2011 (11) TMI 52 - HC - Income Tax

Section 145(3) of the Income Tax Act - manufacturing and trading of Hawai Chappals, Canvas shoes etc - books of accounts of the assessee were found to be defective - Revenue contended that tribunal had also erred in law in allowing the deduction on personal uses of various assets claimed by the respondent in its books of accounts - CIT(A) said that even if it is accepted for the moment that there was defect in the books of account as the AO tried to, it is well established position of law that past result of assessee is the best guide to estimate the income. Undisputedly, the assessee had shown better turnover and better g.p. rate during the year in comparison to immediately preceding year as discussed above. The assessee has also met out the defects pointed out by the A.O - Held that appeal is devoid of any merit - decided in favor of assessee.

Summary

Issues:
Appeal by Revenue under Section 260A of the Income Tax Act against Tribunal's order. Assessment of Assessee firm for Asstt. Year 2004-05. Disallowance of expenses and trading addition by Assessing Officer. Appeal before CIT(A) and Tribunal. Invocation of Section 145(3) of the Income Tax Act. Deduction on personal uses of assets. Confirmation of CIT(A) and Tribunal orders.

Analysis:
The Revenue filed an appeal under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal, Jaipur Bench 'A', regarding the assessment of an Assessee firm engaged in manufacturing and trading. The Assessing Officer had made trading additions and disallowed expenses, which were partly allowed by the Commissioner of Income Tax (Appeals)-III, Jaipur. The Tribunal dismissed the Revenue's appeal and partly allowed the Assessee's cross-objection. The Revenue appealed to the High Court, alleging errors in not confirming the Assessing Officer's order under Section 145(3) of the Act and allowing deductions for personal asset uses.

The High Court considered the submissions and provisions of Section 145, particularly Section 145(3) of the Income Tax Act. It concluded that there was no substantial question of law involved in the case. The CIT(A) noted an increase in turnover and gross profit rate, finding no evidence of undisclosed transactions by the Assessee. The Tribunal concurred, emphasizing the Assessee's improved turnover and profit rates compared to the previous year. It highlighted that past results are a reliable guide to estimate income. The High Court, after reviewing the detailed considerations by the CIT(A) and Tribunal, declined to interfere with their concurrent findings. As no substantial question of law existed, the High Court dismissed the appeal, deeming it meritless.