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2016 (7) TMI 1213

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..... an appeal under Section 260-A. Remand order upheld - Decided against the revenue. - Income Tax Appeal No.206 of 2001 (O&M), Income Tax Appeal No.195 of 2001 (O&M), Income Tax Appeal No.196 of 2001 (O&M), Income Tax Appeal No.205 of 2001 (O&M) - - - Dated:- 21-7-2016 - MR. S.J. VAZIFDAR AND MR. DEEPAK SIBAL, JJ. For The Appellant : Mr.Rajesh Katoch, Advocate For The Respondent : Mr. Pankaj Jain, Senior Advocate with Ms. Divya Suri, Advocate S.J. VAZIFDAR, ACTING CHIEF JUSTICE : These appeals are against the order of the Tribunal remanding the matter to the file of the Assessing Officer to work out the undisclosed income for the block period 01.04.1986 to 30.08.1996. The Tribunal directed the Assessing Officer to re-compute the income with a direction that income of each block year should be separately calculated and segregated from the accepted income of the appellant. 2. The learned counsel appearing on behalf of the appellant has no objection to the order of the remand per se . The grievance is against the certain observations of the Tribunal regarding the manner in which the assessment is to be carried out upon remand. 3. The facts in ITA No.206 of .....

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..... assessment order. Mr. Jain fairly and, in our opinion, rightly accepted the findings of the Assessing Officer that the Maheshwari Group comprised of M/s Maheshwari Rosin Turpentine Works, Hoshiarpur, M/s Maheshwari Paint and Varnish Works, Hoshiarpur, M/s Maheshwari Enterprises, Hoshiarpur, M/s Maheshwari Rosin Products, Hoshiarpur and M/s Maheshwari Synthetic (P) Ltd., Hoshiarpur. The evidence on record overwhelmingly and conclusively establishes that the entities are part of the same group. 8. The group is involved in the manufacture of paint, varnish, enamel, primer, distemper and other such products. During the course of the search and seizure operation, incriminating documents were seized, such as, 43 small ledgers with coded entries, 600 order forms showing booking of orders outside the regular books of account, 136 initial bills with some of the upper and lower portions torn, final bills corresponding to the initial bills but suppressing the sales, bill books, loose sheets, correspondence from purchasers requesting for bills of suppressed quantity and amounts and signed and duly stamped blank voucher forms for debiting expenses according to the wishes and requirements o .....

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..... n that the G.P. rate was erroneous. The Tribunal referred to Section 158B(b), which reads as under: Undisclosed income includes any money, bullion, jewellery or other valuable article of thing or any income based on any entry in the books of account or other documents or transactions, where such money bullion, jewellery, valuables article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purpose of this Act. The following words were inserted at the end by Finance Act, 2002 with retrospective effect from 01.07.1995: or any expense, deduction or allowance claimed under this Act which is found to be false. Whether the amendment applies or not is irrelevant for the purpose of this appeal. 12. As we mentioned earlier, Mr. Katoch, the learned counsel appearing on behalf of the appellant/revenue did not have any objection to the matter being remanded per se . He, however, challenged certain observations in the order. If the challenge is well-founded, it would be necessary to set aside the observations as the assessment order, upon remand, was bound .....

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..... ed to the income earned out of undisclosed sales. The A.O. has tried to work out the undisclosed income but he has adopted the method which constitutes the grounds which we are discussing separately and each method and ground will be separately discussed in various paras of this order. 36. The Ld. DR as well as the A.O. has relied on the decision of the Hon ble Supreme Court in the case of Commissioner of Sales Tax, Madhya Pradesh Vs. H.M. Esufali H.M. Abdulali, 90-ITR-275 (SC)(90). The facts of the case are not applicable to the present case. The A.O. can adopt reasonable estimate but the same is to be linked with the evidence available on record, he cannot start presuming things. If suppose, there is a entry of cash credit on a particular day amounting to ₹ 5000/-, he has to decide this very entry and he cannot be presume (sic) that on each and every day assessee is taking cash credit of ₹ 5000/-. If there are suppressed sales in a particular area or in a particular month, he has to take into account only such sales belonging to a particular area. He cannot presume that such type of action is required to be estimated for all the areas and for all the months. That .....

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..... of the symbols. However, the sale is recorded. Thus, in addition to unrecorded sales there is also a case of sales wrongly recorded, that is to say, it is a case of under-invoicing. 14. Further, even if the observation was meant as one of law, it is incorrect and contrary to Section 158B(b). The words undisclosed income in the section are not restricted to any money . or any income etc. based on entries in the books of account. The money . or any income may also be based on other documents or transactions . This is so where the same represent wholly or partly income or property, which has not been or would not have been disclosed for the purpose of this Act. This is clear from the words based on any entry in the books of account or other documents or transactions If the intention of the legislature was to restrict the ambit of the words undisclosed income to entries in the books of account, it would not have added the words or other documents or transactions . The ambit of the words undisclosed income is understandably wider than income based only on entries in the assessee s books of account. The suppressed income has indeed not been disclosed for the p .....

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..... a particular day may not be the same as the quantum of an entry on another day. If, for instance, it is revealed that the value of the entries bears a proportion to the actual sales of a particular day, the addition must be made proportionately. It could be higher or lower. 18. We find the following observations in paragraph-36 to be far too wide and contrary to the settled principles:- If there are suppressed sales in a particular area or in a particular month, he has to take into account only such sales belonging to a particular area. He cannot presume that such type of action is required to be estimated for all the areas and for all the months. That will give total distortion of the undisclosed income because such undisclosed income has to be matched with undisclosed assets. 19. There cannot be an inflexible rule that suppressed sales in a particular area are of no relevance to the assessment of sales in other areas. This too would depend upon the facts and circumstances of each case. If the evidence reveals a practice of suppressed sales generally and not limited to any particular area, the Assessing Officer would be entitled to draw an inference that the assessee su .....

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..... and all other matters which he thinks will assist him in arriving at a fair and proper estimate, and though there must necessarily be guess-work in the matter, it must be honest guess-work. In that sense, too, the assessment must be to some extent arbitrary. In Raghubar Mandal Harihar Mandal v. State of Bihar [1957] 8 STC 770] a case arising under the Bihar Sales Tax Act, 1944, the law relating to best-judgment assessment was examined at length by this Court. Therein S.K. Das, J., speaking for the Court observed: No doubt it is true that when the returns and the books of account are rejected, the assessing officer must make an estimate, and to that extent he must make a guess; but the estimate must be related to some evidence or material and it must be something more than mere suspicion . To use the words of Lord Russel of Killowen again, he must make what he honestly believes to be a fair estimate of the proper figure of assessment and for this purpose he must take into consideration such materials as the assessing officer has before him, including the assessee's circumstances, knowledge of previous returns and all other matters which the assessing officer thi .....

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..... bt that there is such a nexus. (emphasis supplied) 21. Mr. Jain, the learned senior counsel appearing on behalf of the respondents, submitted that a mere order of remand does not raise a question of law much less a substantial question of law. We will assume that to be correct. However, when an order of remand is made with a direction or an order specifying the manner in which or the principles upon which the order ought to be passed, it is not a simplicitor order of remand. If a question of law arises out of the direction issued, a question of law and even a substantial question of law can always arise from and on account of the direction issued by the appellate authority. For instance, when the appellate authority decides a question of law and remands the matter to the lower authority whether it is the Assessing Officer or the CIT (Appeals) with a direction to decide the matter afresh in accordance with the judgment and it is found that the direction raises a substantial question of law, can always be the subject matter of an appeal under Section 260-A. 22. In the result, the order of remand passed by the Tribunal is upheld. Upon remand, the assessment shall be done .....

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