The ITO, Ward-7(2), Ahmedabad V. Smt Ramdulari Sidhkishor Agarwal, Ahmedabad

ITA 1440/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0688 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 29-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIMAL I MEHTA
• Keywords: Gross profit estimation; Rejection of books of accounts
• Section: 143(3); 145

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD ,, , BEFORE SHRI SHAILENDRA YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ I.T.A. NO.1440/AHD/2012 ( / ASSESSMENT YEAR : 2009-10) THE I.T.O. WARD-7(2) AHMEDABAD / VS. SMT.RAMDULARI SIDHKISHOR AGARWAL D-23, PRUTHAVI TOWER SATELLITE AHMEDABAD-380 015 % ./ ./ PAN/GIR NO. : AJTPA 0345 E ( %' / APPELLANT ) .. ( ()%' / RESPONDENT ) %'* / APPELLANT BY : SHRI VIMAL I. MEHTA, SR.DR ()%'+* / RESPONDENT BY : -NONE- ,-+. / DATE OF HEARING 29/07/2016 /012+. / DATE OF PRONOUNCEMENT 05/09/2016 / O R D E R PER SHRI AMARJIT SINGH, ACCOUNTANT MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-XIV, AHMEDABAD DATED 20/04/2012 FOR THE ASSESSMENT YEAR (AY) 2009-10. THE REVENUE HAS RAISED THE SOLITARY GROUND WHICH READS AS UNDER:- 1) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.68,01,656/- ON ACCOUNT OF LOW GROSS PROFIT MA DE BY THE A.O. AFTER REJECTING THE BOOKS OF ACCOUNT. ITA NO. 1440/AH D/2012 ITO VS. SMT.RAMDULARI SIDHKISHOR AGARWAL ASST.YEAR 2009-10 - 2 - 2. AT THE TIME OF HEARING, NONE APPEARED ON BEHALF OF THE RESPONDENT- ASSESSEE. HOWEVER, A LETTER DATED 29/07/2016 HAS BE EN FILED ON BEHALF OF ASSESSEE THROUGH HER AUTHORIZED REPRESENTATIVE, WHE REIN IT WAS STATED THAT THE APPEAL FOR AY 2009-10 MAY BE TREATED AS COVERED MATTER SINCE THE ASSESSEES OWN CASE FOR AYS 2007-08 & 2008-09 HAS B EEN DEALT WITH ITAT D BENCH AHMEDABAD IN ASSESSEES FAVOUR. 2.1. THE AFORESAID SUBMISSION OF LD.AR HAS NOT BE EN CONTROVERTED BY LD.DR. IN VIEW OF THE FACTS, WE PROCEED TO DISPOS E OF THE REVENUES APPEAL EX-PARTE QUA THE ASSESSEE. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- 3.1. ASSESSEE IS AN INDIVIDUAL STATED TO BE ENGAGED IN THE BUSINESS OF TRADING OF GREY CLOTHS, FABRICS AND HOSIERY ITEMS D URING THE YEAR UNDER CONSIDERATION. ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2009-10 ON 29/09/2009 DECLARING TOTAL INCOME OF RS.1,84,600/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S 'THE ACT') VIDE ORDER DATED 08/12/2011 AND THE TOTAL INCOME WAS DE TERMINED AT RS. 69,86,260/-. THE AO IN THE ASSESSMENT MADE U/S .143(3) OF THE ACT STATED THAT IN THE CASE OF THE ASSESSEE THE GROSS P ROFIT (GP) HAS DECREASED ITA NO. 1440/AH D/2012 ITO VS. SMT.RAMDULARI SIDHKISHOR AGARWAL ASST.YEAR 2009-10 - 3 - MARGINALLY IN THE FINANCIAL YEAR (FY) 2008-09 COMPA RED TO THE GP IN THE FY 2007-08. HE ALSO STATED THAT BUSINESS CANNOT BE RUN WITHOUT INCURRING MANDATORY EXPENDITURES LIKE TRAVELLING, TELEPHONE, SALARY, ETC. HE ALSO REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE ON T HESE GROUNDS U/S.145 OF THE I.T. ACT. HE ALSO POINTED THAT WORKING TO THE WHOLE GROUP, ESPECIALLY WHERE THE PURCHASE AND SALES PARTIES ARE ALSO MAJOR ITY OF EITHER GROUP OR RELATIVES, THE GP SHOWN BY THE ASSESSEE IS TOO MUCH LOW. HE ESTIMATED THE GP @ 2.5%. AGGRIEVED BY THE ORDER OF THE ASSE SSING OFFICER (AO), ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A), W HO VIDE ORDER DATED 20/04/2012 (IN APPEAL NO.CIT(A) XIV/WD.7(2)/153/201 1-12) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE ON THE REASONING THAT THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS AND AP PLYING THE GP RATE WITHOUT POINTING OUT ANY SPECIFIC DEFECTS IN THE BO OKS OF ACCOUNTS. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), NOW THE RE VENUE IS IN APPEAL BEFORE US. 4. BEFORE US LD.SR.DR SUPPORTED THE ORDER OF THE AO . 5. WE HAVE HEARD THE LD.SR.DR, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. AFTER HEARING THE LD.SR.DR, WE FIND THAT, DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, BEFORE THE AO ASSESSEE HAS PRODUCED TH E BOOKS OF ACCOUNT WHICH WAS TEST CHECKED. ON VERIFICATION, IT WAS SE EN THAT ASSESSEE HAS ITA NO. 1440/AH D/2012 ITO VS. SMT.RAMDULARI SIDHKISHOR AGARWAL ASST.YEAR 2009-10 - 4 - NOT CLAIMED ANY EXPENSES IN THE PROFIT & LOSS ACCOU NT OTHER THAN AUDIT FEES AND BANK CHARGES. AO NOTICED THAT ASSESSEES TURNOVER IS OF RS.27.97 CRORES AND SUCH MAGNITUDE OF BUSINESS CANN OT BE DONE WITHOUT INCURRING ANY EXPENSES. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE BOOKS RESULTS SHOULD NOT BE REJECTED AND GROSS PROF IT SHOULD BE ESTIMATED AT THE RATE OF 2.5%. IN RESPONSE TO THERETO, ASSE SSEE SUBMITTED HER REPLY DATED 18/10/2011 WHICH WAS NOT FOUND TENABLE BY THE AO. FINALLY, BOOK RESULT OF THE ASSESSEE WAS REJECTED U/S.145 OF THE ACT. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A). THE LD.CIT(A), AFTER FOLLOWING HIS PREDECESSORS ORDER PASSED FOR AY 2008- 09, HAS ALLOWED THE GROUND OF APPEAL OF THE ASSESS EE BY OBSERVING AS UNDER:- 3.3. DECISION : I HAVE CAREFULLY PERUSED THE FINDINGS OF THE ASSESS ING OFFICER AND SUBMISSIONS MADE BY THE LD.AR. IT IS NOTED THAT TH E ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS ON THE GROUND THAT N O EXPENSES WERE CLAIMED IN THE P&L ACCOUNT OTHER THAN AUDIT FEE AND BANK CHARGES. HE ACCORDINGLY APPLIED THE G.P. RATE OF 2.5% ON THE TURNOVER SHOWN BY THE APPELLANT. THE APPELLANT HAS SUBMITTED THAT TH E BOOKS OF ACCOUNTS WERE AUDITED U/S.44AB OF THE ACT NO DISCREPANCY WA S POINTED OUT BY THE AUDITOR IN THE BOOKS OF ACCOUNT AND IT WERE MAI NTAINED IN ACCORDANCE WITH THE NORMALLY ACCEPTED ACCOUNTING PO LICY AND PRACTICE. THERE WAS NO EXPENDITURE AS THE APPELLANT WAS ACTIN G AS A MEDIATOR AND WHATEVER EXPENSES WERE INCURRED SAME WERE CLAIM ED. THE G.P. RATE SHOWN BY THE APPELLANT WAS LOW AS THE APPELLAN T WAS ACTING WAS MEDIATOR BETWEEN SUPPLIER AND PURCHASER. ITA NO. 1440/AH D/2012 ITO VS. SMT.RAMDULARI SIDHKISHOR AGARWAL ASST.YEAR 2009-10 - 5 - IT HAS FURTHER BEEN POINTED OUT BY THE APPELLANT TH AT FOR A.Y. 2007-08 & 2008-09, THE ADDITION MADE BY THE A.O. HA S BEEN DELETED BY CIT(A) ON SIMILAR GROUNDS. IN VIEW OF THE ABOVE FACTS, I AM OF THE CONSIDERED OPINION THAT THE A.O. WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF AC COUNTS AND APPLYING THE G.P. RATE WITHOUT POINTING OUT ANY SPECIFIC DEF ECTS IN THE BOOKS OF ACCOUNTS. FURTHER, ON SIMILAR GROUNDS, MY PREDECES SOR HAS DELETED THE SIMILAR ADDITIONS MADE FOR A.Y. 2008-09 VIDE ORDER DATED 25/01/2011 IN APPEAL NOD.CIT(A)/XIV/WARD 7 (2)/257/2010-11. WHI LE DECIDING THE APPEAL FOR AY 2008-09 MY PREDECESSOR HAS ALSO DISCU SSED THAT SIMILAR ISSUE WAS DECIDED IN AY 2007-08 AND THE ADDITION MA DE WERE DIRECTED TO BE DELETED. RESPECTFULLY, FOLLOWING THE DECISIO N OF MY PREDECESSOR AND THE DISCUSSION MADE ABOVE, THE ADDITION MADE BY THE A.O. IS DIRECTED TO BE DELETED AND THE GROUND OF APPEAL IS ALLOWED. 5.1. WE FURTHER FIND THAT THE COORDINATE BENCH OF THE TRIBUNAL (ITAT D BENCH AHMEDABAD) ON IDENTICAL FACTS, IN THE CAS E OF ITO VS. SMT.RAMDULARI S.AGARWAL IN ITA NOS.1038 & 1039/AHD/ 2011 FOR AYS 2007-08 & 2008-09 VIDE ORDER DATED 17/07/2015 HAD D ECIDED THE ISSUE IN FAVOUR OF ASSESSEE. HE PLACED ON RECORD THE COPY O F THE AFORESAID ORDER AND POINTED TO THE RELEVANT FINDINGS OF THE ORDER OF THE TRIBUNAL. 5.2. THE COORDINATE BENCH FOR AYS 2007-08 & 2008-09 HAS HELD AS UNDER:- 5. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF B OTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE ASSESSI NG OFFICER HAS GIVEN THE FOLLOWING REASONS FOR THE REJECTION OF BOOKS OF ACC OUNTS:- 4. THE SUBMISSION OF THE ASSESSEE IS CONCERNED BUT NOT ACCEPTABLE DUE TO THE GIVEN REASONS AS UNDER: ITA NO. 1440/AH D/2012 ITO VS. SMT.RAMDULARI SIDHKISHOR AGARWAL ASST.YEAR 2009-10 - 6 - I. COMPARE TO THE SAME STYLE OF BUSINESS II. IT IS ALSO NOT ACCEPTABLE PRINCIPALLY THAT, THE ASS ESSEE HAS TAKEN SO MUCH RISK TO GAIN THE NOMINAL PROFIT BY DOING SU CH A HUGE TURNOVER. III. DURING THE YEAR THE ASSESSEE IS NOT USING ANY BUSIN ESS PREMISES FOR HER TRADING ACTIVITIES WHICH IS NEXT T O IMPOSSIBLE LOOKING TO THE HUGE TURNOVER OF DIFFERENT KINDS OF CLOTHS EVEN THE ASSESSEE IS KEEPING HUGE QUANTITY OF THE DIFFER ENT TYPES OF CLOTHS AT THE END OF THE YEAR. IV. MOREOVER, FROM THE BALANCE SHEET, IT IS SEEN THAT, THE ASSESSEE HAS SHOWN SUNDRY CREDITORS AND ALSO SHOWN THE SUNDR Y DEBTORS WITH THE HUGE OUTSTANDING