COMMISSIONER OF INCOME-TAX Vs. JAIPUR JEWELLERS

JUDGEMENT

(1.) THE Assessing Officer in his assessment order had made three additions of the following nature: (a) The GP ratio was taken at 29.25 per cent as against 17 per cent given by the assessee and on that basis addition of Rs. 15,76,504 was made. (b) Addition of Rs. 11,58,598 was made against unexplained credit entries in the bank account. (c) Addition of Rs. 1,38,77,174 on the ground that the sum was on account of sundry creditors wrongly shown.

(2.) THE assessee filed an appeal against this order of the Assessing Officer. The CIT (Appeals) vide its judgment dated 28 -3 -2005 partly allowed the appeal of the assessee. The addition of Rs. 15,76,504 was reduced to Rs. 3,00,000. The CIT (Appeals), while doing so, accepted the explanation of the assessee that the GP ratio of 29 per cent in earlier years was because of the reason that assessee had sold the jewellery, in those years, at the counter of the five star hotel whereas for the assessment year in question there was no local sale and the sale was by export of jewellery where the profit margin is lesser. CIT (Appeals), in these circumstances, concluded that GP ratio would be different and lesser when the jewellery is exported as against the sale in a five star hotel. This finding is sustained by the ITAT. It is a pure finding of fact and no question of law arises.

(3.) ON the addition of Rs. 38,77,174 we find that the ITAT has sustained the findings of the CIT(A) that the amounts payable to the creditors have been acknowledged by the assessee in its books and the liability pertains to the amount payable by the erstwhile firm being now taken over by the assessee, and that various creditors were paid and were being paid off by the assessee. The ITAT therefore held that so long as there is no cessation of liability by writing back the same, no addition can be made under Section 41(1). This clearly pertains to the finding of facts.