2015 (7) TMI 1318 - AT - Income Tax

Non service of the jurisdictional notice u/s.143(2) - Notice not being not within the stipulated time period - prescribed mode of service u/s.282(1)(a) - HELD THAT - Service on the assessee to be on 30.09.2010, invoking the presumption of section 27 and section 114(f) of the General Clauses Act and the Indian Evidence Act respectively, as well as noticing and appreciating the material placed on record. This, despite, we may reiterate, the position in law, i.e., as to the controversy arising, in view of the objection raised by the assessee during the assessment proceedings being limited to the time of service, which itself therefore becomes undisputable. Whichever way one may thus look at the matter, service on the assessee-firm on 30/9/2010 is in law proved under the given facts and circumstances of the case. The same being within the time limitation stipulated under proviso to s. 143(2), assailing the assessment for want of jurisdiction on that score is misplaced. We decide accordingly. Estimation of income - rejection of books of accounts - HELD THAT - We only consider it fit and proper to estimate the assessee s income for the year holding of a change in the assessee s business for the current year, so that trading in paper, as stated in its SOF, was also added to the existing business of printing. We estimate the income for the year by ascribing the incremental sales to the trading business (in printing paper), retaining the sales and the net profit of the existing business to the level as disclosed for the immediately preceding year, i.e., at ₹ 70 lacs and 5.0% respectively (by rounding of the same). For the balance sales of ₹ 4469.32 lacs for the current year, we estimate the net profit at 1.0%, i.e., at 1/5 of the profit on the manufacturing activity, and is also in line with the industry average, at least apparently. The Revenue has also not brought or even relied upon any material in this regard. This, i.e., the said estimation by us, shall also take care of the Revenue s appeal as well, which impugns the allowance of the indirect expenditure as claimed by the assessee.

Summary

Issues Involved:
1. Validity of the assessment due to non-service of jurisdictional notice under Section 143(2) of the Income Tax Act, 1961.
2. Estimation of income and rejection of books of accounts.

Issue 1: Validity of the Assessment Due to Non-Service of Jurisdictional Notice Under Section 143(2)

The assessee argued that the assessment was invalid due to non-service of the jurisdictional notice under Section 143(2) of the Income Tax Act. The assessee, a partnership firm, claimed that the notice was not served within the stipulated time. The Revenue, however, provided evidence of dispatch through registered post, supported by the dispatch list and acknowledgment from the postal authorities. The Tribunal referred to Sections 282 and 292BB of the Income Tax Act, Section 27 of the General Clauses Act, and Section 114 of the Indian Evidence Act. The Tribunal noted that the presumption of service under Section 27 of the General Clauses Act applies unless contrary evidence is provided. The Tribunal found that the notice was served on 30.09.2010, within the stipulated time, thus validating the assessment.

Issue 2: Estimation of Income and Rejection of Books of Accounts

The assessee's books of accounts were rejected due to various deficiencies, and income was estimated based on past years' results. The assessee claimed that its business had changed to trading in paper, which yields a lower profit margin. However, the Tribunal noted that there was no substantial evidence to support the change in business. The Tribunal observed a significant increase in turnover and a drastic reduction in indirect expenditure, indicating a change in business profile. The Tribunal estimated the income by attributing incremental sales to the trading business and retaining the sales and net profit of the existing business at the previous year's level. The Tribunal allowed the assessee's claim for indirect expenditure and partially allowed both the assessee's and Revenue's appeals.

Conclusion:

The Tribunal held that the service of notice under Section 143(2) was valid and within the stipulated time. The Tribunal also estimated the income by considering the change in business profile and allowed the assessee's claim for indirect expenditure. Both the assessee's and Revenue's appeals were partly allowed.