M/s Oasis Distilleries Limited, Indore v. DCIT, Ludhiana

CO 31/CHANDI/2015 | 2010-2011
Pronouncement Date: 05-10-2016 | Result: Allowed

Appeal Details

RSA Number 3121523 RSA 2015
Assessee PAN AAACO3509R
Bench Chandigarh
Appeal Number CO 31/CHANDI/2015
Duration Of Justice 1 year(s) 1 month(s) 21 day(s)
Appellant M/s Oasis Distilleries Limited, Indore
Respondent DCIT, Ludhiana
Appeal Type Cross Objection
Pronouncement Date 05-10-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted Not Allotted
Tribunal Order Date 05-10-2016
Date Of Final Hearing 24-05-2016
Next Hearing Date 24-05-2016
Assessment Year 2010-2011
Appeal Filed On 14-08-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH CHANDIGARH BEFORE SHRI BHAVNESH SAINI JUDICIAL MEMBER AND SMT. ANNAPURNA GUPTA ACCOUNTANT MEMBER ITA NO. 666/CHD/2015 & C.O.31/CHD/2015 & ITA NO. 667/CHD/2015 A.Y: 2010-11 & 2011-12 THE DCIT VS M/S OASIS DISTILLERIES LTD. CENTRAL CIRCLE-II HOUSE NO. 102 B-2 LUDHIANA. METRO TOWER VIJAY NAGAR SCHEME NO. 54 INDORE. PAN: AAACO3509R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUSHIL KUMAR C IT-DR RESPONDENT BY : SHRI SUDHIR SEHGAL & SHRI AVANTA KUMAR JAIN DATE OF HEARING : 27.09.2016 DATE OF PRONOUNCEMENT : 05.10.2016 O R D E R PER BHAVNESH SAINI JM THIS ORDER SHALL DISPOSE OF ALL THE ABOVE MATTERS IN RESPECT OF THE SAME ASSESSEE. 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. THE APPEALS ARE DECIDED AS UNDER. ITA 666/2015 & C.O. 31/2015 ( A.Y. 2010-11) 3. THE DEPARTMENTAL APPEAL AS WELL AS CROSS OBJECTI ON BY ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LD. 2 CIT(APPEALS)-5 LUDHIANA DATED 31.03.2015 FOR ASSESSMENT YEAR 2010-11. 4. ON GROUND NO. 1 OF DEPARTMENTAL APPEAL THE REVENUE CHALLENGED THE DELETION OF ADDITION OF RS. 19 83 421/- UNDER SECTION 40A(3) OF THE INCOME TAX ACT. THE ASSESSING OFFICER DISALLOWED THE ABOVE AMOUNT F OR ALLEGED CASH PAYMENT TO M/S MALBROS INTERNATIONAL P VT. LTD. THE ASSESSING OFFICER OBSERVED THAT ASSESSEE H AD MADE SINGLE PAYMENT OF RS. 19 83 421/- IN CASH ON 31.03.2010 WHICH WAS IN VIOLATION OF SECTION 40A(3) OF THE INCOME TAX ACT. THE ASSESSEE SUBMITTED BEFORE LD. CIT(APPEALS) THAT IT IS AN LIMITED COMPANY AND HAS CARRIED ON BUSINESS OF MANUFACTURING AND SALE OF LI QUOR. THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUN T AND ALL VOUCHERS OF THE PURCHASES AND SALES ARE PRO PERLY MAINTAINED. THE ACCOUNTS ARE AUDITED BY THE CHARTE RED ACCOUNTANT. THE ASSESSEE HAD RETAIL LIQUOR VENDS I N PATHANKOT CITY IN PUNJAB IN THE YEAR UNDER CONSIDERATION. THE ASSESSEE PURCHASED GOODS FOR SA LE ON VARIOUS DATES DURING THE YEAR FROM M/S MALBROS INTERNATIONAL PVT. LTD. SHRI VINOD RANA AN EMPLOY EE OF THE ASSESSEE COMPANY HAS HANDLED THE DEALINGS OF PURCHASE AND PAYMENT TO THIS SELLER. MR. VINOD RAN A ON TIME TO TIME TOOK ADVANCE MONEY ON IMPREST ACCOUNT FROM THE ASSESSEE COMPANY TO DEAL WITH M/S MALBROS INTERNATIONAL PVT. LTD. MR. VINOD RANA OUT OF THE IMPREST ACCOUNT MADE PAYMENTS TO THE SAID PARTY ON 3 VARIOUS DATES DURING THE YEAR UNDER CONSIDERATION W ITHIN THE LIMIT PRESCRIBED UNDER SECTION 40A(3) OF THE AC T. ALL THESE PAYMENTS AGAINST PURCHASES HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT. THE ENTIRE DETAILS WOULD SHOW THAT AMOUNT WAS ONLY SQUARED OFF. COPY OF THE IMPREST ACCOUNT AND DETAILS WERE SUBMITTED BEFORE LD. CIT(APPEALS) TO SHOW THAT ADDITION IS WHOLLY UNJUST IFIED. 5. THE LD. CIT(APPEALS) NOTED IN FINDINGS THAT ASSE SSEE MADE PURCHASES FROM M/S MALBROS INTERNATIONAL PVT. LTD. HAVING WHOLESALE LICENCE THROUGH THE EMPLOYEE SHRI VINOD RANA. THE DETAILS OF SUCH PURCHASES DURING T HE YEAR HAVE BEEN HIGHLIGHTED IN THE COPY OF ACCOUNT A ND EACH OF THE PURCHASE IS NOT IN VIOLATION OF PROVISI ONS OF SECTION 40A(3) OF THE ACT. THE COPY OF THE ACCOUNT OF THE ASSESSEE IN M/S MALBROS INTERNATIONAL PVT. LTD. WAS ALSO FILED WHICH CONFIRMED THE DATE OF SALE AND RECEIPT OF CASH TIME TO TIME. THE ASSESSING OFFICER IN THE REMAND REPORT MERELY CONTENDED THAT ASSESSEE HAD MADE A SINGLE PAYMENT. THE DETAILS EXPLANATION AND DATE-WISE PURCHASES AND PAYMENT OF CASH ON DIFFERENT DATES HA VE NOT BEEN ADVERSELY COMMENTED UPON BY THE ASSESSING OFFICER IN THE REMAND REPORT. THE FACTUAL EXPLANAT ION GIVEN BY THE ASSESSEE HAVE NOT BEEN DISPUTED BY THE ASSESSING OFFICER. THE ENTRY IN THE ACCOUNT OF SHR I VINOD RANA ON SINGLE DAY SUGGESTED ENTIRE PAYMENT BUT DET AILS SUBMITTED WOULD SHOW THAT PAYMENTS HAVE BEEN MADE T O SELLER ON DIFFERENT DATES WHICH WAS MADE FROM THE 4 IMPREST ACCOUNT. THE LD. CIT(APPEALS) ACCORDINGLY DELETED THE ADDITION. 6. AFTER CONSIDERING RIVAL SUBMISSIONS WE DO NOT F IND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE ASSESSEE HAS FILED COPY OF THE IMPREST ACCOUNT OF S HRI VINOD RANA AT PAGE 23 OF THE PAPER BOOK AND COPY OF LEDGER ACCOUNT OF M/S MALBROS INTERNATIONAL PVT. LT D. AT PAGES 25-27 OF THE PAPER BOOK TO SHOW THAT PAYMENTS HAVE BEEN MADE IN CASH ON DIFFERENT DATES LESS THAN RS. 20 000/-. THE ASSESSING OFFICER IN THE REMAND REPOR T DID NOT DISPUTE CLAIM OF THE ASSESSEE THROUGH ANY EVIDE NCE OR MATERIAL ON RECORD. IT WOULD THEREFORE PROVE THAT THE PAYMENTS HAVE BEEN MADE TO THE AFORESAID PARTY ON VARIOUS DATES DURING THE YEAR WITHIN LIMITS PRESCRI BED UNDER SECTION 40A(3) OF THE ACT. THE LD. DR HOWEV ER SUBMITTED THAT IT WAS SINGLE PAYMENT ONLY HOWEVER SUCH A PLEA IS NOT SUPPORTED BY ANY EVIDENCE. THE LD. DR ALSO SUBMITTED THAT NO DETAILS WERE SUBMITTED BEFORE ASSESSING OFFICER THEREFORE IT IS VIOLATION OF RU LE 40A OF THE IT RULES HOWEVER THE ASSESSING OFFICER DID NO T MAKE ANY ADVERSE COMMENT WHILE FILING THE REMAND REPORT BEFORE LD. CIT(APPEALS) AT THE APPELLATE STAGE. THE ASSESSING OFFICER ALSO DID NOT RAISE ANY OBJECTION WITH REGARD TO THE CLAIM OF THE ASSESSEE IN THE REMAND R EPORT. HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF KULDEEP INDUSTRIAL CORPORATION 209 CTR 400 HELD THA T WHEN ASSESSING OFFICER WAS PRESENT BEFORE LD. 5 CIT(APPEALS) AND DID NOT RAISE ANY OBJECTION RULE 46A NOT VIOLATED. THIS GROUND HAS NO MERIT AND ACCORDINGLY DISMISSED. 7. ON GROUND NO. 2 OF DEPARTMENTAL APPEAL REVENUE CHALLENGED THE DELETION OF ADDITION OF RS. 14 01 80 0/- ON ACCOUNT OF DISALLOWANCE OF INTEREST. THE ASSESSEE IN THE CROSS OBJECTION HAS CHALLENGED THE ORDER OF LD. CIT(APPEALS) IN RESTRICTING THE DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT TO THE TUNE OF RS. 1 32 000/- ON GROUND NO. 1 AND 2 OF THE CROSS OBJECTION. GROU ND NO. 3 OF CROSS OBJECTION IS NOT PRESSED. 8. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SING OFFICER DISALLOWED THE CLAIM OF INTEREST TO THE TUN E OF RS. 15 33 800/-. THE ASSESSING OFFICER NOTED THAT THER E HAS BEEN 100% INCREASE IN INTEREST DEBITED TO THE PROFI T & LOSS ACCOUNT IN COMPARISON TO THE LAST YEAR AND ASS ESSEE HAD PROVIDED INTEREST FREE ADVANCES TO FOLLOWING PA RTIES FOR NON-BUSINESS PURPOSES : I) DIAMOND RESORT P.LTD. RS. 26 40 000/- II) SHRI GAUTAM MALHOTRA RS. 11 00 000/- III) SHRI AMARJIT KAUR RS. 5 00 000/- IV) SHRI SANJIV KUMAR RS. 5 00 000/- V) SHRI ARVIND JAIN RS. 88 70 000/- THE ASSESSING OFFICER THEREFORE CONCLUDED THAT AS SESSEE HAD DIVERTED INTEREST BEARING FUNDS TO NON BUSINESS PURPOSES AND DISALLOWED 5% OF THE TOTAL INTEREST DE BITED 6 TO THE PROFIT & LOSS ACCOUNT AND MADE THE ABOVE ADDITION. 9. THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(APPEALS) AND WRITTEN SUBMISSION OF THE ASSESSEE IS REPRODUCED IN THE IMPUGNED ORDER IN WHICH THE ASSES SEE BRIEFLY EXPLAINED THAT INCREASE IN THE INTEREST EXP ENSES WAS ON ACCOUNT OF COMPANY GOT DISBURSEMENT OF RS. 1 0 CRORES NEW WORKING CAPITAL IN THE MONTH OF MARCH 20 09. HENCE INTEREST WAS CHARGED ONLY FOR FEW DAYS IN PRECEDING ASSESSMENT YEAR. THE ASSESSING OFFICER W AS WRONG IN HOLDING THAT BORROWED FUNDS HAVE BEEN DIVE RTED FOR NON BUSINESS PURPOSES. THE ADDITIONAL AMOUNT BORROWED IN WORKING CAPITAL LOAN HAS BEEN DULY INVE STED IN CURRENT ASSET OF THE ASSESSEE. THE DETAILS OF T HE SAME WERE FURNISHED. IT WAS ALSO SUBMITTED THAT ADDITIO N INTO THE FIXED ASSET IS DONE OUT OF ACCUMULATED AND CURR ENT YEAR PROFIT AND UNSECURED LOANS TAKEN BY THE COMPAN Y DURING THE YEAR UNDER CONSIDERATION. THE AMOUNT ADVANCED TO THESE PARTIES ARE FOR BUSINESS PURPOSES ONLY. MOREOVER THE ASSESSEE COMPANY HAS SUFFICIENT AMOUN T OF UNSECURED LOANS AND SUNDRY CREDITORS ETC. TO WHOM N O INTEREST HAS BEEN PAID IN ASSESSMENT YEAR UNDER APP EAL. IT WAS SUBMITTED THAT DIAMOND RESORTS PVT. LTD. IS A SISTER CONCERN OF THE ASSESSEE AND AMOUNT HAS BEEN PAID OUT OF INTEREST FREE FUNDS AVAILABLE. IN THE CASE OF SHRI GAUTAM MALHOTRA HE WAS THE DIRECTOR OF THE COMPANY AND USED TO LEND TEMPORARY FUNDS TO THE COMPANY AND IN 7 THE SAME WAY HE KEPT MONEY AS IMPREST ACCOUNT MANY A TIMES FOR BUSINESS PURPOSES OF THE ASSESSEE COMPANY . THERE WAS AN OPENING CREDIT BALANCE OF RS. 63 18 12 4/- ON 01.04.2009. THE AMOUNT OF RS. 11 LACS WAS OPENI NG DEBIT BALANCE IN THE MONTH OF MARCH 2010. IN THE C ASE OF SMT. AMARJEET KAUR AND SANJEEV KUMAR RS. 5 LACS CA SH WAS DEBITED IN MARCH 2010 BEING THE AMOUNT OF TENDE R. IN THE CASE OF SHRI ARVIND JAIN THE AMOUNT WAS DEB ITED IN MARCH 2010 BEING THE AMOUNT OF TENDER AND TRANSFERRED TO THE ACCOUNT. IT WAS THEREFORE SUB MITTED THAT MOST OF THE ADVANCES WERE AT THE FAG END OF TH E YEAR I.E. IN MARCH 2010 FOR BUSINESS PURPOSES ONLY. THEREFORE NO DISALLOWANCE SHOULD BE MADE. 10. THE SUBMISSIONS OF THE ASSESSEE WERE FORWARDED TO THE ASSESSING OFFICER FOR HIS COMMENTS IN WHICH HE HAS REITERATED THE SAME FACTS AS HAVE BEEN NOTED IN THE ASSESSMENT ORDER. 11. THE LD. CIT(APPEALS) CONSIDERING SUBMISSIONS O F THE ASSESSEE MATERIAL ON RECORD AND REMAND REPORT OF T HE ASSESSING OFFICER NOTED THAT AMOUNT ADVANCED TO THE TUNE OF RS. 26 40 000/- TO M/S DIAMOND RESORT PVT. LTD. IS NOT FOR ANY BUSINESS PURPOSE THEREFORE DISALLO WANCE OF INTEREST TO THAT EXTENT WAS CONFIRMED FOLLOWING DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES LTD. 286 ITR 1. HOWEVE R WITH REGARD TO AMOUNT OUTSTANDING FROM SHRI GAUTAM 8 MALHOTRA SHOWS THAT AMOUNT WAS OUTSTANDING TIME TO TIME AND HAVE BEEN LIQUIDATED LATER ON. THE AMOUNT OF RS. 63 18 124/- WAS OPENING BALANCE THAT MEANS THA T ASSESSEE COMPANY HAD BEEN USING THE MONEY OF SHRI GAUTAM MALHOTRA WITHOUT INTEREST PAYMENT. THE DEBI T BALANCE AT THE END IF THE YEAR WOULD NOT MAKE OUT A CASE OF DISALLOWANCE OF INTEREST. IN THE CASES OF ADVAN CE SHOWN IN OTHER CASES IT WAS NOTED THAT ADVANCE HAVE BEEN MADE FOR TENDER FEES TO APPLY FOR LIQUOR VEND WHICH IS BUSINESS PURPOSE OF THE ASSESSEE. THEREFORE SA ME COULD NOT BE TREATED AS INTEREST FREE NON BUSINESS PURPOSES. THE DISALLOWANCE OF INTEREST IN CASES OF THESE REMAINING FOUR PURPOSES WERE ACCORDINGLY DELETED. 12. AFTER CONSIDERING RIVAL SUBMISSIONS WE DO NOT FIND ANY JUSTIFICATION TO SUSTAIN EVEN A PART ADDITION O N THIS ISSUE. 13. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND RELIE D UPON DECISION OF HON'BLE PUNJAB & HARYANA HIGH COUR T IN THE CASE OF BRIGHT ENTERPRISES PVT. LTD. 381 ITR 10 4 IN WHICH IT WAS HELD THAT WHEN FUNDS/RESERVES OF THE ASSESSEE WERE SUFFICIENT TO COVER THE INTEREST FREE ADVANCES MADE BY IT OF RS. 10.29 CR TO ITS SISTER C ONCERN WE ARE ENTIRELY IN AGREEMENT WITH THE JUDGEMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V RELI ANCE UTILITIES & POWER LTD. 313 ITR 340 THAT IF THERE E XIST FREE 9 FUNDS AVAILABLE A PRESUMPTION WOULD ARISE THAT INVESTMENT WOULD BE OUT OF INTEREST FREE FUNDS GENE RATED OR AVAILABLE WITH THE COMPANY IF INTEREST FREE FUN DS WERE SUFFICIENT TO MEET THE INVESTMENTS. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO PB-8 TO SHOW THAT ASSESSEE HAS SUFFICIENT FUNDS OF RS. 13.61 CR AS SHARE CAPITAL W HICH IS MORE THAN THE AMOUNT ADVANCED ABOVE. THEREFORE NO ADDITION SHOULD BE MADE. ON THE OTHER HAND LD. DR RELIED UPON ORDERS OF THE ASSESSING OFFICER AND SUB MITTED THAT NO DETAILS WERE FILED BEFORE ASSESSING OFFICER THEREFORE RULE 46A HAVE BEEN VIOLATED. 14. AFTER CONSIDERING RIVAL SUBMISSIONS WE DO NOT FIND ANY MERIT IN ANY OF THE ADDITIONS SUSTAINED BY THE LD. CIT(APPEALS). THE ASSESSEE'S CASE IS COVERED BY REC ENT JUDGEMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BRIGHT ENTERPRISES PVT. LTD. (SUPRA). SINCE THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS AVA ILABLE TO MAKE THE ABOVE ADVANCES THEREFORE NO DISALLOWA NCE OF INTEREST MAY BE MADE AGAINST THE ASSESSEE. MORE OVER IN THE CASES OF FOUR PARTIES LD. CIT(APPEALS) HAS GIVEN A CATEGORICAL FINDING THAT IN THE CASE OF SHRI GAUTAM MALHOTRA HIS FUNDS HAVE BEEN USED BY THE ASSESSEE COMPANY. THEREFORE THERE IS NO QUESTION OF MAKING ANY DISALLOWANCE OF INTEREST AND IN THE CASES OF OTHER PARTIES NAMELY SMT. AMARJEET KAUR SHRI SANJIV KUMAR AND S HRI ARVIND JAIN ADVANCES HAVE BEEN GIVEN FOR THE PURPO SE OF TENDER FEES TO APPLY FOR LIQUOR VENDS WHICH IS THE MAIN 10 BUSINESS OF THE ASSESSEE. THEREFORE LD. CIT(APPEA LS) CORRECTLY DELETED THE DISALLOWANCE OF INTEREST IN T HESE CASES. THERE IS THUS NO MERIT IN THE DEPARTMENTA L APPEAL SAME IS ACCORDINGLY DISMISSED. THERE IS NO VIOLATION OF RULE 46A AS IS ARGUED BY LD. DR. 15. THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED BY SETTING ASIDE THE ORDERS OF AUTHORITIES BELOW AND WHATEVER ADDITION HAVE BEEN SUSTAINED BY THE LD. CIT(APPEALS) ON ACCOUNT OF DISALLOWANCE OF INTEREST IN THE CASE OF M/S DIAMOND RESORTS PVT. LTD. IS ALSO DELET ED. 16. THE CROSS OBJECTION OF THE ASSESSEE IS ACCORDI NGLY ALLOWED ON THIS ISSUE. 17. IN THE RESULT DEPARTMENTAL APPEAL IS DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ITA 667/2015 (A.Y. 2011-12) 18. THIS DEPARTMENTAL APPEAL HAS BEEN DIRECTED AGAI NST THE ORDER OF LD. CIT(APPEALS)-5 LUDHIANA DATED 31.03.2015 FOR ASSESSMENT YEAR 2011-12. 19. ON GROUND NO. 1 REVENUE CHALLENGED DISALLOWANC E OF ADDITION OF RS. 2 78 69 179/- ON ACCOUNT OF LOW NET PROFIT. 19(I) THE ABOVE ADDITION HAS BEEN MADE BY ASSESSING OFFICER ON ACCOUNT OF LOW NET PROFIT. THE ASSESSIN G 11 OFFICER HIGHLIGHTED THAT ASSESSEES NET PROFIT RATE FOR THE CURRENT YEAR IS AT 3.98% AS AGAINST 2.18% FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE ASSESSI NG OFFICER FURTHER COMMENTED THAT THE PROFIT RATE WAS PROGRESSIVE BUT IF THE DISCLOSED AMOUNT OF RS. 4 CR ORES CREDITED IN THE PROFIT & LOSS ACCOUNT WAS TAKEN OUT OF CALCULATION THE NET PROFIT WOULD COME DOWN TO .08% . THE ASSESSING OFFICER THEREFORE REQUIRED THE ASSESSEE TO EXPLAIN THE REASONS FOR THE SAME. IN THE ABSENCE OF ANY EXPLANATION FROM THE SIDE OF THE ASSESSEE THE ASSE SSING OFFICER ADOPTED NET PROFIT RATE OF 2.18% LEADING TO THE ADDITION OF RS. 2.78 CR. 19(II) THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(APPEALS) AND WRITTEN SUBMISSION OF THE ASSESSEE IS REPRODUCED IN THE IMPUGNED ORDER IN WHICH THE ASSES SEE BRIEFLY EXPLAINED THAT THE ASSESSEE HAS CARRIED ON BUSINESS OF MANUFACTURING AND SALE OF LIQUOR AND MAINTAINED REGULAR BOOKS OF ACCOUNT. ALL THE PURCH ASES AND SALES HAVE BEEN RECORDED IN THE BOOKS OF ACCOUN T. CLOSING STOCK HAS BEEN PROPERLY EVALUATED. ALL EXP ENSES ARE PROPERLY VOUCHED AND VERIFIABLE. THE ACCOUNTS ARE AUDITED BY THE CHARTERED ACCOUNTANT AND THE PRODUCT ION OF THE FINISHED GOODS IS STRICTLY UNDER THE CONTROL OF STATE EXCISE & TAXATION AUTHORITIES AND UNDER THEIR CHECK TIME TO TIME. THE ASSESSING OFFICER APPLIED HIGHER PROF IT RATE WITHOUT GOING TO THE FACTS AND CIRCUMSTANCES OF THE CASE. THE APPLICATION OF NET PROFIT RATE OF EARLIER YEAR IS 12 WITHOUT ANY BASIS. THE PROFIT IN ONE YEAR AND THE LOSS IN OTHER YEAR CANNOT BE RULED OUT. IN ORDER TO MAINTA IN THE SALE AND TO COMPETE THE MARKET ONE HAS TO CUT DOWN ITS PROFIT FOR REGULAR CIRCULATION OF FINANCE. SOME LE AKAGES IN THE TRADE OF THE ASSESSEE CANNOT BE RULED OUT WH ICH ARE BEYOND THE CONTROL OF THE ASSESSEE BECAUSE IT H AS TO RELY UPON IT STAFF AND EMPLOYEES ENGAGED. THE ASSE SSING OFFICER HAS NOT POINTED OUT ANY DEFECT DISCREPANCY OR IRREGULARITY IN THE BOOKS OF ACCOUNT AS WELL AS IN THE RUNNING OF THE BUSINESS. THUS BOOK VERSION OF THE ASSESSEE HAS BEEN ACCEPTED BY THE ASSESSING OFFICER AND BOOK RESULTS HAVE NOT BEEN REJECTED. THERE IS NO SUPPRESSION OF SALE OR PURCHASE. THE ASSESSEE RELI ED UPON SEVERAL DECISIONS IN SUPPORT OF THE CONTENTION THAT WITHOUT REJECTING THE BOOKS OF ACCOUNT NO ADDITION CAN BE MADE AGAINST THE ASSESSEE ON MERE SUSPICION. 20. THE LD. CIT(APPEALS) CALLED FOR THE REMAND REPO RT FROM THE ASSESSING OFFICER AND THE ASSESSING OFFICE R IN THE SAME REITERATED THE SAME FACTS AS HAVE BEEN MENTIONED IN THE ASSESSMENT ORDER. 21. THE LD. CIT(APPEALS) AFTER CONSIDERING SUBMISSI ONS OF THE ASSESSEE AND REMAND REPORT OF THE ASSESSING OFFICER NOTED THAT BEFORE ESTIMATING THE GP RATE FO R CURRENT YEAR ASSESSING OFFICER HAS OVER LOOKED AN IMPORTANT STATUTORY REQUIREMENT OF REJECTING THE BO OKS OF ACCOUNT OF THE ASSESSEE. IT WAS SEEN THAT NO DEFEC TS IN 13 THE MAINTENANCE OF THE BOOKS OF ACCOUNT WHAT-SO-EV ER HAVE BEEN POINTED OUT BY THE ASSESSING OFFICER SO A S TO PROCEED TO ESTIMATE A FAIR AND REASONABLE GP. IT I S STATED THAT IT IS A CASE OF SEARCH AND NO INCRIMINA TING DOCUMENTS HAVE BEEN HIGHLIGHTED TO SHOW THAT ASSESS EE HAD MANIPULATED THE BOOKS OF ACCOUNT. THEREFORE I T WAS NOT OPEN TO THE ASSESSING OFFICER TO SUBSTITUTE HIS OWN VIEW FOR APPLYING HIGHER GP RATE. 22. THE LD. CIT(APPEALS) ACCEPTED THE JUDGEMENTS CI TED BY ASSESSEE FOR THE PURPOSE OF DELETING THE ADDITIO N AND ACCORDINGLY DELETED THE ENTIRE ADDITION. 22(I) THE LD. CIT(APPEALS) THEREAFTER HAS CONS IDERED THE ISSUE OF SURRENDER MADE BY THE ASSESSEE IN A SU M OF RS. 4 CRORES IN ORDER TO BUY PEACE OF MIND AND ADDI TION UNDER SECTION 69A OF THE INCOME TAX ACT. THE ASSES SEE SUBMITTED BEFORE LD. CIT(APPEALS) THAT IT IS CARRYI NG ON BUSINESS OF LIQUOR ONLY AND NO INCRIMINATING MATERI AL WAS FOUND DURING THE COURSE OF SEARCH TO PROVE ANY UNDISCLOSED INCOME OR ANY OTHER ITEM TO BE CONSIDER ED AGAINST THE ASSESSEE THEREFORE RS. 4 CRORE WAS CORRECTLY SHOWN UNDER THE HEAD BUSINESS & PROFESSI ON. THE LD. CIT(APPEALS) ACCEPTED THE CONTENTION OF THE ASSESSEE THAT SURRENDER WAS MADE BY ASSESSEE WHICH WAS ATTRIBUTABLE TO THE ACT OF OMISSION AND COMMISSION FOR CARRYING OUT BUSINESS. THEREFORE SAME WAS PROPERL Y CONSIDERED UNDER THE HEAD BUSINESS & PROFESSION. THE 14 CONTENTION OF THE ASSESSEE WAS ACCEPTED THAT THE SURRENDER WAS ON ACCOUNT OF BUSINESS & PROFESSION. 23. THE LD. DR SUBMITTED THAT RULE 46A OF IT RULES HAVE BEEN VIOLATED IN THIS CASE BECAUSE ASSESSEE DID NOT FILE ANY SUBMISSION BEFORE ASSESSING OFFICER. ON THE OT HER HAND LD. COUNSEL FOR THE ASSESSEE REITERATED SUBMI SSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT IS SUE IS COVERED ON IDENTICAL FACTS BY ORDER OF ITAT CHAN DIGARH BENCH IN THE CASE OF DCIT V DEEP MALHOTRA IN ITA 661/2015 WITH C.O. 28/2015 VIDE ORDER DATED 15.03.2016 IN WHICH PARA 6 TO 9 IT WAS HELD AS UND ER : 6. ON GROUND NO. (B) IN THE DEPARTMENT APPEAL REVEN UE CHALLENGED THE DELETION OF ADDITION OF RS. 1 29 01 720/- ON ACCOUNT OF GP RATE. 7. THE AO MADE ADDITION ON ACCOUNT OF COMPARATIVELY LO W GP RATE IN COMPARISON TO THE LAST YEAR. THE AO HAS HIG HLIGHTED THAT THE ASSESSEE WAS ASKED TO FURNISH THE REASONS FOR DECLI NE IN GROSS PROFIT. AO OPINED THAT SAME ARE GENERAL IN NATURE A ND THE GENUINENESS OF THE SALE AS RECORDED IN THE TRADING ACCOUNT WAS NOT ESTABLISHED THEREFORE IN THE OPINION OF THE AO IT WAS FAIR AND REASONABLE TO ESTIMATE THE PROFITS FROM BUSINESS BY ADOPTING THE G.P. RATIO OF 2.85% AS DECLARED BY THE ASSESSEE FOR ASSESSMENT YEAR 2010-11 AND MADE THE ABOVE ADDITION. 7.1 THE ASSESSEE CHALLENGED THE ADDITION B EFORE LD. CIT(A)AND IT WAS SUBMITTED THAT ASSESSEE HAS CARR IED ON BUSINESS OF PURCHASE AND SALE OF LIQUOR ON ALLOTTED VENDS B Y THE EXCISE AND TAXATION DEPARTMENT FOR F.Y 2010-11. THE ASSESSEE H AS MAINTAINED REGULAR BOOKS OF ACCOUNT IN HIS REGULAR COURSE OF B USINESS. ALL THE PURCHASES AND SALES HAVE BEEN DULY RECORDED AND ACC OUNTS ARE AUDITED. ALL THE PURCHASES WERE MADE ON ISSUE O F PERMIT BY THE EXCISE AND TAXATION DEPARTMENT. THE SALE HAVE ALREA DY BEEN DULY 15 RECORDED IN THE BOOKS OF ACCOUNT. 7.2 THE AO HAS ARBITRARILY MADE THIS ADDITION ON ACCOUNT OF LOW GROSS PROFIT BY COMPARING IT WITH THE IMMEDIATE PRE CEDING YEAR. THERE COULD NOT BE ANY COMPARISON OF BOOKS RESULTS OF LAST YEAR BECAUSE IT DEPENDS UPON THE PLACE AREA & LOCATION OF THE ALLOTTED VENDS CHANGES EACH YEAR AND OTHER BUSINESS FACTORS. IN THE YEAR UNDER APPEAL THE ASSESSEE HAD CARRIED ON BUSINESS O F LIQUOR AT GURDASPUR PATHANKOT & BHOGPUR EXCISE CIRCLE HAV ING TOTAL 18 RETAIL VENDS WHEREAS IN THE PRECEDING YEAR THE VEND S WERE IN THE FEROZEPUR FARIDKOT JALANDHAR EXCISE CIRCLE HAVIN G DIFFERENT NUMBER OF VENDS. EACH YEAR IS AN INDEPENDENT YEAR A ND PROFITABILITY IN THE TRADE DEPENDS UPON MANY FACTORS LIKE DEMAND AND SUPPLY PLACE COMPETITION IN THE MARKET AVAILABILITY OF F INANCES ETC. THERE WAS A CUT THROAT COMPETITION IN THE BUSINESS IN ORD ER TO MAINTAIN SALE AND TO COMPETE IN THE MARKET ONE HAS TO LOWER DOWN HIS PROFITS FOR REGULAR CIRCULATION OF FINANCES. THE ASSESSEE H AS TO RELY ON THE STAFF AND EMPLOYEES THEREFORE COMPARISON FROM THE E ARLIER YEAR WAS FACTUALLY WRONG. THE LICENSE FEE HAS ALSO INCREASED AS COMPARE TO THE LAST YEAR AND ADDITIONAL LICENSE FEE WAS ALSO C HARGED WHICH WERE THE FACTOR FOR LOW GROSS PROFIT. THERE IS INCR EASE IN THE EXPENDITURE AS COMPARE TO EARLIER YEAR. ALL THE TRA NSACTIONS ARE CARRIED OUT THROUGH THE EXCISE DEPARTMENT THEREFORE WITHOUT ANY EVIDENCE OF SUPPRESSION OF SALE THE ADDITION WAS W HOLLY UNJUSTIFIED. IT WAS ALSO SUBMITTED THAT ASSESSEE HAS SURRENDERED INCOME OF RS. 2.25 CRORES WHICH HAS BEEN DULY REFLECTED IN THE PR OFIT AND LOSS ACCOUNT AND EVEN IF THERE WAS ANY DISCREPANCY THE S AME WOULD STAND COVERED BY THE INCOME SURRENDERED. THE SUBMISSIONS OF THE ASSESSEE WERE FORWARDED TO THE AO FOR HIS COMMENTS IN WHICH THE AO REITERATED THE FACTS STATED IN THE ASSESSMENT ORDER . 8. LD. CIT(A) CONSIDERING THE SUBMISSIONS OF THE AS SESSEE AND MATERIALS ON RECORD FOUND THAT THE ASSESSEE MAINTA INED BOOKS OF ACCOUNT WHICH HAVE BEEN AUDITED AND NO DEFECT IN TH E SAME HAVE BEEN POINTED OUT BY THE AO. NO EVIDENCE EITHER OF INFLATION OF PURCHASE OR SUPPRESSION OF SALES WERE FOUND. THERE IS NO EVIDENCE OF INFLATION OF ANY EXPENSES. THE CASE OF ASSESSEE HAD BEEN SUBJECTED TO SEARCH UNDER SECTION 1 32 OF THE ACT IN WHICH NO INCRIMINATING DOCUMENTS HAVE BEEN H IGHLIGHTED TO 16 SUPPORT THE ADDITION THUS THE AO COULD NOT REJECT THE BOOKS RESULT AND WHOLE ADDITION IS UNJUSTIFIED. LD. CJT(A) ACCOR DINGLY DELETED THE ADDITION. 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE DO N OT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. NO S PECIFIC DEFECTS HAVE BEEN POINTED OUT IN MAINTENANCE OF BOOKS OF AC COUNT BY THE ASSESSEE. THE ASSESSEE HAS SUFFICIENT REASONS FOR F ALL IN GROSS PROFIT I.E; CHANGE OF THE LOCATION OF THE VENDS ALLOTTED B Y EXCISE DEPARTMENT IN THE YEAR UNDER CONSIDERATION AS WELL AS IN PRECEDING ASSESSMENT YEAR . THE ASSESSEE CLAIMED THAT SINCE L OCATION OF THE LIQUOR SHOP HAVE BEEN CHANGED YEAR TO YEAR AND THER E WAS INCREASE IN THE LICENSE FEE THEREFORE THERE CANNOT BE COMPAR ISON OF THE PROFIT FROM THE EARLIER YEARS. THE REASONS GIVEN BY THE AS SESSEE HAVE NOT BEEN REBUTTED BY THE AO IN HIS COMMENTS BEFORE THE LD. CIT(A). NO INFLATION OF PURCHASES OR SUPPRESSION OF SALES WERE FOUND. AO HAS NOT POINTED OUT IF ANY EXPENSES HAVE BEEN INFLATED BY THE ASSESSEE. LD. COUNSEL FOR THE ASSESSEE REFER TO PAPER BOOK PA GE NO. 22 HIGHLIGHTED THE REASONS THAT THERE WAS INCREASE IN THE EXPENSES IN THE YEAR UNDER CONSIDERATION BY REFERRING TO THE CH ART WHICH IS FILED AT PAGE 22 AND 23 OF THE PAPER BOOK. HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. K.S. BHATIA [2004 ]- 269 ITR 577 HAS HELD THAT MERE LOW GROSS PROFIT IS NOT A GROUND TO REJECT THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE SUBMISSION OF THE ASSESSEE SINCE HAVE NOT BEEN REBUTTED BY AO AT THE APPELLATE STAGE AND NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT IN MAINTENAN CE OF THE BOOKS OF ACCOUNT THEREFORE WHOLE ADDITION WAS UNJUSTIFIE D WHICH WAS CORRECTLY DELETED BY THE LD. CIT(A). THIS GROUND OF APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 24. AFTER CONSIDERING RIVAL SUBMISSIONS WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT IN MAINTENAN CE OF THE BOOKS OF ACCOUNT BY THE ASSESSEE. THE LD. CIT(APPEALS) WAS THEREFORE JUSTIFIED IN DELETING THE 17 ADDITION ON THIS GROUND ITSELF. FURTHER IT IS A C ASE OF SEARCH AND NO MATERIAL HAVE BEEN POINTED OUT AS TO WHAT WAS THE BASIS OF SUBSTITUTING THE PROFIT RATE SHOWN BY THE ASSESSEE WITH THE PROFIT RATE OF EARLIER YEARS. THE ASSESSEE EXPLAINED THE REASONS FOR FALL IN GP DUE T O LOCATION OF THE LIQUOR VEND. THE BUSINESS OF THE A SSESSEE IS CONTROLLED BY STATE EXCISE DEPARTMENT. THE LD. CIT(APPEALS) CALLED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER ON THE SUBMISSIONS OF THE ASSESSE E BUT THE SUBMISSIONS OF THE ASSESSEE HAVE NOT BEEN REBUT TED BY THE ASSESSING OFFICER IN HIS COMMENTS BEFORE LD. CIT(APPEALS). NO INFLATION OF PURCHASES OR SUPPRES SION OF SALES WERE FOUND. THE ASSESSING OFFICER HAS NOT POINTED OUT IF ANY EXPENSES HAVE BEEN INFLATED BY T HE ASSESSEE. THE ISSUE IS THEREFORE COVERED BY ORDER OF ITAT CHANDIGARH BENCH IN THE CASE OF DEEP MALHOTRA (SUPRA). THE LD. DR SUBMITTED THAT RULE 46A OF IT RULES HAVE BEEN VIOLATED IN THIS CASE. HOWEVER IN THIS CASE LD. CIT(APPEALS) CALLED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER IN WHICH ASSESSING OFFICER DID NO T RAISE ANY OBJECTION TO THE SUBMISSIONS OF THE ASSESSEE AN D MERELY REITERATED THE FACTS STATED IN THE ASSESSMEN T ORDER THEREFORE SUBMISSION OF LD. DR ARE REJECTED BY FOLLOWING DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S KULDEEP INDUSTRIAL CORPORA TION (SUPRA). 18 24(I) WE MAY ALSO NOTE HERE THAT THOUGH THE LD. CIT(APPEALS) ALSO DISCUSSED THE ISSUE OF SURRENDERE D INCOME DISCLOSED BY THE ASSESSEE AS INCOME FROM BUSINESS & PROFESSION BUT REVENUE IN THE GROUNDS O F APPEAL HAVE NOT CHALLENGED THOSE FINDINGS OF THE LD . CIT(APPEALS). THE REVENUE HAS MERELY CHALLENGED TH E ADDITION MADE ON ACCOUNT OF LOW NET PROFIT. THEREF ORE FINDING OF FACT RECORDED BY THE LD. CIT(APPEALS) TH AT DISCLOSED INCOME WAS CORRECTLY CREDITED TO THE PROF IT & LOSS ACCOUNT HAS REACHED FINALITY AND NO FURTHER INTERFERENCE IS CALLED FOR IN THE MATTER. IN THIS VIEW OF THE MATTER WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE SAME IS ACCORDINGLY DISMISS ED. 25. ON GROUND NO. 2 REVENUE CHALLENGED DELETING OF RS. 8 74 080/- ON ACCOUNT OF EXCESS CASH FUND DURING TH E COURSE OF SEARCH. THE ASSESSING OFFICER MADE ADDIT ION OF RS. 8 74 080/- ON ACCOUNT OF CASH FOUND AT FOUR PRE MISES OF THE ASSESSEE DURING THE COURSE OF SEARCH AND ASS ESSEE FAILED TO EXPLAIN SOURCE OF THE SAME. THE ASSESSEE SUBMITTED BEFORE LD. CIT(APPEALS) THAT ON THE DATE OF SEARCH ON 21.10.2010 THE ASSESSEE WAS HAVING AVAILABILITY OF MORE CASH IN ITS BOOKS OF ACCOUNT A S CASH IN HAND. THE DETAILS OF SAME ARE NOTED IN THE IMPU GNED ORDER. THE ASSESSING OFFICER IN THE REMAND REPORT DID NOT CONTRADICT THE FACTUAL POSITION SUBMITTED BY TH E ASSESSEE. THE LD. CIT(APPEALS) THEREFORE NOTED T HAT CASH IN HAND AS PER BOOKS OF ACCOUNT IS EXCESS AS A GAINST 19 CASH FOUND DURING THE COURSE OF SEARCH OPERATION. THEREFORE ADDITION WAS DELETED. 26. AFTER CONSIDERING RIVAL SUBMISSIONS WE ARE OF THE VIEW LD. CIT(APPEALS) CORRECTLY DELETED THE ADDITIO N. IT IS A CASE OF LESS CASH FOUND DURING THE COURSE OF SEAR CH. THE ASSESSEE SPECIFICALLY PROVED THAT IT WAS HAVING MORE CASH IN HAND IN THE BOOKS OF ACCOUNT AS AGAINST CAS H FOUND DURING THE COURSE OF SEARCH. THEREFORE FOR LESSER CASH FOUND DURING THE COURSE OF SEARCH NO ADDITION COULD BE MADE AGAINST THE ASSESSEE. THUS ADDITION ON THIS GROUND WAS RIGHTLY DELETED BY THE LD. CIT(APPE ALS). THIS GROUND STANDS DISMISSED. 27. IN THE RESULT DEPARTMENTAL APPEAL IS DISMISSED . 28. IN THE RESULT BOTH THE DEPARTMENTAL APPEALS AR E DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA GUPTA) (BHAVNESH SAINI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 5 TH OCTOBER 2016. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT DR ASSISTANT REGISTRAR ITAT/CHD