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TMI Blog2018 (12) TMI 678X X X X Extracts X X X X X X X X Extracts X X X X ..... or then in absence of specific discrepancy or deficiency in the books of account, the provisions of Section 145(3) cannot be invoked. Hence we hold that the Assessing Officer was not justified in rejecting the books of account merely because the assessee could not file the confirmation from the parties to whom the freight charges were paid. Hence, this ground of assessee’s appeal is allowed. Estimation of income by applying the NP rate - Held that:-Since the Assessing Officer has doubted the claim of freight payment as the assessee has not filed any confirmation and the parties have not responded to the notice issued by the Assessing Officer U/s 133(6) of the Act, therefore, the issue of allowability of the said claim can be reexamined by the Assessing Officer only to the extent of scope of any inflation in the quantum of the freight charges paid by the assessee. So far as the outright rejection of freight charges is concerned we note that when the freight income and freight charges are linked one to one for each trip and also found recorded in the books then the entire claim of the assessee cannot be held as bogus. The only issue which can be examined by the Assessing Officer i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in nature and has not been pressed by the assessee. The ld AR of the assessee made statement at bar that the assessee does not press ground No.1. Accordingly, ground No. 1 of the appeal is dismissed being general and not pressed by the assessee. 5. Ground No. 2 of the appeal is regarding rejection of books of account U/s 145(3) of the Income Tax Act, 1961 (in short the Act). The assessee is a private limited company and engaged in providing transportation work of different parties through the third party vehicles. Thus the assessee is not having any vehicle or lorry but only working as a intermediary in providing transportation service to the clients by hiring the vehicles from third owners. The assessee filed return of income through e-filing on 29/9/2015 declaring total income of ₹ 3,11,790/-. In the scrutiny assessment, the Assessing Officer on examination of the books of account, bills and vouchers has observed that the assessee had paid total freight of ₹ 15,95,77,213/- to number of voluminous truck/trailer owners and most of the freight have been paid in cash to the vehicle drivers. From the vouchers, the complete details of the recipient regarding their i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer issued notice to the vehicle owners at the address taken from the PAN details from the official record without asking the assessee to furnish the present address of these parties. The ld AR has also pointed out that the Assessing Officer has issued these notices U/s 143(2) of the Act on 07/12/2017 giving very short time period to the parties to file their reply up to 15/12/2017 and thereafter the Assessing Officer has passed assessment order on 26/12/2017. The ld AR has pointed out that the truck owners/drivers are illiterate persons and could not reply the notices issued by the Assessing Officer U/s 133(6) of the Act. Though, most of these parties have filed their reply after the assessment order was passed which was not considered by the Assessing Officer. Thus, the ld AR has submitted that the Assessing Officer has completed the assessment in a hurried manner without giving sufficient time to the assessee as well as these parties to file the reply. Hence, the ld AR has submitted that when no specific defect was pointed out by the Assessing Officer in the books of account and only doubted the payment of freight then the same cannot be a reason for rejection of books of acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that each payment of freight can be linked to the freight income booked by the assessee of that particular trip. Therefore, once the assessee has proved the direct nexus between the freight receipt and freight payment as well as a particular trip then the claim of freight payment cannot be doubted and a reason for rejection of books of account. In support of his contention, he has relied upon the various decisions including the decision of the Hon'ble Supreme Court in the case of CIT Vs. Padamchand Ramgopal (1970) 76 ITR 719 (SC) and submitted that the Hon'ble Supreme Court has observed that insignificant mistakes cannot be a ground for resorting to Section 145 of the Act. He has also relied upon the decision of Hon ble Punjab Haryana High Court in the case of Telelinks Vs. CIT, Bhatinda order dated 20/11/2014 in ITA No. 269/2014 and submitted that when the assessee declared NP rate is not less than the average N.P. declared in the past then there is no reason for making any addition. 8. On the other hand, the ld DR has submitted that the assessee has paid the freight charges in cash and has not maintained complete record in the books of account regarding the recipien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnment notes at the time of loading goods in trailer. The business of assessee has been discussed at page 2 of assessment order as under. During the course of the assessment proceedings, it has been stated that the assessee was carrying transportation work of different parties and different types. It is also stated that the assessee is not obtaining any work order, also not filing any specific tender or quotation and also no making any agreement in writing with the parties. The terms and conditions on which work is carried on are always mutually decided by both the parties, no specific agreement is required to be made for the same. The rate of transportation is depend upon the type of goods, risk, weight, distance and market conditions. It is further submitted that nature of goods transported are steel coil, stone, wood, machinery, coal etc. It is further submitted that transportation is done by giving sub contract to market owned trailers on sum margin or say commission basis. Bills have been raised on parties and the parties have paid freight to the assessee. Whatever freight earned from parties have been credited to trailer owners, after deducting the margin which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn to have been made in cash having been inflated by the appellant cannot be ruled out. In view of the discrepancies / deficiencies discussed by the AO in the assessment order, I am of the considered view that the AO has rightly rejected the book results u/s 145(3). Hence, the rejection of book results u/s 145(3) is held to be valid and in accordance with the provisions of law. Thus, the ld CIT(A) has accepted the fact that the assessee has produced the PAN card and registration certificate of each vehicle owner as well as maintained the books of account. It was found that the ledger account of each person regarding freight charges payment have been maintained on the basis of vehicle number and name of the owner as per registration certificate of the vehicle. The Assessing Officer has not doubted the business activity of the assessee being working only an intermediary in the activity of providing transportation to various clients by hiring the vehicles from the vehicle owners. The bills were raised by the vehicle owners to the clients and the assessee is only charging some margin/commission in the transaction for providing the services of transportation. Once this business act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer only to the extent of scope of any inflation in the quantum of the freight charges paid by the assessee. So far as the outright rejection of freight charges is concerned we note that when the freight income and freight charges are linked one to one for each trip and also found recorded in the books then the entire claim of the assessee cannot be held as bogus. The only issue which can be examined by the Assessing Officer is the quantum of the freight charges inflated by the assessee or not. Accordingly, for limited purpose, we set aside the issue of allowability of the freight charges in the above terms. We may clarify that the addition/disallowance, if any, cannot be exceeded the addition sustained by the ld. CIT(A) in the first round of appeal as the department has not challenged the impugned orders of ld. CIT(A). 11. Now we take ITA Nos. 676/JP/2018 and 677/JP/2018. In both these appeals, the assessees have raised common grounds as under: Grounds of ITA No. 676/JP/2018 1. The impugned order passed by the learned Commissioner (Appeals), Ajmer to the extent prejudicial to the appellant is bad in law and liable to be quashed. 2. That ..... X X X X Extracts X X X X X X X X Extracts X X X X
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