ACIT, Sultanpur V. M/s Kamlesh Kumar Jaiswal, Raibareli

ITA 534/LKW/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8176 (ITAT-LUCKNOW)
• Duration Of Justice: 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-07-2012
• Assessment Year: misc
• Appeal Filed On: 09-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDHI SINGH VERMA
• Assessee Lawyers: S K GARG; PRADEEP KAPOOR
• Keywords: Rejection of books of accounts; Business income; Opportunity of being heard; Onus to prove
• Section: 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI MEHAR SI NGH , ACCOUNTANT MEMBER ITA NO. 534/LKW/2011 ASSESSMENT YEAR: 2008 - 09 ACIT CIRCLE, SULTANPUR V. M/S KAMLESH KUMAR JAISWAL ANAND NAGAR, RAEBARELI PAN: AAAAK2565K (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. NIDHI SINGH VERMA, D.R. RESPONDENT BY: S/SHRI. S. K. GARG, ADVOCATE & PRADEEP KAPOOR, C.A. DATE OF HEARING: 02.07.2012 DATE OF PRONOUNCEMENT: 22.08.2012 O R D E R PER S UNIL KUMAR YADAV : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) ON A SOLITARY GROUND THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT AND THEREA FTER APPLYING THE NET PROFIT RATE AFTER MAKING THE ENHANCEMENT OF THE TURNOVER WITHOUT APPRECIATING THE FACT THAT THE BOOKS OF ACCOUNT WERE PROPERLY MAINTAINED . 2 . THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE IS AN AOP CARRYING ON THE BUSINESS OF DEALING IN COUNTRY MADE LIQUOR AND INDIAN MADE FOREIGN LIQU O R, S PIRIT AND B E E R THROUGH SHOPS SITUATED IN THE STATE OF UTTAR PRADESH, UTTARAKHAND AND MANDHYA PRADES. : - 2 - : THE RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR WAS FILED SHOWING TOTAL INCOME OF ` 82,25,810. AS PER THE AUDITED STATEMENT OF ACCOUNTS, GROSS TURNOVER WAS SHOWN AT ` 28,74,27,785 WITH NET PROFIT RATE AT 2.86%. THE TURNOVER AND NET PROFIT DECLARED BY THE ASSESSEE W ERE REJECTED BY THE ASSESSING OFFICER BY INVOKING THE PROVISION S OF SECTION 145(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT'). TURNOVER WAS ENHANCED TO ` 34,49,13,342 BY APPLYING THE FACTOR OF 0.20 PER RUPEE I.E. 20% AND NET PROFIT RATE OF 3.25% WAS APPLIED TO THE ENHANCED TURNOVER , WHICH HAS RESULTED IN TO AN ADDITION OF ` 29,83,875. 3 . AGGRIEVED, THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT THE ASSESSMENT ORDER WAS PASSED ON THE MERE SURMISES AND CONJECTURES AND THERE EXISTED NO MATERIAL MUCH LESS RELEVANT IN SUPPORT OF THE FINDINGS OF THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS ESTIMATED THE TURNOVER BY APPLYING HIS OWN FORMULA AT DIFFERENT POINT OF T IME, WHEREAS THERE WAS NOT EVEN A STUDY MADE BY ANY SOCIO - POLITICA L - OFFICIAL ORGANIZATION INTO THE BEHAV IOR OF C ONSUMERS IN THE MATTER OF CONSU MPTION OF LIQUOR OR PATTERN OF SUCH CONSUMPTION PREVALENT IN DIFFERENT STRATA OF PUBLIC AT L ARGE. WRITTEN SUBMISSION WAS FILED BEFORE THE LD. CIT(A) IN THIS REGARD WHICH WAS REPRODUCED BY THE LD. CIT(A) IN HIS ORDER IN PARA 8.1. 4 . THE LD. CIT(A) RE - EXAMINED THE FACTS IN THE LIGHT OF THE ASSESSEES CONTENTIONS AND BEING CONVINCED WITH THE EXPLANATION S OF THE ASSESSEE, THE LD. CIT(A) HAS DELETED THE ADDITION AFTER HAVING OBSERVED THAT THERE IS NO EVIDENCE ON RECORD TO S HOW THAT THE SALES IN RESPECT OF ANY PURCHASE MADE BY THE ASSESSEE HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT. SALES HAVE BEEN INCREASED IN THE CURRENT YEAR AS COMPARED TO THE EARLIER YEAR AND THE FALL IN THE GROSS PROFIT IS EXPLAINED BY THE FACT THAT IN EARLIER YEAR E XC ISE PAYMENT WAS DEBITED IN THE PROFIT AND LOSS : - 3 - : ACCOUNT , WHEREAS IN THE CURRENT YEAR IT HAS BEEN DEBITED IN THE TRADING ACCOUNT. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) IS EXTRACTED HEREUNDER: - 8(1) I HAVE EXAMINED THE FACTS AND C IRCUMSTANCES OF THE CASE. I HAVE PERUSED THE FINDINGS OF THE ASSESSING OFFICER AND THE SUBMISSIONS MADE BY THE APPELLANT. I HAVE ALSO CONSIDERED THE CASE AUTHORITIES RELIED UPON BY THE APPELLANT. I BEGIN BY EXAMINING THE TRADING RESULTS OF THE APPELLANT FO R THE CURRENT YEAR AS COMPARED TO THE EARLIER YEARS TO ASCERTAIN WHETHER THERE WAS ANY PERCEPTIBLE CHANGE IN THE RESULTS NECESSITATING THE FINDINGS AS GIVEN BY THE AO. THE COMPARABLE FIGURES OF TRADING RESULTS ARE AS UNDER - PARTICULARS ASSESSMENT YEAR 2008 - 09 2007 - 08 2006 - 07 S ALES 28,74,27,785 27,73,36,170 21,98,10,58 3 GROSS PROFIT 3,92,54,297 9,82,19,983 9,70,43,950 G.P. RATE 13.66%* 35.42% 44.15% PROFIT BEFORE TAX 82,25,806 60,62,370 4,99,358 N. P. RATE 2.86% 2. 19% 0.23 % 8(2) I FIND THAT ALTHOUGH, THE TURNOVER AS WELL AS NET PROFIT RATE ARE PROGRESSIVE, THERE IS A FALL IN GP RATE. THE REASONS WERE EXPLAINED BY THE APPELLANT TO THE AO BY STATING THAT 'THE REASON FOR SHARP DECLINE IN G.P. RATE AS DISCLOSED IN THE YEAR UN DER CONSIDERATION IN COMPARISON TO THAT DISCLOSED IN THE IMMEDIATELY PRECEDING TWO YEARS IS THAT IN THE ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 EXCISE DUTY AMOUNTING TO RS.76034686/ - AND : - 4 - : RS.70880259/ - PAID ON PURCHASES MADE IN M.P. WAS DEBITED IN THE PROFIT A ND LOSS ACCOUNT INSTEAD OF TRADING ACCOUNT UNDER THE IMPRESSION THAT THESE WERE ALSO LICENSE FEE PAID TO THE GOVERNMENT, WHEREAS IN THE ASSESSMENT YEAR 2008 - 09 THE ELEMENT OF EXCISE DUTY PAID AMOUNTING TO RS.62129639/ - (RS.56072549 + RS.6057090/ - ) HAS BEEN DEBITED IN THE TRADING ACCOUNT AND RIGHTLY SO BECAUSE EXCISE DUTY CONSTITUTES AN ELEMENT OF PURCHASE PRICE. IF THE AMOUNT OF EXCISE DUTY DEBITED IN THE TRADING ACCOUNT IS REMOVED OUR TRADING ACCOUNT WILL SHOW A G.P. RATE OF 35. 27%.' THE FALL IN GROSS PROF IT RATE IS ADEQUATELY EXPLAINED EVEN IF THE INCREASE IN NET PROFIT RATE IS IGNORED FOR THE TIME BEING. 8(3) THE ENTIRE EXERCISE ADOPTED BY THE AO PROCEEDS ON THE OBSERVATIONS RECORDED IN PARAGRAPH 3 OF THE ASSESSMENT ORDER, THE EXAMINATION OF THE ACCOUNTS AND ITS RESULTS ON P RECONCEIVED CRITERION TAKING IN TO ACCOUNT THE BEHAVIORAL P ATTERN OF THE LIQUOR CONSUMING PU BLIC IS IN PARAGRAPHS 7 TO 8 OF THE ASSESSMENT ORDER AND THE TWO HAVE GIVEN THE AO THE GROUND TO REJECT THE BO O KS OF ACCOUNTS UNDER SECTION 145(3 ) OF THE ACT AS RECORDED BY THE AO IN PARAGRAPH 9 OF THE ASSESSMENT ORDER. THE REJECTION OF THE BOOKS OF ACCOUNTS PROMPTED THE AO TO ENHANCE THE SALES BY 20% AND APPLY A NET PROFIT RATE OF 3.25% TO THE ENHANCED SALES. HENCE, THE AO ASSESSED THE INCOME OF T HE APPELLANT AT RS. 1,12,09,683/ - AS AGAINST THAT SHOWN BY THE APPELLANT AT RS.82,25,806 / - . THE FINDINGS IN PARAGRAPHS 7 TO 8 OF THE ASSESSMENT ORDER ARE INTENDED TO BOLSTER THE OBSERVATIONS ON THE BOOKS OF ACCOUNTS AND METHOD OF ACCOUNTING IN PARAGRAPH 3 O F THE ASSESSMENT ORDER. IN OTHER WORDS, SINCE THE AO HAS : - 5 - : PROCEEDED ON 6 POINTS MENTIONED IN PARAGRAPH 3 OF THE ASSESSMENT ORDER, WHICH INCLUDE NON - ISSUANCE OF CASH MEMOS, ABSENCE OF SHOP WISE DETAILS OF SALES AND PRICE FIXATION BY GOVERNMENT AUTHORITIES AM ONG OTHERS, IT IS IMPERATIVE TO EXAMINE WHETHER THESE CONSTITUTE VALID GROUNDS FOR REJECTION OF BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE ACT. 8(4) SECTION 145(3) OF THE ACT ENABLES THE AO TO MAKE A BEST JUDGMENT ASSESSMENT IN THE MANNER PROVIDED IN SECTION 144 OF THE ACT, IF HE IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WHERE THE METHOD OF ACCOU NTING PROVIDED IN SUB - SECTION (1) HAS NOT BEEN REGULA RLY FOLLOWED BY THE ASSESSEE, OR ACCOUNTING STANDARDS AS NOTIFIED UNDER SUB - SECTION (2) HAVE NOT BEEN RE GULARLY FOLLOWED BY THE ASSESSEE. IN THE IMPUGNED CASE, THE AO HAS GIVEN A CATEGORICAL FINDING IN PARAGRAPH 9 THAT HE WAS NOT SATISFIED ABOUT THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE. NOW THEREFORE, IT REMAINS TO BE SEEN WHETHER THE BOOKS OF ACCOUNTS OF THE APPELLANT CAN BE SAID TO BE INCORRECT OR INCOMPLETE UNDER CIRCUMSTANCES MENTIONED IN PARAGRAPH 3 OF THE ASSESSMENT ORDER, WHICH INCLUDE NON - ISSUANCE OF CASH MEMOS, ABSENCE OF SHOP WI SE DETAILS OF SALES AND PRICE FIXATION BY GOVERNMENT AUTHORITIES AMONG OTHERS. 8 (5) THE AO IS OF THE OPINION THAT THE SYSTEM OF PRICE FIXATION BY THE CONCERNED GOVERNMENT AUTHORITIES GIVES AMPLE SCOPE OF MANIPULATION OF PROFIT MARGIN BY THE APPELLANT. IN ABSENCE OF RECORDS TO SHOW THE ACTUAL PROFIT MARGIN ON SALES, THE RECORDS COULD BE MANIPULATED. THESE AND OTHER OBSERVATIONS IN PARAGRAPH 3, HAVE THE SOLE PURPOSE OF DOUBTING THE AUTHENTICITY : - 6 - : OF THE SALES SHOWN BY THE APPELLANT. THE PURCHASE PRICE IS FIXE D BY THE EXCISE AUTHORITIES AND THE MAXIMUM SALE PRICE IS ALSO FIXED. THE ENTIRE GAMUT BUSINESS IS CONFINED TO THE MARGIN IN BETWEEN. THE CASE OF R.B. JESSARAM FATEHCHAND VS CIT (1969) 75 ITR 33 (BOMBAY) IS AN OLD CASE WHICH INVOLVED REJECTION OF BOOKS OF ACCOUNTS OF A PARTY DEALING IN SALE OF SUGAR IN CASH. HON'BLE BOMBAY HIGH COURT HELD THAT I N THE CASE OF A CASH TRANSACTION WHERE DELIVERY OF GOODS IS TAKEN AGAINST CASH PAYMENT, IT IS HARDLY NECESSARY FOR THE SELLER TO BOTHER ABOUT THE NAME AND ADDRESS OF THE PURCHASER. ACCORDINGLY, IN SUCH CASES, THE ACCOUNT BOOKS OF THE ASSESSEE CANNOT BE REJECTED MERELY ON THE GROUND THAT THE ADDRESSES OF THE PURCHASERS ARE NOT MENTIONED IN THE CASE OF CASH TRANSACTIONS. TO INTERPRET IN PROPER PERSPECTIVE, EVEN THOUGH T HE SALES WERE NOT VERIFIABLE AS IN THE IMPUGNED CASE, THE HON'BLE COURT HELD THAT LACK OF VERIFICATION OF CASH SALES COULD NOT BE A VALID GROUND FOR REJECTION OF BOOKS OF ACCOUNTS. A SIMILAR FINDING WAS GIVEN BY HON'BLE PATNA HIGH COURT IN THE CASE OF MD U MER V. CIT, 101 ITR 525 (PAT.) WHEREIN IT WAS HELD THAT NO OTHER DEFECT EXCEPT ABSENCE OF CASH MEMOS CANNOT BE A VALID GROUND FOR REJECTION OF BOOKS OF ACCOUNTS. 8 (6) THE REJECTION OF BOOKS OF ACCOUNTS ON THE BASIS OF NON - VERIFIABILITY OF SALES, NON - PR ODUCTION OF SALE RATE OF DIFFERENT TYPES OF LIQUOR AND NON - VERIFIABILITY OF STOCK OF VARIO US SHOPS , AS IN THE IMPUGNED CASE, WAS EXAMINED BY HON'BLE ITAT, ALLAHABAD BENCH IN THE CASE OF M/ S PRAYAG WINES VS DCIT, RANGE - 1, ALLAHABAD IN ITA NO. 01 /ALLD/09. TH E HON'BLE COURT VIDE ITS ORDER DATED 31.03.2009 OPINED THAT THE INCOME TAX LAW DOES NOT : - 7 - : REQUIRE THE ISSUANCE OF CASH MEMOS FOR EACH SALE AND THEREFORE ISSUANCE OF ONE CONSOLIDATED CASH MEMO CANNOT BE A DEFECT SO AS TO MERIT REJECTION OF BOOKS OF ACCOUNTS A S HAS BEEN HELD BY THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF RAMJILAL AND SONS VS COMMISSIONER OF SALES TAX 50 STC 344. FURTHER THE HON'BLE COURT ALSO RELIED UPON THE CASE OF AVADHESH PRATAP SINGH ABDUL REHMAN AND BROTHERS VS CIT 210 ITR 406 (ALL) TH AT ABSENCE OF STOCK REGISTER AND FAILURE TO ISSUE CASH MEMOS CANNOT BE A DEFECT SO AS TO MERIT REJECTION OF BOOKS OF ACCOUNTS. 8(7) SECTION 145(3) OF THE ACT EMPOWERS THE ASSESSING OFFICER, IN SUITABLE CASE, TO COMPLETE THE ASSESSMENT IN THE MANNER PROVID ED IN SECTION 144 OF THE ACT BUT SECTION 144 PRESUPPOSES COMPLETION OF ASSESSMENT ON THE BASIS OF ALL RELEVANT MATERIALS GATHERED BY THE ASSESSING OFFICER, THAT TOO, AFTER AGAIN GIVING A PROPER OPPORTUNITY OF BEING HEARD. ITO MUST RECORD A CLEAR FINDING . T HE ITO MUST REFER TO THE INHERENT DEFECT IN THE SYSTEM AND RECORD A CLEAR FINDING THAT THE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE IS SUCH THAT CORRECT PROFITS CANNOT BE DEDUCED FROM THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. IT IS NOT OPEN TO THE ITO TO INTERVENE AND SUBSTITUTE A DIFFERENT SYSTEM OF ACCOUNTING FROM THE ONE WHICH IS FOLLOWED BY THE ASSESSEE, ON THE GROUND THAT THE SYSTEM WHICH COMMENDS TO THE ITO IS BETTER - CIT V. MARGADARSI CHIT FUNDS (P.) LTD. [1985] 155 ITR 442 (AP). ESTIMAT ION MUST NOT BE ARBITRARY, VAGUE AND FANCIFUL BUT MUST BE LEGAL AND REGULAR . THE LAW SAYS THAT THE ITO SHALL MAKE THE ASSESSMENT TO THE BEST OF HIS JUDGMENT; IT MEANS THAT HE MUST MAKE IT ACCORDING TO THE RULES OF REASON AND JUSTICE, NOT ACCORDING TO PRIV ATE OPINION, BUT ACCORDING TO LAW : - 8 - : AND NOT HUMOUR, AND THAT THE ASSESSMENT IS TO BE NOT ARBITRARY, VAGUE AND FANCIFUL, BUT LEGAL AND REGULAR - MYSORE FERTILISER CO. V. CIT [1966] 59 ITR 268 (MAD.). 8(8) IT HAS FURTHER BEEN LAID DOWN THAT ESTIMATE BASED ON BOTH RELEVANT AND IRRELEVANT MATERIAL CANNOT BE SUSTAINED EVEN PARTLY - IF AN ESTIMATE IS BASED PARTLY ON IRRELEVANT MATERIAL AND PARTLY ON RELEVANT MATERIAL, IT IS DIFFICULT TO SUSTAIN THE ESTIMATE BECAUSE IT CANNOT BE SAID AS TO WHAT EXTENT AND WHICH PAR T OF THE FIGURE OF ESTIMATE DEPENDS UPON THE IR RELEVANT PORTION OF THE MATTER - SURAJMAL CHAMPALAL V. CIT [1967] 66 ITR 396 (PAT.). IT HAS BEEN H ELD BY THE HON'BLE ITAT, RAJKOT BENCH IN THE CASE OF ITO VS GIRISH M MEHTA IN ITA NO. 273/RJT/1999 ASUNDER - 'BE FO RE RE JEC TI NG THE BOOKS OF ACCOUNT, THE DEPARTMENT HAS TO PROVE THAT ACCOUNTS ARE UNRELIABLE, INC ORRECT OR INCOMPLETE. THE ACCOUNTS REGULARLY MAINTAINED IN THE COURSE OF BUSINESS, DULY AUDITED UNDER THE PROVISIONS OF IT ACT AND FREE FROM ANY QUALIFICATION BY THE AUDITORS, 'SHOULD BE TAKEN AS CORRECT UNLESS THERE ARE STRONG AND SUFFICIENT REASONS TO INDICATE THAT THEY ARE UNRELIABLE. BOOKS OF ACCOUNT SHOULD NOT BE REJECTED LIGHT - HEARTEDLY. AN ASSESSMENT UNDER S. 144 R/W S. 145 IS AN ASSESSMENT IN WHICH THE AO CAN ESTIMATE THE ASSESSEE'S I NCOME AFTER REJECTING THE BOOKS OF ACCOUNT AND FOR REJECTING THE BOOKS OF ACCOUNT, IT IS THE REVENUE'S ONUS TO PROVE THAT EITHER THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ARE NOT CORRECT AND COMPLETE OR THE METHOD OF A CCOUNTING ADOPTED IS SUCH THAT TRUE PROFIT CANNOT BE DEDUCED THERE FROM. FROM THESE LEGAL PROVISIONS, WHAT FLOWS IS THAT IF THE REVENUE DOUBTS THE : - 9 - : CORRECTNESS OF GP DECLARED BY THE ASSESSEE, IT FIRST OF ALL SHOULD REJECT THE ASSESSEE'S BOOKS OF ACCOUNT AFT ER SATISFYING THE MANDATORY REQUIREMENTS OF S. 145 WHICH CAN BE DONE ONLY AFTER POINTING OUT A SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT. AS THE ONUS TO MAKE OUT A CASE FOR REJECTION OF BOOKS OF ACCOUNT IS ON THE REVENUE, SO THE ASSESSEE CANNOT BE BURDENED W ITH THE RESPONSIBILITY OF PROVING A NEGATIVE ASPECT OF THE MATTER MEANING THEREBY, THE ASSESSEE CANNOT BE HELD RESPONSIBLE FOR NOT HAVING EARNED THE PROFIT AT A PARTICULAR RATE. AS PER THE INCOME - TAX LAWS, THE ASSESSEE HAS TO SUBSTANTIATE HIS RETURN AND IF HE FURNISHES OR PRODUCES NECESSARY EVIDENCE, WHICH IN THE NORMAL COURSE OF THINGS IS KNOWN AS BOOKS OF ACCOUNT, BILLS, VOUCHERS, ETC. IN SUPPORT OF HIS RETURN, THEN IN ORDER TO REBUT THE ASSESSEE'S RELIANCE/SUBMISSIONS WHEN THE RETURN IS SUBSTANTIATED BY SUCH BOOKS OF ACCOUNT, IT IS THE REVENUE'S DUTY TO CARRY ON PROPER INVESTIGATION AND VERIFICATION FROM SUCH BOOKS OF ACCOUNT AND MUST CALL FOR ANY OTHER EXPLANATION OR EVIDENCE, IF SO REQUIRED. AFTER PRODUCTION OF BOOKS OF ACCOUNT AND SUBMISSION OF EXPLANA TION BY THE ASSESSEE, IF ANY ASKED FOR, WITH RESPECT TO THE CONTENTS OF THE RETURN AND BOOKS OF ACCOUNT, THE REVENUE MAY ACCEPT THE SAME OR AFTER POINTING OUT THE SPECIFIC DEFECT MAY REJECT THE BOOKS OF ACCOUNT AND PROCEED TO DETERMINE THE ASSESSEE'S INCOM E AS PER THE PROVISIONS OF S. 145. INCOME - TAX PROVISIONS NOWHERE EITHER AUTHORIZE THE AO OR CAST AN OBLIGATION ON THE ASSESSEE TO PROVE A NEGATIVE RESULT, I.E., TO PROVE AS TO WHY HE FAILED TO MAKE A PROFIT AT A PARTICULAR RATE. 'BEST JUDGMENT ASSESSMENT' IS NOT A PROVISION TO PENALIZE THE ASSESSEE, BUT IS A MACHINERY PROVISION TO ENABLE THE REVENUE TO : - 10 - : ASSESS A PERSON WHEN SITUATION WARRANTS AN ASSESSMENT. THE ORDER UNDER S. 144 IS TO BE MADE TO THE BEST OF THE JUDGMENT OF THE AO WHICH MEANS, THE ORDER HAS TO BE RATIONAL AND IS TO BE BEST ON AN HONEST GUESSWORK FOR WHICH SOME VALID BASIS IS AVAILABLE TO THE AO. THE ORDER INVOLVES EXERCISE OF 'JUDGMENT' BY THE OFFICER. A FAIR ESTIMATION OF INCOME HAS TO BE MADE, THE AO SHOULD TAKE INTO CONSIDERATION THE TOTAL ITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE IN ADDITION TO PROPER EVALUATION OF THE MATERIAL FURNISHED BY THE ASSESSEE AND COLLECTED BY HIM BY HIS OWN EFFORTS. WHERE 'BEST JUDGMENT ASSESSMENT' POWER HAS BEEN CONFERRED, THE LIMITS OF THE POWER ARE IMPLIC IT IN THE OF HIS JUDGMENT ASSESSMENT'. THE JUDGMENT IS VITAL TO DECIDE THE MATTER WITH WISDOM TRUL Y AND LEGALLY. JUDGMENT DOES NOT DEPEND UPON THE ARBITRARY CAPRICIOUS OF THE ASSESSING OFFICER BUT ON SETTLED AND INVARIABLE PRINCIPLE OF JUSTICE.' 8(9) I N THE IM PU GNED CASE, THE VITAL FACT IS THAT THE COMMODITY DEALT BY THE A PPELLANT IS NOT SOLD IN THE O PEN MARKET UNLESS THE SELLER IS AUTHORIZED BY A LICENSE ISSUED BY EXCISE AUTHORITIES UNDER THE CONTROL OF THE STATE GOVERNMENT. THE APPELLANT HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS AND BILLS AND VOUCHERS FOR ALL PURCHASES AND EXPENSES. THE ASSESSING OFFICER HAS NOT PO INTED OUT ANY DEFECT ON THIS ACCOUNT. SO FAR AS THE STOCK POSITION IS CONCERNED, THE GOODS ARE UNDER THE MONITORING OF EXCISE AUTHORITIES OF T HE STATE GOVERNMENT. THE AO HAS COMMENTED IN PARAGRAPH 3 OF THE ASSESSMENT ORDER THAT DAILY SALES ARE REPORTED TO HEAD OFFICE ON LOOSE SLIPS; THE SHOPS ARE FAR OFF AND THERE COULD BE UNDER REPORTING OF SALES OR THAT SHOP WISE DETAILS OF SALES WERE NOT AVAI LABLE AND OTHER SUCH COMMENTS, IS NOT IN MY OPINION A DEFECT BECAUSE THE APPELLANT IS : - 11 - : ENTITLED TO SELL ONLY THE QUANTITY THAT IT HAS BEEN AUTHORIZED TO PURCHASE AT THE BEHEST OF THE EXCISE AUTHORITIES OF THE STATE GOVERNMENT. THE SALE IN ANY CASE CANNOT EX CEED THIS PURCHASE. FURTHER, AS PER THE TERMS OF THE LICENSE, THE APPELLANT CANNOT HAVE ANY OPENING STOCK AT THE BEGINNING OF THE YEAR AND ANY CLOSING STOCK AT THE END OF THE FINANCIAL YEAR. AT THE END OF THE YEAR USUALLY A DISTRESS SALE IS NECESSITATED TO RECOVER ANY AMOUNT FROM THE STOCK REMAINING. TO ALLEGE THAT THE DAY TO DAY SALE OR STOCK OF THE SHOPS WAS NOT VERIFIABLE CANNOT THEREFORE BE A VALID GROUND FOR REJECTION OF BOOKS OF ACCOUNTS. 8 (10) S IMILARLY, AS FAR AS THE SCOPE OF RETAINING A RANGE OF PROFIT MARGIN AT THE WILL OF THE ASSESSEE OR THE RATES OF EACH SIZE AND QUALITY OF BOTTLE IS CONCERNED AS TABULATED BY THE AO IN HIS ASSESSMENT ORDER IS CONCERNED, HERE AGAIN EXCISE AUTHORITIES OF THE STATE GOVERNMENT HAVE PRESCRIBED MAXIMUM RETAIL PRICE A ND THE ASSESSEE CAN IN NO WAY EXCEED THIS PRICE FIXED BY THE EXCISE DEPARTMENT. THE ACTUAL SALE PRICE BEING UNVERIFIABLE IN ABSENCE OF CASH MEMOS IS A SUSPICION, WHICH HOWEVER STRONG IT MAY BE CANNOT BE A VALID GROUND FOR REJECTION OF BOOKS OF ACCOUNTS AS LAID DOWN BY HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF RAMJI LAL AND SONS VS COMMISSIONER OF SALES TAX AND IN THE CASE OF AVADHESH PRATAP SINGH ABDUL REHMAN AND BROTHERS VS CIT (SUPRA). 8(11) THERE IS NO EVIDENCE ON RECORD TO SHOW THAT SALES IN RESPECT OF ANY PURCHASE MADE BY THE ASSESSEE HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS. THE SALES HAVE INCREASED IN THE CURRENT YEAR AS COMPARED TO EARLIER YEARS. THE FALL IN GROSS : - 12 - : PROFIT IS EXPLAINED BY THE FACT THAT IN THE EARLIER YEAR THE EXCISE PAYMENT W AS DEBITED IN PROFIT AND LOSS ACCOUNT WHEREAS IN THE CURRENT YEAR, IT HAS BEEN DEBITED IN THE TRADING ACCOUNT. IN CASE THE TRADING ACCOUNT IS RE - CASTED BY MAKING THE ADJUSTMENT FOR THE EXCISE PAYMENT IN THE TRADING ACCOUNT, THE GROSS PROFIT RATE WOULD BE 3 5.27% WHICH IS ALMOST THE SAME AS THE IMMEDIATELY PRECEDING YEAR. THE NET PROFIT RATE HAS IMPROVED IN THE CURRENT YEAR AS COMPARED TO THE IMMEDIATELY PRECEDING YEAR. 8(12) MY EXAMINATION AND THE JUDICIAL PRONOUNCEMENTS ON THE SUBJECT GO TO SHOW THAT THE REJECTION OF BOOKS OF ACCOUNTS IS BASED ON EXTRANEOUS AND IRRELEVANT MATERIAL. THERE EXIST NO VALID GROUNDS FOR REJECTION OF BOOKS OF ACCOUNTS. ACCORDINGLY, I AM OF THE OPINION THAT THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS ON IRRELEVANT CONSIDERATIONS. CONSEQUENTLY, THERE IS NO JUSTIFICATION IN ENHANCEMENT OF TURNOVER OF THE APPELLANT WITHOUT CONSIDERATION OF THE PURCHASE PRICE AND SALE PRICE AND QUANTITY BEING FIXED BY EXCISE DEPARTMENT OF THE STATE GOVERNMENT. FURTHER, THERE IS ALSO NO JUSTIFICATION IN APPLYING A NET PROFIT RATE FOR THE SAME REASON. IN VIEW OF ABOVE, THE CONSEQUENT ADDITION TO INCOME MADE BY THE AO IS DELETED. THE APPELLANT GETS THE CONSEQUENTIAL RELIEF AND THE GROUNDS OF APPEA L NUM BER 1 TO 5 AS ABOVE ARE ALLOWED. 5 . AGGR IEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND PLACED HEAVY RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER. THE LD. D.R. FURTHER INVITED OUR ATTENTION TO THE PATTERN OF SALES DISCLOSED BY THE ASSESSING OFFICER IN HIS ORDER AT PAGES 4 TO 11 OF THE ASSESSMENT ORDER , WITH THE SUBMISSION THAT THE TREND OF SALE OF LIQUOR IS : - 13 - : NOT IN ACCORDANCE WITH THE FESTIVALS OR OTHER IMPORTANT FACTORS WHICH GENERALLY GOVERN THE SALE OF LIQUOR. DURING THE MONTH OF HOLI FESTIVAL OR NEW YEAR EVE , THE CONSU MPTION OF LIQUOR SHOULD HAVE BEEN SUBSTANTIALLY INCREASE D BUT THERE IS NO INCREASE IN THE SALE OF LIQUOR AS PER RECORD OF THE ASSESSEE. THE ASSESSING OFFICER HAS ALSO EXAMINED DIFFERENT VARIET IES OF SALE OF LIQUORS ON DIFFERENT DAYS IN A WEEK AND NOTICED THAT THERE WAS NO UPWARD OR DOWNWARD TREND IN THE SALE OF LIQUOR EVEN DURING THE WEEK END DAYS. THE LD. D.R. FURTHER CONTENDED THAT THE ASSESSING OFFICER HAS MADE A DETAILED ENQUIRY AND HAS ANALYZED THE TREND OF SALE OF LIQUOR AND WHEN IT WAS NOT FOUND IN ACCORDANCE WITH THE PREVAILING FACTOR, THE ASSESSING OFFICER HAS ESTIMATED THE TURNOVER AND APPLIED NET PROFIT RATE. 6 . WITH REGARD TO THE MAINTENANCE OF ACCOUNT, THE LD. D.R. HAS CONTENDED THAT NO SALE BILL WAS ISSUED BY THE ASSESSEE, ONLY A SLIP CON SIST I NG TOTAL SALES OF WHOLE DAY WAS PRODUCED TO JUSTIFY THE CORRECTNESS OF THE SALES MADE BY THE ASSESSEE. SINCE THE SALES WERE NOT VERIFIABLE, THE ASSESSING OFFICER HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNT. 7 . THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAN D, HAS SUBMITTED THAT THE BOOKS OF ACCOUNT ARE MAINTAINED IN THE HEAD OFFICE ON THE BASIS OF SALES AND PURCHASES MADE BY DIFFERENT BRANCHES SITUATED OVER THREE STATES I.E. UTTAR PRADESH, UTTARAKHAND AND MADHYA PRADESH. IT IS GENERALLY NOT POSSIBLE TO SEND THE COMPLETE DETAILS OF DAILY SALES TO THE HEAD OFFICE. ALL THE BRANCHES OF THE ASSESSEE WERE SENDING TOTAL SALES FOR THE WHOLE DAY TO THE ASSESSEE IN THE HEAD OFFICE. ACCORDINGLY SALES ARE PROPERLY RECORDED. SO FAR AS PURCHASES ARE CONCERNED, LIQUOR I S AN EXCISABLE ITEM AND IT WAS NOT DOUBTED BY THE REVENUE. THE ASSESSING OFFICER HAS RAISED DOUBT ON THE SALES ON THE BASIS OF CONJECTURES AND SURMISES WITHOUT BRINGING ANYTHING ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT IT IS A S ETTLED POSITION OF LAW THAT WITHOUT : - 14 - : POINTING OUT ANY DEFECT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, THE SAME CANNOT BE REJECTED. THE ASSESSEE HAS BEEN FOLLOWING THE SAME METHOD OF ACCOUNTING FOR THE LAST SO MANY YEARS AND AT NO POINT OF TIME IT WAS NOT D OUBTED BY THE REVENUE. 8 . THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO PLACED RELIANCE UPON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF RAMJI LAL AND SONS V. CIT [1982] 50 STC 344 (ALL) IN SUPPORT OF HIS CONTENTION THAT ON THE BASIS OF NON - ISS UANCE OF CASH MEMOS FOR PETTY SALES, THE BOOKS OF ACCOUNT CANNOT BE REJECTED WITHOUT APPRECIATING THE FACT THAT AT THE END OF THE DAY A CONSOLIDATED CASH MEMO WAS ISSUED FOR ALL THE PETTY SALES. 9 . FURTHER RELIANCE WAS ALSO PLACED ON THE DECISION OF THE JUR ISDICTIONAL HIGH COURT IN THE CASE OF AWADESH PRATAP SINGH ABDUL REHMAN & BROS. V. CIT [1994] 210 ITR 406 (ALL), IN WHICH IT HAS BEEN HELD THAT MERE ABSENCE OF STOCK REGISTER OR CASH MEMO MAY NOT LEAD TO AN INFERENCE THAT THE ACCOUNTS ARE FALSE OR INCOMPLE TE AS MAINTENANCE OF THE SAME DEPENDS UPON THE TYPE OF BUSINESS. 