2022 (9) TMI 648 - AT - Income Tax

Estimation of income - garnered transportation receipts - Applicability u/s 44AD for receipts on account of truck plying business - sustainability of the assessee s claim of having garnered a sum from his transportation business i.e, plying of five heavy goods vehicles - assessee had failed to produce the agreements with parties for whom work was claimed to have been executed, assessee had failed to furnish details of expenses incurred in the course of his transportation business and claim of the assessee of having garnered gross receipts from plying of five trucks during the year was beyond comprehension - HELD THAT - We would not hesitate to observe that the claim of the assessee of having garnered gross receipts from plying of five heavy goods vehicles during the year (majority of which were put to use only for part of the year) is beyond our comprehension. In so far the gross receipts as had figured in the assessee s Form No. 26AS i.e against the parties referred at Sr. No. 3 to 7 of the aforesaid chart are concerned, we are of the considered view that there was no justification on the part of the AO to have summarily rejected the same. We, thus, direct the AO to accept the assessee s claim of having garnered gross receipts in lieu of transportation services provided to the aforementioned parties and thus accept his income as disclosed u/s 44AE to the said extent. Garnered transportation receipts from M/s Coal Feeder, Raipur - As a word of caution, we may herein observe that the AO shall in the course of the set-aside proceedings not remain oblivion of the probability of existence of an unholy nexus between a coal trader/transport contractor and a small time transporter/subcontractor (owning less than ten heavy goods vehicles), pursuant whereto on the basis of such connivance a bogus claim of freight expenses raised by the coal trader/transport contractor in the garb of payment of transport charges to such small time transporter/sub-contractor (owning less than ten heavy goods vehicles) who had opted to be assessed at a fixed deemed amount on a per vehicle basis as per the deeming provisions contemplated u/s 44AE the exchequer would be divested of its legal dues. If in case the assessee is unable to substantiate his claim of having garnered transportation receipts, as claimed, from M/s Coal feeder, Raipur to the satisfaction of the AO, then, the estimation of his income as worked out by the AO i.e @8% of the gross receipts under consideration i.e Rs. 3,09,93,450/- shall be sustained. On the other hand to the extent the assessee is able to substantiate his claim of having garnered amount from plying of his five heavy goods vehicles for/on behalf of the aforesaid party, viz. M/s Coal feeder, Raipur, the amount to the said extent shall be excluded by the AO from Rs. 3,09,93,450/- (supra) for estimating his income i.e @8%. As regards the balance amount of Rs.53,88,774/-(supra) for which no explanation as regards the service recipient/payer had been given by the assessee, we finding no infirmity in the estimation of income as regards the said amount @8%, thus, uphold the same to the said extent. The Ground of appeal No. 2 is partly allowed/allowed for statistical purposes in terms of our aforesaid observations.

Issues Involved:
1. Jurisdiction under Section 147.
2. Applicability of Section 44AD for receipts from truck plying business.
3. Issuance of notice under Section 148.
4. Grounds of appeal addition, alteration, and modification.

Detailed Analysis:

1. Jurisdiction under Section 147:
The assessee did not press this ground of appeal. Consequently, it was dismissed as not pressed.

2. Applicability of Section 44AD for Receipts from Truck Plying Business:
The assessee had claimed income from two streams of business: plying of five heavy goods vehicles under Section 44AE and booking of transport work under Section 44AD. The assessee argued that since he opted for the presumptive taxation schemes under Sections 44AD and 44AE, the income disclosed should be accepted without any further scrutiny. However, the AO observed discrepancies such as the failure to furnish copies of agreements, absence of expense records, and the implausibility of garnering Rs. 3.91 crore from five trucks. The AO estimated the income at Rs. 31,29,418, i.e., 8% of the gross receipts of Rs. 3,91,17,728.

3. Issuance of Notice under Section 148:
The assessee did not press this ground of appeal. Consequently, it was dismissed as not pressed.

4. Grounds of Appeal Addition, Alteration, and Modification:
This ground was dismissed as not pressed.

Detailed Observations:

Transportation Receipts and Bank Deposits:
The AO noted deposits of Rs. 3,91,17,728 in the assessee's bank accounts. The assessee claimed these were business receipts from transportation and coal lifting contracts. The AO found the claim of Rs. 3,82,69,760 from plying five trucks implausible, especially given the lack of supporting documents and agreements.

Income Estimation:
The AO estimated the income at 8% of the gross receipts due to the lack of supporting evidence. The Tribunal observed that while the assessee disclosed higher income under Section 44AE, the claim of earning Rs. 3,82,69,760 from five trucks was beyond comprehension. The Tribunal directed the AO to verify the claim of Rs. 3,09,93,450 from M/s Coal Feeder, Raipur, and take appropriate action. The Tribunal accepted the transportation receipts of Rs. 18,87,536 as per Form 26AS and directed the AO to vacate the addition. The Tribunal upheld the AO's estimation of income for the unexplained amount of Rs. 53,88,774 at 8%.

Final Directions:
The Tribunal directed the AO to verify the claim of Rs. 3,09,93,450 from M/s Coal Feeder, Raipur, and take appropriate action based on the findings. The Tribunal allowed the appeal partly for statistical purposes, directing the AO to accept the transportation receipts of Rs. 18,87,536 and sustain the estimation of income for the unexplained amount of Rs. 53,88,774 at 8%.

Conclusion:
The appeal was partly allowed for statistical purposes, with specific directions for verification and appropriate action by the AO. The Tribunal emphasized the need for proper documentation and verification in cases involving substantial claims under presumptive taxation schemes.

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