TaxTMI 
TaxTMI 
2013 (6) TMI 473
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....shown by other assessee of same very trade, after taking into consideration the above, trading results shown by the assessee is liable 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 and 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 on 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 :- "Whether on the facts and in the circumstances of the 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. ....
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.... to ascertain whether the above quantity is correct. In the case of Country Liquor business in MP State, the licence fee (Excise duty) is determined shop-wise and charged @ 105 per bulk litre in the case of Masala and Rs.70/- per bulk litre in the case of plain. Applying this issue price, the total corresponding license fee chargeable with respect to above quantity 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 fee (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. noticed that the assessee disclosed quantity of country liquor to the extent of licence fee of R....
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....that the assessee declared agricultural income of Rs.12,10,310/-. 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 from other sources and rest of the amount Rs.7,26,186/- was accepted from the agricultural 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. 12. The CIT(A) restricted the addition to Rs.1,86,54,659/- 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 seen that AO has made the addition of Rs.7,14,40,512/- on account of difference of suppressed income from liquor business taking the highest difference of suppressed sales which has been determined by applying 20% G.P. rate over cost whereas the policy approved by the State Governament mentions it to be 10%. A.O. has determined suppressed sales &....
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.... order of A.O. in respect of agricultural income and in respect of addition under section 68 of the Act. 15. The ld. Authorised Representative submitted that the A.O. and CIT(A) both have estimated the income by applying the mathematical formula without considering all the relevant facts of the case. Ld. Authorised Representative submitted that the assessee is selling country liquor 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 Representative submitted that the A.O. has applied rates as informed by DEO of one shop at Shivpur 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 climate and season. The ld. Authorised Representative submitted that the A.O. and CIT(A) both have ....
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....elied upon the order of the A.O. 20. We have heard the Ld. Representatives of the parties and records perused. The admitted facts of the case are that the assessee did not produce books of account. To examine the issue, we would like to refer 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 sources" shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official 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 about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144.]" 20.1 It is to note that under....
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....thod of accounting regularly employed, 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 which had been produced in the case had been accepted and acted upon by the department and no serious challenge had been made to their genuineness 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 entries and the correctness thereof under section 34 of the Evidence Act" 20.3 Section 145 of the Act provides that if assessee does not satisfy the condition of section 145 of the Act, the A.O. may make assessment in the manner provided under section 144 of the Act. In the case under consideration, 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 239 (SC) State of Kerala vs C. Velukutty as under :- "What is the scope....
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....t. The limits of the power are implicit in the expression "best of his judgment". Judgment is a faculty to decide matters with wisdom truly and legally. Judgment does not depend upon the arbitrary caprice of a judge, but on settled and invariable principles 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 reasonable 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 authority to function capriciously without regard for the available material. Can it be said that in the instant case the impugned assessment satisfied the said tests ? From the discovery of secret accounts in the head office, it does not necessarily follow that a corresponding set of secret accounts were maintained in the branch office, though 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 have kept parallel accounts, as duplication of false accounts would facilitate discovery....
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....e of G.P. in both types of goods IMFL and country liquor, such procedure is not accepted procedure. Therefore same is not acceptable. A comparative position of purchases declared by the assessee and estimated by the A.O. are a under:- Purchases As per assessee 30,24,42,832 As per A.O. 39,79,70,320 20.5 The assessee did not accept the purchases estimated by the A.O. on following grounds:- (Page no.22 of CIT(A) "(i) AO is not justified in mentioning that the appellant has not submitted the relevant details during the assessment proceedings when the AO himself has determined sales and profit on the basis of details submitted form time to time and as asked for by the A.O. (ii) AO has considered the total duty, including basic duty of 8%, for the purpose of determination of sales. (iii) AO has collected the information from DEO, Shivpuri, Ashok Nagar & Sheopur and has relied heavily on information 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 opernadi of his business in the year under appeal as compared to e....
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....nnot be estimated. The A.O. made the addition of entire/gross sale whereas Hon'ble 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 entire sale proceeds of the assessee cannot be added to the income, only net profit is to be added. Thus, the A.O's finding is contrary to finding of judgement of Hon'ble M.P. High Court. The CIT(A) on one hand rejected the working of estimation 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 judgement one should have reasonable nexus to the available material and circumstances. In the case under consideration, both A.O. and CIT(A) have ignored the past history of the assessee. A comparative trading result furnished by the assessee 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 Afterdeduction of intt. & expenses related to the Liquor Business Net Profit ....
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....70,000/- is added back to the income of the assessee out of agricultural income, treating it as income from other than agricultural income." 23. We have heard the ld. Representatives of the parties and records perused. Since the A.O. himself has accepted the agricultural 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 calculate 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 Rs.31,21,887/-. The A.O. made the addition as the assessee failed to furnish details including PAN etc. The CIT(A) confirmed the order of A.O. observing that the assessee has failed to file the requisite details. 25. We have heard the ld. Representatives of the parties and records perused. The ld. Authorised Representative submitted that the asses....