ITO, BUNDI vs. RAMESHWAR MEENA, BUNDI

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 VIJY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 470/JP/2015 fu/kZkj.k o"kZ@Assessment Year : 2011-12 cuke Income Tax officer, Shri Rameshwar Meena, Vs. Bundi. Prop. M/s Rajshree Goods Transport, By Pass Road, Bundi LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABUPM2238F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Shrawan Kumar Gupta (Adv.) jktLo dh vksj ls@ Revenue by : Shri Roshanta Meena (J.CIT) lquokbZ dh rkjh[k@ Date of Hearing : 12/10/2017 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 08/11/2017 vkns'k@ ORDER

PER: VIJAY PAL RAO, J.M.

This appeal by the Revenue is directed against the order of dated 10.03.2015 of CIT (A), Kota for A.Y. 2011-12. The Revenue has raised the following grounds as under:- “On the facts and in the circumstances of the case the ld. CIT(A), Kota has reed in :- (i) deleting the disallowance of Rs. 23,98,756/- out of total disallowance of Rs. 34,00,2016 made by AO without giving any basis or citing any case law in support of his decision to apply net profit rate of 5% on transport receipts of the assessee. (ii) deleting the disallowance of Rs. 8,91,071/- out of total disallowance of Rs. 16,97,753/- made by the AO without giving

ITA No. 470/JP/2015 ITO vs. Sh. Rameshwar Meena

any basis or citing any case law in support of his decision to apply net profit rate of 4% on liquor receipt of the assessee. (iii) deleting the addition of Rs.1,09,01,000/- made by the AO u.s 68 of the IT Act on account of unexplained cash deposits in the bank account since no documentary evidence has been produced by the assessee either bore AO or even before Ld. CIT(A) to substantiate his explanation regarding nature and sources of cash deposit of Rs. 1,09,01,000/- in his bank account; (iv) deleting the addition of Rs.14,00,000/- made by the AO u.s 68 of the IT Act on account of unexplained cash deposits in the bank account since no documentary evidence has been produced by the assessee either before AO or even before Ld. CIT(A) to substantiate his explanation regarding nature and sources of cash deposit of Rs. 14,00,000/- in his bank account; (v) deleting the addition of Rs. 2,10,580/- made by the AO on account of unexplained loans given to various persons since the assessee never raised the contention before AO or even ld. CIT(A) that he had given loans of Rs. 2,10,580/- out of his unaccounted income mentioned in the order of AO or Ld. CIT(A);

made by the AO in the transport business of the assessee by applying

net profit of 5%. The assessee is engaged in the business of

transportation in the name of M/s Raj Shree Goods Transport

Corporation as well as having liquor business. The assessee filed his

return of income declaring total income of Rs. 26,46,892/- and

agriculture income of Rs. 50,42,500/-. The AO observed that the

assesseee has failed to produce the books of accounts, bills, vouchers

and supporting documents in connection with the business of M/s Raj 2

ITA No. 470/JP/2015 ITO vs. Sh. Rameshwar Meena

Shree Goods Transport Corporation. The AO further noted that the

assessee claimed transportation expenses of Rs. 2,93,97,730/-. Since

the assessee has not produced the books of accounts and other

supporting documents therefore, the AO was of the view that the above

expenses were not incurred wholly and exclusively for the purpose of

business. Accordingly, the AO disallowed 10% of transportation expenses amounting to Rs. 29,39,773/-. Apart from this AO has also

disallowed the claim of expenses on account of conveyance, Petrol,

telephone and mobile expenses of Rs. 55,787/- & Rs. 48,507/-

respectively as well as depreciation of Rs. 3,11,182/- and vehicle loan

interest of Rs. 32,413/-. The AO observed that the element of personal

use cannot be ruled out, therefore, it cannot be said that the above

expenses has been incurred wholly and exclusively for the purpose of

business and accordingly disallowed 20% of the expenses amount to

Rs. 1,44,975/-. The Assessing Officer further disallowed the salary

claimed to have been paid to driver of Rs. 1,08,000/- and others Rs.

1,72,000/- as well as staff welfare expenses of Rs. 35,468/- total

amounting to Rs. 3,15,468/- in toto. On the ground that the assessee

has not furnished any evidence in support of this claim. Thus, the

Assessing Officer disallowed a total amount of Rs. 34,00,216/- in

ITA No. 470/JP/2015 ITO vs. Sh. Rameshwar Meena

connection with the transportation business of the assessee. The

assessee challenged the action of the AO before the ld. CIT(A) and

contended that disallowance made by the AO has resulted a net profit

of Rs. 39,57,985/- in the transport business which is equal 12.70% net

profit rate which is impermissible in this line of business and further the

Assessing Officer has made disallowance without invoking provisions of

u/s 145(3). The ld. CIT(A) estimated income from the transportation

business at 5% and accordingly restricted the disallowance/ addition

made by the AO of Rs. 10,01,460 as against Rs. 34,00,216/- made by

the AO. Thus the ld. CIT(A) has deleted the addition/ disallowance to

the tune of Rs. 23,98,756/-. Aggrieved by the order of the ld. CIT(A),

the Revenue of this appeal.

not produced any books of account or any supporting documents then

the claim of the assesseee is not acceptable. The Assessing Officer has

clearly stated in the assessment order that the assessee has failed to

produce books of accounts as well as bills, vouchers in support of the

expenditure. Hence, disallowance made by the AO at 10% of the transportation expenses, 20% of conveyance petrol, telephone, Mobile

depreciation and vehicle loan expenses due to the personal use of the 4

ITA No. 470/JP/2015 ITO vs. Sh. Rameshwar Meena

telephone and mobile as well as vehicles is justified. Further, when the

assessee has not produced any evidence then the claim of salary to

driver and other staff including staff welfare expenses cannot be

allowed and therefore, the Assessing Officer has disallowed the claim of

the assessee in full. He has relied upon the order of the Assessing

Officer. The ld. DR has further submitted that the ld. CIT(A) estimated

income of the assessee without any basis and therefore the relief

granted by the ld. CIT(A) without citing any instance or prevailing net

profit in this business is based on assumption and not on the facts.

the estimation of the income @ of 5% as against the average net profit

of the assessee in the past year at 1.5% is more than the reasonable

accepted income and therefore, the income estimated by the ld. CIT(A)

needs no interference. The ld. AR has referred the various decisions on

the point and submitted that even the Tribunal has accepted the

income @ of 6.5% GP and therefore, the net income estimated by the

ld. CIT(A) at 5% is much higher than the GP rate at 6.5% accepted by

the Tribunal. He has relied upon the following decisions as under:-

• R.B. Bansilal Abirchand Spinning & Weaving Mills 75 ITR 260. • CIT vs. Maharaja Shree Umaid Mills Ltd. 162 ITR 565 5

ITA No. 470/JP/2015 ITO vs. Sh. Rameshwar Meena • DCIT V Mewar Textile Mills Ltd. 21 Tax World 821 • Mohd. Umer v. CIT 101 ITR 525 • Ajanta Construction (P.) Ltd. Vs. ACIT XXII TW 606 • DCIT Vs. Associated Stone Industries XXII TW 155 • Ghewarchand Vs. ITO XXI TW 571 • Siddheshwari Cotton Mills P. Ltd. V. CIT 117 ITR 953 • Padampath Ramgopal 76 ITR 719 • Malt Bru Ltd. 34 TW 246 • Manohar Lal V. ITO 68 TTJ 27 • Shri Gautam Textile V. ITO 72TTJ 169

material on record. The assessee has not disputed the fact that it failed

to produce any supporting evidence as well as on books of accounts to

substantiate the claim of transportation expenses as well as other

expenses in connection with the conveyance, Petrol, telephone, mobile,

depreciation etc. The dispute is only regarding the quantum of

disallowance made by the AO which has been restricted by the ld.

CIT(A) by estimating the income of the assessee at 5% in the transport

business. The assessee has contended that the net profit declared by

the assessee in the earlier years 2008-09 to 2010-11 which was

accepted by the AO is 1.5% however, we not that all the earlier

ITA No. 470/JP/2015 ITO vs. Sh. Rameshwar Meena

assessment years the return of income were processed u/s 143(1).

There is no scrutiny assessment, therefore, the income declared by the

assessee in the earlier assessment years cannot be taken as accepted

net profit for the purpose of scrutiny assessment made by the AO in the

year under consideration. The Assessing Officer has disallowed various

expenses and some of the expenses were disallowed to the extent of

10% of total expenses and others were disallowed to the extent of 20%

whereas some other expenses claimed on account of salary to the

driver and other staff has been disallowed in toto. Though the assessee

could not produced the supporting documents as well as books of

accounts however, when the Assessing Officer has not invoked the

provisions of section 145(3) then the decision relied upon by the

assessee cannot applied in the case of the assessee. The AO was

framed the order u/s 144 however, the Assessing Officer did not resort

to the provisions of section 145(3). Therefore, there is no illegality in

the action of the AO in disallowing the claim of expenditure under each

head. The CIT(A) after considering the previous history of declared total

income estimated the income @ 5%. We find that the estimation of

income may be adopted in the case when the assessee has not

produced any supporting evidence and to bring the controversy to an

ITA No. 470/JP/2015 ITO vs. Sh. Rameshwar Meena

end. There is no dispute that the income of the assessee was assessed

to tax as a result of disallowance made by the AO is equal to 12.70%

of the turnover which is on the higher side in transport business and

therefore a reasonable and proper estimate was required to be made in

this case of the assessee. The ld. CIT(A) has estimated the income of

the assessee at 5% thereby restricted the disallowance of Rs.

10,01,460/- as against the total disallowance made by the AO of Rs.

34,00,216. Having regard to the facts and circumstances of the case

where the assessee has failed to produce any supporting evidence as

well as proper books of accounts in support of the claim we are of the

considered view that the proper and just estimation of the income. The

impugned order is accordingly modified. Accordingly this ground of the

Revenue is partly allowed.

expenses. We have heard the ld. DR as well as AR and considered the

relevant material on record. The assessing Officer made a total

disallowance of Rs. 16,97,753/- due to the reason that the assessee

failed to produce any supporting evidence as well as books of accounts.

The ld. CIT(A) restricted the disallowance by estimating the net profit

of the assessee at 4% in the liquor business. This issue is identical as 8

ITA No. 470/JP/2015 ITO vs. Sh. Rameshwar Meena

raised in the ground no. (i), therefore, having regard to the facts and

circumstances of the case and our finding in respect of the ground no.

(i). We think it proper and reasonable to estimate the income in the

liquor business @ 5%. The impugned order of the ld CIT(A) is

accordingly modified. This ground is Revenue is party allowed.

added by the AO under section 68 which was deleted by the ld. CIT(A).

During the scrutiny proceedings the AO noted from the AIR

Information of the assesseee that it has deposited a sum of Rs. 97 lacs

in the IDBI Bank and further Rs. 12.01 lacs total amounting to Rs.

1,09,01,000/-. The AO asked the assessee to show cause as to why

this deposit should not be treated as unexplained cash credit. The AO

observed that the assessee has failed to furnish any reply. Further

except the submissions that cash are from receipt of wine, transport

business and agriculture income, no supportive evidence or books of

accounts were produced. Accordingly the AO made an addition of Rs.

1,09,01,000/-. The ld. CIT(A) accepted the explanation of the assessee

that a sum of Rs. 34 lacs deposited in cash was shown with a

description sale proceeds of food soyabeen. Further, the ld. CIT(A) has

noted that the estimated cash turnover of the assessee was around to 9

ITA No. 470/JP/2015 ITO vs. Sh. Rameshwar Meena

Rs. 8.22 crores and therefore, it can be reasonably presumed that the

balance amount of Rs. 63 lacs were deposited out of agriculture

produced sale, cash receipts from wine and transport business.

Accordingly, the ld. CIT(A) directed the AO to delete the addition of Rs.

97 lacs. As regards the deposit of Rs. 12.01 lacs the ld. CIT(A) given

the benefit of a telescopic as it had sustained the addition to the tune

of Rs. 18,08,142/-.

account of unexplained cash deposit in the bank of Rs. 1,4,00,000/-

which was deleted by the ld. CIT(A). The ld. DR has submitted that

during the assessment proceedings the AO found from the CBDT

information of the assessee that a cash of Rs. 14 lacs has been

deposited in the bank account during the year. The AO asked the

assessee to explain the sources of these deposits and in the absence of

any explanation or evidence why the same should not be treated as

unexplained cash credit. The assessee explained the sources of the

deposit as the receipt from wine and transport business as well as

agricultural income. The AO did not accept the explanation of the

assessee and made the addition of Rs. 14,00,000/-. The ld. CIT(A) has

ITA No. 470/JP/2015 ITO vs. Sh. Rameshwar Meena

deleted this addition by granting telescopic benefit as the other addition

sustained by the CIT(A) would be treated as the source of deposit.

relevant material on record. We find that when the Assessing Officer

has made the addition on various heads and part of which was

sustained by the CIT(A) amounting to many times more than this

deposit made in the bank account then the assessee is entitled for the

benefit of telescopic to the extent of the other addition sustained by

that appeal. Hence, we do not find any error or illegality in the order of

the ld. CIT(A) qua this issue.

2,10,580/- on account of unexplained loan account to various persons

which was deleted by the ld. CIT(A) by giving the benefit of telescopic.

relevant material on record. We find that the addition sustained by the

ld. CIT(A) is more than the amount of Rs. 14,00,000/- as deposited in

the bank as well as this amount of Rs. 2,10,580/-. Once the addition

sustained by the ld. CIT(A) is more than the cumulative amounts of

bank deposited of Rs. 14 lacs and loan advance of Rs. 2,10,580/- then,

ITA No. 470/JP/2015 ITO vs. Sh. Rameshwar Meena

we do not find any error or illegality in the order of ld. CIT(A) applying

the telescopic evidence.

relevant material on record. The ld. DR has submitted that the assessee

has not produced any books of accounts to substantiate the claim that

deposit was shown in the books of accounts from agriculture produce

as well as receipts from the wine and transport business. He has relied

upon the order of the Assessing Officer.

material on record we note that the assessee has declared agriculture

income of Rs. 50,42,500/- from the agricultural land taken on lease.

The Assessing Officer has accepted the said claim of agricultural

income. Thus once the Assessing Officer has accepted the agricultural

income of more than Rs. 50 lacs then accepting the claim by the ld.

CIT(A) to the tune of Rs. 34 lacs in bank deposit which is specifically

shown as sale proceed of food soyabin cannot be found fault with.

Hence, to the extent of sources of deposit of Rs. 34 lacs we do not find

any error or illegality in the order of the ld. CIT(A). As regards the

balance amount of Rs. 63 lacs the ld. CIT(A) has deleted the said

addition by considering the fact that the turnover of assessee from the 12

ITA No. 470/JP/2015 ITO vs. Sh. Rameshwar Meena

transport and liquor business is Rs. 8.22 crores, therefore, the said

amount of Rs. 63 lacs can be sourced from the receipt of wine and

transport business. He further noted that the closing balance in the

account of the assessee was only Rs. 3,13,001/- and therefore the

deposit were made by the assessee throughout the year under

consideration. Since this deposit was not in lump sum but spread over

during the year therefore, we do not find any reason to interfere with

the order of the ld. CIT(A) by accepting the source of the deposit as

receipt from the wine and transport business. As regards the benefit of

telescopic of Rs. 12,01,000/- when the addition sustained by the ld.

CIT(A) exceeds the cumulative amount of deposits in the bank and

advance given to the party then we do not find any error or illegality in

granting the said benefit of telescopic.

In the result, the appeal of the Revenue is partly allowed.

Order pronounced in the open court on 08/11/2017

Sd/- Sd/- ¼fot; iky jko½ ¼foØe flag ;kno½ (Vikram Singh Yadav) (Vijay Pal Rao) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 08/11/2017. *Santosh. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 13

ITA No. 470/JP/2015 ITO vs. Sh. Rameshwar Meena 1. vihykFkhZ@The Appellant- ITO, Bundi. 2. izR;FkhZ@ The Respondent- Shri Rameshwar Meena, Prop. M/s Rajshree Goods Transport, By Pass Road, Bundi 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 470/JP/2015} vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत