C.I.T.BIKANER vs. M/S ASHOK BEHL BHARAT SETHI and PARTY

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ITA/89/2009HC RajasthanRJHC01023707200815 January 2013Author: DINESH MAHESHWARI,ARUN BHANSALI5 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal held that even after rejection of books of accounts under Section 145(2), an addition is not automatic unless there are valid reasons. The Tribunal gave preference to the assessee's past history, noting that the declared profit rates for the current year were better than the past year. It referred to its own consistent view and cited cases like Banna Lal Jat Vs. ACIT and JCIT Vs. M/s Tak Sidhawat & Party, holding that without specific defects pointed out by the department, no addition can be made solely on account of non-issuance of sales bills, especially when results are better than the past year. The Tribunal found the CIT(A)'s partial retention of addition paradoxical. Consequently, the Tribunal deleted the entire addition made in both country liquor and IMFL businesses. The High Court, following its own decision in a similar case, found no perversity or wrong principle in the Tribunal's order and dismissed the Revenue's appeal.

What were the facts?

The Revenue appealed against an order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year 1994-1995. The ITAT had dismissed the Revenue's appeal and allowed the assessee's cross-objection, deleting additions made by the Assessing Officer (AO) towards the assessee's country liquor and Indian Made Foreign Liquor (IMFL) businesses. The AO had rejected the assessee's books of accounts under Section 145 and made additions by applying higher net profit rates (18% for country liquor and 26% for IMFL) than declared by the assessee (13.54% and 24.40% respectively). The Commissioner of Income Tax (Appeals) had partly allowed the assessee's appeal, restricting the additions. The ITAT, however, deleted these additions entirely.

What were the issues?

1. Whether the best judgment assessment made by the AO was based on cogent material and relevant criteria, and if the CIT(A) and Tribunal erred in displacing the AO's assessment. The Revenue contended that the AO's best judgment assessment was based on cogent material and relevant criteria, including the assessee's past history and a comparable case (M/s. Ramesh Kumar Trilok Singh & Party). The Revenue argued that the CIT(A) was unjustified in displacing the AO's assessment by relying on comparable cases over the past history and that the Tribunal erred in affirming the CIT(A)'s order. The judgment does not explicitly record the Revenue's specific arguments regarding the comparable case or the CIT(A)'s reasoning beyond what is implied in the question of law. The assessee's arguments are not explicitly detailed but are implied through the Tribunal's findings which accepted the assessee's declared profit rates.

Which sections of the Income-tax Act were involved?

Section 145,Section 260-A,Section 145(2)

AI-generated summary — verify with the full judgment below

vs.

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR J U D G M E N T vs.

Date of Judgment : 15.01.2013 PRESENT HON'BLE MR. JUSTICE DINESH MAHESHWARI HON'BLE MR. JUSTICE ARUN BHANSALI Mr. K.K. Bissa, for the appellant. BY THE COURT (PER HON'BLE BHANSALI, J.): The Revenue has preferred this appeal under Section 260-A of the Income Tax Act, 1961 ('the Act') against the judgment and order dated 30.10.2007 passed by the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur ('the Tribunal') in ITA No.158/JDPR/1998 and CO No.54/05 for the assessment year 1994-1995, whereby the Tribunal has dismissed the appeal of the Revenue and has allowed the cross-objection of the assessee; and in the result, has deleted in toto the impugned additions towards country liquor business and Indian Made Foreign Liquor (IMFL) business of the assessee, as made by the Assessing Officer ('the AO') in the assessment order dated 14.3.1997, and as partly retained by the Commissioner of Income Tax (Appeals), Jodhpur ('the CIT(A)') in the order dated 28.01.1998 as passed in the assessee's appeal.

vs.

The appeal has been admitted on the following question of law:- “Whether the best judgment assessment made by the A.O. was based on cogent material and relevant criteria and the CIT(A) was unjustified in displacing the certain of comparable cases than that of past history and the Tribunal had erred in affirming the order passed by the CIT(A)”. The facts relevant for determination of the question involved in this appeal are that the assessee is engaged in liquor business and during the period relevant to assessment year 1994-1995, the profit of the assessee from country liquor business was assessed at Rs.1,48,55,541/- as against the declared profit of Rs.1,11,74,756/- by adopting a net profit rate of 18% towards the total outgoings (total payment made to Government for lifting goods) as against the declared rate of 13.54% and the gross profit of the assessee from the IMFL business was assessed at Rs.2,68,33,377/- as against declared gross profit of Rs.2,46,55,317/- by adopting a net profit rate of 26% towards the total outgoings as against the declared gross profit rate of 24.40% after rejecting the books of accounts of the assessee, under Section 145 of the Act. The profit rate was adopted by the AO by taking into account the past history of the assessee and comparable case of one M/s. Ramesh Kumar Trilok Singh & Party, Anoopgarh. addition made by the AO to Rs.8,25,308/- for country liquor business and Rs.6,06,162/- for IMFL business. Aggrieved by the aforesaid order dated 28.01.1998, the Revenue preferred an appeal before the Tribunal and the assessee took cross-objections therein. By the impugned order dated 30.10.2007, the Tribunal has allowed the cross-objections taken by the assessee and has dismissed the appeal preferred by the Revenue; and, in the result, has deleted the additions altogether while observing and holding as under :- “4. ..........From the above charts, it is apparently evidenced that the gross profit rate declared in this year is better than the past year. The consistent view of this Bench, in this regard, is that even after rejection of books of accounts u/s 145(2), addition is not automatic unless Vs. M/s Tak Sidhawat & Party in ITA No.615/JU/1998 order dated 07.07.2003 wherein it has held that “the non-issuance of sales bill no addition can be made. Since no specific defects have been found in this case also and the results of the year are better than the past year, we are of the considered opinion that no further addition can be made in the declared results of the assessee and the declared results have to be accepted. Therefore, in our considered opinion, the ld. CIT(A) even after accepting the above theory in principle, has sustained some addition which is paradoxical. The ld. CIT(A) has observed at page No.6 of his order that “admittedly the appellant has shown better profit in this year as compared to the last year”. With the above observations, we dismiss the ground raised by the revenue and accept the ground raised by the assessee, in respect of country liquor account. 5. .........Apparently, the assessee has declared better gross profit rate at 24.04% as compared to 23.85% shown in the immediately preceding assessment year, in spite of the fact that the turnover of IMFL/Beer increased substantially. Since the trading results are better in this year as compared to the earlier year, no further addition is warranted. We therefore, delete the entire addition made in this account as well.

6.

In the result, the appeal of the Revenue is dismissed and the cross objection is allowed.” This court while considering the appeal filed by the Revenue in the case of another liquor contractor being D.B. Income Tax Appeal No.145/2006 (Commissioner of Income Tax, Bikaner Vs. M/s. Jaimal Ram Kasturi and Partners) held as under:- “In our view, ultimately, the matter had been of putting a estimate on the profit of the assessee while recording the findings on facts. The CIT(A) has given cogent reason for not endorsing the approach of the AO in making assessment with reference to the case of another assessee after finding it to be not a directly comparable case and hence, not a safe guide more particularly, when assessee's past history was available and there was no material difference in the facts pertaining to the relevant assessment year and the past history year. The CIT(A), even while accepting past history as the relevant basis for assessment, proceeded to retain a part of the addition to the tune of Rs.10,65,928/- without cogent dismissed. No costs. ”

The reasons forgoing, on all the relevant and material aspects, equally apply to the present appeal too, which is based on self same grounds. Thus, following the decision aforesaid and in the same terms, this appeal also stands dismissed. No costs. (ARUN BHANSALI)J. (DINESH MAHESHWARI)J. RM/

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