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TMI Blog2006 (3) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... , there is no confusion on facts involved in the case. The assessee is carrying on printing work in Unit No. I. It has debited binding expenses in said unit also. It is nobody's case that after printing, binding work was not carried by Unit No. I. No investigations on above line were carried. The objection is why binding charges in Unit No. I when Unit No. II has e binding machines. However, objection is raised without any justification. Binding was done in Unit No. I and expenses claimed duly supported by audited books of account. The expenses claimed on binding in Unit No. I are not held to be fictitious. Likewise Unit No. III admittedly carried printing work without binding and without debiting binding expenses. The Assessing Officer placed no material on record to controvert the claim of the assessee. It is not clear as to on what material doubts has been raised in the proposed order by learned Judicial Member even on points accepted and not challenged by the Assessing Officer. Even the manner of carrying on of business is challenged. However, on doubts and surmises, it is not permissible to deny a claim and interfere with the impugned order. As already noted the question b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be a fair estimate of proper figure of assessment and that assessment should not be dishonestly, vindictively or capriciously made. It should also not be arbitrary. I see some parallel between the facts of the above cited case and case in hand, because profit was disclosed in Unit Nos. II and m on which deduction under section 80-I was claimed and no profit was disclosed in Unit No. I on which no such deduction was permissible and expenses in aforesaid Unit No. I were much higher than this in the other two units. It was probable that more expenses were claimed in Unit No. I and some of the expenses of Unit Nos. II and III were diverted and claimed in Unit No. I. But no presumption under the law could be raised that expenses were so diverted. The assessee has produced accounts with details and, therefore, correct position could have been ascertained from the material statement of relevant persons including management and staff of the assessee could have been examined. But without any investigation and without collecting any material an arbitrary assessment by holding that expenses in Unit No. I should be proportionate to those in Unit Nos. II and III was made. Assessment based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary and production charges for the various units arc disproportionate. (iv) Subscription deposit service expenses amounting to Rs. 17,32,165 has been debited to Unit No. I only whereas proportionatory the same should have been debited to Unit Nos. II and III also. By allocating proportionate expenses to various units, the Assessing Officer held that there was no profit in Unit Nos. II and III which could be allowed deduction under section 80-I of the Act. For this purpose, the Assessing Officer also relied on the provisions of section 80-I(6) and 80-I(9) of the Act. 5. On appeal, the CIT(A) analysed the working of various units and held that the allocation of expenses by the assessee had a rationale and accordingly the claim of deduction under section 80-I of the Act was justified. While doing so, the CIT(A) also observed that if any loss for earlier years remains to be set off the Assessing Officer will adjust the same from the profit of the year. 6. The revenue is in appeal before us against the findings of the CIT(A). Ld. DR stated that Hon'ble Bombay High Court in the case of Synco Industries Ltd. v. Assessing Officer of Income-tax [2002] 254 ITR 608 has held that when ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nery used in Unit No. I were old and the consumption of ink was much higher. As against this, the only machine in Unit No. III was the latest machine and the consumption of ink and electricity was much lower. The assessee allocated the expenses of ink on actual consumption basis which is reflected by separate account books of each unit. No defects have been pointed out by the Assessing Officer in the account books maintained by each unit. We, therefore, hold that the observations of the Assessing Officer about disproportionate allocation of ink expenses to various units is also not justified. The Assessing Officer had also pointed out that the salary and production expenses in Unit No. I was much higher as compared to the expenditure in other units. We find that while Unit Nos. I and II are located in Sahibabad (UP), the Unit No. III is allocated in Haryana. The persons working in one State cannot be transferred to the other State. The minimum wages are also fixed by the State Government. Unit No. I was established in 1971 and, therefore, workers of that unit have become quite senior. Similarly, Unit No. I has 14 machines and, therefore, it employs more workers than the workers wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 1993-94, we hold that as there was no infirmity in the findings of the CIT(A), while upholding the same, we dismiss the ground of appeal raised by the revenue. In the result, both the appeals filed by the revenue are dismissed. Per S.K. Yadav, Judicial Member. 