10 . THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO INVITED OUR ATTENTION TO THE ASSESSMENT ORDER S FOR ASSESSMENT YEARS 2005 - 06 AND 2006 - 07 IN THE ASSESSEES OWN CASE, IN WHICH THE BOOK RESULTS DECLA RED BY THE ASSESSEE WERE ACCEPTED BY THE REVENUE AND NO QUESTION WAS RAISED WITH REGARD TO THE MAINTENANCE OF THE BOOKS OF ACCOUNT ON THE BASIS OF CONSOLIDATED SALE BILL/INVOICE FOR WHOLE OF THE DAY. 11 . OUR ATTENTION WAS FURTHER INVITED TO THE ORDER OF THE ALLAHABAD BENCH OF THE TRIBUNAL IN THE CASE OF M/S PRAYAG WINES V. DCIT IN ITA NO. 01/ALLD/2009 IN WHICH ON AN IDENTICAL CIRCUMSTANCES, THE BOOK RESULTS WERE ACCEPTED BY THE TRIBUNAL AND ADDITION MADE BY THE ASSESSING OFFICER AFTER REJECTING THE BOOKS OF A CCOUNT FOR THE SAME REASONS WERE DELETED. COPY OF THE ORDER OF THE TRIBUNAL IS PLACED ON RECORD AT PAGES 139 TO 152 : - 15 - : OF THE COMPILATION OF THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO INVITED OUR ATTENTION TO THE PHOTOCOPIES OF THE CONSOLIDATED CASH MEMOS SUBMITTED BY THE BRANCH OFFICE S TO THE HEAD OFFICE, WITH THE SUBMISSION THAT CONSOLIDATED CASH MEMO S WERE SUBMITTED REGULARLY TO THE HEAD OFFICE AND ON THAT BASIS THE TOTAL SALES WERE WORKED OUT AND ACCOUNTS ARE MAINTAINED. THEREFORE, THERE IS NO DEFECT IN THE MAINTENANCE OF THE BOOKS OF ACCOUNT. 12 . HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT MAINLY FOR TWO REASONS FIRS T IS THAT THE ASSESSEE HA D NOT ISSUED SALE MEMO OF PETTY SALES BUT A CONSOLIDATED SALE MEMO FOR THE WHOLE DAY WAS ISSUED AND WAS SEN T TO THE HEAD OFFICE , ON THE BASIS OF WHICH THE ACCOUNTS ARE PREPARED. SECOND REASON FOR REJECTION OF THE BOOKS OF ACCOUNT I S THAT THE TREND OF THE SALES DECLARED BY THE ASSESSEE WAS NO T IN ACCORDANCE WITH VARIOUS FACTORS PREVAILING IN THE SOCIETY GOVERNING THE CONSUMPTION OF LIQUOR AT DIFFERENT POINT OF TIME. THE ASSESSING OFFICER HAS PREPARED THE DETAILS OF SALES ON DAY - WISE AND MONTH - WISE IN HIS ORDER. HAVING NOTED NOT MUCH CHANGE IN THE TREND OF SALES, THE ASSESSING OFFICER HAS OBSERVED THAT ON HOLI FESTIVAL AND NEW YEAR EVE THE SALES OF LIQUOR OUGHT TO HAVE BEEN SUBSTANTIALLY INCREASED ON ACCOUNT OF MAXIMUM CONSUMPTION BY THE PUBLIC, BUT IT WAS NOT IN THE CASE OF THE ASSESSEE. LIKEWISE, HE HAS TAKEN EVERY INSTANCE OF DIFFERENT FESTIVALS. WHEREAS THE LD. CIT(A) HAS EXAMINED THE ISSUE IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS. WHILE REJECTING THE BOOKS OF ACCOUNT, T HE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY COMPARABLE CASE TO DEMONSTRATE THAT THE SALES DECLARED BY THE ASSESSEE ARE NOT CORRECT. THE PHOTOCOPIES OF CONSOLIDATED CASH MEMOS ARE PLACED ON RECORD WHEREFOM IT IS CLEARLY EVIDENT THAT THE SALE OF LIQUOR VAR IES FROM TIME TO TIME. SOME : - 16 - : TIME SALES OF LIQUOR ROSE TO ` 80,000 OR EVEN IN LAKHS OF RUPEES AND SOME TIME IT IS IN BETWEEN ` 2,000 TO ` 4,000 PER DAY. BUT THIS DIFFEREN CE IN SALES ON DIFFERENT DAYS CANNOT BE THE REASON FOR REJECTING THE BOOKS OF ACCOUNT UN LESS AND UNTIL IT IS BROUGHT ON RECORD THAT THERE IS SOME SUPPRESSED SALES WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. WHATEVER REASONS GIVEN BY THE ASSESSING OFFICER, THEY WERE BASED ON CONJECTURES AND SURMISES AND NOT ON SCIENTIFIC ANALYSIS. WE HAVE ALSO CAREFULLY EXAMINED THE JUDGMENTS OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF RAMJI LAL AND SONS V. CIT (SUPRA) IN WHICH IT HAS BEEN HELD THAT IF CASH MEMOS ARE NOT ISSUED FOR PETTY SALES, THE BOOKS OF ACCOUNT CANNOT BE REJECTED IF AT THE END OF THE DAY A CONSOLIDATED SALE MEMOS WERE ISSUED FOR ALL PETTY SALES. 13 . IN THE CASE OF AWADESH PRATAP SINGH ABUDL REHMAN & BROS. V. CIT (SUPRA), IT WAS FURTHER HELD BY THE JURISDICTIONAL HIGH COURT THAT MERE ABSENCE OF STOCK REGISTER OR CASH MEMO MAY NOT LEAD TO AN INFERENCE THAT THE ACCOUNTS ARE FALSE OR INCOMPLETE AS MAINTENANCE OF THE SAME DEPENDS UPON THE TYPE OF BUSINESS. 14 . UNDISPUTEDLY IN THE EARLIER YEARS THE BOOK RESULTS DECLARED BY THE ASSESSEE WERE ACCEPTED BY THE REVENUE THOUGH THE MO DE OF ACCOUNTING WAS THE SAME. COPIES OF THE ASSESSMENT ORDERS FOR ASSESSMENT YEARS 2005 - 06 AND 2006 - 07 ARE PLACED AT PAGES 130 TO 138 OF THE COMPILATION OF THE ASSESSEE. 15 . AN IDENTICAL ISSUE WAS EXAMINED BY THE TRIBUNAL IN THE CASE OF M/S PRAYAG WINES V. DCIT (SUPRA) IN WHICH THE TRIBUNAL HAS HELD THAT ABSENCE OF STOCK REGISTER AND FAILURE TO ISSUE CASH MEMOS CANNOT BE A DEFECT SO AS TO MERIT THE REJECTION OF THE BOOKS OF ACCOUNT. THE BOOKS OF ACCOUNT CAN ONLY BE REJECTED IF THERE IS ABSENCE OF STOCK REG ISTER AND CASH MEMO IS COUPLED WITH ABSENCE OF VOUCHERS FOR EXPENSES AND PURCHASES : - 17 - : AND ABOVE ALL THESE THE PROFITS SHOWN IS LOW. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED HEREUNDER: - 8.2(I) HA VING CONSIDERED THE AFORESAID DECISION, WE AR E OF THE OPINION THAT IT IS NOW SETTLED LAW THAT ABSENCE OF STOCK REGISTER AND FAILURE TO ISSUE CASH MEMOS CANNOT BE A DEFECT SO AS TO MERIT THE REJECTION OF BOOKS OF ACCOUNT AS HE LD BY THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF AWADHESH PRATAP SINGH ABDUL REHMAN AND BROTHERS VS CIT (SUPRA). THE BOOKS OF ACCOUNT CAN BE REJECTED ONLY IF THERE IS ABSENCE OF STOCK REGISTER AND CASH MEMO IS COUPLED WITH ABSENCE OF VOUCHERS FOR EXPENSES AND PURCHASES AND ABOVE ALL THESE, THE PROFITS SHOWN IS LOW. FROM THE O BSERVATION OF THE HON'BLE HIGH COURT (SUPRA), IT IS CLEAR THAT BOOKS OF ACCOUNT CANNOT BE REJECTED SIMPLY BCCAUS E ASSESSEE HAS NO T MAINTAINED STOCK REGISTER OR HAS NOT ISSUED CAS H MEMOS. 9. HAVING CONSIDERED THE AFORESAID DECISION, IT IS NOW CLEAR THAT R EJECTION OF ASSESSEE'S BOOKS OF ACCOUNT, IN THE PRESENT CASE, ON THE BASIS OF ABSENCE OF STOCK REGISTER OR CASH MEMO FOR EACH INDIVIDUAL SALE CANNOT BE SUSTAINED AND THEREFORE, WE ARE OF THE OPINION THAT REJECTION OF ASSESSEE'S BOOKS OF ACCOUNT WAS ILLEGAL AND BAD IN LA W. 10. COMING TO THE ASSESSEE'S CASE, THE ADMITTED FACTS ARE THAT THE COMMODITY DEALT WITH BY THE ASSESSEE IS OF SUCH A NATURE WHICH IS NOT AVAILABLE IN THE OPEN MARKET. THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNT AND BILLS/VOUCHERS FOR ALL PURCHASES AND EXPENSES. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DEFECT ON THIS ACCOUNT. SO FAR AS STOCK IS CONCERNED, THE ASSESSEE'S GOODS BEING UNDER THE STRICT CONTROL OF EXCISE : - 18 - : AUTHORITIES, IT HAS TO MAINTAIN DAY - TO - DAY STOCK REGISTER WHIC H WAS DULY MAINTAINED. THE ASSESSING OFFICER HAS ALSO NOT MADE ANY ADVERSE COMMENT. THE ASSESSING OFFICER'S COMMENTS THAT OPENIN G STOCK OF EACH DAY IN EACH SHOP AND CLOSING STOCK ON EACH DAY IN EACH SHOP WAS NOT VERIFIABLE, IN OUR OPINION, WAS NOT A DEFECT BECAUSE THE ASSESSEE CO ULD SELL THE QUANTITY WHICH IT WAS ENTITLED TO PURCHASE, NOTHING MORE NOTHING LESS. THE ASSESSEE COULD ALSO NOT HAVE ANY OPENING STOCK IN THE BEGINNING OF THE YEAR OR CLOSING STOCK AT THE EN D OF THE YEAR, MEANING THEREBY T HAT THE AS SESSEE WAS BOUND TO SELL OR DESTROY THE QUANTITY OF GOODS PURCHASED BY IT AND THEREFORE, TO ALLEGE THAT DAY - TO - DAY OPENING AND CLOSING STOCK AT EACH SHOP WAS NOT VERIFIABLE CANNOT IN OUR OPINION BE A REASON FOR REJECTING THE BOOKS O F ACCOUNT. SIMILARLY, SO FAR AS THE RATES OF EACH SIZE OF BOTTLE IS CONCERNED, HERE AGAIN THE EXCISE AUTHORITIES HAVING PRESCRIBED MAXIMUM RETAIL RATE, THE ASSESSEE COULD, IN NO CIRCUMSTANCES, EFFECT TH E SALES AT A RATE HIGHER THAN THE MAXIMUM RATE PRESCRIBED BY THE EXCISE AUTHOR ITIES AND IT IS NOT THE CASE OF THE DEPARTMENT ALSO. THE REVENUE'S CASE IS THAT THE ASSESSEE MAY HAVE SOLD THE GOODS AT A HIGHER PRICE THA N THE PRICE THE ASSESSEE HAS RECORDED AT THE END OF THE DAY AND THEREFORE, ACTUAL SALE PRICE OF THE GOODS IS NOT VERIF IABLE AND HAS EXPRESSED A SUSPICION THAT BY NOT ISSUING CASH MEMOS FOR EACH INDIVIDUAL SALE THE A SSESSEE HAS AVOIDED THE SALES (V ALUEWISE). 11. SO FAR AS THIS APPREHENSION IS CONCERNED, WE ARE OF THE OPINION THA T THE REVENUE HAD POWER TO VERIFY THE ACTUAL SALE PRICE CHARGED BY THE ASSESSEE BY CARRYING ON SURVEY DURING BUSINESS HOURS. BUT SIMPLY TO ALLEGE ON THE BASIS OF SUSPICION THAT ASSESSEE MIGHT HAVE RECORDED THE SALES ON THE BASIS OF : - 19 - : SINGLE VOUCHER AT LESS THAN THE ACTUAL SALES, IN OUR OPINION, WAS ALS O NOT A REASON FOR REJ ECTING THE BOOKS OF ACCOUNT. IT IS ALSO BECAUSE THE SUSPICION, HOWSOEVER STRONG IT MAY BE, CANNOT BE USED AS AN EVIDENCE FOR REJECTING THE BOOKS OF ACCOUNT. 12. SIN CE THE REVENUE HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO SUGGEST TH AT THE ASSESSE E HAD AVOIDED THE ACTUAL SALES FROM RECORDING IN THE BOOKS OF ACCOUNT. THIS APPRE HENSION OR SUSPICION OF THE REVENUE, IN OUR OPINION, IS ALSO UNFOUNDED. MORE SO , BECAUSE THE ASSESSEE HIMSELF HAS SHOWN A HIGHER GP RATE IN THIS YEAR. 13.1. SO FAR AS FOLLOWING THE CO MPARABL E CASE OF M/S ANISHKA ASSOCIATES IS CONCERNED, WE ARE OF THE OPINION THAT WE HAVING QUASHED THE REVENUE'S ACTION TO REJECT THE BOOKS OF ACCOUNT, THE ISSUE IS RENDERED ACADEMIC, BUT STILL, WE FOR THE SAKE OF CONSIDERATION DEAL WITH THAT ISSUE ALSO. 13.2. .HAVING CONSIDERED THE FACTS, FIRST OF ALL WE ARE OF THE OPINION THAT THE ASSESSING OFFICER HAVING ACCEPTED THAT THE FACTS OF COMPARABLE CASE WERE QUITE DIFFERENT THAN THE FACTS OF THE ASSESSEE'S CASE, THERE WAS NO JUSTIFICATIO N TO RELY UPON THE COMPARABLE CASE. 13.3. WITHOUT PREJUDICE TO ABOVE FINDING, EVEN IF THE COMPARABLE CASE WAS TO BE CONSIDERED, THEN ALSO WE ARE AGAIN OF THE OPINION TH A T (I) THE ASSESSING OFFICER HAVING NOT BROUGHT ALL THE FACTS OF THAT CASE EXCEPT THE TU RNOVER AND THE GP RATE TO THE NOTICE OF THE ASSESSEE AND ALSO (II) HAVING NOT ALLOWED THE ASSESSEE TO CROSS EXAMINE THE PROPRIETOR OF COMPARABLE CASE HIS RELIANCE ON THAT CASE WAS ILLEGAL AND BAD IN LAW. : - 20 - : 13.4. INSPITE OF ABOVE FINDING, WE ARE FURTHER OF TH E OPINION THAT THE ASSESSEE H AVING TRIED TO EXPLAIN THE PECULIAR N A TURE OF ASSESSEE'S BUSINESS AND AS THAT OF THE COMPARABLE CASE, SUCH AS, THE FA C T THAT ASSESSEE WAS DEALING IN BOTH TYPES OF LIQUORS, I.E