SHRI ABDUL LATIF, Jaipur V. ` ACIT, Jaipur

ITA 674/JPR/2011

• Counselvise Citation: 67423114 RSA 2011
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 11-07-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Keywords: Rejection of books of accounts; Depreciation
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.674/ JP/2011 ASSESSMENT YEAR 2007-08 PAN: AAAXPL 1245 R SHRI ABDUL LATIF VS. THE ACIT PROP. A.L. PAPER HOUSE CIRCLE- 7 NEAR TEMPO STAND JAIPUR SANGANER, JAIPUR (APPELLANT ) (RESPONDENT) DATE OF HEARING: 04-01-2012 DATE OF PRONOUNCEMENT: 13-01-2012 ASSESSEE BY : SHRI P.C. PARWAL DEPARTMENT BY : SHRI D.K. MEENA ORDER PER N.L. KALRA, AM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDE R OF THE LD. CIT(A)-III, JAIPUR DATED 26-05-2011 FOR THE ASSESSMENT YEAR 2007-08. 2.1 THE FIRST AND SECOND GROUNDS OF APPEAL RAISED B Y THE ASSESSEE ARE AS UNDER:- (1) THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTI ON OF THE AO IN REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) (2) THE LD. CIT(A) HAS ERRED IN ENHANCING THE TRADI NG ADDITION TO RS. 14,06,112/- BY APPLYING G.P. RATE OF 18.5% ON DECLA RED TURNOVER OF RS. 24,34,80,855/- AS AGAINST TRADING ADDITION OF RS. 6 ,02,625/- MADE BY AO BY APPLYING G.P. RATE OF 18.19% BY NOT ACCEPTING TH E G.P. RATE OF 17.92% DECLARED BY THE ASSESSEE . 2.2 THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF HANDMADE PAPERS IN THE NAME & STYLE OF M/S A.L. PAPER HOUSE. THE ENTIRE SALE OF THE ASSESSEE IS EXPORT SA LES. DURING THE YEAR UNDER 2 CONSIDERATION, IT DECLARED GROSS PROFIT OF RS. 4,36 ,37,845/- ON TURNOVER OF RS. 24,34,80,855/- GIVING A G.P. RATE OF 17.92% AS AGAI NST THE GROSS PROFIT OF RS. 2,62,14,571/- ON TURNOVER OF RS. 14,42,43,406/- GIV ING A G.P. RATE OF 18.17% IN THE IMMEDIATELY PRECEDING YEAR. THE AO OBSERVED THAT AS SESSEE HAS NOT MAINTAINED ANY DAY TO DAY STOCK REGISTER, BILLS/VOUCHERS ARE SELF MADE & DAY TO DAY BASIS OF TRANSACTIONS OF PURCHASES/SALES/EXPENSES IS NOT VERIFIABLE. ACCORDI NGLY, THE AO REJECTED THE BOOKS OF ACCOUNTS BY APPLYING PROVISIONS OF SECTION 145(3) & ESTIMATED THE GROSS PROFIT OF THE ASSESSEE BY APPLYING G.P. RATE DECLARED BY THE ASSE SSEE IN A.Y. 06-07 I.E. 18.17% ON DECLARED TURNOVER, THEREBY MAKING TRADING ADDITION OF RS. 6,02,626/-. 2.3 THE LD. CIT(A) UPHELD THE APPLICATION OF PROVIS IONS OF SECTION 145(3) ON ACCOUNT OF NON AVAILABILITY OF STOCK REGISTER, NON VERIFIAB ILITY OF PURCHASES/EXPENSES BASED ON SELF MADE VOUCHERS & FALL IN G.P. RATE AND ENHANCED THE ADDITION TO RS. 14,06,112/- (AS AGAINST RS. 6,02,626/- MADE BY AO) BY APPLYING G.P. RATE OF 18.5% ON DECLARED TURNOVER. IN APPLYING G.P. RATE OF 18.5%, THE LD. C IT(A) GAVE THE FOLLOWING FINDINGS:- 2.7 I HAVE CAREFULLY EXAMINED THE PAST RECORDS OF THE APPELLANT, THE FINDINGS OF THE A.O. AND THE COUNTER ARGUMENTS RAIS ED BY THE LD. AR, RELEVANT TO THE ISSUE OF THE FURTHER ENHANCEMENT OF INCOME PROPOSED BY THIS OFFICE. IN THE LIGHT OF THE ABOVE, I FIND THE APPELLANTS OBJECTIONS ARE NOT TENABLE AND JUSTIFIED FOR THE FOLLOWING REASONS :- (I) AT THE OUTSET, MOST OF THE APPELLANTS ARGUMENT S AND EXPLANATION ARE FOUND GENERAL AND VAGUE AND ALSO DEVOID OF ANY MERIT AS SUCH. THE APPELLANT HAS ALSO NOT PROVIDED ANY SUPPORTING DETA ILS/INFORMATION TO SUBSTANTIATE THEM. IN ABSENCE OF SUCH VITAL ASPECTS , THEY ARE TERMED AS NON-CONVINCING AND UNTENABLE IN NATURE AND IGNORED AS SUCH. HOWEVER OTHERWISE ALSO, FROM THE APPELLANTS SUBMISSION, IT IS TRANSPIRED THAT TO EXPLAIN THE FALL IN THE G.P RATIO, THEY HAVE HIGHLY RELIED UPON THE ASPECT OF AUGMENT IN THE TURNOVER AND INCLUSION OF NEW CUSTOM ERS BY OFFERING REASONABLE AND COMPETITIVE PRICE WHICH HAS LED TO F ALL IN G.P RATE IN THE CURRENT YEAR. THE MERIT OF ABOVE CONTENTION IS EXAM INED AND PRIMA FACIE, IT WOULD BE HARD TO APPRECIATE SUCH ASSUMPTION OF T HE APPELLANT THAT EVERY TIME AN INCREASE IN TURNOVER/PRODUCTION WOULD RESUL T IN FALL OF G.P. RATIO, 3 UNLESS THE ABOVE PROPOSITION IS SUPPORTED WITH PROP ER JUSTIFICATION AND RELEVANT INFORMATION THEREOF. IN OTHER WORDS, IT IS NOT A UNIVERSAL LAW OR GOSPEL TRUTH THAT TO INCREASE THE TURNOVER OR TO AD D NEW CUSTOMERS, ONE HAS TO ALWAYS REDUCES ITS PROFIT MARGIN AS SUCH. O N THE CONTRARY, AS PER THE GENERAL FINANCIAL PERCEPTIONS, NORMALLY AN INCR EASE IN TURNOVER/PRODUCTION OF UNIT, GENERALLY LEADS TO INC REASE IN PROFITABILITY DUE TO BENEFIT ATTACHED TO HIGHER SCALE OF ECONOMIC ACT IVITIES INVOLVED THERE IN. THE APPELLANT HAS NOT PROVIDED ANY INFORMATION IN T HIS REGARD TO SUPPORT HIS ABOVE CLAIMS. UNDER SUCH CIRCUMSTANCES, THE APP ELLANTS MAJOR DEFENSE, AS DISCUSSED ABOVE, TOWARD FALL IN GP RATI O IN THE CURRENT YEAR HAS BEEN FOUND NON ACCEPTABLE AND UNTENABLE. (II) ONCE THE TRADING RESULT IS REJECTED U/S 143(3) OF I.T ACT, IT IS A KNOW FACT THAT THE ESTIMATION OF THE SAME CAN BE MA DE ON VARIOUS GUIDELINES/PARAMETERS. THE HONBLE RAJASTHAN HIGH C OURT HAS VIEWED IN THE CASE OF INANI MARBLES (175 TAXMAN 56) THAT OUT OF SUCH PARAMETERS, THE APPELLANTS OWN PAST RECORD IS ONE OF THE MOST RELIABLE BASE IN THIS REGARD. IT HAS ALREADY BEEN DISCUSSED THAT IN THE C URRENT YEAR THE APPELLANT HAS DECLARED GP AT 17.92% WHICH IS REVISE D BY THE A.O. AS 18.17% BASED ON THE FIGURES OF IMMEDIATE PREVIOUS Y EAR I.E. A.Y. 2006-07. HOWEVER, AS DISCUSSED ABOVE, IT IS FURTHER TRANSPIR ED THAT IN A.Y. 06-07, CIT(A) HAD REVISED THE GP RATE AT 18.50% AS COMPARE D TO 18.89% ESTIMATED U/S 145(3) OF THE ACT BY THE AO. THE ABOV E FINDINGS OF THE CIT(A) HAS NOT BEEN REVERSED BY ANY OTHER HIGHER AP PELLATE FORUM SO FAR. SINCE THE ORDER OF THE AO HAS MERGED WITH THE ORDER OF THE CIT(A), THEREFORE FOR ALL THE LEGAL AND PRACTICAL PURPOSES THE EFFECTIVE GP RATIO OF THE PRECEDING YEAR IS 18.50% AND NOT 18.17% ORIGINA LLY OFFERED BY THE APPELLANT AND SUBSEQUENTLY REVISED AT 18.89% U/S 14 3(3) OF THE ACT. HOWEVER IT SEEMS THE AO HAS INADVERTENTLY ADOPTED T HE GP RATE AT 18.17% INSTEAD OF 18.89%/18.50% FOR CURRENT YEAR, U /S.145 OF THE ACT AND COMPUTED THE INCOME OF CURRENT YEAR ACCORDINGLY. AS FAR AS THE ISSUE OF THE PENDENCY OF APPEAL FILED AGAINST THE ORDER OF CIT(A) IS CONCERNED, UNTIL AND UNLESS THE FINDING G IVING THEREIN ARE REVERSED BY THE HIGHER APPELLATE AUTHORITY, THE SAM E ARE CONSIDERED AS VALID, EFFECTIVE AND REVENANT UNDER THE GIVEN CIRCU MSTANCES. ACCORDINGLY, AFTER CONSIDERING ALL THE RELEVANT FACTS AND CIRCUM STANCES, IT IS HELD THAT THE GP RATE ADOPTED BY THE AO AS 18.17% IS NOT CONS ONANCE WITH THE RATIO UPHELD IN VARIOUS CASE LAWS AND ALSO AS PER PROVISI ONS OF LAW. ACCORDINGLY, IN MY CONSIDERED VIEWS, THE CORRECT AN D APPROPRIATE APPLICABLE GP RATE, FOR THE CURRENT YEAR U/S 143(3) WOULD BE 18.5% , WHICH HAS BEEN DETERMINED BY AN APPELLANT AUTHORITY IN THE IMMEDIATE PREVIOUS YEAR (I.E. AY. 06-07), ON THE BASIS OF THE APPELLANTS OWN PAST RECORD ONLY. IN VIEW OF THE ABOVE, THE AOS ACTION OF REJECTING THE BOOKS OF ACCOUNTS IS 4 UPHELD AND HE IS ALSO HEREBY DIRECTED TO SUBSTITUTE THE ADDITION U/S 143(3) OF THE ACT FROM RS. 6,02,625/- TO RS. 14,06,112/-. 2.4 DURING THE COURSE OF PROCEEDING BEFORE US, THE LD. AR HAS FILED THE FOLLOWING SUBMISSIONS:- THE VARIOUS OBSERVATIONS MADE BY THE LOWER AUTHOR ITIES FOR JUSTIFYING THE APPLICATION OF SECTION 145(3) ARE U NJUSTIFIED FOR THE FOLLOWING REASONS:- (I) THE ASSESSEE MAINTAINS DAY TO DAY BOOKS OF ACCO UNTS, WHICH IS SUBJECT TO AUDIT. THESE BOOKS ARE DULY SUP PORTED WITH BILLS AND VOUCHERS. THE LOWER AUTHORITIES HAVE NOT POINTED OU T ANY SALES OR PURCHASE WHICH IS OUT OF THE BOOKS OR NOT VOUCHED. THE NATUR E OF THE BUSINESS OF ASSESSEE IS SUCH THAT MAINTENANCE OF DAY TO DAY STO CK REGISTER IS NOT FEASIBLE/ POSSIBLE IN SUCH TYPE OF BUSINESS ACTIVIT IES AS THE ASSESSEE IS MANUFACTURING PAPERS OF DIFFERENT SIZES, THICKNESS & QUALITY. OF COURSE DAY TO DAY QUANTITATIVE DETAILS OF RAW MATERIAL & F INISHED GOODS ARE NOT MAINTAINED BUT AT THE YEAR END STOCK IS PHYSICALLY VERIFIED & VALUED BY THE ASSESSEE. THE LOWER AUTHORITIES HAVE NOT FOUND ANY DEFECT IN THE SAID DETAILS. IN THESE FACTS, THE OBSERVATION OF THE LOW ER AUTHORITIES REGARDING NON MAINTENANCE OF DAY TO DAY STOCK REGISTER OF CON SUMPTION OF EACH ITEM HAS NO RELEVANCE & THUS THIS CANT BE A REASON FOR REJECTING THE BOOKS AND APPLYING PROVISIONS OF SECTION 145(3). (II) IN RESPECT OF PURCHASES OF RAGS, ONLY THE PURC HASES OF SAME FROM SMALL PARTIES WHO ARE FROM THE WEAKER SECTION OF SOCIETY (I.E. KABARIES) IS MADE IN CASH THROUGH SELF MADE VOUCHER S. HOWEVER, IN THE VOUCHERS, COMPLETE ADDRESS/NAME, QUANTITY/RATE & SI GNATURE OF THE SUPPLIERS IS MENTIONED. SINCE SUCH SMALL PARTIES DO NOT HAVE SUCH INCOME WHICH REQUIRES OPENING OF BANK ACCOUNT, PAYMENT IS MADE TO THEM IN CASH. THE LOWER AUTHORITIES HAVE NOT POINTED OUT ANY SPEC IFIC PAYMENT WHICH IS NOT VERIFIABLE. IN THE PREVIOUS YEARS ALSO, THE SYS TEM OF PURCHASES HAS BEEN SAME AND CONSISTENTLY FOLLOWED. IN A.Y. 05-06, AO R EJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY GIVING THE SAME OBSERVA TION BUT CIT(A) IN PARA 2.6 OF ITS ORDER HELD THAT THE OBSERVATION OF THE AO REGARDING PURCHASES OF RAGS IS ONLY ON SURMISES & WITHOUT ANY SPECIFIC INSTANCE . THUS, THE PURCHASES OF RAGS ARE FULLY VERIFIABLE. 2 SECTION 145(3) IS ATTRACTED WHERE THE ASSESSING O FFICER IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE OR THE METHOD OF ACCOUNTING OR THE ACCOUNT ING STANDARDS HAVE NOT BEEN REGULARLY FOLLOWED. THE ASSESSING OFFICER HAS NO OBJECTION ABOUT THE METHOD OF ACCOUNTING OR THE ACCOUNTING STANDARD FOL LOWED. HE HAS ONLY 5 DOUBTED THE CORRECTNESS & COMPLETENESS OF ACCOUNTS FOR THE REASON THAT THE ASSESSEE DOES NOT MAINTAIN THE DAY TO DAY STOCK REG ISTER & PURCHASES OF RAGS IS MADE ON SELF MADE VOUCHERS. BOTH THESE OBSE RVATIONS OF THE AO ARE NOT RELEVANT FOR APPLICATION OF SECTION 145(3) AS E XPLAINED ABOVE. THEREFORE, SECTION 145(3) INVOKED BY THE LOWER AUTH ORITIES, WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN THE BOOKS OF AC COUNTS, IS BAD IN LAW. 3. IT MAY BE NOTED THAT NEVER IN THE PAST, THE BOOK S OF ACCOUNTS HAS BEEN REJECTED. IN A.Y. 06-07, AO REJEC TED THE BOOKS OF ACCOUNTS FOR SIMILAR REASONS WHICH WAS ALSO UPHELD BY THE CIT(A). HOWEVER, HONBLE ITAT VIDE ITS ORDER DT.14.07.2011 IN ITA NO. 36/JP/11 ACCEPTED THE BOOKS OF ACCOUNTS BY GIVING THE FOLLOW ING FINDINGS:- NOT MAINTAINING STOCK REGISTER DOES NOT ATTRACT APPLICATION OF PROVISIONS OF SECTION 145(3) AS THER E MUST BE SOME DISCREPANCY IN THE BOOKS OF ACCOUNTS OR IN THE PURC HASE OR SALES VOUCHERS. COMPLETE BOOKS OF ACCOUNTS ALONG WITH COM PLETE VOUCHERS WERE MAINTAINED & PRODUCED FOR TEST CHECK. CASH PURCHASES OR CASH SALES IS ALSO NOT A GROUND FOR RE JECTION OF BOOKS OF ACCOUNTS WITHOUT BRINGING ANY MATERIAL THAT ASSE SSEE HAS INFLATED THE PURCHASES OR HAS SUPPRESSED ITS SALES. IN EARLIER YEAR ALSO ON SIMILAR FACTS THE BOOKS OF ACCOUNTS WERE RE JECTED BY THE AO & TRADING ADDITION WAS MADE WHICH WAS DELETED BY CI T(A) & TRIBUNAL HAS CONFIRMED THE DELETION OF ADDITION IN ITS ENTIRETY. IN VIEW OF ABOVE FACTS & CIRCUMSTANCES, WE HOLD THAT C IT(A) WAS NOT JUSTIFIED IN UPHOLDING THE APPLICATION OF PROVISION S OF SECTION 145(3) & UPHOLDING PART TRADING ADDITION. 4. OTHERWISE ALSO, ONLY BECAUSE STOCK REGISTER IS N OT MAINTAINED OR THERE ARE SOME INSIGNIFICANT DISCREPA NCIES, BOOKS OF ACCOUNTS CAN NOT BE REJECTED AS HELD IN THE FOLLOWI NG CASES:- GANESH FOUNDRY VS. ACIT 78 TTJ 736 (JODHPUR) CIT VS. JACKSONS HOUSE 198 TAXMAN 385(DELHI) M/S ANTIQUARIAT VS. ACIT XXXVII TAX WORLD 145 (JP) DCIT VS. ASSOCIATED STONE INDUSTRIES LIMITED 22 TW 155 (JP). . AMBIKA TEXTILE INDUSTRIES VS. DCIT22 TW 199 (JP) VADAYATTU JEWELLERY V. STATE OF KERELA, (1997) 104 STC 121, 126 (KER), ST. TERRSA OIL MILLS VS. STATE OF KERALA (1970) 76 ITR 365 (KER.): 6 ADDL. CIT V. V. LAKHANI SHOES LIMITED 34 TAX WORLD 32 (JP) THE TRADING . IN VIEW OF ABOVE, THE AO BE DIRECTED TO ACCEPT T HE BOOKS OF ACCOUNTS. 5. WITHOUT PREJUDICE TO ABOVE, EVEN IF BOOKS OF ACC OUNTS ARE REJECTED IT IS NOT NECESSARY THAT THERE SHOULD BE A TRADING ADDITION. AFTER REJECTION OF BOOKS OF ACCOUNTS, ASSESSMENT IS TO BE MADE IN THE MANNER PROVIDED U/S 144. THIS WOULD REQUIRE TO TAKE INTO C ONSIDERATION ALL THE CIRCUMSTANTIAL FACTS & THE PAST HISTORY. THE SAME I S AS UNDER:- PARTICULARS A.Y. 07-08 A.Y. 06-07 A.Y. 05-06 TURNOVER 24,34,80,855/- 14,42,43,406/- 13,27,24,587/- GROSS PROFIT 4,36,37,845/- 2,62,14,571/- 2,50,74,718/- G.P. RATE 17.92% 18.17% 18.89% (I) FROM THE ABOVE, IT CAN BE NOTED THAT OVERALL GROSS PROFIT HAS INCREASED FROM RS. 2,62,14,571/- TO RS. 4,36,37,845/-. THE ASSESSEE IS INTERESTED IN THE VOLUME OF PROFIT & NOT IN THE RATE OF PROFIT. THE SLIGHT DECLINE IN G.P. RATE BY .25% IS DUE TO THE REASON THAT THE TURNOVER OF THE ASSESSEE HAS INCREA SED BY 69% AS COMPARED TO LAST YEAR. (II) DURING THE YEAR UNDER CONSIDERATION, 24 NEW CUSTOMERS WERE ADDED TO WHOM SALES OF APPROX 13.39 CRORES WAS MADE. THIS WAS POSSIBLE ONLY BY SELLING THE GOODS A T LOWER PRICE THAN SALE TO OTHERS. (III) CIT(A) ENHANCED THE ADDITION TO RS. 14,06,11 2/- BY APPLYING G.P. RATE OF 18.5% ON THE DECLARED TURNOVE R FOR THE REASON THAT TILL THE DATE OF HIS ORDER, THE APPEAL FILED BEFORE THE ITAT FOR A.Y. 06-07 WAS NOT DECIDED. HOWEVER, AFTER THE ORDER OF CIT(A), HONBLE ITAT VIDE ITS ORDER DT.14.07.2011 IN ITA NO. 36/JP/11 HAS ACCEPTED THE G.P. RATE OF 18.17% DECLA RED BY THE ASSESSEE FOR THAT YEAR BY ACCEPTING THE REASON FOR A SMALL DECLINE OF .72% IN THE G.P. RATE ON ACCOUNT OF TURNOVER OF MOR E THAN 14 CRORES. THE ADDITION, THUS, CONFIRMED BY CIT(A) IS HIGHLY ARBITRARY & UNJUSTIFIED. THEREFORE, WHEN THE OVERALL AMOUNT OF PROFIT DECLA RED BY THE ASSESSEE IS BETTER AS COMPARED TO THE RESULTS D ECLARED IN EARLIER YEAR, ENHANCEMENT OF TRADING ADDITION BY CIT(A) BY APPLYING G.P. RATE OF 18.5% IS UNWARRANTED & UNJUSTIFIED. 7 (V) EVEN THE APPLICATION OF G.P. RATE OF 18.17% IN THE PRESENT FACTS OF THE CASE IS NOT JUSTIFIED CONSIDER ING THE INCREASE IN TURNOVER BY AROUND 10 CRORES AS COMPARED TO THE LAS T YEAR & THE DECISION OF HONBLE ITAT IN A.Y. 05-06 & 06-07 WHER E THE TRADING ADDITION MADE BY THE AO WERE DELETED IN TOT ALITY. 2.5. THE LD. AR RELIED UPON FOLLOWING CASES:- MALANI RAMJIVAN JAGANNATH VS. ACIT 207 CTR (RAJ.)19 / 316 ITR 120: CIT VS. SMT. POONAM RANI 41 DTR 194 (DEL.) (2010): CIT V. GOTAN LIME KHANIZ UDYOG 256 ITR 243(RAJ IN VIEW OF ABOVE, THE BOOKS OF ACCOUNTS BE DIRECTED TO BE ACCEPTED & THE TRADING ADDITION OF RS. 14,06,112/- CONFIRMED BY THE CIT(A) BE DELETED. 2.6 ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 2.7 WE HAVE HEARD BOTH THE PARTIES. THE AO IN HIS O RDER HAS OBSERVED THAT PURCHASES, SALES AND EXPENSES ARE NOT FULLY VERIFIABLE FROM TH E SUPPORTING BILLS/ VOUCHERS. BEFORE THE AO, THE ASSESSEE AGREED THAT THE ASSESSEE IS HAVIN G THE RAW MATERIAL AND FINISHED PRODUCTS OF DIFFERENT QUALITIES AND THEREFORE, IT I S NOT POSSIBLE TO MAINTAIN DAY TO DAY STOCK REGISTER. THE AO IN HIS ORDER HAS MENTIONED THAT TH E ASSESSEE HAS AGREED THAT HARDLY A FEW SELF MADE VOUCHERS ARE THERE FOR MAKING PURCHASES. IN THE TRADING ACCOUNT, THERE ARE FOUR ITEMS NAMELY OPENING STOCK, PURCHASES, SALES AND CL OSING STOCK. IT MAY BE POSSIBLE FOR A PARTICULAR NATURE OF BUSINESS THAT IT IS NOT POSSIB LE TO MAINTAIN THE STOCK REGISTER BUT IN CASE THE ASSESSEE IS HAVING THE INVENTORY OF THE OP ENING STOCK AS WELL AS CLOSING STOCK THEN TRADING ACCOUNT CANNOT BE DISTURBED UNLESS THE AO NOTICES THE DISCREPANCIES IN SUCH STOCK. THERE MAY BE SELF MADE VOUCHERS IN RESPECT O F PURCHASES BUT IN CASE SUCH PURCHASE ARE AT THE MARKET RATE AND THE AO HAS NOT BEEN ABLE TO SHOW THAT SUCH PURCHASES 8 ARE INFLATED OR BOGUS THEN PERHAPS TRADING RESULTS CAN BE REJECTED. IF ANY UNVERIFIABLE PURCHASES ARE POINTED OUT BY THE AO AND THE ASSESSE E IS USING SUCH PURCHASES FOR INCREASE IN PERCENTAGE OF WASTAGE THEN THE AO CAN REJECT THE BOOKS OF ACCOUNTS. THE AO IN HIS ORDER HAS NOT POINTED OUT ANY SPECIFIC DISCREPANCIE S. IN THE CASE OF THE ASSESSEE, THE TRIBUNAL IN IMMEDIATELY PRECEDING YEAR HELD THAT T HE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE APPLICATION OF PROVISIONS OF SECTION 145(3) OF THE ACT. HENCE, ON THE BASIS OF THE FACTS MENTIONED BY THE AO IN HIS ORDER, WE H OLD THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS. THE T RADING RESULTS ARE TO BE ACCEPTED BECAUSE IN THE ASSESSMENT YEAR UNDER CONSIDERATION, THE SAL ES HAVE INCREASED TO RS. 24.34 CRORES AS AGAINST RS. 14.42 CRORES IN THE IMMEDIATELY PRE CEDING YEAR AND THERE HAS BEEN A SLIGHT FALL IN PERCENTAGE OF G.P. OF 17.92% AS AGAINST 18 .17% OF THE IMMEDIATELY PRECEDING YEAR. WE THEREFORE, HOLD THAT THE LD. CIT(A) WAS NO T JUSTIFIED IN ENHANCING THE TRADING ADDITION TO RS. 14,06,112/-. 3.1 THE THIRD GROUND OF ASSESSEE IS THAT THE LD. CI T(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OUT OF THE FOLLOWING EXPENSES:- TELEPHONE EXPENSES RS. 55,171/- CONVEYANCE & INTEREST ON CAR LOAN RS. 33,09 8/- DEPRECIATION ON VEHICLE RS. 41,054/- 3.2 THIS ISSUE HAS BEEN DECIDED IN THE IMMEDIATELY PRECEDING YEAR BY THE TRIBUNAL BY RESTRICTING THE DISALLOWANCE TO RS. 25,000/-, RS. 2 0,000/- AND RS. 25,000/- ON ACCOUNT OF TELEPHONE EXPENSES, CONVEYANCE AND INTEREST ON CAR LOAN AND DEPRECIATION ON VEHICLES RESPECTIVELY. THE DISALLOWANCES MADE BY THE AO DURI NG THE YEAR HAVE BEEN MENTIONED ABOVE WHILE DISALLOWANCES MADE BY THE AO WERE TO T HE EXTENT OF RS. 47,100/-, RS. 33,208/- AND RS. 55,156/- RESPECTIVELY IN THE IMME DIATELY PRECEDING YEAR. THEREFORE, 9 LOOKING TO THE DISALLOWANCES RESTRICTED IN THE IMME DIATELY PRECEDING YEAR BY THE TRIBUNAL, WE FEEL THAT IT WILL BE FAIR AND REASONABLE TO REST RICT THE DISALLOWANCE TO THAT EXTENT AS CONFIRMED BY THE TRIBUNAL IN THE IMMEDIATELY PRECE DING YEAR. ACCORDINGLY DISALLOWANCES ARE RESTRICTED TO RS. 25,000/-, RS. 2 0,000/- AND RS. 25,000/- RESPECTIVELY ON ACCOUNT OF TELEPHONE EXPENSES, CONVEYANCE AND INTE REST ON CAR LOAN AND DEPRECIATION ON VEHICLES. 4.. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 13-01 -2012. (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 13 /01/2012 *MISHRA COPY FORWARDED TO :- 1. SHRI ABDUL LATIF, JAIPUR 2. THE ACIT, CIRCLE- 7, JAIPUR 3 THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5 THE LD.DR 6 THE GUARD FILE (ITA NO.674/JP /11) A.R, ITAT, JAIPUR