ITO, Sikar V. TRILOK CHAND ROOP NARAIN & PARTY, Sikar

ITA 1502/JPR/1996

• Counselvise Citation: 150223114 RSA 1996
• Duration Of Justice: 17 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 1994-1995
• Appeal Filed On: 06-07-1996
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: G M MEHTA
• Keywords: Opportunity of being heard; Revised return
• Section: 145; 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH : JAIPUR BEFORE SHRI RAJPAL YADAV AND SHRI R.C. SHARMA ITA NOS. 1502 & 2161/JP/1996 ASSTT. YEARS : 1994-95 & 1995-96 THE INCOME TAX OFFICER, VS. TRILOKCHAND ROOP NARAI N & PARTY WARD-2, SIKAR. SIKAR. PAN NO. - - (APPELLANT) (RESPONDENT) REVENUE BY : SHRI D.C. SHARMA, DR ASSESSEE BY : SHRI G.M. MEHTA. AR DATE OF HEARING : 27.05.2014 DATE OF PRONOUNCEMENT : 30.05.2014 ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE PRESENT TWO APPEALS ARE DIRECTED AGAINST THE O RDERS OF THE LD. CIT(A), JAIPUR DATED 23 RD MAY, 1996 AND 29 TH SEPTEMBER, 1996 PASSED FOR ASSESSMENT YEARS 1994-95 AND 1995-96 RESPECTIVELY. 2. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT TH E LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION TO RS. 1.00 LAC OUT OF THE TRADING ADDITION MADE BY THE ASSESSING OFFICER OF RS. 7,60,642/- AND RS. 5,1 3,572/- IN A.Y. 1994-95 AND 1995-96 RESPECTIVELY. 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN AOP CONSTITUTED BY 59 MEMBERS HAVING UNEQUAL SHARES. IT IS A LIQUOR CONTRACTOR AND OBTAINED LICENSE FOR SELLING COUNTRY LIQUOR, IMFL/BEER IN TH E AREA OF BANDIKUI. IT HAS FILED ITS RETURN OF INCOME ON 29/6/1995 AND 27/10/1 995 DECLARING INCOME OF RS. 85,850/- AND RS. 57,110/- IN A.Y. 1994-95 AND 1 995-96 RESPECTIVELY. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT FOR BOTH THE ASSESSMENT YEARS. THE LD. ASSESSING OFFICER HAD ISS UED NOTICE U/S 143(2) OF THE I.T. ACT, 1961, WHICH WAS DULY SERVED UPON THE ASSESSEE. ON AN ANALYSIS OF THE ACCOUNTS, THE ASSESSING OFFICER WAS NOT SATI SFIED WITH THE CORRECTNESS OF THE ACCOUNTS, THEREFORE, HE REJECTED THEM AND ES TIMATED THE INCOME IN THE TRADING OF LIQUOR. HE MADE THE ADDITION OF RS. 7,60 ,642/- IN A.Y. 1994-95 IN THE COUNTRY LIQUOR ACCOUNT. WHEREAS IN A.Y. 1995-96 , A SUM OF RS. 3,08,003/- AND RS. 2,05,569/- WAS ADDED IN THE COUN TRY LIQUOR ACCOUNT AND IMFL/BEER ACCOUNT RESPECTIVELY. 4. DISSATISFIED WITH THE ADDITION, THE ASSESSEE CAR RIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). THE LD. FIRST APPELLATE AUTH ORITY HAD CONCURRED WITH THE ASSESSING OFFICER WITH REGARD TO THE REJEC TION OF BOOK RESULT BUT DID NOT APPROVE THE ESTIMATION OF THE ADDITION. SHE RES TRICTED THE ADDITION TO RS.1.00 LAC EACH IN BOTH THE ASSESSMENT YEARS. 3 5. DISSATISFIED WITH THE ORDER OF THE LD. CIT(A), R EVENUE CAME UP IN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL HAS DISMIS SED THE APPEAL OF THE REVENUE IN BOTH THE ASSESSMENT YEARS VIDE ORDER DAT ED 27/2/2004. THE ASSESSEE HAS ALSO FILED APPEAL, WHICH WERE ALLOWED. THE ADDITION WAS REDUCED TO RS. 70,000/- IN EACH OF THE YEAR. DISSAT ISFIED WITH THE TRIBUNALS ORDER, THE REVENUE WENT IN APPEAL BEFORE THE HONBL E HIGH COURT. THE HONBLE HIGH COURT HAS REMITTED THIS ISSUE BACK TO THE TRIBUNAL VIDE ITS ORDER DATED 21/1/2014 PASSED IN THE CASE OF CIT VS. RAM SINGH & ORS. REPORTED IN 363 ITR PAGE 417. IN THIS WAY, THESE AR E THE APPEALS AMONGST 83 APPEALS REMITTED BACK BY THE HONBLE HIGH COURT TO THE TRIBUNAL FOR READJUDICATION. 6. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. ADMITTEDLY, THE BOOKS OF THE ASSESSEE ARE NOT RELIABLE, THEY ARE REJECTED. THIS ACTION OF THE ASSESSING OFF ICER HAS BEEN UPHELD BY THE LEARNED CIT(APPEALS). THE ASSESSEE DID NOT CHAL LENGE REJECTION OF BOOK RESULTS BEFORE THE ITAT AND THE DISPUTE TRAVELLED T O THE HON'BLE HIGH COURT WAS WITH REGARD TO ESTIMATION OF INCOME AFTER REJEC TION OF BOOKS. THUS, THE NEXT QUESTION ARISES, IS WHAT SHOULD BE THE ESTIMAT ED ADDITION REQUIRED TO BE MADE BY THE ASSESSING OFFICER TO THE INCOME OF THE ASSESSEE. FOR THIS PURPOSE, SUB-SECTION (3) OF SECTION 145 CONTEMPLATE S THAT ASSESSING OFFICER 4 MAKES AN ASSESSMENT IN THE MANNER PROVIDED IN SEC. 144 OF THE INCOME-TAX ACT, 1961. THIS SECTION READS AS UNDER: SECTION 144. (1) IF ANY PERSON (A) FAILS TO MAKE THE RETURN REQUIRED [UNDER SUB-SECTIO N (1) OF SECTION 139] AND HAS NOT MADE A RETURN OR A REVISED RETURN UNDER SUB- SECTION (4) OR SUB-SECTION (5) OF THAT SECTION, OR (B) FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSU ED UNDER SUB- SECTION(1) OF SEC. 142 [OR FAILS TO COMPLY WITH A D IRECTION ISSUED UNDER SUB-SECTION (2A) OF THAT SECTION ] OR (C) HAVING MADE A RETURN, FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUB-SECTION (2) OF SECTION 143, THE [ASSESSING OFFICER], AFTER TAKING INTO ACCOUNT ALL RELEVANT MATERIAL WHICH THE ASSESSING OFFICER HAS GATHERED, [SHALL, A FTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, MAKE THE AS SESSMENT] OF THE TOTAL INCOME OR LOSS TO THE BEST OF HIS JUDGMENT AN D DETERMINE THE SUM PAYABLE BY THE ASSESSEE ON THE BASIS OF SUCH ASSESS MENT. PROVIDED THAT SUCH OPPORTUNITY SHALL BE GIVEN BY TH E ASSESSING OFFICER BY SERVING A NOTICE CALLING UPON THE ASSESSEE TO SH OW S\CAUSE, ON A DATE AND TIME TO BE SPECIFIED IN THE NOTICE, WHY TH E ASSESSMENT SHOULD NOT BE COMPLETED TO THE BEST OF HIS JUDGMENT : PROVIDED FURTHER THAT IT SHALL NOT BE NECESSARY TO GIVE SUCH OPPORTUNITY IN A CASE WHERE A NOTICE UNDER SUB-SECTION (1) OF S ECTION 142 HAS BEEN ISSUED PRIOR TO THE MAKING OF AN ASSESSMENT UNDER T HIS SECTION.] (2) THE PROVISIONS OF THIS SECTION AS THEY STOOD IM MEDIATELY BEFORE THEIR AMENDMENT BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 94 5 OF 1988), SHALL APPLY TO AND IN RELATION TO ANY ASS ESSMENT FOR THE ASSESSMENT YEAR COMMENCING ON THE IST DAY OF APRIL, 1988, OR ANY EARLIER ASSESSMENT YEAR AND REFERENCES IN THIS SECT ION TO THE OTHER PROVISIONS OF THIS ACT SHALL BE CONSTRUED AS REFERE NCES TO THOSE PROVISIONS AS FOR THE TIME BEING IN FORCE AND APPLI CABLE TO THE RELEVANT ASSESSMENT YEAR.} 7. A BARE PERUSAL OF THIS SECTION WOULD SUGGEST THA T IN ORDER TO ESTIMATE INCOME, LEARNED ASSESSING OFFICER HAS TO EXERCISE H IS DISCRETION WHICH SHOULD BE IN CONSONANCE WITH BEST OF HIS JUDGMENT. HON'BLE HIGH COURT WHILE REMANDING THIS APPEAL TO THE ITAT HAS CONSIDE RED THIS ASPECT IN PARAGRAPH NO. 24 AND OBSERVED AS UNDER: IT IS WELL SETTLED THAT IN A BEST JUDGMENT ASSESSM ENT, THERE IS ALWAYS A CERTAIN DEGREE OF GUESS WORK. THE AUTHORITIES CONCE RNED SHOULD MAKE A HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN TH E BEST JUDGMENT ASSESSMENT AND SHOULD NOT ACT ARBITRARILY. IT IS EQ UALLY TRUE THAT ASSESSEE HIMSELF TO BE BLAMED AS HE DID NOT SUBMIT PROPER ACCOUNTS. 8. APART FROM THE ABOVE PROPOSITION, WE ARE CONSCI OUS OF THE FACT THAT IN VARIOUS AUTHORITATIVE PRONOUNCEMENTS, IT HAS BEEN P ROPOUNDED THAT IN MAKING A BEST JUDGMENT ASSESSMENT, THE ASSESSING OF FICER MUST NOT ACT DISHONESTLY OR VINDICTIVELY OR CAPRICIOUSLY. HE MUS T MAKE WHAT HE HONESTLY BELIEVE TO BE A FAIR ESTIMATE OF THE PROPER FIGURE OF ASSESSMENT AND FOR THIS PURPOSE HE MUST BE ABLE TO TAKE INTO CONSIDERATION LOCAL KNOWLEDGE, 6 REPUTATION OF THE ASSESSEE ABOUT HIS BUSINESS, THE PREVIOUS HISTORY OF THE ASSESSEE OR THE SIMILARLY SITUATED ASSESSEE. IT IS ALSO PERTINENT TO MENTION THAT JUDGMENT IS A FACULTY TO DECIDE MATTER WITH WISDOM, TRULY AND LEGALLY. JUDGMENT DOES NOT DEPEND UPON THE ARBITRARY, CAPRIC E OF AN ADJUDICATOR, BUT ON SETTLED AND INVARIABLY PRINCIPLES OF JUSTICE. TH US, IN A BEST JUDGMENT, EVEN IF, THERE IS AN ELEMENT OF GUESS WORK, IT SHOULD NO T BE A WILD ONE, BUT SHALL HAVE REASONABLE NEXUS TO THE AVAILABLE MATERIAL AND CIRCUMSTANCES OF EACH ASSESSEE. APPRAISING OURSELVES WITH THESE FUNDAMENT ALS, LET US CONSIDER THE FACTORS DISCUSSED BY THE ASSESSING OFFICER IN THE A SSESSMENT WHILE MAKING THE LUMP SUM ADDITION. 9. DURING THE COURSE OF HEARING, WE HAVE DIRECTED T HE LEARNED COUNSEL FOR THE ASSESSEE TO COMPILE THE DETAILS IN TUBULAR FORM EXHIBITING THE TURNOVER ACHIEVED BY THE ASSESSEE; G.P. DECLARED; SHORT LICE NSE FEES PAID BY THE ASSESSEE ETC.. HE COMPILED THE DETAILS AND SUBMITTE D TO US. THE DETAILS READ AS UNDER:- S.NO. ISSUES/DETAILS/QUERY A.Y. 1994-95 A.Y. 199 5-96** 1 LIQUOR CONTRACT FOR THE AREA BANDIKUI BANDIKUI 2 PERIOD OF LIQUOR CONTRACT 01 - 04 - 1993 TO 31 - 03 - 1994 01 - 04 - 1994 TO 31 - 03 - 1995 3 NET PROFIT AS PER PROFIT AND LOSS A/C 152,861.00 74,022.00 4 RETURNED INCOME 85,850.00 57,110.00 5 ASSESSED INCOME 570,680.00 6 TURNOVER ACHIEVED 7 COUNTRY LIQUOR 11,321,746.00 16,080,772.00 IMFL/BEER RETAIL 16,235,875.00 15,998,183.00 7 GROSS PROFIT (AMOUNT & %) GROSS PROFIT % GROSS PROFIT % COUNTRY LIQUOR 7,205,807.00 63.64 9,822,881.00 61.08 IMFL/BEER RETAIL 1,591,591.00 9.80 1,394,249.00 8.72 8 SHORT LICENSE F EE COUNTRY LIQUOR 6,904,810.00 7,825,551.00 IMFL/BEER RETAIL NIL 1,539,642.00 9 GP AFTER SHORT LICENSE FEE % % COUNTRY LIQUOR 300,997.00 2.66 1,997,331.00 12.42 IMFL/BEER RETAIL 1,591,591.00 9.80 (145,393.00) (0.91) 10 NET PROFIT (BEFORE SHORT LICENSE FEE) 7,057,671.00 25.61 9,439,215.00 29.42 11 NET PROFIT (AFTER SHORT LICENSE FEE) 152,861.00 0.55 74,022.00 0.23 12 TURNOVER/GP ADOPTED BY AO TURNOVER % TURNOVER % COUNTRY LIQUOR 11,321,746.00 9.00* 16,080,772.00 63.00 IMFL/BEER RETAIL 16,235,875.00 9.80 15,998,183.00 10.00 13 ADDITIONS MADE BY AO COUNTRY LIQUOR 760,642.00 308,003.00 IMFL/BEER NIL 205,569.00 OTHER DISALLOWANCE (U/S 68) 14 ADDITIONS SUSTAINED BY CIT(A) COUNTRY LIQUOR 100,000.00 100,000.00 IMFL/BEER RETAIL 100,000.00 8 OTHER DISALLOWANCES 15 ITAT COUNTRY LIQUOR 75,000.00 75,000.00 IMFL/BEER RETAIL 75,000.00 ON AN ANALYSIS OF THE ABOVE DETAILS AND IN THE LIGH T OF THE FINDING RECORDED BY THE LD. REVENUE AUTHORITIES BELOW, WE ARE OF THE VIEW THAT THE ASSESSEE HAS DECLARED GROSS PROFIT IN THE COUNTRY LIQUOR AT 63.64% IN A.Y. 1994-95 AND AT 61.08% IN A.Y. 1995-96. IT HAS PAID A SHORT LICENSE FEES OF RS. 15,39,642/- IN A.Y. 1995-96 IN THE IMFL/BEER ACCOUN T. SIMILARLY, IN THE COUNTRY LIQUOR ACCOUNT, IT HAS ALSO PAID SUBSTANTIA L AMOUNT OF SHORT LICENSE FEES. THE G.P. HAS BEEN REDUCED SUBSTANTIALLY AFTER PAYMENT OF SHORT LICENSE FEES. THE LD. A.O. WHILE EXAMINING THE ACCOUNTS OF ASSESSEE APPEARS TO HAVE IGNORED THIS ASPECT. THE SHORT LICENSE FEES HAS WIP ED OUT A SUBSTANTIAL PART OF THE G.P.. IT IS A TRADING EXPENDITURE, IT IS A MAND ATORY LEVY UNDER THE EXCISE REGULATION OF THE STATE GOVT. IF AN ASSESSEE FAILED TO LIFT THE MINIMUM QUOTA AGREED WITH THE EXCISE DEPARTMENT THEN, HE HAS TO C OMPENSATE THE EXCISE DEPARTMENT WITH THE GUARANTEED MONEY OF EXCISE. THE REFORE, LOOKING INTO ALL THESE DETAILS, WE ARE OF THE VIEW THAT THE LD. FIRS T APPELLATE AUTHORITY HAS RIGHTLY FORMED ITS OPINION THAT THE ADDITION OF RS. 1.00 LAC IN EACH OF THE YEAR WOULD MEET THE END OF JUSTICE. AFTER GOING THROUGH THE ORDER OF THE LD. CIT(A), WE DO NOT SEE ANY REASON TO INTERFERE WITH THE IMPUGNED ORDER. 9 10. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. 11. THE ORDER PRONOUNCED IN THE OPEN COURT ON 30/5/ 2014. SD/- SD/- ( R.C. SHARMA ) ( RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30/05/2014 *RANJAN COPY FORWARDED TO: 1. THE APPELLANT- THE INCOME TAX OFFICER, WARD-2, SIKAR. 2. THE RESPONDENT- TRILOKCHAND ROOP NARAIN & PARTY , SIKAR. 3. THE CIT 4. CIT(APPEALS) 5. THE DR 6. GUARD FILE (ITA NOS. 1502 & 2161/JP/1996) BY ORDER A.R., JAIPUR.