AJAY KUMAR LUHARUWALA, Jaipur V. JCIT (OSD), Jaipur

ITA 658/JPR/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2136 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 21-07-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Assessee Lawyers: J K MOHATA
• Keywords: Unexplained cash credit; Rejection of books of accounts; Depreciation; Principle of natural justice; Additional evidence; Commercial expediency
• Section: 143(3)

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 HKKXPUN] YS[KK LNL; ,OA JH DQY HKKJR] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 229/JP/2016 & 658/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 & 2009-10. AJAY KUMAR LUHARUWALA, B-105, TULSI MARG, HANUMAN NAGAR, VAISHALI NAGAR, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 3(1),/JCIT (OSD), CIRCLE-4, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AATPL 9778 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 665/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10. THE ACIT, CIRCLE - 4, JAIPUR. CUKE VS. AJAY KUMAR LUHARUWALA, B-105, TULSI MARG, HANUMAN NAGAR, VAISHALI NAGAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AATPL 9778 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI J.K. MOHATA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 08.08.2017. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 14/08/2017. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THESE THREE APPEALS ARISE OUT OF THE TWO SEPARATE O RDERS OF LD. CIT (A)-I, JAIPUR DATED 05.01.2016 AND CIT (A)-2, JAIPUR DATED 28.05.2015. APPEAL IN ITA NO. 229/JP/2016 IS FILED BY THE ASSESSEE PERTAINING TO ASSESSMENT YEAR 2011-12 AND APPEALS IN ITA NOS. 658/JP/2015 AND 665/JP/2015 ARE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE RESPECTIVELY PERTAINING TO ASS ESSMENT YEAR 2009-10. ALL THESE 2 ITA NOS. 229/JP/2016, 658 & 665/JP/2015. SHRI AJAY KUMAR LUHARUWALA, JAIPUR. APPEALS ARE TAKEN UP TOGETHER FOR HEARING AND ARE B EING DISPOSED OFF BY A CONSOLIDATED ORDER FOR THE SAKE OF BREVITY. FIRST WE TAKE UP ASSESSEES APPEAL IN ITA NO. 229/JP/2016 PERTAINING TO ASSESSMENT YEAR 2011-12. THE ASSESSE E HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE LD. CIT (APPEALS) HAS ERRED IN NOT ACCEPTING TH E ADDITIONAL EVIDENCE DESPITE OF THE EXPLAINED FACTS THAT THE AS SESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING RELEVA NT EVIDENCE BEFORE AO. 2. THE LD. CIT (APPEALS) HAS ALSO ERRED IN NOT GIVING ANY RELIEF IN ADDITIONS MADE BY THE AO ON ACCOUNT OF UNEXPLAINED CREDITS, CASH DEPOSITS AND CASH RECEIPTS FROM PARTIES OF RS. 1,38 ,74,990/-, RS. 23,50,000/- AND RS. 13,67,500/- RESPECTIVELY DESPIT E OF MAKING AVAILABLE ALL RELEVANT DOCUMENTS AND EXPLANATION. 3. THE LD. CIT (APPEALS) HAS ALSO ERRED IN SUSTAINING ADDITION TO THE EXTENT OF RS. 7,19,582/- ON ACCOUNT OF BANK INTERES T/CHARGES DESPITE OF THE FACT OF JOURNAL ENTRY BY DEBITING CA PITAL ACCOUNT INSTEAD TO CLAIM AS AN EXPENSE. 4. THE LD. CIT (APPEALS) HAS ALSO ERRED IN CONFIRMING ADHOC ADDITIONS OF RS. 1,00,000/- TOWARDS DISALLOWANCE OF EXPENSES COMES OUT MORE THAN 50% OF THE EXPENSE CLAIMED BY THE ASSESSE E, WHICH IS ILLOGICAL AND LIABLE TO BE DELETED. 5. THE LD. CIT (APPEALS) HAS ALSO ERRED IN CONFIRMING OTHER ADDITIONS OF RS. 6,01,698/- BEING DIFFERENCE IN 26AS AND PROF IT AND LOSS A/C DESPITE OF MAKING AVAILABLE THE DOCUMENTS AND SUBMI SSIONS IN THE ISSUE. 6. THE APPELLANT CRAVES TO ADD, AMEND, ALTER ANY OTHER GROUNDS OR GROUNDS OF APPEAL AT THE TIME OF HEARING OF APPEAL. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMEN T UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT) WAS FRAMED VIDE ORDER 3 ITA NOS. 229/JP/2016, 658 & 665/JP/2015. SHRI AJAY KUMAR LUHARUWALA, JAIPUR. DATED 05.03.2014. WHILE FRAMING THE ASSESSMENT, TH E AO MADE ADDITIONS OF RS. 2,70,000/- ON ACCOUNT OF RENTAL INCOME, RS. 3,31,6 98/- ON ACCOUNT OF BOTTLING CHARGES, RS. 1,75,92,490/- ON ACCOUNT OF UNEXPLAINE D DEPOSITS/CREDITS, RS. 39,08,881/- ON ACCOUNT OF UNEXPLAINED PAYMENT OF BA NK CHARGES/INTEREST AND RS. 1,00,000/- ON ACCOUNT OF DISALLOWANCE OUT OF VARIOU S EXPENSES. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT (A). T HE LD. CIT (A) WHILE DISPOSING THE APPEAL, PARTLY ALLOWED THE APPEAL. NOW THE ASSESSE E IS IN APPEAL BEFORE THIS TRIBUNAL. 3. GROUND NO. 1 RELATES TO NOT ACCEPTING ADDITIONAL EVIDENCES DESPITE THE FACT THAT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING RELEVANT EVIDENCE BEFORE THE AO. 3.1. THE LD. COUNSEL FOR THE ASSESSEE HAS REITERATE D THE SUBMISSIONS AS MADE IN THE SYPNOSIS. THE WRITTEN SUBMISSIONS OF THE ASSES SEE ARE REPRODUCED AS UNDER : THE FACT THAT THE AR HAS NOT ATTENDED THE CASE P ROPERLY BY VARIOUS MEANS (APPARENT FROM HIS REPLIES AND NON ATTENDANCE ) AND ON THE OTHER SIDE, THE APPELLANT WAS NOT AWARE ABOUT THE D ETAILS SOUGHT AND NOT FURNISHED BY AR DURING ASSESSMENT PROCEEDINGS T ILL COMPLETION OF ASSESSMENT AND AS SUCH, COULD NOT PRODUCE ANY FACT/SUBMISSION/EVIDENCES CALLED UPON BY THE AO OR ANY OTHER EVIDENCES RELEVANT THIS CASE DURING THE COURSE OF P ROCEEDINGS. THIS WAS SUFFICIENT CAUSE OF PREVENTING IN PRODUCING THE EVIDENCE WITH THE ASSESSING OFFICER RELEVANT TO THE CASE AND GROUND O F APPEAL AS PROVIDED IN RULE 46A OF INCOME TAX RULES. THE AO IN HIS REMAND REPORT THOUGH ADVISED NOT TO ACCEPT ADDITIONAL EVID ENCES, AS USUALLY 4 ITA NOS. 229/JP/2016, 658 & 665/JP/2015. SHRI AJAY KUMAR LUHARUWALA, JAIPUR. MADE, BUT HAS NOT COMMENTED ANYTHING ADVERSE AGAINS T THE ADDITIONAL EVIDENCES, AS THE SAME ARE GENUINE DOCUMENTS. THE ADDITIONAL EVIDENCES CONSIST OF COPY OF DVAT RE TURNS AND UNDERTAKING FROM THE EX-EMPLOYEE ARE THE BASE OF TH E CASE FOR PROVING THE GENUINENESS OF THE CREDITS AND OTHER ADDITIONS MADE BY THE AO RESPECTIVELY AND SHOULD BE ACCEPTED PROPER JUSTICE. 3.2. ON THE CONTRARY, THE LD. D/R OPPOSED THE SUBMI SSIONS. 3.3. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIE S. IT IS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE THAT BEFORE LD. CIT (A) HE HAD FILED ADDITIONAL EVIDENCES IN RESPECT OF VARIOUS ISSUES, WHICH WERE NOT ADMITTED. HE SUBMITTED THAT FOR NOT ATTENDING THE HEARING PROPERLY OR NOT FILING THE RE QUIRED DETAILS RELATED TO THE ASSESSEES CASE BY THE THEN A/R, ASSESSEE SHOULD NO T SUFFER. HE SUBMITTED THAT IN THE INTEREST OF NATURAL JUSTICE AND IN ALL FAIRNESS , THESE ADDITIONAL EVIDENCES SHOULD HAVE BEEN ADMITTED AS THESE EVIDENCES WOULD DEMONST RATE THAT THERE WAS NO NEED FOR MAKING ADDITIONS. AFTER GIVING THOUGHTFUL CONS IDERATIONS IN THE MATTER, WE ARE OF THE VIEW THAT IT WOULD BE IN THE FITNESS OF THINGS TO SET ASIDE THE ORDER OF LD. CIT (A) AND RESTORE THE ISSUE TO THE FILE OF LD. CIT (A) WI TH THE DIRECTION TO ADMIT THE ADDITIONAL EVIDENCES AND RE-CONSIDER THE SAME AND D ECIDE THE ISSUE AFRESH. WE DIRECT ACCORDINGLY. GROUND NO. 1 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 4. IN RESPECT OF GROUND NOS. 2, 3, 4 & 5, SINCE WE HAVE RESTORED GROUND NO. 1 RELATING TO ADMISSION OF ADDITIONAL EVIDENCES TO TH E LD. CIT (A) DIRECTING HIM TO ADMIT THE ADDITIONAL EVIDENCES AND DECIDE THE MATTER AFRE SH, WE FIND IT REASONABLE TO 5 ITA NOS. 229/JP/2016, 658 & 665/JP/2015. SHRI AJAY KUMAR LUHARUWALA, JAIPUR. RESTORE ALL THESE GROUNDS TO THE FILE OF LD. CIT (A ) FOR ADJUDICATION AFRESH AFTER ADMITTING THE ADDITIONAL EVIDENCES. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 658/JP/2015 (ASSESSEE) : 6. THE SOLITARY GROUND RAISED BY THE ASSESSEE IN TH IS APPEAL IS AS UNDER :- THE LD. CIT (APPEALS) HAS ERRED IN ESTIMATING GR OSS PROFIT RATE BY TAKING AVERAGE GROSS PROFIT RATE OF PAST THREE YEAR S COMES OUT AT 12.82% INSTEAD OF TAKING AVERAGE OF PAST FIVE YEARS IGNORING THE VARIOUS FACTS AND CIRCUMSTANCES THEN PREVAILED. THE LD. CIT (APPEALS) HAS NOT CONSIDERED THE FACT THAT THERE WAS NO CHANG E IN THE NATURE, THEME, PATTERN AND MODEL OF THE BUSINESS SINCE DECA DE AS WELL THE FACT THAT THE PROCUREMENT/PURCHASE OF SCRAP IS THROUGH G OVERNMENT COMPETITIVE TENDERING/BIDDING IN LOT AND SALE ENTIR ELY DEPENDS ON THE POST TENDERING ACHIEVED QUALITY & QUANTITY OF SCRAP MATERIAL PROCURED, WHICH IS ALWAYS UNCERTAIN. THEREFORE, THE VARIATION IN GP EVERY YEAR IS OBVIOUS AND AS SUCH, AVERAGE OF PAST 5 YEARS GP RAT E COMES OUT 9.97% IS MORE AUTHENTIC AND JUSTIFIED IN THIS CASE. THE TRADING ADDITIONS TO THE EXTENT OF RS. 31,40,845/- (DIFFERE NCE OF 2.85% I.E. 12.82% - 9.97% ON TURNOVER OF RS. 11,02,05,090/-) I S IN EXCESS AND LIABLE TO BE DELETED. 7. THE BRIEF FACTS OF THE CASE ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT UNDER SECTIO N 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 29.12.2011. WHILE FRAMING THE ASSESSMENT, THE AO M ADE ADDITIONS OF RS. 89,95,622/- ON ACCOUNT OF TRADING ADDITION BY TAKIN G AVERAGE GP RATIO OF LAST TWO YEARS, RS. 18,05,000/- ON ACCOUNT OF DISALLOWANCE O F EARNEST MONEY, RS. 3,29,576/- ON ACCOUNT OF WRITE OFF FIXED ASSETS, RS.2,000/- ON ACCOUNT OF DONATION DISALLOWED AND RS. 21,94,186/- ON ACCOUNT OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT (A) WHO AFTER CONSIDERING 6 ITA NOS. 229/JP/2016, 658 & 665/JP/2015. SHRI AJAY KUMAR LUHARUWALA, JAIPUR. THE SUBMISSIONS, PARTLY ALLOWED THE APPEAL. NOW TH E ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 8. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. THE WRITTEN SUBMISSIONS OF TH E ASSESSEE ARE REPRODUCED AS UNDER :- IN THE MATTER, THE ESTIMATION OF GP RATIO CANT B E STANDARDIZED AT ALL THE TIMES, THE NATURE OF TRADE AS WELL PREVAILING C IRCUMSTANCES PLAY VERY IMPORTANT ROLE IN SUCH CASES. IN THE INSTANT CASE, THE ASSESSEE WAS INTO THE BUSINESS OF SCRAP, WHEREIN, THE MAJOR PURCHASES/PRO CUREMENT OF MATERIAL WAS THROUGH PARTICIPATING IN THE TENDERS BEING INVITED BY THE GOVT. DEPARTMENTS AS IS WHERE IS BASIS SEEMS TO HAVE NO CONTROL OF T HE ASSESSEE. THE BUSINESSMAN KEEPING IN MIND THE ONLY THING TO ACHIE VE THE LAST YEAR GP CANT ALLOW TO AFFORD EVEN TO THINK TO PARTICIPATE IN GOV ERNMENT TENDERING. THE TENDERING DEPENDS ON VARIOUS FACTORS AND THE BUSINE SSMAN IS BOUND TO GO WITH THE PREVAILING CIRCUMSTANCES AND LOOKING INTO THE COMMERCIAL EXPEDIENCY. APART FROM IT, THE BUSINESSMAN IS ALSO REQUIRED TO MEET THE FIXED COST/EXPENSES OF ITS BUSINESS, WHICH CAN ONLY BE ME ET, IF THERE IS BUSINESS. IF THERE IS NO BUSINESS ONLY BECAUSE OF THE FACT THAT TENDERING AT THE DESIRED PRICE/COST, THE GP CANT BE ACHIEVED THEN THAT BUSI NESSMAN SHALL SUFFER A LOT BY INCURRING COST TOWARDS FIXED EXPENSES, WHICH HAS TO BORNE COMPULSORILY TO CONTINUE THE BUSINESS IRRESPECTIVE OF VOLUME OF BUS INESS. THE SAME THING APPLYING WHILE MAKING SALES AND THE BUSINESSMAN AGA IN BOUND WITH THE CUT THROAT COMPETITION IN THE TRADE AND FEAR OF LOSING CUSTOMERS, IF ANY TIME QUOTE HIGHER RATE TO THE CUSTOMER. THE FACT IN THE PRESENT CASE IS THAT THE BUSINESS W AS GOING DOWN SINCE THE ASSESSMENT YEAR IN APPEAL AND THE PRESENT STATU S OF BUSINESS IS CLOSED, EVIDENT FROM THE FACT THAT DURING LAST TWO YEARS TH ERE IS NIL SALES. THIS IS ALSO ONE OF THE REASON OF GOING DOWN THE GP, AS THE ASSE SSEE WAS NOT ABLE TO COMPETE WITH OTHER PLAYERS IN THE TRADE IN SUCH A C UT THROAT COMPETITION, WHERE-IN, PURCHASES WAS MADE AT SUBSTANTIAL HIGHER PRICES WITHOUT ANY CORRESPONDING INCREASE IN SALES PRICES. THE FALL OR RISE IN GROSS PROFIT RATIO IN A PARTICU LAR YEAR CANT COMPELLED THE AO TO MAKE TRADING ADDITION PARTICULARLY WHEN T HERE IS NO CONTROL OVER PURCHASES BY THE ASSESSEE AND THE PRICES ARE GOVERN ED BY VARIOUS FACTORS AT THE TIME OF BIDDING, WHICH IS TO BE KEEP IN MIND TO OBTAIN THE CONTRACT/TENDER. THE FACT THAT THE ASSESSEE HAS DULY SHOWN ITS ENTIR E PURCHASES AND SALES, WHICH HAS NOWHERE DISPUTED BY THE AO NOR POI NTED OUT ANY SUPPRESSED SALES OR INFLATED PURCHASES CAN-NOT BE IGNORED. REL IANCE MAY BE PLACED IN THE 7 ITA NOS. 229/JP/2016, 658 & 665/JP/2015. SHRI AJAY KUMAR LUHARUWALA, JAIPUR. CASE OF CIT VS. AMITBHAI GUNWANTBHAI, 129 ITR 573 ( OF HONBLE GUJARAT HIGH COURT), IT WAS HELD THAT IF THERE WAS NO CHALLENGE TO THE TRANSACTIONS REPRESENTED IN THE BOOKS THEN IT IS NOT OPEN TO REV ENUE TO CONTEND THAT WHAT IS SHOWN BY THE ENTRIES IS NOT THE REAL STATE OF AF FAIRS. FURTHER, THE FALL IN GP RATIO AND NON MAINTENANCE OF STOCK REGISTER ALONE C ANT LEAD TO REJECTION OF BOOK RESULTS MAY BE RELIED UPON IN THE FOLLOWING CA SES:- (I) CIT V/S. SMT. POONAM RANI (2010) 326 ITR 223 DELHI: HELD THAT IF THERE IS FALL IN G.P. AND THE ASSESSEE HAS NOT MAIN TAINED STOCK REGISTER, NON MAINTENANCE OF STOCK REGISTER ALONE, CAN NOT LE AD TO REJECTION OF BOOKS RESULTS. (II) CIT V/S. JAS JACK ELEGANCE EXPORTS (2010) 324 ITR 9 5 DELHI: HELD THAT LOOKING TO THE NATURE OF BUSINESS, IF IT IS NOT POS SIBLE TO MAINTAIN QUANTITY ACCOUNT BUT OTHER DETAILS ARE MAINTAINED A ND PRODUCED TO THE AO, THEN THE ASSESSING OFFICER CAN NOT REJECT BOOK RESULT. IN THIS CASE THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF READYMA DE GARMENT AND HE WAS DOING EMBROIDERY WORK, STITCHING WORK ETC. I T WAS NOT POSSIBLE TO MAINTAIN QUANTITY ACCOUNT. (III) CIT V/S. OM OVERSEAS (2009) 315 ITR 185 (P&H): HELD THAT WHEN THE BOOKS OF A/CS ARE REGULARLY MAINTAINED AND NO SPECI FIC DEFECT IN THE BOOKS OF A/C. IS POINTED OUT BY THE ASSESSING OFFIC ER, THE BOOK RESULT CANNOT BE REJECTED SIMPLY BECAUSE THERE IS FALL IN G.P. AND NO STOCK REGISTER MAINTAINED. (IV) DCIT V/S. VISHWANATH PRASAD GUPTA 137 TTJ 385 TM (J ABALPUR) HELD THAT WHEN A.O. COULD NOT FIND ANY MISTAKE IN THE BO OKS OF ACCOUNT OF THE ASSESSEE, SIMPLY ON THE GROUND OF FALL IN G.P. AND THE STOCK REGISTER WAS NOT MAINTAINED ITEM-WISE. ADDITION COULD NOT BE MADE. FURTHER, THE AO HAS REJECTED THE BOOKS OF ACCOUNT I N SPITE OF THE FACT THAT THE ASSESSEE HAS MAINTAINED AND PRODUCED BOOKS OF ACCOU NTS AND BOOKS ARE DULY AUDITED BY A QUALIFIED CHARTERED ACCOUNTANT. ONLY H AVING REASON OF NON MAINTENANCE OF STOCK REGISTER DESPITE OF THE FACT T HAT (A) THE MAJOR PURCHASES IS THROUGH TENDERS INVITED BY GOVERNMENT AND (B) MA INTENANCE OF QUANTITATIVE DETAILS IN VIEW OF NATURE OF ITEMS/BUS INESS NOT POSSIBLE, REJECTION OF BOOKS OF ACCOUNT IS NOT CORRECT. EVERY PERSON HAS ITS OWN WAY TO DO THE BUSINESS AND EVERY YEAR EVEN EVERY DAY IS NEW FOR ANY BUSINESSMAN. NO PERSON CAN BE EXPECTED TO HAVE SAME LEVEL OF EARNINGS/REVENUES, HE HAS EARNED IN P REVIOUS YEARS. 8 ITA NOS. 229/JP/2016, 658 & 665/JP/2015. SHRI AJAY KUMAR LUHARUWALA, JAIPUR. IF WE TALK IN NORMAL LIFE THEN (A) WHY A STUDENT NEVER ACHIEVED SAME RANKING AS IN LAS T YEARS (B) WHY A BATSMAN NEVER MAKE SAME RUNS AS IN HIS LAST M ATCHES (C) WHY A PERSON MET WITH AN ACCIDENT DESPITE OF THE FA CT THAT HE CHOOSE THE SAME ROAD SINCE LONG (D) WHY SAME TRAIN SOME TIMES REACHES BEFORE TIME AND SOME TIMES DELAYED WITH THE SAME DRIVER, TRACK AND FACILITIES. THE CRUX OF THE MATTER IS HISTORY CAN BE GUIDING FA CTOR FOR IMPROVEMENT BUT PRESENT NEVER COME WITH THE SAME RESULTS. THE P RESENT RESULTS MAY BE IMPROVED FOR BETTER AND MAY BE DETERIORATED BADLY A S COMPARED TO HISTORICAL RESULTS, WHICH DEPENDS ON N NUMBER OF FACTORS, SO ME OF MAY BE AVOIDABLE AND SOME OF MAY BE UNAVOIDABLE. FURTHER, THERE IS NO CHANGE IN THE NATURE, THEME, P ATTERN AND MODEL OF BUSINESS SINCE DECADE THEN WHY THE AVERAGE OF GP EA RNED DURING PAST FIVE YEARS SHOULD NOT BE TAKEN. AS SUCH, THE GP RATE ADO PTED BY THE AO IS ARBITRARY BY TAKING HIGHEST YIELDING LAST TWO YEARS GP AND THEN BY CIT(A) TAKING AVERAGE OF LAST 3 YEARS ARE NOT CONSIDERING THE PREVAILING CIRCUMSTANCES AND THE ASSESSEES NATURE OF BUSINESS . THEREFORE, IT SHOULD LIABLE TO BE RESTORED AT LEAST TO THE EXTENT OF AVE RAGE GP RATE COMES FROM THE AUTHENTIC AND ACTUAL BUSINESS RESULTS OF PAST 5 YEA RS ARRIVED AT 9.97% CAN BE SAID IDEAL GP RATIO TO ARRIVE AT THE JUSTIFIED TRAD ING PROFIT. THE GP RATIO OF LAST 5 YEARS ARE AS GIVEN HERE-IN-AFTER:- AY GP RATIO 2004 - 05 4.15% 2005 - 06 7.43% 2006 - 07 7.27% 2007 - 08 12.90% 2008 - 09 18.13% TOTAL 49.88% AVERAGE GP (%) 9.97% AS SUCH, THE HISTORY OF GP RATIO OF LAST 5 YEARS SE EMS TO BE CORRECT AND AVERAGE THEREOF IS JUSTIFIED BASE FOR ARRIVING AT A CTUAL PROFIT IN THE SAID CASE. 8.1. ON THE CONTRARY, THE LD. D/R OPPOSED THE SUBMI SSIONS. 9 ITA NOS. 229/JP/2016, 658 & 665/JP/2015. SHRI AJAY KUMAR LUHARUWALA, JAIPUR. 8.2. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. THE LD. C IT (A) WHILE ADOPTING THE GP RATE AT 12.82% HAS OBSERVED IN PARA 3.3 TO 3.4.2 AS UNDE R :- 3.3. I HAVE PERUSED THE FACTS OF THE CASE, THE AS SESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE ASSESSEE IS E NGAGED IN THE BUSINESS OF SCRAP AND JOB WORK OF BOTTLING. AS REGA RDS, THE SCRAP BUSINESS, THE ASSESSEE OBTAINS SCRAP BY BIDDING, BY TENDER, IN AUCTION BY GOVERNMENT DEPARTMENTS, MORE PARTICULARLY, FIRIN G RANGES OF THE INDIAN AIRFORCE. THE ASSESSING OFFICER HAS POINTED OUT SEVERAL DEFECTS IN THE BOOKS OF ACCOUNTS, WHICH HAVE BEEN REPRODUCE D ABOVE IN THE ASSESSMENT ORDER, VIZ. NON-MAINTENANCE OF STOCK REG ISTER OR QUANTITATIVE DETAILS, NON-MAINTENANCE OF REGISTER F OR CONSUMABLE STORES, NOT PROPER MAINTENANCE OF BILLS FOR PURCHAS ES ETC. SUCH DEFECTS WERE ALSO FOUND IN THE BOOKS OF ACCOUNTS OF THE ASS ESSEE IN A.Y. 2006- 07. THE ITAT, IN ITA NO. 319/JP/2009, FOR THE ABOVE ASSESSMENT YEAR (A.Y 2006-07) HAS UPHELD THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3). FOLLOWING THE ABOVE ORDER, THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) IS UPHELD. 3.4.1. IT HAS BEEN STATED BY THE ASSESSING OFFICER THAT THE GROSS PROFIT RATE IN THIS YEAR IS 7.23% AS AGAINST 13.06% IN A.Y . 2008-09 AND 18.12% IN A.Y. 2007-08. THE APPELLANT HAS STATED TH AT WHILE COMPUTING THE GROSS PROFIT RATE, JOB WORK HAS NOT B EEN INCLUDED IN THE TURNOVER IN A.Y 2008-09 AND 2009-10 WHILE THE SAME HAS BEEN INCLUDED IN THE TURNOVER FOR A.Y. 2007-08. SO ALSO, THE GROSS PROFIT FOR THIS ASSESSMENT YEAR DOES NOT INCLUDE INCOME FROM J OB WORK. FOR MAKING A COMPARISON ON A LIKE TO LIKE BASIS, THE TO TAL TURNOVER IS TAKEN TO INCLUDE SALES AND JOB WORK IN ALL THE YEARS AND THE GROSS PROFIT IS ALSO TAKEN INTO INCOME FROM JOB WORK, IN ALL THE YE ARS. AS PER THIS COMPUTATION, THE APPELLANT HAS COMPUTED THE G.P. RA TE FOR THIS ASSESSMENT YEAR AS 9.37% AS COMPARED TO 12.90% IN A .Y. 2008-09 AND 18.13% IN A.Y. 2007-08. I AGREE WITH THE CONTEN TION OF THE APPELLANT THAT WHEN G.P. IS BEING ESTIMATED ON THE BASIS OF PAST HISTORY, A LIKE TO LIKE COMPARISON HAS TO BE MADE F OR THE COMPUTATION OF GROSS PROFIT AND TURNOVER. 3.4.2. THE ASSESSING OFFICER HAS ESTIMATED THE G.P. BY TAKING THE AVERAGE GROSS PROFIT OF THE PAST TWO YEARS. THE APP ELLANT HAS STATED THAT ITS CASE WAS TAKEN UP FOR SCRUTINY IN A.Y. 200 6-07 WHERE THE MATTER HAS BEEN FINALLY ADJUDICATED BY THE ITAT. TH E ITAT, IN ITA NO. 319/JP/2009, FOR THE ABOVE ASSESSMENT YEAR (AY 2006 -07) HAS UPHELD THE TRADING ADDITION BY ESTIMATING THE GROSS PROFIT RATE AT 7.43%. THE APPELLANT HAS STATED THAT WHILE CONSIDERING THE PAS T HISTORY, THE 10 ITA NOS. 229/JP/2016, 658 & 665/JP/2015. SHRI AJAY KUMAR LUHARUWALA, JAIPUR. AVERAGE G.P. RATE OF THE PAST FIVE YEARS SHOULD BE TAKEN. IN MY CONSIDERED VIEW, PAST HISTORY ON THE BASIS OF THE P AST FIVE YEARS IS A VERY LONG TIME SPAN AND MAY NOT BE A PROPER INDICAT OR. LOOKING TO THE ABOVE FACTS, THE G.P. RATE FOR THIS YEAR IS ESTIMAT ED BY TAKING THE AVERAGE G.P. RATE OF THE PAST THREE ASSESSMENT YEAR S VIZ. A.Y. 2006-07 (7.43%), 2007-08 (12.90%) & 2008-09 (18.13%). THE AVERAGE G.P. RATE FOR THE ABOVE THREE YEARS COMES TO 12.82%. IN VIEW OF THE ABOVE DISCUSSION, THE G.P. RATE FOR THIS YEAR IS ESTIMATE D AT 12.82% AS AGAINST A G.P. RATE OF 9.37% DISCLOSED IN ITS BOOKS OF ACCOUNTS ON A TOTAL TURNOVER OF RS. 11,02,05,090/-. TRADING ADDIT ION TO THE ABOVE EXTENT IS THEREFORE UPHELD AND THE BALANCE ADDITION IS DIRECTED TO BE DELETED. GROUND NO. 2 (A) IS PARTLY ALLOWED. AFTER CONSIDERING THE FINDINGS OF THE LD. CIT (A), WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT (A) WHICH IS HEREBY UPHELD. THE GROUND OF T HE ASSESSEE IS REJECTED. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS REJECTED . 10. NOW WE TAKE UP THE APPEAL OF THE REVENUE IN ITA NO. 655/JP/2015. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1(A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND IN LAW THE LD. CIT (APPEALS) ERRED IN SUSTAINING A GP RATE OF 12.82% IN THE CASE AS AGAINST GP RATE OF 15.59% APPLIED BY TH E ASSESSING OFFICER EVEN AFTER REJECTION OF BOOKS OF ACCOUNTS U/S 145(3 ) HAS BEEN UPHELD. (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT (APPEALS) ERRED IN APPRECIATING THAT AO HAS APPLIED AVERAGE GP OF PAST TWO ASSESSMENT YEARS WHICH IS LO GICAL AND REASONABLE AS IT HAS BEEN HELD IN CASE OF KANSARA B ERING P. LTD. VS. ACIT BY HONBLE RAJASTHAN HIGH COURT THAT PAST HIST ORY IS THE BEST GUIDE FOR ASSESSING INCOME OF THE ASSESSEE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS) ERRED IN RESTRICTING T HE DISALLOWANCE U/S 40(A)(IA) FROM RS. 8,41,200/- TO RS. 13,487/-. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS) ERRED IN RESTRICTING T HE DISALLOWANCES MADE OUT OF VEHICLE EXPENSES, DEPRECIATION ON CAR AND MO TOR CYCLE, OFFICE 11 ITA NOS. 229/JP/2016, 658 & 665/JP/2015. SHRI AJAY KUMAR LUHARUWALA, JAIPUR. EXPENSES, TRAVELLING EXPENSES AND TELEPHONE EXPENSE S FROM RS. 17,71,545/- TO RS. 6,11,266/-. 4. THE APPELLANT CRAVES ITS RIGHTS TO ADD, AMEND OR ALTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. 11. IN RESPECT OF GROUND NO. 1(A) AND (B) RELATING TO SUSTENANCE OF GP RATE OF 12.82%, WE HAVE ALREADY ADJUDICATED THIS GROUND IN THE APPEAL OF THE ASSESSEE THEREBY REJECTING THE GROUND OF THE ASSESSEE AND UP HOLDING THE ORDER OF LD. CIT (A). WE, THEREFORE, FIND NO REASON TO TAKE A DIFFERENT V IEW IN THIS REGARD. THE GROUND OF THE REVENUE IS REJECTED. 12. IN RESPECT OF GROUND NO. 2 RELATING TO RESTRICT ING THE DISALLOWANCE U/S 40(A)(IA) FROM RS. 8,41,200/- TO RS. 13,487/-, THE LD. D/R OPPOSED THE ORDER OF THE LD. CIT (A) AND SUBMITTED THAT THE ORDER OF THE AO MAY BE RESTORED. 12.1. ON THE CONTRARY, THE LD. COUNSEL FOR THE ASSE SSEE SUPPORTED THE ORDER OF LD. CIT (A). 12.2. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. WE FIND THAT THE LD. CIT (A) AFTER DETAILED DISCUSSION AND TAKING INTO CONSIDERA TION VARIOUS PRONOUNCEMENTS OF HONBLE HIGH COURTS AND ALSO THE DECISION OF THE IT AT, AS OBSERVED IN PARA 6.3 OF HIS ORDER HAS ALLOWED THE CLAIM OF THE ASSESSEE. THE C OORDINATE BENCH OF THE TRIBUNAL IN A RECENT JUDGMENT IN THE CASE OF ACIT VS. GIRDHA RI LAL BARGOTI IN ITA NO. 757/JP/2012 DATED 10.04.2015 HAS DECIDED THIS MATTE R AGAINST THE REVENUE BY HOLDING AS UNDER :- 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. ON IS SUE OF AMOUNT 12 ITA NOS. 229/JP/2016, 658 & 665/JP/2015. SHRI AJAY KUMAR LUHARUWALA, JAIPUR. ALREADY PAID DURING THE YEAR OR AMOUNT SHOWN PAYABL E AS ON 31 ST MARCH OF EVERY YEAR, THE VARIOUS COURTS HAVE DIFFER ENT VIEWS I.E. IN FAVOUR OF THE ASSESSEE AND AGAINST THE ASSESSEE. TH E HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD . (SUPRA) HAS HELD THAT WHEN THERE ARE TWO VIEWS ON AN ISSUE, THE VIEW IN FAVOUR OF THE ASSESSEE HAS TO BE PREFERRED. THEREFORE, WE CONFIRM THE ORDER OF LD. CIT (A). WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER OF LD . CIT (A), WHICH IS HEREBY AFFIRMED. THE GROUND OF THE REVENUE IS REJECTED. 13. GROUND NO. 3 RELATES TO RESTRICTING THE DISALLO WANCES MADE OUT OF VEHICLE EXPENSES, DEPRECIATION ON CAR AND MOTOR CYCLE, OFFI CE EXPENSES, TRAVELLING EXPENSES AND TELEPHONE EXPENSES FROM RS. 17,71,545/- TO RS. 6,11,266/-. 13.1. THE LD. D/R HAS SUPPORTED THE ORDER OF THE AO . 13.2. ON THE CONTRARY, THE LD. COUNSEL FOR THE ASSE SSEE SUPPORTED THE ORDER OF THE LD. CIT (A). 13.3. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. THE LD. CIT (A) HAS RESTRICTED THE DISALLOWANCE BY OBSERVING AS UNDER : - 7.3. I HAVE PERUSED THE FACTS OF THE CASE, THE A SSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE APPELLANT HAS STATED VEHICLE EXPENSES INCLUDE EXPENSES ON TRACTORS, TRUCKS, JCB, PICKUP. EXPENDITURE ON THE ABOVE VEHICLES WOULD NOT BE PERS ONAL IN NATURE. CONSIDERING THIS, I RESTRICT THE DISALLOWANCE OUT O F VEHICLE EXPENSES AND DEPRECIATION ON CAR AND MOTOR CYCLES TO A LUMP SUM FIGURE OF RS. 2,00,000/-. AS REGARDS, OFFICE EXPENSES, TRAVELLING EXPENSES AND TELEPHONE EXPENSES, THE DISALLOWANCE MADE BY THE AS SESSING OFFICER IS ON THE HIGHER SIDE. LOOKING TO THE SUBMISSIONS OF T HE APPELLANT, DISALLOWANCE OUT OF THE ABOVE EXPENDITURE IS RESTRI CTED TO 10% OF THE EXPENDITURE. GROUND NO. 2(E) IS PARTLY ALLOWED. 13 ITA NOS. 229/JP/2016, 658 & 665/JP/2015. SHRI AJAY KUMAR LUHARUWALA, JAIPUR. TAKING INTO CONSIDERATION THE DECISION OF THE COORD INATE BENCH IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 IN RESPECT OF DISALLOWANCE OF VARIOUS EXPENSES, WE FIND NO REASON TO INTERFERE IN THE ORD ER OF LD. CIT (A), WHICH IS HEREBY AFFIRMED. THE GROUND OF THE REVENUE IS REJECTED. 14. IN THE RESULT, APPEAL OF THE REVENUE IS REJECTE D. 15. IN TOTALITY, APPEAL OF THE ASSESSEE IN ITA NO. 229/JP/2016 IS ALLOWED FOR STATISTICAL PURPOSES AND APPEALS OF THE ASSESSEE AN D REVENUE IN ITA NO. 658/JP/2015 AND ITA NO. 665/JP/2015 RESPECTIVELY ARE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 14.08.20 17. SD/- SD/- ( HKKXPUN ( DQY HKKJR ) ( BHAGCHAND) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 14/08/2017. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI AJAY KUMAR LUHARUWALA, JAIP UR. 2. THE RESPONDENT THE JCIT(OSD)/ACIT CIRCLE-4, JA IPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 229(3)/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 14 ITA NOS. 229/JP/2016, 658 & 665/JP/2015. SHRI AJAY KUMAR LUHARUWALA, JAIPUR.