IN THE HIGH COURT OF DELHI AT NEW DELHI 
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   ITA 700/2012  
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 CIT             ..... Appellant 
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 Through: Mr Sanjeev Sabharwal, Sr. Standing Counsel with Mr Puneet 
 Gupta, Jr. Standing Counsel. 
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 versus 
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 GARG ACRYLICS LTD         ..... Respondent 
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 Through: Ms Meera Bhatia, Advocate. 
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 CORAM: 
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 HON'BLE MR JUSTICE BADAR DURREZ AHMED 
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 HON'BLE MR JUSTICE R.V.EASWAR 
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 O R D E R 
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      07.01.2013 
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 We have heard the learned counsel for the appellant.  The only 
 question which according to us could arise for consideration would be 
 with regard to the sales tax subsidy received by the respondent ? 
 assessee being in the nature of a capital receipt or revenue receipt. 
 The Tribunal held that this is in the nature of a capital receipt whereas 
 according to the revenue it should be a revenue receipt.  A similar 
 question has been admitted for hearing in CIT v. Bhushan Steel and Strips 
 Ltd.: ITA No.315/2003 on 25.05.2006.  Consequently, we are admitting this 
 appeal on the following substantial question of law: 
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 ?Whether the Income Tax Appellate Tribunal erred in holding that the 
 subsidy of sales tax received by the assessee of `2,46,12,660/- was a 
 capital receipt and not a revenue receipt?? 
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 We may point out that the learned counsel for the respondent urged 
 that the issue with regard to the addition of `1,84,94,428/- also ought 
 to be considered by this Court as a question of law.  That addition was 
 deleted by the CIT (Appeals) as well as by the Tribunal on the ground 
 that the assessing officer had wrongly rejected the books of accounts 
 merely because the percentage of profit in the year had dipped below the 
 usual percentage.  In this connection the Tribunal held as under: - 
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 ?16. We have heard the learned Departmental Representative who strongly 
 supported the discussions in the assessment order.  The learned counsel 
 for the assessee, on the other hand, supported the order of the CIT 
 (Appeals) and has relied upon the detailed submissions made before the 
 CIT (A) which are part of the proper book in pages 34 to 52.  The 
 rejection of the books of accounts by the A.O according to him was not 
 justified, as the A.O has not pointed out any defects in the maintenance 
 of the books of accounts.  All the purchases and the sales are duly 
 entered into books of accounts.  The manufacturing expenses, opening 
 stocks and closing stocks are duly supported by the stock registers 
 maintained.  The fall in the gross profit is adequately explained before 
 the A.O.  According to him there is no reason why the books of accounts 
 of the assessee require rejection.  The sales of the company are made 
 mostly o enterprises in the medium and large scale sectors and the 
 payments are invariably received in cheques.  The purchases and the 
 expenses have all been fully supported by vouchers and documented and 
 paid through regular banking channels.  Exhaustive records were 
 maintained and were scrutinized by the Excise authorities who did not 
 find any errors therein.  The A.O is also not justified in arriving at an 
 artificial average cost to say that the assessee has falsified the 
 trading results. 
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 17. We have carefully gone through the records and are unable to find 
 any merit in the contention of the A.O in rejecting the books of accounts 
 duly maintained in the ordinary course of business.  They are duly audite 
 as required under the Income-tax Act and they have been accepted by the 
 Sales-tax and Excise authorities.  The A.O cannot simply reject the books 
 of accounts on the reasoning that there has been slight fall in the gross 
 profit without bringing to surface the defects that existed in the 
 maintenance of the books of accounts.  The A.O has not made any such 
 attempt to justify his action.  Therefore, in our view, the CIT (Appeals) 
 was perfectly justified in deleting such an addition made without any 
 basis or reason.  The assessee has maintained quantitative details in 
 respect of the stocks dealt with by the assessee.  Having regard to the 
 method of accounting regularly employed by the assessee, we do not accept 
 the theory as propounded by the A.O to reject the books of accounts and 
 determine the profit at an arbitrary figure of 15% on the declared 
 turnover.  The order of the CIT (Appeals) on this issue is upheld.? 
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 We feel that this is a pure question of fact and not a question of 
 law, much less a substantial question of law.  Consequently, the appeal 
 is admitted only in respect of the question with regard to sales tax 
 subsidy as indicated above.  The printing of paper-books is dispensed 
 with.  The appellant is given liberty to file additional documents which 
 were part of the record of Tribunal.  The same be done within four weeks. 
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 Tag along with ITA No.315/2002. 
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 BADAR DURREZ AHMED, J 
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 R.V.EASWAR, J 
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 JANUARY 07, 2013 
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 hs 
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 $ 2 
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