The DCIT, Circle-5(1), Visakhapatnam v. M/s United Freight Carrying Coporation, Visakhapatnam

ITA 115/VIZ/2010 | 2006-2007
Pronouncement Date: 19-10-2010 | Result: Dismissed

Appeal Details

RSA Number 11525314 RSA 2010
Bench Visakhapatnam
Appeal Number ITA 115/VIZ/2010
Duration Of Justice 8 month(s)
Appellant The DCIT, Circle-5(1), Visakhapatnam
Respondent M/s United Freight Carrying Coporation, Visakhapatnam
Appeal Type Income Tax Appeal
Pronouncement Date 19-10-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 19-10-2010
Date Of Final Hearing 22-09-2010
Next Hearing Date 22-09-2010
Assessment Year 2006-2007
Appeal Filed On 19-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO. 286 /VIZAG/ 20 08 ASSESSMENT YEAR : 2005 - 06 ACIT CIRCLE - 4(1) VISAKHAPATNAM UNITED FREIGHT CARRIERS (VIZAG) (P) LTD. VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) PAN NO.AAACU 4498B CO NO. 24 /VIZAG/2008 ASSESSMENT YEAR : 2005 - 06 UNITED FREIGHT CARRIERS (VIZAG) (P) LTD. VISAKHAPATNAM ACIT CIRCLE - 4(1) VISAK HAPATNAM (APPELLANT) VS. (RESPONDENT) ITA NO.115/VIZAG/2010 ASSESSMENT YEAR : 2006 - 07 DCIT CIRCLE - 5(1) VISAKHAPATNAM M/S. UNITED FREIGHT CARRYING CORPORATION VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) PAN NO.AAA F U 9164F APPELLANT BY: SHRI D .S. SUNDER SINGH DR RESPONDENT BY: SHRI I. KAMA SASTRY CA ORDER PER SHRI S.K. YADAV JUDICIAL MEMBER : - THESE APPEALS ARE PREFERRED BY THE REVENUE AGAINST DIFFERENT ASSESSEES WHO HAPPENED TO BE THE SISTER CONCERN. IN ITA NO.286 OF 2008 ASSESSEE HAS FILED THE CROSS OBJECTIONS. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS WE HEARD THEM TOGETHER AND AS SUCH THE SAME ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER. WE HOWEVER PREFER TO ADJUDICATE THEM ONE AFTER ANOTHER. 2 ITA NO.286 OF 2008: 2. THIS IS AN APPEAL OF THE REVENUE IN WHICH REVENUE HAS ASSAILED THE ORDER OF THE CIT(A) ON A SOLITARY GROUND THAT HE HAS ESTIMATED THE PROFIT @ 2.5% WHICH IS NOT REASONABLE. 3. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM CAREFUL PERUSAL OF THE RECORD WE FIND THAT ASSESSEE COMPANY IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF TRANSPORT HANDLING AND MINING WORKS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O. NOTED THAT THE PAYMENTS TOWARDS LORRY HIRE CHARGES OF RS.2 93 45 182/ - INCIDENTA L CHARGES OF RS.2 42 819/ - AND LABOUR CHARGES FOR MINING OF RS.7 84 658/ - WERE MADE IN CASH AND THEY WERE SUPPORTED BY THE SELF - MADE VOUCHERS. THE SELF - MADE VOUCHERS MOSTLY DID NOT CONTAIN THE NAMES AND ADDRESSES OF THE PERSONS TO WHOM SUCH PAYMENTS WERE MADE. COUPLED WITH THE ABOVE FACTS THE FACT THAT THE PROFIT DISCLOSED DURING THE YEAR WAS VERY LOW THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE WERE NOT RELIABLE TO D EDUC E THE CORRECT PROFIT THERE FR OM AND HENCE REJECTED THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEES. CONSEQUENTLY HE ESTIMATED THE INCOME @ 12.5% OF THE TOTAL GROSS RECEIPT. FROM SUCH ESTIMATED INCOME HE ALLOWED THE CLAIM OF DEPRECIATION. 4. THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE CIT(A) WITH THE SUBMISSION THAT ASSESSEE WAS ENGAGED IN DIFFERENT BUSINESS ACTIVITIES AS SUCH UNIFORM FLAT RATE CANNOT BE APPLIED TO DETERMINE THE GROSS PROFIT. THE DETAILS OF DIFFERENT BUSINESS ACTIVITIES WERE ALSO FURNISHED BEFORE THE CIT(A) . B EING PARTLY CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEES THE CIT(A) HAS ESTIMATED THE INCOME FROM DIFFERENT ACTIVITIES AS UNDER: - (I) GOODS TRANSPORT BUSINESS @ 2.5% OF THE RECEIPT OF RS.3 19 84 562/ - RS.7 99 614 (II) CONTRACTUAL TRANSPORT BUSINESS @ 2.5% OF RECEIPT OF RS.17 49 854/ - RS.43 746 (III) MINING OF QUARTZ BUSINESS @ 5% OF THE SALES OF RS.11 92 621/ - RS.59 631` (IV) POCLAIN RECEIPT OF RS.4 86 090/ - CONSTITUTES 1.35% OF THE TOTAL RECEIPTS AND HENCE 1.35% OF THE EXPENSES CLAIMED UNDER THE HEAD ADMINISTRATIVE EXPENSES AND FINANCE CHARGES SHOULD BE ALLOWED AS A DEDUCTION FROM SUCH RECEIPT. THE NET INCOME WOULD BE RS.4 45 413 3 (V) CRANE AND VAN HIRE CHARGES RECEIPT OF RS.1 09 951/ - CONSTITUTES 0.3% OF THE TOTAL RECEIPTS AND HENCE 0.3% OF T HE EXPENSES CLAIMED UNDER THE HEAD ADMINISTRATIVE EXPENSES AND FINANCE CHARGES SHOULD BE ALLOWED AS A DEDUCTION FROM SUCH RECEIPT. THE NET INCOME WOULD BE RS.1 00 912 (VI) LORRY HIRE CHARGES RECEIPT OF RS.3 59 600/ - CONSTITUTES 1% OF THE TOTAL RECEIPTS AND HENCE 1% OF THE EXPENSES CLAIMED UNDER THE HEAD ADMINISTRATIVE EXPENSES AND FINANCE CHARGES SHOULD BE ALLOWED AS A DEDUCTION FROM SUCH RECEIPT. THE NET INCOME WOULD BE RS.3 29 470 TOTAL RS.17 78 786 5 . THE ESTIMATION WITH REGARD TO THE GOODS TRAN SPORT BUSINESS AND CONTRACTUAL TRANSPORT BUSINESS AT 2.5% OF THE GROSS RECEIPT IS NOT ACCEPTED BY THE REVENUE AND THE REVENUE PREFERRED THE PRESENT APPEAL BEFORE US. THE ASSESSEE HAS ALSO ASSAILED THE ESTIMATION OF PROFIT FROM TRANSPORT BUSINESS AT 2.5% T HROUGH HIS C.O. FILED BEFORE US BESIDES ASSAILING THE ORDER OF THE CIT(A) CONFIRMING THE REJECTION OF BOOKS OF ACCOUNTS. WE THEREFORE CONFINE OURSELVES WITH REGARD TO THE ISSUE OF REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF PROFIT FROM THE TRANSPORT BUSINESS OF THE ASSESSEES. 6 . DURING THE COURSE OF HEARING THE LD. COUNSEL FOR THE REVENUE HAS INVITED OUR ATTENTION THAT THE ASSESSEE HAS CLAIMED A SUBSTANTIAL EXPENDITURE AGAINST THE TRANSPORTATION RECEIPT ONLY ON THE BASIS OF THE SELF - MADE VOUCHERS. THESE SELF - MADE VOUCHERS EVEN DID NOT CONTAIN THE NAMES AND ADDRESSES OF THE PERSONS TO WHOM SUCH PAYMENTS WERE MADE. THE ASSESSEE HAS MADE THE PAYMENT OF RS.2 93 45 182/ - ON THE BASIS OF THESE SELF - MADE VOUCHERS. THEREFORE THE REJECTION OF THE BOOKS OF ACCOUNTS BY THE A.O. WAS PROPER. SO FAR AS ESTIMATION OF PROFITS ON THE CONTRACT BUSINESS ARE CONCERNED THE LD. D.R. HAS INVITED OUR ATTENTION TO THE ORDER OF THE CIT IN THE CASE OF SISTER CONCERN OF THE ASSESSEES I.E. M/S. UNITED FREIGHT CARRYING CORPO RATION IN WHICH THE ASSESSEE ITSELF HAS DECLARED NET INCOME BEFORE DEPRECIATION AT 6.75%. THEREFORE THE ASSESSEES SISTER CONCERN CASE IS A MOST COMPARABLE CASE WHICH SHOULD HAVE BEEN FOLLOWED IN THIS CASE FOR ESTIMATING THE NET INCOME FROM THE TRANSPORT BUSINESS. 7 . THE LD. COUNSEL FOR THE ASSESSEES ON THE OTHER HAND HAS SUBMITTED THAT IN THE TRANSPORT BUSINESS ALL DETAILS OF THE PARTIES CANNOT BE OBTAINED AND 4 SOMETIMES THE SELF - MADE VOUCHERS ARE PREPARED TO BOOK THE EXPENSES. BUT IN ANY CASE THE ASSE SSEE HAS MAINT AINED THE COMPLETE DETAILS OF PAYMENTS . THEREFORE THE REJECTION OF THE BOOKS OF ACCOUNTS WAS NOT PROPER. 8 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IN ORDER TO VERIFY THE NATURE OF PR EPARATION OF THE SELF - MADE VOUCHERS THE ASSESSEE WAS ASKED TO PROVIDE SOME SAMPLE VOUCHERS BUT THE ASSESSEE H AS BADLY FAILED TO PRODUCE THE SAME. IN THE ABSENCE OF PHYSICAL VERIFICATION OF SELF - MADE VOUCHERS WE HAVE TO CONFINE OURSELVES FROM THE ORDERS O F LOWER AUTHORITIES AND THE LOWER AUTHORITIES HAVE SPECIFICALLY RECORDED IN THEIR ORDERS THAT MOST OF THE SELF - MADE VOUCHERS DID NOT CONTAIN THE NAMES AND ADDRESSES OF THE PERSON TO WHOM SUCH PAYMENTS ARE MADE. MEANING THEREBY THE SELF - MADE VOUCHERS DID NOT CONTAIN THE COMPLETE DETAILS OF THE PAYEE. THEREFORE THEY ARE NOT OPEN FOR VERIFICATION. WHEN THE EXPENSES ARE NOT OPEN FOR VERIFICATION AND THE ASSESSEE HAS FAILED TO PRODUCE THE RELEVANT MATERIAL ON RECORD TO JUSTIFY THE EXPENSES THE REVENUE AUTH ORITIES ARE JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEES AND ONCE THE BOOKS OF ACCOUNTS ARE REJECTED THE OPTION AVAILABLE WITH THE ASSESSING OFFICER WAS ONLY TO ESTIMATE THE PROFIT IN THE LIGHT OF COMPARABLE CASES. IN THE INSTANT CASE A DMITTEDLY ASSESSEE WAS ENGAGED IN DIFFERENT BUSINESS ACTIVITIES. THOUGH THE ASSESSING OFFICER HAS ESTIMATED THE INCOME @ 12.5% OF THE TOTAL GROSS RECEIPTS BUT THE CIT(A) HAS REJECTED THIS MODE OF ESTIMATION. HE HAS ESTIMATED THE PROFIT OF THE ASSESSEES U NDER DIFFERENT HEADS BY APPLYING DIFFERENT PERCENT AGE OF PROFIT. THE REVENUE HAS ACCEPTED THE ESTIMATION OF PROFIT ON OTHER ACTIVITIES BUT THE PROFIT ESTIMATED ON TRANSPORT BUSINESS WAS QUESTIONED BY THE REVENUE AS WELL AS THE ASSESSEES. 9. THE CIT(A) HAS ESTIMATED THE PROFIT AT 2.5% OF THE GROSS RECEIPT WHICH WERE CONSIDERED TO BE AT LOWER SIDE BY THE REVENUE IN THE LIGHT OF ASSESSEES SISTER CONCERN CASE IN WHICH ASSESSEE HAS DECLARED THE PROFIT FROM THE SAME ACTIVITIES AT 6.75% BEFORE DEPRECIATION. IN THAT CASE THE ASSESSEE HAS MAINTAINED THE PROPER BOOKS OF ACCOUNTS AND IN THE SELF - MADE VOUCHERS 5 DETAILS OF PAYEES WERE FURNISHED AND SINCE THE VOUCHERS WERE OPEN FOR VERIFICATION THE CIT(A) HAS ACCEPTED THE PROFIT DECLARED BY THE ASSESSEES. 10 . THO UGH THE ASSESSEE HAS REFERRED VARIOUS CASE LAWS BUT FOR THE PURPOSE OF ESTIMATION OF PROFIT AFTER REJECTING THE BOOKS OF ACCOUNTS THE BEST CASE AVAILABLE IS EITHER OF THE ASSESSEES EARLIER PAST YEARS OR THE SISTER CONCERN OR THE OTHER CONCERN WHO WERE ENG AGED IN THE SIMILAR ACTIVITIES IN THE SAME AREA. IN THE INSTANT CASE SINCE THE ASSESSEES SISTER CONCERN HAS DECLARED THE PROFIT FROM TRANSPORT BUSINESS AT 6. 7 5% BEFORE DEPRECIATION WE ARE OF THE VIEW THAT THE SAME SHOULD BE ADOPTED IN THE INSTANT CASE ALSO. WE ACCORDINGLY MODIFY THE ORDER OF THE CIT(A) AND DIRECT THE A.O. TO ESTIMATE THE PROFIT FROM TRANSPORT BUSINESS I.E. GOODS TRANSPORT BUSINESS AND CONTRACTUAL TRANSPORT BUSINESS ON 6.75% BEFORE DEPRECIATION OF THE GROSS RECEIPTS. ACCORDINGLY THE REVENUES APPEALS AND THE C.O. OF THE ASSESSEES ARE DISPOSED OFF. ITA 115 OF 2010: 11 . IN THIS APPEAL THE REVENUE HAS ASSAILED THE ORDER OF THE CIT(A) ON A SOLITARY GROUND THAT CIT(A) OUGHT TO HAVE APPRECIATE D THE FACT THAT ESTIMATION OF PROFIT AT 10% WAS DONE IN VIEW OF THE SELF - MADE VOUCHERS FOR MOST OF THE EXPENSES CLAIMED BY THE ASSESSEES IN THE ABSENCE OF PROPER BOOKS OF ACCOUNTS. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE ORDER OF THE AUTHORITIES BELOW AND DOCUMENTS PLAC ED ON RECORD. IN THIS CASE THE BOOK RESULTS OF THE ASSESSEE WAS REJECTED BY THE A.O. ON THE GROUND THAT THE ASSESSEE HAS MAINTAINED THE SELF - MADE VOUCHERS AS PER THE CERTIFICATE BY THE AUDITOR OF THE FIRM AND THE A.O. ESTIMATED THE 10% OF THE GROSS RECEI PT OF RS.2.19 CRORES. 13. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) ACCEPTED THE PROFIT DECLARED BY THE ASSESSEES AFTER DELETING THE ADDITIONS ON THE GROUND THAT THE SELF - MADE VOUCHERS MAINTAINED BY THE ASSESSEES CONTAIN 6 THE FULL DETAILS OF THE RECIPIENT. THEREFORE THE SELF - MADE VOUCHERS ARE OPEN FOR VERIFICATION. DURING THE COURSE OF HEARING THE LD. D.R. COULD NOT PLACE ANY EVIDENCE BEFORE US TO RE BUT THE FINDINGS OF THE CIT(A). HE SIMPLY PLACED THE RELIANCE UPON THE ORDER O F THE A.O. THE LD. COUNSEL FOR THE ASSESSEES HAS ALSO PLACED A RELIANCE UPON THE ORDER OF THE CIT(A). 14. ON PERUSAL OF THE ORDER OF THE CIT(A) WE FIND THAT CIT(A) HAS CATEGORICALLY DISCUSSED IN ORDER THAT IN SELF - MADE VOUCHERS THE ASSESSEE HAS MAIN TAINED COMPLETE DETAILS OF THE PAYEE. BEFORE THE CIT(A) IT WAS EXPLAINED BY THE ASSESSEES THAT AS AND WHEN GOODS ARE LOADED ON THE LO RRY CHALLAN IS PREPARED IN DUPLICATE WHICH IS SERIALLY NUMBER ED AND CONTAINS THE DETAILS LIKE QUANTITY OF MATERIAL LOADED FREIGHT PAYABLE ETC. FROM THIS TOTAL OF FREIGHT CHARGES PAYABLE ADVANCE PAID ON THAT DATE IS DEDUCTED TDS AMOUNT AND BALANCE IS SHOWN AS PAYABLE. THE ORIGINAL CHALLAN IS HANDED OVER TO THE LORRY DRIVER. A GENERAL ENTRY IS PASSED O N THE SAME DAY DEBIT ING THE LORRY HIRE CHARGES HIRE ACCOUNT WITH THE FULL AMOUNT OF HIRE + COMMISSION PAYABLE TO THE BROKER AND CREDITING LORRY HIRE ADVANCE ACCOUNT WITH AMOUNT OF ADVANCE PAID TDS PAYABLE AND BALANCE IS CREDITED TO THE LORRY HIRE BALANCE ACCOUNT. AFTER DE LIVERY OF GOODS AT THE DESTINATION THE RE CEIPT OF GOODS IS ACKNOWLEDGED BY THE RECIPIENT BY WAY OF REPORT PREPARED AT THE DELIVERY POINT. THIS REPORT ALONG WITH THE ORIGINAL CHALLAN IS HANDED OVER TO THE ASSESSEE AT THE HEAD OFFICE AT VISAKHAPATNAM. ON PRODUCTION OF THE CHALLAN ALONG WITH THE REPORT EVIDENCING THE DELIVERY OF GOODS DULY ACKNOWLEDGED BY THE RECIPIENT THE BALANCE FREIGHT IS PAID. THIS AMOUNT IS DEBITED TO LORRY HIRE BALANCE ACCOUNT PREVIOUSLY CREDITED AT THE TIME THE ADVANCE IS GIVEN. S ECOND COPY OF CHALLAN IS RETAINED IN THE BOOKS ITSELF. THE ORIGINAL COPY OF THE CHALLAN ALONG WITH THE VOUCHERS EVIDENCING THE PAYMENT OF BALANCE HIRE AMOUNT IS FILED IN THE VOUCHER FILE IN SUPPORT OF ENTRY IN THE CASH BOOK. THE CHALLAN CONTAINS THE DETA ILS OF NAME OF THE LOCAL LORRY SUPPLIER DRIVER SIGNATURE AND ALSO SIGNATURE OF THE LOADING CLERK. 15 . HAVING EXAMINED THESE COMPLETE DETAILS OF MAINTENANCE OF ACCOUNTS THE CIT(A) WAS CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEES AND DELETED THE ADD ITIONS. WE HAVE ALSO EXAMINED THE DETAILS FURNISHED BY THE ASSESSEES 7 AND ARE CONVINCED WITH IT AND ARE OF THE VIEW THAT CIT(A) HAS RIGHTLY ADJUDICATED THE ISSUE IN THE LIGHT OF DETAILS FURNISHED BEFORE HIM. WE THEREFORE FIND NO INFIRMITY IN HIS ORDER. ACCORDINGLY WE CONFIRM THE SAME. 16 . IN THE RESULT THE ITA NO.286 OF 2008 IS PARTLY ALLOWED C.O. 24 OF 2008 IS DISMISSED AND ITA 115 OF 2010 OF REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 19.10 .20 10 SD/ - SD/ - (BR BASKA RAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM DATED 19 TH OCTOBER 20 10 COPY TO 1 ACIT CIRCLE - 4(1) VISAKHAPATNAM 2 UNITED FREIGHT CARRIERS (VIZAG) (P) LTD PLOT NO.165 A/1 AIE - AP II C LAYOUT GAJUWAKA VISAKHAPATNAM 3 DCIT CIRCLE - 5(1) VISAKHAPATNAM 4 M/S. UNITED FREIGHT CARRYING CORPORATION PLOT NO.165A APIIC PEDAGANTYADA GAJUWAKA VISAKHAPATNAM 5 THE CI T VISAKHAPATNAM 6 THE CIT (A) VISAKHAPATNAM 7 THE DR ITA T VISAKHAPATNAM. 8 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM