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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO, AM & SHRI RAVISH SOOD, JM
PER RAVISH SOOD, JUDICIAL MEMBER:
The present appeals filed both by the assessee and the department are directed against the order passed by the CIT(A)-23, Mumbai, dated 27.07.2010, which had arisen from the assessment order passed u/s 143(3) of the Income Tax Act, 1961, (for short ‘Act’), dated 24.12.2008.
The assessee assailing the order of the CIT(A) had raised the following grounds of appeal before us:
“I. Estimating the income at Rs. 14,59,615/- on the gross commission receipt at Rs. 35,42,315/- as against Rs. 24,80,847/- actually received by the Appellant.
1. In the facts and circumstances of the case and in law the learned CIT(A) erred in taking the gross commission receipts at Rs. 35,42,315/- as against Rs. 24,80,847/- and thereby erred in computing the income at Rs. 14,59,615/-.
2. The reasons given by the learned CIT(A) for taking the gross commission receipts at Rs. 35,42,315/- as against Rs. 24,80,847/- and thereby estimating the income at Rs. 14,59,615/-. II. The appellant craves leave to add, amend, alter, modify or omit any of the aforesaid Grounds of Appeal as occasion may arise or demand.”
3 & 7049/Mum/2010 (A.Y. 2006-07) Shri Nazimuddin A Sheikh 2. The brief facts of the case are that the assessee filed his return of income reflecting an income of Rs. 2,01,440/-, which during the course of the scrutiny proceedings so initiated in his case was claimed to have been derived from the business of transportation, and reflected as per the presumptive scheme of taxation contemplated u/s 44AE of the ‘Act’. The assessee during the course of the assessment proceedings placed on record the ‘Profit & loss a/c’ and the ‘Balance sheet’ for the year under consideration, wherein the ‘total receipts’ were shown at Rs. 35,42,315/-, against which the ‘Gross profit’ and the ‘Net profit’ stood reflected at Rs. 26,62,403/- and Rs. 2,01,440/-, respectively. The A.O during the course of the assessment proceedings observing that the ‘Balance sheet’ of the assessee revealed that he was not owning any truck, thus at the very threshold rejected his claim that the source of the income shown in the return of income was derived from the business of transportation. The A.O further recording the failure on the part of the assessee to produce the books of accounts, bank statements and the duly substantiated details of the expenses claimed to have been incurred during the year under consideration, disallowed the expenses debited by the assessee in toto, and took the ‘total receipts’ of Rs. 35,42,315/- (supra) as the income of the assessee.
The assessee being aggrieved with the order of the A.O, therein carried the same in appeal before the CIT(A). That during the course of the appellate
4 & 7049/Mum/2010 (A.Y. 2006-07) Shri Nazimuddin A Sheikh proceedings the assessee explaining the nature of his business, therein submitted that he was working as a facilitator on commission basis, and would keep track of trucks from Andhra Pradesh and Karnataka, which after off loading the goods in Mumbai would thus be available as empty trucks on their way back to their respective states. The assessee as a facilitator would make available such empty trucks to transport companies which would be in need of the same for transporting their cargo to the places to which such trucks would be headed for. The assessee further conceding that distorted and wrong facts as per which the assessee was projected as owner of trucks were placed before the A.O, attributed the same to the misrepresentation by his earlier counsel who had appeared before the A.O, which had gone unchecked on the part of the assessee, who due to his ill health could not actively participate in the assessment proceedings. The assessee further in his attempt to fortify the ‘Net profit’ as stood reflected in his return of income, therein submitted that he had maintained basic date wise register wherein the truck no., place of destination, rate at which the payment was made to truck operator/truck driver, advance paid to the truck driver and the commission in the said transactions were duly recorded, but however the said register maintained by the assessee alongwith the supporting bills could not be furnished during the course of the assessment proceedings. It was further averred by the assessee that the ‘Commission received’ by him, after being reduced by the expenses paid to the truck drivers, including thappi cum bhatta, labour charges and other day-to-day 3.1 The CIT(A) on an application filed by the assessee U/rule 46A of the Income-tax Rules, 1962, therein seeking admission of a fresh set of ‘Profit & loss a/c’, ‘Balance sheet’, Statement of details and TDS deposited, as additional evidence, therein forwarded the same to the A.O and called upon him to file a report as regards the same, and while so doing advised the A.O to look into the register and the bills as were heavily relied upon by the assessee in his application, in case if the same were considered necessary for furnishing of the report. The A.O vide his report dated. 11.03.2010 furnished with the CIT(A), holding a strong conviction and doubting the genuineness and veracity of the documents which after lapse of substantial time were furnished by the assessee as additional evidence before the CIT(A), strongly objected to the admission of the said documents, and inter alia submitted that the ‘Profit & loss a/c’ and the ‘Balance sheet’ of the assessee suffered from serious infirmities, and as such did not inspire any confidence as regards the contents thereof. That as the observations of the A.O therein pointing out serious lapses in the financial statements of the assessee will have a strong bearing on adjudication of the issue under consideration before us, the same are charted as under:
Profit & Loss a/c Balance Sheet Total Receipts Total Receipts Total Receipts As per ‘Balance sheet’ As per ‘Balance sheet’ As per ‘Balance sheet’ filed during asst. filed with CIT(A) as of the assessee filed (as per ‘P & (as per ‘P & Loss (as per the proceedings. additional evidence U/r with the return of Loss a/c’ filed a/c’ filed with TDS claim 46A). income for A.Y. 2007- during asst. CIT(A) as filed). 08. proceedings). additional evidence U/r 46A). Op.Capital:Rs.1,24,86097 Op. Capital:Rs. 1,14,465/- - Rs. 35,42,315/- Rs. 24,80,847/- Rs. 32,76,380/- (on 01.04.2005) (on 01.04.2005)
Cl.Capital :Rs.1,09,274-97 Cl. Capital :Rs.1,87,980-96 Op.Capital :Rs.98,879-65 (on 31.03.2006) (on 31.03.2006) (on 01.04.2006)
The A.O further in his remand report, referring to the glaring variance in the amounts appearing as the ‘Total receipts’ (in the ‘P & loss a/c’),‘Op. Capital’, ‘Cl.
Capital’ (in the ‘Balance sheet’), therein concluded that the same undoubtedly revealed that the entire exercise carried out by the assessee, therein purporting to place on record a fresh set of ‘Financial statements’ by way of an additional evidence, was just an eye wash, a brainchild of an after thought, and no genuineness could be related to the same. The A.O further scrapped the contention of the assessee that the distorted figures in the ‘financial statements’ filed during the course of the assessment proceedings had emerged on account of misrepresentation of the facts by his earlier counsel, by observing that if that would had been so, then the assessee would not had continued with the services of the same counsel, but the fact as it so remained was that even after the culmination of the assessment proceedings, the same counsel was representing the assessee in the course of the penalty proceedings initiated in his case. The assessee in his
7 & 7049/Mum/2010 (A.Y. 2006-07) Shri Nazimuddin A Sheikh rejoinder to the remand report of the A.O, therein strongly objected to the observations of the A.O and took support of the documentary evidences, which as per the assessee duly supported and substantiated the facts averred by the assessee, and tried to rebut the serious infirmities in the ‘Profit & loss a/c’ and the ‘Balance sheet’ by attributing the same to his earlier counsel.
3.2 The CIT(A) after perusing the facts of the case and the remand report of the A.O, taking cognizance of the fact that the assessee had neither reconciled the serious variances in the multiple sets of ‘Profit & loss a/c’ and the ‘Balance sheet’, as emerged from the remand report of the A.O, nor substantiated the genuineness of the expenses claimed to have been incurred by him, coupled with the fact that the claim of the assessee that the distorted facts furnished during the course of the assessment proceedings were attributable to the misrepresentation of the earlier counsel, was not found to be in accord with the conduct of the assessee as was discernible beyond any scope of doubt from the very fact that despite raising serious allegations against the earlier counsel, the assessee had continued availing the services of the said counsel in the course of the penalty proceedings initiated in the hands of the assessee, being beyond human probabilities, thus did not inspire any confidence and resultantly the CIT(A) after deliberating on the peculiar facts attending to the case, therein declined to accept the explanation put forth by the assessee. The CIT(A) however, after taking the ‘total receipts’ in the hands of the 8 & 7049/Mum/2010 (A.Y. 2006-07) Shri Nazimuddin A Sheikh assessee at Rs. 35,42,315/-, adopted a liberal approach and being of the view that running of a business would necessarily involve some expenses, therein going as per the average stated to have been gathered from the bills produced by the assessee, allowed 50% of the said ‘total receipts’, i.e an amount of Rs. 17,71,157/-, towards thappi and other expenses in the hands of the assessee, and thus partly allowed the appeal of the assessee.
The assessee being aggrieved had assailed the order of the CIT(A) to the extent the addition made by the A.O had been sustained by the CIT(A). That despite affording sufficient opportunities of being heard to the assessee, neither any one appeared for and on behalf of the assessee appellant on the stipulated date of hearing of the appeal before us, nor any application seeking any adjournment was filed by the assessee. That in light of the aforesaid circumstances, we herein as per Rule 24 of the Appellate Tribunal Rules, 1963, proceed with and dispose of the appeal on merits, after hearing the respondent. We have heard the Ld. Departmental representative (for short ‘D.R’), perused the material on record and have given a thoughtful consideration to the issue before us. We are of the considered view that it remains as a matter of fact that the serious infirmities and variances in the ‘Profit & loss a/c’ and the ‘Balance sheet’ furnished by the assessee during the course of the assessment proceedings, as against that furnished by way of an application filed U/r 46A of the Income tax rules, 1962, have not 9 & 7049/Mum/2010 (A.Y. 2006-07) Shri Nazimuddin A Sheikh only remained unreconciled till date, but rather as a matter of fact the assessee except for playing blame games and raising unsubstantiated allegations against his earlier counsel, had not even attempted to carry out the necessary reconciliation which could go to justifiably explain the glaring variances on the basis of any concrete material. We further find that the ‘Op. Balance’ of the ‘Capital a/c’ as on 01.04.2006 (as gathered from the ‘Balance sheet’ of the assessee filed with the return of income for A.Y. 2007-08), is also glaringly found to be at variance with the ‘Cl. Balance’ of the ‘Capital a/c’ as on 31.03.2006, as stands gathered from the aforesaid set of ‘Balance sheets’ for the year under consideration. The ‘total receipts’ as are found reflected in the ‘Profit & Loss a/c’ filed with the A.O during the course of the assessment proceedings, are not only found to be at glaring variance with that furnished by the assessee with the CIT(A) as an additional evidence, but rather both of them are at variance with the ‘total receipts’ as stands reflected in the ‘TDS statement’ which also forms part of the record. Thus in the backdrop of the aforesaid facts as they so remain, it can safely and rather inescapably be concluded that the ‘Profit & loss a/c’ and the ‘Balance sheet’ of the assessee do not inspire any confidence and the same had rightly been rejected by the lower authorities at the very threshold. We are further of the considered view that though the expenses claimed to have been incurred by the assessee were not found to be verifiable beyond any scope of doubt, but however the CIT(A) had adopted a liberal approach and allowed 50% of the ‘total receipts’ as expenses in 10 & 7049/Mum/2010 (A.Y. 2006-07) Shri Nazimuddin A Sheikh the hands of the assessee. We however are unable to persuade ourselves to be in agreement with the finding of the CIT(A), who despite concluding that the ‘Financial statements’ of the assessee did not inspire any confidence, and thus could not be accepted on the very face of it, had however adopted the ‘total receipts’ at Rs. 35,42,315/-(supra), as stood reflected by the assessee in its ‘Financial statements’ filed with the A.O during the course of the assessment proceedings, therein by passing the fact borne from record that the ‘total receipts’ in the hands of the assessee, as per the ‘TDS statement’ was reflected at Rs. 32,76,380/-. We are of the considered view that now when the ‘Profit & loss a/c’ and the ‘Balance sheet’ filed by the assessee during the course of the assessment proceedings undeniably cannot be relied upon and had been scrapped by the lower authorities, therefore picking up of the ‘total receipts’ from such unsubstantiated ‘Financial statements’ which can safely be held to be backed by a hollow claim of the assessee in the thin air, in all fairness cannot be held to be justified. We are of the considered view that now when the lower authorities had before them the ‘TDS statement’ wherein the ‘total receipts’ in the hands of the assessee were reflected at Rs. 32,76,380/-(supra), therefore the same could safely, logically and rather inescapably was supposed to be adopted by the lower authorities as the ‘total receipts’ in the hands of the assessee. We thus set aside the order of the CIT(A) to the extent he had taken the ‘total receipts’ in the hands of the assessee at Rs. 35,42,315/-(supra), and therein restore the matter to the file of the A.O with a 11 & 7049/Mum/2010 (A.Y. 2006-07) Shri Nazimuddin A Sheikh direction that the income of the assessee be computed by substituting the amount of Rs. 32,76,380/-(supra), as against the amount of Rs. 35,42,315/-(supra) so adopted by the CIT(A), and thereafter recompute the ‘Net income’ in the hands of the assessee, as per the findings of the CIT(A).
The ‘Ground of appeal No. 1’ and ‘Ground of appeal No. 2’ are thus partly allowed. The appeal of the assessee is thus partly allowed in terms of our aforesaid observations. :
That at the very outset of the hearing of the present appeal filed by the department, it was submitted by the Ld. D.R that as the tax effect involved in this appeal was less than Rs.10.00 lac, therefore the appeal was not maintainable. The CBDT vide Circular No.21/2015, dated 10/12/2015 has revised the monetary limits for filing of appeals by the Department before the Income-tax appellate tribunal, retrospectively. Since the tax effect in dispute in the captioned appeal filed by the department is stated to be below the monetary limit of Rs.10.00 lac specified in the CBDT Circular, dated 10/12/2015 (supra), the same is dismissed as not maintainable.
In the result, appeal of the Revenue is dismissed.