M/s Roxy Agencies, Delhi V. ITO, New Delhi

ITA 1966/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53099 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 28-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 30-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Keywords: Unexplained investment; Business income
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI F BENC H BEFORE SHRI A.D. JAIN, JM & SHRI A.N. PAHUJA, AM ITA NO.1966/DEL/2010 ASSESSMENT YEAR:2006-07 M/S ROXY AGENCIES, 957/2, CHHOTA CHHIPIWARA, CHAWRI BAZAR,NEW DELHI V/S . INCOME TAX OFFICER, WARD 29(2), NEW DELHI [PAN NO.: AAAFR 2463 E] (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI ANOOP SHARMA, ADVOCATE REVENUE BY SMT. PRATIMA KAUSHIK, DR DATE OF HEARING 28-10-2011 DATE OF PRONOUNCEMENT 04 -11-2011 O R D E R A.N.PAHUJA:- THIS APPEAL FILED ON 30.4.2010 BY THE ASSESSEE AGAI NST AN ORDER DATED 04.03.2010 OF THE LEARNED CIT(A)-XXV, NEW DEL HI RAISES THE FOLLOWING GROUNDS:- 1. THAT THE LEARNED CIT(A) HAS ERRED IN REJECTING T HE FULLY SUPPORTED BOOKS OF ACCOUNTS WITHOUT POINTING OUT AN Y MATERIAL ANOMALY THEREIN AND IN CONSEQUENCE NOT ACCEPTING THE PROFIT FIGURES AS PER BOOKS OF ACCOUN TS, WHICH IS AGAINST THE LAW AND ON FACTS OF THE CASE. 2. WITHOUT PREJUDICE TO ABOVE, PURSUANT TO REJECTIO N OF BOOKS OF ACCOUNTS, WHILE CONFIRMING THE APPLICATION OF NET PROFIT RATE OF 5% OF THE TURNOVER IN WHOLE SALE PAP ER TRADE FOR COMPUTING THE BUSINESS PROFITS AS ADOPTED BY TH E ASSESSING OFFICER THE LEARNED CIT(A) HAS ERRED IN N OT RELYING UPON THE TRADING RESULTS OF EARLIER/SUBSEQU ENT YEARS OF THE SAME ASSESSEE, ON HOLDING THE SAME AS UN- RELIABLE BASED ON UNILATERAL FINDING OF A MINOR DIF FERENCE IN OPENING & CLOSING STOCK(PARA 4.3.3 OF CIT(A)S O RDER) WITHOUT CONFRONTING THE ASSESSEE/AR ON THE SAID ISS UE AND ALSO WITHOUT SUBSTANTIATING THE SAID ADOPTED RA TE WITH ANY OTHER COMPARATIVE INSTANCE AND HENCE THE APPLICATION OF SAID RATE OF 5% IS WITHOUT ANY BASIS AND IS VERY EXCESSIVE, IS THEREFORE BAD IN LAW AND ON FACT S OF THE CASE. ITA N O.1966 /DEL./2010 2 3. THAT WITH DUE REGARD AND RESPECT TO ALL AUTHORIT IES AND PROFESSIONALS, THE REMARKS OF LEARNED CIT(A) VIDE L AST LINE PARA (3) OF THE ORDER MISCHIEVOUS ARE NOT TO BE APPRECIATED IN VIEW OF THE CATEGORICAL RELIANCE ON THE FACTS CONTAINED IN THE ASSESSMENT ORDER, AS TAKEN U P IN THE FIRST GROUND OF APPEAL BEFORE LEARNED CIT(A). 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND, DELE TE OR ALTER ANY ONE OR MORE OF THE AFORESAID GROUNDS OF A PPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2. FACTS IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF ` ` 19,830/- FILED ON 20 TH SEPTEMBER, 2006 BY THE ASSESSEE, TRADING IN PAPER ,AFTER BEING PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1 961 (HEREAFTER REFERRED TO AS THE ACT) WAS SELECTED FOR SCRUTINY WITH THE SERVIC E OF A NOTICE U/S 143(2) OF THE ACT . SUBSEQUENTLY , THE ASSESSING OFFICER[AO IN SH ORT] ISSUED DETAILED QUESTIONNAIRES DATED16.1.2008 & 18.2.2008.DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER[AO IN SHORT] OBT AINED INFORMATION U/S 133 (6) OF THE ACT FROM J&K BANK, CHAWRI BAZAR, DELHI. ON PERUSAL OF AUDITED TRADING AND PROFIT & LOSS ACCOUNT FILED BY THE ASSESSEE WI TH THE RETURN VIS-A-VIS AUDITED TRADING AND PROFIT & LOSS ACCOUNT SUBMITTED BY THE BANK, THE AO NOTICED THAT THE FOLLOWING DISCREPANCIES: AS PER AUDITED PROFIT AND LOSS AC COUNT FILED WITH THE RETURN OBTAINED FROM BANK PURCHASES ` 88,46,487.15 ` I,85,44,875.15 SALES ` 89,07,548.45 ` 1,89,07,548.15 GROSS PROFIT ` 2,67,805.30 ` 5,69,117.30 INTEREST RECEIVED ` 9,28,381 ` 6,27,069 SHORTAGE & EXCESS 0 ` 0.80 ITA N O.1966 /DEL./2010 3 2.1 IN VIEW OF THE AFORESAID DISCREPANCIES IN TH E TWO AUDITED PROFIT AND LOSS ACCOUNT, THE AO ISSUED A QUESTIONNAIRE DATED 20.3.2 008 ,REPRODUCED IN THE ASSESSMENT ORDER, ALONG WITH A NOTICE U/S 142(1) OF THE ACT. THE ASSESSEE DID NOT REPLY NOR ATTEMPTED TO RECONCILE THE AFORESAID DISCREPANCIES. EVEN IN RESPONSE TO QUESTIONNAIRES DATED 1.4.2008 ,19.5.200 8 & 12.11.2008 , THE ASSESSEE DID NOT RECONCILE THE DIFFERENCES. INTER A LIA, IT WAS POINTED OUT THAT THERE WAS A DIFFERENCE OF ` 1,99,964/- IN THE ACCOUNT OF M/S VEER AGENCIES, DELHI AS REVEALED FROM INFORMATION RECEIVED U/S 1 33(6) OF THE ACT. IN NUTSHELL, DESPITE GIVING SUFFICIENT OPPORTUNITY , THE ASSESSE E DID NOT RECONCILE THE FIGURES SHOWN IN THE TRADING AND PROFIT & LOSS AMOUNT ENCLO SED WITH THE RETURN VIS-A- VIS THAT OBTAINED FROM THE BANK. ACCORDINGLY, THE AO REJECTED THE BOOK RESULTS AND ESTIMATED PROFIT @ 5% OF THE SALES OF ` `18907548.45 MENTIONED IN THE TRADING AND PROFIT & LOSS ACCOUNT OBTAINED FROM THE BANK, RESULTING IN NET PROFIT OF ` 9,50,616/-. BESIDES, THE AO OBSERVED THAT THERE W AS A DIFFERENCE OF ` 99,98,388= (1,85,44,875 88,46,487) IN PURCHASES. ACCORDINGLY, THE AO ADDED AN AMOUNT OF ` 19,99,678/- @20% OF THE DIFFERENCE IN PURCHASES BY WAY OF UNEXPLAINED INVESTMENT . 2.2 SINCE THE ASSESSEE HAD SHOWN INTEREST INCOME OF ` 6,27,069/-IN PROFIT AND LOSS ACCOUNT SUBMITTED TO THE BANK WHILE THE TDS CE RTIFICATES ENCLOSED WITH THE RETURN REVEALED INTEREST INCOME OF ` `9,28,381/-, THE AO ADDED INTEREST INCOME OF ` `9,28,381/-. 3. ON APPEAL, THE LEARNED CIT(A) UPHELD THE ADDITIO N OF ` 9,50,616/- WHILE DELETING THE ADDITION OF ` 19,99,678/- MADE BY THE AO IN THE FOLLOWING TERMS:- 4.2 AGGRIEVED BY THE ASSESSMENT ORDER, THE APPELLA NT HAS FILED THIS APPEAL. IT IS CONTENDED THAT THE ASSESSING OFFICER ERRED IN CONCLUDING THAT THREE SETS OF BOOKS OF ACCOUNTS WER E BEING MAINTAINED; THAT THE REJECTION OF THE AUDITED BOOKS WAS BASED ON WRONG FINDINGS; THAT .THE FIGURES REPORTED IN THE P &L ACCOUNT FILED WITH THE RETURN OF INCOME WERE DULY SUBSTANTIATED W ITH VARIOUS ITA N O.1966 /DEL./2010 4 DOCUMENTS INCLUDING THE COPIES OF THE DVAT RETURNS AND COPIES OF PURCHASE AND SALE REGISTERS; THAT THE BOOKS OF ACCO UNTS WERE PRODUCED DURING THE ASSESSMENT PROCEEDINGS, BUT NO ANOMALY OF ANY NATURE WAS NOTICED/POINTED OUT BY THE ASSESSING OFFICER; AND THAT A SWORN AFFIDAVIT BY SHRI RISHI AHUJA, ONE OF THE PARTNERS OF THE APPELLANT FIRM, WAS FILED BEFORE THE ASSESSING OFFI CER BUT WHICH ESCAPED HIS ATTENTION WHILE FRAMING THE IMPUGNED ORDER. 4.3 THE SUBMISSIONS OF THE APPELLANT ARE DULY CONSI DERED WITH RESPECT TO GROUNDS 2 & 3 OF THE APPEAL. 4.3.1 IT IS NOTED THAT BOTH THE P&L ACCOUNTS THE ONE FILED WITH THE RETURN OF INCOME AND THE ONE FILED BEFORE THE BANK ARE AUDITED. BOTH BEAR THE SIGNATURE AND STAMP OF THE AUDITOR, SHRI YOGENDRA KUMAR JAIN (M.N. 94798), CA OF JAIN BANSAL & GUPTA, CHARTERED ACCOUNTANTS. 4.3.2 IT IS NOTED THAT THE VARIATIONS REPORTED IN T HE TWO P&L ACCOUNTS PERTAIN TO NOT ONLY THE FIGURES OF PURCHASE, SALES AND INTEREST INCOME, BUT ALSO TO THE OPENING STOCK. THE P&L ACC OUNT FILED WITH THE RETURN SHOWS THE OPENING STOCK AT `RS. 1,4 7,109, WHILE THE P&L ACCOUNT FILED WITH THE BANK SHOWS THE OPENI NG STOCK AT `RS. 1,47,409. 4.3.3 DISCREPANCY IS ALSO NOTED IN THE CLOSING STOC K OF THE EARLIER YEAR AND /THE OPENING STOCK OF THE YEAR UNDER CONSIDERAT ION. WHILE THE P&L ACCOUNT PERTAINING TO FINANCIAL YEAR 2004-0 5, FILED WITH THE RETURN FOR THE ASSESSMENT YEAR 2005-06, REPORTS THE CLOSING STOCK FIGURE AT RS.`1,58,877, THE OPENING STOCK FIG URE FOR FINANCIAL YEAR 2005-06 IN THE P&L ACCOUNT FILED WIT H THE RETURN IN THE ASSESSMENT YEAR UNDER CONSIDERATION IS SHOWN AS RS.`1,47,109 ONLY. 4.3.4 IT IS ALSO NOTED THAT CONTRARY TO THE AVERMEN T MADE BY SHRI RISHI AHUJA, PARTNER IN THE APPELLANT FIRM, IN HIS AFFIDA VIT OF 26.11.2008 THAT THE P&L ACCOUNT FILED WITH THE BANK WAS SUBMIT TED BY THE STAFF DURING THE PERIOD OF HIS SICKNESS AND WITHOUT HIS KNOWLEDGE, THE P&L ACCOUNT FILED WITH THE BANK BEAR S HIS SIGNATURE ALONG WITH THAT OF THE AUDITOR. 4.3.5 THE OTHER ARGUMENT, ADVANCED BY SHRI RISHI AH UJA, PARTNER IN THE APPELLANT FIRM, IN HIS AFFIDAVIT OF 26.11.2008, THAT THE FIGURES REFLECTED IN THE P&L ACCOUNT FILED WITH THE BANK WE RE INFLATED TO SATISFY ONE OF THE NORMS FOR THE ELIGIBILITY OF LOA N WHICH REQUIRED THAT THE TOTAL SALES OF THE YEAR SHOULD BE FIVE TIM ES OR MORE OF THE TOTAL WORKING CAPITAL LOAN, IS NOT CONVINCING, CONSIDERING THAT THE CASH CREDIT SCHEME MADE AVAILABLE TO THE APPELL ANT BY THE J&K BANK WAS AGAINST THE MORTGAGE OF RESIDENTIAL PR OPERTY BEARING #283, SAINIK