2009 (10) TMI 909 - AT - Income Tax

Summary

Issues involved: Cross appeals filed by the assessee and the Revenue against the order of CIT(A) dated 24.12.2008 for AY 2003-04, in the matter of order passed by the AO u/s 143(3)/144 of the IT Act.

Summary:

1. Assessee's Delay in Submission of Details:
The AO observed that the assessee, engaged in manufacturing, food processing, and infotech, deliberately delayed submission of relevant details despite multiple opportunities. The AO disallowed half of the US office expenses due to lack of furnished details and added it back to the income. The AO also rejected the claim for deduction u/s 80IA, stating the assessee was not engaged in manufacturing activity. Additionally, expenses related to the infotech division were disallowed under Section 14A read with Section 10A. The assessment was completed u/s 143(3)/144, resulting in the deletion of some expenditure by CIT(A) and the direction for carry forward of losses related to the infotech division.

2. Best Judgment Assessment and Legal Position:
The assessee contended before CIT(A) that the AO cannot compute income based on guesswork and speculation. The AO's assessment was framed u/s 143(3)/144 due to the non-cooperative attitude of the assessee. While the AO has wide powers for best judgment assessment, it should not be arbitrary or punitive but based on a fair estimate considering all facts. The AO must indicate the basis of income assessed, failing which the order is liable to be set aside. The CIT(A) also did not correctly appreciate the legal position regarding set off and carry forward loss of an exempt unit.

3. Decision and Restoration of Appeal:
After considering the arguments, the Tribunal decided to restore the appeal to the AO for fresh examination of all issues. The assessee is directed to provide all relevant details, and the AO is instructed to re-examine all claims after giving the assessee a fair hearing. Both the appeals of the assessee and Revenue are allowed for statistical purposes.

Decision pronounced in the open Court on 14th October, 2009.