The Avinash Chalana & Co., Bhopal V. M/s ACIT 1(2), Bhopal

CO 102/IND/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8538 (ITAT-INDORE)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 17-05-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 29-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R N GUPTA
• Assessee Lawyers: MRIDULA BAJPAI
• Keywords: Business income
• Section: 143(3); 56; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AALFA4929P I.T.A.NO. 570 /IND/201 2 A.Y. : 2008-09 ACIT, 1(2), BHOPAL VS. M/S.AVINASH CHALANA & CO.,G-2/119, GULMOHAR COLONY, TRILANGA, BHOPAL APPELLANT RESPONDENT PAN NO. : AALFA4929P C.O.NO.102/IND/2012 (ARISING OUT OF I.T.A.NO. 570/IND/2012) A.Y. : 2008-09 M/S.AVINASH CHALANA & CO.,G-2/119, GULMOHAR COLONY, TRILANGA, BHOPAL CROSS OBJECTOR VS. ACIT, 1(2), BHOPAL RESPONDENT APPELLANT BY : S MT. MRIDULA BAJPAI, CIT DR RESPONDENT BY : SHRI R. N. GUPTA, CA -: 2: - 2 DATE OF HEARING : 1 7 . 0 4 .201 3 DATE OF PRONOUNCEMENT : 17 . 0 5 .201 3 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINS T THE ORDER OF CIT(A) DATED 28.9.2012 FOR THE ASSESSMENT YEAR 2008 -09. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PE RUSED. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF RETAIL SALE OF COUNTRY LIQUOR, INDI AN MADE FOREIGN LIQUOR (IMFL) AND BEER IN THE SHOPS ALLOTTED IN THE DISTRICT OF BALAGHAT, BHOPAL AND RAISEN DURING THE YEAR UNDER C ONSIDERATION. THE ASSESSEE FURNISHED ITS RETURN OF INCOME FOR A. Y. 2008-09 ON 27.09.2008 SHOWING TOTAL INCOME AT RS. 60,08,903/-. THE CASE WAS SELECTED FOR SCRUTINY BY ISSUING NOTICE U/S 143(2) AND ASSESSMENT U/S 143(3) WAS COMPLETED ON 10.12.2010 DETERMINING TAXA BLE INCOME AT RS. 1,33,12,880/-. THE ASSESSING OFFICER NOTED THA T THE ASSESSEE FIRM HAD SHOWN TOTAL SALES AT RS. 34,18,37,223/- AND NET PROFIT AFTER ALLOWING SALARY TO PARTNERS WAS SHOWN AT RS. 59,64 ,037/- WHICH GIVES -: 3: - 3 A NET PROFIT RATE OF 1.74 % . THE ASSESSEE HAD ALSO SHOWN INTEREST ON FDR AT RS 1,76,507/-. DURING THE YEAR UNDER CONSIDE RATION, THE ASSESSEE HAS ALLOTTED LICENSES FOR RUNNING SHOPS IN THE DISTRICTS OF BALAGHAT, BHOPAL AND RAISEN FOR RETAIL SALE OF LIQU OR AND THE LICENSE FEE FOR THE YEAR PAID WAS RS. 22,18,81,367/-. THE ASSE SSING OFFICER NOTICED THAT THE NET PROFIT RATE OF 1.74 % SHOWN BY THE ASSESSEE WAS ON A VERY LOW SIDE. THE ASSESSING OFFICER FURTHER OBSE RVED THAT THE ASSESSEE HAD SHOWN ALL THE SALES MADE IN CASH AND C ASH MEMOS WERE NOT MAINTAINED. THE ASSESSEE STATED BEFORE THE ASSE SSING OFFICER THAT ITS BUSINESS WAS TOTALLY CONTROLLED AND GOVERNED BY