1977 (2) TMI 67 - AT - Income Tax

Summary

Issues Involved:
1. Timeliness of the assessment order.
2. Legality of the assessment under s. 153(1)(b) of the Income Tax Act, 1961.
3. Merits of the net profit estimation by the Income-tax Officer.
4. Levy of interest under s. 271.

Detailed Analysis:

1. Timeliness of the Assessment Order:

The primary issue in the appeal was whether the assessment order was time-barred. The assessee firm filed a revised return on 9th Feb, 1972, and according to s. 153(1)(c) of the Income Tax Act, 1961, the assessment order should have been passed by 8th Feb, 1973. However, the Income-tax Officer passed the order on 21st March, 1973. The Appellate Tribunal found that the assessment was indeed time-barred as it was not completed within the stipulated period. The Tribunal rejected the Department's contention that the case fell under s. 153(1)(b), which allows for an extended period in cases of concealment of income, as there was no valid finding of concealment by the Income-tax Officer.

2. Legality of the Assessment under s. 153(1)(b):

The Appellate Assistant Commissioner had held that the case fell under s. 153(1)(b) due to a prima facie case of concealment of income. However, the Tribunal found no convincing material to support this claim. The Tribunal noted that the Appellate Assistant Commissioner's observations about incomplete statements of accounts and delayed filing of audit statements did not necessarily indicate concealment. Moreover, the Income-tax Officer did not make any specific finding of concealment before the assessment became time-barred, and the penalty proceedings initiated later were eventually dropped. Thus, the Tribunal concluded that the assessment could not be saved under s. 153(1)(b).

3. Merits of the Net Profit Estimation:

On the merits, the Tribunal upheld the Income-tax Officer's estimation of a 10% net profit rate. The assessee had argued that the low profit margin was due to inexperience, rising costs, and calculation errors. However, since the assessee did not maintain proper books of account or provide evidence to substantiate these claims, the Tribunal found the 10% net profit rate reasonable and justified in the line of business.

4. Levy of Interest under s. 271:

The ground of appeal relating to the levy of interest under s. 271 was not pressed by the assessee during the argument. Consequently, the Tribunal upheld the impugned order on this point.

Conclusion:

The Tribunal allowed the appeal, canceling the assessment order as time-barred. However, on the merits, it upheld the Income-tax Officer's estimation of net profit and the levy of interest under s. 271.