DY.COMMISSIONER OF I.T.(ASST) vs. HARJIVANDAS JUTHABHAI

TAXAP/208/1999HC GujaratGJHC24025538199917 November 1999Author: HONOURABLE MR. JUSTICE B.C.PATEL,HONOURABLE MR. JUSTICE K.M.MEHTA5 pages
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What did the High Court hold?

The High Court held that the order under Section 132(5) of the Income Tax Act, 1961, operates in a different field and is not final or conclusive for all purposes. The approval granted under Section 132(5) cannot be treated as a direction. While the Assessing Officer may be required to follow the estimate made under Section 132(5) while making an order under Section 143(3), it is open for the Assessing Officer to take a different view if further material is found during the inquiry. The Tribunal erred in observing that the approval under Section 132(5) should be treated as a direction, especially when no additional substantive material was found at the time of assessment under Section 143(3). Although the Tribunal's ultimate conclusion on the facts might not have been erroneous, its reasoning regarding the finality of the Section 132(5) approval was flawed. The Court answered the question in the negative, in favour of the Revenue.

What were the facts?

During a survey operation under Section 133A of the Income Tax Act, 1961, on June 11, 1986, the Revenue seized two diaries from the assessee's business premises. These diaries recorded sales for seven months, leading the Revenue to estimate the turnover at Rs. 65,11,756/-. The Revenue considered a profit of 14% and the assessee declared an extra income of Rs. 22 lacs. The Revenue believed the entire turnover should be taxed. The assessee argued that the turnover figure could not be treated as taxable income, explaining a chain of transactions involving preparation and sale of articles with added profit over seven months. The CIT(Appeals) and the Tribunal considered this aspect and disposed of the matter, but certain observations by the Tribunal led the Revenue to file this appeal.

What were the issues?

1. Whether the Tribunal, having held that promissory estoppel does not operate against a statute, could subsequently hold that an order under Section 132(5) of the Income Tax Act, 1961, would be final for the purpose of assessment under Section 143(3) of the Act. Assessee's Contention: The assessee argued that the turnover figure of Rs. 65,11,756/- could not be treated as taxable income, explaining a chain of transactions where articles were prepared and sold with added profit over seven months. The CIT(Appeals) and Tribunal considered this aspect and disposed of the matter. Revenue's Contention: The Revenue contended that the order under Section 132(5) is merely an estimation made in a summary manner and it would be open for the assessee to satisfy the Assessing Officer that the estimate is incorrect by placing evidence. The Revenue argued that the Assessing Officer is open to taking a different view based on available material, and the approval under Section 132(5) should not be considered a direction. The Revenue further argued that the Tribunal erred in observing that the approval under Section 132(5) should be treated as a direction.

Which sections of the Income-tax Act were involved?

Section 133A,Section 132(5),Section 143(3)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

TAX APPEAL No 208 of 1999

For Approval and Signature:

Hon'ble MR.JUSTICE B.C.PATEL and MR.JUSTICE K.M.MEHTA ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements?

2.

To be referred to the Reporter or not? : YES

3.

Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO --

The order continues below.

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