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TMI Blog2015 (9) TMI 1180X X X X Extracts X X X X X X X X Extracts X X X X ..... ower than the average profit declared by the assessee, cannot be sole ground to estimate the suppressed sales. The Assessing Officer had also not brought on record any comparable instance to prove that the profit declared by the assessee were wrong. It is trite law that no addition can be made on mere surmises and conjectures. Thus, we do not find any infirmity with the reasoning adopted by the learned CIT(A), nor any evidence was brought on record in rebuttal of the conclusion drawn by the CIT(A). In these circumstances, we hold that the order of CIT(A) is well reasoned and therefore the same is hereby sustained. Accordingly, grounds of appeal filed by the Revenue are dismissed. - Decided in favour of assessee. - ITA No. 3686/Del/2008, ITA No. 3687/Del/2008, ITA No. 171/Del/2009 - - - Dated:- 2-9-2015 - SHRI I.C. SUDHIR AND SHRI INTURI RAMA RAO, JJ. For The Appellant : S/sh. Salil Kapoor, Sanat Kapoor Vikas Jain, Advocates. For The Respondent : Sh. V.R. Sonbhadra, Sr. DR. ORDER PER INTURI RAMA RAO, A.M.: These are the appeals filed by the Revenue directed against different orders of CIT(A) passed on 24.09.2008, 22.09.2008 14.10.2008 for the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hops by the State Govt. on a lottery basis and 37 shops had been run by the AOP from July, 2004 to March, 2005. The respondent assessees, namely, M/s Ganpati Traders filed its return of income for the assessment year 2005-06 on 31.10.2005, declaring income of ₹ 1,09,19,990/-. The return of income was selected for scrutiny assessment and the assessment was completed under Section 143(3) of the Income-tax Act, 1961 (for short the Act ), at a total income of ₹ 2,36,57,914/-. The disparity between the returned income and the assessed income was on account of addition of alleged suppressed sales. While doing so, the Assessing Officer has rejected the books of account by holding that the respondent assessee failed to furnish the Excise/Manual Register maintained by each shop, huge variation in the gross profit rate, wrong valuation of closing stock, misrepresentation of facts by the Auditor in the Tax Audit Report, Breakage not recorded in the books. Further, the Assessing Officer proceeded to estimate the suppressed sales as follows: 4.8.1 Determination of Income: After invoking the provisions of Section 145(3), the income of the assessee is being computed after applyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der:- a) Negative monthly gross profit rates for few months b) Non production of Excise register c) Non maintenance of cash sale voucher d) Non verifiability of sales e) Not recording of breakage by the appellant. f) Incorrect valuation of closing stock. 5.4 From the facts and circumstances of the case, it is seen that the appellant does not issue sale vouchers to the customers. The staff at various shops maintain daily sales statements, manually which contain the complete record of stock and sales made during the day by the appellant. The sale statements are then sent to the Chief Accountant periodically who maintains the books of accounts and stock registers on the computerized environment. Such registers' maintained by the appellant have been produced before the AO. Even, daily sales statements for various shops were furnished. The appellant deals in various brands of liquor which are sold at various rates at different shops. As per the policy of Excise Department., the appellant has to clear its stock -by the last day of the F .Y. as normally the appellant gets the license to operate the shop for one day only. The management decides the rates at which v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of closing stock Hon'ble CIT, Haldwani in proceeding u/s 263 of I.T. Act before him in the case of the appellant for AY 2004-05 has passed a speaking order citing valid reasons as to why the license fees and adhibaar will not form part of the closing stock of the appellant. I have looked into such order and the reasons for non inclusion of such license fees and adhibaar towards the valuation of closing stock appear to be quite convincing and so the AO's observation in this regard does not cut much ice. Similarly, the appellant has furnished certificate from the Addl. Commissioner of Excise, Dehradun who has given necessary explanation clarifying the fact that the payment of adhibaar and license fees has nothing to do with the purchase cost of liquor. From these explanations furnished by the counsel of the appellant, I am convinced that payment of adhibaar and license fee cannot form part of the closing stock. Even if the appellant does not make purchases, license fees and adhibaar have to be paid which pertain to a definite period and accordingly have to be written off in the books of account for the said year. The AO has also contended that the appellant has not prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf at para 45.7 has stated that in liquor trade the purchases are fully verifiable as the Excise Department has full control over the quantity purchased and sold. Thus, the subsequent statements of the AO that sales are not verifiable do not hold any merit. Since the appellant has maintained complete sale summary in the shape of daily sales statement which are also verifiable from the stock registers, I find no reason-to-take the adverse view against the appellant about the actual sales effected-as per such registers. 5.8 Regarding the contention of the AO that the breakage has not been shown by the appellant, it has been submitted by the appellant that any breakage has to be compensated by the concerned staff and it is the duty to provide a new bottle in place of the broken bottle. The responsibility is thereby fixed and the concerned person is made to account for the broken bottle. The said facts duly mentioned before the AO have not been disputed or controverted by the AO. Therefore, the reply of the appellant is found to be convincing and reasonable. The policy of the appellant to make the staff responsible for the breakage in fact goes in appellant's favour and proves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of 6.73%. This approach of the Assessing Officer is totally erroneous and cannot be accepted for the reason that the daily sales statement prepared by the assessee cannot be rejected. In this nature of business, the daily sales statement prepared at each shop is of paramount importance and cannot be simply brushed aside without assigning any reasons. Furthermore, in this kind of business the purchases are fully verifiable and Excise Department of the State Govt. has full control over the quantity of purchase and sales simply because the gross profit returned in certain months is lower than the average profit declared by the assessee, cannot be sole ground to estimate the suppressed sales. The Assessing Officer had also not brought on record any comparable instance to prove that the profit declared by the assessee were wrong. It is trite law that no addition can be made on mere surmises and conjectures. Thus, we do not find any infirmity with the reasoning adopted by the learned CIT(A), nor any evidence was brought on record in rebuttal of the conclusion drawn by the CIT(A). In these circumstances, we hold that the order of CIT(A) is well reasoned and therefore the same is hereby ..... X X X X Extracts X X X X X X X X Extracts X X X X
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