M/S SHREE GANPATI EMBROIDERY PVT. LTD. vs. C.I.T.-II

The assessee has preferred this appeal under Section 260-A of the Income Tax Act, 1961 (in short, ‘the Act’) against the order of the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar, dated 12.10.2007 in ITA No.34 (ASR) 2007, for the assessment year 2003-04, proposing to raise following substantial questions of law:- “i) Whether in the facts and circumstances of the case, the Tribunal is justified in upholding the rejection of books of account as done by the Assessing Officer particularly when the AO had not recorded any satisfaction about the correctness and completeness of the books of account? ii) Whether the books of account can be rejected under section 145(3) without recording any satisfaction with regard to its correctness and completeness? iii) Whether in the facts and circumstances of the case, the Tribunal is justified in estimating the sale of the appellant company at Rs.6,00,00,000/- against declared sales of Rs.5,58,80,907/- without giving any reason or finding in this regard? iv) Whether in view of the facts and circumstances of the case, the Tribunal is justified in estimating the GP rate @ 32% as against declared GP rate of 24.95%? v) Whether the books of account can be rejected merely because there was a surrender during the Survey proceedings? vi) Whether the books of account can be rejected while framing the assessment under section 143(3)

On a survey being conducted under section 133-A of the Act, the Survey team prepared inventories of stocks at the premises of the assessee and found that only a part of the stock was entered in the books of account. The assessee surrendered income of Rs.60,00,000/- by way of excess stock. During the assessment, the Assessing Officer held that complete stock was not reflected from the books of account and made best judgment assessment. The CIT(Appeals) upheld the plea of the assessee that the excess stock was accounted for during the survey and thereafter, addition on account of GP rate by estimating the turn- over was not called for. The ITAT upheld the view of the Assessing Officer regarding the rejection of books of account and applied GP rate of 32% as against 35% applied by the Assessing Officer.

The substantial questions of law framed by the assessee, in effect, relate to the findings recorded after appreciation of evidence.

A perusal of the order of the Assessing Officer shows that explanation of the assessee about books of account having been regularly maintained was rejected by giving detailed reasons. The Tribunal also upheld the finding that the assessee was having sale and purchase outside the books of account and the estimate of sales based on best judgment was upheld. The Tribunal has considered all the points raised by the assessee and also referred to its earlier order upholding the rejection of books of account. The Tribunal also held that the CIT (A) overlooked the reasons given by the Assessing Officer for rejecting the book results. It is not a case where books of account are properly maintained and the Assessing Officer has substituted his own estimate ignoring the books of account, without giving any reasons. There is no patent error in the view taken by the Tribunal that books of account of the assessee could not be accepted as the same did not reflect true income.

Once there was valid basis for rejecting the accounts and assessment was not capricious or vindictive, the estimate had rational, some amount of guess work had to be allowed and could not be interfered with, merely because a different view could be taken.

In view of above, it cannot be held that any substantial question of law arises.

The appeal is dismissed. (Adarsh Kumar Goel) Judge November 10, 2008 ( L.N.Mittal) Judge ‘gs’ 5