Brief Facts of the Case
The assessee is engaged in carrying on transport business in the name of M/s.Chandan Carrier. On enquiry, the AO found that Shri Nilesh Shah, owner of the M/s Nilesh Shah, did not own any truck for its transportation business. The business premise of Shri Nilesh Shah was owned by Shri Hasmukh M. Shah, father of the assessee, for which no rent was paid by M/s. Chandan Carrier.
Further inquiry from HDFC Bank revealed that the assessee was the authorized signatory, power of attorney holder and mandate holder in the case of M/s. Chandan Carrier. The business activity of M/s.Chandan Carrier was limited to movement of truck/tankers owned by the assessee. Therefore, the AO held that the assessee has adopted colourful device to avoid taxes by diverting the income in the name of other party. The AO observed that during the year, Shri Nilesh J. Shah has shown income amounting to Rs.1,07,890/- and the same was added to the total income of the assessee.
Question of Law
Whether any separate addition can be made to the income once return is filed and income is assessed under section 44AE?
Contention of the Assessee
The assessee submitted that the assessee was carrying on business of transaction till January, 2005 and Shri Nilesh Shah was handling the tankers of the assessee, and was paid handling charges. From January, 2005, the assessee decided to close the transportation business and started agricultural operations.
However, Shri Nilesh Shah, who was brother-in-law of the assessee, insisted on the assessee not to sell of all tankers, but to give all tankers to him for plying the same for his transportation business, and that is why all tankers from January, 2005 were given to brother-in-law of the assessee, Shri Nilesh Shah for running transportation business in his proprietary concern, Chandan Carriers.
All tankers were lying in the plot of father of the assessee, H.M. Shah, who is having own proprietary firm, M/s.Shah Carriers for his transportation business. As all tankers lying in the plot of H.M. Shah, due to his poor financial conditions, Shri Nilesh Shah has not given any rent to H.M. Shah.
Shri Nilesh Shah is brother-in-law of the assessee, and gave authorization in the bank only to safeguard his interest in his business, if any cheque is required to be signed and given to any person in his absence.
Without prejudice to the above, the assessee submitted that he has offered income of Rs,2,01,000/- under section 44AE of the Act in the revised return of income filed on 17.3.2008. It was submitted that once income was already considered and assessed by the AO u/s.44AE for his transportation income, no separate addition is required to be made, which was otherwise tantamount to double taxation, which was not permissible under the Act.
Contention of the Revenue
The Department submitted that assessee’s contention that all the papers were in his name, and he was signing the cheque only to help his brother-in law is a spacious agreement. He has not produced any evidence to establish that his brother in law was not legally competent to carry on business in his name. There is no reason to believe that apparent is not real.
Held by the ITAT
The contention of the assessee is that he has shown income from truck under section 44AE of Rs. 2,01,000/- which includes income of Rs.1,07,890/- from M/s. Chandan Carriers, and therefore, no separate addition of Rs.1,07,890/- is warranted. None of the lower authorities has verified this contention of the assessee.
Further, the contention of the assessee is that he has transferred the trucks owned by him to his brother-in-law, Shri Nilesh Shah, as it had started new business of agriculture products, is not substantiated with any evidence as to how and on what terms, the same was transferred and what is the consideration received. Therefore, this contention has been rightly rejected by the lower authorities.
However, we are of the considered view that it shall be in the interest of justice to restore the matter back to the file of the AO to verify whether income from trucks shown at Rs.2,01,000/- under section 44AE by the assessee in the return of income include income from M/s.Chandan Carriers. If so, no further addition of Rs.1,07,890/- to the income of the assessee is required.
We, therefore, set aside the orders of the lower authorities on this issue and restore the matter back to the file of AO to re-adjudicate the issue afresh after verification as per the law, and after allowing reasonable opportunity of hearing to the assessee.
Thus, this ground of appeal of the assessee is allowed for statistical purpose. In the result, the appeal of the assessee is partly allowed for statistical purpose.