KARTAR SINGH AND CO P LTD Vs. INCOME TAX OFFICER
INCOME TAX APPELLATE TRIBUNAL
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R.K. Bali, Accountant Member -
(1.) THIS is an appeal by the assessee against order dated 10-3-1993 passed by the CIT, Jalandhar under Section 263 of the IT Act, 1961.
(2.) The assessee has taken the following grounds :
1. That order passed under Section 263 of the IT Act, 1961 is illegal and bad in law as no reasonable and proper opportunity was even allowed to the appellant.
2. That order passed under Section 263 is illegal and bad in law as CIT assumed jurisdiction on said alleged order passed under Section 143(1) which was never served on the appellant and remained on file of Deptt. This order in view of decision of Hon'ble Madhya Pradesh High Court reported as Smt. Jijeebai Shinde v. CGT  157 ITR 122 is not an order for taking action under Section 263 and now it is time barred and action taken under Section 263 is wrong.
That on facts and in circumstances of the case the order passed under Section 263 is illegal and wrong as no part of income has escaped assessment. The results are supported with books of account which were produced before the CIT at the time of hearing under Section 263 and no defect was pointed out.
The case relied upon by the CIT are not applicable as appellant had maintained regular books of accounts and complete particulars of assets were available from books. The CIT further mis-interpreted Circular No. 29-D (XIX-14) and wrongly relied on Saraya Engg. Works v. CIT [1987) 168 ITR 455 (All.) for rejecting the depreciation allowed by the ITO and in directing to apply net flat rate.
(3.) THAT the appellant craves leave to amend, alter, add or withdraw any ground(s) of appeal before or at time of hearing of appeal for which right is reserved with the appellant.
3. Sh. Sanjiv Mehra, C.A., learned representative of the assessee submitted that he did not want to press ground of appeal No. 1 which is accordingly dismissed.
4. Elaborating other grounds of appeal, Sh. Mehra submitted that the order passed by the CIT under Section 263 is illegal as the CIT has wrongly assumed jurisdiction on the alleged order passed under Section 143(1) which was never served on the assessee and remained only on the file of the Department. Reliance was placed on the decision of Hon'ble Madhya Pradesh High Court in the case of Smt. Jijeehai Shinde v. CGT  157 ITR 122, wherein it was held that an order made by an authority under a statutory provision does not become effective and valid until it is served upon the party concerned. It was pleaded that since the alleged order passed under Section 143(1) was never served on the assessee the lid. CIT was wrong in assuming jurisdiction under Section 263.
4.1 On merits and facts of the case, it was submitted by Sh. Mehra that there was no escapement of income as the trading results declared by the assessee were supported by books of accounts, which were properly audited and the results declared were in accordance with those books of accounts. It was submitted that reliance of the Ld. CIT on the decision of Hon'ble Supreme Court in the case of Brij Bhushan Lal Parduman Kumar v. CIT  115 ITR 524 is misplaced as in the said decision the Hon'ble Supreme Court never held that a net profit rate of 10% can be applied to the case of Contractors. It was submitted that the assessee-company has maintained complete books of accounts and supporting vouchers and the books of accounts are audited by a Chartered Acountant. It was submitted that since the assessment was framed under Section 143(1), the Assessing Officer never asked the assessee to produce the day to day record of consumption of raw material and the work in progress. It was further submitted that in the contract allotted to the assessee the basic raw material namely Iron & Steel as well as Cement were to be supplied by the Govt. Departments and as such they were required to keep check over the work in progress and as such the assessee was not required to maintain day-to-day record of the consumption of raw material and work in progress which was to be monitored by the concerned Govt. departments. It was submitted that a perusal of the Profit & Loss account indicates that the assessee-company has declared a gross profit rate of 10.76% on the total receipts from contract work and the net profit rate comes to slightly more than 6% and not 4% as mentioned by the Ld. CIT. It was submitted that the net profit rate declared in the Profit & Loss account was to be adjusted by making disallowance on account of provision of income-tax and also adjustment of account of other income shown from plying of trucks, which was credited in the Profit & Loss account and depreciation on truck which was debited to the Profit & Loss account. Accordingly, it was submitted that even on merits the Ld. CIT (Appeals) was not justified in cancelling the alleged order passed under Section 143(1), which was not served upon the assessee and he was further in error in directing the Assessing Officer to make fresh assessment after applying' a net profit rate of 10% on the contract receipts.
4.2 Sh. Mehra further submitted that the assessee filed return on income on 4-10 1990 declaring income of Rs. 35,470 and along with the return of income a certificate of Tax Deduction at Source amounting to Rs. 77,049 was filed and accordingly the assessee was entitled to refund of Rs. 5,740 which was not issued to the assessee. It was submitted that the assessee filed letter dated 12-3-1992 and then dated 2-7-1992, copies of which were given to us at pages 16 & 17 of the paper book, requesting for refund, which was never granted to the assessee nor the assessment order was served on the assessee. Accordingly, it was submitted that the order passed by the Ld. CIT (Appeals) under Section 263 being without jurisdiction should be cancelled and the Assessing Officer be directed to issue refund due to the assessee.
4.3 It was further submitted by Sh. Mehra that the action of the Assessing Officer to accept the return of the assessee under Section 143(1) was in accordance with the instructions issued by the Board and as such the CIT, who is an officer subordinate to the Board, cannot hold that order passed by the Assessing Officer in accordance with the instructions of the Board was erroneous and prejudicial to the interest of the revenue. Reliance was placed on the decision of ITAT, Calcutta Bench 'B' in the case of Puranmall Narayan Prasad Kedia (HUF) v. Asstt. CIT [1994) 48 ITD 439.;
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