EXCISE RULE AND THE EXCISE DEPARTMENT HAD DAY TO DAY CONTROL ON THE BUSINESS OF THE ASSESSEE THE CONTRACTOR HAD TO DISPLAY THE SIGN BOA RD IN HINDI INDICATING THE SELLING PRICE OF THE LIQUOR. THE ASS ESSEE SOLD LIQUOR AT THOSE RATES. IT WAS FURTHER SUBMITTED THAT THE EXCI SE OFFICERS KEEP ON VISITING INSPECTING THE LIQUOR SHOP TO ENSURE THAT THE CONTRACTOR DOES NOT CHARGE PRICE MORE THAN THE DISPLAYED. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE SUBMISSION OF THE ASSESS EE OBSERVING THAT MERE DISPLAY OF THE SIGN BOARD DOES NOT INDICATE TH AT THE SALES WERE MADE AT THE DISPLAYED PRICES. THERE IS NO PROVISION IN THE STATE EXCISE ACT OR RULES REQUIRING THE EXCISE AUTHORITIES TO CO NTROL THE SALE PRICE OF -: 4: - 4 THE LIQUOR. A LIQUOR CONTRACTOR IS TO DETERMINE TH E SALE PRICE OF THE LIQUOR AT HIS OWN FREE WILL. THE ASSESSING OFFICER CONCLUDED THAT SINCE CASH MEMOS WERE NOT ISSUED FOR THE LIQUOR SALE, THE RATE CHARGED BY THE ASSESSEE FROM ITS CUSTOMERS CANNOT BE VERIFIED WITH THE RATES ACCOUNTED FOR BY IT IN ITS BOOKS OF ACCOUNT MAINTAI NED. THUS, THE SALES OR LIQUOR ARE NOT VERIFIABLE AND, THEREFORE, PROVIS IONS OF SECTION 145(3) ARE CLEARLY ATTRACTED IN THIS CASE. ACCORDINGLY, TH E ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND E STIMATED THE SALE OF LIQUOR AT TWO TIMES OF LICENSE FEE OF RS. 22,18,81, 367/-, WORKING OUT TO RS. 44,37,62,734/- AS AGAINST SALE OF RS. 34,18,37, 223/-SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. HE APPLIED NET PR OFIT RATE AT 3 % ON THE ESTIMATED SALES OF RS. 44,37,62,734/- WORKING O UT NET PROFIT AT RS. 1,33,12,882/- AND ACCORDINGLY, ASSESSED THE INCOME OF THE ASSESSEE AT RS. 1,33,12,882/-. THE ASSESSING OFFICER HAS ALSO R EFERRED TO THE DECISIONS IN THE CASES OF SHRI BADRIPRASAD BHAGWAND AS & CO. VS. CIT (1995) 82 TAXMAN 109, 111 (MP) AND ACIT VS. GENDALA L HAZARILAL AND CO., (2003)31 ITC 310 (MP). 2. BY THE IMPUGNED ORDER, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO APPLY NET PROFIT RATE AT 1.77 % AS DISCLOSED BY THE ASSESSEE AND ALSO DIRECTED TO ACC EPT THE -: 5: - 5 DISCLOSED TURNOVER IN THE BOOKS OF ACCOUNT. HOWEVER , NO FINDING HAS BEEN RECORDED BY THE LD.CIT(A) WITH RE GARD TO REJECTION OF BOOKS OF ACCOUNT BY THE ASSESSING OFFI CER U/S 145(3). THE PRECISE OBSERVATION OF THE CIT(A) WAS A S UNDER :- 3.4 I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS OF THE APPELLANT. FOR THE SAKE OF BREVI TY, IT MAY BE MENTIONED THAT THE FACTS AND THE REASONS MENTIO NED IN THE ASSESSMENT ORDER FOR A. Y. 2008-09 UNDER CONSID ERATION BY THE ASSESSING OFFICER FOR REJECTING THE BOOKS OF ACCOUNTS AND ESTIMATING THE NET PROFIT AT 3 % ON ESTIMATED T URNOVER AT TWO TIMES OF THE LICENSE FEE PAID ARE IDENTICAL TO THE FACTS AND REASONS GIVEN IN EARLIER ASSESSMENT YEARS 2006-07 & 2007-08. THE ASSESSMENT ORDER OF ASSESSMENT YEAR 20 08- 09 IS VERBATIM THE SAME AS WERE OF A.Y. 2006-07 & A.Y. 2007-08 EXCEPT THE CHANGE IN FIGURES. AS POINTED OU T BY THE AR OF THE APPELLANT, THE ISSUE INVOLVED IN THESE GR OUNDS OF APPEAL WAS CONSIDERED BY THE HON'BLE ITAT IN APPELLANTS OWN CASE FOR ASSESSMENT YEAR 2006-07 & A. Y. 2007-0 8. THE HON'BLE ITAT IN APPELLANTS OWN CASE FOR ASSESSMENT YEAR 2006-07 IN I.T.A.NO. 78/IND/2010 -: 6: - 6 ORDER DATED 15.06.2011 HELD AS UNDER : SIMILARLY. THE HON'BLE ITAT IN A. Y. 2007-08 IN ITA NO.116/IND/ 2011 IN ORDER DATED 13.04.2012 HELD AS UNDER: 4. THUS WE DIRECT THE ASSESSING OFFICER TO COMPUTE BUSINESS INCOME BY APPLYING NET PROFIT RATE OF 1.77 % ON THE DISCLOSED TURNOVER OF THE ASSESSEE. 5. AS FAR AS INTEREST INCOME IS CONCERNED THAT IS TO BE SEPARATELY ADDED IN TOTAL INCOME AS INCOME FROM OTHER SOURCES AS THE SAME HAS NOTHING TO DO WITH THE LIQUOR BUSINESS OF THE ASSESSEE. FINALLY, THE APPEAL OF THE REVENUE IS ALLOWED IN PART. SIMILARLY, THE HON'BLE I.T.A.T. IN ASSESSMENT YEAR 2007-08 IN I.T.A.NO. 116/IND/2011 IN ORDER DATED 13.04.2012 HELD AS UNDER : IF THE TOTATLITY OF FACTS IS ANALYZED WE FIND T HAT SINCE FOR THE ASSESSMENT YEAR 2006-07 THE NET PROFIT RATE WAS DIRECTED TO BE APPLIED AT THE RATE OF -: 7: - 7 1.77 % ON THE DISCLOSED TURNOVER OF THE ASSESSEE, THEREFORE, UNLESS AND UNTIL DIFFERENT FACTS ARE BROUGHT ON RECORD, THERE IS NO REASON TO DEVIATE FROM THE NET PROFIT RATE. IN THE IMPUGNED ORDER THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO ADOPT THE NET PROFIT RATE OF 1.43 %, THEREFORE, THE ORDER OF THE CIT(A) IS MODIFIED TO THIS EXTENT RESULTING INT O PARTLY ALLOWING THE APPEAL OF THE REVENUE. FINALLY THE APPEAL OF THE REVENUE IS PARTLY ALLOWE D . FROM THE ABOVE DECISION OF THE HON'BLE I.T.A.T., IT IS CLEAR THAT THE HON'BLE I.T.A.T. HAS DIRECTED TO APP LY NET PROFIT RATE OF 1.77 % OF THE DISCLOSED TURNOVER OF THE ASSESSEE AND TO SEPARATELY ADD THE INTEREST INCOME SHOWN BY THE APPELLANT AS INCOME FROM OTHER SOURCES. FACTS OF THIS YEAR ARE SAME AS WERE IN ASSESSMENT YEAR 2006-07 AND ASSESSMENT YEAR 2007-08. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE I.T.A.T. IN APPELLANTS OWN CASE IN EARLIER ASSESSMENT YEARS 2006-07 & 2007- 08, THE ASSESSING OFFICER IS DIRECTED TO COMPUTE -: 8: - 8 BUSINESS INCOME BY APPLYING NET PROFIT RATE OF 1.77 % OF THE DISCLOSED TURNOVER OF THE APPELLANT AND ASSE SS THE INTEREST INCOME OF RS. 1,76,507/- SHOWN BY THE APPELLANT AS INCOME FROM OTHER SOURCES. ACCORDINGLY , THESE GROUNDS ARE PARTLY ALLOWED. 3. AGAINST THE ABOVE ORDER OF CIT(A), BOTH THE ASSESS EE AND REVENUE ARE IN APPEAL BEFORE US. THE GROUNDS TA KEN BY THE REVENUE READ AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN : 1. DELETING ADDITION OF RS. 73,48,815/- MAD E BY THE ASSESSING OFFICER ON ACCOUNT OF UNDISCLOSED PROFIT FROM SALE OF LIQUOR. 2. REJECTING THE ESTIMATION OF SALES BY THE ASSESSING OFFICER AT TWO TIMES THE LICENSE FEES IN ACCORDANCE WITH THE JURISDICTIONAL HIGH COURTS DECISION IN THE CASE OF SHRI BADRI PRASAD BHAGWAN DAS & CO. VS. CIT, (1995) 82 TAXMAN 109, 111 (MP), PARTICULARLY WHEN THE -: 9: - 9 CIT(A) HAD IMPLIEDLY ACCEPTED THE REJECTION OF BOOKS WHILE DIRECTING THAT NET PROFIT MAY BE CALCULATED @ 1.77 % AS AGAINST 1.43 % SHOWN BY THE ASSESSEE. 3. DIRECTING THAT NET PROFIT BE ESTIMATED AT 1.77 % AS AGAINST NET PROFIT RATE OF 3 % WHICH WAS APPLIED BY THE ASSESSING OFFICER IN VIEW OF THE JURISDICTIONAL HIGH COURTS DECISION IN THE CASE OF SHRI BADARI PRASAD BHAGWAN DAS & CO. S. CIT, (1995) 82 TAXMAN 109,111 (MP), 4. IN THE CROSS OBJECTION, THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE ASSESSING OFFICERS FINDIN GS AS TO THE APPLICABILITY OF THE PROVISIONS OF SECTIO N 145(3) ARE UNLAWFUL AND INJUDICIOUS HENCE SUCH FINDINGS BE QUASHED AND THE INCOME AS DISCLOSED BY THE ASSESSEE IN THE RETURN SHOULD BE ACCEPTED. -: 10: - 10 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN LAW AN D NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ASSESS INTEREST INCOME RS. 176507/- SEPARATELY AS THE INCOME FROM OTHER SOURCES. SUCH DIRECTIONS ARE UNLAWFUL AND WITHOUT JURISDICTION HENCE BE QUASHED AND IT BE ALSO HELD THAT THE SAID INTEREST INCOME I S A PART OF THE DISCLOSED BUSINESS INCOME ASSESSABLE U/S 28 AND NOT U/S 56. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE DISALLOWANCE OF PARTNERS REMUNERATION CLAIMED AT RS. 5 LACS IS NOT JUSTIFIED AND, THEREFORE, BE ALLOWED. 5. IT WAS ARGUED BY THE LD. AUTHORIZED REPRESENTATIVE THAT THE ASSESSING OFFICER HAS ESTIMATED SALES AT T WO TIMES OF LICENSE FEE AND APPLIED NET PROFIT RATE OF 3 % AND ASSESSED TOTAL INCOME AT RS. 1,33,12,882/- AS AGAINST INCOME OF RS . 59,64,037/- SHOWN IN THE PROFIT AND LOSS ACCOUNT. H E FURTHER SUBMITTED THAT DUE TO CHANGE IN LIQUOR POLICY, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN APPLYING THE PROPOSITI ON OF LAW AS -: 11: - 11 LAID DOWN BY JURISDICTIONAL HIGH COURT IN THE CASE OF BADRI PRASAD BHAGWANDAS & CO. (SUPRA) AND GENDALAL HAZARI LAL & CO.