AI Drafter 
TaxTMI 
TaxTMI 
2019 (5) TMI 945
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....Ld.CIT (A) was justified in not upholding the rejection of books of accounts in spite of specific defects pointed out in the assessment order and deleting the addition of Rs. 3,09,63,422/-. (2) Whether on the facts and in the circumstances of the case, Ld.CIT (A) was justified in restricting the addition of Rs. 3,09,95,390/- made on account of suppression of sale to Rs. 31,968/- allowing relief of Rs. 3,09,63,422/- without taking into consideration that suppression of sales has been logically derived by AO by taking into consideration the duties on purchases and other factors as mentioned in assessment order. (3) Whether on the facts and in the circumstances of the case, Ld.CIT (A) was justified in deleting the addition of Rs. 13,97,442/- made on account of undervaluation of closing stock without appreciating the fact that huge breakage of bottles is not possible as the assessee has mainly purchased goods in plastic bottles and as such there cannot be breakage of such a large number of bottles and no supporting evidence given by the assessee for the claim. The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date;....
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....ed for scrutiny and notice u/s 143(2) and 142(1) were duly served. During the course of assessment Ld. A.O observed that the assessee has disclosed the net profit @ 3.4% of the total turnover as against 3.17% shown in the immediately preceding assessment year. On examining the books of accounts as well as the documents placed before him he noticed that various purchases and sale bills were not produced, no regular sale bills are issued which makes the verification of sale difficult. In absence of sale bills Ld. A.O took the basis of MSP (Maximum Sale Price) and MRP (Maximum Retail Price) mentioned on the label of bottles to compute the sales. Quantity of liquor was taken from the document of Excise Department showing the goods purchased by the assessee. Ld. A.O also observed certain anomalies relating to entry of purchase in the books of accounts and he also challenged the valuation of closing stock being made incorrectly. He accordingly on the basis of following observations rejected the books of accounts and applied provisions of Section 145(3) of the Act:- 1. The assessee has not maintained sale bills and in absence of sale bills correct sales are not verifiable. ....
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.... 1. The assessee is an individual deriving income from sale and purchase of liquor. The return of income has been filed declaring the income of Rs. 38,94,6101-. The accounts are audited and the TAR is filed. The total sales during the year has been shown at Rs. 23.62 crores with a gross profit of Rs. 2.17 crores which comes to 9.220/0 and the net profit is shown at 3.9. 1. The detailed procedure of the business is enumerated hereunder: a. The tenders are floated for the group shops which are allotted to the highest bidder. The tenders are also renewed with an increase of 15 every year. b. The shops of foreign liquor and country liquor are grouped separately and the amounts payable are determined as per the allotment of group shops. c. After getting the tender or the renewal of the licence (a) 10 of the amount is deposited as the initial amount for the 0.::of the shop (Dharohar Rashi). (b) 90 of the balance amount is divided into 24 parts and is payable every fortnightly. (c) 45 i.e. half the amount is paid as basic license fees which is fixed against which the goods are not delivered. (d) 45 i.e. half the amount is p....
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....has right to levy the fine and even to close down the shop. 4. While framing the assessment the Ld. A.O. calculated the sale price and applied the sale rate for the month of April, May and June which fetches a better price because of marriage season and harvesting of crop. The Id. A.O. applied the thumb rule on the assumption that the assessee has sold the goods at 15 above the MSP and made the addition of Rs. 1,15,53,323/_ for foreign liquor. Similarly, he has calculated the sale of country liquor by adopting 15 of MSP and made the addition of 3,03,91,278/-. For IMFL spirit he has adopted the sale rate at 15% above MSP and made the addition of Rs. 1 ,92,21,773/-. Thus, the total addition is made at Rs. 6,16,66,374/-. The Ld. A.O. further disallowed the breakages and shortages claimed by the assessee at Rs. 12,85,423/- on the ground that these shortages are not mentioned in the audit report. This addition has been made for undervaluation of stock assuming the full quantity of stock is available with the assessee. 5. The Ld. CIT(A) after considering the submissions of the assessee and after discussing the trade practice of selling the goods below the MSP observed that ma....
