ITO Ward 34 (1), V. Vinod Jain,

ITA 2749/DEL/2007

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9826 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 03-08-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 31-05-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUSHA KHURANA
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Business income; Set aside
• Section: 143(3); 142(1); 207; 131; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : I : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO. 2749/DEL/2007 ASSESSMENT YEAR : 2003-04 INCOME TAX OFFICER, WARD 34(1), NEW DELHI. VS. SHRI VINOD JAIN, B-7, MAIN ROAD JOHRI PUR VISTAR, DELHI. PAN: ACZPJ 4840 Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHWANI TANEJA, ADVOCATE REVENUE BY : SMT. ANUSHA KHURANA, SR. DR O R D E R PER I.P. BANSAL, JUDICIAL MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIR ECTED AGAINST THE ORDER OF THE CIT (A) DATED 16 TH FEBRUARY, 2007 FOR ASSESSMENT YEAR 2003-04. GROUND OF APPEAL READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT (A) HAS ERRED IN DELETING THE ASSESSED INCOME A T RS.28,11,790/- TAKING THE NP @ 1%. 2. IMPUGNED ASSESSMENT HAS BEEN PASSED U/S 144 OF I NCOME-TAX ACT, 1961 VIDE ORDER DATED 23 RD FEBRUARY, 2006. RETURN OF INCOME WAS FILED ON 2 ND DECEMBER, 2003 AT AN INCOME OF RS.1,53,700/-. THE ASSESSMENT WAS TAKEN INTO SCRUTINY VIDE ISSUE OF NOTICE DATED 29 TH OCTOBER, 2004. IN PARA 2, THE ASSESSING OFFICER HAS MENTIONED THAT A QUESTIONNAIRE WAS ISSU ED ON 22 ND NOVEMBER, 2004 ITA NO.2749/DEL/2007 2 WHICH WAS SERVED ON ASSESSEE ON 24 TH NOVEMBER, 2004 WHEREBY THE ASSESSEE WAS ASKED TO FILE THE DETAILS AND TO PRODUCE THE BO OKS OF ACCOUNT. THE ASSESSEE WAS ALSO REQUIRED TO SUBMIT VARIOUS DETAILS AND THE INFORMATION WAS REQUIRED TO BE SUBMITTED ON 2 ND DECEMBER, 2004. ON 2 ND DECEMBER, 2004 NONE ATTENDED. THEREAFTER, VIDE LETTER DATED 24 TH DECEMBER, 2004, THE ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHY PENALTY SHOULD NOT BE INITIATED F OR NON-COMPLIANCE OF EARLIER NOTICE AND THUS, THE PENALTY PROCEEDINGS WERE FIXED FOR 6 TH JANUARY, 2005. ON 6 TH JANUARY, 2005 IT WAS REQUESTED IN THE LETTER FILED ON BEHALF OF THE ASSESSEE THAT NO PENALTY SHOULD BE IMPOSED AND AN ADJOURNMENT WAS TAKEN FOR FILING THE DETAILS. ON SUCH REQUEST THE HEARING WAS ADJOURNED TO 12 TH JANUARY, 2005 ON WHICH DATE ALSO NONE ATTENDED ON BEHALF OF THE ASSE SSEE AND NO DETAILS WERE FILED. ON 20 TH JANUARY, 2005 A LETTER DATED 20 TH JANUARY, 2005 WAS FILED TO CONTEND THAT PENALTY SHOULD NOT BE IMPOSED AND AN A DJOURNMENT WAS SOUGHT WHICH WAS GIVEN FOR 28 TH JANUARY, 2005 ON WHICH DATE ALSO NONE ATTENDED AND NO DETAIL WAS FILED. THE ASSESSING OFFICER ISSUED LET TER DATED 11 TH JANUARY, 2005 ASKING AGAIN TO FURNISH ALL THE DETAILS BY 17 TH MARCH, 2005 AND IN RESPONSE TO THAT ALSO NO DETAILS WERE FILED. IT IS RECORDED BY THE ASSESSING OFFICER THAT AS THE MATTER WAS GOING TO BE TIME BARRED AND THE ASSESSEE WAS NOT COMING FORWARD WITH THE REQUISITE DETAILS, AGAIN, VIDE LETTER DATE D 2 ND SEPTEMBER, 2005, THE ASSESSEE WAS REQUIRED TO SUBMIT THE DETAILS AND TO PRODUCE THE COMPLETE BOOKS OF ACCOUNT AND THE MATTER WAS ADJOURNED TO 12 TH SEPTEMBER, 2005 AND IT WAS INDICATED THAT IF THE REQUISITE DETAILS ARE NOT FUR NISHED AND BOOKS OF ACCOUNT ARE NOT PRODUCED, THEN, THE ASSESSMENT WILL BE MADE EX PARTE ON MERITS. THERE WAS NO COMPLIANCE FOR THAT NOTICE ALSO. THEREAFTER, ON 5 TH OCTOBER, 2005 A SHOW CAUSE NOTICE FOR LEVY OF PENALTY WAS ISSUED FOR NON -COMPLIANCE AND A NOTICE UNDER SECTION 142(1) WAS ALSO ISSUED FIXING THE HEA RING ON 21 ST OCTOBER, 2005. ON 21 ST OCTOBER, 2005 ALSO NONE APPEARED AND NO DETAILS WE RE FILED. ON 30 TH NOVEMBER, 2005 A SHOW CAUSE NOTICE FOR LEVY OF PENA LTY WAS ISSUED FOR 7 TH DECEMBER, 2005. ON 7 TH DECEMBER, 2005 ALSO NONE ATTENDED ON BEHALF OF THE ASSESSEE. THEREAFTER SUMMONS U/S 131 OF IT ACT, 19 61 DATED 19 TH DECEMBER, 2005 WAS ISSUED ASKING THE ASSESSEE TO FURNISH ALL THE DETAILS ASKED FOR VIDE ITA NO.2749/DEL/2007 3 QUESTIONNAIRE DATE 22 ND NOVEMBER, 2004 AND PRODUCE COMPLETE BOOKS OF ACCOUNT. IT WAS STATED THAT IT WAS A TIME BARRED M ATTER AND IF NO COMPLIANCE IS MADE, THEN, IT WILL BE PRESUMED THAT ASSESSEE HAS N OTHING TO SAY IN THE MATTER. THE CASE WAS FIXED ON 3 RD JANUARY, 2006. IT HAS BEEN MENTIONED IN THE ASSESSMENT ORDER THAT ON 3 RD JANUARY, 2006 LD. AR OF THE ASSESSEE APPEARED AND SOME DETAILS WERE FILED VIDE LETTER DATED NIL A ND AN ADJOURNMENT WAS TAKEN FOR 13 TH JANUARY, 2006 FOR FILING THE REMAINING DETAILS AND TO PRODUCE BOOKS OF ACCOUNT. ON 13 TH JANUARY, 2006 NO FURTHER DETAILS WERE FILED AND BO OKS OF ACCOUNT WERE ALSO NOT PRODUCED. IT IS IN THIS MANN ER THE ASSESSING OFFICER HAS PROCEEDED TO DECIDE THE CASE OF THE ASSESSEE VIDE E X PARTE ORDER PASSED U/S 144 OF THE IT ACT. IT HAS BEEN MENTIONED IN THE AS SESSMENT ORDER THAT THE TURNOVER OF THE ASSESSEE IS RS.28,11,79,007/- OF WH ICH GP RATE WAS SHOWN AT 1.05% AND AFTER CLAIMING THE DIRECT AND INDIRECT EX PENSES, NET PROFIT HAS BEEN SHOWN AT .054%. ASSESSING OFFICER HAS MENTIONED TH AT AS ASSESSEE COULD NOT PROVE THE JUSTIFICATION OF DIRECT AND INDIRECT EXPE NSES CLAIMED IN THE TRADING ACCOUNT AND OTHER EXPENSES, A NET PROFIT RATE OF 1% IS APPLIED TO THE TOTAL SALES AND AS THE ASSESSEE HAS FAILED TO PRODUCE THE BOOKS OF ACCOUNT, HE IS SATISFIED THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME. IT IS IN THIS MANNER THE INCOME OF THE ASSESSEE HAS BEEN ESTIMATE D AT RS.28,11,790/-. 3. AN APPEAL WAS FILED BEFORE THE LD. CIT (A). FIR STLY; IT WAS CHALLENGED THAT ASSESSING OFFICER WAS WRONG IN FRAMING EX PARTE ASS ESSMENT UNDER SECTION 144. AFTER NARRATING THE DEFAULTS OF THE ASSESSEE FOR NO N-COMPLIANCE WITH VARIOUS NOTICES AS MENTIONED IN THE ASSESSMENT ORDER, THE L D. CIT (A) HAS CONCLUDED THAT THE ASSESSING OFFICER WAS JUSTIFIED IN COMPLET ING THE ASSESSMENT EX PARTE UNDER SECTION 144 OF THE ACT FOR WANT OF COMPLIANCE OF NOTICES. SO AS IT RELATES TO APPLICATION OF NET PROFIT RATE, IT WAS SUBMITTED BY THE ASSESSEE THAT ASSESSEE IS WHOLESALE DEALER IN IRON BARS, ETC. THE ASSESSING OFFICER WAS ARBITRARY IN MAKING THE BEST JUDGEMENT ASSESSMENT AND IN MAKING THE ADD ITION. IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS ACCEPTED THE GROSS P ROFIT RATE SHOWN BY THE ASSESSEE, BUT HE DID NOT ACCEPT THE NET PROFIT AND ENHANCED THE SAME ONLY ON ITA NO.2749/DEL/2007 4 ESTIMATE BASIS. A REPLY WAS FILED ON 3 RD JANUARY 2006 ALONG WITH WHICH DOCUMENTS WERE SUBMITTED. THE DETAILS OF THREE YEA RS GP AND NP RATIO WERE GIVEN. THE DETAILS OF OPENING AND CLOSING STOCK, M ONTH WISE PURCHASES AND SALES AND CARTRIDGE INVOLVED ALONG WITH DETAILS OF EXPENDITURES SUCH AS ACCOUNTING CHARGES, AUDIT FEES, BUSINESS PROMOTION EXPENSES, CONFERENCE, DIWALI EXPENSES, MONTH WISE LOADING CHARGES , MONTH WISE DETAIL OF SALARY, VEHICLE MAINTENANCE AND OTHER DETAILS WERE ALSO FIL ED. THE DETAILS OF VARIOUS BANKING ACCOUNTS WERE ALSO FILED. IT WAS SUBMITTED THAT BESIDES THAT ANOTHER LETTER WAS ALSO FILED ALONG WITH CERTAIN DETAILS SU CH AS TELEPHONE EXPENSES, GROUND RENT, OFFICE RENT, ETC. IT WAS SUBMITTED TH AT AUDIT REPORT DULY CERTIFIED WAS ALSO FILED AND THE ASSESSING OFFICER HAS COMPLETELY IGNORED THOSE DETAILS AND EVIDENCES AND HAS PASSED EX PARTE ORDER ARBITRARILY ENHANCING THE NET PROFIT. IT WAS SUBMITTED THAT THE FINDINGS OF THE ASSESSING OF FICER ARE CONTRADICTORY AS IN THE FIRST PARA THE ASSESSING OFFICER IS REFERRING T HAT LD. AR OF THE ASSESSEE HAS ATTENDED FROM TIME TO TIME AND FILED THE DETAILS WH ICH ARE PLACED ON RECORD AND IN THE SECOND PARA HE IS MENTIONING THE DEFAULTS OF TH E ASSESSEE. IT WAS SUBMITTED THAT GP AND NP RATIO FOR THE PRECEDING THREE YEARS HAVING BEEN FILED AND THE ASSESSING OFFICER WAS WRONG IN DEPARTING FROM THE E ARLIER HISTORY OF THE ASSESSEE. IT WAS SUBMITTED THAT THE EXPENSES INCUR RED BY THE ASSESSEE ARE GENUINE AND BARE MINIMUM. REFERENCE WAS MADE TO TH E DECISION OF HON'BLE SUPREME COURT IN THE CASE OF STATE OF ORISSA VS. MA HARAJA SHRI P.V. SINGH DEV 76 ITR 690 TO CONTEND THAT THE ASSESSING OFFICER IS NOT VESTED WITH ARBITRARY POWERS WHILE MAKING THE BEST JUDGEMENT. REFERENCE WAS MADE TO VARIOUS OTHER DECISIONS. CONSIDERING THESE SUBMISSIONS IT HAS BE EN OBSERVED BY LD. CIT (A) THAT ACCORDING TO WELL ESTABLISHED POSITION OF LAW THE ASSESSING OFFICER IS NOT ENTITLED TO MAKE A PURE GUESS AND MAKE AN ASSESSMEN T WITHOUT REFERRING TO ANY EVIDENCE OR ANY MATERIAL AT ALL. THE ASSESSMENT MU ST BE BASED ON SOME RELENT MATERIALS. THE ASSESSING OFFICER HAS NOT BROUGHT O UT ANY COGENT REASON OR ANY COMPARATIVE CASE IN THE SAME BUSINESS OR ANY OTHER RELEVANT MATERIAL ON RECORD TO REJECT THE BOOKS OF ACCOUNT AND APPLY THE NET PR OFIT RATE OF 1% WHICH IS PURELY ON ESTIMATE BASIS. THE ASSESSEE HAS FURNISHED THE RELEVANT DETAILS INCLUDING ITA NO.2749/DEL/2007 5 COPIES OF AUDITED ACCOUNTS, BALANCE SHEET AND PROFI T AND LOSS ACCOUNT ALONG WITH ANNEXURES, TAX AUDIT REPORT U/S 44AB, COMPARATIVE F IGURES OF GROSS PROFIT RATIO AND NET PROFIT RATIO FOR THE LAST 3 YEARS AND OTHER DETAILS. THE ASSESSING OFFICER HAS ACCEPTED THE GP RATE AS CORRECT, BUT HAS ONLY E NHANCED THE NET PROFIT RATE. THE NET PROFIT RATE IS APPLIED IN COMPARISON TO SOM E STANDARD OR OTHER SIMILAR CASES IN THE SAME LINE OF BUSINESS. APPLYING A NET PROFIT RATE MEANS THAT GROSS PROFIT RATE HAS BEEN ACCEPTED AS CORRECT AND ONLY T HE EXPENSES INCURRED IN THE REGULAR COURSE OF THE BUSINESS HAVE BEEN DOUBTED OR DISALLOWED. THE DETAILS OF SUCH EXPENSES WERE FILED DURING THE COURSE OF ASSES SMENT PROCEEDINGS AND WERE AVAILABLE ON RECORD. THESE EXPENSES WERE COMM ENSURATE WITH SIMILAR EXPENSES IN EARLIER YEARS AND, THEREFORE, THESE EX PENSES COULD NOT BE DISALLOWED IN A SUMMARY MANNER. IF THE ASSESSING O FFICER IS TO MAKE THE ASSESSMENT ON BEST JUDGEMENT BASIS, THE GUESS SHOUL D BE HONEST AND SHOULD NOT BE ARBITRARY. IT IS IN THIS MANNER THE LD. CI T (A) HAS DELETED THE ENTIRE ADDITION AND DIRECTED THE ASSESSING OFFICER TO ASSE SS THE INCOME OF THE ASSESSEE AS PER COMPUTATION OF INCOME FURNISHED BY THE ASSES SEE IN THE RETURN OF INCOME ON THE BASIS OF AUDITED ACCOUNTS AND TAX AUDIT REPO RT. THE DEPARTMENT IS AGGRIEVED WITH SUCH FINDINGS OF THE LD. CIT (A), HE NCE, HAS FILED AN APPEAL. 4. IT WAS VEHEMENTLY PLEADED BY LD. DR THAT THE ASS ESSEE HAS FAILED TO PRODUCE BOOKS OF ACCOUNT DESPITE SO MANY OPPORTUNIT IES GIVEN BY THE ASSESSING OFFICER. IT WAS SUBMITTED THAT WITHOUT PRODUCING THE BOOKS OF ACCOUNT THE DETAILS FILED BY THE ASSESSEE HAVE NO MEANING AS ASSESSING OFFICER CANNOT VERIFY THE SAME WITH REFERENCE TO BOOKS OF ACCOUNT. SHE DREW OUR ATTENTION TOWARDS PARA 2 OF THE ASSESSMENT ORDER IN WHICH THE ASSESSING OFFI CER HAS ELABORATED THE DEFAULTS OF THE ASSESSEE FOR