2014 (12) TMI 557 - AT - Income Tax

Gross receipts is to cover up undisclosed deposits or not - Commission from transport - Admission of new evidence admitting and entertaining new evidence of P&L account - Held that - CIT(A) correctly found that the assessee is owner of two tankers - Copies of registration certificates are filed in the paper book and the assessee is earning income by way of running of vehicles on commission basis - CIT(A) on looking to the nature of entries of cash deposits and withdrawals found in the bank account of the assessee maintained with ICICI bank held that the entire amount of deposit made in the bank account cannot be said to be unexplained because after deposit of the cash amounts, there are withdrawals - Since the assessee is in the business of transportation, the explanation of the assessee could not be refused that such deposits have been made out of transport business income - CIT(A) in the absence of any material on record taken the gross receipts which are more than the deposits made in the bank account - CIT(A) taken the gross receipts more than declared by the assessee in the return of income and even the AO has admitted in the assessment order that there are deposits as well as withdrawals in the bank account of the assessee - in the absence of any other source of income, the CIT(A) was justified in holding that the entire amount of deposit in the bank account could not be treated as unexplained - The cash deposit was correctly found to be explained out of receipts of the assessee from transport business - CIT(A) considered the bank account of the assessee and the registration certificates and computation of income filed with the return of income for the purpose of passing the appellate order - there is nothing illegality in his order in reducing the addition Decided against revenue.

Summary

Issues Involved:
1. Admission and consideration of new evidence by the CIT(A).
2. Acceptance of gross receipts shown in new evidence.
3. Acceptance of another source of income (commission from transport) not declared in the return of income.

Detailed Analysis:

Issue 1: Admission and Consideration of New Evidence by the CIT(A)
The Revenue contended that the CIT(A) erred in law and on facts by admitting and entertaining new evidence, specifically the Profit & Loss (P&L) account produced during appellate proceedings, which showed gross receipts of Rs. 18,40,000. The Revenue argued that this was an afterthought to cover up undisclosed deposits of Rs. 11,76,457. The CIT(A) initially rejected the request for admission of additional evidence under Rule 46A, as no reasons were provided for non-production before the Assessing Officer (AO). However, the CIT(A) accepted the explanation that the cash deposits in the bank account were from transportation business receipts, and substantial addition was deleted based on this explanation.

Issue 2: Acceptance of Gross Receipts Shown in New Evidence
The CIT(A) accepted the gross receipts of Rs. 18,40,000 shown in the new evidence, despite the assessee originally declaring gross receipts of Rs. 8,40,000 in the return of income. The CIT(A) found that the assessee did not maintain complete books of account and that the income was not computed as per Section 44AE. The CIT(A) rejected the P&L account under Rule 46A but used the gross receipts figure to explain the cash deposits, determining that the deposits were from the transport business. The CIT(A) estimated the income by applying a higher profit rate of 14.28%, leading to an assessed income of Rs. 2,62,752, thereby granting the assessee relief of Rs. 10,33,705.

Issue 3: Acceptance of Another Source of Income (Commission from Transport)
The CIT(A) accepted that the assessee was earning income from running vehicles on a commission basis, in addition to owning two tankers. This was not declared in the return of income, where only transportation income was shown. The CIT(A) found that the assessee's explanation for the cash deposits being from transport business was reasonable, given the nature of entries in the bank account and the absence of any other source of income. The CIT(A) concluded that the entire amount of deposits could not be treated as unexplained and that the deposits were from the transport business.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal. The Tribunal found no merit in the departmental appeal, noting that the CIT(A) did not admit any new evidence but rather considered the existing bank account, registration certificates, and computation of income filed with the return of income. The Tribunal agreed with the CIT(A)'s estimation of income and the explanation that the cash deposits were from the transport business. The appeal was dismissed, and the CIT(A)'s order was affirmed.