TMI Blog2016 (7) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly, we delete the addition - Decided in favour of assessee - ITA No. 877/Chd/2012, ITA No. 225/Chd/2013 - - - Dated:- 26-11-2015 - SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER For The Appellant : Shri N.K. Saini For the Respondent : Mrs.Raj inder Kaur, DR Both these appeals concern the same assessee and are directed against the separate orders of the learned CIT (Appeals), Chandigarh dated 13.7.2012 and 3.12.2012 relating to assessment years 2008-09 and 2009-10 respectively. Both the appeals were heard together and are being disposed off by this common order for the sake of convenience. The issue in both the appeals is also common. 2. For the sake of convenience, firstly, we will take up ITA No. 877/Chd/2012 relating to assessment year 2008-09. In this appeal, the assessee has raised the following grounds: 1. That the Ld. CIT(A) is not justified in not providing the proper opportunity of hearing which is against the natural justice. 2. That the Ld. CIT(A) is not justified in upholding the rejection of books and the application of provisions of section 145(3) of the I. T. Act. 3. That the Ld. CIT(A) is not justified in no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere not available. In the above circumstances and also in view of the discrepancies noticed by the Assessing Officer in the books of account of the assessee, the Assessing Officer invoked the provisions of section 145(3) of the Income Tax Act, 1961 (in short 'the Act') and as a consequence of which, he rejected the books of account of the assessee. The Assessing Officer applied the net profit rate of 8% on the sales of ₹ 1,60,23,400/- as declared by the assessee himself in the Profit Loss Account. The Assessing Officer observed that as per the prevalent conditions in liquor business in Chandigarh and around for the financial year 2004-05 and as per statistics available on internet, a liquor contractor is able to save anywhere between a minimum of around 6% to 8% on bulk sales and 17% to 20% on retail sales and he has worked out the net profit rate between 9% to 12% by taking a weighted average of bulk and retail sales made by the assessee. The Assessing Officer further pointed out that the rate of profit estimated at 8% was very reasonable and much lesser than the profit rate of 13.13% applied in the case of M/s Singh Associates of Gwalior and 15.5% of M/s Luxmi Nar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase and freight ledger and absence of supporting bills/vouchers without any proper justification and accordingly, he held that the books of account are hit by the mischief of section 145 of the Act. The learned counsel for the assessee further submitted that it is practically impossible to issue sale bills to the customers for sale of liquor and the practice of not issuing bills is prevalent all over the country in this trade. The sale price, however, is displayed by the assessee at the shop and the assessee cannot charge more price than as displayed at the shop because it is practically impossible as every customer looks at the prices displayed at the shop. The Assessing Officer has accepted the purchases and sales as disclosed by the assessee. The learned counsel for the assessee also submitted that with regard to discrepancy in purchase and freight ledger, as pointed out by the Assessing Officer, the payments shown under the head 'freight payment' relates to the payment to loading/unloading of the stock purchased while getting it delivered at the liquor shops and sale to the customers. These charges are entered in the books of account on the day on which actual payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be accepted in view of the discrepancies pointed out by the Assessing Officer. She further submitted that the Assessing Officer was fully justified in adopting/applying the net profit rate of 8%. Accordingly, she submitted that the impugned order may be upheld. 7. We have considered the rival submissions. The admitted facts are that during the year under consideration, the assessee was engaged in the business of wine, liquor and incurred a loss of ₹ 1,07,746/-. This business loss was not claimed in the return. It is also an admitted fact that the assessee has maintained proper books of account along with purchase, expenses bills/vouchers and daily sales statements, which were duly audited and the same were produced before the authorities below. It is also true that the copy of audited Balance Sheet and Profit Loss Account were filed before the Assessing Officer. It is relevant to state here that the purchases are made from various suppliers in accordance with the permits given by the Government, which have been duly vouched and the same have also been verified by the Assessing Officer from original purchase bills. The assessee has also admitted that the sales are mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3532.00 To Newspaper Periodical 1800.00 To Printing stationery 12215.00 To telephone expenses 8495.00 To Audit fee 19663.00 To Rent 470000.00 To Repair Maintenance 12630.00 To salary wages 302600.00 To staff welfare 18869.00 To Professional charges 17500.00 Total 16549396.07 Total 16549398.07 8. The Assessing Officer observed that the bills/vouchers of certain expenses were not available, for example freight, misce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 66 (Asr). In this case, the GP rate of 2.44% shown by the assessee has been accepted. He also relied upon the decision of the I.T.A.T., Agra Bench (TM) in the case of Laxmi Narain Ramswaroop Shivhare (supra). In this case, GP rate of 3.11% and NP rate of 0.34% was accepted. In the case of Laxmi Narain Ramswaroop Shivhare (supra), the Assessing Officer rejected the book results under section 145(3) of the Act, on the ground that all the sales are made in cash without proper vouchers supporting the sales and brand-wise, quality-wise and date-wise were not verifiable and estimated the GP rate at 5% as against 3.11% shown by the assessee. In the aforesaid case, the assessee was a liquor contractor engaged in the business of trading of country liquor and (Indian Made Foreign Liquor) IMFL. While deciding the case, the learned Accountant Member has held as under : 7. Having heard the parties and upon careful consideration of the material on record with reference to precedents cited at Bar, I am satisfied that the grounds in appeal taken by the assessee deserve to be allowed. The admitted facts are that this is the first year of business of the assessee for sale of country liquor and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the similar goods at a higher price or on premium. Discrepancy in stock or quantitative details has also not been found. Nothing has been brought on record to show any discrepancy in the quantities of goods dealt by the assessee. The only difficulty that was found expressed by the assessee is that he was not maintaining sale vouchers, but that fact alone could not be a basis to reject the books of account when the AO himself had accepted the sale value as well as cost of goods declared by the assessee to be correct which were evidenced by entries in the books of account maintained in the regular course of business carried by him. The AO at some stage of proceedings proposed to apply a GP rate on the basis of instances given in his order but the proposed GP rate was never applied by him for the obvious reason that such cases were not the comparable cases. The only acceptable basis to arrive at gross profit is by way of deducting cost of goods sold and direct expenses from the sale value. In the present case, the facts reveal that there is no opening or closing stock. The cost of goods and direct expenses are fully admitted. Sale price is also duly admitted. Therefore, the resultant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r legal justification in rejecting the book results and estimating income by applying higher profit rate than that was declared by the assessee. Accordingly, the profit rate declared at 3.11 per cent by the assessee is directed to be applied on the declared sales of ₹ 8.33,25,882 as against modified rate applied by learned CIT(A). Thus, the grounds raised by Revenue in appeal stand dismissed and those raised by assessee stand allowed. 9. Since there was a difference of opinion between the learned Members of the Bench and Third Member was nominated by the Hon'ble President of the Tribunal under section 255(4) of the Act and the Third member agreed with the view taken by the learned Accountant Member in deleting the addition by applying estimated GP rate of 5%, applied by the Assessing Officer as against 3.11%, declared by the assessee. The learned Third Member has stated that the purchases made by the assessee are duly supported by proper vouchers and are regulated by the Excise Authorities and payment of country liquor is made through Government Warehouses against payment made to the Government on the basis of the auction conducted by the Government. In the instant c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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