TaxTMI 
TaxTMI 
2015 (1) TMI 598
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....der dated 12.11.2010 without affording adequate opportunity of being heard to the appellant. 2. That the CIT(Appeals) erred on facts and in law in upholding the trading addition of Rs. 35,40,410/- made by the assessing officer by applying average gross profit rate of 4.90%. 3. That the CIT(A) erred on facts and in law in upholding the action of the assessing officer in rejecting the books of accounts of the appellant under section 145(3) of the Income Tax Act, 1961 ("the Act"). 3.1 That the CIT(Appeals) erred on facts and in law in holding that the appellant failed to furnish item-wise trading results and quantitative details of opening and closing stock of timber without appreciating that having regard to the nature of the business it was not possible / feasible to maintain such details. 3.2 That the CIT (Appeals) erred on facts and in law in holding that the appellant did not maintain proper books of account and that the turnover was not properly worked out. 4. That the CIT(Appeals) erred on facts and in law in upholding the action of the assessing officer in estimating gross profit rate of 4.90%, relying upon operating results of other entities / assessee's, witho....
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.... transaction in the books of account the assesee was required to explain how it would be able to authenticate the trading results from the books of account so maintained, which were defective. He show caused as to why these books of account may not be rejected as these were not reflecting the proper trading results and also required the assessee to explain why the gross profit rate 4.90% i.e on average basis should not be applied. The average gross profit rate was worked out on the basis of GP rate which was prevailing in the line of business and adopted by the different parties for the different asstt. Years of similar nature of business of timber for the last four years which were as under :- Name of assessee Asstt. year % gross profit Jai Parkash M/s. Narwana Timber Store, Karnal 2004-05 6.00% Jai Parkash M/s. Narwana Timber Store, Karnal 2005-06 4.34% Neeraj Jain Prop. Jagdama Timber Store, Karnal 2006-07 5.66% Sat Paul & Sons, M/s. Kaithal Timber Store, Karnal 2007-08 3.53% Total 19.53% Average Rate 19.53/4= 4.90% 5. The assesee in its reply inter alia submitted as under :- "3. The assessee is in the business of import and wholes....
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....eliable. Accordingly he rejected the same . In support of his conclusion he relied on the decisions i.e. CIT vs. McMillan & Co. (1958) 33 ITR 182 (SC), S.N. Namasivayam Chettiar v. CIT (1960) 38 ITR 579 (SC) wherein Hon'ble Supreme Court has held that keeping of a stock register is of great importance because that is a means of verifying the assessee's accounts by having a quantitative tally; if after taking into account all the materials including the want of a stock register, it is found that from the method of accounting the correct profits of the business are not deductible, the operation of section 145 (3) of the Act would be attracted. M/s. Kachhwala, Gems Jaipur vs. Joint Commissioner of Income-Tax, Jaipur reported in 2006 TIOL-181-SC-IT Appeal (Civil) 5809 of 2006 7. Ld. CIT(A) dismissed the asseseee's appeal interalia observing as under :- 1.08. Further to appreciate the issue, the facts in brief are that the appellant is engaged in the trading of timber. The timber was imported firm abroad. The rates of purchase varied from quality to quality which was specified on the purchase bills itself. The quality of timber was, however, not specified on the sale bills thou....
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....981 Tax 63 (1)(Del), Veeriah Reddiar v. CIT : 38 ITR 152 (Ker.), Bhagwati Emporium v. ITO : (1995) 80 Taxman 227 (Ahd.), Kabir Leathers v. Addl. CIT : (2009) 27 SOT 498 (Delhi), CIT v. Poonam Rani : 326 ITR 223 (Del.), Asoke Refractories (P) Limited : 279 ITR 457 (Cal.), Pandit Bros v. CIT 26 ITR 159 (P & H), M. Durai Raj v. CIT, Ernakulam 83 ITR 484 (Ker.), Jhandu Mal Tara Chand Rice Rills v. CIT (1969) 73 ITR 192 (P & H), Axia Engg. Co. v. ITO : 56 ITD 335 (Chd), Ganesh Foundry v. ITO (2000) 67 TTJ (Jd) 434, ITO v. Oswal Emporium (1989) 30 ITD 241 (Del), Delhi Securities Printers v. DCIT : 2007 15 SOT 353 (Del.). 9. In the alternative Ld. Counsel submitted that the net profit rate has been determined at a very high rate and the same should be reduced. In this regard Ld. Counsel relied on the Tribunal's decisions in the case Suresh Jindal Prop. Vs. ITO in ITA No. 3590/Del/2011 and Income Tax Officer vs. Suresh Jindal Prop. In ITA No. 3542/Del/2011. Ld. DR relied on the orders of the authorities below . 10. We have duly considered the rival contentions and gone through the record carefully. The modus operandi of assessee's business is that it imports the timber from Singapore....
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....l. In all these cases a finding was recorded that it was impracticable, keeping in view the nature of business, to maintain the stock register. We may refer to the decision of Hon'ble Delhi High Court in the case of Jas Jack Elegance Exports (supra). In this case assessee firm was engaged in the business of manufacturing and export of readymade garments. Hon'ble High Court upheld the findings of Tribunal and CIT(A) in observing that maintaining of stock register was not feasible considering the nature of the business being run by the asseseee, engaged in the business of manufacturing readymade garments by purchasing fabric which was then subjected to embroidery, dying and finishing and the converted into readymade garments by stitching. We do not find any such impractibility. It is pertinent to note that AO has not rejected the books solely on account of non maintenance of stock register but also because the AO was not satisfied about the correctness and completeness of the accounts of the assessee also because of the relevant details not being mentioned in the sales invoices though in the purchase invoices all such details were available. Therefore, the AO rightly rejected the ass....
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....ame facts, using the same comparables for the same assessment year, in the case of individual, engaged in the same nature of business, the additions were made on which partial relief was given by the CIT(A), sustaining the G.P. rate of 4%. In the case of Shri Krishan Kumar (supra), the ITAT in paras 8 to 11 of its order has observed as under: 8. We have carefully considered the arguments of both the sides and perused the material placed before us. The Assessing Officer has given four comparable cases on page 6 of the assessment order. For ready reference, the same is reproduced below:- Name of Assessee Asstt. Year % Gross Profit Jai Parkash M/s Narwana Timber Store, 2004- 05 6.00% Karnal Jai Parkash M/s Narwana Timber Store, Karnal 2005- 06 4.34% Neeraj Jain Prop. Jagdama Timber Store, Karnal 2006- 07 5.66% Sat Paul & Sons, M/s Kaithal Timber Store, Karnal 2007- 08 3.53% Total 19.53% Average Rate 19.53/4 = 4.90% 9. At page 7 of the assessment order, the Assessing Officer has given the comparative position of sale and gross profit in the case of the assessee. The same is also reproduced herein below for ready reference:- P....
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....dered as comparable and holding that thought average rate of g.p. in the case of assessee being 4.9% still, the g.p. rate of 3.61% earned in the case of Krishan Kumar is justifiable. The ratio of the judgment on the facts is applicable and proposition that assessee's g.p. may vary year to year and books of account should not have been rejected on hypothecated grounds is also applicable. It has not been disputed that no other defects were found in assessee's books except A.O's expectation of a particular way of identification of cut timber with the individual purchase which in our considered view is rather difficult to maintain. In the circumstances, we uphold the g.p. rate declared by the assessee. 4.2. Relying on the above two decisions, the contention is that since the G.P. rate declared by the assessee for same year is better than earlier, the same should be accepted. 4.3. However, the contention of the Department is that in similar line of business, the G.P. rate, as accepted by the Tribunal, is in the range of 3.61% to 3.63% and, therefore, the same should be accepted. We are inclined to accept the contention of the ld. DR on this count because when G.P. rate is applied ....