M. Rajendran, CHENNAI V. ITO, CHENNAI

ITA 2027/CHNY/2013

• Counselvise Citation: 202721714 RSA 2013
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 18-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM IRS
• Assessee Lawyers: K M MOHANDASS
• Keywords: Presumptive income; Business income
• Section: 32; 147; 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . . !'# , $ #% & BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENTAND SHRI S.S. GODARA, JUDICIAL MEMBER ./ ITA NO. 2027/MDS/2013 $ ' (' / ASSESSMENT YEAR : 2009-10 SHRI M. RAJENDRAN, PROP: SRI PRABHU TRANSPORT, NEW NO.120 (OLD NO.272), THAMBU CHETTY STREET, CHENNAI - 600 001. PAN : AAIPR 0061 Q V. THE INCOME TAX OFFICER, WARD IX(2), CHENNAI - 600 006. (*+/ APPELLANT) (-.*+/ RESPONDENT) *+ / / APPELLANT BY : SHRI K.M. MOHANDASS, CA -.*+ / / RESPONDENT BY : SHRI GURU BHASHYAM, IRS, JCIT 0 / 12 / DATE OF HEARING : 23 RD APRIL, 2014 3'( / 12 / DATE OF PRONOUNCEMENT : 23 RD APRIL, 2014 / O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2009-10. THE APPEAL IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APP EALS)-VII - - I.T.A. NO. 2027/MDS/13 2 AT CHENNAI, ON 4.10.2013 AND ARISES OUT OF THE ASSE SSMENT COMPLETED UNDER SECTION 143(3) READ WITH SECTION 14 7 OF THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE IS AN INDIVIDUAL CARRYING ON BUSINE SS OF PLYING, LEASING AND HIRING OF GOODS CARRIAGES. HE RETURNED A TOTAL INCOME OF ` 4,29,420/- FOR THE ASSESSMENT YEAR UNDER APPEAL. THE TOTAL INCOME CONSISTED OF BUSINESS INCOME AT ` 4,13,000/- AND INCOME FROM OTHER SOURCES AT ` 16,421/-. THE BUSINESS INCOME HAS BEEN COMPUTED BY THE ASSESSEE UNDER SECT ION 44AE OF THE INCOME-TAX ACT, 1961. 3. SECTION 44AE PROVIDES SPECIAL PROVISION FOR COMP UTING PROFITS AND GAINS FROM THE BUSINESS OF PLYING, HIRI NG OR LEASING GOODS CARRIAGES. AS PER SUB-SECTION (1), IN THE CA SE OF AN ASSESSEE, WHO OWNS NOT MORE THAN TEN GOODS CARRIAGE S AT ANY TIME DURING THE PREVIOUS YEAR AND WHO IS ENGAGED IN THE BUSINESS OF PLYING, HIRING AND LEASING SUCH GOODS C ARRIAGES, THE INCOME OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL BE DEEMED TO BE THE AGGREGATE OF THE PROFITS AND GAINS, FROM ALL THE GOODS - - I.T.A. NO. 2027/MDS/13 3 CARRIAGES OWNED BY HIM IN THE PREVIOUS YEAR, COMPUT ED IN ACCORDANCE WITH THE PROVISIONS OF SUB-SECTION (2). SUB-SECTION (2) PROVIDES THAT IN THE CASE OF HEAVY GOODS VEHICL E, THE PRESUMPTIVE INCOME SHALL BE ` 5000/- FOR EVERY MONTH OR PART OF A MONTH PER HEAVY GOODS VEHICLE, WHERE THE GOODS VE HICLE IS OWNED BY THE ASSESSEE IN THE PREVIOUS YEAR OR AN AM OUNT ACTUALLY CLAIMED TO HAVE BEEN EARNED FROM SUCH VEHI CLE, WHICHEVER IS HIGHER. IN OTHER CASES, THE QUANTUM I S ` 4500/- PER MONTH PER VEHICLE. 4. ONCE THE INCOME IS COMPUTED ON THE ABOVE STATED PRESUMPTIVE BASIS, NO OTHER DEDUCTION SHALL BE ALLO WED UNDER SECTIONS 32 TO 38. 