(SUPRA). HE PLACED ON RECORD THE DECISION OF THE I.T.A.T. COORDINATE BENCH IN THE CASE OF SHANKARLAL BHATEWAR A VS. ITO, IN I.T.A.NO. 113/IND/2010 ORDER DATED 15 TH JUNE,2011, IN SUPPORT OF THE PROPOSITION THAT DECISION OF BADRI P RASAD BAHGWANDAS & CO. WERE NOT APPLICABLE TO THE ASSESSE E. HE FURTHER SUBMITTED THAT THE LD. CIT(A) HAS APPLIED T HE NET PROFIT RATE OF 1.77 % ON THE DISCLOSED TURNOVER BY FOLLOWI NG THE ORDER OF I.T.A.T. IN ASSESSEES OWN CASE AND FURTHER DIRE CTED THE ASSESSING OFFICER TO ASSESS INTEREST INCOME SEPARAT ELY AS INCOME FROM OTHER SOURCES. 6. ON THE OTHER HAND THE LD. CIT DR CONTENDED THAT BECAUSE OF THE ASSESSEES FAILURE TO MAINTAIN THE S ALES BILLS, THE ASSESSING OFFICER WAS JUSTIFIED IN REJECTING TH E BOOKS OF ACCOUNT AND THEREAFTER ESTIMATING THE SALES AS WELL AS PROFIT EARNED THEREON KEEPING IN VIEW NATURE OF ASSESSEES BUSINESS, WHICH WAS LIQUOR TRADE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D FOUND -: 12: - 12 FROM RECORD THAT IN THE ASSESSMENT YEAR 2006-07, BO OKS OF ACCOUNT WERE REJECTED BY THE ASSESSING OFFICER BY I NVOKING PROVISIONS OF SECTION 145(2). IN AN APPEAL FILED BE FORE THE CIT(A), THE CIT(A) AFTER RECORDING HIS REASONS HELD THAT THE PROVISIONS OF SECTION 143(3) WERE NOT APPLICABLE IN THIS CASE AND THE BOOKS OF ACCOUNT HAVE NOT BEEN VALIDLY REJE CTED. THE CIT(A) ALSO DIRECTED TO TAKE THE NET PROFIT RATE OF 1.77 % AS SHOWN BY THE ASSESSEE. IN THIS CASE, THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSING OFFICER HAS REJECTED TH E BOOKS OF ACCOUNT MERELY ON THE GROUND THAT THE CASH VOUCHERS WERE NOT MAINTAINED BY THE ASSESSEE FOR THE SALES MADE. HOWE VER, HE OBSERVED THAT DAILY SALES EFFECTED WERE TAKEN INTO SALES ACCOUNT IN THE REGULARLY MAINTAINED BY THE ASSESSEE . A FURTHER FINDING HAS BEEN RECORDED BY THE LD.CIT(A) TO THE E FFECT THAT THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY MATERIAL ON RECORD TO PROVE THAT EITHER THE SALES HAD BEEN UNDER RECOR DED OR UNACCOUNTED SALES WERE MADE BY THE ASSESSEE. AS PER THE LD. CIT(A), SINCE THE QUANTITY OF LIQUOR IS REGULATED B Y THE EXCISE DEPARTMENT AND NO DISCREPANCY IN STOCK OR QUANTITAT IVE DETAILS WAS FOUND BY THE ASSESSING OFFICER, NON MAI NTENANCE -: 13: - 13 OF SALES COULD NOT ALONE BE A BASIS TO REJECT THE BOOKS OF ACCOUNT. AGAINST THIS ORDER OF CIT(A), THE REVENUE WAS IN APPEAL BEFORE US. THE TRIBUNAL VIDE ITS ORDER DATED 15 TH JUNE, 2011, AFTER GIVING DUE REASONING CONFIRMED THE FIN DINGS OF THE CIT(A) TO THE EFFECT THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING BOOKS OF ACCOUNT. THE TRIBUNAL ALSO OB SERVED THAT THERE WAS UNCONTROVERTED FINDING IN THE ORDER OF CI T(A) TO THE EFFECT THAT THERE WAS NO OPENING OR CLOSING STOCK O F THE GOODS OF THE ASSESSEE AND THE BOOKS WERE REGULARLY MAINTA INED WHICH WAS DULY AUDITED AND VERIFIED AND THE SAME WA S DULY FURNISHED ALONGWITH RETURN. THE TRIBUNAL ALSO FOUND THAT NET PROFIT RATE DISCLOSED BY THE ASSESSEE AT 1.77 % WAS REASONABLE CONSIDERING THE PREVAILING RATES IN THIS TRADE. 8. IN THE ASSESSMENT YEAR 2007-08, THE ASSESSEE HAD SHOWN SALES AT RS. 16.94 LAKHS AND THE NET PROFIT D ECLARED THEREON WORKED OUT AT 1.43 %. THE ASSESSING OFFICER APPLIED NET PROFIT RATE AT 3 % ON ESTIMATED SALES. ON APPEA L, THE LD. CIT(A) HELD THAT THE ASSESSING OFFICER WAS NOT JUST IFIED IN REJECTING THE BOOKS OF ACCOUNT AND DELETED THE ADDI TION. IN AN APPEAL FILED BY THE REVENUE AGAINST THIS ORDER OF C IT(A), THE -: 14: - 14 TRIBUNAL VIDE ITS ORDER DATED 13.4.2012, FOLLOWING ITS EARLIER ORDER FOR ASSESSMENT YEAR 2006-07 DIRECTED TO COMPU TE THE BUSINESS PROFIT BY APPLYING NET PROFIT RATE AT 1.77 % ON THE DISCLOSED TURNOVER OF THE ASSESSEE. THE LD. CIT(A) RECORDED A FINDING TO THE EFFECT THAT THE ASSESSING OFFICER HA S NOT POINTED OUT ANY DEFECT THE DEFICIENCY OR INFIRMITY IN THE E XPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSI NG OFFICER HAD REJECTED THE BOOKS OF ACCOUNT MERELY ON THE GRO UND THAT THE CASH VOUCHERS WERE NOT MAINTAINED BY THE ASSESS EE FOR THE SALES MADE. THE LD. CIT(A) FURTHER OBSERVED THAT TH OUGH THE ASSESSEE DID NOT MAINTAIN ANY CASH VOUCHERS FOR THE SALES OF LIQUOR, THE FACT REMAINS THAT THE DAILY SALES EFFEC TED WERE TAKEN INTO ACCOUNT SALES ACCOUNT AND THE BOOKS OF ACCOUNT REGULARLY MAINTAINED BY THE ASSESSEE. THE LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSING OFFICER HAD NOT BROUGHT ANY MATE RIAL ON RECORD TO PROVE THAT EITHER THE SALES HAD BEEN UNDE R-RECORDED OR UNACCOUNTED SALES WERE MADE BY THE ASSESSEE. 9. IT IS CLEAR FROM THE ORDER OF CIT(A) FOR THE ASSESS MENT YEARS 2006-07 AND 2007-08 THAT CLEAR FINDING HAS BE EN RECORDED WHILE SETTING ASIDE ASSESSING OFFICERS OR DER WITH -: 15: - 15 REGARD TO REJECTION OF BOOKS OF ACCOUNT U/S 145(3). DETAILED JUSTIFICATION HAS BEEN GIVEN BY THE LD.CIT(A) AS DI SCUSSED ABOVE TO SUBSTANTIATE HIS STAND THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. IN AN APPEAL FILED BY THE DEPARTMENT AGAINST THIS FINDING OF CIT (A), AFTER RECORDING DETAILED REASONING, THE TRIBUNAL IN ITS O RDER AS NARRATED ABOVE, UPHELD THE CIT(A)S ACTION FOR REVE RSING ASSESSING OFFICERS ACTION U/S 145(3). HOWEVER, IN THE INSTANT YEAR BEFORE US I.E. ASSESSMENT YEAR 2008-09, THE CI T(A) HAS NOT DEALT WITH THE ISSUE OF REJECTION OF BOOKS OF A CCOUNT BY THE ASSESSING OFFICER U/S 145(3). HE SIMPLY APPLIED THE NET PROFIT RATE OF 1.77 % AS HELD BY THE TRIBUNAL IN ASSESSEE S OWN CASE IN EARLIER TWO YEARS. THIS IS THE REASON THAT ASSES SEE HAD TAKEN THIS GROUND IN CROSS OBJECTION AND ALLEGED THE ACTI ON OF ASSESSING OFFICER FOR INVOKING PROVISIONS OF SECTIO N 145(3). THE TRIBUNAL IN BOTH THESE YEARS ONLY AFTER CONSIDERING CIT(A)S ORDER, WHEREIN DETAILED FINDING WAS GIVEN AGAINST A SSESSING OFFICERS ACTION U/S 145(3), REACHED TO THE CONCLUS ION THAT PROFIT RATE AT 1.77 % SHOULD BE APPLIED. THUS, WITH OUT RECORDING A FINDING BY CIT(A) WITH REGARD TO ASSESS ING OFFICERS -: 16: - 16 ACTION FOR REJECTION OF BOOKS OF ACCOUNT, THE LD. C IT(A) WAS NOT JUSTIFIED IN APPLYING NET PROFIT RATE OF 1.77 %, WH ICH WAS DETERMINED BY THE TRIBUNAL UNDER DIFFERENT FACTS AN D CIRCUMSTANCES, WHEREIN DUE JUSTIFICATION WAS GIVEN BOTH BY CIT(A) AND TRIBUNAL FOR NOT UPHOLDING THE ACTION OF THE ASSESSING OFFICER U/S 145(3). WE FOUND THAT THE ASS ESSEE HIMSELF HAS DECLARED NET PROFIT RATE OF 1.89 % WHER EAS CIT(A) HAS REDUCED THE SAME TO 1.77 %. THERE IS NO JUSTIFI CATION IN THIS ACTION OF THE CIT(A). EVEN THOUGH NO MAJOR DEF ECTS WERE POINTED OUT BY THE ASSESSING OFFICER OTHER THAN THE DEFECTS OF NOT ISSUING THE SALE BILLS, BUT THE FACT REMAINS TH AT SALES OF THE ASSESSEE AS RECORDED IN THE BOOKS OF ACCOUNT WERE N OT VERIFIABLE. THEREFORE, KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE MODIFY THE ORDERS OF BOTH THE LOWER AUTHORITIES AND DIRECT THE ASSESSING OFFICER TO WORK OUT PROFIT OF LIQUOR TRADE BY APPLYING NET PROFIT RATE OF 2 % IN PLACE OF NET PROFIT RATE OF 1.89 % SHOWN BY THE ASSESSEE , WHICH WAS ESTIMATED BY THE ASSESSING OFFICER AT 3 %. ONCE THE BUSINESS PROFIT IS DETERMINED BY ESTIMATING NET PROFIT RATE ON THE SALES, NO FURTHER DEDUCTION CAN BE ALLOWED ON ACCOUNT OF A NY -: 17: - 17 EXPENDITURE INCLUDING EXPENDITURE ON ACCOUNT OF REM UNERATION TO PARTNERS. 10. INTEREST INCOME EARNED ON BANK DEPOSIT IS ASSESSABL E AS INCOME FROM OTHER SOURCES. INTEREST INCOME CAN NOT BE SAID TO BE EARNED OUT OF BUSINESS SALES, THUS, INTE REST INCOME IS ASSESSABLE AS INCOME FROM OTHER SOURCES U/S 56 AND NOT AS BUSINESS INCOME U/S 28 OF INCOME-TAX ACT, 1961 . 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED IN PART, WHEREAS THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 17 TH MAY, 2013. SD/- SD/- (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 17 TH MAY, 2013. CPU* 1516