TMI Blog2014 (11) TMI 723X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellant : Sh. S.N. Bhatia, DR For the Respondent : Sh. Pradeep Dinodia, CA Sh. R.K. Kapoor, CA ORDER Per B. C. Meena, A. M. This is the appeal filed by the Revenue emanates from the order of the CIT(A)-VII, New Delhi dated 16/08/2012. 1.1 The assessee is engaged in the business of making purchases of readymade garments from various merchandisers for M/s Jain Sons. These goods are sold to M/s Jain Sons at actual cost plus 2% handling charges and applicable sales tax. This is done to enable centralization of sales tax account with one entity only and such practice was being followed by assessee from more than 15 years and the same has been accepted by the department while framing the orders u/s 143(3) of the Income Tax Act in the earlier years (for example assessment year 1995-96). The AO made an addition of ₹ 1,23,31,637/- on account of unaccounted of consignment sales and also made an addition of ₹ 20,39,828/- on account of unaccounted commission on the sales. CIT(A) has deleted the addition. 2. Now the revenue is in appeal by taking the following grounds of appeal: 1. The order of the ld. CIT(A) is erroneous and contrary to facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness and completeness of account; and (c) making of an assessment in the manner provided u/s 144; Regarding the completeness of accounts it refers not only to the accounting entries for all the transactions done in the previous year but also to the list of books of accounts. In other words, the failure to maintain certain register or any other books makes the accounts of the assessee incomplete. On the other hand, the correctness of the account refers to the quality or accuracy or reliability of accounts maintained by the assessee and it covers reconcilable mistakes or errors in accounts. Thus, the completeness refers to the list of books of accounts and entries therein and the accuracy refers to the quality of the accounts of the assessee. 3.3 In the case of Dhakeswari Cotton Mills Ltd. vs. CIT (1964) 26 ITR 775 (SC) the Hon ble Supreme Court had decided that once the books of accounts of the assessee are rejected then the profit has to be estimated on the basis of proper material available. However, the AO is not entitled to make a pure guess make estimation without reference to any evidence or any material at all. There must be something more than mere suspicion to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own the consignment sales in its turnover. This addition is under the wrong belief that consignment sales should be included in the turnover of the assessee, which is clearly against the guidelines issued by the Institute of Chartered Accountants of India. In any case, the AO has failed to take into account the corresponding figures of the consignment purchases. In any case, the AO has failed to take into account the corresponding figures of the consignment purchases. In any case, the AO has failed to give any opportunity to the assessee for explaining and adducing evidence as to why consignment sales should not be included in the sales-turnover of the assessee. On the other hand, the assessee had explained vide letter dated 11.9.2009 that the goods were received on consignment basis and belong of the consignee and assessee was only entitled to commission thereon and the sales were on behalf of the consignee only and the property in the goods did not vest with the assessee. In the said letter, the assessee reconciled the purchases booked by M/s Jainsons with the sales booked by the assessee, which is ignored by the AO. The AO has neither rejected the explanation nor commented adver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n consistently certifying that the assessee has been regularly following the method of accounting and that the annual profits can be properly deduced from such method of accounting employed by the assessee. The auditors over the years have also been certifying that the accounts are regularly maintained and are complete in the sense that there is no significant omissions therein change in law whether enacted or declared by the Supreme Court. The assessing authority has to look into the substance of the situation and decide the matter in such a manner that neither is put to unreasonable liability nor the assessee is subjected to unreasonable hardship. No doubt it isnot only the right but also the duty of the AO to consider whether or not the books disclosed the true state of accounts and the correct income can be deduced therefrom. But these rights and duty have to be exercised in such a manner and have to be based on cogent reasons and sufficient material. The reasons given by the AO in this case on the facts and circumstances is demonstrated, as erroneous by the assessee. Rejection of books of account should not be done light heartedly as held by the Kerala High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al no. 1 (PB 12) @ ₹ 232.50 per piece for a total price of 8 pieces at ₹ 1,860/-. To give a precise calculation, it worked out as under: 1) Price at which each item sold by Jainsons ₹ 310.00 (PB 3) 2) Less: 22% discount on the above as given ₹ 68.20 by consignor. ₹ 241.80 This has been billed by the assessee to M/s Jainsons as follows: 1) Price of one item at serial no. 1 ₹ 232.50 [PB 12] 2) Add: 4% Sales tax ₹ 9.30 ₹ 241.80 This is just an example. Your honour would find that any item can be similarly tallied with the total sales statement and the bills raised by the assessee on M/s Jainsons based on actual sales. This would clearly prove the contention of the assessee that on consignment sales, the assessee does not charge any mark up except handling charges @ 2%, which is mentioned at the end of each bill. The CIT(A) required the assessee on 29th July 2010 to produce these records for all the years. These records were produced and verified by the CIT(A) on 30th July, 2010. Only upon verification and being satisfied on the accuracy of the above, the CIT(A) passed the order dated 16.8.2010. Your honour has also d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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