COUNTRY MADE LIQUOR AND IMFL WHEREAS IN COMPARABL E CASE, THE ASSESSEE WAS DEALING ONLY WITH COUNTRY LIQUOR WHERE THE MARGIN OF PROFIT IS ALWAYS HIGHER, AREA OF OPERATION WAS DIFFERENT AND IN COMPARABLE CASE, THE ASSESSEE HAD NOT GOT DISCOUNT OF 9% ON PURCHASE WHICH WAS NOT ADMISSIBLE TO THE ASSESSEE A N D IF THAT DISCOUNT IS ACCOUNTED FOR THEN ASSESSEE'S GP WAS HIGHER THAN T HE G.P RATE OF THE COMPARABLE CASE. THE ASSESSING OFFICER THOUGH HAS DULY NOTED ALL THESE FACTORS AND HAS, IN PRINCIPLE, AGREED THAT ASSESSEE'S PROFIT CANNOT BE COMPUTED ON THE BASIS OF COMPARABLE CASE, YET HE PREFERRED TO COMPUTE THE ASSESSEE'S INCOME FROM BUSINESS BY APPLYING A HIGHER GP RATE OF 18% AS AGAINST G.P RATE OF 14.11% DECLARED BY THE ASSESSEE WITHOUT GIVING ANY REASON. 13.5. HAVING CONSIDERED THE AFORESAID FACTS, WE ARE OF TH E OPINION THAT ONCE THE ASSESSING OFFICER HAD ACCEPTED THE ASSESSEE'S SUBMISSIONS THAT FACTS OF COMPARABLE CASE WERE NOT SAME AS WERE THAT OF ASSESSEE, THERE WAS NO JUSTIFICATION ON HIS PART TO RELY ON THE COMPARABLE CASE AND IF AT ALL, HE WAS TO RELY UPON T HEN HE SHOULD HAVE CONSIDERED T HE ASSESSEE'S EXPLANATION IN TOTO I.E HE SHOULD HAVE CONSIDERED THE FACT THAT THE A SSESSEE IN COMPARABLE CASE, WAS GETTING A REBATE OF 9% ON PURCHASES AND IF THA T IS CONSIDERED THEN ASSESSEE' S PROFIT RATE COMES TO 23.11% WH ICH IS MORE THAN THE G.P RATE OF COMPARABLE CASE. : - 21 - : 14. IN VIEW OF ABOVE DISCUSSION AND THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND FOLLOWING THE LAW LAID DOWN BY THE HON'BLE ALLAHABAD HIGH COURT, WHICH IS BINDING ON US, WE ARE OF THE OPINION THAT T HERE WAS NO JUSTIFICATION FOR REJECTING THE BOOKS OF ACCOUNT AND T HEREFORE, SET A SIDE THE ORDERS OF THE LD. CIT( A) AND OF THE ASSES SI NG OFFICER REJECTING THE ASSESSEE'S BOOKS OF ACCOUNT. CONSEQUENTLY, THE ADDITION MADE ON THIS ACCOUNT IS DELETED. 16 . IN T HAT CASE THE BOOKS OF ACCOUNT WERE REJECTED BY THE ASSESSING OFFICER AND NET PROFIT WAS ESTIMATED FOR THE SAME REASONS AS IN THE CASE OF THE ASSESSEE AND THE TRIBUNAL HAS FINALLY DELETED THE ADDITION IN THE LIGHT OF THE NATURE OF BUSINESS OF THE ASSESSEE A ND THE COMPARABLE CASE. 17 . KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT WHILE REJECTING THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER HAS FORMED HIS OWN VIEW ON THE BASIS OF CONJECTURES AND SURMISES WITHOUT BRINGING ANY EVIDENCE ON RECORD, RATHER ANY COMPARABLE CASE. WHEREAS IN THE CASE OF M/S PRAYAG WINES V. DCIT (SUPRA) , THE BOOKS OF ACCOUNT WERE REJECTED BY THE ASSESSING OFFICER ALMOST FOR THE SAME REASONS BUT WHILE DOING SO HE BROUGHT OUT SOME CO MPARABLE CASE. TH E REFORE, WE DO NOT FIND ANY MERIT IN THE REJECTION OF THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ESTIMATION OF TURNOVER WITHOUT ANY BASIS. THERE IS ONLY A PRESUMPTION BY THE ASSESSING OFFICER WITH REGARD TO THE DIFFERENT TRENDS OF SALES AT DIFFERENT POINT OF TIME. IF HE INTEND TO REJECT THE BOOKS OF ACCOUNT OF THE ASSESSEE, HE SHOULD HAVE BRO UGHT OUT SOME COMPARABLE CASE OR SOME COGENT MATERIAL ON RECORD TO DEMONSTRATE THAT THE SALES SHOWN BY THE ASSESSEE IS NOT PROPER AND THERE : - 22 - : MAY BE POS SIBILITY OF SUPPRESSED SALES , B UT NOTHING HAS BEEN DONE BY THE ASSESSING OFFICER. HE SIMPLY REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED TURNOVER AND NET PROFIT. HOWEVER , THE LD. CIT(A) HAS EXAMINED THE ENTIRE ISSUE IN DET AIL IN HIS ORDER. SO FAR AS THE NE T PROFIT SHOWN BY THE ASSESSEE IS CONCERNED, THE LD. CIT(A) HAS CATEGORICALLY OBSERVED IN HIS ORDER THAT SALES HAVE BEEN INCREASED IN THE CURRENT YEAR AS COMPARED TO EARLIER YEARS. FALL IN GROSS PROFIT RATE IS EXPLAINED BY THE FACT THAT IN EARLIER YEAR EXCESS PAYMENT WAS DEBITED IN THE PROFIT AND LOSS ACCOUNT WHEREAS IN THE CURRENT YEAR IT HAS BEEN DEBITED IN THE TRADING ACCOUNT . IN CASE THE TRADING ACCOUNT IS RE - CASTED BY MAKING THE ADJUSTMENT FOR THE EXCISE PAYMENT IN THE TRADING ACCOUNT, THE GROSS P ROFIT RATE WOULD BE 35.27% WHICH IS ALMOST THE SAME AS THE IMMEDIATELY PRECEDING YEA R. THEREFORE, NET PROFIT RATE HAS IMPROVED IN THE CURRENT YEAR AS COMPARED TO THE IMMEDIATELY PRECEDING YEAR . I N THE I MMEDIATE PRECEDING YEAR THE BOOK RESULTS WERE ACCEP TED BY THE REVENUE. THESE FINDINGS OF THE LD. CIT(A) WERE NOT COMMENTED UPON BY THE LD. D.R. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE REJECTION OF BOOKS OF ACCOUNT ARE NOT PROPER AND THE LD. CIT(A) HAS RIGHTLY ACCEPTED THE BOOK RESULTS OF THE ASSESSEE AND DELETED THE ADDITION. ACCORDINGLY THE ORDER OF THE LD. CIT(A) IS CONFIRMED. 18 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.8.2012. S D/ - S D/ - [ MEHAR SINGH ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMB ER DATED: 22.8.2012 JJ: 1807 : - 23 - : COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR