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Income Tax Appellate Tribunal, DELHI BENCHES : D : NEW DELHI
Before: SHRI R.S. SYAL & SHRI KULDIP SINGH
This appeal by the Revenue and the Cross Objection by the assessee arise out of the order passed by the CIT(A) on 20.04.2013 in relation to the assessment year 2009-10.
The only issue raised by the Department in its appeal is against reduction in the amount of addition from goods carriage made by the Assessing Officer. The assessee in its Cross Objection is against the sustenance of addition to a certain level.
Briefly stated, the facts of the case are that the assessee is engaged in the business of transportation of frozen foods, milk & milk products, fruits and vegetables in canned bottles etc.
The return was filed declaring a loss of Rs.2,09,04,537/-.
Thereafter, a revised return was filed claiming certain amount of refund. During the course of assessment proceedings, the Assessing Officer observed that net loss of Rs.2.60 crore was 2
CO No.151/Del/2014 declared by the assessee on gross receipts of Rs.8.59 crore.
This was contrasted with the corresponding figures for the assessment year 2007-08 in which the turnover was Rs.12.63 crore and net profit of Rs.8.60 lac. On being called upon to explain as to why the books of account be not rejected, the assessee tendered its reply which has been incorporated in the assessment order. The Assessing Officer observed that some of the expenses, namely ‘Trip transit’ expenses were not properly supported by vouchers. It was seen that similar issue arose in the proceedings for the assessment year 2008-09 in which a voluntary disclosure of Rs.35 lac was made by the assessee on this score. It was further noticed that some of the sundry creditors were lying for many years and no convincing reply was given except that the same were paid in later years.
It was still further noticed that the assessee was not maintaining stock of tyres and material etc. Considering the above factors, the Assessing Officer invoked the provisions of CO No.151/Del/2014 section 145(3) of the Act and rejected the books of account.
Placing reliance on the provisions of section 44AE, the Assessing Officer computed income @ Rs.3,500/- per month
per truck which resulted into determination of income at Rs.37.38 lac. The ld. CIT(A) did not approve the rejection of books of account. Following the order for the assessment year 2008-09, the ld. CIT(A) sustained the addition at Rs.23.50 lac to the income declared. This is how, both the sides have come up in appeal before the Tribunal in support of their respective stands.
We have heard the parties and perused the relevant material on record. The figures of Sales, Gross profit, Gross profit rate, Net profit and Net profit rate etc. relating to assessment years 2007-08 to 2010-11 have been tabulated by the Assessing Officer on page 7 of his assessment order, which is reproduced as under:-
CO No.151/Del/2014 A.Y. 2007-08 2008-09 2009-10 2010-11 Turn Over (Rs.) 126395653 137345084 85974925 126431540 Gross Profit (Rs.) 23662999 12375305 6489940 17648754 GP Rate % 18.72 9.01 9.5 13.95 Net Profit (Rs.) 860411 (-)31932501 -26002619 -2130629 N.P. Rate % 0.68 -23.25 -30.25 -1.68 Due to depreciation -13146 -26851032 -20904537 -61218668 adjustment as per company law & as per IT Act, Returned Inc.
It is discernible from the above Table that the assessee’s gross profit rate for the current year stood at 9.5% as against 9.01% for the immediately preceding year. The assessee maintained proper books of account along with vouchers which were produced before the Assessing Officer as has been recorded in para 2 of the assessment order. The mere fact that the assessee suffered net loss cannot be a reason to reject the books of account, more specifically when it was contended before the Assessing Officer that the loss occurred due to heavy amount of depreciation during the year under consideration, which fact has not been controverted by the AO.
The other reasons recorded by the Assessing Officer, such as,
CO No.151/Del/2014 non-maintenance of stock of tyres and materials etc. and sundry creditors lying for many years, etc. cannot give rise to the rejection of books of account. When the assessee returned gross profit rate of 9.5%, which is higher than that of preceding year at 9.01%, we hold the books of account, even if rightly rejected, cannot call for a trading addition. Be that as it may, we find that no convincing or legally sustainable reasons have been given for the rejection of books of account. We thus countenance the view point of the ld. CIT(A) on this issue.
It is further seen that the provisions of section 44AE, as invoked by the AO for determining the income, are not attracted as the assessee admittedly owns more than ten goods carriages etc. As such, the application of section 44AE cannot be magnetized.
To sum up, it is held that the books of account were properly maintained by the assessee and their rejection has been rightly overturned in the first appeal.
CO No.151/Del/2014 8. However, it is clear from the assessment order that certain expenses were not properly supported and were based on self made vouchers. This certainly requires disallowance of some expenses. Similar position was prevailing during the course of proceedings for the assessment year 2008-09 in which the assessee agreed for 4% disallowance of ‘Trip transit’ expenses and certain other expenses. The ld. CIT(A) has applied the same yardstick for sustaining the disallowance @ 4% of ‘Trip transit’ expenses and certain amount of `Other expenses’, which in total comes to Rs.23.50 lac. We, therefore, uphold the impugned order sustaining the disallowance to this extent.
In the result, both the appeal as well as the Cross Objection stand dismissed.
Order Pronounced in the open Court on 14.12.2017.