TMI Blog1995 (1) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... ending on March 31, 1961, on January 31, 1964, and for the assessment year 1962-63 for the financial year ending on March 31, 1962, on March 26, 1964. In December, 1966, however, the Enforcement Directorate and the Income-tax Department conducted a raid in the premises of the assessee-company and the premises under the occupation of its managing directors and seized documents from their custody, which revealed that the assessee was systematically over-invoicing its imports of raw materials from Sweden and such over-invoiced amounts were credited to the account of Mr. M. R. Pratap, the managing director of the assessee in a Swedish bank, having the name Svenska Handelsbanken. In the pending assessment for the assessment year 1965-66, the Revenue took notice of several documents and the statements of one D. V. Jagga Rao in his deposition given on March 7, 1970, and March 16, 1970, and subsequently, cross-examination by the assessee's representative and made an addition of an income of Rs. 2,45,514 in the hands of the assessee on account of over-invoicing its imports from Sweden. During the appeal proceeding relating to the said year of assessment, some original materials were produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee repeated its saying that the records for the period up to March, 1968, were in the custody of the Company Law Board and that it would not be in a position to gather any particulars and furnish any information to the Department. It, however, maintained that full and complete particulars had been furnished already and on the basis of the same, assessment had already been completed. It contended that there was no concealment or escapement of income and the conditions for reopening the assessment were not satisfied. The Income-tax Officer who finally resorted to the best judgment assessment on information which disclosed that the assessee had not made a full disclosure of its income and that substantial income, diverted by it to a foreign bank, had escaped assessment, has recorded in his judgment as follows : "After I took charge, I issued a notice under section 142(1) requiring the assessee to produce all account books and invoices, etc., relating to the assessment year 1962-63. The assessee was also asked to specify the exact accounts, ledgers and vouchers taken by the Company Law Board so that I could get the same from them. The assessee was also informed that the return in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 1966-67, it was held that 'kickback commission' was received from Bangalore Trading Corporation, Chellur Corporation and Sarada Agencies. The managing director of India Manufacturers (Private) Limited, a part of which is Sarada Agencies had also deposed that that company had been returning part of the commission received from the assessee. Shri D. V. Jagga Rao, manager, also deposed that he was surrendering four-fifths of the commission to be paid to him. There was also definite evidence to show that such 'kickback commission' was received during the year relevant for 1962-63 assessment. When Mr. T. V. K. Shastry, an employee of the assessee, was specifically questioned on various selfcheques drawn by the assessee which included the following cheques relating to the accounting year relevant for 1962-63 assessment : Date of cheque No. of cheque Amount Rs. 2-3-1962 951046 5,000 13-3-1962 951890 5,000 30-3-1962 949511 6,000 He explained as follows : 'These cheques were supposed to be commission payments of the company to Mr. A. C. R. Menon, of Messrs. Chellur Corporation, Cochin. But these payments did not reach either Mr. A. C. R. Menon or Chellur Corporation. I can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder consideration. There is no dispute that the total commission paid to three agents was in the order of Rs. 97,259. In the absence of further particulars, the Income-tax Officer estimated that 30 per cent. of the total sales would relate to the sales to the agents. On the basis thereof the number of machines sold to these three agents worked out to about 1,340 machines. The 'kickback commission' was accordingly estimated to Rs. 53,600, i.e., at Rs. 40 per machine. To this 4/5ths of commission paid to Sri Jagga Rao of Rs. 28,145 has been added. From the above, it is clear that the Income-tax Officer had some basis in estimating the 'kickback commission' received by the assessee at Rs. 76,116. The addition is accordingly, confirmed. With regard to the addition on account of inflation in imports, the materials referred to in the assessment order for the said addition are the same as referred to by the Income-tax Officer in his order of assessment for the year 1961-62. The very same issue came up for consideration in the appeal filed by the assessee in respect of the assessment year 1961-62 and in my order in Income-tax Appeal No. 31 of 1974-75 of even date I have held as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the relevant previous years. The question is whether what Jagga Rao had stated could have made the Income-tax Officer to entertain a reasonable belief that the assessee might have got over-invoiced the imports made by it from the above company during the two relevant previous years. In our opinion, the above statement could have led the Income-tax Officer to entertain such a belief. We are, therefore, of the opinion that the reopening of the assessment for the assessment year 1961-62 under section 147(a) is proper and the contrary view of the Appellate Assistant Commissioner is not correct." About the assessment year 1962-63, the Tribunal has, however, noted as follows : " As already mentioned, Jagga Rao had stated there that the total amount of over-invoicing was Sw. Krs. 7,56,539 up to the end of August, 1963, and that the same was transferred to the personal account of Sri Pratap in the Swedish bank in September, 1963. There is nothing, however, therein to show that invoices made by the assessee-company from AB Atvidabergs Industries, Sweden, during the previous year relevant to the two assessment years under consideration had been over-invoiced. The said sum represents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner and the Tribunal and obtained a reference on the following questions of law: "(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in deleting the addition of Rs. 3,37,392 representing the profit earned on the over-invoicing of imports for the assessment year 1962-63 ? (2) Whether the Tribunal having directed the Appellate Assistant Commissioner to consider whether an addition as warranted towards overinvoicing of imports for the assessment year 1961-62 was justified in deciding the same issue for the assessment year 1962-63 on merits thereby leaving no option to the Appellate Assistant Commissioner to dispose of the appeal, for 1962-63 on merits ? (3) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in restoring the assessee's appeal for the year 1962-63 with regard to the assessment of kickback commission to the file of the Appellate Assistant Commissioner for fresh consideration especially when the assessment made for the year 1962-63 was a best judgment assessment under section 144 of the Income-tax Act and after considering all the materials available in the records ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the courts apply for interference when an error of law is not evidenced is whether a reasonable person can take the opinion which the authority has, through the order under appeal, taken. Once it is found that a reasonable person could form the opinion, which the lower court or the authority had formed, the appellate court or authority shall desist from interfering with its order. We have chosen to make some observations as to the role of the Appellate Tribunal, because the stage at which it comes to examine the contentions of the assessee or the Revenue is one after all the proceedings under the law, an enquiry before assessment, an enquiry after assessment, if any, under section 143 of the Act and hearing, if any, of the assessee by the Income-tax Officer are completed and the remedy of a statutory appeal before the Appellate Assistant Commissioner is availed of by the assessee or the Revenue ? Its primary task is not to go into the return of the assessee and decide what amount of tax should be levied upon his income, but to see whether the taxing authorities, including the Appellate Assistant Commissioner have committed any error of law or of fact and on account of such error, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd since such a notice is guided by all the consequences of a notice under sub-section (2) of section 139 of the Act and in the case of an assessee, who has failed to make the return, required by a notice issued under sub-section (2) of section 139 of the Act procedure under sub-section (4) or sub-section (5) of that section can be followed and the Income-tax Officer can proceed to make the assessment of the total income or loss to the best of his judgment and to determine the sum payable by the assessee accordingly only if the assessee has not cared to act in response to the notice. Since the assessee is a defaulter, who has not responded to the notice under section 139(2) of the Act and who has also not chosen to take advantage of the filing of the return or to respond to the notices and the letters of the Incometax Officer, he alone created the situation that the proceedings were taken under section 144 of the Act only on such materials, which the Income-tax Officer had gathered. The materials gathered by the Income-tax Officer are the documents found in the Enforcement Directorate's and the Department's raid, including the diary maintained by Jagga Rao who was then employed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o room for interference by the court. It is well-settled that the Tribunal is the final fact-finding body. The questions whether a particular loss is a trading loss or a capital loss and whether the loss is genuine or bogus are primarily questions, which have to be determined on an appreciation of facts. The findings of the Tribunal on these questions are not liable to be interfered with unless the Tribunal has taken into consideration any irrelevant material or has failed to take into consideration any relevant material or the conclusion arrived at by the Tribunal is perverse in the sense that no reasonable person, on the basis of the facts before the Tribunal, could have come to the conclusion to which the Tribunal has come. It is equally settled that the decision of the Tribunal is not to be scrutinised sentence by sentence merely to find out whether all the facts have been set out in detail by the Tribunal or whether some incidental fact which appears on the record has not been noticed by the Tribunal in its judgment. If the court, on a fair reading of the judgment of the Tribunal, finds that it has taken into account all relevant material and has not taken into account any irr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as well as admitted that his dealings outside his accounts during a period of 19 days were of the value of Rs. 31,171.28. From this circumstance, it was open to the Sales Tax Officer to infer that the assessee had large-scale dealings outside his accounts. The assessee has neither pleaded nor established any justifiable reason for not entering in his accounts the dealings noted in the bill book seized'. It is obvious that he was maintaining false accounts to evade payment of sales-tax. In such a situation, it was not possible for the Sales Tax Officer to find out precisely the turnover suppressed. He could only make an estimate of the suppressed turnover on the basis of the material before him. So long as the estimate made by him is not arbitrary and has nexus with facts discovered, the same cannot be questioned. In the very nature of things the estimate made may be an overestimate or an underestimate. But, that is no ground for interfering with his 'best judgment'." The Supreme Court has clearly indicated that so long as the estimate made by the assessing authority is not arbitrary and has nexus with the facts discovered the same cannot be questioned. In the very nature of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our notice several other authorities in the periphery of the issues we have dealt with in the case. They do not appear to us very relevant except that they tell us that the income-tax authorities perform a judicial function under the Income-tax Act and they are invested with an authority to determine finally all questions of fact and that the Tribunal must, in deciding an appeal, consider with due care all the material facts and record its findings on all the contentions raised by the assessee and the Commissioner in the light of the evidence and the relevant law. We have however found that the Tribunal in the instant case assumed a role which it would advisedly have avoided for, although it was sitting in appeal, it was in a proceeding arising out of a best judgment assessment under section 144 of the Act. The materials which otherwise were with the assessee, but he avoided to produce before the Income-tax Officer by not responding to the notice under section 148 of the Act thus, were alien to the proceeding. The Tribunal has confused a proceeding where it had to see whether on the materials before the Income-tax Officer it was possible to say he had acted with bias whether he had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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