IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI T.K. SHARMA (JM) AND SHRI A.L. GEHLOT ( AM) I.T.A. NO.1038/RJT/2009 (ASSESSMENT YEAR 2004-05) ITO, WD.1(4) VS SHRI POLABHA VIRAMBHA MANEK DWARKA PROP OF NAGESHWAR TRANSPORT GODOWN AREA, MITHAPUR DIST : JAMNAGAR PAN : ADCPM3581B (APPELLANT) (RESPONDENT) DATE OF HEARING : 03-11-2011 DATE OF PRONOUNCEMENT : -11-2011 APPELLANT BY : SHRI AVINASH KUMAR RESPONDENT BY: SHRI KALPESH DOSHI O R D E R PER T.K. SHARMA (JM) THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DA TED 19-08-2009 PASSED BY THE CIT(A), JAMNAGAR FOR THE ASSESSMENT YEAR 200 4-05. 2. THE FIRST GROUND RAISED IN THE APPEAL READS AS U NDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO ESTIMATE THE NET PROFIT @3.25% OF GROSS RECEIPT AND THEREBY RESTRICTING TO ADDITION TO RS.457520/- AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER AT RS.1407752/-. 2. THE FACTS LEADING TO THE CONTROVERSY INVOLVED IN THIS GROUND ARE THAT THE ASSESSEE IS AN INDIVIDUAL DOING TRANSPORTATION OF S ALT LIFTING CONTRACT WITH M/S TATA CHEMICALS LTD UNDER HIS PROPRIETORY, VIZ. NAGESHWAR TRANSPORT. IN THE ASSESSMENT YEAR UNDER APPEAL NO RETURN OF INCOME WA S FILED. ASSESSING OFFICER ITA NO.1038/RJT/2009 2 ISSUED NOTICE U/S 142(1) CALLING FOR THE RETURN OF INCOME, WHICH WAS NOT COMPLIED WITH. THEREFORE, HE MADE ASSESSMENT U/S 144 OF THE ACT AFTER GATHERING INFORMATION FROM VARIOUS PERSONS. ASSESSING OFFICE R ISSUED NOTICE U/S 133(6) OF THE ACT TO M/S TATA CHEMICALS LTD FROM WHERE IT WAS GATHERED THAT IT CARRIED OUT CONTRACT WORK OF TATA CHEMICALS LTD FOR A SUM OF RS . 1,36,74,776. SIMILARLY THE ASSESSEE CARRIED OUT TRANSPORTATION WORK WITH BHAGW ATI SHIPPING SERVICE. THE ASSESSING OFFICER ADOPTED NET PROFIT RATE OF 10% AN D WORKED OUT INCOME FROM THESE CONTRACTS AT RS.13,67,480 AND RS. 40,227 RESP ECTIVELY. 3. ON APPEAL BEFORE THE LD.CIT(A) THE ASSESSEE MADE DETAILED SUBMISSIONS WHICH WERE REPRODUCED BY THE CIT(A) AT PARAGRAPH 5 OF HIS ORDER. SINCE THE ASSESSMENT WAS AN EX PARTE ASSESSMENT, THE LD.CIT(A ) FORWARDED THE DETAILS SUBMITTED BEFORE ME TO THE ASSESSING OFFICER FOR HI S COMMENT. THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER IS ALSO R EPRODUCED BY LD.CIT(A) AT PARAGRAPH 6 OF THE IMPUGNED ORDER. THEREAFTER THE LD.CIT(A) CALLED FOR COUNTER- COMMENTS FROM THE ASSESSEE WHICH ARE REPRODUCED AT PARAGRAPH 7 AND THEREAFTER FOR THE DETAILED REASONS GIVEN AT PARAGR APH 8, DIRECTED THE ASSESSING OFFICER TO ADOPT NET PROFIT RATE OF 3.25% OF THE GR OSS CONTRACT RECEIPT FROM TATA CHEMICALS LTD AND M/S BHAGWATI SHIPPING SERVICE. P ARAGRAPH 8 OF THE ORDER OF LD.CIT(A) IS REPRODUCED BELOW: 8. I HAVE CAREFULLY CONSIDERED THE ISSUE. IT IS A FACT THAT THE APPELLANT HAS NOT CO-OPERATED AT THE TIME OF ASSESS MENT AND THE ASSESSMENT HAS BEEN FRAMED EX-PARTE. HOWEVER, EVEN IN EX-PARTE ASSESSMENT ESTIMATE OF PROFIT HAS TO BE REASONABLE. THE VIEW OF ITA NO.1038/RJT/2009 3 THE AO THAT IN CONTRACT WORK, PROFIT IS BEING ESTIM ATED AT 8% IS NOT CORRECT. PAST RECORDS OF THE APPELLANT SHOW THAT D URING THE A.Y. 2002-02 WHERE ASSESSMENT WAS COMPLETED U/S 143(3) A FTER CONSIDERING THE ADDITIONS MADE BY THE AO, THE NET P ROFIT RATE WORKED OUT TO ABOUT 2.76% OF THE RECEIPTS. IF THE ESTIMATE OF INCOME IS MADE TO THE BET OF THE JUDGMENT OF THE AO , PAST RECORDS BECOME VERY RELEVANT. EVEN THE ESTIMATE OF INCOME CANNOT BE MADE IN AN ARBITRARY MANNER WHICH HAPPENS TO BE ALM OST FOUR TIMES OF THE NET PROFIT RATE ADOPTED IN ASSESSMENT BY THE AO HIMSELF. HOWEVER, IN THE FACTS AND CIRCUMSTANCES OF THE CASE IT IS APPARENT THAT IT IS A FIT CASE WHERE NET PROFIT RATE HAS TO BE ESTIMATED. I FIND THAT IN A.Y. 2003-04 DURING THE COURSE OF SCRUTINY ASSESSMENT THE FINAL RATE WORKED OUT ABOUT 2.76%. TAKING INTO ACC OUNT THAT THERE MIGHT BE SOME EXTRA INCOME ALSO EARNED, THE AO IS D IRECTED TO ADOPT A NET PROFIT RATE OF 3.25% OF GROSS CONTRACT RECEIPTS FROM M/S TATA CHEMICALS LTD AND M/S BHAGWATI SHIPPING SERVIC ES. THE AO WILL WORK OUT THE CORRECT INCOME ACCORDINGLY. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING, ON BEHALF OF THE REVENUE , SHRI AVINASH KUMAR APPEARED AND CONTENDED THAT NO VOLUNTARY RETURN OF INCOME WAS FURNISHED BY THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER APPEAL. IN THESE CIRCUMSTANCES, THE ASSESSING OFFICER CALLED FOR THE INFORMATION FROM T WO PARTIES, VIZ. TATA CHEMICALS LTD AND BHAGWATI SHIPPING WORKS AND APPLIED NET PRO FIT RATE OF 10% WHICH IS FAIR AND REASONABLE AND LD.CIT(A) IS NOT JUSTIFIED IN DI RECTING THE ASSESSING OFFICER TO ADOPT NET PROFIT RATE OF 3.25%. 5. ON THE OTHER HAND, SHRI KALPESH DOSHI, THE LD.AR OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF CIT(A). HE POINT ED OUT THAT THE LD.CIT(A) CALLED THE REMAND REPORT, COMMENTS OF THE ASSESSEE THEREON AND THEREAFTER KEEPING IN VIEW THE FACT THAT NET PROFIT RATE DECLA RED BY THE ASSESSEE FOR THE ITA NO.1038/RJT/2009 4 ASSESSMENT YEAR 2000-01 WAS 1.90%; FOR THE ASSESSME NT YEAR 2001-02 IT WAS 2.70%; AND FOR THE ASSESSMENT YEAR 2002-03 IT WAS 1 .39% AND THEREFORE, HE ESTIMATED THE NET PROFIT RATE AT 3.25% WHICH IS FAI R AND REASONABLE. THEREFORE THE VIEW TAKEN BY THE LD.CIT(A) BE UPHELD. 6. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDER OF AUTHORITIES BELOW. IT IS WELL SETTLED LAW THAT EVE N IF FOR ANY REASON SOME ESTIMATE HAS TO BE MADE, IT SHOULD BE FAIR AND REASONABLE KE EPING IN VIEW THE PAST HISTORY OF THE ASSESSEE. APPLYING THIS PRINCIPLE, THE LD.C IT(A), IN THE IMPUGNED ORDER DIRECTED THE ASSESSING OFFICER TO ADOPT NET PROFIT RATE OF 3.25% WHICH IS FAIR AND REASONABLE KEEPING IN VIEW THE NET PROFIT RATE DECL ARED AND ACCEPTED BY THE ASSESSING OFFICER IN HIS EARLIER THREE ASSESSMENT Y EARS. WE ARE, THEREFORE, INCLINED TO UPHOLD THE ORDER OF LD.,CIT(A) THE GRO UND OF APPEAL IS REJECTED. 7. GROUND NO.2 IS AS UNDER: 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 126000/- MADE U/S 44AE OF THE ACT. 8. THE FACTS RELATING TO THE CONTROVERSY INVOLVED I N THIS APPEAL IS THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER ESTIMATED TH E INCOME FROM THREE TRUCKS OWNED BY THE ASSESSEE @RS.4,200 PER TRUCK AND MADE ADDITION OF RS.1,26,000. ON APPEAL BEFORE THE LD.CIT(A) IT WAS CONTENDED THA T THE ASSESSEE WAS USING THE TRUCK IN EXECUTING CONTRACT WORK AND TRANSPORTATION WORK IN THE COURSE OF BUSINESS. THEREFORE, THERE IS NO REASON IN MAKING SEPARATE ADDITION U/S 44AE OF ITA NO.1038/RJT/2009 5 THE I.T. ACT, 1961. IN THE REMAND REPORT THE ASSES SING OFFICER POINTED OUT THAT THE ASSESSEE ALSO RUNS HIS TRUCK ON HIRE FOR THE PURPOS E OTHER THAN CONTRACT WORK WITH M/S BHAGWATI SHIPPING SERVICE; THEREFORE, THE INCOM E WAS CORRECTLY ESTIMATED. IN HIS COUNTER COMMENT, THE LD.AR OF THE ASSESSEE C ONTENDED THAT THREE TRUCKS IN QUESTION WERE USED ONLY FOR TRANSPORTATION OF BUSIN ESS FOR WHICH ADDITION WAS ALREADY MADE BY THE ASSESSING OFFICER BY ESTIMATING THE NET PROFIT. THEREFORE, NO SEPARATE ADDITION U/S 44AE OF THE ACT CAN BE MADE. AFTER CONSIDERING THE SAME IN THE IMPUGNED ORDE, THE LD.CIT(A) DELETED THE ADD ITION OF RS.1,24,000 FOR THE DETAILED REASONS GIVEN AT PARAGRAPHS 11 AS UNDER: 11. I HAVE CONSIDERED THE ISSUE CAREFULLY. THE AP PELLANT IS ENGAGED IN CONTRACT WORK NOT ONLY FROM M/S BHAGWATI SHIPPING SERVICE, BUT ALSO DOING CONTRACT WORK FOR TATA CHEM ICALS LTD. THE COMMENTS OF THE AO THAT THE SAME WAS BEING RUN ON H IRE EVEN OTHERWISE DOES NOT APPEAR TO BE CORRECT BECAUSE THE SAID INFORMATION IS VAGUE AND NO PROPER INSTANCE HAS BEE N POINTED OUT. THE APPELLANT IS DOING HIS OWN TRANSPORTATION WORK FOR VARIOUS CONCERNS WORTH ABOUT RS.1.40 CRORE AND IF HE OWNS O NLY THREE TRUCK ONLY THE SAME MUST HAVE BEEN USED IN APPELLANTS OW N BUSINESS AND THEREFORE, THIS SEPARATE ADDITION OF RS.1,26,00 0 IS DELETED. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRI BUNAL. 9. WE HAVE HEARD BOTH THE SIDES. IT IS PERTINENT T O NOTE THAT ONLY ON DOUBTS AND SUSPICION THE ASSESSING OFFICER MADE SEPARATE A DDITION U/S 44AE OF THE ACT AND THE LD.CIT(A), AFTER CORRECTLY APPRECIATING THE FACT CAME TO THE CONCLUSION THAT THREE TUCKS IN QUESTION WHICH WERE OWNED BY THE ASS ESSEE WERE USED ONLY BY ASSESSEE FOR ITS OWN BUSINESS. IN THESE CIRCUMSTAN CES, NO SEPARATE ADDITION BY ESTIMATING THE INCOME U/S 44AE OF THE ACT CAN BE MA DE. THE VIEW TAKEN BY THE ITA NO.1038/RJT/2009 6 LD.CIT(A) IN THIS REGARD IS FAIR AND REASONABLE. W E, THEREFORE, DECLINE TO INTERFERE WITH THE ORDER OF CIT(A). THIS GROUND OF APPEAL IS REJECTED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE AS M ENTIONED ABOVE. SD/- SD/- (A.L. GEHLOT) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT, DT : 04 TH NOVEMBER, 2011 PK/- COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A), JAMNAGAR 4. THE CIT, JAMNAGAR 5. THE DR, I.T.A.T., RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT