HEERA LAL KATARIA vs. COMMISSIONER OF INCOME TAX

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ITA/21/2001HC RajasthanRJHC02036100200131 August 20164 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the Tribunal's observation that the books of accounts could not have been rejected under Section 145(2) as they were correct and complete, yet subsequently estimating the income to Rs. 1,00,000/-, was not permissible in law. The Court found that if the books of accounts submitted by the assessee were in order, there was no basis for the Tribunal to enhance the income to Rs. 1,00,000/-. Therefore, the Tribunal ought not to have estimated the income after accepting the books of accounts. The question of law was answered in favour of the assessee and against the revenue.

What were the facts?

The assessee, Heera Lal Kataria, proprietor of M/s. Rohit Road Lines, filed his return for Assessment Year 1990-91. The Assessing Officer rejected his books of accounts and enhanced his income from Rs. 92,685/- to Rs. 8,33,214/-. The CIT (Appeals) partly allowed the appeal. The assessee then appealed to the Income Tax Appellate Tribunal (ITAT). The ITAT, after examining the books and verification by the department's representative, estimated the income at Rs. 1,00,000/-. The assessee challenged the ITAT's order before the High Court.

What were the issues?

1. Whether the Tribunal was justified in law in sustaining an addition of Rs. 1 lac on an estimated basis, despite finding that the provisions under Section 145(2) could not be applied as the books of accounts and profits derived therefrom were found to be correct and complete? Assessee's contentions: The assessee argued that once the Tribunal accepted the books of accounts, it could not have estimated the income at Rs. 1,00,000/- without assigning any cogent reasons or basis. Such an estimation is not permissible in law. Revenue's contentions: The revenue contended that in view of the rejection of the books of accounts by the Assessing Officer and the CIT (Appeals), the Tribunal rightly estimated the income at Rs. 1,00,000/- after appreciating the books of accounts.

Which sections of the Income-tax Act were involved?

Section 145(2)

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR --------------------------------------------------------------------- APPELLANT: Heera Lal Kataria son of Late Shri Chittar Mal Kataria, aged about 65 years, Proprietor of M/s.Rohit Road Lines, H-2, Transport Nagar, Jaipur. VERSUS RESPONDENTS:

1.

The Commissioner of Income Tax, N.C.R.B.Building, Statue Circle, Jaipur.

2.

Assistant Commissioner of Income tax, Circle 3(1), N.C.R.B.Building, Statue Circle, Jaipur. Date of Judgement : 31.8.2016 HON'BLE MR.JUSTICE K.S.JHAVERI HON'BLE MR.JUSTICE AJAY RASTOGI Mr.P.K.KASLIWAL, Counsel for appellant-assessee. Mr.R.B.MATHUR ] Mr.NIKHIL SIMLOTE ] Counsel for respondent-revenue. Mr.K.D.MATHUR ] JUDGEMENT --------------

1.

By way of this appeal, assessee has challenged the judgment & order of the Income Tax Appellate Tribunal whereby the Tribunal has partly allowed the appeal of the assessee.

2.

The case of the assessee is that the assessee has filed his return for the Assessment Year 1990-91 whereby his books of accounts were not accepted and the Assessing Officer has enhanced his income from Rs.92,685/- to Rs.8,33,214/- and the -2- appeal was also allowed in part by the CIT (Appeals).

3.

Being aggrieved by the said order, the assessee has preferred appeal before the ld.Tribunal. The ld.Tribunal has looked into the books of accounts and after verification by the representative of department, has delivered the judgment estimating the income to Rs.1,00,000/-.

4.

The counsel for appellant merely contended that having accepted the books of accounts, the ld.Tribunal has not assigned any reason or basis for estimating the income to Rs.1,00,000/-.

5.

At the time of admission, no substantial question of law was framed, however, we consider it appropriate to frame following substantial question of law:- “Whether the Tribunal was justified in law in sustaining addition of Rs.1 lac on estimated basis irrespective of the fact, that the Tribunal has found that provisions under Section 145(2) could not be applied as the Books of Accounts and profits derived therefrom found to be correct and complete?”

6.

Counsel for appellant has taken us to the provisions of Sec.145(2) which read as under:- “145(2). The Central Government may notify in the Official Gazette from time to time income computation and disclosure standards to be followed by any class of assessees or in respect of any class of income.”

7.

Counsel for appellant contended that having accepted the books of accounts, the Tribunal could not have estimated the income of Rs.1,00,000/- and while estimating the income ought to have given cogent reasons and no reasons are given and it is a pure estimation which is not permissible in law.

-3-

8.

Counsel for respondent contended that in view of rejection of books of accounts by the Assessing Officer and the CIT (Appeals), the ld.Tribunal while considering the books of accounts has appreciated the same and has rightly estimated the income to Rs.1,00,000/-.

9.

We are of the view that after having observations made by the ld.Tribunal in para-3, which read as under:- “3. … … The reasons taken for rejecting the accounts have duly been considered with specific reference to the explanation given by the assessee. The books were produced before us and the ld.Senior departmental representative was directed to verify the discrepancy with respect to purchase of tyres as pointed out by the ld.CIT(A) in his order at para 15. 2. This has also been made a basis for rejecting the accounts of the assessee. The ld.departmental representative has informed that version of the assessee is correct. Accordingly and in view of various submissions of the appellant, we find that the account could not have been rejected under section 145(2) as the accounts were correct and complete and true profit of assessee could have been deduced therefrom. However, we also find that the assessee has not maintained complete vouchers for various expenses etc. … …”

10.

The books of accounts which were submitted by the assessee were in order, there was no basis for the ld.Tribunal to enhance the income to Rs.1,00,000/-.

11.

In our view, while accepting the books of accounts, estimating the income to Rs.1,00,000/- by the ld.Tribunal is not permissible in law & the Tribunal ought not to have estimated income having accepted books of accounts.

12.

In view of the above, we answer the question in favour of -4- the assessee and against the revenue. The appeal accordingly stands allowed. (AJAY RASTOGI),J. (K.S.JHAVERI),J. Solanki DS, P.S.

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