COMPLYING WITH VARIOUS NOTICES ISSUED BY THE ASSESSING OFFICER. SHE SUBMITTED THAT SIMPLY SUBMI TTING A LETTER AND SIMPLY FILING THE SOME DETAILS IS NOT THE COMPLIANCE MADE IN RESP ONSE TO THE VARIOUS NOTICES ISSUED BY THE ASSESSING OFFICER. SHE CONTENDED THA T LD. CIT (A) WAS WRONG IN RECORDING THE FINDING THAT THE ASSESSING OFFICER DI D NOT DISTURB THE GROSS PROFIT RATE AND HAS ONLY INCREASED THE NET PROFIT RATE. T HEREFORE, THE LD. DR PLEADED ITA NO.2749/DEL/2007 6 THAT AS ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCO UNT, THE ASSESSING OFFICER WAS RIGHT IN MAKING THE BEST JUDGEMENT ASSESSMENT A ND ASSESSING THE PROFITS OF THE ASSESSEE AT 1% OF THE NET PROFIT ON THE TURNOVE R SHOWN IN THE BOOKS OF ACCOUNT. 5. ON THE OTHER HAND, IT WAS VEHEMENTLY PLEADED BY LD. AR THAT ALL THE DETAILS WERE FILED BY THE ASSESSEE IN THE LETTER DA TED 3 RD JANUARY, 2006. RELYING ON THE GP AND NP RATIO OF THE LAST THREE YEARS, IT WAS PLEADED BY LD. AR THAT THE LD. CIT (A) WAS RIGHT IN ACCEPTING THE CLAIM OF THE ASSESSEE AS THE NET PROFIT RATE SHOWN BY THE ASSESSEE WAS IN THE VICINITY OF NET PR OFIT RATE OF PRECEDING THREE YEARS. IT WAS SUBMITTED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE AUDITED AND REQUISITE DETAILS WERE FURNISHED. THEREFORE, T HE ORDER OF THE LD. CIT (A) SHOULD BE UPHELD. FURTHER RELIANCE WAS PLACED ON T HE FOLLOWING DECISIONS:- 1) BRIJ BHUSHAN LAL PRADUMAN KUMAR VS. CIT 115 ITR 524 (SC) 2) STATE OF ORISSA VS. MAHARAJA B.P. SINGH DEV 76 I TR 690 3) CIT VS. RANICHERA TEA CO. LTD. 207 ITR 979 (CAL) 4) DCIT VS. UNITOR INDUSTRIES 53 TTJ (AHM) 389. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. FROM THE READING OF THE ASSESSMENT ORDER AND THE ORDER OF THE LD. CIT (A), IT IS CLEAR THAT THE ASSE SSEE AT NO STAGE HAS PRODUCED THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER PROVID ED THE ASSESSEE SO MANY OPPORTUNITIES TO PRODUCE THE BOOKS OF ACCOUNT TO FI LE THE RELEVANT DETAILS. THE ASSESSEE HAS FAILED TO FURNISH THE BOOKS OF ACCOUNT AND ALSO FAILED TO FURNISH THE DETAILS CALLED FOR BY THE ASSESSING OFFICER. THE O NLY LETTER WHICH APPEARS TO HAVE BEEN FILED BEFORE THE ASSESSING OFFICER IS A LETTE R SUBMITTED ON 3 RD JANUARY, 2006 A COPY OF WHICH HAS BEEN GIVEN BY LD. AR AT PAGES1 TO 3. IN THE SAID LETTER THE ASSESSEE HAD GIVEN THE FIGURES OF EARLIER TWO YEARS . FOR ASSESSMENT YEAR 2001- 02 THE TURNOVER OF THE ASSESSEE IS RS.11.65 CRORE A ND GP RATIO IS 1.12% AND NP RATIO IS 0.10%. FOR ASSESSMENT YEAR 2002-03 THE TU RNOVER OF THE ASSESSEE IS ITA NO.2749/DEL/2007 7 RS.14.94 CRORE AND GP RATIO IS 0.96% AND NP RATIO I S 0.103%. FOR THE YEAR UNDER CONSIDERATION, THE TURNOVER OF THE ASSESSEE I S RS.28.11 CRORE AND GP RATIO IS 01.05% AND NP RATIO IS 0.054%. THOUGH CERTAIN D ETAILS HAVE BEEN MENTIONED TO BE FURNISHED, BUT AS POINTED OUT EARLIER, IT IS CLEAR THAT BOOKS OF ACCOUNT WERE NOT PRODUCED. THERE IS SUBSTANCE IN THE CONTENTION OF LD. DR THAT IN THE ABSENCE OF BOOKS OF ACCOUNT SUCH DETAILS CANNOT BE VERIFIED . SIMPLY THAT THE BOOKS OF ACCOUNT ARE AUDITED BY AN AUDITOR IS NOT SUFFICIENT TO VERIFY THE CORRECTNESS OF THE BOOKS OF ACCOUNT UNLESS THE BOOKS OF ACCOUNT ARE FU RNISHED. MOREOVER, IN THE REPLY ITSELF IT HAS BEEN SUBMITTED BY THE ASSESSEE THAT AUDITOR HAS GIVEN A REMARK THAT NO STOCK REGISTER WAS MAINTAINED. IF STOCK RE GISTER IS NOT MAINTAINED, THEN, HOW THE AVAILABILITY OF STOCK AT PARTICULAR DATE C AN BE DETERMINED TO VERIFY THE CORRECTNESS OF THE BOOKS OF ACCOUNT. THEREFORE, IT CANNOT BE SAID THAT THE AUDITED ACCOUNTS ITSELF ARE SUFFICIENT TO PROVE THE CORRECT NESS OF THE PROFIT SHOWN BY THE ASSESSEE. WHAT HAS BEEN DONE BY THE LD. CIT (A) IS THAT HE HAS ACCEPTED THE BOOK RESULTS OF THE ASSESSEE DESPITE THE FACT THAT THE BOOKS OF ACCOUNT WERE NEVER PRODUCED EITHER BEFORE THE ASSESSING OFFICER OR BEFORE HIM. LD. CIT (A) ALSO APPEARS TO HAVE FELL IN ERROR WHILE STATING TH AT THE ASSESSING OFFICER DID NOT DISPUTE OR DISTURB THE GP RATE AS SUCH FINDINGS OF LD. CIT (A) ARE CONTRARY TO THE OBSERVATIONS OF ASSESSING OFFICER IN PARA 4. THE A SSESSING OFFICER HAS NEVER STATED THAT HE IS ACCEPTING THE GP RATE SHOWN BY TH E ASSESSEE. IT HAS ALSO NOT BEEN MADE CLEAR THAT IN PRECEDING TWO YEARS THE BOO K RESULTS SHOWN BY THE ASSESSEE WERE WHETHER EXAMINED BY THE ASSESSING OFF ICER AND DETERMINED BY HIM UNDER SECTION 143(3) OR IT WAS JUST ACCEPTANCE OF THE RETURN OF THE ASSESSEE UNDER SECTION 143(1). THEREFORE, EARLIER RESULTS CANNOT BE AN INDICATION TO ACCEPT THE CLAIM OF THE ASSESSEE UNLESS THE ASSESSE E IS ABLE TO SUBSTANTIATE THE RESULTS OF PRESENT YEAR WITH REFERENCE TO THE BOOKS OF ACCOUNT MAINTAINED BY HIM. THE ABSENCE OF BOOKS OF ACCOUNT MAKES THE AUDIT REP ORT MEANINGLESS AS THE SAME CANNOT BE VERIFIED. IN OUR OPINION, LD. CIT ( A) HAS COMMITTED AN ERROR TO ACCEPT THE CLAIM OF THE ASSESSEE IN TOTO IN DIRECTI NG THE ASSESSING OFFICER TO ACCEPT THE BOOK RESULTS OF THE ASSESSEE WITHOUT EXA MINING THE ASPECT THAT WHETHER OR NOT THE ASSESSEE WAS HAVING THE BOOKS O F ACCOUNT AND WHETHER THEY ITA NO.2749/DEL/2007 8 COULD BE RELIED UPON IN THE ABSENCE OF THEIR EXISTE NCE. THERE COULD BE NO DOUBT TO THE LEGAL PROPOSITION THAT IF THE ASSESSING OFFI CER HAS TO PROCEED ON THE BASIS OF BEST JUDGEMENT ASSESSMENT THE ESTIMATE TO BE MAD E BY THE ASSESSING OFFICER MUST BE HONEST AND FAIR. BUT, AT THE SAME TIME, IF THE ASSESSEE IS NOT ABLE TO SUBMIT THE BOOKS OF ACCOUNT FOR VERIFICATION, THEN, THE BOOK RESULTS ON THE FACE OF IT CANNOT ALSO BE ACCEPTED. DURING THE COURSE OF H EARING, IT WAS VEHEMENTLY SUBMITTED BY LD. AR THAT IF THE MATTER IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER, SOME DIRECTIONS MUST BE GIVEN TO THE ASSES SING OFFICER TO MAKE THE FAIR ESTIMATE AS PER PRINCIPLES LAID DOWN IN THE AFOREME NTIONED DECISION RELIED UPON BY HIM. THERE CANNOT BE ANY DISPUTE TO THIS PROPOSI TION THAT IF THE ASSESSMENT IS TO BE BASED ON BEST JUDGEMENT THE ESTIMATE SHOULD B E HONEST AND FAIR AS HELD IN THE AFOREMENTIONED DECISIONS AND PARTICULAR REFEREN CE CAN BE MADE TO THE DECISION OF PRIVY COUNCIL IN THE CASE OF CIT VS. LA KSHMI NARAYAN BADRI DAS 5 ITR 170 (PC) RELYING ON WHICH HON'BLE SUPREME COURT IN THE AFOREMENTIONED DECISION IN THE CASE OF BRIJ BHUSHAN LAL PRADUMAN K UMAR VS. CIT (SUPRA) HAVE HELD THAT AUTHORITY MAKING A BEST JUDGEMENT ASSESSM ENT MUST MAKE AN HONEST AND FAIR ESTIMATE OF INCOME OF THE ASSESSEE AND THO UGH THE ARBITRARINESS CANNOT BE AVOIDED IN SUCH ESTIMATE, THE SAME MUST NOT BE C APRICIOUS, BUT SHOULD HAVE A REASONABLE NEXUS TO THE AVAILABLE MATERIAL AND THE CIRCUMSTANCES OF THE CASE. ACCORDING TO THE FACTS OF PRESENT CASE WHICH HAVE B EEN DISCUSSED ABOVE IT IS CLEAR THAT AT NO POINT OF TIME THE ASSESSEE HAS PRO DUCED THE BOOKS OF ACCOUNT AND LD. CIT (A) WITHOUT EXAMINING THE BOOKS OF ACCO UNT HAS ACCEPTED THE BOOK RESULTS, WHICH ACCORDING TO OUR OPINION IS NOT JUST IFIED IN LAW. WE ARE OF THE OPINION THAT IT WILL MEET THE END OF JUSTICE IF THE MATTER IS RESTORED TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO FRAME DENOVO ASSESSMENT. THE ASSESSING OFFICER WILL GIVE A REASONABLE OPPORTUNITY OF HEAR ING TO THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT AND IF THE ASSESSEE DOES NOT P RODUCE THE BOOKS OF ACCOUNT THEN ASSESSING OFFICER WILL VERIFY AND ASCERTAIN TH E CORRECTNESS OF THE DETAILS FILED BY THE ASSESSEE WITH THE AFOREMENTIONED LETTER DATE D 03.01.2006. AFTER DOING SO HE MAY, IF PERMITTED BY LAW, CAN FRAME THE BEST JUD GEMENT ASSESSMENT AS PER ITA NO.2749/DEL/2007 9 PRINCIPLES LAID DOWN IN THE AFOREMENTIONED DECISION S RELIED UPON BY LD. LD. AR AND IN ACCORDANCE WITH LAW. WE DIRECT ACCORDINGLY. 7. THE ORDER PASSED BY THE LD. CIT (A) IS SET ASIDE AND ASSESSMENT IS RESTORED BACK TO THE FILE OF ASSESSING OFFICER TO B E FRAMED DENOVO AS PER DIRECTIONS GIVEN ABOVE. 8. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS ALLOWED IN THE MANNER AFORESAID. . 9. THE ORDER PRONOUNCED IN THE OPEN COURT ON 21.08. 2009. [A.K. GARODIA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 21.08.2009. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES