TMI Blog2014 (6) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... aintained proper books of account and the same were rejected u/s 145(3) of the Act - The claim of wastage in each year depends upon various factors and cannot be applied uniformly unless the comparable circumstances are analyzed and found to be identical - This would primarily be a question of fact - there is no weight in the plea that the claim of wastage allowed to the assessee in the subsequent year be adopted – thus, no substantial question of law arises for consideration – Decided against Assessee. - ITA No. 355 of 2013 (O&M) - - - Dated:- 9-1-2014 - MR. AJAY KUMAR MITTAL AND MRS. JUSTICE ANITA CHAUDHRY, JJ. Mr. R.K. Bajaj, Advocate for the appellant JUDGEMENT Per: Ajay Kumar Mittal: 1. The assessee has preferred this appeal under Section 260A of the Income Tax Act, 1961 (in short the Act ) against the order dated 12.8.2013 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as the Tribunal ), claiming the following substantial questions of law:- i) Whether the impugned orders are result of misreading and mis-appreciation of law and evidence? ii) Whether the respondent No.1 being final court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in law. 4. After hearing learned counsel for the appellant, we do not find any merit in the appeal. The Assessing Officer, CIT(A) and the Tribunal had sustained the rejection of books of account under Section 145(3) of the Act. The Assessing Officer while disallowing the claim of the assessee had recorded as under:- 4.2 From the reply of the assessee's AR reproduced above, it is obvious that the assessee is not maintaining any stock register of daily consumption of various items used in the business. It is stated in the said reply that the details of opening and closing stock were prepared at the end of the year. However, not even the inventory of opening and closing stock has been furnished leave aside the valuation of the same. It is the contention of the assessee's AR that the consumption of grocery items to food sales cannot be worked out because the items used by the assessee company are numerous, but even if this contention is considered, it cannot be understood as to why even the inventories of opening and closing stock could not be furnished, and in the absence thereof, it is absolutely not understandable as to how the figures and valuation of opening a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's AR was repeatedly given opportunities to show cause as to why the same ratio of 1:3 should not be applied to the year under consideration. The reply furnished by the assessee's AR vide his written submission filed on 16th November, 2010, is reproduced as under:- Regarding explanation called for alleging that why no addition under head sales of food be made by applying the ratio of 1:3 of grocery consumed as confirmed by ITAT in your case in earlier years. In this regard, it is respectfully submitted that, firstly, in latest order dated 6 June, 2008 of Hon'ble ITAT in appeal No. ITA No. 407/ASR/2008, for A.Y. 2005-06 filed by department against sustaining of addition of Rs.65785/- in food sales after restricting the exorbitant addition of Rs.56,80,792/-. In food sales by CIT(A), this ground of appeal of the department has been rejected and finally only addition of Rs.65785/- remained sustained and has become final order as no further appeal is pending against these findings. It is evident from perusal of this judicial order that this alleged ratio of 1:3 has never been applied, not been sustained and further it is evident from the order that the pett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in appeal before us...... ..... the ld. CIT(A) can be said to be justified in reaching the conclusion that the estimation of sales at five times of the consumption of materials is excessive which needed a reasonable basis of estimation with reference to material on record......... ....... In the light of findings reached by the ld. CIT(A), no interfernece is called for in his decision as he has merely corrected the estimation made by the assessing authority and adopted reasonable basis in doing so. 5. The aforesaid findings were affirmed on appeal by the CIT (A) with the following observations:- 5.1 As per the assessment order for the AZY 2008- 09, in respect of receipts from sale of food, the AO noticed that the assessee had shown receipts amounting to Rs.92,25,265/- on account of food sales. The purchase against the food sales was Rs.39.12.897/- an opening and closing stock of food items were shown at Rs.72,82,615/- and Rs.73,18,326/- respectively. The AO asked the assessee to furnish the quantitative details of the opening and closing stock and to explain the method of valuation of the stock with evidence. Since this information was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to several judicial decisions for the proposition that on account of nonmaintenance of stock register and not giving details of opening and closing stock and the day-to-day records of consumption of raw material, the trading results could not be relied upon and that the book results could be rejected, and rejected the book results of the assessee u/s 145(3) of the Act. She, thereafter, proceed to estimate the income of the assessee keeping in view the past history of the case. She noted that past history of the assessee showed that it was in the habit of suppressing and under-reporting its food sales. She noted that in A.Y. 2005-06 and earlier assessment years, the food sales of the assessee company had been estimated by the AO by taking the same to be 5 times of the grocery/ provision consumed but that the Ld. CIT(A) had allowed part relief and estimated the sales by applying the ratio of 1:3. She noted that the 1:3 ratio was subsequently confirmed by the Hon'ble ITAT, Amritsar Bench, Amritsar. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales were themselves enough to show that the books of accounts of the assessee were being manipulated and that the trading results shown did not present the true and correct pictures of the rates of affairs of the assessee. The AO referred to several judicial decisions for the proposition that on account of non-maintenance of stock register and not giving details of opening and closing stock and day to day records of consumption of raw material, the trading results could not be relied upon and that the book results could be rejected and rejected the books results of the assessee u/s 145(3) of the Act. The AO, thereafter, proceeded to estimate the income of the assessee keeping in view the past history of the case. She noted that past history of the assessee showed that it was in the habit of suppressing and under-reporting its food sales. It was noted that in A.Y. 2005-06 and earlier assessment years, the food sales of the assessing company had been estimated by the AO by taking the same to be 5 times of the grocery/provision consumed but the ld. CIT(A) had allowed part relief and estimated the sales by applying the ratio of 1:3. She noted that the 1:3 ratio was subsequently confir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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