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TMI Blog2015 (9) TMI 809X X X X Extracts X X X X X X X X Extracts X X X X ..... Admittedly, the assessee had failed to segregate expenses of the contract business from other nine trucks. Therefore, in such circumstances, no credence whatsoever could have been given to the books of accounts. We are not satisfied that the reasoning given by the ITAT to reverse such findings only on the ground that the A.O. ought to have satisfied that either the accounts maintained were incorrect or incomplete or the method of accounting followed was such as would not lead to correct estimation of income. We are further failed to understand how the burden to establish that the books of accounts maintained were incomplete or incorrect would rest upon the A.O. The CIT (A) could not have un-necessarily been influenced by the fact that the assessee had been filing his return regularly and was continuing the business of contract and truck hiring to conclude that the accounts were properly maintained. Merely because no one had earlier cared to scrutinize the accounts furnished by the assessee could not be a ground to dislodge the order passed by the A.O. Even otherwise, there is no presumption in law attaching presumption of correctness to the continuity of income tax returns. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,18,82,601/-. 4. As against the returned income of ₹ 68,75,230/-, the Assessing Officer (in short 'A.O.') completed the assessment on 31.12.2007 assessing total income at ₹ 98,30,115/-. In the course of assessment proceedings, the A.O. noted that no expenses on diesel and fuel had been shown in respect of the trucks run on hire on the ground that net receipts from the trucks were declared on estimate basis under Section 44AE. On the other hand, huge expenses of ₹ 1,18,82,601/- were debited against the contract income on account of freight and carriage and no details could be furnished by the assessee to show the break-up of these expenses in respect of each of the six trucks stated to be used in the contract business. The A.O. observed that the freight expenses debited in the contract account were apparently excessive considering that they were stated to be incurred only on six trucks and was of the view that since the assessee was unable to provide truck-wise details of such expenses, it was entirely possible that these expenses of ₹ 1.18 crores included expenses incurred on the trucks run one hire. Since it was not possible to verify th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnished and on which tax had been deducted at source. Thus, the freight expenses could not be considered to be excessive or incorrect and no specific reason had been brought out by the A.O. which could lead to the rejection of the books of account and it was held that the A.O. was not justified in rejecting the accounts and in estimating the contract profits to be higher than that declared. It was also held that since the A.O. had accepted the income declared from hiring of trucks, there was no reason to restrict the depreciation allowable on the trucks run on hire and accordingly deleted the addition of ₹ 1,43,971/- on this account also. 7. It is against the aforesaid orders that the present appeal has been filed and vide order dated 13.11.2009 was admitted on the following substantial questions of law as taken in the memorandum of appeal. 1. Whether the accounts maintained by the Assessee were incorrect and incomplete in terms of section 145(3) of the Income Tax Act, when it was not possible to verify from such accounts whether any unvouched expenses relating to one business, profits from which were declared on estimate basis, have actually been debited in the accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve considering that they were stated to be incurred only on six trucks and was of the view that since the assessee was unable to provide truck-wise details of such expenses, it was entirely possible that these expenses of ₹ 1.46 crores included expenses incurred on the trucks run on hire. Since it was not possible to verify the actual expenses on freight incurred in the contract business, the A.O. held that the accounts were incorrect and incomplete and that the net income from contracts had been suppressed by inflating the expenses on freight and he, therefore, rejected the books of accounts under Section 145(3) and estimated net profit from contract at 8% of gross receipts which came to ₹ 1,16,45,687/-. After giving credit for income already declared from contract as well as from running of trucks, the A.O. made an addition of ₹ 54,05,031/- to the contract income declared. 11. The assessee filed an appeal against the assessment order before the Commissioner of Income Tax (Appeals), who vide order dated 21.07.2009 allowed the same following the order of the ITAT in assessee's own case for the Assessment Year 2005-06 in ITA No.1076/Chandi/2008 (Para 6 supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for the assessee would contend that the order passed by the ITAT is in accordance with law and, therefore, called for no interference. We have heard learned counsel for the parties and have gone through the records of the case. 16. Since all the questions are inter-related and interconnected, the same are taken up together for consideration. 17. It is not in dispute that the assessee in ITA No.55 of 2009 had maintained accounts in respect of the contract business showing a huge turn over of ₹ 12.09 crores and insofar as the business in respect of trucks stated to be run on hire, the following account was furnished in the return:- Tyres and spares 4,84,601/- Receipts 15,03,466/- Bank interest 58,571/- Insurance claim 20,813/- Bank charges 1,369/- Depreciation 3,83,925/- Net profit 5,95,813/- 18. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other nine trucks. Therefore, in such circumstances, no credence whatsoever could have been given to the books of accounts. 22. We are not satisfied that the reasoning given by the ITAT to reverse such findings only on the ground that the A.O. ought to have satisfied that either the accounts maintained were incorrect or incomplete or the method of accounting followed was such as would not lead to correct estimation of income. We are further failed to understand how the burden to establish that the books of accounts maintained were incomplete or incorrect would rest upon the A.O. The CIT (A) could not have un-necessarily been influenced by the fact that the assessee had been filing his return regularly and was continuing the business of contract and truck hiring to conclude that the accounts were properly maintained. Merely because no one had earlier cared to scrutinize the accounts furnished by the assessee could not be a ground to dislodge the order passed by the A.O. Even otherwise, there is no presumption in law attaching presumption of correctness to the continuity of income tax returns. The assessments of each year have to be viewed and scrutinized independently as these a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turbed. In such circumstances, the Department is bound by the assessee's choice of method regularly employed, but then in case by this method, the true income or profit of accounts cannot be arrived at, then the A.O. had every reason to invoke Section 145 of the Act in order to work out the real income and thereby deduce the profit and gain therefrom. As already observed earlier, the A.O. had given cogent reasons for not accepting the accounts. Though, these findings were set aside by the ITAT, but then even the ITAT did not conclude that the method of accountancy as employed by the assessee was in any manner correct. In absence of such findings, the order passed by the ITAT cannot be sustained. 26. In Commissioner of Income Tax versus M/s. Mcmillan and Co., AIR 1958 SC 207, the Hon'ble Supreme Court has laid down that if true income or profit cannot be ascertained on the basis of the assessee's methods of preparing accounts, then income must be computed upon such basis and in such a manner as the ITO may determine. This infact is the underlying principle enshrined under Section 145(3) which directs the A.O. to compute the income according to his best judgment in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perverse. A finding on a question of fact is open to attack only in case the same is erroneous in law or where the said finding can be termed to be perverse. In this case, both the aforesaid ingredients are lacking. The substantial questions of law are answered accordingly. 33. Obviously, there cannot be any quarrel with what has been held in M/s Swastik Food Products (supra). But, then this is a case where the findings recorded by the ITAT are not only erroneous but perverse. No fault could have been found by the ITAT when the A.O. had not only doubted the accounts, but had given cogent reasons for concluding that the accounts submitted by the assessee were incorrect and incomplete. It also needs to be noted that in ITA No.55 of 2009, even CIT (A) had concurred with the findings recorded by the A.O., whereas, the CIT (A) in ITA No.38 of 2010 had no option but to have followed the order given by the ITAT in ITA No.1076/Chandi/2008 which is already under challenge in ITA No.55 of 2009. 34. In view of the aforesaid discussion, we find merit in these appeals and answer all the aforesaid questions in favour of the revenue and against the assessee. Consequently, both the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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