M/s Basti Wine Co. (English), Kanpur V. DY. Commissioner of Income Tax-1, Kanpur

ITA 338/LKW/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1212 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 06-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K VISHWAKARMA
• Keywords: Additional evidence; Commercial expediency
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 338/LKW/2016 ASSESSMENT YEAR: 2012 - 13 M/S BASTI WINE CO. (ENGLISH) 24/4, THE MALL K ANPUR V. DCIT RANGE 1 KANPUR T AN /PAN : AAAAB4224A (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI ASHISH JAISWAL, ADVOCATE RESPONDENT BY: SHRI R. K. VISHWAKARMA, D.R. DATE OF HEARING: 13 12 201 7 DATE OF PRONOUNCEMENT: 08 01 201 8 O R D E R PER P ARTHA SARATHI CHAUDHURY, J.M : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A) - I, KANPUR DATED 31/3/2016. 2 . THE ASSESSEE HAS PREFERRED THE FOLLOWING GROUNDS OF APPEAL: - 1 . THAT THE LD. CIT (APPEAL) HAS ERRED IN CONFIRMING THE REJECTIO N OF BOOKS OF ACCOUNT AND ADDITION OF RS. 26,51,070.00 TO GROSS PROFIT. 2 . THAT THE LD. CIT (APPEAL) HAS ERRED IN CONFIRMING THE OTHER DISALLOWANCES MADE BY THE AO AFTER REJECTION OF BOOKS AND ESTIMATION OF GROSS PROFIT. 3 . THAT THE ID. CIT (APPEAL) HAS ERRED IN CONFIRMING AD - HOC DISALLOWANCE ON ACCOUNT OF SHOP RENT PAID OF RS. 5,88,000.00. [ ITA NO.338/LKW/2016 ] 2 4 . THAT THE ID. CIT (APPEAL) HAS ERRED IN CONFIRMING AD - HOC DISALLOWANCE O N ACCOUNT OF SALARY PAID OF RS. 16,46,400.00. 5 . THAT THE ID. CIT (APPEAL) HAS ERRED IN CONFIRMING DISALLOWA NCE ON ACCOUNT OF PROCESSING FEE, ASSESSMENT FEE AND RENEWAL FEE PAID OF RS. 13,83,300.00. 6 . THAT THE ID. CIT (APPEAL) FAILED TO APPRECIATE THAT PROCESSING FEE, ASSESSMENT FEE AND RENEWAL FEE ARE IN THE NATURE OF PAYMENT TO GOVERNMENT AUTHORITIES AND CANNOT S AID TO BE BOGUS. 7 . THAT THE ID. CIT (APPEAL) HAS PASSED THE ORDER WITHOUT PROVIDING PROPER OPPORTUNITY TO THE APPELLANT BEFORE PASSING THE ORDER. 8 . THAT THE APPELLANT CRAVES LEAVE TO INTRODUCE, WITHDRAW OR MODIFY ANY GROUND OF APPEAL WITH THE PERMISSION OF YOU R HONOUR. 3 . GROUNDS NO.1 & 2 RELATE TO THE CONFIRMATION OF REJECTION OF THE BOOKS OF ACCOUNT BY THE LD. CIT(A) AND ADDITION OF RS.26,51,070/ - AND ESTIMATION OF GROSS PROFIT RATE @ 12.50% AS AGAINST 11.59% DECLARED BY THE ASSESSEE. 4 . THE FACTS REGARDING THESE G ROUNDS ARE THAT THE ASSESSEE IS AN AOP IN STATUS AND ENGAGED IN THE BUSINESS OF TRADING LIQUOR. TOTAL NUMBER OF MEMBERS IN THE AOP IS 38. THE BUSINESS OF THE ASSESSEE IS CARRIED FROM (1) 24/4/, THE MALL, KANPUR (HEAD OFFICE) AND (2) 49 SHOPS AT VARIOUS P LACES IN BASTI, GORAKHPUR, SIDDHARTH NAGAR, SANT KABIR NAGAR (BRANCH OFFICES). THE ASSESSEE HAS FILED RETURN DECLARING TOTAL INCOME AT RS.14,02,770/ - WHICH WAS E - FILED ON 26/9/2012. THE ASSESSMENT WAS COMPLETED UNDER SECTION 144 OF THE ACT ON A TOTAL INC OME OF RS.62,68,770/ - AFTER INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT BY ESTIMATING THE G.P. RATE AT 12.50% AS AGAINST 11.59% DECLARED BY [ ITA NO.338/LKW/2016 ] 3 THE ASSESSEE AND MAKING VARIOUS DISALLOWANCES AND ADDITIONS AS APPEARING IN THE ASSESSING OFFICERS ORDER. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH VARIOUS DETAILS REGARDING THE EXPENDITURES AND DOCUMENTARY EVIDENCES. THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS AND FURNISHED REQUIRED DETAILS , SUCH AS COPY OF FORM 27D (TCS CERTIFICATE) FOR PURCHASES MADE AND COPY OF LEDGER ACCOUNTS OF EXPENSES EXCEPT ASSESSMENT FEES, PROCESSING FEES AND RENEWAL FEES. FROM A PERUSAL OF THE LEDGER ACCOUNTS, THE ASSESSING OFFICER NOTICED THAT THE EXPENDITURE WAS INCURRED IN CASH. THE ASSESSEE WAS REQUIRED TO PRODUCE CO MPLETE BOOKS OF ACCOUNT ALONG WITH SUPPORTING BILLS/VOUCHERS WHICH MAY SUBSTANTIATE THE CLAIM OF EXPENDITURES. THE ASSESSEE HAD PRODUCED THE BOOKS OF ACCOUNT COMPRISING CASH BOOK AND LEDGER. THE ASSESSING OFFICER IN HIS ORDER HAS ESTIMATED A HIGHER G.P. RATE AND HAS INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT FOR THE FOLLOWING REASONS: - ( 1 ) THAT ONLY CASH BOOK AND LEDGER WERE PRODUCED. ( 2 ) THAT THE EXPENSES ARE INCURRED IN CASH. ( 3 ) THAT SUPPORTING BILLS AND VOUCHERS RELATING TO SALES, PURCHASES AND OTHER HEA DS OF EXPENSES NOT PRODUCED. ( 4 ) THAT PACKING - WISE QUANTITATIVE DETAILS IN RESPECT OF PURCHASES AND SALES WERE NOT AVAILABLE IN THE SHAPE OF CASH MEMO AND, THEREFORE, ACCORDING TO THE ASSESSING OFFICER , IT WAS NOT POSSIBLE TO ASCERTAIN THE CORRECTNESS OF SALES . ( 5 ) THAT WHEN NO CASH MEMO OR OTHER QUANTITATIVE CHART OF SALES IS AVAILABLE, SALES ARE INCREDULOUS AND POSSIBILITY OF S UPPRESSION OF SALES IS CERTAINLY THERE. [ ITA NO.338/LKW/2016 ] 4 ( 6 ) THAT PURCHASES ARE GOVERNED BY GOVERNING AUTHORITIES WITH LICENSE FEES AND SAME A RE PREDEFINED THA T THE ASSESSEE WILL PURCHASE SUCH QUANTUM DURING THE RELEVANT PERIOD BUT THERE IS NO RESTRICTION FOR THE ASSESSEE THAT AT WHICH RATE IT WILL S ELL OUT ITS LIQUOR. ( 7 ) T HAT T HERE IS DISCREPANCY FOR NON MAINTENANCE OF STOCK RECORDS. ( 8 ) THAT WHEN THERE ARE 38 MEMBERS IN A. O .P, THEN IT IS HARDLY ACCEPTABLE PRACTICE THAT ASSESSEE WILL NOT KEEP SUCH RECORDS OF SALES WHICH DIRECTLY AFFECTS THE INTEREST OF ASSESSEE AS WELL AS MEMBERS SATISFACTION FOR SMOOTH RUNNING OF BUSINESS. ( 9 ) THAT THERE ARE 2 MODEL SHOPS WHERE LIQUOR IS PROPERLY SERVED TO THE CUSTOMER VISIT I NG THERE AND IN THESE TYPES OF MODEL SHOPS , CASH MEMOS ARE CERTAINLY GENERATED AND ARE ISSUED TO CUSTOMERS. ( 10 ) THAT ASSESSEE HAS STATED THAT TRADING RESULTS HAVE REGULARLY BEEN ACCEPTED BY THE D EPARTMENT EXCEPT IN A.Y 20 11 - 12 BUT THE FACT IS THAT BEFORE A.Y 2011 - 12, NO CASE OF ASSESSEE WAS COMPLETED UNDER SECTION 1 4 3(3) OF THE INCOME TAX ACT. 5 . THE ASSESSEE HAD SUBMITTED ITS ARGUMENT THAT THEY ARE ENGAGED IN THE BUSINESS OF TRADING IN FOREIGN LIQUOR. IN THE CASE OF THE ASS ESSEE, LICENSE IS AWARDED FOR A YEAR; THEREFORE, IT IS NOT POSSIBLE FOR THE ASSESSEE TO SELL BEYOND THE LICENSE PERIOD. THE PURCHASES IN RESPECT OF ASSESSEES TRADE ARE SUBJECT TO DEDUCTION