BALANCE. V. THE LOANS & ADVANCES SHOWN BY THE ASSESSEE OF RS.1,35,00,000/- WHERE SHE HAS NOT EVEN HAVING ANY ASSETS IN HER BALANCE SHEET. IT IS ALSO SEEN THAT, THE ASSESS EE HAS HAVING HER OPENING CAPITAL ONLY OF RS. 1,25,710/-. FOR DOI NG SUCH SCALE OF BUSINESS THERE MUST BE REQUIRED SOME REASO NABLE CAPITAL AND ALSO FOR DOING SUCH SCALE OF BUSINESS T HERE MUST BE REQUIRED SOME BASIC INFRASTRUCTURE LIKE, STATIONERY , BUSINESS PREMISES, COMPUTER (AS ALL THE BILLS ARE PREPARED O N THE COMPUTER) AND REASONABLE STRENGTH OF THE STAFF MEMB ERS FOR THE OPERATING THE BUSINESS ACTIVITIES. VI. ASSESSEE TAKEN PLEA THAT, NO EXPENSES INCURRED FOR THE BUSINESS DUE TO ALL THE TRANSACTIONS EXECUTED AFTER ORDER RE CEIVING FROM THE PURCHASER PARTY AND THEN THE SAME IS SOLD OUT A ND GOODS DELIVERED DIRECTLY TO MY PURCHASER FROM MY SELLER P ARTIES. BUT THIS CONTAINS ALSO NOT SUPPORTED AS BEING A LADY SH E HAS NOT HAVING ANY PHONE OR ANY EXPENSES ON ACCOUNT OF TELE PHONE OF THE STAFF MEMBERS. IT IS ALSO SEEN FROM THE CAPITAL ACCOUNT THAT, THE ASSESSEE IS WITHDRAWING ONLY RS.19,000/-. 6. IN OUR OPINION, NONE OF THE ABOVE REASONS CAN JU STIFY THE REJECTION OF BOOKS OF ACCOUNTS AND APPLICATION OF HIGHER GP RATE . SECTION 145, AS IT STOOD AT THE RELEVANT TIME, WHICH GIVES POWER TO THE ASSE SSING OFFICER TO REJECT THE BOOKS OF ACCOUNTS AND ESTIMATE THE PROFIT READS AS UNDER:- 145. (1) INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION OR INCOME FROM OTHER SOURC ES SHALL, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), BE COMPUTED I N ACCORDANCE WITH ITA NO. 1440/AH D/2012 ITO VS. SMT.RAMDULARI SIDHKISHOR AGARWAL ASST.YEAR 2009-10 - 7 - EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGU LARLY EMPLOYED BY THE ASSESSEE. (2) THE CENTRAL GOVERNMENT MAY NOTIFY IN THE OFFIC IAL GAZETTE FROM TIME TO TIME ACCOUNTING STANDARDS TO BE FOLLOWED BY ANY CLASS OF ASSESSEES OR IN RESPECT OF ANY CLASS OF INCOME. (3) WHERE THE ASSESSING OFFICER IS NOT SATISFIED AB OUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) OR ACCOUN TING STANDARDS AS NOTIFIED UNDER SUB-SECTION (2), HAVE NOT BEEN REGUL ARLY FOLLOWED BY THE ASSESSEE, THE ASSESSING OFFICER MAY MAKE AN ASSESSM ENT IN THE MANNER PROVIDED IN SECTION 144. 7. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSING OFFICER CAN REJECT THE BOOKS OF ACCOUNTS IF, I. HE IS NOT SATISFIED ABOUT THE CORRECTNESS AND CO MPLETENESS OF ACCOUNTS; II. WHERE THE METHOD OF ACCOUNTING OR ACCOUNTING ST ANDARDS AS PRESCRIBED HAS NOT BEEN FOLLOWED REGULARLY. THE ASSESSING OFFICER, WHILE REJECTING THE BOOKS AC COUNTS, HAS NOT POINTED OUT THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE IS INCOR RECT OR INCOMPLETE. SIMILARLY, HE HAS NO WHERE STATED THAT THE ASSESSEE DID NOT FOLLOW THE METHOD OF ACCOUNTING PROVIDED U/S 145(1) OR ACCOUNTING STA NDARDS AS PRESCRIBED U/S 145(2). THEREFORE, IN OUR OPINION, NO ADEQUATE REAS ONS HAVE BEEN GIVEN BY THE ASSESSING OFFICER FOR REJECTION OF THE BOOKS OF ACCOUNTS. MERELY BECAUSE THE GROSS PROFIT IS LOW, IT WOULD NOT BE SUFFICIENT TO REJECT THE BOOKS OF ACCOUNTS. THE LOW GROSS PROFIT CAN BE A REASON TO P ROBE DEEP INTO THE ACCOUNTS SO AS TO ASCERTAIN WHETHER THE ACCOUNTS AR E CORRECT OR NOT. BUT, THAT BY ITSELF IS NOT SUFFICIENT TO REJECT THE BOOKS OF ACCOUNTS. IN FACT, THE REASONS GIVEN BY THE ASSESSING OFFICER JUSTIFY THE LOW GROS S PROFIT DISCLOSED BY THE ASSESSEE. IF THE ASSESSEE HAS A MEAGER CAPITAL OF R S.1,25,000/-, SHE DOES NOT HAVE ANY BUSINESS PREMISES AND SHE DOES NOT HAVE AN Y EMPLOYEES. IT ONLY SUPPORTS THE CONTENTION OF THE ASSESSEE THAT SHE IS SIMPLY WORKING AS AN INTERMEDIATOR BETWEEN THE BUYER AND THE SELLER. SHE FIRST BOOKS THE ORDER FROM THE BUYER AND THEN ARRANGES FOR THE SELLER. THE GOO DS IS SUPPLIED DIRECTLY BY THE SELLER TO THE BUYER AND THE PAYMENT TO THE SELL ER IS MADE AFTER RECEIVING THE PAYMENT FROM THE BUYER. SHE HAS ALSO EXPLAINED THAT SHE HAS KEPT A VERY SMALL PERCENTAGE OF MARGIN SO AS TO ACHIEVE HUGE TU RNOVER. ALL THE FACTS NARRATED BY THE ASSESSING OFFICER FOR REJECTION OF BOOKS OF ACCOUNTS AND ITA NO. 1440/AH D/2012 ITO VS. SMT.RAMDULARI SIDHKISHOR AGARWAL ASST.YEAR 2009-10 - 8 - ESTIMATION OF PROFIT DOES NOT SATISFY THE CONDITION S PRESCRIBED U/S 145(3) FOR REJECTION OF BOOKS OF ACCOUNTS. ON THE OTHER HAND, THESE FACTS JUSTIFIED LOW GP DISCLOSED BY THE ASSESSEE. MOREOVER, WE FIND THA T UNDER THE IDENTICAL SET OF FACTS, THE ASSESSING OFFICER IN THE ORDER PASSED U/S 143(3) IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11, ACCEPTED THE ASSE SSEES BOOKS OF ACCOUNTS WHEREIN THE GP RATE OF 0.13% IS DISCLOSED. THE FIND ING OF THE ASSESSING OFFICER IN PARAGRAPH 4 OF THE ORDER READS AS UNDER: - 4. THE ASSESSEE IS AN INDIVIDUAL. DURING THE AY U NDER CONSIDERATION SHE WAS ENGAGED INTO THE BUSINESS OF TRADING IN TEX TILES VIZ. HOSIERY FABRIC, KNITTED GRAY CLOTH ETC. IN THE NAME & STYLE OF M/S KAMLESH TRADERS. FOR THE AY UNDER CONSIDERATION, THE ASSESS EE HAS CLOCKED TURNOVER OF RS.24.45 CRORES AND DISCLOSED GROSS PRO FIT OF RS.3,22,525/- WHICH WORKS OUT AT 0.13% OF TURNOVER. THE ASSESSEE HAS DISCLOSED THE TURNOVER, GP AND GP RATE FOR THE AY 2 009-10 AT RS.20.80 CRORES; RS.2.50 LACS AND 0.12%. DURING THE ASSESSMENT PROCEEDINGS VARIOUS DETAIL S WERE CALLED, WHICH WERE EXAMINED IN DETAIL AND COPIES OF NECESSA RY DOCUMENTS AS DEEMED FIT WERE RETAINED AND KEPT ON RECORD. AFTER SCRUTINY OF VARIOUS DETAILS FILED DURING THE PROCEEDINGS, THE INCOME RE TURNED BY THE ASSESSEE IS ACCEPTED. 8. ADMITTEDLY, THE NATURE OF THE BOOKS OF ACCOUNTS AND METHOD OF ACCOUNTING IN THE YEAR UNDER CONSIDERATION IS IDENT ICAL TO THE BOOKS OF ACCOUNTS AS WELL AS METHOD OF ACCOUNTING OF ASSESSM ENT YEAR 2010-11 WHICH IS ACCEPTED BY THE REVENUE IN THE ORDER PASSED U/S 143(2). WE ALSO FIND THAT UNDER THE IDENTICAL SET OF FACTS, THE ITAT-AHMEDABA D BENCH SUSTAINED THE ORDER OF THE CIT(A) IN THE CASE OF M/S. VISHAL FINA NCE CORPORATION, VIDE ITA NO.1042/AHD/2011, WHEREIN THE ITAT OBSERVED AS UNDE R:- 7. FROM THE BARE READING OF THIS SECTION, IT WOULD REVEAL THAT IT PROVIDES THE MECHANISM HOW TO COMPUTE THE INCOME OF THE ASSESSEE. ACCORDING TO SUB-CLAUSE (I), THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF THE BUSINESS OR PROFESSIONS O R INCOME FROM OTHER SOURCES' SHALL BE COMPUTED IN ACCORDANCE WITH THE M ETHOD OF ACCOUNTANCY EMPLOYED BY AN ASSESSEE REGULARLY SUBJE CT TO THE SUB- SECTION (2) OF SECTION 145 OF THE ACT. SUB-SECTION (2) PROVIDES THAT THE ITA NO. 1440/AH D/2012 ITO VS. SMT.RAMDULARI SIDHKISHOR AGARWAL ASST.YEAR 2009-10 - 9 - CENTRAL GOVERNMENT MAY NOTIFY IN THE OFFICIAL GAZET TE FROM TIME TO TIME THE ACCOUNTING STANDARD REQUIRED TO BE FOLLOWE D BY ANY CLASS OF ASSESSEE IN RESPECT OF ANY CLASS OF INCOME. THUS, I T INDICATES THAT INCOME HAS TO BE COMPUTED IN ACCORDANCE WITH THE ME THOD OF ACCOUNTANCY FOLLOWED BY AN ASSESSEE, I.E., CASH OR MERCANTILE. SUCH METHOD HAS TO BE FOLLOWED KEEPING IN VIEW THE ACCOU NTING STANDARD NOTIFIED BY THE CENTRAL GOVERNMENT FROM TIME TO TIM E. SUB-CLAUSE (3) PROVIDES A SITUATION, I.E., IF THE ASSESSING OFFICE R IS UNABLE TO DEDUCE THE TRUE INCOME ON THE BASIS OF METHOD OF ACCOUNTAN CY FOLLOWED BY AN ASSESSEE THEN HE CAN REJECT THE BOOK RESULTS AND AS SESS THE INCOME ACCORDING TO HIS ESTIMATE OR ACCORDING TO HIS BEST JUDGMENT. THE ASSESSING OFFICER IN THAT CASE IS REQUIRED TO POINT OUT THE DEFECTS IN THE ACCOUNTS OF ASSESSEE AND REQUIRE TO SEEK EXPLANATIO N OF THE ASSESSEE QUA THOSE DEFECTS. IF THE ASSESSEE FAILED TO EXPLAI N THE DEFECTS THEN ON THE BASIS OF THE BOOK RESULTS, INCOME CANNOT BE DET ERMINED AND ASSESSING OFFICER WOULD COMPUTE THE INCOME ACCORDIN G TO HIS ESTIMATION KEEPING IN VIEW THE GUIDING FACTOR FOR E STIMATING SUCH INCOME. 8. THE FIRST OBJECTION OF THE ASSESSING OFF ICER IS THAT ASSESSEE HAS NOT BEEN MAINTAINING CLOSING STOCK AND OPENING STOCK. THE EXPLANATION OF THE ASSESSEE IS THAT IT WAS NOT HAVI NG ANY CLOSING STOCK, THEREFORE, THERE WAS NO JUSTIFICATION TO SUGGEST TH AT STOCK STATEMENT IS TO BE PREPARED. WE HAVE CONSIDERED THE REASON ASSIG NED BY THE ASSESSING OFFICER BUT THE ABOVE REASON DOES NOT SUG GEST ANY DEFECT IN THE ACCOUNTS WHICH PROHIBITS HIM TO DEDUCE THE TRUE INCOME FROM THE ACCOUNTS. FALL IN GP CANNOT BE A GROUND FOR REJECTI NG THE BOOK RESULT SHOWN BY THE ASSESSEE. IT IS ONE OF THE CORROBORATI VE FACT FOR THE ASSESSING OFFICER TO DOUBT THE BOOKS BUT THE LD. AS SESSING OFFICER OUGHT TO HAVE POINTED OUT THE DEFECTS IN THE ACCOUN TS, ONLY THEREAFTER HE CAN ESTIMATE THE GP. LD. FIRST APPELLATE AUTHORI TY RE-APPRECIATED THE MATERIAL AVAILABLE AND ONLY THEN DELETED THE AD DITION. AFTER GOING THROUGH THE ORDER, WE DO NOT FIND ANY REASON TO INT ERFERE WITH IT. ACCORDINGLY, APPEAL OF THE REVENUE IS REJECTED. 9. IN VIEW OF ABOVE, WE DO NOT FIND ANY JUSTIFICATI ON TO INTERFERE WITH THE ORDER OF THE CIT(A) WHICH IS SUSTAINED AND THE REVE NUES APPEAL IS DISMISSED. 6. BEFORE US, REVENUE HAS NOT BROUGHT ANY CONTR ARY BINDING DECISION IN ITS SUPPORT. UNDER THE PROVISIONS OF SECTION 145 O F THE ACT, THE AO CAN ITA NO. 1440/AH D/2012 ITO VS. SMT.RAMDULARI SIDHKISHOR AGARWAL ASST.YEAR 2009-10 - 10 - REJECT THE BOOKS OF ACCOUNTS IF HE IS NOT SATISFIE D ABOUT THE CORRECTNESS AND COMPLETENESS OF ACCOUNTS OR WHERE THE METHOD OF ACCOUNTING OR ACCOUNTING STANDARDS AS PRESCRIBED HAS NOT BEEN REG ULARLY FOLLOWED. THE AO HAS NOT POINTED OUT THAT THE BOOKS OF ACCOUNTS O F THE ASSESSEE IS INCORRECT OR INCOMPLETE. HE HAS ALSO NOT STATED TH AT THE ASSESSEE HAS NOT FOLLOWED THE METHOD OF ACCOUNTING ACCORDING TO THE PROVISIONS OF SECTION 145 OF THE ACT. THE MARGINAL FALL IN GP RATIO COMP ARED TO PRECEDING YEAR AND NON-INCURRING OF EXPENDITURE LIKE TRAVELLING, T ELEPHONE, SALARY, ETC. ARE NOT THE RELEVANT REASONS FOR REJECTING OF BOOKS OF ACCOUNTS UNDER SECTION 145 OF THE ACT. IN VIEW OF THE ABOVE, THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOK RESULT AS HE HAD NOT POINTED OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS AND CONCLUSION OF THE AO TO M AKE THE ADDITION BY APPLYING THE GP RATE WAS PURELY BASED ON SURMISES A ND CONJECTURES. IN VIEW OF THE AFORESAID FACTS AND FOLLOWING THE DECIS ION CITED HEREINABOVE, WE UPHOLD THE ORDER OF LD.CIT(A). THUS, THIS GROU ND OF REVENUE IS DISMISSED. 7. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . THIS ORDER PRONOUNCED IN OPEN COURT ON 05 /0 9 /2016 SD/- SD/- ( ) ( ) ( SHAILENDRA YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 05/ 09 /2016 3...,,.,../ T.C. NAIR, SR. PS ITA NO. 1440/AH D/2012 ITO VS. SMT.RAMDULARI SIDHKISHOR AGARWAL ASST.YEAR 2009-10 - 11 - !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. %' / THE APPELLANT 2. ()%' / THE RESPONDENT. 3. 456 7 / CONCERNED CIT 4. 7 ( ) / THE CIT(A)-XIV, AHMEDABAD 5. :;<(,56 , .562 , 4 / DR, ITAT, AHMEDABAD 6. <=>?- / GUARD FILE. / BY ORDER, ):( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 03.08.16 (MANUSCRIPT GIVEN BY HONBLE AM IS ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 03.08.16/6.9.16 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.6.9.16 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 6.9.16 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER