1999 (9) TMI 120 - AT - Income Tax

Tribunal sets aside assessment, directs proper compliance with requests for summons and allowances

MM Nagalinga Nadar Sons. Versus Assistant Commissioner Of Income-Tax.

The Tribunal allowed the appeal by the assessee, setting aside the assessment completed under section 144 of the IT Act for the assessment year 1986-87. ... Best Judgment Assessment Issues involved:1. Validity of assessment completed under section 144 of the IT Act.2. Duty of the assessee to produce books of account and the AO's obligation to assist in obtaining them.3. Proper assessment of income or loss in an ex parte assessment.4. Denial of depreciation, investment allowance, and interest under section 214 of the IT Act.Issue 1: The appeal challenged the assessment under section 144 of the IT Act for the assessment year 1986-87. The CIT(A) had confirmed the assessment, holding that the onus was on the assessee to prove the loss by producing the books of account. The Tribunal considered whether the Revenue authorities were justified in making the ex-parte assessment ignoring the loss and allowances claimed by the assessee.Issue 2: The assessee had expressed inability to produce the books of account due to a dispute with a former partner. The AO rejected the request for summons under section 131 to obtain the books. The Tribunal analyzed relevant case law emphasizing the duty of the AO to assist the assessee in such situations. Citing decisions of the Allahabad High Court, it concluded that the failure to issue summons to obtain the accounts would vitiate the assessment proceedings.Issue 3: The Tribunal noted that even in an ex parte assessment, the AO is obligated to make a proper assessment of income or loss. It highlighted that the CIT(A) had directed the correct determination of the loss, and the AO had not utilized the audited statements or considered the depreciation and investment allowance claims. The Tribunal found that the AO had not conducted a proper assessment as required by law.Issue 4: The Tribunal addressed the denial of depreciation, investment allowance, and interest under section 214 of the IT Act. It held that the AO should have allowed interest on excess advance tax payment as per the law. The Tribunal directed the AO to redo the assessment, considering all relevant aspects and allowing the necessary depreciation, investment allowance, and interest on excess advance tax payment.In conclusion, the Tribunal allowed the appeal by the assessee, setting aside the assessment and directing the AO to comply with the requests for summons to obtain the books of account. The AO was instructed to redo the assessment, ensuring a proper determination of income or loss, and allowing depreciation, investment allowance, and interest on excess advance tax payment as per the law.