Amcon Car Rentals, Panaji V. The Principal Commissioner of Income Tax, Panaji

ITA 150/PAN/2019

AI Insights

The case involves Amcon Car Rentals, which appealed against the order of the PCIT, Panaji, concerning the assessment year 2014-15. The primary issue was the PCIT's assumption of revisionary jurisdiction under section 263 of the Income Tax Act, 1961, due to the assessee's non-compliance with the audit requirements under section 44AB and incorrect application of section 44AD. The assessee had declared a turnover exceeding Rs. 1 crore but did not get its accounts audited and incorrectly deducted partner remuneration from the estimated profits. The Tribunal found that the PCIT was justified in revising the assessment order as it was erroneous and prejudicial to the interest of the Revenue.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137004 (ITAT-PANAJI)
• Duration Of Justice: 4 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: WT(D)
• Next Hearing Date: 05-11-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 21-04-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 263; 44AD; 143(3); 44AB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJIBENCH:: PANAJI BEFORE SHRI R.S. SYAL, HON. VICE-PRESIDENT & SHRI PARTHA SARATHI CHAUDHURY, HON. JUDICIAL MEMBER (Through virtual hearing) ITA No.150/PAN/2019 (A.Y. 2014-15) Amcon Car Rentals, 2 nd Floor, Patto Centre, Panaji, Goa-403001. PAN: AAKFA 2485 R vs Pr.CIT, Panaji, Goa. Appellant Respondent Assessee by : Smt. Eesha Dukle Revenue by : Shri Badrinath Yamaji Chavan Date of hearing : 06/11/2023 Date of pronouncement : 08/11/2023 ORDER Per PARTHA SARATHI CHAUDHURY, JM: This appeal preferred by the assessee emanates from the order of Principal Commissioner of Income Tax, Panaji (for short, ‘PCIT’), dated 29.03.2019 for A.Y.2014-15 as per the grounds of appeal on record. 2. The solitary grievance of the assessee in this appeal is the assumption of revisionary jurisdiction by the ld. PCIT and subsequently passing order u/sec. 263 of the Income Tax Act, 1961 (for short, 'the Act'). 3. The relevant facts of the case are that the assessee is in the business of car rental services, filed its return of income for the year ITA No. 150/PAN/2019 Amcon Car Rentals 2 under consideration on 30/03/2016 declaring total income of Rs.3,43,540/-. The order of assessment was framed u/sec. 143(3) of the Act on 28/11/2016 accepting the returned income of the assessee. Subsequent to the assessment, it was observed by the ld. PCIT that during the year, the assessee had a turnover of Rs. 1,35,48,457/- and as per sec. 44AB, the assessee was required to get its accounts audited, which it had not done. Further, it was also observed that assessee placed reliance on the provisions of sec. 44AD to estimate the profit @8% of the total contract receipts of Rs.1,354,48,547/- i.e. at Rs. 10,88,853/-. That, further, the assessee also claimed deduction of remuneration to partners amounting to Rs.7,40,312/- and offered the remaining balance only i.e. a sum of Rs. 3,43,541/- as income from business, and such deduction is not allowable u/sec. 44AD. Therefore, the assessee’s turnover during the year was more than Rs. 1 crore for which it was mandatory to get the accounts audited u/sec. 44AB, which the assessee had failed to do. The assessee had found that the most appropriate provision would be sec.44AD and accordingly, had estimated the profit @ 8% of its total receipts. That, out of such estimated profits, the assessee had also deducted remuneration paid to partners and then the balance had been offered as income. The Assessing Officer (AO) has not conducted any enquiry or verification regarding why the assessee had not got its accounts audited nor had verified whether in the business of assessee, sec. 44AD would be applicable and how the assessee had claimed ITA No. 150/PAN/2019 Amcon Car Rentals 3 deduction of remuneration paid to partners. Nothing was enquired by the AO and he has simply accepted the returned income without such necessary enquiry. It is for this reason that the assessment framed u/sec. 143(3) was held to be erroneous and prejudicial to the interest of the Revenue. 4. At the time of hearing, ld.AR for the assessee submitted that in the subsequent assessment year 2015-16, relief has been granted by the Department on the same facts and circumstances to the assessee. Therefore, this is a case of possible view and when two views are possible, it is not correct for the ld. PCIT to invoke revisionary jurisdiction holding the assessment to be erroneous and prejudicial to the interest of the Revenue. Ld.AR further submitted that since they have not audited the books of account, the most appropriate provision was sec.44AD have been applied and, therefore, they have estimated the profit @8% of its total receipts. 5. Per contra, ld.DR vehemently opposed the contention of the ld.AR by submitting that admittedly the turnover of the assessee during the year was more than Rs. 1 crore and as per sec.44AB, it was mandatory to get accounts audited which the assessee had not done. That, further deduction of remuneration paid to partners is not allowable u/sec. 44AD of the Act. 6. We have heard the submissions of both the parties herein and ITA No. 150/PAN/2019 Amcon Car Rentals 4 have considered the relevant material/documents on record and have given considerable thought to the emerging facts and circumstances in this case. 6.1 It is precise and clear that the turnover of the assessee during the year was more that Rs. 1 crore and as per the dictate of the provision specifically sec.44AB of the Act, such assessee has to get its accounts audited. In this case, in spite of assessee having turnover of more than Rs. 1 crore, it had failed to get the accounts audited. If we agree with the submission of the ld.AR, then in that case in every situation where the assessee has turnover of more than Rs. 1 crore, they will not get their accounts audited and would simply rely on sec.44AD and offer 8% of receipts as taxable income, when in fact the financial statute specifies a particular action that has to be strictly followed. Alternatively going by this version of ld.AR, sec. 44AB in the applicable case scenario would be redundant as if non-existent in the Act while simply applying sec. 44AD of the Act and this certainly is not the intent of the legislature regarding the Act. The intention and purpose of the legislator in incorporating sec. 44AB in the statute cannot be nullified and withdrawn by substituting the provisions of sec.44AD of the Act. The assessee has not only failed to get its accounts audited, but while taking benefit and recourse u/sec. 44AD, it had even deducted the remuneration paid to partners, which is not allowable as deduction u/sec. 44AD of the Act. We are also not ITA No. 150/PAN/2019 Amcon Car Rentals 5 inconformity with the argument of ld.AR saying that there emerges two possible views for the fact that in the subsequent assessment year 2015-16, on the same facts and circumstances, the Department had accepted the action of the assessee, but in our considered view the principles of res judicata is not applicable to income tax proceedings and every year has to be seen and adjudicated separately. We are inconformity with the submissions of the ld.DR that the mandatory requirement of sec.44AB, has to be complied wherever such situation arises as per the said provisions. That, further there were also no enquiry or verification on any of these aspects by the AO and he has simply accepted the returned income. Therefore, we do not find any infirmity with the order passed by the ld. PCIT invoking jurisdiction u/sec. 263 of the Act which is hereby upheld. Thus, grounds of appeal raised by the assessee stands dismissed. 7. In the result, appeal of the assessee is dismissed. Order pronounced in open Court on 08 th November, 2023. Sd/- Sd/- (R.S. SYAL) (PARTHA SARATHI CHAUDHURY) VICE PRESIDENT JUDICIAL MEMBER Dated : 08 th November, 2023 vr/- ITA No. 150/PAN/2019 Amcon Car Rentals 6 Copy to : 1. The Appellant. 2. The Respondent. 3. The Pr. CIT concerned. 4. The DR, ITAT, Panaji Bench, Panaji. 5. Guard File. By Order // TRUE COPY // Senior Private Secretary ITAT, Pune.