ACIT, UDAIPUR V. Shri Prakash Chandra Ranka, RAJSAMAND

ITA 404/JODH/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6509 (ITAT-JODHPUR)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-03-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 14-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO.404/JODH/2013 (A.Y. 2008-09) ACIT, CIRCLE-1, VS. SHRI PRAK ASH CHANDRA RANKA, UDAIPUR. PROP. M/S. BABA MARBLES, VILLAGE PASUND, DISTRICT RAJSAMAND. PAN NO. AAUPR 8767 K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMIT KOTHARI. DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 26/03/2014. DATE OF PRONOUNCEMENT : 29/04/2014. O R D E R PER N.K. SAINI, A.M THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 28/03/2013 OF LD. CIT(A), UDAIPUR. THE FOLLOWING G ROUNDS HAVE BEEN RAISED IN THIS APPEAL: ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN:- 1. DELETED THE ADDITION OF RS. 8,57,480/- ON ACCOUN T OF UNDER VALUATION OF PHYSICAL STOCK FOUND DURING THE COURSE OF SURVEY WITHOUT APPRECIATING THE FACT THAT THE TIME OF SURVEY THE R ATE OF MARBLE SLAB 2 ETC. WAS TAKEN ON ESTIMATED BASIS, AS ON PURCHASE B ILLS WERE FOUND WHEREAS AO HAS NOW TAKEN THE RATE ON THE BASIS OF P URCHASE BILLS. 2. DELETED THE TRADING ADDITION OF RS. 2,35,000/- I GNORING THE FACTS OF THE CASE THAT THE ASSESSEE HAD FAILED TO FURNISH ANY CO GENT REASONS FOR THE FALL IN GROSS PROFIT RATE. THAT THE APPELLANT CRAVES TO ADD, AMEND, ALTER, DEL ETED OR MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME O F HEARING. 2 FIRST ISSUE VIDE GROUND NO. 1 RELATES TO THE DELET ION OF ADDITION OF RS. 8,57,480/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF UNDER VALUATION OF STOCK. 3. THE FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE T HAT THE ASSESSEE FILED THE RETURN OF INCOME ON 04/11/2008 DECLARING AN INC OME OF RS. 86,96,620/- WHICH WAS PROCESSED UNDER SECTION 1 43(1) OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT ). LATER ON, CASE WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, NOTICED THAT A SURVEY UNDER SECTION 133A OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 18/09/2007 AND ON PHYSICAL VERIFICATION OF STOCK, T HE TOTAL VALUE OF THE STOCK WAS TAKEN AT RS. 1,37,24,300/- AND THE STOCK AS PER BOOKS OF ACCOUNTS ON THE DATE OF SURVEY WAS WORKED OUT AT RS . 54,69,938/-. THUS, THERE WAS AN EXCESS STOCK OF RS. 82,54,362/-. THE ASSESSING OFFICER 3 POINTED OUT THAT THE ASSESSEE HAD OFFERED INCOME OF RS. 82,77,456/- FOR TAXATION IN THE RETURN OF INCOME AND PAID THE TAXES ON THE SAME. THE ASSESSING OFFICER OBSERVED THAT THE STOCK OF MARBLE SLABS MEASURING 33404.99 CFT WAS UNDERVALUED BY RS. 25.67 PER CFT A ND THE SAME WAS REQUIRED TO BE ENHANCED. THE RELEVANT DISCUSSION H AS BEEN MADE BY THE ASSESSING OFFICER IN PARA 3 TO 3.3 OF THE ASSESSMEN T ORDER DATED 16/12/2010, FOR THE COST OF REPETITION THE SAME IS NOT REPRODUCED HEREIN. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND THE SUBMISSIONS MADE AS INCORPORATED AT PAGE 3 TO 7 OF THE IMPUGNED ORDER WERE AS UNDER:- 2.1 THE SURVEY PARTY HAS PREPARED DETAILED INVENTOR Y OF MARBLE SLABS AND TILES DURING THE COURSE OF SURVEY OPERATION CARRIED OUT O N DATED 18-09-2007. THE TEAM HAS ALSO RECORDED STATEMENT U/S 133A OF THE AP PELLANT. 2.2THE SURVEY TEAM HAS PREPARED AN INVENTORY LIST ( L-1 TO L-6) CONTAINING THE QUANTITY AND COST OF THE STOCK. THIS COST OF TH E STOCK WAS TAKEN BY THE SURVEY TEAM AFTER DETAILED INVESTIGATION OF THE PUR CHASE BILLS AND FOLLOWING PREVAILING MARKET PRICES OF THE MARBLE SLABS. THE T EAM HAS ADOPTED AVERAGE COST OF MARBLE SLABS @RS. 130/-PER CFT. 2.3THE ID ASSESSING OFFICER HAS WITHOUT CONSIDERING THE PREVAILING MARKET CONDITIONS, GROUND REALITIES OF THE MARBLE TRADE AN D EVEN-MORE THE VALUE DULY EXAMINED AND ACCEPTED BY THE SURVEY TEAM, HAS MADE AN ADDITION OF RS. 857,480/- BY INCREASING THE COST OF THE MARBLE SLAB S FOUND DURING THE SURVEY BY RS. 25.57 PER CFT. THIS COST WAS INCREASED ON TH E BASIS OF PURCHASES MADE BY THE APPELLANT PRIOR TO THE DATE OF SURVEY. 2.4THE APPELLANT HUMBLY SUBMITS THAT INVENTORY LIST OF MARBLE SLABS STOCK WAS PREPARED WITHOUT SEGREGATING OLD, BREAKAGES, CR ACKS AND SMALL QUANTITY 4 OF BUNDLE (SMALL THAPPY) OF SLABS. IT IS MOST PRACT ICAL AND ABSOLUTE TRUTH THAT THE VALUE OF THE FRESH AND BIGGER BUNDLE OF MARBLE SLABS (FRESH THAPPY) IS HIGHER THAN THE SMALL AND CRACK THAPPIES. 2.5THE ID ASSESSING OFFICER WHO PASSED IMPUGNED ASS ESSMENT ORDER HIMSELF WAS NOT PART OF THE SURVEY TEAM, THEREFORE, HE HAS NOT PHYSICALLY EXAMINED THE MARBLE STOCKS. UNDER THE CIRCUMSTANCES IT IS SURPRI SE TO FOUND THAT HE HAS DENIED THE COST OF MARBLE SLABS WHICH WERE DULY EXA MINED, CALCULATED AND ADMITTED BY THE NUMBER OF OFFICIALS OF THE INCOME T AX DEPARTMENT DURING THE COURSE OF SURVEY. 2.6 IT IS RESPECTFULLY SUBMITTED THAT THE SURVEY TE AM OF THE INCOME TAX OFFICIALS HAVE PROPERLY CHECKED AND VERIFIED THE COST OF THE MARBLE SLABS WITH THE PURCHASE BILLS AND GROUND REALITIES AND DULY ACCEPT ED THE AVERAGE RATE @130/- PER CFT. 2.7 WHEREAS, THE ID ASSESSING OFFICER HAS WITHOUT C ONSIDERING THE ABOVE FACTS, BASED ON THE PURCHASES OF MARBLE SLABS BY THE APPEL LANT DURING THE PERIOD FROM 01-04-2007 TO 18-09-2007, ADOPTED THE RATE @ 1 55.57 PER CFT BEING AN AVERAGE RATE OF ENTIRE MARBLE SLABS STOCK FOUND AT THE GODOWN OF THE APPELLANT. IN THIS REGARD IT IS HUMBLY SUBMITTED TH AT THE ALLEGED PURCHASES WERE MADE @ 155.57 FOR FRESH MARBLES SLABS HAVING Q UANTITY OF BIG QUANTITY APPROXIMATELY 500 CFT IN EACH AND EVERY PURCHASES. SINCE THESE PURCHASES WERE OF GOOD AND EVEN SIZES, SO, MEASURED IN SQ FT ALSO. ON THE CONTRARY THE MOST OF THE STOCK FOUND THERE WAS NOT OF THE SIMILA R TYPES, QUALITY AND QUANTITY. UNDER THE CIRCUMSTANCES THE COMPARISON OF THE PRICES OF THE PURCHASED MARBLE SLABS WITH OTHER STOCK IS UNJUST A ND UNFAIR. 2.8 IT IS NECESSARY TO NARRATE HERE THAT MARBLE IS A NATURAL STONE AND EACH AND EVERY BLOCK OF SINGLE MINE HAVE DIFFERENT IN FIGURE , IN DESIGN AND QUANTITY AS WELL. THE DEMANDS OF THE BIG THAPPIES ARE MORE AS C OMPARE TO SMALL THAPPIES IN THE MARKET. THE CONSUMER ALWAYS PREFERS THE BIG QUANTITY MARBLE THAPPY FOR THE REASON THAT WHOLE FLOORING DE SIGN MATCHES IN FLOOR AREA. THEREFORE, THE COST OF THE BIG AND SMALL THAP PY ALWAYS HAS DIFFERENCE; MOST OF THE TIMES, LACKING TO THE DEMAN D IN MARKET FOR SMALL THAPPIES A MARBLE TRADER HAS TO PUT THEM FOR MAKING THE TILES OF DIFFERENT SIZES, AND ULTIMATELY THE TILES FETCHES THE PRICES AROUND RS. 8/- PER SQ FT EVEN AFTER INCURRING COST OF MAKING THE TILES AND WASTAG ES. 5 2.9 IN THE PRESENT CASE, THE STOCK INVENTORY PREPAR ED BY THE SURVEY TEAM REVEALS THAT MARBLE THAPPIES HAVING QUANTITY LESS T HAN 50 CFT ARE OF HUGE NUMBERS. THE BIFURCATION OF THE INVENTORY LIST SHOW S THAT THE QUANTITY OF SMALL THAPPIES WAS 14,739 CFT OUT OF THE TOTAL 3348 9 CFT STOCK FOUND. THUS, IN TERMS OF PERCENTAGES 44.01% OF THE TOTAL MARBLE THA PPIES WERE BELONGING TO THE SMALL 'THAPPIES'. IT IS CERTAIN THAT OUT OF THE SE MOST OF THE MARBLE THAPPIES WILL GO FOR TILES CUTTING, WHERE THE REALI ZATION WILL FURTHER REDUCES TO RS.87- PER SQ FT (RS.73.20 PER CFT) AFTER INCURR ING FURTHER EXPENDITURE FOR CUTTING, WASTAGES AND TRANSPORTATIONS. 2.10 THE AVAILABLE QUANTITY OF MARBLE TILES AND SLABS AT THE APPELLANT'S PREMISES CATEGORICALLY SHOWS THAT THERE WAS 84078 C FT (7,69,316.80 SQ FT DIVIDED BY 9.15 TO ARRIVE AT CFT) OF TILES AS COMPA RED TO 33489 CFT OF MARBLE SLABS WHICH IS MORE THAN TWO AND HALF TIMES. THIS S HOWS THAT THE APPELLANT WAS DEALING MORE IN TILES THAN SLABS. 2.11 THE APPELLANT FURTHER SUBMITS THAT THE RECOVERY OF THE 'THAPPY' WILL NOT ALWAYS BE 100% OF THE QUANTITY WHEN IT SOLD OR CUT INTO TILLERS FOR THE REASONS OF CRACKS, MEASUREMENT OF UNPARALLEL SIZE OF THE SL ABS. IT IS ESTABLISHED FACT THAT RECOVERY STANDS ALWAYS AROUND 75% TO 85% OF TH E TOTAL QUANTITY AVAILABLE IN THE 'THAPPY' AS AND WHEN SALES TOOK PL ACE OR IT WENT FOR EDGE CUTTING FOR MAKING TILES. 2.12 THE APPELLANT RESPECTFULLY STATES THAT AT THE TIME OF SURVEY HE CALCULATED COST AFTER CONSIDERING THE ABOVE FACT @ 130/- PER CFT AND SAME HAS BEEN DULY ACCEPTED BY THE REVENUE PARTY. T HEREFORE, THE ASSESSING OFFICER SHOULD NOT HAVE DISTURBED THIS VALUATION OF STOCK. OUR RELIANCE IS PLACED ON THE ORDER OF HON'BLE ITAT JODHPUR BENCH I N CASE OF SH YASHPAL NAWALKHA V DCIT, CIRCLE-2, UDAIPUR, ITA NO. 456/JU/ 2009 DATED 30-11-2011, ( COPY ENCLOSED HEREWITH) 2.13 AFTER CONSIDERING AVERAGE REDUCTION OF 17% IN TERMS OF QUANTITY THE CORRESPONDING VALUE REDUCES TO RS.129/ - PER CFT. WHEREAS, THE APPELLANT HAS VALUED SUCH MARBLE SLABS @ 130/- PER CFT, WHICH WAS HIGHER THAN ACCEPTED LEVEL. 2.14 THE ASSESSING OFFICER HAS PICKED UP THE COST OF THE MARBLE SLABS AT BLANKET RATE OF RS. 155.57 PER CFT, WHEREAS, THE RA TE WOULD HAVE BEEN CONSIDERED AROUND RS. 129/- ( RS.155.57-26.45=129.1 2) PER CFT AS PER THE 6 STANDARD ACCEPTABLE NORMS OF THE BUSINESS. 2.15 IT IS SUBMITTED THAT DURING THE COURSE OF SURVEY OP ERATION THE APPELLANT AS WELL AS THE SURVEY TEAM ACCEPTED THE VALUE @ RS. 130/- PER CFT AGAINST THE ESTIMATED AVERAGE RATE OF RS. 129.12 PER CFT. THERE FORE, THE VALUE ADOPTED BY THE SURVEY TEAM WAS ALREADY IN EXCESS OF THE COS T WOULD HAVE BEEN CONSIDERED. 2.16 THUS, THE DETERMINATION OF THE FRESH COST OF THE CL OSING STOCK FOUND DURING THE SURVEY IS UNFAIR AND BASED ON MERE PRESU MPTION, SO, IT CANNOT BE TENABLE IN THE COURT OF LAW. 2.17 THE APPELLANT HAS SOLD THE MARBLE SLABS @ 157/- PER CFT IN THE IMMEDIATE NEXT ASSESSMENT YEAR WHICH ESTABLISHES THAT THE COS T CANNOT BE ASCERTAINED/ADOPTED AROUND RS. 155.57 PER CFT AS DE TERMINED BY THE ID ASSESSING OFFICER. 2.18 THE SALES OF THE SURVEY STOCK @ 157/- PER CFT INCLU DED THE GROSS PROFIT @ 18.61% DURING THE YEAR UNDER APPEAL AND 23 % IN THE NEXT FINANCIAL YEAR SHOWS THAT THE COST OF THE SLABS WOULD BE RS. 127.78 PER CFT AND RS. 120.89 PER CFT IN THE RESPECTIVE YEARS. AS PER THE PROVISI ONS OF THE VALUATION OF THE STOCK UNDER THE INCOME TAX IS 'COST OR MARKET VALUE WHICHEVER IS LOWER' AND FOLLOWING TO THAT ALSO REVEALS THE COST OF MARBLE S LABS AROUND 127.78 PER CFT WHICH IS LOWER THAN THE ACCEPTED VALUE OF RS. 130/- PER CFT. 2.19 THEREFORE, THE ID ASSESSING OFFICER HAS INCORRECTLY APPLIED THE SALE PRICE AS THE COST OF THE MARBLE SLABS AND MADE UNLAWFUL A DDITION OF RS. 857,480/- TO THE RETURNED INCOME BY REJECTING THE B OOKS OF ACCOUNTS. 2.20WITHOUT PREJUDICE TO ABOVE, FOR THE MOMENT THE COST OF STOCK FOUND DURING THE SURVEY IS BEEN REPLACED BY THE VALUE AS DETERMINED BY THE ID ASSESSING OFFICER, IT WILL AGAIN INCREASES THE PURC HASE PRICE IN THE BOOKS AND CONSEQUENTLY REDUCES THE GROSS PROFIT. FURTHERMORE , THIS INCREASE OF COST WILL ULTIMATELY NOT GENERATE ANY REVENUE BY WAY OF INCOME TAX. 2.21. IN VIEW OF THE FOREGOING GROUNDS THE APPELLAN T PRAYS YOUR HONOUR TO KINDLY DELETE THE BASELESS ADDITION AND ALLOW THIS GROUND OF THE APPEAL. 7 5. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE, OBSERVED THAT THE ASSESSING OFFICER HAD N OT FOUND ANY ADVERSE ENTRY IN THE BOOKS OF ACCOUNTS, BUT SIMPLY MADE AN ADDITION ON LUMP SUM BASIS. HE, THEREFORE, OBSERVED THAT THE ASSESSING OFFICER HAS POWER TO REJECT THE BOOKS OF ACCOUNTS IF ANY CONCRETE EVIDEN CE IS BROUGHT ON RECORD WITH SPECIFIC DEFECT. LD. CIT(A) BY FOLLOWI NG THE DECISION OF THE ITAT IN THE CASE OF YASHPAL NAWALKHA VS. DCIT, CIRC LE-2, UDAIPUR IN I.T.A.NO. 456/JU/2009, DELETED THE ADDITION. IN TH E SAID ORDER, IT WAS OBSERVED AS UNDER:- THE ASSESSEE SURRENDERED THE AMOUNT WHICH HE OFFERE D FOR TAXATION DURING THE COURSE OF SURVEY AND THE REVENUE SHOULD NOT WITHDRA W FROM THE ACCEPTED SURRENDERED .' FURTHER, VIDE PARA 2.7 AT PAGE 4 OF THE SAID ORDER THE HON'BLE ITAT HAS OBSERVED AS UNDER :- 'MOREOVER THE TIME OF SURVEY, THE ASSESSEE MADE CAL CULATION AND THIS CALCULATION WAS ACCEPTED BY THE REVENUE PARTY. THE CALCULATION WAS DONE IN VIEWOF THE PHYSICAL INSPECTION OF THE SLAB. NOW THE AO HAS ESTIMATED THE COST OF SLAB BY CONSIDERING THE YIELD AT 85% . IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAD OBTAINED THE YIELD OF 85% . THE SU RVEY WAS CONDUCTED IN THE MID OF THE YEAR AND THE AO SHOULD HAVE GATHERED THE INFORMATION FROM THE RECORDS AS TO HOW SUCH SLAB WAS UTILIZED BY THE ASS ESSEE FOR THE PURPOSE OF SALE. WE THEREFORE, FEEL THAT THERE WAS NO CASE OF MAKING ADDITION OF RS. 2,12,959/- AS THE CLOSING STOCK WITHOUT CONSIDERING THE YIELD WAS VALUED AT RS. 13.38 FOR THE MARBLE SLABS.' 8 NOW THE DEPARTMENT IS IN APPEAL. 6 . LEARNED D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT DATED 16/12/2010. 7 . IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW A ND FURTHER SUBMITTED THAT THE ARBITRARY ADDITION MADE BY THE ASSESSING O FFICER WAS DELETED BY THE LD. CIT(A) BY FOLLOWING THE DECISION OF ITAT WH EREIN THE FACTS WERE SIMILAR AS THAT OF ASSESSEES CASE. 8 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS NOTICED THAT DURING THE COURSE OF SURVE Y, PHYSICAL VERIFICATION OF STOCK AND VALUATION WAS DONE BY THE SURVEY TEAM, THE ASSESSEE SURRENDERED INCOME ON ACCOUNT OF DIFFERENCE IN THE STOCK TAKEN BY PHYSICAL VERIFICATION AND AS RECORDED IN THE BOOKS OF ACCOUNTS. HOWEVER, THE ASSESSING OFFICER MADE THE FURTHER ADDITION ON ESTIMATE BASIS WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN THE BOOKS OF AC COUNTS. HE ESTIMATED THE RATE OF THE MARBLE SLAB AT RS. 155.67 CFT WHICH WAS TAKEN AT RS. 130/- PER CFT BY THE SURVEY TEAM AFTER TAKING INTO CONSIDERATION THE AVERAGE REDUCTION ON ACCOUNT OF SEGREGATING OLD, BR EAKAGES, CRAKES AND 9 SMALL QUANTITY OF BUNDLE OF SLABS AND APPLIED THE R ATE OF RS. 130/- PER CFT. THEREFORE, IT IS CLEAR THAT THE SURVEY TEAM A FTER MAKING THE DETAILED ENQUIRY AND ON PHYSICAL VERIFICATION OF TH E STOCK, WORKED OUT THE VALUATION OF THE STOCK AND FOUND THE DIFFERENCE IN THE VALUE OF THE PHYSICAL STOCK AND AS RECORDED IN THE BOOKS OF ACCO UNTS. THE ASSESSEE HAD SURRENDERED THE DIFFERENCE AS WORKED OUT BY THE SURVEY TEAM. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFIC ER ON ACCOUNT OF ENHANCED VALUATION OF STOCK WAS NOT JUSTIFIED. IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 9 . THE NEXT ISSUE VIDE GROUND NO. 2 RELATES TO THE D ELETION OF TRADING ADDITION OF RS. 2,35,000/- MADE BY THE ASSESSING OF FICER ON ACCOUNT OF FALL IN GROSS PROFIT RATE. 10 . FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NOTICE D THAT THE ASSESSEE HAD DECLARED GROSS PROFIT RATE OF 18.61% WHICH WAS ON LOWER SIDE IN COMPARISON TO THE IMMEDIATE PRECEDING TWO YEARS WHE REIN THE GROSS PROFIT RATES WERE 33.55% AND 25.07%. THE ASSESSING OFFICER WORKED OUT 10 THE AVERAGE GROSS PROFIT RATE AT 25.74% AND POINTED OUT THAT IN IDENTICAL CASE OF SHRI SUNIL KUMAR PAGARIA GROSS PROFIT DECLA RED FOR THE SAME ASSESSMENT YEAR WAS AT 27.33%. HE, THEREFORE, ENHA NCED THE GROSS PROFIT RATE OF THE ASSESSEE BY 7% AND MADE THE ADDITION OF RS. 2,35,000/-. 11 . BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND MADE THE FOLLOWING SUBMISSIONS:- 3. 1 THE ID ASSESSING OFFICER HAS INCREASED THE GP RATE BY 7% CONSIDERING THE AVERAGE GP @25.74% FOR LAST THREE YEARS AND MAD E AN ADDITION OF RS. 2,35,000/- 3.2 THE ID ASSESSING OFFICER HAS ALSO MADE COMPARISON O F THE GP OF OTHER CONCERN NAMELY M/S SUNIL KUMAR PAGARIA WHOSE GP WAS 27.33%. IT IS ABSOLUTELY UNFAIR TO HAVE COMPARISON WITH THE OTHER CASES PARTICULARLY IN THE MARBLE TRADE. THE EACH AND EVERY MINE OF THE MARBL E HAVE DIFFERENT VARIETY OF MARBLE, THE COMPOSITION OF THE SALES CONTAINING THE MARBLE SLABS, MARBLE TILES AND MARBLE BLOCKS IS ALWAYS DIFFERENT NOT EVEN IN T WO CASES BUT ALSO DIFFERS IN TWO CONSECUTIVE YEARS OF THE SAME CASE. 3.3 THE APPELLANT SUBMITS HEREWITH THE PROFIT AND LOSS ACCOUNT OF THE SAME PERSON WHOSE COMPARISON WAS MADE BY THE ID ASS ESSING OFFICER, IT IS SHOWING THAT THE GP RATE WAS DECLINED FROM 27.33% O F THE YEAR UNDER APPEAL TO 13.00% IN THE IMMEDIATE NEXT YEAR I.E. AY 2009-1 0 AND AGAIN INCREASED TO 17.10% IN THE AY 2010-11. THIS TREND SHOWS THAT THE RE CANNOT BE CONSISTENCY IN THE NET PROFIT EVEN IN THE SAME CASE, THEN IT IS INCORRECT TO APPLY THE GP OF ONE CASE INTO ANOTHER (THE COPY OF PROFIT AND LOSS ACCOUNT ENCLOSED HEREWITH). 3.4 IT IS IMPORTANT TO SUBMIT THAT THE COST OF THE TILE S FOR THE SUNIL PAGARAIA WAS 6.86 PER SQ FT, WHEREAS, THE COST OF T HE TILES FOR THE APPELLANT WAS 8.27 PER SQ.FT. THERE IS HUGE DIFFERENCE IN THE COST OF TILES BY 20 .55%. THIS INCREMENTAL DIFFERENCE OF COST BY 20.55% IS ULTIMAT ELY DRAG THE GROSS PROFIT OF THE APPELLANT BY 10% AS COMPARED TO OTHER CASE CITE D BY THE ID ASSESSING OFFICER. THEREFORE, THE GP CANNOT BE COMPARED WITH THE OTHER AFORESAID NAMELY 11 CASE. 3.5 IN THE APPELLANT'S CASE ITSELF THE GP WAS INCREASED TO 23.00% IN THE IMMEDIATE NEXT YEAR AND AGAIN DECLINED TO 15.82 % IN THE NEXT YEAR THEREOF (THE COPY OF PROFIT AND LOSS ACCOUNT ENCLOSED HEREW ITH). SO, IT HELD THAT THE TREND OF THE PROFIT IS DECLINE NATURE. 3.6 IT IS RELEVANT TO MENTION HERE THAT THE TURNOVER FO R THE PREVIOUS YEARS WAS LESS THAN OF THE TURNOVER OF THE YEAR UNDER APPEAL. IT IS PRUDENT NORM THAT TURNOVER CAN BE SUBSTANTIALLY INCREASED BY LOW ERING THE MARGIN UNLESS THE MONOPOLY ITEMS ARE THERE. IN THE APPELLANT CASE HE DEALT IN THE VERY NORMAL MARBLE PRODUCT, AND WORKING IN MOST COMPETITIVE AND TOUGH MARKET AS WELL. 3.7 IT IS ALSO SUBMITTED THAT THERE ARE NUMEROUS CASES WHERE THE GP WAS LESS THAN THE GP RATE OF THE APPELLANT IN THE YEAR UNDER APPEAL. BUT, IT IS UNFAIR TO COMPARE THEM WITH THE APPELLANT'S CASE. 3.8 IT IS PERTINENT TO MENTION HERE THAT THE ASSESSING OFFICER HAS COMPARED THE OTHER CASE WITH THE APPELLANT'S CASE W ITHOUT APPRECIATING THE FACTS LIKE PERCENTAGE QUANTUM OF SLABS, TILES AND B LOCKS IN TOTAL SALES, QUALITY OF PRODUCTS ETC MANY MORE FACTORS. 3.9 THUS, LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND NATURE OF MARBLE TRADE, THE LOOKING TO THE OVERALL WORKING OF OTHER CASES, MAKING AN ESTIMATED ADDITION IN THE GROSS PROFIT BASED ON THE EARLIER YEARS IS INCORRECT AND ILLEGAL. IT IS SETTLED POSITION OF THE LAW AND ALSO HELD BY VARIOUS COURTS THAT NO ADDITION CAN BE MADE ON THE PURE GUESS, ASSUMPTI ON AND PRESUMPTION OF THE ASSESSING OFFICER. 12. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE, DELETED THE ADDITION MADE BY THE ASSESSIN G OFFICER BY STATING THAT THE ESTIMATED ADDITION MADE BY THE ASSESSING O FFICER WAS WITHOUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNTS. NOW THE DEPARTMENT IS IN APPEAL. 12 13. LEARNED D.R. SUPPORTED THE ORDER OF THE ASSESSING O FFICER AND SUBMITTED THAT SINCE GROSS PROFIT RATE DECLARED BY THE ASSESSEE WAS AT LOWER SIDE IN COMPARISON TO THE EARLIER YEARS AND T HE COMPARABLE CASE, THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFIC ER WAS JUSTIFIED. 14 . IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW A ND STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT( A). 15 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE GROSS PROFIT RATE OF T HE ASSESSEE WAS FLUCTUATING YEAR AFTER YEAR, SO IT WAS NOT CONSISTE NT. THE ASSESSEE EXPLAINED THE REASON FOR FALL IN GROSS PROFIT RATE, IT WAS STATED THAT THE GROSS PROFIT RATE INCREASED TO 23% IN THE IMMEDIATE NEXT YEAR AND AGAIN DECLINED TO 15.82% IN THE NEXT YEAR THEREOF. THERE FORE, IT IS CLEAR THAT THE GROSS PROFIT RATE WAS NOT CONSISTENT IN ALL THE YEARS. IN THE PRESENT CASE, THE ASSESSEE ALSO EXPLAINED THAT IN THE COMPA RABLE CASE, THE HUGE DIFFERENCE WAS THERE IN THE COST OF TILES AND FACTS OF BOTH THE CASES WERE NOT SIMILAR. THE SAID EXPLANATION OF THE ASSESSEE IS NOT REBUTTED. IN THE 13 INSTANT CASE, THE ASSESSING OFFICER DID NOT POINT O UT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNTS TO SUBSTANTIATE THAT THE GROS S PROFIT RATE DECLARED BY THE ASSESSEE WAS NOT IN ACCORDANCE WITH THE BOOK S OF ACCOUNTS MAINTAINED IN THE REGULAR COURSE OF BUSINESS. THER EFORE, THE ESTIMATED ADDITION MADE BY THE ASSESSING OFFICER WAS NOT JUST IFIED AND THE LEARNED LD. CIT(A) RIGHTLY DELETED THE SAME. IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY INFIRMITY IN THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). 16 IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISS ED. (ORDER PRONOUNCED IN THE COURT ON 29 TH APRIL, 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 29 TH APRIL, 2014. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.