Income Tax Appellate Tribunal - Delhi
Ved Prakash Raheja, Ghaziabad vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'H' NEW DELHI
BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
AND
SHRI C.M.GARG, JUDICIAL MEMBER
I.T.A .No.-3231/Del/2012
ASSESSMENT YEAR - 2007-08
Ved Prakash Raheja, Vs. ITO,
C/o-Pradeep & Co. Tax Advocates, Ward-2(1),
4, Navyug Market, Ghaziabad.
Ghaziabad.
PAN-AGWPR1692M
(APPELLANT) (RESPONDENT)
Appellant by: Shri M.Shoib
Respondent by: Mrs. Reena S. Puri, CIT DR
ORDER
PER C.M.GARG, JM
This appeal has been preferred by the assessee against the order of CIT(A), Ghaziabad vide dated 30-04-2012 u/s 250 of the Income Tax Act, 1961 (for short 'the Act') for AY 2007-08.
1. Although the assessee has raised several grounds in this appeal but during the course of arguments before us, the counsel of the assessee stated that he wants to press the ground Nos-3 & 5 only and remaining grounds may kindly be treated as not pressed hence, ground nos.-1, 2, 4, 6, 7 & 8 are dismissed. Therefore, we have confined ourselves to the Grounds Nos. 3 & 5 which read as under :-
"3. That in view by CBDT instructions dt 30.07.2007 the assessee's case should not have been picked up for scrutiny.2 I.T.A .No.-3231/Del/2012
5. The CIT(A) did not appreciate our submissions which were as follows :-
(i) that the assessee owns two trucks. Profit declared by the assessee as per audited books of accounts was more than presumptive rate of Rs.3500/- P.M. as prescribed in Section 44AE of the Act.
(ii) That credit for two contra entries included in transport receipts appearing in copies of accounts off accounts Ambica Steels Ltd. Unit I and Unit II of Rs.150,000/- and Rs.31,133/- was not given.
(iii) That some amounts were received after 31.03.2007 and the Balance-Sheet was prepared on the basis of amounts credited in Bank Account till 31.03.2007."
2. Brief facts of the case giving arise to this appeal are that the assessee is a proprietor of M/s Raheja Road Lines engaged in transport service. As per return, the assessee's receipts from the source of transport service was amounted to Rs.50,26,418/- and profit on such receipts was shown at Rs.1,50,000/- giving net profit rate of 2.98%. The AO selected the case for scrutiny and made an addition of Rs.4,38,151/- for alleged difference in receipts and the AO further adopted net profit @ 15% on receipts from transport service of Rs.50,26,035/- and took up net profit at Rs,5,02,600/- which resulted into assessed income at Rs.9,79,219/- against the returned income of Rs.1,88,470/-.
3. The aggrieved assessee filed an appeal before CIT(A), Ghaziabad which was partly allowed and the addition of Rs.4,38,151/- made by the AO was reduced to Rs.2,57,018/- and the CIT(A) also directed the AO to apply net profit @ 6%. The relevant operating para of CIT(A) is being reproduced as under :-
"5.1. The first issue in appeal is regarding addition of Rs.4,38,151/-. The A.O. found that the receipts, as visible in copies of accounts of M/s Ambica Steels Ltd., Unit-I & Unit-II and others were to the extent of 3 I.T.A .No.-3231/Del/2012 Rs.54,64,569/-, while the assessee had shown Rs.50,26,418/- only in the profit and loss account. The A.O. added the difference.
The appellant points out that from copies of accounts it can clearly be seen that credit entry of Rs.1,50,000 (accounts of Unit No.-I) and Rs.31,133/- (Account of Unit no-II) are not the entries which reflect any transport receipt because these entries are effectively negated by contra entries of the same amounts made immediately on the debit side. I am satisfied with this explanation. Therefore, I hold that difference in transport receipt is explained to the extent of Rs.1,81,133/- (Rs.1,50,000/- + Rs.31,333/-).
However, for rest of the difference the appellant has not been able to give any reconciliation or any acceptable explanation. Therefore, the addition of Rs.4,38,151/- is reduced to Rs.2,557,018/- (Rs.4,38,151- 1,81,133).
Addition is upheld, to the extent of Rs.2,57,018/-. 5.2. The other issue is regarding adoption of 15% of net profit rate by the A.O. I find that no cogent reason has been discussed by the A.O. for enhancing the net profit so steeply ---- from 2.98% as shown by the assessee to 15%. The A.O. has merely referred to hire charge expenses, mentioning that the bills raised do not contain truck numbers, and also that labour and wages expenses may be exaggerated. The A.O has not found out even a single concrete mistake. The A.O has not even compared the amount of expenses or G.P., N.P. as claimed by the assessee with those of any other comparable case.
Therefore, I agree with appellant that adoption of 15% net profit is excessively high. The assessee's books are maintained and audited. It is also an established preposition of law that even the cases, where no books are maintained, are to be assessed on 8% net profit.
Looking into all the aspects I hold that it would be most reasonable if the net profit rate of 6% is applied to cover any possible leakage of revenue by way of inflation of expenses. The A.O. is directed to assess net profit accordingly."
Ground No.-3
4. The Counsel of the assessee has submitted that the assessee's case should not have been picked up for scrutiny in view of instructions dated 30.07.2007 of the Central Board of Direct Taxes (CBDT). Replying to the above, the DR submitted that CBDT instruction or guidelines are not mandatory in nature and the cases were 4 I.T.A .No.-3231/Del/2012 the income declared is less than 5% of gross receipt by the transport contractors can be picked up for scrutiny. The DR supported the action of the AO.
5. The DR further submitted that the assessee did not adopt the course of presumptive basis income covered u/s 44AE of the Act and he himself submitted accounts and return income of Rs.1,88,470/- and, therefore, his case was rightly picked up as the assessee has shown total transport receipts more than 50 lacs during the year under consideration.
6. Section 44AE of the Act was inserted by Finance Act, 1994 which provides a special provision for computing profits and gains of business of plying, hiring and leasing goods carriages. This provision starts with an non-obstance clause by giving an overriding effect over sections 28 to 43C of the Act, for the cases when assessee owns not more than ten goods carriages. This provision provides that the income of such assessee chargeable to tax under the heat of 'Profits and gains of business as profession' shall be deemed to be aggregate of profit and gains from all goods carriage owned by him in the previous year computed in accordance with sub- section 2 of section 44AE of the Act. In this section 44AE of the Act, the words "shall be deemed" are the key words which are indicative of the Legislative intent that the tax shall be chargeable on presumptive income, computed as per sub-section (2) of the section 44Ae of the Act.
7. The scope and effect of above section has been explained in departmental circular No-684 dated 10.06.1994, the relevant portion reads as under :- 5 I.T.A .No.-3231/Del/2012
"32. A new section 44AE has been inserted in the Income-tax Act with a view to providing for a method of estimating income from the business of plying, hiring or leasing trucks owned by a taxpayer. The scheme applies to persons owning not more than ten trucks. It is not applicable to the persons who do not own any truck but operate trucks taken on hire. The income from each truck, being a heavy goods vehicle, will be estimated at Rs.2,000/- for every month or part of a month during which the truck is owned by the assessee. The income from each truck, other than a heavy goods vehicle, will be estimated at Rs.1,800/- for every month or part of a month during which the truck is owned by the assessee. In either case, the taxpayer can declare his income from trucks at a higher amount than that specified above.
32.2 The estimated income is comprehensive. All deductions under section 30 to 38 including depreciation, will be deemed to have been already allowed and no further deduction will be allowed under these sections. The written done value will be calculated, where necessary, as if depreciation as applicable has been allowed. In the case of firms, the normal deductions to the extent allowed under clause (b) of section 40 will be allowed.
