Entire Books of Accounts cannot be rejected on the sole basis of Non-Issuance of Sale Memos: Orissa HC [Read Order]

The Orissa High Court has held that the entire books of accounts cannot be rejected on the sole basis of non-issuance of sale memos.

The Assessee, M/s. Cresent Co. is a partnership firm deriving income from the sale of country liquor. It must be noted at the outset that as regards the AY 2001-02 the ITAT has accepted the books of accounts of all these three Assessees and has allowed their appeals setting aside the orders of the Assessing Officer (AO) and the Commissioner Income Tax (Appeal) [CIT(A)] affirming the said assessment orders.

It is seen in the impugned assessment order which is identical in each of the cases that although the AO accepted the fact that there was nothing wrong with the Assessee’s books of accounts, only on the ground that sales memos were not filed, the books of accounts were rejected by the AO. When the matter went in an appeal to the CIT(A) it was noted by him in the order dismissing the appeals that “it is true that the AO had not pointed out any specific omission or commission nor cited any specific instance of irregularity in the books of accounts” and that the only reason for rejection was that “element of inflation in purchases or incorrectness of purchase could not be ruled out”.

However, it was again surmised that “there was also the possibility of suppression of sale price”. It is therefore plain that both the AO and CIT(A) proceeded on surmises and conjectures with no supporting material to justify the rejection of the Assessee’s books of accounts. The ITAT having accepted the Assessee’s accounts for the subsequent AY 2001-02 for some reason did not accept them as far as the AY in question was concerned.

The division bench headed by the Chief Justice, S. Muralidhar has held that mere non-issuance of production of sale memos could not have been a ground to reject the entire books of account particularly since it pertained to the sale of country liquor to tribal populations. Also, the ITAT appears to have overlooked the fact that the books of account of the Assessee were not rejected by the Excise Department and that the ITAT itself had accepted them for the subsequent AY 2001-02.

M/s. Cresent Co. vs Commissioner of Income Tax, Sambalpur

CITATION: 2022 TAXSCAN (HC) 197

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