TMI Blog1986 (3) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was free to sell liquor at the price of his choice and, therefore, even though the assessee maintained books of accounts and examined by him, according to him, the trading results were not verifiable as the sale vouchers were not maintained. After considering the submissions of the assessee, he applied proviso to s. 145 so as to determine the income on estimate basis. He estimated the sales at 2 1/2 times of the licence fee which came to Rs. 76,05,252 and on estimating the net profit at 8 per cent, adopted the income of Rs. 6,08,416 for the purpose of taxation. 3. On appeal, the pleas taken by the ITO were repeated and the CIT (A) gave his finding in paras 1.11 and 1.12 of his order as under: (i) Regarding the rate of GP he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit but this year the same was shown at 4.76 per cent. Justifying the estimate made by the ITO, the ratio of licence fee to sales applicable in various years was brought to our notice and it was suggested that this year it fell down from 1:3.25 to 1:2.07 and the ITO estimated at 1:2.50 and applied the rate of 8 per cent of net profit. In respect of the asst. yr. 1979-80, it was clarified that the assessee had shown 6.12 and the matter was pending before the CIT(A). Again in the case of another firm wherein some of the partners were common for the asst. yr. 1980-81 and subsequent years the rate of net profit shown was little less than 8 per cent. Commenting upon the observations by the CIT(A) in para 1.11 regarding the method of accounti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulfilment of minimum guarantee in respect of off-take of quantity of liquor as per the terms of the licence. The sales are required to be made in sealed packing as supplied by breweries under the supervision of Excise Department. Every salesman incharge of the shop is required to render statement of sales showing opening quantity receipt of goods during tax day and closing stock from the day together with the sale price, of the goods sold and the expenditure of the day. The daily sale is subject to surprise checking by visiting partners. The sale rates are required to be accepted as per the Excise Rules on the notice board conspicuously shown outside the shop. From various shops the details received are collection in Central office and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,000. This itself makes difference of Rs. 11,67,101. If this aspect is taken into consideration, the net profit percentage would go well above 6 1/2 per cent. In the asst. yr. 1979-80 the net profit rate was 6.12 per cent which according to the assessee was accepted by the ITO though, however, according to the ld. departmental representative the matter is pending before the CIT(A) and, therefore, we would not proceed on the basis that the net profit percentage was accepted by the Revenue but we would only take this aspect into consideration that as per the books the assessee showed 6.12 per cent approximately in the year under consideration. (ii) Regarding the method adopted by way of proportion of sales to licence fee, we are in entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from way of like of society in India, impact is also required to be judged of Government philosophy. The assessee s accounting year begins in April, 1977 ending with March, 1978. In Feb., 1977 the results regarding Government to be headed by Hon ble Shri Morarji Desai were out. The election was preceded by campaign by person no less than late Shri J.P. Narayan, whose ideas on drinking are too well known to be repeated. Hence the impact resulting in adverse effect (or favourable effect) from revenue s point of view is required to be considered and weighed, an exercise which we refrain to undertake the impact of this aspect is not considered by authorities below. (iv) From the case as developed and stated before the authorities below with r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he grounds taken are as follows: "1. On the facts and in the circumstances of the case, the authorities below have erred in invoking the power under proviso to s. 145(1) of the IT Act, 1961, to the facts of the appellant case. the rejection of books of accounts is arbitrary, illegal and totally uncalled for. 2. The estimate of sale at Rs. 65 lacs as against declared sales of Rs. 63,24,600 is arbitrary, without material and lacks judicial basis. Likewise the application of net profit rate of 5 per cent on the estimated sales of Rs. 65 lacs is arbitrary, unjustified and illegal. The enhancement of profit from Rs. 3,01,270 (declared) to Rs. 3,25,000 (assessed by the CIT (A) is quite arbitrary, biased, prejudicial and vindictive in nature s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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