Sh. Hem Raj, Chandigarh V. ACIT, Chandigarh

ITA 877/CHANDI/2012

• Counselvise Citation: 87721514 RSA 2012
• Duration Of Justice: 3 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 22-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS RAJINDER KAUR
• Assessee Lawyers: N K SAINI
• Keywords: Depreciation; Salary income; Principle of natural justice; Difference of opinion
• Section: 143(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO. 877/CHD/2012 (ASSESSMENT YEAR: 2008-09) SHRI HEM RAJ, VS. THE A.C.I.T., #5489, MODERN CIRCLE 3(1), HOUSING COMPLEX, CHANDIGARH. MANIMAJRA, CHANDIGARH. PAN NO. ACEPR1688M AND ITA NO. 225/CHD/2013 (ASSESSMENT YEAR: 2009-10) SHRI HEM RAJ, VS. THE ADDL.C.I.T., #5489, MODERN RANGE III, HOUSING COMPLEX, CHANDIGARH. MANIMAJRA, CHANDIGARH. PAN NO. ACEPR1688M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K. SAINI RESPONDENT BY : MRS.RAJINDER KAUR, DR DATE OF HEARING : 05.11.2015 DATE OF PRONOUNCEMENT : 26.11.2015 O R D E R PER H.L.KARWA, VP : BOTH THESE APPEALS CONCERN THE SAME ASSE SSEE AND ARE DIRECTED AGAINST THE SEPARATE ORDERS OF THE LEA RNED CIT (APPEALS), CHANDIGARH DATED 13.7.2012 AND 3.12.2012 2 RELATING TO ASSESSMENT YEARS 2008-09 AND 2009-10 RESPECTIVELY. BOTH THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. THE ISSUE IN BOTH THE APPEALS IS A LSO COMMON. 2. FOR THE SAKE OF CONVENIENCE, FIRSTLY, WE WILL T AKE UP ITA NO.877/CHD/2012 RELATING TO ASSESSMENT YEAR 2008-09. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT THE LD. CIT (A) IS NOT JU STIFIED IN NOT PROVIDING THE PROPER OPPORTUNITY OF HEARING WHI CH IS AGAINST THE NATURAL JUSTICE. 2. THAT THE LD. CIT (A) IS NOT JUSTIFIED IN UPHOL DING THE REJECTION OF BOOKS AND THE APPLICATION OF PROVISION S OF SECTION 145 (3) OF THE I. T. ACT. 3. THAT THE LD. CIT (A) IS NOT JUSTIFIED IN NOT GIV ING THE SET OFF OF LOSS FROM THE BUSINESS AS CLAIMED BY THE APPELLANT WHILE COMPUTING THE TOTAL INCOME. 4. A) THAT THE LD. CIT (A) IS NOT JUSTIFIED IN UPH OLDING THE APPLICATION OF NET PROFIT RATE @ 8% ON GROSS SALES . B) THAT WITHOUT PREJUDICE TO ABOVE, THE APPELLAN T DISPUTES THE QUANTUM OF NET PROFIT RATE. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE WAS RUNNING LIQUOR, WINE AND BEER SHOP IN MANIMAJRA AND KAIMBWALA AREA OF CHANDIGARH IN THE N AME OF HIS PROPRIETARY CONCERN M/S HEM RAJ & CO. THE ASSESSEE IS A CONTRACTOR AUTHORIZED TO OPERATE THE LIQUOR SHOP FOR THE PERIOD OF ONE YEAR FROM APRIL, 2007 TO MARCH, 3 2008 UNDER THE LAWS OF EXCISE DEPARTMENT OF CHANDIG ARH ADMINISTRATION. THE ASSESSEE PURCHASED WINE FROM DIFFERENT SUPPLIERS AND THE SAME IS SOLD IN CASH. IN THE RETURN OF INCOME, THE ASSESSEE HAD SHOWN INCOME UND ER THE HEAD SALARY ONLY. DURING THE COURSE OF ASSES SMENT PROCEEDINGS, THE ASSESSEE FURNISHED HIS REPLY TOGET HER WITH PROFIT & LOSS ACCOUNT, BALANCE SHEET AND AUDIT REPORT IN FORM NO.3CD FOR THE FINANCIAL YEAR 2007-0 8. THE ASSESSEE ALSO FURNISHED LEDGERS, BILLS/VOUCHERS OF THE LIQUOR BUSINESS AND ORIGINAL BANK ACCOUNT STATEMENT S ALONGWITH SOME OTHER REPLIES TO THE QUESTIONNAIRE. AFTER EXAMINING THE BOOKS OF ACCOUNT OF THE ASSESSEE, THE ASSESSING OFFICER HAS NOTICED CERTAIN DISCREPANCIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE VIZ; NON-MAINTENAN CE OF STOCK REGISTER, NON-MAINTENANCE OF SALES RECORDS, N ON- MAINTENANCE OF BILLS AND VOUCHERS OF EXPENSES AND T HAT THE PURCHASES AND FREIGHT LEDGER WERE NOT IN CONCUR RENCE. THE ASSESSING OFFICER ALSO POINTED OUT THAT THE ASS ESSEE FAILED TO GIVE ANY EXPLANATION ABOUT THE DISCREPANC IES NOTICED BY HIM AND HAS MERELY MENTIONED IN HIS REPL Y THAT THE ASSESSING OFFICER HAD NOT POINTED OUT ANY SPECI FIC DISCREPANCY. THE ASSESSING OFFICER HAS ALSO POINT ED OUT THAT THE BOOKS OF ACCOUNT HAD BEEN PREPARED BY REVE RSE CALCULATIONS TO JUSTIFY THE DEPOSITS IN THE BANK AC COUNT AND THESE WERE NOT PREPARED IN THE NORMAL COURSE OF BUSINESS. THE ASSESSING OFFICER ALSO MENTIONED TH AT THE SALES SHOWN BY THE ASSESSEE APPEARED TO BE DEFLATED AS THE ASSESSEE WAS SHOWING NET LOSS IN THE VENTURE, W HICH IS 4 HIGHLY IMPROBABLE. THE ASSESSING OFFICER ALSO POIN TED OUT THAT THE BILLS/VOUCHERS OF EXPENSES, LIKE FREIGHT, MISCELLANEOUS EXPENSES, REPAIR & MAINTENANCE, STAFF WELFARE, PRINTING & STATIONERY WERE NOT AVAILABLE. IN THE ABOVE CIRCUMSTANCES AND ALSO IN VIEW OF THE DISCREP ANCIES NOTICED BY THE ASSESSING OFFICER IN THE BOOKS OF AC COUNT OF THE ASSESSEE, THE ASSESSING OFFICER INVOKED THE PRO VISIONS OF SECTION 145(3) OF THE INCOME TAX ACT, 1961 (IN S HORT THE ACT) AND AS A CONSEQUENCE OF WHICH, HE REJECT ED THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSING O FFICER APPLIED THE NET PROFIT RATE OF 8% ON THE SALES OF RS.1,60,23,400/- AS DECLARED BY THE ASSESSEE HIMSEL F IN THE PROFIT & LOSS ACCOUNT. THE ASSESSING OFFICER O BSERVED THAT AS PER THE PREVALENT CONDITIONS IN LIQUOR BUSI NESS IN CHANDIGARH AND AROUND FOR THE FINANCIAL YEAR 2004-0 5 AND AS PER STATISTICS AVAILABLE ON INTERNET, A LIQUOR C ONTRACTOR IS ABLE TO SAVE ANYWHERE BETWEEN A MINIMUM OF AROUN D 6% TO 8% ON BULK SALES AND 17% TO 20% ON RETAIL SALES AND HE HAS WORKED OUT THE NET PROFIT RATE BETWEEN 9% TO 12 % BY TAKING A WEIGHTED AVERAGE OF BULK AND RETAIL SALES MADE BY THE ASSESSEE. THE ASSESSING OFFICER FURTHER POINT ED OUT THAT THE RATE OF PROFIT ESTIMATED AT 8% WAS VERY RE ASONABLE AND MUCH LESSER THAN THE PROFIT RATE OF 13.13% APPL IED IN THE CASE OF M/S SINGH ASSOCIATES OF GWALIOR AND 15. 5% OF M/S LUXMI NARAIN SHIVHARE & CO. OF GWALIOR. ACCORDINGLY, THE ASSESSING OFFICER MADE AN ADDITION OF RS.12,81,872/-. 5 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER , THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE TH E LEARNED CIT (APPEALS) AND THE LEARNED CIT (APPEALS) VIDE HIS ORDER DATED 13.7.2012 UPHELD THE ORDER OF THE ASSESSING OFFICER, AND HENCE THE ASSESSEE IS IN APP EAL BEFORE THE TRIBUNAL. 5. BEFORE US, SHRI N.K.SAINI, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. HE FURTHER SUBMITTED THAT THE A SSESSEE SUBMITTED HIS RETURN FOR THE YEAR UNDER CONSIDERATI ON DECLARING SALARY INCOME AT RS.1,65,800/-. HE FURTH ER SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS ALSO ENGAGED IN THE BUSINESS OF WINE A ND LIQUOR AND INCURRED A LOSS OF RS.1,07,746/-. ACCO RDING TO HIM, THE OTHER LOSS WAS NOT CLAIMED IN THE RETURN AS THE SAME WAS NOT ALLOWED TO BE SET OFF AGAINST THE SALA RY INCOME. HE FURTHER POINTED OUT THAT THE ASSESSEE WAS MAINTAINING PROPER BOOKS OF ACCOUNT ALONGWITH PURCH ASE, EXPENSES BILLS/VOUCHERS AND DAILY SALES STATEMENTS, WHICH WERE DULY AUDITED AND THE SAME WERE PRODUCED BEFORE THE LOWER AUTHORITIES. HE ALSO SUBMITTED THAT THE COP Y OF AUDITED BALANCE SHEET, PROFIT & LOSS ACCOUNT AND OT HER RELATED DOCUMENTS WERE SUBMITTED BEFORE THE LOWER AUTHORITIES. SHRI N.K.SAINI, LEARNED COUNSEL FOR TH E ASSESSEE VEHEMENTLY ARGUED THAT THE PURCHASES ARE M ADE FROM VARIOUS SUPPLIERS IN ACCORDANCE WITH THE PERMI TS GIVEN BY THE GOVERNMENT, WHICH HAD BEEN DULY VOUCHE D 6 AND THE SAME HAS ALSO BEEN VERIFIED BY THE LOWER AUTHORITIES FROM THE ORIGINAL PURCHASE BILLS. HE FURTHER STATED THAT THE SALES IN THIS LINE OF BUSINESS ARE MADE IN CASH AND RECORDED ON THE BASIS OF DAILY SALES STATE MENTS GIVEN BY THE EMPLOYEES ATTENDING TO THE SHOP. SHR I N.K.SAINI, LEARNED COUNSEL FOR THE ASSESSEE FURTHER POINTED OUT THAT ALL THE ORIGINAL BILLS FOR PURCHAS E AND DIFFERENT EXPENSES, BILLS, HANDMADE BILLS FOR FREIG HT, MISCELLANEOUS EXPENSES, REPAIR & MAINTENANCE, STAFF WELFARE, PRINTING & STATIONERY , DAILY SALE SUMMARY MADE BY THE EMPLOYEES, QUANTITATIVE OPENING STOCK, PURCH ASES, SALES AND CLOSING STOCK WERE PRODUCED BEFORE THE AUTHORITIES BELOW. NO SPECIFIC DISCREPANCIES IN T HE SAME WERE FOUND OUT BY THE ASSESSING OFFICER EXCEPT THAT ABSENCE OF DAY-TO-DAY STOCK REGISTER, LACK OF SALE RECORDS, DISCREPANCIES IN PURCHASE AND FREIGHT LEDGER AND AB SENCE OF SUPPORTING BILLS/VOUCHERS WITHOUT ANY PROPER JUSTIFICATION AND ACCORDINGLY, HE HELD THAT THE BOO KS OF ACCOUNT ARE HIT BY THE MISCHIEF OF SECTION 145 OF T HE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMIT TED THAT IT IS PRACTICALLY IMPOSSIBLE TO ISSUE SALE BIL LS TO THE CUSTOMERS FOR SALE OF LIQUOR AND THE PRACTICE OF NO T ISSUING BILLS IS PREVALENT ALL OVER THE COUNTRY IN THIS TRADE. THE SALE PRICE, HOWEVER, IS DISPLAYED BY THE ASSESSEE AT THE SHOP AND THE ASSESSEE CANNOT CHARGE MORE PRICE THAN AS DISPLAYED AT THE SHOP BECAUSE IT IS PRACTICALLY IMPOSSIBLE AS EVERY CUSTOMER LOOKS AT T HE PRICES DISPLAYED AT THE SHOP. THE ASSESSING OFFIC ER HAS 7 ACCEPTED THE PURCHASES AND SALES AS DISCLOSED BY TH E ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE ALS O SUBMITTED THAT WITH REGARD TO DISCREPANCY IN PURCHA SE AND FREIGHT LEDGER, AS POINTED OUT BY THE ASSESSING OFFICER, THE PAYMENTS SHOWN UNDER THE HEAD FREIGHT PAYMENT RELATES TO THE PAYMENT TO LOADING/UNLOADIN G OF THE STOCK PURCHASED WHILE GETTING IT DELIVERED AT T HE LIQUOR SHOPS AND SALE TO THE CUSTOMERS. THESE CHARGES ARE ENTERED IN THE BOOKS OF ACCOUNT ON THE DAY ON WHICH ACTUAL PAYMENT FOR THE SAME IS MADE. HE FURTHER P OINTED OUT THAT THERE IS NO DISCREPANCY IN PURCHASES AND F REIGHT LEDGER, AS POINTED OUT BY THE ASSESSING OFFICER. T HE TOTAL CHARGES PAID ON THIS ACCOUNT ARE RS.32,083/-. THE SE EXPENSES WERE NEVER HELD TO BE BOGUS EXPENSES BY TH E ASSESSING OFFICER. HE FURTHER POINTED OUT THAT CE RTAIN HANDMADE BILLS FOR FREIGHT, MISCELLANEOUS EXPENSES, REPAIR & MAINTENANCE, STAFF WELFARE, PRINTING & STATIONERY WERE SUBMITTED BEFORE THE ASSESSING OFFICER. THE LEARN ED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN PARA 8.6 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS MENTION ED THAT THE RATE OF PROFIT ESTIMATED AT 8% IS VERY REA SONABLE AND MUCH LESSER THAN THE PROFIT RATE OF 13.13% APPL IED IN THE CASE OF M/S SINGH ASSOCIATES OF GWALIOR (SUPRA ) AND 15.5% APPLIED IN THE CASE OF M/S LUXMI NARAIN SHIVHARE & CO. OF GWALIOR (SUPRA). THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT THESE TWO CASES PERTAIN TO ASSESSMENT YEAR 2000-01. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO THE 8 DECISION OF I.T.A.T., AGRA BENCH IN THE CASE OF IT O VS. LUXMI NARIAN RAMSWAROOP SHIVHARE (2009) 119 ITD 001 5 (TM) RELATING TO ASSESSMENT YEAR 2001-02. IN THE SAID CASE ALSO, THE ASSESSING OFFICER HAS REJECTED THE B OOK RESULTS OF THE ASSESSEE ON THE BASIS OF RESULTS SHO WN BY THE OTHER TRADERS, NAMELY M/S SINGH ASSOCIATES OF G WALIOR AND M/S LUXMI NARAIN SHIVHARE & CO. OF GWALIOR (SUP RA). THESE ARE THE SAME CASES, WHICH HAVE BEEN MENTIONED IN PARA 8.6 OF THE ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE BEFORE US. THE LEARNED COUNSEL FOR THE A SSESSEE POINTED OUT THAT ON SIMILAR SET OF FACTS, THE I.T.A .T., AGRA BENCH (TM) HELD THAT THERE WAS NO JUSTIFICATION IN REJECTING THE BOOK RESULTS AND ESTIMATING THE INCOM E BY APPLYING GP RATE OF 5% AS AGAINST PROFIT RATE DECLA RED AT 3.11% BY THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE INSTANT CASE ALSO, T HE ASSESSING OFFICER RELYING ON THE CASES OF M/S SINGH ASSOCIATES OF GWALIOR AND M/S LUXMI NARAIN SHIVHAR E & CO. OF GWALIOR (SUPRA) HAS APPLIED HIGHER PROFIT RA TE WITHOUT ANY JUSTIFICATION. HE ACCORDINGLY, SUBMIT TED THAT THE IMPUGNED ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT (APPEALS) MAY BE DELET ED. 6. MRS.RAJINDER KAUR, LEARNED D.R., ON THE OTHER HAND, HEAVILY RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. SHE FURTHER SUBMITTED THAT THE BOOK RESULTS SHOWN BY THE ASSESSEE CANNOT BE ACCEPTED IN VIEW OF THE DISCREPANCIES POINTED OUT BY THE ASSESSING OFFICER. SHE 9 FURTHER SUBMITTED THAT THE ASSESSING OFFICER WAS FU LLY JUSTIFIED IN ADOPTING/APPLYING THE NET PROFIT RATE OF 8%. ACCORDINGLY, SHE SUBMITTED THAT THE IMPUGNED ORDER MAY BE UPHELD. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE ADMITTED FACTS ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS ENGAGED IN THE BUSI NESS OF WINE, LIQUOR AND INCURRED A LOSS OF RS.1,07,746/ -. THIS BUSINESS LOSS WAS NOT CLAIMED IN THE RETURN. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE HAS MAINTAI NED PROPER BOOKS OF ACCOUNT ALONGWITH PURCHASE, EXPENSE S BILLS/VOUCHERS AND DAILY SALES STATEMENTS, WHICH WE RE DULY AUDITED AND THE SAME WERE PRODUCED BEFORE THE AUTHORITIES BELOW. IT IS ALSO TRUE THAT THE COPY OF AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT WERE FILED BEFORE THE ASSESSING OFFICER. IT IS RELEVANT TO STATE HE RE THAT THE PURCHASES ARE MADE FROM VARIOUS SUPPLIERS IN ACCORD ANCE WITH THE PERMITS GIVEN BY THE GOVERNMENT, WHICH HAV E BEEN DULY VOUCHED AND THE SAME HAVE ALSO BEEN VERIF IED BY THE ASSESSING OFFICER FROM ORIGINAL PURCHASE BIL LS. THE ASSESSEE HAS ALSO ADMITTED THAT THE SALES ARE M ADE IN CASH AND RECORDED ON THE BASIS OF DAILY SALES STATE MENTS GIVEN BY THE EMPLOYEES ATTENDED TO THE SHOP. IT I S ALSO STATED THAT THIS PRACTICE IS PREVALENT ALL OVER THE COUNTRY. THE ASSESSING OFFICER HAS NOT ACCEPTED THE BOOK RES ULTS AND REJECTED THE BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. THE ASSE SSING 10 OFFICER HAS OBSERVED THAT THE ASSESSEE HAD NOT MAIN TAINED DAY-TO-DAY STOCK REGISTER DUE TO LACK OF SALE RECOR DS. HE FURTHER POINTED OUT THE DISCREPANCIES IN PURCHASE A ND FREIGHT LEDGERS. HE ALSO STATED THAT THE BILLS/VO UCHERS OF SEVERAL EXPENSES WERE NOT AVAILABLE, FOR EXAMPLE FR EIGHT, MISCELLANEOUS EXPENSES, REPAIR & MAINTENANCE, STAFF WELFARE AND PRINTING & STATIONERY. IT IS TRUE THA T THE ASSESSING OFFICER HAS ACCEPTED THE SALES OF RS.1,60,23,400/- DECLARED BY THE ASSESSEE, HOWEVER, HE HAS APPLIED THE NET PROFIT RATE OF 8% ON THE DECLAR ED SALES AND MADE THE ADDITION OF RS.12,81,872/-. IT IS OBS ERVED THAT THE ASSESSEE FURNISHED TRADING AND PROFIT & LO SS ACCOUNT FOR THE YEAR ENDING 31.3.2008 BEFORE THE ASSESSING OFFICER, WHICH IS REPRODUCED AT PAGE 4 OF THE ASSESSMENT ORDER AND THE SAME READS AS UNDER : MR. HEMRAJ TRADING AND PROFIT & LOSS ACCOUNT FOR THE YEAR ENDING 31.3.2008 PARTICULRS AMOUNT PARITUCLAR AMOUNT TO OPENING STOCK 318800.00 BY SALES 16023400.00 TO PURCHASE 9964178.07 BY CLOSING STOCK 417375.00 TO FREIGHT & CARTAGE 32083.00 BY MISC. INCOME 873.24 TO LICENSE FEES 5200000.00 BY NET LOSS 107746.63 TO ACCOUNTING CHARGES 18000.00 TO BANK CHARGES & INTT. 5782.00 TO TRAVELLING EXPENSES 15846.00 TO DEPRECIATION 35940.00 TO ELECTRICITY & WATER CHARGES 91762.00 11 TO MISC. EXPENSES 3532.00 TO NEW PAPER & PERIODICAL 1800.00 TO PRINTING & STATIONERY 12215.00 TO TELEPHONE EXPENSES 8495.00 TO AUDIT FEE 19663.00 TO RENT 470000.00 TO REPAIR & MAINTENANCE 12630.00 TO SALARY & WAGES 302600.00 TO STAFF WELFARE 18869.00 TO PROFESSIONAL CHARGES 17500.00 TOTAL 16549396.07 TOTAL 16549398.07 8. THE ASSESSING OFFICER OBSERVED THAT THE BILLS/VOUCHERS OF CERTAIN EXPENSES WERE NOT AVAILAB LE, FOR EXAMPLE FREIGHT, MISCELLANEOUS EXPENSES, REPAIR & MAINTENANCE, STAFF WELFARE AND PRINTING & STATIONER Y. IT IS CLEAR FROM THE PROFIT & LOSS ACCOUNT (SUPRA) THA T THE ASSESSEE HAD CLAIMED FREIGHT AND CARTAGE CHARGES AT RS.32,083/-, MISCELLANEOUS EXPENSES AT RS,3532, REP AIR & MAINTENANCE EXPENSES AT RS.12,630/-, STAFF WELFARE EXPENSES AT RS.18,869/- AND PRINTING & STATIONERY EXPENSES AT RS.12,215/-. IN OUR CONSIDERED VIEW, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DOUBTING THE ABOVE EXPENSES, PARTICULARLY THE QUANTUM INVOLVED THEREIN . FURTHERMORE, THE NATURE OF EXPENSES IS SUCH THAT INCURRING OF THE SAME FOR THE PURPOSES OF BUSINESS CANNOT BE DOUBTED. THE MAIN CONTENTION OF THE ASSESSING OFFICER WHILE REJECTING THE BOOKS OF ACCOUNT WAS THAT THE A SSESSEE HAS NOT MAINTAINED ANY SALES BILLS FOR THE SALES CA RRIED FROM ITS LIQUOR SHOPS. WE FIND THAT THE DAILY SAL ES ARE, 12 HOWEVER, RECORDED ON THE BASIS OF DAILY STATEMENTS GIVEN BY THE EMPLOYEES ATTENDING TO THE SHOP. THE ENTRI ES TO THE SAID SALES ARE RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED AT ITS MAIN OFFICE. IT IS ALSO OBSERVE D HERE THAT THE ASSESSEE HAS TIME AND AGAIN EXPLAINED THAT IT IS IMPOSSIBLE TO ISSUE SALE BILLS TO THE CUSTOMER FOR SALE OF LIQUOR AND THE PRACTICE OF NOT ISSUING BILLS IS PRE VALENT ALL OVER THE COUNTRY IN THIS TRADE. IT IS ALSO THE CA SE OF THE ASSESSEE THAT THE SALE PRICE IS DISPLAYED AT THE SH OP AND THERE CANNOT BE ANY VARIANCE IN THE PRICE SO DISPLA YED. IN THE INSTANT CASE, THE ASSESSING OFFICER HIMSELF HAS ACCEPTED THE CORRECTNESS OF SALE AMOUNT BY ADMITTIN G THE DECLARED SALES BY THE ASSESSEE, WHICH WERE SUBSTANT IATED BY THE ENTRIES IN THE BOOKS OF ACCOUNT MAINTAINED I N THE REGULAR COURSE OF BUSINESS CARRIED ON BY THE ASSESS EE. WE MAY ALSO OBSERVE HERE THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DISCREPANCY IN THE QUANTITATIVE DETAILS OF PURCHASE OR SALES MADE BY THE ASSESSEE. SHRI N.K. SAINI, LEARNED COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE COST OF GOODS DEALT INTER-ALIA INCLUDING P URCHASE PRICE, DUTIES AND FEES PAID, SHOP LICENCE FEE AND B OTTLING AND SEALING CHARGES PAID BY THE ASSESSEE HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. THE LEARNED COU NSEL FOR THE ASSESSEE SUBMITTED THAT THE BOOKS OF ACCOUN T CANNOT BE REJECTED MERELY ON THE BASIS OF LACK OF S ALE BILLS. HE RELIED UPON THE DECISION OF I.T.A.T., A MRITSAR BENCH IN THE CASE OF ASHOK KUMAR & COMPANY VS. ITO (2004) 90 TTJ 666 (ASR). IN THIS CASE, THE GP RAT E OF 13 2.44% SHOWN BY THE ASSESSEE HAS BEEN ACCEPTED. HE ALSO RELIED UPON THE DECISION OF THE I.T.A.T., AGRA BENC H (TM) IN THE CASE OF LUXMI NARIAN RAMSWAROOP SHIVHARE (SUPRA). IN THIS CASE, GP RATE OF 3.11% AND NP RAT E OF 0.34% WAS ACCEPTED. IN THE CASE OF LUXMI NARIAN RAMSWAROOP SHIVHARE (SUPRA), THE ASSESSING OFFICER REJECTED THE BOOK RESULTS UNDER SECTION 145(3) OF T HE ACT, ON THE GROUND THAT ALL THE SALES ARE MADE IN CASH W ITHOUT PROPER VOUCHERS SUPPORTING THE SALES AND BRAND-WISE , QUALITY-WISE AND DATE-WISE WERE NOT VERIFIABLE AND ESTIMATED THE GP RATE AT 5% AS AGAINST 3.11% SHOWN BY THE ASSESSEE. IN THE AFORESAID CASE, THE ASSESSEE WAS A LIQUOR CONTRACTOR ENGAGED IN THE BUSINESS OF TRADIN G OF COUNTRY LIQUOR AND (INDIAN MADE FOREIGN LIQUOR) IMF L. WHILE DECIDING THE CASE, THE LEARNED ACCOUNTANT MEM BER HAS HELD AS UNDER : 7. HAVING HEARD THE PARTIES AND UPON CAREFUL CONSIDERATION OF THE MATERIAL ON RECORD WITH REFERENCE TO PRECEDENTS CITED AT BAR, I AM SATISFIE D THAT THE GROUNDS IN APPEAL TAKEN BY THE ASSESSEE DESERVE TO BE ALLOWED. THE ADMITTED FACTS ARE THAT THIS IS THE FIRST YEAR OF BUSINESS OF THE ASSESSEE FOR SALE OF COUNTRY LIQUOR ARID IMF L. THE CONTRACT HAS BEEN AWARDED FOR A LIMITED PERIOD OF ONE YEAR ONLY. THERE WAS NO OPENI NG OR CLOSING STOCK OF GOODS DEALT BY THE ASSESSEE. NO DISCREPANCY HAS BEEN FOUND IN THE QUANTITATIVE DETAILS OF PURCHASE OR SALES EFFECTED BY THE ASSESSEE. THE COST OF GOODS DEALT, INTER ALIA INCLUDING PURCHASE PRICE, DUTIES AND FEES PAID, SHOP LICENSE FEE AND BOTTLING AND SE ALING CHARGES, ETC. PAID BY THE ASSESSEE STAND DULY ACCEP TED BY 14 THE AO WITH NO ADVERSE COMMENTS THEREON. THE AO HIM SELF IS FOUNDTO HAVE ACCEPTED THE DECLARED SALES AT RS. 8,33,25,882. THE BOOKS OF ACCOUNT HAVE BEEN MAINTAINED FOR THE BUSINESS CARRIED (ON) BY THE ASS ESSEE. THE ACCOUNTS ARE DULY AUDITED AND THE RETURN OF INCOME IS ACCOMPANIED BY REPORT OF AU DITORS WHICH ALSO CAME INTO CONSIDERATION OF THE AO. THE REPORT OF AUDITORS CONSTITUTED A MAT ERIAL FOR THE PURPOSE OF ASSESSMENT OF INCOME UNDER S. 143(3) OF THE ACT. REFERENCE ON THI S IS AVAILABLE FROM THE JUDGMENT RENDERED BY HON'BLE DELHI HIGH COURT IN THE CASE OF ADDL. CFT V S. JAY ENGINEERING WORKS LTD. (1978) 113 ITR 389 (DEL). NO ADVERSE COMMENTS THEREON HAVE BEEN MADE BY ANY OF THE AUTHORITIES BELOW. THOUGH THE ASSESSEE DID NOT MAINTAIN ANY CASH VOUCH ERS FOR THE DAILY SALE OF LIQUOR EFFECTED AT ITS VARIOUS SHOPS IN TERMS OF SYSTEM PREVALENT I N THE TRADE, THE FACT REMAINS THAT THE DAILY SALES EFFECTED BY THE EMPLOYEES DEPLOYED AT ITS VAR IOUS SHOPS AND BROUGHT TO ASSESSEE'S CENTRAL OFFICE WERE TAKEN INTO SALES ACCOUNT IN SUC H BOOKS OF ACCOUNT, AS THE SAME WERE THE SALE PROCEEDS THAT WERE ACTUALLY RECEIVED BY THE ASSESSEE. THE ENTRIES IN THE BOOKS OF ACCOUNT MAINTAINED IN REGULAR COURSE ARE CONSIDERED AS RELEVANT AND IS A PRIMA FACIE PROOF OR BASIS TO JUSTIFY THE CORRECTNESS THEREOF. REFERENCE MAY BE HAD TO THE JUDGMENT RENDERED BY HON'BLE ASSAM HIGH COURT IN THE CASE OF TOLARAM DAGA VS. CIT (1966) 59 ITR 632 (ASSAM). THE AO HIMSELF IS FOUND TO HAVE ACCEPTED THE CORRECTNES S OF SALE AMOUNT BY ADMITTING THE DECLARED SALES AT RS. 8,33,25,882. IT IS NOT THE CASE OF REVENUE NOR HAS BEEN FOUND BY THE AO THAT THE SALES EFFECTED BY THE EMPL OYEES ARE NOT AT THE RATE DISPLAYED ON THE SHOPS NOR IS T HE CASE THAT THE DAILY SALES EFFECTED ARE MORE THAN TH E 15 AMOUNT REMITTED AT THE CENTRAL OFFICE OR RECORDED IN THE BOOKS OF ACCOUNT. IT IS ALSO NOT TH E CASE OF REVENUE THAT OTHER PERSONS ENGAGED IN THE SIMILAR BUSINESS IN THE AREA HAVE SO LD THE SIMILAR GOODS AT A HIGHER PRICE OR ON PREMIUM. DISCREPANCY IN STOCK OR QUANTITATIVE DETAI LS HAS ALSO NOT BEEN FOUND. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW ANY DISCREPANCY IN T HE QUANTITIES OF GOODS DEALT BY THE ASSESSEE. THE ONLY DIFFICULTY THAT WAS FOUND EXPRES SED BY THE ASSESSEE IS THAT HE WAS NOT MAINTAINING SALE VOUCHERS, BUT THAT FACT ALONE COUL D NOT BE A BASIS TO REJECT THE BOOKS OF ACCOUNT WHEN THE AO HIMSELF HAD ACCEPTED THE SALE V ALUE AS WELL AS COST OF GOODS DECLARED BY THE ASSESSEE T O BE CORRECT WHICH WERE EVIDENCED BY ENTRIES IN THE BOOK S OF ACCOUNT MAINTAINED IN THE REGULAR COURSE OF BUSIN ESS CARRIED BY HIM. THE AO AT SOME STAGE OF PROCEE DINGS PROPOSED TO APPLY A GP RATE ON THE BASIS OF INSTANCE S GIVEN IN HIS ORDER BUT THE PROPOSED GP RATE WAS NEVER APPLIE D BY HIM FOR THE OBVIOUS REASON THAT SUCH CASES WERE NOT THE COMPARABLE CASES. THE ONLY ACCEPTABLE BASIS TO ARR IVE AT GROSS PROFIT IS BY WAY OF DEDUCTING COST OF GOODS SOLD AND DIRECT EXPENSES FROM THE SALE VALUE. IN THE PRES ENT CASE, THE FACTS REVEAL THAT THERE IS NO OPENING OR CLOSING STOCK. THE COST OF GOODS AND DIRECT EXPENSES ARE FU LLY ADMITTED. SALE PRICE IS ALSO DULY ADMITTED. THEREFOR E, THE RESULTANT GROSS PROFIT WOULD BE RS. 25,89,426 AS UNDER : SALES VALUE (IN RS.) RS.8,33,26,000 LESS : (I) SPIRIT PURCHASES 1,05,10,000 (II). BEER PURCHASES 21,35,000 (III). ISSUE FEE (DUTY) PAID 2,66,04,000 (IV). DIFFERENTIAL DUTY PAID 3,59,99,000 (V). SUB-SHOP LICENSE FEE 4,50,000 (VI) BOTTLING AND 50,39,000 SEALING CHARGES 16 RS.8,07,37,000 GROSS PROFIT RS.2 5,89,000 GP RATE 3.11% THE ABOVE GROSS PROFIT IS EXACTLY THE SAME THAT HAS BEEN DECLARED BY THE ASSESSEE. IN CASE, THE AO WAS NOT S ATISFIED BY THE SALE PRICE OR PROFIT RATE ON SALES, HE COULD HAV E ESTIMATED THE SALES, BUT THAT HAS NOT BEEN DONE IN TH E PRESENT CASE IN APPEAL BEFORE ME. EVEN THE PROVISO AS REFERRED TO S. 145(3) IN THE ORDER OF AO DOES NOT EXI ST IN THE STATUTE. THIS ITSELF SHOWS NON-APPLICATION OF MIND BY THE AO. THE MANDATORY REQUIREMENT AS CONTAINED UNDER SUB-S. (3) OF S. 145 OF THE ACT IS THAT WHERE THE AO IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-S . (1) OR ACCOUNTING STANDARDS AS NOTIFIED UNDER SUB-S. (2), HAVE NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE, THE AO MAY M AKE AN ASSESSMENT IN THE MANNER PROVIDED IN S. 144. THE AO, HOWEVER, HAS NOT RECORDED ANY FINDING SO REQUIRED BY T HE STATUTE NOR THE LEARNED CIT(A) IS FOUND TO HAVE RECOR DED ANY SUCH FINDING AS ENVISAGED UNDER SUB-S. (3) OF S. 145. THE FINDING REACHED BY THE LEARNED CIT(A) THAT ALL THE S ALES CLAIMED CANNOT BE ESTABLISHED BECAUSE OF LACK OF VOUC HERS IS ALSO WITHOUT ANY GOOD BASIS. THE SAME ALSO IS SET ASID E, AS THE AO HIMSELF HAS ACCEPTED THE SALE VALUE DISCLOSED BY THE ASSESSEE. I, THEREFORE, DO NOT FIND ANY FACTUAL OR LEGAL JUSTIFICATION IN REJECTING THE BOOK RESULTS AND EST IMATING INCOME BY APPLYING HIGHER PROFIT RATE THAN THAT WAS DECLARED BY THE ASSESSEE. ACCORDINGLY, THE PROFIT RATE DECLARE D AT 3.11 PER CENT BY THE ASSESSEE IS DIRECTED TO BE APPLIED ON THE DECLARED SALES OF RS. 8.33,25,882 AS AGAINST MODIFIE D RATE APPLIED BY LEARNED CIT(A). THUS, THE GROUNDS RAISED BY REVENUE IN APPEAL STAND DISMISSED AND THOSE RAISED BY ASSESSEE STAND ALLOWED. 9. SINCE THERE WAS A DIFFERENCE OF OPINION BETWEEN THE LEARNED MEMBERS OF THE BENCH AND THIRD MEMBER W AS 17 NOMINATED BY THE HON'BLE PRESIDENT OF THE TRIBUNAL UNDER SECTION 255(4) OF THE ACT AND THE THIRD MEMBER AGRE ED WITH THE VIEW TAKEN BY THE LEARNED ACCOUNTANT MEMBE R IN DELETING THE ADDITION BY APPLYING ESTIMATED GP RATE OF 5%, APPLIED BY THE ASSESSING OFFICER AS AGAINST 3.11%, DECLARED BY THE ASSESSEE. THE LEARNED THIRD MEMBER HAS STATED THAT THE PURCHASES MADE BY THE ASSESSEE ARE DULY SUPPORTED BY PROPER VOUCHERS AND ARE REGULATED BY T HE EXCISE AUTHORITIES AND PAYMENT OF COUNTRY LIQUOR IS MADE THROUGH GOVERNMENT WAREHOUSES AGAINST PAYMENT MADE TO THE GOVERNMENT ON THE BASIS OF THE AUCTION CONDUCTE D BY THE GOVERNMENT. IN THE INSTANT CASE ALSO, THE PUR CHASES MADE BY THE ASSESSEE ARE DULY SUPPORTED BY PROPER VOUCHERS AND ARE REGULATED BY THE EXCISE AUTHORITIE S AND PAYMENT OF LIQUOR IS MADE THROUGH GOVERNMENT ON THE BASIS OF THE AUCTION CONDUCTED BY THE GOVERNMENT. IN THE CASE OF LUXMI NARIAN RAMSWAROOP SHIVHARE (SUPR A), THE MAJORITY VIEW WAS THAT AS REGARDS THE SALE, THE NATURE OF THE ASSESSEES BUSINESS WAS SUCH THAT IT CANNOT MAINTAIN PROPER SALE BILLS. IN THIS CASE ALSO, TH E NATURE OF ASSESSEES BUSINESS IS SUCH THAT IT CANNOT MAINT AIN PROPER SALE BILLS. IN THE CASE OF LUXMI NARIAN RAMSWAROOP SHIVHARE (SUPRA), THE MAJORITY VIEW WAS THAT THE PROFIT VARIES FROM AREA TO AREA AND THE BID MON EY AND SMALL VARIATION OF THE PROFIT CANNOT BE RULED OUT. 10. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT SEE ANY GROUND FOR REJECTING THE BOOK RESULTS. THEREF ORE, THE 18 DECLARED RESULTS ARE TO BE ACCEPTED AND ESTIMATION OF INCOME BY APPLYING THE NET PROFIT RATE OF 8% WAS NO T PROPER. ACCORDINGLY, WE DELETE THE ADDITION OF RS.12,81,872/- MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT (APPEALS). 11. THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.225/CHD/2013 : 12. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1. THAT THE LD. CIT (A) IS NOT JU STIFIED IN NOT PROVIDING THE PROPER OPPORTUNITY OF HEARING WHI CH IS AGAINST THE NATURAL JUSTICE. 2. THAT THE LD. CIT (A) IS NOT JUSTIFIED IN UPHOL DING THE REJECTION OF BOOKS AND THE APPLICATION OF PROVISION S OF SECTION 145 (3) OF THE I. T. ACT. 3. A) THAT THE LD. CIT (A) IS NOT JUSTIFIED IN UPHO LDING THE APPLICATION OF NET PROFIT RATE @ 8% ON GROSS SALES . B) THAT WITHOUT PREJUDICE TO ABOVE, THE APPELLAN T DISPUTES THE QUANTUM OF NET PROFIT RATE & ADDITIONS . 13. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD DECLARED GROSS RECEIPTS OF RS.6,17,34, 456/- AND THE ASSESSING OFFICER DESPITE REJECTING THE BOO KS OF ACCOUNT, ACCEPTED THE SALES DECLARED BY THE ASSESSE E AND HAD APPLIED THE NET PROFIT RATE OF 8% ON THE DECLAR ED SALES. CONSEQUENTLY, THE ASSESSING OFFICER MADE T HE 19 ADDITION OF RS.24,70,797/-, AS AGAINST THE NET PROF IT SHOWN BY THE ASSESSEE FROM THE BUSINESS AT RS.24,67,959/-. THE ASSESSING OFFICER REJECTED TH E BOOK RESULTS ON SIMILAR GROUNDS AS THAT THOSE IN ASSESSM ENT YEAR 2008-09 AND THE LEARNED CIT (APPEALS) UPHELD T HE ORDER OF THE ASSESSING OFFICER FOLLOWING HIS OWN OR DER PASSED IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2 008- 09. IT IS ADMITTED BY THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES THAT THE FACTS OF THE PRESENT YEAR ARE SIMILAR TO THAT OF ASSESSMENT YEAR 2008-09 AND RIVAL CONTENTIO NS ARE ALSO SAME. IN THAT VIEW OF THE MATTER, THE FINDIN GS GIVEN BY US IN ITA NO.877/CHD/2012 SHALL ALSO APPLY TO TH IS APPEAL WITH EQUAL FORCE. FOR THE DETAILED REASONS GIVEN THEREIN, WE ALLOW THE APPEAL OF THE ASSESSEE AND DE LETE THE IMPUGNED ADDITION OF RS.24,70,797/-. 14. THE APPEAL OF THE ASSESSEE IN ITA NO.225/CHD/2013 IS ALLOWED. 15. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE ES ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 DAY OF NOVEMBER, 2015. SD/- SD/- (RANO JAIN) (H.L.KARWA) ACOUNTANT MEMBER VICE PRESIDENT DATED : 26 TH NOVEMBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 20