Income Tax Appellate Tribunal - Agra
Amiruddin Prop. M/S Ariruddin ... vs Department Of Income Tax on 3 October, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL,
AGRA BENCH, AGRA
BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI A.L. GEHLOT, ACCOUNTANT MEMBER
ITA No. 118/Agra/2011
Asstt. Year : 2005-06
Income-tax Officer, vs. Shri Amiruddin,
Ward 4, Aligarh. Prop. M/s. Amiruddin Automobiles Service,
Jamalpur, Aligarh (PAN : AEKPA 3748 K)
ITA No. 133/Agra/2011
Asstt. Year : 2005-06
Shri Amiruddin, vs. Income-tax Officer,
Prop. M/s. Amiruddin Automobiles Service, Ward - 4, Aligarh.
Jamalpur, Aligarh
(Appellant) (Respondent)
Revenue by : Shri K.K. Mishra, Jr. D.R.
Assessee by : None
Date of hearing : 03.10.2012
Date of pronouncement of order : 12.10.2012
ORDER
Per Bhavnesh Saini, J.M.:
Both the cross appeals are directed against the order of the ld. CIT(A), Ghaziabad dated 22.02.2011 for the assessment year 2005-06. The Revenue has filed the appeal on two grounds, which read as under :
2 ITA No. 118 & 133/Agra/2011
"1. The Ld. CIT(Appeals) has erred in law and on facts in adopting the net profit rate of 10% on the total receipts from Generator AMC.
2. The Ld. CIT(Appeals) has erred in law and on facts in deleting the addition of Rs.5,22,742/- made on estimated basis from hiring charges."
2. The appeal of the assessee is filed on six effective grounds of appeal and the same read as under :
"1. Because the learned CIT(Appeals) has erred in confirming the addition of Rs.24,23,137/- alleged unexplained investment.
2. Because the learned CIT(Appeals) has erred in estimating net profit from generator AMC at Rs.7,89,567/-. The rate of net profit adopted at 10% is extremely high.
3. Because the learned CIT(Appeals) has erred while computing income from vehicle hiring and has not allowed various expenses.
4. Because the learned CIT(Appeals) has erred in not excluding the investment in three vehicles of Rs.49,500/-, which belong to Riyasuddin.
5. Because the learned CIT(Appeals) has erred in not deleting an amount of Rs.5 lakh which belong to Mrs. Nafeesha Begum.
6. Because the learned CIT(Appeals) has erred in not admitting the additional evidence submitted by the appellant."
3. Briefly, the facts of the case are that the assessee filed return of income showing income of Rs.4,17,727/-, which was selected for scrutiny assessment. The assessee enjoyed income from his proprietary concern, M/s. Amiruddin 3 ITA No. 118 & 133/Agra/2011 Automobiles Services, Aligarh. The source of income shown by the assessee is contract receipt from BSNL, Aligarh. The books of account were maintained, which were produced at the assessment stage. Since the turnover exceeded Rs.40,00,000/-, therefore, audit report was also filed. At the assessment stage, the statement of assessee was recorded regarding the source of income and nature of contract receipts shown by him in the return of income. The assessee in his statement stated that he was working for generator repairing for BSNL at Aligarh and Bullandshahar. He did not have any other source of income. He has further explained in his statement that as regards the movable property, he owns a Safari vehicle and there is no other movable or immovable property in his name and his family members. He has explained that he has two bank accounts, i.e., current account in PNB, Aligarh and Saving Bank account in SBI, Aligarh. From the statement of the assessee, it was evident that the assessee was showing contract receipts from generator repairing works only for BSNL. Therefore, in order to verify the genuineness of the contract receipts shown by the assessee, information u/s. 133(6) was called for from BSNL regarding payments made to the assessee in a sum of Rs.63,57,785/- and Rs.40,18,451/- received during the financial year by the assessee alongwith security amount and copy of the agreements were also called. BSNL submitted the required information before the AO along with copy of contracts in which it was also explained in further reply that 17 vehicles of 4 ITA No. 118 & 133/Agra/2011 proprietary concern of the assessee are used for office of GMTD, BSNL, Aligarh. Supporting documents and copy of registration certificates were also filed before the AO to show that four Bolero Taxis were registered in the name of proprietary concern of the assessee. Seven different vehicles were registered in the name of assessee. Two Bolero were registered in the name of wife of assessee and three Bolero taxis were registered in the name of son of the assessee, which were provided by the assessee to BSNL on hire. Further information was called for from BSNL regarding payments made to the assessee. BSNL supplied complete details and copies of the agreements to the AO and from the reply of the BSNL, it came to the notice that