DCIT, Jaipur V. M/S BALAJI WINES, Jaipur

ITA 8/JPR/2003

• Counselvise Citation: 823114 RSA 2003
• Duration Of Justice: 11 year(s) 4 month(s) 24 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: 06-01-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHASH CHANDRA
• Keywords: Bogus purchase; Rejection of books of accounts; Business income; Wrong claim
• Section: 143(3); 145

Judgement Text

1 IN THE INCOME TAX APPELALTE TRIBUNAL: JAIPUR BENCH JAIPUR (BEFORE SHRI RAJ PAL YADAV AND SHRI R.C. SHARMA) ITA NO. 08/JP/2003 (A.Y. 1999-2000) DCIT, CIRCLE-6, VS. M/S BALAJI WINES. JAIPUR. SB.-51, GANESH MARG, NAGAR, JAIPUR. (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI SUBHASH CHANDRA - D.R. ASSESSEE BY : SHRI P.C. PARWAL. DATE OF HEARING : 26/05/2014. DATE OF PRONOUNCEMENT : 30/05/2014. O R D E R PER R.C. SHARMA, A.M THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) DATED 11/10/2002 FOR THE ASSESSMENT YEAR 1999-00, IN THE MATTER OF O RDER PASSED U/S 143(3) OF THE I.T. ACT, 1961. 2.1 AT THE OUTSET, IT IS BEING BROUGHT ON RECORD THAT T HIS APPEAL WAS DECIDED BY THE TRIBUNAL VIDE ITS ORDER DATED 21/07/ 2006. AGAINST THIS ORDER OF THE TRIBUNAL, BOTH THE ASSESSEE AND REVENU E APPROACHED 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 DECIDI NG AFRESH AND DENOVO 2 THE TRADING ADDITION MADE BY THE AO BY INVOKING SEC TION 145(3) OF THE IT ACT IN ACCORDANCE WITH LAW. THE HON'BLE HIGH COURT HAS ALSO DIRECTED ITAT TO DECIDE THESE APPEALS EXPEDITIOUSLY NOT LATER THA N 06 MONTHS FROM THE DATE PARTIES ARE CALLED TO PUT THEIR APPEARANCE BEF ORE ITAT. IN ACCORDANCE WITH DIRECTION OF HON'BLE HIGH COURT, TH ESE APPEALS WERE AGAIN HEARD ON MERIT AND ARE DECIDED AFRESH IN THE FOLLOWING MANNER. 2.2 IN THIS APPEAL, THE REVENUE IS AGGRIEVED FOR DE LETION OF ADDITION MADE BY THE AO BY ESTIMATING THE SALES AT HIGHER FI GURE AS WELL AS BY ESTIMATING THE PROFIT RATE AT 14.5%. 2.3 THE RIVAL CONTENTIONS HAVE BEEN HEARD AND RECOR DS PERUSED. THE FACTS IN BRIEF ARE THAT THE ASSESSEE WAS CARRYING O N BUSINESS OF LIQUOR CONTRACT. RETURN OF INCOME WAS FILED AT RS. 1.43 CR ORES IN THE STATUS OF AOP ALONGWITH AUDIT REPORT IN FORM NO. 3CB AND FORM NO. 3CD AS REQUIRED U/S 44AV OF THE I.T. ACT, 1961. DURING THE COURSE O F SCRUTINY ASSESSMENT, THE AO OBSERVED THAT ASSESSEE HAD SOLD COUNTRY LIQU OR THROUGH 167 OUTLETS AND IMFL & BEER FROM VARIOUS OUTLETS SITUATED IN IT S TERRITORY. THE SALES AND GP DISCLOSED BY THE ASSESSEE ARE AS UNDER:- KIND OF LIQUOR TOTAL SALES (RS.) G.P. DISCLOSED G.P . RATE COUNTRY LIQUOR 109764277 32897984 29.97% IMFL & BEER (RETAIL) 120760436 30988407 25.66% IMFL & BEER (WHOLE SALE) 74830781 2382557 3.18% 3 2.4 BY OBSERVING THAT THE ASSESSEE HAS NOT KEPT DAI LY SALES BILL AND BRAND WISE/SIZE WISE QUANTITY DETAILS OF LIQUORS SO LD, ACCORDINGLY BY APPLYING PROVISIONS OF SECTION 145(3) OF THE ACT, H E REJECTED BOOKS RESULTS AND BY APPLYING G.P. RATE OF 70% ON SALES OF COUNTR Y LIQUOR OF RS. 11.52 CRORES AND MADE AN THE ADDITION OF RS. 4.77 CRORES. SIMILARLY IN RESPECT OF IMFL/BEER, THE AO APPLIED G.P. RATE OF 48% ON SALES OF RS. 12.67 CRORES AND MADE THE ADDITION OF RS. 2.98 CRORES. BY THE IM PUGNED ORDER, THE LD. CIT(A) AFTER GIVING DETAILED FINDING, RESTRICTED TH E ADDITION IN CASE OF COUNTRY LIQUOR TO RS. 5 LACS AND IN CASE OF IMFL/BE ER AT RS. 4 LACS. AGAINST THIS ORDER OF CIT(A), THE REVENUE IS IN FURTHER APP EAL BEFORE US. 2.5 IT WAS ARGUED BY THE LD D.R. THAT THE ASSESSEE HAS NEITHER MAINTAINED STOCK REGISTER NOR SALES BILL, THEREFORE , THE AO WAS JUSTIFIED REJECTING BOOKS RESULTS AND APPLYING 70% G.P. RATE IN CASE OF COUNTRY LIQUOR AND 48% IN CASE OF IMFL/BEER. DETAIL SUBMISS ION OF LD. D.R. WAS AS UNDER:- 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 THE RAJ. EXC ISE RULE, 1956. LIKE-WISE CONTRACTS FOR RETAILS SALES OF BEER AND IMFL WERE AWARDED U/R 3A OF RAJ. FOREIGN LIQUOR SALE LICENCE RULES 1982, FOR DIFFERENT PLACES. THE LICENCES WERE OBTAINED BY SUCCESSFUL BIDDERS & OTHER THAN THESE LICENSEES, NO OTHER PERSON WAS PERMITTED TO SALE TH E 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 PRECEDING YR. 4 AS PER THE EXCISE RULES, THE LIQUOR CONTRACTORS HAV E TO MAINTAIN COMPLETE STOCK REGISTER AND RECORD OF ALL THEIR EMPLOYEES AS PER NOKARNAMA AP PROVED BY THE DISTRICT EXCISE OFFICER. NO OTHER PERSON CAN BE PLACED AS AN EMPLOYEE UNLESS TH E DETAILS OF THE EMPLOYEES ARE PROVIDED TO THE DISTRICT EXCISE OFFICER. THE LIQUOR CONTRACTORS HAVE TO SUBMIT MONTHLY ACCOUNT OF RECEIPT OF LIQUOR, SALE THEREOF AND BALANCE STOCK, AT THE END OF THE MONTH TO THE EXCISE 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, PURCHASES OF IMFL AND BEER CAN BE MADE FROM WHOLESALE LICENSEES OF IMFL & DISTILLERIES, RESPECT IVELY, AFTER SEEKING PERMISSION OF THE EXCISE DEPARTMENT. THE PURCHASES ARE PROVED BUT IT IS AN A DMITTED FACT THAT THE SALE PRICE IS NOT FIXED AND THE ASSESSES HAVE NEITHER ISSUED SALE VOUCHERS TO THE PURCHASER NOR MAINTAINED THESE VOUCHERS. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E 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 PRODUCED FOR VERIFICATION. VOUCHERS FOR EXPENSES WERE REQUIRED TO BE PRODUCED. IN SOME CASE S SOME VOUCHERS WERE PRODUCED BUT, BY AND LARGE, IN MAJORITY OF CASES E VEN VOUCHERS WERE NOT PRODUCED. THE ASSESSES WERE ALSO REQUIRED TO PRODUCE THE DETA ILS OF SALE OF BOTTLES AND BARDANA WHICH TOO WERE NOT PROVIDED AND A LUMPSUM A MOUNT WAS CREDITED ON ACCOUNT OF SUCH SALES. THE SAME WERE NOT OPEN TO VE RIFICATION. DETAILS OF PURCHASES, BEING REGULATED AND AS PER THE GUIDELINES OF THE EX CISE DEPARTMENT, WERE PRODUCED BUT SALE VOUCHERS, WERE NOT PRODUCED FOR VERIFICATI ON. THE ASSESSING OFFICERS WERE OF THE VIEW THAT IN THE ABSENCE OF SALE VOUCHERS, THE ASSESSES ARE AT LIBERTY TO CHARGE SELLING PRICE AS PER THEIR OWN SWEET WILL (AS THE S ALES PRICES ARE NOT FIXED). SINCE THE ASSESSES HAD MONOPOLY AND HAVE EXCLUSIVE JURISDICTI ON TO SALE GOODS IN THE AREA/DISTRICT, THEY COULD CHARGE ANY AMOUNT. WHAT A MOUNT WAS ACTUALLY CHARGED BY THE ASSESSES WAS NOT KNOWN SINCE SALES WERE NOT OPE N TO VERIFICATION. THE AOS WAS OF VIEW THAT IN THE LIGHT OF THESE DEFICIENCIES THE BOOKS OF ACCOUNTS ARE 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 REPORT HAV E 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. III. STOCK/SALES REGISTER NOT MAINTAINED (HENCE NOT OPEN TO VERIFICATION) IN SPITE OF THE FACT THAT THE SAME WAS MANDATORY, AS PER EXCISE DEP TT. 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 REASONS WELL KNOWN TO T HE ASSESSEE. 5 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 I N SMALL BOTTLES, WERE OF LOW RATE, THEREFORE, IT WAS NOT PRACTICALLY POSSIBLE TO MAINT AIN THE SALE VOUCHERS. IT WAS FURTHER SUBMITTED THAT IN THIS PARTICULAR TRADE THE CUSTOME RS NEVER LIKE TO DISCLOSE THEIR IDENTITY AND THEREFORE, EVEN IF THE SALE VOUCHER IS MAINTAIN ED, NAME OF RECIPIENT/NAME OF PURCHASERS WILL HAVE TO BE LEFT BLANK. HOWEVER, IT WAS SUBMITTED THAT THE PURCHASES ARE ENTIRELY VOUCHED AND WHEN PURCHASES ARE ENTIRELY VO UCHED, THEN THE CONSEQUENTIAL 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 BEEN M AINTAINED AND ALL THE BOOKS OF ACCOUNTS AND SUPPORTING VOUCHERS WERE GENERALLY PRO DUCED AND MAINTAINED IN ACCORDANCE WITH THE EXCISE RULES. MERELY BECAUSE TH E SALE VOUCHERS HAVE NOT BEEN MAINTAINED, THERE IS NO JUSTIFICATION 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 BOOKS O F ACCOUNT AND TRADING RESULTS, U/S 145(3) OF THE IT ACT, BY HOLDING THAT NON-MAINTENAN CE OF THE SALE VOUCHERS/SALE REGISTER IS A MAJOR DEFECT & SALES ARE NOT OPEN TO VERIFICAT ION. THE ASSESSING OFFICERS, WHILE REJECTING BOOKS OF ACCOUNTS, RELIED UPON VARIOUS JU DGMENTS OF THE APEX COURT & OTHERS COURTS, PARTICULARLY IN THE CASES OF CIT VS. BRITI SH PAINTS INDIA LIMITED, (1991) 188 ITR 44, M/S LAL CHAND WAILATI RAM VS. CIT: (1978) 111 I TR 244 (P&H); M/S BOMBAY CYCLE STORES 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 T HE 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. WHILE MAKING SUCH ADDITION, THE AOS HAVE GIVEN THE DETAILED ANALOGY/FINDINGS/SCIENTIFIC BASIS ETC BY COMPARING SIMILAR TRADE/PAST HISTORY/SALES RATES PREVAILING IN THE OT HER LOCALITY ETC & ALSO ALLOWED REASONABLE OPPORTUNITY TO THE ASSESSEE. FOR REJECTI NG BOOKS OF ACCOUNTS U/S 145 (3) & ESTIMATING THE PROFIT, THE AO RELIED ON THE DECISIO N OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF ABDESH PRATAP SINGH, ABDUL REHMAN & BROS. VS CIT 210ITR406 WHICH INTER ALIA READ 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 TH E BOOKS OF ACCOUNTS & THE SAME CAN NOT BE RELIED UPON TO ASSESS THE INCOME O R PROFITS. IN SUCH A SITUATION THE AUTHORITIES WILL BE JUSTIFIED TO REJE CT THE BOOKS OF ACCOUNTS. 6 IN VIEW OF THE ABOVE FACTS THE AOS HAVE REJECTED T HE BOOKS OF ACCOUNTS. KEEPING IN MIND THE SALES RATES/GP OF COMPARABLE CASES & PA ST HISTORY ETC, AOS HAVE ESTIMATED THE SALES/GP/NP IN THESE LIQUOR CASES. FOR SACK OF CONVENIENCE AND BETTER UNDERSTANDING FOR THE BENCH I AM QUOTING THE FINDIN G OF THE AO IN THE CASE OF M/S RAJA RAM RAJENDRA BHANDARI & PARTY, WHEREIN THE AO HAD G IVEN SCIENTIFIC WORKING TO ESTIMATE THE SALES AND GP/NP AND THE SAME IS STATED HERE AS UNDER:- MY CONCLUSION OF REJECTION OF BOOKS AND ESTIMATION IS VALID IN EYES OF LAW IN SO FAR AS INTERPRETED AND PRECEDENCE LAID DO WN 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 POSS IBLE FOR THE ASSESSING OFFICER TO DETERMINE THE EXACT QUANTITY OF SUPPRESSED SALES. A S SUCH. HE IS EMPOWERED TO ESTIMATE THE SUPPRESSION ON THE BASIS OF MATERIAL BEFORE HIM . SO LONG AS THE ESTIMATE WAS NOT ARBITRARY IT CAN NOT BE QUESTIONED. FURTHER, IF THE ESTIMATE BY THE ASSESSING OFFICER IS BONAFIDE ESTIMATE AND BASED ON RATIONAL BASIS THE F ACT THAT THERE IS NO GOOD PROOF IN SUPPORT OF THAT ESTIMATE BECOMES IRRELEVANT. WHEN T HE 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 ALLOWED 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. I N THE VERY NATURE OF THINGS, THE ESTIMATE MADE MAY BE AN OVER ESTIMATE OR AN UNDER E STIMATE. BUT THAT IS NO GROUND 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 FAST R ULES CAN BE LAID DOWN BY THE COURT TO DEFINE WHAT SORT OF MATERIAL IS REQUIRED ON WHIC H 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 RULE, THE AS SESSEE WAS ENTIRELY RESPONSIBLE FOR THAT SITUATION. 7 THERE ARE SOME MORE ISSUES WHICH ARE IMPORTANT IN T HE MATTER OF ESTIMATION OF PROFITS WHICH REQUIRE FURTHER ELABORATION I.E. AS T O WHAT COMPELLING FACTORS WERE THERE DUE TO WHICH THE AO WAS LEFT WITH NO CHOICE BUT AS TO ESTIMATION OF INCOME WHICH AS A MATTER OF FACT WAS SPEARHEADED BY THE ASSESSEE HI MSELF. 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 AC HIEVED IN THE EVENING HOURS AND THAT TOO WITHIN A PERIOD OF FEW HOURS WHEN HEAVY RUSH OF CUSTOMER IS GATHERED IN THE RETAIL SHOP AND AT THAT TIME IT IS NEITHER PRACTICAL NOR P OSSIBLE TO ISSUE SALE BILLS NOR IT IS 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 SUGGESTION 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 INDICATES THAT 90% OF SALES ARE AFFE CTED IN THE EVENING HOURS AND THERE IS ALWAYS HEAVY RUSH IN THOSE HOURS. IT IS ALSO PER TINENT TO MENTION THAT THE STORY OF FEW HOURS WHICH THE ASSESSEE IS TALKING IS ALSO NOT MEN TIONED THAT WHETHER IT IS 8-10, 9-11, 10-11, 7-9, 7.30-9.30PM. IT IS VERY IMPORTANT TO RE JECT THIS CLAIM AS NO ORIGINAL DOCUMENTS OF SALES WERE PRODUCED TO INDICATE THAT MOSTLY THE SALES ARE AFFECTED IN THE LAST HOURS. AS THE SHOP IS OPENED FOR MORE THAN 16-18 HOURS IT IS HARDLY BELIEVABLE THAT THERE WOULD BE ANY SALES IN THE INITIAL 12 HOURS. THE ASSESSEE TO JUSTIFY HIS CLAIM OF NOT MAINTAINING THE PROPER SALES RECORDS HAS ADVANCED THIS FALSE CLAIM. THESE FACTS SHOWS THAT THE ASSESSEE IS DELIBERATELY INVOLVED IN NOT KEEPING TH E 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 ANY SALES OR AMOUNT OF SALES WAS POSSIBLE, THAT THE EXCISE DEPARTMENT ALSO FREQUENTLY CHECK THE SHO PS AND HEAVY PENALTIES IMPOSED IF ANY DISCREPANCY IS NOTED, THAT THERE IS COMMON RETA ILS 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 FACTS AND MATERIAL COLLECTED ON T HE RECORD AND FROM THE MARKET. THEREFORE, ESTIMATION OF AO CAN NOT BE SUBSTITUTED BY ANOTHER ESTIMATION, UNLESS CONTRARY EVIDENCE PRODUCED 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 GIVIN G CONTRACTS OF LIFTING OF LIQUOR OF PARTICULAR AREAS TO THE HIGHEST BIDDER. EVERY YEARS NEW ASSOCIATION OF PERSONS ARE FLOATED. THERE IS ALWAYS ONE AOP FOR A PARTICULAR F Y FOR A PARTICULAR PLACE AND IT IS HARDLY REPEATED AGAIN. THE NAME OF AOP MEMBERS PERSONS, ME MBERS OF AOP, TERRITORY OF CONTRACT, AMOUNT OF CONTRACT IS DIFFERENT EVERY YEA R. IN SUCH A POSITION THERE CAN NOT BE 8 COMPARABLE CASE. EACH CASE IS REQUIRED TO BE DEALT WITH SEPARATELY ON THE BASIS OF FACTS OF THE CASE. THEREFORE, THERE WILL NOT BE ANY COMPA RABLE CASES AT GIVEN POINT OF TIME TO ESTIMATE GP/NP/TO ETC. IN MY OPINION, IF ANY ARGUMENT IS MADE AVAILABLE OF COMPARABLE CASES TO APPLY GP/NP OR TO THAT SHOULD NOT BE ENTERTAINED UNLESS S PECIFIC EVIDENCE ARE PRODUCED ON RECORD. AS A LAW IMPLEMENTING AGENCIES, IT IS DUTY ON MY PA RT TO ALSO EXAMINE IF VIOLATION OF ANY LAW OF LAND IS MADE. NOBODY IS ABOVE LAW AND ASSESSEE CAN NOT BE ALLOWED TO GO SCOT FREE BY REPEATEDLY AND FREQUENTLY GIVING FALSE STATEMENT NOT BEING INTERROGATED TO THE HILT. THE ASSESSEE AND THE A/R ARE INDULGING IN EXERCISE OF OBFUSCATION, WHICH IS APPARENT FROM THE FACT THAT MAJORITY OF CASE OF LIQ UOR 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 TYP E OF REPLIES BEFORE THE AO AND THE OTHER APPELLATE AUTHORITIES. WHEN ALL THE CASES ARE DIFFE RENT AND NOT COMPARABLE. THEN HOW CAN THE SAME FACTS AND REPLIES BE APPLIED IN ALL. I T 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 ACCOUNTS INVOKING TH E PROVISIONS OF SECTION 145(3) OF THE I.T. ACT, BUT FOR ESTIMATION OF THE PROFITS THEY RE LIED ON VARIOUS INFORMAL INFORMATIONS GATHERED FROM THE MARKET AND ACCORDINGLY APPLIED TH E GP/NP RATE. THIS PRACTICE OF ESTIMATION WAS CONSIDERED BY THE ASSESSES IN THIS L INE 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 CONCERTED AND SINCERE EFF ORT HAS BEEN MADE BY THE TAXING AUTHORITIES OF THE JAIPUR CHARGE TO BASE THEIR ESTI MATION ON SOME AUTHENTIC AND RELIABLE MATERIAL GATHERED. SO, ACCORDINGLY SURVEY WAS CONDU CTED ON THE VARIOUS LIQUOR SHOPS LOCATED AT JAIPUR ON 21.3.2003. FROM ON THE SPOT VE RIFICATION 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 WHICH THEY WERE SUPPO SED TO BE SOLD. ONE SUCH RATE LIST PERTAINING TO THE PERIOD BEFORE 20.3.2003(FROM 21.3 .2003 THE RATES WERE REDUCED) WAS FOUND BY ONE OF THE AO AND IMPOUNDED. NOW THAT THE RATE LIST WAS FOUND, AT WHICH THE COUNTRY LIQUOR, IMFL AND BEER WERE SOLD, IT WAS REQ UIRED THAT THE PURCHASE PRICE OF THE CORRESPONDING ITEMS/VERITIES OF THE LIQUOR BE KNOWN . SO THAT THE PROFIT MARGIN IN THE CORRESPONDING ITEMS COULD BE WORKED OUT SO AS TO GI VE 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 WHI CH WAS PURCHASES BY THE FIRM. SH. NIRANJAN SHARMA EXPRESSED HIS INABILITY TO PRODUCE THE PURCHASE BILLS OF THE ASSESSEE AOP M/S RAJARAM RAJENDRA BHANDARI & PARTY SINCE THE Y WERE CLAIMED TO BE LYING AT AJMER. HOWEVER, HE PRODUCED THE PURCHASE BILLS OF A NOTHER AOP I.E. NIZAMMUDIN MANIRAM AND PARTY WHICH OPERATED IN THE AREA OF HAN UMANGARH IN THE F.Y. 1999-2000. THOUGH THE PURCHASE BILLS OF THE ASSESSEE AOP WERE NOT PRODUCED, BUT NEVERTHELESS 9 PURCHASE PRICE IS MORE OR LESS SAME FOR VARIOUS ITE MS 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 OFFERED BY AOP FIR M OF NIZAMUDIN MANIRAM AND PARTY. ONCE THE PURCHASE PRICES OF VARIOUS ITEMS WERE KNOW N THROUGH THE PURCHASE BILLS, CORRESPONDING EXCISE DUTY AS PAID BY THE ASSESSEE W AS ADDED SO AS TO ARRIVE AT THE TOTAL COST OF A PARTICULAR ITEM. THEREAFTER ON THE BASIS OF RATE LIST FOUND, CORRESPONDING SELLING PRICE WAS APPLIED TO EACH OF THE COMMODITY IN ORDER TO FIND OUT AS TO WHAT EXACTLY THE PROFIT MARGIN WORKS OUT. THEREAFTER CHECKING THE AV ERAGE OF SUCH PROFIT MARGIN CORRESPONDING GP SHALL BE APPLIED. 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 @ RS. 675 PER BULK LITRE OF IMFL. (I.E. RS. 675 FOR 12 BOTTLES) (ONE BULK LITRE MEANS 9 LITRES I.E. 12 BOTTLES OF 7 50 ML EACH) IT, THEREFORE MEANS THAT ON EACH BOTTLE THE EXCISE DUTY PAYABLE IS RS. 56.25 ( RS. 675/12) 2) IN THE CASE OF BEER :- STRONG BEER RS. 117 PER BULK LITRE. THEREFORE RS. 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 RS. 117 EXCISE DUTY PAID ON 14 BOTTLES, THEREFORE ON ON E BOTTLE, RS. 8.35 IS PAID.) SIMILARLY EXCISE DUTY ON LEDGER BEER IS AS UNDER:- LEDGER BEER RS. 78 PER BULK LITRE. THEREFORE RS. 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. 10 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) RS. 2.70/- (AS STATED BY THE ACCOUNTANT NIRANJAN SHARMA RS. 25/- 89.2% 2 IMFL ARISTOCRAT PREMIUM WHISKY RS. 138.29 RS. 230/- 39.8% 3 DIRECTOR SPECIAL WHISKY RS. 109.15 RS. 180/ - 39.36% 4 HAYWARD STRONG RUM RS. 95.83 RS. 160/ - 40% 5 ROYAL CHALLENGE RS. 275.41 RS. 420/ - 34.42% 6 RED KINGHT WHISKY RS. 156.08 RS. 270/ - 42.2% 7 PETER SCOTCH RS. 270.83 RS. 470/ - 42.37% 8 SIGNATURE RS. 310.66 RS. 470/ - 33.9% 9 OLD MONK RS. 103.25 RS. 190/ - 45.65% 10 BAG PIPER RUM RS. 108 RS. 180/ - 40% 11 BEER HAYWARD 500 RS. 29.42 RS. 50/ - 51.16% 12 THUNDER BOLT RS. 27.41 RS. 50/ - 45.18% 13 BULLET RS. 27.41 RS. 50/ - 45.18% THEREFORE, IT IS VERY EVIDENT FROM THE PROFIT MARGI N AS WORKED OUT ABOVE THAT THE COUNTRY LIQUOR HAS A PROFIT MARGIN AROUND 75% TO 90% , IMFL AND BEER HAS PROFIT MARGIN AROUND RS. 35% TO 50% . THERE MAY BE A DIFFERENCE IN THE PROFIT MARGIN OF EACH PARTY ON ACCOUNT OF AREA/LOCATION/POPULATION/DEMAND OF VARIE TY/YEAR OF OPERATION ETC BUT MORE OR LESS THE PROFIT MARGIN CAN VARY BETWEEN 2-5%. IN TH IS VERY PARTICULAR CASE OF MY ASSESSEE I DECIDE TO TAKE GP IN CASE OF COUNTRY LIQ UOR 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.) RS. 18,43,03,959/ - IMFL/BEER (WS) RS. 19,40,04,167/ - IMFL/BEER (RETAIL) RS. 39,88,64,950/ - IMFL/BEER (RETAIL) RS. 61,36,38,384.6/- COUNTRY LIQUOR RS. 16,42,50,017/ - COUNTRY LIQUOR RS. 46,92,85,762.8/ - BY CLOSING STOCK IMFL/BEER(WS) RS. 16,67,160/ - TO EXPENDITURE A/C IMFL/BEER (W.S.) RS. 20,18,98,297/ - 11 IMFL/BEER (RETAIL) RS. 2,61,41,311/ - COUNTRY LIQUOR RS. 23,39,160/ - GROSS PROFIT RS. 30,07,97,780/ - GRAND TOTAL RS. 1,27,85,95,474/ - GRAND TOTAL RS. 1,27,85,95,474/ - P & L ACCOUNT (RECASTED) EXPENDITURE INCOME TO EXPENDITURE A/C RS. 21,40,34,922/ - BY GROSS PROFIT A/C RS. 30,07,97,780/- ALL EXPENSES AS CLAIMED BY THE BY REVENUE A/C ASSESSEE INSURANCE CLAIM RS. 27,000/ - INTEREST AGAINST FDR RS. 9,350/- TO DEPN. RS. 15,43,695/ - NET PROFIT RS. 8,52,55,512.5/ - GRAND TOTAL RS. 30,08,34,130/ - GRAND TOTAL RS. 30,08,34,130/ - THEREFORE, NET PROFIT OF THE ASSESSEE IS WORKED OUT TO BE RS. 8,52,55,512/- FROM THE ABOVE WORKING OF TO/GP/NP IT IS CRYSTAL CL EARLY THAT THE AO, HAD TAKEN ALL POSSIBLE DUE CARE & ADOPTED SCIENTIFIC METHODS TO E STIMATE 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 UPHELD THE FIND ING OF THE ASSESSING OFFICERS ABOUT REJECTION OF BOOKS OF ACCOUNTS UNDER SECTION 145(3) BUT GAVE RELIEF BY REDUCING TRADING ADDITION. IN SOME OF THE CASES, THE CIT(A) RELIED UPON COMPAR ATIVE CASES OF SIMILARLY SITUATED LIQUOR CONTRACTORS AND PAST HISTORY AND DECIDED THE APPEAL S WITHOUT GIVING CLEAR CUT FINDING/BASIS/REASONS BRINGING ANY MATERIAL ON RECO RD, FOR REDUCING TRADING ADDITION OR UPHOLDING AD HOC ADDITION. THE CITS(A) HAVE NOT APPRECIATED THE FACTS & FIGURES COLLECTED & FINDING GIVEN BY THE AOS. FORM THE ABOVE FACTS, IT IS NOTICED THAT THE AO HAD PASSED WELL REASONED ORDER AFTER DISCUSSING THE ENTIRE ISSUE AND ALSO BROUGHT IN MAT ERIAL ON RECORD, THEREFORE, IT WAS DUTY OF THE CIT(A) TO ADDRESS THE ISSUE IN AN APPROPRIATE MANN ER AND NOT IN A SUMMERY OR IN PERFUNCTORY MANNER. THE CIT(A)S HAVE NOT DISCUSSED THE FACTS O F CASES & SUMMARILY EITHER REDUCED THE ADDITION OR UPHELD THE AD HOC ADDITIONS, WITHOUT GI VING ANY BASIS THEREOF. THE APPELLATE AUTHORITIES SEARCHING OF DEFINI TE EVIDENCE TO TEST THE VALIDITY OF THE ADDITIONS MADE BY THE AO HAS TRANSGRESSED INTO THE REALM OF INDEFINITENESS FROM THE REALM OF GUESSWORK FOR COMPUTATION OF INCOME, WHERE THE BOOK S OF ACCOUNT OF ASSESSEE HAVE BEEN 12 REJECTED BY THE AO, HOLDING THAT IT IS NOT POSSIBLE TO ASCERTAIN THE TRUE INCOME OF THE ASSESSEE FROM SUCH BOOKS OF ACCOUNT. THE CIT(A) HAS NOT RECO RDED ANY SATISFACTORY FINDING OR REASONING IN RESTRICTING/REDUCING/ESTIMATING LUMP SUM AD HOCK AMOUNT, 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 CONCERNED SHOULD MADE A HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDGMENT ASSESSMENT AND SHOULD NOT A CT ARBITRARILY. IT IS EQUALLY TRUE THAT ASSESSEE IS HIMSELF TO BE BLAMED AS HE DID NOT SUBM IT 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 ALLOWED TO CALL UPON THE AO TO PROVE CONCLUSIVELY WHAT TURNOVER HE HAS ACTUALLY SUPPRESSED 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 DEDUCING 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 DETERMINE THE ACTUAL SALES & TAXABLE INCOME BY MAKING SUCH COMPUTATION AS HE THINKS 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 DISCHARGED THEIR DUTIES BY ADOPTING SCIENTIFIC BASIS, AFTER MAKING E NQUIRIES, 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 HISTORY. THEREFORE, ESTIM ATION OF THE AO CANT BE SUBSTITUTED BY ANOTHER ESTIMATION, UNLESS CONTRARY EVIDENCES BROUG HT ON RECORD. IT IS ALSO TRUE THAT WHILE DETERMINING THE COR RECT TAXABLE INCOME IT IS ESTIMATE AGAINST ESTIMATION, BUT THAT SHOULD BE SUPPORTED BY SOME JU STIFICATION WHICH IS INITIAL DUTY CASTE UPON AO AND WHEN THE APPEALS ARE BEING PREFERRED EITHER BEF ORE THE CIT(APPEALS) OR BEFORE THE ITAT WHO IS THE FINAL FACT FINDING AUTHORITY, THE FINDIN G OF AO COULD NOT ORDINARILY BE DISTURBED EXCEPT UNDER PERVERSITY. IF APPELLATE AUTHORITIES ARE REVE RSING THE FINDING OF THE AOS THEN IT IS OBLIGATORY UPON THEM TO DISCUSS FACTUAL FINDINGS APPRECIATED B Y THE AOS. AS PER NORMS, THE FINDING OF THE AOS ORDINARILY NOT BE DISTURBED EXCEPT ON THE GROU ND OF PERVERSITY. IT IS THEREFORE, PRAYED THAT THE APPELLATE AUTH ORITIES SHOULD TAKE CORRECT VIEW, KEEPING IN MIND THE FACT THAT THE ASSESSES HAVE NOT MAINTAINED SALES VOUCHERS, EXPENSE VOUCHERS, STOCK REGISTERS ETC, FOR DETERMINING THE ACTUAL SALES & G P/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 145(3), A FAR E ESTIMATE WAS REQUIRED TO BE MADE BY THE ASSESSING OFFICER AND IN ALMOST ALL CASES, THE ASSE SSING OFFICERS HAVE PASSED WELL REASONED ORDERS AND THE AO HAVE BROUGHT ADEQUATE MATERIAL ON RECORD TO JUSTIFY THE ADDITIONS. FURTHER RELIANCE IS PLACED ON VARIOUS CASE LAWS NAMELY DIRE CTOR OF INCOME TAX (EXEMPTION) VS. SHIA DAWOODI BOHRA JAMAT (2012) 344 ITR 653 (GUJ), CIT V S. DEEPAK M KOTHARI (2011) 331 ITR 301 (ALLAHABAD), MANGALORE GANESH BEEDI WORKS VS. CIT (2005) 25CC 329, MYSORE & ANR. & JUDGMENT OF THIS COURT REPORTED IN 199 CTR 422 (RAJ ) CIT VS. SUNIL TALWAR MURLIDHAR & PARTY, ETC. 13 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 UNDER:- THE ASSESSING AUTHORITY WHILE MAKING THE BEST JUD GMENT ASSESSMENT, NO DOUBT, SHOULD ARRIVE AT ITS CONCLUSION WITHOUT ANY BIAS AN D ON RATIONAL BASES. THAT AUTHORITY SHOULD NOT BE VINDICTIVE OR CAPRICIOUS. IF THE ESTIMATE MADE B Y 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 OF THE SITUATION. IT IS HIS BEST JUDGMENT AND NOT OF ANYONE ELSE. THE HIGH COURT COULD 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 WHETHER THE ACCOUNTS MAINTAINED BY THE ASSESSEE WERE RIGHTLY REJECTED AS UNRELIABLE. IF THEY COME TO THE CONCLUS ION THAT THEY WERE RIGHTLY REJECTED, THE NEXT QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER T HE BASIS ADOPTED IN ESTIMATING THE TURNOVER HAS REASONABLE NEXUS WITH THE ESTIMATE MADE. IT THE BASIS ADOPTED IS HELD TO BE A RELEVANT BASIS EVEN THOUGH THE COURTS MAY THINK THAT IT IS NOT THE MOST APPROPRIATE BASIS, THE ESTIMATE MADE BY THE ASSESSING AUTHORITY CANNOT BE DISTURBED . IN THE PRESENT CASE, THERE IS NO DISPUTE THAT THE ASSESSEES ACCOUNTS WERE RIGHTLY DISCARDED . WE DO NOT AGREE WITH THE HIGH COURT THAT IT IS DUTY OF AO TO ADDUCE PROOF IN SUPPORT OF ITS EST IMATE, THE BASIS 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 B Y 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 THIS APPEAL . AS REGARDS THE REJECTION OF THE BOOKS OF ACCOUNT, COGENT REASONS 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 JUDGMENT ASSESSMENT THERE IS ALWAYS A CERTAIN DEGREE OF GUES SWORK. NO DOUBT THE 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 TOTALL Y ARBITRARILY, BUT THERE IS NECESSARILY SOME AMOUNT OF GUESSWORK INVOLVED IN A BEST JUDGMENT ASSESSMENT, AND IT IS THE ASSESSEE HIMSELF WHO IS TO BLAME AS HE DI D NOT SUBMIT PROPER ACCOUNTS. THERE WAS NO ARBITRARINESS IN THE PRESENT CASE ON T HE PART OF THE IT AUTHORITIES. 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 ACCOUNTS AND THE CORRECT INCOME CAN BE DEDUCED THERE FROM. IT IS INCORRECT TO SAY, AS CONTENDED ON BEHALF OF THE ASSESSEE, THAT THE OFFICER IS BOUND TO ACCEPT THE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE THE CORRECTNESS OF WHICH HAD NOT BEEN QUES TIONED IN THE PAST. THERE IS NO ESTOPPEL IN THESE MATTERS, AND THE OFFICER IS NOT B OUND BY THE METHOD FOLLOWED IN THE EARLIER YEARS. 14 FROM THE ABOVE FACTS IT IS SEEN THAT THE AO, HAVE R IGHTLY REJECTED INCOMPLETE/UNRELIABLE ACCOUNTS AND HAVE MADE BEST JUDGMENT IN ESTIMATING TO/GP/NP IN THESE CASES, AFTER COLLECTING THE NECESSARY MATERIAL/INFORMATION ON RECORDS. ON THE OTHER HAND, THE CIT(A)S HAVE ALLOWED RELIEF TO THE ASSESSEES WITHOUT APPRECIATING THE F ACTS 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 ALSO CHOSEN TO FILE APPEAL. THE ITAT, AFTER HEARING THE PARTIES, AGREED WITH THE CONTENTION AS TO REJECTION OF THE B OOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE ACT AND IN SOME CASES, EVEN THE COUNSELS FOR THE AS SESSES ADMITTED THAT PROVISIONS OF SECTION 145 ARE APPLICABLE. HOWEVER, IN SO FAR AS THE ADDIT ION ON ACCOUNT OF QUANTUM, THE ITAT, DID NOT ADOPT A PARTICULAR YARDSTICK ON ACCOUNT OF THE FACT THAT, DIFFERENT PLACES MAY HAVE DIFFERENT FACTS AND CHOSE TO REDUCE THE GP RATE/NP RATE/ADHOC ADDI TION. THE ITAT HAS NEITHER DISCUSSED THE FACTUAL FOUNDATION AND SUBMISSIONS AND BY CRYPTIC O RDER DECIDED THE APPEALS, WITHOUT APPRECIATING THE FINDINGS OF THE AO. IN VIEW OF THE SE FACTS, THE HONBLE HIGH COURT HAS SET ASIDE THE MATTERS BACK TO THE ITAT TO ADJUDICATE ALL THES E CASES AFRESH. KEEPING IN VIEW THE ABOVE DISCUSSION, THE CLEAR CUT/DETAILED FINDINGS GIVEN B Y THE AO, WITH REGARD TO ESTIMATION OF SALES AND GP/NP, MAY PLEASE BE UPHELD AND ORDER OF THE CI T(A), BE SET-ASIDE. 2.6 ON THE OTHER HAND, IT WAS CONTENDED BY THE LD A .R. THAT THE ASSESSEE HAS LIFTED 85.67% OF THE COUNTRY LIQUOR, T HEREFORE, THERE WAS DECLINE IN G.P. RATE. HE FURTHER CONTENDED THAT BEC AUSE OF THIS, THE ASSESSEE WAS REQUIRED TO PAY THE SHORT LICENSE FEES , THEREFORE, N.P. RATE IS BETTER AS COMPARED TO OTHER CASES. IN RESPECT OF IMFL/BEER, IT WAS CONTENDED THAT THE G.P. AT 25.66% AS SHOWN BY THE A SSESSEE WAS BETTER AS COMPARED TO 9.85% SHOWN IN THE LAST YEAR. HE RELIED ON THE FINDINGS RECORDED BY THE LD. CIT(A). 2.7 WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREFU LLY, GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT SALES OF COUNTRY LIQUOR OF RS. 10.97 CRORES, THE ASSESSEE HAS DISCLOSED GRO SS PROFIT OF RS. 3.28 CRORES, WHICH WORKS OUT TO 29.97%. SIMILARLY, IN RE SPECT OF IMFL/BEER, THE 15 ASSESSEE HAD SHOWN SALES OF RS. 12.07 CRORES , ON W HICH GROSS PROFIT OF RS. 3.93 CRORES WAS DECLARED GIVING G.P. RATE OF 25.66% . WE FOUND THAT BECAUSE OF SHORT LIFTING OF COUNTRY LIQUOR, THE ASS ESSEE WAS REQUIRED TO PAY SHORT LICENSE FEES OF RS. 79.25 LACS AND SIMILA RLY IN RESPECT OF IMFL/BEER, SHORT LICENSE FEE OF RS. 3.10 CRORES WAS PAID AND IT IS THE MAIN REASON FOR DECLINING OF NET PROFIT. AFTER RECORDING FOLLOWING DETAILED FINDINGS, THE LD. CIT(A) HAS RESTRICTED THE ADDITIO N IN CASE OF COUNTRY LIQUOR TO RS. 5 LACS AND IN CASE OF IMFL/BEER TO RS . 4 LACS. 1-16 ESAUS NKSUKSA I{KKSA DS RDKSZ DK HKYH IZDKJ LS LE>K GSA A TGK RD /KKJK 1453 DS YXK;S TKUS DK IZU GS ESA FO}KU V IZ DS RDKSZ LS LG ER UGH GWWA A VIHYKFKHZ }KJK CGH[KKRKSA ESA FN[KK;H X;H FCH FOOLUH; UGH GSA D; KSAFD OS VK/KKJHKWR FJDKWMZ MIYC/K UGHA GS FTLDS VK/KKJ IJ ;G FCH CGH[KKRKSA ESA NTZ DH X;H GSA A VIHYKFKHZ US VYX LS FO}KU DJ FU/KKZJ.K VF/KDKJH }KJK VK;DJ VF/KFU;E DH /KKJK 1453 DS YXK;S TKUS DS FO:) VIHY DK FCUNQ UGHA CUK;K GSA A VR% IZLRQR E KEYS ESA VK;DJ VF/KFU;E DH /KKJK 1453 DS YXK;S TKUS DKS LGH EKUK TKRK GSA A 1-17 NSKH EFNJK DS O;OLK; ESA ;|FIR VIHYKFKHZ }KJK ?KKSF'KR LDY YKHK DH NJ DQN EKEYKSA LS LDY YKHK DH NJ LS DE GSA IJURQ EFNJK DS DQY O;OLK; ESA 'KQ}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}KU DJ FU/K KZJ.K VF/KDKJH DS RDZ LS LGER UGH GWWA FD LDY YKHK DH NJ DKS FOFHKUU EKEYKSA ESA RQYUK DK VK/KKJ CUK;K TK; A JKTLFKKU JKT; DH VKCDKJH UHFR ESA EFNJK BSDSN KJ DKS YKHK ;K GKFU DS FY;S 'KKVZ YKBLSAL QHL DH EGROIW.KZ HKWFEDK GS A DQY {KS =KSA ESA TKS FD GKBOS IJ FLFKR GS] VFKOK HKKSXKSFYD N`F'V LS NWLJS JKT;KSA DH LHEK DS IKL GSA] VF/KD FCH DJ IKRS GSA IJURQ BUDS YKHK DH NJ DE GKSRH GSA A IJURQ VF/KDRJ 'KGJH {KS= ESA FCH IZFRKR DE IJURQ YKHK DH NJ VF/KD GKSRH GSA A BSDSNKJ DKS VF/KD FCH DS IZFRKR FYFQFVAX IJ DE 'KKVZ YKBLSAL QHL RFKK DE FCH DS IZFRKR IJ VF/KD 'KKVZ YKBLSAL QHL NSUH GKSRH GSA A BL FCH DS IZFRKR IJ LDY YKHK DH NJ FUHKZJ GKSUH PKFG;S D;KSAFD EFNJK DH FO; NJ JKT; ESA ,D LEKU UGHA GSA A VIHYKFKHZ DS O; KIKJ DK {KS= JK'VH; JKTEKXZ ESA FLFKR GKSUS DS DKJ.K ;G LAHKO GS FD DE DHER IJ VF/K D FCH DH X;H GSA A VR% ;|FI CGQR LS EKEYS DH RQYUK ESA NSKH EFNJK O HKKJR FUFEZR FONSKH EFNJK O FC;J DS O;KIKJ ESA VIHYKFKHZ }KJK ?KKSF'KR LDY YKHK DH NJ VF /KD GSA IJURQ VU; DQN EKEYKSA DH RQYUK ESA DE HKH GSA A IJURQ TGKA RD 'KQ) YKHK D K IZU GSA] ;G NJ 4-71 IZFRKR GS TKS FD RQYUKRED LHKH EKEYKSA LS CGQR VPNH GS RFKK R QYUKRED LEDKYHU VU; EKEYKSA LS HKH VPNH GSA A 1-19 ;FN EKUUH; E/;IZNSK MPP U;K;KY; }KJK FN;S X;S FU.KZ; ESA-HKXOKU NKL CNZHUKJK;.K ESA EKUS X;S QKEWZYS DS VUQLKJ NSKH E FNJK ESA FCH O 'KQ) YKHK DK VUQEKU FD;K TK;S RKS VKADMS FUEU IZDKJ LS GSA %& 19 VSAMJ DH QHL 'KKVZ YKBLSAL 'KQ) JKFK 'KQ) JKFK DK 250 IZFRKR VUQEKFUR FCH 5]53]15]000@& 79]25]712@& 4]73]89]288@& 11]84]7 3]220@& N'KKZ;H X;H 5IZFRKR DH NJ LS NKKZ;K X;K FCH VUQEKFUR YKHK YKHK 10]97]64]277@& 59]23]661@& 1]88]06]459@& 1-20 MIJKSDR PKVZ LS LI'V GS FD NSKH EFNJK DS O;OLK ; ESA VIHYKFKHZ }KJK NKKZ;H X;H FCH VUQEKFUR FCH LS DE GS IJURQ NKKZ;K X;K YKHK VUQEKFUR YKHK LS DKQH VF/KD GSA A 1-21 VKSAD FTYS DH HKKSXKSFYD FLFKFR ESA BLS T;IQJ 'KGJ DS IKL GKSUK FOKS'K EGRO J[KRK GSA A NSKH EFNJK ESA MBKO DK IZFRKR 85-67 I ZFRKR GSA FTLDS DKJ.K LDY YKHK DH NJ ESA FXJKOV VK;H GSA A IJURQ 'KKVZ YKBLSAL QHL DK IZFRKR DE GKSUS DS DKJ.K 'KQ) YKHK DK IZFRKR VU; EKEYKSA LS VPNK GSA A VSAM J JKFK ESA 15 IZFRKR DH O`F) DQN LHEK RD FINYS O'KZ 32-64 IZFRKR DH RQYUK ESA EKSTWN K O'KZ ESA 29-97 IZFRKR DS LDY YKHK DH NJ DKS LI'V DJRK GSA A FO}KU DJ FU/KKZJ.K VF /KDKJH US NKKZ;H X;H FCH :I;S 10]97]64]277@& DS LFKKU IJ :I;S 11]52]52]490@& YH GS RFKK LDY YKHK DH NJ 70 IZFRKR EKURS GQ;S NSKH EFNJK DS O;OLK; DH VK; ESA 4]77]78]760@& :I;S DK ;KSX FD;K GSA A VK; ESA ;G ;KSX FCH DS VUQEKU LS U RKS ESY [ KKRK GS U GH VKSFPR;IW.KZ GSA A BLDS VFRFJDR FINYS ISJKXZKQKSA ESA ;G NS[KK X;K GS F D NSKH EFNJK DS O;OLK; ESA VIHYKFKHZ }KJK ?KKSF'KR 'KQ) YKHK DH FLFKFR VU; FDL H HKH EKEYS LS CGQR VPNH GSA A VR% FO}KU DJ FU/KKZJ.K VF/KDKJH }KJK VIHYKFKHZ DH V K; ESA FD;S X;S 4]77]78]760@& :I;S DS ;KSX DKS LGH UGHA EKUK TKRK GSA A IJURQ FC H IWJH RJG LR;KFIR UGHA GKSUS DS DKJ.K ;G LAHKKOUK JGRH GS FD DQN FCH CGH[KKRKSA ES A FN[KKUS LS JG X;H GKS A FO}KU DJ FU/KKZJ.K VF/KDKJH }KJK ?KKSF'KR FCH :I;S 10]97 ]64]277@& DS LFKKU IJ :I;S 11]52]52]490@& FY;S TKUS DK DKSBZ VKSFPR; UGHA GSA A VUQEKU DS VK/KKJ ESA EKUK TKRK 20 GS FD 5]00]000@& :I;S DH FCH [KKRKSA ESA FN[KKUS L S JG X;H GSA A VR% :I;S 5]00]000@& DS TKSM DKS DUQEZ FD;K TKRK GS RFKK 'KS'K 4]72]78]7 60@& :I;S DS TKSM DKS GVK;K TKRK GSA A HKKJR FUFEZR FONSKH EFNJK DS EKEYS ESA ;|FI VIHYK FKHZ DS EKEYS ESA LDY YKHK DH NJ ESA-CUUK VYH FXJ/KKJH FLAG ,AM IKVHZ >QA>QUWA XZQI LS DE GSA IJURQ FINYS O'KZ DH RQYUK ESA BLESA VPNH O`F) GQ;H GSA A FINYS O'KZ LDY YKHK DK NJ 9-85 IZFRKR DH RQYUK ESA EKSTWNK O'KZ ESA FYFQFVAX DK IZFRKR 58-5 1 IZFRKR GS TCFD FINYS O'KZ ;G 90-25 IZFRKR FKH A EKSTWNK O'KZ ESA [KJHN 8]34]02]479@& :I;S JG X;H GS TCFD FINYS O'KZ ;G 11]18]89]419@& :I;S FKH A FCH DH JKFK ESA HKH DEH VK;H GSA] IJURQ LDY YKHK 1]30]22]000@& :I;S LS C<+DJ 3]09]87]128@& :I;S GKS X;K GSA A FO}KU DJ FU/KKZJ.K VF/KDKJH US VIHYKFKHZ DS EKEYS DH RQYUK ESA-CUUK VY H FXJ/KKJH FLAG ,AM IKVHZ LS DH GSA A ?KKSF'KR FCH 12]07]60]436@& :I;S DS LFKKU IJ :I; S 12]67]98]458@& VUQEKFUR DH X;H GS RFKK LDY YKHK ESA 2]98]74]852@& :I;S DK ;KSX FD; K X;K GSA A VK; ESA FD;K X;K ;G ;KSX FCH DS VUQEKU ESA C<+KSRJH LS CGQR VF/KD G KSUS DS DKJ.K RDZLAXR UGHA GSA A BLDS VFRFJDR ESA-CUUK VYH FXJ/KKJH FLAG ,AM IKVHZ DH HKKSXKSFYD FLFKFR RFKK VIHYKFKHZ DH HKKSXKSFYD FLFKFR ESA CGQR VURJ GSA A VIHYKFKHZ DK O;OLK; >QA>QUWA XZQI DS O;OLK; LS YXHKX 5 XQUK GSA A VIHYKFKHZ DS EKEYS ESA NSKH EFN JK] HKKJR FUFEZR FONSKH EFNJK O FC;J DS LA;QDR 'KQ) YKHK DH FLFKFR RFKK FONSKH EFN JK DS EKEYS ESA FINYS O'KZ DH RQYUK ESA CSGRJ LDY YKHK DH NJ DKS NS[KRS GQ;S RFKK VU; RQYUKRED EKEYS DKS NS[KRS GQ;S ESA FO}KU DJ FU/KKZJ.K VF/KDKJH }KJK HKKJR FUF EZR FONSKH EFNJK O FC;J DS O;KIKJ [KKRS ESA FD;S X;S 2]98]74]852@& :I;S DS ;KSX DKS E SA LGH UGH EKURK GWWA A IJURQ FCH LR;KFIR UGHA GKSUS DS DKJ.K ;G LAHKO GS FD DQN FCH CGH[KKRKSA ESA NTZ DJUS LS JG X;H GKS A FO}KU DJ FU/KKZJ.K VF/KDKJH }KJK ?KKSF'KR FCH :I;S 12]07]60]436@& DS LFKKU IJ :I;S 12]67]98]458@& DKS FY;S TKSU DK DKSBZ VKSFP R; UGHA GSA A VUQEKU DS VK/KKJ IJ 21 4]00]000@& :I;S DH FCH O VK; DKS VKBZ-,E-,Q-,Y O F C;J DS O;OLK; ESA TKSM+ DKS I;KZIR EKURS GQ;S DUQEZ FD;K TKRK GSA A 'KS'K TKSM+ 2]94]74]852@& :I;S DKS GVK;K TKRK GSA THERE IS NO DISPUTE TO THE PROPOSITION THAT ONCE TH E A.O. HAS REJECTED BOOKS RESULTS BY APPLYING PROVISIONS OF SECTION 145 (3) OF THE ACT, BEST JUDGMENT ASSESSMENT IS REQUIRED TO BE DONE. AS PER OUR CONSIDERED VIEW, BEST JUDGMENT ASSESSMENT IS NOT A PROVISION TO P ENALIZE THE ASSESSEE, BUT IS A MACHINERY PROVISION TO ENABLE THE REVENUE TO ASSESS A PERSON WHEN SITUATION WARRANTS SUCH AN ASSESSMENT. THE O RDER U/S.144 IS TO BE MADE TO THE BEST OF THE JUDGMENT OF THE ASSESSING O FFICER WHICH MEANS, THE ORDER HAS TO BE RATIONAL AND IS TO BE BEST ON A N HONEST GUESS WORK FOR WHICH SOME VALID BASIS IS AVAILABLE TO THE ASSESSIN G 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 FURNI SHED BY THE ASSESSEE AND COLLECTED BY HIM BY HIS OWN EFFORTS. WHERE BE ST JUDGMENT ASSESSMENT POWER HAS BEEN CONFERRED, THE LIMITS OF THE POWER ARE IMPLICIT IN THE EXPRESSION BEST OF HIS JUDGMENT AS SESSMENT. THE JUDGMENT IS VITAL TO DECIDE THE MATTER WITH WISDOM, TRULY AND LEGALLY. JUDGMENT DOES NOT DEPEND UPON THE ARBITRARY CAPRICI OUS OF THE ASSESSING 22 OFFICER, BUT ON SETTLED AND INVARIABLE PRINCIPLE OF JUSTICE. THOUGH THERE IS AN ELEMENT OF GUESS WORK IN BEST JUDGMENT ASSES SMENT, IT SHALL NOT BE WILD ONE, BUT SHALL HAVE REASONABLE NEXUS TO THE AVAILABLE MATERIAL AND CIRCUMSTANCES OF EACH CASE. WHILE ESTIMATING T HE GROSS PROFIT, THE ASSESSING OFFICER SHOULD BE FAIR & REASONABLE AND S HOULD KEEP INTO ACCOUNT THE TURNOVER AND THE GROSS PROFIT OF EARLIE R YEARS ALONGWITH ALL THE FACTS AND CIRCUMSTANCES OF THE CASE. BY REJECTI NG BOOK RESULT, THE ASSESSING OFFICER DOES NOT GET ABSOLUTE AND UNBRIDL ED POWERS TO ESTIMATE WHATEVER PROFIT HE WANTS, AS PER HIS SWEET-WILL. 2.8 IN THE INSTANT CASE, THE A.O. HAS NOT GIVEN ANY VALID REASON FOR ENHANCING THE SALES OF ASSESSEE BY 5% OF THE DECLAR ED SALES AND APPLICATION OF G.P. RATE OF 70% ON THE ESTIMATED SA LES IN CASE OF COUNTRY LIQUOR AND 45% OF ESTIMATED SALES IN CASE OF IMFL/B EER. THE A.O. IN PARA NOS. 3.1 AND 3.3 OF THE ASSESSMENT ORDER, HAS CITED SOME INSTANCES OF JORARAM & PARTY FOR A.Y. 1999-2000, WHEREIN 47% G.P . RATE WAS SHOWN IN THE SALES OF COUNTRY LIQUOR. IN VINAYAK WINES ASSES SED BY THE SAME A.O. FOR A.Y. 1999-2000, THE G.P. RATE WAS 54%. IN THE C ASE OF M/S KANHAIYA LAL KAILASH CHAND & PARTY FOR THE ASSESSMENT YEAR 1 994-95, BEFORE THE TRIBUNAL, THE ASSESSEE HAD SHOWN G.P. RATE OF 77.78 %, WHEREAS IN THE CASE OF M/S SHAKUNTALA KANWAR & PARTY BEFORE THE TR IBUNAL FOR A.Y. 1994- 23 95, THE G.P. RATE WAS SHOWN AS 65.4%. THE A.O. HAS, HOWEVER, HIMSELF MENTIONED IN PARA NO. 3.1 OF THE ORDER THAT THE GRO SS PROFIT SO SHOWN DID NOT INCLUDE THE EXPENDITURE DUE TO SHORT LICENSE FE E WHICH HAS BEEN SHOWN BY THE ASSESSEE IN P&L ACCOUNT. HE HAS COMMEN TED FURTHER IN PARA NO. 3.1 OF THE ASSESSMENT ORDER THAT SHORT LICENSE FEE PAID IN THE CASE OF ASSESSEE CONSTITUTES ONLY 14.32% AND THE ASSESSEE H AD LIFTED 85.68% OF THE COUNTRY LIQUOR. HE HAS CITED ONE MORE EXAMPLE OF MO HD. ALI & PARTY, WHEREIN LIQUOR AT 19.15% WAS LIFTED AND THE G.P. RA TE SHOWN WAS AT 65.5%. IN OUR VIEW, THE A.O. WHILE, CITING THESE EX AMPLES, HAS FAILED TO CONSIDER THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND ITS PAST HISTORY WHICH, AS PER THE ESTABLISHED POSITION OF L AW, IS THE BEST GUIDELINE TO ARRIVE AT A JUST G.P. RATE TO ESTIMATE THE INCOM E OF THE ASSESSEE. THE ASSESSEE HAS DISCLOSED G.P. RATE OF 29.97% ON SALES OF RS. 10,97,64,227/- AS COMPARED TO G.P. RATE OF 32.34% ON SALES OF RS. 9,02,82,048/- LAST YEAR IN THE CASE OF COUNTRY LIQUOR. THE REASON FOR THE D ECLINE IN THE G.P. RATE FOR THIS YEAR HAS BEEN SHOWN BY THE ASSESSEE THAT D URING THE YEAR, THE GOVERNMENT HAD INCREASED CONTRACT AMOUNT BY 15% IN COMPARISON TO THE LAST YEAR; THERE WAS DROUGHT IN RAJASTHAN FOR THE L AST FOUR CONSECUTIVE YEARS AND STIFF COMPETITION WAS THERE IN THE TRADE. IN THE CASE OF IMFL & BEER (RETAIL), THE AO HAS APPLIED G.P. RATE OF 48% ON THE ESTIMATED SALES 24 ON THE BASIS THAT IN THE CASE OF JORARAM & PARTY, T HE G.P. DISCLOSED WAS 64%; IN THE CASE OF M/S BANNA ALI & GIRDHARI SINGH & PARTY (JHUNJHUNU GROUP) DURING AY 1999-2000, THE G.P. WAS SHOWN AT 4 8%. IN BOTH THE MATTERS OF COUNTRY LIQUOR AND IMFL & BEER, THE AO, WHILE APPLYING G.P. RATE OF 70% AND 48% RESPECTIVELY, HAS NOT WHISPERED AS TO HOW THE CITED INSTANCES BY HIM ARE COMPARABLE WITH THE CASE OF AS SESSEE AND AS TO WHY THE PAST HISTORY OF THE ASSESSEE SHOULD BE IGNORED. IN PARA NO. 1.11 OF THE FIRST APPELLATE ORDER, THE LD. CIT(A) HAS MENTIONED SOME INSTANCES CITED ON BEHALF OF THE ASSESSEE, WHEREIN IN THE MATTER OF COUNTRY LIQUOR, G.P. RATE HAS BEEN SHOWN VARYING FROM 15.45% TO 30.51% A ND WHERE THE DEPARTMENT HAS APPLIED G.P. RATE VARYING FROM 25% T O 33%. SIMILARLY IN THE MATTER OF IMFL & BEER IN THE CITED CASES, THE G .P. RATE WAS DECLARED VARYING FROM 5.26% TO 19.12% AND G.P. RATE APPLIED BY THE DEPARTMENT VARIED FROM 3.85% TO 26%. A DETAILED DISCUSSION WIT H INSTANCES IN THIS REGARD HAS BEEN MADE BY THE LD. CIT(A) IN PARA NOS. 1.17 AND 1.18 OF THE ORDER. THESE INSTANCES ARE OF M/S BALAJI WINE FOR 1 999-2000, WHEREIN THE CONSOLIDATED NET PROFIT RATE WAS SHOWN AT 6.23%; IN THE CASE OF M/S VINAYAK WINES FOR THE SAME ASSESSMENT YEAR, THE CON SOLIDATED NET PROFIT RATE WAS SHOWN AT 3.81%; IN THE CASE OF M/S BANNA A LI GIRDHARI SINGH & PARTY (JHUNJHUNU GROUP) FOR AY 1999-2000, THE CONSO LIDATED NET PROFIT 25 RATE WAS SHOWN AT 0.74%; IN THE CASE OF M/S JORARAM & PARTY (AY 1999- 2000), THE CONSOLIDATED NET PROFIT RATE WAS SHOWN AT 0.05%; IN THE CASE OF M/S KANHAIYA LAL KAILASH CHAND & PARTY (AY 1994- 95), THE CONSOLIDATED NET PROFIT RATE WAS SHOWN AT 0.81%; IN THE CASE OF M/S SHAKUNTALA KANWAR & PARTY (AY 1994-95), IT WAS SHOWN AT 0.69% AND 0.5 3% IN THE CASE OF M/S BMD KHAN & PARTY (AY 1994-95). THE LD. CIT(A), IN V IEW OF THESE FACTS, HAS COMMENTED THAT IN THE CASE OF ASSESSEE, THE CON SOLIDATED NET PROFIT IN THE COUNTRY LIQUOR ON THE BASIS OF PRO RATA EXPE NSES WORKS OUT AT RS. 1,88,06,459/- GIVING N.P. RATE OF 17.13% AND OTHERW ISE THE N.P. RATE SHOWN AT 4.71% WAS MUCH BETTER THAN THE CITED INSTA NCES MENTIONED ABOVE. LIKEWISE IN THE MATTER OF IMFL, THE LD. CIT( A) HAS COMMENTED THAT THOUGH GROSS PROFIT RATE OF M/S BANNA ALI & PARTY ( JHUNJHUNU GROUP) IS BETTER THAN THE ASSESSEE BUT IN COMPARISON TO LAST YEAR, THERE IS AN INCREASE. LAST YEAR, THE GROSS PROFIT RATE WAS 9.85 % WHICH IS 25.66% THIS YEAR. THIS YEAR PERCENTAGE OF LIFTING IS 58.51 AGAI NST THAT OF 90.25% LAST YEAR. IN THIS YEAR, THE PURCHASES REMAINED WORTH OF RS. 8,34,02,479/- WHICH WAS OF RS. 11,18,89,419/-. THERE IS DECLINE I N THE SALE AMOUNT THIS YEAR BUT GROSS PROFIT HAS INCREASED TO RS. 3,09,87, 128/- FROM RS. 1,30,22,000/- LAST YEAR. AO HAS COMPARED THE CASE O F ASSESSEE WITH THAT OF M/S BANNA ALI GIRDHARI & PARTY AND HAS ESTIMATED THE SALES AT RS. 26 1,267,98,458/- AGAINST THE DECLARED SALES OF RS. 12 ,07,60,436/- WITH GROSS PROFIT OF RS. 2,98,74,852/-. THE SAME HAS BEEN ADDE D IN THE INCOME OF THE ASSESSEE ON ACCOUNT OF IMFL & BEER. WE AGREE WI TH THE FINDING OF THE LD. CIT(A) THAT ADDITION MADE IS NOT LOGICAL, SINCE IT IS EXCESSIVE IN VIEW OF THE ESTIMATION MADE IN THE SALES. THE DIFFERENCE IN THE CIRCUMSTANCES OF THE ASSESSEE WITH THAT OF M/S BANNA ALI GIRDHARI & PARTY HAS ALSO BEEN SHOWN WITH THIS SUBMISSION THAT THE BUSINESS OF ASS ESSEE IS 5 TIMES LARGER THAN THEM. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT SINCE THE ASSESSEE HAD SHOWN BETTER G.P. RATE IN IMFL & BEER SALES, THERE WAS NO MUCH SCOPE FOR THE AO FOR INTERFERENCE AND THE POSS IBILITY OF SALES OUT OF BOOKS, WHICH HELD UNRELIABLE HAS ALREADY BEEN TAKEN INTO ACCOUNT BY THE LD. CIT(A). WE FULLY AGREE WITH THE OBSERVATIONS OF THE LD. CIT(A) THAT THE EXTENT OF PROFIT IN THE NATURE OF LIQUOR BUSINESS D EPENDS UPON SEVERAL FACTORS I.E. GEOGRAPHICAL CONDITION OF THE AREA, SO CIAL AND ECONOMIC CONDITION OF THE PEOPLE IN THE AREA, MIXING HABIT O F THE POPULATION; RAPPORT AMONGST THE CONTRACTORS OF THE AREA; THEIR EXPERIENCE AND ECONOMIC POSITION; POLITICAL POSITION AND STATUS OF THE POPULATION IN AREA AND EXCISE POLICY OF THE GOVERNMENT. THUS, THERE WE RE BOTH TYPES OF INSTANCES OF LOWER AND HIGHER G.P. RATE THAN THE DE CLARED G.P. RATE OF THE ASSESSEE BUT WITHOUT DISCUSSING AS TO WHICH INSTANC ES WERE MORE AKIN TO 27 THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE ASSE SSEE, THE AO WAS NOT JUSTIFIED IN APPLYING THE HIGHER G.P. RATE TO WORK OUT THE INCOME OF THE ASSESSEE ON THE ENHANCED ESTIMATED SALES. 2.9 IN VIEW OF ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). FURTHER MORE, THE FINDING TENDERED BY THE LD. CIT(A) HAS NOT BEEN CONTROVERTED BY BRINING ANY POS ITIVE MATERIAL ON RECORD. ACCORDINGLY, NO INTERFERENCE IS REQUIRED IN THE ORDER OF THE LD. CIT(A). 2.10 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 DATED: 30/05/2014 *RANJAN COPY FORWARDED TO: 1. THE APPELLANT- DEPUTY CIT, CIRCLE 6, JAIPUR. 2. THE RESPONDENT- M/S M/S BALAJI WINES, JAIPUR. 3. THE CIT 4. CIT(APPEALS) 5. THE DR 6. GUARD FILE (ITA NO. 08/JP/2003) BY ORDER A.R., JAIPUR.