2010 (1) TMI 905 - HC - Income Tax

Correctness of estimation of income - Assessee having failed to maintain and on demand produce before the Assessing Officer, the details pertaining to the receipts of the business, which he was legally obliged to the Assessing Officer, under section 114 of the Indian Evidence - Assessee did not bifurcate the gross income declared before the Settlement Commission head-wise by including income from his main business of plying of trucks - Held that - receipts are taken at Rs. 45,000 each in respect of 50 trucks. However, in respect of 2 trucks the receipts are taken by the assessee himself at Rs. 1,50,000 each. Thus the total receipts would workout to Rs. 25,50,000 i.e., (45,000 x 50) (1,50,000 x 2). However depreciation and interest including hire charges have to be allowed Estimate made by the Assessing Officer, based on the finding of the Income-tax Settlement Commission, as against the mere guess work of the CIT(A) - Held that - assessee used to declare additional income from all other sources apart from income from main source, i.e., plying of trucks. In that regard, reference has been made by the CIT(A) to the application filed by the assessee which shows that income from three other sources also used to be claimed namely income from consultation services to the other transporters/truck owners, income from other transporters for the help rendered to procure route permits and income from the help rendered to other transporters for running transportation business. It was on the basis of the aforesaid factors that the total income worked out by the Settlement Commission was not taken into account and, therefore, the argument raised by the revenue is devoid of merit. there cannot be any legal formula for working out the income and the Tribunal has taken correct view by adopting the opinion expressed by the CIT(A), no substantive question of law arise warranting admission of the appeal, appeal dismissed.

Summary

Issues:
1. Estimation of income per truck without books of account.
2. Justification of estimation method by the CIT(A) and the Tribunal.

Estimation of Income per Truck without Books of Account:
The case involved an appeal by the revenue challenging the order of the Tribunal regarding the estimation of income per truck for an assessee who failed to maintain and produce business receipts. The Assessing Officer estimated the income based on a Settlement Commission order for previous years. The Commissioner of Income-tax then estimated the income per truck at a different amount. The Tribunal remanded the issue to the CIT(A), who assessed the income per truck at a higher value. Both the assessee and the revenue appealed the CIT(A)'s decision. The Tribunal upheld the CIT(A)'s order, stating that without books of account, there cannot be a fixed formula for income estimation. The Tribunal dismissed both appeals, emphasizing the absence of a clear method for estimating income without proper documentation.

Justification of Estimation Method by the CIT(A) and the Tribunal:
The CIT(A) considered various factors in estimating the income per truck, including the assessee's experience in the truck business and the nature of his additional income sources. The Settlement Commission's estimation was not solely relied upon due to the assessee's declaration of income from multiple sources. The Tribunal upheld the CIT(A)'s decision, highlighting that in the absence of a specific formula, estimation of income per truck is subjective and based on various considerations. The revenue argued that the Settlement Commission's rate should have been the basis for estimation, but the Court rejected this argument, emphasizing the varied income sources declared by the assessee. The Court concluded that no substantive legal question arose for appeal, leading to the dismissal of the revenue's appeal.

This judgment clarifies the challenges in estimating income without proper documentation and highlights the subjective nature of such estimations based on various factors beyond a simple mathematical formula. The decision underscores the importance of considering all relevant aspects, including the assessee's business experience and additional income sources, in determining income per unit in the absence of concrete records.