M/S SARDAR SINGH vs. COMMISSIONER OF INCOME TAX, RAIPUR

O R D E R ‘ (Passed on QL.9.2009) ‘ DhirendraWisHral J 1) Thei appel'lan’r-assessee has preferred This appeal under Secjfion Z60-A of The Income Tax AcT, 19'61 (for shorf "rhe Acf?) agains‘r The order of The Income Tax Appella’re Tribunal (for breviTy "rhe Tribunal') da‘red 26.9.20CQ;7(Annexure A-4) on the following subsfanfial quesTions of law:- “(i) Whefher on fhe facfs and in The circumsTances of The case, The finding of The Tribunal reversing The order of The Commissioner of Income Tax (Appeals) and upholding aSSessmenT order rejecTing The book profiT is perverse and viTiaTecl in law by reason of reliance on suspicion of surmises and conjecTure? (ii) WheTher There was valid maTerial’ To hold ThaT secTion 145 was applicable \jusTifying'adopTion of 5% neT profiT as againsT 4.5% profiT as per accounTs which was noT found low? (iii) WheTher There was any evidence To hold ThaT sales and profiT shown were noT True and correcT?" 2) Briefly sTaTed, facTs of The case are ThaT The appellanT was engaged in The business of sale of counTry liquor in The / Tr“ l

K1 % \ relevan’r year 1'0 The assessmem‘ year 1994 95 The appellanT- assessee filed return along WITh audn‘ed and reporTs dlScloSIng Tofu! Income of Rs 1 92 418/ Hls case was selec‘red for scruhny by Issuance of no’rlce under Sec’rion 143 (2) of fhe Acf. The Assassmg Officer (for shor‘r A O ) on scruhny of records found fhaf the assessee firm had execufed excuse confracfs of 36 shops during fhe fmancml year 1993—94. Againsf fhe licence fee of Rs.1,61,00,000/— fhe assessee reporfed sale of R3247 64 133/— The assessees own Charfered Accounfanf In his reporf submlffed by fhe assessee along Wlfh his refurn observed thus - o For sales There are no invoices or bills are mamfamed Since if was nof requtred by cusfomer and fhere has been no fradifion & pracfice The sales as such accounfed are based on purchase and sale regisfer. o The same sifua‘fion were also found in r/o boffle charges paymen'rs and empfy byof'lt'ff’e’s purchases (Si replacements no supportings were made available to fhe auditor for verificafion. - Theixcerfificafe of fransfer of opening and closing sfocks from The confracfor were also nof‘produced before fhe audifor. 3) The A.O., in view of the notes of the Auditor issued notice to the assas3ee calling upon him to show cause as to why prowsmns of Section 145 of the Act should not be invoked In reply to the notice the assessee submitted that the firm has maintained regular books of accounts wherefrom the profit and loss could be verified and question of application of Section 145 of the Act to assess correct profit does not i4) OPlSe Rejecting the explanation against Audit Note No.2 wherein it was pointed out that no supporting documents were made [i /

g3 available To The audifor wifh respec’r To bo’rTIe charges and emp’ry boHle purchases & replacemenf for verification, if was observed Thaf The Excise Depar’rmem‘ are concerned f0 ’rhe purchases made by fhe confracfors in respect of liquor and empty boHles are provided for liffing The liquor and sealing is donle by some ofher con‘rracfor who in Turn realize ’rhe value of sealing fixed by fhe Excise Depar’rmem‘. The basic aspec‘i of purlchases of emp’ry baffles from fhe customers/ hawkers was no’riffound vouched as To iTs verifiableness. FurTher observing Tha§T The sales were effecTed from 36 shops and There was no recbrd/regisfer mainTained for day—To-day sales ‘wiTh reflelielnce To purchases for 36 shops during The accounTing period, The A.O. formed an opinion ThaT he is unable To deduce correcf profiT from The books of mainTained and rejecTed The explanafion of The assessee in This regard and invoking The provisions of SecTion 145 (1) The A.O. rejecfed The: books of accounTs. The A.O. esTimaTing The sales aT Rs.2,50,00,000/— and Taking gross profiT @ 5% as againsf disclosed gross profiT of 4.5% by The assessee, added a sum of RS.1,14,486/—. The CIT (Appeals) allowed The appeal of The assessee on The grolmd Thaf The A.O. did noT poinT-ouT A‘O. wiTh a finding ThaT The A.O. gave posiTive finding abouT The de‘fecTs in The mainTenance of by The assessee wiTh reference To adverse remarks of The CharTered AccounTanT,‘who audiTed The accounTs under SecTion 44AB of The AcT, The A.O. furTher probed The booksof and found several defecTs, deTailed in The order of assessmenT, and formed an opinion ThaT True profiT chargeable To Tax cannoT be deduced from The l I i ack‘

g] books of accoun‘rs mainfdined by ”the assessee and produced for finalizaTion of assessmenT. The CIT (Appeals) wiThouT carefuHy examining ’rhe con’ren’rs of assessment order has erroneously recorded a finding Thm‘ fhere is no such finding by gThe AIO regarding defecTs in The accounTs for rejecTing books resulfs. I’r has been fur’rher observed Tha’r fac‘rs of The i , M l instanf case are disfinguishable from The facfs in The maffer of Mdhd. Umer (supra) as in the cifed case ’rhe AO did not give any, fiinding abouf ’rhe defec’rs in fhe accounts maintained by Tha’r hssessee. Concurring wi‘rh The findings of The AO ThaT The Books resuITs were unreliable and Iiable for rejecTion, iT was held ThaT resorTing To provision of SecTion 145 (1) of The AcT mias fully jusTif'ied. 6) Mr. iDubey, Iearhed Senior AdvocaTe for The appelianT- assesisee relying upon The judgmen‘r in fhe of Ganesh JuTei’ "& 2 formulaTed in The memo of appeal are quesTions of Iaw. He furTher submiTs ThaT esTimaTion o’f parofiT despiTe The assessee mainTaining for his business is alsa a quesfion of law as held in Mani & 213‘ITR

44AB of The Ac‘r, formed an opinion fha’r correcT profif' from The accounfs mainfained by ’rhe assessee cannof be deduced i and Therefore, invoked provisions of Secfion 145 of'fhe Acf. The ‘A.O. on close scrufiny of fhe accoun‘rs found several defe}c‘rs, which have been elaboro’reiy menfioned in his order of i assessment. Inherent defecfs presen’r in fhe occoun’rs moinfuined by The assessee have righ’rly been held To be unrel‘iable. The quesTion of esTimaTion of profiT can, by no sTreTch of imaginaTion be considered To be a quesTion of law much‘ Iess subsTonTial quesTion of law and Thus There Is no subsTonTIal quesTion of iaw Involved In This appeal and The appe deserves To be‘dlsmlssed. 8) e ave heard leaned counsel for The parTies. We have gone Throgh The orders passed by The orums below. 9) In Te of Md. Umer sura) The PaTa Hi CourT consering ThaT The AO rejecTed T books priT on on The groud h sales were no veiable, cerTain TransacTion were noTed in lum-sum and here was no fining wiTh rpecT To accepTabili of meThod and irregulariTy of The kepT by The assessee, has held ThaT ThesTribunal and auTriTies below had no maTerial before Them on The basis of whic iT co‘ulc be said ThaT Trading resulTs were noT verifiable and aT, Theree, They should noT be accpTed. 10) n he insTanT cse, The AO, afTer close examinaTio of The books of accounTs prouced by The assessee, ha deTailed Th cogenT reasons in Para—9 of The assessmenT order for rejecTing The books of accounTs. IndepTh enquiry was made by The AO keeping‘in mind The noTes of The CharTered AccounTanT of The assessee in The reporT under SecTion 44AB of The AcT. 11) In The of Ganesh JuTe'Trading (supra) The PaTna High CourT has held ThaT The quesTion “wheTher The findings of‘The Tribunal in upholding The rejecTion of book profiTs shown by i j > / al W h r u f h oh (p n gh iid he of ly n TaT T rif s p T d es unTy ‘ ho h ll Th for e I T a n d s e

12) been held ThaT The books of produced by The alssessee are noT verifiable and Thereby invoked SecTion 145 (‘1) of me Act The Tribunal concurring wiTh The findings of The AO has held 13) l ThaT The defecTs noTiced by The AO and findings given by him are very precise and clearly sTaTed in The assessmenT order. Opinion of The AO ThaT True profiT chargeable To Tax cannoT ’rhe assessee was noT viTiaTed by reasons of surmises and suspicion, parTicularly, when There was no ullega‘rion of change in fhe me‘rhod of accoum‘ing from wha‘r was occep‘red by The aufhori’ries for The previous years" is o ques’rion of law. Sim?ilarly, in the mof’rer of Mani & Co. (supra) The Keralo High Codr’r has held Tha’r The quesTion “wheTher The Tribunal was jusiTified in upholding The esTimaTe of The profiTs despiTe The assiessee mainTaining accounTs for his business” was a quesTion of iLaw. In iThe insTanT case, The appellanT enTered inTo a conTracT wiTh The£xcise DeparTmenT for 36‘shops. He filed his reTurn for The asSessmenT year 1994—95 accompanied by The reporT of his ChhrTered AccounTanT under SecTion 44AB of The AciT. The CharTered AccounTanT in his reporT has caTegorically suhmiTTed ThaT There were no invoices or bills for sales and aclcounTs have been prepared on The basis of purchases and sales regisTer; no supporTing documenTs were made available To The AudiTor in respecT of boTTle charges pegymenfs and empTy boTTle purchases for verificaTion. The AO keeping in mind The above adverse remarks of The CharTered AccounTanT of The assessee fur‘iher probed The books of in depTh and foundl‘rhaT basic aspecfs of purchases of empTy boTTles from The cusTomers/hawkers were noT vouched as To iTs verifiableness and The conTracTor has made ouT The sales on iTs own diSCreTion wiThouT any furTher‘ check by The Excise DeparTmenT. Discussing The effecT of 'non-producTion of purchases of empTy boTTles vis-c‘x-vis figures of sales iT has be deduced from The books of occounfs mainfained by fhe assessee and produced before him'for finaliza’rion of assessment was sufficient for rejecfing The books resul’rs. The fribunal has ca’regor‘ically held fhaf The AO was justified in ireaching f0 The conclusion Tha‘r books resulfs were unreliable, rejecfing fhe same and resorfing To The provisions of $ecTion 145 (1) for making assessmenT. 14) IT i}s seTTIed law ThaT The Tribunal is The final CourT of facT and; The Tribunal on due appreciaTion of maTerial before The A.O§‘. has held ThaT The books of by The assessee were unreliable and The A.O. was jusTified in \ resorTing To SecTion‘145 (1) for making assessmenT. IT is also seTTled law ThaT dispuTe regarding meThod of esTimaTion of sale value and esTimaTion of income on The basis of sales value can,j by no sTreTch of .imaginaTion, be considered To be a l T subsTanTial quesTion of law. 15) ForlThe aforesaid reasons, keeping in view The impugned order of The Tribunal whereby The Tribunal has confiymed The finding of facT recorded by The A.O. wiTh respecT To rejecTion of books of of The assessee and resorTing To SecTion 1451 of The AcT, we are of The opinion ThaT no subsTanTial quesTion of‘ilaw, as proposed by The assessee arises for adjudicaTion of This appeal. 16) In The resulT, The appeal being devoid of subsTance deserves l l , , To be dismissed and is, accordingly, dismissed. No order as To l cosTs. II,._A_饥 “4': Sd/:“ j RN; Chandrakar Dhirondra Mishra l‘l / }’ , Judge ~Judge l l , Roshan/i—