Commissioner of Income Tax vs Naresh Babu Suresh Chand Orai

The above appeal has been admitted on the following substantial question of law:- 1. Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was correct in law in confirming the action of the Commissioner of income tax (Appeals) in directing the Assessing Officer to exclude the ''Nirgam Mulya'' from the purchase price for the purpose of computation of the assessee''s, income as per the provisions of section 44AC of the income tax Act, 1961?

Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was correct in law in holding that ''Nirgam Mulya'' was a part of bid money and did not form part of purchase price for the purpose of section 44AC of the income tax Act, 1961?

Heard Sri Shambhu Chopra, learned counsel for the Department and Sri Ashish Bansal, learned counsel for the assessee-respondent.

The dispute relates to the assessment year 1990-91.

The assessee is a country liquor contractor. The Assessing Officer made assessment u/s 143(3) of the income tax Act, on a total income of Rs. 21,81,850/-. The Assessing Officer, during assessment proceedings, required the assessee to explain why its income should not be determined in accordance with the provisions of 44AC of the income tax Act and why its income should not be computed after including the ''Nirgam Mulya'' amounting to Rs. 38,37,683/-.

The case of the assessee was that the ''Nirgam Mulya'' could not be included in the purchase price for determining income u/s 44AC of the income tax Act. The tribunal by order under appeal has accepted the contention of the assessee and held that the ''Nirgam Mulya'' is the part of bid money and does not form part of the purchase price for the purpose of section 44AC of the income tax Act.

A Division Bench of this court in Commissioner of Income Tax Vs. Shanta Prasad Resham Singh, has held that the provision of section 44AC do not dispense with the regular assessment in accordance with sections 28 to 43C of the Act. It has further been held that section 44AC is a valid piece of legislation and is in adjunct to and explanatory to section 206C of the Act.

In view of the above, the income of the assessee has to be calculated u/s 143(3) of the income tax Act. In this view of the matter, the questions raised by the Department are academic in nature as the income has been calculated as per sections 28 to 43 of the Act. We, therefore, do not find any merit in the appeal. The appeal is dismissed.