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Commissioner of Income Tax Versus Vaibhav Gems Ltd.

2014 (8) TMI 1118 - RAJASTHAN HIGH COURT

Invoking provisions of Sec. 145(3) - trading addition - ITAT has come to a conclusion that in the immediate past assessment year, the ITAT itself had applied GP rate of 2.60% whereas in the present year under consideration, the GP rate has been declared as 4.85% - Held that:- ITAT, after analyzing the material on record and on appreciation of evidence, deleted the addition. The Officer, appearing on behalf of the revenue was unable to contend as to what are the distinguishing features in between .....

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sions of Sec. 145(3) or making/non-making of trading addition is essentially a finding of fact and the Hon'ble Apex Court as well as this Court, in similar cases, have come to the conclusion that if the addition/deletion is on the basis of appreciation of evidence, then no question of law, much less substantial question of law, can be said to be involved in a case like this. - DB Income Tax Appeal No. 12/2014 - Dated:- 21-8-2014 - Ajay Rastogi And J. K. Ranka, JJ. JUDGMENT J. K. Ranka, J. 1. Ins .....

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ssee is an exporter of cut precious and semiprecious stones (gems) and studded gold jewellery. During the previous year, relevant to the year under appeal, the respondent-assessee declared turnover in Domestic Tariff Area (for short, DTA)) unit of ₹ 35,07,51,711/- declaring gross profit of ₹ 17027739 with GP rate of 4.85%. In the EOU the turnover disclosed was ₹ 2,52,61,24,396/-, declaring gross profit of ₹ 34,11,57,119/- and GP rate of 13.51%. The Assessing Officer (for .....

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ails of quality-wise of rough or gem stones or diamonds etc. are not maintained. Accordingly, a show cause notice was issued as to why the provisions of Sec.145(3) be not invoked and addition be not made to the trading results as the results were not fair and reasonable. It appears that the respondent-assessee replied contending therein that the trading results declared in the past years have been accepted by the department and the GP rate depends on combination of sales of different items i.e. .....

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d details as the same accounts are being maintained regularly and have been found to be proper in the past years. 3. The AO, while passing the assessment order, came to the conclusion that true profit of the firm cannot be deduced on the basis of non-maintenance of closing stock details as desired by the department and accordingly in view of CBDT Instruction No.02/2008 dt. 22/02/2008, the AO applied NP rate of 6% on its turnover in the DTA unit where the GP rate was shown as 4.85% and accordingl .....

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he EOU account, the GP rate stands accepted as was declared and the order of the CIT(A) became final. In so far as the DTA account is concerned, it is a finding of fact that the addition, which was made in the immediately preceding year i.e. assessment year 2007-08, is concerned, the ITAT upheld a GP rate of 2.60% and since the GP rate in the DTA account this year is substantially better at 4.85%, therefore, on this premise, the CIT(A) deleted the addition and he justified the deletion by also a .....

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rate, in so far as the current year is concerned, is better than the immediate past assessment year where even the ITAT accepted the rate of 2.60% and accordingly the addition was deleted. It was further observed that the CBDT Instruction No. 02/2008 dt. 22/02/2008 is applicable for the financial year 2008-09 relevant to the assessment year 2009-10 and not for the year under appeal. 6. Mr. Y.S. Meena, DCIT, appearing for the appellant-revenue, contended that various defects were noticed and the .....

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once the provisions of Sec. 145(3) are invoked, it necessarily means that the results shown by the respondent-assessee are not fair and reasonable and true profit cannot be deduced out of such accounts. He further contended that merely because better GP rate has been shown as compared to the preceding year/years, it cannot be said that no further addition can be made. He further contended that the CBDT Instruction No. 02/2008 dt. 22/02/2008 was applicable and was retrospective in nature and ther .....

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articularly, non-maintenance of qualitywise/quantity-wise details of opening stock, closing stock and day to day manufacturing activities as also records having been maintained in the manner, not in accordance with the accounting systems, therefore, provisions of Sec. 145(3) have been invoked and affirmed and thus books have been held to be rejected. 9. In the present case, what is required to be seen is that once the provisions of Sec. 145(3) have been invoked, what should be the fair profits. .....

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