HANDICRAFT HAVELI, Jaipur V. DCIT, Jaipur

ITA 231/JPR/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99495 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 06-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DHK
• Keywords: Rejection of books of accounts; Business income; Cost of acquisition; Non-deduction of tax
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAI PUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YADA V, AM VK;DJ VIHY LA-@ ITA NO. 231/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10. M/S. HANDICRAFT HAVELI, GUJAR GHATI, AMER ROAD, JAIPUR. CUKE VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AACFH 3340 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 224/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-5, JAIPUR. CUKE VS. M/S. HANDICRAFT HAVELI, GUJAR GHATI, AMER ROAD, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AACFH 3340 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 07.10.2015. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 20/11/2015. VKNS'K@ ORDER PER SHRI R.P. TOLANI, J.M. THESE ARE TWO CROSS APPEALS ONE BY ASSESSEE AND OT HER BY REVENUE. THE RESPECTIVE GROUNDS ARE AS UNDER:- ASSESSEES MAIN GROUNDS : 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE APPLICATION OF SECT ION 145(3). 2 ITA NO. 231 & 224/JP/2013 A.Y. 2009-10. M/S. HANDICRAFT HAVELI VS. DCIT, JAIPUR. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED IN IGNORING THE PAST HISTORY AND CONFIRMING T HE GP RATE OF 30% AS AGAINST 24.74% DECLARED BY THE ASSESSEE RESULTIN G TO ADDITION OF RS. 3615229/-. REVENUES GROUNDS : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN :- 1. DELETING THE ADDITION OF RS. 10,37,453/- MADE BY TH E AO U/S 40(A)(IA) OF THE I.T. ACT, 1961. 2. DELETING THE ADDITION OF RS. 32,690/- MADE BY THE A O ON ACCOUNT OF SALES PROMOTION EXPENSES. BRIEF FACTS OF THE CASE ARE - THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF TRADING AND EXPORT OF VARIOUS HANDICRAFT ITEMS BY W AY OF LOCAL SALES, EXPORT SALES AND SALES TO FOREIGN TOURISTS. EARLIER ITS PREMISES WERE SUBJECTED TO SEARCH OPERATIONS BY THE INCOME-TAX DEPARTMENT IN THE YEAR 2005, RESULTING I NTO DISCOVERY OF INCRIMINATING MATERIAL, INCOMPLETE ACCOUNTS, DISCREPANCIES IN STO CK ETC. AND SEIZURE OF BOOKS OF ACCOUNTS. ACCORDING TO ASSESSEE DUE TO SEIZURE OF E ARLIER BOOKS THE ACCOUNTS OF A.Y. 2009-10 COULD NOT BE GOT AUDITED AS IN EARLIER YEAR S, CONSEQUENTLY THE RECORD FOR YEAR IN QUESTION WAS NOT SUPPORTED BY TAX AUDIT STATEMENTS AND CERTIFICATES PRESCRIBED U/S 44AB. THE EARLIER RETURNS FOR A.Y. 06-07 TO 08-09 W ERE ALSO FURNISHED WITHOUT STATUTORY AUDIT REPORT U/S 44AB BY DECLARING ESTIMATED INCOME ON THE BASIS OF 4% N.P. RATE ON THE TURNOVER. THE ASSESSMENT FOR A.Y. 06-07 TO 08-0 9 WAS MADE BY AO U/S 143(3) OF THE IT ACT, 1961 AS UNDER :- 3 ITA NO. 231 & 224/JP/2013 A.Y. 