ACIT, Jaipur V. MADURAM &PARTY,RAJGARH GROUP, Jaipur

ITA 692/JPR/1998

• Counselvise Citation: 69223114 RSA 1998
• Duration Of Justice: 15 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 1997-1998
• Appeal Filed On: 25-11-1998
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: G M MEHTA
• Keywords: 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. 692/JP/1998 ASSTT. YEAR : 1997-98 THE A.C.I.T., VS. M/S MADURAM & PARTY CENTRAL CIRCLE-2, JAIPUR. (RAJGARH GROUP), A-38, KRISHNA NAGAR, LAL KOTHI, JAIPUR. PAN NO. - - (APPELLANT) (RESPONDENT) REVENUE BY : SHRI D.C. SHARMA, DR ASSESSEE BY : SHRI G.M. MEHTA. AR DATE OF HEARING : 26.05.2014 DATE OF PRONOUNCEMENT : 30.05.2014 ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE LD. CIT(A), JAIPUR DATED 24 TH AUGUST, 1998 PASSED FOR ASSESSMENT YEAR 1997-98. THE GRIEVANCE OF THE REVENUE IS THAT THE LD CIT(A) HAS ERRED IN SUSTAINING THE TRADING ADDITION AT RS. 2 LACS AGAINST AN ADDIT ION OF RS. 13,25,534/- IN COUNTRY LIQUOR ACCOUNT AND RS. 8,12,857/- IN IMFL/B EER ACCOUNT. 2. IN GROUND NO. 2, THE REVENUE FURTHER PLEADED THA T THE LD. CIT(A) HAS ERRED IN SUSTAINING DISALLOWANCE OUT OF VARIOUS EXP ENSES AT RS. 10,000/-. 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN AOP AND A LIQUOR CONTRACTOR. IT HAD OBTAINED LICENSE FOR SELLING COU NTRY LIQUOR, IMFL/BEER FOR RAJGARH AREA BY WAY OF A SUCCESSFUL BIDDING IN THE AUCTION CONDUCTED BY THE EXCISE DEPARTMENT. IT HAD FILED ITS RETURN OF INCOM E ON 31/10/1997 DECLARING AN INCOME OF RS. 45,03,789/-. THE CASE OF THE ASSES SEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE U/S 143(2) OF THE I.T. ACT, 1961 WAS ISSUED AND SERVED UPON THE ASSESSEE. ON AN ANALYSIS OF THE ACCOUNTS, THE LD. ASSESSING OFFICER WAS NOT SATISFIED WITH THE CORREC TNESS OF THE ACCOUNTS, THEREFORE, HE REJECTED THEM AND ESTIMATED THE INCOM E IN THE TRADING OF LIQUOR. HE MADE A TRADING ADDITION OF RS. 21,38,391/- . 4. ON APPEAL, THE LD. FIRST APPELLATE AUTHORITY CON CURRED WITH THE HIM WITH REGARD TO REJECTION OF ACCOUNT BUT DID NOT APP ROVE THE CONCLUSIONS OF THE ASSESSING OFFICER FOR ESTIMATING THE INCOME AND MAK ING AN ADDITION OF RS. 21,38,391/-. THE LD. CIT(A) HAS RESTRICTED THIS ADD ITION TO RS. 2.00 LACS. 5. DISSATISFIED WITH THE ORDER OF THE LD. CIT(A), T HE REVENUE CAME UP IN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL HAS DISMIS SED THE APPEAL OF THE REVENUE VIDE ORDER DATED 16/08/2004. ORDER OF THE T RIBUNAL WAS CHALLENGED BEFORE THE HONBLE HIGH COURT AND THE HONBLE HIGH COURT HAS REMITTED THE ISSUE WITH REGARD TO TRADING ADDITION BACK TO THE T RIBUNAL VIDE ITS JUDGMENT DATED 21/1/2014 PASSED IN THE CASE OF CIT VS. RAM S INGH & ORS. REPORTED IN 3 363 ITR PAGE 417. IN THIS WAY, THESE ARE THE APPEAL S AMONGST 83 APPEALS REMITTED BACK BY THE HONBLE HIGH COURT TO THE TRIB UNAL FOR READJUDICATION. 6. THE LD. D.R. RELIED UPON THE ORDER OF THE LD. AS SESSING OFFICER. 7. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. ADMITTEDLY, THE BOOKS OF THE ASSESSEE ARE NOT RELIABLE, THEY ARE REJECTED. THIS ACTION OF THE ASSESSING OFF ICER HAS BEEN UPHELD BY THE LEARNED CIT(APPEALS). THE ASSESSEE DID NOT CHAL LENGE REJECTION OF BOOK RESULTS BEFORE THE ITAT AND THE DISPUTE TRAVELLED T O THE HON'BLE HIGH COURT WAS WITH REGARD TO ESTIMATION OF INCOME AFTER REJEC TION OF BOOKS. THUS, THE NEXT QUESTION ARISES, IS WHAT SHOULD BE THE ESTIMAT ED ADDITION REQUIRED TO BE MADE BY THE ASSESSING OFFICER TO THE INCOME OF THE ASSESSEE. FOR THIS PURPOSE, SUB-SECTION (3) OF SECTION 145 CONTEMPLATE S THAT ASSESSING OFFICER MAKES AN ASSESSMENT IN THE MANNER PROVIDED IN SEC. 144 OF THE 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 D IRECTION ISSUED UNDER SUB-SECTION (2A) OF THAT SECTION ] OR 4 (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, A FTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, MAKE THE AS SESSMENT] OF THE TOTAL INCOME OR LOSS TO THE BEST OF HIS JUDGMENT AN D DETERMINE THE SUM PAYABLE BY THE ASSESSEE ON THE BASIS OF SUCH ASSESS MENT. PROVIDED THAT SUCH OPPORTUNITY SHALL BE GIVEN BY TH E ASSESSING OFFICER BY SERVING A NOTICE CALLING UPON THE ASSESSEE TO SH OW S\CAUSE, ON A DATE AND TIME TO BE SPECIFIED IN THE NOTICE, WHY TH E 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 S ECTION 142 HAS BEEN ISSUED PRIOR TO THE MAKING OF AN ASSESSMENT UNDER T HIS SECTION.] (2) THE PROVISIONS OF THIS SECTION AS THEY STOOD IM MEDIATELY BEFORE THEIR AMENDMENT BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 94 OF 1988), SHALL APPLY TO AND IN RELATION TO ANY ASS ESSMENT FOR THE ASSESSMENT YEAR COMMENCING ON THE IST DAY OF APRIL, 1988, OR ANY EARLIER ASSESSMENT YEAR AND REFERENCES IN THIS SECT ION TO THE OTHER PROVISIONS OF THIS ACT SHALL BE CONSTRUED AS REFERE NCES TO THOSE PROVISIONS AS FOR THE TIME BEING IN FORCE AND APPLI CABLE TO THE RELEVANT ASSESSMENT YEAR.} 8. A BARE PERUSAL OF THIS SECTION WOULD SUGGEST THA T IN ORDER TO ESTIMATE INCOME, LEARNED ASSESSING OFFICER HAS TO EXERCISE H IS DISCRETION WHICH SHOULD BE IN CONSONANCE WITH BEST OF HIS JUDGMENT. HON'BLE HIGH COURT 5 WHILE REMANDING THIS APPEAL TO THE ITAT HAS CONSIDE RED 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 CONCE RNED SHOULD MAKE A HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN TH E BEST JUDGMENT ASSESSMENT AND SHOULD NOT ACT ARBITRARILY. IT IS EQ UALLY TRUE THAT ASSESSEE HIMSELF TO BE BLAMED AS HE DID NOT SUBMIT PROPER ACCOUNTS. 9. APART FROM THE ABOVE PROPOSITION, WE ARE CONSCI OUS OF THE FACT THAT IN VARIOUS AUTHORITATIVE PRONOUNCEMENTS, IT HAS BEEN P ROPOUNDED THAT IN MAKING A BEST JUDGMENT ASSESSMENT, THE ASSESSING OF FICER MUST NOT ACT DISHONESTLY OR VINDICTIVELY OR CAPRICIOUSLY. HE MUS T MAKE WHAT HE HONESTLY BELIEVE TO BE A FAIR ESTIMATE OF THE PROPER FIGURE OF ASSESSMENT AND FOR THIS PURPOSE HE MUST BE ABLE TO TAKE INTO CONSIDERATION LOCAL KNOWLEDGE, REPUTATION OF THE ASSESSEE ABOUT HIS BUSINESS, 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 LEGALLY. JUDGMENT DOES NOT DEPEND UPON THE ARBITRARY, CAPRIC E OF AN ADJUDICATOR, BUT ON SETTLED AND INVARIABLY PRINCIPLES OF JUSTICE. TH US, IN A BEST JUDGMENT, EVEN IF, THERE IS AN ELEMENT OF GUESS WORK, IT SHOULD NO T BE A WILD ONE, BUT SHALL HAVE REASONABLE NEXUS TO THE AVAILABLE MATERIAL AND CIRCUMSTANCES OF EACH ASSESSEE. APPRAISING OURSELVES WITH THESE FUNDAMENT ALS, LET US CONSIDER THE 6 FACTORS DISCUSSED BY THE ASSESSING OFFICER IN THE A SSESSMENT WHILE MAKING THE LUMP SUM ADDITION. 10. DURING THE COURSE OF HEARING, WE HAVE DIRECTED THE LEARNED COUNSEL FOR THE ASSESSEE TO COMPILE THE DETAILS IN TUBULAR FORM EXHIBITING THE TURNOVER ACHIEVED BY THE ASSESSEE; G.P. DECLARED; SHORT LICE NSE FEES PAID BY THE ASSESSEE ETC.. HE COMPILED THE DETAILS AND SUBMITTE D TO US. THE DETAILS READ AS UNDER:- S.NO. ISSUES/DETAILS/QUERY 1 LIQUOR CONTRACT FOR THE AREA RAJGARH 2 PERIOD OF LIQUOR CONTRACT 01 - 04 - 1996 TO 31.03.1997 3 RETURNED INCOME 4,503,789.00 4 ASSESSED INCOME 6,771,150.00 5 TURNOVER ACHIEVED COUNTRY LIQUOR 29,004,940.00 IMFL/BEER RETAIL 24,800,423.00 6 GROSS PROFIT (AMOUNT & %) % COUN TRY LIQUOR 7,773,608.00 26.80 IMFL/BEER RETAIL 2,773,002.00 11.18 7 SHORT LICENSE FEE COUNTRY LIQUOR 1,505,696.00 IMFL/BEER RETAIL 2,493,455.00 8 GP AFTER SHORT LICENSE FEE % COUNTRY LIQUOR 6,267,912.00 21.61 IMFL/BEER RETAIL 279,547.00 1.13 7 9 NET PROFIT (BEFORE SHORT LICENSE FEE) 8,502,940.00 15.80 10 NET PROFIT (AFTER SHORT LICENSE FEE) 4,503,789.00 8.37 11 TURNOVER/GP ADOPTED BY AO TURNOVER % COUNTRY LIQUOR 30,330,472.00 30.00 IMFL/BEER RETAIL 25,613,280.00 14.00 12 ADDITIONS MADE BY AO COUNTRY LIQUOR 1,325,534.00 IMFL/BEER RETAIL 812,857.00 13 ADDITIONS SUSTAINED BY CIT(A) COUNTRY LIQUOR IMFL/BEER RETAIL 200,000.00 ON AN ANALYSIS OF THE ABOVE DETAILS, WE FIND THAT T HE ASSESSEE HAS TO PAY A SUBSTANTIAL AMOUNT FOR THE SAKE OF SHORT LICENSE FE ES, WHICH IS A STATUTORY LEVY REQUIRED TO BE PAID BY A LIQUOR CONTRACTOR FOR NOT LIFTING THE MINIMUM QUANTITY AGREED UPON IN THE AGREEMENT WHILE TAKING LICENSE. THE ASSESSEE HAS ALSO SHOWN RETURNED INCOME OF RS. 45,03,789/-, ITS TURNOVER IN CONTRY LIQUOR IS RS. 2,90,04,940/- AND IT HAS PAID SHORT LICENSE FEES OF RS. 15,05,696/-. THE G.P. AFTER SHORT LICENSE FEES IS 21.61% IN THE COUN TRY LIQUOR ACCOUNT, WHICH IS NORMAL. THE MAJOR PORTION OF THE G.P. HAS BEEN W IPED OUT ON ACCOUNT OF SHORT LICENSE FEES. THEREFORE, LOOKING INTO THE FAC TS AND CIRCUMSTANCES OF THE 8 CASE, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS RI GHTLY RESTRICTED THE ADDITION OF RS. 2.00 LACS. 11. IN VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT FIN D ANY MERIT IN THIS APPEAL OF THE REVENUE, IT IS DISMISSED. 12. THE ORDER PRONOUNCED IN THE OPEN COURT ON 30/5/ 2014. SD/- SD/- ( R.C. SHARMA ) ( RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30/05/2014 *RANJAN COPY FORWARDED TO: 1. THE APPELLANT- THE A.C.I.T., CENTRAL CIRCLE-2, JAIPUR. 2. THE RESPONDENT- M/S MADURAM & PARTY, JAIPUR. 3. THE CIT 4. CIT(APPEALS) 5. THE DR 6. GUARD FILE (ITA NO. 692/JP/1998) BY ORDER A.R., JAIPUR.