I.T.A. NO.76/KB OF 2000-2001 Versus I.T.A. NO.76/KB OF 2000-2001

ORDER

This appeal by the assessee-appellant is directed against the order, dated 24-6-2000 of the CIT(A) on counts as set-forth in the grounds of appeal. Mr. Javed Zakaria, Advocate appeared for the appellant-assessee while Mr. Pervez Akhtar, D.R. represented the respondent-department. Arguing the case of his clients Mr. Javed Zakaria stated that assessee had history of acceptance of its trading version in the past. He referred to assessment order for the assessment year 1997-98 in which the DCIT even after recording a finding to the effect that assessee's sales and purchases are in cash and not open to verification accepted the declared version. Assessee's declared version was also directed to be accepted by this Tribunal vide orders in I.T.A. No.223/KB of 1990-91 (Assessment year 1988-89), dated 3-2-1991. He stated that assessee's business continued to be the same as before namely running a restaurant serving quality food to customers. Books were also kept on same pattern as before. Sales had increased during the period but G.P. had declined by 2.3% on account of disproportionate increase in costs vis-a-vis last year. The Assessing Officer estimated the sales at Rs.90,00,000 (declared Rs.88,84,498) and applied G.P. at 33%. He however, did not confront the assessee with the defects found in assessee's accounts and his 'intention to estimate the income by a notice under section 62 which was obligatory in law. He also failed to identity defects or deficiencies which cast adverse aspersion on assessee's accounts and justified rejection of book version. Learned D.R. on the other hand defended the order of officers below. According to him the defects found in the books namely unverifiability of sales and purchases had duly been pointed out vide order sheet entry, dated 21-6-1999. He argued that the G.P., rate applied and upheld at 33 % was reasonable in the line of business. He therefore, prayed for my sustaining the orders of the officers below on this account. ,

2. I have given due consideration to arguments of both the sides and perused the assessment and appellate orders. The Assessing Officer neither pointed out material defects nor quoted any parallel case to justify his action. The unverifiability of sales and purchases alluded to in the order is immaterial in the context in this case because in spite of the same the accounting version was accepted for the 'preceding year. If the Assessing Officer had objections to decrease in G.P. He should have gone deeper into the matter by comparing the prices of assessee's menu items with prices of raw materials last year to draw adverse inference on valid basis. Learned D.R.'s arguments that assessee had been confronted with the defects on the order sheet is not forceful in the context. A notice under section 62 is a statutory requirement which has to be met and entries in order-sheet are no substitute for the same. Entries on order-sheet are meant only for day-to-day record of proceeding and the Assessing Officer is obligated under the law to issue notice under section 62 confronting the assessee with 'the defects or deficiencies found and his intention to reject the version and made estimates of income etc., in case he is so inclined. Assessee's A.R. pointed out that even in the order-sheet entry the Assessing Officer did not intimate of sales and G.P. I therefore, accept assessee's appeal and direct that the declared sales and G.P. should be accepted.

3. As regards the disallowances from profit and loss account Mr. Javed Zakaria did not press the disallowances out of Misc., conveyance expenses, out of repair and maintenance (general machinery and furniture) and out of telephone expenses. Assessee's appeal on these issues is dismissed being not Pressed. Regarding 1/3 amount added out of crockery and cutlary replacement expenses he argued that no such disallowance used to be made in the pest and the Assessing Officer has not pointed out unverifiable item etc. He stated that this was a routine feature of his client's business and such claims were made and allowed in the past. D.R. could not controvert it. I therefore, order deletion of the amount. The Assessing Officer should have discussed the matter in proper detail if he wanted to deviate from assessee's history. The disallowances out of motor vehicle and printing and stationery expenses at 33% each are reduced to 20% each.

4. The appeal is decided in the manner indicated above.

C. M. A./M.A.K./110/Tax(Trib.) ??????????????????????????????????????????????????????? Order accordingly.