1
\nREPORTABLE
\nIN THE SUPREME COURT OF INDIA
\nCIVIL APPELLATE JURISDICTION
\nCIVIL APPEAL NO. 6110 OF 2009
\nBasir Ahmed Sisodiya …..Appellant
\nversus
\nThe Income Tax Officer ..\u2026Respondent
\nJ U D G M E N T
\nA.M. Khanwilkar, J.
\n1. This appeal takes exception to the final judgment and order
\ndated 21.8.2008 passed by the High Court of Judicature for
\nRajasthan at Jodhpur (for short, \u201cthe High Court\u201d) in Income Tax
\nAppeal No. 69 of 2006, whereby the appellant\u2019s appeal was
\ndismissed and the order of Income Tax Appellate Tribunal,
\nJodhpur Bench (for short, \u2018the ITAT\u2019) came to be upheld.
\n2. In short, the appellant\/assessee was served with a notice
\nunder Section 143(2) of the Income Tax Act, 1961 (for short,
\n\u20181961 Act\u2019) by the Assessing Officer (for short, \u2018Officer\u2019) for the
\nassessment year 19981999,
\npursuant to which an assessment
\n2
\norder was passed on 30.11.2000. This appeal involves limited
\nchallenge to certain addition made under the heads \u201c
\nTrading
\nAccount\u201d and \u201cCredits\u201d in the assessment order. The Officer,
\ninter alia, while relying on the Balance Sheet and the books of
\naccount, took note of the credits amounting to Rs.2,26,000\/(
\nRupees two lakhs twentysix
\nthousand only). The Officer treated
\nthat amount as \u201cCash credits\u201d under Section 68 of the 1961 Act
\nand added the same in declared income of the assessee (for short,
\n\u2018second addition\u2019). The Officer then proceeded to compute the
\nincome of the assessee for the concerned assessment year. The
\nrelevant part of the computation is mentioned below: \u201c
\nCredits:
\nOn examining the balancesheet
\nand accounts books
\nof assessee, it is apparent that the assessee has shown
\ncredit amount of Rs.2,26,000\/in
\nthe names of the following
\n15 persons:
\n\u2026 \u2026 \u2026
\nAccordingly, sufficient time and opportunity was
\ngranted to prove the veracity of credits of Rs. 2,26,000\/as
\nshown by assessee. However false\/wrong particulars or
\nexplanation were submitted with respect to credits shown by
\nassessee. In this manner, the credits of Rs.2,26,000\/shown
\nin the name of 15 persons, is not correct and any correct
\nproof\/evidence has not been produced by assessee with
\nrespect to income of creditors and source of income. Besides
\nthis, the credits of Rs.2,26,000\/as
\nshown in the name of 15
\npersons is held as unexplained under Section 68 and added
\nin declared income of assessee.
\nAccordingly, the computation of income of assessee for
\nassessment year 199899
\nis as follows:
\n3
\nIncome shown in the Returns 87500\/1.
\nDisallowed deduction U\/s.24(1)
\nas per discussion 7200\/2.
\nAdditions in gross profit 10000\/3.
\nAdditions on the basis of less
\nHousehold expenses withdrawals 18000\/4.
\nUnexplained credits as per discussions 226000\/261200\/
\nTotal
\ntaxable Income Tax 348700\/Assessment
\nwas made. Necessary forms were issued. Notice
\nbe issued separately for imposition of penalty under Section
\n272(1)(c).\u201d
\n3. Aggrieved, the appellant\/assessee preferred an appeal before
\nthe Commissioner of Income Tax (Appeals), Jodhpur (for short,
\n\u2018CIT(A)\u2019). The appeal was partly allowed vide order dated
\n9.1.2003. However, as regards the Trading Account and Credits
\nin question, the CIT(A) upheld the assessment order.
\n4. The appellant\/assessee then preferred further appeal to the
\nITAT. Having noted the issues and objections raised by the
\nDepartment and the appellant\/assessee, the ITAT partly allowed
\nthe appeal vide order dated 4.11.2004. However, the order
\nrelating to the second addition (under consideration in the
\npresent civil appeal) regarding credits of Rs.2,26,000\/(
\nRupees
\ntwo lakhs twentysix
\nthousand only) came to be upheld.
\n5. The appellant\/assessee then filed an appeal before the High
\nCourt under Section 260A of the 1961 Act. The appeal was
\n4
\nadmitted on 27.4.2006 on the following substantial question of
\nlaw: \u2018\u2018
\nWhether claim to purchase of goods by the assessee could
\nbe dealt with under Section 68 of the Income Tax as a cash
\ncredit, by placing burden upon the assessee to explain that
\nthe purchase price does not represent his income from the
\ndisclosed sources?\u2019\u2019
\nThe principal argument of the appellant\/assessee was that once
\nthe books of account have been rejected and an assessment order
\nhas been passed, the same books of account cannot be then
\nrelied upon by the Officer to impose consequent addition(s).
\n6. The High Court dismissed the appeal vide impugned
\njudgment and order dated 21.8.2008, as being devoid of merits.
\nThe High Court opined that the amount shown as credits was
\nnothing but bogus entries and was justly added to the income of
\nthe appellant\/assessee. The Court also noted other reasons to
\ndismiss the appeal. Relevant part of the judgment is reproduced
\nhereunder: \u201c\u201c
\nIn our view, none of the submissions advanced by the
\nlearned counsel for the appellant has force. Learned counsel
\nhas proceeded on the basic assumption, about the factum of
\npurchase of goods, having accepted by the authorities below,
\nwhile the categoric finding of the Assessing Officer, which
\nhas not been disturbed in appeal is, that regarding this
\npurchase from unregistered dealer assessee was called upon
\nduring the course of assessment proceedings to prove the
\ncorrectness and genuineness of his claim, but he completely
\nfailed, and therefore, the purchase cannot be accepted. In
\n5
\nour view, this finding, rather is clear and categoric, that
\nno purchase was affected by the assessee, and amount
\nwas shown in a bogus manner, shown to be standing to
\ncredit of alleged purchasers, who could not be shown, to
\nbe either existent, or to be the creditors of the assessee,
\nmuch less for the consideration alleged by the assessee.
\nIt is clear from the assessment orders and the finding
\naffirmed in the appeals, that opportunity was given to
\nthe assessee to substantiate the genuineness of the
\nalleged transactions, but the assessee failed, and efforts
\nmade by the Revenue, to investigate the correctness of
\nthe alleged transaction also could not yield any results,
\nin favour of the assessee.
\nThus it is clear, that the amounts shown to be
\nstanding to the credit of the persons, which had been added
\nto the income of the assessee, was clearly a bogus entry, in
\nthe sense that it was only purportedly shown to be the
\namount standing to the credit of the fifteen persons,
\npurportedly on account of assessee having purchased goods
\nno credit from them, while since no goods were purchased,
\nthe amount did represent income of the assessee from
\nundisclosed sources, which the assessee had only brought
\non record (books of accounts), by showing to be the amount
\nbelonging to the purported sellers, and as the liability of the
\nassessee.
\nThat being the position, the contention about
\nimpermissibility of making addition under this head, in view
\nof addition of Rs.10,000\/having
\nbeen made in trading
\naccount, cannot be accepted, as books of accounts has
\nbeen rejected for the purpose of assessing the gross
\nprofit, as the gross profit shown in the books has not
\nbeen accepted, on the ground, that the assessee had not
\nmaintained day to day stock registers, nor has produced
\nor maintained other necessary vouchers, but then, if
\nthose books of accounts did disclose certain other
\nassets, which are wrongly shown to be liabilities, and for
\nacquisition of which the assessee did not show the
\nsource, it cannot be said that the Assessing Officer was
\nnot entitled to use the books of accounts for this
\npurpose.\u201d
\n(emphasis supplied)
\n6
\n7. The appellant\/assessee in the present civil appeal has
\nreiterated the argument that the Officer, having made the
\naddition under Section 144 of the 1961 Act being \u201cbest judgment
\nassessment\u201d, had invoked powers under subSection
\n(3) of
\nSection 145. For, assessment under Section 144 is done only if
\nthe books are rejected. In that case, the same books cannot be
\nrelied upon to impose subsequent additions, as has been done in
\nthis case under Section 68 of the 1961 Act. The
\nappellant\/assessee adopted a threepronged
\nplea in support of
\nthe above contention; First, that assessment order refers to
\nSection 145(2) of the 1961 Act. It should have mentioned Section
\n145(3) of the 1961 Act. For that, the appellant\/assessee relies on
\nthe amendment of the 1961 Act which came into effect from
\n1.4.1997. It is urged that Section 145(2) prior to 1.4.1997 (preamendment)
\nis akin to Section 145(3) post 1.4.1997 (postamendment).
\nIt is thus urged that the
\nDepartment committed error in mentioning Section 145(2) and
\nnot Section 145(3); Second, that the assessment order in
\nreference to the first addition has incorrectly mentioned the term
\n\u201cnot\u201d. According to the appellant\/assessee, the prefix of the
\nparagraph and the language used, makes it abundantly clear that
\n7
\nthe Department had relied upon Section 145(3) of the 1961 Act to
\nimpose the addition. The appellant\/assessee has also placed
\nreliance on the Hindi version of the assessment order to buttress
\nthis submission; Third, that the assessment was made under
\nSection 144 as the same refers to Section 145(3). Under Section
\n144, the Officer has to make \u201cbest judgment assessment\u201d. The
\nappellant\/assessee urges that the purport of the stated provision
\nis that the Officer reassesses
\nthe entire accounts and makes the
\nassessment of total income and thereafter computes the income
\ntax liability. Resultantly, the Officer (after rejecting the books of
\naccount) cannot then rely on the same books of account to make
\nany subsequent addition(s). The appellant\/assessee also argues
\nthat the approach adopted by the Officer would have the effect of
\ntaxing the same transaction twice.
\n8. To buttress the aforesaid contentions, reliance is placed on
\nMaddi Sudarsanam Oil Mills Co. v. Commissioner of IncomeTax,
\nHyderabad and Andhra1; Commissioner of Income Tax
\nv. Aggarwal Engg. Co. (Jal.)2 and Commissioner of Income
\nTax vs. G.K. Contractors3.
\n1 [1959] 37 ITR 369 (AP)
\n2 (2006) 206 CTR (P&H) 648
\n3 (2009) 19 DTR (Raj) 305 (IT Appeal No. 13\/2009, decided on 28.1.2009)
\n8
\n9. Per contra, the respondent urged that the assumption of the
\nappellant\/assessee that the assessment order had rejected the
\nbooks of accounts under Section 145(3) of the 1961 Act is
\npreposterous. In that, the assessment in question came to be
\nmade under Section 143(3) of the 1961 Act. Thus, the Officer
\nwas justified in relying upon the said books for making
\naddition(s). The respondent would also urge that while imposing
\nthe first addition, the assessment order does not reject the books
\nof accounts, but only that part which pertained to assessing the
\ngross profit, as the assessee had not maintained day to day stock
\nregisters, nor had produced or maintained other necessary
\nvouchers while determining the gross profits. Additionally, the
\nrespondent would also urge that the amount mentioned under
\n\u201cCredits\u201d in the Balance Sheet is incorrect and qualifies as \u201cCash
\nCredits\u201d under Section 68 of the 1961 Act, as stated in the
\nassessment order. Indisputably, the Officer gave several
\nopportunities to the appellant\/assessee to prove the authenticity
\nof the entries in question. As a matter of fact, summon notices
\nwere issued to the named fifteen creditors, but no
\nevidence\/explanation was forthcoming. The finding of fact so
\nrecorded by the Officer is unexceptionable. The respondent thus
\n9
\ncontends that the finding relating to the cash credits, does not
\ngive rise to any substantial question of law.
\n10. Before we proceed to analyze the rival submissions, we need
\nto advert to I.A. No. 57442\/2011 for permission to bring on
\nrecord subsequent events. By this application, the
\nappellant\/assessee has placed on record an order passed by the
\nCIT(A) dated 13.1.2011, which considered the challenge to the
\norder passed by the IncomeTax
\nOfficer under Section 271(1)(c)
\ndated 17.11.2006 qua the appellant\/assessee for the selfsame
\nassessment year 19981999.
\nThe IncomeTax
\nOfficer had passed
\nthe said order as a consequence of the conclusion reached in the
\nassessment order which had by then become final upto the stage
\nof ITAT vide order dated 27.4.2006 to
\nthe effect that the stated
\npurchases by the appellant\/assessee from unregistered dealers
\nwere bogus entries effected by the appellant\/assessee.
\nResultantly, the penalty proceedings under Section 271 were
\ninitiated by the Officer. That order, however, has now been set
\naside by the appellate authority [CIT(A)] in the appeal preferred by
\nthe appellant\/assessee, vide order dated 13.1.2011 with a finding
\nthat the appellant\/assessee had not made any concealment of
\n10
\nincome or furnished inaccurate particulars of income for the
\nconcerned assessment year. As a consequence of the decision of
\nthe appellate authority, even criminal proceedings initiated
\nagainst the appellant\/assessee have been dropped\/terminated
\nand the appellant\/assessee stands acquitted of the charges
\nunder Section 276(C)(D)(1)(2) of the 1961 Act vide judgment and
\norder dated 6.6.2011 passed by the Court of Additional Chief City
\nMagistrate (Economic Offence), Jodhpur City in proceedings No.
\n262\/2005. Reverting back to the decision of the appellate
\nauthority [CIT(A)], vide order dated 13.1.2011, it considered the
\nexplanation offered by the appellant\/assessee in the penalty
\nproceedings concerning assessment year 19981999
\nand went on
\nto observe thus: \u201c
\n17. During the course of appellate proceedings, the
\nappellant filed an application under Rule 46A vide letter
\ndated 16.10.2008 and the same was sent to the ITO, Ward1,
\nMakrana vide this office letter dated 28.1.2009 and
\n1.12.2010 to submit remand report after examination of
\nadditional evidences. Along with the application under Rules
\n46A, the appellant filed affidavits from 13 creditors, sales
\nTax Order for the Financial Year 9798
\nshowing purchases
\nfrom unregistered dealer to the tune of Rs.2,28,900\/,
\ncash
\nvouchers duly signed on the revenue stamp for receipt of
\npayment by the unregistered dealers and copy of Rasan
\nCard\/Voter Identity Card to show identity of the
\nunregistered dealer. The Assessing Officer recorded
\nstatements of 12 unregistered dealers out of 13. In the report
\ndated 22.12.2010, he mentioned that statements of above 12
\npersons were recorded on 15\/16.12.2010 and in respect of
\nidentify, the unregistered filed photo copies of their Voter
\n11
\nIdentity Cards and all of them have admitted that they
\nhave sold marble on credit basis to Sh. Bashir Ahmed
\nSisodia, the appellant, during the Financial Year 9798
\nand received payments after two or three years. However,
\nhe observed that none of them have produced any evidence
\nin support of their statement since all are petty unregistered
\ndealers of marble and doing small business and therefore, no
\nbooks of account were maintained. Some of them have stated
\nthat they were maintaining small dairies in the relevant
\nperiod of time but they could not preserve old dairies. Some
\nof them have stated that they have put their signature on the
\nvouchers on the date of transactions. It is therefore,
\nobserved that the Assessing Officer has neither doubted
\ntheir identity nor any adverse comments in respect of
\npurchase of marble slabs in the Financial Year relevant
\nat AY 9899
\nhas given in the remand report.
\nxxx xxx xxx
\n19. In respect of addition of Rs.2,26,000\/,
\nit would be
\npertinent to note here that there is no denial of
\npurchase of marble slabs worth Rs.4,78,900\/and
\nsale of
\ngoods worth Rs.3,57,463\/and
\ndisclose of closing stock
\nof Rs.2,92,490\/as
\ndisclosed in the trading account for
\nthe year ended on 31.3.98.
\n\u2026\u2026\u2026\u2026\u2026.
\nWithout purchases of marbles, there could not have been
\nsale and disclosure of closing stock in the trading account
\nand it suggests that the appellant must have purchased
\nmarble slabs from unregistered dealers.
\n\u2026\u2026\u2026\u2026\u2026.
\nThe explanation given by the appellant in respect of
\npurchases from the unregistered dealer and their
\ngenuineness are substantiated by filing of affidavits,
\nproducing before the Assessing Officer in the course of
\nremand report and the Assessing Officer did not find any
\nobjectionable in respect identity of the unregistered
\ndealers and claim made for sale of marble slabs to the
\nappellant in the Financial Year relevant to AY 9899.
\n\u2026\u2026\u2026\u2026..
\nThus, there was no justification not to accept the purchase
\nmade from unregistered dealers. If such an addition is made,
\nit would give unreasonable rate of profit. The vouchers in
\n12
\nrespect of purchases made from unregistered dealers were
\nproduced by the appellant.\u201d
\n(emphasis supplied)
\nFinally, in paragraph 20, the appellate authority observed thus: \u2018\u2018
\n20. Under the above facts and circumstances, I am of the
\nview that there was no either concealment of income or
\nfurnishing any inaccurate particulars of income and
\naccordingly, the penalty order dated 17.11.2006 passed by
\nthe Assessing Officer is cancelled. The grounds of appeal
\nallowed.\u2019\u2019
\nNotably, the appellant\/assessee has asserted in paragraph 2 of
\nthe application (I.A. No. 57442\/2011) that consequent to the
\norder passed by the appellate authority dated 13.1.2011, the
\nDepartment has refunded penalty amount of Rs.98,153\/(
\nRupees ninetyeight
\nthousand one hundred fiftythree
\nonly)
\nalongwith interest to the appellant\/assessee. That means the
\nDepartment has allowed the said order dated 13.1.2011 to
\nbecome final.
\n11. We have heard learned senior counsel, Dr. Manish Singhvi
\nand Mr. K. Radhakrishnan appearing for the appellant and
\nrespondent, respectively.
\n12. Before dissecting the rival submissions, we deem it apposite
\nto reproduce the relevant provisions as applicable at the relevant
\ntime for assessment year 19981999
\nas below;
\n\u201cAssessment
\n13
\n143. (1) (a) Where a return has been made under section
\n139, or in response to a notice under subsection
\n(1) of
\nsection 142,(
\ni) if any tax or interest is found due on the basis of
\nsuch return, after adjustment of any tax
\ndeducted at source, any advance tax paid and
\nany amount paid otherwise by way of tax or
\ninterest, then, without prejudice to the
\nprovisions of subsection
\n(2), an intimation shall
\nbe sent to the assessee specifying the sum so
\npayable, and such intimation shall be deemed to
\nbe a notice of demand issued under section 156
\nand all the provisions of this Act shall apply
\naccordingly; and
\n(ii) if any refund is due on the basis of such return,
\nit shall be granted to the assessee:
\nProvided that in computing the tax or interest payable by, or
\nrefundable to, the assessee, the following adjustments shall
\nbe made in the income or loss declared in the return,
\nnamely:(
\ni) any arithmetical errors in the return, accounts
\nor documents accompanying it shall be rectified;
\n(ii) any loss carried forward, deduction, allowance
\nor relief, which, on the basis of the information
\navailable in such return, accounts or
\ndocuments, is prima facie admissible but which
\nis not claimed in the return, shall be allowed;
\n(iii) any loss carried forward, deduction, allowance
\nor relief claimed in the return, which, on the
\nbasis of the information available in such return,
\naccounts or documents, is prima facie
\ninadmissible, shall be disallowed:
\nProvided further that where adjustments are made under
\nthe first proviso, an intimation shall be sent to the assessee,
\nnotwithstanding that no tax or interest is found due from
\nhim after making the said adjustments:
\nProvided also that an intimation for any tax or interest due
\nunder this clause shall not be sent after the expiry of two
\nyears from the end of the assessment year in which the
\nincome was first assessable.
\n(b) Where as a result of an order made under subsection
\n(3) of this section or section 144 or section 147 or section
\n14
\n154 or section 155 or section 250 or section 254 or section
\n260 or section 262 or section 263 or section 264, or any
\norder of settlement made under subsection
\n(4) of section
\n245D relating to any earlier assessment year and passed
\nsubsequent to the filing of the return referred to in clause
\n(a), there is any variation in the carry forward loss,
\ndeduction, allowance or relief claimed in the return, and as a
\nresult of which,(
\ni) if any tax or interest is found due, an intimation
\nshall be sent to the assessee specifying the sum
\nso payable, and such intimation shall be deemed
\nto be a notice of demand issued under section
\n156 and all the provisions of this Act shall apply
\naccordingly, and
\n(ii) if any refund is due, it shall be granted to the
\nassessee:
\nProvided that an intimation for any tax or interest due
\nunder this clause shall not be sent after the expiry of four
\nyears from the end of the financial year in which any such
\norder was passed.
\n(c) Where the assessee is a member of an association of
\npersons or body of individuals and as a result of the
\nadjustments made under the first proviso to clause (a) of
\nsubsection
\n(1) in the income or loss declared in the return
\nmade by the association or body, as the case may be, or as a
\nresult of an order made under subsection
\n(3) of this section
\nor section 144 or section 147 or section 154 or section 155
\nor subsection
\n(1) or subsection
\n(2) or subsection
\n(3) or
\nsubsection
\n(5) of section 185 or subsection
\n(1) or subsection
\n(2) of section 186 or section 250 or section 254 or
\nsection 260 or section 262 or section 263 or section 264, or
\nany order of settlement made under subsection
\n(4) of
\nsection 245D, passed subsequent to the filing of the return
\nreferred to in clause (a), there is any variation in his share in
\nthe income or loss of the association or body, as the case
\nmay be, or in the manner of inclusion of his share in the
\nreturned income, then,(
\ni) if any tax or interest is found due, an intimation
\nshall be sent to the assessee specifying the sum
\nso payable, and such intimation shall be deemed
\nto be a notice of demand issued under section
\n156 and all the provisions of this Act shall apply
\naccordingly, and
\n15
\n(ii) if any refund is due, it shall be granted to the
\nassessee:
\nProvided that an intimation for any tax or interest due
\nunder this clause shall not be sent after the expiry of four
\nyears from the end of the financial year in which any such
\nadjustments were made or any such order was passed.
\n(1A) (a) Where as a result of the adjustments made
\nunder the first proviso to clause (a) of subsection
\n(1),(
\ni) the income declared by any person in the return
\nis increased; or
\n(ii) the loss declared by such person in the return is
\nreduced or is converted into income,
\nthe Assessing Officer shall,(
\nA) in a case where the increase in income under
\nsubclause
\n(i) of this clause has increased the
\ntotal income of such person, further increase the
\namount of tax payable under subsection
\n(1) by
\nan additional incometax
\ncalculated at the rate
\nof twenty per cent on the difference between the
\ntax on the total income so increased and the tax
\nthat would have been chargeable had such total
\nincome been reduced by the amount of
\nadjustments and specify the additional incometax
\nin the intimation to be sent under subclause
\n(i) of clause (a) of subsection
\n(1);
\n(B) in a case where the loss so declared is reduced
\nunder subclause
\n(ii) of this clause or the
\naforesaid adjustments have the effect of
\nconverting that loss into income, calculate a
\nsum (hereinafter referred to as additional
\nincometax)
\nequal to twenty per cent of the tax
\nthat would have been chargeable on the amount
\nof the adjustments as if it had been the total
\nincome of such person and specify the additional
\nincometax
\nso calculated in the intimation to be
\nsent under subclause
\n(i) of clause (a) of subsection
\n(1);
\n(C) where any refund is due under subsection
\n(1),
\nreduce the amount of such refund by an amount
\nequivalent to the additional incometax
\ncalculated under subclause
\n(A) or subclause
\n(B), as the case may be.
\n16
\n(b) Where as a result of an order under subsection
\n(3) of
\nthis section or section 154 or section 250 or section 254 or
\nsection 260 or section 262 or section 263 or section 264, the
\namount on which additional incometax
\nis payable under
\nclause (a) has been increased or reduced, as the case may
\nbe, the additional incometax
\nshall be increased or reduced
\naccordingly, and,(
\ni) in a case where the additional incometax
\nis
\nincreased, the Assessing Officer shall serve on
\nthe assessee a notice of demand under section
\n156;
\n(ii) in a case where the additional incometax
\nis
\nreduced, the excess amount paid, if any, shall be
\nrefunded.
\n(1B) Where an assessee furnishes a revised return under
\nsubsection
\n(5) of section 139 after the issue of an
\nintimation, or the grant of refund, if any, under subsection
\n(1) of this section, the provisions of subsections
\n(1) and (1A)
\nof this section shall apply in relation to such revised return
\nand(
\ni) the intimation already sent for any incometax,
\nadditional incometax
\nor interest shall be
\namended on the basis of the said revised return
\nand where any amount payable by way of
\nincometax,
\nadditional incometax
\nor interest
\nspecified in the said intimation has already been
\npaid by the assessee then, if any such
\namendment has the effect of(
\na) enhancing the amount already paid, the
\nintimation amended under this clause
\nshall be sent to the assessee specifying the
\nexcess amount payable by him and such
\nintimation shall be deemed to be a notice
\nof demand issued under section 156 and
\nall the provisions of this Act shall apply
\naccordingly;
\n(b) reducing the amount already paid, the
\nexcess amount paid shall be refunded to
\nthe assessee;
\n(ii) the amount of the refund already granted shall
\nbe enhanced or reduced on the basis of the said
\nrevised return and where the amount of refund
\nalready granted is17
\n(a) enhanced, only the excess amount of
\nrefund due to the assessee shall be paid to
\nhim;
\n(b) reduced, the excess amount so refunded
\nshall be deemed to be the tax payable by
\nthe assessee and an intimation shall be
\nsent to the assessee specifying the amount
\nso payable, and such intimation shall be
\ndeemed to be a notice of demand issued
\nunder section 156 and all the provisions of
\nthis Act shall apply accordingly:
\nProvided that an assessee, who has furnished a revised
\nreturn under subsection
\n(5) of section 139 after the service
\nupon him of the intimation under subsection
\n(1) of this
\nsection, shall be liable to pay additional incometax
\nin
\nrelation to the adjustments made under the first proviso to
\nclause (a) of subsection
\n(1) and specified in the said
\nintimation, whether or not he has made the said
\nadjustments in the revised return.
\n(2) Where a return has been made under section 139, or
\nin response to a notice under subsection
\n(1) of section 142,
\nthe Assessing Officer shall, if he considers it necessary or
\nexpedient to ensure that the assessee has not understated
\nthe income or has not computed excessive loss or has not
\nunderpaid
\nthe tax in any manner, serve on the assessee a
\nnotice requiring him, on a date to be specified therein, either
\nto attend his office or to produce, or cause to be produced
\nthere, any evidence on which the assessee may rely in
\nsupport of the return:
\nProvided that no notice under this subsection
\nshall be
\nserved on the assessee after the expiry of twelve months
\nfrom the end of the month in which the return is furnished.
\n(3) On the day specified in the notice issued under subsection
\n(2), or as soon afterwards as may be, after hearing
\nsuch evidence as the assessee may produce and such other
\nevidence as the Assessing Officer may require on specified
\npoints, and after taking into account all relevant material
\nwhich he has gathered, the Assessing Officer shall, by an
\norder in writing, make an assessment of the total income or
\nloss of the assessee, and determine the sum payable by him
\non the basis of such assessment.
\n(4) Where a regular assessment under subsection
\n(3) of
\nthis section or section 144 is made,18
\n(a) any tax or interest paid by the assessee under
\nsubsection
\n(1) shall be deemed to have been
\npaid towards such regular assessment;
\n(b) if no refund is due on regular assessment or the
\namount refunded under subsection
\n(1) exceeds
\nthe amount refundable on regular assessment,
\nthe whole or the excess amount so refunded
\nshall be deemed to be tax payable by the
\nassessee and the provisions of this Act shall
\napply accordingly.
\n(5) The provisions of this section as they stood
\nimmediately before their amendment by the Direct Tax Laws
\n(Amendment) Act, 1987 (4 of 1988), shall apply to and in
\nrelation to any assessment for the assessment year
\ncommencing on the 1st day of April, 1988, or any earlier
\nassessment year and references in this section to the other
\nprovisions of this Act shall be construed as references to
\nthose provisions as for the time being in force and applicable
\nto the relevant assessment year.
\nExplanation.An
\nintimation sent to the assessee under subsection
\n(1) or subsection
\n(1B) shall be deemed to be an
\norder for the purposes of sections 246 and 264.
\nBest judgment assessment.
\n144. (1) If any person\u2014
\n(a) fails to make the return required under subsection
\n(1) of section 139 and has not made a
\nreturn or a revised return under subsection
\n(4)
\nor subsection
\n(5) of that section, or
\n(b) fails to comply with all the terms of a notice
\nissued under subsection
\n(1) of section 142 or
\nfails to comply with a direction issued under
\nsubsection
\n(2A) of that section, or
\n(c) having made a return, fails to comply with all
\nthe terms of a notice issued under subsection
\n(2) of section 143,
\nthe Assessing Officer, after taking into account all
\nrelevant material which the Assessing Officer has
\ngathered, shall, after giving the assessee an opportunity
\nof being heard, make the assessment of the total income
\nor loss to the best of his judgment and determine the
\n19
\nsum payable by the assessee on the basis of such
\nassessment:
\nProvided that such opportunity shall be given by the
\nAssessing Officer by serving a notice calling upon the
\nassessee to show cause, on a date and time to be specified in
\nthe notice, why the assessment should not be completed to
\nthe best of his judgment:
\nProvided further that it shall not be necessary to give such
\nopportunity in a case where a notice under subsection
\n(1) of
\nsection 142 has been issued prior to the making of an
\nassessment under this section.
\n(2) The provisions of this section as they stood immediately
\nbefore their amendment by the Direct Tax Laws
\n(Amendment) Act, 1987 (4 of 1988), shall apply to and in
\nrelation to any assessment for the assessment year
\ncommencing on the 1st day of April, 1988, or any earlier
\nassessment year and references in this section to the other
\nprovisions of this Act shall be construed as references to
\nthose provisions as for the time being in force and applicable
\nto the relevant assessment year.
\nMethod of accounting.
\n145. (1) Income chargeable under the head “Profits and
\ngains of business or profession” or “Income from other
\nsources” shall, subject to the provisions of subsection
\n(2), be
\ncomputed in accordance with either cash or mercantile
\nsystem of accounting regularly employed by the assessee.
\n(2) The Central Government may notify in the Official Gazette
\nfrom time to time accounting standards to be followed by any
\nclass of assesses or in respect of any class of income.
\n(3) Where the Assessing Officer is not satisfied about the
\ncorrectness or completeness of the accounts of the
\nassessee, or where the method of accounting provided in
\nsubsection
\n(1) or accounting standards as notified under
\nsubsection
\n(2), have not been regularly followed by the
\nassessee, the Assessing Officer may make an assessment
\nin the manner provided in section 144.\u201d
\n(emphasis supplied)
\n13. Reverting to the findings and conclusions recorded by the
\nOfficer and which commended to the appellate authority, as well
\n20
\nas, the High Court, it must follow that the appellant\/assessee
\ndespite being given sufficient opportunity, failed to prove the
\ncorrectness and genuineness of his claim in respect of purchases
\nof marbles from unregistered dealers to the extent of
\nRs.2,26,000\/(
\nRupees two lakhs twentysix
\nthousand only).
\nResultantly, the said transactions were assumed as bogus entries
\n(standing to the credit of named dealers who were nonexistent
\ncreditors of the assessee).
\n14. However, it has now come on record that the
\nappellant\/assessee in penalty proceedings offered explanation
\nand caused to produce affidavits and record statements of the
\nconcerned unregistered dealers and establish their credentials.
\nThat explanation has been accepted by the CIT(A) vide order
\ndated 13.1.2011. In paragraph 17 of the said decision
\nreproduced hitherto, it has been noted that the Officer recorded
\nstatements of 12 unregistered dealers out of 13 and their identity
\nwas also duly established. After analysing the evidence so
\nproduced by the appellant\/assessee, the appellate authority
\n[(CIT(A)] noted that the Officer had neither doubted the identity of
\nthose dealers nor any adverse comments were offered in reference
\n21
\nto their version regarding sale of marble slabs by them to the
\nappellant\/assessee in the financial year relevant to assessment
\nyear 19981999
\nand receipt of payments after two to three years.
\nFurther, there was no denial of purchase of marbles worth
\nRs.4,78,900\/(
\nRupees four lakhs seventyeight
\nthousand nine
\nhundred only) by the assessee and sale thereof worth
\nRs.3,57,463\/(
\nRupees three lakhs fiftyseven
\nthousand four
\nhundred sixty three only) with closing stock of Rs.2,92,490\/(
\nRupees two lakhs ninety two thousand four hundred ninety
\nonly), as disclosed in the trading account for the year ended on
\n31.3.1998. The appellate authority thus found that without
\npurchases of marbles, there could be no sale and disclosure of
\nclosing stock in the trading account. In other words, the
\nmaterials on record would clearly suggest that the concerned
\nunregistered dealers had sold marble slabs on credit to the
\nappellant\/assessee, as claimed. As a consequence of this finding,
\nthe appellate authority concluded that there was neither any
\nconcealment of income nor furnishing of inaccurate particulars of
\nincome by the assessee. We are conscious of the fact that these
\nobservations are made by the competent forum (appellate
\nauthority) in penalty proceedings under Section 271 of the 1961
\n22
\nAct in favour of the assessee. However, what needs to be noted is
\nthat the stated penalty proceedings were the outcome of the
\nassessment order in question concerning assessment year 19981999.
\nIndeed, at the time of assessment, the appellant\/assessee
\nhad failed to produce any explanation or evidence in support of
\nthe entries regarding purchases made from unregistered dealers.
\nIn the penalty proceedings, however, the appellant\/assessee
\nproduced affidavits of 13 unregistered dealers out of whom 12
\nwere examined by the Officer. The Officer recorded their
\nstatements and did not find any infirmity therein including about
\ntheir credentials. The dealers stood by the assertion made by the
\nappellant\/assessee about the purchases on credit from them; and
\nwhich explanation has been accepted by the appellate authority
\nin paragraphs 17 and 19 of the order dated 13.1.2011.
\n15. To put it differently, the factual basis on which the Officer
\nformed his opinion in the assessment order dated 30.11.2000 (for
\nassessment year 19981999),
\nin regard to addition of
\nRs.2,26,000\/(
\nRupees two lakhs twenty six thousand only),
\nstands dispelled by the affidavits and statements of the
\nconcerned unregistered dealers in penalty proceedings. That
\n23
\nevidence fully supports the claim of the appellant\/assessee. The
\nappellate authority vide order dated 13.1.2011, had not only
\naccepted the explanation offered by the appellant\/assessee but
\nalso recorded a clear finding of fact that there was no
\nconcealment of income or furnishing of any inaccurate
\nparticulars of income by the appellant\/assessee for the
\nassessment year 19981999.
\nThat now being the indisputable
\nposition, it must necessarily follow that the addition of amount of
\nRs.2,26,000\/(
\nRupees two lakhs twentysix
\nthousand only)
\ncannot be justified, much less, maintained.
\n16. Accordingly, this appeal ought to succeed on this count
\nalone and it would be unnecessary for us to dilate on other
\nquestions\/contentions urged by the parties as referred to in the
\nearlier part of this judgment.
\n17. Accordingly, this appeal is allowed. The addition of
\nRs.2,26,000\/(
\nRupees two lakhs twentysix
\nthousand only) by
\nthe Officer under Section 68 of the 1961 Act, towards cash credit
\namount shown against the names of concerned unregistered
\ndealers for the assessment year 19981999,
\nis hereby set aside.
\nThe rest of the assessment order dated 30.11.2000 as modified by
\n24
\nthe CIT(A) vide order dated 9.1.2003, shall remain undisturbed.
\nThere shall be no order as to costs. All pending interlocutory
\napplications are also disposed of.
\n\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026. J.
\n(A.M. Khanwilkar)
\n\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026. J.
\n(Dinesh Maheshwari)
\nNew Delhi;
\nApril 24, 2020.<\/p>\n","protected":false},"excerpt":{"rendered":"
Indeed, at the time of assessment, the appellant\/assessee had failed to produce any explanation or evidence in support of the entries regarding purchases made from unregistered dealers. In the penalty proceedings, however, the appellant\/assessee produced affidavits of 13 unregistered dealers out of whom 12 were examined by the Officer. The Officer recorded their statements and did not find any infirmity therein including about their credentials. The dealers stood by the assertion made by the appellant\/assessee about the purchases on credit from them; and which explanation has been accepted by the appellate authority in paragraphs 17 and 19 of the order dated 13.1.2011. 15. To put it differently, the factual basis on which the Officer formed his opinion in the assessment order dated 30.11.2000 (for assessment year 19981999), in regard to addition of Rs.2,26,000\/( Rupees two lakhs twenty six thousand only), stands dispelled by the affidavits and statements of the concerned unregistered dealers in penalty proceedings. That evidence fully supports the claim of the appellant\/assessee.<\/p>\n