Commissioner of Income Tax vs T.M. Kuruvilla

C.N. Ramachandran Nair, J.—Heard the standing counsel appearing for the appellant and Sri A. Kumar appearing for the respondent.

The question raised is whether the Tribunal was justified in confirming the order of the first appellate authority in accepting the income returned by the assessee and books of account produced in support thereof. On the facts, it is seen that the assessee filed the original return declaring income of Rs. 2,40,638. A revised return was filed declaring a total income of Rs. 4,01,013. The assessee''s case was that the revised return was required to be filed because of the omission to include income from house property amounting to Rs. 1,60,375. During the previous year relevant for 2003-04, the assessee declared loss from contract receipts of over Rs. 69 lakhs. Similarly the assessee has hotel business where the turnover declared was Rs. 25 lakhs and result is a loss. The result of the assessee''s business in restaurant led to a nominal profit of Rs. 23,558, where the turnover was over Rs. 23 lakhs. The assessee claimed depreciation on two imported cars which were not allowed by the Assessing Officer. We find from the assessment order that the Assessing Officer has found that expenses on various items were covered by self-prepared vouchers and some of the expenditure was not covered even by vouchers. Since accounts are found unacceptable for many reasons, the Assessing Officer estimated income under various heads of business. Even though in first appeal, the appellate authority directed acceptance of book figures, the Department filed appeal before the Tribunal which was also dismissed. It is against the Tribunal''s order this appeal is filed by the Department.

After hearing both sides and on going through the Tribunal''s order, we find that they have not even considered the assessment order where the Assessing Officer has stated several reasons for rejecting the books of account. When the first appellate authority reversed the finding of the Assessing Officer, it was the duty of the Tribunal as a fact finding authority to examine as to which authority''s finding is correct. We are obliged to interfere with the Tribunal''s order because the Tribunal has not exercised its jurisdiction properly and fairly. We, therefore, set aside the order of the Tribunal and remit the matter to the Tribunal to re-examine the appeal after giving opportunity to the parties. We make it clear that the Tribunal should call for the books of account and examine whether inadequacies of the accounts and the reasons stated by the Assessing Officer for rejection of it exist and then decide the appeal.