TaxTMI 
TaxTMI 
1995 (8) TMI 89
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....chased country liquor under L-13 licence from the distillery and, thereafter, the stock was transferred to self, as L-14 business. The following purchases and sales were disclosed : ---------------------------------------- Licence Purchase Sales ---------------------------------------- Rs. Rs. L-2 78,09,512 1,22,56,766 L-13 39,26,472 42,16,343 L-14 42,15,831 1,43,22,178 ---------------------------------------- The Assessing Officer noticed during the assessment proceedings that day-to-day sale vouchers as well as the sale register had not been maintained by the assessee. There was no day-to-day stock register. Certain figures were not reconciled in respect of the stock tr....
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....uor. Return of income had been filed declaring total income at Rs. 16,820. Here also, the firm held three licences, namely, L-2, L-13 and L-14. Stock was obtained from the distillery under L-13 licence and then it was transferred to self under L-14 licence for retail sales. The AO did not disturb the profit shown by the assessee under L-13 licence on the ground that proviso to section 44AC was applicable and, therefore, no addition it was made. Addition of Rs. 1,10,000 was made in respect of sales under L-2 licence and second addition of Rs. 1,90,000 was made for sales under L-14 licence. The CIT(A) reduced the addition from Rs. 1,10,000 to Rs. 50,765 in respect of L-2 business of the assessee. She adopted the profit rate of 1% on the total sales shown at Rs. 50,762 under L-2 licence. Profit from sales under L-14 licence was, however, increased from Rs. 1,90,000 to Rs. 4,46,776. Here also, profit rate of 40% was adopted on the purchase price of Rs. 11,16,942. This is how section 44AC was applied. 6. The following purchases and sales had been shown by the assessee under different licences :- --------------------------------------- Licence Purchase....
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....ction 44AC did not bar a regular assessment of the business income of the assessee in accordance with sections 28 to 43C. This decision was followed by the Punjab and Haryana High Court in the case of Sat Pal & Co. v. Excise and Taxation Commissioner [1990] 185 ITR 375. It was held that instead of striking down section 44AC, it is better to read it down as an adjunct to sections 28 to 43C. The jurisdictional High Court also examined the applicability of section 44AC in detail in the case of Gian Chand Ashok Kumar & Co. v. Union of India [1991] 187 ITR 188 (HP). It was held that L-13 licensees came within the purview of the proviso to section 44AC(1)(a) of the Income-tax Act and the provisions of section 206C and other parts of section 44AC(1) did not apply to them. The ld. counsel for the assessee has vehemently argued that the issue stands finally settled by the decision of the jurisdictional High Court and there was no question of income being assessed adopting the profit rate specified in section 44AC of the Income-tax Act. Our attention has also been drawn to another decision of the Punjab and Haryana High Court in the case of K. K. Mittal & Co. v. Union of India [1993] 203 ITR....
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....ons of sub-section (1) shall not apply to a buyer (other than a buyer who obtains any goods, from any seller which is a public sector company) in the further sale of any goods obtained under or in pursuance of the sale under sub-section (1). " Section 44AC was enacted by the Finance Act, 1988 w.e.f. 1-4-1989 and was subsequently omitted by the Finance Act, 1992 w.e.f. 1-4-1993. Section 206C was also enacted by the Finance Act, 1988. At the time section 44AC was omitted from the Income-tax Act, section 206C was amended by the Finance Act, 1992 w.e.f. 1-4-1992. After sub-section (8), an Explanation was inserted. The word "buyer" was defined in that Explanation as under :- " Explanation.---For the purposes of this section--- (a) 'buyer' means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the Table in sub-section (1) or the right to receive any such goods but does not include (i) a public sector company, (ii) a buyer in the further sale of such goods obtained in pursuance of such sale, or (iii) a buyer where the goods are not obtained by him by way of auction and where the sale price of such goods to be....
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....t. We have already examined the two provisions contained in the two sections on this issue. In our view, goods received by the retail vends were in the nature of second sale from L-13 licensee. There is no evidence on record to show that L-14 licensee received any stock directly from the distillery. If any purchases had been made from the distillery, it could have been treated a case of first sale in the hands of L-14 licensee. Though the assessee has maintained a combined trading and profit and loss account, that would not alter the character of the transaction. We have already seen the purchases and sales declared under three different licences. Even if the sales have been shown by book entries, for all intents and purposes it is a sale from L-13 licensees to L-14 licensee. Therefore, the case of L-14 licensee it found to be covered under section 44AC(2) of the Act. We, therefore, hold that the rate of 40% is not required to be made applicable to the case of L-14 licensee. The following observations made by the Punjab and Haryana High Court in the case of Sat Pal & Co. are relevant : " ...It cannot be said that every country liquor contractor was evading income-tax or was runn....