DCIT, Nainital V. M/s Ganpati Traders, Nainital

ITA 3686/DEL/2008

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97160 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 14-07-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 15-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKAS JAIN S; S SH SALIL KAPOOR SANAT KAPOOR
• Assessee Lawyers: V R SONBHADRA
• Keywords: Principle of natural justice; Cost of acquisition; Assessment record; Onus to prove
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : D : NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO . 3686/DEL/2008 ASSESSMENT YEAR: 2005 - 06 DEPUTY COMMISSIONER OF VS. M/S GANPATI TRADERS, INCOME TAX, GOLGHAR, BARA GRASSMAIRE LACK APARTMENT BAZAR, MALLITAL, NAINITAL MALLITAL, NAINITAL (PAN: AAAAG2458H ) (APPELLANT) (RESPONDENT) AND ITA NO. 3687 /DEL/2008 ASSESSMENT YEAR: 2005 - 06 DEPUTY COMMISSIONER OF VS. M/S HIMALAYA TRADING CO. INCOME TAX, GOLGHAR, BARA GRASSMAIRE LACK APARTMENT BAZAR, MALLITAL, NAINITAL MALLITAL, NAINITAL (PAN: AAAJH0175M ) (APPELLANT) (RESPONDENT) AND ITA NO. 171/DEL/2009 ASSESSMENT YEAR: 2005 - 06 DEPUTY COMMISSIONER OF VS. M/S UTTARANCHAL TRADING CO. INCOME TAX, GOLGHAR, BARA GRASSMAIRE LACK APARTMENT BAZAR, MALLITAL, NAINITAL MALLITAL, NAINITAL (PAN:AAAAU0722G) (APPELLANT) (RESPONDENT) APPELLANT BY : S /SH. SALIL KAPOOR, SANAT KAPOOR & VIKAS JAIN, ADVOCATES. RESPONDENT BY : SH. V.R. SONB HADRA, SR. DR. DATE OF HEARING: 14.07.2015 DATE OF PRONOUNCEMENT: 02.09.2015 2 ORDER PER INTURI RAMA RAO, A.M. : THESE ARE THE AP PEALS FILED BY THE REVENUE DIRECTED AGAINST DIFFERENT ORDERS OF CIT(A) PASSED ON 24.09.2008, 22.09.2008 & 14.10.2008 FOR THE ASSESSMENT YEAR 2005 - 06. SINCE I N ALL THE THREE APPEALS COMMON GROUNDS ARE RAISED EXCEPT DIFFERENCE IN AMOUNT , WE PROCEED TO DECIDE THE APPEALS BY A CONSOLIDATED ORDER . THE GROUNDS OF APPEAL RAISED IN ITA NO. 3686/DEL/2008 ARE AS UNDER: I. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS . 1,27,37,924/ - ON ACCOUNT OF SUPPRESSED SALE BY ACCEPTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE WHICH WERE NOT SUBSTANTIATED BY PRIMARY DOCUMENTS. II. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN HOLDING THAT BOOKS OF ACCOUNTS MAINTAINED IN COMPUTERIZED ENVIRONME NT WERE ACCURATE AND RELIABLE EVEN THOUGH THEY WERE NOT SUPPORTED BY PRIMARY DOCUMENTS LIKE SALE BILLS AND VOUCHERS PREPARED AT RETAIL OUTLET AT THE TIME OF SALE. III. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DISALLOWING REJECTING OF BOOKS OF ACC OUNTS BY THE ASSESSING OFFICER WITHOUT EXAMINING THE PRIMARY DOCUMENT LIKE DAILY SALES/STOCK SHEET PREPARED MANUALLY AT EACH SHOP BY THE STAFF WHICH WERE CLAIMED TO HAVE BEEN PREPARED. IV. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN SHIFTING THE ON US ON THE ASSESSING OFFICER WHEN THERE WAS FAILURE ON THE PART OF THE ASSESSE IN DISCHARGING ITS ONUS TO PROVE THE VERACITY OF FIGURES REFLECTED IN BOOKS OF ACCOUNT WITH PRIMARY DOCUMENTS LIKE ONE CASH VOUCHER PREPARED MANUALLY AT EACH SHOP TO RECORD DAY S SALE AND MANUAL SALES/STOCK SHEET PREPARED DAILY BY STAFF AT EACH SHOP. V. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DECIDING THE CASE WITHOUT ADHEARING TO THE PRINCIPLES OF NATURAL JUSTICE? WAS HE JUSTIFIED IN DECIDING THE APPEAL AGAINST DEPAR TMENT CONSIDERING THE ARGUMENTS OF ASSESSEE WITHOUT ASKING FOR THEIR SUPPORTING DOCUMENTS AND BY NOT 3 CONSIDERING THE DEPARTMENTAL STAND AND EXPLANATION OFFERED BY ASSESSING OFFICER. VI. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DECIDING THE CASE WITHOUT EVEN EXAMINING THE ASSESSMENT RECORD, WITHOUT CONSIDERING THE DOCUMENTS PLACED ON RECORD BY THE ASSESSING OFFICER IN SUPPORT OF HER STAND TAKEN IN THE ASSESSMENT ORDER. 2. FOR THE SAKE OF CONVENIEN CE AND BREVITY, THE FACTS IN ITA NO. 3686/DEL/2008 ARE STATED BELOW: - 2.1 BRIEFLY STATED THE FACTS ARE THAT THE RESPONDENT ASSESSES IS AN AOP WITH 63 MEMBERS . IT IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF VARIOUS OF BRANDS OF LIQUOR. THE RESPONDENT ASSESSEE WAS ALLOTTED SHOPS BY THE STATE GOVT. ON A LOTTERY BASIS AND 37 SHOPS HAD BEEN RUN BY THE AOP FROM JULY, 2004 TO MARCH, 2005. THE RESPONDENT ASSESSE ES, NAMELY, M/S GANPATI TRADERS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005 - 06 ON 31.10.2005, DECLAR ING INCOME OF RS. 1,09,19,990/ - . THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) , AT A TOTAL INCOME OF RS. 2,36,57,914 / - . THE DISPARITY BETWEEN THE RETURNED INCOME AND THE ASSESSED INCOME WAS ON ACCOUNT OF A D D I T I O N O F ALLEGED SUPPRESSED SALES. WHILE DOING SO, THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT BY HOLDING THAT THE RESPONDENT ASSESSEE FAILED TO FURNISH THE EXCISE/MANUAL REGISTER MAINTAINED BY EACH SHOP , HUGE VARIATION IN THE GROSS PROFIT RATE , WRONG VALUATION OF CLOSING STOCK, MISREPRESENTATION OF FACTS BY THE AUDITOR IN THE TAX AUDIT REPORT, BREAKAGE NOT RECORDED IN THE BOOKS. FURTHER, THE ASSESSING OFFICER PROCEEDED TO ESTIMATE THE SUPPRESSED SALES AS FOLLOWS: 4 4.8.1 DETERMINATION OF INCOME: AFTER INVOKING THE PROVISIONS OF SECTION 145(3), THE INCOME OF THE ASSESSEE IS BEING COMPUTED AFTER APPLYING THE AVERAGE G.P. RATE OF THE ASSESSEE I.E. 6.73% IN THE MONTHS WHEN THE NEGATIVE G.P. RATE OR G.P. LESS TH AN AVERAGE G.P. RATE IS SHOWN WITHOUT ANY PLAUSIBLE REASON EXCEPT FOR THE MONTHS OF JUNE, 2004 AND MARCH, 2005. TO BE REASONABLE , AVERAGE G.P. RATE OF 6.73% IS BEING APPLIED FOR THE MONTHS OF OCTOBER 2004 TO FEBRUARY 2005. 4.8.2 THE FOLLOWING FORMULA IS BEING APPLIED TO ARRIVE AT THE ESTIMATED SALES DURING THE MONTHS OF OCTOBER, 2004 TO FEBRUARY, 2005 AFTER APPLYING THE AVERAGE G.P. RATE OF 6.73% TOTAL OF DEBIT ITEMS OF TRADING A/C EXCEPT G.P. ( - ) CLOSING STOCK/(1 - 6.73%) OR TOTAL OF DEBIT ITEMS OF TRADIN G A/C EXCEPT G.P. ( - ) CLOSING STOCK/93.27%=ESTIMATED SALE BY APPLYING G.P. RATE OF 6.73% MONTH ESTIMATED SALES BY APPLYING G.P. RATE OF 6.73% TOTAL OF DEBIT ITEMS OF TRADING A/C EXCEPT G.P. ( - ) CLOSING STOCK 63.27%) SALES SHOWN BY THE ASSESSEE DIFFERENCE I.E. UNDISCLOSED SALES (COL. 2 - COL. 3) 1. 2. 3. 4. OCT. 04 25441784 - 930097293.27%=17305470 15525555 1779915 NOV. 04 25266722 - 897466293.27%=17467632 15723147 1744485 DEC.04 26306939 - 1094448193.27=16470953 13650361 2820592 JAN. 0 5 26483160 - 587001093.27%=22100515 18731174 3369341 FEB.05 23034167 - 410960593.27%=20290085 17266494 3023591 TOTAL 93634655 80896731 12737924 BEING AGGRIEVED BY THIS ASSESSMENT ORDER, AN APPEAL WAS FILED BEFORE THE CIT(A), WHO AFTER CONSIDERING THE ENTIRE FACTS OF THE CASE ALLOWED THE APPEAL VIDE PARA 5.3 OF HIS ORDER, WHICH READS AS UNDER: 5.3 I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF THE COUNSEL OF THE APPELLANT AND THE FACTS STATED IN THE ASSESSMENT ORDER BY THE AO. IT IS OBSERVED THAT PRIMARY REASONS GIVEN BY THE AO FOR REJECTION OF THE BOOKS OF ACCOUNT AND CONSEQUENTIAL ADDITION OF SUPPRESSED SALE HAS BEEN GIVEN AS UNDER: - A) NEGATIVE MONTHLY GROSS PROFIT RATES FOR FEW MONTHS B) NON PRODUCTION OF EXCISE REGISTER C) NON MAINTENANCE OF CASH SALE VOU CHER D) NON VERIFIABILITY OF SALES E) NOT RECORDING OF BREAKAGE BY THE APPELLANT. F) INCORRECT VALUATION OF CLOSING STOCK. 5 5.4 FROM THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS SEEN THAT THE APPELLANT DOES NOT ISSUE SALE VOUCHERS TO THE CUSTOMERS. THE STAFF AT VARIOUS SHOPS MAINTAIN DAILY SALES STATEMENTS, MANUALLY WHICH CONTAIN THE COMPLETE RECORD OF STOCK AND SALES MADE DURING THE DAY BY THE APPELLANT. THE SALE STATEMENTS ARE THEN SENT TO THE CHIEF ACCOUNTANT PERIODICALLY WHO MAINTAINS THE BOOKS O F ACCOUNTS AND STOCK REGISTERS ON THE COMPUTERIZED ENVIRONMENT. SUCH REGISTERS' MAINTAINED BY THE APPELLANT HAVE BEEN PRODUCED BEFORE THE AO. EVEN, DAILY SALES STATEMENTS FOR VARIOUS SHOPS WERE FURNISHED. THE APPELLANT DEALS IN VARIOUS BRANDS OF LIQUOR WHI CH ARE SOLD AT VARIOUS RATES AT DIFFERENT SHOPS. AS PER THE POLICY OF EXCISE DEPARTMENT., THE APPELLANT HAS TO CLEAR ITS STOCK - BY THE LAST DAY OF THE F .Y. AS NORMALLY THE APPELLANT GETS THE LICENSE TO OPERATE THE SHOP FOR ONE DAY ONLY. THE MANAGEMENT DEC IDES THE RATES AT WHICH VARIOUS BRANDS HAVE BEEN SOLD WH ICH ARE SUBJECT TO VARIATION FROM TIME TO TIME. THE COMPLETE DETAILS IN THIS REGARD ABOUT THE RATES AT WHICH BRANDS HAVE BEEN SOLD BY THE APPELLANT FROM TIME TO TIME HAVE BEEN FURNISHED BEFORE THE AO. IN THE CASE OF THE APPELLANT, THE G.P. RATE HAS VARIED ON DAY TO DAY BASIS AND UNDER NO CIRCUMSTANCES, THERE CAN BE FIXED RATE OF SUCH G.P. BECAUSE OF VARYING GROSS MARGINS OF DIFFERENT BRANDS AND THE APPELLANT'S POLICY TO SELL THE GOODS EVEN AT LOSS IN O RDER TO CLEAR ITS STOCK. THE FACTORS EXPLAINED FOR SELLING GOODS AT LOW RATES AND EVEN AT LOSS HAVE BEEN ACCEPTED BY THE AO WHICH MEANS THAT THERE IS SUFFICIENT REASON FOR NEGATIVE G.P. AT SOME MONTHS. IT MUST BE APPRECIATED THAT SUCH NEGATIVE G.P. SHALL NOT BE AS A RESULT OF A SINGLE TRANSACTION OF SALE. IT IS A CUMULATIVE EFFECT OF MANY FACTORS AND VARIOUS BRANDS BEING SOLD AT VARIOUS RATES, SOME IN PROFITS AND OTHER IN LOSS. BECAUSE OF HUGE COMPETITION IN THIS LINE OF TRADE, SUCH FLUCTUATION OF GRO SS PR OFIT IS ALSO DEPENDENT ON THE NUMBER OF COMPETITORS IN THE ADJOINING AREAS AND THUS LOCATION OF THE SHOP IS ALSO A FACTOR WHICH DETERMINES THE RATES OF GROSS PROFIT. AS PER THE POLICY OF EXCISE DEPARTMENT, SINCE THE LICENSE IS GRANTED ON YEARLY BASIS, THE' APPELLANT TRIES TO CLEAR ITS STOCK ANY HOW BY THE CLOSE OF THE YEAR. MERELY BECAUSE THE APPELLANT HAS SOLD THE GOODS AT A LOSS AND SUCH SALES ARE DULY REFLECTED IN THE BOOKS OF ACCOUNT AND OTHER EXCISE REGISTERS, THE AO CANNOT BRUSH ASIDE SUCH BOOK RESULTS SUPPORTED BY RELEVANT EVIDENCE. THE AO CANNOT STEP INTO THE SHOES OF A BUSINESSMAN AND TRY TO DICTATE AS TO HOW THE BUSINESS IS TO BE CARRIED OUT. IT IS THE PREROGATIVE OF A BUSINESSMAN TO DECIDE ABOUT THE SELLING RATE VIS - A - VIS BUSINESS EXIGENCIES OF THE SITUATION. 5.5 REGARDING THE OBSERVATION OF THE AO THAT THE EXCISE RECORDS HAVE NOT BEEN PRODUCED BY THE APPELLANT, IT HAS BEEN VEHEMENTLY ARGUED BY THE APPELLANT THAT THE EXCISE RECOR DS WERE SUBMITTED BEFORE THE EXC ISE AUTHORITIES AT THE END OF THE YEAR AND THIS FACT HAS ALSO BEEN CONFIRMED BY THE EXCISE AUTHORITY TO THE AO. THE AO CANNOT PRESUME THAT THE APPELLANT MIGHT HAVE A COPY OF THE SAME MERELY BECAUSE THE EXCISE OFFICER THINKS SO. 6 THE APPELLANT HAS PRODUCED COMP LETE STOCK REGISTERS BEFORE THE AO IN WHICH NO MISTAKE AT ALL HAS BEEN POIN TED OUT TOWARDS THE MAINTENANCE OF SUCH REGISTERS. 5.6 REGARDING THE VALUATION OF CLOSING STOCK HON'BLE CIT, HALDWANI IN PROCEEDING U/ S 263 OF I.T. ACT BEFORE HIM IN THE CASE OF THE APPELLANT FOR AY 2004 - 05 HAS PASSED A SPEAKING ORDER CITING VALID REASONS AS TO WHY THE LICENSE FEES AND ADHIBAAR WILL NOT FORM PART OF THE CLOSING STOCK OF THE APPELLANT. I HAVE LOOKED INTO SUCH ORDER AND THE REASONS FOR NON INCLUSION OF SUCH LICENSE FEES AND ADHIBAAR TOWARDS THE VALUATION OF CLOSING STOCK APPEAR TO BE QUITE CONVINCING AND SO THE AO'S OBSERVATION IN THIS REGARD DOES NOT CUT MUCH ICE. SIMILARLY, THE APPELLANT HAS FURNISHED CERTIFICATE FROM THE ADDL. COMMISSIONER OF EXCISE, DEHRADUN WHO HAS GIVEN NECESSARY EXPLANATION CLARIFYING THE FACT THAT THE PAYMENT OF ADHIBAAR AND LICENSE FEES HAS NOTHING TO DO WITH THE PURCHASE COST OF LIQUOR. FROM THESE EXPLANATIONS FURNISHED BY THE COUNSEL OF THE APPELLANT, I AM CONVINCED THAT PAYMENT OF ADHIBAA R AND LICENSE FEE CANNOT FORM PART OF THE CLOSING STOCK. EVEN IF THE APPELLANT DOES NOT MAKE PURCHASES, LICENSE FEES AND ADHIBAAR HAVE TO BE PAID WHICH PERTAIN TO A DEFINITE PERIOD AND ACCORDINGLY HAVE TO BE WRITTEN OFF IN THE BOOKS OF ACCOUNT FOR THE SAID YEAR. THE AO HAS ALSO CONTENDED THAT THE APPELLANT HAS NOT PRODUCED CASH VOUCHERS. THE APPELLANT HAS ADMITTED THAT CASH VOUCHERS HAVE NOT BEEN ISSUED TO THE CUSTOMERS IN CASE OF LIQUOR SALE AT SHOPS AND ALSO IN BAR AND RESTAURANTS IT IS NOT CUSTOMARY TO I SSUE BILLS TO THE CUSTOMERS. THE BASIC REASON BEING IT WILL NOT SERVE ANY PURPOSE TO THE APPELLANT TO RECORD THE NAMES AND ADDRESSES - OF SUCH CUSTOMERS. THE APPELLANT MAINTAINS THE DAILY RECORD OF STOCK AND SALES IN THE DAILY SALE SUMMARY PREPARED IN THIS REGARD WHICH IS FINALLY INCORPORATED IN THE STOCK REGISTER. IN THIS REGARD THE COUNSEL OF THE APPELLANT HAS REFERRED TO THE JUDGMENT IN THE CASE OF ITO KASHIPUR VS. TRISHNA BAR & RESTAURANT RAM NAGAR ROAD, KASHIPUR BY HON'BLE ITAT DELHI 'C' BENCH IN ITA N O. 2543IDEL/05 FOR THE BLOCK PERIOD: 20QI - 02, WHEREIN - IF HAS BEEN HELD - THAT WHEN THE APPELLANT HAD GIVEN COMPLETE DETAILS OF SALES, SALE RATES, REASONS OF DECLINE AND HAD ALSO DISCLOSED PROFIT WHICH COULD BE TREATED TO BE LOW, THERE WAS NO JUSTIFICATION O N THE PART OF THE AO TO REJECT THE BOOKS OF ACCOUNT. FURTHER THE TRIBUNAL HAS CONCURRED WITH THE ORDER OF THE CIT(A) WHEREIN IT HAS BEEN OBSERVED, 'THE AO HAS NOT BEEN ABLE TO BRING ON RECORD EVEN ONE INSTANCE TO SHOW THAT SALE RATE RECORDED IN THE BOOKS O F ACCOUNT WAS LESS THAN WHAT WAS ACTUALLY CHARGED BY THE APPELL.ANT - FROM ITS - CUSTOMERS. THE BUSINESSMAN IS THE BEST JUDGE TO DETERMINE THE BUSINESS EXPEDIENCY AS TO WHETHER IT IS MORE PROFITABLE TO REDUCE THE SALE PRICE AND INCREASE THE TURN OVER OR TO MAINTAIN THE HIGHER PROFIT DESPITE DECLINE IN SALE. MARKET FORCES DECIDE WHETHER IT IS BENEFICIAL TO REDUCE THE SELLING RATE OR STICK TO THE HIGH GROSS PROFIT DEPENDING ON WHETHER IT IS A SELLERS MARKET OR IT IS A BUYER'S MARKET. THE ASSESSMENT MUST NOT B E BASED ON MERE 7 SUSPICION OR PURE GUESS BUT ON LEGITIMATE MATERIALS FROM WHICH A REASONABLE INFERENCE OF HAVING EARNED INCOME DURING TH E ACCOUNTING YEAR CAN BE DRAWN. 5.7 KEEPING IN VIEW THE ABOVE RULING GIVEN BY THE HORI'BLE ITAT AND THE ID. CIT(A)'S F INDING, THE TRADING RESULTS AS DECLARED BY THE APPELLANT CANNOT BE BRUSHED ASIDE MERELY BECAUSE OF THE REASON THAT THE GROSS PROFIT RATE HAS VARIED IN CERTAIN MONTHS AND THE DAY TO DAY SALE VOUCHERS HAVE NOT BEEN MAINTAINED BY THE APPELLANT. IT APPEARS THA T THE AO HAS FAILED TO APPRECIATE THE COLUMN AND CONTENTS OF THE DAILY SALE STATEMENTS WHICH CONTAIN THE ENTIRE PARTICULARS. THE AO HERSELF AT PARA 45.7 HAS STATED THAT IN LIQUOR TRADE THE PURCHASES ARE FULLY VERIFIABLE AS THE EXCISE DEPARTMENT HAS FULL CO NTROL OVER THE QUANTITY PURCHASED AND SOLD. THUS, THE SUBSEQUENT STATEMENTS OF THE AO THAT SALES ARE NOT V ERIFIABLE DO NOT HOLD ANY MERIT. SINCE THE APPELLANT HAS MAINTAINED COMPLETE SALE SUMMARY IN THE SHAPE OF DAILY SALES STATEMENT WHICH ARE ALSO VERIFIA BLE FROM THE STOCK REGISTERS, I FIND NO REASON - TO - TAKE THE ADVERSE VIEW AGAINST THE APPELLANT ABOUT THE ACTUAL SALES EFFECTED - AS PER SUCH REGISTERS. 5.8 REGARDING THE CONTENTION OF THE AO THAT THE BREAKAGE HAS NOT BEEN SHOWN BY THE APPELLANT, IT HAS BE EN SUBMITTED BY THE APPELLANT THAT ANY BREAKAGE HAS TO BE COMPENSATED BY THE CONCERNED STAFF AND IT IS THE DUTY TO PROVIDE A NEW BOTTLE IN PLACE OF THE BROKEN BOTTLE. THE RESPONSIBILITY IS THEREBY FIXED AND THE CONCERNED PERSON IS MADE TO ACCOUNT FOR THE B ROKEN BOTTLE. THE SAID FACTS DULY MENTIONED BEFORE THE AO HAVE NOT BEEN DISPUTED OR CONTROVERTED BY THE AO. THEREFORE, THE REPLY OF THE APPELLANT IS FOUND TO BE CONVINCING AND REASONABLE. THE POLICY OF THE APPELLANT TO MAKE THE STAFF RESPONSIBLE FOR THE BR EAKAGE IN FACT GOES IN APPELLANT'S FAVOUR AND PROVES ITS BONAFIDE. THE FACT THAT THE APPELLANT HAS NOT CLAIMED THE BREAKAGE BECAUSE, IF STAFF WAS RESPONSIBLE FOR BREAKAGE, IT CANNOT BE MADE A BASIS FOR REJECTION OF THE BOOKS OF ACCOUNT. TO SUM UP, THE AA H AS ALLEGED THAT THE APPELLANT HAS EFFECTED SUPPRESSED SALES DURING CERTAIN MONTHS, TO BE SPECIFIC FROM OCT, 2004 TO FEB , 2005 BECAUSE DURING THESE MONTHS THE G.P. RATES FLUCTUATED VIGOROUSLY YIELDING NEGATIVE RATES OF SUCH G.P. BUT THE AO HAS NOT BEEN ABLE TO PROVE ON RECORD ANY SINGLE INSTANCE OR EVIDENCE TO ESTABLISH THAT THE APPELLANT HAS ACTUALLY MADE SALES OUT OF BOOKS OR SOLD GOODS AT HIGHER RATES THEN THOSE DECLARED BY THE APPELLANT. SINCE THE VALUATION OF STOCK IS PROPER AND PURCHASES HAVE BEEN EXPL AINED AND NO SALES HAVE BEEN FOUND TO HAVE BEEN MADE OUTSIDE THE BOOKS OF ACCOUNT, THERE IS NO JUSTIFICATION TO APPLY THE AVERAGE GROSS PROFIT RATE TO FEW MONTHS AND ESTIMATE THE SUPPRESSED SALES FOR THESE MONTHS AS PER SUCH AVERAGE RATE. THE ONUS LIES ON THE AA TO PROVE THAT THE SALES HAVE ACTUALLY BEEN EFFECTED OUTSIDE THE BOOKS OF ACCOUNT AND SUPPORT THE SAME BY RELEVANT EVIDENCE. THE ENTIRE ADDITION APPEARS TO HAVE BEEN MADE ON 8 SURMISES AND PRESUMPTION WHICH CARRIED NO WEIGHT. THE REFORE, I HAVE NO OTHER OPTION BUT TO DELETE SUCH ADDITION AND THE A O IS HEREBY DIRECTED TO ALLOW CONSEQUENTIAL RELIEF TO THE APPELLANT . HENCE GROUND NOS . (I) TO (VIII) ARE ALLOWED. BEING AGGRIEVED BY THIS ORDER, THE REVENUE IS BEFORE US WITH THE PRESENT APPEALS. 3. THE L D. SENIOR DR VEHEMENTLY ARGUED THAT THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE BOOKS OF ACCOUNT CANNOT BE REJECTED, INASMUCH AS, THE APPELLANT HAD FAILED TO FURNISH THE STOCK REGISTER MAINTAINED AT EACH SHOPS AND S ALES BILLS. HE FURTHER SUBMITTED THA T THE SUBMISSIONS MADE BY THE ASSESSING OFFICER WERE NOT CONSIDERED BY THE CIT(A) AND HENCE HE SUBMITTED THAT THE ORDER PASSED BY THE LEARNED CIT(A) WAS IN GROSS VIOLATION OF PRINCIPLE OF NATURAL JUSTICE. 4. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPR ESENTATIVE OF THE RESPONDENT ASSESSEE HAD RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSING OFFICER HAD PROCEEDED TO ESTIMATE THIS SUPPRESSED SALES ON THE G ROUND THAT THE GROSS PROFIT WAS NEGATIVE DURING THE MONTHS OF OCTOBER, 2004 TO OCTOBER, 2005 AND THE ASSESSING OFFICER ADOPTED GROSS PROFIT RATE OF 6.73%. THIS APPROACH OF THE ASSESSING OFFICER IS TOTALLY ERRONEOUS AND CANNOT BE ACCEPTED FOR THE REASON THA T THE DAILY SALES STATEMENT PREPARED BY THE ASSESSEE CANNOT BE REJECTED . IN THIS NATURE OF BUSINESS, THE DAILY SALES STATEMENT PREPARED AT EACH SHOP IS OF PARAMOUNT IMPORTANCE AND CANNOT BE SIMPLY BRUSHED ASIDE WITHOUT ASSIGNING ANY REASONS. FURTHERMORE, I N THIS KIND OF BUSINESS THE 9 PURCHASES ARE FULLY VERIFIABLE AND EXCISE DEPARTMENT OF THE STATE GOVT. HAS FULL CONTROL OVER THE QUANTITY OF PURCHASE AND SALES SIMPLY BECAUSE THE GROSS PROFIT RETURNED IN CERTAIN MONTHS IS LOWER THAN THE AVERAGE PROFIT DECLARED BY THE ASSESSEE, CANNOT BE SOLE GROUND TO ESTIMATE THE SUPPRESSED SALES . T HE ASSESSING OFFICER HAD ALSO NOT BROUGHT ON RECORD ANY COMPA RABLE INSTANCE TO PROVE THAT THE PROFIT DECLARED BY THE ASSESSEE WERE WRONG . IT IS TRITE LAW THAT NO ADDITION CAN BE MADE ON MERE SURMISES AND CONJECTURES. THUS, WE DO NOT FIND ANY INFIRMITY WITH THE REASONING ADOPTED BY THE LEARNED CIT(A), NOR ANY EVIDENC E WAS BROUGHT ON RECORD IN REBUTTAL OF THE CONCLUSION DRAWN BY THE CIT(A). IN THESE CIRCUMSTANCES, WE HOLD THAT THE ORDER OF CIT(A) IS WELL REASONED AND THEREFORE THE SAME IS HEREBY SUSTAINED. ACCORDINGLY, GROUNDS OF APPEAL FILED BY THE REVENUE ARE DISMISS ED. 6. IN THE RESULT, ALL THE THREE APPEALS FILED BY THE REVENUE ARE DISMISSED. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 2 N D S E P T E M B E R , 2015. S D / - S D / - ( I.C. SUDHIR ) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 N D S E P T E M B E R , 2015. RK/ - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI