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2019 (9) TMI 345

..... e litigating parties were dealt with. The tribunal also directed to remove double jeopardy in its order so that the assessee is not prejudiced twice for the same additions. The power of tribunal while dealing with MA u/s 254(2) is very limited to rectifying mistakes apparent from records and we have no power to review our decision. The next contention of the assessee in this MA is that the tribunal did not deal with overriding effect of Section 40A(3) wherein it is now contended that it did not override all the provisions of the 1961 Act but only override provisions of the Act dealing with computation of income under the head ‘Profit and Gains of Business or Profession’. We are afraid that this contention of the assessee is also not acceptable as tribunal duly dealt with this issue in detail We hold that the assessee has not made out any case for rectifying any mistake which is apparent from records within limited mandate of Section 254(2) and what assessee is seeking is reviewing of our order dated 04.10.2017 which is not permissible within limited mandate of Section 254(2) - MA No. 150-151/Mum/2018 Arising out of ITA No.4896/Mum/2015 & 2135/Mum/2013 - 4-9-2019 - Shri .....

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..... 1961 Act. The assessee is contemplating in the MA by stating that total turnover for ay: 2009-10 was ₹ 7.50 crores and additions to the tune of ₹ 17,99,90,677/- could not be made , while fact of the matter is that disallowance in ay: 2009-10 were made u/s 40A(3) and 40A(3A) as the payments were made for purchases made in the preceding year viz. ay: 2008-09 also in ay 2009-10. As we see later the tribunal infact directed AO to remove double jeopardy as in ay:2008-09 entire purchases got added by invoking provisions of Section 69C while in ay: 2009-10, the AO invoked provisions of Section 40A(3) and 40A(3A) of the 1961 Act. Thus, now the assessee is trying to hair split the order of the tribunal by picking and choosing some portions of the order of the tribunal while on the other hand the tribunal dealt in details with each and every contention of the both the litigating parties to arrive at a well reasoned detailed conclusion in its common order dated 04.10.2017 for ay: 2008-09 and 2009-10. The tribunal in order to avoid double jeopardy instead directed AO not to make additions of the opening balance of creditors of ₹ 10.82 crores as on 01.04.2008 as the said bala .....

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..... material and there is prohibition to use such material against the assessee under such situations . We have carefully gone through the cited judgments and perusal thereof but we could not find any absolute bar on the AO to use incriminating material unearthed as a result of an enquiry and / or investigation while computing income while framing best judgment assessment after rejecting books of accounts rather relied upon judgments by the assessee itself have held that only when AO chooses to estimate profits while framing best judgment assessment , then there is no need to apply provisions of Section 40A(3), 68 and 69 but it is not so otherwise round that when books of accounts are rejected by the AO u/s 145(3) and he did not estimate income by applying profitability, then there is embargo on applying section 40A(3), 68 and 69. Herein the instant case, the AO has not applied the profitability rates to compute income. It is important at this stage to refer to following important judicial pronouncements on the relevant subject: a) Hon ble Supreme Court in the case CST v. H.M.Esufali H.M.Abdulali reported in (1973) 90 ITR 271(SC) has explained the distinction between regular assessment .....

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..... h in the case of income-tax assessment as well as in the case of sales tax assessment. Reference is also drawn to decision of Hon ble High Court of Lahore in the case of Seth Gurmukh Singh v. CIT reported in (1944) 12 ITR 393|(Lah), wherein Justice Mohammad Munir writing his separate judgment held in context of Income-tax Act, 1922 as under: When an assessee produces books of account either in support of his return or as special evidence on a point specified by the Income-tax Officer, the Income-tax Officer has to examine the books in the same way as he would examine any other evidence produced by the assessee under rub-section (3) of Section 23. If the objection to the books is merely one of method or if the books are unreliable merely in the sense that, though they are a correct record of the assessee's transactions, they have been kept in such a manner that they do not ex facie reveal the true result of the assessee's trading activity during the previous year, and the Income-tax Officer can, in some manner, make them the basis of computation of the assessee's income for the previous year, he must proceed under the proviso to Section 13. If, however, the books are fal .....

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..... It is in that view of the matter he has treated the entire sum of ₹ 87,51,092 as income. The first appellate authority had adverted to the contentions of the assessee with reference to the payments made to the sub-contractors. However, the first appellate authority has taken the view that this is at the most a case for rejection of the accounts and that if the accounts are rejected the income has to be estimated. The first appellate authority was of the view that when the income is being estimated there is no question of making separate additions in the light of certain decisions of the other courts. The first appellate authority, therefore, after rejecting the books, had resorted to the estimation of income on percentage basis. Here, it must be noted that the first appellate authority did not thereafter make any reference to the books of accounts and other documents relied on by the assessee for the purpose of estimation of income. In other words he had totally discarded the materials available in the form of books of accounts and other documents. He had resorted to the estimation on percentage basis. On an overall view with regard to the profit that can be derived from a c .....

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..... of the assessee or of the Department in regard to the acceptance of the books of accounts or the estimation of the income with reference to all the materials available on record including the books of account and documents. 6. The question on which notice was issued in the departmental appeal relates to the justification for interfering with the order of the Assessing Officer in estimating the income with reference to the books of accounts and other documents by substituting it with determination of profit on percentage basis. As we have already noted the first appellate authority, without considering the case of the assessee based on the books of accounts and other records, had straightaway thought that this is a fit case for estimation of profit on percentage basis. We do not think that on the facts of this case the first appellate authority was justified in adopting such a course. The Tribunal has also committed the mistake in approving the estimation of income adopted by the first appellate authority. In these circumstances we are of the view that the question of estimation of income from the contract receipt is a matter to be considered by the Assessing Officer himself in acc .....

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..... -payer unless perversity is shown to have occurred in the decisions of the AO or it could be shown that AO did not acted honestly in computing income of the assessee after taking recourse to best judgment assessment. The assessee has also raised a feeble plea to seek protection u/r 6DD(g) and (j) of the 1962 Rules but no material is placed on record as to how the assessee is covered by said rule and this contention is merely a bald condition as no material on record supports the contention of the assessee. Perusal of Section 144 clearly reveals that in case the AO is not satisfied with the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under subsection (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144. Perusal of Section 144 would clearly reveals that the AO, after taking into account all relevant material which the AO has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and we donot fi .....

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..... sessee in ITA no. 2185/Mum/2013 for AY 2009-10 is dismissed . 20. So far as appeal of the assessee in ITA no. 4896/Mum/2015 for AY 2008-09 is concerned, we are of the considered view that our decision in ITA no.2185/Mum/2013 for AY 2009-10 shall apply mutatis mutandis to the appeal for AY 2008-09 as facts situation are similar in both the appeals and the AO shall work out disallowance in the similar manner as for AY 2008-09 as was done for AY 2009-10 by invoking applicable provisions of Section 40A(3)(a) and (b). We also have noticed that assessment for AY2008-09 was framed by the AO by invoking Section 69C wherein all purchases stood dismissed , while for framing assessment for AY 2009-10 , the AO invoked Section 40A(3)/40A(3A) wherein disallowance has been made based on payments made to the so called purchasing parties in excess of ₹ 20000/- otherwise than by account payee cheque or account payee draft which has led to double jeopardy to the assessee as the assessee has opening creditors on 01-04-2008 of ₹ 10.82 crores who virtually got disallowed twice , once when entire purchases were disallowed for AY 2008-09 u/s 69Cand secondly when payments against those purchase .....

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