ACIT, Jaipur V. HANUT SALES CORP., Jaipur

ITA 92/JPR/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 47955 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 03-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Assessee Lawyers: ARVIND AGARWAL; VINOD AGARWAL
• Section: 145

Judgement Text

1 ITA 92-11 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 92/JP/2011 ASSTT. YEAR : 2005-06. THE ACIT, CIRCLE-3, VS. M/S.HANUT SALES CORPN., JAIPUR. 140(1), INDUSTRIAL AREA, JHOTWARA, JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D.K. MEENA RESPONDENT BY : S/SHRI ARVIND AGARWAL & VINOD AGARWAL ORDER DATE OF ORDER : 08/07/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2005-06. 2. THE DEPARTMENT IS OBJECTING IN DELETING THE TRAD ING ADDITION MADE BY AO OF RS. 17,18,453/-. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E CONTINUED TO BE A MANUFACTURER OF PET BOTTLES, JARS AND CONTAINERS ETC. ON EXAMINATI ON OF BOOKS OF ACCOUNTS IT WAS SEEN THAT CONSUMPTION OF RAW MATERIAL BY THE ASSESSEE WA S NOT PROPERLY ACCOUNTED FOR. THERE WAS NO BASIS FOR VERIFICATION OF WASTAGE. THE INVE NTORY OF CLOSING STOCK AND THE BASIS OF ITS VALUATION WERE NOT FILED. THE AO FURTHER OBSERV ED THAT THE PURCHASES SHOWN BY THE ASSESSEE AS PER SCHEDULE-N WERE RS. 1,79,11,778/- W HEREAS AS PER THE DETAILS FILED THE SAME WAS SHOWN AT RS. 1,96,58,641/-. PROPER RECONCI LIATION OF PURCHASE COULD NOT BE 2 FURNISHED BY THE ASSESSEE. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAD SHOWN G.P. OF 12.18% AS AGAINST 22.47% IN THE IMMEDIATELY PRECEDI NG YEAR. THE EXPLANATION FURNISHED FOR THE DECLINE IN GP ON ACCOUNT OF COMPETITION AND INCREASED COST OF MATERIAL WAS NOT ACCEPTED BY THE AO. THE AO PROCEEDED TO APPLY THE GP RATE OF 18% AND MADE THE IMPUGNED ADDITION. 4. IT WAS CONTENDED BEFORE LD. CIT (A) THAT THE BOO KS OF ACCOUNT MAINTAINED BY ASSESSEE WERE DULY AUDITED AND WERE ALSO MAINTAINED AS PER THE REQUIREMENT OF THE EXCISE ACT. REGARDING THE ISSUE OF IMPROPER DETAILS OF CO NSUMPTION IT WAS SUBMITTED THAT THE GOODS PRODUCED BY THE APPELLANT IN DIFFERENT SIZES COULD EASILY BE CONVERTED INTO WEIGHT AND THE WEIGHT OF EACH GOOD PRODUCED BY THE ASSESSE E WAS FIXED. THE LD. A/R FURNISHED A DETAILED COMPARISON CHART CONVERTING THE PRODUCTION IN KG BY MULTIPLYING THE STANDARD RATE TO DEMONSTRATE THAT THE GOODS MANUFACTURED TAL LIED WITH THE CONSUMPTION SHOWN. IT WAS FURTHER CLARIFIED THAT THE RECORDS WERE MAINTAI NED AS PER THE GUIDELINES OF THE EXCISE AUTHORITIES AND NO DIFFERENCE OR IMPROPER ACCOUNTIN G AS ALLEGED BY THE AO WERE NOTICED BY THE EXCISE AUTHORITIES. AS REGARDS THE DIFFERENC E IN PURCHASES THE LD. A/R SUBMITTED THAT THE DETAILS WERE FURNISHED TO THE AO AS DIRECT ED BY HIM WHICH WERE INCLUSIVE OF CENVAT AND DISCOUNT AND THERE WAS NO DIFFERENCE AS ALLEGED BY THE AO. DETAILED RECONCILIATION CHART WAS ALSO FILED BEFORE LD. CIT (A) AND IN RESPECT TO DECLINE IN G.P. RATE, IT WAS EXPLAINED THAT SALES OF THE ASSESSEE HAD DEC LINED BY 29% IN COMPARISON OF EARLIER YEAR. THE COST OF RAW MATERIALS HAD INCREASED BY AL MOST 50 TO 60% AS COMPARED TO IMMEDIATELY PRECEDING YEAR. THE PERFORMANCE OF THE ASSESSEE FIRM HAD ALSO SUFFERED DUE TO STIFF COMPETITION IN MARKET AND THE TECHNOLOGICA L CHANGES WHICH LED TO LOW CAPACITY UTILIZATION OF THE ASSESSEE AS COMPARED TO THE OTHE R PLAYERS IN THE MARKET. QUANTITATIVE 3 DETAILS WERE MAINTAINED AND WERE VERIFIABLE AND NO INSTANCE OF ANY UNRECORDED SALES WERE FOUND OR DETECTED BY THE AO. AFTER CONSIDERING TH E SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, THE LD. CIT (A) WAS SATISFIED W ITH THE EXPLANATION OF THE ASSESSEE. ACCORDINGLY HE DELETED THE ENTIRE TRADING ADDITION. 5. NOW THE DEPARTMENT IS IN APPEAL HERE BEFORE THE TRIBUNAL. 6. THE LD. D/R PLACED RELIANCE ON THE ORDER OF AO. 7. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE PLACED RELIANCE ON THE ORDER OF LD. CIT (A). 8. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, WE FIND NO INFIRMITY IN THE FINDING OF LD. CIT (A). FINDING O F LD. CIT (A) HAVE BEEN RECORDED AT PAGES 4 AND 5 OF HIS ORDER ARE AS UNDER :- I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE. ON PERUSAL OF THE ASSESSMENT ORDER AS WELL AS THE DETA ILS FILED BY THE A/R IT IS SEEN THAT THE A/R HAS BEEN ABLE TO PROVIDE DETAILED SATISFACTORY ANSWER IN RESPECT OF ALL THE ISSUES RAISED BY THE AO I.E CONS UMPTION OF RAW MATERIAL, DIFFERENCE IN PURCHASE FIGURES AND THE DECLINE IN G P. ON THE OTHER HAND, THE AO HAS MERELY RELIED UPON THE PAST RESULTS OF T HE APPELLANT WITHOUT CONSIDERING THE SPECIFIC FACTORS WHICH LED TO THE D ECLINE IN GP. IN THIS CONNECTION, THE DECISION OF THE RAJASTHAN HIGH COUR T IN THE CASE OF MALANI RAMJIVAN JAGANNATH VS. ACIT (316 ITR 120) IS RELEVA NT WHEREIN IT WAS HELD THAT THE ACCOUNTS BOOKS WERE MAINTAINED AS T HEY WERE ORDINARILY MAINTAINED YEAR AFTER YEAR WHICH WERE FOUND TO YIEL D A FAIR RESULT, MERE DEVIATION IN THE GROSS PROFIT RATE CANNOT BE A GROU ND FOR REJECTING THE BOOKS OF ACCOUNTS AND ENTERING THE REALM OF ESTIMATE AND GUESS WORK. EVEN OTHERWISE, IT IS SEEN THAT THE AO HAD MADE THE TRAD ING ADDITION WITHOUT FORMALLY REJECTING THE BOOKS OF ACCOUNTS WHICH WAS NOT IN CONSONANCE WITH THE JUDICIAL DECISIONS IN THIS REGARD. WITHOUT REJECTION OF BOOKS OF AC 4 COUNTS, PROVISIONS OF SECTION 145 COULD NOT HAVE BE EN APPLIED. IN THIS REGARD, REFERENCE IS MADE TO THE DECISION OF ITAT, JAIPUR IN THE CASE OF ITO VS. RAJASTHAN FEEDS (35 TW 36). IN VIEW OF THE FOREGOING, THE TRADING ADDITION MADE BY THE AO IS DELETED. THE ABOVE FINDINGS ARE FINDINGS OF FACT WHICH REMAI NED UNCONTROVERTED. WITHOUT REJECTING BOOKS OF ACCOUNT, NO TRADING ADDITION IS POSSIBLE. THEREFORE, FOR THIS REASON ALSO WE HOLD THAT LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION. THE ORDER OF LD. CIT (A) IS CONFIRMED. 9. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMI SSED. 10. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 08 .07.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- THE ACIT, CIRCLE-3, JAIPUR. M/S. HANUT SALES CORPORATION, JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 92/JP/2011) BY ORDER, AR ITAT JAIPUR.