M/S.GANGPUR WINE vs. COMNR.OF INCOMETAX

Page 1 of 5 ITA Nos.221, 222 and 223 of 2004 IN THE HIGH COURT OF ORISSA AT CUTTACK ITA Nos. 221, 222 and 223 of 2004

ITA No.221 of 2004 M/s. Cresent Co.

Appellant -versus- Commissioner of Income Tax, Sambalpur …. Respondent

ITA No.222 of 2004 M/s. Gangpur Wine

Appellant -versus- Commissioner of Income Tax, Sambalpur …. Respondent

ITA No.223 of 2004 M/s. Moinuddin Enterprises

Appellant -versus- Commissioner of Income Tax, Sambalpur …. Respondent

Advocates, appeared in these cases by video conferencing mode: For Appellant(s) : Mr. Sidhartha Ray, Advocate

For Respondent(s) : Mr. S.S. Mohapatra Senior Standing Counsel (IT)

CORAM: THE CHIEF JUSTICE JUSTICE R. K. PATTANAIK

JUDGMENT 02.02.2022

Dr. S. Muralidhar, CJ

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II) Whether the ITAT is legally correct in holding that rejection of books of accounts solely on the ground of non-issuance of sale memos is proper and justified ?”

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the outset that as regards the AY 2001-02 the ITAT has accepted the books of accounts of all these three Assessees and has allowed their appeals setting aside the orders of the Assessing Officer (AO) and the Commissioner Income Tax (Appeal) [CIT(A)] affirming the said assessment orders. 7. It is seen in the impugned assessment order which is identical in each of the cases that although the AO accepted the fact that there was nothing wrong with the Assessee’s books of accounts, only on the ground that sales memos were not filed, the books of accounts were rejected by the AO. When the matter went in an appeal to the CIT(A) it was noted by him in Para 1.3 of the order dismissing the appeals that “it is true that the AO had not pointed out any specific omission or commission nor cited any specific instance of irregularity in the books of accounts” and that the only reason for rejection was that “element of inflation in purchases or incorrectness of purchase could not be ruled out”.However, it was again surmised that “there was also possibility of suppression of sale price”. It is therefore plain that both the AO and CIT(A) proceeded on surmises and conjectures with no supporting material to justify the rejection of the Assessee’s books of accounts. The ITAT having accepted the Assessee’s accounts for the subsequent AY 2001-02 for some reason did not acceptthem as far as the AY in question was concerned. 8. Where the issue is of sale of country liquor to tribal populations to expect the Assessees to issue sales memos is not even realistic. Importantly, since the books of account of the Assessees in the present appeals have been accepted by the Excise Department, and for the subsequent year AY 2001-02 by the ITAT, there was no reason to resort

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to surmises and conjectures and ‘best judgment assessment’ to reject the Assessee’s books of account for the AY in question. 9. The decision of this Court in Ram Chandra Ram Nivas v. State of Odisha (1970) 25 STC 501 (Ori) supports the aforementioned contentions of the Assessee. There it was held that earning low profits by itself, without corresponding facts, cannot be a ground for holding that the books of account are not properly maintained. In Md. Umar v. Commissioner of Income Tax (1975) 101 ITR 525 (Patna)a Division Bench of that High Court accepted the Assessee’s books of account and held that the rejection was based on suspicion and surmises as well as irrelevant material. In St. Teresa’s Oil Mills v. State of Kerala (1970) 76 ITR 365 (Ker), a Division Bench of Kerala High Court held that the rejection of accounts was not justified particularly because it was based only on the fact of variation in the consumption of electricity. 10. In the present case, mere non-issuance of production of sale memos could not have been a ground to reject the entire books of account particularly since it pertained to sale of country liquor to tribal populations. Also the ITAT appears to have overlooked the fact that the books of account of the Assessee were not rejected by the Excise Department and that the ITAT itself had accepted them for the subsequent AY 2001-02. 11. For all of the aforementioned reasons, the two questions formulated by this Court are answered in favour of the Assessee and against the Department. The impugned orders of the AO, the CIT(A) and the ITAT are accordingly set aside. The appeals are allowed, but in the circumstances, with no order as to costs.

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( S. Muralidhar) Chief Justice

(R. K. Pattanaik) Judge

S.K. Jena/PA