ANIL KUMAR AGARWAL, Jaipur V. ITO, Jaipur

ITA 288/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5434 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gross profit estimation; Rejection of books of accounts; Business income; Depreciation
• Section: 133(6); 145

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NOS. 288/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 200 9-10. SHRI ANIL KUMAR AGARWAL, PROP. M/S. AFFAIRS INDIA, FIRST FLOOR, DHULA HOUSE, BAPU BAZAR, JAIPUR. CUKE VS. THE INCOME-TAX OFFICER, WARD 1(3), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAMPA 9639 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY S BY : SHRI SHRAWAN GUPTA (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SMT. NEENA JEPH (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 10.02.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 24/02/2016. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THE PRESENT APPEAL FILED BY THE ASSESSEE IS ARISIN G FROM THE ORDER DATED 24.12.2013 PASSED BY THE LEARNED CIT (A)-I, JAIPUR FOR THE A.Y. 2009-10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT ON LAW AND FACT THE LD. CIT (A) HAS GROSSLY ER RED IN SUSTAINING THE ORDER OF THE LD. AO THAT BOOKS OF ACCOUNTS WERE REJ ECTED AS PER LAW. THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED WITHOUT GI VEN ANY SPECIFIC REASON IN MAINTENANCE OF BOOKS OF ACCOUNTS AND AS S UCH BOOKS OF ACCOUNTS HAS BEEN REJECTED ILLEGAL AND AGAINST THE FACTS ON RECORD. 2. THAT THE LD. CIT (A) HAS GROSSLY ERRED IN ESTIMATIN G GROSS PROFIT @ 7% WHILE ASSESSEE DECLARED GROSS PROFIT @ 4.99% AND LD . AO HAS ESTIMATED GP @ 8.54%. THE GP RATE HAS BEEN ESTIMATE D BY THE LD. CIT (A) WITHOUT ANY BASIS AND SPECIFIC REASON AND AGAIN ST THE FACTS ON 2 ITA NO. 288/JP/2014 A/Y 2009-10. SHRI ANIL KUMAR AGARWAL VS. ITO RECORD. AS SUCH THE ADDITION OF RS. 12,13,920/- IN TRADING RESULTS DUE TO ESTIMATION OF G.P RATE DESERVES TO BE QUASHED. T HE APPELLANT THEREFORE REQUEST TO DELETE THIS ADDITION. 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) HAS FAILED TO APPRECIATE THE VERY IMPORTANT FACT TH AT ASSESSEE HAS CHANGED THE LINE OF BUSINESS PRODUCTION AND TURNOVE R HAS INCREASED FROM 1.29 CRORE TO 6.04 CRORE. THE RATE OF GP AS ES TIMATED BY THE LD. CIT (A) ON THE BASIS OF PAST YEARS PERFORMANCE IS T OTALLY ILLEGAL AND ADDITION DESERVES TO BE QUASHED. 4. THAT THE LD. CIT (A) HAS GROSSLY ERRED IN DIRECTING THAT EXPENSES OF CONVEYANCE, DEEPAWALI, GENERAL TELEPHONE TRANSPORT AND CAR EXPENSES SHOULD BE DISALLOWED TO 5% SINCE THE GP RA TE HAS BEEN ESTIMATED, HENCE IN THE CIRCUMSTANCES DISALLOWANCE OF EXPENSES IS TOTALLY UNJUSTIFIED AND DESERVES TO BE QUASHED. 5. THAT THE ORDER OF THE LD. AO IS BAD IN LAW AND DESE RVES TO BE QUASHED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PROPRIETOR OF M/S. AFFAIRS INDIA, JAIPUR, AND IS ENGAGED IN THE BUSINESS OF SALE OF C LOTHES. THE ASSESSEE HAS FILED THE RETURN ON 29.09.2009 DECLARING TOTAL INCOME OF RS. 3,90,444/- FOR THE ASSESSMENT YEAR 2009-10. THE CASE OF THE ASSESSEE WAS SCRUTINIZED UNDER SECTION 143(2) OF THE I.T. ACT. DURING ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS SHOWN THE GROSS PROFIT RATE @ 4.99% DECLARING GROSS PROFIT OF RS. 3 0,14,582/- ON THE TURNOVER OF RS. 6,04,07,173/- WHICH IS VERY LOW IN COMPARISON TO PR ECEDING THREE ASSESSMENT YEARS AS UNDER :- A SSTT. YEAR TURNOVER GROSS PROFIT GROSS PROFIT RATE 2006 - 07 1,29,39,351/ - 11,21,736/ - 9.41% 2007 - 08 1,65,40,423/ - 15,31,339/ - 9.26% 2008 - 09 3,16,33,355/ - 22,00,342/ - 6.96% 2009 - 10 6,04,07,173/ - 30,14,582/ - 4.99% 3 ITA NO. 288/JP/2014 A/Y 2009-10. SHRI ANIL KUMAR AGARWAL VS. ITO DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FUR NISHED FORM NO. 3CB AND 3 CD UNDER SECTION 44AB ALONG WITH AUDIT REPORT. ON BEI NG ASKED BY THE AO AS TO THE REASON FOR LOW GP RATE, THE ASSESSEE SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS CHANGED HIS BUSINESS FROM PRODUCTION OF RUNNING CLOTH TO KAFTAN (UNSTITCHED NIGHTY CLOTHS). THE ASSESSEE HAS SUBMITTED THAT MAJOR SALES WERE MADE TO THE PARTIES OF ANANTPUR, ANDHRA PRADESH AND THE SALE PROCEEDS WERE DEPOSITED BY THESE PARTIES IN CASH DIRECTLY IN THE BANK ACCOU NT OPENED BY THE ASSESSEE AT AXIS BANK, ANANTPUR (A.P) FOLLOWED BY TELEPHONIC INFORMA TION TO THE ASSESSEE AND SUBSEQUENTLY THE AMOUNTS WERE TRANSFERRED TO THE AS SESSEES BANK ACCOUNT AT JAIPUR. THE ENTIRE DIRECT DEPOSITS IN BANK ACCOUNT AT ANANT PUR (AP) ARE DULY INCORPORATED IN REGULAR BOOKS OF ACCOUNTS OF THE ASSESSEE. IN THI S REGARD, THE AO VIDE ORDER SHEET ENTRY DATED 13.10.2011 ASKED THE ASSESSEE TO PRODUC E THE DETAILS OF SALES, AMOUNTS RECEIVED AND CONFIRMATIONS FROM THE PARTIES TO WHOM SALES WERE MADE. ON THE BASIS OF THE INFORMATION FURNISHED, THE AO ISSUED LETTERS UN DER SECTION 133(6) TO THE FOLLOWING PARTIES REQUIRING THEM TO FURNISH THE BOOKS OF ACCO UNTS AND CONFIRMATIONS IN RESPECT OF SALE TRANSACTIONS :- A) M/S. P. NIZAMUDDIN; B) M/S. M. DINESH C) M/S. SH. DEEPAK KUMAR JEEVAT RAM D) M/S. Y. SHARIF E) M/S. YAMAN TEXTILE SINCE NO REPLY WAS RECEIVED FROM THESE PARTIES, THE AO VIDE ORDER SHEET ENTRY DATED 14.12.2011 ASKED THE ASSESSEE TO FURNISH THE CONFIR MATIONS FROM THESE PARTIES. THE LD. COUNSEL FOR THE ASSESSEE VIDE HIS LETTER DATED 19.1 2.2011 SUBMITTED AS UNDER :- 4 ITA NO. 288/JP/2014 A/Y 2009-10. SHRI ANIL KUMAR AGARWAL VS. ITO COPY OF ACCOUNT OF M/S. P. NIZAMUDDIN, M. DINESH, DEEPAK KUMAR JEEVAT RAM, Y. SHARIF AND YAMAN TEXTILE HAS NOT BEE N RECEIVED BY THE ASSESSEE, HENCE UNABLE TO PRODUCE BEFORE YOU. ON PR EVIOUS HEARING, WE HAVE ALREADY FILED COPY OF ACCOUNT APPEARING IN OUR BOOKS OF ABOVE SAID PARTIES ALONGWITH COMPLETE ADDRESS AND EVIDENCES IN SUPPORT OF SALE. INSPITE OF OUR REPEATED REQUEST THEY ARE NOT ISSUIN G THE COPY OF ACCOUNT, KINDLY ASK THEM DIRECTLY TO FILE COPY OF ACCOUNT IN YOUR OFFICE. WE FURTHER SUBMIT THAT ABOVE SAID ACCOUNT HOLDERS IS PURCHASER OF ASSESSEE PRODUCT, TO WHOM ASSESSEE HAS GOT TO CONTROL AND INFLUENCE, HENCE UNABLE TO PRODUCE THE CERTIFIED COPY OF ACCOUNT. THE AO OBSERVED THAT SINCE NO COMPLIANCE WAS MADE T O THE LETTERS ISSUED U/S 133(6) BY THE PARTIES, IT IS THE DUTY OF THE ASSESSEE TO F URNISH THE REQUISITE DETAILS AND THE EXPLANATION FURNISHED BY THE ASSESSEE IS NOT ACCEPT ABLE. 2.1. THE ASSESSEE HAS ALSO BEEN ASKED AS TO WHY PRO VISIONS OF SECTION 145 SHOULD NOT INVOKED FOR NON MAINTENANCE OF STOCK REGISTER AND F OR SHOWING LOW GP RATE IN THE YEAR UNDER CONSIDERATION IN COMPARISON TO PRECEDING ASSE SSMENT YEARS. IN RESPONSE, LD. COUNSEL FOR THE ASSESSEE SUBMITTED AS UNDER :- 1. ASSESSEE IS NOT MAINTAINING STOCK REGISTER DUE TO VARIOUS VARIETIES OF CLOTH AND SIZES AND COLOUR OF KAFTAN, AND DUE TO NA TURE OF BUSINESS IT IS NOT FEASIBLE TO MAINTAIN STOCK REGISTER. HOWEVER, E NTIRE PURCHASES AND SALES ARE DULY SUPPORTED BY VOUCHERS AND PURCHASES WERE MADE FROM REGISTERED DEALERS AND PAYMENTS WERE MADE THROUGH A CCOUNT PAYEE CHEQUES. 2. LOOKING TO G.P. CHART, THE G.P. RATE IS 4.99% IN ASSTT. YEAR 2009-10 WHILE IN ASSTT. YEAR 2008-09 & 2007-08 G.P. RATE WA S 6.96% AND 9.26%. THE ASSESSEE SALE HAS INCREASED JUST DOUBLE IN COM PARISON TO 2008-09. 3. IN ASSTT. YEAR 2009-10 THE ASSESSEE HAS DIVERTED HIS BUSINESS FULLY FROM RUNNING CLOTH TO KAFTAN ONLY. THE SALE HAS INCREASE D SUBSEQUENTLY BUT G.P. RATE HAS REDUCED, SINCE TO ACHIEVE THE SALE TARGET, G.P. RATE IS REQUIRED TO BE REDUCED. FURTHER DUE TO COMPETITION IN MARKET G. P. RATE HAS REDUCED. HENCE FOR THE ABOVE REASON THE G.P. RATE HAS BEEN R EDUCED FROM 6.96% TO 4.99%. 5 ITA NO. 288/JP/2014 A/Y 2009-10. SHRI ANIL KUMAR AGARWAL VS. ITO ON CONSIDERATION OF THE SUBMISSIONS MADE BY THE LD. COUNSEL FOR THE ASSESSEE, THE AO FOUND THAT THE LD. A/R HAS FILED NO EVIDENCE IN RES PECT OF THE ABOVE CONTENTION OF THE ASSESSEE. THE AO HAS ALSO MENTIONED VARIOUS DEFECTS IN MAINTENANCE OF BOOKS AS OBSERVED AT PAGE 4 OF THE ASSESSMENT ORDER. THEREF ORE, TAKING INTO CONSIDERATION ALL THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE, REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY INVOKING PROVISIONS OF SECTION 145( 3) AND BY APPLYING AVERAGE GP RATE FOR THREE YEARS OF 8.54%, MADE A TRADING ADDITION O F RS. 21,44,191/- TO THE TOTAL INCOME OF THE ASSESSEE. 2.2. THE AO HAS ALSO MADE ADDITIONS UNDER THE HEAD : (1) CONVEYANCE EXPENSES RS. 639/- OUT OF EXPENSES OF RS. 3279/-, (2) DEEPAWALI EXPENSES RS. 3,100/- OUT OF RS. 30,301/-, (3) GENERAL EXPENSES RS. 3,600/- OUT OF R S. 35,412/-, (4) TELEPHONE EXPENSES RS. 3,500/- OUT OF RS. 31,899/-, (5) TRANSPORT EXPE NSES RS. 5,200/- OUT OF RS. 52,260/- AND (6) CAR EXPENSES AND DEPRECIATION RS. 34,168/- OUT OF RS. 1,70,838/-. THE AO DISALLOWED THE ABOVE EXPENSES FOR THE REASON THAT T HE ASSESSEE HAS NOT MAINTAINED PROPER RECORDS OR PRODUCED ANY EVIDENCES IN RESPECT OF THE EXPENSES INCURRED SUCH AS BILLS, VOUCHERS, CALL REGISTER ETC. AS WELL AS PER SONAL USER OF TELEPHONE AND CAR CANNOT BE RULED OUT, THEREFORE, HE ADDED THE SAME TO THE T OTAL INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF AO, THE ASSESSE E CARRIED THE MATTER BEFORE LD. CIT (A). THE LD. CIT (A) AFTER A DETAILED DISCUSSI ON, DIRECTED THE AO TO APPLY GROSS PROFIT @ 7% ON THE TOTAL SALES DISCLOSED BY THE ASS ESSEE AND COMPUTE THE INCOME 6 ITA NO. 288/JP/2014 A/Y 2009-10. SHRI ANIL KUMAR AGARWAL VS. ITO ACCORDINGLY. THE OBSERVATIONS MADE BY THE LD. CIT ( A) IN PARA 4 AND 4.1 OF HIS ORDER ARE AS UNDER :- 4. I HAVE CONSIDERED FACTS OF THE CASE. IT IS SEE N THAT THE BOOKS OF ACCOUNT HAVE BEEN REJECTED BY THE AO ON THE GROUND THAT THE APPELLANT WAS NOT MAINTAINING STOCK REGISTER, OPENING AN CLOS ING STOCK WERE NOT AVAILABLE, THE DETAILS REGARDING EXPENSES INCURRED ON PRINTING, COLOUR AND CHEMICAL, PACKING MATERIAL, SEMI FINISHED GOODS ETC . WERE NOT BE MAINTAINED. THE AO FURTHER NOTED THAT SOME AMOUNTS WERE DEPOSITED IN THE BANK ACCOUNT WHICH WERE CLAIMED TO HAVE COME FR OM CERTAIN PURCHASERS OF THE GOODS IN ANANTPUR (A.P), BANGALOR E AND AHMEDABAD. THE AO ISSUED NOTICE U/S 133(6) TO THE SO CALLED DE POSITORS ON THE ADDRESSES PROVIDED BY THE APPELLANT. THE APPELLANT WAS ALSO ASKED TO FURNISH CONFIRMATIONS FROM 5 DEPOSITORS WHO, AS PER THE APPELLANT, HAD DEPOSITED MONEY. THE APPELLANT, HOWEVER, FAILED TO FURNISH ANY DETAILS REGARDING THESE DEPOSITS FROM THESE PARTIES. ON THE SE FACTS THE AO REJECTED THE BOOKS OF ACCOUNT OF THE APPELLANT AND ESTIMATED INCOME BY APPLYING G.P. RATE OF 8.54%. IT IS FURTHER NOTED T HAT THE APPELLANT HAS NOT BEEN ABLE TO GIVE ANY COGENT REASON REGARDING THE D EFECTS NOTED BY THE AO IN THE BOOKS OF ACCOUNT EVEN AT THE APPELLATE ST AGE. THE REJECTION OF BOOKS OF ACCOUNT MADE BY THE AO IS, THEREFORE, UPHE LD. 4.1. SO FAR AS THE APPLICATION OF G.P. RATE IS CONC ERNED, IT IS SEEN THAT IN THE A.Y. 2007-08 ON THE SALES OF 1.65 CRORES, G.P. RATE OF 9.26% WAS SHOWN. IN THE A.Y. 2008-09 THE SALES WERE SHOWN AT RS. 3.16 CRORES AND THE G.P. RATE WAS SHOWN AT 6.96%. IN THE YEAR UNDE R CONSIDERATION THE APPELLANT HAS SHOWN SALES OF RS. 6.04 CRORES AND TH E G.P. SHOWN IS 4.99%. THUS, IT IS SEEN THAT WHILE THE TURNOVER OF THE APPELLANT HAS INCREASED THE G.P. RATE HAS GONE DOWN. THE CONTENT ION OF THE APPELLANT 7 ITA NO. 288/JP/2014 A/Y 2009-10. SHRI ANIL KUMAR AGARWAL VS. ITO THAT THERE WAS CHANGE IN THE LINE OF BUSINESS AND T HE PROFIT MARGIN IS TO BE REDUCED TO INCREASE THE TURNOVER OF THE APPELLAN T MAY BE CORRECT TO SOME EXTENT. HOWEVER, SINCE THE APPELLANT HAS NOT M AINTAINED PROPER BOOKS OF ACCOUNT, THE G.P. RATE SHOWN BY HIM CANNOT BE ACCEPTED. CONSIDERING THE OVER ALL FACTS AND CIRCUMSTANCES OF THE CASE, IT WOULD BE APPROPRIATE TO APPLY G.P. RATE OF 7% ON TOTAL SALES DISCLOSED BY THE APPELLANT. THE AO IS DIRECTED TO COMPUTE THE GROSS PROFIT, ACCORDINGLY. 3.1. REGARDING THE ISSUE OF DISALLOWANCES MADE BY T HE AO, THE LD. CIT (A) RESTRICTED THE DISALLOWANCES TO 5% OF THE EXPENSES INCURRED UN DER THESE HEADS, BY OBSERVING AS UNDER :- 4.2. NOW COMING TO THE DISALLOWANCE OUT OF CONVEY ANCE EXPENSES, DIWALI EXPENSES, GENERAL EXPENSES, TELEPHONE EXPENS ES, TRANSPORT EXPENSES AND CAR EXPENSES, IT IS SEEN THAT THESE DI SALLOWANCES HAVE BEEN MADE BY THE AO ON THE GROUND THAT THE APPELLANT HAS NOT MAINTAINED BILLS/VOUCHERS PERTAINING TO THESE EXPENSES AS WELL AS PERSONAL USER TO TELEPHONE AND CAR. IN VIEW OF THESE FACTS, THE DISA LLOWANCE MADE BY THE AO IS UPHELD. HOWEVER, CONSIDERING THE FACTS AND CI RCUMSTANCES OF THE CASE THESE DISALLOWANCES ARE LIMITED TO 5% OF THE E XPENSES INCURRED UNDER THESE HEADS. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 4.1. THE LD. A/R FOR THE ASSESSEE HAS STATED THAT D URING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS CHANGED HIS BUSINESS FROM PRODUCTI ON OF RUNNING CLOTH TO KAFTAN (UNSTITCHED NIGHTY CLOTHS). DURING THE YEAR, THE LD . A/R SUBMITTED THAT MAJOR SALES OF THE ASSESSEE WERE MADE IN ANANTPUR (A.P). FOR CONVE NIENT AND AS PER TRADE PRACTICE PREVAILING IN THAT AREA, ASSESSEE HAS OPENED A BANK ACCOUNT IN AXIS BANK AT ANANTPUR (A.P) AND THE SALE PROCEEDS WERE DEPOSITED IN CASH BY THE PURCHASERS IN THE BANK 8 ITA NO. 288/JP/2014 A/Y 2009-10. SHRI ANIL KUMAR AGARWAL VS. ITO ACCOUNT OF THE ASSESSEE. SUBSEQUENTLY THE AMOUNTS A RE TRANSFERRED TO THE ASSESSEES JAIPUR BANK ACCOUNT AND THE SAME ARE INCORPORATED I N THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE LD. A/R SUBMITTED THAT AS REQUIRED B Y THE A.O., THE ASSESSEE HAS PRODUCED NECESSARY EVIDENCES IN SUPPORT OF SALES AT ANANTPUR BY PRODUCING SALE INVOICE, TRANSPORT GOODS RECEIPTS, CONFIRMATION FRO M TRANSPORT AGENCY FOR DISPATCH OF GOODS, A COMPLETE LIST OF PURCHASERS ALONG WITH INV OICE NO. DATE OF DISPATCH AND COMPLETE ADDRESS. ALL THESE DOCUMENTS WERE CONSIDER ED BY THE AO AND NO DEFECT WAS POINTED OUT. THE LD. A/R FURTHER SUBMITTED THAT IN COMPLIANCE TO AOS NOTE SHEET DATED 13.10.2011 AND 14.12.2011, THE ASSESSEE REPEATEDLY REQUESTED THE PURCHASERS AT ANANTPUR (A.P) TO FURNISH THEIR COPY OF ACCOUNT WIT H THE ASSESSEE AND THEIR CONFIRMATIONS. BUT THE SAME WERE NOT RECEIVED. EVEN THE LETTERS ISSUED BY THE AO U/S 133(6) TO THESE PARTIES HAVE NOT BEEN RESPONDED. TH E LD. A/R CONTENDED THAT SINCE THE ASSESSEE HAS NO CONTROL ON THESE PARTIES AS THEY AR E PURCHASERS OF ASSESSEES PRODUCTS, HENCE THE ASSESSEE WAS UNABLE TO PRODUCE THE COPY O F ACCOUNTS AND CONFIRMATIONS FROM THESE PARTIES. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, THE ASSESSEE HAS FURNISHED THE AUDITED BALANCE SHEET, PROFIT & LOSS ACCOUNT, T RADING ACCOUNT ALONG WITH ALL THE ANNEXURES, AUDIT REPORT AND REPORT IN FORM NO. 3CD. THE ASSESSEE HAS ALSO PRODUCED BOOKS OF ACCOUNTS, NAMELY CASH BOOK, LEDGER, JOURNA L, VOUCHERS AND BILLS OF EXPENSES AND PURCHASES, SALE BOOK AND BANK STATEMENTS BEFORE THE AO, AS REQUIRED BY HIM. CONCLUDING HIS ARGUMENT, THE LD. A/R SUBMITTED THAT THE AO HAS FOUND NO DEFECT IN THE ACCOUNTS MAINTAINED BY THE ASSESSEE EXCEPT THAT GP SHOWN BY THE ASSESSEE WAS LOW IN COMPARISON TO EARLIER YEARS FOR WHICH THE LD. A/R E XPLAINED THAT DUE TO CONSIDERABLE 9 ITA NO. 288/JP/2014 A/Y 2009-10. SHRI ANIL KUMAR AGARWAL VS. ITO INCREASE IN SALES THIS YEAR, THE GP RATE IS REDUCED . THEREFORE, HE REQUESTED THAT THE ADDITION MAY KINDLY BE DELETED. 4.2. ON THE OTHER HAND, THE LD. D/R RELIED ON THE O RDER OF LD. CIT (A). 4.3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. WE NOTICED THAT IT IS AN UNDISPUTED POSITI ON THAT THE ASSESSEE HAS CHANGED THE BUSINESS FROM PRODUCTION OF RUNNING CLOTHS TO KAFTA N AND IT IS ALSO UNDISPUTED POSITION THAT MAJOR SALES OF THE ASSESSEE WERE MADE IN ANANT PUR (A.P). IT IS ALSO UNDISPUTED THAT PURCHASES AND SALES OF THE GOODS WERE DULY SUP PORTED BY VOUCHERS AND THE PURCHASES WERE MADE FROM REGISTERED DEALERS. THE PA YMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUE. HOWEVER, THE SOLE ALLEGATION ON THE BASIS OF WHICH THE AO HAS REJECTED THE BOOKS OF ACCOUNT WAS ON ACCOUNT OF THE ASSESSEES FAILURE TO PRODUCE THE CONFIRMATIONS OF THE ACCOUNTS FROM THE PURCHASERS O F THE GOODS FROM THE ASSESSEE. IN OUR VIEW, THE REJECTION OF BOOKS OF ACCOUNT BY THE AO WAS WITHOUT ANY RHYME AND REASON OR THE JUSTIFICATION. IN OUR VIEW, ONCE THE ASSESSEE WAS MAINTAINING BOOKS OF ACCOUNT, PURCHASES AND SALES WERE DULY VOUCHED, THE RE WAS SUFFICIENT COMPLIANCE IN MAINTAINING THE RECORDS AND THERE WAS NO JUSTIFICAT ION ON THE PART OF THE AO TO REJECT THE BOOKS OF ACCOUNT. ACCORDINGLY, GROUND NO. 1 OF APPEAL IS ALLOWED AND DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. SI NCE WE HAVE HELD THAT THE BOOKS OF ACCOUNTS WERE DULY MAINTAINED BY THE ASSESSEE AND N O SPECIFIC DEFECT HAS BEEN POINTED OUT BY THE AO, THEREFORE, IN OUR VIEW, THE AO HAS N O REASON TO ESTIMATE THE INCOME OF THE ASSESSEE BY APPLYING THE GP RATE OF 8.54%. THE AUTHORITIES BELOW HAVE FAILED TO BRING ON RECORD THE BASIS OF ARRIVING AT THE GP RAT E OF 8.54% WHICH IS CONTRARY TO THE GP 10 ITA NO. 288/JP/2014 A/Y 2009-10. SHRI ANIL KUMAR AGARWAL VS. ITO SHOWN BY THE ASSESSEE TO THE EXTENT OF 4.99%. SINC E WE HAVE HELD THAT THE BOOKS OF ACCOUNTS WERE DULY MAINTAINED BY THE ASSESSEE, THER EFORE, THE ESTIMATION BROUGHT ON RECORD BY THE AO AND CONFIRMED BY LD. CIT (A) IS WI THOUT ANY BASIS. ACCORDINGLY THE ADDITION MADE BY THE AUTHORITIES BELOW IS HEREBY DI RECTED TO BE DELETED. 4.4. SINCE WE HAVE HELD THAT THE BOOKS OF ACCOUNTS WERE DULY MAINTAINED BY THE ASSESSEE AND ALL THE SALES AND PURCHASES ARE DULY V OUCHED AND MAINTAINED BY IT, THEREFORE, WE DO NOT FIND ANY JUSTIFICATION FOR DIS ALLOWING 5% OF THE EXPENSES TOWARDS CONVEYANCE, DEEPAWALI, GENERAL, TELEPHONE, TRANSPOR T AND CAR. ACCORDINGLY THE DISALLOWANCE MADE BY THE AUTHORITIES BELOW ON THESE HEADS IS ALSO DIRECTED TO BE DELETED. IN THE LIGHT OF ABOVE, THE APPEAL OF THE A SSESSEE IS ALLOWED. 5. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/02/2016. SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 24/02/2016. DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI ANIL KUMAR AGARWAL, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- THE ITO WARD 1(3), JAIPUR. 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. 288/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 11 ITA NO. 288/JP/2014 A/Y 2009-10. SHRI ANIL KUMAR AGARWAL VS. ITO