The ACIT, Bhopal V. M/s.. Avinash Chalana & Co.,C/o. Saurabh Gupta, Bhopal

ITA 78/IND/2010

• Counselvise Citation: 7822714 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 16-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR MITRA
• Assessee Lawyers: R N GUPTA
• Keywords: Rejection of books of accounts; Business income

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.78/IND/2010 A.Y. 2006-07 ACIT-1(1), BHOPAL APPELLANT VS M/S. AVINASH CHALANA & CO., BHOPAL PAN AALFA 4929 P RESPONDENT APPELLANT BY : SHRI PRADEEP KUMAR MITRA, SR. DR RESPONDENT BY : SHRI R.N. GUPTA, CA O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A)-I, BHOPAL, DATED 10.11.2009 ON THE GROUND TH AT THE LD. CIT(A) ERRED IN DELETING THE ADDITION IN NE T PROFIT MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SEC. 145(3) AND DIRECTING THE ASSESSING OFFICER TO ACCEPT THE I NCOME DECLARED BY THE ASSESSEE. 2 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD SHR I PRADEEP KUMAR MITRA, LD. SR. DR FOR THE REVENUE AND SHRI R.N. GUPTA, LD. COUNSEL FOR THE ASSESSEE. THE CRUX OF AR GUMENTS ON BEHALF OF THE REVENUE IS THAT THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION WITHOUT CONSIDERING THE PROVI SIONS OF SEC. 145(3) AND FURTHER DIRECTING THE ASSESSING OFFICER TO ACCEPT THE INCOME AS DECLARED BY THE ASSESSEE. ON THE OTHER HA ND, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY DEFENDED THE IMPU GNED ORDER BY SUBMITTING THAT THERE IS NO INFIRMITY IN T HE IMPUGNED ORDER. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. BEFORE COMING TO ANY CONCLUSIO N, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION AS CONTA INED IN PARA 3.4 OF THE IMPUGNED ORDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND FACTS OF THE CASE. IN THIS CASE, THE APPELLANT WAS GRANTED LICENSES FOR SALE OF COUNTRY LIQUOR, IMFL AND BEER FOR A LIMITED PERIOD OF ONE YEAR ONLY. THERE WAS NO OPENING OR CLOSING STOCK OF THE GOODS DEALT WITH BY THE 3 APPELLANT. THE BOOKS OF ACCOUNTS HAVE BEEN REGULARLY MAINTAINED FOR THE BUSINESS CARRIED ON BY THE APPELLANT. THESE BOOKS WERE DULY AUDITED AND THE AUDIT REPORT WAS FURNISHED ALONG WITH THE RETURN. THE ASSESSING OFFICER HAD NOT POINTED OUT ANY DISCREPANCY IN THE QUANTITATIVE DETAILS OF PURCHASE OR SALE EFFECTED BY THE APPELLANT. THE COST OF GOODS I.E. PURCHASE PRICE PAID BY THE APPELLANT STAND DULY ACCEPTED BY THE ASSESSING OFFICER WITH NO ADVERSE COMMENTS THEREON. THE APPELLANT COMPANY PURCHASED THE LIQUOR BASED ON PERMITS GRANTED BY THE EXCISE DEPARTMENT. THE ASSESSING OFFICER HAD ALSO NOT POINTED OUT ANY DEFECT, DEFICIENCY OR INFIRMITY IN THE EXPENSES DEBITED TO THE PROFIT & LOSS ACCCOUNT. THE ASSESSING OFFICER HAD REJECTED THE BOOKS OF ACCOUNTS MERELY ON THE GROUND THAT CASH VOUCHERS WERE NOT MAINTAINED BY THE APPELLANT FOR THE SALES MADE. THOUGH THE APPELLANT DID NOT MAINTAIN ANY CASH VOUCHERS FOR THE SALE OF LIQUOR, THE FACT REMAIN THAT THE DAILY SALES EFFECTED WERE TAKEN INTO SALES ACCOUNT IN THE BOOKS OF ACCOUNTS REGULARLY MAINTAINED BY THE APPELLANT. THE ASSESSING OFFICER HAD NOT BROUGHT OUT ANY MATERIAL ON RECORD TO PROVE THAT EITHER THE SALES AHD BEEN UNDER-RECORDED OR UNACCOUNTED SALES WERE MADE BY THE APPELLANT. SINCE, THE QUANTITY OF THE LIQUOR IS REGULATED BY THE EXCISE DEPARTMENT AND NO DISCREPANCY IN STOCK OR QUANTITATIVE DETAILS WAS FOUND BY THE ASSESSING OFFICER, NON MAINTENANCE OF SALES VOUCHER COULD NOT ALONE BE A BASIS TO REJECT THE BOOKS OF ACCOUNTS. IT IS ALSO 4 NOTICED IN THIS CASE THAT THE APPELLANT HAD SHOWN NET PROFIT OF 1.77%, WHICH WAS CLAIMED BY THE APPELLANT TO BE REASONABLE CONSIDERING THE PREVAILING RATE IN THE TRADE OF COUNTRY LIQUOR AND IMFL. IT MAY ALSO BE NOTED THAT IT IS NOT POSSIBLE TO HAVE CONSTANT GROSS PROFIT OR NET PROFIT IN A TRADE. SINCE NO MATERIAL WAS BROUGHT ON RECORD TO SHOW THAT THE SALES WERE MADE OUTSIDE THE BOOKS OF ACCOUNTS OF THE APPELLANT OR THE AMOUNT OF SALE WAS UNDERSTATED, THE SALES SHOWN BY THE APPELLANT CANNOT BE DISTURBED. I AM IN AGREEMENT WITH THE SUBMISSION OF THE APPELLANT THAT NON- ISSUING OF CASH MEMO IS A GENERAL PRACTICE IN THE LINE OF TRADE AND IS GENERALLY AN ACCEPTED AND PREVALENT PRACTICE. IT MAY BE NOTED THAT ABSENCE OF CASH MEMO IN A GIVEN SITUATION LIKE LIQUOR TRADE MAY NOT PER SE LEAD TO AN INFERENCE THAT THE ACCOUNTS ARE INCORRECT OR INCOMPLETE. HERE IN THE CASE OF APPELLANT, THE ASSESSING OFFICER HAD NOT POINTED OUT ANY DEFECT OR DEFICIENCY IN THE BOOKS OF ACCOUNTS AND ,THEREFORE, THERE WAS NO SUFFICIENT GROUND WITH THE ASSESSING OFFICER FOR INVOKING PROVISIONS U/S 145(3) OF THE I.T. ACT. SINCE PROVISIONS OF SECTION 145(3) OF THE I.T. ACT ARE NOT APPLICABLE IN THIS CASE AND THE BOOKS OF ACCOUNTS HAVE NOT BEEN VALIDLY REJECTED, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ESTIMATING THE SALES AT A HIGHER FIGURE AND APPLYING A HIGHER NET PROFIT THAN DECLARED BY THE APPELLANT. 5 4. IF THE AFORESAID CONCLUSION DRAWN IN THE IMPUGNE D ORDER IS KEPT IN JUXTAPOSITION WITH THE ARGUMENTS ADVANCED B Y THE LD. RESPECTIVE COUNSEL AND THE MATERIAL AVAILABLE ON RE CORD, WE FIND THAT THE ASSESSEE FIRM WAS ENGAGED IN THE BUSINESS OF SALE OF LIQUOR AND BEER IN VARIOUS SHOPS ALLOTTED IN THE DI STRICTS OF JABALPUR, INDORE, RAISEN AND KHANDWA DURING THE REL EVANT PERIOD. THE ASSESSEE FURNISHED RETURN DECLARING INC OME AT RS.12,50,760/- ON 31.10.2006 FOR THE IMPUGNED ASSES SMENT YEAR. IT WAS NOTED BY THE ASSESSING OFFICER THAT TH E ASSESSEE FIRM SHOWED TOTAL SALES AT RS.8,89,09,784/- AND BEF ORE ALLOWING SALARY TO PARTNERS, THE NET PROFIT WAS SHOWN AT RS. 15,70,760/- RESULTING INTO NET PROFIT RATE OF 1.77%. THE ASSESS EE ALSO SHOWED INTEREST ON FDR AT RS.82,230/-. AS PER THE L D. ASSESSING OFFICER, THE NET PROFIT SHOWN BY THE ASSE SSEE WAS TOWARDS LOWER SIDE BY OBSERVING THAT THE ASSESSEE S HOWED ALL SALES IN CASH AND CASH MEMOS WERE NOT MAINTAINED WH EREAS THE STAND OF THE ASSESSEE WAS THAT THE RETAIL BUSIN ESS WAS TOTALLY CONTROLLED AND GOVERNED BY EXCISE RULES AND THE EXCISE DEPARTMENT HAS DAY TO DAY CONTROL ON THE BUSINESS O F THE 6 ASSESSEE AND ALSO THE SELLING PRICE OF THE LIQUOR W AS DISPLAYED ON THE SIGN BOARD AND THE STAFF OF THE EXCISE DEPAR TMENT REGULARLY USED TO INSPECT THE LIQUOR SHOPS ENSURING THAT THE INDICATED PRICE IS NOT CHARGED MORE THAN WHAT IS STIPULATED/DISPLAYED ON THE BOARD. THERE IS UNCONTR OVERTED FINDING IN THE IMPUGNED ORDER THAT THERE WAS NOT OP ENING OR CLOSING STOCK OF THE GOODS OF THE ASSESSEE AND THE BOOKS WERE REGULARLY MAINTAINED WHICH WERE DULY AUDITED AND VE RIFIED AND THE SAME WERE DULY FURNISHED ALONG WITH THE RETURN. EVEN OTHERWISE, NO DISCREPANCY IN ANY MANNER IN QUANTITA TIVE DETAILS WERE FOUND BY THE ASSESSING OFFICER. THE COST OF GO ODS I.E. PURCHASE PRICE, PAID BY THE ASSESSEE, WAS DULY ACCE PTED WITH NO ADVERSE COMMENT AND THE LIQUOR WAS PURCHASED ON THE BASIS OF THE PERMIT GRANTED BY THE EXCISE DEPARTMEN T. NORMALLY, IN THE RETAIL SHOP OF LIQUOR, CASH SALE I S MADE. HOWEVER, THE SALES EFFECTED WERE DULY TAKEN INTO SA LES ACCOUNT. THERE IS NO EVIDENCE ON RECORD TO PROVE THAT EITHER THE SALES WERE UNDER RECORDED. THERE IS A FURTHER FINDING THA T THE NET PROFIT OF 1.77% WAS REASONABLE, CONSIDERING THE PRE VAILING RATES 7 IN THE TRADE. IN VIEW OF THESE FACTS, WE FIND NO JU STIFICATION FOR INVOKING THE PROVISIONS OF SEC. 145(3) OF THE ACT A ND ESTIMATION OF SALES AT HIGHER FIGURE. THUS WE DIRECT THE ASSES SING OFFICER TO COMPUTE BUSINESS INCOME BY APPLYING NET PROFIT R ATE OF 1.77% ON THE DISCLOSED TURNOVER OF THE ASSESSEE. 5. AS FAR AS INTEREST INCOME IS CONCERNED, THAT IS TO BE SEPARATELY ADDED IN TOTAL INCOME AS INCOME FROM OTH ER SOURCES AS THE SAME HAS NOTHING TO DO WITH THE LIQUOR BUSIN ESS OF THE ASSESSEE. FINALLY, THE APPEAL OF THE REVENUE IS ALLOWED IN P ART. ORDER PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES OF BOTH THE SIDES AT THE CONCLUSION OF THE HEARING ON 15 TH JUNE, 2011. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15.6.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE !VYAS!