1. The assessee is in appeal against the order dt. 1st Aug., 2002 passed by the learned CIT(A) on following effective ground : Action of the learned CIT(A) is arbitrary, unjustified and against the canon of justice-- (a) by confirming the addition of Rs. 26,845 against a loss of Rs. 5,245 declared in jeep account, when no specific deficiency in accounting have been pointed out.
2. Brief facts of the case are that in this case return had been filed on 21st Sept., 1997 declaring total income of Rs. 43,270 plus agricultural income of Rs. 8,000. The assessee declared income from various sources like salary, business income and interest from bank deposits. During assessment proceedings, the AO found that the assessee owned a jeep and total receipts from this jeep were declared at Rs. 42,522 against which expenses of Rs. 47,767 including depreciation of Rs. 9,011 had been claimed, resulting in loss of Rs. 5,245. The AO observed that the jeep had been given on monthly hire charges of Rs. 3,200 to Vikas Industrial Works Association (for short VIWA). The AO further observed that VIWA was not filing returns and most of its members were close relatives of the assessee. The AO observed that this transaction was not genuine, therefore, invoking the provisions of Section 44AE(2) of the IT Act, he made an addition of Rs. 26,845 to the total income declared by the assessee. In first appeal, the CIT(A) confirmed the action of the AO.3. Before us, learned Authorised Representative for the assessee submitted that the assessee was maintaining books of account. The transaction with VIWA was genuine and invoking the provisions under Section 44AE(2) was not correct. He submitted that the CIT(A) while sustaining the addition has held as under: 3.3 Even otherwise, in my considered opinion, the appellant is liable to disclose income from hiring of the jeep in accordance with the provisions of Section 44AE of the Act. Provisions of Section 44AE are of overriding nature. As Section 44AE(1) opens with a non obstante clause namely, 'notwithstanding anything to the contrary contained in Sections 28 to 43C, that sub-section overrides the provisions of Sections 28 to 43C of the Act. Sub-section (6) of Section 44AE which provided for declaration of lower profit in case the assessee maintained books of account, was omitted w.e.f. 1st April, 1997. Hence the appellant could not have declared lower profits than prescribed under Section 44AE(2) of the Act. In the light of these provisions, I am of the considered opinion that the AO is justified in invoking the provisions of Section 44AE in the appellant's case. This action of the AO is confirmed.
Learned Departmental Representative for the Revenue, on the other hand, relied on the orders of tax authorities.
4. After hearing the parties to the dispute and perusing the material available on record, we find from the observations made in the impugned order, extracted above, that the CIT(A) relied on the provisions under Section 44AE(2) and Sub-section (6), which provided for declaration of lower profit in case the assessee maintained books of account, was omitted w.e.f. 1st April, 1997. While doing so, the CIT(A) has ignored to look into the newly inserted provisions of Sub-section (6) w.e.f.
1st April, 1997. For the sake of clarity, we reproduce hereunder the newly inserted Sub-section (6) of Section 44AE : (6) Nothing contained in the foregoing provisions of this section shall apply, where the assessee claims and produces evidence to prove that the profits and gains from the aforesaid business during the previous year relevant to the assessment year commencing on the 1st day of April, 1997 or any earlier assessment year, are lower than the profits and gains specified in Sub-sections (1) and (2), and thereupon the AO shall proceed to make an assessment of the total income or loss of the assessee and determine the sum payable by the assessee on the basis of assessment made under Sub-section (3) of Section 143.
From the above, it is seen that it clearly stipulates that the assessee is entitled for declaration of lower profit in case he maintained books of account. In the instant case also, the issue to be examined is whether the assessee maintained the books of account or not, so as to accept its claim regarding declaration of lower profit. We observe from the assessment order that the assessee did not produce vouchers for verification of expenses which led the AO to invoke the provisions of Section 44AE. Also the observation of the AO regarding non-production of vouchers was not rebutted by the assessee either before the AO or the CIT(A). Therefore, there were sufficient reasons for the AO to believe that the transaction was not genuine and he consequently rejected the book results and invoked the provisions of Section 44AE.The plea of the assessee regarding non-application of Section 44AE, in view of Sub-section (6) would have been accepted had there been any rebuttal either before the AO or the CIT(A) regarding verification of expenses claimed. Hence, we decline to interfere with the order of the CIT(A) in invoking the provisions of Section 44AE, in view of non-maintenance of books of account by the assessee. Therefore, we uphold the order passed by the CIT(A) on the issue and reject the ground raised by the assessee.