PROFESSIONAL AUTOMOTIVES PRIVATE LIMITED,JAMMU vs. ASSISSTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR

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BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihyla-@ITA Nos.809 to 815/JP/2025
fu/kZkj.k o"kZ@Assessment Years :2013-14 to 2019-20
Central Circle- 1,
Jaipur
LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.:AAACP9608E vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by :Shri Tarun Mittal, CA jktLo dh vksjls@Revenue by: Shri Ajey Malik, CIT (Th. V.C) lquokbZ dh rkjh[k@Date of Hearing

: 03/07/2025
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 23/07/2025

vkns'k@ORDER

PER: RATHOD KAMLESH JAYANTBHAI, AM

The present bunch of sevenappeals filed by the assessee aggrieved from the seven different order of the learned Commissioner of Income Tax
(Appeal)-4, Jaipur[ for short CIT(A)] for the assessment years 2013-14 to 2019-20 dated 11.04.2025, 08.05.2025, 09.05.2025. The said order of the ld. CIT(A) arise as against the order dated 30.07.2021& 17.08.2021 passed
Professional Automotives Private Limited vs. ACIT under section 143(3)& 153A r.w.s 143(3)of the Income Tax Act, 1961 [ for short Act ]by ACIT, Central Circle-1, Jaipur [ for short AO ].The details of the order under challenge are as under :
ITA no Assessment year
Date of order of ld.
CIT(A)
Date of order of ld. AO
Order passed u/s.
by ld. AO
815/JP/2025
2019-20
11.04.2025
30.07.2021
143(3)
814/JP/2025
2018-19
09.05.2025
17.08.2021
153A r.w.s. 143(3)
813/JP/2025
2017-18
09.05.2025
30.07.2021
153A r.w.s. 143(3)
812/JP/2025
2016-17
09.05.2025
30.07.2021
153A r.w.s. 143(3)
811/JP/2025
2015-16
09.05.2025
30.07.2021
153A r.w.s. 143(3)
810/JP/2025
2014-15
09.05.2025
30.07.2021
153A r.w.s. 143(3)
809/JP/2025
2013-14
08.05.2025
30.07.2021
153A r.w.s. 143(3)

Ld. AO made disallowance of Rs. 4,680/- on account delayed payment PF.

Ground No. 1 & 1.1
4.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
In this ground of appeal the appellant has made a common submission for different assessment years. In the submissions firstly the appellant has contended against the additions made in the assessment orders and the specific submissions have also been given by the appellant in the respective grounds of appeal against such specificadditions. The contentions of the appellant have been considered in the adjudication of the grounds of appeal against such specific additions. Further, the issue raised by the appellant is that for A.Y. 2013-
14 and 2014-15, case of assessee was selected for scrutiny and assessment was completed us 143(3) and that in assessment so completed for AY 2013-14 and 2014-15, the expenses claimed under the head Trip and Toll expenses and Repairs & Maintenance expenses were not doubted and petty disallowance were made out of other expenses claimed such as office expenses. printing etc. The appellant has further contended that for A.Y. 2015-16 to 2017-18, case was not picked for scrutiny and thus the Return of Income filed by assessee had attained finality. No proceedings relating to the assessment with respect to these assessment years under appeal were pending before the Ld. AO as on the date of search, and therefore, the Ld. AO's juri iction u/s 153A was limited only to the material found during the course of search and he could not have made additions/disallowance in the assessments u/s 153A without referring to any incriminating material found / seized during the course of search. It was not permissible for the Ld. AO to make regular scrutiny assessments under the garb of assessment u/s 153A in view of the fact that the return of income filed way back in regular course has attained finality as case was not selected for scrutiny and time for such selection has already lapsed. However these contentions of the appellant are not relevant as during the course of search and seizure action incriminating material was unearthed on the issue of Repairs & Maintenance expenses and on the issue of Toll & Trip Expenses.
On the issue of repair and maintenance expenses, bogus bills were found which were prepared by the appellant itselfhowever shown to have been received from the repairing persons. Also the large amount of such expenses were found to be not represented by any bill or voucher. During the search proceedings on 26.02.2019, various incriminating documents were found & seized from the business premises of M/s Professional Automotives Pvt. Ltd. situated at Sahu
Nagar, Cement Factory. Sawai Madhopur, which were annexed as per annexure
AS, Ex-1 to 118. All the incriminating documents are related to bills & vouchers related to revenue nature. Further, on verification of such bills & vouchers, it was noticed that most of the vouchers are self-made &seems to be bogus/dummy.
The name/business concerns mentioned on some of the bills/vouchers were exactly the same, as stated by the accountant of the assessee Firm during the course of initial search proeceedings such as (1) ChhotuMistri (2) New NSE (3)
Star Seat Repairing Works (4) Shahnawaj Body Repairing (5) Shahnwaj Body
Repairing etc. Further, during the search proceedings all the bill book were seized as a documentary evidences, which proves the modus operandi of claiming bogus expenditure by the company. It is pertinent to mention here that bill-book, as seized during the course of initial search proceedings dated 18.01.2019 are partly in the form of blank. On the other handpartly bills are in the form of estimation of bill in the name of M/s Professional Automotives Pvt. Ltd. PAPL)
Similarly, accountant Shri Manish Kumar Mor also clearly stated in his statement that penalty levied by the RTO &Trafic police to the company's vehicles across over in India were settled by the drivers of such vehicle in cash at that moment.
The same penalty amount was not debited in the books of account under the head penalty. For adjustment of such expenses, the same were debited in the books under the head Toll & Trip Expenses in the books of M/s Professional
Automotive Pvt. Ltd. (PAPL) in various years. Although, receipts of such penalties are annexed by them in their trip related files. Further, he was asked to verify all these expenses, which were debited in the books of account, but he was unable to verify the same.
However, on the basis of documents found from the premise of assessseecompany(PAPL), a summarized chart were prepared in different years to find out the disallowable expenses on account of missing vouchers/bogus vouchers under the head "Repairs & maintenance" and "Toll & Trip Expenses".
For this, a data was prepared for a particular month in different years to verify the genuineness of expenses debited under the head "Repairs & Maintenance" and "Toll & Trip Expenses" in the books of M/s PAPL. On the basis of such data, which was prepared on monthly basis, an estimation of amount of disallowable expenses was worked out in particular year under the head "Repairs &
maintenance" and "Toll & Trip Expenses" in the case of M/s PAPL. The same is also making a part of while recording statement of Shri Om Prakash Agarwal
(Gupta) vide Q. No. 10 to 11 dated28.02.2019. The summarized chart is reproducing as under: -
It was found during the course of search and seizure action that the appellant had claimed excessive repairs and maintenance expenses and the appellant also indulged into manufacturing of bogus bills of repairs and maintenance. Further on the issue of: trip expenses it was found during the course of search and seizure action that disallowable expenses had been claimed as allowable expenses by the appellant and no separate disclosure of expenses of violation of law were not disclosed by the appellant. Accordingly surrender was also made by the appellant during the course of search and seizure proceedings. The surrender was not honoured by the appellant in the return of income.
The 'incriminating material' can be in any form such as evidence in the nature of Professional Automotives Private Limited vs. ACIT i) a document, content of any document ii) an entry in books of account, iii) an asset, iv) a statement given on oath, v) absence of any fact claimed earlier but coming to notice during search, vi) absence of books being found during search; or vii) absence of the office/ business premises as claimed during returns filed or any other documents, etc.
In short, any fact/ evidence which could suggest that the documents/transactions claimed or submitted in any earlier proceedings were not genuine, being only a device/ make belief based on non-existent facts or suppressed/misrepresented facts, would constitute an incriminating material sufficient to make assessment for the purposes of the Act. A mere statement u/s 132(4) is an evidence for making an assessment as held by apex court in B. Kishore Kumar Vs DCIT 234 Taxman
771(SC) and even a statement u/s 132(4) shall also constitute incriminating material to dislodge any earlier finding for the purpose of making an assessment u/s 153A
Commissioner of Income-tax, Thichur v. ST. Francis Clay Decor Tiles [2016] 70
taxmann.com 234 (Kerala)/[2016] 240 Taxman 168 (Kerala)/[2016] 385 ITR 624
(Kerala)/[2016] 287 CTR 187 (Kerala) [22-03-2016]
"18. On going through Section 132 of the Income Tax Act, what we find is that if the authority specified therein has reason to believe that any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922
(11 of 1922), or under sub-section (1) of section 131 of the 1961 Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 142 of 1961 Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice etc, etc., can authorise the officers referred therein to enter and search any building etc. etc. Such authorised officer under sub-section (4) of Section 132 may during the course of search or seizure examine on oath any person who is found to be in possession or control of any books of account, document, money, bullion, jewellery or other valuable article or thing and any statement made by such personduring such examination may thereafter be used in evidence in any proceeding under the Indian Income-
Officer, by virtue of the power conferred on him under section 153A was competent to issue notice under the said provision and require the assessee firms to furnish the returns as provided thereunder. Neither under section 132 or under section 153A, the phraseology "incriminating" is used by the Parliament.
Therefore, any material which was unearthed during search operations or any statement made during the course of search by the assessee is a valuable piece of evidence in order to invoke section 153A of the Income Tax Act, 1961".
(Emphasis Supplied)
The word "incriminating", in the context of section 153A has to be seen as something which can have or may have a bearing on the assessment of correct total income u/s 2(45) as per provisions of the Act. Incriminating material for the purposes of section 153A has to be necessarily construed to be in the nature of a prima facie evidence only (including a circumstantial evidence). Such evidence may or may not turn out to be conclusive evidence after the verification/inquiry during the assessment proceedings.
In the context of section 153C, the use of the expression "books of accounts' u/s 153C again suggests that even the entries recorded in the books of accounts, which have not been correctly recorded or camouflaged would also partake the character of incriminating material, if the same has a bearing on the determination of income which has not been already disclosed in the return filed, if any. The entries in the regular books of accounts would also trigger the assessment u/s 153A/153C, if there is some prima facie evidence that the entry recorded therein is camouflaged, or incorrect, wholly or partially, and such entries have a bearingon determination of total income of such person.
The provisions of section 153A/153C are not the normal assessment provisions like 143(3), rather they are curative provisions to plug the mischief of evasion of taxable income based on evidences found in pursuance to searchand if on account of search, the facts and circumstances suggest that any entry already appearing in books or accepted in earlier assessments based on documents submitted at that point of time, are camouflaged or manipulated or reflected to be in the nature or from a source which is different from the real nature or source as appearing from the evidences found during a subsequent search, then such material/ facts coming to fore now will definitely constitute an incriminating material. In consequence of the same the earlier recorded entries/earlier admitted documents and evidence shall have no force as genuine evidence. If it were held not to be so, then the purpose of 153A would be defeated as it would fail to prevent the mischief, which it sought to prevent just because the entries were already recoded in the books or some documents had already been accepted.
Applying the Hayden's Rule of Mischief, the mere fact that such entries are recorded in the books of accounts or some fabricated or colourful documents have already been accepted as correct, will not prevent such material or entry from being incriminating, if the circumstances suggest otherwise. The Hayden's rule of mischief has been judicially accepted and applied by Calcutta High Court in Reckitt Colman of India Ltd. vs. ACIT (2001) 252 ITR 550 (Cal).
There is a distinction between a mere change of opinion and a change of opinion based on fresh facts. The latter would imply that the earlier conclusions of the AO were misled by placing evidence on suppression or misrepresentation of material facts. An order passed by the AO relying upon such make belief documents,
Professional Automotives Private Limited vs. ACIT suppressed or misrepresented facts, which were later found to be not true, shall become void or voidable, as the case may be. Under such circumstances, the acceptance of any claim, relief etc. in any earlier order shall also have no binding force in any subsequent proceedings and the change of opinion would be permissible. The Courts have accepted the principle that any fraud practiced on the court is always a ground for vacating the judgment, as where the court is deceived or misled asto material circumstances, or its process is abused, resulting in the rendition of a judgment, which would not have been given if the whole conduct of the case had been fair"
As per the judgement of the Hon'ble Madras High Court in case of L. Mohanamvs
Mohamed Idris on 24 June, 2011 in O.S.A.No.310 of 2010-
19. In support of his contention, the learned senior counsel for the appellant/plaintiff relied on the decision of the Hon'ble Supreme Court in Hamza
Haji V. State of Kerala and another reported in (2006) 7 SCC 416, wherein it has been observed that a decision obtained by playing a fraud on Court is liable to be set aside on the basic principle that the party who secured such a decision by fraud cannot be allowed to enjoy its fruits. The learned senior counsel also relied on the observation of the Hon'ble Supreme Court in State of Andhra Pradesh and another Vs. T.Suryachandra Rao reported in (2005) 6 SCC 149 to the effect that the fraud vitiates every solemn Act and fraud and justice never dwell together. In A.V.PapayyaSastry and Others Vs. Govt. Of Andhra Pradesh and others reported in (2007) 4 Supreme Court Cases 221 also, the Hon'ble Supreme Court has observed that fraud vitiates all judicial acts whether in rem or in personam and that a judgment, decree or order obtained by fraud has to be treated as non-est and nullity, whether by the Court of first instance or by the final Court and that the same can be challenged in any Court, at any time, in appeal, revision, writ or even in collateral proceedings. In North Eastern Railway Administration,
Cases 511, the Hon'ble Supreme Court has again reiterated the point that a judgment or decree obtained by fraud either in the first court or in the highest
Court, is a nullity in the eye of law.
Section 44 of the Evidence Act also enables a party otherwise bound by a previous adjudication to show that it was not final or binding because it isvitiated by fraud. The provision gives juri iction and authority to a Court to consider and decide the question whether a prior adjudication is vitiated by fraud. The above propositions of law abundantly make clear that the AO also being a quasi-judicial authority, while functioning under the Act, shall also be bound by similar principles of jurisprudence. For the purposes of assessment of total income u/s 153A also,
Professional Automotives Private Limited vs. ACIT any findings given in respect of any claim/relief in earlier proceedings shall stand vacated by operation of legal principles where it is found that in earlier proceedings the AO has been misled by suppression or misrepresentation of material facts or by producing only make belief documents, which were not found to be genuine subsequently based on emergence of new facts during enquiries.
The view that the AO cannot rescind from accepting the documents admitted earlier is not a gospel truth which can be applied in each and every circumstance.
As per the judgement of the Hon'ble Apex court in ITO Vs. Techspan India (P.)
Ltd. 92 taxmann.com 361 (SC)-
Whether before interfering with proposed re-opening of assessment on ground that same is based only on a change of opinion, Court ought to verify whether assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is basis of alleged escapement of income that was taxable, if assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to Assessing Officer any opinion on questions that are raised in proposed re-assessment proceedings -Held, yes
Whether every attempt to bring to tax income that has escaped assessment, cannot be absorbed by judicial Intervention on an assumed change of opinion even in cases where order of assessment does not address itself to a given aspect sought to be examined in re-assessment proceedings -Held, yes
Applying the above principle in the present context also, it can be safely concluded that in the absence of any categorical finding on the genuineness of a claim in an earlier assessment having being accepted on make belief documents/evidences only, it cannot be said that the A.O. has expressed any opinion on the correctness or otherwise of the items/entries disclosed in the return of income already filed prior to the search. The judicial view is very clear wherein it has been held that the mere submission of some documents proving identity or bank account, affidavits in contrast to the other evidences suggesting the transaction to be suspicious cannot be accepted to have established the genuineness of transaction. If any earlier finding has been found to be vitiated or incorrect based on material found subsequently, the AOshall have powers to review such findings based on any tangible material coming to his notice, while exercising power of assessment of total income u/s 153A.
5.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
(i) The brief facts as per the assessment order are that with respect to theexpenses debited under the head "Toll & Trip Expenses" the accountant Shri
Manish Kumar Mor has stated that penalty levied by the RTO & Traffic police to the company's vehicles across over in India were settled by the drivers of such vehicle in cash at that moment. The same penalty amount was not debited in the books of account under the head penalty. For adjustment of such expenses, the same were debited in the books under the head Toll & Trip Expenses in the books of M/s Professional Automotive Pvt. Ltd. (PAPL) in various years. These expenses which were debited in the books of account, but he was unable to verify the same. On perusal of vouchers, which was debited under the head "Toll & Trip
Expenses" in appellant company, it was noticed that various vouchers are related to payments made to RTO & Traffic police across the India, in the nature of penalty.
The director of the assessee company had stated in his statement that this type of expenses are related to various type of expenses made in cash to RTO &
traffic police for charging of fine against Motor vehicle Act.
(ii) Accordingly, On the basis of documents found from the premise of assessee company(PAPL), a summarized chart were prepared in different years to find out the disallowable expenses on account of missing vouchers/bogus vouchers under the head "Toll & Trip Expenses".
(iii) During the appellate proceedings, the appellant has submitted that the appellant company is engaged in the Transportation of "Four wheeler vehicles"
throughout the country and all the expenses pertaining to a trip i.e. Diesel, Toll tax, RTO expenses, other incidental petty expenses incurred on that trip are debited to Toll and trip expenses and payment for such expenses were primarily made by drivers "on the spot" by way of composition fees and other taxes etc.
However, the survey team as well as Id. AO has not looked into the real nature of expenses incurred and debited under the head "Toll & Trip Expenses" and entire expenses paid to various RTOS were treated as Penalties under Motor vehicles
Act without analyzing the same precisely.
The appellant claimed to have the documents on the basis of which disallowance was made wereprimarily payment to RTO's which can be categorized under following heads:
The appellant contention is that except Shasti, all the payments are basically in the nature of technical default which are compensatory in nature and the same can't be termed as offence/violation of law an the payments made to RTOS include Composition fees, Taxes, fee charged due to Overall length and height of Motor Vehicle being higher than permissible limit, driver not in Uniform, defective tail Lamp, Registration mark and Shastietc and that except Shasti, ie Penalty all other payments are in the nature of fees charged for some or the other irregularity, and therefore are allowable u/s 37 (1), being incurred wholly and exclusively for the purpose of business.
Surrender during the search action:-
Pr. CIT v. Shri RoshanLal Sancheti [IT Appeal No 47 of 2018, dated 30-10-2018],
Hon'ble Rajasthan High Court sti IT Appeal No 47 of 2018, dated 2
'This court in CIT, Bikaner v. Ravi Mathur, supra, which judgment has been relied by the ITAT in the present case, after considering catena of previous decisions, held that the statements recorded under section 132(4) of the IT Act have great evidentiary value and they cannot be discarded summarily and cryptic manner, by simply observing that the assessee retracted from his statement. One has to come to a definite finding as to the manner in which the retraction takes place.
Such retraction should be made as soon as possible and immediately after such statement has been recorded by filing a complaint to the higher officials or otherwise brought to the notice of the higher officials by way of duly sworn affidavit or statement supported by convincing evidence, stating that the earlier statement was recorded under pressure, coercion or compulsion. We deem it appropriate to reproduce para 15 of the said judgment, which reads thus,
"15. In our view, the statements recorded under section 132(4) have great evidentiary value and it cannot be discarded as in the instant case ITA No.
720/JP/2017 M/s BannalalJat Construction Pvt. Ltd., Bhilwara v. ACIT, Central
Circle-Ajmer by the Tribunal in a summary or in a cryptic manner. Statements recorded under section 132(4) cannot be discarded by simply observing thatthe assessee retracted the statements. One has to come to a definite finding as to the manner in which retraction takes place. On perusal of the facts noticed hereinbefore, we have noticed that while the statements were recorded at the time of search on 9-11-1995 and onwards but retraction, is almost after an year and that too when the assessment proceedings were being taken up in November
1996. We may observe that retraction should be made as soon as possible and immediately after such a statement has been recorded, either by filing a complaint to the higher officials or otherwise brought to the notice of the higher officials, either by way of a duly swom affidavit or statements supported by convincing evidence through which an assessee could demonstrate that the statements initially recorded were under pressure/coercion and factually incorrect. In our view, retraction after a sufficient long gap or point of time, as in the instant case, loses its significance and is an afterthought. Once statements have been recorded on oath, duly signed, it has a great evidentiary value and it is normally presumed that whatever stated at the time of recording of statements under section 132(4), are true and correct and brings out the correct picture, as by that time the assessee is uninfluenced by external agencies. Thus, whenever an assessee pleads that the statements have been obtained forcefully/by coercion/undue influence without material/contrary to the material, then it should be supported by strong evidence which we have observed hereinbefore. Once a Professional Automotives Private Limited vs. ACIT statement is recorded under section 132(4), such a statement can be used as a strong evidence against the assessee in assessing the income, the burden lies on the assessee to establish that the admission made in the statements are incorrect/wrong and that burden has to be discharged by an assessee at the earliest point of time and in the instant case we notice that the AO in the Assessment Order observes ME TAY "Regarding the amount of Rs. 44.285
lakhs, it is now contended that the statement u/s 132(4) was not correct and these amounts are in ITA No. 720/JP/2017 M/s Bannalaljat Construction Pvt. Ltd.,
Bhilwara v. ACIT, Central Circle-Ajmer thousands, not lakhs i.e. it is now attempted to retract from the statements made at the time of S & S operations."
Therefore, what we gather from the Assessment Order and on perusal of the above finding that the retraction was at the stage when the assessment proceedings were being finalized i.e. almost after a gap of more than an year.
Such a so-called retraction in our view is no retraction in law and is simply a self- serving statement without any material.
In the above judgement, inter-alia, the following arguments were taken on behalf of the assesse which stand rejected:-
"Per contra, Mr. Prakul Khurana, learned counsel for the respondent-assessee submitted that the surrender was extracted from the assessee by income taxauthorities during the search proceedings by use of coercion, duress and threat, which facts have been explained by the assessee in greater detail in the affidavit of retraction. It is argued that affidavits of Shri Suresh, Shri Ashok Jat and ShriPadam Kumar Jain were also filed, in which they have stated on oath that they did not own any land and therefore there did not arise any question of their accepting any advance from the assessee. Learned counsel referred to Instruction No. 286/2003-IT(Inv.) dated 10.03.2003 issued by the Central Board of Direct Taxes which acknowledges the fact that in certain cases, assessees are forced to disclosed the income during the course of search, seizure and survey operations. It was advised therein that there should be focus and concentration on collection of evidence of income which lead to information of what has not been disclosed or is not likely to be disclosed before the Income Tax Department, and no attempt should be made to obtain confession as to any disclosed income.
Circumstances in which the assessee had to give the statements under Section 132(4) and/or under Section 131 of the Act have been explained in the affidavit filed on 20.05.2013. The very fact that the search continued for as long as 36
hours indicates that coercion and undue influence were exercised by the authorities of the appellantdepartment for making surrender. The affidavit filed by the assessee on 20.05.2013 explained in minute details the circumstances which Professional Automotives Private Limited vs. ACIT led to surrender and how the surrender was extracted from the assessee from the aforesaid seven papers. The assessee has not brought any evidence on record to prove the facts mentioned by the assessee in the affidavit. The persons whose names were mentioned on the papers seized by the department have also denied any amount having been received by them from the assessee as advance against the sale of the properties/land
Learned counsel argued that the Assessing Officer has not given any reason in the assessment order as to why the explanation given by the assessee in the affidavit was not acceptable. Learned CIT(A) has given detailed reasons in respect of each deletion of the addition made by the Assessing Officer. Learned counsel in support of his arguments relied upon the judgment of the Supreme
Court in Pullangode Rubber Produce Company Ltd. Vs. State of Kerala &
Vs. DCIT (TDS) JP, (2017) 87 Taxmann.com 184 Rajasthan; Commissioner of Income Tax Vs. Vegetable Products Ltd. (1973) 88 ITR 192 (SC) and argued that if two views are possible, the view in favour of the assessee should be preferred.
Reliance is also placed on the judgments in Commissioner of Income Tax Vs.
K.Y. Pilliah& Sons, (1967) 63 ITR 411 (SC), Deputy Commissioner of Income Tax
Vs. RatanCorpn., (2005) 197 CTR 536 (Gujarat); The Assistant Commissioner of Income Tax, Central Circle, Ajmer Vs. ShriDevendra Kumar Choudhary, 2-S-10 to 2-S-18, BasantVihar, Bhilwara, ITA No. 828/JP/16, Commissioner of Income Tax
Vs. Ashok Kumar Soni, (2007) 291, ITR, 172 (Raj.), KailashbenManharlal
Chokshi Vs. Commissioner of Income Tax, (2008) 174 Taxman 466 (Gujarat);
Commissioner of Income Tax, Central-II, Mumbai Vs. Omprakash K. Jain, (2009)
178 Taxman 179 (Bombay); Mehta Parikh & Co. Vs. Commissioner of Income
Tax, (1956) 30 ITR 181 (SC); Shree Ganesh Trading Co. Vs. Commissioner of Income Tax, Dhanbad, (2013) 257 CTR 159 (Jharkhand), Commissioner of Income Tax, Karnataka Vs. ShriRamdas Motor Transport Ltd. (2015) 230 Taxman
(2016) 288 CTR 579 (Gujarat)."
(Emphasis Supplied)
The Hon'ble Rajasthan High Court in this case further held as under.-
"In view of the law discussed above, it must be held that statement recorded under Section 132(4) of the Act and later confirmed in statement recorded under Section 131 of the Act, cannot be discarded simply by observing that the assessee has retracted the same because such retraction ought to have been generally made within reasonable time or by filing complaint to superior authorities or otherwise brought to notice of the higher officials by filing duly sworn affidavit or statement supported by convincing evidence. Such a statement when recorded at two stages cannot be discarded summarily in cryptic manner by observing that the assessee in a belatedly filed affidavit has retracted from his statement. Such retraction is required to be made as soon as possible or immediately after the statement of the assessee was recorded. Duration of time when such retraction is made assumes significance and in the present case retraction has been made by the assessee after almost eight months to be precise, 237 days
(Emphasis supplied)
CIT, Bikaner vs. Shri Ravi Mathur (D.B. Income-tax Appeal No. 67/2002), Hon'ble
Rajasthan High Court
"Once a statement is recorded u/s 132(4), such a statement can be used as a strong evidence against the assessee in assessing the income, the burden lies on the assessee to establish that the admission made in the statements are incorrect/wrong and that burden has to be discharged by an assessee at the earliest point of time.....such a so-called retraction in our view is no retraction in law and is simply a self -serving statement without any material".
Commissioner of Income-tax v. MAC Public Charitable Trust [2022] 144
taxmann.com 54 (Madras)/[2023] 450 ITR 368 (Madras) [31-10-2022]
"63. The statements given to the Assessing officer under section 132 (4) have legal force. Unless the retractions are made within a short span of time, supported by affidavit swearing that the contents are incorrect and it was obtained under force, coercion and by lodging a complaint with higher officials, the same cannot be treated as retracted. This position laid down in catena of decisions by the various High Courts in Lekh Raj Dhunna (supra), Bachittar Singh (supra).
Rameshchandra& Co. v. CIT[1987] 35 Taxman 153/168 ITR 375 (Bom.), Dr. S.C.
Gupta (supra), CIT v. Hotel Meriya [2010] 195 Taxman 459/[2011] 332 ITR 537
(Ker.) O. Abdul Razak (supra)."
(Emphasis Supplied)
Commissioner of Income-tax v. Lekh Raj Dhunna [2012] 20 taxmann.com 554
(Punjab & Haryana)/[2012] 344 ITR 352 (Punjab & Haryana)/[2010] 236 CTR 414
(Punjab & Haryana) [29-09-2010]

"15. Having crystalized legal position, it is now apt to delve on the factual situation of the present case. It is not in dispute that the assessee had made a statement under s. 132(4) of the Act whereby a surrender of Rs. 2,00,000 was made.
Besides this, the assessee had admitted that he had eamed commission from M/s
P.M.S. Enterprises, Phagwara which was not disclosed in the return filed by him.
The relevant portion of the statement reads as follows
"I am selling agent of Mis P.M.S. Enterprises, Railway Road, Phagwara and get commission @ 2 per cent on the sales effected through me. I have no other source of income except interest from firm on deposit with the firm. My wife is a housewife and does tailoring work on a very small scale."
16. Further, during search, certain sale documents were seized which bore the signatures of the assessee as well. The said documents depicted total sales of Rs. 4,92,03,005 as noticed earlier.
17. Thus, in view of sub-ss. (4) and (4A) of s. 132 of the Act, the AO was justified in drawing presumption against the assessee and had made addition of Rs.
9,00,000 in his income under s. 68 of the Act. The onus was upon the assessee to have produced cogent material to rebut the aforesaid presumption which he had failed to displace. The assessee retracted from the said statement vide letters dt.24th Nov., 1998 and 11th March, 1999 during the course of assessment proceedings. However, no value could be attached thereto in the present case. In case the statement which was made by the assessee at the time of search and seizure was under pressure or due to coercion, the assessee could have retracted from the same at the earliest. No plausible explanation has been furnished as to why the said statement could not be withdrawn earlier. In sucha situation, the authenticity of the statement by virtue of which surrender had been made at the time of search cannot be held to be bad. The Tribunal, thus, erred in concluding otherwise. The Tribunal, therefore, was not justified in reversing the order of the AO which was affirmed by the CIT(A) also."
6 SOT 18 (Mumbai) [07-11-2005), the Hon'ble ITAT while coming to a conclusion as to the admissibility of a retraction made on an affidavit by the assessee, laid out certain reasoning for not admitting the same. The conclusions drawn by the Tribunal gives an insight to ascertain as to what the Courts have regard to, while dealing with retractions and how a retraction should be framed. The relevant extract is given hereunder-
1. What was retracted subsequently was only a denial. No material evidence was furnished so as to discharge onus cast on the assessee by virtue of statement recorded under sections 132(4) and 131(1A).
2 Presumption raised under section 132(4A) is not rebutted by the assessee by submitting cogent evidence. Hence, the statement given under sections 132(4) and 131(1A) hold their evidentiary value.
3 No material has been submitted to show that there was any pressure or coercion was exercised while recording the statements under sections 132(4) and 131(1A). No complaint was filed immediately after search or recording of statement under section 131(1A) to show that there was any pressure or coercion. Statement under section 132(4) was recorded before witnesses. Hence, there is a presumption that there was no pressure/coercion unless proved.
4 Disclosure was enhanced during statement under section 131(1A) as compared to be given under section 132(4). Hence, the theory of pressure or coercion applied during recording of statement under section 132(4) is not acceptable.
5. The assessee is silent for about 11 months. No letter/correspondence was sent immediately after recording of statement under section 132(4). Hence, theory of pressure or coercion is only an after- thought.
6. Disclosure of several items were based on documents found in the search.
These documents were explained under sections 132(4) and 131(1A). Hence, there is a strong reason to believe that statement under section 132(4)/131(1A) revealcorrect state of affairs and retraction has to be ignored."
In view of the above discussion the addition made in the assessment order is liable to be confirmed.
Without prejudice:-
(iv) In order to verify the contention of the appellant, that the expenses debited under the head "Toll & Trip Expenses", are allowable or not as per the provisions of section 37 of the Income Tax Act, 1961, the relevant provision of section 37 are reproduced hereunder-
"37. (1) Any expenditure(not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession"
Explanation 1-For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.
Explanation 2-For the removal of doubts, it is hereby declared that for the purposes of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession
(Explanation 3-For the removal of doubts, it is hereby clarified that the expression
"expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law" under Explanation 1, shall include and shall be deemed to have always included the expenditure incurred by an assessee-
(i) for any purpose which is an offence under, or which is prohibited by, any law for the time being in force, in India or outside India or (ii) to provide any benefit or perquisite, in whatever form, to a person, whether or not carrying on a business or exercising a profession, and acceptance of such benefit or perquisite by such person is in violation of any law or rule or regulation or guideline as the case may be, for the time being in force, governing the conduct of such person or (ii) to compound an offence under any law for the time being in force, in India or 231 outside India]]
(2) [*]
(28) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party.
(3) [*]
(3A) [
(3B)
(3C)
(3D) [
(4)
(5)
As per section 37 of the Act, any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of business or profession shall be allowed in computing the income chargeable under the head 'Profit and gains of business or profession". However this is subject to the following exceptions which are relevant for the adjudication of the present issue at hand- expenditure incurred for any purpose which is an offunge expenditure incurred for any purpose which is prohibited by lnw thus in the present case the appellant is required to show that not only that the expenditure was incurred wholly and exclusively for the purpose of business but also required to prove that same was not incurred for any purpose which is an offence and also required to prove that the expenditure was not incurred for any purpose prohibited by law. which is (v) In the present case the core accepted fact of the case is that the appellant has paid traffic challans. These challans are in the nature of payment for the violation of provisions of Motor Vehicles Act. The director of the company also stated in the statement that for the purpose of early settlement of the issue the payment has been made in the form of composition fee. Thus due to the violation of the law there was a likelihood of the impounding of the vehicle of the appellant however for the early settlement of the matter composition fees was paid.
The appellant has contended in the submission is that only the "shasti" or the penalty could be disallowed and not the other payments of traffic challans. The appellant has restricted the submissions to the issue of purpose which is an offence' in however not address the issue of expenditure for the purpose which is prohibited by law and even though may not be an offence. Thus even the payments which are for violation of law and may not be penalty even then the same is not allowable as deduction. However, even otherwise, in the present case it is noticed that all the payments by the appellant are in the nature of payments for the purpose which is an offence.
Judgements distinguished:-
(vi) Thus ratio of a judgement relied upon by appellant and which directly or indirectly is pertaining to the period before the impugned Explanation 1 in Section 37(1) which provides a deeming provision - was not in existence is not applicable to the present case.
The judgement in the case of Prakash Cotton Mills (P.) Ltd. v. Commissioner of Income-tax [1993] 67 Taxman 546 (SC)/[1993] 201 ITR 684 (SC)/[1993] 111 CTR
389 (SC)[06 04-1993] was rendered when the impugned Explanation 1 in Section 37(1) which provides a deeming provision was not in existence. Further the judgement pertains to the issue of interest and damages and does not pertain to the issue of 'offence' and 'compounding' and 'punishment. Thus any further judgement relied upon by the appellant which relies upon the judgement in the case of Prakash Cotton Mills (supra) is not applicable to present set of the facts and to the year under appeal.
Similarly, the judgement in the case of CIT v. Lokenath& Co. (Construction)
[1984] 147 624/17, Taxman 209cannot be of any assistance to the assessee to support his case as the said decision was rendered prior to amendment to section 37 of the Act whereby the above referred Explanation 1 was incorporated.
It has been held by the Hon'ble Supreme Court in the case of Commissioner of Income-tax vs. Prakash Chand Lunia (D) [2023] 149 taxmann.com 416
(SC)/[2023] 293 Taxman 229 (SC)/[2023] 454 ITR 61 (SC)[24-04-2023) as under-
26. On the abovesaid analysis, the following conclusions are arrived at:
V. The decisions of this Court in Piara Singh case (supra), and Dr. T.A. Quereshi case (supra), do not lay down correct law in light of the decision of this Court in Haji Aziz & Abdul Shakoor Bros case (supra),and the insertion of Explanation 1 to section 37. In view of the above judgement of Hon'ble Supreme Court, it is respectfully stated that the ratio of the judgements which directly or indirectly rely upon the judgements of CIT v. Piara Singh [1980] 3 Taxman 67/124 ITR 40 (SC) and Dr.
T.A. Quereshi v CIT [2006] 157 Taxman 514/287 ITR 547 (SC) is not applicable.
In the above case the Hon'ble Supreme Court has reiterated the Abdul Shakoor
Bros case (supra)
(vii) The judgement in the case of Commissioner of Income-tax-II, Ludhiana v.
Hero Cycles Ltd. [2009] 178 Taxman 484 (Punjab & Haryana) [09-12-2008] is on the issue of that there is no "deliberate violation of law and it was a case of "innocent violation". Apparently the assessee in that case drew extra power than the permitted and the same was found to be innocent and not deliberate.
However in the present case the facts are different as overloading and over sizing and violation of security norms etc. is not innocent violation. These are in the knowledge of the appellant and its team throughout the entire journey and the same is continued and the same is also repeated in other vehicles and in other journeys. Further in the present case there is judgement of honourable Supreme
Court in ParmajitBhasin v. Union of India AIR 2006 SC 440 which specifically holds that the overloading in a vehicle cannot be continued even after payment of compounding or composition.
(viii) It is held in the case of M/s Taurian Iron & Steel Co vs ACIT, ITA No. 847 &
1613/M/2010 that "Thus, it is obvious from the notification of Ministry of Railways dated 23.12.2005 that the railway authorities do allow overloading of its rake and it charges 2 or 3 times the freight rate applicable to that commodity as punitive charges. Though the words used in the notification are punitive charges' the charges levied by the Indian Railways for carrying the goods in its rake are permitted by Railway authorities itself and the punitive charges are computed as 2
times or 3 times of the freight rates. The punitive charges levied by Railways, in accordance with the notification of Ministry of Railways dated 23.12.2005, for carrying goods in its rakes are not for any purpose which is an offense or which is Professional Automotives Private Limited vs. ACIT prohibited by law'. As a matter of fact, the Indian Railways itself permits carrying weight load beyond the permissible carrying capacity subject to payment of higher rate of freight by 2 times or 3 times. Though the words are 'punitive charges', they are payment which are neither an offense nor is prohibited by the law rather the payment is in accordance with the law as provided in the notification of Ministry of Railways dated 23.12.2005
The discussion in the above judgement pertains to the Notification issued by Ministry of Railways and does not refer to the law made by the Parliament and there is no adjudication in this regard. Further the judgement heavily refers to the Notificationprovision that Indian Railways itself permits carrying weight load beyond the permissible carrying capacity subject to payment of higher rate of freight by 2 times or 3 times. In the above judgement the issue is regarding the higher freight and not of fine or traffic challan. Whereas in the present case in the present appeal, the issue is regarding the violation of law of Motor Vehicles Act and there is no specific provision in the law providing the permission for carrying the overweight vehicle after paying the higher freight. And further that it has been held by the honourable Supreme Court in ParmajitBhasin v. Union of India AIR
2006 SC 440 that "Section 200 does not in any way authorize the State
Government to permit the excess weight to be carried when on various inspection/detection it is noticed that there is carriage of load beyond the permissible limit and that the overweight items have to be immediately removed and "If permitted to be continued, it would amount to fresh commission of the offence for which the compounding was done". Thus being different in terms of facts and law, the above judgement in the case of Taurian Iron & Steel (supra) and judgements which relies upon the judgement are not applicable to the present case.
(ix) The appellant has relied upon the judgements of Hon'ble ITAT in support of the contentions made in the appeal. In the judgements the appellant has cited only one judgement of Hon'ble ITAT Jaipur Bench in the case of Vishal
Chemtrade (P) Ltd. vs The ACIT Circle-1 Kota in ITA No 507/JP/2012. In this judgement the order is based on the judgement in the case of Agrawal Roadlines
(P.) Ltd. v. Deputy Commissioner of Income-tax (2011) 7 ITR(T) 576 (Ahmedabad
- ITAT)/[2011] 44 SOT 40 (Ahmedabad - ITAT) (URO)/[2010] 129 TTJ 49
(Ahmedabad - ITAT) [18-09-2009]
Judgements relied
It has been held by the Hon'ble ITAT in the case of Agrawal Roadlines (P.) Ltd. v.
Deputy Commissioner of Income-tax [2011] 7 ITR(T) 576 (Ahmedabad
ITAT)/[2011] 44 SOT 40 (Ahmedabad - ITAT) (URO)/[2010] 129 TTJ 49
(Ahmedabad- ITAT)[18-09-2009] as under:-
"10. We have heard the learned representatives of both the parties at length and have also perused the materials available on record. It is relevant to state that ShriTusharHemani, learned counsel for the assessee reiterated the submissions made before the lower authorities. He further submitted that in assessee's own case wherein under identical circumstances, the CIT(A)-IV, Ahmedabad vide his order dated 25-10-2007 has allowed the appeal of the assessee for assessment year 2004-05. He further submitted that the order of the CIT(A) for assessment year 2004-05 has become final and therefore, the CIT(A) should have followed the order of his predecessor while deciding theissue. On the other hand, Shri
M.C. Pandit, learned Departmental Representative submitted that the facts of the present year are entirely different and, therefore, the CIT(A) was justified in not following the order of his predecessor passed in the assessee's case for assessment year 2004 05. We have perused the reply of the assessee dated 11-
5-2007 submitted before the Assessing Officer. The contention of the assessee that penalty is not levied in each and every case, moreover the assessee being engaged in the business of transportation of liquid cargo chances of overloading was not frequent. Further, the assessee also submitted that this expenditure is incurred in the normal course of business and corresponding income out of carrying of overload was subjected to tax as the party was billed as per tonnage carried. There is no dispute that the Government of Gujarat had introduced a scheme of "Gold Card" to carry overload on payment of additional fees fixed for that Gold Card. We find that such compensatory fees were being paid to various
RTO authorities that entitled the transporters to carry overload on payment of such compensation fees to the final destination without stopping them to unload the excess weightage. In our view, if these fees were penal in nature then RTO authorities would have recovered the amount from the transporters and unloaded the excess load. In our considered view, the authorities below have not correctly appreciated the facts of the present case. In fact, they have grievously erred in observing that "scheme of Gold Card introduced by the Government of Gujarat entitled the transport carriers to carry overload by payment of additional fees was strange in a way there is no Government machinery would encourage violation of infringement of legal provisions. Both the authorities below have not appreciated the appellate order for assessment year 2004-05 wherein the CIT(A) has discussed the judgment of the Hon'ble Supreme Court in the case of ParmajitBhasin (supra) as well as the provisions of section 194 of the Motor
Vehicles Act, 1988. In our considered view, the judgment of the Hon'ble Supreme
Court in the case of transporters dated 9-11-2005 is operative from the date of the judgment. Here, we are concerned with the assessment year 2005-06 and the Professional Automotives Private Limited vs. ACIT return of income was filed on 30-10-2005 i.e., much before the date of the judgment passed in the case of ParmajitBhasin(supra). In fact, the decision of the Hon'ble Supreme Court (supra) was applicable from 9-11-2005 i.e., from the assessment year 2006-07 and hence not applicable to the facts of the present year. The Hon'ble Supreme Court held that notifications issued by the State
Governments permitting to carry excess weight after giving effect to section 194
of the Motor Vehicles Act has no validity. In this judgment, the Hon'ble Supreme
Court directed the State Governments to withdraw the notification forthwith. As we have already stated hereinabove that the State Government of Gujarat had introduced a scheme of Gold Card which entitled the holder of the card to carry overload on payment of additional fees fixed for that Gold Card. Such compensatory fees were being paid to various RTO authorities that permitted the transporters to carry overload on payment of such compensation fees to final destination without stopping them to unload the excess weight. In Our considered view, payment of fine towards carrying excess load cannot fall into the category either of an offence or infringement of law. It is evident from the record that on payment of additional amount already fixed by RTOs, they have allowed vehicles to move further which itself shows that amount collected by the RTOS was not payment towards infringement of law but in the nature of compensation. It is pertinent to state here that Government of Gujarat has allowed to carry such excess load and collected only compensatory amount from the assessee which cannot be termed as payment towards infringement of law. It is also relevant to state that laws of State Government allowed the transporters to carry excess loadin vehicles in relevant years and hence such payment is not in violation of any law. Thus, considering the entire facts and circumstances of the present case, we are of the considered view that payment of penalty for excess load carried was not for infringement of law but in the nature of compensation in the business activities of transportation of goods"
In the above judgement, the Hon'ble ITAT has observed that the judgement of Hon'ble Supreme Court in the case of ParmajitBhasin v. Union of India AIR 2006
SC 440 regarding the transporters dated 9-11-2005 is operative from the date of the judgment. Here, the concerned assessment year was 2005-06 and the return of income was filed on 30-10-2005 i.e., much before the date of the judgment passed in the case of ParmajitBhasin (supra). In fact, the decision of the Hon'ble
Supreme Court (supra) was applicable from 9-11-2005 i.e., from the assessment year 2006-07 and hence not applicable to the facts of the present year. In the case of the appellant, the years being much later than the AY 2006-07, thus the judgement of Hon'ble Supreme Court in the case of ParmajitBhasin (supra) is applicable to the cases of the appellant. Thus going by the ratio of the judgement
(x) The Hon'ble Supreme Court in the case of ParmajitBhasin v. Union of India
AIR 2006 SC 440has held as under-
Section 200 does not in any way authorize the State Government to permit the excess weight to be carried when on various inspection/detection it is noticed that there is carriage of load beyond the permissible limit. It only gives an opportunity of compounding so that instead of the amounts fixed, lesser amounts can be accepted by the authorised officers. The intention of uploading the excess weight is apparent from a bare reading of the Section 194(1). The liability to pay charge for uploading of the excess load is fixed on one who drives a vehicle or causes a motor vehicle to be driven in contravention of the provisions of Sections 113, 114
and 115. It is to be noted that compounding can be done either before or after the institution of the prosecution in respect of the enumerated offences. Any notification which runs counter to the clear import of Section 194 has no validity.
As rightly submitted by learned counsel for the petitioners after compounding the excess load, same cannot be permitted to be carried in the concerned vehicle.
Such carriage would amount to infraction of Section 113 of the Act. The object for which the maximum permissible weights have been fixed is crystal clear. On a perusal of the provisionsit is clear that the maximum gross weight (in short 'GVB') of the trucks is 16.2 tonnes which enables loading of about 9 tonnes. The load rating is primarily based on the road design, specifications of Indian roads. Rule
95(2) of the Central Motor Vehicles Rules, 1989 (in short 'the Central Rules") prescribes the principles which cover the fixation of GVB of the vehicles. The same reads as follows.
"Rule 95(2) The maximum gross vehicle weight and the maximum safe axle weight of each axle of a vehicle shall, having regard to the size, nature and number of types and maximum weight permitted to be carries by the types as per sub-rule (1), bei Vehicle rating of the gross vehicle weight and axel weight respectively as duly certified by the testing agencies for compliance of the rule
126, or in the maximum vehicle weight and maximum safe axle weight of each vehicle respectively as notified by the Central Government, or ill the maximum total load permitted to be carned by the tyre as specified in sub-rule (1) for the size and the number of the tyres fitted on the axles (s) of the vehicle.
Whichever is less:
Provided that the maximum gross vehicle weight in respect of all vehicles, including multi axle vehicles not be more than the sum total of all the maximum safe axle weights put together."
The Government of India had also fixed GVB for different categories of vehicles.
Reference may be made to notifications dated 18th October, 1996 (no. SO728(E) and 26th May, 2000 (no. SO517E) issued by the Ministry of Surface Transport
(Department of Road Transport and Highways) (Transport Wing). It is apparent from the reply filed by the Union of India that overloading causes significant damage to the road surface and also cause pollution through auto emissions.
Even overloaded vehicles are safety hazards not only for themselves, but also forother road users.
It is pointed out that since the responsibility of enforcing of the provisions of the Act and the Central Rules is that of the State Government they have been advised by the Central Government to scrupulously enforce the provisions of the Act and the Central Rules. It appears that the matter was discussed at the 30th meeting of the Transport Development Council where the following decisions were taken
Learned counsel appearing for the States submitted that the system of issuing cards/passes has been discontinued. However, it was submitted that offloading excess weight from large number of vehicles creates traffic problems and several other practical problems which according to them need to be addressed.
It is to be noted that the constitutional validity of Section 194 and 200 were challenged. It was noted in P. RatnakarRao and others V. Govt. Of A.P. and others (1996 (5) SCC 359) that the discretion given under Section 200(1) to the State Government to prescribe maximum rates for compounding the offence is not unguided, uncanalised and arbitrary. It was, inter alia, held as follows:
………………..
……………….
It is indisputable that the power of compounding vests with the State Government, but the notification issued in that regard cannot authorize continuation of the offence which is permitted to be compounded by payments of the amounts fixed.
If permitted to be continued, it would amount to fresh commission of the offence for which the compounding was done. The State Governments which have not yet withdrawn the notifications shall do it forthwith. So far as the practical difficulties highlighted are concerned, it is for the State Governments concerned to make necessary arrangements to ensure that the difficulties highlighted can be suitably
Professional Automotives Private Limited vs. ACIT remedied by the State Government themselves without in any way overstepping statutory prescriptions."
(emphasis supplied)
(xi) Reference is further made to the judgement of Hon'ble Delhi High Court in the case of Time incorporated vsLokesh Srivastava (2006) 131 Company case 198
(Delhi). In this case it has been observed that the punitive damages are awarded forthe purpose of providing relief to the overloaded Justice delivery system by providing a civil alterative to criminal prosecution of minor crimes. The traffic challans in the present case are for offences for infringement of law falling within the ambit of Explanation to section 37(1) of the Act.
It is held by the Hon'ble Kerala High Court in the case of Commissioner of Income-tax v. Mamta Enterprises [2004] 135 Taxman 393 (Karnataka)/[2004] 266
ITR 356 (Karnataka)/[2004] 187 CTR 414 (Karnataka) [30-10-2003] as under-
"When the section itself declares the expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure, it is not possible to take the view that the expenditure incurred for compounding of the offence should be allowed. When the section is clear and unambiguous, it is not permissible for the Courts to stretch the meaning attached to the provision of law to extend the benefit to a person who violates the law or the Regulations/Rules made by the Corporation or the Municipal Authorities with impunity."
In the aforesaid case, compounding charges for unauthorized construction were paid for regularization on permission of competent authority and the deduction of the same was claimed. The Hon'ble Karnataka High Court held that the compounding fee was expenditure incurred to pay the penalty and was therefore hit by the provision of Explanation to section 37(1) of the Act. In this case the issue the disallowance was upheld even though the competent authority had allowed and regularized the unauthorized construction. Whereas in the present case the applicable law is that as it has been held by the honourable Supreme
Court in ParmajitBhasin v. Union of India AIR 2006 SC 440 that "Section 200
does not in any way authorize the State Government to permit the excess weight to be carried when on various inspection/detection it is noticed that there is carriage of load beyond the permissible limit and that the overweight items have to be immediately removed and "If permitted to be continued, it would amount to fresh commission of the offence for which the compounding was done".
Commissioner of Income-tax [2010] 188 Taxman 388 (Karnataka)/[2010] 322 ITR
401 (Karnataka)/[2010] 231 CTR 401 (Karnataka) [19-01-2010].
The judgement in the case of Mamta Enterprises (supra) has also been relied upon /followed in the case of Nahar Spinning Mills Ltd. vs. Commissioner of Income-tax, Ludhiana [2014] 49 taxmann.com 565 (Punjab & Haryana)/[2014]
226 Taxman 364 (Punjab & Haryana)[28-07-2014) on the issue of amount paid by assessee to Municipal Corporation on account of compounding fee as compensation for condoning deviations from original sanctioned plan.
It has been held by the Hon'ble Punjab and Haryana High Court [Full Bench] in the case of Jamna Auto Industries vs. Commissioner of Income-tax [2008] 167
Taxman 192 (Punjab & Haryana)/[2008] 299 ITR 92 (Punjab & Haryana)/[2008]
214 CTR 649 (Punjab & Haryana) [30-01-2008] as under:-
12. Whenever certain damages are to be paid by an assessee for the breach of a contract, such damages are treated to be normal incidences of business. For allowability as a deduction, a claim for damages is to be tested on the touchstone of the provisions of section 37(1) of the Act. Where an assessee has to pay damages to the other party for the failure to fulfil the contract entered into by him in the ordinary course of his business, the amount of damages so paid is an allowable deduction if it is in the ordinary course of the business, and is not opposed to the public policy
13. A penalty imposed for breach of any law during the course of trade, etc., cannot be described as a commercial loss. If an assessee whileconducting his business has acted in an unlawful manner which has rendered him liable to penalty, the sum so paid cannot be claimed as a deductible expense. Infraction of the law is not a normal incident of business and, therefore, no expense which is paid by way of penalty for a breach of law is admissible deduction. In cases where a penalty has to be incurred, for the reason of the assessee having carried on business in an unlawful manner or in contravention of certain rules and regulations, such penalty could not be regarded as 'wholly and exclusively laid out for the purposes of business as the expense has not been necessitated by the business but by the conduct of the assessee in trying to carry out the business in an unlawful manner. Under section 37(1), only that portion of such payment having composite nature which is attributable to its compensatory character for payment as damages is to be allowed as a deduction. The other portion which is attributable to its penalty nature cannot be allowed as a deduction under section 37(1) because such payment is for infraction of law.
Reference is also made to the decision of the Hon'ble Supreme Court in the case ofHaji Aziz and Abdul Shakoor Bros. vs. Commissioner of Income-tax [1961] 41
ITR 350 (SC)[24-11-1960]. In this case fine paid to customs authorities for release of confiscated goods imported contrary to law was held to be not allowable as deduction u/s 37(1) of the Act.
It is important to note that the judgement in the case of Haji Aziz (supra) was rendered by the honourable Supreme Court in the year even when the impugned
Explanation of Section 37(1) which provides for the deeming provisions for the disallowance - was not on the statute. The scope of disallowance has a significantly increased after the insertion of this deeming explanation.
Further as it has been held in the case of Upper Doab Sugar Mills Ltd. v.
Commissioner of Income-tax [1979] 116 ITR 928 (Allahabad) [04-01-1978] that where the amounts were paid as penalty for the delay made by the assessee in the payment of sugarcane cess and purchase-tax. Mahabir Sugar Mills (Pvt.) Ltd.
v. CIT [1979] 71 ITR87 (All) held that penalty payable under 3(5) of the Sugarcane Cess Act was a penalty for making default in the payment of arrears of sugarcane cess levied under the said Act. It was a criminal liability and was not a permissible deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922. Further the Supreme Court in the case of Haji Aziz and Abdul Shakoor Bros. v.
CIT [1961] 41 ITR 350, held that no expenses which is paid by way of penalty for a breach of the law can be said to be an amount wholly and exclusively laid for the purpose of the business.
It has been held in the case of Commissioner of Income-tax, Bangalore vs.
Jayaram Metal Industries [2007] 158 Taxman 169 (Karnataka)/[2006] 286 ITR
403 (Karnataka)/[2006] 204 CTR 447 (Karnataka) [07-07-2006] that that violation of a statute has to be curbed as otherwise violation would be a premium for violators for the purpose of tax benefits
On the issue of meaning of 'prohibited by law, it has been observed by the Hon'ble Supreme Court in the case of Apex Laboratories (P.) Ltd. v. Deputy
Commissioner of Income-tax LTU[2022] 135 taxmann.com 286 (SC)/[2022] 286
Taxman 200 (SC)/[2022] 442 ITR 1 (SC) [22-02-2022] as under-
35. In BiharilalJaiswal v. CIT [1995] Supp (5) SCR 285, the issue of what is "prohibited by law" was considered by this Court, in the context of interpretation of a condition in a statutory license (for vending liquor) which prohibited transfer of the license by way of sub-letting or entering into a partnership agreement. While
Professional Automotives Private Limited vs. ACIT dealing with the recognition of such a partnership under the IT Act, this Court held that allowing the same would attract the very mischief sought to be avoided:
"This object will be defeated if the licencee is permitted to bring in strangersinto the business, which would mean that instead of the licencee carrying on the business, it would be carried on by others a situation not conducive to effective implementation of the excise law and consequently deleterious to public interest.
It is for this very reason that transfer or subletting of licence is uniformly prohibited by several State Excise enactments. It, therefore, follows that any agreement whereunder the licence is transferred, sub-let or a partnership is entered into with respect to the privilege/business under the said licence, contrary to the prohibition contained in the relevant excise enactment, is an agreement prohibited by law.
The object of such an agreement must be held to be of such a nature that if permitted it would defeat the provisions of the excise law within the meaning of Section 23 of the Contract Act. Such an agreement is declared by Section 23 to be unlawful and vold. The question is whether such an unlawful or void partnership can be treated as a genuine partnership within the meaning of Section 185(1) and whether registration can be granted to such a partnership under the provisions of the Income-tax Act and the Rules made thereunder. We think not. When the law prohibits the entering into a particular partnership agreement, there can be in law no partnership agreement of that nature. The question of such an agreement being genuine cannot, therefore, arise
It is also a known principle that what cannot be done directly, cannot be achieved
Indirectly. As was said in Fox v. Bishop of Chester [1824] 2 BFC 635 Jagir Singh v. Raubir Singh (1999) 2 SCR 282 that it is a "Well-known principle of law that the provisions of an Act of Parliament shall not be evaded by shift or contrivance
And that "To carry out effectually the object of a Statute, it must be construed as to as defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited or enjoined"
This Court, in an appeal arising from an action for specific performance, in G.T.
Girish v. Y. SubbaRaju 2022 SCC Online SC 60, held that giving the relief would imply doing something prohibited by law (bar against conveyance, for a specific period) - it had the effect of defeating the provisions of the law. It was held that:
"Taking the agreement as it is, it necessarily would be in the teeth of the obligation in law of the first Respondent to put up the construction. The Professional Automotives Private Limited vs. ACIT agreement to sell involved clearly terms which are impliedly prohibited by law in that the first Defendant was thereunder to deliver title to the site and prevented from acting upon the clear obligation under law. This is a clear case at any rate wherein enforcing the agreement unambiguously results in defeating the dictate of the law. The 'sublime' object of the law, the very soul of it stood sacrificed at the altar of the bargain which appears to be a real estate transaction. It would, in other words, in allowing the agreement to fructify, even at the end of ten-year period of non alienation, be a case of an agreement, which completely defeats the law for the reasons already mentioned.
78. Going by the recital in the agreement entered into between the Plaintiff and the first Defendant, possession is handed over by the first Defendant to the Plaintiff. The original Possession Certificate is also said to be handed over to the Plaintiff. The agreement, even according to the Plaintiff, contemplated that within three months of conveyance of the site in favour of the first Defendant, the first Defendant was to convey her rights in the site to the Plaintiff. It is quite clear that the parties contemplated a state of affairs which is completely inconsistent with and in clear collision with the mandate of the law. On its term, it stands out as an affront to the mandate of the law.
79. The illegality goes to the root of the matter. It is quite clear that the Plaintiff must rely upon the illegal transaction and indeed relied upon the same in filing the suit for specific performance. The illegality is not trivial or venial. The illegality cannot be skirted nor got around. The Plaintiff is confronted with it and he must face its consequences. The matter is clear.
We do not require to rely upon any parliamentary debate or search for the purpose beyond the plain meaning of the law. The object of the law is set out in unambiguous term. If every allottee chosen after a process of selection under the Rules with reference to certain objective criteria were to enter into bargains of this nature, it will undoubtedly make the law a hanging (sic laughing) stock.
(xii) In the present case it is noticed that all the payments by the appellant are in the nature of payments for the purpose which is an offence. In the Motor Vehicles Act, the Chapter XIII in on the title Offence, Penalties and Procedure".
The first section of this chapter le. "Section 177: General provision for punishment of offences itself provides that "whoever contravenes any provision of this Act or of any rule, regulation or notification made
Professional Automotives Private Limited vs. ACIT thereunder shall, if no penalty is provided for the offence be punishable for the first offence with fine which may extend to one hundred rupees, and for any second or subsequent offence with fine which may extend to three hundred rupees.". Further, section 200 provides for the provisions of composition of offences.
As per the above section any contravention of any provision of this Act or of any rule, regulation or notification made thereunder is an offence. And further that even if no 'penalty' has been provided for the offence, such offence shall be punishable with fine. The Motor Vehicles Act provides for punishment in the form of fine even if no penalty has been provided.
As per Section 181, whoever drives a motor vehicle in contravention of section 3 or section 4 shall be punishable with imprisonment for a term which may extend to three months, or with fine which may extend to five hundred rupees, or with both
Similarly as per section 183, the driving at excessive speed or violation of speed limit is also an offence. As per section 184, whoever drives a motor vehicle at a speed or in a manner which is dangerous to the public, having regard to all the circumstances of the case including the nature, condition and use of the place where the vehicle is driven and the amount of traffic which actually is at the time or which might reasonably be expected to be in the place, shall be punishable.
As per section 190(1), Any person who drives or causes or allows to be driven in any public place a motor vehicle or trailer while the vehicle or trailer has any defect, which such person knows of or could have discovered by the exercise of ordinary care and which is calculated to render the driving of the vehicle a source of danger to persons and vehicles using such place, shall be punishable. Further as per section 190(3), any person who drives or causes or allows to be driven, in any public place a motor vehicle which violates the provisions of this Act or the rules made thereunder relating to the carriage of goods which are of dangerous or hazardous nature to human life. shall be punishable.
Further as per section 194, whoever drives a motor vehicle or causes or allows a motor vehicle to be driven in contravention of the provisions of section 113 or section 114 or section 115 shall be punishable. Section 113
provides for limits of weight and limitations on use. Thusoverweight in the vehicle is an offence. Further as per sub section (4) of section 113, where the driver or person in charge of a motor vehicle or trailer driven in Professional Automotives Private Limited vs. ACIT contravention of sub-section (2) or clause (a) of sub-section (3) is not the owner, a Court may presume that the offerice was committed with the knowledge of or under the orders of the owner of the motor vehicle or trailer.
There are other specified violations mentioned in the sections of the Motor
Vehicles Act and further as per section 177, violation of any rule, regulation or notification made under the Motor Vehicles Act is offence.
(xiii) There cannot be any dispute regarding the disallowability of 'penalty or 'shasti'. Further the vehicle being without adequate safety devices is dangerous for the vehicle, dangerous for the driver and also dangerous for the other common public and other vehicles who might be near the impugned vehicle at any given point of time and can create risk for the life of the many people. Similarly overweight vehicle which is carrying the weight beyond the permissible limits is dangerous for the road infrastructure as the weight being carried is beyond the capacity of the road and also problematic for the general public. Similarly the vehicle which is oversized or which iscarrying the oversized goods is dangerous for the public at large and also dangerous for the public infrastructure.
In view of the above detailed discussion the impugned amount paid by the appellant for traffic challans is for violation of law of Motor Vehicles Act and rules and regulations made thereunder and such violations are specifically termed as 'offence in the Act and even though as per the Explanation 1 in section 37(1) even the expenditure for the purpose which is violations of law which are not in nature of offence is also not allowable, and further that the payment of challan does not regularise and does not authorise the continuation of overloading of vehicle and the overload is required to be removed and similarly other defects like over sizing, safety features missing etc. are required to be rectified immediately and further that the appellant has repeatedly and regularly indulged into practice leading to repeated traffic challans and it is thus calculated and well thought out decision and not an innocent unknown mistake and further in totality of the facts and circumstances the deduction is rightly denied by the learned AO and the addition made in the assessment order is hereby upheld.
(xiv) It is also highly important to note that an explanation viz. Explanation
3 has been inserted in the Act. This explanation clarifies the Explanation 1. This explanation starts with the phrase, "For the removal of doubts, it is hereby clarified that", thus it is clear that this explanation is clarificatory in nature and has been inserted for the removal of doubts. Further the explanation includes the phrase that "shall be deemed to have always", thus no new provision is being added and only already existing position has been clarified through the explanation. The clause (ii) of thisexplanation specifically now states that expenditure incurred by an assessee "to compound an offence under any law for the time being in force", falls under the phrase" expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law of the Explanation 1. It is important to note that this explanation is not a new provision but it clarifies for the purpose of removal of doubts the already existing phrase of Explanation 1. In several judgements the composition expenditure was upheld as disallowable even before introduction of this explanation.
Commissioner of Income Tax, Large Tax Payer Unit II [SLP (Civil) No.
23207 of 2019] as liable to be disallowed even before this explanation was Professional Automotives Private Limited vs. ACIT on the statute. This shows that the explanation 3 is clarificatory in nature and states the position of law already existing.
The Supreme Court has settled a significant controversial issue, regarding allowability of expenditure incurred by the pharma companies in providing freebies /incentives to doctors and other medical practitioners, in favour of Revenue. The said decision thus is understood to clarify the law since its inception, and the controversy as to the proposed amendment by the Finance Act, 2022, by way of insertion of a similar provision from 01.04.2022, vide Explanation 3 to section 37(1) would operate prospectively or retrospectively, also subsides,
Further it has already been held in the case of Commissioner of Income- tax v. Mamta Enterprises [2004] 135 Taxman 393 (Karnataka)/[2004] 266
ITR 356 (Karnataka)/[2004] 187 CTR 414 (Karnataka) [30-10-2003] that "When the section itself declares the expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure, it is not possible to take the view that the expenditure incurred for compounding of the offence should be allowed. When the section is clear and unambiguous, it is not permissible for the Courts to stretch the meaning attached to the provision of law to extend the benefit to a person who violates the law or the Regulations/Rules made by the Corporation or the Municipal Authorities with impunity." (emphasis supplied)
(xv) The appellant has also contended that estimation of the expenditure has been done by the learned AO in the assessment order. However at the same time the appellant has not placed on record the exact details of the expenditure incurred by the appellant in different sub-categories for different months. The working of disallowance was done during the course of search and seizure proceedings andafter that neither during the post search proceedings nor during the assessment proceedings nor during the present appellate proceedings the appellant has placed on details and documents about the exact specific month -wise details. On the other hand the learned AO has used the date of the appellant itself and arrived at the yearly figures
Hon'ble Supreme Court of India in the case of CIT Vs British Paints India
It is held by the Hon'ble Supreme Court in the case of Commissioner of Sales Tax v. H.M. Esufali H.M. Abdulali [1973] 90 ITR 271 that "In estimating any escaped turnover, it is inevitable that there is some guesswork The assessing authonty while making the best judgment assessment, no doubt, should arrive at his conclusion without any bias and on a rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial Prima facie, the assessing authority is the best judge of the situation. It is his best judgment and not anyone else's
The High Court cannot substitute its best judgment for that of the assessing authority."
It is held by the Hon'ble Supreme Court in the case of Kachwala Gems vs.
Joint Commissioner of Income-tax, Jaipur [2007] 158 Taxman 71
(SC)/[2007] 288 ITR 10 (SC)/[2006] 206 CTR 585 (SC)[14-12-2006] that it is well-settled that in a best judgment assessment, there is always a certain degree of guess work and it is the assessee himself who is to blame as he did not submit proper accounts.
The Hon'ble Punjab and Haryana High Court in case of Tara Singh V ITO
[2017] 81 taxmann.com 293 (Punjab & Haryana) held that the assessing officer in a best judgment assessment can resort to a bona fide estimate based on a rational basis.
It is held by the Hon'ble Rajasthan High Court in the case of Chaturbhuj
Manoj Kumar v. Commissioner of Income-tax[2017] 82 taxmann.com 103
(Rajasthan)/[2016] 388 ITR 194 (Rajasthan) [29-07 2016] that by invoking provisions of section 145(3) or in a case of a best judgment assessment under section 144, some guess work will always have to be resorted to by the authorities.
The Hon'ble Andhra Pradesh High Court in the case of Rajnik& Co. v.
Assistant Commissioner of Income-tax[2001] 117 Taxman 675 (Andhra
Pradesh) also observed regarding that where it becomes necessary to have recourse to some form of estimate by the Income-tax Department, that method should be adopted whichapproximates most near to the truth.
It is held by the Hon'ble Supreme Court in the case of Dhakeswari Cotton
Mills Ltd. v. Commissioner of Income-tax [1954] 26 ITR 775 (SC)[29-10-
1954] that that in arriving at its estimate opportunity should be provided to the assessee to place any relevant material on the point that it has, and Professional Automotives Private Limited vs. ACIT opportunity to meet the substance of any private inquiries made by the Income-tax Officer if it is intended to make the estimate on the foot of those enquiries.
In view of the submissions of the appellant, the appellant is provided opportunity to place on record the exact month wise details along with supporting documents copies from with the search and seizure action (no additional evidence is allowed) before the learned AO within one month of passing of this order showing working of the exact amounts on the issues, which shall be considered by the Id. AO after due verification.
In view of this discussion this ground of appeal is hereby dismissed in above terms.
Ground No. 3 to 3.3
6.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
The brief facts noted in assessment order are that during the course of search proceedings at Cement Factory road, Sahu Nagar. Sawai
Madhopur, it was noticed that a lot of bogus expenditure & missing vouchers related to expenses debited in the books of respective company were found. On being confronted, Sh. Manish Kumar Mor, the accountant vide Q. No.34 to 39 categorically stated that bogus bills under the head repairs & maintenance were made in the name of some business concerns such as (1) ChhotuMistri (2) New NSE (3) Star Seat Repairing Works (4)
Shahnawaj Body Repairing (5) Shahnwaj Body Repairing etc at his business place. Further. during revocation of prohibitory arder on 26.02.2019, again various incriminating documents were found & seized from the business premises of M/s Professional Automotives Pvt. Ltd.
situated at Sahu Nagar, Cement Factory, Sawai Madhopur, which were annexed as per annexure AS, Ex-1 to 118. All the incriminating documents were related to bills & vouchers related to revenue nature. Most of the vouchers were found to be self-made & appeared to be bogus/dummy.
These bills/vouchers were found to be of business concerns exactly the same, as stated by the accountant of the assessee Firm during the course of initial search proeceedings such as (1) ChhotuMistri (2) New NSE (3)
Further, as noted in the assessment order, during the search proceedings all the bill book were seized and bill-book, as seized during the course of initial search proceedings dated 18.01.2019 were found topartly blank. On the other handpartly bills were in the form of estimation of bill in the name of M/s Professional Automotives Pvt. Ltd. (PAPL) wherein date was not mentioned, which suggested that the appellant company were producing bogus bills just before initiation of search on dated 16.01.2019 and these incomplete bogus bills were found in the starting of search.
Accordingly, on the basis of bill produced/not produced with respect to expenses debited under the head "Repair and Maintenance" as well as bill books found, a summarized chart was prepared in different years to find out the disallowable expenses on account of missing vouchers/bogus vouchers under the head "Repairs & maintenance".
(PAPL), a summarized chart were prepared in different years to find out the disallowable expenses on account of missing vouchers/bogus vouchers under the head "Repairs & maintenance" and "Toll & Trip
Expenses". For this, a data was prepared for a particular month in different
"Repairs & Maintenance" and "Toll & Trip Expenses" in the books of M/s
PAPL On the basis of such data, which was prepared on monthly basis, an estimation of amount of disallowable expenses was worked out in particular year under the head "Repairs & maintenance" and "Toll & Trip
Expenses" in the case of M/s PAPL. The same is also making a part of while recording statement of Shri Om PrakashAgarwal (Gupta) vide Q. No.
10 to 11 dated 28.02.2019. On being confronted, the director of the company vide Q. No.6,7,88 9 of statement recorded on 28.02.2019 stated that some of mechanic were illetrate belonging to unorganized sector, neither capable of nor were required to maintain any books of accounts and not in a position to provide any bill for work done by them, so the same vouchers in the name of such mechanic/such entities were kept in his possession for making bill against the work done by him. The same bills were made by themselves &
thereafter the same bills-book were returned back to such persons.
It was further admitted by him that some of the bills were lost by the drivers during the transit period & some of was made as "kaccha bill". Therefore, to meet-out/adjustment of such type of expenses, they made these types of provisions. Thus it was admitted that artificial bills were being in future by the appellant
Therefore, as per mutual understanding whenever a repair job was carried out by the mistris, they were getting it noted in a diary and as per convenience as well as their requirement of payment, they were coming to the assessee with such details and the bill books which were kept at assessee's premises, the necessary invoices were made for expenses actually incurred by assessee and subsequently bill books were returned to them.
From reply of the appellant it is apparent that the genuineness of the bill is not proved as well as expenses were not verified with supporting bills and vouchers. Therefore, the contention of the appellant is not acceptable as the argument put forth by the appellant does not hold any strength and is just an argument for the sake of argument. The arrangement adopted by the appellant in debiting expenses can't be said to be valid one and in accordance with provisions of Income Tax Act as well as accounting standard.
Thus in view of above, the Id. AO rightly held that appellant company had involved in making bogus expenses to suppress the actual profit in the case of M/s Professional Automotives Pvt. Ltd. (PAPL).
The appellant has also contended that it had furnished the affidavit of some persons which were not considered by the Id. AO. It is worthwhile to mention here that in such scenario, the copy of affidavits produced by the appellant also does not hold any strength as there is nothing which could prove relation between the bills of business concern and persons giving affidavit ie. the said business concern is registered under his name with a valid registration No.
Apart from this, bill books of some business concern were also found which were used by the appellant to debit the bogus expenses.
Further, as regards the appellant contention that such practice of keeping bill books of third parties was followed only in few months of FY 2018-19
and ESTIMATION was made by adopting percentage of bills found vis a vis bills not found/bills alleged as bogus and estimating disallowance of total of Rs.7.32.32,126/- for all the seven years. On perusal of assessment order, it is noticed that estimation was done on the basis the appellant had failed to venfy the expenses debited under the repair and maintenance head with supporting bills and vouchers on test check basis for a particular month in all the seven years. Thus the circumstantial evidences suggested that appellant followed similar practice in remaining months also.
However at the same time the appellant has not placed on record the exact details of the expenditure incurred by the appellant in different sub- categories for different months. The working of disallowance was done during the course of search and seizure proceedings and after that neither during the post search proceedings nor during the assessment proceedings nor during the present appellate proceedings the appellant has placed on about the exact specific month -wise details and documents.
Hon'ble Supreme Court of India in the case of CIT Vs British Paints India
Ltd (1991) 188 ITR 44 (SC) has held that it is the duty of the assessing officer to determine the taxable income by making such computation as he considers appropriate in the given situation.
It is held by the Hon'ble Supreme Court in the case of Commissioner of Sales Tax v. H.M. Esufali H.M. Abdulali [1973] 90 ITR 271 that "In estimating any escaped turnover, it is inevitable that there is some guesswork. The assessing authority while making the best judgment assessment, no doubt, should arrive at his conclusion without any bias and on a rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation. It is his best judgment and not anyone else's.
The High Court cannot substitute its best judgment for that of the assessing authority."
It is held by the Hon'ble Supreme Court in the case of Kachwala Gems vs.
Joint Commissioner of Income-tax, Jaipur (2007) 158 Taxman 71
(SC)/[2007] 288 ITR 10 (SC)/[2006] 206 CTR 585 (SC) [14-12-2006] that it is well-settled that in a best judgment assessment, there is always a certain degree of guess work and it is the assessee himself who is to blame as he did not submit proper accounts.
The Hon'ble Punjab and Haryana High Court in case of Tara Singh V ITO
[2017] 81 taxmann.com 293 (Punjab & Haryana) held that the assessing officer in a best judgment assessment can resort to a bona fide estimate based on a rational basis.
It is held by the Hon'ble Rajasthan High Court in the case of Chaturbhuj
Manoj Kumar v. Commissioner of Income-tax [2017] 82 taxmann.com 103
(Rajasthan)/[2016] 388 ITR 194 (Rajasthan) [29-07 2016] that by invoking provisions of section 145(3) or in a case of a best judgment assessment under section 144, some guess work will always have to be resorted to by the authorities.
The Hon'ble Andhra Pradesh High Court in the case of Rajnik& Co. v.
Assistant Commissioner of Income-tax[2001] 117 Taxman 675 (Andhra
Pradesh) also observed regarding that where it becomes necessary to have recourse to some form of estimate by the Income-tax Department, that method should be adopted which approximates most near to the truth.
It is held by the Hon'ble Supreme Court in the case of Dhakeswari Cotton
Mills Ltd. v. Commissioner of Income-tax [1954] 26 ITR 775 (SC)[29-10-
1954] that that in arriving at its estimate opportunity should be provided to the assessee to place any relevant material on the point that it has, and opportunity to meet the substance of any private inquiries made by the Income-tax Officer if it is intended to make the estimate on the foot of those enquiries.
In view of the submissions of the appellant, the appellant is provided opportunity to place on record the exact month wise details along with supporting documentscopies from with the search and seizure action (no additional evidence is allowed) before the learned AO within one month of passing of this order showing working of the exact amounts on the issues, which shall be considered by the Id. AO in giving effect to this order after verification.
The appellant has referred to the affidavits given by the labour persons.
However on the one hand the appellant has claimed that such labourers are not even able to make bill for the service rendered by them and they are illiterate and on the other hand the appellant has claimed that they have given the affidavits. It is clearly indisputable that the affidavits have been got manufactured by the appellant from them. Also the identity matching is not proved that they are the same person in whose purpose bill book were printed as claimed by appellant. Without prejudice, also the influence of the appellant on such persons is well established as the appellant was even having the bill books prepared in their business name and was controlling the billings done in their name. Thus such affidavits are merecolourable devices and afterthought of the appellant. When the search and seizure action was taking place neither the appellant showed before the search party the actual work if any carried out by them and also nor produced these persons before the search party for their examination by the search party During the course of search and seizure action it was worked out after detailed analysis of the bills and documents of the appellant that a large percentage of the expenditure on this head was bogus. However the director and the employees of the appellant company merely made theoretical baseless self-serving statement that the expenditure was actual and none of them produced the evidences before withdate and details of work on which such repair and maintenance was carried out, (iii) such claim of expenditure is not a duplicate claim ie. claim of repair and maintenance en-route as well as in the parking area of the appellant. Regarding toll and trip expenses the appellant has claimed that all expenses incurred on the trip are considered in the toll and trip expenses. When during the course of search and seizure action it was found that either the bills were manufactured by the appellant itself or there were no bills and vouchers in the earlier periods, the onus is completely on the appellant to prove with sterling evidences that the expenditure was actually incurred.
Accordingly, for the expenses which was incurred at the country side by the driver during the journey for which no bill was given by the service provider or some kachha bill is given, a voucher is prepared by the accounts department through the bill books of the labourer/Mistri and verified by any of the director/ authorized person. Thus prima facie the appellant has claimed the deduction of these expenses in toll and trip expenses as well as in the repair and maintenance expenses.
It is a settled law that unaccounted transactions take place in secrecy and directevidence about secret transaction would be rarely available and the inference had to be drawn on the basis of circumstances available on the record and that the genuineness of claim had to be considered in view of the surrounding circumstances and applying the test of human probabilities. [SumatiDayal v. CIT [1995] 80 Taxman 89/214 ITR 801 (SC)]
A party who relies on a recitalhas to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed ar taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made
Professional Automotives Private Limited vs. ACIT in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. [Refer judgement of Hon'ble
Supreme Court in CIT v. Durga Prasad More [1971] 82 ITR 540]
It is held by the Hon'ble
Supreme
Court in the case of AnantharamVeerasinghaiah& Co. v. Commissioner of Income-tax [1980]
123 ITR 457 (SC)/[1980] 16 CTR 189 (SC)[15-04-1980] as under-
"Neither law nor human experience guarantees that an assessee who has been dishonest in one assessment year is bound to be honest in a subsequent assessment year."
It is held by the Hon'ble ITAT in Sushil Kumar Mohnani vs. Income-tax
Officer, Ward, Katni (M.P.) [2011] 9 taxmann.com 314 (Jabalpur) abalpur)
(TM) [01-06-2010] as under:-
“…….It is observed that the Hon'ble Apex Court in the case of SumatiDayal (supra) has held as under “………in all cases in which a receipt is sought to be taxed as income, the burden lies upon the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within an exemption provided by the Act lies upon the assessee. But, in view of section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such a case there is, prima facie, evidence against the assessee, viz., the receipt of money, and if he fails to rebut it, the said evidence being unrebutted, can be used against him by holding that it was a receipt of an income nature."
It is clear from the decision of the Hon'ble Supreme Court in the case of SumatiDayal (supra) that direct evidence about secret transaction would be rarely available and the inference had to be drawn on the basis of circumstances available on the record and that the genuineness of claim had to be considered in view of the surrounding circumstances and applying the test of human probabilities."
It is held by the Hon'ble ITAT in Income-tax Officer vs. Solid Machinery Co.
(P.) Ltd. [2022] 143 taxmann.com 293 (Mumbai - Trib.)[19-10-2022] as under-
1. It is also important that when we examine the genuineness of the transactions entered into by the assessee, we must also bear in mind Hon'ble
Supreme Court's observation, in the case of CIT v. Durga Prasad More [1971] 82
ITR 540, to the effect that "Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities". Similarly, in a later decision in the case of SumatiDayal v.
CIT [1995] 80 Taxman 89/214 ITR 801 (SC), Hon'ble Supreme Court rejected the theory that it is for alleger to prove that the apparent and not real, and observed that, "This, in our opinion is a superficial approach to the problem. The matter has to be considered in the light of human probabilities.... Similarly the observation that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winning from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably". We will be superficial in our approach in case we examine the claim of the assessee solely on the basis of documents filed by the assessee and overlook clear the unusual pattern in the documents filed by the assessee and pretend to be oblivious of the ground realities. As Hon'ble Supreme Court has observed, in the case of Durga Prasad More (supra ).......... "it is true that an apparent must be considered real until it isshown that there are reasons to believe that the apparent is not the real party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self- serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents". As a final fact finding authority, this Tribunal cannot be superficial in its assessment of the genuineness of a transaction, and this call is to be taken not only in the light of the face value of the documents sighted before the Tribunal but also in the light of all the surrounding circumstances, the preponderance of human probabilities and ground realities. There may be a difference in subjective perception on such Professional Automotives Private Limited vs. ACIT issues, on the same set of facts, but that cannot be a reason enough for the fact- finding authorities to avoid taking subjective calls on these aspects, and remain confined to the findings on the basis of irrefutable evidence. Hon'ble Supreme
Court has, in the case of Durga Prasad More (supra), observed that "human minds may differ as to the reliability of a piece of evidence but in that sphere the decision of the final fact finding authority is made conclusive by law. This faith in the Tribunal by Hon'ble Courts above makes the job of the Tribunal even more onerous and demanding and, in our considered view, it does require the Tribunal to take a holistic view of the matter, in the light of surrounding circumstances, the preponderance of probabilities and ground realities, rather than being swayed by the not so convincing, but apparently in order, documents and examining them, in a pedantic manner, with the blinkers on.
In the case of Commissioner of Income-tax v. Md. WarasatHussain [1987]
35 Taxman 227 (Patna)/[1988] 171 ITR 405 (Patna)/[1988] 67 CTR 75 (Patna)
[10-09-1987] it was held by Hon'ble Patna High Court as under-
"This was a matter with the special knowledge of the assessee. The Tribunal could not be expected to produce the sale deed. The learned counsel for the assessee submitted that even if the assessee did not produce the original sale deed, the revenue could have obtained certified copy of the sale deed from the registration office and disprovedthe stand of the assessee that the land had been sold really for a sum higher than Rs. 49,500. This does not lie in the mouth of the assessee. No Court or the Tribunal should countenance an assessee the attitude of failure to produce relevant material and ask the adversary to disprove it. This attitude was decried by Chinnappa Reddy, J. in McDowell & Co. Ltd. v.
CTO [1985] 154 ITR 148 (SC).
It is held by the Hon'ble ITAT in the case of KhopadeKisanraoManikrao v.
Assistant Commissioner of Income-tax [2000] 74 ITD 25 (Pune) (TM)/[2000] 69
TTJ 135 (Pune) (TM) [27-01-2000] as under-
134. Having held that the seized record is not the complete record of unaccounted transactions, the question which arises is whether these facts justify the estimation of undisclosed income. It is well settled law that what is apparent is the real state of affairs and the onus to prove that apparent was not real is on the party who claims it to be so. Reference can be made to the Supreme Court decision in the case of CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349. In the present case, the dispute is about the sale consideration of the plots sold by the assessee in the block period. What is apparent state of affair is the consideration of sale shown in the sale agreements/deeds and recorded by the assessee in his regular books of account. Therefore, the burden lies on the department to prove
Professional Automotives Private Limited vs. ACIT that it is false or unaccounted in the present case, there are enough materials in the form of seized record to prove that sale consideration shown by the assessee in his regular books of account and the sale agreements/deeds were false and incorrect. The assessee himself has also admitted this fact by offering the amount of undisclosed income in his return under section 158BC. Therefore, in my opinion, the onus which lies on the Revenue has been discharged. Since the sale consideration recorded in the sale deeds/agreements and in the regular books of account have been proved to be false, in my opinion, the Assessing Officer justified in making the estimate under section 143(3)/145 in accordance with the guidelines given by the Apex Court in the case of Dhakeswari Cotton Mills Ltd.
(supra) and in the case of RaghubarMandalHariharMandal (supra) as discussed by us in earlier part of the order. This view is also fortified by the decision of the Supreme Court in the case of H.M. Esufali H.M. Abdulali (supra). It has been contended on behalf of the assessee that case law relied upon by the Id. senior
D.R. where the estimate was justified related to cases where articles sold were standard articles while in the present case, it isthe land which has been sold which is not of the standard quality in respect of each plot and those cases, therefore, are distinguishable. In my opinion, such aspect of the argument cannot be accepted. Once a fact has been proved to be in existence, the presumption to the existence of such fact can be raised backward and forward as held by the President as 3rd Member in the case of Overseas Chinese Cuisine (supra). It has been held thereon that if a particular habit or bad habit of manipulating the sale bills was found to be existing, then the same state of things could be presumed in respect of other transactions. Even according to the test of human probabilities, as approved by the Hon'ble Supreme Court in the case of SumatiDayal (supra), no man of prudence would sell similar items at similar place having great disparity. No doubt, there may be certain variations on account of mitigating circumstances, which have to be proved by the assessee. Perusal of the record shows that there is a great disparity in the prices of plots in respect of transactions where seized material is available and for transactions where no record is available even though such transactions are made within the short period/interval. This can be proved by some examples
In Survey No. 46, the assessee had sold 5 plots in assessment year 1989-
90 at the rate of Rs. 5 per sq.ft. as per sale agreement/deed. While as per the seized record, it has been found that assessee had charged excess amounts in respect of 4 plots It has also been found that excess money is considerably very high as compared to the price shown in the documents. For instance, the excess money for plot Nos. 7, 8 and 51 were Rs. 12,555 Rs. 15,348 and Rs. 18,533
71 which was similarly situated and sold on the same date. According to the test of human probabilities, the assessee must have charged excess money in respect of the other plots. If there was any mitigating circumstances, it was for the assessee to prove. But, as far as the question of estimation is concerned, there is enough material onthe record to justify the same."
(emphasis supplied)
As per the ratio of the judgement of in the case of Sumilon Industries Ltd.
v. Income Tax Settlement Commission [2017] 83 taxmann.com 352 (Gujarat) as under:-
"18. In case of H. M. Esufali H M. Abdulali (supra) the Supreme Court permitted the department to project the figures of unaccounted production actually available for a short period of an assessment year for the entire year on the ground that in any case of best judgement assessment there is bound to be some guess work.
As long as the same is done bona fide and on the basis of some material on record and not arbitrary. the same would be permissible in law."
As per the ratio of the judgement of the Hon'ble Bombay High Court in the case of Harish Textile Engrs. Ltd. v. Deputy Commissioner of Income Tax, Special
Range-1 [2015] 63 taxmann.com 66 (Bombay)/[2016] 236 Taxman 420
(Bombay)/[2015] 379 ITR 160 (Bombay) (30-10-2015), where loose papers found during search indicated on money receipt by assessee on sale of stenter machines for part of block period and assessee admitted to have received on money during remaining block period also, certain amount was added to assessee's income on basis of guess work as being on money received for remaining block period. The relevant para of the judgement is as under-
5. (e) We have considered the rival submissions. The appellant sought to rely upon the definition of undisclosed income which has been defined in Section 1588(b) of the Act. Undisclosed income is defined as any income based on any entry in the books of account or other documents or transactions which have not been disclosed or would not have been disclosed for the purposes of the Act. It is submitted that in this case, there is no evidence in the form of any entry in the books of account or any other document to establish receipt of 'on money' by the appellant. Consequently, the amount of Rs.10 lakhs being added to the Professional Automotives Private Limited vs. ACIT appellant's income as being 'on money received for the period 1986-1989 is unsustainable in law. It is not in dispute that there is documentary evidence of receipt of 'on money' by the appellant for the period 1989-96. Thus there was evidence of receipt of 'on money only for the part of the block period on sale of Stenter machines for the period 1989-96. This evidence was extrapolated in the impugned order to conclude that 'on money' had been received on the sale of Stenter machines also for the period 1986-89. This extrapolation in case of dealing outside the regular books of accounts was a subject of consideration by the Supreme Court in CSTv. H.M. Esufali AIR 1973 (SC) 2266 and it was not disturbed. This inter alia on the ground that the task of detecting escaped turnover is not easy and would involve some element of guess work. The above decision of Apex Court is sought to be distinguished on the ground that itwas a case of best judgment assessment and therefore would have no application to the case of undisclosed income. We do not accept the above submission. As in case of best judgment assessment an assessment under Chapter XIV B of the Act also involves an element of guess work (see CIT v. Dr. M.K.E Memon 248 ITR 310).
However the guess work should not be arbitrary.......
(emphasis supplied)
As per the ratio of the judgement in the case of Commissioner of Income-tax-VII v. Chetan Das Lachman Das [2012] 25 taxmann.com 227 (Delhi)/[2012] 211
Taxman 61 (Delhi)/[2012] 254 CTR 392 (Delhi) [07-08-2012], transaction can be presumed for whole period on basis of seized material - Seized material can also be relied upon to draw inference that there can be similar transactions throughout period of six years covered by section 153A. The relevant para of the judgement is as under.-
11. We have considered the facts and the rival submissions. We are concerned with the search assessments made under Section 153A of the Act. Unlike
Chapter XIV-B which provided for a special procedure for assessment of search cases, Section 153A which provides for an assessment in case of search, and was introduced by the Finance Act, 2003 w.e.f. 01.06.2003, does not provide that a search assessment has to be made on the basis of evidence found as a result of search or other documents and such other materials or information as are available with the Assessing Officer and relatable to the evidence found. The earlier Section 158BB which is not applicable in case of a search conducted after
31.05.2003, provided that the computation of the undisclosed income can only be on the basis of the evidence found as a result of search or other documents and materials or information as are available with the Assessing Officer, provided they are relatable to the evidence found. Section 153A(1)(b) provides for the Professional Automotives Private Limited vs. ACIT assessment or reassessment of the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. To repeat, there is no condition in this Section that additions should be strictly made on the basis of evidence found in the course of the search or other post-search material or information available with the Assessing Officer which can be related to the evidence found. This, however, does not mean that the assessment under Section 153A can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. The question, however, is whether the seized material can be relied upon to also draw the inference that there can be similar transactions throughout the period of six years covered by Section 153A. It is in this context it is relevant to note the judgment of the Supreme Court in H.M. Esufali H.M. Abdulali (supra).
We have to remember that with the advent of Section 153A we are taken back to the pre-chapter XIV-B situation, where assessments were made on the basis of material and evidence collected during search. In the cited judgment the facts were these. The case arose under the sales tax law. Assessments under the MP
General Sale Tax Actand Central Sales Tax Act had been completed on a dealer of iron and steel. They were made primarily on the basis of the returned filed by the assessee and the books of accounts. Subsequently, the flying squad of the sales tax department inspected the business premises of the assessee and found a bill book for the period of 19 days from September 1 to 19, 1960 showing sales of the value of Rs. 31,171/- which had not been entered in the account books maintained by the dealer. On this basis the Sales Tax Officer initiated reassessment and after rejecting the account books estimated the escaped turn over at Rs. 2,50,000/- under the MP General Sales Tax Act and Rs. 1,00,000/- under the Central Sales Tax Act, adopting the sale of Rs. 31,171/- as escaped turnover for a period of 19 days as the basis. The contention of the assessee in that case was that the action of the Sales Tax Officer was arbitrary inasmuch as he had no evidence of escaped turnover for the entire accounting period and he was not legally correct in estimating or inferring that the assessee would have indulged in sales outside the books of accounts for the entire accounting period.
The Supreme Court rejected such a contention in the following words: -
"It is now proved as well as admitted that his dealings outside his accounts during a period of 19 days were of the value of Rs. 31,171.28. From this circumstance, it was open to the Sales Tax Officer to infer that the assessee had large-scale dealings outside his accounts. The assessee has neither pleaded nor established any justifiable reason for not entering in his accounts the dealings noted in the bill book seized. It is obvious that he was maintaining false accounts to evade payment of sales tax. In such a situation, it was not possible for the Sales Tax
Officer to find out precisely the turnover suppressed. He could only make an estimate of the suppressed turnover on the basis of the material before him. So long as the estimate made by him is not arbitrary and has nexus with facts discovered, the same cannot be questioned. In the very nature of things the estimate made may be an over-estimate or an under-estimate or an under- estimate. But, that is no ground for interfering with his "best judgment". It is true that the basis adopted by the officer should be relevant to the estimate made. The High Court was wrong in assuming that the assessing authority must have material before it to prove the exact turnover suppressed. If that is true, there is no question of "best judgment assessment. The assessee cannot be permitted to take advantage of his own illegal acts. It was his duty to place all facts truthfully before the assessing authority. If he fails to do his duty, he cannot be allowed to call upon the assessing authority to prove conclusively what turnover he had suppressed. That fact must be within his personal knowledge. Hence, the burden of proving that fact is on him. No circumstance has been placed before the assessing authority to show that the assessee's dealings during September 1,
1960, to September 19, 1960, outside his accounts were due to some exceptional circumstance or that they were proportionately more than his dealings outside his accounts during the remaining periods. The assessing authority could not have been in possession of any correct measure to find outthe escaped turnover during the periods November 1, 1959, to August 31, 1960, and September 20, 1960, to October 20, 1960. The task of the assessing authority in finding out the escaped turnover was by no means easy. In estimating any escaped turnover, it is inevitable that there is some guess-work. The assessing authority while making the "best judgment" assessment, no doubt, should arrive at its conclusion without any bias and on rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation. It is his "best judgment" and not of anyone else. The High Court could not substitute its "best judgment" for that of the assessing authority. In the case of "best judgment" assessments, the courts will have to first see whether the accounts maintained by the assessee were rightly rejected as unreliable. If they come to the conclusion that they were rightly rejected, the next question that arises for consideration is whether the basis adopted in estimating the turnover has reasonable nexus with the estimate made. If the basis adopted is held to be a relevant basis even though the courts may think that it is not the most appropriate basis, the estimate made by the assessing authority cannot be disturbed. In the present case, there is no dispute that the assessee's accounts were rightly discarded. We do not agree with the High Court that it is the duty of Professional Automotives Private Limited vs. ACIT the assessing authority to adduce proof in support of its estimate. The basis adopted by the Sales Tax Officer was a relevant one whether it was the most appropriate or not Hence the High Court was not justified in interfering with the same."
12. In the present case the CIT (Appeals) found that the assessee did record two rates as found from the seized papers, but entered only the lower rate in the sale bills. He rightly stated that even though the seized papers related to the period of 18 days in November, 2005 "it reiterates the fact of assessee's conduct in suppressing the profit rate disclosed in the books". The CIT (Appeals) has further found that "the fact of such practice was also admitted by the partners during the search". On the basis of these findings the CIT (Appeals) rightly agreed with the Assessing Officer that the book results deserved to be rejected under Section 145
and an estimate of the true income earned by the assessee had to be made.
Where, however, he appears to have mi irected himself is that after recording the above findings, he should have upheld the turnover of Hing and compound
Hing as estimated by the Assessing Officer instead of directing him to accept the turnover of Hing and compound Hing as shown by the assessee, with a slight enhancement of the gross profit by 2% in the case of Hing and by directing the Assessing Officer to adopt the same rate of gross profit in the case of compound
Hing as was adopted in the case of Hing. The CIT (Appeals) does not appear to be justified in interfering with the estimate made by the Assessing Officer, having regard to the observations made in the judgment of the Supreme Court cited
(supra). The limited question which the CIT (Appeals) couldhave examined was whether the tumover estimated by the Assessing Officer was arbitrary or based on some material.
13. Coming to the order of the Tribunal, we are of the view that the reasons given by it to distinguish the judgment of the Supreme Court cited (supra) are not sound
Firstly, there was seized material in the present case to show that the assessee has been indulging in off-record transactions. The observation of the Tribunal that no evidence was found to show that the actual turnover of the assessee was more than the declared turnover is hair splitting. The Tribunal lost sight of the fact that all was not well with the books of account maintained by the assessee and it has been keeping away its income from the books. That should have been sufficient for the Tribunal to examine the estimate made by the Assessing Officer, having regard to the principles laid down in the judgment of the Supreme Court
(supra). The Tribunal also failed to note the difference between Section 158BB appearing in the Chapter-XIVB and the assessment made by virtue of the provisions of Section 153A of the Act. Secondly, the Tribunal expects the purchasers from the assessee to come forward and declare that they have paid
Fourthly, the Tribunal has relied on the observations of the CIT (Appeals) that no serious consideration can be given to the loose papers and has held that this shows that there is "nothing more in Revenue's kitty apart from those said loose papers pertaining to November, 2005 (financial year 2005-06) to support suppression of sales receipts on the part of the assessee firm" The Tribunal, with respect, has misread the observations of the CIT (Appeals) and has relied on a single observation without reading the order of the CIT (Appeals) as a whole.
Moreover, in such cases, it is expected of the Tribunal to also independentlyexamine the decision of the CIT (Appeals) which is impugned before it. In such cases it would be more appropriate to find out or ascertain whether there is any positive material which is in support of the assessee's case or anything upon which the assessee can rely in order to discharge the burden placed upon him in the light of the judgment of the Supreme Court in H.M. Esufali
H.M. Abdulali (supra). Mere negative findings should not be made use of to throw out the case of the department. Lastly, the reliance placed by the Tribunal on the judgment of this Court in CIT v. Anand Kumar Deepak Kumar (2007) 294 ITR
497/160 Taxman 206 does not seem appropriate. There it was held that there was no presumption that unaccounted sales in the pre-search period would continue in the post search period also. This judgment has no application to the present case because the search took place on 13.12.2005 which falls in the year
Professional Automotives Private Limited vs. ACIT relevant to the assessment year 2006-07 The assessments under Section 153A of the Act have been completed up to and including the assessment year 2006-
07. Even if there can be no presumption that after 13.12.2005 there could have been unaccounted sales of Hing or compound Hing, it is hardly material since only a period of 3% months were left after the date of search till the end of the previous year ie. 31.03.2006. (emphasis supplied)
It is held in the case of GopalLalBhadruka v. Deputy Commissioner of Income-tax
[2012] 27 taxmann.com 167 (Andhra Pradesh)/[2012] 346 ITR 106 (Andhra
Pradesh)/[2012] 253 CTR 80 (Andhra Pradesh) (15-12-2011] that principles of judgement of CST v. H. M. Esufali, H. M. Abdulali [1973] 90 ITR 271 (SC) would equally apply to the case of receipt of on money by the assessee in that case.
The relevant para are as under-
"20. It was contended by learned counsel for the assessees that there was no evidence before the Assessing Officer to concludethat on-money was received by Ahura Holdings in respect of all the sale transactions. It was submitted that there may have been material with regard to eight such transactions but that does not mean that the same script was played out for all the transactions. We cannot agree. There was adequate material before the Assessing Officer in the form of eight sale deeds and in the form of replies given by Gopal to questions posed to him with regard to receipt of on-money to enable the Assessing Officer to come to an informed conclusion in this regard. Appreciation of the available material is within the domain of the Assessing Officer and this does not lead to any substantial question of law, unless the conclusions arrived at are perverse. That is not the position in this case.
21. In CST v. H. M. Esufali, H. M. Abdulali [1973] 90 ITR 271 (SC): [1973] 2 SCC
137 the Supreme Court noted the difficulty in making an assessment ofthe escaped turnover for the purposes of levy of sales tax in the following words
(headnote):
"In estimating any escaped turnover, it is inevitable that there is some guess- work. The assessing authority while making the 'best-judgment assessment no doubt should arrive at its conclusion without any bias and on rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation, It is his best judgment and not of any one else's." (emphasis supplied)
In our opinion, these principles would equally apply for deciding whether, as, in the present case, the evidence of payment of on-money in some transactions would or would not relate to all similar transactions."
(emphasis supplied)
In totality of case, it is clear that appellant has failed to verify the existence of genuine expenditure with genuine bills and vouchers and evidences regarding actual work done and failed to prove the genuineness of same with documentary evidence despite of the fact that the director of the company made commitment during search action that he will prove the genuineness of the expenditure with evidences after the search. In view of these facts, the Id. AO has rightly disallowed the impugned expense debited under the repair and maintenance.
Accordingly, this ground of appeal is dismissed.

