ACIT, Jaipur V. M/S POORNIMA FIRE WORKS, Jaipur

ITA 316/JPR/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87552 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 02-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Income from undisclosed sources; Search and seizure; Loose papers; Opportunity of being heard; Corroborative evidences; Onus to prove
• Section: 143(3); 133A; 133(6); 131

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 VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 316/JP/2012 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 THE A.C.I.T. CENTRAL CIRCLE-1, JAIPUR. CUKE VS. M/S POORNIMA FIRE WORKS, 2-A, 138, SHIV SHAKTI COLONY, SHASHTRI NAGAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AAEFP 4879 L VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT IZR;K{KSI.K @ C.O. NO. 35/JP/2012 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 316/JP/2012) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 M/S POORNIMA FIRE WORKS, 2-A, 138, SHIV SHAKTI COLONY, SHASHTRI NAGAR, JAIPUR. CUKE VS. THE A.C.I.T. CENTRAL CIRCLE-1, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA- @ PAN/GIR NO.: AAEFP 4879 L IZR;K{KSID @ OBJECTOR IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI AJAY MALIK (ADDL.CIT) FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 27/11/2014 ?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 27/02/2015 ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 2 VKNS'K @ ORDER PER: T.R. MEENA, A.M. THIS IS AN REVENUES APPEAL FOR A.Y. 2009-10 AND C. O. OF THE ASSESSEE FOR A.Y. 2009-10 FILED AGAINST THE ORDER D ATED 30/01/2012 BY THE LEARNED CIT(A), CENTRAL, JAIPUR. THE EFFECTIVE GR OUNDS OF THE APPEAL AS WELL AS C.O. ARE AS UNDER:- GROUNDS OF REVENUES APPEAL BEING ITA NO. 316/JP/2 012 (A.Y. 2009-10) 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE CIT(A) (CENTRAL), JAIPUR HAS ERRED IN LAW AS WELL AS FACTS IN REDUCING GP RATE FROM 18.05% WHICH WAS APPLIED BY THE A.O. BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE IT ACT ON THE BASIS OF COMPARABLE CASE OF 16% WITHOUT ANY BASIS DESPITE THE FACT THAT THE CIT(A) HAS UPHELD APPLICABILITY OF SECTION 145(3). 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE CIT(A) (CENTRAL), JAIPUR HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS. 19,50,0 59/- MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED CASH ON THE BASIS OF ADMISSION OF THE PARTNER OF THE ASSESS EE FIRM U/S 132(4) OF THE IT ACT ON THE GROUND THAT THE ASSESSEE HAS DECLARED ADDITIONAL INCOME OF RS. 42 LACS DURING THE YEAR UNDER CONSIDERATION WHICH INCLUDED THE AMOUNT OF UNEXPLAINED CASH. ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 3 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE CIT(A) (CENTRAL), JAIPUR HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE ADDITION OF RS. 12,20,9 99/- OUT OF THE TOTAL ADDITION OF RS. 15,01,237/- MADE B Y THE A.O. ON ACCOUNT OF UNEXPLAINED STOCK FOUND AT THE TIME OF SEARCH/SURVEY DESPITE THE FACT THAT THE CIT(A) HAS PARTLY ACCEPTED THE FACTS MENTIONED BY THE A.O. IN THE REMAND REPORT. GROUNDS OF ASSESSEES C.O. NO. 35/JP/2012 (A.Y. 20 09-10) 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING TRADING ADDITION OF RS. 2,29,402/- BY APPLYING GP RATE 16%. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN COMPUTING THE ALLEGED UNEXPLAINED INVESTMENT IN STOCK AT RS. 4,63,345/- AND THEREBY CONFIRMING ADDITION OF RS. 2,80,238/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCK AFTER ALLOWING SET OFF OF TRADING ADDITION. 2. FIRST GROUND OF REVENUES APPEAL AND ASSESSEES C.O. ARE AGAINST REDUCING THE G.P. RATE FROM 18.5% TO 16% BY THE LEA RNED CIT(A) AND CONFIRMING THE G.P. RATE @ 16%. 2.1 THE ASSESSEE IS IN TRADING OF FIREWORKS. THERE WAS A SEARCH AND SEIZURE OPERATION U/S 132(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) CARRIED OUT ON 22/10/2008 A T THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEES GROUP. DURIN G THE COURSE OF ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 4 SEARCH AND SEIZURE OPERATION, INCRIMINATING DOCUMEN TS/LOOSE PAPERS WERE FOUND AND SEIZED. THE ASSESSEE FILED ITS RETURN OF INCOME ON 30/09/2009 DECLARING INCOME OF RS. 46,03,850/-. THE CASE WAS SCRUTINIZED U/S 143(3) OF THE ACT BY THE ASSESSING OFFICER. THE ASSESSEE IS A PARTNERSHIP FIRM. BOOKS OF ACCOUNT WERE PRODUCE D DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY THE ASSESSEE. O N VERIFICATION OF BOOKS OF ACCOUNT, THE ASSESSEE HAD DECLARED GROSS P ROFIT AT RS. 3,23,516/- ON TOTAL TURNOVER OF RS. 21,57,817/- GIV ING A G.P. RATE OF 14.99%. APART FROM THIS, THE ASSESSEE DECLARED RS. 9,16,182/- ON TOTAL TURNOVER OF RS. 70,24,060/- GIVING G.P. RATE OF 13. 4%, WHICH HAS NOT BEEN ENTERED INTO REGULAR BOOKS OF ACCOUNT. IT IS O BSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT FULLY V OUCHED PURCHASE AND SALE AND ALSO NOT MAINTAINED DAY TO DAY STOCK REGIS TER. THE ASSESSEE MADE PURCHASE OUTSIDE THE STATE AND PURCHASED BILL INCLUDE CHARITY AND MAHAMAI @ .30%, WHICH IS NOT ALLOWABLE AS PER LAW. DUR ING THE COURSE OF SEARCH, AS PER SCHEDULE MENTIONED ON PAGE NO. 2 OF THE ASSESSMENT ORDER, TOTAL UNACCOUNTED PURCHASE WAS DETECTED AT RS . 71,42,709/- AND UNACCOUNTED SALES OF RS. 32,08,310/-. TOTAL STOCK O F RS. 79,04,220/- WAS FOUND DURING THE COURSE OF SEARCH PROCEEDINGS AT VARIOUS BUSINESS PREMISES. AS PER STATEMENT OF SHRI MADAN MOHAN GUPT A, THE MAIN KEY ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 5 PERSON OF THE ASSESSEE GROUP HAS ADMITTED THAT NO P ROPER BOOKS OF ACCOUNT HAD BEEN MAINTAINED BY THE ASSESSEE GROUP, THEREFORE, IT WAS NOT POSSIBLE TO VERIFY THE STOCK FOUND AT VARIOUS P REMISES. SHRI MADAN MOHAN GUPTA HAS STATED IN HIS STATEMENT DATED 21/10 /2008 IN REPLY TO QUESTION NO. 21, WHICH IS REPRODUCED AS UNDER:- IKZ'U 21 VKT FNUKAD 22-10-08 DKS LPZ DH DK;ZOKGH D S NKSJKU TKS YQT ISILZ ANNEXURE BR;KFN IK;S X;S VKSJ TCR FD;S TK JGS GSA MUDS VUNJ DPPS PURCHASE & SALE DH DKXTKR 'KKFEY GS A VKIDS BOOKS OF A/C HKH IWJH RJG CUS GQ, UGH GSA VKSJ BL DKJ.K LVKD DK LR;KIU HKH VKI UGH DJOK I K JGSA GSA BU LHKH DFE;KSA DS CKJS VKI DK D;K DGUK GS A \ MRRJ ESA ;G LOHDKJ DJRK GWWA FD GEKJS IVK[KSA DS BUSINESS ESA DKQH GN RD TRANSACTION CGH [KKRKSA DS CKGJ JGRS GSA GEKJS SALE AND PURCHASES HKH CASH ESA GKSRS GSA A FTUDK FOOJ.K CGH[KKRKSA ESA NTZ UGH GKSRK ;GH DKJ.K FD CG H[KKRS IZFRFNU UPDATE UGHA FD;S TKRS GS VKSJ BLFY, GEKJS BUSINESS PREMISES IJ IK;S X;S STOCK DK LR;KIU DJOKUK LEHKO UGH GSA BU LHKH DFE;KSA DKS ESA IGYS H KH LOHDKJ DJ PQDK GWA FINYS IZUKSA DS MRRJ ESA ESAUS CRK;K FKK FD ESJH V?KKSF'KR VK; ESA LS ESAUS 41 YK[K :I;S YKS XKSA DKS M/KKJ NS J[KS GSA BLDS VYKOK 15 YK[K :- AGREEMENT DS VUQLKJ UKBZ FD FKMH OKYH TEHU VYKOK 20 YK[K DS DJHC UXNH IK;S X;S ESJS ?KJ IJ IK;K X;K GS MLS ESA VIUH V?KKSF'KR [KKRKSA ESA VFTZR VK; DS :I ESA LOHDKJ DJ PQDK GWWA A BLDS VFRFJDR TKS LOOSE PAPER BR;KFN ESJS ?KJ ,OA BUSINESS LFKKUKSA LS IK;S X;S GSA MUESA V?KKSF'KR VK; VKSJ MLLS VFTZR FUOSK DS :I ESA ESA LOSPNK LS VIUH V?KK SF'KR VK; LEFIZR DJUK PKGRK GWWA A ESA ;G HKH LI'V DJUK ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 6 PKGRK GQ FD GEKJS BUSINESS IZFR'BKUKSA ESA DJHC 10 LS 12 YK[KKSA DK STOCK V?KKSF'KR VK; LS VFTZR FUOSK DS :I ESA FO/KEKU GSA A BU LHKH DJXTKR STOCK BR;KFN DS :IK ESA ESA VIUS VUQEKU L 30 YK[K :I;S HKH V?KKSF'KR VK; BL ISV S VK;DJ DS FY, LEFIZR DJRK GWWA A FTLESA V?KKSF'KR STOCK ] SALE, PURCHASES DS DPPS DKXTKR ,OA ESJS ?KJ ,OA BUSINESS IZFR'BKUKSA LS IK;S X;S DKXTKR O NLRKOST ESA YH XBZ TRANSACTION 'KKFEY GSA A DURING THE COURSE OF SEARCH OPERATION, IT IS ALSO FOUND THAT THE BOOKS OF THE ASSESSEE ARE INCOMPLETE AS PER THE STA TEMENT OF SHRI PANKAJ AGARWAL IN REPLY TO Q. NO. 8 RECORDED U/ S 131 OF THE I.T. ACT, 1961 ON 05/01/2008 WHICH IS REPRODUCED BELOW : IZ'U8- ESA VKIDKS VKIDS BUSINESS PREMISES 295-296 THE RAJASTHAN SHORA SUPPLY CO., HAWA MAHAL BAZAR, JAIPUR LS IMPOUND DH X;H LAPTOP FTLDK DATA ,D VYX HARD DISK ESA COPY FD;K GQVK GSA BL HARD DISK DKS [KKSY DJ FN[KK JGK GWWA A D`I;K CRK;S FD BLESA D;K D;K GSA \ MRRJ BL HARD DISK ESA GEKJH FIRM VKSJ CONCERNS DK TALLY &9 VKSJ TALLY &7-2 FORMAT ESA DATA J[KK GSA A TALLY 7-2 ESA HKH CGH DATA GS TKS FD TALLY 9 ESA GSA A CL MLS UPGRADE DJ FN;K X;K GSA A TALLY 9 ESA POORNIMA FIREWORKS DH F.Y. 2005&06] 2006&07 DH RKS IWJH COMPLETE BOOKS GS VKSJ F.Y. 2007&08 O 2008&09 DH INCOMPLETE BOOKS GSA A ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 7 SHRI MADAN MOHAN GUPTA AND SHRI PANKAJ AGARWAL BOTH ADMITTED THAT THE BOOKS OF ACCOUNTS WEE NOT COMPLETED AND ASSESSEE FIRM INDULGED INTO TRANSACTIONS WHICH ARE NOT ENTERED IN THE REGULAR BOOKS OF ACCOUNT. IT HAS BEEN CONCLUDED BY THE ASSESSING OFFICER THAT OPENING STOCK AND CLOSING STOCK IS NOT VERIFIABLE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO VERIFY THE GENUINENESS OF THE PURCHA SES SOME OF THE PARTIES FROM WHOM THE ASSESSEE HAS MADE PURCHASES NO TICES U/S 133(6) OF IT ACT,. 1961 WERE ISSUED TO THE PURCHASERS PARTIES. OUT OF THESE NOTICES ISSUES, FOLLOWING NOTICES WERE RETURNED BACK BY THE POSTAL AUTHORITY UNSERVED GIVING REMARK NOT KNOWN OR NO SUCH ADDRESS ETC. 1. M/S ARJUN FIREWORKS, SIVAKASHI. 2. M/S SHRI DIVAN FOREWORKS, THIRUTHANGAL, SIVKASHI 3. M/S RAJAVEL FIREWORKS FACTOR, SIVKASHI. 4. M/S JAYA LATCHANA FIREWORKS, SIVKASHI. 5. M/S DURGAIAMMAN FIREWORKS, VISHWANATHAN, SIVKASHI . 6. M/S ANITHA SPARKLERS FIREWORKS, SIVKASHI 7. M/S GOKILA FIREWORKS, SIVKASHI. AS THE NOTICES ISSUED TO THE PURCHASE PARTIES RETUR NED UNSERVED BY THE POSTAL AUTHORITY, THEREFORE, THE ASSESSEE WAS ASKED VIDE ORDER ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 8 SHEET DATED 26/11/2010 TO VERIFY ALL THE ABOVE PART IES FROM WHOM THE ASSESSEE HAS MADE PURCHASES WITH SUPPORTING EVIDENCE S. THE ASSESSEE WAS REQUIRED TO VERIFY PURCHASE MADE FROM ALL THE AB OVE PARTIES BUT ASSESSEE HAS BEEN UNABLE TO VERIFY THE PURCHASE WITH SUPPORTING EVIDENCES TO SUBSTANTIATE THE GENUINENESS OF PURCHA SES. THE LEARNED ASSESSING OFFICER ALSO HELD THAT THE ONUS TO PROVE THE PURCHASES GENUINE IS ON THE ASSESSEE BY RELYING ON THE VARIOU S DECISIONS CONSIDERED BY HIM, WHICH IS AS UNDER:- (I) M/S INDIAN WOOLEN CARPET FACTORY VS. ITAT & OTH ERS (2002) 178 CTR 420 AND M.P. HIGH COURT IN THE CASE OF VISP (P) LTD. VS. CIT & ANR. 186 CTR 718. (II) AWADESH PRATAP SINGH ABDUL REHMAN & BROS. VS. CIT (1994) 76 TAXMAN 106 (ALL.). (III) S.N. NAMASIVAYAM CHETTIAR VS. CIT (1960) 38 I TR 579. (IV) M/S KACHWALA GEMS VS. JCIT (2007) 288 ITR 10. ON THE BASIS OF DEFECTS FOUND, AS MENTIONED ABOVE, THE LEARNED ASSESSING OFFICER REJECTED THE BOOK RESULT U/S 145( 3) OF THE ACT. IT IS FURTHER HELD THAT OPENING AND CLOSING BALANCE ARE N OT VERIFIABLE, THERE IS NO SANCTITY OF GROSS PROFIT SHOWN BY THE ASSESSE E. THE ASSESSEE BUSINESS TRANSACTION ON THE BASIS OF REGULAR BOOKS AS WELL AS INCRIMINATING DOCUMENTS CAN BE SUMMARIZED AS UNDER: - ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 9 A.Y. AS PER REGULAR BOOKS OF ACCOUNT UNACCOUNTED SALES SALES G.P. RATIO SALES G.P. RATIO 2003-04 11,89,909/- 11.87% 2004-05 18,29,613/- 13.23% 2005-06 23,09,098/- 11.04% 2006-07 26,27,528/- 12.26% 15,58,786/- 12.26% 2007-08 15,93,180/- 12.98% 49,40,182/- 12.98% 2008-09 20,56,885/- 13.00% 70,88,444/- 13.04% 2009-10 21,57,817/- 14.99% 70,24,060/- 13.04% THE ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD AS TO WHY NOT G.P. @ 18.25% SHOULD NOT BE APPLIED AFTER REJ ECTION OF BOOKS OF ACCOUNT. THE ASSESSEE HAS NOT FILED ANY PROPER R EPLY. FURTHER AS PER COMPARABLE CASE LEARNED ASSESSING OFFICER APPLIED C OMPARABLE CASE OF M/S RAJAN FIREWORKS AND EMPORIUM PROP. M/S SUNDER DA SS HASANI HUF, WHO IS WHOLESALERS/RETAILERS OF FIREWORKS, WHO HAS SHOWN G.P. RATE RANGING G.P. FROM 17% TO 18%. ACCORDINGLY, HE APPLI ED G.P. RATE @ 18.5% ON TOTAL TURNOVER SHOWN IN THE REGULAR BOOKS O F ACCOUNT AT RS. 21,57,817/- AND UNRECORDED TURNOVER OF RS. 70,24,06 0/-. THEREFORE, HE CONCLUDED GROSS PROFIT AT RS. 16,98,648/- AS AGAINS T RS. 2,23,516/- DECLARED BY THE ASSESSEE IN THE REGULAR BOOKS OF AC COUNT AND RS. 9,16,182/- OUT OF BOOKS. THE TRADING ADDITION OF RS. 4,58,950/- WAS MADE BY THE ASSESSING OFFICER. ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 10 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD ALLOWED THE APPEAL PARTLY BY OBSERVING AS UNDER:- 2.3 I HAVE CONSIDERED THE SUBMISSION OF LEARNED A. R. AND HAVE PERUSED THE MATERIAL ON RECORD. UNDISPUTEDLY, ON GO ING THROUGH THE FACTS, PROVISIONS OF SECTION 145(3) ARE CLEARLY APPLICABLE. THIS HAS ALSO NOT BEEN DISPUTED BY THE A .R. COMING TO THE APPLICATION OF G.P. RATE, IT IS QUITE EVIDENT THAT G.P. RATE SHOWN BY THE APPELLANT FOR DIFFERENT YEAR IS CERTAINLY QUITE LESS THAN THE G.P. RATE OF 17.02% T O 18% DECLARED BY M/S RAJAN FIRE WORKS @ EMPORIUM. THE APPELLANT AS WELL AS THIS FIRM BOTH ARE WHOLESALER. I T MAY BE POSSIBLE THAT M/S RAJAN FIRE WORKS & EMPORIUM MA Y BE DOING SOME MANUFACTURING OF ITS OWN, PART FROM MAIN BUSINESS OF WHOLESALE TRADING. CONSIDERING THIS POS ITION, IT WILL BE APPROPRIATE AND REASONABLE TO APPLY THE G.P. RATE OF 16% IN THE CASE OF APPELLANT ON RECORDED (RS. 21,57 ,817/-) AS WELL AS UNRECORDED SALES (RS. 70,24,060/-) BOTH, GIVING THE GROSS PROFIT OF RS. 14,69,100/- AS AGAINST RS. 3,23,516/- DECLARED BY APPELLANT IN REGULAR BOOKS A ND RS. 9,16,182/- OUT OF BOOKS, LEADING TO SUSTAINING THE ADDITION OF RS. 2,2,9,402/-. THUS, RELIEF OF RS. 2,29,547/- I S GRANTED. 4. NOW THE REVENUE AS WELL AS THE ASSESSEE ARE BEFORE US. ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 11 5. THE LEARNED CIT D.R. VEHEMENTLY SUPPORTED THE ORD ER OF THE LEARNED ASSESSING OFFICER. 6. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSES SEE HAS SUBMITTED THAT THERE IS NO DISPUTE AS TO THE FACT THAT THE PR OVISIONS OF SECTION 145(3) OF THE ACT IS APPLICABLE. THE QUESTION IS THA T WHAT SHOULD BE THE GROSS PROFIT RATE AND WHETHER ANY ADDITION IS REQUIR ED WHEN ASSESSEE HAD ALREADY DECLARED UNDISCLOSED INCOME OF RS. 52.1 2 LACS. THE ASSESSING OFFICER APPLIED G.P. RATE @ 18.5% BY REFER RING TO THE CASE OF M/S RAJAN FIREWORKS AND EMPORIUM, WHICH IS NOT JUSTIF IED FOR THE FOLLOWING REASONS. (I) THE A.O. HAS NOT PROVIDED THE FINANCIAL DATA OF M/S RAJAN FIRE WORKS AND EMPORIUM. IN ASSESSMENT PROCEEDINGS, THE RESULT OF THIS FIRM WAS NOT CONFRONTED TO THE ASSESS EE. OTHERWISE ALSO THIS FIRM IS NOT COMPARABLE WITH THE ASSESSEE FOR THE FOLLOWING REASONS: - RAJAN FIRE WORKS ARE EMPORIUM IS A MANUFACTURER CUM WHOLESALER IN THIS BUSINESS WHILE ASSESSEE IS WHOLESALER ONLY. - RAJAN FIRE WORKS AND EMPORIUM IS WELL ESTABLISHED ENTITY IN THIS BUSINESS SINCE 35 YEARS WHILE ASSESS EE STARTED ITS BUSINESS FROM 1998. - THE SIZE OF BUSINESS OF THIS FIRM IS MUCH LARGER T HAN THAT OF ASSESSEE. ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 12 (II) THE COMPARATIVE POSITION OF THE GROSS PROFIT RA TE DECLARED BY THE ASSESSEE AS PER BOOKS OF ACCOUNT ARE AS UNDE R:- A.Y. SALES GROSS PROFIT G.P. RATIO 2009-10 21,57,817/- 3,23,516/- 14.99% 2008-09 20,56,885/- 2,67,395/- 13.00% 2007-08 15,93,180/- 2,06,850/- 12.98% 2006-07 26,27,528/- 3,22,211/- 12.26% 2005-06 23,09,098/- 2,52,912/- 11.04% 2004-05 18,29,613/- 2,41,985/- 13.23% 2003-04 11,89,909/- 1,41,239/- 11.87% FROM THE ABOVE TABLE, IT CAN BE NOTED THAT THE G.P . RATE DECLARED BY THE ASSESSEE IS BETTER AND COMPARABLE T O THE EARLIER YEARS. IN THE PRESENT CASE SINCE THE ASSESS EE HAS DECLARED BETTER RESULTS, THE G.P. RATE DECLARED SHO ULD BE ACCEPTED. THE ASSESSEE HAS DECLARED UNDISCLOSED MISCELLANEOUS INCOME OF RS. 42 LACS, APART FROM UNDISCLOSED INTER EST INCOME AND INCOME FROM UNACCOUNTED BUSINESS OF RS. 10,12,675/-. ONCE THIS IS ASSESSED, NO SEPARATE TRA DING ADDITION OF RS. 4,50,8950/- IS REQUIRED AS MISCELLA NEOUS INCOME OFFERED IS MUCH MORE THAN THE TRADING ADDITI ON MADE BY THE A.O. IN VIEW OF ABOVE THE TRADING ADDITION MADE BY THE A .O. IS UNCALLED FOR AND BE DELETED. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS UNDISPUTED FACT THAT ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 13 THE ASSESSEE HAS BEEN INDULGING IN UNACCOUNTED SALE S/PURCHASES. THE MAJOR EXPENSES ON ACCOUNT OF TRADING OF FIREWORKS HA VE ALREADY BEEN DEBITED BY THE ASSESSEE IN P&L ACCOUNT EXCEPT UNACC OUNTED PURCHASE. THEREFORE, IN UNACCOUNTED PURCHASE RESULTANT TO UNAC COUNTED SALES, THE ASSESSEE HAS MORE PROFITABILITY. THE LEARNED COUNSEL HAS NOT CONTROVERTED THE FINDING GIVEN BY THE LEARNED CIT(A ). IN CASE OF RAJAN FIREWORKS AND EMPORIUM, THE G.P. SHOWN BY IT @ 17% TO 18%, WHO IS DEALING IN WHOLESALE/RETAIL FIREWORKS. THEREFORE, THE LEARNED CIT(A) HAS REASONABLE TO APPLY 16% G.P. ON RECORDED SALES AS WE LL AS UNRECORDED SALES. THUS, WE CONFIRM THE ORDER OF THE LEARNED CIT(A ). THEREFORE, THE REVENUES APPEAL AND ASSESSEES C.O. ON THIS ISSUE ARE DISMISSED. 