TMI Blog2021 (7) TMI 1421X X X X Extracts X X X X X X X X Extracts X X X X ..... is valuation report. This has not been observed by the ld. CIT(A), which procedure he shall accordingly comply with in the set aside proceedings, dilating on and issuing specific finding/s qua each item of valuation being contested by the assessee before him. Whether a rejection of accounts has to necessarily precede a reference to the DVO u/s. 142A? - As the cost met by the assessee, or otherwise proved to have been incurred, or even not incurred by the assessee, as in the case of gift, inheritance, etc., and irrespective of its reflection in his accounts, where maintained, forms part of the assessee s explanation, and it is only the balance, excess cost, which is unexplained with any evidence, for which the rule of evidence (ss. 69/69A) deems it to be his income for the relevant year. Where, then, one may ask, is the question, i.e., for invocation of this rule of evidence, of the rejection of the books of account of the assessee s business, which may not even be maintained or even not bear the said cost, and which (rejection) is for the purpose of properly deducing the business income, which is not a concomitant of the said invocation, and may even be independent of it? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(3) of the Income Tax Act, 1961 ( the Act hereinafter) for the Assessment Year (AY) 2009-10 vide Order dated 19/12/2011. 2. At the outset, it was submitted by the ld. counsel for the assessee, Sh. Modh, that the appellate order is without proper application of mind by the first appellate authority. There has been no consideration of the assessee s replies and explanations furnished during the assessment proceedings for which reference was made by him to pgs. 1-2/PB-1, in the impugned order. Even the Assessing Officer (AO), who was required to submit his comments by the ld. CIT(A) vide his notice dated 13/12/2017, had not furnished the same. Where then, he posited, was the hurry in deciding the appeal ex parte the appellant in April, 2018, after only two notices of hearing. In fact, he was out of the country at the relevant time, advance information of which had been given to the office of the ld. CIT(A)/AO. On being asked as to why, even so, could not the assessee-noticee respond to the said notices inasmuch as it is he who is served the notice/s of hearing, he would reply by stating that there had been, as ascertained by him from the assessee, no service of any notice of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or the respondent or even both, in which, latter event the case as set-up by the party not represented before him, at the earlier (assessment) stage, would have to be considered, and necessarily so, by him. And which sums up the assessee s case, which is unexceptional. This is as only in that case would an appellate authority, in further appeal, be able to know the basis of his adjudication. It is, as such, incumbent upon him to, while reviewing an order, examine the case of the assessee-appellant, i.e., as set-up before him as well as or in the alternative, i.e., as the case may be, before the assessing authority, whose order is being impugned before him, and specify his reasons on each of the points arising for determination, as to why he considers the latter s view as meriting acceptance and is being upheld, i.e., in preference to that of the appellant. That only would show his consideration of the issue/s arising, and the basis of his decision. Further, his order being appealable, it is only thereby that a higher appellate authority would, in further appeal, be able to review his adjudication, absent in the instant case. This is even more relevant where, as in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is shown to be vitiated, or where it is not in agreement with the material on record or is without taking all and only the relevant facts into account. This represents trite law, for which reference may be made to CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC); CIT v. Rayala Corporation (P.) Ltd . [1995] 215 ITR 883 (Mad). How could the said law apply in the instant case where there has been, on the contrary, proper representation before the AO, who has completed the assessment u/s. 143(3) considering the material on record and the assessee s explanation/s, not considered by the ld. CIT(A)? The reliance on the said judgment by him is, clearly, misconceived. 3.3 The matter must, therefore, necessarily travel back to the file of the ld. CIT(A) for a consideration of and a decision on the merits of the case after allowing a reasonable opportunity to the assessee to present his case before him. In fact, in this context, two observations are apposite. The principal addition in this case is on account of a valuation difference (of a storage Godown) based on the report by the Departmental Valuation Officer (DVO) to whom reference was made by the AO during assessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uperfluous as the income of the assessee s said business was neither returned nor, consequently, assessed on the basis of the books of account but, as afore-said, on presumptive basis. Where, then, one may ask, was the need for the assessee to produce them, or for the AO to call for and examine them for the purpose of placing reliance thereon for deducing the income of the assessee s relevant business. And, where found to bear defects, i.e., as not reliable, to reject them and proceed to estimate the said income on the basis of the material available or otherwise gathered by him, after confronting the same to the assessee. In the instant case, the assessee himself does so, i.e., disregards his books assuming them to be maintained, for returning income, which he does on presumptive basis, i.e., in preference to the results exhibited by the said books . That is, the conduct of the parties, which is in conformity with the law, itself exhibits the unreliability and, thus, the non-acceptance of the accounts, indeed their irrelevance, for the purpose of determining the income of the assessee s relevant business. It may also be borne in mind that it is not necessary that a specific ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied upon by the AO, of course after confronting the assessee therewith? This question arises as it is well-settled that the validity of an assessment is not impacted by that of the material gathering process, which can, subject to the adherence to the principles of natural justice, as furnishing reasonable opportunity of rebuttal to the assessee, be relied upon for the purpose of assessment. In Pooran Mal v. Director of Inspection (Inv.) [1974] 93 ITR 505 (SC), a decision by the larger Bench of the Apex Court, it was explained that the test of admissibility of evidence lies in its relevancy. As such, unless there is an express or necessarily implied prohibition in the Constitution or other law, evidence obtained as a result of an illegal search or seizure is not liable to be shut out. Accordingly, it was held that even though the search and seizure may be in contravention of section 132 of the Act, still the material obtained thereby is liable to be used subject to law before the Incometax authorities against the person from whose custody it is seized and, therefore, no writ of prohibition in restraint for such use can be granted. This stands reiterated by it in Dr. Pratap Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh credits could be assessed to tax as income from undisclosed sources in addition to the business income computed by estimate. The taxing authorities, it explained, were not precluded from treating the amounts of the credit entries as income from undisclosed sources simply because the entries appeared in the books of the business whose income they had previously computed on a percentage basis. Reference in this context may with profit be also made to the decision in CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 (SC). The position, as apparent, would be akin to, say, that of a disallowance of an expenditure for want of genuineness despite the assessee s accounts bearing an entry in its respect. This aspect stands also clarified by the Apex Court in A. Krishnaswami Mudaliar (supra) in the following words: If, therefore, there is a system of accounting regularly employed and by appropriate adjustments from the accounts maintained taxable profit may properly be deduced, the Income-tax Officer is bound to compute the profits in accordance with the method of accounting. But where in the opinion of the Income-tax Officer the profits cannot properly be deduced from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) holding a reference without rejection of accounts as bad, could be relied upon. As seen, the clear and settled law does not require the rejection of accounts and, where so, is deemed irrelevant where specific adjustments to the returned income are made on the basis of the satisfaction of the relevant provisions of law, even though the said adjustments pertain to the entries in those accounts, while for an addition u/s. 69/69A the accounts are in fact being accepted to the extent of the relevant entries therein. The said decision does not cite the precise question of law raised before it for being answered, and indeed that admitted and answered by the Hon ble Court. Further still, the judgment is sans any discussion of or on the law in the matter or reference to any precedents. The issue that therefore arises for being answered first is if, in view of the clear provisions of law and the scheme of the Act, and as further explained and expounded by the Apex Court per its several decisions, including by its larger Benches, could the said judgment be regarded as a complete statement of law in the matter and, where considered so, the basis thereof, as also the specification ..... X X X X Extracts X X X X X X X X Extracts X X X X
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