DCIT, Jaipur V. MAHESH KUMAR & PARTY, BUNDI

ITA 3/JPR/1999

• Counselvise Citation: 323114 RSA 1999
• Duration Of Justice: 15 year(s) 4 month(s) 29 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: 1995-1996
• Appeal Filed On: 01-01-1999
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: P K KASLIWAL
• Keywords: Business income
• Section: 143(3); 148; 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. 3/JP/1999 ASSESSMENT YEAR :1995-96 THE DCIT VS. M/S. MAHESH KUMAR & PARTY CENTRAL CIRCLE- 1, JAIPUR BUNDI (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI D.C. SHARMA ASSESSEE BY : SHRI P.K. KASLIWAL DATE OF HEARING: 29-05-2014 DATE OF PRONOUNCEMENT: 30-05-2014 ORDER PER R.C. SHARMA, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST O RDER OF THE LD. CIT(A) DATED 13-10-1998 FOR THE ASSESSMENT YEAR 199 5-96, IN THE MATTER OF ORDER PASSED U/S 143(3) READ WITH SECTION 148 OF TH E I.T. ACT, 1961. 2.1 AT THE OUTSET, IT IS BEING BROUGHT ON RECORD TH AT THIS APPEAL WAS DECIDED BY THE TRIBUNAL VIDE ITS ORDER DATED 14-07- 2005. AGAINST THE ORDER OF THE TRIBUNAL, ASSESSEE APPROACHED THE HON'BLE H IGH COURT, AND THE HON'BLE HIGH COURT VIDE ITS ORDER DATED 21-01-2014 SET ASIDE THE ORDER OF THE TRIBUNAL FOR DECIDING AFRESH AND DENOVO THE ISSUE O F TRADING ADDITION MADE 2 AFTER INVOKING THE PROVISION OF SECTION 145(3) OF T HE ACT IN ACCORDANCE 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, THIS APPEAL WAS AGAIN FIXED AND HEARD ON MER IT AND ARE DECIDED AFRESH IN THE FOLLOWING MANNER. 2.2 THE RIVAL CONTENTIONS HAVE BEEN HEARD AND RECOR DS PERUSED. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN BUSINE SS OF LIQUOR. ON TURNOVER OF COUNTRY LIQUOR OF RS. 4.47 CRORES, THE ASSESSEE HAS SHOWN GROSS PROFIT RATE OF 78.49% AND IN RESPECT OF SALE OF IMFL/BEER AMOUNTI NG TO RS. 2.20 CRORES, THE ASSESSEE HAS SHOWN THE GROSS PROFIT RATE OF 4.5 9%. BY OBSERVING THAT THE ASSESSEE HAS NOT MAINTAINED SALES BILLS, THE AO REJ ECTED THE BOOK RESULT AND MADE ADDITION OF RS. 18.55 LACS. IN TRADING RESULT OF IMFL/BEER, WE FOUND THAT IN IMFL/BEER ACCOUNTS, ON RETAIL BASIS, THE AS SESSEE HAD DECLARED TOTAL SALES OF RS. 2,20,20,795/- AND GROSS PROFIT OF RS. 10,10,083/- GIVING GROSS PROFIT RATE OF 4.59% BEFORE TAKING INTO ACCOUNT THE SHORTFALL. DURING THE IMMEDIATELY PRECEDING YEAR, I.E. ASSESSMENT YEAR 19 94-95, IN THIS ACCOUNT, THE ASSESSEE HAD SHOWN SALES OF RS. 2,03,98,986/- A ND GROSS PROFIT OF RS. 8,29,470/- GIVING GROSS PROFIT RATE OF 4.57%. THE A O HAD ESTIMATED THE SALES FOR THE YEAR UNDER APPEAL AT RS. 2,38,75,809/- AND APPLIED A GROSS PROFIT RATE 3 OF 22%. THE GROSS PROFIT WAS CALCULATED AT RS. 28,6 5,097/- AFTER DEDUCTING DECLARED GROSS PROFIT OF RS. 10,10,083/-, AN ADDITI ON OF RS. 18,55,014/- WAS MADE ON THE GROUND THAT THE GROSS PROFIT RATE SHOWN BY THE ASSESSEE WAS LOW AND VENDERS IN THE SAME LINE OF BUSINESS HAD SHOWN GROSS PROFIT RATE RANGING FROM 20% TO 40%. 2.3 BY THE IMPUGNED ORDER, THE LD. CIT(A) SUSTAINE D THE ADDITION OF RS. 3,31,026/- AFTER APPLYING THE GROSS PROFIT RATE OF 6%. THE PRECISE OBSERVATION OF THE LD. CIT(A) WAS AS UNDER:- 2.5 AFTER PERUSAL OF THE FACTS OF THE CASE, IT IS FOUND THAT DURING THE YEAR UNDER APPEAL, THE APPELLANT HA D DECLARED GROSS PROFIT RATE OF 4.59% AS AGAINST GROSS PROFIT RATE OF 4.57% DECLARING DURING THE IMMEDIATELY PRECEDING YEAR. T HE AO HAD APPLIED A GROSS PROFIT RATE OF 12% WITHOUT ANY BASI S AND MATERIAL IN HER POSSESSION. HOWEVER, IT IS CONSIDER ED REASONABLE, IF GROSS PROFIT RATE OF 6% IS APPLIED I NSTEAD OF GROSS PROFIT RATE OF 12% APPLIED BY THE AO. GROSS PROFIT OF 6% IS APPLIED ON ESTIMATED SALES OF RS. 2,23,51,821/- AND GROSS PROFIT IS WORKED OUT TO RS. 13,41,108/- AS AGAINST THE GRO SS PROFIT DECLARED AT RS. 10,10,083/-. ADDITION ON THIS ACCOU NT COMES TO RS. 3,31,026/- AS AGAINST THE ADDITION OF RS. 18,55 ,014/- MADE BY THE AO. THUS THE APPELLANT GETS RELIEF OF RS. 15 ,23,988/- 2.4 WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREF ULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT THE ASSESSEE'S TRADING RESULT IN 4 RESPECT OF IMFL/BEER RETAIL WAS REJECTED BY THE AO AND AFTER APPLYING NET PROFIT RATE OF 12%, AN ADDITION OF RS. 18,55,014/- MADE BY THE AO. AFTER DISCUSSING THE GROSS PROFIT RATE SHOWN BY THE ASSES SEE IN THE IMMEDIATELY PRECEDING YEAR, THE LD. CIT(A) FOUND THAT THE GROSS PROFIT RATE DURING THE YEAR WAS BETTER. THE LD. CIT(A) OBSERVED THAT THE AO HAS APPLIED ARBITRARY GROSS PROFIT RATE OF 12% WITHOUT ANY BASIS AND MATERIAL I N HER POSSESSION. THERE IS NO DISPUTE TO THE WELL SETTLED PROPOSITION THAT ME RELY BY REJECTING THE BOOKS OF ACCOUNT, THE AO CANNOT MAKE ANY ARBITRARY ADDITI ON. AFTER REJECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT, THE AO IS R EQUIRED TO FRAME THE ASSESSMENT AS PER PROVISIONS CONTAINED U/S 144 OF T HE ACT, WHERE AO CAN ESTIMATE ASSESSEES INCOME. THE ORDER U/S 144 IS TO BE MADE TO THE BEST OF THE JUDGEMENT OF THE ASSESSING OFFICER WHICH MEANS, THE ORDER HAS TO BE RATIONAL AND IS TO BE BEST ON AN HONEST GUESS WORK FOR WHICH SOME VALID BASIS IS AVAILABLE TO THE ASSESSING OFFICER. THE ORDER IN VOLVES EXERCISE OF JUDGEMENT BY THE OFFICER. A FAIR ESTIMATION OF IN COME HAS TO BE MADE, THE ASSESSING OFFICER SHOULD TAKE INTO CONSIDERATION TH E TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE IN ADDITION TO PROPER EVA LUATION OF THE MATERIAL FURNISHED BY THE ASSESSEE AND COLLECTED BY HIM BY H IS OWN EFFORTS. WHERE BEST JUDGEMENT ASSESSMENT POWER HAS BEEN CONFERRE D, THE LIMITS OF THE POWER ARE IMPLICIT IN THE EXPRESSION BEST OF THE HIS JUDGEMENT 5 ASSESSMENT. SUCH BEST JUDGMENT ASSESSMENT DOES N OT DEPEND UPON ARBITRARY CAPRICIOUS OF THE ASSESSING OFFICER, BUT ON SETTLED AND INVARIABLE PRINCIPLE OF JUSTICE. THOUGH THERE IS AN ELEMENT OF GUESS WORK IN BEST JUDGEMENT ASSESSMENT, IT SHALL NOT BE WILD ONE, B UT SHALL HAVE REASONABLE NEXUS TO THE AVAILABLE MATERIAL AND CIRCUMSTANCES O F EACH CASE. WHILE ESTIMATING THE GROSS PROFIT, THE ASSESSING OFFICER SHOULD BE FAIR AND REASONABLE AND SHOULD KEEP INTO ACCOUNT VARIOUS FA CTORS JUST LIKE TURNOVER OF THE ASSESSEE, ITS PAST RECORD ACCEPTED BY THE DE PARTMENT, RATIO SHOWN BY OTHER ASSESSEE HAVING SAME NATURE OF BUSINESS AND WORKING UNDER SIMILAR BUSINESS CIRCUMSTANCES ETC. IN THE INSTANT CASE BEF ORE US, THE AO HAD NO MATERIAL IN HER POSSESSION FOR ESTIMATING GROSS PRO FIT RATE AT 12% IN TERMS OF FINDING RECORDED BY LD. CIT(A). AFTER GIVING DETAIL ED FINDINGS, THE LD. CIT(A) HAS MODIFIED THE GROSS PROFIT RATE BY COMPAR ING WITH THE GROSS PROFIT RATE PREVAILING DURING THE YEAR UNDER CONSIDERATION WHICH WAS BETTER THAN THE GROSS PROFIT RATE DECLARED IN PRECEDING YEAR VIS-A- VIS GROSS PROFIT RATE ACCEPTED IN OTHER LIQUOR TRADERS, ACCORDINGLY UPHEL D THE ADDITION BY APPLYING GROSS PROFIT RATE OF 6%. THE DETAILED FINDINGS RECO RDED BY THE LD. CIT(A) HAS NOT BEEN CONTROVERTED. ACCORDINGLY ,WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A) FOR SUSTAINING THE ADDI TION OF RS. 3,31,026/- 6 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30-05-201 4. SD/- SD/- (RAJ PAL YADAV) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED: 30 TH MAY, 2014 *MISHRA COPY FORWARDED TO:- 1. THE DCIT, CENTRAL CIRCLE- 1, JAIPUR BY ORDE R 2. M/S. MAHESH KUMAR & PARTY, BUNDI 3. THE LD. CIT 4. THE LD. CIT(A), JAIPUR 5..THE LD. DR 6.THE GUARD FILE (IT NO.3/JP/1999) AR ITAT, JAIPU R 7