INCOME TAX APPELLATE TRIBUNAL
It would be relevant to recount the facts of the case in brief. The assessee’s return of income for the year, filed on 30-11-2006 at a loss of Rs.226.07 lakhs, was selected for scrutiny, serving notice u/s. 143(2) of the Act. There being no response to notice u/s. 142(1), the assessment was framed by the AO u/s. 144 of the Act, also considering the paucity of time, estimating the income at 5% of the turnover of Rs.1852.65 lakhs, i.e., at Rs.92.63 lakhs. In first appeal, the assessee raised contentions qua assessment u/s. 144 as well as on the quantum of the income assessed. The Revenue having served notice u/s. 142(1), i.e., which was not complied with, at the new address of the assessee, taking pains to locate the same (from the website of the Registrar of Companies), the assessee’s contention that there was no service of the said notice could not be accepted; it being incumbent on it to notify any change in its address to the Revenue, and which it had clearly failed to. As such, the framing of assessment u/s. 144 of the Act could not be assailed, and was accordingly upheld
DCIT, Circle-9, Ayakar Bhawan, 5th Floor, P7, Chowringhee Square, Kolkata – 700 069 (Appellant) V/s. Negamum Suppl iers Pvt . Ltd. , 4, Fairl ie Place, Mazanine Floor, Room No.M-32, Kolkata-700001[PAN: AAACN 9884A] (Respondent)
IN THE INCOME TAX APPELLATE TRIBUNAL
KOLKATA BENCH “A” KOLKATA
Before Shri Mahavir Singh, Judicial, Member and
Shri Sanjay Arora, Accountant Member
ITA No.574/Kol /2012
Assessment Year: 2006-07
Ayakar Bhawan, 5t h
Kolkata – 700 069
Negamum Suppl iers Pvt .
Ltd. , 4, Fairl ie Place,
Mazanine Floor, Room
[PAN: AAACN 9884A]
By Appellant Shri A.K.Paramanik, DR
By Respondent None
Date of Hearing 23-08-2012
Date of Pronouncement 3-08-2012
O R D E R
PER Sanjay Arora, AM:-
This is an Appeal by the Revenue directed against the Order by the ld. Commissioner of Income-Tax (Appeals)-VIII, Kolkata (‘CIT(A)’ for short) dated 05-01-2012, partly allowing the assessee’s appeal contesting its assessment u/s. 144 of the Inc-tax Act, 1961 (‘the Act’ hereinafter) for the assessment year (A.Y) 2006-07 vide order dated 22-12-2008.
2. The appeal raises a single issue, though per two grounds of appeal, i.e., Ground Nos. 1 & 2. In fine, the Revenue impugns the estimation of the assessee’s net profit, assessed on best judgment basis by the Assessing Officer (AO), at 5% of the assessee’s turnover for the relevant year, i.e., at Rs.92,63,238/-, and which stood modified by the first appellate authority to 0.50% of the said turnover.
3. It would be relevant to recount the facts of the case in brief. The assessee’s return of income for the year, filed on 30-11-2006 at a loss of Rs.226.07 lakhs, was selected for scrutiny, serving notice u/s. 143(2) of the Act. There being no response to notice u/s. 142(1), the assessment was framed by the AO u/s. 144 of the Act, also considering the paucity of time, estimating the income at 5% of the turnover of Rs.1852.65 lakhs, i.e., at Rs.92.63 lakhs. In first appeal, the assessee raised contentions qua assessment u/s. 144 as well as on the quantum of the income assessed. The Revenue having served notice u/s. 142(1), i.e., which was not complied with, at the new address of the assessee, taking pains to locate the same (from the website of the Registrar of
Companies), the assessee’s contention that there was no service of the said notice could not be accepted; it being incumbent on it to notify any change in its address to the Revenue, and which it had clearly failed to. As such, the framing of assessment u/s. 144 of the Act could not be assailed, and was accordingly upheld.
On merits of the income assessed, the ld. CIT(A) culled out the principles attending the framing of a best judgment assessment in his order, i.e., that it should reflect an honest estimate, taking a reasonable view of the entirety of the facts and circumstances and the material on record, even as some element of guess-work would always obtain, which though would not make operate to invalidate the same as long as the estimate represents a fair and reasonable view of the matter, and is not wild or arbitrary, i.e., is guided by the rules of justice, equity and good conscious. Reliance for the purpose was made by him on the decisions in the case of CIT v. Laxminarain Badridas (1937) 5 ITR 170 (PC); State of Kerala v. C. Velukutty (1966) 60 ITR 239 (SC) and CIT v. Ranicherra Tea Co. Ltd. (1994) 207 ITR 979 (Cal). Further, though the principle of res judicata does not apply to the proceedings under the Act, when a question of law or of fact stood decided in the assessee’s own case for an earlier year, the Tribunal would be justified in placing reliance on its earlier decision in the absence of any new material or change in the circumstances – CIT v. Velimalai Rubber Co. Ltd. (1990) 48 Taxman 356 (Ker.) [181 ITR 299] and CIT v. National Bearing Co. Ltd. (1994) 208 ITR 872 (Raj).
The assessee pleading before him that the AO had not given any reasons in support of his estimation, the matter was remanded by the ld. CIT(A) to the file of the AO for verification of facts. In the remand proceedings, in terms of the remand report itself, the relevant part of which stands reproduced by the ld. CIT(A) at page-10 of his order, the assessee produced the necessary evidences and clarifications before the AO, and which were examined by him, to, however, no adverse comment in the matter. The assessee’s declared and assessed profit for the immediately preceding year, i.e., A.Y. 2005-06, and which was the first year of its operations as a liquor trader, was at 0.42% of the turnover. The assessee, though sought to explain its returned loss for the year in terms of excessive licence payments as well as increase in the overhead expenses, seeking to justify the same with reference to the outstanding liability at Rs.74.55 lakhs as at year-end, the ld. CIT(A) found that the bulk of the said liability was for capital outlay, so that it would not impact the operating margin. He, therefore, estimated the assessee’s profit for the year at 0.5% of the turnover. Aggrieved, the Revenue is in appeal before us.
4. Before us, both the parties relied on the orders of the authorities below, i.e., to the extent favourable thereto.
5. We have heard the parties, and perused the material on record.
5.1 We, firstly, observe that the assessee is not in appeal, so that the assessment has to be considered as an assessment u/s. 144 of the Act, i.e., an aspect on which the impugned order carries a definite finding, even as it wrongly states of the assessment order as being one u/s. 143(3) of the Act. That being the case, in our view, it was not proper for the first appellate authority to have remitted the matter back to the file of the AO for allowing the assessee an opportunity to present its case, as well as produce the necessary documents or evidences and clarifications before him, as was afforded by the ld. CIT(A). Reference in this context is made to the decision in the case of CIT v. Rayala Corporation Pvt. Ltd. (1995) 215 ITR 883 (Mad). So, however, the same inconsequential as the Revenue has not challenged the said remission before us; both its grounds, as aforesaid, concerning the estimation of the net profit or the quantum of the income assessed.
5.2 Coming, next, to the issue on merits. The material on which reliance has been ostensibly placed by the authorities below in framing their respective estimates is not before us. It is incumbent on the party challenging an order to show as to in what manner the same is un-informed, and which could only be with reference to underlying records, i.e., the material on which the assessment, as also the revision therein as made, is purportedly based. In the instant case, the assessment order is completely silent on the basis of the estimation of profit by the AO at 5% of the turnover, being guided perhaps by a general notion that that should be a reasonable margin for a businessman to operate on. The same, thus, to that extent cannot be said to be a speaking order, which is a perquisite for the same to be considered as a valid one in the eyes of law. The appellate order makes reference to the assessee’s returned and assessed income for the immediately preceding year, and is therefore more complete and on a sounder basis, even as the reference is per force to only a single year in the past, and which may not be very representative of the assessee’s trade. Also, though definitely preferable, and thus it would only have been more appropriate, to refer also to the working results of other similar traders in liquor business for the relevant year, and to the industry results/average in general; the said information being available in the public domain, and considered and factored in the making an estimate, not having done so by the ld. CIT(A) would not by itself make his order un-sustainable in law. This is particularly so as the Revenue has not led any material to impugn the estimation as made by him, making out a prima facie case in its favour. Merely stating that the results are too low, without anything more, would be by itself be of no consequence. In fact, even where so, so that the Revenue exhibits an apparent infirmity or incongruity in the estimation as adopted by the first appellate authority, the
principle of natural justice would warrant a remand back to the file of the adjudicating authority to meet the same. Under the circumstances, we find no reason to interfere with the findings by the first appellate authority and, accordingly, uphold his order. We decide accordingly.
6. In the result, Revenue’s appeal is dismissed.
Order pronounced in Open Court on the date mentioned hereinabove at caption page.
(Mahavir Singh) (Sanjay Arora)
Judicial Member Accountant Member
Copy of Order Forwarded to:-
3. Concerned CIT
4. CIT (A)
5. DR, ITAT, Kolkata
6. Guard file.
Strengthen preparation & delivery of orders in the ITAT
1) date of taking dictation 23/08
2) direct dictation by Member straight on computer/laptop/dragon dictate No
3) date of typing & draft order place before Member 27/08
4) date of correction 27/08
5) date of further correction -
6) date of initial sign by Members 27/08
7) order uploaded on 28 /08
8) short-hand note attached to file Yes
9) final order and 2nd copy send to Bench Clerk on 28 /08