N.U. Joseph vs Commissioner of Income Tax

K.S. Radhakrishnan, J.—Assessment years relate to 1990-91 and 1991-92 respectively. When the matter came up for admission, this Court framed the following questions of law :

"(1) Whether the Tribunal was justified in sustaining the gross profit addition for the asst. yr. 1991-92 amounting to Rs. 87,277 by enhancing the gross profit from 3.98 per cent to 4.5 per cent when there was no reason stated by the AO for treating the declared profit as low ?

(2) Whether the Tribunal is justified in its view that the Revenue authorities cannot be found fault in regard to the estimate of gross profit at 4.5 per cent for 1991-92, when there is absolutely no material or basis given either for rejecting the declared gross profit and for estimating the gross profit at 4.5 per cent ?"

Counsel appearing for the Revenue submitted that no question of law arises for consideration in these cases.

Order of the assessing authority would indicate that survey u/s 133A was conducted in the business premises of the assessee. Assesses had not filed any return of income for almost ten years. Therefore, notice u/s 148 was served with the previous approval of the Jt. CIT. Return was filed only on 15th March, 2000 declaring total income of Rs. 25,250. Return was processed u/s 143(1) and notice u/s 143(2) was issued. Assessing authority noticed that assessee was doing wholesale business in liquor and on scrutiny of the P&L a/c, it is seen that GP adopted by the assessee is only 3.98 per cent which was too low. Assessing authority, therefore, adopted GP @ 4.5 per cent. Total turnover was Rs. 1,70,23,277, 4.5 per cent of Rs. 1,70,23,277 comes to Rs. 7,66,047 resulting in an addition of Rs. 87,277. Aggrieved by the said order, assessee took up the matter in appeal before the AAC. Common order was passed by the CIT(A) in respect of the year 1991-92 and rest of the assessment years. CIT(A) rejected the appeal and held as follows :

"In my view the GP rate shown by the appellant in all the five years as discussed above (supra) is definitely low in the type of business being carried out by the appellant of the liquor business. The enhancement of the GP rate to 4.5 per cent for 3 years and 7 per cent for two years is just and reasonable. It is not a case before me of the appellant neither in the grounds of appeal nor in statement of facts and not so also written submissions that defect-free accounts have been maintained by the appellant. In the type of business being carried out by the appellant, it is certain and definite that accounts are being always rejected by the AO. The non-co-operation at the appellate stage and not divulging any more information over and above VDIS is purposeful and suitable to the appellant against the interest of Revenue."

Aggrieved by the said order, assessee took up the matter in appeal before the Tribunal with regard to the asst. yrs. 1990-91, 1991-92, 1992-93, 1993-94, 1994-95 and 1995-96 (and) submitted that the Tribunal should have accepted the appellant''s contention that addition made to the GP for 1991-92 would amount to Rs. 87,277 and the same yardstick should have been adopted for the year 1990-91 and 1991-92 as well. The said request was not accepted by the Tribunal and the Tribunal upheld the addition made by the authorities. Counsel appearing for the Department strongly contended that there is no justification in adopting the same standard which was for the year 1990-91. Counsel also made reference to the decisions in Commissioner of Income Tax Vs. Maharaja Shree Umed Mills Ltd., , Asstt. CIT v. Punjab Machinery Works (P) Ltd. (2003) 176 Taxation 53 (Trib), Commissioner of Income Tax Vs. Gotan Lime Khanij Udhyog, , Vel Metal Industries v. State of Tamil Nadu (1988) 68 STC 55 (Mad) and Ratna Cafe v. State of Madras (1993) 33 STC 39. We find it difficult to accept the contention of the assessee. Taking into consideration the entire facts, the mere fact that Revenue has not filed appeal is not a reason to adopt the same yardstick in respect of the years 1990-91 and 1991-92. This is a case where assessee is doing wholesale business in liquor and not filed return. Return was filed only on 15th March, 2000 and claimed the benefit of VDIS. Further, we also notice that during the previous years assessee has not maintained defect-free accounts. All these factors weighed with the Tribunal to sustain the order of the assessing authority for the years 1990-91 and 1991-92 which is essentially a question of fact. Though there is some inconsistency in para 4 in the relief portion of the order, the Tribunal has accepted the order passed by the assessing authority in respect of the asst. yrs. 1990-91 and 1991-92. That being the position we find no illegality in the order of the Tribunal. The appeals are accordingly dismissed.