2008 (8) TMI 903 - AT - Income Tax

Summary

Issues Involved:

1. Validity of assessment under Section 143(3) without mandatory notice under Section 143(2).
2. Validity of assessment under Section 144 without adequate opportunity of being heard.
3. Addition of Rs. 11,00,000 on account of an unproved gift and further addition of 10% on imaginary commission.
4. Rejection of books of accounts and disallowance of Rs. 11,56,208 for unverifiable, excessive, and unreasonable expenses.
5. Disallowance of Rs. 2,29,250 out of transport commission as excessive.
6. General validity of the assessment order.
7. Charging of interest under Sections 234B and 234D.

Detailed Analysis:

1. Validity of Assessment under Section 143(3) without Mandatory Notice under Section 143(2):

The appellant did not press this ground, and it was dismissed as not pressed.

2. Validity of Assessment under Section 144 without Adequate Opportunity of Being Heard:

This ground was considered general and did not require adjudication. Thus, it was not decided.

3. Addition of Rs. 11,00,000 on Account of Unproved Gift and Further Addition of 10% on Imaginary Commission:

The appellant received a gift of Rs. 10,00,000 from Mr. Ashutosh Varshney, confirmed through a gift deed and bank transactions. The AO doubted the genuineness due to lack of close relation and occasion, and added Rs. 11,00,000 (including 10% commission). The CIT(A) confirmed this addition.

Upon review, the Tribunal found:

- The donor confirmed the gift in his statement.
- The gift was made through an account payee cheque.
- The donor's financial capacity was established.
- The AO's suspicion was based on assumptions without concrete evidence.

The Tribunal concluded that the gift was genuine and deleted the addition of Rs. 11,00,000.

4. Rejection of Books of Accounts and Disallowance of Rs. 11,56,208 for Unverifiable, Excessive, and Unreasonable Expenses:

The AO rejected the books of accounts due to non-production of GR slips and estimated freight payment at 85% of receipts, disallowing Rs. 11,56,208. The CIT(A) confirmed this.

The Tribunal found:

- The appellant maintained truck receipt slips containing all necessary details.
- The books of accounts were produced and impounded by the AO.
- The AO's comparison with other cases was not valid as they were not confronted with the appellant and were not comparable.

The Tribunal held that the disallowance was ad hoc and not sustainable, and deleted the addition of Rs. 11,56,208.

5. Disallowance of Rs. 2,29,250 out of Transport Commission as Excessive:

The AO disallowed 50% of the commission paid to the appellant's son, Mr. Vinod Kumar Gupta, considering it excessive. The CIT(A) confirmed this.

The Tribunal found:

- Mr. Vinod Kumar Gupta was engaged in similar business and earned commission from other transporters as well.
- The commission rate was consistent over the years and accepted by the AO in subsequent years.

The Tribunal concluded that the disallowance was based on assumptions and deleted the addition of Rs. 2,29,250.

6. General Validity of the Assessment Order:

This ground was not specifically addressed as the issues were covered under other grounds.

7. Charging of Interest under Sections 234B and 234D:

The charging of interest was deemed consequential and mandatory, and thus upheld.

Conclusion:

The appeal was partly allowed, with significant deletions of additions made by the AO and CIT(A), establishing the genuineness of the gift and the validity of the appellant's books of accounts and commission payments.