the assessee was not only engaged in providing generator maintenance services but was also getting receipts from hiring of vehicles, which fact was contrary to the statement given by the assessee before the AO. Moreover, for providing the vehicles on hire, the possession of vehicles was required by the assessee but no commercial vehicle was shown by the assessee on asset side of the balance sheet filed with the return of income. It was further noticed by the AO that 12 vehicles are registered in the name of assessee, 2 in name of his wife and three in the name of assessee's son. Out of 17 vehicles, 16 vehicles were purchased during the financial year relevant to the assessment year under appeal, but none of the vehicles were shown in the balance sheet of the assessee. Since the investments were made in the vehicles during the assessment year under appeal, therefore, the 5 ITA No. 118 & 133/Agra/2011 AO proceeded to verify the exact amount invested by the assessee in the purchase of vehicles. Information was sought from the Agency of Mahendra Compay at Aligarh, M/s. Vineet Automobiles P. Ltd. who has confirmed in their reply that out of 17 vehicles, 15 vehicles had been purchased from them. Complete details like make of the vehicles, model, date of purchase, cost etc. were provided and it was intimated that cost of the vehicles comes to Rs.63,17,000/-. As the name of financers were also appearing in the list, therefore, show cause notice was issued to the assessee to explain the investment in the vehicles on the basis of documentary evidence. The assessee explained that he has purchased 11 Bolero and one Mahindra Car in his name and two vehicles in the name of his wife for taxi purpose. All the vehicles were financed by ICICI Bank Ltd., Mahindra & Mahindra, Ashoka Leylend Finance and Tata Finance. The details of purchase cost, road tax, insurance, finance and own amount were also enclosed. It was explained that three vehicles purchased in the name of son of the assessee Riyasuddin are for taxi purpose, which were financed by Mahindra & Mahindra Finance and he is assessed to tax. The assessee has received Rs.24,80,563/- from BSNL as vehicle hiring charges of 16 vehicles as per agreement made by his proprietary concern, M/s. Amiruddin Automobiles Service, but the hiring charges of three taxis of his son have been transferred to his son's account. The assessee claimed that the assessee has received Rs.14,500/- per month for one vehicle and 6 ITA No. 118 & 133/Agra/2011 approximately spent Rs.15,700/- on each vehicle per month. The assessee had deposited cash in the bank for the purchase of these vehicles and his wife invested Rs.5,00,000/- out of sale of ornaments. It was also explained that cash amount was deposited by time to time, which was received as loan, gifts from relatives and friends. There was a claim of depreciation. The AO, however, did not accept the contention of the assessee because it was afterthought story made up by the assessee as against his original statement made at the assessment stage. The AO noted that when information regarding unexplained investment in vehicles was obtained through independent source, the assessee was compelled to admit the ownership of several vehicles. The assessee failed to explain margin money deposited for the purchase of vehicles in his name. The source of loan, gift and sale of ornaments by wife not proved through any documentary evidence. It was futile exercise by the assessee to escape assessment of undisclosed income. The AO further found from the return of income filed by his son Riyasuddin that the return of income was filed under the provisions of section 44AF which is not applicable on taxi hiring business and further, he was not receiving any vehicle hiring income from BSNL. The AO, therefore, found that the theory propounded for purchase of vehicles by the son has not been proved. The AO further found that theory of loss suffered by the assessee in vehicle hiring income has not been proved by any evidence because the assessee never claimed any expenses. The AO, therefore, 7 ITA No. 118 & 133/Agra/2011 found that the assessee failed to explain anything before him regarding unexplained investment in number of vehicles and as such addition was made u/s. 69 of the IT Act in a sum of Rs.24,23,137/- and as regards profit from vehicle hiring, the AO allowed depreciation in favour of the assessee and also estimated the expenses for earning vehicle hiring income, in a sum of Rs.12,500/- and held that the assessee has earned Rs.2000/- per month on each vehicle. Accordingly, he estimated the vehicle hiring income at Rs.9,40,469/- and after giving benefit of returned income, addition was made in a sum of Rs.5,22,742/- and accordingly, total income was computed at Rs.33,63,610/-.
3.1 The assessee challenged both the additions before the ld. CIT(A) and written submissions of the assessee are reproduced in the appellate order. The assessee also sought admission of additional evidence in order to explain gift and loans as well as payment of insurance and road tax. It was explained that due to death of wife of assessee he could not produce evidence at the assessment stage. The written submissions of the assessee was confronted to the AO for his comments and the AO submitted in the remand report that since the assessee has not satisfied any condition of Rule 46A, therefore, additional evidence submitted at the appellate stage should not be admitted. The assessee also filed rejoinder before the ld. CIT(A) admitting taxi hiring income. The ld. CIT(A) considering the 8 ITA No. 118 & 133/Agra/2011 explanation of the assessee and the material on record did not accept the additional evidence. The ld. CIT(A) confirmed the addition on account of unexplained investment in purchase of vehicles. The ld. CIT(A) rejected the contention of the assessee that no proper opportunity has been given. However, as regards estimate of income, the ld. CIT(A) applied net profit rate on generator AMC @ 10%, and on vehicle hiring expenses allowed deduction. The AO was accordingly directed to compute the income of the assessee. Findings of the ld. CIT(A) in paras 7 to 7.6 are reproduced as under :
"7. After having carefully considered appellant's submission and also the facts brought out by the AO in the assessment order as well as in the remand report, my conclusions/observations on grounds taken in appeal are as under :
7.1. Grounds of appeal no. 1 & 4 are general in nature. 7.2. Regarding grounds of appeal no. 1,3 & 6:
These grounds have no substance. From the beginning, proper opportunity was given. It is only after the detection of falsity on part of appellant, that appellant started giving various explanations. If assessee was truthful; there was no reason, why he should not have stated basic facts about no. of vehicles and source of earning. The appellant emphatically stated about generator repairing as the only source of income. Nothing about vehicle running! Only safari car was stated, as a personal asset.
It is only after information obtained from BSNL, and further questionnaire/confrontation, that appellant started making explanations.
From the beginning, proper opportunity has been given.9 ITA No. 118 & 133/Agra/2011
In fact, no submission· has been made, on this Issue, during appeal proceedings.
Similarly, there is no substance in ground of appeal no. 3.
All these grounds are rejected.
7.3. Ground of appeal no. 7 (Regarding addition of Rs.24,23,137/-).
The case of Revenue on the issue of unexplained investment in 16 vehicles is so strong that not much discussion is required.
Assessment order is self speaking. The appellant intended to hide its activities of vehicle running. The reason was obvious - source of investment/purchase of vehicles was unaccounted money. The appellant had no option but to admit ownership of vehicles in his name, in name of wife and in name of his son, when department obtained informations from BSNL. In the audited balance sheet, these vehicles were not being shown.
It was also found out that the entire margin money, for getting these vehicles financed, was given in cash. The revised balance sheet prepared by the appellant is obviously an after-thought fabrication. These vehicles were not disclosed in audited balance sheet. Source of cash investment of Rs.24,23,137/remained unexplained .
The additional evidences, in form of affidavits of various persons were furnished before undersigned. The counsel has furnished no explanation whatsoever, as to what prevented appellant to file these affidavits, before AO. These evidences are not worth admissible, as these are certainly after-thought fabrications. The law can not turn blind, to such obvious efforts of fabricating evidences, after evasion is detected.
10 ITA No. 118 & 133/Agra/2011
In fact, such additional evidences have no meaning, because entire fact of vehicle-owning and running was tried to be concealed, from the beginning and intentionally.
The addition of Rs.24,23,137/- is upheld, as source of cash investment remains unexplained and unaccounted.
7.4. Ground of appeal no. 5:
The appellant's son, Sh. Riyasuddin, was definitely assessed to tax, but that does not sanctify assets purchased by assessee, albeit in name of son. This aspect is well discussed on page 10, cla (iii) of assessment order. The son's return of income was showing income u/s 44AF, which is not applicable to taxi hiring business. Other documents were fabricated and furnished later, after detection of unaccounted vehicles. These vehicles were being run by assessee and, hence, unaccounted cash investment in 3 Bolero taxis is also to considered and taxed in hands of assessee.
This is important to note that income of these 3 taxis is also not going in the hands of Sh. Siyasuddin. Moreover, no revised return (even belated), nor even any confessional statement from Riyasuddin, has been furnished before me. The counsel was asked whether Sh. Riyasuddin is ready to own up the unexplained investment and pay due taxes and interest-thereon, but no positive response has come forth.
In such facts and circumstances; I uphold AO's action of treating unaccounted investment, in name of Riyasuddin in 3 Bolero Taxis, as also made by and assessable in the hands of appellant.
7.5. Ground of appeal no. 7(regarding addition of Rs.5,22,742/-) 7.5.1. Observation from assessment records :
(i) Audit report mentions that cash book, ledger and journal are maintained, but no such books are produced before AO or me, inspite 11 ITA No. 118 & 133/Agra/2011 of repeatedly asking counsel to do so. No primary vouchers/bills/documents are also produced, even on a sample basis.
So, the audit report is not authentic. And, book results as shown in return of income are liable to be rejected u/s 145(3) of the Act.
(ii). Statement dated 20.08.2007.
The assessee mentions about 50-60 sites of BSNL Aligarh and BSNL, Bulandshahar, having generators of different capacity.
However, although the assessee states about maintenance of accounts with respect to generator-operators, helpers, purchase of spare parts, other materials etc, and other expenses; no such primary evidence nor books are ever produced before AO or me.
The counsel's reply dated 24.l0.2007 to AO mentions (pt no. 6) that assessee is producing books; but AO has crossed out this point, implying that books were not produced.
(iii) The counsel is not able to give clear picture asto since when assessee is doing the AMC work of generators owned by BSNL; no satisfactory details are furnished as to how much expenses have been claimed. To reiterate; there are no primary evidences for such expenses either.
1.5.2 Rejection of book results and estimation of income I find sufficient force in appellant's contention that AO is incoherent in estimating income from the activities of vehicle-running and generator running and maintenance. The working by AO is faulty because:-
(i) The AO's working implies receipts from vehicle running at Rs.27,97,810/-, which is factually controvertible.
(ii) The proportionate allocation of expenses is without logic. The AO forgets that vehicles are appellant's own assets involving plethora 12 ITA No. 118 & 133/Agra/2011 of expenses while generators are BSNL's assets, for which only maintenance expenditure would be relevant.
(iii) The AO mentions various expenses, in connection with vehicle -
running activity, like interest on finance, road-tax, salary to drivers diesel etc, but, in the end, AO does not make proper estimation and computation. Also, the AO, although mentions depreciation, does not allow any deduction for the same.
(iv) The method of calculation of hiring income is certainly such that same income is being added again and again .
In above facts and circumstances, although I reject the books results, but estimate the income from generator running and maintenance and vehicles running, as under:
(A) Generator AMC Gross Receipts Rs.78,95,673/-
N.P. on estimated rate of 10% Rs. 7,89,567/-
(B). Vehicle - Hiring
Gross Receipts Rs.24,80,563/-
Less: Expenses:
a) Intt. On finance, as per
Documents on record Rs.4,48,355/-
b) Road tax, as per
Documents on record Rs.1,18,340/-
c) Insurance charges, as per
Documents on record Rs.1,93,780/-
d) Diesel (Rs.6500 per month)
Salary to driver (Rs.3000/-
Per month), Service charges
(Rs.500 per month) all as
Estimated by AO
Total Rs.10,000 pm x 16
Vehicles x 9 months Rs.14,40,000/-
Rs.22,00,475/-
Net operating profit Rs. 2,80,090/-
13 ITA No. 118 & 133/Agra/2011
(C) However, once these vehicles are treated as assessee's business assets; depreciation would have to be given, which comes to Rs.20,82,341/-, as per calculation furnished by appellant's counsel (as against Rs.21,45,341/- mentioned by AO in page 13 of assessment order) 7.6. With the above discussion, all the grounds of appeal are taken care of.
6. In the result, appeal is partly allowed."
The Revenue as well as the assessee are in cross appeals on the grounds mentioned above.
4. The ld. DR relied upon the order of the AO and submitted that there was no basis for ld. CIT(A) to adopt net profit rate of 10% on generator receipts and was not justified in deleting the addition of Rs.5,22,742/- on vehicle hiring charges. However, none appeared on behalf of the assessee at the time of hearing. Both the appeals were taken up for hearing on 19.03.2012. However, on the request of the assessee's counsel, Shri Deepak Singh, these were adjourned to 01.05.2012. On 01.05.2012 again, Shri Deepak Singh Advocate moved request for adjournment on the ground that the assessee was ill. Since the counsel was already appointed to argue these appeals, therefore, it was not found reasonable ground for adjournment. Request of the assessee for adjournment was rejected. However, in 14 ITA No. 118 & 133/Agra/2011 the interest of justice, these appeals were adjourned to 27.06.2012. On 26.06.2012, the appeals were adjourned because the Bench was not functioning and further on 07.08.2012 despite service, none appeared on behalf of the assessee. Therefore, these appeals were adjourned to 03.10.2012. On 03.10.2012, the assessee was notified of the date of hearing well in advance through registered post, but despite service of notice, none appeared on behalf of the assessee to argue these appeals. Therefore, both the appeals were heard in the absence of assessee exparte.
5. After hearing the submissions of the ld. DR and perusal of the orders of the authorities below, we do not find any justification to interfere with the order of the ld. CIT(A) in allowing part relief in favour of the assessee. The statement of the assessee was recorded at the assessment stage in which he has admitted source of income from generator repairing of BSNL, Aligarh and Bullandshahar. The assessee maintained books of account and were also audited and income was shown from this source in the return of income also. Except one vehicle in his name, the assessee in statement admitted that he and his family members did not have any movable or immovable property in their names. However, information received from BSNL revealed that assessee was also having 17 vehicles which were used in the office of BSNL, Aligarh. BSNL provided registration certificates and copies of agreements with the assessee to prove that out of 17 vehicles, the 15 ITA No. 118 & 133/Agra/2011 assessee was owner of 16 vehicles, out of which 11 vehicles were in the name of assessee - two in the name of his wife and three in the name of his son. The assessee was receiving vehicle hiring charges for these entire vehicles from BSNL. The material on record and the reply of assessee clearly reveal that the assessee not only was receiving generator repairing expenses from BSNL, but also getting income from vehicle hire charges in respect of several vehicles provided to BSNL on hire. The assessee claimed expenses on vehicles and depreciation. However, the margin money deposited in the banks in cash for obtaining these vehicles could not be supported through any documentary evidence. Whatever explanation was given by the assessee for source of investment in the vehicles, i.e., loan, gift, sale of ornaments of his wife were not substantiated through any evidence. The assessee initially denied ownership of vehicles, but later on he had to admit the same when confronted with the material received from BSNL. Thus, the assessee failed to explain the source in purchase of vehicles through any reliable and cogent evidence. Regarding vehicles purchased in the name of Shri Riyasuddin, son of the assessee, acknowledgement of filing of return was filed, which showed that income was shown under the provisions of section 44AF, which was not applicable to taxi hiring business. He was also not receiving any vehicle hiring charges from BSNL. It was, therefore, clearly established that whatever explanation was given by the assessee in respect of vehicles owned by his son were not proved at all through 16 ITA No. 118 & 133/Agra/2011 documentary evidence. Since the assessee concealed all the facts with regard to vehicle hiring charges, the authorities below rightly held that the assessee made up the story afterthought, when he was confronted with the material collected by the AO. The assessee was given full opportunity to explain the issue, but he failed to explain the same and whatever additional evidences were submitted at the appellate stage were not filed at the assessment stage and no reasons were given as to why the same could not be produced before the AO. Therefore, the assessee failed to explain any of the conditions of Rule 46A for admission of additional evidence at first appeal stage. Since the income from entire vehicles have been considered in the hands of the assessee and was also paid to the assessee by BSNL, therefore, the authorities below rightly considered the investment in the hands of the assessee in respect of three taxis found in the name of assessee's son. The assessee has failed to produce any reliable evidence before the authorities below. Therefore, authorities below were justified in considering the unexplained investment in the hands of the assessee in respect of all the vehicles. Even before us, despite adjournments taken by the assessee earlier, no documentary evidence or paper book has been filed to substantiate the grounds of appeal raised in the appeal of the assessee. Therefore, considering the totality of the facts and circumstances, we do not find any justification to interfere with the order of ld. CIT(A) in rejecting the admission of additional evidence or considering unexplained 17 ITA No. 118 & 133/Agra/2011 investment in the purchase of all the vehicles in the hands of the assessee. When the assessee concealed income from vehicle hiring as well as investment in large number of purchases of vehicles, therefore, the books of accounts of the assessee and the audit report so prepared on this basis are not reliable. The books of account have been rightly rejected by the authorities below and no alternate was left with the ld. CIT(A) except to estimate the income of the assessee on each head of disclosed and undisclosed income. As regards the estimate of income for generator AMC by applying net profit rate of 10%, the order of the ld. CIT(A) appears to be reasonable because the assessee shall have to spent substantial expenses for earning income on this head on account of repairing generators or vehicle charges also. The ld. CIT(A) rightly considered several expenses which were incurred for earning vehicle hiring charges for the purpose of computing income on vehicle charges like interest paid to financers, road tax, insurance charges, service charges, salary and petrol used for plying the vehicles. All these expenses are necessary to run the vehicles. Since the ld. CIT(A) has given substantial relief being the deduction allowed out of various expenses, therefore, no further deduction is necessary in favour of the assessee. Considering the facts and circumstances noted above, we are of the view that the ld. CIT(A) has taken a just view in the matter in order to do justice between the parties. The assessee claimed loss on account of earning vehicle hiring charges, but the same is not proved by any evidence. 18 ITA No. 118 & 133/Agra/2011 Therefore, no such claim can be allowed. We, therefore, do not find any justification to interfere with the order of ld. CIT(A) in estimating the income under both the heads. In view of the above discussion, we do not find any merit in both the cross appeals. The same are accordingly dismissed.
6. In the result, the departmental appeal as well as appeal of the assessee are dismissed.
Order pronounced in the open court.
Sd/- Sd/-
(A.L. GEHLOT) (BHAVNESH SAINI)
Accountant Member Judicial Member
*aks/-
Copy of the order forwarded to :
1. Appellant
2. Respondent
3. CIT(A), concerned By order
4. CIT, concerned
5. DR, ITAT, Agra
6. Guard file Sr. Private Secretary
True copy