AJAY KUMAR MITTAL, J. - (1.) THE assessee has preferred this appeal under Section 260A of the Income Tax Act, 1961 (in short "the Act") against the order dated 12.8.2013 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as "the Tribunal"), claiming the following substantial questions of law: - i) Whether the impugned orders are result of mis - reading and mis -appreciation of law and evidence? ii) Whether the respondent No.1 being final court of fact ought to have dealt with each and every aspect/pleadings of the appellant while affirming and findings of authorities below? iii) Whether the impugned orders are erroneous, perverse and not sustainable in the eyes of law? iv) Whether the respondent No.1 should have allowed 15% wastage especially when the AO has allowed 15% wastage in subsequent years? v) Whether the respondent No.1 has ignored the material evidence? vi) Whether the respondent No.1 has failed to refer to the relevant pleading and evidence on record while passing the impugned order -
(2.) BRIEFLY stated the facts as narrated in the appeal may be noticed. The return of income was filed on 29.9.2008 declaring loss of Rs. 1,34,853/ -. The said return was processed under Section 143(1) of the Act and the case was selected for scrutiny and notice under Section 143 (2) of the Act was issued on 23.9.2009. Subsequently, the case was taken up for scrutiny by the Additional CIT, Range -III, Jalandhar and notices under Sections 143(2) and 142(1) of the Act along with questionnaire dated 24.11.2009 were issued to the assessee. The assessee had shown receipts amounting to Rs. 9,25,265/ - on account of food sales. The purchase against the food sales was Rs. 39,12,897/ - and the opening and closing stock of good items were shown at Rs. 72,82,615/ - and Rs. 73,18,326/ -, respectively. The Assessing Officer vide order dated 29.11.2010 (Annexure A -1) computed the total income of the assessee at Rs. 40,71,805/ -. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [For brevity "the CIT(A)] who vide order dated 30.3.2012 (Annexure A -2) partly allowed the appeal. Still dissatisfied, the assessee approached the Tribunal by way of an appeal. The Tribunal vide order dated 12.8.2013 (Annexure A -3) dismissed the appeal. Hence, the present Income Tax Appeal. Learned counsel for the assessee -appellant submitted that the Assessing Officer, the CIT(A) and the Tribunal had erred in not allowing the claim of the assessee on account of wastage while determining the income of the appellant. According to the learned counsel, the Assessing Officer had allowed 15% on account of wastage in the next year after applying the same formula as has been applied for the current assessment year and, therefore, the approach of the authorities below was unsustainable in law.
(3.) AFTER hearing learned counsel for the appellant, we do not find any merit in the appeal. The Assessing Officer, CIT(A) and the Tribunal had sustained the rejection of books of account under Section 145(3) of the Act. The Assessing Officer while disallowing the claim of the assessee had recorded as under: - "4.2 From the reply of the assessee's AR reproduced above, it is obvious that the assessee is not maintaining any stock register of daily consumption of various items used in the business. It is stated in the said reply that the details of opening and closing stock were prepared at the end of the year. However, not even the inventory of opening and closing stock has been furnished leave aside the valuation of the same. It is the contention of the assessee's AR that the consumption of grocery items to food sales cannot be worked out because the items used by the assessee company are numerous, but even if this contention is considered, it cannot be understood as to why even the inventories of opening and closing stock could not be furnished, and in the absence thereof, it is absolutely not understandable as to how the figures and valuation of opening and closing stock have been arrived at. It is, therefore, obvious that the trading account prepared by the assessee company is incorrect and incomplete, and cannot be relied upon. Moreover, the assessee's AR has himself stated in his reply reproduced above that the items used for consumption by the assessee company are perishable and if not consumed within the requisite time, have to be thrown away. In such circumstances, it is not understandable as to how and why the assessee is maintaining opening and closing stock of huge sums like Rs.72,82,615/ - and Rs.73,18,376/ - as against which, sales of only Rs.92,25,262/ - have been shown. The very figures of opening stock, closing stock and sales are enough to show that the books of account of the assessee company are being manipulated, and the trading results shown do not present the true and correct picture of state of affairs of the assessee. In view of all these facts, the assessee's AR vide order sheet noting dated 16th November, 2010, was required to show cause as to why the book results of the assessee may not be rejected u/s 145(3) of the Income Tax Act, 1961. 4.3 XX XX XX XX 4.4 Therefore, in view of the detailed discussion in the preceding paras, being not satisfied about the correctness and completeness of the accounts of the assessee company, I reject the same u/s 145(3) of the Income -tax Act, 1961. Having thus rejected the book results of the assessee company, it is fair and logical to estimate the income of the assessee, keeping in view the past history of the case. The past history of the case shows that the assessee is in the habit of suppressing and under -reporting its food sales. Further, the facts on record show that the assessee is continuing with the same practice during the year under consideration. In A.Y. 2005 -06 and earlier assessment years, the food sales of the assessee company had been estimated by the AO by taking the same to be 5 times of the grocery/provisions consumed. However, in appeal before the Hon'ble CIT(A), the assessee had got part relief and the ratio of 1:3 was applied by the CIT(A) as against the ratio 1:5 applied by the AO. This ratio of 1:3 was subsequently confirmed by the Hon'ble ITAT, Amritsar Bench, Amritsar, which therefore, became final. Vide order sheet notings dated 21st October, 2010, 1st November, 2010 and 11th November, 2010, the assessee's AR was repeatedly given opportunities to show cause as to why the same ratio of 1:3 should not be applied to the year under consideration. The reply furnished by the assessee's AR vide his written 16th submission filed on November, 2010, is reproduced as under: - "Regarding explanation called for alleging that why no addition under head sales of food be made by applying the ratio of 1:3 of grocery consumed as confirmed by ITAT in your case in earlier years. In this regard, it is respectfully submitted that, firstly, in latest order dated 6 June, 2008 of Hon'ble ITAT in appeal No. ITA No. 407/ASR/2008, for A.Y. 2005 -06 filed by department against sustaining of addition of Rs.65785/ - in food sales after restricting the exorbitant addition of Rs.56,80,792/ -. In food sales by CIT(A), this ground of appeal of the department has been rejected and finally only addition of Rs.65785/ - remained sustained and has become final order as no further appeal is pending against these findings. It is evident from perusal of this judicial order that this alleged ratio of 1:3 has never been applied, not been sustained and further it is evident from the order that the petty addition of Rs.65785/ - in food sales has been sustained only considering the subsequent events. So, the application of alleged grocery to food sales ration of 1:3 does not arise from final latest ITAT's order." The reply of the assessee's AR, as reproduced above,is to say the least, ridiculous. The assessee's AR has referred to the Hon'ble ITAT's order for A.Y. 2005 -06 but has contended that the ratio of 1:3 has never been applied, and not been sustained. It appears that the assessee's AR is neither aware of the facts of the case or its past history, and nor has he bothered to read the assessment order, CIT(A)'s order and ITAT's order for the said assessment years. The relevant portion of the CIT(A)'s order for A.Y. 2005 -06 is reproduced hereunder for ready reference: - "I have carefully considered the submissions of the appellant and have gone through the findings of the AO as incorporated in the order. It is seen from the order that the facts and material based on which the addition was made by AO were similar to the one involved in the case of appellant for the asstt. years 2002 -03 and 2004 -05 appeals wherein were decided vide order dated 31.03.22006 bearing appeal No. 531/04 -05/CIT (A)/Jal and order dated 30.05.2007 vide Appeal No. 518/06 -07/CIT(A)/ Jal. Neither the appellant nor the AO have pointed out any distinguishing facts to the facts as operating in this case for the assessment years 2002 -03 and 2004 -05. Therefore, following my decision in the case of appellant dated 30.05.2007 (supra) the ratio of 1:3 is applied as against 1:5 applied by the AO and the sales are estimated at a sum of Rs.1,12,30,014/ - which results in addition of Rs.65,785/ - with relief of Rs.56,15,007/ - to the appellant." From the order of the Hon'ble CIT(A) reproduced above, it is clear beyond doubt that the ratio of 1:3 has been sustained by the CIT(A) as against ratio of 1:5 applied by the AO. It is this ratio of 1:3 which has been sustained by the Hon'ble ITAT vide its order No. ITA No. 378 (ASR)/2008 dated 23.09.2008, relevant portion of which is reproduced hereunder: - "The AO has recorded the finding of fact that the accounts of the assessee are not correct and complete and as such, the same stood rejected. This finding stands confirmed by the ld. CIT(A). No challenge thereto has been made by the assessee in appeal before us...... ..... the ld. CIT(A) can be said to be justified in reaching the conclusion that the estimation of sales at five times of the consumption of materials is excessive which needed a reasonable basis of estimation with reference to material on record......... ....... In the light of findings reached by the ld. CIT(A), no interfernece is called for in his decision as he has merely corrected the estimation made by the assessing authority and adopted reasonable basis in doing so." ;