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TMI Blog2018 (4) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... e subsequent years i.e. 1989-90 to 1991-92 could not have been taken into account for computing the gross profit rate in respect of Assessment Year 1986-87. Thus, the finding with regard to gross profit rate is based on surmises and conjectures and in fact has been arrived at in contravention of the directions contained in the order dated 31.08.1999 passed by the ITAT. - ITA No. 9/2006 - - - Dated:- 19-8-2017 - Mr. Alok Aradhe And Mr. Sanjeev Kumar JJ. For the Applicant (s) : Mr. SubashDutt, Senior Advocate. For the Respondent(s) : Mr. KDS Kotwal, Advocate. JUDGMENT Per-AlokAradhe, J: - This appeal was admitted for hearing by a Bench of this Court vide order dated 01.02.2016 and following substantial questions of law were framed: (i) Whether on the facts and circumstances of the case, there is implied limitation of no enhancement beyond earlier assessed income in the direction of the Tribunal to apply proper and reasonable GP rate. (ii) Whether under the facts and circumstances of the case, the finding of the Tribunal that books of accounts are liable to be rejected u/s 145, is per se also a finding that gross profit shown is false or less and ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had made the sales below the cost price and came to the conclusion that there was under billing. He therefore made a reference under Section 144A of the Income Tax Act, 1961 to the Assistant Commissioner of Income Tax and sought his guidance, who directed the ITO to find out the facts in view of the submissions made by the appellant before the Assistant Commissioner of Income Tax. It is the case of the appellant that in order to buy peace with the department and to avoid litigation, the appellant revised the return of income under the Amnesty Scheme by disclosing additional sum of ₹ 8,00,000/- in the revised return. Thereupon, the ITO suggested additional of ₹ 69,848/- by application of Gross Profit Rate of 4.465 % on the Sales relating to the auction sales to which appellant agreed so that assessment is closed. However, the ITO continued the assessment on 08.01.1988. The ITO directed the list of 28 parties and directed the appellant to furnish address of the aforesaid parties which were supplied by the appellant. Thereafter, by communication dated 14.01.1988, the ITO informed the appellant that out of 28 parties, 14 could not be traced out and the appellant was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inter alia held that it is unable to agree with the finding recorded by CIT(A) that sale below cost price to unidentifiable parties will not amount to the finding that sales are not verifiable. It was further held that it is a case where books of accounts are not prone to verification but application of reasonable and proper gross profit or net profit rate depending upon the facts and circumstances of the case and comparison with similar dealers in Jammu. Accordingly, the order passed by the CIT(A) was set aside and the matter was remitted to the aforesaid authority with the direction that the revenue can explain the reasonableness of gross profit with positive evidence and not in generalistic manner. The appellant filed an application under Section 154(2) of the Act which was rejected vide order dated 20.06.2000. The appellant also assailed the validity of the order dated 31.08.1999 passed by ITAT before this Court. The Division Bench of this court vide order dated 07.12.2000 dismissed the writ petition and held that no question of law arises for consideration. 6. The CIT(A) by a communication asked the ITO to furnish the details of comparable cases and the gross profit rate, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, (1965) 57 ITR 532 (SC), Mysore Fertiliser Co. Vs. CIT, (1966) 59 ITR 268, Udhav Al Ram Vs. CIT, (1967) 66 ITR 462 (SC), Patiala Biscuit Manufacturers Pvt. Ltd. Vs. CIT, (1976) 103 ITR 208 (P H), CIT Vs. A. Raman Co., (1968) 67 ITR 208 (P H), CIT Vs. Calcutta Discount Co. Ltd., (1973) 91 ITR 0008 (SC), R B JessaramFetegchand (Sugar Dept) Vs. CIT, (1969) 75 ITR 0288 (SC), K.P. Vargese Vs. ITO Anr, (1981) 131 ITR 597(SC), CIT Vs. Hari CharannShyam Sunder Pvt. Ltd., (1986) 159 ITR 703 (CAL), State of Orissa v. Maharaja Shri B.P. Singh Deo, (1970) 76 ITR 0690 (SC), CIT Vs. Simon Carves Ltd., (1976) 105 ITR 212 (SC), International Forests Co. Vs. CIT, (1975) 101 ITR 721 (J K), CIT vs. Nathekkattu Constructions (2004) 269 ITR 346(KER), CIT Vs. Rajni Kant Dave, (2006) 281 ITR 0006 (ALL), CIT Vs. Padam Chand Ram Gopal, (1970) 76 ITR 719 (SC), Madani Construction Corporation Vs. CIT, (2008) 296 ITR 0045 (Gauhati H.C.) and Pajaralal Mittal Vs. Asst. CIT, (2007) 291 ITR 0214 (Gaughati). 8. On the other hand, learned counsel for the revenue has submitted that the directions contained by the ITAT in the order dated 31.08.1999 are binding on the parties as the same as attained finality. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra), the Supreme Court has held that the assessment must be based on some relevant material and the power to assess cannot be exercised under the sweet will and pleasure of the concerned authorities and the Tribunal has to give cogent reasons for upholding the order passed by the authorities. Similar view was taken by the Supreme Court in Commissioner of Income Tax v. Simon Carves Ltd. (supra). In International Foprest Co. v. Commissioner of Income Tax (supra),a Division Bench of this Court has held that even if ITO considers the material placed before him by the assessee to be unreliable, keeping in view the comparative statement of accounts of previous years, he could not proceed to make an arbitrary addition and base his conclusion purely on guess work. In RaghuvarMandalHariharMandal (supra), the Supreme Court held that in case the returns of the assessee and his books of accounts are rejected, the assessing authority must make an estimate but this must be based on such evidence or material as assessing authority has before him including the assessee‟s circumstances, knowledge of previous returns and all other matters which the assessing authority think will assist hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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