COMMISSIONER OF INCOME TAX Vs. AERO CLUB

JUDGEMENT

(1.) This is an appeal filed by the Department relating to the assessment year 1994-95 and 1998-99 in which the following substantial questions of law arise : "(a) Whether, on the facts and in the circumstances of the case, the Tribunal was correct, both on facts and in law, in deleting the addition made by the AO, in the absence of books of account, by estimating the income of the assessee on the basis of the financial results of the succeeding year?

(2.) Briefly delineated, the facts of the case relevant to the assessment year 1994-95 are as follows.

(3.) The assessee-respondent firm was engaged in the business of manufacturing and trading of footwear under the brand name of "WOODLAND" and "WOODS" during the relevant financial year. The said firm was constituted during the financial year 1992-93 as a partnership firm. On 21.07.1999, a survey operation under Section 133A of the Act was conducted at the business premises of the assessee firm and its accountants M/s A.K. Dua and Associates. During the course of the said survey, it came to the notice of the Department that the assessee had not filed its return of income after the assessment year 1993-94. Necessary legal proceedings were initiated against the assessee for non-filing of the returns of the assessment years 1994-95, 1995-96, 1996-97, 1997-98, 1998-99 and 1999-2000. A notice under Section 148 of the Act after recording reasons was issued and served upon the assessee on 25.11.2000 requiring it to file its return of income within the time allowed. The said notice was not complied with and no return was filed by the assessee. Again, a notice under Section 142 of the Act along with questionnaire dated 12.07.2001 was issued to the assessee. Thereafter, again on 29.11.2001 and 12.12.2001, notices under Section 143(2) were issued to the assessee. Yet again, notice under Section 142 dated 14.01.2002 was issued and served upon the assessee. The assessee finally filed its return of income for the assessment year 1994-95 on 17.01.2005 declaring taxable income of ' 6,60,883/-. In the said return, trading results were declared as audited on 01.10.1996, however no audit report under Section 44AB was annexed with the said return. The Assessing Officer took the view that such a return of income was defective and since the return was neither filed within the time allowed under Section 139(1) nor under Section 148 of the Act, no sanctity could be attached to such a return of income.