PIONEER SUITINGS P LTD., Jaipur V. ITO, Jaipur

ITA 171/JPR/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3012 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-05-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 14-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA
• Keywords: Rejection of books of accounts; Depreciation

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH SMC JAIPUR BEFORE SHRI B.R. JAIN, ACCOUNTANT MEMBER ITA NO. 171/JP/2013 ASSTT. YEAR : 2006-07 PAN : AAACP 8242 C M/S. PIONEER SUITINGS (P) LTD. VS. THE ITO D-20, SHANTI PATH, TILAK NAGAR WARD- 6 (1) JAIPUR JAIPUR (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.C. PARWAL RESPONDENT BY : MS ROSHANTA MEENA DATE OF HEARING : 08.05.2013. DATE OF PRONOUNCEMENT : 08-05-2013 ORDER DATE OF ORDER :08/05/2013. PER B.R. JAIN, A.M. THIS APPEAL BY ASSESSEE AGAINST THE ORDER DATED 02 .02.2010 OF LD. CIT (APPEALS)- II, JAIPUR RAISES THE FOLLOWING GROUNDS :- 1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW UP HOLDING THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3). 2. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE TRADING ADDITION TO THE EXTENT OF RS. 2.50 LACS. 2.1 BRIEFLY THE FACTS ARE THAT THE ASSESSEE IS ENGA GED IN MANUFACTURING AND TRADING OF CLOTHES. ON SALES OF RS. 5,57,10,408/-, THE ASSESSE E DECLARED GROSS PROFIT OF RS. 44,86,792/- YIELDING GROSS PROFIT RATE OF 7.95% AS AGAINST GROSS PROFIT RATE OF 10.26% IN THE IMMEDIATELY PRECEDING YEAR AND 8.24% IN THE YE AR BEFORE THAT I.E. ASSESSMENT YEAR 2004-05. DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE AO FOUND THAT THE GROSS PROFIT RATE HAS DECLINED WHICH IS COUPLED WITH THE FACT TH AT THE ASSESSEE VALUED ITS CLOSING STOCK 2 ON AVERAGE RATE BASIS BUT FAILED TO GET VERIFICATIO N DONE THEREOF DESPITE OPPORTUNITY. HE, THEREFORE, AFTER CONSIDERING THE ASSESSEE'S EXPLANA TION REJECTED THE ACCOUNTS BY APPLICATION OF PROVISIONS OF SECTION 145(3) OF THE ACT AND MADE TRADING ADDITION OF RS. 5.00 LACS. THE INCOME THUS STOOD ASSESSED AT NIL AFTER ALLOWING SE T OFF OF BROUGHT FORWARD DEPRECIATION ETC. 2.2 BEFORE THE LD. CIT(A), THE ASSESSEE ADMITTED TH AT ON DAY TODAY BASIS THE QUALITYWISE QUANTITY DETAILS ARE NOT MAINTAINED AND THEREFORE, CLOSING STOCK SHOWN FOR DIFFERENT QUANTITIES IS NOT CAPABLE OF VERIFICATION . CONSIDERING THE FINDINGS AND FACTS ON RECORD, HE UPHELD THE REJECTION OF BOOKS OF ACCOUNT BY APPLICATION OF PROVISIONS OF SECTION 145(3) OF THE ACT. HE HOWEVER, CONSIDERED I T JUSTIFIABLE TO RESTRICT THE TRADING ADDITION TO RS. 2.50 LACS ONLY. 2.3 SHRI P.C. PARWAL, LD. AR OF THE ASSESSEE PLACED ON RECORD PAPER BOOK RUNNING INTO 14 PAGES AND CONTENDED THAT THERE IS NO JUSTIFICATI ON IN UPHOLDING THE ACTION OF THE AO FOR REJECTION OF BOOKS OF ACCOUNT AS THE APPELLANT HAD EXPLAINED THE FALL IN GROSS PROFIT RATE DURING THE YEAR UNDER CONSIDERATION. HE HAS ALSO GI VEN A COMPARATIVE STATEMENT OF AVERAGE SALE PRICE AND QUANTITATIVE TALLY OF STOCK AND ITS VALUATION. THE AUTHORITIES BELOW HOWEVER, FOUND NO INFIRMITY IN THE METHOD OR BASIS OF VALUATION NOR ANY QUANTITATIVE DIFFERENCES HAVE BEEN POINTED OUT. THE REJECTION OF BOOKS OF ACCOUNT SO MADE, THEREFORE, IS REQUIRED TO BE SET ASIDE. THAT APART, THERE IS NO ADVERSE MATERIAL ON RECORD REQUIRING TRADING ADDITION. THE ADHOC TRADING ADDITION SO MAD E IS, THEREFORE, REQUIRED TO BE DELETED. 2.4 ON THE OTHER HAND, THE LD. DR PLACED STRONG REL IANCE ON THE FACTS FOUND BY THE AUTHORITIES BELOW. THE ASSESSEE HAS NOT SHOWN ANY P ERVERSITY IN THE FACTS FOUND FOR REJECTING THE ACCOUNTS BY APPLICATION OF PROVISIONS OF SECTION 145(3) OF THE ACT. THE LD. CIT(A) HAD BEEN QUITE REASONABLE TO ALLOW SUBSTANTI AL RELIEF IN THE TRADING ADDITION AND 3 CONSIDERING IT JUST AND APPROPRIATE, PROCEEDED TO SUSTAIN THE TRADING ADDITION OF RS. 2.50 LACS ONLY. NO FURTHER RELIEF IS REQUIRED TO BE GIVE N. 2.5 I HAVE HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD. ESSENTIALLY, THE ACCOUNTS WERE NOT FOUND CORRECT AND COMPLETE AS THE ASSESSEE DID NOT GET THE VALUATION OF CLOSING STOCK VERIFIED WITH REFERENCE TO BOOKS OF ACCOUNTS AND VOUCHERS ETC. EVEN IT IS NOT SHOWN THAT IT HAS CONSISTENTLY ADOPTED THE SAME METHOD OF VALUATION OF CLOSING STOCK ON AVERAGE COST BASIS. SUCH A DEFECT COUPLED WITH FALL IN GROS S PROFIT RATE MERITS REJECTION OF BOOKS OF ACCOUNT. I, THEREFORE, DO NOT FIND ANY INFIRMITY WI TH THE DECISION TAKEN BY THE LD. CIT(A) IN UPHOLDING REJECTION OF ACCOUNTS.. FINDING NO MER IT IN GROUND NO. 1 IN APPEAL BY THE ASSESSEE, THE SAME STANDS REJECTED. 3.1 IN SO FAR THE GROUND NO. 2 IS CONCERNED, THE LD . CIT(A) HAS LAID NO BASIS TO SUSTAIN AN ADHOC ADDITION OF RS. 2.50 LACS IN A CASE LIKE THIS. NO DISCREPANCIES WARRANTING ANY TRADING ADDITION HAVE BEEN REPORTED IN THE ORDERS O F THE AUTHORITIES BELOW. I, THEREFORE, DIRECT THE DELETION OF ENTIRE TRADING ADDITION AND ALLOW GROUND NO. 2 RAISED IN THE APPEAL 4.0. IN THE RESULT, THE ASSESSEE'S APPEAL STANDS P ARTLY ALLOWED AS PRONOUNCED IN THE OPEN COURT ON 08-05-2013 SD/- ( B.R. JAIN ) ACCOUNTANT MEMBER JAIPUR, MISHRA COPY FORWARDED TO :- M/S. PIONEER SUITINGS (P) LTD., JAIPUR. THE ITO WARD 6(1), JAIPUR. BY ORDER THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 171/JP/2013) AR ITAT JAIPUR. 4