Devaraj & Others Vs ITO (Madras High Court)
Madras High Court held that Income Tax Appellate Tribunal cannot review its earlier order under Section 254(2) of the Income Tax Act. Notably jurisdiction of Tribunal is restricted only to rectify error and not review.
Facts- A scheme to provide dhotis and sarees for the poor was formulated by the Tamil Nadu State Government. Tamil Nadu Textile Corporation (TNTC), a state subsidiary, was entrusted with the responsibility of procuring them. A large scam erupted in the scheme, which led to a search being conducted by the Income Tax Department in the premises of TNTC. During the search proceedings, details of various third parties, including the appellant, pertaining to some transactions were found out, which resulted in the initiation of proceedings u/s. 158BD of the Act.
Tribunal, by order dated 21.09.2011, on finding that since the transactions of the assessee were clandestine and unlawful, held that it is not possible to compare the case of the assessee to that of a normal business carried on. The profit rate of 2.5% disclosed by the assessee might be acceptable only to a wholesale dealer carrying on the business in a lawful manner. The Tribunal considering the 1/3rd deduction towards expenditure being allowed and the income determined Rs.6,17,00,860/- works out to a profit ratio of 8%, however, came to the conclusion that the profit percentage of 8% may be applicable for an assessee who deals in general textiles, but when the appellant/assessee is a supplier of uniform clothes in a government scheme it may be excessive.
