COMMISSIONER OF INCOME TAX Vs. T.M. KURUVILLA

JUDGEMENT

(1.) HEARD the standing counsel appearing for the appellant and Sri A. Kumar appearing for the respondent.

(2.) THE question raised is whether the Tribunal was justified in confirming the order of the first appellate authority in accepting the income returned by the assessee and books of account produced in support thereof. On facts, it is seen that the assessee filed original return declaring income of Rs. 2,40,638. Revised return was filed declaring total income of Rs. 4,01,013. The assessee's case was that the revised return was required to be filed because of the omission to include income from house property amounting to Rs. 1,60,375. During the previous year relevant for 2003 -04, the assessee declared loss from contract receipts of over Rs. 69 lakhs. Similarly the assessee has hotel business where turnover declared was Rs. 25 lakhs and result is a loss. The result of the assessee's business in restaurant led to a nominal profit of Rs. 23,558, where turnover was over Rs. 23 lakhs. The assessee claimed depreciation on two imported cars which were not allowed by the AO. We find from the assessment order that the AO has found that expenses on various items were covered by self prepared vouchers and some of the expenditure were not covered even by vouchers. Since accounts are found unacceptable for many reasons, the AO estimated income under various heads of business. Even though in first appeal, the appellate authority directed acceptance of book figures, the Department filed appeal before the Tribunal which was also dismissed. It is against the Tribunal's order this appeal is filed by the Department.

(3.) AFTER hearing both sides and on going through the Tribunal's order, we find that they have not even considered assessment order where the AO has stated several reasons for rejecting the books of accounts. When the first appellate authority reversed the finding of the AO, it was the duty of the Tribunal as fact finding authority to examine as to which authority's finding is correct. We are obliged to interfere with the Tribunal's order because the Tribunal has not exercised it's jurisdiction properly and fairly. We therefore set aside the order of the Tribunal and remitted the matter to the Tribunal to re -examine the appeal after giving opportunity to the parties. We make it clear that the Tribunal should call for books of accounts and examine whether inadequacies of the accounts and the reasons stated by AO for rejection of it exist and then decide the appeal.