1999 (4) TMI 134 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of Section 44AE.
2. Rejection of books of account and estimation of income.
3. Addition on account of silver articles.

Summary:

1. Applicability of Section 44AE:
The CIT (Appeals) erred in applying section 44AE to the assessee, who owns more than 10 trucks. The CIT (Appeals) concluded that while the assessee's case is not covered by section 44AE, the basis for computing income given in that section can still be applied. The CIT (Appeals) confirmed the estimation of income at Rs. 24,000 per truck per annum, stating that any other interpretation would violate Article 14 of the Constitution.

2. Rejection of Books of Account and Estimation of Income:
The Assessing Officer estimated the income at Rs. 24,000 per truck per annum, rejecting the assessee's books of account on the grounds that expenses were unverifiable. The CIT (Appeals) supported this estimation, despite the assessee maintaining that all receipts were vouched and verifiable. The Tribunal found that neither the Assessing Officer nor the CIT (Appeals) provided specific reasons or pointed out any particular unverifiable expenses. The Tribunal emphasized that the power to reject books of account must be exercised reasonably and judicially. It was noted that the assessee had maintained accounts and provided documentary evidence, which were not properly examined by the authorities. The Tribunal held that the authorities failed to give strong and sufficient reasons for rejecting the books of account and did not provide the assessee with a reasonable opportunity to explain the alleged defects. Consequently, the Tribunal concluded that the accounts of the assessee could not have been rejected, and no addition could have been made to the income returned by the assessee.

3. Addition on Account of Silver Articles:
During a search, silver articles weighing 8.440 kgs and valued at Rs. 54,707 were found. The assessee explained that these articles were partly from Pujaghar, some were not pure silver, and some were received as gifts. The Assessing Officer treated 25% of the silver articles as explained and added Rs. 41,030 to the total income for the unexplained balance. The CIT (Appeals) confirmed this addition, stating that the assessee's explanation was not supported by evidence. The Tribunal, considering the assessee's status, held that possession of 5 kgs of silver articles was fair and reasonable, and upheld the addition for the balance.

Conclusion:
The appeal was partly allowed. The Tribunal deleted the addition made by the Assessing Officer and confirmed by the CIT (Appeals) regarding the estimation of income based on section 44AE. However, the Tribunal upheld the addition on account of unexplained silver articles, considering the possession of 5 kgs of silver as reasonable.