ACIT, Jaipur V. M/S KHETAN TILES PVT. LTD., Jaipur

ITA 549/JPR/2012

• Counselvise Citation: 54923114 RSA 2012
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 05-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS NEENA JEPH
• Assessee Lawyers: P C PARWAL DHK
• Keywords: Rejection of books of accounts

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA-@ ITA NO. 549/JP/2012 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 THE ACIT CIRCLE- 4 JAIPUR CUKE VS. M/S. KHETAN TILES (P) LTD. C-59, ROAD NO.5, VKI AREA JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABCK 0431 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : MRS. NEENA JEPH (JCIT). FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL LQUOKBZ DH RKJH[K@ DATE OF HEARING : 03/11/2014 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 16 /01/2015 VKNS'K@ ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE LD. CIT(A)-II, JAIPUR DATED 16-03-2012 FOR THE ASSESSME NT YEAR 2008-09 WHEREIN 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:- (I) DELETING TRADING ADDITION OF RS. 27,45,015/- MADE BY THE AO BY NOT UPHOLDING REJECTION OF BOOKS OF ITA NO. 549/JP/2012 ACIT VS. M/S. KHAITAN TILES (P) LTD. 2 ACCOUNT DESPITE THE FACT THAT THE ASSESSEE NEITHER HAD ANY REASONABLE BASIS FOR VALUATION OF OLD AND INFERIOR STOCK @ 25% OF RATE OF FRESH STOCK NOR IT WAS ABLE TO IDENT IFY SUCH STOCK. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE D EALS IN MANUFACTURING, TRADING AND EXPORT OF MARBLE, TILES AND SLABS. THE ASSESSEE HAD DISCLOSED A GROSS PROFIT RATE OF 37.92% ON TURNOVER OF RS. 9.58 CRORES AS AGAINST GROSS PROFIT RATE OF 40.79% ON TURNOVER OF RS. 1.04 CROR ES IN PRECEDING YEAR. WHILE VALUING THE CLOSIMG STOCK OF MARBLE, TILES AN D SLABS, THE ASSESSEE HAD ESTIMATED 50% STOCK AS DEFECTIVE WHICH COULD FE TCH MARKET VALUE @ 25% OF THE STOCK OF FRESH GOODS. FOLLOWING THE PAST HISTORY OF THE ASSESSEE, THE AO REJECTED THE BOOKS OF ACCOUNTS AND ADOPTED THE HIGHER GROSS PROFIT RATE OF LAST YEAR AT 40.79% AND MADE T HE IMPUGNED ADDITION. 2.2 AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL WHEREIN THE LD. CIT(A) RELIED ON ITAT ORDER IN ASSESSEES OWN CASE DATED 24-04-2009 FOR THE ASSESSMENT YEAR 2005-06. IN THIS CASE, THE AO M ADE SIMILAR TYPE OF ADDITION AND THE LD. CIT(A) DELETED THE ADDITION. THE ORDER OF THE LD. CIT(A) DELETING THE ADDITIONS WAS CONFIRMED BY ITAT BY FOLLOWING OBSERVATIONS. ITA NO. 549/JP/2012 ACIT VS. M/S. KHAITAN TILES (P) LTD. 3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT VALUATION OF CLOSING STOCK IS BEING FOLLOWED C ONSISTENTLY AS IN THE PAST YEAR. AS REGARDS THE VARIATION OF TH E PRODUCTION VIS-A-VIS POWER CONSUMPTION, THE EXPLANA TION OF THE ASSESSEE IN THE PRECEDING YEARS IS THAT THERE W AS TOTAL PRODUCTION OF MARBLE OF M/S. ANDHI MINES WHEREAS DU RING YEAR THE TOTAL PRODUCTION WAS OF COLOUR MARBLES OF BIDASAR MINES WHICH IS MORE HARD RESULTING INTO MORE POWER CONSUMPTION. THEREFORE, IN SUCH CIRCUMSTANCES AND F ACTS OF THE CASE AND IN THE ABSENCE OF ANY SPECIFIC DEFECT, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RI GHTLY REVERSED THE ORDER OF THE AO. 2.3 THE LD. CIT(A) IN THE IMPUGNED ORDER HELD THAT THERE WERE NO SPECIFIC DEFECTS WHICH WERE POINTED OUT BY THE AO. THE METHOD OF STOCK VALUATION WAS CONSISTENTLY FOLLOWED. THUS IN THE EN TIRETY OF THE FACTS AND CIRCUMSTANCES, THE LD. CIT(A) UPHELD THE BOOKS OF A CCOUNTS AND DELETED THE ADDITION BY FOLLOWING OBSERVATIONS. 3.3 ON CAREFUL CONSIDERATION OF FACTS, THE EXPLANATION RENDERED BY THE APPELLANT IS FOUND TO B E PLAUSIBLE. THE ISSUE UNDER CONSIDERATION IS ALSO CO VERED BY THE ORDER OF MY PREDECESSOR AND HON'BLE ITAT FOR T HE EARLIER YEARS. MY PREDECESSOR VIDE HIS ORDER NO. 70 3/JP/07- 08 DATED 14-10-2006 FOR ASSESSMENT YEAR 2005-06 HAD HELD THAT THE AO WAS NOT JUSTIFIED IN INVOKING THE PROVI SIONS OF SECTION 145(3) ONLY ON THE GROUND OF VALUATION OF D EFECT STOCK BEING DONE ON ESTIMATE BASIS. IT WAS HELD THA T METHOD OF VALUATION OF THE CLOSING STOCK WAS THE SAME AS I N THE ITA NO. 549/JP/2012 ACIT VS. M/S. KHAITAN TILES (P) LTD. 4 EARLIER YEAR AND IT WAS CONSISTENTLY FOLLOWED. SIMI LARLY COMPLETE DETAILS OF SUNDRY CREDITORS ALONGWITH THEI R COMPLETE ADDRESSES HAVE BEEN FILED BY THE APPELLANT BEFORE ME. AS REGARS COMMISSION OF RS. 4292,450/- PAID TO VARIOUS PERSONS, THE APPELLANT HAD FILED DETAILS OF COMMISS ION PAID, TAX DEDUCTED AT SOURCE AND PAN OF EACH RECIPIENT VI DE LETTER DATED 23-07-2010 DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THERE IS NOTHING ON RECORD BROUGHT BY THE AO TO SUBSTANTIATE HIS ALLEGATION THAT COMMISSION EXPE NSES WERE INFLATED OR BOGUS. IN THE ABSENCE OF ANY MATERIAL DISCREPANCY, THE BOOKS OF ACCOUNTS CANNOT BE REJECT ED LIGHT HEARTEDLY. THE APPELLANT HAD SATISFACTORILY EXPLAIN ED THAT FALL IN GROSS PROFIT WAS ATTRIBUTED TO THE INCREASE IN T URNOVER FROM RS. 6.40 CRORES TO RS. 9.57 CRORES. HENCE, THE GROSS PROFIT WAS BOUND TO VARY FROM YEAR TO YEAR. I ACCOR DINGLY DIRECT THE AO TO DELETE THE TRADING ADDITION OF RS. 27,47,015/- MADE BY HIM. THESE GROUNDS OF APPEAL AR E ALLOWED. 2.4 THE LD. DR SUPPORTED THE ORDER OF THE AO. 2.5 THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE FACTS OF THE CASE AND FURTHER RELIED ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES, (2013) 358 ITR 295 FOR TH E PROPOSITION THAT DIFFERENCE IN CLOSING STOCK VALUATION AMOUNTS TO PR EPONEMENT OR ITA NO. 549/JP/2012 ACIT VS. M/S. KHAITAN TILES (P) LTD. 5 POSTPONEMENT OF TAXATION AS IF THE CLOSING STOCK IS INCREASED IN THIS YEAR, IT WILL BE ALLOWED AS OPENING STOCK IN THE NEXT YEA R AND IT WILL REDUCE THE TAXABILITY OF THE NEXT YEAR. THEREFORE, SUCH ADDITI ONS ARE REVENUE NEUTRAL. IT IS FURTHER PLEADED THAT THE AO HAS UNJUSTIFIABLY APPLIED THE HIGHER GROSS PROFIT RATE OF PRECEDING YEAR WHICH WAS EARNED ON A MEAGER TURNOVER OF RS. 1.04 CRORES WHEREAS IN THIS YEAR THE TURNOVER HAS INCREASED FROM RS. 1.04 CRORES TO RS. 9.58 CRORES. THUS THERE BEIN G VALID JUSTIFICATION FOR DECREASE IN GP , T HERE IS NO JUSTIFICATION IN SUCH ADDITION. THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION LOOKING AT THE MER ITS AND PAST HISTORY OF ITAT JUDGMENT IN ASSESSEE'S OWN CASE AND IT IS SUPP ORTED BY HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF CIT VS. EXCEL INDUSTRIES, (SUPRA). 2.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN OUR CONSIDERED THE VIEW, TH E LD. CIT(A) HAS TAKEN JUSTIFIED VIEW BY FOLLOWING ITAT ORDER IN ASSESSEE' S OWN CASE. THE BASIS OF REJECTION OF ACCOUNT BOOKS CANNOT BE UPHELD AS N O SPECIFIC DEFECTS ARE POINTED OUT AND THE ISSUE OF VALUATION OF CLOSING S TOCK HAS BEEN USED AS A TOOL TO REJECT THE BOOKS OF ACCOUNT WHICH CANNOT BE UPHELD. THERE CANNOT BE A FAIR COMPARISON OF GROSS PROFIT RATE OF 40.79% ON TURNOVER OF RS. 1.04 CRORES AS AGAINST TURNOVER OF RS. 9.58 CR ORES. BESIDES THE ITA NO. 549/JP/2012 ACIT VS. M/S. KHAITAN TILES (P) LTD. 6 ADDITION RELATABLE TO VALUATION OF CLOSING STOCK HA S BEEN HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES (SUPRA) TO BE PREPONEMENT OR POSTPONEMENT OF TAXATION. THUS IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND APPEAL OF THE REVENUE IS DISMISSED. 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/01/201 5. SD/- SD/- VH-VKJ-EHUK VKJ-IH-RKSYKUH (T.R. MEENA) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 16 TH JANUARY, 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT, CIRCLE- 4, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- M/S. KHAITAN TILES (P) LTD., JAIPU R . 3. VK;DJ VK;QDRVIHY@ THE CIT(A). 4. VK;DJ VK;QDR@ CIT, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.549/JP/2012) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR ITA NO. 549/JP/2012 ACIT VS. M/S. KHAITAN TILES (P) LTD. 7