TaxTMI 
TaxTMI 
2018 (5) TMI 436
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....inding authority could in law uphold the additions by relying upon perverse findings of lower authority without corelating the same material on record?" 3. After hearing the learned counsel for appellant and the counsel for respondent-department the following additional question of law arises for consideration and it is follows:- "Whether the Tribunal was correct in confirming the order of the Assessing Authority insofar as, packing material is concerned." 4. The appellant-assessee in this case filed return on 27.11.2003 declaring income of Rs. 4,77,480/- after claiming deduction under Section 80IB at Rs. 38,06,850/-. This was processed under Section 143(1) on 31.02.2004. As the case comes under compulsory scrutiny, notice under Section 143 (2) was issued and served on the assessee and thereafter detailed questionnaire was issued on 12.09.2005 and the assessee was asked to submit his reply and thereafter the case was taken up for passing the assessment order. 5. The assessee in this case is in the proprietary business of running M/s Kashmir Super Rice Mills (03 years old), M/s. New Kashmir Rice Mills (08 years old) and M/s. Kashmir Rice & Oil Mills (15 years old). The c....
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....sment in the manner provided in Section 144." 9. Section 80IB of the Income Tax Act, 1961 where under the benefit is taken by the assessee reads as follows:- "80-IB. (1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to 11 (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section." 10. The department does not dispute the eligibility criteria of the assesse in terms of Section 80 IB. 11. Reply was submitted to the show cause notice by the assessee inter alia contending that the assessee -Unit is a new Unit and the efficiency of the assessee-Unit is much better than the old Units and consequently the cost of labour and wages is lesser. Therefore, the cost of production per quintal is lesser and it is the correct figure. This the assesse supported it by the documents submitted before the A.O. wh....
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.... 69C as being unexplained expenditure. On such income, the assesse is not entitled deduction u/s 80IB as this is an expenditure incurred from out of the undisclosed sources and this is not an income derived from the industrial undertaking. Both these additions are made in M/s Kashmir Super Rice Mills. Penalty proceedings u/s 271 (1) (C) in respect of the above discussed additions are also initiated for concealment of the said income. In the show cause dated 27th March, 2006, the assesse was also asked as to why provisions of Section 145 (3) may not be invoked in his case, as the accounts relating to the above items of expenditure were not correct and complete. The assesse has not offered any reply to this. Keeping in view that the accounts relating to the above referred items of expenditure have not been found complete and correct as discussed above, accordingly, the above additions are made after invoking the provisions of Section 145(3) in respect of such accounts only and assessment is framed in the manner provided in Section 144 by making above discussed additions." 14. As a result, the A.O. passed an order determining additional sum of Rs. 8,18,551/- on account of the ex....
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....l appropriate to allow the position to be changed in a subsequent year." 19. This proposition was not accepted by the assessing Officer, the CIT (A) and also the Tribunal. 20. The Commissioner of Income Tax (Appeals), rejected the appeal vide order dated 16.07.2008 by simply extracting the order of the Assessing Officer without any discussion or any finding. 21. Relevant portion of the order dated 16.07.2008 reads as under:- "Considering the facts and circumstances of the case, I am in agreement with the observations of the AO and hold that the AO is justified in making the said disallowances. The AO's actions are upheld and the appeal of the appellant is dismissed on this ground." 22. Aggrieved thereby, the assessees pursued the matter before the Tribunal. The Tribunal on this issue vide order dated 17th July,2009 in paras 5 and 6 held as follows:- "5...........In the present case it is observed that the assesse is entitled for deduction under Section 80IB. The surrounding circumstances suggest that the assesse has been in the habit of recording of claim in respect of labour and wages and also packing material so that he can claim higher deduction u/s 80IB. In ou....
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.... has entertained a doubt on this issue, but to proceed on a mere doubt without relevant supporting material or proper reasons to support the doubt is of no avail. It will be arbitrary exercise of power. 28. We find that while discussing the production cost factor between the assessment and the other two Units, A.O has not taken into consideration the age of the three Units which has been repeatedly pointed by the assessee. The assesse Unit is three years old new machinery while the other two are comparatively old. The labour cost and wages of the older Units were higher. The new Unit (assesse unit) was new and worked on lesser labour. 29. The derivative calculation based on which the A.O. has proceeded is a mere presumptions. There is no specific relevant material to substantiate the finding that the cost of per quintal in the case of assessee-Unit- M/S Kashmir Super Rice Mills is erroneous or wrong. If the Assessing Officer's view is accepted then modernization and consequent reduction in cost of production will become a bane for such new enterprise. The logic of the A.O is counterproductive because better performance and lower cost of production is faulted. If a contra view....
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....is an assessment on the basis of best judgment. In other words that assessment must be based on some relevant material. It is not a power that can be exercised under the sweet will and pleasure of the concerned authorities. The scope of that power has been explained over and over again by this Court. 5. The Agricultural Income Tax Tribunal gave no reasons in its order for affirming the decision of the Assistant Collector. It appears to have been of the view that once the assessing authorities reject the material placed before them as being unreliable those authorities can proceed to levy whatever tax they may levy. It failed to bear in mind the scope of the power of the assessing authorities to levy assessment on the basis of best judgment. Therefore the tribunal was clearly in error in confirming the decision of the Assistant Collector. Hence the High Court was justified in interfering with the order or the tribunal." 35. This decision affirms our view, as above. 36. Reliance is also placed on of the decision of the Hon'ble Supreme Court in case titled "lal Chand Ambica Ram Vs. Commissioner of Ibncome Tax, reported in (1959) 37 ITR 288". The Hon'ble Supreme Court in the s....