MS DM AJAY KUMAR VIVEK KUMAR vs. ASSTT.COMMISSIONER OF INCOME TAX

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA I.T.A No. 59 of 2007 Date of decision: 15.12.2009 M/s.D.M Ajay Kumar Vivek Kumar, A.B., Kullu. …. Appellant Versus Assistant Commissioner of Income Tax & anr. ….. Respondent Coram: The Hon’ble Mr. Justice Deepak Gupta, J. The Hon’ble Mr.Justice V.K.Ahuja, J. Whether approved for reporting? No For the appellant: Mr.M.M.Khanna, Senior Advocate with Mr.Vayur Gautam, Advocate. For the respondents: M/s.Vinay and Vandana Kuthiala, Advocates. Deepak Gupta, J.(Oral) This appeal was admitted on the following substantial question of law:- “1. Whether the case of M/s.Kachwala Gems versus JCIT (2007) 288 ITR 10(SC) is applicable and covers the case of appellant 2 with regard to application of rate of 33% imposed by the Tribunal?” Briefly stated the facts of the case are that the assessee-firm deals in herbs. It declared an income of Rs.17,350/- for the assessment year 1996-97. The Assessing Officer assessed the income vide assessment order dated 19.3.2002 at Rs.11,80,590/-. The main dispute relates to the addition of Rs.4,13,015/- made by the Assessing Officer on account of low gross profit rate. The facts necessary for the decision of the case are that despite opportunity given, the assessee did not produce purchase vouchers in respect of the herbs. It also could not produce the addresses of the sellers from whom it has purchased the herbs. No detail of the persons from whom the assessee had purchased the herbs was given or maintained by the assessee. The opening and closing stock statement could not be verified. Therefore, the Assessing Officer did not accept the books of account of the assessee and assessed the gross profit of the assessee at the rate of 33% of the sales. The assessee had 3 declared gross profit of Rs.6,98,577/- on total sales of Rs.33,68,447/- which gave gross profit rate of 20.73%. In the previous year, the gross profit rate was 33.04%. On appeal the Commissioner of Income Tax (Appeals) deleted the addition on the ground that the Assessing Officer had not pointed out any specific defects or discrepancies in the books of account. He accepted the plea of the assessee and deleted the addition of Rs.4,13,015/-. On further appeal to the ITAT, the Tribunal relying upon the judgment of the Apex Court in M/s.Kachwala Gems Vs. JCIT 2007 (288) ITR 10 held that in view of the fact that the assesse could not produce the purchase vouchers and details of the vendees and in the absence of stock register, the Assessing Officer was well within his right to reject the books of account. In Kachwala Gems’ case, the Apex Court held that where the assessee did not maintain the quantitative details/stock register and there was no evidence to verify the stocks and the genuineness of purchases was not 4 proved without any doubt, the Assessing Officer was well within his right to reject the books of accounts. The Apex Court held as follows:- “10. As regards the rejection of the books of account, cogent reasons have been given by the income-tax authorities for doing so, and we see no reason to take a different view. 11.