Income Tax Appeal v. Inani Marbles (P) Ltd

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR -------------------------------------------------------- INCOME TAX APPEAL No. 39 of 2006 V/S INANI MARBLES (P) LTD Mr. KK BISSA, for the appellant / petitioner Mr. DINESH MEHTA, for the respondent Date of Order : 19.8.2008 HON'BLE SHRI N P GUPTA,J. HON'BLE SHRI KISHAN SWAROOP CHAUDHARI,J. ORDER ----- This appeal has been filed by the Revenue againstthe judgment of the learned Tribunal dated 16.5.2005deciding cross appeals of the assessee and the Revenuewhereby dismissing the appeal of the Revenue and partlyallowing the appeal of the assessee, and maintaining thegross profit rate to be applied at 2.51%. The appeal was admitted on 4.4.2006 by framing thefollowing substantial question of law:- “Whether acceptance of GP Rate by the Tribunal isnot sustainable in law because it is based onignoring the relevant material concerningassessee's own result of the previous year whichvitiates the finding?” We have heard learned counsel for the parties, and have gone through the impugned judgments. The AssessingOfficer rejected the books of accounts for valid reasons,and invoked provisions of Section 145 of the Income TaxAct, and made assessment by applying gross profit rate of15% on the sales disclosed by the assessee, and accordinglyadditions were made to the different result. This matterrelates to assessment year 2000-01. The Assessing Officerfor arriving at this conclusion considered that theassessee had disclosed gross profit rate of 2.30% ascompared to 2.51% in 1999-2000, and 16.04% in assessmentyear 1998-99. Against that order the assessee filed appeal,and the learned Commissioner upheld the invoking of Section145, and examined the aspect of gross profit rate to beapplied and considered that gross profit rate declared bythe assessee during the year is far less than the G.P.Rate(gross profit rate) shown by the other assessees who are inthe same line of business, and applied the G.P. Rate at14.5%. Against this the assessee filed appeal being AppealNo. 448 of 2004, and the Revenue also filed appeal beingAppeal No. 464 of 2004. The learned Tribunal negatived thecontention of the assessee about challenge to invoking theprovisions of Section 145. Then, the aspect of gross profitrate to be applied was considered in para-4 and it wasfound that the Assessing Officer considered certain casesas comparable applied G.P. Rate of 15% which was reduced inappeal to 14.5 % but then it was considered that theAssessing Officer does not get unfettered powers to apply any G.P.Rate of his choice, and he is supposed to be guidedeither by the G.P.Rate declared by the assessee or theprofit rates declared by the comparable cases. Then, it wasconsidered that in resorting to the application of GrossProfit rate on the basis of comparable cases, it isnecessary that those cases, should be, in fact, comparablewith reference to the volume of business, location andother host of factors, and it was found that the objectionsraised by the assessee were not however dealt with, andtherefore, in the absence of any change in the factualposition normally the profit rate declared and accepted inthe preceding year, constitutes a good basis for workingout the Gross Profit. Accordingly since in the earlier yearthe Gross Profit rate declared and accepted was 2.51%, thesame rate should be applied by the learned Tribunal forthis year also. Assailing the impugned order it is contended bythe learned counsel for the Revenue that in the year 1998-99 the Gross Profit rate at 16.04% was applied, andtherefore, there was no justification for the Tribunal toreduce the Gross Profit rate at 2.51%. Learned counsel for the assessee supported theimpugned order, and informed that the Gross Profit rate of2.51% as applied in the assessment year 1999-2000 wasapplied after scrutiny of return, and this Gross Profit Assailing the impugned order it is contended bythe learned counsel for the Revenue that in the year 1998-99 the Gross Profit rate at 16.04% was applied, andtherefore, there was no justification for the Tribunal toreduce the Gross Profit rate at 2.51%. Learned counsel for the assessee supported theimpugned order, and informed that the Gross Profit rate of2.51% as applied in the assessment year 1999-2000 wasapplied after scrutiny of return, and this Gross Profit Learned counsel for the Revenue is not in aposition to dispute this factual aspect of the matter aboutGross Profit rate of 2.51% having been applied for theassessment year 1999-2000, and that having been upheld bythe learned Tribunal. Since the question as framed only comprehends theignoring of the relevant material on the part of theTribunal concerning of the assessee's own results of theprevious year, and that to be vitiating the finding whileas noticed above, the assessee's own result of the previousyear was the G.P. rate of 2.51%, and the same has beenupheld by the Tribunal for this year also. In that view of the matter, the question as framedis required to be answered against the Revenue, and infavour of the assessee, and is so accordingly answered. The appeal thus has no force, and is dismissed. ( KISHAN SWAROOP CHAUDHARI ),J. ( N P GUPTA ),J. /Sushil/