TMI Blog2012 (2) TMI 679X X X X Extracts X X X X X X X X Extracts X X X X ..... liquor and IMFL, the books of account could not be rejected merely on the ground that the sales were not supported by proper vouchers. As such, the Assessing Officer was not justified in invoking the provisions of section 145(3) of the Act and the learned Commissioner of Income Tax (Appeals) rightly deleted the addition in question. In support of his arguments, he placed reliance on the decision dated 15th June, 2011 of this Bench of the Tribunal in the case of ACIT vs. M/s Avinash Chalana Co.; ITA No. 78/Ind/2010 wherein on similar facts the Tribunal directed the Assessing Officer to compute business income by applying net profit rate of 1.77% on the disclosed turnover of the assessee. 3. On the other hand, Shri Arun Dewan, learned Senior DR strongly opposed the order of the learned Commissioner of Income Tax (Appeals) and supported the order of the Assessing Officer by submitting that the Assessing Officer was fully justified in rejecting the books of account of the assessee and as such learned Commissioner of Income Tax (Appeals) was not justified in reversing the assessment order on this issue. 3. We have considered the rival submissions and perused the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omers cannot be verified with the rates accounted for by it in its books of account. Thus, the sales of liquor are not verifiable and, therefore, provisions of section 145(3) of the Act are clearly attracted in this case. The Assessing Officer, therefore, rejected the books of accounts and estimated the sale of liquor at two times of licence fee of ₹ 1,34,00,300/- which worked out to ₹ 2,68,00,600/- as against sale of ₹ 2,36,12,683/-shown by the assessee. The Assessing Officer also applied net profit rate of 3% on the estimates sales of ₹ 2,68,00,600/- working out net profit at ₹ 8,04,018/- and accordingly assessed the income of the assessee at ₹ 8,04,018/-. Felt aggrieved, the assessee approached the learned Commissioner of Income Tax (Appeals), who after hearing the assessee and considering the material available on record as also the cases relied upon before him, observed as under :- In view of the above, the assessee submitted that Assessing Officer was not justified in rejecting the books of account only on the basis that cash memo were not issued for sales made and requested that the Assessing Officer may be directed to accept th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not possible to have constant gross profit or net profit in a trade. Since no material was brought on record to show that the sales were made outside the books of account of the assessee or the amount of sale was understated, the sales shown by the assessee cannot be disturbed. 1 am in agreement with the submission of the assessee that nonissuing of cash memo is a general practice in this line of trade and is generally an accepted and prevalent practice. It may be noted that absence of cash memo in a given situation like liquor trade may not per .'Ie lead to an inference that the accounts are incorrect or incomplete. Here in the case of assessee, the Assessing officer had not pointed out any defect or deficiency in the books of account, and therefore, there was no sufficient ground with the Assessing Officer for invoking provisions u/s. 145(3) of the 1. T Act. Since provisions of section 145(3) of the 1. T Act are not applicable in this case and the books of accounts have not been validly rejected, the Assessing Officer was not justified in estimating the sales at a higher figure and applying a higher net profit than declared by the assessee. It may be mentioned tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of country liquor and IMFL, the books of account could not be rejected merely on the ground that the sales were not supported by proper vouchers and the Assessing Officer was directed to accept the declared results by the Assessee. The facts of this case are identical to the fact of the assessee's case, and thus, the ratio decidendi of I.T.A.T. decision is squarely applicable in the assessee's case. As the issue involved in the present appeal is identical and on the same set of facts, I am also inclined to hold that the Assessing Officer was not justified in rejecting books of account regularly maintained by the assessee merely for non issuing of cash memos for sales made and thereby enhancing the sales and net profit shown by the assessee. The addition in net profit made by the Assessing Officer is therefore, deleted and the Assessing Officer is directed to accept the book results declared by the assessee. Thus, the above grounds are decided in favour of the assessee. 