1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR -------------------------------------------------------- INCOME TAX APPEAL No. 74 of 2006 C I T BIKANER V/S M/S MALLU KHAN Mr. KK BISSA, for the appellant / petitioner Mr. SURESH OJHA, for the respondent Date of Order : 27.8.2008 HON'BLE SHRI N P GUPTA,J. HON'BLE SHRI KISHAN SWAROOP CHAUDHARI,J. ORDER ----- This appeal has been filed by the Revenue against the judgment of the Tribunal dt. 28.6.2005, affirming the order of the Commissioner Appeals dt. 24.8.1998, whereby the Commissioner partly allowed the appeal. The appeal was admitted on 4.8.2006, by formulating the following substantial question of law:- “Whether in the facts and circumstances of the case, the Tribunal has any material to hold that the best judgment assessment resorted by the assessing authority was erroneous, when he has accepted that the books of accounts have rightly been rejected by the assessing authority, merely by stating a matter of caution that in all cases where books of accounts are rejected, does not necessarily lead in additions to income returned by the assessee ?” 2 Facts of the matter, starting from assessment order, till today, are slightly involved. Even though, that involvement may not be very necessary for deciding the question as framed, however, it would be relevant to some extent. The assessee submitted return on 30.10.1995, which were taken for scrutiny, and notices were issued under section 143(2) and 142(1). The Assessing Officer, in the assessment order, rejected the books of accounts, by resorting to the provisions of section 145(2), and has estimated the sales at a figure of Rs.14,06,41,809/- as against declared sale of sum of Rs.13,76,47,067/-, and applying the gross profit of 35.50%, made a trading addition of Rs.29,94,742/-. It may be observed, that other items of the assessment order are not subject-matter of controversy. It may also be observed that in the return, the assessee had shown higher gross profit rate. Against this assessment order dt. 27.3.1998, an appeal was filed by the assessee, which was decided on 24.8.1998. In the meantime, the Assessing Officer, exercising powers under section 154, had passed a suo-moto order on 15.5.1998, by assessing the gross profit rate at 37.51%, and thereby made an addition of Rs.75,157/-. That order was also challenged by the assessee, by filing appeal on 6.7.1998, which also came to be decided by the same 3 authority, and by an order of the same date. In this subsequent appeal, the learned Commissioner found, that the order could not be passed under section 154, as section 154 permits correction of mistake apparent from the record, and not error i.e. failure, or lack, apart from the fact, that no debate or discussion should be needed to establish and approve it, inter alia, with this finding, the addition of Rs.75,157/- was not found to be justified, and was set aside. It is needless to mention, that this order was affirmed in appeal also by ITAT, who dismissed the appeal of the Revenue on 10.8.2005. Thus, to this extent, it becomes clear, that gross profit could be applied, or to be applied, was only 35.50%. The learned Commissioner, deciding the appeal against the original assessment order, found in para 3.1.(d) as under: “(d) Even on the basis of the past history, it is found that during the immediately preceding year, the appellant had declared a G.P. rate of 20.9% as against G.P. rate of 36.10% declared during the year under appeal. Therefore, the A.O. was not justified in making this addition. Addition of Rs.29,94,742/-, made on this ground is deleted.” The Revenue filed appeal against this order, and the learned ITAT dismissed the appeal, though finding, that it is obvious that the books of accounts were not 4 maintained in such a fashion as could show the correct income, as the sales were not verifiable and the expenses were un-vouched, the natural inference to be drawn is that books were not properly kept, and were liable to be rejected. Thus, upholding the rejection of the books of accounts, it simply proceeded to hold, that after rejecting the book results, it is not necessary, that the addition must be made in all cases, with this pre-supposition, considering the gross profit rate, declared this year to be better than that of preceding year, it was held, that no addition can be made, even after rejecting the book results. Thus, the net outcome of the above recapitulation is, that rejection of books of accounts has acquired finality, right up to the Tribunal, applicability of gross profit rate at 35.50% has also acquired finality, in view of the order of the Tribunal dt. 10.8.2005, having not been further assailed by the Revenue. The question, then only remains, as to whether, the Assessing Officer was correct in making addition in the turnover of the assessee. At the cost of repetition, it may be observed that in para 3.1(d), the learned Commissioner has deleted the addition, only on the ground, that the assessee has declared higher gross profit rate this year as compared to the previous year, and more or less similar consideration has prevailed with the learned ITAT. In our view, the fact 5 does remain, that none of the two authorities below have considered the crucial and relevant aspect, which they were required to consider, about the sustainability of the addition in the turnover made by the Assessing Officer. In the totality of the circumstances, it would not be appropriate for this Court to examine the sustainability of the addition made by the A.O., as it is better required to be examined by the two learned authority below. In that view of the matter, While maintaining other part of the order impugned, the matter is remitted back to the learned Commissioner, Income Tax (Appeals) to examine the appeal filed by the assessee on 30.4.1998, only on the limited aspect, as to whether the enhancement in the turnover, made by the Assessing Officer, is sustainable or not. If it is found to be sustainable, then the addition as deleted, obviously would stand restored, and if the enhancement is found not sustainable, the order passed by the learned Commissioner would remain as such. Parties would be entitled to seek such further remedy as may be available to the aggrieved party, against the order of the learned Commissioner, Income Tax (Appeals). The appeal is accordingly allowed in part. While maintaining other part of the order impugned, the matter is 6 remitted back to the learned Commissioner, Income Tax (Appeals) to examine the appeal filed by the assessee on 30.4.1998, only on the limited aspect as to whether the enhancement in the turnover made by the Assessing Officer is sustainable or not. If it is found to be sustainable, then the addition as deleted, obviously would stand restored, and if the enhancement is found not sustainable, the order passed by the learned Commissioner would remain as such. Parties would be entitled to seek such further remedy as may be available to the aggrieved party, against the order of the learned Commissioner, Income Tax (Appeals). ( KISHAN SWAROOP CHAUDHARI ),J. ( N P GUPTA ),J. /m.asif/