PAWAN ENTERPRISES, Jaipur V. ACIT, Jaipur

ITA 94/JPR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5087 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 02-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Keywords: Rejection of books of accounts; Depreciation

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 94/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12. M/S. PAWAN ENTERPRISES, 75, TALKATORA, JAIPUR. CUKE VS. THE DEPUTY COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAEFP 3369 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI VIJAY GOYAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19.09.2016. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 23/09/2016. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. CIT (A)-4, JAIPUR DATED 07.12.2015 PERTAINING TO ASSESSMENT YE AR 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT (A) ERRED IN CONFIRMING THE REJECTION OF THE BOOKS OF A CCOUNTS AND APPLICATION OF SECTION 145(3) OF THE I.T. ACT, 1961. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 6,48,311/- ON A/C OF TRADING ADDITION, BY ESTIMATING THE GP OF ASSESSEE AT 21.50 % ON DECLARED SALES AS AGAINST 21.06% DECLARED BY ASSESSEE. 2. BRIEFLY STATED THE FACTS ARE THAT THE CASE OF TH E ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND ASSESSMENT UNDER SECTION 14 3(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAME D VIDE ORDER DATED 10.03.2014. WHILE FRAMING THE ASSESSMENT, THE AO REJECTED THE B OOKS OF ACCOUNT ON THE BASIS 2 ITA NO. 94/JP/2016 M/S. PAWAN ENTERPRISES. THAT NO STOCK REGISTER WAS MAINTAINED AND ESTIMATED THE GROSS PROFIT AT 22% THEREBY MADE ADDITION OF RS. 13,93,184/- AND ALSO MADE ADDI TION IN RESPECT OF EXCESS DEPRECIATION CLAIMED OF RS. 11,56,155/- THEREBY THE AO COMPUTED THE LOSS AT RS. 60,32,105/- AGAINST LOSS OF RS. 85,81,444/-. THE A SSESSEE AGGRIEVED BY THIS ORDER, PREFERRED AN APPEAL BEFORE LD. CIT (A), WHO SUSTAIN ED THE REJECTION OF BOOKS OF ACCOUNTS. HE, HOWEVER, ESTIMATED THE GROSS PROFIT R ATE AT 21.50% AS AGAINST 21.06% SHOWN BY THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF LD. CIT (A), THE ASSES SEE IS IN APPEAL BEFORE US. 4. GROUND NOS. 1 & 2 ARE INTER-CONNECTED. FIRST GR OUND IS AGAINST REJECTION OF BOOKS OF ACCOUNT. 4.1. THE LD. COUNSEL FOR THE ASSESSEE HAS REITERATE D THE SUBMISSIONS AS MADE IN THE WRITTEN BRIEF. THE LD. COUNSEL SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. HE SUBMITTED THAT PURCHASES AND SALES ARE DULY VERIFIABLE. MERELY BECAUSE THE ASSESSEE WAS NOT MA INTAINING STOCK REGISTER, THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT . THE LD. COUNSEL SUBMITTED THAT THE AO HAS FAILED TO APPRECIATE THE FACTS IN RIGHT PERSPECTIVE. HE SUBMITTED THAT DUE TO HEAVY INFLATION THE COST OF PRODUCTION OF THE AS SESSEE HAS INCREASED SUBSTANTIALLY WHICH COULD NOT BE COMPENSATED BY INCREASE IN SALE PRICE. THE ASSESSEE IS 100% EXPORTER AND THE PRICE OF ITS PRODUCTS DEPENDS ON I NTERNATIONAL FACTORS LIKE COMPETITION FROM OTHER COUNTRIES, DOLLAR FLUCTUATIO NS ETC. THE INCREASE IN THE COST OF PRODUCTION WAS DUE TO INFLATION WHICH BADLY AFFECTE D THE INPUT COST. HE SUBMITTED THAT IN A.Y. 2009-10 THE COST INFLATION INDEX WAS 5 82 WHICH INCREASED TO 632 IN AY 2010-11. THEREFORE, THE INCREASE IN INFLATION WAS BY 50 POINTS. BUT THE COST INFLATION 3 ITA NO. 94/JP/2016 M/S. PAWAN ENTERPRISES. INDEX FOR AY 2011-12 WAS 711 WHICH SHOWS INCREASE I N INFLATION BY 79 POINTS WHICH MEANS INCREASE OF INFLATION BY 12.5% OVER THE LAST YEAR IN COMPARISON OF 8.50% IN AY 2010-11. FURTHER THE TURNOVER OF THE ASSESSEE H AS INCREASED FROM 1315.51 LACS TO 1489.74 LACS. 4.2. ON THE CONTRARY, THE LD. D/R OPPOSED THE SUBMI SSIONS AND SUBMITTED THAT THE ASSESSEE OUGHT TO HAVE MAINTAINED THE STOCK REGISTE R WHEREBY THE COST OF RAW MATERIAL CONSUMED, WASTAGE OCCURRED DURING MANUFAC TURING PROCESS ETC. ARE VERIFIED. IN THE ABSENCE OF VERIFICATION OF MATERI AL, THE AO WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. 4.3. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE AO IS WITHIN HIS POWER TO REJECT THE BOOKS OF ACCOUNT WHERE HE FINDS THAT THE BOOKS SO PRODUCED BEFORE HI M, DOES NOT GIVE TRUE PICTURE OF THE PROFIT. IT IS ALSO SETTLED POSITION OF LAW THAT ASSESSEE IS REQUIRED TO MAINTAIN BOOKS OF ACCOUNT BY WHICH THE TRUE PICTURE OF PROFI T CAN BE DEDUCED. THE AO REJECTED THE BOOKS OF ACCOUNT, HE IS REQUIRED TO FI ND OUT WHETHER THE CORRECT PROFIT IS BEING DEDUCED OR NOT. IN THE CASE IN HAND, THE AO HAS NOT GIVEN SUCH FINDING. THE AO HAS MERELY PROCEEDED ON THE BASIS OF PAST HISTOR Y OF THE ASSESSEE. THEREFORE, IN OUR CONSIDERED VIEW, THIS ACT OF THE AO IS NOT JUST IFIED. THE AO OUGHT TO HAVE FOUND OUT WHAT IS THE IMPACT ON THE PROFIT BY NON MAINTEN ANCE OF STOCK REGISTER. AS THE ASSESSEE HAS DEMONSTRATED THAT IT HAS 100% EXPORT S ALES, THE AO HAS NOT DOUBTED THE SALES. CONSEQUENTLY, THE AO HAS NOT DOUBTED TH E CORRESPONDING PURCHASES. THEREFORE, IN OUR CONSIDERED VIEW, THE AO WITHOUT G IVING SUCH FINDING WAS NOT 4 ITA NO. 94/JP/2016 M/S. PAWAN ENTERPRISES. JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. FURTH ER, WE FIND MERIT IN THE CONTENTION OF THE ASSESSEE THAT THERE IS AN INCREASE IN INFLAT ION THEREBY THE COST OF PRODUCTION WAS INCREASED. THE ASSESSEES TURNOVER HAS ALSO IN CREASED. UNDER THESE FACTS, THE ESTIMATION MADE BY THE AO PURELY ON THE BASIS OF PA ST HISTORY IS NOT JUSTIFIED. THE LD. CIT (A) ALSO WITHOUT CONSIDERING THE FACTS IN RIGHT PERSPECTIVE PROCEEDED TO SUSTAIN THE ORDER OF THE AO WITH MINOR MODIFICATION. UNDER THESE FACTS, WE FIND MERIT IN THE APPEAL FILED BY THE ASSESSEE. ACCORDINGLY, WE HERE BY DIRECT THE AO TO DELETE THE ADDITION. THE GROUND RAISED IN THIS APPEAL IS ALLOW ED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 23/09/2016 . SD/- SD/- FOE FLAG ;KNO ( DQY HKKJR ) (VIKRAM SINGH YADAV) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 23/09/2016. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S. PAWAN ENTERPRISES, JAIPUR. 2. THE RESPONDENT- THE DCIT, CENTRAL CIRCLE-2, JAIP UR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 94/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 5 ITA NO. 94/JP/2016 M/S. PAWAN ENTERPRISES.