1 Commissioner of Income Tax, Udaipur Vs. M/s Suresh Marbles Pvt. Ltd, Chittorgarh (D.B. INCOME TAX APPEAL NO.18/2007) Date of Order :: 13.01.2009 HON'BLE MR. JUSTICE A.M. KAPADIA HON'BLE MR. JUSTICE SANGEET LODHA Mr. K.K. Bissa, for the appellant. Mr. Vikas Balia, for the respondent. 1. This appeal under Section 260A of the Income Tax Act, 1961 (for short 'the Act of 1961' hereinafter) is directed against order dated 05.10.2005 passed by the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur (for short 'the ITAT' hereinafter) in ITA No.554/JDPR/1999 & ITA No.531/JDPR/1999 for the Assessment Year 1996-97, whereby the aforesaid appeals preferred have been partly allowed and the order dated 26.8.99 passed by the Commissioner of the Income Tax (Appeal), (in short 'the CIT(A)' hereinafter), reducing the estimated sales, has been confirmed and the GP rate determined by the CIT(A) as 25% has been enhanced to 25.95%. 2. The relevant facts in nutshell are that the respondent-assessee is engaged in manufacturing of marbles slabs out of the purchased marble blocks. During the relevant assessment year, it declared total sales of Rs.50,87,055/- and job charges of Rs.2,27,873/-. The return filed by the assessee was processed by the Asssessing Officer (in short 'the AO' 2 hereinafter) under Section 143(1)(a) of the Act of 1961. The AO found that the purchase bills of marble blocks show that no weight or measurement of the marble blocks is recorded on the purchase bills. That apart, the AO found that no stock register of marble blocks was maintained by the assessee. In this view of the matter, while rejecting the books of account, on the facts and in the circumstances of the case, the AO estimated the sales of the assessee at 1.5 times the declared sale etc. and considering the comparable case of Anil Marbles Pvt. Ltd. determined the GP rate as 34.42%. Accordingly, the total sales was estimated at Rs.84,04,005/-, which resulted in increase in gross profit by Rs.15,79,845/-. 3. Aggrieved by the aforesaid order dated 25.3.99 passed by the AO, the assessee preferred an appeal before the CIT(A). After due consideration, the CIT(A) upheld the rejection of the books of account by the AO under Section 145(1) of the Act of 1961, however, the learned CIT(A) found the estimated sales so also the GP rate determined by the AO in the higher side. The CIT(A) observed that while determining the estimated sales, the AO has not considered the relevant aspects namely investments, locality, year of establishment of business, manpower utilized, availability of raw material etc. After considering the facts and circumstances of the case, the CIT(A) opined that there is a general feature of under billing in the line of business wherein the assessee is engaged and such feature cannot be ruled out in the case of the 3 assessee as well. Accordingly, the CIT(A) while determining the estimated sales at Rs.55,00,000/- including all receipts held that it will be reasonable to apply GP rate of 25% on estimated sales. 4. Aggrieved by the aforesaid order passed by the learned CIT(A), Revenue as well as the respondent-assessee preferred appeals. The cross-objections were filed by the respondent-assessee in the appeal filed by the Revenue. By the order impugned, the learned ITAT has upheld the order passed by the CIT(A), restricting the enhanced sales to Rs.55,00,000/- , however, in view of the fact that the assessee had declared gross profit rate of 25.95% in the A.Y. 1995-96, the learned ITAT held that the same GP rate should be applied to the assessment year in question as well. 5. The appeal preferred by the Revenue was admitted by this Court on the following substantial question of law : “Whether on the facts and in the circumstances and in law the learned Tribunal was justified in confirming the finding of learned CIT(A) ignoring the fact and finding given by the AO that purchase bill of marble blocks showed no weight or measurement and no stock register was maintained and by considering the comparable case of Anil Marbles Pvt. Ltd., the Gross Profit rate 32.42% taken and addition of Rs.15,79,845/- ?” 6. It is submitted by the learned counsel for the Revenue that the 4 comparable case of M/s. Anil Marbles Pvt. Ltd referred by the AO is an identical case of similar nature and provides a sound basis for estimation of sales as well as gross profit in the case of assessee, therefore, the CIT(A) so also the ITAT have erred in distinguishing the comparable case from the assessee's case. Accordingly, it is submitted by the learned counsel that the order impugned passed by the ITAT so also by the CIT (A) are liable to be set aside and the order passed by the AO deserves to be restored. 7. Per contra, the learned counsel appearing on behalf of the respondent-assessee, while relying upon the judgment of this Court in the matter of 'Commissioner of Income Tax Vs. Akj Granites (P) Limited reported in 301 ITR 291:212 CTR 25, submitted that the best judgment assessment itself is based on estimate and cannot be scaled at exactitude, therefore, on the facts and in the circumstances of the case, no substantial question of law arises in the matter and the order passed by the learned ITAT confirming the order passed by the CIT(A) with the modification in regard to the GP rate to be applied, does not warrant interference by this Court. 8. We have considered the rival submissions and perused the impugned order and other material available on record. 9. It is not the law that books of account of assessee having been rejected as unreliable under Section 142(5) of the Act of 1961, the sales returned by the assessee must necessarily be rejected and such sales 5 should be estimated at higher figure than returned by the assessee. Even after, the rejection of the books of account the Assessing Officer is under obligation to determine as to whether the sales as returned by the assessee should be accepted or a higher sales should be estimated. The estimated sales must be determined fairly on the basis of relevant material on record. As noticed by the learned CIT(A), in the instant case, while determining the estimated sales the AO had not considered the relevant aspects. We are of the considered opinion, on the facts and in the circumstances of the case, the estimated sales determined by the CIT(A) appears to be just and reasonable. 10. Coming to the GP rate, it is to be noticed that as in the case of Akj Granites (P) Limited (supra), the CIT(A) has found that the case of M/s. Anil Marbles was not comparable case for the purpose of lifting the GP rate to be applied to the case of the assessee inasmuch as while adopting the said GP rate, the AO has not considered the investments, locality, year of establishment of business, manpower utilized, availability of raw material etc of both the cases. The learned Tribunal while determining the GP rate as 25.95% has taken into consideration the GP rate declared by the assessee during the assessment year 1995- 96, which undoubtedly is relevant consideration. Moreover, as laid down by this Court in Akj Granites (P) Limited (supra), the best judgment itself is based on estimate and cannot be scaled at exactitude. Thus, for the parity of the reasons, on the facts and in the circumstances of the 6 case, in our considered opinion, the GP rate adopted by the learned Tribunal as aforesaid also cannot be faulted with. 11. For the aforementioned reasons, we answer the substantial question framed by this Court as aforesaid in favour of the assessee and against the revenue. 12. In the result, the appeal fails, it is hereby dismissed. No order as to costs. [SANGEET LODHA], J. [A.M. KAPADIA], J. vijayant