TMI Blog2010 (8) TMI 755X X X X Extracts X X X X X X X X Extracts X X X X ..... Even otherwise apparently photocopies of such daily reports indicated that there are enough variations in the writing and impression of the ink, which in turn indicate that it could not have been written in one sitting. It is because not a single instance has been pointed out by the Assessing Officer that assessee is not issuing vouchers to the customers for sale of petrol and diesel etc. Merely making a general statement without actually looking into the books would not be sufficient to arrive at a finding that assessee is issuing or not issuing vouchers against its sales. Regarding daily stock report we are not convinced that it has been prepared in one sitting. If the department had any doubt it could have submitted the original daily reports and produced before us. It has not been done. So far as the claim of loss is concerned, it is not a consequence of writing of the books but a consequence of doing business in a particular manner and, therefore, excess claim of losses or low GP cannot be a basis for rejecting the books. The rejection of the books in accordance with section 145 is the initial step before AO resorts to next step i.e., estimation of income. Thus, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and in law in confirming action of Assessing Officer in rejecting book results of the assessee without rejecting books of account as there is not a single defect in the books of account. (2)Ld. CIT(A) has erred in facts and in law in adopting shortages of last 3 years as a base to hold shortage in sale of petrol at 0.87 per cent and diesel at 0.38 per cent to be reasonable and further erred in confirming disallowance of excess shortage. 3. The facts of the case are that assessee is running a petrol pump at which it is selling petrol and diesel. During the year under consideration assessee declared sales of petrol to the tune of Rs. 19,18,87,640, sale of premium petrol at Rs. 6,49,43,393. Total sales of items including diesel, super diesel, oil and kerosene and LDO has been declared at Rs. 37,86,22,483 giving GP of Rs. 87,29,367 which is about 2.3 percentage as compared to 2 per cent in the last year on a turnover of Rs. 1,37,42,247 giving GP of Rs. 1,01,33,947. The Assessing Officer examined shortage in petrol and diesel and found that assessee has shown shortage of 0.94 per cent in petrol, 0.47 per cent in premium petrol, 0.70 per cent in diesel and 0.08 per cent in sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n diesel. These guidelines are prepared after the detailed study and loss given are maximum losses and are applicable to the petrol dealers. ( i )In comparable case of Mahendra Motors, the loss of petrol is 0.58 per cent and that of diesel is 0.23 per cent which is operating under the same conditions as appellant. Moreover, the loss on evaporation and handling is more if the quantity sold is less. So assessee s loss should be less than that of M/s. Mahendra Motors. ( j )The Assessing Officer has rejected the contention of the appellant that Hon ble Gujarat High Court vide their order dated 11-6-1996 has released the stock of appellant confiscated by the Civil Department. It has been mentioned that issue for actual loss in petrol and diesel was not examined by the Hon ble Gujarat High Court and the stock was released on the ground that no adulteration or illegality was detected. ( k )It was also mentioned that assessee s plea that no additions on this account were made in earlier years is not acceptable as every year is separate assessment . . . . Considering all the above factors, it was treated that shortage to the extent of 0.58 per cent in petrol and 0.32 per cent in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition of Rs. 7,68,476. 4. The ld. CIT(A) considered the past history of the assessee according to which loss in petrol was as under : Asst. Year Percentage 2001-02 0.85 per cent 2002-03 0.83 per cent 2003-04 0.88 per cent And that in diesel was as under : Asst. Year Percentage 2001-02 0.27 per cent 2002-03 0.31 per cent 2003-04 0.38 per cent Considering the history of the case ld. CIT(A) directed the Assessing Officer to allow a loss of 0.87 per cent in petrol and 0.38 per cent in diesel on account of shortage and work out the addition. As per direction of the ld. CIT(A) the addition worked out on account of excess claim of loss was Rs. 1,83,200. 5. Before us, the ld. AR for the assessee submitted that ld.Assessing Officer has not pointed out any defect in the maintenance of books of account. Therefore, without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly photocopies of such daily reports indicated that there are enough variations in the writing and impression of the ink, which in turn indicate that it could not have been written in one sitting. So far as the claim of loss is concerned, it is not a consequence of writing of the books but a consequence of doing business in a particular manner and, therefore, excess claim of losses or low GP cannot be a basis for rejecting the books. It has been held in CIT v. Jas Jack Elegance Exports [2010] 324 ITR 95 (Delhi) that if accounts are not defective profits cannot be estimated. Similarly, Hon ble Punjab Haryana High Court in CIT v. K.S. Bhatia [2004] 269 ITR 577 held that it is not possible to reject the books of account merely because profits are low as compared to earlier years. 9. Section 145 requires the Assessing Officer to give a finding as to whether method of accounting adopted by the assessee is such that it will not enable the Assessing Officer to compute the income of the assessee correctly or that there are serious defects in the maintenance of accounts which will not enable the Assessing Officer to work out the income of the assessee. Thus section 145 onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re regularly followed. The Assessing Officer has to show here that the way accounts are written or kept (and not accounting method adopted like cash or mercantile), profits cannot be correctly deduced therefrom. For rejecting the books by invoking condition No. 3 the Assessing Officer has to show that the assessee is abruptly changing method of accounting from cash to mercantile or for different transactions it is adopting different method of cash or mercantile. For this the Assessing Officer has to identify the transactions recorded in different methods or identify the Asst. Years, in which different accounting methods (cash or mercantile) have been followed. Every finding relating to three conditions has to be based on evidence and should not be merely an opinion of the Assessing Officer. Further, it is not always correct to resort to estimation after rejecting the books if adequate material is not available to support the estimation of higher income as compared to what assessee has shown. Thus rejection of the books in accordance with section 145 is the initial step before Assessing Officer resorts to next step i.e., estimation of income. Thus, the rejection of books cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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