THE DCIT-3(1), INDORE vs. SHRI VIRENDRA SINGH THAKUR, INDORE

As the issues raised in these bunch of appeals relates to same assessee and are common in nature, therefore, these were heard together and are being disposed off by this common order for the sake of convenience and brevity.

Brief facts of the case are that the assessee is an individual and engaged in the business of liquor contractor. Regular return of income was filed for A.Ys. 2012-13 & 2013-14 which were selected for scrutiny assessment through CASS followed by serving of notices u/s u/s 143(2) & 142(1) of the Act. During the course of assessment proceeding Learned Assessing Officer (in short Ld. AO) observed that the assessee has not maintained proper quantitative as well as sales details. He accordingly rejected the books of accounts and after giving reference to other 3 Virendra Singh Thakur ITANos.28 & others/Ind/2017 businessmen carrying out same business activity estimated net profit @ 3.5% of the total turnover and made the addition for difference between the estimated net profit @ 3.5% and net profit declared by the assessee. Other additions were also made. Penalty also levied u/s 271(1)(c) of the for A.Y. 2012-13 which is under appeal before us.

We first take up cross appeal for A.Y. 2012-13 wherein following grounds of appeal have been raised by the assessee and Revenue: ITANo.28/Ind/2017 by Assessee 1.That the Ld. CIT(A) erred and confirmed the action of assessing officer in rejecting the books of accounts without pointing out any material defect in the correctness and completeness of books of accounts.

We have heard the rival contentions and perused the record placed before us. The first issue in challenge before us by both the parties relates to estimation of net profit wherein Ld. AO estimated net profit @ 3.5% against the net profit of 1.06% declared by the assessee. Ld. CIT(A) has restricted the addition applying net profit rate of 2.16% being the average of net profit rate of 5 years.

Ld. counsel for the assessee referring to the submission made before the lower authorities submitted that the books of accounts were regularly made and are being audited. Sale has increased due to which net profit rate decreased. 7. We find that during the course of appellate preceding the details of turnover of profit of the 3 years are shown in the following manner:

Sales: Foreign Liquor 37834548 94456239 71435987 Country Liquor 148333082 357607272 295898023 Total 186167630 452063511 367334010 2 Net Profit 5159409 5615050 5646475 Less: Commission Income (1039861) (822969) (1000366) Net Profit before Commission 4119548 4792081 4646109 income 3 Net profit Ratio(without 2.21 1.06 1.26 commission) 4 Net Profit Ratio (with 2.77 1.24 1.54 Commission) 5 Number of Shops: Foreign Liquor 1 4 4 Country Liquor In Burhanpur 0 1 1 In Jabalpur 0 4 4 In Indore 8 8 6 8 13 11 Total Shops 9 17 15

From the perusal of the above table it is noteworthy that net profit rate declined drastically in A.Y. 2012-13. During A.Y. 2011-12 Net profit including commission of Rs. 51,59,409/- has been shown on the gross turnover of Rs.18.62 crores but surprisingly during the A.Y. 2012-13 turnover has increased toRs. 45.20 crores and profits to Rs.56,15,050/-. It shows that net profit of Rs. 4,55,641/- has only increased on the increased sales of Rs.26.59 corers. The number of shops has also increased 17 from 9. In the Tax audited report quantitative details are not shown. No regular sale bills are issued. No plausible Virendra Singh Thakur ITANos.28 & others/Ind/2017 reasons have been given by the assessee for sharp decrease in the net profit rate.

In these given facts and in the light of Hon'ble Jurisdictional High Court in the case of ACIT vs. Gendalal Hazarilal and Co. 263 ITR 679 laying down a ratio that the doctrine of res judicata is not applicable but consistency has to be maintained unless there is a manifest distinguishable feature and on applying this principle on the instant case, we find that though facts of every year are separate and one just cannot apply results of preceding year on the current year but looking to the fact that type of business is the same and there is no future thrust to the assessee’s business as the sales have increased drastically and no evidence have been placed on record to prove as to why there is a sharp decrease in the net profit even when other assessee’s running similar type of business are showning better net profit rate. 10. We find that the Ld. CIT(A) has referred and relied on judgment of Hon'ble Rajasthan High Court in the case of Trilok Chand Girdharilal & Party vs. ITO in ITANo.577/2009 dated 21.01.2014 confirming the action of the assessing officer of rejecting the trading results and invoking the provisions of Section 145(3) of the Act, as no 7 Virendra Singh Thakur ITANos.28 & others/Ind/2017 proper sale vouchers were maintained and fairly estimated the net profit. Hon'ble Court confirmed the view taken by the Ld. AO adopting average gross profit rate which was upheld by Ld. CIT(A) and ITAT. We therefore find merit in the finding of ld. CIT(A) calculating net profit rate 2.16% being average of net profit rate declared by assessee for 5 years at 2.77%, 1.33%, 1.54%, 1.77% and 3.5% thereby deleting the addition of Rs.60,57,651/-. We uphold the same and dismiss the assesse’s ground nos.1 & 2 and also dismiss revenue’s ground Nos. No.1,2 & 3 for A.Y. 2012-13.

Now we take up assessee’s ground no.3 challenging the rejection of claim u/s 54B of the Act without considering legal position.

Brief facts relating to this ground are that the assessee sold land and received sale consideration of Rs.14,32,000/- thereon. Cost of acquisition of the land and transfer expenses were shown at Rs.8,14,555/-. The short term capital gain is arising at Rs.6,17,445/-. The assessee made a claim of exemption u/s 54B of the Act at Rs.6,17,445/- but no evidence placed in support thereof before both the lower authorities. Even during the course of hearing before the Tribunal assessee has not made any submissions with 8 Virendra Singh Thakur ITANos.28 & others/Ind/2017 regard to claim of deduction u/s 54B of the Act at Rs.6,17,445/-.

In these given facts and circumstances of the case there seems no reason to interfere in the finding of Ld. CIT(A) confirming the addition. Ground no.3 raised by the assessee deserves to be dismissed.

As a result, Cross appeal for A.Y. 2012-13 stands dismissed. Now we take cross appeal for A.Y. 2013-14 15. We have heard the rival contentions and perused the record placed before us. The following grounds of appeal have been raised.

These set of facts already stands adjudicated by us in the asessee’s case for A.Y.2012-13 in the preceding paragraphs.

We, therefore, consistently taking same view confirm the finding of ld. CIT(A) taking average net profit rate being average net profit rate of 5 years at 2.16%. We accordingly find no reason to interfere in the finding of the Ld. CIT(A) and hold that the net profit in the case of assessee to be computed 2.16% of the total turnover. However, this finding as well as finding for A.Y. 2012-13 should not be taken as basis in the subsequent years and in case similar issue comes in future it should be decided on the basis of facts and figure for the year under appeal. In the result this common issue of estimation of net profit raised by both assessee and revenue stands dismissed.

Now we take ground No.3 of assessee’s appeal for A.Y. 2013-14 for addition of unexplained unsecured loan u/s 68 of the Act at Rs.47,77,000/-.

During the course of hearing before the Tribunal no other evidences have been put forth by the Ld. counsel for the assessee in order to prove identity, creditworthiness and genuineness of the alleged unsecured loan of Rs.47,77,000/-. We, therefore, find no reason to interfere in the finding of the Ld. CIT(A) confirming the addition of Rs.47,77,000/-. Accordingly ground no.4 of the assessee,s appeal is dismissed.

As a result, assessee’s appeal for A.Y. 2013-14 is dismissed. 23. Now we take ground no.4 raised by the Revenue relating to deletion of addition of Rs. 60,19,920/- made by the AO u/s 69 of the Act. 24. We have heard the rival contentions and perused the record placed before us. Ld. AO observed that the assessee Virendra Singh Thakur ITANos.28 & others/Ind/2017 has purchased a flat at Shehnai Residency of Rs.60,19,920/- and called for the copy of purchases documents but the query remain unexplained. Thereafter before the Ld. CIT(A) assessee filed the details along with proof of taking house loan of Rs.42,50,000/- for the purchase of flat. Ld. Departmental Representative (DR) failed to rebut the finding of the Ld. CIT(A). 25. We therefore, in the given facts and circumstances of the case, are of the view that the alleged purchase of flat of Rs.60,19,200/- cannot be categorized under the unexplained investments u/s 69 of the Act as the same have been recorded in the regular books of accounts along with housing loan taken for financing the purchase of the flat. No interference is therefore, called for in the finding of the Ld. CIT(A) deleting the addition of Rs.60,19,920/-. Accordingly, ground no.4 of Revenue’s appeal stands dismissed. 26. Now we take up Assessee’s appeal in ITANo.29/Ind/2017 & Revenue appeal in ITANo.53/Ind/2017 for A.Y. 2012-13. The following grounds of appeal have been raised by the assessee and Revenue:

Both assessee and revenue are in appeal against the levying of penalty u/s 271(1)(c) of the Act.

Brief facts relating to this cross appeals are that various additions were made by the Ld. AO in the assessment completed u/s 143(3) of the Act on 23.03.2015. Penalty proceedings were initiated. During the course of penalty proceeding necessary submissions were filed. Ld. AO levied penalty of Rs.33,50,000/- on the additions for estimated profits at Rs.1,02,07,172/- and incorrect claim of exemption u/s 54B at Rs.6,17,445/-.

Now both the assessee and revenue are in appeal against the order of Ld. CIT(A).

Ld. counsel for the assessee relying on the submissions made before the lower authorities contended that Ld. AO erred in levying the penalty on estimated profits without bringing any adverse material on record. As regards the penalty levied addition of Rs.6,17,445/- on account of rejection of claim u/s 54B of the Act, Ld. counsel for the assessee failed to demonstrate any bonafide reason for making the inaccurate claim.

Per contra Ld. DR vehemently argued supporting the order of Ld. Assessing Officer.

We have heard the rival contentions and perused the record placed before us. Both assessee and Revenue are in 16 Virendra Singh Thakur ITANos.28 & others/Ind/2017 appeal raising in the ground relating to levying of penalty u/s 271(1)(c) of the Act at Rs.33,50,000/-. Penalty u/s 271(1)(c) of the Act is leviable if the assessee conceal the particulars of income or furnishes inaccurate particulars of income.

In the instant appeal part of the penalty is levied on the estimated profits of Rs.1,08,24,617/- made by the AO by applying net profit rate of 3.5% on the sales disclosed by the assessee. From going through the assessment order it is discernable that Ld. AO rejected the books u/s 145(3) of the Act for not maintaining quantitative records and sales vouchers. No doubt has been raised for the purchase made by the assessee from the Excise Department. It is well established fact that the assessee engaged in the Liquor contractor business have to prepare regular quantitative details to be furnished to the Excise Authority.

The regular stock is taken. No anomaly has been found in the audited books of account. Addition has been made only by estimating profits. No adverse finding has been given for any instances which could prove that assessee Virendra Singh Thakur ITANos.28 & others/Ind/2017 has concealed income or furnish inaccurate particulars of income.

In these given facts and circumstances levying penalty on the estimated profits was not justified and is uncalled for. Therefore, Ld. CIT(A) has rightly deleted the penalty levied u/s 271(1)(c) of the Act on the addition for estimated profits and no interference is therefore called for. Accordingly, ground No.1 of the Revenue’s appeal stands dismissed.

As regards the penalty levied on incorrect claim u/s 54B of the Act At Rs.6,17,445/- it remains a undisputed fact that in the income tax return filed by the assessee inaccurate particulars of income were furnished in order to claim deduction/exemption 54B of the Act. Till the hearing before the Tribunal Ld. counsel for the assessee has been unable to prove with adequate material that claim made was a bonafide claim.

We, therefore, in the totality of facts hold that as the assessee furnished inaccurate particulars of income, making an incorrect claim u/s 54B of the Act, Ld. AO was 18 Virendra Singh Thakur ITANos.28 & others/Ind/2017 justified in levying penalty u/s 271(1)(c) of the Act and this action was rightly confirmed by the Ld. CIT(A). Ground no.1 of assessee’s appeal stands dismissed.

In the result, all these cross appeals i.e. ITANo.29/Ind/2017 & ITANo.53/Ind/2017, ITANo.28/Ind/ 2017 & ITANo.52/Ind/2017 and ITANo.262/Ind/2017 & ITANo.253/Ind/2017 stands dismissed.