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2015 (5) TMI 82 - DELHI HIGH COURT

2015 (5) TMI 82 - DELHI HIGH COURT - [2015] 373 ITR 682 (Del) - Rejection of books of accounts - G.P. addition of 1% on uniform basis for AY 2002-2003 to 2007-2008 - Held that:- It is not disputed that the assessee's yield commensurate to the industrial GP disclosed by the assessee is comparable and satisfactory. In our considered view, when no palpable inconsistency in the books of account they cannot be rejected merely on the basis of assumption that assessee is not producing quantitative tall .....

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parable. Under these circumstances, it cannot be held that the assessee's book results are unsatisfactory. Merely because a search is carried on it is not automatically meant that assessee is indulging in some nefarious activities. This is the burden of the revenue to prove in this behalf with material and cogent reasons. The ad hoc disallowance, rejection of books and taking support of this fact which we are not able to subscribe the ad hoc addition of 1% of sales is again without any basis wha .....

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bham Rastogi, Advocates. ORDER S. Ravindra Bhat, J. (Open Court) 1. Issue notice. Mr. Salil Kapoor, Advocate accepts notice on behalf of assessee. 2. These appeals are arise out of the common orders dated 21st July, 2014 passed by the Income Tax Appellate Tribunal (ITAT) in ITA Nos. 3688/del./2012, 3689/del./2012, 3690/del./2012, 3691/del./ 2012 and 3867/del./2012. 3. The question in all these appeals is the acceptance of the assessee s appeals with respect to rejection of books of accounts and .....

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dated 10th May, 2011. 5. The AO after considering the materials on record made addition to the income for the relevant assessment years to the tune of ₹ 19,28,42,391/-. This included 1% of the sale of rice shown in books of accounts for each of the assessment years in question. The relative amounts, to the extent of 1% for various years were added on the ground that the quality wise day to day stock of the rice traded by the assessee was not reflected. The additions made in respect of var .....

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, however, successfully appealed to the ITAT, which rejected the addition on this account. 7. Learned counsel for the Revenue urges that the ITAT fell into error in rejecting the submissions made with respect to the additions made by the AO. In this regard, it is submitted that assessee has not disclosed anywhere that the qualitative details at all relevant points of time are maintained in a stock register etc. Counsel emphasises the fact that the AO had found that such qualitative details were .....

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ed that in the previous assessment years 1999-2000 and 2001-2002, the revenue had accepted the books of accounts as existed as well as the GP rates based on the rice yielding rates disclosed by the assessee. It is submitted that in fact a comparison of the GP rates accepted by the Revenue for previous years, would show that the significantly higher GP rates were disclosed in the concerned assessment years and this itself ought to have prevented the AO from making any alteration. Countering the s .....

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iness, which the AO had considered in the present case, was with regard to procurement and processing of rice. There is no controversy with respect to the other products, which the assessee had traded or engaged with as far as these cases are concerned. The yield rates, as noticed by ITAT for various years, were 61.90% for AY 2002-03, 61.61 % for AY 2003-04, 64.67% for AY 2004-05, 65.11% for AY 2005-06, 68.88% for AY 2006-07, 64.94% for AY 2007-08 and 65.02% for AY 2008-09. The ITAT also noticed .....

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similar, if not identical facts. Like in the present case, the assessees in those cases also maintained regular books of accounts, which were duly audited. All statutory registers, mandatory local laws too were kept on regular basis. The sales and purchases documents were regular. In the present case, too, neither AO nor the DRP was able to find fault with these documents. Further, for three assessment years prior to the block assessment of the years concerned, the scrutiny assessment orders acc .....

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ich is extracted below:- We have heard the rival contentions and perused the material available on record on this issue. The assessee's books of accounts are regularly maintained, audited and no discrepancies whatsoever have been indicated by the Assessing Officer in any material terms. The alleged inconsistency is to the effect that assessee says that no day-to-day quantitative stock tally was maintained. However, certain papers found indicate that assessee was maintaining regular stock det .....

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d at that assessee is not deliberately showing the quantitative details. This is an utter disregard of the fact that all the books of accounts were found and seized and there is no quantitative tally in the account books. Therefore, the conclusion of the Assessing Officer in this behalf to reject the books is purely based on surmises and conjectures. Based on the surmises and conjectures, ad hoc addition of 1% of sales have been made which also is again a fictional work of guesswork and conjectu .....

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producing quantitative tally. Had there been any quantitative tally, assessee has produced stock register but in the absence of day-to-day stock tally at various places of business by itself cannot be a conclusion to give that assessee is shine away from producing the day-to-day tally. In view of these facts, we see no justification in rejection of books of accounts. 9.2 The assessee has demonstrated that its yield of rice, bran and faak is as per the industry norm and the GP rate in all the yea .....

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