Income Tax Appellate Tribunal - Jaipur
Anshu Jain, Jaipur vs Assessee on 17 April, 2015
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM
vk;dj vihy la-@ITA No. 49/JP/2013
fu/kZkj.k o"kZ@Assessment Year : 2008-09
Anshu Jain, cuke A.C.I.T., Circle-1,
1966, Pandit Shivdeen Ka Rasta, Vs. Jaipur.
Kishanpole Bazar, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ADGPJ 3769 G
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Mukesh Khandelwal (CA)
jktLo dh vksj ls@ Revenue by : Smt. Neena Jeph (JCIT)
lquokbZ dh rkjh[k@ Date of Hearing : 25/03/2015
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 17/04/2015
vkns'k@ ORDER
PER: T.R. MEENA, A.M. This is an appeal filed by the assessee against the order dated 15/11/2012 passed by the learned CIT (A)-I, Jaipur for A.Y. 2008-09 The effective grounds of appeal are as under:-
"1 that the ld. CIT(A) erred on facts in sustaining the application of provisions of section 145(3) of the Income Tax Act, 1961.
2 ITA 49/JP/2013_ Anshu Jain Vs. ACIT
2. That the ld. CIT(A) erred on facts in sustaining an NP rate of 18% in the case as against declared NP rate of 14.70% by the appellant."
2. First ground of appeal is not pressed, therefore, we dismiss this ground of appeal as not pressed.
3. The second ground of appeal is against sustaining the NP rate of 18% against the declared NP rate of 14.70%. The assessee derived income from business of transportation, capital gain and other sources. She filed return on 31/10/2008 at Rs. 9,56,930/-. The case was scrutinized U/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as the Act) by the Assessing Officer. The ld. A.O. compared the G.P., N.P. rate from A.Y. 2005-06 to 2007-08. The ld Assessing Officer observed that during the assessment proceedings, he noticed that no record of truck wise receipts of freight had been maintained, no log book was maintained for plying of truck, many expenses supported by internal voucher paid in cash and no record of truck wise payment was maintained. The ld Assessing Officer gave show cause notice on these deficiencies for rejection of books U/s 145(3) of the Act, which was replied by the assessee vide letter dated 13/12/2010, which has been reproduced by the Assessing Officer on pages 2,3, and 4 of the 3 ITA 49/JP/2013_ Anshu Jain Vs. ACIT assessment order. After considering the assessee's reply, he further summarized the defects found in the books of account as under:-
a. No record for truck wise receipt of freight and payments were maintained. Hence it was not possible for correlating the profit or loss on a specific truck. The record maintained by the assessee is inadequate and is not a correct method of determining the true profits of the assessee.
b. As admitted by the assessee himself, no log book was maintained for the vehicles and was held to be impracticable. Thus, there was no way to verify the distance traveled by the vehicles, consumption of diesel and repairing expenses.
c. the assessee did not produce any record relating to the day to day transport activity including the vehicles loaded, unloaded and booked for transportation each day. d. An amount of Rs. 2,49,53,835/- was debited as trip expenses in the P&L account. But for the said expenses proper vouchers were not maintained. Therefore, these expenses were not subject to verification satisfactorily. e. Many other expenses were paid in cash and were supported by self made vouchers only and hence not amenable for verification.
f. the rates for specific routes were not fixed and identifiable details were not recorded.
4 ITA 49/JP/2013_ Anshu Jain Vs. ACIT g. Record of truck wise onward journey and freight received on return journey were not maintained."
On the basis of above defects, the ld Assessing Officer rejected the book result U/s 145(3) of the Act. Thereafter, he estimated the profit. It is held that NP rate of 20.19% is reasonable as against 14.70% shown by the assessee on the receipt of Rs. 2,79,12,589/- subject to allowability of depreciation on the basis of past history of the assessee's case. In previous year also, rejection of books of account had been continuously upheld by the appellate authority and the Hon'ble ITAT, accepted the NP rate of 20.19% as declared by the assessee for A.Y. 2005-06 on total receipt of Rs. 2,61,45,250/-. By relying on the order of the Hon'ble Rajasthan High Court in the case Kansara Bearing Pvt. Ltd. Vs ACIT 270 ITR 235 (Raj. HC), the Assessing Officer estimated the income by applying NP rate of 20.19% at Rs. 2,79,12,589/-
4. Being aggrieved by the order of the learned Assessing Officer, the assessee carried the matter before the learned CIT(A), who had allowed the appeal partly by observing as under:-
"I have carefully perused the order of the A.O., the submissions of the AR and the orders of the Hon'ble ITAT Jaipur filed by the AR of the appellant. In assessment year
5 ITA 49/JP/2013_ Anshu Jain Vs. ACIT 2007-08, the Hon'ble ITAT Jaipur vide its order ITA No. 237/JP/2007 dated 03/09/2010 has upheld the order of the ld. CIT(A) wherein the rejection of books of accounts in the case of the assessee on similar defects has been sustained and a lump sum addition of Rs. 1 lac has been confirmed. Thus, the facts of the case of the appellant are covered by the finding of the Hon'ble ITAT Jaipur in his own case in the previous assessment year. As the AR has not been able to controvert the finding of the Hon'ble ITAT Jaipur regarding the rejection of books of accounts by bringing any new evidence or argument, the rejection of books of accounts by invoking provisions of section U/s 145(3) is sustained. Regarding estimation of income, the Hon'ble ITAT Jaipur has held that the assessee's own case is the best guide for estimating the income after rejection of the books of accounts by placing reliance on the Hon'ble jurisdictional High Court in the case of Gotan Lime Khanij Udyog vs. CIT 256 ITR 253. As per the N.P. rate chart submitted by the appellant, it is seen that the turnover has decreased from Rs. 3,53,30,516/- in the immediately preceding assessment year to Rs. 2,79,12,589/- in this assessment year whereas the n.p. rate subject to depreciation has been confirmed by the Hon'lbe ITAT Jaipur at 13.93% has increased to 14.70%. It is a generally accepted fact that the net profit rate improves with decline in turnover. Therefore, the n.p. rate subject of depreciation is estimated at 6 ITA 49/JP/2013_ Anshu Jain Vs. ACIT 18% as the turnover has declined substantially. Thus, the trading addition of Rs. 9,21,045/- is confirmed."
5. Now the assessee is in appeal before us. The ld AR for the assessee has submitted that the ld CIT(A) reduced the N.P. rate applied by the Assessing Officer @ 20.19% to 18% without assigning any cogent reason. Admittedly few defects are there in the books of the appellant which are beyond the control of the appellant. There are vast variations in the NP rate declared by the appellant for which there are a large number of factors such as increase in diesel price without any corresponding increase in freight charges, increased in repairing of the vehicles due to some accidents and timely recession in the transportation business. In the year under appeal the appellant had declared a NP rate of 14.70% on a turnover of Rs. 2.79 crores which is better than a rate of 13.64% on a turnover of Rs. 3.53 crores. In such circumstances no addition was required to be made. However, the ld CIT(A) reduced the rate of 18% merely using her estimations and observing that since the turnover has decreased the profit was required to be increased.
He also submitted that it has been held by the Hon'ble Rajasthan High court in the case of Kansara Bearing P. Ltd. Vs. ACIT (supra) that 7 ITA 49/JP/2013_ Anshu Jain Vs. ACIT past history is the best guide for assessing income of the assessee. For this purpose past history means immediately preceding year as only immediately preceding year can given fair idea about existing facts and circumstances. Therefore, the ld A.O. erred seriously in applying profit rate for A.Y. 2005-06 while assessing a case for the A.Y. 2008-09 when the results for next year decided by the higher authorities were available. Further the ld CIT(A) also erred in applying a profit rate of 18% when in the immediately preceding year the rate applied by this Hon'ble Bench was merely 13.93%. Since there was no change in the facts and circumstances for the year under appeal as compared to immediately preceding year no addition was required to be made in view of the fact that the assessee herself has declared better profit rate.
He further argued that in past also, similar additions were made by the Assessing Officer, which has been deleted by the Hon'ble ITAT. In A.Y. 2005-06, the Assessing Officer made addition of Rs. 12,47,315/- , which has been reduced by the ld CIT(A) at Rs. 5,36,905/- and finally the Hon'ble ITAT has deleted the addition confirmed by the CIT(A). In A.Y. 2006-07, the Assessing Officer applied NP rate of 22% which has been reduced by the ld CIT(A) to 11.89%, which has been confirmed by the Hon'ble ITAT. In A.Y. 2007-08, the ld CIT(A) confirmed the addition 8 ITA 49/JP/2013_ Anshu Jain Vs. ACIT of Rs. 1 lac only as against the addition made by the Assessing Officer at Rs. 28,63,325/-, which has been confirmed by the Hon'ble ITAT. Therefore, he prayed to delete the addition confirmed by the ld CIT(A).
6. At the outset, the Ld. DR supported the order of the learned CIT(A).
7. We have heard the rival contentions of both the parties and perused the material available on the record. The assessee himself has accepted the rejection of book result U/s 145(3) of the Act. In past also, these books results were not accepted by the appellate authorities. The CIT(A) has estimated the NP rate @ 18% after considering the Hon'ble Jurisdictional High Court's decisions in the case of Gotan Lime Khanij Udyog vs. CIT (supra), the assessee's turnover have come dome heavily and the NP has not increased in proportion. The assessee has not controverted the defects pointed out by the Assessing Officer in assessment order. It is a fact that some of the expenses were not vouched fully and paid in cash, are not verifiable. In past also, similar additions were made by the Assessing Officer, which has been confirmed by the ITAT. The ld CIT(A) also confirmed the additions on the basis of ITAT Bench decision in assessee's own case, but it is clear from the Coordinate Bench decision that nominal addition has been 9 ITA 49/JP/2013_ Anshu Jain Vs. ACIT confirmed by the ITAT whereas ld CIT(A) confirmed the addition at Rs. 9,21,045/- in the year under consideration on same turnover. Therefore, the estimation of income is higher side. Keeping in view the defects in the books of account and line of business, we confirm the addition of Rs. 2 lacs in the interest of justice.
8. In the result, the assessee's appeal is partly allowed. Order pronounced in the open court on 17/04/2015.
Sd/- Sd/-
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(R.P.Tolani) (T.R. Meena)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur
fnukad@Dated:- 17th April, 2015
*Ranjan
vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- MAnshu Jain, Jaipur
2. izR;FkhZ@ The Respondent- ACIT, Circle-1, Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 49/JP/2013) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar