M/S PAWAN ENTERPRISES, JAIPUR V. ASSISTANT COMMISSIONER OF INCOME TAX, JAIPUR

ITA 76/JPR/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6319 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 23-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SEEMA MEENA J DHK
• Keywords: Rejection of books of accounts; Question of law
• Section: 143(3); 145; 2

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 FOT; IKY JKO] U;KF;D LNL; ,OA JH HKKXPAN] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA-@ ITA NO. 76/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2014-15 M/S PAWAN ENTERPRISES, 75, TALKATORA, JAIPUR. CUKE VS. A.C.I.T., CIRCLE-5, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAEFP 3369 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI VIJAY GOYAL (CA) & SHRI GULSHAN AGARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. SEEMA MEENA (JCIT-DR) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 14/06/2018 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 04/07/2018 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THE APPEAL FILED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A)-2, JAIPUR DATED 13/11/2017 FOR THE A.Y. 2014- 15. 2. THE ASSESSEE IS A PARTNERSHIP FIRM WITH THREE PART NERS NAMELY SHRI SHYAM SUNDER LASHKARY, SHRI PAWAN LASHKARY AND SHRI MURARI LAL LASHKARY, ENGAGED IN THE BUSINESS OF MANUFACTURING, TRADING AND EXPORT OF READYMADE GARMENTS, APPARELS AND MADE-UP. RETURN DE CLARING INCOME OF RS. 2,37,70,530/- WAS FILED ON 27-11-2014. THE CASE WAS SELECTED FOR ITA 76/JP/2018_ M/S PAWAN ENTERPRISES VS ACIT 2 SCRUTINY U/S 143(3) OF INCOME TAX ACT, 1961 (IN SHO RT THE ACT). THE ASSESSING OFFICER HAS FINALIZED THE ASSESSMENT AT A N INCOME OF RS. 2,97,19,849/- ON 07-12-2016 AFTER REJECTING BOOKS O F ACCOUNT UNDER SECTION 145(3) OF THE ACT AND MAKING TRADING OF RS. 59,49,319/- BY APPLYING G.P. RATE OF 20.50% AS AGAINST THE DECLARE D G.P. RATE OF 18.02% BY THE ASSESSEE. THE LD. CIT(A) HAS GIVEN PART RELIEF TO THE ASSESSEE. 3. NOW THE ASSESSEE IS IN APPEAL BEFORE THE ITAT BY T AKING FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT (A) ERRED IN CONFIRMING THE REJECTION OF THE BOOKS OF ACCOUNTS AND APPLICATION OF SECTION 145(3) OF THE I.T. ACT, 1961 IN THE CASE OF ASSESSEE MADE BY LD A.O. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS.47,5 0,232/- ON A/C OF TRADING ADDITION, BY ESTIMATING THE GP OF ASSESSEE AT 20% ON DECLARED SALES AS AGAINST 18.02% DECLARED BY ASSESS EE AND 20.5% APPLIED BY LD AO. 3. THAT THE ORDER OF THE LD CIT (A), PARTLY CONFIRM ING THE ADDITION MADE BY THE AO IS ARBITRARY, WHIMSICAL, CAPRICIOUS, PERVERSE AND AGAINST THE LAW AND FACTS OF THE CASE. THE ORDER OF LD CIT-(A) IN THIS REGARD DESERVES TO BE SET ASIDE AND ADDITION MADE B Y THE LD AO DESERVES TO BE DELETED. 4. ALL THESE THREE GROUNDS ARE INTERLINKED AND ARE AGAINST CONFIRMING THE REJECTION OF BOOKS OF ACCOUNT AND ALSO CONFIRMI NG THE ADDITION OF RS. 47,50,232/- ON ACCOUNT OF TRADING ADDITION BY ESTIM ATING THE G.P. OF ITA 76/JP/2018_ M/S PAWAN ENTERPRISES VS ACIT 3 ASSESSEE @ 20%. THE LD. CIT(A) HAS DEALT THE ISSUE IN PARAGRAPH NO. 2.3 OF HER ORDER, WHICH IS REPRODUCED AS UNDER: 2.3 I HAVE PERUSED THE FACTS OF THE CASE, THE ASSE SSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE ASSESSEE IS A GAR MENT EXPORTER AND DURING THE YEAR A GP% OF 18.02% WAS RETURNED COMPAR ED TO 19.44% IN THE PREVIOUS YEAR ON A TURNOVER OF 17.94 CRORE AS COMPA RED TO 23.98 CRORE IN THE CURRENT YEAR. THE AO AFTER EXAMINING THE BOOKS OF ACCOUNTS REJECTED THE SAME UNDER SECTION 145(3) OF THE ACT AND ESTIMA TED THE GP RATE AT THE AVERAGE OF PAST FIVE YEARS AT 20.50%. THE AO OBSERV ED THAT NEITHER THE DAY TO DAY STOCK REGISTER IS MAINTAINED NOR ANY DET AILS PERTAINING TO THE CONSUMPTION OF RAW MATERIAL OR PRODUCTION OF FINISH ED GOODS IS MAINTAINED. FURTHER, THE AO NOTED THAT IF THE STOCK REGISTER COULD NOT BE MAINTAINED FOR THE REASONS CITED BY THE AO AND QUAN TITY DETAILS DID NOT EXIST, ALTERNATE RECORDS SHOULD HAVE BEEN PRODUCED FOR THE PURPOSE OF VERIFICATION ESPECIALLY AS THE PROFITS WERE SHOWING A CONSISTENT DECLINE. FURTHER, HE OBSERVED THAT QUANTITY OF RAW MATERIAL CONSUMED, WASTAGE, FINISHED GOODS MANUFACTURED AND LYING IN THE CLOSIN G STOCK, WERE NOT VERIFIABLE. IN THE PRESENT PROCEEDINGS, THE AR SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF READYMADE GARMENTS WHERE THERE ARE LARGE NUMBERS OF VARIETIES IN EACH RANGE AND THEREFORE, IT IS NOT PRACTICALLY POSSIBLE TO MAINTA IN STOCK REGISTER. IT WAS FURTHER SUBMITTED THAT THE AO HAS SIMPLY PROCEEDED ON THE BASIS OF PAST HISTORY OF THE ASSESSEE. FURTHER, RELIANCE WAS PLAC ED ON THE DECISION OF THE ITAT, JAIPUR FOR AY 2011-12 WHERE IT WAS CLAIMED TH AT A SIMILAR ISSUE AROSE AND THE ITAT HAD NOT UPHELD THE REJECTION OF BOOKS OF ACCOUNTS. I HAVE CAREFULLY PERUSED THE ORDER OF THE ITAT, HO WEVER, IT IS SEEN THAT IN PAST YEAR, THE AO HAD REJECTED THE BOOKS OF ACCOUNT S ON THE SOLE GROUND THAT THE STOCK REGISTER WAS NOT MAINTAINED. HOWEVER , IN THE PRESENT YEAR, THE AO HAD REQUIRED THE ASSESSEE TO GIVE THE DETAIL S OF QUANTITATIVE TALLY VIS A VIS THE MANUFACTURING PROCESS I.E. THE RAW MA TERIAL CONSUMED, WASTAGE, MANUFACTURED GOODS SOLD AND FORMING PART O F CLOSING STOCK ETC. BUT NONE OF THESE DETAILS COULD BE PRODUCED BEFORE THE AO FOR VERIFICATION. ITA 76/JP/2018_ M/S PAWAN ENTERPRISES VS ACIT 4 THUS THE ASSESSEE COULD NOT PRODUCE BEFORE THE AO, THESE PRIMARY RECORDS OF THE MANUFACTURING PROCESS SO THAT THEY COULD BE EXAMINED. FURTHER, THE ASSESSEE COULD NOT FORWARD ANY REASONS FOR THE DECLINE IN G.P RATE AS COMPARED TO THE PREVIOUS YEAR. IN VIEW OF THE ABOVE , AND IN THE ABSENCE OF PRODUCTION OF ANY QUALITATIVE DETAILS EITHER IN THE ASSESSMENT PROCEEDINGS OR BEFORE ME, THE REJECTION OF BOOKS OF ACCOUNTS IS UPHELD. HOWEVER, THERE IS AN INCREASE IN TURNOVER OF THE AS SESSEE OF ALMOST 33% OVER THE LAST YEAR, TAKING THE SAME INTO CONSIDERAT ION THE G.P % TO BE APPLIED IN MODIFIED TO 20% INSTEAD OF 20.5 %. THE G ROUND OF APPEAL IS PARTLY ALLOWED. 5. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE LD AR HAS SUBMITTED AS UNDER: A. REJECTION OF BOOKS OF ACCOUNTS THE ASSESSEE IS E NGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF READYMADE GARMENTS WHER E THERE ARE LARGE NUMBERS OF VARIETIES IN THE EACH RANGE AND THEREFOR E, IT IS NOT PRACTICABLY POSSIBLE TO MAINTAIN STOCK REGISTER. B. THE PAST HISTORY OF THE ASSESSEE AS REGARD REJE CTION OF BOOKS OF ACCOUNT. AY TURNOVER OF GARMENT BUSINESS (IN LACS OF RS.) GP DECLARED BY ASSESSEE FINDINGS OF AO FINDINGS OF LD CIT(A) FINDINGS OF H ONBLE ITAT 2010 -11 1315.51 22.00% LD AO REJECTED BOOKS OF ACCOUNT ON THE GROUND NON MAINTENANCE OF STOCK REGISTER AND ESTIMATED GP AT 22.50% (PB 72-74) LD CIT(A) HELD THAT BOOKS OF ACCOUNT CANNOT BE REJECTED MERELY ON THE GROUND THAT THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER AND DELETED THE TRADING ADDITION. (PB 75-81) NO APPEAL BEFORE HONBLE TRIBUNAL 2011-12 1489.74 21.06% LD AO REJECTED BOOKS OF ACCOUNT ON THE GROUND NON MAINTENANCE OF STOCK REGISTER AND ESTIMATED GP AT 22% (PB 86-91) LD CIT(A) UPHELD THE REJECTION OF BOOKS OF ACCOUNT ON THE GROUND THAT THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER AND ESTIMATED GP RATE OF 21.50% (PB 92-97) HONBLE ITAT HAS HELD THAT AO HAS NOT GIVEN ANY FINDING THAT WHETHER CORRECT PROFIT CAN BE DEDUCED FROM BOOKS OF ACCOUNT. WHEN SALES AND ITA 76/JP/2018_ M/S PAWAN ENTERPRISES VS ACIT 5 PURCHASES ARE VERIFIABLE, BOOKS OF ACCOUNT CANNOT BE REJECTED. (PB 98- 101) 2012-13 1812.47 20.83% LD AO REJECTED BOOKS OF ACCOUNT ON THE GROUND NON MAINTENANCE OF STOCK REGISTER AND ESTIMATED GP AT 22% (PB 106-112) LD CIT(A) HELD THAT BOOKS OF ACCOUNT CANNOT BE REJECTED MERELY ON THE GROUND THAT THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER AND DELETED THE TRADING ADDITION. (PB 113-120) NO APPEAL BEFORE HONBLE TRIBUNAL 2013-14 1794.82 19.44% LD AO REJECTED BOOKS OF ACCOUNT ON THE GROUND NON MAINTENANCE OF STOCK REGISTER AND ESTIMATED GP AT 22% (PB 124-129) LD CIT(A) HELD THAT BOOKS OF ACCOUNT CANNOT BE REJECTED MERELY ON THE GROUND THAT THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER AND DELETED THE TRADING ADDITION. (PB 130-134) HONBLE ITAT CONFIRMED THE FINDINGS OF LD CIT(A) (PB 135- 144) IN ALL THE IMMEDIATELY PRECEDING FOUR YEARS, THE LD AO REJECTED BOOKS OF ACCOUNT ON THE SAME GROUND I.E. NON MAINTENANCE OF STOCK RECORDS AND IN ALL THESE YEARS APPELLATE AUTHORITIES DID NOT SUSTA IN THE REJECTION OF BOOKS OF ACCOUNT. THEREFORE THE LD CIT(A) HAS ERRED IN SU STAINING THE REJECTION OF BOOKS OF ACCOUNT OF THE ASSESSEE FOR WANT OF STOCK RECORDS IN CASE OF A GARMENT EXPORTER. THE FINDINGS OF LD AO/LD CIT(A) D ESERVE TO BE SET ASIDE AND THE BOOKS OF ACCOUNT OF THE ASSESSEE DESERVES T O BE ACCEPTED. C) 145(3) CANNOT BE APPLIED AS NO FINDING OF THE AO ON THE INGREDIENTS OF SECTION 145(3) OF I. TAX ACT TO APPLY THE PROVISIONS OF SECTION 145(3) OF INCO ME TAX ACT, THERE MUST BE FINDING OF THE AO THAT BOOKS OF ACCOUNT ARE NOT CORRECT OR INCOMPLETE OR THE ASSESSEE IS NOT FOLLOWING THE PROPER METHOD OF ACCOUNTING REGULARLY OR NOT FOLLOWING THE ACCOUNTING STANDARDS NOTIFIED BY CENTRAL GOVERNMENT. IN THE CASE OF THE ASSESSEE, THERE IS N O SUCH FINDING OF THE LD AO. ITA 76/JP/2018_ M/S PAWAN ENTERPRISES VS ACIT 6 D) REGARDING DEFECTS POINTED BY THE AO WE MAY SUBMI T AS UNDER: - 1) STOCK REGISTER/RAW MATERIAL REGISTER NOT MAINTAINED THE ASSESSEE IS PURCHASING MATERIAL WHICH IS SUPPO RTED BY PURCHASE BILLS. THE SALE OF THE ASSESSEE IS 100% EXPORT SALES AND A RE SUBJECT TO VERIFICATION. NO DEFECT IN PURCHASE BILLS AND SALES BILLS WAS FOUND BY THE LD AO. THE WAGES IS FULLY SUPPORTED BY WAGES REGISTER. FURTHER THE WAGES OF THE ASSESSEE IS SUPPORTED BY DEPOSIT OF PF AND ESI. WHEN THE COSTS AS WELL AS SALES ARE 100% SUBJECT TO VERIFICATION THAN BOOKS OF ACCOUNT CANNOT BE REJECTED MERELY FOR WANT OF STOCK REGISTE R. THE ASSESSEE HAS EXPLAINED THE REASON FOR NON MAIN TENANCE OF THE STOCK REGISTER. THE ASSESSEE EXPLAINED THAT IT IS PRACTIC ALLY NOT POSSIBLE FOR ASSESSEE TO MAINTAIN STOCK REGISTER; THEREFORE, THE ASSESSEE IS NOT MAINTAINING STOCK REGISTER. THE EXPLANATION OF THE ASSESSEE SHOULD BE CONSIDERED FROM THE VIEW POINT OF A BUSINESSMAN. HO WEVER, EVEN IF STOCK RECORD IS NOT MAINTAINED, THE BOOKS OF ACCOUNTS CAN T BE REJECTED ON THIS GROUND ALONE. 2) THE AO HAS MERELY PROCEEDED ON THE BASIS OF PAS T HISTORY OF GP OF THE ASSESSEE. THE AO HAS NOT SPECIFIED/POINTED OUT WHAT IS THE IMPACT ON THE PROFIT BY NON MAINTENANCE OF STOCK REGISTER. 3) SIMILAR ISSUE AROSE IN AY 2013-14 IN THE CASE OF ASSESSEE AND THE MATTER TRAVELLED UPTO ITAT. IN AY 2013-14, THE LD AO REJEC TED THE BOOKS OF ACCOUNT ON THE SAME GROUND. LD CIT(A) HAS NOT UPHEL D THE REJECTION OF THE BOOKS OF ACCOUNT. THE REVENUE FILED APPEAL BEFO RE HONBLE ITAT AGAINST THE ORDER OF LD CIT(A). HONBLE ITAT CONFIR MED THE FINDINGS OF LD CIT(A). THE FINDINGS OF HONBLE ITAT IS REPRODUCED AS UNDER:- 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. BRIEF FACTS OF THE CASE ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDING NOTED THAT THE ASSESSEE HAD N EITHER MAINTAINED DAY TODAY STOCK REGISTER NOR ANY DETAIL PERTAINING TO T HE DAY TODAY CONSUMPTION OF RAW MATERIAL OR PRODUCTION OF FINISHED. FOR WANT OF COMPLETE DETAILS THE AO INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND MADE THE TRADING ADDITION OF RS. 45,96,781/- BY APPLYING THE G.P. RA TE OF 22% ON THE TURNOVER OF ITA 76/JP/2018_ M/S PAWAN ENTERPRISES VS ACIT 7 RS. 17,94,82,618/- AS AGAINST G.P. RATE OF 19.43% S HOWN BY THE ASSESSEE. IN FIRST APPEAL, THE LD. CIT(A) HAS DELETED THE ADDITI ON BY OBSERVING THAT THE AOS ACTION TO REJECT THE BOOKS OF ACCOUNT IS NOT TENABL E AND FURTHER OBSERVED THAT ITAT JAIPUR BENCH IN ASSESSEE'S OWN CASE FOR THE AS SESSMENT YEAR 2011-12 HAD GRANTED RELIEF TO THE ASSESSEE FOR THE SAME ISS UE. IT IS ALSO NOTED THAT THE ASSESSEE HAD FILED THE STATUTORY AUDIT REPORT BEFOR E THE LD. CIT(A) WHICH HAD NOT BEEN DISPUTED BY THE DEPARTMENT. THE LD.AR OF T HE ASSESSEE ALSO SUBMITTED THE REASON OF DECREASE IN PERCENTAGE OF G .P. IS INCREASE OF INPUT COST IN COMPARISON TO PREVIOUS YEAR. THE LD.AR FURT HER THAT THE COST OF MATERIAL AND WAGES INCREASED DUE TO PRODUCTION OF H IGH QUALITY PRODUCT BUT THE PRICE OF THE PRODUCT COULD NOT BE INCREASED IN SAME PROPORTIONATE DUE TO STIFF COMPETITION WITH CHINA. TAKING INTO CONSIDERA TION ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO THE ORDER OF ITA T JAIPUR BENCH FOR THE ASSESSMENT YEAR 2011-12 IN ASSESSEE'S OWN CASE BESI DES THE CASE LAWS RELIED UPON BY THE LD.AR OF THE ASSESSEE (SUPRA), WE CONCU R WITH THE FINDINGS OF THE LD. CIT(A). THUS GROUND NO. 1 TO 3 OF THE REVENUE A RE DISMISSED. 4) SIMILAR ISSUE AROSE IN AY 2011-12 IN THE CASE OF ASSESSEE AND THE MATTER TRAVELLED UPTO ITAT. IN AY 2011-12, THE LD AO REJEC TED THE BOOKS OF ACCOUNT ON THE SAME GROUND. LD CIT(A) UPHELD REJECT ION OF BOOKS OF ACCOUNT. HONBLE ITAT HAS NOT UPHELD THE REJECTION OF THE BOOKS OF ACCOUNT. THE FINDINGS OF HONBLE ITAT ARE REPRODUCE D AS UNDER:- 4.3. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE AO IS WITH IN HIS POWER TO REJECT THE BOOKS OF ACCOUNT WHERE HE FINDS THAT THE BOOKS SO P RODUCED BEFORE HIM, DOES NOT GIVE TRUE PICTURE OF THE PROFIT. IT IS ALSO SET TLED POSITION OF LAW THAT ASSESSEE IS REQUIRED TO MAINTAIN BOOKS OF ACCOUNT B Y WHICH THE TRUE PICTURE OF PROFIT CAN BE DEDUCED. THE AO REJECTED THE BOOKS OF ACCOUNT, HE IS REQUIRED TO FIND OUT WHETHER THE CORRECT PROFIT IS BEING DEDUCE D OR NOT. IN THE CASE IN HAND, THE AO HAS NOT GIVEN SUCH FINDING. THE AO HAS MERELY PROCEEDED ON THE BASIS OF PAST HISTORY OF THE ASSESSEE. THEREFORE, I N OUR CONSIDERED VIEW, THIS ACT OF THE AO IS NOT JUSTIFIED. THE AO OUGHT TO HAV E FOUND OUT WHAT IS THE IMPACT ON THE PROFIT BY NON MAINTENANCE OF STOCK RE GISTER. AS THE ASSESSEE HAS DEMONSTRATED THAT IT HAS 100% EXPORT SALES, THE AO HAS NOT DOUBTED THE SALES. CONSEQUENTLY, THE AO HAS NOT DOUBTED THE COR RESPONDING PURCHASES. THEREFORE, IN OUR CONSIDERED VIEW, THE AO WITHOUT G IVING SUCH FINDING WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. FURTHE R, WE FIND MERIT IN THE CONTENTION OF THE ASSESSEE THAT THERE IS AN INCREAS E IN INFLATION THEREBY THE COST OF PRODUCTION WAS INCREASED. THE ASSESSEES TU RNOVER HAS ALSO INCREASED. UNDER THESE FACTS, THE ESTIMATION MADE BY THE AO PU RELY ON THE BASIS OF PAST HISTORY IS NOT JUSTIFIED. THE LD.CIT (A) ALSO WITHO UT CONSIDERING THE FACTS IN RIGHT PERSPECTIVE PROCEEDED TO SUSTAIN THE ORDER OF THE AO WITH MINOR MODIFICATION. UNDER THESE FACTS, WE FIND MERIT IN T HE APPEAL FILED BY THE ASSESSEE. ACCORDINGLY, WE HEREBY DIRECT THE AO TO D ELETE THE ADDITION. THE GROUND RAISED IN THIS APPEAL IS ALLOWED. ITA 76/JP/2018_ M/S PAWAN ENTERPRISES VS ACIT 8 5) FURTHER RELIANCE IS PLACED ON THE FOLLOWING DECI SIONS: HONBLE RAJASTHAN HIGH COURT IN THE CASE OF MALANI RAMJIVAN JAGANNATH VS. ASSISTANT COMMISSIONER OF INCOME TAX (2009) 316 ITR 120 HAS HELD AS UNDER:- 10. IN THE FACE OF THESE UNDISPUTED FACTS AND CIRC UMSTANCES, THE TRIBUNAL IN OUR OPINION COULD NOT HAVE INTERFERED WITH THE ORDE R OF CIT(A). IN DOING SO, IT HAD IGNORED ALL ADMITTED FACTS NOTICED BY US ABOVE, IN THE FACE OF WHICH THERE WAS NO OCCASION FOR THE AO TO HAVE RESORTED TO ESTI MATE METHOD. THE GP IS PRIMARILY RESULT OF EXCESS OF SALES OVER PURCHASES, OPENING STOCK, CLOSING STOCK, THE UNSOLD STOCK AT TWO TERMINALS IS ONLY BA LANCING FACTOR. ADMITTEDLY OUT OF THIS FOUR COMPONENTS OF TRADING RESULT, THER E COULD NOT HAVE BEEN ANY GROUND FOR THE REVENUE TO ARRIVE AT DIFFERENT RESUL T. SO FAR AS CLOSING STOCK IS CONCERNED, INVENTORIES OF EXISTING STOCK WERE NOT F OUND TO BE INCORRECT BY THE AO I.E. THAT POSITION OF STOCK AS SHOWN IN THE ACCO UNT BOOKS WAS NOT INCORRECT. THERE BEING NO DISPUTE ABOUT THE SALES A ND PURCHASES, NON- MAINTENANCE OF STOCK REGISTER LOST ITS SIGNIFICANCE SO FAR AS ARRIVING AT GP IS CONCERNED. THEREFORE, THE CIT(A) WAS RIGHT IN HIS R EASONING ABOUT ADMITTED STATE OF AFFAIRS. RESORTING TO ESTIMATE OF GP RATE WAS FOUNDED ON NO MATERIAL. IT WAS MERELY A CASE OF MAKING CERTAIN ADDITIONS ON THE BASIS OF CERTAIN DEFECTS POINTED OUT BY THE AO AND WHICH HE HAS SHOW N IN DIFFERENT ACCOUNT BY GIVING MARGIN OF UNVOUCHED EXPENSES. HE HAS DISALLO WED CERTAIN EXPENSES. 11. THE TRIBUNAL COMMITTED BASIC ERROR IN NOT APPRE CIATING THE REASONING GIVEN BY THE CIT(A). IT IS TRITE TO SAY THAT IN THE FACTS AND CIRCUMSTANCES OF PRESENT CASE, ACCOUNT BOOKS ARE MAINTAINED AS THEY WERE ORDINARILY MAINTAINED YEARS AFTER YEARS AND WHICH WERE FOUND T O YIELD A FAIR RESULT. MERE DEVIATION IN GP RATE CANNOT BE A GROUND FOR RE JECTING BOOKS OF ACCOUNT AND ENTERING REALM OF ESTIMATE AND GUESSWORK. LOWER GP RATE SHOWN IN THE BOOKS OF ACCOUNT DURING CURRENT YEAR AND FALL IN GP RATE WAS JUSTIFIED AND ALSO ADMITTED BY THE AO AS WELL AS CIT(A) AS WELL A S THE TRIBUNAL. THEREFORE, FALL IN GP RATE LOST ITS SIGNIFICANCE. HAVING ACCEP TED THE REASON FOR FALL IN GP RATE, NAMELY, STIFF COMPETITION IN MARKET AND ALSO THAT HUGE LOSS CAUSED IN PARTICULAR TRANSACTION, NEITHER THE REJECTION OF BO OKS OF ACCOUNT WAS JUSTIFIED NOR RESORT TO SUBSTITUTION OF ESTIMATED GP BY RULE OF THUMB MERELY FOR MAKING CERTAIN ADDITIONS. WE ARE, THEREFORE, OF THE OPINION THAT THE FINDINGS ARRIVED AT BY THE TRIBUNAL SUFFERS FROM BASIC DEFEC T OF NOT APPLYING ITS MIND TO THE EXISTING MATERIAL WHICH WERE RELEVANT AND WE NT TO THE ROOT OF THE MATTER. WHEN ALL THE DATA AND ENTRIES MADE IN THE T RADING ACCOUNT WERE NOT FOUND TO BE INCORRECT IN ANY MANNER, THERE COULD NO T HAVE BEEN ANY OTHER RESULT EXCEPT WHAT HAS BEEN SHOWN BY THE ASSESSEE I N THE BOOKS OF ACCOUNT. WE ARE, THEREFORE, UNABLE TO SUSTAIN THE ORDER OF T HE TRIBUNAL. 6) THE DEFECTS POINTED OUT BY THE AO ARE NOT DEFECT AT ALL. THE TRUE PROFIT CAN BE DEDUCED FROM THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. THE ASSESSEE IS MAINTAINING PROPER BOOKS OF ACCOUNT , AND FOLLOWING THE ITA 76/JP/2018_ M/S PAWAN ENTERPRISES VS ACIT 9 ACCOUNTING POLICIES AND ACCOUNTING STANDARDS REGULA RLY. EACH CASE HAS TO BE CONSIDERED ON ITS OWN PECULIAR FACTS, HAVING REG ARD TO THE NATURE OF BUSINESS. ACTION OF THE ASSESSING OFFICER CLEARLY D EMONSTRATES THAT HE COULD NOT GATHER ANY DETAILS OR FIND ANY IRREGULARI TY IN MAINTENANCE OF THE BOOKS SO AS TO JUSTIFY REJECTION OF BOOKS IN TO TO. THEREFORE, WE PRAY YOUR HONOR TO QUASH THE REASONING OFFERED BY THE AS SESSING OFFICER FOR REJECTING THE BOOKS AS LEGALLY UNSUSTAINABLE PROPOS ITION. WE FURTHER RELY ON THE FOLLOWING DECISIONS:- (I) M. DURAI RAJ VS. COMMISSIONER OF INCOME TAX HIGH COURT OF KERALA (1972) 83 ITR 484 (KER) : HELD WHAT IS RELEVANT TO CONSIDER IN SUCH CASES IS WHET HER THE ASSESSEE'S ACCOUNTS ARE MAINTAINED ACCORDING TO THE METHOD REGULARLY EM PLOYED BY HIM, WHETHER THEY ARE CORRECT AND COMPLETE, AND WHETHER THE INCO ME CAN BE PROPERLY COMPUTED FROM THE ACCOUNTS. THERE IS NO FINDING THA T THE PURCHASES HAVE BEEN EXAGGERATED OR THE SALES HAVE BEEN SUPPRESSED, OR T HAT ANY TRANSACTION HAS NOT COME INTO THE ACCOUNTS. IN THESE CIRCUMSTANCES, THE GROUNDS STATED BY THE TRIBUNAL ARE NEITHER VALID NOR RELEVANT IN REJECTIN G THE ACCOUNTS OF THE ASSESSEE. (II) ST TERESAS OIL MILLS VS STATE OF KERALA 76 IT R 365 (KER) ACCOUNTS REGULARLY MAINTAINED IN THE COURSE OF BUSINESS HAVE TO BE TAK EN AS CORRECT UNLESS THERE ARE STRONG AND SUFFICIENT REASON TO INDICATE THAT T HEY ARE UNRELIABLE. (III) CIT VS JAS JACK ELEGANCE EXPORTS 324 ITR 95 (DELHI) :- HONBLE DELHI HIGH COURT HELD THAT SEC. 145(3) PROVIDES FOR ASSESSMENT IN TH E MANNER PRESCRIBED IN S. 144, WHERE THE AO IS NOT SATISFIED ABOUT THE CORREC TNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE OR WHERE EITHER THE ME THOD OF ACCOUNTING PROVIDED IN SUB-S. (1) OR THE ACCOUNTING STANDARDS AS NOTIFIED UNDER SUB-S. (2) HAVE NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE. T HIS IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAD NOT FOLLOWED EITHER C ASH OR MERCANTILE SYSTEM OF ACCOUNTING STIPULATED IN SUB-S. (1) OF S. 145. T HIS IS ALSO NOT THE CASE OF THE REVENUE THAT THE CENTRAL GOVERNMENT HAD NOTIFIED AN Y PARTICULAR ACCOUNTING STANDARDS TO BE FOLLOWED BY MANUFACTURERS AND EXPOR TERS OF READYMADE GARMENTS. HENCE, THE SECOND PART OF SUB-S. (3) OF S . 145 DOES NOT APPLY TO THIS CASE. AS NOTED BY THE CIT(A) AS WELL AS BY THE TRIB UNAL, THE AO HAD NOT POINTED OUT ANY DEFECT IN THE ACCOUNTS BOOKS MAINTAINED BY THE ASSESSEE, WHICH, ADMITTEDLY, WERE PRODUCED BEFORE THE AO FOR HIS CON SIDERATION. THIS IS ALSO NOT THE FINDING OF THE AO THAT THE ACCOUNT OF THE ASSES SEE WAS NOT COMPLETE. NO PROVISION EITHER IN THE ACT OR IN THE RULES REQUIRI NG AN ASSESSEE CARRYING BUSINESS OF THIS NATURE, TO MAINTAIN A STOCK REGIST ER, AS A PART OF ITS ACCOUNTS HAS BEEN BROUGHT TO NOTICE . AS REGARDS NON-PRODUCTION OF STOCK REGISTER, THE ASSESSEE HAS GIVEN AN EXPLANATION WHICH HAS BEEN AC CEPTED NOT ONLY BY THE CIT(A) BUT ALSO BY THE TRIBUNAL AND BOTH OF THEM HA VE GIVEN A CONCURRENT ITA 76/JP/2018_ M/S PAWAN ENTERPRISES VS ACIT 10 FINDING OF FACT THAT MAINTAINING STOCK REGISTER WAS NOT FEASIBLE CONSIDERING THE NATURE OF THE BUSINESS BEING RUN BY THE ASSESSEE WH ICH WAS ENGAGED IN THE BUSINESS OF MANUFACTURING READYMADE GARMENTS BY PUR CHASING FABRIC WHICH WAS THEN SUBJECTED TO EMBROIDERY, DYEING AND FINISH ING AND THEN CONVERTED INTO READYMADE GARMENTS BY STITCHING. SEC. 145(3) T HEREFORE COULD NOT HAVE BEEN APPLIED BY THE AO TO THE PRESENT CASE. AS REGA RDS FAILURE OF THE ASSESSEE TO PRODUCE THE PERSONS TO WHOM PAYMENTS WERE MADE B Y THE ASSESSEE FOR FABRICATION, EMBROIDERY AND DYEING AND FINISHING, E TC., THE AO WAS AT LIBERTY TO SUMMON ANY OR ALL OF THEM IN CASE HE WANTED TO VERI FY THE GENUINENESS OF THE PAYMENTS MADE TO THEM. NO SUCH COURSE OF ACTION WAS , HOWEVER, ADOPTED BY HIM. FAILURE OF THE ASSESSEE TO PRODUCE THOSE PERSO NS COULD NOT HAVE BEEN A GROUND FOR REJECTING THE ACCOUNTS UNDER S. 145(3). THE AO DID NOT POINT OUT ANY DIFFERENCE IN THE CONSUMPTION OF RAW MATERIAL AND P RODUCTION OF FINISHED GOODS WHEN COMPARED TO EARLIER YEARS. THE AO DID NO T SAY THAT AFTER COMPARING THE RAW MATERIAL CONSUMED AND FINISHED GO ODS PRODUCED IN THE PREVIOUS YEARS WITH THE RAW MATERIAL CONSUMED AND T HE FINISHED GOODS PRODUCED IN THE YEAR IN QUESTION, HE HAD FOUND THAT THE NUMBER OF FINISHED GOODS PIECES ACTUALLY PRODUCED BY THE ASSESSEE SHOU LD HAVE BEEN MORE THAN THE NUMBER OF PIECES DECLARED IN THE ACCOUNT BOOKS PRODUCED BEFORE HIM. ANOTHER IMPORTANT ASPECT OF THIS CASE IS THAT, ADMI TTEDLY, THE GP PERCENTAGE DECLARED BY THE ASSESSEE IN THE ASST. YR. 2003-04 W HICH WAS THE IMMEDIATE PRECEDING YEAR, WAS MORE OR LESS THE SAME AS WAS DE CLARED IN THE ASST. YR. 2004-05, TO WHICH THIS APPEAL PERTAINS. HOWEVER, TH E AO, INSTEAD OF APPLYING THE GP RATIO DECLARED IN THE IMMEDIATE PRECEDING YE AR, APPLIED THE GP RATIO DECLARED IN THE ASST. YR. 2002-03, THEREBY FAILING TO MAINTAIN THE ACCEPTED PRINCIPLE OF CONTINUITY AND CONSISTENCY. THE QUESTI ON WHETHER FALL IN GROSS PROFIT STOOD EXPLAINED BY THE ASSESSEE OR NOT IS A QUESTION OF FACT. BOTH, THE TRIBUNAL AS WELL AS CIT(A) HAS ACCEPTED THE EXPLANA TION GIVEN BY THE ASSESSEE. NO SUBSTANTIAL QUESTION OF LAW ARISES. (IV) HARIDAS PARIKH VS ITO 113 TTJ 274 (ITAT JODHPU R):- HONBLE ITAT JODHPUR BENCH HAS HELD THAT UNLESS THE AO IS ABLE TO POINT OUT CERTAIN TRANSACT IONS WHICH HAVE BEEN LEFT TO BE ENTERED IN THE BOOKS OF ACCOUNT OR THAT THE ASSESSEE HAS SOLD SOME OF THE ITEMS AT A PRICE HIGH ER THAN WHAT IS DISCLOSED IN THE BOOKS OF ACCOUNT OR IF PROPER PARTICULARS, BILL S, VOUCHERS, ARE NOT FORTHCOMING ETC., THE BOOKS OF ACCOUNT CANNOT BE RE JECTED WITHOUT ASSIGNING SPECIFIC REASONS. IN THE INSTANT CASE MERELY BECAUS E DIFFERENT RANGE AND NATURE OF ITEMS ARE BEING DEALT WITH BY THE ASSESSEE AND T HE MAINTENANCE OF QUANTITATIVE STOCK OF EACH AND EVERY ITEM IS NOT PR ACTICALLY POSSIBLE, THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WHICH ARE FRE E FROM ANY DEFECT CANNOT BE REJECTED MERELY BECAUSE THE AVERAGE GP RATE WAS SLIGHTLY LOWER THAN THE AVERAGE GP RATE OF THE EARLIER YEAR. (V) VISHAL INFRASTRUCTURE LTD VS ACIT 104 ITD 537 ( ITAT HYDERABAD) :- HONBLE ITAT HYDERABAD A BENCH HELD THAT THE UNDISPUTED FACT IS THAT THE ASSESSEE WHICH IS A LIMITED COMPANY HAS BEEN CONSISTENTLY FO LLOWING A PARTICULAR METHOD OF ACCOUNTING. ITS ACCOUNTS ARE AUDITED BOTH UNDER THE COMPANIES ACT AS WELL AS UNDER S. 44AB. SUCH AUDITED ACCOUNTS ARE BEING F ILED WITH THE REGISTRAR OF COMPANIES AS WELL AS WITH THE IT DEPARTMENT FOR MOR E THAN 7 YEARS. THE ITA 76/JP/2018_ M/S PAWAN ENTERPRISES VS ACIT 11 REVENUE HAS SCRUTINIZED THE ACCOUNTS AND THE METHOD OF ACCOUNTING REGULARLY EMPLOYED AND ADOPTED BY THE ASSESSEE YEAR AFTER YEA R HAVE NOT BEEN FOUND FAULT WITH. AUDITORS OF THE COMPANY BOTH UNDER THE COMPANIES ACT AND THE IT ACT HAVE BEEN CONSISTENTLY CERTIFYING THAT THE ASSE SSEE HAS BEEN REGULARLY FOLLOWING THE METHOD OF ACCOUNTING AND THAT THE ANN UAL PROFITS CAN BE PROPERLY DEDUCED FROM SUCH METHOD OF ACCOUNTING EMPLOYED BY THE ASSESSEE. THE AUDITORS OVER THE YEARS HAVE ALSO BEEN CERTIFYING T HAT THE ACCOUNTS ARE REGULARLY MAINTAINED AND ARE COMPLETE IN THE SENSE THAT THERE IS NO SIGNIFICANT OMISSION THEREIN. THIS FINDING HAS BEEN ACCEPTED BY DIFFERENT AOS OVER A PERIOD OF SEVEN YEARS. THOUGH THE PRINCIPLES OF RES JUDICATA DO NOT APPLY TO INCOME-TAX PROCEEDINGS, EACH ASSESSMENT YEAR BEING A UNIT BY I TSELF, YET IN CASES, WHEN A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTI ES HAVE BEEN ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORD ER, IT MAY NOT BE APPROPRIATE TO ALLOW THAT POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. FOR REJECTING THE VIEW TAKEN FOR THE EARLIER ASSESSMENT YEARS, THERE MUST BE A MATERIAL CHANGE IN THE FACT SITUATION. HONBLE ITAT PLACED RELIANCE ON RADHASOAMI SATSANG VS. CIT (1991) 100 CTR (SC) 267 : (1992) 193 ITR 321 (SC), CIT VS. A.R.J. SECURITY PRINTERS (2003) 183 CTR (DEL) 323 : (2003) 264 ITR 276 (DEL) AND CIT VS. NEO POLY PACK (P) LTD. (2000) 245 ITR 492 (DEL). (VI) AVDESH PRATAP SINGH ABDUL REHMAN & BROS VS CI T (1994) 210 ITR 406 (ALL) -H ELD THAT ABSENCE OF STOCK REGISTER MAY NOT PER SE L EAD TO AN INFERENCE THAT ACCOUNTS ARE FALSE OR INCOMPLETE. (VII) PANDIT BROS VS CIT (1954) 26 ITR 159 (PUN) - HELD THAT ABSENCE OF STOCK REGISTER IS NOT SUFFICIENT GROUND TO REJECT THE BOO KS OF ACCOUNT. (VIII) ASHOK REFRACTORIES PVT LTD VS CIT (2005) 27 9 ITR 475 (CAL) -HE LD THAT ABSENCE OF STOCK REGISTER MAY NOT PER SE LEAD TO AN INFERENCE THAT ACCOUNTS ARE FALSE OR INCOMPLETE. (IX) ST TERESAS OIL MILLS VS STATE OF KERALA 76 I TR 365 (KER.) ACCOUNTS REGULARLY MAINTAINED IN THE COURSE OF BUSINESS HAVE TO BE TAKEN AS CORRECT UNLESS THERE ARE STRONG AND SUFFICIENT REASONS TO I NDICATE THAT THEY ARE UNRELIABLE. (X) ANTIQUAIRIATE VS ACIT 37 TAXWORLD 145 (ITAT. J AIPUR). 7) THE LD AO RELIED UPON THE FOLLOWING DECISION BUT THE FACTS OF THESE CASES ARE NOT IDENTICAL TO THE ASSESSEES CASE. THEREFORE, TH E RATIO LAID DOWN IN THESE DECISIONS ARE NOT APPLICABLE FOR THE ASSESSEE COURTS NAME OF CASE CITATION FACTS/FINDINGS IN THE SE CASE WHICH ARE NOT IN ASSESSEES CASE ALLAHABAD HC AWADESH PRATAP SINGH VS CIT 210 ITR 406 PURCHASE/SALES NOT VERIFIABLE VARIOUS DEFECTS, HELD BOOKS OF ACCOUNT ARE NOT CORRECT AND COMPLETE ITA 76/JP/2018_ M/S PAWAN ENTERPRISES VS ACIT 12 ALSO HELD THAT MERELY FOR WANT OF STOCK REGISTER BOOKS CANNOT BE REJECTED SC CHHABIL DAS TRIBHUWAN DASS SHAH VS CIT 59 ITR 733 TRIBUNAL HELD THAT TRUE PROFIT CANNOT BE DEDUCED FROM THE METHOD OF ACCOUNTING EMPLOYED BY ASSESSEE- BASED ON MATERIAL WHOLE SALE BUSINESS- NO DIFFICULTY IN MAINTENANCE OF STOCK REGISTER IMPORT QUOTA OF HUGE AMOUNT GIVING HANDSOME PROFIT RAJASTHAN GHASI LAL TODAR MAL VS CIT 196 ITR 329 FIXED QUANTITY OF CONSUMPTION AND PRODUCTION SHOWING IN STOCK REGISTER. IN COMPARISON OF TRADING RESULTS WITH ARJUN SOAP FACTORY, THE PROFIT OF THIS ASSESSEE IS VERY LOW. MANUFACTURER OF SOAP WHERE STOCK REGISTER COULD BE MAINTAINED SC S.N. NAMA SIVAYAM CHETTIAR VS CIT 38 ITR 579 1943-44-GP 3.5% WHEREAS IN PREVIOUS TWO YEAR IT WAS 9% & 8% ABSENCE OF VOUCHER TURNOVER WAS ENHANCED BY AO GRAINS PURCHASED FROM INDIA AND SOLD IN COLOMBO GIVING PROFIT 20% TO 39% BOMBAY KISHIN CHAND CHELLA RAM VS CIT 114 ITR 671 FINDING THAT TRUE PROFIT CANNOT BE DEDUCED FROM BOOKS OF ACCOUNT. SALES NOT PROPERLY RECORDED WITH IDENTIFIABLE DETAILS B) SUBMISSIONS AGAINST THE TRADING ADDITION OF RS. 47,50,232/- BY APPLYING G.P. RATE OF 20% AS AGAINST THE DECLARED G.P. RATE OF 18.02% (I) THE GP CHART OF GARMENT BUSINESS OF ASSESSEE W AS AS UNDER:- AY T URNOVER GROSS PROFIT G.P. % 2010 - 11 13,15,51,098 2,89,41,458 22.00% 2011 - 12 14,89,74,562 3,13,81,219 21.06% 2012 - 13 18,12,47,076 3,77,51,735 20.83% 2013 - 14 17,94,82,619 3,48,89,395 19.44% 2014 - 15 23,98,17,304 4,32,13,228 18.02% (II). THE TRADING ADDITION WAS MADE BY LD. AO WITHO UT CONSIDERING THE FACT THE TURNOVER OF THE ASSESSEE HAS INCREASED SUBSTANTIALL Y AND OVERALL GROSS PROFIT OF THE ASSESSEE HAS ALSO INCREASED. THE TURN OVER OF THE ASSESSEE HAS INCREASED BY 33.61% OVER THE LAST YEAR AND THE OVERALL GROSS PRO FIT OF THE ASSESSEE HAS ALSO INCREASED BY 23.85% OVER THE LAST YEAR . THE MAIN OBJECT OF THE BUSINESSMAN IS TO EARN MORE AND MORE PROFIT IRRESPECTIVE OF PERCENTAGE OF GROSS PROFIT RATE. (III) THE REASON OF DECREASE IN PERCENTAGE OF GP IS INCREASE IN INPUT COST. THE COST OF MATERIAL AND WAGES INCREASED SUBSTANTIALLY BUT THE PRICE OF THE ITA 76/JP/2018_ M/S PAWAN ENTERPRISES VS ACIT 13 PRODUCT CANNOT BE INCREASED IN SAME PROPORTIONATE D UE TO STIFF COMPLETION WITH CHINA. (IV) THE RESULTS OF THIS YEAR IS NOT COMPARABLE FRO M PAST YEAR. THE MAIN REASON IS HUGE INCREASE IN TURNOVER OF THE ASSESSEE AND CHANGE IN INTERNATIONAL SCENARIO DUE TO STIFF COMPETITION FRO M CHINA. (V) THE LD CIT(A) ESTIMATED GP AT THE RATE OF 20% W ITHOUT BASIS. NO ANY COMPARABLE CASE HAS BEEN GIVEN IN SUPPORT OF ESTIMA TION OF GP @ 20%. THE BASIS OF 20% IS NOTHING BUT WILD GUESS OF THE L D CIT(A). NO ANY COMPARATIVE CASE WAS GIVEN IN SUPPORT OF HER FINDIN G. EVEN, IF THE ESTIMATION IS MADE, IT CANNOT BE BASED ON WILD GUES S, BUT IT SHOULD BE BASED ON SOME MATERIAL. RELIANCE IS PLACED ON THE F OLLOWING DECISIONS:- (A) DHAKESWARI COTTON MILLS LTD VS CIT 26 ITR 775 ( SC) (B) LAL CHAND BHAGAT AMBICA RAM VS CIT 37 ITR 288 ( SC) (C) OMAR SALAY MOHAMAD VS CIT 37 ITR 151 (SC) THUS THE ADDITION WAS CONFIRMED BY APPLY GP RATE OF 20% ON THE BASIS OF PAST HISTORY OF GP OF THE ASSESSEE WITHOUT CONSIDERING T HE INCREASE IN TURNOVER, INFLATION IN COST AND CHANGE IN INTERNATIONAL SCENA RIO. THE APPELLANT PRAYS YOUR HONOR TO KINDLY TO DELETE THE ADDITION SUSTAINED BY LD CIT(A) AND ALLOW THE APPEAL FILED BY THE ASSESSEE. 6. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE O RDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE FACTS OF THE CASE ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDING NOTED THAT THE ASSE SSEE HAD NEITHER MAINTAINED DAY TO DAY STOCK REGISTER NOR ANY DETAIL PERTAINING TO THE DAY TO DAY CONSUMPTION OF RAW MATERIAL OR PRODUCTION OF FIN ISHED. FOR WANT OF COMPLETE DETAILS, THE AO INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND MADE THE TRADING ADDITION OF RS.59,49,319/- BY APPLYING THE G.P. RATE OF 20.50% ON THE DECLARED TURNOVER OF RS. 23,9 8,17,303/- AS AGAINST ITA 76/JP/2018_ M/S PAWAN ENTERPRISES VS ACIT 14 G.P. RATE OF 18.02% SHOWN BY THE ASSESSEE. THE RELEVA NT OBSERVATION OF THE AO IS AS UNDER:- CONSIDERING ALL ACTS AND CIRCUMSTANCES OF THE CAS E AND ON THE BASIS OF DATA AVAILABLE ON RECORD, IT IS CONSIDERED REASONABLE TO APPLY G.P. RATE OF20.50% ON THE DECLARED TURNOVER OF RS. 23,98 ,17,303/-. THIS WOULD RESULT IN ESTIMATED GROSS PROFIT OF RS. 4,91,62,547 /-. AFTER REDUCING THE GROSS PROFIT ALREADY SHOWN BY THE ASSESSEE AT RS. 4 ,32,13,228/-, THE NET DIFFERENCE OF RS. 59,49,319/- IS HEREBY ADDED TO TH E TOTAL INCOME OF THE ASSESSEE. IN FIRST APPEAL, THE LD. CIT(A) HAS CONFIRMED THE RE JECTION OF BOOKS OF ACCOUNT IN THE ABSENCE OF PRODUCTION OF ANY QUALITA TIVE DETAILS EITHER IN THE ASSESSMENT PROCEEDING OR BEFORE HIM, HOWEVER, THE LD . CIT(A) APPLIED THE GROSS PROFIT RATE OF 20% INSTEAD OF 20.50% APPLIED BY THE AO. WE HAVE ALSO TAKEN INTO CONSIDERATION THE DETAILED WRITTEN S UBMISSION OF THE ASSESSEE HOLDING THAT AOS ACTION TO REJECT THE BOO KS OF ACCOUNT IS NOT TENABLE AND FURTHER OBSERVED THAT ITAT JAIPUR BENCH IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2011-12 HAD GRANTED RE LIEF TO THE ASSESSEE FOR THE SAME ISSUE. THE LD.AR OF THE ASSESSEE DURIN G THE COURSE OF HEARING SUBMITTED THE REASON OF DECREASE IN PERCENTAGE OF G .P. IS INCREASE OF INPUT COST IN COMPARISON TO PREVIOUS YEAR AND THE COST OF MATERIAL AND WAGES INCREASED DUE TO PRODUCTION OF HIGH QUALITY PRODUCT BUT THE PRICE OF THE PRODUCT COULD NOT BE INCREASED IN SAME PROPORTIONAT E DUE TO STIFF COMPETITION WITH CHINA. TAKING INTO CONSIDERATION ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO THE ORDER OF ITA T JAIPUR BENCH FOR THE ITA 76/JP/2018_ M/S PAWAN ENTERPRISES VS ACIT 15 ASSESSMENT YEAR 2011-12 IN ASSESSEE'S OWN CASE BESID ES THE CASE LAWS RELIED UPON BY THE LD.AR OF THE ASSESSEE (SUPRA), WE DO NOT CONCUR WITH THE FINDINGS OF THE LD. CIT(A) AND HOLD THAT THE G. P. RATE SHOWN BY THE ASSESSEE AT 18.02% IS JUSTIFIABLE. THUS THE APPEAL O F THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/07/2018. SD/- SD/- FOT; IKY JKO HKKXPAN (VIJAY PAL RAO) (BHAGCHAND) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 04 TH JULY, 2018 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S PAWAN ENTERPRISES, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE A.C.I.T., CIRCLE-5, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 76/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR