Income Tax Appellate Tribunal - Delhi
Krishan Kumar Najjon, vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES: " D" NEW DELHI
BEFORE SHRI C.L.SETHI, JM AND
SHRI SHAMIM YAHYA, AM
ITA No. 273/Del/2009
A.Y. 2001-02
Shri Krishan Kumar Najjon vs. ITO-1,
Prop. M/s KK Fruit House Almora, Uttarakhand
Sabji Mandi, Almora
(Appellant) (Respondent)
Appellant by :Sh.Ramesh Goyal, C.A.
Respondent by : Sh. JA Khan, Sr.D.R.
ORDER
PER SHAMIM YAHYA, ACCOUNTANT MEMBER
This appeal by the assesee is directed against the order of ldCIT(A) dated 14.10.2008 and pertains to A.Y. 2001-202.
2. The issue raised is that the ldCIT(A) is not justified in sustaining additions made by the A.O.
3. The assessee in this case had shown income from trading in fruits and vegetables, commission on sale of fruits and vegetables and truck plying. For the A.Y. 2002-03 on total sales of Rs. 14,90,880/- on estimate basis net profit shown was at Rs. 89,633/- @ 6%. Net receipts 2 of commission on sale of fruits and vegetables was shown at Rs. 69,287/- @ 5% on sale of Rs. 13,85,730/-. Truck plying income from two mini trucks was shown as per provisions of S.44AE of the Income Tax Act, 1961.
3. During the course of assessment the AO found that the assessee has not been able to explain the source of various investments and expenditure made during the year. He also observed that the assesee had not produced any books of accounts in support of income shown or source of investment/expenditure made during the year. The A.O. proceeded to work out the short fall in investment/expenditure from the available funds of the assessee. He concluded that there was a short fall of Rs. 12,22,039/- in respect of investments/expenditure made by the assessee vis-à-vis funds available with him during the year. He added the sum as undisclosed investment/expenditure of the assessee u/s 69 of the Income Tax Act. The AO further added increase of Rs. 3,75,605/- in the bank balance during the year as unexplained investment u/s 69.
4. Upon assessee's appeal the ldCIT(A) elaborately considered the issue and concluded as under.
"I have looked into the above submissions of the counsel of the appellant. As regards the investments made in trucks standing in the name of Smt. Nisha Najjon, the wife of the appellant to the tune 3 of Rs. 5,48,680/-, the same has been admitted to be out of the bank account of the appellant and the counsel for the appellant has also not controverted on this fact. Similarly in the case of Smt.Channa Rani Najjon, the mother of the appellant, the investment in truck to the tune of Rs. 2,19,789/- has also been made out of the bank account of the appellant which has again not been controverted by the ld.counsel of the appellant. However, legal fiction has been created by filing the income tax returns in the names of Smt.Nisha Najjon and Smt.Channa Rani Najjon in order to explain the investments towards the trucks in the corresponding names. The counsel fo the appellant has stretched a bit further in saying that these trucks have been utilized in the business of the appellant and the freights received thereon have been adjusted against the repayments of loans originally advanced by the appellant on behalf of the wife and mother of the appellant. However, in absence of requisite evidence, these contentions of the counsel of the appellant remain a word of mouth and a façade without establishing such contention. Therefore, I am not in a position to accept the contention of the counsel of the appellant that the investments towards the purchase of trucks to the tune of Rs. 7,67,469/- are out of the own source of the wife and mother of the appellant and the AO is right in treating such investment to be out of the undisclosed source of the appellant. As regards the 4 contention of the appellant that the depreciation of Rs. 7,05,238/- should have been considered while arriving at the cash flow. I am of the considered opinion that the income from the trucks has been declared under the provisions of S.44AE of the Act, wherein the depreciation has been deemed to be allowed and the net income after allowance of such depreciation has been reflected and so the question of giving benefit of such depreciation towards the cash flow in the hand of the appellant does not arise. So, this contention of the appellant is also hereby rejected. As regards the opening capital of Rs. 4,25,000/-, the AO has rejected the same on the ground that the necessary evidence by way of regular books of account could not be furnished. However, the AO has accepted all other entries in the capital account. It is a fact on record that the appellant happens to be an old assessee since 1991-92 and the opening capital as declared at Rs. 4,25,000/- does not appear to be impracticable even though the full proof accounts for all the earlier years could not be furnished. The AO is hereby directed to consider the incidence of such opening capital of Rs. 4,25,00/- while arriving at the cash flow of the appellant and allow consequential relief to the appellant. Coming to the last point i.e. the accretion in the bank account of Rs. 3,75,605/- it ahs been submitted that this has happened because of the uncleared cheques of Rs. 3,75,605/- which have been cleared in the account 5 in the succeeding year. The AO is hereby directed to verify such contention raised by the ld.counsel of the appellant and if the same appears to be true on actual verification of the bank account and the relevant documents, the AO is hereby directed to allow consequential relief of Rs. 3,75,605/- strictly in accordance with law."
5. Against this order the assessee is in appeal before us.
6. We have heard both the counsels and perused records. The ld.counsel for the assessee contended that authorities below have not properly appreciated the cash flow of the assessee. He further submitted that the assessee had not been given any benefit of depreciation and claimed that it was only on this account that there was miss match between the assesee's investment and funds. He claimed that though the income from tuck had been mentioned and shown u/s 44AE of the Act, he claimed that this does not preclude the benefit of depreciation into cash available with the assesee. The ldDR on the other hand relied upon the orders of ldCIT(A). We have carefully considered the submissions. We are in agreement with the contentions of the ld.counsel for the assessee that even where profit is offered and are computed u/s 44AE of the Act the benefit of depreciation in the funds available with the assesee has to be given. For this purpose we refer to the Sub Clause 4 of S.44AE of the Act, which reads as under.
6
"The written down value of any asset used for the purpose of business referred to in Sub-section 1 shall be deemed to have been calculated as if the assesee has claimed and has been actually allowed the reduction in respect of the depreciation for each of the relevant A.Ys. "
From the above it is very clear that there is presumption that the assessee has claimed and has been allowed depreciation. Hence in our considered opinion the matter needs to be reverted to the file of AO to properly appreciate the cash flow of the assessee. The AO shall examine the issue of funds available afresh. In doing so he shall allow the depreciation as funds available. Further more the cash available has to be worked out at the time of investment/expenditure and not overall as at the end of the year. Accordingly the issue is remitted to the files of AO with the above direction. Needless to add the assessee should be granted adequate opportunity of being heard.
7. In the result the assessee's appeal stands allowed for statistical purposes.
Order pronounced in the Open Court on 8th Feb. 2010, upon conclusion of hearing.
(C.L.SETHI) (SHAMIM YAHYA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 8th Feb. 2010
*manga
7
Copy of the Order forwarded to:
1.Appellant; 2.Respondent; 3.CIT; 4.CIT(A); 5.DR;
6.Guard File By Order Dy. Registrar