The Commissioner Of Income Tax v. Classic Motors Ltd

$~ * IN THE HIGH COURT OF DELHI AT NEW DELHI R-30 + ITA 1/2005 THE COMMISSIONER OF INCOME TAX ..... Appellant Through: Mr. Zoheb Hossain, Sr. Standing Counsel. versus CLASSIC MOTORS LTD. ..... Respondent Through: Mr. Manu Monga, Advocate AND R-31+ ITA 11/2005 THE COMMISSIONER OF INCOME TAX ..... Appellant Through: Mr. Zoheb Hossain, Sr. Standing Counsel versus CLASSIC MOTORS LTD. ..... Respondent Through: Mr. Manu Monga, Advocate CORAM: JUSTICE S. MURALIDHAR JUSTICE CHANDER SHEKHAR O R D E R% 27.04.2017 1. The Revenue has filed these two appeals against the common order dated 26th February 2004 passed by the Income Tax Appellate Tribunal (ITAT), New Delhi in ITA Nos. 964 and 965/Delhi/2002 for the Assessment Years (AYs) 1993-94 and 1994-95 respectively. ITA Nos 1 and 11 of 2005 Page 1 of 5 2. Both appeals were admitted by separate orders dated 18th February 2005. As far as ITA No. 11 of 2005 is concerned, which pertained to AY 1993-94, the question of law framed was: "Whether in the facts and circumstances of the present case, the ITAT was correct in law in deleting an addition of Rs. 1,22,13,750/- (or such other amount as computed by A.O. Received in cash by the assessee) made by the Assessing Officer on account of booking of vehicles in the bogus names and premium on sale of these vehicles?" 3. The question of law framed in ITA No.1 of 2005 pertaining to AY 1994-95 was as under: “Whether in the facts and circumstances of the present case, the ITAT was correct in law in deleting an addition of Rs.12,33,048/- made on account of booking of vehicles-in the bogus/fictitious names?" 4. It must be noted at the outset that in both appeals the Revenue had urged one more question but the only question framed in both appeals pertained to the issue of booking vehicles in bogus/fictitious names. 5. The Assessee, a Maruti car dealer, was subjected to a search operation on 9th December 1993 when certain diaries and files were seized. The Assessing Officer (AO) found that the Assessee had booked vehicles in fictitious names with abbreviations like SMC, BA, ML, CF, SMC TOURS, RI, IM, MA, MM, RB, JBL, NHUF etc. No addresses were given against these bookings in abbreviated names. Particulars of the amounts received were also not stated therein. There were cuttings and over-writings on such bookings. For the AY 1993-94, the AO treated all such bookings as belonging to the Assessee and by an Assessment Order dated 30th March 1999 held inter alia that: "Thus total unexplained investment in the booking of vehicles in fictitious names comes to Rs. 4,35,75,000/-. Apart from the foregoing investment in the form of booking amounts, the assessee has also earned premium @ Rs. 20,000/- per vehicle. This comes to Rs. 52,20,000/-. Accordingly, the investment of Rs. 4,35,75,000/- plus premium of Rs. 52,20,000/- amounting in all to Rs. 4,87,95,000/- is taken as assessee's investment from undisclosed sources and income not disclosed to the department and accordingly added back to the total income of the assessee." 6. As far as AY 1994-95 was concerned, initially by an order dated 26th March 1997 the AO made an addition of Rs. 50,65,547 on the above account to the taxable income of the Assessee. The said order was set aside by the Commissioner of Income Tax (Appeals) [CIT (A)] by an order dated 15th May 1998 and the matter remanded to the AO. During the re-assessment, the AO by an order dated 30th March 2001 made an addition only in respect of those bookings where the amount had been received in cash. Thus a sum of Rs.12,33,048 was added to the income of the Assessee. 7. The Assessee then filed appeals before the CIT (A). AS far as AY 1993-94 was concerned, the CIT (A) by an order dated 4th January 2002 held: 6. As far as AY 1994-95 was concerned, initially by an order dated 26th March 1997 the AO made an addition of Rs. 50,65,547 on the above account to the taxable income of the Assessee. The said order was set aside by the Commissioner of Income Tax (Appeals) [CIT (A)] by an order dated 15th May 1998 and the matter remanded to the AO. During the re-assessment, the AO by an order dated 30th March 2001 made an addition only in respect of those bookings where the amount had been received in cash. Thus a sum of Rs.12,33,048 was added to the income of the Assessee. 7. The Assessee then filed appeals before the CIT (A). AS far as AY 1993-94 was concerned, the CIT (A) by an order dated 4th January 2002 held: "...it cannot be said that all the bookings made in abbreviated names belonged to the assessee and not to the genuine customers. This fact has been accepted by the AO in the next assessment year. Keeping all these facts in view and considering that the enquiries are not possible in all such cases, it is held that 25% of the bookings made as calculated by the AO on the basis of the peak should be treated as belonging to assessee and the balance 75% bookings should be treated as investment by genuine customers. Similarly, the premium to the extent of 25% can be taken as belonging to the assessee because the assessee stage managed these bookings only to get the premium on such vehicles at that time. Therefore, additions to the extent of 25% in respect of peak bookings as well as premium received therein is confirmed and the balance stands deleted. (Relief - 75% of Rs. 4,87,75,000=Rs. 3,65,81,250/-)" ITA Nos 1 and 11 of 2005 Page 3 of 5 8. As far as the Assessee's appeal pertaining to AY 1994-95, the CIT (A) by a separate order of the same date observed that the addition of Rs. 12,33,048 by the AO was most reasonable and, therefore, upheld it. 9. In the impugned order the ITAT first dealt with ITA 964/Del/2002 filed by the Assessee for the AY 1993-94 and held: "There is no iota of evidence that the assessee has booked the car in its name or any premium has been earned by the Assessee on sale of car. We have already discussed in detail that without any material or evidence no addition can be made against a person in whose hands the department wants to make the additions. Therefore, for same reasoning we delete this addition also." 10. Following the above reasoning, the addition made for AY 1994-95 was also deleted by the ITAT. 11. Having heard Mr Zoheb Hussein, learned counsel for the Revenue the Court is not persuaded to hold that the ITAT erred in appreciating the evidence before it or that its conclusions on that basis. The findings have turned purely on facts and the view taken was certainly a probable one. The AO's additions, which were upheld by the CIT (A) appeared to have proceeded on surmises and conjectures. As rightly pointed out by the ITAT without some cogent and credible material that the bookings were in fact made by the Assessee for itself, the additions ought not to have been made. 12. For the aforementioned reasons, the questions framed in both appeals are answered in the affirmative i.e., in favour of the Assessee and against the Revenue. 13. The appeals are accordingly dismissed. S.MURALIDHAR, J APRIL 27, 2017 b CHANDER SHEKHAR, J ITA Nos 1 and 11 of 2005 Page 5 of 5