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TMI Blog2019 (9) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... is apparent from records within limited mandate of Section 254(2) and what assessee is seeking is reviewing of our order dated 04.10.2017 which is not permissible within limited mandate of Section 254(2) - MA No. 150-151/Mum/2018 Arising out of ITA No.4896/Mum/2015 & 2135/Mum/2013 - - - Dated:- 4-9-2019 - Shri C.N. Prasad, Judicial Member And Shri Ramit Kochar, Accountant Member For the Assessee : Mr. S.C.Tiwari and Ms Rutuja N. Pawar For the Revenue : Mr. Chaudhary Arun Kumar Singh and Mr. D.G.Pansari, DR ORDER PER RAMIT KOCHAR, ACCOUNTANT MEMBER These two Miscellaneous Applications bearing MA No. 150-151/Mum/2018 arising out of ITA No. 4896/Mum/2015 and ITA no. 2135/Mum/2013 for assessment year(s) 2008-09 and 2009-10 respectively, are filed by assessee u/s 254(2) of the Income-tax Act,1961( hereinafter called the Act ) being aggrieved by common appellate order dated 04.10.2017 passed by Income-Tax Appellate Tribunal, I Bench, Mumbai ( hereinafter called the tribunal ) u/s 254(1) of the 1961 Act wherein assessee is seeking rectification of mistakes apparent from records. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g some portions of the order of the tribunal while on the other hand the tribunal dealt in details with each and every contention of the both the litigating parties to arrive at a well reasoned detailed conclusion in its common order dated 04.10.2017 for ay: 2008-09 and 2009-10. The tribunal in order to avoid double jeopardy instead directed AO not to make additions of the opening balance of creditors of ₹ 10.82 crores as on 01.04.2008 as the said balance gets virtually disallowed twice because in ay: 2008-09 all purchases stood disallowed while in ay: 2009-10 , the AO invoked provisions of Section 40A(3) and 40A(3A) to disallow payments to these parties from whom alleged purchases were made otherwise than through crossed account payee cheques. The decision of the tribunal starts from page 32 and ends on page 56 of the aforesaid common order dated 04.10.2017. The other grievance is that there cannot be simultaneous disallowance u/s 69C in ay: 2008-09 while provisions of Section 40A(3) and 40A(3A) were invoked in ay: 2009-10 , the tribunal has dealt with these issues in details while passing detailed well reasoned common order dated 04.10.2017 for both the years. The AO had br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO u/s 145(3) and he did not estimate income by applying profitability, then there is embargo on applying section 40A(3), 68 and 69. Herein the instant case, the AO has not applied the profitability rates to compute income. It is important at this stage to refer to following important judicial pronouncements on the relevant subject: a) Hon ble Supreme Court in the case CST v. H.M.Esufali H.M.Abdulali reported in (1973) 90 ITR 271(SC) has explained the distinction between regular assessment and best judgment assessment as under: The distinction between a best judgment assessment and assessment based on the accounts submitted by an assessee must be borne in mind. Sometimes there may be innocent or trivial mistakes in the accounts maintained by the assessee. There may be even certain unintended or unimportant omissions in those accounts ; but yet the accounts may be accepted as genuine and substantially correct . In such cases , the assessments are made on the basis of the accounts maintained even though the assessing officer may add back to the accounts price of the items that might have been omit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the Income-tax Officer has to examine the books in the same way as he would examine any other evidence produced by the assessee under rub-section (3) of Section 23. If the objection to the books is merely one of method or if the books are unreliable merely in the sense that, though they are a correct record of the assessee's transactions, they have been kept in such a manner that they do not ex facie reveal the true result of the assessee's trading activity during the previous year, and the Income-tax Officer can, in some manner, make them the basis of computation of the assessee's income for the previous year, he must proceed under the proviso to Section 13. If, however, the books are false, fictitious or cooked for the purposes of assessment to income-tax, the Income-tax Officer must reject them, as he must reject any other false evidence, and make the assessment on the other material before him provided the attention of the assessee is drawn to that material ..Even where the books are held to be false, there is nothing to prevent the Income-tax Officer from using and acting on any admissions that they might contain. For instance, the Incometax Officer may acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t appellate authority was of the view that when the income is being estimated there is no question of making separate additions in the light of certain decisions of the other courts. The first appellate authority, therefore, after rejecting the books, had resorted to the estimation of income on percentage basis. Here, it must be noted that the first appellate authority did not thereafter make any reference to the books of accounts and other documents relied on by the assessee for the purpose of estimation of income. In other words he had totally discarded the materials available in the form of books of accounts and other documents. He had resorted to the estimation on percentage basis. On an overall view with regard to the profit that can be derived from a contract business, the first appellate authority felt that it is strange to think that out of the total contract receipt of ₹ 1,15,47,373 there may be a profit to the tune of ₹ 87,51,092, which will come to more than 75 per cent of the contract receipt. According to us the first appellate authority was not justified on the facts of this case to totally discard the books of accounts and other documents relied on by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer in estimating the income with reference to the books of accounts and other documents by substituting it with determination of profit on percentage basis. As we have already noted the first appellate authority, without considering the case of the assessee based on the books of accounts and other records, had straightaway thought that this is a fit case for estimation of profit on percentage basis. We do not think that on the facts of this case the first appellate authority was justified in adopting such a course. The Tribunal has also committed the mistake in approving the estimation of income adopted by the first appellate authority. In these circumstances we are of the view that the question of estimation of income from the contract receipt is a matter to be considered by the Assessing Officer himself in accordance with law in the light of the observations made in this judgment. In the above circumstances we decline to answer the questions of law on which notice is ordered in the appeal filed by the Department. The above judgments clearly stipulates that there is no bar on taking recourse to incriminating material unea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the 1962 Rules but no material is placed on record as to how the assessee is covered by said rule and this contention is merely a bald condition as no material on record supports the contention of the assessee. Perusal of Section 144 clearly reveals that in case the AO is not satisfied with the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under subsection (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144. Perusal of Section 144 would clearly reveals that the AO, after taking into account all relevant material which the AO has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and we donot find any limitation on the powers of the AO not to take recourse to the incriminating material gathered during enquiry/investigation during assessment proceedings to compute income of the assessee while framing best judgment assessment. From the perusal of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that our decision in ITA no.2185/Mum/2013 for AY 2009-10 shall apply mutatis mutandis to the appeal for AY 2008-09 as facts situation are similar in both the appeals and the AO shall work out disallowance in the similar manner as for AY 2008-09 as was done for AY 2009-10 by invoking applicable provisions of Section 40A(3)(a) and (b). We also have noticed that assessment for AY2008-09 was framed by the AO by invoking Section 69C wherein all purchases stood dismissed , while for framing assessment for AY 2009-10 , the AO invoked Section 40A(3)/40A(3A) wherein disallowance has been made based on payments made to the so called purchasing parties in excess of ₹ 20000/- otherwise than by account payee cheque or account payee draft which has led to double jeopardy to the assessee as the assessee has opening creditors on 01-04-2008 of ₹ 10.82 crores who virtually got disallowed twice , once when entire purchases were disallowed for AY 2008-09 u/s 69Cand secondly when payments against those purchases were made against preceding year outstanding s in AY 2009-10 which has led to double jeopardy . However, this figure of double jeopardy needs to be worked out by the AO and in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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