I.T.A. Nos. 2812 & 2940 (Delhi) of 2011 [Assessment Year 2004-05]. Case: Jai Karan Sharma Vs Deputy Commissioner of Income-tax, Circle 25(1), New Delhi. ITAT (Income Tax Appellate Tribunal)
| Case Number | I.T.A. Nos. 2812 & 2940 (Delhi) of 2011 [Assessment Year 2004-05] |
| Counsel | For Appellant: Salil Aggarwal and Shailesh Gupta and For Respondent: Ms. Y.K. Kakkar |
| Judges | Smt. Diva Singh, J.M. and K.D. Ranjan, A.M. |
| Issue | Income-tax Act, 1961 - Section 68 |
| Judgement Date | July 20, 2012 |
| Court | ITAT (Income Tax Appellate Tribunal) |
Order:
Smt. Diva Singh, J.M., (Delhi 'D' Bench)
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Both the assessee and the Revenue are in appeal against the order dt. 31.3.2011 of CIT(A)-VIII, New Delhi pertaining to the A.Y. 2004-05 wherein the assessee is agitating against the action of the CIT(A) in maintaining the additions of Rs. 1,90,00,000/- and the Revenue against the action of deleting the addition of Rs. 80 lakhs made by the A.O. The grounds raised by the respective parties read as under:-
ITA 2940/Del/2011:
1. That the Ld. CIT(A) has grossly erred both in law and on facts in upholding an addition of a sum of Rs. 1,90,00,000/- being alleged unexplained gifts received by the assessee to be taxed u/s 68 of the I.T. Act. In doing so he has proceeded to delete the trading addition of an amount of Rs. 80,00,000/- by holding that no set off on account of the same would be allowed against addition of Rs. 1,90,00,000/- made as alleged bogus gift.
2. That the Ld. CIT(A) has grossly erred both in law and on facts in sustaining the aforesaid addition, overlooking the fact that no fair, reasonable, proper opportunity has been granted by the A.O. and has thus arbitrarily brushed aside the detailed evidence, information and material furnished by the assessee in order to support the genuineness of the gifts received.
3. That the Ld. CIT(A) has erred both in law and on facts of the case in sustaining the aforesaid addition solely based on the statements of the donors recorded behind the back of the assessee which has no evidentiary value in the eyes of law in as much as same were not made available for cross examination and as such deserved to be excluded for consideration.
4. That the ld. CIT(A) further overlooked the fact that no fair and proper opportunity was provided to the appellant and no specific opportunity in particular to cross examine the donors was ever given to the assessee.
It is therefore prayed that order of ld. CIT(A) upholding the action of the AO be held to be unsustainable and untenable in eyes of law.
ITA 2812/Del/11:
1. Ld. CIT(A) has erred on facts and in law in deleting addition of Rs. 80,00,000/- on account of rejection of books of the assessee company u/s 145(3) of the Act ignoring that while making the addition the then AO specifically pointed out the discrepancies in the books of accounts of the assessee company. Further, the assessee received/paid freight charges in cash which are not verifiable in the absence of name and addresses of the parties on the vouchers as well as in the books of accounts maintained by the assessee company.
2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any grounds of appeal at any time before or during the hearing of this appeal.
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A perusal of the record shows that the assessee disclosed an income of Rs. 46,70,500/- by way of filing a return dt. 31.10.2004 accompanied by tax audit report dt. 12.10.2004 u/s 44AB of the Income Tax Act, 1961. After issuance of notice dt. 27.7.2005 u/s 143(2) it was subjected to scrutiny assessment. The assessee in the return filed had declared income under the heads salary; income from house property; income from business & profession; income from capital gain and income from other sources.
2.1 The department has challenged the addition made by the A.O. of Rs. 80,00,000/-. The reasons for doing the same as discussed by the A.O. are set out as under:-
Return showing income of Rs. 46,70,500/- was filed on 31.10.2004. As it is a Tax Audit case, the assessee filed Audit Report dated 12.10.2004 u/s 44AB of IT Act. The return was processed u/s 143(1) and later on the case was picked up for scrutiny and notice u/s 143(2) was issued on 27.07.2005 and was served on the assessee. In response to the notices, Shri M.L Goval, C.A attended the assessment proceedings from time to time and filed necessary details and the case was discussed with him. The assessee has declared Incomes under the heads salary, income from house property, income from business & profession, income from capital gain and income from other sources.
It has been stated by the assessee that he has been carrying on transportation business under the name of M/s Chetak Transports of India and that during the year under consideration the assessee has also undertaken work for liaisoning on behalf of M/s Bafina Motors P. Ltd. Bombay for selling vehicles on commission basis and has declared commission receipts of Rs. 1,05,00,000/-. The assessee has prepared one trading account in respect of transport business as well as liaisoning business and has declared net profit of Rs. 82,90,178/- in respect of both the businesses. In respect of business of transportation, the assessee has however declared freight receipts of Rs. 3,92,99,380/- and against the same the assessee has claimed expenses of freight payment of Rs. 4,66,09,355/- and booking & delivery expenses of Rs. 4,01,990/- thus declaring a gross loss of Rs. 77,11,965/- from the business of transportation. The assessee was required to furnish necessary evidence and justification of the gross loss incurred by the assessee. He filed a reply on the issue vide his letter dt. 13.11.2006, relevant part of which is reproduced as under:-
"Goods are booked for different destinations as full truck load as well as retail small load. When there is full truck load then truck are hired from the market on particular days at prevailing rate in truck unions and goods are transported. There is always surplus on such booking & most part of total booking of assessee during the year pertains to this category. In case of retail small load booking when even after ¾ days there is not enough goods for complete full truck load of particular directions then whatever load is there same are transported through truck hired from the market at the rate prevailing on particular date in truck unions. The trucks are always hired on full truck load basis. So when there is no full truck load and goods are transported through truck hired from market even when the load was 40% of full truck so there is a loss. These type of bookings are 20 to 25% of total booking in AY 2004-05. The loss in these types of booking is mainly the weight difference and which cannot be avoided. Goods have to be transported after wait of 3-4 days otherwise penalties are to be payable to parties by way of damage. Further there is loss of further business as well as goodwill. The facts stated above are verifiable from the booking register as well as freight register maintained by the assessee.
The reasons for non-completion of full truck load in 3-4 days was lack of marketing on part of assessee. During this A.Y. the salary bill is just 14500/- pm which can employ only a booking persons who cannot go for marketing for transport business. The assessee had diverted all his energy and attention towards development of liaison of activities of truck sales on behalf of M/s Bafina Motors P. Ltd. Bombay during the period.
In addition to above the second reason for low profit or loss in transport activities is attributed to the policy of previous NDA Govt. It linked the fixation of diesel price to certain mechanism of International Price of oil product. During FY 2003-04 (AY 2004-05) diesel prices were increased a number of times thereby increasing freight of trucks hired from the market where as freight on booking from traditional old customers could not be increased in that proportion.
"Therefore, combination of all the factors stated above resulted in loss on 20 to 25% of bookings. However, this loss was compensated by liaison activities where the assessee had diverted his energy and attention".
The reply furnished by the assessee is a general statement without any supporting evidence and the same does not explain the gross loss incurred by the assessee.
The assessee produced books of accounts, consisting of cash book and ledger on 16.11.2006. Again on 11.12.2006 the assessee produced books of accounts consisting of cash book, ledger, booking income register, freight paid register and vouchers. It was noticed from the books of account and vouchers that there were no addresses of the parties from whom freight/booking income was received. Similarly there had been no names and addresses of the persons/concerns to whom the freight charges were paid. The freight charges were stated to have been paid to the driver/owner of the truck that was hired. Also all the freight charges had been paid in cash and there had been no payments through the banking channels. In absence of the names and addresses of the parties from whom freight charges were received or names and address of the parties to whom freight charges were paid and also all the transactions having been carried out of cash, the same are not subject to further verification and are hence non-verifiable and not reliable and the gross loss in respect of transportation business is consequently treated as an unproved loss. In view of above facts, it is held that the books of account of the assessee do not present a correct and complete picture of the assessee's business activities and business profits and the same are liable to be rejected u/s 145(3) of IT Act The books of account of the assessee are therefore rejected u/s 145(3) of the IT Act. While estimating the profits for the transportation business, a trading addition of Rs. 80,00,000/- is made to the results declared by the assessee, thus, not allowing the gross loss of Rs. 77,11.965/- and determining a profit of Rs. 2,88,035/- i.e. (80,00,000 - 77,11,965/-) in respect of the said business. As the assessee has concealed the particulars of his Income, he is liable for penalty u/s 271(1)(c) of the I. T. Act which are separately initiated.
2.2 Apart from the above addition of Rs. 80 lakhs the A.O. taking into consideration that the assessee claimed to have received gifts of Rs. 1,90,00,000/- from 76 persons which had lead to an increase in the capital of the assessee to...
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