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TMI Blog2007 (4) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was not maintaining any such records. The contention of the ld. AR that unless there are change in the facts and circumstances, the department should not take contrary view, is supported by the decision in the case of Radhasoawmi Satsang v. CIT[ 1991 (11) TMI 2 - SUPREME COURT] , wherein Hon ble Supreme Court held that if there is no change in the facts, different conclusion is not warranted. Even though doctrine of res judicata does not apply to the proceedings under the Income-tax Act, at the very same time it is clear that unless there is a change of circumstances, the authorities will not depart from their previous decisions at their sweet will in the absence of material circumstances or reasons for such departure. Thus the rule of consistency which applies to the income-tax proceedings has to be followed. The department has completed the assessment under scrutiny process and the non-maintenance of the stock register was never the made ground for rejecting the books of account or estimating the G.P. at rate higher than the rate declared by the assessee. Thus, we do not find any merit in the action of the lower authorities in rejecting the book results merel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book, hence the addition made should be deleted. 4. That on the facts and in the circumstances of the case, the learned CIT (Appeals) erred in reducing the addition by Rs. 26,680 (50% of Rs. 51,360). Hence the balance of addition should be deleted. 5. That the appellant craves liberty to add, alter, vary or amend any grounds of appeal before the date of hearing or at the time of hearing. 2. Rival contentions have been heard and record perused. Brief facts of the case are that in the course of assessment, the Assessing Officer found that assessee has not maintained stock register, therefore, the consumption of raw-material during the year could not be verified. He further stated that in the absence of stock register, it is not possible to verify the closing stock as declared by the assessee and the value of the stock of papers consumed and sold is also not verifiable. Accordingly, he rejected the books of account by invoking the provisions of section 145(1) of the Income-tax Act, 1961 and estimated the g.p. at 37.05 per cent as against g.p. of 35.05 per cent as declared by the assessee, which resulted into addition of Rs. 4,65,430. 3. By the impugned order, the CIT (Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sults, is to establish the incorrectness and incompleteness of the accounts or where method of accounting followed by the assessee was inconsistent with the accepted method of accounting. Since no such case has been made out by the Assessing Officer, the Assessing Officer was held to be not justified in rejecting the books of account and making the addition. 5. In support of the contention that department is required to maintain consistency, when the facts and circumstances during the year are pari materia with that of the preceding assessment years, the learned AR relied on the decision of jurisdictional High Court in case of CIT v. A.R.J. Security Printers [2003] 264 ITR 276 (Delhi) wherein by relying on the verdict of the Hon ble Supreme Court in Radhasoawmi Satsang v. CIT [1992] 193 ITR 321, it was held that revenue could not be allowed to turn around, after having accepted at least in three assessment years that the business activities fell within the ambit of section 80-I and to say that assessee is not entitled to deduction under section 80-I of the Act. 6. On the other hand, learned DR Shri KC Badhok submitted that in the absence of stock register, the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articular class of business transaction. The assessee should invariably be given opportunity for offering explanation regarding defects in accounts and on his failure to satisfactorily explain the defects, the department would be justified in rejecting the books of account. Thus, books of account should not be rejected light-heartedly. In the instant case the Assessing Officer while rejecting the books of account not indicated any defect in the system of accounting regularly followed by the assessee or its correctness, nor there was any change in the method of accounting during the year under consideration as compared to the earlier years to indicate any intention of assessee, to show low profit. The only objection of the Assessing Officer was that the assessee has not kept stock register except it he had not pointed out any defect in the books of account which persuaded him to reject the book results outrightly and estimate G.P. at higher rate as compared to the G.P. rate shown in the audited books of account which were free from any qualification by the auditor. 9. While examining the books of the assessee, Income-tax Officer has to consider the following aspects : (i) Whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny such finding, there being no reason germane to the unacceptability of the book results, it must be held that the Tribunal as well as the revenue authorities below had no materials before them, on the basis of which it could be said that the trading results were not verifiable and that, therefore, they should not be accepted, nor is it their case that the trading results could not be deducible from the entries of the books of account regularly employed . The Patna High Court, therefore, held that ...the finding of the Tribunal upholding the rejection of the book profit shown by the assessee was vitiated by reason of its reliance upon suspicion, surmises as also irrelevant material. The finding that sales were unverifiable is not based on the materials on record and is an arbitrary finding. 11. The importance of maintenance of stock register of various raw materils used by the assessee in its manufacturing process, is to be judged from the nature of activity the assessee is carrying on. In some industry such stock register plays crucial role whereas in some cases the same is not so important. In some cases stock register plays important role and its non-maintenance may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, the CIT (Appeals) restricted the disallowance to the extent of 1/10th of the total expenses. As the use of telephone for personal purposes by the partners cannot be ruled out, we do not find any reason to interfere in the order of the CIT (Appeals) for retaining the addition on account of telephone expenses to the extent of Rs. 14,000. Ground No. 2 is, therefore, dismissed. 14. With regard to the disallowance of motor-car, conveyance and travelling expenses, we found that on an ad hoc basis, the Assessing Officer has disallowed 1/5th of the total expenses incurred both at Delhi and Bangalore, on the plea that no log book or register was maintained to justify that car was entirely use for business. We have considered the rival contentions and found that partners of the assessee firm was residing at Delhi, therefore, if any disallowance is to be made for non-business purposes and on account of personal use by the partners, the same is required to be confined to the expenses of Rs. 2,40,417 incurred at Delhi Unit. We, therefore, direct the Assessing Officer to restrict the disallowance to the extent of 1/5th, with respect to the expenses incurred on Delhi Unit. As the partners ..... X X X X Extracts X X X X X X X X Extracts X X X X
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