Asst. Commissioner of Income Tax, Circle-2(1)(1), Surat V. M/s. Priyanshi Textile Private Ltd. , Surat

ITA 199/SRT/2022

AI Insights

The case involves the Assistant Commissioner of Income-tax, Circle-2(1)(1), Surat as the appellant and M/s. Priyanshi Textile Pvt. Ltd. as the respondent. The appeal pertains to the assessment year 2013-14 and challenges the order of the National Faceless Appeal Centre, Delhi, which had deleted the additions made by the Assessing Officer regarding unexplained cash credits, share capital, share premium, and estimation of gross profit. The Assessing Officer had initially added these amounts to the assessee's income, suspecting the genuineness of the transactions and the creditworthiness of the lenders. However, the CIT(A) found that the assessee had provided adequate evidence to substantiate the transactions, leading to the deletion of the additions. The Tribunal, after reviewing the submissions and evidence, concurred with the CIT(A)'s findings and dismissed the Revenue's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301806 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-07-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 26-06-2022
• Other Referred Cases: Major Metals vs. UOI, Keystone India P. Ltd. Vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gross profit estimation; Unexplained cash credit; Rejection of books of accounts; Bogus Share capital; Gift; Income from undisclosed sources; Source of fund; Set aside
• Section: 131; 68; 143(3); 142(1); 13; 145(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./ITA No.199/SRT/2022 (Ǔनधा[रणवष[ / Assessment Years: (2013-14) (Physical Court Hearing) Assistant Commissioner of Income-tax, Circle-2(1)(1), Surat, Room No.612, 6 th Floor, Aayakar Bhawan, Near Majura Gate, Surat-395001 Vs. M/s. Priyanshi Textile Pvt.Ltd., C/2, Plot No.74-79, Kim Sayan Road, Sunrise Interagated Textile Park, Kareli, Olpad, Surat- 394540 èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAACY 4125 F (अपीलाथŎ /Appellant) (ŮȑथŎ /Respondent) िनधाŊįरती की ओर से /Assessee by : Shri Mehul Shah, CA राजˢ की ओर से/Revenue by : Shri Ashok B. Koli, CIT- DR स ु नवाई कȧ तारȣख/ Date of Hearing : 26/07/2023 घोषणा कȧ तारȣख/Date of Pronouncement : 29/08/2023 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the Revenue, pertaining to Assessment Year (AY) 2013-14, is directed against the order passed by the National Faceless Appeal Centre, Delhi [NFAC/Ld. CIT(A) for short] dated 30.04.2022, which in turn arises out of an assessment order passed by the Assessing Officer, under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 29.03.2016. 2. Grounds of appeal raised by the Revenue are as follows: “(i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.2,72,33,000/- made by the Assessing Officer on account of unexplained cash credit in the form of unsecured loan u/s 68 of the Act as the assessee has failed to prove bona fide of the transaction within the meaning of Section 68 of the I.T. Act, 1961. (ii) On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.1,08,00,000/- made by the Assessing Officer on account of unexplained share capital and share premium u/s 68 of the Act, since the assessee failed to prove the source of source. Page | 2 ITA No.199/SRT/2022 A. Y. 2013-14 M/s Priyanshi Textile Pvt. Ltd. (iii) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.1,04,57,507/- made on account of estimation of gross profit after rejecting the books of account u/s 145(3) of the Act as the assessee has not maintained day-to-day stock register as well as assessee was unable to explain the fall in gross profit rate with supporting documentary evidences. (iv) It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent. (v) The assessee craves leave to add, alter, amend and/or withdraw any ground(s) of appeal either before or during the course of hearing of the appeal.” 3. Ground No.1 raised by the Revenue relates to deleting the addition of Rs.2,72,33,000/- made by the Assessing Officer, on account of unexplained cash credit in the form of unsecured loan u/s 68 of the Act. 4. Brief facts qua the issue are that assessee filed its return of income for the year under consideration for the assessment year (AY) 2013-14 on 10.10.2013, declaring total income of Rs.16,16,500/-. On verification of the details filed during the course of assessment proceedings, it was observed that during the year, the assessee has received unsecured loans of Rs.2,72,33,000/-. The details of the total loan are as follows: Sr.No. Name Amount received during the year 1 China Gold Exim Pvt. Ltd. 1,23,04,000 2 Sai Ganesh Textile 5,00,000 3 Haresh Laljibhai Rudakiya 49,08,150 4 Nitesh Valjibhai Makrubia 45,36,150 5 Prashant Gobarbhai Hadiya 49,84,700 Total 2,72,33,000 5. At the initial stage, the assessee was asked to furnish contra- confirmation, PAN and addresses of the lenders as required u/s 68 of the Act, vide notice u/s 142(1) of the Act, dated 09.10.2015 relevant portion of which is reproduced as under: “5. Furnish complete details of unsecured loans/advances/deposits taken during the year under consideration (including squared up account). Furnish confirmatory letters along with full address and PAN of the lender.” 