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TMI Blog2004 (10) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer. Beside this, the assessee has also challenged the application of provisions of section 44AD(6) and interest charged under section 234A of the Act. 4. The assessee in his written submission stated that the Assessing Officer has applied provisions of section 44AD(6) and thereby completed the ex parte assessment by applying 8% net profit on the contract receipts. It was further submitted by the learned A/R of the assessee that the best judgment assessment is not a provision to penalise the assessee for its failure. The assessment order has to be rational and based on honest guess work for which some valid basis is available to the Assessing Officer and for this proposition he has relied on the decisions in Shankar Khandasari Sugar Mills v. CIT [1992] 193 ITR 669 (Kar.), T.C.N. Menon v. ITO [1974] 96 ITR 148 (Ker.), Padam Chand v. CST [1986] 62 STC 195, 196 (All.) and Narayan Chandra Baidya v. CIT [1951] 20 ITR 287 (Cal.). The learned counsel for the assessee has also invited our attention on the observation of the CIT(A) that the issue of notice under section 142(1) is not a precondition. It was, therefore, submitted by the learned counsel for the assessee that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder sub-section (1) of section 142 has been issued prior to the making of an assessment under this section." Since in the case before us notice under section 142(1) was issued by the Assessing Officer and the assessee has failed to comply with the same, therefore, the Assessing Officer was justified in completing the assessment under section 144 and since the contract rates are less than Rs. 40 lakhs i.e. Rs. 18,84,672 the Assessing Officer was also justified in applying the net profit rate at 8% in the absence of books of account and other materials in view of the specific deeming provisions of section 44AD(1). This view finds support from the decision of the Hon'ble Rajasthan High Court in the case of CIT v. Sriram & Co. [2001] 250 ITR 169. The decisions relied on by the learned A/R of the assessee are distinguishable and not applicable to the facts of the assessee's case. 6.1 As regards interest under section 234A we find that the learned A/R of the assessee has not mentioned anything about the same in his written submission, therefore, in the absence thereof and also in the absence of any other material available on record we do not find any merit in this regard in the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT [1992] 193 ITR 669 (Kar) wherein it was held that appeal being a continuation of original proceedings, when the ITO has not considered all relevant materials or documents for making best judgment assessment, the appellate authority should consider the relevant materials produced before him, though belatedly. The approach of the authorities should be liberal in applying the procedural provisions of the Act, because the basis of tax under the Act is to levy tax, as far as possible, on the real income. Hence, in the above circumstances, the CIT(A) was not justified in not entertaining the books of account produced before him. Further, it is observed that sub-section (6) has been introduced in the Act w.e.f. 1-4-1998 and during the year under consideration, i.e., the assessment year 1995-96 there was no such requirement in the Act to get the accounts audited for claiming income at an amount less than the amount determined by the rate envisaged in section 44AD(1). Hence, the CIT(A) was not justified in not entertaining the books of account produced before him on the ground that such books of account were not audited as required under section 44AD(6). In view of the above, I do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n further appeal to the Tribunal. By the impugned order, the Tribunal has come to the conclusion that no notice under section 142(1) of the Act was served on the assessee and, therefore, the assessment order passed under section 144 was unsustainable. While holding so, the Tribunal has observed that the service of the first notice by affixture was bad inasmuch as procedure prescribed for effecting service by affixture was not followed by the Assessing Officer and as regards second notice, nothing was brought on record to show that it was served on the assessee. The Hon'ble High Court observing that the department could not produce any evidence to show that any notice was, in fact, served on the assessee, confirmed the finding of the Tribunal to the effect that there was no service of notice on the assessee before completing the assessments and upheld the decision of the Tribunal. Similar to the facts of the above case, in the instant case, though in the order of the assessment the Assessing Officer has stated that notice under section 142(1) was issued and served but the assessee has denied the receipt of the notice before the CIT(A) and before us. The revenue could not bring on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing to the assessee. I also direct the assessee to promptly comply with the notices of the Assessing Officer by producing books of account. 6. Before parting with this dissent note, I would like to observe that the Hon'ble Rajasthan High Court in CIT v. Sriram & Co. [2001] 250 ITR 169 held that Tribunal was justified in further allowing depreciation under section 32 as deduction from the Net Profit estimated by the Assessing Officer by applying rate of 8%. As the allowance of depreciation out of the estimated net profit is not the issue before us, hence, the decision of the Hon'ble Rajasthan High Court in the above case is found not applicable in the instant case. 7. I further find that almost in the similar facts and circumstances in the case of Sanjay Kr. Singh v. ITO [IT Appeal Nos. 138 and 139 (Gauhati) of 2002] for the assessment years 1994-95 and 1995-96, this bench of the Tribunal has vide its order dated 5-9-2003 restored back the issue to the file of the Assessing Officer for fresh determination of income from contract works so that the assessment can be completed on real income earned by the assessee as per books of account. Accordingly, in the instant case, I restor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case, the CIT(A) was justified in observing that "Mere maintenance of books of account" does not give to the appellant immunity from the application of the provisions of section 44AD(1) in view of section 44AD(6), which was inserted in the statute w.e.f. 1-4-1998 only and not applicable to the present year under appeal and therefore, in arriving at the conclusion that provisions of section 44AD(1) were rightly applied by the Assessing Officer? 2. Whether on the facts and circumstances of the case and where it is not in dispute that no post default show-cause notice was issued to the assessee, was the CIT(A) justified in observing "Since the appellant has filed the return of his income, issue of notice under section 143(2) was found sufficient for the completion of his case and issue of notice under section 142(1) is not a pre-condition for completion of the case under section 144 in such situation" and therefore, in concluding that the action of the Assessing Officer in completing the assessment under section 144 was valid? 3. Whether on the facts and circumstances of the case, the decision of the Hon'ble Rajasthan High Court in the case of Sriram & Co. has any applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon'ble President, Income-tax Appellate Tribunal, exercising his powers under section 255(4) of the Income-tax Act, 1961 (hereinafter referred to as the "Act") has referred the following points of difference as framed by the respective Members who heard the above appeal, to me as Third Member: Points of difference as referred to by the Ld. Judicial Member: "1. Whether on the facts and circumstances of the case and keeping in view that the assessee has not challenged the finding of the CIT(A) that the assessee has failed to fulfil both the conditions as required under section 44AA and section 44AB of the Act, it can be said that the assessee has produced the books of account either before the Assessing Officer or before the CIT(A)? 2. Whether on the facts and in the circumstances of the case and in view of ground No. 4 taken before the CIT(A) that "For that the order under section 144 is void and illegal as the necessary condition as to the service of show-cause notice (in absence of notice under section 142(1) as prescribed by the proviso to section 144(1) has not been fulfilled and therefore the order should be annulled." It can be held that no notice under section 142(1) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allow the assessee an opportunity to be assessed on the income determined as per his books of account or should block the bona fide effort of the assessee? 5. Whether on the facts and circumstances of the case and keeping in view the fact that no material was brought before the Tribunal by the revenue to show that the notice under section 142(1) was actually served on the assessee when the assessee has denied the receipt of the same and keeping in view the decision of the Hon'ble Delhi High Court in the case of CIT v. Dr. K.C. Verma [2003] 132 Taxman 598 (Delhi), can the Tribunal presume that the notice under section 142(1) was served on the assessee? 6. Whether on the facts and circumstances of the case and keeping in view the decision of the Tribunal in the case of Ajitsingh Raisingh v. ITO [2002] 76 TTJ (Mum.) 969 and of this bench of the Tribunal in the case of Sanjay Kr. Singh v. ITO [IT Appeal Nos. 138 and 139 (Gauhati) of 2002] vide order dated 5-9-2003, the issue of determination of income from contract works should be restored to the file of the Assessing Officer or not? 7. Whether on the facts and circumstances of the case, when the CIT(A) has given a finding that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the income from contract work at Rs. 1,50,734 as against Rs. 75,575 shown by the assessee and certain other additions were made which were not in dispute. 3. The assessee preferred appeal before the Ld. CIT(A) and several pleas were raised. The contention of the Ld. Counsel for the assessee before the CIT(A) was that the assessee was maintaining books of account and his case did not come within the purview of section 44AD of the Act. The CIT(A) observed that mere maintenance of books of account did not give immunity to the assessee from the obligation of the provisions of section 44AD because as per provision of section 44AD(6) the assessee could have claimed lower rate of profit than prescribed in the aforesaid section provided accounts were maintained as required under section 44AA and duly audited in terms of section 44AB of the Act. According to the Ld. CIT(A) the assessee had not fulfilled such conditions of section 44AD(6) of the Act and thus, the Assessing Officer was justified in applying the provisions of section 44AD of the Act. The assessee also raised the plea that the Assessing Officer was not justified to complete the assessment under section 144 of the Act becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 003 passed in ITA Nos. 138 and 139 (Gau.) of 2002 relating to the assessment years 1994-95 and 1995-96 had already set aside the issue to the file of the Assessing Officer and facts and circumstances of Sanjay Kr. Singh's case were the same and the order of the CIT(A) dated 21-12-2001 which was in appeal before the Gauhati Bench, copy thereof had been filed before me, is identical to the order of the CIT(A) which is the subject-matter of the present appeal and even it is Mr. L. Nampui, the CIT(A) in both the cases. 7. I have gone through the order of the Ld. CIT(A) in the case before me as well as in the case of Sanjay Kr. Singh and except the figures, each and every fact and circumstance is the same as in the case of the present assessee and I have also gone through the order of the Bench which constituted the same Members who have passed the dissenting order in the case before me and the same Members on the same facts and circumstances involved in the case of Sanjay Kr. Singh have restored the matter back to the file of the Assessing Officer. The Ld. Accountant Member had made reference to this order in para 7 of his order and his observation is correct and the Bench should have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment: Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub-section (1) of section 142 has been issued prior to the making of an assessment under this section." A perusal of the above goes to show that in case a notice under sub-section (1) of section 142 has been issued then the Assessing Officer shall not give post default opportunity to the assessee before making the assessment under section 144 of the Act. Nothing was brought by the Department on record before the Bench to show that the Assessing Officer issued notice under section 142(1) of the Act or served the same. Although an attempt has been made by the Ld. Departmental Representative by filing the copy of notice and acknowledgement issued by the Assessing Officer but it cannot be taken on record by me for consideration because it was not presented by the Ld. Departmental Representative before the Bench seized with the issue. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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