ITO, Sikar V. HARI SINGH AMAR SINGH & PARTY, Sikar

ITA 152/JPR/1996

• Counselvise Citation: 15223114 RSA 1996
• Duration Of Justice: 18 year(s) 4 month(s) 14 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: 1993-1994
• Appeal Filed On: 15-01-1996
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHASH CHANDRA; D C SHARMA DRS
• 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.1656/JP/1995 & 152/JP/1996 ASSTT. YEARS : 1992-93 & 1993-94 INCOME-TAX OFFICER, VS. M/S. HARI SINGH AMAR SING H & PARTY, CIRCLE-2, SIKAR. JAIPUR. PAN NO. - - (APPELLANT) (RESPONDENT) REVENUE BY : S/SHRI SUBHASH CHANDRA & D.C. SHA RMA, DRS ASSESSEE BY : SHRI GM 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 AT THE INSTAN CE OF REVENUE AGAINST THE ORDERS OF LEARNED CIT(APPEALS) DATED 08.06.1995 AND 03.11. 1993 PASSED FOR ASSESSMENT YEARS 1992-93 AND 1993-94 RESPECTIVELY. THE ASSESSEE IS A N AOP AND A LIQUOR CONTRACTOR. IN THE ACCOUNTING PERIOD RELEVANT TO THESE TWO ASSESSMENT YEARS, IT HAD OBTAINED LICENSE FOR WHOLESALE AS WELL AS RETAIL TRADING OF COUNTRY LIQU OR AND IMFL & BEER BY WAY OF A SUCCESSFUL BIDDING IN THE AUCTION CONDUCTED BY THE EXCISE DEPARTMENT FOR SUJANGARH, LADANU AND DIDWANA AREA. IT HAD FILED RETURNS OF IN COME ON 31.3.1994 AND 30.11.1994 DECLARING AN INCOME OF RS.87,620 AND RS.51,370 IN A SSESSMENT YEARS 1992-93 AND 1993- 94 RESPECTIVELY. THE CASE OF THE ASSESSEE WAS SELEC TED FOR SCRUTINY IN BOTH THE YEARS. LEARNED ASSESSING OFFICER ON AN ANALYSIS OF THE RE CORD REJECTED THE BOOK RESULTS OF THE ASSESSEE. HE ESTIMATED THE INCOME OF THE ASSESSEE B Y APPLYING SECTION 145(2) OF THE 2 INCOME-TAX ACT, 1961. HE MADE AN ADDITION OF RS.8 L ACS AND RS. 15,95,212 IN ASSESSMENT YEARS 1992-93 AND 1993-94 RESPECTIVELY AS AN AD HOC TRADING ADDITION. 2. DISSATISFIED WITH THE ADDITION, ASSESSEE HAD GON E IN APPEAL BEFORE THE LEARNED CIT(APPEALS). LEARNED FIRST APPELLATE AUTHORITY HAS RESTRICTED THE ADDITION TO RS.1,50,000 IN ASSESSMENT YEAR 1992-93 AND RS. 3 LA CS IN ASSESSMENT YEAR 1993-94. DISSATISFIED WITH THE DELETION, REVENUE CAME UP IN APPEAL BEFORE THE ITAT. THE ASSESSEE HAS ALSO FILED CROSS-APPEAL BEARING NOS. 1603/JP/19 95 AND 98/JP/1996. ALL THESE APPEALS WERE DECIDED BY THE ITAT VIDE ORDER DATED 27.02.200 4, THE ITAT HAS RESTRICTED THE ADDITION TO RS.1,25,000 AND RS. 2 LACS. THE REVENUE WENT IN APPEAL BEFORE THE HON'BLE HIGH COURT. HON'BLE HIGH COURT HAS SET ASIDE THE OR DERS OF THE ITAT AND REMITTED THE ISSUE TO THE ITAT FOR READJUDICATION. THESE ARE THE APPEALS AMONGST 83 APPEALS REMITTED BACK BY THE HON'BLE HIGH COURT BY WAY OF ITS JUDGME NT DATED 21.1.2014 RENDERED IN THE CASE OF CIT VS. RAM SINGH & ORS. REPORTED IN 363 IT R 417. 3. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. ADMITTEDLY, THE BOOKS OF THE ASSESSEE AR E NOT RELIABLE, THEY ARE REJECTED. THIS ACTION OF THE ASSESSING OFFICER HAS BEEN UPHELD BY THE LEARNED CIT(APPEALS). THE ASSESSEE DID NOT CHALLENGE REJECTION OF BOOK RESULT S BEFORE THE ITAT AND THE DISPUTE TRAVELLED TO THE HON'BLE HIGH COURT WAS WITH REGAR D TO ESTIMATION OF INCOME AFTER REJECTION OF BOOKS. THUS, THE NEXT QUESTION ARISES, IS, WHAT SHOULD BE THE ESTIMATED ADDITION REQUIRED TO BE MADE BY THE ASSESSING OFFIC ER TO THE INCOME OF THE ASSESSEE. FOR THIS PURPOSE, SUB-SECTION (3) OF SECTION 145 CONTEM PLATES THAT ASSESSING OFFICER MAKES AN 3 ASSESSMENT IN THE MANNER PROVIDED IN SEC. 144 OF TH E 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 DIRECTION ISSUE D 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, AFTER GIVIN G THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, MAKE THE ASSESSMENT] OF THE TOTAL INCO ME OR LOSS TO THE BEST OF HIS JUDGMENT AND DETERMINE THE SUM PAYABLE BY THE ASSES SEE ON THE BASIS OF SUCH ASSESSMENT. PROVIDED THAT SUCH OPPORTUNITY SHALL BE GIVEN BY TH E ASSESSING OFFICER BY SERVING A NOTICE CALLING UPON THE ASSESSEE TO SHOW S\CAUSE, ON A DATE AND TIME TO BE SPECIFIED IN THE NOTICE, WHY THE 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 SECTION 142 HAS BEEN ISSUED PRIOR TO THE MAKING OF AN ASSESSMENT UNDER THIS SECTION.] (2) THE PROVISIONS OF THIS SECTION AS THEY STOOD IM MEDIATELY BEFORE THEIR AMENDMENT BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1 987 94 OF 1988), SHALL APPLY TO AND IN RELATION TO ANY ASSESSMENT FOR THE ASSESSMENT YEAR COMMENCING ON THE IST DAY OF APRIL, 1988, OR ANY EARLIER ASSESSME NT YEAR AND REFERENCES IN THIS SECTION TO THE OTHER PROVISIONS OF THIS ACT SHALL B E CONSTRUED AS REFERENCES TO THOSE 4 PROVISIONS AS FOR THE TIME BEING IN FORCE AND APPLI CABLE TO THE RELEVANT ASSESSMENT YEAR.} 4. A BARE PERUSAL OF THIS SECTION WOULD SUGGEST THA T IN ORDER TO ESTIMATE INCOME, LEARNED ASSESSING OFFICER HAS TO EXERCISE HIS DISC RETION WHICH SHOULD BE IN CONSONANCE WITH BEST OF HIS JUDGMENT. HON'BLE HIGH COURT WHILE REMANDING THIS APPEAL TO THE ITAT HAS CONSIDERED 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 CONCERNED SHO ULD MAKE A HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN THE BEST JUDGMENT AS SESSMENT AND SHOULD NOT ACT ARBITRARILY. IT IS EQUALLY TRUE THAT ASSESSEE HIMSE LF TO BE BLAMED AS HE DID NOT SUBMIT PROPER ACCOUNTS. 5. APART FROM THE ABOVE PROPOSITION, WE ARE CONSCI OUS OF THE FACT THAT IN VARIOUS AUTHORITATIVE PRONOUNCEMENTS, IT HAS BEEN PROPOUNDE D THAT IN MAKING A BEST JUDGMENT ASSESSMENT, THE ASSESSING OFFICER MUST NOT ACT DISH ONESTLY OR VINDICTIVELY OR CAPRICIOUSLY. HE MUST MAKE WHAT HE HONESTLY BELIEVE TO BE A FAIR ESTIMATE OF THE PROPER FIGURE OF ASSESSMENT AND FOR THIS PURPOSE HE MUST B E ABLE TO TAKE INTO CONSIDERATION LOCAL KNOWLEDGE, REPUTATION OF THE ASSESSEE ABOUT HIS BUS INESS, 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 L EGALLY. JUDGMENT DOES NOT DEPEND UPON THE ARBITRARY, CAPRICE OF AN ADJUDICATOR, BUT ON SETTLED AND INVARIABLY PRINCIPLES OF JUSTICE. THUS, IN A BEST JUDGMENT, EVEN IF, THERE I S AN ELEMENT OF GUESS WORK, IT SHOULD NOT BE A WILD ONE, BUT SHALL HAVE REASONABLE NEXUS TO T HE AVAILABLE MATERIAL AND CIRCUMSTANCES OF EACH ASSESSEE. APPRAISING OURSELVE S WITH THESE FUNDAMENTALS, LET US 5 CONSIDER THE FACTORS DISCUSSED BY THE ASSESSING OFF ICER IN THE ASSESSMENT WHILE MAKING THE LUMP SUM ADDITION. 6. DURING THE COURSE OF HEARING, WE HAVE DIRECTED T HE LEARNED COUNSEL FOR THE ASSESSEE TO PLACE ON RECORD THE DETAILS IN A TABULA R FORM. LEARNED COUNSEL FOR THE ASSESSEE HAS FILED THE DETAILS, THEY READ AS UNDER: S.NO. ISSUES/DETAILS/QUERY A.Y. 1992-93 A.Y. 199 3-94** 1 LIQUOR CONTRACT FOR THE AREA SUJANGARH SUJANGARH 2 PERIOD OF LIQUOR CONTRACT 01 - 04 - 1991 TO 31 - 03 - 1992 01 - 04 - 1992 TO 31 - 03 - 199 3 3 RETURNED INCOME 87,620.00 51,373.00 4 ASSESSED INCOME 947,300.00 1,719,583.00 5 TURNOVER ACHIEVED COUNTRY LIQUOR 19,374,848.00 29,920,424.00 IMFL/BEER RETAIL 25,738,870.00 13,916,212.00 6 GROSS PROFIT (AMOUNT & %) GROSS PROFIT % GROSS PROFIT % COUNTRY LIQUOR 8,626,831.00 44.53 19,919,477.00 66.57 IMFL/BEER RETAIL 9,091,651.00 35.32 8,562,589.00 61.53 7 SHORT LICENSE FEE COUNTRY LIQUOR 3,226,463.00 4,895,931.00 IMFL/BEER RETAIL 12,971,435.00 21,954,791.00 8 GP AFTER SHORT LICENSE FEE % % COUNTRY LIQUOR 5,400,368.00 27.87 15,023,546.00 50.21 IMFL/BEER RETAIL (3,879,784.00) (15.07) (13,392,202.00) (96.23) 6 9 NET PROFIT (BEFORE SHORT LICENSE FEE) 16,285,516.00 36.38 26,902,094.00 61.37 10 NET PROFIT (AFTER SHORT LICENSE FEE) 87,618.00 0.20 51,375.00 0.12 11 TURNOVER/GP ADOPTED BY AO TURNOVER % TURNOVER % COUNTRY LIQUOR 19,374,848.00 45.33 29,920,424.00 66.57 IMFL/BEER RETAIL 25,738,870.00 35.32 16,000,000.00 60.00*** 12 ADDITIONS MADE BY AO COUNTRY LIQUOR 800,000.00* IMFL/BEER 1,595,212.00 OTHER DISALLOWANCE (U/S 68) 13 ADDITIONS SUSTAINED BY CIT(A) IM FL/BEER RETAIL 150,000.00 300,000.00 OTHER DISALLOWANCES 14 ITAT 125,000.00 200,000.00 7. THE ASSESSEE HAS TO PAY SHORT LICENSE FEE OF RS. 1,29,71,435 IN IMFL/BEER ACCOUNT IN ASSESSMENT YEAR 1992-93. SIMILARLY, IN ASSESSMEN T YEAR 1993-94, THE SHORT LICENSE FEE IS A SUBSTANTIAL AMOUNT. IF THESE AMOUNTS ARE BEING DEBITED TO THE TRADING ACCOUNT, THEN, A SUBSTANTIAL PART OF THE NET PROFIT IS BEING WIPED O UT. LEARNED ASSESSING OFFICER DID NOT CONSIDER THIS ASPECT WHILE EVALUATING THE PROFIT SH OWN BY THE ASSESSEE. IN THE LIGHT OF ABOVE DETAILS, WE HAVE EXAMINED THE ORDER OF THE LE ARNED CIT(APPEALS) AS WELL AS THE FINDINGS RECORDED BY THE ASSESSING OFFICER. WE ARE OF THE VIEW THAT LEARNED ASSESSING OFFICER FAILED TO BRING ANY MATERIAL IN SUPPORT OF HIS CONCLUSIONS FOR COMPUTING THE PROFIT OUGHT TO HAVE BEEN GENERATED BY THE ASSESSEE. FOR T HE PURPOSE OF REJECTION OF BOOKS, HE 7 HAS POINTED OUT THE DEFECTS BUT WHETHER ASSESSEE CO ULD HAVE EARNED THIS MUCH OF PROFIT, HE HAS NOT SUBSTANTIATED HIS CONCLUSION WITH SUPPORTIN G MATERIAL. THEREFORE, LOOKING TO THE FACTS AND CIRCUMSTANCES AND ORDER OF THE LEARNED CI T(APPEALS), WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF LEARNED CIT(APPEALS) . 8. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. SD/- SD/- ( R.C. SHARMA ) ( RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 /05/2014 *MOHAN LAL* COPY FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. CIT(APPEALS) 5. THE DR