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Shri Om Prakash Bansal, S/o. Shri Ramavtar Versus Income Tax Officer, Ward-Behror, Behror

2015 (9) TMI 595 - ITAT JAIPUR

Rejection of books of account - trading addition - Held that:- The assessee's books have been rejected year after year and estimate has varied in each year. The ld. Counsel for the assessee has requested for addition on lump sum basis which in our view is not a scientific method and cannot be adopted in assessee's case. Thus looking at the repeated failure of not maintaining proper books, despite a voluminous business, nature of the business and the transactions, assessee cannot be allowed to es .....

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taxable income accordingly. - Decided partly in favour of assessee. - ITA No. 734/JP/2012 - Dated:- 5-6-2015 - R. P. Tolani, JM And T. R. Meena, AM,JJ. For the Appellant : Shri Rajesh Ojha, JCIT For the Respondent : Shri Mahendra Gargieya ORDER Per R P Tolani, JM. This is an appeal filed by the assessee against the order of the ld. CIT(A), Alwar dated 27-07-2012 for the assessment year 2008-09 raising following ground. "The ld. AO has erred in making trading addition of ₹ 7,59,500/- .....

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oceedings, the AO observed that :- "During the year, the assessee has shown receipt of freight of ₹ 22,24,36,643/- and payment of freight of ₹ 2,17,98,232/- thereby declared gross profit of ₹ 6,38,411/-. After claiming expenses of ₹ 5,32,176, net profit of ₹ 1,37,965/- giving net profit rate of 0.61% had been declared. The assessee has claimed above expenses of ₹ 2,17,98,232/- on account of freight payment for the trucks engaged from sub-contractors. Volu .....

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it is not verifiable from the records maintained by the assessee that commission booked in the books of account is correct. (b) At the time of making payment to various subcontractors / truck drivers assessee does not obtain any receipt vide order sheet entry dated 25-11-2010, assessee's A/R was communicated this fact. The assessee filed affidavits of 3 truck owners namely Shri Ramesh Soni, Ramesh Chand Yadav and Shri Babu Lal Yadav wherein it has been stated that they have provided their t .....

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already submitted that when goods are dispatched, a G.R. (Bilty) is prepared on which all the information are noted like name of consignor, name of the consignee, name of transporter, number of truck and amount of total freight . One copy of this GR is given to the truck driver. When goods are safely reached at the destination by the truck driver then he returned this Bilty to transporter. On receipt of this Bilty, transporter credit the account of truck owner by the amounts of freight as noted .....

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ion of this, you can make an enquiry form the truck drivers/ operators who have provided their trucks to the assessee. Further it is most import to mention here that transportation charges paid or payable to truck drivers are subject to TDS, therefore, a prudent truck operator will never accept lesser amount than shown in the TDS certificate. Hence, possibility of manipulation of transportation charges paid is totally ruled out. Acknowledgement of Form No. 16 (TDS Certificate) itself is receipt .....

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the fact that assessee has not obtained any receipt regarding payment from various truck operators. Assessee himself and various truck drivers/ owners have admitted in their statement recorded during the course of assessment proceedings that their signatures are not obtained by the assessee while paying the payments. To verify the above facts, A/R was asked to produce the assessee himself. Summon u/s 131 of the I.T. Act, 1961 were issued to various truck owners namely Shri Ramesh Soni, Shri Rame .....

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do not obtain any receipt of payment of freight. …..On further examination of profit and loss account, it is seen that assessee has claimed various expense which are not vouched. As sub-clause, the claim of these expenses are not subject to proper verification. Details are as under:- 1. 07-11-2007 cash paid for purchase of sweets (not vouched) ₹ 8,000/-. 2. On various dates cash paid to Shri Babu Lal @ ₹ 6,000/- per month. Total amount is ₹ 30,000/-. Nature and purpose .....

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mount. Thus the claim of freight payment shown in the books of account is not verifiable in absence of receipts obtained from the Sub-Contractor / various truck owners/ drivers. The assessee has also not issued any receipt/ vouchers regarding receiving of commission. Since the books maintained by the assessee are not proper and defective in terms of the facts that no records regarding making part payment of freight is maintained and no receipt is issued for charging of fixed commission and claim .....

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nature and of nearby place of Shri Ramniwas Yadav Prop. Shree Krishna Freight, Bansur (ITA No. 26/JP/2010 dated 3-09-2010) on the declared freight receipt of ₹ 2,24,36,643/- which works out to ₹ 8,97,465/- as against ₹ 1,37,965/- declared by the assessee. Accordingly trading addition of ₹ 7,59,500/- is being made by applying the provisions of Section 145(3) of the I.T. Act, 61. This same is added to the total income of the assessee." 3.2 Aggrieved, the assessee prefe .....

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#8377; 7,59,500/- The AR submitted that the AO neither discussed the entire facts of the comparable case with the appellant nor he brought this fact to the knowledge of the assessee. A copy of the said order of Hon'ble Income Tax Appellate Tribunal was made available to the A.R. for his comments. It higher side been submitted that in the case of Shri Ram Niwas Yadav only bilty charges was credited in the profit and loss account. In that case party-wise details of receipt and the payments wer .....

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stomers from the actual truck owners and receives only a small amount as commission/ bilty charges. The appellant has cited cases of certain truck owners where the net profit rate has been shown in the range of 2.05% to 2.8%. It has also been submitted that in the appellant's own case for A.Y. 2009-10, the AO has made a trading addition of ₹ 2 lacs which would result in net profit rate of 1.75% of total transportation receipts of ₹ 308.97 lacs…. ……..I find th .....

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Yadav cited above. In view of above, the trading addition of ₹ 7,59,500/- is sustained." 3.3 Aggrieved, the assessee is before us. 3.4 The ld. Counsel for the assessee contends that rejection of books of account u/s 145(3) of the Act does not confer the power to make arbitrary assessment and if the past history of the assessee is favorably comparable then no trading addition can be made. Reliance is placed on the following case laws. (i) CIT vs. Gotan Lime Khaniz Udyog, 256 ITR 243 (R .....

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fore, in the cases of civil contractors or transporters modified gross profit is usually considered which is nothing but the net profit rate subject to the deduction of depreciation, salary to others/ partners and interest. In the instant case the declared GP rate is 2.85% however, after deducting indirect expenses of ₹ 5,32,176/- the net profit came to ₹ 0.614%. The lower authorities instead of considering the gross profit rate wrongly considered the net profit rate. In the next yea .....

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le to earn more than 3% net profit rate. If 4% net profit rate is adopted then the commission per truck comes to higher figure of ₹ 1,275/- The assessment for the assessment year 2009-10 was framed u/s 145(3) by the same AO and a lump sum addition of ₹ 2.00 lacs was made resulting net profit rate at 1.75% which has been further reduced by CIT(A) to ₹ 50,000/-. Thus the net profit rate of 4% applied by the AO is highly unjustified. 3.5 The ld. DR supported the order of lower aut .....

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