Commissioner Of Income Tax, Bikaner v. M/S. Ashok Behi Bharat Sethi & Party

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR J U D G M E N T D.B. INCOME TAX APPEAL NO.89/2009 Commissioner of Income Tax, Bikaner vs. M/s. Ashok Behi Bharat Sethi & Party Date of Judgment : 15.01.2013 PRESENT HON'BLE MR. JUSTICE DINESH MAHESHWARIHON'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 Section260-A of the Income Tax Act, 1961 ('the Act') against thejudgment and order dated 30.10.2007 passed by the IncomeTax Appellate Tribunal, Jodhpur Bench, Jodhpur ('the Tribunal')in ITA No.158/JDPR/1998 and CO No.54/05 for the assessmentyear 1994-1995, whereby the Tribunal has dismissed the appealof the Revenue and has allowed the cross-objection of theassessee; and in the result, has deleted in toto the impugnedadditions towards country liquor business and Indian MadeForeign Liquor (IMFL) business of the assessee, as made by theAssessing Officer ('the AO') in the assessment order dated14.3.1997, and as partly retained by the Commissioner ofIncome Tax (Appeals), Jodhpur ('the CIT(A)') in the order dated28.01.1998 as passed in the assessee's appeal. The appeal has been admitted on the following question of law:- “Whether the best judgment assessment made bythe A.O. was based on cogent material andrelevant criteria and the CIT(A) was unjustified indisplacing the certain of comparable cases thanthat of past history and the Tribunal had erred inaffirming 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 liquorbusiness and during the period relevant to assessment year1994-1995, the profit of the assessee from country liquorbusiness was assessed at Rs.1,48,55,541/- as against thedeclared profit of Rs.1,11,74,756/- by adopting a net profit rateof 18% towards the total outgoings (total payment made toGovernment for lifting goods) as against the declared rate of13.54% and the gross profit of the assessee from the IMFLbusiness was assessed at Rs.2,68,33,377/- as against declaredgross profit of Rs.2,46,55,317/- by adopting a net profit rate of26% towards the total outgoings as against the declared grossprofit rate of 24.40% after rejecting the books of accounts of theassessee, under Section 145 of the Act. The profit rate wasadopted by the AO by taking into account the past history of theassessee and comparable case of one M/s. Ramesh KumarTrilok Singh & Party, Anoopgarh. Feeling aggrieved, the assessee preferred an appeal beforethe CIT(A), which was partly allowed by the order dated28.01.1998. The CIT(A) though upheld the order of the AO for applying the provisions of Section 145(2) as the sales of theassessee were not supported by vouchers but, came to theconclusion that the addition made by the AO was in factexcessive, keeping in view the past results of the assessee.While observing that when books of accounts are rejected, pasthistory of the case becomes relevant and the same could be aguide for reasonable profit, the learned CIT(A) restricted theaddition made by the AO to Rs.8,25,308/- for country liquorbusiness and Rs.6,06,162/- for IMFL business. Aggrieved by the aforesaid order dated 28.01.1998, theRevenue preferred an appeal before the Tribunal and theassessee took cross-objections therein. By the impugned order dated 30.10.2007, the Tribunal hasallowed the cross-objections taken by the assessee and hasdismissed the appeal preferred by the Revenue; and, in theresult, has deleted the additions altogether while observing andholding as under :- Aggrieved by the aforesaid order dated 28.01.1998, theRevenue preferred an appeal before the Tribunal and theassessee took cross-objections therein. By the impugned order dated 30.10.2007, the Tribunal hasallowed the cross-objections taken by the assessee and hasdismissed the appeal preferred by the Revenue; and, in theresult, has deleted the additions altogether while observing andholding as under :- “4...........From the above charts, it is apparentlyevidenced that the gross profit rate declared in this yearis better than the past year. The consistent view of thisBench, in this regard, is that even after rejection of booksof accounts u/s 145(2), addition is not automatic unlessthere is some valid reasons for doing so. This Bench hasbeen usually giving preference to the past history of theassessee. It is found to be comparable with the currentyear than no further trading addition is allowed to bemade. In this case the results are far far better than thelast year so no further addition is called for. We may referto the case of Banna Lal Jat Vs. ACIT reported in XXVITax World November 2001 part 5 page No.447 in thisregard, inter alia. We may also refer to the case of JCITVs. M/s Tak Sidhawat & Party in ITA No.615/JU/1998order dated 07.07.2003 wherein it has held that “theAssessing Officer has not been able to point out anyspecific defect in the books of accounts of the assessee,the purchases and sales in quantity are fully vouched and controlled by the Excise Department, in such like cases,we have been holding that unless some specific defectsare pointed out by the department, only on account ofnon-issuance of sales bill no addition can be made. Sinceno specific defects have been found in this case also andthe results of the year are better than the past year, weare of the considered opinion that no further addition canbe made in the declared results of the assessee and thedeclared results have to be accepted. Therefore, in ourconsidered opinion, the ld. CIT(A) even after acceptingthe above theory in principle, has sustained someaddition which is paradoxical. The ld. CIT(A) hasobserved at page No.6 of his order that “admittedly theappellant has shown better profit in this year ascompared to the last year”. With the above observations,we dismiss the ground raised by the revenue and acceptthe ground raised by the assessee, in respect of countryliquor account. 5..........Apparently, the assessee has declaredbetter gross profit rate at 24.04% as compared to23.85% shown in the immediately preceding assessmentyear, in spite of the fact that the turnover of IMFL/Beerincreased substantially. Since the trading results arebetter in this year as compared to the earlier year, nofurther addition is warranted. We therefore, delete theentire addition made in this account as well.6.In the result, the appeal of the Revenue isdismissed 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 asunder:- 5..........Apparently, the assessee has declaredbetter gross profit rate at 24.04% as compared to23.85% shown in the immediately preceding assessmentyear, in spite of the fact that the turnover of IMFL/Beerincreased substantially. Since the trading results arebetter in this year as compared to the earlier year, nofurther addition is warranted. We therefore, delete theentire addition made in this account as well.6.In the result, the appeal of the Revenue isdismissed 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 asunder:- “In our view, ultimately, the matter had been of puttinga estimate on the profit of the assessee while recordingthe findings on facts. The CIT(A) has given cogentreason for not endorsing the approach of the AO inmaking assessment with reference to the case of anotherassessee after finding it to be not a directly comparablecase and hence, not a safe guide more particularly, whenassessee's past history was available and there was nomaterial difference in the facts pertaining to the relevantassessment year and the past history year. The CIT(A),even while accepting past history as the relevant basisfor assessment, proceeded to retain a part of theaddition to the tune of Rs.10,65,928/- without cogentand sufficient reason therefor. The Tribunal, therefore,while endorsing the basis adopted by the CIT(A), hasfound no reason to sustain any addition and hence,deleted the addition altogether. M/s. Ashok Behi Bharat Sethi & Party In the totality of circumstances, the Tribunalcannot be faulted in accepting the profit rate as declaredby the assessee while not approving the rate as appliedby the AO. The order as passed by the Tribunal does notappear suffering from any perversity or from theapplication of any wrong principle so as to call forinterference. Accordingly and in view of the above, the answerto the questions formulated in the present case is in theaffirmative i.e. against the revenue and in favour of theassessee. Consequently, the appeal fails and is herebydismissed. No costs. ” The reasons forgoing, on all the relevant and materialaspects, equally apply to the present appeal too, which is basedon self same grounds. Thus, following the decision aforesaid andin the same terms, this appeal also stands dismissed. No costs. (ARUN BHANSALI)J.RM/ (DINESH MAHESHWARI)J.