AMIT ROAD CARRIER INDIA PVT. LTD.,AJMER vs. INCOME TAX OFFICER, WARD-2-3, AJMER

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM

vk;dj vihy la-@ITA No. 694/JP/2018 fu/kZkj.k o"kZ@Assessment Year :2015-16 cuke Jai Nakoda Roadways Pvt. Ltd., Income Tax Officer Vs. 452, Patel Colony, Makhupura, Ward-2(2), Ward No. 29, Ajmer. Ajmer. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACCJ 7715 N vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 676/JP/2018 fu/kZkj.k o"kZ@Assessment Year :2015-16 cuke Shri Agarsen Transways Pvt. Income Tax Officer Vs. Ltd., Ward-2(3), Framji Chowk, Nasirabad. Ajmer. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAMCS 9338 L vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 677/JP/2018 fu/kZkj.k o"kZ@Assessment Year :2015-16 cuke Amit Road Carrier India Pvt. Ltd. Income Tax Officer Vs. Hotel Shanti Palace, Panch Batti Ward-2(3), Chouraha, Nasirabad. Ajmer. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAGCA 9562 N vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Dhiraj Borad (CA) & Shri M.L. Borad (Adv) jktLo dh vksj ls@ Revenue by : Shri Jai Singh (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 13/09/2018 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 17/09/2018

ITA 694 676 & 677/JP/2018_ 2 Jai Nakoda Roadways P Ltd. Vs ITO with two Ors. vkns'k@ ORDER

PER: BENCH

These three appeals by the three different assessees are directed

against the three separate orders dated 12/03/2018 of ld. CIT(A), Ajmer

for the A.Y. 2015-16 respectively.

arising from the similar facts and circumstances, therefore, for the sake of

convenience, these three appeals were clubbed together for hearing and

adjudication.

recording the facts and findings. In this appeal, the assessee has raised

following grounds of appeal:

“1. The impugned order passed by the learned Commissioner (Appeals), Ajmer to the extent prejudicial to the appellant is bad in law and liable to be quashed.

ITA 694 676 & 677/JP/2018_ 3 Jai Nakoda Roadways P Ltd. Vs ITO with two Ors.

total income of the assessee company. On facts and circumstances of the case and law applicable, the sustenance of net profit rate of 1.5% as against declared NP rate of 0.19% and consequentially sustaining trading addition of Rs.21,12,644/- is erroneous and unjustified and in the alternative it is highly excessive.

pressed by the assessee. The ld AR of the assessee made statement at

bar that the assessee does not press ground No.1. Accordingly, ground

No. 1 of the appeal is dismissed being general and not pressed by the

assessee.

account U/s 145(3) of the Income Tax Act, 1961 (in short the Act). The

assessee is a private limited company and engaged in providing

transportation work of different parties through the third party vehicles.

Thus the assessee is not having any vehicle or lorry but only working as a

intermediary in providing transportation service to the clients by hiring the

vehicles from third owners. The assessee filed return of income through

e-filing on 29/9/2015 declaring total income of Rs. 3,11,790/-. In the

scrutiny assessment, the Assessing Officer on examination of the books of

account, bills and vouchers has observed that the assessee had paid total

freight of Rs. 15,95,77,213/- to number of voluminous truck/trailer

ITA 694 676 & 677/JP/2018_ 4 Jai Nakoda Roadways P Ltd. Vs ITO with two Ors.

owners and most of the freight have been paid in cash to the vehicle

drivers. From the vouchers, the complete details of the recipient regarding

their identity, address or confirmation of owners of the vehicles were not

ascertainable. The assessee produced self made vouchers, thus the

Assessing Officer noted that it is not clear whether the recipient owner of

the trucks has accounted for this entire cash payment or not. The

assessee produced a copy of the ledger as appearing in the books of

account for verification of the payments made to the truck/trailer owners.

The Assessing Officer issued notice U/s 133(6) of the Act to 11 parties to

whom the assessee paid the freight charges. The said notices were issued

on 07/12/2017 and required the information up to 15/12/2017. Only two

response were received by the Assessing Officer out of 11 parties and

therefore, the Assessing Officer has proceeded to reject the books of

account of the assessee U/s 145(3) of the Act. The Assessing Officer then

applied a N.P. rate of 2.5% to estimate the income of the assessee and

consequently assessed the total income of the assessee at Rs.

40,41,860/- as against the returned income of Rs. 3,11,790/-.

the ld. CIT(A) and contended that the rejection of books of account is not

justified and sustainable when the Assessing Officer has not pointed out

any specific defects in the books of account and only objection of the

ITA 694 676 & 677/JP/2018_ 5 Jai Nakoda Roadways P Ltd. Vs ITO with two Ors.

Assessing Officer is regarding the claim of payment of freight charges to

the truck/lorry owners. The ld. CIT(A), though, confirmed the rejection of

books of account, however, the income estimated by the Assessing

Officer by applying N.P. rate @ 2.5% was restricted to 1.5%. Hence, the

ld. CIT(A) has partly granted relief to the assessee on the quantum of the

addition.

assessee has been maintainable proper and regular books of account

which has been audited by the qualified auditors and therefore, when no

defect was pointed out by the auditor in the books of account as well as

no specific defect was pointed out by the Assessing Officer in the books of

account then the rejection of the same is not warranted as per provisions

of Section 145(3) of the Act. The ld AR has further submitted that even

regarding the freight payment, the assessee produced the details of the

vehicle owners together with PAN of each and every owner and on the

basis of those details, the Assessing Officer issued notice to the vehicle

owners at the address taken from the PAN details from the official record

without asking the assessee to furnish the present address of these

parties. The ld AR has also pointed out that the Assessing Officer has

issued these notices U/s 143(2) of the Act on 07/12/2017 giving very

short time period to the parties to file their reply up to 15/12/2017 and

ITA 694 676 & 677/JP/2018_ 6 Jai Nakoda Roadways P Ltd. Vs ITO with two Ors.

thereafter the Assessing Officer has passed assessment order on

26/12/2017. The ld AR has pointed out that the truck owners/drivers are

illiterate persons and could not reply the notices issued by the Assessing

Officer U/s 133(6) of the Act. Though, most of these parties have filed

their reply after the assessment order was passed which was not

considered by the Assessing Officer. Thus, the ld AR has submitted that

the Assessing Officer has completed the assessment in a hurried manner

without giving sufficient time to the assessee as well as these parties to

file the reply. Hence, the ld AR has submitted that when no specific defect

was pointed out by the Assessing Officer in the books of account and only

doubted the payment of freight then the same cannot be a reason for

rejection of books of account. The assessee has duly produced the details

and proved the identity of the recipient of the payment. The ld AR has

further submitted that about 70 to 80% of the freight payment was made

through cheques and only 20 to 25% of the payment was in cash and

therefore, in the peculiar nature of the business of the assessee, the cash

payment is inevitable to the small vehicle owners who have only one

vehicle in their individual capacity. Even otherwise when the freight

receipts and payments are matching then the claim of freight payment

cannot be doubted. The assessee does not have own vehicles for

transportation but transportation is done by giving sub-contract to the

ITA 694 676 & 677/JP/2018_ 7 Jai Nakoda Roadways P Ltd. Vs ITO with two Ors.

persons owning the vehicles used for transportation and therefore, the

assessee is earning only some commission in the entire activity and

transaction. Bills have been raised on the parties which is not in doubt.

These bills are raised through the vehicle owners and therefore whatever

freight received from the parties by the assessee, the same has been

directed credited to the vehicle owner’s account after deducting the

margin/commission of the assessee, which is considered as income of the

assessee. Thus, when the transactions are matching regarding receipt

and payment of the freight for each and every bill as well as vehicle then

the claim of freight payment is otherwise cannot be disallowed or

doubted. The ld AR has submitted that the Assessing Officer and the ld.

CIT(A) has followed the decision of this Tribunal in the case of Om

Prakash bansal Vs. ITO order dated 05/6/2015 in ITA No. 734/JP/2012

whereas the facts of the said case are distinguishable and the finding in

the said case is specific to the facts of the said case and cannot be

applied in general and particular to the case of the assessee. In the said

case, the assessee did not issue or maintain any receipt or voucher and

was involved in transportation of cement. He has referred to the order of

the ld. CIT(A) and submitted that the ld. CIT(A) has admitted the fact

that the assessee have been maintaining books of account and produced

the record of the vehicle number and Registration certificate. The ledgers

ITA 694 676 & 677/JP/2018_ 8 Jai Nakoda Roadways P Ltd. Vs ITO with two Ors.

of each person to whom the freight charges have been paid by the

assessee has been maintained on the basis of vehicle number and name

appearing in the registration certificate of the vehicle. The ld. CIT(A) has

accepted the fact that each payment of freight can be linked to the freight

income booked by the assessee of that particular trip. Therefore, once the

assessee has proved the direct nexus between the freight receipt and

freight payment as well as a particular trip then the claim of freight

payment cannot be doubted and a reason for rejection of books of

account. In support of his contention, he has relied upon the various

decisions including the decision of the Hon'ble Supreme Court in the case

of CIT Vs. Padamchand Ramgopal (1970) 76 ITR 719 (SC) and submitted

that the Hon'ble Supreme Court has observed that insignificant mistakes

cannot be a ground for resorting to Section 145 of the Act. He has also

relied upon the decision of Hon’ble Punjab & Haryana High Court in the

case of Telelinks Vs. CIT, Bhatinda order dated 20/11/2014 in ITA No.

269/2014 and submitted that when the assessee declared NP rate is not

less than the average N.P. declared in the past then there is no reason for

making any addition.

paid the freight charges in cash and has not maintained complete record

in the books of account regarding the recipient of the freight charges,

ITA 694 676 & 677/JP/2018_ 9 Jai Nakoda Roadways P Ltd. Vs ITO with two Ors.

therefore, the Assessing Officer found various defects in the books of

account. Most of the vouchers are self made and the notices issued U/s

133(6) of the Act by the Assessing Officer were not responded by nine

parties out of eleven, therefore, the Assessing Officer has rightly rejected

the books of account of the assessee. He has relied upon the orders of

the authorities below.

material on record. There is no dispute that the assessee has carried out

the business activity of transportation of goods by giving sub-contract to

the persons owning vehicles. The assessee does not own any vehicle for

transportation and hence the income of the assessee is in the shape of

margin/commission on the freight receipt from the clients and freight paid

to the vehicle owners. The ld. CIT(A) has accepted the fact that the

freight received by the assessee has a direct nexus with the freight paid

by the assessee for a particular trip and therefore, freight income and

freight payment for a particular trip is maintaining as per the regular

books of account, which is not in dispute. The Assessing Officer has

questioned the claim of freight charges payment by the assessee on the

ground that the assessee has made the payment of freight in cash for

which the assessee has produced self made vouchers and therefore, in

absence of confirmation from the recipient, this claim of the assessee was

ITA 694 676 & 677/JP/2018_ 10 Jai Nakoda Roadways P Ltd. Vs ITO with two Ors.

not acceptable. We note that the entire payment of freight is not in cash

but only the part of the payment is in cash. However, once the assessee

has established this fact with the entries recorded in the books of account

particularly in the ledger account of the parties to show that each

payment of freight is linked to the freight income booked by the assessed

in respect of a particular trip then the claim of the assessee of payment of

freight cannot be rejected or disallowed merely on the ground that the

assessee has made some payment in cash for which the self made

vouchers were produced by the assessee. The relevant finding of the ld.

CIT(A) on this issue in para 4.3 as under:

“4.3 I have gone through the assessment order, statement of facts, grounds of appeal and written submissions carefully. It is seen that the assessee supplies trailers to main contractors (transporters) who issue builty/consignment notes at the time of loading goods in trailer. The business of assessee has been discussed at page 2 of assessment order as under.

“During the course of the assessment proceedings, it has been stated that the assessee was carrying transportation work of different parties and different types. It is also stated that the assessee is not obtaining any work order, also not filing any specific tender or quotation and also no making any agreement in writing with the parties. The terms and conditions on which work is carried on are always mutually decided by both the parties, no specific agreement is required to be made for the same. The rate of transportation is depend upon the type of goods, risk, weight, distance and market conditions. It is further submitted that nature of goods transported are steel coil, stone, wood, machinery, coal etc. It is further submitted that transportation is done by giving sub contract to market owned trailers on sum margin or say commission basis. Bills have been raised on parties and the parties have paid freight to the assessee. Whatever freight earned from parties have been credited to trailer

ITA 694 676 & 677/JP/2018_ 11 Jai Nakoda Roadways P Ltd. Vs ITO with two Ors.

owners, after deducting the margin which is received as income of the assessee.”

The AO conducted enquiries u/s 133(6). After considering the outcome of the enquiries made u/s 133(6), the AO found out discrepancies / deficiencies in the books of accounts which has been discussed by the AO in the assessment order at page 2 to 5. In view of the discrepancies / deficiencies noted by the AO, book results of the appellant were rejected u/s 145(3) and net profit of the appellant was estimated by the AO @2.5% of the freight receipts of Rs. 16,16,74,377/- declared in the profit and loss account, relying on the decision of ITAT Jaipur Bench in the case of Om Prakash Bansal vs ITO, Ward- Behror (ITA No. 734/JP/2012, order dated 05.06.2015, A.Y. 2008-09). During the course of appellate proceedings, the appellant has furnished explanation with supporting evidences with respect to the discrepancies / deficiencies discussed by the AO in the assessment order. The explanation furnished by the appellant is found to be reasonably correct. It can be seen that the appellant has maintained his books of accounts mainly on the basis of vehicle number and RC number. The ledger of each person whom freight charges have been paid by the appellant have been maintained by the appellant on the basis of vehicle number and name appearing in RC of the vehicle. In the voucher prepared for payment of freight in cash, the appellant writes vehicle number, amount paid and obtains signature of the recipient (driver / owner of the vehicle). In the bills issued by the appellant for the freight charges received by him, name of the party (main transporter), vehicle number, destination of the vehicle (from & to) and amount of freight in respect of each trip and date of each trip are mentioned. The appellant has furnished statement linking each freight payment with the corresponding freight income (trip register) booked by the appellant to show that there is no freight payment without any freight income against that payment. The appellant obtains copy of PAN Card and RC from each person whom the payment of freight is paid by the appellant.

ITA 694 676 & 677/JP/2018_ 12 Jai Nakoda Roadways P Ltd. Vs ITO with two Ors.

I have gone through each document furnished by the appellant carefully. The contention of the appellant that its each payment of freight can be linked to freight income booked by him in respect of that particular trip is found to be correct. Still, the possibility of freight payment shown to have been made in cash having been inflated by the appellant cannot be ruled out. In view of the discrepancies / deficiencies discussed by the AO in the assessment order, I am of the considered view that the AO has rightly rejected the book results u/s 145(3). Hence, the rejection of book results u/s 145(3) is held to be valid and in accordance with the provisions of law.”

Thus, the ld CIT(A) has accepted the fact that the assessee has produced

the PAN card and registration certificate of each vehicle owner as well as

maintained the books of account. It was found that the ledger account of

each person regarding freight charges payment have been maintained on

the basis of vehicle number and name of the owner as per registration

certificate of the vehicle. The Assessing Officer has not doubted the

business activity of the assessee being working only an intermediary in

the activity of providing transportation to various clients by hiring the

vehicles from the vehicle owners. The bills were raised by the vehicle

owners to the clients and the assessee is only charging some

margin/commission in the transaction for providing the services of

transportation. Once this business activity of the assessee is not doubted

and the freight income and freight payment which are matching to each

other with the transaction by transaction of each trip then the freight

charges payment cannot be disallowed or held as bogus ignoring the fact

ITA 694 676 & 677/JP/2018_ 13 Jai Nakoda Roadways P Ltd. Vs ITO with two Ors.

that the corresponding freight receipt is accepted on the basis of the

same bills. Even if the Assessing Officer was not satisfied with the claim of

freight payment for want of supporting evidence and confirmation from

the recipient of the freight then the claim of the freight payment can be

examined and disallowed to the extent of not found to be proved by the

assessee. The non-acceptance of a particular claim of expenditure cannot

be a reason to hold that the books of account of the assessee are

defective and suffering from deficiency or discrepancies warranting

rejection U/s 145(3) of the Act. In case, the Assessing Officer was not

satisfied with the claim of freight charges then that particular claim could

have been examined and disallowed to the extent of not proved by the

assessee instead of resorting to the provisions of Section 145(3) of the

Act. Even otherwise some other expenditure which is not substantiated by

the assessee by filing a supporting evidence, the same can be disallowed

but these disallowances cannot be a reason for rejection of books of

account. Accordingly, when the assessee has been maintaining regular

books of account duly audited by the qualified auditor then in absence of

specific discrepancy or deficiency in the books of account, the provisions

of Section 145(3) of the Act cannot be invoked. Hence we hold that the

Assessing Officer was not justified in rejecting the books of account

merely because the assessee could not file the confirmation from the

ITA 694 676 & 677/JP/2018_ 14 Jai Nakoda Roadways P Ltd. Vs ITO with two Ors.

parties to whom the freight charges were paid. Hence, this ground of

assessee’s appeal is allowed.

by applying the NP rate. This issue is consequential in nature and

therefore, in view of our finding on the issue of rejection of books of

account, this ground becomes infructuous. Since the Assessing Officer has

doubted the claim of freight payment as the assessee has not filed any

confirmation and the parties have not responded to the notice issued by

the Assessing Officer U/s 133(6) of the Act, therefore, the issue of

allowability of the said claim can be reexamined by the Assessing Officer

only to the extent of scope of any inflation in the quantum of the freight

charges paid by the assessee. So far as the outright rejection of freight

charges is concerned we note that when the freight income and freight

charges are linked one to one for each trip and also found recorded in the

books then the entire claim of the assessee cannot be held as bogus. The

only issue which can be examined by the Assessing Officer is the quantum

of the freight charges inflated by the assessee or not. Accordingly, for

limited purpose, we set aside the issue of allowability of the freight

charges in the above terms. We may clarify that the

addition/disallowance, if any, cannot be exceeded the addition sustained

ITA 694 676 & 677/JP/2018_ 15 Jai Nakoda Roadways P Ltd. Vs ITO with two Ors.

by the ld. CIT(A) in the first round of appeal as the department has not

challenged the impugned orders of ld. CIT(A).

appeals, the assessees have raised common grounds as under:

Grounds of ITA No. 676/JP/2018 “1. The impugned order passed by the learned Commissioner (Appeals), Ajmer to the extent prejudicial to the appellant is bad in law and liable to be quashed.

not been pressed by the assessee. The ld AR of the assessee made

ITA 694 676 & 677/JP/2018_ 16 Jai Nakoda Roadways P Ltd. Vs ITO with two Ors. statement at bar that the assessee does not press ground No.1 of both

these appeals. Accordingly, ground No. 1 of both these appeals is

dismissed being general and not pressed by the assessee.

account on the identical grounds as in ITA No. 694/JP/2018 and

estimated the income by applying the N.P. rate @ 2.5%, which was

restricted by the ld. CIT(A) to 1.75%. The issue of rejection of books of

account have been considered by us in ITA No. 694/JP/2018 and in view

of our finding in ITA No. 694/JP/2018, the said issue has been decided in

favour of the assessee.

said issue is set aside to the record for limited purpose of examination

and verification of the claim. The assessee is directed to file the relevant

supporting evidences.

Order pronounced in the open court on 17/09/2018.

Sd/- Sd/- ¼foØe flag ;kno½ ¼fot; iky jko½ (VIKRAM SINGH YADAV) (VIJAY PAL RAO) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 17th September, 2018

ITA 694 676 & 677/JP/2018_ 17 Jai Nakoda Roadways P Ltd. Vs ITO with two Ors. *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- (i) Jai Nakoda Roadways Pvt. Ltd., Ajmer. 1. (ii) Shri Agarsen Transways Pvt. Ltd., Nasirabad. (iii) Amit Road Carrier India Pvt. Ltd., Nasirabad. izR;FkhZ@ The Respondent- (i) The ITO, Ward-2(2), Ajmer. 2. (ii) The ITO, Ward-2(3), Ajmer. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 694, 676 & 677/JP/2018) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत