ITO, Sikar V. BHARAT SINGH & PARTY, Sikar

ITA 1667/JPR/1995

• Counselvise Citation: 166723114 RSA 1995
• Duration Of Justice: 18 year(s) 10 month(s) 25 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: 1992-1993
• Appeal Filed On: 05-07-1995
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHASH CHANDRA; D C SHARMA
• Assessee Lawyers: G M MEHTA
• Keywords: Business income
• Section: 143(3); 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI RAJ PAL YADAV AND SHRI R.C. SHARMA) ITA NO. 1667/JP/1995 ASSESSMENT YEAR : 1992-93 THE ITO VS. M/S. BHARAT SINGH & PARTY WARD-2, SIKAR SIKAR (APPELLANT) (RESPONDENT) ITA NO. 1604/JP/1995 ASSESSMENT YEAR : 1992-93 M/S. BHARAT SINGH & PARTY VS. THE ITO SIKAR WARD- 2, SIKAR (APPELLANT) (RESPONDENT) ITA NO. 153/JP/1996 ASSESSMENT YEAR : 1993-94 THE ITO VS. M/S. BHARAT SINGH & PARTY WARD- 2, SIKAR SIKAR (APPELLANT) (RESPONDENT) ITA NO. 99/JP/1996 ASSESSMENT YEAR : 1993-94 M/S.BHARAT SINGH & PARTY VS. THE ITO SIKAR WARD- 2, SIKAR (APPELLANT) (RESPONDENT) DEPARTMENT BY: S/ SHRI SUBHASH CHANDRA & D.C. SH ARMA ASSESSEE BY : SHRI G.M. MEHTA DATE OF HEARING: 27-05-2014 DATE OF PRONOUNCEMENT: 30-05-2014 2 ORDER PER R.C. SHARMA, AM THESE ARE THE CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE AGAINST ORDERS OF THE LD. CIT(A) DATED 08-06-1995 A ND 03-11-1995 FOR THE ASSESSMENT YEARS 1992-93 AND 1993-94 RESPECTIVELY, IN THE MATTER OF ORDERS PASSED U/S 143(3) OF THE I.T. ACT, 1961. 2.1 AT THE OUTSET, IT IS BEING BROUGHT ON RECORD TH AT THESE APPEALS WERE DECIDED BY THE TRIBUNAL VIDE ITS ORDER DATED 27-02- 2004. AGAINST THIS ORDER OF THE TRIBUNAL, BOTH THE ASSESSEE AND REVENUE APPR OACHED TO THE HON'BLE HIGH COURT, AND THE HON'BLE HIGH COURT VIDE ITS ORD ER DATED 21-01-2014 SET ASIDE THE ORDER OF THE TRIBUNAL FOR DECIDING AFRESH AND DENOVO THE ISSUE REGARDING TRADING ADDITION MADE BY THE AO IN ACCORD ANCE WITH LAW. THE HON'BLE HIGH COURT HAS ALSO DIRECTED ITAT TO DECIDE THESE APPEALS EXPEDITIOUSLY NOT LATER THAN 06 MONTHS FROM THE DAT E PARTIES ARE CALLED TO PUT THEIR APPEARANCE BEFORE ITAT. IN ACCORDANCE WITH DI RECTION OF HON'BLE HIGH COURT, THESE APPEALS WERE AGAIN HEARD ON MERIT AND ARE DECIDED AFRESH IN THE FOLLOWING MANNER. 2.2 RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS P ERUSED. THE FACTS IN BRIEF ARE THAT THE ASSESSEE WAS GRANTED LIQUOR CONT RACT IN THE CAPACITY OF 3 AOP. THE ASSESSEE HAS FILED A SEPARATE TRADING AND PROFIT AND LOSS ACCOUNT IN RESPECT OF IMFL/BEER RETAIL BUSINESS. DURING THE Y EAR CONSIDERATION, THE ASSESSEE HAS SHOWN TOTAL PURCHASES AT RS. 5,08,92,3 95/- AND SALES TO THE TUNE OF RS. 5,63,46,004/- AND GROSS PROFIT OF RS. 54,53, 609/-, IF WE TAKE OUT THE SHORT LICENCE FEE FOR RS. 62,84,903/- AND THE DEPRE CIATION OF RS. 3,62,600/- THEN NET PROFIT REMAINS AT RS. 49,13,197/-. THE EXP ENSES INCURRED AND CLAIMED BY THE ASSESSEE ARE MAINLY ON SALARIES AND RENT. THE ASSESSEE CLAIMS AND ALSO ON RECORD THAT THERE IS PROFIT IN TRADING. THE ASSESSEE AOP WAS NOT IN A POSITION TO LIFT THE QUANTITY REQUIRED TO FULF ILL THE CONTRACT, THEREFORE, THE ASSESSEE HAD TO DEPOSIT SHORT LICENCE FEE OF RS. 62 ,84,904/-. BUT DESPITE THAT FACTS REMAINS THAT THOUGH THE ASSESSEE HAS MAINTAIN ED REGULAR BOOKS OF ACCOUNT BUT HE HAS NOT PRODUCED THE STOCK REGISTER ON THE PLEA THAT THE SAME WAS DEPOSITED WITH THE EXCISE DEPARTMENT . THE AO F OUND THAT ASSESSEE HAS ALSO NOT PRODUCED THE PURCHASE/ SALE VOUCHERS FOR H IS VERIFICATION. 2.3 BY THE IMPUGNED ORDER, THE LD. CIT(A) RESTRICTE D THE DISALLOWANCE AMOUNTING TO RS. 1.00 LAC AFTER HAVING FOLLOWING OB SERVATIONS. COMING TO THE APPELLANTS CLAIM FOR DISALLOWANCE OF LOSS ON IMFL AND BEER RETAIL BUSINESS, THE LD. COUN SEL OF THE APPELLANT HAS PRODUCED THE AUDITED STATEMENT OF ACC OUNTS ARE AS UNDER:- 4 IMFL BEER TOTAL PURCHASES 4,40,34,978 32,48,585 4,72,83,563 PAYMENT TO EXCISE DEPTT. (PERMIT & LICENCE FEE) 33,14,441 2,94,391 36,08,832 4,73,49,419 35,42,976 5,08,92,395 SALES 5,24,76,740 38,69,264 5,63,46,004 GROSS PROFIT 51,27,321 3,26,288 54,53,609 IN THIS CASE ALSO BOOKS OF ACCOUNT WERE PROPERLY MAINTAINED, STOCK DETAILS WERE MAINTAINED BUT SALE VOUCHERS WERE NOT PRODUCED BY THE APPELLANT. FOR WANT OF SAL E VOUCHERS ALONE, WHERE FULL QUANTITY AND RATES HAVE BEEN MAIN TAINED BY THE APPELLANT AND NO DEFECT HAS BEEN DEDUCTED BY TH E ASSESSING OFFICER UNDER THESE ACCOUNTS, THEREFORE, I RESTRICT THE DISALLOWANCE OF RS. 1 LAKH. IN EFFECT, THE APPELLAN T GETS A RELIEF OF RS. 500000/- 2.4 AGAINST THE ORDER OF THE LD. CIT(A), BOTH REVEN UE AND ASSESSEE ARE IN APPEAL BEFORE US. 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS, GONE THROU GH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT THE AO REJECTED TH E BOOK RESULT BY STATING THAT THE ASSESSEE HAS NOT MAINTAINED SALES BILLS AN D STOCK REGISTER . ONCE THE BOOKS OF ACCOUNT ARE REJECTED, THE ASSESSMENT IS TO BE FRAMED U/S 144 OF THE ACT. AS PER OUR CONSIDERED VIEW, BEST JUDGMENT AS SESSMENT IS NOT A PROVISION TO PENALIZE THE ASSESSEE, BUT IS A MACHIN ERY PROVISION TO ENABLE THE REVENUE TO ASSESS A PERSON WHEN SITUATION WARRANTS SUCH AN ASSESSMENT. 5 THE ORDER U/S.144 IS TO BE MADE TO THE BEST OF THE JUDGMENT OF THE ASSESSING OFFICER WHICH MEANS, THE ORDER HAS TO BE RATIONAL A ND IS TO BE BEST ON AN HONEST GUESS WORK FOR WHICH SOME VALID BASIS IS AVA ILABLE TO THE ASSESSING OFFICER. THE ORDER INVOLVES EXERCISE OF JUDGMENT BY THE OFFICER. A FAIR ESTIMATION OF INCOME HAS TO BE MADE, THE ASSESSING OFFICER SHOULD TAKE INTO CONSIDERATION THE TOTALITY OF THE FACTS AND CIRCUMS TANCES OF THE CASE IN ADDITION TO PROPER EVALUATION OF THE MATERIAL FURN ISHED BY THE ASSESSEE AND COLLECTED BY HIM BY HIS OWN EFFORTS. WHERE BEST J UDGMENT ASSESSMENT POWER HAS BEEN CONFERRED, THE LIMITS OF THE POWER A RE IMPLICIT IN THE EXPRESSION BEST OF HIS JUDGMENT ASSESSMENT . T HE JUDGMENT IS VITAL TO DECIDE THE MATTER WITH WISDOM, TRULY AND LEGALLY. JUDGMENT DOES NOT DEPEND UPON THE ARBITRARY CAPRICIOUS OF THE ASSESSING OFFI CER, BUT ON SETTLED AND INVARIABLE PRINCIPLE OF JUSTICE. THOUGH THERE IS A N ELEMENT OF GUESS WORK IN BEST JUDGMENT ASSESSMENT , IT SHALL NOT BE WILD O NE, BUT SHALL HAVE REASONABLE NEXUS TO THE AVAILABLE MATERIAL AND CIRC UMSTANCES OF EACH CASE. WHILE ESTIMATING THE GROSS PROFIT, THE ASSESSING OF FICER SHOULD BE FAIR & REASONABLE AND SHOULD KEEP INTO ACCOUNT THE TURNOVE R AND THE GROSS PROFIT OF EARLIER YEARS ALONGWITH ALL THE FACTS AND CIRCUMST ANCES OF THE CASE. BY REJECTING BOOK RESULT, THE ASSESSING OFFICER DOES N OT GET ABSOLUTE AND UNBRIDLED POWERS TO ESTIMATE WHATEVER PROFIT HE WAN TS, AS PER HIS SWEET-WILL. 6 2.6 THE HON'BLE SUPREME COURT IN BRIJ BHUSAN LAL PR ADUMAN KUMAR, ETC. VS. CIT (115 ITR 524), CATEGORICALLY OBSERVED THA T WHILE MAKING BEST JUDGMENT ASSESSMENT , THE ASSESSING OFFICER SHOULD KEEP IN MIND WHAT HONESTLY HE BELIEVES TO BE FAIR ESTIMATED OR THE PR OPER FIGURE OF ASSESSMENT. FURTHERMORE, HONBLE CALCUTTA HIGH COURT IN THE CAS E OF CIT VS. POPULAR ELECTRIC CO.PVT.LTD. REPORTED IN 203 ITR 630 WHERE IN IT WAS OBSERVED THAT WHILE MAKING BEST JUDGMENT , THE ASSESSING OFFICE R SHOULD MAKE INDEPENDENT AND WELL GROUNDED ESTIMATE AND SUCH EST IMATE MAY BE BASED ON ADEQUATE AND RELEVANT MATERIALS. IN THE INSTANT CA SE, WE FOUND THAT BY POINTING OF SALES BILLS, THE AO HAS APPLIED ARBITRA RY RATE OF PROFIT AND MADE AN ADDITION OF RS. 6.00 LACS. FROM THE RECORD, WE F OUND THAT THE ASSESSEE HAS DECLARED GROSS PROFIT RATE OF 71.39% IN THE CASE O F COUNTRY LIQUOR AND 9.65% IN THE CASE OF IMFL/BEER . DUE TO SHORT LIFTING OF COUNTRY LIQUOR, THE ASSESSEE WAS REQUIRED TO PAY A SUM OF RS. 1,18,02,705/- AS S HORT LICENCE FEE AND IN THE CASE OF IMFL/BEER AMOUNTING TO RS. 62,84,904/-. AFT ER SHORT LICENCE FEE, THE GROSS PROFIT RATE IN THE CASE OF COUNTRY LIQUOR WOR KS OUT TO 13.71%. HOWEVER, THERE WAS LOSS IN IMFL/BEER AT 1.51% AFTER SHORT LI CENCE FEE. THE AO ADOPTED THE GROSS PROFIT RATE AT 71.39% IN THE CASE OF COUNTRY LIQUOR AND 9.65% IN THE CASE OF IMFL/BEER . ACCORDINGLY, THE A O DISALLOWED A LOSS OF RS. 6.00 LACS IN RESPECT OF IMFL/BEER . AFTER RECO RDING THE FINDINGS AT PAGE 7 2 OF HIS APPELLATE ORDER, THE LD. CIT(A) OBSERVED T HAT IN THIS CASE BOOKS OF ACCOUNT WERE PROPERLY MAINTAINED, STOCK DETAILED WE RE MAINTAINED BUT SALES VOUCHERS WERE NOT PRODUCED BY THE ASSESSEE. THE LD. CIT(A) OBSERVED THAT FOR WANT OF SALE VOUCHERS ALONE, WHERE FULL QUANTIT Y AND RATES HAVE BEEN MAINTAINED BY THE ASSESSEE AND NO DEFECT HAS BEEN D ETECTED BY THE AO IN THE ACCOUNTS, THE AO WAS NOT JUSTIFIED IN DISALLOWING E NTIRE LOSS SUFFERED BY ASSESSEE. ACCORDINGLY, HE RESTRICTED THE DISALLOWAN CE OF RS. 1.00 LAC. LOOKING TO THE GROSS PROFIT RATE DECLARED BY THE AS SESSEE VIS-A-VIS QUANTUM OF SHORT LICENCE FEE PAID BY THE ASSESSEE, WE DO NO T FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) FOR DELETING THE LOSS OF RS . 5.00 LACS, IN SO FAR AS FAILURE OF THE ASSESSEE WAS ONLY TO PRODUCE SALES B ILLS. THE DETAILED FINDINGS RECORDED BY THE LD. CIT(A) AS REPRODUCED ABOVE HAVE NOT BEEN CONTROVERTED BY THE DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD. CIT(A) FOR SUSTAINI NG THE DISALLOWANCE OF RS. 1.00 LAC. THUS THE APPEALS OF THE REVENUE AND ASSES SEE FOR THE ASSESSMENT YEAR 1992-93 ARE DISMISSED. M/S. BHARAT SINGH & PARTY A.Y. 1993-94 3.1 RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PE RUSED. FROM THE RECORD, WE FOUND THAT DURING THE ASSESSMENT YEAR 19 93-94, THE ASSESSEE'S WORKING RESULT WAS MUCH BETTER IN SO FAR AS GROSS P ROFIT RATE DECLARED WAS AT 8 78.64% AS COMPARED TO IMMEDIATELY PRECEDING YEAR A T 71.39% IN THE CASE OF COUNTRY LIQUOR. SIMILARLY, IN THE CASE OF IMFL/B EER GROSS PROFIT RATE DECLARED WAS AT 27.66% AS COMPARED TO IMMEDIATELY PRECEDING YEAR AT 9.65%. WE FOUND THAT DUE TO SHORT LIFTING OF ASSURE D QUANTITY OF LIQUOR, THE ASSESSEE WAS REQUIRED TO PAY SHORT LICENCE FEE OF R S. 1.45.73,816/- IN THE CASE OF COUNTRY LIQUOR AND RS. 1,77,59,251/- IN THE CASE OF IMFL/BEER. AFTER OBSERVING IT IS FOUND THAT THE ASSESSEE HAS NOT PRO DUCED SALES BILLS AND THE AO HAS MADE ADDITION OF RS. 3.90 LACS IN THE CASE O F COUNTRY LIQUOR AND RS. 2.80 LACS IN THE CASE OF IMFL/BEER. 3.2 AFTER HAVING FOLLOWING OBSERVATION, THE LD. CIT (A) HAS SUSTAINED THE ADDITION OF RS. 1.00 LAC. 4.2 I FIND THAT ALTHOUGH THE ASSESSING OFFICER HA S NOT ADOPTED A RATIONAL BASIS AND IN HOLDING THE ASSESSE E SQUARELY RESPONSIBLE FOR NOT INCREASING HIS SALES BY 15% COM PARED TO THE EARLIER YEAR, YET THE FACT REMAINS THAT THE APPELLA NT COULD NOT PRODUCE SALE VOUCHERS AND, THEREFORE, ACCORDINGLY B OOK RESULTS OF THE APPELLANT HAVE TO BE REJECTED. UNDER THE CIR CUMSTANCES, I FEEL ENDS OF JUSTICE WILL BE MET IF AN ADDITION OF RS. 1,00,000/- IS SUSTAINED AND CONFIRMED. THE APPELLANT WOULD GET A RELIEF OF RS. 2,90,000/- UNDER THIS HEAD. 5. DURING THE YEAR UNDER CONSIDERATION, THE APPELLA NT HAD SHOWN TOTAL SALES OF IMFLAND BEER TO THE TUNE O F RS. 5,70,21,375/- AGAINST THE PURCHASE OF RS. 3,82,55,7 23/- DISCLOSING THE NET PROFIT AT THE RATE OF 149.50%. T HE APPELLANT HAS DEPOSITED SHORT LICENCE FEE OF RS. 1,77,59,251/ - IN RESPECT OF IMFL AND RS. 84,374/- IN BEER ACCOUNT. THE ASSESSIN G OFFICER FURTHER FOUND THAT THE EXPENSES CLAIMED WERE MAINLY ON ACCOUNT 9 OF INTEREST ON PAYMENT, SALARY, RENT AND DEPRECIAT ION. THE ASSESSING OFFICER HAS OBSERVED THAT THE APPELLANT H AS MAINTAINED REGULAF BOOKS OF ACCOUNT BUT HAS NOT PRO DUCED A SINGLE VOUCHER FOR RETAIL SALES NOR HAS HE PRODUCED STOCK REGISTER ON THE PLEA THAT THE SUM WAS DEPOSITED WITH THE EXC ISE DEPARTMENT. ON THIS GROUND AND ALSO ON THE GROUND T HAT THE SALES DID NOT INCREASE BY 15%, WHEREAS THE PURCHASE PRICE HAVE INCREASED, THE ASSESSING OFFICER HAS REJECTED THE B OOK RESULTS OF THE APPELLANT AND APPLIED THE PROVISION OF SECTION 145(2) OF THE I.T. ACT. HE HAS ESTIMATED THE SALES BY INCREASING IT BY 10 LAC OVER AND ABOVE THAT DISCLOSED BY THE APPELLANT AND WORKED OUT THE GROSS PROFIT RATE AT THE RATE OF 28%, WHICH HAS RESULTED INTO AN ADDITION OF RS. 2,80,000/-. 5.1 AS AGAINST THIS, THE LD. COUNSEL OF THE APPELLA NT, IN HIS WRITTEN SUBMISSION, HAS CONTENDED AS UNDER:- IN TERMS OF PERCENTAGE OF SALES TO PURCHASES, THE FOLLOWING WERE THE TRADING RESULTS ACHIEVED INCASE OF IMFL/BEER TRADING:- A.Y. 1992-93 A.Y.1993-94 SALES (IMFL/BEER ) 5,63,46,004 5,70,21,375 PURCHASES 4,72,83,563 3,82,55,723 SURPLUS 90,62,441 1,87,65,652 %AGE OF SALES TO 119,16% 149,05% PURCHASES SURPLUS TO SALES 16.08% 32,9% IT IS ALSO IMPORTANT TO MENTION HERE THAT THE CONTR ACT AMOUNT HAS A DIRECT LINK WITH THE PURCHASE AMOUNT. THE SALES IS NOT CONNECTED WITH THE CONTRACT. IN CASE OF IMFL/BE ER, THE TOTAL FULFILLMENT OF CONTRACT IS RS. 371.25 PER BULK LITR E OF ITS PURCHASE AND IN CASE OF BEER IT IS RS. 48/- PER CAS E OF LEDGER BEER AND RS. 72/- PER CASE (OF 12 OF BOTTLES) OF ST RONG BEER. LIKE IN COUNTRY LIQUOR, THE LD. ASSESSING OFFICER H AS IGNORED THE BETTER TRADING RESULTS ACHIEVED AND ATT ACKED ON THE 10 SALES AMOUNT WITHOUT APPRECIATING THE FACT THAT DUR ING THE SECOND YEAR OF CONTRACT, THE SALES WERE 149.05% OF THE PURCHASES AS AGAINST 19.16% ACHIEVED IN THE FIRST Y EAR OF CONTRACT (A.Y. 1992-93). IN THIS CONTEXT, MY ATTENTION IS DRAWN TO THE ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL IN THE CASE OF THE AS SESSEE HIMSELF FOR THE ASSESSMENT YEAR 1992-93 IN APPEAL C ASE NO. 361/94-95 DATED 8-06-1995, WHERE FOLLOWING THE DECI SONOF M/S. BARI SINGH & PARTY, AOP, IN APPEAL CASE NO. 371/94- 95 DATED 8-06-1995, AN ADDITION TO THE EXTENT OF RS. 1,00,0 00/- WAS SUSTAINED AND CONFIRMED. ACCORDINGLY, IN THIS CASE ALSO, I SUSTAIN THIS ADDITION TO THE EXTENT OF RS. 1,00,000 /-. THE APPELLANT WOULD GET A RELIEF OF RS. 1,80,000/- UNDE R THIS HEAD. 6. IN THE RESULT, THE APPEAL IS ALLOWED IN PART. 3.3 WE HAVE CONSIDERED THE RIVAL CONTENTIONS, GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FIND FROM RECORD THAT THE NET PROFIT RATE DISCLOSED BY THE ASSESSEE BEFORE SHORT LICENCE FEE WAS AT 21. 11%, HOWEVER, DUE TO PAYMENT OF HEAVY LICENSE FEE, NET PROFIT RATE AFTER PAYMENT OF SHORT LICENCE FEE HAS RESULTED INTO NET LOSS OF 1.83%.. CONSIDERI NG THESE FACTS AND ALSO FACT OF ASSESSEE'S FAILURE TO MAINTAIN SALES BILLS, THE LD. CIT(A) HAS UPHELD THE ADDITION OF RS. 1.00 LAC. THE DETAILED FINDINGS REC ORDED BY THE LD. CIT(A) AS REPRODUCED ABOVE HAVE NOT BEEN CONTROVERTRED BY THE DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON RECORD, ACCORDING LY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A) FOR UPHOLDING THE ADDITION 11 OF RS. 1.00 LAC . THUS BOTH THE APPEALS OF THE REVE NUE AND ASSESSEE ARE DISMISSED. 4.0 IN THE RESULT, THE APPEALS OF THE REVENUE AND T HE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30-05-2014. SD/- SD/- (RAJ PAL YADAV) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED: 30 TH MAY, 2014 *MISHRA COPY FORWARDED TO:- BY ORDER 1. THE ITO, WARD- 2, SIKAR 2. M/S. BHARAT SINGH & PARTY, SIKAR 3. THE LD. CIT 4. THE LD. CIT(A), JAIPUR 5..THE LD. DR 6.THE GUARD FILE (IT NO.1667 & 1604/JP/95) A.R. ITA T: JAIPUR 12 13