Sri Manoharsa Ladwa, Harihara V. ITO, Davangere

ITA 711/BANG/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9514 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-09-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 16-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V S SREELEKHA
• Assessee Lawyers: B P SACHIN KUMAR
• Keywords: Business income
• Section: 234B; 250; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.L. KALRA, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA NOS.709 TO 712/BANG/2009 ASSESSMENT YEARS: 2002-03 TO 2005-06 SHRI MANOHAR LADWA, LADWA STREET, HARIHARA. : APPELLANT VS. THE INCOME TAX OFFICER, WARD 3, DAVANGERE. : RESPONDENT APPELLANT BY : SHRI B.P. SACHIN KUMAR RESPONDENT BY : SMT. V.S. SREELEKHA O R D E R PER BENCH THESE APPEALS FILED BY THE ASSESSEE PERTAIN TO AS SESSMENT YEARS 2002-03 TO 2005-06. FOR THE ASSESSMENT YEARS 2003 -04 TO 2005-06, THE CIT(APPEALS) HAS PASSED A CONSOLIDATED ORDER DATED 5.3.09 AND FOR THE ASSESSMENT YEAR 2002-03, THE CIT(APPEALS) HAS PASS ED A SEPARATE ORDER, ALSO DATED 5.3.09. SINCE COMMON ISSUES ARE INVOLV ED IN THESE APPEALS, THEY ARE HEARD AND DISPOSED OF TOGETHER FOR THE SA KE OF CONVENIENCE AND BREVITY. ITA NOS. 709 TO 712/B/09 PAGE 2 OF 8 2. THE BASIC ISSUE THAT ARISES FOR CONSIDERATION IN ALL THESE APPEALS IS WHETHER THE ASSESSING OFFICER IS JUSTIFIED IN ESTIM ATING THE INCOME FROM BUSINESS OF OPERATING PASSENGER BUSES BY STATING T HAT BUSES OPERATED FOR MORE DAYS THAN DECLARED BY THE ASSESSEE. 3. BRIEFLY STATED, THE FACTS ARE AS FOLLOWS. THE A SSESSEE IS AN INDIVIDUAL. FOR THE CONCERNED ASSESSMENT YEARS, TH E ASSESSEE HAD OPERATED PASSENGER BUSES TAKING THEM ON LEASE. 4. IN PURSUANCE OF NOTICE U/S. 148, THE ASSESSEE FI LED RETURN FOR THE RESPECTIVE ASSESSMENT YEARS BY ESTIMATING INCOME. THE INCOME RETURNED WAS BASED ON THE NUMBER OF BUSES WHICH WERE RUN BY THE ASSESSEE AND ALSO THE NUMBER OF DAYS FOR WHICH THE BUSES HAD BEE N PUT TO OPERATION. THE AO REJECTED THE GROSS COLLECTION DECLARED BY TH E ASSESSEE ON ACCOUNT OF RUNNING OF PASSENGER BUSES AND MADE HIS OWN ESTI MATION. THE DETAILS OF THE NUMBER OF BUSES PLIED, NUMBER OF DAYS BUSES WERE RUN ACCORDING TO THE ASSESSEE, NUMBER OF DAYS ADOPTED BY THE AO, GRO SS COLLECTION BY THE ASSESSEE AND GROSS COLLECTION ESTIMATED BY THE AO, NET INCOME DECLARED FOR THE RESPECTIVE ASSESSMENT YEARS AND NET INCOME ASSESSED BY THE AO ARE AS FOLLOWS: ASST. YEAR BUSES PLIED NO. OF DAYS BUSES RUN BY ASSESSEE NO. OF DAYS ADOPTED BY AO GROSS COLLECTIONS DECLARED BY ASSESSEE GROSS COLLECTIONS ESTIMATED BY THE AO NET INCOME DECLARED BY ASSESSEE NET INCOME ASSESSED BY AO 2002-03 KA-17- 4083 KA-17A- 8383 KA-17B- 6573 TOTAL 90 90 120 150 280 150 580 725,040 937,080 1,758,240 3,420,360 1,208,400 2,915,360 2,197,800 6,321,560 44,209 159,921 ITA NOS. 709 TO 712/B/09 PAGE 3 OF 8 2003-04 KA-17- 4083 KA-17A- 8383 TOTAL 90 90 150 250 400 957,600 1,231,200 2,188,800 1,596,000 3,420,000 5,016,000 44,470 639,060 2004-05 KA-17- 4083 KA-17A- 8383 TOTAL 90 90 150 240 390 1,098,760 1,382,650 2,481,410 1,831,260 3,687,060 5,518,320 47,210 673,099 2005-06 KA-17- 4083 KA-17A- 8383 TOTAL 90 90 150 240 390 1,060,200 1,368,000 2,428,200 1,767,000 1,368,000 5,415,000 65,360 513,088 5. IT IS TO BE MENTIONED HERE THAT ASSESSMENT FOR A LL THE YEARS WERE COMPLETED U/S. 144 R/W.S. 147 OF THE ACT SINCE THE ASSESSEE DID NOT COMPLY WITH MOST OF THE HEARING NOTICES AND NO BOOKS OF AC COUNTS/BILLS/VOUCHERS ETC. WERE PRODUCED IN SUPPORT OF THE GROSS COLLECTI ON AND EXPENSES DECLARED IN THE RETURN OF INCOME FROM THE OPERATION OF PASSENGER BUSES. 6. ON FURTHER APPEAL, THE CIT(APPEALS) CONFIRMED TH E ESTIMATION OF INCOME ADOPTED BY THE AO. BEFORE THE CIT(APPEALS) ALSO, THE ASSESSEE DID NOT REPRESENT THE CASE. HOWEVER, BEING AGGRIEV ED BY THE CIT(APPEALS) ORDER, THE ASSESSEE HAS PREFERRED THESE SECOND APPE ALS BEFORE US. 7. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE A SSESSEE MAY BE EXCUSED FOR NON-ATTENDANCE OF HEARINGS BEFORE THE A O AND THE CIT(APPEALS). IT WAS SUBMITTED BY THE LD. AR THAT THE ASSESSEE IS A HEART PATIENT SUFFERING FOR MANY YEARS AND HAD FREQUENTLY GOT ADMITTED TO THE HOSPITAL ON ACCOUNT OF HEART AILMENT. HE ALSO FILE D AN AFFIDAVIT OF THE ASSESSEE TO THE ABOVE EFFECT AND ALSO PROMISED THAT HENCEFORTH THE ITA NOS. 709 TO 712/B/09 PAGE 4 OF 8 ASSESSEE WOULD CO-OPERATE WITH THE DEPARTMENT. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE WAS NOT AN EDUCATED PERSON. OVER THE YEARS, THE ASSESSEE, IT WAS SUBMITTED, HAD SUFFERED GREAT FIN ANCIAL LOSSES AND HE HAD PAID THE TAX LIABILITY FOR ASSESSMENT YEARS CONCERN ED BY SELLING MOST OF HIS ASSETS. IT WAS ALSO SUBMITTED THAT THE TAXES DEMAN DED EXCEEDED THE ASSESSED INCOME IN ALL THE CONCERNED ASSESSMENT YEA RS. 8. ON MERITS, IT WAS SUBMITTED THAT THE ASSESSEE HA D COMPUTED GROSS COLLECTION FROM THE BUSINESS OF OPERATING PASSENGER BUSES ON THE BASIS OF ACTUAL DAY TO DAY COLLECTIONS, NUMBER OF TRIPS PER DAY, NUMBER OF SEATS OCCUPIED AND NUMBER OF DAYS OF OPERATION OF BUSES. THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ARBITRARILY REJECTING THE CLAI M OF THE ASSESSEE AS TO THE NUMBER OF DAYS DURING WHICH EACH BUS RAN WITHOUT AN Y VALID REASON AND SUBSTITUTING HIS IMAGINARY NUMBER OF DAYS. THE ASS ESSING OFFICER HAD MADE HIGH PITCHED ASSESSMENT BY THROWING AWAY THE N ORMS LAID DOWN BY THE HONBLE SUPREME COURT IN VARIOUS CASES INCLUDIN G THAT OF STATE OF KERALA VS. C. VELUKUTTY (1966) 60 ITR 239 . IT WAS FURTHER SUBMITTED THAT IN RESPECT OF A.Y. 2002-03, THE AO HAS ESTIMATED BUSIN ESS INCOME AT RS.1,47,000 IN RESPECT OF THREE BUSES; WHEREAS FOR A.YS. 2003-04 TO 2005- 06, THE AO HAS ESTIMATED AN INCOME RANGING BETWEEN RS.5.5 LAKHS TO RS.6.5 LAKHS. FOR THE A.YS. 2003-04 TO 2005-06, I T WAS SUBMITTED THAT HIGH PITCHED ASSESSMENTS ARE COMPLETED WITHOUT ANY PROPE R REASONING. FOR THE A.YS. 2003-04 TO 2005-06, IT WAS SUBMITTED THAT THE ASSESSEE WAS PLYING ONLY TWO BUSES IN COMPARISON WITH THREE BUSES IN A. Y. 2002-03 AND HENCE ADOPTION OF INCOME ON ESTIMATED BASIS FOR A.YS. 200 3-04 TO 2005-06 IS VERY MUCH ON THE HIGHER SIDE AND IS NOT BASED ON ANY RAT IONALE. ITA NOS. 709 TO 712/B/09 PAGE 5 OF 8 9. THE LD. DR, ON THE OTHER HAND, SUPPORTED THE ORD ER OF THE AUTHORITIES BELOW. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE INCOME ASSESSED AND TOTAL TAX DEMANDED, INCLUDING INTEREST U/S. 234A AND 234B FOR A.YS. 200 3-04 TO 2005-06 ARE AS FOLLOWS: ASST. YEAR INCOME ASSESSED (RS.) TAX (RS.) INTEREST U/S. 234A (RS.) INTEREST U/S. 234B (RS.) TOTAL (RS.) 2003-04 1,74,003 63,511 1,01,792 1,65,303 3,39,306 2004-05 1,75,930 42,223 79,167 1,21,390 2,97,320 2005-06 1,30,485 15,971 43,921 59,892 1,90,377 TOTAL 4,80,418 8,27,003 AS AGAINST THE TOTAL INCOME ASSESSED AT RS.4,80,418 FOR THE A.YS. 2003-04 TO 2005-06, THE TOTAL TAX DEMANDED IS AT RS.8,27,00 3. THE ASSESSEE HAD FILED A COPY OF THE SUMMONS RECEIVED BY HIM FROM TH E DEBTS RECOVERY TRIBUNAL. IN THE SUMMONS, IT IS CLEARLY MENTIONED THAT THE ASSESSEE OWES MONEY TO THE KARNATAKA BANK LTD. THESE FACTS SHOW THAT THE ASSESSEE IS HAVING FINANCIAL DIFFICULTIES. MORE OVER, THE ASS ESSEE HAD FILED AFFIDAVIT STATING THAT HE IS A HEART PATIENT AND THIS IS THE REASON FOR NON-APPEARANCE BEFORE THE AO AND THE CIT(APPEALS). HOWEVER, THE A O CANNOT BE FAULTED FOR PASSING A BEST JUDGMENT ASSESSMENT SINCE WE FIN D FROM THE RECORD THAT THE ASSESSEE HAS BEEN SERVED WITH NOTICES AT LEAST ON FOURTEEN OCCASIONS. TAKING INTO ACCOUNT THE TOTALITY OF CIRCUMSTANCES O F THE CASE AND IN THE INTEREST OF JUSTICE, WE ARE OF THE UNANIMOUS OPINIO N THAT THE MATTER NEEDS RECONSIDERATION FOR THE FOLLOWING REASONS. EVEN IN A BEST JUDGMENT ASSESSMENT, THE JUDICIAL PRONOUNCEMENTS ARE CLEAR T HAT IT SHOULD NOT BE A ITA NOS. 709 TO 712/B/09 PAGE 6 OF 8 HIGH PITCHED ASSESSMENT. THE HONBLE SUPREME COURT IN THE CASE OF STATE OF KERALA VS. C. VELUKUTTY (1966) 60 ITR 239 HELD THAT THOUGH THERE IS AN ELEMENT OF GUESS WORK IN A BEST JUDGMENT ASSESSMEN T, IT SHOULD NOT BE A WILD ONE, BUT SHOULD HAVE A REASONABLE NEXUS TO THE AVAILABLE MATERIAL AND THE CIRCUMSTANCES OF EACH CASE. THOUGH THE SECTION PROVIDES FOR A SUMMARY METHOD BECAUSE OF THE DEFAULT OF THE ASSESS EE, IT DOES NOT ENABLE THE ASSESSING AUTHORITY TO FUNCTION CAPRICIO USLY WITHOUT REGARD TO THE AVAILABLE MATERIAL. THE DECISION OF THE SUPREME CO URT IN THE CASE OF BRIJ BHUSHAN LAL PARDUMAN KUMAR VS. CIT (1978) 115 ITR 5 24 HELD THUS: THE AUTHORITY MAKING A BEST JUDGMENT ASSESSMENT MUST MA KE AN HONEST AND FAIR ESTIMATE OF THE INCOME OF THE ASSESSEE AND THO UGH ARBITRARINESS CANNOT BE AVOIDED IN SUCH AN ESTIMATE, THE SAME MUST NOT B E CAPRICIOUS BUT SHOULD HAVE A REASONABLE NEXUS TO THE AVAILABLE MAT ERIAL AND THE CIRCUMSTANCES OF THE CASE. 11. THE AO OUGHT TO HAVE TAKEN INTO ACCOUNT COMPARABLE CAS ES. MORE OVER IN RESPECT OF A.Y. 2002-03, THE AO ESTIMATED T HE BUSINESS INCOME WAS AT RS.1,47,455 IN RESPECT OF THREE BUSES (TOTAL NUMBER OF DAYS DURING WHICH THE BUS WAS RUN WAS ADOPTED BY THE AO AT 580 DAYS FOR THREE BUSES). IN RESPECT OF A.YS. 2003-04 TO 2005-06, THE AO ESTIMATED THE BUSINESS INCOME AT RS.6,39,060, 6,73,099 & 5,13,088 RESPECTIVELY (TOTAL NUMBER OF DAYS DURING WHICH THE BUS WAS RUN WAS ADO PTED BY THE AO AT 400, 390 & 390 DAYS RESPECTIVELY). THE AO HAS NOT BROUGHT OUT ANY MATERIAL DIFFERENCE IN THE BUSINESS OF THE ASSESSEE , EXCEPT THAT IN THE A.YS. 2003-04 ONWARDS, HE HAS OPERATED ONLY TWO BUSES AS AGAINST THREE BUSES FOR THE A.Y. 2002-03. THEREFORE, THIS ACTION OF THE SAME AO ADOPTING TWO ITA NOS. 709 TO 712/B/09 PAGE 7 OF 8 DRASTICALLY DIFFERENT FIGURES IN RESPECT OF THE SAM E ASSESSEE FOR TWO SIMILAR ASSESSMENT YEARS WHERE THE ASSESSMENT ORDERS ARE PA SSED ON THE SAME DATE CLEARLY REFLECTS THAT THE IMPUGNED ASSESSMENT ORDER IS VITIATED AND IS LIABLE TO BE QUASHED. 12. MORE OVER, THE ASSESSEE HAD FILED AFFIDAVIT DET AILING THE REASONS FOR THE ABSENCE BEFORE THE AO AND THE CIT(APPEALS) AND HE HAS PROMISED THAT HE WILL CO-OPERATE WITH THE DEPARTMENT IN COMPLETIO N OF THE ASSESSMENT. THEREFORE, IN THE LIGHT OF THE ABOVE SAID REASONS, THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DISPOSA L IN ACCORDANCE WITH LAW. THE ASSESSING OFFICER SHALL TAKE INTO CONSIDERATION THE COMPARABLE CASES IN SIMILAR LINE OF BUSINESS. THE AO SHALL TAKEN IN TO ACCOUNT THE NUMBER OF DAYS THE BUSES ARE RUN BY EXAMINING THE PERIOD FOR WHICH THE BUSES ARE TAKEN ON HIRE AND ALSO ALLOW THE EXPENDITURE, IF AN Y, SUCH AS LEASE AMOUNT PAID FOR HIRING OF THE BUSES ETC., WHILE COMPUTING THE INCOME OF THE ASSESSEE. NEEDLESS TO STATE THAT THE ASSESSEE SHAL L CO-OPERATE WITH THE ASSESSING OFFICER FOR FACILITATING COMPLETION OF TH E ASSESSMENT. 13. WITH THE ABOVE OBSERVATIONS, WE DISPOSE OF THE MATTER AND THE APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOS ES. PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF SEPTEMBER 2009. SD/- SD/- ( N.L. KALRA ) (GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 11 TH SEPTEMBER, 2009. DS/- ITA NOS. 709 TO 712/B/09 PAGE 8 OF 8 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) . BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.