Income Tax Appellate Tribunal (ITAT) Chandigarh in a recent judgment has ruled that the nature of business of liquor is such that it cannot maintain proper sale bills and accepted the assessee’s contention that it is practically impossible to issue sale bills to the customers for retail sale of liquor.

Case Details:
ITA No. 877/Chd/2012 AY : 2008-09 ITA No. 225/Chd/2013 AY: 2009-10
Hem Raj (Appellant) vs ACIT (Respondent)
Date of Order: 26-11-2015

Case Laws referred:
Ashok Kumar & Company Vs. ITO (2004) 90 TTJ 666 (Asr)
ITO Vs. Luxmi Nar ian Ramswaroop Shivhare (2009) 119 ITD 0015 (Agra)(TM)

Brief Facts of the Case:
The assessee was running liquor, wine and beer shop in Chandigarh in proprietary concern M/s Hem Raj & Co. In the return of income, the assessee had shown income under the head “salary” only. During the course of assessment proceedings, the assessee furnished his reply together with Profit & Loss Account, Balance Sheet and Audit Report in Form No.3CD for the f inancial year 2007-08. The assessee also furnished ledgers, bills/vouchers of the liquor business and bank account statements. The Assessing Officer (AO) has noticed certain discrepancies in the books of account of the assessee viz; non-maintenance of stock register, non-maintenance of sales records, non maintenance of bills and vouchers of expenses. Consequently rejecting books of account of the assessee AO invoked the provisions of section 145(3) and applied the net profit rate of 8% on the sales of Rs.1,60,23,400/- as declared by the assessee himself.

CIT(Appeals) also upheld the order of the Assessing Officer.

Before ITAT, it was contended that the assessee was maintaining proper books of account alongwith purchase, expenses bills/vouchers and daily sales statements, which were duly audited and the same were produced before the lower authorities. The copy of audited Balance Sheet, Profit & Loss Account and other related documents were submitted, the purchases were made from various suppliers in accordance with the permits given by the Government, which had been duly vouched. He further stated that the sales in this line of business are made in cash and recorded on the basis of daily sales statements given by the employees at tending to the shop.

It was further submitted that it was practically impossible to issue sale bills to the customers for sale of liquor and the practice of not issuing bills is prevalent all over the country in this trade. The sale price, however, is displayed by the assessee at the shop and the assessee cannot charge more price than as displayed at the shop because it is practically impossible as every customer looks at the prices displayed at the shop

Important Excerpts from ITAT Judgment
It is clear from the Profit & Loss Account (supra) that the assessee had claimed freight and cartage charges at Rs.32,083/-, miscellaneous expenses at Rs,3532, repair & maintenance expenses at Rs.12,630/-, staff welfare expenses at Rs.18,869/- and printing& stationery expenses at Rs.12,215/- . In our considered view, the Assessing Officer was not justified in doubting the above expenses, particularly the quantum involved therein. Furthermore, the nature of expenses is such that incurring of the same for the purposes of business cannot be doubted. The main contention of the Assessing Officer while rejecting the books of account was that the assessee has not maintained any sales bills for the sales carried from its  liquor shops. We find that the daily sales are, however, recorded on the basis of daily statements given by the employees at tending to the shop. The entries to the said sales are recorded in the books of account maintained at its main office. It is also observed here that the assessee has time and again explained that it is impossible to issue sale bills to the customer for sale of liquor and the practice of not issuing bills is prevalent all over the country in this trade. It is also the case of the assessee that the sale price is displayed at the shop and there cannot be any variance in the price so displayed. In the instant case, the Assessing Officer himself has accepted the correctness of sale amount by admitting the declared sales by the assessee, which were substantiated by the entries in the books of account maintained in the regular course of business carried on by the assessee. We may also observe here that the Assessing Officer has not pointed out any discrepancy in the quantitative details of purchase or sales made by the assessee. Shri N.K. Saini , learned counsel for the assessee submitted that the cost of goods dealt inter-alia including purchase price, duties and fees paid, shop licence fee and bottling and sealing charges paid by the assessee has been accepted by the Assessing Officer. The learned counsel for the assessee submitted that the books of account cannot be rejected merely on the basis of lack of sale bills.

In the instant case also, the purchases made by the assessee are duly supported by proper vouchers and are regulated by the Excise Authorities and payment of liquor is made through Government on the basis of the auction conducted by the Government.  In the case of Luxmi Narian Ramswaroop Shivhare (supra), the majority view was that as regards the sale, the nature of the assessee’s business was such that it cannot maintain proper sale bills. In this case also, the nature of assessee’s business is such that it cannot maintain proper sale bills. In the case of Luxmi Narian Ramswaroop Shivhare (supra), the majority view was that the profit varies from area to area and the bid money and small variation of the profit cannot be ruled out.

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