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2018 (1) TMI 1504 - HC - Income TaxBest judgment assessment - NP determination - estimation of profit - as per ITAT CIT (A) was justified in directing the Assessing Officer to recompute the profits by increasing the same @ 1% as against 2% applied by the Assessing Officer - HELD THAT - On due consideration of the arguments of the learned counsel for the parties so also the law laid down by the Supreme Court in the case of State of Orissa v. Maharaja Shri B.P. Singh Deo 1969 (12) TMI 2 - SUPREME COURT and a Division Bench of this Court in the case of Karan Singh v. Commissioner of Wealth Tax 1980 (2) TMI 24 - MADHYA PRADESH HIGH COURT we are of the view that the order passed by the learned Appellate Tribunal is based on best judgment assessment . The power to levy assessment on the basis of best judgment is not an arbitrary power; it is an assessment on the basis of best judgment. Therefore the Tribunal was not in error in confirming the decision of the Commissioner of Income Tax (Appeal). No case to interfere with impugned order passed by the learned Appellate Tribunal as prayed for is made out; nor any substantial question of law is arising in this appeal.
Issues:
1. Estimation of profits by the Assessing Officer. 2. Justification of increasing profit by 1%. 3. Application of best judgment assessment. 4. Confirmation of the decision of the Commissioner of Income Tax (Appeal). Estimation of Profits by the Assessing Officer: The appeal under Section 260-A of the Income Tax Act, 1961 was filed against the order of the Income Tax Appellate Tribunal, which had increased the profit by 1% for the assessment year 2011-12. The Tribunal found that the Assessing Officer's estimation of profits lacked cogent and relevant material. The Tribunal noted that the net profit for the relevant assessment year would be much higher than the average of the two preceding years if a 2% increase was considered. Therefore, the Commissioner of Income Tax (Appeal) was reasonable in directing the Assessing Officer to recompute the profits by increasing it by 1%. Justification of Increasing Profit by 1%: The Commissioner of Income Tax (Appeal) had allowed the appeal filed by the assessee in part and directed the Assessing Officer to recompute the profits by increasing it at the rate of 1% instead of the 2% applied in the original assessment order. The Income Tax Appellate Tribunal considered the net profit ratios of previous assessment years and concluded that the 1% increase was justified. The Tribunal dismissed the appeal of both the revenue and the assessee, upholding the decision to increase the profit by 1%. Application of Best Judgment Assessment: The Tribunal based its decision on the concept of "best judgment assessment," emphasizing that it is not an arbitrary power but an assessment made on the basis of the best judgment. The Tribunal found that the Assessing Officer's estimation of profits lacked a solid foundation, leading to the conclusion that the Commissioner of Income Tax (Appeal) was justified in increasing the profit by 1%. The Tribunal held that the power to levy assessment based on best judgment is not arbitrary but a reasoned decision. Confirmation of the Decision of the Commissioner of Income Tax (Appeal): Upon considering the arguments and legal precedents, the Court found that the Tribunal's order was based on best judgment assessment. It noted that the Tribunal erred in confirming the decision of the Commissioner of Income Tax (Appeal). The Court concluded that there was no case to interfere with the impugned order passed by the Appellate Tribunal, as no substantial question of law was arising in the appeal. Consequently, the Income Tax Appeal was dismissed for lacking merit.
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