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TMI Blog2005 (2) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... o audited accounts as well as quantitative statement of daily sales and purchases and compared it with the rate prevailing in Ahmedabad Bullion Merchant Association and found that the profit arrived at in each and every transaction was correct. All these exercise was done by the CIT(A) in the presence of the Assessing Officer. No ground has been taken by the Revenue with regard to any additional materials relied on by the CIT (Appeals) in contravention of rule 46A, while reaching to such conclusion. The Hon ble Supreme Court in Brij Bhushan Lal Praduman Kumar v. CIT [ 1978 (10) TMI 2 - SUPREME COURT] , categorically observed that while making best judgment assessment , the Assessing Officer should keep in mind what honestly he believes to be fair estimated or the proper figure of assessment. Furthermore, Hon ble Calcutta High Court in the case of CIT v. Popular Electric Co. (P.) Ltd.[ 1992 (3) TMI 15 - CALCUTTA HIGH COURT] wherein it was observed that while making best judgment , the Assessing Officer should make independent and well grounded estimate and such estimate may be based on adequate and relevant materials. In the instant case no mistake has been pointed out by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed business of bullion and diamond in wholesale basis and his turnover is Rs. 79,39,22,675. The assessee has shown G.P. at Rs. 14,46,772 which in terms of percentage comes to 0.18 per cent. Since the GP shown by the assessee is very low as compared to other dealer dealing in same commodity, the Assessing Officer issued show-cause notice to the assessee as to why its results should not be rejected. It was submitted by the assessee that there was competition in the market in this line of business and the G.P. margin is very low. The assessee also submitted the statement of day-to-day purchases, sales and profit/loss arise and the margin of G.P. and submitted that the book results may be accepted. The assessee also submitted that through oversight the sales-tax has been debited in the trading account, instead. of debiting it to the Profit & Loss account and after closing the Profit & Loss account and considering the sales-tax liability in Profit & Loss account, the G.P. would work out to 0.23 per cent. The Assessing Officer did not accept the assessee's contention to be convincing on the following two grounds: (i) The assessee's sales are mainly effected in cash and the full address ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the cash purchasers, and therefore, sales was not open to verification. He, therefore, submitted that the matter should be restored back to the Assessing Officer for examining afresh and assessee may be directed to furnish names and addresses of the purchasers so as to enable the Assessing Officer to verify the correctness of the sales/purchases in the books of account. 7. On the other hand, the learned AR, Mr. D.M. Rindani, Chartered Accountant vehemently argued that during the course of scrutiny assessment the assessee had filed audited books of account in which there was no adverse comment by the auditor along with quantitative details of daily purchase and sales. In the line of business, the assessee was dealing, it was not practicable for the assessee to insist the purchasers, making cash purchases from the assessee, to disclose their fully names and addresses, and therefore, on some cash bills names and addresses were not fully recorded. He further contended that in case of cash sales even if the buyer had stated wrong names and addresses, the assessee was bound to record whatever names and addresses has been given to the assessee, as the assessee has no reason to doubt t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only two days and because of paucity of funds, the assessee could not hold the stock for a long period, and started selling immediately on receipt of goods. He, therefore, submitted that the Assessing Officer has not given any valid reason for rejection of book results and estimation of profit at 0.41 per cent of the sales. The learned AR also relied on the judgment of Kerala High Court in the case of M. Durai Raj v. CIT [1972] 83 ITR 484 in support of proposition that the department was not justified in rejecting the book results on the plea of lo~ gross profit rate and absence of particulars of address of the customers, without which verification of sales was not possible. It was observed by the Hon'ble High Court that there was no need to have complete particulars of names and addresses of the customers in the case of cash transactions and in the absence of such particulars in the sale of bullion could not be a ground for not accepting the book results of the assessee. The assessee had admittedly maintained its accounts according to the method regularly employed by him, and the profit and gain of the business should be properly computed from his account. The learned AR also rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliable. Even though, it is not possible to lay down the exact circumstances in which accounts should be rejected as unreliable or incorrect, yet the accounts may be rejected as unreliable if important entries and transactions are omitted therefrom or if proper particulars and vouchers, bills, etc. are not forthcoming or if they did not include entries relating to particular class of business transaction. The assessee should invariably be given opportunity for offering explanation regarding defects in accounts and on his failure to satisfactorily explain the defects, the Department would be justified in rejecting the books of account. Thus, books of account should not be rejected light-heartedly. The duty of the Assessing Officer is to administer the provisions of the Act in the interest of public revenue and to prevent evasion or escapement of tax legitimately due to the State. At the very same time, the duty of the Appellate Authority is to ensure not only that the provisions of the Act are administered in the interest of public revenue so as to prevent evasion/ escapement of tax, but at the very same time to ensure that only the tax legitimately due to the State is collected. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llate Authority has all the powers which the original authority may have. In the absence of any statutory provisions to the contrary, the appellate authority is vested with the plenary powers, which the subordinate authority has in the matter. In this case, the CIT (Appeals) himself has looked into audited accounts as well as quantitative statement of daily sales and purchases and compared it with the rate prevailing in Ahmedabad Bullion Merchant Association and found that the profit arrived at in each and every transaction was correct. All these exercise was done by the CIT(A) in the presence of the Assessing Officer. No ground has been taken by the Revenue with regard to any additional materials relied on by the CIT (Appeals) in contravention of rule 46A, while reaching to such conclusion. 11. Where the Assessing Officer makes estimations, he had to provide evidence and proof as to the falsity of the books of account, etc. where he failed to do so, he should not reject the books of account. 12. The Hon'ble Supreme Court in Brij Bhushan Lal Praduman Kumar v. CIT [1978] 115 ITR 524, categorically observed that while making "best judgment assessment", the Assessing Officer should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of account, as held in the judgment of M. Durai Raj's case by the Kerala High Court, relied on by the learned AR. 15. The fact that some of the cash vouchers, the names and addresses of buyers were not fully written, may give rise reason to doubt regarding genuineness of the sale price, but mere suspicion is not enough for making addition by estimating higher G.P. rate. For rejecting sale price of cash transactions, the Assessing Officer has to bring corroborative material on record to reach to the conclusion that sale price of these cash bills were lower than the sale price of credit sales bills in respect of which full names and addresses of the buyers were written. However, the Assessing Officer has not pointed out any cash bills in respect of such sales, in which lower price have been collected. On the other hand, during the appellate proceedings, on verification of each and every transaction of cash sales by the CIT (Appeals) in the presence of the Assessing Officer, it was found and categorically noted by the CIT (Appeals) that there was no difference in price collected by the assessee in respect of such cash sales transactions. The Department is also not aggrieved by an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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