2014 (2) TMI 430 - AT - Income Tax

Tribunal confirms deletions of additions to commission income and household expenses for assessment year 2005-06

ITO, Ward-6(1) Surat Versus Shri Devilal R. Gehlot Surat. Prop. M/s. Chaudhary Roadlines

The Tribunal upheld the CIT(A)'s decisions in appeals and cross-objections related to the assessment year 2005-06, focusing on the deletion of additions ... Deletion made on account of protective basis – Held that:- The commission income has already been estimated by him – thus, there is absolutely no justification in estimating the same amount again as business receipts of the assessee, and the action of the AO is just a matter of conjecture and surmises and deleted entire addition - The assessee is merely receiving commission income on booking of trucks from its clients and the freight payments were made by the clients to the truck owners and that the commission income has already been estimated by the Revenue, could not be controverted by Revenue – thus, the same amount could not be taxed as business receipts in the hands of the assessee thus, there is no mistake in the order of the CIT(A) in deleting the addition on the issue – Decided against Revenue. Deletion made on account of low household expenses – Held that:- The CIT(A) has recorded that the assessee is living a simple life in village and did not have any car or membership of club and has shown withdrawal for family of five members in the accounting year 2004-2005, which were sufficient for meeting household expenses - there is no justification for making any addition on account of low household expenses – Decided against Revenue. Estimation of commission income – Held that:- The CIT(A) has passed a well reasoned speaking order on the issue - the assessee receives common income from the truck owners, but the assessee was not able to furnish any details about the owners' names and addresses - there is no way to find out the exact amount of commission earned by the assessee - the estimate of commission income of the assessee at Rs.10,00,000/- instead of Rs.6,19,625/- as shown by the assessee could not be said to be arbitrary – Decided against Assessee. Deletion made on account of unexplained investment – Held that:- The CIT(A) has recorded that no addition on this account is called for since the investment in trucks is duly reflected in the accounts of two ladies as also the income - there is no justification in making the addition in the hands of the assessee - The two ladies were existing income tax assesses, and there is no material brought on record to justify the addition made in the hands of the assessee –Decided against Revenue. Deletion made u/s 44AE of the Act – Held that:- The addition made by estimating the income from trucks under section 44AE of the Act was deleted by the CIT(A) on the ground that the trucks did not belong to the assessee, but belonged to two ladies - income from the trucks could not be considered in the hands of the assessee - the trucks were reflected in the accounts of the two ladies, who were existing income tax assesses - the income from the trucks in question could not be assessed in the hands of the assessee – Decided against Revenue. Issues Involved:1. Addition of commission income on protective and substantive basis.2. Addition of low household expenses.Issue 1: Addition of Commission IncomeThe appeal by the Revenue and Cross-Objections by the assessees involved the assessment year 2005-06 and focused on the deletion of additions made by the Assessing Officer (AO) regarding commission income. In the case of the Revenue's appeal concerning Shri Devilal R. Gehlot, the CIT(A) had deleted the addition of Rs.7,00,000/- made on a protective basis and Rs.1,75,000/- on a substantive basis. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee only received commission income for arranging trucks, and the AO's attempt to tax the same income again was unjustified. The Tribunal found no mistake in the CIT(A)'s order and dismissed the Revenue's appeal. Similarly, in the Cross-Objections of the assessee, the CIT(A)'s decision to estimate commission income at Rs.10,00,000/- instead of Rs.6,19,625/- as shown by the assessee was upheld. The Tribunal agreed with the CIT(A) that the AO had to estimate the income due to lack of details provided by the assessee, confirming the CIT(A)'s decision and dismissing the Cross-Objections.Issue 2: Addition of Low Household ExpensesRegarding the addition of Rs.42,550/- on account of low household expenses, both the Revenue's appeal and the Cross-Objections by the assessee raised similar concerns. The CIT(A) had ruled in favor of the assessee, stating that the expenses were sufficient for the family's needs, considering the simple lifestyle in a village without luxuries like cars or club memberships. The Tribunal upheld the CIT(A)'s decision, confirming that there was no justification for adding to the household expenses. Therefore, the Tribunal dismissed both the Revenue's appeal and the Cross-Objections on this issue.In summary, the Tribunal's judgment in the appeals and cross-objections related to the assessment year 2005-06 primarily focused on the deletion of additions made by the AO regarding commission income and low household expenses. The Tribunal upheld the CIT(A)'s decisions in both cases, emphasizing the lack of justification for the additions and confirming the deletions. Ultimately, the appeals of the Revenue and the Cross-Objections of the assessees were dismissed by the Tribunal.