VIHAR, PITAMPURA, DELHI IN THE NAME OF SHRI RAJ AHUJA, THE OTHER PARTNER IN THE APPELLANT FIRM. 4.3.6 THE ASSESSING OFFICER POINTED OUT THE ANOMALI ES IN MARCH, 2008 ITSELF AND REPEATEDLY SOUGHT EXPLANATION FROM THE A PPELLANT. THE ITA N O.1966 /DEL./2010 5 APPELLANT FAILED TO ATTEND THE PROCEEDINGS TILL AP RIL, 2008. SUBSEQUENTLY, THE AUTHORIZED REPRESENTATIVE AND THE PARTNER OF THE FIRM APPEARED, BUT SIDE-TRACKED THE ISSUE OF DI SCREPANCY. IT WAS ONLY IN NOVEMBER, 2008 THAT THE PARTNER OF THE FIRM STATED THAT THE DIFFERENCES APPEARING IN THE TWO P&L ACCOU NTS WERE PURELY DUE TO INADVERTENCE AND BONAFIDE REASONS. 4.3.7 THE APPELLANT HAS SOUGHT TO RELY ON THE COPIE S OF THE DVAT RETURN AND PURCHASE AND SALE LEDGER ACCOUNTS THAT C ORRESPOND TO THE P&L ACCOUNT FILED WITH THE RETURN INCOME. H OWEVER, THESE FIGURES ARE IN QUESTION ON ACCOUNT OF THE EXISTENCE OF ANOTHER SET OF AUDITED P&L ACCOUNT FILED WITH THE BANK THAT REFLECTS SALES AT `RS.1,89,07,518 AS AGAINST `RS.89,07,548 REFLECT ED IN THE P&L ACCOUNT FILED WITH THE RETURN. 4.3.8 IT IS ALSO NOTED THAT THE AUDITOR, SHRI YOGEN DER JAIN, WHOSE SIGNATURE APPEARED ON THE TWO SETS OF P&L ACCOUNT U NDER SCRUTINY, ALSO APPEARED BEFORE THE ASSESSING OFFICE R DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, BUT GAVE NO E XPLANATION IN RESPECT OF THE DISCREPANCIES. 4.3.9 CONSIDERING THAT TWO SETS OF AUDITED P&L ACCO UNTS WERE AVAILABLE FOR THE SAME PERIOD WITH THE ASSESSING OF FICER, AND THERE WAS NO SATISFACTORY EXPLANATION BY THE APPELL ANT TO EXPLAIN THE DISCREPANCIES IN THE TWO ACCOUNTS, IT WAS A REA SONABLE PRESUMPTION THAT ALL WAS NOT WELL WITH THE ACCOUNTS OF THE APPELLANT AND THAT THERE WAS A PARALLEL CONDUCT OF BUSINESS OUTSIDE THE BOOKS. UNDER THESE CIRCUMSTANCES, NO C REDENCE CAN BE PLACED ON THE AFFIDAVIT OF SHRI RISHI AHUJA, WHICH IS MERELY A SELF SERVING PIECE OF PAPER WITH UNSUBSTAN TIATED CLAIMS. THEREFORE, THE ACTION OF THE ASSESSING OFF ICER, IN REJECTING THE BOOK RESULTS AS REFLECTED BY THE P&L ACCOUNT FILED WITH THE RETURN OF INCOME, IS SUSTAINED. CONSEQUEN TLY, GROUNDS 2 AND 3 OF THE APPEAL ARE DISMISSED. 5. GROUND 4 OF THE APPEAL IS CONSIDERED NEXT. 5.1 REJECTING THE BOOKS OF ACCOUNTS AND AFTER CONSI DERING THE SALES FIGURES REPORTED TO THE BANK AS THE CORRE CT FIGURE, THE ASSESSING OFFICER ESTIMATED THE NET PRO FIT AT 5% ON THE BASIS THAT THE NET PROFIT VARIED BETWE EN 5% TO 6% IN PAPER TRADE, AND ARRIVED AT THE FIGURE OF RS.`9,50,616/-.HE ALSO ESTIMATED 20% OF THE DIFFERENCE IN PURCHASES REPORTED IN THE TWO P&L ACCOUNTS AS UNEXPLAINED INVESTMENT FOR CARRYING OUT UNACCOUNTED SALES. WITH REGARD TO THE VARYING FIGU RES OF INTEREST INCOME, THE ASSESSING OFFICER ADOPTED T HE FIGURE REPORTED IN THE P&L ACCOUNT ACCOMPANYING THE RETURN OF INCOME IN VIEW OF THE TDS CERTIFICATES ITA N O.1966 /DEL./2010 6 ATTACHED ALONG WITH. THUS, TAXABLE INCOME WAS WORKED OUT BY ADDING RS.`9,50,616/- ON ACCOUNT OF NET PROFIT; RS.`19,99,678/- ON ACCOUNT OF UNEXPLAIN ED INVESTMENT IN PURCHASES; AND RS.`9,28,381/- ON ACCOUNT OF INTEREST INCOME. 5.2 THE APPELLANT IS AGGRIEVED BY THE ADDITIONS OF `RS.9,50,616 ON ACCOUNT OF NET PROFIT AND RS.`19,99,678 ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PURCHASES. IT IS CONTENDED THAT THE NET PROFIT RATE ADOPTED BY THE ASSESSING OFFICER AT 5% WAS EXCESSIVE AS COMPARED TO THE GP OF 2% TO 3% REPORTED BY THE APPELLANT IN BOTH THE ACCOUNTS. IT WAS ALSO ARGUED THAT THE ADDITIONS MADE BY THE ASSESSIN G OFFICER WERE BASED ON SUSPICION AND SURMISES AND WERE BAD IN LAW AND ON FACTS OF THE CASE. THE APPELLANT ALSO SUBMITTED WITH REGARD TO THE ADDITIO N ON ACCOUNT OF UNEXPLAINED INVESTMENT THAT WITHOUT PREJUDICE, THE ENTIRE PURCHASES ARE ON CREDIT AND N O ELEMENT OF INVESTMENT IS NORMALLY INVOLVED. FINALL Y IT WAS STATED THAT THE APPELLANT WAS A SMALL TIME ASSESSEE AND THAT HIS NET EARNINGS ARE HARDLY ANY TO MAKE HIS SURVIVAL. 5.3 THE ARGUMENTS OF THE APPELLANT ARE CONSIDERED: 5.3.1 THE ARGUMENT OF THE APPELLANT THAT IT IS A S MALL TIME ASSESSEE WITH HARDLY ANY NET EARNINGS FOR SURVI VAL IS FALSIFIED BY THE FINANCIAL POSITION APPARENT FROM T HE BALANCE SHEET IN THE BEGINNING AND THE END OF THE RELEVANT YEAR. A PERUSAL OF THE BALANCE SHEET REVEALS THAT, APART FR OM THE SECURED LOAN FROM THE BANK, THE APPELLANT HAS RAISE D UNSECURED LOAN OF ALMOST IDENTICAL AMOUNT OF RS.`38 LAKHS. THE CREDITORS AT THE BEGINNING OF THE YEAR WERE `RS . 81.5 LAKHS AND AT THE END STOOD AT RS.`30.65 LAKHS. DEBT ORS AT THE BEGINNING OF THE YEAR WERE RS.`1.65 CRORES AND THE END OF THE YEAR RS.`1.30 CRORES. THE APPELLANT HAS ALSO T AKEN CAR LOAN FROM BANK AND HAS CLAIMED EXPENSES OF RS.11.83 LAKHS. WITH SUCH LEVELS OF DEBTORS, CREDITORS AND EXPENSES, THE APPELLANT CANNOT BE SAID TO BE A SMALL TIME ASS ESSEE, NOR ONE WHO IS FINDING IT HARD TO MAKE TWO ENDS MEE T. 5.3.2 THE APPELLANT HAS ALSO SOUGHT TO RELY UPON TH E GP RATES REPORTED IN THE RETURN OF INCOME IN EARLIER Y EARS, BUT SINCE THERE IS DISCREPANCY OF FIGURES REPORTED IN T HE P&L ACCOUNT OF THE RELEVANT YEAR AND THE EARLIER YEAR, THE APPLICATION OF THE EARLIER GP RATES CANNOT BE A REL IABLE BASIS TO ESTIMATE THE PROFIT FOR THE CURRENT YEAR. ITA N O.1966 /DEL./2010 7 5.3.3 UNDER THESE CIRCUMSTANCES, FOLLOWING REJECTI ON OF BOOKS OF ACCOUNT, THE COMPUTATION OF THE NET PROFIT BY THE ASSESSING OFFICER AT 5% APPEARS TO BE MORE THAN FAI R AND REASONABLE AS IT TRANSLATES INTO GROSS PROFIT OF ON LY ABOUT 6.4%, WHICH IS NOT UNCOMMON IN PAPER TRADE. THEREF ORE, THE ADDITION OF `RS.9,50,616/- IS CONFIRMED. HOWEVER, THE ADDITION OF `RS.19,99,678/- AS UNEXPLAINED INVESTME NT MADE FOR CONDUCTING BUSINESS OUTSIDE THE BOOKS, AT 20% O F THE DIFFERENCE BETWEEN THE PURCHASES REPORTED IN THE P& L ACCOUNT FILED WITH THE BANK AND THAT FILED WITH THE RETURN IS NOT BACKED BY ANY APPARENT JUSTIFICATION, AND IS HE NCE DELETED. THUS, GROUND 4 OF THE APPEAL IS PARTLY AL LOWED. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF LEARNED CIT(A).THE LD. AR ON BEHALF OF THE ASSESSEE CONTENDED THAT SALE FIGURES SHOWN BY HIM IN THE PROFIT AND LOSS ACCOUNT ANNEXED TO THE RETURN, HAVING BEEN ACCEPTED BY THE SALES TAX AUTHORITIES, THE LD. CIT( A) WAS NOT JUSTIFIED IN REJECTING THE BOOKS AND UPHOLDING THE RATE OF 5% OF THE SALE S ADOPTED BY THE AO WHILE MAKING THE ADDITION. SINCE THE ASSESSEE HAD CONSIS TENTLY BEEN INCURRING LOSSES, THE BASIS ADOPTED BY THE AO WAS NOT JUSTIFIED, THE LD. AR ADDED . ON THE OTHER HAND ,THE LD. DR SUPPORTED THE FINDINGS OF LEARNED CIT(A) AND POINTED OUT THAT AFFIDAVIT FILED BY THE ASSESSEE BEFORE THE LD. CIT( A) WAS A SELF SERVING DOCUMENT AND COULD NOT BE RELIED UPON. HE ADDED THAT ESTIMA TION OF PROFIT @ 5% WAS REASONABLE ,KEEPING IN VIEW MARGIN IN THE TRADE WHI LE THE BOOK RESULTS SHOWN BY THE ASSESSEE IN THE PRECEDING YEARS WERE NOT RELIAB LE, AS CONCLUDED BY THE LD. CIT(A).INTER ALIA, THE LD. DR RELIED UPON THE DECIS ION IN SRIRAM & COMPANY. VS. CIT 316 ITR 139(RAJ). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, THE AUDITED TRADING AND PROFIT & LOSS ACCOUNT OBTAINED BY THE AO FROM THE BANK WAS SIGNED BY THE SAME AUDITOR VIZ. SHRI YOGENDRA KUMAR JAIN , CA OF JAIN BANSAL & GUPTA, CHARTERED ACCOUNTANTS, W HO SIGNED THE TRADING AND PROFIT & LOSS ACCOUNT AS ALSO BALANCESHEET ,ANNEXE D WITH THE RETURN. THOUGH THE SAID AUDITOR APPEARED BEFORE THE AO, HE DID NOT EXP LAIN THE DISCREPANCIES NOR THE REASONS FOR PREPARING TWO DIFFERENT SET OF FIN AL ACCOUNTS FOR THE SAME ASSESSMENT YEAR. DESPITE SUFFICIENT OPPORTUNITY ALL OWED BY THE AO AND THE LD. ITA N O.1966 /DEL./2010 8 CIT(A), THE ASSESSEE DID NOT RECONCILE THE DIFFERE NCES POINTED OUT BY THE AO ON THE BASIS OF AUDITED TRADING AND PROFIT & LOSS ACC OUNT OBTAINED FROM THE BANK VISA-VIS ENCLOSED WITH THE RETURN. EVEN BEFORE US, THE SITUATION IS NO BETTER AND LD. AR DID NOT ATTEMPT TO RECONCILE THE DIFFERENCES NOR EXPLAINED THE REASONS FOR PREPARING TWO SET OF AUDITED TRADING AND PROFIT & L OSS ACCOUNT AND BALANCESHEET. THE LD. CIT(A) POINTED OUT THAT THE VARIATION REPOR TED IN THE TWO P&L ACCOUNTS PERTAINED NOT ONLY IN RESPECT THE FIGURES OF PURCH ASE, SALES AND INTEREST INCOME, BUT EVEN IN RESPECT OF THE OPENING STOCK. THE P&L ACCOUNT RELEVANT TO THE FY 2004-05, FILED WITH THE RETURN FOR THE AY 2005-06, REFLECTED CLOSING STOCK OF ` 1,58,877 WHILE THE OPENING STOCK FIGURE FOR FINANCI AL YEAR 2005-06 IN THE P&L ACCOUNT FILED WITH THE RETURN FOR THE ASSESSMENT YE AR UNDER CONSIDERATION, REVEALED OPENING STOCK OF ` `1,47,109.AS REGARDS AVERMENTS MADE BY SHRI RISHI AHUJA, PARTNER OF THE FIRM, IN HIS AFFIDAVIT OF 26 .11.2008 THAT THE P&L ACCOUNT FILED WITH THE BANK WAS SUBMITTED BY THE STAFF DURING THE PERIOD OF HIS SICKNESS AND WITHOUT HIS KNOWLEDGE, THE LD. CIT(A) POINTED OUT T HAT THE P&L ACCOUNT FILED WITH THE BANK BORE HIS SIGNATURE ALONG WITH THAT OF THE AUDITOR. AS REGARDS HIS AVERMENT THAT THE FIGURES REFLECTED IN THE P&L ACCO UNT FILED WITH THE BANK WERE INFLATED TO SATISFY ONE OF THE NORMS FOR THE ELIGIB ILITY OF LOAN WHICH REQUIRED THAT THE TOTAL SALES OF THE YEAR SHOULD BE FIVE TIMES OR MORE OF THE TOTAL WORKING CAPITAL LOAN, THE LD. CIT(A) OBSERVED THAT THE CASH CREDIT LIMITS AVAILABLE TO THE ASSESSEE WERE AGAINST THE MORTGAGE OF RESIDENTIAL PROPERTY B EARING #283, SAINIK VIHAR, PITAMPURA, DELHI IN THE NAME OF SHRI RAJ AHUJA, THE OTHER PARTNER IN THE FIRM. IT IS FURTHER MENTIONED BY THE LD. CIT(A) THAT THOUGH THE ANOMALIES WERE POINTED OUT TO THE ASSESSEE IN MARCH, 2008 ITSELF AND REPEATED OPP ORTUNITIES WERE ALLOWED TO THE ASSESSEE, HIS AR INITIALLY SIDE TRACKED THE ISS UE AND IT WAS ONLY IN NOVEMBER, 2008 THAT THE PARTNER OF THE ASSESSEE FIRM STATED T HAT THE DIFFERENCES APPEARING IN THE TWO P&L ACCOUNTS WERE PURELY DUE TO INADVER TENCE AND BONAFIDE REASONS. EVEN THE PLEA REGARDING ACCEPTANCE OF SALES BY SALE S TAX AUTHORITIES WAS REJECTED SINCE THE ASSESSEE ITSELF REFLECTED DIFFE RENT FIGURES IN AUDITED P&L ACCOUNT FILED WITH THE BANK . IN THE ABSENCE OF RE CONCILIATION OF PURCHASES AND SALES REFLECTED IN THE AUDITED TRADING AND PROFIT& LOSS ACCOUNT SUBMITTED BY THE ITA N O.1966 /DEL./2010 9 ASSESSEE TO BANK VIS--VIS ENCLOSED WITH THE RETURN AND THERE BEING NO COGENT EXPLANATION BEFORE US, WE DO NOT FIND ANY INFIRMITY IN THE APPROACH OF THE LD. CIT(A) IN UPHOLDING REJECTION OF BOOK RESULTS, DISC LOSED IN THE TRADING AND PROFIT LOSS ACCOUNT ENCLOSED WITH THE RETURN. THE ARGUMENT THAT SALES TAX AUTHORITIES HAVE ACCEPTED THE FIGURES IS NOT RELEVANT SINCE TH ERE IS NOTHING TO SUGGEST AS TO WHETHER OR NOT THE AUDITED PROFIT AND LOSS OBTAINED FROM THE BANK WAS PLACED BEFORE THE SALES TAX AUTHORITIES. IN THESE CIRCUMS TANCES, ONCE THE ASSESSEE FAILED TO RECONCILE THE FIGURES OF PURCHASES AND SA LES IN THE TWO AUDITED PROFIT & LOSS ACCOUNT , IT WAS OPEN TO THE AO AND THE LD. CI T(A) TO REJECT THE BOOK RESULTS AND ESTIMATE THE PROFITS, HAVING RECOURSE TO PROVI SIONS OF SEC.145(3) OF THE ACT THIS VIEW OF OURS IS ALSO FORTIFIED BY THE DECISIO N OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KY PILLIAH AND SONS, 63 ITR 411(SC). AS REGARDS ESTIMATION OF PROFITS, NO DOUBT THE AO/CIT(A) SHOUL D TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDGMENT ASSESSMENT AND SHOULD NOT ACT TOTALLY ARBITRARILY, BUT THERE IS NECESSARILY S OME AMOUNT OF GUESS WORK INVOLVED IN A BEST JUDGMENT ASSESSMENT, AND IT IS T HE ASSESSEE HIMSELF WHO IS TO BLAME AS HE DID NOT SUBMIT PROPER ACCOUNTS AND DETA ILS.[ KACHWALA GEMS VS JCIT, 288 ITR 10 (2007)(SC) ]. IT IS TRUE THAT AO OR THE CIT(A) ARE NOT FETTERED BY TECHNICAL RULES OF EVIDENCE AND ARE ENTITLED TO ACT ON MATERIALS WHICH MAY NOT BE ACCEPTED AS EVIDENCE IN COURT OF LAW, NEVERTHELESS, THE ASSESSING OFFICER SHOULD ADOPT A METHOD WHICH MUST REFLECT THE PROFITS TRULY AND JUSTLY[ GEMINI PICURES LTD. VS CIT (1958) 33 ITR 547 (MAD).] FOR ESTIMATING THE GROSS PROFIT, THE AO AND THE LD. CIT(A) CAN ALWAYS HAVE A LOOK AT THE MARGIN RETURNED IN COMPARABLE CASES OR EVEN IN ASSESSEES OWN CASE. WE FIND THAT THE AO AFTER REJECTING BOOK RESULTS ESTIMATED NET PROFIT @ 5% ON THE GROUND THA T THE NET PROFIT RATE IN THE PAPER INDUSTRY VARIED BETWEEN 5 TO 6%.HOWEVER, THE BASIS FOR SUCH CONCLUSION IS NOT EVIDENT FROM HIS ORDER NOR ANY COMPARABLE CASE S HAVE BEEN CITED.THE LD. CIT(A) WHILE UPHOLDING REJECTION OF BOOK RESULTS SU STAINED THE ADDITION MADE BY THE AO ON THE GROUND THAT EARLIER YEAR RESULTS WERE NOT RELIABLE IN VIEW DISCREPANCIES IN THE FIGURES IN THE EARLIER YEAR. T HE LD. AR ON THE OTHER HAND, SOUGHT ESTIMATION OF PROFITS ON THE BASIS OF EARLI ER YEARS. HOWEVER, NEITHER THE ITA N O.1966 /DEL./2010 10 AO/ THE LD. CIT(A) NOR EVEN THE ASSESSEE CITED ANY COMPARABLE INSTANCES. FOR ESTIMATING THE PROFITS, THE AO/LD. CIT(A) CAN AL WAYS HAVE A LOOK AT THE MARGIN RETURNED IN COMPARABLE CASES OR EVEN IN ASSESSEES OWN CASE. SINCE FOR ESTIMATING PROFITS, COMPARABLE INSTANCES ARE NOT BE FORE US NOR EVIDENT FROM THE IMPUGNED ORDER, WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO FOR ESTIMATING PROFITS IN THE LIGHT OF COMPARABLE INSTANCES, AFTER ALLOWING SUFFICIENT OPPORTUNITY TO THE ASSESSEE. CONSEQUENTLY, GROUND NO. 1 IN THE APPEA L IS DISMISSED WHILE GROUND NO.2 IS ALLOWED AS INDICATED HEREINBEFORE. 6. GROUND NO.3 RELATES TO CERTAIN OBSERVATIONS BY THE LD. CIT(A). SINCE THE LD. AR ON BEHALF OF THE ASSESSEE DID NOT MAKE ANY SUBMI SSIONS BEFORE US ON THIS GROUND WHILE NO ADDITIONAL GROUND HAVING BEEN RAISE D BEFORE US IN TERMS OF RESIDUARY GROUND NO. 4 IN THE APPEAL, ACCORDINGLY, THESE GROUNDS ARE DISMISSED. 7. IN THE RESULT, APPEAL IS PARTLY ALLOWED BUT F OR STATISTICAL PURPOSES. SD/- SD/- (A.D. JAIN) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. M/S ROXY AGENCIES, 957/2, CHHOTA CHHIPIWARA, CHA WRI BAZAR, NEW DELHI. 2. INCOME TAX OFFICER, WARD 29 (2), NEW DELHI. 3. CIT(A)-XXV, NEW DELHI. 4. CIT CONCERNED. 5. DR, ITAT,F BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI ORDER PRONOUNCED IN OPEN COURT