TMI Blog2015 (4) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act in all the years.- Decided against assessee. G.P. rate as well as total sales turnover estimated challenged - Held that:- The learned Assessing Officer applied comparable case of M/s Rajan Fireworks and Emporium Prop. M/s Sunder Dass Hasani HUF, who is wholesalers/retailers of fireworks, who has shown G.P. rate ranging G.P. from 17% to 18%. The learned AR argued that the case of M/s Rajan Fireworks and Emporium Prop. M/s Sunder Dass Hasani HUF is not a comparable case hence distinguished on various facts and figures and nature of trading activity in quantum and experience. The assessee has shown G.P. in 2009-10 @ 14.99% on recorded sales of ₹ 21,57,817/-, therefore, we apply G.P. rate in A.Y. 2003-04 @ 13%, in A.Y. 2004-05 @ 14%, in A.Y. 2005-06 @ 13% and in A.Y. 2006-07 @ 13.5% in the interest of justice. The Assessing Officer is directed to recalculate the income of the assessee on the basis of G.P. rate decided by this Court in year wise on estimated total turnover by the learned CIT(A).- Decided in favour of assessee. - ITA Nos. 1004 to 1007/JP/2013 - - - Dated:- 19-2-2015 - R. P. Tolani, JM And T. R. Meena AM,JJ. For the Appellant : Shri P C Parwal, (CA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw in estimating the unrecorded sales, twice the recorded sales and thus estimating the total sales at ₹ 69,27,294/- (wrongly taken at ₹ 46 lacs). She has further in applying G.P. rate of 17% on such estimated turnover as against G.P. rate of 11.04% declared by the assessee on the actual turnover of ₹ 23,09,098/- resulting into trading addition of ₹ 9,22,728/- (wrongly computed at ₹ 45,27,088/-). Grounds of assessee's appeal being ITA No. 1007/JP/2013 (A.Y. 2006-07) 1. The learned CIT(A) has erred on facts and in law in confirming the trading addition of ₹ 1,98,392/- by applying G.P. rate of 17% on the turnover of ₹ 41,86,314/- as against G.P. rate of 12.26% declared by the assessee. 2. In A.Y.2003-04 to 2005-06, the assessee challenged the validity of issuance of notice U/s 153-A of the Income Tax Act, 1961 (hereinafter referred as the Act) and addition on account of G.P. rate. In A.Y. 2006-07, the appellant only challenged the G.P. rate addition. 2.1 Brief facts of the case are that there was a search and seizure operation carried out on 22/10/2008 at the business and residential premises of the assessee's group. Du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3/- 13.23% 2005-06 23,09,098/- 11.04% 2006-07 26,27,528/- 12.26% 15,58,786/- 12.26% 2007-08 15,93,180/- 12.98% 49,40,182/- 12.98% 2008-09 20,56,885/- 13.00% 70,88,444/- 13.04% 2009-10 21,57,817/- 14.99% 70,24,060/- 13.04% The assessing has admitted this fact that it indulged into transactions which were not entered into regular books of account. These facts were also admitted by Shri Madan Mohan Gupta, the main key person of the assessee group in his statement recorded during the course of search operation. Shri Madan Mohan Gupta has stated in his statement dated 21/10/2008 in reply to question No. 21, which is reproduced as under:- During the course of search operation, it is also found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the transactions regarding purchases and sales were made in cash, which was not completely entered in regular books of account. He also presumed that the assessee might have destroyed paper relating to unaccounted sales. Shir Madan Mohan Gupta and Shri Pankaj Agarwal in his statement had admitted that all the transactions of sales and purchases were not entered into the regular books of account. Further he also referred Section 114(d) of the Indian Evidence Act for interpolation of the evidence for A.Y. 2003-04 to 2005-06. On the basis of ratio of accounted sales and unaccounted sales found during the course of search in A.Y. 2006-07 to 2009-10. He calculated total sales for A.Y. 2003-04 at ₹ 35,69,729/- in place of ₹ 11,89,909/-, in A.Y. 2004-05 at ₹ 54,88,839/- in place of ₹ 18,29,613/-, in A.Y. 2005-06 at ₹ 46,00,000/- in place of ₹ 23,09,098/-. However, in A.Y. 2006-07, the gross sales has been taken at ₹ 26,27,528/- (as per regular books of account) and ₹ 15,58,786/- (on the basis of unaccounted sales and on the basis of seized material) at ₹ 41,86,314/-. The learned Assessing Officer applied G.P. rate in A.Y. 2003-04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion being an exceptional year. She herself calculated the ratio of recorded sales to unrecorded sales 1:2 and estimated total turnover of ₹ 24 lacs in A.Y. 2003-04 in place of ₹ 47,59,636/-. She further considered the appellant's own case decided by the learned CIT(A) in A.Y. 2009-10 vide order dated 20/1/2012 ITA 69/10-11 wherein G.P. rate was applied @ 16% on recorded and unrecorded sales. She further observed that it is a general accepted principle that the G.P. rate increases with decline in turnover. Since the turnover is held to be of ₹ 24 lacs, the G.P. is estimated @ 19% on total turnover. Thus, the learned CIT(A) confirmed G.P. rate @ 19% on total recorded and unrecorded sales of ₹ 24 lacs and gave the set off gross profit declared at ₹ 1,41,239/- against the estimated profit of ₹ 4,56,000/-. The net addition of ₹ 3,14,761/- was confirmed by her in A.Y. 2003-04. 3.1 In A.Y. 2004-05, similar decision has been taken on proceeding U/s 153A and rejection of books of account U/s 145(3) of the Act on the basis of same argument given by the learned CIT(A) in A.Y. 2003-04, she estimated the total sale turnover on the basis of ratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales of ₹ 26.27 lacs unaccounted sales of ₹ 15.58 lacs was only found. Therefore the estimation of the unaccounted sales made by the AO is de hores any material and such estimation is not envisaged in assessment u/s 153A. The AO has applied higher g.p. rate by referring to the case of M/s Rajan Fire Works and Emporium. The application of the g.p. rate on this basis is not justified for the following reasons:- (i) The AO has not provided the financial data of M/s Rajan Fire Works and Emporium. In assessment proceedings, the result of this firm was not confronted to the assessee. (ii) The g.p. rate of this concern is not comparable with the assessee for the following reasons:- - Rajan Fire Works and Emporium is a manufacturer cum wholesaler in this business while assessee is wholesaler only. - Rajan Fire Works and Emporium is well established entity in this business since 35 years while assessee started its business from 1998. - The size of business of this firm is much larger than that of assessee. (iii) The comparative position of the gross profit rate declared by the assessee as per books of account are as under:- Assessment Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which such activities are not indulged in. Thus looking at the entirety of statement, seized material, there exist enough evidence admitted by the assessee himself; establishing that material was found to issue notices u/s 153A for all the six assessment years. This statutory process has been diligently followed by ld. AO and confirmed by ld. CIT(A). Learned CIT(A) was more than reasonable in estimating the turnover and G.P. rate and allowing part relief to assessee, therefore, he prayed to confirm the order of the learned CIT(A). 6. We have heard the rival contentions of both the parties and perused the material on record. The case law of Jai Steel India Vs. ACIT (supra) relied upon by the learned counsel for the assessee on 153A proceeding is not squarely applicable as the Hon'ble Rajasthan High Court has decided in this case the issue of any whether deduction can be claimed U/s 153A of the Act or not. As mentioned by the learned CIT(A) in her order that the assessment was completed U/s 143(1) of the Act, which has been held by the Hon'ble Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (supra) that the proceeding completed U/s 143(1)(a) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,69,727/- 2004-05 13.23% 17.25% 18% 73,18,452/- 54,88,839/- 2005-06 11.04% 17.50% 17% 92,36,392/- 69,29,294/- 2006-07 12.26% 17.75% 17% 41,86,314/- 41,86,314/- The learned Assessing Officer applied comparable case of M/s Rajan Fireworks and Emporium Prop. M/s Sunder Dass Hasani HUF, who is wholesalers/retailers of fireworks, who has shown G.P. rate ranging G.P. from 17% to 18%. The learned AR argued that the case of M/s Rajan Fireworks and Emporium Prop. M/s Sunder Dass Hasani HUF is not a comparable case hence distinguished on various facts and figures and nature of trading activity in quantum and experience. The assessee has shown G.P. in 2009-10 @ 14.99% on recorded sales of ₹ 21,57,817/-, therefore, we apply G.P. rate in A.Y. 2003-04 @ 13%, in A.Y. 2004-05 @ 14%, in A.Y. 2005-06 @ 13% and in A.Y. 2006-07 @ 13.5% in the interest of justice. The Assessing Officer is di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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