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TMI Blog2019 (7) TMI 756X X X X Extracts X X X X X X X X Extracts X X X X ..... e authority or the Tribunal cannot be disturbed by the High Court in exercise of powers u/s 260-A unless such finding is perverse or is such which no person of reasonable prudence could arrive at in the given facts of the case. Undisputedly the powers of FAA in matters of assessment are co-extensive with the Assessing Authority, in so far as the CIT(A) had issued a notice and thereafter made the enhancement on the basis of relevant material, no question of law may arise against such estimation as it would remain a finding of fact. In so far as the enhancement made by the CIT (A) is based on cogent material and evidence, the said finding does not suffer from any error of Law. In M. Janardhana Rao Vs Joint CIT [ 2005 (1) TMI 14 - SUPREME COURT] held that in the exercise of the powers under Section 260-A of the Act, the findings of fact of the Tribunal cannot be disturbed. - Income Tax Appeal No. - 50 of 2009 - - - Dated:- 12-7-2019 - Bharati Sapru And Vivek Varma JJ. For the Appellant : Shambhu Chopra,Arun Pratap Singh,Rishi Raj Kapoor For the Respondent : C.S.C.,Ashish Agarwal ORDER (D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the rate in the industry, the addition of trading profits of ₹ 1,32,02,742 for the year under consideration is legally sustainable? 4. The assessee is a firm and is engaged in business of manufacture and export of woolen carpet rugs. It filed its return of income showing income at ₹ 86,19,540/- for the assessment year 2004-05. The case of the assessee was selected for scrutiny and thereafter notices under section 143(2)/142(1) of the Act were issued. 5. The accountant of the assessee firm and its counsel appeared before the assessing officer and produced cash book, ledger account, journal book, purchase and sale registers, stock register, bills, vouchers etc. 6. The Assessing Officer on examination of records found that sales and purchase was satisfactory. However, on verification, he noticed that the weaving charges and manufacturing expenses were not verifiable as per record of the assessee and the gross profit rate for assessment year 2004- 05 has gone down considerably as compared to the preceding assessment years i.e. 2002-03 and 2003-04. 7. The Assessing Officer required the assessee to expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction of taxes as most of payment were below ₹ 20,000/- as the addresses of these persons are not complete so verifiability of weaving charges is not possible. Similarly in the case of manufacturing expenses case it cannot be said to be fully verifiable. In view of these facts applicability of Section 145(3) cannot be ruled out. IV. The assessee has maintained purchase/ manufacturing and sale register, stock register but in view of nature and work of the industry and maintenance of assessee's own accounts, the stock position and consumption of raw material and cost there upon can not be correctly deduced as piece to piece manufacture, consumption, cost, sale etc is not co-relatable from the books kept by the assessee, so consumption as well as stock cannot be said fully verifiable. Hence applicability of Section 145(3) on this score also cannot be denied. 11. The Assessing Officer, thus computed and assessed the income of the assessee at ₹ 92,52,420/- 12. The assessee aggrieved by the additions made in the assessment order dated 13.02.2006 challenged the same by filing appeal before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court in the case of M/s Kaka Carpets vs Commissioner of Income Tax, Varanasi, Income Tax Appeal No. 8 of 2008, delivered on 28.04.08. 18. To the contrary, learned counsel for the revenue submitted that books of account were not properly maintained by the appellant-assessee which were rightly rejected by the Assessing Officer by invoking provisions of Section 145(3) of the Act. The CIT (Appeals) not only confirmed the action of the assessing officer but also enhanced the GP rate from 15 % to 23.01 %. and there is no apparent error either on the part of the learned Tribunal or in the order passed by the authorities below. 19. It is further submitted that the maximum number of weavers could not be verified in absence of necessary details being furnished by the assessee. Regarding correctness of weaving charges and further the stock position and consumption of raw materials and cost thereupon cannot be correctly deducted as piece to piece manufacture, consumption, cost, sales was also not correlated from the books of account. He also submitted that in maximum number of cases neither PAN was provided nor the address of the weavers were disclosed. As su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut in case of some of the weavers total payment of ₹ 589324 had been made as weaving charges without any deduction of tax at source. As the addresses of these persons were not complete, verification of weaving charges was not possible. Similarly in the case of manufacturing expenses, it could not be fully verified. The Assessing Officer recorded that the stock position and consumption of raw material and cost thereof cannot be correctly deduced as piece to piece manufacture, consumption, cost, sales is not correlated from the books kept by the assessee and therefore, in view of the unverifiability of the same with reference to the records of the recipients and non maintenance of proper stock records, the AO has invoked the provisions of Section 145(3) of the Act, 1961 and thereafter estimated the GP rate at 15 % as against the 14.52 %. 23. It may be stated here that section 145 (3) of the Act, provides that where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee or where method of accounting or accounting standards under subsection (2) have not been regularly followed by the assessee, The Assessing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, it concluded that there is an element of non-genuine expenses. It also took note that there is decline in the cost of raw materials as compared to earlier years. The stock register was not properly maintained and as such it was not possible to ascertain the quantitative details of stock, cost as per unit. 26. Tribunal also noted that the assessee has failed to explain satisfactorily before it as to what was the reason for decline in the gross profit rate and increase in the manufacturing expenses and in absence of any reliable material on record, learned Tribunal did not interfere in the findings arrived at by the authorities below and held that the authorities below were justified in rejecting the book result of the assessee under Section 145(3) of the Act. 27. The Tribunal has recorded categorical finding that the assessee has failed to prove genuineness of weaving charges and no explanation was given as to why weaving charges were kept outstanding in the books of account for years together and even the complete addresses of the weavers were not furnished. Apart from this, a finding has been recorded that in case of half of the weavers no P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground of non maintenance of stock records and the CIT(A) on appeal has sustained the rejection of books of account of the assessee for want of stock records. Therefore, the findings of CIT(A) on the said point cannot be said to be faulted with when the assessee failed to explain the reason for non maintenance of the stock register and also made a bald statement that it is practically not possible for assessee to maintain stock register. The appellant-assessee failed to submit any cogent explanation. 34. Whether the books of account were being properly maintained or not, whether all the entries about the sale transactions therein were made or not, whether stock register was being maintained properly or not, are all questions of fact. The main issue with regard to weaving charges, the same remained unverified on account of non furnishing of necessary details of the weavers by the assessee. In such circumstances, the Tribunal has come to a conclusion that the assessing officer, has, rightly invoked the provisions of Section 145(3) of the Act and rejected the books of account. This action of the assessing officer has been upheld on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s shown the G.P. Rate 16.20 per cent, as against 33.44 percent. In the previous assessment year. Thus, during the assessment year under consideration, the G.P. Rate was low. The commissioner of Income- tax (Appeals) discussed the facts and circumstances pertaining to the manufacturing cost and selling price. The Assessing Officer has taken the G.P. rate at 27 percent. When the books of account were not properly maintained and the vouchers pertaining to the consumable items were not available for verification, then we find justification for rejection of the books of accounts by the Assessing Officer Once the books of account rejected, then there is no option before the Assessing Officer except to estimate the sale and G.P. Rate which he determined by taking by taking by comparative figure of the assessee for the previous assessment year. The Tribunal has already given the partial relief in the facts and circumstances of the case, there is no scope to give any further relief specially when the estimation is a question of fact. The Tribunal is a final fact finding authority as per the ratio laid down in the case of Kamala Ganapathy SubramaniumV. CED (2002) 253 ITR 692 (SC). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded by the AO or the first appellate authority or the Tribunal cannot be disturbed by the High Court in exercise of powers under Section 260-A of the Act unless such finding is perverse or is such which no person of reasonable prudence could arrive at in the given facts of the case. 41. Undisputedly the powers of First Appellate Authority in matters of assessment are co-extensive with the Assessing Authority, in so far as the CIT (A) had issued a notice and thereafter made the enhancement on the basis of relevant material, no question of law may arise against such estimation as it would remain a finding of fact. In so far as the enhancement made by the CIT (A) is based on cogent material and evidence, the said finding does not suffer from any error of Law. 42. In M. Janardhana Rao Vs Joint CIT, reported in (2005) 273 ITR 50 (SC), the Hon'ble Supreme Court held that in the exercise of the powers under Section 260-A of the Act, the findings of fact of the Tribunal cannot be disturbed. The Hon'ble Court held as follows. 14. Without insisting on the statement of substantial question of law in the memorandum of appeal an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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