ITO, CHENNAI V. M/s. Celebrate Screens (P) Ltd., CHENNAI

ITA 1571/CHNY/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51785 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 18-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 07-10-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Additional evidence
• Section: 142(1); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, AM AND SHRI GEORGE MATHAN, JM ITA. NO. 1571//MDS/2009 [A Y: 2005-06] THE INCOME-TAX OFFICER MEDIA WARD - I CHENNAI. VS. M/S CELEBRATE SCREENS (P) LTD 829, AIRLINES BUILDING ANNA SALAI CHENNAI 600 002. (PAN NO. AABCC 9212 A) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. SRIDHAR, ADVOCATE DEPARTMENT BY : SHRI SHAJI P. JACOB, SR. DR DATE OF HEARING : 18.08.2011 DATE OF PRONOUNCEMENT : 26.08.2011 O R D E R PER GEORGE MATHAN, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-VI, CHENNAI IN APPEAL NO. 236/08-09 DATE D 09.07.2009 FOR THE ASSESSMENT YEAR 2005-06. PAGE 2 OF 7 ITA NO. 1571/MDS/2009 2. SHRI SHAJI P. JACOB, SR. DR REPRESENTED ON BEHAL F OF THE REVENUE AND SHRI S. SRIDHAR, ADVOCATE REPRESENTED O N BEHALF OF THE ASSESSEE. 3. IN REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW A ND FACTS OF THE CASE. 2. THE LD. CIT(A) ERRED IN REDUCING THE INCOME ESTIM ATED BY THE ASSESSING OFFICER AT 10% TO LESS THAN 3.7% WITHOUT APPRECIATING THE STEEP INCREASE IN GROSS COLLECTION FROM 2.73 CRORES TO 4.75 CRORES. 3. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FAC T THAT THE ASSESSING OFFICER RESORTED TO ESTIMATING THE IN COME DUE TO NON PRODUCTION OF BOOKS AND ACCOUNTS AND OTHER SUPPORTING MATERIALS BY THE ASSESSEE. 4. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FAC T THAT THE ASSESSEE HIMSELF HAD SUBMITTED IN THE LETTER DAT ED 10.08.2004 THAT THEIR INCOME FOR THE ASSESSMENT YEA R 2005-06 WOULD BE AROUND 35 LAKHS. PAGE 3 OF 7 ITA NO. 1571/MDS/2009 5. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. IT WAS SUBMITTED BY THE LD. D.R. THAT THE ASSESS EE IS A COMPANY WHICH IS DOING THE BUSINESS OF DISTRIBUTION OF FEATURE FILMS. IT WAS HIS SUBMISSION THAT THERE WAS A SURVEY ON TH E BUSINESS PREMISES OF THE ASSESSEE ON 26.07.2004 AND ON THE B ASIS OF THE SURVEY, IT WAS NOTICED THAT THE ASSESSEE HAD TAXABL E INCOME FOR WHICH THE ASSESSEE HAD NOT FILED RETURN OF INCOME F OR THE RELEVANT ASSESSMENT YEAR. NOTICES U/S 148, 142(1) AND 143(2 ) OF THE INCOME- TAX ACT, 1961 [IN SHORT, THE ACT] WERE SERVED ON TH E ASSESSEE ON VARIOUS OCCASIONS. IT WAS HIS SUBMISSION THAT NUMB ER OF OPPORTUNITIES HAD BEEN GRANTED TO THE ASSESSEE. IT WAS HIS SUBMISSION THAT THE ASSESSEE HAD NOT CO-OPERATED IN THE ASSESSMENT PROCEEDINGS AND CONSEQUENTLY ASSESSMENT U/S 144 OF THE ACT HAD BEEN COMPLETED ON 31.10.2008 WHEREIN GROSS COLLECTI ON OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR WAS TAKEN AS PER THE EVIDENCES FOUND DURING THE COURSE OF SURVEY. THE A SSESSING OFFICER HAD ESTIMATED 10% OF THE GROSS COLLECTION AS INCOME OF THE ASSESSEE. PAGE 4 OF 7 ITA NO. 1571/MDS/2009 IT WAS HIS SUBMISSION THAT ON APPEAL BEFORE THE LD. CIT(A), THE LD. CIT(A) HAD REDUCED THE ESTIMATION FROM 10% AND HAD DIRECTED THE ASSESSING OFFICER TO SUBSTITUTE THE TAXABLE INCOME AT RS. 15 LAKHS. IT WAS HIS SUBMISSION THAT THERE WAS ABSOLUTE NON-C OOPERATION ON THE PART OF THE ASSESSEE AND STILL THE LD. CIT(A) H AD ESTIMATED THE INCOME OF THE ASSESSEE AT RS. 15 LAKHS AS AGAINST 10% OF THE GROSS COLLECTIONS AS MADE BY THE ASSESSING OFFICER. IT W AS HIS SUBMISSION THAT IN VIEW OF THE DECISION OF THE HON'BLE JURISDI CTIONAL HIGH COURT IN THE CASE OF CIT VS. RAYALA CORPORATION (P) LTD. REPORTED IN [1995] 215 ITR 883 [MAD.] WHEREIN IT HAS BEEN HELD THAT SO LONG AS THE ESTIMATE MADE BY THE ASSESSING AUTHORITY IS NOT ARB ITRARY AND HAS NEXUS WITH THE FACTS DISCOVERED, THE SAME CANNOT BE QUESTIONED, THE ASSESSEE CANNOT BE PERMITTED TO TAKE ADVANTAGE OF HIS OWN ILLEGAL ACTS. IT WAS HIS SUBMISSION THAT THE LD. C IT(A) HAD ENTERED INTO A REAPPRAISAL OF EVIDENCES AND HAD TAKEN INTO CONSIDERATION ADDITIONAL EVIDENCES PRODUCED BY THE ASSESSEE FOR T HE PURPOSE OF FIXING THE INCOME OF THE ASSESSEE AT RS. 15 LAKHS . IT WAS HIS FURTHER SUBMISSION THAT HOW THE LD. CIT(A) HAS ARRI VED AT FIXING THE INCOME OF THE ASSESSEE AT RS. 15 LAKHS IS ALSO NOT AVAILABLE ON RECORD. IT WAS HIS SUBMISSION THAT THE LD. CIT(A)S ORDER BE REVERSED. PAGE 5 OF 7 ITA NO. 1571/MDS/2009 5. IN REPLY, THE LD. A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A). IT WAS HIS SUBMISSION THAT ALL EVI DENCES HAD BEEN FOUND DURING THE COURSE OF SURVEY AND FURTHER THE A SSESSEE HAD ALSO BECOME DEFUNCT. IT WAS HIS SUBMISSION THAT THE INC OME AS FIXED BY THE LD. CIT(A) IS LIABLE TO BE SUSTAINED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. AT THE OUTSET, IT IS NOTICED THAT THE HON'BLE JURISDICTION AL HIGH COURT IN THE CASE OF RAYALA CORPORATION [P] LTD [SUPRA] HAS NOT HELD THAT THE APPELLATE AUTHORITY SHOULD NOT INTERFERE IN A BEST JUDGMENT ASSESSMENT. IF THE BEST JUDGMENT ASSESSMENT DOES N OT HAVE NEXUS WITH THE FACTS DISCOVERED THE APPELLATE AUTHORITY W OULD VERY MUCH BE IN ITS DUTY TO INTERFERE WITH SUCH ORDER. A PER USAL OF THE ORDER OF THE ASSESSING OFFICER CLEARLY SHOWS THAT THE ASSESS ING OFFICER HAS TAKEN 10% OF THE GROSS COLLECTION AS NET PROFIT OF THE ASSESSEE. HOW AND WHY THE ASSESSING OFFICER HAS ADOPTED 10% IS NO T COMING OUT OF THE ORDER OF THE LD. CIT(A). A PERUSAL OF PARA 3.25 OF THE ORDER OF THE LD. CIT(A) CLEARLY SHOWS THAT IN A SCRUTINY ASS ESSMENT FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, THE ASSESSIN G OFFICER HAD PAGE 6 OF 7 ITA NO. 1571/MDS/2009 ACCEPTED NET PROFIT OF 3.71%. IN THE CASE OF ESTIM ATING AN INCOME, THE COMPARATIVE METHOD IS NORMALLY TO BE APPLIED AN D BEST COMPARISON WOULD BE THE ASSESSEES OWN DATA FOR THE PRECEDING YEARS OR SUCCEEDING YEARS. HERE IT IS NOTICED THAT IN THE PRECEDING YEAR, THE ASSESSING OFFICER HAS, UNDER SCRUTINY ASS ESSMENT, ACCEPTED NET PROFIT RATE AT 3.71%. ONCE THIS IS SO , OBVIOUSLY ESTIMATING A NET PROFIT RATE OF THE ASSESSEE AT 10% WOULD BE HIGHLY ARBITRARY. A PERUSAL OF THE ORDER OF THE LD. CIT(A ) FURTHER CLEARLY SHOWS THAT HE HAS RECOGNIZED THAT THE NET PROFIT RA TE ADOPTED FOR THE IMMEDIATELY PRECEDING YEAR IS 3.71%, BUT HAS RE DUCED THE SAME TO RS. 15 LAKHS, WHICH IS ALSO WITHOUT ANY REASON. THIS ALSO IS NOT PERMISSIBLE. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT AS THE ASSESSEES ASSESSMENT FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR HAS BEEN COMPLETED BY ACCEPTING THE NET PROFIT RATE AT 3.71%, THE ADOPTION OF SAME PERCENTAGE FOR THE CURRENT ASS ESSMENT YEAR WOULD MEET THE ENDS OF JUSTICE. IN THESE CIRCUMSTA NCES, THE ORDER OF THE LD. CIT(A) STANDS MODIFIED TO THE EXTENT TO ADOPT THE NET PROFIT RATE OF THE ASSESSEE AT 3.71%. PAGE 7 OF 7 ITA NO. 1571/MDS/2009 7. IN THE RESULT, THIS APPEAL OF THE REVENUE IS PAR TLY ALLOWED. PRONOUNCED IN THE COURT ON 26/08/2011. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 26 TH AUGUST, 2011. VL/ COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE