Shri Prakash Shrimali v. Assistant Commissioner Of Income Tax, Circle-1, Udaipur (Raj

HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Income Tax Appeal No. 146/2018 Shri Prakash Shrimali S/o Late Shri Shiv Shankar, Aged About 67 Years,Proprietor - Hi-Tech Earth Movers, 6-Municipal Colony, Shivaji Nagar,Udaipur (Raj.) 313001 (Pan No. ADSPS139F) ----Appellant Versus Assistant Commissioner of Income Tax, Circle-1, Udaipur (Raj.) ----Respondent For Appellant(s) : Mr. Neeraj Kumar JainFor Respondent(s): Mr. G.S. Chouhan HON'BLE THE CHIEF JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE DINESH MEHTA 11/07/2019 Judgment 1.The question of law sought to be urged by the assessee/appellant iswhether the rejection of its books of account and imposition of Gross ProfitRate at 1.03% (with the corresponding Gross Profit Margin of 7.98%) basedupon the previous assessment years returned and accepted rate, is justified. 2.The facts are that the assessee carries on business as a dealer of TataMotors; it also carries on after sale service of heavy equipment andmachinery. The record would show that the Assessing Officer sent severalnotices (12) under Section 143 (2) and 142 (1) of the Income Tax Act, whichwere not complied with. Eventually, based upon the materials before him, theAO rejected the books of accounts. While doing so, the AO noticed that the statutory auditors certificate under Section 44AB had certified that thedocuments and the books were in order and had been properly audited. Yet, itwas noticed that the assessee had not maintained Stock Register. The AO,therefore, proceeded to verify the material that was on record - includingledger and other books and found various discrepancies. As a consequence,the books of accounts were rejected and applying the pattern of previousreturn years, which were accepted by the Revenue, the Gross Profit Marginand profit rate were imposed for calculating the tax liability; the assessmentwas completed of ₹1,32,74503/-. 3.The assessee carried this order in appeal; the CIT (Appeals),exhaustively listed the grounds of appeal i.e. the grievances lodged and thenconcluded in favour of the assessee in the following terms :- “3.3 I have considered the submissions of the appellant as wellas the findings of the A.O., given in the assessment order. Itappears that the defects pointed out in the books of account i.e.difference in sale amounts declared in the sale account andjournal, difference in the sale promotion expenses and discountetc. have been reconciled by the appellant during theassessment proceedings itself as no additions on this accounthave been made in the total income of the appellant. Further, itis also not a case of the A.O. that the expenses claimed by theappellant in the profit and loss account are not supported byproper vouchers and some of the expenses were not subject toverification. The books of account maintained by the appellantwere audited U/s.44B of the Act and the statutory auditor havenot pointed out any specific defects in maintaining the books ofaccount. As regards the non maintenance of stock register andquantitative tally, it is seen that the appellant deals in spare partof machinery the volume of which is numerous and it is not acase of the A.O. that the valuation of closing stock made by theappellant is not in accordance with the method provided underthe law. Mere non maintenance of stock register cannot be madea basis for rejection of books of account because beforeinvoking the provisions of section 145(3) of the I.T. Act the A.O.is bound to prove that the books of account maintained by theappellant is not reflecting the correct income and therefore it isnot possible to assess the correct income of the appellant. Inview of above discussions and the defects pointed out by theA.O. have been reconciled by the appellant and the same hasbeen accepted by the A.O., there is no reason for invoking theprovisions of section 145(3) of the I.T. Act and therefore the rejection of books of account u/s.145(3) of the I.T. Act in thecase of the appellant is held to be unjustified. 4.The ITAT – which was approached by the Revenue, considered theentire record and noticed that the books of accounts in this case were notreliable. The assessee’s returns had relied upon the books of accounts todeclare the net profit margin at 0.52% - with the corresponding gross profitmargin of 3.50%. Furthermore, it is evident that as against the turn overreported for the concerned assessment year i.e. AY 2009-10, which were₹30,54,48,903/-, and the gross profit declared was ₹1,06,76,006/-. However,for the previous year, the turn over for the same business was ₹14,31,22,117/-and the gross profit shown was ₹1,14,24,580/-. Facially, therefore, there wasa steep down turn in the declared gross profit margin; the net profit increasedonly by rupees one lac or as against, the turn over increased by more than100%. This clearly seems to have alerted the AO to examine the record andbased upon his assessment of the ledger and other documents available onrecord rejected the books of accounts. 5.All that the ITAT did in this case was to correct the error evident on theface of the record, in the Revenue’s appeal, evident in CIT (A) order. TheCourt is also satisfied that the main ground of the assessee of denial ofopportunity to appear before the ITAT, is unpersuasive and cannot beaccepted. A notice of hearing clearly was served on 24.07.2013; the hearingwas to take place on 02.09.2013. There is no document relied upon by theassessee to show that he was incapacitated; he was prevented from instructinghis counsel to appear before the ITAT on the date of hearing fixed for thatpurpose on which he was aware. For these reasons, the ground of denial ofopportunity is also unsubstantiated. 6.For the foregoing reasons, the Court is of the opinion that the ITAT’sfindings are pure findings of fact and do not call for any interference. Nosubstantial question of law arises in this appeal. 7.The appeal is accordingly dismissed. (DINESH MEHTA),J (S. RAVINDRA BHAT),CJ 3-ArunV/-