ACIT, Jaipur V. MANGAT RAM BHAGIRATH MAL & PARTY, Jaipur

ITA 694/JPR/1998

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78093 (ITAT-JAIPUR)
• Duration Of Justice: 16 year(s) 4 month(s) 1 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: 1996-1997
• Appeal Filed On: 28-01-1998
• 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. 694/JP/1998 ASSTT. YEAR : 1996-97 ASSISTANT CIT, VS. M/S.MANGAT RAM BHAGIRATH MAL & PARTY CENTRAL CIRCLE-2, (BHADRA GROUP), JAIPUR. JAIPUR. PAN NO. - - (APPELLANT) (RESPONDENT) REVENUE BY : SHRI D.C. SHARMA, DR ASSESSEE BY : SHRI GM 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 LEARNED CIT(APPEALS) DATED 24.08.1998 PASSED FOR ASSESSMENT YEAR 1996-97 . THE GRIEVANCE OF THE REVENUE IS THAT LEARNED CIT(APPEALS) HAS ERRED IN RESTRICTING THE TRADING ADDITION IN COUNTRY LIQUOR /IMFL/BEER TRADING AT RS. 2 LACS AS AGAINST RS.14,8 7,738 MADE BY THE ASSESSING OFFICER. 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 ON RETAIL FOR BHADRA AREA FROM EXCISE DEPARTMENT OF RAJASTHAN GOVERNMENT . IT HAD FILED ITS RETURN OF INCOME DECLARING AN INCOME OF RS.2,10,110 ON 29 TH NOVEMBER, 1996. LEARNED ASSESSING OFFICER WAS NOT SATISFIED WITH THE BOOKS OF ACCOUNTS MAINT AINED BY THE ASSESSEE, THEREFORE, HE REJECTED THE BOOK RESULTS AND MADE A TRADING ADDITI ON OF RS.16,97,848. HE ALSO DISALLOWED 20% OF THE EXPENSES DEBITED BY THE ASSESSEE UNDER V ARIOUS HEADS. IN THIS WAY, AGAINST AN 2 INCOME OF RS.2,10,110, LEARNED ASSESSING OFFICER H AD DETERMINED THE TAXABLE INCOME OF THE ASSESSEE AT RS.19,75,730 VIDE ASSESSMENT ORDER DATED 06.05.1998. 3. ON APPEAL, LEARNED CIT(APPEALS) HAS RESTRICTED T HE TRADING ADDITION TO RS.2 LACS AND DISALLOWANCE AT RS.20,000 OUT OF VARIOUS MISCEL LANEOUS EXPENSES DISALLOWED BY THE ASSESSING OFFICER AT RS.67,772. 4. 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 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, 3 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 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. 4 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 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. DURING THE COURSE OF HEARING, WE HAD DIRECTED TH E LEARNED COUNSEL FOR THE ASSESSEE TO PLACE ON RECORD THE DETAILS IN TABULAR FORM EXHI BITING THE TURNOVER, G.P. AND G.P. ADOPTED BY THE ASSESSING OFFICER ETC. HE PLACED ON RECORD THESE DETAILS WHICH READ AS UNDER: S.NO. ISSUES/DETAILS/QUERY 1 LIQUOR CONTRACT FOR THE AREA BHADRA 2 PERIOD OF LIQU OR CONTRACT 01 - 04 - 1995 TO 31.03.1996 3 NET PROFIT AS PER PROFIT & LOSS A/C 208,310.00 4 RETURNED INCOME 210,110.00 5 ASSESSED INCOME 5 1,975,730.00 6 TURNOVER ACHIEVED COUNTRY LIQUOR 41,956,666.00 IMFL/BEER RETAIL 21,425,122.00 7 GROSS PROFIT (AMOUNT & %) % COUNTRY LIQUOR 26,556,284.00 63.29 IMFL/B EER RETAIL 3,079,672.00 14.37 8 SHORT LICENSE FEE COUNTRY LIQUOR 18,310,350.00 IMFL/BEER RETAIL 8,890,893.00 9 GP AFTER SHORT LICENSE FEE % COUNTRY LIQUOR 8,245,934.00 19.65 IMFL/BEER RETAIL (5,811,221.00) (27.12) 10 NET PROFIT (BEFORE SHORT LICENSE FEE) 27,409,553.00 43.25 11 NET PROFIT (AFTE R SHORT LICENSE FEE) 208,310.00 0.33 12 TURNOVER/GP ADOPTED BY AO TURNOVER % COUNTRY LIQUOR 42,842,727.00 64.00 IMFL/BEER RETAIL 22,236,910.00 17.50 13 TRADING INCOME ESTIMATED BY LD. AO COUNTRY LIQUOR 886,061.00 IMFL/BEER RETAIL 811,787.00 1,487,738.00 1,697,848.00 (TRADING ADDITIONS MADE BY LD. AO) LESS : BY ASSESSEE 210,110.00 6 14 ADDITIONS SUSTAINED BY CIT(A) COUNTRY LIQUOR & IMFL/BEER 200,000.00 9. ON DUE CONSIDERATION OF THESE DETAILS AS WELL AS THE CONTENTIONS OF THE LEARNED DR, WE ARE OF THE VIEW THAT ASSESSEE HAS DISCLOSED G.P. AT 63.29% IN IMFL/BEER ACCOUNT. ASSESSEE HAS TO PAY A SHORT LICENSE FEE OF RS.1,83, 10,350 IN COUNTRY LIQUOR ACCOUNT AND RS.88,90,893 IN IMFL/BEER ACCOUNT, WHICH IS ALMOST TWO CRORES OF RUPEES. THIS PAYMENT HAS WIPED OUT THE MAJOR PORTION OF THE PROFIT EARNE D BY THE ASSESSEE. IT IS A TRADING EXPENSES AND LEARNED ASSESSING OFFICER HAS IGNORED THIS ASPECT. IT GOES TO REDUCE THE NET PROFIT EARNED BY THE ASSESSEE BECAUSE IT IS A STATU TORY LEVY BY THE EXCISE DEPARTMENT. IN THE LIGHT OF THE DETAILS, EXTRACTED SUPRA, WE HAVE EXAMINED THE ISSUE WITH ALL POSSIBLE ANGLES BUT WE WERE AT A LOSS TO UNDERSTAND THE LOGI C ASSIGNED BY THE ASSESSING OFFICER WHILE MAKING THE ADDITION. IN PARAGRAPH NO. 4 OF TH E ASSESSMENT ORDER, LEARNED ASSESSING OFFICER HAS COMPUTED THE AD HOC DISALLOWA NCE BUT HAS NOT REFERRED ANY DETAILS OR FACTS OF ANY SIMILARLY SITUATED ASSESSEE WHO HAS SHOWN A HIGHER G.P. LEARNED FIRST APPELLATE AUTHORITY HAS EXERCISED HER DISCRETION WH ICH SHOULD NOT BE INTERFERED BY THE SECOND APPELLATE AUTHORITY UNLESS IT IS ESTABLISHED THAT EXERCISE OF SUCH DISCRETION IS BASED ON EXTRANEOUS REASONS OR IT IS NOT IN CONSONANCE WI TH THE FACTS ON RECORD. THEREFORE, WE DO NOT FIND ANY MERIT IN THIS APPEAL, IT IS DISMISS ED. 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* 7 COPY FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. CIT(APPEALS) 5. THE DR