C I T Jaipur Of Income Tax-Iii, Jaipur v. M/S Shree Ram Overseas, 1-A, Sanga Setu Road, Sanganer, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 155 / 2010 C I T Jaipur of Income Tax-III, Jaipur ----Appellant Versus M/S Shree Ram Overseas, 1-A, Sanga Setu Road, Sanganer, Jaipur ----Respondent Connected With D.B. Cross Objection Civil No. 79 / 2011 C I T Jaipur of Income Tax-III, Jaipur ----Petitioner Versus M/S Shree Ram Overseas, 1-A, Sanga Setu Road, Sanganer, Jaipur ----Respondent _____________________________________________________ For Appellant(s) : Mr. Daksh Pareek on behalf of Mr. Sameer Jain For Respondent(s) : Mr. Ashish Sharma _____________________________________________________ HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYASJudgment 20/09/2017 1.By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal haspartly allowed the appeal of the assessee and dismissed theappeal of the department. 2.This court while admitting the appeal framed the followingquestion of law:- 1. D. B. Income Tax Appeal No. 155/2010 “Whether estimation of gross profit can be madeignoring comparable gross profit of similar business andaddition be deleted without cogent reason?” 3.Counsel for the appellant has taken us to the order of AO, wherein it has been observed as under:- “I have considered the reply of the assessee, but thesame has found deficient. On one hand, the assessee claimsto be selling ‘general readymade garments of sanganeriprinting, while at the same time, the assessee claims thatthe high standard and non inflammable quality of colour andchemical as approved by abroad country is said.” As such,when cost of inputs is of high quality the productsmanufactured has to be a high fashion is possible but theassessee is also dealing in high fashion garments. Thus, thearguments of the assessee are to this extent unacceptable.Secondly, the assessee has claimed that is indulging insanganeri prints which is different from that used by AvonCreations. By the moot question is other exporters such asM/s. Rajaveer International, [GP 37%} and M/s. Ecotune(India) Pvt. Ltd {GP 45%} which use sanganeri prints intheir commodities are showing higher gross profits. Theseconcerns are also exporters. As such, there is everypossibility that exporters dealing in this segment are havinghigher profit margins. But, the assessee is given discount ofhis comparatively higher turnover, as such, GP of AvonCreations is being applied, which would be quite reasonablelooking to the overall circumstances in this trade.” 4.He has also gone us through the order of the CIT(A) andcontended that Tribunal while considering the gross profit ofassessee observed as under:- “We find that in the case of M/s SopraInternational, Sopra Overseas have also declared the G.P.rate @ 6% against the turnover or Rs. 2.40 crores, whichalso support the trading result declared by the assessee.Further we find that ld. CIT(A) though confirmed theaddition upto Rs. 25 lacks. However there was no basisprovided. Having considered the totality of the facts andcircumstances, we are of the view that the authoritieswere unjustified in making and partly sustaining thetrading addition without any sound basis and ignoring thelegal and factual position available on record. Still however, we feel that with a view to cover any possibleleakage, we hereby direct the AO to reduce the additionsustained by the CIT(A) to Rs. 5 lac, which shall meetboth the ends of justice.” 5.Last time when the matter was listed, the court directed thecounsel to produce G. P. rate of the assessee for the last fiveyears. Now the same has been produced and for ready referencewe reproduced the same as under:- however, we feel that with a view to cover any possibleleakage, we hereby direct the AO to reduce the additionsustained by the CIT(A) to Rs. 5 lac, which shall meetboth the ends of justice.” 5.Last time when the matter was listed, the court directed thecounsel to produce G. P. rate of the assessee for the last fiveyears. Now the same has been produced and for ready referencewe reproduced the same as under:- Assessment YearGross Profit RateTurn Over (Rs.)1998-1999 6.62% 3,11,56,000/-1999-20006.28% 4,42,21,376/-2000-016.50% 3,44,25,957/-2001-026.06% 2,66,32,819/-2002-036.48% 4,56,83,822/-2003-046.04% 8,84,68,805/- 6.Following our earlier decision, we are of the consideredopinion that last five years average G.P. is to be applied for thedecision of this case which comes to 6.25. 7.Therefore, we modify the order of the Tribunal and instead of5 lacs, we make addition considering the G. P. as 6.25 per cent. 8.The appeal is allowed to the aforesaid extent. 9. In view of decision of the appeal, the cross-objection maynot survive and the same stands dismissed. (VIJAY KUMAR VYAS)J. (K.S.JHAVERI)J. B.M.G./Gourav/161-162