ITO, Jaipur V. PRADEEP KUMAR DOSHI, Jaipur

ITA 971/JPR/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54123 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 27-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Assessee Lawyers: G L GUPTA
• Keywords: Rejection of books of accounts

Judgement Text

1 ITA 971-10 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 971/JP/2010 ASSTT. YEAR : 2007-08. THE INCOME-TAX OFFICER, VS SHRI PRADEEP KUMAR DOS HI, WARD 4(2), F-443/C, ROAD NO. 12, JAIPUR. V.K.I. AREA, JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D.K. MEENA RESPONDENT BY : SHRI G.L. GUPTA DATE OF HEARING : 10.08.2011 DATE OF PRONOUNCEMENT : 19.8.2011. ORDER DATE OF ORDER : 19/08/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2007-08. 2. THE DEPARTMENT IS OBJECTING IN NOT APPROVING REJ ECTION OF BOOKS OF ACCOUNT BY INVOKING PROVISIONS OF SECTION 145(3) AND THEREAFTE R DELETING THE ADDITION OF RS. 7,57,471/- MADE BY AO BY ADOPTING GROSS PROFIT RATE OF 6%. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE WAS DE RIVING INCOME FROM MANUFACTURING OF COPPER WIRE, ALUMINUM WIRE AND DPC WIRE. THE QU ANTITY TALLY OF MANUFACTURING AND TRADING ACTIVITY WERE SHOWN SEPARATELY. AFTER EXAMI NING THE RECORD, THE AO OBSERVED THAT ASSESSEE PURCHASED COPPER FROM HINDUSTAN COPPER LTD . AS WELL AS FROM PRIVATE SUPPLIERS 2 BUT THERE WERE PRICE DIFFERENCE ON SUCH PURCHASES E VEN ON THE SAME DATES. CONSIDERING THIS DEFECT, THE AO REJECTED THE BOOKS OF ACCOUNT B Y INVOKING PROVISIONS OF SECTION 145(3). THEREAFTER, THE ASSESSEE WAS REQUIRED TO E XPLAIN THE REASONABLENESS OF THE PROFIT SHOWN. DETAILED WRITTEN SUBMISSIONS WERE FILED. T HE AO FOUND THAT THE EXPLANATION IS NOT SATISFACTORY. THE AO FURTHER NOTED THAT THERE IS SHORTAGE SHOWN OF 215.52 KG IN TRADING GOODS. THE AO FURTHER NOTED THAT ASSESSEE H AS SHOWN GROSS PROFIT RATE OF 7.58% IN EARLIER YEAR WHEREAS IN THE YEAR UNDER CONSIDERATIO N THE GROSS PROFIT RATE HAS BEEN SHOWN AT 4.65%. THEREFORE, HE HELD THAT GROSS PROFIT SHO WN BY ASSESSEE IS NOT REASONABLE, ACCORDINGLY HE APPLIED A GROSS PROFIT RATE OF 6% WH ICH RESULTED IN A TRADING ADDITION OF RS. 7,57,471/-. DETAILED SUBMISSIONS WERE FILED BE FORE LD. CIT (A). IT WAS SUBMITTED THAT THE INSPECTOR WAS DEPUTED FOR VERIFICATION OF TOTAL QUANTITY OF PURCHASES AND SALES BOTH OF MANUFACTURING AND OF TRADING, AND THERE WAS NO INST ANCE FOUND UNRECORDED PURCHASES/SALES. ALL THE STOCK RECORDS PRESCRIBED AS PER EXCISE RULES WERE MAINTAINED AND SHORTAGE WAS NORMAL IN THE COURSE OF BUSINESS A CTIVITY WHICH WAS ONLY 1.45%. THE SAME IS NEGLIGIBLE. ACCORDINGLY IT WAS SUBMITTED T HAT THERE IS NO OTHER MATERIAL BEFORE THE AO TO REJECT THE BOOKS OF ACCOUNT AND ADOPTED A HIGHER GROSS PROFIT RATE. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERI AL ON RECORD, THE LD. CIT (A) WAS SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. ACC ORDINGLY HE HELD THAT THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT AND MAK ING TRADING ADDITION. 4. AGAINST THESE FINDINGS OF LD. CIT (A), THE DEPAR TMENT IS IN APPEAL HERE BEFORE THE TRIBUNAL. 5. THE LD. D/R PLACED RELIANCE ON THE ORDER OF AO. 3 6. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE PLACED RELIANCE ON THE ORDER OF LD. CIT (A). 7. AFTER CONSIDERING THE ORDERS OF THE AO AND LD. C IT (A), WE FIND NO INFIRMITY IN THE FINDING OF LD. CIT (A). FINDINGS OF LD. CIT (A ) AT PAGES 4 & 5 ARE AS UNDER :- I HAVE CONSIDERED FACTS OF THE CASE AND ARGUMENT S TAKEN BY SH. GUPTA QUITE CAREFULLY. THE BASIC REASON PROPOSING REJECT ION OF BOOKS OF ACCOUNTS IN PARA 3.1 OF THE ASSESSMENT ORDER WAS DIFFERENCE IN PURCHASE RATES BUT AS ARGUED AND CLARIFIED BY SH. GUPTA THERE WAS NO SUCH DIFFERENCE CONSIDERING THE EXCISE DUTY ELEMENT WHICH WAS SEPAR ATELY CHARGED AND THEREFORE, THE VERY BASIS OF THE SHOW CAUSE NOTICE ISSUED DOES NOT SURVIVE. FURTHER, REGARDING VARIATION IN SALE RATES IT IS PU RELY A BUSINESS CONSIDERATION AND IT ALSO CANNOT BE CONSIDERED AS A DEFECT ON THE BASIS OF WHICH THE BOOKS OF ACCOUNTS CAN BE REJECTED BY INVO KING PROVISIONS OF S. 145(3) OF I.T. ACT. REGARDING SHORTAGE IT IS A FAC T THAT DAY TO DAY STOCK RECORD AS PER EXCISE REGULATIONS ARE MAINTAINED AND AO HAS NOT PROVED ANY INSTANCE OF ANY UNACCOUNTED SALE. FURTHER, CONSIDE RING BULK PURCHASE AND THE SCALE OF SALES IN TRADING SEGMENT SUCH SHORTAGE WHICH IS 1.46% OF TOTAL TRADING CANNOT BE CONSIDERED AS ABNORMAL WHICH FURT HER CAN BE CONSIDERED AS PATENT DEFECT FOR THE PURPOSE OF REJECTION OF BO OKS OF ACCOUNTS. UNDER THESE CIRCUMSTANCES, IN MY CONSIDERED VIEW THERE IS NO SUCH MAJOR DEFECTS IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLAN T BECAUSE OF WHICH THE BOOKS OF ACCOUNTS COULD HAVE BEEN REJECTED BY INVOK ING PROVISIONS OF S. 145(3) OF I.T. ACT AND, THEREFORE, SUCH REJECTION O F BOOKS OF ACCOUNTS IS HEREBY NOT APPROVED. ONCE THE REJECTION OF BOOKS OF ACCOUNTS IS NOT APPROVED THEN THERE IS NO QUESTION OF MAKING ANY TR ADING ADDITION ON THE BASIS OF ESTIMATED GP RATE AND THEREFORE, SUCH TRAD ING ADDITION MADE BY AO OF RS. 7,57,471/- IS HEREBY DELETED. 4 THE ABOVE FINDING REMAINS UNCONTROVERTED, THEREFORE , THE FINDINGS OF LD. CIT (A) ARE CONFIRMED. 8. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMI SSED. 9. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 19. 8.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- THE ITO WARD 4(2), JAIPUR. SHRI PRADEEP KUMAR DOSHI, JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 971/JP/2010) BY ORDER, AR ITAT JAIPUR.