2011 (3) TMI 1792 - AT - Income Tax

Summary

Issues involved: Appeal against assessment order u/s 143(3) of the Income Tax Act, 1961 for A.Y. 2002-03. Addition of various sums to total income by the Income Tax Officer.

Summary:

Issue 1: Assessment Order u/s 143(3)
The appellant challenged the assessment order u/s 143(3) of the Income Tax Act, 1961, contending that the CIT(A) erred in confirming the order without considering the details and documents filed during the assessment proceedings.

Issue 2: Addition to Total Income
The Income Tax Officer added manufacturing expenses, share capital, unsecured loans, current liabilities, personal expenses, finance charges, administrative, selling & distribution expenses, and additions in fixed assets to the total income. The appellant argued that these additions were arbitrary and excessive.

Detailed Judgment:
The appellant, a company engaged in the pharmaceutical business, filed a return declaring a loss for A.Y. 2003-04. After scrutiny, the Income Tax Officer assessed the income at a higher amount due to lack of cooperation from the appellant in providing necessary details. The CIT(A) partially allowed the appeal, leading the appellant to file a second appeal before the ITAT.

Consequent to the ITAT's decision to set aside the assessment order, the AO re-assessed the income, adding various expenses and sums back to the declared loss. The appellant contended that it had maintained proper records, which were not considered by the lower authorities. The CIT(A) provided partial relief, prompting the appellant to appeal to the Tribunal.

The Tribunal noted that even in a best judgment assessment, the AO cannot adopt an arbitrary approach without proper records. The lower authorities were criticized for unjustifiably adding various expenses and sums to the income. The Tribunal found the assessment to be excessive, harsh, and arbitrary, ordering it to be set aside and re-assessed by the AO, with proper consideration of the appellant's records.

In conclusion, the appellant's appeal was allowed for statistical purposes, emphasizing the need for a fair and reasonable assessment process based on available records and legal requirements.