Income Tax Appellate Tribunal - Jodhpur
Malu Khan & Party vs Dy. Cit on 1 November, 2004
Equivalent citations: [2004]1SOT281(JODH)
ORDER
Hari Om Maratha, J.M. The appeals as well as the cross objection arise out of the appellate order dated 28-4-1995 and pertain to assessment year 1989-90. For the sake of convenience, we are adjudicating all these by this common order.
2. The assessee deals in sale of country liquor and Indian Made Foreign Liquor (IMFL). The assessee filed return of income for assessment year 1989-90 on 6-12-1999 declaring an income of Rs. 1,58,52,264. While computing the assessment, the assessing officer made various additions and passed the assessment order from 27-3-1992. Feeling aggrieved by the assessment order, the assessee went in appeal before the CIT(A). The CIT(A) gave certain directions to the learned assessing officer to compute the income of the appellant/assessee de novo. Under these directions, the assessing officer again computed the assessment order which is dated nil and that the assessment order which was passed after the set aside of the earlier assessment order by the learned CIT(A), is the subject-matter before us now. Against this assessment order also, the assessee went in appeal before the CIT(A) who, in turn, partly allowed the grounds of appeal of the assessee. Now, both the assessee, as well as the department are in appeal before us against this appellate order.
3. First we will deal with the appeal of the assessee, in which the assessee has taken two main grounds of appeal. The first main ground of appeal is contained in ground Nos. 1 and 2. This ground relates to the addition sustained by the learned CIT(A) with regard to country liquor. The assessee has objected to the application of provisions of section 145 of the Income Tax Act, 1961 (hereinafter referred to as the Act).
4. We have heard the rival submissions as advanced by the learned Authorised Representative and learned Departmental Representative; perused the evidence on record and also considered the PB compilation filed by the learned Authorised Representative, alongwith the provisions and decisions relied before us.
5. The assessing officer made an addition of Rs. 70,000 after applying the provisions of section 145 of the Act and the same was confirmed by the CIT(A). The learned Authorised Representative Shri Suresh Ojha has submitted in oral as well as w/s that the pressing of the provisions of section 145 into service in the given facts and circumstances of this case are not warranted, particularly, when the assessee has been maintaining all the requisite records which include books of account as per the contract entered into between the assessee and the Government of Rajasthan. The learned Authorised Representative further submitted that the department has not been able to pin-point any particular instance by which it can he said that the books of account are not properly being maintained. For that, there are some defects in the accounts so maintained. On the other hand, the learned Departmental Representative Shri T.R. Chawla has supported the orders of authorities below in this regard and has further submitted that the applicability of provisions of section 145 are quite justified.
6. After careful consideration of the oral as well as w/s of both the learned representatives, and after going through the evidence on record, we are of the considered opinion that the applicability of the provisions of section 145 is not illegal in the given facts and circumstances of this case. As is usual in this line of business, the assessee has not been able to vouch the sale bills because of the nature where sale is made over the counter and that too, in cash at various places. We have been consistently holding in such cases, which are dealing in this line of business, that the applicability of the provisions of section 145 of the Act are quite justified, but at the same time, we have been holding that despite the fact that the provisions of section 145 are made applicable, the additions on this count cannot be sustained until and unless some specific defects or instances are pinpointed in the accounts of the assessee. In addition to that, when the assessee is able to justify the account books on the basis of its own past history as well as by comparing the results with similar or identical assessees who deal in same line of business, in a way we can say that there are two stages when of application of provisions of section 145 comes into picture. The first being the sheer and simple application of the provisions of section 145 and the second being the actual additions or in another words the practical applicability of the provisions of section 145 in this case. Similar to the other cases, we are holding that the application part of this section is justified but at the same time, unless the other part is proved by the department, it cannot be said that the department has been able to prove its case for making additions by adopting a particular gross profit rate or net profit rate.
7. The evidence before us reveals that the assessee has been maintaining all proper and relevant accounts. The only thing which the assessee could not provide to the department is the sales bills, which is not possible and pragmatic in this line of business. So, the applicability of section 145 of the Act is upheld but no additions can be made because the additions are not warranted in the given facts and the circumstances of the case.
8. The assessee-firm has shown sale of bottles alongwith liquor in Nagore area on 25-5-1988, in Churu areas such sales have been shown on 4-4-1988, 23-4-1988 and 10-5-1988. But in the case of Bikaner Branch, no such notings were made. So the assessing officer made ad hoc additions on these grounds.
9. The learned Authorised Representative has drawn our attention to pg. No. 1 of his PB wherein a comparative chart depicting sales, profits and g.p. rate for the years 1988-89 and 1989-90 has been placed. According to the learned Authorised Representative, during the year under consideration, the g.p. rate is shown at 68.94 per cent whereas in the assessment year 1988-89, which is the immediately preceding year, the g.p. rate shown is only 27.14 per cent. He has further submitted that the reason for this big difference in g.p. rate is because of the increase in sales by about Rs. 60 lakhs.
10. The other chart on the same page depicts the comparative analysis of expenses incurred towards general expenses, salary, shop rent and wages. From this, the learned Authorised Representative has tried to explain that these expenses are on the higher side for the current year. Even then, the g.p. declared is very very high, namely 69.94%. So, according to the learned Authorised Representative, the case of the assessee is genuine, fully explained and depending on clear and true facts.