6. In response to this, the assessee, vide its letter dated 04.12.2015, has submitted a list giving details of unsecured loan. As the assessee has not Page | 3 ITA No.199/SRT/2022 A. Y. 2013-14 M/s Priyanshi Textile Pvt. Ltd. submitted complete details as required, therefore Assessing Officer has issued a show cause notice u/s 142(1) of the Act dated 06.01.2016, the relevant part of the same is reproduced below: “in case of fresh loan, if any, including squared accounts, please prove capacity & creditworthiness of the person from whom loan was received by you and in case of failure to prove the same, show cause as to why necessary additions be not made in your case treating the same as unexplained and your unaccounted income of the year.” 7. In response to this, the assessee, vide its letter dated 13.01.2015, submitted details related to unsecured loans along with confirmations letters, their bank account and copies of their return of income for the year. 8. However, the Assessing Officer noted that in the case of individual persons from whom assessee has received unsecured loans during the year, the assessee has submitted confirmations, ledgers, their bank accounts and copies of their return of income for the year. On perusal of these details, it was noted by Assessing Officer that these individuals have deposited amounts of cash in their respective bank account just before giving loan to the assessee. In other words, the individual lenders have deposited cash of equivalent amount in their bank account before issuing cheques. The assessee has failed to prove the source of such cash. It was claimed by the assessee that source of cash deposited in bank accounts of the lenders is gift received by them in cash from their relatives. However, Assessing Officer did not accept the contention of the assessee and asked the assessee to furnish complete details of gifts so received and the identity, capacity and creditworthiness of the so-called donors, if any. Therefore, Assessing Officer has issued another notice vide notice u/s 142(1) dated 02.03.2016, the assessee was specifically asked as under: “In case of any of the credit entry into the bank or cash book is claimed to have been received from some person, please produce the person with all evidences to prove capacity& creditworthiness of the person as also genuineness of the transaction & identity proof, bank account, return of income, balance sheet and Page | 4 ITA No.199/SRT/2022 A. Y. 2013-14 M/s Priyanshi Textile Pvt. Ltd. audit report of the said person. Similar exercise is to be done in respect of unsecured loans and investors.” 9. However, assessee could not furnish complete details, therefore, Assessing Officer noted that capacity and creditworthiness of the creditors and genuineness of the loan transactions is not proved. The Assessing Officer noted that in respect of other two concerns, the assessee has not given complete details such as their confirmation, acknowledgement of IT return with computation of total income, return of income, balance sheet and audit report so as to prove capacity and creditworthiness of the creditors and genuineness of the loan transactions. Although some of details have been furnished by the assessee by way of letter dated 28.02.2016, however the Assessing Officer noted that these were not sufficient. The Assessing Officer noted that in the case of M/s Sai Ganesh Textiles merely two pages of bank statement and a computer print-out of ledger is given. There is no authenticity of such computer print-out of leger. In the bank account there is a cash deposit of Rs.5,00,000/- on the same day when cheque is issued to the assessee. In the case of China Gold Exim Pvt. Ltd. again a computer print-out is given which is not signed by anybody and thus, has no authenticity. In the so-called bank account, there is no proof that it is from the bank officially. In fact it is also just a plane paper computer print out. There are credit entries just before issue of cheque to the assessee. At the end of the year, the assessee claimed that China Gold Exim Pvt. Ltd. received funds from some other private limited companies but nothing has been submitted to prove the same. Although photocopy of part of audit report of China Gold Exim Pvt. Ltd. was submitted by assessee, however, the Assessing Officer noted that the same is not a proof for capacity and creditworthiness. As per the details there is a loss to the said company during the year. Total capital and reserves of the said company are of Rs.57,805/- only. Unless and until the lender is produced for verification with complete details, it cannot be said that capacity Page | 5 ITA No.199/SRT/2022 A. Y. 2013-14 M/s Priyanshi Textile Pvt. Ltd. and creditworthiness is established. From the above, it is crystal clear that the assessee has introduced its unaccounted income in form of cash credits by using name of different persons, who have no capacity to advance any money to the assessee and that is why, the assessee absolutely failed to satisfy three basic criteria of cash credits as required u/s 68 of the Act. Further the assessee was unable to produce the said creditors for examination before the department as required. Thus, in view of the above fact, discussion, reply of assessee, provisions of Act, judicial pronouncements as discussed above, it is established that the assessee failed to furnish the required details so as to prove the identity, creditworthiness and genuineness of the so-called lenders and to discharge the primary onus cast u/s 68 of the Act. Therefore, an amount of Rs.2,72,33,000/- was held by Assessing Officer to be unexplained cash credit of assessee u/s 68 of the Act and added to the total income of assessee. 10. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Learned CIT(A) who has deleted the addition made by Assessing Officer. Before, ld CIT(A), the assessee has submitted the copy of individual assessment orders of Haresh Rudakiya, Prashant Hadiya and Nitesh Makrubia which clearly, mentioned the respective additions made by the assessing officer. In fact, the Assessing Officer of Prashant Hadiya and Nitesh Makrubia was same, as the Assessing Officer of assessee’s case and assessment orders were passed within a gap of one or two days. Thus, the Assessing Officer was well aware of the issues under inquiry in individual cases as also issues under inquiry in assessee’s case as lenders. It is also a fact that all these 3 individual lenders were existing shareholders and directors of the assessee- company. Therefore, once source funds are already taxed in individual Directors/Shareholders cases, there is no case for further addition in the case of assessee- company, as unexplained cash credits. In the case of M/s China Gold Exim Pvt. Ltd. and Page | 6 ITA No.199/SRT/2022 A. Y. 2013-14 M/s Priyanshi Textile Pvt. Ltd. M/s Sai Ganesh Textiles, also the assessee has explained the source of source. Thus, for all the 5 parties from whom cash credits were taken by the assessee, the assessing officer's observations and findings of non-compliance to basic requirements of proving the identity, creditworthiness and genuineness stand explained by the assessee. The remand report from the Assessing Officer further confirmed the availability of all these details on Assessing Officer's file. Therefore the addition of Rs.2,72,33,000/- was deleted by ld CIT(A). 11. Aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us. 12. Before us, Ld. CIT-DR for the Revenue, argued that during the appellate proceedings, the NFAC/Ld. CIT(A) has called for remand report u/s 250(4) of the Act, from the Assessing Officer and accordingly he has submitted the same on 18.12.2017, wherein, it has been informed that the assessee has produced all 5 money lenders before the Assessing Officer and statement u/s 131 of the Act was also taken from them. While taking the statement, Shri Haresh and Nitesh have stated that the source of unsecured loan granted to the assessee-company was gift received from the relatives. In other three case the same was offered from loan taken from third parties. Therefore, ld DR contended that addition made by the Assessing Officer may be sustained. 13. On the other hand, Ld.Counsel for the assessee, pleaded that in the individual assessment orders of Mr. Haresh Rudakiya, Mr. Prashant Hadiya and Mr. Nitesh Makrubia, the respective additions were made by the Assessing Officer therefore again in the hand of assessee-company, the addition should not be made. This way, ld Counsel defended the order passed by the Ld. CIT(A). Page | 7 ITA No.199/SRT/2022 A. Y. 2013-14 M/s Priyanshi Textile Pvt. Ltd. 14. We have heard the rival parties and have gone through the material placed on record. The ld CIT(A) observed that assessee had explained to the Assessing Officer regarding source of funds credit in the case of M/s China Gold Exim Pvt. Ltd. from another company to whom plant and machinery was to be sold by M/s China Gold Exim Pvt. Ltd. and loan was received for that purpose. This fund was used by M/s China Gold to advance loan to the assessee. Details filed before the Assessing Officer are also enclosed in the paper book and in the remand report dated 22.01.2018, the Assessing Officer not made any adverse comments regarding availability of such details in the file of the assessing officer. This loan was also returned back in the same financial year through account payee cheque. As regards loan from three individual lenders, namely: (i)Haresh L. Rudakiya, (ii) Nitesh V Makrubia and (iii) Prashant Hadiya, the assessee has emphasized in the rejoinder to remand report that all the relevant records were available on the file of the assessing officer. It was stated that Shr. Haresh L. Rudakiay had received a gift of Rs.85,00,000/- in cash which was deposited in the bank at the time of making investment in assessee- company. Statement of this lender was recorded u/s 131 of the Act, during remand proceedings also and details of gift were claimed to have been furnished by this individual in his personal scrutiny assessment. It was also stated by the assessee that addition of Rs.85,00,000/- as unexplained gift and Rs.1,17,70,000/- as unexplained unsecured loans were made in the assessment order of Sh. Haresh L. Rudakiya. It was thus claimed that the source of fund in the hands of Haresh L. Rudakiya stood explained from the loan/share application money given to the assessee- company. Similarly, from Nitesh V Makrubia, it was stated that addition of Rs.1,15,00,000/- pertaining to unexplained cash gift was made which explained the investment made by him in the assessee- company. In the case of Prashant Hadiya (Prop. of Sai Ganesh Textiles) also, it was stated that the addition of Rs.1,77,80,000/- was made by the assessing officer, as unexplained cash credits. The assessee had explained cash deposits of Rs.5 Page | 8 ITA No.199/SRT/2022 A. Y. 2013-14 M/s Priyanshi Textile Pvt. Ltd. lakhs in the case of Sai Ganesh Textiles out of previous cash withdrawal noticeable from bank statements. Based on these facts, it was contended that there was no case for any addition u/s 68 of the Act, pertaining to unsecured loans taken by the assessee. The Assessing Officer's remand report has not countered any of the factual explanation/submissions of the assessee claimed to have been filed during the assessment proceedings. In fact, the Assessing Officer has confirmed all such documentary submissions available on the file of the Assessing Officer. In view of the above factual position, the ld CIT(A) observed that assessee had clearly discharged its onus as required u/s 68 of the Act pertaining to unsecured loans/credits of Rs.2,72,33,000/- from five parties. Therefore the addition of Rs.2,72,33,000/- was deleted by ld CIT(A). The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the ld.CIT(A) and we dismiss ground no.1 raised by the Revenue. 15. Ground No.2 raised by the Revenue relates to deleting the addition of Rs.1,08,00,000/- made by the Assessing Officer on account of unexplained share capital and share premium. We note that this ground No.2 raised by the Revenue relates to ground No.1 of the Revenue, which we have adjudicated, therefore, we do not repeat the facts of the issue for the sake of brevity. We have heard both the parties. The ld Counsel defended the order passed by ld CIT(A). On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. In the assessment order, the Assessing Officer noted that new share capital of Rs.18,00,000/-, and share premium of Rs.90,00,000/- totaling Rs.1,08,00,000/- was received from Mr. Haresh L Rudakiya, Mr. Prashant G Hadia and Mr. Nitesh V Makrubia @ Rs.36,00,000/- each. After examining the details filed during the assessment proceedings, the Assessing Officer gave following findings in the assessment order. Page | 9 ITA No.199/SRT/2022 A. Y. 2013-14 M/s Priyanshi Textile Pvt. Ltd. (i) The Assessing Officer questioned the genuineness of transaction due to premium charged at Rs.50 per share for face value of Rs.10 per share whereas book value of the assessee -company prior to share issue was Nil. Reference to Bombay High Court decision of Major Metals vs. UOI 19 taxmann.com 176 was made by the Assessing Officer to emphasise that issue of shares at premium higher than net worth to the investors having no relations with the company has to be treated as non-genuine. (ii) The Assessing Officer also concluded that the assessee failed to prove primary onus of identity, creditworthiness and genuineness and added Rs.1,08,00,000/- as unexplained cash credits. 16. During the appellate proceedings, the assessee has explained and assessee has shown through documentary submissions that the existing individual directors / shareholders had invested in the company, as loan, as well as share application money. For Haresh L. Rudakiya, Rs.49,08,150/- advanced to the assessee, during current year included Rs.36,00,000/- towards share application money and similarly for other two individuals Mr. Nitesh V Makrubia, Rs.45,35,150/- advanced to the assessee in current assessment year included Rs.36,00,000/- towards share application money and for Mr. Prashant Hadiya Rs.49,84,700/- advanced in the current assessment year included Rs.36,00,000-, as share application money. Thus, it was contended that addition of Rs.1,08,00,000/- on account of share application money was double addition made by the Assessing Officer once u/s 68 and second time under the head “unexplained share application money”. 17. The ld CIT(A) after considering the above facts, observed that the Assessing Officer had already made additions u/s 68 which included Rs.1,08,000,00/-. The ld CIT(A) has deleted the whole addition of Page | 10 ITA No.199/SRT/2022 A. Y. 2013-14 M/s Priyanshi Textile Pvt. Ltd. Rs.2,72,33,000/- which also included Rs.1,08,00,000/-, as the assessee’s submissions before Assessing Officer in the assessment, as well as remand proceedings proved the identity, genuineness and creditworthiness of three individual lenders. Hence, ld CIT(A) held that addition of Rs.2,72,33,000/- which also included Rs.1,08,00,000/-, therefore, further addition of Rs.1,08,00,000/- is not sustainable in the eye of law. The ld CIT(A) also noted that Assessing Officer's observation in para 6.8 of the assessment order referring to the decision of Hon'ble Bombay High Court in the case of M/s Major Metals Limited reported in 19 taxmann.com 176 (Bom) (supra) is not applicable to the facts of the current case as the investments in new share capital at premium was made by the existing shareholders / directors of the assessee- company and these individuals were not unknown to the company. Hence, the addition of Rs.1,08,00,000/- was deleted by ld CIT(A). We have gone through the above findings of ld CIT(A) and noted that there is no infirmity in the conclusion reached by ld CIT(A), therefore, we dismiss ground No.2 raised by the Revenue. 18. Ground No.3 raised by Revenue relates to deleting addition of Rs.1,04,57,507/- on account of estimation of gross profit after rejecting the books of accounts u/s 145(3) of the Act. 19. Succinct facts qua the issue are that on verification of records and details filed during the course of assessment proceedings, it was noticed by Assessing Officer that during AY 2011-12 assessee has shown total turnover of Rs.11,75,00,080/- on which it has earned gross profit of Rs.2,08,45,756/- which resulted in gross profit rate of 17.74%. In the immediate proceeding year assessee’s turnover was Rs.6,00,18,563/- on which it has earned gross profit of Rs.1,59,89,683/- which resulted in gross profit rate of 26.64%. As such there is fall in gross profit rate by 8.90%, which translates in monetary terms to Rs.1,04,57,507/-. The assessee was required to explain the reason for Page | 11 ITA No.199/SRT/2022 A. Y. 2013-14 M/s Priyanshi Textile Pvt. Ltd. fall in gross profit with supporting documentary evidences along with the basic documents. The assessee submitted books of accounts, stock details, Purchase bills, Sales bills etc, However, Assessing Officer rejected the reply of the assessee and noted that there has been a fall of 8.90% in the gross profit ratio when compared to the preceding year and no specific reasons have been given nor any evidence produced to substantiate and justify the fall in gross profit percentage. Considering, assessee failure to produce basic document for its production, inward and outward register quantity-wise as well as quality-wise, it was presumed by Assessing Officer that assessee is not maintaining inward and outward register. Hence, after giving due consideration to the facts and circumstances of the case the gross profit ratio was taken at 26.64% same as of last year. Therefore, gross profit is worked out to Rs.3,13,02,021/- (26.64% of 11,75,00,080). Accordingly, difference of Rs.104,57,507/- (3,13,02,021 – 2,08,45,756) was added to total income of assessee. 20. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Learned CIT(A) who has deleted the addition made by Assessing Officer. The ld CIT(A) observed that the rejection of books of account by assessing officer, was without any specific defects. How non-availability of day-to-day quantity stock register could alter the books results when all purchase details, quantity and value of stock and all other details were available and filed before the assessing officer. In view of these facts, the rejection of books of accounts and estimation of gross profit @ last year gross profit, was held by ld CIT(A), as not sustainable. Hence, the addition of Rs.1,04,57,507/- on account of fall in gross profit was deleted by ld CIT(A). Aggrieved by the order of Ld. CIT(A) the Revenue is in appeal before us. Page | 12 ITA No.199/SRT/2022 A. Y. 2013-14 M/s Priyanshi Textile Pvt. Ltd. 21. The Ld. CIT-DR for the Revenue, pleaded that on verification of the records, it was stated by Assessing Officer that assessee-company had disclosed GP @ 17.74% whereas, the same in the preceding year was @ 26.64%. During the assessment proceedings, assessee failed to explain the reason for fall in GP with necessary documentary evidences and convincing reasons. Hence, addition of Rs.1,04,57,507/- was correctly added to the income of the assessee, therefore addition made by the Assessing Officer may be sustained. 22. On the other hand, Ld.Counsel for the assessee defended the order passed by the Ld. CIT(A). 23. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee. We note that Assessing Officer has discussed this issue on para 10 of the assessment order, whereby the books of accounts were rejected u/s 145(3) of the Act due to non- maintenance of day-to-day stock register and non-production of the books of accounts by the assessee. The Assessing Officer noted that there was fall in GP from 26.24% on turnover of Rs.6,00,18,563/- in the immediately preceding AY to 17.74% on turnover of Rs.11,75,00,080/- in the current assessment year (AY). The Assessing Officer analysed the details filed by the assessee during assessment proceedings and noted that the day-to-day stock register was not maintained by the assessee. It was also noted by the Assessing Officer that the assessee did not produce books of accounts for verification. Hence, the books of accounts were rejected u/s 145(3) of the Act and profit was estimated by applying GP of 26.64% for preceding assessment year. Thus, addition of Rs.1,04,57,507/- was made on account of low GP in the current assessment year. In the appellate proceedings, the assessee has countered the rejection of books of accounts and estimation of profits at the rate of gross profit of immediately preceding assessment year. The assessee Page | 13 ITA No.199/SRT/2022 A. Y. 2013-14 M/s Priyanshi Textile Pvt. Ltd. has shown from documentary submission on various dates that copy of bank statement, bank book, ledger accounts of expenses and income, purchase bills, closing stock with quantity and value etc, were submitted and it was claimed that without maintaining books of accounts, such details could not have been filed before the assessing officer. It was also contended that the assessee had explained the specific reasons for fall in gross profit in the current assessment year through a comparable tabular chart demonstrating the change in turnover under various heads of manufacturing, trading and job work during current assessment year as compared to the preceding assessment year. It was also explained that the increased turnover (almost double in current assessment year) could be achieved through reduced margins. Hence, the assessee had contended that gross profit addition was made by ignoring the submissions / explanations filed by the assessee. The assessee has relied on Hon'ble ITAT, Ahmedabad’s decision in the case of Keystone India P. Ltd. Vs. DCIT (99 TTJ 386), wherein it was held that without any specific defects pointed out by the Assessing Officer in the maintenance of books of accounts, book results could not be rejected. 24. Based on the above factual position, the ld CIT(A) noted that Assessing Officer has got stuck only on the day-to-day quantity stock register, whereas all purchase bills and details of expenses debited in the P & L A/c, were duly submitted by the assessee. The Assessing Officer has also observed incorrectly that no books of accounts were produced for verification, whereas paper book containing submissions made before the Assessing Officer indicates the opposite of Assessing Officer's view. Even the explanation for fall in gross profit of current assessment year is found to be duly explained by the assessee and the Assessing Officer simply ignored this explanation. The assessee has shown that in the current assessment year, there was increased turnover under trading category where margins were substantially low and the overall increase in turnover could be achieved due Page | 14 ITA No.199/SRT/2022 A. Y. 2013-14 M/s Priyanshi Textile Pvt. Ltd. to reduced margins. The assessee has also relied on the decisions whereby rejection of books of account without any specific defects was not in accordance with the provision could not bring out as to how non-availability of day-to-day quantity stock register could alter the books results when all purchase details, quantity and value of stock and all other details were available and filed before the Assessing Officer. In view of these facts, the rejection of books of accounts and estimation of gross profit @ last year gross profit is not sustainable in the eye of law. Hence, the addition of Rs.1,04,57,507/- on account of fall in gross profit was deleted by ld CIT(A). On a careful reading of the ld. CIT(A) order and the findings thereon, we do not find any valid reason to interfere with the decision and findings of the ld.CIT(A), hence we confirm and approve the findings of ld CIT(A) and dismiss ground No.3 raised by the Revenue. 25. In the result, appeal filed by the Revenue is dismissed. Order is pronounced on 29/08/2023 by placing result on notice board. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat / Ǒदनांक/ Date: 29/08/2023 Dkp Outsourcing Sr.P.S. Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Sr. Private Secretary/Private Secretary/ Assistant Registrar, ITAT, Surat