TMI Blog1999 (4) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... s and payment of interest. The income works out to Rs. 6,10,208 and after-considering depreciation on trucks and payment of interest as claimed by the assessee the net income works out to Rs. 35,658 from 14 trucks. The Assessing Officer came to the conclusion that only the gross receipts received from M/s. Bombay Goods Transport Garrage, Nagpur are verifiable and the expenses shown by the assessee are totally unverifiable as no other supporting documents/vouchers are maintained. According to him, it cannot be said that the assessee has maintained any books of account. He, therefore, estimated the net income truck plying business at the rate of Rs. 24,000 per truck per annum totalling to Rs. 3,36,000 as against Rs. 35,658 shown by the assessee. 3. Before the CIT (Appeals) it was submitted that since the assessee has maintained more than 10 trucks, provisions of section 44AE are not attracted and income cannot be computed by taking a resort to that section. It was also submitted that the assessee has maintained books of account and details of expenses were given to the Assessing Officer and that it was because of heavy interest liability and benefit of 40 per cent depreciation that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e admittedly vouched and are verifiable. He further submitted that the Assessing Officer did not verify the expenses although vouchers were available as per paras 10 and 11 of the assessee's submission placed at page 2 of the paper book. He also invited out attention to assessee's note placed at page 5 of PB and assessee's letter to Assessing Officer placed at page 7 of PB and submitted that the assessee has maintained accounts, but no attempt was ever made to examine the accounts and verify the expenses. The representative of the assessee reiterated before us as well that the assessment in past assessment years, i.e., 1992-93 and 1993-94 were completed after search and returned income was accepted and that the assessee has shown better results for assessment year 1994-95. It was further submitted that the CIT (Appeals) was unduly influenced by the Assessing Officer's oral remark that the assessee was unco-operative and for that neither the record nor the assessment order speaks of it. He invited our attention to para 2 of the CIT (Appeals)' order and contended that the Department has taken contradictory stand as on one hand the CIT (Appeals) has mentioned that the books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliance is placed by the learned counsel for the assessee. 10. This is a search and seizure case and while making assessment the Assessing Officer has admittedly issued notices under section 142(1) and 143(2) and he has also mentioned the compliance thereof by the assessee, as it is evident from para 2 of the assessment order. The Assessing Officer has estimated the income on the ground that the expenses are unverifiable and it cannot be said that the assessee has maintained any books of account. Thus he has denied the maintenance of the books of account itself. As contrary to that, the CIT (Appeals) has mentioned in his order that the books of account and documents were seized in the course of search and seizure operation. We find that to that extent the assessee's contention is correct. The CIT (Appeals) has also pointed out that according to the Assessing Officer regular books of account were not maintained. This simply means that books of account were maintained. He has further observed that the accounts are not correct and complete as they are not properly maintained and as only gross receipts are verifiable. Thus the CIT (Appeals) has accepted the maintenance and existence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. It is noticed that inspite of all these submissions made by the assessee neither the Assessing Officer nor the CIT (Appeals) has pointed out as to how the expenses are not verifiable, which expenses are not verifiable and how the books of account maintained by the assessee are not correct and complete or not properly maintained. In our opinion, it was a statutory duty of the Assessing Officer and the CIT (Appeals) to examine the method of accounting employed by the assessee and (i) to see whether or not it is regularly employed and (ii) to determine whether the income or profit or gains of the assessee can properly be deduced therefrom. It is settled principle that the power of rejection of books of account is to be reasonably and judicially exercised. But in this case we find that this had not been done so. 13. It is also pertinent to note that the authorities below have failed to give strong and sufficient reasons to indicate that the books of account of the assessee are unreliable, incorrect and incomplete before rejecting the same. They have also not given reasonable opportunity to the assessee of being heard and for offering explanation regarding defects in the accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly deduced therefrom, the accounts of the assessee could not be rejected and no addition could be made to the income returned by the assessee." 14. On merit also we find that neither the Assessing Officer nor the CIT (Appeals) has pointed out any particular item of expenditure which is not vouched. In the light of claim of the assessee before the authorities below in writing that the assessee has maintained books of account this year and is also in possession of all documentary evidence to support his income and expenditure, it was the bounded duty of the Assessing Officer and the CIT (Appeals) to verify and indicate the particulars of expenditure which were not vouched. In that case also it would have been a good case for separate addition and not for rejection of books of account. Our view is duly supported by following decision: (1) In the case of R.B. Jessaram Fatehchand v. CIT [1970] 75 ITR 33 (Bom.) where addresses of purchases were not shown in the case of cash transaction and books of account were rejected, the Hon'ble Bombay High Court held: "In our opinion, the assessee's account books are to be accepted, unless, on verification, they disclosed any faults or defect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Act, 1961; it was a case under the provisions of the proviso to sub-section (1) of section 145. Once, therefore, the method of accounting employed by the assessee has been regularly employed and income, profits and gains could properly be deduced from such regularly employed method of accounting, that is the end of the matter for the purpose of the proviso to sub-section (1) of section 145. There was no finding with present case that any of the entries in the books of account was not correct, there was no finding that the assessee was not employing a method of accounting and there was no finding that such a method of accounting had been irregularly employed by the assessee. In the absence of such finding, there being no reason germane to the unacceptability of the book results, it had to be held that the Tribunal and the authorities below had no materials before them, on the basis of which it could be said that the trading results were not verifiable and that, therefore, they should not be accepted, nor was it their case that the trading results could not be deduced from the entries of the books of account regularly employed. Consequently, the assessment made in pursuance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order for assessment year 1992-93 placed at page 10 to 12 of PB we find that the income disclosed by the assessee is accepted by the Department. It is also on served that the assessee has shown comparatively better results than the results shown in assessment years 1992-93 and 1993-94 which are accepted by the Department. This is also not a case of the Department that any incriminating books of account and documents or materials were found in the course of the search and, therefore, the conclusion arrived at by them is based on any such material. As no material was found in the course of search to suggest the higher income and as better results are shown in this year on the basis of books of account maintained, the action of the authorities below for estimating higher income cannot be justified. 18. In his order the CIT (Appeals) has stated that the returned income of last two assessment years was accepted because provision of section 44AE were then not operative. While commenting in such a manner the CIT (Appeals) has contradicted himself. In the beginning of para 3 of his order on one hand he has mentioned that since the assessee derives income from more than 14 trucks h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 10 trucks, provisions of section 44AE are not applicable. Provisions of section 44AE are not mandatory as claimed by the Department. Thus applicability is subject to provisions of sub-section (6), which says if the evidence is produced, book results are to be accept. Moreover, the CIT (Appeals) is not competent to comment on legislative intents and has no jurisdiction to interpret the Act as firstly he is a creature of the Act and secondly there is no ambiguity in the statutory provisions. 21. In the case of Keshavji Ravji Co. the Hon'ble Supreme Court has held as under: "As long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible. The supposed intention of the Legislature cannot then be appealed to whittle down the statutory language which is otherwise unambiguous." According to the ratio of this decision the interpretation of legislative intent is not permissible as statutory provisions under section 44AE are unambiguous. 21.1 Then the CIT (Appeals) says that any interpretation other than his own is in violation of Article 14 of the Constitution which guarantees equality before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition is deleted. 26.1 Ground Nos. 2 and 3 relate to the addition of Rs. 41,030 on account of silver. During the course of search silver articles weighing 8.440 kgs. valuing Rs. 54,707 was found. Assessee's explanation was that the silver articles represent partly articles of Pujaghar some are not pure silver and some are received as gifts by assessee, his wife and children from time to time on different occasions. According to the Assessing Officer these articles are not shown in the assessee's wealth statement on 31st March, 1993. He, therefore, considered the status of the assessee and other factors and treated 25 per cent of silver articles as explained and for balance he added Rs. 41,030 to the total income of the assessee. 27. Before the CIT (Appeals) the assessee raised the same arguments which were put forth before the Assessing Officer. The CIT (Appeals) confirmed the addition as the explanation of the assessee was not supported by any evidence and the relief given by the Assessing Officer was quite reasonable. 28. Learned counsel for the assessee submitted that looking to the statuts of the assessee having more than 14 trucks etc. the possession of 8 kgs. of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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