2003 (7) TMI 45 - HC - Income Tax

Assessee had deliberately kept the account books incomplete - no illegality can be said to have been committed by the Assessing Officer when he invoked section 145(2) of the Act and assessed the income of the assessee on estimate basis - Tribunal held that if the incentives are taken into account the gross profit rate would go to .3 per cent. - Tribunal is justified in fixing the gross profit rate on estimate basis at .27 per cent. of the total turnover - Tribunal did not commit any illegality by directing the assessment of the assessee s income on estimate basis by taking gross profit rates at .27 per cent.

Summary

Issues:
1. Application of section 145(2) of the Income-tax Act for estimating income.
2. Justification for enhancing income maintained by the Commissioner of Income-tax (Appeals).
3. Assessment of income based on estimate basis.
4. Validity of invoking section 145(2) due to incomplete account books.
5. Consideration of gross profit rates from different sources for income assessment.

Analysis:
1. Application of section 145(2) for estimating income:
The appellant, engaged in lottery ticket sales, did not file returns until after a search at their premises. The Assessing Officer invoked section 145(2) due to incomplete account books, estimating income at Rs. 10,48,000. The Commissioner of Income-tax (Appeals) reduced this to Rs. 1,50,000, considering various factors. The Tribunal directed assessment at a gross profit rate of .27 per cent., excluding estimated expenses, based on the case of M/s. R.P. Lottery.

2. Enhancement of income by the Commissioner of Income-tax (Appeals):
The Commissioner of Income-tax (Appeals) allowed relief of Rs. 9,98,000, considering the appellant's operations and surrender made during search. The Commissioner also deleted an addition of Rs. 1,00,000 as agricultural income, based on previous acceptance. The Tribunal upheld this decision regarding agricultural income.

3. Assessment of income based on estimate basis:
The Tribunal directed the Assessing Officer to calculate income at a gross profit rate of .27 per cent., excluding estimated expenses. The Tribunal considered factors such as incentives received by other entities to determine the appropriate gross profit rate for the appellant.

4. Validity of invoking section 145(2) due to incomplete account books:
The Assessing Officer invoked section 145(2) due to incomplete account books, as observed from missing cash balance entries. The Tribunal did not find fault with this decision, as the appellant had not challenged the rejection of the books of account.

5. Consideration of gross profit rates from different sources for income assessment:
The Tribunal considered various gross profit rates from different sources, ultimately applying a rate of .27 per cent. for the appellant's income assessment. The Tribunal's decision was based on comparisons with similar cases and excluded certain incentives to arrive at the final gross profit rate.

In conclusion, the High Court dismissed the appeal, agreeing with the Tribunal's assessment based on the gross profit rate of .27 per cent. applied to estimate the appellant's income. The Court found no substantial question of law arising from the case.