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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI R. K. PANDA & MS. SUCHITRA KAMBLE
PER R. K. PANDA, AM : This appeal filed by the assessee is directed against the order dated
23.03.2015 of the ld. CIT(A), Bilaspur (CG) relating to assessment year
2010-11.
Ground of appeal nos.1 and 2 by the assessee reads as under :- “1. That under the facts & law, the learned Commissioner of Income Tax (Appeals) erred in confirming the observation of the learned Assessing Officer that the provisions of Sec.145(3) were applicable for rejection of book results and estimating the income on the basis of turnover. Prayed that provisions of Sec.145(3) are not applicable and book results be accepted. 2. That under the facts & law, the learned Commissioner of Income Tax (Appeals) further erred in estimating the net profit rate at 5% of the turnover as against 3.03% declared by the appellant, rejecting the explanation filed.
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Prayed to accept the book results and the addition be deleted.”
Facts of the case, in brief, are that the assessee is a private limited
company engaged in transport business and filed its return of income on
30.09.2010 declaring total income of Rs.27,25,030/-. During the course of
assessment proceedings, the Assessing Officer observed that the assessee has
shown gross receipt from the transporting contracts at Rs.8,75,52,316/- and has
shown net profit of Rs.26,27,611/- which is around 3%. This according to him
is very much on the lower side and the assessee has grossly inflated his various
expenses like transportation charges, Diesel & Lubricant expenses, salary &
wages, repair and maintenance, etc.. The Assessing Officer asked the assessee
to produce the books of account and justify the various expenses debited in
profit and loss account. He also issued summons to all the transporters as per
address given by the assessee. However, the requisite information in the
specified Performa was neither furnished by the assessee nor any of the
transporters and they were not found in the given address also as per the report
of the Inspector. After considering the various details furnished by the assessee
and observing that there are lots of discrepancies in books of account, the
Assessing Office rejected the book results and estimated the net profit at 7% of
the total contract receipt.
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In appeal, the ld. CIT(A) while upholding the rejection of books results
reduced such net profit to 5% of the turnover.
Aggrieved with such order of the ld. CIT(A), the assessee is in appeal
before the Tribunal.
The ld. counsel for the assessee submitted that the net profit rate adopted
by the ld. CIT(A) is highly arbitrary and not based on the past results. He
submitted that in the immediately preceding assessment year on a total turnover
of Rs.4.54 crores, the assessee had declared net profit of Rs.6.93 lakhs which
comes to 1.5% and after considering the other income the net profit declared
during that year was 1.8%. He submitted that in the assessment year 2008-09,
the assessment order was passed u/s 143(3) and the Assessing Officer had
accepted the book results with nominal addition of only Rs.70,000/-. Referring
to the decision of the Raipur Bench of the Tribunal in the case of J. N.
Construction vide ITA No.270/RPR/2013 order dated 16.04.2018, he submitted
that the Tribunal in the said decision has allowed the appeal filed by the
assessee and accepted the book results where net profit declared by the assessee
before remuneration and interest to partners was shown at 1.04%. He
accordingly submitted that the order of the ld. CIT(A) should be set-aside and
the profit declared by the assessee be accepted.
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The ld. DR on the other hand submitted that the ld. CIT(A) has very
reasonably reduced the net profit from 7% to 5% which under the facts and
circumstances of the case is justified. He submitted that when the assessee was
unable to justify the various expenses claimed in the profit and loss account by
producing proper bills and vouchers and the transporters to whom such
transportation charge has been paid the assessee cannot claim further relief.
We have heard the rival arguments made by both the sides and perused
the material available on record. We find the assessee in the instant case is a
transport contractor and has declared net profit of Rs.26,27,611/- on the
transport contract receipt of Rs.8,75,52,361/-. The net profit shown by the
assessee comes to 3.03% which was rejected by the Assessing Officer on
account of various defects in the books of account produced before him and the
Assessing Officer estimated the net profit at 7% by rejecting the book results.
We find ld. CIT(A) reduced such net profit to 5%. It is the submission ld.
counsel for the assessee that in the past the Department has accepted the book
results with minor disallowance for assessment year 2008-09. Further, in the
immediately preceding assessment year, the assessee had shown 1.8% net profit
and the same was accepted in summary assessment. It is also the submission of
the ld. counsel for the assessee that in the case of J.N. Construction (supra), the
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Tribunal has directed the Assessing Officer to accept the book results without
any further addition where the profit shown before remuneration and interest to
partners was shown at 1.04%. We find some force in the above argument of the
ld. counsel for the assessee. It is an admitted fact that while estimating the net
profit at 7% the Assessing Officer has not given any comparable cases. The ld.
CIT(A) while directing the Assessing Officer to estimate the profit at 5% has
also not given any comparable cases and distinguished the decision in the case
of G.N. Construction (supra) cited before him holding that the facts of that case
are different and, therefore, cannot be a comparable case. Considering the
totality of the facts of the case and keeping in view the past record of the
assessee, we are of the considered opinion that adoption of 3.2% net profit as
against 5% net profit adopted by the ld. CIT(A) will meet the ends of justice.
We hold and direct accordingly. The grounds of appeal nos.1 and 2 by the
assessee are accordingly partly allowed.
Ground no.3 by the assessee reads as under :-
“3. That under the facts & law, the learned Commissioner of Income Tax (Appeals) further erred in confirming the disallowance of Rs.2,10,000/- U/S 40(a)(ia) rw Sec. 194I made by the learned Assessing Officer not considering the decisions of various Benches of Hon’ble Tribunals including the jurisdictional Tribunal and also rejecting the certificate similar to as referred in Sec.201(1A) – proviso.”
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After hearing both the sides, we find the assessee has paid Rs.2,10,000/-
as hiring charges to one Shri Daljeet Singh Kalara on which no TDS was
deducted for which the Assessing Officer disallowed the said amount u/s
40(a)(ia) of the I.T. Act. The ld. CIT(A) upheld the action of the Assessing
Officer on the ground that the assessee had liability to tax deducted at source on
payment made to Shri Daljeet Singh Kalara and, therefore, on account of failure
on the part of the assessee to deduct tax at source, the Assessing Officer was
justified in disallowing the expenditure. It is the submission of the ld. counsel
for the assessee that in view of the decision of the Hon’ble Delhi High Court in
the case of CIT vs. Ansal Land Mark Township (P.) Ltd. reported in 377 ITR
365 if the payee has declared such amount in his return of income and paid due
tax thereon, no disallowance u/s 40(a)(ia) is called for. He, however, agreed
that given an opportunity the assessee is in a position to furnish the details
substantiating that the payee has paid the taxes due on this amount. The ld. DR
while supporting the order of the ld. CIT(A) has no objection for restoring the
matter to the file of the Assessing Officer with a direction to the assessee to
substantiate such claim. Considering the totality of the facts of the case and in
the interest of justice, we deem it proper to restore the issue to the file of the
Assessing Officer with a direction to give an opportunity to the assessee to
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substantiate with evidence to his satisfaction that the payee has declared the
amount and paid taxes due thereon. We hold and direct accordingly. The
ground raised by the assessee is allowed for statistical purposes.
In the result, the appeal filed by the assessee is partly allowed for
statistical purposes. Order pronounced in the open Court on this 17th August, 2018.
Sd/- Sd/- (SUCHITRA KAMBLE) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 17-08-2018. Sujeet Copy of order to: - 1) The Appellant 2) The Respondent 3) The CIT 4) The CIT(A) 5) The DR, I.T.A.T., Raipur. By Order //True Copy// Sr. Private Secretary ITAT, Raipur