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TMI Blog2013 (6) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... nored the past history of the assessee, thus on perusal of comparative chart, it is noticed that in the year under consideration the assessee has shown comparatively better result, as G.P. is 7.34% and not profit 2.13%. Thus it will be fair and just if addition to the extent of ₹ 20,00,000/- is sustained which will cover all deficiencies and lapses noticed by the A.O. and balance addition of ₹ 6,94,40,512/- (7,14,40,512 - 20,00,000) made by the A.O. is deleted. Thus, ground of the assessee's appeal are partly allowed. Estimation of agricultural income - in absence of evidence provided by assessee the A.O. taken 40% of the said amount of which calculation comes to ₹ 4,84,124/- and the same was treated as income from other sources - Held that:- Since the A.O. himself has accepted the agricultural income in A.Y. 2008-09 and to maintain consistency the A.O. should follow the same formula in the year under consideration as followed in A.Y. 2008-09 since the land holding and other facts are similar. Therefore, the A,O, is directed to calculate the agricultural income in accordance with the income determined in A.Y. 2008-09. In favour of assessee for statistical purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s score is liable to be deleted. 4. That the learned CIT (Appeals) has been erred on facts and in law, while sustaining the addition for Rs.3621887/- made by the AO u/s 68 of the Income Tax Act, no addition is liable to be sustained, same is liable to be deleted. 5. That the appellate order of CIT (Appeals) dated 29.06.2012 is bad in law." 3. The Revenue has raised the following grounds of appeal :- "Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.5,27,85,853/- out of addition of Rs.7,14,40,512/- made on account of disallowance for difference of suppressed income. The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date; the appeal is finally heard for disposal." ITA No.419/Agra/2012 by the assessee 4. The brief facts of the case are that the assessee is a liquor contractor and is deriving income from selling of liquor. The assessee did not produce books of account to verify the expenditure before the A.O. During the assessment proceedings, the A.O. noticed that the assessee declared gross receipt of Rs.32,65,29,808/- showing G.P. @ 7.37% as against the last y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fee CL-Masala 3,75,361.39 x 105 3,94,12,945.95 Plain 7,34,547 x 70 5,14,18,290 TOTAL 9,08,31,235.95 8. On perusal of the details, the A.O. noticed that in addition to the cost of fright Rs.12,23,654/- (proportionate), sealing and bardana charges of Rs.2,18,03,013/- and purchase cost of Rs.25,04,809/- in respect of Dholpur licence shop, the assessee himself claimed total licence fee (Excise duty) on account of country liquor purchase in respect of DEOs in M.P. State amounting to Rs.9,96,84,189/- (licence fee Rs.9,16,14,348/- plus basic duty of Rs.80,69,841/-). On the basis of Dholpur licence shop, the A.O. noticed that the assessee disclosed quantity of country liquor to the extent of licence fee of Rs.9,08,31,235/- and the quantity of purchase with respect to the remaining difference of claim of Rs.88,52,953/- which has not been disclosed by the assessee. The A.O. further noticed that the quantity relating to purchase cost of 25,04,809/- in respect of Dholpur shop has also not been included in the declared quantity. The A.O. accordingly calculated the total amount of Rs.1,13,57,762/- (Rs.88,52,953 + Rs.25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirmation in respect of following charges:- (Page no.15) "(i) M/s Pooja Greh Nirman Rs.5,00,000/- (ii) Shri Harvinder Singh Bhatia Rs.31,21,887/-" 11. The A.O. has made the addition under section 68 of the Act. 12. The CIT(A) restricted the addition to Rs.1,86,54,659/- out of liquor business and allowed relief of Rs.5,27,85,853/- as under :- (Paragraph no.3.5) "3.5 From the perusal of assessment order, it is seen that AO has made the addition of Rs.7,14,40,512/- on account of difference of suppressed income from liquor business taking the highest difference of suppressed sales which has been determined by applying 20% G.P. rate over cost whereas the policy approved by the State Governament mentions it to be 10%. A.O. has determined suppressed sales gross profit with various alternatives based on the rates adapted as per Govt. policy. AO has determined all these amounts very scientifically based on the prescribed rates except for the amount of Rs.7,14,40,512/- which is found based on hypothetical and assumed profit rate of 20% of cost. Therefore, total addition of Rs.7,14,40,512/- is not found sustainable as per facts on record. Determination of suppressed sales at Rs.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Madhya Pradesh and Dholpur and more than 7 Districts in Rajasthan. Ld. Authorised Representative submitted that A.O. has wrongly relied upon the figures of one of the shop at Dholpur and estimated for the whole year which is unreasonable. Ld. Authorised Representative submitted that the A.O. has applied rates as informed by DEO of one shop at Shivpur but the A.O. did not mention whether the rates as informed by the DEO is for which period and whether same are relevant to the year under consideration. Ld. Authorised Representative submitted that looking to the nature of business of the assessee the rates are fluctuating considering various facts including climate and season. The ld. Authorised Representative submitted that the A.O. and CIT(A) both have estimated the income without considering the earlier years result wherein the department has accepted the final outcome of the assessment. Ld. Authorised Representative submitted that the A.O. has ignored the fact that against the basic licence fee at Rs.80,69,841/- no purchases could be made, basic licence fee is not adjusted against the purchase made and moreover the contractor some time is not lifted the liquor against licence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assessees or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144.]" 20.1 It is to note that under section 145(1), the income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" has to be computed in accordance with the method of accounting regularly employed by the assessee, unless in the opinion of the Income-tax Officer, the income, profits and gains cannot properly be deduced therefrom or the Income-tax Officer is not satisfied about the correctness or completeness of the accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neness or that they were kept regularly in the course of business. That being the case, the accounts are relevant and afford prima facie proof of the entries and the correctness thereof under section 34 of the Evidence Act" 20.3 Section 145 of the Act provides that if assessee does not satisfy the condition of section 145 of the Act, the A.O. may make assessment in the manner provided under section 144 of the Act. In the case under consideration, it is no doubt that the assessee did not produce the books of account; therefore, the A.O. is to make assessment under section 144 of the Act. The Scope of best judgment has been examined by the Apex Court in the case of 60 ITR 239 (SC) State of Kerala vs C. Velukutty as under :- "What is the scope of section 12(2)(b) of the Act ? The expression "to the best of his judgment" in the said clause is presumably borrowed from section 23(4) of the Income-tax Act. The said expression in the Income-tax Act was the subject of judicial scrutiny. The Privy Council in Commissioner of Income-tax v. Laxminarayan Badridas has considered those words. Therein it observed: "He (the assessing authority) must not act dishonestly, or vindictively or capr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of each case. Though subsection (2) of section 12 of the Act provides for a summary method because of the default of the assessee, it does not enable the assessing authority to function capriciously without regard for the available material. Can it be said that in the instant case the impugned assessment satisfied the said tests ? From the discovery of secret accounts in the head office, it does not necessarily follow that a corresponding set of secret accounts were maintained in the branch office, though it is probable that such accounts were maintained. But, as the accounts were secret, it is also not improbable that the branch office might not have kept parallel accounts, as duplication of false accounts would facilitate discovery of fraud and it would have been thought advisable to maintain only one set of false accounts in the head office. Be that as it may, the maintenance of secret accounts in the branch office cannot be assumed in the circumstances of the case. That apart, the maintenance of secret accounts in the branch office might lead to an inference that the accounts disclosed did not comprehend all the transactions of the branch office. But that does not estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) "(i) AO is not justified in mentioning that the appellant has not submitted the relevant details during the assessment proceedings when the AO himself has determined sales and profit on the basis of details submitted form time to time and as asked for by the A.O. (ii) AO has considered the total duty, including basic duty of 8%, for the purpose of determination of sales. (iii) AO has collected the information from DEO, Shivpuri, Ashok Nagar Sheopur and has relied heavily on information of DEO, Ashok Nagar when the appellant has not carried out business in Ashok Nagar. (iv) The appellant has carried on the same business since long. There is no change in the nature, line, modus opernadi of his business in the year under appeal as compared to earlier years. He has declared better gross profit during the year and his trading results should be accepted." 20.6 The CIT(A) also did not agree with the A.O. The relevant observation of the CIT(A) are as under:- (Page nos.22 23 (CIT(A)) "3.4 It is an admitted fact that the appellant has not produced his books of accounts and relevant records for verification of sales with reference to quantity as well as rate at any stage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he working of estimation of the A.O. and, on the other hand, he relied upon rejected working of the A.O and addition was sustained. Under the circumstances, both the orders of the A.O. and CIT(A) connote be sustained. 20.8 As stated above that while making best judgement one should have reasonable nexus to the available material and circumstances. In the case under consideration, both A.O. and CIT(A) have ignored the past history of the assessee. A comparative trading result furnished by the assessee has been placed at page no.1 of Paper Book, which is reproduced as under :- Comparative Position of Trading results A.Y. Sales Gross Profit G.P. Rate Afterdeduction of intt. expenses related to the Liquor Business Net Profit % N.P. Finally assessed by AO or Hon ble ITAT Agra Bench Agra 05-06 293123139/- 12220302/- 4.16 3841464 1262894 2578570 0.87% 1.2% by Hon ble ITAT Agra Bench, Agra 06-07 132265429/- 4029612/- 3.04% 1475687 1.11% Sales estimated and applied 1.3% N.P. income finally assessed at 2016917/- as against 1475687/- disclosed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y. 2008-09 and to maintain consistency the A.O. should follow the same formula in the year under consideration as followed in A.Y. 2008-09 since the land holding and other facts are similar. Therefore, the A,O, is directed to calculate the agricultural income in accordance with the income determined in A.Y. 2008-09. 24. The fourth ground is in respect of addition of Rs.36,21,887/- under section 68 of the Act. The A.O. made addition of Rs.36,21,887/- on account of loan taken from M/s. Pooja Greh Nirman Rs.5,00,000/- and from Shri Harvinder Singh Bhatia Rs.31,21,887/-. The A.O. made the addition as the assessee failed to furnish details including PAN etc. The CIT(A) confirmed the order of A.O. observing that the assessee has failed to file the requisite details. 25. We have heard the ld. Representatives of the parties and records perused. The ld. Authorised Representative submitted that the assessee filed confirmation and copies of accounts of both the parties. The assessee was having sufficient material to establish that the loans were taken during the course of business for the purpose of business. He further submitted that copy of PAN and other details were furnished. It was a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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