Discount adjustment allowed while calculating suppression of sale due to difference in price of menu card and daily stock sheet

Brief of the Case

ITAT Chennai held In the case of ACIT vs. Sh. R. Paneerselvam (Individual) that normally, the sale price mentioned in the menu card would be the sale price of the liquor. However, the fact is that the liquor shops are giving discount on the liquor sold to their corporate guests, walk in customers, etc. for various reasons. One of the reasons presumably may be to attract many customers. The menu card or tariff card said to be found during the course of survey operation does not mention or disclose any of the discounts said to be given by the assessee during happy hours to corporate guests, walk in customers, etc. However, we cannot totally rule out the claim of the assessee that certain discounts are given to the corporate guests, walk in customers and happy hours discount. Also, in the absence of any material like reference in tariff card or menu card, it cannot be ruled out that the assessee inflated the discount. Hence, taking into consideration the nature of trade and material found during the course of survey operation and the statement recorded from the person in-charge of Bar, estimation of sale suppression modified at 26% instead of 56.33% estimated by the AO.

Facts of the Case

A survey under Section 133A was conducted on 27.02.2008 in the business premises of the assessee. During the course of survey operation, incriminating materials were found in relation to suppression of sale of liquor at Rohini International Bar, T. Nagar, Chennai. According to the revenue, in the Permit Room of Rohini International Bar, the price of liquor entered in daily stock sheet was substantially less than the price mentioned in the menu card. The assessee kept the current books in the Bar. On examination of one Shri Raju, in-charge of Rohini International Bar, it was found that suppression of sale was done from 5 to 6 years earlier. The said Shri Raju further confirmed that the Bar bill books would be destroyed and separate set of sale bills would be prepared underlying the sale price. The Investigation Department worked out the average sale suppression at 56.33%.

The revenue further submitted that the assessee explained before the Assessing Officer that the collection from Rohini International Bar was calculated on the basis of the price mentioned in the menu card. According to the Ld. D.R., the assessee further explained that the liquor is not sold at the prices mentioned in the tariff card or menu card. In fact discount was given at 50% to 10%. Therefore, indirectly, , the assessee accepted that there was suppression of sale. Accordingly, the Assessing Officer estimated the suppression of sale in Rohini International Bar at 56.33%.

Contention of the Assessee

The ld counsel of the assessee submitted that the only dispute between the assessee and Department is that the liquor was sold at a lesser price than it was mentioned in the menu car or tariff card. According to the Ld. counsel, liquor business is a competitive one. The assessee has to give various discounts to attract the customers. Therefore, even though the sale price was mentioned in the tariff card and menu card, the assessee was forced to give discount at 50% to 10%. He explained that the assessee in fact was giving discount to corporate guests, walk in customers and happy hours discount, etc. Therefore, estimating the sale on the basis of the price mentioned in the tariff card and menu card is not justified. He submitted that in fact there was no suppression of sales. Therefore, the CIT (A) ought to have deleted the entire addition made by the Assessing Officer.

Contention of Revenue

The ld counsel of the revenue submitted that when the suppression was established, there was no reason to restrict the same to 30% by CIT (A).

Held by CIT (A)

CIT (A) ignoring the material found on record restricted the addition to 30% as against 56.33% estimated by the Assessing Officer.

Held by ITAT

ITAT held that admittedly, there was a survey in the business premises of the assessee and the revenue authorities found certain incriminating materials. It is an admitted fact that the sale price entered in the daily stock register is less than the sale price mentioned in the menu card. The Department contends that the price mentioned in the sale register should be the sale price of the liquor. Normally, the sale price mentioned in the menu card would be the sale price of the liquor. However, the fact is that the liquor shops are giving discount on the liquor sold to their corporate guests, walk in customers, etc. for various reasons. One of the reasons presumably may be to attract many customers. Whatever may be the reason, the menu card should also reflect the sale price, happy hours discount and discount that may be given to corporate guests, walk in customers, etc. The menu card or tariff card said to be found during the course of survey operation does not mention or disclose any of the discounts said to be given by the assessee during happy hours to corporate guests, walk in customers, etc. However, we cannot totally rule out the claim of the assessee that certain discounts are given to the corporate guests, walk in customers and happy hours discount. Also, in the absence of any material like reference in tariff card or menu card, it cannot be ruled out that the assessee inflated the discount.

Further, Shri Raju, who is in-charge of Rohini International Bar, admitted before the authorities that the sale suppression was done from 5 to 6 years earlier. He has further admitted that bill books are destroyed and separate set of sale bills are prepared underlying the sale price. In view of this categorical statement, this Tribunal is of the considered opinion that the suppression of sa44le on liquor is confirmed and now what remains is the estimation of quantum of suppression of sale. The Assessing Officer totally rejecting the claim of the assessee regarding discount, estimated the suppression at 56.33%.The CIT (A), however, estimated the same at 30%. This Tribunal is of the considered opinion that by taking into consideration the nature of trade and material found during the course of survey operation and the statement recorded from the person in-charge of Bar, estimation of sale suppression at 26% would meet ends of justice. In other words, the sale suppression of liquor should be estimated at 26% instead of 56.33% estimated by the AO.

Accordingly appeal of the revenue partly allowed.