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2006 (11) TMI 253 - AT - Income TaxPowers Of Appellate Tribunal u/s 255 - claiming refund after adjustment of pre-paid taxes - whether after granting of refund u/s 143(1)(a)(ii), notice u/s 143(2) could be issued or not? - rejection of the books of account u/s 145(2) - Net profit rate - HELD THAT - The powers of the Hon'ble President of ITAT are absolute discretion of the Hon'ble President to constitute a Special Bench for disposal of any particular case. Hon'ble Supreme Court of India in the case of ITAT also held that the functions entrusted under sub-sections (1) and (3) of section 255 to the President of the Appellate Tribunal are obviously administrative function. They have nothing to do with exercise of any judicial powers. It was further held that it is obvious that the President in this connection may even act suo motu if it is brought to his notice that any important point is pending for decision in the matter which requires to be decided by a larger Bench. If the President acting on such information and in bona fide exercise of his powers constitutes a larger Bench or a Special Bench for deciding a matter it cannot be said that he Acts ultra vires his functions entrusted to him by the Legislature u/s 255(1) read with section 255(3) of the Income-tax Act, 1961. Notice u/s 143 - We are of the view that the principle laid down by Hon'ble Jurisdictional M.P. High Court in the case of Kamal Textiles 1990 (12) TMI 56 - MADHYA PRADESH HIGH COURT would squarely apply to the case, where refund is granted by the Assessing Officer after processing of the return u/s 143(1)(a)(ii). Accordingly, the decision of the Hon'ble Delhi High Court in the case of Apogee International 1996 (3) TMI 119 - DELHI HIGH COURT and the decision of Hon'ble Supreme Court in the case of Gujarat Electricity Board 2002 (10) TMI 5 - SUPREME COURT , also fortify our opinion on the said legal proposition. Considering above legal proposition, we may revert back to the first decision of the ITAT, Indore Bench in the case of Arihant Builders, Developers Investors (P.) Ltd., Indore, in IT Appeal of 1993 for assessment year 1991-92, in which the Tribunal decided the referred question in favour of the assessee, which is heavily relied upon by the ld. counsel for the assessee. The D.B. of ITAT, Indore Bench in IT Appeal of 1993 decided the issue in favour of the assessee on the premise that processing u/s 143(1)(a) is an assessment and, therefore, once refund is granted, no fresh assessment proceedings could begin by issue of notice u/s143(2). The same contentions were raised before the Tribunal on behalf of the assessee. Thus, the Tribunal concluded that the assessment has become complete in that case and nothing more was needed to be complete the assessment. The ld. counsel for the assessee, therefore, demolished his own case by contending now that the processing of the return u/s 143(1)(a) is not an assessment, as is also held in his own argued case of Om Prakash Bagria 2006 (4) TMI 95 - MADHYA PRADESH HIGH COURT . As per the decision in the case of Om Prakash Bagria there is a distinction between processing of the return u/s 143(1)(a) and section 143(2). The case laws relied upon by the ld. counsel for the assessee would not support his contention at all. Hence, we hold that the Assessing Officer was perfectly justified and have jurisdiction to issue notice u/s 143(2), even after refund was granted to the assessee u/s 143(1)(a)(ii) of the Act. This issue is, therefore, decided in favour of the Revenue and against the assessee. Rejection of the books - failure to prove the genuineness of payments - labour charges and cartage expenses - HELD THAT - Considering the finding of the authorities below, we do not find any merit in the case of the assessee with regard to the rejection of the books of account with the aid of section 145(2) of the Act. We confirm the orders of the authorities below to that extent. Net profit rate - HELD THAT - The assessee is also civil contractor engaged in construction work taken on contract and the gross receipt of the assessee are below Rs. 40 lakhs. Therefore, in our considered view, the net profit rate of 12.5 per cent applied by the authorities below in the case of the assessee is excessive and exorbitant. We, accordingly, modify the application of net profit rate from 12.5 per cent to 8 per cent on the gross receipt shown by the assessee. The Assessing Officer shall work out the profit accordingly. As a result, this ground of appeal of the assessee is in IT Appeal is partly allowed. Accordingly, we answer the question referred to the Special Bench in favour of the Revenue.
Issues Involved:
1. Validity of notice under section 143(2) after granting refund under section 143(1)(a)(ii). 2. Preliminary objections to the constitution of the Special Bench. 3. Rejection of books of account under section 145(2). 4. Application of net profit rate. Detailed Analysis: 1. Validity of Notice under Section 143(2) after Granting Refund under Section 143(1)(a)(ii): The primary legal issue addressed was whether the Assessing Officer (AO) could issue a notice under section 143(2) of the Income-tax Act, 1961, after granting a refund under section 143(1)(a)(ii). The Tribunal concluded that the AO was justified in issuing such a notice. The decision was based on the interpretation that sections 143(1)(a)(i) and 143(1)(a)(ii) are interconnected, and the phrase "without prejudice to the provisions of sub-section (2)" applies to both. The Tribunal emphasized that section 143(1)(a) deals with the issuance of intimation and not an assessment, thus allowing the AO to proceed under section 143(2) for a regular assessment. 2. Preliminary Objections to the Constitution of the Special Bench: The assessee raised preliminary objections regarding the constitution of the Special Bench, arguing that since the appeal in IT Appeal No. 952/Ind/94 was withdrawn, there was no valid reference for the Special Bench. The Tribunal rejected this objection, stating that the President of ITAT has the discretion to constitute a Special Bench under section 255(3) of the Act. The Tribunal noted that the constitution of the Special Bench was valid and necessary to address the legal issue comprehensively. 3. Rejection of Books of Account under Section 145(2): In IT Appeal No. 92/Ind/96, the AO rejected the books of account under section 145(2) due to discrepancies in labor charges and cartage expenses. The AO found that the assessee did not maintain proper muster rolls and supporting vouchers, leading to doubts about the genuineness of the expenses. The Tribunal upheld the rejection of the books of account, agreeing with the AO's findings that the assessee failed to substantiate the claimed expenses. 4. Application of Net Profit Rate: The AO applied a net profit rate of 12.5% on the gross receipts of the assessee, which was engaged in civil construction. The Tribunal found this rate to be excessive and modified it to 8%, referring to the provisions of section 44AD, which, although effective from 1-4-1994, provided a reasonable guideline for determining the net profit rate for civil contractors. The Tribunal directed the AO to recompute the profit accordingly. Conclusion: The Tribunal decided in favor of the Revenue on the primary legal issue, confirming the validity of the notice under section 143(2) after granting a refund under section 143(1)(a)(ii). The preliminary objections to the constitution of the Special Bench were dismissed. The rejection of the books of account under section 145(2) was upheld, and the net profit rate was adjusted to 8%. IT Appeal No. 952/Ind/94 was dismissed as withdrawn, and IT Appeal No. 92/Ind/96 was partly allowed.
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