT STAND. THE SUBMISSION OF LD. AR IS THAT THE PROFIT RATIO IS THE SAME AS QUOTED BY THE AO I.E. 3.50% IF WE ELIMINATE THE INTEREST AND DEPRECIATION EXPENSES FROM THE PROFIT. THE SAME FAC T WAS COMMUNICATED IN THE STATEMENT TO THE AO. THERE WAS NO IOTA OF DEFE CT IN THE BOOKS OF THE ASSESSEE. THE CASE LAW CITED BY THE DR IS NOT RELEV ANT TO THE FACTS OF THE PRESENT CASE AS BESIDES THE STATEMENT THE AO HAS TO BRING SUFFICIENT EVIDENCE BEFORE MAKING THE ADDITION. IN THIS CONNECTION WE R ELY ON THE JUDGMENT OF HIGH COURT OF MYSORE IN THE CASE OF P. VENKANNA VS. CIT, 72 ITR 328. THE RELEVANT EXTRACT IS REPRODUCED BELOW : OTHER THINGS BEING EQUAL, PROFITS ESTIMATED DURING AN EARLIER PERIOD MAY, IN A PROPER CASE, GUIDE THE ESTIMATION OF THE PROFITS OF A SUBSEQUENT YEAR. BUT THE EARLIER ESTIMATES CAN HAVE RELEVANCE ONLY IF THE CO NDITIONS IN WHICH THE BUSINESS ACTIVITY OF THE LATER PERIOD IS CONDUCTED ARE SO SI MILAR TO THOSE OF THE EARLIER PERIOD THAT IT WOULD BE REASONABLE TO INFER THAT TH E PROPORTION BETWEEN THE TURNOVER AND THE PROFITS REMAINS UNALTERED. BUT THE RE WAS NO INSTITUTION OF ANY SUCH COMPARISON BY THE ITO SINCE HE DID NOT DEPEND UPON THE ESTIMATION OF THE PROFITS OF THE EARLIER YEARS. HIS ESTIMATION DEPEND ED ON A FORMULA EVOLVED FOR OTHER ASSESSEES WITHOUT A DISCLOSURE OF ITS BASIS O R THE GROUNDS FOR THE BELIEF THAT THEY WERE COMPARABLE CASES. THE APPELLATE TRIBUNAL WHICH MADE ITS ESTIMATE BY AN ENTIRELY NEW PROCESS BESTOWED NO THOUGHT TO THE QUESTION WHETHER THE EARLIER ESTIMATES COULD PROPERLY REFLECT SUBSEQUENT PROFITS . IT ASSUMED THEY DID. THE ESTIMATE SO MADE, IN THE ERRONEOUS BELIEF THAT A FO RMULA FOR AN ESTIMATE ONCE EVOLVED CONSTITUTES AN INFALLIBLE BASIS FOR ALL SUB SEQUENT ESTIMATES, CANNOT BE SUSTAINED FOR THE REASON THAT WHAT IT OVERLOOKED WA S THAT, NORMALLY, A CHANGE IN MARKET CONDITIONS DISTURBS THE OLD RATIO BETWEEN TH E TURNOVER AND THE PROFITS. THERE WAS NO MATERIAL FOR THE TRIBUNAL TO SET ASIDE THE ORDER OF THE AAC. THERE IS NO MATERIAL TO JUSTIFY THE ADDITION MADE B Y THE IT AUTHORITIES TO THE GROSS PROFIT SHOWN BY THE ASSESSEE IN HIS ACCOUNT B OOKS. THE ADDITIONS WERE MADE ON AD HOC BASIS AND NOT ON THE EVIDENCE SUCH A S THE TRADING CONDITIONS ITA NO. 830/KOL/2013 A.Y. 2009-10 DCIT CIR-3 ASL VS. M/S SANJAY TRANSPOR T AGENCY PAGE 5 IN SIMILAR TRADE OR ON THE RECONSTRUCTION OF THE AC COUNT BOOKS OF THE ASSESSEE ON THE BASIS SELECTED BY THE ITO WHICH WAS DIFFEREN T FROM THE ONE ADOPTED BY THE ASSESSEE. IN VIEW OF ABOVE WE DO NOT FIND ANY R EASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, WE UPHOLD THE SAME. THIS GROUND OF REVENUE IS DISMISSED. 7. THE SECOND ISSUE RAISED BY REVENUE IS AS REGARDS THAT LD. CIT(A) GAVE RELIEF ASSESSEE OF 76,49,136/- DISALLOWED BY AO U/S 40A(2) EXPENSES PAID TO THE RELATED PARTIES. 8. DURING THE YEAR ASSESSEE HAS CLAIMED SEVERAL EX PENSES IN ITS BUSINESS FOR WHICH THE SERVICES OF FAMILY MEMBERS WERE AVAIL ED. THE DETAILS OF SUCH EXPENSES ARE LISTED BELOW:- NATURE OF EXPENSES AMOUNT DEBITED IN P&L A/C AMOUNT PAID TO THE FAMILY MEMBERS HIRED TRUCK FOR SAND TRANSPORTATION RS.80,05,927/- RS.68,02,328/- STONE PICKING & STACKING EXPENSES RS.43,22,000/- R S.32,26,640/- OVERBURDEN / COAL TRANSPORTATION EXPENSES RS.1,48,82,580/- RS.1,48,82,580/- OVERBURDEN REMOVAL EXPENSES RS, 78,62,550/- RS. 3 3,38,800/- FORESTATION EXPENSES RS 23,46,196/- RS. 23,46,196 /- TOTAL RS.3,05,96,544/- THE ASSESSING OFFICER, DURING ASSESSMENT PROCEEDING S, OBSERVED THAT THE ADDRESSES TO ALL THE PARTIES TO WHOM THE PAYMENT IS MADE IS THE SAME AS THE ADDRESS OF THE ASSESSEE. THE PARTIES TO WHOM THE PA YMENT HAS BEEN MADE ARE DOING THE BUSINESS ONLY FOR THE ASSESSEE. FOR D IFFERENT KINDS OF JOB NAME OF SAME PEOPLE ARE APPEARING AGAIN AND AGAIN. IT SH OWS THAT ASSESSEE WAS DEBITING ITS ACCOUNT BY GIVING ACCOMMODATING ENTRIE S TO ITS FAMILY MEMBERS. EVEN THE ASSESSEE HAS MADE THE PAYMENT AFTER DEDUCT ION OF TDS AND THROUGH BANKING CHANNEL BUT THESE HAVE BEEN CLAIMED AT INFLATED AMOUNT. ACCORDINGLY THE AO DISALLOWED ALL THE EXPENSES PAID TO THE FAMILY MEMBERS TO THE TUNE OF RS. 76,49,136/- (3,05,96,544 * 25%) AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO. 830/KOL/2013 A.Y. 2009-10 DCIT CIR-3 ASL VS. M/S SANJAY TRANSPOR T AGENCY PAGE 6 9. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. C IT(A) AND SUBMITTED THAT NO BAR ON THE PAYMENT TO THE FAMILY MEMBER EXC EPT THE PROVISION OF SEC. 40A(2) OF THE ACT. THE AO HAS NOT POINTED OUT ANY U NREASONABLE AMOUNT OF PAYMENT PAID TO THE PARTIES. THE LD. CIT(A) HAS DEL ETED THE ADDITION MADE BY AO BY OBSERVING THAT THE AO HAS NOWHERE POINTED ANY CASE OF THE APPLICABILITY OF SEC40A(2). THERE IS NO ANY EVIDENC E BY THE AO THAT IT IS AN ACCOMMODATING ENTRY. THERE IS NOT ANY DETAIL OF THE MARKET RATE WHICH SHOWS THAT THE PAYMENT HAS BEEN MADE EXCESSIVELY. THERE I S NO BASIS FOR ESTIMATING THE FIGURE @ 25% FOR MAKING THE DISALLOWANCE. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS IN APPEAL BEFORE US. 10. BOTH THE PARTIES RELIED ON THE ORDERS AS FAVORI NG THE SAME. AT THE OUTSET WE FIND THAT THE AO HAS MADE THE ADDITION ON HIS SU RMISE AND WITHOUT BRINGING ANY DEFECT IN THE EXPENDITURE INCURRED BY THE ASSES SEE. WE ALSO FIND THAT THE SIMILAR EXPENSES WERE CLAIMED BY THE ASSESSEE IN TH E EARLIER YEARS AND SUBSEQUENT YEARS AND NO DISALLOWANCE WAS MADE. THE LD. DR HAS ALSO FAILED TO BRING ANYTHING CONTRARY TO THE FINDINGS OF LD. C IT(A). IN VIEW OF ABOVE WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF TH E LD. CIT(A). ACCORDINGLY, UPHOLD THE SAME. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 11. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 26 /08/2016 SD/- SD/- ( !') ( !') (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP $!% &- 26 / 08 /201 6 ITA NO. 830/KOL/2013 A.Y. 2009-10 DCIT CIR-3 ASL VS. M/S SANJAY TRANSPOR T AGENCY PAGE 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIRCLE-3, ASANSOL AT PARMAR BUILD ING, 54, G.T. ROAD, (WEST), ASAN SOL-713 304 2. /RESPONDENT-M/S SANJAY TRANSPORT AGENCY, 41, N.S.B. ROAD, RANIGANJ-71347 3. %.%/0 1 1 2 / CONCERNED CIT ASANSOL 4. 1 1 2- / CIT (A) ASANSOL 5. 567 /0, 1 /0 , / DR, ITAT, KOLKATA 6. 7:; <= / GUARD FILE. BY ORDER/ 1! , /TRUE COPY/ / % 1 /0 ,