COMMISSIONER OF INCOME TAX, CIT-Alwar V. THE TRUCK OPERATORS UNION, N.H.8, BEHROR (ALWAR)

ITA/105/2010

AI Insights

The case revolves around the Income Tax appeal by the Commissioner of Income Tax against the Truck Operators Union concerning the applicability of section 44AE of the Income Tax Act for estimating income after rejecting the books of accounts under section 145(3). The Tribunal had earlier modified the CIT(A)'s order and confirmed the AO's decision, which was challenged in the High Court. The primary legal question was whether the estimation of income based on section 44AE was justified when an ex parte assessment under section 144 was carried out by the Assessing Officer. The High Court upheld the Tribunal's decision, agreeing that section 44AE was not applicable as the Union did not own any goods carriers.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 821453 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 17-07-2017
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Respondent
• Court: HIGH COURT
• Assessee Lawyers: PARINITOO JAIN
• Keywords: Assessment; Books of Accounts; Estimation of income; Ex-parte; Income Tax
• Section: 144; 145(3); 44AE

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 105 / 2010 COMMISSIONER OF INCOME TAX, CIT-Alwar ----Appellant Versus THE TRUCK OPERATORS UNION, N.H.8, BEHROR (ALWAR) ----Respondent _____________________________________________________ For Appellant(s) : Ms. Parinitoo Jain For Respondent(s) : _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Judgment 17/07/2017 1. By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal preferred by the assessee modifying the order of CIT(A) and confirming the order of AO. 2. This Court while admitting the matter has framed the following question of law:- “Whether, after rejection of books of accounts under section 145(3) and estimating the income on the basis of statutory provision given under section 44 AE of the Act applicable on similar industry was not justified for calculation of income when ex parte assessment under section 144 of the Act was carried out by the Assessing Officer?” 3. Counsel for the appellant contended that the Tribunal has (2 of 5) [ITA-105/2010] seriously committed an error on basis the order on analogy under section 44AE which cannot be made applicable. However, the Tribunal while considering the matter in para 6 observed as under:- “6. We have heard the rival contentions and perused the facts of the case. The assessee is a union of truck operators and the copy of the constitution is available on record (PB 1 to 9) with the aims and objects as under: (1) To encourage cooperation among the truck owner of Behrot. (2) To represent before the administration regarding the problem the truck owners in respect of octroi, sales tax etc. 3) To protect the interest of all truck owners by reducing competition and bringing parity in truck fares. (4) For solving the problems of truck owners to represent before the Govt with unity and cooperation. The assessee union is having the members and membership fee is charged and accounted for in the receipt and payment account. Apart from said membership fee, it has been submitted that the assessee is charging Rs 10/- per bilty and same is accounted for declared in the receipt and payment account. The bilties are of two types. The first type is that the owner of the truck gets the higher charges from the destination directly and no TDS is deducted since the truck operator gets the payment directly and it was explained before the ld. CIT(A) vide letter dated 29-03-2007 (PB 25-35). The second type of bilty is such where the truck owner does not get hire charges directly and the company deduct the tax at source and the cheque is given to the assessee union which is recorded in the register, cash is withdrawn and payment is made to the truck owner. The said hire charges/freight is never received in cash but through account payee cheque in the bank account at Behror. It was explained with regard to various queries and discrepancies pointed out before the ld CIT(A) ie. with regard to difference in the receipts as per bank account amounting to Rs 8,60,54.757/- as per TDS certificate, it was Rs 9,34,91,816. The explanation in this regard submitted before the ld CITA) was that this difference is for \"to be billed bilty\" in which TDS is deducted on the gross amount including the advance of the driver whereas truck union gets the payment after the deduction of the advance/payment of the driver. As regards the difference in the gross receipts and receipts from the (3 of 5) [ITA-105/2010] companies, it has been submitted vide letter dated 29-3-2007 before the ld CIT(A) as an arithmetical mistake of the Accountant (PB 25-26). It was submitted that section 44AE is applicable on the assessee who owns not more than 10 goods carrier at anytime during the previous year. In the present case there is nothing on record that the assessee owns any goods carrier which is evident from the balance sheet and the record before both the authorities below. At the outset, we are convinced with the explanation given before the ld.CIT(A) and the argument made before us that in the present case, section 44AE cannot be made applicable since the assessee is not the owner of the goods carrier and the AO is not justified at the very outset to make a calculation of Rs 42,000/- per truck for 185 trucks. No such addition can be made in the manner which the AO has done. Certainly the assessee has not produced the books of account and in circumstances and facts of the case, the AO has to proceed in making the assessment taking into account all relevant materials which the AO has gathered after giving the opportunity of being heard to the assessee. In the present case, there is no dispute to the fact that the assessee is in receipt of membership fees in cash and the bilty charges @Rs 10-per Bilty that too in cash. The assessee has declared the bilty receipts @Rs 5,59,100 and the membership fees at Rs 1,36,600 against which the assessee has claimed the expenditure leaving behind the net profit at Rs 82,512/-. The payments and the expenses so incurred though are not on verifiable. The gross receipt amounting to Rs.915,70,098 (PB 35) which has been disbursed as payment to truck operators Rs.8,60,54,757- and payment to truck operators being advance and brokerage charges as Rs.55,15,341-. The bilty charges and the membership fee received by the assessee are not in dispute. It is also not in dispute that the assessee does not own any truck. The assessee is running a Union not purely as a business venture but with the main objects mentioned hereinbefore. The facts is also not under dispute that the amount received in the bank account on the bilties (to be billed) are received through account payee cheque and cash is withdrawn. There is nothing on record that such cash withdrawal is unexplained expenditure of the assessee and no parallel unexplained expenditure or investment is on record. Therefore when the reciept is made and if the same is treated as income, the withdrawal has to be given deduction against such income in the absence any adverse finding on withdrawals of case by any of the authorities below. There is also nothing on record that any amount more than Rs.10/- per bilty is retained by the assessee union. Therefore, (4 of 5) [ITA-105/2010] apparently and in the absence of any adverse facts on record, the assessee received bilty charges @ Rs.10/- per bilty apart from membership fees as explained, appear to be correct and convincing. There is also no dispute to the fact that few of the truck owners gets the freight at the destination directly. Now in such circumstances and facts of the case and the material on record whether income assessed by the authorities below is correct or not has to be perused. As observed earlier, the assessee is in receipt of Bilty charges and Membership fees and the amount received through account payee cheque from various companies is disbursed to the truck owners and nothing is retained by the assessee union. The total receipt for the purpose of taxaton as declared by the assessee are bilty charges amounting to Rs.5,59,100/- and membership fees Rs.1,36,600/- totaling to Rs.6,95,700/- out of which the assessee has declared the expenses amounting to Rs.6,13,188/- leaving behind Rs.82,512/- as net profit. Therefore, the assessee was having the surplus of Rs.82,512/- in the form of cash available as at the end of the year. The amount received in the back account as observed earlier is withdrawal from the bank and paid to truck owner. The tax deducted at source as is evident from the statement of total income at PB 12, amounting to Rs. 19,58,414/- which has been deducted during the impugned year has not actually been received in the bank account of the assessee and has not been disbursed to the owner of the trucks during the year. Therefore, the said tax deducted at source in the absence of anything to the contrary on record, is retained by the assessee is receipt of the assessee. The said TDS as it appears is not passed on the truck owners. lt was argued by the ld. AR that equivalent amount of tax deducted at source is also given to the truck owners and a separate register is maintained for each and every TDS receivable and payable to truck owner. The liabilities pay is declared in the balance sheet on record (PB 20). As per availability of finds the truck owners are given back the equivalent amount of TDS and as at the end of the year the amount of TDS remains payable which is paid as per the availability of funds with the assessee. But Mr. Poddar has not substantiated his claim with any documentary evidence. Therefore, in the circumstance and facts of the case, in the absence of the books of account or any details, there is every possibility of leakage of Revenue. To plug the same, the income of the assessee is estimated at Rs3.00 lacs which will meet both the ends of justice. The AO is directed to act accordingly. Thus Ground No. 1 to 4 of the assessee are partly allowed.” (5 of 5) [ITA-105/2010] 4. We are in complete agreement with the view taken by the Tribunal. The issue is required to be answered in favour of the assessee against the department. 5. The appeal stands dismissed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. A.Sharma/66 "