M/S SARAF SEASONING UDHYOG vs. THE COMMISSIONER OF INCOME TAX
What did the High Court hold?
The Tribunal held that the matter was essentially one of appreciation of evidence and no substantial question of law arose for consideration. The Tribunal noted that the AO had rejected the assessee's books of accounts after finding that the assessee was not maintaining requisite records, specifically a stock register and details of material consumption. The AO provided five reasons for rejecting the books. The estimation of GP was done only thereafter. The Tribunal observed that the estimated GP rate was not grossly disproportionate to the GP rate declared by the assessee or the GP rate of the preceding year. Therefore, the appeal was dismissed.
What were the facts?
The appeal was filed by M/s Saraf Seasoning Udhyog (the assessee) against an order of the Assessing Officer (AO). The AO had estimated the gross profit (GP) at 15% for the assessment year under consideration. The assessee's declared GP was 14.29%, which was lower than the preceding year's GP of 16.49%. The AO rejected the assessee's books of accounts, citing reasons such as the lack of a stock register and other material consumption details. The AO's estimation of GP was made after rejecting the books. The appeal was heard on admission by the Rajasthan High Court, Jaipur Bench.
What were the issues?
1. Whether the estimation of gross profit at 15% by the Assessing Officer was legally impermissible when the sales and purchases made by the appellant were accepted. Assessee's Contention: The assessee argued that since the sales and purchases were accepted, the AO's estimation of the gross profit at 15% was legally impermissible. The assessee's declared GP was 14.29% for the year under consideration. Revenue's Contention: The revenue's position, as reflected in the AO's actions, was that the assessee's books of accounts were unreliable due to the lack of proper record-keeping, including a stock register and details of material consumption. This led to the rejection of the books and subsequent estimation of GP.
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
Judgment 01/08/2023 Heard on admission. Learned counsel for the appellant referring to the order passed by the Assessing Officer submitted that where the sales and purchases made by the appellant are accepted, the process of estimation for arriving at gross profit at 15% was legally impermissible. We find that in the present case, having found that during the year under consideration, the GP declared by the assessee was 14.29% in comparison to the GP for the preceding year at 16.49%, the Assessing Officer proceeded to examine the correctness of the books of accounts and found that the assessee is not maintaining the requisite record, particularly stock register as well as other details of consumption of materials. The Assessing
[2023:RJ-JP:16076-DB] (2 of 2) [ITA-65/2019] Officer gave as many as five reasons for rejecting books of accounts. The estimation has been done only thereafter. It is not a case where the estimation as compared to the GP rate declared by the assessee in comparison to the GP for the preceding year and one which has been estimated are grossly disproportionate. Essentially, the matter is only of appreciation of evidence and no question of law arises for consideration, therefore, the appeal is dismissed.
(PRAVEER BHATNAGAR),J (MANINDRA MOHAN SHRIVASTAVA),J Sanjay Kumawat-48
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