11. So far as the tampering of day to day records, which is alleged by the department, is concerned, that has been fully explained in the letter replied to the department and according to us, this is not a specific instance which can justify the additions under the provisions of section 145 of the Act. These anomalies, over-writings noted by the assessing officer are fully explained by the learned Authorised Representative in its reply. The gross profit rate declared by the assessee for this year is comparatively very high when it is compared with the assessees case for the preceding year, and when it is also undisputed fact that all accounts are maintained in accordance with the guidelines and rules laid down by the Government of Rajasthan, in our opinion no addition is called for under the provisions of section 145 of the Act. So, in the country liquor account, on the basis of small overwritings and non-availability of sales bill, in the given circumstances where the sale of bottles is done over the counter at various places and that too by cash, it is not possible to maintain sales vouchers. The additions in this regard are only based on surmises and guess work by the department. No specific instance, which goes to the root of the matter, so as to justify the additions under the provisions of section 145 have been brought to our notice by the department. There is no reason why not to accept the evidence which could not be rebutted by the department. No evidence which is made on presumptions can be sustained. The onus to disprove the primary evidence produced by the assessee is heavily cast on the department. The suspicion, howsoever strong, cannot be made the basis for addition. Consequently, we accept ground Nos. 1 and 2 of the appeal of the assessee.
12. The next ground of appeal which is contained in grounds 3 and 4 of the appeal pertains to the second part of the line of business, namely IMFL account. In this account, the additions have been made by the department in the same way as it has been made in the case of country liquor as discussed above.
13. The assessee declared a g.p. rate of 3.68 per cent and the assessing officer applied g.p. rate of 5 per cent relying on the g.p. rate shown by contractors of Jodhpur and Hanumangarh at 10.10 per cent and 4.4 per cent respectively. The g.p. rate shown at Sriganganagar and Karanpur contractors was at 7 per cent.
14. It is true that the business of the assessee is spread in Bikaner area. The learned Authorised Representative has submitted that the rate applicable in Jodhpur and Sriganganagar cannot be applied to Bikaner which is a deep desert area and the people there are not rich as compared to the people residing in Jodhpur and Sriganganagar areas. The assessee declared g.p. rate of 3.8 per cent in the immediately preceding assessment year. Due to increase in the sale by 70 lakhs, there has been slight fall in the g.p. rate. The arguments of the learned Authorised Representative holds water that the slight fall in the g.p. rate is due to increase in the sales.
15. After considering all these facts in the light of the reasonings given in the case of the country liquor, we hold that the applicability part of section 145 technically, is justified, but no pragmatic additions are called for in this account as well. The assessee declared g.p. rate of 3.88 per cent in the preceding assessment year and 3.68 per cent during this year. Admittedly, the sales have increased by 70 lakhs. So the g.p. rate has to be slightly lowerand the same is quite justified. So we do not find any prudent reason to interfere in the g.p. rate declared by the assessee. Only in case when one wants to increase such g.p. rate he can do it on surmises, conjectures and guess work which cannot be sustained in the eyes of law. Since there is no evidence on record to justify any addition to be made when proper accounts are maintained, in such like circumstances, this Tribunal, in the case of this assessee only, for the subsequent years, namely 1990-91 and 1991-92 has held that no additions can be made in this account. The order of the Tribunal in ITA Nos. 803 and 804/Jp/94 in the case of this assessee only which is dated 16-1-2001 has also taken the same view as we have taken now. As a result, we get full support from the findings of the Tribunal from the above order. So the applicability of section 145 of the Act is only limited to the extent as we have discussed above. But no additions are called for. As a result, we accept these grounds of assessee, namely ground Nos. 3, 4 and 5.
16. Now we will deal with the appeal of the department in ITA No. 1475/Jp/95. The department has raised, in all, four grounds of appeal which are contained in ground Nos. (i) to (iv) which are reproduced below :
On the facts and in the circumstances of the case, the learned CIT(A) has erred in :
(i) deleting the addition of Rs. 1,00,000 made in the country liquor profit & loss account,
(ii) deleting the disallowance of Rs. 10,000 made out of shop expenses in IMFL,
(iii) deleting the disallowance of Rs. 50,000 made out of freight & octroi in IMFL,
(iv) deleting the addition of Rs. 25,000 made for unexplained cash credit under section 68 in IMFL.
17. All these reliefs which are the subject matter of this appeal of the department and contained in the above grounds of appeal were not decided by, the learned CIT(A) on merits. The learned CIT(A) has disposed of all these additions by holding that once the provisions of section 145 are applicable and addition is made in the trading account, there is no justification for making separate disallowances/additions. Therefore, the learned CIT(A) deleted all the additions in question, now, without deciding these issues on merits. Since we have deleted the trading additions which were added by the learned CIT(A) in the assessees appeal, it is desirable on our part to restore back these issues to the file of the learned CIT(A) with the direction that he shall decide these grounds on merits. This Tribunal being the Final Fact Finding body, has to get full and final facts before coming to any final conclusion.
18. As a result, we restore back all these grounds, to the file of the learned CIT(A). These grounds of appeal are accepted for statistical purposes. However, the learned CIT(A) is directed to give clear opportunity of hearing to the assessee before deciding these grounds.
19. The C.O. is in support of the learned CIT(A)s order. In view of our above findings with regard to the departments appeal, the CO is disposed of accordingly. Since we are setting aside all these grounds to the file of the learned CIT(A) to be decided on merits, the assessee has full opportunity of placing its case before the learned CIT(A) in this regard. We order accordingly.