Income Tax Appellate Tribunal - Jaipur
Poornima Fire Works, Jaipur vs Assessee on 19 February, 2015
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM
vk;dj vihy la-@ITA Nos. 1004 to 1007 /JP/2013
fu/kZkj.k o"kZ@Assessment Years : 2003-04 to 2006-07
M/s Poornima Fire Works, cuke The A.C.I.T.
2-A, 138, Shiv Shakti Colony, Vs. Central circle-1,
Shashtri Nagar, Jaipur. Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAEFP 4879 L
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (C.A.)
jktLo dh vksj ls@ Revenue by : Shri Ajay Malik (Addl.CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 27/11/2014
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 19/02/2015
vkns'k@ ORDER
PER: T.R. MEENA, A.M. This is a set of assessee's appeals for A.Ys. 2003-04 to 2006-07, filed against the common order dated 03/10/2013 by the learned CIT(A), Central, Jaipur. The effective grounds of all the appeals are as under:-
2 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT Grounds of assessee's appeal being ITA No. 1004/JP/2013 (A.Y. 2003- 04) "1. The learned CIT(A) has erred on facts and in law in upholding the validity of trading addition made by A.O. in assessment framed U/s 153A, dehors any incriminating material found in search or otherwise gathered by him for the year under consideration.
1.1 The learned CIT(A) has erred on facts and in law in estimating the unrecorded sales, twice the recorded sales and thus estimating the total sales at Rs.
35,69,727/- (wrongly taken at Rs. 24 lacs). She has further in applying G.P. rate of 19% on such estimated turnover as against G.P. rate of 11.87% declared by the assessee on the actual turnover of Rs. 11,89,909/- and 17% applied by the A.O. resulting into trading addition of Rs. 5,37,009/- (wrongly computed at Rs. 3,14,761/-)."
Grounds of assessee's appeal being ITA No. 1005/JP/2013 (A.Y. 2004-05) "1. The learned CIT(A) has erred on facts and in law in upholding the validity of trading addition made by A.O. in assessment framed U/s 153A, dehors any incriminating material found in search or otherwise gathered by him for the year under consideration. 1.1 The learned CIT(A) has erred on facts and in law in estimating the unrecorded sales, twice the recorded sales and thus estimating the total sales at Rs. 54,88,839/- (wrongly taken at Rs. 36 lacs). She has further in applying G.P. rate of 18% on such estimated turnover as against G.P. rate of 13.23% declared by the assessee on the actual turnover of 3 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT Rs. 18,29,613/- and 17.25% applied by the A.O. resulting into trading addition of Rs. 7,46,006/- (wrongly computed at Rs. 4,06,015/-)."
Grounds of assessee's appeal being ITA No. 1006/JP/2013 (A.Y. 2005-06) "1. The learned CIT(A) has erred on facts and in law in upholding the validity of trading addition made by A.O. in assessment framed U/s 153A, dehors any incriminating material found in search or otherwise gathered by him for the year under consideration. 1.1 The learned CIT(A) has erred on facts and in law in estimating the unrecorded sales, twice the recorded sales and thus estimating the total sales at Rs. 69,27,294/- (wrongly taken at Rs. 46 lacs). She has further in applying G.P. rate of 17% on such estimated turnover as against G.P. rate of 11.04% declared by the assessee on the actual turnover of Rs. 23,09,098/- resulting into trading addition of Rs. 9,22,728/- (wrongly computed at Rs. 45,27,088/-)." Grounds of assessee's appeal being ITA No. 1007/JP/2013 (A.Y. 2006-07) "1. The learned CIT(A) has erred on facts and in law in confirming the trading addition of Rs. 1,98,392/- by applying G.P. rate of 17% on the turnover of Rs. 41,86,314/- as against G.P. rate of 12.26% declared by the assessee."
2. In A.Y.2003-04 to 2005-06, the assessee challenged the validity of issuance of notice U/s 153-A of the Income Tax Act, 1961 4 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT (hereinafter referred as the Act) and addition on account of G.P. rate. In A.Y. 2006-07, the appellant only challenged the G.P. rate addition. 2.1 Brief facts of the case are that there was a search and seizure operation carried out on 22/10/2008 at the business and residential premises of the assessee's group. During the course of search and seizure operation, incriminating documents/loose papers were found and seized. The learned Assessing Officer issued notice U/s 153A of the Act in all the assessment years, thereafter detailed questionnaire was issued by him. The assessee is a partnership firm engaged in wholesale and retail business of fireworks. The learned Assessing Officer observed that the books of account had not been produced by the assessee in A.Y. 2003-04 and 2004-05 but produced for the A.Y. 2005-06 and 2006-
07. In A.Y. 2003-04, the learned Assessing Officer presumed that the assessee firm had not maintained regular books of account. During the course of assessment proceedings, the assessee firm furnished copy of balance sheet, trading account, P&L account and other details/informations. On verification of details, the learned Assessing Officer found the following G.P. on total turnover with percentage of G.P., the chart is as follows:
5 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT Sl. A.Y. Gross Profit (Rs.) Total Turnover %age of No. (Rs.) G.P. 1 2003-04 1,41,238/- 11,89,909/- 11.87%
2. 2004-05 2,41,985/- 18,29,613/- 13.23%
3. 2005-06 2,54,912/- 23,09,098/- 11.04%
4. 2006-07 3,22,211/- 26,27,528/- 12.26% It has been further observed that in absence of complete books of account, the closing stock of the firm is not verifiable resultantly the gross profit worked out also had no sanctity. Further during the course of assessment proceedings, the assessee furnished the details of unaccounted sales in A.Y. 2006-07 to 2009-10, which is reproduced as under:-
A.Y. As per regular books of account Unaccounted sales Sales G.P. Ratio Sales G.P. Ratio 2003-04 11,89,909/- 11.87% 2004-05 18,29,613/- 13.23% 2005-06 23,09,098/- 11.04% 2006-07 26,27,528/- 12.26% 15,58,786/- 12.26% 2007-08 15,93,180/- 12.98% 49,40,182/- 12.98% 2008-09 20,56,885/- 13.00% 70,88,444/- 13.04% 2009-10 21,57,817/- 14.99% 70,24,060/- 13.04% The assessing has admitted this fact that it indulged into transactions which were not entered into regular books of account. These facts were also admitted by Shri Madan Mohan Gupta, the main key person of the assessee group in his statement recorded during the course of search 6 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT operation. Shri Madan Mohan Gupta has stated in his statement dated 21/10/2008 in reply to question No. 21, which is reproduced as under:-
Ikz'u 21 vkt fnukad 22-10-08 dks lpZ dh dk;Zokgh ds nkSjku tks yqt isilZ Annexure bR;kfn ik;s x;s vkSj tCr fd;s tk jgs gSa muds vUnj dPps purchase & sale dh dkxtkr 'kkfey gS A vkids Books of A/c Hkh iwjh rjg cus gq, ugh gSa vkSj bl dkj.k LVkd dk lR;kiu Hkh vki ugh djok ik jgsa gSa bu lHkh dfe;ksa ds ckjs vki dk D;k dguk gSa \ mRrj eSa ;g Lohdkj djrk gwWa fd gekjs iVk[ksa ds business esa dkQh gn rd transaction cgh [kkrksa ds ckgj jgrs gSa gekjs sale and purchases Hkh cash esa gksrs gSa A ftudk fooj.k cgh[kkrksa esa ntZ ugh gksrk ;gh dkj.k fd cgh[kkrs izfrfnu update ugha fd;s tkrs gS vkSj blfy, gekjs business premises ij ik;s x;s stock dk lR;kiu djokuk lEHko ugh gSa bu lHkh dfe;ksa dks eSa igys Hkh Lohdkj dj pqdk gwa fiNys iz'uksa ds mRrj esa eSua s crk;k Fkk fd esjh v?kksf"kr vk; esa ls eSaus 41 yk[k :I;s yksxksa dks m/kkj ns j[ks gSa blds vykok 15 yk[k :- agreement ds vuqlkj ukbZ fd FkMh okyh tehu vykok 20 yk[k ds djhc uxnh ik;s x;s esjs ?kj ij ik;k x;k gS mls eSa viuh v?kksf"kr [kkrksa esa vftZr vk; ds :i esa Lohdkj dj pqdk gwWa A blds vfrfjDr tks loose paper bR;kfn esjs ?kj ,oa business LFkkuksa ls ik;s x;s gSa muesa v?kksf"kr vk; vkSj mlls vftZr fuos'k ds :i esa eSa LosPNk ls viuh v?kksf"kr vk; lefiZr djuk pkgrk gwWa A eSa ;g Hkh Li"V djuk pkgrk gq fd gekjs business izfr"Bkuksa esa djhc 10 ls 12 yk[kksa dk stock v?kksf"kr vk; ls vftZr fuos'k ds :i esa fo/keku gSa A bu lHkh djxtkr stock bR;kfn ds :Ik esa eSa vius vuqeku l 30 yk[k :I;s Hkh v?kksf"kr vk; bl isVs vk;dj ds fy, lefiZr djrk gwWa A ftlesa v?kksf"kr stock] 7 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT sale, purchases ds dPps dkxtkr ,oa esjs ?kj ,oa business izfr"Bkuksals ik;s x;s dkxtkr o nLrkost esa yh xbZ transaction 'kkfey gSa A During the course of search operation, it is also found that the books of the assessee are incomplete as per the statement of Shri Pankaj Agarwal in reply to Q. No. 8 recorded U/s 131 of the I.T. Act, 1961 on 05/01/2008 which is reproduced below:
iz'u8- eSa vkidks vkids business premises 295-296 The Rajasthan Shora Supply Co., Hawa Mahal Bazar, Jaipur ls impound dh x;h laptop ftldk data ,d vyx hard disk esa copy fd;k gqvk gSa bl hard disk dks [kksy dj fn[kk jgk gwWa A d`I;k crk;s fd blesa D;k D;k gSa \ mRrj bl hard disk esa gekjh firm vkSj concerns dk tally&9 vkSj tally&7-2 format esa data j[kk gSa A tally 7-2 esa Hkh cgh data gS tks fd tally 9 esa gSa A cl mls upgrade dj fn;k x;k gSa A tally 9 esa Poornima fireworks dh F.Y. 2005&06] 2006&07 dh rks iwjh complete books gS vkSj F.Y. 2007&08 o 2008&09 dh incomplete books gSa A On the basis of above facts, the learned Assessing Officer concluded that the opening stock as well as closing stock of the firm was not verifiable. During the course of assessment proceedings, the learned Assessing Officer issued notice U/s 133(6) of the Act to verify the
8 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT purchases in some of the cases. Out of these notices issues, following notices were returned back by the postal authority unserved giving remark "Not known" or "No such address" etc.
1. M/s Arjun Fireworks, Sivakashi.
2. M/s Shri Divan Foreworks, Thiruthangal, Sivkashi
3. M/s Rajavel Fireworks factor, Sivkashi.
4. M/s Jaya Latchana Fireworks, Sivkashi.
5. M/s Durgaiamman Fireworks, Vishwanathan, Sivkashi.
6. M/s Anitha Sparklers Fireworks, Sivkashi
7. M/s Gokila Fireworks, Sivkashi.
The learned Assessing Officer again gave the reasonable opportunity of being heard to prove the genuineness of the purchases made by it. The learned Assessing Officer also held that the onus to prove the purchases genuine is on the assessee by relying on the various decisions considered by him, which is as under:-
(i) M/s Indian Woolen Carpet Factory Vs. ITAT & Others (2002) 178 CTR 420 and M.P. High Court in the case of VISP (P) Ltd. Vs. CIT & Anr. 186 CTR 718.
(ii) Awadesh Pratap Singh Abdul Rehman & Bros. Vs. CIT (1994) 76 Taxman 106 (All.).
(iii) S.N. Namasivayam Chettiar Vs. CIT (1960) 38 ITR 579.
(iv) M/s Kachwala Gems Vs. JCIT (2007) 288 ITR 10.
9 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT The learned A.R. for the assessee submitted reply before the Assessing Officer and claimed that on the basis of seized material for A.Y. 2003-04 to 2005-06, no unaccounted sales and purchases were detected by the department. The learned Assessing Officer calculated the ratio between the sales entered in the regular books of account and unaccounted sales as per the chart given above i.e. 1:3. The assessee's claim was that during the A.Y. 2003-04 to 2005-04, there was no unaccounted sales/purchases but which was not found acceptable to the Assessing Officer on the basis of subsequent year unaccounted sale and purchase found by him and held that modus operandi of the assessee firm was not maintaining regular books of account and all the transactions regarding purchases and sales were made in cash, which was not completely entered in regular books of account. He also presumed that the assessee might have destroyed paper relating to unaccounted sales. Shir Madan Mohan Gupta and Shri Pankaj Agarwal in his statement had admitted that all the transactions of sales and purchases were not entered into the regular books of account. Further he also referred Section 114(d) of the Indian Evidence Act for interpolation of the evidence for A.Y. 2003-04 to 2005-06. On the basis of ratio of accounted sales and unaccounted sales found during the course of 10 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT search in A.Y. 2006-07 to 2009-10. He calculated total sales for A.Y. 2003-04 at Rs. 35,69,729/- in place of Rs. 11,89,909/-, in A.Y. 2004-05 at Rs. 54,88,839/- in place of Rs. 18,29,613/-, in A.Y. 2005-06 at Rs. 46,00,000/- in place of Rs. 23,09,098/-. However, in A.Y. 2006-07, the gross sales has been taken at Rs. 26,27,528/- (as per regular books of account) and Rs. 15,58,786/- (on the basis of unaccounted sales and on the basis of seized material) at Rs. 41,86,314/-. The learned Assessing Officer applied G.P. rate in A.Y. 2003-04 after rejecting the book result U/s 143(3) of the Act @ 17%, 17.25% in A.Y. 2004-05, 17.50% in A.Y. 2005-06 and 17.75% in A.Y. 2006-07 and made trading addition of Rs. 6,67,899/- in A.Y. 2003-04, Rs. 10,20,448/- in A.Y. 2004-05, Rs. 13,61,457/- in A.Y. 2005-06 and Rs. 2,29,789/- in A.Y. 2006-07.
3. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the learned CIT(A), who had allowed the appeal partly in all the years after considering the Hon'ble Jurisdictional High Court's decision in the case of Jai Steel India Vs. ACIT (2013) 88 DTR 1 and Hon'ble Supreme Court decision in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 210 CTR (SC) 30 and held that the proceeding U/s 153A of the Act is valid. During the course of search, incriminating documents were found and seized, in 11 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT which unrecorded sales were found by the Assessing Officer for A.Y. 2006-07 to 2009-10. Further during the course of search, statement of partner of the firm was recorded U/s 132(4) of the Act wherein they have admitted unaccounted sales as well as the cash purchases and cash sales in this line of business of fireworks. The Assessing Officer further investigated the purchases by issuing notice U/s 133(6) of the Act, which also returned back unserved with remarks "Not known" and "No such address". She further held that the Hon'ble ITAT in various cases has held that in case of non-genuine purchases, the rejection of books of account U/s 145(3) of the Act is justifiable. Once the books of account have been rejected, the Assessing Officer is free is decide the assessee's income reasonable on the principles of natural justice by collecting evidence and considering the past history of the case. She further relied on the decision of the Hon'ble Supreme Court in the case of Ambika Prasad Thakur Vs. Ram Ekbal Rai (1961) 1 SCR 758 equivalent to AIR 1966 SC, 605, wherein it was observed that "Presumption can be made both backward and forward within a reasonably proximate time." The learned Assessing Officer calculated the ratio between accounted sales and at 1:3 and estimated the turnover and G.P. by relying 12 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT on comparable case of M/s Rajan Fire Works. She also analysed the percentage of unrecorded sale in A.Y. 2006-07 to 2008-09 and average also. The search year has not been taken into consideration being an exceptional year. She herself calculated the ratio of recorded sales to unrecorded sales 1:2 and estimated total turnover of Rs. 24 lacs in A.Y. 2003-04 in place of Rs. 47,59,636/-. She further considered the appellant's own case decided by the learned CIT(A) in A.Y. 2009-10 vide order dated 20/1/2012 ITA 69/10-11 wherein G.P. rate was applied @ 16% on recorded and unrecorded sales. She further observed that it is a general accepted principle that the G.P. rate increases with decline in turnover. Since the turnover is held to be of Rs. 24 lacs, the G.P. is estimated @ 19% on total turnover. Thus, the learned CIT(A) confirmed G.P. rate @ 19% on total recorded and unrecorded sales of Rs. 24 lacs and gave the set off gross profit declared at Rs. 1,41,239/- against the estimated profit of Rs. 4,56,000/-. The net addition of Rs. 3,14,761/- was confirmed by her in A.Y. 2003-04.
3.1 In A.Y. 2004-05, similar decision has been taken on proceeding U/s 153A and rejection of books of account U/s 145(3) of the Act on the basis of same argument given by the learned CIT(A) in A.Y. 2003-04, she estimated the total sale turnover on the basis of ratio between 13 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT recorded and unrecorded sales i.e. 1:2 at Rs. 36 lacs and applied G.P. rate @ 18% and allowed set off of gross profit declared by the assessee in estimated the G.P. at Rs. 6,48,000/- and a net addition at Rs. 4,06,015/- was confirmed in A.Y. 2004-05.
In A.Y. 2005-06, the G.P. rate was applied by the learned CIT(A) @ 17% on estimated total turnover of Rs. 46 lacs and gross profit at Rs. 7,82,000/-. She allowed the set off gross profit of Rs. 2,54,912/- disclosed by the assessee and net addition of Rs. 5,27,088/- was confirmed.
In A.Y. 2006-07, she applied G.P. rate @ 17% on total turn of Rs. 41,86,314/- and calculated the G.P. at Rs. 7,11,673/- and allowed the set off gross profit declared at Rs. 5,13,281/- and final net addition was confirmed at Rs. 1,98,392/-.
The learned CIT(A) rectified her order vide order dated 23/12/2013 in A.Y. 2003-04 and estimated total sales of Rs. 35,69,727/- in place of 24 lacs and estimated the gross profit at Rs. 6,78,248/- in place of Rs. 4,56,000/-. In A.Y. 2004-05 estimated the total sale at Rs. 54,88,839/- in place of Rs. 36 lacs and estimated G.P. rate @ 18% at Rs. 9,87,991/- in place of Rs. 6,48,000/-. In A.Y. 2005-06 estimated the 14 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT total sale at Rs. 69,27,294/- in place of Rs. 46 lacs and estimated G.P. rate @ 17% at Rs. 11,77,640/- in place of Rs. 7,82,000/-.
4. Now the assessee is in appeals before us. The learned A.R. for the assessee submitted as under:-
" Section 153A provides that in case of search, assessing officer shall assess or re-assess the total income in respect of each of six assessment year immediately preceding the assessment year relevant to the previous year in which search is conducted. Therefore, before applying section 145(3), the AO has to record a finding as to how this section is applicable in respect of each of the assessment year. On the basis of general observation in one or few years, the same cannot be applied for all the six immediately preceding A.Y.'s.
It is a fact on record that no unrecorded purchase or sales for the years under consideration were found in search. Therefore estimating the unrecorded sales at three times of recorded sales on the basis of finding pertaining to A.Y. 2007-08 to 2009-10 is without any basis. It may be noted that in A.Y. 2006-07 against recorded sales of Rs.26.27 lacs unaccounted sales of Rs.15.58 lacs was only found. Therefore the estimation of the unaccounted sales made by the AO is de hores any material and such estimation is not envisaged in assessment u/s 153A.
The AO has applied higher g.p. rate by referring to the case of M/s Rajan Fire Works and Emporium. The application of the g.p. rate on this basis is not justified for the following reasons:-
15 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT
(i) The AO has not provided the financial data of M/s Rajan Fire Works and Emporium. In assessment proceedings, the result of this firm was not confronted to the assessee.
(ii) The g.p. rate of this concern is not comparable with the assessee for the following reasons:-
- Rajan Fire Works and Emporium is a manufacturer cum wholesaler in this business while assessee is wholesaler only.
- Rajan Fire Works and Emporium is well established entity in this business since 35 years while assessee started its business from 1998.
- The size of business of this firm is much larger than that of assessee.
(iii) The comparative position of the gross profit rate declared by the assessee as per books of account are as under:-
Assessment Sales Gross G. P. Rate
Year Profit (%)
2009-10 21,57,817/- 3,23,516/- 14.99
2008-09 20,56,885/- 2,67,395/- 13.00
2007-08 15,93,180/- 2,06,850/- 12.98
2006-07 26,27,528/- 3,22,211/- 12.26
2005-06 23,09,098/- 2,52,912/- 10.95
2004-05 18,29,613/- 2,41,985/- 13.22
2003-04 11,89,909/- 1,41,239/- 11.87
16 ITA 1004 to 1007/JP/2013,
M/s Purnima Fire Works Vs. ACIT
From the above table it can be noted that the G.P. rate declared by the assessee vary from year to year and comparable with other years.
(iv) In A.Y. 2009-10 AO applied g.p. rate of 18.5% which was reduced by your goodself to 16%.
He relied on the following case laws:
(i) Sinhgad Technical Education Society Vs. ACIT 57 DTR 241 (Pune)
(ii) LMJ International Ltd. Vs. DCIT 22 SOT 315 (Cal.)
(iii) Shabbir Allauddin Latiwala Vs. DCIT 138 TTJ 104 (ITAT) (Rajkot)
(iv) DCIT vs. Royal Marwar Tobacco Product (P) Ltd 16 DTR 129/ 120 TTJ 387 (Ahmadabad)
(v) Anil Kumar Bhatia & Ors. Vs. ACIT 1 ITR 484 (Trib) (Del)
(vi) Anil P Khimani Vs. DCIT 2010-TIOL-177-ITAT-MUM
(vii) ACIT Vs Kamal Kumar S. Agrawal (Indl.) & Ors. 41 DTR 105 (Nag) (Trib)
(viii) Jagdish Duggal vs. ACIT 24 DTR 174 (Chd.)(Trib)
(ix) ACIT Vs. M/s Rochem Separation Systems (I) Pvt Ltd.
2011-TIOL-334-ITAT-MUM Ld. Counsel further contends that in respect of 3 assessment years i.e. 03-04 to 05-06 no incriminating material was recovered, therefore, no notice for these assessment years could have been issued. In view of above cited judgments, consequently the assessment being unabetted and no incriminating material having been found; cannot be framed u/s 153A.
5. The D.R. vehemently supported the order of the learned CIT(A) and argued that vide statement dtd. 21-10-08 assessee has himself admitted that he was engaged in the business of carrying out purchases 17 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT and sales outside the books of accounts. He has nowhere referred to any year as exception in which such activities are not indulged in. Thus looking at the entirety of statement, seized material, there exist enough evidence admitted by the assessee himself; establishing that material was found to issue notices u/s 153A for all the six assessment years. This statutory process has been diligently followed by ld. AO and confirmed by ld. CIT(A). Learned CIT(A) was more than reasonable in estimating the turnover and G.P. rate and allowing part relief to assessee, therefore, he prayed to confirm the order of the learned CIT(A).
6. We have heard the rival contentions of both the parties and perused the material on record. The case law of Jai Steel India Vs. ACIT (supra) relied upon by the learned counsel for the assessee on 153A proceeding is not squarely applicable as the Hon'ble Rajasthan High Court has decided in this case the issue of any whether deduction can be claimed U/s 153A of the Act or not. As mentioned by the learned CIT(A) in her order that the assessment was completed U/s 143(1) of the Act, which has been held by the Hon'ble Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (supra) that the proceeding completed U/s 143(1)(a) of the Act are not same as an 18 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT assessment U/s 143(2) of the Act. Besides these cases will be applicable when no material is found during the course of search. We find merit in the contentions of ld DR that considering the statement of assessee dtd. 21-10-2008 it has been admitted that assessee was regularly engaged in unrecorded purchases and sales; no exception of any year has been claimed. Consequently the statement and the seized record for other year unambiguously become incriminating material for valid issue of notices u/s 153A. The ground raised challenging the validity of notices u/s 153A are dismissed 6.1 In these circumstance the case laws relied on by the assessee become inapplicable as the incriminating material as a result of search exists on the record. During the course of search, incriminating documents were found. On the basis of these documents, the Assessing Officer has tabulated unrecorded sales from A.Y. 2006-07 to 2009-10 and also considered the preponderance of possibility for A.Y. 2003-04 to 2005-06 alongwith statement U/s 132(4) of the Act by the partners and on admission of unrecorded sales in the line of fireworks business without quoting a particular year. It is admitted by the appellant in his statement dated 21/10/2008 that it has been indulging in unrecorded purchase and sales; no year of exception is stated. This leads to a clear 19 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT indication the assessee as a regular policy indulged in such clandestine maintenance of books and avoided taxes. Therefore, the notices issued U/s 153A for all the years by the Assessing Officer are valid and CIT(A) has rightly upheld them. Further reassessment proceedings were abated in A.Y. 2003-04, 2004-05 and 2005-06 as the assessee's case were only processed U/s 143(1) of the Act. Therefore, we confirm the order of the learned CIT(A) on issuance of notice U/s 153A of the Act in all the years.
7. The learned A.R. also challenged the G.P. rate as well as total sales turnover estimated. The facts and figures are as under:-
A.Y. GP rate GP rate GP rate Total Total
declared applied applied by turnover turnover
by A.O. CIT(A) estimated by estimated by
the A.O. the CIT(A)
2003-04 11.87% 17% 19% 47,59,636/- 35,69,727/-
2004-05 13.23% 17.25% 18% 73,18,452/- 54,88,839/-
2005-06 11.04% 17.50% 17% 92,36,392/- 69,29,294/-
2006-07 12.26% 17.75% 17% 41,86,314/- 41,86,314/-
The learned Assessing Officer applied comparable case of M/s Rajan Fireworks and Emporium Prop. M/s Sunder Dass Hasani HUF, who is wholesalers/retailers of fireworks, who has shown G.P. rate ranging G.P. from 17% to 18%. The learned AR argued that the case of M/s Rajan Fireworks and Emporium Prop. M/s Sunder Dass Hasani HUF is 20 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT not a comparable case hence distinguished on various facts and figures and nature of trading activity in quantum and experience. The assessee has shown G.P. in 2009-10 @ 14.99% on recorded sales of Rs. 21,57,817/-, therefore, we apply G.P. rate in A.Y. 2003-04 @ 13%, in A.Y. 2004-05 @ 14%, in A.Y. 2005-06 @ 13% and in A.Y. 2006-07 @ 13.5% in the interest of justice. The Assessing Officer is directed to recalculate the income of the assessee on the basis of G.P. rate decided by this Court in year wise on estimated total turnover by the learned CIT(A).
8. In the result, the assessee's appeals are partly allowed. Order pronounced in the open court on 19/02/2015.
Sd/- Sd/-
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(R.P.Tolani) (T.R. Meena)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur
fnukad@Dated:- 19th February, 2015
*Ranjan
vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- M/s Poornima Fire Works, Jaipur.
2. izR;FkhZ@ The Respondent- The A.C.I.T., Central circle-1, Jaipur.
3. vk;dj vk;qDr@ CIT 21 ITA 1004 to 1007/JP/2013, M/s Purnima Fire Works Vs. ACIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 1004 to 1007/JP/2013) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar