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TMI Blog2015 (7) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount. As to whether similar state of affairs prevailed in the past for the AYs 2004-05 to 2008-09 in assessee’s case cannot be said with certainty. According to the ld. DR, similar state of affairs would have prevailed in the past assessment years also. The profits earned by the assessees in similar line of business could therefore be considered by the AO in determining the income of assessee. When books of accounts are rejected and income is estimated, the best yardstick for such estimation is the past history in Assessee’s own case, provided such past history is accepted by the revenue in assessments completed after due enquiry u/s.143(3) of the Act. When assessment is completed u/s.143(1) of the Act, the return filed by the Assessee is accepted as it is. The scheme of assessment under section 143(1) of the Income-tax Act, 1961, is the policy of tax administrations across countries to adopt a two-stage procedure of assessment as part of risk management strategy. In the first stage, all tax returns are processed to correct arithmetical mistakes, internal inconsistencies, tax calculation and verification of tax payment. At this stage, no verification of income is undertaken. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consisting of interest income, profit on sale of assets, rental income and miscellaneous income. The assessee claimed various expenses amounting to ₹ 53,15,55,168 and offered net income of ₹ 70,64,490 for taxation in respect of the business of fleet owning and transport contract. The assessee s main claim of expenditure was under the two heads viz., Lorry hire charges at ₹ 33,03,90,483 and truck maintenance at ₹ 8,39,82,308. The other expenses include travelling, commission, rent, etc. 4. There was a survey carried out in the business premises of the assessee u/s. 133A of the Income-tax Act, 1961 [ the Act ] on 14.7.2011. In the course of survey, the survey team could not find any bills/vouchers with regard to various expenses claimed in the P L account. Only four files of daily returns of transactions pertaining to Bangalore Head Office for the periods 1.4.08 to 30.6.08, 1.7.08 to 30.9.08, 1.10.08 to 31.1.09 1.2.09 to 31.3.09 were found. Even in these files, the information available was not clear and no definite conclusions could be arrived at with regard to nature of expenditure, amount of expenditure etc. A statement of Mr. Kushal Chand Dharamshi, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, it derives income from transportation of goods and owns about 100 heavy goods vehicle and Light Commercial Vehicles. Sometimes, the Assessee also engaged third party vehicles by paying hire charges for transportation of goods. Apart from the transportation business the Assessee also operated a petrol bunk. This in short was his business activity. As far as transportation business was concerned, the Assessee submitted that it owned about 100 heavy goods vehicles and light commercial vehicles. Judging the extent of income having regard to the presumptive income mentioned in the Section 44AE of the Act, and assuming further that all the vehicles are heavy goods vehicles only, the total income of the Assessee could be worked out, at best, in terms of presumptive provisions at ₹ 42,00,000/- [Rs.3,508/- x 12 x 100]. As far as the business of running petrol bunk, the Assessee submitted that, the turnover of the Assessee for the year under appeal from the petrol bunk business was only ₹ 39,99,554/-. In other words, there was almost no business of operating the petrol bunk carried on by the Assessee during the year under appeal. 8. The Assessee submitted before CIT(A) that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) found that profit percentage declared by the assessee in this year was 1.03%. He was therefore of the view that estimation of 8% of turnover as done by the AO was highly excessive and unreasonable. He was, however, of the view that 3% of the turnover could be estimated as profit of the assessee. 13. Still aggrieved, the assessee has filed the appeal before the Tribunal. 14. This appeal was heard by the Tribunal and an order dated 1.1.2014 was passed by the Tribunal. The Tribunal firstly came to the conclusion that the assessee failed to demonstrate that it was maintaining books of account as required under the Act. The Tribunal also held that assessee has not brought out any evidence to justify the claim of profit at 1.03% of the turnover, except for placing reliance on the returns of income filed in the earlier years. The Tribunal held that those returns are not conclusive in the matter because those returns for AYs 2004-05 to 2008-09 had been accepted u/s. 143(1) of the Act and acceptance of a return u/s. 143(1) of the Act will not be conclusive as there was no scrutiny assessment. The Tribunal therefore came to the conclusion that the CIT(A) was reasonable in restricting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessing authority determined the profit at 8%, the first appellate authority reduced it to 3% and the tribunal has reduced it to 2.5%. In coming to the said finding, all the three authorities have declined to take note off the evidence by way of earlier returns. In that view of the matter, what the authorities have done is a mere guess work and without any basis. That is not permissible in law as held by the Apex Court in the aforesaid judgment. 8. In that view of the matter, the impugned orders are unsustainable. Hence, the order passed by the tribunal is hereby set-aside. Matter is remitted back to the tribunal for fresh consideration in the light of the observations made above. In that view of the matter, the substantial question of law is answered in favour of the assessee and against the revenue and appeal is partly allowed. 17. The appeal was fixed for hearing as per the directions of the Hon ble jurisdictional High Court. The ld. counsel for the assessee submitted before us that the Hon ble High Court has clearly held that evidence in the form of earlier returns had to be taken note of by the Tribunal. According to him, therefore, the assessee s profit declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee able to produce evidence in the form of vouchers in support of expenses debited to the P L account. As to whether similar state of affairs prevailed in the past for the AYs 2004-05 to 2008-09 in assessee s case cannot be said with certainty. According to the ld. DR, similar state of affairs would have prevailed in the past assessment years also. The profits earned by the assessees in similar line of business could therefore be considered by the AO in determining the income of assessee. 21. We have already observed that rejection of books of account by the AO is no longer an issue, as the assessee has accepted the rejection of books of account. When books of accounts are rejected and income is estimated, the best yardstick for such estimation is the past history in Assessee s own case, provided such past history is accepted by the revenue in assessments completed after due enquiry u/s.143(3) of the Act. When assessment is completed u/s.143(1) of the Act, the return filed by the Assessee is accepted as it is. The scheme of assessment under section 143(1) of the Income-tax Act, 1961, is the policy of tax administrations across countries to adopt a two-stage procedure o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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