C.I.T. CENTRAL, JAIPUR vs. M/S JANTA SWEET HOME PVT. LTD.
What did the High Court hold?
The High Court, by following its co-ordinate bench's judgment in IT Appeal No. 81/2007, held that when sales declared by the assessee were accepted by sales-tax authorities and the Assessing Officer (AO) failed to produce cogent material to show sales out of books, his estimate of sales more than one and a half times the declared sales was not justified. The Court found that the CIT(A) and Tribunal were justified in taking the sales figure at Rs. 26 lakhs. Regarding the GP rate, the Court noted the AO's error in using a comparable case (Anil Marbles (P) Ltd.) without considering the difference in the period of operation and the assessee being in its first year. The CIT(A)'s application of a 25% GP rate, as against the assessee's declared 20.6%, was considered reasonable, and the AO's rate of 32.42% was not approved. The Court concluded that the orders of the CIT(A) and Tribunal were not suffering from perversity or wrong principles, as they were based on reasonable estimates of sales and GP rate with cogent reasons. Accordingly, the appeals were dismissed.
What were the facts?
The appeals were filed by the Commissioner of Income Tax (Central), Jaipur against M/s Janta Sweet Home Pvt. Ltd. for assessment year(s) not specified in the provided text. The appeals challenged orders passed by lower authorities. The respondent-assessee's counsel submitted that the issue involved had already been adjudicated by this Court in IT Appeal No. 81/2007 decided on 09.01.2013, reported in (2013) 354 ITR 238 (Raj.). The High Court perused the cited judgment which dealt with the quantum of sales and the Gross Profit (GP) rate.
What were the issues?
1. Whether the Assessing Officer's estimate of sales, more than one and a half times the declared sales, was justified when sales-tax authorities accepted the declared sales and the AO failed to produce cogent material regarding out-of-books sales? (Question of law and fact, concerning addition to income based on estimated sales). 2. Whether the Assessing Officer erred in selecting a comparable case for GP rate calculation, ignoring the difference in the period of operation (whole year vs. approximately 9 months) and the assessee being in its first year of functioning? (Question of law and fact, concerning the determination of GP rate). 3. Whether the orders passed by the CIT(A) and the Tribunal were suffering from perversity or application of wrong principles in estimating sales and GP rate? (Question of law and fact, concerning the validity of findings by appellate authorities). Assessee's arguments: Not explicitly recorded, but the judgment implies the assessee's position was upheld by the CIT(A) and Tribunal regarding sales and GP rate. Revenue's arguments: The Assessing Officer made an estimate of sales and applied a GP rate of 32.42% based on a comparable case, which the assessee contested.
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
Order 09/05/2018 It is submitted by the learned counsel for the respondent that issue involved in this case has already been adjudicated by this Court in IT Appeal No.81/2007 decided on 09.01.2013 reported in (2013) 354 ITR 238 (Raj.). We have perused the aforesaid judgment in which following adjudication was made by the Co-ordinate bench of this Court in para No.10 to 14, which reads as under:- “10. When the sales declared by the assessee had been accepted by the sales-tax authorities and the AO failed to bring on record any cogent material to show the quantum of sales out of books of accounts, his estimate more than one and half time the sales declared by the assessee could not have been considered justified. On a reasonable estimate, the CIT(A) and the Tribunal have, in our opinion, not committed any error in taking the figure of sales at Rs.26 lakhs and not beyond.
(3 of 3) [ITA-153/2013]
So far GP rate was concerned, the AO was obviously in error in taking the case of Anil Marbles (P) Ltd. As a comparable one, while omitting to consider the basic difference that the said company had worked for whole of the year whereas the respondent- assessee had worked only for a period of about 9 months during the year in question, as the commercial production of the assessee started only from the third week of June, 1995, and the assessee had been in the first year of its functioning.
In the totality of circumstances, the CIT(A) could not have been faulted in applying the GP rate of 25 per cent as against 20.6 per cent declared by the assessee but while not approving the rate of 32.42 per cent as applied by the AO.
The orders as passed by the CIT(A) and the Tribunal do not appear suffering from any perversity or from application of any wrong principle. In our view, ultimately, the matter had been of putting a reasonable estimate on the quantum of sales and on the GP rate while recording the findings on facts. When the authorities have recorded such findings with cogent reasons and on relevant considerations, we find no reason to interfere.
Accordingly and in view of the above, the answer to the question formulated in the present case in the affirmative i.e., against the Revenue and in favour of the assessee.” While following aforesaid judgment, all these income tax appeals are hereby dismissed. (RAMCHANDRA SINGH JHALA)J. (GOPAL KRISHAN VYAS) J. Ishan(62-67) Powered by TCPDF (www.tcpdf.org)
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