The Add.CIT, Sagar v. M/s Brindawan Rai & Co.,, Sagar

ITA 38/JAB/2009 | 2005-2006
Pronouncement Date: 14-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 3822714 RSA 2009
Assessee PAN AAIFP4821E
Bench Indore
Appeal Number ITA 38/JAB/2009
Duration Of Justice 1 year(s) 11 month(s) 18 day(s)
Appellant The Add.CIT, Sagar
Respondent M/s Brindawan Rai & Co.,, Sagar
Appeal Type Income Tax Appeal
Pronouncement Date 14-01-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 14-01-2011
Date Of Final Hearing 22-10-2010
Next Hearing Date 22-10-2010
Assessment Year 2005-2006
Appeal Filed On 27-01-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C.SHARMA ACCOUNTANT MEMBER PAN NO. : AAHHFB-2050-Q I.T.A.NO.30/JAB/2009 A.Y. : 2005-06 ADDITIONAL CIT BASANT KESHERWANI & CO. RANGE SAGAR VS JAWAHARGANJ SAGAR. (APPELLANT) (RESPONDENT) PAN NO. : AAIFP-4821-E I.T.A.NO.36/JAB/2009 A.Y. : 2005-06 ADDITIONAL CIT PHOOLSINGH & CO. RANGE SAGAR VS JAWAHARGANJ SAGAR. (APPELLANT) (RESPONDENT) PAN NO. : AAHHFB-2051-R I.T.A.NO.38/JAB/2009 A.Y. : 2005-06 ADDITIONAL CIT BRINDAWAN RAI & CO. RANGE SAGAR VS BRINDAWAN BAG SAGAR. (APPELLANT) (RESPONDENT) -: 2: - 2 PAN NO. : AAHFK-6427-A I.T.A.NO. 40/JAB/2009 A.Y. : 2005-06 ADDITIONAL CIT KAPIL KESHERWANI & CO. RANGE SAGAR VS JAWAHARGANJ SAGAR. (APPELLANT) (RESPONDENT) PAN NO. : AAIFP4821E I.T.A.NO.27/JAB/2009 A.Y. : 2005-06 ADDITIONAL CIT HARI NARAYAN TRADERS RANGE SAGAR VS BRINDAWAN BAG SAGAR. (APPELLANT) (RESPONDENT) PAN NO. : AAGFG-4309-N I.T.A.NO.33/JAB/2009 A.Y. : 2005-06 ADDITIONAL CIT GOPAL KRISHNA & CO. RANGE SAGAR VS JAWAHARGANJ SAGAR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.K. SINGH CIT DR RESPONDENTS BY : S/SHRI H.P. VERMA ASHISH GOYAL AND GIRISH AGARWAL -: 3: - 3 O R D E R PER BENCH: THESE ARE APPEALS FILED BY THE REVENUE IN THE CASE OF DIFFERENT ASSESSEES OF THE SAME GROUP AGAINST THE O RDERS OF CIT(A) JABALPUR FOR THE ASSESSMENT YEAR 2005-06 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME-TAX ACT 1961. AS COMMON GROUNDS HAVE BEEN RAISED IN CASE OF ALL T HE ASSESSEES BEFORE US THEY WERE HEARD TOGETHER AND A RE NOW DECIDED BY THIS CONSOLIDATED ORDER. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. 3. FACTS IN BRIEF ARE THAT ALL THE ASSESSEE FIRM WERE CARRYING ON BUSINESS OF SALE OF COUNTRY LIQUOR AND INDIAN MADE FOREIGN LIQUOR I.E. IMFL IN CERTAIN SHOPS IN SAGAR . WHILE FRAMING ASSESSMENT THE AO MADE ADDITION ON ESTIMAT E BASIS BY STATING THAT THERE WAS UNDER BILLING OF SALE OF COUNTRY LIQUOR. IN THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO PRODUCE INSPECTION BOOK WHICH IN TERMS OF EXCISE LICENCE WAS REQUIRED TO BE MAINTAINED TO RECORD THE SELLING RATES OF DIFFERENT BRANDS OF THE LIQUOR. HOWEVER THE SAME W AS NOT -: 4: - 4 PRODUCED ON THE GROUND THAT NO SUCH INSPECTION BOOK WAS AVAILABLE/MAINTAINED THEN THE AO REQUIRED THE INFO RMATION FROM EXCISE DEPARTMENT WHICH SUPPLIED THE INFORMAT ION IN RESPECT OF SOME OF THE SHOPS INSPECTED BY THEM AND THAT ALSO FOR ONE DAY WHICH WAS THE DAY WHEN THE EXCISE INS PECTOR HAD VISITED THE SHOP TO CHECK THE RATES AT WHICH DIFFER ENT BRANDS OF LIQUOR WERE SOLD. IT WAS EXPLAINED BY THE ASSESSEE THAT SUCH INSPECTION BOOK WAS JUST TO AVOID UNNECESSARY COMPE TITION AMONGST VARIOUS LICENSEES. IT WAS FURTHER CONTENDED THAT EVEN IF ANY LICENSEE FOUND TO BE SELLING LIQUOR BELOW TH E RATES PRESCRIBED THEN FOR THAT DEFAULT A MINIMUM PENALTY OF RS. 400/- U/S 139 OF THE EXCISE ACT WAS LEVIABLE. 4. THE AO FOR NOT PRODUCING THE INSPECTION BOOK AND T HE DAILY STOCK REGISTER AS WELL AS THE SALES BILLS HEL D THE BOOKS OF ACCOUNT TO BE NOT RELIABLE AND THEN BY INVOKING SEC TION 145(3) ESTIMATED THE INCOME IN ACCORDANCE WITH THE PROVISI ONS OF SECTION 144 OF THE INCOME-TAX ACT 1961 AND FOR WH ICH HE ADOPTED THE AVERAGE SALE RATE WHICH HE WORKED OUT ON THE BASIS OF THE INFORMATION RECEIVED FORM THE EXCISE D EPARTMENT AND TOOK IT TO BE THE UNIFORM SELLING RATE FOR THE WHOLE YEAR -: 5: - 5 AND WORKED OUT THE SALES OF COUNTRY LIQUOR ACCORDIN GLY AND MADE THE ADDITION. AO ALSO INCREASED THE SALE OF IN DIAN MADE FOREIGN LIQUOR. 5. SIMILAR ADDITIONS WERE MADE BY THE ASSESSING OFFICER IN RESPECT OF ALL THE ASSESSEES BY RELYING ON ONE DAY INSPECTION REPORT OF THE EXCISE DEPARTMENT. THE ADD ITION WAS MADE BY ESTIMATING HIGHER SALES WERE REJECTED BY TH E LD. CIT(A) AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CAREFULLY CONSIDERED THE FACTS ON RECORD AND THE SUBMISSIONS MADE BY THE RIVAL PARTIES. THE APPELLAN T'S SUBMISSION AGAINST THESE ADDITIONS ARE TWO-FOLD. FI RST HE HAS CHALLENGED THE A.O. 'S ACTION OF HOLDING THE BOOKS OF ACCOUNTS TO BE NOT RELIABLE AND NEXT BY INVOKING SECTION 145(3) HAS ESTIMATED THE SUPPRESSE D SALES. THE MATERIAL FACTS WHICH WERE CONSIDERED TO HOLD THE BOOKS OF ACCOUNTS TO BE NOT RELIABLE ARE: (A) THAT THE INSPECTION BOOK RECORDING THE DAY-WISE DETAILS OF THE SELLING RATES OF VARIOUS BRANDS OF LIQUOR/MEASURES WAS NOT PRODUCED. (B) NO DAILY STOCK REGISTER HAS BEEN MAINTAINED AND (C) NO SALES BILLS HAVE BEEN ISSUED. 3.6 ON THE NON-MAINTENANCE/PRODUCTION OF INSPECTION BOOK IT IS TO OBSERVE THAT IT IS NOT ONE OF THE RE GULAR BOOKS OF ACCOUNT PRESCRIBED UNDER THE ACT WHICH IS TO BE MAINTAINED BY THE ASSESSEE. THE MAINTENANCE OF THES E BOOKS IS FOR THE PURPOSE OF REGULATING THE EXCISE R ULES -: 6: - 6 OF SELLING THE LIQUOR ABOVE THE FLOOR PRICE. IF THE ASSESSEE HAS NOT MAINTAINED THE INSPECTION BOOK TH EN IT IS A VIOLATION OF THE EXCISE RULES. FURTHER IT I S ALSO NOTED THAT THE EXCISE DEPARTMENT DOES NOT APPEAR TO BE VERY MUCH PARTICULAR ON THE MAINTENANCE OF THI S BOOK SINCE HAD IT NOT BEEN SO THEN THIS INSPECTION BOOK WOULD HAVE BEEN EXAMINED PERIODICALLY BY EVEN CALLING FOR THE PERIODICAL REPORTS OF THE RATES AT WHICH THE LIQUOR HAD BEEN SOLD ON THE VARIOUS DATES FALLI NG IN A PERIOD. ON THE OTHER HAND THERE WAS INSPECTION O NLY ON ONE DAY AND THAT TOO AT SEVEN SHOPS OUT OF THE 1 7. IT SHOWS THIS RULE. FURTHER THE CLAIM DISCOUNT OF T HE LD. AR THAT ON THE DATES OF INSPECTION THE RATES WERE' DELIBERATELY DISPLAYED AT FIGURES WHICH THAT EVEN THE EXCISE DEPARTMENT IS NOT VERY MUCH SERIOUS TO ENFOR CE WERE ABOVE THE MINIMUM PRESCRIBED RATES SO AS TO AVOID BEING BOOKED U/S 39 OF THE EXCISE ACT CAN AL SO NOT BE DISCOUNTED. IN SHORT NO SERIOUS COGNIZANCE FOR NON-PRODUCTION/MAINTENANCE OF THE INSPECTION BOOK CAN BE TAKEN FOR COMING TO THE FINDING THAT HE BOOK S OF ACCOUNT ARE NOT RELIABLE. I 3.7 NEXT IS THE NON-MAINTENANCE OF DAILY STOCK REGI STER. THE NON-MAINTENANCE DOES NOT BY ITSELF LEAD TO THE INFERENCE THAT THE ASSESSEE OUGHT TO HAVE SOLD SOME STOCK OUT OF THE BOOKS. IN ANY CASE THERE IS NO SUC H FINDING EITHER. THE A.O. HAS NOT CARRIED OUT ANY EXERCISE WHICH MAY EVEN OBLIQUELY POINT OUT TO SUCH AN ANOMALY. FURTHER IT IS EITHER AS HE HAS MADE THE ADDITION ON ACCOUNT OF SUPPRESSION OF SALES. 3.8 AS REGARDS THE NON-MAINTENANCE OF THE SALES BILLS I FIND FORCE IN THE STAND TAKEN BY THE APPELL ANT THAT IN THE LIQUOR BUSINESS SALE BILLS ARE NOT ISSU ED. NO CONTRACTOR EVER ISSUES THE SALES BILL. MOREOVER THESE BILLS WOULD BE DEVOID OF ANY CREDIBILITY FOR THE -: 7: - 7 REASON THAT A BUYER NEVER GIVES HIS NAME OR ADDRESS. IN THE LIQUOR TRADE THE SALES ARE ACCOUNTED ON THE BASIS OF CASH COLLECTION WHICH THOUGH MAY BE A CRUDE METHOD BUT AN RECOGNIZED ONE. 3.9 HOWEVER AT THE SAME TIME IT IS TO ADD THAT IT D OES NOT MEAN THAT THE SALES RECODED IN THE BOOKS OF ACCOUNT IS TO BE ACCEPTED AT ITS FACE VALUE WITHOUT ANY QUESTIONING. THE RELIABILITY OF THIS FIGURE CAN STI LL BE QUESTIONED AND ONE WAY TO FIND OUT WHETHER THE FIGU RE IS RELIABLE OR NOT IS TO LOOK AT THE ACCEPTABILITY OF THE GROSS PROFIT RATIO AND THE NET PROFIT RATIO. BUT TH E NET PROFIT RATIO OF 2.66% DECLARED BY THE ASSESSEE APPE ARS TO BE QUITE ACCEPTABLE IN THE LIGHT OF THE FACT THA T IN THE CASES OF A LARGE NUMBER OF LIQUOR CONTRACTORS THE INCOME WAS RETURNED BY ADOPTING A NET PROFIT RATE O F 1.25 %. IN THOSE CASES THE ADDITION MADE BY THE A.O. BY APPLYING A NET PROFIT RATE OF 1.55 % WAS DELETED IN THE FIRST APPEAL. EVEN IN THE CITED CASES OF M/S NARMAD A ENTERPRISES THE A.O. BY REJECTING THE BOOKS OF ACCO UNTS HAD MADE THE ADDITION BY ADOPTING A RATE OF 1.75 %. EVEN IF THIS RATE OF 1.75 % IS CONSIDERED STILL NO ADDITION IN THIS CASE IS POSSIBLE. DURING THE COURS E OF APPELLATE PROCEEDINGS THE LD. A.R. ALSO RAISED THE POINT THAT THE NET PROFIT RATE DECLARED BY THE ASSE SSEE IN COMPARISON TO OTHER LIQUOR CONTRACTORS WAS MUCH BETTER. TO VERIFY THIS FACT THE AO VIDE LETTER DT. 19.11.2008 WAS ASKED TO FURNISH THE DETAILS OF THE TURN OVER AND THE PROFIT DECLARED BY OTHER LIQUOR CONTRACTORS. BUT IN RESPONSE THE A.O. DID NOT FURNI SH ANY INFORMATION. 3.10 THE A.O. HAS MADE THE ADDITION ON ACCOUNT OF SUPPRESSION OF SALES AND AS SUCH HAS NOT IGNORED TH E BOOKS OF ACCOUNTS. THE A.O. IN FACT HAS ACCEPTED AL L -: 8: - 8 OTHER ACCOUNTS EXCEPT THE SALES ACCOUNT AND HAS TAK EN AN ENHANCED FIGURE OF SALES. BUT THERE IS NO DIRECT EVIDENCE TO HOW THAT THE ASSESSEE WAS UNDER-STATING THE SALES AND IN VIEW OF WHICH THE DATA GATHERED FR OM THE EXCISE DEPARTMENT DOES NOT CONSTITUTE TO BE VER Y MATERIAL EVIDENCE. MOREOVER THE ESTIMATION OF SALES IS BASED ON TOO THIN A DATA TO GIVE ANY CREDENCE. FURT HER THIS ESTIMATION ON THE BASIS OF AVERAGE SALE PRICE HAS RESULTED IN ASSESSING THE INCOME AT A FIGURE WHICH BY ALL STANDARDS IS HIGHLY UN-REALISTIC FOR THE REASON THAT IF THERE HAD BEEN A PROFIT MARGIN OF 15% THEN THE EXCISE DEPTT. INSTEAD WOULD HAVE PLACED A CEILING O N THE SALE PRICE. IN VIEW OF ALL THESE FACTS IT IS TO HOLD THAT THE NET PROFIT RATIO OF 2.66 % DECLARED BY THE ASSESSEE BY NO STANDARD CAN BE CONSIDERED TO BE LOW AS TO CALL FOR AN ADDITION. THE ADDITION SO MADE THEREFORE IS DELETED. 6. AGGRIEVED BY THE ABOVE ORDER OF THE LD. CIT(A) TH E REVENUE IS IN FURTHER APPEAL BEFORE US. IT WAS CONT ENDED BY THE LD. CIT DR SHRI K.K.SINGH THAT DURING THE COUR SE OF SCRUTINY ASSESSMENT THE AO HAS CALLED THE ASSESSEE TO PRODUCE INSPECTION BOOK WHICH HE WAS REQUIRED TO M AINTAIN IN TERMS OF EXCISE LICENCE. SUCH INSPECTION BOOK CO NTAINS THE SELLING RATE OF DIFFERENT BRANDS OF LIQUOR ACTUALLY SOLD BY THE ASSESSEE. AS THE ASSESSEE DID NOT PRODUCE THE SAME THE AO CALLED INFORMATION FROM THE EXCISE DEPARTMENT AND O N THE BASIS OF SUCH INFORMATION THE AO HAS ESTIMATED SAL ES FOR -: 9: - 9 ENTIRE YEAR IN RESPECT OF ALL THE SHOPS RUN BY THE ASSESSEE FIRM AND MADE THE ADDITION. HE FURTHER CONTENDED THAT AS PER THE INSPECTION REPORT OF THE EXCISE DEPARTMENT ON THE D AY OF INSPECTION THE ASSESSEE WAS FOUND TO BE SELLING TH E LIQUOR AT THE RATES ABOVE THE MINIMUM SELLING RATES FIXED BY THE GOVERNMENT. HOWEVER THE ASSESSEE HAS ONLY RECORDED THE MINIMUM SELLING PRICE IN RESPECT OF THE LIQUOR ACTU ALLY SOLD THUS HAVE NOT RECORDED THE AMOUNT CHARGED OVER AND ABOVE THE MINIMUM SELLING PRICE FIXED BY THE GOVERNMENT. THEREFORE THE AO WAS JUSTIFIED IN REJECTING THE BOOK RESULTS AND ESTIMATING THE SALES IN RESPECT OF ALL THE SHOPS FO R THE ENTIRE 365 DAYS BY TAKING AVERAGE SELLING PRICE ABOVE THE MINIMUM SELLING PRICE ADOPTED BY THE ASSESSEE. 7. ON THE OTHER HAND IT WAS CONTENDED BY THE LD. AUTHORIZED REPRESENTATIVE SHRI H.P.VERMA THAT QUANT ITY-WISE DETAILS OF THE SALE WAS FURNISHED BEFORE THE AO ALO NGWITH THE AUDITED ACCOUNTS THEREFORE NON-MAINTENANCE OF STO CK REGISTER CANNOT PREJUDICE THE CASE OF THE ASSESSEE. HE FURTH ER SUBMITTED THAT IN THE LINE OF BUSINESS OF LIQUOR TR ADE SALES BILLS ARE NOT ISSUED AND EVEN THE CUSTOMERS DO NOT PREFER TO -: 10: - 10 HAVE SALES BILL EVEN WHERE SALES BILLS ARE ISSUED THE CUSTOMERS DO NOT GIVE THEIR NAMES AND ADDRESS AND THEREFORE THE BILLS REMAINED UNVERIFIABLE. RELIANCE WAS PLACED ON THE D ECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF SHA HABUDDIN & SONS 38 STC 47 AND RAMJILAL & SONS 50 STC 344 WHEREIN IT WAS HELD THAT ENTRY OF SALES ON THE BASI S OF CASH COLLECTION OF THE DAY IS THOUGH A CRUDE METHOD BUT IT IS RECOGNIZED METHOD. HE FURTHER CONTENDED THAT MERELY ON THE BASIS OF ON E DAY INSPECTION THE SALE OF ENTIRE PERIOD FOR 365 DAYS CANNOT BE INCREASED WITHOUT ANY MATERIAL MUCH LESS A COGENT M ATERIAL FOUND BY THE ASSESSING OFFICER IN THE COURSE OF SCR UTINY ASSESSMENT. AS PER LD. AUTHORIZED REPRESENTATIVE A PPLYING THE INSPECTION TO ALL THE SHOPS WHICH WERE NOT VISITED AT ALL BY THE EXCISE DEPARTMENT AND MAKING ADDITION IN THEIR HAND S ALSO BY ESTIMATING SIMILAR SALES IN CASE OF THOSE SHOPS WER E NOT LEGALLY TENABLE AND JUSTIFIED. HE FURTHER EXPLAINED THE MOD US OPERANDI IN THE LIQUOR TRADE WHEREIN NUMBER OF PER SONS COME TOGETHER TO DO THE BUSINESS. THESE FELLOWS ARE ALLO TTED VARIOUS SHOPS AND GIVEN LICENCES BY THE EXCISE DEPARTMENT T O RUN THE -: 11: - 11 SHOPS. IN SUCH CASES IT IS NOT POSSIBLE TO EARN IN COME FROM VARIOUS PLACES AND NOT ACCOUNT FOR THE SALES WHEN S O MANY DIFFERENT PERSONS WHO ARE NOT FAMILY MEMBERS WERE ASSOCIATED. THESE SHOPS ARE ACTUALLY MANAGED BY THE MANAGERS/SALESMEN. SINCE THE SHOPS ARE ALLOTTED TO VARIOUS DIFFERENT PERSONS/GROUPS TO CHECK THE MAL-PRACTICE OF BIGGER CONTRACTORS SELLING SELL LIQUOR AT A CUT THROAT COM PETITION AT LOWER RATES TO DIFFERENT OTHER CONTRACTORS TO HARM THEM THE GOVERNMENT HAS PUT A CHECK BY PRESCRIBING A MINIMUM RATE. HE FURTHER SUBMITTED THAT EVEN IF ANY ADDITION IS M ADE THE SAME IS TO BE RESTRICTED TO THE NET PROFIT RATE ON SUCH SALES RATHER THAN ON THE ENTIRE SALES ESTIMATED BY THE AS SESSING OFFICER. FOR THIS PURPOSE RELIANCE WAS PLACED ON T HE DECISION OF THE HON'BLE M.P. HIGH COURT IN THE CASE OF BALCH AND AJIT KUMAR 263 ITR 610. WITH REGARD TO THE INSPECTION B OOK IT WAS CONTENDED BY THE LD. AUTHORIZED REPRESENTATIVE THAT IT IS NOT A PART OF REGULAR BOOK AND IS MEANT ONLY FOR EX CISE PURPOSES. WITH REGARD TO THE STOCK REGISTER CONTEN TION OF THE LD. AUTHORIZED REPRESENTATIVE WAS THAT IN CASE OF L IQUOR TRADE PURCHASES ARE UNDER STRICT CONTROL OF THE EXCISE DE PARTMENT -: 12: - 12 AND COUNTRY LIQUOR WAS PURCHASED FROM SPECIFIED WAR EHOUSES WHERE THE ASSESSEE HAD TO PAY THE DUTY. THE BOTTLE CHARGES AND SELLING CHARGES WERE ALSO TO BE PAID. THEREFORE THE ENTIRE PURCHASES WERE VERIFIABLE ALONGWITH THE AUDIT REPOR T. THE ASSESSEE HAS FURNISHED FULL QUANTITATIVE DETAILS OF PURCHASES SO MADE AND THERE WAS NO ADVERSE REMARK BY THE AUDI TOR WITH REGARD TO THE PURCHASES SO MADE. MERELY BECAUSE THE AO HAS NOT MADE ANY INQUIRY FROM THE WAREHOUSES BOOKS OF ACCOUNT CANNOT BE REJECTED. THE LD. AUTHORIZED REPRESENTATI VE ALSO DRAWN OUR ATTENTION TO THE VARIOUS ORDER OF THE TRI BUNAL IN THE SIMILAR TRADE WHEREIN NET PROFIT RATE HAS BEEN ADO PTED AT 1.25 % AS AGAINST NET PROFIT OF 1.75 % APPLIED BY THE DE PARTMENT. OUR ATTENTION WAS ALSO DRAWN TO THE CHANGED EXCISE POLICY OF THE STATE GOVERNMENT WHEREIN SYSTEM FOR ALLOTMENT OF SHOPS HAS BEEN CHANGED FROM 2004. UNDER THE CHANGED SYSTE M OF ALLOTMENT OF LIQUOR SHOP THE SHOPS ARE NOT PUT TO OPEN AUCTION INSTEAD LICENCE FEE FOR EACH SHOP IS FIXED THE INTENDING RETAIL DEALERS OFFER THEIR NAMES SHOPS A RE THEN ALLOTTED BY LOTTERY SYSTEM. ON ALLOTMENT OF SHOPS A PART OF THE LICENCE FEE WHICH IS APPROXIMATELY LESS THAN 10 % OF IT CALLED -: 13: - 13 BASIC LICNECE FEE IS TO BE DEPOSITED WITH THE EXCI SE DEPARTMENT. THE REST OF THE LICENCE FEE IS COST OF THE LIQUOR THAT THE CONTRACTOR WOULD LIFT FROM THE GOVERNMENT CONTROLLED GODOWN. HOWEVER WHILE TAKING DELIVERY OF THE LIQUO R FROM GODOWN THE DEALER HAS TO PAY ITS COST OUT OF THE B ALANCE LICENCE FEE. THE LIQUOR IS LIFTED FROM TIME TO TIME AND THE ADJUSTMENT IS ACCORDINGLY MADE OUT OF THE BALANCE LICENCE FEE. THE DEALER HAS TO MAKE PAYMENT OF THE BOTTLES AND CORKING CHARGES BESIDES COST OF THE LIQUOR WHICH IS PAID THROUGH THE LICENCE FEE. HE FURTHER EXPLAINED THE P ROFITABILITY IN CASE OF LIQUOR TRADE BY STATING THAT WHEN THE LI QUOR IS LIFTED MORE THAN THE LICENCE FEE EXCISE PAYMENT FOR LIQUO R IS TO BE MADE. WHEN THE COST OF LIQUOR LIFTED IS LESS THAN B ALANCE LICENCE FEE THE DEALER PAYS THE BALANCE LICNECE FE E BY CHALLAN TO THE EXCISE DEPARTMENT. IN THE CASE OF THE INSTAN T ASSESSEES BEFORE US THIS SITUATION PREVAIL AND ASSESSEE WAS REQUIRED TO MAKE PAYMENT ACCORDINGLY WHICH RESULTED INTO LOSS. THE POSITION WAS ALSO EXPLAINED WHEN THE CONTRACT PERI OD ENDS. IT WAS SUBMITTED THAT AFTER THE PERIOD OF CONTRACT EXP IRES AND THE ASSESSEE IS LEFT WITH STOCK IN HAND HE HAS TWO OPT IONS TO DEAL -: 14: - 14 WITH THE SITUATION BECAUSE THE DEPARTMENT DOES NOT TAKE SUCH STOCK BACK. EITHER THE ASSESSEE HAS TO DESTROY THE STOCK OR TO GIVE THE STOCK TO THE NEW DEALERS WHO HAS AL LOTTED THE SHOPS FOR THE SUBSEQUENT YEAR. SINCE THE NEW DEALER HAS ALSO TO LIFT THE MINIMUM QUANTITY OF LIQUOR FROM THE GOD OWN HE DOES NOT BUY THE CLOSING STOCK OF LIQUOR FROM THE O LD CONTRACTOR AT PREVAILING PRICE. EVEN IF HE PURCHASES HE PAYS ONLY FOR THE BOTTLING AND CORKING CHARGES. THE RATE OF BOTTLING AND CORKING ARE FIXED BY THE DEPARTMENT. IN THIS WAY THE ASSES SEE WAS PUT TO GREAT LOSS BY LOSING THE COST OF LIQUOR LEFT AT THE END OF LICENCE PERIOD. IT WAS SUBMITTED THAT TO THIS EFFEC T A PANCHNAMA WAS ALSO DRAWN BY THE EXCISE DEPARTMENT. IN RESPECT OF SUFFERING THE LOSS OF COST OF LIQUOR AT THE END OF THE YEAR THE ASSESSEE HAD ACTUALLY SOLD THE STOCK LEFT WITH HIM TO THE NEW DEALER AT A COST OF BOTTLING AND CORKING RE DUCED AT NIL COST OF LIQUOR AND SUFFERED LOSS OF COST OF LIQUOR. TO AVOID POSITION OF 100 % LOSS ON ACCOUNT OF STOCK LEFT OVE R THE DEALER SELLS THE LIQUOR AT LESS THAN THE MINIMUM COST AT T HE END OF THE YEAR TO MINIMIZE LOSS. ACCORDING TO THE LD. AUT HORIZED REPRESENTATIVE THE AO HAS IGNORED ALL THESE FACTUA L POSITION -: 15: - 15 AND ENTRIES MADE IN THE BOOKS OF ACCOUNT. THE AO HA S JUST ADOPTED ONE DAY SELLING PRICE WHICH WAS ABOVE THE M INIMUM SELLING PRICE AS OBSERVED BY THE EXCISE DEPARTMENT AND APPLIED THE SAME TO THE ENTIRE YEAR BY DISREGARDING FACTUAL POSITION AND WITHOUT ANY COGENT MATERIAL IN HIS POS SESSION. BY OBSERVING ABOUT THE INSPECTION BY THE EXCISE DEPART MENT OF SOME SHOPS ON ONE PARTICULAR DAY THE AO HAS MADE T HE ENTIRE ADDITION. BY POINTING OUT AOS OBSERVATION IN HIS ORDER WHEREIN THE AO HAS WORKED OUT THE AVERAGE SELLING R ATE AND APPLIED THE SAME QUANTITY SOLD IN ALL THE SHOPS OF THE ASSESSEE FIRM AND TREATED THE DIFFERENCE BETWEEN THE SALES S O WORKED OUT BY HIM AND SALES DECLARED BY THE ASSESSEE AS UN DISCLOSED INCOME OF THE ASSESSEE. THERE WAS NO MATERIAL OR M UCH LESS A COGENT MATERIAL IN THE HANDS OF THE AO TO HOLD THAT THE ASSESSEE HAS ALWAYS SOLD COUNTRY LIQUOR AT A PRICE ABOVE THE MINIMUM PRICE. IT WAS NOT POSSIBLE IN VIEW OF THE L ARGE NUMBER LIQUOR CONTRACTOR IN COMPETITION WITH THE AS SESSEE. THE ASSESSEE HAD TO SELL THE LIQUOR EVEN BELOW THE MINIMUM RATE IN MANY SHOPS PARTICULARLY IN THE LAST MONTH OR WEEK OF THE LEASED PERIOD. HE FURTHER EXPLAINED THE EXCISE POLICY OF -: 16: - 16 LIQUOR TRADE ACCORDING TO WHICH AFTER THE CLOSE OF THE LEASE PERIOD THE ASSESSEE CANNOT SELL THE STOCK TO ANY P ERSON OTHER THAN THE NEW CONTRACTOR AND THE NEW CONTRACTORS DOE S NOT PAY MORE THAN THE BOTTLING AND SEALING CHARGES. EVEN AF TER SELLING THE LIQUOR BELOW THE MINIMUM RATE AT THE END OF THE YEAR ALMOST IN ALL THE SHOPS THERE REMAINED THE CLOSING STOCK AND THE ASSESSEE HAD TO SELL THE SAME TO THE NEW CONTRA CTOR AT MUCH LOWER RATES WHICH IS REQUIRED TO BE TAKEN INT O ACCOUNT FOR DETERMINING THE ACTUAL PROFIT THE ASSESSEE HAS EARNED BUT THE AO HAS NOT TAKEN INTO ACCOUNT THIS FACTUAL POSI TION WHILE MAKING ADDITION ON ACCOUNT OF SALE AND ESTIMATING T HE HUGE PROFIT IN ASSESSEES HANDS. 8. AGAINST THE ABOVE ORDER OF LD. CIT(A) THE REVENUE IS IN FURTHER APPEAL IN ALL THE CASES BEFORE US. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D ALSO DELIBERATED ON THE CASE LAWS REFERRED TO BY THE LD. AUTHORIZED REPRESENTATIVE AND LD. CIT DR DURING THE COURSE OF HEARING BEFORE US. FROM THE RECORD WE FOUND THAT ALL THE A SSESSEES IN THE INSTANT APPEALS ARE ENGAGED IN THE BUSINESS OF LIQUOR -: 17: - 17 TRADE WHEREIN LICENCES ARE GIVEN BY THE STATE EXCI SE DEPARTMENT. PURCHASES AND SALE OF LIQUOR IS TO BE M ADE AS PER THE TERMS AND CONDITIONS OF THE LICENCE. DURING THE COURSE OF SCRUTINY ASSESSMENT THE AO FOUND THAT ON ONE DAY INSPECTION WAS MADE BY THE EXCISE OFFICIALS WHEREI N IT WAS OBSERVED THAT THE ASSESSEE WAS SELLING LIQUOR ON TH AT DAY AT THE PRICE ABOVE THE MINIMUM PRICE WHICH IS FIXED B Y STATE GOVERNMENT. AO ALSO OBSERVED THAT THE ASSESSEE WAS NOT MAINTAINING STOCK REGISTER AND ALSO NOT ISSUING SAL E BILLS TO LIQUOR CUSTOMERS. ON THE BASIS OF THIS ALLEGATION O F THE EXCISE DEPARTMENT THAT ON THE VERY DATE OF INSPECTION THE ASSESSEE WAS FOUND TO BE CHARGING PRICE ABOVE THE MINIMUM PR ICE THE AO REJECTED THE BOOKS OF ACCOUNT AND BY APPLYING TH E HIGHER SALE PRICE FOR THE ENTIRE PERIOD OF 365 DAYS COMPRI SING IN THE YEAR AND ALSO IN RESPECT OF ALL THE SHOPS RUN BY TH E ASSESSEE HE MADE HEAVY ADDITIONS ON ACCOUNT OF SALES. CONTEN TION OF THE ASSESSEE BEFORE THE AO WAS THAT THE ASSESSEE HA S NOT SOLD THE LIQUOR AT ANY FIXED RATE BUT THESE SALE RATES F LUCTUATED ROUND THE YEAR. THE RATES AT WHICH THE LIQUOR WAS S OLD DEPENDED ON MANY FACTORS LIKE STOCK AVAILABLE WITH THE -: 18: - 18 ASSESSEE SALE RATE OF THE COMPETITORS THE SEASON & OFF SEASON FACTOR THE AVERAGE RATE WORKS OUT AT RS. 17/- FOR NIP OF PLAIN COUNTRY LIQUOR & 22/- FOR NIP OF MASALA COUNTRY LIQ UOR. THE RATES AS OBTAINED BY THE AO FROM THE STATE EXCISE A UTHORITIES IN RESPECT OF THE SHOPS OF THE ASSESSEE FIRM WERE P REVALENT AT THE DATES SPECIFIED THEREIN BUT IT IS ALSO TRUE TH AT THE SAME RATES DID NOT PREVAIL ROUND THE DATES SPECIFIED THE REIN BUT IT IS ALSO TRUE THAT THE SAME RATES DID NOT PREVAIL ROUND THE YEAR AND THAT THE RATES AVAILABLE WITH THE AO WAS APPLIC ABLE ON THE PARTICULAR DATE MENTIONED THEREIN. THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNT AND HAS BEEN DU LY AUDITED AND THE NATURE OF TRADE OF THE ASSESSEE IS SUCH THAT THE CUSTOMERS OF THE ASSESSEE ARE RELUCTANT TO TAKE SALE BILLS ( DUE TO SOCIAL CONSTRAINTS) FROM THE ASSESSEE KEEPI NG THIS IN MIND IT CANNOT BE SAID THAT SINCE THE SALE BILLS AR E NOT AVAILABLE WITH THE ASSESSEE THE SALES OF THE ASSES SEE ARE INCORRECT. TO APPLY THE SALE RATE OF ANY PARTICULAR DATE ON THE SALE OF COUNTRY LIQUOR FOR THE ENTIRE YEAR IS NOT T ENABLE AND THERE IS NO POINT OF UNDER BILLING OF SALES BY THE ASSESSEE. REGARDING CONTENTION OF THE AO TO INCREASE THE SALE S OF THE -: 19: - 19 ASSESSEE BY THE AMOUNT ARRIVED AT BY CALCULATING TH E DIFFERENCE IN SALES AS APPEARING IN THE BOOKS OF THE ASSESSEE AND THE SALES CALCULATED ON THE ESTIMATED BASIS ASSUMING TH E RATE OF SALE OF LIQUOR TO BE CONSTANT ROUND THE YEAR THE S AME IS NOT CORRECT ON THE BASIS OF REASONS LISTED ABOVE. FURTH ER EVEN IF THE ABOVE DIFFERENCES ARE ADDED TO THE SALES OF THE ASSESSEE THE RESULTANT NET PROFIT IS ABOUT 8.56 % BEFORE INT EREST & SALARY TO THE PARTNERS AND IT IS NOT AT ALL PRACTIC ALLY POSSIBLE TO EARN SUCH HUGE AMOUNT OF NET PROFIT KEEPING IN MIND THAT THE ASSESSEE IS BEING CLOSELY WATCHED THE STATE EXCISE AUTHORITIES AND THAT THERE IS INTENSE COMPETITION IN THE MARKET . FURTHER THE DETAILS OF SALES TO THE CUSTOMER IN ALL THE THR EE BOTTLE SIZES OF BOTH TYPE OF COUNTRY LIQUOR I.E. PLAIN & MASALA WAS SUBMITTED. FURTHER THE DETAILS OF THE CLOSING STOC K SALE IN Q P AND N WERE ALSO SUBMITTED. IT WAS FURTHER EXPLAINED THAT THERE WAS SUBSTANTIAL CHANGE IN THE SYSTEM OF ALLOT MENT OF LIQUOR LICENCE BY THE GOVERNMENT. UNDER THE CHANGED SYSTEM THE SHOPS WERE NOT PUT TO OPEN AUCTION BUT THE LIC ENCE FEE FOR EACH SHOP IS FIXED. THE RETAIL DEALERS OFFER THEIR NAMES THE SHOPS ARE THEN ALLOTTED BY THE LOTTERY SYSTEM. AFTE R ALLOTMENT -: 20: - 20 OF SHOPS A PART OF LICNECE FEE IS BEING DEPOSITED WHICH IS CALLED BASIC LICNECE FEE. THE REST OF THE LICENCE F EE IS THE COST OF THE LIQUOR THAT A CONTRACTOR WOULD LIFT FROM THE GO VERNMENT CONTROLLED GODOWN. WHILE TAKING THE DELIVERY OF THE LIQUOR FROM GODOWN THE DEALER HAS TO PAY ITS COST OUT OF THE B ALANCE LICENCE FEE. THE LIQUOR IS LIFTED FROM TIME TO TIME AND ADJUSTMENT IS ACCORDINGLY MADE OUT OF THE BALANCE L ICNECE FEE. BESIDES THE LICENCE FEE A DEALER HAS TO MAKE PAYME NT OF BOTTLES AND CORKING CHARGES. THUS THIS PAYMENT IS BESIDE THE COST OF LIQUOR COMPRISING IN THE LICENCE FEE. AS PE R THE TERMS OF THE LICENCE THE GOVERNMENT WILL NOT TAKE UP THE LI QUOR WHICH REMAINED UNSOLD AT THE END OF THE LICENCE PERIOD NO R THE ASSESSEE CAN SALE THE SAME IN OPEN MARKET. MEANING THEREBY THE ASSESSEE HAS TO SUFFER LOSS ON ACCOUNT OF SUCH UNSOLD STOCK. COST OF LIQUOR PROCURED ATTRIBUTABLE TO SUCH LICENCE FEE IS NOT REFUNDABLE EVEN IF THE STOCK IS LEFT AT THE END OF THE LICENCE FEE. THE LICENCE HOLDER IS NOT AUTHORIZED T O SELL SUCH LIQUOR IN THE OPEN MARKET AFTER THE END OF THE LICE NCE PERIOD. HOWEVER HE IS BOUND TO HAND OVER SUCH UNSOLD LIQUO R TO THE SUBSEQUENT ALLOTTEES WHO NORMALLY DO NOT LIKE TO L IFT SINCE THE -: 21: - 21 NEW ALLOTTEE IS ALSO PAYING HIGHER LICENCE FEE IN O RDER TO PROCURE THE LICENSE. EVEN IF THE ASSESSEE PERSUADE HIM TO PURCHASE THE SAME SUCH SUBSEQUENT ALLOTTEES ONLY P AYS FOR BOTTLING AND CORKING CHARGES AND NOT FOR COST OF LI QUOR PER SE. THUS THE COST OF LIQUOR INCURRED BY THE ASSESSEE I S FULL WASTAGE WHICH IS REQUIRED TO BE TAKEN INTO ACCOUNT WHILE ASCERTAIN THE ACTUAL PROFIT EARNED BY HIM DURING TH E LICENCE PERIOD COMPRISING IN THE RELEVANT ASSESSMENT YEAR U NDER CONSIDERATION. THE CONTENTION OF THE LD. AUTHORIZED REPRESENTATIVE WAS THAT THE TRIBUNAL IS LAST FACT F INDING AUTHORITY AND THIS FACT SHOULD BE CONSIDERED FOR AS CERTAINING THE REAL PROFIT EARNED BY THE ASSESSEE AND THE DEPA RTMENT SHOULD NOT BE ALLOWED TO LEVY TAX ON THE NOTIONAL/U NREALISTIC AND ESTIMATED PROFIT WORKED OUT BY THE AO BY DISREG ARDING THE FACTUAL SITUATION AND THE TERMS OF THE LICENCE. 10. FURTHERMORE EVEN WHILE ESTIMATING THE PROFIT EARNE D ON THE SALE OF LIQUOR DURING THE YEAR IT IS NOT PR OPER ON THE PART OF THE AO TO APPLY THE HIGHER RATE OF LIQUOR F OUND TO BE CHARGED IN ONE DAY TO THE ENTIRE PERIOD OF 365 DAYS COMPRISING IN THE RELEVANT ASSESSMENT YEAR. IT IS ALSO NOT PRO PER AND -: 22: - 22 JUSTIFIED TO APPLY THE HIGHER RATE ON THE SALES EFF ECTED IN OTHER SHOPS WHICH WERE NOT VISITED BY EXCISE OFFICIALS AN D AS SUCH NO HIGHER PRICE WAS FOUND TO BE CHARGED BY THOSE SHOPS . EVEN IN CASE OF ESTIMATION THE SAME SHOULD BE REALISTIC AN D BASED ON ENTIRETY OF FACTS AND CIRCUMSTANCES OF CASE SO PREV AILING. IN THE INSTANT CASE BEFORE US THE AO HAS APPLIED THE RATE AS OBSERVED BY THE EXCISE DEPARTMENT IN ONE DAY OF THE IR INSPECTION TO THE ENTIRE YEAR AND ALSO TO ALL THE SHOPS BEING RUN BY THE ASSESSEE WHICH WERE NOT INSPECTED BY THE EXCISE DEPARTMENT. IN TERMS OF THE ADDITION MADE BY THE AS SESSING OFFICER NET PROFIT RATE WORKS OUT TO BE 8 % TO 10 % BEFORE INTEREST AND REMUNERATION TO PARTNERS WHICH IS PRA CTICALLY NOT POSSIBLE IN THE LINE OF ASSESSEES BUSINESS HAVING INTENSE COMPETITION IN THE MARKET. AS PER OUR CONSIDERED V IEW THE AO SHOULD BE REASONABLE ENOUGH EVEN IF HE APPLIES THE RATE FOUND IN ONE DAY AND SHOULD LIMIT THE SAME PRECISELY TO T HE SHOPS WHEREIN SUCH EXCESS RATE IS FOUND TO BE CHARGED. IT IS NOT PROPER TO APPLY THE SAME RATE TO ALL SHOPS WHEREIN NO SUCH HIGHER RATE WAS FOUND TO BE CHARGED UNLESS THERE I S ANY COGENT MATERIAL TO THIS EFFECT. IN THE AUDITED BOOK S OF ACCOUNT -: 23: - 23 NOTHING INCRIMINATING WAS FOUND EXCEPT THE AOS OBS ERVATION TO THE EFFECT THAT ON ONE DAY THE EXCISE DEPARTMEN T HAS FOUND THAT THE ASSESSEE HAS CHARGED PRICE ABOVE THE MINIM UM RATE. IN THIS REGARD THE CONTENTION OF THE ASSESSEE WAS THAT AS PER THE EXCISE POLICY AND THE TERMS OF THE LICENCE THE ASSESSEE CANNOT SALE LIQUOR BELOW THE MINIMUM PRICE. THIS CO NDITION IS IMPOSED TO AVOID COMPETITION AMONGST THE VARIOUS DE ALERS WHO ARE ALLOTTED LICENCE. IT IS A MATTER OF RECORD THAT THE ASSESSEE DID NOT SELL THE COUNTRY LIQUOR ALWAYS AT THE HIGHER RATES BECAUSE IT WAS NOT POSSIBLE WITH THE LARGE NU MBER OF LIQUOR CONTRACTORS IN COMPETITION WITH THE ASSESSEE . FOR THE SALE IN SOME SHOPS AT A RATE WHICH IS BIT HIGHER TH AN THE MINIMUM IN CASE THE AO WANTS THE EXTRA PROFIT IS RE QUIRED TO BE SET OFF AGAINST THE LOSS DUE TO SALE OF LIQUOR T O THE NEW CONTRACTORS AT THE END OF THE PERIOD OF LICNECE WH ICH WAS EFFECTED MERELY AT THE BOTTLING & CORKING CHARGES. 11. NOW WE WILL TAKE CASE OF EACH OF THE DEALER TO FIND OUT WHAT THE AO HAS DONE. IN THE CASE OF M/S BRINDAWAN RAI & COMPANY WE FOUND THAT THE ASSESSING OFFICER HAS M ADE THE -: 24: - 24 OBSERVATION ABOUT THE INSPECTION BY THE EXCISE AUTHORITIES OF 5 SHOPS ON ONE PARTICULAR DAY AS UNDER:- RATE PLAIN MASALA SL. N O. NAME OF SHOP DATE AS PER P-4 INSPECTION DATE Q P N Q P N 1 PEERJHA LAR NOV. 2004 86.4 0 43.2 0 21.6 0 98.6 4 49.3 2 24.6 6 2 AUSLODA NOV. 2004 -'- -'- -'- -'- -'- -'- 3 TANODIA -'- 25/01/2005 80.0 0 40.0 0 20.0 0 100. 00 50.0 0 25.0 0 4 AGAR MAR. 2005 21/03/2005 -'- -'- -'- -'- -'- -'- 5 GHOSIP URA -'- 21/03/2005 -'- -'- -'- -'- -'- -'- 12. ON THE BASIS OF ABOVE CHART THE AO HAS WORKED OU T THE AVERAGE SELLING RATE AND APPLIED THE SAME TO AL L QUANTITIES SOLD IN 17 SHOPS OF THE APPELLANT FIRM AND TREATED THE DIFFERENCE BETWEEN THE SALES SO WORKED OUT BY HIM AND SALES DECLARED BY THE ASSESSEE AS THE UNDISCLOSED INCOME OF THE ASSESSEE AT RS. 1 11 09 868/-. FROM THE RECORD WE F OUND THAT THE ASSESSEE DID NOT SALE THE COUNTRY LIQUOR ALWAY S AT THE HIGHER RATE BECAUSE IT IS NOT POSSIBLE WITH THE LAR GE NUMBER OF LIQUOR CONTRACTORS IN COMPETITION WITH THE ASSESSEE . THE ASSESSEE HAD TO SALE THE LIQUOR BELOW THE MINIMUM RATE IN -: 25: - 25 MANY SHOPS PARTICULARLY IN THE LAST MONTH OR WEEK OF THE LEASE PERIOD BUT THE ASSESSEE DOES NOT HAVE ANY EVIDENCE ABOUT THE SALE OF LIQUOR TO THE CUSTOMERS BELOW THE MINIMUM RATES. IT MAY BE APPRECIATED THAT AFTER TH E CLOSE OF THE LEASE PERIOD THE ASSESSEE CAN NOT SALE THE ST OCK TO ANY PERSON OTHER THAN THE NEW CONTRACTOR AND NEW CONTRA CTOR DO NOT PAY MORE THAN THE TOTAL BOTTLING CHARGES AND SEALING CHARGES. EVEN AFTER SELLING THE LIQUOR BELOW THE MINIMUM RATES AT THE END OF THE YEAR ALMOST IN ALL THE SHO PS THERE REMAINED THE CLOSING STOCK AND THE ASSESSEE HAD TO SALE THE SAME TO THE NEW CONTRACTORS AT MUCH LOWER RATES. HOWEVER THESE FACTS WERE DULY DISCLOSED TO THE ID. AO AND A LL THE DETAILS WERE FURNISHED BEFORE HIM. HOWEVER THE LD. ASSESSIN G OFFICER DID NOT TAKE THE FACTS DISCUSSED ABOVE INTO CONSI DERATION. HAD HE DONE SO HE COULD HAVE FOUND THAT THE BOTT LES PLAIN & MASALA COUNTRY LIQUOR HAVE BEEN SOLD ON 31-03-20 05 AT THE RATES OF NIPS PINTS AND QUARTS HAVE BEEN SOLD AT T HE RATE OF RS. 3.35 5.84 & 10.94 AND RS. 3.35 5.84 & 10.94 IN PLACE OF RS. 17- 34 & 68 AND RS. 22- 44 & 88 RESPECTIVELY. IF THE SALES OF THE CLOSING STOCK ARE ADOPTED AS PER EVIDENCE ON RECORD. -: 26: - 26 ON THE ABOVE SAID RATES IT IS EVIDENT THAT THE SA LES SHOWN BY THE ASSESSEE ARE NOT LESS THAN THE SALES AS PER MI NIMUM SELLING RATES AND THE VERY BASIS FOR REJECTION OF THE SOLITARY SALES A/C IN THE BOOKS OF ACCOUNTS BY THE ASSESSI NG OFFICER IS NOT AT SOUND FOOTING. THE CIT (A) HAS ACCEPTED THE TRADING RESULTS SHOWING THE NET PROFIT BEFORE PAYMENT OF REMUNERATION AND INTEREST TO THE PARTNERS AT RS. 18 33 137/- ON THE SALES AT 2.08%. THE ASSESSEES ACCOUNTS TOO K INTO CONSIDERATION THE LIQUOR LIFTED PAYMENT FOR UNLIFT ED LIQUOR OPENING STOCK PURCHASES FROM PRECEDING YEAR'S DEALE R AND CLOSING STOCK TO SUCCEEDING YEAR'S DEALER. CONSIDER ING ALL THE FACTS THE INCOME WAS DECLARED BY THE ASSESSEE. FOR THE SALES IN SOME SHOPS AT THE RATE A BIT HIGHER THAN THE MINIMU M THE EXTRA PROFIT IS SET OFF AGAINST THE LOSS SUFFERED D UE TO REASONS DISCUSSED HEREIN ABOVE AND SALES AT THE CLOSE OF TH E YEAR AT RATES MUCH BELOW THE MINIMUM TO CLEAR OFF THE STOCK TO AVOID HIGHER LOSSES. WE ALSO FOUND THAT THE ASSESSEE HAS PAID THE TOTAL LICENCE FEE FOR FOREIGN & COUNTRY LIQUO R AT RS. 5 90 20 463/- WHICH INCLUDES LICENCE FEE FOR COUNT RY LIQUOR AT RS. 3 87 59 103/- AND FOREIGN LIQUOR AT RS. 2 02 61 360/-. -: 27: - 27 AGAINST THE TOTAL COUNTRY LIQUOR LICENCE FEE OF RS . 3 87 59 103/- THE ASSESSEE HAS SHOWN THE TOTAL SAL ES OF COUNTRY LIQUOR AT RS. 5 41 38 242/- FROM ALL THE S HOPS. THE EXCISE INSPECTOR HAD INSPECTED ONLY 5 SHOPS AND THAT TOO FOR ONLY ONE DAY. TOTAL LICENCE FEE FOR THESE SHOPS P EERJHALAR (RS. 21 70 000/-) AUSLAWDA (RS. 27 47 000/-) TANODIA (RS . 25 00 000/-) AGAR & GHOSHIPURA (RS. 70 25 400/- ) COMES TO RS. 1 44 42 400/- AND THEREFORE ON AVERAGE RAT E BASIS THE SALES SHOWN BY THE ASSESSEE AGAINST THESE 5 SHOPS WITH GROSS LICENCE FEE AT RS. 1 44 42 400/- WILL COME TO RS. 2 01 72 968/- AND PER DAY (360 DAYS AND FIVE HOLIDA Y) SALES OF THESE 5 SHOPS WILL COME TO RS. 56 036/-. THE ASSES SING OFFICER HAS ESTIMATED THE SALES FROM ALL THE SHOPS AT RS. 6 52 48 110/-. THE ANNUAL SALES FOR 5 SHOPS AS PE R ABOVE CALCULATION WILL COMES TO RS. 2 43 12 7 22/- AND PER DAY SALE SHALL COME TO RS. 67 535/-. IT MEANS THAT IF THE SALES FOR ONE DAY ARE INCREASED THEN THEY MAY BE INCREAS ED BY RS. 11 499/- ON WHICH THE N.P. SHALL WORK OUT TO RS. 239/- IF THE N.P. RATE 2.08% IS APPLIED. -: 28: - 28 13. I N THE CASE OF HARI NARAYAN & COMPANY WE FOUND THAT IN SOME SHOPS FOR SOME DAYS (MOSTLY FOR ONE DAY) TH E SALE WAS FOUND TO BE AT A RATE MORE THAN THE MINIMUM PRESCRI BED. THE AO TOOK THE ENHANCED RATES FOR THE WHOLE YEAR. HE C ALCULATED THE AVERAGE RATE ON THIS BASIS AND APPLIED IT TO AL L THE SHOPS IRRESPECTIVE OF THE FACT THAT (I) IT WAS ONLY IN SO ME SHOPS THAT THE EXCESS RATE WAS DISPLAYED (II) AVERAGE RATE COU LD NOT BE APPLIED FOR THE WHOLE YEAR FOR THE SHOPS WHERE SUCH HIGHER RATE WAS FOUND. (III) AVERAGE RATE COULD NOT BE APP LIED TO THE TOTAL SALES INCLUDING THE SHOPS WHERE SALES WERE MA DE AT THE MINIMUM RATE. IN THE CASE OF THE ASSESSEE THE ASSE SSING OFFICER HAS MADE THE OBSERVATION ABOUT THE INSPEC TION BY THE EXCISE AUTHORITIES OF 11 SHOPS ON ONE PARTICULAR DAY AS UNDER:- RATE PLAIN MAS ALA SL. NO . NAME OF SHOP DATE AS PER P-4 INSPECTION DATE Q P N Q P N 1 INGORIA NOV.200 4 30 86.4 0 43.2 0 21.6 0 98.64 49.3 2 24.6 6 2 LOHANA RD. 7 15 21 27/11 /04 3 LOHARIA - 4 BADGARA - 5 SUNDRABAD 8 6 KHARSOD 2 -: 29: - 29 KALA 7 SIMLAWDA 22 8 CHIROLA 25 9 BALEDI 30 10 NARSINGA - 11 CHIKALI 30 14. ON THE BASIS OF ABOVE CHART THE AO WORKED OUT TH E AVERAGE SELLING RATE AND APPLIED THE SAME TO ALL QU ANTITIES SOLD IN 23 SHOPS OF THE APPELLANT FIRM AND TREATED THE DIFFERENCE BETWEEN THE SALES SO WORKED OUT BY HIM AND SALES DECLARED BY THE ASSESSEE AS THE UNDISCLOSED INCOME OF THE A SSESSEE AT RS. 1 56 41 895/-. FROM THE RECORD WE FOUND THAT TH E ASSESSEE DID NOT SALE THE COUNTRY LIQUOR ALWAYS AT THE HIGHER RATE BECAUSE IT IS NOT POSSIBLE WITH THE LARGE NUMB ER OF LIQUOR CONTRACTORS IN COMPETITION WITH THE ASSESSEE. THE A SSESSEE HAD TO SALE THE LIQUOR BELOW THE MINIMUM RATE IN M ANY SHOPS PARTICULARLY IN THE LAST MONTH OR WEEK OF THE LEA SE PERIOD BUT THE ASSESSEE DOES NOT HAVE ANY EVIDENCE ABOUT T HE SALE OF LIQUOR TO THE CUSTOMERS BELOW THE MINIMUM RATES. AFTER THE CLOSE OF THE LEASE PERIOD THE ASSESSEE CAN NOT SAL E THE STOCK TO ANY PERSON OTHER THAN THE NEW CONTRACTOR AND NEW CO NTRACTOR DO NOT PAY MORE THAN THE TOTAL BOTTLING CHARGES AND SEALING -: 30: - 30 CHARGES. EVEN AFTER SELLING THE LIQUOR BELOW THE MINIMUM RATES AT THE END OF THE YEAR ALMOST IN ALL THE SHO PS THERE REMAINED THE CLOSING STOCK AND THE ASSESSEE HAD TO SALE THE SAME TO THE NEW CONTRACTORS AT MUCH LOWER RATES. THESE FACTS WERE DULY DISCLOSED TO THE ID. AO AND ALL THE DETAI LS WERE FURNISHED. THE LD. ASSESSING OFFICER DID NOT TAKE THE ABOVE FACTS INTO CONSIDERATION. HAD HE DONE SO HE COUL D HAVE FOUND THAT THE BOTTLES PLAIN & MASALA COUNTRY LIQU OR HAVE BEEN SOLD ON 31-03-2005 AT THE RATES OF NIPS PI NTS AND QUARTS HAVE BEEN SOLD AT THE RATE OF RS. 3.35 5.84 & 10.94 AND RS. 3.35 5.84 & 10.94 IN PLACE OF RS. 17- 34 & 68 AND RS. 22- 44 & 88 RESPECTIVELY. IF THE SALES OF THE CLOSING STOCK ARE ADOPTED AS PER EVIDENCE ON RECORD. ON THE ABO VE SAID RATES THEN IT WILL BE EVIDENT THAT THE SALES SHOW N BY THE ASSESSEE ARE NOT LESS THAN THE SALES AS PER MINIMU M SELLING RATES AND THE VERY BASIS FOR REJECTION OF THE SO LITARY SALES A/C IN THE BOOKS OF ACCOUNTS BY THE ASSESSING OFFICER IS NOT AT SOUND FOOTINGS. HOWEVER THE CIT (A) HAS ACCEPTED T HE TRADING RESULTS SHOWING THE NET PROFIT BEFORE PAYMENT OF REMUNERATION AND INTT. TO THE PARTNERS AT RS. 21 8 7 571/-ON -: 31: - 31 THE SALES AT 2.02% %. FROM THE RECORD WE ALSO FOUND THAT HE ASSESSEE HAS PAID THE TOTAL LICENCE FEE FOR FOREIG N & COUNTRY LIQUOR AT RS. 7 15 41 945/- WHICH INCLUDES LICENCE FEE FOR COUNTRY LIQUOR AT RS. 4 67 90 945/- AND FOREIGN LIQ UOR AT RS. 2 47 51 000/-. AGAINST THE TOTAL COUNTRY LIQUOR L ICENCE FEE OF RS. 4 67 90 945/- THE ASSESSEE HAS SHOWN THE TOTAL SALES OF COUNTRY LIQUOR AT RS. 6 47 53 001/- FROM ALL THE SH OPS. THE EXCISE INSPECTOR HAD INSPECTED ONLY 11 SHOPS AND THAT TOO FOR ONLY ONE DAY. TOTAL LICENCE FEE FOR THESE SHOP S INGORIYA & CHIKALI (RS. 52 30 000/-) LOHANA ROAD (RS. 22 37 00 0/-) LOHARIYA & BADGARA (RS. 195 000/- ) SUNDRABAD (RS. 17 58 000/- ) KHARSOD KALA (RS. 19 27 000/-) SIML AWDA (RS.12 71 000/-) CHIROLA (RS. 20 13 000/- ) BALED I (RS. 25 78 000/- ) NARSIGHA (RS. 18 88 000/-) COMES TO RS. 1 90 97 000/-AND THEREFORE ON AVERAGE BASIS THE SALES SHOWN BY THE ASSESSEE AGAINST THESE 11 SHOPS WITH GROSS LICENCE FEE AT RS. 1 90 97 000/- WILL COME TO RS. 2 64 27 935/- AND PER DAY( 360 DAYS AND FIVE HOLID AY) SALES OF THESE 11 SHOPS WILL COME TO RS. 73 410/-. THE A SSESSING OFFICER HAS ESTIMATED THE SALES FROM ALL THE SHOPS AT RS. -: 32: - 32 8 03 94 896/- . THE ANNUAL SALES FOR 11 SHOPS AS P ER ABOVE CALCULATION WILL COMES TO RS. 3 28 11 932/- AND PE R DAY SALE SHALL COMES TO RS. 91144/-. IT MEANS THAT IF THE S ALES FOR ONE DAY ARE INCREASED THEN THEY MAY BE INCREASED BY RS . 17 734/- ON WHICH THE N.P. SHALL WORK OUT TO RS. 358/- IF THE N.P. RATE 2.02% IS APPLIED. 15. IN THE CASE OF GOPAL KRISHNA & CO. WE FOUND THAT IN SOME SHOPS FOR SOME DAYS (MOSTLY FOR ONE DAY) THE S ALE WAS FOUND TO BE AT A RATE MORE THAN THE MINIMUM PRESCRI BED. THE AO TOOK THE ENHANCED RATES FOR THE WHOLE YEAR. HE C ALCULATED THE AVERAGE RATE ON THIS BASIS AND APPLIED IT TO AL L THE SHOPS IRRESPECTIVE OF THE FACT THAT (I) IT WAS ONLY IN SO ME SHOPS THAT THE EXCESS RATE WAS DISPLAYED (II) AVERAGE RATE COU LD NOT BE APPLIED FOR THE WHOLE YEAR FOR THE SHOPS WHERE SUCH HIGHER RATE WAS FOUND. (III) AVERAGE RATE COULD NOT BE APP LIED TO THE TOTAL SALES INCLUDING THE SHOPS WHERE SALES WERE MA DE AT THE MINIMUM RATE. THE ASSESSING OFFICER HAS MADE THE O BSERVATION ABOUT THE INSPECTION BY THE EXCISE AUTHORITIES OF 10 SHOPS ON ONE PARTICULAR DAY AS UNDER:- -: 33: - 33 RATE PLAIN MASALA SL . N O. NAME OF SHOP DATE AS PER P-4 INSPECTION DATE Q P N Q P N 1 KALIADEHOD (UJJAIN) MAY 2005 23 30 100 50 25 120 60 30 2 KALIADEHOD(UJJAI N) JUNE 200 4 6 13 20 27 100 50 25 120 60 30 3 MADKKOTTA (PACHEDI PALKHED I PIPLON KALAN) JULY 2004 28/7/04 80 40 20 100 50 25 4 MADKKOTTA (PACHEDI PALKHED I PIPLON KALAN) AUG. 04 28/7/04 80 40 20 100 50 25 5 MADKKOTTA (PACHEDI PALKHED I PIPLON KALAN) SEPT. 04 28/7/04 80 40 20 100 50 25 6 MADKKOTTA (PACHEDI PALKHED I PIPLON KALAN) OCTO .04 28/7/04 80 40 20 100 50 25 7 BHATPACHALANA NOV. 04 28/7/04 83. 86 41. 43 20. 96 103 .22 51. 61 25.8 0 8 MADKKOTTA (PACHEDI PALKHED I PIPLON KALAN) NOV. 04 28/7/04 80 40 20 100 50 25 9 MADKKOTTA (PACHEDI PALKHED I PIPLON KALAN) DEC. 04 28/7/04 80 40 20 100 50 25 10 MADKKOTTA JAN. 28/7/04 80 40 20 100 50 25 -: 34: - 34 (PACHEDI PALKHED I PIPLON KALAN) 05 11 KALIADEHOD JAN. 05 100 50 25 120 60 30 12 MADKKOTTA (PACHEDI PALKHED I PIPLON KALAN) FEB. 05 28/7/04 80 40 20 100 50 25 13 KALIADEHOD FEB. 05 28/7/04 100 50 25 120 60 30 14 MADKKOTTA (PACHEDI PALKHED I PIPLON KALAN) MARC H05 28/7/04 80 40 20 100 50 25 16. ON THE BASIS OF ABOVE CHART THE AO WORKED OUT T HE AVERAGE SELLING RATE AND APPLIED THE SAME TO ALL QU ANTITIES SOLD IN 22 SHOPS OF THE APPELLANT FIRM AND TREATED THE DIFFERENCE BETWEEN THE SALES SO WORKED OUT BY HIM AND SALES DECLARED BY THE ASSESSEE AS THE UNDISCLOSED INCOME OF THE A SSESSEE AT RS. 1 75 84 348/-. HOWEVER WE FOUND FROM THE RECORD THAT THE ASSESSEE DID NOT SALE THE COUNTRY LIQUOR ALWAYS AT THE HIGHER RATE BECAUSE IT IS NOT POSSIBLE WITH THE LARGE NUMB ER OF LIQUOR CONTRACTORS IN COMPETITION WITH THE ASSESSEE. THE A SSESSEE HAD TO SALE THE LIQUOR BELOW THE MINIMUM RATE IN M ANY SHOPS PARTICULARLY IN THE LAST MONTH OR WEEK OF THE LEA SE PERIOD BUT THE ASSESSEE DOES NOT HAVE ANY EVIDENCE ABOUT T HE SALE OF -: 35: - 35 LIQUOR TO THE CUSTOMERS BELOW THE MINIMUM RATES. AFTER THE CLOSE OF THE LEASE PERIOD THE ASSESSEE CAN NOT SAL E THE STOCK TO ANY PERSON OTHER THAN THE NEW CONTRACTOR AND NEW CO NTRACTOR DO NOT PAY MORE THAN THE TOTAL BOTTLING CHARGES AND SEALING CHARGES. EVEN AFTER SELLING THE LIQUOR BELOW THE MINIMUM RATES AT THE END OF THE YEAR ALMOST IN ALL THE SHO PS THERE REMAINED THE CLOSING STOCK AND THE ASSESSEE HAD TO SALE THE SAME TO THE NEW CONTRACTORS AT MUCH LOWER RATES. ALL THESE FACTS WERE DULY DISCLOSED TO THE ID. AO AND ALL THE DETAILS WERE FURNISHED. THE LD. ASSESSING OFFICER DID NOT TAKE THE ABOVE FACTS INTO CONSIDERATION. HAD HE DONE SO HE COUL D HAVE FOUND THAT THE BOTTLES PLAIN & MASALA COUNTRY LIQU OR HAVE BEEN SOLD ON 31-03-2005 AT THE RATES OF NIPS PI NTS AND QUARTS HAVE BEEN SOLD AT THE RATE OF RS. 3.35 5.84 & 10.94 AND RS. 3.35 5.84 & 10.94 IN PLACE OF RS. 17- 34 & 68 AND RS. 22- 44 & 88 RESPECTIVELY. IF THE SALES OF THE CLOSING STOCK ARE ADOPTED AS PER EVIDENCE ON RECORD. ON THE ABO VE SAID RATES THEN IT WILL BE EVIDENT THAT THE SALES SHOW N BY THE ASSESSEE ARE NOT LESS THAN THE SALES AS PER MINIMU M SELLING RATES AND THE VERY BASIS FOR REJECTION OF THE SO LITARY SALES A/C -: 36: - 36 IN THE BOOKS OF ACCOUNTS BY THE ASSESSING OFFICER WAS NOT JUSTIFIED. THE CIT (A) HAS ACCEPTED THE TRADING RES ULTS SHOWING THE NET PROFIT BEFORE PAYMENT OF REMUNERATION AN D INTEREST TO THE PARTNERS AT RS. 17 62 052/- ON THE SALES AT 2.4%. FROM THE RECORD WE FOUND THAT THE ASSESSEE HAS PAID THE TOTAL LICENCE FEE FOR FOREIGN & COUNTRY LIQUOR AT RS. 5 1 4 89 820/- WHICH INCLUDES LICNECE FEE FOR COUNTRY LIQUOR AT RS . 4 55 34 580/- AND FOREIGN LIQUOR AT RS. 59 55 240/- . AGAINST THE TOTAL COUNTRY LIQUOR LICENCE FEE OF RS. 4 55 34 580/- THE ASSESSEE HAS SHOWN THE TOTAL SALES OF COUNTRY LIQUO R AT RS. 6 30 00 690/- FROM ALL THE SHOPS. THE EXCISE INSPEC TOR HAD INSPECTED ONLY 10 SHOPS AND THAT TOO FOR ONLY ONE D AY. TOTAL LICENCE FEE FOR THESE SHOPS KALIADEH GATE ( RS. 69 19 000/-) MADKOTA ( RS. 2 42 285/-) PACHETI ( RS. 3 95 670/-) PALKHEDI ( RS. 2 73 185/-) PIPLON KALAN ( RS. 7 05 940/-) CHAT PACHALANA ( RS. 30 53 000/- ) RUNIJA ( RS. 25 06 000/-) JAHA NGIRPUR ( RS. 23 70 000/-) AMLA ( RS. 26 71 000/-BANGRED ( R S. 22 48 000/-) COMES TO RS. 2 13 84 080/- AND THEREFO RE ON AVERAGE BASIS THE SALES SHOWN BY THE ASSESSEE AGAI NST THESE 10 SHOPS WITH GROSS LICENCE FEE AT RS. 2 13 84 080/ - WILL COME -: 37: - 37 TO RS.2 95 86 565/- AND PER DAY ( 360 DAYS AND FIVE HOLIDAY) SALES OF THESE 10 SHOPS WILL COME TO RS. 82 185/-. THE AO HAS ESTIMATED THE SALES FROM ALL THE SHOPS AT RS. 8 05 85 038/-. THE ANNUAL SALES FOR 10 SHOPS AS PER ABOVE CALCULAT ION WILL COME TO RS. 3 78 44 577/- AND PER DAY SALE SHALL CO ME TO RS.1 05 124/-. IT MEANS THAT IF THE SALES FOR ONE DAY ARE INCREASED THEN THEY MAY BE INCREASED BY RS. 22 939 /- ON WHICH THE NET PROFIT SHALL WORK OUT TO RS. 550/- IF THE NET PROFIT RATE 2.4 % IS APPLIED. 17. IN M/S PHOOL SINGH & COMPANY THE ASSESSING OFFICER HAS MADE THE OBSERVATION ABOUT THE INSPECTION BY THE EXCISE AUTHORITIES OF 3 SHOPS ON ONE PARTICULAR DAY AS U NDER:- RATE PLAIN MASALA SL. NO . NAME OF SHOP DATE AS PER P-4 INSPEC TION DATE Q P N Q P N 1 STATION RD. SAGAR 17/05 /04 17/05 /04 68 34 17 88 44 22 2 GOPALGANJ 22/09 /04 22/09 /04 72 36 18 92 46 23 3 BINA SHEHAR 24/05 /04 24/05 /04 92 46 23 100 50 25 18. ON THE BASIS OF ABOVE CHART THE AO WORKED OUT TH E AVERAGE SELLING RATE AND APPLIED THE SAME TO ALL QU ANTITIES SOLD -: 38: - 38 IN 9 SHOPS OF THE APPELLANT FIRM AND TREATED THE D IFFERENCE BETWEEN THE SALES SO WORKED OUT BY HIM AND SALES DECLARED BY THE ASSESSEE AS THE UNDISCLOSED INCOME OF THE A SSESSEE AT RS. 54 98 440/-. WE FOUND FROM THE RECORD THAT THE ASSESSEE DID NOT SALE THE COUNTRY LIQUOR ALWAYS AT THE HIGHE R RATE BECAUSE IT IS NOT POSSIBLE WITH THE LARGE NUMBER OF LIQUOR CONTRACTORS IN COMPETITION WITH THE ASSESSEE. THE A SSESSEE HAD TO SALE THE LIQUOR BELOW THE MINIMUM RATE IN M ANY SHOPS PARTICULARLY IN THE LAST MONTH OR WEEK OF THE LEA SE PERIOD BUT THE ASSESSEE DOES NOT HAVE ANY EVIDENCE ABOUT T HE SALE OF LIQUOR TO THE CUSTOMERS BELOW THE MINIMUM RATES. IT MAY BE APPRECIATED THAT AFTER THE CLOSE OF THE LEASE PERIO D THE ASSESSEE CAN NOT SALE THE STOCK TO ANY PERSON OTHE R THAN THE NEW CONTRACTOR AND NEW CONTRACTOR DO NOT PAY MORE T HAN THE TOTAL BOTTLING CHARGES AND SEALING CHARGES. EVEN AFTER SELLING THE LIQUOR BELOW THE MINIMUM RATES AT THE END OF T HE YEAR ALMOST IN ALL THE SHOPS THERE REMAINED THE CLOSING STOCK AND THE ASSESSEE HAD TO SALE THE SAME TO THE NEW CON TRACTORS AT MUCH LOWER RATES. HOWEVER THE LD. ASSESSING OFFICER DID NOT TAKE THE ABOVE FACTS INTO CONSIDERATION. HAD HE DO NE SO HE -: 39: - 39 COULD HAVE FOUND THAT THE BOTTLES PLAIN & MASALA COUNTRY LIQUOR HAVE BEEN SOLD ON 31-03-2005 AT THE RATE S OF NIPS PINTS AND QUARTS HAVE BEEN SOLD AT THE RATE OF RS. 3.75 4.25 & 5.50 AND RS. 3.75 4.25 & 5.50 IN PLACE OF RS. 17- 34 & 68 AND RS. 22- 44 & 88 RESPECTIVELY. IF THE SALES OF THE CLOSING STOCK ARE ADOPTED AS PER EVIDENCE ON RECORD. ON T HE ABOVE SAID RATES THEN IT WILL BE EVIDENT THAT THE SALES SHOWN BY THE ASSESSEE ARE NOT LESS THAN THE SALES AS PER MINIMU M SELLING RATES AND THE VERY BASIS FOR REJECTION OF THE SO LITARY SALES A/C IN THE BOOKS OF ACCOUNTS BY THE ASSESSING OFFICER WAS NOT SUSTAINABLE.THE CIT (A) HAS ACCEPTED THE TRADING RE SULTS SHOWING THE NET PROFIT BEFORE PAYMENT OF REMUNERA TION AND INTEREST TO THE PARTNERS AT RS. 21 50 704/- ON THE SALES AT 2.76%. FOR THE SALES IN SOME SHOPS AT THE RATE A BI T HIGHER THAN THE MINIMUM THE EXTRA PROFIT IS SET OFF AGAIN ST THE LOSS SUFFERED DUE TO ITEMS AT (II) AND (IV) ABOVE. WE AL SO FOUND THAT THE ASSESSEE HAS PAID THE TOTAL LICENCE FEE FOR FO REIGN & COUNTRY LIQUOR AT RS. 5 46 57 352/- WHICH INCLUDE S LICENCE FEE FOR COUNTRY LIQUOR AT RS. 4 07 05 452/- AND FOR EIGN LIQUOR AT RS.1 39 51 900/-. AGAINST THE TOTAL COUNTRY LIQ UOR LICENCE -: 40: - 40 FEE OF RS. 4 07 05 452/- THE ASSESSEE HAS SHOWN THE TOTAL SALES OF COUNTRY LIQUOR AT RS. 5 86 24 831/- FROM ALL THE SHOPS. THE EXCISE INSPECTOR HAD INSPECTED ONLY 3 SHOPS AND THAT TOO FOR ONLY ONE DAY. TOTAL LICENCE FEE FOR T HESE SHOPS STATION RD. SAGAR (RS. 75 30 000/-) GOPALGANJ (RS . 91 05 000/-) AND BINA SAHAR (RS. 99 60 000/- ) COME S TO RS. 2 65 95 000/- AND THEREFORE ON AVERAGE RATE BA SIS THE SALES SHOWN BY THE ASSESSEE AGAINST THESE 3 SHOPS WITH GROSS LICENCE FEE AT RS. 2 65 95 000/- WILL COME TO RS. 3 83 02 667/- AND PER DAY (360 DAYS AND FIVE HOLIDA Y) SALES OF THESE 3 SHOPS WILL COME TO RS. 1 06 396/-. THE ASS ESSING OFFICER HAS ESTIMATED THE SALES FROM ALL THE SHOPS AT RS. 6 41 23 271/-. THE ANNUAL SALES FOR 3 SHOPS AS PER ABOVE CALCULATION WILL COME TO RS. 4 18 95 085/- AND PER DAY SALE SHALL COME TO RS. 1 16 375/-. IT MEANS THAT IF THE SALES FOR ONE DAY ARE INCREASED THEN THEY MAY BE INCREASED B Y RS. 9 979/- ON WHICH THE N.P. SHALL WORK OUT TO RS. 2 75/- IF THE N.P. RATE 2.76% IS APPLIED. 19. IN THE CASE OF M/S BASANT KESHARWANI & COMPANY WE FOUND THAT THE ASSESSING OFFICER HAS MADE THE OB SERVATION -: 41: - 41 ABOUT THE INSPECTION BY THE EXCISE AUTHORITIES OF 6 SHOPS ON ONE PARTICULAR DAY AS UNDER:- RATE PLAIN MASALA SL. NO. NAME OF SHOP DATE AS PER P-4 INSPECTION DATE Q P N Q P N 1 CHANDPUR 18/07/04 18/07/04 80 40 20 100 50 25 2 DEVRI 07/04/04 18/07/04 68 34 17 88 44 22 3 MUCHHRAI 17/11/04 18/07/04 72 36 18 92 46 23 4 KAKKAGANJ 06/07/04 18/07/04 80 40 20 100 50 25 5 MANDIBMORA 11/07/04 18/07/04 68 34 17 88 44 22 6 RAHELI 09/10/04 18/07/04 72 36 18 92 46 23 20. ON THE BASIS OF ABOVE CHART THE AO WORKED OUT TH E AVERAGE SELLING RATE AND APPLIED THE SAME TO ALL QU ANTITIES SOLD IN 11 SHOPS OF THE APPELLANT FIRM AND TREATED THE DIFFERENCE BETWEEN THE SALES SO WORKED OUT BY HIM AND SALES DECLARED BY THE ASSESSEE AS THE UNDISCLOSED INCOME OF THE A SSESSEE AT RS. 49 62 088/-. WE FOUND THAT THE ASSESSEE DID NO T SALE THE COUNTRY LIQUOR ALWAYS AT THE HIGHER RATE BECAUSE IT IS NOT POSSIBLE WITH THE LARGE NUMBER OF LIQUOR CONTRACTOR S IN COMPETITION WITH THE ASSESSEE. THE ASSESSEE HAD TO SALE THE LIQUOR BELOW THE MINIMUM RATE IN MANY SHOPS PARTIC ULARLY IN THE LAST MONTH OR WEEK OF THE LEASE PERIOD BUT THE ASSESSEE -: 42: - 42 DOES NOT HAVE ANY EVIDENCE ABOUT THE SALE OF LIQ UOR TO THE CUSTOMERS BELOW THE MINIMUM RATES. EVEN AFTER THE CLOSE OF THE LEASE PERIOD THE ASSESSEE CAN NOT SALE THE STO CK TO ANY PERSON OTHER THAN THE NEW CONTRACTOR AND NEW CONTRA CTOR DO NOT PAY MORE THAN THE TOTAL BOTTLING CHARGES AND SEALING CHARGES. EVEN AFTER SELLING THE LIQUOR BELOW THE MINIMUM RATES AT THE END OF THE YEAR ALMOST IN ALL THE SHO PS THERE REMAINED THE CLOSING STOCK AND THE ASSESSEE HAD TO SALE THE SAME TO THE NEW CONTRACTORS AT MUCH LOWER RATES. THESE FACTS WERE DULY DISCLOSED TO THE ID. AO AND ALL THE DETAI LS WERE FURNISHED. HOWEVER THE LD. ASSESSING OFFICER DID NO T TAKE THE ABOVE FACTS INTO CONSIDERATION. HAD HE DONE SO H E COULD HAVE FOUND THAT THE BOTTLES PLAIN & MASALA COUNTR Y LIQUOR HAVE BEEN SOLD ON 31-03-2005 AT THE RATES OF NIP S PINTS AND QUARTS HAVE BEEN SOLD AT THE RATE OF RS. 3.75 4.25 & 5.50 AND RS. 3.75 4.25 & 5.50 IN PLACE OF RS. 17- 34 & 68 AND RS. 22- 44 & 88 RESPECTIVELY. IF THE SALES OF THE CLOSING STOCK ARE ADOPTED AS PER EVIDENCE ON RECORD. ON THE ABOVE S AID RATES THEN IT WILL BE EVIDENT THAT THE SALES SHOWN BY THE ASSESSEE ARE NOT LESS THAN THE SALES AS PER MINIMUM SELLING RAT ES AND THE -: 43: - 43 VERY BASIS FOR REJECTION OF THE SOLITARY SALES A/ C IN THE BOOKS OF ACCOUNTS BY THE ASSESSING OFFICER IS ABSOLUTE LY WRONG AND THEREFORE THE ORDER OF THE CIT (A) WHICH HAS AC CEPTED THE TRADING RESULTS SHOWING THE NET PROFIT BEFORE PA YMENT OF REMUNERATION AND INTEREST TO THE PARTNERS AT RS. 23 97 339/- ON THE SALES AT 2.79%. WE ALSO FOUND FROM THE RECOR D THAT THE ASSESSEE HAS PAID THE TOTAL LICENCE FEE FOR FOREIG N & COUNTRY LIQUOR AT RS. 5 98 03 721/- WHICH INCLUDES LICENCE FEE FOR COUNTRY LIQUOR AT RS. 4 40 44 302/ AND FOREIGN LIQU OR AT RS. 1 57 59 419/-. AGAINST THE TOTAL COUNTRY LIQUOR LI CENCE FEE OF RS. 4 40 44 302/- THE ASSESSEE HAS SHOWN THE TOTAL SALES OF COUNTRY LIQUOR AT RS. 6 42 37 614/- FROM ALL THE SH OPS. THE EXCISE INSPECTOR HAD INSPECTED ONLY 6 SHOPS AND THAT TOO FOR ONLY ONE DAY. TOTAL LICENCE FEE FOR THESE SHOPS C HANDPUR (RS. 9 95 000/-) DEVRI (RS. 63 90 000/-) MACHARYAI (RS.35 49 870/- ) KAKAGANI (RS. 55 71 225/-) MAND IBAMORA (RS.23 60 000/-) REHLI (RS. 78 60 000/-) COMES TO RS. 2 67 26 095/- AND THEREFORE ON AVERAGE RATE BA SIS THE SALES SHOWN BY THE ASSESSEE AGAINST THESE 6 SHOPS WITH GROSS LICENCE FEE AT RS.2 67 26 095/- WILL COME TO RS. 3 89 79 402/- -: 44: - 44 AND PER DAY (360 DAYS AND FIVE HOLIDAY )SALES OF T HESE 6 SHOPS WILL COME TO RS. 1 08 276/-. THE ASSESSING OFFICER HAS ESTIMATED THE SALES FROM ALL THE SHOPS AT RS. 6 91 99 702/- . THE ANNUAL SALES FOR 6 SHOPS AS PER ABOVE CALCULAT ION WILL COME TO RS. 4 19 90 399/- AND PER DAY SALE SHALL C OME TO RS. 1 16 640/-. IT MEANS THAT IF THE SALES FOR ONE DAY ARE INCREASED THEN THEY MAY BE INCREASED BY RS. 8 364/ - ON WHICH THE N.P. SHALL WORK OUT TO RS. 233/- IF TH E N.P. RATE 2.79% IS APPLIED. 21. IN THE CASE OF M/S KAPIL KESHARWANI & COMPANY THE ASSESSING OFFICER HAS MADE THE OBSERVATION ABOUT T HE INSPECTION BY THE EXCISE AUTHORITIES OF 7 SHOPS ON ONE PARTICULAR DAY AS UNDER:- RATE PLAIN MASALA SL. NO . NAME OF SHOP DATE AS PER P-4 INSPECTION DATE Q P N Q P N 1 TILLIGAV 31/08/04 31/08/04 72 36 18 92 46 23 2 BALEH 19/07/04 19/07/04 80 40 20 100 50 25 3 GADAKOTTA 23/07/04 23/07/04 72 36 18 92 46 23 4 PATKUI 14/04/04 14/04/04 80 40 20 100 50 25 5 JAMUNIYA 27/08/04 27/08/04 68 34 17 88 44 22 -: 45: - 45 6 BINA SHEHER/STATION 24/05/04 24/05/04 92 46 23 100 50 25 7 RAJVAMS 12/08/04 12/08/04 72 36 18 92 46 23 22. ON THE BASIS OF ABOVE CHART THE AO WORKED OUT THE AVERAGE SELLING RATE AND APPLIED THE SAME TO ALL QU ANTITIES SOLD IN 16 SHOPS OF THE APPELLANT FIRM AND TREATED THE DIFFERENCE BETWEEN THE SALES SO WORKED OUT BY HIM AND SALES DECLARED BY THE ASSESSEE AS THE UNDISCLOSED INCOME OF THE A SSESSEE AT RS. 72 07 543/-. HOWEVER AS A MATTER OF FACT THE ASSESSEE DID NOT SALE THE COUNTRY LIQUOR ALWAYS AT THE HIGHER RA TE BECAUSE IT IS NOT POSSIBLE WITH THE LARGE NUMBER OF LIQUOR CON TRACTORS IN COMPETITION WITH THE ASSESSEE. THE ASSESSEE HAD TO SALE THE LIQUOR BELOW THE MINIMUM RATE IN MANY SHOPS PARTIC ULARLY IN THE LAST MONTH OR WEEK OF THE LEASE PERIOD BUT THE ASSESSEE DOES NOT HAVE ANY EVIDENCE ABOUT THE SALE OF LIQ UOR TO THE CUSTOMERS BELOW THE MINIMUM RATES. IT MAY BE APP RECIATED THAT AFTER THE CLOSE OF THE LEASE PERIOD THE ASSES SEE CAN NOT SALE THE STOCK TO ANY PERSON OTHER THAN THE NEW CO NTRACTOR AND NEW CONTRACTOR DO NOT PAY MORE THAN THE TOTAL BOTTLING CHARGES AND SEALING CHARGES. EVEN AFTER SELLING T HE LIQUOR BELOW THE MINIMUM RATES AT THE END OF THE YEAR ALM OST IN ALL -: 46: - 46 THE SHOPS THERE REMAINED THE CLOSING STOCK AND THE ASSESSEE HAD TO SALE THE SAME TO THE NEW CONTRACTORS AT MUCH LOWER RATES. THE LD. ASSESSING OFFICER DID NOT TAKE THE ABOVE FACTS INTO CONSIDERATION. HAD HE DONE SO HE COULD HAVE FOUND THAT THE BOTTLES PLAIN & MASALA COUNTRY LIQUOR HA VE BEEN SOLD ON 31-03-2005 AT THE RATES OF NIPS PINTS AND QUA RTS HAVE BEEN SOLD AT THE RATE OF RS. 3.75 4.25 & 5.50 AND RS. 3.75 4.25 & 5.50 IN PLACE OF RS. 17- 34 & 68 AND RS. 22 - 44 & 88 RESPECTIVELY. IF THE SALES OF THE CLOSING STOCK AR E ADOPTED AS PER EVIDENCE ON RECORD. ON THE ABOVE SAID RATES THEN IT WILL BE EVIDENT THAT THE SALES SHOWN BY THE ASSESSEE ARE NOT LESS THAN THE SALES AS PER MINIMUM SELLING RATES AND TH E VERY BASIS FOR REJECTION OF THE SOLITARY SALES A/C IN THE BOOKS OF ACCOUNTS BY THE ASSESSING OFFICER IS NOT JUSTIFIE D. THE CIT (A) HAS ACCEPTED THE TRADING RESULTS SHOWING THE NET PROFIT BEFORE PAYMENT OF REMUNERATION AND INTEREST TO THE PARTN ERS AT RS. 29 24 878/- ON THE SALES AT 2.66%. FROM THE RECOR D WE ALSO FOUND THAT THE ASSESSEE HAS PAID THE TOTAL LICENCE FEE FOR FOREIGN & COUNTRY LIQUOR AT RS. 7 67 92 582/- WHI CH INCLUDES LICENCE FEE FOR COUNTRY LIQUOR AT RS. 5 13 90 337/- AND FOREIGN -: 47: - 47 LIQUOR AT RS. 254 02 245/-. AGAINST THE TOTAL COUN TRY LIQUOR LICENCE FEE OF RS. 5 13 90 337/ THE ASSESSEE HAS S HOWN THE TOTAL SALES OF COUNTRY LIQUOR AT RS. 7 57 76 252/- FROM ALL THE SHOPS. THE EXCISE INSPECTOR HAD INSPECTED ONLY 7 SHOPS AND THAT TOO FOR ONLY ONE DAY. TOTAL LICENCE FEE FOR T HESE SHOPS TILI (RS. 39 60 000/) BALEH (RS. 7 85 000/-) GARHAHKO TA (RS. 88 05 000/-) PATKUI (RS. 11 00 000) JAMUNIA (RS. 41 45 000/-) BINA STATION(RS.63 90 000/-) RAJWANS (RS. 7 85 000/-) COMES TO RS. 2 59 70 000/- AND THEREF ORE ON AVERAGE RATE BASIS THE SALES SHOWN BY THE ASSES SEE AGAINST THESE 7 SHOPS WITH GROSS LICENCE FEE AT RS. 2 59 7 0 000/- WILL COME TO RS. 3 82 93 371/- AND PER DAY (360 DAYS AND FIVE HOLIDAY) SALES OF THESE 7 SHOPS WILL COME TO RS. 1 06 370/-. THE ASSESSING OFFICER HAS ESTIMATED THE SALES FROM ALL THE SHOPS AT RS. 8 29 83 795/- . THE ANNUAL SALES FOR 7 SHOPS AS PER ABOVE CALCULATION WILL COMES TO RS. 4 19 35 688 /- AND PER DAY SALE SHALL COMES TO RS. 1 16 488/-. IT MEANS T HAT IF THE SALES FOR ONE DAY ARE INCREASED THEN THEY MAY BE I NCREASED BY RS. 10 118/- ON WHICH THE N.P. SHALL WORK OUT TO RS. 269/- IF THE N.P. RATE 2.66% IS APPLIED. -: 48: - 48 23. WITH REGARD TO AOS OBSERVATION THAT AT THE WINE SHOP BILLS WERE NOT ISSUED BY THE ASSESSEE IN THI S REGARD OUR OBSERVATION IS THAT CUSTOMERS COMING TO THE WINE SH OP DO NOT TAKE ANY BILL AND EVEN IF THEY ARE BEING INSISTED F OR TAKING THE BILLS THEY DO NOT TELL THEIR NAME AND ADDRESS. ACC ORDINGLY MERELY ISSUING THE BILLS WITHOUT NAME AND ADDRESS I S A FUTILE EXERCISE. SINCE IN THE LIQUOR TRADE ENTIRE QUANTIT Y IS BEING PURCHASED ONLY FROM THE EXCISE DEPARTMENT AND NOT F ROM THE OPEN MARKET IT WILL NOT MAKE ANY DIFFERENCE IF NO BILL IS ISSUED SINCE THE QUANTITY OF THE PURCHASES ARE BEING TALLI ED WITH RESPECT TO THE LICENCE FEE PAID AND WINE TAKEN FROM THEIR GODOWN COMPLETE DETAILS OF WHICH WERE FURNISHED BY THE ASSESSEE. FURTHERMORE THE ASSESSEE IS NOT ENTITLED TO SELL THE CLOSING STOCK LEFT WITH HIM AT THE END OF THE LICEN CE PERIOD IN OPEN MARKET THEREFORE NON MAINTENANCE OF STOCK REG ISTER WILL NOT ADVERSELY EFFECT THE SITUATION MUCH. SUCH STOCK EVEN IF LEFT AT THE END OF THE LICENCE PERIOD THE SAME IS REQUI RED TO BE HANDED OVER TO THE SUBSEQUENT ALLOTTEE OF THE SHOP WHEREIN NORMALLY NO COST OF LIQUOR IS BEING PASSED ON TO TH E ASSESSEE THE SAME IS HANDED OVER MERELY AT A COST OF CORKING AND -: 49: - 49 PACKING. THUS THE OBSERVATION OF THE AO THAT BILLS WERE NOT ISSUED AT THE WINE SHOP AND STOCK REGISTER WAS NOT MAINTAINED IS NOT GOING TO MATERIALLY AFFECT THE P ROFITABILITY OF THE ASSESSEE. IN SUCH LINE OF ACTIVITY IT IS PROPE R TO APPLY THE RATE OF NET PROFIT WHICH IS PREVAILING AT THE RELE VANT POINT OF TIME AND TO COMPUTE THE PROFIT ACCORDINGLY. IF WE A CCEPT THE ADDITION MADE BY THE ASSESSING OFFICER THE SAME WI LL RESULT IN NET PROFIT RATE OF 8 % TO 10 % WHICH IS PRACTICALLY NOT POSSIBLE IN THIS TRADE. ON THE CONTRARY THE CIT(A) HAS APPL IED THE PREVAILING RATE OF PROFIT AND FOUND THAT ASSESSEE H AS SHOWN CORRECT AND REASONABLE PROFIT. 24. IN VIEW OF THE ABOVE OBSERVATION AND FINDING WE CAN SAFELY CONCLUDE THAT THE ADDITIONS HAVE BEEN MADE B Y THE ASSESSING OFFICER ON THE BASIS OF ONE DAY OBSERVATI ON BY THE EXCISE DEPARTMENT REGARDING SALE AT A PRICE HIGHER THAN THE MINIMUM PRICE. THE AO HAS APPLIED THE HIGHER RATE I N RESPECT OF ALL THE SHOPS THE ASSESSEE WERE HAVING AND FOR T HE ENTIRE PERIOD OF 365 DAYS. ESTIMATION OF PROFIT BY THE ASS ESSING OFFICER BY REJECTING THE BOOKS OF ACCOUNT WHICH W ERE DULY -: 50: - 50 AUDITED WHEREIN ONLY MISTAKE RELATING TO SUCH OBSE RVATION BY THE EXCISE DEPARTMENT ONLY FOR ONE DAY WAS POINTED OUT WAS NOT JUSTIFIED AT ALL. WHENEVER ANY ADDITION IS REQU IRED TO BE MADE THE AO HAS TO BRING COGENT MATERIAL ON RECORD INDICATING HIGHER SALES PRICE CHARGED BY THE ASSESS EE WHICH HAS NOT FOUND PLACE IN THE REGULAR BOOKS OF ACCOUNT . IN RESPECT OF ONE DAY WHEREIN THE AO HAS BASED HIS FINDING ON THE BASIS OF OBSERVATION OF EXCISE DEPARTMENT THE ADDITION I S REQUIRED TO BE MADE BUT IT IS NOT JUSTIFIED TO APPLY THE SA ME SELLING PRICE FOR THE ENTIRE PERIOD OF 365 DAYS AND TO ALL THE SHOPS OF ASSESSEE BY IGNORING THE ACTUAL ENTRIES MADE IN THE AUDITED BOOKS OF ACCOUNT. AT THE VERY SAME TIME IT IS NOT PROPER TO DELETE THE ADDITION MADE IN RESPECT OF THE DAY IN W HICH THE SALE IS FOUND TO BE MADE AT HIGHER PRICE AS PER INS PECTION REPORT OF EXCISE DEPARTMENT. KEEPING INTO VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THESE CASES AS DISCUSSED HEREINABOVE WE CONSIDER IT FIT AND PROPER TO APPLY THE HIGHER SELLING RATE AS WORKED OUT BY THE ASSESSING OFFICER IN RESPECT OF 5 % OUT OF TOTAL 365 DAYS OF THE YEAR IN RESPEC T OF ONLY THOSE SHOPS WHEREIN HIGHER SALES PRICE WAS FOUND. I T IS NOT -: 51: - 51 PROPER TO APPLY THE HIGHER RATE OF SALE TO THOSE SH OPS WHICH WERE NOT FOUND TO HAVE CHARGED ANY HIGHER RATE NOR THERE WAS ANY INSPECTION REPORT OF THE EXCISE DEPARTMENT. AS THE AO HAS MADE THE BASIS OF HIS ADDITION ONLY IN RESPECT OF O NE DAY FOR WHICH THERE WAS INSPECTION REPORT OF THE EXCISE DEP ARTMENT THE ADDITION IS ONLY WARRANTED IN RESPECT OF THAT S ALES AND BY TAKING THE SAME AS EXEMPLARY WE CAN REASONABLY APP LY THE SAME TO 5 % OF TOTAL 365 DAYS WHICH WORKS OUT TO B E 18 DAYS ( 5 % OF 365 DAYS ). THUS WE MODIFY BOTH THE ORDERS OF THE LOWER AUTHORITIES AND RESTRICT THE ADDITIONS ACCORD INGLY IN RESPECT OF ALL THE ASSESSEES AS DISCUSSED HEREIN AB OVE. 25. IN THE RESULT ALL THE APPEALS OF THE REVENUE ARE ALLOWED IN PART IN TERMS INDICATED ABOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 14 TH JANUARY 2011. SD/- SD/- (R.C. SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 14 TH JANUARY 2011. CPU* 11171