ACIT, Jaipur V. MAHENDRA SINGH BHANDARI KISHAN SHARMA & PARTY, DHOLPUR

ITA 706/JPR/1998

• Counselvise Citation: 70623114 RSA 1998
• Duration Of Justice: 15 year(s) 7 month(s) 3 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: 27-10-1998
• 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. 706/JP/1998 ASSESSMENT YEAR : 1996-97 THE ACIT VS. M/S. MAHENDA SINGH BHANDARI CENTRAL CIRCLE- 2 KISHAN SHARMA & PARTY JAIPUR (DHOLPUR GROUP), DHOLPUR (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 27-08-1998 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 AFTER INVOKING THE PROVISION OF SECTION 145(3) OF T HE ACT IN ACCORDANCE WITH 2 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 DERIVES INCOME FROM TRADING IN IMFL AND CO UNTRY LIQUOR . THIS WAS THE FIRST YEAR OF THE BUSINESS OF THE ASSESSEE AND IT HAD OBTAINED A LICENSE FROM EXCISE DEPARTMENT FOR SELLING THESE COMMODITIE S. ALL THE PURCHASES WERE FOUND TO BE FULLY VOUCHED BUT THE SALES VOUCHE RS WERE NOT MAINTAINED. THE AO HAD NOTED THAT THE AGGREGATE OF DAILY CASH S ALES WAS REFLECTED IN THE BOOKS OF ACCOUNT BUT THE SALES VOUCHERS AND THE RAT ES OF SELLING THE LIQUOR, WERE NOT DISCLOSED. HE ACCORDINGLY, INVOKED THE PRO VISION OF SECTION 145 OF THE I.T. ACT AND PROCEEDED TO ESTIMATE THE SALES AN D GROSS PROFIT RATE WHICH RESULTED INTO TRADING ADDITION OF RS. 12,24,745/-. 2.3 BY THE IMPUGNED ORDER, THE LD. CIT(A) SUSTAINED THE ADDITION TO RS. 1.00 LAC AFTER HAVING FOLLOWING OBSERVATIONS. IT WAS SUBMITTED BEFORE ME THAT THE NATURE OF THE BUSINESS WAS SUCH THAT THE SALE VOUCHERS COULD NOT BE ISSUED OTHERWISE THE APPELLANT WAS MAINTAINING REGULAR BOO KS OF ACCOUNT AND THEREFORE, THE AO HAS ERRED IN INVOKING THE PROVISION OF SECTION 145. NO BASIS FOR ADOPTING HIG HER GROSS PROFIT RATE OR COMPARABLE CASES HAVE BEEN CITED BY THE AO AND THEREFORE, THE ADDITION MADE BY THE AO WAS UNWARRAN TED. IT WAS 3 SUBMITTED BEFORE ME THAT THE ASSESSEE AOP WAS EARLI ER OPERATING IN THE NAME AND STYLE OF LIKAYAT KHAN AND PARTY AND THE GROSS PROFIT RATE IN THE CASE OF LIKAYAT KHAN A ND PARTY FOR THE ASSESSMENT YEARS 1994-95 AND 1995-96 WAS 26.55% AND 32.01% AND THAT THE CIT(A) HAD REDUCED THE ADDITIO N OF RS. 1,00,000/- IN EACH YEAR, AGAINST WHICH NO SECOND AP PEAL HAD BEEN FILED BY THE DEPARTMENT. NUMBER OF OTHER CASES HAVE BEEN CITED BY THE LD. AO WHERE THE GROSS PROFIT RATE WAS MUCH LOWER. THE FACT AND CIRCUMSTANCES OF SUBMISSIONS OF THE AP PELLANT HAVE BEEN CAREFULLY CONSIDERED. IT IS NOTED THAT IT AT AND CIT(A) ARE CONSISTENTLY UPHOLDING THE INVOKING OF P ROVISION OF SECTION 145 IN LIQUOR CASES WHERE SALES VOUCHERS WE RE NOT MAINTAINED. THE GENERAL APPROACH IS THAT A LUMPSUM ADDITION HAS BEEN UPHELD AS COMPARISON WITH OTHER CASES OPER ATING IN DIFFERENT AREAS UNDER DIFFERENT CIRCUMSTANCES. CONS IDERING THESE DECISIONS AND THE FACT THAT THE APPELLANT IS SHOWIN G MUCH BETTER RESULTS THAT THE EARLIER YEARS, IN MY VIEW LUMP-SUM ADDITION OF RS. 1 LAC WILL BE JUST AND FAIR. THE AO IS DIRECTED TO REDUCE THE TRADING ADDITION AMOUNTING TO RS. 12,24,745/- TO RS . 1,00,000/- . 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 BARI-BASERI. THIS IS THE IST YEAR OF ASSESSEE'S BUSINESS. THE GR OSS PROFIT RATE DECLARED BY THE ASSESSEE IS AS UNDER:- KIND OF LIQUOR TURNOVER GROSS PROFIT GROSS PROFI T RATE COUNTRY LIQUOR , IMFL/BEER 69509069/- 27211224/- 39.14% 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 4 AND THEREFORE, MADE TRADING ADDITION OF RS. 12,24,7 45/-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 70733814/- 40.20% 28435969/- 2721224/- 1224745/- 22440849/- THE AO HAS APPLIED THE PROVISION OF SECTION 145(3) OF THE ACT ON THE PLEA THAT THE ASSESSEE HAS NOT MAINTAINED SALES BILLS. T HERE IS NO DISPUTE THAT ONCE THE BOOKS OF ACCOUNT ARE REJECTED, THE ASSESSMENT I S TO BE FRAMED U/S 144 OF THE ACT. AS PER OUR CONSIDERED VIEW, BEST JUDGME NT ASSESSMENT IS NOT A PROVISION TO PENALIZE THE ASSESSEE, BUT IS A MACHIN ERY PROVISION TO ENABLE THE REVENUE TO ASSESS A PERSON WHEN SITUATION WARRANTS SUCH AN ASSESSMENT. THE ORDER U/S.144 IS TO BE MADE TO THE BEST OF THE JUDGMENT OF THE ASSESSING OFFICER WHICH MEANS, THE ORDER HAS TO BE RATIONAL A ND IS TO BE BEST ON AN HONEST GUESS WORK FOR WHICH SOME VALID BASIS IS AVA ILABLE TO THE ASSESSING OFFICER. THE ORDER INVOLVES EXERCISE OF JUDGMENT BY THE OFFICER. A FAIR ESTIMATION OF INCOME HAS TO BE MADE, THE ASSESSING OFFICER SHOULD TAKE INTO CONSIDERATION THE TOTALITY OF THE FACTS AND CIRCUMS TANCES OF THE CASE IN ADDITION TO PROPER EVALUATION OF THE MATERIAL FURN ISHED BY THE ASSESSEE AND COLLECTED BY HIM BY HIS OWN EFFORTS. WHERE BEST J UDGMENT ASSESSMENT 5 POWER HAS BEEN CONFERRED, THE LIMITS OF THE POWER A RE IMPLICIT IN THE EXPRESSION BEST OF HIS JUDGMENT ASSESSMENT . T HE JUDGMENT IS VITAL TO DECIDE THE MATTER WITH WISDOM, TRULY AND LEGALLY. JUDGMENT DOES NOT DEPEND UPON THE ARBITRARY CAPRICIOUS OF THE ASSESSING OFFI CER, BUT ON SETTLED AND INVARIABLE PRINCIPLE OF JUSTICE. THOUGH THERE IS A N ELEMENT OF GUESS WORK IN BEST JUDGMENT ASSESSMENT , IT SHALL NOT BE WILD O NE, BUT SHALL HAVE REASONABLE NEXUS TO THE AVAILABLE MATERIAL AND CIRC UMSTANCES OF EACH CASE. WHILE ESTIMATING THE GROSS PROFIT, THE ASSESSING OF FICER SHOULD BE FAIR & REASONABLE AND SHOULD KEEP INTO ACCOUNT THE TURNOVE R AND THE GROSS PROFIT OF EARLIER YEARS ALONGWITH ALL THE FACTS AND CIRCUMST ANCES OF THE CASE. BY REJECTING BOOK RESULT, THE ASSESSING OFFICER DOES N OT GET ABSOLUTE AND UNBRIDLED POWERS TO ESTIMATE WHATEVER PROFIT HE WAN TS, 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 THAT THE 6 ASSESSEE HAS DECLARED GROSS PROFIT RATE OF 39.14% W HICH APPEARS TO BE QUITE REASONABLE. HOWEVER, KEEPING IN VIEW THE SHORTCOMIN G NOTED BY THE AO, THE LD. CIT(A) AFTER RECORDING THE FINDINGS AT PAGE 2 O F HIS APPELLATE ORDER MODIFIED THE TRADING ADDITION AND SUSTAINED THE SAM E TO RS. 1.00 LAC. THE FINDING RECORDED BY THE LD. CIT(A) HAS NOT BEEN CON TROVERTRED BY THE DEPARTMENT BY BRINING ANY POSITIVE MATERIAL ON RECO RD. ACCORDINGLY, WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE LD. CIT( A). 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED ORDER PRONOUNCED IN THE OPEN COURT ON 30-05-2 014. SD/- SD/- (RAJ PAL YADAV) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED: 30 TH MAY, 2014 *MISHRA COPY FORWARDED TO:- 1. THE ACIT, CENTRAL CIRCLE- 2, JAIPUR BY ORDER 2. M/S. MAHENDRA SINGH BHANDARI KISHAN SHARMA & PAR TY 3. THE LD. CIT 4. THE LD. CIT(A), JAIPUR 5..THE LD. DR 6.THE GUARD FILE (IT NO.706/JP/1998) AR ITA T, JAIPUR 7