2013 (8) TMI 193 - HC - Income Tax

Method of computing profit rate - A.O. used comparable method of accounting - CIT upheld the method of accounting but reduced the amount of addition - Tribunal deleted disallowance - Held that - The CIT(A) has given cogent reason for not endorsing the approach of the AO in making assessment with reference to the case of another assessee after finding it to be not a directly comparable case and hence, not a safe guide more particularly, when assessee s past history was available and there was no material difference in the facts pertaining to the relevant assessment year and the past history year. The CIT(A), even while accepting past history as the relevant basis for assessment, proceeded to retain a part of the addition without cogent and sufficient reason therefor. The Tribunal, therefore, while endorsing the basis adopted by the CIT(A), has found no reason to sustain any addition and hence, deleted the addition altogether - Tribunal cannot be faulted in accepting the profit rate as declared by the assessee while not approving the rate as applied by the AO - Following decision of ) CIT v. Jaimal Ram Kasturi & Partners 2013 (7) TMI 813 - RAJASTHAN HIGH COURT - Decided against Revenue.

Summary

Issues:
- Appeal against the judgment and order dated 30.10.2007 passed by the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur.
- Dismissal of the appeal of the Revenue and allowance of the cross-objection of the assessee by the Tribunal.
- Deletion of additions towards country liquor business and Indian Made Foreign Liquor (IMFL) business of the assessee.
- Admissibility based on the question of law regarding the best judgment assessment made by the A.O. and displacement of comparable cases by the CIT(A) and the Tribunal.

Analysis:
The High Court considered an appeal against the Tribunal's judgment dated 30.10.2007, where the Tribunal dismissed the Revenue's appeal and allowed the cross-objection of the assessee, leading to the deletion of additions related to the country liquor and IMFL business of the assessee. The main issue revolved around the best judgment assessment made by the Assessing Officer (A.O.) and the subsequent actions by the CIT(A) and the Tribunal. The A.O. had rejected the books of accounts of the assessee under Section 145 of the Income Tax Act, 1961, and made additions based on past history and comparable cases. The CIT(A) partly upheld the A.O.'s decision but reduced the additions considering the past results of the assessee. The Tribunal, in its order, emphasized the importance of past history and rejected the Revenue's appeal, deleting the additions in entirety based on the improved performance compared to previous years.

The High Court referred to a similar case involving another liquor contractor to support the decision, highlighting the significance of past history in assessing profits. The Court noted that the CIT(A) had valid reasons for not following the A.O.'s approach based on a different assessee's case, emphasizing the relevance of the assessee's past history. The Tribunal's decision to delete the additions was upheld, emphasizing that the Tribunal had correctly considered the profit rate declared by the assessee and found no reason to sustain any additions. The Court concluded that the Tribunal's decision was not flawed and did not warrant interference, leading to the dismissal of the appeal in favor of the assessee.

In summary, the High Court upheld the Tribunal's decision to dismiss the Revenue's appeal and allow the cross-objection of the assessee, leading to the deletion of additions towards the country liquor and IMFL business. The Court emphasized the importance of past history in determining profits and supported the Tribunal's decision based on the improved performance of the assessee compared to previous years. The appeal was dismissed, affirming the Tribunal's decision and ruling in favor of the assessee.