4. We agree with the submission of the learned counsel for the assessee that this Bench of the Tribunal had an occasion to decide an identical issue in the case of ACIT v. M/.s Avinash Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave constant gross profit or net profit in a trade. Since no material was brought on record to show that the sales were made outside the books of accounts of the assessee or the amount of sale was understated, the sales shown by the assessee cannot be disturbed. I am in agreement with the submission of the assessee that non-issuing of cash memo is a general practice in the line of trade and is generally an accepted and prevalent practice. It may be noted that absence of cash memo in a given situation like liquor trade may not per se lead to an inference that the accounts are incorrect or incomplete. Here in the case of assessee, the Assessing Officer had not pointed out any defect or deficiency in the books of accounts and ,therefore, there was no sufficient ground with the Assessing Officer for invoking provisions u/s 145(3) of the I.T. Act. Since provisions of section 145(3) of the I.T. Act are not applicable in this case and the books of accounts have not been validly rejected, the Assessing Officer was not justified in estimating the sales at a higher figure and applying a higher net profit than declared by the assessee. 4.If the aforesaid conclusion drawn in the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er figure. Thus we direct the Assessing Officer to compute business income by applying net profit rate of 1.77% on the disclosed turnover of the assessee. If the conclusion drawn in the aforesaid order is kept in juxtaposition with the facts of the present appeal, we find that the facts are identical, we, therefore, following the aforesaid order of the Tribunal, confirm the order of the learned Commissioner of Income Tax (Appeals) by holding that the Assessing Officer was not justified in rejecting the books of accounts regularly maintained by the assessee merely on the ground of non-issuance of cash memos for sales made and thereby enhancing the sales and net profit shown by the assessee. Identically in the case of ACIT v. Surewin Marketing Private Limited (ITA No. 605/Ind/2010) for the assessment year 2007- 08, this Bench vide order dated 21st December, 2011 modified the orders of the lower authorities and directed the Assessing Officer to apply net profit rate of 1.5% in place of net profit rate of 1.5% shown by the assessee. We further find that learned Commissioner of Income Tax (Appeals) while coming to a particular conclusion has elaborately dealt with the submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 66,87,858/- ii. Makson Ind.P. Ltd. ₹ 41.09,329 iii. Makpar Exports P.Ltd ₹ 17,05,500 ₹ 1,25,02,687 The Assessing Officer treated the above amounts as deemed dividend in the hands of the assessee and added the same to the total income of the assessee u/s 2(22)(e) of the Act for the reasons mentioned in the assessment order. 3. Felt aggrieved, the assessee approached the learned Commissioner of Incometax (Appeals). The thrust of the submissions made before the learned Commissioner of Incometax (Appeals) is that the Assessing Officer was not justified in treating the funds borrowed by the assessee company from the above three companies as deemed dividend u/s 2(22)(e) of the Act since the assessee was neither a registered or beneficial shareholder in any of the above companies. 4. The learned Commissioner of Incometax (Appeals) for the reasons given in his appellate order held that it is an admitted fact that the assessee company was not a share holder in any of the other thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated them in a subsequent statute, the legislature must be taken to have used them according to the meaning which a Court of competent jurisdiction has given them. Page 46 para 23 In the 1961 Act, the word shareholder is followed by the following words being a person who is the beneficial owner of shares . This expression used in Section 2 (22)(e) , both in the 1961 Act and in the amended provisions w.e.f. 1st April ,1968 only qualifies the word shareholder and does not in any way alter the position that the shareholder has to be a registered shareholder. These provisions also do not substitute the aforesaid requirement to a requirement of merely holding a beneficial interest in the shares without being a registered holder of shares. The expression being is a present participle. A participle is a word which is partly a verb and partly an adjective. In Section 2(22) (e), the present participle being is used to described the noun shareholder like an adjective. The expression being a person who is the beneficial owner of shares is therefore a further requirement before a shareholder can be said to fall within the parameters of Section 2 (22) (e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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