2014 (1) TMI 834 - AT - Income Tax

Validity of Assessment u/s 144 of the Act Held that - There was no defect in the books of account resulting in the very Financial Statements which book results could not be rejected for a separate estimation alone - The assessing authorities themselves have contradicted their findings inspite of the assessee claiming in the immediately preceding Assessment Year the Assessing Officer had accepted 1% to be taxed insofar as the learned CIT(A) in those years had directed the Assessing Officer to adopt 1% income on the gross lorry receipts of the assessee - there was no reason to divert from the consistent adoption of 1% of the gross receipts to be taxed in the hands of the assessee on the basis of book results insofar as the return of 1% income also includes the extra income generated by the assessee on the hiring of the tipper which has been restricted by the learned CIT(A) to 5% as against 24% returned. The Assessing Officer is directed to compute the total receipts income at 1% of the gross freight receipts plus receipts of tipper hiring and also to accept the income returned by the assessee disclosed in the audited Financial Statements for which there can be no separate addition insofar as the disallowance of salary and interest to the partners was not on the basis of assessee not to be subjected to assessment order being passed u/s.144 - The income from interest is to be taxed as returned by the assessee Decided partly in favour of Assessee.

Summary

Issues:
1. Assessment made under section 144 of the Income Tax Act challenged as arbitrary and unjustified.
2. Dispute over determination of income from business.
3. Allegation of improper and unjustified income determination.
4. Application of 5% Net Profit and enhancement of income deemed arbitrary.
5. Disagreement with re-determination of income by the Commissioner citing non-comparable case laws.

Analysis:

Issue 1:
The appellant challenged the assessment made under section 144 of the Income Tax Act as arbitrary and unjustified, claiming cooperation with the department. The Assessing Officer estimated the income at Rs. 96,41,327, disallowing salary and interest to partners under Section 184(5). The appellant argued against the arbitrary nature of the assessment.

Issue 2:
Dispute arose regarding the determination of income from the business. The Assessing Officer determined the income at Rs. 95,42,661, while the Commissioner set it at Rs. 4,03,87,306, leading to the appellant's contention of arbitrariness and lack of justification in the determination.

Issue 3:
The appellant alleged that the income determination was improper and unjustified, further challenging the application of 5% Net Profit and the enhancement of income without a valid basis.

Issue 4:
The application of 5% Net Profit and the subsequent enhancement of income were deemed arbitrary and unjustified by the appellant, questioning the validity of the Commissioner's actions in re-determining the income.

Issue 5:
The appellant disagreed with the Commissioner's re-determination of income, citing non-comparable and irrelevant case laws. The appellant argued that the Commissioner should have considered the submissions and contentions presented rather than relying on unrelated precedents.

The detailed analysis of the judgment reveals the appellant's dissatisfaction with the assessment under section 144, the disagreement over income determination, and the challenges against the application of 5% Net Profit. The appellant's arguments centered around the alleged arbitrariness and lack of justification in the assessment and income determination process, emphasizing the need for a fair and reasonable approach in determining the taxable income. Ultimately, the appeal was partly allowed, indicating a partial success for the appellant in challenging the initial assessment and income determination.