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The Income Tax Officer, Ward 7 (3) , Jaipur Versus Shri Parmanand Sharma

2016 (7) TMI 263 - ITAT JAIPUR

AO rejected the books of accounts of the assessee and applied GP @ 2.39% taking average of 2 earlier years on gross turnover - CIT(A) reduced GP rate reduced from 2.39% to 1.50% - Held that:- Finding of fact is not controverted by the revenue by placing any contrary material on record. The revenue has not disputed the fact that in the year under appeal there is increase in the sales and the margin as stated by the assessee is not rebutted by the revenue by bringing any material which suggest tha .....

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tional High Court in the case of CIT vs. G.K. Contractor [2009 (1) TMI 840 - RAJASTHAN HIGH COURT ] - Held that:- The judgment as relied on by the ld. CIT (A) pertains to the business outstandings. From the paper book as filed, in Annexure-B to Form No. 3 CD, it is stated that the loan from M/s. B.K. Industries is of ₹ 2,50,000/-. However, in respect of M/s. Pooja Steels, ₹ 1,00,000/- also treated as loan. There is no material available on record suggesting that these amounts were tr .....

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is sustained - Decided against assessee - ITA No. 319/JP/2015 - Dated:- 3-6-2016 - SHRI KUL BHARAT, JM & SHRI T.R. MEENA, AM For The Revenue : Shri Raghuvir Singh Dugar (Addl.CIT) For The Assessee : Shri M.L.Borad (Advocate) ORDER PER SHRI KUL BHARAT, JM. This appeal by the Revenue is directed against the order of ld. CIT (Appeals)- 3, Jaipur dated 27.01.2014 pertaining to A.Y. 2011-12. The revenue has raised the following grounds of appeal :- (i) The ld.CIT (A) has upheld the rejection o .....

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creditors or market outstandings , and further no confirmations from these parties were produced. 2. Briefly stated the facts are that the case of the assessee was selected for scrutiny assessment and assessment under section 143(3) of the IT Act (hereinafter referred to as the Act) was framed thereby the AO rejected the books of accounts of the assessee and applied GP @ 2.39% taking average of two earlier years on gross turnover. Hence the AO made trading addition of ₹ 35,85,474/-. Furthe .....

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% in place of 2.39%. The ld. CIT (A) also deleted the addition made on account of cash credit of ₹ 3,50,000/-. 3. The revenue aggrieved by this order, is in appeal. The first ground is against reducing the trading addition from ₹ 35,85,474/- to ₹ 7,58,951/-. 3.1. The ld. Senior D/R submitted that ld. CIT (A) was not justified in reducing the gross profit rate. The ld. D/R submitted that ld. CIT (A) has upheld the rejection of books of account and failed to appreciate the fact t .....

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varies from year to year and is dependent upon various factors. The ld. Counsel submitted that in the age of tough competition the assessee as a business strategy, has reduced the margin which resulted into increase in the turnover. As the margins are decreased, natural consequence would be lesser profit ratio. Therefore, he submitted that the AO was not justified in adopting the gross profit at 2.39%. 3.3. We have heard rival contentions, perused the material on record and orders of authoritie .....

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against GP rate shown by the assessee at 1.26%. The AO s case is that the assessee is dealing in Iron sheets, MS Pipes etc. has not maintained quantitative and qualitative details in respect of different size, different thickness and different gaze of stock. As per AO the stock was maintained weight wise and not on the basis of different quality wise. The AO also noticed that the purchases were shown less by ₹ 69604/- as also that the assessee has not valued the stock at cost or market pri .....

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stock register on the basis of different sizes, different gazes etc. It is further stated that the books of accounts of the assessee are audited u/s 44AB of IT Act and the auditors have given quantitative details as required by clause 28( b) of Form No. 3 CD and no mistake is pointed out by the auditors. As regards the difference in purchases, it is stated that such difference was only 0.02% of the total purchases and being nominal may not be a basis for rejection of book of accounts. As regards .....

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re not correct and true income of the assessee was not possible from such books of accounts. As per the appellant simply absence of stock register of quality wise of stock may not be a basis for rejection of books of accounts unless certain falsity is detected in the books of accounts. Therefore the appellant disputed the rejection of the books of accounts. As regards estimation of profits, the appellant s contention is that the rate of gross profit dependent on many factors including market con .....

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ppellant also filed details in respect of sales and purchases on random basis which indicated that the GP rate during this F.Y. in different months varied between 0.78% to 1.66% and that the average rate of GP was 1.25%. It was accordingly claimed that the estimation of profit by applying higher GP rate was also not justified. On careful consideration of all relevant facts, it may be mentioned that the provisions of sec. 145(3) can be applied when the books of accounts maintained by the assessee .....

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heets etc. was not maintained, it may be mentioned that the assessee has maintained such stock register on weight wise and such procedural deficiency in itself did not indicated any incorrectness or incompleteness of the books of accounts. In fact even as per the accounting standard the assessee is not required to maintain such records. The statutory auditor has also not pointed out any inaccuracy in respect of quantitative details required in Form No. 3 CD. As regards the other objection of the .....

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ot disputed by the assessee and this fact indicated that the books of accounts are not correct and complete. Therefore provisions of sec. 145(3) were applicable in the case of the assessee. As regards the estimation of profits after rejection of books of accounts, it is a settled law that even after invoking the provisions of sec. 145(3), the AO is not empowered to assess the income at whatever figures he wants and the AO is supposed to make an honest estimation either based on the past history .....

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e increase in turnover/sales decline in GP rate is expected is also supported from the following decisions of Hon ble Jurisdictional ITAT Jodhpur relied upon by the appellant. i. ITO vs. Arun Kumar Gupta, 103 TTJ 134 (Jd) ii. Madan Lal vs. Income Tax Officer, 99 TTJ 538 (Jd) It is also fact that the assessee has reduced the profit margin during the assessment year under consideration to achieve the higher sales of the turnover and these facts were also before the AO. It is also fact that the app .....

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crores in the immediate preceding year as also the contention of the assessee that for increasing the sales GP rate was reduced can not be doubted or faulted. Keeping in view the totality of facts, it will be fair and reasonable to apply GP rate of 1.50% on the total turnover of ₹ 317586765/- and accordingly GP is determined at ₹ 4763801/- as against ₹ 4004850/-. The trading addition to the extent of ₹ 758951/- is confirmed. The appellant gets relief of ₹ 2826523/-. .....

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the ld. CIT (A) was not justified in reducing the rate of Gross Profit. The ground raised by the revenue is devoid of any merit, hence rejected. 4. Ground No. 2 is against deletion of addition of ₹ 3,50,000/- made by the AO on account of unexplained cash credits. 4.1. The ld. D/R submitted that the ld. CIT (A) was not justified in deleting the addition. The ld. D/R submitted that the judgment of the Hon ble Jurisdictional High Court rendered in the case of CIT vs. G.K. Contractor, 19 DTR .....

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