ITO-WARD--1-(3), ASANSOL, ASANSOL vs. NARESH KUMAR CHAPARIA, BURDWAN

- This Revenue’s appeal for assessment year 2006-07 is directed against the Commissioner of Income Tax (Appeals), Asnsol dated 16.12.2016. passed in case No.128/CIT(A)/ASL/Ward-1(3)/Asl/14-15, involving proceedings u/s 143(3)/254/145 of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file perused.

The Revenue’s sole substantive ground in the instant appeal pleads that CIT(A) has erred in law as well as on facts in directing the Assessing Officer to compute assessee’s net profit @ 8% of the turnover on account of his failure in substantiating truck hiring charges claimed as expenditure. The CIT(A)’s detailed discussion on the instant sole issue reads as under:- “3. Decision:- A.Y. 2006-07 ITO Wd-1(3), Asl. Vs. Naresh Kr. Chaparia Page 2 The assessee is in the line of transportation business acting as an agent. The return of income during the previous year was filed declaring total income of Rs.1,810,070/-. The case was selected for scrutiny and the assessment was completed on 31/12/2008 wherein the total income was assessed at Rs.1,02,94,590/-. During the course of first Appellate proceedings the Ld. CIT(A) rejected the books of account of assessee under section 145 and estimated the total income of the assessee at the rate of 10% of the turnover i.e. Rs.10,45,928/-. Thereafter being aggrieved with the enhancement order of the CIT(A) the assessee went in appeal before the Tribunal. The hon'ble Tribunal vide their order dated 3rd May 2012 have set-aside the issue back to the Assessing Officer with the following directions:- ‘Further, Ld. Counsel for the assessee stated that since the assessee was unable to produce books of accounts, CIT(A) enhanced the assessment by applying net profit rate @ 10% as against the declared profit of 2%. Ld. Counsel for the assessee in all fairness stated that he is ready to produce completed books of account as well as he is ready to explain the issue of truck hire charges being individual truck and not on contract basis. On these facts, Ld. CIT, DR Shri L.K.S. Dahiya also conceded that let the issue be examined afresh by Assessing Officer but he requested the bench to direct the assessee to appear before Assessing Officer as and when called for. In the light of the above facts and circumstances, we feel that let these two issues be examined afresh by Assessing Officer. Hence, we set aside the issues to the file of Assessing Officer and allow the appeal of assessee for statistical purposes.’ In the consequential assessment order passed in pursuance to the directions of ITAT the Assessing Officer on 28th March 2014 has computed the total income at Rs.62,14,640/-. In the said assessment the truck hire charges claimed to have been paid by the assessee of Rs.54,03,848/- has been disallowed by the Assessing Officer. Further the Assessing Officer observed that certain payments had been made without deduction of TDS and accordingly disallowance under section 40(ia) of Rs.6,31,550/- was also made. The assessee in his submissions has highlighted that the Assessing Officer has disallowed excessive truck hire charges the gross receipts declared by the assessee is Rs.1,04,59,286/- out of which the disallowance made by the AO Rs.54,03,848/p-. The disallowance of truck hire charges have been made for want of verification as follows:- Disallowance of hire Reasons charges (a) 3,92,202/- On the ground of 1.38,413/- wrong vehicle number A.Y. 2006-07 ITO Wd-1(3), Asl. Vs. Naresh Kr. Chaparia Page 3 46,415/- (non-transport vehicle)[bogus or inflated expenditure (b) 47,41,001/- No record found with RTO/Truck number not registered with RTO Asansol (c) 39,402/- As inflated 46,415/- expenditure Total – Rs.54,03,848/- On going through the assessment order and the findings of the Assessing Officer recording the defects pointed out in the books of accounts of the assessee I am of the opinion that the Bills and vouchers produced by the assessee are not authentic and not reliable. Numerous mistakes have been pointed out by the AO in the Bills prepared for payment of higher charges. Accordingly the books of accounts of the assessee are hereby rejected u/s. 145(3) of the Act. It is contention of the A/R that the AO has made repeated disallowance on the same ground. The turnover of the assessee and the work done as transportation agent has not been disputed by the AO. However, the AO after rejection of books has to make a reasonable estimate of the income of the assessee. The assessment cannot be based without material facts. I propose to go by the provision in the Act given in section 44AD where the income has to be assessed at 8% of the gross turnover even if the assessee does not maintain any books of accounts. Therefore on rejection of the books of accounts the net profit in the case of the as is taken at 8% of the gross receipts in line with the provisions of section 44AD regarding presumptive taxation. The gross receipts of the as is Rs.1,04,59,286/-. The AO is directed to compute the net profit at 8% of the turnover. The appeal of the assessee ion this issue is partly allowed.”

We have given our thoughtful consideration to rival submissions. There is no dispute that this assessee is a transport commission agent. The relevant receipts from the concerned customers assigning him the corresponding transportation works are not in dispute as the issue before us is that of substantiation of truck hire charges amounting to ₹54,03,848/-. He has failed to tally the relevant trucks numbers vis-à-vis the information obtained from RTO Department. He has also been found to have inflated some expenses (supra). The same invited the impugned disallowance in course of first assessment. The CIT(A) has applied net profit @ 10% against the declared