The ACIT, 2(1), Bhopal V. M/s Surewin Marketing Pvt. Ltd., Bhopal

ITA 605/IND/2010

• Counselvise Citation: 60522714 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 04-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: R N GUPTA
• Keywords: Rejection of books of accounts; Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AAFCS4043M I.T.A.NO. 605 / IND /20 10 A.Y. : 2007 - 08 ACIT, M/S.SUREWIN MARKETING PVT.LTD., 2(1), VS BHOPAL. APPEL LANT RESPONDENT APPELLANT BY : SHRI ARUN DEWAN, SR. DR RESPONDENT BY : SHRI R.N.GUPTA, CA DATE OF HEARING : 1 9 .12.2011 DATE OF PRONOUNCEMENT : 21 .12.2011 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 20.8.2010 FOR THE FOR THE ASSESSMEN T YEAR 2007-08. 2. THE ONLY GRIEVANCE OF THE REVENUE RELATES TO DELETI ON OF ADDITION MADE BY THE ASSESSING OFFICER BY APPLYING THE NET -: 2: - 2 PROFIT RATE OF 3 % ON ESTIMATED SALES OF RS. 16.82 CRORES BY INVOKING PROVISIONS OF SECTION 145(3) OF THE INCOME -TAX ACT, 1961. 3. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAG ED IN RETAIL SALE OF INDIAN MADE FOREIGN LIQUOR (IMFL), B EER AND COUNTRY LIQUOR IN VIDISHA, BHOPAL AND BILASPUR DIST RICTS. DURING THE YEAR, THE ASSESSEE HAD SHOWN TOTAL SALES OF RS. 13.76 CRORES, WHICH GAVE A NET PROFIT RATE OF 1.2 % . BY OBSERVING THAT SALE OF THE ASSESSEE WAS NOT VERIFIA BLE, THE AO REJECTED THE BOOKS OF ACCOUNTS BY APPLYING THE PROV ISIONS OF SE 145(3) AND APPLIED NET PROFIT RATE OF 3 % BY ESTIM ATING SALES AT RS. 16.82 CRORES. 4. BY THE IMPUGNED ORDER, THE LD. CIT(A) HELD THAT THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT , WHICH WERE REGULARLY MAINTAINED AND NOT DISTURBING THE DECLARE D RESULTS BY ENHANCING THE NET PROFIT RATE, FOLLOWING WAS THE PRECISE OBSERVATION OF THE CIT(A) :- 17. I HAVE CONSIDERED THE FACTS OF THE CASE. THE APPELLANT WAS GRANTED THE LICENSE FOR SALE OF COUNT RY LIQUOR, IMFL AND BEER FOR THE PERIOD OF ONE YEAR. -: 3: - 3 PERUSAL OF THE AUDIT REPORT REVEALS THAT THERE IS N O OPENING OR CLOSING STOCK OF LIQUOR. THE APPELLANT HAS MAINTAINED REGULAR BOOKS OF ACCOUNT IN THE COURSE OF ITS BUSINESS WHICH HAVE BEEN DULY AUDITED. THE AO HAS NOT POINTED OUT ANY DISCREPANCY IN THE QUANTITATIVE DETAILS OF SALES OR PURCHASES MADE BY THE ASSESSEE. PURCHASE OF LIQUOR WAS CARRIED OUT ON THE BASIS OF PERMIT GRANTED BY EXCISE AUTHORITIES. NO ADVERSE FINDINGS HAVE BEEN MADE IN REGARD TO EXPENSES DEBITED TO THE PROFIT AN D LOSS ACCOUNT. THE ONLY REASON FOR REJECTING THE BOOKS OF ACCOUNT IS THAT THE APPELLANT DID NOT MAINTAIN CASH VOUCHERS IN RESPECT OF SALES MADE, WHICH IN MY OPINION, CANNOT JUSTIFY REJECTION OF BOOKS OF ACCOUNT WITHOUT ANY FURTHER CORROBORATIVE EVIDENCE. THE AO HAS NOT NEGATED THE FACT THAT DAIL Y SALES EFFECTED WERE RECORDED IN THE BOOKS MAINTAINED BY THE ASSESSEE. THE AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THAT THE APPELLANT HAD INDULGED IN SALES OUTSIDE OF THE BOOK S -: 4: - 4 OF ACCOUNT, OR THAT THE SALES WERE SUPPRESSED BY TH E ASSESSEE, OR THAT THERE IS ANY DISCREPANCY IN THE STOCK. IN THIS CONTEXT IT WOULD BE RELEVANT TO NOTE THAT THE ASSESSEES BUSINESS OPERATIONS ARE SUBJECT TO REGULAR INSPECTION BY EXCISE AUTHORITIES. THE LEARNED COUNSEL HAS ALSO EXPLAINED AS TO HOW THE CHANGE IN EXCISE POLICY HAS RESULTED IN STIFF COMPETITION IN THIS LINE OF BUSINESS WHICH HAS ADVERSELY AFFECTED PROFIT MARGINS. FOR THIS REASON ALSO, RELIANCE BY THE ASSESSING OFFICER ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF GENDAMAL HAZARIMAL MAY NOT BE VERY RELEVANT, OWING TO THE CHANGED CIRCUMSTANCES. IN FACT THIS DECISION DOES NOT ADVANCE THE CAUSE OF THE AO AS IT IS ACTUALLY IN FAVOUR OF THE ASSESSEE. NO DEFECT IN THE BOOKS OF ACCOUNT HAVE BEEN POINTED OUT BY THE ASSESSING OFFICER WHICH WOULD JUSTIFY INVOKING THE PROVISIONS OF SECTION 145(3). THE FACTS OF THE APPELLANTS CASE ARE SQUARELY COVERED BY THE DECISION OF THE I.T.A.T. AGRA BENCH IN THE CASE OF -: 5: - 5 LAXMINARAYAN RAMASWAROOP SHIVHARE REPORTED IN 123 TTJ 241, WHERE IT HAS BEEN HELD THAT REJECTION OF BOOKS OF ACCOUNT MERELY ON THE BASIS THAT THE ASSESSEE DOES NOT MAINTAIN CASH VOUCHERS IS NOT JUSTIFIED. I AM THEREFORE OF THE VIEW THAT THE AO W AS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT WHI CH WERE REGULARLY MAINTAINED, AND IN DISTURBING THE DECLARED RESULTS BY ENHANCING THE NET PROFIT . THE ADDITION MADE IS ACCORDINGLY DELETED AND THE AO IS DIRECTED TO ACCEPT THE RESULTS DECLARED BY THE APPELLANT. 5. AGGRIEVED BY THE ABOVE ORDER, THE REVENUE IS IN FUR THER APPEAL BEFORE US. WE HAVE CONSIDERED RIVAL CONTENTI ONS. FROM THE RECORD, WE FOUND THAT DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, THE ASSESSEE HAS PRODUCED ITS ENTIRE B OOKS OF ACCOUNT, WHEREIN AO HAS NOT POINTED OUT ANY DISCREP ANCY IN THE QUANTITATIVE DETAILS OF SALES AND PURCHASES MAD E BY THE ASSESSEE. ONLY ON THE PLEA THAT ASSESSEE HAS NOT IS SUED AND KEPT COPY OF SALES BILLS, HE REJECTED THE BOOKS OF ACCOUNT AND APPLIED NET PROFIT RATE OF 3 %. THE LD. CIT(A) HAS OBSERVED THAT -: 6: - 6 PURCHASE OF LIQUOR WAS CARRIED OUT ON THE BASIS OF PERMIT GRANTED BY THE EXCISE AUTHORITIES AND NO ADVERSE FI NDING HAS BEEN GIVEN BY THE ASSESSING OFFICER. THE LD. CIT(A) ALSO OBSERVED THAT AO HAS NOT NEGATED THE FACT THAT DAIL Y SALES EFFECTED WERE RECORDED IN THE BOOKS MAINTAINED BY T HE ASSESSEE AND NOTHING WAS BROUGHT ON RECORD BY THE A SSESSING OFFICER TO PROVE THAT THE ASSESSEE HAS INDULGED ANY SALES OUTSIDE THE BOOKS OF ACCOUNT OR THAT THE SALES WERE SUPPRESSED BY THE ASSESSEE OR THAT THERE IS ANY DISCREPANCY IN THE STOCK. HE FURTHER OBSERVED THAT THE ASSESSEES BUSINESS OP ERATIONS ARE SUBJECT TO REGULAR INSPECTION BY THE EXCISE AUT HORITIES THAT THERE WAS CHANGE IN THE EXCISE LAW POLICY, WHICH RE SULTED INTO STEEP COMPETITION IN THE LINE OF BUSINESS WHICH HAS ALREADY EFFECTED PROFIT MARGIN. AFTER GIVING ALL THESE FIND INGS, HE HAS DELETED NOT ONLY ESTIMATION OF GROSS PROFIT AT HIGH ER RATE, BUT ALSO ADDITION MADE ON ACCOUNT OF HIGHER SALES. INSP ITE OF THESE FINDINGS THE FACT THAT THE SALES OF THE ASSESSEE WA S UNVERIFIABLE REMAINED IN RECORD. ONLY ON THE BASIS OF SALES FIGU RES THE ACCURACY OF PROFIT RATE DECLARED BY THE ASSESSEE CA N BE VERIFIED. IN ABSENCE OF VERIFIABLE SALES FIGURES, ONE HAVE TO GO ON -: 7: - 7 ESTIMATION KEEPING IN VIEW THE PROFIT EARNED BY THE ASSESSEE ENGAGED IN SIMILAR TRADE VIS--VIS TOTALITY OF FACT S AND CIRCUMSTANCES OF THE CASE. THEREFORE, CONSIDERING T HE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE MODIFY B OTH THE ORDERS OF THE LOWER AUTHORITIES AND DIRECT THE AO T O APPLY NET PROFIT RATE OF 1.5 % IN PLACE OF NET PROFIT RATE OF 1.25 % AS SHOWN BY THE ASSESSEE. WE DIRECT ACCORDINGLY. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 21 ST DECEMBER, 2011. SD/ - SD/ - (JOGINDER SINGH ) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :21 ST DECEMBER, 2011. CPU* 2012