TMI Blog2018 (4) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) on this issue and allow grounds No.1 & 2 of the appeal of the assessee. Disallowance on account of shop rent paid - Held that:- Only affidavits and confirmation of receipts of shop rent are enclosed and the Department did not conduct any independent enquiry and physical verification regarding rent paid and both the Assessing Officer and the ld. CIT(A), on ad-hoc and summary basis, have stated that the rent should be @ ₹ 3,000/- per month per shop, however, neither the order of the AO nor of the ld. CIT(A) was a speaking order on this issue and the reasons for arriving at the conclusion was not spelt out specifically. We are of the considered view that any ad-hoc disallowance made summarily by a quasi-judicial authority, without any factual basis, cannot be held justified. Ad-hoc disallowance on account of salary paid - Held that:- Total salary paid of ₹ 3,800/- per month and ₹ 1,800/- as house rent allowance i.e. totaling to ₹ 5,600/- per month to each employee, is evidenced with affidavit filed as placed in the paper book from pages 52 to 147. As held in various judicial pronouncements discussed hereinabove, how the business has to be conducted, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to appreciate that processing fee, assessment fee and renewal fee are in the nature of payment to Government Authorities and cannot said to be bogus. 7. That the Id. CIT (Appeal) has passed the order without providing proper opportunity to the appellant before passing the order. 8. That the appellant craves leave to introduce, withdraw or modify any ground of appeal with the permission of your honour. 3. Grounds No.1 2 relate to the confirmation of rejection of the books of account by the ld. CIT(A) and addition of ₹ 26,51,070/- and estimation of gross profit rate @ 12.50% as against 11.59% declared by the assessee. 4. The facts regarding these grounds are that the assessee is an AOP in status and engaged in the business of trading liquor. Total number of members in the AOP is 38. The business of the assessee is carried from (1) 24/4/, The Mall, Kanpur (Head Office) and (2) 49 Shops at various places in Basti, Gorakhpur, Siddharth Nagar, Sant Kabir Nagar (Branch Offices). The assessee has filed return declaring total income at ₹ 14,02,770/- which was e-filed on 26/9/2012. The assessment was completed under section 144 of the Act on a total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved to the customer visiting there and in these types of Model Shops, cash memos are certainly generated and are issued to customers. (10) That assessee has stated that trading results have regularly been accepted by the Department except In A.Y 2011-12 but the fact is that before A.Y 2011-12, no case of assessee was completed under section 143(3) of the Income Tax Act. 5. The assessee had submitted its argument that they are engaged in the business of trading in foreign liquor. In the case of the assessee, license is awarded for a year; therefore, it is not possible for the assessee to sell beyond the license period. The purchases in respect of assessee s trade are subject to deduction of TCS and, therefore, purchases made are fully verifiable from the purchase bills as well as TCS certificates submitted to the Department. It is not possible in the trade of assessee to make purchases from outside, as it is purchased only after payment of license fee. The quantum of purchase is fixed and, therefore, no sales is possible outside the books of account, as the assessee could not sell the liquor in excess to the quantity of purchases in which license fee has been paid. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is provided which is coupled with water and glass and there is no sitting place attached with the shop. Furthermore, the observation of the Assessing Officer that before assessment year 2011-12, assessment was never done under section 143(3) of the Act was also not correct since for assessment years 2009-10 and 2010-11 also assessments under scrutiny were completed by ITO1(1), Kanpur. The copies of assessment orders were also submitted before the ld. CIT(A). Thereafter, the ld. CIT(A) goes on to record certain inferences from the assessment order and summarily rejects the submission of the assessee and sustained the addition made by the Assessing Officer without assigning any specific reason for his decision and that from his order also we do not find that it is a speaking order and mere drawing of inferences cannot be equated to giving independent findings, which is required by a quasi judicial authority. 7. Being further aggrieved, the assessee preferred an appeal before us and at the time of hearing, the ld. A.R. of the assessee vehemently argued regarding the practicality involved in the trading sale of liquor business which is accepted all over India and reiterated the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government. The nature of assessee s business is such that it cannot maintain proper sale bills. Therefore, it was held by the Co-ordinate ITAT Bench that merely because day-to-day sale bills and vouchers were not available, it cannot be a ground for rejection of the books of account and that the results declared by the assessee should be accepted. 11. In the case of ITO, Range 3(1), Gwalior vs. Laxmi Narain Ramswaroop Shinhare (supra), the assessee was engaged in the business of trading in country liquor and IMFL and the Assessing Officer rejected the book results of the assessee on the ground that all the sales were made in cash without proper vouchers supporting the sales. In this case, it was held by the Co-ordinate ITAT Agra Bench that when the books of account were produced before the Department and there is no significant defect in the books of account and in the factual details of the case, the gross profit rate declared by the assessee has to be accepted. 12. The Hon'ble jurisdictional High Court in the case of CIT vs. Prayag Wines (supra) has held that it is not necessary that cash memo is required to be issued for each and every sale and the books of account ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut then the Assessing Officer also questions that whether the said expenses were actually paid by the assessee and whether the same were reasonable for its business or not. Then the Assessing Officer goes on to state that on analyzing the facts, according to the Assessing Officer, rent of the shops cannot be more than ₹ 3,000/- per shop per month and accordingly rent paid at ₹ 1,000/- per shop per month for 49 shops for 12 months i.e. ₹ 5,88,000/- (i.e. 49,000/- x 12 = 5,88,000/-) was disallowed and added to the total income of the assessee. 16. The ld. CIT(A) accepted the findings of the Assessing Officer without recording a specific finding and speaking order on the issue. 17. The argument of the assessee is that during the assessment proceedings, complete details like location of shop, name and address of the landlord, and the amount of rent paid was furnished before the Assessing Officer. The Assessing Officer has made addition by disallowing rent @ ₹ 1,000/- per shop per month in an arbitrary manner without conducting any enquiry to prove the allegation. The assessee has submitted affidavits in the form of confirmations for receipts of shop rent, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer. 21. The assessee submitted that liability of expenditure under the act has to be decided on the basis of commercial expediency of the expenditure incurred and the reasonableness of such expenditure. The test of commercial expedience for determining whether the expenditure incurred for the purpose of business is reasonable expenditure has to be decided from the view point of businessman and not of the Department. According to the assessee, only two persons one Cashier and another Sales Person is required to manage the shop. The assessee placed reliance upon the judicial pronouncements in the cases of Aluminium Corpn. of India Ltd. vs. CIT [1972] 86 ITR 11 (SC); J.K. Woolen Mfrs. Vs. CIT [1969] 72 ITR 612 (SC); CIT vs. Walchand Co. (P) Ltd. [1967] 65 ITR 381 (SC) and CIT vs. Laxmi Cement Distributors (P) Ltd. [1976] 104 ITR 711 (Guj.). In all these cases, it was held that reasonableness of expenditure has to be decided from the view point of businessman (assessee) and not of the Department. The assessee further submitted that affidavit in the form of confirmation for receipts of salary and house rent from employees are enclosed in the paper book from pages 50 to 147. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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