- (1.) This appeal under s. 260A of the IT Act, 1961 ('the Act') by the Revenue against the judgment dt. 5th Oct., 2005 passed by the Income-tax Appellate Tribunal, Jodhpur Bench, Jodhpur ('the Tribunal') in ITA No. 527/Jd/1999 and relating to the asst. yr. 1996-97 has been admitted on the following question of law: Whether on the facts and in the circumstances and in law, the learned Tribunal was justified in allowing the relief of Rs. 8,54,010 out of trading addition of Rs. 8,66,728 made by AO by relying on the decision of Howrah Trading Co. (P) Ltd. vs. CIT, 1968 67 ITR 582 while approving the action of the CIT(A) in rejecting the book result? The facts relevant for determination of the question involved in this appeal are that the assessment proceedings in relation to the respondent-assessee were completed on 25th March, 1997 under s. 143(3) of the Act, wherein, the AO, inter alia, noticed that the assessee had declared GP rate of 20.6 per cent and considered the same to be low as compared to the GP rate of 32.72 per cent declared by another concern viz., Anil Marbles (P) Ltd. for the asst. yr. 1996-97. The AO came to the conclusion that the assessee, who was dealing in marble, indulged in suppression of purchase cost of marble blocks and sales of marble and, therefore, the then applicable provisions of s. 145(1) were attracted. Accordingly, while rejecting the books of account of the assessee, the AO made an addition of Rs. 8,66,725 by applying GP rate of 32.42 per cent on the estimated sales. The AO made the estimate of the sales of the assessee at one and half times the total declared sales plus job receipts and increase in closing stock.
(2.) Feeling aggrieved, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), Udaipur, ['the CIT(A)'] which was partly allowed by the order dt. 26th Aug., 1999. The CIT(A), though found that the provisions of s. 145 of the Act had rightly been invoked by the AO but came to the conclusion that the comparison made by the AO of the assessee with the said Anil Marbles (P) Ltd. for estimation of sales and application of GP rate was not justified for the reasons that the period of working of both the companies was different and the sales declared by the assessee had been accepted by the sales-tax authorities. Further, the CIT(A) also came to the conclusion that the application of GP rate at 32.42 per cent was not justified. However, taking the GP rate declared by the assessee to be on the lower side, particularly for the general trend/practice of under billing in the marble business, the learned CIT(A) put the estimate on the sales of the appellant at Rs. 26 lakhs and, while applying the GP rate of 25 per cent on such sales, put the sustainable addition only at Rs. 12,715.
(3.) The Revenue questioned the order so passed by the CIT(A) before the Tribunal, who by the order impugned came to the conclusion that the AO increased the turnover by 50 per cent of the declared amount of sales without indicating any reason for such enhancement and the CIT(A) was justified in enhancing the sales to Rs. 26 lakhs from Rs. 23.46 lakhs declared by the assessee. The Tribunal further held that the case of Anil Marbles had rightly been distinguished and the GP rate of 25 per cent had reasonably been applied as against 20.6 per cent declared by the assessee. Consequently, the Tribunal dismissed the appeal filed by the Revenue. Hence, this appeal.;