M/s Sarvesh Kumar Sohan Lal, Farrukhabad V. Dy. C.I.T. Circle-2(1), Farrukhabad

ITA 80/AGR/2011

• Counselvise Citation: 8020314 RSA 2011
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-06-2012
• Assessment Year: 1997-1998
• Appeal Filed On: 10-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K JAIN
• Keywords: Business income; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 80/AGRA/2011 ASSTT. YEAR : 1997-98 M/S. SARVESH KUMAR SOHAN LAL, VS. D.C.I.T., CIRCL E 2(1), RAKABGANJ, FARRUKHABAD. FARRUKHABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PANKAJ GARGH, ADVOCATE RESPONDENT BY : SHRI R.K. JAIN, JR. D.R. DATE OF HEARING : 06.06.2012 DATE OF PRONOUNCEMENT OF ORDER : 22.06.2012 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A), GHAZIABAD DATED 06.01.2011 FOR THE ASSESSMENT YEAR 1997-98, CHALLENGING THE LEVY OF PENALTY U/S. 271(1)(C) OF THE IT ACT. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE DEALS IN SALE OF COUNTRY LIQUOR. THE AO DECIDED THE ISSUE OF DETERMINATION O F PROFITS FROM SALE OF COUNTRY LIQUOR IN THE ABSENCE OF ANY SALE BILLS FOR THE FIN ANCIAL YEAR IN QUESTION AS ADMITTED BY THE ASSESSEE. AT THE ASSESSMENT STAGE, THE ASSES SEE WAS REQUIRED TO EXPLAIN WHY THE CASE BE NOT DECIDED ON THE BASIS OF COMPARABLE CASES IN ORDER TO COMPUTE THE HIGHER BUSINESS INCOME OF THE ASSESSEE. THE AO AFTE R ELABORATE DISCUSSION AND ITA NO. 80/AGRA/2011 2 CONSIDERING VARIOUS CASE LAWS COMPUTED THE BUSINESS INCOME OF THE ASSESSEE. ACCORDINGLY, THE LICENSE FEE IN ASSESSEES CASE BEI NG RS.3,31,08,407/-, 2.5 TIMES OF THIS COMES TO RS.8,27,71,018/- AND NET PROFIT @ 8% WAS APPLIED AND PROFIT WAS ESTIMATED AT RS.66,21,681/- AND WHATEVER AMOUNT WAS DECLARED IN THE PROFIT AND LOSS ACCOUNT AT RS.1,88,251/- WAS REDUCED AND INCOM E WAS ESTIMATED AT RS.64,33,430/-. THE ADDITION WAS ACCORDINGLY MADE. THE AO, VIDE SEPARATE ORDER, LEVIED PENALTY AGAINST THE ASSESSEE U/S. 271(1)(C) OF THE IT ACT TO THE EXTENT THE QUANTUM WAS CONFIRMED BY THE LD. CIT(A) AND THE TRI BUNAL. 2.1 THE ASSESSEE CHALLENGED THE LEVY OF PENALTY BEF ORE THE LD. CIT(A) AND THE SUBMISSIONS OF THE ASSESSEE HAVE BEEN INCORPORATED IN THE APPELLATE ORDER. THE ASSESSEE HIGHLIGHTED THAT THE LD. CIT(A) VIDE ORDER DATED 03.04.2000 DETERMINED/ESTIMATED SALES AT RS.4,13,85,508/-, I.E ., 1:1:25 OF BID MONEY OF RS.3,31,08,407/- AND APPLIED NET PROFIT RATE OF 3.5 % AND DETERMINED THE NET PROFIT OF ASSESSEE AT RS.14,48,493/- AND ALLOWED SUBSTANTI AL RELIEF TO THE ASSESSEE IN A SUM OF RS.49,84,937/- IN RESPECT OF THE INCOME FROM SAL E OF LIQUOR. IT WAS ALSO SUBMITTED THAT AFTER ADJUSTMENT OF TAXES, REFUND WA S DUE TO THE ASSESSEE. THE ASSESSEE HAS, THEREFORE, NOT CONCEALED THE PARTICUL ARS OF INCOME NOR FILED INACCURATE PARTICULARS OF INCOME. THE LD. CIT(A), HOWEVER, DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE PENALTY AND DISMISSE D THE APPEAL OF THE ASSESSEE ON MERITS, BUT AS REGARDS THE QUANTUM OF PENALTY, THE CONTENTION OF THE ASSESSEE WAS ITA NO. 80/AGRA/2011 3 ACCEPTED THAT PENALTY IS LEVIABLE ON THE REVISED AM OUNT OF CONCEALED INCOME. ACCORDINGLY, THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED. 3. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE D ISCLOSED ALL THE PARTICULARS OF INCOME IN THE RETURN OF INCOME AND ULTIMATELY INCOM E IS ESTIMATED BY THE AUTHORITIES BELOW, WHICH FACT IS ALSO CONFIRMED BY THE TRIBUNAL WHILE DISMISSING BOTH THE CROSS APPEALS OF THE ASSESSEE AND THE REVE NUE VIDE ORDER DATED 24.08.2005, COPY OF WHICH IS PLACED ON RECORD. HE H AS SUBMITTED THAT ON ESTIMATE OF INCOME, PENALTY IS NOT LEVIABLE. HE HAS RELIED U PON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. ARJUN P RASAD AJEET KUMAR, 214 CTR 355, IN WHICH IT WAS HELD THAT THE ORDER OF CIT(A) DELETING PENALTY UNDER SECTION 271(1)(C) ON THE GROUND THAT THERE BEING NOTHING ON RECORD THAT ASSESSEES EXPLANATION LACKED BONA FIDES, PENALTY UNDER SECTIO N 271(1)(C) COULD NOT IMPOSED ON THE BASIS OF ESTIMATING SALES AND MAKING ADDITIO N BY APPLYING NET PROFIT RATE WAS RIGHTLY SUSTAINED BY TRIBUNAL AND NO SUBSTANTIA L QUESTION OF LAW AROSE. . 3.1 HE HAS ALSO SUBMITTED THAT WHEN ADDITION IS MAD E TO THE INCOME BASED ON ESTIMATE, THERE IS NO CONCEALMENT OF INCOME AND NO PENALTY IS LEVIABLE AND RELIED UPON THE DECISION OF HONBLE ALLAHABAD HIGH COURT I N THE CASE OF CIT VS. RAJBANS SINGH, 276 ITR 351 AND IN THE CASE OF CIT VS. HARNA M SINGH & CO., 106 ITR 532, ITA NO. 80/AGRA/2011 4 THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. AERO TRADERS (P) LTD., 231 CTR 524 AND THE DECISION OF HONBLE PUNJ AB & HARYANA HIGH COURT IN THE CASE OF CIT VS. M.M. RICE MILLS, 253 ITR 17. HE HAS FURTHER RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. AARKAY SAREE MUSEUM, 187 ITR 147, IN WHICH IT WAS HELD THAT MERE LY BECAUSE CERTAIN ADDITIONS WERE MADE IN THE TRADING ACCOUNT BY THE AO, IT DID NOT NECESSARILY FOLLOW THAT THE ASSESSEE HAD CONCEALED ITS INCOME. CANCELLATION OF PENALTY WAS HELD AS VALID. 4. ON THE OTHER HAND, THE LD. DR RELIED UPON THE OR DERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT WHEN PART OF THE QUANTUM ADDITIO N HAS BEEN CONFIRMED BY THE TRIBUNAL, IT IS A FIT CASE FOR LEVY OF PENALTY. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE FINDINGS OF AUTHORITIES BELOW. IT IS NOT IN DISPUTE THAT THE AS SESSEE DEALS IN SALE OF COUNTRY LIQUOR. THE AO DETERMINED THE PROFIT FROM SALE OF C OUNTRY LIQUOR IN THE ABSENCE OF SALE BILLS. THE ASSESSEE SUBMITTED BEFORE THE AO TH AT ALL EXPENSES EXCEPT FREIGHT IN THE TRADING ACCOUNT ARE PAID TO EXCISE DEPARTMENT A ND ARE VERIFIABLE AND STOCK REGISTER AND SALE PRICE ARE CHECKED BY THE EXCISE A UTHORITIES. THE ASSESSEE MAINTAINED THE QUANTITATIVE TALLY, AS CONTAINED IN THE AUDIT REPORT. THE AO REJECTED THE BOOK RESULTS BECAUSE THE SALE BILLS ARE NOT AVA ILABLE AND IT IS NOT OPEN TO VERIFICATION. IT IS GENERALLY SEEN THAT THE SALE OF LIQUOR IS MADE IN CASH AND EVEN IF ITA NO. 80/AGRA/2011 5 CASH MEMO IS PREPARED BY THE ASSESSEE, AGAIN THE SA LE IS NOT VERIFIABLE. THUS, IN THE CASE OF LIQUOR SALE, THE SALES TO THE PETTY CUSTOME RS ARE NEVER SUBJECTED TO VERIFICATION. THE PURCHASES ARE ALWAYS MADE FROM TH E GOVERNMENT DEPARTMENT AND SUBJECT TO THE CONTROL BY THE EXCISE AUTHORITIES. T HEREFORE, THE ASSESSEE PRODUCED DETAILS OF PURCHASES AND EXPENSES AND ALSO MAINTAIN ED QUANTITATIVE DETAILS OF LIQUOR. THEREFORE, MERELY BECAUSE SALES WERE NOT VE RIFIABLE MAY BE A GROUND FOR ESTIMATE OF PROFIT, BUT IT WOULD NOT MAKE OUT A CAS E THAT THE ASSESSEE CONCEALED THE PARTICULARS OF HIS INCOME OR FILED INACCURATE PARTI CULARS OF INCOME. THE AO ESTIMATED THE PROFIT OF THE ASSESSEE BY APPLYING HI GHER AMOUNT OF LICENSE FEES AND HIGHER GROSS PROFIT RATE, WHICH WAS SUBSTANTIALLY R EDUCED BY THE LD. CIT(A) AND THE TRIBUNAL ALSO CONFIRMED THE ORDER OF THE AUTHORITIE S BELOW ON COMPUTING THE INCOME OF THE ASSESSEE ON ESTIMATE BASIS. THUS, IT IS A CASE OF ESTIMATE OF INCOME BY APPLYING HIGHER SALES AND HIGHER GROSS PROFIT BY THE AO AND REDUCED BY THE LD. CIT(A). WHEN THE INCOME OF THE ASSESSEE IS ESTIMATE D, THERE CANNOT BE A CASE OF CONCEALMENT OF INCOME OR FILING INACCURATE PARTICUL ARS OF INCOME. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION IN THE CA SE OF ARJUN PRASAD AJEET KUMAR (SUPRA), WHICH IS A CASE OF COUNTRY LIQUOR AND SALE WAS ESTIMATED BY THE AO AT 2 TIMES OF LICENSE FEES AND NET PROFIT RATE OF 5% WAS APPLIED FOR COMPUTING THE INCOME. THE LD. CIT(A) CANCELLED THE PENALTY, WHICH WAS CONFIRMED BY THE TRIBUNAL. THEREFORE, ON SUCH FACTS, THE DEPARTMENTA L APPEAL WAS DISMISSED. THIS DECISION DIRECTLY APPLIES TO THE CASE OF ASSESSEE A ND OTHER DECISIONS CITED BY THE LD. ITA NO. 80/AGRA/2011 6 COUNSEL FOR THE ASSESSEE ALSO SUPPORT THE CASE OF T HE ASSESSEE FOR CANCELLATION OF PENALTY. CONSIDERING THE TOTALITY OF FACTS AND CIRC UMSTANCES AND THAT THE ASSESSEE DISCLOSED ALL PARTICULARS IN THE RETURN OF INCOME A ND AT THE ASSESSMENT STAGE, THEREFORE, MERELY ON ESTIMATE OF INCOME, PENALTY IS NOT LEVIABLE. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND C ANCEL THE PENALTY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY