SHRI RAM GOPAL SONI, JAIPUR V. ASSISTANT COMMISSIONER OF INCOME TAX, SIKAR

ITA 48/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8526 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 12-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MEENA ACIT
• Keywords: Rejection of books of accounts; Corroborative evidences; Set aside

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 48/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2013-14 SHRI RAM GOPAL SONI PROP. BHAGWATI JEWELLERS 201, OPP. KAMLA NEHRU SCHOOL, JAIPUR. CUKE VS. THE ACIT, CIRCLE, SIKAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ADTPS 9174 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI VIJAY GOYAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI K.C. MEENA (ACIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING :26/03/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 10/04/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 02.11.2017 OF THE LD. CIT (A), JAIPUR FOR THE ASSES SMENT YEAR 2013-14. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE REJECTION OF BOOKS OF ACCOUNT MADE BY LD. AO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE TRADING ADDI TION OF RS. ITA NO. 48/JP/2018 SHRI RAM GOPAL SONI VS. ACIT 2 40,86455/- MADE BY LD. AO BY ESTIMATING THE GROSS P ROFIT BY APPLYING UP RATE OF 0.24% AS AGAINST 0.11% DECLARED BY ASSESSEE ON THE DECLARED TURNOVER OF THE ASSESSEE. 3. THE ASSESSEE PRAYS FOR LEAVE TO ADD, TO AMEND, T O DELETE, OR MODIFY THE ALL OR ANY GROUNDS OF APPEAL ON OR BEFOR E THE HEARING OF APPEAL. 2. GROUND NO. 1 IS REGARDING REJECTION OF BOOKS OF ACCOUNTS BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE IT ACT. THE ASSESSEE IS A TRADER OF GOLD AND SILVER BARS/BULLIONS. THE ASSE SSEE E-FILED HIS RETURN OF INCOME 29.09.2013 DECLARING TOTAL INCOME OF RS. 23,28,020/-. DURING THE SCRUTINY ASSESSMENT THE AO OBSERVED THAT MOST O F THE SALES WERE MADE IN CASH FOR WHICH NOT PROPER RECORD OF THE BUY ERS HAVE BEEN MAINTAINED. ACCORDINGLY, THE AO ISSUED A SHOW CAUSE NOTICE VIDE LETTER DATED 29.01.2016 AND ASKED THE ASSESSEE TO EXPLAIN THE DECLINED GP RATE DURING THE YEAR UNDER CONSIDERATION AND FURTHE R TO FURNISH COMPLETE VOUCHERS OF EXPENSES AND IN THE ABSENCE OF THE SAME AS TO WHY THE BOOKS OF ACCOUNTS SHOULD NOT BE REJECTED BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. THE ASSESS EE FILED THE REPLY AND OBJECTED TO THE REJECTION OF BOOKS OF ACCOUNTS. THE AO DID NOT ACCEPT THE REPLY OF THE ASSESSEE AND HELD THAT IT IS A FIT CASE FOR INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. ACCORDINGL Y, THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE REJECTED AND INCOME O F THE ASSESSEE WAS ITA NO. 48/JP/2018 SHRI RAM GOPAL SONI VS. ACIT 3 ESTIMATED ON THE BASIS OF GP RATE 0.24% AS AGAINST DECLARED GP RATE 0.11%. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. 3. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE ASSESSEE MAINTAINED COMPLETE BOOKS OF ACCOUNT-CASH BOOK, LEDGER, JOURNAL, PURCHASES AND SALES REGISTER. THE ASSESSEE HAS ALSO PRODUCED BANK ACCOUNTS AND DAY TO DAY STOCK REGISTER WITH SU PPORTING VOUCHERS DULY AUDITED BY THE AUDITOR. ALL THE PURCHASES AND SALES ARE COMPLETELY VOUCHED AND SUPPORTED BY DAY TO DAY STOCK DETAILS W HICH WERE PRODUCED FROM TIME TO TIME DURING THE COURSE OF ASS ESSMENT PROCEEDINGS. THE AO DULY INSPECTED AND VERIFIED ALL THESE DETAILS ON TEST CHECK BASIS AND NO DEFECT OR DISCREPANCY WAS POINTE D OUT. THE OPENING STOCK, PURCHASES AND CLOSING STOCK AS DECLARED BY T HE ASSESSEE WERE ACCEPTED BY THE AO AS CORRECT. THEREFORE, THE ASSES SEE PRODUCED ALL THE RELEVANT DETAILS AND DOCUMENTS WITH COMPLETE BOOKS OF ACCOUNTS FOR THE EXAMINATION AND VERIFICATION OF THE AO. THE ASSESSE E ALSO EXPLAINED THE REASONS FOR DECLINE IN GP RATE DUE TO NEAR ABOUT 50 0% INCREASED IN THE TURNOVER DURING THE YEAR UNDER CONSIDERATION AND FU RTHER DUE TO A VERY HIGH VARIATION IN THE PRICE OF GOLD AND SILVER DURI NG THE YEAR. THE AO WITHOUT POINTING OUT ANY SPECIFIC DEFECTS IN THE BO OKS OF ACCOUNTS HAS ITA NO. 48/JP/2018 SHRI RAM GOPAL SONI VS. ACIT 4 REJECTED ONLY ON PRESUMPTION AND GENERAL OBJECTIONS . THE LD. AR HAS FURTHER CONTENDED THAT BOOKS OF ACCOUNTS CANNOT BE REJECTED ON THE GROUND OF CASH SALES MORE SO WHEN THE QUANTITY OF S ALES ARE AVAILABLE IN STOCK REGISTER AND VALUE OF THE GOODS SOLD IS VERIF IABLE FROM MARKET QUOTATION. THE ASSESSEE HAS SOLD GOODS ON CREDIT AN D AS WELL ON CASH, A COMPLETE RECORD OF THE CUSTOMERS IS MAINTAINED IN R ESPECT OF THE GOODS WERE SOLD ON CREDIT BASIS BUT FOR THE GOODS SOLD TO CUSTOMER ON CASH, THERE IS NO NEED TO MAINTAINED THE NAME, ADDRESS AN D PAN NUMBER OF THE CUSTOMERS. THIS IS PRACTICE IS FOLLOWED TO AVOI D UNNECESSARY LABOUR AS WELL AS MAINTAINING OF RECORD. EVEN OTHERWISE AS PER RULES 114B OF THE INCOME TAX RULES QUOTING OF PAN IN RELATION TO SALE OR PURCHASE OF GOODS OR SERVICES WHERE THE TRANSACTION AMOUNT IS E XCEEDING TO RS. 2,00,000/-. THE ASSESSEE HAS NOT VIOLATED THE SAID RULES AND THEREFORE, THIS CANNOT BE A REASON FOR REJECTION OF BOOKS OF A CCOUNT. THE LD. AR HAS FURTHER SUBMITTED THAT THE AO HAS ALSO GIVEN A REASON FOR NON VERIFIABLE EXPENSES WHEREAS THE ASSESSEE HAS NOT DE BITED ANY EXPENDITURE IN THE TRADING ACCOUNT EXCEPT THE PURCH ASES WHICH WERE FULLY VERIFIABLE. THEREFORE, THE REASONS ASSIGNED B Y THE AO FOR REJECTION OF BOOKS OF ACCOUNTS ARE CONTRARY TO THE RECORD. TH E PURCHASES MADE DURING THE YEAR ARE ENTERED IN THE INWARD OF THE ST OCK REGISTERED AND ITA NO. 48/JP/2018 SHRI RAM GOPAL SONI VS. ACIT 5 THE SALE MADE BY THE ASSESSEE ARE MENTIONED IN THE OUTWARD COLUMN OF THE STOCK REGISTER AND THE REMAINING BALANCE AFTER CONSIDERING THE OPENING STOCK IS STOCK IN HAND. THEREFORE, THERE IS A COMPLETE RECONCILIATION OF THE ENTRIES IN THE STOCK REGISTER AND THE OBSERVATION OF THE AO IS CONTRARY TO THE RECORD. THE ASSESSEE HAS FURNISHED THE DETAILS OF SUPPLIERS FROM WHOM PURCHASES WERE MADE ALONG WI TH COPY OF ACCOUNTS AS WELL AS CONFIRMATIONS IN RESPECT OF CRE DIT SALES WERE ALSO PRODUCED BEFORE THE AO. THUS, THE LD. AR HAS SUBMIT TED THAT THE ASSESSEE HAS PRODUCED ALL THE REQUISITE DETAILS, DO CUMENTS, SUPPORTING EVIDENCE, BOOKS OF ACCOUNTS AND STOCK REGISTER TO S HOW THAT ALL THE TRANSACTIONS OF SALES AND CLOSING STOCK ARE FULLY V ERIFIABLE. THE ASSESSEE IS FOLLOWING PROPER METHOD OF ACCOUNTING IS MAINTAI NING THE BOOKS OF ACCOUNTS REGULARLY WHICH ARE AUDITED THEREFORE, IN THE ABSENCE OF ANY SPECIFIC DEFECTS THE GENERAL OBSERVATION OF THE AO CANNOT BE A REASON FOR REJECTION OF BOOKS OF ACCOUNT. IN SUPPORT OF HI S CONTENTION, HE HAS RELIED UPON THE DECISION IN CASE OF MALANI RAMJIVAN JAGANNATH VS. ACIT 316 ITR 120 (RAJ.) AS WELL AS DECISION OF HONBLE D ELHI HIGH COURT DATED 07.05.2010 IN CASE CIT VS. SMT. POONAM RANI IN ITA NO. 406/2009 AND SUBMITTED THAT THE DECLINE IN THE GP RATE FOR THE Y EAR UNDER ITA NO. 48/JP/2018 SHRI RAM GOPAL SONI VS. ACIT 6 CONSIDERATION CANNOT BE A REASONS FOR REJECTION OF BOOKS OF ACCOUNTS TO HOLD THAT THE BOOKS ARE NOT CORRECT. 4. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE ASSESSING OFFICER HAS GIVEN A SPECIFIC FINDING THAT THE ASSES SEE IS UNABLE TO RECONCILE THE QUANTITIES HANDLED AS BETWEEN PURCHAS E AND SALES BECAUSE NO QUANTITATIVE ACCOUNTS ARE MAINTAINED. TH EREFORE, THE ACCOUNTS ARE TO BE TAKEN AS UNPROVED SO THAT THE IN COME RETURNED MAY BE REJECTED AND INCOME BE ESTIMATED BASED ON THE RE ASONABLE CRITERIA BEING THE AVERAGE OF GP DECLARED IN PAST. HE HAS RE LIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER AFTER OBS ERVING THAT THE ASSESSEE HAS MADE CASH SALES AND COMPLETE DETAILS O F THE PURCHASERS WERE NOT MAINTAINED BY THE ASSESSEE HAS ISSUED A SH OW CAUSE NOTICE IN PARA 3.1 AS UNDER:- 3.1 VIDE THIS OFFICE LETTER DATED 29/01/2016, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS UNDER:- ON EXAMINATION OF BOOKS OF ACCOUNTS SUBMITTED DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS IT IS NOTICED THAT ON GROSS TURNOVER/SALE OF RS. 3,34,82,56,893/-, GROSS PROFIT HAS BEEN DECLARED AT RS. 39,49,362/- THIS GIVE G.P. RATE OF 0.11% AS AGAINST 0.37% DECLARED IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. FURTHER IT IS NOTICES THAT MOST OF THE SALES HAVE BEEN MADE IN CASH AND YOU HAVE NOT FURNISHED COMPLETE VOUCHER S OF ITA NO. 48/JP/2018 SHRI RAM GOPAL SONI VS. ACIT 7 EXPENSES THEREFORE THE PROFIT DEPENDING ON BOOKS OF ACCOUNTS CANNOT BE DEDUCTIBLE AND ALSO NOT GIVING TRUE AND C ORRECT FIGURES OF TRADING RESULTS AND THEREFORE SHOW CAUSE AS TO W HY BOOKS OF ACCOUNTS MAY NOT BE REJECTED BY INVOKING PROVISIONS OF SECTION 145(3) OF THE ACT. IN REPLY TO THE SAID SHOW CAUSE NOTICE THE ASSESSEE MADE THE SUBMISSIONS WHICH WERE REPRODUCED BY THE AO IN PARA 3.2 OF THE ASSESSMENT ORDER AS UNDER:- 3.2 IN REPLY TO ABOVE QUERY THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS STATING THEREIN THAT:- 1.(I) ASSESSEE MAINTAINED COMPLETE BOOKS OF ACCOUN TS----- WHICH ARE DULY AUDITED. (II)PURCHASES ARE COMPLETELY VOUCHED. DETAILS OF SU PPLIERS FROM WHOM PURCHASES WERE MADE WITH DULY CONFIRMED COPY O F ACCOUNTS (MAJOR ACCOUNTS) WERE SUBMITTED DURING COURSE OF AS SESSMENT PROCEEDINGS. (III) SALES ARE COMPLETELY VOUCHED. CONFIRMATIONS O F ACCOUNTS OF SOME OF THE PURCHASERS AND SOME CASH SALES BILLS WE RE SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. (IV) DETAILS OF MONTHLY PURCHASES, SALES AND CLOSIN G STOCK IN QUANTITY AND VALUE WERE SUBMITTED DURING THE COURSE OF ASSES SMENT PROCEEDINGS. (V) ONLY FOR THE REASONS THAT G.P. RATE IS LOW FROM EARLIER YEAR BOOKS CANNOT BE REJECTED. (VI) THERE IS NO EXPENSED IN TRADING ACCOUNT EXCEPT PURCHASES WHICH ARE FULLY VERIFIABLE. ALL THE BOOKS OF ACCOUNTS PURCHASES AND SALES VOUCH ERS WERE PRODUCED FROM TIME TO TIME WHICH WERE EXAMINED AND VERIFIED. NO SPECIFIC DEFECT AS TO THE TRADING RESULTS WAS NOTIC ED/POINTED OUT. HENCE BOOKS OF ACCOUNTS ARE NOT LIABLE TO BE REJECT ED. ITA NO. 48/JP/2018 SHRI RAM GOPAL SONI VS. ACIT 8 2. REASONS FOR LOW G.P. WERE EARLIER SUBMITTED DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS MAY KINDLY BE CONSIDER. 3. ASSESSEE ACHIEVED TOTAL TURNOVER 3348256893 ON O PENING CAPITAL RS.2432900/- AND BANK OD LIMIT OF RS.8000000/- WITH OUT PAYMENT OF INTEREST OTHER THAN ON BANK OD ACCOUNT. MONEY CIRCULATION IS IMPORTANT PART OF BUSINESS WIT HOUT EARLY PAYMENT OF SALES CONSIDERATION--------- 4. BOOKS OF ACCOUNTS ARE MAINTAINED IN REGULARLY EM PLOYED METHOD OF ACCOUNTING IN A WAY THAT A.O. CAN DEDUCE TRUE AN D CORRECT INCOME. SUCH BOOKS CANNOT BE REJECTED ON PRESUMPTIO NS-HISTORY OF PAST YEARS IS TO BE CONSIDERED. AS HELD IN M/S THE GANPATI GEMS AND APRT VS ACIT, ITAT JAIPUR BENCH JAIPUR (2014) T W. VOLUME 51 PART-V PAGE 300. IN ASSESSMENT YEAR 201-12 ON TO TAL SALES RS.564274514/- G.P. RATE DECLARED WAS 0.28% WHICH W AS ACCEPTED IN ASSESSMENT UNDER SECTION 143(3). IN ASSESSMENT O F ASSESSMENT YEAR 2012-13 TRADING RESULTS WERE ACCEPTED IN ASSES SMENT U/S 143(3). 5. EVEN AFTER APPLYING THE PROVISIONS OF SECTION 14 5, TRADING ADDITIONS MADE CAN BE DELETED IN ITS ENTIRETY AS H ELD IN CIT VS GOTAN LIME KHANIJ UDHYOG-RAJ.H.C. (2001)T W. VOLUME XXVI PAGE 205. 6. REJECTION OF BOOKS OF ACCOUNT-ESTIMATION OF PROF IT-SUBSTANTIAL INCREASE IN TURNOVER FALL IN GP RATE-WHETHER AO JUS TIFIED IN APPLYING A HIGHER GP, IGNORING THAT, THERE HAS BEEN SUBSTANT IAL INCREASE IN SALE- HELD- NO- ITAT, JAIPUR BENCH JAIPUR CLARITY G OLD(P) LTD VS THE ACIT, T.W. 2014 VOLUME 52 PAGE 23. 7. COMPLETE VOUCHERS OF EXPENSES DEBITED IN PROFIT & LOSS A/C WERE PRODUCED DURING THE COURSE OF HEARING IN WHICH SOME VOUCHERS WERE SELF-MADE. THUS, IN THE SHOW CAUSE NOTICE, THE AO HAS POINTED OUT MAINLY TWO THINGS, ONE IS DECLINE IN THE GP RATE DURING THE YE AR UNDER CONSIDERATION AND SECOND THE SALES HAVE BEEN MADE IN CASH AND ASS ESSEE HAS NOT ITA NO. 48/JP/2018 SHRI RAM GOPAL SONI VS. ACIT 9 FURNISHED COMPLETE VOUCHERS OF EXPENSES. AS REGARDS THE DECLINE IN THE GP RATE THE SAME CANNOT BE A REASON FOR REJECTION O F BOOKS OF ACCOUNTS THOUGH IT CAN BE A REASON FOR VERIFICATION OF THE B OOKS OF ACCOUNTS TO FIND OUT ANY DISCREPANCY OR ABNORMALITY ATTRIBUTING TO THE LOWER GP RATE DECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDE RATION. 6. AS REGARDS THE SALES MADE IN CASH AND NOT FURNIS HING OF THE COMPLETE VOUCHERS OF EXPENSES, THE ASSESSEE IN ITS REPLY HAS SUBMITTED THAT IT MAINTAINED COMPLETE BOOKS OF ACCOUNTS DULY AUDITED. THE PURCHASE ARE COMPLETELY VOUCHED AND DETAILS OF SUPP LIERS FROM WHOM PURCHASES WERE MADE DULY CONFIRMED. THE DETAILS OF MONTHLY PURCHASES AND SALES AND CLOSING STOCK IN QUANTITY AND VALUE W ERE SUBMITTED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. THE ASSES SEE ALSO POINTED OUT THAT THERE IS NO EXPENSES DEBITED IN THE TRADIN G ACCOUNT EXCEPT PURCHASE WHICH ARE FULLY VERIFIABLE. WE FIND FROM T HE RECORD THAT THE ASSESSEE PRODUCED DAILY STOCK OF GOODS AS WELL AS M ONTHLY STOCK SUMMERY OF PURCHASE REGISTER, SALES REGISTER BEFORE THE AO. ONCE, THE DAILY AS WELL AS MONTHLY SUMMARY OF PURCHASE AND SA LE OF STOCK WERE PRODUCED BEFORE THE AO THEN, THE ASSESSEE BEING A T RADER IN BULLION IS NOT ACCEPTED TO GIVE MORE DETAILS AND MAINTAIN SOME OTHER RECORD. IT IS PERTINENT TO NOTE THAT THE ASSESSING OFFICER HAS NO T POINTED OUT THAT ITA NO. 48/JP/2018 SHRI RAM GOPAL SONI VS. ACIT 10 EITHER THE PURCHASES WERE INFLATED OR THE SALES WER E SUPPRESSED BY THE ASSESSEE RATHER THE RATE OF BULLION IS VERIFIABLE F ROM INDEPENDENT SOURCE AS PER MARKET QUOTED RATES AND THEREFORE, THERE IS NO SCOPE OF ANY INFLATION OF PURCHASE OR SUPPRESSION OF SALES IN RE SPECT OF TRADING IN BULLION. FURTHER, THE AO HAS NOT POINTED OUT ANY DI SCREPANCY IN THE DAILY STOCK OF GOODS AS WELL AS MONTHLY STOCK SUMMERY, PU RCHASE AND SALES REGISTER PRODUCED BY THE ASSESSEE. FROM THESE RECOR D AND ACCOUNTS ALL THE TRANSACTIONS OF PURCHASES AND SALES ARE VERIFIA BLE AND THEREFORE, THE REASONS CITED THAT FULL PURCHASES OF THE CASH SALES ASSIGNED BY THE AO FOR REJECTION OF BOOKS OF ACCOUNT WITH PAN NUMBER A RE NOT MAINTAINED BY THE ASSESSEE IS NOT SUSTAINABLE DUE TO THE REASO NS THAT THERE IS NO PROVISION REQUIRING THE ASSESSEE TO TAKE A PAN NUMB ER AND FULL DETAILS OF THE PURCHASER IN RESPECT OF TRADING ACTIVITY WHE N INDIVIDUAL SALE IS NOT EXCEEDING THE SPECIFIED AMOUNT AS PER RULES 114B OF THE INCOME TAX RULES. EVEN OTHERWISE WHEN THE ASSESSEE HAS PRODUCE D THE ENTIRE RECORD INCLUDING THE CONFIRMATION OF PURCHASE AND C OMPLETE RECORD OF THE SALES WITH VOUCHERS THEN THE BUSINESS ACTIVITY OF THE ASSESSEE BEING TRADING IN BULLION AND THE RATE OF ANY POINT OF TIM E OF PURCHASE AND SALE ARE INDEPENDENTLY VERIFIABLE FROM THE MARKET RATES THEN THIS CANNOT BE A REASON FOR REJECTION OF BOOKS OF ACCOUNT. AS REGARD S THE NON FURNISHING ITA NO. 48/JP/2018 SHRI RAM GOPAL SONI VS. ACIT 11 OF VOUCHERS TO VERIFY THE EXPENSES IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAS NOT DEBITED ANY EXPENDITURE IN THE TRA DING ACCOUNT WHICH IS RELEVANT FOR THE PURPOSE OF VERIFICATION OF THE BOOKS FOR INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT AND CONSEQU ENTLY THE INCOME OF THE ASSESSEE WAS TO BE ESTIMATED BY APPLYING THE GP RATE. THUS, THE REASONS CITED BY THE AO ARE NOT BASED ON THE SPECIF IC DEFECTS OR DISCREPANCY IN THE BOOKS OF ACCOUNTS BUT THESE ARE ONLY GENERAL OBSERVATION AND PRESUMPTION/ SURMISES. THE HONBLE JURISDICTIONAL HIGH COURT IN CASE OF MALANI RAMJIVAN JAGANNATH VS. ACIT (SUPRA) HAS HELD IN PARA 10 AND 11 AS UNDER:- 10. IN THE FACE OF THESE UNDISPUTED FACTS AND CIRCUMST ANCES, THE TRIBUNAL IN OUR OPINION COULD NOT HAVE INTERFERED W ITH THE ORDER OF CIT(A). IN DOING SO, IT HAD IGNORED ALL ADMITTED FA CTS NOTICED BY US ABOVE, IN THE FACE OF WHICH THERE WAS NO OCCASIO N FOR THE ASSESSING OFFICER TO HAVE RESORTED TO ESTIMATE METH OD. THE GP IS PRIMARILY RESULT OF EXCESS OF SALES OVER PURCHASES, OPENING STOCK, CLOSING STOCK, THE UNSOLD STOCK AT TWO TERMINALS IS ONLY BALANCING FACTOR. ADMITTEDLY OUT OF THIS FOUR COMPONENTS OF T RADING RESULT, THERE COULD NOT HAVE BEEN ANY GROUND FOR THE REVENU E TO ARRIVE AT DIFFERENT RESULT. SO FAR AS CLOSING STOCK IS CON CERNED, INVENTORIES OF EXISTING STOCK WERE NOT FOUND TO BE INCORRECT BY THE ASSESSING OFFICER I.E. THAT POSITION OF STOCK AS SH OWN IN THE ACCOUNT BOOKS WAS NOT INCORRECT. THERE BEING NO DIS PUTE ABOUT THE SALES AND PURCHASES, NON-MAINTENANCE OF STOCK R EGISTER LOST ITS SIGNIFICANCE SO FAR AS ARRIVING AT GP IS CONCER NED. THEREFORE, THE CIT(A) WAS RIGHT IN HIS REASONING ABOUT ADMITTE D STATE OF AFFAIRS. RESORTING TO ESTIMATE OF GP RATE WAS FOUND ED ON NO ITA NO. 48/JP/2018 SHRI RAM GOPAL SONI VS. ACIT 12 MATERIAL. IT WAS MERELY A CASE OF MAKING CERTAIN AD DITIONS ON THE BASIS OF CERTAIN DEFECTS POINTED OUT BY THE ASSESSI NG OFFICER AND WHICH HE HAS SHOWN IN DIFFERENT ACCOUNT BY GIVING M ARGIN OF UNVOUCHED EXPENSES. HE HAS DISALLOWED CERTAIN EXPEN SES. 11. THE TRIBUNAL COMMITTED BASIC ERROR IN NOT APPRECIA TING THE REASONING GIVEN, BY THE CIT(A). IT IS TRITE TO SAY THAT IN THE FACTS AND CIRCUMSTANCES OF PRESENT CASE, ACCOUNT BOOKS AR E MAINTAINED AS THEY WERE ORDINARILY MAINTAINED YEARS AFTER YEAR S AND WHICH WERE FOUND TO YIELD A FAIR RESULT. MERE DEVIATION I N GP RATE CANNOT BE A GROUND FOR REJECTING BOOKS OF ACCOUNT, AND ENT ERING REALM OF ESTIMATE AND GUESSWORK. LOWER GP RATE SHOWN IN THE BOOKS OF ACCOUNT DURING CURRENT YEAR AND FALL IN GP RATE WAS JUSTIFIED AND ALSO ADMITTED BY THE ASSESSING OFFICER AS WELL AS C IT(A) AS WELL AS THE TRIBUNAL. THEREFORE, FALL IN GP RATE LOST IT S SIGNIFICANCE. HAVING ACCEPTED THE REASON FOR FALL IN GP RATE, NAM ELY, STIFF COMPETITION IN MARKET AND ALSO THAT HUGE LOSS CAUSE D IN PARTICULAR TRANSACTION, NEITHER THE REJECTION OF BOOKS OF ACCO UNT WAS JUSTIFIED NOR RESORT TO SUBSTITUTION OF ESTIMATED G P BY RULE OF THUMB MERELY FOR MAKING CERTAIN ADDITIONS. WE ARE, THEREFORE, OF THE OPINION THAT THE FINDINGS ARRIVED AT BY THE TRI BUNAL SUFFERS FROM BASIC DEFECT OF NOT APPLYING ITS MIND TO THE E XISTING MATERIAL WHICH WERE RELEVANT AND WENT TO THE ROOT OF THE MAT TER. WHEN ALL THE DATA AND ENTRIES MADE IN THE TRADING ACCOUNT WE RE NOT FOUND TO BE INCORRECT IN ANY MANNER, THERE COULD NOT HAVE BEEN ANY OTHER RESULT EXCEPT WHAT HAS BEEN SHOWN BY THE ASSE SSEE IN THE BOOKS OF ACCOUNT. WE ARE, THEREFORE, UNABLE TO SUST AIN THE ORDER OF THE TRIBUNAL. THUS, THE DECLINE IN THE GP RATE CANNOT BE A GROUND FOR REJECTION OF BOOKS OF ACCOUNTS. IN THE CASE IN HAND, THERE IS NO DISPUTE THAT THERE IS MANIFOLD INCREASE IN THE TURNOVER OF THE ASSESSEE I N COMPARISON TO THE PRECEDING YEARS WHICH IS ABOUT 5 TIMES MORE THAN TH E EARLIER YEARS. ITA NO. 48/JP/2018 SHRI RAM GOPAL SONI VS. ACIT 13 THEREFORE, A REASONABLE DECLINED IS A NORMAL FEATUR E AND OUTCOME OF THE MANIFOLD INCREASE IN THE TURNOVER. THE HONBLE DELHI HIGH COURT IN CASE OF CIT VS. SMT. POONAM RANI (SUPRA) HAS ALSO H ELD THAT IN THE ABSENCE OF FINDING TOWARDS FALSEHOOD OF BOOKS OF AC COUNT OR ANY SPECIFIC DEFECTS AND DISCREPANCY IN THE ACCOUNT BOO KS MAINTAINED BY THE ASSESSEE WHICH WERE DULY AUDITED U/S 44AB OF THE CE NTRAL EXCISE ACT THERE WAS NO REASONS FOR THE AO TO TREAT THE ACCOUN TS OF THE ASSESSEE AS DEFECTIVE OR INCOMPLETE. THUS WHEN THE ASSESSEE MAINTAINED THE ACCOUNT ACCORDING TO THE METHOD REGULARLY EMPLOYED BY HIM AND THERE IS NO FINDING THAT THE PURCHASES HAVE BEEN INFLATED OR SALES HAVE BEEN SUPPRESSED OR ANY TRANSACTION IS NOT RECORDED IN TH E ACCOUNTS, THE REJECTION OF BOOKS OF ACCOUNT BY THE AO BASED ON GE NERAL OBSERVATION IS NOT VALID. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE. TH IS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 7. GROUND NO. 2 IS REGARDING THE ADDITION MADE BY T HE AO BY APPLYING GP RATE 0.24%. SINCE THE REJECTION OF BOOK S OF ACCOUNT HAS BEEN SET ASIDE BY US, THEREFORE TRADING ADDITION ON ESTIMATED GROSS PROFIT IS CONSEQUENTIAL TO GROUND NO. 1 AND ACCORDI NGLY TRADING ADDITION MADE BY THE AO IS DELETED. ITA NO. 48/JP/2018 SHRI RAM GOPAL SONI VS. ACIT 14 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/04/2019 . SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 10/04/2019. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE M/S SHRI RAM GOPAL SONI, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- ACIT, CIRCLE, SIKAR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 48/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR