C.I.T. CENTRAL, JAIPUR vs. M/S JANTA SWEET HOME PVT. LTD.

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ITA/153/2013HC RajasthanRJHC01015726201309 May 2018Author: GOPAL KRISHAN VYAS,RAMCHANDRA SINGH JHALA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court, by following a co-ordinate bench's decision in IT Appeal No. 81/2007 decided on 09.01.2013, reported in (2013) 354 ITR 238 (Raj.), held that the findings of the CIT(A) and the Tribunal were not suffering from perversity or the application of any wrong principle. The Court agreed that when sales declared by the assessee were accepted by sales-tax authorities and the AO could not produce cogent material to show sales outside the books, his estimate of sales more than one and a half times the declared sales was not justified. The Court found the CIT(A)'s acceptance of sales at Rs. 26 lakhs to be reasonable. Regarding the GP rate, the Court noted the AO's error in using a comparable case without considering the difference in operational periods and the assessee's first year of functioning. The Court upheld the CIT(A)'s application of a 25% GP rate as against the 20.6% declared by the assessee and the AO's rate of 32.42%. The Court concluded that the matter involved a reasonable estimate on sales and GP rate, and since the authorities recorded findings with cogent reasons, there was no reason to interfere. 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., Nai Sarak, Jodhpur. The appeals concerned various assessment years, though not explicitly stated for each appeal. The core of the dispute revolved around the Assessing Officer's (AO) estimation of sales and Gross Profit (GP) rate. The AO had made an estimate of sales more than one and a half times the declared sales and applied a GP rate of 32.42%. The Commissioner of Income Tax (Appeals) [CIT(A)] and the Income Tax Appellate Tribunal (ITAT) had accepted sales at Rs. 26 lakhs and applied a GP rate of 25%. The High Court was considering the appeals against the ITAT's order.

What were the issues?

The primary issue before the High Court was whether the findings of the CIT(A) and the Tribunal regarding the estimation of sales and the GP rate were justified. Specifically: 1. **Question of Law/Mixed Law and Fact:** Whether the AO was justified in estimating sales at more than one and a half times the declared sales, when the sales declared by the assessee were accepted by the sales-tax authorities and the AO failed to produce cogent material to prove sales outside the books of accounts. * **Assessee's Contention:** The assessee argued that since sales-tax authorities accepted declared sales and the AO lacked evidence for undisclosed sales, the AO's estimate was unjustified. * **Revenue's Contention:** The revenue, through the AO's actions, contended that the declared sales were understated and an higher estimate was warranted. 2. **Question of Law/Mixed Law and Fact:** Whether the AO was justified in applying the GP rate of 32.42% by taking the case of Anil Marbles (P) Ltd. as comparable, without considering the difference in the period of operation and the fact that the assessee was in its first year of functioning. * **Assessee's Contention:** The assessee argued that the AO erred in using a comparable case without considering the significant differences, such as the assessee's limited operational period (about 9 months) and being in its first year. * **Revenue's Contention:** The revenue, through the AO's actions, sought to apply a higher GP rate based on the comparable case.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Income Tax Appeal No. 153 / 2013 Commissioner of Income Tax (Central), Jaipur ----Appellant Versus M/S Janta Sweet Home Pvt. Ltd., Nai Sarak, Jodhpur (Rajasthan.) ----Respondent Connected With D.B. Income Tax Appeal No. 150 / 2013 Commissioner of Income Tax (Central), Jaipur ----Appellant Versus M/S Janta Sweet Home Pvt. Ltd., Nai Sarak, Jodhpur (Rajasthan.) Respondent D.B. Income Tax Appeal No. 151 / 2013 Commissioner of Income Tax (Central), Jaipur ----Appellant Versus M/S Janta Sweet Home Pvt. Ltd., Nai Sarak, Jodhpur (Rajasthan.) ----Respondent D.B. Income Tax Appeal No. 152 / 2013 Commissioner of Income Tax (Central), Jaipur ----Appellant Versus M/S Janta Sweet Home Pvt. Ltd., Nai Sarak, Jodhpur (Rajasthan.) ----Respondent D.B. Income Tax Appeal No. 155 / 2013 Commissioner of Income Tax (Central), Jaipur ----Appellant Versus M/S Janta Sweet Home Pvt. Ltd., Nai Sarak, Jodhpur (Rajasthan.) ----Respondent (2 of 3) [ITA-153/2013] D.B. Income Tax Appeal No. 156 / 2013 Commissioner of Income Tax (Central), Jaipur ----Appellant Versus M/S Janta Sweet Home Pvt. Ltd., Nai Sarak, Jodhpur (Rajasthan.) ----Respondent _____________________________________________________ For Appellant(s) : Mr. K.K. Bissa. For Respondent(s) : Mr. Anjay Kothari. _____________________________________________________ HON'BLE MR. JUSTICE GOPAL KRISHAN VYAS HON'BLE MR. JUSTICE RAMCHANDRA SINGH JHALA

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]

11.

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.

12.

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.

13.

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.

14.

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)

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