GALAXY IMPEX, Jaipur V. DCIT, Jaipur

ITA 529/JPR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5564 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 17-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRITHIVI RAJ MEENA A DD
• Keywords: Rejection of books of accounts; Commercial expediency
• Section: 145

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA- @ ITA NO. 529/JP/2016 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2012-13 M/S GALAXY IMPEX, 45, GEM ENCLAVE, PRADHAN MARG, MALVIYA NAGAR, JAIPUR. CUKE VS. THE DC.I.T., CIRCLE-6, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABFG 9397 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI MAHENDRA GARGIEYA (ADVOCATE) JKTLO DH VKSJ LS @ REVENUE BY : SHRI PRITHIVI RAJ MEENA (ADD. CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 20/02/2017 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT :28/02/2017 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)-2, JAIPUR DATED 22.03.2016 FOR A.Y. 2012-13. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE AS UNDER:- 1.1 THE LD. CIT(A) ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN INVOKING SEC. 145(3) OF THE ACT. THE PROVISION SO I NVOKED BEING CONTRARY TO THE PROVISIONS OF LAW AND FACTS, THE SA ME KINDLY BE QUASHED. CONSEQUENTLY THE TRADING ADDITION OF RS.21 ,48,229/- KINDLY BE DELETED IN FULL. ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 2 1.2 ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE, THE LD. CIT(A) FURTHER ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN APPLYING THE GP RATE OF 46% AS AGAINST 44.71% DECLARED BY TH E ASSESSEE [47.23% APPLIED BY THE AO]. HENCE, THE GP RATE SO A PPLIED AND THEREBY PARTLY SUSTAINING THE ADDITION UP TO RS.21, 48,229/- IS TOTALLY CONTRARY TO THE PROVISIONS OF LAW AND FACTS ON THE RECORD AND HENCE, THE ADDITION KINDLY BE DELETED IN FULL. 2. THE LD. CIT(A) ERRED IN LAW AS WELL AS ON THE FA CTS OF THE CASE IN PARTLY CONFIRMING THE DISALLOWANCES OF THE FOLLOWIN G EXPENSES: S. NO. HEAD OF EXPENSES EXP. CLAIMED BY THE ASSESSEE DISALLOWED BY AO PARTLY SUSTAINED BY THE LD. CIT(A) 2.1 CONVEYANCE EXP. RS.9,73,835/- 15% OF TOTAL 10% OF TOTAL 2.2 OFFICE EXP. RS.1,75,818/- 2.3 STAFF WELFARE EXP. RS.(1,96,282/- + 2,83,181/-) RS.4,79,463/- 2.4 TELEPHONE EXPENSES RS.2,42,816/- 2.5 FOREIGN TRAVELLING EXP. RS.36,51,757/ - 2.6 SALES PROMOTION EXP. RS.2,29,889/- TOTAL RS.61,06,705 RS.9,16,005 RS.6,10,670 THE DISALLOWANCES SO MADE AND PARTLY CONFIRMED BY THE LD. CIT(A) BEING TOTALLY CONTRARY TO THE PROVISIONS OF LAW AND FACTS OF THE CASE, KINDLY BE DELETED IN FULL. ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 3 2. IN RESPECT OF GROUND NO. 1(I) AND 1(II), THE BRI EF FACTS OF THE CASE ARE THAT THE ASSESSEE DEALS IN MANUFACTURING AND TR ADING OF STONES AT JAIPUR & CHENNAI AND ALSO EXPORTS THE SAME OUTSIDE INDIA. DURING THE YEAR UNDER CONSIDERATION, ON A TOTAL TURNOVER OF RS .1659.84 LAKHS, A GROSS PROFIT OF RS.742.04 LAKHS & NET PROFIT OF RS. 185.55 LAKHS I.E. A GROSS PROFIT RATE OF 44.71% AND NET PROFIT RATE OF 7.75% HAS BEEN RETURNED. IN THE PREVIOUS YEAR, THE GROSS PROFIT RA TE AND NET PROFIT RATE STOOD AT 49.74% AND 10.53% RESPECTIVELY AND THE SAM E HAD DECREASED SIGNIFICANTLY IN THE CURRENT YEAR. THE ASSESSING OF FICER FOUND THAT WASTAGE IN THE COURSE OF MANUFACTURING HAD BEEN CLA IMED AT 15.80% AS AGAINST 8.93% IN THE PRECEDING ASSESSMENT YEAR. THE QUANTITATIVE DETAILS AS INDICATED IN THE ANNEXURE ATTACHED WITH THE FORM NO.3CD GAVE DETAILS IN TERMS OF SQ. METER AND PIECES ONLY OF AL L QUALITY OF GOODS. THE ASSESSING OFFICER OPINED THAT SUCH INVENTORY DID NO T PROVIDE DETAILS OF MANUFACTURING GOODS AND OF THE YIELD. IT WAS ALSO N OTED THAT ASSESSEE HAD NOT FURNISHED THE DETAILS OF ITEM WISE INVENTOR Y OF VARIOUS GOODS PURCHASED LIKE SANDSTONE, GREY STONE, ROUGH SANDSTO NE AND OTHERS USED FOR MANUFACTURE, EXPORT AND TRADING. THE DETAILS OF SOLD INVENTORY DO NOT INDICATE HOW THE SAME CAN BE BIFURCATED AND DIFFERE NTIATED WITH EACH ITEM OF INVENTORY FOR THE PURPOSE OF EXAMINATION. T HE ASSESSEE HAD STATED THAT IT IS NOT POSSIBLE TO MAINTAIN SUCH AN INVENTORY IN A LARGE ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 4 MANUFACTURING UNIT, ITEM WISE. THE ASSESSEE WAS ASK ED TO EXPLAIN THE INCREASE IN MANUFACTURING EXPENSES AND IT WAS SUBMI TTED THAT THE RATE OF RAW MATERIALS HAVE INCREASED RANGING BETWEEN 10% TO 160% AND A CHART TO THAT EXTENT WAS SUBMITTED, THE DECREASE IN GROSS PROFIT WAS EXPLAINED LARGELY THROUGH THE INCREASED COST OF RAW MATERIAL. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE ITEM WISE QUANTITATIVE STOCK MAINTAINED AT JAIPUR AND CHENNAI AND HAD ALSO FAILED TO PRODUCE ITEM WISE DETAILS OF SUCH INVENTORY MONT H WISE AS WELL AS COPIES OF STOCK STATEMENTS FILED WITH THE BANKS FRO M WHOM THE LIMITS HAD BEEN TAKEN. FURTHER NOT BEING SATISFIED WITH EX PENDITURE UNDER THE HEAD FREIGHT INWARD AND PACKING MATERIAL BEING ABNO RMALLY HIGH AND COULD NOT BE EXPLAINED, THE ASSESSING OFFICER NOT B EING SATISFIED WITH THE DETAILS, OPINED THAT THE BOOK RESULTS DECLARED BY T HE ASSESSEE CANNOT BE RELIED UPON AND IN ABSENCE OF COMPLETE DETAILS, TRU E PROFIT COULD NOT BE DEDUCED AND REJECTED THE BOOK RESULTS INVOKING SECT ION 145(3) OF THE I.T. ACT, 1961. AFTER REJECTING THE BOOKS, THE GRO SS PROFIT WAS ESTIMATED AT 47.23% I.E. AVERAGE OF THE GROSS PROFI T OF PRECEDING ASSESSMENT YEAR AT 49.74% AND CURRENT YEAR AT 44.71 %. 3. AGAINST THE SAID ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND OBJECTED TO THE RE JECTION OF BOOKS OF ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 5 ACCOUNTS UNDER SECTION 145(3) OF THE I.T. ACT, 1961 . AS REGARDS THE STOCK REGISTER, THE LD AR RELIED ON THE TAX AUDIT R EPORT TO CLAIM THAT THE SAME HAD BEEN CERTIFIED AND DETAILS OF RAW MATERIAL AND FINISHED GOODS HAD BEEN MAINTAINED. HE FURTHER REITERATED THAT YIE LD OF FINISHED GOODS, PERCENTAGE OF YIELD AND WASTAGE/REJECTION FIGURES H AD BEEN PROVIDED FOR BOTH THE UNITS I.E. JAIPUR AND CHENNAI SEPARATELY. HE FURTHER CONTENDED THAT DETAILS OF ALL EXPENDITURE WERE PROVIDED AND A LSO THAT PURCHASES DETAILS WERE ALSO PROVIDED SINCE THEY WERE FROM UNR ELATED PARTIES, THE SAME SHOULD HAVE BEEN ACCEPTED AND THE ABNORMAL INC REASE IN PURCHASES PRICES AND RAW MATERIAL WAS ALSO THE REAS ON FOR THE DECREASED GROSS PROFIT. FURTHER, THE FIGURE OF WASTAGE HAD BE EN WRONGLY MENTIONED AT 15.80% IN THE CURRENT YEAR AGAINST 8.97% OF PREV IOUS YEAR BY THE ASSESSING OFFICER, AND THE APPELLANT CONTENDED THAT IN FACT IN THE CURRENT YEAR, THE WASTAGE WAS 8.93% WHICH WAS LESSER THAN T HE PREVIOUS YEAR. THE APPELLANT THUS CONTENDED THAT THE REJECTION OF BOOKS OF ACCOUNTS WAS NOT IN ORDER AND ALSO THAT EVEN IF THE SAME ARE REJECTED, AN ADDITION NEED NOT NECESSARILY BE MADE. THE LD AR CLAIMED THA T THE FALL IN GROSS PROFIT WAS DUE TO INCREASE IN COST OF RAW MATERIAL AS WELL AS DUE TO DECREASE IN TURNOVER WHICH DECREASED FROM RS.21,85, 71,128/- TO RS.16,59,84,045/- IN THE CURRENT YEAR. THUS, THE LD AR SUBMITTED THAT EVEN THOUGH PAST HISTORY IS CONSIDERED TO BE A GOOD GUIDE BUT IN THE ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 6 ASSESSEES CASE, SINCE HE HAD EXPLAINED THE PECULIA R FACTS OF THE CURRENT YEAR, THE SAME NEED NOT BE APPLIED. AFTER CONSIDER ING THE ASSESSEES SUBMISSION, THE LD CIT(A) UPHELD THE REJECTION OF B OOKS OF ACCOUNTS BUT GROSS PROFIT WAS DETERMINED AT 46% AS AGAINST 44.71 % DISCLOSED BY THE ASSESSEE. THE RELEVANT FINDING OF THE LD CIT(A) IS REPRODUCED AS UNDER: DURING THE YEAR, THERE HAS BEEN A DECREASE IN THE TURNOVER OF THE ASSESSEE AS WELL AS IN THE GROSS PROFIT. IT IS CONT ESTED THAT THE STOCK REGISTER AND STOCK DETAILS WERE SUBMITTED TO THE AS SESSING OFFICER. THE DECREASE IS CLAIMED DUE TO INCREASE IN RAW MATERIAL PRICE AND DECREASE IN TURNOVER. THE ASSESSING OFFICER FOR REASONS DISCUSS ED EARLIER REJECTED THE BOOKS OF ACCOUNTS. THE WASTAGE, IT IS CLAIMED, HAS BEEN TAKEN WRONGLY AT A HIGHER FIGURE BY THE ASSESSING OFFICER WHICH I S FOUND TO BE TRUE. HOWEVER, AS REGARDS THE STOCK DETAILS, THE ASSESSEE WAS DEALING IN DIFFERENT TYPES OF STONES AND THE SAME WAS BEING CO NVERTED INTO FINISHED GOODS AND THEN SOLD/EXPORTED. THE ASSESSING OFFICER HAS HELD THAT THIS BIFURCATION OF THE STOCK AND RELATING THE SAME TO F INISHED GOODS COULD NOT BE EXPLAINED BY THE ASSESSEE. FURTHER EVEN BEFO RE ME WHEN ASKED TO EXPLAIN HOW THE FIGURES OF FINISHED PRODUCTS WER E BEING ARRIVED AT AS PER THE QUANTITIES, THE AUTHORIZED REPRESENTATIVE H AD EXPRESSED HIS INABILITY FOR THE SAME. THUS, CONSIDERING THE DEFEC TS POINTED OUT BY THE ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 7 ASSESSING OFFICER, THE REJECTION OF BOOKS OF ACCOUN TS IS UPHELD. NOW COMING TO THE PERCENTAGE TO BE ADOPTED, IN THE PREV IOUS YEAR THE GROSS PROFIT WAS 49.74% WHILE IN THE CURRENT ASSESSMENT Y EAR IT IS ONLY 44.71%. THE DECREASE IS EXPLAINED THROUGH INCREASE IN RAW MATERIAL COST AND DECREASE IN TOTAL TURNOVER. IT IS TRUE THAT THE TURNOVER HAS DECREASED BY ABOUT 24% AND THERE WAS INCREASE IN THE PRICE OF RAW MATERIAL AND HENCE IT WILL BE REASONABLE TO ADOPT THE GROSS PROF IT AT 46% OF THE TOTAL TURNOVER. THIS GROUND IS PARTLY ALLOWED. 4. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED A S UNDER: 4.1 IT WAS SUBMITTED THAT THE ASSESSEE HAS ADMITTED LY MAINTAINED COMPLETE BOOKS OF ACCOUNTS CONSISTING OF CASH BOOK, LEDGER, JOURNAL AND STOCK REGISTER OF RAW MATERIAL & PRODUCTION, ST OCK REGISTER OF FINISHED GOODS. ALL THE PURCHASES AND SALES ARE FUL LY VOUCHED. ALL THE EXPENSES WERE FULLY SUPPORTED BY VOUCHERS. THE FINA NCIAL ACCOUNTS AND THE OTHER SUBSIDIARY & QUANTITATIVE RECORDS WERE DU LY MAINTAINED. FURTHER THE ACCOUNTS WERE SUBJECTED TO TAX AUDIT U/ S 44AB(PB 1-9). THE SAME WERE PRODUCED BEFORE THE AO ALSO ALONGWITH OTH ER DETAILS FROM TIME TO TIME. THE AO HAS NOT AT ALL JUDICIOUSLY CON SIDERED SUBMISSIONS MADE BEFORE THE AO. ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 8 4.2 THE CONTENTION THAT THE ASSESSEE HAS MAINTAINED COMPLETE DAY TO DAY QUANTITATIVE DETAILS, IS DULY SUPPORTED BY THE EXAMINATION DONE BY THE LEARNED TAX AUDITOR WHEREIN THROUGH ANNEXURE G (PB 18) WITH REFERENCE TO CLAUSE NO.28 OF TAR (PB 8), THE QUANTI TATIVE DETAILS HAVE BEEN FURNISHED OF RAW MATERIALS AND FINISHED GOODS BOTH. THE RELEVANT EXTRACT FROM TAR, ARE AS UNDER: 9(B) BOOKS OF ACCOUNTS MAINTAINED. (IN CASE BOOKS OF ACCOUNT ARE MAINTAINED IN A COMPUTER SYSTEM, MENTION THE BOOKS OF ACCOUNT GENERATED BY SUCH COMPUTER SYSTEM). PURCHASES BOOK, SALES BOOK, CASH BOOK, BANK BOOK, JOURNAL, LEDGER (BOOKS OF ACCOUNT GENERATED BY COMPUTER SYSTEM AND STOCK REGISTER. 9(C) LIST OF BOOKS OF ACCOUNT EXAMINED. SAME AS MENTIONED IN 9(B) ABOVE. 4.3 THE OBJECTION OF THE LEARNED AO THAT THE ASSESS EE HAD MAINTAINED THE QUANTITATIVE DETAILS AS INDICATED AND ANNEXURE ATTACHED WITH THE FORM NO.3CD IN TERMS OF SQUARE METER AND PIECES ONL Y OF ALL QUANTITY OF GOODS. HOWEVER, SUCH INVENTORY AND DETAILS ATTACHED WITH FORM 3CD ARE GIVING THE EXTRACTS OF RAW MATERIAL AND OF FINISHED GOODS BUT DOES NOT PROVIDE THE DETAILS OF MANUFACTURED GOODS AND OF TH E YIELD. ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 9 IN FACT, IT APPEARS A GROSS MISCONCEPTION OF FACT O N THE PART OF THE AO ON THE FACE OF THE RECORD ITSELF IN AS MUCH AS A PERUS AL OF PB 18 TO 19 BEING ANNEXURE G TO TAR, CLEARLY SHOWS AND ALSO ADMITTED BY THE AO AS WELL THAT THE ASSESSEE HAS MAINTAINED THE DETAILS OF RAW MATERIAL AND FINISHED GOODS BOTH STILL HOWEVER, HIS GRIEVANCE WAS THAT TH E ASSESSEE HAS NOT PROVIDED THE DETAILS OF MANUFACTURED GOODS AND OF T HE YIELD. A BARE PERUSAL OF THIS ANNEXURE SHALL REVEAL THAT F OR JAIPUR UNIT, THE ASSESSEE HAS SHOWN THE YIELD OF FINISHED GOODS IN A BSOLUTE TERM I.E. 136506.46 SQ. MTR. AND THE PERCENTAGE OF YIELD BEIN G 89.34%, AS ALSO THE ABSOLUTE FIGURE OF WASTAGE/REJECTION BEING 16,2 87.52 SQ. MTR., MEANING THEREBY THE WASTAGE PERCENTAGE WAS 10.66%. SIMILARLY FOR CHENNAI UNIT ALSO WHICH WAS ENGAGED IN TRADING AND MANUFACTURING BOTH, SIMILAR FIGURES OF RAW MATERIAL CONSUMPTION, PRODUCTION AND YIELD HAVE BEEN GIVEN. AFTER OBTAINING FINISHED GOODS, TH ERE COULD NOT HAVE BEEN ANY WASTAGE OR REJECTION THEREAFTER. THEREFORE , THE ALLEGATION OF THE AO IS GROSSLY INCORRECT ON THE FACE OF IT. FURT HER SEPARATE CHART OF WASTAGE GIVEN TO AO (PB 78). 4.4 THE ALLEGATION OF THE AO THAT THE ASSESSEE DID NOT FURNISH THE DETAILS OF ITEM-WISE INVENTORIES OF VARIOUS PURCHASED GOODS , IS SOMETHING IMPOSSIBLE AND IMPRACTICABLE FOR ANY TRADER/BUSINES SMAN IN THIS LINE, ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 10 WHICH OTHERWISE IS NOT A PREVAILING TRADE PRACTICE FOR THE REASON THAT THERE ARE SEVERAL TYPES OF STONES RUNNING INTO HUND REDS AND THE PRICE VARIATION IS VERY NOMINAL. THE ASSESSEE HAS BEEN FO LLOWING THE SAME METHOD OF MAINTENANCE OF STOCK REGISTER AND VALUING THE STOCK AT AVERAGE COST PRICE SINCE INCEPTION, WHICH OTHERWISE IS IN ACCORDANCE WITH THE PREVAILING TRADE PRACTICE. THE AO WHEN CONFRONT ED ON THIS ASPECT THE ASSESSEE, HE DULY REPLIED THE ABOVE FACTS HOWEVER, THEREAFTER THE AO DID NOT RAISE ANY QUERY MEANING THEREBY HE FELT SATISFI ED. 4.5 AS REGARDS THE AOS ALLEGATION THAT THE ASSESSE E MADE PURCHASES AT HIGHER PRICES AS COMPARED TO THE PRECEDING YEAR, IT IS SUBMITTED THAT THE FACT IS ADMITTED THAT THE ASSESSEE MADE PURCHASES F ROM THE OUTSIDE PARTIES ONLY AND NO ONE WAS IN RELATION OF THE PART NERS OF THE ASSESSEE FIRM. THAT BEING THE POSITION, S. 40A(2) DOES NOT A PPLY AND THE GENUINENESS OF THE EXPENDITURE AND THE FACT OF MAKI NG PAYMENT NOT HAVING BEING UNDER DOUBT, IT HAS TO BE ACCEPTED THA T THE ASSESSEE MADE PURCHASES AT THE PREVALENT PRICES IN THE BEST BUSIN ESS INTEREST. THE AO COULD AND SHOULD HAVE MADE INQUIRIES DIRECTLY FROM THOSE SUPPLIERS TO BRING THE TRUTH ON RECORD, HAD HE GOT SOME DOUBT. F URTHER AS REGARDS THE EXPECTATION OF THE AO THAT THE SALE PRICE