DCIT, Jaipur V. MAHENDRA SINGH BHANDARI, BHARATPUR

ITA 705/JPR/1998

• Counselvise Citation: 70523114 RSA 1998
• Duration Of Justice: 15 year(s) 7 month(s) 19 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: 11-10-1998
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: S P SINGHAL
• Section: 143(3); 145; 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI RAJ PAL YADAV AND SHRI R.C. SHARMA) ITA NO. 705/JP/1998 ASSESSMENT YEAR : 1996-97 THE ACIT VS. M/S. MAHENDRA SINGH BHANDARI CENTRAL CIRCLE- 2 ROOP NARAIN & PARTY( DEEG GROU P) JAIPUR BHARATPUR (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI D.C. SHARMA ASSESSEE BY : SHRI S.P. SINGHAL DATE OF HEARING: 26-05-2014 DATE OF PRONOUNCEMENT: 30-05-2014 ORDER PER R.C. SHARMA, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST ORD ER OF THE LD. CIT(A) DATED 26-08-1998 FOR THE ASSESSMENT YEAR 1996-97, I N THE MATTER OF ORDER PASSED U/S 143(3) OF THE I.T. ACT, 1961. 2.1 AT THE OUTSET, IT IS BEING BROUGHT ON RECORD TH AT THIS APPEAL WAS DECIDED BY THE TRIBUNAL VIDE ITS ORDER DATED 20-10- 2004. AGAINST THE ORDER OF THE TRIBUNAL, REVENUE APPROACHED TO THE HON'BLE HIGH COURT, AND THE HON'BLE HIGH COURT VIDE ITS ORDER DATED 21-01-2014 SET ASIDE THE ORDER OF THE TRIBUNAL FOR DECIDING AFRESH AND DENOVO THE ISSUE O F TRADING ADDITION MADE 2 AFTER INVOKING THE PROVISION OF SECTION 145(3) OF T HE ACT IN ACCORDANCE WITH LAW. THE HON'BLE HIGH COURT HAS ALSO DIRECTED ITAT TO DECIDE THESE APPEALS EXPEDITIOUSLY NOT LATER THAN 06 MONTHS FROM THE DAT E PARTIES ARE CALLED TO PUT THEIR APPEARANCE BEFORE ITAT. IN ACCORDANCE WITH DI RECTION OF HON'BLE HIGH COURT, THIS APPEAL WAS AGAIN FIXED AND HEARD ON MER IT AND ARE DECIDED AFRESH IN THE FOLLOWING MANNER. 2.2 THE RIVAL CONTENTIONS HAVE BEEN HEARD AND RECOR DS PERUSED. THE ASSESSEE HAD OBTAINED LICENSE FOR SELLING COUNTRY L IQUOR AND IMFL/BEER FOR DEEG, NADBAI AND KAMA AREA BY WAY OF SUCCESSFUL BID DING IN THE AUCTION/ TENDER FLOATED BY THE EXCISE DEPARTMENT. THE AOP IS REQUIRED TO PAY THE TENDERED AMOUNT BY PURCHASING GOODS EQUIVALENT THER ETO. IN CASE OF FAILURE, IT HAS TO DEPOSIT THE SHORT LICENSE FEE. THE COUNTR Y LIQUOR IS PROVIDED FROM THE DEPOTS OF THE RAJASTHAN STATE GANGANAGAR SUGAR MILLS LTD. WHILE THE IMFL/BEER IS OBTAINED FROM THE DISTILLERIES/ WHOLES ELLERS AGAINST THE PERMIT ISSUED BY THE EXCISE DEPARTMENT. THE SALE PRICE IS HOWEVER NOT FIXED BY THE EXCISE DEPARTMENT. ON EXAMINATION OF THE BOOKS OF A CCOUNT AND OTHER DETAILS, THE FOLLOWING FACTS HAVE EMERGED OUT. THE ASSESSEE HAD DRAWN UP SEPARATE TRADING ACCOUNT IN RESPECT OF DEEG, NADBAI AND KAMA GROUPS. IN DEEGA AREA ON SALES OF IMFL/BEER AND COUNTRY LIQUOR AMOUNTED TO RS. 1,57,62,305/- ON WHICH GROSS PROFIT HAS BEEN DECLAR ED AT RS. 59,88,249/- WHICH GIVE A PROFIT RATE OF 37.99%. IN NADBAI AREA SALES OF COUNTRY LIQUOR AS 3 WELL AS IMFL/BEER AMOUNTED TO RS. 1,42,51,261/- ON WHILE GROSS PROFIT OF RS. 48,80,106/- HAS BEEN DECLARED GIVING GROSS PROF IT RATE OF 34.24% AND IN KAMA PAHADI AREA ON SALES OF RS. 1,47,08,489/- GROS S PROFIT HAS BEEN DECLARED AT RS. 55,25,657/- GIVING GROSS PROFIT RAT E OF 37.56%. AS STATED EARLIER, THE ASSESSEE HAS NOT PRODUCED SALE VOUCHER S OR ANY OTHER SUPPORTING MATERIAL AND AS SUCH THE CORRECTNESS OF THE TRADING RESULTS CAN NOT BE VERIFIED. ACCORDINGLY, THE AO REJECTED TRADING RESULTS BY INV OKING PROVISION OF SECTION 145(3) OF THE ACT AND THEREAFTER BY APPLYIN G GROSS PROFIT RATE ON 39% ON ESTIMATED SALES OF RS. 4.64 CRORES MADE AN ADDIT ION OF RS. 17,17,359/-. 2.3 BY THE IMPUGNED ORDER, THE LD. CIT(A) RESTRICTE D THE ADDITION TO RS. 1.00 LAC AFTER HAVING FOLLOWING OBSERVATIONS. THE FACTS OF THE CASE OF HAVE BEEN CONSIDERED. TH E ITAT AND VARIOUS CIT(A) HAVE BEEN UPHOLDING THE INV OKING OF PROVISION OF SECTION 145 IN RESPECT OF LIQUOR CASE S WHERE SALES VOUCHERS WERE NOT MAINTAINED. HOWEVER, NO BASIS OR COMPARABLE CASES HAVE BEEN QUOTED BY THE AO FOR HIS ESTIMATE OF SALES AND GROSS PROFIT RATE. ON THE OTHER HAND, THE APPELLANT HAS CITED NUMBER OF CASES WHERE THE GROSS PROFIT RA TE WAS MUCH LOWER. IT HAS BEEN NOTED THAT IN SIMILAR CASES AND IN THE CASE OF APPELLANT IN EARLIER YEARS, A LUMP SUM ADDITION HAS BEEN MADE/ UPHELD BY THE CIT(A) TO COVER UP ANY POSSIBLE LEAKA GE OF REVENUE AS THE SALES VOUCHERS WERE NOT AVAILABLE. C ONSIDERING THESE FACTS AND THE FACT THAT THE GROSS PROFIT RATE FOR THE PRESENT A.Y. WAS BETTER THAN THE EARLIER YEARS, IN MY VIEW, A LUMP SUM ADDITION OF RS. 1,00,000/- WILL BE JUST AND PROPER. 4 2.4 AGAINST THE ABOVE ORDER OF THE LD. CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 2.5 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FO UND FROM THE RECORD THAT THE ASSESSEE IS A RETAIL TRADE OF COUNTRY LIQU OR, IMFL/BEER IN DEEG. THIS IS THE IST YEAR OF ASSESSEE'S BUSINESS. THE GROSS P ROFIT RATE DECLARED BY THE ASSESSEE IS AS UNDER:- KIND OF LIQUOR TURNOVER GROSS PROFIT GROSS PROFI T RATE COUNTRY LIQUOR , IMFL/BEER 44722055 16394012 36.65% THE AO REJECTED THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT FOR THE REASONS MENTIONED AT PAGE 2 PARA 3 OF THE ASSESSMENT ORDER THAT SALE IS NOT VERIFIABLE AND THEREFORE, MADE TRADING ADDITION OF RS. 17,17,3 58/-BY APPLYING A HIGHER GROSS PROFIT RATE AS UNDER:- KIND OF LIQUOR SALE ESTIMATED GROSS PROFIT RATE APPLIED GROSS PROFIT ESTIMATED GROSS PROFIT DECLARED ADDITION MADE SHORT LICENCE FEE COUNTRY LIQUOR , IMFL/BEER 46439413 39% 18111371 16394012 1717359 13450892 THE AO HAS APPLIED THE PROVISION OF SECTION 145(3) OF THE ACT. THERE IS NO DISPUTE THAT ONCE THE BOOKS OF ACCOUNT ARE REJECTE D, THE ASSESSMENT IS TO BE FRAMED U/S 144 OF THE ACT. AS PER OUR CONSIDERED VI EW, BEST JUDGMENT ASSESSMENT IS NOT A PROVISION TO PENALIZE THE ASS ESSEE, BUT IS A MACHINERY 5 PROVISION TO ENABLE THE REVENUE TO ASSESS A PERSON WHEN SITUATION WARRANTS SUCH AN ASSESSMENT. THE ORDER U/S.144 IS TO BE MAD E TO THE BEST OF THE JUDGMENT OF THE ASSESSING OFFICER WHICH MEANS, THE ORDER HAS TO BE RATIONAL AND IS TO BE BEST ON AN HONEST GUESS WORK FOR WHICH SOME VALID BASIS IS AVAILABLE TO THE ASSESSING OFFICER. THE ORDER INV OLVES EXERCISE OF JUDGMENT BY THE OFFICER. A FAIR ESTIMATION OF I NCOME HAS TO BE MADE, THE ASSESSING OFFICER SHOULD TAKE INTO CONSIDERATION TH E TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE IN ADDITION TO PROPER EV ALUATION OF THE MATERIAL FURNISHED BY THE ASSESSEE AND COLLECTED BY HIM BY H IS OWN EFFORTS. WHERE BEST JUDGMENT ASSESSMENT POWER HAS BEEN CONFERRE D, THE LIMITS OF THE POWER ARE IMPLICIT IN THE EXPRESSION BEST OF HIS JUDGMENT ASSESSMENT . THE JUDGMENT IS VITAL TO DECIDE THE MATTER WITH W ISDOM, TRULY AND LEGALLY. JUDGMENT DOES NOT DEPEND UPON THE ARBITRARY CAPRICI OUS OF THE ASSESSING OFFICER, BUT ON SETTLED AND INVARIABLE PRINCIPLE OF JUSTICE. THOUGH THERE IS AN ELEMENT OF GUESS WORK IN BEST JUDGMENT ASSESSMENT , IT SHALL NOT BE WILD ONE, BUT SHALL HAVE REASONABLE NEXUS TO THE AVAILAB LE MATERIAL AND CIRCUMSTANCES OF EACH CASE. WHILE ESTIMATING THE G ROSS PROFIT, THE ASSESSING OFFICER SHOULD BE FAIR & REASONABLE AND S HOULD KEEP INTO ACCOUNT THE TURNOVER AND THE GROSS PROFIT OF EARLIER YEARS ALONGWITH ALL THE FACTS AND CIRCUMSTANCES OF THE CASE. BY REJECTING BOOK RESU LT, THE ASSESSING OFFICER 6 DOES NOT GET ABSOLUTE AND UNBRIDLED POWERS TO ESTIM ATE WHATEVER PROFIT HE WANTS, AS PER HIS SWEET-WILL. 2.6 THE HON'BLE SUPREME COURT IN BRIJ BHUSAN LAL PR ADUMAN KUMAR, ETC. VS. CIT (115 ITR 524), CATEGORICALLY OBSERVED THA T WHILE MAKING BEST JUDGMENT ASSESSMENT , THE ASSESSING OFFICER SHOULD KEEP IN MIND WHAT HONESTLY HE BELIEVES TO BE FAIR ESTIMATED OR THE PR OPER FIGURE OF ASSESSMENT. FURTHERMORE, HONBLE CALCUTTA HIGH COURT IN THE CAS E OF CIT VS. POPULAR ELECTRIC CO.PVT.LTD. REPORTED IN 203 ITR 630 WHERE IN IT WAS OBSERVED THAT WHILE MAKING BEST JUDGMENT , THE ASSESSING OFFICE R SHOULD MAKE INDEPENDENT AND WELL GROUNDED ESTIMATE AND SUCH EST IMATE MAY BE BASED ON ADEQUATE AND RELEVANT MATERIALS. IN THE INSTANT C ASE, WE FOUND WITHOUT GIVING ANY BASIS, THE AO HAS ESTIMATED THE ENHANCED SALES AS WELL AS APPLIED HIGHER GROSS PROFIT RATE. HOWEVER, THE LD. CIT(A) A FTER CONSIDERING THE GROSS PROFIT RATE SHOWN BY OTHER LIQUOR CONTRACTORS AND T OTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, AND BY KEEPING IN VIEW THE FAILURE OF THE ASSESSEE TO MAINTAIN SALES BILLS, AND AFTER RECORDING THE D ETAILED FINDINGS SUSTAINED, THE ADDITION TO RS. 1.00 LAC WHICH IS VERY REASONAB LE. THE DETAILED FINDINGS RECORDED BY THE LD. CIT(A) OF HIS APPELLATE ORDER HAS NOT BEEN CONTROVERTED. ACCORDINGLY, WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A). 7 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED ORDER PRONOUNCED IN THE OPEN COURT ON 30 -05-2014 . SD/- SD/- (RAJ PAL YADAV) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED: 30 TH MAY, 2014 *MISHRA COPY FORWARDED TO:- 1. THE DCIT, CENTRAL CIRCLE- 2, JAIPUR 2. M/S.MAHENDRA SINGH BHANDARI ROOP NARAIN & PARTY (DEEGGROUP), BHARATPUR 3. THE LD. CIT 4. THE LD. CIT(A), JAIPUR 5..THE LD. DR 6.THE GUARD FILE (IT NO.705/JP/1998) BY ORDER AR ITAT, JAIPUR 8