JASMIT SINGH TIBB, MUMBAI V. ITO 20(1)(3), MUMBAI

ITA 8426/MUM/2010

• Counselvise Citation: 842619914 RSA 2010
• Duration Of Justice: 3 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 21-11-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 03-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: CHARANJIT SINGH TIBB
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I , BENCH MUMBAI , BEFORE SHRI R.C.SHARMA , A M AND SHRI SANJAY GARG, J M ITA NO. 8 426 / MUM/20 1 0 ( ASSESSMENT YEAR : 200 7 - 0 8 ) JASMIT SING H TIBB , DR. CHARAT SINGH BUNGALOW, DR. CHARAT SINGH COLONY, ANDHERI (EAST), MUMBAI - 400 093 VS. ITO 20(1)93), MUMBAI - 12 PAN/GIR NO. : A A GPT 0546 G ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI CHARANJIT SINGH TIBB /REVENUE BY : SHRI O.P.SINGH DATE OF HEARING : 13 TH JANUARY , 201 4 DATE OF PRONOUNCEMENT : 22 ND JANUARY , 201 4 O R D E R PER R.C.SHARMA ( A .M.) : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), DATED 30 - 09 - 2010 , FOR THE ASSESSMENT YEAR 200 7 - 0 8 , IN THE MATTER OF ORDER PASSED UNDER SECTION 143(3) OF THE I.T. A CT. 2 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 3 . THE SUCCINCT FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SELLING OF FRANKIES THROUGH VARIOUS OUTLETS (25 OUTLETS) EITHER OWNED BY HIM OR GIVEN ON FRANCHISE UNDER THE BRAND NAME OF TIBBS FRANKIE. IN THE ASSESSMENT ORDER , THE A O HAS OBSERVED THAT THE ASSESSEE HAS 25 SALES OUTLETS SHOWING TOTAL TURNOVER OF APPROXIMATELY RS. 44 LAKHS ITA NO. 8426 /20 1 0 2 DURING THE RELEVANT ASSESSMENT YEAR. THEREFORE, ON ACC OUNT OF THE SAME ACCORDING TO THE AO, THE AVERAGE DAILY SALES WORKS OUT TO RS. 488/ - PER DAY PER OUTLET AND WHEN, THE SAME IS DIVIDED BY SALE OF RS. 25/ - PER FRANKIE, IT WORKS OUT THAT THE ASSESSEE HAS SOLD ONLY 20 FRANKIES PER OUTLET DURING THE RELEVANT ASS ESSMENT YEAR. THIS ACCORDING TO THE AO IS QUITE LOW FOR A BRANDED PRODUCT. IT WAS ALSO OBSERVED THAT THE SALES COUNTER OF FRANCHISEE CANNOT RUN ECONOMICALLY ON SUCH LOW TURNOVER. THEREFORE, ON ACCOUNT OF THESE FACTS, THE AO HAS ISSUED ENQUIRY LETTERS U/S.1 33(6) OF THE ACT TO ALL THE FRANCHISEES ASKING TO FURNISH DETAILS OF FRANKIES SOLD DURING THE RELEVANT ASSESSMENT YEAR THROUGH THEIR RESPECTIVE COUNTERS. IN THIS REGARD, THE AO HAS OBSERVED THAT EXCEPT FOR TWO PARTIES NONE OF THE FRANCHISEES RESPONDED TO T HESE NOTICES ISSUED. IT WAS ALSO OBSERVED THAT EVEN IN RESPECT OF THESE TWO PARTIES WHO HAVE RESPONDED, THE REPLIES WERE ACTUALLY SENT BY THE ASSESSEE ON THE UP OF THE FRANCHISEES. FURTHER, ON VERIFICATION OF THE DETAILS FILED BY THE ASSESSEE, THE AO HAS O BSERVED THAT THIS IS SHOWN BY THE ASSESSEE ON ACCOUNT OF J. TIBBS (THROUGH 29 OUTLETS), TIBBS PURE FOOD (THROUGH 26 OUTLETS) AND TIBBS BAR BQ (THROUGH 4 OUTLETS) AS DISCUSSED IN PARA 9 OF THE ASSESSMENT ORDER IS FOR RS. 89,44,817/ - FOR THE RELEVANT ASSESSM ENT YEAR. ACCORDINGLY, ON ACCOUNT OF THE SAME ACCORDING TO THE AO THE AVERAGE SALES WORKS OUT TO RS. 856/ - PER DAY PER OUTLET. AGAIN, CONSIDERING THE SALE PRICE OF RS. 25/ - PER 20 HE HAS WORKED OUT SALE OF 34 FRANKIES PER DAY PER OUTLET DURING THE RELEVANT A SSESSMENT YEAR, WHICH ACCORDING TO THE AO IS QUITE LOW. THEREAFTER, ITA NO. 8426 /20 1 0 3 HE HAS RECORDED A DETAILED STATEMENT OF SHIR CHARANJIT SINGH TIBB, ELDER BROTHER OF THE APPELLANT AND BASED THEREON, HE HAS REJECTED THE BOOKS OF ACC OUNT MAINTAINED BY THE ASSESSEE AND MAD E ADDITION AFTER ESTIMATING UNACCOUNTED SALES. 4. THE ADDITIONS MADE ON ACCOUNT OF SALE OF FRANKIES WERE CONFIRMED BY THE CIT(A) . 5 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF LOWER AUTHORITIES. FROM THE RECORD, WE FOUN D THAT ON THE BASIS OF ENQUIRY LETTERS U/S.133(6) AS WELL AS EVIDENCES BROUGHT ON RECORD BY THE AO , THE CIT(A) FOUND THAT ASSESSEE HAS NOT ACCOUNTED CORRECTLY THE SALE OF FRANKIES. HOWEVER, W HILE COMPUTING THE UNACCOUNTED SALE OF FRANKIES AMOUNTING TO RS. 8 1,61,200/ - AND VEGETABLES FRANKIES AMOUNTING TO RS. 4,92,480/ - , THE CIT(A) HAS ALLOWED WASTAGE AT THE RATE OF 5% ONLY WHICH APPARENTLY IS VERY LOW IN RESTAURANT BUSINESS . AS THE ASSESSEE WAS DEALING IN FULLY COOKED ITEMS, IT CANNOT LAST FOR MORE THAN 12 HOU RS , HENCE REPLACEMENT WAS GIVEN FOR UNSOLD MATERIAL LEFT WITH EACH OUTLET. AS PER OUR CONSIDERED VIEW, KEEPING IN VIEW THE ASSESSEES NATURE OF BUSINESS BEING RESTAURANT SALE, WE DEEM I T REASONABLE TO ALLOW WASTAGE AT 15 % . THE AO IS ACCORDINGLY DIRECTED TO RECOMPUTED THE UNACCOUNTED SALE AFTER FOLLOWING WASTAGE OF 15 %. 6 . FURTHER THE CONTENTION OF THE LEARNED AR WAS THAT THREE MILLS BY 8 STAFF MEMBER IS REQUIRED TO BE TAKEN INTO CONSIDERATION WHILE COMPUTING ITA NO. 8426 /20 1 0 4 UNACCOUNTED SALES, HOWEVER, LOWER AUTHORITIES H AVE NOT GIVEN CREDIT FOR THE MATERIAL PURCHASED AND CONSUMED BY THE STAFF MEMBERS. 7 . WE ALSO FOUND THAT WHILE COMPUTING UNACCOUNTED SALES, THE LOWER AUTHORITIES HAVE NOT CONSIDERED THE PURCHASES MADE BY THE ASSESSEE, WHICH WAS ACTUALLY CONSUMED BY ITS STA FF MEMBERS. WITHOUT STAFF MEMBERS, IT IS NOT PRACTICABLE TO RUN THE NUMBER OF OUTLETS AS CONSIDERED AND ACCEPTED BY THE AO. WE ACCORDINGLY, DIRECT THE AO TO REDUCE THE PURCHASES WHICH ARE ACTUALLY CONSUMED BY THE STAFF MEMBERS. THE REASONABLE NUMBER OF ST AFF MEMBERS IS TO BE TAKEN A T 5 AS AGAINST 8 STAFF MEMBERS PLEADED BY THE ASSESSEE. WE DIRECT THE AO TO REDUCE THE QUANTUM OF UNACCOUNTED SALES CORRESPONDING TO THE PURCHASES CONSUMED BY STAFF MEMBERS . 8 . NORMALLY, ACCEPTED INDUSTRY NORMS SUGGEST RATIO O F AVERAGE COST TO SALES BETWEEN 30% TO 40% . K EEPING INTO ACCOUNT TOTALITY OF FACTS AND CIRCUMSTANCES, WE DIRECT THE AO TO TAKE THIS RATIO AT 35% FOR THE PURPOSE OF CALCULATING THE UNACCOUNTED SALES. WE DIRECT ACCORDINGLY. 9 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED IN PART . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND JANUARY. 201 4 . 22 ND JAN,2014 SD/ - SD/ - ( ) ( SANJAY GA RG ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 22 /01/2014 /PKM , PS ITA NO. 8426 /20 1 0 5 COPY OF THE OR DER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//