DCIT, Jaipur V. MEGHRAJ SINGH SURENDRA POAL SINGH & PARTY, Jaipur

ITA 462/JPR/1999

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78076 (ITAT-JAIPUR)
• Duration Of Justice: 14 year(s) 10 month(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: 30-07-1999
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: S K SHARMA
• Keywords: Business income; 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. 462/JP/1999 ASSTT. YEAR : 1996-97 DEPUTY CIT, VS. M/S. MEGHRAJ SINGH SURENDRA PAL SINGH CENTRAL CIRCLE-2, & PARTY, H-9, CHITRANJAN MARG, C-SCHEME, JAIPUR. JAIPUR. PAN NO. - - (APPELLANT) (RESPONDENT) REVENUE BY : SHRI D.C. SHARMA, DR ASSESSEE BY : SHRI SK SHARMA, AR DATE OF HEARING : 23.05.2014 DATE OF PRONOUNCEMENT : 30.05.2014 ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED CIT(APPEALS) DATED 17.05.1999 PASSED FOR ASSESSMENT YEAR 1996-97 . THE REVENUE HAS TAKEN TWO GROUNDS OF APPEAL WHEREBY IT HAS PLEADED THAT LEARN ED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.6,51,520 OUT OF THE TRA DING ADDITION OF RS.7,26,520. IN THE SECOND GROUND, IT HAS PLEADED THAT ASSESSING OFFICE R HAS MADE AD HOC DISALLOWANCE OUT OF VARIOUS EXPENSES AT RS.1,20,172, LEARNED CIT(APPEAL S) HAS ERRED IN RESTRICTING THIS DISALLOWANCE TO RS.25,000. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS AN ASSOCIATION OF PERSONS AND A LIQUOR CONTRACTOR. IT HAD OBTAINED LICENSE FOR SELL ING COUNTRY LIQUOR , IMFL AND BEER AS A RETAILER FOR JAITRAM AREA BY WAY OF A SUCCESSFUL BI DDING IN THE AUCTION CONDUCTED BY THE EXCISE DEPARTMENT OF RAJASTHAN GOVERNMENT. IT HAD F ILED ITS RETURN OF INCOME DECLARING 2 AN INCOME OF RS.1,64,693 ON 30 TH OCTOBER, 1996. ON AN ANALYSIS OF THE ACCOUNTS, LEA RNED ASSESSING OFFICER WAS NOT SATISFIED WITH THE CORREC TNESS OF ASSESSEES BOOKS OF ACCOUNTS. HE REJECTED THEM AND ESTIMATED THE INCOME BY OBSERV ING AS UNDER: 4. THE EXPLANATION OF THE ASSESSEE HAS BEEN CAREFU LLY CONSIDERED BUT I AM NOT FULLY CONVINCED WITH THE SAME. IN THE ABSENCE OF TH E SALE VOUCHERS AS STATED EARLIER, THE TRADING RESULTS CANNOT BE SUBJECTED TO VERIFICATION AND IT CANNOT BE SAID THAT THE SALES OR PROFITABILITY HAS BEEN CORRECTLY REFLECTED. IN THE IMFL, THE PROFITS ARE COMPUTED BY APPLYING G.P. RATE OF 16% ON SALES OF RS.2,56,17,184 WHICH GIVES A PROFIT OF RS.40,98,750 AND AFTER DEDUCTING THE DECLARED PROFIT OF RS.38,72,230, ADDITION OF RS.2,26,520 IS MADE. 5. IN THE COUNTRY LIQUOR ACCOUNT CONSIDERING THE NE T PROFITABILITY OF 18.17% WITH REFERENCE TO THE LIFTING PERCENTAGE OF 24.58%, A LUMP SUM ADDITION OF RS.5,00,000 IS MADE TO COVER UP THE LEAKAGES. 3. SIMILARLY, ASSESSEE HAD DERBITED EXPENSES UNDER THE HEAD; (A) DIESEL & PETROL; (B) MISCELLANEOUS EXPENSES; (C) OFFICE EXPENSES; (D) RE PAIR AND MAINTENANCE; (E) STAFF WELFARE EXPENSES AND (F) DEPRECIATION ON VEHICLES. LEARNED ASSESSING OFFICER HAS DISALLOWED 20% ON AD HOC BASIS OUT OF THESE EXPENSES DEBITED I N THE ACCOUNTS. 4. ON APPEAL, LEARNED CIT(APPEALS) HAS RESTRICTED T HE TRADING DISALLOWANCE TO RS.75,000 AGAINST RS.7,26,520 AND RS.25,000 OUT OF MISCELLANEOUS EXPENSES AGAINST RS.1,20,172 MADE BY THE ASSESSING OFFICER. 5. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. ADMITTEDLY, THE BOOKS OF THE ASSESSEE AR E NOT RELIABLE, THEY ARE REJECTED. THIS ACTION OF THE ASSESSING OFFICER HAS BEEN UPHELD BY THE LEARNED CIT(APPEALS). THE ASSESSEE DID NOT CHALLENGE REJECTION OF BOOK RESULT S BEFORE THE ITAT AND THE DISPUTE TRAVELLED TO THE HON'BLE HIGH COURT WAS WITH REGAR D TO ESTIMATION OF INCOME AFTER 3 REJECTION OF BOOKS. THUS, THE NEXT QUESTION ARISES, IS WHAT SHOULD BE THE ESTIMATED ADDITION REQUIRED TO BE MADE BY THE ASSESSING OFFIC ER TO THE INCOME OF THE ASSESSEE. FOR THIS PURPOSE, SUB-SECTION (3) OF SECTION 145 CONTEM PLATES THAT ASSESSING OFFICER MAKES AN ASSESSMENT IN THE MANNER PROVIDED IN SEC. 144 OF TH E INCOME-TAX ACT, 1961. THIS SECTION READS AS UNDER: 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 DIRECTION ISSUE D 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, AFTER GIVIN G THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, MAKE THE ASSESSMENT] OF THE TOTAL INCO ME OR LOSS TO THE BEST OF HIS JUDGMENT AND DETERMINE THE SUM PAYABLE BY THE ASSES SEE ON THE BASIS OF SUCH ASSESSMENT. PROVIDED THAT SUCH OPPORTUNITY SHALL BE GIVEN BY TH E ASSESSING OFFICER BY SERVING A NOTICE CALLING UPON THE ASSESSEE TO SHOW S\CAUSE, ON A DATE AND TIME TO BE SPECIFIED IN THE NOTICE, WHY THE 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 SECTION 142 HAS BEEN ISSUED PRIOR TO THE MAKING OF AN ASSESSMENT UNDER THIS SECTION.] (2) THE PROVISIONS OF THIS SECTION AS THEY STOOD IM MEDIATELY BEFORE THEIR AMENDMENT BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1 987 94 OF 1988), SHALL 4 APPLY TO AND IN RELATION TO ANY ASSESSMENT FOR THE ASSESSMENT YEAR COMMENCING ON THE IST DAY OF APRIL, 1988, OR ANY EARLIER ASSESSME NT YEAR AND REFERENCES IN THIS SECTION TO THE OTHER PROVISIONS OF THIS ACT SHALL B E CONSTRUED AS REFERENCES TO THOSE PROVISIONS AS FOR THE TIME BEING IN FORCE AND APPLI CABLE TO THE RELEVANT ASSESSMENT YEAR.} 6. A BARE PERUSAL OF THIS SECTION WOULD SUGGEST THA T IN ORDER TO ESTIMATE INCOME, LEARNED ASSESSING OFFICER HAS TO EXERCISE HIS DISC RETION WHICH SHOULD BE IN CONSONANCE WITH BEST OF HIS JUDGMENT. HON'BLE HIGH COURT WHILE REMANDING THIS APPEAL TO THE ITAT HAS CONSIDERED 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 CONCERNED SHO ULD MAKE A HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN THE BEST JUDGMENT AS SESSMENT AND SHOULD NOT ACT ARBITRARILY. IT IS EQUALLY TRUE THAT ASSESSEE HIMSE LF TO BE BLAMED AS HE DID NOT SUBMIT PROPER ACCOUNTS. 7. APART FROM THE ABOVE PROPOSITION, WE ARE CONSCI OUS OF THE FACT THAT IN VARIOUS AUTHORITATIVE PRONOUNCEMENTS, IT HAS BEEN PROPOUNDE D THAT IN MAKING A BEST JUDGMENT ASSESSMENT, THE ASSESSING OFFICER MUST NOT ACT DISH ONESTLY OR VINDICTIVELY OR CAPRICIOUSLY. HE MUST MAKE WHAT HE HONESTLY BELIEVE TO BE A FAIR ESTIMATE OF THE PROPER FIGURE OF ASSESSMENT AND FOR THIS PURPOSE HE MUST B E ABLE TO TAKE INTO CONSIDERATION LOCAL KNOWLEDGE, REPUTATION OF THE ASSESSEE ABOUT HIS BUS INESS, THE PREVIOUS HISTORY OF THE ASSESSEE OR THE SIMILARLY SITUATED ASSESSEE. IT IS ALSO PERTINENT TO MENTION THAT JUDGMENT IS A FACULTY TO DECIDE MATTER WITH WISDOM, TRULY AND L EGALLY. JUDGMENT DOES NOT DEPEND UPON THE ARBITRARY, CAPRICE OF AN ADJUDICATOR, BUT ON SETTLED AND INVARIABLY PRINCIPLES OF JUSTICE. THUS, IN A BEST JUDGMENT, EVEN IF, THERE I S AN ELEMENT OF GUESS WORK, IT SHOULD NOT 5 BE A WILD ONE, BUT SHALL HAVE REASONABLE NEXUS TO T HE AVAILABLE MATERIAL AND CIRCUMSTANCES OF EACH ASSESSEE. APPRAISING OURSELVE S WITH THESE FUNDAMENTALS, LET US CONSIDER THE FACTORS DISCUSSED BY THE ASSESSING OFF ICER IN THE ASSESSMENT WHILE MAKING THE LUMP SUM ADDITION. 8. THE CONTRACT VALUE OF COUNTRY LIQUOR IS RS.1,99, 22,000. ASSESSEE HAS DECLARED SALES IN COUNTRY LIQUOR AT RS.3,26,95,853. LEARNED ASSESSING OFFICER HAS ACCEPTED THE SALES IN THIS CASE. THE G.P. DECLARED BY THE ASSESS EE IS AT RS.64.13% OF THE TURNOVER. THE ASSESSEE HAD TO PAY SHORT LICENSE FEE OF RS.1,50,24 ,595. THIS HAS REDUCED THE G.P. TO RS.59,41`,845 IN TERMS OF PERCENTAGE, IT COMES OUT TO 18.17%. LEARNED ASSESSING OFFICER HAS MADE A LUMP SUM ADDITION OF RS.5 LACS BUT HAS T OTALLY IGNORED THE FACTOR OF SHORT LICENSE FEE PAID BY THE ASSESSEE. SIMILAR ARE THE C IRCUMSTANCES IN IMFL/BEER ACCOUNT. THE ASSESSEE HAD TO PAY SHORT LICENSE FEE OF RS.58, 57,989 WHICH IS ALMOST 20% OF THE TOTAL SALES DECLARED BY THE ASSESSEE AS WELL AS ACC EPTED BY THE ASSESSING OFFICER. LOOKING INTO THESE FACTORS, LEARNED CIT(APPEALS) HAS REDUCE D THE ESTIMATION OF G.P. SUBSTANTIALLY. 9. AS FAR AS THE AD HOC DISALLOWANCES ARE CONCERNED , WE ARE OF THE VIEW THAT ONCE ASSESSING OFFICER HAS REJECTED THE BOOK RESULTS AND ESTIMATED THE G.P. THEN HE OUGHT TO HAVE NOT MADE A SEPARATE ADDITION, HOWEVER, LEARNED CIT(APPEALS) HAS ALREADY RESTRICTED IT TO RS.25,000. CONSIDERING THESE FACTORS, WE DO N OT SEE ANY REASON TO INTERFERE IN THE ORDER OF LEARNED CIT(APPEALS). THIS APPEAL OF THE R EVENUE IS DISMISSED. 10. THE ORDER PRONOUNCED IN THE OPEN COURT ON 30/5/ 2012. SD/- SD/- ( R.C. SHARMA ) ( RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 /05/2014 *MOHAN LAL* 6 COPY FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. CIT(APPEALS) 5. THE DR