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TMI Blog2013 (8) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Thus AR has demonstrated that the outstanding freight payable were paid in subsequent years and in subsequent year the payment to this outstanding freight has been accepted by the A.O. while making the assessment under Section 143(3). The list showing freight payable with date of its payment has been placed. In the light of above admitted facts and as per the detailed dissections made by the CIT(A) CIT(A) has rightly appreciated the system of accounting maintained by the assessee & has rightly deleted the addition - appeal of the Revenue is dismissed. - ITA No. 41/Agra/ 2012 - - - Dated:- 31-5-2013 - Shri Bhavnesh Saini And Shri A. L. Gehlot,JJ. For the Appellant : Shri Waseem Arshad, Sr. D. R. For the Respondent : Shri Mahesh Agarwal, C. A. ORDER Per A. L. Gehlot,Accountant Member:- The appeal by the Revenue is filed against the order of learned CIT(A), Gwalior dated 23.11.2011 for A.Y. 2008-09. 2. The ground of appeal raised by the Revenue is reproduced as under:- "Whether on the facts and in the circumstances of the case, the ld. CIT(Appeals) has erred in deleting the addition of Rs.3,21,58,268/- made by the AO on account of unproved freigh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Sunil Kulshreshtra refused for any kind of transaction. Please explain why should not your all creditors be considered bogus please submit will 22.12.2010 at 11.30 A.M. Sd/- The appellant has given written replies on 22.12.2010 and 24.122010. On 27.12.10, appellant's A.R. has been informed that letters sent u/s 133(6) to sundry creditors for freight and route expenses payable have been received back without service. It has been given the opportunity to prove the genuineness of the same and hearing has been adjourned 31.12.10. On the said date, as per the order sheet, A.R. has attended the hearing and submitted the compliance. Accordingly, assessment has been passed on the same date by theA.O. The modus operandi of the appellant company, as explained before the A.O. also is that it is doing transportation business in which it hires the truck from open market through brokers available in the market. The broker in turn, sends the desired number of truck available in the market for loading the goods. The truck driver with truck then approaches the appellant company, negotiates the freight according to distance, weight etc. The appellant company then pays some advance against the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounts. The trading liability, as reflected in regular books of accounts, cannot be rejected unless proved bogus or fictitious. The appellant has submitted required details showing that it had regular business dealings in respect of transactions involved. Simply because no reply has been received in response to information sought u/s 133(6), A.O. cannot jump to the conclusions that these are bogus creditors and treat the same as unexplained credits in absence of any adverse material. The instant cases are not found to be of cash credits simpliciter, but all amounts are payable to parties against the services rendered by them and which have also been paid in due time during next year. On perusal of records, it is seen that the appellant has claimed freight and route expenses and sundry creditors against them regularly in earlier years as per its audited balance sheet which have also been accepted by the A.O. vide orders passed u/s 143(3). Details of last 3 years are as under:- Sl.No. A.Y. Freight/truck running expenses Sundry creditors Remarks 1. 2005-06 7,35,57,334/- 1,48,85,143/- Disallowance of Rs.50,000 on estimated ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o serious challenge had been made to their genuineness or that they were kept regularly in the course of business. That being the case, the accounts are relevant and afford prima facie of the entries and the correctness thereof under s. 34 of the Evidence Act. The learned A.R. submitted that in the case under consideration the A.O. did not dispute the result declared by the assessee, once the A.O. has not disputed the result declared by the assessee such addition cannot be made. The learned A.R. in support of his contention relied upon the decision in the case of Devine International Vs. DCIT, 134 ITD 149 (Del.) 5. We have heard learned representatives of the parties and records perused. To examine the issue, we would like to refer relevant provisions of section 145 of the Act which reads as under:- "145. (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time accounting stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. Therefore, in case where the Income-tax Officer or the taxing authority finds that in maintaining accounts, the assessee has regularly employed a particular method 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 represents to the taxing authority that its accounts are maintained by a method of accounting regularly employed, he expects the Income-tax Officer to act upon such method and compute the income accordingly. 5.2 In this regard, for appreciating the scheme of the Act, we would like to refer certain judicial pronouncements which are as under:- The Hon'ble Rajasthan High Court in the case of CIT vs. Gotanlime Khanij Udyog, 256 ITR 243 (Raj) held that provisions do not envisage that by resorting to best judgment assessment, the assessing authority must reach a different figure of income and profit than what has been disclosed by the assessee. The judgment of Hon'ble Delhi High Court in the case of CIT vs. Smt. Poonam Rani (Delhi) 326 ITR 223 is applicable to the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed in section 144 where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee or where either the method of accounting provided in sub-section (1) or the accounting standards as notified under sub-section (2) has been regularly followed by the assessee. It was not the case of the revenue that the assessee had not followed either cash or mercantile system of accounting. It was also not the case of the revenue that the Central Government had notified any particular accounting standard to be followed by tour operators. Hence, the second part of sub-section (3) of section 145 would not apply to the instant case. [Para 5] ..............The Assessing Officer had not pointed out any particular defect or discrepancy in the account books maintained by the assessee. During the course of hearing before the Commissioner (Appeals), it was pointed out by the assessee that her account books were duly audited under section 44AB of the Central Excise Act and the quantitative details as required by ................. (Page 227 .....)clause 28(b) of Form No. 3CD regarding raw material and finished products (i.e., opening stock of raw ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e account books had been disallowed by the Assessing Officer. There was no finding by the Assessing Officer that the actual quantity of finished products produced by the assessee was more than what was shown in the account books. There was no finding that the ....... (Page 228 ) assessee had made any such sale of the finished products which was not reflected in the account books. There was no finding by the Assessing Officer that the finished products were sold by the assessee at a price higher than what was declared in the account books. In those circumstances, the Commissioner (Appeals) and the Tribunal were justified in holding that the Assessing Officer could not have increased the gross profit ratio merely because it was low as compared to the gross profit ratio of the preceding year. [Para 9] The revenue contended that the assessee was not maintaining the daily stock register. However, no such finding was found in the assessment order. On the other hand, the assessee had submitted before the Commissioner (Appeals) that Form No. 3CD containing all the quantitative details in respect of raw materials as well as the finished goods and duly audited by the certified accountant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2010 which reads as under :- ( Page No. 3 4, Paper book) "The assessee has submitted the desired details of freight payable with Freight memo number, date, amount etc. before your good self for your verification. Before submitting further, the assessee wishes to explain the mechanism the business of the assessee. The assessee is doing Transportation businesses in which they hire the truck from open market through brokers available in the market by telephone them. The broker in turn sends the desired number of trucks available in the open market for loading of goods. The truck driver with truck reached to us fixed the freight according to distance weight etc. the assessee in turn provide the advance against the freight agreed towards. Diesel and other expenses on the way and load the goods in the truck. The truck drivers deliver the goods to destination and come back to assessee with delivery challans to balance payment of freight payable. The assessee on the basis of said delivery challans prepare the bill for freight and submit to their customer to payment. As number of transactions running in thousands during a year. Hence all the records are maintained on the basis of truck nu ..... 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