2018 (12) TMI 1314 - AT - Income Tax

Entitlement to expenses against the undisclosed receipts of truck - addition made by the AO on account of freight of truck owned by the assessee - whether only the profits embedded and not the whole of gross receipts are taxable? - Held that - It would be, under the circumstances, incorrect to say that the assessee has not been allowed any expenditure against the said receipt, but only that the same to the extent admissible, stands already claimed and allowed as a part of regular business expenditure. There is no need or occasion to, under the circumstances, engage in any estimation exercise. The case law relied upon, even as indicated above, is distinguishable. Why, as observed by the Bench during hearing, the depreciation claim itself works to about 10% of the gross freight. The claim for TDS, deductible at 2%, and not paid to the assessee but to the Central Government, has been already allowed. To conclude, no evidence in support thereof being adduced at any stage, the assessee s claims, both as regards the incurring of expenditure over and above that allowed, as well as the source thereof, remain unproved, if not disproved; the assessee, by all available accounts, having been already allowed his claim for the relevant expenditure against his undisclosed receipt, which appears to be arising to him regularly and in the normal course of his business, though kept outside books. The assessee s case, being wholly unsubstantiated and presumptuous, has thus rightly been not accepted by the Revenue. The matter being otherwise wholly factual, the assessee s reliance on the decisions supra, including on his own case for AY 2011-12, which stands already met, to no rebuttal and, in fact, a tacit admission of its inapplicability by the ld. counsel, would be of no consequence - no infirmity in the Revenue s case or reason to interfere and, accordingly, uphold the impugned order - decided against assessee

Summary

Issues Involved:
1. Confirmation of additions made by the Assessing Officer (AO) on account of undisclosed freight receipts.
2. Deduction of expenses against undisclosed income.
3. Adjudication of disallowance of narma labor and miscellaneous expenses.

Issue-Wise Detailed Analysis:

1. Confirmation of Additions on Account of Undisclosed Freight Receipts:

The primary issue in the appeal is the confirmation of additions amounting to ?15,09,609/- made by the AO on account of freight receipts not disclosed by the assessee. The assessee, engaged in the business of ginning cotton, was found to have received freight charges which were not reflected in the final accounts or disclosed in the return of income. The AO, upon discovering this discrepancy, added the entire amount to the taxable income, noting that the assessee failed to provide evidence for any expenses incurred against these receipts. The CIT(A) upheld this addition, emphasizing that the assessee did not furnish any evidence to support the claim of incurring expenses for earning the said income.

2. Deduction of Expenses Against Undisclosed Income:

The assessee argued that only the net income, i.e., gross receipts less expenses, should be taxed. However, the AO and CIT(A) found that the assessee did not provide any evidence of expenses incurred, such as fuel, salary to drivers, or maintenance costs. The CIT(A) also noted that the assessee had already claimed significant expenses under various heads, including salary, interest, machinery repair, and diesel expenses, in the regular accounts. Therefore, any further claim would amount to a double deduction. The Tribunal observed that the assessee failed to substantiate the claim with any evidence and that the expenditure claimed might have already been included in the regular business expenses. As such, the Tribunal upheld the CIT(A)'s decision, noting that the assessee's argument, while valid in principle, failed on factual grounds.

3. Adjudication of Disallowance of Narma Labor and Miscellaneous Expenses:

The assessee raised additional grounds regarding the disallowance of narma labor and miscellaneous expenses, which were not adjudicated by the CIT(A). The Tribunal noted that there was no record showing these grounds were pressed before the CIT(A) but gave the benefit of the doubt to the assessee. It directed the CIT(A) to adjudicate these grounds on merits after allowing the assessee a reasonable opportunity to be heard.

Conclusion:

The Tribunal dismissed the assessee's appeal regarding the addition of undisclosed freight receipts and the deduction of expenses against such receipts, upholding the CIT(A)'s order. However, it directed the CIT(A) to adjudicate the disallowance of narma labor and miscellaneous expenses. The appeal was partly allowed for statistical purposes.