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Income Tax Appellate Tribunal, CUTTACK ‘SMC’ BENCH,
Before: SHRI N.S SAINI
This is an appeal filed by the assessee against the order of CIT(A)-2,
Bhubaneswar dated 24.8.2016 for the assessment year 2010-2011.
The only grievance of the assessee is that the ld CIT(A) erred in
confirming the order of the Assessing Officer in making addition of
Rs.3,67,689/-.
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I have heard the rival submissions and perused the orders of lower
authorities and materials available on record. In the instant case, the
Assessing Officer observed that the assessee has claimed freight expenses of
Rs.3,18,78,780/-. The assessee could not furnish the list of vehicle numbers
and freight charges. The ledger account produced shows only the total
amount paid towards freight charges on a particular date but does not have
the details of payee of freight charges. The net profit disclosed by the
assessee is around 3.4% of gross receipts which is too low in the line of trade.
Also, the expenditure claimed towards freight charges is considered excessive.
He, therefore, disallowed 1% of gross freight charges claimed and debited to
the profit and loss account and, thereby made an addition of Rs.3,67,689/-.
On appeal before the ld CIT(A), the assessee argued that the
disallowance of one percentage is excessive and should be restricted to 0.5%.
Ld CIT(A) did not accept the contention of the assessee and confirmed the
action of the Assessing Officer.
Before me, ld A.R. reiterated the submission made before the ld CIT(A).
Ld D.R. relied on the order of the ld CIT(A).
In the above facts and circumstances of the case, I am of the considered
view that the Tribunal in many cases of many assesses in transport business
has held net profit @ 3% of gross receipts as reasonable. If transport
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expenses claimed by the assessee is disallowed @ 0.5% of gross transport
expenses claimed by the assessee, then the net profit of the assessee from
transport business will work out at 4% will be quite reasonable. Therefore, the
disallowance made by the Assessing Officer out of freight charges is excessive
and it would meet the ends of justice if the same is restricted to 0.5% of the
total freight charges claimed by the assessee. I, therefore, modify the order
of ld CIT(A) to this extent and partly allow the ground of the appeal.
In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 05/01/2017 in the presence of parties. Sd/- (N.S Saini) ACCOUNTANT MEMBER Cuttack; Dated 05/01 /2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Smt. Sujata Ray, W/O. Shri Subrat Kumar Ray, At-Badadanda Sahi, Talcher Town, Dist: Angul. 2. The Respondent. ITO, Ward-2, Dhenkanal 3. The CIT(A)-2, Bhubaneswar. 4. CIT, Bhubaneswar. 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//
BY ORDER,
ASST.REGISTRAR, ITAT, Cuttack