Appeal details
Counselvise Citation
[2019] 117 COUNSELVISE.COM (IT) 0551 (ITAT-AGRA)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 year(s) 7 month(s) 18 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
16-05-2019
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
DB
Next Hearing Date
15-05-2013
Assessment Year
2009-2010
Appeal Filed On
28-09-2012
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.419/AGRA/2012 ASSESSMENT YEARS: 2009-10 SHRI LAXMI NARAYAN SHIVHARE, VS. JOINT COMMISSI ONER OF INCOME TAX-III, B-17, ASHOK VIHAR COLONY, GWALIOR. GWALIOR (M.P). (PAN : AHIPS 2394 E). ITA NO.442/AGRA/2012 ASSESSMENT YEARS: 2009-10 ASSTT. COMMISSIONER OF INCOME TAX, VS. SHRI LAXMI NARAYAN SHIVHARE, CIRCLE-3(1), GWALIOR. B-17, ASHOK VIHAR COLONY, TANSEN ROAD, GWALIOR (M.P.). (PAN : AHIPS 2394 E). (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI RAJENDRA SHARMA, ADVOCATE REVENUE BY : SHRI WASEEM ARSHAD, SR. D.R. DATE OF HEARING : 15.05.2013 DATE OF PRONOUNCEMENT : 24.05.2013 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND R EVENUE AGAINST THE ORDER DATED 29.06.2012 PASSED BY THE LD. CIT(A), GWALIOR FOR THE ASSESSMENT YEAR 2009-10. 2 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) G WALIOR HAS BEEN ARBITRARY AND UNJUST WHILE SUSTAINING THE ADDI TION FOR RS.18654659/- TOWARDS THE INCOME OF THE APPELLANT F ROM LIQUOR BUSINESS, NO ADDITION IS LIABLE TO BE SUSTAINED, AD DITION SUSTAINED BY THE CIT (APPEALS) IS LIABLE TO BE DELETED. 2. THAT WHILE SUSTAINING THE ADDITION AT RS.1865465 9/- THE CIT (APPEALS) HAS COMPLETELY IGNORED THE FACTS AND SUBM ISSIONS MADE BY THE APPELLANT AND ALSO THE PAST RECORD AND MARGIN O F PROFIT SHOWN BY OTHER ASSESSEE OF SAME VERY TRADE, AFTER TAKING INT O CONSIDERATION THE ABOVE, TRADING RESULTS SHOWN BY THE ASSESSEE IS LIA BLE TO BE ACCEPTED, ADDITION MADE BY THE A.O. AND SUSTAINED BY THE CIT (APPEALS) IS LIABLE TO BE DELETED. 3. THAT LEARNED CIT (APPEALS) HAS BEEN ARBITRARY AN D UNJUST WHILE SUSTAINING THE ADDITION AT RS.484124/- MADE BAY THE AO WHILE ESTIMATING THE INCOME FROM AGRICULTURE AT RS.726186 /- AS AGAINST SHOWN BY THE ASSESSEE AT RS.1210310/-, INCOME SHOWN BY THE APPELLANT IS LIABLE TO BE ACCEPTED, ADDITION MADE O N THIS SCORE IS LIABLE TO BE DELETED. 4. THAT THE LEARNED CIT (APPEALS) HAS BEEN ERRED ON FACTS AND IN LAW, WHILE SUSTAINING THE ADDITION FOR RS.3621887/- MADE BY THE AO U/S 68 OF THE INCOME TAX ACT, NO ADDITION IS LIABLE TO BE SUSTAINED, SAME IS LIABLE TO BE DELETED. 5. THAT THE APPELLATE ORDER OF CIT (APPEALS) DATED 29.06.2012 IS BAD IN LAW. 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 3 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .5,27,85,853/- OUT OF ADDITION OF RS.7,14,40,512/- MADE ON ACCOUNT OF DISALLOWANCE FOR DIFFERENCE OF SUPPRESSED INCOME. THE APPELLANT RESERVES HIS RIGHT TO ADD, AMEND OR A LTER THE GROUNDS OF APPEAL ON OR BEFORE THE DATE; THE APPEAL IS FINALLY HEARD FOR DISPOSAL. ITA NO.419/AGRA/2012 BY THE ASSESSEE 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A LIQUOR CONTRACTOR AND IS DERIVING INCOME FROM SELLING OF LIQUOR. THE ASSESS EE DID NOT PRODUCE BOOKS OF ACCOUNT TO VERIFY THE EXPENDITURE BEFORE THE A.O. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE DEC LARED GROSS RECEIPT OF RS.32,65,29,808/- SHOWING G.P. @ 7.37% AS AGAINST T HE LAST YEARS GROSS RECEIPT OF RS.33,75,06,175/- AT G.P. RATE OF 5.61%. THE A.O. FURTHER NOTICED THAT IN A.Y. 2008-09 THE ASSESSEE HAS DECLARED ADDITIONAL INCOME OF RS.33,00,000/-. 5. IN THE ABSENCE OF BOOKS OF ACCOUNT, THE A.O. ON THE BASIS OF INFORMATION AVAILABLE ON RECORD FURNISHED BY THE ASSESSEE NOTIC ED THAT THE ASSESSEE DID NOT BIFURCATE THE SALE OF COUNTRY LIQUOR MASALA & PLA IN AND IMFL/BEER. THE A.O. NOTICED THAT IN ORDER TO WORK OUT THE CORRECT/SUPPR ESSED INCOME, IT IS ESSENTIAL TO 4 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 ARRIVE AT THE PROFIT FROM IMFL/BEER AND COUNTRY LIQ UOR SEPARATELY. THE A.O. CALCULATED THE PURCHASES OF IMFL AS UNDER :- (PAGE NO.5) PARTICULARS BASIS OF ALLOCATION FL (AMOUNT) DUTY AS PER LICENSES 9,96,65,450 BASIC DUTY IN THE DUTY RATIO 87,79,021.78 PURCHASES ACTUAL 6,75,54,240 FREIGHT EQUAL (PRORATE BASIS) 12,23,654.50 ISSUE FEE ACTUAL 4800 TOTAL 17,72,27,166 6. THE A.O. ON THE BASIS OF MADHYA PRADESH GAZETTE DATED 15.01.2008 NOTICED THAT MINIMUM SELLING RATES OF IMFL WERE NOT LESS TH AN 10% OF PROFIT OVER THE COST OF LIQUOR + EXCISE DUTY + FEE + TRANSPORTATION CHAR GES. BY APPLICATION OF MINIMUM SELLING RATE OF 10% PROFIT OVER AND ABOVE THE COST OF IMFL, THE MINIMUM SALE AMOUNT AND RESULTANT GROSS PROFIT HAS BEEN CALCULAT ED BY THE A.O. AS UNDER :- (PAGE NO.6) (I) TOTAL SALE :- 17,72,27,166 X 110/100 = RS.19,49,49,882.60 (II) GROSS PROFIT AT MINIMUM SELLING PRICE = 1,77,2 2,716/- (RS.19,49,49,882.60 RS.17,72,27,166) 7. SIMILARLY, IN RESPECT OF COUNTRY LIQUOR, THE A.O . HAS SEPARATELY CALCULATED THE SALE AND PROFIT ON THE BASIS OF DETAILED SUBMISSION MADE BY THE ASSESSEE AND ON THE 5 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 BASIS OF COUNTRY LIQUOR BUSINESS IN MADHYA PRADESH STATE. THE A.O. CALCULATED THE LICENCE FEE IN RESPECT OF COUNTRY LIQUOR AS UND ER :- (PAGE NO.6) IT IS PERTINENT TO ASCERTAIN WHETHER THE ABOVE QUA NTITY IS CORRECT. IN THE CASE OF COUNTRY LIQUOR BUSINESS IN MP STATE, THE LICENCE FEE (EXCISE DUTY) IS DETERMINED SHOP-WISE A ND CHARGED @ 105 PER BULK LITRE IN THE CASE OF MASALA AND RS.70/- PE R BULK LITRE IN THE CASE OF PLAIN. APPLYING THIS ISSUE PRICE, THE TOTA L CORRESPONDING LICENSE FEE CHARGEABLE WITH RESPECT TO ABOVE QUANTI TY IN BULK LITRE WILL BE S UNDER :- PARTICULARS BULK LITRE X ISSUE RATE LICENSE FEE CL-MASALA 3,75,361.39 X 105 3,94,12,945.95 PLAIN 7,34,547 X 70 5,14,18,290 TOTAL 9,08,31,235.95 8. ON PERUSAL OF THE DETAILS, THE A.O. NOTICED THAT IN ADDITION TO THE COST OF FRIGHT RS.12,23,654/- (PROPORTIONATE), SEALING AND BARDANA CHARGES OF RS.2,18,03,013/- AND PURCHASE COST OF RS.25,04,809/ - IN RESPECT OF DHOLPUR LICENCE SHOP, THE ASSESSEE HIMSELF CLAIMED TOTAL LICENCE FE E (EXCISE DUTY) ON ACCOUNT OF COUNTRY LIQUOR PURCHASE IN RESPECT OF DEOS IN M.P. STATE AMOUNTING TO RS.9,96,84,189/- (LICENCE FEE RS.9,16,14,348/- PLUS BASIC DUTY OF RS.80,69,841/-). ON THE BASIS OF DHOLPUR LICENCE SHOP, THE A.O. NOTI CED THAT THE ASSESSEE DISCLOSED QUANTITY OF COUNTRY LIQUOR TO THE EXTENT OF LICENCE FEE OF RS.9,08,31,235/- AND THE QUANTITY OF PURCHASE WITH RESPECT TO THE REMAINING DIFFERENCE OF CLAIM OF RS.88,52,953/- WHICH HAS NOT BEEN DISCLOSED BY THE ASSESSEE. THE A.O. FURTHER NOTICED THAT THE QUANTITY RELATING TO PURCHASE COST OF 25,04,809/- IN RESPECT OF 6 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 DHOLPUR SHOP HAS ALSO NOT BEEN INCLUDED IN THE DECL ARED QUANTITY. THE A.O. ACCORDINGLY CALCULATED THE TOTAL AMOUNT OF RS.1,13, 57,762/- (RS.88,52,953 + RS.25,04,809). ON THE BASIS OF ABOVE CALCULATION, THE A.O. NOTICED THAT THE ASSESSEE HAS NOT CORRECTLY DISCLOSED THE QUANTITY O F PURCHASE OF COUNTRY LIQUOR. THE A.O. ON THE BASIS OF HIS OWN CALCULATION FINALL Y CALCULATED SUPPRESSED INCOME OF RS.7,14,40,512./- AS UNDER :- (PAGE NO.14) 6(B). SALE OF IMFL LIQUOR : - THE ASSESSEE WAS SPECIFICALLY ASKED VIDE PARA-9 OF ORDER SHEET ENTRY DATED 14.12.11 AS UNDER :- PLEASE CALCULATE THE RATES OF IMFL/BEER BY APPLYING THE ACTUAL SELLING RATES WORKED OUT THE DIFFERENCE BY DEDUCING DISCLOSED SALE AND SHOW CAUSE AS TO WHY THE DIFFERENCE SHOULD NOT BE ADDED AS SUPPRESSED INCOME. THE ASSESSEE HAS NOT FURNISHED ANY QUANTITATIVE DET AILS OF BRAND-WISE AND IMFL, BEER DESPITE REPETITIVE REQUES TS MADE. AS PER THE PREVALENT MARKET PRACTICE, THE RATE OF IMFL ARE CHARGED AT MUCH HIGHER RATE THAN THE PRESCRIBED MINIMUM RATE BEING 10% OVER AND ABOVE THE COST PRICE. IN CERTAIN CASES, THE MARKET PROFIT GOES VERY HIGH. CONSIDERING THE ENTIRE FACTS OF THE CASE, IT WILL BE MOST LOGICAL, REASONABLE AND JUSTIFIED TO COMPUTE THE SALE BY APP LYING GROSS PROFIT RATE OF 20% ON THE TOTAL COST OF IMFL LIQUOR AS UND ER :- = COST X 120 100 = RS.17,72,27,166 X 120 100 = RS.21,26,72,600/- THE TOTAL SALES OF CL AND IMFL ARE AS UNDER :- RS.18,52,97,720 + RS.21,26,72,600 = RS.39,79,70,32 0/- 7 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 THE ASSESSEE HAS DISCLOSED TOTAL SALES OF RS.32,65, 29,808/-. BASED ON THE ABOVE, THE DIFFERENCE OF RS.7,14,40,51 2/- IS TREATED AS SUPPRESSED INCOME AND IS ADDED BACK TO THE TOTAL IN COME OF THE ASSESSEE. IT IS TO REITERATE HERE THAT THE EXPENSES CLAIMED B Y THE ASSESSEE ARE MOSTLY TO THE GOVT. DEPARTMENT. IN ORDER TO EF FECT THE TOTAL SALES THE ASSESSEE IS NOT REQUIRED TO INCUR ANY ADDITIONA L EXPENSES TO EFFECT THE SUPPRESSED SALES. ACCORDINGLY, THE NET DIFFERE NCE OF SALES AS REFERRED TO THE ABOVE REPRESENTS THE TOTAL SUPPRESS ED INCOME WHICH IS BEING ADDED TO THE TOTAL INCOME 9. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. HAS ALSO NOTICED THAT THE ASSESSEE DECLARED AGRICULTURAL INCOME OF RS.12,10,3 10/-. IN ABSENCE OF DETAILS, THE A.O. TREATED THE AGRICULTURAL INCOME @ 40% OF WHICH CALCULATION COMES TO RS.4,84,124/- AND THE SAME WAS TREATED AS INCOME FR OM OTHER SOURCES AND REST OF THE AMOUNT RS.7,26,186/- WAS ACCEPTED FROM THE AGRI CULTURAL INCOME. 10. THE A.O. HAS ALSO MADE ADDITION OF RS.36,21,887 /- AS THE ASSESSEE HAS FAILED TO PRODUCE EVIDENCE AND CONFIRMATION IN RESPECT OF FOLLOWING CHARGES:- (PAGE NO.15) (I) M/S POOJA GREH NIRMAN RS.5,00,000/- (II) SHRI HARVINDER SINGH BHATIA RS.31,21,887/- 11. THE A.O. HAS MADE THE ADDITION UNDER SECTION 68 OF THE ACT. 8 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 12. THE CIT(A) RESTRICTED THE ADDITION TO RS.1,86,5 4,659/- OUT OF LIQUOR BUSINESS AND ALLOWED RELIEF OF RS.5,27,85,853/- AS UNDER :- (PARAGRAPH NO.3.5) 3.5 FROM THE PERUSAL OF ASSESSMENT ORDER, IT IS SE EN THAT AO HAS MADE THE ADDITION OF RS.7,14,40,512/- ON ACCOUNT OF DIFFERENCE OF SUPPRESSED INCOME FROM LIQUOR BUSINESS TAKING THE H IGHEST DIFFERENCE OF SUPPRESSED SALES WHICH HAS BEEN DETERMINED BY AP PLYING 20% G.P. RATE OVER COST WHEREAS THE POLICY APPROVED BY THE S TATE GOVERNAMENT MENTIONS IT TO BE 10%. A.O. HAS DETERMINED SUPPRES SED SALES & GROSS PROFIT WITH VARIOUS ALTERNATIVES BASED ON THE RATES ADAPTED AS PER GOVT. POLICY. AO HAS DETERMINED ALL THESE AMOUNTS VERY SCIENTIFICALLY BASED ON THE PRESCRIBED RATES EXCEPT FOR THE AMOUNT OF RS.7,14,40,512/- WHICH IS FOUND BASED ON HYPOTHETIC AL AND ASSUMED PROFIT RATE OF 20% OF COST. THEREFORE, TOTAL ADDIT ION OF RS.7,14,40,512/- IS NOT FOUND SUSTAINABLE AS PER FA CTS ON RECORD. DETERMINATION OF SUPPRESSED SALES AT RS.2,28,49,257 /- IS BASED ON MINIMUM RATES AND RS.5,37,17,794/- IS BASED ON RATE S GIVEN BY DEO SHIVPURI CONSIDERING THE SALES DETERMINED BASED ON 100% DUTY, INCLUDING 8% BASIC DUTY, WHICH HAS BEEN OBJECTED TO BY THE APPELLANT BUT NOT FOND EXPRESSLY EXCLUDED AS PER THE GAZETTE. A.O. HAS ALSO CALCULATED SUPPRESSED INCOME OF RS.1,86,54,659/- AF TER ALLOWING DEDUCTION OF FREIGHT OF RS.12,53,654/- AND AFTER TA KING INTO ACCOUNT APPELLANTS SUBMISSIONS. A.O. HAS ARRIVED AT VARIO US ALTERNATIVES BASED ON SPECIFIC INFORMATION. APPELLANTS SUBMISS IONS MADE DURING THE COURSE OF APPEAL PROCEEDINGS REGARDING DECLARAT ION OF HIGHEST GROSS PROFIT RATE AS COMPARED TO PRECEDING YEARS AN D PRINCIPLE OF CONSISTENCY HAVE ALSO BEEN CONSIDERED. FROM PERUSA L OF PRECEDING YEARS ORDERS, IT IS SEEN THAT FOR A.Y. 2006-07 AN ADHOC ADDITION HAS BEEN MADE BY APPLYING NET PROFIT RATE OF 5% ON TOTA L SALES DETERMINED AS PER RATES GIVEN BY DEO WITHOUT INVOKING PROVISIO NS OF SEC. 145(3). WHEREAS DURING THE YEAR UNDER APPEAL, NO BOOKS OF A CCOUNTS HAVE BEEN PRODUCED, SALE/GROSS PROFIT HAVE BEEN DETERMIN ED SCIENTIFICALLY BASED ON SPECIFIC INFORMATION. THEREFORE, THERE IS NO CONSISTENCY OF THE FACTS FOR BOTH THE YEARS. ACCORDINGLY, PRINCIP LE OF RES-JUDICATA AS WELL AS RULE OF CONSISTENCY DONT APPLY TO THE ISSU E UNDER APPEAL. 9 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 KEEPING IN VIEW FACTS AND MATERIAL ON RECORD, I AM OF THE CONSIDERED OPINION THAT THE LOWEST AMOUNT OF SUPPRE SSED SALES AND PROFIT ON WHICH NO FURTHER DEDUCTION IS ALLOWABLE, WHICH COMES TO RS.1,86,54,659/- IS FOUND SUSTAINABLE AND HEREBY CO NFIRMED. ACCORDINGLY, THE APPELLANT GETS RELIEF OF RS.5,27,8 5,853/- (RS.7,14,40,512 1,96,54,659) ON THIS GROUND. 13. SINCE THE CIT(A) HAS PARTLY ALLOWED THE APPEAL, THEREFORE, THE ASSESSEE IS IN APPEAL THROUGH GROUND NOS.1 & 2 WHERE ADDITION OF R S.1,86,54,659/- HAS BEEN CONFIRMED BY THE CIT(A) AND THE REVENUE IS IN APPEA L AGAINST THE ADDITION OF RS.5,27,85,853/- DELETED BY THE CIT(A). 14. THE CIT(A) CONFIRMED THE ORDER OF A.O. IN RESPE CT OF AGRICULTURAL INCOME AND IN RESPECT OF ADDITION UNDER SECTION 68 OF THE ACT. 15. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THA T THE A.O. AND CIT(A) BOTH HAVE ESTIMATED THE INCOME BY APPLYING THE MATHEMATI CAL FORMULA WITHOUT CONSIDERING ALL THE RELEVANT FACTS OF THE CASE. LD . AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE IS SELLING COUNTRY LIQU OR AND IMFL/BEER AT 40 SHOPS OF DIFFERENT PLACES OF MADHYA PRADESH AND DHOLPUR AND MORE THAN 7 DISTRICTS IN RAJASTHAN. LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT A.O. HAS WRONGLY RELIED UPON THE FIGURES OF ONE OF THE SHOP AT DHOLPUR AND ESTIMATED FOR THE WHOLE YEAR WHICH IS UNREASONABLE. LD. AUTHORISED REPRESENTATI VE SUBMITTED THAT THE A.O. HAS 10 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 APPLIED RATES AS INFORMED BY DEO OF ONE SHOP AT SHI VPUR BUT THE A.O. DID NOT MENTION WHETHER THE RATES AS INFORMED BY THE DEO IS FOR WHICH PERIOD AND WHETHER SAME ARE RELEVANT TO THE YEAR UNDER CONSIDERATION. LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT LOOKING TO THE NATURE OF BUSINESS OF THE ASSESSEE THE RATES ARE FLUCTUATING CONSIDERING VARIOUS FACTS INCLUDING CLI MATE AND SEASON. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE A.O. A ND CIT(A) BOTH HAVE ESTIMATED THE INCOME WITHOUT CONSIDERING THE EARLIE R YEARS RESULT WHEREIN THE DEPARTMENT HAS ACCEPTED THE FINAL OUTCOME OF THE AS SESSMENT. LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE A.O. HAS IGNORED THE FACT THAT AGAINST THE BASIC LICENCE FEE AT RS.80,69,841/- NO PURCHASES COULD BE MADE, BASIC LICENCE FEE IS NOT ADJUSTED AGAINST THE PURCHASE MADE AND MOREOVER THE CONTRACTOR SOME TIME IS NOT LIFTED THE LIQUOR AGAINST LICENCE FEE PAID BEING TH ERE ARE NO SALES, THUS THE ASSESSEE CAN BE ENTITLED ONLY FOR ADJUSTMENT OF LIQUOR COST WITH LICENCE FEE AND NOT WITH BASIC LICENCE FEE. THUS, LICENCE FEE PAID AT RS.9, 96,84,189/- IS CORRECTLY PAID. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE AS SESSEE HAS ONLY LIFTED THE QUANTITY AS MENTIONED BY THE A.O. AT PAGE NO.6 OF T HE ASSESSMENT ORDER WHICH IS SUPPORTED BY THE CERTIFICATE FROM DEO. LD. AUTHOR ISED REPRESENTATIVE FURTHER SUBMITTED THAT PROFIT WORKED OUT ON COUNTRY LIQUOR IS INCORRECT BECAUSE THEY HAVE NOT ADDED BASIC LICENCE FEE, FREIGHT IN PURCHASE WH ILE CALCULATING ALL THE AMOUNT OF PURCHASE FOR CALCULATING OF G.P. LD. AUTHORISED RE PRESENTATIVE SUBMITTED THAT THE 11 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 A.O. HAS WRONGLY CALCULATED PROFIT ON IMFL ON THE C OST WHICH INCLUDED BASIC LICENCE FEE AND THE SAME WAS NOT TAKEN INTO CONSIDE RATION WHILE CALCULATING OF THE PERCENTAGE OF PROFIT ON PURCHASE I.E. 10% WHICH IS EVEN NOT APPLICABLE ON THESE PURCHASES AS CLARIFIED IN THE GAZETTE. 16. THE LD. AUTHORISED REPRESENTATIVE DREW OUR ATTE NTION TO PAGE NO.1 OF PAPER BOOK WHEREIN COMPARATIVE POSITION OF GROSS PROFIT & NET PROFIT OF DIFFERENT YEARS HAVE BEEN PLACED. 17. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THA T IN A.Y. 2005-06 IN ASSESSEES OWN CASE THE I.T.A.T. HAS ACCEPTED 1.2% PROFIT RATE, A COPY OF THE ORDER OF I.T.A.T. HAS BEEN PLACED AT PAGE NO.38 OF ASSESS EES PAPER BOOK. LD. AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT IN A.Y. 2006-07 THE I.T.A.T. HAS ACCEPTED 1.3% N.P. RATE. HE FURTHER SUBMITTED THAT IN A.Y. 2007-08 THE A.O. HIMSELF ACCEPTED 2.43% N.P. RATE AND IN A.Y. 2008-0 9 THE N.P. RATE INITIALLY ACCEPTED IS 3.3%. 18. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THA T THE ESTIMATION MADE BY THE A.O AND SUSTAINED BY THE CIT(A) IS EXCESSIVE AND ON HIGHER SIDE. HE ACCORDINGLY 12 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 HELD THAT NECESSARY RELIEF MAY BE GRANTED BY ACCEPT ING THE INCOME DECLARED BY THE ASSESSEE. 19. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTH ER HAND, RELIED UPON THE ORDER OF THE A.O. 20. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. THE ADMITTED FACTS OF THE CASE ARE THAT THE ASSESSE E DID NOT PRODUCE BOOKS OF ACCOUNT. TO EXAMINE THE ISSUE, WE WOULD LIKE TO REF ER RELEVANT PROVISIONS OF SECTION 145 OF THE ACT WHICH READS AS UNDER:- 145. (1) INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' OR 'INCOME FROM OTHER SOURC ES' SHALL, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), BE COMPUTED I N ACCORDANCE WITH EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGU LARLY EMPLOYED BY THE ASSESSEE. (2) THE CENTRAL GOVERNMENT MAY NOTIFY IN THE OFFICI AL GAZETTE FROM TIME TO TIME ACCOUNTING STANDARDS TO BE FOLLOWED BY ANY CLASS OF ASSESSEES OR IN RESPECT OF ANY CLASS OF INCOME. (3) WHERE THE ASSESSING OFFICER IS NOT SATISFIED AB OUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) OR ACCOUN TING STANDARDS AS NOTIFIED UNDER SUB-SECTION (2), HAVE NOT BEEN REGUL ARLY FOLLOWED BY THE ASSESSEE, THE ASSESSING OFFICER MAY MAKE AN ASSESSM ENT IN THE MANNER PROVIDED IN SECTION 144 .] 13 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 20.1 IT IS TO NOTE THAT UNDER SECTION 145(1), THE I NCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION OR I NCOME FROM OTHER SOURCES HAS TO BE COMPUTED IN ACCORDANCE WITH THE METHOD OF ACCOUN TING REGULARLY EMPLOYED BY THE ASSESSEE, UNLESS IN THE OPINION OF THE INCOME-T AX OFFICER, THE INCOME, PROFITS AND GAINS CANNOT PROPERLY BE DEDUCED THEREFROM OR T HE INCOME-TAX OFFICER IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE. UNDER THE SUB-SECTION (3) OF SECTION 145 IN ANY CAS E WHERE THE ACCOUNTS ARE CORRECT AND COMPLETE TO THE SATISFACTION OF THE INCOME-TAX OFFICER BUT THE METHOD EMPLOYED IS SUCH THAT, IN THE OPINION OF THE INCOME -TAX OFFICER, THE INCOME CANNOT PROPERLY BE DEDUCED THEREFROM, THEN THE COMPUTATION HAS TO BE MADE UPON SUCH BASIS AND IN SUCH MANNER AS THE INCOME-TAX OFFICER MAY DETERMINE. HOWEVER, IF THE INCOME-TAX OFFICER IS NOT SATISFIED ABOUT THE C ORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE OR WHERE NO METHOD OF ACCO UNTING HAS BEEN REGULARLY EMPLOYED BY THE ASSESSEE, THE INCOME-TAX OFFICER MA Y MAKE THE ASSESSMENT IN THE MANNER PROVIDED IN SECTION 144. SECTION 145 IS MAND ATORY AND THE REVENUE IS BOUND BY THE ASSESSEE'S CHOICE OF A METHOD REGULARL Y EMPLOYED UNLESS BY THAT METHOD THE TRUE INCOME, PROFITS AND GAINS CANNOT BE ARRIVED AT. IN OTHER WORDS, SECTION 145 ENACTS THAT FOR THE PURPOSE OF SECTION 28 (PROFITS AND GAINS OF BUSINESS, PROFESSION OR VOCATION) AND SECTION 56 (INCOME FROM OTHER SOURCES), INCOME, PROFIT AND GAINS MUST BE COMPUTED IN ACCORDANCE WITH THE M ETHOD OF ACCOUNTING 14 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 REGULARLY EMPLOYED BY THE ASSESSEE. THEREFORE, IF T HE ASSESSEE REGULARLY EMPLOYS A PARTICULAR METHOD OF ACCOUNTING AND IF NO DEFECTS A RE FOUND IN THE METHOD OR MAINTENANCE OF ACCOUNTS, THE TAXING AUTHORITY IS BO UND TO COMPUTE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION OR VOCATION IN ACCO RDANCE WITH THE METHOD EMPLOYED BY THE ASSESSEE. THEREFORE, IN CASE WHERE THE INCOME-TAX OFFICER OR THE TAXING AUTHORITY FINDS THAT IN MAINTAINING ACCOUNTS , THE ASSESSEE HAS REGULARLY EMPLOYED A PARTICULAR METHOD AND DOES NOT MAKE ANY INVESTIGATION TO FIND OR DOES NOT FIND ANY DEFECT IN THE ACCOUNTS AND ACCEPT THE ACCOUNTS AS THEY ARE, HE IS BOUND TO COMPUTE THE INCOME IN ACCORDANCE WITH THE ACCOUN TS MAINTAINED BY THE ASSESSEE. THEREFORE, WHEN THE ASSESSEE REPRESENTS TO THE TAXI NG AUTHORITY THAT ITS ACCOUNTS ARE MAINTAINED BY A METHOD OF ACCOUNTING REGULARLY EMPL OYED, HE EXPECTS THE INCOME- TAX OFFICER TO ACT UPON SUCH METHOD AND COMPUTE THE INCOME ACCORDINGLY. 20.2 IN THE CASE OF TOLARAM DAGA VS. COMMISSIONER OF INCOME-TAX [1966] 59 ITR 632 (ASSAM) , THE COURT HELD AS UNDER:- IT WOULD APPEAR THAT THE ACCOUNTS OF THE FIRM WHIC H HAD BEEN PRODUCED IN THE CASE HAD BEEN ACCEPTED AND ACTED UPON BY THE DE PARTMENT AND NO SERIOUS CHALLENGE HAD BEEN MADE TO THEIR GENUINENES S OR THAT THEY WERE KEPT REGULARLY IN THE COURSE OF BUSINESS. THAT BEING THE CASE, THE ACCOUNTS ARE RELEVANT AND AFFORD PRIMA FACIE PROOF OF THE ENTRIE S AND THE CORRECTNESS THEREOF UNDER SECTION 34 OF THE EVIDENCE ACT 15 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 20.3 SECTION 145 OF THE ACT PROVIDES THAT IF ASSESS EE DOES NOT SATISFY THE CONDITION OF SECTION 145 OF THE ACT, THE A.O. MAY MAKE ASSESS MENT IN THE MANNER PROVIDED UNDER SECTION 144 OF THE ACT. IN THE CASE UNDER CO NSIDERATION, IT IS NO DOUBT THAT THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNT; THEREFORE, THE A.O. IS TO MAKE ASSESSMENT UNDER SECTION 144 OF THE ACT. THE SCOPE OF BEST JUDGMENT HAS BEEN EXAMINED BY THE APEX COURT IN THE CASE OF 60 ITR 23 9 (SC) STATE OF KERALA VS C. VELUKUTTY AS UNDER :- WHAT IS THE SCOPE OF SECTION 12(2)(B) OF THE ACT ? THE EXPRESSION 'TO THE BEST OF HIS JUDGMENT' IN THE SAID CLAUSE IS PRESUMA BLY BORROWED FROM SECTION 23(4) OF THE INCOME-TAX ACT. THE SAID EXPRE SSION IN THE INCOME-TAX ACT WAS THE SUBJECT OF JUDICIAL SCRUTINY. THE PRIVY COUNCIL IN COMMISSIONER OF INCOME-TAX V. LAXMINARAYAN BADRIDAS HAS CONSIDER ED THOSE WORDS. THEREIN IT OBSERVED: 'HE (THE ASSESSING AUTHORITY) MUST NOT ACT DISHONES TLY, OR VINDICTIVELY OR CAPRICIOUSLY BECAUSE HE MUST EXERCISE JUDGMENT I N THE MATTER. HE MUST MAKE WHAT HE HONESTLY BELIEVES TO BE A FAIR ESTIMAT E OF THE PROPER FIGURE OF ASSESSMENT, AND FOR THIS PURPOSE HE MUST, THEIR LOR DSHIPS THINK, BE ABLE TO TAKE INTO CONSIDERATION LOCAL KNOWLEDGE AND REPUTE IN REGARD TO THE ASSESSEE'S CIRCUMSTANCES, AND HIS OWN KNOWLEDGE OF PREVIOUS RETURNS BY AND ASSESSMENTS OF THE ASSESSEE, AND ALL OTHER MATTERS WHICH HE THINKS WILL ASSIST HIM IN ARRIVING AT A FAIR AND PROPER ESTIMATE; AND THOUGH THERE MUST NECESSARILY BE GUESS-WORK IN THE MATTER, IT MUST BE HONEST GUESS-WORK. IN THAT SENSE, TOO, THE ASSESSMENT MUST BE TO SOME EXT ENT ARBITRARY. ' THE PRIVY COUNCIL, WHILE RECOGNIZING THAT AN ASSESS MENT MADE BY AN OFFICER TO THE BEST OF HIS JUDGMENT INVOLVED SOME GUESS-WOR K, EMPHASIZED THAT HE MUST EXERCISE HIS JUDGMENT AFTER TAKING INTO CONSID ERATION THE RELEVANT MATERIAL. THE VIEW EXPRESSED BY THE PRIVY COUNCIL I N THE CONTEXT OF THE INCOME-TAX ACT WAS FOLLOWED WHEN A SIMILAR QUESTION AROSE UNDER THE SALES TAX ACT. A DIVISION BENCH OF THE CALCUTTA HIGH COUR T IN JAGADISH PROSAD PANNALAL V. MEMBER, BOARD OF REVENUE, WEST BENGAL, CONFIRMED THE ASSESSMENT MADE BY THE SALES TAX AUTHORITIES, AS IN MAKING THE BEST JUDGMENT 16 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 ASSESSMENT THE SAID AUTHORITIES CONSIDERED ALL THE AVAILABLE MATERIALS AND APPLIED THEIR MIND AND TRIED THEIR BEST TO COME TO A CORRECT CONCLUSION. SO TOO, A DIVISION BENCH OF THE PATNA HIGH COURT IN DO MA SAHU KISHUN LAL SAO V. STATE OF BIHAR REFUSED TO INTERFERE WITH THE BEST JUDGMENT ASSESSMENT OF A SALES TAX OFFICER AS HE TOOK EVERY RELEVANT MA TERIAL INTO CONSIDERATION, NAMELY, THE SITUATION OF THE SHOP, THE RUSH OF THE CUSTOMERS AND THE STOCK IN THE SHOP AND ALSO THE ESTIMATE MADE BY THE ASSISTAN T COMMISSIONERS IN THE PREVIOUS QUARTERS. UNDER SECTION 12(2)(B) OF THE ACT, POWER IS CONFERR ED ON THE ASSESSING AUTHORITY IN THE CIRCUMSTANCES MENTIONED THERE UNDE R TO ASSESS THE DEALER TO THE BEST OF HIS JUDGMENT. THE LIMITS OF THE POWER A RE IMPLICIT IN THE EXPRESSION 'BEST OF HIS JUDGMENT'. JUDGMENT IS A FA CULTY TO DECIDE MATTERS WITH WISDOM TRULY AND LEGALLY. JUDGMENT DOES NOT DE PEND UPON THE ARBITRARY CAPRICE OF A JUDGE, BUT ON SETTLED AND INVARIABLE P RINCIPLES OF JUSTICE. THOUGH THERE IS AN ELEMENT OF GUESS-WORK IN A 'BEST JUDGMENT ASSESSMENT', IT SHALL NOT BE A WILD ONE, BUT SHALL HAVE A REASON ABLE NEXUS TO THE AVAILABLE MATERIAL AND THE CIRCUMSTANCES OF EACH CASE. THOUGH SUBSECTION (2) OF SECTION 12 OF THE ACT PROVIDES FOR A SUMMARY METHOD BECAUSE OF THE DEFAULT OF THE ASSESSEE, IT DOES NOT ENABLE THE ASSESSING A UTHORITY TO FUNCTION CAPRICIOUSLY WITHOUT REGARD FOR THE AVAILABLE MATER IAL. CAN IT BE SAID THAT IN THE INSTANT CASE THE IMPUGNE D ASSESSMENT SATISFIED THE SAID TESTS ? FROM THE DISCOVERY OF SE CRET ACCOUNTS IN THE HEAD OFFICE, IT DOES NOT NECESSARILY FOLLOW THAT A CORRE SPONDING SET OF SECRET ACCOUNTS WERE MAINTAINED IN THE BRANCH OFFICE, THOU GH IT IS PROBABLE THAT SUCH ACCOUNTS WERE MAINTAINED. BUT, AS THE ACCOUNTS WERE SECRET, IT IS ALSO NOT IMPROBABLE THAT THE BRANCH OFFICE MIGHT NOT HAV E KEPT PARALLEL ACCOUNTS, AS DUPLICATION OF FALSE ACCOUNTS WOULD FACILITATE D ISCOVERY OF FRAUD AND IT WOULD HAVE BEEN THOUGHT ADVISABLE TO MAINTAIN ONLY ONE SET OF FALSE ACCOUNTS IN THE HEAD OFFICE. BE THAT AS IT MAY, THE MAINTENANCE OF SECRET ACCOUNTS IN THE BRANCH OFFICE CANNOT BE ASSUMED IN THE CIRCUMSTANCES OF THE CASE. THAT APART, THE MAINTENANCE OF SECRET ACCOUNT S IN THE BRANCH OFFICE MIGHT LEAD TO AN INFERENCE THAT THE ACCOUNTS DISCLO SED DID NOT COMPREHEND ALL THE TRANSACTIONS OF THE BRANCH OFFICE. BUT THAT DOES NOT ESTABLISH OR EVEN PROBABILIZE THE FINDING THAT 135% OR 200% OR 500% O F THE DISCLOSED TURNOVER WAS SUPPRESSED. THAT COULD HAVE BEEN ASCER TAINED FROM OTHER MATERIALS. THE BRANCH OFFICE HAD DEALINGS WITH OTHE R CUSTOMERS. 17 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 THEIR NAMES WERE DISCLOSED IN THE ACCOUNTS. THE ACC OUNTS OF THOSE CUSTOMERS OR THEIR STATEMENTS COULD HAVE AFFORDED A BASIS FOR THE BEST JUDGMENT ASSESSMENT. THERE MUST ALSO HAVE BEEN OTHE R SURROUNDING CIRCUMSTANCES, SUCH AS THOSE MENTIONED IN THE PRIVY COUNCIL'S DECISION CITED SUPRA. BUT IN THIS CASE THERE WAS NO MATERIAL BEFOR E THE ASSESSING AUTHORITY RELEVANT TO THE ASSESSMENT AND THE IMPUGNED ASSESSM ENTS WERE ARBITRARILY MADE BY APPLYING A RATIO BETWEEN DISCLOSED AND CONC EALED TURNOVER IN ONE SHOP TO ANOTHER SHOP OF THE ASSESSEE. IT WAS ONLY A CAPRICIOUS SURMISE UNSUPPORTED BY ANY RELEVANT MATERIAL. THE HIGH COUR T, THEREFORE, RIGHTLY SET ASIDE THE ORDERS OF THE TRIBUNAL. 20.4 FROM ABOVE DISCUSSIONS, IT IS RELEVANT TO NOTE THAT WHILE MAKING A BEST JUDGEMENT ASSESSMENT THE A.O. DOES NOT POSSESSES AB SOLUTE ARBITRARY AUTHORITY TO ASSESS ANY FIGURE HE LIKES AND ALTHOUGH HE IS NOT F OUND BY STRICT JUDICIAL PRINCIPLE HE SHOULD BE GUIDED BY RULES OF JUSTICE, EQUITY AND GOOD CONSCIENCE. THE LIMITS OF POWER IS AN ELEMENT OF GUESS WORK IN A BEST JUDGEME NT, IT SHALL NOT BE A WILD ONE BUT SHALL HAVE REASONABLE NEXUS TO THE AVAILABLE MA TERIAL AND THE CIRCUMSTANCES OF EACH CASE. IT IS SETTLED LAW THAT THERE IS CERTAIN DEGREE OF GUESS WORK IN BEST JUDGEMENT ASSESSMENT VIDE GANGA PRASAD SHARMA VS. C IT, 127 ITR 271 (M.P.), CIT VS. BADRADAS RAMRAI SHOP, AIR 1937 P.C. 133, AN D BRIJ BHUSHAN LAL PARDUMAN KUMAR VS. CIT, AIR (1979) SC 209. THE A. O. AND CIT(A) BOTH HAVE ESTIMATED BUSINESS PROFIT ON THE BASIS OF THEIR OWN ASSUMPTION AND PRESUMPTION. ESTIMATION OF PROFIT BY ESTIMATING PURCHASES, THEN APPLYING CERTAIN PERCENTAGE OF G.P, THEN CONVERTED PURCHASES IN TO SALE AND THEN E STIMATED PROFIT BY APPLYING CERTAIN PERCENTAGE OF G.P. IN BOTH TYPES OF GOODS I MFL AND COUNTRY LIQUOR, SUCH 18 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 PROCEDURE IS NOT ACCEPTED PROCEDURE. THEREFORE SAME IS NOT ACCEPTABLE. A COMPARATIVE POSITION OF PURCHASES DECLARED BY THE A SSESSEE AND ESTIMATED BY THE A.O. ARE A UNDER:- PURCHASES -------------------------------------------------- -- AS PER ASSESSEE AS PER A.O. 30,24,42,832 39,79,70,320 20.5 THE ASSESSEE DID NOT ACCEPT THE PURCHASES ESTI MATED BY THE A.O. ON FOLLOWING GROUNDS:- (PAGE NO.22 OF CIT(A) (I) AO IS NOT JUSTIFIED IN MENTIONING THAT THE APP ELLANT HAS NOT SUBMITTED THE RELEVANT DETAILS DURING THE ASSESSMEN T PROCEEDINGS WHEN THE AO HIMSELF HAS DETERMINED SALES AND PROFIT ON THE BASIS OF DETAILS SUBMITTED FORM TIME TO TIME AND AS ASKED FO R BY THE A.O. (II) AO HAS CONSIDERED THE TOTAL DUTY, INCLUDING BA SIC DUTY OF 8%, FOR THE PURPOSE OF DETERMINATION OF SALES. (III) AO HAS COLLECTED THE INFORMATION FROM DEO, SH IVPURI, ASHOK NAGAR & SHEOPUR AND HAS RELIED HEAVILY ON INFORMATI ON OF DEO, ASHOK NAGAR WHEN THE APPELLANT HAS NOT CARRIED OUT BUSINESS IN ASHOK NAGAR. (IV) THE APPELLANT HAS CARRIED ON THE SAME BUSINESS SINCE LONG. THERE IS NO CHANGE IN THE NATURE, LINE, MODUS OPERN ADI OF HIS BUSINESS IN THE YEAR UNDER APPEAL AS COMPARED TO EARLIER YEA RS. HE HAS DECLARED BETTER GROSS PROFIT DURING THE YEAR AND HI S TRADING RESULTS SHOULD BE ACCEPTED. 19 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 20.6 THE CIT(A) ALSO DID NOT AGREE WITH THE A.O. T HE RELEVANT OBSERVATION OF THE CIT(A) ARE AS UNDER:- (PAGE NOS.22 & 23 (CIT(A)) 3.4 IT IS AN ADMITTED FACT THAT THE APPELLANT HAS NOT PRODUCED HIS BOOKS OF ACCOUNTS AND RELEVANT RECORDS FOR VERIFICA TION OF SALES WITH REFERENCE TO QUANTITY AS WELL AS RATE AT ANY STAGE OF ASSESSMENT OR EVEN APPEAL. QUANTITATIVE DETAILS, AS GIVEN, ARE T OO NO VERIFIABLE FOR TOTAL SALES EFFECTED VIS--VIS SALE RATE. BOTH AO AND THE APPELLANT HAVE RELIED UPON HE EXCISE POLICY OF THE STATE GOV. AND REFERRED O PARA 9.3 (REPRODUCED SUPRA)A OF MP GAZETTE DD. 15.0 1.2008 FOR CHARGING OF MINIMUM RATE OF IMFL. AS PER STATE POL ICY, MINIMUM SELLING PRICE OF IMFL COULD NOT BE LESS THAN 10% OF PROFIT OVER THE COST OF LIQUOR PLUS EXCISE DUTY PLUS TRANSPORTATION CHARGES. THE ONLY DISPUTE IN THIS REGARD IS CONSIDERATION OF 8% OF BA SIC DUTY. THE RELEVANT CLAUSE OF THE GAZETTE ONLY MENTIONS ABOUT DUTY WITHOUT EXCLUDING THE BASIC DUTY PAID IMMEDIATELY AFTER THE DRAW. AS PER THE PUBLISHED POLICY, IMFL COULD NOT BE SOLD AT LESS TH AN THE VALUE DETERMINED APPLYING 10% PROFIT UPON EXCISE DUTY PLU S FEE PLUS TRANSPORTATION CHARGES AND INCOME TAX. IT NOWHERE EXCLUDES THE BASIC DUTY. THEREFORE, THE DETERMINATION OF SALES BY THE AO CONSIDERING THE AMOUNT OF DUTY PAID IS JUSTIFIED AS THE APPELLANT H AS NEVER PRODUCED HIS BOOKS OF ACCOUNTS AND SUPPORTING DOCUMENTS/EVID ENCES, AT ANY STAGE, FOR VERIFICATION OF DECLARED SALES OF IMFL. THE NEXT QUESTION IS OF QUANTIFICATION OF SALES WITH REFERENCE TO QUANTI TY AND AMOUNT. SO FAR QUANTITY IS CONCERNED, THERE IS NO DISPUTE. TH E ONLY DISPUTE IS QUANTIFICATION WITH REFERENCE TO AMOUNT. A.O. HAS QUANTIFIED IMFL SALES AT RS.19,49,49,882/- BY APPLYING 10% PROFIT O VER COST PRICE OF IMFL AS PER STATE GOVT. POLICY AND THEN HAS AGAIN A SSESSED TOTAL SALES AT RS.21,26,72,600/- BY APPLYING 20% PROFIT R ATE ON TOTAL COST OF IMFL PRESUMING THAT AS PER PREVAILING MARKET PRICE, RATE OF IMFL IS CHARGED AT MUCH HIGHER RATE THAN THE PRESCRIBED MIN IMUM RATE. HOWEVER, AO HAS NOT BROUGHT ON RECORD ANY MATERIAL IN HIS SUPPORT EITHER IN FORM OF COMPARABLE CASE(S) OR ANY OTHER E VIDENCE. 20 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 20.7 THUS, IT IS FOUND THAT ESTIMATION MADE BY THE A.O. IS BASED ON MATHEMATICAL FORMULA AND SIMPLY ON MATHEMATICAL FORMULA INCOME C ANNOT BE ESTIMATED. THE A.O. MADE THE ADDITION OF ENTIRE/GROSS SALE WHEREAS HONBLE M.P. HIGH COURT IN THE CASE MANMOHAN SADAVA VS. CITR, 304 ITR 52 (M.P) FOLLOWING CIT VS. BALCHAND AJIT KUMAR, 263 ITR 610 (M.P.) HELD THAT E NTIRE SALE PROCEEDS OF THE ASSESSEE CANNOT BE ADDED TO THE INCOME, ONLY NET PR OFIT IS TO BE ADDED. THUS, THE A.OS FINDING IS CONTRARY TO FINDING OF JUDGEMENT O F HONBLE M.P. HIGH COURT. THE CIT(A) ON ONE HAND REJECTED THE WORKING OF ESTI MATION OF THE A.O. AND, ON THE OTHER HAND, HE RELIED UPON REJECTED WORKING OF THE A.O AND ADDITION WAS SUSTAINED. UNDER THE CIRCUMSTANCES, BOTH THE ORDERS OF THE A.O . AND CIT(A) CONNOTE BE SUSTAINED. 20.8 AS STATED ABOVE THAT WHILE MAKING BEST JUDGEME NT ONE SHOULD HAVE REASONABLE NEXUS TO THE AVAILABLE MATERIAL AND CIRC UMSTANCES. IN THE CASE UNDER CONSIDERATION, BOTH A.O. AND CIT(A) HAVE IGNORED TH E PAST HISTORY OF THE ASSESSEE. A COMPARATIVE TRADING RESULT FURNISHED BY THE ASSES SEE HAS BEEN PLACED AT PAGE NO.1 OF PAPER BOOK, WHICH IS REPRODUCED AS UNDER :- COMPARATIVE POSITION OF TRADING RESULTS A.Y. SALES GROSS PROFIT G.P. RATE AFTER DEDUCTION OF INTT. & EXPENSES RELATED TO % N.P. FINALLY ASSESSED BY AO OR HONBLE ITAT AGRA BENCH AGRA 21 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 THE LIQUOR BUSINESS NET PROFIT 05-06 293123139/- 12220302/- 4.16 3841464 1262894 2578570 0.87% 1.2% BY HONBLE ITAT AGRA BENCH, AGRA 06-07 132265429/- 4029612/- 3.04% 1475687 1.11% SAL ES ESTIMATED AND APPLIED 1.3% N.P. INCOME FINALLY ASSESSED AT 2016917/- AS AGAINST 1475687/- DISCLOSED. 07-08 253548344/- 15142186/- 5.97% 3381657 1.49% 61 61656/- 2.43% ACCEPTED/ASSESSED NO APPEAL 08-09 283394956/- 18942906/- 5.6% 6138059 2.16% 613 8059+3300000=9438059 3.3% NO APPEAL 09-10* 326529801/- 24086975/- 7.34% 6955730 2.13% ( UNDER CONSIDERATION) *NOTE: THAT ASSESSEE HAS DEDUCTED THE EXPENSES UND ER THE HEAD INTT. AT RS.8463304/- AND ALSO SHOWN TH E INTT. & OTHER INCOME AT RS.4413591/- AFTER ADJUSTMENT OF TH E INCOME AT RS.4413591/- WITH EXPENSES OF INTT., NE T INTT. CLAIMED AT RS.4049713/- BEING RELATED TO THE LIQUOR BUSINESS. 20.9 ON PERUSAL OF ABOVE COMPARATIVE CHART, WE NOTI CE THAT IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN COMPARATIVELY BETTER RESULT, AS G.P. IS 7.34% AND NOT PROFIT 2.13%. HOWEVER, AFTER CONSIDERING T OTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, IT WILL BE FAIR AND JUST IF ADDITION TO THE EXTENT OF RS.20,00,000/- IS SUSTAINED WHICH WILL COVER ALL DE FICIENCIES AND LAPSES NOTICED BY THE A.O. WE ACCORDINGLY CONFIRM THE ADDITION TO TH E EXTENT OF RS.20,00,000/- AND BALANCE ADDITION OF RS.6,94,40,512/- (7,14,40,512 20,00,000) MADE BY THE A.O. IS DELETED. THUS, GROUND NO.1 & 2 OF THE ASSESSEE S APPEAL ARE PARTLY ALLOWED. 21. GROUND NO.3 IS IN RESPECT OF ESTIMATION OF AGRI CULTURAL INCOME. THE ASSESSEE DECLARED AGRICULTURAL INCOME OF RS.12,10,310/-. TH E ASSESSEE DID NOT FURNISH ANY EVIDENCE. IN ABSENCE OF EVIDENCE, THE A.O. TAKEN 4 0% OF THE SAID AMOUNT OF WHICH 22 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 CALCULATION COMES TO RS.4,84,124/- AND THE SAME WAS TREATED AS INCOME FROM OTHER SOURCES. THE BALANCE AMOUNT OF RS.7,26,186/- WAS A CCEPTED AS AGRICULTURAL INCOME BY THE A.O. THE CIT(A) CONFIRMED THE ACTION OF THE A.O. 22. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THA T IN A.Y.2008-09 THE A.O. HIMSELF ACCEPTED AGRICULTURAL INCOME AS UNDER:- 3. LAST YEAR THE ASSESSEE HAD DECLARED AGRICULTURA L INCOME AT RS.12,02,510/- OUT OF WHICH RS.1,35,416/- WERE TREA TED AS INCOME FROM OTHER SOURCES. BY APPLICATION OF SAME RATIO THIS YEAR RS .1,70,000/- IS ADDED BACK TO THE INCOME OF THE ASSESSEE OUT OF AGRICULTURAL I NCOME, TREATING IT AS INCOME FROM OTHER THAN AGRICULTURAL INCOME. 23. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. SINCE THE A.O. HIMSELF HAS ACCEPTED THE AGRICULTURA L INCOME IN A.Y. 2008-09 AND TO MAINTAIN CONSISTENCY THE A.O. SHOULD FOLLOW THE SAME FORMULA IN THE YEAR UNDER CONSIDERATION AS FOLLOWED IN A.Y. 2008-09 SINCE THE LAND HOLDING AND OTHER FACTS ARE SIMILAR. THEREFORE, THE A,O, IS DIRECTED TO CA LCULATE THE AGRICULTURAL INCOME IN ACCORDANCE WITH THE INCOME DETERMINED IN A.Y. 2008- 09. 24. THE FOURTH GROUND IS IN RESPECT OF ADDITION OF RS.36,21,887/- UNDER SECTION 68 OF THE ACT. THE A.O. MADE ADDITION OF RS.36,21, 887/- ON ACCOUNT OF LOAN TAKEN FROM M/S. POOJA GREH NIRMAN RS.5,00,000/- AND FROM SHRI HARVINDER SINGH BHATIA 23 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 RS.31,21,887/-. THE A.O. MADE THE ADDITION AS THE ASSESSEE FAILED TO FURNISH DETAILS INCLUDING PAN ETC. THE CIT(A) CONFIRMED TH E ORDER OF A.O. OBSERVING THAT THE ASSESSEE HAS FAILED TO FILE THE REQUISITE DETAI LS. 25. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT TH E ASSESSEE FILED CONFIRMATION AND COPIES OF ACCOUNTS OF BOTH THE PARTIES. THE AS SESSEE WAS HAVING SUFFICIENT MATERIAL TO ESTABLISH THAT THE LOANS WERE TAKEN DUR ING THE COURSE OF BUSINESS FOR THE PURPOSE OF BUSINESS. HE FURTHER SUBMITTED THAT COP Y OF PAN AND OTHER DETAILS WERE FURNISHED. IT WAS ALSO SUBMISSION OF THE LD. AUTHO RISED REPRESENTATIVE THAT CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE, SOME TIME SUCH LOANS ARE NECESSARY AND ASSESSEE HAS SUFFICIENT MATERIAL TO P ROVE THE SAME. THE ALTERNATE SUBMISSION OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT IF ANY ADDITION IS TO SUSTAINED, BENEFIT OF TELESCOPING OF ADDITION SUSTA INED IN TRADING RESULT MAY ALSO BE ALLOWED. AFTER HEARING THE LD. DEPARTMENTAL REPRES ENTATIVE, WE FIND IT APPROPRIATE TO SEND BACK THIS ISSUE TO THE FILE OF A.O. WITH TH E DIRECTION TO DECIDE THE ISSUE AFRESH AS COMPLETE FACTS OF THE ISSUE HAS NOT BEEN BROUGHT ON RECORD CONSIDERING THE BUSINESS EXPEDIENCY AND NATURE OF BUSINESS OF T HE ASSESSEE. THE A.O. IS DIRECTED TO DECIDE THE ISSUE IN ACCORDANCE WITH LAW . THE A.O. MAY ALSO CONSIDER THE ALTERNATE CONTENTION OF THE LD. AUTHORISED REPR ESENTATIVE FOR SET OFF OF ADDITION, 24 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 IF ANY, AGAINST THE ADDITION SUSTAINED ON ACCOUNT O F PROFIT AS IN THE CASE UNDER CONSIDERATION WHICH HAS BEEN SUSTAINED BY US AT RS. 20,00,000/-. THE A.O. MAY DECIDE THE ISSUE AFTER PROVIDING REASONABLE OPPORTU NITY OF HEARING TO THE ASSESSEE. ITA NO.442/AGRA/2012 BY THE REVENUE 26. THE SOLE GROUND RAISED IN REVENUES APPEAL IS I N RESPECT OF DELETION OF ADDITION OF RS.5,27,85,853/- BY THE CIT(A). THIS I S A COMMON GROUND AS RAISED IN GROUND NOS.1 & 2 OF ASSESSEES APPEAL. THESE GROUN DS I.E. GROUND NOS.1 & 2 OF ASSESSEES APPEAL HAVE BEEN DECIDED AFTER A DETAILE D DISCUSSION AND THOSE GROUNDS WERE PARTLY ALLOWED BY US. IN THE LIGHT OF THE FAC T, THIS GROUND OF REVENUES APPEAL IS DISMISSED. 27. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES AND APPEAL OF THE REVENUE IS D ISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* 25 ITA NOS.419 & 442/AGRA/2012 A.YS. 2009-10 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY
