2012 (5) TMI 121 - HC - Income Tax

Invoking section 56(1)- Addition made by the AO on a/c of excess generation of income by assessee Held that - As section 44AE providing for a method of estimating income from the business of plying, hiring or leasing trucks owned by a taxpayer has been held to be applicable, the CIT(A) and the Tribunal were justified in deleting the additions made holding that it cannot be treated as income from other sources - only ground for making the addition that the assessee was not able to explain the discrepancies in the account-books cannot be ground for making addition as income from other sources - Income, if it is changeable to tax under any heads specified in Section 14, item A to E, it cannot be changed as income from other sources - thus the addition made by the AO due to increase in the capital cannot be taxed under Section 56 as income from other sources as the accretion in the capital is relatable to profit from transport business of the assessee

Summary

Issues:
Challenging the order of the Income Tax Appellate Tribunal regarding deletion of addition made on account of excess generation of income under Section 56(1) of the Act without explaining the source and nature of capital generation.

Analysis:
The case involved a challenge to an order passed by the Income Tax Appellate Tribunal regarding the deletion of an addition made on account of excess generation of income by invoking Section 56(1) of the Income Tax Act. The petitioner, a proprietor of a freight carrier company, disclosed income under Section 44AE of the Act, claiming to possess only eight trucks. The Assessing Officer made additions to the income, questioning the source of daily expenses and rejecting the plea under Section 44AE. The CIT(A) partly allowed the appeal, which was further taken to the Tribunal by the department. The Tribunal dismissed the appeal, leading to the present challenge.

The key contention revolved around the applicability of Section 44AE of the Act, which provides a special provision for computing profits from business of goods carriages. The section deems the income of an assessee owning up to ten goods carriages to be the aggregate of profits from all carriages owned, calculated as per the provisions. The legislative intent behind the section is to charge tax on presumptive income, as clarified in a departmental circular.

The Court emphasized that the purpose of such provisions like Section 44AE is to facilitate hassle-free assessments for eligible taxpayers without the need for extensive probing, provided conditions are met. The presumptive income, whether less or more, is taxable, and the assessee is not required to maintain account books. Therefore, even if the actual income exceeds the calculated income under Section 44AE, it cannot be taxed.

Furthermore, the Court rejected the argument of the revenue to justify the addition under Section 56 as income from other sources. It clarified that if income falls under specified heads in Section 14, it cannot be taxed as income from other sources. In this case, the addition made by the Assessing Officer due to increased capital could not be taxed under Section 56 as income from other sources, as it was related to the profit from the transport business.

Ultimately, the Court held that since Section 44AE was applicable, the additions made by the Assessing Officer were rightly deleted by the CIT(A) and the Tribunal. The Assessing Officer's failure to provide any other head of income for the assessee, coupled with the nature of the addition, led to the dismissal of the appeal without finding any substantial question of law involved.