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TMI Blog2017 (1) TMI 1530X X X X Extracts X X X X X X X X Extracts X X X X ..... any independent enquiry and physical verification regarding rent paid and both the Assessing Officer and the ld. CIT(A), on ad-hoc and summary basis, have stated that the rent should be @ ₹ 3,000/- per month per shop, however, neither the order of the Assessing Officer nor of the ld. CIT(A) was a speaking order on this issue and the reasons for arriving at the conclusion was not spelt out specifically. We are of the considered view that any ad-hoc disallowance made summarily by a quasi-judicial authority, without any factual basis, cannot be held justified and accordingly we set aside the order of the ld. CIT(A) - Decided in favour of assessee. Ad-hoc disallowance on account of salary paid - Held that:- As held in various judicial pronouncements discussed hereinabove, how the business has to be conducted, it is the prerogative of the assessee and not of the Department. The Department is, however, free to conduct enquiry and have a physical verification to put forth the allegation on the assessee, but on guess work and summary basis any addition made is unwarranted. In view of commercial expediency of the expenditure incurred and the evidences placed before us in the paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant before passing the order. 8. That the appellant craves leave to introduce, withdraw or modify any ground of appeal with the permission of your honour. 3. Grounds No.1 2 relate to the confirmation of rejection of the books of account by the ld. CIT(A) and addition of ₹ 26,51,070/- and estimation of gross profit rate @ 12.50% as against 11.59% declared by the assessee. 4. The facts regarding these grounds are that the assessee is an AOP in status and engaged in the business of trading liquor. Total number of members in the AOP is 38. The business of the assessee is carried from (1) 24/4/, The Mall, Kanpur (Head Office) and (2) 49 Shops at various places in Basti, Gorakhpur, Siddharth Nagar, Sant Kabir Nagar (Branch Offices). The assessee has filed return declaring total income at ₹ 14,02,770/- which was e-filed on 26/9/2012. The assessment was completed under section 144 of the Act on a total income of ₹ 62,68,770/- after invoking the provisions of section 145(3) of the Act by estimating the G.P. rate at 12.50% as against 11.59% declared by the assessee and making various disallowances and additions as appearing in the Assessing Officer s orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore A.Y 2011-12, no case of assessee was completed under section 143(3) of the Income Tax Act. 5. The assessee had submitted its argument that they are engaged in the business of trading in foreign liquor. In the case of the assessee, license is awarded for a year; therefore, it is not possible for the assessee to sell beyond the license period. The purchases in respect of assessee s trade are subject to deduction of TCS and, therefore, purchases made are fully verifiable from the purchase bills as well as TCS certificates submitted to the Department. It is not possible in the trade of assessee to make purchases from outside, as it is purchased only after payment of license fee. The quantum of purchase is fixed and, therefore, no sales is possible outside the books of account, as the assessee could not sell the liquor in excess to the quantity of purchases in which license fee has been paid. The assessee has got 49 Shops in various places and it is not possible to control the entire activity of employee like sales, collection, etc and accordingly in order to control the same, shop-wise sheet is prepared demonstrating the details of opening stock, stock taken from depot, entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment years 2009-10 and 2010-11 also assessments under scrutiny were completed by ITO1(1), Kanpur. The copies of assessment orders were also submitted before the ld. CIT(A). Thereafter, the ld. CIT(A) goes on to record certain inferences from the assessment order and summarily rejects the submission of the assessee and sustained the addition made by the Assessing Officer without assigning any specific reason for his decision and that from his order also we do not find that it is a speaking order and mere drawing of inferences cannot be equated to giving independent findings, which is required by a quasi judicial authority. 7. Being further aggrieved, the assessee preferred an appeal before us and at the time of hearing, the ld. A.R. of the assessee vehemently argued regarding the practicality involved in the trading sale of liquor business which is accepted all over India and reiterated the submissions made before the subordinate authorities. The ld. A.R. of the assessee further relied upon the following judicial pronouncements:- (1) Hem Raj vs. ACIT [2016] 159 ITD 589 (Chandigarh) (2) ITO, Range 3(1), Gwalior vs. Laxmi Narain Ramswaroop Shinhare [2009] 119 ITD 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the results declared by the assessee should be accepted. 11. In the case of ITO, Range 3(1), Gwalior vs. Laxmi Narain Ramswaroop Shinhare (supra), the assessee was engaged in the business of trading in country liquor and IMFL and the Assessing Officer rejected the book results of the assessee on the ground that all the sales were made in cash without proper vouchers supporting the sales. In this case, it was held by the Co-ordinate ITAT Agra Bench that when the books of account were produced before the Department and there is no significant defect in the books of account and in the factual details of the case, the gross profit rate declared by the assessee has to be accepted. 12. The Hon'ble jurisdictional High Court in the case of CIT vs. Prayag Wines (supra) has held that it is not necessary that cash memo is required to be issued for each and every sale and the books of account cannot be rejected on the very basis that only one consolidated cash memo was issued at the end of the day and that there were no cash memo for each and every sales. The crux of the decision was that if the consolidated sale figure is given in the single statement in the form of cash book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the shops cannot be more than ₹ 3,000/- per shop per month and accordingly rent paid at ₹ 1,000/- per shop per month for 49 shops for 12 months i.e. ₹ 5,88,000/- (i.e. 49,000/- x 12 = 5,88,000/-) was disallowed and added to the total income of the assessee. 16. The ld. CIT(A) accepted the findings of the Assessing Officer without recording a specific finding and speaking order on the issue. 17. The argument of the assessee is that during the assessment proceedings, complete details like location of shop, name and address of the landlord, and the amount of rent paid was furnished before the Assessing Officer. The Assessing Officer has made addition by disallowing rent @ ₹ 1,000/- per shop per month in an arbitrary manner without conducting any enquiry to prove the allegation. The assessee has submitted affidavits in the form of confirmations for receipts of shop rent, which are enclosed in the paper book from pages 1 to 49. 18. We have perused the case record, heard the rival contentions and analyzed the facts and circumstances in the case and we find that in the paper book filed, only affidavits and confirmation of receipts of shop rent are enclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred for the purpose of business is reasonable expenditure has to be decided from the view point of businessman and not of the Department. According to the assessee, only two persons one Cashier and another Sales Person is required to manage the shop. The assessee placed reliance upon the judicial pronouncements in the cases of Aluminium Corpn. of India Ltd. vs. CIT [1972] 86 ITR 11 (SC); J.K. Woolen Mfrs. Vs. CIT [1969] 72 ITR 612 (SC); CIT vs. Walchand Co. (P) Ltd. [1967] 65 ITR 381 (SC) and CIT vs. Laxmi Cement Distributors (P) Ltd. [1976] 104 ITR 711 (Guj.). In all these cases, it was held that reasonableness of expenditure has to be decided from the view point of businessman (assessee) and not of the Department. The assessee further submitted that affidavit in the form of confirmation for receipts of salary and house rent from employees are enclosed in the paper book from pages 50 to 147. 22. We have perused the case record, analysed the facts and circumstances and considered the judicial pronouncements placed before us and we find that total salary paid of ₹ 3,800/- per month and ₹ 1,800/- as house rent allowance i.e. totaling to ₹ 5,600/- per month t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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