1. I have the privilege of going through the erudite order proposed by my Learned Brother Shri Keshaw Prasad, Accountant Member but with great respect and in spite of persuading myself to agree with it, even after discussion with him over it, I am unable to concur with him on the point of eligible deduction under section 80-1 of the Income-tax Act (hereinafter called as an 'Act'). I, therefore, adjudicate the issue of eligible deduction under section 80-I of the Act independently as under: 2. Though my learned brother has narrated the facts in his order but I wish to discuss it elaborately in order to adjudicate the impugned issue judiciously. 3. The assessee is engaged in the business of printing magazines and books and its Unit No. I, which is a printing press, was set-up in 1972 in Sahibabad. It is engaged in cover printing of Magazine as also double colour printing for inside pages. Assessee set-up another Uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Unit Nos. II and III. The Assessing Officer has identified certain expenses, which were booked under Unit No. I and not in Unit Nos. II and III and reproduced the same in a tabulated form in his order. In order to understand the facts of the case, I extract the same as under: Unit No. I Unit No. II Unit No. III Process of ink 76,80,945 - - Ink 46,88,877 - 2,22,223 Motor Vehicle exp. 2,55,870 22,845 41,804 Binding material 3,59,992 9,20,457 - Subscription + 17,32,165 - - Deposit scheme Travelling 15,958 - - Salaries production charges 38,76,712 4,58,665 3,41,208 Paper 2,36,62,145 - - 5. The Assessing Officer further examined the total receipts in Unit No. I which it is shown at Rs. 3,62,26,613 including cost of paper supplied. If the cost of paper which is at Rs. 2,36,62,145 is reduced from the total receipt, the actual receipt comes to Rs. 1,25,64,468. Thus, the amount of actual work done in Unit No. I is Rs. 1,25,64,468 while actual work done in Unit No. II at Rs. 1,29,03,964 and Rs. 1,28,42,491 in Unit No. III. Against this total work done by this individual Unit No. 1, assessee has shown salaries and production charges at Rs. 38,76,712 against Rs. 4,58,665 and Rs. 3,41,209 show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,62,26,613 includes cost of paper supplied to the assessee and if the cost of this paper which is at Rs. 2,36,62,145 is reduced from the total receipt, the actual receipt comes to Rs. 1,25,64,468. Against this actual receipt, assessee has shown expenses on ink at Rs. 1,23,69,822 resulting into a surplus receipt of Rs. 1,94,646 against which assessee has booked Rs. 38.76 lakhs on account of salary and production charges and Rs. 18.86 lakhs on account of repairs resulting into heavy loss of Rs. 1,36,02,887 in Unit No. I. This specific finding of the Assessing Officer was not controverted by the CIT(A) while accepting the claim of the assessee. The learned DR further contended that even if it is accepted that Unit No. I contains old machines and Unit No. III contains r modern machines but the printing speed of the modern machine is faster than the old machine and consumption of ink always depends upon the quantity of production and not the quality of machine, which was used in printing. It is an admitted fact that the production of Unit No. III is higher than the Unit No. I. In these circumstances, the consumption of ink should be more in Unit No. III as compared to Unit No. I but the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... os. II and III, no expenditure under this head were debited in Unit Nos. II and III. With regard to expenses booked under the head of Ink and process of ink in Unit No. I, it was submitted that the entire expenses does not pertain to ink consumed in Unit No. I but the cost shown against the processing of ink is in fact a cost of ink which was sold by the assessee. For other expenses booked under Unit No. I, the Learned Counsel for the assessee has relied upon the observations of CIT (A). 10. Having considered the rival submissions and from a careful perusal of records, I find that Unit No. I was set up in 1972 at Sahibabad and it was engaged in printing of magazines and books. Unit No. II was established in 1989-90 at Sahibabad-II and is engaged in binding of magazines and books and the Unit No. III was set up in 1991-92 at Faridabad having completely modern machines with a capacity of printing 25,000 sheets per hour duly dried and folded. Though it is not clear, how much sheets were printed during the impugned assessment year by Unit No. III and Unit No. I but from a perusal of the details of total receipt we find that it is less than the Unit No. III as by reducing the cost of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of ink, which was sold to other units, but no evidence was placed before the Tribunal at any point of time in this regard. Had it been sold to other units by Unit No. I, why the assessee has booked it under the head 'process of ink', as expenses. No explanation to this effect was furnished before the Tribunal during the course of hearing. In the absence of proper explanation, no inference can be drawn that the expenses booked under the head of 'process of ink' is the cost of ink sold by Unit No. I to other units. In these circumstances, total expenses booked under the head of 'ink' in Unit No. I comes to Rs. 1,23,69,822 against the total expenses under the head 'Ink' booked at Rs. 2,22,223 in Unit No. III whereas the work done by Unit No. III is more than the Unit No. I. This aspect was not examined by the CIT(A) and he simply has held that the expenses shown under the 'process of ink' as part of ink sold by Unit No. I to other units without any concrete evidence. 12. In these circumstances, I am of the view that I he assessee has not properly apportioned the expenses under the head 'Ink' in Unit Nos. I and III whereas the work done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Unit No. III at Faridabad. No doubt the salary and production charges may be more in Unit No. I being old unit, containing a number of machines but it cannot be more than twelve times of the Unit No. III whereas, the work done in Unit No. III is more than Unit No. I. I have also examined the expenses booked under the head binding material at Rs. 3,59,992 in Unit No. I in the light of the facts that the assessee had set up its Unit No. II for binding purposes consisting of perfect binding system, but failed to understand why the expenses in the head, binding material was booked in Unit No. I because nothing is placed on record that binding of printed material was done by the Unit No. I itself and the Unit No. I have its own binding machine whereas no expenses under this head was booked in Unit No. III. All these discrepancies pointed out by the Assessing Officer were not duly met by the CIT(A) while directing the Assessing Officer to accept the claim of the assessee. It is an admitted fact that the Unit No. I is no longer eligible for deduction under section 80-I of the Act and Unit Nos. II and III are eligible for deduction. In the light of r these facts, the CIT (A) was requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the hearing. ORDER [AS PER THIRD MEMBER] Order under section 255(4) of the Income-tax Act, 1961 Per Shri Vimal Gandhi, President 1. This matter has come up before me on account of following directions dated March 1, 2004 of Hon'ble Delhi High Court given in ITA Nos. 376 and 386/2003:- The question is answered accordingly. The effect is that the order made by the Accountant Member on 4-6-2003 is liable to be set aside and is so set aside. That being the case, it leaves us with two conflicting orders; one passed by the Accountant Member and one passed by the Judicial Member. Thus, there being an unresolved difference of opinion, we send the matter back to the Tribunal, to pass an appropriate order in terms of sub-section (4) of section 255 of the Income-tax Act, for a resolution of the difference in the manner prescribed. 2. In terms of section 255(4) of the Income-tax Act, the following two questions are framed to resolve the difference between the two learned Members of the Bench: 1. Whether on the facts and in the circumstances of the case ld. Accountant Member is right in upholding the order of ld. CIT(A) in the two assessment years under consideration? 2. Whether on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inting. Similarly Rs. 76,80,945 was shown under the head Process of ink in Unit No. I. But no expenses was shown in Unit No. III. In Unit No. I another sum of Rs. 48,26,988 was shown under the head 'Ink', corresponding to that only Rs. 1,04,113 was shown under similar head in Unit No. III. He, accordingly, concluded that expenses on ink in Unit No. I were claimed at Rs. 1,23,69,822 against Rs. 1,04,113 in Unit No. I. When called upon to explain above discrepancies, the assessee filed a revised chart of receipt and expenses (noted above), in which there was some variation from details filed earlier (on comparison of details, it is seen that loan in Unit No. I was shown at Rs. 1,36,02,887 against Rs. 1,33,62,190 shown in earlier detail). The Assessing Officer held that no plausible reason was given as to why certain expenses were booked only in Unit No. I and not in Unit No. III. The Assessing Officer further observed that Subscription Deposit, Service expenses amounting to Rs. 17,32,165 were debited in Unit No. I only. 7. The assessee had explained that above scheme for supply of free magazines on deposit was started in the year 1972, when Unit Nos. II and III were not in ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of Income-tax Act and the assessee was held to be not entitle to any deduction under the above section. 