Sh. Bhavendra Jha, New Delhi V. ACIT, New Delhi

CO 377/DEL/2010

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7174 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 22-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR MEEL
• Keywords: Business income; Depreciation; Period of limitation; Additional evidence; Time period of passing order
• Section: 44AD; 143(3); 144

Judgement Text

ITA NO. 2529/DEL/2010 & CO. NO. 377/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 2529/DEL/2010 A.Y. : 2006-07 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 22(1), NEW DELHI ROOM NO. 238-B, 2 ND FLOOR, CR BUILDING, IP ESTATE, NEW DELHI VS. SHRI BHAVENDRA JHA, D-129, KRISHNA PARK, NEW DELHI (PAN/GIR NO. : ADJPB9878K) AND AND AND AND CROSS OBJECTION NO. 377/DEL/2010 (IN ITA NO. 2529/DEL/2010) A.Y.. : 2006-07 SH. BHAVENDRA JHA, D-129, KIRSHNA PARK, NEW DELHI (PAN/GIR NO. : ADJPB9878K) VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 22(1), NEW DELHI ROOM NO. 238-B, CR BUILDING, IP ESTATE, NEW DELHI -110001 (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : CA, SACHIN JAIN DEPARTMENT BY : PRADEEP KUMAR MEEL, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA : AM PER SHAMIM YAHYA : AM PER SHAMIM YAHYA : AM PER SHAMIM YAHYA : AM THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. C OMMISSIONER OF INCOME TAX (APPEALS)-XXIV, NEW DELHI DATED 15.3.20 10 AND PERTAIN TO ASSESSMENT YEAR 2006-07. ITA NO. 2529/DEL/2010 & CO. NO. 377/DEL/2010 2 2. THE GROUNDS RAISED IN THE REVENUES APPEAL RE AD AS UNDER:- (I) ON THE FACTS AND ON THE CIRCUMSTANCES OF THE C ASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LA W AND ON THE FACTS IN DELETING THE INCOME ESTIMATED AT RA TE OF 8% BY ASSESSING OFFICER BY APPLYING THE PROVISIONS OF SECTION 44AD OF THE ACT IN THE ABSENCE OF BOOKS OF ACCOUNTS. (II) ON THE FACTS AND ON THE CIRCUMSTANCES OF THE C ASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LA W AND ON THE FACTS IN RESTRICTING THE PROFIT OF THE ASSES SEE AT ` 10,30,220/- AS AGAINST THE INCOME COMPUTED BY THE ASSESSING OFFICER AT ` 41,36,162/- BY ADMITTING TH E ADDITIONAL EVIDENCE IN VIOLATION OF PROVISIONS OF L AID DOWN UNDER RULE 46A(1) OF THE IT RULES. (III) THE APPELLANT CRAVES LEAVES TO ADD, ALTER OR AMEND ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEAR ING OF THE APPEAL. 3. THE GROUNDS RAISED IN THE ASSESSEES CROSS OBJE CTION READ AS UNDER:- (I) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) -XXIV WAS WRONG AND UNJUSTIFIED IN UPHOLDING THE IMPUGNED ITA NO. 2529/DEL/2010 & CO. NO. 377/DEL/2010 3 ASSESSMENT WHICH WAS COMPLETED BY ASSESSING OFFICER U/S. 144 OF THE ACT. I). WITHOUT PROPER SERVICE OF THE NOTICE ISSUED U/S . 143(2) OF THE ACT WITHIN THE LIMITATION PERIOD AND II) WITHOUT ADHERING / COMPLYING TO PROVISIONS OF SECTION 144 OF THE ACT. II) THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CA SE, WHEN BOOKS OF ACCOUNTS OF THE ASSESSEE WERE LOST, THE LD . COMMISSIONER OF INCOME TAX (APPEALS)-XXIV, WHILE UPHOLDING THE BEST JUDGEMENT ASSESSMENT COMPLETED U/S . 144 OF THE ACT, WAS WRONG IN SUSTAINING THE ADDITIO NS AGGREGATING TO ` 3,12,675/- TO THE DECLARED NET PRO FIT FROM THE BUSINESS OF RENT A CAB RUN UNDER THE NAME AND S TYLE OF M/S UNIQUE TOURISM, AGGREGATING TO ` 8,10,823/- BEING 1.56% OF THE TOTAL RECEIPTS WHICH WAS BETTER THAN T HE NET PROFIT RATE @ 1.19% ACCEPTED BY THE DEPARTMENT IN THE ASSESSMENT COMPLETED U/S. 143(3) OF THE ACT FOR THE IMMEDIATELY PRECEDING YEAR I.E. A.Y. 2005-06. ITA NO. 2529/DEL/2010 & CO. NO. 377/DEL/2010 4 (III) THE RESPONDENT CRAVES LEAVE OF THIS HONBLE C OURT TO ADD, AMEND, ALTER OR WITHDRAW ANY GROUND AT THE TIME OF HEARING. 4. IN THE CROSS OBJECTION ASSESSEE HAS RAISED A I SSUE THAT THERE WAS NO PROPER SERVICE OF NOTICE ISSUED U/S. 143(2) OF THE ACT WITHIN THE LIMITATION PERIOD. 5. IN THIS REGARD LD. COMMISSIONER OF INCOME TAX (APP EALS) HAS GIVEN A FINDING THAT NOTICE U/S. 143(2) WAS NOT RET URNED BY THE POSTAL AUTHORITIES, HENCE, THERE IS NO LOGIC AS TO WHY IT WOULD NOT HAVE BEEN SERVED AT THE ADDRESS. HOWEVER, THE ASSESSEE FA ILED TO RESPOND TO THE STATUTORY NOTICES ISSUED BY THE ASSESSING OFFIC ER. THEREFORE, LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THE A SSESSEE HAS INCORRECTLY REFUTED THE RECEIPT OF ANY NOTICE DUE T O SHIFTING OF OFFICE. LD. COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT T HE SUBMISSION OF THE ASSESSEE DOES NOT INSPIRE MUCH CONFIDENCE AS THIS IS NEITHER SUBSTANTIATED NOR CONVINCING. IN THIS REGARD, LD. COMMISSIONER OF INCOME TAX (APPEALS) STATED THAT THE FOLLOWING POIN TS ARE WORTH TO BE CONSIDERED:- ITA NO. 2529/DEL/2010 & CO. NO. 377/DEL/2010 5 I) ASSESSING OFFICER ADOPTED VALID AND LEGAL PROCE DURE TO SERVE THE NOTICE AT THE PROPER ADDRESS AS AVAILABLE WITH HIM. II) ASSESSING OFFICER COULD NOT HAVE KNOWN THE LA TEST ADDRESS OF THE ASSESSEE IN ABSENCE OF ANY SUBMISSION BY THE ASSESSEE IN THIS REGARD AFTER RECEIPT OF THE FIRST NOTICE. III) IN THE WAKE OF NON-COMPLIANCE AND NON-FURNISHIN G ANY DETAILS/ DOCUMENTS BY THE ASSESSEE AND CONSIDERING THE PREVAILING TIME CONSTRAINTS BEING LIMITATION MATTER, THE ASSESSING OFFICER WAS NOT SUPPOSED TO RUN FROM PILL AR TO POST TO MAKE ENQUIRIES BENEFICIAL TO THE ASSESSEE. HENCE, LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT I N THE PREVAILING CIRCUMSTANCES, THE ASSESSING OFFICER DI D NOT HAVE ANY ALTERNATIVE BUT TO COMPLETE THE ASSESSMENT; AS THE LIMITATION TO COMPLETE THE PROCEEDINGS WAS EXPI RED. 5.1 LD. COMMISSIONER OF INCOME TAX (APPEALS) FURTHER H ELD THAT ASSESSEE CANNOT TAKE A PLEA THAT NO ADEQUATE OPPOR TUNITY WAS PROVIDED TO HIM. HE OBSERVED THAT THE ASSESSEE OPTED NOT TO COMPLY WITH THE STATUTORY NOTICES ISSUED TO HIM AND S ERVED AT THE ADDRESS PROVIDED BY THE ASSESSEE HIMSELF. THE ASSE SSING OFFICER IS ITA NO. 2529/DEL/2010 & CO. NO. 377/DEL/2010 6 NOT TO BE BLAMED FOR TAKING A UNILATERAL DECISION I N THE PREVAILING FACTS AND CIRCUMSTANCES OF THE CASE. 6. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HA S GIVEN A CORRECT FINDING IN THIS REGARD. IN OUR CONSIDERE D OPINION, THERE IS NO NEED OF INTERFERENCE ON OUR PART. ACCORDINGLY, WE HOLD THAT THE ISSUE RAISED BY THE ASSESSEE IS LIABLE TO BE DISMISSED. 8. ON MERITS, THE ASSESSING OFFICER HAD NOTED THAT ASSESSEE HAD NOT GIVEN ANY REPLY TO THE NOTICES. HENCE, HE COMPUTED THE PROFIT @ 8% OF THE GROSS RECEIPT WHICH CAME TO ` 41,36,162/-. 9. ASSESSEE APPEALED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN THIS REGARD. LD. COMMISSIONER OF INC OME TAX (APPEALS) HELD THAT LEGAL FICTION CREATED IN SECTION 44AD CANN OT BECOME A BASIS FOR WORKING OUT THE INCOME OF THE ASSESSEE, WHO IS H AVING DIFFERENT BUSINESS AND TURNOVER OTHER THAN SPECIFIED IN THAT SECTION. LD. COMMISSIONER OF INCOME TAX (APPEALS) FURTHER OBSERVE D THAT HE WAS OF THE CONSIDERED VIEW THAT THE ASSESSING OFFICER HAD NOT APPLIED THE SECTION 44AD OF THE IT ACT TO WORK OUT THE INCOME OF THE ASSESSEE, BUT SHE HAS SIMPLY TAKEN THE GUIDANCE BY THAT SECTION WH ILE WORKING OUT ITA NO. 2529/DEL/2010 & CO. NO. 377/DEL/2010 7 THE INCOME. ONE LEGAL FICTION CANNOT BE APPLIED BE YOND ITS SPECIFICATIONS. LD. COMMISSIONER OF INCOME TAX (APPEA LS) FURTHER PROCEEDED TO COMPUTE THE ASSESSEES BUSINESS INCOME AS UNDER:- 5.1 THE APPELLANT HAS PAID ` 2,77,64,779/- TO THE OWNERS OF HIRED / LEASED OUT OF CORRESPONDING RECE IPTS OF ` 2,95,37,000/-. THE TDS HAS BEEN DEDUCTED THERE ON TREATING THEM AS SUB-CONTRACTOR. THIS SUM IS OUTGOING AT SOURCE. THUS, NORMALLY, THERE IS NO P ROFIT ELEMENT EMBEDDED IN THE OUTGOINGS OF ` 2,77,64,779/- , UNLESS PROVED OTHERWISE. THE INCOME FROM THIS PAR T OF BUSINESS, AS PER THE LD. AUTHORISED REPRESENTATIVES WORKING FILED BEFORE ME IS ` 5,76,866/-. KEEPING IN VIEW THE FACTS IN TOTALITY, PROFIT RATIO AND SUBMISSION OF THE LD. AUTHORISED REPRESENTATIVE, I AM OF THE CONSIDERED VIEW THAT DISALLOWANCE OF ` 2,00,000/- OUT OF EXPENDITURE ON THIS SCORE WILL MEET THE END OF JUSTICE AS NOTHING MUCH I S LEFT TO EARN THIS INCOME. HENCE THE ASSESSABLE INCOME FROM HIRED / LEASED VEHICLES WORKS OUT TO ` 7,76,866/-. ITA NO. 2529/DEL/2010 & CO. NO. 377/DEL/2010 8 5.2 THE RECEIPTS FROM PLYING OF OWNED VEHICLES OF TH E APPELLANT IS ` 2,21,65,024/-. AFTER ALLOWING CORRESPONDING GENUINE AND VERIFIABLE EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS, THE INCOME CAN BE DEDUCTED THEREFROM. THE INCOME FORM THIS PART OF BUSINESS, AS PER THE LD. AUTHORISED REPRESENTATIVES WORKING FILED BEFORE ME IS ` 1,40,679/-. HOWEVER, NO DETAILS WERE PRODUCED FOR VERIFICATION / INVESTIGATION. THE BOOKS OF ACCOUNT S, BILLS VOUCHERS HAVE BEEN CLAIMED TO HAVE BEEN MISPLACED; HENCE THESE WERE NOT PRODUCED EITHER BEFORE THE ASSESSING OFFICER OR ME. THE INCOME THEREFORE HAS TO WORK OUT BY APPLYING LOGIC OR REASONING THAT HE MUST HAD INCURRED ALL THE CONTINGE NT EXPENSES IN THE REGULAR COURSE OF BUSINESS. IT I S ALSO A FACT THAT THE ASSESSING OFFICER DID NOT CARE TO QUOTE/MENTION ANY COMPARATIVE CASE TO ESTABLISH THA T THE ASSESSEE HAD SUPPRESSED HIS BUSINESS PROFITS; PARTICULARLY CONSIDERING THE FACT EMERGING FROM RECORDS NOT ONLY OF THE RELEVANT YEAR BUT OF EARLI ER YEARS ALSO. THE NET PROFIT RATIO OF THE RELEVANT Y EAR FOR ITA NO. 2529/DEL/2010 & CO. NO. 377/DEL/2010 9 RENT-A-CAB BUSINESS IS BETTER THAN THE EARLIER YEAR S. AT MOST THE ASSESSING OFFICER WOULD HAVE APPLIED THE NET PROFIT RATE OF 8% ON THE RECEIPTS OF ` 2,21,65, 024/- ( ` 5,17,95,303/- LESS ` 2,95,37,000) IN RESPECT OF OWNED VEHICLES BY THE APPELLANT IN ADDITION TO INC OME WORKED OUT IN PARA 5.1 ABOVE. THERE IS INTEREST O UT GOINGS OF ` 4,84,087/- AND DEPRECIATION OF ` 25,87,313/-, WHICH AFFECT THE NET PROFIT RATE SUBSTANTIALLY. IN CASE THE APPELLANT WOULD HAVE NO T TAKEN LOAN FOR HIS VEHICLES, THE NET INCOME WOULD H AVE BEEN ON HIGHER SIDE. THE APPELLANT HAS FILED AFF IDAVIT STATING THAT THE VEHICLES ARE DIESEL DRIVEN. IN T HIS REGARD SOME OF THE RCS WERE ALSO PRODUCED FOR VERIFICATION. AFTER ANALYZING ALL FACTS, I AM OF THE CONSIDERED VIEW THAT THE FUEL COST CANNOT BE LESS T HAN THE 40% OF RECEIPTS THOUGH THE APPELLANT HAS SHOWN @ 50%, HR COST WOULD BE 13% OF RECEIPTS AS CLAIMED, REPAIR AND MAINTENANCE COST WOULD BE 10% OF RECEIPTS AS CLAIMED, THE ROAD TAX AND INSURANCE COST WOULD B E 7% OF RECEIPTS AS CLAIMED AND OTHER EXPENSES INCLUDING BANK CHARGES CANNOT BE MORE THAN 15%. ITA NO. 2529/DEL/2010 & CO. NO. 377/DEL/2010 10 CONSIDERING THE FACTS IN TOTALITY, I AM OF THE VIEW THAT PROFIT @ 15% OF BUSINESS RECEIPTS OF ` 2,21,65,024 /- IN RESPECT OF OWNED VEHICLES BY THE APPELLANT, BEFORE CLAIM OF INTEREST OUT GOINGS OF ` 4,84,087/- AND DEPRECIATION OF ` 25,87,313/- WILL BE REASONABLE TO MEET THE END OF JUSTICE, WHICH WORKS OUT OF ` 32,24,476/-. AFTER ALLOWING SET OFF OF INTEREST OU T GOINGS OF ` 4,84,087/- AND DEPRECIATION OF ` 25,87,313/-, THE INCOME FROM RENT-A-CAB IN RESPECT O F OWNED VEHICLES BY THE APPELLANT COMES TO ` 2,53,354/ - 5.2.1 THUS THE ASSESSABLE BUSINESS INCOME WORKS OUT TO ` 10,30,220/- (` 7,76,866/- PLUS ` 2,53,354/-). 10. AGAINST THE ABOVE ORDER, BOTH THE REVENUE AND A SSESSEE ARE IN APPEAL BEFORE US. 11. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HA S NOTED THAT IN RESPECT OF HIRED/LEASED VEHICLES ASSESSEE HAS SHOWN PROFIT OF ` 7,76,866/-. KEEPING IN VIEW THE FACTS IN TOTALITY, LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT HE WAS OF THE CONSID ERED VIEW THAT DISALLOWANCE OF ` 2,00,000/- OUT OF EXPENDITURE ON THIS SCORE WILL MEET THE END OF JUSTICE. HENCE, THE ASSESSABLE INCOME F ROM HIRED / LEASED ITA NO. 2529/DEL/2010 & CO. NO. 377/DEL/2010 11 VEHICLES WORKS OUT TO ` 7,76,866/-. WE FIND THAT LD . COMMISSIONER OF INCOME TAX (APPEALS) HAS PASSED A REASONABLE ORDER IN THIS REGARD. 11.1 AS REGARDS INCOME FROM PLYING OF OWNED VEHICLE S, LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ELABORATELY CONSIDERED THE ISSUE. LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN A FINDING THAT CONSIDERING THE FACTS IN TOTALITY, HE WAS OF THE CONSIDERED VIEW THAT THE PROFIT @ 15% OF BUSINESS RECEIPTS OF ` 2, 21,65,024/- IN RESPECT OF OWNED VEHICLES BY THE APPELLANT, BEFORE CLAIM OF INTEREST OUT GOINGS OF ` 4,84,087/- AND DEPRECIATION OF ` 25,87,313/- W ILL BE REASONABLE TO MEET THE END OF JUSTICE, WHICH WORKS OUT OF ` 32,24, 476/-. AFTER ALLOWING SET OFF OF INTEREST OUT GOINGS OF ` 4,84,0 87/- AND DEPRECIATION OF ` 25,87,313/-, THE INCOME FROM RENT-A-CAB IN RESP ECT OF OWNED VEHICLES BY THE APPELLANT COMES TO ` 2,53,354/-. TH US, LD. COMMISSIONER OF INCOME TAX (APPEALS) COMPUTED THE ASS ESSABLE BUSINESS INCOME WORKS OUT TO ` 10,30,220/- (` 7,76,8 66/- PLUS ` 2,53,354/-). WE HAVE CAREFULLY CONSIDERED THE SUBMI SSIONS, WE FIND THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS PAS SED A REASONABLE ORDER, WHICH DOES NOT NEED ANY INTERFE RENCE ON OUR PART. HENCE, WE UPHOLD THE ORDER OF THE LD. COMMISSIONER O F INCOME TAX (APPEALS). ITA NO. 2529/DEL/2010 & CO. NO. 377/DEL/2010 12 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/5/2012. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [RAJPAL YADAV] [RAJPAL YADAV] [RAJPAL YADAV] [RAJPAL YADAV] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 11/5/2012 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4.CIT (A) 5.DR, I TAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES