allegedly not servedThe AO completed best judgment assessment applying provisions of section 44AD(1) simply on the ground that the assessee-contractor did not produce books of account, bills, vouchers, etc., in response to notices under section 142(1) said to have been served on assessee and the assessee failed to respond to the same. The assessee preferred an appeal before the CIT (A) and contended that he was maintaining books of account and his case did not come within the purview of section 44AD of the Act and further that no notice under section 142(1) was served on him. The CIT (A) observed that mere maintenance of books of account did not give immunity to the assessee from the obligation of the provisions of section 44AD because as per provision of section 44AD(6), the assessee could have claimed lower rate of profit than prescribed in the aforesaid section provided accounts were maintained as required under section 44AA and duly audited in terms of section 44AB of the Act. According to the CIT (A), the assessee had not fulfilled such conditions of section 44AD(6) of the Act and thus, the AO was justified in applying the provisions of section 44AD of the Act. Held: A definite finding on the ground specifically raised by the assessee that, notice under section 142(1) was not served, was not recorded by the CIT(A). Further provisions of section 44AD(6) were not on statute for relevant assessment year thus, the CIT(A) was not justified in ignoring the books of account being produced before him and observing that assessee had not complied with provisions of section 44AD(6). Matter, therefore, remanded to AO to provide for fresh opportunity to the assessee.
1. This appeal preferred by the assessee is directed against the order passed by the CIT(A), dt. 22nd Dec., 2001 for the asst. yr. 1995-96.
2. The learned counsel for the assessee shows his inability to appear before the Tribunal on the date of hearing. However, he submitted that the written submissions may be considered while deciding the appeal.
Accordingly, it was decided to dispose of the appeal after hearing the learned Departmental Representative and the written submissions filed by the learned Authorised Representative of the assessee.
3. All the ground Nos. 1 to 5 taken by the assessee are against upholding of the completion of assessment under Section 144 and confirmation of addition made by the AO. Beside this, the assessee has also challenged the application of provisions of Section 44AD(6) and interest charged under Section 234A of the Act.
4. The assessee in his written submission stated that the AO has applied provisions of Section 44AD(6) and thereby completed the ex parte assessment by applying 8 per cent net profit on the contract receipts. It was further submitted by the learned Authorised Representative of the assessee that the best judgment assessment is not a provision to penalise the assessee for its failure. The assessment order has to be rational and based on honest guesswork for which some valid basis is available to the AO and, for this proposition, he has relied on the decisions reported in Shankar Khandasari Sugar Mills v.CIT T.C.N. Memon v. ITO (1974) 96 ITR 148 (Ker), 62 STC 195 (All) and Narayan Chandra Baidya v. CIT (1951) 20 ITR 287 (Cal). The learned counsel for the assessee has also invited our attention on the observation of the CIT(A) that the issue of notice under Section 142(1) is not a precondition. It was, therefore, submitted by the learned counsel for the assessee that the assessment suffers from material irregularity and, therefore, the appeal be allowed.
5. On the other hand, the learned Departmental Representative supported the orders of the AO and the CIT(A).
6. We have carefully heard the rival submissions of the parties including the written submission of the learned Authorised Representative of the assessee and perused the material available on record. We find that the assessee is a civil contractor. Despite the various notices issued by the AO under Sections 143(2) and 142(1), the assessee has not produced the books of account, details of the expenses, vouchers, bank account explaining the deposits and withdrawals, dependants of the family members, details of outstanding liabilities and security deposit as shown in the balance sheet. We further find that number of opportunities were provided to the assessee by the AO. Since there was no compliance by the assessee, the AO has completed the assessment under Section 144 invoking the provisions of Section 44AD(1) by applying net profit rate at 8 per cent on the contract receipts of Rs. 18,84,672 and thereby determined the income from contract work at Rs. 1,50,734. Since the assessee has-failed to produce the books of account and other information, there was no option left to the AO other than application of Section 44AD(1). The learned Authorised Representative of the assessee stated in his written submission that Section 44AD(6) has come into force w.e.f. 1st April, 1998. But we find that the AO has not invoked the provisions of Section 44AD(6) as the assessee has failed to produce the books of account.
Therefore, we do not find any merit in the plea of the learned Authorised Representative of the assessee. Now, coming to the provisions of the Section 144, we find that best judgment assessment can be made if the assessee has failed to comply (with) the notice issued under Section 142(1) of the Act. The relevant provisions of Section 144(1) are reproduced as under: (b) fails to comply with all the terms of a notice issued under Sub-section (1) of Section 142 or fails to comply with a direction issued under Sub-section (2A) of that section, or Provided further that it shall not be necessary to give such opportunity in a case where a notice under Sub-section (1) of Section 142 has been issued prior to the making of an assessment under this section." Since, in the case before us, notice under Section 142(1) was issued by the AO and the assessee has failed to comply with the same, therefore, the AO was justified in completing the assessment under Section 144 and since the contract rates are less than Rs. 40 lakhs, i.e., Rs. 18,84,672, the AO was also justified in applying the net profit rate at 8 per cent in the absence of books of account and other materials in view of the specific deeming provisions of Section 44AD,(1). This view finds support from the decision of the Hon'ble Rajasthan High Court in the case of CIT v. Sriram & Co. (2001) 250 ITR 169 (Raj). The decisions relied on by the learned Authorised Representative of the assessee are distinguishable and not applicable to the facts of the assessee's case.
6.1 As regards interest under Section 234A, we find that the learned Authorised Representative of the assessee has not mentioned anything about the same in his written submission, therefore, in the absence thereof and also in the absence of any other material available on record, we do not find any merit in this regard in the ground taken by the assessee.
7. In this view of the matter and for the discussions made hereinabove, we decline to interfere in the order passed by the CIT(A) but with different reasons and accordingly, all the grounds taken by the assessee are rejected.
8. In the result, the appeal filed by the assessee is dismissed.N.S. SAINI, A.M.: 2nd Jan., 2004 I have the benefit of going through the proposed order drafted by the learned brother, JM. Though I agree with the conclusion as arrived at in respect of ground No. 5 of the appeal, but I have not been able to agree with the decision proposed in the draft order in respect of ground Nos. 1 to 4 of the above appeal. I have also discussed the matter with him at considerable length but neither the learned brother is yielding to my point of view nor I am able to persuade myself to agree with this part of this draft order. Accordingly, to come, but of this cul de sac and with the leave and consent of my learned brother, I proposed to write this note of dissent to express my views on the matter.
2. This is an appeal against the order of the CIT(A) in whose order the order of the AO has merged. The ground Nos. 1 to 4 are directed against the decision of the CIT(A) upholding the assessment made by the AO under Section 144 of the Act and the decision of the CIT(A) to confirm the determination of income from contract works at the rates specified in Sub-section (1) of Section 44AD. The assessee in his written submission explained the circumstances in which the notices of the AO could not be complied with and the same are negligence of the then Authorised Representative of the assessee and lack of knowledge of the IT laws and its assessment procedures on the part of the assessee being new to the IT Department. It was also submitted by the assessee that after this lapse on the part of the then Authorised Representative of the assessee, the assessee has changed him and appointed a new person to assist him in his tax matters and assessments. In the above circumstances, the submission of the assessee is to the effect that the CIT(A) should have admitted the books of account of the assessee either by examining himself or by calling a remand report from the AO. For this, reliance was placed on the decision in the case of Shankar Khandasari Sugar Mills v. CIT (1992) 193 ITR 669 (Kar) wherein it was held that appeal being a continuation of original proceedings, when the ITO has not considered all relevant materials or documents for making best judgment assessment, the appellate authority should consider the relevant materials produced before him, though belatedly. The approach of the authorities should be liberal in applying the procedural provisions of the Act, because the basis of tax under the Act is to levy tax, as far as possible, on the real income. Hence, in the above circumstances, the CIT(A) was not justified in not entertaining the books of account produced before him. Further, it is observed that Sub-section (6) has been introduced in the Act w.e.f. 1st April, 1998 and during the year under consideration, i.e., the asst. yr. 1995-96, there was no such requirement in. the Act to get the accounts audited for claiming income at an amount less than the amount determined by the rate envisaged in Section 44AD(1). Hence, the CIT(A) was not justified in not entertaining the books of account produced before him on the ground that such books of account were not audited as required under Section 44AD(6). In view of the above, I do not find any justification on the part of the CIT(A) for not admitting the books of account produced before him and upholding the assessment made by the AO to the best of his judgment in absence of books of account. It may be pertinent to point out here that the Hon'ble Supreme Court in the case of CIT v. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC), has held that the power of first appellate authority is coterminous with that of the AO and he can do what the AO can do and also direct him to do what he has failed to do.
3. The next submission of the assessee is to the effect that the CIT(A) without disputing the contention of the assessee that no notice under Section 142(1) or post-default show-cause notice was ever served on the assessee, upheld the assessment under Section 144 as in the opinion of the CIT(A) after issuance of notice under Section 143(2), the above were not required. The assessee has denied the service of notice under Section 142(1) specifically in ground No. 4 of the appeal before the CIT(A). The CIT(A) has not stated that this denial of the assessee was erroneous. The view of the CIT(A) is clearly contrary to the express provisions contained in proviso to Section 144(1) itself. Thus, in my considered opinion, the CIT(A) was not justified on this count also in upholding the assessment for the reason stated in the appellate order.
4. Now, no material was produced before us by the Revenue to show that either notice under Section 142(1) or post-default show-cause notice was actually served on the assessee before completion of the assessment under Section 144. I find that recently the Hon'ble Delhi High Court in the case of CIT v. Dr. K.C. Verma (2003) 132 Taxman 598 (Del), has affirmed the decision of the Tribunal annulling the assessment order in the similar facts and circumstances. The Hon'ble Delhi High Court has observed (at page No. 599) that one of the grounds urged before the appellate authority was that since the assessee had not received any notice under Section 142(1) of the Act, the assessment orders passed under Section 144 of the Act, were illegal. The CIT(A) did not agree with the assessee on the question of service of notice under Section 142(1) of the Act, but he deleted the additions made by the AO to the income returned. Being aggrieved, the assessee carried the matter in further appeal to the Tribunal. By the impugned order, the Tribunal has come to the conclusion that no notice under Section 142(1) of the Act was served on the assessee and, therefore, the assessment order passed under Section 144 was unsustainable. While holding so, the Tribunal has observed that the service of the first notice by affixture was bad inasmuch as procedure prescribed for effecting service by affixture was not followed by the AO and as regards second notice, nothing was brought on record to show that it was served on the assessee. The Hon'ble High Court observing that the Department could not produce any evidence to show that any notice was, in fact, served on the assessee, confirmed the finding of the Tribunal to the effect that there was no service of notice on the assessee before completing the assessments and upheld the decision of the Tribunal. Similar to the facts of the above case, in the instant case, though in the order of the assessment the AO has stated that notice under Section 142(1) was issued and served but the assessee has denied the receipt of the notice before the CIT(A) and before us. The Revenue could not bring on record, any material before us to show that the notice was, in fact, served upon the assessee. In the circumstances, I am constrained to hold that no notice under Section 142(1) was served on the assessee. In view of this, in my considered opinion, the impugned assessment order is unsustainable and is liable to be quashed.
5. Further, I find that the Mumbai Bench of this Tribunal in the case of Ajit Singh Rai Singh v. ITO (2002) 76 TTJ (Mumbai) 969 has observed at p. 973 as under: "Moreover, as we have already discussed, regarding provisions of Section 44AE, we are of the opinion that once income declared by the assessee was found lower than that specified in Sub-section (2) thereupon the AO should proceed to make an assessment under Section 143(3) as provided in Section 44AE(6). The language of Sub-section (6) empowers the AO to make an assessment of the total income as well as determine loss, if any. This assessment requires to be made under Section 143(3) and not under Section 44AE. Therefore, we are of the opinion that under the circumstances of the case when the declared income was lower than that specified in section, supported by P&L a/c attached with the returns then the provisions of Section 44AE have been wrongly invoked." I find that the provisions of Section 44AE and Section 44AD are similarly worded. Similar to the facts of the above case, in the instant case also, the assessee has declared profit lesser than the amount specified in Section 44AD(1) and has maintained books of account and the AO has invoked the provisions of Sub-section (1) of Section 44AD as books of account were not produced before him. Respectfully following the above decision of the Tribunal, in my considered opinion, the provisions of Section 44AD is an option available to the assessee and when the assessee chose to declare lesser profit, then the AO has to make an assessment under Section 143(3) and the invoking of the provisions of Section 44AD(1) in the circumstances was erroneous.
However, as the assessee has also failed to substantiate his income declared by not producing the books of account before the AO, therefore, to meet the ends of justice, I restore this issue back to the file of the AO for fresh adjudication as per the provisions of law after allowing adequate opportunity of hearing to the assessee. I also direct the assessee to promptly comply with the notices of the AO by producing books of account.
6. Before parting with this dissent note, I would like to observe that the Hon'ble Rajasthan High Court in CIT v. Sriram & Co. (2001) 250 ITR 169 (Raj), held that Tribunal was justified in further allowing depreciation under Section 32 as deduction from the net profit estimated by the AO by applying rate of 8 per cent. As the allowance of depreciation out of the estimated net profit is not the issue before us, hence, the decision of the Hon'ble Rajasthan High Court in the above case is found not applicable in the instant case.
7. I further find that almost in the similar facts and circumstances in the case of Sri Sanjay Kr. Singh v. ITO in ITA Nos. 138 & 139/Gau/2002 for the asst. yrs. 1994-95 and 1995-96, this Bench of the Tribunal has vide its order dt. 5th Sept., 2003, restored back the issue to the file of the AO for fresh determination of income from contract works so that the assessment can be completed on real income earned by the assessee as per books of account. Accordingly, in the instant case, I restore back the above issue to the file of the AO and direct him to complete the assessment as above.
8. In the result, the appeal filed by the assessee is partly allowed for the statistical purposes.
In this appeal there is difference of opinion between the Members of the Bench, therefore, the following questions are referred to the Hon'ble President of the Tribunal under Section 255(4) of the IT Act, 1961, for opinion of the Third Member. The points of difference are as under: "1. Whether, on the facts and in the circumstances of the case and keeping in view that the assessee has not challenged the finding of the CIT(A) that the assessee has failed to fulfil both the conditions as required under Section 44AA and Section 44AB of the Act, it can be said that the assessee has produced the books of account either before the AO or before the CIT(A)? 2. Whether, on the facts and in the circumstances of the case and in view of ground No. 4 taken before the CIT(A) that "for that the order under Section 144 is void and illegal as the necessary condition as to the service of show-cause notice in absence of notice under Section 142(1) as prescribed by the proviso to Section 144(1) has not been fulfilled and, therefore, the order should be annulled", it can be held that no notice under Section 142(1) was served on the assessee when the assessee has not challenged the service of said notice issued under Section 142(1) at any stage? 3. Whether, on the facts and in the circumstances of the case, the assessment made under Section 144 at an income of Rs. 1,83,030 including the disputed income from contract work Rs. 1,50,734 is in accordance with rule of audi alteram partem and as per provision of Section 144 of the IT Act or the assessment should be restored back to the AO for fresh adjudication as per provision of law?"N.S. SAINI, AM. : 13th Jan., 2004 In this appeal there is difference of opinion between the Members of the Bench, therefore, the following questions are referred to the Hon'ble President of the Tribunal under Section 255(4) of the IT Act, 1961, for opinion of the Third Member. The points of difference are as under: "1. Whether, on the facts and circumstances of the case, the CIT(A) was justified in observing that "mere maintenance of books of account" does not give to the appellant immunity from the application of the provisions of Section 44AD(1) in view of Section 44AD(6), which was inserted in the statute w.e.f. 1st April, 1998 only and not applicable to the present year under appeal and, therefore, in arriving at the conclusion that provisions of Section 44AD(1) were rightly applied by the AO? 2. Whether, on the facts and circumstances of the case and where it is not in dispute that no post-default show-cause notice was issued to the assessee, was the CIT(A) justified in observing "since the appellant has filed the return of his income, issue of notice under Section 143(2) was found sufficient for the completion of his case and issue of notice under Section 142(1) is not a precondition for completion of the case under Section 144 in such situation" and, therefore, in concluding that the action of the AO in completing the assessment under Section 144 was valid? 3. Whether, on the facts and circumstances of the case, the -decision of the Hon'ble Rajasthan High Court in the case of CIT v. Sriram & Co. (2001) 250 ITR 169 (Raj), has any application in deciding the issues under the instant appeal before the Tribunal? 4. Whether, on the facts and circumstances of the case, keeping in view the reasons and circumstances explained by the assessee for which he could not comply with the notices of the AO and keeping in view that the Tribunal is the highest fact-finding authority under the scheme of the IT Act, 1961, and keeping in view that the supreme purpose is to determine the correct taxable income, in the instant, should the Tribunal allow the assessee an opportunity to be assessed on the income determined as per his books of account or should block the bona fide effort of the assessee? 5. Whether on the facts and circumstances of the case and keeping in view the fact that no material was brought before the Tribunal by the Revenue to show that the notice under Section 142(1) was actually served on the assessee when the assessee has denied the receipt of the same and keeping in view the decision of the Hon'ble Delhi High Court in the case of CIT v. Dr. K.C. Verma (2003) 132 Taxman 598 (Del), can the Tribunal presume that the notice under Section 142(1) was served on the assessee? 6. Whether, on the facts and circumstances of the case and keeping in view the decision of the Tribunal in the case of Ajit Singh Rai Singh v. ITO (2002) 76 TTJ (Mumbai) 969 and of this Bench of the Tribunal in the case of Sanjay Kr. Singh v. ITO in ITA Nos. 138 and 139/Gau/2002 vide order dt. 5th Sept., 2003, the issue of determination of income from contract works should be restored to the file of the AO or not? 7. Whether, on the facts and circumstances of the case, when the CIT(A) has given a finding that the assessee has maintained the accounts but has not got the same audited under Section 44AE as required in his opinion by the provisions of Section 44AD(6), can it be said that the assessee has not challenged the finding of the CIT(A) that the assessee has failed to fulfil both the conditions as required under Section 44AA and Section 44AB of the Act? 8. Whether on the facts and circumstances of the case, keeping in view the ground No. 4 raised before the CIT(A) and ground No. 2 raised before the Tribunal, can it be held that the assessee has not challenged the service of notice issued under Section 142(1) at any stage?"PHOOL SINGH, J.M. (AS THIRD MEMBER): 20th Oct., 2004 The Hon'ble President, Tribunal, exercising his powers under Section 255(4) of the IT Act, 1961, (hereinafter referred to as the "Act"), has referred the following points of difference as framed by the respective Members who heard the above appeal, to me as Third Member : "1. Whether, on the facts and circumstances of the case and keeping in view that the assessee has not challenged the finding of the CIT(A) that the assessee has failed to fulfil both the conditions as required under Section 44AA and Section 44AB of the Act, it can be said that the assessee has produced the books of account either before the AO or before the CIT(A)? 2. Whether, on the facts and in the circumstances of the case and in view of ground No. 4 taken before the CIT(A) that "For that the order under Section 144 is void and illegal as the necessary condition as to the service of show-cause notice in absence of notice under Section 142(1) as prescribed by the proviso to Section 144(1) has not been fulfilled and, therefore, the order should be annulled", it can be held that no notice under Section 142(1) was served on the assessee when the assessee has not challenged the service of said notice issued under Section 142(1) at any stage? 3. Whether, on the facts and in the circumstances of the case, the assessment made under Section 144 at an income of Rs. 1,83,030 including the disputed income from contract work Rs. 1,50,734 is in accordance with rule of audi alteram partem and as per provision of Section 144 of the IT Act or the assessment should be restored back to the AO for fresh adjudication as per provision of law?" "1. Whether, on the facts and circumstances of the case, the CIT(A) was justified in observing that "mere maintenance of books of account" does not give to the appellant immunity from the application of the provisions of 44AD(1) in view of Section 44AD(6), which was inserted in the statute w.e.f. 1st April, 1998 only and not applicable to the present year under appeal and, therefore, in arriving at the conclusion that provisions of Section 44AD(1) were rightly applied by the AO? 2. Whether, on the facts and circumstances of the case and where it is not in dispute that no post-default show-cause notice was issued to the assessee, was the CIT(A) justified in observing "since the appellant has filed the return of his income, issue of notice under Section 143(2) was found sufficient for the completion of his case and issue of notice under Section 142(1) is not a precondition for completion of the case under Section 144 in such situation" and, therefore, in concluding that the action of the AO in completing the assessment under Section 144 was valid? 3. Whether, on the facts and circumstances of the case, the decision of the Hon'ble Rajasthan High Court in the case of CIT v. Sriram & Co. (2001) 250 ITR 169 (Raj), has any application in deciding the issues under the instant appeal before the Tribunal? 4. Whether, on the facts and circumstances of the case, keeping in view the reasons and circumstances explained by the assessee for which he could not comply with the notices of the AO and keeping in view that the Tribunal is the highest fact-finding authority under the scheme of the IT Act, 1961, and keeping in view that the supreme purpose is to determine the correct taxable income, in the instant, should the Tribunal allow the assessee an opportunity to be assessed on the income determined as per his books of accounts or should block the bona fide effort of the assessee? 5. Whether on the facts and circumstances of the case and keeping in view the fact that no material was brought before the Tribunal by the Revenue to show that the notice under Section 142(1) was actually served on the assessee when the assessee has denied the receipt of the same and keeping in view the decision of the Hon'ble Delhi High Court in the case of CIT v. Dr. K.C. Verma (2003) 132 Taxman 598 (Del), can the Tribunal presume that the notice under Section 142(1) was served on the assessee? 6. Whether, on the facts and circumstances of the case and keeping in view the decision of the Tribunal in the case of Ajit Singh Rai Singh v. ITO (2003) 76 TTJ (Mumbai) 969 and of this Bench of the Tribunal in the case of Sanjay Kr. Singh v. ITO in ITA Nos. 138 and 139/Gau/2002 vide order dt. 5th Sept., 2003, the issue of determination of income from contract works should be restored to the file of the AO or not? 7. Whether on the facts and circumstances of the case, when the CIT(A) has given a finding that the assessee has maintained the accounts but has not got the same audited under Section 44AB as required in his opinion by the provisions of Section 44AD(6), can it be said that the assessee has not challenged the finding of the CIT(A) that the assessee has failed to fulfil both the conditions as required under Section 44AA and Section 44AB of the Act? 8. Whether, on the facts and circumstances of the case, keeping in view the ground No. 4 raised before the CIT(A) and ground No. 2 raised before the Tribunal, can it be held that the assessee has not challenged the service of notice issued under Section 142(1) at any stage?" In order to appreciate the respective arguments of the learned representatives of the parties on the above points of difference, it will be appropriate to reproduce certain basic facts which are appearing on the record.
2. The assessee, an individual, engaged in civil contract works, had filed its return of income for the year 1995-96 showing total income of Rs. 1,07,870, out of which the net profit of Rs. 75,575 was returned by the assessee out of contract works of Rs. 18,84,672 executed during the relevant period. The AO noted that the net profit rate comes to 4.01 per cent and he further noted that gross receipt of contract work was duly supported by TDS certificates but expenses claimed by the assessee at Rs. 18,09,097 were not supported with bills and vouchers. He noted further that notices under Sections 143(2) and 142(1) of the Act were duly issued and served upon the assessee asking him to furnish the books of account, details of each expenses as claimed with bills and vouchers and to furnish bank account along with total deposits/withdrawals and other information relating to family members, outstanding liability, etc. The AO noted that there was no compliance from the side of the assessee and no adjournment petition was received.
The case was again listed for hearing on 19th Nov., 1997 but again there was no compliance. The case was again re-fixed for 18th Dec., 1997 but the assessee failed to turn up. Another opportunity appears to have been given by the AO on 29th Jan., 1998 but the assessee failed to comply with the terms of the letter. As the assessee did not comply with the notices, the AO proceeded to complete the assessment and he applied the provisions of Section 44AD(1) of the Act and worked out the income from contract work at Rs. 1,50,734 as against Rs. 75,575 shown by the assessee and certain other additions were made which were not in dispute.
3. The assessee preferred appeal before the learned CIT(A) and several pleas were raised. The contention of the learned counsel for the assessee before the CIT(A) was that the assessee was maintaining books of account and his case did not come within the purview of Section 44AD of the Act. The CIT(A) observed that mere maintenance of books of account did not give immunity to the assessee from the obligation of the provisions of Section 44AD because as per provision of Section 44AD(6), the assessee could have claimed lower rate of profit than prescribed in the aforesaid section provided accounts were maintained as required under Section 44AA and duly audited in terms of Section 44AB of the Act. According to the learned CIT(A), the assessee had not fulfilled such conditions of Section 44AD(6) of the Act and thus, the AO was justified in applying the provisions of Section 44AD of the Act.
The assessee also raised the plea that the AO was not justified to complete the assessment under Section 144 of the Act because no notice under Section 143(2) (sic 142(1) of the Act was ever served on the assessee. However, the CIT(A) rejected this plea of the assessee by noting that the assessee had filed the return of his income and issue of notice under Section 143(2) was found sufficient for the completion of his case and issue of notice under Section 142(1) was not a precondition for completion of the case under Section 144 of the Act.
This ground was, accordingly, rejected on merit.
4. The appeal came up for hearing before the Tribunal and the learned JM, as appearing from his order, confirmed the action of the learned CIT(A) and dismissed the appeal after noting that the AO had issued various notices under Sections 143(2) and 142(1) of the Act and the assessee failed to produce books of account, details of expenses, vouchers, bank account and other details as called for and the AO was justified to apply the provisions of Section 44AD(1) of the Act. The contention of the assessee was that the provisions of Section 44AD(6) of the Act came into force w.e.f. 1st April, 1998. The learned JM observed that the AO had not invoked that provision and about the validity of the assessment completed under Section 144 of the Act by the AO, the learned JM concluded that the AO was justified as the assessee failed to comply with the notice issued under Section 142(1) of the Act.
5. The learned AM, as against it, concluded that the Department had failed to prove on record that notice under Section 142(1) of the Act or post-default show-cause notice was actually served on the assessee before completion of the assessment under Section 144 of the Act and he was of the view that the assessment order was unsustainable and liable to be quashed but after discussing the provisions of Section 44AD(1), he was of the view that the matter requires fresh scrutiny at the level of the AO where the assessee will produce the books of account and the AO will examine the same after providing an opportunity of being heard.
He, accordingly, allowed the appeal for statistical purposes.
6. On the date of hearing, the learned counsel for the assessee submitted that on identical facts involved in a case of Sanjay Kr.
Singh, the Tribunal, Gauhati Bench, vide its order dt. 5th Sept., 2003, passed in ITA Nos. 138 and 139/Gau/2002 relating to the asst. yrs.
1994-95 and 1995-96, had already set aside the issue to the file of the AO and facts and circumstances of Sanjay Kr. Singh's case were the same and the order of the CIT(A), dt. 21st Dec, 2001, which was in appeal before the Gauhati Bench, copy thereof had been filed before me, is identical to the order of the CIT(A) which is the subject-matter of the present appeal and even it is Mr. L. Nampui, the CIT(A) in both the cases.
7. I have gone through the order of the learned CIT(A) in the case before me as well as in the case of Sanjay Kr. Singh and except the figures, each and every fact and circumstance is the same as in the case of the present assessee and I have also gone through the order of the Bench which constituted the same Members who have passed the dissenting order in the case before me and the same Members on the same facts and circumstances, involved in the case of Sanjay Kr. Singh, have restored the matter back to the file of the AO. The learned AM had made reference to this order in para 7 of his order and his observation is correct and the Bench should have restored the issue in the case in hand once they have passed the order in the case of Sanjay Kr. Singh much earlier to the dissenting order recorded in the present case and it could have avoided the situation of dissenting order and hearing before the Third Member. It is really unfortunate that the same members of the same Bench on the identical facts and circumstances have decided the issue by restoring the issue to the file of the AO but in the case in hand it had taken a different view. In view of these facts, the matter has to go back to the file of the AO as done by the learned AM, as it will be in conformity to the order of the same Bench sitting at Guwahati which is based on similar facts and circumstances.
8. Apart from it, I am also of the view that the learned GIT(A) had also not decided the issue properly before him because the assessee has raised ground No. 4 in the grounds of appeal before the CIT(A) that no notice under Section 142(1) was ever served upon the assessee. A definite finding was to be recorded on that point which has not been done by the learned CIT(A) as he has simply observed that notice under Section 143(2) of the Act was issued and that was sufficient for completion of assessment of the case and the issue of notice under Section 142(1) of the Act was not a precondition for completion of the case under Section 144 in such situation. The learned CIT(A) overlooked the following second proviso of Section 144 and the same is produced below: (a) fails to make the return required under Sub-section (1) of Section 139 and has not made a return or a revised return under Sub-section (4) or Sub-section (5) of that section, or (b) fails to comply with all the terms of a notice issued under Sub-section (1) of Section 142 or fails to comply with a direction issued under Sub-section (2A) of that section, or (c) having made a return fails to comply with all the terms of a notice issued under Sub-section (2) of Section 143.
the AO, after taking into account all relevant material which the AO has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment: Provided that such opportunity shall be given by the AO by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment: Provided further that it shall not be necessary to give such opportunity in a case where a notice under Sub-section (1) of Section 142 has been issued prior to the making of an assessment under this section." A perusal of the above goes to show that in case a notice under Sub-section (1) of Section 142 has been issued, then the AO shall not give post-default opportunity to the assessee before making the assessment under Section 144 of the Act. Nothing was brought by the Department on record before the Bench to show that the AO issued notice under Section 142(1) of the Act or served the same. Although an attempt has been made by the learned Departmental Representative by filing the copy of notice and acknowledgement issued by the AO but it cannot be taken on record by me for consideration because it was not presented by the learned Departmental Representative before the Bench seized with the issue. The fact remains that in the absence of any material produced by the Department before the Bench to show the issuance and service of notice under Section 142(1) of the Act by the AO before making assessment under Section 144 of the Act, it was in the fitness of things to restore the matter back to the file of the AO.9. Further, provisions of Section 44AD(6) of the Act were not on the statute for the asst. yr. 1995-96 and the learned CIT(A) was not justified to ignore the books of account being produced before him by the assessee and to observe that the assessee had not complied with the provisions of Section 44AD(6) of the Act. The assessee was not expected to comply with the provisions because in the asst. yr. 1995-96, the same was not on the statute book. In view of this, the learned CIT(A) should have considered the books of account himself or should have restored the matter back to the file of the AO and the learned AM was justified in doing the same by restoring the matter back to the file of the AO.10. In the end, I do agree with the final finding recorded by the learned AM in restoring the matter though his earlier finding was that the assessment order was liable to be quashed and instead of quashing the same, he subsequently restored the matter back to the file of the AO for providing an opportunity.
11. So far as framing of point of difference is concerned, the only one point was involved as to whether the order of the CIT(A) should be confirmed or the matter should go back to the file of the AO to work out the income from civil contract after providing opportunity to the assessee to produce books of account and other related documents as pleaded by him before the CIT(A). Instead of referring this one question, the learned Members have framed as many as 11 questions-three by the learned JM and eight by the learned AM. All these points stand covered by the observation recorded by me in the above paragraphs and no necessity for recording the specific finding on each and every point referred by the respective members as actually there is no such points of difference but each of the respective Members have placed their respective views taken in their respective orders.
12. With this observation let the matter go back to the Bench for deciding the appeal as per law.