Shri Krishnabhagwan R. Sharma Vs ACIT (ITAT Rajkot)
Summary: The Income Tax Appellate Tribunal, Rajkot Bench, disposed of cross appeals filed by the assessee, Shri Krishnabhagwan R. Sharma, proprietor of M/s. Kandla Cargo Carriers, and the Revenue for Assessment Year 2009-10. The appeals arose from the order of the learned CIT(A), Jamnagar dated 23.12.2014. The assessee’s appeal was partly allowed, while the Revenue’s appeal was dismissed.
The principal issue in the assessee’s appeal and Revenue’s Grounds Nos. 1 to 3 concerned transportation charges of Rs.1,22,57,102/- shown as payable to eight transporters. The Assessing Officer treated the entire amount as bogus after an Inspector’s inquiry found that some parties were unavailable at the stated addresses and some denied having undertaken transactions with the assessee. The assessee also failed to produce original bills and proof of subsequent payments. The Assessing Officer accordingly made an addition of Rs.1,22,57,102/-.
The CIT(A) upheld the finding that the liabilities and corresponding expenses were unverifiable, but rejected the methodology of adding the entire outstanding liability. He held that the liabilities represented trading expenses and that the proper approach was to determine the true business income by rejecting the books and estimating profit under section 145. Since the assessee had declared a net profit ratio of 1.61% on gross receipts of Rs.22,82,64,234/-, the CIT(A) applied a 4% net profit rate and sustained an addition of Rs.54,53,224/-.