5. IN THE PRESENT CASE, THE ASSESSEE HAS CLAIMED TH E BENEFIT OF SECTION 44AE AND COMPUTED INCOME FROM TEN HEAVY GOODS VEHICLE ON A PRESUMPTIVE RATE. 6. THE ASSESSING OFFICER ON VERIFICATION OF THE REC ORDS, FOUND THAT THE ASSESSEE HAD MORE THAN TEN VEHICLES OWNED BY HIM DURING THE RELEVANT PREVIOUS YEAR AND THEREFORE, TH E ASSESSEE IS NOT ENTITLED FOR THE BENEFIT OF SECTION 44AE. THE EXPLANATION OF - - I.T.A. NO. 2027/MDS/13 4 THE ASSESSEE WAS THAT ONE VEHICLE TN-28-AD-8353 COU LD NOT BE PLIED DURING THE PREVIOUS YEAR AS IT WAS UNDER REPA IR. THE SAID VEHICLE WAS BOUGHT ONLY ON 28.1.2009 AND WAS PUT TO USE ONLY AFTER 1 ST MARCH, 2009. FOR ABOUT TWO MONTHS OR SO, THE VEHI CLE WAS IN THE SHED UNDERGOING REPAIR. 7. THE ASSESSING OFFICER HELD THAT WHAT IS NECESSAR Y AS PER THE STATUTE IS THAT THE ASSESSEE SHOULD NOT OWN MOR E THAN TEN VEHICLES, WHEREAS, IN THE PRESENT CASE, HE OWNS MOR E THAN TEN VEHICLES AND THE FACT THAT ONE VEHICLE WAS UNDER RE PAIR IS NOT A POINT TO BE CONSIDERED WHILE APPLYING THE PRESUMPTI VE RATE PROVIDED UNDER SECTION 44AE. 8. IN THE ABOVE CIRCUMSTANCES, THE ASSESSING OFFICE R COLLECTED THE BANK STATEMENT AND FOUND THAT THE TOT AL CREDITS REFLECTED IN THE ASSESSEES ACCOUNT CAME TO ` 5,65,83,500/-. THE SAID CREDITS WERE VERIFIED WITH FORM 16A AND FO RM 26AS. ACCORDINGLY, HE ADOPTED ` 4,65,92,812/- FOUND AS PER FORM 16A. ANOTHER AMOUNT OF ` 1,67,299/- HAS BEEN ADOPTED FROM FORM 26AS. ` 98,23,389/-, THE REMAINDER CREDIT REFLECTED IN AXI S BANK ACCOUNT HAS ALSO BEEN TAKEN AS INCOME. IN TOTAL, T HE ASSESSING - - I.T.A. NO. 2027/MDS/13 5 OFFICER ADOPTED A TOTAL RECEIPT OF ` 5,65,83,500/-. THEREAFTER, HE ESTIMATED THE INCOME FROM THE ABOVE RECEIPTS AT 10% WHICH WORKED OUT TO ` 56,58,350/-. HE HAS DETERMINED A TOTAL INCOME OF ` 56,65,250/- AFTER MAKING NECESSARY ADJUSTMENTS. 9. IN FIRST APPEAL, THE BUSINESS INCOME WORKED OUT BY THE ASSESSING OFFICER WAS EXAMINED IN DETAIL BY THE COM MISSIONER OF INCOME TAX (APPEALS). HE AGREED WITH THE BASIS OF ASSESSMENT ADOPTED BY THE ASSESSING AUTHORITY. HE ALSO UPHELD THE TOTAL AMOUNT OF RECEIPTS ADOPTED BY THE ASSESSI NG AUTHORITY. BUT, ON THE QUANTUM OF INCOME, HE REDUCED THE ESTIM ATION FROM 10% TO 8%. THE FIRST APPEAL WAS DISPOSED OF WITH T HIS MARGINAL RELIEF. 10. THE ASSESSEE IS AGGRIEVED AND THEREFORE, THE SE COND APPEAL BEFORE THE TRIBUNAL. 11. THE DETAILED GROUNDS RAISED BY THE ASSESSEE REA D AS BELOW:- 1.0 THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) VII, CHENNAI UPHOLDING THE DENIAL O F BENEFIT OF PRESUMPTIVE TAXATION UNDER SECTION 44AE OF THE I NCOME- TAX ACT IS ERRONEOUS BOTH ON FACTS AND IN LAW. - - I.T.A. NO. 2027/MDS/13 6 1.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) VII, ERRED BY NOT CONSIDERING THE FACT THAT THE A PPELLANT HAD NOT OWNED MORE THAN TEN ROADWORTHY GOODS CARRIAGES AT ANY POINT OF TIME DURING THE PREVIOUS YEAR FOR THE PURP OSE OF PUTTING THEM INTO BUSINESS. 1.2 THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) VII, ERRED IN CONFIRMING THE DENIAL OF BENEFIT OF PRESUMPTIVE TAXATION AND ESTIMATING THE INCOME AT 8% OF THE TUR NOVER WITHOUT CONSIDERING THE EXPLANATIONS AND EVIDENCES SUBMITTED BY THE APPELLANT HEREIN. 1.3 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) VII, ERRED IN NOT CONSIDERING THE GROUND NO.10 OF THE GR OUNDS OF APPEAL AND SUBMISSIONS OF THE APPELLANT DISPUTING T HE QUANTUM OF TURNOVER ARRIVED BY THE ASSESSING OFFICE R. 1.4 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) VII, ERRED IN HOLDING THAT THE APPELLANT HAD NOT DISPUTE D TURNOVER OF THE BUSINESS EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 2.0 THE FINDING OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) VII THAT ASSESSING OFFICERS CONCLUSION IN RELATION TO HIS OBSERVATION IN THE ASSESSMENT ORDER THAT LOR RY BEARING NO. TN28AD8353 WAS NOT OPERATIONAL AND WAS PUT INTO USE ONLY NEXT YEAR IS NOT A FACT, IS AGAINST THE FACT S AND WITHOUT ANY BASIS. 2.1 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) VII OUGHT TO HAVE CONSIDERED THE OBSERVATIONS OF THE AS SESSING OFFICER AT PAGE NO.2 OF PARA 4 OF THE ASSESSMENT ORDER REGARDING THE ENQUIRY MADE IN RESPECT OF REPAIR OF THE VEHICLE BEARING NO.TN28AD8353. 2.2 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) VII, ERRED IN CONCLUDING THAT THAT VEHICLE BEARING NO.TA N 4410 WAS OWNED BY THE APPELLANT TILL 30.09.2008 WHEN ACT UALLY THE VEHICLE WAS SOLD ON 09.01.2008 AND DELIVERED ON 29.02.2008, WHICH WAS CONFIRMED BY THE BUYER AND AC CEPTED BY THE ASSESSING OFFICER. 2.3 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) VII, ERRED IN OBSERVING THAT THE VEHICLE BEARING NO.TAN 4410 WAS SOLD ON 04.12.2012, ON THE BASIS OF THE CONFIRMATIO N LETTER - - I.T.A. NO. 2027/MDS/13 7 DATED 04.12.2012 PRODUCED BEFORE THE ASSESSING OFFI CER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2.4 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) VII OUGHT TO HAVE CONSIDERED THE HYPOTHETICAL CASE EXPL AINED BY THE APPELLANT BEFORE THE ASSESSING OFFICER AND ALSO BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) VII FOR PROVING THAT THE LEGAL OWNERSHIP OF THE GOODS CARRIAGE ALON E IS NOT SUFFICIENT FOR AVAILING THE BENEFIT OF SECTION 44AE OF THE ACT BUT THE GOODS CARRIAGE SHOULD ALSO BE IN A CONDITIO N TO PUT INTO USE. 2.5 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) VII ERRED IN CONFIRMING THE OBSERVATIONS OF THE ASSESSI NG OFFICER THAT THE APPELLANT HAS HIRED GOODS CARRIAGES FROM O THERS FOR THE USE OF M/S CONTAINER CORPORATION OF INDIA LIMIT ED. 12. WE HEARD SHRI K.M. MOHANDASS, THE LEARNED CHART ERED ACCOUNTANT APPEARING FOR THE ASSESSEE AND SHRI GURU BHASHYAM, THE LEARNED JOINT COMMISSIONER OF INCOME TAX APPEARING FOR THE REVENUE. 13. IT IS AN UNDISPUTED FACT REFLECTED IN THE RECOR DS OF THE CASE THAT THE ASSESSEE HAD OWNED ATLEAST ELEVEN HEAVY VE HICLES DURING THE RELEVANT PREVIOUS YEAR. IT MIGHT BE TRU E THAT THE ASSESSEE HAD OPERATED ONLY TEN VEHICLES AND ONE VEH ICLE WAS UNDER REPAIR. BUT, THE TOTAL NUMBER OF VEHICLES OW NED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS AT ANY POINT O F TIME DURING THE PREVIOUS YEAR WAS MORE THAN TEN. - - I.T.A. NO. 2027/MDS/13 8 14. THE PRESUMPTIVE RATE PROVIDED UNDER SECTION 44A E APPLIES ONLY IN A CASE WHERE THE ASSESSEE OWNS NOT MORE THAN TEN GOODS CARRIAGES AT ANY POINT OF TIME DURING THE PREVIOUS YEAR. IT MEANS IF AN ASSESSEE WAS THE OWNER OF ELEVEN GOO DS CARRIAGES EVEN FOR A SINGLE DAY DURING THE PREVIOUS YEAR, THE ASSESSEE WILL NOT BE ENTITLED FOR BENEFIT OF SECTIO N 44AE. THE LAW DOES NOT SAY THAT ONLY TEN GOODS CARRIAGES SHOU LD BE OPERATED BY THE ASSESSEE. THE ASSESSEE SHOULD OWN TEN VEHICLES WHICH MAY BE FULLY OPERATED OR NOT. LIKEW ISE, WHERE ASSESSEE OWNS MORE THAN TEN GOODS CARRIAGES BUT OPE RATES ONLY TEN CARRIAGES DURING THE PREVIOUS YEAR, STILL THE A SSESSEE IS NOT ENTITLED FOR THE BENEFIT OF SECTION 44AE. THE COND ITION IS THAT THE ASSESSEE SHOULD CARRY ON THE BUSINESS OF PLYING, HI RING OR LEASING GOODS CARRIAGES AND ALSO OWN NOT MORE THAN TEN GOODS CARRIAGES. THEREFORE, EVEN THOUGH ONE VEHICLE OF T HE ASSESSEE WAS UNDER REPAIR DURING THE PREVIOUS YEAR AND IN FA CT THE ASSESSEE HAD OPERATED ONLY TEN GOODS CARRIAGES, HE IS NOT ENTITLED FOR THE BENEFIT OF SECTION 44AE FOR THE SI MPLE REASON THAT HE HAS OWNED MORE THAN TEN GOODS CARRIAGES ATLEAST AT ONE POINT OF TIME DURING THE RELEVANT PREVIOUS YEAR. - - I.T.A. NO. 2027/MDS/13 9 15. THEREFORE, WE ARE NOT ABLE TO ACCEPT THE CONTEN TION OF THE ASSESSEE THAT HE IS ENTITLED TO BE COVERED BY SECTI ON 44AE. THIS GROUND THUS FAILS. 16. THE LEARNED CHARTERED ACCOUNTANT HAS CONTENDED ALTERNATIVELY THAT THE ESTIMATION OF INCOME MADE BY THE COMMISSIONER OF INCOME TAX (APPEALS) IS ON THE HIGH ER SIDE. RELYING ON THE DECISION OF ITAT, CHANDIGARH B BEN CH IN THE CASE OF HARYANA KASHMIR TRANSPORT CARRIERS V. JOINT COMMISSIONER OF INCOME TAX (46 SOT 193), THE LEARNE D CHARTERED ACCOUNTANT HAS CONTENDED THAT EVEN IF THE ASSESSEE IS NOT COVERED BY SECTION 44AE, IT IS NECESSARY IN AN ESTIMATION CASE TO WORK OUT THE INCOME COMPARABLE TO THE PRESU MPTIVE RATE PROVIDED UNDER SECTION 44AE. THE LEARNED JOINT COM MISSIONER OF INCOME TAX APPEARING FOR THE REVENUE, ON THE OTH ER HAND, SUBMITTED THAT THE ESTIMATION MADE BY THE COMMISSIO NER OF INCOME TAX (APPEALS) IS JUST AND PROPER. 17. WE HAVE CONSIDERED THIS ALTERNATIVE GROUND ALSO VERY CAREFULLY. - - I.T.A. NO. 2027/MDS/13 10 18. THE ASSESSING OFFICER HAS ADOPTED THE AMOUNT OF TOTAL CREDITS AS EQUIVALENT TO TOTAL RECEIPTS REFLECTED I N THE ACCOUNT OF THE ASSESSEE MAINTAINED WITH AXIS BANK LTD. IT IS NOT CLEAR WHETHER ALL THE CREDITS REFLECTED IN THE SAID ACCOU NT WERE IN FACT IN THE NATURE OF RECEIPTS OF THE ASSESSEE OBTAINED FROM THE BUSINESS OF PLYING OF GOODS CARRIAGES. THERE IS A POSSIBILITY THAT SOME OF THE CREDITS MAY BE MONIES DEPOSITED BY THE ASSESSEE FROM HIS CASH TURNOVER AND NOT INDEPENDENT RECEIPTS EARNED FROM BUSINESS. THEREFORE, THERE IS A REASONABLE CHANCE OF DUPLICATION. FORM 16A DEFINITELY SHOWS ` 4,65,92,812/- AS RECEIPTS WHICH SHOULD NOT BE QUESTIONED. LIKEWISE, THE SUM OF ` 1,67,299/- SHOWN IN FORM 26AS ALSO SHOULD NOT BE QU ESTIONED. THE COMPUTATION IS REQUIRED ONLY WITH REFERENCE TO BALANCE AMOUNT OF ` 98,23,389/-. THE ASSESSING AUTHORITY IS DIRECTED TO VERIFY THIS AMOUNT OF CREDITS REFLECTED IN THE AXIS BANK ACCOUNT AND VERIFY WHETHER THIS MUCH AMOUNT REALLY REPRESEN TED INDEPENDENT BUSINESS RECEIPTS OR THE AMOUNT INCLUDE D OTHER CREDITS ARISING OUT OF THE CASH TURNOVER OF THE ASS ESSEE. THE ASSESSING OFFICER HAS TO FIRST ASCERTAIN THE CORREC TNESS OF THE CREDIT AMOUNT OF ` 98,23,389/-. - - I.T.A. NO. 2027/MDS/13 11 19. NOW COMING TO THE ESTIMATION OF INCOME, WE FIND THAT THE 10% ESTIMATED BY THE ASSESSING OFFICER IS DEFINITEL Y ON THE HIGHER SIDE. THE 8% ESTIMATED BY THE COMMISSIONER OF INCOME TAX (APPEALS) IS ALSO EQUALLY ON THE HIGHER SIDE. THE ITAT, CHANDIGARH B BENCH IN THE CASE OF HARYANA KASHMIR TRANSPORT CARRIERS V. JOINT COMMISSIONER OF INCOME TAX (46 SO T 193) HAS CONSIDERED A SIMILAR CASE, WHERE ESTIMATION OF INCO ME WAS NECESSITATED IN A CASE OF A TRANSPORTER WHO OWNED M ORE THAN TEN GOODS CARRIERS. AFTER EXAMINING THE CASE IN A DETA ILED MANNER, THE TRIBUNAL HELD THAT EVEN IN SUCH CASES WHERE THE BENEFIT OF SECTION 44AE IS NOT DIRECTLY AVAILABLE, THE PRESUMP TIVE RATE SUGGESTED IN SECTION 44AE GIVES A GUIDELINE TO ESTI MATE THE INCOME. IN VIEW OF THE ABOVE ORDER OF CHANDIGARH B ENCH OF TRIBUNAL, WE FIND THAT AN INTERFERENCE IS CALLED FO R IN THE PRESENT CASE. 20. TAKING INTO CONSIDERATION ALL ASPECTS OF THE CA SE, WE MODIFY THE RATE OF ESTIMATION OF INCOME TO 5% AS AG AINST 8% DETERMINED BY THE COMMISSIONER OF INCOME TAX (APPEA LS). - - I.T.A. NO. 2027/MDS/13 12 21. ACCORDINGLY, THE ASSESSING OFFICER SHALL FIRST CONFIRM THE CORRECTNESS OF THE TOTAL RECEIPTS AND THEREAFTER, E STIMATE THE BUSINESS INCOME AT 5% OF SUCH TOTAL RECEIPTS. 22. IN RESULT, THIS APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON WEDNESDAY, THE 23 RD OF APRIL, 2014 AT CHENNAI. SD/- SD/- (S.S. GODARA) (DR. O.K. NARAYANAN) ( . . !'#) ( . . . ) $ #% /JUDICIAL MEMBER /VICE-PRESIDENT /CHENNAI, 5# /DATED, THE 23 RD APRIL, 2014. KRI. #6 / -$178 98(1 /COPY TO: 1. *+ /APPELLANT 2. -.*+ /RESPONDENT 3. 0 :1 () /CIT(A)-VII, CHENNAI-34 4. 0 :1 /CIT-VIII, CHENNAI 5. 8;! -$1$ /DR 6. !' < /GF.