Income Tax Appellate Tribunal - Jaipur
Sanjay Jain, Jaipur vs Assessee on 30 March, 2016
1 ITA No. 562/JP/2014
Shri Sanjay Jain, Prop. M/s. Mahaveer Transport Co. vs. ACIT, Circle- 5, Jaipur
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IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCHES, JAIPUR
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BEFORE:SHRI R.P.TOLANI, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 562/JP/2014
fu/kZkj.k o"kZ@Assessment Year : 2009-10
Shri Sanjay Jain cuke The ACIT
Prop. M/s. Mahaveer Transport Co. Vs. Circle- 5
14, Transport Nagar, Jaipur Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACSPJ 2383 D
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by : Shri Raj Mehra, JCIT -DR
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Mukesh Khandelwal, CA
lquokbZ dh rkjh[k@ Date of Hearing : 02/02/2016
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 30 /03/2016
vkns'k@ ORDER
PER R.P. TOLANI, JM:-
The assessee has filed an appeal against the order of the ld. CIT(A)- II, Jaipur dated 25-06-2014 for the assessment year 2009-10 wherein following grounds have been raised by the assessee .
''1. That the ld. CIT(A) has erred seriously on the facts in sustaining the action of the ld. AO of invoking the provisions of Section 145(3) of the I.T. Act, 1961.
2. That the ld. CIT(A) has erred further seriously on facts in sustaining the application of the net profit rate of 3.4% on freight receipts, resulting into an addition of Rs. 22,42,558/- 2 ITA No. 562/JP/2014 Shri Sanjay Jain, Prop. M/s. Mahaveer Transport Co. vs. ACIT, Circle- 5, Jaipur
3. That the ld. CIT(A) has erred seriously on facts and in law in not following the earlier decisions of Hon'ble ITAT in the case of the appellant in respect of last three assessment years.'' 2.1 Brief facts of the case are that the assessee is a transporter owning self trucks, hiring other trucks and earning transport commission. Record reveals that since past many years the books of account of the assessee are rejected and taxable profits are estimated, there is no record to compare any year where assessee books have been accepted as reflecting true and correct profits. In the impugned year, the assessee declared turnover of Rs. 15,31,53,579/- and net profit rate of 1.94% thereon. Finding various discrepancies and deficiencies in the books of accounts, which were not made good by the assessee, ld. AO rejected the books of accounts by observing that the assessee himself has accepted deficiencies pointed out in the books of account which included the freight payment of Rs. 8,00,21,464/-. Most of the payments made were in cash. The relevant records were not produced before the AO and even complete vouchers in this behalf were not maintained. The AO observed that the names and address of the recipients of such cash transportation charges were also not maintained. Thus assessee's freight expenditure around Rs. 1.00 crore was unverifiable.
3 ITA No. 562/JP/2014
Shri Sanjay Jain, Prop. M/s. Mahaveer Transport Co. vs. ACIT, Circle- 5, Jaipur 2.2 In respect of freight receipts of Rs. 7,31,32,115/- which included gross receipts from own trucks and commission/ profit on plying of trucks of others, the assessee has not maintained any truck wise details of receipt of and expenditure of own trucks and the commission or profit earned on plying of others trucks. The trip expenses of Rs. 92,01,739/- incurred through drives as way side expenses were not vouched and could not be produced by the assessee. No log book of trucks was maintained, besides assessee has claimed loading and loading charges for which no vouchers were maintained. In the absence of proper records and vouchers, the AO was of the view that real income of the assessee was not verifiable. Relying on assessee's own case in preceding years, the AO after rejecting books of accounts, worked out the net profit rate of 3.40% and made addition accordingly.
2.3 Aggrieved, the assessee is in first appeal where the ld. CIT(A) referred to ITAT orders in assessee's own case for the assessment year 2006- 07, 2007-08 and 2008-09 and rejected the assessee's plea to adopt the same rate of net profit by holding as under that facts were distinguishable by following observations:
''4.3 In view of the above defects, the action of the Assessing Officer in rejecting the books of account u/s 145(3) is upheld. The counsel of the appellant has emphasized the facts of earlier years and 4 ITA No. 562/JP/2014 Shri Sanjay Jain, Prop. M/s. Mahaveer Transport Co. vs. ACIT, Circle- 5, Jaipur application of net profit of 2% as upheld by Hon'ble ITAT in A.Y. 2006-07 and 1.75% in A.Y. 2007-08 and 1.19% in A.Y. 2008-09. However, the facts and circumstances of the current year undergone material change. The position in the current year is as under:-
(i) it is seen that freight receipts have been reduced from Rs.
21.48 crores in A.Y. 2007-08 to Rs. 17.26 crores in A.Y. 2008- 09 to Rs. 15.31 crores in the current year.
(ii) A large part of the expenditure in the form of freight payment of Rs. 8 crores, repairs and maintenance of Rs. 1,05,90,161/- , trip expenses of Rs. 92,01,739/- , tyre expenses of Rs. 59,76,562/- are not amendable to verification, out of turnover of Rs. 15,31,53,579/- which is an extremely large percentage.
(iii) No reasons have been given for decrease in freight receipts this year as compared to the preceding year. 4.4 The ITAT has not accepted the books results of the appellant in any of the earlier years. The orders of the appellate authorities for earlier years do not set any precedent which is bound to be followed in subsequent years if the facts and circumstances have undergone a material change. Moreover, strictly speaking res judicata does not apply to income tax proceedings as each assessment year being a separate unit, what is decided in one year may not apply in the following year. It was held by Hon'ble Rajasthan High Court in the case of Cosmopolitan Education Society vs. CIT (299 ITR 47) that each assessment year in income tax proceedings is independent and the principles of res judicata do not apply to income tax proceedings. It was held by Hon'ble Kolkata High Court in the case of CIT vs. Avery India Ltd. (255 ITR 485) that a decision taken in regard to an earlier assessment year does not operate as res judicata for a subsequent assessment year. The Hon'ble Rajasthan High Court in the case of CWT vs. Smt. Kusum Bader (185 ITR 70) held that the decision on one issue in respect of a particular assessment year cannot be held to be conclusive for another assessment year. The principle of res judicata was therefore, held to be not applicable. 5 ITA No. 562/JP/2014
Shri Sanjay Jain, Prop. M/s. Mahaveer Transport Co. vs. ACIT, Circle- 5, Jaipur 4.5 In the case of Commissioner of Sales Tax, Madhya Pradesh vs. H.M. Esufali H.M. Abdulali (90 ITR 271), the Hon'ble Supreme Court while holding that the Assessing Officer was the best judge of the situation and the High Court could not substitute its ''best judgement'' for that of the assessing authority, held that in the case of ''best judgement'' assessments, the Courts will have to first see the accounts maintained by the assessee were rightly rejected as unreliable. If they come to the conclusion that they were rightly rejected, the next question that arises for consideration is whether the basis adopted in estimating the turnover has reasonable nexus with the estimate made. If the basis adopted is held to be a relevant basis even though the Courts may think that it is not the most appropriate basis, the estimate made by the Assessing Officer cannot be disturbed.
4.6 It is seen that the ITAT too has not accepted the book results of the appellant and has varied the rate of net profit from year to year, on the basis of facts of that year. Considering the facts and circumstances in the present case and decisions cited above, the addition of Rs. 22,42,558/- made by the AO is confirmed. Accordingly, this ground of appeal is dismissed .'' 2.4 The ld. AR of the assessee contends that in the preceding years, ITAT Jaipur after upholding rejection of books of accounts, estimated the following rate of net profit in respective year:
A.Y. Turnover N.P. rate N.P. rate N.P. rate
declared by applied by determined
appellant AO by ITAT
2006-07 20,52,51,992 1.78% 3.40% 2%
2007-08 21,48,63,667 1.48% 3.40% 1.75%
2008-09 17,26,10,403 1.19% 3.40% 1.50%
6 ITA No. 562/JP/2014
Shri Sanjay Jain, Prop. M/s. Mahaveer Transport Co. vs. ACIT, Circle- 5, Jaipur It is contended that the addition retained by the ld. CIT(A) is exorbitant as compared to preceding years. It has not been disputed that there is increase in the turnover of the transportation charges received by the assessee and there being three ITAT orders in assessee's own case, the average net profit of the respective years should be adopted. It is further contended that it has be held by Hon'ble Jurisdictional High Court that past history of the assessee is the best guide for applying a particular rate while assessing income in case books of account are being rejected. Such view was held in the case of CIT vs. Saddruddin Hussain, (2003) 263 ITR 677 and Inani Marbles, 175 Taxman 56 by the Hon'ble Rajasthan High Court. Keeping in view the said judgements the addition so made by the AO may kindly be deleted. 2.5 The ld. DR on the other hand contends that:-
(i) The assessee deliberately does not maintain proper books of account and proper records and on or other reasons gets the books of account rejected and net profit rate estimates which serves targeted purpose to the assessee to avoid proper scrutiny and determination of taxable profits. Such clandestine practice of not maintaining proper record from year to year cannot be claimed by the assessee as a matter of right, to be applying average net profit in every year. The income tax law does not contemplate the assessee to be rewarded for continuing default of rejection of books of 7 ITA No. 562/JP/2014 Shri Sanjay Jain, Prop. M/s. Mahaveer Transport Co. vs. ACIT, Circle- 5, Jaipur account indulged in by his own lapses. The assessee must be found to be cleaned handed, he has not given any plausible explanation as to why and how proper record and books of accounts were not maintained and as to why they were not produced. Thus in the absence of any clear explanation of sufficient cause for not maintaining or producing proper books of accounts and record to enable proper ascertainment of taxable profits in terms of sec 145, the claim of average net profit rate application by the assessee is untenable. The assessee must come clean in his case. The ld. CIT(A) has given long list of distinguishing feature between this year and earlier years.
The assessee has not controverted any of the distinguishing features pointed by ld. CIT(A) in this year as compared to others. Consequently, earlier orders based on pure facts of each year, cannot be held as binding judicial precedents and average net profit cannot be applied in this year. It is settled principle of law that principles of res judicata are not applicable as each assessment year is separate entity of assessment. Since the facts are held to be distinguishable in this year, principle of consistency is also not applicable. The assessee has failed to demonstrate that distinguishing features pointed out by the ld. CIT(A) are in any way are unjustified. The ld. DR thus relied on the order of the ld. CIT(A).
8 ITA No. 562/JP/2014
Shri Sanjay Jain, Prop. M/s. Mahaveer Transport Co. vs. ACIT, Circle- 5, Jaipur 2.6 We have heard the rival contentions and perused the materials available on record. We find merit in the contentions of the ld. DR that the assessee has not maintained proper records and books of account. The assessee's non-explanation of huge expenses around Rs. 1.00 crore and wayside expenses of Rs. 92,01,739/- cannot be taken lightly as they are incurred in cash. It is the burden on the assessee to demonstrate that the expenses claimed by him are corroborated and reasons for non-maintenance of records are duly explained. It has not been demonstrated by the assessee that distinguishing features as pointed out by the ld. CIT(A) in respect of earlier years and current year are unjustified. Consequently, the nature of inference leads to believe that in this year the severity and nature of defects in the books of account are different than earlier years. We thus find merit in the contentions of the ld. DR that principles of res judicata do not apply to ITAT proceedings and principles of consistency are also not applicable as facts are distinguishable. It is settled law that estimate based on best judgment assessment due to rejection of books of accounts, should not be ordinarily interfered by appellate authorities, unless there are demonstratively cogent reasons to do so. In this case, the assessee has failed to point out that order of the ld. CIT(A) as to estimation of net profit rate is 9 ITA No. 562/JP/2014 Shri Sanjay Jain, Prop. M/s. Mahaveer Transport Co. vs. ACIT, Circle- 5, Jaipur contrary or excessive. In view thereof, we see no infirmity in the order of the ld. CIT(A) which is upheld. Thus the appeal of the assessee is dismissed. 3.0 In the result, appeal of the assessee is dismissed.
Order pronounced in the open court on 30 /03/2016.
Sd/- Sd/-
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(Vikram Singh Yadav) (R.P.Tolani)
ys[kk lnL;@ Accountant Member U;kf;d lnL;@Judicial Member
Tk;iqj@Jaipur
fnukad@Dated:- 30 /03/ 2016
*Mishra
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Shri Sanjay Jain, Prop. M/s. Mahaveer Transport Co. Jaipur
2. izR;FkhZ@The Respondent-The ACIT, Circle- 5, Jaipur
3. vk;dj vk;qDr¼vihy ) @ CIT(A)
4. vk;dj vk;qDr@ CIT
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No.562/JP/2014) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar