IN THE INCOME TAX APPELLATE TRIBUNAL
`D' : NEW DELHI
DELHI BENCH `D
G.D.AGRAWAL, VICE PRESIDENT AND
BEFORE SHRI G.D.AGRAWAL,
I.C.SUDHIR, JUDICIAL MEMBER
SHRI I.C.SUDHIR,
No.3543/Del/2011
ITA No.3543/Del/2011
2007-08
Assessment Year : 2007-
Income Tax Officer, Vs. Shri Krishan Kumar,
Ward-
Ward-1, Prop. M/s Mittal Timber Store,
Karnal. Timber Market,
Karnal.
PAN : AEXPK3283Q.
(Appellant) (Respondent)
No.3755/Del/2011
3755/Del/2011
ITA No.3755/Del/201
2007-08
Assessment Year : 2007-
Shri Krishan Kumar, Vs. Income Tax Officer,
Prop. M/s Mittal Timber Ward-1,
Ward-
Store, Karnal.
Timber Market,
Karnal.
AEXPK3283Q.
PAN : AEXPK3283Q.
(Appellant) (Respondent)
Revenue by : Shri R.S.Negi, Sr.DR.
Assessee by : Shri Ved Jain & Ms.Rano Jain, CAs
and Shri V.Mohan, Advocate.
ORDER
G.D.AGRAWAL, VP :
PER G.D.AGRAWAL,
ITA No.3543/Del/2011 is the appeal by the Revenue in which
following ground is raised:-
"On the facts and in the circumstances of the case, the
ld.CIT(A) has erred in directing to work out profit by
applying a G.P. rate of 4% as against 4.9% applied by the
2 ITA No.3543/Del/2011 &
3755/Del/2011
AO without appreciating that G.P. rate declared in the
comparable cases of the line relied upon by the AO had
shown better results and the account books maintained by
the assessee suffered from defects so as to warrant
invoking of section 145(3) of the I.T."
2. ITA No.3755/Del/2011 is the appeal by the assessee in which
following grounds are raised:-
"1. That on the facts & in the circumstances of the case,
the ld.CIT(A) has erred on law & facts by confirming the
imposition of section 145(3) and upholding rejection of
books of accounts despite furnishing of requisite
information & documents including stock register.
2. That on the facts & in the circumstances of the case
the ld.CIT(A) has erred on law & facts by applying the
Gross Profit rate @ 4% (from 4.90% assessed by the ld.AO)
against 3.63% shown by the assessee, despite no defects
has been found by the ld.AO in the books of accounts of
the assessee."
3. Since common issues are raised in these cross-appeals, they are
heard and are being adjudicated upon together.
4. The assessee is an individual who derives income from purchase
and sale of different kinds of timber. For the year under consideration,
on the sale of `8,40,09,166/-, gross profit of `30,49,494/- was
disclosed. The rate of gross profit was 3.63%. The Assessing Officer
rejected the assessee's books of account and after considering the
average of four comparable cases applied gross profit of 4.90%.
3 ITA No.3543/Del/2011 &
3755/Del/2011
5. On appeal, learned CIT(A) upheld the rejection of books of
account but he reduced the GP rate to 4% as against 4.90% applied by
the Assessing Officer. Aggrieved with the order of learned CIT(A), both
the parties are in appeal before us.
6. At the time of hearing before us, it was pointed out by the
learned counsel that at page 7 of the assessment order, the Assessing
Officer has given a comparative position of immediately preceding two
years from which, it is evident that the GP rate of AY 2005-06 and
2006-07 was 2.37% and 2.65% respectively, which has been accepted
by the Revenue as reasonable. In this regard, he referred to the
assessment order placed at pages 57 to 59 of the paper book for AY
2006-07. He also referred the four comparable cases given by the
Assessing Officer at page 6 of the assessment order and stated that
only comparable case for AY 2007-08 is of Sat Paul & Sons wherein GP
rate of 3.53% was disclosed. All other three cases were for earlier
years. He stated that if earlier years are to be compared, then the
assessee's own case is the best guide rather than other cases. If
comparison is to be made with others, it should be for the same year.
In either case, the GP disclosed by the assessee in the year under
consideration is better. He further submitted that the rejection of
books of account itself is unjustified because the assessee has
maintained all the necessary details and the same were produced
before the Assessing Officer also. However, since the assessee's GP is
better than the earlier year and also better than the comparable case
given by the Assessing Officer himself, he is resting his argument
mainly on the applicability of the gross profit rate. Even if books are to
be rejected, a reasonable rate of GP is to be applied. He, therefore,
submitted that on the facts of the assessee's case, there was no
justification for the applicability of higher rate of GP.
4 ITA No.3543/Del/2011 &
3755/Del/2011
7. The learned DR, on the other hand, relied upon the orders of
authorities below and stated that the applicability of GP rate of 4.90%
by the Assessing Officer is quite reasonable and the same should be
sustained.
8. We have carefully considered the arguments of both the sides
and perused the material placed before us. The Assessing Officer has
given four comparable cases on page 6 of the assessment order. For
ready reference, the same is reproduced below:-
Name of Assessee Asstt. Year % Gross Profit
Jai Parkash M/s Narwana Timber Store, 2004-05 6.00%
Karnal
Jai Parkash M/s Narwana Timber Store, 2005-06 4.34%
Karnal
Neeraj Jain Prop. Jagdama Timber Store, 2006-07 5.66%
Karnal
Sat Paul & Sons, M/s Kaithal Timber 2007-08 3.53%
Store, Karnal
Total 19.53%
Average Rate 19.53/4 = 4.90%
9. At page 7 of the assessment order, the Assessing Officer has
given the comparative position of sale and gross profit in the case of
the assessee. The same is also reproduced herein below for ready
reference:-
Particulars/AY 2005-06 2006-07 2007-08
Sales 73194816.00 58871050.00 84009166.00
GP 1737528.00 1560090.00 3049494.00
NP 232204.29 239771.82 367238.40
GP Ratio 2.37% 2.65% 3.63%
5 ITA No.3543/Del/2011 &
3755/Del/2011
10. The assessment year under appeal is 2007-08. The comparable
cases of other assessees are for AY 2004-05 to 2007-08. If we take the
comparable cases of AY 2007-08, then we find that the GP rate for the
comparable cases quoted by the Assessing Officer himself is 3.53%
whereas in the case of the assessee, the GP rate is 3.63%. If we
compare the trading result of the year under consideration as
compared to earlier year in assessee's own case, we find that in AY
2006-07, the GP rate was 2.65% which is accepted by the Revenue in
the order passed under Section 143(3) wherein the Assessing Officer
held as under:-
"Purchases and sales shown have been verified from the
books of account. During the course of asstt. proceedings
it was noticed that the assessee had shown gross turnover
of Rs.58871050/- and G.P. of Rs.1560090/- and G.P. rate of
2.65% against gross turnover of Rs.73194816/-, G.P. of
Rs.1737528/- and G.P. rate of 2.37% of immediately
preceding year. The G.P. rate is on higher side, whereas
gross profit rate in this line of trade shown 2.85% in the
case of M/s Janta Timber Store, Timber Market, Karnal."
11. From the above, it is evident that the Assessing Officer himself
considered the GP rate of 2.65% in AY 2006-07 to be reasonable. In AY
2005-06, in assessee's own case, the GP rate of 2.37% was accepted
by the Revenue. In view of the totality of above facts, we do not find
any justification for applicability of GP rate of 4.90%. The gross profit
rate disclosed by the assessee at 3.63% is better as compared to
earlier two years of assessee's case and also better than the
comparable case of Sat Paul & Sons quoted by the Assessing Officer
for AY 2007-08. In view of the above, we do not find any justification
6 ITA No.3543/Del/2011 &
3755/Del/2011
for sustaining the part of the trading addition by applying GP rate of
4%. The same is deleted.
12. In the result, the appeal of the assessee is allowed while the
appeal of the Revenue is dismissed.
Decision pronounced in the open Court on 6th July, 2012.
Sd/- Sd/-
I.C.SUDHIR)
(I.C.SUDHIR) (G.D.AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 06.07.2012
VK.
Copy forwarded to: -
1. Revenue : Income Tax Officer,
Ward-
Ward-1,
Karnal.
2. Assessee : Shri Krishan Kumar,
Prop. M/s Mittal Timber Store,
Timber Market,
Karnal.
3. CIT
4. CIT(A)
5. DR, ITAT
Assistant Registrar
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