9911796707
TMI Blog2004 (6) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment proceedings it has been noticed by the AO that the assessee has shown the gross amount received from ONGC at Rs. 23,79,301 whereas the details furnished by the ONGC authorities showed that the assessee received gross amount of Rs. 31,18,294. The explanation of the assessee before the AO is that the assessee was maintaining cash system of accounting, therefore, the amount received of Rs. 23,79,301 be considered. The books of account have not produced before the AO. Regarding the estimation of income it was the submission of the assessee before the AO that the affidavits of various jeep owners were filed to show that the assessee was deducting only 5 per cent commission. The AO rejected the explanation of the assessee with the observation that the affidavits filed by the assessee are not supported by any evidence and books of accounts have also not been produced. It has been noticed by the AO that the assessee's statement on oath was recorded on 24th July, 1990, at the time of search and seizure operation. In the statement, in reply to question No. 35, the assessee has stated that from the year 1985 to 1990 he earned undisclosed commission of Rs. 8,00,000. Further, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 on account of household expenses. The CIT(A) reduced the addition on account of commission income from Rs. 3,82,696 estimated by the AO to Rs. 2,49,464 by applying net profit rate of 8 per cent on total receipt of Rs. 31,18,294. The CIT(A) allowed the relief of Rs. 1,33,232. The second addition made by the AO on account of jeep No. 9497 of Rs. 5,000 has been confirmed. 3. In respect of investment in house property, the addition of Rs. 2,40,567 made by the AO has been reduced to the extent of Rs. 1,75,567 and relief of Rs. 65,000 was allowed. The addition, on account of household expenses Rs. 12,000 have been deleted by the CIT(A). 4. ITA Nos. 4402 (by assessee) and 4589/Ahd/1995 (by Revenue)—Asst. yr. 1989-90 The assessee submitted return of income declaring loss of Rs. 1,29,555. During the assessment proceedings, after discussion on the issue, the AO applied net profit rate at 12.5 per cent on the gross receipt from general duty of Rs. 29,80,399 and calculated net profit at Rs. 3,72,612. The AO has also determined the gross receipt from emergency duty at Rs. 24,77,926 and applied net profit rate at 21.5 per cent, accordingly calculated net profit at Rs. 5,32,754. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sum has been confirmed. 8. ITA Nos. 2802 (by assessee) and 2754/Ahd/1995 (by Revenue)—Asst. yr. 1990-91 During the assessment proceedings the AO noticed that the assessee received Rs. 47,27,235 on account of jeep on hire for general duty and on emergency duty. The AO examined the case of the assessee and a detailed discussion is made in his order. In earlier year the AO estimated commission income at the rate of 12.5 per cent in respect of general duty and 21.5 per cent in respect of emergency duty. After considering the relevant facts of the case the AO applied 20 per cent rate on Rs. 47,27,235 for both types of receipts and worked out the gross commission income at Rs. 9,45,447. After allowing Rs. 1,45,447 from gross income of Rs. 9,45,447 on account of salary, office expenses, etc., the AO estimated net income of Rs. 8,00,000. The AO further noticed that during the year total receipts of the assessee were Rs. 64,87,585; out of this sum Rs. 17,60,350 is in respect of vehicles owned by the assessee in his names or in the names of other persons. This receipt of Rs. 17,60,350 is from vehicles not owned by the assessee. The AO estimated Rs. 9,00,000 as net income after allowi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him. In the statement the assessee stated that one-half of the purchase price of the land, i.e., Rs. 33,500 was paid by him and the balance was paid by his brother. On perusal of capital account filed along with the return of income the CIT(A) noticed that a sum of Rs. 33,500 was debited to the capital account. In this circumstance the CIT(A) observed that the AO was not justified in making the addition of Rs. 33,500. 11. ITA No. 985/1996 (by assessee) and 1223/1995 (by Revenue)—Asst. yr. 1991-92 The assessee has filed return of income for asst. yr. 1991-92 declaring income of Rs. 1,19,130. The AO made the estimate of income from other parties' vehicles for Rs. 17,13,093 by applying 20 per cent rate of profit on receipt of Rs. 85,65,467. The AO discussed the issue in his order and noticed that during the year under consideration the total receipt was Rs. 1,61,00,973. He further noticed that the receipt from others' vehicles was of Rs. 85,65,467 while the receipts from his own jeeps was Rs. 14,96,506. It has also been noticed by the AO that the commission income from above gross receipt should be Rs. 8,56,546 whereas the assessee has accounted for only Rs. 4,28,273. Thus, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credits are bogus cash credits. It has also been stated by the AO in his order that the penalty has also been initiated for the contravention of s. 269SS. 16. Another addition made by the AO is Rs. 17,17,500 on account of disclosure during the course of search. The AO made the said addition with the following observations: "Q-35. Explained the provisions of s. 271(1)(c), Expln. 5 of the IT Act. Accordingly, you can disclose your income under voluntary disclosure and you will be exempted from penal action if you want to avail the benefit of said scheme. A-35: Yes, I disclose the following incomes: Rs. (2) Unaccounted investment in house 2,89,000 (3) Unaccounted investment in furniture 25,000 (4) Unaccounted investment in land (plot) 33,500 (5) Margin money in jeeps 5,00,000 (6) Unaccounted investment in Charada house 70,000 Total 17,17,500" The AO has also made addition of Rs. 11,334 as income from other sources. While making assessment the AO had taken Rs. 4,28,453 as profit from the P L a/c of the assessee. 17. The CIT(A) after considering the submission of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Rs. 1,19,482 as against profit of Rs. 4,28,453 taken by the AO. 19. ITA No. 986/Ahd/1996—Asst. yr. 1992-93—By assessee ITA No. 1224/Ahd/1996—Asst. yr. 1992-93—By Revenue The assessee filed return of income declaring total income of Rs. 2,29,390. On the basis of earlier assessment year the AO rejected the books of account maintained by the assessee. It has been observed by the AO that the assessee did not maintain proper books of account and voucher, etc. The AO found that provisions of s. 145 of the Act are clearly applicable in the case of the assessee. After rejecting the books of account the AO applied 20 per cent of the gross receipt of Rs. 80,84,241 of which calculation comes to Rs. 16,16,848. The AO accordingly estimated this income on account of other parties' vehicles. Similarly, for the purpose of estimation of income from own vehicles the AO applied 50 per cent of the profit rate on gross receipt of Rs. 17,07,165 of which calculation comes to Rs. 8,53,582. The AO accordingly estimated Rs. 8,53,582 being profit from hiring of own vehicles subject to depreciation. The AO accordingly allowed depreciation of Rs. 3,87,180 as claimed by the assessee. In addition to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submission made by the appellant. It is seen that the proper vouchers regarding the expenses claimed have not been maintained and many of the expenses are not vouched at all. The facts of the case are similar to that mentioned in my orders for the asst. yrs. 1986-87 to 1990-91 in the appellant's case. The explanation submitted by the appellant does not fully explain the sharp increase in the percentage of expenses claimed to the gross receipts from 64.2 per cent allowed last year to 89.2 per cent claimed this year. Therefore, considering the facts of the case, expenses to the extent of Rs. 2.5 lakhs are disallowed out of expenses of Rs. 15,21,948 claimed by the appellant. Thus, expenses to the extent of Rs. 12,71,948 are allowed as against Rs. 17,07,165 claimed. Hence, the net income before allowing the depreciation from the vehicles owned by the appellant comes to Rs. 17,07,165 - Rs. 12,71,948, i.e., Rs. 4,35,217 as against Rs. 8,53,582 assessed by the AO. Thus, relief of Rs. 4,18,365 (Rs. 8,53,582 - 4,35,217) is allowed." 21. In respect of addition on account of cash credits the CIT(A) deleted the said addition with the following observations: "I have considered the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 145(2) of the IT Act. The AO estimated the income of the assessee as under: "In earlier years commission income has been adopted at 20 per cent. As the facts and circumstances of the case are similar and identical, 20 per cent commission income on the gross receipts of Rs. 86,87,454 is adopted which comes to Rs. 17,37,490. In earlier years 50 per cent income has been estimated on the receipts of his own jeeps. As the facts of the case are similar and identical 50 per cent profit is estimated on Rs. 17,37,490. The profit on his own vehicles comes to Rs. 8,11,128. Subject to the above remarks, total income is worked out as under: Rs. Commission income as discussed above 17,37,490 Business income on his own vehicle as discussed above 8,11,128 25,48,618 Less : Deprn. as per statement 3,98,727 Net taxable income 21,49,897" The CIT(A) after considering the submission of the assessee held that the AO was justified in rejecting books of account and in invoking s. 145 of the IT Act. The CIT(A) followed the earlier years' orders for asst. yrs. 1990-91, 1991-92 and 1992-93, and accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion also to determine the net profit before allowing the depreciation at 25.5 per cent of the following receipts from the vehicles belonging to himself shown by the appellant: (i) Jeep hire charges (i) Jeep hire charges Rs. 15,75,541 (ii) Car hire charges Rs. 46,716 (iii) Mini bus hiring charges Rs. 2,43,860 Rs. 18,66,117 Thus, the net profit before allowing the depreciation is 25.5 per cent of Rs. 18,66,117, i.e., Rs. 4,75,860. Therefore, the net profit before allowing the depreciation from the vehicles belonging to the appellant is determined at Rs. 4,75,860, as against Rs. 8,11,128 taken by the AO. Thus, the relief of Rs. 3,35,268 (Rs. 8,11,128 - Rs. 4,75,860) is allowed. In view of the discussion made above, the total income of the appellant is determined as under: Rs. Rs. (i) Net commission income from hire of vehicles belonging to others 6,94,996 (ii) Net income before allowing depreciation from the vehicles belonging to the appellant himself 4,75,860 Less : Depreciation allowed by the AO 3,98,727 77,123 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at this fact of 5 per cent commission has been admitted by different jeep owners in their affidavits. The bill received from ONGC, Ankleshwar project, the assessee deducted at 5 per cent commission. 25. The other submission of the learned Authorised Representative is that the estimation of income in case of assessee is own vehicles. The assessee is separately entitled for depreciation in case where the income is estimated by applying a net profit rate. In support of this contention, the learned Authorised Representative relied upon the order of the Tribunal, Jodhpur Bench, in the case of Ansari Builders vs. ITO (2000) 66 TTJ (Jd) 902. He has also relied upon the judgment of Hon'ble Rajasthan High Court in the case of CIT vs. Jain Construction Co. (1999) 156 CTR (Raj) 290. The learned Authorised Representative while concluding his submissions contended that the income sustained by the CIT(A) is on higher side. The assessee is an illiterate person having no corroborate assets and investments which justify such higher estimation of income sustained by the CIT(A). It is also the submission of the learned Authorised Representative that on identical set of facts in case of partnership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds of the appeal of Revenue and urged that on these grounds the orders of the AO be restored. 27. We have considered the rival submissions of the parties, perused the record and gone through the decisions cited before us. There was a search and seizure under s. 132 on 24th July, 1990. The assessee is engaged in the business of giving jeeps and taxis of own and others on hire to ONGC authorities at Ankleshwar. During the course of search the statement of the assessee was recorded under s. 132(4). The assessee made a disclosure of Rs. 17,17,500 pursuant to Expln. 5 to s. 271(1)(c) of the IT Act. The relevant question No. 35 and reply to it by the assessee are reproduced in para No. 16 of this order. The AO has invoked s. 145 and rejected the books of account. This action of the AO has been confirmed by the CIT(A). The assessee has failed to submit any material, evidence or convincing reasons that the finding of the lower authorities on this issue is incorrect. We have also noticed that the assessee did not maintain proper books of account and has also not followed a correct method of accounting on which basis the income of the assessee in above years can be ascertained. In a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission of the learned Authorised Representative that 5 per cent net profit be applied is reasonable or not. The disclosure made at the time of search is consolidated one for asst. yrs. 1986-87 to 1991-92 (upto the date of search 24th July, 1990). The details of bifurcation of this disclosure for different years have not been given, so the disclosure is to be seen accordingly and as per finding given by us as above. Since the disclosure is for asst. yrs. 1986-87 to 1990-91, therefore, it is useful to refer some data of income estimated by AO, sustained by the CIT(A) and after the order of the Tribunal of earlier years, which are as under: Asst. yr. By assessee (Rs.) By AO (Rs.) By CIT(A) (Rs.) After the order of Tribunal (Rs.) 1986-87 --- --- --- 79,155 1987-88 --- --- --- 1,83,700 1988-89 1,18,965 6,40,263 4,30,031 --- 1989-90 (-) 1,29,555 7,41,223 5,43,132 --- 1990-91 74,630 19,83,500 4,57,260 --- 1991-92* 29,545 44,38,328 13,40,553 --- Total 2,62,85 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in mind the above discussions and looking to the nature of business of the assessee, we find that net profit rate in such business is not more than 5 per cent. If the assessee maintained proper books of account and after claiming depreciation, this 5 per cent net profit rate might not been have possible. However, to cover other deficiencies/aspects/facts and inclusion of current years profit we find that it will be fair and reasonable to both sides if 6 per cent net profit is to apply on the turnover determined by the AO. The AO is directed accordingly. It is pertinent to mention that we directed for net profit rate which will cover all allowable expenses including depreciation and interest, etc. for which no separate deduction is to be allowed by the AO. Further, no separate addition is required for vehicles own by assessee and vehicles of others and income from car for asst. yr. 1989-90, jeep for asst. yr. 1988-89 as the total turnover of those vehicles has been considered in total turnover. 28. Now, we examine yearwise other grounds of appeal as under: Asst. yr. 1988-89: The AO made addition of Rs. 5,000 on account of jeep which has been sustained by CIT(A). Since the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the balance sheet for the asst. yr. 1989-90 does reflect the value of two cars, but the appellant had claimed depreciation on one car only in the asst. yr. 1989-90. While filing the return of income for the asst. yr. 1990-91, the appellant has claimed depreciation on the cost of one car plus WDV of the other car reduced by the sale proceeds of one car. Hence, the depreciation has been claimed as per provisions of the IT Act. The addition of Rs. 60,000 made by the AO is not justified and the same is deleted." 32. We find that the AO has not properly appreciated the facts and the issue. The CIT(A) has deleted the addition after proper appreciation of facts, against which the Revenue has not pointed out any material. Under the circumstances we do not find any error in the order of the CIT(A). We, therefore, confirm the order of the CIT(A) on this issue. 33. The next addition is of Rs. 1,20,000. The addition made by the AO on account of margin money has been deleted by the CIT(A) with the following observations: "I have considered the facts of the case and the submission made by the appellant. Considering the facts that the banks normally do not give 100 per cent loan amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not pointed out any contrary material to the finding of the CIT(A). Under the circumstances we find that the assessee has shown his share of investment by debiting capital account. Therefore, we do not find any infirmity in the order of the CIT(A). Therefore, the order of the CIT(A) is confirmed on this issue. 36. Asst. yrs. 1991-92 and 1992-93: (1) The additions of Rs. 1,40,000 for 1991-92, Rs. 1,03,000 and Rs. 2,00,000 for asst. yr. 1992-93 made by the AO under s. 68 have been deleted by the CIT(A) on the ground that estimated income exceeds the income declared by the assessee, so after allowing benefit of telescoping no separate addition is required. We have directed the AO to estimate the profit from business by applying 6 per cent net profit rate, whether the impugned addition is covered by the benefit of telescoping or not, requires fresh calculation. On principle, we agree with the CIT(A) but for the purpose of calculation, we are sending back this issue to the file of AO for his calculation. If the AO finds that the addition is not covered by telescoping benefit of additions in the past years' income as well for the current year, he is at liberty to decide the is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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