9911796707
TMI Blog2016 (5) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... determination of income on an estimate basis. We would revert to the specific grievance pleaded by the Revenue in subsequent part of this order. Let us first take adumbrated facts. 3. The assessee-company is engaged in the manufacture of glass. It was carrying out job work for M/s.Haryana Sheet Glass Ltd. The Excise Department had carried a search operation at the office premises of M/s.Haryana Sheet Glass Ltd (HSGL) on 23.9.2003. The Excise Department had seized a document inventorised as Annexure-A/7. This document contained both recorded and unrecorded transactions. According to the assessee, an employee of Sagar Glass Enterprises, who was also working as job worker for HSGL has prepared this Annexure-A/7. The stand of the assessee before the Revenue authorities was that it does not disclose true picture of the assessee, because, it was not found at the premises of the assessee. It was not recorded by any authorized employee of the assessee. It was a document recorded by third person. Thereafter, survey was carried out at the premises of the assessee under section 133A of the Act on 18.12.006. The assessments in the Asstt.Years 2001-02 and 2002-03, have been reopened by issuanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has taken peak amount of sales at a particular time during the year. It further contended that for the purpose of levy of excise, dispute went to Settlement Commission. In the Settlement Commission the sales worked out by the assessee, on the basis of peak theory has been accepted. The levy of excise has been determined on this sale. Thus, the AO is not justified in taking cognizance of the entries in Annexure- A/7 as well as in the books of accounts. The assessee has filed the working which has been reproduced by the CIT(A) at page no.13 and 14 of the impugned order. The basis explained by the assessee has been noticed by the CIT(A) at page nos.14 and 15 which reads as under: Asstt.Year 2001-02 "On the basis of the peak value of sales it filed revised Excise Duty Returns before the Excise Authorities It may be seen that the appellant went before the Hon'ble Settlement Commission of Custom and Excise for settlement of its cases for the period May 1999 to August 2003. The Hon'ble Settlement Commission of Central Excise passed the final order u/s 32F(7) of Central Excise Act, 1944 on 6.6.2007 determining total undervaluation of sales at Rs. 22,49,09,770/- for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09,770/- for the period May 1999 to August 2003. This comprised of undervaluation of Rs. 7,00,25,375/- for the period December 2001 to August 2003 and Rs. 15,48,84,395/- for the period May 1999 to November 2001. The amount of under valuation of sales for the relevant period as per the working filed before the Hon'ble Settlement Commission of Excise & Custom , has been arrived at Rs. 4,77,00,314/-. In other words the appellant has recorded sales to the tune of Rs. 16,15,21,809/- in its regular books of accounts and over and above Rs. 4,77,00,314/- has been collected by it in cash during the relevant period from the outside the books of accounts. As such the total turnover of the relevant period after taking into consideration Annexure books of accounts was to the tune of Rs. 20,92,22,123/-. 7.12 There is no doubt about the fact that the books of accounts maintained by the appellant for the relevant period are defective in the sense that they do not reflect correct and complete picture of the appellants transactions. The aforesaid table would reflect that the appellant tried to offset all the cash receipts over and above the amount recorded in books of accounts to the extent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that as far as reopening of the assessment and rejection of the books of accounts in these years are concerned, he does not press these grounds of appeal. According to the ld.counsel for the assessee, the only issue required to be adjudicated in the appeals of the assessee is, what rate of profit required to be applied on the alleged unaccounted sales. On the strength of Hon'ble Gujarat High Court's decision in the case of Black Diamond Trading Co. Tax Appeal No.235 2015 and others, he contended that even after the rejection of the books of accounts, the AO has to compute the profit on reasonable basis. He further contended that in this decision, the Hon'ble High Court has observed that once net profit rate is being applied, then, there is no question of further making any addition of Rs. 40A(3) of the Income Tax Act. He placed on record copy of the decision. He further contended that in the Asstt.Years 2000-01 and 2003-04, the assessee has approached Settlement Commission. The Settlement Commission has accepted the working of unaccounted sales and accepted the application of net profit rate at 5%. The ld.counsel for the assessee further placed on record the details of net profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee i.e. cash or mercantile, such method has to be followed keeping in view the Accounting Standard notified by the Central Government from time to time. Sub clause 3 provides a situation, that is, if the Assessing Officer is unable to deduce the true income. On the basis of method of accountancy followed by an Assessee than he can reject the book result and the assessee's income according to his estimation or according to his best judgment. The Assessing Officer in that case is required to point out the defects in the accounts of Assessee and required to seek explanation of the Assessee qua those defects. If the assessee failed to explain the defects than on the basis of the book result, income cannot be determined and Assessing Officer would compute the income according to his estimation keeping in view the guiding factor for estimating such income. 13. For exercising the best judgment, section 144 of the Income Tax Act provide the guidance to the ld.AO. This section reads as under: "144. [(1)] If any person- (a) fails to make the return required [under sub-section (1) of section 139] and has not made a return or a revised return under subsection (4) or sub-section (5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that judgment is a faculty to decide matter with wisdom, truly and legally. Judgment does not depend upon the arbitrary, caprice of an adjudicator, but on settled and invariably principles of justice. Thus, in a best judgment, even if, there is an element of guess work, it should not be a wild one, but shall have reasonable nexus to the available material and circumstances of each assessee. 14. Admittedly, the assessee did not press its ground challenging reopening of the assessment. Similarly, the assessee did not challenge the rejection of books of accounts. Thus, its profit has to be worked out on estimate basis. The area of dispute between the assessee and the Revenue is that the assessee has worked out total unaccounted sales on the basis of peak theory applied to the entries available in Annexure-A/7 books of account. As far as taking cognizance of Annexure-A/7, is also not disputed. In order to buttress its stand, the assessee has contended that this working has been accepted by the Settlement Commission for the purpose of levy of excise as well as for the purpose of income-tax in the Asstt.Years 2000-01 and 2003-04. The logic for giving this working is that Annexure-A/7 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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