MAHASHWARI SYNTHETICS PVT LTD. HOSHIARPUR vs. COMMISSIONER OF I.T. (CENTRAL), LUDHIANA AND ANR.

The assessee has preferred this appeal under Section 260A of the Income Tax Act, 1961 (for short, “the Act”) against the order dated 1.9.2008, Annexure A-4, passed by the Income Tax Appellate Tribunal, Amritsar in I.T. (SS) No.9 (ASR)/2002 for the assessment period from 1.4.1986 to 30.8.1996, proposing to raise questions of law mentioned in para 20 of the appeal.

Learned counsel for the appellant presses following questions:- “i) Whether in the facts and circumstances of the case, the ITAT was justified in not taking a final view in the matter when all facts and figures were available before it, rather than again restoring the Block assessment back to the Assessing Officer, when the later admittedly failed to abide by its directions as given in original order? ii) That in the facts and circumstances of the case, was the ITAT correct in holding that there was no judicial bias operating in this case qua the fact that despite revenue’s appeal pending before the High Court, the undisclosed income was substantially enhanced in second Block assessment order? iii) Whether in the facts and circumstances of the case, the ITAT, while restoring the matter back to the Assessing Officer, was right in making fresh observations, inconsistent with its original order, amounting to review of its earlier order?” xx xx xx xx “vi) Whether in the facts and circumstances of the case, was the ITAT justified in refusing to award appropriate cost to the assessee, more so when the order of the Assessing Officer was not upheld but again restored back by the ITAT?”

There was search and seizure action in the premises of the directors/partners of the assessee on 30.8.1996, resulting in seizure of cash, jewellery and other valuables and also incriminating books of account and other documents. Block assessment was done. The matter was carried by the assessee in appeal to the Tribunal, which was disposed of vide order dated 4.12.2000, inter-alia, with the following directions:- “45.1 However, we also give some guidelines in arriving at net profit rate. The net rate can be arrived at by applying N.P. rate accepted by the department in the case of the appellant or the NP rate shown by other concerns dealing in the same business or manufacturing items of the nature as manufactured by the appellant concern. The N.P. rate can also be arrived at by working out the income surrendered by the appellant as undisclosed income and other undisclosed assets found during the Block period by the AO. The AO, however, can work out the NP rate in accordance with the facts and circumstances of the case as well as material available on record, but he should give due opportunity of being heard to the appellant and also such rate should be reasonable, logical and judicious based on reasonable evidence.”

After remand, assessment was made but the assessee again carried the matter to the Tribunal and submitted that the order of assessment was not in accordance with the order of remand. The Tribunal disposed of the matter by the impugned order dated 1.9.2008, inter-alia, with the following observations:- “....In our opinion, the approach of the AO treating the entire sales as undisclosed income is against the basic principles of Income-tax law. Hence we restore the matter to the file of the AO for estimating the reasonable profit on suppressed sales on the basis of material on record in consonance with the earlier order of the ITAT. It is needless to say that the AO is required to consider the objection put before the AO vide letter cited supra in true spirit and adequate opportunity of hearing to be given by the AO to the assessee.”

We have heard learned counsel for the assessee.

It was submitted that the Tribunal should have taken a final view and there was no justification for remand. Observations made in the impugned order of remand are inconsistent with the directions in the earlier order. It was further submitted that after remand, if same authority deals with the matter, its order will be vitiated by judicial bias, particularly when the assessing authority was also associated with search.

We are unable to hold that in the facts and circumstances of the case, questions sought to be raised are substantial questions of law.

No doubt, where material is enough, the appellate Court should normally determine the issue on merits, even if such issue has not been dealt with by the original authority. However, power of remand can be exercised when as a result of finding of the appellate authority, re-determination of issue becomes necessary. In the present case, on facts, the Tribunal held that it was necessary to have re-determination of assessment for the reasons mentioned in the impugned order. We are unable to hold that the reasons mentioned by the Tribunal for rejecting the conclusion for re-determination of issues are perverse.

Questions No.(i), (iii) and (vi) are, thus, not substantial questions of law. As regards question No.(ii), we are unable to hold that merely because an authority has to deal with the matter again, after remand, such authority suffers from judicial bias. The Tribunal rejected the contention of the appellant, relying upon judgment of the Hon’ble Supreme Court in Union of India v. Vipin Kumar Jain 260 ITR 1 (SC), holding that there could be no apprehension of bias merely because the authority under Section 132 of the Act and the Assessing Officer is the same. The question of bias has to be decided on facts of each case and mere fact that the officer associated with search, made assessment, was not by itself a ground to impute bias. While making assessment, the Assessing Officer had to apply the judicial norms. We are, thus, unable to hold that the question raised is a substantial question of law.

The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE August 11, 2009