8. THE SECOND GROUND OF REVENUES APPEAL IS AGAINST DELETING THE ADDITION OF RS. 19,50,059/- ON ACCOUNT OF UNEXPLAIN ED CASH ON THE BASIS OF ADMISSION OF PARTNER OF THE ASSESSEE FIRM U/S 13 2(4) OF THE ACT ON THE GROUND THAT THE ASSESSEE HAD DECLARED ADDITIONA L INCOME OF RS. 42 LACS DURING THE YEAR UNDER CONSIDERATION. THE ASSESS ING OFFICER OBSERVED THAT DURING THE COURSE OF SEARCH PROCEEDIN G, AS PER PHYSICAL INVENTORY OF CASH, THE CASH OF RS. 20,64,200/- WAS F OUND, OUT OF THIS, RS. 20 LACS WAS SEIZED BY THE AUTHORIZED OFFICER. AS PER BOOKS MAINTAINED BY THE ASSESSEE ON THE DATE OF SEARCH, T HE ASSESSEE BALANCE ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 14 WAS RS. 1,14,141/-, THEREFORE, EXCESS CASH OF RS. 19 ,50,059/- WAS FOUND. SHRI MADAN MOHAN GUPTA, KEY PERSON OF THE AS SESSEE GROUP HAD STATED IN REPLY TO QUESTION NO. 20 IN HIS STATEMENT THAT IT IS UNRECORDED INCOME OF THE FAMILY OF THE ASSESSEE. THE STATEMENT IS REPRODUCED BELOW: IZ- 20 VKT FNUKAD 22-10-08 DKS VKIDS FUOKL LFKKU IJ LPZ DH DK;ZOKGH DS NKSJKU DJHC 20 YK[K :IK;S UXNH IK;S X;S A BLDS CKJSA ESA VKIDK D;K DGUK GSA LIV DJSA ? M- MIJKSDR JDE TKS FEYH GS OG ESJH V?KKSFKR VK; GR IEVANCE TKS ESUSA BOOKS OF ACCOUNT TKS ESA N'KZK UGHA J[KH GS ;G ESJH VK; O;OLK; LS LECFU/KR GS TKS N'KKZ;H UGHA X;H GSA THE ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE, WHICH HAS BEEN AVAILED BY THE ASSESSEE V IDE LETTER DATED 17/12/2010. IT HAS BEEN SUBMITTED BEFORE THE ASSESS ING OFFICER THAT ON VERIFICATION OF THE BOOKS OF ACCOUNT FOUND FROM THE PERIOD 15/10/2008 TO 22/10/2008, THE ASSESSEE HAS ADDED UNVERIFIABLE SALES AND PURCHASES OF WHICH NO SUPPORTING VOUCHERS HAD BEEN FURNISHED. THE ASSESSING OFFICER HELD THAT THE CASH AVAILABILITY O N DATE OF SEARCH AS SUBMITTED BY THE ASSESSEE WAS RS. 20,64,200/- HAS NO BASIS. THE ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 15 ASSESSEE FAILED TO FURNISH ANY SATISFACTORY EXPLANA TION REGARDING CASH FOUND DURING THE COURSE OF SEARCH. THEREFORE, HE TR EATED EXCESS CASH OF RS. 20,50,059/- AS INCOME FROM UNDISCLOSED SOURCE A ND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 9. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD ALLOWED THE APPEAL BY OBSERVING THAT THE LEARNED ASSESSING OFFICER HAS NOT ACCEPTED THE BOOKS OF ACCOUNT PREPARED AFTER THE DA TE OF SEARCH BY INCLUDING THE UNACCOUNTED SALES AND PURCHASES AND A LSO CONSIDERING THAT IN THE STATEMENT, THE APPELLANT HAD ADMITTED T HE CASH TO BE UNACCOUNTED. ON THE BASIS OF UNACCOUNTED PURCHASES/ SALES, THE AVAILABILITY OF CASH HAS BEEN EXPLAINED BY THE ASSE SSEE BEFORE THE ASSESSING OFFICER, WHICH HAS BEEN REJECTED BY HIM WI THOUT APPRECIATING THE FACTS. IT IS ALSO ARGUED BY THE AR BEFORE THE L EARNED CIT(A) THAT UNDISCLOSED PROFIT FROM UNDISCLOSED SALE RECORDED I N SEIZED MATERIAL TOTALING TO RS. 26,73,213/- SPREAD OVER IN FOUR YEA RS. THE ADDITIONAL INCOME HAS FURTHER BEEN OFFERED FOR TAXATION TO EXP LAIN THE ACQUISITION OF UNACCOUNTED ASSETS. SUCH INCOME IS RS. 42 LACS F OR A.Y. 2009-10, RS. 3.5 LACS FOR A.Y. 2008-09 AND RS. 6.5 LACS FOR A.Y. 2007-08. THUS, TOTAL ADDITIONAL INCOME OFFERED BY THE ASSESSEE WAS RS. 52 LACS INCLUDED THE ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 16 UNDISCLOSED PROFIT AS WELL AS INTEREST ON LOAN ADDIT IONALLY OFFERED, TOTAL UNACCOUNTED INCOME OFFERED, CAME TO RS. 79,69,706/- WHEREAS UNACCOUNTED ASSETS FOUND TO BE NOTICED DURING THE C OURSE OF SEARCH, INTER ALIA, INCLUDES CASH LOAN OF RS. 35 LACS, UNEX PLAINED CASH OF RS. 19,50,059/- AND UNACCOUNTED INVESTMENT IN LAND AT R S. 15 LACS. THE LEARNED ASSESSING OFFICER HAD ACCEPTED THE EXPLANAT ION PARTLY AS MUCH AS THAT CASH LOAN OF RS. 35 LACS AND UNEXPLAINED IN VESTMENT IN LAND WAS NOT ADDED WHEREAS UNEXPLAINED CASH WAS ADDED. 10. NOW THE REVENUE IS IN APPEAL BEFORE US. 11. THE LEARNED CIT DR VEHEMENTLY SUPPORTED THE ORDE R OF THE ASSESSING OFFICER. 12. AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSE E HAS SUBMITTED AS UNDER:- THE AO OBSERVED THAT SH. MADAN MOHAN GUPTA IN HIS STATEMENT IN REPLY TO Q.20 ADMITTED IT TO BE UNDISC LOSED INCOME. THE EXPLANATION OF THE ASSESSEE THAT THE CAS H FOUND IS OUT OF UNDISCLOSED SALES AND PURCHASE IS WI THOUT SUPPORTING EVIDENCE. HE THEREFORE MADE ADDITION OF RS.19,50,059/- BY TREATING THE SAME AS INCOME FROM UNDISCLOSED SOURCES. THE CIT(A) AT PARA 3.3, PG 8 TO 10 OF HIS ORDER CONSI DERING THE FACT THAT ASSESSEE HAS OFFERED UNDISCLOSED PROF IT OF ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 17 RS.26,73,213/- AND ADDITIONAL INCOME OF RS.52,00,00 0/- BETWEEN ASSESSMENT YEARS 2006-07 TO 2009-10 AND ALSO CONSIDERING THE FACT THAT AO HIMSELF HAS ALLOWED THE SET OFF UNDISCLOSED INCOME AGAINST UNDISCLOSED INVESTME NT MADE IN LOAN/ LAND, ALLOWED THE SET OFF THE UNDISCLO SED CASH FOUND AGAINST THE UNDISCLOSED INCOME OFFERED F OR TAX AND THUS DELETED THE ADDITION. THERE IS NO DISPUTE AS TO THE FACT THAT ASSESSEE HAS OFFERED SUBSTANTIAL UNDISCLOSED INCOME BETWEEN AY 20 07- 08 TO 2009-10 WHICH IS MORE THAN THE UNDISCLOSED INVESTMENT MADE BY THE ASSESSEE AND THE UNRECORDED CASH FOUND IN SEARCH. THE POSITION OF INCOME SO DECL ARED AND THE INVESTMENT FOUND THERE AGAINST IS AS UNDER: - PARTICULARS AMOUNT UNDISCLOSED INCOME DECLARED UNDISCLOSED INCOME ON UNACCOUNTED TURNOVER BETWEEN AY 2006-07 TO 2009-10 2659901 MISCELLANEOUS INCOME BETWEEN AY 2007-08 TO 2009-10 5200000 TOTAL UNDISCLOSED INCOME DECLARED 7859901 UNDISCLOSED INVESTMENT BETWEEN AY 2006-07 TO 2009-10 LOANS 35,00,000/- CASH 19,50,059/- INVESTMENT IN LAND 15,00,000/- TOTAL UNDISCLOSED INVESTMENT 69,50,059/- EXCESS OF UNDISCLOSED INCOME OVER UNDISCLOSED INVESTMENT 9,09,842/- ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 18 FROM THE ABOVE, IT IS EVIDENT THAT CASH FOUND IN SE ARCH IS COVERED BY THE UNDISCLOSED INCOME OFFERED BY THE ASSESSEE IN THE RETURN. CIT(A) HAS THEREFORE RIGHTLY DELETED THE ADDITION. THE GROUND OF THE DEPARTMENT B E THEREFORE BE DISMISSED. 13. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE AS SESSEE HAS ALREADY DISCLOSED EXCESS UNDISCLOSED INCOME OVER UNDISCLOSE D INVESTMENT IN THE RETURN ITSELF. IT IS A FACT THAT THE ASSESSEE H AS ADMITTED ADDITIONAL INCOME ON ACCOUNT OF CASH FOUND DURING THE COURSE O F SEARCH. THE STATEMENT RECORDED U/S 133A OF THE ACT HAS NO EVIDE NTIARY VALUE AS HELD BY THE HON'BLE SUPREME COURT BUT THE STATEMENT RECORDED U/S 132(4) HAS EVIDENTIARY VALUE, WHICH IS ALSO REBUTTAB LE PRESUMPTION AS HELD BY THE HON'BLE APEX COURT IN VARIOUS CASES. IT IS FACT THAT SHRI MADAN MOHAN GUPTA IN QUESTION TO ANSWER NO. 21 IN ST ATEMENT U/S 133A DATED 22/10/2008 HAD ADMITTED THAT THE CASH OF RS. 20 LACS WAS FOUND AT RESIDENCE, HAD DISCLOSED ADDITIONAL INCOME . THE LEARNED AR FOR THE ASSESSEES ARGUMENT THAT THE EXCESS CASH FOUND DURING THE COURSE OF SEARCH AT RESIDENCE WAS RESULT OF UNACCOUNTED SAL E MADE IN PRECEDING YEARS. THE LEARNED CIT(A) ALSO ANALYSED THE WHOLE FACTS WITH REFERENCE TO CASH AND UNACCOUNTED INVESTMENT FOUND AND HAS GIVEN ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 19 DETAILED FINDINGS ON THIS ISSUE, WHICH HAS NOT BEEN CONTROVERTED BY THE LEARNED CIT DR. THEREFORE, WE CONFIRM THE ORDER OF TH E LEARNED CIT(A). 14. IN THE RESULT, THE APPEAL OF THE REVENUE ON THI S GROUND IS DISMISSED. 15. THE THIRD GROUND OF THE REVENUES APPEAL AND SEC OND GROUND OF THE ASSESSEES C.O. ARE AGAINST DELETING THE ADDITI ON OF RS. 12,20,999/- OUT OF TOTAL ADDITION OF RS. 15,01,237 ON ACCOUNT O F UNEXPLAINED STOCK FOUND AND CONFIRMING ADDITION OF RS. 2,80,238/- AFT ER ALLOWING SET OFF TRADING ADDITION. THE ASSESSING OFFICER OBSERVED THA T DURING THE COURSE OF SEARCH PROCEEDINGS, STOCK AMOUNTING TO RS. 79,04 ,220/- WAS FOUND. THE DETAILS OF STOCK FOUND IS AS UNDER:- S. NO. PREMISES VALUE OF STOCK 1 M/S POORNIMA FIRE WORKS 291-292, HAWA MAHAL BAZAR, JAIPUR. RS. 11,95,196/- 2. M/S RAJASTHAN SHORA SUPPLY COMPANY 295-196, KHAWAS JI KA RASTA, HAWA MAHAL BAZAR, JAIPUR. RS. 2,31,485/- 3. M/S POORNIMA FIRE WORKS & M/S RAJASTHAN SHORA SUPPLY COMPANY 865, KHAWAS JI KA RASTA, HAWA MAHAL BAZAR, JAIPUR. 60,18,614/- 4. WARE HOUSE AT VILL. ROOPA KI NANGAL, RAM GARH ROAD, JAIPUR (GODOWN NO. 3) RS. 2,67,395/- 5. WARE HOUSE AT VILL. ROOPA KI NANGAL, RAM GARH ROAD, JAIPUR (GODOWN NO. 4) RS. 1,91,530/- TOTAL STOCK RS. 79,04,220/- ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 20 THE ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE TO VERIFY THE STOCK FOUND DURING THE COU RSE OF SEARCH, WHICH WAS REPLIED BY IT VIDE LETTER DATED 17/12/2010. THE A SSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS THAT VALUATION MADE BY THE AUTHORIZED OFFICER HAD NOT VA LUED THE CLOSING STOCK ON ACCOUNTING PRINCIPLE I.E. STOCK VALUED AT LOWER COST OR NET REALIZABLE VALUE AND NOT AT MRP, IT WORKED OUT TOTAL STOCK AS PER ITS VALUATION AT RS. 17,52,601/- AND CLAIMED THAT THERE IS NO DIFFERENCE IN PHYSICAL STOCK FOUND DURING THE COURSE OF SEARCH A ND STOCK DECLARED AS PER BOOK. IT ALSO SUBMITTED THAT THERE WAS A DISCREP ANCY IN CHART OF STOCK TAKING AT SHOP NO. 865, HAWA MAHAL BAZAR, JAIP UR AND CALCULATED THE DIFFERENCE IN THE STOCK AT RS. 18,30,610/-. THE LEARNED ASSESSING OFFICER FAIRLY ACCEPTED THE DISCREPANCY POINTED OUT BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THERE WA S A TOTALING MISTAKE IN THE SUMMARY SHEET OF STOCK TAKEN BY THE AUTHORIZED OFFICER AT RS. 20,81,172/- WHICH HAS ALSO BEEN ACCEPTED BY T HE ASSESSING OFFICER. FINALLY, HE CALCULATED THE PHYSICAL STOCK ON DATE OF SEARCH AT RS. 39,92,438/- AFTER REDUCING THE G.P. @ 18.5% FROM THE TOTAL STOCK FOUND IN PHYSICAL, THE COST OF STOCK CALCULATED AT RS. 32 ,53,880/- AS PER BOOKS OF ACCOUNT. AFTER CONSIDERING THE VARIOUS PURCHASES , NOT RECOFRDED IN ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 21 THE REGULAR BOOKS OF ACCOUNT, THE STOCK WAS AT RS. 1 7,52,601/-, THUS EXCESS STOCK OF RS. 15,01,237/- WAS FOUND AT THE TIM E OF SEARCH, WHICH WAS ADDED IN THE INCOME OF THE ASSESSEE AS UNRECORDE D INVESTMENT IN STOCK AND TREATED THE INCOME FROM UNDISCLOSED INCOM E. 16. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING O FFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT(A ), WHO HAD PARTLY ALLOWED THE APPEAL BY GIVING DETAILED FINDINGS ON PA GE NOS. 17, 18 AND 19 AND CONFIRMED THE NET ADDITION UNDER THIS HEAD A T RS. 2,80,238/-. 17. NOW THE REVENUE IS IN APPEAL AND ASSESSEE IS IN C.O. BEFORE US. 18. THE LEARNED CIT DR VEHEMENTLY SUPPORTED THE ORDE R OF THE ASSESSING OFFICER WHEREAS THE LEARNED AR FOR THE ASS ESSEE CHALLENGED THE ADDITION CONFIRMED BY THE LEARNED CIT(A) ON THE BASIS OF NOT ALLOWING THE SET OFF TRADING ADDITION. HE FURTHER SU BMITTED AS UNDER:- I. THERE IS NO DISPUTE AS TO THE FACT THAT THE PHYSI CAL STOCK FOUND IN SURVEY IS VALUED AT MRP. THEREFORE, TO ARRI VE AT THE COST PRICE, DEDUCTION IS REQUIRED TO BE GIVEN O N ACCOUNT OF (A) NORMAL DISCOUNT FROM MRP AND (B) DEDUCTION FOR G.P. RATE. THE AO HAS ALLOWED DEDUCTION FOR G.P. RATE BUT HE HAS NOT ALLOWED DEDUCTION FOR DISCO UNT FROM MRP RATE. II IT IS A COMMON PRACTICE IN THIS TRADE THAT DIS COUNT OF AT LEAST 50% IS ALLOWED ON THE MRP. THIS FACT IS EVIDENT FROM ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 22 THE ADVERTISEMENT CUTTING PUBLISHED IN NEWS PAPER AN D BANNERS/PAMPHLETS WHERE IT IS STATED THAT THE FIREWOR KS ARE AVAILABLE AT 50% DISCOUNT TO CUSTOMERS. THIS DIS COUNT IS MORE IN THE ASSESSEES CASE AS MOST OF THE SALES ARE TO SHOPKEEPERS. THEREFORE, BEFORE CIT(A), ASSESSEE PREPA RED A COMPARATIVE STATEMENT OF MRP RATE AND ACTUAL COST . THIS STATEMENT IS PLACED AT. FROM THIS STATEMENT, IT IS CLEAR THAT THE DIFFERENCE IN THE MRP AND COST PRICE IS RANGING FROM 35% TO 95%. THEREFORE, TO ARRIVE AT THE COST PRICE, ASSESSEE CLAIMED THAT A REASONABLE DEDUCTION OF AT LEAST 50% BE ALLOWED FROM THE PHYSICAL STOCK VALUED ON MRP . III. CIT(A) CALLED FOR A REMAND REPORT ON THIS CLA IM OF THE ASSESSEE. THE AO IN ITS REPORT DATED 26.12.2011 AT P ARA 6 ADMITTED THAT ASSESSEE DESERVES SOME BENEFIT AS MRP RATE IS HIGHER THAN THE ACTUAL SALE RATE BUT INCORRECTLY MENTIONED THAT SAME HAS BEEN ALLOWED BY THE AO AT PA GE 11 OF THE ORDER. IN FACT NO ALLOWANCE IS GIVEN BY TH E AO FROM MRP RATE TO ARRIVE AT THE SALE RATE. THE AO AL SO MADE CERTAIN OBSERVATIONS ON THE CALCULATION MADE BY THE ASSESSEE IN PARA 7-15 OF THE REMAND REPORT. THE ASSE SSEE VIDE ITS LETTER DATED 30.12.2011 EXPLAINED EACH AND EVERY OBJECTION OF THE AO RAISED IN THE REMAND REPORT. IV. CIT(A) AFTER CONSIDERING THE VARIOUS EVIDENCES, THE REMAND REPORT AND ALSO THE REJOINDER OF THE ASSESSE E ON THE REMAND REPORT ACCEPTED THAT A DISCOUNT IS TO BE ALLOWED FROM MRP RATE TO ARRIVE AT THE SALE RATE BUT AT THE ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 23 SAME TIME INCORRECTLY OBSERVED THAT HEAVY DISCOUNT RANGING FROM 70% TO 90% IS NOT BELIEVABLE. FINALLY, SHE ALLOWED A DISCOUNT OF 45% TO THE MRP TO ARRIVE AT TH E SALE PRICE. THE DISCOUNT SO ALLOWED IS AT A LOWER SIDE. CONSIDERING THE EVIDENCES FILED, SUCH DISCOUNT SHOU LD BE AT LEAST 50% AS CLAIMED BY THE ASSESSEE. V. CIT(A) HAS CONSIDERED THAT STOCK VALUED AT RS.2,6 7,395/- AT GODOWN NO. 3 AND AT RS.1,91,530/- AT GODOWN NO. 4 ARE NOT AT MRP RATE IN AS MUCH AS THE MRP RATE IS NOT MENTIONED IN THESE LISTS WHEREAS ON OTHER LIST, MRP RATE IS MENTIONED. IT MAY BE NOTED THAT THIS LIST CONTAIN T HE VARIOUS ITEMS OF CRACKERS. THE RATE MENTIONED IN THI S LIST IS PER BOX/CASE. THE RATE ON THE BOX/CASE IS ONLY THE M RP RATE AND THEREFORE DISCOUNT OF 50% NEED TO BE ALLOWE D FROM THIS VALUE ALSO TO ARRIVE AT THE SALE VALUE. VI. ON THE ABOVE BASIS, THE COST OF THE STOCK FOUND IN SEARCH WOULD WORK OUT AS UNDER:- STOCK VALUED AT MRP RATE ACCEPTED BY CIT(A) RS.33, 02,028/- STOCK AT GODOWN NO. 3 RS.2,67,395/- STOCK AT GODOWN NO.4 RS.1,91,530/- TOTAL RS.37,60,953/- LESS:- 50% DISCOUNT TO ARRIVE AT SELLING RATE RS.18,80,476/- BALANCE RS.18,80,476/- LESS:- G.P. MARGIN @15% RS.2,82,071/- BALANCE BEING COST OF GOODS RS.15,98,405/- ADD:- COST OF CHEMICAL AT SHOP NO. 295-296 RS.2,31,485/- TOTAL VALUE OF STOCK AT COST RS.18,29,890/- ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 24 LESS:-BOOK VALUE OF STOCK RS.17,52,601/- EXCESS STOCK RS.77,289/- FROM THE ABOVE, IT CAN BE NOTED THAT EXCESS STOCK IS ONLY RS.77,289/- AND NOT RS.4,63,345/- AS WORKED OUT BY CIT(A). THIS EXCESS STOCK IS ALSO ON ACCOUNT OF ESTIM ATING THE DISCOUNT FROM MRP AT 50% WHEREAS THE EVIDENCE ON RECORD SHOW THAT SUCH DISCOUNT IS AT HIGHER RATE AN D THEREFORE THE ADDITION SUSTAINED BY CIT(A) IS UNCALL ED FOR. VII WITHOUT PREJUDICE TO ABOVE, EVEN IF THE EXCESS DETERMINED BY CIT(A) IS ACCEPTED THEN SET OFF OF THE SAME SHOUL D BE CONSIDERED AGAINST THE TRADING ADDITION OF RS.24,04 ,135/- SUSTAINED BY CIT(A) IN A.Y. 03-04 TO 06-07 AND ALSO FROM THE TRADING ADDITION, IF ANY, SUSTAINED IN THE YEAR UNDER CONSIDERATION IN AS MUCH AS SUCH TRADING ADDITION H AS NOT BEEN SET OFF AGAINST ANY OTHER UNEXPLAINED INVESTMENT/EXPENSES. ON THIS BASIS ALSO, NO ADDITIO N ON ACCOUNT OF EXCESS STOCK IS JUSTIFIED. IN VIEW OF ABOVE, THE TRADING ADDITION CONFIRMED BY CIT(A) BE DELETED BY ALLOWING THE CROSS OBJECTION OF THE AS SESSEE AND DISMISSING THE GROUND OF THE DEPARTMENT. 19. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE LEARNED AR CONSI DERED THE RECONCILIATION IN HIS SUBMISSION AND EXCESS STOCK H AS BEEN CALCULATED AT RS. 77,289/- IN PLACE OF ADDITION CONFIRMED BY THE LEARNED CIT(A) AT RS. 2,80,238/-. THE FACTS AND FIGURE MENTIONED BY THE AS SESSEE ARE ITA 316/JP/2012 & C.O.35/JP/2012_ ACIT VS. M/S PURNIMA FIRE WORKS 25 REQUIRED TO BE VERIFIED FROM THE RECORD OF THE ASSE SSEE AND SEIZED MATERIAL, THEREFORE, WE SET ASIDE THIS ISSUE TO THE ASSESSING OFFICER TO RE-VERIFY THESE FACTS AND FIGURE REPRODUCED ABOVE I N CONCILIATION OF STOCK. ACCORDINGLY, THIS GROUND OF APPEAL IS SET AS IDE TO THE ASSESSING OFFICER. 20. IN THE RESULT, REVENUES APPEAL IS DISMISSED AN D C.O. OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 27/02/2015. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 27 TH FEBRUARY, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE A.C.I.T., CENTRAL CIRCLE-1, JAIPUR . 2. IZR;FKHZ @ THE RESPONDENT- M/S POORNIMA FIRE WORKS, 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. 316/JP/2012 & C.O. 35/JP/2012) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR