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TMI Blog2013 (6) TMI 566X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed partly. - I.T.A No. 1615/Kol/2009 - - - Dated:- 18-6-2013 - Shri K. K. Gupta, AM And Shri Mahavir Singh, JM,JJ. For the Appellant : Shri Somnath Ghosh Sarnath Ghosh, Advocates For the Respondent : Shri Javed Khan, Sr. DR (originally) and Shri L. K. S. Dehiya, CIT., DR (clarification) ORDER Per Shri Mahavir Singh, JM:- This appeal by assessee is arising out of order of CIT(A), Asansol in Appeal No. 262/CIT(A)/Asl/Ward-2(2)/Asl/2007-08 dated 30.06.2009. Assessment was framed by ITO, Ward-2(2), Asansol u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2005-06 vide his order dated 31.12.2007. 2. The assessee in this appeal has raised modified grounds in terms of Rule 11 of Income- tax Appellate Tribunal Rules, 1963 and the relevant grounds raised read as under: "1. FOR THAT the Ld. Commissioner of Income Tax (Appeals) Asansol acted unlawfully in upholding the purported disallowance made by the Ld Income Tax Officer, Ward 2(2), Asansol in the sum of Rs. 7,60,963/- being 10% of the expenses claimed under head Purchase and also erred in resorting to enhancement by way of disallowing a further sum of Rs. 67,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances of the instant case and the specious action on that behalf is altogether arbitrary, unreasonable and perverse. 7 FOR THAT the Ld. Commissioner of Income Tax (Appeals) Asansol erred in resorting to the impugned enhancement in the sum of Rs.60,63,926/- by invoking the provisions of s. 68 of the Income Tax Act,1961 under the scope of s. 250(4) of the Income Tax Act, 1961 without judiciously applying his mind on the issue in considering the source of such deposit have been proved on record and the purported action on that behalf is ultra vires, ab initio void and perverse." 3. Brief facts leading to the above appeal are that the assessee is an electrical contractor carrying out Government as well as private contracts. The type of work includes several electrical projects getting temporary and permanent electric connection from West Bengal State Electricity Board (WBSEB) at different sites all over the West Bengal. The assessee to carry out the above projects and in pursuance of this work purchase material, employ labour on wages at specified sites etc. The AO during the course of assessment proceedings made various disallowances and additions as under: (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses on account of telephone and mobile at Rs.1,25,636/-, on entertainment at Rs.2,15,685/-, on travelling and conveyance at Rs.1,86,970/- and further Rs.85,685/- as other expenses. As noted above in the chart, the AO has made disallowance of 10% expenses on all these items and also made addition on undisclosed RD at Rs.1,04,529/- and personal drawings at Rs.4,08,960/-. The CIT(A) enhanced these expenses. The assessment was framed by AO u/s. 143(3) of the Act and assessee has produced all regular books of account like cash book, ledger and bank statements etc. However, he failed to produce, on requisition made in respect of various parties, from whom purchases were made and to whom the payments were made during the relevant period. In the absence of the same, the AO disallowed 10% of wages, purchase and some expenses. The AO also made addition on account of undisclosed recurring deposit and assessee's claim was that this amount was transferred by cheque from Current Account no. CC1033 maintained with Oriental Bank of Commerce, Asansol Branch. A copy of current Account was submitted before the AO and assessee tried to explain the same that this is out of explained sources. As rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses, charges and unproved credits/transfers/deposits in the hands of the assessee. We find that the assessee's total contract receipts are at Rs.1,15,38,537/- and addition including enhancement by CIT(A) stands at Rs.1,60,36,879/-. It is not the case of the revenue that these deposits/unproved credits/transfer are not related to business transactions rather the assessee's counsel has filed a complete chart before us stating that the entire deposits/transfers/credits are proved and these are related to business transactions only and out of contract receipts. In such circumstances, can we uphold the assessment order or order of CIT(A)? In our view no, the answer to above queries is negative. We further find that the assessee before us has produced copy of Tribunal's order in assessee's own case for AY 2003-04 in ITA No.1833/K/2007 wherein assessee has challenged the net profit rate applied by AO and confirmed by CIT(A) at 5.35% by rejecting the books of account in the absence of the vouchers and following ground was raised by assessee: "ii) For that on the facts of the case the Ld. CIT(A) was not justified in sustaining the estimate of Net Profit @ 5.35% of Gross Contract Rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous returns by and assessments of the assessee and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though there must necessarily be guess-work in the matter, it must be honest guess-work. In making a best judgment assessment the Assessing Officer does not possess absolutely arbitrary authority to assess at any figure he likes and that although he is not bound by strict judicial principles he should be guided by rules of justice, equity and good conscience. A best judgment assessment is not by way of penalty for non-compliance and it cannot be made capriciously in utter disregard to the material on record. At the same time, there is nothing in the language of section 144 or 145 of the act for holding that an assessment made by an officer under these sections without conducting a local enquiry and without recording the details and results of that enquiry cannot have been made to the best of his judgment within the meaning of that section. The best judgment assessment ought to be based on a fair and proper estimate of the assessee's income and the inferences to be drawn from the available material should be properly inferable infe ..... 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