M/s. Bikaner Golden Carriers, Unjha. V. The Income tax Officer, Ward-2, Patan.

ITA 1171/AHD/2004

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8908 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 15-09-2009
• Assessment Year: 2000-2001
• Appeal Filed On: 12-04-2004
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ALOK JOSHI
• Assessee Lawyers: SUNIL H TALATIAR
• Keywords: Depreciation; TDS
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI H. L. KARWA, JM AND N. S. SAINI, AM) ITA NO.1171/AHD/2004 A. Y.: 2000-01 M/S. BIKANER GOLDEN CARRIERS, STATION ROAD, UNJHA PA NO. AACFB 0914C VS THE INCOME TAX OFFICER, WARD-2, PATAN (APPELLANT) (RESPONDENT) ITA NO.2119/AHD/2004 A. Y.: 2000-01 THE INCOME TAX OFFICER, WARD-2, PATAN VS M/S. BIKANER GOLDEN CARRIERS, STATION ROAD, UNJHA PA NO. AACFB 0914C (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI SUNIL H. TALATI,AR DEPARTMENT BY SHRI ALOK JOSHI, DR O R D E R PER H. L. KARWA: THESE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE C IT(A), GANDHINAGAR DATED 10-03-2004 RELATING TO ASSESSMENT YEAR 2000- 01. 2. THE ASSESSEE HAS CHALLENGED THE ACTION OF THE CI T(A) IN RETAINING THE ADDITION OF RS.2,00,000/- BY TREATING IT TO BE ESTIMATED INCOME ON THE TRUCKS NOT OWNED BY THE ASSESSEE. THE REVENUE HAS CHALLENGED THE ACTION OF THE CIT(A) IN RESTRICTING THE ADDITION OF RS.11,06,819/- ON ACCOUNT OF UNDER-STATEMENT OF CAR TING EXPENSES TO RS.2,00,000/- GRANTING RELIEF OF RS.9,06,819/-. ITA NO.1171 AND 2119/AHD/2004 BIKANER GOLDEN CARRIERS 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE NATURE OF ASSESSEES BUSINESS IS THAT OF GOODS CARRIERS. AS PER THE TDS CERTIFICATE ATTACHED WITH THE RETURN FILED BY THE ASSESSEE, THE GROSS RE CEIPT WERE SHOWN AT RS.19,41,247/-. WHEREAS, AS PER THE ACCOUNT FILED W ITH THE RETURN, THE GROSS RECEIPTS WERE SHOWN TO BE ONLY RS.8,42,428/-. ACCORDING TO THE AO THERE WAS UNDER-STATEMENT OF GROSS RECEIPT TO THE E XTENT OF RS.11,06,819/-. THE AO REQUIRED THE ASSESSEE TO EXP LAIN THE ABOVE DISCREPANCY. THE ASSESSEE REPLIED THAT THE WHOLE RE CEIPTS AS APPEARED IN THE TDS WAS NOT BELONGING TO IT BECAUSE THE BUSINES S OF THE ASSESSEE WAS TO SUPPLY TRUCKS ON COMMISSION BASIS. THE ASSESSEE ALSO EXPLAINED THAT THE GROSS RECEIPTS INCLUDED IN THE RETURNED INCOME OF ITS OWN TRUCK OF RS.5,63,,974/- AND THAT THE ASSESSEE HAD SHOWN COMM ISSION OF RS.2,78,444/- IN RESPECT OF TRUCKS OF OTHERS DEPLOY ED ON COMMISSION BASIS. IT WAS ALSO EXPLAINED BY THE ASSESSEE THAT T HE RENT FOR SUCH TRUCKS ARE BEING DIRECTLY PAID BY THE PARTIES TO THE TRUCK DRIVERS AND, THEREFORE, THE ASSESSEE HAS ACCOUNTED ONLY FOR HIS COMMISSION INCOME. THE AO DID NOT ACCEPT THE ABOVE EXPLANATION OF THE ASSESSEE ON THE GROUND THAT THE GROSS RECEIPTS INDICATED IN THE TDS CERTIFICATE WER E OBVIOUSLY OF THE ASSESSEE. HE, THEREFORE, HELD THAT IT WAS FOR THE A SSESSEE TO PROVE THAT IT HAD PAID OTHER CONTRACTEES WITH REFERENCE TO TRUCKS NOT OWNED BY HIM AND IN SUCH CASE, THE ASSESSEE OUGHT TO HAVE PROVED SUCH PAYMENTS TO INDIVIDUAL TRUCK OWNERS. THE AO OBSERVED THAT THERE WAS NO RECORD OF PAYEES NOR THERE WAS ANY COGENT EVIDENCE TO ESTABLI SH THAT A PORTION OF ASSESSEES CARTING RECEIPTS WAS PAID TO OTHERS AND THAT FOR SUCH CASH PAYMENTS EVEN PROVISIONS OF SECTION 40A(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) WERE APPLICABLE. AS THE ASSESSEE FAILED TO PROVE THE NATURE OF PAYMENT AND IDENTITY OF PAYEES, THE AO AD DED THE AMOUNT OF RS.11,06,819/- AS UNDER-STATED CARTING RECEIPTS. ITA NO.1171 AND 2119/AHD/2004 BIKANER GOLDEN CARRIERS 3 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE C ARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE TOOK THE FOLLOWING LINE OF ARGUMENTS: (1) THAT THE ASSESSEE HAD ONLY ONE TRUCK (TRUCK NO. GRW 3086) REGISTERED IN THE NAME OF ONE OF THE PARTNERS AND THE SAID TRUCK WAS OPERATIVE FOR EARNING TRUCK FREIGHT. AS IS USUAL IN THE LINE OF TRANSPORT BUSINESS, THE ASSESS EE FIRM USED TO TAKE TRUCKS OWNED BY THE OTHER TRUCK OWNERS ON COMMISSION BASIS. (II) THAT TOTAL TDS OF RS.42,096/- WAS MADE TO THOS E PARTIES TO WHOM GOODS WERE TRANSPORTED AND THE TOTA L RECEIPTS AS PER TDS CERTIFICATE AS SHOWN THEREIN WA S RS.19,49,247/-. THESE RECEIPTS WERE IN RESPECT OF T HE VARIOUS TRUCKS OF THE OUTSIDERS WHOSE TRUCKS WERE TAKEN ON COMMISSION BASIS. THE SAID PARTIES PAID THE TRUCK F REIGHTS TO THESE TRUCK OWNERS DIRECTLY ON THEIR REACHING THE G OODS TO VARIOUS PLACES IN BIHAR, DELHI AND VIRAMGAM AND THE COMMISSION RECEIVED THERE FROM BY THE ASSESSEE WAS THE ONLY INCOME FROM SUCH TRUCK OWNERS. (III) THAT THE SAID PARTIES PAID TRUCK FREIGHT TO T HE TRUCK OWNERS DIRECTLY AND IT IS ONLY DUE TO THIS THAT THE ASSESSEE HAS EARNED COMMISSION FROM SUCH TRANSACTIONS. (IV) THAT IN RESPECT OF TRUCK OWNED BY THE ASSESSEE FIRM THE TOTAL TRUCK FREIGHT OF RS.5,63,974/- HAS BEEN A LREADY CREDITED TO HAVE RECEIVED AS INCOME. THIS SUM OF RS.5,63,974/- ALONG WITH