THE DY./ACIT, 3(1), BHOPAL vs. M/S. GENDA LAL HAZARILAL & COMPANY, SEHORE

PER MANISH BORAD, AM.

The above captioned appeal is filed at the instance of Revenue

pertaining to Assessment Year 2009-10 and is directed against the

orders of Ld. Commissioner of Income Tax (Appeals)-2 (Appeals)(in

short ‘Ld.CIT(A)’], Bhopal dated 27.09.2016 which is arising out of

the order u/s 147 r.w.s. 143(3) of the Income Tax Act 1961(In short

the ‘Act’) dated 11.02.2015 framed by ACIT-3(1), Bhopal.

Genda Lal Hazarilal & Company ITA No.1320/Ind/2016 “On the facts and in the circumstances of the case, whether Ld. CIT(A) was justified in deleting the addition of Rs.46,11,148/- made by AO on account of Gross Profit which was not offered for taxation.”

assessee is a partnership firm engaged in the business of sale and

purchase of liquor. Return of income declaring income of

Rs.1,21,41,551/- was filed for Assessment Year 2009-10 on

23.09.2009. Assessment u/s 143(3) of the Act was completed on

21.12.2011 assessing income of Rs.2,98,76,890/-. Subsequently

Learned Assessing Officer (In short ‘Ld.A.O’) on observing that there

is a mismatch of the purchase shown in the financial statements as

against purchases appearing in Form No.26AS, issued notice u/s

148 of the Act dated 21.03.2014 for the alleged escapement of

income of Rs.61,11,148/-.

Income Tax return filed in compliance of notice u/s 148 showing at

Rs.1,21,41,551/-. Reconciliation of the purchase was duly

submitted in order to prove that no addition was called for.

However the reply was not acceptable to the Ld. A.O and he on the

basis of alleged difference of Rs.84,49,668/- in respect of purchase

Genda Lal Hazarilal & Company ITA No.1320/Ind/2016 of liquor assumed the unaccounted sales at Rs.1,39,85,890/- and

made addition of gross profit of Rs.46,11,148/- by applying gross

profit rate at 33.97%. Income assessed at Rs.1,81,41,818/-

succeeded on the ground relating to the alleged addition of

Rs.46,11,148/- but Ld. CIT(A) has sustained the addition made by

Ld.A.O at Rs.2,82,339/- for difference in purchase. The alleged

addition made by Ld. CIT(A) has not been challenged before us and

only the revenue is in appeal against the deletion of addition made

at Rs.46,11,148/-.

supporting the finding of Ld.A.O.

finding of Ld.CIT(A) and also submitted that necessary

reconciliation statement of purchase duly filed which indicated that

the purchases as shown in the books of account are almost same to

the purchases appearing in Form 26AS except for a difference of

Rs.2,82,399/-.

Genda Lal Hazarilal & Company ITA No.1320/Ind/2016 8. We have heard rival contentions and perused the records

placed before us. The revenue is in appeal against the finding of

Ld.CIT(A) deleting the addition of Rs.46,11,148/- made by the

Ld.A.O by applying the gross profit rate @ 32.97% on the estimated

unaccounted sale of liquor at Rs.1,39,85,890/- which was based on

the alleged difference in purchases amounting to Rs.84,49,668/-

appearing in the books of accounts vis-à-vis purchases appearing

in Form 26AS for the tax collected at Source.

purchase was filed before Ld.CIT(A) by the assessee;

S.No. Particulars Amount 1 Purchases as per Books 16,13,98,798 2 As per Form No.26AS the purchases are 19,67,166 Rs.167881298/- and not Rs.16,98,48,464/- . Hence the difference Rs.1967166 3 Amount of Trade/Quantity discount 44,60,671 credited in our ledger in purchases – IFFL account 4 Amount of purchases on which no issue for 17,37,492 Liquor is lifted as per certificate of Excise department Total adjusted amount of purchases as per 16,95,66,125 books of accounts 10. We further find that the following finding of Ld.CIT(A) deleting

the addition of Rs.46,11,148/- has not been controverted by Ld.

Genda Lal Hazarilal & Company ITA No.1320/Ind/2016 Departmental Representative.

“4.6 I have considered the reasoning given in the assessment order and the submissions of the appellant. The AO has not discussed or rebutted the explanation given by the assessee during assessment proceedings. The addition has been made simply stating that the assessee could not substantiate the difference of Rs.84,49,668 with documentary evidence. It is seen that the only document available with the AO which has been made the basis for the addition is Form 26AS giving details of TCS on the value of purchases made by the appellant during the F. Y. 2008-09. The AO has first estimated that against the difference in purchases amounting to Rs.84,49,668/-, the corresponding unaccounted sale of liquor would have been Rs.1,39,85,890/-. Thereafter, he has estimated the gross profit on the estimated sales of Rs. 1,39,85,590/- @ 32.97% and thus made an addition of RS.46,11,148 as undisclosed gross profit.

The addition of Rs.46,11, 148/- is thus an estimate of gross profit on estimated sales. The books of accounts have not been rejected u/s 145(2). The addition is based solely upon the difference in purchases as per Form 26AS and as shown in the P & L account.

Regarding IMFL, the submission of the appellant that the purchases reflected in .Form 26AS are Rs.16,78,81,298/- and not Rs.16,98,48,464/- as taken by the AO in found to be correct. Further, a reference to the Purchase account of IMFL shows that the total purchases debited to the purchase account are to the tune ofRs.2,98,85,4701-. At the same time, credit notes totaling Rs.44,60,6711- have been credited to the Purchase account of IMFL. It leaves the net purchases at Rs. 2,54,24,7991-. Since the appellant has claimed less purchases than the purchases as per Form No. 26AS, there is no element of under- disclosure of income.

Genda Lal Hazarilal & Company ITA No.1320/Ind/2016 Regarding the purchase of country liquor, the appellant has filed a certificate from the State Excise Department, Distt. Sehore, confirming that during the F.Y. 2008-09, the appellant deposited license fee of Rs.13,71,76,887 in respect of country liquor. However, stocks were lifted for Rs.13,54,39,395/- only and stocks were not lifted for Rs.17,37,492/-. As stated by ld. AR, since the stocks were not lifted, the amount of Rs.17,37,492/- was not shown under the had purchases but under the had License Fee paid. The explanation of the appellant is acceptable in view of the certificate of the Excise authorities.

In view of the above facts, it is held that the appellant has satisfactorily explained difference in purchases to the expent of Rs. 19,67,166 + Rs.44,60,671 + Rs.l7,37,4.92 = Rs.16,95,66,125/-. The addition of Rs.46,11,148/- made by the AO on account of gross profit on estimated sales corresponding to the difference in purchases is deleted.”

as well as going through the finding of Ld.CIT(A) are of the view that

the assessee has successfully proved that there is no major

difference in the purchases as reflected in Form 26AS and the

books of accounts except for a minor difference of Rs.2,82,389/-

which has already been added by Ld.CIT(A) to the income disclosed

by the assessee and the finding of the Ld.CIT(A) has not been

controverted by the Departmental Representative. We therefore find

no reason to interfere in the finding of Ld.CIT(A) deleting the

addition of Rs.46,11,148/- made by the Ld.A.O on account of

Genda Lal Hazarilal & Company ITA No.1320/Ind/2016 estimation of gross profit on the estimated sales calculated on the

basis of alleged difference in purchases.

The order pronounced in the open Court on 11.12.2018.

Sd/- Sd/-

( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER �दनांक /Dated : 11 December, 2018 /Dev Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file.

By Order, Asstt.Registrar, I.T.A.T., Indore