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TMI Blog2015 (7) TMI 1318X X X X Extracts X X X X X X X X Extracts X X X X ..... books of accounts - HELD THAT:- We only consider it fit and proper to estimate the assessee s income for the year holding of a change in the assessee s business for the current year, so that trading in paper, as stated in its SOF, was also added to the existing business of printing. We estimate the income for the year by ascribing the incremental sales to the trading business (in printing paper), retaining the sales and the net profit of the existing business to the level as disclosed for the immediately preceding year, i.e., at ₹ 70 lacs and 5.0% respectively (by rounding of the same). For the balance sales of ₹ 4469.32 lacs for the current year, we estimate the net profit at 1.0%, i.e., at 1/5 of the profit on the manufacturing activity, and is also in line with the industry average, at least apparently. The Revenue has also not brought or even relied upon any material in this regard. This, i.e., the said estimation by us, shall also take care of the Revenue s appeal as well, which impugns the allowance of the indirect expenditure as claimed by the assessee. - I.T.A. No. 5818/Mum/2014, I.T.A. No. 6664/Mum/2014 - - - Dated:- 17-7-2015 - SHRI D. MANMOHAN, VP AND ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sponse to notice u/s.142(1) of the Act dated 09.11.2011, requiring it to attend on 18.11.2011, raised an objection to the service of notice u/s.143(2) on it on 17.11.2011 vide letter of even date (APB pg.1). The objection stood reiterated in appeal, to meet which a remand export was called for by the ld. CIT(A). The notice under reference having been sent per registered post, as evidenced by the speed post dispatch folder dated 30.08.2010, as maintained by the office of the AO, at the assessee s registered address, which remain unchanged and which had came back unserved and, besides, evidenced by a receipt, again duly received from the Postal Department (RPAD pg. 18), the assessee could not claim non-service and its objection was, therefore, without merit. Aggrieved, the assessee is in second appeal. 4. The respective cases The assessee s case, relying on case law, as before the authorities below, is along with the following lines: a. that there is no justification for the time lag between date of issue of the notice and date of service as contended by ld. A.O. b. that there is no evidence of the issue of the notice. c. that the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein named,- (a) by post or by such courier services as may be approved by the Board; or (b) in such manner as provided under the Code of Civil Procedure, 1908 (5 of 1908) for the purposes of service of summons; or (c) in the form of any electronic record as provided in Chapter IV of the Information Technology Act, 2000 (21 of 2000); or (d) by any other means of transmission of documents as provided by rules made by the Board in this behalf. (2) The Board may make rules providing for the addresses (including the address for electronic mail or electronic mail message) to which the communication referred to in sub-section (1) may be delivered or transmitted to the person therein named. Explanation.-For the purposes of this section, the expressions electronic mail and electronic mail message shall have the meanings as assigned to them in Explanation to section 66A of the Information Technology Act, 2000 (21 of 2000). Notice deemed to be valid in certain circumstances. 292 BB. Where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (e) That judicial and official acts have been regularly performed; (f) That the common course of business has been followed in particular cases; (g) That evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it; (h) That if a man refuses to answer a question which he is not compelled to answer by law, the answer, if given, would be unfavourable to him; (i) That when a document creating an obligation is in the hands of the obligor, the obligation has been discharged. The assessee s right to object to service of notice u/s.143(2) dated 23.08.2010 is saved on account of his taking the same before the A.O. during the assessment proceedings vide letter dated 17.11.2011, filed on that date, the contents of which, being relevant are as under: To, ITO 16 (2)(4), Matru Mandir, Mumbai. Subject: Non Receipt of 143(2) for M/s Color Craft A.V 2009-10 (PAN: AADFC7740A) Dear Sir, As informed by the assessee, it is hereby respectfully submitted that notice under section 143(2) has not been served on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of post referred to in section 27 of the General Clauses Act, and to which only, therefore, the said provision is applicable, stands, as noted with approval in Milan Poddar (supra), clarified by the Tribunal, whose order was under challenge before it, applying the principle of updating construction, that registered post would take within its sweep not only speed post but also all other mails forming part of the establish system of mails in which their receipt and movement is recorded to assure safe delivery (para 21). All the principal attributes of registered post were inherently present in speed post , so that the two were of the same genus (para 14). The term registered post being not defined, it could only be so in terms of its elements, which the tribunal gathered from the dictionary meaning of the word registered ; its common parlance meaning; and its substance (paras 13, 14). How could, we wonder, a different view of the matter be taken or adopted?. In other words, speed post was in substance only registered post and, consequently, the statutory presumption of section 27 shall hold in its respect as well. It was further noted by the tribunal that section 27 did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atch list as prepared being genuine and authentic and, further, that the notices (communications) were actually dispatched as per the said document. The same thus bolsters the Revenue s case of the service being actually effected on the date as specified therein, which could only be challenged on the basis of some controverting evidence/material, and which, in view of the opposing claims, it needs to be appreciated, would have to be the date specified and, further, bear corroboration by the postal department. There being in fact no contrary material, the date of service, on the strength and the basis of the material on record, which is only as generated in the ordinary course of its business by the Revenue, i.e., as to delivery of communications and the arrangement entered with the postal department in its respect, is 30.09.2010. We, accordingly, hold the same to be on the said date and, therefore, the service of notice u/s. 143(2) dated 23.08.2010 as within time. 5.3 We may, without prejudice to the foregoing, also discuss the assessee s case as to non service, i.e., as later made out to, expanding the scope of the objection raised in the assessment proceedings, and whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddressed to the said firm. One is, given his educational qualification (B.Com/Q. No. 2), even otherwise hard put to explain his behaviour in accepting a document under his signature, particularly of a firm with which he claims no relation. It becomes incomprehensible and outside the bounds of credulity where he, as contended, has no knowledge of the said firm. The contention of no knowledge of the said firm is even otherwise incomprehensible on facts, i.e., given the fact that the firm has its premises at the stated address, and he himself was physically present thereat at the relevant time, stating of the same to also be the address of his father s business. 5.4 It is for the foregoing evidences and reasons that, notwithstanding the respondent s claim of not knowing the addressee firm and having not received any notice from the income tax department, that we find no merit whatsoever in the assessee s claim of non service of the notice under reference, even as, at the cost of repetition, we state that the same could be contested only qua its timing. We may toward this also deal with the assessee s other contentions in the matter. True, the notices or the envelope containi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case. The foregoing would also show that the reliance on the said decision by the Revenue is not, as contended, misplaced, and toward which we may also refer to the substantial question of law (a) raised before the hon ble court (pg. 623 of the reports). Rather, in the facts of that case, there was no proof of delivery and the only basis for averring service was the speed post having not returned back unserved. The ratio of the said decision is, therefore, squarely applicable in the facts of the present case. 5.5 As regards the Revenue s reliance on case law, we have, drawing on the settled law on service per post, which is a prescribed mode of service u/s.282(1)(a) of the Act, as clarified by the hon ble court in Milan Poddar (supra) with reference to several decisions by the hon ble apex court, found it to be a case of valid service. Even no infirmity in the said decision stands brought to our notice despite being specifically the ld. AR being specifically questioned in the matter during hearing. The decision by the tribunal relied upon would thus be of little consequence. The decision in the case of CIT vs. Cebon India Ltd. [2009] 184 Taxmann 290 (P H) is based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espectively, was not valid. The AO, however, we observe, estimated the profit for the current year at 41.08 %, i.e., as returned for the immediately preceding year, being in fact the lowest of the profit rates obtaining for the past three years, relying on the decisions in the case of Action Electricals vs. Dy. CIT [2002] 258 ITR 188 (Del) and P. Venkanna vs. CIT [1969] 72 ITR 328 (Mys.), so that a best judgement assessment based on past years results is valid and not arbitrary. The same stood confirmed by the first appellate authority in-as-much as he found no reason to disturb the same. He, however, allowed the assessee s claim of all expenses claimed through debit to the profit and loss account for the year, at ₹ 58,00,975/-, against which the Revenue is in appeal. The ld. AR was, at this stage, asked by the Bench, if there was anything on record to show of a change of business for the current year, viz., the changed profile of the customers; the sales tax returns; the audited report u/s.44AB, which, vide column 8 thereof requires the Auditor to report/specify the nature of the business as well as if there is any change in the business during the year, etc., to which he ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, and which would be available. On the contrary, the ld. CIT(A) clearly refers to the audit report furnished (at pg. 14 of his order), stating of it as reporting the assessee s business as: Off set and screen printing , i.e., as mentioned in the assessment order and as being taken by the Revenue, and of there being no change in the business during the year, vide columns 8(a) and 8(b) thereof. In fact, why, again, one may ask, one switch from a highly profitable business to one which can hardly be said to be profitable and, thus, as business at all profit motive being an essential feature of an activity to qualify as business . The assessee s reply, on this question being asked during hearing, of the earlier business as no longer viable, can hardly be countenanced. A business would cease to exist only on an alternate good/service, more economical than the existing product, arriving in, and in fact accepted by, the market, which transition itself would take place only over a period of time. There is no such explanation; rather, no reference to any such product? There is further nothing on record to show of the Revenue having accepted the assessee s profit at 20% for a later y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business profile. True, the said expenditure being largely fixed or semi fixed, tends to remain constant, but that assumption would be valid only for the same level of physical activity/output, or where it falls in the same range and, besides, would not fall to negligible levels (in terms of turnover), i.e., were it to bear the same character, as it does. In fact, holding the same constant at ₹ 25.80 lacs, i.e., as obtaining for the immediately preceding year, implies an increase of ₹ 32.21 lacs (Rs.58.01 lacs ₹ 25.80 lacs) for the current year, and which works to 0.72% of the incremental turnover of ₹ 4468.68 lacs for the year, i.e., as against a level of 36%-37% (of the turnover for the preceding year, falling, thus, to as low as 2% of its earlier level, signifying, again, a change in the business profile. Couple this with the fact that the Revenue itself states of the assessee s sale for the current year being, in the main, to its two sister concerns, doubting the same on that basis, i.e., as, inferably, not genuine transactions. Under the circumstances, we only consider it fit and proper to estimate the assessee s income for the year ho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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