TMI Blog1996 (3) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... namely, M/s. Sumit Textile Mills, M/s. Sabarmati Mills India and M/s. Arvind Padding Works were found. These books pertained to assessment years 1994-95 and 1995-96 for the first two firms and for assessment year 1995-96 for the third firm. Though three different persons were shown to be the respective proprietors of these three concerns as informed by the bankers of the three concerns, the assessee, in his statement recorded at the time of survey, admitted owning these three concerns. He also offered to surrender Rs. 5 lakhs and Rs. 6 lakhs for assessment years 1994-95 and 1995-96 respectively as capital introduced in the three concerns out of his undisclosed income. He also owned up as his own money the various cash deposits appearing in different names in the account books. The accounts of the three concerns were stated to have been written by himself. 3. In view of the above facts, summons under section 131(3) were issued to produce the aforementioned books. The books were produced and were also impounded on 25-11-1994 under section 131(3). The examination of these books revealed that the three proprietary concerns were in existence prior to assessment year 1994-95 also. Summ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 2. Order U/s 131 Books produced are - (3) dated 25-11-94. impounded. 3. Summons U/s Requiting attendance on Assessee attends 131 dated 6-12-94 8-12-94 with all account as desired. books of the 3 firms with purchase sales bills for A.Ys. 1991-92 to 93-94. 4. Assessee's Request for taking copies, - Letter dt. extracts of relevant accounts 7-12-94. and also photocopies of the accounts impounded. 5. Order U/s Order impounding bill books, - 131(3)dt. 8-12-94 vouchers, etc., produced by the assessee. 6. Notice U/s To furnish return for A.Y. Served on 142(1) dt. 15-12-94 1994-95 by 30-12-94 17-12-94 7. Assessee's Stating inability to produce - letter dt. books of earlier years and 20-12-94 requesting copies of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of - letter dt. impounded material. 24-1-95. 13. Assessee's A. Stating that inspection is Copy to CIT with letter dt. commenced and will take a request to 30-1-95 at least one month. direct the AO to provide photocopies B. Request for extension of time to file return. C. Request for photocopies. 14. Deptt. letter Stating : dt. 2-2-95 A. None attended on 31-1-95. - B. No further time can be allowed to file the return. C. Issue of filing has no importance as assessment proceedings have commenced. D. Inspection permitted and hearing fixed on 20-2-95. E. Non-attendance will result into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from Arvind Padding Works 50,000 --------- 69,22,400 --------- 8. Being aggrieved by the assessment so made, the assessee carried the matter to the ld. CIT(Appeals). Before the CIT(Appeals), besides challenging the various additions, the assessee had, inter alia, also challenged the legality of the impounding of books and the legality of the order made under section 144. The ld. CIT(Appeals) confirmed the action of the Assessing Officer taken by him under section 144 and also confirmed the quantum of assessment. The assessee is, therefore, now in appeal before us against the said order of the ld. CIT(Appeals). 9. Shri C.L. Jhanwar and Shri U.C. Jain appeared for the assessee. Opening his arguments. Shri Jhanwar, at the outset, strongly assailed the various actions of the Assessing Officer, as also the order of the first appellate authority which confirmed those actions in their entirety. It was submitted that the case was a classic example of undue haste. While ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. [1986] 19 ITD 655 (Jp.). 12. Finally, Shri Jhanwar took strong exception to the observation of the ld. CIT(Appeals) in his order to the effect that " the appellant was running away from enquiries ". In this connection it was submitted that out of several notices/letters sent by the department, only one letter bearing no. 1271 dated 2-2-1995 accompanied with a summons under section 131 was returned which was subsequently served by affixture. The reason of the same remaining unserved was that on the day on which it was sought to be served, the assessee was out of station. Save this solitary instance, no notice or letter from the department was treated in a contemptuous manner which could lead the ld. CIT(Appeals) to make such a sweeping generalisation. The conduct of the assessee should have been seen in totality before making such an observation. For this, reliance was placed on the decisions in Sir Padampat Singhania v. CIT [1953] 24 ITR 141 (All.), and Ponkunnam Traders v. Addl. ITO [1972] 83 ITR 508 (Ker.). 13. Summarising his arguments, on the legality of the various actions of the Assessing Officer, Shri Jhanwar urged that the order made under section 144 be cancelled or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee did file the return on the basis of a trial balance and profit and loss account available with him. This clearly indicates the non-co-operative attitude of the assessee as on the same basis, the assessee could have filed his return within the time allowed by the notice under section 142(1). 16. Moreover, the return filed was a conditional return, making it subject to the application filed before the Settlement Commission. There was no provision at all in the Act, Shri Bhayana submitted, to file such conditional return and hence the Assessing Officer was justified in not taking note of such a return. 17. Shri Bhayana agreed with Shri Jhanwar that the assessment was a hurried one, but, the Assessing Officer could not sit over it and allow it to linger on where high stakes were involved. He, thus, justified the haste with which the assessment was completed. 18. As regards Shri Jhanwar's exception against the order of the ld. CIT(Appeals), Shri Bhayana contended that the language may not be to one's liking, but what mattered was the thought and the content reflected in the order. 19. In the opinion of Shri Bhayana, since the ld. counsel had not pressed s seriousl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nous or complicated, the Assessing officer had the power under section 142(2A) to get the accounts audited and could have then determined the income instead of doing so arbitrarily. Thus, it was finally urged that the assessment made under section 144 be annulled or set aside with a direction to make fresh assessment de novo. 26. We have heard the reasonings tendered by the learned representatives with close attention and application, made to maintain their respective stands. We have also closely scrutinized the material placed before us. 27. Though our reasons may be different, we agree with the ld. D/R that the case has a history of its own. Charges of excesses committed have been traded by both the sides. The charge of the assessee is that the department used excessive power which was unwarranted and unlawful. The charge of the department is that the assessee showed utmost non-co-operative attitude and a recalcitrant conduct, the obvious consequence of which was an assessment under section 144. Let us examine the issue in detail. 28. The purpose of the Income-tax Act, 1961 is to levy and collect taxes on income. The Act is a self-contained code. In order to carry out the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash balance. But the important thing is that there should be reasons to assume the powers under both the provisions. Similarly, a survey may be carried out under section 133A. This does not automatically empower the authority to arm himself with the powers under section 131(1). The circumstances under which the authority can do so are mentioned in section 133A(6), that is, when the person fails to afford the required facility to inspect the books, or verify cash, stocks, etc., or evades to provide any information and so on. Thus unless such circumstances exist, powers under section 131(1) cannot be assumed during the course of survey. 32. Coming to the facts of the case, survey was conducted on 25-11-1994. Summons under section 131 was also issued on the same day and the assessee produced the books on the same day. The Assessing Officer passed an order under section 131(3) on the same day impounding the books, the reason given being ' for deeper scrutiny '. Neither there is any evidence to show that the assessee did not co-operate in any respect, nor is there any finding or even allegation to that effect by the Assessing Officer which could have compelled him to impound the boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee furnished his return on 14-2-1995. Hence, the Assessing Officer was bound to consider the said return. It was not in consonance with the legal provisions for him to say that as the assessment proceedings have already commenced, the issue of filing the return has no importance. We repeat, before the Assessing Officer finalised the assessment, the assessee had a right to file a belated return under section 139(4), and having so filed, it was obligatory for the Assessing Officer to consider the same. 36. We reject the contention of the ld. D/R that it was a conditional return. Though, it is couched in such language by using the words " subject to ", in essence, it is merely an information that the assessee has approached the Settlement Commission and if the Commission decides to proceed with the application, then the jurisdiction will rest with the Commission. This is simply what the law states and cannot be termed as a condition laid down by the assessee himself. 37. Now it would be pertinent to examine the reasons which prevented the assessee from filing the return. No sooner the books were impounded on 25-11-1994, and before the notice under section 142(1) wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... competent to the discharge of his office ought to confine himself, that is, within the limits and for the objects intended by the Legislature." 39. In the present case, the Assessing Officer, firstly illegally impounded the books and then asked the assessee to furnish a return without affording an opportunity of inspection or allowing to take photocopies and then proceed to make the assessment under section 144. In our opinion, it is difficult to say that the Assessing Officer acted honestly or without caprice. 40. At this juncture, it is pertinent to note that the assessee filed the return on 14-2-1995 on the basis of a trial balance and profit and loss account available with him. But that is not the only material which can be said to be sufficient for filing a return with all true particulars. Besides the figure of profit or loss, there are many other aspects to be looked into, say, particulars for claim of depreciation, which can be incorporated in the return only by scanning the books in detail. Thus when the Assessing Officer had made up his mind to frame the assessment under section 144, subsequent opportunities provided for inspection were of little significance. This to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation shall be extended. 43. In the present case, there is nothing on record to show that the assessee was running away from the department as observed by the ld. CIT(Appeals), which would necessitate the Assessing Officer to pin him down in a hurried manner as argued by Shri Bhayana. This is not to suggest that we are against efficiency and promptness. It has to be there, but due process of law should not be the casualty of such an enthusiasm. 44. And now a final word about the order of the ld. CIT(Appeals). So far as the quantum of assessment is concerned, it is not a speaking order. The ld. CIT(Appeals), instead of viewing the additions on merits, confirmed them merely because, in his opinion, the assessee was running away from the enquiries. As discussed earlier, it was not so. Over and above that, contrary to all judicial pronouncements, the ld. CIT(Appeals) goes on to add that : "Such estimates have to be somewhat on the high side in the ex parte order to guard against under assessment .... If the appellant has played with fire he cannot complain of his fingers having been burnt in the process." 45. Referring to the order of the ld. CIT(Appeals) in general and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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