Subsequently, a search action u/s 132 was carried out by the Income Tax Department in the case of Om Transport Group, on 16.1.2019, to which assessee belongs. During the course of search, various loose papers/documents were found and seized. Also, statements of directors and employees were recorded. Various details and information as called for by ld.AOwas furnished and assessment was completed after making following disallowances:
A.Y.
Toll & Trip expense debited to P&L
Addition on account of toll and trip expenses
Repairs &
Maintenance debited to P&L
Addition on account of repairs & maintenance
Expenses
2013-14
5,76,91,238.00
1,45,61,268.00
9,87,01,272.00
2,07,272.00
2014-15
6,73,13,408.00
1,69,89,904.00
9,71,30,783.00
2,03,974.00
2015-16
8,01,22,347.00
2,02,22,880.00
10,69,87,642.50
2,30,260.00
2016-17
7,00,41,032.00
84,39,944.00
10,25,31,553.00
63,204.00
2017-18
9,49,53,699.00
1,69,99,971.00
9,00,45,343.00
93,91,768.00
2018-19
14,33,92,485.74
2,13,65,480.00
15,20,30,774.18
3,91,87,577.00
2019-20
15,63,87,292.70
2,14,20,553.00
15,62,02,481.70
2,39,48,071.00

12,00,00,000/-

7,32,32,126/-
(& not through dealers) for specific duration and entire payment is received through banking channels from the companies after deduction of due tax at source. At the time of search, assessee owned more than 350 boxed trucks of higher capacity which are engaged in the transportation business carried on by the assessee. All the vehicles have two set of drivers along with one helper, who are remunerated by salary which is paid to them on monthly basis. All the expenses pertaining to a trip, i.e. Diesel, Toll tax, RTO expenses, other incidental petty expenses incurred on that trip are debited to Tour and trip expenses.
At the time when the trip is started, a lumpsum advance is given to the driver under signed voucher to meet out the journey expenses and the authorization slips are given for topping up of diesel and fuel. For the purposes of accounting, assessee maintains Trip settlement sheets, which contain all the details of trip undertaken, right from vehicle details, i.e. ownership of vehicle, vehicle number, trip details i.e. the distance traveled, fuel Quantity / status, driver details (i.e. name, phone number, license number), advance given to driver, alongwith all the supporting evidences in respect of expenses incurred by driver, i.e. diesel slips, toll receipts, repairs bills, any other charges paid including the government payments on road. For the control purposes, the management tracks the vehicle by GPS system in place and further the particular vehicle team is supposed to show the major occurrence on road by showing face and real time photo of the matter.
During the course of search & seizure action on 16.1.2019 carried out in the case of Om
Agrawal group, office of assessee company situated at Cement Factory Road, Sahu
Nagar, Sawai Madhopur was also searched. During the course of search, certain documents (in the nature of expenses vouchers/invoices) were also found, which were inventoried as Exhibits No. 1 to 7 of Annexure –AS. Also, statements of accountant Sh.
Manish Kumar Mor and Director Sh. Om Prakash Gupta were recorded. Sh. Manish
Kumar Mor, in his statements explained the entire process of accounting of transportation activity. In the process, in response to Question No.34 of statements recorded on 16.1.2019, he was required to explain as to under which head penalty levied by RTO or traffic police was recorded. In response to query so raised, it was explained by him that such expenses were recorded under “Toll and Trip Expenses” as per directions of directors. It is matter of fact that documents found in search, with regards to “Toll & Trip
Expenses”, were in the nature of receipts issued by RTOs etc. mainly regarding levy of composition fees and Taxes paid by drivers during journey and few other payments made by them for on the spot settlement so as to avoid unnecessary delay in transportation.
Similarly, at question No. 37 (APB 374 of Vol 2), Sh. Manish Mor was asked to clarify how the repairs expenses incurred by drivers en- route are recorded in books of accounts and whether they submit any bills/ vouchers for the same. In response to the same, it was explained by him that usually drivers provide bills, however at times bills are not furnished and simply added as expense in Trip Settlement Sheet (as the repairs is done by roadside mechanics, who do not keep any bill book and provide “Kaccha Bill” or sometimes bill is lost by driver) or bills so furnished are not proper, in such cases, vouchers are subsequently prepared for such amounts (i.e. expenses actually incurred, for which proper supporting documents are not furnished by truck drivers), It is pertinent to note here that in the type of business assessee is engaged in, it has to completely depend upon truck drivers in day to day business and though there is mechanism of maintaining proper invoices, still such instances are unavoidable as usually repairing services availed en-route are taken from road side mechanics, who are from unorganized sector and do not maintain provide proper invoices. It was also clarified by Sh. Manish Mor in his statements that this process was being followed for past 5-6 months only.
During the course of statements of Sh. O.P. Gupta recorded on 18.1.2019 (APB 392-398
of Vol 2), i.e. during the course of search, at question no.6 and 7 (APB 394-395 of Vol
2), it was enquired, if he agreed with the statements of Sh. Manish Mor and whether statement that assessee was booking bogus expenses, on the basis of bill books of Mistris as found during the course of search was correct. Since, the search proceedings were going on since 16.1.2019, Sh. O.P. Gupta was fully exhausted mentally, Same is evident from the reply given in response to question no.7, which reads as under:
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t;iqjvkSjlokbZ ek/kksiqjfLFkrO;olkf;difjljksaijryk’kh o losZ{k.kdkjokbZtkjhgSbufiNys 60 ?kaVksaesadbZtxgdbZckjc;ku ns pqdkgWwlkFkghfoHkkx dh vU; dkjokgheasHkhlkFk o lg;ksx ns jgkgWwvHkheSaekufld
:Ik ls
FkdpqdkgWwvkSjvki
}kjk dh xbZlpZesafey kxtkr]
cqDlvkWQvdkmUVlcgqrcMhrknkneasgSftudksaiw.kZr% le>us ds fy, eq>s dqNvfrfjDrfnuksa ds le; dh t:jr gSAvr% esjk vki ls fuosnu gS fd bl dkjokgh dks iw.kZ djus ds fy, eq>s dqN le; nsa] eSa vxys ikap fnu ckn bu cqDl vkWQ vdkmUVl dks ns[kdj bu lHkh lokyksa ds tokc nsus esa [kqndks l{ke le>waxkA
Accordingly, in the statements so recorded, he was forced to admit the facts narrated by Sh. Manish Mor in his statements. It is pertinent to note here that no specific query whatsoever was made from Sh. O.P. Gupta regarding Toll & Trip Expenses during statements recorded u/s 132(4).
It is submitted that the search in the case of the assessee was initiated on 16.1.2019 and prohibitory order u/s 132(3) was placed on 18.1.2019 night after extensive search at the business/ office premises for almost 3 days. Thereafter during the course of proceedings while revoking the prohibitory order, which took place after a lapse of more than one month, on 26.02.2019, statements of Sh. O.P. Gupta were recorded again. During the course of such statements, at question no. 6 to 8 (APB 402-404 of Vol 2), queries were raised as to whether statements of Sh.Manish Mor regarding debiting of repairs and maintenance expenses on the basis of bill books of certain mistris since past 5 to 6
months was correct. In response to this, it was categorically explained by Sh. O.P. Gupta that bill books were printed by respective mistris only and not by assessee. Moreover, it was clarified that such expenses were actually incurred and these were not bogus and rather these were such for which no proper supporting invoice was provided by truck drivers.
Relevant extracts of statements referred above are as under:
iz'u&6 eSavkidkscrkukpkgrkgwWfdfnukad 16-01-2019 dkseSallZizksQsluyvkWVkseksfVoizk- fy-] eSllZvkse VªkaliksVZ dEiuhvkSjeSllZthVhih VªkaliksVZ dEiuh ds lhesaVQ Vªh] lkgwuxj] lokbZ ek/kksiqjfLFkrifjljijvk;djvf/kfu;e dh /kkjk 132 ds rgr~ dh x;hryk’kh dh dk;Zokgh ds nkSjkuJheuh’kdqekjeksjiq= Jhtxnh’kizlkneksj ds c;kuntZfd, x, FksAJheuh’k us viusc;kuksaesaiz’u la[;k 37]38 vkSj 39 ds tokc es crk;kFkkfdvkidhdEiuh ls lacaf/kros
[kpsZtksMªkbZoj ds
}kjkfd, tkrsgSvFkokfofHkUuljdkjhdeZpkfj;ksadksHkqxrku ls lacaf/krgksrsgSmudkbanzktvkidhys[kk iqLRkdksaesafdlizdkjfd;ktkrkgSAJheuh’k us crk;kFkkfd bl rjg ds [kpksZ ds dqNfcyrksMªkbZojykdjnsrkgSrFkkdqNfcydPpsgksrsgSvFkokMªkbZojykdj ugh nsrkgSA bl izdkj ds [kpksZdkscfg;ksa es
Mkyus ds fy, geu qNfefL=;ksa dh fcycqdNiokbZx;hgSrFkk bl izdkj ds [kpksZ ds fy, fcyokmplZbUghfcycqdksa ls QkM+djcfg;ksaesa ,aVªhdjnhtkrhgSAeSavkidksJheuh’k ds c;kuksa dh izfrfn[kk jgkgwWAd`i;k bls ns[kdjcrk,afd bl ckjsesavkidk ;kdgukgS \
mÙkj&6 bl ckjs es eSadgukpkgrkgwafdeuh"kus ,slkdgkFkkfd ;stksQthZfcycukdjcfg;ksaesa ,aVjdjus dh izfØ;kgS oks fiNys 5&6 eghuksa ls gh 'kq: dh x;hgSAbllsigysge bl rjg ds [kpksZ ds okmplZyxkrsughaFksA iz’u&7 fnuakd 26-02-2019 ls vkids bl ifjljijtkjhvk;djvf/kfu;e dh /kkjk 132 ds rgr~ tkjhryk’kh dh dk;Zokgh ds nkSjkuvkids bl ifjljij j[ksfoRro"kZ 2014&15 ls pkywfoRro"kZ 2018&19 rd dh vof/k ls lacaf/krfcy ,oaokmplZ dk lR;kiufd;kx;kvkSjik;kx;kfdvkiusviuhdaiuheSllZizksQsluyvkWVkseksfVoizkafya dh ys[kk iqLrdksaesafjis;j ,aMesaVsusalgSMesatks [kpsZ ,aVjfd, x, gSmulslacaf/krokmplZ@fcyksa ds HkkSfrdlR;kiu ds nkSjkuik;kx;kfddqN [kpksZ ds okmplZlacaf/krQkbZyesa ugh esaVasufd, x, gSvkSjtksesaVasufd, x, gSmuesa ls dqNfcyokmplZ mu QthZfcycqdksa ls lacaf/krgSftudhfcycqdvkiusghNiokdj buds fcy Loa; QkMs+ gSAvr%
ykHkgkfu [kkrsesaMsfCkVfd, x, fjis;j ,aMesaVsusalgSM ds varxZrtk qYk [kpsZMkys x, gSmuesa ls dqN ds rksokmplZ bl ifjljij ugh ik, x, gSvkSjdqNokmplZokLrfodughagSvFkokQthZgSAd`i;kmfprdkj.knsrsgq, Li"Vdjsafdbu
[kpksZdk ;ksa Uk vLohdk;Zekuktk, \
Professional Automotives Private Limited vs. ACIT mRrj&7- eSavkidkscrkukpkgrkgwafdukrks ;s fcy@okmplZQthZgSvkSjukgh ;s [kpsZQthZg ;ksfdftufefL=;ksa ls gedkedjokrsgS oks brus i<s+&fy[ksughagSblfy, mUgksausviuhfcycqdsa
;gh j[k j[khgSAgefcydkVdjfcycqdokfilmudksfHktoknsrsgSAesjk [kpkZokLrfodgSysfdu muds fcy@okmplZblfy, ughaesaVsaufd, x, g ;ksafdMªkbZoj ls dqNfcyxqegkstkrsgSvkSjdqN
[kpsZ
,slsgksrsgSftudsfcymiyC/k ughagksrsgStSlsfdxkM+h ds ,DlhMsaVgksusijlsVyesaV ds fy, MªkbZoj }kjknhx;hjkf’kbR;kfnA
Similarly, vide question No. 9, explanation was sought from Sh. O.P. Gupta regarding
Toll & Trip expenses debited to profit & loss accounts, which were alleged to be penalties levied by RTO of different states for violation of sections of Motor Vehicle Act.
In response to the same, it was explained by Sh. O.P. Gupta that payments made to RTOs are in the nature of Composition fees paid by drivers for on the spot settlement and are admissible, being incurred in the regular course of transportation business. Thereafter, certain tables were prepared by department based on the vouchers which were available at the same premises even on 16.1.2019 (vouchers not prior to March 2015 were referred)
.On the basis of such tables, Toll and trip expenses worth Rs. 11,69,24,472/- and repairs
& Maintenance expenses worth Rs. 7,32,32,126/- were computed as disallowable for A.Y. 2013-14 to 2019-20. Basically, on the basis of very few sample bills, disallowance was Estimated for 7 years. In fact, no bills whatsoever were found for A.Y. 2013-14, still disallowance was made for that year on estimation basis. In statements of Sh. O.P. Gupta as recorded at the time of lifting of prohibitory order, he categorically denied booking of any bogus repairing and maintenance expenses and stated that expenses were actually incurred during the course of business and further stated that “Toll and trip expenses”
were also either in nature of composition fees paid by drivers or other expenses incurred by them. However, without refuting such statements and without bringing any tangible material to prove otherwise, departmental authorities obtained surrender of Rs.12 crores from assessee with respect to “Toll & Trip expenses”. It would not be out of place to mention here that proceedings for lifting prohibitory order were commenced at around
1.00 in noon on 26.2.2019, which were finally concluded at the late night of 28.2.2019
i.e. after more than 2 days and assessee was under so much pressure that he had to sign on dotted lines, which is evident from bare perusal of his statements itself, wherein he has nowhere accepted incurrence of any bogus/excessive expenses. Question no.10 of the statements of Sh. O.P. Gupta as recorded on 28.02.2019 is reproduced as under for the sake of convenience (APB 399-409 of Vol 2).:
iz’u&10- ryk’kh dh dk;Zokgh ds nkSjku ;gkaik, x, okmplZ ds vk/kkjijfoRro"kZ 2014&15 ls pkywfoRro"kZ
2018&19 ds tuojhrd dh vof/k ds fy, vyx&vyxfoRro"kZ ds dqNParticulars months dh lSaiycsfllijfMVsyrS;kj dh gSftldsfy, fcy@okmplZ dk HkkSfrdlR;kiufd;kgSvkSjVSyhesaykHk&gkfu
[kkrsesalacaf/krgSMesa ml vof/k ds fy, MsfcVsM [kpZ ls rqyukdjrsgq, iwjso"kZ dh [kpZ dh fMVsy ,LVhesV dh x;hgSA bl izdkj ls ekgviszy 2018] ebZ 2018] twu 2018] tuojh 2018] tuojh 2017] ekpZ 2016 ,oaekpZ
2015 ls lacaf/krdqNfMVsyrS;kjdjok;hx;hgSftulslacaf/krlkjf.k;ksa dk fizaVvkmVeSavkidksfn[kk jgkgwWftls ns[kdjvkiuslkbZufd, gSvkSjftUgsavkidsc;kuksa dk ghikVZcuk;ktkjgkgSAvkSj
;g ekursgq, fdblhvuqokresalacaf/krfoRro"kZesaHkhblhiz.kkyh ls
[kpksZdksMsfCkVfd;kx;kgksxkAbulkjf.k;ksaesarS;kjMkVkvkSjvkidhokLrfodys[kk cfg;ksa ls rqyukRed ,d fMVsy
¼Summary)rS;kj dh x;hgStksfdfuEukuqlkjgS %&

Period
Total Expenses
R&M As per
P&L
Voucher Not found or bogus vouchers
Ratio of voucher not found
Total Expenses
Toll & Trip As per P&L
Amount of penalties under MV
Act
Ratio of disallowable expenses u/s 37(1)
(Actual)
April 2018
9,397,484
2,066,151
21.99
12,472,745
2,490,700
19.97
(Actual)
May 2018
12,668,344
2,422,514
19.12
13,262,737
1,899,803
14.32
(Actual)
June 2018
17,477,930
3,399,917
19.45
12,838,644
2,247,120
17.50

39,543,758
7,888,582
19.95
38,574,126
6,637,623
17.21
(Estimated)
2018-19
120,040,455
23,948,071

106,595,150
18,345,025

(Actual)
Jan.2018
15,381,188
3,895,347
25.33
10,597,090
15,78,569
14.90
(Estimated)
2017-18
1,54,708,161
39,187,577
25.33
143,392,486
21,365,480

(Actual)
Jan. 2017
7,368,937
751,134
10.19
7,297,640
1,302,650
17.85
(Estimated)
2016-17
92,166,519
9,391,768
10.19
95,237,930
16,999,971

(Actual)
March 2016
13,225,451
7,880
0.06
7,002,982
844,100
12.05
(Estimated)
2015-16
105,340,467
63,204

70,041,032
8,439,944

(Actual)
March 2015
11,065,606
23,433
0.21
6,319,413
1,594,940
25.24
(Estimated)
2014-15
109,647,771
230,260

80,122,347
20,222,880

mijk r lkj.kh esafoRro"kZ 2014&15 ls pkywfoRro"kZ 2018&19 ds fy, VsLVp ds vk/kkjijfjis;j ,aMeSaVsuaslgSMesa]
lacaf/krfcy@ckmplZ ds vHkkovkSjosfcytksvkidhdaiuh }kjk Loa; dkVs x, gS] vLohdk;Z [kpZiwjso"kZdsfy,
,LVhesVfd;kx;kgSAblhizdkjVkWy ,aMfVªigSMesavkjVhvksvkWfQldkspqdk;hx;hisuYVh dk vkdMkHkhfoRro"kZ 2014&15 ls pkywfoRro"kZ
2018&19
ds fy,
VsLVp ds vk/kkjijvuqekfurfd;kx;kgSAvr%
bl ckjs es viukmfprLi"Vhdj.kizLrqrdjsafdmijk r lkj.kh ds vk/kkjijfuEufyf[krfoj.kkuqlkj [kpksZdk ;ksa u vLohdk;Zekuktk,%&
Disallowable Expenses on account of missing voucher / bogus voucher under the head “Repair &
Maintenance”
Disallowable Expenses u/s 37 under the head “Toll &
Trip Expenses
Aggregeate disallowable expenses
2014-15
230,260
20,222,880
20,453,140
2015-16
63,204
8,439,944
8,503,148
2016-17
9,391,768
16,999,971
26,391,739
2017-18
39,187,577
21,365,480
60,553,057
2018-19
23,948,071
18,345,025
42,293,096
Total
72,820,880
85,373,300
158,194,180

blhizdkjo"kZ 2012&13 ls lacaf/krfcYl@okmplZ bl ifjljij ugh ik, tkus ds dkj.kfoRro"kZ 2012&13 ,oa
2013&14 ds fy, fjis;j ,aMesaVsusalgSMvkSjVkWy ,aMfVªigSMesa ls Disallowance dk Estimation vHkhrdrS;kj ugh fd;ktkldkgSAijarq 2013&14 ds fy, ekpZ 2013 ls lacaf/krfcYlokmplZtCrdjfy, x, gSAvr%
Li"VdjsfdD;ksao"kZ 2014&15 ds fy, tksvuqikrfudkykx;kgSmlhvuqikresafjis;j ,aMesaVsusalgSMvkSjVkWy ,aMfVªigSMesa ls Disallowance dk Estimation fuEukuqlkjekuktk, %&

2012-13
2,07,272
1,45,61,268
1,47,68,540
2013-14
2,03,974
1,69,89,904
1,71,93,878
Total
4,11,246
3,15,51,172
3,19,62,418
Gross Total
7,32,32,126
11,69,24,472
19,01,56,598

d`i;k bl ckjsesaviukmfprdkj.kLi"VdjsaA mRrj&10- bl ckjsesaeSavkidk gukpkgrkgwWfdvkiustks ,LVhesVfd;kgS oks iwjslkyesaflQZ ,d gheghus ds MkVk ds vk/kkjijfd;kgSA oks HkhvkiustkslSaiycsfllijeghuklsy Vfd;kgS oks tuojh ;k ekpZfy;kgSApwafdbueghuksaesavU; ljdkjhfoHkkxksa ds HkhVkxsZVgksrsgSblfy, bueghuksa es tk aEikmfMaxQhl@isuYVh dk fQxjgS oks T;knkgSA bl otg ls ,LVhes’ku dh jkf’kbruhT;knkvk;hgSAesjkekuukgSfdvkiusfjis;j ,aMesaVsusalgSMesatk isallowance dk
Estimationfd;kgSoks lghughag ;ksafdftufcyksadksvkiusgSaMesMokmplZ@cksxlokmplZekursgq, vLohdk;Zfd;kgS oks lHkhlghgSAeSavkidksbulHkhokmplZdkslR;kfirdjoknwaxkAtSlkfdeSausigysghcrk;kgSfdtksfcycqDl
;gkfeyhgSmulslacaf/krokmplZflQZpkywfoRro"kZ 2018&19 ds dqNeghuksaesaghMsfCkVfd, x, gSaAvr% vkids
}kjkfoRro"kZ 2012&13 ls 2018&19 ds fy, /kkjk 37 ds rgr~ vkjVhvk k;kZy; esapqdk;hx;hisUkYVhbR;kfn dh
Professional Automotives Private Limited vs. ACIT fQxj dk ,LVhes’ku :- 11]69]24]472@& dh jkf’kdks 'kkfeydjrsgq, dqy :- 12 djksM+ dh jkf’kfeflaxfcyokmplZ
,oa
/kkjk
37
ds rgr~
lacaf/krfoRro"kksZesalfEefyr@la;qDr
:Ik ls vLohd`rdjusgsrqLohdkjdjrkgwa(Admittedfor disallowance)vkSjfjis;j
,aMesaVsuaslgSM ds fcYlokmplZdkseSavkidksoSfjQkbZdjoknwaxkAlkFkgh :- 12 djksMesa ls :- 30]75]528@&(120000000 –
116924472) ls lacaf/krC;kSjkeSavkidkscknesadSydqysVdjdsizLrqrdjnwaxkA
From bare perusal of above, it is evident that, Sh. O.P. Gupta has stated that:
-
Estimation of Toll and Trip expenses was not proper as the same was done on the basis of data of one month only, that too for January or March and since Government departments also have targets in these months, figure of composition fees would obviously be on the higher side in these months and conseqment Estimation made on by search team this basis is also high.
-
Estimation of Repair and Maintenance expenses is also not proper, as the vouchers have been debited on the basis of bill books (of mechanics) only for few months of F.Y. 2018-19. It was further stated that such data will be produced for verification
Then, immediately after such denial, it has been mentioned in statements that he admitted sum of Rs.12 crores including disallowance of Rs.11,6924,472/- on account of “Toll and trip expenses” (though legitimately and genuinely incurred) - as computed by the department, which itself proves that statements recorded regarding surrender of additional income were on dotted lines and not voluntary.

Therefore, after receiving copies of such statements, when it was realized that statements were misinterpreted and recorded by the department in their own language and phraseology, Sh. O.P. Gupta retracted such statements by filing affidavit (APB 410-411
of Vol 2), whereby it was stated that some of his utterances were not interpreted recorded in the statement properly.
In present appeals, assessee has challenged the disallowance of Toll & Trip Expenses and repairs & maintenance expenses made vide assessment order passed u/s 153A. Basically, for Toll & Trip Expenses, the only documents found was receipts regarding payment made to RTO (which were not incriminating in view of submission made below). With respect to Repairs & Maintenance expenses, certain blank bill books were found, on the basis of which it was inferred that assessee was booking bogus expenses (though it was clarified by Sh. Manish Mor as well as Sh.O.P. Gupta that all expenses recorded in books were actual and neither bogus nor inflated). Moreover, Sh. Manish Mor in his preliminary statements itself had stated that the process of taking bills (in order to book expenses incurred in respect of which either “Kaccha bill” was provided by driver or bill was lost by driver in transit) and preparing vouchers was started by company for past 5-6 months only. It is thus clear that disallowance made on account of Repairs & Maintenance
Professional Automotives Private Limited vs. ACIT expense prior to A.Y. 2019-20 is absolutely arbitrary. With this background, common issuewise submission is made as under:
Issue 1: Disallowance made in absence of incriminating documents found during search:
As stated above, so far as Toll and Trip expenses are concerned:
- payments made to RTO were in the nature of Composition fees paid to RTO, which is an allowable expense;
- such expenses were incurred during normal course of business under commercial expediency;
- payments were made out of funds available with assessee from regular sources of income;
- books of accounts were duly audited by qualified chartered accountant, wherein no adverse remarks were made nor the same were reported under disallowances u/s 37(1);
-
Assessment for A.Y. 2013-14 and 2014-15 were completed u/s 143(3), wherein no discrepancy was found with regards to “Toll & Trip Expenses” and no addition was made on this issue.
Thus, receipts regarding payment made to RTO cannot be termed as incriminating in any manner.
Similarly, with regards to Repairs & Maintenance expenses, documents found were either in the nature of blank bill books or certain undated bills, for which as stated above, it was specifically mentioned in statements recorded itself that the practice of taking bills from 6
parties as mentioned in statements (for booking expenses for which no proper supporting invoice is available) was being followed for past 5-6 months. It is a matter of fact that not a single evidence was brought on record by search officials or by ld.AO during assessment proceedings to prove that this practice was being followed continuously for past 7 years. It is settled position of law that statements recorded u/s 132(4) have great evidentiary value and in the event either assessee or the department wishes to disprove the facts narrated in statements, there has to be some cogent material in support of the same.
Moreover, during the course of recording of statements, it was stated by search team that the bills and vouchers for FY 2012-13 and 2013-14 could not be located however they had seized vouchers for March 2014 (i.e. F. Y. 2013-14) which are available at Exhibits
A-107 to A-116. Further based on the figures noted for March 2014, the search officials had proportionately worked out the proportion of disallowable expenses.
It is thus noteworthy to mention here that no documents whatsoever were found/seized for A.Y. 2013-14 and assessment for A.Y. 2013-14 was already completed u/s 143(3), therefore disallowance made for A.Y. 2013-14 is beyond juri iction.
In view of above, it is submitted that addition made by ld.AO vide assessment order u/s 143(3) r.w.s. 153A was not based on any incriminating material found as a result of search. At this juncture, it is submitted that a bare perusal of section 153A itself, makes it clear that only assessment/re assessment pending on the date of search shall stand abate and will be carried out afresh. If assessment for particular year is already completed on the date of search, whether through scrutiny assessment or by virtue of expiry of limitation period prescribed for issuance of notice u/s 143(2), such assessment can be disturbed only if, any incriminating documents are found as a result of search.
It may kindly be noted that for:
(i)
A.Y. 2013-14 and 2014-15, case of assessee was selected for scrutiny and assessment wascompleted us 143(3). It is also relevant to state that in assessment so completed for AY 2013-14 and 2014-15, the expenses claimed under the head Trip and Toll expenses and Repairs & Maintenance expenses were not doubted and petty disallowance were made out of other expenses claimed such as office expenses, printing etc.
(ii)
A.Y. 2015-16 to 2017-18, case was not picked for scrutiny and thus the Return of Income filed by assessee had attained finality. No proceedings relating to the assessment with respect to these assessment years under appeal were pending before the Ld. AO as on the date of search, and therefore, the Ld. AO’s juri iction u/s 153A was limited only to the material found during the course of search and he could not have made additions/
disallowance in the assessments u/s 153A without referring to any incriminating material found / seized during the course of search. It was not permissible for the Ld. AO to make regular scrutiny assessments under the garb of assessment u/s 153A in view of the fact that the return of income filed way back in regular course has attained finality as case was not selected for scrutiny and time for such selection has already lapsed.

It is settled proposition of law based on numerous judgments of Hon’ble High Courts
(including Juri ictional High Court) and a plethora of ITAT decisions that no additions could be made in the assessment u/s 153A for a particular assessment year if there is no incriminating material found as a result of search and proceedings u/s 153A cannot be employed as a substitute for regular assessment. Thus, it is submitted that the additions made vide impugned assessment without referring to any incriminating documents found during search could not have been made at all in assessment made u/s 153A on income which already stood accepted especially when no incriminating material in this regard was found as a result of search.
In support of this contention, reliance is placed on recent judgement of Hon’ble Supreme
Appeal No.6580 of 2021, where, after thorough analysis of provisions of assessment in Search Cases, as amended from time to time, legislative intent behind such amendments and provisions of assessment u/s 143(3) /147, it has been concluded that:
i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the juri iction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the juri iction to assess or reassess the ‘total income’ taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.
The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.
Therefore, in these facts and circumstances and in view of the well-established law in this regard, the Ld. AO has grosslyerred in making disallowance of Toll & Trip expenses and Repairs and Maintenance expenses for A.Y. 2013-14 to 2017-18, vide assessment completed u/s 153A of the Income Tax Act, 1961. Reliance is also placed on:
Jai Steel India v. ACIT reported in 259 CTR 281(Rajasthan HC)
In a case where nothing incriminating is found though s. 153A would be triggered and assessment or reassessment to ascertain the total income is required to be done, the same would not result in any addition and the assessments made earlier may have to be reiterated. Argument of the counsel that the AO is free to disturb the income, expenditure
Professional Automotives Private Limited vs. ACIT or deduction dehorns any incriminating material while making the assessment u/s 153A is not borne out from the scheme of the said provision. Provisions of ss. 153A to 153C cannot be interpreted to be further innings for the AO and / or the assessee beyond the provisions of ss. 139, 147 and 263A harmonious construction of the entire provisions of s. 153A would lead to an irresistible conclusion that the word ‘assess’ has been used the context of abated proceedings and ‘reassess’ has been used for completed assessment proceedings which do not abate as they are not pending on the date of initiation of the search or making of requisition and can be tinkered only on the basis of incriminating material found during the course of search or requisition of documents, therefore, it is not open to the assessee to seek deduction or claim relief not claimed by it in the original assessment which already stands completed in an assessment u/s 153A made in pursuance of a search or requisition.”
Search and seizure- Block Assessment- Undisclosed Income- General Principles-
Assessment completed on date of search- No incriminating materials found during search- Block Assessment not valid- Income Tax Act, 1961, ss. 132,153A.
Hon’ble Delhi High Court in the case of Pr. CIT vs Meeta Gutgutia vide order dated
25.05.2017 reported in 396 ITR 691, after discussing decisions of various courts on the issue, decided the appeal in favour of assessee by holding that invocation of provisions of section 153A is unjustified in respect of years for which no incriminating documents were found and also no assessment was pending on the date of search. In this case in para
63, it is further observed by Hon’ble Court that in case of Kurle Papers Mills Pvt. Ltd.,
(which was decided by Hon’ble Delhi High Court in favour of assessee), Hon’ble
Supreme Court has dismissed the revenue’s SLP on 07.12.2015. Reliance is also placed on:
-
Dr.Ratan Kumar Sharma vs ACIT (ITAT JAipur) ITA No.797-798/JP/14
-
Dr.Vikram Goyal vs DCIT (ITAT Jaipur) ITA No.174/JP/17
-
All Cargo Global Logistics Ltd. v. DCIT (2012) 18 ITR (Trib) 106 (Mumbai)
(SB) – Later on upheld by Bombay High Court.
-
Gurinder Singh Bawa v. DCIT (2012) 28 Taxmann.com 328 (Mum Trib),
-
Kusum Gupta v. DCIT, ITA Nos. 4873/Del/2009, (2005-06)2510 (A.Y. 2003-04),
3312(A.Y. 2004-05) 2833/Del/2011(A.Y. 2006-07)
-
MGF Automobiles Ltd. V. ACIT, ITA No’s 4212 & 4213/Del/2011
-
Tarannum Zafar Khan Vs. ACIT, ITA Nos. 5888 to5890/Mum/2009
-
Vee Gee Industrial Enterprises vs. ACIT, ITA No. 1/Del/2011& ITA
No.2/Del/2011
-
ACIT Vs. Shri ManojNarain Aggarwal, ITA Nos. 5518 to 5524/Del/2012 (ITAT-
Delhi)
-
Mir Mazharuddin ITA Nos. 1153 to 1159/Hyd/2012
-
Asha Kataria, I.T.A. Nos. 3105, 3106 & 3107/Del/2011
-
M/s JadauJewellersVs. ACIT ITA Nos. 686/JP/2014
-
Damodar Das Agarwal Vs. ACIT in ITA Nos. 152 to 155/JP/2015
-
Nirmal Kumar Agarwal Vs. ACIT in ITA Nos. 156 & 157/JP/2015

Thus, in light of the above legal pronouncements, it was submitted before ld.CIT(A) that since no proceeding with respect to the assessment years A.Y 2013-14 to 2017-18 were pending before the Ld. AO, therefore, the Ld. AO did not have juri iction for such years to make addition in the assessments u/s 153A without referring to any incriminating paper seized during the course of search, related to relevant assessment year.
However, submission made by assessee was rejected by ld.CIT(A) primarily on the observation that even statements recorded during search also constitute incriminating material and that assessee itself was preparing bills for repairs and maintenance, which were shown to have been prepared by Mistris. Further, ld.CIT(A) has alleged that bill books as found and seized during search were partly blank, partly undated and some of which were in the nature of Estimation of Bill and thus were incomplete and held as bogus.
Similarly, with regards to Toll and Trip expenses, it has been observed by ld.CIT(A) that accountant, Sh. Manish Mor in his statements has stated that payments made to RTO were debited under the head “Toll and Trip Expenses” and not as penalty. Also, ld.CIT(A) has relied upon the statements of Sh. Om Prakash Gupta recorded on 28.2.2019, wherein admission of additional income was obtained from him on the basis of disallowance estimated by the departmental officials for 7 years.
On the basis of such observations, ld.CIT(A) concluded that appellant claimed excessive repairs and expenses and was preparing bogus bills and expenses not allowable under Toll and Trip expenses were also being claimed as allowable and there was non- disclosure of expenses incurred a result of violation of law. Ld.AO also arrived at a Professional Automotives Private Limited vs. ACIT conclusion that any fact/evidence which could suggest that the documents/ transactions claimed or submitted in original proceedings were not genuine and even mere statements u/s 132(4) constitute incriminating material.
In this regard, it is submitted that even though ld.CIT(A) has concluded that mere statements recorded during search also constitute valid evidence for initiating and completing assessment u/s 153A, however has misinterpreted such vital statements. Your honours would appreciate that neither Sh. O.P. Gupta nor Sh. Manish Kumar Mor at any point of time have admitted that any of the two expenses, i.e. Repairs and Maintenance expenses as well as Toll and Trip expenses were not genuine or not actually incurred. In fact, they have clearly admitted that expenses were actually incurred during the regular course of business. So far as Repairs and Maintenance expenses are concerned, it was clearly stated that bill books found were related to expenses actually incurred, however for which supporting invoices were not available. Similarly, w.r.t. Toll and Trip expenses it was submitted that majority payments were in respect of Composition Fees.
Overloading charges etc. which were not penal in nature. Also, as stated in preceding paras that surrender of additional income was obtained on dotted lines and therefore such statements could not be relied upon.
Ld.CIT(A) has also relied upon a number of judicial pronouncements, none of which has been delivered in the context of section 153A and thus are not applicable to the facts of the case.
Issue 2: Toll and Trip Expenses
As stated above, it is reiterated that the assessee company is engaged in the Transportation of “Four wheeler vehicles” throughout the country from the point of their manufacturer to the directed destinations. In the process, assessee has engaged more than 350 boxed trucks of higher capacity for transportation and all the expenses pertaining to a trip, i.e. Diesel, Toll tax, RTO expenses, other incidental petty expenses incurred on that trip are debited to Toll and trip expenses.
As stated above, during the course of search & seizure action on 16.1.2019 carried out in the case of Om Agrawal group, office of assessee company situated at Cement Factory
Road, Sahu Nagar, Sawai Madhopur was also searched. During the course of search, certain documents were found which were inventoried as Exhibits No. 1 to 7 of Annexure
–AS. Also, statements of accountant Sh. Manish Kumar Mor and Director Sh. Om
Prakash Gupta were recorded. Sh. Manish Kumar Mor, in his statements explained the entire process of accounting of transportation activity, however no specific query was raised from Sh. O.P. Gupta on this issue and he was simply made to admit the statements given by Sh. Manish Mor, which is evident from the fact that Sh. O.P. Gupta stated that he was completely exhausted and mentally tired due to continuous extensive search at Professional Automotives Private Limited vs. ACIT various premises of assessee for past 60 hours and requested to allow some time to furnish necessary explanation after considering the books of accounts. Thereafter, while recording of statements at the time of lifting of prohibitory order, at question no.9, specific query was raised regarding expenses debited to Toll and Trip expenses account being payments made to RTO for non-compliance of regulations under Motor Vehicle
Act and explanation was sought as to how the same are allowable u/s 37(1), being penal in nature. (Relevant extracts of statements so recorded are as under:
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Hkhik;kx;kgSfdvkidhdaiuheSllZizksQsluyvkWVkseksfVoizk- fy+- }kjktksviusykHkgkfu [kkrsesaVkWy ,aofVªigSM ds varxZrtks [kpsZMsfcVfd, tkjgsgSmulslacaf/krfcy@okmplZesaVkWyifpZ;ksa ds vfrfjDr mu isufYV;ksa ds pkykuHkhgS]
ftudksfdblhgSM&VkWy ,aMfVªigSMesaMsfcVfd;kx;kgSvkSjtksfofHkUujkT;ksa ds vkjVhvksvkWfQl }kjkeksVjOghdy ,DV dh /kkjkvksa ds ikyuughadjus ds dkj.kyxkbZx;hgSvkSjvk;djvf/kfu;e dh /kkjk 37¼1½ ds vuqlkjfdlhHkhdkuwu dh ikyukughafd, tkus ds dkj.kyxk;hx;h 'kkfLr dh ,otesapqdk;hx;hjkf’k ,d Lohdk;Z [kpZ ¼Allowable expense) ugh ekuktkldrkgSAd`i;kcrk,afd bl ckjsesavkidkD;kdgukgS \
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It is thus submitted that payment for such expenses were primarily made by drivers “on the spot” by way of composition fees and other taxes etc. It was also submitted by Sh.
Om Prakash Gupta that in the nature of businessassessee is engaged, such expenses are wholly and exclusively incurred for the purposes of business and are incidental to the nature of business and in most of the cases it is levied by various state transport departments under pressure of revenue collection for the department. However, search officials, without considering the business exigency of incurring such expenditure has proceeded to estimate the disallowable amount. Basically, departmental team
ESTIMATED the disallowability for all the six years, including year under consideration without having any concrete basis. Such tables prepared by search officials on estimation basis are reproduced at Question No. 10 of statements of Sh. Om Prakash Gupta (APB
405-408 of Vol 2). During the course of lifting of prohibitory orders, such tables were shown to Sh. Om Prakash Gupta and his signatures were obtained on those sheets that he agreed with such calculations, according to which the penalty payments were estimated at Rs.11,69,24,472/- for 7 years i.e. from F.Yrs. 2012-13 to 2018-19. Also, surrender of Rs.12 crores was obtained from Sh. Om Prakash Gupta on account of such expenses alleged to be disallowable u/s 37. As stated in the earlier paras, bare perusal of language of the statements show that surrender was not voluntary and under duress.
Further, looking at the entire scenario created and the heat generated as a result of search, in which statements were recorded, i.e. during the search proceedings directors of the firm, many of their staff members were required to be continuously present on the spot
Professional Automotives Private Limited vs. ACIT and to explain and give clarification on different issues which even were not directly related with them and during which period directors / employees were interrogated on various issues, without allowing them to even carry on routine activities and thus harassing them and putting them to severe physical stress and mental agony. Search officials even did not allow the concerned persons to read and understand what has been recorded and simply got their signatures on the papers so prepared, which amounts to violation of human rights, and thus statements so recorded cannot be relied upon. In this regard, reliance is placed on decision of Patna High Court in the case of Bihar Human
Rights Commission vs Rajendra Singh, wherein it was held that:
“the members of the raiding party may take their own time to conclude the search &
seizure operations but such operations must be carried out keeping in view the basic human rights of the individual. They have no right to cause physical and mental torture to him. If the officer in-charge of the interrogation/recording of statements wanted to continue with the process he should have stopped the same at the proper time and resumed it next morning. But continuing the process without any break or interval at odd hours up to 3:30 AM, forcing the applicant and/or his family members to remain awake when it is time to sleep was torturous act which and can not be countenanced in a civilised society. It was violative of their rights relating to dignity of the individual and therefore violative of human rights. Even die-hard criminal offenders have certain human rights which can not be taken away. The applicant’s position was not worse than that. In the opinion of the Commission, the Income Tax Department should ensure that the search
& seizure operations at large in future are carried out without violating one’s basic human rights. To conclude the Commission is prima facie satisfied that there has been violation of the applicant’s human rights by the concerned officials of the Income Tax
Department while continuing the search and seizure operations for which he is entitled to be monetarily compensated.”
Immediately after conclusion of the search proceedings, the assessee company through its director applied for the copies of the said statements along with other seized material which were supplied to them. On receipt of the copies of statements and after in-depth and minute examination thereof, it was observed that many of the replies have not been properly and correctly recorded.
Accordingly, when all the facts were correlated with the material available and the books of accounts maintained in the regular course, it was found that statements were not recorded properly and actually none of the expenses were of the nature which could be disallowed u/s 37(1) since all of them were incurred under business exigency and wholly and exclusively for the purpose of business. Further the expenses alleged as bogus were genuine and actually incurred and the repairs of the vehicles on which such expenses were alleged as bogus were actually carried out and without which the respective vehicle
Professional Automotives Private Limited vs. ACIT could not even run on the road. Therefore, the assessee company while filing its returns in response to notice u/s 153A had not offered any additional income in this regard and an affidavit of Shri Om Prakash Gupta, Director of the company affirming the facts as narrated above was filed (APB 410-411 of Vol 2).
It was thus submitted before ld. CIT(A) that the so-called confession as made by Shri Om
Prakash Gupta in his statements recorded during the course of search deserves to be ignored and excluded while examining the genuineness of the expenses claimed.
However, ld.CIT(A) did not appreciated the submission of the assessee and thus placed sole reliance on statements recorded and brushed aside the retraction by holding that retraction was not done in timely manner. In this regard, it is submitted that while arriving at such conclusion, ld.CIT(A) has failed to controvert submission of assessee that disallowances were made by the department purely on Estimation basis and were made in arbitrary manner and confessional statements of assessee were recorded on dotted lines.
Moreover, not a single independent evidence was brought on record by the department in support of such disallowance, except retracted statements. It is thus submitted before hon’ble bench that sole and heavy reliance placed on such confessional statements is not in accordance with law. Ld.CIT(A) has relied upon a number of judicial pronouncements, which do not give cognizance to retraction if made belatedly. So far as the present case is concerned, it is submitted that search in this case was conducted on 16.01.2019 and prohibitory orders were lifted as late as on 28.2.2019 (during which surrender was obtained). Thereafter, notices u/s 153A for filing of Return were issued on 29.09.2020, during which period, offices of counsels were also not fully functional due to breakdown of COVID 19 and therefore Returns u/s 153A could be filed on 09.02.2021. Then, during the course of assessment proceedings, it was realised that retraction affidavit could not be filed at earlier and without much delay the same was filed. Your honours would appreciate that hon’ble Supreme Court, in order to avoid undue hardship to the assesses, had extended various due dates (falling due in COVID period) as prescribed under the Income Tax Act multiple times and which eventually ended till February 2022. It is thus submitted that adverse inference drawn by ld.CIT(A) solely for the reason that retraction affidavit was filed belatedly, deserves to be ignored and excluded in the interest of substantive justice.
Without prejudice to above, submission on merits as was made before ld.CIT(A) is made as under:
At this juncture, kind attention of your goodself is invited to Annexure AS-44, which are produced herewith for your verification, which contains various challan slips settled by way of Composition fees (which have been treated as disallowable). From perusal of such slips, it is quite evident that on most of the occasions, description on challan is mentioned as “overall height and length of motor vehicle is more than permissible limit” or the Professional Automotives Private Limited vs. ACIT vehicle is overloaded. In this regard, it is mentioned that make of vehicle transporting
“four wheelers” is designed in such a manner that a given number of vehicles can be accommodated in one truck and assessee cannot decide on height and length of truck which is based on the standard of the industry. Apart from this, there may be a few challans for violation of traffic rules, however, assessee being in the transportation business has to depend on the services of the truck drivers for execution of transportion of four wheeler and has no control over such violation. Your honours would appreciate that assessee has to engage such vehicles to fulfill its business requirements and thus payments made towards challans in respect of such issues are commercial expediency.
Moreover, nature of business being such that, if delivery of a particular lot gets delayed,
Car companies (with which assessee has contract of transportation) are reluctant to award projects in future and also levied the penalties for delay in delivery. Accordingly, in order to save the losses on account of delay, the assessee has to bear these levies without contesting against it and prefer to go for compounding on the spot.
It is submitted that the “over dimensional consignments” are indivisible and cannot be divided into parts and pieces and therefore there is no other possibility except to transport them by exceeding the permitted limits related to creation areas/cities. Thus, transportation of this is a business necessity and commercial exigency and does not involve any deliberate intention of violating any law or rules. It is further submitted that the compounding fees paid under the Motor Vehicle Act to the RTO, is an option given to the assessee to continue carrying such over dimensional vehicle after payment of specified fee, which is compensatory in nature and cannot be referred as penalty. Also, delay on one side results in delay in delivery of consignments of Cars on return route also. It is therefore practically not feasible to resist and waste time on such issues.

With this background, it is submitted that after thorough verification of the documents seized by the department, which has been relied upon for making addition on account of “Toll & Trip Expenses” by alleging the same as penal, it can be observed that primarily payment to RTO’s can be categorized under following heads:
1. Composition Fees
2. Overall height and length of Vehicle is more than permissible limit
3. Shasti
4. MV found without adequate Warning and safetly devices
5. Tax
6. Driver Without Uniform
From perusal of above, it is evident that so far as except Shasti, none of the payments can be treated as Offence/Violation of law. All other payments are basically in the nature of some or the other technical default, which are compensatory in nature. Whereas neither
Professional Automotives Private Limited vs. ACIT survey team nor ld.AO has looked into the real nature of expenses incurred and debited under the head “Toll & Trip Expenses” and entire expenses paid to various RTOs have been treated as Penalties under Motor vehicles Act without analyzing the same precisely.
As stated above that payments made to RTOs include Composition fees, Taxes, fee charged due to Overall length and height of Motor Vehicle being higher than permissible limit, driver not in Uniform, defective tail Lamp, Registration mark and Shasti etc. Your honours would appreciate that except Shasti, i.ePenalty all other payments are in the nature of fees charged for some or the other irregularity, and therefore are allowable u/s 37 (1), being incurred wholly and exclusively for the purpose of business. In support of such contention, assessee prepared complete detail of payments made to RTOs (for 5
months out of 7 months, which have been taken as basis for estimating expenses for entire year), which was furnished before ld.CIT(A) (APB 494-594 of Vol 2). It is submitted that while preparing the details, it is observed that there is some difference in the monthwise amount of Toll & Trip Expenes as computed by assessee and as taken by the department, which appears to be due to certain figures not properly considered by the department) alongwith summary of such expenses specifying various heads as stated above. From perusal of such details, it is evident that payment on account of penalty is a very small percentage of total payment made in comparison to that computed by ld.AO.
With this background, submission w.r.t.alloawbility of “Toll & trip expense” being payments to RTO is made and in this regard, at the oustet, provisions of section 37 of the Act are reproduced herein below for the sake of ready reference:
(1)
Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession"
Explanation.-For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.
(2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party.
Finance Act 1998, w.r.e.f.1.4.1962. In memorandum explaining Finance Bill 1998, legislative intention behind insertion of such explanation was defined as under:
“Disallowance of illegal expenses
It is proposed to insert an explanation after sub-section (i) of section 37 to clarify that no allowance shall be made in respect of expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law. This proposed amendment will result in disallowance of the claim made by certain tax payers of payments on account of protection money, extortion, hafta, bribes, etc. as business expenditure. This amendment will take effect from 1st April, 1962 and will accordingly apply in relation to the assessment year 1962-1963 and subsequent years. [Clause 17]”
Thereafter, the CBDT clarified this position vide Circular 772 dated 23/12/1998 whose operative part reads as follows:
Finance (No.2)Act, 1998
Disallowance of Illegal expenses
Section 37 of the Income-tax Act is amended to provide that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purposes of business or profession and no deduction or allowance shall be made in respect of such expenditure. This amendment will result in disallowance of the claims made by certain assessees in respect of payments on account of protection money, extortion, hafta, bribes etc. as business expenditure. It is well decided that unlawful expenditure is not an allowable deduction in computation of income. This amendment will take effect retrospectively from 1stApril, 1962 and will, accordingly, apply in relation to the assessment year 1962-63 and subsequent years.
Thus basically, intention of statute was to not allow the deduction on account of any expenses, paid for any illegal purpose, for example bribe, hafta, extortion etc. in the name of business expediency. It is submitted that each provision in the Act is inserted with some purpose/ intent, which is described in the legislative intention explained while introducing the same. Therefore, while making any disallowance, such purpose has to be kept in mind and provisions of Act ought not to be applied mechanically, as it may result in undue hardship to assessee. Similarly the intention of the Legislature in inserting explanation 1 to section 37(1) was to ensure that payments made for any unlawful purpose should not be allowed as business expense, whereas in the case of assessee, genuine transportation business is being carried on by assessee, and in the course of such business, certain fee has been charged by RTO for overloading etc., i.e. for a purpose which is not illegal or infringement of law and is the rather is in the nature of remedial or offsetting charges which thus deserves to be allow
:

P/2025
P/2025
ACIT

From perusal of above, specifically includes col ticked on “Composition composition fees is not pe under the head “Shasti” in Hon’ble Ahmedabad benc
No. 3365/Ahd/2016 has d for infringement of law.
“8. We have consider short issue before us i compensatory in nature,
Professional Automotives Private Limited vs.

it is evident that there are in all 7 heads m lumns for “Taxes”, “Shasti”, however the To n Fees”, which also strengthens above subm enal in nature, had it been so, the same would ha nstead.
ch of ITAT in the case of Ocean Agro (India) Lt distinguished payments of “Compensatory natur red rival submissions and gone through the rec is, whether compounding fees expended by and allowable expenditure under section 37(1)
P/2025
ACIT mentioned, which oll officials have mission that the ave been charged td. vs DCIT ITA re” and that made cord carefully. A the assessee is ) or not. We find
11.7.2012 states that the assessee to make payment of Rs.20,000/- to avoid any future litigation. The assessee has settled the issue by paying the sum as compensation/damages for the interest of its business, which according to us, cannot be treated as incurred for infraction of any law and therefore to be disallowed. We are not convinced with the action of the AO in disallowing the impugned claim of the assessee, as there is no finding recorded by the Revenue authorities below to demonstrate that expenses incurred by the assessee is a penal in nature and assessee has committed any contravention of law.
Revenue authorities simply treated the expenses as inadmissible without examination of any facts. In the absence of the same, we are not inclined to uphold orders of both the authorities below on this issue, which is accordingly deleted and the ground of appeal of the assessee on this issue is allowed.”
Thus, basically fines paid for a purpose which is unlawful/illegal shall be covered by explanation and not the payments of compensatory nature.
With regards to allowability of composition fees paid to Road Transportation authority due to overloading is concerned, reliance is placed on following judicial pronouncements:
Vishal Chemtrade (P) Ltd. vs ACIT 507/JP/12 : In this case, assessee was an authorized dealer of liquid chemicals manufactured by SVCI, a unit of DCM Shriram Consolidated
Ltd. The supply orders were received from the parties in terms of number of tankers which are loaded from different destinations.During some RTO inspection it was found that assessee's tanker was carrying more tonnage than its registered capacity which is violation of RTO rules. As a consequence for spot release of tanker the driver of assessee is required to pay composition fee lest tanker is not impounded. In this scenario, hon’ble
ITAT held as under (Relevant extracts of decision para reproduced):
“3.4
Ahemdabad Bench in the case of Agarwal Road Lines (P) Ltd. vs. ACIT (supra) and other cases cited supra, the Ground No. 1 of the assessee is allowed.”
M/s Kiran Roadlines vs ACIT ITA No.27/Rjt/2019 (Rajkot- Trib.)
“5. The assessee is a registered firm in the business of transportation. It appears that for A.Y. 2004-05 & 2005-06 identical penalty debited to P&L account has been allowed by the Ld. CIT(A). In appeal preferred before the ITAT by the Revenue dated 06.03.2009, the Hon’ble Bench has been pleased to restore this issue to the file of the Ld. AO to verify the facts whether, if the assessee carried excess load and if the penalty is imposed by the RTO not for payment towards infringement of law but as fine collected by him, the same was directed to be allowed. Upon which, on 09.12.2010, after considering the receipts by the RTO, the Ld. Addl.CIT, Gandhidham Range came to a finding that same was paid as fine and has been debited as penalty in the books of accounts. In that view of the matter, the Ld. Addl.CITwas of the opinion that even if such amount was paid as penalty still the same is clearly a compensatory levy and, therefore, same cannot be disallowed under Section 37 of the Act. Finally, the same was, therefore, decided in favour of the assessee.
The copy of each of orders passed by the Co-ordinate Bench dated 06.03.2009, order dated 09.12.2010 passed by the Addl.CIT, Gandhidham Range and the consequential order passed under Section 143(3) r.w.s. 254 of the Act by the Ld. ACIT, Gandhidham
Circle, Gandhidham-Kutch has been placed on record before us annexing the same in the paper book, considering which, we do not hesitate to conclude that Rs.6,09,100/- in respect of overloading paid by the appellant is an allowable expenses under Section 37 of the Act. Therefore, the same is allowed in favour of the assessee.”
DCIT vs. Anju Saraf [2022] 142 taxmann.com 508 (Nagpur - Trib.)
Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Compounding fees) - Assessment years 2005-06 and 2006-07 - Assessing Officer on perusal of audit report observed that assessee incurred expenditure for overloading of trucks - Assessee submitted before Assessing Officer that amount so paid was not in violation of law but an option given to assessee to pay compounding fees for transportation over dimensional consignments generally termed as overloading charges and expenses were not penalty in nature and not infringement of law - Assessing Officer did not accept plea of assessee and disallowed assessee's claim holding that said expenditure was in nature of penalty for violation of law and thus, not allowable -
However it was found that expenditure incurred by assessee was compounding fee, charged by RTO for overloading trucks which was necessary for smooth functioning of business of assessee - Whether, therefore, deduction would be allowable - Held, yes [Para
28] [In favour of assessee]
Hon’ble Mumbai bench of ITAT in the case of Lift & Shift India P Ltd. vs ACIT ITA
No.5606/Mum/2015 and 4521/Mum/2016 , vide its common order has held as under:
“6. In view of the above facts and circumstances, we are of the view that once the assessee is engaged in transportation of cargo of over dimensional consignment / over weighted, whether front side or rear side dimension of consignment as well as weight of consignment exceeded the limits allowed under Motor Vehicles Act, 1988 is allowable expenditure being compounding fee in the normal course of business. In this case, the nature of payment is not penalty but as a compounding fee under an option given to assessee for transporting of over dimensional consignment generally termed as overloading charges and hence, the same is to be treated as business expenditure, allowable under section 37(1) of the Act. In term of the above, we reverse the orders of the lower authorities and allow the appeal of the assessee.”
Hon’ble Mumbai bench of ITAT in the case of Bharat C. Gandhi, Mumbai vs Department of Income Tax in ITA No.4270/MUM/2009, has held as under:
“9. In view of the legal principles established above and also noticing that the assessee has made about 230 trips by paying compounding fees, as per the rules in the Motor Vehicle Act, it cannot be stated that assessee's payments of compounding fees is in violation of law. Since assessee is engaged in transporting of over dimensional capacities in its transport business, it is necessary business expense wholly for the purpose of business. Therefore, the same is allowable under section 37(1). CIT(A)'s order on this is confirmed.”
Similarly, Mumbai ITAT in the case of M/s. Chadha & Chadha Co. in ITA No.
6140/Mum/2009 dated 17.09.2010 has held that:
"9. The liability for additional freight charges was considered in the case of ITO vs.
Ramesh Stone Wares by the ITAT Amritsar Bench in 62 TTJ (Asr) 93 wherein the additional freight charges paid to Railway Department for overloading was considered and held that the expense was not penal in nature because it is not the infringement of law but same is violation of contract that too not by the assessee but by his agent, i.e.
Coal Authority of India. In terms of an agreement, if coal is finally found by the authorities to be overloaded then the assessee has to pay additional freight charges which according to the terminology of the contract is called penalty freight. This liability was not considered as penal nature and allowed. In assessee's case also the overloading charges are to be incurred regularly in view of the nature of goods transported for the said steel company and since the nature of the goods is indivisible and generally more than the minimum limit prescribed under the Motor Vehicle Act, the assessee has to necessarily pay compounding charges for transporting goods as part of the business expenses. These are not in contravention of law and the RTO authorities neither seized
Professional Automotives Private Limited vs. ACIT the vehicle nor booked any offence but are generally collecting as a routine amount at the check post itself while allowing the goods to be transported. In view of the nature of collection and payment which are necessary for transporting the goods in the business of the assessee, we are of the opinion that it does not contravene the M V Act as stated by the A.O. and the CIT(A).”
Hon’ble Rajkot bench of ITAT in the case of M/s. Agrawal Automobiles Gandhidham v.
Asstt. Commissioner of Income Tax in ITA No. 444/Rjt/2012 has held that :
“5. With regard to disallowance of overloading charges of Rs. 38,243/- paid to RTO, the ld. counsel of the assessee relied on the decision of the Mumbai Bench of the Tribunal in the case of DCIT V/s Shri Bharat C Gandhi (supra) wherein the Tribunal following the decision of the Amritsar Bench of the Tribunal in the case of ITO V/s Ramesh Stone
Wares reported in : 62 TTJ (Asr) 93 held that overloading charges paid by the transporter as per the Rules in the Motor Vehicle Act are allowable u/s. 37 of the Income
Tax Act, 1961. The ld. counsel of the assessee submitted that these charges are compensatory in nature, therefore, the AO be directed to allow the same.
6. Having heard both the sides, we have carefully gone through the orders of the authorities below. It is pertinent to note that ITAT, Mumbai Bench in the case of Shri
Bharat C Gandhi(supra) on identical facts and after considering the relevant provisions of Motor Vehicle Act held that assessee's payments of compounding fees is allowable.
We, therefore, following the decision of Co-ordinate Bench of the Tribunal in the case of Shri Bharat C Gandhi (supra), delete the disallowance of Rs. 38,243/- as overloading charges paid to RTO. Ground No. 1 is allowed.”

Agarwal Roadlines Pvt. Ltd. vs DCIT in ITA No. 668/Ahd/2009
“10. We have heard the learned representatives of both the parties at length and have also perused the materials available on record. …………
………………………
………………………
11. In view of the above discussions we are of the view that the addition made by the AO and confirmed by the CIT(A) is not sustainable and accordingly, we delete the addition of Rs.17,88,262/”
After relying upon above decision of Ahmedabad ITAT, hon’ble Mumbai bench of ITAT has allowed appeal of assessee in the case of Shri Vishwanath V Kale vs ITO ITA No.
590/Mum/2010 , where the only issue under consideration was allowability of overloading charges levied by Road Transport Authorities as business expense.
With regards to allowability of composition fees paid to Road Transportation authority due to Overall length and height of vehicle being more than permissible limit is concerned, reliance is placed on following judicial pronouncements:
DCIT vs. Anju Saraf [2022] 142 taxmann.com 508 (Nagpur - Trib.) (Supra)
Hon’ble Mumbai bench of ITAT in the case of Bharat C. Gandhi, Mumbai vs Department
Of Income Tax in ITA No.4270/MUM/2009, has held as under:
“9. In view of the legal principles established above and also noticing that the assessee has made about 230 trips by paying compounding fees, as per the rules in the Motor Vehicle Act, it cannot be stated that assessee's payments of compounding fees is in violation of law. Since assessee is engaged in transporting of over dimensional capacities in its transport business, it is necessary business expense wholly for the purpose of business. Therefore, the same is allowable under section 37(1). CIT(A)'s order on this is confirmed.”
Hon’ble Mumbai bench of ITAT in the case of Lift & Shift India P Ltd. vs ACIT ITA
No.5606/Mum/2015 and 4521/Mum/2016 (Supra)
In view of above judicial pronouncements also, it is submitted that Expenses in the nature of Composition Fees and Fees paid due to Overall length and height of vehicle being more than permissible limit deserve to be deleted outrightly.
With regards to allowability of composition fees paid to Road Transportation authority due to the offences committed such as inadequate safety devices and the driver being without uniform which are essentially compensatory in nature when the ruling of the judgement by the Hon’ble Ahmedabad bench of ITAT in the case of Ocean Agro (India)
Ltd. vs DCIT ITA No. 3365/Ahd/2016 is applied into the facts and circumstances of the case, reliance is placed on following judicial pronouncements:
-
Vishal Chemtrade (P) Ltd. vs ACIT 507/JP/12 (supra):
-
M/s Kiran Roadlines vs ACIT ITA No.27/Rjt/2019 (Rajkot- Trib.)(supra)
-
M/s. Chadha & Chadha Co. in ITA No. 6140/Mum/2009 dated 17.09.2010 (supra)
-
Hon’ble Rajkot bench of ITAT in the case of M/s. Agrawal Automobiles
Gandhidham v. Asstt. Commissioner of Income Tax in ITA No. 444/Rjt/2012
(supra)
-
AgarwalRoadlines Pvt. Ltd. vs DCIT in ITA No. 668/Ahd/2009 (supra)
In view of above judicial pronouncements also, it is submitted that Expenses in the compensatory nature such as inadequate safety devices and lack of proper uniform by the driver deserves to be deleted outrightly.
With regards to allowability of composition fees paid, reliance is placed on the decision of hon’ble Jaipur ITAT in the case of Vishal Chemtrade (P) Ltd. vs ACIT 507/JP/12
(supra).
In view of above judicial pronouncement also, it is submitted that Expenses in the compensatory nature such as Composition fees deserves to be deleted outrightly.
Similarly, kind attention of your goodself is invited to certain challans, which contain only single nature of payment, i.e. “Tax” and thereafter section under which said tax is charged is mentioned. Such challans do not contain any column for penalty, few such challans are reproduced as under:
Pages 145 and 154 Exhibit 44

Page145
Professional Automotives Private Limited vs.

P/2025
It is also noteworthy to mention here in such challans apart from “Tax” the other column is “Rakkam”, i.e amount and no mention of Penalty/Shatsti. This also strengthens submission of assessee that not all the payment made to RTOs are penal in nature and wherever the same are penal, it has been specifically mentioned under the head “Shasti”.
As the relevant sections of Motor Vehicles Act is mentioned on above challans, some of such sections are briefly explained herewith:
Section 39/192: Here, section 39 provides nature of default, whereas section 192 provides amount of fine/Levy etc.
39. Necessity for registration.—No person shall drive any motor vehicle and no owner of a motor vehicle shall cause or permit the vehicle to be driven in any public place or in any other place unless the vehicle is registered in accordance with this Chapter and the certificate of registration of the vehicle has not been suspended or cancelled and the vehicle carries a registration mark displayed in the prescribed manner:
Provided that nothing in this section shall apply to a motor vehicle in possession of a dealer subject to such conditions as may be prescribed by the Central Government.
Thus, basically levy under section 39/192 is on account of either Vehicle not registered or does not carry a registration mark displayed in the prescribed manner. So far as assessee is concerned, it being engaged in transportation of “Four Wheelers” of big brands and transports such goods at long distance, therefore using a vehicle without registration is next to impossible. However, it is quite possible that registration mark of the vehicle is partly damaged/fell down from one side en route and RTO levy is for that reason. Your goodself would appreciate that such default also cannot be termed as Penal in nature.
Similarly, few more examples are given below:
102. Cancellation or modification of scheme.—
(1) The State Government may, at any time, if it considers necessary, in the public interest so to do, modify any approved scheme after giving—

(i) the State transport undertaking; and (ii) any other person who, in the opinion of the State Government, is likely to be affected by the proposed modification, an opportunity of being heard in respect of the proposed modification.
(2) The State Government shall publish any modification proposed under sub-section (1) in the Official Gazette and in one of the newspapers in the regional languages circulating in the area in which it is proposed to be covered by such modification, together with the date, not being less than thirty days from such publication in the Official Gazette, and the time and place at which any representation received in this behalf will be heard by the State Government
Page 195 of Exhibit 44

Going further, ld.CIT(A) has stated that reliance placed by assessee on decision of Hon’ble Ahmedabad ITAT in the case of M/s Agarwal Roadlines (P) Ltd. is misplaced in view of the decision of hon’ble Supreme Court in the case of Paramjit Bhasin vs Union of India AIR 2006 SC 440., which held Gold Card scheme of Gujrat State Govt. as invalid.
Basically, as per the said scheme, transporter was permitted to carry excess load subject to payment of additional fees. Your honours would appreciate that present case is purely related to Income Tax Act and thus is not affected by finding given in respect of scheme as per Motor Vehicles Act. Moreover, wherever intention of Motor Vehicles Act is to charge a particular levy under the head “penalty”, there is specific column given all the challans.
Similarly, ld.CIT(A) has placed reliance on decision of hon’ble Delhi High Court in the case of Time incorporated vs LokeshSrivastava (2006) 131 Company case 198 (Delhi).
As stated in the order, in this case, hon’ble Court has observed that punitive charges are awarded for the purpose of providing relief to the overloaded Justice delivery system by providing a civil alternative to criminal prosecution of minor crimes. Your honours would appreciate that this decision is also not in the context of Income tax Act and therefore conclusion drawn on the basis of this decision is not applicable to the present case.
Ld.CIT(A) has relied few more cases also, which are also not applicable to the present case, being either delivered in the context of some other law or on distinguishing facts.
Ld.CIT(A) has also observed that payments made by assessee are for the purpose, which is an offence. Basically, ld.CIT(A) has drawn such inference from the heading of Chapter
XIII of the Motor Vehicles Act, viz. “Offence, Penalties and Procedure”. Your honours would appreciate that first of all, Chapter heading also includes “Procedure” apart from Offences and penalties and secondly, various sections under this chapter provide for different types of charges, which not only include fines in monetary terms but also include imprisonment depending upon nature of violation, i.e. how it affects public at large. Thus, all such violation cannot be kept at par even for the purposes of Income tax
Act. It is thus requested that wherever law provides only monetary fines and not imprisonment, the same need to be treated as compensatory, being charged so as to compensate the State Government for loss, if any occurred to road infrastructure due to overloading etc. and to further discourage people to commit such defaults.
Ld.CIT(A) has observed that claim regarding “tax” in the traffic challans appear to be of general reference and is equivalent to composition fees/penalty. In this regard, it is submitted that many challans specifically have separate columns for “taxes” as well as “composition fees”, thus both cannot be used interchangeably. Moreover, if there was any doubt regarding these factual aspects, necessary direct enquiries could have been made by ld.AO/CIT(A) from respective authorities of Road Transport Department.
Without prejudice to above submission that payments to RTOs being incurred wholly and exclusively for the purpose of business and thus deserves to be allowed, in the alternative it was submitted that:
The disallowance for the entire 7 years has been ESTIMATED by search officials on the basis of vouchers of few months. Such exercise of search officials contains two main errors viz.:
1. All payments to RTO’s have been considered as Penal in nature, without understanding the true nature thereof, which has resulted in the very high percentage of penalty (based on which disallowance for entire period have been Estimated) in comparison to what could have been actually treated as Penal in nature and;
2. While selecting sample month, the fact that in certain months Toll expenses are quite lower than the months selected for Estimation has not been considered and thus
Estimation is quite excessive.
In order to depict how the Estimation is too high, assessee compiled monthwise data of 7
years, which were furnished before ld. CIT(A) and are available at APB 494-594 of Vol
2. From perusal of the such details, it is evident that the months selected do not represent entire year, For example disallowance for A.Y. 2015-16 has been computed on the basis of Expenses of March 2015, where Toll expenses are Rs.63,19,413/-, which comprises
7.89% of total expenses for A.Y. 2015-16, as against which expenses for the month April
2014 are merely 41,49,666/-, which constitute merely 5.18% of total expenses. Similarly, to compute disallowance for A.Y. 2017-18, January 2017 has been considered, where disallowance is of Rs.72,97,640/-, viz. 7.69% as against which lowest expenses were noted in the month of November 2016, which amounted to Rs.45,61,942/-, which comprise 4.80% only of entire expenses. Moreover, no detail has been analysed for A.Y.
2013-14 and 2014-15 and rate computed for A.Y. 2015-16 has been applied to those years also.
However, ld. CIT(A) has justified the action of ld.AO in estimating the expenditure by stating that assessee has not placed documents of exact monthwise details and therefore ld.AO has arrived at yearly figures. Ld.CIT(A) has then referred certain rulings, which are primarily w.r.t. Best Judgement Assessment. Your honours would appreciate that in the present case, assessee has given every precise details available with it and has even clearly segregated the challans depending upon their nature, wherein amount of “shasti/penalty” is very less. Also, no defect whatsoever has been pointed out by Professional Automotives Private Limited vs. ACIT ld.CIT(A) in the working so furnished by assessee, still the same has not been accepted and addition has been confirmed on very generalized observations.
It is also submitted that even if assessing officer has to make certain estimations while computing Assessed Income, the same has to be based on some logical foundation. In the present case, merely on the basis of vouchers of 7 months, estimation of disallowance has been made for 7 years and that too without any precise bifurcation on the basis of nature of payment in challans.
In view of above submission, at the most challans made by RTOs only under the head
“Shasti” can be treated as penal in nature and Chart showing revised percentage of disallowance is enclosed at APB 494 to 594 of Vol 2. It is further relevant to state here that ld.CIT(A) while concluding the ground of appeal has issued direction that the appellant is provided opportunity to place on record the exact month wise details along with supporting documents, copies from with the search and seizure action (no additional evidence is allowed) before the learned AO within one month of passing of this order showing working of the exact amounts on the issues, which shall be considered by the ld. AO after due verification.
Your honours would appreciate that direction so issued by ld. CIT(A) itself is beyond juri iction as complete details were already furnished before ld.AO as well as ld.CIT(A) and moreover such direction is not comprehendible as once appeal is decided by ld.CIT(A), what AO has to do after going through the details furnished by assessee as per directions of ld.CIT(A). Moreover, it is a matter of fact that power of Commissioner of Income Tax (Appeals) to restore the matter to the file of AO was withdrawn by Finance
Act 2001 as a measure to reduce litigation.
Relevant extracts of memorandum explaining the provisions of financeact 2001 are reproduced hereunder for the sake of convenience:
“MEASURES TO REDUCE LITIGATION
Powers of the Commissioner (Appeals) not to include powers to set aside the assessment
Under the existing provision contained in sub-section (1) of section 251 of the Income-tax
Act, in an appeal filed before a Commissioner (Appeals) against an order of assessment, the Commissioner (Appeals) may confirm, reduce, enhance or annul the assessment, or he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment in accordance with the directions given by him, after making such further enquiry as may be necessary.
With a view to help bringing about an early finalisation to the assessment and to avoid prolonging the process of litigation, it is proposed to amend section 251 so as to provide
Professional Automotives Private Limited vs. ACIT that, in an appeal filed before the Commissioner (Appeals) against an order of assessment, the Commissioner (Appeals) may not set aside the assessment or refer the case back to the Assessing Officer for making fresh assessment.”
The proposed amendment will take effect from 1st June, 2001. It will be applicable to appellate orders passed by Commissioner
(Appeals) on or after 1.6.2001. [Clause 77]
It is further submitted recently by Finance Act 2024, ld.CIT(A) has been again granted power to set aside the case to the filed of assessing officer, however such power is restricted to assessments completed u/s 144 only. It is thus submitted that direction issued by ld.CIT(A)in present case is beyond juri iction.
It is further submitted that ld. CIT(A) has given an open ended direction, whereby AO has to verify the details furnished by assessee and has also dismissed the appeal simultaneously, which is also self contradictory. It is thus submitted that order passed by ld.CIT(A) suffers from serious defects and deserves to be set aside.
Issue 3: Repairs and Maintenance Expenses
In this regard, at the outset it is submitted that assessee was maintaining a minimum of 254 transportation vehicles in the period of A.Y.2013-14 to 2019-20, which has went on till 366 in the A.Y. 2019-20. In A.Y. 2019-20, assessee has incurred total expenses worth
Rs. 15,62,02,481.70 towards Repairs & Maintenance. Thus, if we compute the average repairs & maintenance expenses for A.Y. 2019-20, it comes to Rs.4,26,782/- per vehicle per annum, i.e. approximately 35,565/- per month, which cannot be treated as excessive in any manner.
It is further submitted that as stated above, during the course of search, certain bill books were found, which pertained to Mistris, who used to do repairing work for vehicles owned by assessee. It was stated by accountant Sh. Manish Mor as well as director, Sh.
O.P. Gupta that these parties were providing actual services to assessee, however being from unorganized sector and were neither capable of nor were required to maintain any books of accounts, thus they were not in a position to provide any bill for work done by them. However, assessee being Income Tax assessee (whose books of accounts are subject to audit) required such supporting documentary evidences in support of expenses incurred. Therefore, as per mutual understanding whenever a repair job was carried out by the mistris, they were getting it noted in a diary and as per convenience as well as their requirement of payment, they were coming to the assessee with such details and the bill books which were kept at assessee’s premises, the necessary invoices were made for expenses actually incurred by assessee and subsequently bill books were returned to them. It was further stated that at times, when truck drivers incur repairing expenses, en-
Professional Automotives Private Limited vs. ACIT route, for which no proper supporting bill is available/bills are lost in transit, then vouchers are prepared by employee of company. As stated above, it was clarified by Sh.
Manish Mor and confirmed by Sh. O.P. Gupta also that this practice was followed by assessee for past 5-6 months only. However, statements of Sh. Manish Mor were misinterpreted so as to conclude that company was booking bogus repairing expenses.
Though, it was clarified in response to question no. 48, itself that expenses in E fleet software are actually incurred and these duly match with trip settlement sheet and no expenses are inflated.
iz'u 48 d`Ik;kcrk,afdD;ke-fleet Softwareesatks [kpsZntZgSmrusgh [kpsZdEiuh ds vFkkZrPAPL ds cgh
[kkrkasesan’kkZ,ax;sgSvFkokmlls c<+kdjfn[kk, x;sgSa\
mRrj48 thugha] PAPL ds cgh [kkrkasesa [kpsZ c<+kj ugh fn[kk,atkrsgS ;fne-fleet SoftwareesantZ
[kpksZavkSjfu;fercgh [kkrksaesantZ [kpksaZ dk feykufd;ktk;sxkrks ;gnksuks ds [kpsZcjkcjvk,ax Eiuhesa
[kpksZdksInflate ugh fd;ktkrkgSaA
However, ld.AO has used only part of the statements as per his convenience and has ignored the above submission, wherein it is clearly mentioned that expenses are not inflated.

Similarly, Sh. O.P. Gupta also, in response to Question No. 6 and 7 to statements recorded on 26.2.2019 has clarified this position. Question No. 6 and 7 is reproduced as under:
iz'u&6 eSavkidkscrkukpkgrkgwWfdfnukad 16-01-2019 dkseSallZizksQsluyvkWVkseksfVoizk- fy-] eSllZvkse VªkaliksVZ dEiuhvkSjeSllZthVhih VªkaliksVZ dEiuh ds lhesaVQ Vªh] lkgwuxj] lokbZ ek/kksiqjfLFkrifjljijvk;djvf/kfu;e dh /kkjk 132 ds rgr~ dh x;hryk’kh dh dk;Zokgh ds nkSjkuJheuh’kdqekjeksjiq= Jhtxnh’kizlkneksj ds c;kuntZfd, x, FksAJheuh’k us viusc;kuksaesaiz’u la[;k 37]38 vkSj 39 ds tokc es crk;kFkkfdvkidhdEiuh ls lacaf/kros
[kpsZtksMªkbZoj ds
}kjkfd, tkrsgSvFkokfofHkUuljdkjhdeZpkfj;ksadksHkqxrku ls lacaf/krgksrsgSmudkbanzktvkidhys[kk iqLRkdksaesafdlizdkjfd;ktkrkgSAJheuh’k us crk;kFkkfd bl rjg ds [kpksZ ds dqNfcyrksMªkbZojykdjnsrkgSrFkkdqNfcydPpsgksrsgSvFkokMªkbZojykdj ugh nsrkgSA bl izdkj ds [kpksZdkscfg;ksa es
Mkyus ds fy, geu qNfefL=;ksa dh fcycqdNiokbZx;hgSrFkk bl izdkj ds [kpksZ ds fy, fcyokmplZbUghfcycqdksa ls QkM+djcfg;ksaesa ,aVªhdjnhtkrhgSAeSavkidksJheuh’k ds c;kuksa dh izfrfn[kk jgkgwWAd`i;k bls ns[kdjcrk,afd bl ckjsesavkidk ;kdgukgS \
mÙkj&6 bl ckjs es eSadgukpkgrkgwafdeuh"kus ,slkdgkFkkfd ;stksQthZfcycukdjcfg;ksaesa ,aVjdjus dh izfØ;kgS oks fiNys 5&6 eghuksa ls gh 'kq: dh x;hgSAbllsigysge bl rjg ds [kpksZ ds okmplZyxkrsughaFksA iz’u&7 fnuakd 26-02-2019 ls vkids bl ifjljijtkjhvk;djvf/kfu;e dh /kkjk 132 ds rgr~ tkjhryk’kh dh dk;Zokgh ds nkSjkuvkids bl ifjljij j[ksfoRro"kZ 2014&15 ls pkywfoRro"kZ 2018&19 rd dh vof/k ls lacaf/krfcy ,oaokmplZ dk lR;kiufd;kx;kvkSjik;kx;kfdvkiusviuhdaiuheSllZizksQsluyvkWVkseksfVoizkafya dh ys[kk iqLrdksaesafjis;j ,aMesaVsusalgSMesatks [kpsZ ,aVjfd, x, gSmulslacaf/krokmplZ@fcyksa ds HkkSfrdlR;kiu ds nkSjkuik;kx;kfddqN [kpksZ ds okmplZlacaf/krQkbZyesa ugh esaVasufd, x, gSvkSjtksesaVasufd, x, gSmuesa ls
Professional Automotives Private Limited vs. ACIT dqNfcyokmplZ mu QthZfcycqdksa ls lacaf/krgSftudhfcycqdvkiusghNiokdj buds fcy Loa; QkMs+ gSAvr%
ykHkgkfu [kkrsesaMsfCkVfd, x, fjis;j ,aMesaVsusalgSM ds varxZrtk qYk [kpsZMkys x, gSmuesa ls dqN ds rksokmplZ bl ifjljij ugh ik, x, gSvkSjdqNokmplZokLrfodughagSvFkokQthZgSAd`i;kmfprdkj.knsrsgq, Li"Vdjsafdbu
[kpksZdk ;ksa Uk vLohdk;Zekuktk, \
mRrj&7 eSavkidkscrkukpkgrkgwafdukrks ;s fcy@okmplZQthZgSvkSjukgh ;s [kpsZQthZg ;ksfdaftufefL=;ksa ls gedkedjokrsgS oks brus i<s+&fy[ksughagSblfy, mUgksausviuhfcycqdsa
;gh j[k j[khgSAgefcydkVdjfcycqdokfilmudksfHktoknsrsgSAesjk [kpkZokLrfodgSysfdu muds fcy@okmplZblfy, ughaesaVsaufd, x, g ;ksafdMªkbZoj ls dqNfcyxqegkstkrsgSvkSjdqN
[kpsZ
,slsgksrsgSftudsfcymiyC/k ughagksrsgStSlsfdxkM+h ds ,DlhMsaVgksusijlsVyesaV ds fy, MªkbZoj }kjknhx;hjkf’kbR;kfnA
From perusal of above, it is evident that Sh. Om Prakash Gupta has completely disagreed with the search party on the issue that expenses booked under the head Repairs &
Maintenance were bogus and rather stated that bill books of mistris were kept as per their instructions as those mistris were not maintaining books. It is submitted that such mistris did not wish that their client should shift somewhere else solely for the reason that they were not providing them proper bills (which was pre requisite for assessee for claiming any expenses) and thus facilitated them by providing their bill books.
In fact, while concluding the statements at Question No. 10, again assessee was specifically asked about bogus repairs & maintenance expenses and he categorically denied that such expenses were bogus and also re-confirmed that such practice of keeping bill books of third parties was followed only in few months of F Y 2018-19. It is thus clear that Sh. Manish Mor, in his statements recorded as well as Sh. Om Prakash Gupta, in their respective statements have specifically mentioned that such bill books pertaining to certain parties were not used in past and this practice was followed only in few months of F Y 2018-19. In fact, assessee requested before ld.AO to issue summons to such parties for making verification of the same before taking any adverse view in this regard.
However, ld.AO without making any direct enquiry and without taking into account the explanation furnished by Sh. Om Prakash Gupta, proceeded to follow the expenses
ESTIMATED by search team alleging the same as bogus repairs & maintenance expenses. It is pertinent to note here that such ESTIMATION was made by adopting percentage of bills found vis a vis bills not found / bills alleged as bogus. Accordingly, a sum of Rs. 7,32,32,126/- was estimated as disallowable for all the seven years, yearwise details of which is furnished in above paras (Q 10 to Sh.O.P. Gupta Ji).
It is settled proposition of law that no addition / disallowance could be made dehorse the material. When as a result ofsearch no paper whatsoever was found indicating that the assessee has claimed expenditure on account of repairs and maintenance of vehicles which is bogus, no disallowance could be made. However, adverse inference was drawn by search officials in this regard though no evidence was found by them which suggests that expenses incurred were not genuine. The search team totally brushed aside the aspect
Professional Automotives Private Limited vs. ACIT and necessity of receiving such repairing services which in no manner could be held as non-genuine. The incurrence of repair expenditure being a necessary corollary to the running of business, the rendering of such service cannot be denied. Also, the comparison of the expenditure incurred in this head needs to be made with the expenditure incurred by the assessee in earlier years and so also the expenditure incurred by other assessees operating in the line of business.
In this regard, kind attention of your goodself is invited to Question No. 37, 38 & 40 of statements recorded of Sh. Manish Kumar Mor, which reads as under:
iz'u&37 d`i;kcrk, fdRepair dk
[kpkZtksMªkbZoj
}kjkfd;ktkrkgS
;kfofHkUufoHkkxksa ds ljdkjhdeZpkfj;ksadkstksHkqxrkufd;ktkrkgSmldkbanzktcgh[kkrksaesafdlizdkjfd;ktkrkgSvkSjD;kamldsfy,
MªkbZojfcyizLrqrdjrkgS \
mÙkj&37
veweuRepair ds fcyMªkbZojykdjnsrkgSysfdubuesa ls dqNfcydPpsgksrsgSrFkkvU;
[kpsZogdsoyfglkcesatksM+dj ns nsrkgSftudsfy, dksbZfcyokmpj ugh gksrkgSAblfy, ftu [kpksZa ds fcy ;k
Repair ds dPpsfcyogMªkbZojnsrkgSmudkscgh[kkrksaesaMkyus ds fy, PAPL us ,d izfØ;kviukbZgqbZgSftldsvuqlkj
;g [kpsZcgh[kkrksaesaMkystkrsgSA iz’u&38 d`i;kbu [kpksZdksPAPLesaMkyus ds fy, viukbZxbZizfØ;k ds ckjsesafoLrkj ls crk,a \
mÙkj&38 bu [kpksZdksMk+yus ds fy, dEiuh }kjkdqNfefL=;ksa dh fcycqdNiokbZxbZgSrFkk buds fy, ;g okmpjbUghafcycqd ls t;iqjm|ksxifjlj] lokbZ ek/kksiqjfLFkrdk;kZy; esadk;ZjrdeZpkjhesjs }kjkcrk, tkusij ,d fu/kkZfjrAmount dk okmpjrS;kjdjfn;ktkrkgSrFkk ml okmpj dk baUnzktRepair HeadesaPAPL ds cgh[kkrksaesadjfn;ktkrkgSA iz’u&40 d`i;kcrk,afdPAPL }kjkfdrus le; ls bucksxl [kpksZdkscgh[kkrksaesaMkyus das fy, Repair enesa
;gfcycukusfdizfØ;kbLrseky dh tkjghgS \
mÙkj&40 ;gizfØ;kfiNys 5&6 eghuksa ls ghPAPL }kjkviukbZxbZgSA
From perusal of above, it is evident that Sh. Manish Kumar Mor has clearly stated the accounting procedure adopted for accounting of Repairs expenses in the books of accounts on the basis of bills, vouchers submitted by drivers after completion of the trip, who at times do not provide bills or do not provide proper bills, which creates difficulty in accounting of the relevant expenditure as well as to getting approval of such expenditure from the concerned management. Accordingly, for the expenses which was incurred at the country side by the driver during the journey for which no bill was given by the service provider or some kachha bill is given, a voucher is prepared by the accounts department and verified by any of the director/ authorized person. Thus, adverse inference drawn solely due to self made vouchers is not correct. This is also relevant to state that in the day to day life, each vehicle driver would come across a situation of taking a road side repair service such as the punctured vehicle or minor or major
Further the estimation of income was made on assumptions and presumptions without having any material in the possession nor any material was brought on record as a result of search or collected during the course of assessment proceedings based on which it could be alleged that there were documents available for remaining period also. Had it been so the same should have been found during the course of search in however, no such evidence / document / incident was either found or brought on record, therefore, the estimation made dehorse the material deserves to be ignored and excluded. In this regard reliance is also placed on the decision of hon’ble Rajasthan High court in the case of Dr.
Rajendra Prasad Gupta reported in 25 TW 87 wherein Hon’ble court has held that no addition could be made “dehorse” the material.
It is submitted that estimation of expenses so made is completely arbitrary as no contrary evidences whatsoever was found by search officials which prove that assessee was consistently following such practice in earlier years also, nor was it established that expenses claimed were excessive in comparison to level of business of assessee. In support of this contention, affidavits of the mistris whose bill books were found at the premises of the assessee company, were also furnished before ld.AO as well as ld.CIT(A)
(APB 413-432 of Vol 2), wherein they categorically stated that since they are illiterate and do not maintain books of accounts, they had kept their bill books at assessee’s premises. One such affidavit is being reproduced herewith for the sake of ready reference:
Affidavit of Sh. Kamlesh S/o Sh. Panna Lal Prop. M/s Karan Mistri
It is submitted that ld.AO without rebutting the same, and merely on the basis of few vouchers, estimated the disallowance for all the 7 years, instead for one year i.s 2019-20
relevant to F.Y. 2018-19. Moreover, ld.AO also estimated disallowable expenses for A.Y.
2013-14, for which not a single document was found. Ld. CIT(A) has also brushed aside such affidavits furnished by Mistris solely for the reason that their business concerns were not having any valid registration No. In this regard, as stated above also, it is reiterated that such mistris were completely from unorganized sector and therefore were not registered but that per se would not render services provided by them as non-genuine.
Moreover, ld. CIT(A) has alleged that since mistris were not educated, affidavits also would have been prepared by assessee and were thus not reliable. It is further submitted
Professional Automotives Private Limited vs. ACIT that both ld.AO and ld.CIT(A) are vested with vital powers u/s 131 and could have made direct enquiries from such “Mistris” in case of any doubt, however instead of doing so, they proceeded to conclude that services not provided by them in any of the years though it was specifically mentioned by directors in theirs statements as well as by Mistris in affidavits that services were actually provided , payments were made and such practice of keeping their bill books at assessee’s premises was being followed for past 5-6 months only.
It is further submitted that it is a matter of settled legal principle that the doctrine of res judicata does not apply to tax laws so far as under the Income Tax Act, each year is an independent year and the assessment is to be made for each year independently based upon the evidences available for that particular year.
Reliance is placed on decisions of:
[2023] 154 taxmann.com 22 (Gujarat) Principal Commissioner of Income-tax v. Shri
Pushkar Construction Co.
Section 69A of the Income-tax Act, 1961 - Unexplained moneys (Illustrations) –
Assessment year 2015-16 - Competent Authority conducted search upon a partner of assessee-firm on 4- 12-2014 and seized documents which related to housing projects developed by assessee and contained details of cash [on-money] as well as cheque received by assessee in relation to sale of units in projects during assessment years 2011-
12 to 2014-15 - Assessing Officer during assessment proceedings for assessment year
2015-16 having found that cash [on money] received by assessee against sale of units in projects was not referred in account books and ratio of on-money was about 41 per cent of actual sale consideration worked out on-money consideration at certain amount and added same to assessee's income for assessment year 2015-16 as undisclosed income -
Whether since material in nature of seized documents was not reliable and it was not related to assessment year 2015-16 and nothing was there to show that on-money was received in respect of sale of units recognized to be sale of assessment year concerned, impugned addition was not justified - Held, yes [Para 6.1] [In favour of assessee]
Hon’ble ITAT in the case of Dr. R.M.L. Mehrotra v. Asstt. CIT [1999] 68 ITD 288 (All.), where, the assessee with other members of his family and certain other doctors was running a pathology clinic. They were subjected to search where certain assets, account books and other documents were found and seized. During the course of search, a notebook was also found which contained details of receipts from patients for a period of approximately two months. The aforesaid receipts were classified by the assessee in three groups, i.e., (i) advance received in full, (ii) part payment received in advance and balance received later and (iii) part payment received in advance and balance not received. In the last category, part payments aggregating to ₹ 85,820 were received while
Professional Automotives Private Limited vs. ACIT payments aggregating to ₹ 72,915 were never received, as patients did not turn up to collect the report. The Assessing Officer took the percentage of suppression of receipts,
(which amounted to ₹ 1,65,405) to the total accounted receipts at 19 per cent and applying the same to the total receipts, worked out the suppressed income at ₹ 6,16,004
for the whole year. Before the Tribunal, the assessee objected to such multiplication formula applied by the Assessing Officer. The Tribunal upheld the view of the assessee and observed that department was not correct in adopting and applying the multiplication formulae. It was observed by the Tribunal that as regards the multiplication formula, in first place, it was a search case in which a search party is supposed and expected to find out all the incriminating documents, and materials as also undisclosed assets. A search assessment much less a block assessment, therefore, stands on different footing than a normal assessment or an assessment based on the best judgment of the Assessing Officer.
In the instant case, the assessee was searched and during this search no other diary or other record comparable to the notebook was found out by the search party for the remaining period which normally would have been, had it been maintained. It was further observed that though such records pertaining to the remaining period could have been destroyed by the assessee, if the assessee had actually made a fortune of similar receipts in respect of the remaining part of the year, they must be reflected by certain movable or immovable assets found during the course of search. In the present case, no such assets were ever found by the department which could be attributed to any of such hypothetical receipts. The Tribunal held that under these circumstances though estimation could be made, such estimation should not be vague and illogical which leads to absurdity. It was held that the department was not correct in applying the multiplication formula adopted by the AO.
J. Gopal Rao v. State of Orissa [1993] 88 STC 488 (Ori.)
– The Orissa High Court also had an occasion to deal with an issue relating to backward projection of materials under the Sales Tax Act. In this case, the assessee was carrying on business in grocery articles. In this case, the liability of the petitioner was determined by estimating daily sales at ₹ 75, ₹ 80 and ₹ 100 for the assessment years 1978-79, 1979-80
and 1980-81, respectively. The petitioner objected to the said liability and approached the Orissa High Court. The Court observed that the department did not have any evidence/materials except the admission of the petitioner that daily sales ranged from ₹
100 to ₹ 125 in February,1982. It was observed that for making presumption for the assessment years 1978-79 to 1980-81, some material is required. It cannot be stated by way of generalisation that the result of survey in one year can be treated as the basis of assessment in another year. If the Assessing Officer wants to do so, some material has to be brought on record to justify just projection. Mere presumption cannot be made the basis for any assessment. What is relevant is the nature of evidence/material discovered.
If the materials discovered relate to any particular assessment year, those cannot be Professional Automotives Private Limited vs. ACIT utilised for making assessment of other years unless the relevance to other years is established by the officer. This view was taken by the concerned Court in the decisions of Allahabad High Court in Babu Ram Vishnoi v. CST [1972] 29 STC 392 and Hukam
Chand MahendraKumar v. CST [1972] 29 STC 394 and relied upon in the present case.
In Samrat Beer Bar v. Asstt. CIT [2000] 75 ITD 19/251 ITR (AT) 1 (Pune) (TM)
– During the course of search action at the premises of the assessee-firm, a diary was found and it contained certain entries of sale of liquor for the period from September 28,
1988 to August 25, 1989. On the basis of the said entries in the diary, the Assessing
Officer concluded that the assessee would have continued the same pattern of suppressing sales even for the broken period for respective financial years. He, therefore, worked out his suppression of sales for all the years under the block period. In appeal, there was a difference of opinion between the Judicial Member and the Accountant Member on the issue as to whether under Chapter XIV-B, the Assessing Officer is empowered to estimate the suppression of sales for a larger period. On a reference made to the Third
Member, it was held that no evidence had been found in the course of search showing suppression of sales in respect of any period other than September 28, 1988 to August 25,
1989. There was also no other indication to suggest that the seized diary was not exhaustive of unaccounted transactions relating to sale of liquor.
It was held by Hon’ble High Court of Bombay in the case of CIT v. C. J. Shah & Co.
(246 ITR 671) that estimation of undisclosed profit made by AO for the entire block period on the basis of seized loose papers which indicated undisclosed sales for three months was not justified.
In the case of D. N. Kamani HUF (70 ITD 77) Hon’ble ITAT Patna Bench held that documents regarding receipt of on-money by assessees having been found in respect of sale of flats to one party, addition could not be made in respect of all the parties to whom assessee sold flats merely on the basis of presumption.
In the case of Fort Projects Pvt. Ltd (63 DTR 145) Hon’ble ITAT Kolkata Bench held that AO was not justified in extrapolating few notings in a seized diary to balance flats in three projects given that no incriminating evidence pertaining thereto was found in the course of search.
On the similar note, the Hon’ble ITAT Jaipur Bench in case of ACIT v. M.M. Sales
Agencies (2006) 153 Taxman 13 held that the income cannot be estimated for the period for which no information is available on the basis of the seized record.
Pune Bench of the Tribunal in Hotel Vrindavan v. Asstt. CIT [2000] 67 TTJ (Pune) 139
wherein it was held that the undisclosed income under Chapter XIV-B cannot be based
Similarly, the Hon’ble ITAT Ahmedabad Bench in case of DCIT v. Royal Marwar
Tobacco Product Pvt. Ltd (2009) 29 SOT 53 held that the Assessing Officer was not justified in making estimated additions for earlier assessment years based on the documents seized for A.Y. 2004-05. 123 TTJ 180 Nirmal Fashions (P) Ltd. Vs. Dy. CIT (Kol ‘B’)
Search and seizure – Assessment u/s 153A – Computation of undisclosed income –
In view of above, it is reiterated that it was clarified by Sh. Manish Mor in preliminary statements itself that no bogus expenses were booked by assessee and moreover, practice of keeping bill books of mechanics and to prepare vouchers to book expenses, for which bills are lost by drivers/not furnished by them was being continued for past 5-6 months only. Thereafter, Sh. O.P. Gupta also affirmed with such statements and no evidence was brought on record by ld.AO to prove that such practice was being followed in earlier years also. It is therefore submitted that disallowance of Repairs & Maintenance expenses for A.Y. 2013-14 to 2018-19 is absolutely arbitrary and not in accordance with law and deserves to be deleted.
With regards to the disallowance made for A.Y. 2019-20, it is submitted that as stated above expenses were actually incurred and were not at all inflated/bogus. In fact, no evidence whatsoever was found as a result of search nor brought on record during assessment proceedings, which could be corroborated with the allegation that the expenses claimed by the assessee were not genuine. Thus, so far expenses were actually incurred and were wholly and exclusively for the purpose of business, the same deserve to be allowed as per section 37(1), for which detailed submission as made at ground of appeal no. 1 may please be considered. It is thus submitted that Repairs and Maintenance expenses claimed by assessee are completely genuine and deserves to be allowed as such.
It is further submitted that neither any instance of bogus expenditure nor missing vouchers was pointed out by search officials in relation to expenses debited to Profit &
Loss Account which could be related to the year under consideration. It is thus submitted that disallowance made on account of Repairs & Maintenance expenses also deserve to be deleted.
With regards to observations of ld. CIT(A) regarding - confirming the action of ld.AO in estimating the disallowance for all the 7 years, and also regarding directions issued by ld.CIT(A) that appellant is provided opportunity to place on record the exact month wise details along with supporting documents and copies from with the search and seizure action (no additional evidence is allowed) before the learned AO within one month of passing of this order showing working of the exact amounts on the issues, which shall be considered by the ld. AO in giving effect to this order after verification, it is submitted that observations of ld.CIT(A) are on similar lines as given while confirming disallowance of Toll and Trip expenses. Since, detailed submission in this regard has already been made in preceding paras, which may plese be considered while adjudicating this issue also.
Issue 4: Disallowance u/s 36(1)(va) Employee’s Contribution to PF/ESI
In this regard, at the outset details of disallowance made on this account for years under consideration is tabulated as under:
Assessment Year
Amount
2013-14
26,773/-
2014-15
7,920/-
2015-16
1,560/-
2016-17
1,560/-
2017-18
NIL
2018-19
NIL
2019-20
4,680/-
It is submitted that the above disallowances were made by ld.AO as the payment on account of employee’s contribution were made after the due dates specified under respective Acts though before the end of financial year itself.
In this regard it is humbly submitted that in the years when such expenses were incurred, it was settled preposition of law that, the Employee’s contribution, if paid after the due dates prescribed in the respective acts, however paid before the filing of return u/s 139(1) of the Act was allowable expenses. It is submitted that amendment in the Act as brought in by Finance Act 2021, clarifying that Employee’s Contribution paid after due date as specified in respective Act but before the due date of filing Return of Income shall not be allowed is much after the filing of returns of Income for respective years. It is submitted that deduction was claimed under bona fide belief that the same were allowable in view of various judicial pronouncements. It is therefore requested that no liability may be fastened upon assessee due to amendment brought in after filing of Return of Income.
Without prejudice to above, it is further submitted that ld.AO has made addition without even considering that the delay was for a very short duration and in many cases was attributable to last date of payment being on Sunday/ Public Holiday. Similarly, many payments were made within grace period of 5 days as is allowed in case of payment through cheque. Details of payments as disallowed by ld.AO and payments made on Sunday/ Public Holiday etc. are tabulated as under:

2013-14
P/F
Month
Amount
Due date
Date of Payment
Remarks
May-12
2,154.00
15.06.2012
16.06.2012
within grace period
Jun-12
2,154.00
15.07.2012
16.07.2012
Sunday
Jul-12
2,154.00
15.08.2012
17.08.2012
National Holiday
Sep-12
1,374.00
15.10.2012
16.10.2012
within grace period
Oct-12
1,374.00
15.11.2012
22.11.2012

Dec-12
1,374.00
15.01.2013
16.01.2013
within grace period
Jan-13
1,374.00
15.02.2013
23.02.2013

Apr-12
1,374.00
15.04.2013
18.04.2013
within grace period
Apr-12
1,740.00
15.05.2012
15.09.2012
May-12
1,740.00
15.06.2012
15.09.2012

Jun-12
1,740.00
15.07.2012
15.09.2012
Sunday
Jul-12
1,860.00
15.08.2012
15.09.2012
National Holiday
Oct-12
1,860.00
15.11.2012
14.12.2012

Dec-12
1,860.00
15.01.2012
07.02.2013
Sunday
Total
24,132.00

ESI
Month
Amount
Due date
Date of Payment

Oct-12
1,055.00
21.11.2012
22.11.2012
within grace period
Jan-13
1,059.00
21.02.2013
23.02.2013
within grace period
May-12
255.00
21.06.2012
10.07.2012

Oct-12
272.00
21.11.2012
23.08.2013

Total
2,641.00

2015-16
P/F
Month
Amount
Due date
Date of Payment
Remarks
Apr-14
1,560.00
15.05.2014
16.05.2014
within grace period
Total
1,560.00

2016-17
P/F
Month
Amount
Due date
Date of Payment

Jan-16
1,560.00
15.02.2016
16.02.2016
within grace period
Total
1,560.00

Above details have been sumarrised as under for the sake of convenience:
P/F
A.Y.
Within Grace Period
Sunday
National
Holiday
Remaining
Total
2013-14
6,276.00
2,154.00
2,154.00
13,548.00
24,132.00
2014-15
-
-
-
7,920.00
7,920.00
2015-16
1,560.00
-
-
-
1,560.00
2016-17
1,560.00
-
-
-
1,560.00
2019-20
1,560.00
1,560.00
-
1,560.00
4,680.00
Total
10,956.00
7,314.00
4,014.00
17,568.00

E.S.I
A.Y.
Within Grace Period
Remaining
Total
2013-14
2,114.00
527.00
2,641.00

In view of above, it is submitted that addition to the tune of Rs. 22,284/- out of disallowance on account of Employee’s contribution to PF and Rs. 2114/- out of Employees contribution to ESI deserves to be deleted in any case.
Issue 5:
For A.Y. 2017-18 amd A.Y. 2018-19, ld.AO has made disallowance of Rs.2,04,54,699/- and Rs. 1,03,74,272/- respectively on allegation that excess brought forward depreciation has been claimed by assessee.
In this regard, it is submitted that such disallowance has been made for the reason that brought forwards depreciation available with assessee have been adjusted by ld.AO towards the additions made on account of Toll & Trip expenses and Repairs &
Maintenance expenses resulting into lesser amount available for the respective
Assessment Years. Since, detailed submission has been made in support of such additions
(as above), against which unabsorbed depreciation has been adjusted, no separate submission is made on this issue.
To sum up, detailed submission w.r.t. allegation of ld.AO and ld. CIT(A), made as above is summarized as under:
12,00,00,000/- made under the head Toll and trip expenses and disallowance was solely based on confessional statements of director Sh. O.P. Gupta and statements of employee
Sh. Manish Kumar Mor as recorded during search. Such statements were not appreciated properly and Sh. O.P. Gupta retracted such statements during assessment proceedings by filing affidavit. However, ld.AO CIT(A) has not given cognizance to such retraction stating that Retraction affidavit not filed in timely manner. It is submitted that due to outbreak of COVID pandemic, offices of assessee as well of counsels were not fully functioning, therefore retraction could be filed during assessment proceedings, which may please be given cognizance in view of decisions of hon’ble Apex Court, whereby various timelines were extended multiple times, which went on till February 2022. 2. Payment to RTO & Traffic police considered as penal in nature- In this regard, as stated above, majority payments made are in the nature of compounding/Composition fees, payment due to Overall length and height of Vehicle being more than specified limit, Taxes, Vehicle number plate not properly visible, driver not in Uniform, tail light is not proper etc. which all are of compensatory nature and thus allowable in view of various judicial pronouncements and detailed submission made above.

a Sh. Kamlesh S/o Sh. Panna Lal Prop. M/s Karan Mistri
413-
415

b
Sh. Hanuman S/o Sh. Chhitar Prop. M/s Mewat Diesel Garage & Battery
Spare Parts
416-
418

c.
Sh. Mustak Ahmed S/o Sh. Abdul Saleem Prop. M/s Shahnawaj Body
Repairing Works
419-
421

d Sh. Naimudin S/o Sh. Mohd. Ileaz Prop. M/s Star Seat Repairing Works
422-
424

e Mohd. Rustam S/o Sh. Abdul Rasheed Prop. M/s Chotu Mistri
425-
427

f. Shakir S/o Sh. Mohd. Kallu Prop. M/s New NSE
428-
430

g Sh. Manoj S/o Sh. Bhuralal Prop. M/s Sanjay Repairing Shop
431-
432
27
.
Copy of Written submission dated 28.08.2024 filed before ld. CIT(A)-4 for A.Y.
2013-14 to AY 2019-20 along with enclosures containing
433-493
a Details of Toll & Taxes Expenses of March,2015
494-
517

b Details of Toll & Taxes Expenses of March,2016
518-
531

c. Details of Toll & Taxes Expenses of January,2017
532-
547

d Details of Toll & Taxes Expenses of January,2018
548-
567

e Details of Toll & Taxes Expenses of June,2018
568-
594
28
.
Copy of Rejoinder filed on 05.03.2025 before ld. CIT(A)-4 for A.Y. 2013-14 to AY 2019-20
595-608

12,00,00,000/-
7,32,32,126/-

Record reveals that it took 43 days for the revenue to look the premises and the record but they could merely obtained the disclosure which is based on the books of account and there is no incriminating material whatsoever was found. The assessee as stated in affidavit that it was due to continuous pressure from the revenue there was no option left with the assessee and he has tosurrendered the income under pressure which is duly recorded in the books of account of the assessee and is duly supported by the bills and vouchers. Those books of the assessee were audited by independent Chartered Accountant under the Companies Act as well as under the Income Tax Act, separately and there is no whisper of Professional Automotives Private Limited vs. ACIT such bogus or claim of penalty in those audit reports. The assessee explained all these facts of pressure technique used to obtain the disclosure from him in his affidavit dated 12.04.2021 i.e. within a period of another 43 days of completion of the search, retracting the statement saying that the disclosure obtained from him which was without any cogent basis or material found and without properly appreciating the replies given by the assessee. While doing so even the business exigencies, which was completely contrary to the evidence available on record has not considered. The assessee in addition also filed the affidavit of seven mistries[ along with the identity proof ] who were paid the expenditure incurred by the assessee and it was alleged that the bill book found of those mistries were used to book the excess expenditure. All those seven people categorically explained as to why they have been paid as per the work executed by them and as to the reasons as to why their bill book found from the premises of the assessee. The revenue while making the addition could not finalize the amount actually claimed as bogus or in violation for RTO rules. Therefore, revenue adopted a technical for taking the one-month sample and applies for whole the year. The assessee objected to that estimation of taking the month of February and March stating that the expenditure of this month cannot be a basis as these
Gupta (Raj. High Court) 25 TW 87. In that case Hon’ble High Court held that ;
“the assessment is to be framed in the light of material that has come in possession of the AO during the course of search which is the foundation of proceedings and the AO is not conferred with power to make estimation of income dehors the material in his possession.”

As is evident from the above discussion that the issue in this appeal is that can the statement be recorded u/s. 132(4) without having any incriminating material on record and the statement recorded without that is Professional Automotives Private Limited vs. ACIT binding to the assessee or not merely based on the surmises and conjectures?. The bench noted from the plain reading of sub-section (4) which shows that the authorized officer during the course of raid is empowered to examine any person if he is found to be in possession or control of any undisclosed books of account, documents, money or other valuable articles or things, elicit information from such person with regard to such account books or money which are in his possession and can record a statement to that effect. Under this provision, such statements can be used as evidence in any subsequent proceeding initiated against such person under the Act. Thus, the question of examining any person by the authorized officer arises only when he found such person to be in possession of any undisclosed money or books of account.
Admittedly in the present case based on the facts available on record the allegation of bogus claim in repairs and maintenance merely based on the blank bill book found for which the assessee filed the affidavit within a reasonable time. The assessee also filed affidavit retracting the statement as it was under undue pressure and considering the fact that the search was continued for 43 days. The assessee made surrendered merely based on surmises and conjecture and there was no incriminating material found during the extensive search conducted by the revenue for more than 43
Professional Automotives Private Limited vs. ACIT days. Even otherwise also on the dates of search, the Department was not able to find any unaccounted money, unaccounted bullion nor any other valuable articles or things, nor any unaccounted documents nor any other valuable articles or things, nor any unaccounted documents nor any such incriminating material either from the premises of the company or from the residential houses of the managing director and other directors. In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorized officer during the course of search and recording any statement from them by invoking the powers under section132(4) of the Act, does not arise. Therefore, the statement of the managing director of the assessee, recorded patently under Section 132(4) of the Act, does not have any evidentiary value. This provision embedded in sub-section (4) is obviously based on the well-established rule of evidence that mere confessional statement without there being any documentary proof shall not be used as evidence against the person who made such statement. Not only that the mere evidence being the statement of the director of the assessee company was also retracted within 43 days of completion of the search [ here 43 days search was continued and after 43 days from that conclusion the assessee] retracted from the statement by filling a detailed
International P. Ltd [ 166 taxmann.com 722 (Rajasthan) ] wherein Hon’ble
High Court held that;
11. Now it is a matter of record that Shirish Chandrakant Shah had retracted his statements given before the Assessing Officer. Even otherwise, an admission by the assessee cannot be said to be a conclusive piece of evidence. The admission of the assessee in absence of any corroborative evidence to strengthen the case of the Revenue cannot be made the basis for any addition. Therefore, the substantial questions of law framed by the appellant pertained to an open issue which stands concluded by the decision of the Hon'ble Supreme Court; one such decision was rendered in "M/s PullangodeRubber Produce Co. Ltd. v. State of Kerala And Another" [1973] 19 ITR 18. We also get support of our from the decision of the apex court in the case of PCIT Vs. Abhisar Buildwell Private Limited [ 149 taxmann.com 399
(SC)]wherein the court held that :
12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under section 153A of the Act is linked with the search and requisition under sections 132 and 132A of the Act.
The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the juri iction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume
Professional Automotives Private Limited vs. ACIT the juri iction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub-section (2) of Section 153A would be redundant and/or rewriting the said provisions, which is not permissible under the law.
13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material.
14. In view of the above and for the reasons stated above, it is concluded as under:
(i) that in case of search under section 132 or requisition under section 132A, the AO assumes the juri iction for block assessment under section 153A;
(ii) all pending assessments/reassessments shall stand abated;
(iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the juri iction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments.
Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections
147/148 of the Act and those powers are saved.

The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.

Civil Appeal Nos.7738-7739/2021, 7736-7737/2021, 7732-7735/2021
and 7740-7743/2021

As is evident from page no. 2 of the assessment order that the ld. AO relied upon the question no. 34 to 39 of the statement of accountant Shri
Manish Kumar Mor. Since that statement is relied upon by the revenue it Professional Automotives Private Limited vs. ACIT would be appropriate to exact the same here in below for the sake of brevity of the issue;
Based on the above statement ld. AO formed a view that bogus bills under the head repairs and maintenance were made in the name of following business concerns at his business place;
S. No.
Name of the concerns
Address
1. Chhotu Mistri
Near Bhankrota, Jaipur.
2. New NSE Kamani Repairing
Sangam Vihar, Vinayak Hotel Ke Pass,
Gopalpura, Jaipur.
3. Star Seat Repairing Works
Near BhankrotaPulia, Jaipur.
4. Karan Mistri
Gopalpura Bypass, Jaipur.
5. Mewat Diesel Garrage& Battery
Spare Parts
Near BhankrotaPulia, Jaipur.
6. Shahnawaj Body Repairing
Works
Near BhankrotaPulia, Jaipur.

The ld. AO noted that while search proceeding various blank bill books were found and seized as Annexure AS Ex-1 to 7. The bill books were of the following persons / entities ;
S. No.
Name & address of the person/entities
Table blank
Pages
Exhibit Nos.
1. Karan Mistry, GopalpuraBaipass,
Jaipur
1 to 102
1
2. Sanjay Repairing Shop, Narayan
Vihar, Jaipur.
1 to 197
2
3. Star Seat Repairing Works, Near
BhankrotaPulia, Jaipur.
1 to 100
3
4. Chhotu Mistri, Near Bankrota, Jaipur
1 to 202
4
5. New NSE Kamani Repairing,
Sangam Vihar, GopalpuraBaipass, jaipur.
1 to 104
5
6. Mewat Diesel Garrage& Battery
Thus, ld. AO relying on the statement of accountant Mr. Manish noted that penalty levied by the RTO & Traffic police to the company’s vehicle across over in India were settled by drivers of such vehicle at that moment. That penalty paid was not debited in the books of account under the head penalty.
Record reveals that the nature penalties or fees that has been paid by the assessee are briefly on the following head;
1. Composition Fees
2. Compounding Fees
3. Overall Length & height of MV – more than the permissible limit
4. MV Found without adequate warning device and safety device
5. Shasti
6. Tax
7. Without uniform

For the adjustment of such expenses, the same were debited in the books under the head Toll and Trip Expenses in the books of account of the assessee for all the years. Although the receipts of such penalties are annexed by them in their trip related files.

As is evident from the above scene that except that statement of the accountant no incriminating material whatsoever was found. As is evident from the assessment order and as repeated herein above, the records also shows that the receipts were attached with the trip-related files. Thus, it is very much clear that there was no basis or material to doubt the Professional Automotives Private Limited vs. ACIT expenditure already booked in the books of account of the assessee firm that too on estimate basis which are duly supported by the detailed trip vouchers obtained each trip wise from the drivers. Thus, merely on the blank bill book and the statement of the accountant it was inferred that the assessee claimed that penalty under the other head and thereby claimed bogus expenses, that is the claim on the side of the revenue.
Having done so and to verify the genuineness of such a type of bill book found from the office premises of the assessee, the director of the assessee company was asked vide Q. No. 6, 7, 8 & 9 on 28.02.2019 to explain the reason as to why the blank bill-book was kept in his office premises. In reply to that he had stated that some of the mechanics areilliterate, so the same vouchers in the name of such mechanics/such entities are kept in his possession for making bill against the work done by him. The same bills were made by themselves & thereafter the billsbook were returned to such persons. He has also stated that some of the bills were lost by the drivers during the transit period & some of was made as "kaccha bill", therefore, to meet-out and to support that expenditure that paperwork was adjusted with such type of expenses and thereby to maintain proper recordsby the assessee and thereby that arrangement was also explained. No businessmen so openly keep the loophole and that too
Professional Automotives Private Limited vs. ACIT known to all. Therefore, the contention of the assessee has merit that expenditure incurred are of those parties in fact for the work done by themselves. Even their affidavits were placed on record and there is no rebuttal in the assessment proceeding by the ld. AO in the assessment proceeding, before the ld. CIT(A) and before us saying that the contention started in the affidavit are not correct.Merely based on the reply of the director of the company which was retracted, the ld. AO noted that the assessee company involved in making bogus expenses to suppress the actual profit in the case of M/s Professional Automotives Pvt. Ltd. (PAPL).
Similarly, on perusal of vouchers, which was debited under the head "Toll &
Trip Expenses in PAPL, ld. AO noted that various vouchers are related to payments made to RTO & Traffic police across India, in the nature of penalty too. The director of the assessee company has stated in his statement that this type of expense relates to various types of expenses made in cash to RTO & traffic police for charging of fine against Motor
Vehicle Act and thereby ld. AO inferred that those expenses are disallowable expenses. However, based on documents found from the premises of the assessee company (PAPL), a summarized chart was prepared in different years to find out the disallowable expenses on account of missing vouchers/bogus vouchers under the head "Repairs &
Professional Automotives Private Limited vs. ACIT maintenance" and "Toll & Trip Expenses" at page 5 & 6 of the assessment order.Based on that sample data gathered by the ld. AO for one month he applied the same logic for estimating throughout the assessment year
2013-14 to 2019-20 under the head toll and trip expenses at Rs.
12,00,00,000/- and under the head repairs and maintenance expenses for Rs. 7,32,32,126/-. As is evident that the ld. AO made a permutation and combination while determining the figure of disallowance and there is no real basis or homeworkto derive the correct figure.
169, 211 for all those years. Except the tax audit report which is filed after the search has remark at page no. 275 for the A. Y. 2019-20 wherein the tax auditor reported as under:
“The assessee company incurred expenses on account of claim for violation under Motor Vehicle Act which includes under head Toll Tax and Trip Expenses.
The exact quantification of fines and penalties on this account cannot be ascertained.”

Even the ld. AO recorded noted in the order that trip wise expenditure is maintained and even in that case the slip of traffic police and that of the RTO were attached with the trip wise vouchers and based on that he has prepared the breakup for a month. While doing so he stressed on the statement of the accountant was made. But that statement clearlyestablish that the toll and trip expenditure and that of the Repairs and Maintenance is claimed by each driver and in that processthere is no roll of the Jaipur
Corporate office in this regard, if an overall view of the statement is taken.
At this juncture we note that even if the addition is made based on the book no guess work is permitted as done by the ld. AO in estimating the disallowance. We get support of our view from the decision of the Hon’ble
[ 421 ITR 109] wherein the High Court has observed as follows:
20. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is, whether the Appellate Tribunal committed any error in passing the impugned order.
21. Section 145 of the Act reads as follows :
"145. Method of accounting. (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee.
(2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assessee or in respect of any class of income.
(3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in section 144."
22. The law, as far as Section 145 of the Act is concerned, is summed up in the case of Commissioner of Income-tax v. A.Krishnaswami Mudaliar, (1964)53 ITR
122, as follows :
"..........the expression in the opinion of the Income-tax Officer in the proviso to section 13 of the Indian Income-tax Act, 1922, does not confer a mere discretionary power; in the context, it imposes a statutory duty on the Income-tax
Officer to examine in every case the method of accounting employed by the assessee and to see whether or not it has been regularly employed and to determine whether the income, profits and gains of the assessee could properly be deduced therefrom ...... If, therefore, there is a system of accounting regularly employed and by appropriate adjustments from the accounts maintained taxable profit may properly be deduced, the Income-tax Officer is bound to compute the profits in accordance with the method of accounting. But where in the opinion of the Income-tax Officer the profits cannot properly be deduced from the system of accounting adopted by the assessee it is open to him to adopt a more suitable basis for computation of the true profits."
Court in several cases and the following observations made by it in the case of Lalchand Bhagat Ambica Ram v. Commissioner of Income-tax, (1959)37 ITR
288, is apposite
"The limits of our juri iction to interfere with the finding of fact reached by the courts or tribunals of facts have been laid down by us in various decisions of this court. In DhirajlalGirdharilal v. Commissioner of Income tax we observed that when a court of fact arrives at its decision by considering material which is irrelevant to the enquiry, or acts on material, partly relevant and partly irrelevant, where it is impossible to say to what extent the mind of the court was affected by the irrelevant material used by it in arriving at its decision, a question of law arises : Whether the finding of the court of fact is not vitiated by reason of its having relied upon conjectures, surmises and suspicions not supported by any evidence on record or partly upon evidence and partly upon inadmissible material. We also observed in Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax, West Bengal that an assessment so made without disclosing to the assessee the information supplied by the departmental representative and without giving any opportunity to the assessee to rebut the information so supplied and declining to take into consideration all materials which the assessee wanted to produce in support of the case constituted a violation of the fundamental rules of justice and called for interference on our part."
24. The Assessing Officer thought fit to estimate 10% commission for providing accommodation entries to the tune of Rs. 12,00,02,100/-. The CIT(A) took the view that the estimation of commission @ 10% by the Assessing Officer is l/3rd of the said benefit, which could be termed as excessive and not a reasonable estimate. The CIT(A), without there being anything on record, thought fit to take the view that the estimate by the appellant at 3% translates to 1% of the benefit derived, which could be termed as too low, and in such circumstances, estimated at 2%, which would translate to about 6.7% of the benefit alleged to have been derived by M/s.PACL India Limited. This is nothing but pure guesswork without there being any material or basis for arriving at the same.
25. Ordinarily, we would not have entertained the appeal of the present nature having regard to the fact that the income has been assessed based on estimation. However, the way the authorities have proceeded with the guesswork, it cannot be approved.
Thus, following the view as held by the High Court wherein the High court has observed that “although clause (3) of Section 145 gives discretion to the Assessing Officer to make an assessment in the manner provided in Section 144 of the Act, yet this discretion cannot be exercised arbitrarily.”Here while making disallowance the ld. AO made the disallowance merely business on a retracted statement without referring to any incriminating material and that too on mere guess work and therefore, that action of the ld. AO and that of the ld. CIT(A) is against the law and binding precedent cited herein above. As we have already held videwhile dealing with ground no. 1 that there cannot be any addition merely based on a statement and in fact that statement has been retracted by the director of the company. Not only that, but the company has also filed an affidavit of all the mistries whose bill bookwere found and the same were not controverted by the revenue. When the matter taken up before the ld. CIT(A) he confirmed the addition stating that the assessee failed to prove the same as worked and the assessee company made a commitment to prove the genuineness of the expenditure and that is why he has confirmed the addition.
Be that it may so the bench noted that except this there is no adverse material or that of any incriminating material so as to establish that the claim of expenditure is to inflate the expenditure and that to reduce the profit. To determine this allegation that the assessee has in fact booked the excess expenditure and thereby reduced the profit or not the bench jotted down the position of the assessee for the Gross profit and that of the net profit offered for all the years corresponding to their turnover under the disputedyears which reads as under :

Table A Assessment year
Turnover Rs.
Gross Profit
%
Paper book page number
2013-14
66,60,55,033
16.64
24
2014-15
71,19,98,846
15.67
60
2015-16
79,44,11,682
14.45
99
2016-17
79,94,16,918
19.67
137
2017-18
93,50,86,849
22.46
178
2018-19
124,04,07,530
24.62
247
2019-20
131,94,41,455
22.02
286

The above-gross profit shows an increasing trend for all the years in terms of percentage as well as on turnover part. The bench noted that for the year
Professional Automotives Private Limited vs. ACIT under consideration i.e. A. Y. 2019-20 if we considered the last three years average relying on the judgment of our own High court in the case of Clarity
Gold P Ltd. 102 taxmann.com 421 where in the court guided to take last three year average to estimate the profit rate and thereby if we see the Gross
Profit rate
[
AY
2016-17
to 2018-19
=
22.25
%
(19.67+22.46+24.62)/3 ] compared that average with the current year at 22.02 gives the decrease for 0.23 % and if that amount applied for the year’sturnover the same would be for Rs. 30,34,715/ [ 1319441455 * 0.23
% ]. Thus, if at all the addition to the alleged booking of excess claim is to be made the same cannot be more than Rs. 30,34,715/- as for the other year the gross profit offered by the assessee is on an increasingtrend.
Thus, we order to disallow a sum of Rs. 30,34,715/- for the year under consideration which will render the justice to both the parties as far as the claim of excess expenditure issue.
Having discussed here in above that no separate addition is required under the heard Repairs and Maintenance Expenses head as the Gross profit declared by the assessee for all the past years shows a better result with that of the past year and considering the decrease trend for the year under consideration,we order to disallow a sum of Rs. 30,34,715/- to end the justice on that issue for A. Y. 2019-20. Now coming to the issue of the penalty amount debited in all those years the bench noted that the ld. AO questioned the expenditure under the head Toll and Trip Expenses and while estimating that amount debited in the profit and loss account he choose the vouchers for the month June
2018 and the relevant extract of breakup of the expenditure for that moth is as under [ based on the chart filed on 11.07.2025 by the assessee] :
For the month of June 2018
Based on the seized material A-43 to 45 paper book page 568 to 594

Table - B
Nature of Expenses
Amount Rs.
1. Composition Fees
4,23,500
2. Compounding Fees
5,80,000
3. Overall Length & height of MV – more than the permissible limit
1,24,000
4. MV Found without adequate warning device and safety device
2,87,000
5. Shasti
10,400
6. Tax
7,86,000
0.08 %
Total Expenses for the year
15,63,87,292
0.08 % being the amount of shasti on same way as estimated by the ld. AO
1,25,109

The breakup of the expensesat serial no 1 to 7 shows the expenditure is compensatory in nature except at serial number 5. The composition fees and compounding fees are part of the levy of toll or road tax as is evident from the following circular issued by the GST council wherein the reference to the circular of Ministry of Road and transport is also made wherein that amount was to be considered as one type of additional toll. The relevant extract is reproduced below:
Having clarified that issue we do not see any reason to say that these expenditure are having the nature of penalty but is compensatory in nature, except “Shashti” which is purely a penalty. Thus, now since the assessee or that of the ld. AO relies on that one month estimate for computing the various payment made on head we also left with no option to decide that issue based on that analysis done. Having done so the bench noted in Table B that except Shashti all the payment are compensatory in nature and thereby taking that base the only disallowable expenses is on account of shasti and as calculated in Table B the same is disallowable for an amount of Rs. 1,25,109/-. While doing so we also get support of the following judicial precedent in the submission filed by the assessee cited ;
The co-ordinate bench of Mumbai ITAT in the case of Lift & Shift India P Ltd. vs
ACIT ITA No.5606/Mum/2015 and 4521/Mum/2016 , vide its common order has held as under:
“6. In view of the above facts and circumstances, we are of the view that once the assessee is engaged in transportation of cargo of over dimensional consignment / over weighted, whether front side or rear side dimension of consignment as well as weight of consignment exceeded the limits allowed under Motor Vehicles Act, 1988 is allowable expenditure being compounding fee in the normal course of business. In this case, the nature of payment is not penalty but as a compounding fee under an option given to assessee for transporting of over dimensional consignment generally termed as overloading charges and hence, the same is to be treated as business expenditure, allowable under section 37(1) of the Act. In term of the above, we reverse the orders of the lower authorities and allow the appeal of the assessee.”
After relying upon above decision of Ahmedabad ITAT, hon’ble Mumbai bench of ITAT has allowed appeal of assessee in the case of Shri Vishwanath V Kale vs
ITO ITA No. 590/Mum/2010 , where the only issue under consideration was allowability of overloading charges levied by Road Transport Authorities as business expense.With regards to allowability of composition fees paid to Road
Transportation authority due to the offences committed such as inadequate safety devices and the driver being without uniform which are essentially compensatory in nature when the ruling of the judgement by the Hon’ble
No. 3365/Ahd/2016 is applied into the facts and circumstances of the case, reliance is placed on following judicial pronouncements:
1. Vishal Chemtrade (P) Ltd. vs ACIT 507/JP/12 (supra):
2. M/s Kiran Roadlines vs ACIT ITA No.27/Rjt/2019 (Rajkot- Trib.)(supra)
3. M/s. Chadha & Chadha Co. in ITA No. 6140/Mum/2009 dated 17.09.2010
(supra)
4. Hon’ble Rajkot bench of ITAT in the case of M/s. Agrawal Automobiles
Gandhidham v. Asstt. Commissioner of Income Tax in ITA No. 444/Rjt/2012
(supra)
5. Agarwal Roadlines Pvt. Ltd. vs DCIT in ITA No. 668/Ahd/2009 (supra)

Considering the above judicial decision and nature of expenditure as listed in Table B we are of the view that except Shashti all other expenditures are compensatory in nature and therefore, we order to disallow a sum of Rs.
1,25,109 for the year under consideration. Based on this observation ground no 2 to 5.3 raised by the assesseeare partly allowed.

18 of the Finance Act, 1956, extending this period of limitation to two years from the end of the assessment year. The amendment was given retrospective effect from 1-4-1956. On 12-3-1957, the ITO issued a notice calling upon the assessee to show cause as to why, in respect of the assessment year 1954-55, the assessee should not be treated as an agent under section 43 in respect of certain non-residents. The case of the assessee, inter alia, was that the proposed action was barred by limitation as right to commence proceedings of assessment against the assessee as an agent of non-resident for the assessment year 1954-55 ended on 31-3-1956, under the Act before it was amended in 1956. This Court in the case of S.S. Gadgil (supra) accepted the contention of the assessee and held as under :
". . . The Legislature has given to section 18 of the Finance Act, 1956, only a limited retrospective operation, i.e., up to April 1, 1956 only. That provision must be read subject to the rule that in the absence of an express provision or clear implication, the Legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned, nor to authorise the Income- tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided become barred." (p. 240)
20. On a proper construction of the provisions of section 150(1) and the effect of its operation from 1-4-1989, we are clearly of the opinion that the provisions cannot be given retrospective effect prior to 1-4-1989 for assessments which have already become final due to bar of limitation prior to 1-4-1989. Taxing provision imposing a liability is governed by normal presumption that it is not retrospective and settled principle of law is that the law to be applied is that which is in force in the assessment year unless otherwise provided expressly or by necessary implication. Even a procedural provision cannot in the absence of clear contrary intendment expressed therein be given greater retrospectivity than is expressly mentioned so as to enable the authorities to affect finality of tax assessments or to open up liabilities, which have become barred by lapse of time. Our conclusion, therefore, is that sub-section (1) of section 150, as amended with effect from 1-4-
1989, does not enable the authorities to reopen assessments, which have become final due to bar of limitation prior to 1-4-1989 and this position is applicable equally to reassessments proposed on the basis of orders passed under the Act or under any other law.
21. As a result of the discussion aforesaid, the appeal is allowed. The judgment of the Delhi High Court dated 24-5-1996 is hereby set aside. As prayed in the petition, the impugned notices issued by the respondent of the Income-tax
Department under sections 148 and 142 against the appellant for the assessment years 1968-69 to 1971-72 and 1981-82 are hereby quashed. The appeal stands allowed with costs.
The above view is also get support by a decision of Nagpur Bench of this ITAT in the case of M B Traders Vs. ACIT [ 132 TTJ 490 ] wherein the co-ordinate bench held that ;
9. After an in-depth study of the entire case record, on a patient hearing of both the sides and after reading the case law cited at length, our observations and findings on the matter are as follows.
Before giving our observation and finding, it has been deemed proper to quote ss.
150 and 151 as it is, as under :
"150. (1) Notwithstanding anything contained in s. 149 the notice under s. 148 may be issued at any time of the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law.
(2) The provisions of sub-s. (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the lime the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken.
151. (1) In a case where an assessment under sub-s. (3) of s. 143 or s. 147 has been made for relevant assessment year, no notice shall be issued under s. 148
by an AO, who is below the rank of Asstt. CIT or Dy. CIT unless the Jt. CIT is satisfied on the reasons recorded by such AO that it is a fit case for the issue of such notice.
Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief CIT or CIT is satisfied, on the reasons recorded by the AO aforesaid, that it is a fit case for the issue of such notice.
(2) In a case other than a case falling under sub-s. (1), no notice shall be issued under s. 148 by an AO, who is below the rank of Jt. CIT, after the expiry of four years from the end of the relevant assessment year, unless the Jt. CIT is satisfied, on the reasons recorded by such AO, that it is a fit case for the issue of such notice.
Explanation : For the removal of doubts, it is hereby declared that the Jt. CIT, the CIT or the Chief CIT, as the case may be, being satisfied on the reasons recorded by the AO about fitness of a case for the issue of notice under s. 148, need not issue such notice himself."
Sec. 149 deals as quoted above with regard to time-limit for notice. Sec. 150 deals with regard to provision for cases where assessment is in pursuance of an order on appeal. In our considered view there is no bar for issuing notice under s. 148 by the AO on the direction of the first appellate authority. At the same time, reassessment proceeding must be based on the belief of the AO and not of the CIT or appellate authority or that of the Tribunal as had been meant and interpreted from a perusal of s. 147 of the IT Act. The direction of higher authority should not be interpreted as a blanket direction by the AO. But that should be accompanied by the direct satisfaction of the AO with regard to the escapement of income. The appellate authorities or higher authorities cannot interfere on this power of the AO. It means the direction of the higher authorities and that of the appellate authorities must be acted upon by the AO with utter satisfaction. Taking initiation of reassessment proceeding without satisfaction of the AO, simply on the basis of the blanket direction, will not justify the action of initiation of reopening proceeding. In this particular case as has been rightly pointed out by the learned
Authorised Representative from p. 13 of the paper book filed, the AO has simply acted upon, i.e., initiated reopening proceeding on the basis of the direction of the CIT(A) and has totally ignored his part of the job i.e., his satisfaction, as is evident from p. 13 of the paper book filed by the learned counsel which is quoted below for better appraisal of facts :
"Assessee filed the return of income of Rs. 39,720 on 25th Jan., 1993. Assessment under s. 143(3) was completed on a total income of Rs. 15,55,579 on 29th March, 1996 making addition of Rs. 15,15,859. The order under s. 143(3) was contested before CIT(A) who cancelled the order of the AO and directed as under :
'It is held that assessment proceedings are bad in law and hence cancelled. The AO should take remedial action under s. 147 or any other provisions of the Act to tax the income escaping assessment.'
Accordingly notice under s. 148 of the IT Act, 1961 was issued and sent by RPAD on 27th March, 1998, but assessee denied about the receipt of notice vide his letter dt. 12th Jan., 1999. Considering the legal aspect at the initial stage and considering the large amount of income to be taxed, an approval under s. 147 may kindly be granted. Asstt. CIT,
Circle-1(3), Nagpur."
10. Direction of the higher authority including that of the CIT(A) will not confer power to assume juri iction to the AO to initiate reassessment proceeding. With this considered view, on a total in-depth study of the case laws and considering the rival submissions, we allow the assessee's appeal and cancel the order of the Professional Automotives Private Limited vs. ACIT

CIT(A). Before parting with the order it is to be pointed out that the notice issued under s. 143(2) was also barred by time in this case and since the root of the matter had been dealt at length as above, we did not feel it proper to again deal with ground No. 5 in detail. Howsoever it is treated to have been considered and decided in favour of the assessee.
11. In the result, the assessee's appeal is allowed.
Even the co-ordinate bench of Kolkata vide dealing with the appeal of the revenue in the case of ITO Vs. Sri Biswajit Chatterjee ITA no. 565/Kol/2023 has also held that “ CIT(A) has not power under the provision of law for giving any direction to AO for re-opening of assessment”. Respectfully following the finding as discussed herein above we are of the considered view that ld. CIT(A) will not confer power to assume juri iction to the AO to initiate reassessment proceeding. Even otherwise the apex court has also while dealing with the provision of section 147/148 of the Act in the case of Parashuram Pottery Works Co. Ltd Vs ITO [ 1977] 106 ITR 1
held that;
“According to section 148 of the Act of 1961, before making the assessment, reassessment or recomputation under section 147, the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139; and the provisions of the Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section. The Income-tax Officer has also, before issuing such notice, to record his reasons for doing so. Section 149
prescribes the time limit for the notice. The time limit in a case not falling under clause (ii) of sub-section (1) of section 149, with which we are not concerned, shall be eight years from the end of the relevant assessment year. Incases falling under clause (b) of section 147, however, the time limit for the notice is four years from the end of the relevant assessment year. Clause (a) of section 147 of the Act of 1961 corresponds to clause (a) of sub-section (1) of section 34 of the Act of 1922. The language of clause (a) of section 147 read with sections 148 and 149 of the Act of 1961 as also the corresponding provisions of the Act of 1922 makes it plain that two conditions have to be satisfied before the Income-tax Officer acquires juri iction to issue notice under section 148 in respect of an assessment beyond the period of four years but within a period of eight years from the end of the relevant year, viz., (i) the Income-tax Officer must have reason to believe that income chargeable to tax has escaped assessment, and (ii) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee (a) to make a return under section 139 for the assessment year to the Income-tax Officer, or (b) to disclose fully and truly material facts necessary for his assessment for that year. Both these conditions must co-exist to confer juri iction on the Income-tax Officer. It is also imperative for the Income-tax Officer to record his reasons before initiating proceedings as required by section 148(2). Another requirement is that before notice is issued after the expiry of four years from the end of the relevant assessment years, the Commissioner should be satisfied on the reasons recorded by the Income-tax
Officer that it is a fit case for the issue of such notice. The duty which is cast upon the assessee is to make a true and full disclosure of the primary facts at the time of the original assessment. Production before the Income-tax Officer of the account books or other evidence from which material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure contemplated by law. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessments:
See Income-tax Officer v. LakhmaniMewal Das [1976] 103 ITR 437 (SC).
The words "omission or failure to disclose fully and truly all material facts necessary for his assessment for that year" postulate a duty on the assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise, the assessing authority has to draw inference as regards certain other facts; and ultimately from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable: See Calcutta Discount Co. v. Income-tax Officer [1961] 41 ITR
191 , 201 (SC). As further observed in that case:
"Does the duty, however, extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative,Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else—far less the assessee—to tell the assessing authority what inferences, whether of facts or law, should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences—whether of facts or law—he would draw from the primary facts."
There is nothing before us to show that in the return filed by the assessee- appellant the particulars given were not correct. Form C under rule 19 of the Indian
Income-tax Rules, 1922, at the relevant time gives the form of return which had to be filed by the companies. Part V of that form deals with depreciation. The said part requires a number of columns to be filled in by the assessee. It has not been suggested that any of the information furnished or any of the particulars given in those columns by the appellant-companywere factually incorrect. Nor is it the case of the revenue that the appellant failed to furnish the particulars required to be inserted in those columns. Indeed, the copy of the return has not been filed and consequently no argument on that score could be or has been addressed before us. Part V of the form no doubt requires the assessee to state the written down value in column No. (2). Such written down value had to be specified without taking into account the initial depreciation because such depreciation in terms of clause (vi) of section 10(2) of the Act of 1922 could not be deducted in determining the written down value for the purpose of that clause. The case of the appellant is that in determining the amount of depreciation at the time of the original assessment for the two assessment years in question, the Income-tax Officer relied upon the written down value of the various capital assets as obtaining in the records of the department. This stand has not been controverted. When an Income-tax Officer relies upon his own records for determining the amount of depreciation and makes a mistake in doing so, we fail to understand as to how responsibility for that mistake can be ascribed to an omission or failure on the part of the assessee. It also cannot be disputed that initial depreciation in respect of items of capital assets in the shape of new machinery, plant and building installed or erected after the 31st day of March, 1945, and before the 1st day of April, 1956, is normally claimed and allowed. It seems that the Income-tax Officer in working the figures of depreciation for certain items of capital assets lost sight of the fact that the aggregate of the depreciation, including the initial depreciation, allowed under different heads could not exceed the original cost to the assessee of those items of capital assets. The appellant cannot be held liable because of this remissness on the part of the Income-tax Officer in not applying the law contained in clause (c) of the proviso to section 10(2)(vi) of the Act of 1922. As observed by Shah J. in Commissioner of Income-tax v. Bhanji Lavji [1971] 79 ITR 582 (SC), section 34(1)(a) of the Act of 1922 (corresponding to section 147(a) of the Act of 1961) does not cast a duty upon the assessee to instruct the Income-tax Officer on questions of law.
It may also be mentioned that so far as the assessment for the assessment year
1957-58 is concerned, the assessment order was once rectified and at another
Professional Automotives Private Limited vs. ACIT time revised. Despite such rectification and revision, the above mistake in the calculation of the depreciation remained undetected. It was only in October, 1965, that the Income-tax Officer realised that higher amount of depreciation had been allowed to the appellant than was actually due. A letter to that effect was consequently sent to the assessee on October 5, 1965. It was, however, nowhere mentioned in that letter that the higher amount of depreciation had been allowed and the income as such had escaped assessment because of the omission or failure on the part of the assessee to disclose truly and fully all material facts.
Reference to such omission or failure came only in a subsequent communication.
The submission made on behalf of the appellant is not without force that reference was made to the assessee's omission or failure to disclose truly and fully all material facts because it was realised that after the expiry of four years from the end of the relevant assessment year, no action for reopening of assessment could be taken on the basis of detection of mistake alone unless there was also an allegation that the income had escaped assessment because of the omission or failure of the appellant to disclose fully and truly material facts. Looking to all the facts, we are of the opinion that it cannot be said that the excess depreciation was allowed to the appellant-company and its income as such escaped assessment because of its omission or failure to disclose fully and truly all material facts.
It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. So far as the income-tax assessment orders are concerned, they cannot be reopened on the score of income escaping assessment under section 147 of the Act of 1961 after the expiry of four years from the end of the assessment year unless there be omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. As already mentioned, this cannot be said in the present case. The appeal is consequently allowed, the judgment of the High Court is set aside and the impugned notices are quashed.”

Thus, what is not permitted directly cannot be permitted indirectly and therefore, the ld. CIT(A) cannot broaden the scope of the appeal decision to “advise” or “compel” another round of litigation again and again and as held by the apex court that we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage. Thus, looking to the provision of the law, decided case and facts of the present case we are of the considered view that ld. CIT(A) was tasked with deciding whether the addition under Section 153A was sustainable given the Professional Automotives Private Limited vs. ACIT specific facts and circumstance of the case. Ld. CIT(A) rightfully found it was not (for want of incriminating material) and deleted it. At that point, ld. CIT(A)’s authority ended. Ld. CIT(A) should have simply allowed the appeal on that issue.
By proceeding to direct the AO to consider re-opening under Section 147, the ld.
In the result, the appeal of the assessee in ITA no. 815/JP/2025 is Partly Allowed.

For all these years appeal the ld. AR of the assessee vehemently argued that for the assessment year 2013-14 and 2014-15, case of assessee was selected for scrutiny and assessment wascompleted us
143(3). It is also relevant to state that in assessment so completed for AY
2013-14 and 2014-15, the expenses claimed under the head Trip and Toll expenses and Repairs & Maintenance expenses were not doubted and petty disallowance were made out of other expenses claimed such as office expenses, printing etc. So far as regards the assessment year 2015-16 to 2017-18, case was not picked for scrutiny and thus the Return of Income filed by assessee had attained finality. No proceedings relating to the assessment with respect to these assessment years under appeal were Professional Automotives Private Limited vs. ACIT pending before the Ld. AO as on the date of search. Therefore, the ld. AO’s juri iction u/s 153A was limited only to the incriminating material found during the course of search and he could not have made additions/
disallowance in the assessments u/s 153A without referring to any incriminating material found / seized during the course of search. It was not permissible for the Ld. AO to make regular scrutiny assessments under the garb of assessment u/s 153A in view of the fact that the return of income filed way back in regular course has attained finality as case was not selected for scrutiny and time for such selection has already lapsed. Based on stated facts and relying on the decision of the apex court in the case of PCIT Vs. AbhisharBuildwell P. Ltd., no addition can be made of the transaction which are already reflected and declared in the regular return of income filed. He also serviced the various decision as cited in his written submission.

Since the addition made in the search proceeding is not related to any incriminating material and the statement made at the time of search which was not supported by any incriminating material and thereby if the same is retracted no addition can be made as held by our own High Court in the case of PCIT Vs. M/s. Esspal International P. Ltd. DB ITA no. 25/2024
dated 03/09/2024 wherein High Court held that the merely based on the retracted statement no addition can be made. Even otherwise our High
Court has also held in the case of Jai Steel India v. ACIT reported in 259
CTR 281(Rajasthan HC) that :
In a case where nothing incriminating is found though s. 153A would be triggered and assessment or reassessment to ascertain the total income is required to be done, the same would not result in any addition and the assessments made
Professional Automotives Private Limited vs. ACIT earlier may have to be reiterated. Argument of the counsel that the AO is free to disturb the income, expenditure or deduction dehorns any incriminating material while making the assessment u/s 153A is not borne out from the scheme of the said provision. Provisions of ss. 153A to 153C cannot be interpreted to be further innings for the AO and / or the assessee beyond the provisions of ss. 139, 147
and 263A harmonious construction of the entire provisions of s. 153A would lead to an irresistible conclusion that the word ‘assess’ has been used the context of abated proceedings and ‘reassess’ has been used for completed assessment proceedings which do not abate as they are not pending on the date of initiation of the search or making of requisition and can be tinkered only on the basis of incriminating material found during the course of search or requisition of documents, therefore, it is not open to the assessee to seek deduction or claim relief not claimed by it in the original assessment which already stands completed in an assessment u/s 153A made in pursuance of a search or requisition.”

Even otherwise the issue of making the addition in search case dehors the incriminating material set right by the apex court while dealing with the case of revenue named Principal Commissioner of Income Tax, Central-3 Vs.
Abhisar Buildwell (P) Ltd. [ 149 taxmann.com 399 (SC) ];
5. We have heard learned counsel for the respective parties at length.
The question which is posed for consideration in the present set of appeals is, as to whether in respect of completed assessments/unabated assessments, whether the juri iction of AO to make assessment is confined to incriminating material found during the course of search under section 132 or requisition under section 132A or not, i.e., whether any addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132 A of the Act, 1961 or not.
6. It is the case on behalf of the Revenue that once upon the search under section 132 or requisition under section 132A, the assessment has to be done under section 153A of the Act, 1961 and the AO thereafter has the juri iction to pass assessment orders and to assess the 'total income' taking into consideration other material, though no incriminating material is found during the search even in respect of completed/unabated assessments.
High Court, Orissa High Court, Calcutta High Court, Rajasthan High Court and the Kerala High Court have taken the view that no addition can be made in respect of completed/unabated assessments in absence of any incriminating material. The lead judgment is by the Delhi High Court in the case of Kabul Chawla (supra), which has been subsequently followed and approved by the other High Courts, referred to hereinabove. One another lead judgment on the issue is the decision of the Gujarat High Court in the case of Saumya Construction (supra), which has been followed by the Gujarat High Court in the subsequent decisions, referred to hereinabove. Only the Allahabad High Court in the case of Pr. CIT v. Mehndipur
Balaji 2022 SCC Online All 444/[2023] 147 taxmann.com 201/ [2022] 447 ITR 517
has taken a contrary view.
7.1 In the case of Kabul Chawla (supra), the Delhi High Court, while considering the very issue and on interpretation of section 153A of the Act, 1961, has summarised the legal position as under:
Summary of the legal position
38. On a conspectus of section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:
i. Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place.
ii. Assessments and reassessments pending on the date of the search shall abate.
The total income for such AYs will have to be computed by the AOs as a fresh exercise.
iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax".
iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material."
'assess' in Section 153 A is relatable to abated proceedings (i.e., those pending on the date of search) and the word 'reassess' to completed assessment proceedings.
vi. Insofar as pending assessments are concerned, the juri iction to make the original assessment and the assessment under section 153A merges into one.
Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO.
vii. Completed assessments can be interfered with by the AO while making the assessment under section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment."
7.2 Thereafter in the case of Saumya Construction (supra), the Gujarat High Court, while referring the decision of the Delhi High Court in the case of Kabul Chawla
(supra) and after considering the entire scheme of block assessment under section 153A of the Act, 1961, had held that in case of completed assessment/unabated assessment, in absence of any incriminating material, no additional can be made by the AO and the AO has no juri iction to re-open the completed assessment. In paragraphs 15 & 16, it is held as under:
"15.On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the'
assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections
132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby; it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year, falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub- section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment
Professional Automotives Private Limited vs. ACIT yearwhich had abated under the second proviso would stand revived. The proviso thereto says, that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the, six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A, of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of, the Act is annulled in appeal or any other proceeding.
16. Section 153A bears the heading "Assessment in case of search or requisition".
It is well settled as held by the Supreme Court in a catena of decisions that the heading of the, section can be regarded as a key to the interpretation of the operative portion of, the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning
From the heading of section 153, the intention of the Legislature is clear, viz, to provide for assessment in case of search and requisition. When, the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment, should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra), the earlier assessment would have to be reiterated. In case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act."
8. For the reasons stated hereinbelow, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra), taking the view that no addition can be made in respect of completed assessment in absence of any incriminating material.
9. While considering the issue involved, one has to consider the object and purpose of insertion of Section 153A in the Act, 1961 and when there shall be a block assessment under section 153A of the Act, 1961. 9.1 That prior to insertion of Section 153A in the statute, the relevant provision for block assessment was under section 158BA of the Act, 1961. The erstwhile scheme of block assessment under section 158BA envisaged assessment of 'undisclosed income' for two reasons, firstly that there were two parallel assessments envisaged under the erstwhile regime, i.e., (i) block assessment under section 158BA to assess the 'undisclosed income' and (ii) regular assessment in accordance with the provisions of the Act to make assessment qua income other than undisclosed income. Secondly, that the 'undisclosed income'
was chargeable to tax at a special rate of 60% under section 113 whereas income other than 'undisclosed income' was required to be assessed under regular assessment procedure and was taxable at normal rate. Therefore, section 153A came to be inserted and brought on the statute. Under Section 153A regime, the intention of the legislation was to do away with the scheme of two parallel assessments and tax the 'undisclosed' income too at the normal rate of tax as against any special rate. Thus, after introduction of Section 153A and in case of search, there shall be block assessment for six years. Search assessments/block assessments under section 153A are triggered by conducting of a valid search under section 132 of the Act, 1961. The very purpose of search, which is a prerequisite/trigger for invoking the provisions of sections 153A/153C is detection of undisclosed income by undertaking extraordinary power of search and seizure, i.e., the income which cannot be detected in ordinary course of regular assessment. Thus, the foundation for making search assessments under sections
153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search.
10. On a plain reading of Section 153A of the Act, 1961, it is evident that once search or requisition is made, a mandate is cast upon the AO to issue notice under section 153 of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same.
Section 153A of the Act reads as under:
"153A. Assessment in case of search or requisition - (1) Notwithstanding anything contained in Section 139, Section 147, Section 148, Section 149, Section 151 and Section 153, in the case of a person where a search is initiated under section 132
or books of account, other documents or any assets are requisitioned under section 132-A after the 31st day of May, 2003, the Assessing Officer shall—
(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply
Professional Automotives Private Limited vs. ACIT accordingly as if such return were a return required to be furnished under section 139; b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made:
Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years:
Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132-A, as the case may be, shall abate.
(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or Section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner:
Provided that such revival shall cease to have effect, if such order of annulment is set aside
Explanation.—For the removal of doubts, it is hereby declared that,—
(i) save as otherwise provided in this section, section 153-B and section 153-C, all other provisions of this Act shall apply to the assessment made under this section;
(ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year."
11. As per the provisions of Section 153A, in case of a search under section 132
or requisition under section 132A, the AO gets the juri iction to assess or reassess the 'total income' in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner.
Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would
Professional Automotives Private Limited vs. ACIT assume the juri iction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention does not seem to be to re- open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act,
1961, in case of a search under section 132 or requisition under section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the juri iction to assess or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections
147/48 of the Act, subject to fulfilment of the conditions mentioned in sections
147/148, as in such a situation, the Revenue cannot be left with no remedy.
Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy.
12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under section 153A of the Act is linked with the search and requisition under sections 132 and 132A of the Act.
The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the juri iction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the juri iction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub- section (2) of Section 153A would be redundant and/or rewriting the said provisions, which is not permissible under the law.
13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material.
Respectfully following the decision of the apex court we considered the arguments of the assessee that no addition can be made in respect of the completed assessment in the absence of any incriminating material. Since we have considered technical ground no. 1 raised by the assessee and thereby quashed the impugned assessment order the grounds of appeal raised by the assessee on the merits becomes academic and thereby the same are not required to be adjudicated. Based on these observations the appeal of the assessee in ITA no. 809 to 813/JP/2025 for assessment year
2013-14 to 2017-18 are allowed.
18. Now the left-out appeal is for the assessment year 2018-19 in ITA no.
814/JP/2025 wherein the assessee has taken following grounds of appeal;

“1. On the facts and in the circumstances of the case the Ld.CIT(A) has erred in conforming the order passed by Assessing Officer u/s 143(3) rws153A of the Income Tax Act, 1961 even when no incriminating documents whatsoever pertaining to the year under appeal was found as a result of search, and the additions have been made by Ld. AO primarily referring to statements of director
Sh. O.P. Gupta, as recorded during search, wherein surrender was obtained from him. Appellant prays that Sh. O.P. Gupta had retracted from his confessional statements, and thus the same could not be relied upon in the absence of any other corroborative evidence, thus the consequent order passed being not in accordance with law, deserves to be quashed.

Similarly ground no. 2 to 5.3 raised by the assessee aresimilar to ground no. 2 to 5.3 raised by the assessee in ITA no. 815/JP/2025 and we have heard both the parties and persuaded the materials available on record. The bench noticed that the issues raised by the assessee in this appeal No. ITA No. 814/JP/2025 isequally similar on set of facts and grounds as that of the assessee in ITA No. 815/JP/2025. Therefore, it is not imperative to repeat the facts and arguments of both the parties. Hence, the bench feels that the decision taken by us in ITA No. 815/JP/2025 for Assessment Year 2019-20 shall apply mutatis mutandis in ITA No.
814/JP/2025for the Assessment Year 2018-19 only to the exception that the figure of disallowance against the amount of Rs. 30,34,715/- for the year under consideration it would be Rs. Nil as the gross profit declared in the year under consideration is improved as discussed in ITA No. 815/JP/2025
and as regards the confirmation of addition on account of the Shashti it would be Rs. 3,01,124/- based on the chart submitted by the ld. AR of the assessee as per the direction of the bench vide forwarding letter dated
11.07.2025. Based on this observation ground no. 2 to 5.3 raised by the assessee are partly allowed.

The bench noted that the ground no .7 raised by the assessee is the disallowance of Rs. 1,03,74,272/- made by the ld. AO the bench noted that even the ld. CIT(A) while dealing with this issue noted that this ground being consequential in nature to computation and allowability of carried forward and therefore, we direct the ld. AO to give proper effect to this issue of brought forward depreciation claim of the assessee in accordance with law.

Ground no. 8 being the initiation of penalty which are independent of the assessment and there being no such levy arises from the order of the lower authority and therefore, this ground become premature at this stage.
Ground no. 9 being the general ground does not require our finding.Based
Professional Automotives Private Limited vs. ACIT on these observations the appeal of the assessee in ITA no. 814/JP/2025 is partly allowed.

In the result the appeal of the assessee in ITA no. 809 to 813/JP/2025 are allowed and that of the appeal in ITA no. 814 & 815/JP/2025 stands partly allowed. Order pronounced in the open court on 23 /07/2025. ¼Mk0 ,l- lhrky{eh½

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(Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai)
U;kf;dlnL;@Judicial Member ys[kklnL;@Accountant Member
Tk;iqj@Jaipur fnukad@Dated:- 23/07/2025
*Ganesh Kumar/ Santosh, Sr. PS
आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू
1. The Appellant- Professional Automotives Pvt. Ltd., Jammu and Kashmir
2. izR;FkhZ@ The Respondent- ACIT, Central Circle-1, Jaipur
3. vk;dj vk;qDr@ Theld CIT
4. vk;dj vk;qDr ¼vihy½@The ld CIT(A)
5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत
6. xkM ZQkbZy@ Guard File (ITA Nos. 809 to 815/JP/2025) vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत