Acit Jaipur v. M S Allied Gems Corporation Jaipur

In The Income Tax Appellate Tribunal Jaipur Benche S Jaipur Before Shri Vijay Pal Rao Jm Dr Arjun Lal Sai Ni Am Ita No 794 Jp 2011 Assessment Year 2005 06 Acit Circle 1 Jaipur Cuke Vs M S Allied Gems Corporation Bhandia Bhawan Johari Bazar Jaipur Lfkk H Ys Kk La Thvkbzvkj La Pan Gir No Aacfa 2928 D Vihykfkhz Appellant Izr Fkhz Respondent Co No 76 Jp 2011 Arsing From Ita No 794 Jp 2011 Assessment Year 2005 06 M S Allied Gems Corporation Bhandia Bhawan Johari Bazar Jaipur Cuke Vs Acit Circle 1 Jaipur Lfkk H Ys Kk La Thvkbzvkj La Pan Gir No Aacfa 2928 D Vihykfkhz Appellant Izr Fkhz Respondent Ita No 795 Jp 2011 Assessment Year 2007 08 Acit Circle 1 Jaipur Cuke Vs M S Allied Gems Corporation Bhandia Bhawan Johari Bazar Jaipur Lfkk H Ys Kk La Thvkbzvkj La Pan Gir No Aacfa 2928 D Vihykfkhz Appellant Izr Fkhz Respondent Co No 77 Jp 2011 Arsing From Ita No 795 Jp 2011 Assessment Year 2007 08 Ita No 794 795 Jp 11 716 Jp 12 Co 76 77 Jp 11 6 0 Jp 12 Acit Vs M S Allied Gems Corporation 2 M S Allied Gems Corporation Bhandia Bhawan Johari Bazar Jaipur Cuke Vs Acit Circle 1 Jaipur Lfkk H Ys Kk La Thvkbzvkj La Pan Gir No Aacfa 2928 D Vihykfkhz Appellant Izr Fkhz Respondent Ita No 716 Jp 2012 Assessment Year 2008 09 Acit Circle 1 Jaipur Cuke Vs M S Allied Gems Corporation Bhandia Bhawan Johari Bazar Jaipur Lfkk H Ys Kk La Thvkbzvkj La Pan Gir No Aacfa 2928 D Vihykfkhz Appellant Izr Fkhz Respondent Co No 60 Jp 2012 Arsing From Ita No 716 Jp 2012 Assessment Year 2008 09 M S Allied Gems Corporation Bhandia Bhawan Johari Bazar Jaipur Cuke Vs Acit Circle 1 Jaipur Lfkk H Ys Kk La Thvkbzvkj La Pan Gir No Aacfa 2928 D Vihykfkhz Appellant Izr Fkhz Respondent Assessee By Shri Rajeev Sogani Ca Revenue By Shri P P Meena Jcit Date Of Hearing 08 11 2017 Date Of Pronouncement 15 12 2017 Ita No 794 795 Jp 11 716 Jp 12 Co 76 77 Jp 11 6 0 Jp 12 Acit Vs M S Allied Gems Corporation 3 Vknsk Order Per Vijay Pal Rao J M These Are Three Appeals By The Revenue And Cross O Bjections Of The Assessee Against The Orders Of The Ld Cit A Jaipur For The A Y 2005 06 2007 08 2008 09 Respectively The Reven Ue Has Raised The Common Grounds In These Appeals The Grounds Raised For The Assessment Years 2005 06 Are As Under Whether On The Facts And In The Circumstances Of T He Case And In Law The Ld Cit A Is Justified In I Restricting The Trading Addition To The Extent O F Rs 11 54 Lacs As Against Addition Of Rs 96 69 746 Made By The Ao On Account Of Unverifiable Purchases Keeping In View The Decision Of The Ld Cit A 1 Jaipur In The Case Of M S Nand K Ishore Meghraj In Ita No 583 08 09 Dated 09 03 2009 And Confirmed By The Honble Itat Jaipur Bench Jaipur Ii Relying On Past History Of The Case In Spite Of The Fact That During The Year Under Consideration Most Of The Pur Chases Of The Assessee Were From Persons Concerns Issuing Bills Without Delivery Of Goods 2 The Assessee Is A Partnership Firm And Engaged I N The Business Precious And Semi Previous Stones And Silver And Go Ld Jewellery While Completing The Assessment For The A Ys In Question The Ao Found That The Assessee Has Not Maintained Stock Register And As Per The Audit Report The Inventory Of Closing Stock Has Been Valu Ed On Estimate Basis Ita No 794 795 Jp 11 716 Jp 12 Co 76 77 Jp 11 6 0 Jp 12 Acit Vs M S Allied Gems Corporation 4 The Ao Further Noted That The Assessee Made Purchas Es From 45 Parties Which Are Found To Be Entry Providers For T He Purpose Of Issuing Bills Without Actual Sales The Ao Has Made Referen Ce To The Facts Found During The Search And Survey Conducted By The Depar Tment On Those Entrys Provider Parties The Ao Issued