Only paid members can access this page.
Income-tax Officer, Ward 2(5), Rajkot. Versus Girish M. Mehta. - 2005 (2) TMI 494 - ITAT RAJKOT - Income Tax
Method Of Accounting
..... s were not recorded fully. 16. In the instant case no mistake has been pointed out by the Assessing Officer either in the books of account or in the statement of purchases, sales and stock which was maintained quantitatively on day-to-day basis. The findings recorded by the CIT(A) at page Nos. 3 and 4 have not been controverted by the department by bringing any positive material on record. We are, therefore, inclined to agree with the learned AR, Mr. Rindani, that the assessee has maintained proper books of account and full details regarding the purchases, sales and stock registers were furnished to the Assessing Officer in which no defect whatsoever was pointed out, thus there was no reason before the Assessing Officer for rejecting the book results and thereby estimating the profit merely by comparing the assessee s G.P. rate. M/s. Gayatri Bullion, which was standing entirely on different footings than the assessee. 17. In the result, the appeal of the Revenue is dismissed.
Member(s) D. T. GARASIA., R. C. SHARMA. ORDER Per R.C Sharma, Accountant Member.- This is an appeal filed by the Revenue against the order of the CIT(A) dated 31-5-1999 for the assessment year 1998-99. 2. The grievance of the Revenue relates to the deletion of addition made on account of low gross profit amounting to Rs. 18,08,310. The Revenue has also grievance that the CIT(A) has erred in law and on facts in holding that the books of account could not have been rejected. 3. The brief facts of the case are that during course of assessment proceedings under section 143(3), the Assessing Officer observed that along with return of income, the assessee has filed Trading Account, Profit and Loss Account and Balance Sheet and Capital Account duly audited by the Chartered Accountants. The Audit Report in the prescribed Form 3CD was also filed. The assessee is engaged in trading of gold, silver and diamond. He also derived income from job work in setting of synthetic stones. The Assessing Officer further observed that up to the assessment year 1997-98, the assessee was doing business in synthetic stone only and the present business of trading in gold, silver and diamond has been started from this year only. The Assessing Officer also observed that the turnover of the assessee in the assessment year 1997-98 when he was doing business in synthetic stone was Rs. 2,46,534 on which the gross profit shown was at Rs. 83,886 which comes to 34 per cent. During the year the assessee has started business of bullion and diamond in wholesale basis and his turnover is Rs. 79,39,22,675. The assessee has shown G.P. at Rs. 14,46,772 which in terms of percentage comes to 0.18 per cent. Since the GP shown by the assessee is very low as compared to other dealer dealing in same commodity, the Assessing Officer issued show-cause notice to the assessee as to why its results should not be rejected. It was submitted by the assessee that there was competition in the market in this line of business and the G.P. margin is very low. The assessee also submitted the statement of day-to-day purchases, sales and profit/loss arise and the margin of G.P. and submitted that the book results may be accepted. The assessee also submitted that through oversight the sales-tax has been debited in the trading account, instead. of debiting it to the Profit and Loss account and after closing the Profit and Loss account and considering the sales-tax liability in Profit and Loss account, the G.P. would work out to 0.23 per cent. The Assessing Officer did not accept the assessee s contention to be convincing on the following two grounds (i) The assessee s sales are mainly effected in cash and the full address of the purchasers are not mentioned in the cash memo as such sales are not open to verification. (ii) The assessee s contention regarding recasting of account with regard to sales tax is also not acceptable as it is against the principle of Accountancy. 4. The Assessing Officer, therefore, held that the book results are not acceptable and the G.P. was estimated keeping in view the G.P. shown by the comparable dealer, M/s. Gayatri Bullion 0.41 per cent. Thus, the Assessing Officer rejected the assessee s GP rate of 0.18 per cent and estimated GP at 0.41 per cent and trading addition of Rs. 18,08,310 was made. 5. By the impugned order, the CIT(A) deleted the addition by observing that the assessee has filed, day-to-day purchases and sales records, which clearly show that on various occasions, there were losses also. From the assessment records produced before the CIT(A) in the presence of the Assessing Officer, the CIT(A) recorded, a finding to the effect that the Assessing Officer has not able to pin point any instance of sales where sales rate has been shown below the market rate. As per the CIT(A), the Assessing Officer has also not found any fault with the quantitative details of purchase and sales maintained by the assessee on day-to-day basis. The CIT(A) has also found that in this line of business many of the purchasers do not want to disclose their correct identity, therefore, it may not be possible for the assessee to record the correct names and addresses of its purchasers. In view of this and also in view of the fact that day-to-day quantitative details of purchase and sales have been maintained by the assessee, book results cannot be rejected. The CIT(A) has also observed that it has not been proved by the Assessing Officer that on a particular date, the appellant had shown less sales rate of gold and silver as compared to market rate. The Assessing Officer was also present at the time of hearing and he was also shown both cash and debit sales which were comparable, the CIT(A), therefore, held that it cannot be said that in case of cash sales, sale rate was less. He therefore, deleted the additions made on account of gross profit. 6. Aggrieved by the order of the CIT(A), the Department is in appeal before the Tribunal. It was contended by the learned DR that in spite of giving opportunity, the assessee failed to furnish full names and address of the cash purchasers, and therefore, sales was not open to verification. He, therefore, submitted that the matter should be restored back to the Assessing Officer for examining afresh and assessee may be directed to furnish names and addresses of the purchasers so as to enable the Assessing Officer to verify the correctness of the sales/purchases in the books of account. 7. On the other hand, the learned AR, Mr. D.M. Rindani, Chartered Accountant vehemently argued that during the course of scrutiny assessment the assessee had filed audited books of account in which there was no adverse comment by the auditor along with quantitative details of daily purchase and sales. In the line of business, the assessee was dealing, it was not practicable for the assessee to insist the purchasers, making cash purchases from the assessee, to disclose their fully names and addresses, and therefore, on s.................