CIT-XI Vs. ZOHRA EMPORIUM

JUDGEMENT

(1.) The revenue is aggrieved by an order dated 18.10.2013 of the Income Tax Appellate Tribunal (hereinafter referred to as "the ITAT") in ITA No.3862/Del./2000. It urges three issues and states that they involve substantial questions of law, first, on the deletion of addition relatable to unrecorded purchases (Rs. 83,25,768/-); rejection of the sum of Rs. 16,85,743/-, which had been added originally by the Assessing Officer (AO) on account of the gross profit rate adopted by him); and on the deletion of addition of Rs. 87,429/-, claimed by the assessee as expenses towards embroidery charges. Briefly, the facts are that the assessee for assessment year (AY) 1996-97 - filed a return declaring its total income as Rs. 1,19,370/-. The assessment was selected for scrutiny. The AO rejected the assessee's books of account by invoking Section 145(2) and brought to tax a sum of Rs. 113,24,060/-. In doing so, the amounts inter alia of Rs. 83,25,768/- due to unaccounted purchases, Rs. 20,93,098/- - due to unrecorded sales and Rs. 87,429/- due to embroidery charges were added. A similar exercise had been conducted for AY 1994-95 and the AO appears to have adopted the route of referring the assessee's accounts to special auditor under Section 142(2A). That exercise ran into technical problems on account of the fact that the extension of time for completing the special audit was not agreed to be extended by the assessee; but was done at the instance of the special auditor. The special auditor failed to understand that embroidered finished goods cannot, in any case, be traced out from opening stock inventory and purchases made. The ITAT therefore rejected the AO's determination based on the sub-audit. The AOs order in the present instance was carried in appeal to the CIT, who granted substantial relief in respect of the matters which are subject matter of the present appeal. However, relief was denied to the extent of Rs. 4,07,355/- on the second question i.e. on recorded sales, but substantial relief was granted for the balance amount. The assessee and the revenue appealed to the ITAT. By the impugned order, the revenue's appeal was rejected and the assessee was granted the relief that it sought.

(2.) It is urged by the revenue that the assessee had miserably failed to produce material to substantiate its claim with respect to opening and closing stock, and had only partially satisfied the AO on discount. The learned counsel stressed that in the course of the assessment proceedings, the stand of the assessee was equivocal, in the sense that at one stage, a claim was made that relevant books or inventories existed, but later, it was urged that the books had been destroyed. Given the nature and volume of transactions, submitted counsel for the revenue, the AO was justified in rejecting books of account and taking the total volume of transactions on the one hand and applying the GP rate of 25.14% in the circumstance of the case.

(3.) Counsel for the assessee contended that the appreciation of facts by the lower authorities is neither perverse nor unreasonable as to call for interference by this Court under Section 260A of the Income Tax Act. He pointed out the relevant portions of the CIT's order and stated that the said authority not only followed the previous assessment year AY 1994-95 but also adduced independent and additional reasons for the present year. The ITAT too considered all these grounds and rejected the revenue's contention.