Rajasthan Wine Agency vs Commissioner of Income Tax and Another

Though the appeal was admitted on five substantial questions of law but Mr. Kasliwal, counsel appearing for the appellant-assessee submits that the effective issue is in question No. 3, which reads as under:

Whether the Tribunal was justified in sustaining the addition at Rs. 1.50 lakhs on the appeal filed by the Revenue against the order of CIT(A), irrespective of the fact that the Tribunal has accepted, that order passed by the CIT(A) is reasoned one ?

The appellant is a partnership firm and derived income from sale of liquor. The appellant filed its IT return for the asst. yr. 1985-86 declaring income of Rs. 50,000. A notice u/s 143 of the IT Act was issued to the appellant and the AO vide order dt. 29th March, 1990, while declining to accept the book result, assessed the net profit of the appellant-assessee at the rate of 3 per cent. The AO estimated the sales from Rs. 3,62,87,231 to Rs. 4,00,00,000, made an addition of Rs. 12,00,000 and assessed the income of the assessee as Rs. 18,60,224. Challenging this order of the AO, the appellant-assessee filed an appeal before the CIT(A). The CIT(A) vide its order dt. 23rd Oct., 1990 allowed the appeal, set aside the addition of Rs. 12,00,000 as made by the AO and remitted the case to the AO to consider the matter afresh,

The AO reconsidered the matter and the material placed before it and after considering the material, estimated the sales of the assessee as Rs. 4,00,00,000 and after applying a net profit at the rate of 3 per cent made the addition of Rs. 12,00,000 in the income and after allowing the depreciation, he assessed the income of the appellant as Rs. 18,12,289. The assessee again filed an appeal before the CIT(A), The CIT(A) reduced the addition from Rs. 12,00,000 to Rs. 1,20,000. The assessee has not chosen to challenge the addition of Rs. 1,20,000. However, the Department challenged the order of CIT(A) in appeal before the Income Tax Appellate Tribunal (for short ''the Tribunal'') whereby addition of Rs. 12,00,000 has been reduced to Rs. 1,20,000. The Tribunal by the impugned order has enhanced addition from Rs. 1,20,000 to Rs. 1,50,000.

Heard, learned Counsel for the parties.

Counsel for the assessee-appellant submitted that when no defect was found either by the CIT(A) or by the Tribunal in the books of account, then the result should be accepted and the addition is unwarranted.

On the other hand, Mrs. Parinitoo Jain, learned Counsel appearing for the Department has supported the order of Tribunal.

After hearing learned Counsel for the parties, we have gone through the orders passed by the AO, CIT(A) as well as the Tribunal. In para 2 of the assessment order, the AO in clear terms has stated that the assessee was asked to produce the stock register as well as sale and purchase vouchers for verification of the closing stock and other items as directed by the CIT(A), but the directions of the AO were not complied with. Thus, keeping all the facts in view, the AO has estimated the total sales including rebate of the assessee at Rs. 4,00,00,000 and in view of inadequacy of the accounts, a net profit rate of 3 per cent was considered to be reasonable and thus, the AO assessed the net income of the assessee to Rs. 12,00,000 that has been reduced to Rs. 1,20,000 by the CIT(A) and the same has been accepted by the assessee as no appeal was filed by the assessee and in the appeal filed by the Department, the Tribunal has enhanced the net income from Rs. 1,20,000 to Rs. 1,50,000.

In the facts and circumstances of the case, when the relevant documents which were required by the AO to verify the closing stock the required documents were not produced, we are of the opinion that the AO has committed no error in rejecting the book result of the respondent-assessee. The AO while dealing with the matter has proceeded in accordance with the provisions of the IT Act and assessed the net income of the assessee as aforesaid. However, the CIT(A) taking into consideration the entire facts and circumstances of the case, has reduced the addition. The Tribunal has finally sustained the addition of Rs. 1,50,000. Thus, considering the nature of business and appreciation of facts as well as the fact that the assessee has not challenged the addition of Rs. 1,20,000 sustained by the CIT(A) on the same ground, we see no substance in the appeal while on the same ground the Tribunal found that addition of Rs. 1,50,000 is just and reasonable. The appeal fails and is, hereby dismissed.