AUROBINDO SANITARY STORES Vs. CIT

JUDGEMENT

(1.) THIS is an appeal under section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') filed by the appellant against the order dated 12 -3 -2002 of the Income Tax Appellate Tribunal, Cuttack Bench, Cuttack in I.T.A. No. 301/CTK/1997.

(2.) THE facts briefly are that the appellant is a partnership firm consisting of three partners, namely, Sri Harish Chandra Bhol, Sri Rabindranath Bhol and Sri Jitendranath Bhol. The appellant carries on the business of Sanitary Stores and for the assessment year 1989 -90 the appellant filed a return on 31 -7 -1989 disclosing a total income of Rs.78,000. The return was accompanied by a trading and profit and loss account but no balance sheet. A letter dated 14 -9 -1989 was issued by the assessing officer to the appellant to file a balance sheet and in response to the said letter, a balance sheet was filed by the appellant enclosing the details of the sundry creditors and sundry debtors. The return was processed under section 143(1)(a) of the Act and intimation was sent to the assessee on 16 -1 -1990 raising a demand of only Rs. 48. Thereafter, on 16 -6 -1993 a search and seizure operation was conducted in the case of Sri R.N. Bhol, the partner of the appellant firm. A survey operation under section 133(a) of the Act was also conducted in the business premises of the appellant and certain books of account of the appellant were also seized from the custody of Sri R.N. Bhol. Action for re -assessment was initiated under section 147 of the Act for assessing the income which has escaped assessment for the assessment year 1989 -90 and a notice was issued to the appellant under section 148 of the Act on 9 -11 -1993 to furnish a return of its income for the assessment year 1989 -90. The appellant intimated the assessing officer by a letter dated 20 -9 -1994 to treat the original return filed on 31 -7 -1989 as the return in response to the notice under section 148 of the Act. The appellant was heard through its partner Sri R.N. Bhol and an order of re -assessment was passed under section 143(3)/147 of the Act determining the total income of the appellant at Rs. 3,79,090 for the assessment year 1989 -90. In the said re -assessment order, the Assistant Commissioner of Income Tax, Investigation Circle -II, Cuttack (hereinafter referred to as 'the assessing officer') held: (i) that the book result of the appellant can never be relied upon as true and correct and as such the total income of the appellant ought to be determined on estimate by invoking section 145 of the Income Tax Act, and (ii) that an investment of Rs. 2,70,421 made by the appellant remained unexplained and is treated as deemed income of the appellant as per the provision of section 69 of the Act.

(3.) WHEN this appeal against the impugned order dated 12 -3 -2002 of the Tribunal was admitted on 11 -12 -2003, the court formulated the following two substantial questions of law which arise for decision in this case.