TMI Blog2018 (2) TMI 1917X X X X Extracts X X X X X X X X Extracts X X X X ..... the creditor or their share holder and lastly, the genuineness of the transaction. As stated by the AO that merely establishing the identity of the creditor or the transaction have been routed through bank instruments is not enough. As per AO that assessee has not complied with the legal obligation to explain the source of share application money and the premium and even the confirmations have not been furnished and the amount was accordingly treated as unexplained and added to the income of the assessee u/s 68 We deem it appropriate to set aside the matter to the file of the AO to examine the same afresh taking into consideration the above discussions. In the result, ground of assessee s appeal is allowed for statistical purposes. Disallowance of power charges - AO held that the said sum relates to preceding year and the same was disallowed and added to the income of the assessee - HELD THAT:- There is no dispute that the year in which the liability has crystallized, the assessee shall be eligible to claim the same. However, from the material available on record, it is not clear whether the assessee has claimed the same in the earlier years to which the said payment orig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnection with the share capital money received from various share holders. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of ₹ 81,84,399/-. 2. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in confirming the action of the ld. AO in making disallowance of ₹ 5,52,719/- on account of payment made to RSEB. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the said disallowance of ₹ 5,52,719/-. 3. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in rejecting the books of accounts by invoking the provisions of section of 145(3) of I.T. Act, 1961 and making trading addition of ₹ 30,62,100/- by applying a G.P. rate of 1.84% on the estimated turnover of ₹ 4.50 crores. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by accepting the book results and deleting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has not complied with the legal obligation to explain the source of share application money and the premium and even the confirmations have not been furnished and the amount was accordingly treated as unexplained and added to the income of the assessee u/s 68 of the Act. 4. During the course of appellate proceedings before the ld. CIT(A), the assessee reiterated its submission made before the Assessing Officer and submitted additional evidence in the form of confirmations from the shareholders which have since been obtained by the assessee company. A remand report from the AO was called by the ld CIT(A). The AO in his remand report stated that the additional evidence so furnished by the assessee in respect of 9 persons by way of confirmation letter do not contain any date on them. Hence the additional evidence so submitted by the assessee may not be relied upon. In his rejoinder, the assessee submitted that the confirmation letters states clearly cheque no. and the date of cheque cleared from the respective shares holder s bank account, therefore, it cannot be said that assessee has not mentioned the dates in the confirmation. It was submitted that merely bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sal by one of the share holder Sh. Devendra Grover, it was submitted that assessee has not been supplied copy of notice issued u/s 133(6) and in absence of the same, it cannot be held again the assessee. It was further submitted that a copy of the share certificates allotted to Sh. Devender Grover is enclosed and it was also submitted that the shares have since been transferred to Mrs Ranjana Malhotra. Therefore, the refusal of Sh. Devender Grover is not right that he has not invested in the share capital of the assessee company. It was submitted that the AO has not brought on record any contrary evidence to the confirmation so filed by the assessee. 6. The ld CIT(A) confirmed the addition so made by the AO and his relevant findings are reproduced as under:- 4.9 Having considered the material placed on record, I find that in this case the appellate proceedings have been fixed a number of times in the last about six years and only a few scanty details were filed to substantiate the sources of funds. Despite providing a number of opportunities to the appellant no evidence in the form of copy of bank account of the appellant, copy of their ITR filed, proof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount pertaining to these shareholders aggregating to ₹ 81,84,399 (out of total sum of ₹ 1,81,84,399) u/s 68 of the IT Act, 1961. 7.3 Before ld. CIT(A), during appellate proceedings, remaining confirmations were filed as additional evidences which were also accepted by ld. CIT(A). Thus, the reason of addition by the ld. AO was mitigated before the ld. CIT(A). However, unfortunately, ld. CIT(A) confirmed the addition for all together different reason of nonappearance of these shareholders. It is submitted that even in respect of 55% of the share application money received, in respect of which no addition was made by ld. AO, the shareholders did not appear before him during the assessment proceedings. The contradictory stand taken by ld. CIT(A) deserves to be quashed. Particulars Share Capital Securities Premium Total Total Capital Issued during the year 33,01,600 1,48,82,799 1,81,84, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis that the addition of the proviso to section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P) Ltd.,(supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Asha Iron Trading Co. - Bank 16- 17 Arun Bansal - - Bank 11 Devendra Kumar Grover - Bank 12 Sadhna Garg - Bank 6-7 Youdhvir Chouhan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the assessee Company because it is a pragmatic requirement of fair play in action. Reliance is placed on the decision of Hon ble Supreme Court in the case of Andaman Timber Industries, CIVIL APPEAL NO. 4228 OF 2006, dated 2nd Sept 2015, wherein it was held that where opportunity for cross examination is not given, it is violation of principles of natural justice. Relevant extract is set out here for the sake of convenience: ..that - not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity in as much as it amounted to violation of principles of natural justice because of which the assessee was adversely affected . 7.11 Without prejudice to above it is submitted the inspite of making a specific request for the copy of the notice as well as reply of Mr. Devendra Kumar Grover, the same was not provided to the assessee Company. In such a situation it shall be apt to hold that Mr. Devendra Kumar never denied. 7.12 Without agreeing, it is submitted that even if Mr. Deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove it is submitted that ld. AO rejected the books of account of the assessee Company and the said rejection is also affirmed by ld. CIT(A). It is settled legal proposition that once books are rejected no disallowance is permissible under the law by referring the same set of rejected books of account. Hence, the disallowance made is bad in law. Reliance is placed on the following judicial pronouncements. Relevant extracts have been set out here for the sake of convenience: CIT vs. G.K. Contractor [2009] 19 DTR 305 (Raj) Nardev Kumar Gupta [2013] 142 ITD 303 (Jaipur - Trib.) Cosmopolitan Trading Corporation (ITA No. 298/JP/2013) In view of the above the assessee Company discharged its onus and since nothing contrary has been brought on record by the Id. AO, transactions should be accepted as genuine and entire addition deserves to be deleted by allowing this ground of appeal. 8. The ld DR is heard who has vehemently argued the matter and relied upon the findings of the lower authorities. 9. We have heard the rival contention and purused the material available on record. During the year under consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e money belonged to the assessee and was their unaccounted money, which had been channelized. 13. As we perceive, there are two sets of judgments and cases, but these judgments and cases proceed on their own facts. In one set of cases, the assessee produced necessary documents/evidence to show and establish identity of the shareholders, bank account from which payment was made, the fact that payments were received thorough banking channels, filed necessary affidavits of the shareholders or confirmations of the directors of the shareholder companies, but thereafter no further inquiries were conducted. The second set of cases are those where there was evidence and material to show that the shareholder company was only a paper company having no source of income, but had made substantial and huge investments in the form of share application money. The assessing officer has referred to the bank statement, financial position of the recipient and beneficiary assessee and surrounding circumstances. The primary requirements, which should be satisfied in such cases is, identification of the creditors/shareholder, creditworthiness of creditors/shareholder and genuineness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature to show that the subscribers had made genuine investment or had, acted as angel investors after due diligence or for personal reasons. The final conclusion must be pragmatic and practical, which takes into account holistic view of the entire evidence including the difficulties, which the assessee may face to unimpeachably establish creditworthiness of the shareholders. 20. Now, when we go to the order of the tribunal in the present case, we notice that the tribunal has merely reproduced the order of the Commissioner of Income Tax (Appeals) and upheld the deletion of the addition. In fact, they substantially relied upon and quoted the decision of its coordinate bench in the case of MAF Academy (P.) Ltd., (supra) a decision which has been overturned by the Delhi High Court vide its judgment in MAF Academy (P.) Ltd (supra). In the impugned order it is accepted that the assessee was unable to produce directors and principal officers of the six shareholder companies and also the fact that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer has observed that there were genuine concerns about identity, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because they had reportedly left that address. The view of the Tribunal was that merely because the assessee could not produce these three parties, there was nevertheless no justification to draw an adverse inference. This approach as accorded approval by the Supreme Court in these words : In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have made efforts to pursue these notices/creditors to determine their creditworthiness. These observations sound the death-knell for the contentions raised on behalf of the Department in the present batch of appeals. 13. There cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessee it should not be harassed by the Revenue s insistence that it should prove the negative. In the case of a public issue, the Company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The Company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the IT Act. The burden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their creditworthiness, share application forms and share holders' register, share transfer register etc. are furnished to the Assessing Officer and the Assessing Officer has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false and cannot be acted upon, then no addition can be made in the hands of the company under sec. 68 and the remedy open to the revenue is to go after the share applicants in accordance with law. We are afraid that we cannot apply the ratio to a case, such as the present one, where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self-confessed accommodation entry providers , whose business it is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, and the assessee. The ratio is inapplicable to a case, again such as the present one, where the involvement of the assessee in such modus operandi is clearly indicated by valid material made available to the Assessing Officer as a result of investigations carried out by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity or ascertaining active nature of business activity. PAN is a number which is allotted and helps the Revenue keep track of the transactions. PAN number is relevant but cannot be blindly and without considering surrounding circumstances treated as sufficient to discharge the onus, even when payment is through bank account. 19. On the question of creditworthiness and genuineness, it was highlighted that the money no doubt was received through banking channels, but did not reflect actual genuine business activity. The share subscribers did not have their own profit making apparatus and were not involved in business activity. They merely rotated money, which was coming through the bank accounts, which means deposits by way of cash and issue of cheques. The bank accounts, therefore, did not reflect their creditworthiness or even genuineness of the transaction. The beneficiaries, including the respondent-assessee, did not give any share-dividend or interest to the said entry operators/subscribers. The profit motive normal in case of investment, was entirely absent. In the present case, no profit or dividend was declared on the shares. Any person, who would invest money o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them. 31. The respondent herein is a Private Limited Company. It is not the case of the respondent that the Directors or persons behind the companies making the investment in their shares were related or known to them. It is highly implausible that an unknown person had made substantial investment in a private limited company to the tune of ₹ 63,80,100/- and ₹ 75,60,200/- i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entity of persons who had made such investments. The particulars of the receipt and GIR number of the persons, who had made such investments in the matter of companies registered under the Companies Act, 1956, were furnished. Notices of 5 companies out of 7 companies were received unserved with the remark of the postal department that they had shifted their addresses. But no attempt was made by the department to pursue the enquiry thereafter which, notwithstanding the remark about shifting of addresses, prima facie established genuineness of such companies as existing persons. It had come on record that another company did exist and was under liquidation, the existence of which at relevant time could not be doubted. Likewise, in the case of individual investors, the Tribunal had reached the finding that their identities had been established by the assessee. [Para 10] Applying the principle enunciated by the Supreme Court in CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78/25 Taxman 80F, the irresistible conclusion was that the conclusion of the Tribunal that the assessee had discharged his initial burden in respect of 6 companies and 9 individual investors, was based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier; viz. the identity of the third party making the payment, its creditworthiness and genuineness of the transaction. Whilst it is true that the assessee cannot be called upon to adduce conclusive proof on all these three questions, it is nonetheless legitimate expectation of the process that he would bring in some proof so as to discharge the initial burden placed on him. Since section 68 itself declares that the credited sum would have to be included in the income of the assessee in the absence of explanation, or in the event of explanation being not satisfactory, it naturally follows that the material submitted by the assessee with his explanation must itself be wholesome or not untrue. It is only when the explanation and the material offered by the assessee at this stage passes this muster that the initial onus placed on him would shift leaving it to the Assessing Officer to start inquiring into the affairs of the third party. [Para 39] The Commissioner (Appeals) and consequently the Tribunal were right to the extent of their conclusion that the assessee had come up with some proof of identity of some of the entries in question. But, from this inference, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 28 of them responded; 2 did not receive the notice and 9 of them received the notices and responded but did not submit any confirmation. [Para 7] Having regard to the circumstances, particularly, the fact that these investors not only did not submit confirmation but had concededly reported far less income than the amounts invested, the assessee could not, under the circumstances, be said to have discharged the burden which was upon it. It is not sufficient for the assessee to merely disclose the addresses or identities of the individuals concerned. The other way of looking at the matter is that having given the addresses, the inability of the noticees who are approached by the Assessing Officer to afford any reasonable explanation as to how they got the amounts given the nature of their income which was disproportionally less than what they subscribed as share capital would also amount to the revenue having discharged the onus if at all which fell upon it. The assessee in this case was incorporated barely few months before the commencement of the assessment year, and there is no further information, or anything to indicate why its mark up of the share premium thousa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said amount under Section 68. The question of law consequently is answered in favour of the Revenue and against the assessee. 3.12 In case of M/s Shubh Mines Pvt Ltd, the Hon ble Rajasthan High Court has held as under: (7) A bare perusal of the assessment order reveals that the AO has made the addition on suspicion which is based on the statements of third party Shri Asseem Kumar Gupta, admittedly, recorded in the back of the assessee. It has come on record that the share application money of ₹ 50,00,000/- was received from Moderate Credit Corporation ltd., a listed company. It is not disputed before this court that the investment made was received by account payee cheque and the same was refunded by an account payee cheque when the company dropped its project. In the considered opinion of this court, in absence of any cogent evidence on record establishing that the money shown to have received as share application money, was as a matter of fact, unaccounted money belonging to the assessee company, the finding arrived at by the AO, which is based on suspicion, has rightly been held not sustainable in the eyes of law. Suffice it to say that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the human probabilities and normal course of human conduct. It is only when the explanation and the material offered by the assessee at this stage passes this muster that the initial onus placed on it would shift leaving it to the Assessing Officer to start inquiring into the affairs of the third party. 4.4 Whilst it is true that the assessee cannot be called upon to adduce conclusive proof on all these three requirements, it is nonetheless legitimate expectation of the process that he would bring in sufficient proof, which is credible and at the same time verifiable, so as to discharge the initial burden placed on him. Whether initial onus stands discharged would depend upon facts and circumstances of each case. 4.5 The degree of burden of proof on the assessee will vary from assessee to assessee. In case of private limited companies where shares are allotted through private placement to persons generally known to directors or shareholders, directly or indirectly, burden of proof is on higher pedestal as compared to public limited companies where the large scale subscription are offered through public issue and shares are subscribed by general public. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on business and recognition of the said company in the eyes of public. Merely producing certificate of incorporation, PAN number or assessment particulars did not establish the identity of the person. PAN numbers are allotted on the basis of applications without actual de facto verification of the identity or ascertaining active nature of business activity. The actual and true identity of the person or a company was the business undertaken by them. Further, these documents have their limitation and cannot be relied upon blindly when there are surrounding circumstances to show that the subscriber was a paper company and not a genuine investor. 4.9 In respect of the genuineness of the transaction and creditworthiness of the shareholder, it would be incorrect to state that the onus to prove the same stands discharged in all cases if payment is made through banking channels. Whether or not onus is discharged depends upon facts of each case. It depends on whether the two parties are related or known to each other; the manner or mode by which the parties approached each other, whether the transaction was entered into through written documentation and due diligence to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the individual cases, however, largely similar proposition emerges, as we have discussed above, and hence, these authorities have not been discussed separately. 12. In light of above legal proposition, if we were to analyse the facts of the present case, the assessee company being a private limited company, the burden of proof is clearly on higher pedestal as compared to public limited company. It is not in dispute that the assessee company has submitted the particulars of the shareholders in terms of their name and address, number of shares allotted and amounting received towards the share capital and share premium. It is also a fact that these persons are initial subscribers to the share capital of the assessee company and the shares have been issued by the assessee company and the necessary filings have been made with the Registrar of Companies. It is also a fact that the said shares have since been transferred to the third persons. The confirmation from the said shareholders as well the new shareholders who have bought these shares are on record. The name and address of these shareholders are on record and notices issued by the AO u/s 133(6) at the said addresses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stant case. Whether share subscribers have their own profit making apparatus and were involved in any tangible business activity or were they merely rotated money, which was coming through the bank accounts. These are some of the questions which remain unanswered in the present case. 14. At the same time, we find that the assessee company has submitted that these shareholders have since transferred their shareholding to third persons and are not cooperating with the assessee company and sharing further information. The question is what is the course of action available with the AO in such cases when the fact of shareholding has been transferred to third persons has not been disputed by the Revenue. In our view, in such cases, where the AO has the necessary information in form of name, address and their PAN details, he should reach out to these shareholders directly as well as to the jurisdictional AO to seek the necessary information/documentation. In the instant case, the assessee company has furnished the name and address of all these shareholders for all nine persons and PAN detail in respect of six out of nine persons to the AO. Further, we note that during the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enuine and was accepted by the ld. AO. However, confirmations in respect of remaining nine shareholders could not be submitted during the assessment proceedings and during the appellate proceedings, said remaining confirmations were filed as additional evidences which were also accepted by ld. CIT(A). In light of the same, it was submitted that for this sole reason of non submission of confirmations, the ld. AO added the amount pertaining to these shareholders aggregating to ₹ 81,84,399 and before the ld. CIT(A), the same was mitigated by filing the said confirmations. 16. We have given a careful consideration to the aforesaid contentions so raised by the AO. Firstly, it is not clear atleast from the reading of the assessment order and any other material on record that the AO has accepted the share application money in respect of 55% of the share transaction on the basis of confirmation obtained from the shareholders and filed during the assessment proceedings. There is no discussion regarding confirmation being filed by these shareholders representing 55% of the share transaction in the assessment order. Notwithstanding the same, nothing has been brought to our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant no evidence in the form of copy of bank account of the appellant, copy of their ITR filed, proof of identity of the share applicant in the form of voter card/passport etc. could be filed . The appellant was given another opportunity before the AO in the course of remand proceedings to produce the share applicants but the result remained the same. The appellant has rather justified the furnishing of few details to substantiate its contentions. 4.10 On examination of record, I find that no detail could be filed by the appellant to substantiate the identity of the applicant, creditworthiness of the share applicants and genuineness of the transactions. The AO has issued notices on the addresses furnished by the appellant but no one attended the proceedings or furnished any evidence. In fact out of all the share applicants only one applicant responded back and he also denied having made any investment in the shares of the company. The appellant on being confronted with the remand report has made only bald statements and could not furnish any evidence to prove its contentions. Therefore, in the absence of any evidence to substantiate, I hold that AO was just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settlement. There is no dispute that the year in which the liability has crystallized, the assessee shall be eligible to claim the same. However, from the material available on record, it is not clear whether the assessee has claimed the same in the earlier years to which the said payment originally belongs and whether the same was allowed for tax purposes. If it was already claimed and allowed in the earlier years, the AO is right in disallowing the same. Where it was not claimed and not allowed in the earlier years, the assessee shall be eligible to claim the same in the year under consideration. The matter is accordingly set-aside to the file of the AO to examine the said aspect of the matter and decide the same afresh. In the result, the ground is allowed for statistical purposes. 23. Regarding Ground No. 3 of the assessee s appeal, the facts of the case are that during the course of assessment proceedings, the Assessing Officer observed that assessee company has declared sales of ₹ 4,34,02,675/- on which gross loss of ₹ 22,34,097/- has been claimed. It was further observed by the AO that the assessee has declared sale price of ₹ 18821/- per ton ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after rejection of books of accounts, the only remedy available in law with the ld. AO is best judgment u/s 144. The provisions of section 144 of the Act provide for making the best judgment after taking into account all the material which the AO has gathered. In making a best judgment, the AO must not act dishonestly or vindictively or capriciously because he must exercise judgment in the matter. Therefore, the AO must make what he honestly believes to be a fair estimate of the proper figure of assessment and for this purpose he must be able to take into consideration local knowledge and repute in regard to the assessee s circumstances and it must be honest guess work. In making best judgment assessment, the AO does not possess arbitrary powers to assess at any figure, he likes. He must be guided by rules of justice, equity and good conscience. A best judgment assessment is not a punitive assessment. 3.2 It is submitted that ld. AO is duty bound to provide assessee the opportunity to rebut the material or working on the basis of which the estimation for enhancing the returned income of the assessee was made. In the present case, ld. AO has straight away applied the G ..... X X X X Extracts X X X X X X X X Extracts X X X X
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