M/S JAISU SHIPPING CO. PVT. LTD.,,RAJKOT-GUJARAT vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, GANDHIDHAM CIRCLE,, GANDHIDHAM
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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Smt. Annapurna Gupta & Shri T.R. Senthil Kumar
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted Through Virtual Court) Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member
ITA No. 972 & 1007/Rjt/2010 Assessment Year 2006-07
M/s. Jaisu Shipping The ACIT, Co. Pvt. Ltd. Gandhidham Circle, 8, Sindhu Society, Vs Gandhidham Adipur PAN:AAACJ6998H The ACIT, M/s. Jaisu Shipping Gandhidham Circle, Co. Pvt. Ltd. Gandhidham 8, Sindhu Society, Adipur (Appellant) PAN:AAACJ6998H (Respondent) Assessee Represented: None Revenue Represented: Shri Shramdeep Sinha, CIT-DR Date of hearing : 30-05-2023 Date of pronouncement : 31-05-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
These cross appeals are filed by the Assessee and the Revenue as against the Appellate order dated 31.03.2010 passed by the Commissioner of Income Tax (Appeals)-II, Rajkot arising out of
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the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2006-07.
At the outset, the Ld. CIT-DR Shri Shramdeep Sinha appearing for the Revenue submitted that the appeal filed by the Revenue wherein the tax effect is below taxable limit prescribed by the CBDT Circular No. 17 of 2019 dated 08.08.2019. Thus the Revenue appeal be dismissed as withdrawn.
Recording the above submission, the appeal filed by the Revenue is hereby dismissed as withdrawn.
Regarding the appeal filed by the assessee, today is the 30th time of hearing of the appeal, None appeared on behalf of the assessee in spite of notice served through department by way of Affixture on 18.05.2023. There is no authorization given to any Counsel by the assessee. This clearly shows that the assessee is not interested in pursuing the above appeal. So with the available materials on record, we are proceeding to dispose of the above appeal with the assistance of Ld. CIT-DR
The brief facts of the case is that the assessee is the owner of Ships, Charterers and engaged in the business of shipping dredging & marine contractor. For the Assessment Year 2006-07, the assessee filed its Return of Income declaring total income of Rs. 9,62,032/-, the return was taken up for scrutiny assessment. The Assessing Officer found that the assessee has shown Rs. 1,38,06,641/- as miscellaneous receipts during the year, which is
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more than ten times that of the previous year. The assessee was asked to explain why the misc. receipt should not be charged to tax under the normal provisions of the Income Tax, other than Special provisions related to income of shipping companies, as these receipts are not qualifying and relevant shipping income of Tonnage Tax company assessable u/s. 115 V-I of the Act.
The assessee submitted the misc. receipts has been earned by operating qualifying ships only, just because the income is mentioned as misc. receipts it does not fall under the incidental activities as defined u/s. 115 V-I of the Act. Thus the assessee submitted that the misc. receipts are earned from operating qualifying ships namely “AI-Nims” and “Kamal-21” on hire basis for transportation of various material to specified place in the sea. However the Assessing Officer not satisfied with the above reply and treated the misc. receipts is taxable under the normal provisions of the Income Tax Act.
6.1. Similarly, the Assessing Officer found that the assessee has received unsecured loan of Rs. 40,00,000/- from Mr. Ishwar Adwani which was squared off during the year. The assessee was asked to prove the identity, genuineness and creditworthiness of the lender. However the assessee has submitted the copy of the ledger of the party in its books of account. Therefore the Assessing Officer added the unsecured loan of Rs. 40,00,000/- as unexplained income u/s. 68 of the Act.
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Aggrieved against the Assessment Order, the assessee filed an appeal before Ld. Commissioner of Income Tax (Appeals). The Ld. CIT(A) found that the misc. receipts to be treated as income chargeable to tax under the normal provision only but the gross receipts cannot be totally taxed. However there was no details of expenditure incurred by the assessee for earning the above misc. income. But the assessee has returned Net Profit percentage of 2.7% for the earlier Assessment Year 2005-06 and 5.87% for the present Assessment Year 2006-07. Thus the Ld. CIT(A) estimated 10% of the misc. receipts as taxable net profit and therefore confirmed the addition to Rs. 13,80,664/- and partly allowed the ground.
7.1. Regarding the addition of unsecured loan of Rs.40,00,000/-. The Ld. CIT(A) held that prima facie the assessee has to satisfy basic three parameters namely identity, creditworthiness of the creditors and genuineness of the transaction is to be proved by the assessee. Here in this case, the identity of the creditor itself is not proved by the assessee. Though the assessee claims the creditor is NRI, however failed to prove any documentary evidence namely Passport to prove its claim. Therefore the Ld. CIT(A) confirmed the addition since the basic ingredients of section 68 is not proved by the assessee.
Aggrieved against the Appellate Order, the assessee is in appeal before us raising the following Ground of Appeal: (1) That, the learned CIT(A) has wrongly confirmed of Rs. 13,80,664/- being 10% of the total Miscellaneous Receipts as normal business income and not as shipping income u/s 115 V-I.
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(2) That, the learned CIT(A) has confirmed addition of Rs.40,00,000/- u/s 68 on account of unexplained cash credit. (3) That, the finding of the learned CIT (A) are not justified in law as well as facts of the case and required to be deleted.
Regarding Ground no. 1 estimation of 10% of the total Misc. receipts as normal business income and not as shipping income u/s. 115 VI of the Act, the Ld. CIT(A) held as follows: “…(c) I have carefully gone through rival submissions and details placed on records. As per section 115 VI, the relevant shipping income includes income from core activities and incidental activities as stated in Rule 11R. The core activities of the appellant are dredging activities and the incidental income stated in the rule includes maritime consultancy charges, income from loading and unloading cargo, ship management fees and maritime fees. The appellant carried out various activities under the head 'Misc. Activities, like 'on shore repairs of tugs with the help of qualifying ships, transport of bunkers, charter, etc. Therefore, the appellant contended that the income was earned with the operation of qualifying ships. The AO stated that these activities were not covered either under the core activities, or incidental activities, and therefore, the whole Misc. Income was to be taxed separately. (ca) I found from the records that the appellant carried out various operations with the help of qualifying ships, but these activities were not dredging activities which form the core activity of the appellant company and these operations could not be taken as incidental activity as stated in Rule 11 R of the Income Tax Rules. The A.O. is correct to this extent. But, I opine that the whole of such Misc. Receipts could not be considered as taxable income. The appellant also incurred corresponding expenses to earn such Misc. Income (cb) It is the duty of the A.O to tax the real income. Therefore, in the present case, the gross Misc. Receipts could not be real income. In this regard, a reference may be invited to CIT v/s President Industries 258 ITR 654 (Guj.). It is held that - "It cannot be a matter of an argument that the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realization of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that investment by way of incurring cost in acquiring goods which have been sold have been made by the assessee and that has also not been disclosed. In the absence of such finding of fact
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the question whether entire sum of undisclosed sale proceeds can be treated income of the relevant assessment year answers by itself in negative. The record goes to show that there is no finding nor any material has been referred about the suppression of investment in acquiring the goods which have been found subject of undisclosed sales. Therefore, no question of law which requires to be referred to this Court arises out of Tribunals order. The order of Tribunal under s. 256(1) is not erroneous in reaching such conclusion." (cc) On the basis of above decision, it is quite clear that the gross receipts cannot be totally taxed. The appellant maintained books of accounts audited under the Companies Act and under Income Tax Act. The corresponding expenses for earning this Misc. Income were also debited in the profit and loss account. Thus, only net profit of such income is to be separately taxed. There is no finding to the effect that the expenses to earn these miscellaneous receipts were not accounted or disclosed. In the absence of such observation, entire miscellaneous receipts cannot be treated as income of this assessment year. It is found that the appellant returned a net profit percentage of 2.7 in A.Y. 05- 06 and 5.87% in A.Y. 06- 07. But, this percentage cannot be taken as a yardstick for arriving at the profit embedded in the miscellaneous receipts. Though the expenses related for earning these receipts are accounted, the details of the relevant expenses were not culled out and produced before me. The A.R. also expressed his difficulty in submitting the same. So, I feel it will meet the ends of justice, if I fairly estimate 10% of the miscellaneous receipts as taxable net profit. Therefore, the addition of Rs.13,80,664/- is confirmed, as against the addition of Rs. 1,38,06,641/-. This ground of appeal is partly allowed.” 9.1. There is no material available on record to hold that the misc. income earned by the assessee is also from the core activity of the shipping business. The misc. receipts generated on the activities carried out by the assessee on shore repairs of tugs with the help of qualifying ships, transport of bunkers, charter, etc. were not dredging activities which form the core activity of the assessee company as well as these activities could not be taken us incidental activity as prescribed in Rule 11 R of the Income Tax Rules. In the absence of relevant details, we have no other option than to confirm the order passed by the Ld. CIT(A) who has fairly estimated 10% of the misc. receipts as taxable income of the assessee. Thus the
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findings arrived by the Ld. CIT(A) does not require any interference and the ground raised by the Assessee is hereby rejected.
Ground no. 2 addition on account of unexplained cash credit u/s. 68 of the Act. Here also the assessee has not provided any documentary evidence that the loan creditor is a NRI and the bank details of the NRI and repayment details by the assessee. Thus the assessee failed to prove the identity of the creditor itself, we have no hesitation in confirming the addition made by the Ld. CIT(A). Thus the ground raised by the Assessee is devoid of merit and the same is dismissed.
In the result, the appeal filed by the Assessee is hereby dismissed.
Order pronounced in the open court on 31-05-2023
Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 31/05/2023 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, राजकोट
