C B AGGARWAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this appeal filed under s. 260A of the IT Act, 1961 (for short, the Act), the assessee has prayed for determination of the following question of law :

(2.) THE appellant-assessee is carrying on the business of sale and purchase of lottery tickets on commission basis. He did not file return of income for the asst. yrs. 1988-89 to 1994-95 till his premises were searched on 29th Oct., 1993, in terms of s. 132(1) of the Act and notices were issued by the Asstt. CIT, Investigation Circule-I, Patiala (hereinafter described as the AO). In the course of search, cash book, ledger and vouchers were seized from the premises of the appellant. He made a surrender under s. 132(4) of the Act of Rs. 1,00,000 each for the asst. yrs. 1993-94 and 1994-95. Thereafter, he filed return of income for the asst. yrs. 1989-90, 1991-92, 1992-93, 1993-94 and 1994-95. In the return filed on 30th March, 1994, for the asst. yr. 1993-94, the appellant declared an income of Rs. 1,35,000 which included an amount of Rs. 1,00,000 surrendered at the time of search. The AO issued notice to the assessee under s. 143(2) of the Act. He appeared before the AO along with his advocate and submitted reply dt. 9th Nov., 1994 stating therein that the books of account for the relevant period were in the possession of the Department. Thereupon, the AO supplied him photostat copies of the documents. However, no further return was filed by him. Vide letter dt. 12th Oct., 1994, the AO asked the assessee to disclose the basis on which he had estimated his income at Rs. 35,000. He was also asked to furnish the statement indicating the total turnover, gross profit, gross expenses and net profit of the business and indicate the basis on which the said amount was computed. In his reply dt. 9th Nov., 1994, the assessee stated that the income of Rs. 35,000 was given out on estimate basis because the books of account were not available.

(3.) THE Commissioner of Income-tax (A), Patiala [for short, CIT(A)] allowed the appeal of the assessee and granted him relief to the extent of Rs. 9,98,000 by assigning the following reasons :