I.S. Verma, J.M. - (1.) THIS appeal by the assessee is directed against the order of the CIT(A), dt. 23rd March, 1990, wherein various grounds have been taken which we proceed to decide one by one.
(2.) Ground No. 1 : Addition made on account of gross profit sustained by the CIT(A). The assessee's counsel has submitted that the lower authorities had made the addition in the trading account by rejecting the gross profit rate declared without pointing any specific mistake in the assessee's accounts. The learned Departmental Representative, on the other hand, has relied on the orders of the lower authorities. We have considered the rival submissions. Under the IT Act assessment of a person can be framed under s. 143(3) or under s. 144 or under s. 147 or under s. 145 r/w s. 144. An assessment under s. 143(3) is to be completed on the basis of materials available with the AO whereas an assessment under s. 144 is an ex parte assessment but the AO has power to estimate the assessee's income to the best of knowledge. An assessment under s. 147 is the assessment of income which has escaped assessment whereas an assessment under s. 145 r/w s. 144 in an assessment which the AO can estimate the assessee's income after rejecting the books of account and for rejecting the books of account it is the Revenue's onus to prove that either the books of account maintained by the assessee are not correct and complete or the method of accounting adopted is such that true profits cannot be deduced therefrom. From these legal provisions what follows is that if the Revenue doubts the correctness of GP declared by the assessee, then, it first of all should reject the assessee's books of account after specifying mandatory requirement of s. 145 which, according to us, can be done only after pointing out specific defects in the books of account. As the onus to make out a case for rejection of books of account is on the Revenue, so the assessee cannot be burdened with the responsibility of proving a negative aspect of the matter meaning thereby the assessee cannot be held responsible for not having earned the profit at a particular rate.
(3.) AS per the IT Law the assessee has to substantiate his return and if he furnishes or produces necessary evidence, which in the normal course of things is known as books of account, in support of his return, then, in order to rebut the assessee's reliance/submissions when the return is substantiated by such books of accounts, it is the Revenue's duty to carry on proper investigation and verification from such books of accounts and must call for any other explanation or evidence if so required. After production of books of account and submissions of the explanation by the assessee if any asked for with respect to the contents of the return and books of account, the Revenue may accept the same or after pointing out the specific defects may reject the books of account and proceed to determine the assessee's income as per the provisions of s. 145.;