2004 (10) TMI 288 - AT - Income Tax

Summary

Issues Involved:
1. Completion of assessment under section 144.
2. Application of provisions of section 44AD(6).
3. Interest charged under section 234A.
4. Service of notice under section 142(1).
5. Admission of books of account by CIT(A).

Detailed Analysis:

1. Completion of Assessment under Section 144:
The assessee challenged the completion of assessment under section 144, arguing that the assessment was not rational and lacked a valid basis. The Tribunal noted that despite multiple notices issued under sections 143(2) and 142(1), the assessee did not produce the necessary documents, leading the Assessing Officer to complete the assessment under section 144. The Tribunal found that the Assessing Officer was justified in completing the assessment under section 144 due to the assessee's non-compliance with the notices.

2. Application of Provisions of Section 44AD(6):
The assessee contended that section 44AD(6) was not applicable for the assessment year 1995-96 as it came into force with effect from 1-4-1998. The Tribunal observed that the Assessing Officer did not invoke section 44AD(6) but instead applied section 44AD(1) due to the absence of books of account. The Tribunal upheld the application of section 44AD(1) by the Assessing Officer, noting that the contract receipts were less than Rs. 40 lakhs and the net profit rate of 8% was appropriately applied.

3. Interest Charged under Section 234A:
The Tribunal found that the assessee did not mention anything about the interest charged under section 234A in his written submission. In the absence of any material on record, the Tribunal did not find any merit in the ground taken by the assessee regarding the interest charged under section 234A.

4. Service of Notice under Section 142(1):
The Tribunal noted that the CIT(A) observed that the issue of notice under section 142(1) was not a precondition for completing the assessment under section 144. However, the Tribunal emphasized that the service of notice under section 142(1) was a significant procedural requirement. The dissenting Accountant Member highlighted that no material was produced by the revenue to show that the notice under section 142(1) was actually served on the assessee. The Tribunal found that the assessment order was unsustainable due to the lack of evidence of service of notice under section 142(1).

5. Admission of Books of Account by CIT(A):
The Tribunal noted that the CIT(A) did not entertain the books of account produced by the assessee on the ground that they were not audited as required under section 44AD(6). The dissenting Accountant Member pointed out that section 44AD(6) was not applicable for the assessment year 1995-96. The Tribunal agreed that the CIT(A) should have admitted the books of account and considered them for the assessment.

Conclusion:
The Tribunal, after considering the submissions and the material on record, upheld the order of the CIT(A) with different reasons, rejecting all the grounds taken by the assessee. However, the dissenting Accountant Member proposed that the matter should be restored to the file of the Assessing Officer for fresh adjudication, considering the books of account and other relevant materials. The Third Member agreed with the dissenting Accountant Member, directing the matter to be restored to the Assessing Officer for fresh determination of income from contract works, ensuring compliance with the procedural requirements and providing an opportunity to the assessee to produce the necessary documents.