The ITO, Ward-1(4), Surat V. Parag Syntex Pvt.Ltd., Surat

ITA 4292/AHD/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9130 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-12-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 05-12-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Gross profit estimation; Rejection of books of accounts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH D DD D BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI MUKUL SHRAWAT MUKUL SHRAWAT MUKUL SHRAWAT MUKUL SHRAWAT, , , , JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER AND AND AND AND SHRI SHRI SHRI SHRI N.S.SAINI N.S.SAINI N.S.SAINI N.S.SAINI, , , , ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER DATE OF HEARING : 13-12-2010 DRAFTED ON:16- 12-2010 ITA NO. 4292 /AHD/ 200 7 ASSESSMENT YEAR :2004-05 INC OME TAX OFFICER, WARD 1(4), ROOM NO.4, GROUND FLOOR, AAYAKAR BHAVAN, MAJURA GATE, SURAT. VS. PARAG SYNTEX PVT.LTD., 43-45, GIDC, PANDESARA, SURAT. PAN/GIR NO. : AABCP 3969 M (A PPELLANT ) .. ( RESPONDENT ) OF HEARING : 16-12-2010 DRAFTED ON:16-12-2010 C.O. NO.34/AHD/2008 ARISING OUT ITA NO.4292/AHD/2007 ASSESSMENT YEAR :2004-05 PARAG SYNTEX PVT.LTD., 43-45, GIDC, PANDESARA, SURAT. VS. INCOME TAX OFFICER, WARD 1(4), ROOM NO.4, GROUND FLOOR, AAYAKAR BHAVAN, MAJURA GATE, SURAT. B Y REVENUE : SHRI U. B. MISHRA, D.R. RESPONDENT BY: SHRI HARDIK VORA. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AND THE CRO SS OBJECTION FILED THE ASSESSEE AGAINST THE ORDER OF T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, SURAT, DATE D 17-9-2007. 2. THE SOLE GROUND OF APPEAL OF THE REVENUE READS A S UNDER:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE ADDITION OF `.7,33,264/- MADE ON ACCOUNT OF CESSATI ON OF OUTSTANDING LIABILITY UNDER SECTION 41(1) OF THE I . T. ACT. - 2 - 3. THE BRIEF FACTS OF THE CASE ARE THAT IN THE ASSE SSMENT ORDER THE LEARNED ASSESSING OFFICER HAS STATED THAT THE A SSESSEE HAS FURNISHED DETAILS OF LOANS/CREDITORS WHICH ARE OUTS TANDING FOR MORE THAN THREE YEARS WHICH ARE AS UNDER :- SR. NO. NAME OF THE PARTY. AMOUNT OUTSTANDING (`) 1 ACME MARKETING 36,550/ - 2 BRILLIANT CHEMICALS PVT. LTD. 52,160/ - 3 BIO CHEM DYES PVT. LTD. 59,959/ - 4 DYA NMIC SOFTLINK PVT. LTD. 21,200/ - 5 HEMTEX CHEMICALS 48,600/ - 6 HITESH TRADING CORPORATION 14,916/ - 7 JAI AMBE GUM INDUSTRIES 1,01,270/ - 8 KRISHNA SALES 55,500/ - 9 LABH LAXMI BEARING CENTRE 38,895/ - 10 MANGALAM ENTERPRISES 76,280/ - 11 SHREE SAI ERECTOR 40,000/ - 12 THAKOR REDUVTANT P. LTD. 1,47,890/ - 13 TECHNO RUBBER INDIA 1,41,440/ - 14 VAM ORGANIC CHEMICALS LTD. 41,802/ - 15 YOGESH DYESTUFF PRODUCT P. LTD. 28,652/ - TOTAL 8,95,114/ - 4. IT WAS STATED THAT OUT OF THE OUTSTANDING AMOUNT OF `.8,95,114/- LOANS/CREDITORS OF `.7,33,264/- WERE N OT CONFIRMED. PARTIES AT SR.NO.2, 3, 7,9,11 AND 12 ABOVE WERE NOT AVAILABLE ON THE ADDRESSES GIVEN AS PER THE INSPECTORS REPORT. THE LEARNED ASSESSING OFFICER THEREFORE ASKED THE ASSESSEE AS T O WHY THE AMOUNT OF `.7,33,264/- BE NOT ADDED UNDER SECTION 41(1) AS THE LOAN DID NOT EXIST. THE ASSESSEE SUBMITTED THAT THE SE LIABILITIES ARE MORE THAN THREE YEARS OLD AND THE ASSESSEE HAD PURC HASED GOODS FROM ALL THESE PARTIES IN THE EARLIER YEARS. IT WAS ARGUED THAT SINCE THERE WAS NO REMISSION OF LIABILITY IN THE BALANCE SHEET THEREFORE NO ADDITION CAN BE MADE UNDER SECTION 41(1). THE LEARN ED ASSESSING - 3 - OFFICER DID NOT ACCEPT THIS EXPLANATION AND WAS OF THE OPINION THAT AS PER THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF T.V. SUNDARAM IYENGER & SONS LTD., (222 ITR 344) DUE TO INFLUX OF TIME THE LIABILITY IS CEASED AND THEREFORE ADDITION MUST BE MADE UNDER SECTION 41(1). THE LEARNED ASSESSING OFFICER HAS T HEREFORE MADE AN ADDITION OF `.7,33,264/-. 5. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX (APPEALS), THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THESE LIABILITIES HAVE NOT BEEN WRIT TEN OFF IN THE BALANCE SHEET AND THEREFORE IN VIEW OF THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF AMBICA MILLS LTD VS. CIT 54 ITR 167 (GUJ), THE ADDITION CANNOT BE MADE. 6. AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE, THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) HELD AS UNDER:- I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND OBSERVATION OF THE LEARNED ASSESSING OFFICER. THE FACT IS THAT ALL THESE LIABILITIES ARE MORE THA N THREE YEARS OLD. HENCE IF THERE IS BOGUS LIABILITY THEY CANNOT BE ADDED IN THE CURRENT YEAR BUT CAN ONLY BE ADDED IN THE YEAR IN WHICH THEY AROSE. HAVING SAID THAT, IN THE CASE OF THE AS SESSEE NO ADDITION CAN BE MADE IN THE CURRENT YEAR AS BOGUS L IABILITY. THE LEARNED ASSESSING OFFICER HAS STATED THAT LIABI LITIES HAVE CEASED AND THEY ARE NO MORE PAYABLE AND HENCE ADDIT ION MADE UNDER SECTION 41(1). THE FACT IS THAT ALL OF T HESE LIABILITIES HAVE BEEN SHOWN IN THE BALANCE SHEET AS SUBSISTING. THE DECISION OF THE HON'BLE SUPREME COU RT IN THE CASE OF T. V. SUNDARAM IYENGER (SUPRA) IS NOT APPLI CABLE BECAUSE THE SUPREME COURT HAD GIVEN THE DECISION ON THE FACTS OF THE CASE WHERE THE ASSESSEE HAD REMITTED T HE LIABILITY FROM THE BALANCE SHEET. THE DECISION OF T HE HON'BLE GUJARAT HIGH COURT IN THE CASE OF AMBICA MILLS (SUP RA) IS SQUARELY APPLICABLE WHEREIN THE HIGH COURT HAS STAT ED THAT SO LONG AS THE LIABILITY IS SHOWN IN THE BALANCE SH EET THEY CANNOT BE TREATED AS CEASED AND HENCE NO ADDITION C AN BE MADE UNDER SECTION 41(1). HENCE FOLLOWING THE DECIS ION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF AMBICA MI LLS (SUPRA) THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER IS DELETED AND THIS GROUND OF APPEAL IS ALLOWED. - 4 - 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTE D THE ORDER OF THE LEARNED ASSESSING OFFICER MAD THE LEAR NED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE LEARNED ASSESSING OFFICER OBSERVED THAT ALL THE LIABILITIES IN QUESTION ARE MORE THAN THREE YEARS OLD AND AS PER THE DECISION O F HON'BLE SUPREME COURT IN THE CASE OF T.V. SUNDARAM IYENGER & SONS LTD., (SUPRA) DUE TO INFLUX OF TIME THE LIABILITY IS CEAS ED AND THEREFORE ADDITION MUST BE MADE UNDER SECTION 41(1) AND ADDED `. 7,33,264/- TO THE INCOME OF THE ASSESSEE. IN APPEAL; THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION ON THE GROUND THAT ALL OF THE LIABILITIES HAVE BEEN SHOWN IN THE BALANCE SHEET AS SUBSISTING AND THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF T. V. SUNDARAM IYENGER (SUPRA) IS NO T APPLICABLE BECAUSE THE SUPREME COURT HAD GIVEN THE DECISION ON THE FACTS OF THE CASE WHERE THE ASSESSEE HAD REMITTED THE LIABIL ITY FROM THE BALANCE SHEET. THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF AMBICA MILLS (SUPRA) WAS SQUARELY APPLI CABLE WHEREIN THE HIGH COURT HAS STATED THAT SO LONG AS THE LIABI LITY IS SHOWN IN THE BALANCE SHEET THEY CANNOT BE TREATED AS CEASED AND HENCE NO ADDITION CAN BE MADE UNDER SECTION 41(1). WE FIND T HAT IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS NOT WRITTEN BACK THE LIABILITY IN QUESTION IN ITS BOOKS OF ACCOUNT AND THE SAME SUBSI STS IN THE BOOKS OF ACCOUNT AS A LIABILITY. FURTHER, IT IS ALSO NOT IN DISPUTE THAT THE LIABILITIES IN QUESTION ARE BROUGHT FORWARD BALANCE FROM PREVIOUS YEAR AND ARE NOT NEW LIABILITY CREDITED DURING THE YEAR UNDER CONSIDERATION. 9. SECTION 41(1) (A) OF THE ACT PROVIDES AS UNDER:- THE FIRST-MENTIONED PERSON HAS OBTAINED, WHETHER I N CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPE CT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENE FIT - 5 - ACCRUING TO HIM SHALL BE DEEMED TO BE PROFITS AND G AINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE T O INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHE THER THE BUSINESS OR PR4OFESSION IN RESPECT OF WHICH THE ALL OWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEA R OR NOT; OR 10. A READING OF THE ABOVE PROVISION SHOWS THAT THE AMOUNT OF BENEFIT BY WAY OF REMISSION OR CESSATION OF THE TRA DING LIABILITY IS DEEMED AS INCOME CHARGEABLE TO TAX OF THAT PREVIOUS YEAR IN WHICH SUCH REMISSION OR CESSATION TAKES PLACE. IN THE IN STANT CASE WE FIND THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT ACTUAL REMISSION OR CESSATION HAS IN F ACT TAKEN PLACE AND ALSO THE SAID REMISSION OR CESSATION HAS NOT TA KEN PLACE IN ANY OTHER PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN ABSENCE OF SUCH MATERIAL BROUGHT ON RECORD BY REVENUE IN OUR CONSIDERED OPINION, THE ADDITION MAD E UNDER SECTION 41(1) IS WITHOUT SATISFACTION OF THE CONDIT IONS PRECEDENT THERETO. WE THEREFORE, CONFIRM THE ORDER OF THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) DELETING THE A DDITION OF `.7,33,264/- AND DISMISS THIS GROUND OF APPEAL OF T HE REVENUE. 11. THE GROUND OF CROSS OBJECTION OF THE ASSESSEE R EADS AS UNDER:- ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING ACTION OF LEA RNED ASSESSING OFFICER IN MAKING ADDITION OF `.14,36,816 /- ON ACCOUNT OF LOW GROSS PROFIT. 12. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE COMPANY IS ENGAGED IN THE BUSINESS OF DYEING OF ART SILK CLOTH ON JOB WORK BASIS. DURING THE YEAR THE ASSESSEE HAD SHOWN TURNO VER OF `.1.32 CRORES AGAINST WHICH THE ASSESSEE HAD SHOWN LOSS OF `.1,53,951/- WHEREAS IN THE LAST YEAR THE ASSESSEE HAD SHOWN TUR NOVER OF `.2.44 CRORES AND GROSS PROFIT RATE OF 12.52% THEREBY SHOW ING A HUGE FALL IN G.P. THE LEARNED ASSESSING OFFICER ASKED THE ASS ESSEE TO FURNISH THE STOCK REGISTER OF COLOUR AND CHEMICALS AND DETA ILS OF DAY TO DAY - 6 - STOCK OF COLOUR AND CHEMICALS TAKEN AND DAY TO DAY CONSUMPTION OF RAW MATERIAL AND LABOUR CHARGES ETC. THE ASSESSEE F AILED TO PRODUCE THESE REGISTERS AND BASIC RECORDS AND STATE D THAT THE MAIN REASON FOR DECLINE IN G.P. IS DUE TO DECLINING TREN D OF JOB WORK DONE BY THE ASSESSEE. THE ASSESSEE WAS FACING FINANCIAL CRISIS AND AS A RESULT WAS NOT IN A POSITION TO RUN HIS UNIT EFFICI ENTLY. THE JOB CHARGES HAS BEEN REDUCED BY 46% IN COMPARISON TO LA ST YEAR WHEREAS THERE WERE SOME COSTS LIKE POWER, FUEL, GAS EXPENSES, WATER CHARGES ETC. WHICH WERE FIXED MINIMUM CHARGES WHICH HAD TO PAID BY THE ASSESSEE EVEN IF NO PRODUCTION WAS D ONE BY THE ASSESSEE PAID. COMPETITION IN TEXTILE MARKET HAD I NCREASED AND THEREFORE, THERE IS LOSS. THE LEARNED ASSESSING OFF ICER DID NOT ACCEPT THIS EXPLANATION AND STATED THAT THE ASSESSE E COMPANY HAD NOT MAINTAINED DAY TO DAY STOCK REPORT. THE PHYSICA L VERIFICATION OF STOCK WAS CARRIED OUT DURING THE YEAR END OF YEAR B UT THESE DETAILS WERE NOT GIVEN. THE LEARNED ASSESSING OFFICER STAT ED THAT THERE WAS CONTINUOUS FALL IN GROSS PROFIT RATE FROM ASSES SMENT YEAR 2002- 03 WHEN IT WAS 17.17%. FOR A.Y. 2003-04 THE G.P. RA TE WAS 12.52% AND IN THE CURRENT YEAR THERE WAS A GROSS LOSS. THE LEARNED ASSESSING OFFICER THEREFORE REJECTED THE BOOKS OF A CCOUNTS AND ADOPTED THE AVERAGE GROSS PROFIT RATE OF LAST THREE YEARS WHICH AMOUNTED TO 9.68% AND THEREBY MADE AN ADDITION OF ` .14,36,816/- TO THE INCOME OF THE ASSESSEE. 13. ON APPEAL, BEFORE THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS), THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE REPEATED THE SUBMISSIONS MADE BEFORE THE LEARNED AS SESSING OFFICER. THE ASSESSEE FURTHER STATED THAT IT HAD FI LED THE DAY TO DAY DETAILS OF JOB WORK IN TERMS OF QUANTITY AND VALUE, DETAILS RELATING TO PARTY-WISE JOB WORK IN EXCESS OF `.50,000/-, MON TH-WISE DETAILS OF LABOUR CHARGES PAID, CLOTH PROCESSED, COLOUR AND CH EMICAL EXPENSES., POWER AND FUEL, WATER CHARGES BEFORE THE LEARNED ASSESSING OFFICER. THE ASSESSEE STATED THAT THE LEA RNED ASSESSING OFFICER HAD FAILED TO BRING ANY EVIDENCE WHICH INDI CATED THAT - 7 - ASSESSEE HAD INFLATED THE CONSUMPTION OF COLOUR CHE MICALS AND THAT THE CLAIM OF MANUFACTURING EXPENSES WAS EXCESS IVE. 14. AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNE D AUTHORISED REPRESENTATIVE OF THE ASSESSEE, THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) OBSERVED AS UNDER :- 2.3. I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND OBSERVATION OF THE LEARNED ASSESSING OFFICER. THE SUBMISSION GIVEN BY THE APPELLANT IS GENERAL IN NATURE. NO DETAILED DOCUMENTARY EVIDENCE HAS BEEN SHOWN AS TO WHY THERE WAS A LOSS. ADMITTEDLY THE APPELLANT HAS NOT MAINTAINED DAY TO DAY CONSUMPTION REGISTER OF COLOU R AND CHEMICALS IN ABSENCE OF WHICH IT UNABLE TO IDENTIFY THE CORRECT INCOME AND EXPENSES. THERE IS ALSO NO EVIDE NCE TO VERIFY THE DETAILS. THE LEARNED ASSESSING OFFICER H AS THEREFORE RIGHTLY REJECTED THE BOOKS OF ACCOUNTS. I N THE CASE OF KACHWALA GEMS VS. JCIT (288 ITR 10), THE BOOKS O F ACCOUNTS HAVE BEEN RIGHTLY REJECTED BY THE LEARNED ASSESSING OFFICER. IN THIS CASE THE HON'BLE SUPREME COURT HAS STATED AS UNDER:- IT IS WELL SETTLED THAT IN A BEST JUDGEMENT THERE IS ALWAYS A CERTAIN DEGREE OF GUESS WORK. NO DOUBT THE AUTHORITIES SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDGEMENT ASSESSMENT AND SHOULD NOT ACT ARBITRARILY, BUT THER E IS NECESSARILY SOME AMOUNT OF GUESS WORK INVOLVED IN A BEST JUDGEMENT ASSESSMENT. THE LEARNED ASSESSING OFFICER RESTORED TO BEST JUDGEMENT OF THE ASSESSEE ON THE FOLLOWING GROUND: I) THE ASSESSEE HAD NOT MAINTAINED QUANTITATIVE DETAILS/STOCK REGISTER; II) THERE WAS NO EVIDENCE TO VERIFY CLOSING STOCK; III) THE GENUINENESS OF PURCHASES WAS NOT PROVED WITHOUT ANY DOUBT. . THERE WAS NO ARBITRATION IN THIS CASE IN RESORTI NG TO BEST JUDGMENT ASSESSMENT. IT WAS THE ASSESSEE HIMSELF WHO WAS TO BLAME AS HE DID NOT SUBMIT PROPE R ACCOUNTS. 2.4. IN VIEW OF THE ABOVE DECISION OF SUPREME COURT AND AS THE ASSESSEE HAS NOT MAINTAINED THE DAY TO DAY CONS UMPTION O\REGISTER OF COLOUR CHEMICALS, THE BOOKS OF ACCOUN TS HAVE - 8 - BEEN RIGHTLY REJECTED BY THE LEARNED ASSESSING OFFI CER AND SINCE THE BASIS OF ADDITION IS ESTIMATION OF GROSS PROFIT OF LAST YEAR THE SAME IS NOT DISTURBED AND HENCE THE ADDITI ON MADE BY THE LEARNED ASSESSING OFFICER IS CONFIRMED. THIS GROUND OF APPEAL IS THEREFORE DISMISSED. 15. THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE RELIED ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF DHARMESH SILK MILLS P. LTD. VS. ITO WARD 1 (2) ITA NO.4108/AHD/20 07 ASSESSMENT YEAR 2004-05 ORDER DATED 21.08.2009 AND ARGUED THAT THE DECISION OF THE HON'BLE SUPREME COURT WAS DISTINGUISHED BY T HE TRIBUNAL IN THIS CASE ON THE GROUND THAT IN THAT CASE THE SUPRE ME COURT FOUND THAT THERE WAS BOGUS PURCHASES MADE BY THE ASSESSEE AND THIS WAS NOT THE FACT IN THE CASE BEFORE THE TRIBUNAL. S IMILARLY IN THE CASE OF THE ASSESSEE THERE WAS NO FINDING BY THE LE ARNED ASSESSING OFFICER OR THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS) THAT THE ASSESSEE HAS IN FACT MADE BOG US PURCHASES AND THEREFORE THE DECISION OF THE HON'BLE SUPREME C OURT WAS NOT APPLICABLE IN THE CASE OF THE ASSESSEE ALSO. THEREF ORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIF IED IN CONFIRMING THE ADDITION MADE BY THE LEARNED ASSESSI NG OFFICER BY RELYING ON THE DECISION OF THE HON'BLE SUPREME COUR T. 16. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORT ED THE ORDERS OF THE LOWER AUTHORITIES. 17. WE FIND THAT IN THE INSTANT CASE IT IS NOT IN D ISPUTE THAT THE ASSESSEE HAS NOT MAINTAINED DAY TO DAY STOCK REGIST ER OF COLOUR CHEMICALS, COAL ETC. THE ASSESSEE COULD NOT SHOW A NY REASON FOR NON MAINTENANCE OF DAY TO DAY STOCK REGISTER. THE ABOVE COUPLED WITH THE FACT THAT THE ASSESSEES TRADING ACCOUNT S HOWS A SHARP DECLINE IN THE RATE OF GROSS PROFIT FROM THE IMMEDI ATELY PRECEDING YEAR, IN THE IMMEDIATELY PRECEDING YEAR GROSS PROFI T OF THE ASSESSEE WAS 12.52%, WHEREAS DURING THE YEAR UNDER CONSIDERATION THE GROSS PROFIT DECLARED WAS NEGATIV E I.E. GROSS LOSS OF 1.10% WAS THE REASON FOR REJECTING BOOK RESULT BY THE LOWER - 9 - AUTHORITIES AND IN OUR CONSIDERED OPINION THE SAID DECISION IN THE ABOVE FACTS DOES NOT WARRANT ANY INTERFERENCE BY US . FURTHER, THE CONTENTION OF THE ASSESSEE IS THAT THE GROSS PROFIT RATE OF 9.68% ACCEPTED BY THE LOWER AUTHORITIES FOR THE YEAR UNDE R CONSIDERATION WAS HIGH BECAUSE CASH EXPENSES LIKE POWER AND FUEL, GAS EXPENSES, WATER CHARGES ETC. WHICH ARE FIXED MINIMU M CHARGES AND CANNOT BE REDUCED IN COMPARISON WITH PRODUCTION . WE FIND THAT THE ABOVE CONTENTION OF THE ASSESSEE WAS ACCEPTED B Y THE LOWER AUTHORITIES AND THEREFORE, THE LOWER AUTHORITIES ES TIMATED THE GROSS PROFIT RATE OF THE YEAR UNDER CONSIDERATION AT THE RATE 9.68% WHEREAS IN THE IMMEDIATELY PRECEDING YEAR THE GROSS PROFIT RATE OF THE ASSESSEE WAS 12.52%. WE FIND THAT IN THE INSTAN T THE LEARNED ASSESSING OFFICER REJECTED THE BOOK RESULT MAINLY O N THE GROUND THAT THE STOCK REGISTER OF COLOUR, CHEMICAL AND COA L ETC., WERE NOT MAINTAINED BY THE ASSESSEE AND THUS THE REVENUE CO8 ULD NOT VERIFY THE ACTUAL CONSUMPTION OF SUCH MATERIAL. NO MATERIA L WAS BROUGHT BEFORE US BY THE ASSESSEE TO SHOW THAT THE CONSUMPT ION OF THE MATERIAL SHOWN BY THE ASSESSEE DURING THE YEAR WAS IN PARITY WITH THE RATE OF CONSUMPTION OF SUCH MATERIALS ACCEPTED IN THE PAST IN THE CASE OF THE ASSESSEE. IN ABSENCE OF SUCH A MAT ERIAL BROUGHT ON RECORD BY THE ASSESSEE WE DO NOT FIND ANY GOOD REAS ON TO INTERFERE WITH THE ESTIMATE MADE BY THE LOWER AUTHORITIES. WE THEREFORE, CONFIRM THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) AND DISMISS THIS GROUND OF CROSS OBJECTIO N OF THE ASSESSEE. 18. IN THE RESULT, THE APPEAL OF THE REVENUE AS WEL L AS THE CROSS OBJECTION OF THE ASSESSEE BOTH ARE DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 23 RD DAY OF DECEMBER, 2010. SD/- SD/- (MUKUL SHRAWAT ) (N. S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: AHMEDABAD,23 RD DAY OF DECEMBER, 2010 - 10 - COMPILED AND COMPARED BY: PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS)-I, SURAT. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 16-12-2010 -------------- ----- 2. DRAFT PLACED BEFORE AUTHORITY 20-12-2010 ----- -------------- 3. DRAFT PROPOSED & PLACED 20-12-2010 ----------- -------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 20-12-2010 ---------- -------- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 22-12-2010 ------- ------------- 6. KEPT FOR PRONOUNCEMENT ON 23-12-2010 -------- ----------- 7. FILE SENT TO THE BENCH CLERK 23-12-2010 ---- --------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- ------------------- 9. DATE OF DISPATCH OF ORDER ---------------- ---- -----------------