Decided on December 19,1994



M.A.A. Khan, Judicial Member - (1.) THIS is an appeal from CIT (A)'s order dated 18-10-1993 confirming a penalty of Rs. 1,23,062 levied under Section 271(1)(c) of the IT Act, 1961 ('the Act').
(2.) Briefly stated the relevant facts are that during the accounting period relevant to A.Y. 1985-86 the assessee dealt in country liquor on retail basis. It used to get the licensed quantity of liquor periodically from the Govt. Distillery at Sri Ganganagar. The required number of bottles were, however, to be supplied by the assessee. It could make such supply of bottles from purchases made from the distillery @ Rs. 2 per empty bottle and/or from the market or persons selling empty bottles to it @ Re. 1 per bottle. The assessee used to charge Re. 1 per bottle from the customers of liquor bottles. In the course of assessment proceedings the Assessing Officer (A.O.) noted from the details filed of the empty bottles that in the month of March 1985 the assessee had shown purchase of 35,032 of empty bottles @ Rs. 2 per bottle from the distillery and of 3,59,198 bottles @ Re. 1 per bottle from the market/other persons. Utilisation of 1,75,165 bottles only was shown in that month. But, at the same time the balance of 2,19,065 bottles was not reflected in the closing stock. On scrutiny of the empty bottles purchase a/c for the period from April 1984 to February 1985, the A.O. noticed that the assessee had shown supply to the distillery of more number of empty bottles than shown in the books. On looking at the gross profit declared by the assessee the A.O. noted that gross profit rate was declared at 3.6% on total sales of Rs. 6,52,53,557 which, in his opinion, was low and should have been at 4% leading to enhancement of the gross profit by Rs. 12,501. The A.O., therefore, referred the matter under Section 144A of the I.T. Act, 1961 ('the Act') for instructions from his IAC.
(3.) BEFORE the IAC the assessee explained that extra bottles, whenever required by the assessee, were supplied to it @ Rs. 2 per empty bottle by the distillery. But this plea stood demolished by Sri Vishal Singh Shekhawat, the Manager of the distillery, who had stated in his statement recorded by the A.O. that no sale of empty bottles otherwise than in cash was ever made to the assessee and that the sales so made to the assessee, at no time, exceeded 20% of the total requirement. The IAC was, however, of the opinion that some of the country liquor vendors at the retail shops might have sold liquor to the consumers in glasses. He, therefore instructed the A.O. to verify that fact. But, the IAC further instructed the A.O. that the addition on account of discrepancy in the empty bottles account for the whole year was to be made at Rs. 2,50,000 only inclusive of the specific addition of Rs. 2,19,065 on account of the bottles purchased in the month of March 1985 and not shown in the closing stock. He approved of the trading addition of Rs. 12,501 also.;

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