M/s Deluxe Roadlines Pvt. Ltd., Bangalore V. DCIT, Bangalore

ITA 16/BANG/2013

• Counselvise Citation: 1621114 RSA 2013
• Duration Of Justice: 2 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 07-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR JT
• Assessee Lawyers: V SRINIVASAN
• Keywords: Recovery proceedings; Business income; Opportunity of being heard; Question of law
• Section: 133A; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER ITA NO.16/BANG/2013 ASSESSMENT YEAR : 2009-10 M/S. DELUXE ROADLINES PVT. LTD., # 79, 4 TH CROSS, N.R. ROAD, KUMBALGUNDI, KALASIPALAYAM, BANGALORE 560 002. PAN: AAACD 5875F VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI V. SRINIVASAN, CA RESPONDENT BY : SHRI P. DHIVAHAR, JT. CIT(DR) DATE OF HEARING : 01.07.2015 DATE OF PRONOUNCEMENT : 10.07.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 30.11.2012 OF THE CIT(APPEALS) PERTAINING TO ASSESSMENT YEAR 2 009-10. 2. IN THIS APPEAL, THE ONLY GRIEVANCE PROJECTED BY THE ASSESSEE IS WITH REGARD TO THE ACTION OF THE CIT(APPEALS) IN DETERMI NING THE BUSINESS INCOME OF THE ASSESSEE FROM THE BUSINESS OF OWNING FLEET AND OPERATING AS ITA NO.16/BANG/2013 PAGE 2 OF 14 A TRANSPORT CONTRACTOR @ 3% OF THE GROSS RECEIPTS A S AGAINST 8% ESTIMATED BY THE AO. ACCORDING TO THE ASSESSEE, THE PROFIT O F ASSESSEE OUGHT TO HAVE BEEN DETERMINED AT 1.03% WHICH WAS THE INCOME DECLA RED IN THE RETURN OF INCOME AND WHICH IS COMPARABLE WITH THE PAST HISTOR Y OF PROFITS DECLARED IN ITS CASE. 3. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE APPE AL ARISES ARE AS FOLLOWS. THE ASSESSEE IS A COMPANY. IT IS A FLEET OWNER AND TRANSPORT CONTRACTOR. FOR THE AY 2009-10, ASSESSEE FILED ITS RETURN OF INCOME ON 29.9.2009 DECLARING INCOME OF RS.70,64,490. THE FR EIGHT COLLECTION AND SALES FIGURES WERE AS FOLLOWS:- FREIGHT COLLECTION : RS.52,45,46,476 SALES : RS. 39,99,554 -------------------- TOTAL RS.52,55,46,030 -------------------- THE ASSESSEE ALSO DECLARED OTHER INCOME AT RS.84,63 ,079 CONSISTING OF INTEREST INCOME, PROFIT ON SALE OF ASSETS, RENTAL I NCOME AND MISCELLANEOUS INCOME. THE ASSESSEE CLAIMED VARIOUS EXPENSES AMOUN TING TO RS.53,15,55,168 AND OFFERED NET INCOME OF RS.70,64, 490 FOR TAXATION IN RESPECT OF THE BUSINESS OF FLEET OWNING AND TRANSPO RT CONTRACT. THE ASSESSEES MAIN CLAIM OF EXPENDITURE WAS UNDER THE TWO HEADS VIZ., LORRY HIRE CHARGES AT RS.33,03,90,483 AND TRUCK MAINTENAN CE AT RS.8,39,82,308. THE OTHER EXPENSES INCLUDE TRAVELLING, COMMISSION, RENT, ETC. ITA NO.16/BANG/2013 PAGE 3 OF 14 4. THERE WAS A SURVEY CARRIED OUT IN THE BUSINESS P REMISES OF THE ASSESSEE U/S. 133A OF THE INCOME-TAX ACT, 1961 [TH E ACT] ON 14.7.2011. IN THE COURSE OF SURVEY, THE SURVEY TEAM COULD NOT FIND ANY BILLS/VOUCHERS WITH REGARD TO VARIOUS EXPENSES CLAIMED IN THE P&L ACCOUNT. ONLY FOUR FILES OF DAILY RETURNS OF TRANSACTIONS PERTAINING T O BANGALORE HEAD OFFICE FOR THE PERIODS 1.4.08 TO 30.6.08, 1.7.08 TO 30.9.08, 1.10.08 TO 31.1.09 & 1.2.09 TO 31.3.09 WERE FOUND. EVEN IN THESE FILES, THE INFORMATION AVAILABLE WAS NOT CLEAR AND NO DEFINITE CONCLUSIONS COULD BE ARRIVED AT WITH REGARD TO NATURE OF EXPENDITURE, AMOUNT OF EXPENDITURE ETC. A STATEMENT OF MR. KUSHAL CHAND DHARAMSHI, M.D., WAS RECORDED IN THE COURSE OF SURVEY ON 14.7.11. IN HIS STATEMENT, HE STATED THAT SUPPORTI NG VOUCHERS WERE KEPT SEPARATELY IN THE HEAD OFFICE. EVEN IN THE HO, NO BOOKS OF ACCOUNTS OR VOUCHERS WERE FOUND. WHATEVER RECORDS WERE AVAILAB LE WERE IMPOUNDED IN THE COURSE OF SURVEY AND THE EXPENSES RECORDED IN T HOSE DOCUMENTS WERE DIRECTED TO BE SUBSTANTIATED. 5. IN THE COURSE OF ASSESSMENT PROCEEDINGS, MR. KUS HAL CHAND DHARAMSHI, M.D. OF THE COMPANY, APPEARED IN RESPONS E TO THE NOTICE OF THE AO TO SUBSTANTIATE THE EXPENSES DEBITED IN THE P&L ACCOUNT WITH SUPPORTING DOCUMENTS LIKE VOUCHERS, BILLS, ETC. TH E ASSESSEE WAS ALSO DIRECTED TO PRODUCE BOOKS OF ACCOUNT. THE ASSESSEE DID NOT COMPLY WITH THE DIRECTIONS OF THE AO IN THIS REGARD. HENCE A P ROPOSAL U/S. 144 OF THE ACT WAS ISSUED BY THE AO VIDE LETTER DATED 17.11.20 11 TO ASSESS INCOME OF ASSESSEE AT 8% OF THE TOTAL TURNOVER WHICH WAS AT R S.52,85,46,030 WHICH ITA NO.16/BANG/2013 PAGE 4 OF 14 WORKS OUT TO RS.4,22,83,682. IT WAS ALSO PROPOSED TO ADD THE OTHER INCOME DISCLOSED BY THE ASSESSEE AT RS.84,63,079. THUS TH E TOTAL INCOME PROPOSED FOR ASSESSMENT WAS RS.5,07,46,761. DESPIT E THE ABOVE NOTICE, THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNT, BANK STATEMENTS, BILLS, VOUCHERS, IN SUPPORT OF EXPENDITURE CLAIMED. ON TH E BASIS OF ABOVE SEQUENCE OF EVENTS AND FAILURE ON THE PART OF ASSES SEE TO PRODUCE DOCUMENTS CALLED FOR, THE AO CAME TO THE FOLLOWING CONCLUSION:- FROM THE FOREGOING, I ARRIVE AT THE CONCLUSION THA T EITHER THE ASSESSEE IS NOT HAVING/MAINTAINING BOOKS OF ACCOUNT AND SUPPORTING VOUCHERS/BILLS TOWARDS VARIOUS EXPENDITU RE CLAIM OR THE SAME ARE NOT PRODUCED IN SPITE OF SEVERAL OPPOR TUNITIES AND SUFFICIENT TIME OFFERED TO THE ASSESSEE. IN VIEW OF THE ABOVE, I AM NOT SATISFIED ABOUT TH E CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE. HENCE I PROCEED TO MAKE THE ASSESSMENT IN THE MANNE R PROVIDED IN SEC. 144 OF THE I.T. ACT AS STIPULATED IN SEC. 1 45(3) OF THE I.T. ACT. 6. THE AO ACCEPTED THE TURNOVER DECLARED BY THE ASS ESSEE IN THE P&L ACCOUNT FILED AS IT WAS IN TUNE WITH ITS PAST HISTO RY. THEREAFTER, THE AO PROCEEDED TO DETERMINE THE INCOME OF THE ASSESSEE B Y APPLYING 8% AS PROPOSED IN THE SHOW CAUSE NOTICE AND DETERMINED TH E INCOME OF THE ASSESSEE AT RS.4,22,83,682 WHICH IS 8% OF THE TURNO VER UNDER THE HEAD INCOME FROM BUSINESS. 7. BEFORE THE CIT(APPEALS), THE ASSESSEE SUBMITTED THAT, IT DERIVES INCOME FROM TRANSPORTATION OF GOODS AND OWNS ABOUT 100 HEAVY GOODS ITA NO.16/BANG/2013 PAGE 5 OF 14 VEHICLE AND LIGHT COMMERCIAL VEHICLES. SOMETIMES, T HE ASSESSEE ALSO ENGAGED THIRD PARTY VEHICLES BY PAYING HIRE CHARGES FOR TRANSPORTATION OF GOODS. APART FROM THE TRANSPORTATION BUSINESS THE A SSESSEE ALSO OPERATED A PETROL BUNK. THIS IN SHORT WAS HIS BUSINESS ACTIV ITY. AS FAR AS TRANSPORTATION BUSINESS WAS CONCERNED, THE ASSESSEE SUBMITTED THAT IT OWNED ABOUT 100 HEAVY GOODS VEHICLES AND LIGHT COMM ERCIAL VEHICLES. JUDGING THE EXTENT OF INCOME HAVING REGARD TO THE P RESUMPTIVE INCOME MENTIONED IN THE SECTION 44AE OF THE ACT, AND ASSUM ING FURTHER THAT ALL THE VEHICLES ARE HEAVY GOODS VEHICLES ONLY, THE TOTAL I NCOME OF THE ASSESSEE COULD BE WORKED OUT, AT BEST, IN TERMS OF PRESUMPTI VE PROVISIONS AT RS. 42,00,000/- [RS.3,508/- X 12 X 100]. AS FAR AS TH E BUSINESS OF RUNNING PETROL BUNK, THE ASSESSEE SUBMITTED THAT, THE TURNO VER OF THE ASSESSEE FOR THE YEAR UNDER APPEAL FROM THE PETROL BUNK BUSINESS WAS ONLY RS. 39,99,554/-. IN OTHER WORDS, THERE WAS ALMOST NO BU SINESS OF OPERATING THE PETROL BUNK CARRIED ON BY THE ASSESSEE DURING THE Y EAR UNDER APPEAL. 8. THE ASSESSEE SUBMITTED BEFORE CIT(A) THAT IT IS IN THE ABOVE BACKGROUND OF THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE THAT THE EXTENT OF INCOME SHOWN BY THE ASSESSEE HAS TO BE LO OKED AT. THE ASSESSEE SUBMITTED THAT THE INCOME OF RS. 70,64,490 /- OFFERED IN THE RETURN OF INCOME WAS REASONABLE AND ALSO COMMENSURATE WITH THE BUSINESS ACTIVITIES OF THE ASSESSEE. THE ASSESSEE ALSO SUBMI TTED THAT IT WAS ONLY ENTITLED TO A SMALL COMMISSION OF LESS THAN RE.1 IN ITS PETROL BUNK BUSINESS. THIS COMMISSION WAS MUCH LESS THAN 1% IN THIS LINE OF ACTIVITY. FURTHER, THE ITA NO.16/BANG/2013 PAGE 6 OF 14 EXTENT OF INCOME IN TRANSPORTATION BUSINESS WAS ALS O NOT VERY HIGH. CONSIDERING THE ABOVE EXTENT OF INCOME FROM OWN VEH ICLES AND ALSO THE COMMISSION RECEIVED IN RESPECT OF ENGAGING THIRD PA