TMI Blog2021 (10) TMI 689X X X X Extracts X X X X X X X X Extracts X X X X ..... s, surely one would not normally expect inflation therein, however, there is nothing on record to exhibit the reconciliation of the payments with the amounts claimed, which are in no insubstantial sums. The non-acceptance of the assessee's book results, and completing the assessment as a best judgment assessment, is, under the circumstances, unexceptional. Reasonability of the estimation of profit - The normal profit, i.e., but for the said loss, is thus ₹ 9,79,868, or about 3% of sales, the quantum of which approximates that by the assessee for the relevant year. It is this profit rate that is therefore relevant and comparable. The said case, which is thus comparable, favours the Revenue's estimation rather than being supportive of the assessee's case. Rather, normal market conditions, as against dull, which obtained in that year, would yield a still higher profit rate. Why, the assessee's disclosed profit is at 1.3%, as against 3% in the cited case. The Hon'ble jurisdictional High Court in Badri Prasad Bhagwandas Co. [ 1994 (10) TMI 268 - MADRAS HIGH COURT ] approved a net profit rate of 5% of sales. The estimation of the net profit of the liqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alidly carrying on the liquor business, as sought to be canvassed with reference to the provisions of the Akbari Rules as applicable for f.y. 2004-05. Another aspect of the matter, which therefore needs to be clarified, is that to the extent the firm's capital is regarded as unexplained and, thus, as its' income, no claim qua interest on partner's capital would even otherwise survive thereon. - ITA No. 19/JAB/2020 - - - Dated:- 7-10-2021 - SH. SANJAY ARORA, HON'BLE ACCOUNTANT MEMBER For the Appellant : Sanjay Seth, CA For the Respondents : S.K. Halder, Sr. DR ORDER Per Sanjay Arora, AM This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-28, Mumbai (Camp at Jabalpur) ('CIT(A)' for short) dated 02/01/2014, dismissing the assessee's appeal contesting its' assessment under section 144 of the Income Tax Act, 1961 ('the Act' hereinafter) for the Assessment Year (AY) 2005-06 vide Order dated 24/11/2010. 2. The appeal raises two grounds, as under, which shall be taken up in seriatim: '1. That the assessee had filed ITR declaring loss of ₹ 26,130 and the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the first appellate authority. 5. I have heard the parties, and perused the material on record. 5.1. My first observation in the matter is that the assessee has not, at any stage, including before the Tribunal, disputed the invocation of sec. 144, and for which reference is also made to the assessee's submissions dated 18/6/2012 before the ld. CIT(A) (PB pgs. 66-68), also reproduced in the impugned order (IO) (pgs. 3-5). In fact, as a reading of the assessment order shows, there has been non-compliance of notice/s u/s. 143(2) as well as u/s. 142(1), leading to the best judgment assessment. Reference to sec. 145(3), which also results in the same consequence, thus becomes an additional ground for the application of sec. 144. Further, as regards sec. 145(3), a sale bill is a primary document of any business entity selling goods or services, also having legal implications. It is the sale bill that evidences the sale, raising a charge on the buyer, and on the basis of which the sale consideration can be correlated with the good sold there-against, including the quantity thereof. Yielding thus its sale price, excess of which over the cost thereof is profit by definition. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly, and the assessee fails on its' Gd. 1. 6. Gd. 2 agitates the addition of ₹ 37.80 lacs, credited by the assessee in its' accounts in the name of its' two partners, i.e., Sh. Santosh Jaiswal and Sh. Asit Dixit, at ₹ 37 lacs and ₹ 0.80 lacs respectively. The assessee's case is that Sh. Asit Dixit participated in a lottery system in February, 2004 to obtain Country Liquor Shop (CLS) of the Government of MP, and was successful in getting three such shops for f.y. 2004-05. As the same involved capital, i.e., toward earnest money; arranging bank guarantee, etc., which he did not have, Sh. Dixit (AD) made Sh. Jaiswal (SJ) his partner with 75% share, and who provided the necessary capital. Accordingly, the balance-sheet of the firm as on 31/3/2004 is as under: (PB pg. 65) Sr. Liability Amount (Rs.) Sr. Credit Amount (Rs.) 1. Capital A/c. Partner Santosh Jaiswal 37,00,000 1. Earnest Money deposited with Excise Department 18,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Santosh Jaiswal (Ratlam), also in liquor business (as evidenced from its' Balance-Sheet (PB pgs. 20-35, at pg. 32)), and not his Sand business, as stated by the AO. The amount was withdrawn cash, and introduced in the assessee-firm from 18/2/2004 to 31/3/2004 by way of partner's capital. It is for this reason that the same is reflected as the closing capital in the names of its' two partners as on 31/3/2004 (PB pg. 65) and as opening capital (on 01/4/2004), the latter sought to be explained thus by way of a CA certificate dated 27/8/2012 furnished in the remand proceedings. Sh. Dixit, prior to venturing into this business, worked as a sales manager in a liquor firm, drawing a salary of ₹ 10,000 to ₹ 12,000 per month, and which explains the nominal capital of ₹ 80,000 attributed to him. The Revenue's case, again not assailed before me with any material, also remains the same. Decision 8. I have heard the parties, and perused the material on record. 8.1. At the very outset, it may be clarified that the fact of the profit of the business having been estimated is by itself no bar for regarding a credit in the books of the business as unexpla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.4.2004, effective 01.04.2004 (at PB pgs. 61-64). The contention is untenable. The partnership deed, in that case, would clearly record this fact, stating of the partnership being effective from an earlier date. That apart, the different assets stated as held by the firm as on 31.03.2004, would be in the name of the firm, which is neither claimed, much less shown, at any stage, including before me. Why, the license issued by the State Excise Department, not furnished despite being called for by the Revenue, would also be in the name, or endorsed in favour, of the assessee-firm. Rather, the claim of an oral arrangement (i.e., prior to 01.04.2004) itself clarifies that there was no instrument of partnership, i.e., in writing, for the said period, which could have been furnished to the respective Departments, viz. Excise Department, Collector, Bank, State Warehouse (for sealing and bottling), etc. by the firm toward registration and monies paid to/deposited, therewith, by, or for or on behalf of, the assessee-firm. The matter, it may be appreciated, has serious implications qua the genuineness of the impugned credits. Why would anyone, one may ask, invest without consideration, even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... els, cannot be equated with the same amount today. There is no bank account or otherwise anything to demonstrate the savings over a period of time. Why, even the name of the concern where he was working, or the period of his service, both relevant from the standpoint of the truth of the explanation, have not been stated, much less shown. Even if the salary, as stated, was received, and held, in cash, not impractical, particularly considering its volume, all that was required was to obtain a letter to that effect or a salary certificate from the said firm. In fact, the utility or the value of money is not constant across all persons, and it depends largely on the quantum of the sum under question with reference to his total capital at the relevant time. In the instant case, going by the explanation furnished, the same perhaps represents the total capital (or at least that represented by movable property) of the creditor, so that it is surprising that he holds the entire of it in cash, which, apart from being non-remunerative, is a very risky proposition. Further, savings would, apart from income, the stated source thereof, also depend on the financial obligations of the concerned pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any source) that would exhibit the source and, correspondingly, the application of cash with him. The summary of his capital account in the books of M/s. Santosh Jaiswal (Ratlam) for f.y. 2003-04 (PB pg.32), as indeed at PB pg. 48, does not exhibit date-wise withdrawal nor of it being in cash and, rather, reflects another withdrawal of ₹ 74 lacs as well as a capital introduction at ₹ 80 lacs, again emphasizing the need for the cash account aforesaid, which would include all these entries, thereby explaining the investment in the assessee-firm. This would further also include another withdrawal (for FDR) at ₹ 2,42,786, which may be relevant; the assessee stating before the AO of SJ having introduced capital (in the assessee-firm) in the form of FDR in 2004 out of his past capital. The assessee, who has thus though made out a prima facie case, cannot be said to have discharged the burden of proof cast on it by law. The matter is accordingly set aside to the file of the AO to provide an opportunity to the assessee to state its' case before him. Surely, it is extremely undesirable that matters should get remitted back after years. An appeal, however, is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y add, that SJ has a negative capital in the firm Santosh Jaiswal (Ratlam), which in fact exceeds his investment in the assessee-firm. Rather, the said firm itself has no capital. In view of his negative balance therein, there is no question of his withdrawing his capital therefrom, and which therefore is not a correct description of the source of his investment in the assessee-firm. That, however, would not materially alter the assessee's explanation as to source, which, thus, is to be regarded as a borrowing from SJ (Ratlam), a firm in which he is a 30% partner (PB pgs. 20-21). In fact, it has been already clarified that the immediate source of investment by SJ can only be said to be the cash available with him, on the relevant dates, from any source, accounts of all of which, as it appears, are audited. In fact, that all the relevant accounts stand maintained and, further, audited, is itself a reason for remission inasmuch as it indicates the existence of the relevant evidence with the assessee, while at the same time though it does make it unfathomable that the same were not produced and relied upon in evidence, and despite abundant opportunity provided to do so. Needless t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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