Income Tax Appellate Tribunal - Delhi
Haryana Liquor Company , New Delhi vs Assessee on 29 February, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI 'C' BENCH
BEFORE SHRI RAJPAL YADAV, JM & SHRI A.N. PAHUJA, AM
ITA No.1852/Del/2012
Assessment year:2008-09
M/S Haryana Liquor V/s. Additional C.I.T.,Range-
Company.C-423,Sarita 22,New Delhi
Vihar,New Delhi
[PAN : AAAAH2567C]
(Appellant) (Respondent)
Assessee by Shri Ravi Mall, AR
Revenue by Shri Sat Pal Singh, DR
Date of hearing 25-06-2012
Date of pronouncement 25-06-2012
ORDER
A.N.Pahuja:- This appeal filed on 20.04.2012 by the assessee against an order dated 29th February, 2012 of the ld. CIT(A)-XXIII, New Delhi, raises the following grounds:-
1. "That the learned CIT(A) has erred both on facts and in law in disposing of the appeal ex-parte on the ground that in response to the notices issued there had been no compliance by the assessee/appellant. The learned CIT(A) failed to appreciate, no such notices were ever served on the assessee, an AOP which stood dissolved on 31.03.2008.
1.2 That the learned CIT(A) has failed to comprehend that, though notices as were sent through speed post at the addresses mentioned in the memo of appeal, could not be served on the assessee/appellant, since an AOP dissolved on 31.03.2008 and as such notices of hearing ought to have been either issued to any member of the AOP appellant or even to the Chartered Accountant, 2 I.T.A. no.1852/Del./2012 who was the authorized representative of the assessee an AOP.
1.3 That the learned CIT(A) has failed to appreciate that, the assessee an AOP was constituted for a limited period and was constituted to exploit the liquor licenses granted by the Government of Haryana for the financial year 2007-2008 and as such notices of hearing ought to have been issued to the members of an AOP in accordance with law.
2. That in the alternative and without prejudice, the learned CIT(A) while disposing of the appeal ex-parte should have disposed of the appeal 'on merits' of the addition made computing the income at Rs.1,80,05,610/- and on the additions made disputed before him as were raised in the grounds of appeal by the appellant. The CIT(A) has further failed to appreciate that he was obliged in law to have disposed of the appeal on merits despite the fact that there had been non-appearance by the assessee.
2.1 That the learned CIT(A), while deciding the appeal of the assessee has failed to apply the provisions of section 250(6) of the Income Tax Act when he simply disposed of the appeal ex-parte without disposing of the grounds of the appeal raised before him, and as such, same is unsustainable in law and liable to be set aside.
2.2 That the learned CIT(A) has erred in ignoring the judicial pronouncement of the Ahmedabad Bench of the Tribunal in the case of Gujarat Themis Biosyn Ltd. reported in 74 ITD 339, wherein it has been held that, section 250(6) is obligatory for CIT(A) and thus CIT(A) should pass a speaking order stating points raised in appeal, his reasons thereon and reasons for such decision.
3. That in the alternative and without prejudice, the learned CIT(A) ought to have been held that an income declared by the assessee in its annual return of income was since supported by the annual audited account where no discrepancy was found, the income declared by the assessee of `.46,61,920/- deserved to have been accepted by the Assessing Officer and the income computed by him of `.1,80,05,606/- was unsustainable.
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4. That in any case and without prejudice the learned CIT(A) has failed to appreciate that the Assessing Officer had not granted to the assessee fair and proper opportunity of being heard and the assessment made was thus vitiated in law.
5. That the learned CIT(A) has also failed to appreciate that, the judgment cited by him in the order impugned of the Apex Court in the case of CIT vs. B.N. Bhattachargee & another reported in 118 ITR 461 and that of the Income Tax Appellate Tribunal in the case of CIT vs. Multiplan India Pvt. Ltd., reported in 38 ITD 320 (Del.) had no application in respect of the appeal filed by the assessee u/s 246 A of the Income Tax Act.
6. That in any case and without prejudice the learned CIT(A) in order to render the substantial justice ought to have issued at least one notice of hearing to the authorized representative Shri Manoj Gupta who was appearing before the Assessing Officer in the course of proceedings before him so as to ensure that whether or not the appellant was really interested in pursuing the appeal.
It is therefore prayed the order of the learned CIT(A) to be set aside and he be directed to hear the appeal on merits and in the alternative it is prayed the income returned by the assessee be accepted and the additions made by the Assessing Officer was untenable both on facts and in law. It be further held that the interest levied u/s 234B of the Income Tax Act was not leviable."
2. Facts, in brief, as per relevant orders are that return declaring income of ``46,61,920/-filed on 30.09.2008 by the assessee, trading in liquor, was selected for scrutiny with the service of a notice u/s 143(2) of the Income- tax Act, 1961 (hereinafter referred to as the 'Act'),issued on 24.9.2009. During the course of assessment proceedings, the Assessing Officer (A.O. in short) noticed that the assessee, an AOP, comprising 19 partners having different shares, purchased liquor from various persons including licence holders for wholesale liquor which included IMFL. Total purchases were `16,00,89,326/- and 4 I.T.A. no.1852/Del./2012 sales `29,72,98,954/-. The entire sales were in cash except to M/s Palm Town & Country Club. Likewise entire expenses were incurred in cash. Besides purchases of `6,98,21,000/- were also in cash. In order to ascertain the genuineness of purchases, the AO issued summons u/s 131 & notice u/s 133(6) of the Act to 11 parties mentioned on page 2 of the assessment order. In response only, Gurgaon Liquor, a sister concern of the assessee responded. The AO observed on perusal of bills of few suppliers like Gurgaon Liquor Company, Locus Enterprises, & M/S Gan Nayak Enterprises that though rates of various brands of liquor were available, there was no evidence regarding MRP as well as sale price while the liquor policy of the Haryana Government indicated that price of liquor sold in respect of various brands should not be less than MRP. Despite repeated requests to furnish evidence of sale, the assessee did not reply while there was no source of information for verifying the sale price. In these circumstances, the AO observed as under:-
a. "The assessee made purchases and the supplier collected TCS, hence, his purchases are to be believed genuine keeping in view of this.
b. Assessee made certain expenses which are un-doubtly genuine such as license fee to the State Government. c. Assessee furnished some purchase bills of liquor which indicates the purchase price of liquor various brands. d. Assessee has not issued any sale bill to any person except in the case of M/s Palms Town and Country Club, Gurgaon. e. Sales made to Palms Town are pertaining to premium brand, which are selective and it does not represent the other popular brands which were sold without issuing the sale bills (sale of M/s Palms Town was around ``15 lakh only). f. Since all the sale was in cash and assessee fails to give any evidence regarding the sale price of items.
g. Since assessee is supposedly maintaining the stock register and State Government is also keeping check on the quantity maintained by the vendors, so the quantity furnished by the assessee is to be believed genuine."
2.1 Thereafter, referring to minimum retail price given in the Haryana Liquor Policy of various liquor brands and purchase prices of country liquor, IMFL
5 I.T.A. no.1852/Del./2012 and beer, the AO concluded in para 2.3 of the assessment order that average percentage margin from country liquor was 69.88%. Since the assessee made purchase of country liquor at `2,57,69,713/-, the AO estimated total sale from country liquor at ``8,55,56,816/-. Likewise, the AO worked out sale of IMFL at `25,07,64,289/- and sale of beer at ``2,99,35,765/- in para 2.4 & 2.5 of the assessment order on the basis of purchases made by the assessee. Accordingly, total sales were worked out to `37,96,41,139/- as against sale of ``29,72,98,954/- reflected by the assessee. On the basis of data collected by the assessee, the AO served a draft assessment order on the assessee on 27th December, 2010. In response the assessee replied as under:-
"Sir, the state government of Haryana has only used the term "minimum sales price" in the Haryana Excise Policy 2007-08 which is in no way can be said to be the selling price. These prices are only indicative prices which has been mentioned in the policy document for attracting the new licencees to invest in the business of liquor in the State of Haryana to increase the revenue of State Excise. The liquor business of Haryana is highly competitive and driven by the market forces even the manufacturer's of all types of liquor (including country liquor, IMFL, Beer etc.) do not print any prices on the bottle/packaging itself. Actual bottles of different types of liquors are also being produced for your kind verification.
Hence the "minimum sale price" used in the excise policy cannot be taken as the sale price.
Further the sale excise policy has also defined the rule for lifting of quota at clause no.l2.8 which is binding on the licencee and in case of failure to lift the quota the penalties has also been defined the same clause which are very stringent and can earn losses to the licencee. Hence in order to evade those hardships of non-lifting of quota, assessee sells the goods at much cheaper rates than the retail rates of market to whomsoever comes to the vend for the purchase of liquor in bulk quantities which also lower down the average sale price of the firm."
2.2 After considering the reply of the assessee, the AO rejected the trading results having recourse to provisions of section 145 of the Act on the ground that the assessee :-
6 I.T.A. no.1852/Del./2012
a) had not shown the sale bill of its items except in case of one party.
b) did not furnish the basis of applying sale rate.
c) had shown lower sale rate in the case of country liquor in contradiction with the policy of the state government.
d) made huge cash purchases and the parties from whom purchase are made are unavailable.
2.3 Accordingly, the AO added an amount of ``1,33,43,686/- (`82311195- 68967509.08).computed as under:-
Particulars Total qty Rate per Purchase Sale rate Sale amount Sale Sale amount in piece amount [In `] shown by shown by rate worked on the pieces purchase the the presc basis of MRP[In assessee assessee [In ribed `] [In `] `] by the govt.
[In `] Quarts 350436 15.50 5434678.30 50 17521800 55 19273980 (Bottle) Pints 709824 8.62 6125189.60 25 17745600 30 21294720 (Half) Nips 2782833 5.10 14209841.62 12.11 33700109.08 15 41742495 (Quarter) Total 25769709.52 68967509.08 82311195.00
3. On appeal, none appeared on behalf of the assessee before the ld. CIT(A) despite notice dated 20th October, 2011, 27th January, 2012 and 14th February, 2012 nor filed any written submissions. Accordingly the ld. CIT(A) concluded as under:-
"2. The appeal of the appellant was fixed for hearing on 29.11.2011 vide notice u/s 250 dated 20.10.2011. The notice was sent through speed post at the address given in Form No.35 filed on 27.01.2011. None attended on that date. On 27.01.2012 7 I.T.A. no.1852/Del./2012 another notice was issued fixing the appeal for hearing on 07.02.2012. This notice was also not complied with. Final notice dated 14.02.2012 has been issued through speed post, fixing the case for hearing on 29.02.2012. On this date also none attended nor has any application for adjournment been filed. No written submissions have been made in support of the appeal.
3. In CIT Vs. B.N. Bhattacharya (1977) 118 ITR 461 (Supreme Court), the Hon'ble Apex Court while dealing with the issue of prosecution of appeal has stated that "preferring any appeal means more than formally filing it but effectively pursuing it."
The Delhi Tribunal in CIT Vs. Multiplan India Pvt. Ltd. as reported in 38 ITD 320 (Delhi) when faced with a similar situation of non prosecution of appeal dismissed the appeal of revenue.
4. In the circumstances the appeal of the appellant is dismissed on account of non prosecution and no decision on merits is being given."
4. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A). At the outset, both the parties agreed that matter requires consideration by the learned CIT(A), there being no findings on merit of the additions nor the ld. CIT(A) passed a speaking order on the various issues raised before him. To a query by the Bench, the ld. AR submitted that none of the notices issued by the ld. CIT(A) were received by the assessee and that ld. CIT(A) was not justified in disposing of the appeal in a summary manner without allowing sufficient opportunity to the assessee.
5. We have heard both the parties and gone through the facts of the case. As is apparent from the facts of the case, none of the notice dated notice dated 20th October, 2011, 27th January, 2012 and 14th February, 2012 issued by the ld. CIT(A) appear to have been served upon the assessee nor the ld. DR placed before us any material regarding service of any of these notices. In these circumstances, the ld. CIT(A) dismissed the appeal without even analyzing the issues or recording his specific findings on the said issues raised in the grounds of appeal before him . This approach of the learned CIT(A) is not in accordance with law. A mere glance at the impugned order reveals that 8 I.T.A. no.1852/Del./2012 the order passed by the ld. CIT(A) is cryptic and grossly violative of one of the facets of the rules of natural justice, namely, that every judicial/quasi-judicial body/authority must pass reasoned order, which should reflect application of mind by the concerned authority to the issues/points raised before it. The application of mind to the material facts and the arguments should manifest itself in the order. Section 250(6) of the Act mandates that the order of the CIT(A) while disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for the decision. The requirement of recording of reasons and communication thereof by the quasi-judicial authorities has been read as an integral part of the concept of fair procedure and is an important safeguard to ensure observance of the rule of law. It introduces clarity, checks the introduction of extraneous or irrelevant considerations and minimizes arbitrariness in the decision-making process. W e may reiterate that a 'decision' does not merely mean the 'conclusion'. It embraces within its fold the reasons forming basis for the conclusion.[Mukhtiar Singh Vs. State of Punjab,(1995)1SCC 760(SC)]. It is well settled that reasons are the links between the material on record and the conclusion arrived at by the court and the appellate authority being a quasi judicial authority, the order passed by him should show that he has applied his mind and taken into consideration the basic requirements germane to the issue [V.N. Purushothaman vs. Ag.ITO (1984) 149 ITR 120 (Ker.)].
5.1 A Co-ordinate Branch in the case of Gujarat Themis Biosyn Ltd. vs. Jt.
CIT 74 ITD 339 (Ahd) ,in identical circumstances, observed as under:
"3. We have carefully considered the facts and circumstances of the case as well as submissions made before us. The impugned order passed by the CIT(A) is clearly violative of the express provisions of s. 250(6), which provides that the appellate orders of the CIT(A) are to state the points arising in the appeal, the decision of the authority thereon and the 9 I.T.A. no.1852/Del./2012 reasons for such decision. The underlying rationale of the provision is that such orders are subject to further appeal to the Tribunal. Speaking order would obviously enable a party to know precise points decided in his favour or against him. Absence of the formulation of the point for decision for want of clarity in a decision undoubtedly puts a party in quandary. Sec. 250(6) expressly embodies the principles of natural justice and such a provision is clearly mandatory in nature. The impugned order passed by the CIT(A) in violation of the provisions of s. 250(6) cannot, therefore, be sustained. Regarding the decisions of the Delhi Bench of the Tribunal in Multiplan India Ltd. (supra) cited by the learned CIT(A), we find that the said decision is clearly distinguishable. Sec 254 referring to the orders of the Tribunal confers plenary jurisdiction on the Tribunal in the matter of passing orders under s. 254(1). There is no such express stipulation in s. 254 as contained under the provisions of s. 250(6) relating to the orders of first appellate authority. Therefore, reliance placed by the CIT(A) on Multiplan India Ltd. (supra) is entirely misplaced. Similarly, the case of Late Tukojirao Holkar (supra) cited by the learned CIT(A) is distinguishable and does not support the view taken by the CIT(A).
For the reasons indicated above, we hereby set aside the impugned order of the CIT(A) and direct the CIT(A) to dispose of the appeal of the assessee afresh after allowing proper opportunity in accordance with law."
6. In view of the foregoing, especially when the ld. CIT(A) has not passed a speaking order on various issues raised before him ,we consider it fair and appropriate to set aside the order of the ld. CIT(A) and restore the matter to his file for deciding the issues raised in the grounds raised before him by the assessee, afresh in accordance with law, after allowin g sufficient opportunity to both the parties. Needless to say that while redeciding the appeal, the ld. CIT (A) shall pass a speaking order, keeping in mind, inter alia, the mandate of provisions of sec. 250(6) of the Act. The assessee shall suo motu approach the ld. CIT(A) within three months of the receipt of this order for expeditious disposal of appeal and shall not seek any adjournment without valid reasons.
7. No other plea or argument was raised before us.
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8. In the result, appeal is allowed but for statistical purposes .
Order pronounced in open Court
Sd/- Sd/-
(RAJPAL YADAV) (A.N. PAHUJA)
(Judicial Member) (Accountant Member)
NS
Copy of the Order forwarded to:-
1. Assessee.
2. Addl. C.I.T., Range-22, New Delhi
3. CIT concerned.
4. CIT(A), XXIII, New Delhi
5. DR, ITAT,'C' Bench, New Delhi
6. Guard File.
BY ORDER,
Deputy/Asstt.Registrar
ITAT, Delhi