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TMI Blog2014 (6) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... ther the respondent No.1 should have allowed 15% wastage especially when the AO has allowed 15% wastage in subsequent years? v) Whether the respondent No.1 has ignored the material evidence? vi) Whether the respondent No.1 has failed to refer to the relevant pleading and evidence on record while passing the impugned order?" 2. Briefly stated the facts as narrated in the appeal may be noticed. The return of income was filed on 29.9.2008 declaring loss of Rs. 1,34,853/-. The said return was processed under Section 143(1) of the Act and the case was selected for scrutiny and notice under Section 143 (2) of the Act was issued on 23.9.2009. Subsequently, the case was taken up for scrutiny by the Additional CIT, Range-III, Jalandhar and notices under Sections 143(2) and 142(1) of the Act along with questionnaire dated 24.11.2009 were issued to the assessee. The assessee had shown receipts amounting to Rs. 9,25,265/- on account of food sales. The purchase against the food sales was Rs. 39,12,897/- and the opening and closing stock of good items were shown at Rs. 72,82,615/- and Rs. 73,18,326/-, respectively. The Assessing Officer vide order dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... himself stated in his reply reproduced above that the items used for consumption by the assessee company are perishable and if not consumed within the requisite time, have to be thrown away. In such circumstances, it is not understandable as to how and why the assessee is maintaining opening and closing stock of huge sums like Rs.72,82,615/- and Rs.73,18,376/- as against which, sales of only Rs.92,25,262/- have been shown. The very figures of opening stock, closing stock and sales are enough to show that the books of account of the assessee company are being manipulated, and the trading results shown do not present the true and correct picture of state of affairs of the assessee. In view of all these facts, the assessee's AR vide order sheet noting dated 16th November, 2010, was required to show cause as to why the book results of the assessee may not be rejected u/s 145(3) of the Income Tax Act, 1961. 4.3 XX XX XX XX 4.4 Therefore, in view of the detailed discussion in the preceding paras, being not satisfied about the correctness and completeness of the accounts of the assessee company, I reject the same u/s 145(3) of the Income-tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of 1:3 does not arise from final latest ITAT's order." The reply of the assessee's AR, as reproduced above,is to say the least, ridiculous. The assessee's AR has referred to the Hon'ble ITAT's order for A.Y. 2005-06 but has contended that the ratio of 1:3 has never been applied, and not been sustained. It appears that the assessee's AR is neither aware of the facts of the case or its past history, and nor has he bothered to read the assessment order, CIT(A)'s order and ITAT's order for the said assessment years. The relevant portion of the CIT(A)'s order for A.Y. 2005-06 is reproduced hereunder for ready reference:- "I have carefully considered the submissions of the appellant and have gone through the findings of the AO as incorporated in the order. It is seen from the order that the facts and material based on which the addition was made by AO were similar to the one involved in the case of appellant for the asstt. years 2002-03 and 2004-05 appeals wherein were decided vide order dated 31.03.22006 bearing appeal No. 531/04-05/CIT (A)/Jal and order dated 30.05.2007 vide Appeal No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation was not submitted by the assessee despite reminders, the AO gave another opportunity to the assessee to submit the requisite information, as well as to produce the stock register containing the inventory of opening and closing stock and day to day consumption of the provisions and the groceries purchased and month-wise particulars of opening stock, purchases, consumption and closing stock of the groceries or the provisions. The month-wise break-up of the purchases and sales was also asked for along with the month-wise ratio of consumption of groceries/provisions to food sales. The assessee submitted before the AO that it was not maintaining day to day stock register of consumption of groceries due to various reasons. It was submitted that maintenance of consumption register was not feasible for the reason that there was 250 items which were consumed and that there were numerous perishable items purchased items purchased which if not consumed within the requisite time, had to be thrown away. It was submitted that numerous items became obsolete and outdated if not consumed within the stipulated time and had to be destroyed. It was submitted that for this reason no consumptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee submitted that in the latest order dated 6th June, 2008 of the ITAT for the A.Y. 2005-06 in its case filed by the department against sustaining addition of Rs.65,785/- in food sales after restricting the exorbitant addition of Rs.56,80,792/- in food sales by CIT(A), this ground of appeal was rejected and thus only addition of Rs.65,785/- remained. It was, therefore, contended that the alleged ratio of 1:3 had never been applied nor been sustained by the CIT(A) or by the Hon'ble ITAT. The AO, however, referred to the relevant portion of the Ld. CIT(A) for A.Y. 2005-06 in which he had clearly mentioned that he was applying the ratio of 1:3 as against the ratio of 1:5 applied by the AO and that the assessee had got relief of Rs.56,15,007/- on the application of the said ratio by the learned CIT (A). The AO further noted that the Hon'ble ITAT had noted that the assessee had not challenged the rejection of the books results by the AO which had been confirmed by the Ld. CIT(A), and had upheld the estimation of the sales by the ld. CIT(A) by applying the ratio of 1:3 between grocery contention and sales holding that it was a reasonable basis. Hence, the AO held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 1:3 ratio was subsequently confirmed by the ITAT, Amritsar Bench. Hence, the AO gave a show cause notice to the assessee to explain as to why the ratio of 1:3 may not be applied in the assessment year under consideration. The assessee submitted that in the latest order dated 6th June, 2008 of the ITAT for the A.Y. 2005-06 in its case filed by the department against sustaining addition of Rs.65,785/- in food sales after restricting the exorbitant addition of Rs.56,80,792/- in food sales by CIT(A), this ground of appeal was rejected and thus only addition of Rs.65,785/- remained. It was, therefore, contended that the alleged ratio of 1:3 had never been applied nor been sustained by the CIT(A) or by the ITAT. The AO, however, referred to the relevant portion of the order of the Ld. CIT(A) for A.Y. 2005-06 in which he had clearly mentioned that he was applying the ratio of 1:3 between grocery contention and sales holding that it was a reasonable basis. Hence, the AO held that the ratio of 1:3 was to be applied for estimating the sales made by the assessee. Taking into account the value of the purchases, opening and closing stock, the consumption by the assessee was worked out to Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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