1995 (6) TMI 55 - AT - Income Tax

Summary

Issues:
- Dispute over estimation of sales due to absence of sale vouchers and verifiability
- Application of proviso to s. 145(1) based on absence of sale vouchers
- Argument regarding maintenance of stock register and Excise passes for verification
- Justification of sales estimates by the Assessing Officer (AO)
- Lack of basis for sales estimates and absence of specific profit rate considerations
- Comparison with similar cases and reliance on Excise authorities' fixed prices
- Conclusion on the validity of sales estimates and decision on appeals

Analysis:
The judgment involves cross-appeals of two assessees for the asst. yr. 1989-90, heard together for convenience. In the case of Chaman Lal & Co., the AO estimated sales at Rs. 46,50,000 due to unverifiable sales as no sale vouchers were maintained, later reduced to Rs. 39,00,000 on appeal. Similarly, in Rattan Lal & Co.'s case, estimated sales were reduced from Rs. 90 lakhs to Rs. 80 lakhs. The assessees argued that as L-13 licensees, they followed Excise authorities' fixed prices and maintained stock registers with excise passes for verification.

The learned counsel contended that the absence of sale vouchers did not warrant application of proviso to s. 145(1) as all purchases were duly vouched, and sales were made as per Excise regulations. The Departmental Representative argued that low G.P. rate justified sales estimates. The Tribunal found the AO's application of s. 145(1) unjustified, emphasizing the maintenance of stock registers with detailed entries and Excise passes for all supplies.

Regarding sales estimates, the Tribunal noted the lack of reasoning or basis provided by the authorities. The purchases were accepted, and no discrepancies were found, questioning the arbitrary nature of the sales estimates without considering a specific profit rate or unaccounted sales. The Tribunal highlighted the fixed prices by Excise authorities and the absence of defects in the assessees' books of account.

The Tribunal concluded that the sales estimates lacked a basis and were arbitrary, especially without a specific profit rate consideration. It emphasized that the entire sale proceeds could not be deemed as profit, and the assessees' appeals were allowed while the Revenue's appeals were dismissed. The judgment highlighted the importance of following Excise regulations, maintaining proper records, and providing justifications for sales estimates to avoid arbitrary decisions by the authorities.