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Income Tax Appellate Tribunal, DELHI BENCH “SMC-1”, NEW DELHI
Before: SHRI S.V. MEHROTRA
O R D E R PER S.V. MEHROTRA, A.M :
Both the captioned appeals have been preferred by the same assessee were heard together and are being disposed of by this consolidated order for the sake of convenience.
2. This appeal filed by the assessee is directed against the order dated 13.12.2012 passed by the Commissioner of Income Tax (Appeals), Muzaffarnagar, u/s 143(3) of the Income Tax Act, 1961 (in short “the Act”) relating to A.Y. 2009-10.
Brief facts of the case are that the assessee filed her return of income declaring income of Rs.1,73,190/- in the status of AOP. The assessee was engaged in the purchase and sale of country liquor. The Assessing Officer noticed that assessee had purchased and sold the country liquor having concentration of 36% V/V which were 180 ml. size, 200 ml. size, 375 ml. size and 750 ml. size. He noted that the assessee produced books of account but sales were not vouched. He further noted that assessee in his reply dated 13.10.2011 stated that M.R.P. of country liquor sold was as under :-
i) M.R.P. of 180 ml. Rs.33/- ii) M.R.P. of 200 ml. Rs.37/- iii) M.R.P. of 375 ml. Rs.66/- iv) M.R.P. of 750 ml. Rs.131/-
He further noted that the purchase price of the aforesaid items were as under :-
i) Purchase price of 180 ml. Rs.26.17 ii) Purchase price of 200 ml. Rs.28.61 iii) Purchase price of 375 ml. Rs.51.87 iv) Purchase price of 750 ml. Rs.99.31
5. Thus, he concluded that the average G.P. on these four items was much higher than the G.P. shown by the assessee. He required the assessee to show-cause as to why the books of account may not be rejected u/s 145(3) as the sales were not vouched. After considering the assessee’s submissions, the Assessing Officer rejected the books of account and took G.P. at 21% of total purchases and re-drafted the trading and Profit & Loss Account and arrived at net profit of Rs.6,23,965/- after disallowing 25% of travelling and loading and unloading expenses. He further disallowed Rs.20,000/- from shop rent claimed at Rs.27,000/- by assessee. Ld. CIT(A) confirmed the addition of Rs.6,23,970/- inter-alia observing as under :-
“The appellant’s contention that the AO had not pointed out any defects in books of account has no force particularly in absence of sale vouchers, the books were incomplete and as such, the AO was fully justified in rejecting the same. The appellant during the course of assessment proceedings and appellate proceedings and utterly failed to substantiate her claim of sales affected at less than M.R.P. by supporting details and evidences. On the other hand in the light of the facts as discussed above it is not a case of making sales at less than M.R.P. The AO in the assessment order as well as remand report has cogently discussed the impugned issue which is not repeated here for the sake of brevity. The appellant has utterly failed in rebutting the findings of the AO as mentioned in the remand report. Thus it is held that the AO was perfectly justified in estimating GP @ 21% of total purchases at Rs.21,36,863/- and thereby determining net profit at Rs.6,23,970/-. The action of the AO is confirmed on this aspect. Grounds of appeal Nos.2 to 9 are dismissed.”
6. Ld. CIT(A) partly allowed the assessee’s appeal. Being aggrieved with the order of Ld. CIT(A), the assessee is in appeal before the Tribunal and has taken following grounds of appeal :-
“1. Appellate order as completed is wrong, illegal and against the facts.
That the L'd C.I.T. (A) should not have confirmed the rejection of account & application of higher G.P., as done by L'd A.O. in assessment order.
3. That the appellant has maintained the proper accounts including Stock Register. The L'd A.O. has rejected the accounts for want of Sales Voucher without confronting any case, where the selling rate is higher them appellant. On the other hand the appellant AOP filed the comparable case of the same year, passed u/s 143(3) of the I.T.Act 1961 where the G.P. & Selling rate are lesser then appellant's G.P. and appellant’s Selling rate. The Appellant has also filed the judgement of Hon'ble High Court & Hon'ble ITAT but L’d C.I.T. (A) has neither given any importance to the comparable case & has ignored the judgement of Hon'ble High Court & Hon'ble ITAT. The L'd CIT(A) has not confronted any other case where G.P. shown is better than appellant case. In the circumstances, L'd CIT(A) is not justified to confirm the rejection of account.
4. That the L'd C.I.T. (A) has also confirmed the rate of G.P. applied by A.O. in assessment order on those grounds which are not existed in the case of appellant AOP. In fact, L'd CIT(A) has confirmed the application of higher rate on the basis of conjuncture & surmises.
That the L'd A.O. is totally fail to confront any other case where G.P. is better then appellant's G.P. Even in comparable case of the same year, whose results are accepted by A.O. in the order u/s 143(3) of the I.T. Act, filed before L'd CIT (A} is totally ignored. The L'd A.O. has not summon the other dealer of nearby palaces for enquiring their G.P. & N.P. shown by them, after making the request of appellant. In these circumstances the L'd CIT (A) should have not confirmed the application of higher rate of G.P.
That the G.P. applied by A.O. is very very excessive when the appellant filed the comparable case & decision of Hon’ble High Court & Hon’ble ITAT in support of G.P. shown by him. In the appellate order, the L’d CIT(A) should have accepted the G.P. shown by the appellant after considering the comparable cases & other judgements of higher courts.
7. The L’d CIT(A) should have not confirmed the enhancement of the sales on the basis of conjuncture & surmises.”
Ld. counsel for the assessee submitted that assessee’s books of account had been rejected solely on the ground that sales were not duly vouched. He relied upon the decision of Hon’ble Allahabad High Court in the case of CIT vs. Prayag Wines wherein Hon’ble High Court has held as under :-
“7. Having heard the learned counsel for the parties, we are of the view that it is not necessary that a cash memo is required to be issued for each and every sale and consequently, books of accounts could not be rejected on the sole ground that only one consolidated cash memo was issued at the end of the day.
In Ramji Lal and Sons Vs. Commissioner Sales Tax, 50 STC 344 the Allahabad High Court has held that no adverse inference against the veracity of the account maintained by the assessee could be drawn nor the assessee's account books could be rejected on the ground of not issuing separate cash memo in respect of petty sales and in issuing a consolidated cash memo at the end of the day. The same view was reiterated by the Allahabad High Court in the case of Commissioner of Sales Tax Vs. Vishnbu Chandra Vipin Chandra, 51 STC 345, wherein the Court held that failure to issue cash memos by itself was insufficient to reject the books of account, where the books were otherwise verifiable.
9. In the light of the aforesaid, the order of the Assessing Officer rejecting the books of account under Section 145(3) of the Act and consequently, making an addition of the income on estimate basis was reversed by the Tribunal. Further, such addition made on estimate basis is a question of fact as has been held in Commissioner (Custom Vs. Stoneman Marble, (2011) 2 SCC 758, Vijay K.Talwar Vs. CIT, (2011) 1 SCC 673, New Plaza Restaurant vs. ITO, 309 ITR 259 (HP) and Sanjay Oil Cake Vs. CIT, 316, ITR 274 (Gujrat)."
8. In the case of Prayag Wines (supra), the Hon’ble Allahabad High Court relied upon the decision in the case of Commissioner of Sales Tax vs. Vishnbu Chandra Vipin Chandra, 50 STC 345, wherein the Court held that failure to issue cash memos was insufficient to reject the books of account, where the books were otherwise verifiable. In the present case, the assessee in its reply dated 31.10.2011 noted at page 2 of the assessment order had clearly stated that Stock Register was maintained by assessee which gave all the details of opening stock, purchases and sales quantity-wise. The assessee had also filed month-wise details of purchases, sales and closing stock which has been noted at page 3 of the assessment order. Thus, in the present case also, it cannot be said that there were no details maintained by the assessee in regard to sales. Therefore, the decision relied upon by Ld. counsel for the assessee is squarely applicable to the facts of the present case and, therefore, respectfully following the same, it is held that the rejection of books of account solely on the basis of non-maintenance of sales vouchers was not justified. Accordingly, the addition made by the Assessing Officer, as confirmed by Ld. CIT(A), is deleted.
In the result, the assessee’s appeal in for Assessment Year 2009-10 is allowed.
ITA No.3794/Del/2016 (A.Y. 2009-10):
This appeal filed by the assessee is directed against the order dated 17.03.2016 passed by the Commissioner of Income Tax (Appeals), Muzaffarnagar, u/s 271(1)(c) of the Act relating to A.Y. 2009-10.
The Assessing Officer had initiated penalty proceedings u/s 271(1)(c) in respect of addition made in assessment order. Since I have deleted the addition in the quantum appeal, therefore, the penalty order has no legs to survive.
In the result, assessee’s appeal in for Assessment Year 2009-10 is also allowed.
Resultantly, both the captioned appeals of the assessee are allowed. Order pronounced in the open court on this 01st day of December, 2016.