TaxTMI 
TaxTMI 
2018 (6) TMI 450
X X X X Extracts X X X X
X X X X Extracts X X X X
....e G. The Tribunal had only considered the issue whether the estimation of income made is justified or not. However, on expressing our mind, the learned counsel for the respondent specifically pointed to Sl. No. (vi) among the questions of law as raised in the appeal for consideration of the court, which is extracted hereunder : "(vi) Are not the orders of the Income-tax Appellate Tribunal and the Commissioner of Income-tax (Appeals) bad in law for having adopted the special auditor's report only in part discarding the part favourable to the appellant ?" 2. It was pointed out that in computing the undisclosed income, specifically on the question of expenditure for earning that income, a deduction at the rate of 15.5 per cent. coming to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it of the accounts of the directors also. 4. The special auditor proceeded with the audit, selecting 8 out of the 84 chitties conducted in the said period. The special auditor filed a report, based on which the assessment was completed. The appeals to the first appellate authority and the Tribunal were rejected. The assessee was before this court with I. T. A. No. 136 of 2010 (Madhurapuri Chits and Finance Co. P. Ltd. v. CIT [2011] 338 ITR 202 (Ker)) challenging the appointment of the special auditor and the assessment carried on, purportedly adopting the special auditor's report. The Department contested the same on the ground that the special auditor's report was only for the guidance of the Assessing Officer. The Assessing Offic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g and Assurance Standard (AAS)-15-Audit Sampling" issued by the Institute of Chartered Accountants. The comments offered by the special auditor as found in the appellate order also indicates that the chitties were selected at random, excluding those having higher and lower sala (chit amount). The samples selected were from the medium category since the sala of the 84 chitties ranged between Rs. 5,000 to Rs. 8,00,000. While there were only single chitties of the lowest and the highest amount, there were 41 number of chitties with sala of Rs. 1,00,000 and 20 numbers with salary of Rs. 20,000, The eight chitties selected were with sala of Rs. 50,000, Rs. 1,00,000 (both 1 in number), Rs. 2,00,000, Rs. 3,00,000 and Rs. 5,00,000 (all three in num....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ets subscribed to by the company, which was also not accounted. We do not see any scope to interfere in such computation made on the report of the special auditor. 8. The Tribunal too considered the question of estimation made on the assessment carried out by the Assessing Officer. We find it relevant to extract para 2.6 of the Tribunal's order, which puts in proper perspective the computation made by the Assessing Officer, hereinbelow : "2.6 It was noticed by the Assessing Officer that the total cash col lection from the subscribers against these 8 chitties was Rs. 3,55,35,144, which is against the total sala amount of Rs. 6,64,00,000. The word 'sala' and 'sala amount' was described in the foot note to annexure 14 att....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nted out that the profit and loss account as relied upon by the assessee available in annexure B refers to the expenditure for the entire block period of seven years. The total expenditure shown is Rs. 81,95,150.66, This has to be claimed by the assessee in the regular assessment and not in the block assessment, is the specific contention taken. The income as per the accounts was Rs. 23,51,250 while that computed by the Assessing Officer on the basis of the special auditor's report was Rs. 76,78,334 ; resulting in an undisclosed income of Rs. 53,27,084. We are inclined to accept the contention for the Revenue. 10. The assessee definitely would have filed returns for the assessment years and regular assessments ought to have been comple....