TMI Blog2013 (10) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... the arbitrary caprice of the Assessing Officer, but on settled principles of justice. The authority concerned has to make an honest and fair estimate of income. Reliance has been placed on the judgment of Hon’ble Supreme Court of India in the case of Dhakeswari Cotton Mills Ltd [1954 (10) TMI 12 - SUPREME Court], wherein it has been held that in making an assessment under Section 23(3) of the Indian Income-tax Act, the Income-tax Officer is not fettered by technical rules of evidence and pleadings and he is entitled to act on material which may not be accepted as evidence in a court of law, but the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 of 2008. 2. This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short the Act ) against the ITA No. 615 of 2008 order dated 7.12.2007 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar in ITA No. 167(ASR)/2007, relating to the assessment year 2003-04 claiming the following substantial questions of law (out of which questions (i) and (iv) have not been pressed and only questions (ii) and (iii) remains to be answered:- (ii) Whether the Ld. ITAT is justified to interfere in the well reasoned findings given by the 1st appellate authority to the effect that there is no valid ground to disallow the expenditure of Rs. 3 lacs out of Rs. 3.50 lacs claimed by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be ruled out. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A) ]. The CIT(A) vide order dated 7.2.2007 (Annexure A-2) upheld the disallowance of Rs. 50,000/- out of the total disallowance of Rs. 3,50,000/- and deleted the remaining addition. Against the order of the CIT(A), the revenue filed an appeal before the Tribunal whereas the assessee filed cross-objections. The Tribunal vide order dated 7.12.2007 (Annexure A-3) increased the disallowance of expenditure from Rs. 50,000/- upheld by the CIT(A) to Rs. 2,50,000/- out of total claim of Rs. 3,50,000/-. Hence, the present appeal by the assessee. 4. We have heard learned counsel for the parties and peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding to the learned counsel, the addition sustained by the Tribunal was, thus, correct. 7. After giving our thoughtful consideration to the respective submissions of learned counsel for the parties, we find merit in the submission made by the learned counsel for the assessee. 8. It is trite law that there has to be prima facie material for formation of opinion by the assessing authority that the books of account have not been properly maintained or profits disclosed therein does not depict correct state of affair. It is accepted principle that where the books of account are rejected or true profits are not disclosed in the books of account, some element of guess work while framing the assessment is inevitable. The guess work should not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eculative element in it, has at the same time to be based on some reasonable objective data. It is not known what facts and circumstances were taken into account in fixing the amount of increase and how an overall assessment was made. There has been progressive increase in the taxable turnover of the assessee and for the previous year he had shown the gross turnover at Rs. 3,06,894.31 as against Rs. 3,73,476.12 for the year in dispute. It cannot, therefore, be positively said, in the absence of any other material, that the assessee had concealed any income. No authority is needed for the proposition that the best judgment assessment cannot be arbitrary. Even best judgment assessment implies and imports a legal and judicial consideration and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Assessing Officer in the assessment order while making the addition which are to the following effect:- Since the nature of these expenses is such the element of inflated expenditure under this head cannot be ruled out. 13. The CIT(A) had recorded as under:- However, this fact also means that it is not possible to properly verify these expenses. Hence, it would be fair and reasonable to uphold Rs.50,000/- out of the disallowance of Rs.3,50,000/- and balance Rs.3,00,000/- is deleted. 14. The Tribunal while adjudicating the appeal had observed as under:- However, considering that it cannot be ruled out that the assessee would have incurred some expenses under the aforesaid heads, we consid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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