Where assessee had not claimed any depreciation in its original return on taxis owned by him and had also not shown income from business of running taxi on hire, thereafter he was precluded to make fresh claim of depreciation in return filed pursuant to search operation under section 153A, because proceedings under section 153A or 147 are designed to provide benefit to revenue and not to assessees.

Assessee had claimed depreciation in return filed in response to notice under section 153A, i.e., search operation. AO alleged that in the original return filed under section 139(1), assessee had neither shown income from hiring of taxi nor claimed depreciation on taxi, therefore, the depreciation claim could not be allowed because the same was claimed for first time pursuant to notice under section 153A. Held: Returns of income filed in response to notice under section 153A are as a consequence of search action taken under section 132 on the assessees. These proceedings are analogous to proceedings under section 147, i.e., reassessment, to the extent that these proceedings are for the benefit of revenue and not that of the assessee. Therefore, assessee could not be permitted to convert such reassessment proceedings as his appeal or revision in disguise and seek relief in respect of depreciation earlier not claimed in original return of income.

Decision: Against the assesse.

IN THE RAJASTHAN HIGH COURT

K.S. JHAVERI & VIJAY KUMAR VYAS, JJ.

CIT v. Shri Tikam Khandelwal & Ors.

D.B. Income Tax Appeal Nos. 35, 37, 40, 41, 43, 44, 47, 50/2012 and D.B. Income Tax Appeal No. 7/2016

20 September, 2017

Appellant(s) by: Anil Metha with Sameer Sharma

Respondent(s) by: Mahendra Gargieya with Lokesh Tai

Since these appeals arise out of the same order, they are being decided by this common order. By way of these appeals, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal of department as well as the appeal of assessee was allowed.

This Court while admitting the ITA No. 35/2012 on 14-8-2014 has framed following substantial question/s of law :–

“(1) Whether the Tribunal was justified in on one hand not interfering with the finding that no books of accounts and supporting bills/vouchers were maintained by the assessee at the time of search and simultaneously, on the other hand reducing the addition made on the ground of unexplained construction and working in progress expenses of Rs. 22,32,583 to merely Rs. 63,770?

(2) Whether the Tribunal was justified in deleting the addition of Rs. 46,74,000 made by the assessing officer on account of suppressed sales shown by the assessee, even when the documents found during search were corroborated by the assessee’s statement recorded under section 132(4) of the Act and whether an impossible burden can be placed on the revenue to establish the excess consideration received by the assessee?”

(3) Whether the Tribunal was justified in deleting the addition of Rs. 88,25,000 which was made by the assessing officer on account of unexplained investment of the assessee in various properties, when no evidence in support of the said investment was submitted by the assessee?”

This Court while admitting the ITA No. 37/2012 on 14-8-2014 has framed following substantial question/s of law :–

(i) Whether the Tribunal was justified in on one hand upholding the finding that no books of accounts and supporting bills/vouchers were maintained by the assessee at the time of search and thereby confirming the rejection of books of accounts and simultaneously, on the other hand reducing the addition made on the ground of unexplained construction and working in progress expenses of Rs. 40,00,000 to merely Rs. 1,00,000?

(iii) Whether the Tribunal was justified in deleting the addition of Rs. 1,49,020 being expenditure paid in cash in violation of the provisions of section 40A(3) of the Act, on the ground that since this Section is not required?

(v) Whether the Tribunal was justified in deleting the addition of Rs. 87,25,000 made by the assessing officer on account of suppressed sales shown by the assessee, even when the documents found during search were corroborated by the assessee’s statement recorded under section 132(4) of the Act and whether an impossible burden can be placed on the revenue to establish the excess consideration received by the assessee?

(vi) Whether the Tribunal was justified in deleting the addition of Rs. 56,52,427 made by the assessing officer under section 68 of the Act on account of unexplained cash credit, despite assessee failing to furnish any documentary proof in support of the said cash credits and whether that tantamount to not affording adequate opportunity to the assessee?

This Court while admitting the ITA No. 40/2012 on 14-8-2014 has framed following substantial question/s of law :–

“(1) Whether the Tribunal was justified in on one hand upholding the finding that no books of accounts and supporting bills/vouchers were maintained by the assessee at the time of search and thereby confirming the rejection of books of accounts and simultaneously, on the other hand reducing the addition made on the ground of unexplained construction and working in progress expenses of Rs. 13,00,000 to merely Rs. 50,000?

(2) Whether the Tribunal was justified in deleting the addition of Rs. 75,000 being expenditure paid in cash in violation of the provision of section 40A(3) of the Act, on the ground that since other addition has been made disallowance under this Section is not required?

(3) Whether the Tribunal was justified in deleting the addition of Rs. 77,14,000 made by the assessing officer on account of suppressed sales shown by the assessee, even when the documents found during search were corroborated by the assessee’s statement recorded under section 132(4) of the Act and whether an impossible burden can be placed on the revenue to establish the excess consideration received by the assessee?

(4) Whether the Tribunal was justified in deleting the addition of Rs. 31,93,100 made by the assessing officer under section 68 of the Act on account of unexplained cash credit, despite assessee failing to furnish any documentary proof in support of the said cash credits and whether that tantamount to not affording adequate opportunity to the assessee?”

This Court while admitting the ITA No. 41/2012 on 14-8-2014 has framed following substantial question/s of law :–

(1) Whether the Tribunal was justified in on one hand upholding the finding that no books of accounts and supporting bills/vouchers were maintained by the assessee at the time of search and thereby confirming the rejection of books of accounts and simultaneously, on the other hand deleting the entire addition made on the ground of unexplained construction and working in progress expenses of Rs. 75,78,260?

(2) Whether on the facts and circumstances of the case, the Tribunal was justified in deleting the entire addition of Rs. 75,78,260 despite holding that the assessee’s cost of construction varies and the expenses are not verifiable?

This Court while admitting the ITA No. 43/2012 on 14-8-2014 has framed following substantial question/s of law :–

“(1) Whether the Tribunal was justified in on one hand upholding the finding that no books of accounts and supporting bills/vouchers were maintained by the assessee at the time of search and thereby confirming at the rejection of books of accounts and simultaneously, on the other hand reducing the addition made on the ground of unexplained construction and working in progress expenses of Rs. 1,50,00,000 to merely Rs. 2,50,000?

(2) Whether the Tribunal was justified in deleting the addition of Rs. 19,22,600 being expenditure paid in cash in violation of the provisions of section 40A(3) of the Act, on the ground that since other addition has been made disallowance under this Section is not required?

(3) Whether the Tribunal was justified in deleting the addition of Rs. 1,38,70,000 made by the assessing officer on account of suppressed sales shown by the assessee, even when the documents found during search were corroborated by the assessee’s statement recorded under section 132(4) of the Act and whether an impossible burden can be placed on the revenue to establish the excess consideration received by the assessee?

(4) Whether the Tribunal was justified in deleting the addition of Rs. 3,87,00,404 made by the assessing officer under section 68 of the Act on account of unexplained cash credit, despite assessee failing to furnish any documentary proof in support of the said cash credits and whether that tantamount to not affording adequate opportunity to the assessee?

(5) Whether the Tribunal was justified in deleting the addition of Rs. 73,61,00,000 made by the assessing officer and confirmed by the Commissioner (Appeals) on account of unexplained cash credit, in spite of holding that the transaction was benami transaction of the assessee?

(6) Whether the Tribunal was justified in deleting the addition made on account of unexplained cash found during search of Rs. 10,00,000 when the same was accepted and offered by the assessee for taxation and no retraction was filed by the assessee, by simply relying upon cash book prepared by the assessee after the search proceedings?

(7) Whether the Tribunal was justified in deleting the addition of Rs. 2,10,00,000 which was made by the assessing officer and confirmed by the Commissioner (Appeals) on account of unexplained investment of the assessee in the Global City Project, when no evidence in support of the said investment was submitted by the assessee?

(8) Whether the Tribunal was justified in deleting the addition of Rs. 83,91,000 which was made by the assessing officer on account of unexplained cash deposit of the assessee in bank accounts in the name of various persons, even after confirming the finding that assessee was maintaining the said Benami Bank accounts?”

This Court while admitting the ITA No. 44/2012 on 14-8-2014 has framed following substantial question/s of law :–

“(1) Whether the Tribunal was justified in on one hand upholding the finding that no books of accounts and supporting bills/vouchers were maintained by the assessee at the time of search and thereby confirming at the of search and thereby confirming the rejection of books of accounts and simultaneously, on the other hand reducing the addition made on the ground of unexplained construction and working in progress expenses of Rs. 1,00,00,000 to merely Rs. 3,96,300?

(2) Whether the Tribunal was justified in deleting the addition of Rs. 19,71,053 being expenditure paid in cash in violation of the provisions of section 40A(3) of the Act, on the ground that since other addition has been made disallowance under this Section is not required?

(3) Whether the Tribunal was justified in deleting the addition of Rs. 3,00,000 made by the assessing officer on account of suppressed sales shown by the assessee, even when the documents found during search were corroborated by the assessee’s statement recorded under section 132(4) of the Act and whether an impossible burden can be placed on the revenue to establish the excess consideration received by the assessee?

(4) Whether the Tribunal was justified in deleting the addition of Rs. 3,22,64,594 made by the assessing officer under section 68 of the Act on account of unexplained cash credit, despite assessee failing to furnish any documentary proof in support of the said cash credits and whether that tantamount to not affording adequate opportunity to the assessee?

(5) Whether the Tribunal was justified in deleting the addition of Rs. 2,49,31,125 which was made by the assessing officer and confirmed by the Commissioner (Appeals) on account of unexplained investment of the assessee in various properties, when no evidence in support of the said investment was submitted by the assessee?

(6) Whether the Tribunal was justified in deleting the addition of Rs. 28,79,500 which was made by the assessing officer on account of unexplained cash deposit of the assessee in bank accounts in the name of various persons, even after confirming the finding that assessee was maintaining the said Benami Bank accounts?”

This Court while admitting the ITA No. 47/2012 on 5-4-2012 has framed following substantial question/s of law :–

“(i) Whether the Tribunal was justified in deleting the addition of Rs. 3,42,60,562 being expenditure paid in cash in violation of the provisions of section 40A(3) of the Act?

(ii) Whether the Tribunal was justified in giving benefit of rule 6DD(g) to the assessee, ignoring that the conditions provided in the rule were not existing and part payment was made by cheque to such persons?

(iii) Whether the Tribunal was justified in deleting the addition of Rs. 79,52,500 made by the assessing officer under section 68 of the Act on account of unexplained cash credit, despite assessee failing to furnish any documentary proof in support of the said cash credits and whether that tantamount to not affording adequate opportunity to the assessee?”

This Court while admitting the ITA No. 50/2012 on 14-8-2014 has framed following substantial question/s of law :–

“(1) Whether the Tribunal was justified in on one hand upholding the finding that no books of accounts and supporting bills/vouchers were maintained by the assessee at the time of search and thereby confirming at the of search and thereby confirming the rejection of books of accounts and simultaneously, on the other hand reducing the addition made on the ground of unexplained construction and working in progress expenses of Rs. 50,00,000 to merely Rs. 1,48,360?

(2) Whether the Tribunal was justified in deleting the addition of Rs. 18,02,064 being expenditure paid in cash in violation of the provision of section 40A(3) of the Act, on the ground that since other addition has been made disallowance under this Section is not required?

(3) Whether the Tribunal was justified in deleting the addition of Rs. 59,50,000 made by the assessing officer on account of suppressed sales shown by the assessee, even when the documents found during search were corroborated by the assessee’s statement recorded under section 132(4) of the Act and whether an impossible burden can be placed on the revenue to establish the excess consideration received by the assessee?

(4) Whether the Tribunal was justified in deleting the addition of Rs. 69,17,000 made by the assessing officer under section 68 of the Act on account of unexplained cash credit, despite assessee failing to furnish any documentary proof in support of the said cash credits and whether that tantamount to not affording adequate opportunity to the assessee?

(5) Whether the Tribunal was justified in deleting the addition of Rs. 33,00,000 which was made by the assessing officer and confirmed by the Commissioner (Appeals) on account of unexplained investment of the assessee in various properties, when no evidence in support of the said investment was submitted by the assessee?”

This Court while admitting the ITA No. 7/2016 on 8-8-2016 has framed following substantial question/s of law :–

“(i) Whether the Tribunal has erred in directing the revenue to apply net profit @ 10% subject to interest and depreciation whereas for the same assessee for earlier assessment years net profit @ 12% was upheld by the ITAT and there has been no change in business of the assessee in current assessment year.

(ii) Whether Tribunal has erred in recording the finding that the assessee entitled for claiming interest paid on borrowed capital as business expense without any evidence or material on record of having utilized the said amount towards business.”

For the convenience a chart has been prepared by the counsel for the parties which reads as under :–

S. No.	Question of law		DB ITA No. 37/2012 (AY 05-06) A/o 228 & 154/JP/11	DB ITA No. 40/2012 (AY 04-05) A/o 153 & 227/JP/11	DB ITA No. 50/2012 (AY 06-07) A/o 155 & 229/JP/11	DB ITA No. 44/2012 (AY 07 -08) A/o 391 & 431/JP/11	DB ITA No. 43/2012(AY 08-09) A/o 392 & 487/JP/11
1.	Whether the Tribunal was justified one hand upholding the finding that no books of accounts and supporting bills/vouchers were maintained by the assessee at the time of search and thereby confirmed the rejection of books of accounts and simultaneously, on the other hand reducing the addition made on the ground of unexplained construction and work in progress expenses.	AO CIT ITAT Q No. Addition	Pg 6-7 (PB 22-23) Pg 19 Pr. 3.4 (PB48) Pg 2 Pr. 2.6 (PB 83) 1 Rs. 40,00,000	Pg 6 pr 8 (PB24-25) Pg 5-6, Pr.3.3, (PB 65-66) 1 13,00,000	Pg 4 Pr (PB 23) Pg 6-9 Pr. 3.3 (PB38) A/R (PB71) 1 50,00,000	Pg6-7 Last (PB 26-27) Pg 12-13 Pr. 3.3.3. (PB 53- 54) Pg 12-14 Pr. 3.79PB 123- 125) 1 1,00,00,000	Pg 8 Pr 12 (PB 31-32) Pg 22 Pr 12 (PB 57) Pg 71 Pr 6.8 (PB 178-179) 1 1,50,00,000
2.	Whether the Tribunal justified in deleting the addition of being expenditure paid in cash in violation of the provision of section 40A(3) of the Act. On the ground that since other addition has been made disallowance under this section is not required.	AO CIT ITAT Q No. Addition	Pg 3-6 (PB 19-22) Pg 13 Pr. 2.4 (PB42) Pg 13 Pr. 4.4 (PB 94) 2 Rs. 1,49,020	Pg 6 (PB 24) Pg 6, Pr.2.3, (PB 38) Pg 11 Pr 4.2, (PB 74) 2 75,000	Pg 7-8 (PB 26) Pg 2 Pr. 2.4 (PB 34) Pg 3-4 pr 3.3 (PB72) 2 18,02,064	Pg 3-6 Pr (PB 26) Pg 6 Pr 2.5- 2.6 (PB 46- 47) Pg 5 Pr 2.5 (PB116) 2 19,71,053	Pg 6-8 Pr 11(PB 29-31) Pg 19 Pr 4.3 (PB 56) Pg 60-61 Pr. 5.9 (PB 167) 2 19,22,600
3.	Whether the Tribunal was justified in deleting the addition made by the assessing officer on account of suppressed sales shown by the assessee even when the documents found during search were corroborated by assessee’s statement recorded under section 132(4) OF THE Act and whether an imposibe burden can be placed on the revenue to established the excess consideration received by the assessee?	AO CIT ITAT Q No. Addition	Pg 11-12 (PB 27-28) Pg 28-32 Pr. 6.3 (PB 90- 93) A/R (PB 85) 3 Rs. 87,25,000	Pg 12 (PB 30) Pg 12 Pr. 5.4 (PB 48) Pg 11 Pr.3.8, (PB 73) 3 77,14,000	Pg 11-12 Pr (PB 30) Pg 18-20 Pr. 8.3 (PB 50- 52) Pg 25-28 Pr 7.8 – 7. 12 A/R (PB89) 3 59,50,000	Pg 11-12 (PB 31-32) Pg 26 Pr. 7 (PB 142) Pg 12-14 Pr. 3.79PB 123- 125) 3 3,00,000	Pg 3-4 Pr 8(PB 26-27) Pg 5-6 Pr 2.3 (PB 42-43) Pg 26-60 Pr. 2.16 (PB 133-137) 3 1,38,70,000
4.	Whether the Tribunal was justified in deleting the addition made by the assessing officer under section 68 of the Act on account of unexplained cash credit, despite assessee failing to furnish any documentary proof in support of the said cash and whether that tantamount to not affording adequate opportunity to the assessee?	AO CIT ITAT Q No. Addition	Pg 9,10 (PB 25-26) Pg 45 to 50 Pr. 7.10 7.18 (PB 74-79) Pg 13,14 Pr. 5.2-5.6 (PB 94-95) 4 Rs. 56,52,427	Pg 12 last (PB 30) Pg 13, Pr. 7, (PB 49) Pg 17 Pr. 6. 7 (PB 80-81) 43193100	Pg 10-11 Pr (PB 29) Pg 27-33 Pr. 9.4 (PB 59- 65) Pg 29 Pr 8. 5 (PB97) A/R (PB71) 469,17,000	Pg 19 Last (PB 29-40) Pg 68 Pr. 9.5 (PB 109) Pg 72 Pr. 9.2 (PB 183) 4 3,22,64,594	Pg 10 Pg 14 (PB 33-34) Pg 52-58 Pr. 7.4 onwards (PB 89-95) Pg 111 Pr 8.10 (PB 218) 3,87,00,404
5.	Whether the Tribunal was justified in deleting the addition made by the assessing officer and confirmed by the Commissioner (Appeals) on account of unexplained investment of the assessee in various properties, when no evidence in support of the said investment was submitted by the assessee?	AO CIT ITAT Q No. Addition				Pg11-19 (PB 31-39) Pg 44 Pr. 9. (PB 85) Pg 65 Pr 7.22 PB 176) 5 2,49,31,125
6.	Whether the Tribunal was justified in deleting the addition which was made by the assessing officer and confirmed by the Commissioner (Appeals) on account of unexplained cash credit of the assessee on various properties, when no evidence in support of the said investment was submitted by the assessee?	AO CIT ITAT Q No. Addition			Pg 8 Pr 9 (PB 27) Pg 10-11 Pr. 4.3 (PB 42- 43) Pg 8-9 Pr 4. 7 (PB 76- 77) A/R (PB 74) 5 33,00,000		Pg 11 Pr (PB 34) Pg 52 -58 Pr 7.4 onwards (PB 89-95) Pg 109-111 Pr. 8.9 onwards (PB 216-218) 5 73,61,00,000
7.	Whether the Tribunal was justified in deleting the addition made by the assessing officer on account of unexplained cash deposit of the assessee in banks accounts in the name of various persons, even confirming the finding that assessee was maintaining the said benami bank accounts?	AO CIT ITAT Q No. Addition				Pg 10-11 (PB 31) Pg 24-26 Pr. 6.5-6.7 (PB 65-67) Pr. 5.7(PB 138) 6 1,00,00,000	Pg 4-5 Pr 9(PB 27-38) Pg 3-6 Pr 2 (PB 40-43) Pg 39-40 Pr 3.8 (PB 146-147) 8 83,91,000
8.	Whether the Tribunal was justified in deleting the addition made on account of unexplained cash found during search of Rs. 10,00,000 when the same was accepted and offered by the assessee for taxation and no retraction was field by the assessee, by simply relying upon cash book prepared by the assessee after the search proceedings?	AO CIT ITAT Q No. Addition					Pg 11 Pr 15 (PB 34) Pg 62 Pr 8.4 (PB 99) Pg 120 -121 Pr. 9.8 (PB 227) 6 10,00,000
9.	Whether the Tribunal was justified in deleting the addition made of Rs. 2,10,00,000 which was made by the assessing officer and confirmed by the Commissioner (Appeals) on account of unexplained investment of the assessee in Global City Project, when no evidence in support of the said investment was nsubmitted by the assessee?	AO CIT ITAT Q No. Addition					Pg 112-113 Pr 16 (PB 35- 36) Pg 68 Pr 9.3 (PB 105) Pg 126-127 Pr. 10.8 (PB 233) 7 2,10,00,000

Counsel for the appellant has taken us to the order of Tribunal wherein it has been observed as under :–

“3.3 I have considered the argument of the A.R and have perused the assessment order and relevant record. It is seen that the appellant has mainly contended that Shri Sunil Jhalani is not the benami of the appellant. It is seen that Shri Shankar Khandelwal, the brother of the appellant, has admitted Shri Sunil Jhalani to be his benami. Considering the same situation the assessing officer has considered Shri Sunil Jhalani to be benami of the appellant’s group. However, in such situation, the assessing officer was not at all justified to make addition of investment in the hands of appellant during the year, as purchase from benami person will not require any actual investment by appellant during the year. Hence on this logic of assessing officer, the entire addition needs to be deleted in the year under consideration.

3.3.1 However, considering the argument of the appellant that Sushil Jhalani, Gopal Saini etc has not been admitted to be benami of Tikam Khandelwal and considering that generally one person cannot be considered to be benami for Shri Shankar Khandelwal as well as appellant Shri Tikam Khandelwal, it would be appropriate for the assessing officer to have examined the source of payment for purchase of the plots and if the source was not explained, then addition should have been made. Now this issue has been examined by the undersigned. 3.3.2 Regarding purchase from Shri Shushil Jhalani, it was mentioned by the assessing officer himself that out of Rs. 30 lakhs has been paid through cheque and Rs. 6 lakhs has been paid in cash. The A.R of the appellant has further submitted that Rs. 24 lakhs was paid by taking loan from ICICI Bank for which the copy of letter/chart from ICICI Bank indicating amount financed, terms of repayment and agreement dated etc has been filed before the undersigned. It was submitted that these details could not be have been submitted before the assessing officer as no such occasion arose as assessing officer has not doubted about the investment in purchase of plot during the assessment proceedings and has not given any show cause for the same. Copy of this document was also made available to assessing officer. Considering these facts, the addition of Rs. 24 lakhs is deleted and since no clear cut evidence has been filed for source of cash payment of Rs. 6 lakhs, expect the argument of cash flow statement, which is quite sketchy and not supported by confirmation from the persons from whom contended cash was received, the addition to the extent of Rs. 6 lakhs is hereby upheld.”

He contended that no reasons are given by the ITAT while deciding the issue on question No. 1 observed as under :–

“5.1 The 4th ground of appeal of the assessee is that the learned Commissioner (Appeals) has erred in confirming the disallowance out of taxi expenses to the extent of 20% as against disallowance of 1/3rd of taxi expenses.

5. 2 The revenue in Ground No. 2 is aggrieved against reducing the disallowance of taxi hiring expenses to 20% as against 33.33% made by the assessing officer.

5.3 We have heard both the parties. The assessing officer has disallowed 1/3rd of the expenses to the extent of Rs. 2,08,504. The return for the assessment year 2008-09 has been filed after the search operation and this is the only return.

The assessing officer has disallowed depreciation after placing reliance on the decision of ITAT Jodhpur in the case of Suncity Alloys (P) Ltd. v. ACIT, Central Circle-1 in ITA Nos. 586 to 588/JU/2008. This case is not applicable as it is not a case of making block assessment and moreover, this is only assessment based on the original return. Hence, there was no case of making disallowance of depreciation. The learned Commissioner (Appeals) was therefore, justified in deleting the disallowance made by the assessing officer on account of depreciation. The grievance of the assessee is that the learned Commissioner (Appeals) has confirmed the disallowance so made by the learned Commissioner (Appeals) is confirmed and the depreciation is held to be allowed. Thus ground No. 2 of the revenue and Ground No. 4 of the assessee both are dismissed.

6.1 The 5th ground of appeal of the assessee is that the learned Commissioner (Appeals) has erred in not allowing the claim of Depreciation.

6.2 During the court of hearing, the learned AR of the assessee has not pressed this ground. Hence, the same is dismissed being not pressed.

7.1 The sixth ground of appeal of the assessee is that the learned Commissioner (Appeals) has erred in not annulling the assessment order as the assessing officer has not provided proper opportunity of being heard.

7.2 We have heard both the parties. This issue has been decided us in the case of Shankar Lal Khandelwal in ITA No. 155/JP/2011, dt. 12-8-2011. Following that order, we held that the learned Commissioner (Appeals) was justified in not annulling the assessment order. Thus Ground No. 6 of the assessee is dismissed.

8.1 The 4th ground of the revenue is that the learned Commissioner (Appeals) has erred in not admitting the additional evidence.

8.2 We have heard both the parties. The learned Commissioner (Appeals) has rightly admitted the additional evidence because the assessee was not provide adequate opportunity of being heard. However, in order to decide the issue and to determine the tax payable by the assessee, the learned Commissioner (Appeals) was justified in admitting the additional evidences. Hence Ground No. 4 of the revenue is dismissed.

9.1 The 5th ground of the revenue is that the learned Commissioner (Appeals) has erred in directing the assessing officer to give set off for unaccounted/suppressed sale consideration against the availability of unaccounted money.

9.2 We have heard both the parties. Since no such set off is being claimed by the assessee before us and therefore, this issue is academic and does not require to be adjudicated upon.”

He contended that no reasons are given by the ITAT while deciding the issue on question No. 2 observed as under :–

“4. The assessee has filed return of income on 20-1-2009 declaring income of Rs. 10,96,760.

5. After obtaining prior approval from the Hon’ble Director General of Income Tax, (Investigation) vide Letter No. DGIT/JPR/R-12/CASS/2008-09/2103, dt. 2-2-2009 along with questionnaire fixing the case for hearing on 9-2-2009 which was duly served upon him on 9-2-2009.

6. Notice under section 143(2)/142(1) were issue don 4-2-2009 alongwith questionnaire for fixing the case for hearing on 9-2-2009 which was duly served upon the assessee on 9-2-2009. In response to notices issued Shri Pramod Bhatra, FCA & A/R of the assessee alongwith Accountant – Shri Dharmendra Kumar for the assessee attended from time to time. Various details were filed which are placed on record and case was discussed with them.

7. Disallowance of Taxi Running business : The assessee has shown business of running taxi on hire basis but no details of the business have been filed such as log book, total number of taxis engaged on hire, payment received, vouchers for expenses etc. In absence of these details it is not possible to verify the actual transactions. Perusal of Profit & Loss account filed by the assessee reveals that the assessee has shown income from vehicle hire at Rs. 763260 and has claimed indirect expenses for running of taxi at Rs. 625512. The assessee was asked to give details with the documentary evidences in support of the claim but he has given only computersied copies of ledger and has failed to provide any evidence in this regard to support his claim whether he has incurred expenses for running the taxi. Moreover, the statement filed showing the vehicles are not taxi but are private vehicles which have no stay permit. Hence out of above 1/3rd is disallowed which works out to Rs. 208504 and the same is added to the total income of the assessee being unverifiable.

8. On account of depreciation: On perusal of details and ledger account produced by the assessee it is noticed that the assessee has claimed depreciation @ 30% at Rs. 5,62,631. The assessee has claimed depreciation in the return filed in response to notice under section 153A on 2-7-2008. In his original return the assessee neither shown income from hiring of taxi nor claimed depreciation on taxi in his original return filed under section 139(1). During the course of assessment proceedings the assessee was asked as to why depreciation claimed on taxi be not disallowed as the assessee has claimed depreciation in the original return filed under section 139(1) of Income Tax Act but has claimed depreciation in the return filed in pursuance to notice under section 153A of Income Tax Act. The assessee filed reply dated nil stating that —

“It would be wrong and bad in law to disallow depreciation solely on the ground that income from taxi running business was declared while filing the return under section 139 and no depreciation was claimed in the said return of income. For sake of convenience clause (a) of sub-section (1) of section 153 is reproduced here in below —

Thus depreciation on taxi vehicles has been claimed by the assessee under the provisions of Income Tax Act. As applicable, as if the such return were a return required to be furnished under section 139. Further there is no bar on carry forward of absorbed depreciation for set off in subsequent years.”

The same is disallowable in view of judgment of ITAT in the case of Suncity Alloys Pvt. Ltd. v. ACIT in ITAs No. 586 to 588/Ju/2008 for assessment years 2001-02, 2002-03 & 2003-04 which reads as follows :–

“The assessing authority primarily declined to accept such a claim as the assessees has made no such claim in the returns of income filed originally under section 139 of the Act. He was of the view that returns of income filed in response to notice under section 153A of the Income Tax Act are as a consequence of action taken under section 132 of the Act on these assessees. These proceedings are analogous to proceedings under section 147 of the Act to the extent that these are proceedings for the benefit of revenue and not that of the assessee. The assessee cannot be permitted to convert these reassessment proceedings as his appeal or revision in disguise and seek relief in respect of items earlier not claimed in the original return of income. Reliance was placed to the judgment rendered b y the Hon’bloe Bombay High Court in K. Sudhakar S. Saubhag v. ITO (2000) 241 ITR 865 (Bom) which was rendered by taking notice of the principle laid by the Hon’ble Apex Court in Sun Engineering Works (P) Ltd. (1992) 198 ITR 297 (SC) to the effect that in reassessment proceedings, an assessee can neither claim nor be allowed a deduction that was not claimed in the original return. As such, it was held that the assessment proceedings initiated on the basis of an action under section 132 of the Act also cannot be utilised by the assessee to seek relief not claimed earlier. This all goes to show that the assessment or reassessment made pursuant to notice under section 153A of the Act are not de novoassessments. We, therefore, find no merit in the ground raised in appeal to make a new claim of deduction or allowance as such where admittedly the regular assessments are shown as completed assessment on the date of initiation of under section 132 of the Act. Such a ground in all these appeals stands rejected.”

Hence the claim of depreciation is not allowable in view of the judgment of ITAT, Jodhpur bench, Jodhpur delivered in the above case. Therefore, Rs. 5,62,631 is disallowed and added to the total income of the assessee.”

Learned counsel relied upon decision of the Supreme Court reported in Attar Singh Gurmukh Singh v. Income Tax Officer Ludhiana, 1991(1) SCC 667 and contended that Section 40A(3) was inducted for the benefit of assessee and while considering the constitutional validity the Supreme Court has observed as under :–

“In our opinion, there is little merit in this contention. Section 40A(3) must not be read in isolation or to the exclusion of rule 6DD. The section must be read along with the rule. If read together, it will be clear that the provisions are not intended to restrict the business activities.

There is no restriction on the assessee in his trading activities. Section 40A(3) only empowers the assessing officer to disallow the deduction claimed as expenditure in respect of which payment is not made by crossed cheque or crossed bank draft. The payment by crossed cheque or crossed bank daft is insisted on to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of the income from undisclosed sources. The terms of section 40A(3) are not absolute. Considerations of business expediency and other relevant factors are not excluded. Genuine and bona fidetransactions are not taken out of the sweep of the section. It is open to the assessee to furnish to the satisfaction of the assessment officer the circumstances under which the payment in the manner prescribed in section 40A(3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received the cash payment. Rule 6DD provides that an assessee can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule. It will be clear from the provisions of section 40A(3) and rule 6DD that they are intended to regulate business transactions and to prevent the use of un-accounted money for business transactions.

See Mudiam Oil Company v. ITO (1973) 92 ITR 519 (AP). If the payment is made by a crossed cheque drawn on a bank or a crossed bank draft, then it will be easier to ascertain, when deduction is claimed, whether the payment was genuine and whether it was out of the income from disclosed sources. In interpreting a taxing statute, the court cannot be oblivious of the proliferation of black money which is under circulation in our country. Any restraint intended to curb the chances and opportunities to use or create black money should not be regarded as curtailing the freedom of trade or business.”

Counsel for the respondent Mr. Gargieya has contended that each issue is appreciation of facts and no substantial question of law has been raised, however he has relied upon following decisions of each of the issues :–

“On section 68 Cash Credit :–

CIT v. Orissa Credit Corp. Ltd. (1986) 159 ITR 78 (SC)

Aravali Trading Co. v. ITO (2008) 8 DTR 199 (Raj)

CIT v. First Point Finance Ltd. (2006) 286 ITR 477 (Raj)

What is a Substantial Question of Law?

Santosh Hazari v. Purushottam Tiwari (Dead) By LRs (2001) 170 CTR 160 (SC)

M. Janardhana Rao v. JCIT (2005) 273 ITR 50 (SC)

DCIT v. Marudhar Hotels (P) Ltd. (1999) 155 CTR (Raj) 437

On admission of additional evidences:

Smt. Prabhavati S. Shah v. CIT (1998) 148 CTR (Bom) 192“

Taking into consideration the issue and the facts we have gone through the order of the Tribunal the Tribunal while considering gross profit of the assessee for the previous year has rightly estimated 1% of the total turnover. In that view of the matter, the view taken by the Tribunal is required to be affirmed. Similarly, the assessee has made a chart showing of gross profit chart which reads as under :–

Assessment Year	2003-04				2004-05
	Assessee	AO	CIT(A)		Assessee	AO	CIT(A)	ITAT
Gross Profit	2010000	2010000	2010000	2010000	1786000	1786000	1786000	1786000
Net Profit	176880	1376880	494953	200880	205400	1505400	693329	255400
NP Rate	8.80%	68.50%	24.62%	9.99%	11.50%	84.29%	38.82%	14.30%
Addition on account of construction/WIP Expenses made by the assessing officer & Sustained by learned Commissioner (Appeals)/ITAT		1200000	318073	24000		1300000	487929	50000