RAJVI PAPER TRADERS PVT.LTD.,VAPI vs. THE INCOME TAX OFFICER, WARD-7, VAPI

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ITA 2745/AHD/2016Status: DisposedITAT Surat26 July 2019AY 2012-136 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Assessing Officer was not justified in making an addition on account of URD purchases without rejecting the assessee's books of accounts. The Tribunal noted that the assessee's profit margins were higher than the previous year and that the case law relied upon by the authorities was distinguishable.

What were the facts?

The assessee, a paper trader, made significant purchases from unregistered dealers (URD). The Assessing Officer disallowed a portion of these URD purchases, treating them as unverifiable, and made an addition based on an estimated profit rate without rejecting the assessee's books of accounts.

What were the issues?

Whether an addition can be made on account of unverifiable purchases from unregistered dealers without rejecting the assessee's books of accounts.

Which sections of the Income-tax Act were involved?

Section 145(3)

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Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: SHRI BHAVNESH SAINI & SHRI O.P.MEENA

For Respondent: Shri S.R.Meena –Sr.DR

Per contra, the ld.Senior Departmental Representative relied on 7. the order of Lower Authorities.

We have heard the rival submissions and perused the material 8. available on record, we find that the Assessing Officer has made addition by estimating the gross profit rate of URD purchases without rejection of books of accounts. The Assessing Officer has not pointed out any particular defects or discrepancies in the accounts books maintained the assessee. It is further noticed that the assessee has show gross profit rate @5.05% as against 3.50% of last year net profit of 0.88% as against net profit rate of 0.76% of last year, therefore the gross profit and net profit rate disclosed by the assessee is also higher than the last year. Therefore, we do not find any reason to estimate

Rajvi Paper Traders Pvt. Ltd., Vs. ITO, Ward-7, Surat/ITA No.2745/AHD/2016 A.Y. 2012-13 Page 5 of 6

the net profit rate without bringing material on record, further the assessee is dealing in waste paper in which the assessee is making purchases from various customers. Further the case law of Vijay Desai (HUF) (Supra) relied by the ld.Assessing Officer and ld.CIT(A) is related to search and seizure action was carried out and incriminating material was found during the search indicating unrecorded purchases, therefore the same is distinguishable on the present facts of the case. Further, we find that the Hon’ble Karnataka High Court in the case of CIT Vs. Anil Kumar & Co. [2016] 67 Taxmann.com 278 (Karnataka) wherein it was held that where the books of accounts of the assessee had not been rejected and assessment having not been framed u/s.144 of entire addition made by Assessing officer based on estimation of income was to be deleted. Similarly, the ld.Counsel further placed reliance on the decision of Hon’ble Rajasthan High Court in the case of Vijay Industries Vs. CIT, Alwar, Tax Appeal NO.21/2005 dated 21.03.2017 wherein also it was held that addition cannot be justified without rejection of books of accounts. Similarly, in the case of ACIT Vs. Ercon Composites [2014] 49 taxmann.com 489 (Jodhpur Tribunal) wherein it was held that without rejecting books of account addition on estimate basis was not justified. In view of the above facts, we are of the considered opinion that the Assessing Officer was not justified in making addition of Rs.57,73,496/- on account of URD purchases, hence the same is

Rajvi Paper Traders Pvt. Ltd., Vs. ITO, Ward-7, Surat/ITA No.2745/AHD/2016 A.Y. 2012-13 Page 6 of 6

therefore directed to be deleted, accordingly, the sale ground of the appeal of the assessee is allowed.

In the result, appeal of the assessee is allowed. 9.

The order pronounced in the open court on 26.07.2019 10. Sd/- Sd/- (BHAVNESH SAINI) (O.P.MEENA) (�याियकसद�यतथा/JUDICIAL MEMBER) (लेखासद�यकेसम� /ACCOUNTANT MEMBER) सुरत/ Surat, �दनांक Dated: 26th July, 2019/S.Gangadhara Rao, Sr.PS Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order / / TRUE COPY / / Assistant Registrar, Surat

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