32.3 As assessee who filed the return, estimating income on the basis of the specified amount per truck or estimating a higher income, will neither be required to maintain books of account under the provisions of section 44AA, nor required to get accounts audited under the provisions of section 44AB, in respect of his income from the business of plying, hiring or leasing trucks. However, even such an assessee has to comply with the requirements of both sections 44AA and 44AB in respect of his businesses which are not covered by this scheme."
8. On careful consideration of rival submissions of both the parties, we observe that total transport receipt of the assessee was more than Rs.50 lacs and the assessee himself declared an income of Rs.1,88,470/- as per his accounts. The assessee did not adopt to avail the benefit of special provision available u/s 44AE of the Act in respect of the calculation of his income on presumptive basis. Therefore, in view of assessee's own conduct and willingness not to adopt presumptive basis income and 6 I.T.A .No.-3231/Del/2012 voluntarily declaring an income of Rs.1,88,470/- on transport contract service receipts more than 50 lacs. We have no reason to see any ambiguity or proversity in the action of the AO in picking up the case of the assessee for scrutiny.
Accordingly, Ground No-3 of the assessee is dismissed.
Ground No.-5
9. The assessee's representative submitted that admittedly the assessee owns two trucks and profit declared by the assessee as per audited books of accounts was more than presumptive rate of Rs.3,500/- per month as prescribed in section 44AE of the Act. Therefore, the CIT(A) was not justified in making an addition to the same. The AR further submitted that the credit for two trucks entries included under transport receipt appearing in the copies of accounts of Ambica Steel Ltd. (Unit-I & II) amounting to Rs.1,50,000/- and 31,333/- was not considered which ought to have been given to the assessee because same amounts were received after closing of FY that was 31.03.2007 and the financial accounts of the assessee were prepared on the basis of amounts credited in bank account till 31.03.2007. The AR finally submitted that the part additions as confirmed by the CIT(A), Ghaziabad are based on mis- interpretation of the provisions of the Act based on surmises and conjecture and, therefore, the same should be set aside.
10. Replying to the above submissions, Ld. DR submitted that Ld. CIT(A) have considered the difference in transport receipt to the extent of Rs.1,81,133/-, therefore, ground no-5 is mis-conceived and deserved to be dismissed. Ld. DR 7 I.T.A .No.-3231/Del/2012 supported the impugned order and requested that the order of the CIT(A) is based on factual matrix of the case and the same should be upheld.
11. On careful consideration of the submissions and perusal of the record and the impugned order, we observe that in para 5.1 of the impugned order as reproduced hereinabove, it is very clear that CIT(A), Ghaziabad has considered the explanation pertaining to the difference in transport receipts to the extent of Rs.1,81,133/-, therefore, we are unable to accept the contention of the assessee that credit for two contra entries related to Ambica Steel Ltd. (Unit-I & II) has not been given.
12. The Counsel of the assessee has relied on the judgement of Hon'ble Jurisdictional High Court of Allahabad in ITA No.-74/2009 CIT, Kanpur vs Nitin Soni vide dated 26.04.2012 and submitted that a very purpose and idea of enactment of section 44AE of the Act was to provide hassle free proceedings to complete the assessment without further proving provided the conditions laid down in such enactments are fulfilled. The AR further submitted that the presumptive income which may be more or less of the actual is taxable and such an assessee is not required to maintain any books of accounts. He further submitted that if actual income in a given case is more than income calculated under sub-section 2 of the section 44AE can not be taxed. IN this case of Nitin Soni (supra) their lordship held that the assessee's disclosed income u/s 44AE of the Act with a fact that he possesses only 8 trucks and their lordship held that in this situation assessee is not 8 I.T.A .No.-3231/Del/2012 required to maintain any books and his income can not be calculated more than income calculated as per sub-section 2 of the section 44AE of the Act.
13. On carefully perusal and thoughtful consideration of the facts and circumstances of the present case that respectfully hold that the benefit of the ratio of this judgement of Hon'ble High Court in the case of Nitin Soni (supra) is not available to the present appellant assessee. We observe that admittedly the assessee owns two trucks but he did not opted the benefit of presumptive income calculation as prescribed in section 44AE of the Act. As per department circular No-684 dated 10.06.1994 as reproduced hereinabove at the end of paragraph 32, it has been specifically stated that "in either case, the taxpayer can declare his income from trucks at a higher amount than that specified above".
14. In this situation when assessee himself declaring income from two trucks at higher side than as per sub-section (6) & (7) of the section 44AE, it is open to the assessee that he may return his income on the higher or lower side to the presumptive income as prescribed in sub-section 2. At the cost of repetition, we would also observe that when assessee choose presumptive basis income than he is not bound to keep books of accounts but in the present case, the assessee never opted his calculation of income on presumptive basis u/s 44AE(2) of the Act and not only he maintained books of accounts but he also get them audited and on the basis of audited accounts, he submitted a return showing income higher than presumptive 9 I.T.A .No.-3231/Del/2012 calculation. In this situation, the tax authorities below are not bound with the provision of section 44AE(2) of the Act.
15. Coming to the issue of presumptive rate of income as per section 44AE of the Act, we observe that the assessee himself has not adopted the recourse availability in section 44AE of the Act to return the income on presumptive basis. Admittedly, the assessee owns two trucks but when the assessee himself has waived the recourse available to him to assess his income on presumptive basis then the revenue authorities are not bound to extend benefit of presumptive income to the assessee as prescribed in section 44AE of the Act. The CIT(A) has considered the G.P. rate issue and has partly allowed the issue in favour of the assessee by reducing G.P. rate from 15% to 6%. Considering all facts and circumstances of the case, we are of the view that CIT(A) was justified in reducing the G.P.rate and we upheld this finding. In view of above, we are unable to see any infirmity, perversity or any other valid reason to interfere with the impugned order. In this position, ground no-5 is also dismissed.
16. Before we part with the order, we find it appropriate to mention that the assessment order was passed on 22.10.2009 and the same was picked up by CIT u/s 263 of the Act for revision as he noted that assessment order was erroneous and pre- judicious to the interest of the revenue. The CIT passed the order u/s 263 of the Act on 16.03.2012 after affording a due opportunity of hearing to the assessee in these proceedings. The assessee has filed a written submissions along with proceedings of 10 I.T.A .No.-3231/Del/2012 documentary evidence during the proceedings u/s 263 of the Act. Simultaneously, the assessee also instituted an appeal against the assessment order u/s 250 of the Act before CIT(A), Ghaziabad on 23.12.2009 which was pending when the assessee and his Counsel attended the proceedings u/s 263 of the Act before CIT, Ghaziabad. The CIT, Ghaziabad had passed an order u/s 263 of the Act on 16.03.2012 and later to that the original appeal of the assessee before CIT(A), Ghaziabad u/s 250 of the Act came up for hearing and the assessee himself attended the proceedings before CIT(A) in his appeal. A careful perusal of the order vide dated 30.04.2013 at CIT(A), Ghaziabad shows that the assessee has not mentioned this important fact before CIT(A), Ghaziabad that an order u/s 263 of the Act, has been passed against him by his Co-ordinate Officer, Sh. O.P.Pahadia, CIT, Ghaziabad. In this situation, we have no hesitation to hold that the assessee has not come with the clean hands neither before the authorities below nor before this Tribunal and his conduct is contemptuous and we admonish the same.
17. In the result, the appeal of the assessee is dismissed.
Order pronounced in the Open Court on 31. 01.2013
Sd/- Sd/-
(SHAMIM YAHYA) (C.M.GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 31.01.2013
*Amit Kumar*
11 I.T.A .No.-3231/Del/2012
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI