Commissioner Of Income Tax, Jaipur-Ii, Jaipur v. M/S Vijay Industries

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 186 / 2008 Commissioner of Income Tax, Jaipur-II, Jaipur. ----Appellant Versus M/s Vijay Industries 230, Sindhi Colony, Rajapark, Jaipur. ----Respondent _____________________________________________________ For Appellant(s) : Mr. R.B. Mathur with Mr. K.D. MathurFor Respondent(s) : Mr. Mahendra Gargieya with Ms. Manisha Surana & Mr. Fazlur Rahman Khan _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHURJudgment Per Hon’ble Jhaveri, J. 22/05/2017 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 modifying the order ofthe CIT(A). 2.This Court while admitting the appeal on 21.10.2008 has framed the following substantial questions of law: “(i)Whetherinthefactsandcircumstances of the case the ITAT has notacted perversely and illegally in holding thatthe rejection of books of accounts by AOwhich was upheld by the CIT(A) was not inaccordance with law and deleting the entiretrading additions?(ii)Whetherinthefactsandcircumstances of the case the ITAT has notacted perversely and illegally and wasjustified in holding the profit accured onimport entitlement as income derived from an industrial undertaking? (iii)Whetherinthefactsandcircumstances of the case the ITAT has notacted perversely and illegally in directing tocalculate the deduction of both 80HHC ontotal income?” 3.1On the first issue, Mr. Mathur has taken us to the order ofthe Tribunal wherein in para 11 the Tribunal has held as under: “11. We are convinced with the argumentsmade by the Ld. AR that there was increaseof the prices of the copper during theimpugned year which is a major part ofdirect cost whereas there has not beencorresponding increase in the selling prices.There was an increase in the cost of exportexpenditure. The main reason for decreasein gross profit rate was duty difference ofRs.98,78,483/- which is the direct costwhich has been born by the assessee duringthe impugned year. The AO has relied uponthe addition made in the case of M/s.Emkay Exports, sister concerned but theadditions so made have been deleted by theLd. CIT(A) and by the Tribunal in ITANo.250/JP/05 and 275/JP/05 of event date.Therefore, in such circumstances and factsof the case, no trading addition is called forby any of the authorities below. Therefore,the addition made by the AO are directed tobe deleted on this Account. This GroundNo.1.1 and 1.2 of the assessee are allowedand solitary ground of the Revenue isdismissed.” 3.2Mr. Mathur has contended that the Tribunal has committedserious error in setting aside the order of the Assessing Officer aswell as the CIT(A). 3.3In view of the fact that both the authorities have givenreasons for assessing the value of 27.3% whereas the CIT(A) hasreduced it to 22.5%. However, the Tribunal while nullifying thegross profit has reduced it to 22%. In that view of the matter, therefore, he contended that the order of the Tribunal is requiredto be reversed and in view taken by the Assessing Officer ought tohave been accepted. 3.4In our considered opinion, the Tribunal has relied upon thedecision of earlier appeal where the addition was made of sisterconcerned. No doubt that appeal was dismissed as being low taxappeal. In the reduction of Gross Profit rate by 0.5% will notmake any difference but the reasoning adopted by the Tribunal iscorrect. 4.Mr. Mathur contends that the second issue is squarelycovered by the decision of Supreme Court in the case of Liberty therefore, he contended that the order of the Tribunal is requiredto be reversed and in view taken by the Assessing Officer ought tohave been accepted. 3.4In our considered opinion, the Tribunal has relied upon thedecision of earlier appeal where the addition was made of sisterconcerned. No doubt that appeal was dismissed as being low taxappeal. In the reduction of Gross Profit rate by 0.5% will notmake any difference but the reasoning adopted by the Tribunal iscorrect. 4.Mr. Mathur contends that the second issue is squarelycovered by the decision of Supreme Court in the case of Liberty India vs. Commissioner of Income Tax [2009] 317 ITR 218(SC). However, Mr. Gargieya has relied on the decision ofSupreme Court in the case of B. Desraj Vs. Commissioner ofIncome Tax (2008) 301 ITR 0439 and Commissioner ofIncome Tax vs. Meghalaya Steels Ltd. [2016] 383 ITR 0217 (SC). 4.1In our considered opinion, in view of the decision of LibertyIndia vs. Commissioner of Income Tax (supra) the issue isrequired to be answered in favour of the department and againstthe assessee. 4.2In so far as the issue No.(iii) is concerned, Mr. Gargieya hascontended that the issue is squarely covered by the decision ofthis Court in the case of Commissioner of Income Tax vs. M/s Modern Threads (I) Ltd. Jaipur in DB Income Tax AppealNo.337/2008, decided on 08.02.2017. This Court in theaforesaid case in para 8 & 9 has observed as under: “8. In view of the above, it is well settledposition that the earlier view which wasconfirmed by the Hon’ble Supreme Court isrequired to be followed since other DivisionBench has not followed the earlierdecisions. 9. In that view of the matter, the issue isanswered in favour of the assessee andagainst the department subject to the view which is also referred to Larger Bench asper the order of the Hon’ble Supreme Courtreported in [2016] 380 ITR 1 (SC).Therefore, parties will be abide by thedecision of the Hon’ble Supreme Courtwhich is subject to applicability of theprovision for the relevant assessment year.The appeal stands disposed off.” 5.In that view of the matter, the issue No.(iii) is answered infavour of the department. 5.1Therefore, the issue No.(i) is answered in favour of theassessee, issue No.(ii) is answered in favour of the departmentand issue No.(iii) is answered in favour of the assessee subject tothe decision of SLP. 6.The appeal stands disposed of accordingly. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. Asheesh Kr. Yadav/31