RTY VEHICLES AND ALMOST NEGLIGIBLE INCOME IN THE PETROL BUNK BUSINESS, IT W AS SUBMITTED THAT THE INCOME OF RS. 70,64,490/- SHOWN BY THE ASSESSEE WAS REASONABLE AND IN ACCORDANCE WITH THE GROUND REALITIES OBTAINING IN T HE FACTS OF THE ASSESSEES CASE. 9. THE ASSESSEE ALSO SUBMITTED THAT INCOME DECLARE D BY IT IS IN TUNE WITH THE PAST HISTORY IN ITS OWN CASE AND THEREFORE ADDITION MADE BY THE AO SHOULD BE DELETED. 10. THE CIT(APPEALS) FIRSTLY UPHELD THE REJECTION O F BOOKS OF ACCOUNTS BY THE AO. THE ASSESSEE HAS ACCEPTED THIS PART OF THE ORDER OF CIT(APPEALS) AND IN THE GROUNDS OF APPEAL FILED BEFORE THE TRIBU NAL, THERE IS NO CHALLENGE TO THE VALIDITY OF REJECTIONS OF BOOKS OF ACCOUNT B Y THE AO U/S. 145(3) OF THE ACT. IN THIS APPEAL WE ARE CONCERNED ONLY WITH THE ESTIMATION OF INCOME OF THE ASSESSEE. 11. AS FAR AS THE CLAIM THAT INCOME DECLARED BY ASS ESSEE SHOULD BE ACCEPTED, THE CIT(A) LOOKED AT THE PAST HISTORY OF THE ASSESSEES CASE WHICH WAS AS FOLLOWS:- ITA NO.16/BANG/2013 PAGE 7 OF 14 YEAR ENDING TURNOVER (RS.) PROFIT (RS.) PERCENTAGE 31/3/2004 38,39,12,686 36,40,150 0.95 31/3/2005 50,25,74,388 48,54,614 0.97 31/3/2006 58,97,06,091 11,88,594 0.20 31/3/2007 53,22,23,311 21,38,784 0.40 31/3/2008 55,93,97,896 52,86,974 0.95 12. THE LD. CIT(APPEALS) FOUND THAT PROFIT PERCENTA GE DECLARED BY THE ASSESSEE IN THIS YEAR WAS 1.03%. HE WAS THEREFORE O F THE VIEW THAT ESTIMATION OF 8% OF TURNOVER AS DONE BY THE AO WAS HIGHLY EXCESSIVE AND UNREASONABLE. HE WAS, HOWEVER, OF THE VIEW THAT 3% OF THE TURNOVER COULD BE ESTIMATED AS PROFIT OF THE ASSESSEE. 13. STILL AGGRIEVED, THE ASSESSEE HAS FILED THE APP EAL BEFORE THE TRIBUNAL. 14. THIS APPEAL WAS HEARD BY THE TRIBUNAL AND AN OR DER DATED 1.1.2014 WAS PASSED BY THE TRIBUNAL. THE TRIBUNAL FIRSTLY C AME TO THE CONCLUSION THAT THE ASSESSEE FAILED TO DEMONSTRATE THAT IT WAS MAINTAINING BOOKS OF ACCOUNT AS REQUIRED UNDER THE ACT. THE TRIBUNAL AL SO HELD THAT ASSESSEE HAS NOT BROUGHT OUT ANY EVIDENCE TO JUSTIFY THE CLA IM OF PROFIT AT 1.03% OF THE TURNOVER, EXCEPT FOR PLACING RELIANCE ON THE RE TURNS OF INCOME FILED IN THE EARLIER YEARS. THE TRIBUNAL HELD THAT THOSE RETURN S ARE NOT CONCLUSIVE IN THE MATTER BECAUSE THOSE RETURNS FOR AYS 2004-05 TO 200 8-09 HAD BEEN ACCEPTED U/S. 143(1) OF THE ACT AND ACCEPTANCE OF A RETURN U/S. 143(1) OF THE ACT WILL NOT BE CONCLUSIVE AS THERE WAS NO SCRU TINY ASSESSMENT. THE TRIBUNAL THEREFORE CAME TO THE CONCLUSION THAT THE CIT(A) WAS REASONABLE ITA NO.16/BANG/2013 PAGE 8 OF 14 IN RESTRICTING THE DETERMINATION OF INCOME AT 3%, A S COMPARED TO 8% OF THE TURNOVER ESTIMATED BY THE AO. THE TRIBUNAL FURTHER HELD THAT THE CIT(A) HAS NOT GIVEN ANY COMPARABLE CASES IN SIMILAR LINE OF BUSINESS TO COME TO THE CONCLUSION THAT 3% OF THE TURNOVER IS REASONABL E IN ESTIMATING BUSINESS INCOME OF THE ASSESSEE. THE TRIBUNAL HELD THAT IT W OULD MEET THE ENDS OF JUSTICE IF THE BUSINESS INCOME IS RESTRICTED TO 2.5 % OF THE TOTAL TURNOVER. 15. THE ASSESSEE WAS NOT SATISFIED WITH THE RELIEF GIVEN BY THE TRIBUNAL AND FILED AN APPEAL BEFORE THE HONBLE HIGH COURT O F KARNATAKA IN ITA NO.213/2014. THE FOLLOWING SUBSTANTIAL QUESTION OF LAW WAS ADMITTED BY THE HONBLE HIGH COURT:- WHETHER THE TRIBUNAL IS JUSTIFIED IN LAW IN ESTIMA TING THE APPELLANTS BUSINESS PROFIT AT 2.5% OF THE TOTAL TU RNOVER WITHOUT ANY BASIS AND CONTRARY TO INCOME ACCEPTED IN THE EA RLIER YEARS AND RECORDED A PERVERSE FINDING ON THE FACTS AND CIRCUM STANCES OF THE CASE? 16. THE HONBLE HIGH COURT REFERRED TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RAGHUBAR MANDAL HARIHAR MANDAL V. THE STATE OF BIHAR (1957 VOL. VIII STC 770) , WHEREIN IT WAS HELD THAT WHEN THE RETURNS AND BOOKS OF ACCOUNT ARE REJECTED, THE AO M UST MAKE AN ESTIMATE AND TO THAT EXTENT HE MUST MAKE A GUESS, BUT THE ES TIMATE MUST BE RELATED TO SOME EVIDENCE OF MATERIAL AND IT MUST BE SOMETHI NG MORE THAN MERE SUSPICION. THE AO MUST MAKE A FAIR ESTIMATE FOR TH IS PURPOSE, HE MUST TAKE INTO CONSIDERATION MATERIAL BEFORE HIM LIKE AS SESSEES CIRCUMSTANCES, ITA NO.16/BANG/2013 PAGE 9 OF 14 PREVIOUS RETURNS AND ALL OTHER MATTERS, WHICH THE A O THINKS WILL ASSIST HIM IN ARRIVING AT A FAIR AND PROPER ESTIMATE. THEREAFTE R, THE HONBLE HIGH COURT HELD AS FOLLOWS:- 7. THEREFORE, IN THE INSTANT CASE, WHEN THE ASSES SEE DID NOT PRODUCE THE BOOKS OF ACCOUNTS, THE ASSESSING OFFICE R WAS NOT HELPLESS. THE ASSESSEE HAS BEEN FILING RETURNS EVER Y YEAR. IN FACT, HE HAS PRODUCED FIVE YEARS RETURNS. IT IS FROM THAT THEY TOOK THE TURNOVER BECAUSE THE TURNOVER OFFERED BY THE ASSESS EE FOR THE YEAR 2009-10 WAS COMPARABLE WITH THE PAST FIVE YEARS TUR NOVER AS REFLECTED IN THE RETURNS FILED. THEY ACTED ON THAT. HOWEVER, HE REFUSED TO ACT ON THE PROFITS SHOWN IN THE SAID RET URNS. NO REASONS ARE GIVEN FOR NOT RELYING ON THE SAID PROFITS AT TH E SAME TIME, HE HAS ALSO NOT TAKEN INTO CONSIDERATION THE COMPARABL E CASES IN SIMILAR BUSINESS TO COME TO THE CONCLUSION. WITHOUT ANY BASIS, THE ASSESSING AUTHORITY DETERMINED THE PROFIT AT 8%, TH E FIRST APPELLATE AUTHORITY REDUCED IT TO 3% AND THE TRIBUNAL HAS RED UCED IT TO 2.5%. IN COMING TO THE SAID FINDING, ALL THE THREE AUTHOR ITIES HAVE DECLINED TO TAKE NOTE OFF THE EVIDENCE BY WAY OF EA RLIER RETURNS. IN THAT VIEW OF THE MATTER, WHAT THE AUTHORITIES HAVE DONE IS A MERE GUESS WORK AND WITHOUT ANY BASIS. THAT IS NOT PERMI SSIBLE IN LAW AS HELD BY THE APEX COURT IN THE AFORESAID JUDGMENT . 8. IN THAT VIEW OF THE MATTER, THE IMPUGNED ORDERS ARE UNSUSTAINABLE. HENCE, THE ORDER PASSED BY THE TRIB UNAL IS HEREBY SET-ASIDE. MATTER IS REMITTED BACK TO THE TRIBUNAL FOR FRESH CONSIDERATION IN THE LIGHT OF THE OBSERVATIONS MADE ABOVE. IN THAT VIEW OF THE MATTER, THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE AND APPEAL IS PARTLY ALLOWED. 17. THE APPEAL WAS FIXED FOR HEARING AS PER THE DIR ECTIONS OF THE HONBLE JURISDICTIONAL HIGH COURT. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE HONBLE HIGH COURT HAS CLEARLY H ELD THAT EVIDENCE IN THE FORM OF EARLIER RETURNS HAD TO BE TAKEN NOTE OF BY THE TRIBUNAL. ACCORDING TO ITA NO.16/BANG/2013 PAGE 10 OF 14 HIM, THEREFORE, THE ASSESSEES PROFIT DECLARED IN T HE RETURN OF INCOME FOR AY 2009-10 WAS MORE THAN THE PAST HISTORY IN ITS OWN C ASE AND THEREFORE THE SAME OUGHT TO BE ACCEPTED. 18. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT T HE HONBLE HIGH COURT HAS OBSERVED THAT NO REASONS WERE GIVEN FOR NOT REL YING ON THE PROFITS DECLARED BY THE ASSESSEE IN THE PAST AND ALSO THAT THE REVENUE AUTHORITIES HAVE NOT TAKEN INTO CONSIDERATION COMPARABLE CASES IN SIMILAR BUSINESS TO SUPPORT ITS CONCLUSIONS. ACCORDING TO HIM, THE PAS T HISTORY IN ASSESSEES OWN CASE IS NOT CONCLUSIVE IN THE MATTER AS IN NONE OF THE EARLIER ASSESSMENT YEARS, THE ASSESSEES CASE WAS TAKEN UP FOR SCRUTINY AND WHATEVER PROFITS WERE DECLARED WERE ACCEPTED U/S. 1 43(1) OF THE ACT WITHOUT ANY VERIFICATION. IN SUCH CIRCUMSTANCES, ACCORDING TO HIM, IT WOULD NOT BE APPROPRIATE TO RELY ON THE PAST HISTORY OF THE ASSE SSEES CASE AND THE BETTER WAY OF ESTIMATING THE PROFITS OF THE BUSINESS OF TH E ASSESSEE WOULD BE TO TAKE PROFITS OF COMPARABLE CASES IN SIMILAR LINE OF BUSINESS TO THAT OF THE ASSESSEE. 19. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. IN OUR VIEW, THE DIRECTIONS OF THE HONBLE HIGH COU RT IN PARA 7 & 8 OF ITS JUDGMENT DATED 14.8.2014 ARE TO THE FOLLOWING EFFEC T :- (1) IN ACCEPTING THE TURNOVER OF ASSESSEE DECLARED IN THE PROFIT & LOSS ACCOUNT, THE REVENUE HAS RELIED ON THE PAST HISTORY OF ASSESSEES OWN CASE. ITA NO.16/BANG/2013 PAGE 11 OF 14 (2) THE REVENUE AUTHORITIES HAVE, HOWEVER, NOT APPL IED THE SAME YARDSTICK WHEN IT CAME TO DETERMINING THE PROFITS O F THE ASSESSEE AND FOR DOING SO THEY HAVE NOT ASSIGNED ANY REASONS. (3) THE REVENUE, IN ANY EVENT, OUGHT TO HAVE TAKEN INTO CONSIDERATION COMPARABLE CASES IN SIMILAR BUSINESS TO JUSTIFY EST IMATION OF PROFIT. (4) THEREFORE, THE DETERMINATION OF PROFITS OF THE ASSESSEE WAS MERELY A GUESS WORK AND WITHOUT ANY BASIS. 20. IN OUR VIEW, THE FACT THAT THE ASSESSEES RETUR NS IN THE PAST WAS ACCEPTED WITHOUT ANY SCRUTINY OR VERIFICATION BECAU SE THOSE RETURNS WERE ACCEPTED U/S. 143(1) OF THE ACT, WAS A PROPER BASIS NOT TO RELY ON THE PAST HISTORY OF PROFITS IN ASSESSEES OWN CASE. THEREFO RE, THE PAST HISTORY OF INCOME IN ASSESSEES OWN CASE CANNOT BE THE SOLE BA SIS ON WHICH INCOME OF THE ASSESSEE CAN BE DETERMINED. BESIDES THE AB OVE, AS POINTED OUT BY THE LD. DR IN THE COURSE OF HIS ARGUMENTS, AT THE T IME OF SURVEY U/S. 133A OF THE ACT, NO BOOKS OF ACCOUNT OF ASSESSEE WERE FOUND , NOR WAS THE ASSESSEE ABLE TO PRODUCE EVIDENCE IN THE FORM OF VO UCHERS IN SUPPORT OF EXPENSES DEBITED TO THE P&L ACCOUNT. AS TO WHETHER SIMILAR STATE OF AFFAIRS PREVAILED IN THE PAST FOR THE AYS 2004-05 TO 2008-0 9 IN ASSESSEES CASE CANNOT BE SAID WITH CERTAINTY. ACCORDING TO THE LD . DR, SIMILAR STATE OF AFFAIRS WOULD HAVE PREVAILED IN THE PAST ASSESSMENT YEARS ALSO. THE PROFITS ITA NO.16/BANG/2013 PAGE 12 OF 14 EARNED BY THE ASSESSEES IN SIMILAR LINE OF BUSINESS COULD THEREFORE BE CONSIDERED BY THE AO IN DETERMINING THE INCOME OF A SSESSEE. 21. WE HAVE ALREADY OBSERVED THAT REJECTION OF BOO KS OF ACCOUNT BY THE AO IS NO LONGER AN ISSUE, AS THE ASSESSEE HAS ACCEP TED THE REJECTION OF BOOKS OF ACCOUNT. WHEN BOOKS OF ACCOUNTS ARE REJEC TED AND INCOME IS ESTIMATED, THE BEST YARDSTICK FOR SUCH ESTIMATION I S THE PAST HISTORY IN ASSESSEES OWN CASE, PROVIDED SUCH PAST HISTORY IS ACCEPTED BY THE REVENUE IN ASSESSMENTS COMPLETED AFTER DUE ENQUIRY U/S.143(3) OF THE ACT. WHEN ASSESSMENT IS COMPLETED U/S.143(1) OF THE ACT, THE RETURN FILED BY THE ASSESSEE IS ACCEPTED AS IT IS. THE SCHEME OF ASSES SMENT UNDER SECTION 143(1) OF THE INCOME-TAX ACT, 1961, IS THE POLICY O F TAX ADMINISTRATIONS ACROSS COUNTRIES TO ADOPT A TWO-STAGE PROCEDURE OF ASSESSMENT AS PART OF RISK MANAGEMENT STRATEGY. IN THE FIRST STAGE, ALL T AX RETURNS ARE PROCESSED TO CORRECT ARITHMETICAL MISTAKES, INTERNAL INCONSIS TENCIES, TAX CALCULATION AND VERIFICATION OF TAX PAYMENT. AT THIS STAGE, N O VERIFICATION OF INCOME IS UNDERTAKEN. IN THE SECOND STAGE, A CERTAIN PERCENTA GE OF THE TAX RETURNS ARE SELECTED FOR SCRUTINY/AUDIT ON THE BASIS OF THE PROBABILITY OF DETECTING TAX EVASION. AT THIS STAGE, THE TAX ADMINISTRATION IS C ONCERNED WITH THE VERIFICATION OF THE INCOME. IN INDIA, THE SCHEME OF SUMMARY ASSESSMENT BEING IN FORCE SINCE 1ST DAY OF JUNE, 1999 DOES NOT CONTAIN ANY PROVISION ALLOWING FOR PRIMA FACIE ADJUSTMENT. THE SCOPE OF THE PRESENT SCHEME IS LIMITED ONLY TO CHECKING AS TO WHETHER TAXES HAVE B EEN CORRECTLY PAID ON THE INCOME RETURNED. UNDER THE EXISTING PROVISIONS OF SECTION 143(1), THERE ITA NO.16/BANG/2013 PAGE 13 OF 14 IS NO PROVISION FOR CORRECTING ARITHMETICAL OR INTE RNAL INCONSISTENCIES. 'THE INTIMATION UNDER SECTION 143(1) IS ONLY FICTIONALLY TAKEN AS A NOTICE OF DEMAND UNDER SECTION 156 OF THE ACT. LIKE OTHER FIC TIONS, TO UNDERSTAND THE MEANING OF THIS FICTION SO CREATED HERE ONE MUST LO OK TO ITS PURPOSE. THE APPARENT PURPOSE OF THIS FICTION IS TO MAKE THE MAC HINERY PROVISION FOR RECOVERY OF TAX APPLICABLE TO THE RECOVERY OF TAX A SSESSED IN TERMS OF SECTION 143(1) AND NOTHING MORE. THOUGH NOTICE OF D EMAND UNDER SECTION 156 IS TO BE SERVED IN THE PRESCRIBED FORM BUT THE INTIMATION UNDER SECTION 143(1) IS NOT IN ANY SUCH PRESCRIBED FORM, YET BY F ICTION SO CREATED, ALL INCIDENCE OF NOTICE OF DEMAND SHALL BECOME APPLICAB LE EVEN TO THAT INTIMATION, FOR ANY STATUTORY FICTION MUST BE CARRI ED TO ITS LOGICAL CONCLUSION. FROM ALL THIS IT FOLLOWS THE INTIMATION IS NOTHING BUT MERELY AN ACKNOWLEDGEMENT SLIP TO THE EFFECT THAT THE RETURN FILED HAS BEEN ACCEP TED AND THE ASSESSING OFFICER HAS ACTED UPON THAT AND F OR THE PURPOSES OF RECOVERY THAT SHALL BE DEEMED TO BE A NOTICE OF DEM AND AS IF ISSUED UNDER SECTION 156. 22. IN OUR VIEW, THEREFORE, THE PAST HISTORY IN ASS ESSEES CASE WOULD NOT BE THE APPROPRIATE YARDSTICK TO ESTIMATE INCOME. W E ARE THEREFORE OF THE VIEW THAT IT WOULD BE JUST AND APPROPRIATE TO SET A SIDE THE ORDER OF THE CIT(APPEALS) ON THIS ISSUE AND REMAND THE QUESTION OF ESTIMATION THE INCOME OF THE ASSESSEE TO THE ASSESSING OFFICER FOR FRESH CONSIDERATION, KEEPING IN VIEW THE PROFITS EARNED BY THE ASSESSEES IN SIMILAR LINE OF BUSINESS. THE AO WILL MAKE NECESSARY ENQUIRIES IN THIS REGARD AND ALSO ITA NO.16/BANG/2013 PAGE 14 OF 14 AFFORD OPPORTUNITY OF BEING HEARD TO THE ASSESSEE A ND THEREAFTER ESTIMATE THE INCOME OF ASSESSEE. 23. FOR STATISTICAL PURPOSES, THE APPEAL OF THE ASS ESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF JULY , 2015 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 10 TH JULY , 2015 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR/ SENIOR PRIVATE SECRETARY ITAT, BANGALORE.