1981 (9) TMI 161 - AT - Income Tax

Tribunal upholds Income Tax Officer's proceedings under section 143(2)(b) and 13% profit rate

The Tribunal upheld the validity of the Income Tax Officer's initiation of proceedings under section 143(2)(b) of the Income-tax Act and the application ... Assessment, Reopening Of Summary Assessment Issues:1. Validity of reopening the assessment under section 143(2)(b) of the Income-tax Act, 1961.2. Making of fresh assessment on an income higher than what was determined in the original assessment.Detailed Analysis:Issue 1: Validity of reopening the assessment under section 143(2)(b) of the Income-tax Act, 1961.The case involved the assessee filing a return showing an income of Rs. 71,440, which was accepted in the original assessment under section 143(1). Subsequently, the Income Tax Officer (ITO) initiated proceedings under section 143(2)(b) to verify the correctness of the return. The ITO estimated the net income at Rs. 90,080 due to unvouched expenses and lack of detailed construction-wise expenses. The assessee contended that the proceedings under section 143(2)(b) were not validly initiated by the ITO, citing decisions in similar cases. The Appellate Assistant Commissioner (AAC) upheld the validity of the proceedings under section 143(2)(b) and the application of a net profit rate of 13 per cent. The Appellate Tribunal agreed with the AAC, stating that the proceedings were validly initiated as per the provisions of the Income-tax Act.Issue 2: Making of fresh assessment on an income higher than what was determined in the original assessment.The assessee further argued that the application of a flat rate of profit was unjustified, as there were variations in profit due to time lag in project execution and fluctuating raw material prices. The departmental representative defended the application of the 13 per cent profit rate, claiming it was just and proper based on past records. The Tribunal upheld the lower authorities' decision, stating that the profit rate of 13 per cent was reasonable and consistent with past assessments. The Tribunal rejected the assessee's argument regarding the impact of time lag on profits, deeming it a common feature in the business. Consequently, the appeal was dismissed, and the decision of the lower authorities was upheld.In conclusion, the Tribunal found that the proceedings under section 143(2)(b) were validly initiated by the ITO and upheld the application of a 13 per cent profit rate for the fresh assessment. The Tribunal rejected the assessee's arguments regarding the validity of the proceedings and the impact of time lag on profits, ultimately dismissing the appeal.