R S INDUSTRIES vs. ASSITANT COMMISSIONER OF INCOM

ITA/20/2003HC RajasthanRJHC02043971200202 November 20162 pages

AI SummaryDismissed

What did the High Court hold?

The High Court held that it was in complete agreement with the view taken by the Tribunal. The Tribunal had observed that the books of accounts were rejected in earlier years, and the manufacturing account did not reflect the true affairs. While relief was granted for burning loss, the Tribunal felt that a 10% GP rate was reasonable and justified given the totality of circumstances and the allowance for burning loss. The Tribunal found the resale account not verifiable and identifiable, thus not considering it reasonable to restrict sales at 3%. The Tribunal directed that the GP rate be taken at 10% without bifurcation. The High Court found no perversity in the Tribunal's order and answered the issue in favour of the department. The appeal was accordingly dismissed.

What were the facts?

The assessee, M/s R.S. Industries, is in appeal before the High Court against an order of the Income Tax Appellate Tribunal (ITAT). The ITAT had partly allowed the assessee's appeal and fully allowed the revenue's appeal. The dispute pertains to the assessment year(s) not explicitly stated but implied to be around 1985-86. The core issue involved the rejection of the assessee's books of accounts due to higher burning loss and the enhancement of the gross profit (GP) rate on the resale account. The High Court noted that the Tribunal observed that books of accounts were rejected in earlier years as well, and the manufacturing account did not reflect true affairs. The Tribunal had previously upheld a 10% GP rate for assessment year 1985-86 under similar circumstances, which was accepted by the assessee. The assessee's counsel could not refute the Tribunal's observations.

What were the issues?

1. Whether the Income Tax Appellate Tribunal acted perversely in setting aside the finding of the CIT(A) without any material on record and enhancing the gross profit rate on resale account to 10% from 3%? (Question of law and fact, concerning the enhancement of GP rate). Assessee's contentions: The assessee argued that the Tribunal acted perversely by enhancing the GP rate without material on record. The specific arguments made by the assessee before the Tribunal are not fully detailed, but the High Court noted that the assessee's counsel could not refute the Tribunal's observations. Revenue's contentions: The revenue contended that the books of accounts were rejected due to higher burning loss, and the manufacturing account did not reflect true affairs. The Tribunal observed that the resale account was not verifiable and identifiable, justifying a higher GP rate. The revenue's appeal before the Tribunal was fully allowed.

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR. D.B. Income Tax Appeal No.20/2003 M/s R.S. Industries vs. The Assistant Commissioner of Income Tax.

DATE OF ORDER ::: 02.11.2016 HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE MAHENDRA MAHESHWARI Mr. A.Kasliwal for the appellant. Mr. Nikhil Simlote for the respondent/s. 1. By way of this appeal, the appellant has assailed the judgment & order of the Tribunal whereby the Tribunal has partly allowed the appeal filed by the assessee and revenue appeal was fully allowed. 2. This court while admitting the matter has framed the following question of law:- "(i) Whether the Income Tax Appellate Tribunal acted perversely in setting aside the finding of the CIT(A) without any material on record and enhancing the gross profit rate on resale account to 10% from 3% ?." 3. The Tribunal has in para 13 observed as under:- “13.We have heard the rival parties and have perused the material available on record. In this connection, it is observed that the admitted fact of this case are that books accounts were rejected even in earlier years. The manufacturing account clearly shows that it is not reflecting the true affairs of the assessee, raw material and manufacturing of finished product. Books of accounts of the assessee were, therefore, rejected on accounted on account of higher burning loss and g.p. Rate was applied. For the assessment year 1985-86,

under

the

similar circumstances, gross profit rate of 10% was upheld by the first appellate authority and which was finally accepted by the assessee. We have allowed relief to the assessee on account of claim of

2 burning loss but at the same time feel that if the totality of the circumstances is taken into account the g.p. Rate at 10% would not only be reasonable but justified on account of the allowance of the burning loss. Since the resale account is no verifiable and identifiable, we do not consider it reasonable to restrict the sales on that account at 3%. The Id A.R. has also not placed any material on record to prove the argument of revenue that resale account is not verifiable.

Under

the circumstances, we direct that the g.p. rate be taken at 10% without bifurcating the account into 2 or 3 parts. This ground of appeal taken by the assessee, therefore, stands dismissed and the appeal on this account filed by the revenue in ITA No. 713/JP/98 stands allowed. We order accordingly.” 4. Though requisite order of the AO and Tribunal or Appellate Authority is not record, counsel for the appellant is not in a position to refute the observations made by the Tribunal in para 13 referrred herein above. 5. In that view of the matter, we are in complete agreement with the view taken by the Tribunal, the issue is answered in favour of the department against the assessee. 6. The appeal is accordingly dismissed. (Mahendra Maheshwari), J. (K.S. Jhaveri), J. A.Sharmas/s-96

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