Bombay High Court
Ajitsingh Raisingh vs Ito on 20 May, 2002
Equivalent citations: (2002)76TTJ(MUMBAI)969
ORDER
Mukul Shrawat, J.M. The assessee is in appeal arising out of the order of Commissioner (Appeals) XL, Mumbai, and raised several grounds, however, before us mainly Ground No. 1 was argued, which is reproduced below :
"Under the facts and the circumstances of the case, the learned Commissioner (Appeals) was not justified in upholding the addition made by the assessing officer by rejecting the books of accounts of the appellant and estimating the income of the appellant under section 44AE of the Act at Rs, 1,41,000."
2. The appellant is an individual engaged in the business of running trucks on hire. The main grievance of the assessee was in respect of rejection of the books of account and estimation of income by invoking the provisions of section 44AE of Income Tax Act. The facts in brief were that the appellant was asked to produce the books of account and for that number of opportunities were granted by the assessing officer. However, the assessee has failed to do so. The assessing officer was in possession of an account of M/s. City Automobiles and found a difference in the figures shown by the assessee. According to the copy of account collected by the assessing officer of M/s. City Automobiles the purchases were of Rs. 4,23,262 whereas the assessee has shown the same at Rs. 2,65,467 only. Further, the assessing officer has also observed that the payment made by the assessee were to the tune of Rs. 4,13,407 as per the copy of the account collected, while the assessee has shown the payment of Rs. 2,28,767. Due to this reason and on account of non-production of books of accounts the assessing officer has concluded that he was unable to take any cognizance of the profit and loss account being not supported by any books of account and decided to invoke the provisions of section 44AE of Income Tax Act. The assessing officer has mentioned that the assessee has owned six trucks out of which five trucks were old and one truck was new, acquired during the accounting year, therefore, he has worked out the income of the trucks as provided in section 44AE at Rs. 1,41,000. Further, the assessing officer has also found from the repair expenses that there was some discrepancy in respect of one another truck and he was of the opinion that the said truck though may not be owned by the assessee but have been taken on hire, therefore, estimated an income of Rs. 15,000 therefrom.
3. In first appeal learned Commissioner (Appeals) has rejected the contention of the assessee on the ground that even after providing number of opportunities the assessee has failed to produce the books of account, therefore, the assessing officer was justified in invoking the provisions of section 44AE and estimating the income from truck plying at Rs. 1,41,000.
4. On behalf of the assessee learned authorised representative, Shri S.C. Kapadia has vehemently argued that the provisions of section 44AE has wrongly been applied in the present case. Narrating the circumstances of the case he has mentioned that during the course of assessment proceedings the assessing officer was changed due to which the assessee suffered. The assessee has actually produced the books of account before the predecessor assessing officer but could not produce the same before the successor assessing officer due to non-availability of the accountant. In respect of the difference in the account of M/s. City Automobiles he has pleaded that the assessing officer has not informed the assessee about any discrepancy during the course of assessment proceedings and the assessee has come to know only after receiving the assessment order. Thus, he has argued that inference was drawn against the assessee without providing an opportunity of hearing which was against the principle of natural justice. Coming to the provisions of section 44AE he has strongly argued that as per sub-section (6) where the assessee produces such evidence to prove that the profits and gains from the plying business is lower than the profits specified in sub-section (1) and (2) of section 44AE. Then thereupon the assessing officer shall proceed to make the assessment of the total income or loss on the basis of assessment to be made under section 143(3) of Income Tax Act. Thus, he has argued that the assessing officer should have made the assessment under section 143(3) instead of applying the rate of income as provided under other sub-section of the section. In such cases when the assessment is to be made under sub-section (6) then a loss can also be determined. Hence, he has concluded that the provisions of the Act has been wrongly invoked, therefore, the addition made was not in accordance with law.
5. On the behalf of the revenue learned Departmental Representative, Shri K.M. Prasad has strongly supported the views taken by the assessing officer and learned Commissioner (Appeals). He has argued that since the assessee has failed to produce the books of account in support of the income declared, therefore, the assessing officer was left with no option but to determine the income under the provisions of section 44AE. Under such circumstances when the income was not based upon books of account then the assessing officer was duty bound to assess the income in accordance with sub-section (2) of section 44AE. He has further argued that sub-section (6) has used the word "shall" in respect of making an assessment of the total income in such cases where the income declared by the assessee found to be lower than specified in sub-section (2). Thus, he has concluded that the circumstances of the case has forced the assessing officer to proceed under section 44AE to assess the income as provided in sub-section (2) of the said section.
6. We have carefully considered the rival submissions. We have also perused the orders of the authorities below as well as certain computation and list annexed along with compilation. There is no dispute in respect of the facts of the case as narrated above. The only difference is in respect of this fact that the assessee has claimed to have produced the books of account before the predecessor assessing officer, however, the assessment order does not give any such indication. But the fact remains as it was that before the successor assessing officer who has finally passed the impugned assessment order the assessee has failed to produce the books of accounts though on number of occasions the same was demanded, Ultimately the assessing officer has invoked the provisions of section 44AE and estimated the income of 6 trucks @ Rs. 24,000 annually at Rs. 1,20,000 and the income of the new truck was estimated at Rs. 21,000 being plied for part of the year. This 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. 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 plied. The estimated income is comprehensive. All deduction under sections 30 to 38 including depreciation, will be deemed to have been already allowed and no further deduction will be allowed under these sections. An assessee who files the returns, 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 be accounts audited under the provisions of section 44AB, in respect of his income from the business of plying, hiring or leasing trucks. The income from truck business, estimated in accordance with this provision, will be aggregated with the other incomes of the assessee, from any other business or under other heads of income in accordance with the normal provisions of the Income Tax Act. Accordingly, all deductions under Chapter VI-A and rebate under Chapter VIII will be available to the assessee, if the conditions therein are fulfilled. The scheme is optional. A system of rebuttal has been provided. A person can claim that his income in respect of the abovementioned business is lower than the specified estimate of income. In such case he must produce necessary evidence to prove his case. Such a case will be scrutinised for regular assessment under section 143(3). This amendment takes effect from 1-4-1994, and will, accordingly, apply in relation to assessment year 1994-95 and subsequent years. The assessment year under appeal is assessment year 1996-97. From the provisions of the Act it is thus clear that the assessee has to substantiate his income with the relevant material if the declared profits and gains are lower than that specified in sub-section (2) of the section. In the present case it is an admitted fact that there was a profit and loss account and other accounts filed along with the return of income as mentioned in para 4 of the assessing officer's order. Only on the basis of the accounts available before the assessing officer some difference was detected with the copy of account of one another party from whom the assessee had made certain purchases. Since the assessee had failed to produce the books of account, therefore, the assessing officer has specifically mentioned in that paras that he was unable to take the cognizance of the profit and loss account as the same was not supported by the books of account. On perusal of profit and loss account filed on page 8 of the paper book we have found that the assessee has shown hire charges to the tune of Rs. 13,56,412 and after claiming expenditure net profit was declared at Rs. 38,768. On page 9 of the paper book the assessee has also filed the balance sheet drawn as on 31-3-1996. During the course of assessment proceedings vide letter dated 24-7-1998, as appeared on para 11 of paper book the assessee has submitted the confirmation of loans as well as the statement of bank account. He has also furnished the details of expenses such as repairs, spare parts, petrol and diesel, etc. Considering the accounts furnished and the details of expenses filed it appears that the same were based on the books of account maintained by the assessee. However, it cannot be ruled out that due to certain unfavourable circumstances the assessee was unable to produce such book's of account. Under such circumstances in our opinion it would be fair and reasonable to provide an opportunity to the assessee so that he can substantiate the income declared.
Moreover, as we have already discussed, regarding provisions of section 44AE, we are of the opinion that once income declared by the assessee was found lower than that specified in sub-section (2) thereupon the assessing officer should proceed to make on assessment under section 143(3) as provided in section 44AE(6). The language of sub-section (6) empowers the assessing officer to make an assessment of the total income as well as determine loss, if any. This assessment requires to be made under section 143(3) and not under section 44AE. Therefore, we are of the opinion that under the circumstances of the case when the declared income was lower than that specified in the section, supported by profit and loss account attached with the returns then the provisions of section 44AE have been wrongly invoked. However, the assessee has also failed to substantiate his income declared by not producing the books of account, therefore, to meet the ends of justice we restore this issue back to the file of the assessing officer with the direction to determine the income as per the provisions of law after providing adequate opportunity of hearing to assessee. We also direct the assessee to promptly comply the notices of the assessing officer by producing books of accounts.
7. In the result, the appeal of the assessee is allowed only for statistical purpose.