M/s. NBA Diamond Mfg.Co., Surat V. The ACIT.,Circle-9, Surat

ITA 4056/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5689 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 19-05-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 06-11-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ASHWIN PAREKH
• Keywords: Gross profit estimation; Rejection of books of accounts
• Section: 143(3); 64; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : A HMEDABAD CAMP AT SURAT (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON'BLE SH RI D.C. AGRAWAL, A.M.) I.T.A. NO. 4056/AHD./2007 ASSESSMENT YEAR : 2004-2005 M/S. N.B.A. DIAMOND MFG. CO., SURAT -VS.- ASSI STANT COMMISSIONER OF INCOME TAX, (PAN : AADFN 5698 Q) CIRCLE-9, SURAT (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWIN PAREKH RESPONDENT BY : SHRI SANJEEV KASHYAP, SR. D.R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 14.08.2007 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-V, SURAT FOR TH E ASSESSMENT YEAR 2004-05. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A PARTNERSHIP FIRM CARRYING ON BUSINESS IN DIAMOND JOB WORK. FOR THE ASSESSMENT YEAR UNDER APP EAL, IT FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.7,24,899/-. THIS RETURN OF INCOM E WAS ACCOMPANIED WITH AUDITED REPORT UNDER SECTION 44AB IN FORM NO. 3CB & 3CD. THE COMPARATIVE PROFIT FOR THE YEAR UNDER APPEAL AND LAST YEAR ARE AS UNDER :- SR. NO. PARTICULARS AY 2004-05 AY 2003-04 AY 2002-0 3 1. TURNOVER 8,56,11,470/- 3,29,84,652/- 0 2. GROSS PROFIT 18,32,166/- 7,22,715/- 0 3. GROSS PROFIT % 2.14% 2.19% 0 THE ASSESSING OFFICER OBSERVED THAT THERE IS A SLIG HT FALL IN THE GROSS PROFIT. ON VERIFICATION OF BALANCE-SHEET, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS SHOWN SUNDRY CREDITORS (OUTSTANDING LABOUR PAYMENT) OF RS.3,84,44,921/-. I N THIS REGARD, THE ASSESSING OFFICER ASKED THE 2 ITA NO. 4056/AHD/2007 ASSESSEE TO FURNISH CONFIRMATION FROM THE LABOUR CO NTRACTOR ALONGWITH THEIR PAN AND PARTICULARS OF RETURN AS PER ORDER-SHEET ENTRY DATED 26.07.2006 . THE ASSESSEE HAVING FAILED TO DO SO, THEREFORE, THE ASSESSING OFFICER REQUESTED HIM TO P RODUCE EVIDENCE/ PRODUCTION OF SUB- CONTRACTORS AS PER ORDER SHEET DATED 14.09.2006. HA VING FAILED TO DO SO, THE ASSESSING OFFICER ISSUED A NOTICE DATED 27.10.2006 [THIS BEING MADE P ART OF ASSESSMENT ORDER ON PAGE 2-3] IN COMPRISE TO THE ABOVE, THE ASSESSEE VIDE HIS LETTER DATED 08.11.2006 STATED THAT IT IS HIGHLY DIFFICULT TO MANAGE VARIOUS TYPE OF LABOURERS AND T HUS ACCORDING TO ASSESSING OFFICER, THE ASSESSEE EVADED THE REQUISITE DETAILS. SUBSEQUENTLY , THE ASSESSEE COULD PRODUCE ONLY THREE SUB- CONTRACTORS FOR VERIFICATION, WHOSE STATEMENTS WERE RECORDED BY THE ASSESSING OFFICER ON OATH. THE ASSESSING OFFICER CAME ACROSS MANY DISCREPANCIE S. HE, THEREFORE, ISSUED A SHOW-CAUSE NOTICE DATED 07.12.2006, WHICH WAS REPRODUCED AT PA GE 4 OF THE ASSESSMENT ORDER. THERE WAS NO COMPLIANCE FROM THE SIDE OF ASSESSEE AFTER OBTAININ G SHOW-CAUSE NOTICE DATED 07.12.2006. 2.1. THEREAFTER, THE ASSESSING OFFICER ISSUED ANOTH ER SHOW-CAUSE NOTICE DATED 15.12.2006, WHICH HAS BEEN REPRODUCED AT PAGE 5 OF THE ASSESSME NT ORDER. AT THIS STAGE, THE ASSESSEE FILED WRITTEN REPLY DATED 15.12.2006, THE REPLY OF THE AS SESSEE HAS BEEN REPRODUCED BY THE ASSESSING OFFICER IN PARA 9 OF THE ASSESSMENT ORDER. THE ASSE SSING OFFICER WAS NOT SATISFIED WITH REGARD TO THE SUBMISSIONS MADE BY THE ASSESSEE. THE OBSERVATI ON OF ASSESSING OFFICER HAS BEEN RECORDED IN THE ASSESSMENT ORDER VIDE PARA 15. THEREAFTER TH E ASSESSING OFFICER IN PARA 20 OF THE ASSESSMENT ORDER OBSERVED THAT THE ASSESSEE ITSELF HAS QUOTED A CASE OF BHADIYADARA DIAMONDS VS.- DCIT, CENTRAL CIRCLE, SURAT, WHEREIN THE FAIR RATE OF GROSS PROFIT HAS BEEN HELD TO BE AT 6%. THUS, CONSIDERING THE OVERALL FACTS OF THE CASE, TH E ASSESSING OFFICER MADE THE ADDITION CALCULATED AT 6% OF TURNOVER AS CONSEQUENCE TO THE LOWER GROSS PROFIT MARGIN, WHICH ACCORDING TO HIM WAS NOT EXPLAINED BY THE ASSESSEE. THE ASSESSIN G OFFICER WORKED OUT SUCH ADDITION AT RS.33,04,522/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS), THE ASSESSEE VIDE SUBMISSION DATED 26.06.2007 CONTENDED THAT THE ONLY GROUND FOR ESTIMATION OF GROSS PROFIT IS THE NON-APPEARANCE OF CERTAIN JOB WORKERS. THE ASSESSEE ALSO PUT RELIANCE ON CASE LAWS AS INCORPORATED ON PAGE 2 OF ITS SUBMISSIONS. THE ASSE SSEE CONTENDED THAT IT HAS PRODUCED COMPLETE BOOKS OF ACCOUNTS AND THEREFORE, THE ADDITION MADE SHOULD BE DELETED. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE ASSESSEE H AS AGAIN QUOTED THE CASE OF BHADIYADRA 3 ITA NO. 4056/AHD/2007 DIAMONDS, WHICH HAS ALREADY BEEN DISCUSSED BY THE A SSESSING OFFICER IN THE ASSESSMENT ORDER. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEA LS), THE ASSESSEE ALSO CONTENDED THAT BOOK RESULTS SHOULD NOT BE DISTURBED AS BOOKS OF AC COUNTS WERE AUDITED AND NO DEFECTS WERE POINTED OUT BY THE ASSESSING OFFICER. AFTER CONSIDE RING THE AFORESAID SUBMISSIONS, IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) UPHELD THE ACTION OF ASSESSING OFFICER FOR THE DETAILED REASONS GIVEN IN THE IMPUGNED ORDER, WHICH READS AS UNDER :- I HAVE GONE THROUGH THE CONTENTION OF THE APPELLAN T AS WELL AS THAT OR THE ASSESSING OFFICER, I HAVE PERUSED THE DETAILS FILED BY THE AP PELLANT FIRM AND FIND THAT THE APPELLANT HAS BEEN MAINTAINING BOOKS OF ACCOUNTS BU T DAY-TO-DAY STOCK RECORD AND JOB INWARD REGISTERS AS WELL AS ISSUE-REGISTERS ARE NOT MAINTAINED. THE APPELLANT TRIED TO COMPARE G,P. RATES OF FEW SUB-CONTRACTORS. THE APPELLANT FAILED TO PRODUCE THE PARTIES UPON WHOM SUMMONS WERE SEWED. THE APPEL LANT ITSELF RELIED UPON THE G,P, RATIO OF 6% AS REASONABLE AS IN THEIR OWN COMP ARABLE CASE OF BHADIYADARA DIAMONDS. MOREOVER IN THE CASES OF M/S BALAR EXPORT S AND SHRI VALLABHBHAI G. ZADAPHIA, WHICH ARE ALMOST EVENLY PLACED, EVEN HIGH ER GP HAS BEEN DISCLOSED. THEREFORE AS HELD IN S.N.NAMASIVAYAM CHETTIAR VS. C TT (I960) 38 ITR 579 (SC),THE AO CAN RESORT TO THE FIRST PROVISO TO SEC. 145 (AS IT THEN STOOD) EVEN IF THE ASSESSEE HAS REGULARLY EMPLOYED A METHOD OF ACCOUNTING; IF I T DOES NOT SHOW CORRECT PROFITS OF THE YEAR. IF AFTER TAKING INTO ACCOUNT THE ABSEN CE OF STOCK REGISTER COUPLED WITH OTHER MATERIALS, THE AO FEELS THAT CORRECT PROFITS CANNOT BE DEDUCED FROM THE ACCOUNTS, HE CAN RESORT TO THE SAID PROVISO. THE WORDS 'IN THE OPINION OF THE ITO' IN THE PROVIS O TO SEC. 13 OF THE OLD ACT DO NOT CONFER MERE DISCRETIONARY POWER BUT IN THEIR CONTEX T IMPOSE A STATUTORY DULY ON THE TTO TO EXAMINE IN EACH CASE THE METHOD OF ACCOUNTIN G EMPLOYED TO SEE (I) WHETHER IT IS REGULARLY EMPLOYED; AND (II) TO DETERMINE WHE THER THE INCOME, PROFITS AND GAINS OF THE ASSESSEE CAN PROPERLY BE DEDUCED THEREFROM. CIT VS. MCMILLAN & CO. (1958) 33 TTR 182 (SC). AS IT HAS BEEN HELD IN 188 ITR 44 (SC) BRITISH PAIN TS INDIA LTD./IT IS NOT ONLY THE RIGHT, BUT THE DUTY OF THE ASSESSING OFFICER TO CON SIDER WHETHER OR NOT THE BOOKS DISCLOSE THE TRUE STATE OF ACCOUNTS AND THE CORRECT INCOME CAN BE DEDUCED THEREFROM. IT IS INCORRECT TO SAY THAT THE OFFICER IS BOUND TO ACCEPT THE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSES THE CORRECTNESS OF WHICH HAD NOT BEEN QUESTIONED IN THE PAST. THERE IS NO ESTOPPEL IN THE SE MATTERS AND THE OFFICER IS NOT BOUND BY THE METHOD FOLLOWED IN THE EARLIER YEARS, IN AN OLD CASE OF BOMBAY HIGH COURT IT HAS BEEN HEL D THAT BEFORE EXERCISING HIS POWERS UNDER THE PROVISO TO SECTION 13 IT IS NECESS ARY THAT AN INCOME-TAX OFFICER SHOULD FIND THAT THE METHOD OF ACCOUNTING EMPLOYED BY THE ASSESSES IS SUCH THAT THE PROFITS MADE CANNOT BE PROPERLY DEDUCTED THEREFROM. THE INCOME-TAX OFFICER NEED NOT, HOWEVER, MAKE AN EXPLICIT STATEMENT TO THAT EF FECT. IT IS SUFFICIENT IF HIS ORDER HAS THE EFFECT OF IMPLIEDLY RECORDING SUCH A FINDING. H ELD, ON THE FACTS, THAT THE ABSENCE OF THE QUANTITATIVE OF PURCHASES AND SALES CONSIDER ED ALONG WITH THE OTHER CIRCUMSTANCES WAS SUFFICIENT MATERIAL TO ENABLE THE INCOME-TAX DEPARTMENT TO 4 ITA NO. 4056/AHD/2007 PROCEED TO ASSESS THE PROFITS OF THE ASSESSEE UNDER THE PROVISO TO SECTION 13. ( 81 TTR 609 (BOM) DHANDIRAM DALICHAND ). LN THAT CASE T HE BOOKS OF ACCOUNT PRODUCED BY THE ASSESSEE DID NOT DISCLOSE ANY QUANTITATIVE T ALLY IN CONNECTION WITH HIS SALES AND PURCHASES; AND SALES ON WHOLESALE MADE ON CREDI T DISCLOSED THAT THE ASSESSEE HAD MADE PROFITS BETWEEN 8% AND 10% AND PROFITS ON THE RETAIL SALES SHOULD BE HIGHER BUT THE ACCOUNTS OF THE ASSESSEE SHOWED A GR OSS PROFIT OF 7.8% ONLY. IN THE LIGHT OF THE ABOVE DISCUSSION, I AM IN AGREE MENT WITH THE ASSESSING OFFICER THAT IN ABSENCE OF MATERIAL DETAILS, TRUE PROFIT CO ULD NOT BE DETERMINED. I AM UNABLE TO ACCEPT THE ARGUMENTS OF THE APPELLANT THAT SINCE THE APPELLANT WAS MAINTAINING REGULAR BOOKS OF ACCOUNTS THE ASSESSING OFFICER SHO ULD NOT HAVE DISTURBED THE BOOK RESULTS. THE ADDITION SO MADE BY THE ASSESSING OFFI CER IS ACCORDINGLY UPHELD. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER OF I NCOME TAX(APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUND :- THE LEARNED CIT(A.) HAS GRIEVOUSLY ERRED IN LAW AN D ON FACTS IN CONFIRMING THE ADDITION OF RS.33,04,522/- ON ACCOUN T OF GROSS PROFIT MADE BY THE ASSESSING OFFICER BY ESTIMATING PROFIT OF 6% INSTEAD OF 3% TRADE PROFIT APPLIED IN IDENTICAL CASES. THE ADDITION OF RS.33,04,522/- SHOULD, THEREFORE, BE DELETED. 4. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF A SSESSEE SHRI ASHWIN PAREKH APPEARED AND FILED A PAPER BOOK CONTAINING 133 PAGES WHICH, INTE R ALIA, INCLUDES WRITTEN SUBMISSIONS BEARING PAGES 1 TO 7. RELYING ON THE WRITTEN SUBMISSIONS, T HE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT IN THIS CASE, THE ASSESSING OFFICER ESTIMATED THE GROS S PROFIT WITHOUT REJECTING THE BOOKS OF ACCOUNTS. IT WAS CONTENDED THAT IN THE FOLLOWING CA SES, IT IS HELD THAT NO ADDITION FOR GROSS PROFIT CAN BE MADE WITHOUT REJECTING THE BOOKS OF ACCOUNTS :- (I) ACIT VS.- SURESH K. BHAGAT (MUM.) 90 TTJ16; (II) ITO-VS.- KAILASH SHARMA & SONS (2004) 84 TTJ (JD.) 955; (III) TRIVNI PHARNA VS.- ITO (2004) 85 TTJ (JP) 950; (IV) SANJEEVKUMAR LODHA VS.- ITO (2004) 86 TTJ 4 02; (V) SANGRUR VANASPATI MILLS LTD. (2004)88 TTJ 979 . 5. ON THE BASIS OF THE AFORESAID DECISIONS, THE LD. COUNSEL OF THE ASSESSEE CONTENDED THAT ENTIRE ADDITION IS REQUIRED TO BE DELETED ON PRELIM INARY GROUND OF LAW. IT WAS FURTHER CONTENDED THAT DURING THE YEAR, THE ASSESSEE, A PARTNERSHIP F IRM ENGAGED IN THE BUSINESS OF DIAMOND CUTTING & POLISHING ON JOB WORK BASIS. THE ACTIVITIES CARRI ED OUT BY THE ASSESSEE ARE AS UNDER :- 5 ITA NO. 4056/AHD/2007 (I) THE ASSESSEE RECEIVED ROUGH DIAMONDS FOR MANUFA CTURING FROM CLASSIC DIAMOND (I) LTD.. (II) THE ASSESSEE ISSUED/ GAVE THE SAME DIAMONDS FO R MANUFACTURING TO VARIOUS JOB WORKERS. (III) ON JOB LABOUR RECEIPT FROM CLASSIC DIAMOND (I ) LTD., THE ASSESSEE DEDUCTED COMMISSION AND PAID THE JOB CHARGES TO JOB WORKERS. (IV) THE ASSESSEE DID NOT EMPLOY WORKERS FOR MANUFA CTURING DIAMOND. THE JOB WORKERS WHO MANUFACTURED DIAMONDS PAID WAGES TO WOR KERS. (V) THE ASSESSEE DEDUCTED A FIXED COMMISSION OF 2% PER CARAT ON ROUGH DIAMONDS RECEIVED FOR MANUFACTURING ON JOB WORK BASIS AND IS SUED TO JOB WORKERS FOR ACTUAL MANUFACTURING. 5.1. IT WAS FURTHER SUBMITTED BY THE LD. COUNSEL OF THE ASSESSEE THAT SIMILAR ACTIVITY WAS CONDUCTED BY ANOTHER ASSESSEE SHRI SAVAJIBHAI DHARA MSHIBHAI PATEL, WHO IS ASSESSED AS THE SAME ASSESSING OFFICER BECAUSE THE ASSESSING OFFICER HIM SELF ACCEPTED THE GROSS PROFIT OF 3.06%. THE COPY OF ORDER OF SAVAJIBHAI DHARAMSHIBHAI PATEL IS ENCLOSED IN THE PAPER BOOK AT PAGES 57 TO 62. HE CONTENDED THAT SINCE THE ASSESSEE AND SHRI SAVAJ IBHAI DHARAMSHIBHAI PATEL, BOTH WERE DOING DIAMOND CUTTING AND POLISHING WORK OF CLASSIC DIAMO ND (I) LTD., BUT THE RATE OF PROFIT ESTIMATED BY ASSESSING OFFICER FOR SAME WORK CARRIED OUT BY T WO DIFFERENT CONTRACTORS OF CLASSIC DIAMONDS (I) LTD. IS DISCRIMINATORY WHICH IS EVIDENT FROM TH E ORDER OF ASSESSING OFFICER IN THE CASE OF SAVAJIBHAI DHARAMSHIBHAI PATEL. 5.2. IT WAS FURTHER SUBMITTED THAT COMPLETE CONFIRM ATIONS FROM THE SUB-CONTRACTORS WERE FURNISHED BEFORE THE ASSESSING OFFICER. OUT OF 32 J OB WORKERSCIT(A) 24 JOB WORKERS COMPLIED WITH THE TERMS OF SUMMONS. THE 4 JOB WORKERS PERSON ALLY APPEARED BEFORE THE ASSESSING OFFICER WHOSE STATEMENTS WERE RECORDED IN ENGLISH LANGUAGE THOUGH THEY ARE ILLITERATE AND UNDERSTAND ONLY GUJRATI LANGUAGE. THE ASSESSEE FURTHER MADE TH E FOLLOWING SUBMISSIONS :- (I) THE JOB WORKERS CONFIRMED THEIR OUTSTANDING BAL ANCES. (II) ACCEPTED THE WORK CARRIED OUT BY THEM AND TERM S OF PAYMENT WITH THEIR OBLIGATIONS. (III) THE ASSESSING OFFICER ASKED THE EXPLANATION W ITHOUT ALLOWING THE JOB WORKERS TO REFER THE BOOKS OF ACCOUNTS OR OTHER PAPERS. THE REFORE, THE INCORRECT BALANCE ORALLY STATED CANNOT BE THE BASIS FOR ESTIMATION OF GROSS PROFIT. 6 ITA NO. 4056/AHD/2007 (IV_ IN SUCH CIRCUMSTANCES AFFIRMATION MADE IS INCO RRECT IN VIEW OF SECTION 94 OF THE EVIDENCE ACT WHICH STIPULATES THAT SUCH AFFIRMA TION IS REBUTTABLE BY PROVIDING T5HE EVIDENCES ON RECORD AS PER THE DECISION OF THE HON'BLE SUPREME COURT SHRI KISAN VS.- KRUKSHETRA UNIVERSITY AIR. 1996 SC 376. (V) SINCE THE BALANCE OF THE JOB WORKERS AS PER THE IR BOOKS OF ACCOUNTS AND AS PER APPELLANTS BOOKS OF ACCOUNTS TALLY, THE RECORDS AR E CORRECT EVIDENCES AND DIFFERENCE IN BALANCE ORALLY STATED BY JOB WORKERS CANNOT BE RELIED UPON AS THESE ARE NOT RELEVANT EVIDENCES IN VIEW OF THE DECISION OF HIMACHAL PRADESH HIGH COURT REPORTED AT 106 ITR 64 AND ITAT, JAIPUR BENCH IN ITO VS.- RATAN DEVI DUGAR 20 ITD 483. (VI)NO ONE CAN ORALLY STATE A CORRECT FIGURE. SUCH A STATEMENT HAS NO EVIDENTIARY VALUE AS COMPARED TO BOOKS OF ACCOUNTS OF JOB WORKE RS AND THE APPELLANT, THEIR CONFIRMATIONS. AUDITED BALANCE SHEET REVEALING CORR ECT FIGURE AS HELD BY THE HON'BLE KERALA HIGH COURT IN PAUL MATHEWS & SONS V S.- CIT (2003) 263 ITR 101. (VII) IN VIEW OF FACTS OF PAYMENT MADE TO JOB WORKE RS DURING THE YEAR, PAYMENT OF THEIR OUTSTANDING IN SUBSEQUENT YEAR BY ACCOUNT PAY EE CROSSED CHEQUES, ADMISSION OF JOB WORKERS, AUDITED ACCOUNTS, ASSESSM ENT OF JOB WORKERS (THEY ARE EXISTING ASSESSEE), DISALLOWANCES OF ANY LABOUR PAY MENT IS NOT CORRECT IN VIEW OF THE DECISION OF ITAT IN ITO VS.- TWINKLE PAPER (P) LTD. 95 TTJ (TN) 987. COPIES OF ACKNOWLEDGMENT OF I.T. RETURN OF SOME OF THE JOB WORKERS ARE ENCLOSED (PAGE 75 TO 77). THE LIST OF NAME, ADDRESS, PAN OF 36 JOB WORKERS ARE ENCLOSED (PAGES 78-80). THE COPY OF JOB LABOUR INCOME REGISTER (PAG ES 81 TO 89) AND JOB LABOUR EXPENSES REGISTER (PAGES 90 TO 102) ARE ENCLOSED. AS COMPLETE BOOKS OF ACCOUNTS OF JOB WORK ACTIVITY WITH ALL EVIDENCES WERE PRODUCED BEFORE ASSESSING OFFICER THE ADDITION MADE SHOULD BE DELETED. 5.3. WITH REGARD TO 6% OF GROSS PROFIT RATE APPLIED BY THE ASSESSING OFFICER ON THE BASIS OF THE DECISION OF ITAT, AHMEDABAD IN THE CASE OF ACIT VS .- BHADIYADARA DIAMONDS IN IT(SS) A. NO. 16/AHD/1999, IT WAS SUBMITTED THAT THIS DECISIO N IS NOT APPLICABLE TO THE ASSESSEE SINCE (I) THE ITAT IN THAT CASE ESTIMATED 6% GROSS PROFIT ON UNACCOUNTED JOB LABOUR, AND (II) THE ITAT IN THAT CASE ACCEPTED GROSS PROFIT OF 2.19% AS PER BOO KS OF ACCOUNTS FOR THE JOB WORK RECORDED IN THE BOOKS OF ACCOUNTS. 5.4. FINALLY, THE LD. COUNSEL OF THE ASSESSEE MADE A PRAYER THAT GROSS PROFIT RATE OF 2.14% AS PER BOOKS OF ACCOUNTS BE ACCEPTED IN VIEW OF THE DE CISION DATED 08.11.2005 OF ITAT, AHMEDABAD IN THE CASE OF ACIT VS.- BHADIYADARA DIA MONDS IN IT(SS) A. NO. 16/AHD/1999. 7 ITA NO. 4056/AHD/2007 6. ON THE OTHER HAND, SHRI SANJEEV KASHYAP, SR. D.R . APPEARING ON BEHALF OF THE REVENUE VEHEMENTLY OBJECTED TO THE SUBMISSIONS MADE BY THE LD. COUNSEL OF THE ASSESSEE. HE SUBMITTED THAT FACTS OF THE ASSESSEES CASE ARE DIFFERENT. IN THIS CASE, IT CANNOT BE SAID THAT ASSESSING OFFICE R HAS NOT REJECTED THE BOOKS OF ACCOUNTS. SUFFICIENT REASONS ARE GIVEN BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER FOR REJECTING THE BOOKS OF ACC OUNTS AND ESTIMATED THE GROSS PROFIT @ 6% RELYING ON THE DECISION OF ITAT, AHMEDABAD IN THE C ASE OF ACIT VS.- BHADIYADARA DIAMONDS, SURAT IN IT(SS) A. NO. 16/AHD/1999. THE LD. D.R. D REW OUR ATTENTION TO THE GROUNDS OF APPEAL OF THE ASSESSEE, WHEREIN THE ASSESSEE VIRTUALLY ACC EPTED THE REJECTION OF BOOKS OF ACCOUNTS. IN THE GROUNDS OF APPEAL ITSELF, THE ASSESSEE IS MAKING A PRAYER THAT GROSS PROFIT ESTIMATE OF 6% BE REDUCED TO 3% ON THE BASIS OF THE DECISION IN IDENT ICAL CASES. HE SUBMITTED THAT VARIOUS IDENTICAL CASES, RELIED BY THE LD. COUNSEL OF THE ASSESSEE AR E NOT APPLICABLE TO THE ASSESSEES CASE. IN THIS CASE, THE ASSESSING OFFICER HAS FOLLOWED THE DECISI ON OF TRIBUNAL DATED 08.11.2005 IN THE CASE OF ACIT VS.- BHADIYADARA DIAMONDS (SUPRA), WHEREIN IT IS HELD THAT GROSS PROFIT @ 6% SHOULD BE APPLIED. IN THAT CASE, THE ASSESSING OFFICER ESTIMA TED THE GROSS PROFIT @ 10%. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) REDUCED IT TO 8% AND FINALLY TRIBUNAL REDUCED IT TO 6%. THE ASSESSING OFFICER HAS FOLLOWED THE SAID DECISION OF ITAT AND ESTIMATED THE GROSS PROFIT @ 6% WHICH IS CONFIRMED BY LEARNED COMMISSIO NER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER, THEREFORE, THE VIEW TAKEN BY THE LE ARNED COMMISSIONER OF INCOME TAX(APPEALS) BE UPHELD. 7. IN HIS REJOINDER, THE LD. COUNSEL OF THE ASSESSE E DREW OUR ATTENTION TO THE ASSESSMENT ORDER AT PAGES 131 TO 133 OF THE PAPER BOOK IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04. HE POINTED OUT THAT IN THE ASSESSMENT YEAR 2003-04 IN ASSESSEES OWN CASE , THE ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 143(3) ON 24.01.2006, WHEREIN HE ESTIMATED THE GROSS PROFIT @ 3% ON THE BASIS OF COMPARABLE CASES. THEREFORE, THE ASSESSING OFFICER BE DIRECTED TO RE-WORK OUT THE ADDITION BY APPLYING GROSS PROFI T RATE OF 3%. 8. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. FROM THE PERUSAL OF GROUND OF APPEAL, IT CAN BE SEEN THAT THE ASSESSEE HAS ACCEPTED THE REJECTION OF BOOKS OF ACCOUNTS. EVEN OTHERWISE, THE ASSESSING OFFICER HAS GIVEN COGENT REASON FOR REJECTING THE BOOKS OF ACCOUNTS. ONCE THE BOOKS OF ACCOUNTS REJECTED, THE ASSESSING OFFICER HAS NO OPTION BUT TO ESTIMATE THE GROSS PROFIT. THE DECISION DATED 08.11.2005 OF ITAT, 8 ITA NO. 4056/AHD/2007 AHMEDABAD IN THE CASE OF ACIT VS.- BHADIYADARA DIA MONDS, SURAT IN IT(SS) A. NO. 16/AHD/1999 (SUPRA) RELIED BY THE ASSESSING OFFICER PERTAINS TO ESTIMATION OF GROSS PROFIT ON UNACCOUNTED RECEIPTS OF LABOUR JOB WORK. THE G.P. R ATE OF 6% IS APPLICABLE ONLY IN RESPECT OF UNACCOUNTED LABOUR JOB WORK AND NOT LABOUR JOB WORK RECEIVED, WHICH ARE DULY RECORDED IN THE BOOKS OF ACCOUNTS. IN ASSESSEES OWN CASE FOR THE A SSESSMENT YEAR 2003-04, THE ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 143(3) ON 24.01.2006, WHEREIN HE ESTIMATED G.P. @ 3% ON GROSS RECEIPTS ON AGREED BASIS. IN THAT ASSES SMENT YEAR, THE ASSESSEE ITSELF MADE THE FOLLOWING SUBMISSION:- THE GROSS PROFIT SHOWN BY THE ASSESSEE IS 2.20%. T HE GROSS PROFIT TO BE ESTIMATED ON THE BASIS OF COMPARABLE CASES IS 3% AN D HENCE ADDITION OF 0.8% OF RS.3,29,84,652/- WORKS OUT TO RS.2,63,877/- ON AGREED BASIS. 9. KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CI RCUMSTANCES OF THE CASE AND THE FACT THAT IN THE ASSESSMENT YEAR 2003-04 IN ASSESSEES OWN CASE, THE ASSESSING OFFICER ACCEPTED THE G.P. RATE OF 3%, WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO APPLY G.P. RATE OF 3% ON GROSS RECEIPTS OF RS.8,56,11,470/- AND RE-WORK OUT THE ADDITION. 10. IN THE RESULT, FOR STATISTICAL PURPOSES, THE AP PEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 02.07.201 0 SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 02 / 07 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.