TMI Blog2005 (11) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... authority and the revisional authority are held to be arbitrary to the extent they upheld the rate of 9 per cent, and are, therefore, quashed. The matter is remitted to the appellate authority to reconsidered as to the rate which can be applied while estimating net profits - - - - - Dated:- 29-11-2005 - Judge(s) : SHANTANU KEMKAR. JUDGMENT Shantanu Kemkar J.-The petitioner claims to be carrying on the business of medicines at Hoshangabad in the name of M/s. Anand Medical Stores. On the basis of a survey dated March 7, 1991, conducted under section 133B of the Income-tax Act, 1961 ("the Act" for short), by the Assistant Director (Investigation), Bhopal, a notice under section 142(1) read with section 148 of the Act was issued to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the net profit rate of 9 per cent; thus in the absence of any material on record the order passed by the authorities deserves to be quashed. In support of his contentions, he relied on the judgments in the case of Ganga Prasad Sharma v. CIT [1981] 132 ITR 87 (MP); Karnataka State Forest Industries Corporation Ltd. v. CIT [1993] 201 ITR 674 (Karn); State of Orissa v. Maharaja Shri B.P. Singh Deo [1970] 76 ITR 690 (SC); AIR 1970 SC 670; P.J. Philip v. State of Kerala [1993] 201 ITR 591 (Ker). Shri Rohit Arya, learned senior counsel appearing for the respondents, has contended that on the basis of survey conducted, the petitioner furnished information under section 133B of the Act, basing upon which and the survey report a notice under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e extent that computation of profit at 9 per cent., is excessive and arbitrary, the petitioner cannot challenge the total sales taken by the Income-tax Officer, confirmed in appeals and revisions. He also contended that the scope of interference in this petition under article 226 is limited and unless there is arbitrary exercise of powers by the authorities, no interference is called for in the writ jurisdiction. In support of his contention, he relied on the judgments passed in the case of CST v. Kutubali Noorjibhai and Co. [1975] 36 STC 523 (Bom); State of Orissa v. Fancy Motors Accessories Agency [1988] 69 STC 34 (Orissa); State of Orissa v. Tormal Rameswardas [1988] 68 STC 204 (Orissa); Bhagwandas Khandelwal v. CST [1971] 27 STC 388 (MP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 145 to make such computation in such method as he determines for deducing the correct profits and gains. In the case of P.J. Philip v. State of Kerala [1993] 201 ITR 591, the Kerala High Court has held that the best judgment assessment must be fair, reasonable and based on material. In the case of CST v. Kutubali Noorjibhai and Co. [1975] 36 STC 523, the Bombay High Court held that best judgment assessment made by the taxing authority must inevitably involve some guess-work, but its sole base cannot be imagination. The estimate made by the taxing authority in making a best judgment assessment should not be vindictive or capricious, but it should be a bona fide estimate and arrived at on a rational basis. There has to be a reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usness in the estimation of turnover, the basis on which it was made could be challenged in the circumstances. In Bhagwandas Khandelwal v. CST [1971] 27 STC 388, the Division Bench of this court has held that a best judgment assessment is to be based on some material which could reasonably lead to the conclusion arrived at. In CST v. H. M. Esufali, H. M. Abdulali [1973] 90 ITR 271, the Supreme Court observed that it is inevitable that there is some guess-work while making the best judgment assessment. The assessing authority while assigning the best judgment should arrive at his conclusion without any bias and on rational basis. The authority should not be vindictive or capricious. If the estimate is bona fide estimate and is based on a rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecked and inspected by the authorities, during the survey conducted under section 133B of the Act. It was also contended before the appellate authority that on the basis of the accounts maintained by him, his income did not exceed taxable quantum for both the years. However, no attention was given to the petitioner's contentions by the Deputy Commissioner of Income-tax (Appeals) though the Deputy Commissioner of Income-tax (Appeals) on the basis of the said trading and profit and loss account accepted the sales shown by the petitioner. However, he maintained the rate of 9 per cent, by observing that it is reasonable for the medicine shop business. In my considered view, this reasoning appear to be arbitrary and unreasonable in view of the D ..... X X X X Extracts X X X X X X X X Extracts X X X X
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