Commissioner of Income Tax vs Charbhuja Trading Co.

This appeal has been filed by revenue, against the judgment of the Tribunal dated 2-2-2005, accepting the appeal of the assessee, and deleting the addition made by the assessing officer, and confirmed in appeal, so also treating Form No. 12 to have been filed on 26-1-1992, and at the same time, holding, that the assessing officer has not verified the statements made by the assessee.

The appeal was admitted by framing following three substantial questions of law:

Whether in the facts and circumstances, the Tribunal was justified in deleting the addition and setting aside the order of assessing officer as confirmed by Commissioner (Appeals) without assigning any reasons for taking a different view than what has been taken by authorities below ?

Whether there was any material before the Tribunal to reverse the findings reached by the lower authorities about the state of affairs of the books of accounts produced by (sic. before) the assessing officer and consequently resorting to best judgment assessment ?

Whether in the facts and circumstances of the case, the Tribunal was justified in law in allowing registration of the firm u/s 184(7) of the Act of 1961 without there being any application having been moved when according to the admitted case of the assessee the earlier counsel has failed to produce the application of the registration of the firm ?

So far as first two questions are concerned, order of the Tribunal shows, that all the Tribunal has done, is to quote the observations of the learned Commissioner (Appeals), made in para 3.1, then has reproduced the submissions, made on behalf of the assessee, and then has straightway, held as under:

I am convinced that the assessee had maintained proper books which were only audited and the assessee had traded for only five months starting from October to February, I accept the ground of appeal and set aside the findings of the Commissioner (Appeals) and delete this addition.

It is required to be grasped, that the learned Tribunal under the scheme of things, is a final court of fact as appeal u/s 260A, lies only on substantial questions of law, with the consequence that, learned Tribunal is required fo go into all factual aspects of the matter, appreciate them and then record its own findings.

So far as finding recorded by the Tribunal, as quoted above, is concerned, on the face of it, some of the findings of the assessing officer, and the learned Commissioner (Appeals), of course, did not appear to be sustainable, but at the same time, the finding albeit the cryptic finding, recorded by the Tribunal, is also not sustainable. A look at the order of the assessing officer shows, that it has positively been recorded, that according to the assessee, the books of account were misplaced somewhere by his erstwhile advocate late Shri Basanti Lal Jain, and are not traceable, therefore, the same had not been filed, and had simply filed audited account, which has not been accepted. Thus, the finding of the learned Tribunal about assessee having maintained proper books, which were duly audited, is, on the face of it, unsustainable, being dead against the assessee''s own case, as it is writ at large on record, that the Cotton Corporation of India has certified to have purchased the cotton from the assessee to the tune of Rs. 1,44,12,908, while the assessee has disclosed the sale to the tune of Rs. 1.24 crore. In absence of books of accounts and in absence of any discussion of material, to be available with the Tribunal, to believe, the appellant to have undertaken sale worth Rs. 1.24 crore only, the finding, on the face of it, is bad. Likewise, so far as finding of the learned Commissioner (Appeals) and assessing officer is concerned, may be that books of accounts were not produced, but then to allow deduction of expenses in paltry amount of Rs. 40,000 only, on the face of it is absurd. As appears from the submissions, recorded by the learned Tribunal, that the assessee has satisfied (sic-? specified) the names of transporter, purchaser, data bilty and lorry number, weight and amount of freight. Likewise, other external evidence as was available to support the expenditure was also produced, which has not been considered by the learned authorities below and the Tribunal as well. Then it is required to be comprehended, that a person transacting business worth more than Rs. 1.44 crore, could not be able to manage the business by incurring the paltry expenses of Rs. 40,000 under the different heads. .

We may make it clear, that we should not be understood to the recording findings on any of the items either way, so as to influence decision to be arrived at by the learned Tribunal. The observations made are only for the purpose of appreciating the unsustainable finding recorded by the Tribunal.

Thus, the first two questions as framed are required to be, and are answered in favour of the revenue and against the assessee.

So far as question No. 3 is concerned, it is required to be reappreciated by the Tribunal. Firstly, as to whether, it is established that the assessee has submitted Form No. 12 on 28-1-1992, as alleged, and if is found to have not been submitted, then the consequences thereof were also required to be gone into on the basis; of the legal provisions, as they existed at the relevant time, and on the basis of case law, if any.

Thus, the question No. 3 is answered, in the manner that the Tribunal was not justified in allowing registration without examining about the aspect of the matter.

In the result, the appeal is allowed and the matter is remitted back to the Tribunal for deciding the appeal afresh on all aspects, keeping in view the observations made above.