OF TCS AND, THEREFORE, PURCHASES MADE ARE FULLY VERIFIABLE FROM T HE PURCHASE BILLS AS WELL AS [ ITA NO.338/LKW/2016 ] 5 TCS CERTIFICATES SUBMITTED TO THE DEPARTMENT. IT IS NOT POSSIBLE IN THE TRADE OF ASSESSEE TO MAKE PURCHASES FROM OUTSIDE, AS IT IS PURCHASED ONLY AFTER PAYMENT OF LICENSE FEE. THE QUANTUM OF PURCHASE IS FIXED AND, THEREFORE, NO SALES IS POSSIBLE OUTSIDE THE BOOKS OF ACCOUNT, AS THE ASSESSEE COULD NOT SELL THE LIQUOR IN EXCESS TO THE QUANTITY OF PURCHASES IN WHICH LICENSE FEE HAS BEEN PAID. THE ASSESSEE HAS GOT 49 SHOPS IN VARIOUS PLACES AND IT IS NOT POSSIBLE TO CONTROL THE E NTIRE ACTIVITY OF EMPLOYEE LIKE SALES, COLLECTION, ETC AND ACCORDINGLY IN ORDER TO CONTROL THE SAME, SHOP - WISE SHEET IS PREPARED DEMONSTRATING THE DETAILS OF OPENING STOCK, STOCK TAKEN FROM DEPOT, ENTIRE SALES DURING THE DAY AND CLOSING INVENTORY, EXPENSES INCURRED, CASH IN HAND AND THE SAME IS REPORTED TO THE MAIN OFFICE DAILY AND ON THE BASIS OF THE ABOVE SHEET, CORRESPONDING ENTRIES ARE MADE IN THE BOOKS OF ACCOUNT. IN THE HEAD OFFICE, ASSESSEES BOOKS OF ACCOUNT ARE MAINTAINED WITH THE HELP OF DATAS RE LATING TO PURCHASE, SALES AND EXPENSES MADE AVAILABLE ON DAILY BASIS THOUGH VARIOUS CHANNELS. THE ASSESSEE FURTHER CONTENDED THAT NO CASH MEMOS ARE ISSUED FOR RETAIL CASH SALES MADE BY THE SHOPS, BUT AT THE END OF THE DAY A CONSOLIDATED ENTRY IN THE BOOKS OF ACCOUNT FOR ALL THE RETAIL SHOPS ARE MADE. THESE CONTENTIONS OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAD RESORTED TO THE PROVISIONS OF SECTION 145(3) OF THE ACT AND ESTIMATED THE G.P. AT HIGHER RATE. 6 . BE FORE THE LD. CIT(A), THE ASSESSEE HAD MADE A DETAILED SUBMISSION WHEREIN THE ARGUMENTS MADE BEFORE THE ASSESSING OFFICER WERE REITERATED AND IN ADDITION , IT WAS SUBMITTED THAT ALL THE PURCHASE BILLS ALONG WITH TCS CERTIFICATES WERE PRODUCED IN SUPPORT OF P URCHASES MADE BY THE ASSESSEE AND AS REGARDS SALES, IT IS AN ADMITTED FACT THAT NO SEPARATE CASH MEMOS ARE ISSUED FOR EACH AND EVERY TRANSACTION OF [ ITA NO.338/LKW/2016 ] 6 SALE AND THE ENTIRE SALES MADE DURING THE DAY IS ACCOUNTED FOR IN CASH BOOK AT THE END OF THE DAY. IT WAS E VEN ADMITTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ITSELF THAT CASH BOOK AND LEDGER WERE PRODUCED BY THE ASSESSEE. SINCE CASH BOOK IS THE BASIC EVIDENCE FOR RECORDING SALES, THEREFORE, IT CANNOT BE HELD THAT ASSESSEE DID NOT PRODUCE ANY EVIDENC E AS REGARDS SALES. THE ASSESSEE PLACED RELIANCE ON THE DECISION IN THE CASE OF M/S RAMJI LAL & SONS VS. C OMMISSIONER OF SA LES TAX, 50 STC 344 WHEREIN IT WAS OBSERVED THAT THE FACTS OF THE CASE ARE SUCH THAT THE PRACTICE ADOPTED BY THE ASSESSEE WAS THAT I N RESPECT OF PETTY SALES , H E DID NOT ISSUE SEPARATE CASH MEMO, BUT AT THE END OF THE DAY PASSED A CONSOLIDATED CASH MEMO FOR ALL THE PETTY SALES. THE ASSESSEE FURTHER SUBMITTED BEFORE THE LD. CIT(A) THAT TWO MODEL SHOPS WHERE LIQUOR IS SERVED TO THE CUST OMERS, ONLY PLACE IS PROVIDED WHICH IS COUPLED WITH WATER AND GLASS AND THERE IS NO SITTING PLACE ATTACHED WITH THE SHOP. FURTHERMORE, THE OBSERVATION OF THE ASSESSING OFFICER THAT BEFORE ASSESSMENT YEAR 2011 - 12, ASSESSMENT WAS NEVER DONE UNDER SECTION 14 3(3) OF THE ACT WAS ALSO NOT CORRECT SINCE FOR ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 ALSO ASSESSMENTS UNDER SCRUTINY WERE COMPLETED BY ITO1(1), KANPUR. THE COPIES OF ASSESSMENT ORDERS WERE ALSO SUBMITTED BEFORE THE LD. CIT(A). THEREAFTER, THE LD. CIT(A) G OES ON TO RECORD CERTAIN INFERENCES FROM THE ASSESSMENT ORDER AND SUMMARILY REJECTS THE SUBMISSION OF THE ASSESSEE AND SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER WITHOUT ASSIGNING ANY SPECIFIC REASON FOR HIS DECISION AND THAT FROM HIS ORDER ALSO WE DO NOT FIND THAT IT IS A SPEAKING ORDER AND MERE DRAWING OF INFERENCES CANNOT BE EQUATED TO GIVING INDEPENDENT FINDINGS , WHICH IS REQUIRED BY A QUASI JUDICIAL AUTHORITY. [ ITA NO.338/LKW/2016 ] 7 7 . BEING FURTHER AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE US AND AT THE TIME OF HEARING , THE LD. A.R. OF THE ASSESSEE VEHEMENTLY ARGUED REGARDING THE PRACTICALITY INVOLVED IN THE TRADING SALE OF LIQUOR BUSINESS WHICH IS ACCEPTED ALL OVER INDIA AND REITERATED THE SUBMISSIONS MADE BEFORE THE SUBORDINATE AUTHORITIES. THE LD. A.R. OF THE ASSESSEE FURTHER RELIED UPON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: - ( 1 ) HEM RAJ VS. ACIT [2016] 159 ITD 589 (CHANDIGARH) ( 2 ) ITO, RANGE 3(1), G W ALIOR VS. LAXMI NARAIN RAMSWAROOP SHINHARE [2009] 119 ITD 15 (AGRA) (TM) ( 3 ) CIT VS. PRAYAG WINES [2014] 384 ITR 660 ( ALLD) 8 . THE LD. D.R., ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. THE LD. D.R. FURTHER ARGUED THAT IN THE ABSENCE OF DAY - TO - DAY CASH MEMO, THERE MAY BE A POSSIBILITY THAT SALES RATE MAY BE INFLATED AND ACTUAL FIGURE OF SALES , THEREFO RE , BECOMES SUSPICIOUS. THE LD. D.R., HOWEVER, ACCEPTED THE FACT THAT PURCHASE OF LIQUOR IS SUBJECT TO LICENSE FEES AND ASSESSEE CANNOT IN ANY WAY HAVE MORE SALES THAN THE QUANTITY PURCHASED ON THE FACE OF THE LICENSE FEES PAID. 9 . WE HAVE PERUSED THE CASE R ECORD, HEARD THE RIVAL CONTENTIONS AND CONSIDERED THE JUDICIAL PRONOUNCEMENTS PLACED BEFORE US. WE FIND THAT CASH BOOK AND LEDGER WERE PRODUCED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND THIS FACT IS NO T DISPUTED BY THE DEPARTMENT , AS IT IS ON RECOR D. ALL THE PURCHASE BILLS ALONG WITH TCS CERTIFICATES IN SUPPORT OF PURCHASES MADE BY THE ASSESSEE WERE ALSO PRODUCED BEFORE THE ASSESSING OFFICER. DAY - TO - DAY SALES MADE AND ACCOUNTED FOR IN THE CASH BOOK AT THE END OF THE DAY WERE ALSO BEFORE THE DEPART MENT AND HAS PLACED BEFORE US IN THE PAPER BOOK. [ ITA NO.338/LKW/2016 ] 8 10 . IN THE CASE OF HEM RAJ VS. ACIT (SUPRA) ALSO , ASSESSEE WAS ENGAGED IN THE BUSINESS OF LIQUOR AND SALES WERE DONE IN CASH. THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE O N THE GROUND THAT ASSESSEE HAS NOT MAINTAINED DAY - TO - DAY STOCK REGISTER AND SALES RECORD. IT WAS HELD BY THE CO - ORDINATE ITAT CHANDIGARH BENCH THAT ALL OVER THE COUNTRY IN LIQUOR TRADE, IT WAS THE NORMAL PRACTICE OF NOT ISSUING BILLS FOR EVERY SALE AND SA LES ARE RECORDED ON THE BASIS OF DAILY STATEMENTS. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DISCREPANCY IN THE QUANTITATIVE DETAILS OF PURCHASE OR SALES. IT IS ALSO THE CASE OF THE ASSESSEE THAT SALE PRICE IS DISPLAYED AT THE SHOP AND THERE CANNOT B E ANY VARIANCE IN THE PRICE SO DISPLAYED. THE PURCHASES MADE BY THE ASSESSEE WERE EVEN DULY SUPPORTED BY PROPER VOUCHERS AND REGULATED BY THE EXCISE AUTHORITIES AND PAYMENT OF LIQUOR IS THROUGH GOVERNMENT ON THE BASIS OF AUCTION CONDUCTED BY THE GOVERNMEN T. THE NATURE OF ASSESSEES BUSINESS IS SUCH THAT IT CANNOT MAINTAIN PROPER SALE BILLS. THEREFORE, IT WAS HELD BY THE CO - ORDINATE ITAT BENCH THAT MERELY BECAUSE DAY - TO - DAY SALE BILLS AND VOUCHERS WERE NOT AVAILABLE, IT CANNOT BE A GROUND FOR REJECTION OF THE BOOKS OF ACCOUNT AND THAT THE RESULTS DECLARED BY THE ASSESSEE SHOULD BE ACCEPTED. 11 . IN THE CASE OF ITO, RANGE 3(1), G W ALIOR VS. LAXMI NARAIN RAMSWAROOP SHINHARE (SUPRA), THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN COUNTRY LIQUOR AND IMFL AND THE ASSESSING OFFICER REJECTED THE BOOK RESULTS OF THE ASSESSEE ON THE GROUND THAT ALL THE SALES WERE MADE IN CASH WITHOUT PROPER VOUCHERS SUPPORTING THE SALES. IN THIS CASE, IT WAS HELD BY THE CO - ORDINATE ITAT AGRA BENCH THAT WHEN THE BOOKS OF ACCOUNT W ERE PRODUCED BEFORE THE DEPARTMENT AND THERE IS NO SIGNIFICANT DEFECT IN THE BOOKS OF ACCOUNT AND IN THE FACTUAL DETAILS OF [ ITA NO.338/LKW/2016 ] 9 THE CASE, THE GROSS PROFIT RATE DECLARED BY THE ASSESSEE HAS TO BE ACCEPTED. 12 . THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. PRAYAG WINES (SUPRA) HAS HELD THAT IT IS NOT NECESSARY THAT CASH MEMO IS REQUIRED TO BE ISSUED FOR EACH AND EVERY SALE AND THE BOOKS OF ACCOUNT CANNOT BE REJECTED ON THE VERY BASIS THAT ONLY ONE CONSOLIDATED CASH MEMO WAS ISSUED AT THE END OF THE DAY AND THAT THERE WERE NO CASH MEMO FOR EACH AND EVERY SALES. THE CRUX OF THE DECISION WAS THAT IF THE CONSOLIDATED SALE FIGURE IS GIVEN IN THE SINGLE STATEMENT IN THE FORM OF CASH BOOK WHERE DAY - TO - DAY SALES ARE RECORDED, IN SUCH CIRCUMSTANCES FOR EVERY SA LES CASH MEMO IS NOT REQUIRED. 13 . WE FIND IN THE INSTANT CASE OF THE ASSESSEE, CASH BOOK AND LEDGER WERE WITH THE DEPARTMENT. THE PURCHASE BILLS ALONG WITH TCS CERTIFICATES WERE ALSO PRODUCED. THE SELLING PRICE WAS ALSO DISPLAYED IN FRONT OF EVERY SHOP OF T HE ASSESSEE. ALL THE PURCHASES ARE DONE BY THE ASSESSEE ON THE BASIS OF LICENSE FEES AND TCS CERTIFICATES , WHICH WERE ALSO NOT DISPUTED BY THE DEPARTMENT. IT IS ALSO THE PREVAILING PRACTICE ALL OVER THE COUNTRY THAT NO CASH MEMO IS ISSUED FOR DAY - TO - DAY SALES AND AS SUBMITTED BY THE ASSESSEE , TWO MODEL SHOPS DO NOT HAVE ANY SITTING AREA ATTACHED WITH THE SHOP S . NEITHER T HE ASSESSING OFFICER NOR THE LD. CIT(A) HAS CONDUCTED ANY INDEPENDENT ENQUIRY REGARDING THE SAME AND JUST ON THE BASIS OF GUESS WORK HAS OBSERVED THAT ASSESSEE IS NOT BRINGING OUT FULL PARTICULARS. EVEN THE JUDICIAL PRONOUNCEMENTS ARE CLEAR ON THE FACTS THAT IN THE NATURE OF TRADE AS LIKE ASSESSEE, CASH MEMOS FOR DAY - TO - DAY SALES ARE NOT REQUIRED AND THAT A CONSOLIDATED ENTRY IN THE CASH BOOK ALONG WITH RELEVANT DOCUMENTS OF PURCHASE OF LIQUOR ARE SUFFICIENT TO PROVE THE GENUINENESS. IN THIS VIEW OF THE MATTER, WE HOLD THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE [ ITA NO.338/LKW/2016 ] 10 REJECTION OF THE BOOKS OF ACCOUNT AND ADOPTING THE G.P. RATE ON T HE HIGHER SIDE AND, THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND ALLOW GROUNDS NO.1 & 2 OF THE APPEAL OF THE ASSESSEE. 14 . GROUND NO.3 RELATES TO THE CONFIRMATION OF AD - HOC DISALLOWANCE ON ACCOUNT OF SHOP RENT PAID OF RS.5,88,000/ - . 15 . IT IS THE CASE OF THE DEPARTMENT, REGARDING THIS ISSUE, THAT THE ASSESSEE WAS UNABLE TO PRODUCE DOCUMENTARY EVIDENCE REGARDING THE EXPENDITURE AND THE ASSESSING OFFICER IN THE ASSESSMENT ORDER OBSERVED THAT KEEPING IN VIEW THE LOCATION OF SHOPS INCLUDING REN T @ RS.4,000/ - PER MONTH FOR ITS TWO MODEL SHOPS, THE AGGREGATE CLAIM OF RENT SEEMS TO BE ON HIGHER SIDE. THE ASSESSING OFFICER FURTHER ACCEPTS IN HIS ORDER THAT CERTAINLY MOST OF THE SHOPS WERE TAKEN ON RENT TO SELL LIQUOR BUT THEN THE ASSESSING OFFICER ALSO QUESTIONS THAT WHETHER THE SAID EXPENSES WERE ACTUALLY PAID BY THE ASSESSEE AND WHETHER THE SAME W ERE REASONABLE FOR ITS BUSINESS OR NOT. THEN THE ASSESSING OFFICER GOES ON TO STATE THAT ON ANALYZING THE FACTS, ACCORDING TO THE ASSESSING OFFICER, REN T OF THE SHOPS CANNOT BE MORE THAN RS.3,000/ - PER SHOP PER MONTH AND ACCORDINGLY RENT PAID AT RS.1,000/ - PER SHOP PER MONTH FOR 49 SHOPS FOR 12 MONTHS I.E. RS.5,88,000/ - (I.E. 49,000/ - X 12 = 5,88,000/ - ) WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 16 . THE LD. CIT(A) ACCEPTED THE FINDINGS OF THE ASSESSING OFFICER WITHOUT RECORDING A SPECIFIC FINDING AND SPEAKING ORDER ON THE ISSUE. 17 . THE ARGUMENT OF THE ASSESSEE IS THAT DURING THE ASSESSMENT PROCEEDINGS , COMPLETE DETAILS LIKE LOCATION OF SHOP, N AME AND ADDRESS OF THE LANDLORD , AND THE AMOUNT OF RENT PAID WAS FURNISHED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS MADE ADDITION BY [ ITA NO.338/LKW/2016 ] 11 DISALLOWING RENT @ RS.1,000/ - PER SHOP PER MONTH IN AN ARBITRARY MANNER WITHOUT CONDUCTING ANY ENQUIRY TO P ROVE THE ALLEGATION . THE ASSESSEE HAS SUBMITTED AFFIDAVITS IN THE FORM OF CONFIRMATION S FOR RECEIPTS OF SHOP RENT , WHICH ARE ENCLOSED IN THE PAPER BOOK FROM PAGES 1 TO 49. 18 . WE HAVE PERUSED THE CASE RECORD, HEARD THE RIVAL CONTENTIONS AND ANALYZED THE FACTS AND CIRCUMSTANCES IN THE CASE AND WE FIND THAT IN THE PAPER BOOK FILED , ONLY AFFIDAVITS AND CONFIRMATION OF RECEIPTS OF SHOP RENT ARE ENCLOSED AND THE DEPARTMENT DID NOT CONDUCT ANY INDEPENDENT ENQUIRY AND PHYSIC AL VERIFICATION REGARDING RENT PAID AND BOT H THE ASSESSING OFFICER AND THE LD. CIT(A) , ON AD - HOC AND SUMMARY BASIS , HA VE STATED THAT THE RENT SHOULD BE @ RS.3,000/ - PER MONTH PER SHOP, HOWEVER, NEITHER THE ORDER OF THE ASSESSING OFFICER NOR OF THE LD. CIT(A) WAS A SPEAKING ORDER ON THIS ISSUE AND T HE REASONS FOR ARRIVING AT THE CONCLUSION WAS NOT SPELT OUT SPECIFICALLY. WE ARE OF THE CONSIDERED VIEW THAT ANY AD - HOC DISALLOWANCE MADE SUMMARILY BY A QUASI - JUDICIAL AUTHORITY , WITHOUT ANY FACTUAL BASIS , CANNOT BE HELD JUSTIFIED AND ACCORDINGLY WE SET A SIDE THE ORDER OF THE LD. CIT(A) AND ALLOW THE ASSESSEES GROUND NO.3 OF THE APPEAL. 19 . GROUND NO.4 RELATES TO THE CONFIRMATION OF AD - HOC DISALLOWANCE ON ACCOUNT OF SALARY PAID OF RS.16,46,400/ - . 20 . THE ASSESSEE HAS FURNISHED THE NAME OF SHOPS AND THE AMOUNT DEB ITED FOR EACH SHOP. THE ASSESSEE WAS UNABLE TO FURNISH THE NAME OF THE PERSONS EMPLOYED, IDENTITY & ADDRESS OF THE EMPLOYEES TO WHOM SUCH PAYMENTS WERE MADE. THE ASSESSING OFFICER FURTHER OBSERVES THAT UNDOUBTEDLY IT IS ACCEPTED THAT LOOKING TO THE BUSIN ESS OF THE ASSESSEE, MANPOWER FOR EACH SHOP IS REQUIRED BUT AT THE SAME TIME , THE ASSESSING [ ITA NO.338/LKW/2016 ] 12 OFFICER ON THE SUBMISSIONS OF THE ASSESSEE THAT IT HAS DEPUTED TWO EMPLOYEE OF EACH SHOP AND SALARY OF RS.3,800/ - PER MONTH AND HOUSE RENT OF RS.1,800/ - HAS BEEN PA ID TO ALL 49 X 2 = 98 EMPLOYEES WAS NOT ACCEPTABLE TO THE ASSESSING OFFICER IN THE ABSENCE OF COGENT EVIDENCE. THE ASSESSING OFFICER, WITHOUT CONDUCTING ANY INDEPENDENT ENQUIRY, HAS HELD THAT SHOPS OF THE ASSESSEE COULD NOT BE HANDLED BY TWO EMPLOYEES WHE RE LICENSE FEES FOR SOME OF THE SHOPS WERE OF HIGHER RANGE, THAT MEANS THE EXPECTED VOLUME OF SALES OF THESE SHOPS WERE SUCH THAT IT COULD NOT HAVE BEEN MANAGED BY TWO EMPLOYEES. IN THE ABSENCE OF DOCUMENTARY EVIDENCE, 1/4 TH OF THE TOTAL EXPENSES CLAIMED BY THE ASSESSEE WAS DISALLOWED AND A SUM OF RS.16,46,400/ - WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 21 . THE ASSESSEE SUBMITTED THAT LIABILITY OF EXPENDITURE UNDER THE ACT HAS TO BE DECIDED ON THE BASIS OF COMMERCIAL EXPEDIENCY OF THE EXPENDITURE INCURRED AND THE REASONABLENESS OF SUCH EXPENDITURE. THE TEST OF COMMERCIAL EXPEDIENCE FOR DETERMINING WHETHER THE EXPENDITURE INCURRED FOR THE PURPOSE OF BUSINESS IS REASONABLE EXPENDIT URE HAS TO BE DECIDED FROM THE VIEW POINT OF BUSINESSMAN AND NOT OF THE DEPARTMENT. ACCORDING TO THE ASSESSEE, ONLY TWO PERSONS ONE CASHIER AND ANOTHER SALES PERSON IS REQUIRED TO MANAGE THE SHOP. THE ASSESSEE PLACED RELIANCE UPON THE JUDICIAL PRONOUNC EMENTS IN THE CASE S OF ALUMIN I UM CORP N. O F INDIA LTD. VS. CIT [1972] 86 ITR 11 (SC); J.K. WOOLEN MFRS. VS. CIT [1969] 72 ITR 612 (SC); CIT VS. WALCHAND & CO. (P) LTD. [1967] 65 ITR 381 (SC) AND CIT VS. LAXMI CEMENT DISTRIBUTORS (P) LTD. [1976] 104 ITR 711 (GUJ.). IN ALL THESE CASES, IT WAS HELD THAT REASONABLENESS OF EXPENDITURE HAS TO BE DECIDED FROM THE VIEW POINT OF BUSINESSMAN (ASSESSEE) AND NOT OF THE DEPARTMENT. THE ASSESSEE FURTHER SUBMITTED [ ITA NO.338/LKW/2016 ] 13 THAT AFFIDAVIT IN THE FORM OF CONFIRMATION FOR RECEIPTS O F SALARY AND HOUSE RENT FROM EMPLOYEES ARE ENCLOSED IN THE PAPER BOOK FROM PAGES 50 TO 147. 22 . WE HAVE PERUSED THE CASE RECORD, ANALYSED THE FACTS AND CIRCUMSTANCES AND CONSIDERED THE JUDICIAL PRONOUNCEMENTS PLACED BEFORE US AND WE FIND THAT TOTAL SALARY PAID OF RS.3,800/ - PER MONTH AND RS.1,800/ - AS HOUSE RENT ALLOWANCE I.E. TOTALING TO RS.5,600/ - PER MONTH TO EACH EMPLOYEE, IS EVIDENCED WITH AFFIDAVIT FILED AS PLACED IN THE PAPER BOOK FROM PAGES 52 TO 147. AS HELD IN VARIOUS JUDICIAL PRONOUNCEMENTS DISCUSSE D HEREINABOVE, HOW THE BUSINESS HAS TO BE CONDUCTED, IT IS THE PREROGATIVE OF THE ASSESSEE AND NOT OF THE DEPARTMENT . THE DEPARTMENT IS , HOWEVER , FREE TO CONDUCT ENQUIRY AND HAVE A PHYSICAL VERIFICATION TO PUT FORTH THE ALLEGATION ON THE ASSESSEE, BUT ON GUESS WORK AND SUMMARY BASIS ANY ADDITION MADE IS UNWARRANTED. IN VIEW OF COMMERCIAL EXPEDIENCY OF THE EXPENDITURE INCURRED AND THE EVIDENCES PLACED BEFORE US IN THE PAPER BOOK AND THE JUDICIAL PRONOUNCEMENTS DISCUSSED HEREINABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND ALLOW GROUND NO.4 OF THE APPEAL. 23 . GROUNDS NO.5 & 6 RELATE TO THE CONFIRMATION OF DISALLOWANCE OF PROCESSING FEE, ASSESSMENT FEE AND RENEWAL FEE OF RS.13,83,300/ - . 24 . ON THIS ISSUE, AS APPEARING IN THE ORDERS OF THE ASSESSING OFFICER AND THE LD. CIT(A), THE ASSESSEE COULD NOT FURNISH ANY DETAILS OF EXPENSES RELATING TO PROCEEDING FEES, ASSESSMENT FEES AND RENEWAL FEES AND IN THE ABSENCE OF THESE DETAILS, ADDITION WAS MADE. THE ASSESSEE HAS HOWEVER FILED COMPLETE DETAILS OF RE NEWAL, PROCESSING AND ASSESSMENT FEES ALONG WITH SHOP - WISE CHART AND RECEIPTS LETTER FROM THE DISTRICT EXCISE OFFICER, WHICH IS ENCLOSED IN THE PAPER BOOK AND FILED AS [ ITA NO.338/LKW/2016 ] 14 ADDITIONAL EVIDENCE. THE ASSESSEE HAS PRAYED THAT SINCE THE ADDITIONAL EVIDENCES FILED GO TO THE ROOT OF THE MATTER, THE SAME MAY BE ADMITTED FOR DECIDING THE ISSUE. WE HAVE PERUSED THE PAPER BOOK AND WE FIND THAT THE ADDITIONAL EVIDENCES GO TO THE ROOT OF THE MATTER WHEREIN ALL THESE DETAILS OF RENEWAL, PROCESSING AND ASSESSMENT FEES PAID TO THE GOVERNMENT ARE THERE AND SUCH EVIDENCES FILED BY THE ASSESSEE ARE ACCEPTED. WE ALSO FIND THAT THESE PAYMENTS WERE PAID TO THE GOVERNMENT AGENCIES AND THAT IS CERTIFIED FROM THE RECEIPT LETTER OF THE DISTRICT EXCISE OFFICER. WE ARE OF THE CONSIDERE D VIEW THAT UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, THESE EXPENSES CANNOT BE HELD AS UNJUSTIFIED EXPENSES AND IT HAS DIRECT NEXUS WITH THE NATURE OF BUSINESS OF THE ASSESSEE AND THE PAYMENT IS ALSO DULY DEBITED IN THE CASH BOOK AND IT HAS BEEN PAI D TO THE GOVERNMENT. WITH THESE FINDINGS, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND ALLOW GROUNDS NO.5 & 6 OF THE APPEAL. 25 . GROUNDS NO.7 & 8 ARE GENERAL IN NATURE, HENCE REQUIRE NO ADJUDICATION. 26 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 8/1/2018 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 8 TH JANUARY, 2018 JJ: 1812 [ ITA NO.338/LKW/2016 ] 15 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR