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OD- 18 IN THE HIGH COURT AT CALCUTTASpecial Jurisdiction (Income Tax)ORIGINAL SIDE IA No.GA/1/2022 ITAT/3/2021 M/S. SHEO SHAKTI COKE INDUSTRIES -Versus-ASSISTANT COMMISSIONER OF INCOMETAX, CIRCLE-37, KOLKATA Appearance:Mr. Mainak Bose, Adv.Mr. Arijit Chakrabarti, Adv.Mr. Kajal Ray, Adv....for the appellant.Mr. Amit Sharma, Adv.,. . . for the respondent. BEFORE: The Hon’ble JUSTICE T.S. SIVAGNANAM -And- The Hon’ble JUSTICE HIRANMAY BHATTACHARYYA Date : 8[th] April, 2022.This appeal filed by the assessee under Section 260A ofthe Income Tax Act, 1961 (the ‘Act’ in brevity) is directedagainst the order dated 14[th] September, 2021 passed by the IncomeTax Appellate Tribunal, “A” Bench, Kolkata (in short the ‘Tribunal’) in ITA No.2597/Kol/2019 for the assessment year 2015-16. The assessee has raised the following substantial questions of law for consideration : “I) Whether the Income Tax Authority has the authority toassume the percentage of gross profit of an assesseeon being unsatisfied as to the correctness of theaccounts?assume the percentage of gross profit of an assesseeon being unsatisfied as to the correctness of theaccounts?II)Whether the decision of the Income Tax Authority insummarily reducing the percentage of gross profit ofthe assessee is perverse, contrary to and withoutauthority of law?”summarily reducing the percentage of gross profit ofthe assessee is perverse, contrary to and withoutauthority of law?” We have heard Mr. Mainak Bose, learned standing counselappearing for the appellant/assessee and Mr. Amit Sharma, learnedcounsel appearing for the respondent/revenue. The short question involved in the instant case iswhether the percentage of gross profit as determined by theCommissioner of Income Tax (Appeals) – 11, Kolkata [CIT(A)] at 40per cent was justified or not. The tribunal confirmed the orderpassed by the CIT(A) and has not given any independent finding.The assessee filed the return of income on 30[th] September, 2013 andthe case was selected for scrutiny and notice under Section 143(2)was served and, thereafter, notice under Section 142(1) withrequisitions was issued and served on the assessee. One of theissues before the assessing officer was with regard to the claim for deduction made by the assessee under Section 80IC of the Act.The assessing officer by an order dated 22[nd] February, 2016rejected the entire claim of deduction made by the assessee underSection 80IC of the Act. The assessee carried the matter in appealbefore the CIT(A) and the CIT(A) after considering the manner inwhich the assessing officer proceeded to deal with the matterfollowed the order passed by the assessing officer and held thatthe conclusion of the assessing officer to be incorrect and,accordingly, rejected the same. Such finding has been rendered inparagraph 21 of the order passed by the CIT(A) which is quotedbelow : “I have carefully considered the rival contentions andsubmissions. The issue that comes out starkly is that theappellant’s sales have been made in cash for which thereis no reliance evidence. Looking at the assessment order,I form an impression that the ld. AO has based hisapproach on presumption and has got swayed away by hisown approach, so much so, that he has ignored evidencesfurnished by the appellant during the assessmentproceedings. I find that he was incorrect in concludingthat the appellant’s business did not exist at all. Healso erred in holding that there is were no purchases orsales and that all that had been presented by theappellant was a mere hog wash to claim the exemption u/s80IC of the Act. To this extent, the ld. AO’s conclusionsare found to be incorrect and are rejected”. “I have carefully considered the rival contentions andsubmissions. The issue that comes out starkly is that theappellant’s sales have been made in cash for which thereis no reliance evidence. Looking at the assessment order,I form an impression that the ld. AO has based hisapproach on presumption and has got swayed away by hisown approach, so much so, that he has ignored evidencesfurnished by the appellant during the assessmentproceedings. I find that he was incorrect in concludingthat the appellant’s business did not exist at all. Healso erred in holding that there is were no purchases orsales and that all that had been presented by theappellant was a mere hog wash to claim the exemption u/s80IC of the Act. To this extent, the ld. AO’s conclusionsare found to be incorrect and are rejected”. After having come to such a conclusion, the CIT(A)proceeded to examine as to whether the claim of gross profit madeby the assessee at 57.01 per cent was justified or not. TheCIT(A)took note of certain details as well as the gross profit ofthe sister concerns and held that the books of accounts submittedby the assessee were revealed the true and correct picture of theprofit earned by the assessee. Accordingly, the books wererejected under Section 143(3) of the Act. Thereafter, in paragraph31.1 of the order the CIT(A) holds that 40 per cent should betaken as the gross profit. The assessee was in appeal against thesaid order before the tribunal stating that their claim at 50 percent ought to have been accepted. The revenue was in appeal beforethe tribunal stating that the order of the assessing officershould have been affirmed by the CIT(A) and the appeal by theassessee ought to have been dismissed. The assessee is before usby way of this appeal. The question would be whether the assesseecould have been deniedof any appeal filed as against thedirection of the entire claim for deduction under Section 80IC bythe assessing officer. The settled legal principle is that theappellant cannot be put to a situation worse than what they wouldhave been if they have not preferred appeal. In this regard, weplace reliance on the decision of the Hon’ble Supreme Court inBenarasi & Others Vs. Ram Phal, reported in (2003) 9 SC 606. Inthe instant case had the CIT(A) not proceeded further after concluding that order of the assessing officer was incorrect, inall probabilities the matter would not have travelled this far. Infact, we find that the CIT(A), while coming to the conclusion thatthe order of the assessing officer is incorrect, would point outthat the finding of the assessing officer was on presumptions andthat he ignored the evidences furnished by the assessee during theassessment proceedings. If such was the conclusion of the CIT(A),the question would be whether the books could have been rejectedunder Section 145(3) of the Act. This inconsistency also has ledto a decision by the CIT(A) which is also based on certainpresumptions or the opinion of the CIT(A). It appears that theassessee was not put on specific notice that the gross profitshould have been determined at 40 per cent qua their claim ofgross profit at 57.01 per cent. Thus, the best course that shouldhave been adopted by the CIT(A) was to remand the matter back tothe assessing officer to re-do the assessment and issue certainguidelines or on the other hand directed the assessing officer tosubmit a remand report. The CIT(A) did not adopt either of thesetwo courses but proceeded to determine the gross profit once againby way of guess work which in our opinion was incorrect in so faras the assessing officer had completed the assessment. As pointedout earlier the tribunal has not given any independent reason foraffirming the order of the CIT(A). Thus, taking note of thepeculiar facts and circumstances of the case, we are of the considered view that the matter should be remanded back to theassessing officer to consider only the aspect as to whether thedenial of the gross profit to the extent of 17.01 per cent by theCIT(A) as affirmed by the tribunal was correct or not. In thisregard, the assessee should be given an opportunity by theassessing officer to place records and documents to justify thatthe gross profit as determined by them at 57.01 per cent wascorrect.We make it clear that whatever relief granted by theCIT(A), namely, determination of gross profit at 40 per centcannot be altered and the same stands affirmed and what remains isonly to consider as to whether the remaining amount of grossprofit, namely, 17.01 per cent of which relief was denied to theassessee by the CIT(A) which requires to be considered by theassessing officer.For all the above reasons, the appeal is allowed. Theorder passed by the tribunal is set aside and the matter isremanded to the assessing officer for fresh consideration in termsof the observations and directions contained therein. Theassessing officer shall afford an opportunity of personal hearingto the authorised representative of the assessee and permit themto produce the books and records and, thereafter, pass a reasonedorder on merits in accordance with law. Consequently, thesubstantial questions of law are left open. In light of the above, the appeal (ITAT/3/2022) standsdisposed of. Consequently, the connected application (GA/1/2022)stands closed. (T.S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.) S.DasAR