ITO, KARAULI vs. MANNETA GARG, KARAULI

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jkWo] U;kf;d lnL; ,oa Jh HkkxpUn] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM vk;dj vihy la-@ITA No. 875/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2012-13. cuke The Income Tax Officer, Smt. Maneeta Garg, Vs. Ward Karauli. Prop. MN/s. Shreeji Telelink, E-54,Mohan Nagar, Hindaun City, Karauli. LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AOYPG 7819 K vihykFkhZ@Appellant izR;FkhZ@Respondent

Cross Objection No. 41/JP/2016 (Arising out of vk;dj vihy la-@ITA No. 875/JP/2016) fu/kZkj.k o"kZ@Assessment Year : 2012-13. cuke Smt. Maneeta Garg, The Income Tax Officer, Vs. Prop. MN/s. Shreeji Telelink, Ward Karauli. E-54,Mohan Nagar, Hindaun City, Karauli. LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AOYPG 7819 K vihykFkhZ@Appellant izR;FkhZ@Respondent jktLo dh vksj ls@ Revenue by : Shri A.S. Nehra (JCIT) fu/kZkfjrh dh vksj ls@Assessee by : Shri Manish Agarwal (CA) lquokbZ dh rkjh[k@ Date of Hearing : 12.07.2018. ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 20/07/2018. vkns'k@ ORDER PER VIJAY PAL RAO, J.M. This is appeal by the revenue and cross objection by the assessee are directed against the order dated 22nd July, 2016 of ld. CIT (A), Kota for the assessment year 2012-13. The revenue has raised the following grounds :-

2 ITA No. 875/JP/2016 & CO 41/JP/2016 Smt. Maneeta Garg, Karauli.

“ On the facts and in the circumstances of the case, ld. CIT (A) has erred in :-

(i) Deleting addition of Rs. 8,75,543/- made by disallowing proportionate interest payment ; (ii) Deleting addition of Rs. 70,50,000/- made u/s 68 for unverified unsecured loans; (iii) The appellant craves liberty to raise additional ground and to modify/amend the ground of appeal at the time of hearing.”

Ground no. 1 is regarding deletion of addition made by the AO on

account of interest payment.

phones and accessories in the name of M/s. Shriji Telelink. The assessee firm filed its return of income on 6th January, 2013 declaring total income of Rs. 8,58,680/-.

During the scrutiny assessment, the AO noted that the assessee has given

loans/advances of Rs. 1,00,96,320/- free of interest whereas the assessee has

incurred interest expenditure of Rs. 8,75,543/-. The assessee though explained

before the AO that these advances were given in the course of business of the

assessee as the amount of Rs. 25 lacs was given as security to M/s. More Mobile &

Support Pvt. Ltd. whereas an amount of Rs. 74,96,320/- was given as an advance

for purchase of mobiles which was subsequently purchased by the assessee. As

regards the amount of Rs. 1,00,000/- given to Dr. Pushpendra Garg, the assessee

explained that assessee’s own interest free funds were sufficient to advance the

amount of Rs. 1,00,000/-. Since the assessee did not produce his books of accounts

before the AO, accordingly, the AO disallowed the entire claim of interest of Rs.

3 ITA No. 875/JP/2016 & CO 41/JP/2016 Smt. Maneeta Garg, Karauli.

8,75,543/-. On appeal, the ld. CIT (A) has deleted the addition made by the AO by

considering the fact that the amount of Rs. 25,00,000/- given to M/s. More Mobile &

Support Pvt. Ltd. was a security deposit by the assessee and shown in the Balance

Sheet. Similarly, the amount of Rs. 74,96,320/- was given as an advance for

purchase of goods from The Mobile Store Services Ltd. Therefore, the major

amount of Rs. 99,96,320/- was considered as given in the normal course of business

of the assessee and, therefore, no disallowance is called for in respect of the said

amount. The remaining amount of Rs. 1,00,000/- was found to be given from the

assessee’s own interest free funds.

the assessee has failed to produce the books of accounts as well as other supporting

evidence in support of the claim that the amounts were given in the normal course

of business of the assessee. He has relied upon the orders of the Assessing Officer.

3.1. On the other hand, the ld. A/R of the assessee has submitted that the

assessee has shown Rs. 25,00,000/- as advance given to M/s. More Mobile &

Support Pvt. Ltd. in Schedule-G of Balance Sheet as a security payment. Therefore,

once the amount was paid as a security deposit for the purpose of business of the

assessee, then the same cannot be treated as an advance for the purpose of

disallowing the claim of interest. As regards the advance of Rs. 74,96,320/-, the ld.

A/R has submitted that it was a trade advance given to M/s. The Mobile Store

Services Ltd. and duly appearing in the Schedule-G under the head Loans and

Advances. He has further submitted that this amount was outstanding balance of

running trade transactions with the said company. The assessee produced Vat

return in Form No. 7A for the period 01.04.2012 to 30.06.2012 which shows the

4 ITA No. 875/JP/2016 & CO 41/JP/2016 Smt. Maneeta Garg, Karauli.

purchase of Rs. 90,55,296/- made from M/s. The Mobile Store Services Ltd. All

these materials were produced before the AO. However, the AO has completely

disregarded these evidences and made the disallowance. The ld. CIT (A) after

considering the supporting evidence has deleted the disallowance made by the AO.

The remaining amount of Rs. 1,00,000/- paid to Dr. Pushpendra Garg is out of

interest free funds available with the assessee in the shape of capital. The assessee

was having opening capital balance of Rs. 26,18,038/- which was sufficient for such

payment of Rs. 1,00,000/-. Therefore, no disallowance is called for on account of

interest expenditure when the borrowed fund was used exclusively for the business

purpose. He has supported the order of ld. CIT (A).

record. The assessee has shown the advances to three persons/parties as under :-

i) Security (More Mobiel and Support) Rs. 25,00,000/- ii) The Mobile Store Services Ltd. Rs. 74,96,320/- iii) Dr. Pushpendra Garg Rs. 1,00,000/- Rs. 1,00,96,320/-

The AO disallowed the interest claim of Rs. 8,75,543/- on the ground that the

assessee has taken loan on one hand and given interest free advances to these

parties. We note that the assessee had duly explained the nature of advances given

by the assessee to these three parties. The first amount of Rs. 25,00,000/- was

given to M/s. More Mobile & Support Pvt. Ltd. as a security for doing the business

with the said company as the assessee is a wholesale trader in mobiles and

accessories. The said amount has been shown by the assessee in the Balance Sheet

as security deposit and, therefore, once the said amount is paid in connection with

5 ITA No. 875/JP/2016 & CO 41/JP/2016 Smt. Maneeta Garg, Karauli.

the business of the assessee then the disallowance of interest expenditure by the AO

is not justified. The business transaction with M/s. More Mobile & Support Pvt. Ltd.

is not in dispute as the assessee has shown an outstanding balance of Rs.

6,15,568/- under sundry creditors for trade and, therefore, it is clear that the

assessee was having the business with the said company and the security deposit

was made for the purpose of business and commercial expediency. The second

amount of Rs. 74,96,320/- was given to M/s. The Mobile Store Services Ltd. and

shown as Trade advance. The assessee has also shown purchases of Rs.

90,55,296/- from 01.04.2012 to 20.06.2012. Therefore, having regard to the volume

of purchases made from the said company, the advance of Rs. 74,96,320/- for

purchases of goods would not attract any disallowance on account of interest

expenditure. The third payment of Rs. 1,00,000/- to Dr. Pushpendra Garg who is a

close relative of the assessee, was claimed from the assessee’s own interest free

funds available in the shape of capital. We note that the opening capital balance of

the assessee of Rs. 26,18,038/- is not in dispute and, therefore, the payment of Rs.

1,00,000/- by the assessee to the relative will be in the category of drawings against

the capital balance and hence cannot be considered as the payment was from the

borrowed fund. The ld. CIT (A) after considering all these facts as available on the

assessment record, has decided the issue at page 12 to 14 as under :-

“ I have gone through assessee’s submission and AO’s findings.

As regards Ground No. 5 related to the disallowance of interest on proportionate basis, the fact is that as per the Balance Sheet of the assessee, the deposit of Rs. 25 lakhs is shown clearly in the name

6 ITA No. 875/JP/2016 & CO 41/JP/2016 Smt. Maneeta Garg, Karauli.

against More Mobile & Support Pvt. Ltd. From a search of Corporate Directory database it is seen that the company More Mobile & Support Pvt. Ltd. is registered since 2009 in Delhi & is active, with address of Panipat, Haryana. This basic information could easily have been accessed by the A.O. which he failed to do. Further, as per the Balance Sheet & VAT returns also, the genuineness of the transactions with the company was provable. For the A.O. to disregard the trade transactions & disallow proportionate interest on the premise that advances made to this company were interest free loans, appears to be unfair, more so since he has not brought any positive evidence to prove his conclusion and relied only on lack of copy of accounts & address details for this purpose. Thus, the VAT returns & existence of the company in corporate records shows that the transactions were genuine business transactions. Further, the Auditors have duly certified these balances approving in various schedules of the Balance Sheet of the assessee. Hon’ble Supreme Court of India in Hero Cycles (P) Ltd. v. Commissioner of Income-tax (Central), Ludhiana in 63 taxmann.com 308 (SC) Whether once it is established that there is nexus between expenditure and purpose of business (which need not necessarily be business of assessee itself), revenue cannot justifiably claim to put itself in arm-chair of businessman or in position of Board of Directors and assume role to decide how much is reasonable expenditure having regard to circumstances of case – Held, yes – Assessee filed its return claim deduction of interest paid on borrowed sums from Bank under section 36(1)(iii) – Assessing Officer finding that assessee had used borrowed funds for giving interest free loans to its subsidiary company and directors, rejected

7 ITA No. 875/JP/2016 & CO 41/JP/2016 Smt. Maneeta Garg, Karauli.

assessee’s claim – High Court upheld order of Assessing Officer – It was noted that advance to subsidiary company became imperative as a business expediency in view of undertaking given to financial institutions by assessee to effect that it would provide additional margin to subsidiary company to meet working capital for meeting any cash losses – Insofar as loans to directors were concerned, said loans were granted out of assessee’s own surplus funds – Whether in view of aforesaid, impugned order passed by High Court was to be set aside – Held, yes [in favour of assessee] The operative portion of the judgement is also extracted as under- ..In the case of S.A. Builders Ltd. v. CIT (appeals)[2007 (288) ITR 1/158 Taxman 74]. After taking note of and discussing on the scope of commercial expediency, the Court summed up the legal position in the following manner :- “26. The expression “ commercial expediency “ is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. 27. No doubt, as held in Madhav Prasad Jatia v. CIT [1979 (118) ITR 200 (SC)], if the borrowed amount was donated for some sentimental or personal reasons and not on the ground of commercial expediency, the interest thereon could not have been allowed under section 36(1)(iii) of the Act. In Madhav Prasad’s case [1979(118) ITR 200 (SC), the borrowed amount was donated to a college with a view to commemorate the memory of the assessee’s deceased husband after whom the college was to be named, it was held by this court that

8 ITA No. 875/JP/2016 & CO 41/JP/2016 Smt. Maneeta Garg, Karauli.

the interest on the borrowed fund in such a case could not be allowed, as it could not be said that it was for commercial expediency. 28. Thus, the ratio of Madhav Prasad Jatia’s case [1979 (118) ITR 200 (SC) is that the borrowed fund advanced to a third party should be for commercial expediency if it is sought to be allowed under section 36(1)(iii) of the Act. 29. In the present case, neither the High Court nor the Tribunal nor other authorities have examined whether the amount advanced to the sister concern was by way of commercial expediency. 30. It has been repeatedly held by this court that the expression “for the purpose of business” is wider in scope than the expression “ for the purpose of earning profits” vide CIT v. Malayalam Plantations Ltd. [1964 53 ITR 140 (SC), CIT v. Birla Cotton Spinning and Weaviong Mills Ltd.[1971 82 ITR 166 (SC)], etc. “ 13. In the process, the Court also agreed that the view taken by the Delhi High Court in CIT v. Dalmia Cement (P) Ltd. [2002] 254 ITR 377/121 Taxman 706 wherein the High Court had held that once it is established that there is nexus between the expenditure and the purpose of business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circvumstances of the case. It further held that no businessman can be compelled to maximize his profit and that the income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman.

Under the circumstances as discussed above the legal precedents that it is the assessee’s decision to advance moneys on the basis of

9 ITA No. 875/JP/2016 & CO 41/JP/2016 Smt. Maneeta Garg, Karauli.

commercial expediency with or without interest and the fact that the A.O could not prove any adverse nexus between the two parties and the assessee firm., it is opined that the disallowances of interest on proportionate basis to the extent of Rs. 8,75,543/- by the assessing officer was not warranted. The same is accordingly directed to be deleted. This ground of appeal is allowed.”

In view of the facts and circumstances of the case as well as the above discussion,

we do not find any error or illegality in the order of ld. CIT (A) qua this issue.

Ground No. 2 is regarding deletion of addition of Rs. 70,50,000/-

made under section 68 for unexplained credit on account of unsecured

loans.

i) M/s. Divyansh Telelink Rs. 20,00,000/- ii) M/s. Frontier Agencies Rs. 4,00,000/- iii) M/s. Sujas Health Care Rs. 3,50,000/- iv) Shiv Kumar Trading Co. Rs. 13,00,000/- v) Shri Girraj Trading Co. Rs. 15,00,000/- vi) M/s. Vinayak Enterprises Rs. 15,00,000/- Rs. 70,50,000/- ------------------

The AO has made an addition of the said amount for want of sufficient documentary

evidence in support of the claim of the assessee. The assessment was framed ex

parte and, therefore, the AO made the addition. On appeal, the ld. CIT (A) has

10 ITA No. 875/JP/2016 & CO 41/JP/2016 Smt. Maneeta Garg, Karauli.

deleted the addition after considering the documents available on the assessment

record as well as the explanation of the assessee.

the assessee has not produced satisfactory documentary evidence in support of the

claim despite sufficient opportunity was granted by the AO. Even the assessee did

not produce the books of account before the AO. He has relied upon the order of

the A.O.

6.1. On the other hand, the ld. A/R of the assessee has submitted that the AO

issued notice to all these six parties for verification of the claim and in response the

loan creditors have submitted confirmations, their identity, return of income, bank

account showing the transaction through bank as well as creditworthiness as they

have also produced the return of income. This enquiry was conducted by the AO

himself and despite all these loan creditors have confirmed the transaction of giving

loans to the assessee through banking channel, the AO made the disallowance. The

ld. A/R has referred to the relevant documents in the paper book and submitted that

all these documents were part of the assessment record and produced by the loan

creditors in response to the notice issued by the AO. The ld. A/R has submitted that

as per the record all these materials were available with the AO from pages 19 to 49

of the paper book. All the six creditors have produced their confirmations, return of

income, bank statement, balance sheet extracts which proved that the claim of the

assessee is genuine. These documents were produced by the creditors on their own

in response to the enquiry conducted by the AO. Therefore, once the creditors have

submitted the relevant evidence as well as confirmations, the ld. CIT (A) has rightly

deleted the addition made by the AO.

11 ITA No. 875/JP/2016 & CO 41/JP/2016 Smt. Maneeta Garg, Karauli.

record. We note that all the six creditors have produced the confirmations, returns

of income as well as their relevant record from the books of account to show that

the transactions of loans given to the assessee were duly recorded in the books of

account and through banking channel. Further, all these creditors are also assessed

by the same AO and, therefore, it was not difficult for the AO to examine the

genuineness of the transactions and creditworthiness of the creditors. In fact, the

AO conducted the enquiry and in response the relevant supporting evidences were

filed by these creditors. Thus it is clear that despite receiving the supporting

evidence directly from the creditors, the AO has made the addition by citing the

reason that the assessee did not produce supporting evidence. The ld. CIT (A) has

considered this issue in para 16 & 17 as under :-

“ I have gone through assessee’s submission and AO’s findings.

As regard Ground No. 6 above regarding addition made on account of unsecured loans u/s 68 by the AO, it is correct that as per legal provisions the assessee should prove identity, capacity of lenders as well as genuineness of transaction. However, it has also been held that where lender is assessed to tax, assessee can avoid addition by filing confirmation with particulars of PAN. In cases where the assessee furnishes full details regarding the alleged lenders/creditors etc, it is up to the department to peruse the matter further to examine these and to examine their creditworthiness. In the case of Brahamanand Agarwal, Thekedar vs. DCIT Jaipur Bench of ITAT have held that when net profit is estimated by AO by rejecting the book result U/s 145(3) of the Act, no separate addition can be made on account of cash creditor. ITAT relied upon the decision of Rajasthan High Court in the case of CIT vs. G.K. Contractor 19 DTR 305 (Raj.) wherein the Hon’ble Jurisdictional High Court held that when net profit is estimated by the

12 ITA No. 875/JP/2016 & CO 41/JP/2016 Smt. Maneeta Garg, Karauli.

Assessing Officer by rejecting the book result u/s 145(3) of the Act, no separate addition can be made on account of cash creditors. Even if we go into the merits of the case on factual basis, it is to be seen as to what information was made available to the A.O. as verified from the case records and how he regarded it. The following loans were in question :-

i) M/s. Divyansh Telelink Rs. 20,00,000/- ii) M/s. Frontier Agencies Rs. 4,00,000/- iii) M/s. Sujas Health Care Rs. 3,50,000/- iv) Shiv Kumar Trading Co. Rs. 13,00,000/- v) Shri Girraj Trading Co. Rs. 15,00,000/- vi) M/s. Vinayak Enterprises Rs. 15,00,000/- Rs. 70,50,000/- ------------------

The assessee submitted initially that the business had closed down since past two years. However, during the assessment proceedings, the following documents were submitted to the AO. a) Confirmation of accounts with PAN details from all the lenders. b) Transaction details showing all loans were acquired through Banking channels. c) TDS deduction details whenever interest was paid on these loans and the quarterly statement was duly submitted to the department mentioning TDS deduction from interest paid to these parties and the PAN details in case of Sh. Rambabu Gupta proprietor M/s. Giriraj Trading, Sh. Shiv Kumar Gupta prop. Shiv Kumar trading Co., Mahendra Kumar Garg (Divyansh Telelink) & Devendra Kumar Garg (Vinayak Enterprises). d) From a perusal of the other details filed by the assessee’s A/R in the course of the assessment proceedings it is also seen that – Sh. Rambabu Gupta proprietor of M/s. Giriraj Trading Company, Sh. Shiv Kumar Gupta Prop. Of Shiv Kumar Trading Co. and M/s. Nisha Gera, Prop. Of Frontier Agencies are assessed with the same assessing officer and they have all confirmed the loans by providing copy of accounts, return of income acknowledgment & covering letter (incase of 1st two parties) etc. e) Similarly, the two parties M/s. Vinayak Enterprises & Divyansh Telelink were lenders who are already mentioned as per 40A(2)(b) note in the

13 ITA No. 875/JP/2016 & CO 41/JP/2016 Smt. Maneeta Garg, Karauli.

assessee’s audited accounts are also apparently in the same A.O’s jurisdiction so checking their creditworthiness should never have been an issue and also their account copies, interest payments, PAN details were available with the A.O. The loan entries are also appearing in the respective lender’s Balance Sheet extracts which the A.O. could have easily cross checked if he had any doubts regarding the same as they were assessed with him. Further M/s. Vinayak Enterprises had an balance of 40,79,578/- as outstanding while the A.O. questions only loan of Rs. 15 lakhs obtained during the year as non-genuine. f) Xxxxx xxxxxxxx xxxxxxxxxxx g) Since all the above details were provided in the course of assessment proceedings themselves, it cannot also be a case of additional evidence. The assessee had discharged its primary onus by providing details of the lenders. In case these persons did not appear for personal examination or same did not respond to the 133(6) notices, it cannot be said that these were unexplained cash credits. Xxxxxxxxxx xxxxxxxxx xxxxxxxxxxx Xxxxxxxxxx xxxxxxxxx xxxxxxxxxxx Xxxxxxxxxx xxxxxxxxx xxxxxxxxxxx

Xxxxxxxxxx xxxxxxxxx xxxxxxxxxxx

Xxxxxxxxxx xxxxxxxxx xxxxxxxxxxx

Xxxxxxxxxx xxxxxxxxx xxxxxxxxxxx

Thus under the facts and circumstances of the case, I am of the opinion that as regards all the lenders, the assessee had duly discharged its initial burden of proof regarding the unsecurted loans taken. Therefore, it is surprising that the A.O. still wanted to confirm the identity & creditworthiness, despite him being the A.O. to majority of the above lenders. Still, the A.O. should have investigated further with all his available tools and paraphernalia available in case if he was not satisfied with the first body of supporting evidences. In case he fould anything adverse and different from the claims made by the assessee, subsequently after bringing the discrepancies in the assessee’s claims and his own investigation and confronting the results to the assessee

14 ITA No. 875/JP/2016 & CO 41/JP/2016 Smt. Maneeta Garg, Karauli.

and getting his version, made the addition u/s 68 as per the intention of the law in this regard. Since he failed to do so in the cases of all the lenders, the addition made by him in respect of these cases of unsecured loans treated as cash credits, cannot be upheld both on the facts as well as on legal precedents as discussed above. Thus the addition of Rs. 70,50,000/- made u/s 68 is directed to be deleted and this Ground of appeal is allowed.”

Thus it is clear that the ld. CIT (A) has examined the evidences available on the

assessment record and found that the AO was having all the relevant details and

supporting evidence during the assessment proceedings as called for under section

133(6) of the Act. On examination of these details and evidence as submitted by

the six creditors, we find that the claim of the assessee was duly supported by the

evidence produced by the creditors who having confirmed the transactions and also

produced the evidence regarding their creditworthiness as all these creditors filed

their returns of income, their ledger account and bank statements showing the

transactions of loans given to the assessee. Accordingly in the facts and

circumstances of the case, we do not find any error or irregularity in the order of ld.

CIT (A) qua this issue.

In the Cross Objection the assessee has raised the only issue

regarding trading addition made by the AO of Rs. 4,49,453/- was

confirmed by the ld. CIT (A).

material on record. The AO rejected the book result of the assessee for want of

production of books of accounts. The AO noted that the assessee has declared GP

15 ITA No. 875/JP/2016 & CO 41/JP/2016 Smt. Maneeta Garg, Karauli.

@ 0.92% as against 1.08% in the immediately preceding year. Accordingly, the AO

adopted the GP declared by the assessee in the preceding year and made an

addition of Rs. 4,49,453/-. The ld. A/R of the assessee has submitted that this is the

second year of business of the assessee and there is a substantial increase in the

turnover of the assessee, therefore, merely there is a decrease in the GP rate does

not warrant any addition. Thus the ld. A/R has submitted that when there is an

increase in the turnover of the assessee from Rs. 9,60,00,000/- in the preceding

year to Rs. 28,69,00,000/- during the year under consideration, the slight variation

in the GP rate does not warrant any addition.

8.1. On the other hand, the ld. D/R has relied on the orders of the authorities

below.

record, we note that the AO has given the comparative details of the sales and GP

declared by the assessee for the earlier year as well as for the year under

consideration at page 3 as under :-

S.No. A.Y. Sale Gross Profit G.P. Rate N.P. Rate

1 2012-13 286929315 2649384 0.92 0.32 2 2011-12 96007637 1038243 1,08 062 3 2010-11 N.A. N.A. N.A. N.A.

Thus it is clear that there is three-fold increase in the turnover of the assessee for

the year under consideration in comparison to the immediately preceding year. This

is the second year of the business activities of the assessee, therefore, the decrease

in the GP from 1.08% to 0.92% is not so significant having regard to the three-fold

increase in the turnover. Even otherwise the AO has to estimate the income of the

16 ITA No. 875/JP/2016 & CO 41/JP/2016 Smt. Maneeta Garg, Karauli. assessee by taking a reasonable and proper basis and average of the past GP declared by the assessee can be a good guidance. Since this is the second year of the business, therefore, only two years are available for considering the average of the GP. Hence in the facts and circumstances of the case, when the variation in the GP is insignificant and there is an increase in the turnover of the assessee of more than three times from Rs.9,60,00,000/- to Rs. 28,69,00,000/- then there is no justification of making addition by applying the GP rate of earlier year. Accordingly, in the facts and circumstances of the case, we delete the addition made by the AO on this account. 10. In the result, appeal of the revenue is dismissed while cross objection of the assessee is allowed.

Order pronounced in the open court on 20/07/2018. Sd/- Sd/- ¼ HkkxpUn½ ¼ fot; iky jkWo ½ (BHAGCHAND) ( VIJAY PAL RAO ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 20/07/2018. das/ आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant-The ITO, Ward Karauli, Karauli. 2. izR;FkhZ@ The Respondent-Smt. Maneeta Garg, Karauli. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File {ITA No. 875/JP/2016} vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत

17 ITA No. 875/JP/2016 & CO 41/JP/2016 Smt. Maneeta Garg, Karauli.