C I T vs. PAWAN KUMAR

The assessee was engaged in the business of manufacturing and sale of bricks under the trade name of M/s. Sadhu Ram Pawan Kumar and Co. BKO in his individual capacity. He was also enjoying shares income as a partner, from M/s. Garg Bricks Co. The assessee filed return of income on 27.9.2001 showing total income of Rs.74331/-. The return of income was accompanied by audit report in form No. 3 CD comprising of balance sheet, trading account, P & L account, coal account, capital account of the proprietor and other details. The return of income was processed u/s 143(1)(a) of I. T. Act at the returned income. Thereafter the case was selected for scrutiny. During the course of assessment proceedings the Assessing Officer noticed that one Shri Gaurav Garg had shown purchases of 128000 number of bricks on credit basis for a sale consideration of Rs.144000/- from the assessee. The aforesaid information was put to verification. After that the Assessing Officer came to the conclusion that the assessee had been manufacturing the bricks and selling them outside the books and as such sales were not being disclosed in the return of income tax. The Assessing Officer also noticed certain more discrepancies. Assessing Officer worked out the number of bricks at 5775000. The Assessing Officer also accepted the figure of opening and closing stock disclosed by the Assessing Officer and thus the same had been worked out to 6766725/-. The Assessing Officer applied gross profit rate of 14% on the aforesaid estimated sale of Rs.6766725/-. In this manner, gross profit was worked out at Rs.947340/- as against returned gross profit of Rs.3,13,568/- and the addition of Rs.633772/- was thus made.

The assessee filed an appeal before the Commissioner of Income Tax ( Appeals ). The Commissioner of Income Tax ( Appeals ), Hisar after considering the submissions of both the parties opined that the assessee sold the bricks outside the books of accounts and thus, the books of accounts produced before the Assessing Officer deserves to be rejected and held that Section 145(3) of the Act was applicable. The Commissioner of Income Tax ( Appeals ), Hisar was also of the opinion that the estimate of bricks produced at Rs.5775000/- was quite justified. The application of gross profit rate of 14% was also held to be reasonable. Accordingly , the addition of Rs.633772/- was confirmed and dismissed the appeal vide order dated 18.11.2004. 4. The assessee filed appeal before the Tribunal. The Tribunal vide impugned order dated 20.4.2007 partly allowed the appeal filed by the assessee and instead of 14% applied gross profit rate at 10%. The Tribunal also made an addition of Rs.1,44,000/- for the sales disclosed by the assessee.

We have heard Sh. Yogesh Putney , Advocate for the revenue and perused the record.

Counsel for the revenue has vehemently argued that the estimate of gross profit rate of 14% as applied by the Assessing Officer was quite reasonable in the facts and circumstances of the case and the Tribunal wrongly ordered the reduction at 10%. Learned counsel has also argued that in view of the details, as noticed and highlighted in the assessment order, the estimate of sales made by the Assessing Officer was quite reasonable and justified and therefore, the Tribunal has wrongly accepted the sales shown by the assessee.

After hearing the learned counsel, we find no infirmity in the impugned order of the Tribunal. The Tribunal has given a pure finding of fact on all the issues. While reducing the gross profit rate, the Tribunal has noticed that neither the assessee nor the Assessing Officer has given any instance of the comparable case belonging to the same vicinity where the brick klin of the assessee was situated. The cases relied upon by the Assessing Officer belongs to different Districts and States and the location of the brick klin was far away from the site of the assessee and keeping in view the totality of the facts, the Tribunal held that the gross rate of 14% as applied by the Assessing Officer was highly excessive and without any basis. The gross profit rate of 10% as applied by the Tribunal was after considering the past history and the gross profit rate in subsequent years. Thus, no substantial question of law arises for determination of this Court in the present appeal and the same is hereby dismissed.