Rajasthan High Court - Jaipur
C I T vs Rajaram Jaidev on 31 January, 2014
Author: Ajay Rastogi
Bench: Ajay Rastogi
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR JUDGMENT *** DB Income Tax Appeal No.37/2005 CIT Vs. M/s. Rajaram Jaidev & party & connected appeals as per Schedule-A appended to this judgment. Date of Judgment : 31/01/2014 HON'BLE MR. JUSTICE AJAY RASTOGI HON'BLE MR. JUSTICE J.K. RANKA Smt. Parinitoo Jain ] Mr. RB Mathur ] Mr. Nikhil Simlote ], for the revenue. Mr. PK Kasliwal ] Mr. Naresh Gupta ], for the assessees. BY THE COURT (Per Hon'ble Ranka, J.)
1. These Income Tax Appeals u/Sec. 260A of the Income Tax Act, (for short, IT Act') are directed against the orders of the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur (for short, 'ITAT'). Most of the appeals have been preferred by the revenue while in some of the cases, the assessees have also chosen to file appeals.
2. Since a common substantial question of law is involved in the bunch cases relating to liquor contractors, all these appeals are being disposed of by this common order with consent of the parties.
2-A In DB ITA No.37/2005 & 125/2005 following substantial questions of law were framed by the Court:
Substantial question of law in DB ITA No.37/2005 (Assessment Year 1997-98):
(1) Whether in the facts and circumstances of the case, the ITAT and CIT(A) were justified in law in restricting the addition without assigning any reasons when the invoking of the provisions of section 145 of the Act has been upheld?
(2) Whether in the facts and circumstances of the case, the ITAT has not acted perversely in reducing and restricting the trading additions without assigning any reasons and making estimation over estimation.?
Substantial question of law in DB ITA No.125/2005 (Assessment Year 1997-98):
(1) Whether in the facts and circumstances of the case the ITAT and CIT(A) were justified in law in restricting the additions without assigning any reasons when the invoking of the provisions of section 145 of the Act has been upheld?
(2) Whether in the facts and circumstances of the case, the ITAT & CIT(A) has not acted perversely in reducing and restricting the trading additions without assigning any reasons and making estimation over estimation.?
3. The undisputed facts are that the assessees are liquor contractors and were awarded license by the State of Rajasthan for sale of Indian made country liquor (IMCL) under Rule 67(1) and 67(kk) of the Rajasthan Excise Rules, 1956 so also the retail sale of Beer and Indian made foreign liquor (IMFL) under Rule 3-A of Rajasthan Foreign Liquor (Grant of Wholesale and Retail) Sale License, Rules, 1982 under exclusive privilege system for different places. In some of the cases, the assessees had formed Association Of Persons (AOP) and obtained license/contract to sell the liquor as aforesaid exclusively. The licenses were obtained by successful bidders and other than these licensees, no other person was permitted to sale the liquor which is a prohibited commodity.
4. In the State of Rajasthan contracts for wholesale and retail sale of liquor are awarded separately by the Excise Commissioner for a fiscal year after obtaining tenders from the registered contractors and it comes somewhere in the month of January/February of the preceding fiscal year for contract of the next financial year and by and large, the business begins from 1st of April and ends by 31st of March of the next year.
5. By and large, the revenue district is divided into various groups of shops, known as liquor group after combining two or more tehsils or areas of tehsils of a district. While in retail, sale of particular liquor group of shops can only operate and for wholesale: sale of liquor is awarded to a licensee for whole of the Rajasthan. In some cases, the liquor contract is awarded for two years consecutively with some increase in guarantee amount in the second year of contract. Profitability in liquor business depends on several factors like socio economic condition, literacy, drinking habits of population of area of operation. If the area is prosperous from agricultural, industrial and commercial point of view, there is likelihood to be more consumption of all kinds of liquor. If it is urban area, then there will be more consumption of IMFL and Beer.
6. This Court, in bunch of identical cases relating to liquor contractors , CIT Vs. Ram Singh & others (DB Income Tax Appeal No.117/2004 & other connected cases), after considering the issue at length, decided the similar controversy vide Judgment dt.21/01/2014 holding that the orders of the ITAT, being stereo-typed, non-speaking, unreasoned, arbitrary and whimsical, there was no option except to remand the matter to the ITAT to revisit the issue afresh denovo in accordance with the guidelines, referred to therein. We shall refer to the order of the CIT(A) as well as ITAT a little later.
7. Counsel for the revenue submitted that in all these appeals, the orders have been passed by the ITAT in stereo-typed manner without referring to even contentions raised by the either side and in a routine and perfunctory manner, order has been passed and fully supported the judgment rendered by this Court in the case of CIT Vs. Ram Singh (supra).
8. Ld. counsel for the assessees, on the other hand, submitted that once the CIT(A) gave detailed order elaborating the submissions raised by both the sides and when order of the CIT(A) is detailed and when the matter was before the ITAT and the ITAT has simply affirmed the view of the CIT(A), then no reasoning was required by the ITAT. They, however, candidly agreed that the provisions of Sec.145(3) are applicable as has been held by the CIT(A) and that finding has been affirmed by the ITAT but they contended that while even the AO made estimates so also the CIT(A), and the ITAT had no option but to agree with the estimate made by the CIT(A), a higher appellate authority and accordingly supported the order of the ITAT.
9. Shri Naresh Gupta not only relied upon the order rendered by the ITAT but also submitted that in this very bunch of cases, this Court, in the case of CIT Vs. M/s. Mahendra Kr. Tiwari & party (DB ITA No.136/2005), when the matter was at the stage of admission, dismissed the appeal of the revenue vide order dt. 31/07/2007 holding that the finding of the Tribunal in up-holding the view of the CIT(A) is a finding of fact and does not give rise to any question of law much less a substantial question of law.. Therefore, he contended that this Court has found that it is a pure finding of fact and even in this very bunch one case was decided by this Court and, as such, on parity of reasoning, it should also be held to be a finding of fact because ultimately the ITAT has applied an estimate though may have upheld the finding of the CIT(A) and on estimates, it cannot be said that substantial question of law arises. He further contended that review application was also moved in this very case (CIT Vs. Mahendra Kumar Tiwari) (supra) and this Court vide order dt.02/07/2012 even dismissed the review petition and therefore, submitted that the judgment of this Court has become final. He also relied upon the judgments in the case of CIT Vs. Pilliah and Sons (K.Y.): (1967) 063 ITR 0411; CIT Vs. Global Vantedge P. Ltd.: (2013) 354 ITR 0021; Indo-Burma Petroleum Co. Ltd. Vs. CIT: (1980) 124 ITR 0719; Jessaram Fatehchand (R.B.) (Sugar Dept.) Vs. CIT: (1970) 075 ITR 0033; Sahibuddin and Sons Vs. CST: (1976) 38 STC 47 (All.); CIT Vs. Raman (A.) & Co. (1968) 067 ITR 0011; Ramchandra Ramnivas Vs. State of Orissa: (1970) 25 STC 501 (Orissa); CIT Vs. Saddruddin Hussain: (2003) 263 ITR 677; Kansara Bearings P. Ltd. Vs. ACIT: (2004) 270 ITR 235; CIT Vs. Dr. A.P. Bahal: (2010) 322 ITR 0071; Ashoke Refractories P. Ltd. Vs. CIT: (2005) 279 ITR 0457; CIT Vs. Gotan Lime Khanij Udhyog: (2002) 256 ITR 0243; CST Vs. Pilot Shoe Factory: (1977) 39 STC 95 (All) and on the above proposition, submitted that on mere estimates, no question of law arises.
10. We have considered the arguments advanced by counsel for the parties and have also gone through the judgments referred to by the counsels including the impugned orders.
11. Before we proceed further, it would be appropriate to quote finding of the CIT(A) as well as ITAT in two of the appeals out of this bunch (DB ITA No.37/2005) , which is reproduced ad-infra:-
CIT(A) :-
I have gone through the various orders of the ITAT and the CIT(A) and the general trend adopted by all these Appellate Authorities was that a lump sum addition for any possible leakage of the revenue had been made. The A.R. has quoted cases where lesser G.P. Rate has been accepted. Considering the facts and circumstances of the case, in my view a lump-sum addition of Rs.3,00,000/- will be sufficient and reasonable. The appellant will get a relief of Rs.19,69,936/-
ITAT:-
After hearing both the parties and on perusal of material available on record, it appears that both lower authorities made/restricted the additions on estimate basis after applying section 145 for the reasons mentioned in the AO's order. However, by looking to the line of trade, the additions sustained by the CIT(A) are still looking on higher side. Therefore, we modify both the orders of the lower authorities and restrict the additions as under:-
Appeal No. Addition Addition Relief No. sustained sustained By CIT(A) by Tribunal
------------ ------------ -------------- -----------
ITA 576/98 3,00,000/- 2,00,000/- 1,00,000/-
ITA 575/98 1,00,000/- 75,000/- 25,000/- ITA 581/98 2,00,000/- 1,50,000/- 50,000/- ITA 740/98 2,00,000/- 1,50,000/- 50,000/- ITA 580/98 3,00,000/- 2,00,000/- 1,00,000/- ITA 577/98 1,00,000/- 75,000/- 25,000/- ITA 578/98 1,50,000/- 1,00,000/- 50,000/- ITA 582/98 75,000/- 50,000/- 25,000/- ITA 579/98 2,00,000/- 1,50,000/- 50,000/- ITA 518/98 4,00,000/- 3,00,000/- 1,00,000/-
Thus the assessees will get further adhoc relief as mentioned above. When we have given further relief to the assessee from the orders of the CIT(A), then the ground taken by the department has become infructuous. So the ground taken by the department is dismissed and ground taken by the assessee is partly allowed in all the appeals.DB ITA No.125/2005
CIT(A):-
I have gone through the various orders of the ITAT and CIT(Appeals) in respect of similar cases of the liquor contractors and it is noted that generally a lumpsum addition for any possible leakage of revenue had been made. Considering the facts and circumstances, in my view, a lump sum addition of Rs.2,00,000/- will be sufficient and reasonable. The appellant will get a relief of Rs.10,35,599/-.
ITAT:-
We heard both the parties and gone through the material available on record from which it appears that the assessee-AOP is the licence holder for retail sale of Country Liquor, IMFL & Beer etc. For the reasons mentioned in the orders of the AO, we uphold the applicability of section 145. The AO made the additions on estimate basis. The CIT(A) has also restricted the addition on estimate basis.
In the facts and circumstances of the case, the orders of the CIT(A) appears more reasonable for the reasons mentioned in his orders. Therefore, we decline to interfere with the orders of CIT(A) which are hereby upheld alongwith the reasons mentioned therein.
12. Thus what we notice from the above is that the ITAT, without any reasoning either further gave relief or sustained the order of the CIT(A) without application of mind and even without referring to the contentions raised on either side. In so far as the submission of counsel for the assessees that in one of the cases (CIT Vs. Mahendra Kr. Tiwari) (supra), this Court has held it to be a question of fact needless to mention that this Court vide order dt.31/07/2007 had specifically observed in Para No.8 as under:-
By way of foot-note, we may observe that we asked the counsel for the revenue as to whether in any of the Income Tax Appeals preferred from the group of Income Tax Appeals decided by the Income Tax Appellate Tribunal on 20.10.2004 i.e. impugned order, any substantial question of law has been framed and appeal admitted by this Court, the answer was in the negative.
13. As reveals from the record, counsel for the revenue was not able to lay hands on the similar other appeals already having been admitted as a substantial question of law by this Court earlier and therefore, the Court, by way of the above foot note, observed in such a manner. It may be pointed out that in the earlier bunch of cases, decided by this Court vide order dt. 21/01/2014, most of the appeals were admitted by this Court prior to the order of this Court dt.31/07/2007 in Mahendra Kumar Tiwari (supra). Even the present appeal (CIT Vs. Rajaram Jaidev & party) DB ITA No.37/2010, was admitted on substantial question of law by this Court as early as on 01/03/2005 and for ready reference, we again quote the substantial question of law, which was admitted by this Court on 01/03/2005:-
Substantial question of law in DB ITA No.37/2005:
(1) Whether in the facts and circumstances of the case, the ITAT and CIT(A) were justified in law in restricting the addition without assigning any reasons when the invoking of the provisions of section 145 of the Act has been upheld?
(2) Whether in the facts and circumstances of the case, the ITAT has not acted perversely in reducing and restricting the trading additions without assigning any reasons and making estimation over estimation.?
14. Therefore, in our view, the judgment passed by this Court in the case of CIT Vs. Mahendra Kumar Tiwari (supra) is per-incurium as counsel for the revenue while hearing of the aforesaid appeal on 31/07/2007 was unable to lay hands or to convince the Court that similar appeals on similar questions have already been admitted by this Court earlier.
15. The other judgments, cited by ld. counsel for the assessees, are judgments where the questions have been answered at the stage of admission or on other points whereas in the bunch of cases, decided by this Court on 21/01/2014 and the present bunch as well, the questions were admitted as substantial question of law and, therefore, distinguishable.
16. This Court in the case of CIT Vs. Ram Singh (supra), after elaborate discussion and referring to the order of the ITAT, has ultimately observed in Para No.38 ad infra:-
38. On perusal of the above, orders it as apparent and patent that the ITAT has not even recorded the arguments advanced by the parties nor has it come out with the discernible basis as to why adhoc stated addition has been sustained. There is no recording of facts and there is no discussion about any comparable cases or the past history or working for the adhoc addition and deletion. There is no reason assigned as to why Tribunal does not agree with the finding recorded by AO or CIT(A). We fail to understand as to how Tribunal has arrived to a conclusion in confirming, enhancing, reducing or deleting the estimation of income arrived at by CIT(A) & AO. The Tribunal is supposed to set out reasons in support of its decision by narrating full facts and discussing the issues in detail so that the person aggrieved knows why it has come to a particular conclusion.
17. The principles fully hold the present cases also. In the entire order, reproduced supra in para-11 the Tribunal has not recorded any finding of fact and no reasons are assigned as to why the Tribunal does not agree with the finding recorded by the AO or CIT (Appeals) as the case may be and in our view, the present cases are also of the similar nature as has been decided by this Court in the case of CIT Vs. Ram Singh (supra).
18. Resultantly, the present bunch of cases are also identical to the bunch decided on 21/01/2014 (DB ITA No.117/2004, CIT Vs. Ram Singh) and this Court has also referred to judgments rendered by the Apex Court in the case of Kranti Associates (P) Ltd. Vs. Masood Ahmed Khan: (2010)9 SCC 496 where the Hon'ble Apex Court has desired what an authority whether administrative, quasi-judicial or judicial has to function and even guidelines have been given as to how the orders are required to be passed by judicial or even quasi-judicial authorities. This Court has also considered the findings recorded by the Karnataka High Court in CIT Vs. Gauthamchand Bhandari reported in (2012) 347 ITR 491.
19. Accordingly, we are also of the view that it is no doubt true that in an order of affirmation, repetition of the reasons elaborately may not be necessary but even then the arguments advanced/points urged deserves to be dealt with. Reasons for affirmation have to be indicated, though in appropriate cases they may be briefly stated. Recording of reasons is part of fair procedure and reasons are harbinger between the mind of the maker of the decision in the controversy and the decision or conclusion arrived at and they always substitute subjectivity with objectivity and as observed in Alexander Machiniery (Dudley) Ltd. Crabtree, 1974 L.C.R. 120, failure to give reasons amounts to denial of justice and this is what was also abserved by the Apex Court in 2005 (2) SC 329 Mangalore Ganesh Beedi Works Vs. CIT & Anr.
20. We find the orders of the ITAT being stereo typed, non-speaking, unreasoned, arbitrary and whimsical, and we have no option except to remand the matter back to the ITAT to re-visit the issue afresh de-novo in accordance with the guidelines, referred to herein above and as summarized herein above.
21. Resultantly, in our considered view, all the impugned orders passed by the ITAT, wherein appeals (Schedule-A) have been filed either by the revenue or by the assessees cannot be sustained in the eyes of law and are hereby quashed & set aside to be decided afresh and de-novo in accordance with law. We also direct the ITAT to decide all the matters expeditiously but in no case later than six months from the date parties are called upon to put their appearance before the ITAT. However, it is made clear that the ITAT may not be influenced/inhibited by any of the observations, referred to herein above and may decide independently on merits in accordance with law. Parties are directed to appear before the ITAT on 24/03/2014. No costs.
[J.K. RANKA],J [AJAY RASTOGI],J.
Dsr/Raghu/p.15/
Schedule A to Judgment in
Income Tax Appeal No.37/2005
CIT Vs. Rajaram Jaidev & Party
S. No.
Income Tax Appeals
Title
1
37/2005
CIT Vs. Rajaram Jaidev & Party
2
125/2005
CIT Vs.Rajendra Singh Bhandari & Kishan Sharma & Party
3
126/2005
CIT Vs. Shiv Kumar & Party
4
127/2005
CIT Vs. M/s Budha Ram Makhan Lal & Party
5
128/2005
CIT Vs. M/s. Radha Devi Purshottam Agarwal & Party
6
129/2005
CIT Vs. Rajendra Singh Bhandari & Kishan Sharma & Party
7
131/2005
CIT Vs. Trilok Chand & Party
8
133/2005
CIT Vs. Bhullan Singh & Party
9
134/2005
CIT Vs. Ram Prakash & Party
10
135/2005
CIT Vs. M/s. Raja Ram & Party
11
137/2005
CIT Vs. M/s. Mahendra Singh Bhandari & Roop Narain & Party
12
146/2005
CIT Vs. M/s Mahendra Singh Bhandari & Kishan Sharma & Party
13
294/2005
Babuddin & Party Vs. CIT
14
902/2008
Babuddin & Party Vs. CIT
15
417/2009
CIT Vs. M/s. M/s. Balaji Wines
(J.K. Ranka), J. (Ajay Rastogi), J.
Certificate:All corrections made in the judgment/order have been incorporated in the judgment/order being e-mailed.
/Raghu, Sr. PA