The Revenue has preferred the present appeal under Section 260A of the IncomeTax Act, 1961, against the order of the Income Tax Appellate Tribunal, Ahmedabad Bench 'A' in ITA No. 1950/Ahd/2008, by proposing the following questions as substantial questions of law. “[A] Whether the Appellate Tribunal is right in law and on facts in holding that the Assessing Officer is not justified in rejecting the book results of the assessee by invoking Sec.145(3) of the I.T.Act, 1961?
[B] Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.25,00,690/ made on account of low GP after rejecting the book results?”
2. We have heard Mrs.Mauna Bhatt for the appellant.
3. The relevant facts are that upon the assessee filing its Return of Income for the Assessment Year 200506, the Assessing Officer i.e. The Additional CIT, Range6, Ahmedabad doubted the correctness and creditworthiness of the accounts of the assessee on the ground that they were loose paper sets kept in box file manner and such method of maintaining books of account was improper according to the Assessing Officer. He, therefore, invoked the provisions of Section 145(3) of the Act and rejected the books of account. On that premise, he increased gross profit to 24.14% from 21.64% declared by the assessee. An addition of Rs.25,00,690/ was made on account of low Gross Profit.
3.1 The Appellate Commissioner, after considering the submissions of the assessee visàvis the observations of the Assessing Officer, recorded its findings as under:
“While rejecting the books of accounts u/s 145(3) of the Act and thereby making huge addition, the assessing officer has not brought on record any material evidence. It is seen that nothing irregular on the part of the appellant to have maintained a consolidated stock register, backed up by detailed daily stock cards containing elaborate details of the inward and outward movement of gooks. Since the appellant has adopted a scientific method of valuing its stock on actual cost basis, there is no reason for the A.O. to recompute the value of closing stock. The appellant has also been able to justify the pricing policy for sales made to its sister concern considering the charge of reconciling the figures of the average sale price and average raw material cost along with the margin if profit compared to the sale price. I find that the appellant is justified in reconciling its financial results and also convincingly explained out that marginal fall in G.P. It appears to me that the appellant is also justified in pointing out that the very same records and accounting method have never been questioned in the past scrutiny assessments as being defective.”
4. The Appellate Tribunal confirmed the order of the Commissioner (Appeals) with following reasons and findings.
“It is observed that the no defect was found in the stock records kept by the assessee in loose card. The maintenance of stock record in loose card may give a reason to the Assessing Officer to verify or scrutinize the stock records with caution but that by itself does not empower the Assessing Officer to eject (sic.) the stock records only on the basis of suspicion without funding (sic.) the actual instance of any manipulation therein. Further, merely from the manner of presentation to assume all the opening stock was of raw material without verifying the actual break up is not proper in the part of the Learned Assessing Officer and such arbitrary assumption cannot be upheld. Further, merely there was fluctuation in sale rate also is not a reason for rejecting the book results without pointing out any falsity in the books of account. We therefore, agree with the Learned Commissioner of Income Tax (Appeals) that the rejection of book result in the instant case was not justified. We therefore, confirm the order of the Learned Commissioner of Income Tax (Appeals) and dismiss the ground of appeal of the revenue.”
5. From the facts of the case and considering the submissions of learned advocate for the appellant in the context, the conclusions and findings arrived at by the Tribunal are found proper. It may be true that the books of accounts are required to be maintained in proper manner, however, a generalized proposition that they were in separate sheets of paper and therefore liable to be rejected, could not be accepted. The Assessing Officer resorted to section 145(3) of the Act with such generalized approach, and concluded that improper and irregular record keeping “always falls short of on creditworthiness test”, without going into the actual accounts kept by the assessee and the state of accounting figures. As could be seen from the order of the Commissioner (Appeals), the assessee satisfied and convinced the Appellate Authority by submitting a detailed explanation on various points raised by the Assessing Officer with reference to and from the accounts, including on the aspect of manner of maintenance of stock register and the books of account. It was pointed out that the accounts were kept in sheets since last 25 years and it was submitted to the satisfaction of the appellate commissioner that they were never found unreliable. The assessee thus discharged his burden before the Appellate Commissioner, pursuant to which the Commissioner arrived at his findings, which in turn came to be affirmed by the Tribunal, as quoted hereinabove.
5.1 The confirming findings by the Tribunal are in the realm of appreciation of facts and are factual in nature. No perversity or legal infirmity is noticed therein. No question of law, much less any substantial question of law, therefore, arises for consideration. It is observed and held in M.Janardhana Rao Vs. Joint Commissioner of Incometax [AIR 2005 SC 1309] that there is no scope for interference by the High Court in appeal under section 260A of the Act with a finding recorded that when such finding could be treated to be a finding of fact.
6. Accordingly, this Tax Appeal is dismissed.
[V. M. SAHAI, J.] Amit [N. V. ANJARIA, J.]