11. The assessee before the Assessing Officer claimed that separate books of account were maintained by each of the three units, but Assessing Officer in the light of discussion referred to above, observed that such separate books were mostly self-serving and could not form basis of working out of true profits. The Assessing Officer also noted that there was variation in profit of Unit Nos. II and III shown from time to time. But no explanation was offered as to why there was such a variation. The Assessing Officer accordingly concluded that assessee was not entitled to any deduction under section 80-I of IT. Act. The Assessing Officer had also made an issue of set off of brought forward losses under section 80-I(6) of Income-tax Act but that controversy has been resolved by the Members and is no more subject of reference. 12. Similar order was passed by the Assessing Officer for assessment year 1994-95 and deduction claimed under section 80-I was denied to the assessee. The Assessing Officer observed that audited account did not give separate income and expenses on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II and III. 15. As regards expenditure on ink, it was pointed out that a sum of Rs. 76,80,945 taken as an expenditure under the head Process of Ink was not an expenditure but receipt recovered on account of ink from sister concerns. This way only Rs. 48 lakhs were claimed as expenditure on ink in Unit No. I against Rs. 1.25 crores taken by the Assessing Officer. It was explained that consumption of ink in Unit No. I was higher on account of 14 machines employed by Unit No. I, whereas Unit No. III had only one modern machine. The machines in Unit No. I, were old and use of ink was higher, whereas in modern machine in Unit No. III consumption of ink and electricity was much lower. 16. As regards salary and production expenditure, the assessee explained that Unit Nos. I and II were at Sahibabad in U.P., whereas Unit No. III was atFaridabadin the State ofHaryana. Persons employed in one State could be transferred to the other State. Unit No. I was set up in 1972 and, therefore, workers employed in that unit were in service for more than 20 years. Their salaries because of above long period had risen exorbitantly, while Unit No. III set up in 1991 in Faridabad was only 3-4 years old. Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I is very old having old generation machines consuming more ink. The consumption of ink in heat-offset machine is of liquid form and being new generation consumption of ink and electricity in Unit No. III is much lower. Similarly expenditure on salary is higher in Unit Nos. I and II as they are older employing more people as against Unit No. III which is a modern new unit doing work mainly on automatic machines having few employees. Hence, the Assessing Officer was not justified in drawing adverse interference on this account. Similarly the subscription deposit scheme is in vogue since 1972 for Unit No. I only. Hence, expenditure on this account cannot be debited to Unit Nos. II and III. Hence, the Assessing Officer's contention cannot be accepted. 6. I also find that on similar facts deduction under section 80-I has been allowed in previous years. The Assessing Officer cannot change his opinion in subsequent years without there being any change of facts or change in provision of law. The appellant fulfilled the conditions for grant of deduction under section 80-I. Even sub-section (9) of section 80-I authorizes the Assessing Officer to make adjustment in profit in case certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) noted that Unit No. III had done printing on the paper supplied by the publishers and therefore there was no purchase of paper. Thus, situation in two units was different. He further noted the nature of printing in these units was different. Unit No. I had done printing on the paper purchased by the assessee whereas no purchase of paper was made by the Unit No. III. Printing was done on paper supplied to the assessee. Thus, non-consumption of paper by Unit No. III was fully explained. The learned Accountant Member has observed, had the Assessing Officer examined this point from the documents furnished by the assessee, perhaps this confusion would have not arisen. (b) As regards disproportionate expenses of ink in different units the learned Accountant Member observed that Unit No. I had 14 machines whereas Unit No. III had only one. Unit No. I came into existence in 1972, whereas Unit No. III came into existence in 1991-92. Thus the machinery used in Unit No. I was old and the consumption of ink was much higher than Unit No. III. According to the learned Accountant Member no defects have been pointed out by the Assessing Officer in the books of account maintained by each unit. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minor disallowance under rules 6B and 6D for prior period expenses. The ground in the appeal according to learned Accountant Member was merely academic and infructuous. As facts and circumstances of the case were c same, he held that similar view has to be taken in the assessment year 1994-95. Accordingly, impugned order of CIT(A) was upheld in the proposed order. 22. The learned Judicial Member did not agree with the above proposed order of learned Accountant Member. He examined the reasons given by the Assessing Officer in para Nos. 4 and 5 of the impugned order. The arguments of learned Departmental Representative and learned Representative of the assessee are noted in paras 8 and 9 of Judicial Member's proposed order. He thereafter proposed to remit the matter back to the Assessing Officer for recomputation of deduction under section 80-I after working out true expenses of different units after making a detailed enquiry and investigation and thereafter to re-compute the deduction under section 80-1 . The matter was, therefore, restored to the Assessing Officer with the following observation:- 10. Having considered the rival submissions and from a careful perusal of records, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I and III expenses are booked at Rs. 14,01,967 and Rs. 6,05,235 respectively as evident from the comparative chart appearing in assessment order. 11. It was also observed by the Assessing Officer that the assessee has booked the expenses under the head 'Process of Ink' at Rs. 76,80,945 and under the head of 'Ink' at Rs. 46,88,877 totalling to Rs. 1,23,69,822 against the total expenses under the head 'Ink' booked at Rs. 2,22,223 in Unit No. III. With regard to expenses under the head 'Process of Ink', it was stated on behalf of the assessee before the CIT(A) that it was a cost of ink, which was sold to other units, but no evidence was placed before the Tribunal at any point of time in this regard. Had it been sold to other units by Unit No. I, why the assessee has booked it under the head 'Process of Ink' as expenses. No explanation to this effect was furnished before the Tribunal during the course of hearing. In the absence of proper-explanation, no inference can be drawn that the expenses booked under the head of process of ink is the cost of ink sold by Unit No. I to other units. In these circumstances, total expenses booked under the head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not spell out the nature of scheme and the reasons why the entire expenses under this head was booked only in Unit No. I. In these absence of complete details, the stand of the assessee cannot be accepted that these expenses only pertain to Unit No. I. In these circumstances, I am of the view that this needs a proper verification. 14. The other objection of the Assessing Officer was with regard to salary and production charges booked at Rs. 38,76,712 in Unit No. I against Rs. 4,58,665 in Unit No. II and Rs. 3,41,208 booked in Unit No. III. Admittedly Unit Nos. I and II are established at Sahibabad and Unit No, III at Faridabad. No doubt the salary and production charges may be more in Unit No. I being old unit, containing a number of machines but it cannot be more than twelve times of the Unit No. III whereas, the work done in Unit No. III is more than Unit No. I. I have also examined the expenses booked under the head 'Binding material' at Rs. 3,59,992 in Unit No. I in the light of the facts that the assessee had set up its Unit No. II for binding purposes consisting of perfect binding system, but failed to understand why the expenses in the head, binding material was boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with for your kind perusal. You are therefore, requested to kindly examine it and if you find yourself in agreement with it, kindly give your concurrence, otherwise purpose a question for reference to their member. With regards. Sincerely yours, Sd/- I do not know what discussion took place between the learned Members, but having regard to the stand taken by the learned Members, and perhaps out of frustration the learned Accountant Member wrote in his hand below signed order of the Judicial Member that 'he agreed with the ultimate finding of his learned brother'. The aforesaid manner of disposing of the appeals was challenged by the assessee in Writ Petition before the Hon'ble Delhi High Court which resulted in the order dated 1st March, 2004 reproduced above. 24. In the light of the direction of the Hon'ble High Court both the appeals were again fixed for hearing. The learned Departmental Representative supported proposed order of Judicial Member for the reasons given therein. He has also been referred to and relied upon reasoning given by the Assessing Officer. Learned counsel for the assessee on the other hand, explained order of CIT(A) by submitting that the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Member in the proposed order as no evidence of sale of Ink by Unit No. I was placed before the Tribunal at any point of time. The learned Judicial Member has accordingly held that Ink in Unit No. I comes to Rs. 1,23,69,822 against Rs. 2,22,223 shown in Unit No. I. The learned Judicial Member has further observed that above aspect was not examined by the learned CIT(A) and he simply held that expenses shown under the head Process of ink was part of Ink sold by Unit No. I without any concrete evident. 27. During the course of hearing of the appeal the learned Counsel for the assessee submitted that CIT(A) has accepted assessee's claim and revenue had come up in appeal before the Appellate Tribunal. It was therefore for the revenue to establish that the finding recorded by the learned CIT(A) was erroneous and was wrong and that of the Assessing Officer was correct. The ld. Judicial Member wrongly placed burden on the assessee to show that finding of the CIT(A) was correct. He further submitted that Tribunal at no stage asked the assessee to show material that the findings of the learned CIT(A) were correct. In the above circumstances the learned Counsel for the assessee submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any reasonable conclusion that consumption of Ink shown by Unit No. I was excessive and that shown by Unit No. III was low. The Assessing Officer took wrong figures in to account. It cannot be disputed that different type of machine consume different quantity of ink depending upon type and kind of machines, type of printing carried and paper etc. used in the machines. The case of the assessee could not be rejected on short ground that ink consumed by Unit No. I could not be 14 times more than the ink consumed by Unit No. III. As no material is available on record to support the conclusion that claim made in Unit No. I was excessive, above finding has to be held to be based on surmises and conjectures particularly when it is not in dispute that machines employed in Unit No. I are old and of different type then one modern machine in Unit No. III. In my considered opinion, learned CIT(A) and Accountant Member carried proper analysis of facts and circumstances of the case and rightly rejected the objection raised by the Assessing Officer as not justified. 30. The second objection raised by the Assessing Officer pertained to higher expenses on account of consumption of paper. No expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blisher. Whereas Unit No. I carried on printing on paper purchased by the said Unit from the market. Purchase of paper is duly debited in books of account of Unit No. I. No attempt to challenge that expenses debited by Unit No. I on purchase of paper were wrong was made by the Assessing Officer. Likewise no enquiry or investigation was carried to establish that Unit No. III in fact purchased and used paper but did not debit the same in accounts. Without any challenge to audit books of account, various expenses are rejected on surmises. It is true that paper was supplied to the publisher as observed in the assessment order. The publisher supplied paper to Unit No. in for printing and not to Unit No. I. The said Unit had to buy paper from the market and such purchases were debited in the books of account. Thus when purchases has not been challenged nor there is any other material on record that expenditure was not incurred what is the justification of deducting cost of paper from total receipt in Unit No. I? What is the justification for not accepting that Unit No. III did not purchase paper? What is wrong with explanation of the assessee? I see no justification for interfering with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive, Woman's Era, and other language magazines. This deposit is refundable at six months notice by either side. Till the deposit is with the company the reader shall continue to get the magazine free of charge. On refund of the deposit the magazines supply shall be stopped. This scheme is in vogue since 1968 and at present the total subscribers are more than 15,000. On this deposit no interest is paid. To supply the magazines the Company buy magazines from Delhi Prakashan Vitran Pte Ltd. and the purchase cost of these magazines are debited to Profit Loss A/c. Detailed literature of the scheme is attached. 34. On appeal CIT(A) accepted the explanation of the assessee that Subscription Deposit Service Scheme was invoked in 1972 when other two Unit Nos. II and in did not come to existence and investment in two units were made by the assessee out of profit as earned by it and not out of funds of the scheme. When the matter came up before the Appellate Tribunal, the learned Accountant Member in the proposed order accepted the impugned order of CIT(A) after discussion of facts and circumstances of the case. 35. The learned Judicial Member however made observations contrary to record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case, there is no justification for placing onus on the assessee and for holding that stand of the assessee cannot be accepted. All the ingredients of scheme and all expenses claimed were made available on record which further reflect that assessee had sufficient profit to make investment in Unit Nos. II and III. It was, therefore, for the Assessing Officer to show from evidence that assessee was wrongly debiting expenses in Unit No. I which in fact pertained to Unit Nos. II and III. The Assessing Officer was duty bound to collect material to support inference drawn by him against the assessee. No case was set up by the assessee which was required to be established. Further the case is held to be not examined by the learned CIT(A) when simultaneously it is held that proper verification was not carried on by the Assessing Officer to whom the matter is sought to be remanded. This is the fate of the assessee on whom protracted litigation has been inflicted. 37. The Assessing Officer and also learned Judicial Member in the proposed order objected to certain other expenses claimed in Unit No. I like production charges including salary booked at Rs. 38,76,712 in Unit No. I against much ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and related question whether the said onus was discharged was required to be examined. The assessee had rendered explanation only to remove doubts raised by the Assessing Officer in the impugned order. The explanation was held to be reasonable and claim rational and justified on facts. That was the question required to be examined by the Appellate Tribunal in accordance with the law. I have however find that instead of examining above questions, order proposed totally different an d new questions based on suspicions and doubts. A good explanation duly accepted by the ld. CIT(A) has been treated as bad after wrongly placing onus on the assessee which under the law was on the Revenue. 39. It is clear from the assessment orders that income shown and expenses claimed by the assessee have been duly allowed in the assessment order. None of the expenditure has been treated as ingenuine or not connected or related to the business carried out by the assessee. In the above background and without any material, and without and justification on the part of the Assessing Officer some of the expenses claimed by the assessee were held to be inflated in Unit No. I and were deflated in Unit Nos. II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the accounts disclosed did not comprehend all the transactions of the branch office. But that does not establish or even probabilize the finding that 135 per cent or 200 per cent or 500 per cent of the disclosed turnover was suppressed. That could have been ascertained from other materials. The branch office had dealings with other customers. Their names were disclosed in the accounts. The accounts of those customers of their statements could have afforded a basis for the best judgment assessment. There must also have been other surrounding circumstances, such as those mentioned in the Privy Council's decision cited supra But in this case there was no material before the assessing authority relevant to the assessment and the impugned assessments were arbitrarily made by applying a ratio between disclosed and concealed turnover in one shop to another shop of the assessee. It was only a capricious surmise unsupported by any relevant material. The High Court, therefore, rightly set aside the orders of the Tribunal. Nor can we accede to the request of the learned counsel for the State to remand the matter to the Tribunal for fresh disposal. The sales tax authority had every opp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment must be based on some relevant material. It is not a power that can be exercised under the sweet will and pleasure of the concerned authorities. The scope of that power has been explained over and over again by this Court. The Agricultural Income-tax Tribunal gave no reasons in its order for affirming the decision of the Asstt. Collector. It appears to have been of the view that once the assessing authorities reject the material placed before them as being unreliable those authorities can proceed to levy whatever tax they may levy. It failed to bear in mind the scope of the power of the assessing authorities to levy assessment on the basis of best judgment. Therefore, the Tribunal was clearly in error in confirming the decision of the Asstt. Collector. Hence, the High Court was justified in interfering with the order of the Tribunal. 46. It is evident from above that even when the material produced by the assessee is rejected, the authorities cannot proceed to levy whatever tax they may levy. The assessment must be based on some material. If it is not based on any material then it has to be held to be capricious and arbitrary. The question which is raised in most of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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