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Income Tax Appellate Tribunal, ‘B’ BENCH, KOLKATA
Before: Shri Rajpal Yadav, Vice-(KZ) & Shri Rajesh Kumar
Per Rajpal Yadav, Vice-President (KZ):- The present appeal is directed at the instance of assessee against the order of ld. Principal Commissioner of Income Tax, Kolkata-9, Kolkata dated 15.03.2021 passed under section 263 of the Income Tax Act, 1961 for assessment year 2016-17.
The assessee has taken four grounds of appeal, but in brief his grievance revolves around a single issue, namely the ld. Pr. CIT has erred in taking cognizance under section 263 of the Income Tax Act and thereby setting aside the assessment order dated 10.10.2018 passed under section 143(3) of the Income Tax Act.
Assessment Year: 2016-2017 Manish Periwal 3. Brief facts of the case are that the assessee is an individual engaged in the business of transportation. He has filed his return of income electronically on 19.01.2017 under section 139(4) of the Income Tax Act. An assessment order was passed under section 143(3) on 10.10.2018. The assessee was having six vehicles and he offered income under section 44AE at Rs.6,75,238/-. The ld. Assessing Officer has accepted the returned income from the business of Plying Goods Vehicles.
4. It emerges from the record that the ld. Assessing Officer himself has made a prayer to the ld. CIT for taking cognizance under section 263 as discernable from paragraph 2 of the impugned order. On the request of the ld. Assessing Officer, ld. Commissioner took cognizance under section 263 and issued a show-cause notice to the assessee, the copy of such show-cause notice is available at page 13 of the paper book, which reads as under:- “GOVERNMENT OF INDIA: MINISTRY OF FINANCE OFFICE OF THE PR.COMMISSIONER OF INCOME TAX-9 AAYAKR BHAWAN DAKSHIN : 2. GARIAHAT ROAP(SOUTffl.KOLKATA-7QO 068. No. Pr. CIT-9/Kol/ 263 /2020-21/ Dated 13/01/2020 To MANISH PERIWAL, PAN - ERPP4973J Sub: Proceedings u/s 263 of the I.T. Act, 1961 in the case of Shri Manish Periwal for the A.y. 2016-17 - Matter - Reg. Please refer to the above. From the examination of materials on record, it is seen that the assessment order u/s 143(3) of the I.T. Act dated 10/10/2018 passed by the A.O. for the A.Y. 2016-17 is erroneous in so far as it is prejudicial to the interests of the revenue. During the course of assessment proceedings of the assessee, the A.O. had failed to examine following issues: Under-reporting of income u/s 44AE of the Income Tax Act 2. During the year under consideration, the assessee was engaged in plying of 5 heavy goods vehicle A 1 other than heavy goods vehicle weighing 10,300 kg, Hence, the assessee was required to compute income in accordance with the provisions of Section 44AE of the I.T. Act. It is observed from the records that the assessee had under-reported the income u/s 44AE of the Act. The calculation of under reporting is tabulated below:
Assessment Year: 2016-2017 Manish Periwal SI. Vehicle No. Unladen Status Calculation of Total Income No. Weight income profit (in Rs.) u/s.44AE 01 WB851176 Rs. 2,27,516/- 17200 KG or Heavy goods (Rs.1000 X 18.9597755 vehicle 18.959755 (tons) X (tonsS) 12 (months) = 02 WB851176 17200 KG Rs. 2,27,516/- Heavy goods (Rs.1000 X vehicle 18.959755 (tons) X 12 (months) 03 WB851260 17200 KG Rs. 2,27,516/- Heavy goods (Rs.1000 X vehicle 18.959755 (tons) X 12 (months) 04 NL 10300 KG Other than Rs.7,500 X 12 Rs. 90,000/- 02/00688 Heavy goods vehicle 05 OR14Q0488 17200 KG Rs 2 27 5-~ - Heavy goods (Rs.1000 X vehicle 18.959755 (tons) X 12 (months) 06. WB695118 17200 KG Rs,2.27 Sir - Heavy goods (Rs.1000 X vehicle 18.959755 (tons) X 12 (months) 07 Deemed Profit u/s 44AE from 6 vehicles Rs.12,27,580/- 08 Rs. 6,75,238/- Deemed profit as calculated by the Assessee and accepted by the A.O during the assessment proceedings 09. Under-assessment of income / profit Rs. 5,52,342/-
In keeping with the provisions of section 44AE of the I, T. Act. 1961, the difference between the deemed profit calculated above and deemed profit shown by the assessee in ITR is to be treated as under-reported income. The Assessing Officer had accepted the returned income without making the required enquiry into the facts of the case as noted above which has made the assessment order erroneous in so far as it is prejudicial to the interests of the revenue.
In the light of the above, it is clear that the AO has, while passing the order u/s 143(3) of the Act, failed to make proper and the required enquiry/verification under clause (a) of Explanation 2 to section 263 of the I.T. Act, 1961 in respect of the above issue. As such, the assessment order u/s 143(3) of the I.T. Act, 1961 dated 10/10/2018 is erroneous and prejudicial to the interests of Revenue.
5. In view of the above, the impugned assessment order u/s 143(3) of the I.T. Act dated 10/10/2018 is proposed to be revised/set aside u/s 263 of the Income Tax Act.
Assessment Year: 2016-2017 Manish Periwal 6. For the purpose of hearing of your petition, the date fixed is 27/01/2021 at 1.00 p.m. in my chamber at Income Tax Office, Room No. 30, 2nd Floor, 2. Gariahat Road (South).Kolkata-700 068. Please note that it is not possible to grant further adjournment in this case beyond the date of hearing fixed herein above. Therefore, you are requested to file your written submissions, either in person or through representative, duly authorized in writing or through Email 10 [Kolkata.pcit9@incometax.gov.in] or by post together with supporting documents on or before 27/01/2021 without fail. Sd/- (Kachui Timothy Zimik) Pr. Commissioner of Income Tax - 9, Kolkata”
In response to the show-cause notice, the assessee has filed written submission. It was contended by the assessee that classification of vehicles for taking different income under section 44AE has been inserted by Finance Act, 2018 and it is not applicable upon the assessee in A.Y. 2016-17. This aspect has been duly noticed by the ld. Commissioner in paragraphs no. 5 to 7 of the impugned order. However, this submission of the assessee did not meet the approval of the ld. CIT. For better appreciation of the facts and circumstances, we deem it appropriate to take note of the submission made by the assessee as well as the finding recorded by the ld. Commissioner in this regard, which reads as under:-
“5. In compliance to the above, the assessee vide letter dated 22/01/2021 had requested to drop the revision proceedings. The relevant portion of the submission is reproduced hereunder for ready reference.
"In the above mentioned notice your goodself has asked us to give explanation regarding the calculation of Income u/s 44AE of the Income Tax Act, 1961. We would like state that you have made calculation on the basis of Unladen Weight and subsequently classifying the vehicle as a Heavy Goods Vehicle (HGV) or Other than Heavy Goods Vehicle (OTHGV) and then calculated income on HGV at the rate of 1,000 per ton per month and on OTHGV at the rate of 37.500 per vehicle per month. However, this method of calculation was introduced bv the Finance Act, 2018 by amending Section 44AE of the Income Tax Act, 1961 and thus applicable on AY 2019-20 and subsequent assessment years. An extract of the Finance Act, 2018 has been attached herewith for your reference.
Since this particular case is related to AY 2016-17 the above method of classifying in HGV and OTHGV cannot be applied. The previous regime wherein a blanket rate of 7,500 per month per vehicle was applied without classifying into HDV or OTHGV shall be applicable. Thus, the calculation of income will be as follows:
Assessment Year: 2016-2017 Manish Periwal
SN Particulars Amount (in Rs.) A 5,40,000 Presumptive income u/s 44AE- Rs.75000/-*12*6 vehicle B 6,75,238 Income claimed to have been actually earned C Taxable income (higher of A or B) 6,75,328 The submission of the assessee is considered and placed on record.
6, The submission of the assessee is required to be checked with the Income Tax Act' 1961 as amended by Finance Act 2018 where it is clearly written that:
“following sub-section (2) shall be substituted for the existing sub-section (2) of section 44AE by the Finance Act, 2018, w.e.f. 1-4-2019:
(2) For the purposes of sub-section (1), the profits and gains from each goods carriage,
(i) being a heavy goods vehicle, shall be an amount equal to one thousand rupees per ton of gross vehicle weight or unladen weight, as the case may be, for every month or part of a month during which the heavy goods vehicle is owned by the assessee in the previous year or an amount claimed to have been actually earned from such vehicle, whichever is higher;
(ii) other than heavy goods vehicle, shall be an amount equal to seven thousand five hundred rupees for every month or part of a month during which the goods carriage is owned by the assessee in the previous year or an amount claimed to have been actually earned from such goods carriage, whichever is higher.”
Prior to the said amendment section 44AE read as under: (2) For the purpose of sub-section (1), the profits and gains from each goods carriage shall be an amount equal to seven thousand five hundred rupees for every month or part of a month during which the goods carriage is owned by the assessee in the previous year or an amount claimed to have been actually earned from the vehicle, whichever is higher.
From the above discussions, it is seen that the AO has not properly examined the facts of the case and the provisions the 44AE of the Act while passing the order dated 10/10/2018. Therefore, the assessment order dated 10/10/2018 is set aside being erroneous and prejudicial to the interests of the revenue with the direction to make the required enquiries regarding the issues raised in this case and to pass a reasoned fresh assessment after giving sufficient opportunities of being heard to the assessee”.
With the assistance of the ld. Representative, we have gone through the record carefully. Ld. Counsel for the assessee emphasized on the point
Assessment Year: 2016-2017 Manish Periwal that change in the law is not applicable on the assessee in this assessment year, whereas ld. CIT(DR) relied upon the order of the ld. Pr. CIT. On due consideration of the above facts and circumstances, we are of the view that there is no error committed by the ld. Assessing Officer. He followed position of law as available in section 44AE at that point of time as applicable in A.Y. 2016-17. On the other hand, ld. CIT did not record any finding on this aspect. The brief finding which is recorded is available only in paragraph no. 8 and this finding is totally silent on the submissions made by the assessee as noticed by the ld. CIT in paragraphs no. 5 & 6. There is no mention as to how the position of law changed by the Finance Act, 2018, which has been made applicable w.e.f. 1st April, 2019 is applicable upon the assessee in this year. Therefore, we are of the view that the ld. Pr. CIT is not justified in setting aside the assessment order. We allow this appeal and quash the impugned order.