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2016 (4) TMI 658 - ITAT JAIPUR

2016 (4) TMI 658 - ITAT JAIPUR - TMI - Estimation of income - G.P. rate determination - basis of which the AO has rejected the books of account was on account of the assessee’s failure to produce the confirmations of the accounts from the purchasers of the goods from the assessee - Held that:- Rejection of books of account by the AO was without any rhyme and reason or the justification. In our view, once the assessee was maintaining books of account, purchases and sales were duly vouched, there .....

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bring on record the basis of arriving at the GP rate of 8.54% which is contrary to the GP shown by the assessee to the extent of 4.99%. Since we have held that the books of accounts were duly maintained by the assessee, therefore, the estimation brought on record by the AO and confirmed by ld. CIT (A) is without any basis. Accordingly the addition made by the authorities below is hereby directed to be deleted.

As books of accounts were duly maintained by the assessee and all the sale .....

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Smt. Neena Jeph (JCIT) ORDER PER SHRI LALIET KUMAR, J.M. The present appeal filed by the assessee is arising from the order dated 24.12.2013 passed by the learned CIT (A)-I, Jaipur for the A.Y. 2009-10. The assessee has raised the following grounds of appeal :- 1. That on law and fact the ld. CIT (A) has grossly erred in sustaining the order of the ld. AO that books of accounts were rejected as per law. The books of accounts have been rejected without given any specific reason in maintenance of .....

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The appellant therefore request to delete this addition. 3. That on facts and circumstances of the case and in law the ld. CIT (A) has failed to appreciate the very important fact that assessee has changed the line of business production and turnover has increased from 1.29 crore to 6.04 crore. The rate of GP as estimated by the ld. CIT (A) on the basis of past years performance is totally illegal and addition deserves to be quashed. 4. That the ld. CIT (A) has grossly erred in directing that e .....

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n on 29.09.2009 declaring total income of ₹ 3,90,444/- for the assessment year 2009-10. The case of the assessee was scrutinized under section 143(2) of the I.T. Act. During assessment proceedings, the AO noticed that the assessee has shown the gross profit rate @ 4.99% declaring gross profit of ₹ 30,14,582/- on the turnover of ₹ 6,04,07,173/- which is very low in comparison to preceding three assessment years as under :- Asstt. Year Turnover Gross Profit Gross Profit Rate 2006 .....

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ty cloths). The assessee has submitted that major sales were made to the parties of Anantpur, Andhra Pradesh and the sale proceeds were deposited by these parties in cash directly in the bank account opened by the assessee at Axis Bank, Anantpur (A.P) followed by telephonic information to the assessee and subsequently the amounts were transferred to the assessee s bank account at Jaipur. The entire direct deposits in bank account at Anantpur (AP) are duly incorporated in regular books of account .....

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d) M/s. Y. Sharif e) M/s. Yaman Textile Since no reply was received from these parties, the AO vide order sheet entry dated 14.12.2011 asked the assessee to furnish the confirmations from these parties. The ld. Counsel for the assessee vide his letter dated 19.12.2011 submitted as under :- Copy of account of M/s. P. Nizamuddin, M. Dinesh, Deepak Kumar Jeevat Ram, Y. Sharif and Yaman Textile has not been received by the assessee, hence unable to produce before you. On previous hearing, we have al .....

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nce was made to the letters issued u/s 133(6) by the parties, it is the duty of the assessee to furnish the requisite details and the explanation furnished by the assessee is not acceptable. 2.1. The assessee has also been asked as to why provisions of section 145 should not invoked for non maintenance of stock register and for showing low GP rate in the year under consideration in comparison to preceding assessment years. In response, ld. Counsel for the assessee submitted as under :- 1. Assess .....

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ssessee sale has increased just double in comparison to 2008-09. 3. In asstt. Year 2009-10 the assessee has diverted his business fully from running cloth to kaftan only. The sale has increased subsequently but G.P. rate has reduced, since to achieve the sale target, G.P. rate is required to be reduced. Further due to competition in market G.P. rate has reduced. Hence for the above reason the G.P. rate has been reduced from 6.96% to 4.99%. On consideration of the submissions made by the ld. Coun .....

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n of ₹ 21,44,191/- to the total income of the assessee. 2.2. The AO has also made additions under the head : (1) Conveyance expenses ₹ 639/- out of expenses of ₹ 3279/-, (2) Deepawali expenses ₹ 3,100/- out of ₹ 30,301/-, (3) General expenses ₹ 3,600/- out of ₹ 35,412/-, (4) Telephone expenses ₹ 3,500/- out of ₹ 31,899/-, (5) Transport expenses ₹ 5,200/- out of ₹ 52,260/- and (6) Car expenses and depreciation ₹ 34,168/- out .....

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, directed the AO to apply Gross Profit @ 7% on the total sales disclosed by the assessee and compute the income accordingly. The observations made by the ld. CIT (A) in para 4 and 4.1 of his order are as under :- 4. I have considered facts of the case. It is seen that the books of account have been rejected by the AO on the ground that the appellant was not maintaining stock register, opening an closing stock were not available, the details regarding expenses incurred on printing, colour and ch .....

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however, failed to furnish any details regarding these deposits from these parties. On these facts the AO rejected the books of account of the appellant and estimated income by applying g.p. rate of 8.54%. it is further noted that the appellant has not been able to give any cogent reason regarding the defects noted by the AO in the books of account even at the appellate stage. The rejection of books of account made by the AO is, therefore, upheld. 4.1. So far as the application of g.p. rate is .....

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and the profit margin is to be reduced to increase the turnover of the appellant may be correct to some extent. However, since the appellant has not maintained proper books of account, the g.p. rate shown by him cannot be accepted. Considering the over all facts and circumstances of the case, it would be appropriate to apply g.p. rate of 7% on total sales disclosed by the appellant. The AO is directed to compute the gross profit, accordingly. 3.1. Regarding the issue of disallowances made by th .....

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se facts, the disallowance made by the AO is upheld. However, considering the facts and circumstances of the case these disallowances are limited to 5% of the expenses incurred under these heads. 4. Now the assessee is in appeal before us. 4.1. The ld. A/R for the assessee has stated that during the year under consideration the assessee has changed his business from production of running cloth to Kaftan (unstitched nighty cloths). During the year, the ld. A/R submitted that major sales of the as .....

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ssary evidences in support of sales at Anantpur by producing sale invoice, transport goods receipts, confirmation from transport agency for dispatch of goods, a complete list of purchasers along with invoice no. date of dispatch and complete address. All these documents were considered by the AO and no defect was pointed out. The ld. A/R further submitted that in compliance to AO s note sheet dated 13.10.2011 and 14.12.2011, the assessee repeatedly requested the purchasers at Anantpur (A.P) to f .....

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Balance Sheet, Profit & Loss account, Trading Account along with all the annexures, Audit Report and report in Form No. 3CD. The assessee has also produced books of accounts, namely Cash Book, Ledger, Journal, vouchers and bills of expenses and purchases, sale book and bank statements before the AO, as required by him. Concluding his argument, the ld. A/R submitted that the AO has found no defect in the accounts maintained by the assessee except that GP shown by the assessee was low in compa .....

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lso undisputed position that major sales of the assessee were made in Anantpur (A.P). It is also undisputed that purchases and sales of the goods were duly supported by vouchers and the purchases were made from registered dealers. The payments were made through account payee cheque. However, the sole allegation on the basis of which the AO has rejected the books of account was on account of the assessee s failure to produce the confirmations of the accounts from the purchasers of the goods from .....

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