DCIT, Jaipur V. M/S SANKALP INTERNATIONAL, Jaipur

ITA 835/JPR/2011

• Counselvise Citation: 83523114 RSA 2011
• Duration Of Justice: 2 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 27-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Business income; Opportunity of being heard; Question of law

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 835/JP/2011 ASSTT. YEAR- 2008-09 PAN NO. AAKFS4376D THE D.C.I.T., M/S SANKALAP INTERNATIONAL, CIRCLE-4, JAIPUR. VRS. F-944, ROAD NO. 14, VKI A REA, JAIPUR. (APPELLANT) (RESPONDENT) DEPARTMENT BY :- SHRI D.C. SHARMA. ASSESSEE BY :- SHRI P.C. PARWAL. DATE OF HEARING : 11/06/2014 DATE OF PRONOUNCEMENT : 13/06/2014 PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 15/07/2011 OF THE LEARNED C.I.T.(A)-II, JAIPUR FOR T HE A.Y. 2008-09. THE SOLE GROUND OF APPEAL IS AGAINST DELETING THE TRADING AD DITION OF RS. 83,83,894/- MADE BY THE ASSESSING OFFICER BY HOLDING THAT NON-M AINTENANCE OF STOCK REGISTER BY THE ASSESSEE DOES NOT CONSTITUTE ANY DE FECT IN THE BOOKS OF ACCOUNT WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND TRADING OF WOODEN FURNITURE AND HANDICRAFT. THE SAME ARE EXPORTED OUT OF INDIA. THE ASSESSEE HAD CLAIMED EXEMPTION U/S 10BA OF THE INCOME TAX ACT , 1961 (HEREINAFTER REFERRED AS THE ACT) OF RS. 11,29,009/- DURING THE YEAR UNDER CONSIDERATION. 2 THE LEARNED ASSESSING OFFICER OBSERVED THAT G.P. RAT E DURING THE YEAR UNDER CONSIDERATION HAD GONE DOWN COMPARED TO PRECEDING YE AR, THEREFORE, HE GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE TO THE ASSESSEE. THE ASSESSEE ALSO AVAILED OPPORTUNITIES VIDE LETTERS DA TED 3/12/2010, 18/12/2010 AND 23/12/2010, WHICH HAVE BEEN REPRODUCED BY THE A SSESSING OFFICER IN HIS ASSESSMENT ORDER ON PAGE NOS. 3 TO 10. THE LEARNED A SSESSING OFFICER AFTER CONSIDERING THE ASSESSEES REPLY HELD THAT PAYMENT OF COMMISSION TO FOREIGN BUYING AGENT HAS NOTHING TO DO WITH THE MANUFACTURIN G COST OF THE ASSESSEE, PAYMENT OF THE COMMISSION TO THE FOREIGN BUYING AGE NT, DUTY DRAW BACK AND DEBP HAVE NOTHING TO DO WITH THE G.P. RATE. VERIFIAB ILITY OF PURCHASES AND SALES ARE NOT SUFFICIENT TO ARRIVE AT A CORRECT TRA DING RESULT, NON-REJECTION OF ACCOUNT BOOKS IN EARLIER YEAR DOES NOT GIVE A FREE HAND TO THE ASSESSEE TO MANAGE ITS TRADING RESULT AT ITS SWEET WILL. THE ARGUM ENT MADE BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT HANDICRA FT ITEMS ARE BEING MADE OF VARIOUS WOODS, VARIOUS DESIGNS, SIZES, COLOURS AND V ARIOUS TYPES OF HARDWARE ARE USED IN IT AND NOT POSSIBLE TO MAINTAIN STOCK R EGISTER, WAS ALSO NOT FOUND TENABLE TO THE ASSESSING OFFICER. THE ASSESSEE COULD HAVE MADE STOCK REGISTER WITH THE HELP OF COMPUTER. NON-MAINTENANCE OF DAY TO DAY CONSUMPTION REGISTER, QUANTITATIVE DETAILS OF BASIC RAW MATERIAL , FINISHED PRODUCT, BY PRODUCT AND STOCK REGISTER HAVE DIRECT BEARING ON PROFIT AS CLOSING STOCK IS SUBJECT TO MANIPULATION. THE LEARNED ASSESSING OFFICER HELD TH AT IN ABSENCE OF CLOSING 3 STOCK, CORRECTNESS AND COMPLETENESS OF ACCOUNTS OF THE ASSESSEE IS NOT ACCEPTABLE. THUS, HE REJECTED THE BOOK RESULT U/S 14 5(3) OF THE ACT, FOR WHICH HE RELIED UPON ON FOLLOWING CASES. I. CHHABIL DAS TRUBHUWANDAS SHAH VS. CIT 59 ITR 733(S C). II. GHASIRAM TODARMAL VS CIT 196 ITR 329. III. 11 ITR 923. IV. 114 ITR 671 (BOM). V. 38 ITR 579 (SC) VI CIT VS BRITISH PAINTS INDIA LTD (1991) 188 ITR 44 (SC). VII. PUNJAB TRADING CO.LTD. VS CIT 53 ITR 335 (PUNJAB ). VIII. DHANDRAM DELICHAND VS. CIT 81 ITR (BOM). IX. AMIYA KUMAR ROY & BROTHERS VS CIT 206 ITR 306(CA L.). X. RAM KRISHAN POONGALIA 184 CTR 448 (RAJ). XI. NAMASIVAYAM CHETTIAR (S.N.) VS. CIT (1960) 38 I TR 579(SC). HE FURTHER OBSERVED THAT CORRECT APPROACH TO DETERM INE THE G.P. ADDITION WOULD BE A RATIO OF GROSS PROFIT VIS A VIS DECLARED TURNOVER. THE ITAT HAS UPHELD RELIANCE UPON IN THE CASE OF KANSARA BEARING PVT. LTD. VS. ACIT (270 ITR 325) (RAJ.) AND AJAY GOYAL VS. ITO (99 TTJ 164), WHEREIN IT WAS HELD THAT PAST YEAR PROFIT DECLARED BY THE ASSESSEE IS THE BE ST GUIDE FOR APPLICATION OF GP/NP. THE LEARNED ASSESSING OFFICER APPLIED G.P. R ATE OF PRECEDING YEAR FOR THE YEAR UNDER CONSIDERATION I.E. 26.54%. ACCORDING LY HE MADE THE ADDITION OF RS. 83,83,894/- IN TRADING RESULTS. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A), WHO HAD ALLOWED THE APPEAL BY OBSERVING THAT:- 4 THE APPELLANT IS ENGAGED IN THE BUSINESS OF EXPORT OF WOODEN FURNITURE AND HANDICRAFTS ITEMS. ON PERUSAL OF THE ASSESSMENT ORDER, IT IS SEEN THAT THE AO NOTICED THAT GP OF THE YEAR UNDER REFERENCE I.E. 24.19% HAD FALLEN DOWN AS COMPARED TO THE GP OF PRECEDING YEAR I.E. 26.54%. THE AO NOTICED THAT THE APPELLANT DID NOT MAINTAIN ANY STOCK REGISTER AND DAY TO DAY QUANTITATIVE DETAILS OF THE RAW MATERIAL, FI NISHED GOODS AND BY PRODUCTS. THE AO WAS OF THE OPINION THAT INCREASES IN SALES YEAR AFTER YEAR WAS AN INDICATION THAT THE BUSINESS OF THE ASSESSEE WAS FLOURISHING. THE AO WAS NOT SATISFIED WITH THE EXPLANATION SUBMITTED BY THE APPELLANT AND THEREAFTER MADE TRADING ADDITION OF RS 83,83,8947- BY REJECTING BOOKS OF ACCOUNT. ON CONSIDERATION OF FACTS IN ENTIRETY, I F IND THAT THE APPELLANT IS AN EXPORTER. ALL THE SALE PROCEEDS WERE REALIZED IN CONVERTIBLE FOREIGN EXCHANGE. IT IS NOT THE CASE OF THE AO THAT PURCHAS ES OR EXPENSES WERE INFLATED BY THE ASSESSEE. THE APPELLANT HAS MAINTAI NED COMPLETE PURCHASE BILLS SHOWING INWARD CHALLAN NO. AND DATE OF RECEIP T OF MATERIAL. AFTER RECEIPT OF GOODS, THESE ARE CHECKED BY THE SUPERVIS ORS AND BILLS ARE PASSED BY PARTNERS. MORE THAN 98% OF THE PAYMENTS FOR PURC HASE OF GOODS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. I FIND CONSIDER ABLE FORCE IN THE ARGUMENTS OF THE APPELLANT THAT FY 2007-08 WAS A VE RY UNUSUAL YEAR FOR EXPORTERS AS THE INDIAN RUPEE WAS APPRECIATING AND US DOLLAR WAS DECLINING DAY BY DAY. THE AVERAGE RATE OF US $ AGAINST RUPEE HAD DEC LINED BY 11.49% IN THE YEAR UNDER REFERENCE AS COMPARED W ITH THE PRECEDING YEAR WHICH HAD A DIRECT IMPACT ON THE GP SHOWN BY THE AP PELLANT. THERE IS NO DISPUTE TO THE FACT THAT ABOUT 92% OF TOTAL SALES O F THE APPELLANT WERE INVOICED IN US $. FURTHER THE AVERAGE RATE OF EURO CURRENCY AGAINST RUPEE HAD DECLINED BY 3.9% AS COMPARED TO THE PRECEDING Y EAR. THIS ALSO HAD A DIRECT IMPACT ON THE GP SHOWN BY THE APPELLANT SINC E ABOUT 7.80% OF TOTAL SALES WERE INVOICED IN EURO. DURING THE COURSE OF A PPELLATE PROCEEDING, THE COUNSEL OF APPELLANT HAS SUBMITTED A COMPARATIV E CHART FOR FY 2006-07 AND FY 2007-08 WHICH CONTAINS THE DETAILS OF THE IT EMS EXPORTED, SIZE OF THE ITEMS, INVOICE NO., CODE NO., SALE PRICE IN US $ AND EXCHANGE RATE OF US $. THIS CHART IS ENCLOSED WITH THIS APPELLATE OR DER AS ANNEXURE-A. ON PERUSAL OF THE SAME, I FIND THAT FOR MAJORITY OF IT EMS (44 ITEMS), THE SALE PRICE HAD INCREASED EXCEPT 3 ITEMS IE. COFFEE TABLE FOLD THICK TOP, DINING TABLE FOLD, AND TV CABINET 3 DRAWER WHERE IT REMAIN ED THE SAME. THE 5 INCREASE WAS AS HIGH AS 20% FOR SOME OF THE ITEMS I .E. 3 SIDE GLASS CABINET ONE DOOR ONE DRAWER AND 10% FOR TV CABINET 2 DOOR & ONE DOOR. DESPITE OF THIS INCREASE IN SALE PRICE IN US $, THE GP HAD DECLINED SINCE THE AVERAGE EXCHANGE RATE OF US $ HAD DECLINED FROM RS 44.89 TO RS 39.73. THE AVERAGE DECLINE IN GP RATE DUE TO STRENGTHENING OF RUPEE IN TERMS OF REALIZATION OF MONEY FOR 47 ITEMS WAS 5.13%. DUE TO THIS PRECISE REASON, THE GOVERNMENT HAD COME UP WITH SOME DAMAGE CONTROL MEASURES TO HELP THE EXPORTERS TO TIDE OVER THE PROBLEMS CAUSED BY THE SUDDEN STRENGTHENING OF RUPEE AGAINST DOLLAR. THE GOVERNME NT THEREFORE INCREASED THE DUTY DRAW BACK RATES FROM 1.75% TO 5% . IF THESE FACTORS ARE TAKEN INTO ACCOUNT THEN IT IS OBVIOUS THAT THE FALL IN THE GP WAS DUE TO FALL IN THE VALUE OF US $ VIS-A-VIS INDIAN RUPEE. FURTHE R THE SALES OF THE APPELLANT HAD INCREASED FROM RS. 29.17 CRORES TO RS 35.69 CRORES AND AS THE TURNOVER INCREASED, THE GP WAS BOUND TO DECLINE . THE NON MAINTENANCE OF STOCK REGISTER WAS NOT FATAL AND SUFFICIENT TO REJECT THE TRADING RESULTS OF THE ASS ESSEE AS THE AO WAS NOT ABLE TO POINT OUT ANY MATERIAL DEFECT IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. THE HON'BLE JAIPUR TRIBUNAL, VIDE HIS ORDER DATED 10.03.2011 IN ITA NO. 501/JP/2010 FOR AY 2007-08 HA D DISMISSED THE APPEAL OF THE REVENUE ON IDENTICAL FACTS BY HOLDING AS UNDER : 'WE HAVE HEARD BOTH THE PARTIES. NORMALLY A BUSINES SMAN WILL TRY TO HAVE MORE TURNOVER AS LESSER PROFIT IN CASE HE H AS RAISED THE LOANS FOR THE PURPOSE OF BUSINESS. IT IS SEEN THAT THE THERE IS SUBSTANTIAL INCREASE IN UNSECURED LOANS DURING THE YEAR AS COMPARED TO IMMEDIATELY PRECEDING YEARS. THUS THE R ATIO GROSS PROFIT VERSUS THE CAPITAL INCLUDING LOANS WILL STAN D REDUCED AS COMPARED TO EARLIER YEAR IN WHICH THE ASSESSEE HAS UTILIZED ITS CAPITAL AND NO LOANS WERE RAISED. IN CASE THE LOANS ARE EXCLUDED FOR DETERMINING THE GROSS PROFIT VIS-A-VIS CAPITAL THEN THE RATIO OF GROSS VERSUS CAPITAL DURING THE YEAR IS BETTER AS COMPARE D TO LAST TWO PRECEDING YEARS. IT IS TRUE THAT GROSS PROFIT DURIN G THE YEAR IS LESSER AS COMPARED TO LAST TWO PRECEDING YEARS. THE ASSESS EE HAS GIVEN THE VALID EXPLANATION FOR FALL IN GROSS PROFIT RATE . IT IS NOT THE CASE OF THE REVENUE THAT SUCH EXPLANATION IS INCORRECT. THE EXPLANATION IS 6 REASONABLE AND WILL HAVE THE IMPACT ON REDUCING THE GROSS PROFIT RATE. THE HON'BLE DELHI HIGH COURT IN THE CASE OF C IT VS GAS JACK ELEGANCE EXPORTS (233 CTR 398) HAS AN OCCASION TO C ONSIDER THE CASE OF THE ASSESSEE WHICH WAS CONVERTING THE FABRI C INTO GARMENTS. IN THAT CASE, IT WAS NOT POSSIBLE FOR THE ASSESSEE TO HAVE THE STOCK REGISTER. THE ASSESSEE GAVE THE REASONS FOR FALL IN GROSS PROFIT RATE. THE HON'BLE DELHI HIGH COURT HELD THAT NO SUBSTANTI AL QUESTION OF LAW FOR MAKING THE TRADING ADDITION AROSE AS THE ASSESS EE HAVE GIVEN THE EXPLANATION FOR FALL IN GROSS PROFIT RATE. IN THE I NSTANT CASE, THE ASSESSEE IS ENGAGED IN THE MANUFACTURING OF VARIOUS ITEMS OF FURNITURE AND HANDICRAFTS. IN SUCH TYPE OF BUSINESS , IT IS NOT POSSIBLE TO HAVE THE STOCK REGISTER OR DAY TO DAY CONSUMPTIO N REGISTER. IF THE ASSESSEE IS ABLE TO EXPLAIN THE FALL IN GROSS PROFI T RATE AS COMPARED TO LAST YEAR THEN THERE IS NO CASE FOR MAKING ANY T RADING ADDITION. THE JURISDICTIONAL HIGH COURT IN THE CASE OF MALANI RAMJIVAN JAGANNATH VS ACIT (316 ITR 120) HELD THAT MERE DEVI ATION IN GROSS PROFIT RATE CANNOT BE A GROUND FOR REJECTING BOOKS OF ACCOUNT WHEN THE ACCOUNTS ARE MAINTAINED IN THE FORM IN WHI CH THESE ARE MAINTAINED FOR SO MANY YEARS AND THE ASSESSEE GAVE THE EXPLANATION FOR FALL IN GROSS PROFIT RATE. IN THAT CASE, THE REJECTION OF BOOKS OF ACCOUNT AND APPLYING THE GROSS PROFIT RATE WAS HELD AS NOT JUSTIFIED. HENCE THE DECISION OF JURISDICTIONAL HIG H COURT IS SQUARELY APPLICABLE IN THE INSTANT CASE. WE THEREFORE, HELD THAT THE CIT(A) WAS JUSTIFIED IN DELETING THE TRADING ADDITION. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED'. THE NON-MAINTENANCE OF STOCK RECORDS BY THE ASSESSE E DID NOT CONSTITUTE ANY DEFECT IN THE BOOKS OF ACCOUNT. IT WAS HELD BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS JAS JACK ELEGANCE EXPORTS (32 4 ITR 95) THAT NO PROVISION EITHER IN THE ACT OR IN THE RULES REQUIRING AN ASSESSEE CARRYING BUSINESS OF THIS NATURE TO MAINTAIN A STOCK REGISTE R AS A PART OF ITS ACCOUNTS, HAD BEEN BROUGHT TO THEIR NOTICE. THE ASS ESSEE HAD EXPLAINED THAT MAINTAINING STOCK REGISTER WAS NOT FEASIBLE CO NSIDERING THE NATURE OF THE BUSINESS BEING RUN BY IT WHICH WAS MANUFACTURIN G READYMADE GARMENTS BY PURCHASING FABRIC WHICH WAS THEN SUBJEC TED TO EMBROIDERY, 7 DYEING AND FINISHING AND THEN CONVERTED INTO READYM ADE GARMENTS BY STITCHING. SECTION 145(3) OF THE ACT THEREFORE COUL D NOT HAVE BEEN APPLIED BY THE ASSESSING OFFICER. IN THE PRESENT CASE, I FI ND THAT THE AO HAS NOT POINTED OUT ANY MATERIAL DEFECT IN THE BOOKS OF ACC OUNTS MAINTAINED BY THE APPELLANT. ALL THE SALES WERE VERIFIABLE. THERE WAS NO ALLEGATION BY THE AO THAT PURCHASES OR EXPENSES CLAIMED BY THE ASSESS EE WERE INFLATED. NON MAINTENANCE OF STOCK REGISTER WAS NOT SUFFICIEN T TO REJECT THE BOOKS OF ACCOUNT. IT WAS HELD BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS SMT. POONARA RANI (326 ITR 223) THAT THE ASSESSING OFFIC ER HAD NOT POINTED OUT ANY PARTICULAR DEFECT OR DISCREPANCY IN THE BOOKS O F ACCOUNT MAINTAINED BY THE ASSESSEE. THE ASSESSING OFFICER HAD NO MATER IAL BEFORE HIM TO TREAT THE ACCOUNTS OF THE ASSESSEE AS DEFECTIVE OR INCOMPLETE. THE FALL IN GROSS PROFIT RATIO, IN THE ABSENCE OF ANY COGENT RE ASONS COULD NOT BY ITSELF BE A GROUND TO HOLD THAT PROPER INCOME OF THE ASSES SEE COULD NOT BE DEDUCED FROM THE ACCOUNTS MAINTAINED BY THE ASSESSE E AND CONSEQUENTLY, COULD NOT HAVE BEEN A GROUND TO REJEC T THE ACCOUNTS INVOKING SECTION 145(3) OF THE ACT. THERE WAS NO FI NDING THAT THE ACTUAL COST OF THE RAW MATERIAL OR THE ACTUAL COST OF PROC ESSING CARRIED OUT PURCHASED BY THE ASSESSEE WAS LESS THAN WHAT WAS DE CLARED IN THE BOOKS OF ACCOUNT. THERE WAS NO FINDING BY THE ASSESSING O FFICER THAT THE ACTUAL QUANTITY OF THE FINISHED PRODUCT PRODUCED BY THE AS SESSEE WAS MORE THAN WHAT IT WAS SHOWN IN THE BOOKS OF ACCOUNT OR THAT T HE FINISHED PRODUCT WAS SOLD BY THE ASSESSEE AT A PRICE HIGHER THAN WHA T WAS DECLARED IN THE BOOKS OF ACCOUNT. IN THESE CIRCUMSTANCES, THE C OMMISSIONER (APPEALS) AND THE TRIBUNAL WERE JUSTIFIED IN HOLDIN G THAT THE ASSESSING OFFICER COULD NOT HAVE INCREASED THE GROSS PROFIT R ATIO MERELY BECAUSE IT WAS LOW AS COMPARED TO THE GROSS PROFIT RATIO OF TH E PRECEDING YEAR. SIMILARLY, A LOW RATE OF GROSS PROFIT, IN THE ABSEN CE OF ANY MATERIAL POINTING TOWARDS FALSEHOOD OF THE BOOKS OF ACCOUNT, COULD NO T BY ITSELF BE A GROUND TO REJECT THE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT. IT WAS HELD BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS PARADISE HOLIDAYS (325 ITR 013) THAT THE ACCOUNTS WHICH ARE REGULARLY MAIN TAINED IN THE COURSE OF BUSINESS AND ARE DULY AUDITED, FREE FROM ANY QUALIF ICATION BY THE AUDITORS, SHOULD NORMALLY BE TAKEN AS CORRECT UNLESS THERE AR E ADEQUATE REASONS TO INDICATE THAT THEY ARE INCORRECT OR UNRELIABLE. THE ONUS IS UPON THE 8 REVENUE TO SHOW THAT EITHER THE BOOKS OF ACCOUNT MA INTAINED BY THE ASSESSEE WERE INCORRECT OR INCOMPLETE OR THAT THE M ETHOD OF ACCOUNTING ADOPTED BY HIM WAS SUCH THAT TRUE PROFITS OF THE AS SESSEE CANNOT BE DEDUCED THEREFROM. IN THE PRESENT CASE, NO DEFECT H AS BEEN POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE A SSESSEE SO AS TO WARRANT TRADING ADDITION. THE BOOKS OF ACCOUNTS WER E AUDITED U/S 44AB OF THE I T ACT. FURTHER LOW PROFIT IS NEITHER A CIRCUM STANCE NOR MATERIAL TO JUSTIFY THE TRADING ADDITION. LOW PROFIT IN A PARTI CULAR YEAR BY ITSELF CANNOT BE A GROUND FOR INVOKING THE PROVISIONS OF SECTION 145(3) OF THE I T ACT WITHOUT THE SUPPORT OF ANY MATERIAL ON RECORD. THE APPELLANT HAS SATISFACTORILY EXPLAINED THE REASONS FOR DECLINE IN GP SINCE ITS TURNOVER HAD INCREASED AND THE AVERAGE EXCHANGE RATE OF US $ VIS-A-VIS INDIAN RUPEE HAD DECLINED. NON MAINTENANCE OF STOCK REGIST ER THEREFORE DID NOT LEAD TO LEAKAGE OF ANY REVENUE. FURTHER NO SPEC IFIC DISCREPANCY/DEFECT IN THE BOOKS OF ACCOUNT OF THE A SSESSEE HAD BEEN POINTED OUT BY THE AO. THE AO HAD NOT BROUGHT ANY M ATERIAL ON RECORD TO ESTABLISH THAT PURCHASES WERE INFLATED OR RECEIPTS WERE SUPPRESSED. THEREFORE THERE WAS NO JUSTIFICATION IN INVOKING TH E PROVISIONS OF SECTION 145(3) OF THE I T ACT. IF THERE WAS NO CHALLENGE TO THE TRANSACTIONS REPRESENTED IN THE BOOKS OF ACCOUNTS, THEN IT WAS N OT OPEN TO THE DEPARTMENT TO CONTEND THAT WHAT WAS SHOWN BY THE EN TRIES WAS NOT THE REAL STATE OF AFFAIRS. THERE IS NO DISPUTE TO THE W ELL SETTLED LEGAL PROPOSITION THAT THE BOOKS OF ACCOUNT REGULARLY MAI NTAINED BY THE ASSESSEE IN THE NORMAL COURSE OF BUSINESS, WHICH ARE SUBJECT TO AUDIT AS PER THE PROVISIONS OF I T ACT, SHOULD BE TAKEN AS CORRECT U NLESS THERE ARE STRONG AND SUFFICIENT REASONS TO INDICATE THAT THEY ARE UN RELIABLE. SUCH BOOKS OF ACCOUNT CANNOT BE REJECTED LIGHT-HEARTEDLY WITHOUT POINTING OUT ANY SPECIFIC DEFECT THEREIN AS HELD BY HONBLE JODHPUR TRIBUNAL IN THE CASE OF HARIDAS PARIKH VS ITO (113 TTJ 274). MERELY BECAUSE DIFFERE NT RANGE AND NATURE OF ITEMS ARE BEING DEALT WITH BY THE ASSESSEE AND THE MAINTENANCE OF QUANTITATIVE STOCK OF EACH AND EVERY ITEM IS NOT PR ACTICALLY POSSIBLE, THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WHICH ARE FREE F ROM ANY DEFECT CANNOT, BE REJECTED. ACCORDINGLY I HOLD THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO WAS NOT RIGHT IN MAKING TRADING ADDITION 9 OF RS. 83,83,8947-. I THEREFORE DIRECT THE AO TO DE LETE THE ADDITION OF RS. 83,83,8947-. THESE GROUNDS OF APPEAL ARE ALLOWED. NOW THE REVENUE IS IN APPEAL BEFORE US. 4. THE LEARNED D.R. RELIED UPON THE ORDER OF THE ASS ESSING OFFICER AND ARGUED THAT THE CASE LAWS REFERRED BY THE LEARNED A SSESSING OFFICER SQUARELY APPLICABLE IN CASE OF THE ASSESSEE. THE ASSESSEE DI D NOT MAINTAIN THE STOCK REGISTER AND WITHOUT STOCK REGISTER, CORRECTNESS AND COMPLETENESS OF THE BOOKS OF ACCOUNT CANNOT BE JUDGED. THE LEARNED ASSESSING O FFICER WAS RIGHT IN ENHANCING THE G.P. DURING THE YEAR UNDER CONSIDERAT ION, THEREFORE, HE REQUESTED TO CONFIRM THE ADDITION. 5. AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED CIT(A) AND ARGUED THAT THE REASONS FOR DECLINE OF G.P. WAS SUBMITTED BEFORE THE ASSESSING OFFICER. THERE WAS A L ESS COMMISSION PAYMENT DURING THE YEAR. THE RUPEE AGAINST THE DOLLAR WAS STR ONGER, THEREFORE, THE ASSESSEE RECEIVED LESS IN INDIAN RUPEES COMPARED TO PRECEDING YEAR. THE BOOKS OF ACCOUNT WERE AUDITED, THE EXPORT SALE INCRE ASE SUBSTANTIALLY & INCREASE IN DUTY DRAW BACK. HE FURTHER ARGUED THAT I N HANDICRAFT BUSINESS, NUMBER OF ITEMS MADE OF WOODS WITH DIFFERENT SIZES, C OLOURS, QUALITY DO NOT HAVE SIMILARITY AND IT IS DIFFICULT TO MAINTAIN THE STOCK REGISTER. MOSTLY, THE SALES ARE EXPORTED AND PAYMENTS RECEIVED IN FOREIGN CONVERTIBLE EXCHANGE THROUGH BANKING CHANNELS. ALL THE PURCHASES WERE INV OICED AND CHECKED BY THE PARTNERS,. THE LEARNED A.R. FURTHER RELIED UPON THE ASSESSEES OWN CASE IN ITA 10 NO. 501/JP/2010 FOR A.Y. 2007-08 WHEREIN BOOKS OF A CCOUNT WERE REJECTED AND G.P. WAS ESTIMATED ON THE BASIS OF CAPITAL EMPLOYED AND GROSS PROFIT RATIO. WHEREIN THE HONBLE ITAT JAIPUR BENCH, JAIPUR HAS DI SMISSED THE REVENUES APPEAL BUT THE MODE OF ADDITION OF THE ASSESSING OF FICER WAS THE BASIS OF CAPITAL EMPLOYED AND GROSS PROFIT RATIO, THEREFORE, THE LEARNED CIT(A) HAS RIGHTLY DECIDED THE APPEAL IN FAVOUR OF THE ASSESSE E. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE LEARNED COUNS EL FOR THE ASSESSEE HAD GIVEN THE REASON FOR DECLINE IN G.P. DURING THE YEA R UNDER CONSIDERATION COMPARED TO PRECEDING YEAR. HE DRAWN OUR ATTENTION O F HIS SUBMISSIONS BEFORE THE ASSESSING OFFICER VIDE LETTER DATED 18/12/2010 AND IT IS EVIDENT THAT RUPEE WAS STRONG AGAINST THE DOLLAR DURING THE YEAR, WHICH HAS DIRECT NEXUS WITH EXPORT TURNOVER IN INDIAN RUPEES. THE ASSESSEE HAD A LSO PAID LESS COMMISSION DURING THE YEAR AND PURCHASER HAD ABLE TO DEAL THE TRANSACTION DIRECTLY WITH THE ASSESSEE ON REDUCED COST OF PURCHASE/SALE. THE L EARNED A.R. AFTER CONSIDERING ALL EFFECTS OF COMMISSION PAYMENT, DUTY DRAW BACK AND STRONGER OF RUPEES HAD DEMONSTRATED THAT IN REAL SENSE, ACTUAL G.P. WAS BETTER THAN PRECEDING YEAR, WHICH HAS NOT BEEN CONTROVERTED BY T HE ASSESSING OFFICER AS WELL AS LEARNED D.R. DURING THE COURSE OF HEARING B EFORE US. IN PAST ALSO, SIMILAR ADDITION IN G.P. BY REJECTING OF THE BOOKS OF ACCOUNT WAS MADE BY THE ASSESSING OFFICER, WHICH HAS BEEN DECIDED BY THE COO RDINATE BENCH IN 11 ASSESSEES OWN CASE FOR A.Y. 2007-08 IN FAVOUR OF AS SESSEE, THEREFORE, WE DO NOT HESITATE TO CONFIRM THE ORDER OF THE LEARNED C IT(A). 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 13/06/2014. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 13 TH JUNE, 2014 * RANJAN COPY FORWARDED TO :- 1. THE DCIT, CIRCLE-4, JAIPUR. 2. M/S SANKALAP INTERNATIONAL, JAIPUR. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 835/JP/2011) BY ORDER, AR ITAT JAIPUR.