Tribunal Error: High Court Remands Case for Fresh Hearing after Best Judgment Assessment Appeal

Commissioner Of Income-Tax Versus Rayala Corporation Private Limited

Commissioner Of Income-Tax Versus Rayala Corporation Private Limited - [1995] 215 ITR 883, 87 TAXMANN 8 Issues Involved:

1. Deletion of addition representing profit earned on over-invoicing of imports for the assessment year 1962-63.
2. Tribunal's direction to the Appellate Assistant Commissioner regarding over-invoicing of imports for the assessment year 1961-62 and its impact on the assessment year 1962-63.
3. Restoration of the assessee's appeal regarding the assessment of kickback commission for the year 1962-63 to the Appellate Assistant Commissioner for fresh consideration.

Summary:

Issue 1: Deletion of Addition Representing Profit Earned on Over-Invoicing of Imports

The Tribunal found that the statement of Jagga Rao, which indicated over-invoicing up to August 1963, was sufficient to lead the Income-tax Officer to believe that income had escaped assessment for the assessment years 1961-62 and 1962-63. However, the Tribunal noted that there was no evidence showing that over-invoicing was made during the previous years relevant to the two assessment years under consideration. Consequently, the Tribunal deleted the addition of Rs. 3,37,392 representing the profit earned on over-invoicing for the assessment year 1962-63.

Issue 2: Tribunal's Direction to the Appellate Assistant Commissioner Regarding Over-Invoicing of Imports

The Tribunal directed the Appellate Assistant Commissioner to consider whether an addition was warranted towards over-invoicing of imports for the assessment year 1961-62. However, it decided the same issue for the assessment year 1962-63 on merits, thereby leaving no option for the Appellate Assistant Commissioner to dispose of the appeal for 1962-63 on merits.

Issue 3: Restoration of the Assessee's Appeal Regarding Kickback Commission

The Tribunal restored the assessee's appeal regarding the assessment of kickback commission for the year 1962-63 to the Appellate Assistant Commissioner for fresh consideration. The Tribunal noted that the Income-tax Officer and the Appellate Assistant Commissioner had not considered all the materials relating to the matter, including affidavits filed by the agents and the former chief accountant of the assessee-company.

Conclusion:

The High Court found that the Tribunal overstepped its constraints by considering additional evidence produced by the assessee at the appellate stage in a proceeding arising out of a best judgment assessment u/s 144 of the Income-tax Act. The High Court emphasized that the Tribunal should have evaluated whether the Income-tax Officer committed any error in his best judgment assessment based on the materials available to him. The case was remitted back to the Tribunal for a fresh hearing and disposal in accordance with law, with a reminder to consider the conduct of the assessee in evaluating the Income-tax Officer's estimates.