Kay Polyplast Limited v. Additional Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR-------------------------------------------------------- INCOME TAX APPEAL No. 54 of 2006 KAY POLYPLAST LIMITED V/S ADDITIONAL COMMISSIONER OF INCOME TAX JUDGMENT Date of Judgment : 19.5.2008 HON'BLE SHRI N P GUPTA,J. HON'BLE SHRI KISHAN SWAROOP CHAUDHARI,J. Mr. PRAKASH JHAWARIA, for the appellant.Mr. KK BISSA, for the respondent. BY THE COURT (PER HON'BLE GUPTA, J.): This appeal has been filed by the assessee,against the judgment of the learned Tribunal, partlyallowing the cross objections of the assessee, andremanding the matter to the Commissioner. The remand hasbeen made on the aspect of gross profit rate. However,the learned Commissioner, and the learned Tribunal,upheld the rejection of books of accounts, and resortingto provisions of Sec. 145 (1) of the Income Tax Act,1961, challenging which aspect this appeal has beenfiled. The appeal was admitted vide order dated 22.5.2006,by framing following substantial question of law: “Whether on the facts andcircumstances of the case, thelearned Tribunal is justified inupholding the order passed by theld. CIT(A) by confirming therejection of books of account u/s145(1) of the Income Tax Act, 1961by the assessing officer isjustified and correct? The matter was heard for quite a long time. Aperusal of the order of the Commissioner shows, thatrejection of the books of accounts has been upheld,mainly on the ground, that wastage percentage fromfabric to bags is as high as 12.1%, as compared to othercases, in which it is only 2.49%. The learnedCommissioner appears to have compared the case of M/sKandhari and Kandhari Pvt. Limited. The AssessingOfficer has also considered purportedly comparablecases, being M/s Chittor Poly Feb and Kandhari &Kandhari Pvt. Ltd., and found, that the assessee hasdeclared gross profit rate of 8.5% only, and concluded,that books of account did not disclose a true and properincome. Arguing the appeal it was contended, that forrejection of books of accounts, the Assessing Officershould not be satisfied, about correctness andcompleteness of the accounts of the assessee, whichprecisely is not the finding of the assessing officer.Then, it was submitted, that from the balance sheetsetc., already available with the assessing officer, itis clear, that the percentage of waste, rendered in themanufacturing process, is practically consistent fromthe year 1988-89 onwards, though in the year 1987-88, itwas as high as 23.41%, and for all other years, thisextent of wastage, as shown in the books of accounts,has been accepted by the Assessing officer, andtherefore, there was no justification for rejecting thebooks of accounts for the assessment year in question only. Then, learned counsel also tried to show, that incases of other industries, situated at Udaipur itself,manufacturing the same product, and practicallyemploying the same manufacturing process, are alsoshowing the extent of wastage, around the one, as shownby the assessee. It may be observed here, that in this appeal,under Section 260-A, it may not be open to us, toreceive fresh evidence, as attempted by the learnedcounsel for the appellant, and thereby entering intothe process of re-appreciating the evidence, and arriveat a different conclusion. But, then, in any case, thefact does remain, that it prima facie appears, that inthe case of the assessee itself, the respondentdepartment has accepted the percentage of wastage, asshown by the assessee from the year 1987-88 onwards, andthe percentage of wastage as shown from 1988-89, doesnot bear much fluctuation, and it is not shown, that thebooks of accounts of the assessee, for other years havebeen rejected, rather it is stated by the learnedcounsel for the appellant, that in other years the bookshave been accepted. Thus, in our view, there is a million dollarcircumstance to show, that before rejecting the books ofaccounts, learned Assessing officer did not take intoaccount, other relevant attending circumstances,including the consistent wastage percentage, shown bythe assessee, and the same having been accepted by thedepartment. In view of the above, we think it appropriate,to set aside the impugned order, and direct the learnedCommissioner to decide the matter afresh, after givingopportunity of hearing to the assessee, to show thecomparable figures of wastage percentage, rendered inthe manufacturing process of other industries, involvedin manufacturing identical product, and employingidentical process of manufacturing, and to satisfy thelearned Commissioner, about the wastage percentage,shown by the assessee, during the past assessment years,and that having been accepted by the revenue, and thento consider the impact of the above, if established bythe assessee, on the question, as to whether the booksof account of the assessee, are required to be rejectedor not. Accordingly, the question, as framed, isanswered in negative, in favour of the assessee, andagainst the Revenue. The impugned orders of the learnedTribunal, and the learned Commissioner, are set aside,and the matter is remitted back to the learnedCommissioner, as above, for deciding the matter afresh. Parties shall appear before the Commissioneron 28.7.2008. (KISHAN SWAROOP CHAUDHARI ),J. ( N P GUPTA ),J. /ns./