ITO WD 13(2)(1), MUMBAI v. SURESH JAYDAYAL MADAN, INDORE

ITA 4226/MUM/2010 | 2005-2006
Pronouncement Date: 25-11-2011 | Result: Allowed

Appeal Details

RSA Number 422619914 RSA 2010
Bench Mumbai
Appeal Number ITA 4226/MUM/2010
Duration Of Justice 1 year(s) 6 month(s)
Appellant ITO WD 13(2)(1), MUMBAI
Respondent SURESH JAYDAYAL MADAN, INDORE
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted G
Tribunal Order Date 25-11-2011
Date Of Final Hearing 24-10-2011
Next Hearing Date 24-10-2011
Assessment Year 2005-2006
Appeal Filed On 25-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI R.K. PANDA A.M. AND SHRI V. DURGA RAO J.M. ITA NO. 4226/MUM/2010 ASSESSMENT YEAR: 2004-05 INCOME-TAX OFFICER- WARD 13(2)(1) APPELLANT R.NO. 425 4 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI 400 020. VS. SHRI SURESH JAYDAYAL MADAM RESPONDENT C/O M/S SATYANARAYAN GOYAL & CO. VAIBHAV CHAMBERS 7/1 USHAGANJ CHHAWANI INDORE (M.P.). APPELLANT BY : MR. VIJAY MEHTA RESPONDENT BY : MR. GOVIND JAVERI ORDER PER V. DURGA RAO J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-24 MUMBAI PASSED ON 17/03/2010 FOR THE ASS ESSMENT YEAR 2005-06 WHEREIN THE REVENUE HAS RAISED THE FOLLOWIN G GROUNDS OF APPEAL:- (1) I) THE LD. CIT(A) ON THE FACTS AND IN THE CIRC UMSTANCES OF THE CASE AND IN LAW ERRED IN HOLDING THAT BOOKS OF ACC OUNTS OF THE ASSESSEE ARE HELD TO BE CORRECT AND CANNOT BE REJEC TED ON THE GROUND THAT ASSESSEE IS FOLLOWING THE CASH SYSTEM O F ACCOUNTING AND THERE WAS CLOSURE OF BUSINESS ACTIVITIES DURING THIS YEAR THERE IS AN EXCEPTIONAL FACT IN THIS YEAR WHEN NO DETAILS WERE FILED BEFORE THE AO. II) THE LD. CIT(A) ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE AND IN LAW ERRED IN HOLDING THAT BOOKS OF ACCOUNT OF THE ASSESSEE ARE HELD TO BE CORRECT AND CANNOT BE REJEC TED WITHOUT APPRECIATING THE ADMITTED FACT THAT FIGURE OF FREIG HT PAYMENT AND FREIGHT RECEIPT ARE NOT COMPARABLE. III) THE LD. CIT(A) ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW ERRED IN HOLDING THAT BOOKS OF ACC OUNT OF THE ASSESSEE ARE HELD TO BE CORRECT WITHOUT GIVING OPPO RTUNITY TO THE ITA NO. 4226/M/2010 SURESH JAYDAYAL MADAM 2 AO TO VERIFY THE FREIGHT PAYMENT AND FREIGHT RECEIP T AS CLAIMED BY THE ASSESSEE. 2) THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED . 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS AN INDIVIDUAL AND IS PROPRIETOR OF RAHUL ROADWAYS DOI NG BUSINESS OF FLEET OWNERS AND TRANSPORTERS. THE CASE WAS REOPENE D BY ISSUANCE OF NOTICE U/S 148 OF THE ACT ON 07/02/08. INITIATION O F PROCEEDINGS U/S 147 WAS MAINLY ON THE BASIS OF AN INFORMATION RECEI VED FROM THE ITO WARD 8(3) KOLKATTA STATING THAT THE ASSESSEE HAD SOLD THE TRUCKS ON 31/07/04 AT RS. 46 25 000/- TO M/S KHAITAN COMMERCI AL SERVICES PVT. LTD. THE AO NOTED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAD NOT FILED RETURN OF INCOME FOR THE YEAR UNDER CONSI DERATION AND ON VERIFICATION OF BALANCE SHEET ALONG WITH RETURN OF INCOME FOR AY 2004- 05 IT WAS NOTICED THAT THE WDV OF TRUCKS WAS DECLA RED AT RS. 5 18 619/- AND THE AO THUS CONCLUDED THAT THERE W AS SHORT TERM CAPITAL GAIN OF RS. 41 06 309/- WHICH HAD ESCAPED A SSESSMENT FOR THE YEAR UNDER CONSIDERATION I.E. IN AY 2005-06. THE AO AFTER ISSUING OF STATUTORY NOTICES U/S 143(2) AND 142(1) TO THE ASSE SSEE AND CONSIDERING THE COMPLIANCES MADE BY THE ASSESSEE AG AINST THE SAID NOTICES MADE THE IMPUGNED ADDITION FOLLOWING CERT AIN CASE LAWS. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE CIT(A). 3. BEFORE THE CIT(A) THE ASSESSEE REITERATED THE S UBMISSIONS MADE BEFORE THE AO AND SUBMITTED THAT WHILE FRAMING THE ASSESSMENT ORDER THE AO TOOK THE RECOURSE TO SECTION 145 OF THE ACT AND REJECTED THE BOOKS OF ACCOUNT AND PROCEEDED TO FRAME THE ASSESSM ENT ASSUMING THE INCOME U/S 44AE. AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE THE CIT(A) HELD THAT THERE IS NO PROPER B ASIS FOR REJECTION OF BOOKS OF ACCOUNT BY THE AO THEREFORE THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE HELD TO BE CORRECT AND CANNOT BE REJEC TED ON THE FACTS OF THE CASE. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. ITA NO. 4226/M/2010 SURESH JAYDAYAL MADAM 3 4. BEFORE US THE LEARNED DR HAS INVITED OUR ATTENT ION TO THE PARA 12 & 13 OF THE ASSESSMENT ORDER WHICH ARE EXTRACTE D BELOW:- 12. ON VERIFICATION OF THE FREIGHT PAID DETAILS IT WAS NOTICED THAT THE ASSESSEE HAS RECEIVED BILL FOR VOUCHER NO. CP-48 ON 03/10/2004 BUT THE PAYMENT WAS MADE ON 04/07/2044. MUCH EARLIER. SIMILARLY VOUCHER NO. CP-49 FOR PAYMENT M ADE ON 04/07/2004 BUT THE BILL WAS RAISED ON 03/10/2004 WHICH MUCH AFTER THE PAYMENT IS MADE. LIKEWISE THERE WERE MIS TAKES IN VOUCHER NOS. CP-89 CP-90 CP-91 CP-132 CP-163 C P-166 CP- 223 CP-224. THE ASSESSEE WAS CONFRONTED WITH THESE MISTAKES. HOWEVER THERE WAS NO COMMENT ON THIS ISSUE. SUBSEQ UENTLY THE ASSESSEE FURNISHED A REVISED STATEMENT THROUGH COUR IER CORRECTING THE ABOVE MISTAKES. 13. IT IS IMPORTANT TO NOTE HERE THAT THE COMPARATI VE CHART OF FREIGHT RECEIVED AS PER TDS CERTIFICATES FREIGHT P AID AND FREIGHT BOOKED IN THE PROFIT & LOSS ACCOUNT IN EARLIER YEA RS BY THE ASSESSEE IS AS UNDER: 01/04/02 TO 31/3/03 01/04/03 TO 31/03/04 01/04/04 TO 31/03/05 FREIGHT AS PER TDS CERTIFICATE 9 56 65 277 6 08 58 736 NIL FREIGHT ACTUALLY BOOK TO P&L ACCOUNT 9 42 79 118/- 6 61 70 984/- 21 57 958 % OF FREIGHT PAID TO THE FREIGHT RECEIVED 91.79% 89.27% 187.68 REFERRING TO THE ABOVE OBSERVATIONS OF THE AO THE LEARNED DR SUBMITTED THAT THERE IS HUGE DIFFERENCE OF FREIGHT PAID WHICH IS BEYOND JUSTIFICATION THEREFORE THE BOOKS OF ACCOUNT FURN ISHED BY THE ASSESSEE DOES NOT SUPPORT THE CASE OF THE ASSESSEE. HE CONTENDED THAT THE CHARTS PREPARED FOR FREIGHT PAID WERE MANIPULAT ED AND THE MISTAKES WERE BROUGHT BY THE AO IN THE ABOVE PARAGR APHS. HE THEREFORE SUBMITTED THAT THE PROVISIONS OF SECTION 145 OF THE ACT ARE CLEARLY APPLICABLE TO THE FACTS OF THE CASE AS THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF INCOME EXPENSES DE BITED IN P&L A/C. ITA NO. 4226/M/2010 SURESH JAYDAYAL MADAM 4 5. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE AO MADE RECOURSE TO THE SECTION 145 ON THE BASIS OF SOME WRONG INTERPRETATIONS IN THE VOUCHERS. IT I S SUBMITTED THAT THE MISUNDERSTANDINGS WERE MADE CLEAR BY FILLING TH E REVISED STATEMENTS AT THE ASSESSMENT LEVEL ITSELF DONE IN M AKING THE VOUCHERS. IT IS CONTENDED THAT SINCE THE REGULAR BO OKS OF ACCOUNT IS MAINTAINED BY ASSESSEE FOLLOWING CASH SYSTEM OF ACC OUNTING THE AO WAS UNJUSTIFIED IN APPLYING THE PROVISIONS OF SECTI ON 145 OF THE ACT. IT IS FURTHER CONTENDED THAT THE APPLICATION OF SECTIO N 44AE BY THE AO IS ALSO UNJUSTIFIED AS THE ASSESSMENT ORDER HAS BEEN P ASSED ON THE BASIS OF FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING WH ILE THE ASSESSEE FOLLOWED CASH SYSTEM OF ACCOUNTING AND HENCE THE ASSESSMENT ORDER PASSED BY THE AO IS WRONG. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE FREIGHT PAID IN THE YEAR UNDER C ONSIDERATION IS MUCH HIGHER THAN THE FREIGHT RECEIVED IN THE YEAR U NDER CONSIDERATION FOR THE REASON THAT THE ASSESSEE MAINTAINS THE ACCO UNTS ON CASH BASIS AND THE INCOME AND EXPENSES ARE BOOKED IN THE YEAR OF ACTUAL RECEIPT AND ACTUAL PAYMENT. HE THEREFORE SUBMITTED THAT T HE PAYMENT OF THE FREIGHT WERE MADE IN THE CURRENT YEAR OF THE SERVIC ES AVAILED IN THE EARLIER YEARS WHILE THE RECEIPTS OF THE FREIGHT BOO KED THOUGH RELATED TO THE PREVIOUS YEAR WERE CREDITED IN THE YEAR UNDER C ONSIDERATION. HE POINTED OUT THAT IN THE CASH SYSTEM OF ACCOUNTING A S THE BASIS TAKEN IS THE RECEIPT AND PAYMENT THE PROPER COMPARISON C ANNOT BE DONE AS CAN BE DONE IN ACCRUAL SYSTEM OF ACCOUNTING BECAUSE OF THE LACK OF MATCHING COST CONCEPT. IT IS SUBMITTED THAT THE BOO KS OF ACCOUNT CANNOT BE REJECTED FOR THE REASON THAT THE ASSESSEE HAS INCURRED LOSSES IN THE BUSINESS FOR WHICH HE PLACED RELIANC E ON THE JUDGMENT OF HONBLE P&H HIGH COURT IN THE CASE OF CIT VS. OM OVERSEAS 172 TAXMAN 185 (P&H). REFERRING TO PARA 12 OF ASSESSMEN T ORDER WHEREIN THE AO OBSERVED THAT THE DATES OF FREIGHT PAYMENT A ND RECEIPTS ARE MISMATCHED AND THAT THE ASSESSEE FURNISHED A REVISE D STATEMENT AND HAS NOT COMMENTED ON THE ISSUE OF DATES MISMATCHED THE LEARNED COUNSEL CLARIFIED THAT THE DATES OF PAYMENTS IN THE DETAILS SUBMITTED ITA NO. 4226/M/2010 SURESH JAYDAYAL MADAM 5 BEFORE THE AO WERE IN THE MONTH/DATE/YEAR FORMAT AN D THE AO TOOK SAME IN THE DATE/MONTH/YEAR FORMAT HENCE THE WHOLE CONFUSION. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS PERUSE D THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. THE ISSUE INVOLVED IN THIS APPEAL IS WHETHER THE AO IS RIGHT IN REJECTING THE BOOKS OF ACCOUNT WHILE FRAMING THE ASSESSMENT ORDER FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING WHERE THE ASSESSEE FOLLOWED CASH SYSTEM OF ACCOUNTING IN MAINTAINING ITS BOOKS OF AC COUNT. WE FIND THAT THE ASSESSEE IS MAINTAINING ITS BOOKS OF ACCOU NT FOLLOWING CASH SYSTEM OF ACCOUNTING WHEREAS THE AO FRAMED THE ASSE SSMENT ORDER FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING REJE CTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. IN VIEW OF THE ABOVE MISM ATCHING OF THE FREIGHT RECEIVED AND PAID BY THE ASSESSEE. THE CIT( A) HELD THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE CORRECT AND CA NNOT BE REJECTED ON THE FACTS OF THE CASE. THE FINDINGS OF THE CIT(A) A RE AS UNDER:- 8.4 THE AO HAS FURTHER POINTED OUT THE VARIATION IN PERCENTAGE OF FREIGHT PAYMENT TO FREIGHT RECEIVED WHICH HAS BE EN WORKED OUT AT 187.68 FOR THE YEAR UNDER CONSIDERATION. TO THIS OBSERVATION IT HAS BEEN EXPLAINED BY THE ASSESSEE THAT SINCE HE WA S FOLLOWING CASH SYSTEM OF ACCOUNTING AND THERE WAS A CLOSURE O F BUSINESS ACTIVITIES DURING THIS YEAR THERE IS AN EXCEPTIONA L FACT IN THIS YEAR DUE TO WHICH THE FIGURES OF FREIGHT PAYMENT A ND FREIGHT RECEIPT ARE NOT COMPARABLE. THIS EXPLANATION SEEMS TO BE LOGICAL IN THE LIGHT OF THE FACT THAT THE ASSESSEE HAS SOLD ALL HIS TRUCKS DURING THE YEAR TO ONE CALCUTTA BASED PARTY. ON THI S VERY BASIS THE CASE WAS REOPENED. IN THIS LIGHT WHEN THE ASSE SSEE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING THERE HAS TO B E SUCH MISMATCH IN THE LAST YEAR OF BUSINESS IN THE FIGURE S OF RECEIPT AND PAYMENT. FURTHER THE MISTAKE POINTED OUT BY THE AO IN THE DATES HAS ALSO BEEN EXPLAINED BY THE ASSESSEE PROPERLY. T HEREFORE THERE IS NO PROPER BASIS FOR REJECTION OF BOOKS OF ACCOUNTS. THE AO HAS RELIED ON CERTAIN CASE LAWS ALSO IN THIS REGARD BUT SUCH RELIANCE IS OF NO HELP WHEN THE VERY BASIS OF REJE CTING THE BOOKS IS NOT PROPER. ACCORDINGLY THE BOOKS OF ACCOUNTS O F THE ASSESSEE ARE HELD TO BE CORRECT AND CANNOT BE REJECTED ON TH E FACTS OF THE CASE. THEREFORE THIS GROUND OF THE APPELLANT IS AL LOWED. 7. THE CONTENTION OF THE REVENUE IS THAT THE AO DU RING THE COURSE OF ASSESSMENT PROCEEDINGS POINTED OUT CERTAIN DISC REPANCIES AS TO THE DATE OF RECEIPT AND PAYMENT OF FREIGHT IN PARA 12 O F THE ASSESSMENT ITA NO. 4226/M/2010 SURESH JAYDAYAL MADAM 6 ORDER. TO QUOTE ONE INCIDENCE THE AO HAS POINTED OU T THAT THE RECEIPT OF FREIGHT WAS ON 03/10/04 VIDE CP 48 BUT THE PAYM ENT WAS MADE ON 04/07/2004 MUCH EARLIER. IT WAS EXPLAINED DURING T HE APPEAL PROCEEDINGS POINTING OUT AT THE DETAILS FILED BEFO RE THE AO AS WELL AS DURING THE APPEAL PROCEEDINGS THAT THE DATES OF PA YMENTS IN THE DETAILS SUBMITTED WERE IN THE MONTH/DATE/YEAR FORMA T AND THE AO TOOK THE SAME IN THE DATE/MONTH/YEAR FORMAT HENCE THE WHOLE CONFUSION. THE RELEVANT PAYMENT VOUCHER WAS ALSO FI LED AND REFERRED TO WHICH IS DATED AS 07/04/2004 AND NOT AS 04/07/20 04. COMING TO THE DATE OF RECEIPT WHICH THE AO HAS TAKEN AT 03/1 0/2004 IT WAS POINTED OUT THAT THE ACTUAL DATE MENTIONED IN THE S HEET IS 10/03/2004 AND NOT 03/10/2004. THE RELEVANT VOUCHER IS ALSO PRODUCED. THEREFORE IN THIS PARTICULAR CASE THE ACT UAL FREIGHT RECEIPT DATE IS 10/03/2004 AND THE ACTUAL PAYMENT DATE IS 0 7/04/2004 AND THEREFORE THE PAYMENT IS AFTER THE RECEIPT OF FREIG HT. HOWEVER IT WAS ALSO POINTED OUT THAT IN THIS LINE OF TRADE IF THE FREIGHT RECEIPT IS DELAYED FOR ANY REASON FREIGHT PAYMENT STILL WILL HAVE TO BE MADE TO THE TRUCK OWNER. IN VIEW OF THE ABOVE NOTINGS THE A O DISBELIEVED THE SUBMISSIONS OF THE ASSESSEE. THE LEARNED COUNSEL FO R THE ASSESSEE WITH REGARD TO THE ABOVE OBSERVATIONS OF THE AO SU BMITTED BEFORE THE CIT(A)_ AND EVEN BEFORE US THAT THE RECEIPT OF FREI GHT WAS ON 03/10/2004 VIDE CP-48 BUT THE PAYMENT WAS MADE ON 0 4/07/2004 MUCH EARLIER. HE FURTHER SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS VIDE LETTER DATED 26/12/08 ANOTHER CHAR T WAS FILED CORRECTING THE DATE OF PAYMENT FORMAT TO DAY/MONTH/ YEAR. A BARE COMPARISON OF THE CHART WITH THE EARLIER CHART WIL L REVEAL THAT ONLY THE REPORTING FORMAT OF THE DATES HAS BEEN CHANGED INCORPORATING THE DETAILS OF TOTAL FREIGHT PAYMENTS OF RS. 40 50 119/ -. THEREFORE THE LEARNED COUNSEL CONTENDED THAT THE ALLEGATION OF TH E AO THAT THE ASSESSEE HAS MANIPULATED THE CHARTS OF FREIGHT PAID IS NOT CORRECT AND WITHOUT ANY BASIS. IN RESPECT OF THE DATE OF RE CEIPT WHICH THE AO HAS TAKEN AT 03/10/2004 THE LEARNED COUNSEL CLARIF IED THAT THE ACTUAL DATE MENTIONED IN THE SHEET SUBMITTED DURING THE ASSESSMENT ITA NO. 4226/M/2010 SURESH JAYDAYAL MADAM 7 PROCEEDINGS IS 10/03/2004 AND NOT 03/10/2004 AS TAK EN BY THE AO. THEREFORE IN THIS PARTICULAR CASE ACTUAL FREIGHT R ECEIPT DATE IS 10/03/2004 AND THE ACTUAL PAYMENT DATE IS 07/04/200 4 AND THEREFORE THE PAYMENT IS AFTER THE RECEIPT OF THE FREIGHT. THE CONTENTION OF THE REVENUE IS THAT THE ASSESSEE FILE D THE DETAILS WHICH WERE NOT FILED BEFORE THE AO AND WITHOUT GIVING OPP ORTUNITY TO THE AO TO VERIFY THE FREIGHT PAYMENT AND FREIGHT RECEIPT THE CIT(A) HELD THAT BOOKS OF ACCOUNT OF THE ASSESSEE ARE HELD TO BE PRO PER. AGAINST THE FINDINGS OF THE VIDE PARAGRAPHS 12 13 & 14 OF HIS ORDER FOR DISBELIEVING THE PAYMENT OF FREIGHT CHARGES BY THE AO THE LEARNED COUNSEL FOR THE ASSESSEE EXPLAINED BEFORE THE CIT(A ) AND EVEN BEFORE US THAT THE AO HAS TAKEN THE DATES DIFFERENTLY. IN OUR CONSIDERED THE ENTIRE FACTS PERTAINING TO THE DATES OF RECEIPT AND PAYMENT OF FREIGHT NEEDS TO BE EXAMINED THOROUGHLY. TAKING INTO CONSID ERATION OF THE FACTS OF THE CASE WE SET ASIDE THE ORDER OF THE CI T(A) AND RESTORE THE ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION T O DECIDE THE ISSUE DE- NOVO IN ACCORDANCE WITH LAW AND AFTER PROVIDING REA SONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSE E IS DIRECTED TO PUT-FORTH ALL THE DETAILS WHICH WERE FILED BEFORE THE CIT(A) BEFORE THE AO IN SUPPORT OF HIS CASE. 8. IN THE RESULT APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF NOVEMBER 2011. SD/- SD/- (R.K. PANDA) (V. DURG A RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI DATED: 25 TH NOVEMBER 2011 KV ITA NO. 4226/M/2010 SURESH JAYDAYAL MADAM 8 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE G BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI.