Income Tax Appellate Tribunal - Amritsar
Ashok Kumar & Company vs Ito on 25 June, 2003
Equivalent citations: (2004)90TTJ(ASR)666
ORDER
H.L. Karwa, J.M.:
This is an appeal by the assessee and is directed against the order of the Commissioner (Appeals), Ludhiana, dated 2-2-1996, relating to the assessment year 1990-91.
2. In this appeal, the assessee has taken the following grounds "1. That the order of the Commissioner (Appeals) is against law and facts of the case.
2. That the learned Commissioner (Appeals) has erred in concurring with the Income Tax Officer in invoking the provisions of section 145(2), while rejecting the books of account of the appellantfirm and estimating its total income.
3. That the Commissioner (Appeals) has erred in concurring with the Income Tax Officer in not accepting the income declared at Rs. 1,24,180 by the assessee and has further erred in assessing the same at Rs. 2,23,976. The order is most arbitrary and he has erred in not accepting the contention of the assessee because :
(i) The learned Commissioner (Appeals) has erred in concurring with the Income Tax Officer while arbitrarily estimating the sales at Rs. 1,55,00,000 as against sales of Rs. 1,60,32,336 declared by the assessee-firm, and further erred in concurring with the Income Tax Officer in arbitrarily applying a GP rate of 2.7 per cent as against 2.44 per cent declared by the assessee-firm and henceforth upholding the addition of Rs. 96,000.
(ii) The learned Commissioner (Appeals) has erred in concurring with the Income Tax Officer in not appreciating the circumstances leading to low GP to the assessee-firm during the year under consideration.
4. Such other grounds as may be urged at the time of hearing."
3. Briefly stated, the facts of the case are that the assessee filed its return on 12-8-1991, declaring an income of Rs. 1,24,180. The return was processed under section 143(l)(a) of the Act on 28-1-1992. However, the case was picked up for selective scrutiny and the statutory notices under section 143(2)/142(l) along with detailed questionnaire were issued to the assessee. The assessee is a partnership firm carried on the business of running five L-2 vends at Chobati Chowk, Sat Narain Bazar, Amritsar Road, Hussainpur and Jalandhar Road. During the year under consideration, the assessee had declared total sales of Rs. 1,50,32,336 and declared GP of Rs. 36,22,411. While arriving at the GP, the assessee did not take into consideration licence fee paid amounting to Rs. 33 lakhs, which had been debited to the P&L a/c. The assessee was asked to explain the basis of recording sales in the books as no sale vouchers and sale bills had been produced by the assessee and it did not have any quantitative tally of the goods purchased and sold during the year. The assessee was also asked to file brand-wise details of whisky and beer purchased and sold. The assessee vide letter dated 30-9-1992, stated that details of brand-wise whisky could not be prepared. It was stated that there were many brands with so much varieties of whisky and it was not possible to prepare such a list. It was also stated that the sales were recorded on daily basis as the amount of sales is deposited and recording is made accordingly in the cash book. Further, it was claimed that the GP rate shown was comparable with other assessees engaged in the same line of business. The assessing officer found that the assessee did not have details of daily sales particularly when the employees of the assessee were looking after five vends at difference places. The assessing officer took the view that it is not understandable as to why these employees were not preparing sale vouchers of each day. According to the assessing officer, it is a general practice in this line of business that on each day sale vouchers for total sales during the day is prepared, cash and stock tallied and also vouchers along with cash and stock record are submitted to the assessee who is holding overall control of all the vends. The assessing officer was of the view that the assessee had deliberately not produced the details and consequently he invoked the provisions of section 145(2) of the Act, and after estimating the sales at Rs. 1,55,00,000, he applied the GP rate of 2.7 per cent and made the addition of Rs. 96,000. The assessing officer also noted that the GP rate of M/s Ashok Kumar & Co., L-2, Hadiabad, was 3.26 per cent on total turnover of Rs. 51,10,827 and in the case of M/s Amrit Rai & Co., L-2, Maqsoodan, L-2, Hardev Road and L-2, Sadar Bazar, the GP rate was 1.75 per cent on sale of Rs. 94,79,901.
4. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal to the Commissioner (Appeals).
5. Before the Commissioner (Appeals), it was submitted by the assessee that complete books of account were being maintained and there was no reason or defect pointed out which would lead to the rejection of such books, During the course of hearing of the appeal, the learned Commissioner (Appeals) asked the assessee to produce before him daily sales statements, stock register, etc., but the assessee failed to produce the same. The learned Commissioner (Appeals) observed that it was one of the contentions of the assessee before him that the GP rate shown by the assessee was comparable with the other cases and, therefore, the same could be accepted.
6. The learned Commissioner (Appeals) found that the records maintained and produced at the time of assessment or appeal were not complete and a proper verification of the purchase and sale transactions could not be made. The learned Commissioner (Appeals) further pointed out that no document was produced before him to support the view that GP rate of 2.144 per cent declared was adequate. According to him, the GP rate was low as the retailer would make much higher profit. The learned Commissioner (Appeals) also observed that there was nothing wrong with the turnover of the assessee's trade and after achieving healthy turnover the GP rate should also be reasonable.
6.1 After considering the entire facts of the present case, the learned Commissioner (Appeals) held that the assessing officer was justified in rejecting the books of account and making the addition of Rs. 96,000 in the trading results. The learned Commissioner (Appeals) concluded that the GP rate estimated by the assessing officer was very reasonable.
7. Aggrieved by the order of the Commissioner (Appeals), the assessee is in further appeal before the Tribunal. Shri Ravish Sood, advocate, while appearing for the assessee, reiterated the submissions made before the authorities below. He further submitted that the assessing officer was not justified in estimating the sales at Rs. 1,55,00,000 as against the sales of Rs. 1,50,32,336 declared by the assesseefirm. It was also submitted that the assessing officer was provided with all the details, information and explanations called for which he has, totally ignored while assessing the income. It was vehemently argued that the application of an estimated GP rate on estimated sales was unreasonable and unwarranted. It was also submitted that in the case of M/s Amrit Rai & Co., L-2, Maqsoodan, L-2, Hardev Road and L-2, Sadar Bazar, the GP rate was 1.75 per cent on sale of Rs. 9,47,990. According to the learned counsel for the assessee, the GP declared by the assessee was higher than the GP rate declared by the aforesaid concern. In that view of the matter also, the assessing officer was not justified in rejecting the book results. He further submitted that while deciding the appeal, the learned Commissioner (Appeals) has not properly appreciated the facts of the present case and confirmed the action of the assessing officer without assigning any cogent reasons. Accordingly, it was submitted that the order of the Commissioner (Appeals) may be set aside.
8. Shri S.K. Mittal, the learned Departmental Representative, strongly supported the orders of the authorities below.
9. I have carefully considered the rival submissions and have also perused the orders of the authorities below, It is an admitted position that the assessee had furnished audited accounts along with the return of income. The auditors have not given any adverse comments in the report. Similarly, the assessee was dealing in exciseable items and had maintained statutory registers prescribed by the excise authorities. The assessing officer has not pointed out any material defects in the books of account maintained by the assessee. Even the excise authorities have accepted the books maintained by the assessee. It seems that the assessing officer has made the addition merely on the ground that the assessee could not produce certain sale vouchers and sale bills. The assessing officer has also asked the assessee to file brand-wise details of whisky and beer purchased and sold. In this regard, it was contended by the assessee that there were many brands with so much varieties of whisky and it was not possible to prepare such details. It seems that both the authorities below have not correctly appreciated the nature of the business being carried out by the assessee. In that view of the matter also, the addition was not justified. Furthermore, the GP rate of 2.144 per cent declared by the assessee was considered to be low by the authorities below. However they have not assigned any cogent reasons while holding so. Keeping in view the total turnover of the assessee, it cannot be said that the GP declared by the assessee was low by any standard. It seems that the assessing officer has estimated the GP rate of 2.7 per cent without any basis. Similarly, the sales were estimated at a figure of Rs. 1,55,00,000 without assigning any reason. It is not discerning from the order of the assessing officer that as to how he bad estimated the GP rate 2.7 per cent. As I have already noted hereinabove that no defect has been pointed out in the books of account and the accounts were audited by the auditors. Similarly, the excise authorities have not pointed out any defect in the books of account maintained by the assessee. The assessee was dealing in exciseable items and was being checked periodically by the excise authorities.
10. Considering all the above noted facts, I do not see any justification in making the addition. It is also true that no sales and purchases were found outside the books of account. It is also not the case of the department that the assessee was not showing the correct income in its books of account.
11. Viewed from any angle, the learned Commissioner (Appeals) was not justified in upholding the action of the assessing officer. Accordingly, I set aside the impugned order and allow the appeal of the assessee.
12. In the result, the appeal is allowed.