M/S CERAMIC INDUSTRIES, Jaipur V. ACIT, Jaipur

ITA 460/JPR/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74801 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 14-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHASH CHANDRA
• Assessee Lawyers: H M SINGHVI
• Keywords: Gross profit estimation; Income from undisclosed sources; Question of law
• Section: 145; 143(3); 133(6)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI HARI OM MARATHA AND SHRI N.K. SAI NI) ITA NO. 460/JP/2012 ASSESSMENT YEAR : 2008-09 PAN: AAAFC 7360 H M/S. CERAMIC INDUSTRIES VS. THE ACIT S707-A, ROAD NO.6 CIRCLE- 4 VKI AREA, JAIPUR JAIPUR (APPELLANT) (RESPONDENT) ITA NO. 551/JP/2012 ASSESSMENT YEAR : 2008-09 PAN: AAAFC 7360 H THE ACIT VS. M/S. CERAMIC INDUSTRIES CIRCLE- 4 S707-A, ROAD NO.6 JAIPUR VKI AREA, JAIPUR (APPELLANT) (RESPONDENT) ITA NO. 26/JP/2013 ASSESSMENT YEAR : 2009-10 PAN: AAAFC 7360 H THE ACIT VS. M/S. CERAMIC TABLEWARE (P) LTD. CIRCLE- 4 S707-A, ROAD NO.6 JAIPUR VKI AREA, JAIPUR (APPELLANT) (RESPONDENT) ITA NO. 942/JP/2012 ASSESSMENT YEAR : 2009-10 PAN: AAAFC 7360 H M/S. CERAMIC TABLEWARE (P) LTD. VS. THE JCIT S707-A, ROAD NO.6 CIRCLE- 4 VKI AREA, JAIPUR JAIPUR (APPELLANT) (RESPONDENT 2 ASSESSEE BY : SHRI H.M. SINGHVI DEPARTMENT BY: SHRI SUBHASH CHANDRA DATE OF HEARING: 21-01-2014 DATE OF PRONOUNCEMENT: 30-01-2014 ORDER PER HARI OM MARATHA, JM:- THE ABOVE CAPTIONED APPEALS ARE CROSS APPEALS FOR THE ASSESSMENT YEAR 2008-09 AND2009-10. ALL THESE APPEALS WERE HEARD TO GETHER AND ALMOST SIMILAR ISSUES ARE INVOLVED THEREIN. THEREFORE, FOR THE SAKE OF CONGRUENCE, CONVENIENCE AND BREVITY, WE ARE PROCEEDING TO DECID E THEM BY A COMMON ORDER. ITA NOS.460/JP/2012-ASSESSEE AND 551/JP/2012 REVEN UE (A.Y.2008-09) 2.1 THESE CROSS APPEALS HAVE BEEN FILED AGAINST THE ORDER OF THE LD. CIT(A)-II, JAIPUR DATED 29-03-2012. 2..2 THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN:- (I) SUBSTITUTING THE ADDITION OF RS. 3,72,92,789/- MADE BY THE AO ON ACCOUNT OF SUPPRESSION OF YIELD/ SALES BY TRADING ADDITION OF RS. 60,60,400/- WITHOUT APPRECIATING THAT THE ESTIMATION OF WASTAGE MADE BY THE AO WAS ON THE BASIS OF REPORT OF CGRI WHICH IS AN INDEPENDENT AGENCY HAVING EXPERTISE IN THE RELATED FIELD. 2.3 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS. 3 1. WHETHER IT IS OPEN TO THE CIT (A) TO MAKE OUT A NEW CASE FOR APPEAL BY TAKING UP GROUNDS OR ARGUMENTS INDULGE IN GUESSES AND CONJECTURES WHICH THE ASSESSEE NEVER RAISED BEFORE THE CIT(A). THE LD. C IT(A) DELETED THE ADDITION OF RS. 3,72,92,789/- MADE BY A O BY APPLYING THE WASTAGE OF 25% AND APPLIED GROSS PROFI T RATE OF 24.25% ON DECLARED SALES AS AGAINST GROSS PROFIT RATE OF 22.59% DECLARED BY THE ASSESSEE MADE A TRADING ADDI TION OF RS. 60,60,400/-. 2. THE LD. CIT(A) CONFIRMED THE APPLICATION OF PROVISION OF SECTION 145(3) WITHOUT POINTING OUT AN Y SPECIFIC DEFECTS IN THE METHOD OF ACCOUNTING AND ST OCK REGISTER AND PRODUCTION REGISTER ETC. EXCEPT THE LO W GROSS PROFIT RATE AND TRANSPORTATIONS CHARGES PAID TO SIS TER CONCERN. (3) (A) THE LD. CIT(A) WENT WRONG IN APPLYING THE GROSS PROFIT RATE OF 24.25% WHICH IS ARBITRARY BASED ON GUESSES AND CONJECTURES WITHOUT GIVING ANY OPPORTUNITY TO THE APPELLANT. (B) WHETHER THE LD. CIT(A) WAS JUSTIFIED IN APPLYING GROSS PROFIT RATE 24.25% AS AGAINST GROSS PROFIT RATE OF22.59% DECLARED BY THE ASSESSEE AND ACCEPTED BY THE AO IS BASED ON AN OBVIOUS MISTAKE. 3.1 BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF BONE CH INA AND STONE WARE CROCKERY FOR THE LAST MANY YEARS. THE ASSESSEE HAS BEEN MAINTAINING COMPLETE BOOKS OF ACCOUNT INCLUDING THE STOCK REGIS TER PERTAINING TO RAW MATERIAL, FINISHED GOODS, PACKING MATERIAL AND ALSO PRODUCTION REGISTER. THIS FIRM WAS SUBSEQUENTLY CONVERTED INTO A COMPANY. THE ASSESSEE IS COVERED UNDER THE CENTRAL EXCISE ACT AND RULES WHICH ARE MA NDATORY AND ACCORDING 4 TO WHICH IT IS REQUIRED TO MAINTAIN ALL THE RECORDS WHICH IS BEING REQUIRED TO BE MAINTAINED UNDER THE CENTRAL EXCISE RULES AND IT INCLUDES THE STOCK REGISTER IN RESPECT OF RAW MATERIAL, FINISHED PROD UCT, PACKING MATERIAL ETC. ALL THESE REGISTERED ARE SUBJECT TO VERIFICATION AN D CHECKING BY THE CENTRAL EXCISE AUTHORITY AT ANY TIME. THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE IN ITS REGULAR COURSE OF BUSINESS ARE DULY AUDITED AS PER THE PROVISIONS OF SECTION 44AB OF THE I.T. ACT, 1961 ( THE ACT FOR SHORT). THERE IS NO ADVERSE REPORT IN THE AUDIT REPORT. THE ASSES SEE HAS BEEN FOLLOWING THE SAME METHOD OF ACCOUNTING OVER THE YEARS. FOR THE A SSESSMENT YEAR 2008-09, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 27-12-2010 IN WHICH TRADING ADDITION OF RS. 3,72,92,272/- ON ACCOUNT OF WASTAGE IS CALCULATED @ 25% AS AGAINST SHOWN AT 32.26% . THE AO HAS TREATED THE YIELD DIFFERENCE ON ACCOUNT OF WASTAGE AS THE ASSESSEE SUPPRESSED TH E PRODUCTION AND ACCORDINGLY HE HAS ADDED GROSS PROFIT RATE AT 22.59 % ON THE VALUE OF ALLEGED SUPPRESSED PRODUCTION AND TREATED BY THE AO AS SALE S OUT OF THE BOOKS OF ACCOUNT. 3.2 IT WAS ARGUED BEFORE US THAT EXACTLY ON IDENTIC AL AND SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE IN ASSESSMENT YEARS 2001- 02, 2004-05, 2005-06, 2006-07 AND 2007-08, THE AO BY ADOPTING THE SAME ME THODOLOGY HAS MADE SIMILAR TRADING ADDITION BY TAKING SALES OUTSIDE TH E BOOKS OF ACCOUNT ALLEGEDLY EMANATING FROM ALLEGED EXCESS WASTAGE CLA IMED AT 25% BASED ON 5 THE REPORT OF CGCRI, KHURJA. THE MATTER FOR THOSE Y EARS TRAVELED UPTO THE TRIBUNAL WHO HAS REVERSED THE FINDINGS OF THE AO AN D THE LD. CIT(A). WHEN THE ASSESSEE FILED THE REPORT OF CGCRI, KHURJA IN S UPPORT OF WASTAGE CLAIMED IN THOSE YEARS, THE LD. CIT(A) AND ITAT HAV E DELETED THE IMPUGNED ADDITION, ACCEPTING THE ASSESSEE'S APPEAL AND ALLOW ING THE WASTAGE CLAIMED BY IT. IT WAS FOUND IN CONSONANCE WITH THE REPORT O F CGCRI, KHURJA. THE REVENUE IS OF THE OPINION THAT THE TRIBUNALS ORDER (SUPRA), COPY OF WHICH HAS BEEN ENCLOSED AT PAGES 47 TO 69 OF THE ASSESSE E'S PAPER BOOK DATED 16- 03-2007, 18-07-2008, 21-11-2008, 09-09-2009 AND 26- 11-2010 HAS NOT BEEN ACCEPTED BY THE REVENUE AND AN APPEAL HAS BEEN FILE D BEFORE THE HON'BLE HIGH COURT. 3.3 AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE HAV E FOUND THAT THE ISSUE INVOLVED IN THIS APPEAL FILED BY THE REVENUE IN ITA NO.551/JP/2012 STANDS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE A FOREMENTIONED ORDER OF ITAT. IN THE ORDER OF THE TRIBUNAL IN ITA NO. 258/ JP/2005 FOR THE ASSESSMENT YEAR 2001-02 DATED 16-03-2007, IT HAS BE EN HELD AS UNDER:- 6. WE HAVE PERUSED THE FACTS OF THE CASE. THE LD. AR MR. H.M. SINGHVI ARGUED THAT THE ASSESSEE HAS PROD UCED ALL THE BOOKS OF ACCOUNT , VOUCHERS AND THE ASSESSEE'S ACCO UNTS ARE AUDITED AND ALL THE PRODUCTION IS SUBJECT TO EXCISE DUTY AND NOT EVEN A SINGLE UNIT OF PRODUCTION CAN GO OUT OF THE FACTORY WITHOUT RECORDING THE SAME IN THE EXCISE REGISTERS WHICH ARE REGULARLY AND CONTINUOUSLY VERIFIED BY THE EXCISE D EPARTMENT 6 AND ARE UNDER THEIR CONTROL. THE AO HAS NOT POINTED OUT ANY DEFECT IN THE PURCHASES , SALES , OPENING STOCK AN D CLOSING STOCK AND AS EXPLAINED BEFORE THE AO AND THE LD. CIT(A) T HAT M/S. BHARAT POTTERIES LTD. I.E. A SISTER CONCERN IS MANU FACTURING MORE OF MAXIMUM STONEWARE CROCKERY AND THE ASSESSEE IS MANUFACTURING MORE OF BONE CHINA CROCKERY AND THE D IFFERENCE IN YIELD AND THE WASTAGE AND THE GROSS PROFIT HAD B EEN EXPLAINED VIDE OUR LETTER DATED 26-3-04 BEFORE THE AO AND SIM ILARLY THE OUTPUT/INPUT RATIO HAS ALSO BEEN EXPLAINED BEFORE T HE AO THROUGH THE SAME LETTER AND THE AO HAS NOT COMMENTE D UPON THE SAME AND HAS NOT FOUND OUT ANY DEFECT IN OUR EX PLANATION . THE ASSESSEE HAS ALSO FILED BEFORE THE AO FOLLOWIN G DOCUMENTS / PUBLICATIONS TO SUPPORT THE WASTAGE DECLARED BY T HE ASSESSEE IS REASONABLE AND ACCORDING TO THE STANDARD PRACTICE A DOPTED IN THE COUNTRY AS UNDER:- 1. C.G.C.R.I., KHURJA (PB NO. 13 TO 1) 2. PUBLICATION OF ARTICLE IN WHITE WARES (P.B. NO. 18) 3. PHOTOCOPY OF HAND BOOK OF CERAMICS VOLUME 2 (EDITORS. KUMAR ) SHOWING TYPICAL COMPOSITION OF BO NE CHINA 4. PHOTOCOPY OF THE CHAPTER 5 OF STONEWARE IN THE BOOK S PUBLISHED BY THE INSTITUTE OF MATERIALS (P.B. NO. 2 1 TO 22). IN THE REPORT OF CGCRI, KHURJA, (REFER P.B. NO. 17) , THE WASTE WORKED OUT TO 28.31% TO 38.7% INTEREST HE BON E CHINA CROCKERY AND IN THE CASE OF STONEWARE CROCKERY IT W ORKD OUT TO 24% TO 34.8%. WE AGREE WITH THE ARGUMENTS OF THE LD. AR THAT THAT THE MAIN OBJECTION RAISED BY THE AO WAS THAT INPUT/OUTPUT RA TIO IN VARIOUS MONTHS HAS THE INCONSISTENCY WHICH HAS BEEN DULY EXPLAINED BY THE ASSESSEE VIDE LETTER DATED 26-3-04 AND THE SECOND OBJECTION BY THE AO WAS THAT THE SISTER CONC ERN M/S. BHARAT POTTERIES LTD. HAS DECLARED MORE YIELD AND M ORE GROSS PROFIT , HAS ALSO BEEN EXPLAINED BY THE ASSESSEE VI DE THE SAME LETTER DATED 26-3-04. THEREFORE, THE INCONSISTENCY IN THE INPUT/OUTPUT RATIO IN VARIOUS MONTHS THE REASONS FO R WHICH HAS 7 BEEN EXPLAINED BY THE ASSESSEE , CANNOT BE THE BAS IS FOR REJECTION OF BOOKS OF ACCOUNT.THE YIELD AND GROSS P ROFIT RATE DECLARED BY THE SISTER CONCERN M/S. BHARAT POTTERIE S LTD. WHICH HAVE ALSO BEEN EXPLAINED BY THE ASSESSEE CAN ALSO N OT BE THE BASIS FOR REJECTION OF BOOKS OF ACCOUNT SINCE M/S. BHARAT POTTERIES LTD. IS MANUFACTURING MAXIMUM OF STONEWAR E CROCKERY AND FOR MANY OTHER REASONS WHICH WERE EXPL AINED BY THE ASSESSEE VIDE ITS LETTER DATED 26-3-04 WHICH WA S IGNORED BY THE AO AND THE AO HAS NOT POINTED OUT ANY SPECIFIC DEFECTS IN THE PURCHASES, SALES, OPENING STOCK AND CLOSING STO CK OF THE ASSESSEE AND THE AO HAS NOT BROUGHT ON RECORD ANY C OGENT MATERIAL TO PROVE THAT THE ASSESSEE HAS SOLD THE UN DER- PRODUCTION OUT OF THE BOOKS OF ACCOUNT. THEREFORE , IN SUCH CIRCUMSTANCES AND FACTS OF THE CASE , THE AO IS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT BY INVOKING PROVISI ONS OF SECTION 145(3) OF THE ACT AND THE ADDITIONS MADE BY THE AO ARE LIABLE TO BE DELETED. THE OBJECTION OF THE LD. DR T HAT THE LD. CIT(A) HAS NOT RELIED UPON THE CGCRI REPORT, CALCUT TA , THE LD. AR HAS POINTED OUT THAT THE IN THE SAME REPORT IT HAS BEEN MENTIONED THAT THE SAID ORGANIZATION IS NOT INVOLVE D PRODUCTION PRACTICE AND THE ARE NOT SURE TO WHAT EXTENT THEIR OPINION WILL BE USEFUL FOR THE PURPOSE OF THE ASSESSEE AND IN SUCH CIRCUMSTANCES AND FACTS OF THE CASE, THE REPORT OF CGCRI, CALCUTT A ALONE CANNOT BE THE BASIS FOR REJECTION OF BOOKS OF ACCOU NT AND MAKING AN ESTIMATION OF WASTAGE AND THE LD. CIT(A) WAS NOT JUSTIFIED IN IGNORING OTHER MATERIAL WHICH WAS PLAC ED BEFORE HIM AS MENTIONED HEREINBEFORE. THEREFORE, THE LD. C IT(A) WAS NOT JUSTIFIED IN SUSTAINING THE APPLICABILITY OF SE CTION 145(3) OF THE ACT AND ADDITION OF RS.11,15,087/-. THUS GROUND NO. 1 OF THE ASSESSEE IS ALLOWED AND THE SOLITARY GROUND OF THE REVENUE IS DISMISSED. .ACCORDINGLY THE APPEAL FILED BY THE REVENUE STANDS DISMISSED, BY RESPECTFULLY FOLLOWING THE ABOVE ORDER. 3.4 WITH REGARD TO ASSESSEE'S APPEAL IN ITA NO.460/ JP/2012, IT HAS BEEN SUBMITTED BY THE LD. AR THROUGH WRITTEN SUBMISSION AS UNDER:- 8 I) THE LEARNED CIT (A) HAS MADE OBSERVATION ON P AGE- 4 THAT THE TRANSPORTATION CHARGES WERE PAID FOR FEW MONTHS WHEREAS THE TRANSPORTATION CHARGES WERE PAID THROUG HOUT FOR FULL YEAR. THE CIT (A) FURTHER OBSERVED THAT THE PREMISE S OF M/S CERAVIT SANITWARE (I) PVT LTD WERE AT SHORT DISTANC E OF FEW HUNDRED METER WHEREAS IT WAS ABOUT 31/2 K.M II) THE FIGURE GIVEN IN PARA II OF PAGE 4 ARE OF AS SESSMENT YEAR 2007-08 AND NOT FOR THE YEAR UNDER APPEAL. AGA IN THE CIT (A) ASSESSED A WRONG FACT. III) THE CIT (A) IN LAST PARA OF PAGE -4 HAS WRONGL Y OBSERVED THAT THE TRANSPORTATION PAYMENT WERE MADE IN CASH AND ALL THE FIGURE WERE GIVEN PERTAINING TO LAST ASSESS MENT YEAR WHEREAS ALL THE PAYMENT WERE MADE BY ACCOUNT PAYEE CHEQUES (SEE P.B. PAGE NO. 76 TO 90) THE LEARNED CIT (A) HAS MADE OUT AN ALTERNATE EXTRA ADDITION OF RS. 6060400/-ON ACCOUNT OF LOW GP COMPA RED TO IMMEDIATELY PRECEDING YEAR RELYING ON THE DECISION OF THE HONORABLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V/S. INAMI MARBLES (P) LTD (316 ITR 125).THE FCATS OF INAMI MA RBLES (P) LTD ARE TOTALLY DIFFERENT FROM THE FACTS OF THE ASS ESSEE CASE BECAUSE OF THE FOLLOWING :- 1. THE AO HAS ACCEPTED THE GP RATE WHILE WORKING OU T THE ADDITION BY APPLYING THE GP RATE OF THE ASSESSE E 2. THE AO & CIT (A) BOTH HAVE ACCEPTED THE COST OF PRODUCTION AND NO OPPORTUNITY WAS GIVEN TO APPELLAT E ASSESSEE FOR REASON FOR LOW GP IN COMPARISON TO IMMEDIATELY PRECEDING YEAR. THIS YEAR THE COST OF PRODUCTION HAS INCREASE D BY 13% IN COMPARISON TO INCREASE IN SALES PRICE WHICH WAS BY 11% THUS THERE WAS FACT DIFFERENCE OF 2% BEING THE INCREASE IN COST PRICE.. THIS WAS THE BASIC FACT FOR FALLEN IN GP AS COMPARE TO PRECEDING YEAR. 9 3. NO SPECIFIC DEFECTS WERE POINTED OUT EITHER BY A O OR CIT (A) AND FURTHER THE LD. CIT (A) ON PAGE 5 IS MENTIONED THAT THE NOTICES U/S 133(6) OF THE IT ACT WERE ISSUED TO THREE PARTIES WERE RETURNED UNSERVED BY THE POSTAL DEPARTMENT WIT H THE REMARK INCOMPLETE ADDRESS OR NOT TRACEABLE 1. M/S. SALAM & SONS VILLAGE BASIKALAN, DISTRICT MUZAFFAR NAGAR (U.P) 2. M/S. NATIONAL TRADING COMPANY SHOP NO. 66, TEHSIL PARISER MARKET, BHAGAT SINGH ROAD, MUZAFFAR NAGAR (U.P) 3. M/S. NATIONAL TRADING COMPANY PUL KAMBOHAN , ATISH BAZAR, SAHARAN PUR (U.P) THE LD. CIT (A) ASKED THE APPELLANT TO RECONCILE TH E ACCOUNTS OF THE ABOVE PARTIES AND WE FILED A LETTER DATED 29.03.2012 (SEE P.B. PAGE NO.4).WE FURTHER SUBMIT A S UNDER IN RESPECT IF EACH PARTY 1. M/S. SALAM & SONS, MUZAFFAR NAGAR : - THE ASSESSEE HAS FILED STATEMENT OF ACCOUNT DULY CONFIRMED (SEE P.B. PAGE NO. 18) ON DATED 29/03/2012 FURTHER IN THE A.Y. 200 9-10 THE APPEAL OF THIS YEAR IS ALSO FIXED TODAY . THE ASSES SEE HAS ALSO FILED THE CONFIRMATION OF ACCOUNTS ALONGWITH PAN CA RD (SEE P.B. PAGE NO. 9 TO 11 OF A.Y. 2009-10, APPEAL NO. 2 6) THERE WAS OPENING BALANCE WHICH WAS BROUGHT FORWARD FROM PRECEDING YEAR. THE PAYMENTS OF BILLS WERE MADE THR OUGH ACCOUNT PAYEE CHEQUES AND THE GOODS WERE RECEIVED T HROUGH TRUCK. THE COPIES OF THE GR AND WEIGHT SLIP WERE SH OWN TO THE CIT (A) DURING APPEAL PROCEEDING (SEE P.B. PAGE NO. 33 TO 46) 2. M/S. NATIONAL TRADING COMPANY, MUZAFFAR NAGAR : THE ASSESSEE HAS FILED STATEMENT OF ACCOUNT OF THE PARTY RECEIVE ON EMAIL ALONGWITH THE RECONCILIATION STATEMENT WIT H THE COPY OF ACCOUNT OF THE SUPPLIER IN BOOKS OF THE ASSESSEE (SEE P.B. 10 PAGE NO. 19 TO 31) ON DATED 29/03/2012 FURTHER IN T HE A.Y. 2009-10 WHICH IS ALSO FIXED TODAY . THE ASSESSEE HA S ALSO FILED THE CONFIRMATION OF ACCOUNTS ALONGWITH PAN CARD (SE E P.B. PAGE NO.30 TO 33 OF A.Y. 2009-10, APPEAL NO. 26). T HERE WAS OPENING BALANCE WHICH WAS BROUGHT FORWARD FROM PREC EDING YEAR. THE PAYMENT OF BILLS WERE MADE THROUGH ACCOUN T PAYEE CHEQUES AND THE GOODS WERE RECEIVED THROUGH TRUCK . THE COPIES OF THE GR AND WEIGHT SLIP WERE SHOWN TO THE CIT (A) DURING APPEAL PROCEEDING (SEE P.B. PAGE NO. 33 TO 46) 3. M/S. NATIONAL TRADING COMPANY, SAHARANPUR :- THE ASSESSEE HAS FILED STATEMENT OF ACCOUNT DULY CONFIR MED (SEE P.B. PAGE NO. 32) ON DATED 29/03/2012 SINCE THESE ABOVE PARTIES ARE OUTSIDE THE RAJASTHAN AND THE PURCHASES ARE BEING INTERSTATE PURCHASES. THE A SSESSEE HAS ISSUED C FORM TO THESE PARTIES AGAINST ALL THE IN VOICES (SEE P.B. PAGE NO. 33 TO 46) AND THE TWO CASES THERE WAS NO COMPLIANCE WAS MADE BY THE SUPPLIERS IN RESPONSE TO NOTICE 133(6) OF TH E IT ACT FROM THE OFFICE OF CIT (A) OFFICE. 1. NAVEEN LEATHER BONE PRODUCT HEAD OFFICE PLOT NO. 388, LONI TO RATAUL ROAD GANDHI SHABLU MARG, LONI GHAZIABAD 2. M/S. SPECIALITY MINERALS LTD. PLOT NO. 505, G.I.D.C. ESTATE BHUJ-KUTCH. ( GUJRAT.) IN COMPLIANCE TO THIS WE HAVE TO SUBMIT AS UNDER:- 1. NAVEEN LEATHER BONE PRODUCT : - THIS NOTICE WAS RECEIVED BY THE PRAVEEN LEATHER BONE PRODUCT BUT TH ERE ARE NO SUCH PARTIES AS SUPPLIERS IN THE BOOKS OF THE ASSES SEE. THERE WAS A MISTAKE BY THE STAFF OF CIT (A) IN MENTIONING THE NAME. THE 11 COPIES OF INVOICES OF PRAVEEN LEATHER WERE FILED TO CIT (A) DURING THE APPELLATE PROCEEDING. M/S PRAVEEN LEATHE R HAS SEND REPLY DIRECTLY TO THE CIT (A) VIDE A LETTER DATED 2 4.12.2011 ALONGWITH CONFORMATION OF ACCOUNTS, COPIES OF BALAN CE SHEET & PROFIT & LOSS ACCOUNT ALONGWITH COPY OF IT RETURN . THERE IS NO DIFFERENCE IN THE ACCOUNT SENT BY THE PARTY IN T HE ACCOUNT APPEARING IN BOOKS OF ASSESSEE 2. M/S. SPECIALITY MINERALS LTD .:- THE NOTICE U/S 133(6) WAS RECEIVED BY THE PARTY BUT THE SAME WAS NOT COMP LIED FOR THE REASON BEST KNOWN TO THE PARTY. THE ASSESSEE HOWEVE R FILED THE CONFIRMATION OF ACCOUNT RECEIVED BY EMAIL VIDE LETT ER DATED 29.03.2012 (SEE P.B. PAGE NO. 5) . THE NAME OF THE COMPANY WAS CHANGE AND NEW NAME OF THE COMPANY IS 20 MICRON S NANO MINERALS LIMITED. SIMILARLY IN THESE TWO CASES THE ASSESSEE HAS ISSUE D C FORM AGAINST ALL THE INVOICES. THE LD. CIT (A) HAS APPLIED THE PROVISION OF SECTIO N 145(3) ONLY ON THE TECHNICAL GROUND WHICH CAN NOT B E THE DEFECT IN THE EYES OF LAW AND IN THE DECIDED CASE LAW OF I TAT AND HONORABLE HIGH COURT ON THE ONE HAND THE LD. CIT (A) HIMSELF HAS ACCEPTE D THE BASIS OF PAST HISTORY AND ON THE BASIS OF ITAT THAT THE PROVISION IF SECTION 145 (3) ARE NOT APPLICABLE OF A.Y. 2001- 02 (SEE P.B. PAGE NO. 49) SINCE NO DEFECT HAVE BEEN POINTED OUT BY THE AO AS WELL AS CIT (A).THE AO AND CIT (A) HAVE ACCEPTED T HE PRODUCTION AS A RESULT OF THIS THE LD. CIT (A) HAS ACCEPTED THE OPENING STOCK, PURCHASE , SALES & CLOSING STOCK AND LD. CIT (A) HAS NOT POINT OUT SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS AND WITHOUT POINTED OUT ANY DEFECTS IN THE BOOKS OF ACC OUNTS THE PROVISION OF 145(3) CAN NOT BE APPLIED. THE ADDITIO N MADE BY THE CIT (A) IS FLIMSY AND TECHNICALLY GROUND MAY KI NDLY BE DELETED THE ASSESSEE RELIED ON THE FOLLOWING DECISI ONS:- M/S SHREE HARI INDUSTRIES V/S ADDITIONAL CIT RANGE BHARATPUR:- WHERE IT WAS HELD THAT WHERE THE ASSESSE MENTIONED THE COMPLETE BOOK OF ACCOUNT AND A.O HAS NOT FOUND 12 ANY DISCREPANCY IN MAINTAINS OF RECORD AND DAY TO D AY STOCK RECORDS. ASSESSES HAS GIVEN EXPLANATION IN RESPECT OF EACH AND EVERY DISCREPANCY INCLUDING OF FALL IN GP RATE CIT (A) RELIED ONLY THE ORDER OF THE ITAT FOR A.Y. 94-95 BUT DID N OT CONSIDER THE ORDER OF ITAT FOR A.Y. 96-97 AND 97-98 WHERE AP PLICATION OF SECTION 145(3) WAS HELD UNJUSTIFIED. A.O. HAS N OT POINTED OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNT AND HA S NOT BROUGHT ANY EVIDENCE OF UNRECORDED PRODUCTION OR SALE, THE INVOKING OF PROVISION OF SACION 145(3) WAS NOT JUSTIFIED AND HO NBLE ITAT DELETED THE ADDITIONS MALANI RAMJIVAN JAGNNATH V ASSTT. CIT :- WHERE IT WAS HELD THAT MERE DEVIATION IN GP RATE CAN NOT BE A GROUND FOR REJECTING BOOKS OF ACCOUNTS AND ENTERING REALM OF ESTIMATE AN D GUESS WORK WHERE LOWER GP RATE SHOWN IN THE BOOKS OF ACCO UNT DURING CURRENT YEAR AND FALL IN GP RATE WAS JUSTIFIED AND ALSO ADMITTED BY ALL THE LOWER AUTHORITIES. THE REJECTION OF BOOK S OF ACCOUNT WAS THEREFORE, JUSTIFIED NOR RESORT TO SUBSTITUTION OF ESTIMATED GP BY RULE OF THUMB MERELY FOR MAKING CERTAIN ADDITION S. ASSISTANT COMMISSIONER OF INCOME TAX VS. INTERMEDIA CABLES COMMUNICATION (P) LTD :- IT IS A SETTLED LAW, THE SUSPICION, HOWEVER STRONG IT MAY BE, NEVER REPLACES THE SPECIF IC FINDINGS OR EVIDENCE AS THEY UNAMBIGUOUSLY THROW LIGHT ON THE INCOMPLETENESS AND INACCURACY OF THE ACCOUNTS OF T HE ASSESSEE. IT IS NOT THE CASE HERE. THEREFORE, THERE IS NO SCO PE FOR ANY SUCH SURMISES AND SUSPICION IN MATTERS OF REJECTION OF B OOKS OF ACCOUNTS. IT IS THE ONUS ON THE AO TO ENLIST THE DE FECTS OR DISCREPANCIES OR ENTRIES OR FAILURE OF THE ASSESSEE IN MAINTAINING SOME REQUISITE BOOKS IN THE ORDER BEFORE THE BOOKS ARE REJECTED UNDER S. 145(3).AO MIGHT NOT HAVE MENTIONED EXPRESS IVELY THE PROVISION OF S. 145(3) IN THE ORDER BUT THE REQUIRE MENT IS, AO MUST ENLIST THE DEFECTS OR DISCREPANCIES OR INCOMPL ETENESS OR INACCURACIES OF THE ACCOUNTS OF THE ASSESSEE.IN THE INSTANT CASE AO DID NOT BOTHER TO HONOUR THE LAW IN ITS TRUE SPI RIT. THE AO CANNOT RESORT TO ESTIMATION OF INCOME WITHOU T REJECTION OF ACCOUNTS SYSTEMATICALLY MAINTAINED BY THE ASSES SEE FOR ALL THE YEAR UNDER CONSIDERATION AND ALSO WITHOUT INVOKING THE PROVISION OF S.145 AFTER DULY COMPLYING WITH THE CO NDITION SPECIFIED IN THEM. AOORDER DOES NOT CONTAIN A WHIS PER ABOUT 13 THE PROVISION OF S.145 WHILE HE PROCEEDED TO MAKE B EST JUDGMENT ASSESSMENT. THIS IS NOT DONE. THEREFORE, T HE AO MADE BEST JUDGMENT ASSESSMENTS IN THIS CASE ASSUMING JUR ISDICTION UNDER S. 145(3) INVALIDLY. SUCH ASSESSMENTS ARE UNS USTAINABLE .THEREFORE, CIT(A) DID NOT APPROVE THE AOS DECISIO N RIGHTLY AND HE WAS SILENT ON THE ISSUES RELATING TO THE PR OVISION OF S.145 AND REJECTED THE AOS BASIS I.E. 40 PER CENT OF THE ELECTRICITY CONNECTION OF AN AREA. HE FIXED THE ESTIMATION AT 1 0 PER CENT OF THE SAME. THE ESTIMATION OF ANY KIND I.E. 40 PER CE NT OR 10 PER CENT AS THE CASE MAY BE, CANNOT BE APPROVED WHEN TH E BOOKS OF ACCOUNTS OF THE ASSESSEE ARE NOT PROVED FAULTY ON F RONTS OF ACCURACY OR INCOMPLETENESS. IT IS A TRITE LAW THAT THE ONUS IS HEAVILY ON THE AO WHEN THE BOOKS ARE NOT TO BE REJE CTED AND THE INCOME OF THE ASSESSEE IS ESTIMATED UNLESS, THE ACC OUNTS ARE REJECTED FOR EXPRESS REASONS, WHICH IS NOT THERE IN THIS CASE, AND CORROBORATED BY THE CONCLUSIVE EVIDENCE, IN CONSEQU ENTI, ANY DECISION ON THE ESTIMATION OF INCOME IS UNSUSTAINAB LE IN LAW. THEREFORE, THE REJECTION OF THE BOOKS OF ACCOUNTS I MPLIEDLY MADE BY THE AO AS CONFIRMED BY THE CIT(A) IS NOT PROPER AND THEREFORE CANCELLED. IN CONSEQUENTI, THE ESTIMATION OF INCOME MADE BY THE AO FOR ALL SEVEN ASSESSMENT YEARS ADOPT ING 40 PER CENT OF THE ELECTRICITY CONNECTIONS OF THE AREA AS THE BASIS HAS TO BE DISMISSED. MADNANI CONSTRUCTION CORPORATION (P) LTD. VS. CIT (2008)296 ITR 45 (GAU) WHEN THE AO HAS NEITHER EXPRESSED HI S DISSATISFACTION ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOU NTS NOR ANY ERROR IS POINTED OUT IN P&L A/C AND AUDITED REPORT, THE POWERS OF BE ST JUDGMENT CANNOT BE INVOKED. ASHOKE REFRACTORIES (P) LTD VS. CIT (2005) 199 CTR (CAL) 115 : (2005) 279 ITR 457 (CAL) WITHOUT FORMATION OF OPINION THAT THE ACCOUNTS MAINTAINED BY THE ASSESSEE WERE NOT CORRECT OR COMP LETE OR THAT INCOME COULD NOT BE DEDUCED FROM THE BOOKS O F ACCOUNTS, THE ASSESSEES BOOKS OF ACCOUNTS CANNOT BE REJECTED AND SUCH A REJECTION IS PERVERSE AND VOID. 14 INTERNATIONAL FOREST CO. VS. CIT 1975 CTR (J&K) 88 : (1975) 101 ITR 721 (J&K) ACCOUNTS CANNOT BE REJECTED MERELY ON THE GROUND TH AT THE SUMMONS ISSUED TO PARTIES WERE EITHER RETURNE D UNSERVED OR NO COMPLIANCE WAS MADE WHERE THE ASSESSEE HAS M AINTAINED PROPER BOOKS OF ACCOUNTS AND THEY WERE AUDITED UND ER S. 44AB AND WERE PRODUCED BEFORE THE AO IN WHICH NO OT HER DEFECT WAS FOUND. DY. CIT VS. ASSOCIATED PETROLEUM CORPORATION (2011) 44 SOT 45 (AHD) WITHOUT POINTING OUT ANY DEFECT, THE AO CANNOT RESO RT TO REJECTION OF BOOKS AND WITHOUT REJECTION BOOKS OF ACCOUNTS, AO CANNOT ESTIMATE THE PROFITS. CIT VS PARADISE HOLIDAYS (2010) 48 DTR (DEL) 349 : (2010) 325 ITR 13 COMMISSIONER OF INCOME-TAX-IV VS SYMPHONY COMFORT SYSTEM LTD OCTOBER 1 , 2012 :- IT WAS HELD ON ESTIMATION OF INCOME (GROSS PROFIT RATE ) ASSESSMENT YEAR 2005-06 .- ASSESSING OFFICER NOTICED THAT THERE WAS FALL IN GROSS PROFIT RATE DECLARED BY ASSESSEE AS COMPARE T PRECEDING YEAR AND HE MADE AD DITION ON ACCOUNT OF LOW GP RATE TO ASSESSEE INCOME HOWEVER NO SPECIFIC DEFECT IN MAINTAIN OF BOOKS OF ACCOUNT BY THE ASSESSEE HAD BEEN POINTED OUT BY ASSESSING OFFICER WHETHER ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING BOOKS RESULT S AND ENHANCING GROSS PROFIT COMMISSIONER OF INCOME-TAX VS GOTAN LIME KANIJ UDHY OG ON 21 JULY, 2001 :- IT WAS HELD ON POINT NO. 7 BOTH THESE PROVISIONS DO NOT ENVISAGE THAT BY RESORTING TO BES T JUDGMENT ASSESSMENT, THE ASSESSING AUTHORITY MUST REACH A DI FFERENT FIGURE OF INCOME AND PROFIT THAN WHAT HAS BEEN DISCLOSED B Y THE ASSESSEE. BEST JUDGMENT IS ALSO TO BE BASED ON THE MATERIAL AVAILABLE ON ROAD. THEREFORE, NOTWITHSTANDING THE R EJECTION OF THE BOOKS OF ACCOUNT, THE MATERIAL DISCLOSED BY THE ASSESSEE ALONG WITH OTHER MATERIAL THAT MAY BE COLLECTED BY THE INCOME 15 TAX OFFICER FORMS THE BASIS OF COMPUTATION OF INCOM E. ON THAT BASIS WHAT CONCLUSIONS ARE TO BE REACHED IS INDEPEN DENT OF THE RESULTS SHOWN IN THE BOOKS OF ACCOUNTS, IF ANY MAIN TAINED BY THE ASSESSEE SECTION 145 ONLY PROVIDE THE BASIS ON WHIC H COMPUTATION OF INCOME IS TO BE MADE FOR THE PURPOSE OF DETERMINING THE AMOUNT OF TAX PAYABLE BY AN ASSESSE E. THE PROVISION BY ITSELF DOES NOT DEAL WITH ADDITION OR DELETION IN THE INCOME. THEREFORE MERELY BECAUSE THERE IS SOME DEFI CIENCY IN THE BOOKS OF ACCOUNTS OR MERELY BECAUSE OF REJECTIO N OF THE BOOKS OF ACCOUNTS IT DOSE NOT MEAN THAT IT MUST LEA D NECESSARILY TO ADDITION IN THE RETURNED INCOME OF ASSESSEE. WHA T CHANGES IN EITHER CASE IS THE BASIS FOR COMPUTING THE INCOME C HARGEABLE UNDER THE HEAD PROFIT AND GAIN OF BUSINESS OR PROF ESSION OR INCOME FROM OTHER SOURCES. THE RESULT WOULD DEPEND ON THE OTHER PRINCIPLES OF COMPUTING THE INCOME. THEREFORE , WE HOLD THAT MERELY CHANGING THE BASIS OR METHOD OR ARRIVIN G AT THE END RESULT OF WORKING OUT THE COMPUTATION OF TAXABLE IN COME UNDER THE INCOME TAX ACT, NECESSARILY DOSE NOT RESULT IN DEVISING PROFIT OR GAIN FROM BUSINESS OR OTHER SOURCES DIFFERENT FR OM ONE RETURNED BY THE ASSESSEE, WHERE HE HAS RETURNED HIS INCOME AND DIFFERENT FROM THE RESULT REACHED BY THE ASSESSEE A S PER THE METHOD OF ACCOUNTING EMPLOYED BY HIM, BY ADOPTING A DIFFERENT BASIS BY THE ASSESSEE AUTHORITY. IT WAS HELD ON POINT NO. 11 LIKEWISE THE APPEAL OF THE REVENUE BEFORE THE TRIBU NAL HAS BEEN REJECTED ON THE GROUND OF HAVING INVOKED THE PROVIS ION OF SECTION 145 BY ADOPTING A METHODOLOGY OF HIS OWN. T HE ASSESSING OFFICER BY REJECTING THE EXPLANATION FURN ISHED BY HIM FOR RETURNING THE INCOME AT THE REDUCED GROSS PROFI T RATE HAS MADE ADDITION ON ESTIMATE BASIS. THE COMMISSIONER O F INCOME TAX(APPEALS) WHILE SUBSTANTIALLY ACCEPTING THE EXPL ANATION FURNISHED BY THE ASSESSEE FOR REDUCTION IN GROSS PR OFIT RATE OVER ITS TURNOVER DURING THE YEAR IN QUESTION, WAS JUSTI FIED IN NOT SUSTAINING THE ADDITION MADE BY THE INCOME TAX OFFI CER AND HAVING COME TO THAT CONCLUSION THE FORMATION OF EST IMATION FELL WITHIN THE DOMAIN OF THE COMMISSIONER OF INCOME-TAX (APPEALS) THE PART OF THE ORDER OF THE INCOME-TAX APPELLATE T RIBUNAL, IN OUR OPINION, DOES NOT GIVE RISE TO ANY QUESTION OF LAW. DCIT VS.ASSOIATED STON INDUSTRIES LIMITED 22 TW 155 (JP) . WHERE IT WAS HELD THAT WITHOUT POINTING OUT ANY SPE CIFIC 16 DEFECT IN THE ACCOUNT BOOKS OR BRINGING ON RECORD INSTANCES OF UNRECORDED PRODUCTION OR UN RECORDED SALE, BOOKS O F ACCOUNTS CAN NOT BE REJECTED BY APPLYING PROVISION OF SECTIO N 145(3). AMBIKA TEXTILE INDUSTRIES VS.DCIT22 TW 199(JP) IT WAS HELD THAT HUGE TRADING ADDITION CAN NOT MADE WITHOU T POINTING OUT ANY DEFECT IN BOOKS OF ACCOUNTS. VADAYATTU JEWELLERY VS. STATE OF KERALA (1997) 104 STC 121, 126 (KER) , IT WAS HELD THAT REJECTION OF ACCOUNTS IS NOT J USTIFIED WHERE THE DEFECTS POINTED OUT IN THE BOOKS OF ACCOU NTS WERE OF GENERAL AND TECHNICAL NATURE, OBJECTIONS OF THE DEA LER NOT CONSIDERED REGISTERS PRODUCED WERE NOT VERIFIED AND NOT SUOPERVISION OF SALES OR PURCHASE WAS ESTABLISHED. ST TERESA OIL MILLS VS. STATE OF KERALA (1970) 76 I TR 365 (KER) :- ACCOUNT REGULARLY MAINTAINED IN COURSE BUSINESS HAVE TO BE TAKEN AS CORRECT UNLESS THERE ARE STRONG AND SUF FICIENT REASONS TO INDICATE THAT THEY ARE UNRELIABLE. THE DEPARTMEN T HAS TO PROVE SATISFACTORILY THAT THE ACCOUNTS BOOKS ARE UNRELIAB LE, INCOORECT OR INCOMPLETE BEFORE IT CAN NOT BE REJECT THE ACCOUNTS . REJECTION SHOULD NOT BE DONE LIGHT. 3.5 ON THE OTHER HAND, THE LD. DR HAS TRIED TO JUST IFY AND SUPPORT THE ACTION OF THE LD. CIT(A). 3.6 AFTER CONSIDERING THE ABOVE, WE HAVE FOUND THAT WITHOUT PINPOINTING ANY DEFECT MUCH LESS ANY MATERIAL DEFECT IN THE BOO KS OF ACCOUNT OF THE ASSESSEE REGULARLY MAINTAINED, PROVISION OF SECTION 145(3) OF THE ACT CANNOT BE INVOKED. WE DRAW SUPPORT FROM THE DECISION RELIE D ON BY THE LD. AR IN HIS WRITTEN SUBMISSION. ACCORDINGLY, WE ARE OF THE CONSIDERED OPINION THAT PROVISION OF SECTION 145(3) OF THE ACT HAS BEEN WRO NGLY INVOKED. THEREFORE, 17 ANY ADDITION MADE AS A CONSEQUENCE OF INVOKING OF S ECTION 145(3) HAS TO GO. WE HOLD ACCORDINGLY AND ALLOW THIS APPEAL ITA NOS.942/JP/2012-ASSESSEE AND 26/JP/2013 REVENU E (A.Y.2009-10) 4.1 THESE ARE THE CROSS APPEALS WHICH HAVE BEEN FIL ED AGAINST THE ORDER OF THE LD. CIT(A)-II, JAIPUR DATED 16-10-2012 5.1 THE BRIEF FACTS OF THE CASE ARE THAT CERAMIC IN DUSTRIES WAS A PARTNERSHIP FIRM. IT WAS CONVERTED INTO A PRIVATE C OMPANY DURING THE YEAR. THE PARTNERS OF THE FIRM BECAME THE SHARE HOLDERS O F THE COMPANY. IN THIS YEAR, THE ASSESSEE HAS DECLARED GROSS PROFIT OF RS. 7,45,50.196/- ON TURNOVER OF RS. 34,77,30,020/- GIVING A GROSS PROFIT RATE 21 .44$ AND NET PROFIT OF RS. 82,12,453/- WHICH COMES TO NET PROFIT RATE OF 2.39 %. THE COMPARABLE CHART OF THE RATES FOR THE LAST THREE YEARS IS AS UNDER:- F.Y. PERCENTAGE TURNOVER (RS.) GROSS PROFIT (RS.) 2008-09 21.44% 34,77,30,020/- 7,45,50,196/- 2007-08 22.59% 36,45,39,389/- 8,23,40,403/- 2006-07 24.64% 29,44,37,868/- 7,25,47,521/- DURING THE ASSESSMENT PROCEEDINGS, THE BOOKS OF ACC OUNT WERE EXAMINED ON TEST CHECK BASIS. THE AO FOUND FOLLOWING DISCREPANC IES IN THEM. 1. THE ASSESSEE HAS CLAIMED LOSS @ 37.02% 2. THE PURCHASES MADE FROM SISTER CONCERNS WERE NO T FOUND IN ORDER. 3. THE JOB CHARGES PAID TO SISTER CONCERN WERE NOT FOUND COMPARABLE. 18 4. NO RECORD REGARDING PURCHASE OF FINISHED GOODS FROM ITS SISTER CONCERN WHICH WERE SOLD AFTER MAKING SOME DE CORATION THEREON. 5. NO RECORD IS MAINTAINED SEPARATELY REGARDING INTERMEDIARY PROCESSES IN VIEW OF THE ABOVE AND AFTER CONSIDERING THAT THE AO REJECTED THE BOOKS IN ASSESSEE'S SISTER CONCERNS NAMELY BHARAT POTTERIES (P) LTD. FOR THE ASSESSMENT YEAR 2004-05 (P) LTD. ON THE BASIS OF TH E RECORD OBTAINED BY THE DEPARTMENT REGARDING WASTAGE FROM CENTRAL GLASS AND CERAMIC INSTITUTE CALCUTTA. AS PER THIS REPORT, THE WASTAGE HAS TO BE ADOPTED @ 20%. AFTER MENTIONING THESE DEFECTS/ DEFICIENCIES, THE AO HAS REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE U/S 145(3) OF THE ACT. IT W AS STATED ON BEHALF OF THE ASSESSEE THAT THE ISSUE INVOLVED IN THIS APPEAL STA NDS COVERED BY THE ITAT ORDER REGARDING RATIO OF WASTAGE. HOWEVER, THE LD. CIT(A) HAS ALSO CONFIRMED THE IMPUGNED ADDITION OF RS. 5,93,70,607/ - AND HAS BEEN ADDED AS UNACCOUNTED INCOME. 5.2 AGGRIEVED AGAINST THE ABOVE ADDITION, THE ASSES SEE PREFERRED AN APPEAL AND THE LD. CIT(A) HAS GIVEN A PART RELIEF BY SUBST ITUTING THE TRADING ADDITION OF RS. 5,93,70,607/- BY RS. 20,45,868/- . 5.3 AS A RESULT OF THIS FINDINGS, BOTH THE PARTIES ARE AGGRIEVED AND HAVE COME IN APPEAL BEFORE US. 19 5.4 THE ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. WHETHER IT IS OPEN TO THE CIT (A) TO MAKE OUT A NEW CASE FOR APPEAL BY TAKING UP GROUNDS OR ARGUMENTS INDULGE IN GUESSES AND CONJECTURES WHICH THE ASSESSEE NEVER RAISED BEFORE THE CIT(A). THE LD. C IT(A) DELETED THE ADDITION OF RS. 5,93,70,607/- MADE BY A O BY APPLYING THE WASTAGE OF 25% AND APPLIED GROSS PROFI T RATE OF 22.20% DECLARED BY THE ASSESSEE MADE A TRADING ADDITION OF RS. 26,45,868/- 2. THE LD. CIT(A) CONFIRMED THE APPLICATION OF PROVISION OF SECTION 145(3) WITHOUT POINTING OUT AN Y SPECIFIC DEFECTS IN THE METHOD OF ACCOUNTING AND ST OCK REGISTER AND PRODUCTION REGISTER ETC. EXCEPT THE LO W GROSS PROFIT RATE. (3) (A) THE LD. CIT(A) WENT WRONG IN APPLYING THE GROSS PROFIT RATE OF 22.20% WHICH IS ARBITRARY BASED ON GUESSES AND CONJECTURES WITHOUT GIVING ANY OPPORTUNITY TO THE APPELLANT. (B) WHETHER THE LD. CIT(A) WAS JUSTIFIED IN APPLYING GROSS PROFIT RATE 22.20% AS AGAINST GROSS PROFIT RATE OF 21.44% DECLARED BY THE ASSESSEE AND ACCEPTE D BY THE AO IS BASED ON AN OBVIOUS MISTAKE. 5.5 THE REVENUE HAS RAISED THE FOLLOWING GROUND:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN RESTRICTING THE TRADING ADDITION TO RS. 26,45,868/- AGAINST RS. 5,93,70,607/- MADE BY THE AO WITHOUT APPRECIATING T HAT THE ESTIMATION OF WASTAGE MADE BY THE AO WAS ON THE BASIS OF REPORT OF CGRI WHICH IS AN INDEPENDENT AGE NCY HAVING EXPERTISE IN THE RELATED FIELDS. 5.6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED ENTIRE RECORD. IN FACT, THE MAIN ISSUE RAISED BY THE ASSES SEE BY TAKING AS MUCH AS 20 THREE GROUNDS AND THE GROUNDS OF THE REVENUE ARE IN RESPECT OF ONE ISSUE RELATING TO APPRECIATION OF THE REPORT OF CGRI WHIC H IS AN INDEPENDENT AGENCY OF HAVING EXPERTISE IN THE RELATED FIELD. TH E SUBMISSIONS OF THE PARTIES ARE EXACTLY SIMILAR TO WHAT WAS TAKEN IN AS SESSMENT YEAR 2008-09 WHEN THIS COMPANY WAS HAVING A STATUS OF FIRM. AS P ER THE LD. AR, THIS ISSUE STANDS FULLY COVERED BY THE ORDER OF THE TRIBUNAL A S DISCUSSED AND STATED IN EARLIER ASSESSMENT YEAR. 5.7 PER CONTRA, THE LD. DR HAS REPEATED THE REASONS GIVEN BY THE AO IN MAKING THE IMPUGNED ADDITION. 5.8 AFTER CONSIDERING THE RIVAL SUBMISSIONS AND TRE ADING THROUGH ENTIRE RECORD INCLUDING THE TRIBUNAL ORDERS REFERRED BY TH E LD. AR , WE HAVE FOUND THAT NO SPECIFIC DEFECT MUCH LESS ANY MATERIAL DEFE CT HAS BEEN POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNT OF THE ASSESSEE DULY MAINTAINED DURING THE COURSE OF THIS REGULAR BUSINESS. THE OTHER ISSUES R EGARDING ADOPTION OF A PARTICULAR GROSS PROFIT RATE IS NOT TENABLE IN THE EYES OF LAW IN VIEW OF THE REASONS MENTIONED IN THE CASE OF THE FIRM AS IT WAS IN ASSESSMENT YEAR 2008- 09, AS ABOVE. THE FACTS AND LEGAL POSITION REGARDIN G THE PURCHASES MADE FROM DIFFERENT 10 PARTIES ARE MUTATIS MUTANDIS, SAM E AND SIMILAR IN SEPARATE SPIRIT. THEREFORE, BY FOLLOWING THE TRIBUNAL ORDER IN THE FORMER PART OF THIS ORDER, WE ARE OF THE CONSIDERED OPINION THAT NO TRA DING ADDITION CAN BE MADE IN THE HANDS OF THE COMPANY ON ACCOUNT OF TRADING ACTIVITIES. ACCORDINGLY, 21 WE DELETE THE ENTIRE ADDITION SO MADE BY THE AO. AS A RESULT, WE ALLOW THE APPEAL OF THE ASSESSEE AND DISMISS THE APPEAL OF TH E REVENUE. 6.0 IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED AND THAT OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30-01-2014. SD/- SD/- (.N.K. SAINI) (HARI OM MARATHA) ACCOUNTANT MEMBER JUDICIAL MEMEBR JAIPUR DATED: 30 TH JAN 2014 *MISHRA COPY FORWARDED TO:- BY ORDER 1. M/S. CERMAIC INDUSTRIES, JAIPUR 2. M/S. CERAMIC TABLEWARE (P) LTD., JAIPUR 3. THE ACIT CIRCLE- 4, / JCIT CIRCLE- 4, JAIPUR 4. THE LD. CIT(A) 5. THE LD. CIT 6. THE DR 7. THE GUARD FILE (IT NO. 460/JP/12) A.R., ITAT, JAIPUR 22 23