Summons To T Hese Parties But Returned Un Served And Un Complied With Accordingl Y The Assessing Officer Rejected The Books Of Accounts Of The Asses See By Invoking The Provisions Of Section 143 3 On The Ground That Th E Assessee Has Failed To Produce The Suppliers In Person For Examination And Consequently Failed To Discharge The Onus To Prove The Claim Of Purchases Thus The Ao Held That The Purchases In Question Remained Unv Erifiable And Therefore The Ao Not Satisfied With The Correctnes S And Completeness Of Accounts Of The Assessee The Ao Then Proceeded To Estimate The Income Of The Assessee On The Basis Of The Profit 25 On Unverifiable Purchases The Ao Computed The Profit 25 On The Purchase Of Rs 3 86 78 985 For The Assessment Year 2005 06 Amoun Ting To Rs 96 69 746 The Said Amount Was Added To The Incom E Of The Assessee Similar Additions Were Made For The Other Assessment Years The Ld Cit A Though Upheld The Rejection Of Books Of Accounts Of The Assessee However The Ld Cit A Restricted The Add Ition While Ita No 794 795 Jp 11 716 Jp 12 Co 76 77 Jp 11 6 0 Jp 12 Acit Vs M S Allied Gems Corporation 5 Considering The Average Gp Rate Of The Past Assessm Ent Years 13 60 Applied On Total Sale Of Rs 560 16 Lacs And Consequently The Addition Was Confirmed To The Extent Of Rs 11 54 L Acs As Against Rs 96 69 746 For A Y 2005 06 A Similar Finding Ha S Been Given For The Other Assessment Years Though The G P Rate Estimat Ed Varies As Per The Average Of The Past G P Rate Aggrieved By The Impugned Orders Of The Ld Cit A The Revenue As Well As Assessee File D These Appeals And Cross Objection Respectively 3 The Ld Dr Has Submitted That The Ao Rejected The Books Of Account On The Ground That The Majority Of The Purc Hases Of The Assessee Were Found To Be Unverifiable And Further The Parties From Whom The Assessee Claim The Purchases Were Providin G Accommodation Entries In All The Cases As Pointed Out By The Ao The Purchases Could Not Be Verified Due To Non Production Of Necessary Details And Parties Before The Ao Therefore The Ao Was Justified In M Aking The Addition U S 69 C 25 Of Bogus Purchases By Following Decis Ions Of Honble Gujarat High In Case Of Vijay Proteins Ltd Vs Dci T 58 Taxmann Com 44 Guj The Ld Dr Has Also Relied Upon The Decisio N Of Honble Gujarat High Court In Case Of Sanjay Oil Cakes Industries V S Cit 316 Itr 274 And Submitted That The Honble High Court Upheld Th E Disallowance Of Ita No 794 795 Jp 11 716 Jp 12 Co 76 77 Jp 11 6 0 Jp 12 Acit Vs M S Allied Gems Corporation 6 Bogus Purchases He Has Contended That The Ld Cit A Is Not Justified In Restricting The Disallowance To The Gp Rate Addi Tion When There Are Honble High Court Decision Confirming The Disallow Ance 25 Of Bogus Purchases The Ld Dr Has Also Referred To The Deci Sion Of Honble Gujarat High Court In Case Of N K Industries Vs Dcit 72 Tamann Com 289 142 Dtr 962 And The Honble Supreme Court Has Dismissed The Slp Filed Against The Decision Of The Honble Gujar At High Court Therefore The Same Has Attained The Finality 4 On The Other Hand The Ld Ar Of The Assessee Ha S Submitted That An Identical Issue Was Considered By This Tribunal In Assessees Own Case For The Assessment Year 2006 07 Vide Order Dat Ed 10 06 2001 In Ita No 603 Of 2010 Wherein Though The Tribunal Has Upheld The Rejection Of Books Of Accounts U S 145 3 However The Gp Rate Addition Made By The Ld Cit A Was Also Upheld By The Tribu Nal The Ld Ar Has Further Contended That The Honble Jurisdiction Hig H Court In Case Of Cit Vs Amrapali Jewells P Ltd 65 Dtr 196 Has Uphel D The Order Of This Tribunal Whereby The Gp Rate Addition Made By The T Axing Authorities Was