M/S HARE RAMA HARE KRISHNA CORALS PVT. LTD., JAIPUR V. INCOME TAX OFFICER, WARD-6-2, JAIPUR

ITA 209/JPR/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9933 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 18-02-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A.N. NEHRA
• Keywords: Rejection of books of accounts
• Section: 207; 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 BENCHE S, JAIPUR JH JES'K LH- 'KEKZ] YS[KK LNL; ,O A H JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C. SHARMA, AM & SHRI VIJAY PAL RAO, JM VK;DJ VIHY LA-@ ITA NO. 209/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2015-16. M/S. HARE RAMA HARE KRISHNA CORALS PVT. LTD., C-101-G, RIDHI SIDHI COMPLEX, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD-6(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABCH 7017 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI A.N. NEHRA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 03.04.2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 21/05/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 26.12.2018 OF LD. CIT (A)-2, JAIPUR FOR THE ASSESSMENT YEAR 2015- 16. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF IT ACT , 1961. 2. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE TRADING ADDITION OF RS. 26,53,797/- BY APPLYING G.P . RATE OF 12% ON TURNOVER OF RS. 8,21,60,955/- AS AGAINST G.P. RA TE OF 8.77% DECLARED BY THE ASSESSEE. 3. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY A NY OF THE GROUNDS OF APPEAL. 4. THE APPROPRIATE COST BE AWARDED TO THE ASSESSE E. 2 ITA NO. 209/JP/2019 M/S. HARE RAMA HARE KRISHNA CORALS PVT. LTD., JAIPU R. GROUND NOS. 1 & 2 ARE REGARDING REJECTION OF BOOKS OF ACCOUNT UNDER SECTION 145(3) AND CONFIRMING TRADING ADDITION BY A PPLYING GP RATE OF 12% AS AGAINST GP RATE OF 8.77% DECLARED BY THE ASS ESSEE. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPOR T, EXPORT AND WHOLESALE OF PRECIOUS/SEMI PRECIOUS, NON PRECIOUS STONES, GEMS & JEWELLERY. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATI ON ON 29.09.2015 DECLARING TOTAL INCOME OF RS. 3,50,020/-. DURING THE SCRUTINY ASSE SSMENT, THE AO NOTED THAT THE ASSESSEE HAS SHOWN PURCHASES OF SEMI FINISHED CORAL MIX SHAPE @ RS. 90,000/- PER KG ON 3 RD APRIL, 2014 FROM M/S. P.D & COMPANY WHEREAS THE PU RCHASES MADE ON 11.11.2014 FROM THE SAME PARTY OF SEMI FINISHED COR AL MIX SHAPE IS RS. 63,000/- PER KG. AGAIN THE RATE OF PURCHASES OF CORAL ROUGH (RU BRUM) IS SHOWN @ RS. 23,727/- PER KG FROM M/S. BRANCACCIO RAFFAELE ITALY ON 04.03 .2015 WHEREAS THE ASSESSEE HAS SHOWN THE SAME ARTICLE PURCHASED FROM SHREE G.K. CH UDIWALAS, JAIPUR ON 14 TH MARCH, 2015 AT RS. 65,000/- PER KG. AGAIN THE PURC HASES OF CORAL ROUGH (RUBRUM) WAS MADE FROM DITTA ORLANDO LORENZO ITALY ON 01.04. 2014 AT RS. 10,278/- PER KG. SIMILARLY, THE AO HAS ALSO POINTED OUT A VAST VARIA TION IN THE SALE PRICE RECORDED BY THE ASSESSEE OF CORAL ROUGH (RUBRUM) WHICH RANGES F ROM RS. 500/- PER KG TO RS. 18,000/- PER KG. THE SALE PRICE OF CORAL MIX SHAPE SEMI FINISHED IS ALSO VARY FROM RS. 60,000/- PER KG TO RS. 90,000/- PER KG. THE AO ACCORDINGLY ASKED THE ASSESSEE TO EXPLAIN THE REASONS FOR SAME ITEM SALE/PURCHASE ON DIFFERENT RATES ON DIFFERENT DATES. ACCORDINGLY, THE AO OBSERVED THAT THE VALUE OF OPENING STOCK AND CLOSING STOCK AND ACTUAL SALES AND PURCHASES ARE NOT VERIFI ABLE. THE RATES OF ITEMS ARE VALUED ON THE BASIS OF SIZE AND PIECES PURCHASED AN D SOLD BUT THE ASSESSEE HAS NOT MAINTAINED STOCK ON THE BASIS OF SIZE OF THE ITEMS. EVEN THE SIZE OF THE STONES ARE 3 ITA NO. 209/JP/2019 M/S. HARE RAMA HARE KRISHNA CORALS PVT. LTD., JAIPU R. NOT MENTIONED EITHER IN THE PURCHASE OR SALE BILLS. THUS THE AO OPINED THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE DO NOT SHOW THE REAL PICTURE OF ITS BUSINESS. THE AO FURTHER NOTED THAT THERE IS A STI FF DECLINE IN THE GP DECLARED FOR THE YEAR UNDER CONSIDERATION IN COMPARISON TO THE G P DECLARED IN THE PRECEDING YEAR. THE AO ACCORDINGLY PROPOSED TO REJECT THE BO OKS OF ACCOUNT UNDER SECTION 145(3) AND ESTIMATE THE INCOME OF THE ASSESSEE BY A PPLYING AVERAGE GP. THE ASSESSEE FILED ITS REPLY BUT THE AO WAS NOT SATISFI ED WITH THE REPLY OF THE ASSESSEE AND HELD THAT DURING THE YEAR UNDER CONSIDERATION P URCHASES AND SALES MADE BY THE ASSESSEE ARE NOT COMPARABLE DUE TO THE FACT THAT TH E DETAILS MENTIONED IN THE BILLS OF PURCHASES AND SALES MADE AT DIFFERENT RATES ON DIFF ERENT DATES ARE ONLY ROUGH/SEMI FINISHED/FINISHED CORAL, HOWEVER, THE RATES OF THE ITEMS ARE VALUED ON THE BASIS OF SIZE OF THE PIECES SOLD OR PURCHASED BUT NO DETAILS ARE GIVEN IN THE PURCHASE OR SALE BILLS AS WELL AS THE ASSESSEE HAS ALSO NOT MAINTAIN ED STOCK ON THE BASIS OF SIZE OF THE ITEMS. ACCORDINGLY, THE AO REJECTED THE BOOKS OF A CCOUNT ON THE GROUND THAT THE VALUATION OF THE STOCK IS NOT QUALITATIVE AND QUANT ITATIVE AND NO VERIFICATION CAN BE MADE. THE AO THEN APPLIED THE AVERAGE GP OF THE PR ECEDING YEAR WORKED OUT AT 14.44% AND THEN APPLIED GP @ 12% ON THE TURNOVER OF THE ASSESSEE TO ESTIMATE THE INCOME. ACCORDINGLY, THE AO HAS MADE AN ADDITION O F RS. 26,53,797/- ON THIS ACCOUNT. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A) BUT COULD NOT SUCCEED. 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT THE ASSESSEE HAS MAINTAINED COMPLETE QUANTITATIVE DETAILS OF VARIOUS ITEMS MANUFACTURED/SOLD BY IT. THE LOWER AUTHORITIES HAVE NOT FOUND ANY DISCREPANC Y IN THE DETAILS SO MENTIONED. THE OPENING STOCK, PURCHASES, SALES AND CLOSING STO CK HAS BEEN ACCEPTED BY THEM. 4 ITA NO. 209/JP/2019 M/S. HARE RAMA HARE KRISHNA CORALS PVT. LTD., JAIPU R. THE ONLY DEFICIENCY POINTED OUT BY THE LOWER AUTHOR ITIES IS THAT QUALITY-WISE DETAILS ARE NOT MAINTAINED FOR WHICH THEY HAVE REFERRED TO DIFFERENT RATES OF PURCHASE/SALE OF CORAL ROUGH/CORAL SEMI-FINISHED. HOWEVER, THE A O HAS IGNORED THAT THE ASSESSEE HAS PURCHASED CORAL ROUGH AT DIFFERENT RATES AND AT SUCH RATE IT IS TRANSFERRED FOR MANUFACTURE. THE ROUGH IS CONVERTED INTO SEMI-FINI SHED/FINISHED GOODS AND THEREAFTER THE SAME IS SOLD. ONLY IN FEW CASES THE ASSESSEE HAS TRADED IN ROUGH/SEMI-FINISHED GOODS. THE CLOSING STOCK IS VA LUED AT COST BASED ON ITS QUALITY. THUS, WHEN THE ASSESSEE HAS MAINTAINED COMPLETE QUA NTITATIVE RECORD, THEN THE DECLINE IN GP RATE LOSSES ITS SIGNIFICANCE. HE HAS RELIED UPON THE FOLLOWING DECISIONS :- PCIT VS. BHAWANI SILICATE INDUSTRIES, 236 TAXMAN 596 (RAJ. HC) MALANI RAMJIVAN JAGANNATH VS. ACIT 316 ITR 120 (RAJ. HC) CIT VS. GOTAN LIME KHANIZ UDYOG 256 ITR 243 (RAJ.) PR. CIT VS. HUES INDIA LTD. 2015-TIOL-2275/2016 ITL 455 (RAJ.) DT. 30.07.2015 . CIT VS. JACKSONS HOUSE 198 TAXMAN 385 (DELHI) AND SUBMITTED THAT MERELY BECAUSE QUALITATIVE RECOR D WAS NOT MAINTAINED, THE BOOKS OF ACCOUNT COULD NOT BE REJECTED. A MINOR DEFICIEN CY OF QUALITY-WISE RECORD IN BOOKS OF ACCOUNT WOULD NOT NECESSARILY LEAD TO ADDITION I N INCOME OF THE ASSESSEE. THUS THE LD. A/R HAS SUBMITTED THAT IN ALL THESE DECISIO NS, THE HONBLE HIGH COURTS HAVE TAKEN A CONSISTENT VIEW THAT NOT MAINTAINING THE QU ALITY-WISE STOCK DETAILS CANNOT BE A REASON FOR REJECTION OF BOOKS OF ACCOUNT. SO FAR AS VARIATION IN THE PURCHASE AND 5 ITA NO. 209/JP/2019 M/S. HARE RAMA HARE KRISHNA CORALS PVT. LTD., JAIPU R. SALE OF CORAL ROUGH AND CORAL SEMI-FINISHED GOODS A RE CONCERNED, WHERE PURCHASES ARE MADE AT HIGHER RATE THAN THEY ARE SOLD AT HIGHE R RATE AFTER MIXING WITH THE LOWER RATE PURCHASES. SIMILARLY THE ASSESSEE HAS SPECIFI CALLY POINTED OUT THE REASONS FOR DECLINE IN OVERALL GP RATE FROM 12.81% TO 8.77% BY GIVING BIFURCATION