C I T UDAIPUR vs. M/S TRILOK CHAND and PARTY

ITA/40/2006HC RajasthanRJHC01010258200613 September 2006Bench: RAJESH BALIA,RAJENDRA PRASAD VYAS3 pages

AI SummaryDismissed

What did the High Court hold?

The Tribunal held that the findings regarding the addition of Rs. 3 lakhs were findings of fact and did not raise any substantial question of law. The Tribunal considered the payment of Rs. 75,20,967/- towards the shortfall in liquor/IMFL quantity as a business loss or expenditure. Taking into account the average Gross Profit (GP) rate shown by the assessee, the Tribunal was of the opinion that the addition of Rs. 3 lakhs sustained by the CIT (Appeals) was justifiable. The Tribunal dismissed the Revenue's appeal, thereby upholding the CIT (Appeals)'s order and not restoring the AO's larger additions. The Tribunal referred to its own previous decisions in similar circumstances where no substantial question of law arose. No issue was expressly left undecided.

What were the facts?

The assessee, M/s Trilok Chand & Party, engaged in the business of country liquor, IMFL, and Beer, filed a return of income for assessment year 1997-98 declaring Rs. 8,79,480/-. The Assessing Officer (AO) rejected the assessee's books of accounts due to unverifiable retail sales and made an addition of Rs. 13,32,140/- by applying a net profit rate. The CIT (Appeals) partially allowed the appeal, sustaining an addition of Rs. 3 lakhs. The Revenue, aggrieved by this reduction, appealed to the Income Tax Appellate Tribunal (ITAT). The ITAT considered a payment of Rs. 75,20,967/- made by the assessee towards a shortfall in liquor/IMFL quantity, deeming it a business loss or expenditure. The ITAT found the Rs. 3 lakh addition justifiable and dismissed the Revenue's appeal.

What were the issues?

1. Whether the Tribunal erred in sustaining an addition of Rs. 3 lakhs as business income, when the Assessing Officer had made additions of Rs. 13,32,140/- based on best judgment assessment due to unverifiable retail sales? Assessee's contentions: Not recorded. Revenue's contentions: The Revenue argued that the additions made by the AO were justified due to the unverifiable nature of retail sales and that the CIT (Appeals) erred in reducing the addition. The Revenue sought to restore the AO's order. The Revenue relied on the principle that when books of accounts are rejected, best judgment assessment is permissible. The Revenue's appeal before the ITAT was for restoring the order of the Assessing Officer making larger additions. 2. Whether the Tribunal's finding that the addition of Rs. 3 lakhs was justifiable, considering the payment of Rs. 75,20,967/- towards a shortfall in liquor/IMFL quantity, constitutes a substantial question of law?

Which sections of the Income-tax Act were involved?

Not specified

AI-generated summary — verify with the full judgment below

1 D.B. INCOME TAX APPEAL NO.40/2006 CIT, Udaipur Vs. M/s Trilok Chand & Party. Date : 13.9.2006 PRESENT HON'BLE MR. JUSTICE RAJESH BALIA HONBLE MR. JUSTICE GOPAL KRISHAN VYAS Mr. K.K. Bissa for the appellant. None present for the respondents. ________ Heard learned counsel for the appellant. None has appeared for the respondents in spite of service of notice. The facts of the case are that the assessee was holding the licence for carrying on the business of country liquor, IMFL and Beer. He had submitted his return of income for assessment year 1997-98 at Rs.8,79,480/-. The Assessing Officer has rejected the books of accounts inter alia on the ground that retail sales are not vouchable and, therefore, he resorted to best judgment assessment and made additions of Rs.13,32,140/- by applying the net profit rate in country liquor has business as well as in respect of retail sale of

2 IMFL and Bear. The CIT (Appeals) partly allowed the appeal by sustaining the addition at a lump sum of Rs.3 lakhs. Being aggrieved with the aforesaid order of the CIT (Appeals) the Revenue preferred the appeal before the Income Tax Appellate Tribunal. The Tribunal found by considering the fact that the assessee had to pay and about which there is no dispute an amount of Rs.75,20,967/- towards short fall in the quantity of liquor / IMFL during the relevant period and considering that it is a part of business loss or business expenditure and considering the average GP rate shown by the assessee, the Tribunal was of the opinion that the additions of Rs.3 lacs as sustained by the CIT (Appeals) were justifiable and the Revenue's appeal for restoring the order of the Assessing Officer making large additions were dismissed. We are of the opinion that the aforesaid findings are finding of fact and not raise any question of law. In D.B. IT Appeal No.72/2005 CIT Vs. M/s Om Prakash Mula Ram and Party and D.B.I.T. Appeal

3 No.65/2005 both decided on 13.12.2005 it has been held by this Court in like circumstances that no substantial question of law arises. Accordingly, this appeal fails and is hereby dismissed. [GOPAL KRISHAN VYAS], J. [ RAJESH BALIA ], J. babulal/

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