2018 (12) TMI 992 - HC - Income Tax

Allowability of loss - Defects in the Audited Books of Accounts - destruction of physical accounts due to heavy rains - sharp and continuous fall in nickel prices - Held that - We note that both the CIT(A) and the Tribunal on examination of the facts have come to the conclusion that there was material evidence available before the Assessing Officer for him to carry out necessary investigation to determine whether or not the loss suffered by the respondent assessee was justifiable. The best judgment assessment can certainly be resorted to by the Assessing Officer in the absence of any record, but it cannot be arbitrary. This is more particularly so when various supporting documents justifying their loss return was filed before the Assessing Officer and he had completely ignored the same. We find that this appeal essentially is in respect of question of facts. In the above view, the question as proposed does not give rise to any substantial question of law. Thus, not entertained.

Summary

Issues:
Challenge to order under Section 260A of the Income Tax Act, 1961 for Assessment Year 2009-10; Questions of law regarding upholding order of CIT(A) and sufficiency of information submitted by assessee for verification by Assessing Officer.

Analysis:
1. The respondent, engaged in trading metals, declared a loss of &8377; 18.74 lakhs for Assessment Year 2009-10, citing destruction of physical books of accounts due to flood. The Assessing Officer assessed income at &8377; 57.95 lakhs, disregarding evidence of loss. The CIT(A) allowed the appeal, noting supporting documents and lack of further verification by the Assessing Officer.

2. The Revenue appealed to the Tribunal, which upheld the CIT(A)'s decision. The Tribunal acknowledged the loss of physical accounts and the evidence provided by the respondent, emphasizing the lack of dispute by the Revenue regarding the submitted documents. The Tribunal highlighted the fall in steel prices and dismissed the Revenue's appeal, cautioning against arbitrary best judgment assessments.

3. Both the CIT(A) and the Tribunal found material evidence justifying the respondent's loss and criticized the Assessing Officer's failure to investigate despite the supporting documents. The judgment emphasized that best judgment assessments should not be arbitrary, especially when sufficient evidence is presented. The appeal was considered a question of facts, and the proposed legal questions were deemed insubstantial.

4. Ultimately, the Tribunal dismissed the appeal, emphasizing the importance of fair assessments and proper consideration of evidence. No costs were awarded in the case. The judgment highlighted the significance of thorough examination of facts and evidence in tax assessments to ensure fairness and justice in the process.