THIRUVENGATAM VINAYAGAM,CHENNAI vs. ITO, NCW-10(3), CHENNAI

आदेश / O R D E R

PER MANU KUMAR GIRI, JM:

This captioned Appeal filed by the Assessee is directed against

the order of the Ld. Commissioner of Income Tax (Appeals), NFAC,

Delhi [‘CIT(A)’ in short] dated 07.07.2025 for Assessment Year

2016-17.

ITA 2285 Chny 2025 AY 2016-17) Thiruvengatam vs ITO NCW 10(3) :: 2 ::

ITA 2285 Chny 2025 AY 2016-17) Thiruvengatam vs ITO NCW 10(3) :: 3 ::

Transport. The assessee filed his return for the assessment year under

consideration, i.e., 2016-17 declaring total income of Rs.8,30,570/-. The

case of the assessee was selected for limited scrutiny. Statutory notices

u/s.142(1) were issued to the assessee on various dates seeking for

certain details. The assessee filed its reply vide letter dated 18.04.2018.

The assessee submitted that the auditor Mr.V.Krishnamoorthy who had

audited the accounts u/s.44AB of the Act for the A.Y. 2016-17, has

expired and hence the books of accounts was not accessible. Further,

M/s.Akbar Rifa & co., Chartered accountants, prepared the revised

financials based on the books of accounts produced in tally data and

hardcopy. The assessee also submitted that the vouchers, bills related to

first 8 months of the financial year under consideration were destroyed in

ITA 2285 Chny 2025 AY 2016-17) Thiruvengatam vs ITO NCW 10(3) :: 4 ::

the flood in December 2015(evidence in the form of property loan

sanction letter enclosed) and hence the same cannot be produced.

referred the case for special audit u/s.142(2A) of the Act to M/s.Jain

Bafna and Associates, CAs. The special audit report was given to

Assessing Officer. Based on the same, the Assessing Officer assessed the

total income at Rs.1,51,16,889/- as against the returned income of

Rs.8,30,570/- by making following additions to the total income of the

assessee for the assessment year under consideration and passed an

order u/s.143(3) of the Act dated 20.08.2019:

Particulars Amount in Rs. Returned Income 8,30,570 Sale of land - LTCG 25,83,109 Income u/s.64 gift to wife 27,083 Purchase of vacant land u/s.69 16,85,000 Sale of vacant landu/s.68 25,00,000 Sundry creditors u/s.68 22,16,745 Sundry Debtors u/s.68 18,25,802 Lease Advance u/s.68 30,00,000 Acceptance of loan in Cash u/s.68 2,00,000 Disallowances u/s.40a(ia) 1,57,311 (interest paid without deduction of TDSJ Disallowances u/s 40a(ia) 91,269 (Professional Charges Assessed Income 1,51,16,889 5. Aggrieved by the order of the Assessing Officer, the assessee preferred

an appeal before the ld.CIT(A).

ITA 2285 Chny 2025 AY 2016-17) Thiruvengatam vs ITO NCW 10(3) :: 5 ::

all the grounds and confirmed the Assessing Officer’s order by passing an

order dated 07.07.2025 by holding as under:

“6.2 The main argument put forth by the assessee is regarding the claim made by the assessee that profit shall be computed u/s.44AE of IT Act, 1961. On perusal of various submissions made by the Appellant, it is seen that the Appellant has requested for application of Section 44AE of IT Act, 1961 to compute profit in the impugned case. Appellant has got its books of accounts audited on 10.10.2016. However, it is seen that Appellant has not opted for computing profit u/s 44 AE of IT Act, 1961 while filing return of income. On verification of return of income filed by the Appellant, it is emanating from Schedule BP in ITR, that Appellant has computed profit from Business arriving from Profit and Loss Account. Appellant has not chosen section 44AE in the same schedule in ITR for AY 2012-13.” 7. Further, all the additions made by the Assessing Officer in his

assessment order were confirmed by dismissing all the grounds of the

assessee.

us.

submitted that the ld.CIT(A) has erred in rejecting the claim of the

assessee to consider the claim of section 44AE of the Act, as the nature of

business of the assessee is transport. Further, both the Assessing Officer

as well as the ld.CIT(A) have erred in adopting the details and findings

given by the special auditor u/s.142(2A) of the Act, which was based on

the assumptions and surmises, as the assessee had lost the books of

ITA 2285 Chny 2025 AY 2016-17) Thiruvengatam vs ITO NCW 10(3) :: 6 ::

accounts and vouchers and other documents in flood during December

2015 itself. Further, the ld.AR submitted that the claim of the assessee

was to adopt the provisions of section 44AE of the Act to estimate the

income of the assessee, as the assessee had lost the entire books of

accounts and records in floods during December 2015.

No.75/Chny/2019 dated 30.05.2019 for the A.Y. 2015-16, wherein in

assessee’s own case, the Tribunal directed the Assessing Officer to take

guidance from provisions of Section 44AE of the Act, when the assessee

was owning 16 Transport vehicles. Further, the said decision has been

followed by the Tribunal in assessee’s own case in ITA No.2283 and

2284/Chny/2025 dated 24.10.2025 for the A.Y.2011-12 and 2012-13 and

directed to follow the provisions of section 44AE of the Act to arrive at the

total income of the assessee. In view of the above arguments the ld.AR

for prayed deleting the additions made by the Assessing Officer and allow

the claim of the provisions of section 44AE of the Act for the impugned

year also.

and the ld.CIT(A) and submitted that the assessee is owning morethan 10

vehicles and hence the provisions of section 44AE is not applicable to the

ITA 2285 Chny 2025 AY 2016-17) Thiruvengatam vs ITO NCW 10(3) :: 7 ::

present facts of the case. Therefore, the ld.DR prayed for confirming the

order of the ld.CIT(A).

ITA No. 2283 & 2284/Chny/2025 for the A.Y. 2011-12 & 2012-13

“4.0 We have heard the rival submissions and perused the materials available on record. The assessee is engaged in the business of lorry transport. The return of income for assessment years 2011-12 was filed by the assessee on 31.10.2011 declaring a total income of Rs.6,56,750/-. It was duly processed u/s 143(1) of the act. Subsequently, the case of the sought to be reopened vide issuance of notice u/s 148 of the act on 24.03.2018. In response to the said notice, the assessee filed his return of income on 17.04.2018 declaring the same total income of Rs.6,56,750/-. The assessee is a proprietor of Velmurugan Lorry service engaged in the business of running Lorries for hire. It is not in dispute that assessee owns more than 10 Lorries. The assessment was completed u/s.143(3) r.w.s 147 of the Act on 27.12.2018 for assessment year 2011-12 determining total income of Rs.65,35,793 after making the following additions / disallowances:- a. Excess depreciation disallowed – Rs.8,88,335/- b. Adhoc disallowance of certain finance expenses at 10% - Rs.11,15,347/-. c. Disallowance u/s 40a(ia) on account of interest – Rs.7,16,625/-. d. Disallowance of expenditure – Rs.31,58,736/-. 5.0 The assessee pleaded before the Ld.AO as well as before the Ld.AO that though the return of income was filed after duly getting his accounts audited from an independent C.A, the books of accounts were lost and damaged due to severe floods that occurred in Chennai. Hence, the assessee was prevented from sufficient cause by not producing the books of accounts together with the supporting vouchers even though the same were indeed available at the time of filing of return which alone enabled the independent C.A to conduct the audit of the books. Accordingly, the assessee expressed his inability to produce the books of accounts and documentary evidence to buttress the issues that were subject matter of additions and disallowances. It was also pointed out to the Ld.CIT(A) that the Coordinate Bench of this Tribunal in assessee’s own case for assessment year 2015-16 had directed the revenue to adopt the profit by applying the presumptive income prescribed in section 44AE of the Act on estimated basis. The Ld. CIT(A) however ignored the contentions of the assessee and upheld the additions and disallowances made by the Ld.AO after giving marginal relief on account of adhoc disallowance of expenses by 3% i.e. 10% adhoc disallowance reduced to 7%. 6.0 We find that the identical issue was subject matter of consideration by this Tribunal in assessee’s own case for assessment year 2015-16 in ITA No.75/Chny/2019 dated 30.05.2019 wherein it was held as under:- “…5. Being aggrieved by the order of the Id. Commissioner of Income Tax (Appeals), the appellant is in appeal before us in the present appeal. It is contended before us that though the provision of presumptive taxation

ITA 2285 Chny 2025 AY 2016-17) Thiruvengatam vs ITO NCW 10(3) :: 8 ::

u/s.44AE of the Act are not strictly applicable to the assessee, guidance can be taken from the provision of Section 44AE and presumptive rate of tax can be applied placing reliance on the decision of Ahmadabad Bench (camp at Surat) of the Tribunal in the case of Gayatri Corporation vs. ITO in ITA Nos.894 & 1099/Ahd/2014, dated 05.04.2017.

"4. We have carefully considered the arguments of both the sides and perused the material placed before us. It is not in dispute that the assessee was plying the goods carriage which were four. Therefore, the number of goods carriages plied by the assessee was well within the ambit of the section 44AE. The Assessing Officer has rejected the book result and has estimated the income by making various disallowance out of the expenses claimed by the assessee. He also enhanced the receipt shown by the assessee. The estimated disallowance made by the AO were partly reduced by the CIT(A). Therefore, undisputedly, in the assessee's case, the actual dispute is only with regard to estimation of the income from trucks plying business. In our opinion, when the Legislature has provided some formula for estimation of income in the case of a transporter, who owns less than ten goods carriages, there would not be any justification for not estimating the income of the assessee as per the formula prescribed in section 44AE. It is irrelevant whether the revised return furnished by the assessee is ITA No.2626/Ahd/2010 Kesharbhai G. Chaudhary vs. ITO Asst. Year 2006-07 valid or not.When the question of estimation of the income of a transporter comes, section 44AE is a good guideline in the case of transporter who owns less than 10 goods carriage. In view of the above, we direct the AO to determine the income of the assessee as per the section 44AE of the IT Act.”

and this decision was followed Ahmadabad Bench (camp at Surat) of the Tribunal in the case of Gayatri Corporation (supra). In our opinion, it is a fit case to estimate the profit provision from plying trucks at the rate

ITA 2285 Chny 2025 AY 2016-17) Thiruvengatam vs ITO NCW 10(3) :: 9 ::

prescribed under the provisions of section 44AE of the Act. Accordingly, we direct the Ld.Assessing Officer to compute the profit from plying trucks by applying the provisions of secti9on 44AE of the Act. 8. In the result, the appeal of the assessee is partly allowed.…”

Respectfully following the same, the grounds raised by the assessee are partly allowed for assessment year 2011-12.

7.0 As stated earlier, the decision rendered for assessment year 2011- 2012 shall apply mutatis mutandis for assessment year 2012-13 also in view of identical facts except with variance in figures.” 12. We have carefully considered the rival submissions, perused the

material available on record and gone through the orders of the

authorities along with the judicial precedents relied upon. The assessee is

an individual engaged in the business of lorry transport. It is an admitted

fact that the assessee owned more than ten goods carriages during the

year under consideration. It is also undisputed that the assessee’s books

of account, vouchers and supporting evidences for a substantial part of

the relevant previous year were destroyed in the floods that occurred in

December 2015, a fact which has not been controverted by the Revenue.

The assessee’s case was selected for limited scrutiny. However, owing to

non-production of complete books of account, the Assessing Officer

referred the matter for special audit under section 142(2A) of the Act and

thereafter proceeded to assess the income by making multiple additions

u/s.68, 69, 40(a)(ia) and by estimating business income, resulting in an

assessed income of Rs.1,51,16,889/- as against the returned income of

Rs.8,30,570/-.

ITA 2285 Chny 2025 AY 2016-17) Thiruvengatam vs ITO NCW 10(3) :: 10 ::

Assessing Officer as well as the ld. CIT(A) erred in not adopting a

reasonable method of estimation of income having regard to the nature of

transport business and in ignoring the consistent view taken by the

Coordinate Benches of this Tribunal in the assessee’s own case for earlier

assessment years.

are admittedly not strictly applicable to the assessee since the assessee

owned more than ten goods carriages during the relevant previous year.

However, the issue before us is not the strict application of section 44AE,

but whether the presumptive scheme contained therein can be taken as a

reasonable guiding yardstick for estimation of income, particularly when

the books of account are not available and the business carried on is

purely transport business.

assessee’s own case for A.Y. 2015-16 in ITA No.75/Chny/2019 dated

30.05.2019, after considering identical facts, categorically held that even

where section 44AE is not strictly applicable, the provisions thereof

provide a fair and reasonable basis for estimating income from transport

business. The Tribunal, relying upon the decision of the Ahmedabad

Bench in Kesharbhai Gharmarbhai Chaudhary vs. ITO [23 taxmann.com

ITA 2285 Chny 2025 AY 2016-17) Thiruvengatam vs ITO NCW 10(3) :: 11 ::

273], directed the Assessing Officer to compute the income by applying

the rates prescribed u/s.44AE of the Act. The relevant portion of the order

is extracted below:

“7. We heard the rival submissions and perused the material on record. The Assessing Officer made several disallowance resulting in assessed income two or three times higher than the returned income. Assessee is engaged only in transport business owning sixteen vehicles. The dispute is only with regard to estimation of income though provisions of Section 44AE of the Act are not strictly applicable. The Ahmadabad Bench of the Tribunal in the case of Kesharbhai Gharmarbhai Chaudhary vs. ITO, 23 taxmann.com 273 had held as under:-

“4. We have carefully considered the arguments of both the sides and perused the material placed before us. It is not in dispute that the assessee was plying the goods carriage which were four. Therefore, the number of goods carriages plied by the assessee was well within the ambit of the section 44AE. The Assessing Officer has rejected the book result and has estimated the income by making various disallowance out of the expenses claimed by the assessee. He also enhanced the receipt shown by the assessee. The estimated disallowance made by the AO were partly reduced by the CIT(A). Therefore, undisputedly, in the assessee's case, the actual dispute is only with regard to estimation of the income from trucks plying business. In our opinion, when the Legislature has provided some formula for estimation of income in the case of a transporter, who owns less than ten goods carriages, there would not be any justification for not estimating the income of the assessee as per the formula prescribed in section 44AE. It is irrelevant whether the revised return furnished by the assessee is ITA No.2626/Ahd/2010 Kesharbhai G.Chaudhary vs. ITO Asst.Year - 2006-07 valid or not. When the question of estimation of the income of a transporter comes, Section 44AE is a good guideline in the case of transporter who owns less than ten goods carriage. In view of the above, we direct the AO to determine the income of the assessee as per the section 44AE of the IT Act.”

and this decision was followed by Ahmadabad Bench (camp at Surat) of the Tribunal in the case of Gayatri Corporation (supra). In our opinion, it is a fit case to estimate the profit provision from plying trucks at the rate prescribed under the provisions of Section 44AE of the Act. Accordingly, we direct the ld. Assessing Officer to compute the profit from plying trucks by applying the provisions of Section 44AE of the Act.”

ITA 2285 Chny 2025 AY 2016-17) Thiruvengatam vs ITO NCW 10(3) :: 12 ::

in assessee’s own case for A.Ys. 2011-12 and 2012-13 in ITA Nos.2283 &

2284/Chny/2025 dated 24.10.2025. Thus, there exists a consistent

judicial precedent in assessee’s own case, on identical facts, directing

estimation of income by taking guidance from section 44AE of the Act.

The ld. CIT(A) rejected the assessee’s claim primarily on the ground that

the assessee did not opt for section 44AE while filing the return of income

and that the books of account were audited u/s.44AB of the Act. In our

considered opinion, this reasoning is legally untenable. Once the books of

account were admittedly not available due to circumstances beyond the

control of the assessee and the Assessing Officer himself was not satisfied

with the correctness and completeness of the accounts, the question

before the appellate authorities was to determine a fair and reasonable

method of estimation, and not merely to examine whether the assessee

had opted for section 44AE in the return of income.

cannot be arbitrary or excessive and must be based on some rational

basis having nexus with the nature of business and past history of the

assessee. The ld. CIT(A), in our view, failed to appreciate this settled

legal position and also failed to follow the binding decisions of the

Coordinate Benches rendered in the assessee’s own case.

ITA 2285 Chny 2025 AY 2016-17) Thiruvengatam vs ITO NCW 10(3) :: 13 ::

presumptive basis, it is a settled principle of law that separate additions

on account of cash credits, sundry creditors, sundry debtors, lease

advances and disallowances of expenses do not ordinarily survive, unless

the Revenue establishes that such items represent independent and

unexplained sources of income not connected with the business.

disallowances u/s.40(a)(ia) are all intrinsically linked to the business

operations and to the books of account which themselves were not

accepted. The Assessing Officer has not brought on record any material to

demonstrate that these items represent income from sources outside the

transport business. Therefore, once income is estimated by applying a

presumptive basis, the impugned additions cannot be sustained.

land, we find that the same also requires fresh examination in light of the

overall estimation of income and availability of evidence, and therefore,

the same is also liable to be set aside for reconsideration by the Assessing

Officer.

binding decisions of the Coordinate Benches of this Tribunal in assessee’s

own case for earlier assessment years, we hold that this is a fit case for

ITA 2285 Chny 2025 AY 2016-17) Thiruvengatam vs ITO NCW 10(3) :: 14 ::

estimation of income by taking guidance from the provisions of section

44AE of the Act.

Assessing Officer to recompute the income of the assessee by estimating

the profits from transport business by applying the rates prescribed

u/s.44AE of the Act as a guiding principle. Consequential additions and

disallowances made u/s.68, 69 and 40(a)(ia), being subsumed in such

estimation, are directed to be deleted. The sole addition towards long-

term capital gains on sale of land requires fresh examination in light of

the overall estimation of income and availability of evidence, and

therefore, the same is also set aside for reconsideration by the Assessing

Officer.

In the result, the appeal of the assessee is partly allowed for statistical

purposes. Order pronounced on the 10th day of February, 2026, in Chennai.

Sd/- Sd/- (जगदीश) (मनु कुमार िग�र) (MANU KUMAR GIRI) (JAGADISH) �या�यक सद)य/JUDICIAL MEMBER लेखा सद)य/ACCOUNTANT MEMBER

चे�नई/Chennai, *दनांक/Dated: 10th February, 2026. SNDP, Sr. PS आदेश क� ��त+ल,प अ-े,षत/Copy to:

ITA 2285 Chny 2025 AY 2016-17) Thiruvengatam vs ITO NCW 10(3) :: 15 :: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF