My client's books have been rejected and the officer has estimated a per-vehicle profit. How does the Tribunal test whether that estimate is reasonable?
By comparing it with the presumptive figures Parliament itself has fixed. The Delhi Bench upheld an estimate of Rs 50,000 per tanker per annum, about Rs 4,000 a month, on the footing that under the presumptive scheme in s.44AE the monthly income for a heavy vehicle was Rs 5,000 and for other goods carriages Rs 4,500, so the estimate was not based on irrational parameters, and it dismissed the appeal.
Decided by the ITAT (Shri Amit Shukla, Judicial Member and Shri O.P. Kant, Accountant Member (Income Tax Appellate Tribunal, Delhi Bench 'A+SMC', New Delhi)) on 2019-01-23, reported as ITA No. 3276/Del/2018, Assessment Year 2010-11. It bears on section 44AE, section 44AB, section 143(3), section 40(b) of the Income Tax Act 1961, in Presumptive Taxation & Audit, Assessment & Scrutiny and Evidence & Burden of Proof matters.
This is the other face of the presumptive scheme and it cuts against the assessee. Section 44AE is a benefit an eligible transporter may claim, but the figures in it are also a legislatively fixed measure of what a goods carriage is expected to earn, and an Assessing Officer who estimates at or below those figures after rejecting the books has a strong answer to the charge that his estimate is arbitrary. Practitioners who challenge an estimate purely as guesswork should compute the presumptive figure first: if the estimate is below it, the challenge is very likely to fail, and the ground should be shifted to the validity of the rejection of the books or to the specific defects alleged. Two limits on the order should be kept in view. It is short, and it does not analyse the defects in the books beyond accepting the findings below. And the assessee here was audited under s.44AB and had returned part of its income as assessable under s.44AE, so the section was in the picture on the assessee's own case; the order is not authority that s.44AE rates may be applied to a business that is not a goods-carriage business. Note that the CIT(A) had already directed that interest and remuneration to partners be allowed under s.40(b), and that direction was not disturbed.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee was a partnership firm engaged in the transportation of goods through owned as well as hired and leased trucks and tankers. It filed a return for AY 2010-11 on 15 October 2010 declaring total income of Rs 7,75,950. The case was selected for scrutiny and a notice under s.143(2) was issued and complied with. The Assessing Officer noticed the tax auditor's remark that the audit had been carried out under s.44AB and that the income and expenditure account included income of heavy vehicles (tankers) assessable under s.44AE. In view of various defects observed in the books, he rejected them and estimated the profit of the business in the assessment under s.143(3) completed on 30 March 2013, at Rs 29,00,000, being about Rs 50,000 per tanker per annum. The CIT(A) upheld the rejection and the estimate, with a direction to allow interest and remuneration to the partners in accordance with s.40(b). The assessee appealed to the Tribunal against both the rejection of the books and the estimate.
The appeal was dismissed. The estimate made by the Assessing Officer and confirmed by the CIT(A) was not based on irrational parameters, and in comparison with the estimation of income under the presumptive taxation scheme it was justified and reasonable (paragraphs 5 and 6).
The Bench recorded the CIT(A)'s note that an income of Rs 50,000 per tanker per annum had been estimated by the Assessing Officer, which worked out to around Rs 4,000 per month per tanker and which the CIT(A) considered reasonable. It then observed that under the presumptive scheme of taxation in s.44AE in respect of plying, hiring or leasing goods carriages, monthly income for a heavy vehicle was estimated at Rs 5,000 per month per vehicle and for a vehicle other than a heavy goods vehicle at Rs 4,500 per month per vehicle. Measuring the officer's estimate against those figures, it held that the estimate was not based on irrational parameters and that, in comparison with the estimation of income under the presumptive taxation scheme, the estimate made by the Assessing Officer and its confirmation by the CIT(A) were justified and reasonable.
We find that the estimation made by AO/CIT(A) is not based on irrational parameters.
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Handle my notice → Ask a CA on WhatsAppBy comparing it with the presumptive figures Parliament itself has fixed. The Delhi Bench upheld an estimate of Rs 50,000 per tanker per annum, about Rs 4,000 a month, on the footing that under the presumptive scheme in s.44AE the monthly income for a heavy vehicle was Rs 5,000 and for other goods carriages Rs 4,500, so the estimate was not based on irrational parameters, and it dismissed the appeal. This was decided by the ITAT (Shri Amit Shukla, Judicial Member and Shri O.P. Kant, Accountant Member (Income Tax Appellate Tribunal, Delhi Bench 'A+SMC', New Delhi)) and bears on section 44AE, section 44AB, section 143(3), section 40(b) of the Income Tax Act 1961. It is reported as ITA No. 3276/Del/2018, Assessment Year 2010-11. This is the other face of the presumptive scheme and it cuts against the assessee. Section 44AE is a benefit an eligible transporter may claim, but the figures in it are also a legislatively fixed measure of what a goods carriage is expected to earn, and an Assessing Officer who estimates at or below those figures after rejecting the books has a strong answer to the charge that his estimate is arbitrary. Practitioners who challenge an estimate purely as guesswork should compute the presumptive figure first: if the estimate is below it, the challenge is very likely to fail, and the ground should be shifted to the validity of the rejection of the books or to the specific defects alleged. Two limits on the order should be kept in view. It is short, and it does not analyse the defects in the books beyond accepting the findings below. And the assessee here was audited under s.44AB and had returned part of its income as assessable under s.44AE, so the section was in the picture on the assessee's own case; the order is not authority that s.44AE rates may be applied to a business that is not a goods-carriage business. Note that the CIT(A) had already directed that interest and remuneration to partners be allowed under s.40(b), and that direction was not disturbed. If it applies to you, the first step is this: Before attacking an estimate as arbitrary, compute what the s.44AE figures would give for the same fleet and the same months; if the estimate is lower, drop the arbitrariness ground.
The assessee was a partnership firm engaged in the transportation of goods through owned as well as hired and leased trucks and tankers. It filed a return for AY 2010-11 on 15 October 2010 declaring total income of Rs 7,75,950. The case was selected for scrutiny and a notice under s.143(2) was issued and complied with. The Assessing Officer noticed the tax auditor's remark that the audit had been carried out under s.44AB and that the income and expenditure account included income of heavy vehicles (tankers) assessable under s.44AE. In view of various defects observed in the books, he rejected them and estimated the profit of the business in the assessment under s.143(3) completed on 30 March 2013, at Rs 29,00,000, being about Rs 50,000 per tanker per annum. The CIT(A) upheld the rejection and the estimate, with a direction to allow interest and remuneration to the partners in accordance with s.40(b). The assessee appealed to the Tribunal against both the rejection of the books and the estimate. The matter was decided on 2019-01-23 by the ITAT (Shri Amit Shukla, Judicial Member and Shri O.P. Kant, Accountant Member (Income Tax Appellate Tribunal, Delhi Bench 'A+SMC', New Delhi)). On those facts the ITAT held as follows. The appeal was dismissed. The estimate made by the Assessing Officer and confirmed by the CIT(A) was not based on irrational parameters, and in comparison with the estimation of income under the presumptive taxation scheme it was justified and reasonable (paragraphs 5 and 6).
The Bench recorded the CIT(A)'s note that an income of Rs 50,000 per tanker per annum had been estimated by the Assessing Officer, which worked out to around Rs 4,000 per month per tanker and which the CIT(A) considered reasonable. It then observed that under the presumptive scheme of taxation in s.44AE in respect of plying, hiring or leasing goods carriages, monthly income for a heavy vehicle was estimated at Rs 5,000 per month per vehicle and for a vehicle other than a heavy goods vehicle at Rs 4,500 per month per vehicle. Measuring the officer's estimate against those figures, it held that the estimate was not based on irrational parameters and that, in comparison with the estimation of income under the presumptive taxation scheme, the estimate made by the Assessing Officer and its confirmation by the CIT(A) were justified and reasonable. In the words reproduced by the source cited on this page: "We find that the estimation made by AO/CIT(A) is not based on irrational parameters."
It was decided by the ITAT on 2019-01-23 and is reported as ITA No. 3276/Del/2018, Assessment Year 2010-11. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 44AE, section 44AB, section 143(3), section 40(b), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The appeal was dismissed. The estimate made by the Assessing Officer and confirmed by the CIT(A) was not based on irrational parameters, and in comparison with the estimation of income under the presumptive taxation scheme it was justified and reasonable (paragraphs 5 and 6). It arises in Presumptive Taxation & Audit, Assessment & Scrutiny and Evidence & Burden of Proof matters, on section 44AE, section 44AB, section 143(3), section 40(b) of the Income Tax Act 1961, and was decided by Shri Amit Shukla, Judicial Member and Shri O.P. Kant, Accountant Member (Income Tax Appellate Tribunal, Delhi Bench 'A+SMC', New Delhi). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Attack the rejection of the books instead: identify each defect the officer relied on and answer it, because once the rejection stands the estimate is very difficult to disturb. Use the correct s.44AE figures for the year — Rs 5,000 and Rs 4,500 a month applied for AY 2011-12 to AY 2014-15, Rs 7,500 flat from AY 2015-16, and the differentiated per-tonne rate for heavy goods vehicles from AY 2019-20. If the assessee is a firm, secure the s.40(b) deduction for partners' interest and remuneration out of the estimated income, as the first appellate authority directed here. Where the fleet is mixed — owned, hired and leased — put the composition on record, because an estimate applied uniformly across a mixed fleet is a different question from an estimate on owned vehicles.
Searched for later treatment; none was found. That is not the same as a source affirming it. A citedby: search returns nothing. A second probe on the firm's name with s.44AE returns only the order itself. No later decision adopting the use of the s.44AE presumptive figures as a yardstick for an estimate after rejection of books was found, and no Delhi High Court appeal from it was traced. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order opens with an unnumbered paragraph reciting the appeal and setting out the grounds, and its numbered paragraphs then run 2, 3, 4, 4.1, 4.2, 4.3, 4.4, 4.5, 5, 5.1 and 6, ending with the disposal. There is no duplicated paragraph number: the isolated figures '2' and '3' printed above the running head 'ITA No.3276/Del./2018' are page numbers, and the '1.' and '2.' inside the opening paragraph are the numbers of the grounds of appeal. Paragraph 5.1 is a further holding not reproduced in this entry: it upholds the estimate of Rs 5 lakh of net profit on receipts of Rs 1,71,30,734 from hired tankers, on the footing that the assessee's own comparative chart showed a gross profit of about Rs 11.21 lakh from those tankers, and it dismisses the grounds. The Bench's own reasoning is at paragraph 5, from which the quotation is taken. A discrepancy in the report that a reader must notice: the assessment year is 2010-11, but the monthly figures the Bench treats as applicable 'during the relevant period' — Rs 5,000 for a heavy vehicle and Rs 4,500 for other goods carriages — are the figures substituted into s.44AE with effect from 1 April 2011, that is from AY 2011-12; the lower figures applied to AY 2010-11. The Bench used those figures only as a comparative yardstick for the reasonableness of an estimate and not to compute income under s.44AE, so the mismatch does not affect the disposal, but the figures in this order must not be taken as the s.44AE rates for AY 2010-11. The order does not itself set out s.44AE. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was dismissed. The estimate made by the Assessing Officer and confirmed by the CIT(A) was not based on irrational parameters, and in comparison with the estimation of income under the presumptive taxation scheme it was justified and reasonable (paragraphs 5 and 6).
TaxSphere, “National Transport Company v ITO — the s.44AE presumptive rates used as the yardstick for an estimate after books were rejected”, https://taxnotice.vittsphere.com/caselaw/case/national-transport-company-v-ito-44ae-rates-as-the-yardstick-for-an-estimate/ (validity last checked 2026-09-08)
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My client is assessed under s.44AE on his own trucks, but he also hired trucks from the market. The officer has disallowed all the running expenses. Is that right?
My client wants to file under s.44AD. What turnover can he have, what rate must he declare, and can the firm still deduct partners' salary and interest from the presumptive figure?
My client runs six trucks, two of them well over twelve tonnes. What does he declare under s.44AE, and from which year did the per-tonne rate start?
What are the current 44AD, 44ADA and 44AB limits, and what does the 5% cash test mean?