OF GP RATE EARNED ON EXPORT SALE AND THE LOCAL SALE. HE HAS F URTHER CONTENDED THAT THE GP RATE IN LOCAL SALE HAS BEEN REDUCED FROM 13.33% TO 13.21 % WHICH IS VERY NEGLIGIBLE AND THAT TOO ON ACCOUNT OF INCREASE IN LOCAL SALES FROM RS. 221.89 LACS TO RS. 356.77 LACS. HOWEVER, IN THE EXPORT SALES, THE GP RATE HAS DECLI NED FROM 12.35% TO 5.43% DUE TO INCREASE IN THE TURNOVER FROM RS. 255.67 LACS TO RS. 464.83 LACS. 4. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THERE IS A VAST DIFFERENCE IN THE PURCHASE PRICE AS WELL AS THE SALE PRICE MADE B Y THE ASSESSEE AT THE SAME POINT OF TIME AND FROM THE SAME PARTIES. THEREFORE, THE DIFFERENCE IN THE PURCHASE AND SALE PRICE ATTRIBUTED TO THE SIZE AND QUALITY OF TH E STONES, THE VALUATION OF THE CLOSING STOCK IS NOT POSSIBLE IN THE ABSENCE OF THE STOCK M AINTAINED ON QUALITY-WISE. THE AO HAS GIVEN RELEVANT DETAILS IN THE ASSESSMENT ORDER TO SHOW THAT THERE IS WIDE DIFFERENCE IN PURCHASE PRICE OF THE SAME GOODS MADE AT THE SAME POINT OF TIME. SIMILARLY, THERE IS A HUGE DIFFERENCE OF SALE PRICE MADE BY THE ASSESSEE AND AS PER THE PURCHASE BILLS AND SALE BILLS, THE ARTICLE IS S HOWN AS SAME BEING SEMI-FINISHED CORAL MIX STONES, MAINLY TWO TYPES OF STONES WERE P URCHASED AND SOLD BY THE ASSESSEE ONE IS SEMI FINISHED CORAL MIX AND ANOTH ER IS CORAL ROUGH (RUBRUM) BUT THE DIFFERENCE IN THE PURCHASE AND SALE OF THESE IT EMS AT THE SAME POINT OF TIME HAS NOT BEEN EXPLAINED BY THE ASSESSEE. FURTHER, IN TH E ABSENCE OF THE DETAILS AND STOCK REGISTER MAINTAINED ON DIFFERENT QUALITY OF STOCKS, IT IS NOT POSSIBLE TO VERIFY THE CORRECTNESS OF THESE PURCHASES AND SALES AS WELL AS THE VALUATION OF OPENING AND 6 ITA NO. 209/JP/2019 M/S. HARE RAMA HARE KRISHNA CORALS PVT. LTD., JAIPU R. CLOSING STOCKS. THEREFORE, THIS IS NOT A SIMPLE CA SE OF ANY GRAIN STOCK OR OTHER GOODS WHERE THERE IS NO MUCH DIFFERENCE OF QUALITY OF PUR CHASES MADE IN DIFFERENT LOTS, BUT THE GOODS PURCHASED AND SOLD BY THE ASSESSEE ARE PR ECIOUS STONES AND, THEREFORE, THE PRICE OF STONE IS COMPLETELY DEPENDS ON THE SIZ E OF STONE. THEREFORE, IN THE ABSENCE OF MAINTAINING THE DETAILS AND STOCK REGIST ER ON THE BASIS OF THE SIZE OF STONES, THE VALUATION OF OPENING AND CLOSING STOCK IS NOT POSSIBLE. FURTHER, THE BILLS AND VOUCHERS OF PURCHASES AS WELL AS SALES ALSO DO NOT MENTION THE SIZE OF STONES. ACCORDINGLY, THE AO HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNT WHEN THE SAME ARE NOT REFLECTING THE TRUE AND CORRECT AFFAIRS OF BUSINESS ACTIVITY OF THE ASSESSEE. AS REGARDS THE ADDITION MADE BY THE AO BY TAKING THE G P RATE AT 12%, IT IS VERY REASONABLE CONSIDERING THE PAST HISTORY OF THE ASSE SSEE AND AVERAGE GP OF PAST HISTORY COMES TO 14.44% WHEREAS THE AO HAS APPLIED ONLY 12% FOR ESTIMATING THE INCOME OF THE ASSESSEE. HE HAS RELIED UPON THE ORD ERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE IS DEALING IN PRECIOUS AND SE MI-PRECIOUS STONES. THE AO IN THE ASSESSMENT ORDER HAS GIVEN THE RELEVANT DETAILS OF THE RATE OF PURCHASES MADE BY THE ASSESSEE OF A PARTICULAR TYPE OF STONE BUT T HE DIFFERENCE IN THE RATES IS VERY SIGNIFICANT EVEN WHEN THE PURCHASES ARE MADE FROM T HE SAME PARTY AND WITHIN A SPAN OF ONE WEEK. THEREFORE, THERE IS A GOOD REASO N FOR QUESTIONING THE CORRECTNESS OF THE PURCHASE AND SALE PRICE DECLARED BY THE ASSE SSEE. THIS IS NOT A STRAY INCIDENT AS NOTICED BY THE AO BUT THIS VARIATION IN THE PURC HASE AND SALE PRICE OF THE SAME TYPE OF STONE IS IN MAJORITY OF THE CASES. THE AO HAS GIVEN THESE DETAILS IN PARA 3 AS UNDER :- 7 ITA NO. 209/JP/2019 M/S. HARE RAMA HARE KRISHNA CORALS PVT. LTD., JAIPU R. 3. ON PERUSAL OF THE DETAILS FILED, IT IS FOUND T HAT THE ASSESSEE HAS PURCHASED/SOLD CORAL ROUGH / SEMI FINISHED / FINISH ED CORALS AT DIFFERENT RATES ON DIFFERENT DATES. IN THE PURCHASE LEDGER S UBMITTED BY THE ASSESSEE IT IS FOUND THAT THE RATE OF PURCHASE OF S EMI FINISHED CORAL MIX SHAPE MENTIONED @ 90,000/- PER KG ON 3.4.2014 FROM P.D. & COMPANY AND RATE OF PURCHASE OF SEMI FINISHED CORAL MIX SHAPE MENTIONED @ 63,000/- PER KG FROM P.D & COMPANY ON 1 1.11.2014, RATE OF PURCHASE OF CORAL ROUGH (RUBRUM) @ 23,727/- PER KG FROM BRANCACCIO RAFFAELE ITALY ON 4.3.2015 AND RATE OF C ORAL ROUGH (RUBRUM) @ 65,000/- FROM SHREE G.K. CHUDI WALAS JAI PUR ON 14.3.2015, RATE OF CORAL ROUGH (RUBRUM) @ 10,278/- FROM DITTA ORLANDO LORENZO ITALI ON 1.4.2014. LIKE THIS, IN THE SALE LEDGER SUBMITTED BY THE ASSE SSEE IT IS FOUND THAT THE RATE OF SOLD CORAL ROUGH (RUBRUM) @ 18,000/- PE R KG TO SHRI GK CHUDI WALAS, JAIPUR ON 5.4.2014 AND CORAL ROUGH (RU BRUM) @ 6,168/- PER KG TO TAITUNG RED CORAL CO. LTD. TAIWAN ON 9.10 .2014 AND CORAL ROUGH (RUBRUM) @ 500 PER KG TO HARMAN TRADE INC. D ELHI ON 25.3.2015, AND CORAL MIX SHAPE SEMI FINISHED @ 90,0 00/- PER KG ON 19.2.2015 AND CORAL SEMI FINISHED MIX SHAPE @ 60,00 0/- PER KG TO NARAYAN & CO. ON 23.1.2015 AND CORAL SEMI FINISHED MIX SHAPE @ 70,000/- PER KG TO NARAYAN & COMPANY ON 30.10.2014 AND CORAL SEMI FINISHED MIX SHAPE @ 60,000/- PER KG TO NARAYAN & C OMPANY ON 1.9.2014. ON ASKING REASONS FOR SAME ITEMS SELLING /PURCHASING ON DIFFERENT RATES ON DIFFERENT DAYS, THE A/R OF THE A SSESSEE FURTHER SUBMITTED THAT THE RATES ARE DIFFERENT ON THE BASIS OF SIZE OF THE PIECES OF CORALS. THE SIZE IS NOT MENTIONED IN THE BILLS B ECAUSE OF VOLUMINOUS PURCHASE AND SALE OF THE CORALS. THEREFORE, IT IS CONCLUDED THAT THE ASSESSEE IS NOT MAINTAINING QUALITATIVE AND QUANTIT ATIVE STOCK OF THE ITEMS PURCHASED AND SOLD. THEREFORE, THE VALUATION OF OPENING STOCK AND CLOSING STOCK AND ACTUAL VALUE OF SALE AND PURC HASE ARE NOT VERIFIABLE. DURING THE YEAR UNDER CONSIDERATION, TH E ASSESSEE HAS 8 ITA NO. 209/JP/2019 M/S. HARE RAMA HARE KRISHNA CORALS PVT. LTD., JAIPU R. PURCHASED CORAL OF RS. 2,00,06,034/- FROM ITS SISTE R CONCERN M/S. P.D. & COMPANY AND SOLD CORAL OF RS. 3,08,63,405/- TO M/ S. NARAIN & COMPANY. SALES & PURCHASES TO RELATED CONCERNS ARE NOT COMPARABLE DUE TO THE FACT THAT THE DETAILS MENTIONED IN THE B ILLS OF PURCHASES AND SALES MADE AT DIFFERENT RATES ON DIFFERENT DATES AR E ONLY ROUGH/SEMI FINISHED/FINISHED CORAL, HOWEVER, THE RATES OF THE ITEMS ARE VALUED ON THE BASIS OF SIZE OF THE PIECES SOLD OR PURCHASED B UT THE ASSESSEE HAS NOT MAINTAINED STOCK ON THE BASIS OF SIZE OF THE IT EMS AND NOT MENTIONED SIZE OF THE ITEMS SOLD OR PURCHASED IN SE LL/PURCHASE BILLS. THUS, THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSES SEE DO NOT SHOW THE REAL PICTURE OF ITS BUSINESS. THUS IT IS CLEAR THAT THE ASSESSEE HAS MADE PURCHAS ES TO THE TUNE OF RS. 2,00,06,034/- FROM SISTER CONCERN M/S. P.D. & COMPA NY AND SOLD CORAL OF RS. 3,08,63,405/- TO M/S. NARAIN & COMPANY. BOTH THESE CONCERNS ARE RELATED PARTIES AND, THEREFORE, THE NON SPECIFICATION OF THE QUALIT Y OF THE ARTICLES PURCHASED AND SOLD EITHER IN THE BILLS OF PURCHASE/SALE OR IN THE STOC K REGISTER IS A SERIOUS DEFECT IN THE BOOKS OF ACCOUNT AND THAT TOO WHEN THE ASSESSEE IS DEALING WITH THE RELATED PARTIES. THOUGH THE DIFFERENCE MAY BE DUE TO THE SIZE AND QU ALITY OF THE STONE WHICH IS RECORDED UNDER SAME CATEGORY BUT IT IS NOT A GENERA L COMMODITY OF GRAIN/OIL SEED SO THAT PRACTICALLY IT MAY NOT BE POSSIBLE TO MAINTAIN THE STOCKS AND DETAILS AS PER THE QUALITY OF THE GRAIN OR OIL SEED. THE ASSESSEE IS DEALING IN THE PRECIOUS AND SEMI- PRECIOUS STONES AND THE PRICE OF STONES VARIES IN T HOUSANDS TIME DEPENDING UPON THE SIZE AND QUALITY OF STONE. IT IS APPARENT FROM THE DETAILS AS RECORDED BY THE AO THAT THE PURCHASE AS WELL AS SALE PRICE VARI ES FROM RS. 63,000/- TO RS. 90,000/-, THAT MAY BE DUE TO QUALITY OF STONES BUT THE ASSESSEE HAS SHOWN ALL THESE 9 ITA NO. 209/JP/2019 M/S. HARE RAMA HARE KRISHNA CORALS PVT. LTD., JAIPU R. ARTICLES UNDER THE SAME CATEGORY OF SEMI FINISHED C ORAL MIX SHAPE. THESE PURCHASES WERE MADE FROM SAME RELATED PARTIES. SIMILARLY, TH E PURCHASES OF CORAL ROUGH (RUBRUM) WAS MADE AT A PRICE WHICH RANGES FROM RS. 500/- PER KG TO RS. 65,000/- PER KG. A SIMILAR VARIATION IS ALSO NOTICED AND APP ARENT ON RECORD REGARDING THE SALE TRANSACTIONS. THEREFORE, APART FROM THE CORRECTNES S OF THE PURCHASE AND SALE PRICES DECLARED BY THE ASSESSEE, THE CLOSING STOCK OF THE ASSESSEE CANNOT BE VALUED WHEN THE ASSESSEE IS NOT MAINTAINING THE SAME ON THE BAS IS OF SIZE OF THE STONES. THERE IS NO DISPUTE THAT THERE IS A STEEP DECLINE IN GP FOR THE YEAR UNDER CONSIDERATION IN BOTH SEGMENTS I.E. DOMESTIC AS WELL AS EXPORT. THE AO HAS GIVEN THE DETAILS OF THE GP DECLARED BY THE ASSESSEE FOR THE PRECEDING YEARS IN PARA 4 AS UNDER :- ASSESSMENT YEAR TURNOVER GP SHOWN EXPORT TURNOVER GP SHOWN IN EXPORT 2012 - 13 5,88,15,013/ - 15.80% 1,21,08,527/ - 26.10% 2013 - 14 6,25,11,670/ - 14.71% 1,48,21,355/ - 18.36% 2014 - 15 4,77,66,869/ - 12.81% 2,55,67,932/ - 12.35% 2015 - 16 8,21,60,956/ - 8.77% 4,64,83,679/ - 5.43% THE AO HAS GIVEN THE REASONS FOR REJECTING THE BOOK S OF ACCOUNT AS NO DETAILS ARE MENTIONED IN THE PURCHASE AND SALE BILLS AT DIFFERE NT RATES ON DIFFERENT DATES AND STOCK REGISTER MAINTAINED BY THE ASSESSEE IS ALSO N OT REVEALING THE VALUE ON THE BASIS OF SIZE AND QUALITY OF THE STONES. ACCORDINGLY THE VALUATION OF STOCKS CANNOT BE CORRECTLY VALUED BASED ON THE DETAILS RECORDED IN T HE BOOKS OF ACCOUNT AND PARTICULARLY IN THE STOCK REGISTER OF THE ASSESSEE. THE DEFECT IN THE VALUATION OF STOCK IS A SUFFICIENT REASON FOR REJECTION OF BOOKS OF AC COUNT AS THE BOOK RESULTS OF THE ASSESSEE ARE DIRECTLY AFFECTED BY THE VALUATION OF STOCK. THE DECISIONS RELIED UPON BY THE LD. A/R OF THE ASSESSEE ARE ALL IN RESPECT O F THE COMMODITIES WHICH ARE 10 ITA NO. 209/JP/2019 M/S. HARE RAMA HARE KRISHNA CORALS PVT. LTD., JAIPU R. CEREALS/MUSTARD SEEDS OR OILS AND, THEREFORE, THE V ARIATION OF QUALITY OF THOSE COMMODITIES DO NOT AFFECT THE VALUE SIGNIFICANTLY W HEREAS THE QUALITY OF THE STONE IS THE SOLE BASIS OF THE VALUE IN CASE OF PRECIOUS STO NES. ACCORDINGLY, THOSE DECISIONS CANNOT BE APPLIED TO THE CASE OF THE ASSESSEE. FUR THER, THERE IS NO QUARREL ON THE POINT THAT THE DECLINE IN GP RATE CANNOT BE THE SOL E BASIS OF REJECTION OF BOOKS OF ACCOUNT. HOWEVER, IN THE CASE OF ASSESSEE, THE AO HAS CLEARLY MADE OUT THE SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNT OF THE ASS ESSEE AND PARTICULARLY THE CORRECTNESS OF THE VALUATION OF THE STOCKS WHICH WI LL LEAD TO INCORRECT RESULTS FROM THE BOOKS OF ACCOUNT. FURTHER, IT IS ALSO NOT IN DISPUT E THAT THE REJECTION OF BOOKS OF ACCOUNT MAY NOT NECESSARILY LEAD TO TRADING ADDITIO N BUT AFTER REJECTION OF BOOKS OF ACCOUNT, THE AO HAS TO ESTIMATE THE INCOME OF THE A SSESSEE ON BEST JUDGMENT BASIS. THE PAST HISTORY OF GP DECLARED BY THE ASSESSEE, WH ICH IS NOT IN DISPUTE IS A GOOD GUIDANCE AND PROPER BASIS FOR SUCH ESTIMATION. THE LD. CIT (A) HAS REFERRED AND RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF MALANI RAMJIVAN JAGANNATH VS. ACIT, 207 CTR 19 (RAJ.) WHER EIN THE HONBLE HIGH COURT HAS ALSO HELD THAT THE PAST HISTORY OF GP IS A PROPER B ASIS OF ESTIMATION OF INCOME. IN THE CASE IN HAND, THOUGH THE AVERAGE OF THE GP DECL ARED BY THE ASSESSEE IN THE PRECEDING YEARS IS WORKED OUT 14.44% WHICH IS NOT D ISPUTED BY THE ASSESSEE, HOWEVER, THE AO HAS ESTIMATED THE INCOME BY TAKING A REASONABLE GP RATE AT 12%. THEREFORE, THE AO HAS ALREADY CONSIDERED THE DECLIN E IN THE GP FOR THE YEAR UNDER CONSIDERATION DUE TO THE INCREASE IN THE TURNOVER. ONCE THE AO HAS APPLIED 12% WHICH IS LESS THAN THE AVERAGE OF THE GP DECLARED B Y THE ASSESSEE IN THE PRECEDING YEARS, THEN THE REASON EXPLAINED BY THE ASSESSEE FO R DECLINE IN GP IS ALREADY SUBSUMED IN THE SAID REASONABLE RATE TAKEN BY THE A O AT 12%. EVEN OTHERWISE, A 11 ITA NO. 209/JP/2019 M/S. HARE RAMA HARE KRISHNA CORALS PVT. LTD., JAIPU R. REASONABLE DECLINE IN THE GP DUE TO INCREASE IN THE TURNOVER IS ACCEPTED BUT NOT A DECLINE OF MORE THAN HALF OF THE AVERAGE OF THE GP. THEREFORE, THE 2% DISCOUNT GIVEN BY THE AO IS MORE THAN SUFFICIENT AND REASONA BLE TO ACCOMMODATE THE REASONABLE DECLINE IN THE GP DUE TO INCREASE IN TUR NOVER. HENCE IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDERS OF THE AUTHORITIES BELOW. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 21/05/2 019. SD/- SD/- ( JES'K LH- 'KEKZ ) ( FOT; IKY JKWO (RAMESH C. SHARMA ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 21/05/2019. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S. HARE RAMA HARE KRISHNA CORAL S PVT. LTD, JAIPUR. 2. THE RESPONDENT THE ITO, WARD 6(2), JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 209/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 12 ITA NO. 209/JP/2019 M/S. HARE RAMA HARE KRISHNA CORALS PVT. LTD., JAIPU R.