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TMI Blog2018 (3) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... answer both the questions in favour of the revenue to the above extent and set aside the impugned decision. Having regard to the reasons given by the assessing officer in the two assessment orders for rejecting the claim of the assessee for deduction for the residual period, i.e. the period not covered by special audit, we are of opinion that a further exercise ought to be carried out by the assessing officer to ascertain the quantum of inflated income for the residual period which could qualify for deduction and remand the matter to him. We have already referred to the assessing officer’s order pertaining to the second block assessment which we have examined for adjudicating this appeal. This order has been annexed to an application tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two block periods is perverse ? The Tribunal, in its decision under appeal had directed the assessing officer to exclude sums of ₹ 2,90,43,971/- and ₹ 5,90,21,000/- from the assessee s income. The Tribunal found the said sums were shown by the assessee in its account as fictitious income. The proceeding arose from a search and seizure operation conducted on 28th February and 23rd September 1996. In pursuance of such operations, two block assessment orders were made for two periods between 1986-87 to 1997-98 and 1987-88 to 1997-98. A special audit was conducted in the assessee s case for the period between 22nd December 1988 and 28th February 1996. The special auditor, according to the assessee had, indicated ₹ 61,26,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecial Auditors and to deduct the same from the figure of sale. Needless to say that the assessee should be allowed ample opportunity to explain its case. Similar direction is also being given in respect of the bogus profit on bill discounting operation included in the accounts of the assessee. (quoted verbatim) On remand, the assessing officer rejected part of the deduction claimed in the assessment order dated 26th October, 2004. The assessing officer, inter alia, held:- (ii) In view of the direction of the I.T.A.T. to ascertain the amount for sales inflation mainly from the report of Special Auditor, the assessee s submission to also consider the figure of sales inflation for the period Sept. 1995 to March, 1996 for deduction fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock periods, the break-up being ₹ 2,90,43,971/- and ₹ 5,90,21,000/-. In this decision delivered on 19th May 2006 the Tribunal observed and held:- We have considered the rival submissions and perused the records. We have carefully gone through the orders of the AO and the ITAT (supra). On this issue we find that the ITAT had directed that the sales and other inflation should be excluded mainly from the special auditors report but had never directed that such exclusion should be only from the special auditors report. There cannot be any justification for not excluding the entire inflation for the entire block period when the total undisclosed income is being computed up to 28-02-1996 and 23-09-1996 for the two block assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erely because the assessee s income was audited by the chartered accountants in regular process, there cannot be unqualified acceptance of the audited figures. But the nature of deletion directed for the residual period, in our opinion was not proper without scrutiny. There is no material from which the Tribunal could reach the conclusion that the sums directed to be deleted were not disputed by the assessing officer or that the sums represented the correct figures. We answer both the questions in favour of the revenue to the above extent and set aside the impugned decision. However, having regard to the reasons given by the assessing officer in the two assessment orders for rejecting the claim of the assessee for deduction for the residual ..... X X X X Extracts X X X X X X X X Extracts X X X X
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