2009-10. M/S. HANDICRAFT HAVELI VS. DCIT, JAIPUR. A.Y. INCOME RETURNED INCOME AS SESSED ADDITION MADE 06 - 07 19,52,010/ - [4% OF 4,88,00,234/-] 22,58,656/ - [4.5% OF 5,01,92,364/-] 3,06,646/ - 07 - 08 22,51,767/ - [4% OF 5,62,94,191/-] 22,51,767/ - [4% OF 5,62,94,191/-] - 08 - 09 27,08,669/ - [4% OF 6,77,16,728/-] 36,81,936/ - [5% OF 7,36,38,728/-] 9,73,267/ - FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE DID NOT GET THE BOOKS AUDITED AND FOLLOWED SAME ESTIMATED METHODOLOGY OF ESTIMATING I NCOME AND FILED ITS RETURN OF INCOME DECLARING BUSINESS INCOME OF RS. 30,95,480/- FOLLOWING A.Y. 06-07 BY APPLYING SAME N.P. RATE OF 4.5% ON TURNOVER OF RS. 6,87,88,4 40/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN QUES TION, LD. AO FOUND THAT THERE WERE NEITHER ACCOUNT STATEMENTS NOR AUDIT REP ORT AS STATUTORILY REQUIRED U/S 44AB AND CALLED ON THE ASSESSEE IN THIS BEHALF. IN RESPO NSE THERETO, ASSESSEE REITERATED ITS STEREOTYPE RESPONSE THAT THE ACCOUNT BOOKS WERE NOT AUDITED AS IN PAST YEARS SINCE THE BOOKS FOR FY 2005-06 ARE IN THE CUSTODY OF THE DEPA RTMENT. SINCE IN EARLIER YEARS ASSESSEE HAS FILED ITS RETURN OF INCOME ON ESTIMATE BASIS APPLYING NP RATE OF 4.5%, FOLLOWING THE PAST PRACTICE INCOME AS ESTIMATED MAY BE ACCEPTED. LD. AO OBSERVED THAT THE ASSESSEE HAS NOT MAINTAI NED BOOKS OF ACCOUNTS. THE OPENING AND CLOSING STOCK, PURCHASES AND SALES ARE NOT SUBJECT TO VERIFICATION. PURCHASE COST IS FOUND TO BE VERY LOW WHEREAS THE SALES ARE MAINLY EFFECTED TO FOREIGNERS/TOURIST. THE CLAIM OF EXPENSES IS NOT SUBJECT TO VERIFICATIO N. ACCORDINGLY, THE AO REJECTED THE BOOKS OF ACCOUNTS WHATEVER WERE MAINTAINED U/S 145( 3) AND CONSIDERING THE ASSESSEES PAST GP RESULTS, MADE TRADING ADDITION OF RS.36,15 ,229/- BY APPLYING G.P. RATE OF 30% 4 ITA NO. 231 & 224/JP/2013 A.Y. 2009-10. M/S. HANDICRAFT HAVELI VS. DCIT, JAIPUR. ON TURNOVER OF RS.6,87,88,440/- AS AGAINST G.P. RAT E OF 24.74% DECLARED BY THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL. THE LD . CIT (A) CONFIRMED THE REJECTION OF BOOKS OF ACCOUNT UNDER SECTION 145(3) AND SUSTAINED THE TRADING ADDITION BY EFFECTIVELY FOLLOWING OBSERVATIONS: - ADMITTEDLY THE BOOKS OF ACCOUNTS OF THE ASSESSEE AR E NOT TRUE AND COMPLETE IN AS MUCH AS OPENING/CLOSING BALANCE OF S TOCK WERE NOT CARRIED FORWARD IN A.Y. 06-07 ONWARDS. IT IS NOT THE CASE T HAT THE BOOKS OF ACCOUNTS COULD NOT BE COMPLETED DUE TO ANY FAULT OF THE DEPA RTMENT AND IN FACT THE APPELLANT AS PER HIS OWN CONVENIENCE IS NOT COMPLET ING SUCH BOOKS OF ACCOUNTS AS THE APPELLANT FINDS IT MORE CONVENIENT AND FAVOURABLE TO SHOW NET PROFIT ON PERCENTAGE BASIS. SUCH ADOPTION OF N. P. RATE IS DEFINITELY NOTHING TO DO WITH THE ACTUAL PROFIT. THEREFORE, TH E BOOKS OF ACCOUNTS NEITHER CAN BE SAID TO BE COMPLETE OR TRUE NOR IT C AN BE SAID THAT TRUE PROFITS CAN BE DERIVED FROM SUCH BOOKS OF ACCOUNTS. THUS, AS REGARDS APPLICATION OF PROVISIONS OF SEC. 145(3), THE ACTIO N OF THE AO CANNOT BE FAULTED. - THERE CAN BE NO DISPUTE THAT THE ESTIMATION OF PROF IT SHOULD BE BASED EITHER ON THE PAST HISTORY OF THE CASE OR ANY COMPA RABLE CASE OF THE SAME TRADE/LOCALITY. THE APPELLANT IS RELYING ON A.Y. 06 -07 WHERE THE ASSESSMENT WAS COMPLETED BY APPLYING 4.5% OF N.P. ON TOTAL TUR NOVER AS AGAINST 4.43% DECLARED BY THE ASSESSEE. HOWEVER, THE ESSENTIAL IS SUE TO BE NOTED IS THAT THE APPELLANT IS NOT CARRYING FORWARD ITS OPENING/C LOSING STOCK FROM THE YEAR 2005 ONWARDS. SUCH ACTION OF NOT CARRYING FORW ARD OF OPENING/CLOSING FIGURES FROM A.Y. 06-07 ONWARDS IS NOT DUE TO ANY D EFAULT OF THE DEPARTMENT AND IT APPEARS TO BE FOR THE OWN CONVENI ENCE OF THE APPELLANT THAT THE BOOKS OF ACCOUNTS ARE NOT BEING COMPLETED PROPERLY AND INCOME/PROFIT IS BEING SHOWN BY APPLYING SPECIFIC P ERCENTAGE OF TURNOVER. IN THIS BACKGROUND, THE N.P. RATE OF 4.5% ADOPTED I N A.Y. 06-07 WAS ALSO NOT BASED ON THE ACTUAL PAST HISTORY OF THE CASE. 5 ITA NO. 231 & 224/JP/2013 A.Y. 2009-10. M/S. HANDICRAFT HAVELI VS. DCIT, JAIPUR. - DURING THE APPELLATE PROCEEDINGS, THE APPELLANT WAS REQUIRED TO STATE/FURNISH THE EXACT DETAILS OF GROSS PROFIT/NET PROFIT SHOWN IN THE PERIOD BEFORE THE SEARCH I.E. YEAR 2005 BECAUSE ONLY IN TH AT PERIOD, THE BOOKS OF ACCOUNTS OF THE ASSESSEE CAN BE SAID TO BE COMPLETE IN AS MUCH AS IN THE SUBSEQUENT PERIOD, THE ASSESSEE HAS NEVER COMPLETED ITS TRADING ACCOUNTS AND HAS SHOWN THE PROFIT BASED ON FIXED PERCENTAGE OF TURNOVER. HOWEVER, THE LD. AR OF THE APPELLANT FAILED TO FURNISH EVEN SUCH BASIC DETAILS. - THE APPELLANT DURING THE APPELLATE PROCEEDINGS FILE D DETAILS OF GROSS PROFIT SHOWN IN A.Y. 07-08, 08-09 AND 09-10 (REFER TABLE A T PAGE 7 OF THE ORDER) THOUGH EVEN SUCH FIGURES ARE BASED ON THE BOOKS OF ACCOUNTS WHICH ARE OTHERWISE NOT COMPLETE IN AS MUCH AS OPENING AND CL OSING STOCK ARE CONSIDERED TO BE BALANCING FIGURE. IN A.Y. 07-08, G .P. IS SHOWN AT 27.82%. DURING APPELLATE PROCEEDINGS, WHEN THE APPELLANT WA S SPECIFICALLY REQUIRED TO SUBMIT G.P. RATE SHOWN IN A.Y.S PRIOR TO 2006-07 , THE APPELLANT SHOWN HIS INABILITY TO FURNISH SUCH INFORMATION. IN THIS BACK GROUND, THE APPELLANT HAS CREATED SUCH CIRCUMSTANCES THAT THE AO WAS LEFT WIT H NO OTHER OPTION BUT TO APPLY G.P. RATE NEARER TO A.Y. 06-07 AND AS IN A .Y. 07-08, THE G.P. RATE WAS SHOWN AT 27.82% THAT TOO BASED ON INCORRECT BOO KS, THE AO APPLIED G.P. RATE OF 30%. THE IMPORTANT ISSUE WHICH IS TO B E LOOKED INTO IS THAT IN SUCH CIRCUMSTANCES WHEN THE APPELLANT IS BENT UPON TO SHOW HIS PROFIT SIMPLY ON N.P. RATE WITHOUT CONSIDERING THE EFFECT OF OPENING AND CLOSING STOCK AND NOT WILLING TO PROVIDE NECESSARY INFORMAT ION THEN SUCH ESTIMATION OF G.P. @30% CAN VERY WELL BE TREATED AS BONAFIDE E STIMATE BASED ON RATIONAL BASIS. - THE APPELLANT HAS NOT BROUGHT ON RECORD ANY MATERIA L FACT EXCEPT CITING HIS OWN N.P. RATE BASED ON INCOMPLETE BOOKS AS TO HOW S UCH G.P RATE @30% WAS EXCESSIVE OR UNJUSTIFIED. IT IS A SETTLED LAW TH AT WHEN THE PROFIT ARE TO BE ESTIMATED, CERTAIN DEGREE OF GUESS WORK IS BUT N ATURAL BUT IN THE GIVEN CIRCUMSTANCES WHEN ESTIMATION OF THE PROFIT BY AO I S ON RATIONAL BASIS KEEPING IN VIEW THE GIVEN CIRCUMSTANCES, THEN THE B EST JUDGMENT OF THE AO CANNOT BE SUBSTITUTED WITH ANY OTHER BEST JUDGMENT. FOR SUCH PROPOSITION, 6 ITA NO. 231 & 224/JP/2013 A.Y. 2009-10. M/S. HANDICRAFT HAVELI VS. DCIT, JAIPUR. RELIANCE IS PLACED ON THE DECISION OF HONBLE SUPRE ME COURT IN CASE OF COMMISSIONER OF SALES TAX VS. H.M. ESUFALI H.M. ABD ULALI REPORTED IN 90 ITR 271. THEREFORE, THE ACTION OF AO IN ESTIMATING THE PROFIT/INCOME BY APPLYING G.P. RATE OF 30% IS CONFIRMED AND ACCORDIN GLY ADDITION OF RS.36,15,229/- IS SUSTAINED. LD. CIT(A) HOWEVER DELETED THE DISALLOWANCES IN RES PECT OF SEC. 40(A)(I) AND SALES PROMOTION EXPENSES AND ALLOWED ASSESSEEES GROUNDS IN THIS BEHALF. 3. AGGRIEVED, ASSESSEE AND REVENUE ARE BEFORE US QU A THEIR RESPECTIVE GRIEVANCES. 4. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGU ED THAT THE BOOKS OF ACCOUNT FOR F.Y. 2005-06 WERE IN THE CUSTODY OF THE DEPARTM ENT AND DUE TO NON-AVAILABILITY OF STOCK VALUATION, AND FOR WANT OF OPENING STOCK AND CLOSING STOCK FIGURES, THE ASSESSEES AUDIT COULD NOT BE COMPLETED. IT HAS NOT BEEN DISPU TED THAT MONTH-WISE PURCHASES AND SALES FIGURES WERE PROVIDED TO THE AO. SINCE OPENI NG AND CLOSING STOCK FIGURES WERE NOT AVAILABLE, IT WAS NOT POSSIBLE TO PREPARE BOOKS OF ACCOUNT IN THE MANNER REQUIRED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS AND FURNISH A COMPLETE AUDIT REPORT. IN THESE CIRCUMSTANCES ASSESSEE OFFERED TO BE TAXED ON NET P ROFIT BASIS AS IN EARLIER YEARS I.E. FOR ASSESSMENT YEARS 2006-07 TO 08-09. ASSESSEE OFFERED 4% NET PROFIT ON THE SALES IN AY 2006-07, LD. AO INCREASED IT TO 4.5% FOR THE A.YS. 2006-07 AND 07-08 AND 5% NET PROFIT FOR A.Y. 2008-09. THUS THE BASIS OF ESTIMAT ION OF ASSESSEES INCOME WAS 5% NET PROFIT OF THE TURNOVER AND NOT THE GROSS PROFIT. 4.1. IT IS FURTHER PLEADED THAT BOTH THE LOWER AUTH ORITIES HAVE APPLIED G.P. RATE OF 30% CONSIDERING THE G.P. RATE OF 27.82% DECLARED IN A.Y. 07-08. IN DOING SO, IT IS IGNORED THAT IN A.Y. 08-09, WHICH IS THE IMMEDIATEL Y PRECEDING YEAR, THE AO IN THE 7 ITA NO. 231 & 224/JP/2013 A.Y. 2009-10. M/S. HANDICRAFT HAVELI VS. DCIT, JAIPUR. ASSESSMENT MADE U/S 143(3) HAS ASSESSED THE INCOME BY APPLYING N.P. RATE OF 5%. EVEN THIS RATE IS REDUCED BY CIT (A) VIDE ORDER DATE D 04.06.2014 TO 4.5%. IT MAY ALSO BE NOTED THAT IN A.Y. 06-07, THE APPLIED N.P. RATE OF 4.5% CONSIDERING THE N.P. RATE OF 4.43% IN A.Y. 05-06. FURTHER, IN A.Y. 08-09, THE G .P. RATE DECLARED WAS 24.37% WHEREAS THE G.P. RATE FOR THE YEAR IS 24.74%. THUS , THE G.P. RATE DECLARED DURING THE YEAR IS BETTER AS COMPARED TO THE LAST YEAR THOUGH IT IS SLIGHTLY LOWER AS COMPARED TO A.Y. 07-08. IT IS CONTENDED THAT FOLLOWING EARLIER YEAR THE ESTIMATED INCOME MAY BE ACCEPTED AT 5% NP AS ACCEPTED IN AY 2008-09. 