1. These two appeals filed by the department relate to the same assessee and so they are heard together and disposed of by this common order, for the sake of convenience.
2. The assessee is an individual deriving income from commission and interest. The assessment years involved in these appeals are 1975-76 and 1976-77. The assessee followed the year ended 31st March as his previous year. Formerly, the assessee was assessed to income-tax at Goa up to and including the assessment year 1972-73. It appears that no assessments were made for the assessment years 1973-74 and 1974-75, and that the assessee shifted his residence to Bombay. Returns of income were filed before the ITO, Bombay, on 22-3-1978 declaring income of Rs. 14,310 for the assessment year 1975-76 and Rs. 7,616 for the assessment year 1976-77. The assessee did not maintain any books of accounts in respect of his commission business. The assessee filed profit and loss account and the balance sheet prepared from the bank accounts for both the years, which showed sundry creditors of Rs. 75,000 for the assessment year 1975-76 and sundry creditors of Rs. 1,50,000 for the assessment year 1976-77. The ITO observed that the assessee had no evidence to show that he was carrying on commission business and if so the extent of the income therefrom. Further, he observed that the assessee did not explain as to how the opening capital is accumulated.
Further, no confirmatory letters were filed in support of the loans shown as sundry creditors. In this view of the matter, he proposed to add the sum of Rs. 75,000 in the assessment year 1975-76 and Rs. 1,30,000 in the assessment year 1976-77 and submitted the draft assessment orders accordingly to the IAC under Section 144B of the Income-tax Act, 1961.
3. Before the IAC, the assessee filed revised profit and loss account and balance sheets showing sundry creditors of Rs. 10,000 in the first year and Rs. 65,000 in the second year. The IAC ignored the revised statements on the ground that they were not before the ITO. However, he approved the addition of Rs. 75,000 in the first year and gave a set off of the same amount in the second year, so that he approved an addition of Rs. 55,000 only in the second year.
4. The assessee appealed to the Commissioner (Appeals) and contended that the action of the ITO and the IAC was not justified. It was explained that the assessee had no accounts and had left Goa and came to a new place. The assessment records from Goa was not before the ITO at the time he made out the draft assessment orders. Further, it was pointed out that the original profit and loss account was made in a hurry and was obviously incorrect because the cash in hand and banks shown at Rs. 8,667 in the original balance sheet for the year 1976-77 was less than the bank balance of Rs. 9,667 itself, as shown in the revised statement filed before the IAC. It was the case of the assessee that the original profit and loss accounts were not prepared with due care and attention and were incorrect and so the assessments should not have been based on such incorrect statements. The Commissioner (Appeals) considered the above contentions and found that there was material discrepancy between the balance sheets as filed before the ITO and as filed before the IAC which required reconciliation after proper scrutiny of the bank accounts and personal examination of the assessee, if necessary. Hence, he set aside the assessments and directed the ITO to do the same afresh in accordance with law proceeding from the stage of filing the returns.
5. Shri A.R. Viswanathan, the learned representative for the department, urged before us that the Commissioner (Appeals) was not justified in his decision. He strongly contended that the assessee was already given four opportunities on 31-3-1978, 28-10-1978, 17-11-1978 and 7-2-1979 before the two assessments completed on 18-9-1979.
According to him the assessee had sufficient opportunity to prove his case and so the Commissioner (Appeals) should not have given a further chance to the assessee.
6. Shri Anil Harish, the learned representative for the assessee, on the other hand, supported the order of the Commissioner (Appeals). He stated that the earlier profit and loss accounts were obviously incorrect as was manifest from the figures stated earlier. Further, the assessee was trying to get the confirmatory letters from the creditors but was finding it difficult because of his displacement from Goa to Bombay. He stated that he had since obtained the confirmatory letters which could be produced before the ITO for his scrutiny. Further, he stated that the assessments were drafted without looking to the past records of the assessee which had not yet reached the !TO from Goa. He pointed out that the IAC was not inclined to give further time to the assessee because the assessment was getting time-barred. Under the circumstances he urged that in the interest of justice, the order passed by the Commissioner (Appeals) deserved to be upheld.7. We have considered the contentions of both the parties as well as the facts on record. We find force in the contentions raised for the assessee. We find that there is an apparent conflict between the two sets of profit and loss accounts-one filed before the ITO, before he made the draft assessment order, and the other filed before the IAC, before the assessments were finalised. We agree with the Commissioner (Appeals) that the discrepancy required reconciliation. It cannot be said that the first one was always correct especially when the cash and bank balance therein was less than the bank balance itself. Further, the records of the assessee were not before the ITO and they were relevant materials for determining the capital accumulation in the hands of the assessee. In view of the above reasons, we hold that the Commissioner (Appeals) was quite justified in the decision that he has taken. Hence, we uphold his order for both the years.