TaxTMI 
TaxTMI 
2013 (4) TMI 117
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....bsp; 2. The appellant-assessee is the sole proprietrix of the firm M/s Sri Ganesh Electronics, Chennai and the relevant assessment years are 1996-97, 1997-98 and 1998-99. The assessee is a dealer in electronic appliances, namely, Tvs, VCRs, Refrigerators and other home appliances. A survey under Section 133A of the Income Tax Act was conducted in the business premises of the assessee on 3.4.98 and the statements regarding various business activities were recorded and the books of accounts for the financial year 1996-97 (A.Y. 1996-97) were impounded. The assessing officer rejected the books of accounts while framing the assessment and applied the gross profit at the rate of 19.735 percent against the admitted gross profit rate of the assessee at 3 to 5 percent. The assessing officer issued notices under Section 142 as well as under Section 148 calling for returns for the respective assessment years and the notices were served on one S.Raman, the husband of the assessee. The assessee filed the return for the assessment year 1996-97 on 22.3.99 admitted an income of Rs.48,580/-. As there was no response from the assessee, a show cause notice was issued on 19.3.2001 and in response to ....
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....by the assessee. So far as the Revenue's appeal challenging the deletion of Rs.5,00,000/- is concerned, the Appellate Tribunal restored the order of the assessing officer and set aside the order of the first appellate authority by holding that it is a perquisite received by the company and hence chargeable to tax. Challenging the above orders of the Appellate Tribunal, the assessee has filed the present tax case appeals. 3. We have heard Mr. V.S. Jayakumar, learned counsel for the appellant and Mr. T. Ravikumar, learned counsel for the respondent. 4. Question No.1: It is seen from the order of the assessing officer that a survey was conducted under Section 133A of the Act in the business premises of the assessee on 3.4.98 by the Income Tax Officer, CIB-II, during which physical inventory of stock was taken and the books pertaining to the financial year 1996-97 (A.Y.1997-98) were impounded and only marks of identification were made in the books relating to the financial year 1997-98 (A.Y.1998-99). It is also seen that a number of defects in the maintenance of account books, erasures, pencil entries, undercasting the figures, wrong carry forward of figures from page to page ....
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....) The survey report is full of facts precisely emphasising the defects and anomalies in the books of accounts. The entire report has discussed "improper maintenance of books" illustrating various types of defects in maintenance of ledger accounts. Similarly, whereas on one hand wrong totalling of day book balances has been noticed, on the other hand, cash shortages of certain dates have been alleged. (iv) The very fact that for two out of three years, without any material, the A.O., has estimated gross profit, shows that A.O., had resorted to section 145 for those two years. In view of the above, it is extremely difficult for me, even to presume that books of accounts could be considered to be correct or complete. Correct profits cannot be ascertained if we start from these accounts. Therefore, the only option is to reject the book result as unreliable and to compute an estimate of gross profit or net profit. Since the ledger accounts are not credit worthy, even recording of expenses cannot be accepted to be either complete or correct. Therefore, the only prudent choice is to go for an objective and reasonable estimation of net profit based on the turnovers. The assessed tu....
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....ee, which is taxable under Section 28(iv) of the Act. On appeal, the first appellate authority accepted the contention of the assessee and held that since gifts are acts of gratis, those cannot have the nature of income in the hands of the recipient and that there will be no scope for assessment under Section 28(iv). With that finding, the first appellate authority deleted the addition of Rs.5,00,000/-. When the matter was further taken up on appeal by the Revenue, the Appellate Tribunal, after going through the provision of Section 28(iv), held that though it is an admitted fact that such trips are usually given by the manufacturing companies to their retailers for the development of business, it rejected the contention of the assessee that the said perquisite did not fall within the purview of Section 28(iv), as the perquisites are chargeable to tax and that the benefit which the assessee derived had a direct nexus between the business of the assessee and the benefits derived and these benefits cannot be called "gratis" as held by the first appellate authority. Accordingly, the Appellate Tribunal set aside the order of the first appellate authority and restored the order of the a....