ITO, Jaipur V. BANNA ALI GIRDHARI SINGH & PARTY(NAWALGARH GROUP), Jaipur

ITA 72/JPR/2003

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78095 (ITAT-JAIPUR)
• Duration Of Justice: 11 year(s) 3 month(s) 16 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: 1999-2000
• Appeal Filed On: 13-02-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Bogus purchase; Rejection of books of accounts; Business income; Opportunity of being heard; Wrong claim; Right to appeal; Revised return
• Section: 147; 145; 27; 263; 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH : JAIPUR BEFORE SHRI RAJPAL YADAV AND SHRI R.C. SHARMA ITA NO. 72/JP/2003 ASSTT. YEAR : 1999-00 INCOME-TAX OFFICER, VS. M/S. BANNA ALI GIRDHARI S INGH & PARTY WARD-4(2), (NAWALGARH GROUP), C-23, MALKHERA HO USE, JAIPUR. VIJAY VIHAR COLONY, NAYAKHERA, AMBA BARI, JAIPUR. PAN NO. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI D.C. SHARMA, DR ASSESSEE BY : SHRI PC PARWAL, AR DATE OF HEARING : 20.05.2014 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 09.12.2002 PASSED FOR ASSESSMENT YEAR 1999-00 . THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT LEARNED CIT(APPEALS) HAS ERRED IN D ELETING THE ADDITION OF RS.1,30,57,175, OUT OF THE TRADING ADDITION OF RS.1 ,36,57,175. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE I S AN AOP CONSTITUTED BY FORTY TWO PERSONS WITH DETERMINATE SHARES. IT HAD OBTAINED A LICENSE FOR SELLING COUNTRY LIQUOR, IMFL & BEER FOR NAVALGARH DISTRICT AREA BY WAY OF S UCCESSFUL BIDDING IN THE AUCTION/TENDER FLOATED BY THE EXCISE DEPARTMENT OF RAJASTHAN GOVERNMENT. IT HAD PAID AN AUCTION MONEY OF RS.3,65,62,612. THE BREAK UP OF TH E AUCTION MONEY PAID BY THE ASSESSEE IS AS UNDER: AUCTION MONEY PAID KIND OF LIQUOR FOR F.Y. 97-98 FOR F.Y. 98-99 1. COUNTRY LIQUOR RS. RS.2,08,15,002 2. IMFL (RETAIL) RS. RS.1,19,60,000 2 3. BEER(RETAIL) RS. RS. 37,87,610 TOTAL: RS. RS.3,65,62,612 3. THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 2 9.12.1999 DECLARING AN INCOME OF RS.4,72,260. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE UNDER SEC. 143(2) WAS ISSUED AND SERVED UPON THE AS SESSEE. ON AN ANALYSIS OF THE ACCOUNTS, LEARNED ASSESSING OFFICER WAS NOT SATISF IED WITH REGARD TO THE CORRECTNESS OF THE BOOKS OF ACCOUNTS AND ACCORDINGLY HE REJECTED THEM. LEARNED ASSESSING OFFICER HAD ESTIMATED THE INCOME OF THE ASSESSEE. HE WAS OF THE OPINION THAT ASSESSEE HAS SHOWN G.P. AT 60.59% IN THE COUNTRY LIQUOR AND 39.4% IN IMFL & BEER. HE MADE REFERENCE TO FOUR CASES WHILE ESTIMATING THE PROFIT FROM COUNTRY LIQU OR AND OBSERVED THAT PROFIT IN THIS LINE OF BUSINESS IS RANGING BETWEEN 65% TO 77.8%. ACCORD ING TO THE ASSESSING OFFICER, THE ASSESSEE HAS FAILED TO ESTABLISH GENUINENESS OF ITS SALES. IN OTHER WORDS, SALES OF THE ASSESSEE WERE NOT VERIFIABLE. LEARNED ASSESSING OF FICER HAS WORKED OUT THE SALES BY ADDING G.P. OF 78% TO THE COST INCURRED BY THE ASSE SSEE. ON THIS ASSUMED SALES, HE APPLIED THE G.P. OF 78% AND WORKED OUT THE GROSS PROFIT WHI CH ASSESSEE OUGHT TO HAVE DECLARED. THE FOLLOWING DETAILS EXHIBITS THE ACTION OF THE AS SESSING OFFICER FOR CALCULATING THE ADDITION REQUIRED TO BE MADE IN THE HANDS OF THE AS SESSEE. IT READS AS UNDER: KIND OF LIQUOR TURNOVER SALES ESTIMATED G.P. RATE APPLIED GROSS PROFIT ESTIMATED GROSS PROFIT DECLARED ADDITION MADE COUNTRY LIQUOR 3,28,40,708 4,00,00,000 78% 3,12,00,000 1,99,01,375 1,12,98,625 IMFL AND BEER 1,82,79,676 2,00,00,000 48% 96,00,000 72,41,450 23,58,550 3 4. DISSATISFIED WITH THE ADDITION, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(APPEALS). LEARNED CIT(APPEALS) HAD MADE DETAILED ANALYSIS OF ACCOUNTS AND OBSERVED THAT A LUMP SUM ADDITION OF RS.4,00,00 0 IN COUNTRY LIQUOR ACCOUNT AND RS.2,00,00 IN IMFL & BEER WOULD BE SUFFICIENT TO ME ET THE ENDS OF JUSTICE. 5. DISSATISFIED WITH THIS DELETION, REVENUE IS IN A PPEAL BEFORE US. LEARNED DR WHILE IMPUGNING THE ORDER OF LEARNED CIT(APPEALS) HAS REL IED UPON THE ORDER OF THE ASSESSING OFFICER. HE SUBMITTED THAT THIS IS ONE OF THE CASES AMONGST 83 APPEALS REMITTED BY THE HON'BLE HIGH COURT TO THE ITAT FOR READJUDICATION. HE FILED WRITTEN SUBMISSIONS THOUGH IT IS COMMON FOR ALL THE APPEALS, HE POINTED OUT TH AT THE SUBMISSIONS WOULD TAKE CARE VITAL POINTS INVOLVED IN THESE APPEALS. MAY IT PLEASE YOUR HONOURS: THE ASSESSES ARE LIQUOR CONTRACTOR & WERE AWARDED L ICENCE BY THE STATE OF RAJASTHAN FOR SALE OF IMCL U/R 67(1) & 67(KK) OF TH E RAJ. EXCISE RULE, 1956. LIKE-WISE CONTRACTS FOR RETAILS SALES OF BEER AND I MFL WERE AWARDED U/R 3A OF RAJ. FOREIGN LIQUOR SALE LICENCE RULES 1982, FOR DI FFERENT PLACES. THE LICENCES WERE OBTAINED BY SUCCESSFUL BIDDERS & OTHER THAN TH ESE LICENSEES , NO OTHER PERSON WAS PERMITTED TO SALE THE LIQUOR. CONTRACTS ARE AWARDED (BY TENDERING PROCESS) TO THE REGISTERED CONTRACTOR BY THE EXCISE COMMISSIONER FOR A FISICAL YR. (I.E. 1 ST APRIL TO 31 ST MARCH), IN THE MONTH OF JAN./FEB. OF THE PRECEEDIN G YR. AS PER THE EXCISE RULES, THE LIQUOR CONTRACTORS HA VE TO MAINTAIN COMPLETE STOCK REGISTER AND RECORD OF ALL THEIR EMPLOYEES AS PER NOKARNAMA APPROVED BY THE DISTRICT EXCISE OFFICER. NO OTHER PERSON CAN BE PLACED AS AN EMPLOYEE UNLESS THE DETAILS OF THE EMPLOYEES ARE PROVIDED TO THE DI STRICT EXCISE OFFICER. THE LIQUOR CONTRACTORS HAVE TO SUBMIT MONTHLY ACCOUNT OF RECEI PT OF LIQUOR, SALE THEREOF AND BALANCE STOCK, AT THE END OF THE MONTH TO THE EXCIS E INSPECTOR BY 5 TH OF THE FOLLOWING MONTH. IN THE CASE OF COUNTRY LIQUOR, THE PURCHASES ARE MADE FROM THE EXCISE DEPARTMENT THROUGH PERMITS. ACCORDINGLY, PUR CHASES OF IMFL AND BEER 4 CAN BE MADE FROM WHOLESALE LICENSEES OF IMFL & DIST ILLERIES, RESPECTIVELY, AFTER SEEKING PERMISSION OF THE EXCISE DEPARTMENT. THE PU RCHASES ARE PROVED BUT IT IS AN ADMITTED FACT THAT THE SALE PRICE IS NOT FIXED A ND THE ASSESSES HAVE NEITHER ISSUED SALE VOUCHERS TO THE PURCHASER NOR MAINTAIN ED THESE VOUCHERS. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSES WERE SPECIFICALLY ASKED TO FURNISH, SHOP-WISE & BRAND-WI SE, DETAILS OF ALL RECEIPTS AND SALE OF IMCL, IMFL AND BEER, WHICH WERE NOT PRODUCE D FOR VERIFICATION. VOUCHERS FOR EXPENSES WERE REQUIRED TO BE PRODUCED. IN SOME CASES SOME VOUCHERS WERE PRODUCED BUT, BY AND LARGE, IN MAJORITY OF CASES E VEN VOUCHERS WERE NOT PRODUCED. THE ASSESSES WERE ALSO REQUIRED TO PRODUC E THE DETAILS OF SALE OF BOTTLES AND BARDANA WHICH TOO WERE NOT PROVIDED AND A LUMPSUM AMOUNT WAS CREDITED ON ACCOUNT OF SUCH SALES. THE SAME WERE NO T OPEN TO VERIFICATION. DETAILS OF PURCHASES, BEING REGULATED AND AS PER TH E GUIDELINES OF THE EXCISE DEPARTMENT, WERE PRODUCED BUT SALE VOUCHERS, WERE N OT PRODUCED FOR VERIFICATION. THE ASSESSING OFFICERS WERE OF THE VI EW THAT IN THE ABSENCE OF SALE VOUCHERS, THE ASSESSES ARE AT LIBERTY TO CHARGE SEL LING PRICE AS PER THEIR OWN SWEET WILL (AS THE SALES PRICES ARE NOT FIXED). SIN CE THE ASSESSES HAD MONOPOLY AND HAVE EXCLUSIVE JURISDICTION TO SALE GOODS IN TH E AREA/DISTRICT, THEY COULD CHARGE ANY AMOUNT. WHAT AMOUNT WAS ACTUALLY CHARGED BY THE ASSESSES WAS NOT KNOWN SINCE SALES WERE NOT OPEN TO VERIFICATION. TH E AOS WAS OF VIEW THAT IN THE LIGHT OF THESE DEFICIENCIES THE BOOKS OF ACCOUNTS A RE LIABLE TO BE REJECTED U/S 145(3) OF THE IT ACT. IN ADDITION TO ABOVE, THE AOS INTER ALIA, HAVE ALSO NOTICED THE FOLLOWING DEFECTS:- I. SALES BILLS ARE NOT MAINTAINED HENCE SALE RATES & QUANTUM OF SALES/T.O. NOT OPEN TO VERIFICATION. AUDITORS IN THEIR AUDIT R EPORT HAVE ALSO OBSERVED THESE DEFECTS. II. VOUCHERS FOR VARIOUS EXPENSES NOT PROPERLY MAIN TAINED HENCE GENUINENESS /REASONABLENESS OF VARIOUS EXPENSES WAS NOT OPEN TO VERIFICATION. THE SAME HAVE BEEN POINTED OUT BY THE AUDITORS. 5 III. STOCK/SALES REGISTER NOT MAINTAINED (HENCE NOT OPEN TO VERIFICATION) IN SPITE OF THE FACT THAT THE SAME WAS MANDATORY, AS P ER EXCISE DEPTT. IV. SEPARATE TRADING ACCOUNTS FOR CL/IMFL/BEER NOT MAINTAINED. V. ORIGINAL DOCUMENTS RELATED TO DAILY SALES HAVE B EEN DESTROYED, INTENTIONALLY, TO AVOID VERIFICATION, FOR THE REASO NS WELL KNOWN TO THE ASSESSES. 3. ON THE OTHER HAND THE ASSESSES HAVE CLAIMED THA T ALL THE PURCHASES WERE VOUCHED AND VERIFIABLE AND THEY HAVE PRODUCED THE R ELEVANT PURCHASES VOUCHERS/PERMITS OF THE PURCHASES OF THE LIQUOR, BU T IN SO FAR AS THE SALE BILLS ARE CONCERNED, IT WAS SUBMITTED THAT SINCE THE QUANTUM OF LIQUOR IS SO SMALL, IN THE CASE OF IMCL, THE SAME IS BEING SOLD IN POUCHES AND IMFL IN SMALL BOTTLES, WERE OF LOW RATE, THEREFORE, IT WAS NOT PRACTICALLY POSS IBLE TO MAINTAIN THE SALE VOUCHERS. IT WAS FURTHER SUBMITTED THAT IN THIS PAR TICULAR TRADE THE CUSTOMERS NEVER LIKE TO DISCLOSE THEIR IDENTITY AND THEREFOR E, EVEN IF THE SALE VOUCHER IS MAINTAINED, NAME OF RECIPIENT/NAME OF PURCHASERS WI LL HAVE TO BE LEFT BLANK. HOWEVER, IT WAS SUBMITTED THAT THE PURCHASES ARE EN TIRELY VOUCHED AND WHEN PURCHASES ARE ENTIRELY VOUCHED, THEN THE CONSEQUENT IAL SALE VERSION OUGHT TO HAVE BEEN ACCEPTED AS THE SALE WAS OUT OF THE VERY GOODS PURCHASES BY THE ASSESSEES. IT WAS ALSO SUBMITTED BY THE ASSESSES THAT ALL THE DETAILS, AS DESIRED BY THE EXCISE DEPARTMENT, EXCEPT SALE VOUCHERS, HAD BE EN MAINTAINED AND ALL THE BOOKS OF ACCOUNTS AND SUPPORTING VOUCHERS WERE GENE RALLY PRODUCED AND MAINTAINED IN ACCORDANCE WITH THE EXCISE RULES. MER ELY BECAUSE THE SALE VOUCHERS HAVE NOT BEEN MAINTAINED, THERE IS NO JUST IFICATION FOR REJECTING BOOKS OF ACCOUNTS. 4. THE AOS DID NOT CONVINCE WITH ABOVE SUBMISSION OF THE ASESSEES, AS THE AO WAS UNABLE TO DEDUCE THE CORRECT AMOUNT OF SALES /SALE RATES/GP/NP FROM SAID ACCOUNTS. ACCORDINGLY, THE AO REJECTED THE BO OKS OF ACCOUNT AND TRADING RESULTS, U/S 145(3) OF THE IT ACT, BY HOLDING THAT NON-MAINTENANCE OF THE SALE VOUCHERS/SALE REGISTER IS A MAJOR DEFECT & SALES AR E NOT OPEN TO VERIFICATION. THE 6 ASSESSING OFFICERS, WHILE REJECTING BOOKS OF ACCOUN TS, RELIED UPON VARIOUS JUDGMENTS OF THE APEX COURT & OTHERS COURTS, PARTI CULARLY IN THE CASES OF CIT VS. BRITISH PAINTS INDIA LIMITED, (1991) 188 ITR 44, M/ S LAL CHAND WAILATI RAM VS. CIT: (1978) 111 ITR 244 (P&H); M/S BOMBAY CYCLE STO RES CO. LTD. VS, CIT: (1958) 33 ITR 13(BOMBAY); SN NAMA SIVAYAM CHETTIER VS, CIT: (1960) 38 ITR 579 (SC); COMMISSIONER OF INCOME-TAX VS. MC MILLAN & CO.: 38ITR 182(SC) ETC. AFTER REJECTING THE BOOKS OF ACCOUNTS, IN SOME OF THE CASES, THE AO HAVE ESTIMATED GROSS PROFIT RATE AND IN SOME OF THE CASE S NET PROFIT RATE AND IN SOME OF THE CASES ADHOC ESTIMATED ADDITION HAD BEEN MADE. W HILE MAKING SUCH ADDITION, THE AOS HAVE GIVEN THE DETAILED ANALOGY/FINDINGS/S CIENTIFIC BASIS ETC BY COMPARING SIMILAR TRADE/PAST HISTORY/SALES RATES PR EVAILING IN THE OTHER LOCALITY ETC & ALSO ALLOWED REASONABLE OPPORTUNITY TO THE ASSESS EE. FOR REJECTING BOOKS OF ACCOUNTS U/S 145 (3) & ESTIMATING THE PROFIT, THE A O RELIED ON THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF ABDESH PRATAP SINGH, ABDUL REHMAN & BROS. VS CIT 210ITR406 WHICH INTER ALIA RE AD AS UNDER:- WHERE THE ABSENCE OF STOCK REGISTER, CASH MEMOS I S COUPLED WITH OTHER FACTORS LIKE LACK OF VOUCHERS FOR EXPENSES & LOW PROFIT WHICH GIVE RISE TO A LEGITIMATE INFERENCE THAT ALL IS NOT WELL WITH THE BOOKS OF ACCOUNTS & THE SAME CAN NOT BE RELIED UPON TO ASSESS THE INCO ME OR PROFITS. IN SUCH A SITUATION THE AUTHORITIES WILL BE JUSTIFIED TO RE JECT THE BOOKS OF ACCOUNTS. IN VIEW OF THE ABOVE FACTS THE AOS HAVE REJECTED T HE BOOKS OF ACCOUNTS. KEEPING IN MIND THE SALES RATES/GP OF COMPARABLE CA SES & PAST HISTORY ETC, AOS HAVE ESTIMATED THE SALES/GP/NP IN THESE LIQUOR CASE S. FOR SACK OF CONVENIENCE AND BETTER UNDERSTANDING FOR THE BENCH I AM QUOTING THE FINDING OF THE AO IN THE CASE OF M/S RAJA RAM RAJENDRA BHANDARI & PARTY, WHE REIN THE AO HAD GIVEN SCIENTIFIC WORKING TO ESTIMATE THE SALES AND GP/NP AND THE SAME IS STATED HERE AS UNDER:- 7 MY CONCLUSION OF REJECTION OF BOOKS AND ESTIMATION IS VALID IN EYES OF LAW IN SO FAR AS INTERPRETED AND PRECEDENCE LAID DOWN IN VARIOUS CASE LAWS AS DISCUSSED BELOW:- A) COMMISSIONER OF SALES TAX VS H.ESUF ALI, H.M. A BDUL ALI 90ITR271(1973)(SC):- IN THE CASE OF SUPPRESSED SALES IF IT IS NOT POSSI BLE FOR THE ASSESSING OFFICER TO DETERMINE THE EXACT QUANTITY OF SUPPRESS ED SALES. AS SUCH. HE IS EMPOWERED TO ESTIMATE THE SUPPRESSION ON THE BASIS OF MATERIAL BEFORE HIM. SO LONG AS THE ESTIMATE WAS NOT ARBITRARY IT C AN NOT BE QUESTIONED. FURTHER, IF THE ESTIMATE BY THE ASSESSING OFFICER I S BONAFIDE ESTIMATE AND BASED ON RATIONAL BASIS THE FACT THAT THERE IS NO G OOD PROOF IN SUPPORT OF THAT ESTIMATE BECOMES IRRELEVANT. WHEN THE ESTIMATE IS NOT ARBITRARY OR IRRATIONAL, THE BEST JUDGEMENT ASSESSMENT CAN NOT B E INTERFERED WITH. IT IS THE DUTY OF THE ASSESSEE TO PLACE ALL FACTS TRUTHFULLY BEFORE THE AO. IF HE FAILS TO DO HIS DUTY HE CAN NOT BE ALLOWE D TO CALL UPON THE AO TO PROVE CONCLUSIVELY WHAT TURNOVER HE HAS SUPPRESSED. THAT FACT MUST BE WITHIN HIS PERSONAL KNOWLEDGE. HENCE, THE BURDEN OF PROVING THAT FACT IS ON HIM. IN THE VERY NATURE OF THINGS, THE ESTIMATE MAD E MAY BE AN OVER ESTIMATE OR AN UNDER ESTIMATE. BUT THAT IS NO GROUN D FOR INTERFERING WITH HIS BEST JUDGEMENT. B) CIT VS LAXMINARAIN BADRIDAS 5 ITR (1937) 170, 18 0(PC):- IT HAS BEEN HELD THAT IN ALL SUCH ASSESSMENTS THER E MUST NECESSARILY BE GUESS WORK, BUT IT MUST BE HONEST GUESS WORK AND IN THAT SENSE TOO THE ASSESSMENT MUST BE TO SOME EXTENT ARBITRARY. C) GANGA RAM BALMOKAND VS CIT 5ITR(1973) LEH. 464:- IT CAN NOT BE DENIED THAT THERE MUST BE SOME MATER IAL BEFORE THE ITO ON WHICH TO BASE HIS ESTIMATE, BUT NOT HARD AND FAS T RULES CAN BE LAID 8 DOWN BY THE COURT TO DEFINE WHAT SORT OF MATERIAL I S REQUIRED ON WHICH HIS ESTIMATE CAN BE FOUNDED. D) RAGHUBAR MANDAL HARIHAR MANDALS CASE 8 STC 770( SC)(1957):- IT HAS BEEN HELD THAT IF THE SALES TAX OFFICER WAS COMPELLED TO ADOPT A RULE OF THUMB WHICH IN A SENSE IS AN ARBITRARY RU LE, THE ASSESSEE WAS ENTIRELY RESPONSIBLE FOR THAT SITUATION. THERE ARE SOME MORE ISSUES WHICH ARE IMPORTANT IN T HE MATTER OF ESTIMATION OF PROFITS WHICH REQUIRE FURTHER ELABORA TION I.E. AS TO WHAT COMPELLING FACTORS WERE THERE DUE TO WHICH THE AO W AS LEFT WITH NO CHOICE BUT AS TO ESTIMATION OF INCOME WHICH AS A MA TTER OF FACT WAS SPEARHEADED BY THE ASSESSEE HIMSELF. IT IS CLAIMED BY THE LD. A/R OF THE ASSESSEE THAT T HERE IS A GENERAL PRACTICE IN THE LINE OF TRADE IS THAT 90% ON TOTAL SALES ARE ACHIEVED IN THE EVENING HOURS AND THAT TOO WITHIN A PERIOD OF FEW H OURS WHEN HEAVY RUSH OF CUSTOMER IS GATHERED IN THE RETAIL SHOP AND AT T HAT TIME IT IS NEITHER PRACTICAL NOR POSSIBLE TO ISSUE SALE BILLS NOR IT I S ECONOMICAL TO EMPLOYEE LARGE NUMBER OF EMPLOYEES IN EVERY RETAIL SHOP ONLY FOR THE PURPOSE OF ISSUING THE SALE BILLS. THE ABOVE STATEMENT IS SUPPRESSION VERY, SUGGESTION FALSI (IT MEANS SUPPRESSION OF TRUTH IS EQUIVALENT TO SUGGEST ION OF FALSE HOOD) AND THERE IS NOTHING ON RECORD AS EVIDENCE TO PROVE THE ABOVE FACT. NO SUCH WRITTEN DOCUMENT OR EVIDENCE WAS PRODUCED WHICH IND ICATES THAT 90% OF SALES ARE AFFECTED IN THE EVENING HOURS AND THERE I S ALWAYS HEAVY RUSH IN THOSE HOURS. IT IS ALSO PERTINENT TO MENTION THAT T HE STORY OF FEW HOURS WHICH THE ASSESSEE IS TALKING IS ALSO NOT MENTIONED THAT WHETHER IT IS 8-10, 9-11, 10-11, 7-9, 7.30-9.30PM. IT IS VERY IMPORTANT TO REJECT THIS CLAIM AS NO ORIGINAL DOCUMENTS OF SALES WERE PRODUCED TO IND ICATE THAT MOSTLY THE SALES ARE AFFECTED IN THE LAST HOURS. AS THE SHOP I S OPENED FOR MORE THAN 16-18 HOURS IT IS HARDLY BELIEVABLE THAT THERE WOUL D BE ANY SALES IN THE INITIAL 12 HOURS. THE ASSESSEE TO JUSTIFY HIS CLAIM OF NOT MAINTAINING THE 9 PROPER SALES RECORDS HAS ADVANCED THIS FALSE CLAIM. THESE FACTS SHOWS THAT THE ASSESSEE IS DELIBERATELY INVOLVED IN NOT K EEPING THE PROPER RECORDS OF SALES AND BASELESS CLAIMS ARE ADVANCED. IT IS ALSO CLAIMED BY THE ASSESSEE THAT INTERN AL CHECK AND CONTROL IN EACH RETAIL SHOP IN SUCH A WAY THAT NO LEAKAGE OF A NY SALES OR AMOUNT OF SALES WAS POSSIBLE, THAT THE EXCISE DEPARTMENT ALSO FREQUENTLY CHECK THE SHOPS AND HEAVY PENALTIES IMPOSED IF ANY DISCREPANC Y IS NOTED, THAT THERE IS COMMON RETAILS PRICE LIST WHICH IS DISPLAYED OUT SIDE THE SHOP EVERY DAY. NO EVIDENCE WAS PRODUCED EVER IN SUPPORT OF ANY ITS CLAIM. THEREFORE, IT IS ALSO AN EXAMPLE OF SUPPRESIO VERY, SUGGESTION FALSI WITHOUT PREJUDICE TO THE EARLIER ORDERS IT IS TO ME NTION HERE THAT ESTIMATION OF THE AO MAY BE A GUESS WORK BUT IS NOT ARBITRARY. IT IS BASED ON THE BASIS OF ENQUIRIES MADE BY THE AO AND THE FA CTS AND MATERIAL COLLECTED ON THE RECORD AND FROM THE MARKET. THEREFORE, ESTIMATION OF AO CAN NOT BE SUBSTITUTED BY ANOTHER ESTIMATION, UNLESS CONTRARY EVIDENCE PRODUC ED ON RECORD. IT IS ALSO IMPORTANT TO MENTION HERE THAT EACH CASE IS DIFFERENT. IT IS WELL KNOWN FACT THAT THE EXCISE DEPARTMENT IS EVERY YEAR GIVING CONTRACTS OF LIFTING OF LIQUOR OF PARTICULAR AREAS TO THE HIG HEST BIDDER. EVERY YEARS NEW ASSOCIATION OF PERSONS ARE FLOATED. THERE IS ALWAYS ONE AOP FOR A PARTICULAR FY FOR A PARTICULAR PLACE AND IT IS HARD LY REPEATED AGAIN. THE NAME OF AOP MEMBERS PERSONS, MEMBERS OF AOP, TERRIT ORY OF CONTRACT, AMOUNT OF CONTRACT IS DIFFERENT EVERY YEAR. IN SUCH A POSITION THERE CAN NOT BE COMPARABLE CASE. EACH CASE IS REQUIRED TO BE DEA LT WITH SEPARATELY ON THE BASIS OF FACTS OF THE CASE. THEREFORE, THERE WI LL NOT BE ANY COMPARABLE CASES AT GIVEN POINT OF TIME TO ESTIMATE GP/NP/TO E TC. IN MY OPINION, IF ANY ARGUMENT IS MADE AVAILABLE OF COMPARABLE CASES TO APPLY GP/NP OR TO THAT SHOULD NOT BE ENTER TAINED UNLESS SPECIFIC EVIDENCE ARE PRODUCED ON RECORD. 10 AS A LAW IMPLEMENTING AGENCIES, IT IS DUTY ON MY PA RT TO ALSO EXAMINE IF VIOLATION OF ANY LAW OF LAND IS MADE. NO BODY IS ABOVE LAW AND ASSESSEE CAN NOT BE ALLOWED TO GO SCOT FREE BY REPE ATEDLY AND FREQUENTLY GIVING FALSE STATEMENT NOT BEING INTERROGATED TO TH E HILT. THE ASSESSEE AND THE A/R ARE INDULGING IN EXERCISE OF OBFUSCATION, W HICH IS APPARENT FROM THE FACT THAT MAJORITY OF CASE OF LIQUOR CONTRACTS ARE HANDLED BY ONE PARTICULAR PROFESSIONAL. IT HAS BEEN NOTICED THAT EACH AND EVERY CASE IS DIFFERENT BUT THE ABOVE PARTICULAR PROFESSIONAL IS FILING SIMILAR TYPE OF REPLIES BEFORE THE AO AND THE OTHER APPELLATE AUTHO RITIES. WHEN ALL THE CASES ARE DIFFERENT AND NOT COMPARABLE. THEN HOW CA N THE SAME FACTS AND REPLIES BE APPLIED IN ALL. IT IS ANOTHER EXAMPLE OF SPPRESIO VERY, SUGGESTION FALSI. BASIS OF COMPUTATION :- OF LATE IT WAS NOTICED, THAT IN ALL THE LIQUOR CASE S THE ASSESSING AUTHORITIES WOULD INVARIABLY REJECT THE BOOKS OF AC COUNTS INVOKING THE PROVISIONS OF SECTION 145(3) OF THE I.T. ACT, BUT F OR ESTIMATION OF THE PROFITS THEY RELIED ON VARIOUS INFORMAL INFORMATIONS GATHE RED FROM THE MARKET AND ACCORDINGLY APPLIED THE GP/NP RATE. THIS PRACTICE O F ESTIMATION WAS CONSIDERED BY THE ASSESSES IN THIS LINE OF TRADE TO BE WILD GUESS WORK OF THE AOS AND THE SAME PLEAS WOULD BE TAKEN TO GET AW AY WITH THE ADDITIONS MADE BY THE AOS. BUT THIS TIME A VERY CON CERTED AND SINCERE EFFORT HAS BEEN MADE BY THE TAXING AUTHORITIES OF T HE JAIPUR CHARGE TO BASE THEIR ESTIMATION ON SOME AUTHENTIC AND RELIABL E MATERIAL GATHERED. SO, ACCORDINGLY SURVEY WAS CONDUCTED ON THE VARIOUS LIQUOR SHOPS LOCATED AT JAIPUR ON 21.3.2003. FROM ON THE SPOT VERIFICATI ON OF THOSE SHOPS IT WAS GATHERED THAT EACH SHOP HAD A PRINTED RATE LIST WHI CH WAS AVAILABLE IN REGARD TO ALL THE VARITIES OF CL/IMFL & BEER AT WHI CH THEY WERE SUPPOSED TO BE SOLD. ONE SUCH RATE LIST PERTAINING TO THE PE RIOD BEFORE 20.3.2003(FROM 21.3.2003 THE RATES WERE REDUCED) WA S FOUND BY ONE OF THE AO AND IMPOUNDED. NOW THAT THE RATE LIST WAS FO UND, AT WHICH THE 11 COUNTRY LIQUOR, IMFL AND BEER WERE SOLD, IT WAS REQ UIRED THAT THE PURCHASE PRICE OF THE CORRESPONDING ITEMS/VERITIES OF THE LI QUOR BE KNOWN. SO THAT THE PROFIT MARGIN IN THE CORRESPONDING ITEMS COULD BE WORKED OUT SO AS TO GIVE A SUPPORT TO THE FINDINGS OF THE ESTIMATION OF GROSS PROFIT AND NET PROFIT AS TAKEN BY THE ASSESSING AUTHORITIES. ACCORDINGLY ACCOUNTANT OF THE AOP FIRM SH. NIRANJAN SHARMA WAS CALLED TO PRODUCE THE ORIGINAL BILLS OF PURCHASES OF CL/IMFL AND BEER WHICH WAS PURCHASES B Y THE FIRM. SH. NIRANJAN SHARMA EXPRESSED HIS INABILITY TO PRODUCE THE PURCHASE BILLS OF THE ASSESSEE AOP M/S RAJARAM RAJENDRA BHANDARI & PA RTY SINCE THEY WERE CLAIMED TO BE LYING AT AJMER. HOWEVER, HE PROD UCED THE PURCHASE BILLS OF ANOTHER AOP I.E. NIZAMMUDIN MANIRAM AND PA RTY WHICH OPERATED IN THE AREA OF HANUMANGARH IN THE F.Y. 1999-2000. T HOUGH THE PURCHASE BILLS OF THE ASSESSEE AOP WERE NOT PRODUCED, BUT NE VERTHELESS PURCHASE PRICE IS MORE OR LESS SAME FOR VARIOUS ITEMS IN THE PARTICULAR FINANCIAL YEARS. MOREOVER, IT IS A WORK OF ESTIMATION ON THE PART OF AO FOR WHICH SOME YARDSTICK IS REQUIRED, WHICH IN THIS CASE IS O FFERED BY AOP FIRM OF NIZAMUDIN MANIRAM AND PARTY. ONCE THE PURCHASE PRIC ES OF VARIOUS ITEMS WERE KNOWN THROUGH THE PURCHASE BILLS, CORRESPONDIN G EXCISE DUTY AS PAID BY THE ASSESSEE WAS ADDED SO AS TO ARRIVE AT THE TO TAL COST OF A PARTICULAR ITEM. THEREAFTER ON THE BASIS OF RATE LIST FOUND, C ORRESPONDING SELLING PRICE WAS APPLIED TO EACH OF THE COMMODITY IN ORDER TO FI ND OUT AS TO WHAT EXACTLY THE PROFIT MARGIN WORKS OUT. THEREAFTER CHE CKING THE AVERAGE OF SUCH PROFIT MARGIN CORRESPONDING GP SHALL BE APPLIE D. IN ORDER TO CALCULATE THE EXCISE DUTY, THE METHOD I S AS FOLLOWS (AS PRESCRIBED BY STATE EXCISE DEPARTMENT.):- 1) IN CASE OF IMFL :- THE PAYMENT TOWARDS EXCISE DUTY AS PER THE STATE EXCISE LAWS (F.Y.99-2000) IS @ ` 675 PER BULK LITRE OF IMFL. (I.E. ` 675 FOR 12 BOTTLES) (ONE BULK LITRE MEANS 9 LITRES I.E. 12 BOTTLES OF 7 50 ML EACH) 12 IT, THEREFORE MEANS THAT ON EACH BOTTLE THE EXCISE DUTY PAYABLE IS ` 56.25 ( ` 675/12) 2) IN THE CASE OF BEER :- STRONG BEER ` 117 PER BULK LITRE. THEREFORE ` 8.35 PER BOTTLE OF STRONG BEER. (1 BULK LITRE=9 LITRE WHICH IS =9000ML 1 BEER BOTTLE CONTAINS 650 ML, THEREFORE, 9000 ML B EER IS FILLED IN APPROXIMATELY 14 BOTTLES. (IF ` 117 EXCISE DUTY PAID ON 14 BOTTLES, THEREFORE ON ON E BOTTLE, ` 8.35 IS PAID.) SIMILARLY EXCISE DUTY ON LEDGER BEER IS AS UNDER:- LEDGER BEER ` 78 PER BULK LITRE. THEREFORE ` 5.57 PER BOTTLE OF LEDGER BEER. 3) IN CASE OF COUNTRY LIQUOR :- 85% OF TOTAL ISSUE PRICE A CHART IS PRODUCED BELOW TO ELABORATE ON THE PROFI T MARGIN OF COUNTRY LIQUOR/IMFL AND BEER. S.NO. ITEM PURCHASE PRICE AS PER THE BILLS BROUGHT BY ASSESSEE FOR VERIFICATION. THE PURCHASE PRICE INCLUDE EXCISE DUTY. SALE PRICE AS PER THE RATE LIST FOUND IN THE COURSE OF SURVEY (RATE LIST WAS OF THE PERIOD BEFORE 21.3.03) PROFIT PERCENTAGE 1 COUNTRY LIQUOR (200ML POUCH) 2.70/- (AS STATED BY THE ACCOUNTANT NIRANJAN SHARMA 25/- 89.2% 2 IMFL ARISTOCRAT PREMIUM WHISKY 39.8% 13 3 DIRECTOR SPECIAL WHISKY 39.36% 4 HAYWARD STRONG RUM 40% 5 ROYAL CHALLENGE 34.42% 6 RED KINGHT WHISKY 42.2% 7 PETER SCOTCH 42.37% 8 SIGNATURE 33.9% 9 OLD MONK 45.65% 10 BAG PIPER RUM 40% 11 BEER HAYWARD 500 51.16% 12 THUNDER BOLT 45.18% 13 BULLET 45.18% THEREFORE, IT IS VERY EVIDENT FROM THE PROFIT MARGI N AS WORKED OUT ABOVE THAT THE COUNTRY LIQUOR HAS A PROFIT MARGIN A ROUND 75% TO 90% , IMFL AND BEER HAS PROFIT MARGIN AROUND ` 35% TO 50% . THERE MAY BE A DIFFERENCE IN THE PROFIT MARGIN OF EACH PARTY ON AC COUNT OF AREA/LOCATION/POPULATION/DEMAND OF VARIETY/YEAR OF OPERATION ETC BUT MORE OR LESS THE PROFIT MARGIN CAN VARY BETWEEN 2-5%. IN THIS VERY PARTICULAR CASE OF MY ASSESSEE I DECIDE TO TAKE GP IN CASE OF COUNTRY LIQUOR AS 65% AND IN CASE OF IMFL AND BEER AS 35% AND GP OF 5% IN CASE OF WHOLESALE OF IMFL AND BEER. TRADING ACCOUNT (RE CASTED) (BASED ON ABOVE GP RATE ). EXPENDITURE INCOME TO PURCHASE A/C BY SALES ACCOUNT IMFL/BEER (W.S.) 18,43,03,959/- IMFL/BEER (WS) 19,40,04,167/- IMFL/BEER (RETAIL) 39,88,64,950/- IMFL/BEER (RETAIL) 61,36,38,384.6/- 14 COUNTRY LIQUOR 16,42,50,017/- COUNTRY LIQUOR 46,92,85,762.8/- BY CLOSING STOCK IMFL/BEER(WS) 16,67,160/- TO EXPENDITURE A/C IMFL/BEER (W.S.) 20,18,98,297/- IMFL/BEER (RETAIL) 2,61,41,311/- COUNTRY LIQUOR 23,39,160/- GROSS PROFIT 30,07,97,780/- GRAND TOTAL 1,27,85,95,474/- GRAND TOTAL 1,27,85,95,474/- P & L ACCOUNT (RECASTED) EXPENDITURE INCOME TO EXPENDITURE A/C 21,40,34,922/- BY GROSS PROFIT A/C 30,07,97,780/- ALL EXPENSES AS CLAIMED BY THE BY REVENUE A/C ASSESSEE 27,000/- INTEREST AGAINST FDR 9,350/- TO DEPN. 15,43,695/- NET PROFIT 8,52,55,512.5/- GRAND TOTAL 30,08,34,130/- GRAND TOTAL 30,08,34,130/- THEREFORE, NET PROFIT OF THE ASSESSEE IS WORKED OUT TO BE ` 8,52,55,512/- 15 FROM THE ABOVE WORKING OF TO/GP/NP IT IS CRYSTAL CL EARLY THAT THE AO, HAD TAKEN ALL POSSIBLE DUE CARE & ADOPTED SCIENTIFIC ME THODS TO ESTIMATE ACCURATE & REASONABLE TO/GP/NP AFTER COLLECTING THE NECESSARY FACTS & MATERIAL ON RECORD. THESE ADDITIONS WERE CHALLENGED BEFORE THE RESPECTI VE COMMISSIONERS OF INCOME TAX (APPEALS) BY THE ASSESSES, WHO HAVE UPHE LD THE FINDING OF THE ASSESSING OFFICERS ABOUT REJECTION OF BOOKS OF ACCO UNTS UNDER SECTION 145(3) BUT GAVE RELIEF BY REDUCING TRADING ADDITION. IN SOME O F THE CASES, THE CIT(A) RELIED UPON COMPARATIVE CASES OF SIMILARLY SITUATED LIQUOR CONTRACTORS AND PAST HISTORY AND DECIDED THE APPEALS WITHOUT GIVING CLEAR CUT F INDING/BASIS/REASONS BRINGING ANY MATERIAL ON RECORD, FOR REDUCING TRADING ADDITI ON OR UPHOLDING AD HOC ADDITION. THE CITS(A) HAVE NOT APPRECIATED THE FAC TS & FIGURES COLLECTED & FINDING GIVEN BY THE AOS. FORM THE ABOVE FACTS, IT IS NOTICED THAT THE A O HAD PASSED WELL REASONED ORDER AFTER DISCUSSING THE ENTIRE ISSUE AND ALSO BR OUGHT IN MATERIAL ON RECORD, THEREFORE, IT WAS DUTY OF THE CIT(A) TO ADDRESS THE ISSUE IN AN APPROPRIATE MANNER AND NOT IN A SUMMERY OR IN PERFUNCTORY MANNE R. THE CIT(A)S HAVE NOT DISCUSSED THE FACTS OF CASES & SUMMARILY EITHER RED UCED THE ADDITION OR UPHELD THE AD HOC ADDITIONS, WITHOUT GIVING ANY BASIS THER EOF. THE APPELLATE AUTHORITIES SEARCHING OF DEFINIT E EVIDENCE TO TEST THE VALIDITY OF THE ADDITIONS MADE BY THE AO HAS TRANSGRESSED IN TO THE REALM OF INDEFINITENESS FROM THE REALM OF GUESSWORK FOR COMP UTATION OF INCOME, WHERE THE BOOKS OF ACCOUNT OF ASSESSEE HAVE BEEN REJECTED BY THE AO, HOLDING THAT IT IS NOT POSSIBLE TO ASCERTAIN THE TRUE INCOME OF THE ASSESS EE FROM SUCH BOOKS OF ACCOUNT. THE CIT(A) HAS NOT RECORDED ANY SATISFACTO RY FINDING OR REASONING IN RESTRICTING/REDUCING/ESTIMATING LUMP SUM AD HOCK AM OUNT, HENCE, IT IS NOT A SPEAKING ORDER. IT IS WELL SETTLED THAT IN A BEST JUDGMENT ASS ESSMENT THERE IS ALWAYS A CERTAIN DEGREE OF GUESS WORK. THE AUTHORITIES CONCE RNED SHOULD MADE A HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDG MENT ASSESSMENT AND SHOULD 16 NOT ACT ARBITRARILY. IT IS EQUALLY TRUE THAT ASSESS EE IS HIMSELF TO BE BLAMED AS HE DID NOT SUBMIT PROPER ACCOUNTS. IT WAS THE DUTY OF THE ASSESSEE TO PLACE ALL FACTS TRUTHFULLY BEFORE THE AO AND IF HE FAILS TO DO HIS DUTY, HE CANNOT BE ALLOWE D TO CALL UPON THE AO TO PROVE CONCLUSIVELY WHAT TURNOVER HE HAS ACTUALLY SUPPRESS ED BUT, AT THE SAME TIME, SEC. 145 OF THE ACT, 1961 CONFERS SUFFICIENT POWERS UPON THE AO TO MAKE SUCH COMPUTATION IN SUCH MANNER AS HE DETERMINES FOR DED UCING THE CORRECT PROFIT AND GAINS. THIS MEANS THAT WHERE ACCOUNTS ARE PREPARED WITHOUT DISCLOSING TRUE AND CORRECT SALE/INCOME, IT IS THE DUTY OF THE AO TO DE TERMINE THE ACTUAL SALES & TAXABLE INCOME BY MAKING SUCH COMPUTATION AS HE THI NKS FIT AND IT IS THEREFORE NOT ONLY THE RIGHT BUT THE DUTY OF THE AO TO ACT IN EXERCISE OF ITS JUDICIOUS DISCRETION WITHIN THE AMBIT OF LAW FOR DETERMINING THE CORRECT TAXABLE INCOME. IN THESE CASES THE AOS HAVE DULY AND HONESTLY DISCHAR GED THEIR DUTIES BY ADOPTING SCIENTIFIC BASIS, AFTER MAKING ENQUIRIES, COLLECTED FACTS & MATERIAL ON RECORD & GATHER NECESSARY INFORMATION, FOR ESTIMATING THE SA LES/TO & GP/NP OF THE ASSESSES, BASED ON COMPARABLE CASES AND PAST HISTOR Y. THEREFORE, ESTIMATION OF THE AO CANT BE SUBSTITUTED BY ANOTHER ESTIMATION, UNLESS CONTRARY EVIDENCES BROUGHT ON RECORD. IT IS ALSO TRUE THAT WHILE DETERMINING THE COR RECT TAXABLE INCOME IT IS ESTIMATE AGAINST ESTIMATION, BUT THAT SHOULD BE SUP PORTED BY SOME JUSTIFICATION WHICH IS INITIAL DUTY CASTE UPON AO AND WHEN THE AP PEALS ARE BEING PREFERRED EITHER BEFORE THE CIT(APPEALS) OR BEFORE THE ITAT W HO IS THE FINAL FACT FINDING AUTHORITY, THE FINDING OF AO COULD NOT ORDINARILY B E DISTURBED EXCEPT UNDER PERVERSITY. IF APPELLATE AUTHORITIES ARE REVERSING THE FINDING OF THE AOS THEN IT IS OBLIGATORY UPON THEM TO DISCUSS FACTUAL FINDINGS AP PRECIATED BY THE AOS. AS PER NORMS, THE FINDING OF THE AOS ORDINARILY NOT BE DI STURBED EXCEPT ON THE GROUND OF PERVERSITY. IT IS THEREFORE, PRAYED THAT THE APPELLATE AUTH ORITIES SHOULD TAKE CORRECT VIEW, KEEPING IN MIND THE FACT THAT THE ASSESSES HA VE NOT MAINTAINED SALES 17 VOUCHERS, EXPENSE VOUCHERS, STOCK REGISTERS ETC, F OR DETERMINING THE ACTUAL SALES & GP/NP, BASED ON THE FACTS OF THE EACH CASE. THE AO/CIT(A) HAVE COME TO A CATEGORICAL FINDIN G AS TO REJECTION OF BOOKS OF ACCOUNTS AND INVOKING OF PROVISIONS OF SECTION 1 45(3), A FARE ESTIMATE WAS REQUIRED TO BE MADE BY THE ASSESSING OFFICER AND IN ALMOST ALL CASES, THE ASSESSING OFFICERS HAVE PASSED WELL REASONED ORDERS AND THE AO HAVE BROUGHT ADEQUATE MATERIAL ON RECORD TO JUSTIFY THE ADDITION S. FURTHER RELIANCE IS PLACED ON VARIOUS CASE LAWS NAMELY DIRECTOR OF INCOME TAX (EX EMPTION) VS. SHIA DAWOODI BOHRA JAMAT (2012) 344 ITR 653 (GUJ), CIT VS. DEEPA K M KOTHARI (2011) 331 ITR 301 (ALLAHABAD), MANGALORE GANESH BEEDI WORKS VS. CIT (2005) 25CC 329, MYSORE & ANR. & JUDGMENT OF THIS COURT REPORTE D IN 199 CTR 422 (RAJ) CIT VS. SUNIL TALWAR MURLIDHAR & PARTY, ETC. IN THE CASE OF CST VS. H.M. ESUFALI H. M. ABDULAL I 90 ITR 271 (SC), THE HONBLE APEX COURT, INTER ALIA HAS OBSERVED AS UNDE R:- THE ASSESSING AUTHORITY WHILE MAKING THE BEST JUD GMENT ASSESSMENT, NO DOUBT, SHOULD ARRIVE AT ITS CONCLUSION WITHOUT A NY BIAS AND ON RATIONAL BASES. THAT AUTHORITY SHOULD NOT BE VINDICTIVE OR CAPRICIO US. IF THE ESTIMATE MADE BY THE ASSESSING AUTHORITY IS A BONA FIDE ESTIMATE AND IS BASED ON A RATIONAL BASIS, THE FACT THAT THERE IS NO GOOD PROOF IN SUPPORT OF THAT ESTIMATE IS IMMATERIAL. PRIMA FACIE, THE ASSESSING AUTHORITY IS THE BEST JUDGE O F THE SITUATION. IT IS HIS BEST JUDGMENT AND NOT OF ANYONE ELSE. THE HIGH COURT CO ULD NOT SUBSTITUTE ITS BEST JUDGMENT FOR THAT OF THE ASSESSING AUTHORITY. IN T HE CASE OF BEST JUDGMENT ASSESSMENTS, THE COURTS WILL HAVE TO FIRST SEE WHET HER THE ACCOUNTS MAINTAINED BY THE ASSESSEE WERE RIGHTLY REJECTED AS UNRELIABLE . IF THEY COME TO THE CONCLUSION THAT THEY WERE RIGHTLY REJECTED, THE NEX T QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER THE BASIS ADOPTED IN ESTIM ATING THE TURNOVER HAS REASONABLE NEXUS WITH THE ESTIMATE MADE. IT THE BAS IS ADOPTED IS HELD TO BE A RELEVANT BASIS EVEN THOUGH THE COURTS MAY THINK THA T IT IS NOT THE MOST APPROPRIATE BASIS, THE ESTIMATE MADE BY THE ASSESSI NG AUTHORITY CANNOT BE DISTURBED. IN THE PRESENT CASE, THERE IS NO DISPUTE THAT THE ASSESSEES ACCOUNTS 18 WERE RIGHTLY DISCARDED. WE DO NOT AGREE WITH THE HI GH COURT THAT IT IS DUTY OF AO TO ADDUCE PROOF IN SUPPORT OF ITS ESTIMATE, THE BAS IS ADOPTED BY THE AO WAS A RELEVANT ONE WHETHER IT WAS THE MOST APPROPRIATE OR NOT. THIS CASE IS SQUARELY APPLICATION & COVERS THE FINDING/ESTIMATION OF TURNOVER/SALE & GP/NP MADE BY THE AOS IN THESE CASES. IN THE CASE OF KACHWALA GEMS VS. JCIT 288 ITR 10 (S C), INTER ALIA HELD AS UNDER:- WHETHER THERE WERE BOGUS PURCHASES OR NOT, IS A FIN DING OF FACT, AND THE COURT CANNOT INTERFERE WITH THE SAME IN THI S APPEAL. AS REGARDS THE REJECTION OF THE BOOKS OF ACCOUNT, COGENT REASO NS HAVE BEEN GIVEN BY THE IT AUTHORITIES FOR DOING SO, AND THERE IS NO REASON TO TAKE A DIFFERENT VIEW. IT IS WELL SETTLED THAT IN A BEST J UDGMENT ASSESSMENT THERE IS ALWAYS A CERTAIN DEGREE OF GUESSWORK. NO DOUBT T HE AUTHORITIES CONCERNED SHOULD TRY TO MAKE AN HONEST AND FAIR EST IMATE OF THE INCOME EVEN IN A BEST JUDGMENT ASSESSMENT, AND SHOULD NOT ACT TOTALLY ARBITRARILY, BUT THERE IS NECESSARILY SOME AMOUNT O F GUESSWORK INVOLVED IN A BEST JUDGMENT ASSESSMENT, AND IT IS THE ASSESS EE HIMSELF WHO IS TO BLAME AS HE DID NOT SUBMIT PROPER ACCOUNTS. THERE W AS NO ARBITRARINESS IN THE PRESENT CASE ON THE PART OF THE IT AUTHORITI ES. IN THE CASE OF CIT VS. BRITISH PAINTS INDIA LTD. 18 8 ITR 44 (SC) THE HONBLE COURT, INTER ALIA HELD AS UNDER:- IT IS NOT ONLY THE RIGHT BUT THE DUTY OF THE AO TO CONSIDER WHETHER OR NOT THE BOOKS DISCLOSED THE TRUE STATE OF ACCOUN TS AND THE CORRECT INCOME CAN BE DEDUCED THERE FROM. IT IS INCORRECT T O SAY, AS CONTENDED ON BEHALF OF THE ASSESSEE, THAT THE OFFICER IS BOUN D TO ACCEPT THE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE TH E CORRECTNESS OF WHICH HAD NOT BEEN QUESTIONED IN THE PAST. THERE IS NO ESTOPPEL IN THESE MATTERS, AND THE OFFICER IS NOT BOUND BY THE METHOD FOLLOWED IN THE EARLIER YEARS. 19 FROM THE ABOVE FACTS IT IS SEEN THAT THE AO, HAVE R IGHTLY REJECTED INCOMPLETE/UNRELIABLE ACCOUNTS AND HAVE MADE BEST J UDGMENT IN ESTIMATING TO/GP/NP IN THESE CASES, AFTER COLLECTIN G THE NECESSARY MATERIAL/INFORMATION ON RECORDS. ON THE OTHER HAND , THE CIT(A)S HAVE ALLOWED RELIEF TO THE ASSESSEES WITHOUT APPRECIATI NG THE FACTS OF THE CASE & FINDING GIVEN BY THE AOS. AGAINST THE ORDERS OF THE CIT(A), REVENUE HAS PREFE RRED APPEAL BEFORE ITAT AND IN SOME OF THE CASES, THE ASSESSES HAVE AL SO CHOSEN TO FILE APPEAL. THE ITAT, AFTER HEARING THE PARTIES, AGREED WITH THE CONTENTION AS TO REJECTION OF THE BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE ACT AND IN SOME CASES, EVEN THE COUNSELS FOR THE ASSESSES A DMITTED THAT PROVISIONS OF SECTION 145 ARE APPLICABLE. HOWEVER, IN SO FAR AS THE ADDITION ON ACCOUNT OF QUANTUM, THE ITAT, DID NOT A DOPT A PARTICULAR YARDSTICK ON ACCOUNT OF THE FACT THAT, DIFFERENT PL ACES MAY HAVE DIFFERENT FACTS AND CHOSE TO REDUCE THE GP RATE/NP RATE/ADHO C ADDITION. THE ITAT HAS NEITHER DISCUSSED THE FACTUAL FOUNDATION AND SU BMISSIONS AND BY CRYPTIC ORDER DECIDED THE APPEALS, WITHOUT APPRECIA TING THE FINDINGS OF THE AO. IN VIEW OF THESE FACTS, THE HONBLE HIGH COURT HAS SET ASIDE THE MATTERS BACK TO THE ITAT TO ADJUDICATE ALL THESE CA SES AFRESH. KEEPING IN VIEW THE ABOVE DISCUSSION, THE CLEAR CUT/DETAILED F INDINGS GIVEN BY THE AO, WITH REGARD TO ESTIMATION OF SALES AND GP/NP, MAY P LEASE BE UPHELD AND ORDER OF THE CIT(A), BE SET-ASIDE. 6. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSES SEE FILED WRITTEN SUBMISSIONS. HE CONTENDED THAT ASSESSING OFFICER HAS MADE TRADING A DDITION OF RS.112,98,625 IN THE COUNTRY LIQUOR ACCOUNT BY APPLYING GP RATE OF 78% O N AN ESTIMATED TURNOVER OF RS.4 CRORES. LEARNED ASSESSING OFFICER HAD MADE REFEREN CE TO FOUR CASES WHERE G.P. IS RANGING IN BETWEEN 65% TO 77.78% BUT ALL THESE FOUR CASES R ELATE TO ASSESSMENT YEAR 1994-95. THE YEAR UNDER REFERENCE IS 1999-2000. IF THE ADDITION MADE BY THE ASSESSING OFFICER ARE 20 SUSTAINED, THEN, IT WOULD RESULT A RETURN ON INVEST MENT AT 244% IN ONE YEAR WHICH IS IMPOSSIBLE. SIMILARLY, IN THE IMFL ACCOUNT, G.P. RA TE DECLARED BY THE ASSESSEE IS BETTER THAN THE ONE APPLIED BY THE ASSESSING OFFICER IN TH E LAST YEAR. 7. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AND G ONE THROUGH THE RECORDS CAREFULLY. SECTION 145 HAS A DIRECT BEARING ON THE CONTROVERSY, THEREFORE, IT IS SALUTARY UPON US TO TAKE NOTE OF THIS PROVISI ON. '145(1) INCOME CHARGEABLE UNDER THE HEAD PROFITS A ND GAINS OF BUSINESS OR PROFESSION OR INCOME FROM OTHER SOURCES SHALL, S UBJECT TO THE PROVISIONS OF SUB-SECTION (2), BE COMPUTED IN ACCORDANCE WITH EIT HER CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSE SSEE. (2) THE CENTRAL GOVERNMENT MAY NOTIFY IN THE OFFICI AL GAZETTE FROM TIME TO TIME ACCOUNTING STANDARDS TO BE FOLLOWED BY ANY CLASS OF ASSESSEES OR IN RESPECT OF ANY CLASS OF INCOME. (3) WHERE THE ASSESSING OFFICER IS NOT SATISFIED AB OUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WH ERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) OR ACCOUNTIN G STANDARDS AS NOTIFIED UNDER SUB-SECTION (2), HAVE NOT BEEN REGULARLY FOLL OWED BY THE ASSESSEE, THE ASSESSING OFFICER MAY MAKE AN ASSESSMENT IN THE MAN NER PROVIDED IN SECTION 144.' 8. FROM THE BARE READING OF THIS SECTION, IT WOULD RE VEAL THAT IT PROVIDES THE MECHANISM HOW TO COMPUTE THE INCOME OF THE ASSESSEE . ACCORDING TO SUB- CLAUSE ( I ), THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AN D GAINS OF THE BUSINESS OR PROFESSIONS OR INCOME FROM OTHER SOURCE S' SHALL BE COMPUTED IN ACCORDANCE WITH THE METHOD OF ACCOUNTANCY EMPLOYED BY AN ASSESSEE REGULARLY 21 SUBJECT TO THE SUB-SECTION (2) OF SECTION 145 OF TH E ACT. SUB-SECTION (2) PROVIDES THAT THE CENTRAL GOVERNMENT MAY NOTIFY IN THE OFFIC IAL GAZETTE FROM TIME TO TIME THE ACCOUNTING STANDARD REQUIRED TO BE FOLLOWED BY ANY CLASS OF ASSESSEE IN RESPECT OF ANY CLASS OF INCOME. THUS, IT INDICATES THAT INCOME HAS TO BE COMPUTED IN ACCORDANCE WITH THE METHOD OF ACCOUNTAN CY FOLLOWED BY AN ASSESSEE, I.E., CASH OR MERCANTILE. SUCH METHOD HAS TO BE FOLLOWED KEEPING IN VIEW THE ACCOUNTING STANDARD NOTIFIED BY THE CENTRA L GOVERNMENT FROM TIME TO TIME. SUB-CLAUSE (3) PROVIDES A SITUATION, I.E., IF THE ASSESSING OFFICER IS UNABLE TO DEDUCE THE TRUE INCOME ON THE BASIS OF METHOD OF AC COUNTANCY FOLLOWED BY AN ASSESSEE THEN HE CAN REJECT THE BOOK RESULTS AND AS SESS THE INCOME ACCORDING TO HIS ESTIMATE OR ACCORDING TO HIS BEST JUDGMENT. THE ASSESSING OFFICER IN THAT CASE IS REQUIRED TO POINT OUT THE DEFECTS IN THE AC COUNTS OF ASSESSEE AND REQUIRE TO SEEK EXPLANATION OF THE ASSESSEE QUA THOSE DEFECTS. IF THE ASSESSEE FAILED TO EXPLAIN THE DEFECTS THEN ON THE BASIS OF THE BOOK R ESULTS, INCOME CANNOT BE DETERMINED AND ASSESSING OFFICER WOULD COMPUTE THE INCOME ACCORDING TO HIS ESTIMATION KEEPING IN VIEW THE GUIDING FACTOR FOR E STIMATING SUCH INCOME. WHERE A STOCK ACCOUNT IS NOT MAINTAINED AND RECONCILIATIO N IS NOT POSSIBLE IN BETWEEN THE AGGREGATE OF STOCK ON OPENING DATE AND STOCKS P URCHASED WITH THE AGGREGATE OF STOCK SOLD AND AVAILABLE IN CLOSING STOCK OR SAL ES ARE NOT VERIFIABLE THEN, IN SUCH CASES, IF THE GROSS PROFIT IS LOW IN COMPARIS ON WITH PAST YEARS OR IN COMPETITIVE BUSINESS, THEN ASSESSING OFFICER CAN RE JECT THE BOOK RESULTS AND ESTIMATE THE INCOME. 22 9. ADMITTEDLY, THE BOOKS OF THE ASSESSEE ARE NOT RE LIABLE, 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, 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 : 23 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.} 10. A BARE PERUSAL OF THIS SECTION WOULD SUGGEST TH AT 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. 11. APART FROM THE ABOVE PROPOSITION, WE ARE CONSC IOUS 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 24 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. HIS BRIEF FINDING READS AS U NDER: PROFIT FROM COUNTRY LIQUOR THE TRADITIONAL METHOD EMPLOYED IN RAJASTHAN STATE FOR COUNTRY LIQUOR AS WELL AS IMFL AND BEER IS TO ESTIMATE THE SALES AND TO APPLY A GROSS PROFIT RATE THEREON. AS PER THE SEPARATE TRADING ACCOUNT GIVEN BY THE ASSESSEE FOR COUNTRY LIQUOR THE SALES SHOWN ARE RS.3,28,40,708 ON WHICH GROSS PROFIT OF RS.1,99,01,375 HAS BEEN SHOWN GIVING A GROSS PROFIT RATE OF 60.59% ON WHICH GROSS PROFIT OF RS.1,99,01,375 HAS BEEN SHOWN GIVING A GROSS PROFIT RATE OF 60.59% WHICH IS LOW IN COUNTRY LIQUOR TRADE. IN THE CASE OF BMD KHAN ME NTIONED AT PAGE 2 OF THE ORDER 2 (ITA NO. 1549/JP/97 A.Y. 94-95) THE ASSESSE E HAS SHOWN A GROSS PROFIT RATE OF 7.78%. IN THE CASE OF M/S. KANHAIYALAL KAIL ASH CHAND THE G.P. RATE SHOWN WAS 63.64%. IN HIS RATE OF M/S. SHAKUNTLA KANWAR & PARTY KHETRI, THE G.P. RATE UPHELD BY THE ITAT JAIPUR IN ITA NO.200/JP/1998 A.Y . 94-95 WAS 65.4%. IN THIS VERY CASE THE ITAT, JAIPUR HAS CITED A NUMBER OF CA SES OF COUNTRY LIQUOR WHERE THE GROSS PROFIT RATE HAS VARIED FROM 52% TO 65.5%. THEREFORE, KEEPING IN VIEW THE FACT MENTIONED ABOVE I APPLY A GROSS PROFIT RATE OF 78% ON ESTIMATED SALES OF RS.4,00,000 IN TH E COUNTRY LIQUOR A/C WHICH WILL BRING HIS GROSS PROFIT AT RS.3,12,00,000 AS AGAINST THE DECLARED G.P. OF RS.1,99,01,375 AND WILL RESULT IN AN ADDITION OF RS .1,12,98,625. IMFL & BEER ACCOUNT A CONSOLIDATED TRADING ACCOUNT HAS BEEN PREPARED AN D FILED BY THE ASSESSEE. THE GROSS SALES DECLARED ARE AT RS.1,82,7 9,676 ON WHICH GROSS PROFIT OF RS.72,41,450 GIVING THEREBY A G.P. RATE OF 39.61%. BUT THIS IS LOW. THE ANOTHER SISTER CONCERN OF THE ASSESSEE AOP HAVING SAME NAME BUT SEPARATE GROUP VIZ. M/S. BANNU ALI GIRDHAN SINGH & PARTY (JHUNHJUNU GRO UP) HAS SHOWN A GROSS PROFIT RATE OF 48% IN IMFL & BEER ACCOUNT FOR THE S AME ASSESSMENT YEAR. NO BETTER COMPARABLE CASE CAN BE GIVEN, OTHER THAN THI S. THIS GROUP CASE IS THE BEST GUIDE & EXAMPLE OF ADOPTING A GROSS PROFIT RATE EOF 48% IN THIS ACCOUNT. I, 25 THEREFORE, ESTIMATE THE SALE AT RS.2,00,00,000 AND WORKED OUT THE GROSS PROFIT @ 48% AT WHICH WILL RESULT IN AN ADDITION OF RS.23,58 ,550. IN VIEW OF THE ABOVE DISCUSSION TOTAL INCOME IS COM PUTED AS UNDER: INCOME DECLARED BY THE ASSESSEE. RS. 4,72,260 ADD: 1. ADDITION IN COUNTRY LIQUOR A/C AS DISCUSSED ABOVE. RS.1,12,98,625 2. ADDITION IN IMFL & BEER A/C. RS. 23, 58,550 AS DISCUSSED ABOVE. TOTAL: RS.1,41,29,435 ROUNDED OFF RS.1,41,29,440 ASSESSEE ISSUE NECESSARY FORMS DEMAND NOTICE AND CH ALLAN CHARGE INTEREST AS PER RULES . 12. LET US FIRST CONSIDER FIRST THE SUBMISSIONS MAD E BY THE LEARNED DR. LEARNED DR HAS HIGHLIGHTED THE CIRCUMSTANCES WHICH GOAD THE AS SESSING OFFICER TO REJECT THE BOOK RESULTS. SINCE BOOKS OF ACCOUNTS HAVE BEEN REJECTE D AND ASSESSEE IS NOT DISPUTING THE REJECTION OF BOOKS, THEREFORE, THE SUBMISSIONS MADE ON PAGE NOS. 1 TO 3 UP TO PARAGRAPH 4 ARE CONCERNED, THEY ARE NOT RELEVANT FOR THE CONTRO VERSY IN HANDS. THEREAFTER, LEARNED DR HAS REPRODUCED PART OF ASSESSMENT ORDER IN THE CASE OF RAJARAM RAJENDRA BHANDARI & PARTY. 13. ON PERUSAL OF THE ASSESSMENT ORDER REPRODUCED BY THE LEARNED CIT(DR), IT REVEALS THAT FOR COMPUTING THE ESTIMATED ADDITION, LEARNED ASSESSING OFFICER HAS MADE REFERENCE TO A MATERIAL FOUND DURING THE COURSE OF SURVEY CONDUCTED ON 21.3.2003 ON A DIFFERENT ASSESSEES (NOT IN THE CASE OF RARARAM RAJ ENDRA BHANDARI). THUS, THE DETAILS WHICH ARE REFERRED ARE NOT CONSIDERED BY THE ASSESS ING OFFICER IN THE PRESENT CASE. BEFORE 26 PROCEEDINGS FURTHER, WE WOULD LIKE TO MAKE A REFERE NCE TO THE ITATS ORDER IN THE CASES OF SLOCUM INVESTMENT PVT. LTD. VS. DCIT REPORTED IN 106 ITD PAGE 1, WHEREBY ITAT HAS EXPLAINED THE SCOPE OF DEPARTMENTS APPEAL IN PARA 181. IT IS PERTINENT TO TAKE NOTE OF THE FOLLOWING OBSERVATIONS: 181. WE ARE ALSO OF THE VIEW WHERE AN ASSESSEE S EEKS TO PUT FORTH A NEW PLEA BEFORE TRIBUNAL WITHOUT FACTS NECESSARY FOR ADJUDIC ATION OF APPEAL BEING AVAILABLE ON RECORD IN ALLOWING SUCH PLEA, THE APPROACH OF TH E TRIBUNAL SHOULD BE DIFFERENT FOR4 THE FOLLOWING REASONS:- (A) AN ASSESSEE HAS NO OTHER AVENUE AND IF ON THE FACTS AND IN LAW IF ULTIMATELY IT IS FOUND THAT THE ASSESSEE IS NOT LIA BLE TO TAX THE REVENUE CANNOT HAVE GRIEVANCE. AFTER ALL, ARTICLE 265 OF TH E CONSTITUTION OF INDIA PROVIDES THAT NO TAX SHALL BE LEVIED AND COLL ECTED EXCEPT BY AUTHORITY OF LAW. IF ULTIMATELY THE ASSESSEE IS FOU ND TO BE LIABLE TO TAX, HE COMPENSATES THE REVENUE IN THE FORM OF INTEREST. THEREFORE, THE TRIBUNAL CAN EVEN THINK OF A REMAND OF THE CASE FOR A FINDING ON FACTS OR CAN ADJUDICATE ON FACTS ITSELF. (B) ON THE OTHER HAND THE REVENUE HAS OTHER OPTIONS OPE N TO IT UNDER THE ACT. IF THE ORDER OF AN ASSESSING OFFICER IS ERRONE OUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE THE SAME CAN BE REVISE D BY THE CIT UNDER SEC. 263 OF THE ACT. IF INCOME CHARGEABLE TO TAX ES CAPES ASSESSMENT, PROCEEDINGS UNDER SEC. 147 CAN BE INITIATED TO BRIN G TO TAX SUCH ESCAPED INCOME. IN AN APPEAL BY THE ASSESSEE AGAINS T THE ORDER OF THE ASSESSING OFFICER, THE CIT(A) HAS POWER OF ENHANCEM ENT UNDER SEC. 251 OF THE ACT. (C) THE REVENUE DOES NOT HAVE A RIGHT OF APPEAL AGAINST THE ORDER OF THE ASSESSING OFFICER. THEREFORE, IF ASSESSING OFFICER DOES NOT INVOKE SEC. 93, AND IF THE SAME WAS ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF REVENUE, THE SAME COULD BE REVISED BY THE CIT UNDER SECTION 263. 27 14. THUS, THE FACTS WHICH ARE NOT CONSIDERED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER CANNOT BE PERMITTED TO BE BROUGHT ON RECORD AT THE SECOND APPELLATE STAGE. APART FROM THAT AN ANALYSIS OF THESE DETAILS STILL REQUIRED TO BE MADE BECAUSE CERTAIN CALCULATIONS HAVE BEEN MADE BY THE ASSESSIN G OFFICER WITHOUT CONSIDERING THE PAYMENT OF SHORTFALL LICENSE FEE. THE ASSESSEE IS A LIQUOR CONTRACTOR. ACCORDING TO THE TERMS OF LICENSE, A LIQUOR CONTRACTOR IS REQUIRED T O LIFT LIQUOR FROM THE GOVERNMENT OF RAJASTHAN FOR A SPECIFIED VALUE, IF THE CONTRACTOR DOES NOT TAKE DELIVERY FOR THE SPECIFIED VALUE, IT IS LIABLE TO MAKE GOOD THE DEFICIENCY OF BID MONEY (EXCISE DUTY) AT THE END OF THE YEAR TO THE STATE GOVERNMENT. IT IS CALLED AS SHORT LICENSE FEE. THE SHORT LICENSE FEE PAYMENTS ARE DIRECTLY LINKED WITH THE PROFITABILITY IN THE SENSE THAT WHEN THERE IS LESS DEMAND OF LIQUOR, A CONTRACTOR PREFERS TO LIFT LOWE R QUANTITY OF LIQUOR AND PAY SHORTFALL OF EXCISE DUTY. WHETHER CREDIT OF THAT SHORTFALL FEES HAS BEEN GIVEN TO THE ASSESSEE OR NOT WHILE CALCULATING THE ULTIMATE NET PROFIT IS ONE OF THE IMPORTANT FACTORS. THUS, THESE DETAILS CANNOT TAKE THE CASE OF LEARNED DR ANY FURTHER. 15. REVERTING BACK TO THE PRESENT CASE, IT IS TO BE SEEN THAT THE RATE OF G.P. IN A YEAR DEPENDS ON MONEY FACTORS. IN THE CASE OF A LIQUOR C ONTRACTOR, SOME OF THE FACTORS ARE (A) GEOGRAPHICAL CONDITION OF A PARTICULAR AREA; (B) EX CISE POLICY OF THE STATE GOVERNMENT FOR A PARTICULAR YEAR; (C) POLITICAL CONDITION, NATURA L PROSPERITY OR CALAMITY, TOURS AND PUBLIC, (D) SOCIO AND ECONOMIC CONDITIONS OF A PARTICULAR A REA, POPULATION MIX I.E. URBAN OR RURAL OF A PARTICULAR AREA. THESE ARE SOME OF THE FACTORS AMONGST OTHERS WHICH MAY INFLUENCE THE TRADING RESULTS OF AN ASSESSEE. IT IS ALSO PERT INENT TO NOTE THAT GENERAL MARKET CONDITION 28 BASED ON DEMAND AND SUPPLY POSITION, THE RISE OR FA LL IN THE MARKET RATES, THE EXPERIENCE AND AVAILABILITY OF FUNDS WITH THE CONTRACTOR ARE A LSO SOME OF THE OTHER FACTORS. 16. WE HAVE EXTRACTED THE ASSESSMENT ORDER, ON PERU SAL OF THIS; IT REVEALS THAT WHILE ESTIMATING THE G.P. AT 78% IN THE COUNTRY LIQUOR AC COUNT, LEARNED ASSESSING OFFICER IS HARPING UPON THREE CASES AND THEN ADOPTED THE RATE AVAILABLE AT THE HIGHEST. THE STAND OF THE ASSESSEE IS THAT INSTEAD OF COMPARING ITS RESUL TS WITH CASES OF THREE CONCERNS FOR ASSESSMENT YEAR 1994-95, ASSESSING OFFICER OUGHT TO HAVE CONSIDERED THE MATERIAL OF SIMILAR ASSESSEE IN ASSESSMENT YEAR 1999-00. THE AS SESSEE FURTHER POINTED OUT THAT BEFORE LEARNED CIT(APPEALS), IT WAS DEMONSTRATED THAT G.P. IN COUNTRY LIQUOR ACCOUNT OF THIS YEAR VARIED IN BETWEEN 52% TO 65.5%. IT WAS ALSO PO INTED OUT THAT IT IS QUITE IMPOSSIBLE TO GIVE A RETURN OF 244% OF THE INVESTMENT. THE G.P. D ECLARED BY THE ASSESSEE IN THIS YEAR AT 60.59% IN THE COUNTRY LIQUOR IS BETTER THAN THE G.P . DECLARED BY THE ASSESSEE AT 54.18% AND APPLIED BY THE ASSESSING OFFICER AT 56% IN THE LAST YEAR. SIMILARLY, WE HAVE EXAMINED THE IFML/BEER ACCOUNT, THE G.P. DECLARED B Y THE ASSESSEE IS BETTER THAN ITS SISTER CONCERN. IT IS SHORT LICENSE FEE WHICH HAS INFLUENC ED THE RESULT. LEARNED FIRST APPELLATE AUTHORITY HAS CONSIDERED ALL THESE ASPECTS WHILE RE STRICTING THE ADDITIONS. WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF THE LEARNED CIT(APPEALS). THE ORDER IS 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* 29 COPY FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. CIT(APPEALS) 5. THE DR