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TMI Blog2004 (8) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... ewspapers too and the learned Authorised Representative of the assessee filed a copy of news item in Economic Times dt. 9th March, 2001 placed at p. 30 of paper book wherein it was stated that IT Department has decided against scrutiny of tax returns for the second year in a row as a part of its drive to promote the image of an assessee-friendly tax Department. Thus, AO was not justified in taking up the case of the assessee for scrutiny in violation of the promise contained in the said instructions. Though on this short ground, the assessment so framed deserves to be quashed. I am supported in my view by the apex Court judgment in the case of Navneetlal Javeri vs. K.K. Sen, [ 1964 (10) TMI 16 - SUPREME COURT] . Therefore, scrutiny case in violation of CBDT instructions are bad in law and I quash the assessment framed by the AO for all the three years. - HON'BLE RAM BAHADUR, J.M. For the Appellant : M.L. Daga, Adv. For the Respondent : A.K. Bar, Adv. ORDER Ram Bahadur, J.M. 1. These 3 appeals are respectively filed by the assessee as well as Revenue against the order of CIT(A)-II, Jabalpur, dt. 21st Jan., 2002 for the asst. yrs. 1995-96, 1996-97 and 1997-98 under s. 143(3)/14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding first ground, the learned counsel for the assessee submitted that IT Department has issued Instruction No. 1967, dt. 7th June, 1999, regarding guidelines for selection of cases for assessment under s. 143(3) of the IT Act, 1961, a copy of which is filed at page No. 26 of the paper book and reported in (1999) 154 CTR (St) 30 31. Similarly the Department again issued Instruction No. 1984, dt. 9th June, 2000, a copy of which is placed at page No. 27 of the paper book and reported in (2000) 111 Taxman 329 (Tax Lit.). It is stated in the said instructions that scrutiny of cases be restricted only to the following: (i) Search and seizure cases, (ii) Assessment following survey under s. 133A, (iii) Reassessment under s. 147, (iv) Set aside assessments, (v) Cases where assessment under s. 143(3) becomes mandatory in order to comply with the directions of the Supreme Court/High Court/Special Courts, (vi) All cases of Central circles not specifically covered in above items. 7. The exception is where the Chief CIT authorises scrutiny. His power is also limited to exceptional cases and that too on recording of reasons in writing. 8. It has further been provided in the said notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... convenience of the Department and though binding on the AO, the assessee cannot seek any relief because they are not meant for any favour to the assessee. Asst. yr. Relief granted 1995-96 Rs. 1,62,062 1996-97 Rs. 2,83,172 1997-98 Rs. 2,09,821 14. The assessee, still dissatisfied against the order of the CIT(A), is in appeal before the Tribunal and the Revenue is also in appeal before the Tribunal against the relief given to the assessee by the CIT(A). 15. I have heard the arguments of Shri M.L. Daga, FCA, learned Authorised Representative on behalf of the assessee and Shri A.K. Bar learned Departmental Representative on behalf of the Revenue. 16. The learned Authorised Representative of the assessee has argued and invited attention to provisions of s. 119 of the IT Act and stated that the Board may, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of the provisions of ss. 139, 143, 144, 147, 148, etc.), general or special orders setting forth such directions or instructions (not being prejudicial to the assessee) as to the guidelines, principles or procedures to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under s. 2(40) which says an assessment made under s. 143(3) or 144 shall be treated as regular assessment. For completing assessment under s. 143(3) (i.e. assessment made after scrutiny), notice under s. 143(2) is mandatory. The learned Authorised Representative of the assessee vehemently submitted that assessment proceedings be quashed as they have been completed in total disregard to the clear Board s instructions. 17. On the contrary the learned Departmental Representative submitted that since the assessee did not file return inspite of heavy turnover, the AO has correctly issued notice under s. 148 to assess the income escaping assessment. He drew my attention to Expln. 2(a) to s. 147, which says Where no return of income has been furnished by the assessee, although his total income in respect of which he is assessable under this Act during the previous year exceeded the maximum amount, which is not chargeable to income-tax. The assessee cannot take benefit from above instructions, which are meant for persons filing return voluntarily and not in response to s. 148. He relied upon the order of CIT(A) on this issue who has elaborately discussed the matter in para 4 of his ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred for and on behalf of staff working for the assessee and expenditure is fully incurred for business purposes. The learned Departmental Representative relied upon order of CIT(A). I have perused the comparative chart filed at page No. 51 of the paper book and found that the expenses claimed are quite reasonable. Accordingly addition of Rs. 3,823, Rs. 4,013 and Rs. 4,258 are hereby deleted for asst. yrs. 1995-96 to 1997-98. 21. Regarding disallowance of Rs. 688 out of shop expenses of Rs. 3,444 for asst. yr. 1995-96, it was submitted that AO has disallowed the expenses on estimate and has not made any disallowance for subsequent 2 years. It was also claimed that such expenses are allowable upto Rs. 10,000 under s. 37(2). Looking to the meager claim, the disallowance of Rs. 688 is hereby deleted. 22. Regarding disallowance of Rs. 3,029, Rs. 3,742 and Rs. 5,049 out of postage and telephone account, it was submitted that the expenditure are reasonable looking to the turnover of the assessee-firm. It was also claimed that the expenditure includes postage expenses also and none of the partners reside at Rewa. As such, the disallowance of 20 per cent of claim is highly excessive. I ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in normal course of business as may be seen from details filed. The counsel drew my attention to the order of CIT(A) for asst. yr. 2000-01 in the case of Agrawal Tractors placed at pp. 142-146 of the paper book and stated that service expenses to the tune of Rs. 7.22 lakhs claimed were allowed in full and disallowance of Rs. 92,200 made by AO in the case of above firm were deleted in its entirety. It was stated that the assessee makes after-sales service of tractors sold by M/s Agrawal Tractors. The learned Departmental Representative relied upon the order of CIT(A) who has discussed this ground in para 8 of his order and stated that due justice has been given by CIT(A). Considering the facts of the case, details filed and nature of expenses as well as order of CIT(A) in the case of Agrawal Tractors and particularly the fact that no disallowance by AO has been made in asst. yr. 1995-96, assessment of which was completed simultaneously, I hold that CIT(A) was not justified in sustaining the disallowance made by AO. Accordingly disallowances of Rs. 16,050 and Rs. 43,562 out of service expenses are hereby deleted. 25. Now I take up the appeal of Revenue for all the three years. 26. Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tains copies of sales-tax orders for all the 3 years and it was claimed that book results as shown by the appellant were almost accepted. It was stated that AO has mentioned in his order that stocks have been suppressed by appellant by showing less profits. The CIT(A) has held that closing stock of a year will be the opening stock of subsequent year and the Revenue will not be benefited by such bald claim. Accordingly the learned Authorised Representative of the assessee relied upon the order of CIT(A) who has discussed this issue very elaborately. 29. I have gone through the order of CIT(A) on this issue and find no infirmity. Considering the above facts of the case, the order of the CIT(A) is sustained on this ground. 30. Regarding disallowances out of travelling expenses for all the 3 years, it was claimed by learned Departmental Representative that AO has examined 2 employees of the appellant-firm and considering the averment made by 2 employees, he came to a reasonable conclusion and accordingly made disallowances of Rs. 96,000, Rs. 1,41,600, and Rs. 1,08,000, respectively, for 3 years and CIT(A) was not justified in deleting the above disallowances. 31. The learned Authorised ..... X X X X Extracts X X X X X X X X Extracts X X X X
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