2011 (12) TMI 245 - HC - Income Tax

Books of accounts produced were rejected as unreliable by A.O. - CIT(A) relying on order in case of CIT v. Dabur Bricks Co. accepted the assessee s appeal Held that - The said order has been found to be suffering from perversity and has been set aside by a separate order CIT v. Dabur Bricks Co. (2011 - TMI - 208233 - Punjab And Haryana High Court ). Keeping in view the reasons recorded therein, the entire basis of the order passed by CIT(A) & Tribunal are also not sustainable. Therfore, the matter is remitted back to the Tribunal to decide the appeal afresh. - Decided in favor of Revenue

Summary

Issues:
1. Interpretation of substantial questions of law in Income Tax Appeals under Section 260-A of the Income Tax Act, 1961.
2. Assessment of income based on estimation and reliability of books of accounts.
3. Rejection of books of accounts by the Assessing Officer and subsequent appeal process.
4. Perversity in the order passed by the Tribunal and its implications on the assessment.

Analysis:
1. The judgment pertains to Income Tax Appeals filed under Section 260-A of the Income Tax Act, 1961, arising from an order by the Income Tax Appellate Tribunal. The revenue raised substantial questions of law regarding the correctness of the Tribunal's order. The first question was whether the Tribunal's order was perverse due to incorrect assumptions of fact. The second issue was related to the cogency of evidence supporting the finding that the assessee's books of accounts were free from any infirmity.

2. A survey under Section 133A of the Act was conducted on the assessee's business premises, leading to the estimation of 70 lakh bricks manufactured during the year based on loose papers found. The Assessing Officer made additions to the income by applying a net profit rate of 12% due to the rejection of the assessee's books of accounts as unreliable. The Commissioner of Income Tax (Appeals) later applied a gross profit rate of 14.8%, as claimed by the assessee, and confirmed the assessment after adjustments. The CIT(A) relied on a previous case and accepted the assessee's appeal.

3. The Tribunal's order was found to be perverse and was set aside in a separate order. The judgment highlighted the perversity in the Tribunal's decision and concluded that the entire basis of the orders by the CIT(A) and the Tribunal was not sustainable. As a result, the questions of law were answered in favor of the revenue against the assessee. The matter was remitted back to the Tribunal for a fresh decision on the appeal based on merits and in accordance with the law.

4. In conclusion, the judgment addressed the issues of interpretation of substantial questions of law, assessment based on estimation and reliability of books of accounts, the rejection of books of accounts, and the perversity in the Tribunal's order. The decision emphasized the need for a fresh assessment based on the correct application of the law and factual considerations.