TaxTMI 
TaxTMI 
2011 (9) TMI 600
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....2. In this connection, it has been mentioned in the assessment order that the assessee-company filed its return on 29.11.2006 declaring loss of Rs. 25,70,58,700/-. In this return, refund of Rs. 5,05,95,897/- was claimed. The return was taken up for scrutiny and for this purpose, the notice u/s 143(2) of the Act was issued and served on the assessee. In response to this notice, representatives of the assessee from Deloitte Haskins & Sells attended from time to time. This finding was challenged before the learned CIT(A). For this purpose, an affidavit has also been filed on behalf of the company deposing inter alia that the notice u/s 143(2) has not been received by the assessee. The learned CIT(A) forwarded this affidavit to the Assessing Officer for her comments. It was submitted that as per records a notice u/s 143(2) dated 28.09.2007 was issued to the assessee. This notice was dispatched by speed post on 04.10.2007 as per acknowledgement of the dispatch with code No.902-10, in which the entry in respect of the assessee appears at serial No.15. It was further submitted that the envelope containing the notice was not received back by the office to show that it remained undelivered.....
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....validly served on the assessee upto 20.11.2007. Our attention has been drawn towards the affidavit of the branch manager dated 20.10.2010, affirming inter alia that the assessee had not received notice u/s 143(2) dated 28.09.2007. Further, our attention has been drawn towards "Statement of Facts" filed before the learned CIT(A). In paragraph No.4, it is stated that no notice u/s 143(2) has been served on the assessee. The Assessing Officer served a questionnaire dated 25.06.2008, seeking certain information and clarifications from the assessee. In this questionnaire and reply thereto, the Assessing Officer and the assessee have referred to the notice dated 28.09.2007. The notice was never served on the assessee. Therefore, the assessment is legally unsustainable. Our attention has been specifically drawn towards assessee's reply letter dated 14.07.2008, in which a reference had been made to the notice under section 143(2). According to the learned counsel, the assessee came to know about the notice when the questionnaire dated 25.06.2008 was received. On these facts, the arguments are that the presumption contained in General Clauses Act is rebutted by filing the affidavit. There i....
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....procedure for handing various communications from the department to the assesses and others. Section 27 of the General Clauses Act contains a presumption that where any Central Act requires any document etc. to be served by post, then the service shall be deemed to be effected where the envelope is properly addressing, proper stamps affixed thereon and posted by registered post, and unless the contrary is proved, the service is deemed to have been effected at the time at which the document would be delivered in the ordinary course of post. In view of this provision, a presumption arises that the notice has been served on the assessee within 2-3 days of posting. This presumption is sought to be rebutted by the affidavit of the branch manager. However, this affidavit does not disclose the basis for deposing that the notice was not received till date. No inquiry has been made from the post office. The affidavit has been filed after a long time from the issuance of the notice. With efflux of time, memory is likely to fail. Thus, there is no basis to support the affidavit. 4.1 The learned counsel relied on a number of cases to the effect that service of the notice within time is mandat....
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....oned that this concern raised bills in two series having invoice numbers of three digits and five digits. The Sales-tax Department was affixing its stamp on the bills at the check post, but such stamps are not there on all the bills. Particularly, these stamps are not there on the invoices having the number in five digits. The genuineness of expenses has not been proved; (iv) in view of these observations, 50% of expenditure in respect of purchases from Asha Enterprise and Central Tyres are held to be disallowable. Purchases of diesel from sundry suppliers have also been held to be disallowable. 5.1 The AO thereafter referred to various comments made by the auditors. After considering the submissions made by the assessee, it has been held that the books are not complete in all respects. A reference has been made to the method of computation of profit adopted by the assessee, which is stated to be in accordance with AS-7, issued by the Institute of Chartered Accountants of India. The assessee has followed percentage completion method for recognizing revenues. At the beginning of the project, total receipts, after taking escalation claims into account, have been fixed at Rs. 821,01....
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....mated. The assessing authority has to look into the substance of the matter so as to avoid putting the assessee under unreasonable hardship or liability. It is the duty as well as the right of the Assessing Officer to consider whether the books disclose true state of affairs and correct income can be deducted therefrom. These rights and duties have to be exercised in a judicious manner by bringing cogent material and reasons on record. In view of these findings, it has been held that the AO was not right in rejecting the accounts. As a corollary to this finding, the application of rate of 10% to the revenues of this year for determining profit has also been rejected. The revenue is in appeal against these findings. 7. The ld. DR initially submitted in a brief manner the method adopted by the AO for computation of income. It is submitted that the assessee had followed percentage completion method for determining the profit. This method has been accepted by the AO. However, he checked various expenses and found that proper bills were not maintained. He also did not accept the method of computing profit as the very initial estimate was a loss for which no justification was there. Fin....
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....ion was made or got made in respect of such expenditure and in fact the whole of the addition has been deleted. It is urged that in view of the aforesaid, the matter may either be restored to the file of the AO or the ld. CIT(A) for deciding this matter again. 8. In reply, the ld. counsel submitted that the assessee is a foreign company and it has entered into an agreement with NTPC Ltd. for civil work of a dam. It had filed the return of income showing loss of about Rs. 25.70 crore. Against the aforesaid, the total income has been assessed at about Rs. 11.68 crore. There is a wide gap between the two figures for apparently no reason. He referred to the finding of the AO recorded on page nos. 19 and 20 regarding the method adopted by the assessee to compute profit or loss. This is based upon the initial estimation of loss of Rs. 130,81,90,931/-. The assessments for assessment years 2003-04 to 2005-06 have been completed on the basis of aforesaid estimation of loss. In other words, the figure of estimated loss has been accepted in earlier assessment years by the AO in scrutiny assessments. Therefore, this figure cannot be objected to now as it would disturb the consistent method fo....
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....3/2005) 88,67,27,527 (H) Additional revenue to be recognised for the year 117,29,76,865 (I) Less: Amount billed to NTPC during 2005-06 116,82,11,448 (J) Reversal of Opening unbilled revenue (25,94,98,241) (K) Further unbilled revenue to be recorded 26,42,63,658 Provision for loss (L) Total anticipated loss =(C)-(A) 130,81,90,931 (M) Excess of cost over revenue till 31 March,2006 =(D)-(F) 32,81,88,632 (N) Provision for loss to be recognized 98,00,02,299 (O) Less: Recognised till 31 March, 2005 (-) 13662497 (P) Difference to be accounted for 96,63,39,802 8.1 The ld. counsel referred to the remarks of the auditor, reproduced by the AO on page nos. 2 and 3 of the assessment order. These were dealt with para-wise. The case of the ld. counsel is that none of the remarks has any bearing on the correctness of the books of account and, therefore, remarks cannot form the basis for rejection of books of account. In past, the books were maintained in the same manner which had been accepted. 8.2 Coming to verification of expenses ma....
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....ount arises only where the assessee has not followed a regular method of accounting or where the method is such that profits and gains cannot be properly deducted. It means that the method adopted by the assessee must prima facie prevail where it is regularly employed. However, the AO can exercise this power when true profits cannot be determined. He also relied on the decision in the case of Bhai Sunder Dass Sardar Singh (P) Ltd. Vs. CIT, (1972) 84 ITR 106 (Del). In this case, the AO had estimated the profit of the assessee in respect of a contract on account of low profit rate of 9%. By rejecting the accounts he applied the rate of 12.5%. Before the AAC, it was admitted that full quantitative details might not be available in respect of stores of the value of Rs. 1,30,000/- consumed in execution of the contract. He considered the facts and reduced the addition to Rs. 10,000/-. The Tribunal also considered the additional material that net profit for the next year was 9.9%. The addition was reduced to Rs. 6,000/-. The Hon'ble Delhi High Court held that there was material before the Tribunal to make estimated addition and no question of law arises from the order of the Tribunal. The....
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....ress of the work. On the aforesaid basis, returns have been filed for assessment years 2003-04 to 2005-06. In these returns, the receipts have been estimated on the basis of actual expenditure incurred. From the expenditure, the percentage of work completed is ascertained and the revenue is recognized accordingly. This very method has been followed in this year. The AO examined the books. He referred to some discrepancies in the accounting of expenditure incurred on addition to site office at camp. This expenditure is capital in nature and has not been claimed by the assessee as revenue expenditure. The averments made by the ld. counsel in this behalf have not been responded to by the ld. DR. He also examined expenditure incurred in respect of purchase of lubricant from Asha Enterprises. Nine items have been mentioned on page no. 7 in respect of such purchases. He also examined purchase of tyres from Central Tyres. 22 items have been listed on page no. 11. Five items bear five digits invoice numbers and the rest bear three digits invoice numbers. The expenses listed by the AO are miniscule compared to the overall expenditure. It is also mentioned that position in respect of purchas....