Find a Lawyer

I.T.A. No.1617/ KB of 1982-83, decided on 4th July, 1987.

---S. 63--Best judgment assessment--Assessing Officer while rejecting trading results of assessee and estimating sales has to evolve basis for it--Assessing Officer, if wanted to rely upon any parallel case, he should confront the assessee with that--Where Assessing officer failed to evolve such basis and did not confront assessee with cases he relied upon declared version of assessee was ordered to be accepted by the Tribunal.

Rehmat Ali Sheikh for Appellant.

Abdul Ghani Channa, D.R. for Respondent.

Date of hearing: 4th. July, 1987.

This appeal has been filed by the appellant to impugne the order of 'learned AAC recorded by him on 27th April, 1983 relating to assessment year 1981-82.

The brief facts giving rise to this appeal are that the appellant, a Registered Firm, derived its income from selling handicrafts and declared its sales at Rs.1,65,375 with GP rate of 19.93%. The ITO however, for various reasons mentioned in his assessment order estimated the sales at Rs.2,00,000 and applied GP rate of 25%. On appeal, however, the learned AAC confirmed the sales as estimated by the ITO but reduced the GP rate to 22%. The appellant still feels aggrieved and has come up in second appeal before me.

Mr. Rehmat All Sheikh, the learned counsel for the appellant, contended before me that assessment year 1981-82 has been the first assessment year for the appellant. According to -him in subsequent years of 1982-83 and 1983-84 the appellant declared its receipts at Rs.1,96,230 with GP rate of 19.98% and Rs.2,10,938 with GP rate of 19.85% and the same were accepted by the assessing officer. The learned counsel submitted that the ITO failed to evolve any basis either for his estimated sales or for application of GP rate. He, further contended that the learned AAC also erred in confirming the estimated sales of Rs.2,00,000 as there was no basis for it. Similarly, according to him, the order of learned AAC whereby he reduced the GP rate to 22% was also not sustainable in law because it was not based on any material. The learned counsel vehemently argued that he cited before the ITO three parallel cases of Ganj Buksh, Dastkari, Hyderabad Handicrafts and Muslim Handicrafts. The learned counsel submitted that in the first case 20% GP rate .was adopted whereas in the other two cases 15% GP rate was applied. He concluded that if the sales declared in the subsequent two assessment years and GP rate applied together with the GP rate in the parallel cases were taken into consideration the finding given by both the officers below was not sustainable in law. Mr. Abdul Ghani Channa, the learned DR, however, supported both the officers below.

I have heard both the learned counsel and the learned DR: I think that the submission of Mr. Rehmat Shaikh is well founded. It is trite law that while the assessing officer was rejecting the trading results and estimating the sales he had to evolve the basis for it. A Similarly it is also trite law that if the ITO wanted to rely upon any parallel case, he should confront the assessee with it. Unfortunately, here both the principles of law stated above have not been complied with. The assessing officer estimated the sales at Rs.2,00,000 and applied GP rate of 25% without collecting some material to support them. Similarly the appellant relied upon parallel cases and mentioned them in his letter addressed to the ITO. However, the ITO did not confront him with any parallel case sought to be relied upon by him.

It is true that the appellant has not maintained proper books of accounts during the relevant assessment year. However, he has maintained a ledger wherein he has recorded not only his purchases but also his sales. However, in view of the fact that assessment year 1981-82 is the first year of the business of the appellant and in view of the fact that his declared sales of subsequent two years have been accepted wherein he had shown improvement in sales. I think that the declared version of the appellant should be accepted. Since both the officers below have failed to evolve any basis for estimating the sales at Rs.2,00,000/- and since the parallel cases relied upon disclosed 20% and 15% GP rate, the declared version of the appellant could be accepted. I, therefore, allow this appeal and direct the ITO to accept the trading results of the appellant. The appeal stands disposed of as indicated above.

M.B.A./416/T Appeal allowed.

Find a Lawyer Near You

Dealing with a matter like this? Connect with a verified advocate in your city — free on SJP Lawyers Directory.