Defective drafting of the assessment orders. - Income Tax - 1271/CBDT

INSTRUCTION NO. 1271/CBDT Dated : January 8, 1979 Reference is invited to Pare 19.03 of minutes of the Commissioners' Conference held in May, 1979 wherein it has been highlighted that the main reason for the Department's lack of success before the Appellate authorities is defective drafting of the assessment orders. The statistics for the last 7 years show that the percentage of success wholly or partly before the Tribunal has been only 33% to 40% in those years and very many of the Department's appeals to the Tribunal fail because facts and material were not properly gathered and discussed in the orders. At times even additions which were otherwise fully sustainable are deleted mainly because of inherent weaknesses in the Department's case. The Tribunal being a totally independent body is not supposed to fill up the lacunae left at lower levels in the Department's case. 2. The following defects are commonly found in the assessment orders: (i) Before the ITOs resort to estimate of gross profit, sufficient justification is not given to reject the trading results as shown by the assessees. The accounts regularly maintained by the assessee can only be rejected either under proviso to Section 145(1) or under sub-section (2) thereof. In either case the ITO will have to make out a case with sufficient reasons spelt out in assessment order. Thereafter at the stage of estimation of profit on account of low gross profit the ITOs do not generally cite any comparable case to support the rate of profit applied by them. In all such cases the assessees succeed in appeal by quoting some other cases where a lower gross profit rate has either been accepted or applied by the ITO. Many a time additions are deleted because a lower rate is found to have been accepted in the subsequent years in the assessee's own case, although the assessment orders in those years did not give any reason either accepting or applying a lower rate of profit. Instructions already exist that the ITOs should quote comparable cases in order to justify a particular rate of profit applied. In the assessee's own case in subsequent year if a lower rate of profit has been shown and accepted by the ITO, he should discuss the distinguishing features of the case for the year justifying a lower rate of profit either accepted or applied by the ITO. If such discussion is there, the appellate authorities before whom the said assessment would be cited in connection with appeal for earlier year in the assessee's own case or in any other case would have before them the distinguishing features of the case so cited and will not readily accept the said case as a comparable instance justifying lower G.P. rate. (ii) In many cases, it is found that even though the assessees had requested for issue of summons under section 131 to prove the genuineness of the various transactions appearing in their books, the Income-tax Officers do not issue the summons. The assessees make capital out of this lapse at the time of hearing of the appeal by the Tribunal. The ITOs should weigh the request of the assessee in terms of onus on whom the burden of proof lies and issue summons wherever such action is warranted. (iii) Very often, the assessees file affidavits to support their case. Sometimes these affidavits are rejected by the Income-tax Officers without examining the deponents. Rejection of the affidavits without examining the deponents is claimed to be irregular and very often the assessee's claim is allowed by the Tribunal. (iv) In some cases, particularly those which are taken up only towards the end of the time-limit the assessees claim that they had not been allowed sufficient time for explaining and proving their case. In such cases, the Tribunal generally records an adverse finding against the Department. (v) Very often disallowances are made without giving sufficient reasons. In many cases, even the details of the inadmissible items are not mentioned while making lumpsum additions. In such cases, the additions are generally reduced or deleted. The Departmental representative is generally not able to contest the claim of the assessees in such cases as, very often, even the details of these expenses are not available on the assessment record. (vi) The penalty appeals are very often allowed as the orders are found to have been passed in a mechanical manner. Some times the orders are in cyclostyled forms and show that the officer levying the penalty had not applied his mind to the facts of the case. The penalty orders very often do not discuss the explanation given by the assessees and such explanations are rejected only by saying that the explanation was not satisfactory. 3. The Board desire that the Commissioners should bring the above noted shortcomings to the notice of the ITOs so that they do not recur in framing the assessment/penalty orders., The Commissioners and IACs should also constantly impress upon the ITOs the imperative need for making balanced, well reasoned and realistic assessment. These aspects of assessment work should be particularly looked into during inspection of ITOs work and the defaulting officers would be pulled up and adversely commented wherever called for. The same check should also be exercised when the adverse appellate orders are scrutinised in the Commissioner's office. 4. Further to ensure that the ITOs in their charges make proper and balanced assessments as would stand the test of appeal, the Commissioners may also enlist the assistance of the AACs. Though the confidential remarks of the AACs will not form a part of the C.C.Roll, the Commissioners should take them into consideration before recording their comments.