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

ITA 564/LKW/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0195 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 06-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gross profit estimation; Unexplained cash credit; Rejection of books of accounts
• Section: 143(3); 68

Judgement Text

I.T.A. NO. 564/LKW/2017 ASSESSMENT. YEAR:2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH SMC, LUCKNOW BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.564/LKW/2017 ASSESSMENT YEAR:2013-14 M/S BASTI WINE CO. (ENGLISH) 24/4, THE MALL, KANPUR. PAN:AAAAB 5674 J VS. A.C.I.T., RANGE-1, KANPUR. (APPELLANT) (RESPONDENT) O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER DATED 18/07/2017 LEARNED CIT(A)-I, KANPUR. IN THIS APPEA L THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS: 1. THAT THE LD. CIT (APPEALS) HAS ERRED IN CONFIRM ING THE ADDITION OF RS.1355715.00 MADE BY AO ON ESTIMATION OF BOOK PROFIT BY REJECTION OF BOOKS OF ACCOUNT. 2. THAT THE LD. CIT (APPEALS) HAS ERRED IN CONFIRMI NG THE REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF PRO FIT MADE BY AO WITHOUT ANY PREMISE ARBITRARILY. 3. THAT THE LD. CIT (APPEALS) HAS ERRED IN CONFIRMI NG ADDITION OF RS.1000000.00 ON ACCOUNT OF CAPITAL INT RODUCED BY MEMBERS TREATING IT AS UNEXPLAINED CASH CREDIT. 4. THAT THE ADDITION / DISALLOWANCE MADE BY AO AND CONFIRMED BY LD. CIT (APPEALS) ARE HIGHLY EXCESSIVE . APPELLANT BY SHRI ASHISH JAISWAL, ADVOCATE RESPONDENT BY S HRI C. K. SINGH, D.R. DATE OF HEARING 03/12/2018 DATE OF PRONOUNCEMENT 07/12/2018 I.T.A. NO. 564/LKW/2017 ASSESSMENT. YEAR:2013-14 2 2. AT THE OUTSET, LEARNED A. R. SUBMITTED THAT THE ASSESSING OFFICER HAS WRONGLY REJECTED THE BOOKS OF ACCOUNT AND HAS ESTIM ATED THE PROFITS OF THE ASSESSEE. IT WAS SUBMITTED THAT THE ASSESSEE HAD M AINTAINED PROPER BOOKS OF ACCOUNT AND THE ACCOUNTS WERE AUDITED U/S 44AB O F THE ACT AND NO ADVERSE COMMENTS REGARDING BOOKS OF ACCOUNT HAVE BE EN GIVEN BY THE CHARTERED ACCOUNTANT. IT WAS SUBMITTED THAT THE AS SESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 145(3) MAINLY FOR THE REASON THAT THERE WAS A POSSIBILITY OF SUPPRESSION OF SALES. IT WAS SUBMITTED THAT NO SEPARATE CASH MEMOS WERE ISSUED FOR EACH AND EVERY SALE BUT CONSOLIDATED ENTRY WAS BEING MADE IN CASH BOOK AFTER CLOSE OF THE DAY AND THIS PRACTICE WAS NOT NEW AND IT WAS BEING ACCEPTED BY THE DEPARTMENT FOR SEVERAL YEARS. IT WAS SUBMITTED THAT IN ASSESSEES OWN CASE FOR ASSESSMEN T YEAR 2011-12 IN I.T.A. NO.741/LKW/2016 DATED 24/08/2018, THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND SIMILARLY IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2012-13 IN I.T.A. NO.338/LKW/2016 VIDE ORDER D ATED 08/01/2018, THE HON'BLE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. ARGUING THE OTHER ADDITIONS, SUSTAINED BY LEARNED CIT(A), L EARNED A. R. SUBMITTED THAT ONE OF THE MEMBERS OF AOP HAD INTRODUCED RS.10 ,00,000/- AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE COPY OF CO NFIRMATION ALONG WITH THE COPIES OF ITR OF THE MEMBER WERE FILED AND IN T HIS RESPECT OUR ATTENTION WAS INVITED TO PAGES 22 TO 29 OF THE PAPER BOOK WHE RE THE COPIES OF CONFIRMATION OF ACCOUNT ALONG WITH THE COPIES OF RE TURNS WERE PLACED. IT WAS SUBMITTED THAT HAVING FURNISHED THESE DOCUMENTS , THE ONUS OF THE ASSESSEE WAS DISCHARGED AND ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSEE AND RELIANCE IN THIS RESPECT WAS PLACED ON AN ORDER OF HON'BLE M.P. HIGH COURT IN THE CASE OF CIT VS. METACHEM INDUSTRI ES [2000] 245 ITR 160 (MP). I.T.A. NO. 564/LKW/2017 ASSESSMENT. YEAR:2013-14 3 3. LEARNED D. R., ON THE OTHER HAND, SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 5. I HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THR OUGH THE MATERIAL PLACED ON RECORD. AS REGARDS THE FIRST ISSUE OF RE JECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF PROFIT, I FIND THAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 & 2012-13 IN I.T.A. NO.741/LKW/2017 AN D 338/LKW/2017 RESPECTIVELY, THE SIMILAR ISSUE OF REJECTION OF BOO KS OF ACCOUNT AND ESTIMATION OF PROFITS HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. I FIND THAT IN THOSE YEARS THE TRIBUNAL HAS HELD THAT CASH BOOK , LEDGER AND OTHER DOCUMENTS INCLUDING PURCHASE BILLS AND TCS CERTIFIC ATES WERE FILED BEFORE THE ASSESSING OFFICER AND DURING THE YEAR UNDER CON SIDERATION, I FIND THAT ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT U/S 143(3) AND IN PARA 2 OF HIS ORDER HAS NOTED THAT ASSESSEE HAD FILED FROM TI ME TO TIME THE REQUIRED DETAILS AND EXPLANATIONS AND HE HAS EXAMINED THE SA ME. I FIND THAT IN ASSESSMENT YEAR 2011-12 IN I.T.A. NO.741/LKW/2016 T HE HON'BLE TRIBUNAL VIDE ORDER DATED 24/08/2018 HAD DECIDED THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER: 9. NOW COMING TO ITA NO.741/LKW/2016, WE FIND THAT THE ASSESSING OFFICER IN THIS CASE OBSERVED THAT GR OSS PROFIT RATE HAS COME DOWN 11.60% FROM 12.34% AND THEREFORE HE REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND A PPLIED GROSS PROFIT RATE OF 12.50%. WE FIND THAT DURING A. Y. 2012- 13 IN THE CASE OF ASSESSEE ITSELF, THE ASSESSING OF FICER HAD REJECTED THE BOOKS OF ACCOUNTS AND HAD APPLIED GROS S PROFIT RATE OF 12.50% AS AGAINST 11.59% DECLARED BY THE AS SESSEE. THE ASSESSEE VIDE GROUNDS NO. 1 AND 2 IN A.Y. 2012- 13 HAD AGITATED REJECTION OF BOOKS OF ACCOUNT AND APPLICAT ION OF HIGHER G.P. RATE AND THE HON'BLE TRIBUNAL HAD ALLOW ED GROUND NO.1 AND 2 BY HOLDING AS UNDER: 9. WE HAVE PERUSED THE CASE RECORD, HEARD THE RIVAL CONTENTIONS AND CONSIDERED THE JUDICIAL I.T.A. NO. 564/LKW/2017 ASSESSMENT. YEAR:2013-14 4 PRONOUNCEMENTS PLACED BEFORE US. WE FIND THAT CASH BOOK AND LEDGER WERE PRODUCED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND THIS FACT IS NOT DISPUTED BY THE DEPARTMENT, AS IT IS ON RECORD. AL L THE PURCHASE BILLS ALONG WITH TCS CERTIFICATES IN SUPPO RT OF PURCHASES MADE BY THE ASSESSEE WERE ALSO PRODUCED BEFORE THE ASSESSING OFFICER. DAY-TO-DAY SALES MAD E AND ACCOUNTED FOR IN THE CASH BOOK AT THE END OF TH E DAY WERE ALSO BEFORE THE DEPARTMENT AND HAS PLACED BEFORE US IN THE PAPER BOOK. 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 ON THE GROUND THAT ASSESSEE HAS NOT MAINTAINED DAY-TO-DAY STOCK REGISTER AND SALES RECO RD. 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 SALES ARE RECORDED ON THE BASIS OF DAILY STATEMENTS. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DISCREPANCY IN THE QUANTITATIVE DETAILS OF PURC HASE OR SALES. IT IS ALSO THE CASE OF THE ASSESSEE THAT SALE PRICE IS DISPLAYED AT THE SHOP AND THERE CANNOT BE 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 GOVERNMENT. THE NATURE OF ASSESSEES BUSINESS IS SUCH THAT IT CANNOT MAINTAIN PROPER SALE BILLS. THEREFORE, IT WAS HELD BY THE CO-ORDINATE ITAT BENC H 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 RESU LTS DECLARED BY THE ASSESSEE SHOULD BE ACCEPTED. 11. IN THE CASE OF ITO, RANGE 3(1), GWALIOR 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 I.T.A. NO. 564/LKW/2017 ASSESSMENT. YEAR:2013-14 5 PROPER VOUCHERS SUPPORTING THE SALES. IN THIS CASE , IT WAS HELD BY THE CO-ORDINATE ITAT AGRA BENCH THAT WHEN THE BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE DEPARTMENT AND THERE IS NO SIGNIFICANT DEFECT IN TH E BOOKS OF ACCOUNT AND IN THE FACTUAL DETAILS OF THE CASE, THE GROSS PROFIT RATE DECLARED BY THE ASSESSEE HAS TO BE ACCEPTED. 12. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. PRAYAG WINES (SUPRA) HAS HELD THAT IT IS NOT NECESSARY THAT CASH MEMO IS REQUIRED TO BE ISSUED F OR 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 SALES 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 ALS O PRODUCED. THE SELLING PRICE WAS ALSO DISPLAYED IN F RONT OF EVERY SHOP OF THE ASSESSEE. ALL THE PURCHASES A RE DONE BY THE ASSESSEE ON THE BASIS OF LICENSE FEES A ND TCS CERTIFICATES, WHICH WERE ALSO NOT DISPUTED BY T HE 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 SHOPS. NEITHER THE ASSESSING OFFICER NOR T HE 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 L IKE 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 REJECTION OF THE BO OKS OF I.T.A. NO. 564/LKW/2017 ASSESSMENT. YEAR:2013-14 6 ACCOUNT AND ADOPTING THE G.P. RATE ON THE HIGHER SI DE 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. 10. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNA L IN THE CASE OF ASSESSEE ITSELF, WE ALLOW THE GROUND NO. 1 OF THE APPEAL. THE GROUNDS NO. 2 AND 3 WERE NOT PRESSED BY THE ASSESSEE, THEREFORE, THESE GROUNDS ARE DISMISSED AS NOT PRESSED. IN THE PRESENT YEAR ALSO THE ASSESSING OFFICER HAS REJECTED BOOKS OF ACCOUNT ON THE BASIS OF LOWER GROSS PROFIT RATES. THE FIND INGS OF ASSESSING OFFICER ARE REPRODUCED BELOW: 4.3.HERE IN THIS CASE, THE ASSESSEE HAS DECLA RED THE GROSS PROFIT RATE OF 12.07% FOR THIS YEAR ON THE TOTAL TU RNOVER. IN THE IMMEDIATELY PRECEDING YEAR I.E. A.Y.2012-13, THE IN COME WAS ESTIMATED ON THE SIMILAR GROUNDS ENHANCING THE GROS S PROFIT RATE FROM DECLARED G. P. RATE OF 11.59% TO 12.5%. THIS YEAR T HE GROSS PROFIT RATE HAS BEEN DECLARED AT 12.07%. CONSIDERING THE F ACTS OF THE CASE AS NARRATED IN PRECEDING PARAS AND GIVING JUSTICE T O THE ASSESSEE THE GROSS PROFIT RATE IS BEING ESTIMATED THIS YEAR ALSO @ 12.5%. THE DIFFERENCE IN THE DECLARED G.P. AND ESTIMATED G.P. COMES TO RS.13,55,715/-. THIS PROFIT WILL BE ADDED IN THE IN COME OF THE ASSESSEE OWING TO THE REASONS NARRATED ABOVE. THE REASONS FOR REJECTION OF BOOKS OF ACCOUNT ARE S AME AS IN I.T.A. NO.741 FOR ASSESSMENT YEAR 2011-12, THEREFORE, RESPECTFULL Y FOLLOWING THE JUDICIAL PRECEDENTS IN THE CASE OF THE ASSESSEE ITSELF, THE FIRST ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 5.1 NOW COMING TO SECOND ISSUE OF DEPOSIT OF RS.10, 00,00/- BY ONE OF THE MEMBERS OF THE ASSESSEE AOP, I FIND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT ONE NEW MEMBER SMT. SHAKUNTALA JAISWAL HAD INTRODUCED CAPITAL OF RS.10, 00,00/- IN CASH AND I.T.A. NO. 564/LKW/2017 ASSESSMENT. YEAR:2013-14 7 ASSESSEE WAS ASKED TO JUSTIFY THE SAME AND ON REPLY FILED BY THE ASSESSEE THE ASSESSING OFFICER OBSERVED THAT MEMBER HAD FILE D RETURN OF INCOME SHOWING INCOME OF RS.1,92,000/- ONLY AND HAD NOT FI LED ANY CASH FLOW STATEMENT TO JUSTIFY THE ACCUMULATION OF RS.10,00,0 0/- AND THEREFORE, THE ADDITION WAS MADE U/S 68 OF THE ACT. THE LEARNED C IT(A) UPHELD THE ADDITION BY HOLDING THAT PAN, ADDRESS AND ASSESSMEN T PARTICULARS WERE NOT FURNISHED BEFORE THE ASSESSING OFFICER. HOWEVER, W E FIND THAT COPY OF CONFIRMATION OF ACCOUNT ALONG WITH THE COPY OF ITRS FROM ASSESSMENT YEAR 2008-09 TO ASSESSMENT YEAR 2013-14 ARE PLACED ON PA GES 24 TO 29 OF THE PAPER BOOK. WE FURTHER FIND THAT HON'BLE M.P. HIGH COURT IN THE CASE OF CIT VS. METACHEM INDUSTRIES (SUPRA) HAS HELD AS UNDER: 'ONCE IT IS ESTABLISHED THAT THE AMOUNT HAS BEEN IN VESTED BY A PARTICULAR PERSON, BE HE A PARTNER OR AN INDIVIDUAL , THEN THE RESPONSIBILITY OF THE ASSESSEE IS OVER. WHETHER THA T PERSON IS AN INCOME-TAX PAYER OR NOT AND WHERE HE HAD BROUGHT TH IS MONEY FROM, IS NOT THE RESPONSIBILITY OF THE FIRM. THE MO MENT THE FIRM GIVES A SATISFACTORY EXPLANATION AND PRODUCES THE P ERSON WHO HAS DEPOSITED THE AMOUNT, THEN THE BURDEN OF THE FI RM IS DISCHARGED AND IN THAT CASE THAT CREDIT ENTRY CANNO T BE TREATED TO BE THE INCOME OF THE FIRM FOR THE PURPOSES OF IN COME-TAX. 5.2 I, THEREFORE, CONSIDERING THE TOTALITY OF THE F ACTS, AS DISCUSSED HEREIN ABOVE, AM OF THE VIEW THAT THE LEARNED CIT(A) WAS N OT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER. ACCORD INGLY, THE ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARN ED CIT(A) IS DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 07/12 /2018) SD/. ( T. S. KAPOOR ) ACCOUNTANT MEMBER DATED:07/12/2018 *SINGH I.T.A. NO. 564/LKW/2017 ASSESSMENT. YEAR:2013-14 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW