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TMI Blog2010 (8) TMI 755X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 super diesel. According to the Assessing Officer shortage shown by the assessee in petrol and diesel was found to be excessive as compared to similar products sold by the assessee or by other petrol pump dealers. The assessee explained to the Assessing Officer why there is su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant. 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 diesel as in the comparable case of M/s. Mahendra Motors is reasonable and balance claim of the appellant of excess shortage was disallowed. The Assessing Officer, however, did not agree with the above contentions of the assessee. He noted as under :- (1)Petrol and premium petrol are same. Shortage in premium petrol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 rejecting the books he cannot proceed to estimate the income of assessee. The disallowance of loss is in fact estimation of income which cannot be done without first invoking the provisions of section 145. On merit the ld. AR repeated the same arguments as were advanced before the ld. Assessing Officer and before the ld. CIT(A). 6. On the other hand, the ld. DR pointed out that Assessing Officer has pointed out several defects in the body of his assessment order. They are not issuing any bill and voucher in respect of several sales and preparing daily report in one sitting. 7. We have considered the rival submissions and perused the material on record. In our consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 only relates to method of accounting or recording of the events which take place during the course of business. Section 145 cannot be invoked for carrying out business imprudently or very good results in the business are not shown. It is for the assessee to carry out the business as per his own prudence. Efficient businessman may give better results and higher income whereas imprudent or inefficient businessman may not be able to earn the profit to that extent. The books of an imprudent businessman cannot be rejected because in the eyes of Assessing Officer he has not declared the profits as it ought to have been. In the similar manner books of account of a prudent businessman giving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 done without pointing the defects in accounts or accounting method. As we have held above, the Assessing Officer has neither given any finding about rejection of books nor it is discernible from his order, the working of his mind for rejection of the books. In view of this we hold that Assessing Officer has failed to discharge the onus of rejecting the books and invoking section 145(3). We are supported by the decision of Hon'ble Gauhati High Court in Madnani Construction Corpn. (P.) Ltd. v. CIT [2008] 296 ITR 45 wherein it is held that accounts cannot be rejected if Assessing Officer did not find books of account incorrect or any infirmity in the audit report. In CIT v. Rajni Kant Dave [200 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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