2016 (11) TMI 369 - HC - Income Tax

Administrative expenditure - Held that - A perusal of the chart shows that not only trend of administrative expenses have gone progressive in assessment years 1986-87, 1987-88 and 1988-89 but there is much increase in assessment year 1989-90. There was no justification to assume that administrative expenses of 1988-89 were same as that of 1986-87 and CIT (Appeals) has not given any cogent reason whatsoever, to accept this profitability that is why in light of difference in receipts of expenses shown by the assessing officer, Tribunal has not accepted the same and in our opinion rightly so. Tribunal has not found the finding of CIT (Appeals)acceptable and reversing the same, it has accepted profitability as assessed by assessing officer. It is no doubt true that appellate authority cannot pass order of dismissal/rejection without reversing/upsetting findings recorded by Court/ authority below which has not been done by CIT (Appeals) in the present case. For reasons aforesaid, Tribunal has discussed profitability as accepted by CIT (Appeals) and found the same not justified or correct, has rightly declined to accept the same. Order of Income Tax Appellate Tribunal restoring assessment order cannot be said to be faulty or erroneous in any manner.

Summary

Issues:
Assessment proceedings for assessment year 1989-90, Estimation of allowable expenditure, Net profit rate determination, Administrative expenses verification and estimation.

Analysis:

1. The appeal under Section 260-A of the Income Tax Act, 1961 arose from assessment proceedings for the assessment year 1989-90. The Income Tax Appellate Tribunal set aside the order passed by the Commissioner of Income Tax (Appeals) and estimated the allowable expenditure per month at ?1,15,000 as against ?1,00,000 estimated by the Assessing Officer.

2. The Commissioner of Income Tax (Appeals) had assessed the net profit rate at 1% for the appellant based on previous assessments. However, the Tribunal did not agree with this approach and discussed various expenses claimed by the appellant, including Advertisement Expenses, Vehicle Running Expenses, and others. The Tribunal considered the nature of expenses and estimated the allowable expenditure at ?1,15,000.

3. The Assessing Officer found that the administrative expenses claimed by the assessee were not verifiable. The Tribunal considered the contract receipts for the assessment year 1987-88 and estimated the administrative expenses for the current assessment year, giving weight to the inflationary trend. The administrative expenses were determined at ?18.00 lakhs.

4. The Tribunal analyzed the details of administrative expenses claimed by the assessee, showing a progressive increase over the assessment years. The Tribunal disagreed with the Commissioner of Income Tax (Appeals) for assuming that administrative expenses of 1988-89 were the same as in 1986-87. The Tribunal accepted the profitability as assessed by the Assessing Officer.

5. The Tribunal concluded that the findings of the Commissioner of Income Tax (Appeals) regarding profitability were not justified. The Tribunal found no fault in the order of the Income Tax Appellate Tribunal restoring the assessment order. The appeal lacked merit and was dismissed based on the discussions and analysis provided.

6. In summary, the judgment addressed issues related to the estimation of allowable expenditure, determination of net profit rate, verification and estimation of administrative expenses. The Tribunal's decision was based on a detailed analysis of the facts and circumstances, leading to the dismissal of the appeal.