M/s Sri Laxmi Ganapthi Abkari Enterprises, Visakhapatnam V. The ITO, Ward-2, Srikakulam

ITA 286/VIZ/2006

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2557 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-11-2010
• Assessment Year: misc
• Appeal Filed On: 05-06-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J SIRI KUMAR
• Keywords: Set aside
• Section: 143(3); 251

Judgement Text

ITA NO.286/VIZAG/2006 SRI LAXMI GANAPATHI ABKARI E NTERPRISES, SRIKAKULAM PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.286/VIZAG/2006 ASSESSMENT YEAR: 1989-90 SRI LAXMI GANAPATHI ABKARI ENTERPRISES, SRIKAKULAM. VS. ITO, WARD-2, SRIKAKULAM (APPELLANT) PAN NO: AACFL 5753B (RESPONDENT) APPELLANT BY: SHRI YA RAO, CA RESPONDENT BY: SHRI J SIRI KUMAR, DR ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 28.3.2006 PASSED BY LD. CIT(A-II), VISAKHAPATNAM AND IT RELATES TO THE ASSESSMENT YEAR 1989-90. 2. THOUGH THE ASSESSEE HAS RAISED AS MANY AS 9 GRO UNDS, THE PLEA OF THE ASSESSEE IS THAT THE TAX AUTHORITIES SHOULD HAVE AC CEPTED THE GROSS PROFIT OFFERED BY THE ASSESSEE, AS PER THE DIRECTIONS OF T HE ITAT IN ITS ORDER DATED 28.6.2005. WITH REGARD TO THE EXPENSES, IT IS PRAY ED THAT IT SHOULD BE RESTRICTED TO THE EXTENT SUSTAINED BY THE TRIBUNAL. 3. THE FACTS RELATING TO THE ISSUE ARE STATED I N BRIEF. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF ARRACK BUSINESS. THE ASSESSMENT ORIGINALLY PASSED UNDER SECTION 143(3) W AS REVISED BY THE LEARNED CIT UNDER SECTION 263. AGAINST THE ORDER PA SSED UNDER SECTION 143(3) R.W.S. 263, THE ASSESSEE FILED APPEAL BEFORE LEARNED CIT(A) AND THE FIRST APPELLATE AUTHORITY RESTORED THE MATTER BACK TO THE FILE OF ASSESSING OFFICER. AGAINST THE ORDER PASSED UNDER SECTION 14 3(3) R.W.S. 250, THE ASSESSEE FILED APPEAL BEFORE THE LEARNED CIT(A) AND GOT PARTIAL RELIEF. AGAINST THE RELIEF SO GRANTED, THE REVENUE FILED AP PEAL BEFORE THE ITAT, WHICH DISPOSED OF THE APPEAL, VIDE ITS ORDER DATED 28.6.2005, BY SETTING ITA NO.286/VIZAG/2006 SRI LAXMI GANAPATHI ABKARI E NTERPRISES, SRIKAKULAM PAGE 2 OF 5 ASIDE THE MATTER AGAIN TO THE FILE OF ASSESSING OFF ICER WITH THE FOLLOWING DIRECTION. AS REGARDS GROUND NO.2, 3 AND 5, THE ADMITTED FAC TS OBSERVED FROM THE ORDER OF THE ASSESSING OFFICER THAT THE SA LES WERE AT RS.1,64,48,890/- WHICH WERE NOT RELIABLE. SALES BI LLS, ACCOUNTS BOOKS WERE NOT PRODUCED AND THEREFORE, THE BOOKS WE RE REJECTED. THE ASSESSING OFFICER ESTIMATED THE SALES RS.1,75,0 0,00,000/- AND ADOPTED 83% GP WHERE AS THE LEARNED CIT(A) REDUCED TO 4% NP BUT NO WHERE THE PURCHASE OF ARRACK HAS NOT BROUGHT ON RECORD IN THE ORDER OF ASSESSING OFFICER AS WELL AS LEARNED C IT(A). THE ASSESSING OFFICER DISBELIEVED THE SALES, THEREFORE ENHANCED THE SALE WHICH IS NOT JUSTIFIED WHERE AS THE ASSESSING OFFICER HAS TO CONSIDER THE PURCHASES ALSO ON THE BASIS OF MANDATO RY EXCISE PURCHASE REGISTER MAINTAINED BY THE ASSESSEE UNDER EXCISE RULES. WE, WHILE RELYING ON ORDER IN ITA NOS.388 TO 390/M/ 97 DATED 18.3.1984 SET ASIDE THE ASSESSMENT ORDER AND ORDER OF LEARNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO PASS FRESH ASSESSMENT ORDER AFTER HEARING THE ASSESSEE W ITHIN THE PROVISIONS OF THE ACT. BEFORE THE ASSESSING OFFICER, THE ASSESSEE EXPRESSE D ITS INABILITY TO PRODUCE THE PURCHASE RECORDS MAINTAINED UNDER THE EXCISE RU LES AND HENCE THE ASSESSING OFFICER ESTIMATED THE TURNOVER AT RS.1.75 CRORES AND GROSS PROFIT AT 83% AND DETERMINED THE TOTAL INCOME AT RS.11,74, 430/-. THE ASSESSEE CARRIED THE MATTER IN APPEAL AGAIN BEFORE THE LEARN ED CIT(A) WHO DISMISSED THE APPEAL BY HOLDING THAT THE ASSESSEE HAS FAILED TO COMPLY WITH THE DIRECTIONS OF THE ITAT TO PRODUCE THE PURCHASE RECO RD. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE CONTENTION OF THE LEARNED AUTHORISED REP RESENTATIVE ARE THAT A) THE ASSESSEE COULD NOT PRODUCE THE PURCHASE REC ORD SINCE THEY HAVE BEEN SURRENDERED TO THE STATE EXCISE AUTHORITI ES AS PER THE RELEVANT EXCISE RULES. B) THE ASSESSING OFFICER IS REQUIRED TO VERIFY TH E PURCHASE INDEPENDENTLY AS PER THE DIRECTION OF ITAT AND DECI DE THE MATTER. THUS THE ASSESSING OFFICER CAN DISTURB THE RESULTS ONLY IF D ISCREPANCIES ARE NOTICED AS A RESULT OF VERIFICATION OF PURCHASES. C) THERE IS NO REASON TO SUSPECT THE PURCHASES, S INCE ALL THE PURCHASES HAVE BEEN MADE FROM A.P BEVERAGES CORPORA TION LTD., A STATE GOVERNMENT UNDERTAKING. D) THERE IS NO JUSTIFICATION IN REJECTING THE BOO K RESULTS AND IN ESTIMATING THE PROFIT. ITA NO.286/VIZAG/2006 SRI LAXMI GANAPATHI ABKARI E NTERPRISES, SRIKAKULAM PAGE 3 OF 5 E) THE ASSESSEE HAS CARRIED THE ARRACK BUSINESS ONLY FOR A PERIOD OF 12 MONTHS, WHICH WAS SPREAD IN TWO FINANCIAL YEARS RELATING TO THE ASSESSMENT YEARS 1988-89 AND 1989-90. THE RESULTS SHOWN BY THE ASSESSEE FOR THE ASSESSMENT YEAR 1988-89 HAS BEEN A CCEPTED UNDER SECTION 143(3) OF THE ACT BY MAKING ONLY FEW ADDITIONS. F) THE ASSESSING OFFICER SHOULD HAVE ACCEPTED THE BOOK RESULTS INSTEAD OF ESTIMATING THE SALES AND INCOME WHEN NO DEFECTS HAVE BEEN NOTICED IN THE PURCHASES. 5. ON THE CONTRARY, THE LEARNED DEPARTMENTAL REP RESENTATIVE SUBMITTED THAT THE ASSESSEE HAS FAILED TO PRODUCED THE PURCHA SE REGISTERS AND HENCE THE LEARNED CIT(A) WAS RIGHT IN LAW IN UPHOLDING TH E ORDER OF THE ASSESSING OFFICER. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. THE WHOLE ISSUE REVOLVES AROUND THE DIRECTION GIVEN BY THE TRIBUNAL IN THE EARLIER ROUND OF PROCEEDING. THE CASE OF THE ASSES SEE IS THAT THE ASSESSING OFFICER WAS DIRECTED TO CONSIDER THE PURCHASES WHIL E DETERMINING THE TOTAL INCOME. SINCE THE ASSESSEE HAD SURRENDERED THE PURC HASE RECORDS TO THE EXCISE OFFICIALS, IT COULD NOT PRODUCE THE SAME BEF ORE THE ASSESSING OFFICER. HOWEVER, SINCE THE PURCHASES HAVE BEEN MADE FROM TH E STATE GOVERNMENT UNDERTAKING, NO DEFECTS COULD HAVE BEEN NOTICED AND HENCE THE ASSESSING OFFICER SHOULD HAVE ACCEPTED THE BOOK RESULTS. ON THE OTHER HAND, THE CONTENTION OF THE DEPARTMENT IS THAT THE ASSESSING OFFICER WAS JUSTIFIED IN REJECTING THE BOOKS AND ESTIMATING THE PROFIT SINCE THE ASSESSEE HAS FAILED TO PRODUCE THE PURCHASE RECORD. 7. ON A CAREFUL READING OF THE TRIBUNAL ORDER D ATED 28.6.2005 EXTRACTED (SUPRA), IT IS NOTICED THAT THE TRIBUNAL HAS OBSERV ED THAT ASSESSEE HAS FAILED TO PRODUCE THE SALES BILLS AND ACCOUNT BOOKS AND HE NCE THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SALES TURNOVER DEC LARED BY THE ASSESSEE WAS NOT RELIABLE. THE VIEW OF THE TRIBUNAL APPEAR S TO BE THAT THE ASSESSING OFFICER SHOULD HAVE CONSIDERED THE PURCHASES ALSO W HILE MAKING THE ESTIMATE SINCE THE ASSESSEE IS MAINTAINING PURCHASE REGISTER AS PER THE RELEVANT EXCISE RULES. HOWEVER, THE TRIBUNAL HAS F INALLY DIRECTED THE ASSESSING OFFICER TO PASS FRESH ASSESSMENT ORDER WI THIN THE PROVISIONS OF ITA NO.286/VIZAG/2006 SRI LAXMI GANAPATHI ABKARI E NTERPRISES, SRIKAKULAM PAGE 4 OF 5 LAW. IN VIEW OF THE SAID DIRECTION, WE ARE UNABLE T O ACCEPT THE CONTENTION OF THE ASSESSEE THAT THERE IS A DIRECTION FROM THE TRIBUNAL TO ACCEPT THE TURNOVER. IT IS PERTINENT TO NOTE THAT, IN THE INIT IAL LINES OF THE PARAGRAPH, THE TRIBUNAL HAS TAKEN NOTE OF THE FACT THAT THE SA LES DISCLOSED BY THE ASSESSEE SUFFER FROM DEFICIENCIES DUE TO NON PRODUC TION OF SALES BILLS AND ACCOUNT BOOKS. HENCE, IN OUR VIEW, THE TRIBUNAL HA S ONLY EXPRESSED ITS OPINION THAT THE PURCHASES SHOULD HAVE BEEN CONSIDE RED WHILE ESTIMATING THE SALES TURNOVER. 8. BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS EXPRESSED ITS INABILITY TO PRODUCE THE PURCHASE REGISTER, SINCE THEY HAD BEEN SURRENDERED TO THE EXCISE OFFICIALS LONG BACK AND DUE TO LAPSE OF TIME IT WAS VERY DIFFICULT TO GET BACK THE SAME FROM THEM. EVEN IF THE SAID DIFFICUL TY FACED BY THE ASSESSEE IS CONSIDERED, THE SALES HAD TO BE ESTIMATED BY TH E ASSESSING OFFICER SINCE THE ASSESSEE HAS FAILED TO PRODUCE THE SALES BILL. IT IS NOT BORNE OUT OF THE RECORD THAT THE ASSESSEE COULD SUBSTANTIATE THE SAL ES REPORTED BY IT. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY I N THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BOOK SALES AND E STIMATING THE TURNOVER. 9. IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 251 OF THE ACT, THE SALES TURNOVER WAS ESTIMATED AT RS.1.75 CR ORES AND THE GP AT 83%. IN THE APPEAL FILED AGAINST THE SAID ORDER, THE THEN LEARNED CIT(A) ACCEPTED THE SALES TURNOVER OF RS.1,64,49,623/- REPORTED BY THE ASSESSEE, BUT DIRECTED THE ASSESSING OFFICER TO ADOPT THE NET PRO FIT RATE OF 4% FOR DETERMINING THE INCOME. HOWEVER, THE TRIBUNAL SET ASIDE THE MATTER AGAIN TO THE FILE OF THE ASSESSING OFFICER AND IN THE ORD ER PASSED UNDER SECTION 143(3) R.W.S.254, THE ASSESSING OFFICER HAS AGAIN E STIMATED THE SALES TURNOVER AT RS.1.75 CRORES AND ADOPTED THE GP RATE AT 83%. AS ALREADY POINTED OUT THE ASSESSING OFFICER HAD TO ESTIMATE T HE SALES, SINCE THE ASSESSEE COULD NOT PRODUCE THE SALES BILLS. HOWEVE R, NO BASIS HAS BEEN CITED BY THE ASSESSING OFFICER FOR MAKING THE SAID ESTIMATE. WITH REGARD TO THE PURCHASES, THE ASSESSEE HAS SHOWN THAT IT WAS P REVENTED TO PRODUCE THE SAME SINCE THE RELEVANT RECORDS WERE HANDED OVE R TO THE EXCISE OFFICIALS. THUS BY TAKING INTO CONSIDERATION ALL TH E ABOVE SAID ASPECTS, WE ITA NO.286/VIZAG/2006 SRI LAXMI GANAPATHI ABKARI E NTERPRISES, SRIKAKULAM PAGE 5 OF 5 ARE OF THE VIEW THAT WE NEED TO ESTIMATE THE GROSS PROFIT AND ACCORDINGLY WE OPINE THAT THE GROSS COMPUTED BY US AS DETAILED BELOW WOULD MEET THE ENDS OF JUSTICE. SALES TURNOVER REPORTED BY THE ASSESSEE 1,64,49,623 ADD:- 5% TOWARDS DEFICIENCIES 8,22,481 ----------------- 1,72,72,104 (-) OPENING STOCK AND PURCHASE AS PER BOOKS 32 ,31,300 ------------------ GROSS PROFIT 1,40,40,804 ========= ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO RE- COMPUTE THE TOTAL INCOME BY TAKING THE GROSS PROFIT DETERMINED ABOVE. WE OR DER ACCORDINGLY. 10. WITH REGARD TO THE EXPENSES, THE ASSESSING OFFICER HAS ALREADY DISALLOWED THE EXPENSES TO THE EXTENT DETERMINED BY THE TRIBUNAL IN ITS EARLIER ORDER IN ADDITION TO THE DISALLOWANCES MADE VOLUNTARILY BY THE ASSESSEE. HENCE, WE ARE OF THE VIEW THAT NO INTERF ERENCE IS CALLED FOR IN THAT REGARD. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 23 RD DECEMBER, 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE:23-12-2010 COPY TO 1 ROWE & PAL, DR NO.14-36-1, KRISHNA NAGAR, VISAKHA PATNAM. 2 ITO, WARD-2, SRIKAKULAM 3 4. THE CIT II, VISAKHAPATNAM. THE CIT(A) - II, VISAKHAPATNAM. 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM