Commissioner of Income Tax vs Prayag Wines

This is an appeal filed by the income tax Department u/s 260A of the income tax Act, 1961, against the order passed by the income tax Appellate Tribunal, Lucknow, for the assessment year 2005-06. The assessee caries on the business of purchase and sale of country liquor, Indian made foreign liquor and beer through 28 shops at various locations in Allahabad, Pratapgarh and Jaunpur districts. For the said assessment year, the assessee filed his return u/s 139 of the Act disclosing the total income of Rs. 14,99,890 and claiming refund thereon. The case was processed u/s 143(1) of the Act resulting in refund of Rs. 6,83,671 which was issued to the assessee. Subsequently, the case of the assessee was selected for the scrutiny and a notice u/s 143(2) of the Act was issued to the assessee. The Assessing Officer, subsequently, passed an order u/s 143(3) of the Act computing the total income of the assessee at Rs. 65,15,451. The Assessing Officer observed in its order that the assessee had disclosed the gross profit of Rs. 1,39,27,677 which was on the lower side and that the gross profit works out to Rs. 1,89,00,000, thus, resulting in extra profit addition of Rs. 49,72,323.

The reason for enhancing the income was rejecting the books of account and applying the provision of section 145(3) for estimation of gross profit. The rejection of the books of account was on account of the fact that cash memo for individual sales was not issued and that a single cash memo was issued for each day. The Assessing Officer also noticed that the opening and closing stock of each shop was not verifiable.

The assessee being aggrieved by the assessment order filed an appeal, which was allowed by the Tribunal and the books of account was accepted and the gross profit indicated by the assessee was affirmed. The income tax Department being aggrieved by the appellate order has filed the present appeal.

We have heard Sri Shambhu Chopra, the learned counsel for the appellant and Sri Ashish Bansal, the learned counsel for the respondents.

The learned counsel for the appellant submitted that the Tribunal has committed an error in accepting the books of account and gross profit. The learned counsel submitted that the Assessing Officer was justified in rejecting the books of account in the light of the fact that only one cash memo was being issued every day, which was insufficient. On the other hand, the learned counsel for the assessee submitted that there was nothing wrong in the procedure followed by the assessee in issuing one cash memo each day for the petty sales and that no adverse inference could be drawn nor the books of account could be rejected on these grounds. Further, the net profit rate had increased in comparison to the earlier years and that the books of account were produced and the movement of goods were verifiable from the stock registers maintained under the Excise Act and, consequently, the sales which were recorded in the stock registers was easily verifiable.

Having heard the learned counsel for the parties, we are of the view that it is not necessary that a cash memo is required to be issued for each and every sale and, consequently, books of account could not be rejected on the sole ground that only one consolidated cash memo was issued at the end of the day.

In Ramji Lal and Sons Vs. Commissioner of Sales Tax, the Allahabad High Court has held that no adverse inference against the veracity of the account maintained by the assessee could be drawn nor the assessee''s account books could be rejected on the ground of not issuing separate cash memo in respect of petty sales and in issuing a consolidated cash memo at the end of the day. The same view was reiterated by the Allahabad High Court in the case of Commissioner of Sales Tax Vs. Vishnuchandra Vipin Chandra, wherein the court held that failure to issue cash memos by itself was insufficient to reject the books of account, where the books were otherwise verifiable.

In the light of the aforesaid, the order of the Assessing Officer rejecting the books of account u/s 145(3) of the Act and, consequently, making an addition of the income on estimate basis was reversed by the Tribunal. Further, such addition made on estimate basis is a question of fact as has been held in Commissioner of Customs (Import) Vs. Stoneman Marble Industries and Others, Vijay Kumar Talwar Vs. Commissioner of Income Tax, Delhi, , New Plaza Restaurant Vs. Income Tax Officer, and Sanjay Oilcake Industries Vs. Commissioner of Income Tax, In view of the reasons stated aforesaid, we do not find any substantial question of law arising for our consideration in this appeal and is dismissed at the admission stage.