DCIT, Jaipur V. BHAGIRATHMAL JAKHAR & PARTY, Jaipur

ITA 242/JPR/1999

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78085 (ITAT-JAIPUR)
• Duration Of Justice: 15 year(s) 1 month(s) 9 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: 1996-1997
• Appeal Filed On: 20-04-1999
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHASH CHANDRA; D C SHARMA
• Keywords: Depreciation; 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 NO. 242/JP/1999 ASSTT. YEAR : 1996-97 DEPUTY CIT, VS. M/S. BHAGIRATH MAL JAKHAR & PAR TY CENTRAL CIRCLE-2, GOPALPURA BYPASS, TONK ROAD), JAIPUR. JAIPUR. PAN NO. - - (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SUBHASH CHANDRA & SHRI D.C. SHARMA, DR ASSESSEE BY : SHRI S.P. SINGHAL. AR DATE OF HEARING : 27.05.2014 DATE OF PRONOUNCEMENT : 30.05.2014 ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE PRESENT APPEAL IS DIRECTED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), JAIPUR DATED 02 ND FEBRUARY, 1999 PASSED FOR ASSESSMENT YEAR 1996-97. IN THE FIRST GROUND OF APP EAL, THE GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETIN G THE ADDITION OF RS. 4,75,109/- MADE BY THE ASSESSING OFFICER. 2. IN THE NEXT GROUND OF APPEAL, THE GRIEVANCE OF T HE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE M ADE BY THE ASSESSING 2 OFFICER OUT OF VARIOUS EXPENSES NAMELY DIESEL EXPEN SES, DEPRECIATION ON VEHICLES, TELEPHONE ETC. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN AOP AND A LIQUOR CONTRACTOR. IT HAD OBTAINED LICENSE FOR SELLING COU NTRY LIQUOR AND IMFL/BEER FOR FATEHPURA AREA BY WAY OF SUCCESSFUL BIDDING IN THE AUCTION/TENDER FLOATED BY THE EXCISE DEPARTMENT OF THE STATE GOVERNMENT. I T HAS FILED ITS RETURN OF INCOME ON 31 ST OCTOBER, 1996 DECLARING AN INCOME OF RS. 3,78,559/ -. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSE SSMENT AND A NOTICE U/S 143 (2) OF THE I.T. ACT, 1961 WAS ISSUED AND SERVED UPON THE ASSESSEE. ON AN ANALYSIS, THE LD ASSESSING OFFICER WAS NOT SATISFIE D WITH THE BOOK RESULT OF THE ASSESSEE, HE REJECTED THE BOOKS RESULT AND ESTI MATED THE PROFIT IN THE TRADING ACCOUNT. HE FURTHER DISALLOWED 20% OF EXPEN DITURE OUT OF SHOP EXPENSES AND STAFF WELFARE EXPENSES. HE FURTHER DIS ALLOWED 25% OF EXPENDITURE ON THE DIESEL, TELEPHONE AND DEPRECIATI ON ON THE VEHICLES. IN THIS WAY, THE LD. ASSESSING OFFICER HAS DETERMINED THE T AXABLE INCOME OF THE ASSESSEE AT RS. 12,35,370/- AS AGAINST RS. 3,78,559 /- DECLARED BY THE ASSESSEE. 4. ON APPEAL, THE LD. FIRST APPELLATE AUTHORITY HAS CONFIRMED THE ADDITION OF RS. 1.00 LAC INSTEAD OF RS. 5,25,109/- MADE BY THE ASSESSING OFFICER. 3 5. DISSATISFIED WITH THE ORDER OF THE LD. CIT(A), T HE REVENUE WENT IN APPEAL BEFORE THE TRIBUNAL. ON RECEIPT OF NOTICE IN THE REVENUES APPEAL, THE ASSESSEE FILED CROSS OBJECTION BEARING NO. 83/JP/20 05. THE APPEAL AND THE CROSS OBJECTION WERE DECIDED BY THE TRIBUNAL VIDE O RDER DATED 09 TH JUNE, 2006. THE ORDER OF THE LD. CIT(A) WAS UPHELD AS FAR AS DELETION OF TRADING ADDITION IS CONCERNED. THE REVENUE WENT IN APPEAL B EFORE THE HONBLE HIGH COURT AND THE HONBLE HIGH COURT HAS REMITTED THIS APPEAL TO THE TRIBUNAL FOR RE ADJUDICATION VIDE ITS JUDGMENT DATED 21 ST JANUARY,. 2001 RENDERED IN THE CASE OF CIT VS. RAM SINGH & ORS. REPORTED IN 36 3 ITR PAGE 417. 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 MAKES AN ASSESSMENT IN THE MANNER PROVIDED IN SEC. 144 OF THE INCOME-TAX ACT, 1961. THIS SECTION READS AS UNDER: 4 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 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 5 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, 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 6 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. THE ASSESSEE HAS DECLARED TURNOVER OF RS. 4,47,4 9,147/- WITH GROSS PROFIT OF RS. 1,91,69,192/- IN TERMS OF PERCENTAGE GROSS PROFIT IS 42.83% OF THE TURNOVER. THE LD ASSESSING OFFICER HAS CONSIDER ED THE COST OF PURCHASES AND THEREAFTER ADDED THE GROSS PROFIT ELEMENT IN OR DER TO WORK OUT ESTIMATED SALES FIGURE, BECAUSE SALES OF THE ASSESSEE WERE NO T VERIFIABLE. IN THIS WAY, ESTIMATED SALES HAD BEEN WORKED OUT AT RS. 4,52,74, 256/-, HE APPLIED G.P. OF 43.50%. THIS GIVES ESTIMATED PROFIT OF RS. 1,96,94, 301/-. THE DIFFERENCE BETWEEN THE GROSS PROFIT DECLARED BY THE ASSESSEE A ND ESTIMATED WORK OUT BY THE ASSESSING OFFICER HAS BEEN ADDED AS AN INCOME O F THE ASSESSEE, WHICH COMES OUT TO FIGURE OF RS. 5,25,109/-. IT IS PERTIN ENT TO MENTION THAT THE ASSESSEE HAD TO PAY SHORT LICENSE FEES OF RS. 1,13, 33,710/-, WHICH IS ALMOST 20% OF THE TURNOVER SHOWN BY IT. THIS SHORT LICENSE FEES IS A COMPULSORY 7 LEVY BY THE EXCISE DEPARTMENT ON ACCOUNT OF NON-LIF TING MINIMUM QUOTA OF THE LIQUOR. SINCE THE ASSESSEE COULD NOT ACHIEVE TH E SALES TARGET, THEREFORE, IT COULD NOT LIFT THE MINIMUM QUOTA AND HAD TO PAY SHO RT LICENSE FEES. IT IS A TRADING EXPENSES. IT HAS TO BE DEBITED FROM THE TRA DING ACCOUNT. WHILE CONSIDERING THE G.P. RATE SHOWN BY THE ASSESSEE, IT APPEARS THAT THE LD. ASSESSING OFFICER HAS IGNORED THIS IMPORTANT FACTOR . TAKING INTO CONSIDERATION ALL THESE FACTORS VIS-A-VIS THE FINDI NG OF FACT RECORDED BY THE LD. CIT(A), WE DO NOT SEE ANY REASON TO INTERFERE I N THE ORDER OF THE LD. CIT(A). IT IS ALSO TO BE NOTICED THAT LD. FIRST APP ELLATE AUTHORITY HAS MADE AD HOC ADDITION AFTER CONSIDERING ALL THE FACTORS. THE DISCRETION EXERCISED BY THE LD. FIRST APPELLATE AUTHORITY OUGHT NOT TO BE D ISTURBED BY THE SECOND APPELLATE AUTHORITY, WHICH IS BASED ON ESTIMATION, UNLESS, IT IS ESTABLISHED THAT THE DISCRETION EXERCISED BY THE LD. CIT(A) IS BASED ON EXTRANEOUS REASONS AND NOT IN CONSONANCE WITH THE FACTS ON REC ORD. 10. AS FAR AS AD HOC DISALLOWANCES ARE CONCERNED, W E ARE OF THE VIEW THAT ONCE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE REJECTED , THEN AD HOC ADDITION MADE BY THE LD. ASSESSING OFFICER WOULD TAKE CARE A LL OTHER EXPENSES DEBITED IN THE ACCOUNTS. THE LD. ASSESSING OFFICER HAS NOT DETERMINED THE TAXABLE INCOME OF THE ASSESSEE ON THE BASIS OF BOOK S OF ACCOUNT, THEREFORE, 8 HE OUGHT NOT TO HAVE MADE SEPARATE DISALLOWANCES. I N VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT SEE ANY MERIT IN THIS APPEAL , IT IS 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- DEPUTY CIT, CENTRAL CIRCLE-2, JA IPUR. 2. THE RESPONDENT- M/S. BHAGIRATH MAL JAKHAR & PA RTY, JAIPUR. 3. THE CIT 4. CIT(APPEALS) 5. THE DR 6. GUARD FILE (ITA NO. 242/JP/1999) BY ORDER A.R., JAIPUR.