COMMISSION EARNED FROM OTH ER TRUCK OWNERS AS WELL AS COMMISSION EARNED BY THE F IRM FROM OTHER PARTIES AMOUNTING TO RS. 2,78,444/-, THE GROS S TOTAL ITA NO.1171 AND 2119/AHD/2004 BIKANER GOLDEN CARRIERS 4 INCOME OF THE ASSESSEE WAS I. E. RS.8,42,428/-. TH E AO HAS TAKEN THIS FIGURE AS THE TOTAL TRUCK FREIGHT WHICH IS NOT CORRECT AS THE COMPLETE DETAILS OF TRUCK FREIGHT AN D COMMISSION WITH PROFIT & LOSS ACCOUNT WAS FILED AS WELL AS BOOKS OF ACCOUNTS WERE PRODUCED BEFORE HIM. (V) THAT THE ASSESSEE HAS MAINTAINED COMPLETE ACCOU NTS OF RECEIPTS OF COMMISSION WHICH WAS ACCEPTED BY THE AO WHILE ACCEPTING THE TOTAL RECEIPT OF RS.8,42,428/- COMPRISING OF ASSESSEES OWN TRUCK FREIGHT INCOME OF RS.5,63,9 74/- AND COMMISSION INCOME OF RS.2,78,444/-. THUS, THERE WAS ABSOLUTELY NO JUSTIFICATION IN NOT ACCEPTING THE SA ID RECEIPTS AS CORRECT AND WITHOUT REJECTING THE REGULARLY MAIN TAINED ACCOUNTS, THERE WAS NOT JUSTIFICATION IN MAKING THE ADDITION OF HUGE AMOUNT SIMPLY BECAUSE OF TDS CERTIFICATE RE CEIPTS WHICH WAS AS STATED ABOVE FULLY RECONCILED AS RECEI PTS NOT BELONGING TO OR EARNED BY THE ASSESSEE. 5. THE CIT(A) SUSTAINED THE ADDITION TO THE EXTENT OF RS.2,00,000/- AND THE BALANCE WAS DIRECTED TO BE DELETED. THE REL EVANT PORTION OF THE OBSERVATIONS OF THE CIT(A) ARE AS UNDER: 2.5 I HAVE CAREFULLY CONSIDERED THE RELEVANT FACT S AND PROVISIONS OF LAW WITH REGARD TO THE ISSUE INVOLVED . I FIND THAT THE CLAIM OF THE APPELLANT TO APPLY PROVISION OF SE CTION 44AE AT THIS STAGE IS NOT ADMISSIBLE FOR THE SIMPLE REASON THAT IN ACCORDANCE WITH THESE PROVISIONS ITSELF THE AMOUNT DECLARED BY THE APPELLANT IN THE RETURN WAS ASSESSABLE AS PR OFIT AND GAINS FROM THE TRUCK OWNED BY THE APPELLANT. I ALSO FIND THAT THE ASSESSING OFFICER HAS NOT CONSIDERED THE ISSUE IN PROPER PERSPECTIVE. THE ASSESSING OFFICER IN FACT HAS ATTE MPTED TO TAX THE GROSS RECEIPTS WITHOUT CONSIDERING THE PROBABLE AND REASONABLE EXPENSES. THIS WAS ESSENTIAL FOR THE ASS ESSING OFFICER IN ORDER TO DETERMINE OR ESTIMATE INCOME OF THE APPELLANT WITH REFERENCE TO TRUCKS WHICH WERE NOT O WNED BY HIM IN A FAIR AND JUST MANNER. THE ASSESSING OFFICE R HAS NOT ITA NO.1171 AND 2119/AHD/2004 BIKANER GOLDEN CARRIERS 5 ASSIGNED ANY REASON WHILE REJECTING THE CONTENTIONS OF THE APPELLANT THAT THE RECEIPTS INDICATED IN THE TDS CE RTIFICATES WERE IN FACT GROSS RECEIPTS AND THAT THERE WAS MATE RIAL ON RECORD WHICH INDICATED THAT A SUBSTANTIAL PORTION O F GROSS RECEIPTS WAS PERTAINING TO TRUCKS, WHICH WERE NOT O WNED BY HIM AND THAT RELEVANT DIRECT EXPENSES WERE NOT CLAI MED BY THE APPELLANT WITH REFERENCE TO SUCH TRUCKS. THE CLAIM OF THE APPELLANT OUGHT TO HAVE BEEN CONSIDERED BY THE ASSE SSING OFFICER IN AN OBJECTIVE AND REALISTIC MANNER. THE R ECORDS MAINTAINED BY THE APPELLANT CLEARLY INDICATE THAT T HE APPELLANT WAS ONLY OWNING ONE TRUCK I.E. TRUCK NO.GRW-3086 AND DEPRECIATION WAS ALSO CLAIMED ONLY ON THIS ONE TRUC K. IN THE TRUCK RECEIPTS I.E. BULLTY, THE TRUCK NUMBER OF THE SPECIFIC TRUCK CARRYING THE GOODS WAS AVAILABLE AND IN SOME CASES THE APPELLANT WAS ALSO ABLE TO IDENTIFY THE OWNERS OF T HESE TRUCKS. THE BASIC DEFAULT ON THE PART OF THE APPELLANT IS T HAT IT WAS NOT MAINTAINING ANY RECORD OF THE OUTGOINGS TO THESE OT HER TRUCKS BECAUSE THE PAYMENTS WITH REFERENCE TO THESE TRUCKS WERE BEING COLLECTED DIRECTLY BY THE DRIVER FROM THE OTH ER PARTY AT THE TIME OF DELIVERY OF THE GOODS. HOWEVER, AS THE TRUCK WAS BEING ARRANGED BY THE APPELLANT, THE TDS CERTIFICAT E INDICATING GROSS PAYMENT IS ISSUED IN THE NAME OF THE APPELLAN T ONLY, IN THE PROCESS, IT IS ALSO OBVIOUS THAT THE TRUCK OWNE RS OF THESE OTHER TRUCKS ARE NOT BROUGHT TO BOOK FOR THE PURPOS E OF TAXATION AND IT CANNOT BE ASCERTAINED WHETHER THESE OWNERS OF THE TRUCKS WERE PAYING ANY INCOME-TAX ON THE AMOUNT S SO RECEIVED AS TRUCK HIRE. FULL IDENTIFICATION OF SUCH PAYEES AS WELL AS THEIR RESPECTIVE RECEIPTS, AS A PROOF OF TH E PAYMENT, IS NOT AVAILABLE WITH THE APPELLANT. IN THESE CIRCUMST ANCES, THEREFORE, THE APPELLANT IS REQUIRED TO BE HELD ACC OUNTABLE TO COMPENSATE THE DEPARTMENT FOR THE INCOME-TAX THAT H AS ESCAPED WITH REFERENCE TO PAYMENTS MADE TO SUCH OTH ER TRUCK OWNERS AS THE APPELLANT HAD FAILED TO MAINTAIN THE RELEVANT RECORDS. IT WILL, THEREFORE, BE JUDICIOUS AND FAIR APPROACH TO ESTIMATE THE NET INCOME (AS AGAINST GROSS RECEIPTS BROUGHT TO TAX BY THE ASSESSING OFFICER) ON SUCH OTHER TRUCKS AND BRING TO TAX THE SAME IN THE HANDS OF THE APPELLANT. IT IS S EEN THAT THE APPELLANT HAS SHOWN GROSS RECEIPTS OF RS.5,63,9747- WITH REFERENCE TO TRUCK OWNED BY ITSELF. AS AGAINST THES E GROSS RECEIPTS, THE FOLLOWING ARE THE DIRECT EXPENSES CLA IMED BY THE APPELLANT, WHICH ARE RELATING TO APPELLANT'S OWN TR UCK: INSURANCE PREMIUM RS. 6,147/- DIESEL EXPENSES RS. 2,05,947/- VEHICLE REPAIRS RS. 44,035/- SALARY EXPENSES (DRIVERS) RS. 57,1007- ITA NO.1171 AND 2119/AHD/2004 BIKANER GOLDEN CARRIERS 6 VEHICLE TAX RS. 14,9347- DEPRECIATION RS. 13,909/- TOTAL RS.3,42,0727- THE GROSS PROFIT OF THE APPELLANT FROM ITS OWN TRUC K, THEREFORE, WORKS OUT TO RS.2,21,902/- (I.E. 563974 - 342072). ON A PROPORTIONATE BASIS GROSS PROFIT ON THE GROSS RECEI PTS OF OTHER TRUCKS OF RS.13,85,273/- ACCORDINGLY WORKS OUT TO RS.5,46,331/-. WITH A FURTHER DISCOUNT OF APPROXIMA TELY 10% ON ACCOUNT OF OTHER OVERHEADS AND CONSIDERING THE F ACT THAT SOME OWNERS OF OTHER TRUCKS MAY EITHER NOT BE TAXAB LE OR WOULD OTHERWISE BE ENTITLED TO BASIC RELIEF OF INCO ME WHICH IS NOT LIABLE TO TAX IN THE HANDS OF ANY INDIVIDUAL, T HE GROSS PROFIT FROM THESE OTHER TRUCKS WHICH COULD BE LIABLE TO TA X CAN BE ESTIMATED TO BE AROUND RS.4,80,000/-. AS ; AGAINST THIS, THE APPELLANT HAD SHOWN COMMISSION INCOME OF RS.2,78,44 4/-. IN A FAIR ESTIMATE, THEREFORE, I AM OF THE VIEW THAT A N INCOME OF ABOUT RS.2 LAKH WAS FURTHER LIABLE TO BE BROUGHT TO TAX IN THE HANDS OF THE APPELLANT ON ACCOUNT OF TRUCKS NOT OWN ED BY ITSELF. THE APPELLANT HAS ALREADY CLAIMED OVERHEAD EXPENSES WITH REFERENCE TO OTHER TRUCKS AND THEREFORE THE SA ME HAVE NOT BEEN DISTURBED. I FIND THAT THE ABOVE ESTIMATION OF RS.2 LAKH WOULD ALSO COVER THE LIABILITY OF THE APPELLANT ON ACCOUNT OF PROVISIONS OF SECTION 40A(3). THE APPELLANT HAD GRO SS RECEIPT OF RS. 13,82,2737-WHICH WERE PERTAINING TO OTHER TRUCK S. OUT OF THESE GROSS RECEIPTS, THE APPELLANT HAD SHOWN COMMI SSION INCOME OF RS.2,78,444/- AND THERE WAS TDS OF RS.26, 000/- LEAVING BEHIND AN AMOUNT OF ABOUT RS.9.8 LAKH AND DISALLOWANCE U/S.40A(3) ON THE SAME WORKS OUT TO RS .1.86 LAKH, EVEN IF IT IS PRESUMED THAT THE WHOLE AMOUNT PAID OUT BY THE APPELLANT WAS IN CONTRAVENTION TO THE PROVISION S OF SECTION 40A(3). IN VIEW OF THE FOREGOING, I THEREFORE HOLD THAT OUT OF THE ADDITION OF GROSS RECEIPTS MADE BY THE ASSESSING OF FICER, ONLY THE INCOME ELEMENT OF RS.2 LAKH, WHICH WAS SKIPPING INCOME TAX ON ACCOUNT OF DEFAULT BY THE APPELLANT IN NOT I DENTIFYING THE OWNERS OF OTHER TRUCKS WAS SUSTAINABLE. THE ADD ITION MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT IS AC CORDINGLY SUSTAINED TO THE EXTENT OF RS.2 LAKH AND THE BALANC E IS DIRECTLY TO BE DELETED. THE ASSESSING OFFICER SHALL ACCORDINGLY GRANT APPROPRIATE RELIEF TO THE APPELLANT. THIS GRO UND OF APPEAL IS THEREFORE, TREATED AS PARTLY ALLOWED. 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD . IN THE INSTANT CASE, ITA NO.1171 AND 2119/AHD/2004 BIKANER GOLDEN CARRIERS 7 THE AO HAS ATTEMPTED TO TAX THE GROSS RECEIPTS WITH OUT CONSIDERING THE PROBABLE AND REASONABLE EXPENSES. THE AO HAS NOT AP PRECIATED THIS FACT THAT THE ASSESSEE OWNED ONLY ONE TRUCK. IN OUR VIEW , THE AO WAS NOT JUSTIFIED IN ESTIMATING THE INCOME OF THE ASSESSEE WITH REFERENCE TO TRUCKS WHICH WAS NOT OWNED BY THE ASSESSEE. THE AO HAS NOT APPRECIATED THIS FACT THAT THE RECEIPTS INDICATED IN THE TDS CERTIFI CATE WERE IN FACT GROSS RECEIPTS AND THAT THERE WAS MATERIAL ON RECORD WHIC H INDICATED THAT A SUBSTANTIAL PORTION OF GROSS RECEIPTS WAS PERTAININ G TO TRUCKS WHICH WERE NOT OWNED BY THE ASSESSEE AND THAT RELEVANT DIRECT EXPENSES WERE NOT CLAIMED BY THE ASSESSEE WITH REFERENCE TO SUCH TRUC KS. HOWEVER, IT IS A FACT THAT THE ASSESSEE WAS NOT MAINTAINING ANY RECO RD OF OUTGOINGS TO THESE OTHER TRUCKS BECAUSE THE PAYMENTS WITH REFERE NCE TO THESE TRUCKS WERE BEING COLLECTED BY THE DRIVERS FROM OTHER PART IES AT THE TIME OF DELIVERY OF GOODS. SINCE THE TRUCKS WERE BEING ASSI GNED BY THE ASSESSEE, THE TDS CERTIFICATE WAS ISSUED IN THE NAME OF THE A SSESSEE ONLY. WE AGREE WITH THE OBSERVATIONS OF THE CIT(A) THAT TRUCK OWNE RS OF THESE OTHER TRUCKS WERE NOT BROUGHT TO BOOK FOR THE PURPOSE OF TAXATION. THE ASSESSEE WAS ALSO NOT HAVING FULL IDENTIFICATION OF SUCH PAYEES. NO PROOF OF PAYMENT IS AVAILABLE WITH THE ASSESSEE. THUS, CO NSIDERING THE ENTIRE FACTS OF THE PRESENT CASE, WE ARE IN AGREEMENT WITH THE OBSERVATIONS OF THE CIT(A) THAT OUT OF THE ADDITION OF GROSS RECEIP TS MADE BY THE AO, ONLY THE INCOME ELEMENT OF RS.2,00,000/- WHICH WAS ESCAP ING INCOME TAX ON ACCOUNT OF DEFAULT OF THE ASSESSEE IN NOT IDENTIFYI NG THE OWNERS OF OTHER TRUCKS WAS SUSTAINABLE. IN OUR CONSIDERED VIEW, THE CIT(A) HAS PASSED A WELL REASONED ORDER AFTER APPRECIATING THE FACTS OF THE PRESENT CASE AND THE EVIDENCES BROUGHT ON RECORD. WE ALSO OBSERVE TH AT THE ADDITION OF RS.2,00,000/- SUSTAINED BY THE CIT(A) IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE IS QUITE REASONABLE AND HENCE, NO INTERFERENCE IN THE ORDER OF THE CIT(A) IS REQUIRED. ACCORDINGLY, WE UP HOLD THE ORDER OF THE CIT(A) AND DISMISS BOTH THE APPEALS. ITA NO.1171 AND 2119/AHD/2004 BIKANER GOLDEN CARRIERS 8 7. IN THE RESULT, THE ASSESSEES APPEAL AS WELL AS REVENUES APPEAL ARE DISMISSED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 25-09 -09. SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (H. L. KARWA) JUDICIAL MEMBER DATE : 25-09-2009 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD