2013 (12) TMI 552 - HC - Income Tax

Power to reject books of accounts u/s 145 - Held that - The assessee filed its return of income in response to notice u/s 148 - The AO as well as CIT(A) made addition on the basis of estimate - The Tribunal is a final fact finding authority - The Tribunal reduced the addition being made on estimate - The AO should first point out the defect in bokks of accounts and reject them rather making an addition on adhoc basis - Decided against Revenue.

Summary

Issues:
Appeal under section 260-A of the Income Tax Act against the judgment of the Income Tax Appellate Tribunal for the assessment year 1993-94. Substantial question of law regarding the Assessing Officer's powers under section 145(3) of the Income Tax Act.

Analysis:
The appeal was filed by the Department under section 260-A of the Income Tax Act against a judgment and order passed by the Income Tax Appellate Tribunal for the assessment year 1993-94. The substantial question of law raised in the appeal was whether the Income Tax Appellate Tribunal was correct in not upholding the statutory powers given to the Assessing Officer under section 145(3) of the Income Tax Act, 1961. The appeal was admitted by a coordinate Bench of the High Court for consideration.

Upon reviewing the record, it was found that a search and seizure operation was conducted at the assessee's premises in 1992, leading to the discovery of certain incriminating documents. The assessee filed its return of income after the search, showing a total loss. The Assessing Officer made additions to the income, which were partly upheld by the CIT(A) based on estimation. Both the Department and the assessee then appealed to the Income Tax Appellate Tribunal, which further reduced the addition based on estimation.

The High Court noted that the addition was made on an estimate basis by the Assessing Officer and the CIT(A), and the Tribunal also reduced the addition on the same basis. The Court cited various cases to establish that estimation is a question of fact. Additionally, it was emphasized that the Tribunal is the final fact-finding authority, as supported by legal precedents.

Based on the facts and legal principles presented, the High Court concluded that the substantial question of law raised in the appeal favored the assessee and went against the Department. Therefore, the appeal filed by the Department was dismissed, affirming the decision of the Income Tax Appellate Tribunal.