4.2. THE AO APPLIED G.P. RATE OF 30% BY MENTIONING THAT IT IS BY CONSIDERING THE ASSESSEES OWN PAST RESULTS, IGNORING THAT IN PAST, INCOME IS ESTIMATED BY APPLICATION OF N.P. RATE AND NOT THE G.P. RATE. CIT (A) HAS ALSO A CCEPTED THAT ESTIMATION OF PROFIT SHOULD BE BASED EITHER ON THE PAST HISTORY OF THE C ASE OR ON THE BASIS OF COMPARABLE CASE OF THE SAME TRADE/LOCALITY. HOWEVER, FOR UPHOL DING THE G.P. RATE OF 30%, HE IGNORED THE G.P. RATE OF 24.37% DECLARED IN A.Y. 0 8-09 AND INCORRECTLY OBSERVED THAT INCOME FOR A.Y. 06-07 IS ESTIMATED BY THE AO BY APP LYING N.P. RATE OF 4.5% OF THE TURNOVER AS AGAINST 4.43% DECLARED BY THE ASSESSEE WHEREAS THE FACT IS THAT N.P. RATE OF 4.5% WAS APPLIED BY THE AO AGAINST N.P. RATE OF 4% DECLARED BY THE ASSESSEE CONSIDERING THE N.P. RATE OF 4.43% FOR A.Y. 05-06. THE LD. CIT (A) FURTHER IGNORED THE FACT THAT IN A.Y. 08-09, THE AO HIMSELF ASSESSED TH E INCOME BY APPLYING N.P. RATE OF 5% AS AGAINST 4% DECLARED BY THE ASSESSEE. IN THESE CI RCUMSTANCES, THE DECISION OF HONBLE SUPREME COURT RELIED BY THE LD. CIT (A) HAS NO RELEVANCE. 8 ITA NO. 231 & 224/JP/2013 A.Y. 2009-10. M/S. HANDICRAFT HAVELI VS. DCIT, JAIPUR. 4.3. RELIANCE IS PLACED ON HONBLE JURISDICTIONAL H IGH COURT JUDGMENT IN THE CASE OF CIT VS. GOTTON LIME KHANIZ UDYOG, 256 ITR 243 (RAJ. ) WHICH LAYS DOWN THE PROPOSITION THAT WHILE MAKING AN ESTIMATE OF INCOME, THE BEST G UIDE FOR THE ASSESSMENT IS PAST HISTORY OF THE ASSESSEE. A PERUSAL OF THE ABOVE RE VEALS THAT THE ASSESSEE AND THE DEPARTMENT BOTH HAVE BEEN FOLLOWING PAST HISTORY BY ESTIMATING THE INCOME ON THE BASIS OF NET PROFIT OF TO AND NOT GROSS PROFIT. 4.4. THE LD. COUNSEL CONTENDS THAT IN VIEW OF ACCEP TED PAST HISTORY OF ESTIMATING INCOME @ 5% NET PROFIT ON TO THE INCOME FOR THE YEA R IN QUESTION MAY BE ACCEPTED AT 5% NET PROFIT. WRITTEN SUBMISSIONS ARE FILED WHICH ARE DULY CONSIDERED. 5. THE LD. DR. ON THE OTHER HAND VEHEMENTLY CONTEND S THAT THE ASSESSEE IS ONE OF THE PROMINENT HANDICRAFT EXPORTER AND DEALER OF JAI PUR HAVING HUGE TURNOVER. ON THE PRETEXT OF A PAST SEARCH ASSESSEE HAS ADOPTED A SUI TABLE DESIGN ESCAPING FROM THE STATUTORY PROVISIONS OF SEC. 44AB WHICH PRESCRIBE A RIGOROUS PROCEDURE OF MAINTENANCE OF RECORD, ACCOUNTS, ITS AUDIT AND PREPARATION OF C RUCIAL INFORMATION UNDER FORM 3CD. IF THE BOOKS WERE SEIZED AS BACK AS IN 2005, IT WAS DU E TO THE DEFAULT OF THE ASSESSEE WHO DID NOT WRITE THEM IN UP TO DATE MANNER. BESIDE S AFTER SEARCH IT WAS INCUMBENT ON ASSESSEE TO COMPLETE THE BOOKS FOR FY 2005-06 AND S UBSEQUENT YEARS; WHY IT HAS NOT BE DONE IS BEST KNOWN TO ASSESSEE. SURPRISINGLY ASS ESSEE HAS BEEN AVAILING PREMIUM ON ITS DEFAULTS BY NOT GETTING ALL THE ACCOUNTS OF ALL SUBSEQUENT YEARS NOT AUDITED AND BY GETTING HIS ASSESSMENTS FRAMED ON ESTIMATED NP BASI S THUS CLEVERLY AVOIDING TAXES AND SCRUTINY OF HOST OF HEADS OF EXPENSES. 9 ITA NO. 231 & 224/JP/2013 A.Y. 2009-10. M/S. HANDICRAFT HAVELI VS. DCIT, JAIPUR. 5.1. THE PLEA ABOUT RELIANCE ON PAST HISTORY SHOULD BE BONA FIDE ONE AND NOT A CLANDESTINE DEVICE TO AVOID MAINTENANCE OF THE RECO RD AND OFFERING AUDIT OF ACCOUNTS AS PER DULY APPROVED ACCOUNTING STANDARDS OF ICAI AND CERTIFIED IN PRESCRIBED STATUTORY FORMS. THIS STATUTORY PROCESS IS ENACTED BY THE LEG ISLATURE TO ENSURE PROPER TAX COMPLIANCE AND ASCERTAINMENT OF CORRECT AND TRUE PR OFITS U/S 145(3). BESIDES ASSESSEE BEING AN EXPORTER COMES UNDER REGULATORY NORMS OF L AWS LIKE FOREX, FEMA ETC. WHICH ALL REQUIRE STRICT MAINTENANCE OF ACCOUNTS AND RECORD. THEREFORE, IT IS UNIMAGINABLE THAT SUCH A HUGE EXPORT BUSINESS CAN BE CARRIED OUT WITH OUT MAINTAINING PROPER BOOKS OF ACCOUNTS, STOCK DETAILS AND AUDIT. THUS THE SO CAL LED PAST HISTORY IS NOTHING BUT A CLANDESTINE DEVISE BY THE ASSESSEE FOR AVOIDING TAX ES AND HAS NO FORCE AS PRECEDENCE. 5.2. THIS YEAR LD. AO AND CIT(A) SENSED THE ASSESSE ES INGENIOUS DESIGN OF AVOIDING TAXES AND TO SUBVERT ITS ATTEMPT, ADOPTED THE GP ME THOD FOR ESTIMATION OF ASSESSEES INCOME. THE NP BASED PAST HISTORY BEING A DESIGN TO SUIT ASSESSEE IS TOTALLY UNRELIABLE, A COLORABLE DEVISE AND PRETEXT INVENTED BY ASSESSEE TO SUIT ITS PURPOSE OF EVADING TAXES AND ALSO AVOIDING STATUTORY AUDIT AND PROPER SCRUTI NY BY AUDITORS. PRINCIPLE OF RES JUDICATA DO NOT APPLY TO INCOME TAX PROCEEDINGS AS IT IS SETTLED LAW THAT EVERY YEAR OF ASSESSMENT IS DISTINCT AND SEPARATE. 5.3. THOUGH ASSESSEE HAS RAISED A GROUND CHALLENGI NG REJECTION OF BOOKS, NOT A SINGLE ARGUMENT HAS BEEN MADE IN THIS BEHALF. THUS ON ONE HAND ASSESSEE IS SATISFIED WITH REJECTION OF BOOKS AND ON THE OTHER HAND WANTS TO AVAIL PREMIUM ON ITS DEFAULTS AND NON MAINTENANCE OF PROPER RECORD. THE LOWER AUT HORITIES ARE PERFECTLY JUSTIFIED IN REJECTING THE DEFECTIVE BOOKS WHATEVER ARE MAINTAIN ED BY THE ASSESSEE AND ESTIMATING 10 ITA NO. 231 & 224/JP/2013 A.Y. 2009-10. M/S. HANDICRAFT HAVELI VS. DCIT, JAIPUR. THE INCOME ON GP BASIS AND NOT ON NP BASIS. IT IS A LSO SETTLED LAW THE ESTIMATE OF INCOME AS MADE BY LOWER AUTHORITIES SHOULD NOT BE N ORMALLY INTERFERED UNLESS IT IS PROVED TO BE ARBITRARY OR CAPRICIOUS. ASSESSEE EXCE PT REITERATING ITS STEREOTYPE STAND OF PAST HISTORY HAS FAILED TO DEMONSTRATE THAT GP BASE D ESTIMATE AS ADOPTED IN THIS YEAR IS ARBITRARY OR CAPRICIOUS. BESIDES IT IS A CASE WHERE THE CLANDESTINE DESIGN STANDS EXPOSED BY AUTHORITIES BELOW, CONSEQUENTLY ASSESSEE HAS NO EQUITABLE RIGHT TO ASK FOR PREMIUM ON ITS DEFAULTS, THE ORDERS OF LOWER AUTHORITIES AR E RELIED ON. 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS AND CONTENTIONS RAISED BY LD. DR CARRY SU BSTANTIAL MERIT, ASSESSEE IS NOT DISPUTED TO BE A PROMINENT TRADER AND EXPORTER WHIC H IS EVIDENT FROM THE VOLUME OF TO ALSO. LAW HAS PRESCRIBED VARIOUS REGULATORY PROCEDU RES TO ENSURE TAX COMPLIANCE AND TRANSPARENCY IN ACCOUNTS AND BUSINESS TRANSACTIONS. SEC. 44AB, RELEVANT AUDIT NORMS, STATUTORY FORMS ETC. HAVE BEEN MADE MANDATORY FOR A SSESSEES HAVING PRESCRIBED TO. FURTHER, LD. DR HAS RIGHTLY POINTED OUT THAT ASSESS EE BEING AN EXPORTER, APART FROM AUDIT REGULATIONS OF INCOME TAX, IS ALSO REGULATED BY VAR IOUS OTHER STRINGENT LAWS LIKE FOREX AND FEMA WHICH MAKES THE ASSESSEE PROPOSITION QUITE UNBELIEVABLE THAT PROPER BOOKS COULD NOT BE MAINTAINED AND AUDIT COULD NOT BE DONE U/S 44AB. MERELY BECAUSE A SEARCH WAS CONDUCTED ON ASSESSEE IN 2005 AND BOOKS WERE SEIZED CANNOT ABSOLVE THE ASSESSEE FROM STATUTORY OBLIGATION OF GETTING THE B OOKS AUDITED IN ALL THESE SUCCESSIVE YEARS. THE SEIZURE OF BOOKS IN 2005 ALSO GOES AGAIN ST THE ASSESSEE IMPLYING THAT THERE WERE DISCREPANCIES IN ITS PAST RECORD. INSTEAD OF C ORRECTING ITS CONDUCT, SURPRISINGLY, ASSESSEE IS HABITUALLY USING THESE SHORTCOMINGS FOR ITS ADVANTAGE AND IN THE NAME OF 11 ITA NO. 231 & 224/JP/2013 A.Y. 2009-10. M/S. HANDICRAFT HAVELI VS. DCIT, JAIPUR. PAST HISTORY CLAIMING PREMIUM ON ITS DISOBEDIENCE O F LEGAL PROVISIONS. THUS THE PAST HISTORY OF THE ASSESSEE ITSELF CANNOT BE CALLED SOU ND, BONA FIDE AND PERSUASIVE. 6.1. LD. CIT(A) HAS GIVEN COPIOUS REASONING TO EXPO SE THE DESIGN OF THE ASSESSEE WHICH NEEDS NO REPETITION. THE PERTINENT CONTENTION OF LD. DR, THAT EXCEPT THE PLEA OF PAST HISTORY, ASSESSEE HAS NOT PROVED THAT THE GP B ASED INCOME ESTIMATE AS MADE BY AUTHORITIES BELOW IS ARBITRARY OR CAPRICIOUS DESERV ES TO BE ACCEPTED. IT IS SETTLED LAW THAT IN CASES OF ESTIMATE OF INCOME, SAME SHOULD NOT BE GENERALLY INTERFERED UNLESS THEY ARE DEMONSTRATED TO BE ARBITRARY OR UNREASONABLE WHICH IS NOT THE CASE BEFORE US. BESIDES THE CONDUCT OF THE ASSESSEE CANNOT BE REWARDED BY P REMIUM ON HIS DELIBERATE DEFAULTS. PRINCIPLES OF RES JUDICATA ARE NOT APPLICABLE TO IN COME TAX PROCEEDINGS AS EVERY YEAR IS A DISTINCT AND SEPARATE UNIT BESIDES THE DESIGN EMPLO YED BY THE ASSESSEE COULD BE INFERRED BY THE AUTHORITIES IN THIS YEAR. THE PAST HISTORY HAS NO PERSUASIVE VALUE LOOKING AT THESE FACTS. IN VIEW OF THE ENTIRETY OF FACTS A ND CIRCUMSTANCES WE SEE NO REASON TO INTERFERE WITH ORDERS OF THE AUTHORITIES BELOW ON T HIS ISSUE, WHICH ARE UPHELD. THE FACT THAT ASSESSEE ITSELF WANT ESTIMATION ALBEIT ON NP B ASIS SHOW A DESIRE OF REJECTION OF BOOKS. IN VIEW OF THESE FACTS AND CIRCUMSTANCES ASS ESEES GROUNDS AND APPEAL IS DISMISSED. 7. ADVERTING TO REVENUES APPEAL, THE LD. D/R RELIE D ON THE ORDER OF AO. 8. APROPOS THE FIRST GROUND, THE LD. COUNSEL FOR TH E ASSESSEE CONTENDS THAT THE ISSUE PERTAINING TO NON-DEDUCTION OF TAX AT SOURCE U/S 194H, IS COVERED BY THE HONBLE DELHI HIGH COURT JUDGMENT IN THE CASE OF CIT VS. JD S APPARELS PVT. LTD. (2015) 370 ITR 454 (DELHI) HOLDING AS UNDER :- 12 ITA NO. 231 & 224/JP/2013 A.Y. 2009-10. M/S. HANDICRAFT HAVELI VS. DCIT, JAIPUR. AMOUNT DEDUCTED BY BANK WHILE REMITTING THE MONEY TO THE ASSESSEE ON PAYMENTS RECEIVED FROM CUSTOMERS WHO HAD MADE PURCH ASES THROUGH CREDIT CARDS COULD NOT BE SAID TO BE COMMISSION BUT IT IS CHARGES FOR PROVIDING BANKING SERVICES AND THERE IS NO RELATION SHIP OF AGENT AND PRINCIPAL. THUS, SECTION 194H IS NOT ATTRACTED AND THERE IS NO QUESTION OF DISALLOWANCE U/S 40(A)(IA) FOR NON DEDUCTION OF TAX AT SOURCE. 8.1. BESIDES, JAIPUR BENCH OF THE TRIBUNAL IN THE C ASE OF BHANDARI JEWELLERS VS. ACIT IN ITA NO. 745/JP/11 HAS TAKEN THE SAME VIEW IN PAR A 7 OF ITS ORDER. FURTHER, RELIANCE IS PLACED ON THE ORDER IN M/S. GEM PARADISE IN ITA NO. 746/JP/11, ACIT VS. JET AIRWAYS (INDIA) LTD. (2014) 146 ITD 682 (MUM.) (TRIB.) AND MARUDHAR HOTELS (P) LTD. VS. JCIT (2013) 92 DTR 33 (JD.)(TRIB.) AND TATA TELESERVICES LTD. VS. DCIT (2013) 140 ITDF 451 (BANG.)(TRIB.). 9. APROPOS THE REMAIN GROUND, LD. AO MADE AD HOC D ISALLOWANCE OF 10% ON SALES PROMOTION EXPENSES WHICH WAS UPHELD BY LD. CIT (A) HOLDING THAT ASSESSEE DID NOT FILE COMPLETE VOUCHERS IN RESPECT OF THE CLAIM. THE LD. COUNSEL PLEADED THAT THE FINDING IS TOTALLY INCORRECT AS THE ASSESSEE VIDE LETTER DATED 16.12.2011 DURING THE COURSE OF ASSESSMENT PROCEEDINGS FURNISHED DETAILS OF 14 BILL S FURNISHED THE BILLS. 10. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. APROPOS THE FIRST GROUND OF THE REVENUE, RESPECTFULLY FOLLO WING HONBLE DELHI HIGH COURT JUDGMENT IN THE CASE OF CIT VS. JDS APPARELS PVT. L TD. (SUPRA) AND ITAT JAIPUR ORDER IN THE CASE OF BHANDARI JEWELLERS VS. ACIT (SUPRA) AND GEM PARADISE (SUPRA), THE GROUND OF THE REVENUE U/S 40(A)(IA) IS DISMISSED. 13 ITA NO. 231 & 224/JP/2013 A.Y. 2009-10. M/S. HANDICRAFT HAVELI VS. DCIT, JAIPUR. 11. APROPOS THE GROUND NO. 2, SINCE DETAILS IN RESP ECT OF SALES PROMOTION EXPENSES WERE FILED BEFORE AO, IN VIEW THEREOF, THERE IS NO JUSTIFICATION IN ADHOC DISALLOWANCE OF 10% ON SALES PROMOTION EXPENSES. THIS GROUND OF THE REVENUE IS DISMISSED. 12. IN THE RESULT, APPEALS FILED BY THE ASSESSEE AS WELL AS REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.11.2015. SD/- SD/- FOE FLAG ;KNO VKJ-IH-RKSYKUH (VIKRAM SINGH YADAV) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 20/11/ 2015 DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ M/S. HANDICRAFT HAVELI, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT : THE DCIT, CENTRAL CIRCLE-2, JAIPU R. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 231 & 224/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 14 ITA NO. 231 & 224/JP/2013 A.Y. 2009-10. M/S. HANDICRAFT HAVELI VS. DCIT, JAIPUR.