SHREE SIDDHI VINAYAK INDUCTION PVT. LTD., Jaipur V. DCIT, Jaipur

ITA 116/JPR/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 1591 (ITAT-JAIPUR)
• Duration Of Justice: 5 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 01-02-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure; Question of law; Condonation of delay; TDS; Set aside; Liquidation
• Section: 131; 145; 28; 271(1)(c); 43B; 139; 143(3); 133A; 40(a)(ia); 195; 250; 201; 139(1); 64; 44AB; 48; 13; 145(3)

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,’A’ JAIPUR Mk 0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 01/JP/2021 fu/kZkj.k o"kZ@Assessment Year : 2015-16 Shree Siddhi Vinayak Inductions Pvt. Ltd., C-184, Phase-II, Bagru Extn. Jaipur-302007 cuke Vs. The DCIT, Central Circle-03, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAICS 2561 B vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 116/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2012-13 M/s Shree Siddhi Vinayak Induction Pvt. Ltd., C-184, RIICO Industrial Area, Phase- II, Bagru (Jaipur) cuke Vs. The DCIT, Circle-07, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAICS 2561 B vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 279/JP/2019 fu/kZkj.k o"kZ@Assessment Year : 2014-15 M/s Shree Siddhi Vinayak Induction Pvt. Ltd., C-184, RIICO Industrial Area, Phase- II, Bagru Extension, Jaipur cuke Vs. The Dy. Commissioner of Income Tax, Central Circle-03, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAICS 2561 B vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Manish Agarwal (CA) jktLo dh vksj ls@ Revenue by : Sh. P. R. Meena (PCIT) 2 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur lquokbZ dh rkjh[k@ Date of Hearing : 25/08/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 29/08/2022 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM These three appeals are filed by the assessee aggrieved from the order of the Commissioner of Income Tax (Appeals) -04 & 01 Jaipur [ Here in after referred as Ld. CIT(A) ] for the assessment year 2015-16, 2012-13 & 2014-15 dated 25.01.2019, 28.11.2016 & 17.12.2018 respectively which in turn arises from the order passed by the DCIT, Circle-01, Jaipur & DCIT, Central Circle-03, Jaipur passed under Section 143(3) of the Income tax Act, 1961 (in short 'the Act') dated 26.12.2016, 27.03.2015, & 13.12.2016 respectively. 2. In ITA No. 01/JP/2021 for A.Y 2015-16, the assessee has raised following grounds in this appeal:- “1. On the facts and in the circumstances of the case and in law, ld.CIT(A) has grossly erred in confirming disallowance of Rs.91,975/- made by ld.AO u/s 40(a)(ia) of the Income Tax Act, arbitrarily. 1.1 That, ld. CIT(A) has further erred in confirming the disallowance made by ld.AO u/s 40(a)(ia) by grossly ignoring the fact that payment of interest (on which tax could not be deducted at source) was made to M/s Religare Finvest Ltd.(a reknown NBFC), which would have definitely included such interest in its income and paid taxes due thereon. It is therefore submitted that there is no loss to revenue and disallowance made u/s 40(a)(ia) is unwarranted and deserves to be deleted. 3 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur 2. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in confirming disallowance of Rs. 1,33,14,566/- made by Ld. AO u/s 43B of the Income Tax Act, arbitrarily. 3. That the Ld. CIT(A) has further erred in confirming the disallowance made by Ld. AO by ignoring the submission of the assessee that none of the statutory liabilities i.e. ESI, PF, VAT, TDS, CST was routed through the profit & loss a/c in the books of the assessee company. Thus appellant prays addition so made may please be deleted. 3.1 On the facts and in the circumstances of the case, ld.CIT(A) has grossly erred in confirming the disallowance to the tune of Rs.27,411/- made by ld.AO u/s 36(1)(va) arbitrarily. 4. That, ld.CIT(A) has grossly erred in confirming disallowance to the tune of Rs.27,411/- by grossly ignoring the fact that such sum pertained to F.Y. 2013-14 and was already added back by ld.AO while making assessment order for A.Y. 2014-15. It is therefore submitted that disallowance of Rs.27,411/-deserves to be deleted in toto. 5. On the facts and in the circumstances of the case and in law, ld. CIT (A) has grossly erred in confirming the action of ld. AO in invoking provisions of section 145(3) arbitrarily. 5.1 That ld. CIT(A) has further erred in confirming the rejection of books by solely relying upon statements of staff recorded during the course of survey. It is prayed that staff, whose statements were relied upon for rejecting books, was neither authorized, nor aware of all the places where stock was kept, thus rejection of books on such basis deserves to be held bad in law. 6. On the facts and in the circumstances of the case and in law, ld.CIT(A) has grossly erred in confirming trading addition of Rs.98,02,903/- made by ld.AO arbitrarily. Appellant prays trading addition so made deserves to be deleted. 6.1 That, ld. CIT(A) has further erred in confirming trading addition by brushing aside submission made by assessee on merits that there was no shortage of stock and in fact stock alleged to be short (actually kept at some other place) was sold subsequent to the date of survey and such sales duly stood recorded in books of accounts (and not varied by ld.AO).which fact is fortified from the Excise records also. It is therefore prayed that trading addition so made deserves to be deleted. 4 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur 7. That the appellant craves the leave to amend / alter all or any of the grounds of this appeal on or before the hearing of the matter.” 3. In ITA No. 116/JP/2017 for A.Y 2012-13, the assessee has raised following grounds in this appeal:- “1. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in confirming addition of Rs.61,86,770/- made by Ld. AO u/s 43B of the Income Tax Act, arbitrarily therefore, the addition so made deserves to be deleted. 1.1 That the Ld. CIT(A) has further erred in confirming the addition made by Ld. AO ignoring the submission of the assessee that VAT amount was not routed through the profit & loss a/c in the books of the assessee company. Thus appellant prays addition so made may please be deleted. 2. That the appellant craves the leave to amend / alter all or any of the grounds of this appeal on or before the hearing of the matter. 4. In ITA No. 279/JP/2019 for A.Y 2014-15, the assessee has raised following grounds in this appeal:- “1. On the facts and in the circumstances of the case and in law, ld.CIT(A) has grossly erred in confirming the disallowance of Rs.2,32,314/- made by ld.AO u/s 40(a)(ia) of the Income Tax Act, 1961 arbitrarily. 1.1 That, the ld.CIT(A) has grossly erred in confirming the addition of Rs.2,32,314/- by ignoring the fact that payment to M/s Religare Finvest Ltd. Was made without deduction of tax at source under exceptional circumstances and further it was NBFC and had due taxes on interest so received, thus there is no loss to revenue. It is therefore prayed that addition of Rs.2,32,314/- deserves to be deleted. 2. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in confirming addition of Rs.1,84,11,316/- made by Ld. 5 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur AO u/s 43B of the Income Tax Act, arbitrarily therefore, the addition so made deserves to be deleted. 2.1 That the Ld. CIT(A) has further erred in confirming the addition made by Ld. AO ignoring the submission of the assessee that VAT amount was not routed through the profit & loss a/c in the books of the assessee company. Thus appellant prays addition so made may please be deleted. 3. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in upholding the disallowance of ESI / EPF Rs. 1,73,019/- made by Ld. AO u/s 36(1)(va) of the Income Tax Act,1961. Appellant prays that disallowance so confirmed deserves to be deleted. 4. That the appellant craves the leave to amend / alter all or any of the grounds of this appeal on or before the hearing of the matter.” 5. All three appeals are argued by both the parties on the same day and since, the issue in all the three appeals being similar and interconnected the same is disposed off by this common order and for disposing these appeals for take the facts summarizing the facts as well as grounds are taken from the appeal folder for A. Y. 2015- 16 and is considered as lead case. 6. Before we proceed to decide the appeal on merits for the assessment year 2015-16 the registry pointed out that the appeal of the assessee is delayed and is accompanied a petition for condonation of delay in filling an appeal along with the affidavit of the director of the company stating the reasons of delay on an affidavit duly executed before the notary public. 6 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur 6.1 In the said petition for condonation of delay the assessee company has contended as under : “Sub: Application seeking Condonation of delay - M/s Shree Siddhi Vinayak Inductions Pvt. Ltd. -Assessment Year 2015-161 In the aforesaid context, it is humbly submitted that, Ld. CIT(A).Jaipur-4, Jaipur passed order u/s 250 of the 1. T. Act, 1961, dated 25.01.2019 for the captioned Assessment Year, which was received by the appellant on 06.02.2019. The appeal against the said order was supposed to have been filed by assessee on or before 07.04.2019. However, appeal is being filed now, which has delayed by 64 days as the Company is in the process of compulsory liquidation, due to which a number of formalities are going on. Creditors are pressing hard for recovery of their outstanding dues. In all such pressure, it skipped attention of directors to file appeal against the CIT (A) order. An affidavit signed by assessee deposing the above facts is enclosed herewith. In the circumstances of the matter it is humbly prayed to the Hon'ble Bench to please direct the condonation of delay and to be kind enough to direct the listing of the appeal for disposal on the merits. Your kindness would go a long way to depart effective justice to the ignorant litigants.” The ld. AR appearing on the behalf of the assessee submitted that the considering the facts and circumstances stated in the petition the delay of 646 days may be condoned based on the stated facts. 6.2 On the other hand the ld. DR objected to the petition and stated that the assessee being a private limited company having the consultant and directors for attending all the matters and this being the important event the plea taken by the assessee is company is not maintainable and may be rejected. 7 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur 6.3 We have heard the rival contentions and also gone through the submissions made by both the parties. Taking into consideration and facts of the case, we rely on the decision of Hon’ble Supreme Court in the case of N Balakrishnan vs. M. Krishnamurthy [1998 (9) TMI 602 - Supreme Court; Other Citation 2008 (228) E.LT. 162 (SC), 1998 AIR 3222, 1998 (1) Suppl SCR 403, 1998 (7) SCC 123, 1998 (6) JT 242, 1998 (5) SCALE 105], it was averred/held, as follows, by the Hon'ble Supreme Court: “9 It is axiomatic that condonation of delay is a matter of discretion of the court. Section 5 of the Limitation Act does not say that such discretion can be exercised only if the delay is within a certain limit. Length of delay is no matter, acceptability of the explanation is the only criterion. Sometimes delay of the shortest range may be uncondonable due to a want of acceptable explanation whereas in certain other cases, delay of a very long range can be condoned as the explanation thereof is satisfactory. Once the court accepts the explanation as sufficient, it is the result of positive exercise of discretion and normally the superior court should not disturb such finding, much less in revisional jurisdiction, unless the exercise of discretion was on wholly untenable grounds or arbitrary or perverse. But it is a different matter when the first court refuses to condone the delay. In such cases, the superior court would be free to consider the cause shown for the delay afresh and it is open to such superior court to come to its own finding even untrammelled by the conclusion of the lower court. 10. The reason for such a different stance is thus: The primary function of a court is to adjudicate the dispute between the parties and to advance substantial justice. The time-limit fixed for approaching the court in different situations is not because on the expiry of such time a bad cause would transform into a good cause. 11. Rules of limitation are not meant to destroy the rights of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused reason of legal injury............... The law of limitation is thus founded on public policy. It is enshrined in the maxim interest reipublicae ut sit finis litium (it is for the general welfare that a period be put to litigation). Rules of limitation are not meant to destroy the rights of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time. 12 A 8 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur court knows that refusal to condone delay would result in foreclosing a suitor from putting forth his cause. There is no presumption that delay in approaching the court is always deliberate...... 13 It must be remembered that in every case of delay, there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put forth as part of a dilatory strategy, the court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time, then the court should lean against acceptance of the explanation...........’’ We found from the facts of the petition that the contentions raised in the petition was not malafide and the circumstances stated in the petition is not controverted by the revenue. In view of the above facts, circumstances of the case and the decision of Hon’ble Supreme Court (supra), the delay made in the case of the assessee is condoned and appeal is decided on merits. 7. The fact as culled out from the records is that the return was filed declaring a total loss of Rs. -4,93,41,587/- on 30.09.2015. During the year, the assessee has derived income from business of manufacturing of iron billets and interest income on FDRs and security deposits. Notices were issued under section 142(1)/142(3) and the assessee filed their reply in the proceedings. In the assessment proceeding the ld. AO made various addition. The assessee has challenged the order of the assessing officer before the CIT(A) and as the CIT(A) has not granted favour fully to the 9 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur assessee the assessee has marched this appeal for the sustained the trading addition made by the AO rejecting the books of the assessee and in adding he has sustained the disallowance under section 43B, 40(a(ia) and 36(1)(va) made by the ld. AO. Aggrieved from the order of the ld. CIT(A) the assessee is in appeal before us. 8. In ITA No. 01/JPR/20121 the assessee has taken seven grounds out of that ground no. 7 being general in nature does not require any adjudication. Ground no. 1, 1.1, 3, 4 and 3.1 not pressed as confirmed by the assessee in his written submission and thus, stands dismissed. Even the written submission made before are related to ground no. 2, 5, 6 and 6.1 are effectively challenged in this appeal before us by the assessee company. 9. In the proceedings before us the ld. AR has filed the copy of the paper book containing the copy of the audit reports, various evidences and submissions made before the lower the authorities and a compilation of case laws relied upon by the AR of the assessee. 10 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur 9.1 The written submission filed by the assessee in respect of the grounds contested before us are as under : “Brief facts of the case are that the appellant is a company engaged in the business of manufacturing of MS Ingot and runner riser as its by product. Return of Income for the years under appeal was filed as under: D e t a ils and explanations sought by ld.AO were furnished and assessments were completed by ld. AO after various disallowances/additions in all the assessment years. Aggrieved of the orders so passed by the ld. AO, appeals were preferred before ld. CIT(A), wherein part relief was allowed. Present appeals have been filed against orders so passed by ld. CIT(A). Summary of grounds of appeal raised is as under: Nature of Addition /Disallowance Assessment Year Ground of Appeal No. Amount (Rs.) Remarks Disallowance u/s 43B 2012-13 1 & 1.1 61,86,770/- - 2014-15 2 & 2.1 1,84,11,316/- - 2015-16 2 1,33,14,566/- - Addition u/s 40(a)(ia) 2014-15 1 & 1.1 2,32,314/- Not pressed 2015-16 1 & 1.1 94,975/- Not pressed Disallowance u/s 36(1)(va) 2014-15 3 1,73,019/- Not pressed 2015-16 3 & 3.1 27,411/- Not pressed Trading Addition 2015-16 5 to 6.1 98,02,903/- - With this background, issue-wise submission is made as under: Disallowance u/s 43B: Facts pertaining to this issue are that assessee maintains separate account for VAT/CST and does not route the same through profit & loss account. Disallowance u/s 43B was made by ld. AO on account of Statutory liability (VAT/CST) outstanding as on 31st March of the Assessment Year Date of filing Return Total Income 2012-13 29.09.2012 36,45,910/- 2014-15 30.11.2014 (-) 3,91,40,149/- 2015-16 30.09.2015 (-) 4,93,41,587/- 11 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur respective Financial Years and which was not paid on or before due date of filing of Return of Income in terms with section 43B of the Income Tax Act. Ld. AO was of the view that even though VAT was not claimed in Profit & Loss account, the same is to be treated as Revenue receipt and provisions of section 43B are applicable to the case. Ld. AO relied on the decision of Hon’ble Supreme Court in the case of Associate Cement Company Ltd. vs CIT (1993) 201 ITR 435 and Apex Court decision in the case of Chowringhee Sales Bureau (1973) 87 ITR 542 in AY 2012-13 and in other two assessment years the ld. AO has relied upon the judgment of hon’ble Bench in the case of SVG Express Services which was relied upon by ld. CIT(A) in AY 2012-13 while dismissing the appeal of the assessee . In this regard, at the outset, provisions of section 43B are reproduced for the sake of convenience: [Certain deductions to be only on actual payment. 43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of— (a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or] (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, [or] (c) any sum referred to in clause (ii) of sub-section (1) of section 36,] [or] (d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution [or a State financial corporation or a State industrial investment corporation], in accordance with the terms and conditions of the agreement governing such loan or borrowing [, or] (e) any sum payable by the assessee as interest on any [loan or advances] from a scheduled bank in accordance with the terms and conditions of the agreement governing such loan [or advances],] [or] (f) any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee,] shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to 12 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him : [Provided that nothing contained in this section shall apply in relation to any sum [***] which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. From perusal of above, it is evident that as per provisions of section 43B, certain deductions otherwise allowable under this Act are allowed only on actual payment thereof on or before due date of filing of Return of Income and if not paid by such date, the same are allowed in the year of actual payment irrespective of year of accrual of such expenditure. Basically, normal practice is that VAT/CST etc. recovered from the clients are firstly credited to the profit & loss account as part of sales and thereafter on payment thereof, are debited to profit & loss account. Whereas admittedly in the present case, the assessee was showing the amount of VAT/CST collected from the customers as liability without crediting the same in the profit and loss account and similarly it was making the payment of such liabilities without debiting the profit and loss account i.e assessee is following the exclusive method. Moreover, there is no mandate under the Act to route the amount of tax collected and paid through the profit and loss account. AS submitted, ld. AO and ld. CIT(A) has not doubted the method employed for accounting the VAT/CST however, based on certain judgments has held the same as disallowable. The decisions as relied upon by them have already been discussed and set aside by various courts including the Jurisdictional high court, which is as under: Ld. AO in the case of Associated Cement Company: As per ld. AO, in said judgment, it has been held that for the purpose of deduction of tax at source from payment to contractors a tax has to be deducted from entire sum paid or credited and not merely income component of the sum. It is not understood as to how such finding of Hon’ble Apex court is applicable to the case of assessee. The ld. AO and ld. CIT(A) further placed reliance on the decision of Hon’ble Apex Court in the case of Chowringhee Sales Bureau: In this 13 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur regard, ld.AO has observed that court has held that if VAT receipts are part of the turnover for taxation purposes, the same is liable to be regarded as Revenue Receipts in the hands of assessee when unpaid to the government account. Hon’ble Ahmedabad Bench in the case of SDCE Projects Pvt. Ltd. vs DCIT in ITA No. 2556/AHD/2017 (case laws paper book pages 13-18, relevant page 15) vide its order dated 01.10.2019 after considering the decision in the case of Chouringhee Sales Bureau has held that: 6.1. “The aforesaid judgment was rendered by the Hon’ble court in the year 1973 whereas the provision of section 43B was brought under the statue with effect from 01.04.1983. Thus it is clear that the aforesaid judgment was not rendered in the context of the provision of section 43B of the Act. In holding so we find support and guidance from the judgment of Hon’ble Delhi High Court in the case of CIT vs. Noble & Hewitt (I) (P) Ltd. reported in 166 Taxman 48 wherein it was held as under: ...................... ..................... 6.2. We further note that the Hon’ble Supreme Court in the case of Chowringhee Sales Bureau (Pvt.) Ltd. (supra) has also observed that the assessee shall not be entitled for the deduction on account of sales tax liability as and when it will be incurred irrespective of the actual payment. The relevant finding of the Hon’ble Apex Court stands under: “ the sales tax amount realized by the assessee formed part of its trading receipts. However, the assessee was entitled to deduction inasmuch as the liability had arisen for payment of sales tax for the relevant years, even though these amounts had not been paid to the sales tax authorities.” 6.3 Thus from the above, there remains no ambiguity to the fact that there was no dispute in connection with the deduction of certain expenses on actual payment basis. In view of the above, we are not inclined to rely on the judgement of Hon’ble Apex Court of Chowringhee Sales Bureau (Pvt.) Ltd. being distinguishable from the facts of the case.” In view of above, it is submitted the reliance placed by lower authorities on this judgment is misplaced. 14 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur Ld. CIT(A) has also relied upon decision of Hon’ble Bangalore ITAT in the case of Jain Christopher (2013) 36 CCH 0011. Your honours would appreciate that said decision is also distinguishable on facts as in that case service tax was routed through Profit & loss account, whereas in the instant case of appellant same is not routed through P&L account. Hon’ble Bangalore bench of ITAT very recently, vide its decision dated 15.06.2021 in the case of M/s Ken Consulting Private Ltd. vs DCIT in ITA No. 300-301/Bang/2019 by decision of hon’ble Ahmedabad bench of ITAT in the case of SDCE Projects (P) Ltd. has held as under: (case law paper book pages 19-23, relevant page 23) 13. The decision rendered by the coordinate Bangalore bench in the case of N R Kumaraswamy (supra) and by the Ahmedabad bench in the case of SDCE Projects (P) Ltd (supra) covers the present issue in favour of the assessee. We have noticed that the Banglore bench has followed the decision rendered by Hon’ble Bombay High Court in the case of Knight & Frank (India) (P) Ltd. (supra) and the Ahmedabad bench has followed the decision rendered by Hon’ble Delhi High Court in the case of CIT vs. Noble & Hewitt (I) (P) Ltd. (supra). Accordingly, following the above said decisions, we hold that the outstanding service tax liability is not liable to be added u/s 43B of the Act, since the same has not been claimed as deduction. Accordingly, we set aside the order passed by ld. CIT(A) and direct the AO to delete the impugned addition.” In view of above, it is clearly evident that decision relied upon by ld. CIT(A) has been overruled by subsequent decision of Bangalore bench of Hon’ble ITAT. Hon’ble Delhi High Court in the case of CIT vs Noble and Hewitt (I) (P) Ltd. reported in 166 Taxmann 48, has held as under (case law paper book page 12 backside): “6. In our opinion since the assessee did not debit the amount to the Profit & Loss Account as an expenditure nor did the assessee claim any deduction in respect of the amount and considering that the assessee is following the mercantile system of accounting, the question of disallowing the deduction not claimed would not arise. 7. Learned Counsel for the revenue submits that the assessee has sought to evade tax under the mercantile system of accounting. We are of the view that it is not for the revenue authorities to tell the assessee how to maintain its accounts. 15 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur 8. We cannot find any fault in the view taken by the Tribunal and find no merit in this appeal.” Hon’ble Bombay High Court in the case of CIT vs Knight Frank (India) Pvt. Ltd. in I.T. Appeal No.247 of 2014 with 255 of 2014 in decision dated 16.08.2016 has held as under (case law paper book page 8-11, relevant page 11 back side): 7. regarding question (ii): (a) It is an admitted position before us that the respondent assessee had not claimed any deduction on account of the service tax payable in order to determine its taxable income. In the above view, there can be no occasion to invoke Section 43B of the Act.” Attention of the hon’ble bench is invited to the fact that apart from this, ld. CIT (A) has placed major reliance on the decision of Hon’ble Jaipur bench of ITAT in case of SVG Express Services vs DCIT in ITA No. 987/JP/2015 (case laws paper book pages 2-7). In this regard, in this regard it is submitted that on further appeal, Hon’ble Rajasthan High Court has set aside said decision of Hon’ble ITAT in D.B. Income Tax Appeal No. 122/2017 vide order dated 12.12.2017 (Case law paper book pages 1) wherein the hon’ble court has dealt the issue as under: Question of law framed in this case was: “Whether the ld. ITAT was justified under law while sustaining the addition of the amount of Rs.88,79,713/- on the basis of Form 26AS only while the said amount which was pertaining to service tax was not included in the profit & loss account of the assessee for the A.Y. 2012-13, ignoring the settled principle of law that provisions of Section 43B can’t be invoked for making additions on account of tax liabilities where the same has not been claimed as deduction?” In the case, Hon’ble Court has held as under: 6. We have heard both the parties. 7. In view of the observations made by the Delhi High Court in Noble & Hewitt (India) (P) (Supra), as reproduced above, the case of the assessee is covered by the same observations of Delhi High Court. Hence, the issue if answered in favour of the assessee against the department. 