Pest-O-Kill vs Commissioner of Income Tax

Dhirendra Mishra, J.—The appellant/assessee has preferred this appeal u/s 260A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") against the order (Annex. Al) of Tribunal on the following substantial questions of law:

A. Whether the Tribunal was justified in not adjudicating ground No. 2 which goes to the root of assessment that as appellant was prevented from sufficient cause, the assessment should not have been framed ex parte u/s 144 on the ground that it was not pressed, whereas, it was not only argued but written submission was also made ?

B. Whether the Tribunal was justified in directing to treat entire receipt of Rs. 2,97,839 to tax whereas the assessee offered to be assessed at profit at 7.2 per cent on receipt of Rs. 2,97,839 by wrongly distinguishing judgment of Hon''ble High Court of MP in Commissioner of Income Tax Vs. Balchand Ajit Kumar,

C. Whether merely for non-production of any document the authority can proceed ex parte against the assessee ?

D. Whether merely on non-production of the account book the return available on record duly audited by the chartered accountant, cannot be looked into ?

Briefly stated, facts of the case are that the appellant/assessee filed return showing total income of Rs. 7,675 along with photocopy of the audited account as per Section 44AB of the Act including balance sheet, contract and P&L a/c. The case was taken up for scrutiny after approval of Commissioner (Appeals) (for brevity "Commissioner (Appeals)") and notice u/s 143(2) of the Act was served. Again notice u/s 142(1) of the Act along with queries calling for certain clarifications in connection with scrutiny, was served. A show-cause notice was served requiring the assessee to show as to why assessment may not be completed ex parte on his failure to reply to the queries. Though a written reply was filed by the assessee, but books of account, bills and vouchers were not produced. Several opportunities were given to the assessee. Ultimately, ex parte assessment u/s 144 of the Act was made on the basis of record. The appellant/assessee had shown a receipt of Rs. 38,75,298 for the relevant assessment year and he had shown percentage of profit at 7.12 per cent as against the profit shown at 8.02 per cent and 8 per cent in the previous two years respectively. From the documents, it was also observed -that the assessee had shown gross contract receipt of Rs. 41,73,137 as per TDS certificate enclosed with the return. However, in the return he had shown gross receipt from Balco at Rs. 38,75,298. Thus, the difference in the gross receipt of Rs. 2,97,839 was treated as income of the assessee u/s 68 of the Act and added to the total income of the assessee. A penalty proceeding u/s 271(1)(c) was also initiated.

On the basis of aforesaid facts, income of the assessee was assessed as Rs. 4,86,980 after adding disallowances under various heads as mentioned in para 6 of the assessment order and accordingly, demand note was issued.

On appeal by the assessee, Commissioner (Appeals) partly allowing the appeal, reduced disallowances to an across the board figure of Rs. 50,000. However, addition of Rs. 2,97,839 in income of the assessee by the assessing officer was confirmed.

On second appeal by the assessee, the Tribunal confirmed the order of the Commissioner (Appeals) and dismissed the appeal by the impugned order.

Shri Rajeev Shrivastava, learned Counsel appearing for the appellant, vehemently argued that the sum of Rs. 2,97,839 received by the assessee was towards the gross payment received by him from Balco for the work of repair and maintenance done by the assessee, and the same has been added in income of the assessee, whereas, the assessing officer ought to have computed profit @ 7.2 per cent on the above receipt and that amount alone could be added as income of the assessee.

Relying upon the judgment in the matter of Commissioner of Income Central II Vs. Suresh N. Gupta, , it was argued that under the Income Tax Act, tax is levied on income and nothing else.

Further relying upon the judgment in the matter of Commissioner of Income Tax, Bangalore Vs. Infosys Technologies Ltd., , it was contended that there are four components of tax. The first component is the character of the imposition, the second is the person on whom the levy is imposed, the third is the rate at which tax is imposed and the fourth is the value to which the rate is applied for computing tax liability. If there is any ambiguity in any of the four concepts, then levy would fail.

On the other hand, Shri Rajeshwara Rao, learned Counsel for the respondent-Revenue, argued that the appellant was afforded with several opportunities before making ex parte assessment u/s 144 of the Act. There was a difference of Rs. 2,97,839 between the receipt shown in the return filed by the assessee and the actual receipt from Balco derived from TDS certificate enclosed with the return and also from the documents received from Balco in respect of the contract work executed by the assessee firm during the assessment year 2001-02. The appellant/assessee was served with a show-cause notice and called upon to explain the above difference, failing which ex parte assessment was contemplated. However, despite service of notice, the assessee did not come forward to explain the discrepancy and in these circumstances, Rs. 2,97,839 was added in income of the assessee. The argument of the appellant that the total amount of Rs. 2,97,839 could not be added in income of the assessee and for the purposes of assessing income, profit ought to have been computed as computed on the return amount filed by the assessee, has rightly been rejected on the ground that expenses towards purchases and other expenses in the business have been duly accounted for by the assessee in his Profit & Loss account submitted along with his return. In the absence of any valid explanation for suppression of the above receipts in his return, the same has rightly been accepted as additional income of the assessee.

We have heard learned Counsel for the parties and perused the material available on record, including the orders of both the Tribunals.

The law laid down in the judgments cited by the appellants, is that the Income Tax on a given rate can be applied to the assessee only after assessing the taxable income, meaning thereby that before applying the rate at which tax is to be levied upon the assessee, his income has to be assessed. In the instant case, the assessee filed his return for the assessment year showing gross receipt of Rs. 38,75,298. On verification of the documents enclosed with the return and information received from Balco, it revealed that the assessee had suppressed gross receipt of Rs. 2,97,839. The appellant had also filed Profit & Loss account showing total income of Rs. 7,675. The appellant was afforded with an opportunity to explain the above discrepancy. The explanation forwarded by the appellant for the aforesaid discrepancy was again forwarded to the assessing officer and remand report was obtained. On receiving the remand report, the Commissioner (Appeals) forwarded copy of the same along with annexures to the appellant for giving his response, however, he failed to give his response. In these circumstances, the suppressed receipt amount of Rs. 2,97,839 has been added in income of the appellant. In our considered opinion, the reasoning assigned by the assessing officer, which has been subsequently confirmed in Commissioner (Appeals) and Tribunal, is proper and addition of the aforesaid amount in income of the assessee has been rightly made. No substantial question of law, as proposed by the appellant, arises for adjudication of this appeal.

In the result, the appeal being devoid of substance deserves to be dismissed at the admission stage itself and is, accordingly, dismissed.