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....We have heard rival contentions and perused the records placed before us. Revenue has raised two common grounds firstly challenging the deletion and addition of suppressed sales and secondly for deleting the addition of undervaluation closing stock. 14. We will first take up Ground No, 1 & 2 of the revenue wherein the revenue has challenged the finding of Ld. CIT(A) not upholding the rejection of books of accounts and deleting the addition for suppressed sales of Rs. 3,09,63,442/-. 15. Ld. CIT(A) deleted the addition for suppressed sale of Rs. 3,09,63,442/- observing as follows; "4.1 Ground No.1: Through this ground of appeal the appellant has challenged the addition of Rs. 3,09,95,390/- on account of suppression of sale. I have gone through the assessment order and reasons brought out by the AO. The AO has stated that the appellant has made the sale of liquor below the m1l11mUm sale price on presumptive basis particularly when the books of account are duly maintained and audited by the auditor u/s 44AB. Moreover, the AO has not pointed out any specific defects in the books of accounts. The AO failed to point out any discrepancy in quantitative details of sale and pu....
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....se of assessment proceedings and no defects have been pointed out by the AO. By merely non-issuance of sales bills it cannot be presumed that the appellant has suppressed the sales. Most of the time liquor vendors indulging in the sale of liquor below minimum sale price (MSP). It is a common practice to sale the liquor below MSP because of the competition in the market. In most of the cases the excise department has imposed the penalty for indulging in the sale of liquor below MSP. Although the prohibition of sale below MSP and above MRP as per the licensing condition may be true but the fact that liquor contractors in the State sell the liquor even below the MSP is also equally true and is a matter of fact. In fact the sale of liquor below MSP, if noticed by the State Excise authorities is merely an irregularity and in such case, the license of the concerned contractor is liable to be suspended minimum for a period of 3 days and maximum for one week and in case of violation for more than once, the license for remaining period of year can be cancelled. The liquor contractors under the conditions of license are required to purchase minimum guaranteed quantity of liquor which is the ....
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....ported in (2016) 28 IT J 295 , where the IT AT after considering the position of strict regulation and condition over the country liquor contractor under the provisions of law and after considering the facts that regular books of accounts were maintained which is duly audited and in view of fact no discrepancy in any manner in the quantitative details maintained was found by AO, has, held that there was no justification in rejection of books of accounts and application of provisions of section 145(3). The ITAT also held that estimation of sales at higher figures are not justified and held that NP Rate of l. 77 was reasonable. 2. ACIT v/s Surewin Marketing Pvt Ltd reported in (2016) 28 ITJ 299. In that case also the ITAT disapproved the rejection of books of accounts in absence of any discrepancy in quantitative details of sales and purchases. The ITAT upheld the view of CIT (A) that the purchase of liquor was on the basis of permit granted by Excise authorities and in absence of any adverse finding or in absence of any discrepancy in daily sales recorded and in particular in absence of any material to show that the assessee was indulged in' effecting sales outside the ....
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....the customer is always in hurry to purchase the goods and is hardly interested in taking the sales bills. However regular quantitative details are maintained for the opening stock, purchases, sales and closing stock. Ld. A.O has rejected the books of accounts merely on the observation that sale bills are not prepared which makes it difficult to verify the actual sales and there is always the possibility that assessee sales goods at a higher price but records at lower price in the books. Ld. A.O made the addition for suppressed sales at Rs. 3,09,95,390/- riding on these observations. 17. We observe that no specific instance has been pointed out by the Ld. A.O about any transaction which could prove that the assessee had suppressed the sales by way of receiving higher amount for sales but entered the figure on lower price in the books of accounts. The basis taken by the Ld. A.O is the MSP and MRP. No weightage has been given by the Ld. A.O that the goods are not always sold on MRP due to competition which forces to make sale at lower price. Gross Profit rate remains consistent. Books of accounts have been duly audited. Quantitative details of various qualities of goods have bee....