ITO 25(2)(1), MUMBAI V. KAVITA J PATEL, MUMBAI

ITA 8729/MUM/2010

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0162 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-05-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 14-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PURUSHOTTAM KASHYAP
• Assessee Lawyers: NARAYAN SWAMI
• Keywords: Rejection of books of accounts
• Section: 133(6); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 8729/MUM/2010 ASSESSMENT YEAR: 2007 - 08 ITO - 25(2)(1) C - 11 B LD. G., ROOM NO. 107, P.K. BHAVAN , BKC, BANDRA (E) MUMBAI - 400051. VS. SMT. KAVITA J. PATEL, 01, NARAYAN NIWAS, ROKADIA LANE, BORIVALI(W) MUMBAI - 400092. PAN NO. A HGPP1740D APPELLANT RESPONDENT REVENUE BY : SHRI PURUSHOTTAM KASHYAP, DR ASSESSEE BY : SHRI NARAYAN SWAMI, A R DATE OF HEARING : 07 /06/2017 DATE OF PRONOUNCEMENT : 04/09/2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE REVENUE . THE RELEVANT ASSESSME NT YEAR IS 2007 - 08 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 35 , MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3 ) OF THE INCOME TAX ACT 1961, (T HE ACT). ITA NO. 8729/MUM/2010 2 2. THE GROUND S OF APPEAL READ AS UNDER: - I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERR ED IN DELETING THE ADDITION OF RS.68,12,451/ - MADE BY THE AO ON ACCOUNT OF INFLATED TRANSPORT CHARGES CLAIMED BY THE ASSESSEE AND DIRECTING THE AO TO ESTIMATE THE NET PROFIT @ 8% OF TRANSPORT CHARGES RECEIVED IN SPITE OF HAVING APPRECIATED THE FACT THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE CANNOT BE ACCEPTED AS COMPLETE AND CORRECT. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CI T(A) ERRED IN HO LD ING THAT THE ASSESSEE IS NOT LIABLE TO DED UCT TDS U/S.194C(1) OF THE I .T. ACT, 1961 FROM TRANSPORT PAYMENTS MADE BY HIM AND NOT APPRECIATING THE FACT THAT THE NATURE OF PAYMENTS MADE ARE IN THE NATURE OF SUB - CONTRACT CHARGES AND THE ASSESSEE IS THUS LIABLE TO DEDUCT THE TDS U/S 1 94C(2) OF THE ACT. III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRE D IN DELETING THE ADDITION OF RS. 15,29,162/ - MADE BY THE AO ON ACCOUNT OF CESSATION OF LIABILITY. IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) ERRED IN DELETING 25% AD - HOC DISALLOWANCE OF RS.10,92,139/ - MADE BY THE AO OUT OF DIFFERENT EXPENSES CLAIMED BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT. 3. WE BEGIN WITH THE 1 ST GROUNDS OF APPEAL. THE ASSESSING OFFICER (AO) ISSUED NOTICE U/S 133(6) TO THE PERSONS TO WHOM THE ASSESSEE CLAIMED TO HAVE MADE PAYMENTS OF TRANSPORT CHARGES BUT THESE WERE RETURNED BACK WITHOUT SERVICE. THE N THE AO ASKED THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO PROVIDE DETAILS OF TRANSPORTATION CHARGES SU CH AS BANK STATEMENT REFLECTING THE TRANSACTION, COPIES OF RETURN OF INCOME ALONG WITH PROFIT AND LOSS ITA NO. 8729/MUM/2010 3 ACCOUNT, BALANCE SHEET ETC. OF THE PARTIES. HOWEVER, THE ASSESSEE FAILED TO FILE THE ABOVE DETAILS. THEREFORE, THE AO DISALLOWED THE TOTAL TRANSPORTATION CHARGES OF RS.68,12,451/ - CLAIMED BY THE ASSESSEE. 3.1 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS OBSERVED THAT THE AO WOULD NOT BE JUSTIFIED IN DISALLOWING THE ENTIRE TRANSPORTATION CHARGES O F RS.68,12,451/ - AS THE ASSESSEE CANNOT EARN RS.1,23,90,595/ - AS TRANSPORTATION CHARGES WITH ONLY FOUR TRUCKS OWNED BY HIM. THEREFORE, HE DIRECTED THE AO TO ESTIMATE THE INCOME OF THE ASSESSEE UNDER THE HEAD BUSINESS @ 8% OF THE TRANSPORTATION CHARGES RE CEIVED WHICH WORKS OUT TO RS.9,91,248/ - (8% OF RS.1,23,90,595/ - ). 3.2 BEFORE US, THE LD. DR SUPPORTS THE ORDER PASSED BY THE AO. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE RELIES ON THE ORDER PASSED BY THE LD. CIT(A). 3.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT THAT THE ASSESSEE HAS AVAILED TRANSPORTATION FACILITY FROM VARIOUS AGENTS WHO IN TURN HIRED TRUCKS FROM SMALL TRUCK OWNERS AND PAYMENTS WERE MADE TO TRUCK DRIVERS AND THE AGENTS WERE PA ID THEIR SERVICE CHARGES . WE FIND THAT THE LD. CIT(A) HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145 AND ESTIMATED THE PROFIT @ 8% OF THE TRANSPORT CHARGES RECEIVED WHICH WORKS OUT TO RS.9,91,248/ - . WE UPHOLD THE ORDER OF THE LD. CIT( A) AND DISMISS THE 1 ST GROUND OF APPEAL. ITA NO. 8729/MUM/2010 4 4. WE NOW MOVE TO THE 2 ND GROUND OF APPEAL. WE AGREE WITH THE FINDING OF THE LD. CIT(A) THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT AT SOURCE U/S 194C(1) AS THIS SUB SECTION WAS EFFECTIVE ONLY FROM 01.06.2007 IN THE CASE OF INDIVIDUAL/HUF. THUS THE 2 ND GROUND OF APPEAL IS DISMISSED. 5. THE 3 RD GROUND OF APPEAL RELATES TO THE ADDITION OF RS.15,29,162/ - MADE BY THE AO U/S 41(1). HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD, WE AGREE W ITH THE FINDING OF THE LD. CIT(A) THAT THE ASSESSEE HAD MADE PAYMENTS TO THE EXTENT OF RS.1,89,350/ - TO M/S J.A. TRANSPORT. ALSO IT IS EVIDENT FROM THE LEDGER ACCOUNT OF M/S M.R. TRANSPORT THAT THE TRANSPORT CHARGES CLAIMED RELATED TO THE IMPUGNED ASSESSME NT YEAR AND DID NOT REPRESENT ANY OPENING BALANCE AS HELD BY THE AO. IN VIEW OF THE ABOVE WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE 3 RD GROUND OF APPEAL. 6. FINALLY WE COME TO THE 4 TH GROUND OF APPEAL. WE AGREE WITH THE LD. CIT(A) THAT ONCE THE INCOME IS ESTIMATED @ 8% ON TRANSPORT CHARGES RECEIVED, THERE IS NO NEED TO MAKE FURTHER AD - HOC DISALLOWANCE. THE LD. CIT(A) HAS RIGHTLY DELETED THE AD - HOC DISALLOWANCE OF RS.10,92,139/ - . WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE 4 TH GROUND OF APPEAL. ITA NO. 8729/MUM/2010 5 7. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/09/2017. SD/ - SD/ - (MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 04/09/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI