Shri Kishan Kumar Saraiwala v. The Commissioner Of Income Tax,-Iii, Jaipur Crb Building Statuecircle Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 325 / 2011 Shri Kishan Kumar Saraiwala, S/o Late Sh. Surajmal Saraiwal,Aged About 35 Years, R/o Prop of M/s Kanhiya Lal GulabchandSurani Bazar Srimadhopur Distt. Sikar ----Appellant Versus The Commissioner of Income Tax,-III, Jaipur CRB Building StatueCircle Jaipur ----Respondent D.B. Income Tax Appeal No. 338 / 2011 Shri Kishan Kumar Saraiwala, S/o Late Sh. Surajmal Saraiwal, Aged About 35 Years, R/o Prop. of M/s Kanhiya Lal Gulabchand, Surani Bazar Srimadopur Distt. Sikar ----Appellant Versus The Commissioner of Income Tax-III, Jaipur NCRB Building Statue Circle Jaipur ----Respondent _____________________________________________________ For Appellant(s) : Mr. Siddharth Ranka For Respondent(s) : Ms. Mahi Yadav for Mr. Sameer Jain _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Judgment 29/08/2017 1.In both these appeals common question of law and facts areinvolved hence they are decided by this common judgment. 2.By way of these appeals, the appellant has assailed thejudgment and order of the Tribunal whereby Tribunal has partlyallowed the cross objection filed by the assessee and dismissedthe appeal of the department. 3.This court while admitting the appeals framed followingsubstantial questions of law:- 3.1Appeal No.325/2011 admitted on 3.5.2012 “Whether it is implicit under the provisions ofS.145(3) of the Act, 1961 to make someadditions on rejection of accounts when thereis no material to support that assessee hasearned higher income and under thesecircumstances whether the trading additionsof Rs.2,86,783/- was justified when the samewas not supported by any material onrecord?” 3.2Appeal no.338/2011 admitted on 15.9.2011 “Whether it is implicit under the provisions ofS.145(3) of the Act, 1961 to make someadditions on rejection of accounts when thereis no material to support that assessee hasearned higher income and under thesecircumstances whether the trading additionsof Rs.2,47,340/- was justified when the samewas not supported by any material onrecord?” 4.The facts of the case are that the assessee has not maintained the stock register qualitywise as well as weightwise.However, the stock register is maintained in terms of the bagsonly from which it is not possible to workout the stock weightwiseand quantiywise. No details of Churi, Cattlefeed, Khal etc. were furnished by the assessee in support of his claim. The assesseeexplained to the AO that valuation is made on qualitywise of goodswhereas he does not maintain qualitywise record of the goodstraded. In the absence of qualitative details, commoditiespurchases/sales and its quantitative details in weight, it is notpossible for the AO to verify the value of the closing stock. The AOhas invoked the provisions of Section 145(3) of the Act andapplied the gross profit rate of 10.50% on increased turnover aswell as increase in closing stock. 5.Counsel for the appellant Mr. Ranka contended that tribunalitself for the previous year relied upon the decision of this court inCommissioner of Income Tax vs. Gotan Lime Khanij Udhyogreported in (2002) 256 ITR 243 wherein it has been held asunder:- 5.Counsel for the appellant Mr. Ranka contended that tribunalitself for the previous year relied upon the decision of this court inCommissioner of Income Tax vs. Gotan Lime Khanij Udhyogreported in (2002) 256 ITR 243 wherein it has been held asunder:- “Likewise, the appeal of the Revenue beforethe Tribunal has been rejected on the groundof having invoked the provisions of Section145 by adopting a methodology of his own.The Assessing Officer by rejecting theexplanation furnished by him for returningthe income at the reduced gross profit ratehas made additions on estimate basis. TheCommissioner of Income-tax (Appeals) whilesubstantially accepting the explanationfurnished by the assessee for reduction ingross profit rate over its turnover during theyear in question, was justified in notsustaining the additions made by theIncome-tax Officer and having come to thatconclusion the formation of estimation fellwithin the domain of the Commissioner ofIncome-tax (Appeals). That part of the orderof the Income-tax Appellate Tribunal, in ouropinion, does not give rise to any question oflaw. 12. As a result of the aforesaid discussion,our answer to question No. 1 is that therewas no error in the order of the Tribunal indeleting the entire additions to the tradingresults after holding that the provisoto Section 145 was applicable. That being theposition, question No. 1 is answered in theaffirmative, i.e., in favour of the assesseeand against the Revenue.” 5.1He also relied upon the two decisions; one of Rajasthan High Court in PR. Commissioner of Income Tax vs. Bhawani SilicateIndustries (2016) 65 taxmann.com 106 (Raj.) and other decisionof Gujarat High Court in Jaytick Intermediates (P.) Ltd. vs.Assistant Commissioner of Income Tax (2016) 73 taxmann.com195 (Gujarat). 5.2He has also relied upon the following statement for 5 yearswhich reads as under:- ParticularsAssessment Year2002-032003-042004-052005-062006-07Turnover79,92,455/- 89,77,593/- 1,35,10,598/-1,53,85,440/- 1,95,65,833/-% --12.33%50.49%13.88%27.17%Increment(YOY)Gross Profit3,64,456/-4,70,130/-4,25,368/-5,19,414/-7,75,903/-% Increment --28.99%-9.52%22.11%49.38%(YOY)G.P. Rate by the4.56%5.24%3.15%3.37%3.97%AssesseeG.P. Rate by the--9.00%--10.50%9.00%AOG.P. Rate by the--5.24%--5.24%5.24%ITAT 6.Counsel for the respondent contended that AO has rightlytaken into consideration the contentions and rejected the appealof the department but at the same time the analogy for calculatingGP rate which has been applied for previous year 5.24% is notrequired to be disturbed. 7.We have heard counsel for the parties. 7.1Taking into consideration our own recent view, the averageof five years GP is to be taken into consideration which comes to3.91%.of five years GP is to be taken into consideration which comes to3.91%. 7.2In that view of the matter, taking average of previous fiveyears GP as 3.91%, the appeals stand allowed.years GP as 3.91%, the appeals stand allowed. 7.For the assessment year 2006-07, the addition sustained bythe ITAT is set aside however for the assessment year 2005-06,the addition is sustained. (INDERJEET SINGH),J. (K.S. JHAVERI),J. Brijesh 5-6.