SHOUL D HAVE ALSO BEEN INCREASED BY THE ASSESSEE SIMILARLY TO THAT EXTENT, FIRSTLY, SUFFICE TO SAY ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 11 THAT IT WAS A BUSINESSMAN DECISION TAKING INTO THE PREVAILING TRADE CONDITIONS, FACTS AND CIRCUMSTANCES, IN THE BEST BU SINESS INTEREST AND SECONDLY, THE PURCHASE HAD TO BE MADE AT HIGHER PRI CES HOWEVER, THE SUPPLIES WERE TO BE MADE TO THE IMPORTERS/BUYERS, W ITH WHOM, THE ASSESSEE HAD ALREADY ENTERED INTO AGREEMENT. THEREF ORE THE ASSESSEE WAS CONTRACTUALLY OBLIGED TO HONOUR THE COMMITMENT ALREADY MADE. IN OTHER WORDS, THE ASSESSEE HAD ALREADY COMMITTED THE SALES PRICES HOWEVER, IN THE MEANWHILE THE RAW MATERIAL PRICES W ENT UP AND HENCE THE ASSESSEE WAS NOT IN A POSITION TO RECOUP THE IN CREASE IN THE PRICES MORE PARTICULARLY, IN THE ABSENCE OF AN ESCALATION CLAUSE. REF. PR. 2.6 ALSO. 4.6 THE AO ALSO ALLEGED THAT THE ASSESSEE FAILED TO PRODUCE ITEM-WISE QUANTITATIVE SOCK REGISTER MAINTAINED AT JAIPUR AND CHENNAI AND HAD ALSO FAILED TO PROVIDE ITEM-WISE DETAILS OF SUCH INVENTO RY MONTH WISE AS WELL AS COPIES OF STOCK STATEMENTS FILED WITH THE BANK F ROM WHOM THE LIMITS HAVE BEEN TAKEN. IT IS SUBMITTED THAT THE ASSESSEE DID MAINTAIN ALL THE POSSIBLE QUANTITATIVE DETAILS METICULOUSLY ON DAY TO DAY BAS IS AND THE SAME IS EVIDENT FROM THE VARIOUS COPIES OF CHART SHOWING ST OCK REGISTER OF RAW MATERIAL & PRODUCTION, STOCK REGISTER OF FINISHED G OODS. HOWEVER, THE ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 12 SAME WERE EVEN DULY PRODUCED BEFORE THE AO TIME TO TIME FOR HIS VERIFICATION. HENCE THIS ALLEGATION IS FACTUALLY IN CORRECT. HOWEVER THE AO NEVER ASKED OF FURNISHING COPIES OF STOCK STATEMENT FILED WITH THE BANK, AS EVIDENT FROM THE QUERY LETTER DATED 05.11.2014 ( PB 79-82) 4.7 THE AO ALLEGED THAT THE FREIGHT INWARD EXPENSES OF RS.117.83 LACS AND EXPENSES OF PACKING MATERIAL OF RS.157.91 LACS WERE VERY HIGH. HOWEVER, SUCH ALLEGATION IS WITHOUT MAKING ANY COMP ARISON OR GIVING OTHER DETAILS WHICH MADE HIM TO ALLEGE LIKE THIS. T HUS, HIS OBJECTION APPEARS TO BE VAGUE AND BASELESS. NO PAYMENT TO REL ATED PARTIES HAVE BEEN MADE AND PAID TO THIRD PARTIES AS PER PREVAILI NG RATES. 4.8 THE ALLEGATION OF THE AO THAT THE ASSESSEE HAD NOT GIVEN ANY REASON FOR THE INCREASE IN THE COST AT PG 4 PR 1, IS COMPL ETELY BASELESS AND CONTRARY TO THE FACTS IN AS MUCH AS HE HIMSELF HAS ADMITTED IN THE EARLIER PART OF THE ORDER AT PGS 2-3 THAT THE ASSESSEE SUBM ITTED THE REASON BEHIND FALL IN G.P. RATE BEING INCREASE IN THE PURC HASE PRICE OF RAW MATERIAL RANGING BETWEEN 10% TO 160% (WHICH IS CORR ECTLY 4.3% TO 37.2% AND FROM RS.10 PER SQ. MTR. TO RS.160 PER SQ. MTR). THE PURCHASES WERE MADE FROM UNRELATED OUTSIDE VARIOUS PARTIES AT THE PREVAILING MARKET PRICES, AS EVIDENT FROM THE COPIE S OF INVOICES (PB 84- 98). THE AO COULD HAVE MADE INQUIRIES FROM THOSE PA RTIES DIRECTLY. ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 13 4.9 THE AO APPEARS TO HAVE WRONGLY MENTIONED THE FI GURE OF WASTAGE AND APPEARS TO HAVE PROCEEDED ON MISCONCEPTION OF F ACTS BY SAYING THAT THE ASSESSEE DECLARED WASTAGE OF 15.80% THIS YEAR A S AGAINST 8.93% IN THE PRECEDING ASSESSMENT YEAR AND ALLEGED THAT THER E WAS NO REASON FOR SUCH A SHARP INCREASE IN THE WASTAGE. HOWEVER, THE CORRECT FACTS ARE OTHERWISE. THE ASSESSEE, IN FACT, DECLARED MUCH LES SER WASTAGE OF 8.93% THIS YEAR AS AGAINST 15.80% IN AY 2010-11. IN AY 2011-12 THE ASSESSEE DECLARED 13.82%. THUS, THE PERCENTAGE OF W ASTAGE IS CONSTANTLY COMING DOWN AND HAS SHARPLY DECREASED. K INDLY REFER THE COMPARATIVE CHART (PB 78). THE VERY BASIS OF S. 145 REMAINS NO MORE. 4.10 THE AO ALLEGED THAT THE DETAILS OF SOLD INVENT ORY DOES NOT INDICATE HOW THE SAME CAN BE BIFURCATED AND DIFFERENTIATED W ITH EACH ITEMS OF INVENTORY FOR THE PURPOSE OF EXAMINATION. IT WAS ST ATED BY THE ASSESSEE THAT IT IS NOT POSSIBLE TO MAINTAIN SUCH INVENTORY IN A LARGE MANUFACTURING UNIT ITEM-WISE. IT IS SUBMITTED THAT FIRSTLY THERE APPEARS NO SPECIFIC QUERY RAISED BY THE AO AS STATED NOR TH E ASSESSEE EVER GAVE ANY SUBMISSION AS MENTIONED. THUS, NONE OF THE OBJECTIONS RAISED COULD BE MADE A BASIS OF INVOKING SEC. 145. ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 14 4.11 THE LD. CIT(A), AS EVIDENTLY CLEAR FROM HER OR DER HAS SUMMARILY CONFIRMED THE APPLICATION OF SEC. 145 WITHOUT APPRE CIATING THE VARIOUS FACTUAL SUBMISSIONS AND THE CASE LAWS CITED AND EVE N WITHOUT APPRECIATING THE PRACTICAL DIFFICULTIES IN THE MAIN TENANCE OF THE QUANTITATIVE RECORDS, THE WAY THE REVENUE WANTS MOR E PARTICULARLY, WHEN THERE IS NO PRESCRIPTION U/S44AA R/W RULE 6F. IN FA CT, THE AO WANTED THE ASSESSEE TO DO SOMETHING HUMANELY IMPOSSIBLE. IT HA S BEEN HELD IN VARIOUS CASES THAT MAINTENANCE OF THE ACCOUNTS & RE CORDS IN A PARTICULAR MANNER, THE ACCOUNTS CANNOT BE REJECTED. FURTHER, R EJECTION OF ACCOUNTS IS A SERIOUS MATTER AND UNLESS SPECIFIC DEFECTS ARE POINTED OUT AND IT IS SHOWN THAT DUE TO SUCH DEFECT, THE PROFITS ARE NOT REASONABLY ASCERTAINABLE, THE ACCOUNTS CANNOT BE REJECTED IN A CASUAL OR ROUTINE MANNER. 4.12. DURING THE COURSE OF HEARING BEFORE THE LD CI T(A), WHEN THE ASSESSEE WAS ASKED TO CLARIFY HOW THE YIELD AND WAS TAGE WAS ARRIVED AT AND WHETHER AFTER DOING SOME WORK, THE STONE AND TH E ULTIMATE PRODUCT HAS CHANGED THE SHAPE, A CHART SHOWING THE MATHEMAT ICAL WORKING OF WASTAGE OF 8.93% WAS SUBMITTED, AS UNDER: ASSESSMENT YEAR 2012-13 GOODS ISSUED FOR PRODUCTION (SQ. MTR) ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 15 JAIPUR 152793.98 CHENNAI 67450.00 220243.98 FINISHED GOODS PRODUCTION JAIPUR 136506.46 CHENNAI 64077.50 200583.96 WASTAGE JAIPUR 16287.52 CHENNAI 3372.50 19660.02 % OF WASTAGE ON GOODS ISSUED FOR PRODUCTION WASTAGE(19660.52) X 100 GOODS ISSUED FOR PRODUCTION (220243.98) 8.93% IT WAS SUBMITTED THAT THE RAW/ROUGH/CRUDE STONE AS AVAILABLE IN THE MOTHER EARTH OR IN ROCKS IS UNEARTH/QUARRIED/EXCAVA TED BY THE MINE OWNERS AND IS OF DIFFERENT SHAPE AND SIZE. IT IS PU RCHASED AS A RAW MATERIAL. SIZING IS DONE. EDGE CUTTING IS DONE BY M ACHINES AS WELL AS BY TOOLS MANUALLY. VARIOUS NATURAL FLAWS SUCH AS COLOR VARIATION, JOINTS, FISSURES MOLES, PATCHES, HAIRLINE, CRACKS ETC. ARE REMOVED BY ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 16 HAND/MACHINE PROCESS AND BY USE OF VARIOUS TOOLS, C HEMICALS, POLISH, RESIN, VEX ETC. DRESSING & CUTTING, WASHING, LAVIGA TION, CALIBRATION, TUMBLING, MOLDING AND OTHER UPGRADING TECHNIQUES AR E APPLIED. AS PER REQUIREMENT SLABS AND TILES ARE PRODUCED. THE SLABS AND TILES EXPORTED BY THE ASSESSEE FIRM ARE DIFFERENT THAN RAW MATERIA LS PURCHASED BY THE ASSESSEE FIRM. IN THE EXPORT BUSINESS THE QUALITY O F PRODUCT IS OF UTMOST IMPORTANCE. EVEN A SINGLE DEFECT IN QUALITY OF GOOD S, THE ENTIRE SHIPMENT IS REJECTED BY THE BUYER. HOWEVER, IN THE ORDER, THERE APPEARS NO ADVERSE REM ARK OF THE CLAIM OF WASTAGE MADE BY THE ASSESSEE THIS YEAR AT 8.93% AND THUS, THE CONTENTIONS OF THE AO HAVE BEEN IMPLIEDLY REJECTED. IT IS SUBMITTED THAT WHEN THE LD. CIT(A) HAS NEITHER FOUND ANY FAULT IN THE SUBMISSIONS EXPLAINING THE REASON OF FALL IN THE GP/NP RATE AS ALSO HAS JUSTIFIED THE WASTAGE CLAIMED THIS YEAR, THERE WAS NO REASON YET TO UPHELD THE PART ADDITION BY APPLYING GP RATE OF 46%. HENCE, THE IMP UGNED ADDITION KINDLY BE DELETED IN FULL. 4.13. MINOR IRREGULARITIES, EVEN ASSUMING WERE THER E, CANNOT BE MADE A BASIS OF THE REJECTION OF THE BOOKS OF ACCOUNTS OR OF TRADING ADDITION. KINDLY REFER PADAMPATH RAMGOPAL (1970) 76 ITR 719 ( SC). ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 17 4.14. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HA S BEEN CARRYING ON THE SAME BUSINESS IN THE SAME SET UP AND UNDER THE SAME FACTS AND CIRCUMSTANCES. EVEN THE MANNER AND METHOD OF RECORD ING THE TRANSACTIONS HAS ALSO BEEN THE SAME SINCE AY 2003-0 4. ALL ALONG IN THE PAST, THE CASES OF THE ASSESSEE ARE BEING SELECTED FOR SCRUTINY IN ALMOST EVERY YEAR EXCEPT IN A.Y. 2010-11. THE SAME BOOKS O F ACCOUNTS AND THE OTHER ANCILLARY RECORD SHOWING FINANCIAL AND QUANTI TATIVE DETAILS, MAINTAINED IN A SIMILAR MANNER IN THE PAST ALSO, WE RE DULY PRODUCED BEFORE THE EARLIER ASSESSING OFFICERS YET HOWEVER, IN NONE OF THESE YEARS, THE AO HAS EVER INVOKED S.145 AND REJECTED THE ACCO UNTS EITHER DIRECTLY OR INDIRECTLY OR EVEN REMOTELY. THEREFORE, THERE AP PEARS NO SPECIAL REASON AS TO WHY THE AO SHOULD HAVE DEPARTED FROM T HE SETTLED POSITION ON FACTS AND ON LAW BETWEEN THE PARTIES AND TO UNSE TTLED THE SAME. KINDLY REFER COPIES OF ASSESSMENT ORDER FOR AY 2011 -12 (PB 109-112), AY 2009-10 (PB 113-120), AY 2008-09 (PB 121-126), AY 2 007-08 (PB 127- 132). SIMILARLY EVEN IN LATER YEARS A.Y. 2013-14, 2 014-15 ASSESSMENT COMPLETED U/S 143(3), YET S.145 WAS NOT INVOKED (CO PIES SUBMITTED). 4.15 IN THE IMPUGNED ASSESSMENT ORDER, THE AO HAS N OT WHISPERED A SINGLE WORD AS TO WHY HE IS BREAKING THE RULE OF CO NSISTENCY, WHICH OTHERWISE IS BINDING UPON HIM. IN THESE CIRCUMSTANC ES THEREFORE THE ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 18 DOCTRINE OF RES JUDICATA CERTAINLY APPLIES ON THE F ACTS OF THE PRESENT CASE, SO FAR AS THIS ASPECT IS CONCERNED. IT HAS BEEN HELD THAT THOUGH THE DOCTRINE OF RES JU DICATA DO NOT APPLY TO INCOME TAX PROCEEDING YET HOWEVER, UNLESS THERE IS A CHANGE IN THE FACTS AND CIRCUMSTANCES, THE VIEW TAKEN EARLIER SHO ULD NORMALLY BE TAKEN CONSISTENTLY. FOR THIS KINDLY REFER SARDAR KEHAR SI NGH V/S CIT (1991) 92 CTR 88(1992) 195 ITR 769 (RAJ.), AND A RECENT DECIS ION IN CIT V/S EXCEL INDUSTRIES LTD. (2013) 358 ITR 295 (SC). IT IS A JUDICIALLY ACCEPTED PRINCIPLE THAT WHEN THE FACTS ARE SAME, A UNIFORM VIEW SHOULD BE ADOPTED FOR THE SUBSEQUENT Y EARS IN THE INCOME TAX PROCEEDINGS UNLESS THERE IS A MATERIAL CHANGE I N THE FACTS, WHICH HAS NOT BE ESTABLISHED BY THE AO. KINDLY REFER RADHASOA MI SATSANG V/S CIT(1992) 193 ITR 321 (SC), ON THE THEORY OF CONSIS TENCY, HAS HELD AS UNDER: STRICTLY SPEAKING, RES JUDICATA DOES NOT APPLY TO THE INCOME TAX PROCEEDINGS. THOUGH, EACH ASSESSMENT YEAR BEING A U NIT, WHAT WAS DECIDED IN ONE YEAR MIGHT NOT APPLY IN THE FOLLOWIN G YEAR, WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH DIFFERENT ASS ESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTI ES HAVE ALLOWED THAT POSITION TO NE SUSTAINED BY NOT CHALLENGING THE ORD ER, IT WOULD NOT BE AT ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 19 ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. 4.16. ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE SUBMISSIONS ON MERITS ALSO, IT IS SUBMITTED THAT NO TRADING ADDITION AT A LL WAS CALLED FOR IN VIEW OF THE FOLLOWING FACTS AND SUBMISSIONS: 4.17 ADDITION NEED NOT BE MADE, EVEN IF SEC. 145 IN VOKED: IT IS SUBMITTED THAT EVEN INVOKING OF SEC. 145 DOES NOT C ONFER BLIND POWERS UPON THE AO AND HE IS NOT AT LIBERTY TO ASSESS THE INCOME AT WHATEVER FIGURE HE WANTS. HE IS BOUND TO MAKE AN HONEST ESTI MATION OF INCOME. IN THE CASE OF CIT VS. GOTAN LIME KHANIZ UDYOG (200 2) 256 ITR 243 (RAJ), IT HAS BEEN HELD THAT MERE REJECTION OF BOOK S OF ACCOUNTS NEED NOT NECESSARILY LEAD TO ADDITIONS TO THE RETURNED INCOM E. HOWEVER, IT WILL APPEAR THAT IN THE PRESENT CASE, T HE LD. AO HAS NOT MADE A FAIR ESTIMATION IN CONFORMITY OF THE ABOVE SETTLE D JUDICIAL GUIDELINE. IT IS NOT DENIED THAT THE ASSESSEE WAS ENGAGED IN THE BUS INESS OF MANUFACTURING, TRADING AND EXPORT OF STONES IN THE PAST AS ALSO IN THE LATER YEARS. THEREFORE, THERE IS NO REASON STILL NO T TO CONSIDER THE PAST HISTORY WHICH IS THE BEST MATERIAL TO BE USED FOR F AIR ESTIMATION AS PER THE BINDING DECISIONS. THE LD. AO IS TOTALLY SILENT ON THIS ASPECT. ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 20 4.18 AS REGARDS THE FOLLOWING G.P./N.P. RATE THIS Y EAR, THE ASSESSEE MADE CATEGORICAL SUBMISSIONS BEFORE THE AO VIDE LET TER DATED 12.01.2015 (PB 73-74) READING AS UNDER: IN RESPECT OF QUERY NO.15 OF YOUR QUERY LETTER, WE ENCLOSE HEREWITH COMPARATIVE GP AND NP CHART FOR LAST THREE YEARS ALONGWITH TURNOVER DETAILS. THE ASSESSEE FIRM HAS D ECLARED A GP RATE OF 44.71% ON TOTAL TURNOVER OF RS.16,59,84,045 /- FOR THE YEAR UNDER REFERENCE AS AGAINST GP RATE OF 49.74% D ECLARED ON TOTAL TURNOVER OF RS.21,85,71,128/- FOR THE IMMEDIA TELY PRECEDING YEAR. THE NP RATE DECLARED FOR THE YEAR UNDER REFER ENCE WAS 7.75% AS AGAINST NP RATE OF 10.53% DECLARED FOR THE IMMEDIATELY PRECEDING PREVIOUS YEAR. THE MAIN REASON FOR FALL IN THE GP RATE FOR THE YEA R UNDER REFERENCE WAS DUE TO INCREASE IN COST OF RAW MATERI ALS IN THE YEAR UNDER REFERENCE. WE ENCLOSE HEREWITH A STATEMENT SH OWING BREAK UP OF TRADING ACCOUNT FOR THE YEAR ENDED 31.03.2012 AND 31.03.2011. IT IS EVIDENT FROM THE ENCLOSED STATEME NT THAT THE COST OF PURCHASES IN THE YEAR UNDER REFERENCE WAS 4 1.15% OF TOTAL TURNOVER WHEREAS IN THE IMMEDIATELY PRECEDING YEAR I.E. FINANCIAL YEAR 2010-11 IT WAS 36.70% OF TOTAL TURNOVER OF THA T YEAR. THERE ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 21 WAS ABOUT 5.03% INCREASE IN THE COST OF PURCHASES M ADE DURING THE YEAR UNDER REFERENCE. WE PRODUCE HEREWITH THE D ETAILS OF PURCHASES MADE DURING THE YEAR UNDER REFERENCE WITH PURCHASE BILLS OF RAW MATERIALS COST COMPARISON FOR THE FINA NCIAL YEAR 2010- 11 AND 2011-12 (PB 84-98) ALONGWITH COPIES OF PURCH ASE BILLS OF RAW MATERIALS IN SUPPORT OF INCREASE IN COST OF RAW MATERIALS IN THE YEAR UNDER REFERENCE. THE PERUSAL OF ENCLOSED STATE MENT (PB 83) SHOWS THAT INCREASE IN RAW MATERIALS COST IN THE YE AR UNDER REFERENCE WAS ABOUT 4% TO 37% AS COMPARED TO COST O F IMMEDIATELY PRECEDING YEAR. THE PURCHASES AND SALES ARE FULLY VOUCHED AND TRANSACTIONS OF PURCHASES AND SALE ARE THROUGH BANKING CHANNELS. FURTHER THE BOOKS OF ACCOUNTS ARE DULY AUDITED AND BACKED BY STOCK RECORDS AND QUANTITATIVE TALLY. (PB 100). THE OTHER MAIN REASON FOR FALL IN THE GP RATE FOR T HE YEAR UNDER REFERENCE WAS DUE TO DECREASE IN TURNOVER FOR THE Y EAR UNDER REFERENCE. THE TURNOVER OF THE ASSESSEE FIRM DECREA SED FROM RS.21,85,71,128/- TO RS.16,59,84,045/- IN THE OVER UNDER REFERENCE. THERE WAS A FALL OF ABOUT 24% IN TURNOVE R IN THE YEAR UNDER REFERENCE. THE FALL IN THE TURNOVER RESULTED IN FALL IN THE GP RATE DUE TO INCREASE IN PERCENTAGE OF COST OF FIXED NATURE OF ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 22 EXPENDITURE AND OTHER DIRECT EXPENDITURE. INT. & DE P. INCREASE THIS YEAR BY 32 LACS I.E. 1.93% MORE W.R.T. TURNOVER (PB 70). THE MAIN REASON FOR FALL IN THE NP RATE FOR THE YEA R UNDER REFERENCE WAS DUE TO DECREASE IN GP RATE FOR THE Y EAR UNDER REFERENCE BY ABOUT 5% WHICH RESULTED FALL IN NP RA TE FOR THE YEAR UNDER REFERENCE. HOWEVER, IT APPEARS THAT THE AO & LD. CIT (A) HAVE NOT APPRECIATED THESE SUBMISSIONS JUDICIOUSLY. THESE SUBMISSIONS HA VING BEEN MADE AND DULY SUPPORTED WITH THE EVIDENCES, REMAINING UN-REB UTTED, THERE IS NO REASON THAT WHY THE AO SHOULD HAVE MADE THE ADDITIO N. 4.19 OTHERWISE A.Y. 2011-12 DISTINGUISHABLE: SINCE THE ASSESSEE HAD ALREADY SUCCESSFULLY DISTINGUISHED THE FACTS OF THE PRECEDING YEAR A.Y. 2011-12 FROM THE PECULIAR FACTS AVAILABLE IN THIS Y EAR, WHICH FACT IS NOT DISPUTED BY THE AO & LD. CIT (A), HENCE THERE WAS N O JUSTIFICATION EVEN OF COMPUTING AN AVERAGE OF THE TWO YEARS OF THE GP RATE AT 47.23% AND TO APPLY THE SAME. THE PAST HISTORY THOUGH IS TREAT ED TO BE A GOOD GUIDE IN THE MATTERS OF ESTIMATIONS HOWEVER, FOR FAIR EST IMATION UNLESS THE FACTS ARE NOT FOUND EXACTLY IDENTICAL, BLIND APPLIC ATION OF THE PAST HISTORY IS ALSO EQUALLY NOT PERMISSIBLE. ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 23 4.20 PERTINENTLY THE LD. CIT(A) HAS VERY CLEARLY AC CEPTED THE FACTUAL CONTENTIONS RAISED EXPLAINING THE REASONS BEHIND TH E FALL OF GP/NP RATE YET HOWEVER, INSTEAD OF DELETING THE COMPLETE ADDIT ION, REDUCED THE GP RATE FROM 47.23% APPLIED BY THE AO TO 46% ONLY BUT ABSOLUTELY WITHOUT FURNISHING ANY REASON AS TO WHY SHE DID NOT ACCEPT DECLARED GP RATE OF 44.71%. THERE IS ABSOLUTELY NO BASIS/REASONING BEHI ND ADOPTING 46%. ONCE THE LD. CIT(A) HAS ACCEPTED THE CONTENTIONS, S HE WAS BOUND TO HAVE ALLOWED THE RELIEF MORE PARTICULARLY, WHEN THE REVENUE IS NOT IN APPEAL CHALLENGING THE FINDINGS RECORDED AND THE RE LIEF GRANTED BY HER. 5. THE LD DR IS HEARD WHO HAS RELIED ON THE ORDER O F THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE PRINCIPAL CONTENTION RAIS ED BY THE ASSESSING OFFICER WHILE REJECTING THE BOOKS OF ACCOUNTS HAS B EEN SUBSTANTIAL INCREASE IN THE AMOUNT OF WASTAGE AS COMPARED TO PR EVIOUS YEAR WHERE THE PRODUCTION HAS ALSO INCREASED SUBSTANTIALLY DUR ING THE YEAR. ON PERUSAL OF DOCUMENTS AVAILABLE ON RECORD, IT IS NOT ED THAT THE PERCENTAGE OF WASTAGE DURING THE YEAR IS 8.93% AS AGAINST 15.8 % IN A.Y. 2010-11. THE DETAILED WORKING THEREOF HAS BEEN REPRODUCED AB OVE. FURTHER, THE TURNOVER HAS, IN FACT, DECREASED FROM RS.21.85 CROR E TO RS.16.59 CRORE ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 24 DURING THE YEAR. THEREFORE, ON BOTH ACCOUNT, THERE IS CLEARLY AN ACTUAL INACCURACY WHICH HAS CREPT IN OR WRONGLY APPRECIATE D BY THE ASSESSING OFFICER WHICH HAS RESULTED IN REJECTION OF BOOKS OF ACCOUNTS. THE OTHER REASON MENTIONED BY THE ASSESSING OFFICER WHILE REJ ECTING THE BOOKS OF ACCOUNTS HAS BEEN THE DECREASE IN THE GP RATE VIS- -VIS LAST YEAR AND NON-MAINTENANCE OF QUANTITATIVE DETAILS IN TERMS OF RAW MATERIAL AND FINISHED GOODS ACCOUNT. ON PERUSAL OF THE RECORD, I T IS NOTED THAT THE FALL IN GP RATE HAS BEEN REASONABLY EXPLAINED BY THE ASS ESSEE THROUGH FACTS AND FIGURES AND AS FAR AS THE QUANTITATIVE DETAILS OF RAW MATERIAL AND FINISHED GOODS ARE CONCERNED, THE SAME HAVE BEEN AP PROPRIATELY DISCLOSED IN THE TAX AUDIT REPORT AND THEREFORE, DE TAILS HAVE BEEN SUBMITTED DURING THE COURSE OF ASSESSMENT AND THE A PPELLATE PROCEEDINGS. IN THE LIGHT OF ABOVE, WE DO NOT SEE A NY JUSTIFIABLE REASON FOR REJECTION OF BOOKS OF ACCOUNTS IN THE INSTANT C ASE. FURTHER, NO REASONABLE BASIS HAS BEEN GIVEN FOR ESTIMATING THE GP RATE BY THE LOWER AUTHORITIES. IN THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO TAKING INTO CONSIDERATION THE FACT THAT IN THE PREV IOUS YEARS AS WELL AS IN THE SUBSEQUENT YEARS, THE BOOKS OF ACCOUNTS HAVE BE EN ACCEPTED BY THE REVENUE, WE DO NOT SEE ANY JUSTIFIABLE BASIS FOR RE JECTION OF BOOKS OF ACCOUNTS IN THE INSTANT YEAR. IN THE RESULT, WE ARE OF THE VIEW THAT A.O WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT S AND MAKING THE GP ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 25 ABOVE. PURSUANT THERETO THE GROUND TAKEN BY THE ASS ESSEE IS THEREFORE ALLOWED. 7. IN RESPECT OF GROUND NO.2, THE BRIEF FACTS OF TH E CASE ARE THAT THE ASSESSING OFFICER HAS MADE AN ADDITION ON ACCOUNT O F EXPENSES UNDER THE HEAD CONVEYANCE OF RS.9,73,835/-, OFFICE EXPENS E RS.1,75,818/-, STAFF WELFARE EXPENSES WITH STAFF-MESS EXPENSES RS. 4,79,463/-, TELEPHONE EXPENSES RS.2,42,816/-, VEHICLE REPAIRING EXPENSES RS.3,53,127/-, FOREIGN TRAVELLING EXPENSES RS.36,51 ,757/-, AND SALES PROMOTION EXPENSES RS.2,29,889/- WHICH IN TOTAL WOR KS OUT TO RS.61,06,705/-. DURING THE COURSE OF ASSESSMENT PRO CEEDING, THE ASSESSING OFFICER HAS FOUND THAT NO CALL REGISTER, LEDGER, VOUCHERS AND LOG BOOK MAINTAINED BY THE ASSESSEE, HENCE THE ASSE SSING OFFICER MADE 20% OF THE ABOVE DISALLOWANCE. 8. THE LD CIT(A) HELD THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS ON THE HIGHER SIDE, HENCE THE ADDITION M ADE BY THE ASSESSING OFFICER IS RESTRICTED TO 10%. 9. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT A BARE READING OF THE IMPUGNED ORDER SHALL REVEAL THAT IN ALMOST ALL THE CASES THE DISALLOWANCES HAVE BEEN MA DE ON AD HOC BASIS, SIMPLY ON MERE SUSPICION, SURMISES AND CONJECTURES. NO SPECIFIC INSTANCE ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 26 OF ANY NATURE WHATSOEVER HAS BEEN GIVEN BY THE AO I N THE IMPUGNED ORDER TO SUPPORT HIS CONTENTION WITH THE DOCUMENTAR Y EVIDENCE THAT THE EXPENDITURES WERE INCURRED FOR NON-BUSINESS PURPOSE S, ELEMENT OF PERSONAL USE WAS THERE. AN ALLEGATION REMAINS A MER E ALLEGATION UNLESS PROVED. SUSPICION CANNOT TAKE THE PLACE OF REALITY, ARE THE SETTLED PRINCIPLES KINDLY REFER DHAKESHWARI COTTON MILLS V/ S CIT (1954) 26 ITR 775 (SC). 9.1 IT WAS SUBMITTED THAT A BUSINESSMAN IS THE BEST JUDGE TO TAKE CARE OF ITS OWN INTEREST & TO TAKE DECISIONS AND TH E AO IS NOT SUPPOSED TO INTERVENE THEREIN NOR HE CAN REPLACE THE ASSESSE E. HERE, WHATEVER DECISIONS WERE TAKEN BY THE ASSESSEE HAS TO BE UNDE RSTOOD AS TAKEN OUT OF COMMERCIAL EXPEDIENCY. KINDLY REFER T.T (P) LTD. V/S CIT (1980) 121 ITR 551 (KAR), CIT V/S UDHOJI SHRIKRISHNADAS (1983) 139 ITR 827 (MP), JK WOOLEN MANUFACTURES V/S CIT (1969) 72 ITR 612 (S C). 9.2 IT WAS FURTHER SUBMITTED THAT NEITHER THE AO NO R THE LD. CIT(A) HAVE PROVIDED ANY REASONABLE BASIS WHATSOEVER FOR MAKING THE ESTIMATED DISALLOWANCE. THEY ALSO IGNORED THE VITAL FACT THAT IN THE PAST NO SUCH DISALLOWANCE WAS EVER MADE. KINDLY REFER ASSESSMENT ORDER (PB 111) WHERE TOTAL RS.7,84,388/- WERE CLAIMED WHICH CAME T O 0.36% OF THE TURNOVER. IT MAY BE CLARIFIED THAT IN THE ASSESSMEN T ORDER HOWEVER, (PB ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 27 101 & 111) THE AO WRONGLY TOTALED THE SAME AT RS.10 ,83,017/-. IN THAT YEAR THE AO DISALLOWED RS.2,16,803/- WHICH COMES TO 0.10% OF THE TURNOVER. AS AGAINST THIS THE SUBJECTED EXPENDITURE WERE OF RS.61,06,705/- AS SELECTED BY THE AO AND CAME TO 3. 68% OF THE TURNOVER. SOME OF THE EXPENSES WERE INCURRED FOR TH E FIRST TIME THIS YEAR ONLY LIKE CONVEYANCE, OFFICE, STAFF WELFARE, FOREIG N TRAVELLING WHICH IS 3.18% OF THE TURNOVER. 9.3 IT WAS SUBMITTED THAT LOOKING TO A HUGE TURNOVE R OF MORE THAN RS.16.59 CRORES (APPROX), CLAIM OF EXPENDITURE IS O THERWISE VERY MEAGER. ON THE ABOVE EXPENSES KINDLY REFER A CHART (PB 101) HEREIN ABOVE. THUS SUCH A MEAGER CLAIM TO ACHIEVE SUCH A HUGE TURNOVER IS NOT AT ALL UNJUSTIFIED. ALL THESE EXPENSES WERE INCURRED EXCLU SIVELY FOR BUSINESSES PURPOSE AND ARE UNDER THE PROVISIONS OF THE ACT. 10. THE LD DR IS HEARD WHO HAS RELIED ON THE ORDER OF LOWER AUTHORITIES. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. NO SPECIFIC EXPENDITURE HAS BE EN IDENTIFIED BY THE ASSESSING OFFICER WHICH CALLS FOR DISALLOWANCE EITH ER IN TERMS OF THE SAID EXPENDITURE BEING BOGUS IN NATURE OR NOT INCURRED F OR THE PURPOSES OF BUSINESS CARRIED ON BY THE ASSESSEE. THERE IS NO B ASIS FOR DISALLOWANCE ON ADHOC BASIS IN THE EYES OF LAW. IN THE RESULT, THE DISALLOWANCE MADE ITA NO.529/JP/2016 M/S GALAXY IMPEX VS. C.I.T.(A), JAIPUR 28 BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD CI T(A) IS DELETED. THE GROUND TAKEN BY THE ASSESSEE IS THUS ALLOWED. 12. REGARDING GROUND NO.3 WHICH IS AGAINST LEVY OF INTEREST UNDER SECTION 233B AND 234D, SINCE THE SAME IS CONSEQUENT IAL IN NATURE, THE SAME IS DISMISSED. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/02/2017. SD/- SD/- DQY HKKJR FOE FLAG ;KNO (KUL BHARAT) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:-28/02/2017. * SANJEEV*. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S GALAXY IMPLEX, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- THE CIT, CIRCLE-6, JAIPUR. 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. 529/JP/2016} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR