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Income Tax Officer, Ward 1 (1) , Kota Versus Harish Kumar Sachdeva

2016 (4) TMI 906 - ITAT JAIPUR

Disallowance on account of net profit - Held that:- AO has not given any justification for applying 12% net profit on the estimated sale in the hands of licensee. In case of AOP, the case has been scrutinized U/s 143(3) of the Act where income disclosed by the AOP has been accepted by the Assessing Officer. The income result has been accepted by the Assessing Officer. Copy of scrutiny assessment has been placed in the paper book. The findings given by the ld CIT(A) are also not on merit in estim .....

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ddition on account of unexplained investment - Held that:- The ld CIT(A) has examined this issue thoroughly, which has not been controverted by the ld DR, thus the Assessing Officer have doubted the cash payment made to the sellers of the house property, which is not prohibited under the IT laws. The source in the hands of AOP had been explained by the assessee, therefore, we uphold the order of the ld CIT(A). - Decided in favour of assessee. - ITA No. 416/JP/2012, ITA No. 826/JP/2012, C.O. No. .....

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the circumstances of the case, the ld CIT(A) has erred in: (i) Reducing the NP rate from 12% to 20% of the turnover without any valid basis when the assessee has not maintained any books of accounts; (ii) deleting addition of ₹ 67,00,000/- on account of unexplained investment of the assessee just by accepting explanation of the assessee and without examining validity of creation of AOP and taxability of income in its hands. Grounds in assessee s Appeal ITA No. 826/JP/2012 1. The ld CIT(A) .....

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assessee in its hand when same is already assessed in case of Royal Wines, has resulted into double taxation. (iii) Income should be assessed on substance not merely on legal form. (iv) Not providing reasonable opportunity to establish that turnover of assessee is included in turnover of Royal Wines and thereby not considering the details filed by Royal Wines. 1.1 The ld Assessing Officer has erred on facts and in law in assessing the share of income from AOP of Royal Wines in hands of assessee .....

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turnover of Royal Wines. b) Separately estimating and assessing the income of liquor license of assessee in its hand when same is already assessed in case of Royal Wines, has resulted into double taxation. c) Income should be assessed on substance and not merely on legal form. d) Not providing reasonable opportunity to establish that turnover of assessee is included in turnover of Royal Wines and thereby not considering the details filed by Royal Wines. 1.1 The ld Assessing Officer has further e .....

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77; 1,00,600/-. The case was scrutinized U/s 143(3) of the Income Tax Act, 1961 (in short the Act). The first ground of revenue s appeal, assessee s cross appeal and cross objection filed by the assessee is against reducing the net profit rate applied by the Assessing Officer 20% to 12% by the ld CIT(A). The ld Assessing Officer observed that during the course of assessment proceedings, the assessee has not produced the books of account, bills vouchers etc. on the pretext that the return had bee .....

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he plea that the same had been included in the AOP M/s Royal Wines. The information obtained from the excise department and the TCS certificate, the details of purchase and sale had been provided there. As per TCS certificate, the total purchase of the liquor during the year were ₹ 1,23,84,855/- in respect of shop No. 6/65 and ₹ 1,25,54,540/- in respect of shop No. 6/58. Thus, the total purchases were made at ₹ 2,49,39,435/-. In point No. 5.13 of the license, it has been mentio .....

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uor business were not produced by the assessee. The assessee also admitted in his statement that he had no knowledge about the monthly rent given to the shops and also about the employees of the shop. In absence of books of account, purchase and sale bill, vouchers and supporting document, the ld Assessing Officer held that the correct profit cannot be deduced from the liquor business. The Assessing Officer gave show cause notice on this issue and estimating the net profit @ 12% on the turnover. .....

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the appeal partly by observing as under:- I have considered the AOS findings & assessee s submissions and also gone through the order of Assessing Officer in the ease of M/s Royal Wines, AOP. It is seen that assessee has not obtained any permission from State Excise Department 'to do business in the name of AOP. All the purchases (in respect to liquor shops licensed to the assessee) during the year were made in the name of assessee. All the payments (in respect to liquor shops licensed t .....

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it can be concluded that assessee has not transferred the license to the AOP, and that all the transactions (in respect to liquor shops licensed to the assessee) were carried out by assessee himself. It is therefore held that profits from the shops licensed to the assessee has to be assessed in the hands of assessee itself. Once it is held that profits from the shops licensed to the assessee has to be assessed in the hands of assessee itself, the profits from the above has to be estimated. Esti .....

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xpenses, salaries of employees and other misc. expenses. In similar line of trade, most of the traders have shown profits below 2%. Considering the above, in my opinion, it would be fair 86 reasonable to estimate the income of assessee @ 2% of the turnover. The same comes to ₹ 5,98,546/-. It is also seen that the credit for TCS has already been allowed in the case of AOP, M/s Royal Wines so. Assessee will not be entitled for credit of TCS. It is seen that M/s Royal Wines declared Net Profi .....

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to delete balance addition of ₹ 30,28,645/-. This ground of appeal is therefore partly allowed. 5. Now the revenue and assessee are in appeals and assessee also in C.O. before us. The ld DR has vehemently supported the order of the Assessing Officer. At the outset, the ld AR of the assessee has submitted that the first issue in this case is whether an assessee to whom license for running a shop of liquor is given by the excise department is prohibited for entering into a partnership or for .....

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d income of the AOP is assessed by the department in order passed u/s 143(3). In this connection, reliance is placed in case of Durga Madira Sangh Vs. CIT 153 ITR 226 (Raj.) (HC) where it was held that where the Excise Act does not prohibit entering into partnership by license holders with non-licensees, such a partnership is valid and eligible for registration. Further, the Supreme Court in case of Biharilal Jaiswal & Others Vs. CIT 217 ITR 746 at Page 758 held that where law prohibits ente .....

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sale of the two shops licensed to the assessee is included in the purchase and sale of the AOP and AOP is assessed by AO u/s 143(3), the same cannot be again assessed in the hands of the assessee. Hence, the addition made by the AO and partly confirmed by the CIT(A) is bad in law and the same be deleted. He further submitted that the AO has wrongly stated that in earlier years the assessee was running the liquor shop in his individual capacity. In fact in AY 06-07 an 07-08, the assessee has run .....

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e on an incorrect assumption of facts and applying N.P. rate of 12% is incorrect and unjustified. The ld AR has further submitted that the AO, Udaipur in various cases of liquor, where shops were allotted to the individual members but they form an AOP, assessed the income of such individual shops in the hands of the AOP and not in the hands of the individual members. Further, the credit of TDS in the name of individual members was allowed to the AOP. The assessment of such income in the hands of .....

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ate is also excessive and unreasonable more particularly when he has himself mentioned that most of the traders have shown the profit below 2%. Further, when M/s Royal Wines has already been assessed @ 0.12%, there is no reason to apply N.P. rate of 2% on such turnover. Therefore, the addition of ₹ 5,62,633/- confirmed by CIT(A) is unjustified and the same be deleted. He relied on the decision of Hon ble Jodhpur ITAT Bench in the case of ACIT Vs. M/s Krishan Lal Meel & Party alongwith .....

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on record. It is undisputed fact that the license was granted in the name of the assessee by the excise department for two shops. The sale of the liquor has been disclosed by the assessee in the business of AOP. The assessee has not taken any permission from the excise department for transferring his business to the AOP but as per excise rule, only permission is required to run the business in the name of AOP by the licensee. The AOP already had been considered this business and disclosed the i .....

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the case has been scrutinized U/s 143(3) of the Act where income disclosed by the AOP has been accepted by the Assessing Officer. The income result has been accepted by the Assessing Officer. Copy of scrutiny assessment has been placed in the paper book. The findings given by the ld CIT(A) are also not on merit in estimating the income @ 2% as in the hands of AOP, same income has been taxed by holding that Assessing Officer of the AOP namely Royal Wines has not considered the issue of license i .....

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n scrutiny has accepted the assessee s income as such and no disallowance on account of net profit has been made wherein net profit has been accepted by the Assessing Officer @ .12%. Accordingly, we dismiss the revenue s appeal on this ground and allow the assessee s appeal on this ground. 7. The 2nd ground of the revenue s appeal is against deleting the addition of ₹ 67 lacs on account of unexplained investment. The ld Assessing Officer observed that the assessee had purchased a house at .....

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xcise laws and it is not possible that huge amount of ₹ 67 lacs in cash had been made by the assessee. He recorded his statement, which has been reproduced by the Assessing Officer on page 12 and 13 of the assessment order. For sake of convenience, which is reproduced as under:- The ld Assessing Officer further held that since the genuineness of the transaction was not proved beyond doubt as the assessee has capital in AOP at ₹ 11,99,860/- whereas amount withdrew at ₹ 67 lacs. .....

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n of ₹ 67 lacs under the head unexplained investment in house from undisclosed source. 8. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had deleted the addition by observing as under:- 4.3.2 The A.O. made the addition on the ground that the creation of AOP, M/s Royal Wines was held to be illegal and therefore cash withdrawal of ₹ 67,00,000/- cannot be treated as genuine. In my opinion, the creation of AOP was not held .....

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availability of cash with AOP and instead harped on other irrelevant facts. I have gone through the cash book of Royal Wines and it was seen that there was availability of sufficient funds with the AOP and the transaction of ₹ 67,00,000/- was duly recorded. I have also examined the issue of return of part of the money to members of AOP and not to the AOP itself. It was explained that the money was intended to be returned to the AOP through its members. In my opinion, it is irrelevant how t .....

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