Deleted He Has Also Relied Upon The Decision Dated 15 03 2012 Of The Coordinate Benches Of This Tribunal In Case Of M S Swarnganga Jewellers Vs Acit Ita No 833 Jp 2011 Ita No 794 795 Jp 11 716 Jp 12 Co 76 77 Jp 11 6 0 Jp 12 Acit Vs M S Allied Gems Corporation 7 5 We Have Considered The Rival Submissions As Well As Relevant Material On Record The Assessing Officer Rejected The Books Of Account By Invoking The Provisions Of Section 145 3 The I Ssue Of Rejection Of Books Of Accounts Is Involved In The Cross Objectio N Filed By The Assessee Therefore We Deal With This Issue While Deciding The Cross Objection Once The Books Of Accounts Are Rejected By The Ao The Only Course Of Action Left To The Ao Is To Assess The I Ncome Of The Assessee On The Basis Of Best Judgment And Gp Rate Is Consi Dered As Proper And Reasonable Basis And Guidance For The Best Judgment Once The Books Result Are Rejected The Assessing Officer Cannot Pr Oceed To Make An Addition To The Income Offered By The Assessee As P Er Books Result However The Ao In The Case Of The Assessee Instead Of Applying The Gp Rate Made On Addition 25 Of The Purchases To The Book Results This Act Of The Assessing Officer Itself Contradicts The Decision Of Rejecting The Books Of Accounts And Books Result The Tribuna L In Assessees Own Case For The Assessment Year 2006 07 Has Considered This Issue And Upheld The Order Of The Ld Cit A In Para 2 20 And 2 30 As Under 2 20 Hence There Are Certain Concerns For Which R Evenue Got Evidence In The Form Of Statement Recorded In Respe Ct Of Such Parties Opening Balance Is Rs 37 06 175 While T He Closing Balance Is Rs 42 81 496 It Means That There Is An Accretion Of Amount Of Rs 5 75 Lacs It Means That To This Ex Tent Accretion Ita No 794 795 Jp 11 716 Jp 12 Co 76 77 Jp 11 6 0 Jp 12 Acit Vs M S Allied Gems Corporation 8 In Purchase Is Without Supporting The Correct Bills Of Course Total Openting Balance Of All Parties Is Rs 1 15 43 782 And The Closing Balance Is Rs 1 33 36 193 However Look Ing To The Accretion In The Closing Balance Of The Concerns Fo R Which Revenue Has Material The Addition Confirmed By The Ld Cit A Is Reasonable 2 30 The Honble P H High Court In The Case Of Up Lakesh Metal Industrial V Cit 177 Taxman 298 Held That Issue Dec Ided By This Is In The Realm Of Appreciation Evidence The Find Of Tribunal As Mentioned In This Judgment Is As Under However In Our Opinion The Observation Of The Asse Ssing Officer That The Assessee Was Prima Facie Required To Prove The Genuineness Of The Transaction And Identity Of The Creditors Is Not Misplaced Because There Is No Distinction Laid Betw Een The Trade Creditor And The Non Trade Creditor And We Are Furt Her Of The Opinion That In Case The Assessee Claims Liability Of Payment To The Trade Creditors Shown In The Balance Sheet The Assessee Is Definitely Required To Prima Facie Prove The Identi Ty Of The Trade Creditors As Well As The Genuineness Of The Transac Tion In This Case Admittedly The Assessee Has Neither Been Able To Disclose The Complete Addresses Of The Trade Creditors Nor I S Able To Give The Complete Addresses Of The Consignors Nor The Na Me Has Been Mentioned On The Challan Forms So The Verification Of The Same By The Assessing Officer Became Totally Impracticab Le On Account Of Lack Of This Complete Information Supplied By Th E Assessee It Means That The Assessee Failed In Establishing The Genuineness Of The So Called Trade Creditors Appearing In Its Book S Of Account We Are Further Of The Opinion That Since In The Ins Tant Case Of The Assessee The Point Under Consideration Before Us I S Regarding The Genuineness Of The Liability Amounting To Rs 1 75 26 586 Shown By The Assessee In Its Balance Sheet As Trade Credi Tors So It Was Not Relevant For Us To Consider As To Whether The P Urchases Made Ita No 794 795 Jp 11 716 Jp 12 Co 76 77 Jp 11 6 0 Jp 12 Acit Vs M S Allied Gems Corporation 9 By The Assessee Were Genuine Or Not Or To Whether T He Assessee Has Inflated Those Purchases Or Not It Is Also Not Material To Consider Whether The Grs From Sale Tax Department W Ere Verified Or Not So The Cit A On Considering These Points Was Not Justified In Deleting The Impugned Addition Without Discussing As To Whether The Liability Of Trade Creditors Shown B Y The Assessee In The Absence Of Furnishing Complete Addresses Of Trade Creditors Consignors And The Payment Vouchers Was G Enuine Or Not While Evaluating The Material Collected By The Reve Nue On The Touch Stone On Human Probability And Considering Th E Accretion In The Closing Balance In Respect Of Parties For Wh Ich Revenue Has Material In Thejform Of Statement We Fell That The Ld Cit A Was Reasonable In Confirming The Addition Of Rs 5 00 L Acs Hence Both The Grounds Of Assessee As Well As Revenue Are Dism Issed We Further Noted That When The Corresponding Sale I S Not In Dispute Then The Question Is Only Regarding The Correct Amo Unt Of Purchases And Verification Of The Same The Ld Dr Has Relied Upon The Various Decisions Of Honble Gujarat High Court However We Find That In All Those Decisions There Was A Finding Of Facts That T He Assessee Inflated The Purchases Upto 25 And Therefore It Was Not A Case Of Non Verification Of The Purchase And Rejection Of Book S Of Accounts But The Fact Was Established In The Investigation That The Assessee Inflated The Purchase Price And Accordingly The Addition Of 25 Being Inflated Purchases Was Made And Upheld By The Tribunal Which Was Again Upheld By The Honble High Court On The Contrary I N The Case Of The Ita No 794 795 Jp 11 716 Jp 12 Co 76 77 Jp 11 6 0 Jp 12 Acit Vs M S Allied Gems Corporation 10 Assessee The Ao Not Given Any Finding Of Inflated P Urchases By The Assessee But Doubted The Very Transaction Of Purcha Ses Due To Non Production Of These Parties Before The Ao The Ao H As Not Given The Finding That The Prices Of The Goods Was Inflated B Y The Assessee But The Ao Doubted The Genuineness Of The Purchases On The Ground That The Suppliers Were Found To Be Accommodation Entries Pr Oviders When The Ao Rejected The Book Results U S 145 3 Of The Act Then The Ao After Rejection Of The Books Of Account Can Proceed To Ma Ke The Assessment On The Basis Of Best Judgment Instead Of Resorting Make The Addition To The Book Results Accordingly In The Facts And Cir Cumstances Of The Case And In View Of The Decision Of This Tribunal In Ass Essees Own Case For A Y 2006 07 We Do Not Find Any Error Or Illegality In The Orders Of The Ld Cit A In Restricting The Addition To The Avera Ge Gp Rate Based On The Past History Hence The Grounds Raised In The Revenue Appeals Are Rejected Being Without Any Substance Or Merits 6 In The Cross Objection Of The Assessee Has Raise D The Common Grounds Is As Under 1 In The Facts And Circumstances Of The Case And I N Law The Ld Cit A Has Erred In Confirming The Action Of The Ld Ao In Confirming The Trading Addition Of Rs 11 54 Out Of The Total Addition Of Rs 96 69 746 Made By The Ld Ao The Action Of The Ita No 794 795 Jp 11 716 Jp 12 Co 76 77 Jp 11 6 0 Jp 12 Acit Vs M S Allied Gems Corporation 11 Ld Cit A Is Illegal Unjustified Arbitrary And A Gainst The Facts Of The Case Relief May Please Be Granted By Quashing The Rejection Of Books And Deleting The Trading Addition Of Rs 1 1 54 2 The Assessee Craves Its Rights To Add Amend Or Alter Any Of T He Grounds On Or Before The Hearing 7 The Assessee Has Challenged The Order Of The Ld Cit A In Confirming The Addition To The Extent Of Gp Rate 8 We Have Heard The Ld Ar As Well As Ld Dr And C Onsidered The Relevant Material On Record We Find That The Asses See Failed To Substantiate The Purchases Recorded In The Books Of Accounts And To That Extent The Purchases Were Not Verifiable The Assessing Officer Has Also Pointed That The Inventory Of Closing Stock Ha S Been Valued On Estimated Basis As Pointed Out And Specifically Men Tioned In The Audit Report And Therefore The Assessee Was Not Maintain Ing The Stock Register Showing The Quantity And Qualitative Detai Ls Including The Purity Of The Previous Matters Therefore The Valuation O F The Closing Stock Was Also Found To Be Estimated And Not The Actual A Nd Correct Value The Ao Issued Summons To The Parties From Whom The Assessee Made The Purchases However There Was No Response And No Compliance Of The Notice Issued By The Ao To These Parties Thus The Assessing Officer Has Rightly Pointed Out That The Sale To The Extent Of More Than 60 Of Ita No 794 795 Jp 11 716 Jp 12 Co 76 77 Jp 11 6 0 Jp 12 Acit Vs M S Allied Gems Corporation 12 The Assessee Was Not Verifiable Therefore In Thes E Facts And Circumstances Of The Case When The Sales Of The Ass Essee To The Extent Of More Than 60 Is Not Verifiable Due To The Failu Re Of The Assessee To Produce The Relevant Evidence And The Supplier Then The Book Results Of The Assessee Would Not Reflected True Picture And C Onsequently It Was A Sufficient And Proper Ground For Rejection Of Books Of Accounts By The Ao The Ld Cit A Has Dealt With This Issue In Par A 4 3 As Under 4 3 I Have Carefully Perused The Order Of The Ao A Nd The Extensive Submissions Of The Ar The Most Pertinent Point In The Case Of The Assessee Is That The Honble Itat Jaip Ur Bench Has Already Adjudicated In Identical Facts In The Case Of The Assessee For A Y 2006 07 Vide Its Order Ita No 603 Jp 2010 Dated 10 06 2011 Similar Disallowances Were Made By The Ao Under Similar Facts And Circumstances As Are Involved In The Appellants Present Appeal For A Y 2005 06 On Perusal Of The Same I Find That The Honble Itat Jaipur In The Appellants Cas E For A Y 2006 07 Based On A Detailed Discussion From Pages 2 To 9 Has Upheld The Rejection Of Books Of Account By Invoking The P Rovisions Of S 145 3 In The Case Of The Assessee Due To Unverifia Ble Purchases Therefore As The Facts And Circumstances Are The S Ame In This Year I Uphold The Decision Of The Ao To Reject The Books Of Accounts Of The Assessee And Estimate His Income Thus The Ld Cit A Has Decided This Issue By Foll Owing Decision Of This Tribunal In Assessees Own Case For The Assessment Year 2006 07 Hence We Do Not Find Any Error Or Illegality In Th E Orders Of The Ld Cit A Qua This Issue Ita No 794 795 Jp 11 716 Jp 12 Co 76 77 Jp 11 6 0 Jp 12 Acit Vs M S Allied Gems Corporation 13 In The Result The Appeals Of The Revenue And Co Of The Assessee For All Three Assessment Years Are Dismissed Order Pronounced In The Open Court On 15 12 2017 Sd Sd Dr Arjun Lal Saini Vijay Pal Rao Accountant Member Judicial Member Tk Iqj Jaipur Fnukad Dated 15 12 2017 Santosh Vknsk Dh Izfrfyfi Vxzsfkr Copy Of The Order Forwarded To 1 Vihykfkhz The Appellant Acit Circle 1 Jaipur 2 Izr Fkhz The Respondent M S Allied Gems Corporation Bhandi A Bhawan Johari Bazar Jaipur 3 Vk Dj Vk Qdr Cit 4 Vk Dj Vk Qdr Cit A 5 Fohkkxh Izfrfuf K Vk Dj Vihyh Vf Kdj K T Iqj Dr Itat Jaipur 6 Xkmz Qkbzy Guard File Ita No 794 795 Jp 2011 716 Jp 12 Co No 76 77 Jp 11 Co 60 Jp 12 Vknskkuqlkj By Order Lgk D Iathdkj Asst Registrar