DCIT, New Delhi V. M/s Lalsons Jewellers Ltd., New Delhi

ITA 5586/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3796 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 30-05-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 09-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MONGA
• Assessee Lawyers: AMIT SACHDEVA
• Keywords: Bad and doubtful debts
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.G. BANSAL ITA NO. 5726(DEL)/2010 ASSESSMENT YEAR : 2007-08 LALSONS JEWELLERS LTD., DEPUTY COMMISSIONER OF INCOME 23B/6, NEW ROHTAK ROAD, VS. TA X, CIRCLE 4(1), NEW DELHI NEW DELHI. ITA NO. 5586(DEL)/2010 ASSESSMENT YEAR : 2007-08 DEPUTY COMMISSIONER OF INCOME LALSONS JEWELLERS LTD., TAX, CIRCLE 4(1), NEW DELHI. VS. 23B/6, NEW ROHTAK ROAD, NEW DELHI. PAN-AAACL2055M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AJAY VOHRA, ADVOCATE & SHRI AMIT SACHDEVA, ADVOCATE DEPARTMENT BY : SHRI A.K. MONGA, SR. DR ORDER PER K.G. BANSAL : AM THESE CROSS APPEALS OF THE ASSESSEE AND THE RE VENUE WERE ARGUED IN A CONSOLIDATED MANNER BY THE LD. COUNSEL FOR THE ASSESSEE AND THE LD. DR. THE ASSESSEE HAS TAKEN UP THREE GROUNDS IN THE A PPEAL. IN THE COURSE OF HEARING BEFORE US, IT HAS BEEN EXPLAINED THAT TH E REAL GRIEVANCE IS PROJECTED IN GROUND NOS. 2.1 AND 2.2 THAT THE LD. CIT(APPEALS) ERRED ON ITA NOS. 5726&5586(DEL)/2010 2 FACTS AND IN LAW IN REJECTING THE BOOKS OF ACCOUNT AND ESTIMATING THE NET PROFIT AT 2.5% OF THE SALES, THEREBY ASSESSING T HE INCOME AT RS. 1,45,36,030/- AGAINST THE DISCLOSED INCOME OF RS. 47,39,887/-. THE REVENUE HAS ALSO TAKEN THREE GROUNDS IN ITS APPEAL. IT HAS BEEN EXPLAINED TO US BY THE LD. DR THAT THE REAL GRIEVANCE IS CONTAINED IN GROUND NO. 2 THAT THE LD. CIT(APPEALS) ERRED IN REDUCING THE INCOME TO RS. 1,45,36,030/- AGAINST THE ASSESSED INCOME OF RS. 1,72,39,091/-. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RETURN ON 29.10.2007 DECLARING TOTAL INCOME OF RS. 47,39,887 /-. THE RETURN WAS INITIALLY PROCESSED U/S 143(1) AND THEREAFTER IT WAS TAKEN UP FOR SCRUTINY BY ISSUING STATUTORY NOTICE U/S 143(2) ON 22.9.2 008. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADI NG IN GOLD ORNAMENTS. THE ASSESSEE DISCLOSED SALES OF ABOUT RS. 58.14 CRORE. THE CONSUMPTION OF RAW-MATERIAL HAS BEEN SHOWN AT RS. 53.53 CRORE. THE RATIO OF FINISHED GOODS TO THE MATERIAL CONSUMED IS 96.87%, AND THE ASSESSEE HAD SHOWN GROSS PROFIT RATIO AT 3.27%. THE NET PROFIT RA TIO STANDS AT 0.79%. 2.1 THE AO CONDUCTED CERTAIN ENQUIRIES IN THE COU RSE OF ASSESSMENT PROCEEDINGS, ON THE BASIS OF WHICH HE CAME TO THE CONCLUSION THAT THE ITA NOS. 5726&5586(DEL)/2010 3 BOOKS OF ACCOUNT ARE NOT RELIABLE. THEREFORE, T HE BOOKS WERE REJECTED. THEREAFTER, THE INCOME WAS COMPUTED AT 12% OF AV ERAGE CAPITAL EMPLOYED DURING THE YEAR. THUS, THE TOTAL INCOME WAS ASSESSED AT RS. 1,72,39,090/-. 2.2 THE MATTER WAS AGITATED IN APPEAL. IN THE IM PUGNED ORDER, IT IS MENTIONED THAT THE THREE PARTIES, NAMELY, (I) M OHIT EXPORTS,; (II) JAINEM IMPEX AND (III) GYAN EXPORTS FAILED TO COMPLY W ITH THE SUMMONS ISSUED TO THEM U/S 131 OF THE ACT IN THE COURSE OF ASS ESSMENT PROCEEDINGS. EVEN IN THE COURSE OF REMAND PROCEEDINGS, THREE PARTI ES, NAMELY, -(I) MOHIT EXPORTS; (II) BHERUMAL SHAMANDAS; AND (III) INDO G EM CORPORATION FAILED TO COMPLY WITH THE SUMMONS. THE ASSESSEE HAS BEEN DEALING WITH THESE PARTIES REGULARLY AND, THEREFORE, IT IS OBLIGED TO FURNISH AT LEAST CONFIRMATION FROM THESE PARTIES OR TO PRODUCE T HEM. IT IS FURTHER MENTIONED THAT THE ASSESSEE HAS NOT SUBMITTED Q UANTITATIVE RECONCILIATION OF GOLD AND JEWELLERY STOCK BASED ON SALE AND P URCHASE VOUCHERS. THEREFORE, IT HAS BEEN HELD THAT THE BOOKS CANNOT BE RELIED UPON FOR DETERMINING THE INCOME. HE APPLIED THE NET PROFI T RATE OF 2.5% TO THE DISCLOSED SALES AND ESTIMATED THE INCOME AT RS. 1,45,36,030/-. AGGRIEVED BY THIS ORDER, BOTH THE PARTIES ARE IN APPEAL. ITA NOS. 5726&5586(DEL)/2010 4 3. IN THE COURSE OF HEARING BEFORE US, THE LD. COUN SEL SUBMITTED THAT THE AO MADE ENQUIRIES FROM 11 PARTIES IN ALL IN REGAR D TO TRADING TRANSACTIONS. COMPLIANCE MADE BY THESE PARTIES HAD BEEN MENTIO NED, WHICH CAN BE SUMMARIZED AS UNDER:- (I) TWO PARTIES, NAMELY, HEERA JEWELLERS AND SAMART H TRADERS COMPLIED WITH THE REQUIREMENT OF SUMMONS ON 16.12.2009. T HIS IS WITNESSED BY TWO ORDER SHEET ENTRIES OF THAT DATE. THE EVIDENCE FILED BY HEERA JEWELLERS HAS BEEN PLACED IN THE PAPER BOOK ON PAGE NOS. 46 TO 6 0, WHICH CONSISTS OF A LETTER DATED 16.12.2009; COPY OF BANK ACCOUNT; CO PY OF INCOME-TAX RETURN ACKNOWLEDGEMENT FOR ASSESSMENT YEAR 2007-08 AND THE COPY OF LEDGER ACCOUNT OF THE ASSESSEE IN ITS BOOKS. SIMILARLY, THE EVIDENCE IN THE CASE OF SAMARTH TRADERS FILED BY IT HAS BEEN PLACED IN TH E PAPER BOOK FROM PAGE NOS. 61 TO 69. THE SUMMONS WERE DULY SERVED TO SARTHAK ENTERPRISES, A COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK ON PAGE NO. 78. ON PERUSAL THEREOF, IT IS SEEN THAT IT IS ONLY A C OPY OF THE SUMMONS WHICH DOES NOT SHOW ITS SERVICE. IT IS CLARIFIED THAT NO MENTION HAS BEEN MADE ABOUT ANY OF THESE PARTIES IN THE ASSESS MENT ORDER AND, THEREFORE, IT IS PRESUMED THAT THE AO IS SATISFIED ABOUT THE TRANSACTIONS WITH THESE PARTIES. ITA NOS. 5726&5586(DEL)/2010 5 (II) IN REGARD TO OTHER EIGHT PARTIES IN RESPECT OF WHICH THE ENQUIRY WAS MADE, IT IS SUBMITTED THAT ALTHOUGH THE SUMMONS TO SELECTIVE GEMS WERE RETURNED IN THE ASSESSMENT PROCEEDINGS, THE SAME WERE SERVED IN THE COURSE OF REMAND PROCEEDINGS AND THE AO REPORTED THAT THIS PARTY CONFIRMED TO HAVE SUPPLIED STONES TO THE ASSESSEE . SIMILAR POSITION IS OBTAINED IN THE CASE OF GAURAV EXPORTS AND AYUS H ENTERPRISES. IN THE CASE OF RAJU GEMS, THE SUMMONS WERE SERVED IN TH E COURSE OF ASSESSMENT PROCEEDINGS BUT THE PARTY DID NOT RESPOND. HOW EVER, CONFIRMATION WAS SUPPLIED IN THE COURSE OF REMAND PROCEEDINGS T HAT IT SUPPLIED RAW- MATERIAL TO THE ASSESSEE. SAUMALAYA IMPEX COULD NOT BE SERVED NOTICE IN ASSESSMENT PROCEEDINGS AS THE NOTICE WAS RETURNED WITH THE REMARK NO SUCH PARTY AT GIVEN ADDRESS. HOWEVER, SUMMONS WERE SERVED IN THE COURSE OF REMAND PROCEEDINGS. THE PARTY CONFIRME D THE TRANSACTIONS WITH THE ASSESSEE IN REGARD TO SALES AND FILED A C OPY OF ITS RETURN OF INCOME. IN THE STATEMENT, IT WAS DEPOSED THAT HE HAD VACATED HIS OFFICE PREMISES AT KAROL BAGH AND THEREAFTER STARTED FUNCTIONING FROM PREET VIHAR. THE REMAINING THREE PARTIES COULD NOT BE CONTACTED EVE N IN REMAND PROCEEDINGS. THE LD. CIT(APPEALS) GAVE ADVERSE FINDING ON AC COUNT OF NON-COMPLIANCE OF THESE THREE PARTIES. IN RESPECT OF THESE P ARTIES ALSO, THE ASSESSEE HAS ITA NOS. 5726&5586(DEL)/2010 6 GIVEN FURTHER DETAILS THAT ALTHOUGH CONFIRMATION W AS OBTAINED FROM MOHIT EXPORTS AND FILED, BUT THE LD. CIT(APPEALS) MENTIO NED THAT NO CONFIRMATION HAD BEEN FILED FROM THIS PARTY. SUMMONS ISSUE D TO THIS PARTY IN THE COURSE OF ASSESSMENT PROCEEDINGS WERE RETURNED W ITH THE REMARK NO SUCH PARTY AT GIVEN ADDRESS. JAINEM IMPEX LEFT THE PR EMISES AND THAT IS WHY THE SUMMONS ISSUED TO IT IN THE COURSE OF ASSESS MENT PROCEEDINGS WERE RETURNED WITH THE REMARK LEFT. THIS SHOWS THAT THE PARTY EXISTED AT THE ADDRESS AT THE TIME OF THE TRANSACTION BUT THERE AFTER MOVED OUT OF THE PREMISES. THE PRESENT ADDRESS IS NOT KNOWN TO T HE ASSESSEE. SIMILAR POSITION OBTAINS IN THE CASE OF GYAN EXPORTS. T HE CASE OF THE ASSESSEE ON THE BASIS OF THESE DETAILS IS THAT ENQUIRY WAS ACTUALLY CONDUCTED WITH 11 PARTIES. EIGHT PARTIES CONFIRMED THE TRANSACTIONS WITH THE ASSESSEE AT ONE STAGE OR THE OTHER OF THE PROCEEDINGS. CONFIRM ATION WAS FILED FROM MOHIT EXPORTS BUT AT THE TIME OF MAKING ENQUIRY, THIS PARTY DID NOT EXIST AT THE GIVEN ADDRESS. JAINEM IMPEX AND GYAN EXPO RTS WERE EXISTING PARTIES BUT HAD LEFT THE PREMISES AT THE TIME OF MA KING ENQUIRIES. THUS, THE BOOKS OF ACCOUNT COULD NOT BE REJECTED IN ABSENC E OF ANY VERIFICATION FROM THREE OF 11 PARTIES. ITA NOS. 5726&5586(DEL)/2010 7 (III) IN REGARD TO TRANSACTIONS WITH FOUR CUSTOMER S, ON THE BASIS OF WHICH ADVERSE INFERENCE WAS DRAWN BY THE AO, IT WAS SUBMITTED THAT IN THE CASE OF SARANDEEP KAUR, THE AO HAD RECORDED THE STA TEMENT OF HER HUSBAND, WHO DENIED ANY PURCHASE FROM THE ASSESSEE. HOW EVER, HE CLARIFIED THE POSITION IN LETTER DATED 16.12.2009 THAT HE HAD NO BUSINESS RELATION WITH THE ASSESSEE. HOWEVER, IN FINANCIAL YEAR 2006-07 HIS WIFE HAD PLACED ORDER FOR PURCHASE OF ONE SET AND ADVANCED OF RS. 10,000/- TO THE ASSESSEE. THIS SET WAS NOT FOUND UP TO THE MARK AND, THEREF ORE, DELIVERY WAS NOT TAKEN. THE ADVANCE WAS RETURNED BY THE ASSESSEE TO HIM. IT IS MENTIONED THAT THE CONTENTS OF THIS LETTER MORE OR LESS TAL LIED WITH THE TRANSACTIONS RECORDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUN T. THE LEDGER SHOWS SALE OF JEWELLERY, WEIGHING 62.28 GRAMS FOR RS. 68,550 /- VIDE BILL NO. 120 DATED 14.5.2006. CASH OF RS. 10,000/- WAS ALSO RECEI VED ON SAME DAY. THE ENTRY WAS REVERSED AS SALES RETURN AT RS. 59, 170/-. IN THE ENTRY, A CROSS REFERENCE WAS MADE TO BILL NO. 120 MENTIONED ABOVE . SANDEEP CHAUDHARY HAD FURNISHED NO REPLY IN ASSESSMENT PROCEEDINGS. HOWEVER, IN THE REMAND REPORT IT HAS BEEN CONFIRMED BY THE AO THAT LITI GATION HAS BEEN GOING ON BETWEEN HIM AND THE ASSESSEE. IN SUCH A CIRCUMSTA NCE, IT WAS EXPECTED THAT HE SHALL NOT RESPOND TO THE QUERY MADE BY TH E AO. THE COMPLAINT IN THE MATTER HAS BEEN PLACED IN THE PAPER BOOK ON P AGE NOS. 109 TO 121. IN ITA NOS. 5726&5586(DEL)/2010 8 THE CASE OF VIJAY CHAUDHARY, THE DETAILS WERE INADVERTENTLY NOT FURNISHED IN THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, THE LEDGER ACCOUNT AND THE BILL WERE SUBMITTED IN THE REMA ND PROCEEDINGS WHICH HAVE NOW BEEN PLACED IN THE PAPER BOOK ON PAGE NOS . 102 AND 103. IN THE CASE OF ANITA MAHENDROO, THE ASSESSEE DID NOT C ONDUCT ANY TRANSACTION IN THE RELEVANT PREVIOUS YEAR. THE ACCOUNT FOR FIN ANCIAL YEARS 2005-06 AND 2006-07 HAS BEEN PLACED BEFORE THE LOWER AUTHORIT IES AND NOW PLACED IN THE PAPER BOOK ON PAGE NOS. 94 AND 98. ON THE B ASIS OF THESE FACTS, IT IS ARGUED THAT NO DISCREPANCY WHATSOEVER EXISTED IN SO FAR AS THE TRANSACTIONS OF THE ASSESSEE WITH THESE FOUR CU STOMERS ARE CONCERNED. (IV) IN REGARD TO THE LOANS, THE ASSESSEE WAS U NABLE TO FILE CONFIRMATION FROM BHERUMAL SHAMANDAS. HOWEVER, SUMMONS WERE SE RVED FINALLY IN THE COURSE OF REMAND PROCEEDINGS AND IT SENT A REPLY ALONG WITH THE COPY OF ACCOUNT OF THE ASSESSEE SHOWING DEBIT BALANCE OF RS. 4,59,873/-. FURTHER, IN THE CASE OF INDO GEM CORPORATION, CONFIRMATI ON IN RESPECT OF THE AMOUNT OF RS. 3,37,000/- COULD NOT BE FILED EITHE R IN THE COURSE OF ASSESSMENT PROCEEDINGS OR THE REMAND PROCEEDINGS. THE CASE OF THE ASSESSEE IS THAT IT REQUESTED THE CONCERNED PARTY TO FURNISH CONFIRMED COPY OF ACCOUNT, FOR WHICH LETTERS WERE WRITTEN , BUT NO RESPONSE WAS ITA NOS. 5726&5586(DEL)/2010 9 RECEIVED. TWO SUCH LETTERS ARE PLACED IN THE PAPER BOOK ON PAGE NOS. 122 AND 123. 3.1 THE ARGUMENTS OF THE LD. COUNSEL ARE THAT T HE ASSESSEE HAS BEEN ASSESSED OVER A PERIOD OF 15 YEARS AND ITS BOOK RESULTS WERE ACCEPTED IN PAST. SOME ASSESSMENTS WERE ALSO MADE UNDER SECTION 143(3). THERE IS NO CHANGE IN THE MANNER IN WHICH THE BOOKS OF ACCO UNT ARE MAINTAINED FOR THIS YEAR. ALTHOUGH THE ASSESSEE HAS NOT B EEN ABLE TO PRODUCE EVIDENCE IN RESPECT OF SOME PARTIES, THAT BY IT SELF IS NOT SUFFICIENT TO REJECT THE BOOKS OF ACCOUNT ESPECIALLY IN THE CIRCUMSTAN CE THAT MOST OF THE PARTIES HAVE CONFIRMED THE TRANSACTIONS. THEREF ORE, IT IS AGITATED THAT THE FINDING OF THE LD. CIT(APPEALS) REGARDING REJECTI ON OF BOOKS OF ACCOUNT MAY BE SET ASIDE. 3.2 COMING TO COMPUTATION OF INCOME, IT IS SUBMITT ED THAT EVEN IF BOOKS ARE REJECTED, NONE OF THE LOWER AUTHORITIES H AVE SHOWN ANY OBJECTIVE EVIDENCE FOR THEIR RESPECTIVE ASSESSMENTS. THE ASSESSEE HAS SHOWN THE RATIO OF PRODUCTION TO RAW-MATERIAL CONSUMED IN FIN ANCIAL TERMS AT 96.87%, WHICH IS COMPARABLE WITH THE RATIOS OF 96.16%, 96.92% AND 97.17% IN RESPECT OF ASSESSMENT YEARS 2004-05, 2005-06 AND 2006-07 RESPECTIVELY, ITA NOS. 5726&5586(DEL)/2010 10 BEING IMMEDIATELY THREE PRECEDING YEARS. THESE R ATIOS ARE COMPARABLES AND, THEREFORE, EVEN AFTER REJECTION OF BOOKS OF ACCOUNT NO ADDITION COULD HAVE BEEN SUSTAINED. 4. IN REPLY, THE LD. DR RELIED ON THE FINDINGS OF THE LD. CIT(APPEALS) CONTAINED IN PARAGRAPH NOS. 3.5 TO 3.7, WHICH READ AS UNDER:- 3.5 I HAVE CONSIDERED THE WRITTEN SUBMISSION ON BE HALF OF THE APPELLANT, THE FINDINGS OF THE ASSESSING OFFICER I N THE ASSESSMENT ORDER AS WELL AS IN THE REMAND REPORT AND THE F ACTS ON RECORD. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, E NQUIRIES WERE MADE BY THE ASSESSING OFFICER TO VERIFY THE PURCHAS ES MADE, MAKING CHARGES PAID AND BAD DEBTS WRITTEN OFF DUR ING THE RELEVANT PREVIOUS YEAR BY WAY OF ISSUANCE OF SUMMON S UNDER SECTION 131 TO SOME OF THE PARTIES WHOSE DETAILS WERE MADE AVAILABLE BY THE ASSESSEE. SOME OF THE SUMMONS SO ISSUED WERE RETURNED UNSERVED OR WITH REMARKS AS LEFT OR NO REPLY WAS FURNISHED BY THE PARTIES. SECONDLY, IT WAS OBS ERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT BEEN A BLE TO SUBMIT QUANTITATIVE RECONCILIATION OF GOLD AND DIAMOND JEWELLERY STOCK BASED ON SALE AND PURCHASE VOUCHERS. DRAWING ADVE RSE INFERENCE FROM THE ABOVE, THE AO REJECTED THE BOOKS OF ACCOUNT OF THE APPELLANT AND COMPLETED ASSESSMENT ON ESTIMATE BASIS BY ADOPTING RATE OF RETURN OF 12% ON AVERAGE FUNDS/CAP ITAL EMPLOYED, THEREBY ESTIMATING THE INCOME OF THE APPELLANT A T RS. 1,72,39,091/- AS AGAINST THE RETURNED INCOME OF R S. 47,49,887/-. IT IS OBSERVED THAT ORDINARILY, A TRADER IS N OT REQUIRED TO KNOW THE IDENTITY OF THE CUSTOMER WHO BUYS THE GOODS, MAKES THE PAYMENT IN CASH AND DOES NOT MAINTAIN ANY ACCOUNT WITH THE TRADERS. IN SUCH A SITUATION, IT CANNOT BE THE RE SPONSIBILITY OF THE TRADER TO PRODUCE THE CUSTOMER FOR VERIFICATI ON OF SALE. HOWEVER, THIS MAY NOT BE APPLICABLE TO THE TRADE P URCHASES AND/OR JOB WORKS. HOWEVER, WHEN REPEATED PURCHASES AND/ OR JOB WORKS ITA NOS. 5726&5586(DEL)/2010 11 OF SUBSTANTIAL AMOUNTS ARE MADE DURING THE YEAR TO THE SAME PERSONS/PARTIES IN THIS SITUATION, THERE IS A VA LID PRESUMPTION THAT THE PERSONS/PARTIES ARE KNOWN TO THE TRADERS. THERE IS ADMITTEDLY NO DISPUTE OVER THE FACT THAT ALL THE PERSONS/PAR TIES, TO WHOM SUMMONS/NOTICES WERE SENT, HAVE NOT CONFIRMED THE TRANSACTIONS WITH THE APPELLANT. TO BE PRECISE, THREE PARTIES, NAMELY, (I) M/S MOHIT EXPORTS; (II) JAINAM IMPEX AND (III) GYAN EXP ORT FAILED TO COMPLY WITH THE SUMMONS UNDER SECTION 131 OF THE A CT DURING THE ASSESSMENT PROCEEDINGS. 3.6 EVEN DURING THE REMAND PROCEEDINGS, THREE PARTIES, NAMELY, I) M/S MOHIT EXPORTS, II) M/S BHERUMAL SHAMANDAS; AND III) M/S INDO GEMS CORPORATION FAILED TO RESPOND TO THE SUM MONS UNDER SECTION 131 OF THE ACT. IN SUCH CIRCUMSTANCES, TH E ASSESSEE CANNOT BE ABSOLVED OF THE OBLIGATION TO FURNISH CO NFIRMATIONS AT LEAST FROM THE AFOREMENTIONED PERSONS/PARTIES OR TO PRODUCE THEM. 3.7 IT IS ALSO OBSERVED THAT THE APPELLANT H AS NOT BEEN ABLE TO SUBMIT QUANTITATIVE RECONCILIATION OF GOLD AND DIA MOND JEWELLERY STOCK BASED ON SALE AND PURCHASE VOUCHERS. UNDER THESE CIRCUMSTANCES, THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND THE TRADING RESULTS SHOWN THEREIN WHICH ARE NOT OPEN TO VERIFICATION CANNOT BE ACCEPTED. THE BOOKS OF A CCOUNT AND THE DETERMINATION OF PROFIT ON ESTIMATE HAS BEEN, THU S, RIGHTLY DONE BY THE ASSESSING OFFICER. HOWEVER, IN MY CONSIDERED V IEW, ESTIMATION OF INCOME BY ADOPTING NET PROFIT RA TE OF 2.5% ON THE DISCLOSED SALES OF RS. 58,14,41,257/-, WHICH COMES TO RS. 1,45,36,030/-, WOULD MEET THE ENDS OF JUSTICE. HE NCE, THE APPELLANT GETS A RELIEF OF RS. 27,03,061/-. AS RESULT, GROUNDS OF APPEAL NO. 1 AND 2 ARE PARTLY ALLOWED. 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. IT IS AN ACCEPTED POSITION THAT THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNT FOR THIS YEAR ON THE SAME BASIS AS IN EARLIER YEARS. IN THE PAST, BOOK RESULTS WERE ACCEPTED. ADMITTEDL Y, ASSESSMENTS FOR ITA NOS. 5726&5586(DEL)/2010 12 ASSESSMENT YEARS 2001-02, 2003-04 AND 2005-06 W ERE MADE U/S 143(3). AFTER CONSIDERING ENQUIRIES MADE IN THE COURSE OF ASSESSMENT AND IN THE COURSE OF REMAND PROCEEDINGS, ONLY FOLLOWING MATT ERS SURVIVE:- (I) MOHIT EXPORTS COULD NOT BE PRODUCED ALTHOU GH CONFIRMATION FROM THIS PARTY WAS FILED IN THE COURSE OF REMAND PROCEEDING S AND NO COMMENT WAS MADE THEREON BY THE AO; (II) NO EVIDENCE COULD BE LED FROM JAINEM IMP EX AND GYAN EXPORTS AS THESE PARTIES HAD LEFT THE PREMISES; AND (III) NO CONFIRMATION COULD BE PRODUCED FROM IND O GEM CORPORATION. 5.1 IT MAY BE MENTIONED THAT ENQUIRIES WERE MADE IN ALL FROM 17 PARTIES. EXCEPT THE AFORESAID DEFICIENCIES, EVIDENCE HAS BEEN LED FROM OTHER PARTIES, IN WHICH NO DISCREPANCY HAS BEEN POINTED OUT BY ANY OF THE LOWER AUTHORITIES. THE ASSESSEE COULD NOT HAVE BEEN EX PECTED TO OBTAIN CONFIRMATION FROM THE PARTIES WHICH HAD LEFT THE P REMISES AS IT WAS NOT IN A POSITION TO ASCERTAIN THE CURRENT ADDRESS. I NDO GEM CORPORATION IS A RAJASTHAN PARTY FROM WHICH NO CONFIRMATION COULD BE PRODUCED ALTHOUGH ITA NOS. 5726&5586(DEL)/2010 13 THE ASSESSEE WROTE LETTERS TO THIS PARTY TWICE . IN ANY CASE, NON-FILING OF CONFIRMATION OF LOAN CANNOT BE A BASIS FOR REJEC TION OF BOOKS OF ACCOUNT FOR THE PURPOSE OF MAKING TRADING ADDITION. THUS, ON PROPER APPRECIATION OF THE EVIDENCE ON RECORD, IT CAN BE SAID THAT T HE SUFFICIENT GROUNDS DID NOT EXIST FOR REJECTION OF BOOKS. ACCORDING LY, IT IS HELD THAT THE BOOKS OF ACCOUNT COULD NOT HAVE BEEN REJECTED IN A LIGHT HEARTED MANNER, ESPECIALLY WHEN THE SAME WERE MAINTAINED ON SAME BASIS AS IN EARLIER YEARS. EVEN IF IT IS PRESUMED THAT THE BOOKS C OULD BE REJECTED, THE PROFITS HAVE TO BE DETERMINED IN A FAIR MANNER AN D ON THE BASIS OF PAST RESULTS OR THE RESULTS IN COMPARABLE CASES. THI S MATTER HAS NOT BEEN GONE INTO AT ALL BY THE LOWER AUTHORITIES. THE AO DETERMINED PROFIT ON THE BASIS OF RETURN ON AVERAGE CAPITAL EMPLOYED DURIN G THE YEAR AND @ 12% THEREOF. NO EXERCISE WAS CARRIED OUT TO EXAMINE WHETHER THE RESULTS IN PAST WERE COMMENSURATE WHEN COMPARE WITH APPLICA TION OF THIS METHOD. IN ANY CASE, SUCH A METHOD IS AN UNUSUAL METHOD, WHICH IS UNHEARD OF. THE LD. CIT(APPEALS) AFTER DISCUSSING THE MATTE R IN PARAGRAPH NOS. 3.5 AND 3.6, SUMMARILY ESTIMATED NET PROFIT AT 2.5% O F THE DISCLOSED SALE WITHOUT DISCLOSING ANY BASIS. NO THIRD PARTY EVIDE NCE OR PAST RESULTS OF THE ASSESSEE HAVE BEEN CONSIDERED TO ARRIVE AT THI S DECISION. THEREFORE, WE ARE UNABLE TO SUSTAIN THE PART ADDITION UPHELD BY HIM. SINCE, WE ARE OF ITA NOS. 5726&5586(DEL)/2010 14 THE VIEW THAT THE BOOK RESULTS COULD NOT HAVE BEEN DISTURBED, IT FOLLOWS THAT THE QUESTION OF RESTORATION OF THE ORDER OF THE AO DOES NOT ARISE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE OPEN COUR T ON 17 TH JUNE, 2011. SD/- SD/- (R.P. TOLANI) (K.G.BANSA L) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 17 TH JUNE, 2011. SP SATIA COPY OF THE ORDER FORWARDED TO:- LALSONS JEWELLERS LTD., NEW DELHI. DCIT, CIRCLE 4(1), NEW DELHI. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.