M/s. BALMIKI SINGH, Faizabad V. ACIT, Faizabad

ITA 157/LKW/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48343 (ITAT-LUCKNOW)
• Duration Of Justice: 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 1993-1994
• Appeal Filed On: 04-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K B AJAJ
• Keywords: Rejection of books of accounts; Business income; Charitable institution; Principle of natural justice; Rule of consistency
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B - BENCH, LUCKNOW. BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT AND SHRI N.K.SAINI, ACCOUNTANT MEMBER I.T.A.NO.157(LKW.)/2011 A.Y.: 1993-94 M/S. BALMIKI SINGH, VS. THE ACIT, CIVIL LINES, FAIZABAD RANGE, KIDWAI NAGAR, FAIZABAD. FAIZABAD. PAN ASJPS5580L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMIT SHUKLA, ADVOCATE RESPONDENT BY : SHRI P.K.BAJAJ, SR.D.R. O R D E R PER N.K.SAINI, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD.CIT(A)-I, LUCKNOW DATED 19.1.2011 RELATING TO THE ASSESSMENT YEAR 1993-94. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. BECAUSE THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.9,77,250/- BY APPLYING NET PROFIT RATE OF 3.73% OF THE TOTAL SALES FOR DETERMINING THE INCOME OF LIQUOR BUSINESS. 2. BECAUSE ON THE FACTS AND CIRCUMSTANCES OF THE CASE, APPLICATION OF NET PROFIT RATE AT 3.73% WAS NOT JUSTIFIED AS NO SPECIFIC DEFECTS HAVE BEEN FOUND IN THE BOOKS OF ACCOUNTS AND ALSO IN THE EXPENSES DEBITED IN THE PROFIT AND LOSS ACCOUNT BY THE AUTHORITIES BELOW. 3. BECAUSE IN ANY CASE, IN THE CASE OF THE APPELLANT ITSELF, THE 2 LD. CIT(A) FOR THE ASSESSMENT YEAR 1994-95 ON SIMILAR FACTS AND CIRCUMSTANCES BY EVEN DATE OF ORDER (I.E. 19.01.2011) HAS UPHELD THE NET PROFIT RATE OF 2% ON THE SALES SHOWN BY THE APPELLANT AND THEREFORE, APPLICATION OF NET PROFIT RATE 3.73% IN THE IMPUGNED ASSESSMENT YEAR IS WHOLLY UNJUSTIFIED. 4. BECAUSE IN ANY CASE, APPLICATION OF NET PROFIT RATE AT 3.73% ON THE SALES SHOWN BY THE APPELLANT IS HIGHLY EXCESSIVE LOOKING TO THE FACT THAT THE ASSESSING OFFICER HAS HIMSELF APPLIED NET PROFIT RATE OF 3% IN THE IMPUGNED ASSESSMENT YEAR AND CIT(A) HIMSELF HAS APPLIED 2% IN THE CASE OF THE APPELLANT FOR ASSESSMENT YEAR 1994-95. 5. BECAUSE THE ORDER APPEALED AGAINST TO THE EXTENT OF GROUND RAISED ABOVE, IS CONTRARY TO THE FACTS, LAW AND PRINCIPLES OF NATURAL JUSTICE. 2. FROM THE ABOVE GROUNDS, IT IS GATHERED THAT THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEAL RELATES TO THE CONFIRMATION OF THE ADDITION OF RS.9,77,250 BY APPLYING NET PROFIT RATE. 3. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND DERIVES INCOME FROM PURCHASE AND SALE OF COUNTRY LIQUOR. ORIGINALLY, ASSESSMENT IN THIS CASE WAS COMPLETED ON TOTAL INCOME OF RS.12,23,750 AGAINST RETURNED INCOME OF RS.5,970. SINCE THE ASSESSEE COULD NOT SATISFY ABOUT THE CORRECTNESS/COMPLETENESS OF THE BOOKS OF ACCOUNTS, THE AO INVOKED THE PROVISIONS OF SECTION 145(3) OF THE INCOME-TAX ACT,1961 (IN SHORT THE ACT) AND ESTIMATED THE SALES AT THE RATE OF 2.5 TIMES OF BID MONEY AND LICENCE FEE AMOUNTING TO RS.2,17,16,688. THUS, THE TURNOVER WAS WORKED OUT AT RS.5,42,91,720. ON THE SAID TURNOVER, THE AO APPLIED A NET PROFIT RATE OF 3% AND WORKED OUT THE INCOME. AGAINST THE ASSESSMENT ORDER PASSED BY THE AO, THE ASSESSEE PREFERRED AN APPEAL TO THE LD.CIT(A), WHO 3 ALLOWED RELIEF ON CERTAIN ADDITIONS. THE DEPARTMENT CHALLENGED THE ORDER OF THE LD.CIT(A) BEFORE THE ITAT, LUCKNOW BENCH WHEREIN VIDE ORDER DATED 23.12.2002 IN I.T.A.NO.1294(ALLD.)/1995, THE ORDER OF THE LD.CIT(A) WAS SET ASIDE AND THE MATTER WAS REMANDED TO THE AO TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW. 3.1 DURING THE COURSE OF FRESH ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE FACTS OF THE CASE REMAINED THE SAME AS WERE AT THE TIME OF ORIGINAL ASSESSMENT BECAUSE THE ASSESSEE NEITHER COULD PRODUCE BOOKS OF ACCOUNTS NOR CASH MEMOS AND VOUCHERS FOR EXPENSES. THE AO AGAIN INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT. THE AO CALCULATED THE SALES ON THE BASIS OF DECISION DATED 15.1.2003 OF THE I.T.A.T., LUCKNOW BENCH IN THE CASE OF ACIT, CIRCLE (2), KANPUR VS. M/S.UNNAO WINES, KANPUR IN I.T.A.NO.1973(ALLD.)/1995. THE AO APPLIED THE NET PROFIT RATE OF 4% AND ESTIMATED THE NET PROFIT AT RS.26,52,536. THE ASSESSEE FURTHER WENT IN APPEAL BEFORE THE LD.CIT(A), WHO VIDE ORDER DATED 4.2.2005, DIRECTED THE AO TO COMPUTE THE INCOME BY ESTIMATING SALES AT 2.5 TIMES OF BID MONEY/LICENCE FEE EXCLUDING EXCISE DUTY ELEMENT OF RS.3,25,75,032 AND TO ESTIMATE THE INCOME BY APPLYING NET PROFIT AT 2.5%. AGAINST THE SAID ORDER OF THE LD.CIT(A), THE ASSESSEE PREFERRED SECOND APPEAL BEFORE THE I.T.A.T., LUCKNOW BENCH WHEREIN VIDE ORDER DATED 26.10.2007 IN I.T.A.NO.507(LUC.)/2005, IT WAS DIRECTED AS UNDER : THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THAT OF THE CASE OF GOVIND PRASAD KRISHNA KUMAR (SUPRA), THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE ITAT AGRA BENCH(SUPRA), WE RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR ESTIMATION OF SALES AS DISCUSSED IN THE ORDER OF ITAT AGRA BENCH (SUPRA).' 4 3.2 ON THE BASIS OF THE DIRECTIONS AS GIVEN IN THE AFORESAID ORDER BY THE I.T.A.T., THE AO POINTED OUT THAT HE I.T.A.T., AGRA BENCH IN THE CASE OF GOVIND PRASAD KRISHNA KUMAR VS. JCIT HELD AS UNDER : WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AFTER REJECTION OF BOOKS OF ACCOUNT, THE ASSESSING OFFICER HAS TO COMPLETE THE ASSESSMENT TO THE BEST OF HIS JUDGMENT IN THE MANNER LAID DOWN U/S 144 OF THE ACT. HOWEVER, IN THE CASE BEFORE US THE ASSESSING OFFICER HAS ESTIMATED THE SALES BY APPLYING 2.5 TIMES OF THE BID MONEY RELYING ON THE DECISION OF HON'BLE M.P. HIGH COURT IN THE CASE OF BADRI PRASAD BHAGWAN DAS & CO. (SUPRA). IN THIS CASE, THE PURCHASE PRICE OF THE LIQUOR WAS 11.80 PER LITER AND THE SALES WERE AT RS.30/- PER LITRE. THE RATIO OF SALES TO PURCHASE WAS 2.5. THUS THE ESTIMATION OF SALES WAS MADE BY MULTIPLYING 2.5 TO THE BID MONEY. THUS, THE ESTIMATION OF SALES ON THE BASIS OF BID MONEY WAS HELD TO BE JUSTIFIED. IN THE CASE BEFORE US, THE INFORMATION REGARDING THE PURCHASE AND SALES RATES AS FIXED BY THE STATE GOVERNMENT ARE NOT AVAILABLE. THE RATIO OF DECISION OF HON'BLE M.P. HIGH COURT CAN BE APPLIED FOR ESTIMATION OF SALES ON THE BASIS OF PURCHASE AND SALES PRICE FIXED BY THE STATE GOVERNMENT. THE ASSESSEE HAD PURCHASED LIQUOR ON BULK RATE BASIS WHEREAS THE SALES ARE MADE ON RETAIL BASIS IN PACKING OF BOTTLES, 1/2 BOTTLE, 1/4 BOTTLE AND POUCH OF 100 ML. THE SALES RATES ARE DIFFERENT FOR EACH PACKING. THE AVERAGE SALE RATE PER LITRE HAS TO BE WORKED OUT FROM THE RATES FIXED BY THE STATE EXCISE DEPARTMENT. THE QUANTITY OF LIQUOR PURCHASED IS AVAILABLE WITH THE ASSESSEE. THE SALES CAN BE ESTIMATED BY MULTIPLYING AVERAGE SALES RATE PER LITRE TO THE QUANTITY PURCHASED. THE SALES CAN ALSO BE ESTIMATED FROM THE RATIO OF SALE PRICE PER LITRE TO PURCHASE PRICE PER LITRE AND MULTIPLYING AMOUNT OF TOTAL PURCHASES EXCLUDING ALL OVER HEADS. MATHEMATICALLY IT CAN BE ARRIVED AT AS UNDER: IN OTHER WORDS SALES CAN BE ESTIMATED BY MULTIPLYING THE FIGURE DERIVED FROM SALES/LITRE RATE FIXED BY THE GOVERNMENT DIVIDED BY THE PURCHASE RATE PER LITRE TO THE BID MONEY. MATHEMATICALLY IT CAN BE ARRIVED AT AS UNDER: LET THE TOTAL PURCHASE MADE DURING THE YEAR ARE X AND PURCHASE PRICE PER LITRE IS Y AND SALES RATE PER LITRE FIXED IS Z. THE SALES WILL BE Z X X/Y. IT IS FURTHER CLARIFIED THAT THE METHOD GIVES THE CORRECT ESTIMATION 5 OF SALES SHOULD BE ADOPTED. ' 3.3 THE AO POINTED OUT THAT IN THE ABSENCE OF SALE RATE FIXED BY THE STATE GOVERNMENT IN RESPECT OF COUNTRY LIQUOR, THE FINDINGS OF THE I.T.A.T.,AGRA BENCH IN THE CASE OF GOVIND PRASAD KRISHNA KUMAR VS. JCIT COULD NOT BE APPLIED IN ASSESSEES CASE. HE, THEREFORE, COMPLETED THE ASSESSMENT ON THE BASIS OF THE ORDER OF THE LD.CIT(A) DATED 4.2.2005 WHEREIN THE INCOME OF THE ASSESEE FOR COUNTRY LIQUOR BUSINESS WAS DETERMINED AT RS.9,77,250. 4. AGAINST THE SAID ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL TO THE LD.CIT(A) AND THE SUBMISSIONS MADE BEFORE HIM AS MENTIONED IN PARA 7 OF THE IMPUGNED ORDER, ARE REPRODUCED VERBATIM AS UNDER : THE LD. COUNSEL SRI AMIT SHUKLA APPEARING ON BEHALF OF THE APPELLANT CONTENDED THAT THE ASSESSING OFFICER, HAS NOT FOLLOWED THE DIRECTION OF THE I.T.A.T. IN ITS TRUE SPIRIT, FIRSTLY; THE CONCEPT OF ESTIMATING THE SALES AT 2 % TIMES OF BID MONEY HAS BEEN CATEGORICALLY OVER RULED BY HOLDING THAT THE BID MONEY HAD NO CO- RELATION WITH THE SALES, AND THEREFORE. IT CAN NOT BE TAKEN AS BASIS FOR ESTIMATING THE SALES AND SECONDLY; THE SALES CAN ALSO BE ESTIMATED ON THE BASIS OF AVERAGE SALE RATE PER LITRE TO THE QUANTITY PURCHASED, OR TAKING THE RATIO OF SALE PRICE PER LITRE TO PURCHASE PRICE PER LITRE AND THEREBY MULTIPLYING THE AMOUNT OF TOTAL PURCHASES, EXCLUDING OVERALL HEADS. THIS WAS CATEGORICALLY MENTIONED IN THE SECOND LIMB OF THE I.T. A.T. ORDER. IN CASE, THE SALE RATE FIXED BY THE STATE GOVERNMENT FOR THE FINANCIAL YEAR 1992-93 WAS NOT AVAILABLE THEN THE SECOND AND THIRD OPTION GIVEN BY THE I.T.A.T. SHOULD HAVE BEEN FOLLOWED. HIS MAIN PLEA WAS THAT IN THE CASE OF LIQUOR BUSINESS EXISTING AT THAT TIME THERE WAS NO OPENING AND CLOSING STOCKS AND PURCHASES WERE FULLY VERIFIABLE QUANTITYWISE AND ALSO VALUE WISE AS THE PURCHASE RATES WERE FIXED BY THE STATE GOVERNMENT IN THE LICENSE FEE ITSELF. THE ONLY ISSUE WHICH NEEDS TO BE DETERMINED IS THE SALE PRICE WHICH CAN BE DETERMINED BY TAKING THE AVERAGE SALE PRICE AS THERE IS NO DISPUTE REGARDING THE QUANTITY OF SALES MADE DURING THE YEAR. 6 5. THE LD.CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CONFIRMED THE ACTION OF THE AO OBSERVING AS UNDER : 8. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, MATERIAL ON RECORD AND THE DIRECTION GIVEN BY THE I.T.A.T. VIDE THEIR ORDER DATED 26.10.2007. ON THE ISSUE OF ESTIMATE OF INCOME FROM COUNTRY LIQUOR BUSINESS, THE FIRST AND FOREMOST ASPECT IS THAT THE PROFIT SHOWN BY THE APPELLANT AS PER ITS BOOKS OF ACCOUNTS HAS NOT BEEN ACCEPTED BY ANY OF THE AUTHORITIES EARLIER AND THEREFORE, THE PROFIT SHOWN BY THE APPELLANT CAN NOT BE UPHELD AS THE REJECTION OF BOOKS OF ACCOUNTS IS NOT A SUBJECT MATTER OF ADJUDICATION AT THIS STAGE. THE ONLY ISSUE IS WHETHER, THE SALES CAN BE ESTIMATED AS PER THE FORMULA/DIRECTION GIVEN BY THE HON'BLE ITAT (SUPRA.). IT IS SEEN THAT THE ASSESSING OFFICER HAS FAILED TO GIVE EFFECT OF THE ITAT ORDER ON THE GROUND THAT THE STATE GOVERNMENT HAS NOT FIXED THE SALE RATE AND THEREFORE, THE SALES CAN NOT BE DETERMINED OR ESTIMATED. FROM THE FINDING GIVEN BY THE ITAT IT IS SEEN THAT FOR THE ESTIMATION OF SALES THREE PARAMETERS HAVE BEEN LAID DOWN: (I) TO WORK OUT THE AVERAGE SALE RATE AS PER THE RATE FIXED BY THE STATE EXCISE DEPARTMENT; (II) BY MULTIPLYING THE AVERAGE SALE RATE PER LITRE TO THE QUANTITY OF PURCHASE MADE AND (III) BY TAKING THE RATIO OF SALE PRICE PER LITRE TO PURCHASE PRICE PER LITRE AND MULTIPLYING THE AMOUNT OF TOTAL PURCHASES EXCLUDING OVER ALL HEADS. DURING THE COURSE OF HEARING THE COUNSEL WAS REQUIRED TO FURNISH MONTH WISE DETAILS OF PURCHASES QUANTITY WISE AND RATE WISE AND ALSO THE MONTHWISE DETAILS OF SALES QUANTITY WISE AND RATE WISE. THE SAID DETAILS WERE FURNISHED BY THE COUNSEL VIDE LETTER DATED 07.01.2011. FROM THE PERUSAL OF THE SAID DETAILS, IT IS SEEN THAT THE TOTAL PURCHASES FOR SADA AND MASALA COUNTRY LIQUOR IS RS.25,52,644/- WHICH INCLUDES COST PRICE PER LITRE AND THE COST OF POUCHING I.E. CAPSULING CHARGES. THERE IS NO OPENING AND CLOSING STOCK. AS AGAINST PURCHASE OF RS.25,52,644/- THE SALES HAVE BEEN SHOWN AT RS.2,62,34,427/- (ROUNDED UP). THE SALE RATE OF SADA COUNTRY LIQUOR AND MASALA COUNTRY LIQUOR IS SHOWN AT RS.8.60/- AND RS.11/- RESPECTIVELY PER 200 ML. POUCH. THE TOTAL QUANTITY OF SALE OF SADA 200 ML POUCH IS 1,15,165/- AND 22,94,400/- OF MASALA 20ML POUCH AND 16,000/- OF MASALA 100ML POUCH. AS FAR AS QUANTITY OF SALE IS CONCERNED, THERE CAN NOT BE ANY DISPUTE. THE AVERAGE SALE RATE DURING THE YEAR OF EACH ITEM IS AS UNDER:- 7 (I) SADA 200ML POUCH RS.8.60 PER POUCH (II) MASALA200ML POUCH RS.11.00 PER POUCH (III) MASALA 100ML POUCH RS.7.00 PER POUCH IF MONTHWISE AVERAGE SALE RATE AS ABOVE IS APPLIED TO OVER ALL QUANTITY SOLD THEN THE SALE SHOWN BY THE APPELLANT AT RS.2,62,34,427/- IS LIABLE TO BE ACCEPTED. 9. NOW, COMES THE QUESTION OF ESTIMATING THE NET PROFIT RATE AFTER TAKING INTO CONSIDERATION ALL THE HEADS OF EXPENSES AND ALSO DIRECT COST RELATING TO BID MONEY/LICENSE FEE ETC. THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT ORDER HAS APPLIED NET PROFIT RATE OF 4% WHICH CAN NOT BE SAID TO BE EXCESSIVE LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO THAT THE SALES HAVE BEEN ACCEPTED BY ME AS SHOWN BY THE APPELLANT. IF, THE RATE OF 4% IS APPLIED ON THE TOTAL SALES SHOWN BY THE APPELLANT THEN THE NET PROFIT COMES TO RS.10,49,377/-. HOWEVER, THE ASSESSING OFFICER HAS HIMSELF TAKEN THE NET INCOME FROM COUNTRY LIQUOR BUSINESS AT RS.9,77,250/-, THE SAME IS NOT DISTURBED AND IS ACCEPTED TO BE CORRECT INCOME FROM SUCH BUSINESS. THUS, THE ADDITION MADE BY THE ASSESSING OFFICER FOR RS.9,77,250/- IS CONFIRMED, AS THE NET PROFIT RATE, ROUGHLY COMES TO 3.73% OF THE TOTAL SALES WHICH CAN NOT BE SAID TO BE EXCESSIVE. IN THE RESULT NO RELIEF IS CALLED FOR ON THIS SCORE. 6. NOW, THE ASSESSEE IS IN APPEAL. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE AO WORKED OUT THE INCOME AS WAS DONE BY THE THEN LD.CIT(A) VIDE ORDER DATED 4.2.2005 AND THE NET PROFIT RATE WAS APPLIED AT 3.73%, WHICH WAS WITHOUT ANY BASIS. IT WAS STATED THAT FOR THE ASSESSMENT YEAR 1994-95, THE AO IN ASSESSEES OWN CASE, APPLIED THE NET PROFIT RATE OF 2% AND WHEN THE ASSESSEE PREFERRED APPEAL TO THE LD.CIT(A) IN APPEAL NO.CIT(A)-I/LKO/08-09/487, THE ACTION OF THE AO WAS CONFIRMED VIDE ORDER DATED 19.1.2011.A COPY OF THE SAID ORDER WAS FURNISHED, WHICH IS AVAILABLE ON THE RECORD. IT WAS CONTENDED THAT THE 8 DEPARTMENT HAS NOT PREFERRED ANY APPEAL AGAINST THE SAID ORDER DATED 19.1.2011 AND WHEN THE DEPARTMENT ITSELF HAS ACCEPTED, THE NET PROFIT RATE OF 2% IN THE SUCCEEDING YEAR AND THE LD.CIT(A) ALSO HAD CONFIRMED THE SAME RATE, THERE WAS NO OCCASION TO APPLY THE NET PROFIT RATE OF 3.73% FOR THE YEAR UNDER CONSIDERATION WHEN THE FACTS ARE SIMILAR IN BOTH THE YEARS. HE, THEREFORE, REQUESTED THAT THE NET PROFIT RATE OF 2% ACCEPTED BY THE DEPARTMENT AND ALSO CONFIRMED BY THE LD.CIT(A) IN THE SUCCEEDING YEAR MAY BE DIRECTED TO BE APPLIED FOR THE YEAR UNDER CONSIDERATION. 8. IN HIS RIVAL SUBMISSIONS, THE LD.D.R. STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT IN SIMILAR CIRCUMSTANCES, THE DEPARTMENT ITSELF HAS ACCEPTED NET PROFIT RATE OF 2% ON THE ESTIMATED TURNOVER IN THE SUCCEEDING YEAR AND NO REASON HAS BEEN GIVEN FOR DEVIATION FROM THE SAID RATE FOR THE YEAR UNDER CONSIDERATION. EVEN THE IMPUGNED ORDER HAS ALSO BEEN PASSED BY THE SAME CIT(A) ON 19.1.2011 I.E. THE SAME DATE ON WHICH THE ORDER WAS PASSED BY THE LD.CIT(A) FOR THE SUCCEEDING YEAR. THEREFORE, KEEPING IN VIEW THE PRINCIPLE OF CONSISTENCY, THE LD.CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE AO WHEREIN NET PROFIT RATE OF 3.73% HAS BEEN APPLIED INSTEAD OF 2 % NET PROFIT RATE APPLIED FOR THE SUCCEEDING YEAR. IT IS WELL SETTLED THAT RESJUDICATA IS NOT APPLICABLE IN INCOME-TAX PROCEEDINGS, HOWEVER, THE PRINCIPLE OF CONSISTENCY IS TO BE KEPT IN MIND AS HAS BEEN CATEGORICALLY HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS.CIT, (1992) 193 ITR 321(S.C.) AS UNDER : 9 ` STRICTLY SPEAKING, RES JUDICATA DOES NOT APPLY TO INCOME-TAX PROCEEDINGS. THOUGH, EACH ASSESSMENT YEAR BEING A UNIT, WHAT WAS DECIDED IN ONE YEAR MIGHT NOT APPLY IN THE FOLLOWING YEAR; WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. (I) IN THE CASE OF CIT VS. J.K.CHARITABLE TRUST (2009) 308 ITR 161(S.C.), THE HON'BLE SUPREME COURT HELD THE SIMILAR VIEW AS UNDER : WHERE THE ASSESSEE TAKES THE STAND THAT THE REVENUE HAS ACTED MALA FIDE IN NOT PREFERRING APPEAL IN ONE CASE AND FILING APPEAL IN ANOTHER CASE, THE ASSESSEE HAS TO PROVE MALA FIDES. THERE MAY BE CERTAIN CASES WHERE BECAUSE OF THE SMALL AMOUNT OF REVENUE INVOLVED NO APPEAL IS FILED. POLICY DECISIONS HAVE BEEN TAKEN NOT TO PREFER APPEAL WHERE THE REVENUE INVOLVED IS BELOW A CERTAIN AMOUNT. SIMILARLY, WHERE THE EFFECT OF THE DECISION IS REVENUE NEUTRAL THERE MAY BE NO NEED FOR PREFERRING THE APPEAL. ALL THESE CERTAINLY PROVIDE FOUNDATION FOR DEPARTURE FROM THE GENERAL RULE. THE MERE FACT THAT THE REVENUE HAS NOT PREFERRED AN APPEAL DOES NOT OPERATE AS A BAR FOR THE REVENUE TO PREFER AN APPEAL IN ANOTHER CASE WHERE THERE IS JUST CAUSE FOR DOING SO OR IT IS IN THE PUBLIC INTEREST TO DO SO OR FOR PRONOUNCEMENT OF A HIGHER COURT WHEN DIVERGENT VIEWS ARE EXPRESSED BY DIFFERENT HIGH COURTS. BUT WHERE THE FACTS SITUATION IN ALL THE ASSESSMENT YEARS IS THE SAME, AND IF THE REVENUE HAS NOT APPEALED FROM THE DECISION FOR AN EARLIER YEAR, ITS APPEAL FROM THE DECISION FOR A SUCCEEDING YEAR WILL BE DISMISSED. (II) ON THE PRINCIPLE OF CONSISTENCY THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. LEADER VALVES LTD.(2007) 295 ITR 273 (P & H) HELD AS UNDER : THAT KEEPING IN VIEW THE PRINCIPLE OF CONSISTENCY, THE REVENUE COULD NOT BE PERMITTED TO RAISE AN ISSUE IN ISOLATION ONLY FOR ONE YEAR IN THE CASE OF ONE ASSESSEE, WHILE ACCEPTING THE FINDINGS ON THE SAME 10 ISSUE IN THE CASE OF OTHER ASSESSEES AND FOR OTHER YEARS IN THE CASE OF THE ASSESSEE. (III) THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. HARYANA TOURISM CORPORATION LTD. (2010) 327 ITR 26 (P & H) HELD AS UNDER: . THAT ONCE A SIMILAR PROPOSITION HAD BEEN ACCEPTED BY THE REVENUE IN RESPECT OF ASSESSMENT YEAR 1997-98, THEN IT WAS NOT OPEN TO IT TO CHALLENGE A SIMILAR FINDING AND DEVIATE FROM ITS EARLIER STAND. 9.1 IN THE PRESENT CASE THE DEPARTMENT HAS ACCEPTED NET PROFIT RATE OF 2 % IN THE ASSESSAMENT YEAR 1994-1995 HOWEVER MADE THE ADDITION BY APPLYING THE NET PROFIT RATE OF 3.73% FOR THE YEAR UNDER CONSIDERATION, THEREFORE BY KEEPING IN VIEW THE RATIO LAID DOWN IN THE AFORESAID DECISIONS OF THE HON'BLE SUPREME COURT AND THE HON'BLE PUNJAB AND HARYANA HIGH COURT, WE DELETE THE ADDITION OF RS.9,77,250 MADE BY THE AO AND CONFIRMED BY THE LD.CIT(A). 10. IN THE RESULT, THE APPEAL IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 23.5.2011. SD. SD. (H.L.KARWA) (N.K.SAINI) VICE PRESIDENT ACCOUNTANT MEMBER MAY 23RD ,2011. COPY TO THE : 1. APPELLANT 2. RESPONDENT 3. CIT(A) (4) CIT 5.DR. A.R.,ITAT, LUCKNOW. SRIVASTAVA. 11