C I T JAIOUR III vs. M/S HANDMADE PAPER and BOARD IND

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 133 / 2010 Commissioner of Income Tax, Jaipur- III, Jaipur. ----Petitioner Versus M/s Handmade Paper and Board Industries, Gramodyog Road, Sanganer, Jaipur ----Respondent _____________________________________________________ For Petitioner(s) : Mr. Sameer Jain For Respondent(s) : Mr. N.K. Jain _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 03/01/2018 By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal of the assessee. This Court while admitting the matter framed the following questions of law:- “Whether the learned ITAT being the last fact finding body was right in law in reducing the Gross Profit Rate without any evidence inspite of upholding the application of Section 145(3) for rejection of books of accounts and stock?” In view of the observations made by the Tribunal which reads as under:- “4. We have considered the arguments of the ld. DR, written submissions of the assessee and gone through the material available on record. The survey team has observed that the books of account

(2 of 3) were not found complete on the date of survey and stock position could not be worked out. Also various discrepancies were found in the books of account available during the course of survey. The assessee also did not produce the total bills of purchases, sales and expenses for reconciliation with the books of account which were impounded. The AO mentioned at para 2 in his order that as per computer

printed

sheet,

the

stock

of Rs.2,30,61,658/- was there whereas as per physical verification at the time of survey, the stock found was of Rs.63,46,048/-. The explanation of the assessee during the course of assessment proceedings after completion of books of account was that stock lying at the time of survey was for Rs.2,30,61,658/- on account of raw material, work in progress, finished goods packing material and store consumables whereas the survey team has valued the same at Rs.63,46,028/-. The explanation submitted by the assessee was ignored by the AO and there are no basis of the valuation made by the Department which could be brought on record by the AO in his order by the ld. DR in this regard. The AO also referred that it is not easy to value the stock of the assessee firm as it requires the technical knowledge of hand made papers as submitted by the assessee. In the absence of any basis for valuation made by the Department and no defect has been pointed out by the AO in the valuation

made

the

assessee

at Rs.2,30,61,658/-, we are of the view that the AO is not justified in taking the value of the stock at Rs.63,46,048/- which is without any basis and whatsoever kind. Therefore, the AO is not justified in treating the shortage in closing stock to the tune of Rs.1,74,19,662/- and the same cannot be taxed as income of the assessee. The ld. CIT (A) is also not justified in sustaining the addition of Rs.34,83,936/-.” In our considered opinion, while considering Section 145(3), the Tribunal has rightly substituted its opinion. We are in complete agreement with the view taken by the Tribunal. No interference is called for. Hence, the appeal stands dismissed.

(3 of 3) (VIJAY KUMAR VYAS) J. (K.S. JHAVERI)J.