Shri Sureshsingh Laxmansingh Rawat,, GANDHIDHAM v. The Assistant Commissioner of Income Tax, Gandhidham Circle,, GANDHIDHAM

ITA 1214/RJT/2009 | 2005-2006
Pronouncement Date: 16-12-2010 | Result: Allowed

Appeal Details

RSA Number 121424914 RSA 2009
Assessee PAN AGCPR3485Q
Bench Rajkot
Appeal Number ITA 1214/RJT/2009
Duration Of Justice 11 month(s) 15 day(s)
Appellant Shri Sureshsingh Laxmansingh Rawat,, GANDHIDHAM
Respondent The Assistant Commissioner of Income Tax, Gandhidham Circle,, GANDHIDHAM
Appeal Type Income Tax Appeal
Pronouncement Date 16-12-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 16-12-2010
Assessment Year 2005-2006
Appeal Filed On 31-12-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI D.T. GARASIA (JM) I.T.A. NO. 1214/RJT/2009 (ASSESSMENT YEAR 2005-06) SHRI SURESHSINGH LAXMANSINGH RAWAT VS THE ACIT GAN DHIDHAM CIRCLE PROP OF M/S SURESH CORPORATION GANDHIDHAM PLOT NO.193 SECTOR NO.1/A GANDHIDHAM PAN : AGCPR3485Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KAMLESH RATHOD RESPONDENT BY: SHRI AVINASH KUMAR O R D E R A.L. GEHLOT : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-II RAJKOT DATED 06-10-2009 FOR THE ASSE SSMENT YEAR 2005-06. 2. THE EFFECTIVE GROUND RAISED IN THIS APPEAL IS TH AT THE CIT(A) ERRED IN CONFIRMING THE REJECTION OF BOOKS OF ACCOUNT AND ES TIMATION OF GROSS PROFIT @5% AND CONSEQUENTIAL TO ADDITION CHARGING OF INTEREST UNDER SECTION 234B OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS NOTICED THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY SUPPORTING BILLS PAYMENT VOUCHERS TRI P REGISTER OR ANY OTHER BASIC RECORDS FROM FREIGHT AGENCIES IN SUPPORT OF FRIGHT EXPENSES. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS PRODUCED A CO MPUTER REPORT OF FREIGHT EXPENSES RS. 6 14 16 089. THE ASSESSING OFFICER M ADE THE ADDITION OF RS.21 38 836 AFTER REJECTING BOOKS OF ACCOUNT APPLY ING GROSS PROFIT RATE OF 5%. RS.6 52 39 214 ON TOTAL RECEIPTS. THE RELEVANT FIN DINGS OF THE ASSESSING OFFICER ARE REPRODUCED BELOW: ITA NO.1214/RJT/2009 2 G) THE NON PRODUCTION OF VOUCHERS OF CASH PAYMENTS OF RS.6.41 CRORES IS ITSELF SUFFICIENT TO REJECT THE B OOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. CONSIDERING THE ABOVE DISCUSSION IT IS CLEAR THAT THE ASSESSEE HAS PAID FREIGHT IN CASH TO VARIOUS TRUCK DRIVERS WITHOUT KEEPING THE PAYMENT VOUCHERS. ALL THE PAYMENTS WER E MADE IN CASH SO THE ASSESSEE HAS TRIED HIS BEST TO INFLATE THE EXPENSES IN ABSURD MANNER WITHOUT KEEPING THE BOOKS IN PROPER M ANNER. SO I REJECT THE BOOKS OF ACCOUNTS BY INVOKING SECTION 14 5(3) OF THE ACT. THE TOTAL RECEIPTS ARE RS.6 52 39 214/- SO BY TAKI NG GP @5% THE SAME COMES TO RS.32 61 961/-. THE ASSESSEE SHOWN G ROSS PROFIT OF RS.11 23 125/- SO DIFFERENCE OF RS.21 38 836/- IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY U/S 274 R.W. S. 271(1)(C) IS INITIATED SEPARATELY. 4. THE CIT(A) CONFIRMED THE ORDER OF ASSESSING OFFI CER BY OBSERVING AS UNDER: (CL) ON THE ABOVE DETAILED DISCUSSION I DECIDE TO UPHOLD THE DECISION TAKEN BY A.O. IN REJECTING THE BOOKS OF AC COUNTS AND ESTIMATING THE PROFIT AT 5% OF TURNOVER WHEREAS HE RETURNED ONLY A PALTRY PERCENTAGE OF 1.72. EVEN THE CASE WHICH A.O . RELIED RAJASTHAN FREIGHT CARRIERS THE GP RETURNED WAS 3.5 3% FAIRLY REASONABLE WHEN COMPARED TO THE APPELLANT. IT IS IMMATERIAL WHETHER THE APPELLANT WAS ONLY A COMMISSION AGENT O R A SUB- CONTRACTOR. BUT THE FACT REMAINS THAT GP WHICH HE RETURNED WAS NOT REASONABLE. THE CASE OF RAJASTHAN FREIGHT CARR IERS THROWS A GOOD PICTURE ABOUT THE WHOLE EPISODE AND A.O. WAS CORRECT IN APPLYING THE PRINCIPLES OF THE SAID DECISION. HIS ESTIMATION OF PROFIT AT 5% IS UPHELD. 5. THE LD.AR SUBMITTED THAT THE ASSESSING OFFICER A ND THE CIT(A) BOTH HAVE NOT APPRECIATED THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE. HE SUBMITTED THAT THE BUSINESS ACTIVITY OF THE ASSESSE E IS AN AGENT OF M/S BISHAN SAROOP RAM KISHAN AGRO PVT LTD FOR PAYMENT OF TRUCK CHARGES OF THEIR CARGO. M/S BISHAN SAROOP RAM KISHAN AGRO PVT LTD IS AN EXP ORTER AND IS GATHERING THE GOODS AT KANDLA PORT TRUST. THE ASSESSEE IS ENGAGE D AS AN AGENT OF THE SAID PARTY TO PAY TRUCK CHARGES FOR AND ON BEHALF OF THE M. THE AMOUNT WAS REIMBURSED BY M/S BISHAN SAROOP RAM KISHAN AGRO PVT LTD. THE ASSESSEE ITA NO.1214/RJT/2009 3 EARNED ONLY SOME PART OF THE AMOUNT IN THE FORM OF COMMISSION. THE LD.AR DEMONSTRATED THE SYSTEM OF ACCOUNTING FOLLOWED BY T HE ASSESSEE BY REFERRING TO THE PROFIT & LOSS ACCOUNT WHERE INCOME OF RS.6 52 3 9 214 WAS TAKEN AS PER SCHEDULE 5 OF THE FINANCIAL STATEMENT. AGAINST THE SAID INCOME THE ASSESSEE CLAIMED EXPENSES OF RS.6 41 16 089 AS PER SCHEDULE 6 OF THE FINANCIAL STATEMENT. THE LD.AR SUBMITTED THAT WHATEVER THE A MOUNT PAID TO THE TRUCK OWNERS HAS BEEN ACCOUNTED FOR UNDER THE HEAD FREIG HT EXPENSES (PAPER BOOKNO2 PAGE 33 ONWARDS) AND WHATEVER THE AMOUNT RE CEIVED FROM M/S BISHAN SAROOP RAM KISHAN AGRO PVT LTD HAS BEEN ACCOUNTED F OR UNDER THE HEAD FREIGHT INCOME. THE LD.AR FILED THE LEDGER COPIES OF FREI GHT INCOME AND EXPENDITURE WHICH HAS BEEN PLACED AT PAGE 17 ONWARDS IN THE PAP ER BOOK NO2. THE LD.AR HAS DEMONSTRATED THE SYSTEM OF ACCOUNTING BY REFERR ING TO ONE VOUCHER DATED 07-06-2004 WHEREIN INCOME OF RS.94 94 222 HAS BEEN CREDITED AND EXPENDITURE OF RS.93 30 920 WAS DEBITED. THE DETAILED BIFURCAT ION POINTED OUT BY THE LD.AR IS APPEARING AT PAGE 19 OF THE PAPER BOOK NO 2 . THE SAME IS REPRODUCED BELOW: DATE FREIGHT INCOME BILL NO. RAISED FREIGHT EXPENSE NET RS. 07/04/2004 08/08/2004 09/04/2004 10/04/2004 12/04/2004 13/04/2004 15/04/2004 19/04/2004 22/04/2004 24/04/2004 26/04/2004 30/04/2004 06/05/2004 07/05/2004 10/05/2004 12/05/2004 13/05/2004 14/05/2004 19/05/2004 26/05/2004 489 045 499 836 501 973 1 017 087 301 202 688 341 480 661 511 711 473 880 216 863 307 636 505 601 41 130 22 050 493 308 301 995 188 896 510 906 312 708 439 750 480 633 491 239 493 339 999 593 296 021 676 502 472 393 502 910 465 729 213 133 302 345 496 905 40 423 21 671 484 823 296 801 185 647 502 118 307 329 432 186 8 412 8 597 8 634 17 494 5 181 11 839 8 267 8 801 8 151 3 730 5 291 8 696 707 379 8 485 5 194 3 249 8 788 5 379 7 564 ITA NO.1214/RJT/2009 4 02/06/2004 03/06/2004 05/06/2004 685 972 23 342 480 329 9 494 222 674 173 22 941 472 067 9 330 920 11 799 401 8 262 163 301 6. THE LD.AR FURTHER SUBMITTED THAT THE BOOKS OF AC COUNT OF THE ASSESSEE IS SUBJECT TO AUDIT. THE AUDIT REPORT HAS BEEN FILED ALONG WITH THE RETURN OF INCOME. IT IS ALSO THE SUBMISSION OF THE LD.AR THAT THE ASS ESSEE HAS APPLIED LOWER DEDUCTION OF TAX AT SOURCE AND SATISFIED TO THE ASS ESSING OFFICER; THE ASSESSING OFFICER ACCORDINGLY ACCEPTED THE ASSESSEES CONTENT ION AND ALLOWED TO DEDUCT TAX AT SOURCE @0.4% ONLY INSTEAD OF 1%. THE COPY OF CE RTIFICATE GIVEN BY THE ASSESSING OFFICER DATED 13-04-2004 HAS BEEN PLACED AT PAGE 29 OF THE ASSESSEES PAPER BOOK.NO1 THE LD.AR SUBMITTED THAT NET INCOME EARNED DECLARED BY THE ASSESSEE IS 1.72% WHEREAS WHILE ALL OWING LOWER DEDUCTION CERTIFICATE THE CALCULATION OF PERCENTAGE OF NET IN COME COME TO RS.1.275%. THE LD.AR SUBMITTED THAT THIS FACTUAL POSITION HAS BEEN POINTED OUT TO ASSESSING OFFICER VIDE LETTER DATED 10-12-2007. THE RELEVANT FACTS POINTED OUT BY THE LD.AR ARE REPRODUCED AS BELOW FROM PAGES 30 & 31 OF ASSES SEES PAPER BOOK NO1 WHEREIN A COPY OF LETTER DATED 10-12-2007 FILED BEF ORE THE ASSESSING OFFICER HAS BEEN PLACED: 1. DURING THE YEAR UNDER CONSIDERATION WE HAVE ACT ED AS AGENT FOR PAYMENT OF TRUCK CHARGES ON BEHALF OF M/S BISHA N SAROOP RAM KISHAN AGRO PVT LTD. BRIEF DETAILS ABOUT THE WORK DONE ARE HIGHLIGHTED AS PER BELOW CHART: PARTICULARS AMOUNT IN RS. GROSS INCOME I.E. TRANSPORTATION FREIGHT AS PER LORRY RECEIPTS (SEE CONFIRMATION LEDGER ENCLOSED AT PG 1) 6 52 39 214/- GROSS PAYMENTS / CREDITS AS PER TDS CERTIFICATE (SEE TDS CERTIFICATES ENCLOSED AT PG 3) 6 52 39 214/- TDS DEDUCTED IN RS 2 91 756/- TDS AS A % OF GROSS RECEIPTS 0.4472% AGGREGATE VALUE OF TRANSPORT CHARGES PAID TO THE TRUCK DRIVERS / OWNERS (SEE P&L A/C AND FREIGHT EXPENSES LEDGER ENCLOSED AT PG 5 TO 14. WE ALSO ENCLOSED 6 41 16 0-89/- ITA NO.1214/RJT/2009 5 HEREWITH THE SAMPLE COPY OF BILL NO.3 DATED 31-08-2004 ALONGWITH TRUCKWISE INCOME & EXPENDITURE CHART AT PG 15 TO 77 THE REST OF THE DOCUMENT HAD BEEN PRODUCED AT THE TIME OF PERSONAL HEARING HAD ON 06-12-2007) INCOME EARNED FROM ABOVE PARTY 11 23 125/- NET INCOME EARNED PERCENTILE 1.72% FROM THE ABOVE COMPARATIVE CHART YOU WILL OBSERVE T HAT THE NET TDS RATE AS A PERCENTILE OF GROSS RECEIPTS DEDUCTED IS 0.4472% WHERE AS THE NET INCOME EARNED PERCENTILE RATE IS 1.72%. THE LOWER RATE DEDUCTION CERTIFICATE @0.4% ISSUED TO THE ABOVE PAR TY IS ENCLOSED HEREWITH FOR YOUR READY REFERENCE AT PG 78. THE ES TIMATION OF INCOME AS PER LOWER DEDUCTION CERTIFICATE COMES TO 1.275% AS PER WORKING GIVEN BELOW: PARTICULARS AMOUNT IN RS. GROSS AMOUNT OF CONTRACT RECEIPTS AS PER LOWER DEDUCTION CERTIFICATE 10 00 00 000/- RATE OF LOWER DEDUCTION 0.4% AMOUNT OF TDS TO BE DEDUCTED 4 00 000/- ESTIMATED NET INCOME FOR ABOVE TAX LIABILITY 12 75 000/- ESTIMATED NET INCOME PERCENTILE 1.275% NET INCOME PERCENTILE DECLARED BY US 1.72% WE BELIEVE THAT THE ASSESSING OFFICER MUST HAVE CON SIDERED THE MODUS OPERANDI AND NATURE OF BUSINESS WHILE ESTIMAT ING THE ABOVE NET INCOME PERCENTILE WHILE ISSUING THE LOWER DEDUC TION CERTIFICATE. ONCE THE ESTIMATION HAS BEEN MADE AT INITIAL STAGE AT A SPECIFIC RATE THUS DURING THE ASSESSMENT PROCEEDING ESTIMAT ING THE NET PROFIT @5% IS PURE GUESS WORK AND NOT JUSTIFIED. 7. THE LD.DR ON THE OTHER HAND RELIED UPON TH E ORDERS OF AUTHORITIES BELOW. 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES RECORD PERUSED. THE AO CAN ASSUME JURISDICTION IN REJECTING THE BOO KS OF ACCOUNTS OF THE ASSESSEE BY VIRTUE OF SECTION 145 OF THE INCOME-TAX ACT RELATING TO 'METHOD OF ACCOUNTING'. THE SAID SECTION 145 READS AS UNDER:- 145 (1) INCOME CHARGEABLE UNDER THE HEAD PRO FITS AND GAINS OF BUSINESS OR PROFESSION OR 'INCOME FROM OTHER SOURCES' SHALL BE COMPUTED IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. PROVIDED THAT IN ANY CASE WHERE THE ACCOUNTS ARE CO RRECT AND COMPLETE TO THE SATISFACTION OF THE ASSESSING OFFICER BUT THE M ETHOD EMPLOYED IS SUCH THAT IN ITA NO.1214/RJT/2009 6 THE OPINION OF THE ASSESSING OFFICER THE INCOME CA NNOT PROPERLY BE DEDUCED THERE FROM THEN THE COMPUTATION SHALL BE MADE UPON SUCH BASIS AND IN SUCH MANNER AS THE ASSESSING OFFICER MAY DETERMINE. PROVIDED FURTHER .... PROVIDED ALSO..... (2)WHERE THE ASSESSING OFFICER IS NO T SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE OR WH ERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) OR ACCOUNTIN G STANDARDS AS NOTIFIED UNDER SUB-SECTION (2) HAVE NOT BEEN REGULARLY FOLLOWED B Y THE ASSESSEE THE ASSESSING OFFICER MAY MAKE AN ASSESSMENT IN THE MANNER PROVID ED IN SECTION 144. 8.1 SUB-SECTION (2) ABOVE IS SAME AS THE SUB SECT ION (3) OF THE POST AMENDED SECTION 145 OF THE INCOME TAX ACT HAS FOLLOWING ING REDIENTS: (A) AO BEING NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE; (B) THE VERY MEANING OF THE CORRECTNESS AND COMPLE TENESS OF THE ACCOUNTS; AND MAKING OF AN ASSESSMENT IN THE MANNER PROVIDED IN S ECTION 145. 8.2 THE ABOVE TWO INGREDIENTS (A) AND (B) ARE RELEVANT FOR REJECTION OF THE ACCOUNTS OF THE ASSESSEE. REGARDING THE 'AO BEING N OT SATISFIED' ABOUT THE CORRECTNESS AND COMPLETENESS OF THE ASSESSEE'S ACCO UNTS THE CALCUTTA HIGH COURT JUDGMENT IN THE CASE OF ASHOK REFRACTORIES PV T. LTD (279 ITR 457) IS RELEVANT. IN THE SAID CASE THE HONBLE HIGH COURT HELD THAT IN ORDER TO REJECT THE ACCOUNTS THE AO HAS TO COME TO AN OPINION THAT THE INCOME CANNOT BE PROPERLY DEDUCED FROM THE ACCOUNTS SO MAINTAINED. IN ORDER T O ARRIVE AT SUCH CONCLUSION IT MUST BE SHOWN THAT THE AO HAS TAKEN INTO CONSIDE RATION RELEVANT FACTORS AND NOT OMITTED TO CONSIDER THE MATERIAL BEFORE HIM. RE GARDING THE REJECTION OF BOOKS OF ACCOUNTS ACCEPTING THE BOOKS OF ACCOUNTS OF TH E ASSESSEE IS A RULE AND REJECTING THE SAME IS AN EXCEPTION'. THIS IS THE PR INCIPLE IN EXISTENCE KEEPING IT IN MIND. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V CHANDRAVILAS HOTEL (1987) 165 ITR 300 (GUJ) HELD AS UNDER: PAGE 317 IT IS ALSO IMPORTANT TO BEAR IN MIND THAT UNDER SECTION 145(2) THE INCOME CHARGEABLE UNDER THE HEAD ' PROF ITS AND GAINS ITA NO.1214/RJT/2009 7 OF BUSINESS OR PROFESSION ' OR ' INCOME FROM OTHER SOURCES ' HAS TO BE COMPUTED IN ACCORDANCE WITH THE METHOD OF ACCOUN TING REGULARLY EMPLOYED BY THE ASSESSEE UNLESS IN THE OPINION OF THE INCOME-TAX OFFICER THE INCOME PROFITS AND GAINS CANNOT PROPE RLY BE DEDUCED THERE FROM OR THE INCOME-TAX OFFICER IS NOT SATISFI ED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE. UNDER THE PROVISO TO SUBSECTION (1) OF SECTION 145 IN ANY CASE WHERE THE ACCOUNTS ARE CORRECT AND COMPLETE TO THE SATISFACTION OF THE INCOME-TAX OFFICER BUT THE METHOD EMPLOYED IS S UCH THAT IN THE OPINION OF THE INCOME-TAX OFFICER THE INCOME CANNO T PROPERLY BE DEDUCED THERE FROM THEN THE COMPUTATION HAS TO BE PAGE 318 MADE UPON SUCH BASIS AND IN SUCH MANNER AS THE INCOME-TAX OFFICER MAY DETERMINE. HOWEVER IF THE I NCOME-TAX OFFICER IS NOT SATISFIED ABOUT THE CORRECTNESS OR C OMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE OR WHERE NO METHOD OF ACCO UNTING HAS BEEN REGULARLY EMPLOYED BY THE ASSESSEE THE INCOME -TAX OFFICER MAY MAKE THE ASSESSMENT IN THE MANNER PROVIDED IN S ECTION 144. SECTION 145 IS MANDATORY AND THE REVENUE IS BOUND B Y THE ASSESSEE'S CHOICE OF A METHOD REGULARLY EMPLOYED UN LESS BY THAT METHOD THE TRUE INCOME PROFITS AND GAINS CANNOT BE ARRIVED AT.( FOND BOLD BY US) IN OTHER WORDS SECTION 145 ENACTS THAT FOR THE PURPOSE OF SECTION 28 (PROFITS AND GAINS OF BUSINES S PROFESSION OR VOCATION) AND SECTION 56 (INCOME FROM OTHER SOURCES ) INCOME PROFIT AND GAINS MUST BE COMPUTED IN ACCORDANCE WIT H THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. T HEREFORE IF THE ASSESSEE REGULARLY EMPLOYS A PARTICULAR METHOD OF A CCOUNTING AND IF NO DEFECTS ARE FOUND IN THE METHOD OR MAINTENANC E OF ACCOUNTS THE TAXING AUTHORITY IS BOUND TO COMPUTE THE PROFIT S AND GAINS OF BUSINESS OR PROFESSION OR VOCATION IN ACCORDANCE WI TH THE METHOD EMPLOYED BY THE ASSESSEE. THEREFORE IN CASE WHERE THE INCOME- TAX OFFICER OR THE TAXING AUTHORITY FINDS THAT IN M AINTAINING ACCOUNTS ITA NO.1214/RJT/2009 8 THE ASSESSEE HAS REGULARLY EMPLOYED A PARTICULAR ME THOD AND DOES NOT MAKE ANY INVESTIGATION TO FIND OR DOES NOT FIND ANY DEFECT IN THE ACCOUNTS AND ACCEPT THE ACCOUNTS AS THEY ARE HE IS BOUND TO COMPUTE THE INCOME IN ACCORDANCE WITH THE ACCOUNTS MAINTAINED BY THE ASSESSEE. THEREFORE WHEN THE ASSESSEE REPRE SENTS TO THE TAXING AUTHORITY THAT ITS ACCOUNTS ARE MAINTAINED B Y A METHOD OF ACCOUNTING REGULARLY EMPLOYED HE EXPECTS THE INCOM E-TAX OFFICER TO ACT UPON SUCH METHOD AND COMPUTE THE INCOME ACCO RDINGLY. 8.3 THE ABOVE SCOPE OF THE PROVISIONS OF SECT ION 145 CONCLUSIVELY ESTABLISHING THE FACT THAT WHAT IS IMPORTANT FOR R EJECTION OF BOOKS IS THE AO BEING NOT SATISFIED ABOUT THE CORRECTNESS AND COMPLETENES S OF THE ACCOUNTS AND IT IS NOT THE QUESTION OF ASSESSEE ESTABLISHING THE METHO D APPLIED IS FIT ENOUGH TO DEDUCE FROM THE ACCOUNTS THE CORRECT PROFITS. BUT IT IS THE AO'S OPINION WHICH IS MATERIAL AND SAID OPINION SHOULD BE ABOUT BOTH CORR ECTNESS AND COMPLETENESS AS THE CONJUNCTION 'AND' IS USED. 8.4. IN THE LIGHT OF ABOVE DISCUSSION WE FIND THAT THE ASSESSING OFFICER AND CIT(A) BOTH HAVE NOT APPRECIATED THE FACTS OF THE C ASE UNDER CONSIDERATION. THE ASSESSEE IS SIMPLY AN AGENT FOR MAKING PAYMENTS TO VARIOUS TRUCK OWNERS ON BEHALF OF THE PARTY M/S BISHAN SAROOP RAM KISHAN A GRO PVT LTD AND SAME WERE REIMBURSED BY THAT PARTY M/S BISHAN SAROOP RAM KIS HAN AGRO PVT LTD. THE INCOME OF THE ASSESSEE IS ONLY THE DIFFERENCE BETWE EN THE PAYMENTS MADE TO VARIOUS TRUCK OWNERS AND AMOUNT RECEIVED FROM THE P RINCIPAL M/S BISHAN SAROOP RAM KISHAN AGRO PVT LTD. THIS FACT HAS BEEN CLEARL Y ESTABLISHED AND DEMONSTRATED BY THE LEARNED AR BY REFERRING TO VARI OUS PAGES OF THE PAPER BOOK WHILE ARGUING THE CASE AS NOTED ABOVE. ACCORDING T O SECTION 145 AND IN THE LIGHT OF THE ABOVE DISCUSSION WE ARE OF THE CONSIDERED VI EW THAT INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PR OFESSION SHALL BE COMPUTED IN ACCORDANCE WITH EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. THE ASSESSING OFFICER IS BOUND TO FOLLOW THE METHOD ITA NO.1214/RJT/2009 9 OF ACCOUNTING FOLLOWED BY THE ASSESSEE. HOWEVER I N CASE WHERE THE ASSESSING OFFICER IS NOT SATISFIED ABOUT THE CORRECTNESS OR C OMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE OR THE METHOD OF ACCOUNTING PROVIDED I N SUB SECTION (1) OR ACCOUNTING STANDARD AS NOTED UNDER SUB SECTION (2) HAVE NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE ASSESSING OFFICER MAY MA KE AN ASSESSMENT IN THE MANNER PROVIDED IN SECTION 144 OF THE ACT. AS DISC USSED AND NOTED ABOVE THAT THE ASSESSING OFFICER AND CIT (A) BOTH HAVE FAILED TO APPRECIATE THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE. THE SATISFACT ION ABOUT THE INCORRECTNESS OF THE ACCOUNTS NOTED BY THE ASSESSING OFFICER CANNOT BE UPHELD ON THE GROUND THAT HE HIMSELF DID NOT UNDERSTAND WHAT METHOD OF ACCOUN TING HAS BEEN FOLLOWED BY THE ASSESSEE. IN SUCH TRANSACTIONS THERE ARE TWO WAYS OF RECORDING TRANSACTIONS BY GROSS AMOUNT OR BY NET AMOUNT. THE ASSESSEE FOL LOWED GROSS AMOUNT OF FREIGHT RECEIVED AND AMOUNT OF FREIGHT PAID WHICH I S ALSO NOT AN INCORRECT METHOD OF ACCOUNTING. IF THE ASSESSEE COULD HAVE FOLLOWED NET METHOD OF AMOUNT RECEIVED AND PAID THEN QUESTION OF CLAIMING EXPENS ES TO THE EXTENT OF RS.6.41 CRORES ABOUT CANNOT ARISE. WE THEREFORE ARE OF T HE CONSIDERED VIEW THAT THE ASSESSEE FOLLOWED A RECOGNIZED METHOD OF ACCOUNTING AND THE REVENUE AUTHORITIES FAILED TO POINT OUT ANY DEFECT IN THAT. THEREFORE IN ACCORDANCE WITH SECTION 145 OF THE ACT THE ASSESSING OFFICER IS BOU ND TO ACCEPT THE METHOD OF ACCOUNTING FOLLOWED. WE THEREFORE UNDER THE FAC TS AND CIRCUMSTANCES OF THE CASE DO NOT AGREE WITH THE REVENUE AUTHORITIES THAT THE BOOKS OF ACCOUNT IS TO BE REJECTED U/S 145. WHEN BOOKS OF ACCOUNT ARE NOT LIA BLE TO BE REJECTED THE QUESTION OF ESTIMATION OF INCOME DOES NOT ARISE. TH E CIT (A) AND THE AO WHILE SUBMITTING REMAND REPORT BEFORE CIT(A) HEAVILY RELI ED UPON AN ORDER OF THE ITAT RAJKOT IN THE CASE OF RAJASTHAN FRIGHT CARRIERS IN ITA NO 793/RJT/ 2004 ORDER DATED 23.8.2006. THE SAID DECISION AND OTHER DECISI ONS/ORDERS WHICH RELIED UPON BY THE CIT (A) ARE DISTINGUISHABLE ON FACTS AS THO SE CASES WERE DECIDED BY THE COURTS CONSIDERING THE FACTS OF RESPECTIVE CASES WH ICH ARE NOT SIMILAR TO THE FACTS OF THE CASE UNDER CONSIDERATION. AFTER CONSIDERING TOTALITY OF THE FACTS OF THE CASE WE DO NOT FIND ANY SUBSTANCE IN ADDITION MADE BY TH E ASSESSING OFFICER AND ITA NO.1214/RJT/2009 10 SUSTAINED BY THE CIT (A) THEREFORE THE SAME IS DEL ETED. CHARGING OF INTEREST UNDER SECTION 234B IS CONSEQUENTIAL THE AO IS DIRE CTED ACCORDINGLY. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 16-12-2010 SD/- SD/- (D.T. GARASIA) (A.L. GEHLOT ) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT DATED: 16 TH DECEMBER 2010 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-II RAJKOT 4. THE CIT-I RAJKOT 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT RAJKOT