- (1.) Present appeal under Section 260-A of the Income Tax Act 1961, has been preferred against the judgment and order dated 22.12.2003 passed by Income Tax Appellate Tribunal, Lucknow in ITA No.305/Luc/2002 for the Assessment Year 1998-99. On 06.07.2004, a Coordinate Bench of this Court has admitted the instant appeal on the following substantial questions of law: 1. "Whether considering the facts and circumstances of the case, the Tribunal erred in law in holding that no finding had been recorded for rejecting the books of account, only by relying on the decision of Andhra Pradesh High Court in the case of ITR 442, even though the Assessing Officer had discussed in detail the defects in the books of account before rejecting them under section 145 (3) and the Apex Court has in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. vs. CIT, 1997 227 ITR 172 laid down that the income relating to a particular year is to assessed in that very year. 2. Whether the Tribunal erred in law by holding that the Department is bound to accept the system of accounting regularly adopted by the assessee in the past, although the Apex Court in the case CIT vs. British Paints,1999 188 ITR 44 has observed that there was no estoppel in taxation matters and the officer was not bound by the method followed in the earlier years.
(2.) The brief facts of the case are that the assessee company is engaged in the manufacturing and sale of Khandsari (sugar). For the assessment year under consideration, the assessee has filed its return of Nil income but the A.O. under section 143(3) has completed the assessment on a total income of Rs.17,99,380/- by rejecting the books of account under section 145(3) of the Act. The additions of Rs.12,15,867/- and Rs.4,38,400/- respectively were made on estimate basis, which were upheld by the First Appellate Authority but the Tribunal has deleted the same. Being aggrieved, the department has filed the present appeal.
(3.) With this background, Sri D. D. Chopra, learned counsel for the department submits that net sale shown for the assessment year under consideration had been declined, as compared to previous assessment years' sale. The explanation given by the assessee is not acceptable that business was conducted through wholesalers and only on receipt of sale figure from them, sale and expenses were recorded. The assessee was sending Khandsari to Commission Agent at distinctive places including Bengal, Assam and so on and against the consignment sent for sale in future, the assessee was obtaining substantial amount as advances from those commission agents. The assessee was counting for such consignments sale as and when those commission agents were sending sale notice detailing the actual amount of sale consideration and making necessary entries in the books of account. Notices under section 133(6) were sent, out of which, 12 did not respond. Even in the cases, where response was made, discrepancies were found. So, the explanation given by the assessee pertaining to anomalies was not accepted. In these circumstances, the A.O. has rightly invoked the provisions of Section 145 (3) and made the addition on estimate basis.;