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JAYTICK INTERMEDIATES P. LTD Versus THE ACIT

2016 (7) TMI 966 - GUJARAT HIGH COURT

Rejection of books of accounts - Held that:- It will not be out of place to mention here that the assessee is a manufacturing unit and it has to pay the excise duty. It is the specific contention of the assessee that the books of accounts maintained by it are tallying and the excise duty is paid on that basis. The stock register is not tallying with the other books of account only because some of the items were not deleted from the stock register. Taking into account the decision of this Court, .....

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that:- When the Tribunal found that there was neither concealment of income on the part of the assessee nor there was furnishing of inaccurate particulars, but the disallowance was made only on the ground of estimation, no case was made out for levying of penalty and therefore the Tribunal concurred with the findings of the CIT (Appeals). Tribunal has erred in confirming the penalty under section 271 (1) (c) of the Act - Decided in favour of assessee - TAX APPEAL NO. 1196 of 2007 With TAX APPEAL .....

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and confirmed the order of the Assessing Officer. 2. At the time of admitting this Appeal, following question of law was framed:- (i) Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in upholding the action of the Respondent in rejecting the books of accounts of the Assessee under Section 145 (2) of the Act and further erred in confirming the part of the addition on estimated basis? 3. Mr.B.S.Soparkar, learned advocate for the appellant sub .....

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d as under:- 4. I have considered the facts of the case, Section 145 (2) is applicable when no proper accounting method is followed or where the books of account are neither complete nor correct. In this case, the change of method of accounting on account of modvat cannot be a reason for rejecting the books of account especially there is nothing to hold that the change in accounting method of modvat is a malafide act on the part of the appellant. Further, the arguments raised by the appellant in .....

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-tax Act because the said provision is not applicable to this case. Therefore on this issue, the argument of the appellant is accepted to the case of the appellant. The first ground of appeal is therefore allowed. 4. He further contended that the CIT (Appeals) rightly allowed the appeal filed by the assessee. However, the Tribunal has reversed the finding of CIT (Appeals) in the appeal filed before it and observe as under:- 6. We have heard the rival contentions of both the parties. Looking to t .....

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ord of all the raw materials and the stock register. The assessee has also valued the raw material at average rate and annual consumption of respective raw materials and this year the assessee has changed the method of valuation. The assessee has also not followed any method as regard to finished goods. The Assessing Officer has also observed that the assessee has made pencil entries in the books and the assessee is not keeping and maintaining vouchers. Therefore, we are of the view that the Ass .....

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his count to ₹ 6,00,000 (Rupees Six Lakhs). 5. He submitted that the Tribunal has committed an error in passing the impugned order. In support of his submissions, he has relied upon the decision of this Court in Commissioner of Income-tax-IV v. Symphony Comfort Systems Ltd. reported in [2013] 35 Taxmann.com 533 (Gujarat), and a decision of Delhi High Court in Commissioner of Incometax- XII v. Smt.Poonam Rani reported in [2010] 192 Taxman 167 (Delhi). 6. Mr.Parikh, learned counsel for the r .....

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l fall in G.P. Rate. The reasons ascribed by the assessee are not satisfactory and hence I reject the same. Further, the reply to my various notice including last and final show cause notice given by the assessee are also not satisfactory. The assessee failed to substantiate with vouchers and books as required in my aforesaid notice u/s. 282 (I) r.w.s. 143 (3) of the I.T.Act. I also reject submission made by Tax Auditors vide his letter Dtd. 21-1-98, who failed to attend personally but submitted .....

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on here that the assessee is a manufacturing unit and it has to pay the excise duty. It is the specific contention of the assessee that the books of accounts maintained by it are tallying and the excise duty is paid on that basis. The stock register is not tallying with the other books of account only because some of the items were not deleted from the stock register. Taking into account the decision of this Court, not maintaining the day-today stock register is not a ground to reject the books .....

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l submissions, we do not find any justification to interfere with the order of the learned CIT(A) in deleting the addition. The AO merely gone by the fact that there was a fall in the gross profit rate as compared to the preceding assessment year which itself is no ground to reject the books of accounts of the assessee. No specific defect in the maintenance of the books of accounts by the assessee has been pointed out AO. The AO further noted that day to day stock and inward and outward register .....

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absence of any specific defect pointed out in the books of accounts and the records maintained on computer, the AO was not justified in rejecting the books results, or to enhance the gross profit rate. Accordingly, there is no merit in this ground of appeal of the revenue. The same is accordingly, dismissed. From the above, it can be seen that the entire issue is based on appreciation of evidence on record. No question of law, therefore, arises particularly when the Commissioner (Appeals) as wel .....

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O merely made comparative study of the expenses for the year under consideration with the preceding assessment year and found that expenses incurred in the preceding assessment year were 2.89% on turnover but in the assessment year under appeal it was 4.78% on the turnover. The expenses were, therefore, found excessive without pointing out as to which of the expenses incurred by the assessee was not connected with the business activity of the assessee. The AO has not pointed out which of the exp .....

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e Tribunal concurrently held that on the basis of the evidence, addition as made by the Assessing Officer was not justified, we are not inclined to interfere. 9. In Commissioner of Income-tax-XII v. Smt.Poonam Rani (supra), it is observed as under:- 10. During the course of arguments before us, it was submitted by the learned counsel for the appellant that the assessee was not maintaining the Daily Stock Register. We, however, find no such finding in the assessment order. On the other hand, we n .....

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e. Hence, even if no such register was being maintained by the assessee as is contended by the learned counsel for the appellant, that by itself does not lead to inference that it was not possible to deduce the true income of the assessee from the accounts maintained by her, nor the accounts can be said to be defective or incomplete for this reason alone. If stock register is not maintained by the assessee that may put the Assessing Officer on guard against the falsity of the return made by the .....

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unts more carefully and to look for some material which could lead to the conclusion that the accounts maintained by the assessee were not correct. But, a low rate of gross profit, in the absence of any material pointing towards falsehood of the accounts books, cannot by itself be a ground to reject the account books under Section 145(3) of the Act. 10. In view of above observations and considering the facts of the case, we are of the opinion that the view taken by CIT (Appeals) is required to b .....

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o.1782 of 2010 is concerned, the same is preferred against the order of penalty imposed by the Tribunal by the same impugned order. 12. At the time of hearing of this appeal, Ms.Shah, learned counsel for the appellant has relied upon the decision reported in Commissioner of Income-tax II v. Mamta Machinery Pvt. Ltd. reported in 252 ITR 417 (Gujarat), wherein it is observed as under:- For the assessment year 2004-05, the Assessing Officer after disallowing the expenditure under section 14A of the .....

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