Prakash Shrimali v. Assistant Commissioner of Income-tax, Circle-1, Udaipur
[Citation -2019-LL-0711-12]

Citation 2019-LL-0711-12
Appellant Name Prakash Shrimali
Respondent Name Assistant Commissioner of Income-tax, Circle-1, Udaipur
Court HIGH COURT OF RAJASTHAN AT JODHPUR
Relevant Act Income-tax
Date of Order 11/07/2019
Assessment Year 2009-10
Judgment View Judgment
Keyword Tags substantial question of law • valuation of closing stock • assessment proceedings • gross profit margin • quantitative tally • rejection of books • promotion expenses • net profit margin • notice of hearing • gross profit rate • statutory auditor • stock register • tax liability • spare part
Bot Summary: The question of law sought to be urged by the assessee/appellant is whether the rejection of its books of account and imposition of Gross Profit Rate at 1.03 based upon the previous assessment years returned and accepted rate, is justified. Eventually, based upon the materials before him, the AO rejected the books of accounts. As a consequence, the books of accounts were rejected and applying the pattern of previous return years, which were accepted by the Revenue, the Gross Profit Margin and profit rate were imposed for calculating the tax liability; the assessment was completed of 1,32,74503/-. The books of account maintained by the appellant were audited U/s.44B of the Act and the statutory auditor have not pointed out any specific defects in maintaining the books of account. Mere non maintenance of stock register cannot be made a basis for rejection of books of account because before invoking 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 the appellant is not reflecting the correct income and therefore it is not possible to assess the correct income of the appellant. In view of above discussions and the defects pointed out by the A.O. have been reconciled by the appellant and the same has been accepted by the A.O., there is no reason for invoking the provisions of section 145(3) of the I.T. Act and therefore the ITA-146/2018 rejection of books of account u/s.145(3) of the I.T. Act in the case of the appellant is held to be unjustified. The assessee s returns had relied upon the books of accounts to declare the net profit margin at 0.52 - with the corresponding gross profit margin of 3.50.


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 Jain For Respondent(s) : Mr. G.S. Chouhan HON'BLE CHIEF JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE DINESH MEHTA Judgment 11/07/2019 1. question of law sought to be urged by assessee/appellant is whether rejection of its books of account and imposition of Gross Profit Rate at 1.03% (with corresponding Gross Profit Margin of 7.98%) based upon previous assessment years returned and accepted rate, is justified. 2. facts are that assessee carries on business as dealer of Tata Motors; it also carries on after sale service of heavy equipment and machinery. record would show that Assessing Officer sent several notices (12) under Section 143 (2) and 142 (1) of Income Tax Act, which were not complied with. Eventually, based upon materials before him, AO rejected books of accounts. While doing so, AO noticed that (2 of 4) [ITA-146/2018] statutory auditors certificate under Section 44AB had certified that documents and books were in order and had been properly audited. Yet, it was noticed that assessee had not maintained Stock Register. AO, therefore, proceeded to verify material that was on record - including ledger and other books and found various discrepancies. As consequence, books of accounts were rejected and applying pattern of previous return years, which were accepted by Revenue, Gross Profit Margin and profit rate were imposed for calculating tax liability; assessment was completed of 1,32,74503/-. 3. assessee carried this order in appeal; CIT (Appeals), exhaustively listed grounds of appeal i.e. grievances lodged and then concluded in favour of assessee in following terms :- 3.3 I have considered submissions of appellant as well as findings of A.O., given in assessment order. It appears that defects pointed out in books of account i.e. difference in sale amounts declared in sale account and journal, difference in sale promotion expenses and discount etc. have been reconciled by appellant during assessment proceedings itself as no additions on this account have been made in total income of appellant. Further, it is also not case of A.O. that expenses claimed by appellant in profit and loss account are not supported by proper vouchers and some of expenses were not subject to verification. books of account maintained by appellant were audited U/s.44B of Act and statutory auditor have not pointed out any specific defects in maintaining books of account. As regards non maintenance of stock register and quantitative tally, it is seen that appellant deals in spare part of machinery volume of which is numerous and it is not case of A.O. that valuation of closing stock made by appellant is not in accordance with method provided under law. Mere non maintenance of stock register cannot be made basis for rejection of books of account because before invoking provisions of section 145(3) of I.T. Act A.O. is bound to prove that books of account maintained by appellant is not reflecting correct income and therefore it is not possible to assess correct income of appellant. In view of above discussions and defects pointed out by A.O. have been reconciled by appellant and same has been accepted by A.O., there is no reason for invoking provisions of section 145(3) of I.T. Act and therefore (3 of 4) [ITA-146/2018] rejection of books of account u/s.145(3) of I.T. Act in case of appellant is held to be unjustified. 4. ITAT which was approached by Revenue, considered entire record and noticed that books of accounts in this case were not reliable. assessee s returns had relied upon books of accounts to declare net profit margin at 0.52% - with corresponding gross profit margin of 3.50%. Furthermore, it is evident that as against turn over reported for concerned assessment year i.e. AY 2009-10, which were 30,54,48,903/-, and gross profit declared was 1,06,76,006/-. However, for previous year, turn over for same business was 14,31,22,117/- and gross profit shown was 1,14,24,580/-. Facially, therefore, there was steep down turn in declared gross profit margin; net profit increased only by rupees one lac or as against, turn over increased by more than 100%. This clearly seems to have alerted AO to examine record and based upon his assessment of ledger and other documents available on record rejected books of accounts. 5. All that ITAT did in this case was to correct error evident on face of record, in Revenue s appeal, evident in CIT (A) order. Court is also satisfied that main ground of assessee of denial of opportunity to appear before ITAT, is unpersuasive and cannot be accepted. notice of hearing clearly was served on 24.07.2013; hearing was to take place on 02.09.2013. There is no document relied upon by assessee to show that he was incapacitated; he was prevented from instructing his counsel to appear before ITAT on date of hearing fixed for that purpose on which he was aware. For these reasons, ground of denial of opportunity is also unsubstantiated. (4 of 4) [ITA-146/2018] 6. For foregoing reasons, Court is of opinion that ITAT s findings are pure findings of fact and do not call for any interference. No substantial question of law arises in this appeal. 7. appeal is accordingly dismissed. (DINESH MEHTA),J (S. RAVINDRA BHAT),CJ 3-ArunV/- Prakash Shrimali v. Assistant Commissioner of Income-tax, Circle-1, Udaipur
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