16 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur 8. The Appeal stands allowed.” Hon’ble Hyderabad ITAT in the case of Vansum Erectors Private Ltd. vs ITO in ITA No. 732 of 2018 in decision dated 15.02.2019 has held as under: (case law paper book page 24 to 26, relevant page 26 backside) “8. We find that the Coordinate Bench of the Tribunal in the case of M/s Jain Christopher, Srikanth & Srikanth, CA (Supra) observed that though Service Tax was collected, it was not paid and was shown as outstanding liability and in these circumstances, the Coordinate Bench held that it has to be disallowed u/s 43B of the Act. In the case before us, the assessee has not routed the service tax through the P & L a/c and has not claimed it as a deduction. Therefore, the decision of the Hon’ble Delhi High Court in the case of Noble & Hewitt (cited supra) would apply. Therefore respectfully following the decisions of Hon’ble Bombay and Delhi High Courts, we hold that the disallowance u/s 43B is not sustainable.” In view of above, it is submitted that judicial pronouncements relied upon by both ld.AO and ld. CIT(A) are either not applicable to the facts of the case or have been overruled by subsequent decisions more particularly in the case of SVG Express Services which is overruled by the hon’ble jurisdictional high court and case of assessee is squarely covered by these judicial rulings, therefore, it is humbly prayed that the disallowance made in all the three assessment years u/s 43B deserves to be deleted. Addition u/s40(a)(ia) Not pressed. Disallowance u/s 36(1)(va): Not pressed. Trading Addition in A.Y. 2015-16: Brief facts pertaining to the grounds of appeal are that the assessee is a private limited company and a survey action u/s 133A was carried out at its factory premises on 17.12.2014. During the course of survey, stock verification was done by survey team and it is alleged that there is shortage in physical stock when compared to stock recorded in books of accounts. Ld. AO has tabulated such stock as per physical verification and that recorded in books in Assessment order at page 11 para 7, which is as under: 17 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur S. No. Details of Stock As per physical Verification (in Tonnes) As per books (in Tonnes) Difference (in Tonnes) Rate Amount 1. Raw Material (M.S. Scrap) 225 500.080 275.080 25,000 68,77,000/- 2. Finished Goods (Billets) 92 1183.570 1091.57 30,000 3,55,07,100/- Total 4,23,84,100/- However after considering the objections raised by the assessee the stock of finished goods was revised by the ld. AO and accordingly the shortage was finally worked out at Rs. 3,80,55,100/- as against the shortage of stock worked out at Rs. 4,23,84,100/- at the time of survey (AO para 7.12 page 19 of the order). During the course of survey, statements of one junior staff, Sh. Sitaram Sain, were also recorded u/s 131 wherein has was asked to explain the alleged difference in stock, whereby he stated that the same could be explained by “Sethji”. Question no. 16 and 17 of such statements are reproduced for the sake of convenience: iz0 16 vkids }kjk dPpk eky dh dher 56]25]000@& vk jgh gS tc fd LVWkd jftLVj ds vuqlkj 1]25]02]000@& vk jgh gSA nksuksa dk vUrj 68]77]000@& vk jgk gSA bl ckjs esa vkidk D;k dguk gS \ mÙkj 16 bldk tokc Hkh lsBth nssaxsA iz0 17 losZ ds nkSjku rS;kj eky yxHkx 92 Vu gS ftldh dher 27]60]000@& crkbZ gSA LVkWd jftLVj ds vuqlkj rS;kj eky 11]83]570@& Vu vkrk gS ftldh dher yxHkx 3]55]07]100@& vkrh gSA nksuksa dk vUrj 3]27]47]100@& vkrk gSA blds ckjs esa D;k dguk gS \ mÙkj 17 bldk tokc lsBth nsaxsA Thereafter the explanation was sought from Sh. Ashok Dharendra, Director who in reply to question No.2 in the statement recorded on 18.12.14 recorded u/s 132(1) (APB 127-128) stated that books of accounts were not complete as on the date of survey and after recording complete sale bills, difference will not be significant. Reply so given is reproduced as under: 18 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur mÙkj&02 bl laca/k esa EkS ;g dguk pkgrk gwW fd vkt fnukWd 18-12-2014 rd esjh daiuh dh ys[kk&iqLrdsa iw.kZr% ugha fy[kh x;h gS vkSj esjs dqN foØ; fcy ys[kk&iqLrdksa esa bUnzkt djus ds Ik’pkr~ bruk varj ugh vk,xkA orZeku esa eS bruk gh Li"V dj ldrk gwWA^^ Thereafter, during the course of assessment proceedings show cause notice was issued by Ld. AO, in response to which vide reply dt. 28.11.2016 (APB 51-109) detailed explanation and relevant extract of stock registers and bills were filed. However, ld. AO has not accepted the same and invoked the provisions of section 145(3) by alleging that assessee has made out of books sales of both raw material and finished goods to the extent of Rs.3,80,55,100/- during the year which is solely based on the alleged shortage of stock during the course of survey and made the addition of Rs.98,02,903/- by applying GP rate of 2.87% on total sales declared by the assessee and also on alleged unaccounted for sales of Rs.3,80,55,100/-. In first appeal, addition made was upheld by ld. CIT(A) in summary manner solely on the basis of statement of junior staff Sh. Sunil Sain, and also on the observations of ld.AO made in assessment order without properly considering the reply of the assessee. While upholding the addition, ld. CIT(A) has completely disregarded the details furnished by the assessee in the shape of Audited Financial Statements, Excise Records and Statements of Director and rather relied upon statement of a junior level staff who, incidentally is the son of the factory supervisor and was not having overall authority nor fully aware with the stock and other related issues. With this background, it is submitted that assessee company is registered with Service Tax, Excise and VAT and maintains regular books of accounts along with stock records, excise records and also files regular returns of manufacturing, sales etc. as per the applicable Excise Law. The books of accounts of assessee are audited both under Companies Act 2013 as well as U/s 44AB of the Income Tax Act. It is further submitted that the assessee is a manufacturer of MS Billets which is an excisable product and is registered with the excise department. As per requirements of the Excise Rules and Regulations, it is mandatory for the assessee to record daily production and sales of the finished goods (MS Billets) in Excise Register. Accordingly assessee is complying with such requirements. A copy of the relevant Excise register for the period 15.12.2014 to 31.03.2015 was also submitted (APB 61-64). At this juncture, kind attention of your honours is invited to page 61 of paper book, i.e. copy of such register where the opening stock of the Finished Goods as on 17.12.2014 is appearing at 1183 MT and production from 17.12.2014 to 31.03.2015 was only around 433 MT. As against this, sales during the period 17.12.2014 to 31.03.2015 is appearing at 1567 MT. There were no purchase of finished Goods (MS Billets) by the assessee during the FY 2014-15. Thus, it is evident that the assessee 19 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur had sold the goods which were there in the stock as on 17.12.2014 in the subsequent period and a closing stock of around 50 MT as on 31.03.2015 was left out of the production made during the balance period of the subject AY 2015-16. It is relevant to state that such sales have not been doubted by the ld.AO who further made the addition of the GP on the alleged shortage of stock which tantamount to double addition. Similarly, the assessee has to mandatorily record the purchases and consumption of Raw Material in the excise record. A copy of the relevant Excise register for the period 15.12.2014 to 31.03.2015 was also furnished (APB 55-60). It may be observed from the above register that on 17.12.2014 the stock of the Raw Material was 500 MT (APB 57) and inwards out of Purchases from 17.12.2014 to 31.03.2015 was Appx. 1130 MT. As against this, consumption for production of MS Billets during the period 17.12.2014 to 31.03.2015 was only 472 MT, leaving closing stock of Raw Material of 1158 Mt as on 31.03.2015. Thus, it is evident that the assessee had consumed the stocks of Raw Material which were there in the stock as on 17.12.2014 in the subsequent period and there was no major shortage of Raw Material of 275 MT as alleged by ld.AO. It is submitted that the excise records are frequently inspected and checked by Excise Range office, Excise Anti Vision and DGCE office. These are also inspected by Commercial Tax Authorities ( VAT – Range and Anti vision both) and there cannot be any substantial difference in the quantities of Raw Material and Finished Goods in such a tightly supervised regulatory environment as alleged in the show cause notice. It is further submitted that the stock of Raw Material comprises of Melting scrap, Sponge Iron, Silico Magnese, H. R. Sheet Etc. which was lying as a large heap except for Silico Magnese which was there in Jute bags in the factory go-down. The density and weight of different type of raw material is different and the actual weight can be known only by actual weighment on weighbridge in some truck or other container. The survey was commenced and concluded on the very same day. Weighing so much of the stock available at different places at the factory premises [as is evident from the survey records (APB 111-114)] is humanly impossible task more particularly looking to the total number of three officials in the survey team out of which two were the ITO rank officer and only one inspector was present. During the course of assessment proceedings it was contended that, on the date of survey, there was no physical counting and/or weighing of all the stocks of Raw Material and Finished Goods carried out by the Income Tax Officials. There is nothing on record which establishes any actual weighment of Raw Material Stock nor any proof was given to the assessee. However, such contention was rejected by ld.AO by simply stating that the stock was taken in the presence of the employees of the assessee company and director Shri Ashok Dharendra also not raised this issue when he was confronted with 20 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur the same. In this regard it is submitted that at the residential premises of Shri Ashok Dharendra search action was carried out and he was under pressure and that pressure has made this assertion. It is submitted that later on he has retracted from his statements also, copy of the affidavit filed in this regard is at APB 36-38 which remained uncontroverted in the case of the assessee company. Further, it is submitted that from 07.12.2014 to 16.12.2014, around 795 MT of Raw material was received in the factory out of which around 195 was local scrap and 600 MT was Imported scrap for which documentary evidence of clearance from Customs, CONCORE, and shipping companies, transportation of the material in closed containers from ICD Kanakpura to factory premises is available on record and the same is duly entered in the excise records too. Total consumption of Raw Material for manufacturing of Billets is only around 299 MT and thus raw material stock of over 500 Mt was very much there mostly comprising of the Imported scrap which by nature is heavier but will appear as small heap compared to the local scrap, visually. As already submitted that the Income Tax Officials have only estimated the quantity / weight of the raw material by visual inspection only. It may also be noted that there was stock of End Cuttings billets of 5 Mt appx. as on 17.12.2014 which was neither shown in the physical stock present nor shown as shortage whereas the officials had taken the excise records for End Cuttings too during the survey. Thus it appears that the stock taking was done in a casual manner and there were shortcomings / errors in the process and recordings of the stocks. As submitted above, on 17.12.2014 the opening stock of the Finished Goods was 1183 MT and production from 17.12.2014 to 31.03.2015 was only around 433 MT. Whereas the sales during the period 17.12.2014 to 31.03.2015 was 1567 MT and no purchases of Finished Goods were made during this period. This is evident from the excise record of the assessee. Out of this sales, around 810 MT was Interstate Sales which involves actual movement of Finished goods from factory to different state. If the stock of Finished Goods was not there with the assessee on 17.12.2014, with just 433 MT of production, how the sales of 1567 MT were made by the assessee. Another aspect worth noting in this case is that the assessee has already accounted for sales of the subject stock in the books of accounts and it is reflected in the Profit and Loss of the assessee for the AY 2015-16. How it can be shown again as out of the books sale again which effectively will mean double booking of the sale of material and thus not possible. Thus, although the assessee had submitted all the relevant details, quantitative figures reconciling the stock with the books, stock records, excise records, subsequent sales, purchases etc, the learned AO has not 21 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur taken any cognizance and has rather concentrated on making high pitched order by rejecting the books of accounts all-together under section 145(3) of the IT Act, 1961. Again, in para 7.13 of the assessment order, the Learned AO has taken altogether different view of taking basis of lower GP rate during the assessment year 2015-16 as compared to the earlier years as basis for rejecting the books of accounts and made lump sum addition on the basis of arbitrarily applying average GP rate of past four years not only to the whole turnover of the assessee for the AY 2015-16 but also on the alleged out of the books Sales of raw material and finished goods. This shows the casual approach of assessing officer. The assessee had appraised the learned AO about the declining trend in the business and mounting losses during the assessment proceedings. She herself has mentioned in the assessment order that the profits are continuously declining since past three years, but has still made addition on the basis of average rate. It is also relevant to state that in the preceding assessment year the GP rate declared by the assessee was never doubted where the assessment was completed u/s 143(3). Incidentally assessment for AY 12-13 and 14-15 are also before the hon’ble bench wherein no such doubts were raised about the reasonableness of the gross profit rate declared by the assessee. Further the GP rate worked out by the ld.AO at 2.87% also is not in accordance with the GP rate of past 4 assessment years as adopted which is evident from the table below: AY Turnover Gross Profit GP % 2011-12 69,63,20,432/- 2,10,86,499/- 3.02 2012-13 74,71,14,618/- 3,44,82,706/- 4.62 2013-14 81,98,64,757/- 2,45,72,221/- 3.00 2014-15 41,19,58,844/- (83,32,850/-) (2.02)* * Assessee was in Gross loss Without prejudice to above, it is further submitted that has been stated by ld.AO to be average GP rate of past 4 years but same has been taken high arbitrarily. The average GP rate of past 4 years actually comes to 2.15%. It clearly should be the casual approach taken by the ld. AO. However, not admitting the above position, it is submitted that normally for estimating the profit by applying GP rate, average GP of last 3 years is taken as basis and this practice had been is broadly accepted / upheld by hon’ble ITAT benches/ hon’ble High courts, considering this proposition, the average GP of past 3 years comes to 1.86% . As per provisions of section 145(3), The A.O may proceed under Section 145(3) under any of the following circumstances: (a) Where (S)he is not satisfied about the correctness or completeness of the accounts or 22 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur (b) Where method of accounting cash or mercantile has not been regularly followed by the assesse; or (c) Accounting Standards as notified by the Central Government have not been regularly followed by the assessee. Though the broad parameters have been laid down in the Section itself under which the provisions are required to be invoked for rejection of books of account in a particular case, yet, a definite ground work is sine- qua-non on part of the Assessing Officer before resorting to the provisions of section. It is to be noted that in this case the provisions of Section are invoked on the pretext of fall in gross profit rate. Though the fall in G.P rate definitely provides a ground to the Assessing Officer for invocation of the provisions of Section 145(3) yet it is not a sufficient condition. The Assessing Officer is required to analyses various other parameters which have the effect on the gross profit rate of the assessee for the relevant period, before drawing any conclusion on the merit of such claim. The fall in G.P rate might be a symptom of malice with which the assessee’s account would be suffering. However, it is the duty of the Assessing Officer to pin point the malice and bring it out in the Assessment Order by marshaling the facts encompassing the same which was not done by the learned AO. This was held in many cases decided earlier. In this regard, reliance is placed on: • In Ramchindra Ramniwas V/s State of Orissa (1970) 25 STC 501(Ori) it was held that the account books of the assessee cannot be rejected merely on the ground of low profits. • In Pandit Brothers V/s CIT, (1954)26 ITR 159 (Punj), S. Veereah Reddiar V/s CIT, (1960) 38 ITR 152 (Ker), M. Durai Raj v/s CIT (1972) 83 ITR 484 (Ker), it was held that the books of the accounts of the assessee cannot be rejected where profits disclosed were low and there was no stock register. • In International forest company V/s CIT (1975) 101 ITR 721 (J&K) it was held that the books of the accounts of the assessee cannot be rejected due to omission of all alleged sale, denied to have been made by the assessee, without verifying it by examining the supposed purchaser. • In Shambhu Ratan Shailender Kumar V/s CST, (1972) 30 STC 1972 (All), Sitaram Rajaram V/s CST (1976), 38 STC 554 (All), it was held that the books of the assessee cannot be rejected merely on the ground of decline in turnover unless some defect is found in the account books, fall in turnover may be due to several reasons and not necessarily due to suppression of sales. 23 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur • In Kailash Stationary Stores V/s CST, (1982) Tax LR (NOC) 82 (All), it was held that the books of accounts of assessee can not be rejected on account of the discrepancies found in the stock position declared by the assessee on estimate at the time of survey. • In Vadayattu Jewellery V/s State of Kerela (1997) 104 STC 121, 126 (Ker), it was held that the books of account of the assessee cannot be rejected where the defects pointed out in the books of accounts were of general or technical nature, objection of the dealer were not considered, register produced were not verified and no suppression of sales or purchases was established. • In Malini Ramjiwan Jagannath V/s ACIT, (2009) 316 ITR 120 (RAJ), it was held that mere deviation in Gross Profit Rate cannot be a ground for rejecting the books of accounts and entering the realm of estimate and guess work. It is further held the rate of GP in a particular year depends on many factors e.g. the general market conditions based on demand and supply position, the rise or fall in market rates, specially abrupt once, the capital position vis-à-vis the turnover achieved and many others. It is for the assessee to explain the fall, if it so happens, and to substantiate his reasons. Even if, thereafter, the assessing officer considers the material placed before him by the assessee to be unreliable, keeping in view the comparative statement of accounts of the earlier years, he cannot proceed to make an arbitrary addition and base his conclusion purely on guess work. He can do so only if he relates his estimates to some evidence or material on the record as it is now well settled that if the profit shown by the assessee in his return is not accepted, it is for the taxing authorities to prove that the assessee made more profits. • In Surjamal Champalal V/s CIT (1967) 66 ITR 396, 402-403(PAT), it was held that If an estimate is based partly upon irrelevant material and partly upon relevant material, it is difficult to sustain such an estimate because it can not be said to what extent and which part of the figure of estimate was dependent upon the irrelevant portion of the material. • In yet another case decided by the Tribunal in ITO v. Girish M Mehta [2008] 296 ITR (AT) 125 (Rajkot), it was pointed out, that the pre-condition for estimating business income of the assessee, where an assessee keeps accounts is that the assessee’s books should have been found to be unreliable or otherwise not capable of proving the assessee’s income. Without this first step, the fact that the gross profit is low cannot by itself be a ground for taking a view that it is open to the Assessing Officer to make good the alleged deficiency in gross profit. 24 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur It is to be noted that during the survey, no document/evidence of any sort whatsoever was found and/or recorded which indicates / prove any out of books sale or clandestine removal of material by the assessee. In the light of facts and records and submissions, there was no major difference in the physical stocks of Raw Material and Finished Goods which can be treated as an out of books sales made by the assessee company. The assessee has duly accounted for all the purchases, sales and production of the Raw Material / Finished Goods and By Products and all other related transactions of the company in its books of accounts and which are audited too and the accounts are also already presented for your verification. Thus, the books of accounts cannot be rejected U/s 145(3) of the Income Tax Act, 1961 and the GP cannot be accordingly estimated and the addition made at Rs. 98,02,903/- may please be directed to be deleted. Without prejudice to our above submission and in the alternative, it is submitted average GP rate should only be applied only in respect of alleged sales i.e. the amount of shortage of stock found during the course of survey out of books and not on the entire turnover. Your honours would appreciate that no discrepancy whatsoever was found/pointed out by lower authorities in books of accounts nor any adverse observations have been made in respect of turnover declared by assessee based on the books of accounts maintained in regular course. Also as submitted above, in earlier assessment years also while completing the assessments u/s 143(3) no defects were found in the books of accounts maintained by the assessee. In the scenario, if at all some trading addition is upheld, the same should be restricted by applying GP rate on such alleged out of books sales. In this regard, reliance is placed on decision of Hon’ble Jaipur bench of ITAT delivered in the case of Gunesh India (P) Ltd. in ITA Nos. 38/JP/21 and 21/JP/21. Facts in that case were that assessee was engaged in the Transportation business and in execution of its Contract had appointed certain employees as subcontractors, who were eventually treated as masked sub-contractors. Ld. AO made addition of entire payment made to such sub-contractors, whereas ld. CIT(A) confirmed addition by applying enhanced GP rate on entire turnover. On further appeal, Hon’ble ITAT restricted the higher GP rate only in respect of such employee sub-contractors as no adverse finding were recorded by lower authorities in respect of other sub-contractors. The observations of the hon’ble bench as given in para 11 of the order are reproduced for the sake of ready reference (case law paper book pages 27-38, relevant page 37 backside): “11. We have considered the rival contentions, submissions and decisions relied upon by both the parties. It is not disputed by both the parties that the transportation work has not been undertaken 25 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur even through these 13 people who are also employee of the company. The only issue that the transportation charges are inflated by steering part of the transaction with that of the employee’s name. The director of the company has already replied vide question no. 39 extracted above that the whole amount is not consist of bogus expenditure. In the case of the assessee ld. CIT(A) has already by passing a reasoned order stated that the profit can be estimated @ 4 %. The revenue has challenged that action of the ld. CIT(A) and assessee has also contended that the profit declared by the assessee company @ 1.59 % be accepted. As regards the contention of the revenue that the whole tainted amount should be added has no base, there is no cogent evidence or argument placed before us as to why the detailed and reasoned finding of the ld. CIT(A) is not sustainable. Revenue has not brought anything on record that in real terms the transportation work billed to corporate client is in fact not done. Even in the search only the statement of Shri Mahesh Gupta is relied upon wherein he has stated in fact work is done. Revenue has in this case only taken a plea that the transaction has been done though the employee for which the assessee has already established that the work has been done and the reason behind that also explained in that case the whole expenditure cannot be disallowed as revenue failed established that in real terms the work is not done and the expenses are bogus. Per contra the ld. AR argued that the work is executed and even the AO has accepted the turnover related this expenditure and there is no adverse finding at the time search or in the assessment order except that in the name of employees. Thus, in that state of affairs the only question is whether the expenses claimed through the employee’s name and ultimately paid to other transporter are at arm’s length or not? Since at this stage we have not been provided such analysis, we feel that it in the interest of the justice at best 3.5 % which is accepted by Shri Mahesh Gupta offered by him in assessment and he is also key person in this case and therefore, we our considered view an addition @ 3.5 % can be sustained in this case also and that 3.5 % rate be added on the turnover related to employee of the assessee for an amount of Rs. 3,40,11,858/- to settle the issue in the interest of justice. In view of above, it is alternatively prayed that in the event the hon’ble bench was of the view that the stock was short as on the date of survey and had resulted into the unrecorded sales to such extent, at the most reasonable GP rate may be applied only in respect of such sales as against the GP rate applied by the ld. AO on the total turnover. Submitted Respectfully.” 26 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur 9.2 The ld. AR of the assessee has also relied upon the following judicial decisions to drive home his contentions raised against the grounds raised by him: • Copy of Judgment of Hon'ble High Court Rajasthan dated 12/12/2017 in the case of CIT vs M/s. SVG Express Services in ITA NO. 122/2017. • Copy of order of Hon'ble ITAT Jaipur Bench dated 17/11/2016 in the case of CIT vs SVG Express Services in I.T.A. NO.987/JP/15. • Copy of Judgment of Hon'ble High Court of Bombay dated 16/08/2016 in the case of CIT vs Knight Frank(India) Pvt Ltd. L.T.A. 247 of 2014, 255 of 2014 • Copy of Judgment of Hon'ble High Court of Delhi dated 17/11/2006 CTT vs Noble And Hewitt (I) (P) Ltd. ITA No. 2910/Delhi/2004. • Copy of order of Hon'ble Ahemedabad bench of ITAT dated 01/10/2019 in the case of SDCE Projects Pvt. Ltd. Vs D.C.LT in ITA Nos. 2556/AHD/2017. • Copy of order of Hon'ble Bangalore bench of ITAT dated 15/06/2021 in the case of Ken Consulting Pvt Ltd. Vs D.C.LT. Circle 4(1)(1) Bangalore ITA Nos. 300 & 301/BANG/2019. • Copy of order of Hon'ble Hyderabad bench of ITAT dated 15/2/2019 in the case of M/s Vansun Erectors Pvt. Ltd. Vs Income Tax Officer in ITA No. 732/HYD/2018. • Copy of order of Hon'ble Jaipur bench of ITAT dated 14/07/2022 in the case of M/s Gunesh (India) Pvt. Ltd. in ITA No. 38/JP/2021 and ITA No. 21/JP/2021. 10. Based on the above written arguments now we take up the individual ground raised by the assessee in this appeal. The ground no. 2 contested before us is for disallowance of Rs. 1,33,14,566/- made by the ld. AO under section 43B of the Act. While making the disallowance the observations of the ld. AO is as under: “4. On perusal of column 26B/Annexure-D of the Tax audit report furnished, it was observed that the assessee has admittedly failed to pay the following outstanding statutory dues till the due date of filing ITR as required under the provisions of Sec. 43B : 1. CST Payable Rs. 57,635/- 27 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur 2. ESI Payable Rs. 34,321/- 3. PF Payable Rs. 145865/- 4. TDS Payable Rs. 36,295/- 5. VAT Payable Rs. 1,30,40,450/- Rs. 1,33,14,566/- In the assessee's case for the AY 2012-13, the Ld.CIT(A)-1, Jaipur vide his order dated 28.11.16 has confirmed the addition of 61,86,770/- on the identical issue of non-payment of statutory liabilities as per provisions of the Sec.43B and citing the decision of the Hon'ble ITAT, Jaipur in the case of SVG Express Services Vs DCIT (ITA No. 987/JP/2015) on the similar issue and the decision of the Hon'ble Supreme Court in the case of Chowringhee Sales Bureau Vs. CIT(Supra). Respectfully following the same, the above expenses are being disallowed under the provisions of Sec. 43B as the same were not paid before the due date of filing return and added back to the total income of the assessee for the A.Y 2014-15. Penalty proceedings u/s 271(1)(c) are initiated for concealment of income by filing inaccurate particulars of income.” 11. Aggrieved from the said addition assessee has marched the appeal before the CIT(A) and the ld. CIT(A) has recorded his findings as under: “8. With respect to this ground I find that already a view is taken by CIT(A)-1 for the A.Ys. 2012-13 for such disallowance. Since the facts are same I find no reason to deviate from the same. On the facts and in the circumstances of the case, the disallowance of Rs. 1,33,14,566/- is confirmed. Appellant’s appeal in Ground No. 2 is dismissed. 11.1 Since, for this year the ld. CIT(A) has relied upon the finding of A. Y. 2012-13 the same is also extracted for the sake of brevity : “3.1.2 Determination: (i) The brief facts of the case are that the appellant is engaged in the business of manufacturing of ingot, billets and trading of iron scrap. The AO has made addition of Rs. 61,86,770 /- u/s 43B of the IT Act as the appellant has not deposited the amount of VAT payable as on 28 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur 31.03.2012 before the due date of filing of return of income with the concerned authorities. The AO has relied on decision of Hon'ble Supreme Court in the case of M/s Chowringhee Sales Bureau (P) Ltd. vs. CIT (87 ITR 542) and held that VAT is a part of trading receipt. The AO has discussed the issue in detail in the assessment order. (ii) During appellate proceedings, it was submitted by the appellant that the VAT amount was not routed through its Profit and Loss account and it was acting as the collecting and depositing agency i.e. it was collecting VAT on the sales invoices and depositing the same with the sales tax authorities on behalf of the person to whom sales were made and thus no part of the VAT amount transaction was debited in profit and loss account effecting its profitability and thus there was no loss of revenue to the department which is the ultimate concern of the tax authorities. It was further submitted that the Scope of Section 438 of the Act is as under: a) Section 438 provides that certain expenditure / payments which are otherwise eligible for deduction under the Act shall be allowed as a deduction only in the year of actual payment irrespective of the year of accrual of such expenditure. b) However, the section shall not apply to any sum which is paid on or before the due date of filing of return of income as stipulated under Section 139(1) of the Act. c) If the liability to pay the specified sum pre-existed on the first day of the previous year, (ie, outstanding liabilities) deduction will be allowed only if the payment is made on or before the end of the previous year. d) In other words, the due date for filing the return deadline applies to the sums for which the liability was incurred during the previous year and not to pre-existing liabilities. (iii) It was further submitted that the nature of expenses covered under Section 438 a) Any tax, duty, cess or fee under any law; b) Contribution made by employer to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees; c) Bonus or commission to employees; d) Interest on any loan or borrowing from any public financial institution or a State financial corporation or a State Industrial Investment corporation: e) Interest on any loan or advances from a Scheduled bank: f) Sum payable by the assessee as an employer by way of leave encashment. (iv) It was the contention of the appellant that from the scope and nature of section 43B of the Act, it is quite evident that the intention of the legislator was that if any amount of expenditure falling in (a) to (f) above is claimed by the assessee in its profit and loss account and any liability in respect of that remains outstanding at year end and has not been paid by the assessee before the due date of filing of the income tax return, 29 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur then it is subjected to disallowance under section 43B of the Act. It was submitted that in the instant case under consideration, the AO has disallowed a sum of Rs. 61,86,770/- u/s 438 of the Act for non-deposit of VAT payable within period prescribed under the Act, in spite of the fact that the VAT amount was not routed through the Profit and Loss A/c in the books of the assessee company. Thus the basis of additions / disallowance taken by the AO was not correct and beyond the scope of section 43Bof the Act. In support of its contention, the appellant has also relied upon Explanation 1 of section 43B of the Act. The appellant has also relied upon a number of judicial pronouncements. (v) I have duly considered the submissions of the appellant, assessment order and the material placed on record. It is an undisputed fact that the appellant raised invoices wherein it had included VAT and included the same in the total amount of the invoices raised by it. It is also an undisputed fact that the appellant did not route the VAT collected by it through its Profit & Loss account and the outstanding amount of VAT as on 31.03.2012 has not paid within the stipulated time to the government account. It may be mentioned that the appellant followed exclusive method of accounting in which. VAT paid is not routed through the profit and loss account and is reflected in the Balance Sheet when it remained payable at the end of the financial year. In this method, the VAT paid is set off from the VAT collected and the balance is to be paid to government account, it may be mentioned that VAT is collected by the appellant on behalf of the government and the outstanding amount is to be paid before the due date of furnishing the return of income. It would be relevant to reproduce here the provisions of section 438 of the Act as under: "Certain deduction to be only on actual payment. 43B Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of [(a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force. or... Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return." (vi) Thus, it is very clear that any tax by whatever name called is covered u/s 438 of the Act. It may be mentioned that in the case of Chowringhee Sales Bureau vs. CIT (Supra), the Hon'ble Supreme Court held that the sales tax collected, and not deposited with the treasury, would form part of the assessee's trading receipt. In the instant case under consideration, the appellant had collected VAT from its clients but did not pay the outstanding amount of VAT as on 31.03.2012 before the due date of filing of return of income. Therefore, the ratio in the case of Chowringhee 30 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur Sales Bureau is clearly applicable to the facts of the instant case under consideration. (vil) It may be mentioned that the Hon'ble ITAT, Bangalore Bench in the case of JAIN CHRISTOPHER (2013) 36 CCH 0011 has held that: "The assessee's plea that sales tax was different from service tax was rightly rejected by CIT(A)since the assessee was a firm of Chartered Accountants is selling is services and not goods, so the tax applicable is service tax which stands on the same bracket as sales tax in terms of services rendered as sales tax holds for goods sold. The AO had pointed out that the said amount has been included as business receipts in its TDS Certificates and as such, the same should have been included in its receipts. This has not been precisely done by the assessee. It was an admitted fact that during the course of assessee's profession, a sum of Rs.29.60.000/-was realized/ collected as service tax payable and the same is not capital receipt. The moment the service tax is realized, it becomes payable to the Govt. account and if it is not paid, it partakes the character of income of the assessee, since the assessee could utilize this amount in any manner whatsoever, there is no restriction placed on its utilization. This is amply clear from the TDS certificate furnished by the assessee and also the credit appearing in the assessee's bank account. Therefore, to arrive at the professional income, the service tax realized should have been included in the gross receipts unless paid to Government exchequer within the due date of filing of return. Since service tax realized is included in the total income. the same is to be allowed as a deduction in the year it is paid to the Government account. The CITIA) had allowed the alternative plea of the assessee and had directed the AO to deduct the service tax when the payment is made to the Govt. account in the subsequent year. ACIT v. Real Image Media Technologies (P) Ltd. (ITAT Chennai) Cit v Noble and Hewitt India (P) Ltd (Del): DCI v Manah M. Chheda 29 SOT 138-Mumbai ITAT, distinguished. (viii) It may further be mentioned that in the case of SVG Express Services Vs DCIT, similar issue was before the jurisdictional Hon'ble ITAT, Jaipur and vide its order dated 17.11.2016 in ITA No. 987/JP/2015 for the AY 2012-13, it was held by the Hon'ble ITAT that: "3.4 We have heard the rival contentions and perused the material available on record. The Assessing officer has made the impugned addition on account of service tax firstly holding the same as part of professional receipts in the hands of the appellant and thereafter, he has invoked the provisions of section 43B of the Act given that the service tax has not been deposited before the due date of filing of return of income. Undisputedly, the service tax has been collected by the assessee from its customers during the year and the same has not been paid before the due date of filing of return of income. In the case of Chowringhee Sales Bureau 31 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur (Supra), the Hon'ble Supreme Court has laid down the following proposition of law and the relevant observation are as under: "8. It is apparent from the order of the AAC and has not been disputed before us in the present case that in the cash memos issued by the appellant to the purchasers in the auction sale it was appellant who was shown as the seller. The amount realized by the appellant from the purchasers included sales tax. The appellant. however, did not pay the amount of sales tax to the actual owner of the goods auctioned because the statutory lability for the payment of that sales fox wos that of the oppelant, The oppelion company did not also deposit the amount realized by it as sales tax in the State exchequer because if took the position that the statutory provision creating that lability upon it was not valid. As the amount of sales-fox was received by the appellant in its character as an auctioneer, the amount. In our view, should be held to form part of its trading or business receipt. The appellant would, of course, be entitled to claim deduction of the amount as and when it pays it to the State Government. 9. The fact that the appellant credited the amount received as sales tax under the head sales tax collection amount", would not, in our opinion, make any material difference. It is the frue nature and the quality of the receipt and not the head under which it is entered in the account books as would prove decisive. If a receipt is a trading receipt, the fact that it is not so shown in the account books of the assessee would not prevent the assessing authority from treating it as trading receipt." Therefore, the ratio of the Hon'ble Supreme Court decision in the case of Chowringhee Sales Bureau that the Sales tax collected and not deposited with the treasury would form part of the assessee's trading receipt is clearly applicable to the facts of the case. In the instant case, the assessee has contended that it has followed the exclusive method of accounting where the service tax has not been routed through the profit/loss account. In our view, in light of decision in case of Chowringhee Sales Bureau, such contention will not hold good and irrespective of method of accounting followed by the assessee, service tax collected and not deposited will be considered as part of professional receipts. Unlike the situation prevailing at the time when the Hon'ble Supreme Court delivered its judgement in case of Chowringhee Sales Bureau when there were no clear provisions pari-materia to section 438 of the Act, now given that there are specific provisions in terms of section 438 of the Act, to our mind principle and ratio laid down in case of Chowringhee Sales Bureau continues to hold good except that its rigour has been slightly modified to the extent that the taxes collected can be deposited before the due date of filing of return of income and in case there is a delay, it will be 32 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur added to the professional receipts of the assessee and will be allowed to claim deduction of the amount in the year of payment. Further, we have gone through the decision of the Coordinate Bench in the case of Jain Christopher (2013) 36 CCH 0011 which has distinguished the decision of the Hon'ble Delhi High Court in case of CIT vs. Noble And Hewitt (1) P. Ltd. [2008] 305 ITR 324 (Delhi) and the same clearly supports the case of the Revenue. We have also gone through the other decisions relied upon by the Id AR and find that the same have been rendered solely in the context of claim of deduction under the profit/loss account and disallowance under section 43B of the Act and has not considered the issue of whether the service tax collected and remaining unpaid will form part of total income of the assessee and equally not considered the decision of Hon'ble Supreme Court in case of Chowringhee Sales Bureau (supra) and hence, doesn't support the case of In light of above discussions, we confirm the order of the Id CIT(A) who has rightly confirmed the disallowance of service tax collected by the appellant from its customers and didn't deposit the same before the due date of filing of return of income. The appellant shall be at liberty to claim the same in the subsequent year of payment as per provisions of section 43B of the Act." (ix) As the facts of the instant case under consideration are squarely covered by the above referred decision of Hon'ble ITAT, Jaipur, it is, therefore, held that the AO was justified in making addition of Rs. 61,86,770/- u/s 43B of the Act and hence the same is hereby sustained. However, the AO is hereby directed to allow the same in the year of payment, as per the provisions of section 43B of the Act.” 12. Aggrieved the assessee has taken the issue before us. The ld. AR of the assessee against this ground for disallowance u/s. 43B heavily relied upon the written submission made and as extracted herein above. The ld. AR of the assessee in addition to the above written arguments submitted that the assessee being company regularly following Mercantile method of accounting and also consistently not including the indirect tax as part of the revenue and do not debit the same in the profit and loss account and the 33 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur whatever the indirect tax that has been collected as is shown in the balance sheet for that he has drawn our attention to the respective clauses of the form no. 3CD being the tax audit report submitted to the assessing officer for the year under consideration. Based on these set of arguments for the addition confirmed under section 43B of the Act, the ld. AR heavily relied upon the findings of the Bombay high court’s in the case of Knight Frank (India) Private Limited and the findings of the jurisdictional high court in the case of CIT Vs. SVG Express services where in the Honourable Jurisdictional High court held as under:- “1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal of the assessee reversing the view taken by CIT(A). 2. This court while admitting the appeal on 09.05.2017 framed the following question of law "Whether the Ld. ITAT was justified under law while sustaining the addition of the amount of Rs. 88,79,713/-on the basis of Form 26AS only while the said amount which was pertaining to service tax was not included in the profit and loss account of the assessee for the AY 2012-2013, ignoring the settled principle of law that provisions of Section 43B can't be invoked for making additions on (2 of 3) [ITA-122/2017] account of tax liabilities where the same has not been claimed as deduction?" 3. Counsel for the appellant has contended that the Tribunal has not properly considered the judgment of Delhi High Court in the case Income Tax Appeal No.839/2007 (Commissioner of Income Tax-8 Vs. Noble & Hewitt (India) (P) Ltd.) decided on 10th September, 2007 wherein which has been reproduced as under: "In our considered since the assessee did not debit the amount to the P&L a/c as an expenditure nor did the assessee claim any deduction in respect of the amount and considering that the assessee is following the mercantile system of accounting, the question of disallowing the deduction not claimed would not rise." 4. He contended that the aforesaid judgment has been followed by the Bombay High Court in Income Tax Appeal No.158/2013(Commissioner 34 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur of Income Tax-8 Vs. M/s Calibre Personnel Services Pvt. Ltd., Mumbai) decided on 2 nd February, 2015 wherein which reads as under: "We are unable to appreciate the grievance of the Revenue as the Delhi High Court in Noble & Hewitt Pvt. Ltd. (Supra) has considered both Section 438 of the Act and also the issue of mercantile system of accounting followed by the assessee before it. The revenue is not able to point out why the decision of Delhi High Court requires reconsideration. In our view, the Delhi High Court's decision in Noble & Hewitt Pvt. Ltd. (supra) has correctly held that Section 43B of the Act is a provision for allowing deduction of tax on payment but this can only be triggered if deduction with regard to taxes payable is claimed for arriving at taxable income" (3 of 3) [ITA-122/2017] 5. Counsel for the respondent has contended that the judgment passed by the Tribunal just and proper. He has supported the reasoning adopted by the Tribunal in paragraph 3.3 which reads as under "The Id DR is heard who has relied heavily on the order of the Hon'ble Supreme Court decision in case of Chowringhee Sales Bureau 87 ITR 542 and submitted that the Id CIT(A) has rightly held the service tax collected as part of the professional receipts and given that the same has not been deposited by the due date of filing of return of income, the same is not allowable under section 43B of the Act." 6. We have heard both the parties. 7. In view of the observations made by the Delhi High Court in Noble & Hewitt (India) (P) (Supra), as reproduced above. The case of the assessee is covered by the same observations of Delhi High Court. Hence, the issue is answered in favour of the assessee against the department. 8. The appeal stands allowed.” 13. Based on the above decision relied upon he has submitted that sales being accounted net of the taxes and has not been debited the sales tax in the profit and loss account the provision of section 43B will not be attracted and the disallowance made by the AO is required to be vacated considering the judgment relied upon. 35 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur 14. Per contra, the ld. DR heavily relied upon the findings of the ld. CIT(A) given in detailed for the assessment year 2012-13. He has supported the view of the ld. CIT(A) considering the judgment of the supreme court in the case of Chowringhee Sales Bureau Vs. CIT (supra) where in the apex court has already hold a view that the sales tax collected, and not deposited with the treasury, would form part of the assessee’s trading receipt. In the instance case the assessee has already collected the VAT (Sales Tax) from its customer but did not pay the outstanding amount as on the year end date or before the due date of date of filling the return of income. He further submitted that the CIT(A) has rightly confirmed the addition. The ld. DR further submitted that the judgement relied upon by the ld.AR of the assessee are before the amendment in the law and are related to service tax portion and not related to VAT portion. For that he read the provision of section 145A of the Act which reads as under : Method of accounting in certain cases. 145A. For the purpose of determining the income chargeable under the head "Profits and gains of business or profession",— (i) the valuation of inventory shall be made at lower of actual cost or net realisable value computed in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145; (ii) the valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by 36 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur the assessee to bring the goods or services to the place of its location and condition as on the date of valuation; (iii) the inventory being securities not listed on a recognised stock exchange, or listed but not quoted on a recognised stock exchange with regularity from time to time, shall be valued at actual cost initially recognised in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145; (iv) the inventory being securities other than those referred to in clause (iii), shall be valued at lower of actual cost or net realisable value in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145: Provided that the inventory being securities held by a scheduled bank or public financial institution shall be valued in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145 after taking into account the extant guidelines issued by the Reserve Bank of India in this regard: Provided further that the comparison of actual cost and net realisable value of securities shall be made category-wise. Explanation 1.—For the purposes of this section, any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment. Explanation 2.—For the purposes of this section,— (a) "public financial institution" shall have the meaning assigned to it in clause (72) of section 2 of the Companies Act, 2013 (18 of 2013); (b) "recognised stock exchange" shall have the meaning assigned to it in clause (ii) of Explanation 1 to clause (5) of section 43; (c) "scheduled bank" shall have the meaning assigned to it in clause (ii) of the Explanation to clause (viia) of sub-section (1) of section 36. 15. The ld. DR also draw our attention to the facts and findings of the decision relied upon and in particular he draw our attention to the detailed findings given in the case of CIT Vs. Knight Frank (India) Private Limited : “4. In appeals for both the assessment years, the Commissioner of Income Tax (Appeals) [CIT(A)] held that Section 145A(a)(ii) of the Act would apply as it is not restricted only to manufacturing and trading companies. It was concluded that the service tax stands on the same 37 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur footing as excise duties, sales tax and other taxes, which are collected to be paid over to the Government. Similarly, the order of the Assessing Officer with regard to Section 43B of the Act was also upheld. 5. On further appeal, the Tribunal by the impugned order held that Section 145A(a)(ii) of the Act would have no application in respect of the service tax billed on rendering of services. This for the reason the Section 145A(a)(ii) deals with goods and not services. It also held that Section 43B of the Act would have no application in the present facts as no liability to pay the same to the Government arose before the last date of filing of the Returns. Besides, it held that no deduction had been claimed on the aforesaid amour while determining its income. Accordingly, the appeal of the respondent assessee was allowed. 6. Regarding question (1):- (a) For the better appreciation of the controversy to be examined, it reproduce Section 145A of the Act, which at the relevant time read as under : "145A Notwithstanding anything to the contrary contained in Section 145- (a) the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "Profits and gains of business or profession" shall be – (i) in accordance with the method of accounting regularly employed by the assessee; and (ii) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. Explanation For the purposes of this section, any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment.” (b) The grievance of the Revenue to the impugned order of the Tribunal is that Section 145A(a)(ii) of the Act would apply as the amount receivable on rendering of services would also include the service tax. This service tax is similar to excise duty, sales tax and other taxes, which have to be collected to be paid over to the Government. (c) It is very clear from the reading of Section 145A(a)(ii) of the Act that it only covers cases where the amount of tax, duty, cess or fee is actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. (d) In this case, the respondent-assessee has admittedly not paid or incurred any liability for the purposes of bringing any goods to the place of its location. In this case, the respondent- assessee is rendering services. Thus, on the plain reading of Section145A(a)(ii) of the Act, it is self evident that the same would not apply to the service tax billed on rendering of services. This is so as the service tax billed has no relation to any goods nor does it have anything to do with bringing the goods to a particular location. 38 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur (e) The Explanation to Section 145A(a) of the Act does not expand its scope. An Explanation normally does not widen the scope main section. It merely helps clarifying an ambiguity. (See Zakiyr Begam v/s. Shanaz Ali & Ors., 2010 (9) SCC 280). The main part of the Section specifically restrict its ambit only to valuation of purchase and sale of goods and inventory. Rendering of service is not goods or inventory: Goods would mean movables and inventory would mean stock of goods. Therefore, Explanation would only apply for valuation of sales and purchase of goods and stock of goods as provided in the main part. The Explanation in this case clarifies/ explains that any tax, duty, cess or fee paid or incurred will have to be taken into valuation of goods even if such payment results in any night to the person making the payment. This Explanation was necessary as otherwise in terms of Accounting Standard - (AS-2) issued by the Institute of Chartered Accountants of India provides that cost of goods would include the duties and taxes paid, other then the duties and taxes which give a right to recover the same from the taxing authorities to illustrate duty draw back etc. Thus, the Explanation. only seeks to clarify the fact that notwithstanding any right acquired on payment of taxes to recover the same from the government, for the purpose of Section 145A of the Act, the same cannot be excluded even though the AS-2 provides otherwise. It does not even remotely deal with the issue of service tax. (f) Further, it is to be noted that Service Tax was first introduced in India by Finance Act, 1994. Section 145A of the Act was first introduced into the Act only by Finance (No.2) Act, 1998 w.e.f. 1 April, 1999. It was thereafter substituted by Finance (No.2) Act, 2009 which is identical, except for addition of clause (b), dealing with interest. However, the Parliament did not while substituting it, deem it fit to explicitly include the valuation of Services therein. Thus, it is clear that the legislature never intended to restrict the applicability of Section 145A of the Act only to goods and not extend it to Services. As observed by the Apex Court in State of Bihar v/s. S. K. Roy AIR 1966 (SC) 1995: “It is well recognized principle in dealing with construction that a subsequent legislation may be looked at in order to see what is the Sm proper interpretation to be put upon an earlier Act where the earlier Act is obscure or capable of more then one interpretation." We must make it clear that we do not find any ambiguity in Section 145A of the Act as arising for our consideration. However, even if one were to assume the main part of Section 145A of the Act, is capable of more then one interpretation, the interpretation sought to be canvassed by the Revenue, is not sustainable. Therefore, Section 145A of the Act would have no application in cases where service is provided by the Assessee. (f) In view of the above, the question (1) as proposed does rise to any substantial question of law. Thus, not entertained. 7. Regarding question (ii) : 39 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur (a) It is an admitted position before us that the respondent assessee had not claimed any deduction on account of the service tax payable in order to determine its taxable incor no occasion to invoke Section In the above view, there can be of the Act. (b) Mr. Suresh Kumar, learned Counsel for the Revenue fairly states that the issue stands concluded against the Revenue by the decisions of this Court in Commissioner of Income Tax Vs. Ovira Logistics P. Ltd. 377 ITR 129 and Commissioner of Income Tax Vs. Calibre Personnel Services Pvt. Ltd. (Income Tax Appeal No. 158 of 2013) rendered on, 2 nd February, 2015. (c) In view of the above, the question (ii) as proposed is covered by the decision of this Court. Therefore, it does not give rise to any substantial question of law. Thus, not entertained.” 16. The ld. DR on reading of the above decision submitted that all the decisions are related the service tax regimes. Since the provision of section 145A was not included the word service the courts have held that the same is not required to be included while computing the income under the head profit and gains of business or profession. Since, the said provision before the amendment was not obligated to the assessee to include the service tax portion as per provision of section 145A of the Act the thus, it cannot be termed a business income or business expenses and in that set of facts the courts have taken a view that the provision of section 145A r.w.s. 43B will not attract disallowance since section 145A does mandate assessee to include service tax portion while computing the business income. Whereas the VAT and other indirect tax levy related to the goods were already part of section 145A of the Act 40 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur and the assessee being company has to comply the provisions of section 145A of the Act and for computing the business income chargeable to tax the company has to include the indirect tax levy and thus, on a joint reading of the provision of section 145A r.w.s 43B the disallowance made by the AO is in accordance with the law and the decision relied upon are not applicable in the facts of the case. 17. We have heard the rival contentions, submissions and decisions relied upon by both the parties to drive home to their contentions. As the issue before us is revolving between the provisions of section 43B and section 145A of the Act. We have perused the provisions both the sections. The decisions relied upon by the ld. AR of the assessee is related to the disallowance of services and that too before the amendment made in the provision of section 145A of the Act by Finance Act 2018. The relevant memorandum explaining the amendment is as under ; These amendments will take effect from 1st April, 2018. Clause 45 of the Bill seeks to substitute new sections 145A and 145B for section 145A of the Income-tax Act relating to method of accounting in certain cases and taxability of certain income: The proposed new section 145A provides that for the purpose of determining the income chargeable under the head "Profits and gains of business or profession",— (i) the valuation of inventory shall be made at lower of actual cost or net realisable value in accordance with the income 41 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur computation and disclosure standards notified under sub-section (2) of section 145; (ii) the valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation; (iii) the valuation of inventory being securities not listed on a recognised stock exchange; or listed but not quoted on a recognised stock exchange with regularity from time to time, shall be valued at actual cost initially recognised in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145; (iv) inventory being securities other than those referred to in clause (iii), shall be valued at lower of actual cost or net realisable value in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145 and for this purpose the comparison of actual cost and net realisable value shall be done category-wise. It is also proposed to provide for an Explanation in the said section so as to provide that any tax, duty, cess or fee, by whatever name called, under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment for the purposes of the said section. The proposed new section 145B provides that notwithstanding anything to the contrary contained in section 145, the interest received by an assessee on any compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received. It is further proposed to provide that the claim for escalation of price in a contract or export incentives shall be deemed to be the income of the previous year in which reasonable certainty of its realisation is achieved. It is also proposed to provide that income referred to in sub-clause (xviii) of clause (24) of section 2 shall be deemed to be the income of the previous year in which it is received, if not charged to income tax for any earlier previous year. These amendments will take effect retrospectively from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-2018 and subsequent years. 17.1 It is also necessary to see the provision of section 145A before amendment which is extracted here in below: “Method of accounting in certain cases. 145A. Notwithstanding anything to the contrary contained in section 145,- (a) the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head Profits and gains of business or profession" shall be 42 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur (i) in accordance with the method of accounting regularly employed by the assessee; and (ii) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. Explanation-For the purposes of this section", any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment; (b) interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received.” 17.2 As it is evident that the above provision did not include valuation of services and thus the section 145A after amendment reads as under : “[Method of accounting in certain cases 145A. For the purpose of determining the income chargeable under the head Profits and gains of business or profession’- (i) the valuation of inventory shall be made at lower of actual cost or net realisable value computed in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145; (ii) the valuation of purchase and sale of goods or services and a inventory shall be adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation; (iii) the inventory being securities not listed on a recognised stock change, or listed but not quoted on a recognised stock exchange with regularity from time to time, shall be valued at actual cost initially recognised in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145; (iv) the inventory being securities other than those referred to in clause (iii), shall be valued at lower of actual cost or net realisable value in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145;” 17.3 Ongoing through the above provisions of section 145A which is considered by the various high courts that since in the earlier provisions services were not included the assessee cannot be 43 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur obligated to considered it as income and thus the courts considering the legislative intentions allowed the view that since the assessee is under no obligation to considered the services while following the said old provision of section 145A and thus, the courts has vacated the disallowance of service tax under section 43B. Whereas in this case the assessee has to consider the VAT while computing the income and in accordance with the provision of section 145A of the Act the disallowance of unpaid VAT is very well attracted under the provision of section 43B of the Act and since all the decisions relied upon by the ld. AR are related to the service tax laws and ld. AR could not brought on record any judgement on the VAT laws we do not find force in the arguments of the ld. AR of the assessee and based on the above observations of the law the case law relied upon are also differentiated. Thus, considering the above set of findings and considering the detailed finding recorded by the ld. CIT(A) citing the judgement of the Honourable apex court in the case of Chowringhee Sale Bureau (P) Ltd Vs. CIT 87 ITR 542 we confirm the disallowance made by the AO. As regards the other disallowance made u/s. 43B such as PF, ESI, TDS since the ld. AR did not controvert the findings of the lower authority the same is also 44 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur confirmed. Thus, we dismiss the ground no 2 raised by the assessee. 18. The ground number 5 to 6.1 raised by the assessee is related to addition of Rs. 98,02,903/- made by the assessing officer after rejecting the books of account of the assessee. 19. Brief facts pertaining to the grounds of appeal are that the assessee is a private limited company. A survey action u/s 133A was carried out at its factory premises on 17.12.2014. During the course of survey, stock verification was done by survey team and it is alleged that there is shortage in physical stock when compared to stock recorded in books of accounts. Ld. AO has tabulated such stock as per physical verification and that recorded in books in Assessment order at page 11 para 7. However, after considering the objections raised by the assessee the stock of finished goods was revised by the ld. AO and accordingly the shortage was finally worked out at Rs. 3,80,55,100/- as against the shortage of stock worked out at Rs. 4,23,84,100/- at the time of survey (AO para 7.12 page 19 of the order). The statements of the concerned persons were also recorded. Thereafter, during the course of assessment 45 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur proceedings a show cause notice was issued by Ld. AO, in response to which vide reply dt. 28.11.2016 (APB 51-109) detailed explanation and relevant extract of stock registers and bills were filed. However, ld. AO has not accepted the same and invoked the provisions of section 145(3) by alleging that assessee has made out of books sales of both raw material and finished goods to the extent of Rs.3,80,55,100/-. During the year which is solely based on the alleged shortage of stock worked out during the course of survey and made the addition of Rs.98,02,903/- by applying GP rate of 2.87% on total sales declared by the assessee and also on alleged unaccounted for sales of Rs.3,80,55,100/-. 20. In first appeal, addition made was upheld by ld. CIT(A) where in the observations of the ld. CIT(A) is extracted here in below : 17. I have perused the written submissions submitted by the ld. AR and the order of the AO. I have also gone through various judgements cited by the Ld. AR and those contained in the order so AO. 17.2 The Ld. A/R has contended that his stock was lying elsewhere and an attempt is made to reconcile the stock. I am NOT in agreement with the Ld. A/R. During the course of survey the appellant /his main accountant was asked multiple times, before and after taking of the inventory that whether the stock is lying else where. The person replied in negative. The detailed discussion in this regard can be seen in the para 7.4 to 7.6 of the AO order. The infirmity found are sound and based on investigations. The rejection of books and consequent estimation of profit is confirmed.” 46 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur 21. The ld. AR of the assessee submitted that the ld. CIT(A) in summary manner solely on the basis of statement of junior staff Sh. Sunil Sain, and also on the observations of ld. AO upheld the addition. The ld. CIT(A) has completely disregarded the details furnished by the assessee in the shape of Audited Financial Statements, Excise Records and Statements of Director and rather relied upon statement of a junior level staff who, incidentally is the son of the factory supervisor and was not having overall authority nor fully aware with the stock and other related issues. The ld. AR of the assessee further submitted that assessee company is registered with Service Tax, Excise and VAT and maintains regular books of accounts along with stock records, excise records and also files regular returns of manufacturing, sales etc. as per the applicable Excise Law. The books of accounts of assessee are audited both under Companies Act 2013 as well as u/s 44AB of the Income Tax Act. It is further submitted that the assessee is a manufacturer of MS Billets which is an excisable product and is registered with the excise department. As per requirements of the Excise Rules and Regulations, it is mandatory for the assessee to record daily production and sales of the finished goods (MS Billets) in Excise Register. Accordingly, assessee is complying all the legal 47 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur requirements. A copy of the relevant Excise register for the period 15.12.2014 to 31.03.2015 was also submitted (APB 61-64). The ld. AR of the assessee further submitted that at page 61 of paper book, i.e. copy of such register where the opening stock of the Finished Goods as on 17.12.2014 is appearing at 1183 MT and production from 17.12.2014 to 31.03.2015 was only around 433 MT. As against this, sales during the period 17.12.2014 to 31.03.2015 is appearing at 1567 MT. There was no purchase of finished Goods (MS Billets) by the assessee during the FY 2014-15. Thus, it is evident that the assessee had sold the goods which were there in the stock as on 17.12.2014 in the subsequent period and a closing stock of around 50 MT as on 31.03.2015 was left out of the production made during the balance period of the subject AY 2015- 16. It is relevant to state that such sales have not been doubted by the ld.AO who further made the addition of the GP on the alleged shortage of stock which tantamount to double addition.Similarly, the assessee has to mandatorily record the purchases and consumption of Raw Material in the excise record. A copy of the relevant Excise register for the period 15.12.2014 to 31.03.2015 was also furnished (APB 55-60). It may be observed from the above register that on 17.12.2014 the stock of the Raw Material was 500 MT (APB 57) and 48 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur inwards out of Purchases from 17.12.2014 to 31.03.2015 was Appx. 1130 MT. As against this, consumption for production of MS Billets during the period 17.12.2014 to 31.03.2015 was only 472 MT, leaving closing stock of Raw Material of 1158 Mt as on 31.03.2015. Thus, it is evident that the assessee had consumed the stocks of Raw Material which were there in the stock as on 17.12.2014 in the subsequent period and there was no major shortage of Raw Material of 275 MT as alleged by ld.AO. It is submitted that the excise records are frequently inspected and checked by Excise Range office, Excise Anti Vision and DGCE office. These are also inspected by Commercial Tax Authorities ( VAT – Range and Anti vision both) and there cannot be any substantial difference in the quantities of Raw Material and Finished Goods in such a tightly supervised regulatory environment as alleged in the show cause notice. It is further submitted that the stock of Raw Material comprises of Melting scrap, Sponge Iron, Silico Magnese, H. R. Sheet Etc. which was lying as a large heap except for Silico Magnese which was there in Jute bags in the factory go-down. The density and weight of different type of raw material is different and the actual weight can be known only by actual weighment on weighbridge in some truck or other container. The survey was 49 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur commenced and concluded on the very same day. Weighing so much of the stock available at different places at the factory premises [as is evident from the survey records (APB 111-114)] is humanly impossible task more particularly looking to the total number of three officials in the survey team out of which two were the ITO rank officer and only one inspector was present. During the course of assessment proceedings, it was contended that, on the date of survey, there was no physical counting and/or weighing of all the stocks of Raw Material and Finished Goods carried out by the Income Tax Officials. There is nothing on record which establishes any actual weighment of Raw Material Stock nor any proof was given to the assessee. However, such contention was rejected by ld.AO by simply stating that the stock was taken in the presence of the employees of the assessee company and director Shri Ashok Dharendra also not raised this issue when he was confronted with the same. In this regard it is submitted that at the residential premises of Shri Ashok Dharendra search action was carried out and he was under pressure and that pressure has made this assertion. It is submitted that later on he has retracted from his statements also, copy of the affidavit filed in this regard is at APB 36-38 which remained uncontroverted in the case of the assessee 50 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur company. Further, it is submitted that from 07.12.2014 to 16.12.2014, around 795 MT of Raw material was received in the factory out of which around 195 was local scrap and 600 MT was Imported scrap for which documentary evidence of clearance from Customs, CONCORE, and shipping companies, transportation of the material in closed containers from ICD Kanakpura to factory premises is available on record and the same is duly entered in the excise records too. Total consumption of Raw Material for manufacturing of Billets is only around 299 MT and thus raw material stock of over 500 Mt was very much there mostly comprising of the Imported scrap which by nature is heavier but will appear as small heap compared to the local scrap, visually. As already submitted that the Income Tax Officials have only estimated the quantity / weight of the raw material by visual inspection only. It may also be noted that there was stock of End Cuttings billets of 5 Mt appx. as on 17.12.2014 which was neither shown in the physical stock present nor shown as shortage whereas the officials had taken the excise records for End Cuttings too during the survey. Thus, it appears that the stock taking was done in a casual manner and there were shortcomings / errors in the process and recordings of the stocks. As submitted above, on 17.12.2014 the opening stock of 51 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur the Finished Goods was 1183 MT and production from 17.12.2014 to 31.03.2015 was only around 433 MT. Whereas the sales during the period 17.12.2014 to 31.03.2015 was 1567 MT and no purchases of Finished Goods were made during this period. This is evident from the excise record of the assessee. Out of these sales, around 810 MT was Interstate Sales which involves actual movement of Finished goods from factory to different state. If the stock of Finished Goods was not there with the assessee on 17.12.2014, with just 433 MT of production, how the sales of 1567 MT were made by the assessee. Another aspect worth noting in this case is that the assessee has already accounted for sales of the subject stock in the books of accounts and it is reflected in the Profit and Loss of the assessee for the AY 2015-16. How it can be shown again as out of the books sale again which effectively will mean double booking of the sale of material and thus not possible. Thus, although the assessee had submitted all the relevant details, quantitative figures reconciling the stock with the books, stock records, excise records, subsequent sales, purchases etc, the learned AO has not taken any cognizance and has rather concentrated on making high pitched order by rejecting the books of accounts all-together under section 145(3) of the IT Act, 1961. 52 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur 21.1 The ld. AR submitted that in para 7.13 of the assessment order, the Learned AO has taken altogether different view of taking basis of lower GP rate during the assessment year 2015-16 as compared to the earlier years as basis for rejecting the books of accounts and made lump sum addition on the basis of arbitrarily applying average GP rate of past four years not only to the whole turnover of the assessee for the AY 2015-16 but also on the alleged out of the books Sales of raw material and finished goods. This shows the casual approach of assessing officer. 22.2 The assessee had appraised the learned AO about the declining trend in the business and mounting losses during the assessment proceedings. She herself has mentioned in the assessment order that the profits are continuously declining since past three years, but has still made addition on the basis of average rate. It is also relevant to state that in the preceding assessment year the GP rate declared by the assessee was never doubted where the assessment was completed u/s 143(3). Incidentally assessment for AY 12-13 and 14-15 are also before the hon’ble bench wherein no such doubts were raised about the reasonableness of the gross profit rate declared by the assessee. 53 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur Further the GP rate worked out by the ld.AO at 2.87% also is not in accordance with the GP rate of past 4 assessment years as adopted which is evident from the table below: AY Turnover Gross Profit GP % 2011-12 69,63,20,432/- 2,10,86,499/- 3.02 2012-13 74,71,14,618/- 3,44,82,706/- 4.62 2013-14 81,98,64,757/- 2,45,72,221/- 3.00 2014-15 41,19,58,844/- (83,32,850/-) (2.02)* * Assessee was in Gross loss It was further submitted that average GP rate of past 4 years has been taken arbitrarily. The average GP rate of past 4 years actually comes to 2.15%, thus, it is seen that the AO has taken a casual approach. However, not admitting the above position, it is submitted that normally for estimating the profit by applying GP rate, average GP of last 3 years is taken as basis and this practice had been is broadly accepted / upheld by hon’ble ITAT benches/ hon’ble High courts, considering this proposition, the average GP of past 3 years comes to 1.86% . 23. Per contra, the ld. DR has heavily relied upon the findings recorded by the assessing officer and reasoning given by the ld. 54 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur CIT(A) while dealing with the additions. He has further submitted that the stock was taken in the presence of the party and the difference is found which is substantial and looking the facts as detailed in the assessment the addition made by the ld. AO deserve to be confirmed. 24. We have heard the rival contentions and perused the written arguments and decisions relied upon by both the parties. It is not disputed by the revenue that the records maintained by the assessee was in accordance of the excise records and not a single defect pointed except that there is a difference in the physical stock and book stock. For this the ld. AR has argued various aspect that the working done by the department was not possible in a single day to take the complete stock but at the same time he has not justice the working done by the survey team to tally the difference in stock. His arguments that each and every purchase and sales is recorded in terms of value and quantity in the records maintained by the assessee is not disputed but once the team has taken the stock in the presence of the officer and the ld. AR except the general arguments unable to reconcile the figure. At the same time the various contentions raised by the assessee in the assessment 55 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur proceedings were not considered by the ld. AO and even the ld. CIT(A) has not given his detailed finding so as to deal with the contentions raised by the assessee in full. The order of CIT(A) is non speaking on these aspects. The ld. AR also brought to our notice that stock of finished goods was revised by the ld. AO and accordingly the shortage was finally worked out at Rs. 3,80,55,100/- as against the shortage of stock worked out at Rs. 4,23,84,100/- at the time of survey (AO para 7.12 page 19 of Assessment order ). We found force in the alternative argument of the ld. AR of the assessee that since the department has alleged that there is a shortage of stock in the physical stock taking then in that case since the purchases are already recorded and if the allegation of the department considered true and disregarded the submission of the assessee on merits then in that case only profit can be added for these alleged out of books sales which is considered as shortage of stock. For this contention he relied on the decision of the coordinate bench in the case of Gunesh India Private Limited in ITA no. 38/JP/2021 and 21/JP/2021. The relevant extract is duly form part of the submission of the assessee. Being consistent on the finding given in that case that we considered that when the ld. AO has not disputed the purchases and only the shortage is to be considered as 56 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur out of book sales and in that situation only the average profit as worked out @ 1.86% can be added considering the average of last 4 years on the corrected shortage worked out for Rs. 3,80,55,100/- which we considered that will end the justice in the present set of facts. Thus, ground no. 5 to 6.1 raised by the assessee are partly allowed. 25. The fact of the case and issues raised in ITA NO. 116/JPR/2017 and in ITA NO. 279/JPR/2019 are similar to the case in ITA NO. 01/JPR/2021 so far as Ground No.1 and 1.1 in ITA 116/JPR/2017 and ground no. 2 in ITA No. 279/JPR/2019 is concerned and we have heard both the parties and persuaded the materials available on record. The bench has noticed that the issues raised by the assessee in these appeals are equally similar on set of facts and grounds. Therefore, it is not imperative to repeat the facts and various grounds raised by both the parties. Hence, the bench fees that the decision taken by us in ITA No. 01/JPR/2021 shall apply mutatis mutandis in the ITA No. 116/JPR/2017 and ITA NO. 279/JPR/2019 in those similar grounds raised in these two appeals. The other ground raised by the assessee are not pressed as per their written submission and thus, dismissed. 57 ITA No. 01/JP/2021 Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur vs. DCIT, Jaipur In the result ITA NO. 01/JPR/2021 for A. Y. 2015-16 is partly allowed, ITA NO.116/JPR/2017 for A. Y. 2012-13 is dismissed and ITA No. 279/JPR/2019 for A.Y. 2014-15 is also stands dismissed. Order pronounced in the open court on 29/08/2022 Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 29/08/2022 *Ganesh Kumar vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- M/s Shree Siddhi Vinayak Induction Pvt. Ltd., Jaipur 2. izR;FkhZ@ The Respondent- DCIT, Central Circle-03, Jaipur DCIT, Circle-07, Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA No. 01/JP/2021, 116/JP/2017 & 279/JP/2019) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar