Judgment:
D.V. Shylendra Kumar, J.
Re: ITA No. 407 of 2004:
1. This is an appeal of the revenue under Section 260A of the Income Tax Act, 1961 [for short the Act].
2. The assessment year is 1996-97 and the assessee is a private limited company. The assessee had originally filed a return of its income under Section 139(1) of the Act as per the return dated 29-11-1996, disclosing a taxable income of Rs. 17,06,295/-.
3. The assessee became wise and chose to file a revised return on 9-2-2007 under Section 139(5) of the Act, reducing its taxable income to Rs. 2,49,927/-.
4. While processing this revised return, the assessing officer found that certain claims of the assessee such as receipts of a sum of Rs. 24,44,000/- from M/s Associated Edible Oil Ltd., and further amount of Rs. 24,15,000/-from M/s ACC Ltd., were not genuine receipts, in the sense, the assessee had not effected the sales of any product in respect of which the said two companies could have issued such receipts and which version was in fact corroborated, as the assessee's own extract of accounts with these two companies produced by the assessee itself did not contain the corresponding entries in the books of account and therefore the assessing officer thought it fit to add back these amounts to the taxable income of the assessee i.e. a sum of Rs. 48,59,000/- as taxable income to the already disclosed amount of Rs. 2,49,927/- and concluded the assessment on such premise after making adjustments in respect of other claims and deductions etc.
5. A resultant assessment order was passed by the assessing officer assessing the total taxable income at Rs. 45,07,680/- and the tax liability with surcharge at Rs. 20,73,532/-, to which was added the interest under Section 234B & C of the Act and after necessary adjustments, resulting in a demand for Rs. 40,19,960/-. Separate proceedings were directed to be initiated under Section 271(1)(c) of the Act for levy of penalty.
6. The assessee having appealed to the Commissioner of Income Tax (Appeals)-II, Bangalore under Section 246A of the Act and met with success. The appellate commissioner, purporting to follow the ruling of the Income Tax Appellate Tribunal rendered in the case of the very assessee for the earlier assessment years viz., 1993-94 and 1994-95, allowed the appeal, set aside the assessment order and directed deletion of the additions made by the assessing officer over and above the taxable income as disclosed by the assessee.
7. It was now the turn of the revenue to go in appeal before the tribunal under Section 253 of the Act. The tribunal, purporting to follow its earlier decision and also being of the view that the revenue has not filed any appeal against the said decision of the tribunal etc., obviously dismissed the appeal.
8. We have heard Sri M.V. Sheshachala, learned standing Counsel for the revenue-appellants and Sri S. Parthasarathi, learned Counsel for the assessee-respondent.
9. Though the appeal had been admitted to examine the following question of law:
Whether the tribunal is right in arriving at a conclusion that the department having accepted the bogus nature of purchases, expenses and depreciation also should accept the bogus sales even though there was independent evidence showing that these sales were genuine?
and if we were not apprised of any other developments, perhaps, we would have examined the same, it is brought to our notice by Sri Parthasarathi, learned Counsel for the respondent-assessee that in respect of the earlier order of the tribunal in the case of the very assessee, the revenue did ultimately prefer an appeal, like the present appeal and for the assessment year 1994-05 and that appeal, which was numbered as ITA 8 of 1999, has been disposed of by a Division Bench of this Court in terms of the judgment dated 19-10-2006 by allowing the appeal of the revenue and remanded the matter to the assessing officer as requested by the learned Counsel for the revenue as also the learned Counsel for the assessee, for reexamining the entire thing and to assess afresh the exact tax liability of the assessee for that year in the light of the original return which had been filed in that case, as it was found as a matter of fact that the revised return had been filed beyond the permitted time, and thereafter to arrive at the precise tax liability and to quantify the tax liability etc.
10. It is submitted that in the wake of this judgment in respect of the vary assessee for the earlier assessment year, this matter also warrants a remand to the very authority for determination of the tax liability afresh.
11. However, Sri Seshachala, learned standing Counsel for the revenue does not agree and, submits that the revenue is in a position to sustain the correctness of the assessment order independent of the outcome for the earlier assessment year and the development in the earlier assessment year cannot have any bearing on the tax liability of the assessee in the present case etc.
12. While we notice that the two entries relating to the same sale transaction in favour of two companies referred to above were not accepted by the assessing officer for the simple reason that the date of receipt of the payment was one relating to the subsequent assessment year viz., the assessment year 1997-98, being the payment received during the amounting period relating to 1997-98, same receipt cannot, obviously, be taken as receipts for the assessment year with which we are concerned in this appeal and therefore they had become fictitious entries or bogus entries and it had become necessary for the assessee to explain the source of the amount in its hands during that assessment year and this perhaps having been not done by the assessee, the assessing officer thought it fit to add back the amount as unexplained income of the assessee.
13. However, Sri Parthasarathi, learned Counsel for the respondent-assessee submits that the assessing officer having not necessarily indicated that it is being done with a specific statutory provision, there cannot be any such assessment only on the basis of the submissions made by the learned Counsel for the revenue.
14. Be that as it may, it may not be necessary to go into further on this aspect here in this appeal, as we think it proper to remand the matter to the first appellate authority, for the reason that the first appellate authority has simply followed an earlier order of the tribunal for passing the order as it had done in the present case, but that order of the tribunal itself having been set aside by this court in the case of the very assessee, as referred to above, that reasoning does not hold good any more and it is necessary for the first appellate authority to independently examine the merits of the appeal on whatever grounds the assessee might have urged before the first appellate authority and to pass orders in accordance with law.
15. It is for this reason, we set aside the order of the tribunal as well as the order of the first appellate authority and remand the matter to the first appellate authority i.e. the Commissioner of Income Tax (Appeals)-II, Bangalore, for deciding the appeal of the assessee afresh and in accordance with law and based on the existing materials which had been placed by the assessee before the assessing officer and further material placed before the first appellate authority, but nothing beyond.
16. In this view of the matter, we find it not necessary to answer the question posed for our answer, as it virtually amounts to preempting the first appellate authority from independently examining the appeal on its merits.
17. Ordered accordingly. Appeal is allowed and the matter is remanded to the first appellate authority.
Re: ITA No. 408 of 2004:
18. In this appeal, except for the fact that the assessment year in question is 1995-96, all other facts and circumstances are identical with the facts and circumstances that existed in the earlier appeal [ITA No 407 of 2004] and therefore, for the very reasons mentioned by us while disposing the said appeal, this appeal is also allowed on identical terms. The impugned orders of the tribunal as well as the first appellate authority are set aside and the matter is remanded to the first appellate authority.