2014 (5) TMI 587 - HC - Income Tax

Disallowance of Expenses - Books of account Actual state of affairs Held that - Merely recording the contention is not enough - The CIT (A) should have discussed the evidence which was sought to be relied upon by the assessee - The question of disallowing any expenditure will arise in case the books of account are believed, but any particular entry in that account is not believed the AO had evidently made the best judgment assessment after rejecting the books of accounts of the assessee the matter is required to be remitted back to the AO for adjudication Decided in favor of Revenue.

Summary

Issues:
1. Condonation of delay in preferring the appeal.
2. Dismissal of appeal by the Tribunal.
3. Allegations of incorrect assessment by the Assessing Officer.
4. Reversal of Assessing Officer's order by CIT (Appeal).
5. Lack of discussion on evidence by CIT (Appeal).
6. Requirement of remand to Assessing Officer for re-examination.

Analysis:
1. The Court first addressed the issue of delay in preferring the appeal and condoned the delay, disposing of the application for condonation of delay.

2. The appeal was filed against a judgment where the Tribunal, in agreement with the CIT (Appeal), had dismissed the Revenue's appeal. The appellant contended that the decisions by both the CIT (Appeal) and the Tribunal were considered perverse.

3. The appellant argued that the Assessing Officer had made a best judgment assessment due to discrepancies in the assessee's books of accounts, which did not reflect the actual state of affairs. The CIT (Appeal) had reversed the Assessing Officer's decision without discussing the evidence relied upon by the assessee, leading to the argument that the finding should not have been set aside without proper disclosure of ignoring or misappreciating evidence.

4. The Respondent submitted that appropriate evidence was presented before the CIT (Appeal) to demonstrate the incorrectness of the Assessing Officer's findings. However, the Respondent had no control over how the judgment was written by the CIT (Appeal). It was argued that the anomaly in the assessment was due to a wrong appreciation of the facts and circumstances.

5. After hearing both parties, the Court decided to remand the matter to the Assessing Officer. The orders of the Tribunal, CIT (Appeal), and Assessing Officer were set aside, and the Assessing Officer was instructed to re-examine the evidence, hear the assessee, and pass a new order in accordance with the law.

6. Ultimately, the appeal and the application were disposed of in light of the decision to remand the matter to the Assessing Officer for a fresh assessment based on proper examination of evidence and legal considerations.