PIONEER SUITINGS PVT. LTD, Alwar V. ITO, Jaipur

ITA 836/JPR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5580 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: misc
• Appeal Filed On: 23-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: POONAM RAI DCIT DR DHK

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 836/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 M/S. PIONEER SUITINGS (P) LTD. BEHIND 9, MANU MARG KABIR COLONY, ALWAR CUKE VS. THE ITO WARD- 6(1) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAACP 8424 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI MANISH JAIN, CA JKTLO DH VKSJ LS@ REVENUE BY: SMT. POONAM RAI, DCIT- DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 17/02/2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 21/02/2017 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORD ER OF THE LD. CIT(A)5, JAIPUR DATED 11-07-2016 FOR THE ASSESSMEN T YEAR 2010-11 RAISING FOLLOWING GROUNDS OF APPEAL. 1. THAT THE LD. CIT(A) HAS ERRED ON THE FACTS AND THE LAW IN INVOKING PROVISIONS OF SECTION 145(3) AN D REJECTING BOOKS OF ACCOUNT REGULAR / AUDITED. 2. THAT THE LD. CIT(A) HAS ERRED ON THE FACTS AND THE LAW IN CONFIRMING THE ADDITION TO THE EXTENT OF RS. 5.00 LACS ON ACCOUNT OF TRADING RESULTS. ITA NO.836/JP/2016 M/S. PIONEER SUITINGS (P) LTD. VS. ITO, WARD- 6(1), JAIPUR 2 2.1 APROPOS GROUND NO. 1 AND 2 OF THE ASSESSEE, THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) IS AS UNDER:- 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELLANT. WHILE REJECTING THE BOOKS OF ACCOUNT U/S 145(3), THE AO H AS NOTED THAT THE BREAK-UP AND OTHER DETAILS OF CLOSING STOC K WERE NOT MAINTAINED BY THE ASSESSEE , WHICH AMOUNTS TO NON- MAINTENANCE OF STOCK REGISTER. THE AO HAS ALSO STAT ED THAT ON SIMILAR FACTS IN A.Y. 2006-07, WHEREIN DEFECTS WERE NOTED IN VALUATION OF CLOSING STOCK COUPLED WITH DECLINE IN GROSS PROFIT RATE, THE BOOKS OF ACCOUNT WERE REJECTED. TH E REJECTION OF BOOKS OF ACCOUNT WAS CONFIRMED BY THE CIT(A) AS WELL AS ITAT. THE RELEVANT EXTRACT OF THE ORDER OF THE HON' BLE ITAT JAIPUR BENCH IN ITA NO. 171/JP/2013 FOR A.Y. 2006-0 7 DATED 8-05-2013 IS QUOTED THEREIN. 2.4 THE REJECTION OF BOOKS OF ACCOUNT WAS UPHELD IN A.Y. 2006-07 DUE TO THE INCORRECTNESS AND INCOMPLET ENESS OF ACCOUNTS SINCE THE ASSESSEE DID NOT GET THE VALUATI ON OF CLOSING STOCK VERIFIED WITH REFERENCE TO BOOKS OF A CCOUNT AND VOUCHERS ETC. IT WAS HELD THAT SUCH A DEFECT COUPLE D WITH FALL IN GROSS PROFIT RATE MERITS REJECTION OF BOOKS OF A CCOUNT. IN THE APPELLATE PROCEEDINGS FOR THIS YEAR, THE APPELL ANT WAS ASKED TO PRODUCE DETAILED BREAK UP OF CLOSING STOCK . IT WAS OBSERVED THAT NO SUCH DETAILED INVENTORY HAS BEEN MAINTAINED AND ALSO NO STOCK REGISTER IS MAINTAINED . ADDED TO THIS, THERE IS A CONSIDERABLE FALL IN GROSS PROF IT RATE THIS YEAR, WHICH IS NOT PROPERLY EXPLAINED WITH DOCUMENT ARY EVIDENCE. ONLY GENERAL REASONS HAVE BEEN CITED AND THE SAME HAVE NOT BEEN SUBSTANTIATED. THEREFORE, ESSENTIALLY THE DEFECTS NOTED THIS YEAR ARE THE SAME AS IN A.Y. 200 6-07 WHEREIN REJECTION OF BOOKS OF ACCOUNT WAS SUSTAINED . THE FACTS BEING SIMILAR THIS YEAR, THE REJECTION OF BOO KS OF ACCOUNT U/S 145(3) IS UPHELD. 2.5 THE NEXT QUESTION RELATES TO THE ESTIMATION OF PROFITS. IT IS SEEN THAT THE GROSS PROFIT RATE IN A .Y. 2008-09 WAS 11.14% AND IN A.Y. 2009-10 IT WAS 9.47%. IN COMPARISON, THE GROSS PROFIT RATE THIS YEAR HAS FAL LEN TO ITA NO.836/JP/2016 M/S. PIONEER SUITINGS (P) LTD. VS. ITO, WARD- 6(1), JAIPUR 3 7.62%. THE REASONS CITED FOR FALL IN GROSS PROFIT R ATE ARE MAINLY ON ACCOUNT OF INCREASE IN SALES AND INCREA SE IN RAW MATERIAL AND OTHER EXPENSES WHEREAS THE SALE PRICE DID NOT COMMENSURATELY. THE REASONS CITED ARE GENERAL AND N OT SUBSTANTIATED WITH PROPER EVIDENCES. AS FAR AS SALE S ARE CONCERNED, THE GROWTH THIS YEAR IS ONLY AROUND 14% AS COMPARED TO THE PRECEDING YEAR. MOREOVER, GROSS PRO FIT RATE DOES NOT NECESSARILY FALL IN INCREASED SALES, UNLES S THERE ARE VALID REASONS FOR THE SAME. THUS THE REASONS CITED FOR ALL IN GROSS PROFIT RATE ARE UNACCEPTABLE BEING UNSUBSTANT IATED. IN ORDER TO ESTIMATE THE PROFITS, THE BEST GUIDE IS TH E ASSESSEE'S OWN PROFITABILITY IN THE IMMEDIATELY PRECEDING YEA RS AS HELD BY THE HON'BLE JURISDICTIONAL HIGH COURT IN SE VERAL CASES. THE AO HAS ADOPTED THIS VERY YARDSTICK IN ES TIMATING THE PROFIT THIS YEAR. THE AVERAGE GROSS PROFIT RATE OF PRECEDING TWO YEARS COMES TO 10.3% WHEREAS GROSS PR OFIT RATE IN THE IMMEDIATELY PRECEDING YEAR WAS 9.47%. EVEN IF THE GROSS PROFIT RATE OF IMMEDIATELY PRECEDING YEA R IS ADOPTED, IT WILL RESULT IN AN ADDITION OF RS. 21,09 ,000/-. IN COMPARISON, THE AO HAS MADE AN ADDITION OF RS. 5,00 ,000/- WHICH SEEMS VERY REASONABLE IN THE FACTS OF THE CAS E. ACCORDINGLY, THE METHOD AND QUANTUM OF PROFIT ESTIM ATION DEPLOYED BY THE AO IS UPHELD. THESE GROUNDS ARE THE REFORE, DISMISSED. 2.2 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE OPPOSED THE INVOCATION OF PROVISION OF SECTION 145(3) OF TH E ACT AS TO REJECTION OF BOOKS OF ACCOUNT AND ALSO CONFIRMATION OF ADDITION OF RS. 5.00 LACS BY THE LOWER AUTHORITIES. THE LD. AR OF THE ASSESSEE F ILED THE WRITTEN SUBMISSION WHICH HAS BEEN TAKEN INTO CONSIDERATION. 2.3 ON THE OTHER, HAND, THE LD. DR RELIED ON THE OR DERS OF THE AUTHORITIES BELOW. ITA NO.836/JP/2016 M/S. PIONEER SUITINGS (P) LTD. VS. ITO, WARD- 6(1), JAIPUR 4 2.4 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. BRIEF FACTS OF THE CASE ARE TH AT THE ASSESSEE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFAC TURING AND TRADING OF COTTON SUITINGS AND SHIRTINGS FABRICS. THE FACTO RY IS LOCATED AT TIJARA ROAD, ALWAR. DURING THE YEAR UNDER CONSIDERATION, T HE ASSESSEE HAS SHOWN THE TURNOVER OF RS. 1140.13 LACS AND GROSS P ROFIT OF RS. 86.83 LACS GIVING GROSS PROFIT RATE OF 07.62%. THE CORRESPONDI NG FIGURES FOR PRECEDING YEARS FOR TURNOVER, GROSS PROFIT AND GROS S PROFIT RATE OF THE ASSESSEE COMPANY ARE AS UNDER:- A.Y. SALES (RS. IN LACS) G.P. (RS. IN LACS) G.P. RATE (%AGE) 2008-09 799.80 89.10 11.14 2009-10 1035.36 98.09 09.47 2010-11 1140.13 86.83 07.62 AS REGARDS THE INVOCATION OF PROVISIONS OF SECTION 145(3) AS TO REJECTION OF BOOKS OF ACCOUNT, IT IS NOTED THAT NO SUCH DETAI LED INVENTORY AS WELL STOCK REGISTER WAS MAINTAINED BY THE ASSESSEE BEFOR E THE LOWER AUTHORITIES AND THE ASSESSEE DID NOT GET THE VALUATION OF THE C LOSING STOCK VERIFIED WITH REFERENCE TO THE BOOKS OF ACCOUNT AND VOUCHERS ETC. THEREFORE, THE AUTHORITIES BELOW HAVE RIGHTLY INVOKED THE PROVISIO NS OF SECTION 145(3) OF THE ACT AS TO REJECTION OF BOOKS OF ACCOUNT. TAKING INTO CONSIDERATION THE ORDERS OF THE LOWER AUTHORITIES, I CONCUR WITH THE VIEWS OF THE LD. CIT(A) ON THE ISSUE OF REJECTION OF BOOKS OF ACCOUNT OF TH E ASSESSEE. AS REGARDS ITA NO.836/JP/2016 M/S. PIONEER SUITINGS (P) LTD. VS. ITO, WARD- 6(1), JAIPUR 5 THE ISSUE OF CONFIRMING THE ADDITION OF RS. 5.00 LA CS BY THE AUTHORITIES BELOW, THE LD. CIT(A) HAS GIVEN A DETAILED FINDING TAKING INTO CONSIDERATION THE GROSS PROFIT RATE OF THE ASSESSEE FOR THE LAST THREE YEARS. EVEN IF THE GROSS PROFIT OF IMMEDIATE PRECEDING YEA R IS ADOPTED THEN ALSO THE ADDITION WORKS OUT MUCH MORE THAN RS. 5.00 LACS . THEREFORE, THE ORDER OF THE LD. CIT(A) DOES NOT REQUIRE ANY INTERFERE NCE ON THIS ISSUE. THE ORDER OF THE LD. CIT(A) IS WELL REASONED ONE. THUS I FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) ON THE ISSUE OF CONFIRMING THE ADDITION OF RS. 5.00 LACS. RESULTANTLY, THE ORDER O F THE LD. CIT(A) IS CONFIRMED THE GROUND NOS. 1 AND 2 RAISED BY THE ASS ESSEE ARE DISMISSED. 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 /02/2 017. SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 21 /02/ 2017 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. PIONEER SUITINGS (P) LTD., AL WAR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 6(1), JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 836/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR