Subodh Parkash, Yamunanagar v. JCIT, Yamunanagar

ITA 373/CHANDI/2011 | 2007-2008
Pronouncement Date: 04-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 37321514 RSA 2011
Bench Chandigarh
Appeal Number ITA 373/CHANDI/2011
Appellant Subodh Parkash, Yamunanagar
Respondent JCIT, Yamunanagar
Appeal Type Income Tax Appeal
Pronouncement Date 04-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 04-01-2011
Date Of Final Hearing 28-12-2011
Next Hearing Date 28-12-2011
Assessment Year 2007-2008
Appeal Filed On 11-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI H.L.KARWA VICE PRESIDENT AND SHRI MEHAR SINGH ACCOUNTANT MEMBER ITA NO. 373/CHD/2011 ASSESSMENT YEAR: 2007-08 SHRI SUBODH PARKASH V JCIT 57 PROFESSORCOLONY YAMUNA NAGAR. YAMUNA NAGAR. PAN: ABBPP-0664K & ITA NO. 362/CHD/2011 ASSESSMENT YEAR : 2007-08 DCIT V SHRI SUBODH PARKASH YAMUNA NAGAR. PROP. M/S AASTHA TRADING CO. 0-3 INDUSTRIAL AREA YAMUNA NAGAR. (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI RAVI SHANKAR & B.M.MONGA DEPARTMENT BY: SHRI N.K.SAINI DATE OF HEARING : 28.12.2011 DATE OF PRONOUNCEMENT : 04.01.2012 ORDER PER MEHAR SINGH AM THE PRESENT APPEALS FILED BY THE ASSESSEE AND REVEN UE RESPECTIVELY ARE DIRECTED AGAINST THE ORDER DATED 2 8.01.2011 PASSED BY THE LD. CIT(A) U/S 250(6) OF THE INCOME-T AX ACT 1961 (IN SHORT 'THE ACT'). 2. IN ASSESSEE'S APPEAL THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ORDER OF LD. CIT(A) IS BAD IN LAW AND AGAINST THE FACTS OF THE CASE. 2 2. THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ORDERS OF AO BY SUSTAINING THE INCOME OF M/S CITIZEN ROADLINES @ 4.51% NP RATE WITHOUT APPRECIATING THE FACTS THAT WORK HAS BEEN DONE BY OWN TANKERS AND TANKERS HIRED FROM OUTSIDE. 3. THAT THE LD. CIT(A) HAS ERRED IN ADOPTING THE NE T PROFIT @ 1.75% OF GROSS TURNOVER OF M/S AASTHA TRADING CO. IGNORING THE FACT THAT THE BUSINESS OF THE FIRM HAS DOUBLED AS COMPARED TO PREVIOUS YEAR AND THE SALE OF THE MOLASSES HAVING LESSER GP HAS INCREASED MANIFOLD WITHOUT SIMILAR INCREASE IN SALE OF RICE HAVING MORE GP COUPLED WITH THE FACT THAT THE BANK INTEREST ON WORKING CAPITAL HAS INCREASED ALMOST TO DOUBLE. 4. THAT THE LD. CIT(A) HAS ERRED WHILE APPLYING THE NP RATE OF 1.75% IN THE CASE OF AASTHA TRADING CO. WITHOUT GIVING EFFECT TO THE FACT THAT THE EXPENSES PROPORTIONATE TO THE ADDITION MADE IN THE FREIGHT INCOME OF CITIZEN ROADLINES TO THE EXTENT IT IS RECEIVED FROM THE AASTHA TRADING CO. SHOULD HAVE BEEN ALLOWED IN THE HANDS OF AASTHA TRADING CO. 5. THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS.1 13 233/- ON ACCOUNT OF DISCOUNT AND REBATE IN M/S AASTHA TRADING CO. EVEN AFTER ADOPTING THE NP RATE WHICH LEADS TO DOUBLE TAXATION AS THE INCOME IS ALREADY INCLUDED WHILE ARRIVING AT NP. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD AND DISPOSED OFF. 3. IN REVENUES APPEAL THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS RIGHT IN ALLOWING RELIEF TO THE ASSESSEE BY REDUCING THE NET PROFIT RATE TO 1.75% A S 3 AGAINST 2% APPLIED BY THE AO ADMITTING THE ASSESSE ES PLEA THAT INTEREST BURDEN ON SECURED LOANS HAS BEEN INCREASED; WHEREAS INTEREST BURDEN HAS BEEN ACTUALL Y INCREASED MERELY BY 91% AS AGAINST TURNOVER WHICH INCREASED MORE THAN 131% AS COMPARED TO PREVIOUS YEAR ? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS RIGHT IN ALLOWING RELIEF TO THE ASSESSEE BY REDUCING THE NET PROFIT RATE TO 1.75% A S AGAINST 2% APPLIED BY THE AO WHEN THE ASSESSEE IS BENEFITED IN VIEW OF LARGE SCALE BUSINESS ECONOMICS DUE TO SUBSTANTIAL INCREASE IN SALES AS SEVERAL EXPENSE S OF FIXED & SEMI FIXED NATURE WOULD HAVE NOT BEEN INCREASED IN PROPORTION OF INCREASE IN SALES. 3. THE APPELLANT CRAVES FOR LEAVE TO ADD OR AMEND T HE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 4. IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SET ASIDE AND THAT OF THE AO BE RESTORED. ITA NO.373/CHD/2011 (ASSESSEE'S APPEAL) 4. IN ASSESSEES APPEAL GROUND NOS. 1 & 6 ARE GENE RAL IN NATURE. HENCE NEED NO SEPARATE ADJUDICATION. 5. IN GROUND NO.2 THE ASSESSEE CONTENDED THAT CIT( A) ERRED IN UPHOLDING THE ORDERS OF THE AO BY SUSTAINI NG THE INCOME OF M/S CITIZEN ROADLINES ESTIMATED @ 4.51% NP RATE WITHOUT APPRECIATING THE FACTS THAT WORK HAS BEEN DONE BY OWN TANKERS AND TANKERS HIRED FROM OUTSIDE. THE ASSESSEE CONTENDED THAT THESE TRUCKS FABRICATED FOR THE SPECIFIC PURPOSE OF CARRYING MOLASSES CANNOT BE UT ILIZED FOR ANY OTHER PURPOSE OF TRANSPORTATION. THE LD. AR FURTHER 4 CONTENDED THAT THE ASSESSEE HAD UTILIZED THESE TRUC KS OPTIMALLY DURING THE YEAR UNDER CONSIDERATION. LD . AR ALSO CONTENDED THAT TRUCKS FROM OUTSIDE WERE ALSO H IRED FOR THIS PURPOSE. THE AO AFTER REJECTION OF THE BOOKS OF ACCOUNT WHICH WERE UPHELD BY THE CIT(A) ESTIMATED ASSESSEES INCOME FROM CITIZEN ROADLINES YAMUNANAG AR THE CONCERN RUNNING THE TRANSPORT BUSINESS BY APPLYING A NP RATE OF 4.5% BEING THE AVERAGE NP OF THE PRECEDING TWO YEARS I.E. 1.5% FOR THE ASSESSMENT YEAR 2005-06 AN D 4.88% FOR THE ASSESSMENT YEAR 2006-07. THE CIT(A) RECORD ED A FINDING THAT THE ASSESSMENT FRAMED BY APPLYING GP R ATE IN THE EARLIER ASSESSMENT YEARS HAVE BEEN ACCEPTED BY THE APPELLANT. 6. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE RIVAL SUBMISSIONS AND RELEVANT RECORD. THE ASSESSEE APPEL LANT CHALLENGED THE NP RATE ARGUING THAT THE NET PROFIT FROM TRANSPORTATION BUSINESS RANGES BETWEEN 2 TO 3%. HO WEVER AO HAD APPLIED NET PROFIT AT 4.51% WHICH IS ON HIGH ER SIDE. IT WAS FURTHER CONTENDED BY THE ASSESSEE THAT TRUCKS/TANKERS OWNED BY THE APPELLANT ARE DESIGNED AND FABRICATED IN THE MANNER THAT THESE CAN BE UTILIZED FOR THE PURPOSE OF TRANSPORTING MOLASSES. THESE TRUCKS HAV E BEEN FABRICATED FOR THE SPECIFIED PURPOSE AND HENCE THE SAME CANNOT BE UTILIZED FOR ANY OTHER PURPOSE. THE LD. AR CONTENDED THAT THE NP OF 4.5% IS ON THE HIGHER SIDE . IT WAS FURTHER ARGUED BY THE LD. AR THAT IN TERMS OF SEC TION 44AE OF THE ACT MAXIMUM INCOME PER TRUCK IS RS.3500/- P ER MONTH. ACCORDINGLY THE ESTIMATE MADE BY THE AO IS ON THE 5 HIGHER SIDE. LD. CIT(A) REJECTED THIS LINE OF CONT ENTION RAISED BY THE ASSESSEE. LD. CIT(A) OBSERVED THAT T HE ESTIMATE MAY BE BASED ON THE TRADING RESULTS OF THE COMPARABLE CASES OR IT MAY BE BASED ON THE ASSESSEE S OWN HISTORY. THE AO HAD COMPUTED THE INCOME OF THE ASS ESSEE BY APPLYING AVERAGE NP RATE WHICH WAS ACCEPTED BY T HE ASSESSEE IN THE EARLIER TWO YEARS. ACCORDINGLY TH E CIT(A) UPHELD THE FINDINGS OF THE LD. AO. HOWEVER KEEPIN G IN VIEW THE SPECIFIC FACTUAL SUBMISSION MADE BY THE ASSESSE E WE ARE OF THE CONSIDERED OPINION THAT NP RATE AT 4.25% IS FAIR AND REASONABLE. ACCORDINGLY WITH A VIEW TO MEET THE E NDS OF JUSTICE THE AO IS DIRECTED TO COMPUTE THE INCOME O F THE ASSESSEE AT NP RATE OF 4.25%. THUS THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7. IN GROUND NOS. 3 & 4 ASSESSEE CONTENDED THAT CI T(A) ERRED IN ADOPTING NET PROFIT @ 1.75% OF GROSS TURNO VER OF M/S AASTHA TRADING CO. IGNORING THE FACT THAT THE BUSINESS OF THE FIRM HAD DOUBLED AS COMPARED TO THE PREVIOUS YEAR AND THE SALE OF MOLASSES HAVING LESSER GP HAS INCR EASED MANY FOLD WITHOUT SIMILAR INCREASE IN SALE OF RICE HAVING MORE GP COUPLED WITH THE FACT THAT BANK INTEREST ON WORKING CAPITAL HAS INCREASED ALMOST DOUBLE. THE APPELLANT DERIVES INCOME FROM THE BUSINESS OF TRANSPORTATION TRADING OF MOLASSES RICE ETC. AND IS ALSO RUNNING A BRICK KIL N. IN ADDITION THE ASSESSEE HAD SHOWN INCOME UNDER THE H EAD INCOME FROM HOUSE PROPERTY AND OTHER SOURCES. TH E AO REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE BY IN VOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. LD. C IT(A) 6 UPHELD THE REJECTION OF BOOKS OF ACCOUNT BY THE AO IN VIEW OF THE FINDINGS RECORDED IN PARA 3.2 OF THE APPELLATE ORDER. THE AO COMPUTED THE ASSESSEES INCOME FROM M/S AASTHA TRADING CO. WHICH DEALS WITH THE TRADING OF MOLASS ES ETC. BY APPLYING NP RATE OF 2% AS PER THE LAST YEAR WHIC H WAS ACCEPTED BY THE ASSESSEE. THE ASSESSEE CHALLENGED THE APPLICATION OF NP OF 2% STATING THAT THE TURNOVER O F THE APPELLANT HAD DOUBLED AS COMPARED TO THE PREVIOUS Y EAR AND IT HAS BEEN MENTIONED THAT THE CIRCUMSTANCES OF THE BUSINESS ARE NOT COMPARABLE TO THE PREVIOUS YEAR. IT WAS CONTENDED THAT GROSS PROFIT OF THE APPELLANT HAD FA LLEN TO 4.75% DURING THE YEAR UNDER APPEAL AS COMPARED TO 7 .26% DURING THE YEAR 2006-07 DUE TO STIFF COMPETITION A ND THE TURNOVER AT MORE THAN DOUBLE. CONSEQUENTLY THE RE SULTANT NET PROFIT HAS FALLEN FROM 1.92% IN THE ASSESSMENT YEAR 2006-07 TO 0.93% DURING 2007-08. ASSESSEE ALSO CONTENDED INCREASE IN THE INTEREST PAID AND JUSTIFI ED NET PROFIT SHOWN BY HIM. 8. THE LD. CIT(A) REDUCED THE NET PROFIT RATE APPLI ED BY THE AO AT 2% TO 1.75%. HOWEVER HAVING REGARD TO T HE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND SUBMISSIONS MADE BY THE LD. AR REGARDING THE HIKE IN EXPENDITURE AND TURNOVER OF MOLASSES AS ALSO TO ME ET THE ENDS OF NATURAL JUSTICE THE AO IS DIRECTED TO APPL Y NET PROFIT RATE AT 1.50% . THUS THE ASSESSEE GETS PARTIAL RE LIEF. 9. IN THE COURSE OF APPELLATE PROCEEDINGS BEFORE US THE LD. AR DID NOT PRESS GROUND NO.5 AND HENCE THIS GROUND OF APPEAL IS TREATED AS DISMISSED AS NOT PRESSED. 7 10. RESULTANTLY THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ITA NO. 362/CHD/2011 (REVENUES APPEAL) 11. IN REVENUES APPEAL THE GROUND NOS. 3 & 4 A RE GENERAL IN NATURE AND NEED NO SEPARATE ADJUDICATION . 12. THE ISSUES RAISED BY THE REVENUE IN GROUND N OS. 1 & 2 HAVE BEEN ADJUDICATED IN ASSESSEE'S APPEAL U NDER GROUND NOS. 3 & 4 IN PARA 7 OF THIS ORDER. IN VIEW OF THE CLEAR FINDINGS ON THE ISSUE RAISED BY THE ASSESSEE THESE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 13. IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO. 373/CHD/2011) IS PARTLY ALLOWED AND THAT OF THE REV ENUE IN ITA NO. 362/CHD/2011) IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JAN. 2012. SD/- SD/- (H.L.KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 4 TH JAN. 2012. POONAM COPY TO: THE APPELLANT THE RESPONDENT THE CIT(A) THE CIT DR ASSISTANT REGISTRAR ITAT CHANDIGARH