1995 (5) TMI 57 - AT - Income Tax

Summary

Issues:
1. Challenge to jurisdiction assumption by Asstt. CIT, Inv. Circle, Patiala.
2. Dispute over turnover estimation for cloth business.

Analysis:

Issue 1:
The appeal challenged the assumption of jurisdiction by the Asstt. CIT, Inv. Circle, Patiala, as being illegal due to the lack of reasons recorded for transfer of jurisdiction and failure to communicate such reasons to the assessee. The counsel for the assessee argued that the transfer violated the principles of natural justice as reasons were not communicated, citing the Supreme Court decision in Ajantha Industries & Ors. vs. CBDT & Ors. The Departmental Representative contended that communication of reasons was not necessary as the transfer was within Patiala. The Tribunal noted that the case was transferred from one officer to another within Patiala, distinguishing it from the Ajantha Industries case where the transfer was between different stations. The Tribunal held that the non-communication of reasons did not render the transfer invalid, as no appeal was provided against a transfer order under s. 127 of the IT Act. The Tribunal concluded that the Assessing Officer acted validly based on the transfer order, and the remedy might be sought through writ jurisdiction. Thus, the challenge to jurisdiction assumption was rejected.

Issue 2:
The dispute over turnover estimation for the cloth business arose from a search at the assessee's premises, leading to an addition of unrecorded sales based on diary notations. The Assessing Officer estimated sales at Rs. 8,50,000, resulting in an addition to the turnover. The CIT(A) reduced the estimated turnover to Rs. 2,50,000 and applied a net profit rate of 10%. The assessee argued that the turnover estimation was high, citing the turnover for the following year. The Tribunal considered the lack of books of account and the nature of the business, directing the Assessing Officer to take the net profit from the cloth business at Rs. 20,000, based on the turnover of Rs. 2 lacs. The appeal was partly allowed, settling the turnover dispute.

This comprehensive analysis covers the issues raised in the legal judgment, detailing the arguments presented by both parties and the Tribunal's reasoning and decision on each issue.