TMI Blog2005 (3) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... Fortune Stone Ltd. 13,50,000 15,98,000 79,98,000 By AOP Members Shri Ashwani Kumar Dixit Rs. 2 lacs 2. Shri Ashwani Kumar Dixit deposited Rs. 2 lacs in cash on 21st April, 1999 by cash. The assessee filed confirmation of Shri Ashwani Kumar Dixit along with PAN No. ADVPD-1945-K (paper book 12). During the course of statement before the AO under s. 131 of the Act, Shri Dixit had denied that he had deposited any money with the assessee. 3. After hearing rival submissions, we are of the opinion that the PAN was given before the lower authorities and Shri Dixit was assessed to tax by the ITO, Ward 4(1), Jaipur, as per copy of acknowledgement slip. The counsel for the assessee submitted that no opportunity to cross examine Shri Dixit was given. Therefore, this issue is restored to the file of the AO with the direction that he should verify the fact of advancing Rs. 2 lacs from income-tax record of Shri Dixit. He should also give an opportunity of being heard and to cross-examine Shri Dixit by the assessee. Shri Anil Wadia Rs. 15 lacs and Shri Sohan Lal Singla Rs. 37 lacs 4. The brief facts of the case are that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pril, 1999. This was a case of adjustment which is borne out from the record produced before the lower authorities. Therefore, we are of the opinion that the learned CIT(A) erred in sustaining the addition of Rs. 10 lacs in the name of Smt. Kamoda Devi under s. 68 of the Act. Hence, we delete this amount of Rs. 10 lacs sustained by the learned CIT(A). By cash creditors Shri Devender Singh Rs. 50,000 7. After perusal of the facts of the record, we find that Shri Devender Singh had deposited Rs. 50,000 in cash. He had not been assessed to tax. The simple confirmation had been filed before the lower authorities. We find no infirmity in the order of the learned CIT(A) on this issue. Therefore, we sustain the addition of Rs. 50,000. Shri Ghanshyam Das Rs. 98,000 8. Similar is the case of Shri Ghanshyam Das who has given confirmation on plain piece of paper and no sources of the amount had been explained before the lower authorities. Therefore, the learned CIT(A) had rightly sustained the addition made for unexplained cash credit of Rs. 50,000. We decline to interfere with the order of the learned CIT(A) on this issue. Shri Nand Singh Rs. 50,000 and Shri Pushpendra Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed CIT(A) had rightly deleted the addition to the extent of Rs. 33,32,800. Therefore, we decline to interfere with the order of the learned CIT(A). Ground No. 1 of the Revenue: Deletion of trading addition of Rs. 5,92,55,512 Ground No. 1 of the assessee : Sustaining the income of Rs. 2.60 crores against loss of Rs. 2,92,30,610 shown by the assessee. 13. The brief facts of the case are that the assessee AOP had taken liquor contract (IMFL/Beer wholesale, IMFL Beer retail and Country liquor for Tehsils of Ajmer, Kekri, Kishangarh, Vijaynagar and Beawar, the major parts of which are rural areas. The return of income was submitted along with audited statement of accounts under s. 44AB of the Act, declaring loss of Rs. 2,76,86,920. The assessment was completed vide order dt. 31st March, 2003 under s. 143(3) at income of Rs. 9,64,86,310 by the AO. The position of the trading results achieved, assessed and sustained was as under: Trading loss shown by the assessee Rs. 2,92,30,610 Add. Depreciation Rs. 15,43,690 = 2,76,86,920 Trading profit assessed by the AO (Total Rs. 11,29,42,432) 8,52,55,512 Trading additions sustained by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its own fault and the books of account had rightly been rejected in the absence of the stock register, sale vouchers coupled with factors like lack of vouchers for expenses. He further relied upon the case of Awadhesh Pratap Singh Abdul Rehman Bros. vs. CIT (1994) 119 CTR (All) 1 : (1994) 210 ITR 406 (All) and submitted that the AO had rightly invoked the provisions of s. 145(2) of the Act. 16. The learned Authorised Representative made the following submissions: "On the basis of survey dt. 21st March, 2003, on two or three retail shops of IMFL/Beer of M/s Surjeet Wines (liquor contractor of Jaipur city in the financial year 2002-03) by some other officers of IT Department, Jaipur (not the learned AO), the retail sales rates of Jaipur city were applied on the assessee AOP and G.P. rate on that basis was applied which are as under: IMFL/Beer Wholesale 5 per cent IMFL/Beer retail 35 per cent Country liquor 65 per cent In avoidance of provisions of s. 142(3) of IT Act, no opportunity to cross-examine the source or the persons, from whom the information for margin of profit was collected by the Survey Team and applied on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liquor rates cannot be compared. (c) Information was gathered that no survey at any country liquor shop was carried out in Jaipur by the survey team so as to justify the application of such high G.P. rate of 65 per cent in case of country liquor branch. Moreover, the country liquor can only be purchased from M/s Rajasthan State Ganganagar Sugar Mills Ltd. and that too after payment of huge amount of permit fee and other charges to the State Excise Department and issue price to M/s Ganganagar Sugar Mills Ltd. If high margin of profit is charged, the manufacture of illicit country liquor at number of places in the remote areas and villages takes place. The manufacture of illicit liquor results in lower sales of branded county liquor dealt by the licensed contractors like assessee AOP. (d) That in case of wholesale IMFL/Beer, the total sales are vouched. The retailers get credit of fulfilment of liquor contract price on the basis of purchases in terms of quantity and, therefore, it is compulsory to issue sale invoices so as to verify the purchases made by retailers. There is no justification for the learned AO to apply G.P. rate of 5 per cent on wholesale sales. (e) The major pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but also arbitrary and whimsical." 17. The learned Authorised Representative made the following submissions in response to argument of the learned Departmental Representative. (1) The assessment of the assessee was completed under s. 143(3) of IT Act and not under s. 144 of the IT Act and, therefore, the learned Departmental Representative was not correct in stating before this Hon ble Tribunal that the assessee was not co-operating and, therefore, the AO was left with no alternative but to complete the assessment ex parte on the basis of material collected during the survey dt. 21st March, 2003 on the Jaipur liquor contractor. (2) Not a single case of manufacturing or selling spurious liquor by the assessee was found or noticed either by the Excise Department or others. The allegation that the assessee was selling spurious liquor was totally baseless. Moreover, if the assessee was to sell spurious county liquor, the liability on account of short license fee would have increased for not lifting the liquor as per obligation to purchase it as per the contract. (3) If one liquor contactor is indulging in any unlawful or illegal activities of carrying on liquor trade, the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates of Jaipur city in March, 2003. In these three years, there was drastic changes in the excise policy resulting in high duty and resultant high retail price. (c) As reported in leading daily Newspaper (paper book p. 10) the Jaipur liquor contractor used to sell liquor at Jaipur-Ajmer Border at just 50 per cent of the retail rates sold in Jaipur city. When the liquor was available at just 50 per cent of Jaipur city rates at the Border areas, no residents of assessee s liquor contract area would purchase it at the retail rates of Jaipur city. The assessee had to reduce the rates even lower than sold at border areas by Jaipur liquor contractors. (d) Without prejudice to above, for application of retail rates of Jaipur liquor contractor (charged in Jaipur city), the learned AO did not allow cross-examination as provided under s. 142(3) of IT Act. The rates applied could not be verified and, therefore, it is not known whether the rates applied were the actual rates or the creation of the learned AO. The assessee had collected evidence for retail rates of Jaipur city. The list is appearing at page No. (6) of the paper book. 18. We have heard the rival submissions and perused the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,610 (Rs. 2,60,00,000 + Rs. 2,92,30,610). 22. On this ground the learned Departmental Representative submitted that AO had rightly placed reliance on the case of Surjeet Wines, Jaipur. The assessee had not complied with the requirement of the AO for furnishing the requisite information and documents. Therefore, the AO had rightly estimated the income in the manner under s. 144 of the Act. He relied upon the case of CST vs. H.M. Esufali H.M. Abdulali and some other judgments. He submitted that the AO can estimate the income by applying the rule of thumb which in a sense is an arbitrary rule. The assessee was entirely responsible for that situation. 23. We considered the submissions of the learned Departmental Representative and submissions of the learned Authorised Representative had already been reproduced in this order. After perusal of the facts of the case, we find that the AO relied upon the case of Surjeet Wines, Jaipur. In this case, survey under s. 133A of the Act was conducted on 21st March, 2003. 24. As regards the application of G.P. rate of 5 per cent on IMFL Beer (wholesale), we agree with the opinion of the learned CIT(A) that no addition can be made in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order. Besides, we find that the AO has not completed the assessment in the manner laid down under s. 144 of the Act. He passed the order under s. 143(3) of the Act after relying on the case of Surjeet Wines, Jaipur. 27. Now we have to decide the issue whether the learned CIT(A) was justified in sustaining the trading addition of Rs. 5,52,50,610 (Rs. 2.60 crores + loss of Rs. 2,92,30,610). 28. After perusal of the record, we find that the learned CIT(A) after rejecting the basis adopted by the AO had estimated net profit for the year under appeal at Rs. 2.60 crores on the basis of income declared during subsequent assessment year, i.e., asst. yr. 2001-02. The learned CIT(A) had not discussed this issue in detail and the order of the learned CIT(A) is devoid of reasons as to how the income of the subsequent year can be substituted as income of the year under appeal. The trading addition can be made on the basis of immediately preceding, i.e., past assessment year or on the basis of comparable cases as held by the various Courts and also as per the book "Techniques of Investigation for Assessment" issued by the IT Department. Besides after going through the arguments of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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