9911796707
TMI Blog2004 (8) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... er produced before AO. 3. The assessee is a contractor firm which carried on contract work allotted by Government departments. During the year the assessee received gross contract receipts of Rs. 71,05,190 against which it declared net profit of Rs. 1,90,073 @ 2.7 per cent. This was considered by the AO to be very low. The assessee had detailed Rs. 10,33,796 under the head carriage in contract account. The AO applied net profit rate of 10 per cent on estimated net profit from the business at Rs. 7,10,519 and did allow interest of Rs. 18,087 paid to third parties from the above profit. 4. The status of the assessee was taken as URF as per separate order passed under s. 185(5) of the Act. The CIT(A) cancelled the order of the AO passed under s. 185(5) of the Act and allowed registration to the assessee-firm. 5. The Department is aggrieved. We have heard the rival submissions and have perused the evidence on record. 6. The learned Departmental Representative, Shri Asha Ram Choudhary, has submitted that the CIT(A) has not considered the averments of the order passed under s. 144 by the AO. The assessee committed repeated defaults whiled dealing with the order passed under s. 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpleted under s. 144 of the Act and there is no proof whether the profits have been divided in the ratio specified in the deed. The assessee went in appeal. It was, inter alia, contended that on the basis of the material that was filed by the assessee, the ITO could have ascertained as to whether the profits of the firm were divided or not according to the profit sharing ratio as specified in the partnership deed and that the firm is genuine and the ITO was not justified in refusing to grant registration. The AAC taking the aforesaid facts into consideration, opined that it was not a proper case for refusal to grant registration for the simple reason that an ex parte order has been made. He, therefore, by his order dt. 8th Nov., 1978, directed the ITO to consider the application and to decide the matter in accordance with law. The consequence of this was that the status of the assessee as found by the ITO, namely, unregistered firm, was set aside. Being dissatisfied, the ITO, "B" Ward, Hanumangarh, went in appeal. The order of the AAC was, inter alia, assailed on the ground that as the assessee failed to comply with the notice, the ITO was within his rights to reject the applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such failure as mentioned in s. 144 but confers a discretionary power on the ITO to refuse registration in such cases. This discretionary power is not to be exercised arbitrarily or capriciously but in a lawful manner on the basis of material circumstances present in a given case. In appeal, the appellate authority can exercise the power in which discretion was exercised and may set aside the order in a proper case. 12. In the Hon ble jurisdictional High Court decision, the registration was refused to the assessee-firm on the ground that the assessment had been completed under s. 144 of the Act and there was no proof whether the profits had been divided in the ratio specified in the deed. In the given case, the ITO has clearly mentioned that the assessee had not fully complied with the notices sent to it by the ITO. There was a difference between non-compliance and not proper compliance. If the assessee had complied and the ITO was not satisfied with the compliance, it cannot be stated that there was non-compliance of the notice. In para 2 of the assessment order passed under s. 144 of the Act, the ITO has observed that the notices were not fully complied with by the assessee. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm did not comply with the notices issued under ss. 142(1) and 143(2). Continuation of registration of the firm need not invariably be refused in every case where a best judgment assessment has been made on the firm." 14. So, according to this decision, where there are two opinions and particularly in case of a penal provision, the benefit should go to the assessee. 15. In another case relied by the learned Authorised Representative, J.M. Seth vs. CIT (1965) 56 ITR 293 (Mad), wherein it has been held: "It is true that there is a lot of discrepancy between the stock position as disclosed in the assessee s stock book and the sales accounts now produced by them. It may be that even the assessee s explanation for the discrepancies pointed out was not quite convincing. But, the real question is whether it can be said that the assessee must have been maintaining another set of account books and that they committed default in not producing them in complying with the notice under s. 22(4) of the Act. The assessee cannot escape the consequence of non-production of books called for by merely pretending that he has no books. If the evidence would justify the inference in any given c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/Jp/1996 of the Department, ground No. 1 is in relation to assessee s claim of depreciation. 20. The learned Departmental Representative, Shri Asha Ram Choudhary, has heavily relied on the statement of partner, Shri Udaram, who according to him, had admitted that the truck was hired by the firm and neither any partner nor the firm owned any truck, so the claim of depreciation amounting to Rs. 44,214 was not admissible to the assessee. The learned Departmental Representative relied on the AO s orders in this regard. 21. On the other hand, the learned Authorised Representative, Shri U.C. Jain, relied on the learned CIT(A) s order and has further submitted that the AO had applied net profit rate of 10 per cent on contract receipts and had also allowed interest paid to third parties on funds borrowed. The AO did not allow depreciation on the ground that no depreciation chart had been filed in support of the claim. The AO noticed that the depreciation claim as calculated by the assessee was arithmetically wrong. With these remarks the AO had not allowed depreciation claimed by the assessee. The learned Authorised Representative has further submitted that this depreciation is allowa ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
