ACIT, New Delhi v. M/s Jayanti Metal & Alloys,, Delhi

ITA 3765/DEL/2009 | 2002-2003
Pronouncement Date: 15-01-2010 | Result: Dismissed

Appeal Details

RSA Number 376520114 RSA 2009
Assessee PAN AACFJ0998G
Bench Delhi
Appeal Number ITA 3765/DEL/2009
Duration Of Justice 4 month(s) 10 day(s)
Appellant ACIT, New Delhi
Respondent M/s Jayanti Metal & Alloys,, Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 15-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 15-01-2010
Date Of Final Hearing 04-01-2010
Next Hearing Date 04-01-2010
Assessment Year 2002-2003
Appeal Filed On 04-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : D : NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI A.K. GARODIA ACCOUNTANT MEMBER ITA NO. 3765/DEL/2009 ASSESSMENT YEAR : 2002-03 ACIT CIRCLE 21(1) NEW DELHI. VS. M/S JAYANTI METAL & ALLOYS BAWANA ROAD SHAHBAD DAULTPUR DELHI 110 042. PAN : AACFJ 0998 G (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI B.K. GUPTA SR. DR ORDER PER I.P. BANSAL JUDICIAL MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIR ECTED AGAINST THE ORDER OF THE CIT (A) DATED 7 TH JULY 2009 FOR ASSESSMENT YEAR 2002-03. GROUNDS O F APPEAL READ AS UNDER:- 1. THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION MADE ON ACCOUNT OF TRADING RESULT AMOUNTIN G TO RS.7 46 158/- BEING LOW GP SHOWN BY THE ASSESSEE. 2. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER AL L OR ANY OF THE AFORESAID GROUNDS OF APPEAL AND ADD ANY OTHER G ROUND OF APPEAL. 2. THE RETURN IN THE PRESENT CASE WAS FILED DECLARI NG NET LOSS OF RS.24 13 190/- WHICH HAS BEEN ASSESSED BY THE AO AT NET LOSS OF RS.15 80 687/- BY MAKING CERTAIN ADDITIONS INTER ALIA TRADING ADDI TION OF RS.7 46 158/- ON ACCOUNT ITA NO.3765/DEL/2009 2 OF LOW GP RATE. IT WAS NOTICED BY THE AO THAT GP R ATE SHOWN DURING THE YEAR HAD FALLEN DOWN TO 0.89% FROM 5.72%. AN EXPLANATION WA S SOUGHT FROM THE ASSESSEE AND IT WAS EXPLAINED THAT PURCHASE COST DURING THE YEAR UNDER CONSIDERATION HAD INCREASED AND THERE WAS FALL IN SALE PRICES. IT WA S ALSO SUBMITTED THAT US DOLLAR RATE WAS INCREASED AND MARKET WAS HIT BY PRICE FLUC TUATION IN US DOLLAR AND POUND STERLING AND BECAUSE OF THESE ADVERSE CONDITI ONS THE TURNOVER HAD FALLEN DOWN BY ALMOST RS.5 CRORE. IT WAS SUBMITTED THAT 7 5% OF SALES WERE TO HERO MAJESTIC INDIA ONLY WHICH WAS 85% IN THE PREVIOUS Y EAR AND THUS GP RATE WAS LOWER BECAUSE OF INCREASE IN PURCHASE COST AND DECR EASE IN SALE PRICE. NECESSARY BOOKS OF ACCOUNT ALONG WITH VOUCHERS BI LLS ETC. WERE PRODUCED. A SURVEY WAS ALSO CONDUCTED AT THE PREMISES OF THE AS SESSEE ON 8 TH MARCH 2002 AND STOCK OF RS.38 32 389/- WAS FOUND WHICH AS PER BOOKS WAS RS.37 97 952/- AND THERE WAS DIFFERENCE OF RS.30 000/- IN THE STOC K AND A SURPLUS CASH WAS ALSO FOUND OF RS.11 65 763/-. IT WAS NOTED BY THE AO TH AT CERTAIN EXPENDITURE ON FUEL DIESEL AND WAGES ETC. WERE ALSO INCREASED. THE AO ESTIMATED THE SALES OF THE ASSESSEE AT RS.5 55 00 000/- AGAINST 5.49 CRORE AND APPLIED GP RATE OF 2.25% AND AFTER GIVING SET OFF OF GROSS PROFIT SHOWN BY T HE ASSESSEE NET ADDITION OF RS.7 46 158/- WAS MADE BY INVOKING THE PROVISIONS O F SECTION 145 OF IT ACT 1961. THE ADDITION WAS CHALLENGED IN THE APPEAL FI LED BEFORE THE CIT (A) WHO IN PARA 5.2 WHILE DECIDING THE ISSUE HAS OBSERVED THAT THE REASONS FOR INVOKING SECTION 145 BY THE AO WERE : (I) DIFFERENCE IN CLOSING STOCK OF RS.30 000/- FOUN D AT THE TIME OF SURVEY; (II) DIFFERENCE OF CASH IN HAND FOUND AT THE TIME O F SURVEY; (III) DECREASE IN SALES FROM RS.10.04 CRORE TO RS.5 .49 CRORE; AND (IV) DECLINE IN GP RATE FROM 5.72% TO 0.89%. 3. THE LD. CIT (A) OBSERVED THAT BEFORE INVOKING TH E PROVISIONS OF SECTION 145 THE AO WAS REQUIRED TO SEE: (I) WHETHER THE ASSESSEE HAS REGULARLY EMPLOYED A M ETHOD OF ACCOUNTING?; ITA NO.3765/DEL/2009 3 (II) EVEN IF REGULAR ADOPTION OF A METHOD OF ACCOUN TING IS THERE WHETHER THE ANNUAL PROFITS CAN PROPERLY BE DEDUCED FROM THE METHOD EMPLOYED? (III) WHETHER THE ACCOUNTS WERE CORRECTLY MAINTAINE D; AND (IV) WHETHER THE ACCOUNTS MAINTAINED ARE COMPLETE I N THE SENSE THAT THERE IS NO SIGNIFICANT OMISSION THEREIN. 4. HE OBSERVED THAT IF THE ANSWER TO THESE FOUR QUE STIONS ARE IN AFFIRMATIVE THEN THE PROFITS OF THE ASSESSEE WERE TO BE COMPUTE D ON THE BASIS OF BOOKS OF ACCOUNT AND HE FOUND THAT ANSWER TO THESE FOUR QUES TIONS WERE IN AFFIRMATIVE. THEN LD. CIT (A) REFERRING TO THE PROVISIONS OF S ECTION 145(3) HAS OBSERVED THAT THE ASSESSEE HAS BEEN MAINTAINING ITS ACCOUNT CORRE CTLY AND COMPLETELY. THE AO DID NOT DISPUTE THE METHOD OF ACCOUNTING FOLLOWE D BY THE ASSESSEE AND ALSO THE COMPLIANCE OF THE ACCOUNTING STANDARDS. THE EX PLANATION REGARDING LOW GP RATE WAS FURNISHED BY THE ASSESSEE AND THEY WERE AL SO TEST CHECKED AND THE AO HIMSELF HAD ADMITTED SUCH FACTS IN THE ASSESSMENT O RDER ITSELF. THE CIT (A) OBSERVED THAT IN THE ABSENCE OF ANY PARTICULAR TRAN SACTION TO BE LEFT OUT TO BE ENTERED IN THE BOOKS OF ACCOUNT OR THE FACT THAT TH E ASSESSEE HAS SOLD SOME OF THE ITEMS AT A PRICE HIGHER THAN WHAT WAS DISCLOSED IN THE BOOKS OF ACCOUNT ESTIMATION OF SALE AND GP RATE COULD NOT BE APPLIED AND FOR HOLDING SO HE HAS REFERRED TO VARIOUS DECISIONS IN PARA 5.5. IN PARA 5.6 CIT (A) HAS OBSERVED THAT ASSESSEES ACCOUNTS WERE DULY AUDITED U/S 44AB OF THE ACT IN WHICH NO DEFECT WHATSOEVER WAS FOUND BY THE AO AND THUS THE ADDIT ION MADE BY THE AO COULD NOT BE SUSTAINED. THE CONCLUSION OF CIT (A) AS F OUND FROM PARA 5.2 TO 5.7 IS REPRODUCED BELOW FOR THE SAKE OF CONVENIENCE:- 5.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSION M ADE ON BEHALF OF THE APPELLANT AND THE FINDINGS OF THE A.O. THE A.O. INVOKED THE PROVISIONS OF SECTION 145 AND DISTURBED THE TRADING RESULTS BY ESTIMATING THE SALES DURING THE YEAR UNDER CONSIDER ATION AT RS. 5 55 00 000/- AS AGAINST RS. 5 49 19 351/- DECLARED BY THE ASSESSEE AND APPLYING THE G.P. RATE OF 2.25% THEREON WHICH U LTIMATELY RESULTED INTO AN ADDITION OF RS. 7 46 158/-. THE AB OVE ACTION WAS TAKEN BY THE A.O. ON THE FOLLOWING GROUNDS: - ITA NO.3765/DEL/2009 4 (I) THERE WAS A DIFFERENCE IN THE CLOSING STOCK AS ON THE DATE OF SURVEY AMOUNTING TO RS. 30 000/-. (II) THERE WAS A DIFFERENCE IN CASH IN HAND AMOUN TING TO RS. 11 70.000/- FOUND DURING THE SURVEY OPERATIONS WHIC H WAS DECLARED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOU NT AS ADDITIONAL INCOME. (III) WHEN THE SALES HAVE COME DOWN FROM RS. 10.04 CRORES IN THE PRECEDING YEAR TO RS. 5.49 CRORES DURING THE YEAR U NDER CONSIDERATION THE EXPENSES INCURRED ON FUEL DIESE L AND WAGES HAVE INCREASED OR REMAINED ALMOST THE SAME AS COMPARED TO LAST YEAR. (IV) THE G.P. RATE OF THE ASSESSEE HAS DRASTICALLY COME DOWN FROM 5.72% IN THE PRECEDING YEAR TO 0.89% DURING THE YEA R UNDER CONSIDERATION. 5.3 WHILE EXAMINING THE BOOKS OF THE ASSESSEE THE A.O. HAS TO CONSIDER THE FOLLOWING ASPECTS: (I) WHETHER THE ASSESSEE HAS REGULARLY EMPLOYED A M ETHOD OF ACCOUNTING? (II) EVEN IF REGULAR ADOPTION OF A METHOD OF ACCOUN TING IS THERE WHETHER THE ANNUAL PROFITS CAN PROPERLY BE DEDUCED FROM THE METHOD EMPLOYED? (III) WHETHER THE ACCOUNTS ARE CORRECTLY MAINTAINED ? (IV) WHETHER THE ACCOUNTS MAINTAINED ARE COMPLETE I N THE SENSE THAT THERE IS NO SIGNIFICANT OMISSION THEREIN? IF THE ANSWERS TO ABOVE FOUR QUESTIONS ARE IN THE A FFIRMATIVE ASSESSEES PROFITS ARE TO BE COMPUTED ON THE BASIS OF HIS ACCOUNTS. ON THE PERUSAL OF THE MATERIALS PLACED ON RECORD I N THE INSTANT CASE I FIND THAT ANSWERS TO ALL THE ABOVE FOUR QUESTIONS WERE AFFIRMATIVE. 5.4 . THOUGH THE A.O. HAS NOT SPECIFICALLY MENTION ED THE SUB-SECTION SECTION 145 WHICH HAS BEEN RELIED UPON BY HIM IN TH IS CASE IT IS NOT DIFFICULT TO INFER THAT SUB-SECTION 3 OF SECTION 14 5 HAS BEEN APPLIED BY HIM. SECTION 145(3) READS AS FOLLOWS: WHERE THE ASSESSING OFFICER IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUBSECTION (1) OR ACCOUNTING ITA NO.3765/DEL/2009 5 STANDARDS AS NOTIFIED UNDER SUB-SECTION (2) HAVE N OT BEEN REGULARLY FOLLOWED BY THE ASSESSEE THE ASSESSING OFFICER MAY MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SECTION 144. IT IS CLEAR FROM ITS PLAIN READING THAT THE AFOREME NTIONED SUBSECTION HAS THE FOLLOWING INGREDIENTS:- (A) THE ASSESSEE IS REQUIRED TO REGULARLY EMPLOY E ITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING AS PER THE ACCOUNTI NG STANDARDS AND MEANING AND CONSEQUENCES OF NOT REGUL ARLY FOLLOWING THE SYSTEM OF ACCOUNTING; (B) THE A.O. NOT BEING SATISFIED ABOUT THE CORRECT NESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE AND TH E VERY MEANING OF CORRECTNESS AND COMPLETENESS OF ACCOUNT; AND (C) MAKING OF AN ASSESSMENT IN THE MANNER PROVIDED U/S 144; REGARDING THE COMPLETENESS OF ACCOUNTS IT REFERS NO T ONLY TO THE ACCOUNTING ENTRIES FOR ALL THE TRANSACTIONS DON E IN THE PREVIOUS YEAR BUT ALSO TO THE LIST OF BOOKS OF ACCOUNTS. IN OTHER WORDS THE FAILURE TO MAINTAIN CERTAIN REGISTER OR ANY OTHER B OOKS MAKES THE ACCOUNTS OF THE ASSESSEE INCOMPLETE. ON THE OTHER H AND THE CORRECTNESS OF THE ACCOUNTS REFERS TO THE QUALITY O R ACCURACY OR RELIABILITY OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND IT COVERS RECONCILABLE MISTAKES OR ERRORS IN ACCOUNTS. THUS THE COMPLETENESS REFERS TO THE LIST OF BOOKS OF ACCOUNTS AND ENTRIES THEREIN AND THE ACCURACY REFERS TO THE QUALITY OF THE ACCOUNTS OF T HE ASSESSEE. REGARDING THE ASSESSING OFFICER BEING NOT SATISFIE D ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ASSESSEES ACCOU NTS THE CALCUTTA HIGH COURTS JUDGMENT IN THE CASE OF ASHOK E REFRACTORIES (P) LTD. V. CIT [20051 279 ITR 457 IS RELEVANT. IN THE SAID CASE THE HONBLE HIGH COURT HELD THAT IN ORDER TO REJECT THE ACCOUNTS THE ASSESSING OFFICER HAS TO COME TO AN OPINION THAT TH E INCOME CANNOT BE PROPERLY DEDUCED FROM THE ACCOUNTS SO MAINTAINED . IN ORDER TO ARRIVE AT SUCH CONCLUSION IT MUST BE SHOWN THAT TH E ASSESSING OFFICER HAS TAKEN INTO CONSIDERATION RELEVANT FACTO RS AND NOT OMITTED TO CONSIDER THE MATERIAL BEFORE HIM. IT IS THE ASSE SSING OFFICERS OPINION WHICH IS IMPORTANT AND THE SAID OPINION SHO ULD BE ABOUT EITHER THE CORRECTNESS OR COMPLETENESS OF THE BOOKS . 5.5 IN THE LIGHT OF THE ABOVE SCOPE OF SECTION- 145(3) IF THE FACT OF THE INSTANT CASE IS EXAMINED IT MAY BE SEEN THAT T HE REJECTION WAS DONE MERELY WITHOUT ANY FINDING ON THE CORRECTNESS OR COMPLETENESS OF THE BOOKS OF ACCOUNT. IN VIEW OF T HE ABOVE AND IN ITA NO.3765/DEL/2009 6 MY CONSIDERED OPINION THE REJECTION THE BOOKS OF A CCOUNT UNDER SECTION 145 OF THE I.T. ACT WHILE ACCEPTING THE BO OKS AS CORRECT AND COMPLETE IS AN INVALID ASSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER AS HE DID NOT DISPUTE THE METHOD OF ACCOUNT ING FOLLOWED BY THE ASSESSEE AND COMPLIANCE OF THE ACCOUNTING STAND ARD. THE FACTS OF THE CASE CLEARLY INDICATE THAT THE APPELLANT HAS FURNISHED EXPLANATION REGARDING THE DECLINE OF GP RATE THE B OOKS OF ACCOUNTS AND STOCK REGISTER WERE PRODUCED BY THE ASSESSEE AN D THEY WERE TEST-CHECKED BY THE A.O. AT THE TIME OF ASSESSMENT PROCEEDINGS. THE A.O. HAS HIMSELF ADMITTED THIS FACT IN THE ASSE SSMENT ORDER ITSELF. UNLESS THE AO IS ABLE TO POINT OUT CERTAIN TRANSACTIONS WHICH HAVE BEEN LEFT TO BE ENTERED IN THE BOOKS OF ACCOUN T OR THAT THE ASSESSEE HAS SOLD SOME OF THE ITEMS AT A PRICE HIGH ER THAN WHAT IS DISCLOSED IN THE BOOKS OF ACCOUNT OR IF PROPER PART ICULARS BILLS VOUCHERS ARE NOT FORTHCOMING ETC. THE BOOKS OF AC COUNT CANNOT BE REJECTED WITHOUT ASSIGNING SPECIFIC REASONS. IN THE INSTANT CASE THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WHICH A RE FREE FROM ANY DEFECT CANNOT BE REJECTED MERELY BECAUSE THE GP RATE WAS LOWER THAN THE GP RATE OF THE EARLIER YEAR. IN OTHER WORD S MERE DECLINE OF GP RATE IS NOT A SUFFICIENT GROUND FOR REJECTION OF BOOKS OF ACCOUNTS. RELIANCE IS PLACED ON THE DECISIONS IN THE CASES OF YOG RAJ SAINI V ACIT (2008) 108 TTJ 912 (DELHI) HARIDAS PARIKH V I TO (2008) 113 TTJ (JODH) 274 AND ITO VS. GIRISH M. MEHTA (2007) 1 05 LTD 585 (RAJKOT). IN THE BACKGROUND OF THE FACT THAT THE RE ASONS FOR DECLINE IN GP RATE WERE EXPLAINED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS THE REASONS QUOTED BY A.O. FOR REJECTI NG THE BOOKS OF ACCOUNTS ARE NOT JUSTIFIED. BESIDES THAT AFTER THE REJECTION OF THE BOOKS OF ACCOUNTS THE ESTIMATION OF INCOME WAS MAD E BY THE A.O. WITHOUT ANY CONCRETE BASIS FOR DOING SO. IN THE CAS E OF DHAKESWARI COTTON MILLS LTD. V. CIT (1964) 26 ITR 775 (SC) THE HONBLE SUPREME COURT HAD DECIDED THAT ONCE THE BOOKS OF AC COUNTS OF THE ASSESSEE ARE REJECTED THEN THE PROFIT HAS TO BE EST IMATED ON THE BASIS OF PROPER MATERIAL AVAILABLE. HOWEVER THE A. O. IS NOT ENTITLED TO MAKE A PURE GUESS & MAKE ESTIMATION WITHOUT REFE RENCE TO ANY EVIDENCE OR ANY MATERIAL AT ALL. THERE MUST BE SOME THING MORE THAN MERE SUSPICION TO SUPPORT SUCH ADDITION. THE HONBL E SUPREME COURT HAS RECONFIRMED THE EARLIER STAND IN THE CASE OF CIT VS. K.Y. PILLIAH & SONS (1967) 64 ITR 411 (SC) WHERE IT HAS BEEN DECIDED THAT ANY LUMP SUM ADD BACK TO THE TRADING RESULT IF FOUND JUSTIFIED MUST BE DONE IN PROPER EXERCISE OF DISCRETION OBJEC TIVELY & JUDICIOUSLY ON THE BASIS OF RELEVANT MATERIAL. 5.6 IN THE CASE ON HAND THE UNDISPUTED FACT I S THAT THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING A PARTICULAR METHOD OF ACCOUNTING. ITS ACCOUNTS ARE AUDITED UNDER SECTION 44AB OF THE INCO ME-TAX ACT. AUDITORS HAVE BEEN CONSISTENTLY CERTIFYING THAT THE ASSESSEE HAS BEEN REGULARLY FOLLOWING THE METHOD OF ACCOUNTING A ND THAT THE ITA NO.3765/DEL/2009 7 ANNUAL PROFITS CAN BE PROPERLY DEDUCED FROM SUCH ME THOD OF ACCOUNTING EMPLOYED BY THE ASSESSEE. THE AUDITORS O VER THE YEARS HAVE ALSO BEEN CERTIFYING THAT THE ACCOUNTS ARE REG ULARLY MAINTAINED AND ARE COMPLETE IN THE SENSE THAT THERE IS NO SIGN IFICANT OMISSIONS THEREIN. THE ASSESSING AUTHORITY HAS TO LOOK INTO T HE SUBSTANCE OF THE SITUATION AND DECIDE THE MATTER IN SUCH A MANNER TH AT NEITHER IS PUT TO UNREASONABLE LIABILITY NOR THE ASSESSEE IS SUBJE CTED TO UNREASONABLE HARDSHIP. NO DOUBT IT IS NOT ONLY THE RIGHT BUT ALSO THE DUTY OF THE ASSESSING OFFICER TO CONSIDER WHETHER O R NOT THE BOOKS DISCLOSED THE TRUE STATE OF ACCOUNTS AND THE CORREC T INCOME CAN BE DEDUCED THEREFROM. BUT THESE RIGHT AND DUTY HAVE TO BE EXERCISED IN SUCH A MANNER AND HAVE TO BE BASED ON COGENT REASON S AND SUFFICIENT MATERIAL. THE REASONS GIVEN BY THE ASSES SING OFFICER IN THIS CASE ON THE FACTS AND CIRCUMSTANCES IS DEMONSTRATED AS ERRONEOUS BY THE ASSESSEE. REJECTION OF BOOKS OF ACCOUNT SHOU LD NOT BE DONE LIGHT HEARTEDLY AS HELD BY THE KERALA HIGH COURT IN THE CASE OF ST. TERESAS OIL MILLS V. STATE OF KERALA [1970] 76 ITR 365 AND BY THE ASSAM HIGH COURT IN THE CASE OF TOLARAM DAGA V. CIT [1966] 59 ITR 632. ACCOUNTS REGULARLY MAINTAINED IN THE COURSE OF BUSINESS HAVE TO BE TAKEN AS CORRECT UNLESS THERE ARE STRONG AND SUF FICIENT REASONS TO INDICATE THAT THEY ARE UNRELIABLE AND INCORRECT. TH E A.O. HAS TO PROVE SATISFACTORILY THAT THE ACCOUNT BOOKS ARE UNRELIABL E OR INCORRECT OR INCOMPLETE BEFORE HE CAN REJECT THE ACCOUNTS AND TH IS CAN BE DONE BY SHOWING THAT IMPORTANT TRANSACTIONS ARE OMITTED OR IF PROPER PARTICULARS AND VOUCHERS ARE NOT FORTHCOMING OR THE ACCOUNTS DO NOT INCLUDE ENTRIES RELATING TO A PARTICULAR CLASS OF B USINESS. 5.7 THUS FOR ALL THESE REASONS AND AS THE ASSES SEE HAS PRODUCED SUFFICIENT MATERIAL JUSTIFYING ITS CLAIM AND AS IT HAS REPELLED THE CONTENTIONS ADVANCED BY THE ASSESSING OFFICER WITH COGENT MATERIAL AND EVIDENCE I AM OF THE CONSIDERED VIEW THAT ON T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICE R WAS NOT CORRECT IN MAKING THE LUMP SUM ADDITION OF RS. 7 46 158/- B Y ENHANCING THE AMOUNT OF SALES TO THE EXTENT OF RS. 5.55 CRORES. A DDITION IF ANY COULD BE MADE TO THE EXTENT OF SPECIFIC UNACCOUNTED SALE DIFFERENCE IN STOCK DIFFERENCE IN THE ACCOUNTS OF THE CUSTOMERS ETC. AND NOT IN THE GENERAL WAY OF ENHANCING THE SALE ON ESTIMATE. RELI ANCE IS PLACED ON A RECENT JUDGMENT OF THE GUJARAT HIGH COURT IN T HE CASE OF CIT V. GURUBACHHAN SINGH J. JUNEJA (2008) 302 ITR 63. ADDI TION IF ANY CALLED FOR MUST BE RESTRICTED TO THE ACTUAL AMOUNT OF DISCREPANCY/DIFFERENCE IN SALES PURCHASE STOCK D ECLARATION TO THE BANK CUSTOMERS AND SUPPLIERS ACCOUNTS ETC. THE EN TIRE EXERCISE DONE BY THE A.O. IS BASED ON SURMISES AND CONJECTUR ES AND WITHOUT ANY EVIDENCE. THEREFORE IT IS HELD THAT THE ASSESS ING OFFICER IS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 145 OF THE ACT AND ADDITION ON ACCOUNT OF TRADING RESULT TO THE EXTENT OF RS.7 46 158/- IS DIRECTED TO BE DELETED. THUS GROUND NO.2 3 & 4 AR E ALLOWED. ITA NO.3765/DEL/2009 8 5. NOTICE OF HEARING WAS SENT TO THE ASSESSEE HOWE VER ON THE DATE OF HEARING NONE WAS PRESENT. THEREFORE WE PROCEED TO DECIDE THIS APPEAL EX PARTE QUA THE ASSESSEE AFTER HEARING LD. DR. 6. LD. DR VEHEMENTLY RELIED UPON THE FINDINGS GIVEN BY THE AO. HE SUBMITTED THAT THE ASSESSEE COULD NOT EXPLAIN PROPE RLY THE DECLINE IN GP RATE AND THUS THE ADDITION WAS RIGHTLY MADE BY THE AO AND THUS THE ADDITION HAS WRONGLY BEEN DELETED BY THE CIT (A). 7. WE HAVE CAREFULLY HEARD LD. DR AND WE HAVE CAREF ULLY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE ORDER OF THE CIT (A ). THE AO HAS PROCEEDED O MAKE ADDITION ON THE BASIS THAT THERE WAS A DECLINE IN GP RATE AS COMPARED TO EARLIER YEAR. EVEN THE AO DID NOT APPLY THE GP RA TE OF LAST YEAR. THE CIT (A) IS RIGHT IN OBSERVING THAT UNLESS THERE IS SPECIFIC DE FECT IS FOUND IN THE MAINTENANCE OF BOOKS OF ACCOUNT ADDITION COULD NOT BE MADE. S O FAR AS IT RELATES TO ADDITION MADE ON ACCOUNT OF SURPLUS CASH FOUND DURING THE CO URSE OF SURVEY IT WAS SUBMITTED BY LD. DR THAT THE SAME WAS DECLARED BY T HE ASSESSEE. THEREFORE IT IS NOT EVEN THE CASE OF THE DEPARTMENT THAT SURPLUS CASH FOUND DURING THE COURSE OF SURVEY IS ALSO THE REASON FOR MAKING THE ADDITIO N. IN THIS VIEW OF THE SITUATION GOING INTO THE ENTIRETY OF FACTS WE ARE OF THE OPI NION THAT THERE WAS NO SOUND BASIS FOR MAKING ADDITION ON ACCOUNT OF GP RATE PAR TICULARLY IN VIEW OF THE FINDING THAT THERE WAS NO PARTICULAR DEFECT FOUND IN THE BO OKS OF ACCOUNT AND DEPARTMENT IS UNABLE TO BRING ANY MATERIAL ON RECORD THAT THER E WAS ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT OR IN THE ENTRIES MADE IN THE BOOK S OF ACCOUNT. THEREFORE WE DECLINE TO INTERFERE IN THE ORDER OF THE CIT (A) VI DE WHICH THE IMPUGNED ADDITION HAS BEEN DELETED. 8. IN THE RESULT THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. . 9. THE ORDER PRONOUNCED IN THE OPEN COURT ON 15.01. 2010. SD/- SD/- [A.K. GARODIA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 15.01.2010. ITA NO.3765/DEL/2009 9 DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES