1982 (6) TMI 118 - AT - Income Tax

Tribunal emphasizes notice of enhancement in income tax assessment, sets aside order, stresses procedural fairness.

The Tribunal set aside the ld. AAC's order regarding the computation of the assessee's income without notice of enhancement, emphasizing the necessity of ... - Issues:1. Assessment of income derived from contract work including hiring of welding sets, cutting sets, trucks, and jeeps.2. Discrepancy in income declared by the assessee and computed by the Income Tax Officer (ITO).3. Appeal against the order of the ld. AAC regarding the computation of the assessee's income without notice of enhancement.Analysis:1. The assessee, an individual deriving income from contract work, disclosed income of Rs. 55,000 subject to depreciation during the assessment proceedings. The ITO observed additional income from hiring trucks and jeeps amounting to Rs. 1,62,918, not disclosed by the assessee. The ITO calculated the gross profit at 20% on total gross receipts of Rs. 4,23,000, resulting in an increased income assessment of Rs. 84,600 compared to the assessee's declared income of Rs. 55,000.2. The assessee contested the ITO's assessment before the ld. AAC, arguing that the disclosed net profit of Rs. 55,000 was sufficient, representing a 13% net profit rate on total receipts. However, the ld. AAC rejected the assessee's claim, directing the ITO to recalculate the income by applying a gross profit rate to the undisclosed income from hiring trucks and jeeps, as done in previous assessments.3. The assessee appealed against the ld. AAC's order, contending that the order sought to enhance the income without providing a notice of enhancement, which the assessee deemed necessary. The department supported the ld. AAC's order, asserting that no notice of enhancement was required when setting aside an assessment, even if it led to income enhancement. The Tribunal noted that while the ld. AAC had the authority to enhance the income, the absence of a notice of enhancement to the assessee rendered the order invalid. Consequently, the Tribunal set aside the ld. AAC's order and remanded the matter back for reassessment, emphasizing the necessity of providing the assessee with a notice of enhancement as per the IT Act, 1961.4. The Tribunal allowed the appeal for statistical purposes, emphasizing the importance of adherence to procedural requirements, including providing notices of enhancement to taxpayers during assessment proceedings to ensure fairness and compliance with legal provisions.