M/S PRIME EXPORT, Jaipur V. ITO, Jaipur

ITA 654/JPR/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99443 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 06-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DHK
• Assessee Lawyers: ANIL SHARMAC A
• 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 FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 654/JP/2012 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 . M/S. PRIME EXPORT, F-47, MALVIYA INDUSTRIAL AREA, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 6(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABFP 4550 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI ANIL SHARMA(C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19.10.2015. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 30/10/2015. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THE APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORD ER OF LD. CIT (A)-II, JAIPUR DATED 19.04.2012 FOR THE ASSESSMENT YEAR 200 7-08. THE GROUNDS RAISED IN THE ASSESSEES APPEAL ARE AS UNDER :- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (APPEAL) IS NOT JUSTIFIED IN CONFIRMING THE TRADING ADDITION OF RS. 7,50,000/- AGAINST THAT OF RS. 9,46 ,001/- MADE BY THE A.O. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT (APPEAL) IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF RS. 1,54,917/- TOWARDS BELATED DEPO SIT OF PF CONTRIBUTION. 2 ITA NO. 654/JP/2012 A.Y. 2007-08 M/S PRIME EXPORT VS. ITO, JAIPUR. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF READYM ADE GARMENTS. THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 31.10.20 07 DECLARING NIL INCOME. DURING THE YEAR UNDER CONSIDERATION THE AS SESSEE HAS SHOWN GROSS PROFIT OF RS. 88,23,314/- ON A TURNOVER OF RS . 3,72,44,815/- GIVING A GP RATE OF 23.7% IN COMPARISON TO GROSS PROFIT OF R S. 79,81,347/- ON A TURNOVER OF RS. 3,04,23,857/- GIVING A GP RATE OF 2 6.23% IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THUS THE AO NOTED FALL IN GP RATE IN THE YEAR UNDER CONSIDERATION IN COMPARISON TO IM MEDIATELY PRECEDING ASSESSMENT YEAR. ON BEING ASKED TO FURNISH THE REA SONS FOR FALL IN GP RATE, THE LD. A/R VIDE HIS REPLY DATED 03.12.2009 EXPLAIN ED AS UNDER :- IT IS SUBMITTED THAT BENEFIT OF EXPORT INCENTIVE (DRAWBACK) HAS BEEN REDUCED FROM 15.88% LACS TO 13.59 LACS IN THIS YEAR WHICH HAS RESULTED IN DECLINE IN G.P. RATE BY 0.80% . FURTHER ADVERSE FOREIGN EXCHANGE RATE AND TOUGH COMPETITION IN FOREIGN MARKET HAS ALSO AFFECTED THE BUSINESS OF ASSESSEE. IT IS SUBMITTED THAT ASSESSEE IS MAINTAINING COMPLETE BOO KS OF ACCOUNTS AND SUPPORTING VOUCHERS AND DOCUMENTS WHIC H IS SUBJECT TO AUDIT U/S 44AB OF THE ACT. 2.1. ON PERUSAL OF THE DOCUMENTS FURNISHED BY THE A SSESSEE, THE AO OBSERVED THAT AS PER THE AUDIT REPORT, THE ASSESSEE DOES NOT MAINTAIN DAY TO DAY STOCK RECORDS, AND CLOSING STOCK IS VALUED O N THE BASIS OF PHYSICAL 3 ITA NO. 654/JP/2012 A.Y. 2007-08 M/S PRIME EXPORT VS. ITO, JAIPUR. VERIFICATION BY MANAGEMENT. NO INVENTORY OF PHYSIC AL STOCK IS PRODUCED. THUS THE VERIFICATION OF VALUATION OF CLOSING STOCK COULD NOT BE MADE. TAKING INTO CONSIDERATION THE ABOVE DEFECTS, THE AO HELD THAT CORRECT PROFITS CANNOT BE ASCERTAINED UNLESS THE OPENING AN D CLOSING STOCKS ARE VALUED CORRECTLY. THE VALUATION OF STOCK DOES AFFEC T TAXABLE INCOME OF THE BUSINESS. THUS THE AO TAKING INTO CONSIDERATION TH E COMMENTS MADE BY THE STATUTORY AUDITORS IN THE AUDIT REPORT, AND NON MAINTENANCE OF PROPER BOOKS OF ACCOUNT, INVOKED THE PROVISIONS OF SECTION 145(3) OF THE IT ACT, AND REJECTED THE BOOKS OF ACCOUNTS OBSERVING THAT T HE RESULTS SHOWN BY THE ASSESSEE ARE NOT RELIABLE. THEREFORE, BY APPLYING T HE GP RATE OF 26.23% OF THE IMMEDIATELY PRECEDING YEAR AND ESTIMATING THE G P AT RS. 97,69,315/- ON THE ESTIMATED TURNOVER OF RS. 3,72,44,315/-, HE MADE THE TRADING ADDITION OF RS.9,46,001/- TO THE INCOME OF THE ASSE SSEE. 3. BEING AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE LD. CIT (A) CHALLENGING THE ADDITION OF RS. 9,46,001/-. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFOR E LD. CIT (A) THAT THE TURNOVER OF THE ASSESSEE DURING THE RELEVANT PR EVIOUS YEAR HAD INCREASED TO RS. 3,72,44,815/- AS AGAINST THAT OF R S. 3,04,23,857/- IN THE PRECEDING YEAR MARKING AN INCREASE OF 22% OVER PREC EDING YEAR. THE 4 ITA NO. 654/JP/2012 A.Y. 2007-08 M/S PRIME EXPORT VS. ITO, JAIPUR. ASSESSEE HAD ACHIEVED THE INCREASED TURNOVER BY RED UCING THE SALE PRICE OR PROVIDING DISCOUNT ETC. THE INCREASE IN COST OF RA W MATERIAL AND DIRECT EXPENSES AND REDUCTION IN SALE PRICES AS COMPARED T O PRECEDING YEAR, HAD RESULTED IN LOWER MARGINS DURING THE RELEVANT PREVI OUS YEAR. THE LD. A/R SUBMITTED THAT ON THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE AO WAS NOT JUSTIFIED IN ESTIMATING THE GROSS PROFIT OF THE ASS ESSEE BY APPLYING THE PRECEDING YEAR GP RATE OF 26.23%. THUS HE PRAYED TH AT THE IMPUGNED ADDITION MAY BE DELETED. 5. THE LD. CIT (A) AFTER CONSIDERING VARIOUS ASPECT S OF THE ISSUE AND ALSO PLACING RELIANCE ON JUDICIAL PRONOUNCEMENTS AS DISC USSED IN HIS ORDER, UPHELD THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3 ). HE OBSERVED THAT ONCE THE BOOKS OF ACCOUNT WERE REJECTED, SOME ESTIM ATE WAS BOUND TO BE THERE. THE BEST JUDGMENT ITSELF IS BASED ON ESTIMAT E AND CANNOT BE SCALED AT EXACTITUDE. THE LD. CIT (A) ALLOWING PART RELI EF RESTRICTED THE TRADING ADDITION TO RS. 7,50,000/- INSTEAD OF RS. 9,46,001/ - MADE BY THE A.O. 6. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. ONE OF THE REASONS WHICH HAS GIVEN BY THE LD. A/R F OR FALL IN GP IS ON ACCOUNT OF DECREASE IN EXPORT INCENTIVE DURING THE YEAR AS COMPARED TO LAST 5 ITA NO. 654/JP/2012 A.Y. 2007-08 M/S PRIME EXPORT VS. ITO, JAIPUR. YEAR. AS PER THE LD. CIT (A), THE EXPORT INCENTIVE SHOULD FORM PART OF THE NET PROFIT AND NOT THE GROSS PROFIT OF THE ASSESSEE . IF WE CONSIDER THIS SUBMISSION OF THE A/R AND THE FINDING OF THE LD. CI T (A) WITH WHICH IT AGREE, THE COMPUTATION OF TURNOVER AND GP FOR THE Y EAR UNDER CONSIDERATION AS WELL AS THE PREVIOUS YEAR SHALL BE AS UNDER :- ASSTT. YEAR TURNOVER GROSS PROFIT G.P. RATE 2007 - 08 3 , 58 , 85 , 208/ - 74,63,707/ - 20.80% 2006 - 07 2,88,35,620/ - 63,93,110 22.17% DIFFERENCE 1.37% ON PERUSAL OF THE ABOVE, IT IS CLEAR THAT THE FALL IN GP RATE IS 1.37% AS AGAINST 2.53% CONSIDERED BY THE LOWER AUTHORITIES. FURTHER, NO SUBSTANTIVE ARGUMENTS HAVE BEEN TAKEN IN RESPECT OF THE OTHER R EASONS FOR THE FALL IN GP RATE. HENCE CONSIDERING THE PAST RECORDS OF THE ASSESSEE, WE CONFIRM THE GP ADDITION @ 1.37% AS AGAINST 2.53% DONE BY TH E AO. THE SAME WILL TRANSLATE AN ADDITION OF RS. 4,91,627/- (RS. 3,58,8 5,208 X 1.37%) AS AGAINST RS. 9,46,001/- DONE BY THE AO. THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 8. IN RESPECT OF GROUND NO. 2, WE HAVE CONSIDERED T HE RIVAL SUBMISSIONS. THE DEPOSITS OF PF/ESI HAVE BEEN MADE BEFORE THE DU E DATE OF FILING OF THE RETURN OF INCOME AND IN THE LIGHT OF HONBLE JURISD ICTIONAL HIGH COURT 6 ITA NO. 654/JP/2012 A.Y. 2007-08 M/S PRIME EXPORT VS. ITO, JAIPUR. DECISION IN THE CASE OF UDAIPUR DUGDH UTPADAK SAHAK ARI SANGH LTD.(2013) 35 TAXMANN.COM 616, WE DELETE THE ADDITION OF RS. 1 ,54,917/- MADE BY THE AO. HENCE THIS GROUND OF APPEAL IS ALLOWED. 9. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/10/2015 . SD/- SD/- VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 30/10/ 2015 DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S. PRIME EXPORT, JAIPUR. 2. THE RESPONDENT- THE ITO WARD 6(1), JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO.654/JP/2012) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 7 ITA NO. 654/JP/2012 A.Y. 2007-08 M/S PRIME EXPORT VS. ITO, JAIPUR.