C I T JAIPUR vs. BABU LAL AGARWAL

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ITA/268/2010HC RajasthanRJHC02053584201010 July 2013Author: NARENDRA KUMAR JAIN-II,MAHESHWARI DINESH9 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that there was no substantial question of law involved in the appeal. Regarding the trading addition, the Court found that the AO enhanced the GP rate to 8.5% from the assessee's declared 7.43% without a cogent basis. It noted that the assessee's GP rate in the current year was higher than in the preceding years (7.01% for AY 2004-05 and 6.98% for AY 2003-04), making the declared rate not fanciful or baseless. Since the CIT(A) deleted the addition on relevant considerations and the ITAT concurred, the Court found no substantial question of law. Concerning the addition of Rs.13,05,091/- for marriage expenditure, the Court observed that this was also an estimation by the AO, which was disapproved by the CIT(A) after considering the record. The ITAT had also examined the matter in detail and found the AO's estimate to be without basis, with the sources of expenditure being explained through withdrawals by the daughters, reflected in their bank accounts and income tax returns. The Court concluded that this issue involved appreciation of evidence, and the concurrent findings of the CIT(A) and ITAT against the revenue did not reveal any illegality or perversity leading to a substantial question of law. The appeal was accordingly dismissed.

What were the facts?

The appeal by the revenue (CIT Jaipur-II) challenges an order of the Income Tax Appellate Tribunal (ITAT) dated 20.11.2009 for the assessment year 2005-06. The ITAT had partly allowed the revenue's earlier appeal on 13.02.2009, but this order was recalled by the ITAT on 25.05.2009 due to a lack of adequate opportunity for the assessee. The revenue's subsequent appeal against the recall order was dismissed as infructuous by the High Court. The assessee, engaged in manufacturing and trading of bed sheets and cloths, had declared a Gross Profit (GP) of 7.43% on a turnover of Rs.1,11,55,235/-. The Assessing Officer (AO) rejected the assessee's books of accounts under Section 145(3) and made a trading addition of Rs.1,91,439/- by estimating GP at 8.5% on an estimated turnover of Rs.1.20 crore. The AO also made an addition of Rs.13,05,091/- on account of unexplained expenditure for the marriage of the assessee's two daughters.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether on the facts and in circumstances of the case, the ITAT was justified in law in deleting the trading addition despite the fact that the invocation of provisions of Section 145(3) was upheld? 2. Whether on the facts and in circumstances of the case, the ITAT was justified in law in deleting the addition of Rs. 13,05,091/- made on account of unexplained expenditure in marriage without considering the material and facts discussed by the Assessing Officer? The revenue contended that the assessee had not properly explained the book profit, and the AO made the trading addition after giving proper opportunity. It argued that with Section 145(3) upheld, there was no reason to delete the AO's additions. The revenue further submitted that the GP rate of 8.5% applied by the AO was justified given the unverifiable sales and lack of stock register. Regarding the marriage expenditure, the revenue argued that the assessee failed to furnish complete details and evidence, and the AO's estimate was justified based on statements and prevailing social norms. The assessee's contentions, as reflected in the lower authorities' orders and the Tribunal's findings, were that the GP rate of 7.43% shown was better than the previous year's 7.01% and that the AO's estimation of GP was without a cogent basis. For the marriage expenditure, the assessee argued that the AO's estimate was based on guesswork, and the sources of expenditure were explained through withdrawals by the daughters from their bank accounts and their own income, which were verifiable. The assessee relied on the CIT(A)'s findings that the AO lacked evidence and that the estimate was on the higher side.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 145(3)

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Income Tax Appellate Tribunal, Jaipur

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C.P.Goyal PA

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