POORNIMA FIRE WORKS, Jaipur V. ACIT, Jaipur

ITA 1004/JPR/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87526 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 24-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Search and seizure; Opportunity of being heard
• Section: 143(3); 153A; 133(6); 131

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NOS. 1004 TO 1007 /JP/2013 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2003-04 TO 2006-07 M/S POORNIMA FIRE WORKS, 2-A, 138, SHIV SHAKTI COLONY, SHASHTRI NAGAR, JAIPUR. CUKE VS. THE A.C.I.T. CENTRAL CIRCLE-1, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AAEFP 4879 L VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI AJAY MALIK (ADDL.CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 27/11/2014 ?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 19/02/2015 VKNS'K @ ORDER PER: T.R. MEENA, A.M. THIS IS A SET OF ASSESSEES APPEALS FOR A.YS. 2003- 04 TO 2006-07, FILED AGAINST THE COMMON ORDER DATED 03/10/2013 BY THE LEARNED CIT(A), CENTRAL, JAIPUR. THE EFFECTIVE GROUNDS OF ALL THE APPEALS ARE AS UNDER:- ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 2 GROUNDS OF ASSESSEES APPEAL BEING ITA NO. 1004/JP /2013 (A.Y. 2003- 04) 1. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE VALIDITY OF TRADING ADDITION MADE BY A.O. IN ASSESSMENT FRAMED U/S 153A, DEHORS ANY INCRIMINATING MATERIAL FOUND IN SEARCH OR OTHERWISE GATHERED BY HIM FOR THE YEAR UNDER CONSIDERATION. 1.1 THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW I N ESTIMATING THE UNRECORDED SALES, TWICE THE RECORDED SALES AND THUS ESTIMATING THE TOTAL SALES AT RS. 35,69,727/- (WRONGLY TAKEN AT RS. 24 LACS). SHE HAS FURTHER IN APPLYING G.P. RATE OF 19% ON SUCH ESTIMATED TURNOVER AS AGAINST G.P. RATE OF 11.87% DECLARED BY THE ASSESSEE ON THE ACTUAL TURNOVER OF RS. 11,89,909/- AND 17% APPLIED BY THE A.O. RESULTING INTO TRADING ADDITION OF RS. 5,37,009/- (WRONGLY COMPUTED AT RS. 3,14,761/-). GROUNDS OF ASSESSEES APPEAL BEING ITA NO. 1005/JP /2013 (A.Y. 2004-05) 1. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE VALIDITY OF TRADING ADDITION MADE BY A.O. IN ASSESSMENT FRAMED U/S 153A, DEHORS ANY INCRIMINATING MATERIAL FOUND IN SEARCH OR OTHERWISE GATHERED BY HIM FOR THE YEAR UNDER CONSIDERATION. 1.1 THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW I N ESTIMATING THE UNRECORDED SALES, TWICE THE RECORDED SALES AND THUS ESTIMATING THE TOTAL SALES AT RS. 54,88,839/- (WRONGLY TAKEN AT RS. 36 LACS). SHE HAS FURTHER IN APPLYING G.P. RATE OF 18% ON SUCH ESTIMATED TURNOVER AS AGAINST G.P. RATE OF 13.23% DECLARED BY THE ASSESSEE ON THE ACTUAL TURNOVER OF ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 3 RS. 18,29,613/- AND 17.25% APPLIED BY THE A.O. RESULTING INTO TRADING ADDITION OF RS. 7,46,006/- (WRONGLY COMPUTED AT RS. 4,06,015/-). GROUNDS OF ASSESSEES APPEAL BEING ITA NO. 1006/JP /2013 (A.Y. 2005-06) 1. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE VALIDITY OF TRADING ADDITION MADE BY A.O. IN ASSESSMENT FRAMED U/S 153A, DEHORS ANY INCRIMINATING MATERIAL FOUND IN SEARCH OR OTHERWISE GATHERED BY HIM FOR THE YEAR UNDER CONSIDERATION. 1.1 THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW I N ESTIMATING THE UNRECORDED SALES, TWICE THE RECORDED SALES AND THUS ESTIMATING THE TOTAL SALES AT RS. 69,27,294/- (WRONGLY TAKEN AT RS. 46 LACS). SHE HAS FURTHER IN APPLYING G.P. RATE OF 17% ON SUCH ESTIMATED TURNOVER AS AGAINST G.P. RATE OF 11.04% DECLARED BY THE ASSESSEE ON THE ACTUAL TURNOVER OF RS. 23,09,098/- RESULTING INTO TRADING ADDITION OF RS. 9,22,728/- (WRONGLY COMPUTED AT RS. 45,27,088/-). GROUNDS OF ASSESSEES APPEAL BEING ITA NO. 1007/JP /2013 (A.Y. 2006-07) 1. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE TRADING ADDITION OF RS. 1,98,392/- B Y APPLYING G.P. RATE OF 17% ON THE TURNOVER OF RS. 41,86,314/- AS AGAINST G.P. RATE OF 12.26% DECLARED BY THE ASSESSEE. 2. IN A.Y.2003-04 TO 2005-06, THE ASSESSEE CHALLENG ED THE VALIDITY OF ISSUANCE OF NOTICE U/S 153-A OF THE INCOME TAX AC T, 1961 ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 4 (HEREINAFTER REFERRED AS THE ACT) AND ADDITION ON A CCOUNT OF G.P. RATE. IN A.Y. 2006-07, THE APPELLANT ONLY CHALLENGED THE G.P. RATE ADDITION. 2.1 BRIEF FACTS OF THE CASE ARE THAT THERE WAS A SE ARCH AND SEIZURE OPERATION CARRIED OUT ON 22/10/2008 AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEES GROUP. DURING THE COURSE OF SEARCH AND SEIZURE OPERATION, INCRIMINATING DOCUMENTS/LOOSE PA PERS WERE FOUND AND SEIZED. THE LEARNED ASSESSING OFFICER ISSUED NO TICE U/S 153A OF THE ACT IN ALL THE ASSESSMENT YEARS, THEREAFTER DETAILE D QUESTIONNAIRE WAS ISSUED BY HIM. THE ASSESSEE IS A PARTNERSHIP FIRM EN GAGED IN WHOLESALE AND RETAIL BUSINESS OF FIREWORKS. THE LEARNED ASSESSI NG OFFICER OBSERVED THAT THE BOOKS OF ACCOUNT HAD NOT BEEN PRODUCED BY THE ASSESSEE IN A.Y. 2003-04 AND 2004-05 BUT PRODUCED FOR THE A.Y. 2005-06 AND 2006- 07. IN A.Y. 2003-04, THE LEARNED ASSESSING OFFICER PRESUMED THAT THE ASSESSEE FIRM HAD NOT MAINTAINED REGULAR BOOKS OF A CCOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FIRM FURNISHED COPY OF BALANCE SHEET, TRADING ACCOUNT, P&L ACCOUNT AND OTH ER DETAILS/INFORMATIONS. ON VERIFICATION OF DETAILS, T HE LEARNED ASSESSING OFFICER FOUND THE FOLLOWING G.P. ON TOTAL TURNOVER WI TH PERCENTAGE OF G.P., THE CHART IS AS FOLLOWS: ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 5 SL. NO. A.Y. GROSS PROFIT (RS.) TOTAL TURNOVER (RS.) %AGE OF G.P. 1 2003-04 1,41,238/- 11,89,909/- 11.87% 2. 2004-05 2,41,985/- 18,29,613/- 13.23% 3. 2005-06 2,54,912/- 23,09,098/- 11.04% 4. 2006-07 3,22,211/- 26,27,528/- 12.26% IT HAS BEEN FURTHER OBSERVED THAT IN ABSENCE OF COM PLETE BOOKS OF ACCOUNT, THE CLOSING STOCK OF THE FIRM IS NOT VERIF IABLE RESULTANTLY THE GROSS PROFIT WORKED OUT ALSO HAD NO SANCTITY. FURTHE R DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FURNISHED T HE DETAILS OF UNACCOUNTED SALES IN A.Y. 2006-07 TO 2009-10, WHICH IS REPRODUCED AS UNDER:- A.Y. AS PER REGULAR BOOKS OF ACCOUNT UNACCOUNTED SALES SALES G.P. RATIO SALES G.P. RATIO 2003-04 11,89,909/- 11.87% 2004-05 18,29,613/- 13.23% 2005-06 23,09,098/- 11.04% 2006-07 26,27,528/- 12.26% 15,58,786/- 12.26% 2007-08 15,93,180/- 12.98% 49,40,182/- 12.98% 2008-09 20,56,885/- 13.00% 70,88,444/- 13.04% 2009-10 21,57,817/- 14.99% 70,24,060/- 13.04% THE ASSESSING HAS ADMITTED THIS FACT THAT IT INDULGE D INTO TRANSACTIONS WHICH WERE NOT ENTERED INTO REGULAR BOOKS OF ACCOUNT. THESE FACTS WERE ALSO ADMITTED BY SHRI MADAN MOHAN GUPTA, THE MAIN K EY PERSON OF THE ASSESSEE GROUP IN HIS STATEMENT RECORDED DURING THE COURSE OF SEARCH ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 6 OPERATION. SHRI MADAN MOHAN GUPTA HAS STATED IN HIS STATEMENT DATED 21/10/2008 IN REPLY TO QUESTION NO. 21, WHICH IS RE PRODUCED AS UNDER:- IKZ'U 21 VKT FNUKAD 22-10-08 DKS LPZ DH DK;ZOKGH D S NKSJKU TKS YQT ISILZ ANNEXURE BR;KFN IK;S X;S VKSJ TCR FD;S TK JGS GSA MUDS VUNJ DPPS PURCHASE & SALE DH DKXTKR 'KKFEY GS A VKIDS BOOKS OF A/C HKH IWJH RJG CUS GQ, UGH GSA VKSJ BL DKJ.K LVKD DK LR;KIU HKH VKI UGH DJOK I K JGSA GSA BU LHKH DFE;KSA DS CKJS VKI DK D;K DGUK GS A \ MRRJ ESA ;G LOHDKJ DJRK GWWA FD GEKJS IVK[KSA DS BUSINESS ESA DKQH GN RD TRANSACTION CGH [KKRKSA DS CKGJ JGRS GSA GEKJS SALE AND PURCHASES HKH CASH ESA GKSRS GSA A FTUDK FOOJ.K CGH[KKRKSA ESA NTZ UGH GKSRK ;GH DKJ.K FD CG H[KKRS IZFRFNU UPDATE UGHA FD;S TKRS GS VKSJ BLFY, GEKJS BUSINESS PREMISES IJ IK;S X;S STOCK DK LR;KIU DJOKUK LEHKO UGH GSA BU LHKH DFE;KSA DKS ESA IGYS H KH LOHDKJ DJ PQDK GWA FINYS IZUKSA DS MRRJ ESA ESAUS CRK;K FKK FD ESJH V?KKSF'KR VK; ESA LS ESAUS 41 YK[K :I;S YKS XKSA DKS M/KKJ NS J[KS GSA BLDS VYKOK 15 YK[K :- AGREEMENT DS VUQLKJ UKBZ FD FKMH OKYH TEHU VYKOK 20 YK[K DS DJHC UXNH IK;S X;S ESJS ?KJ IJ IK;K X;K GS MLS ESA VIUH V?KKSF'KR [KKRKSA ESA VFTZR VK; DS :I ESA LOHDKJ DJ PQDK GWWA A BLDS VFRFJDR TKS LOOSE PAPER BR;KFN ESJS ?KJ ,OA BUSINESS LFKKUKSA LS IK;S X;S GSA MUESA V?KKSF'KR VK; VKSJ MLLS VFTZR FUOSK DS :I ESA ESA LOSPNK LS VIUH V?KK SF'KR VK; LEFIZR DJUK PKGRK GWWA A ESA ;G HKH LI'V DJUK PKGRK GQ FD GEKJS BUSINESS IZFR'BKUKSA ESA DJHC 10 LS 12 YK[KKSA DK STOCK V?KKSF'KR VK; LS VFTZR FUOSK DS :I ESA FO/KEKU GSA A BU LHKH DJXTKR STOCK BR;KFN DS :IK ESA ESA VIUS VUQEKU L 30 YK[K :I;S HKH V?KKSF'KR VK; BL ISV S VK;DJ DS FY, LEFIZR DJRK GWWA A FTLESA V?KKSF'KR STOCK ] ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 7 SALE, PURCHASES DS DPPS DKXTKR ,OA ESJS ?KJ ,OA BUSINESS IZFR'BKUKSA LS IK;S X;S DKXTKR O NLRKOST ESA YH XBZ TRANSACTION 'KKFEY GSA A DURING THE COURSE OF SEARCH OPERATION, IT IS ALSO FOUND THAT THE BOOKS OF THE ASSESSEE ARE INCOMPLETE AS PER THE STA TEMENT OF SHRI PANKAJ AGARWAL IN REPLY TO Q. NO. 8 RECORDED U/ S 131 OF THE I.T. ACT, 1961 ON 05/01/2008 WHICH IS REPRODUCED BELOW : IZ'U8- ESA VKIDKS VKIDS BUSINESS PREMISES 295-296 THE RAJASTHAN SHORA SUPPLY CO., HAWA MAHAL BAZAR, JAIPUR LS IMPOUND DH X;H LAPTOP FTLDK DATA ,D VYX HARD DISK ESA COPY FD;K GQVK GSA BL HARD DISK DKS [KKSY DJ FN[KK JGK GWWA A D`I;K CRK;S FD BLESA D;K D;K GSA \ MRRJ BL HARD DISK ESA GEKJH FIRM VKSJ CONCERNS DK TALLY &9 VKSJ TALLY &7-2 FORMAT ESA DATA J[KK GSA A TALLY 7-2 ESA HKH CGH DATA GS TKS FD TALLY 9 ESA GSA A CL MLS UPGRADE DJ FN;K X;K GSA A TALLY 9 ESA POORNIMA FIREWORKS DH F.Y. 2005&06] 2006&07 DH RKS IWJH COMPLETE BOOKS GS VKSJ F.Y. 2007&08 O 2008&09 DH INCOMPLETE BOOKS GSA A ON THE BASIS OF ABOVE FACTS, THE LEARNED ASSESSING OFFICER CONCLUDED THAT THE OPENING STOCK AS WELL AS CLOSING STOCK OF T HE FIRM WAS NOT VERIFIABLE. DURING THE COURSE OF ASSESSMENT PROCEED INGS, THE LEARNED ASSESSING OFFICER ISSUED NOTICE U/S 133(6) OF THE A CT TO VERIFY THE ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 8 PURCHASES IN SOME OF THE CASES. OUT OF THESE NOTICE S ISSUES, FOLLOWING NOTICES WERE RETURNED BACK BY THE POSTAL AUTHORITY U NSERVED GIVING REMARK NOT KNOWN OR NO SUCH ADDRESS ETC. 1. M/S ARJUN FIREWORKS, SIVAKASHI. 2. M/S SHRI DIVAN FOREWORKS, THIRUTHANGAL, SIVKASHI 3. M/S RAJAVEL FIREWORKS FACTOR, SIVKASHI. 4. M/S JAYA LATCHANA FIREWORKS, SIVKASHI. 5. M/S DURGAIAMMAN FIREWORKS, VISHWANATHAN, SIVKASHI . 6. M/S ANITHA SPARKLERS FIREWORKS, SIVKASHI 7. M/S GOKILA FIREWORKS, SIVKASHI. THE LEARNED ASSESSING OFFICER AGAIN GAVE THE REASONA BLE OPPORTUNITY OF BEING HEARD TO PROVE THE GENUINENESS OF THE PURCHAS ES MADE BY IT. THE LEARNED ASSESSING OFFICER ALSO HELD THAT THE ONUS T O PROVE THE PURCHASES GENUINE IS ON THE ASSESSEE BY RELYING ON THE VARIOU S DECISIONS CONSIDERED BY HIM, WHICH IS AS UNDER:- (I) M/S INDIAN WOOLEN CARPET FACTORY VS. ITAT & OTH ERS (2002) 178 CTR 420 AND M.P. HIGH COURT IN THE CASE OF VISP (P) LTD. VS. CIT & ANR. 186 CTR 718. (II) AWADESH PRATAP SINGH ABDUL REHMAN & BROS. VS. CIT (1994) 76 TAXMAN 106 (ALL.). (III) S.N. NAMASIVAYAM CHETTIAR VS. CIT (1960) 38 I TR 579. (IV) M/S KACHWALA GEMS VS. JCIT (2007) 288 ITR 10. ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 9 THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED REPLY BE FORE THE ASSESSING OFFICER AND CLAIMED THAT ON THE BASIS OF SEIZED MAT ERIAL FOR A.Y. 2003-04 TO 2005-06, NO UNACCOUNTED SALES AND PURCHASES WERE DETECTED BY THE DEPARTMENT. THE LEARNED ASSESSING OFFICER CALCULATED THE RATIO BETWEEN THE SALES ENTERED IN THE REGULAR BOOKS OF ACCOUNT A ND UNACCOUNTED SALES AS PER THE CHART GIVEN ABOVE I.E. 1:3. THE ASS ESSEES CLAIM WAS THAT DURING THE A.Y. 2003-04 TO 2005-04, THERE WAS N O UNACCOUNTED SALES/PURCHASES BUT WHICH WAS NOT FOUND ACCEPTABLE TO THE ASSESSING OFFICER ON THE BASIS OF SUBSEQUENT YEAR UNACCOUNTED SALE AND PURCHASE FOUND BY HIM AND HELD THAT MODUS OPERANDI OF THE AS SESSEE FIRM WAS NOT MAINTAINING REGULAR BOOKS OF ACCOUNT AND ALL TH E TRANSACTIONS REGARDING PURCHASES AND SALES WERE MADE IN CASH, WHIC H WAS NOT COMPLETELY ENTERED IN REGULAR BOOKS OF ACCOUNT. HE ALSO PRESUMED THAT THE ASSESSEE MIGHT HAVE DESTROYED PAPER RELATING TO UNACCOUNTED SALES. SHIR MADAN MOHAN GUPTA AND SHRI PANKAJ AGARWAL IN HI S STATEMENT HAD ADMITTED THAT ALL THE TRANSACTIONS OF SALES AND PUR CHASES WERE NOT ENTERED INTO THE REGULAR BOOKS OF ACCOUNT. FURTHER HE ALSO REFERRED SECTION 114(D) OF THE INDIAN EVIDENCE ACT FOR INTER POLATION OF THE EVIDENCE FOR A.Y. 2003-04 TO 2005-06. ON THE BASIS OF RATIO OF ACCOUNTED SALES AND UNACCOUNTED SALES FOUND DURING THE COURSE OF ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 10 SEARCH IN A.Y. 2006-07 TO 2009-10. HE CALCULATED TO TAL SALES FOR A.Y. 2003-04 AT RS. 35,69,729/- IN PLACE OF RS. 11,89,90 9/-, IN A.Y. 2004-05 AT RS. 54,88,839/- IN PLACE OF RS. 18,29,613/-, IN A.Y. 2005-06 AT RS. 46,00,000/- IN PLACE OF RS. 23,09,098/-. HOWEVER, IN A.Y. 2006-07, THE GROSS SALES HAS BEEN TAKEN AT RS. 26,27,528/- (AS P ER REGULAR BOOKS OF ACCOUNT) AND RS. 15,58,786/- (ON THE BASIS OF UNACC OUNTED SALES AND ON THE BASIS OF SEIZED MATERIAL) AT RS. 41,86,314/-. TH E LEARNED ASSESSING OFFICER APPLIED G.P. RATE IN A.Y. 2003-04 AFTER REJ ECTING THE BOOK RESULT U/S 143(3) OF THE ACT @ 17%, 17.25% IN A.Y. 2004-05, 17.50% IN A.Y. 2005-06 AND 17.75% IN A.Y. 2006-07 AND MADE TRADING ADDITION OF RS. 6,67,899/- IN A.Y. 2003-04, RS. 10,20,448/- IN A.Y. 2004-05, RS. 13,61,457/- IN A.Y. 2005-06 AND RS. 2,29,789/- IN A .Y. 2006-07. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING O FFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD ALLOWED THE APPEAL PARTLY IN ALL THE YEARS AFTER CONSIDERIN G THE HONBLE JURISDICTIONAL HIGH COURTS DECISION IN THE CASE OF JAI STEEL INDIA VS. ACIT (2013) 88 DTR 1 AND HON'BLE SUPREME COURT DECISI ON IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD. (2 007) 210 CTR (SC) 30 AND HELD THAT THE PROCEEDING U/S 153A OF THE ACT IS VALID. DURING THE COURSE OF SEARCH, INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED, IN ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 11 WHICH UNRECORDED SALES WERE FOUND BY THE ASSESSING OF FICER FOR A.Y. 2006-07 TO 2009-10. FURTHER DURING THE COURSE OF SE ARCH, STATEMENT OF PARTNER OF THE FIRM WAS RECORDED U/S 132(4) OF THE A CT WHEREIN THEY HAVE ADMITTED UNACCOUNTED SALES AS WELL AS THE CASH PURCHASES AND CASH SALES IN THIS LINE OF BUSINESS OF FIREWORKS. THE ASSESSING OFFICER FURTHER INVESTIGATED THE PURCHASES BY ISSUING NOTIC E U/S 133(6) OF THE ACT, WHICH ALSO RETURNED BACK UNSERVED WITH REMARKS NOT KNOWN AND NO SUCH ADDRESS. SHE FURTHER HELD THAT THE HONBL E ITAT IN VARIOUS CASES HAS HELD THAT IN CASE OF NON-GENUINE PURCHASE S, THE REJECTION OF BOOKS OF ACCOUNT U/S 145(3) OF THE ACT IS JUSTIFIAB LE. ONCE THE BOOKS OF ACCOUNT HAVE BEEN REJECTED, THE ASSESSING OFFICER I S FREE IS DECIDE THE ASSESSEES INCOME REASONABLE ON THE PRINCIPLES OF N ATURAL JUSTICE BY COLLECTING EVIDENCE AND CONSIDERING THE PAST HISTOR Y OF THE CASE. SHE FURTHER RELIED ON THE DECISION OF THE HON'BLE SUPRE ME COURT IN THE CASE OF AMBIKA PRASAD THAKUR VS. RAM EKBAL RAI (1961) 1 S CR 758 EQUIVALENT TO AIR 1966 SC, 605, WHEREIN IT WAS OBSE RVED THAT PRESUMPTION CAN BE MADE BOTH BACKWARD AND FORWARD WITHIN A REASONABLY PROXIMATE TIME. THE LEARNED ASSESSING OFFICER CALCULATED THE RATIO BETWEEN ACCOU NTED SALES AND AT 1:3 AND ESTIMATED THE TURNOVER AND G.P. BY R ELYING ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 12 ON COMPARABLE CASE OF M/S RAJAN FIRE WORKS. SHE ALS O ANALYSED THE PERCENTAGE OF UNRECORDED SALE IN A.Y. 2006-07 TO 20 08-09 AND AVERAGE ALSO. THE SEARCH YEAR HAS NOT BEEN TAKEN INTO CONSID ERATION BEING AN EXCEPTIONAL YEAR. SHE HERSELF CALCULATED THE RATIO OF RECORDED SALES TO UNRECORDED SALES 1:2 AND ESTIMATED TOTAL TURNOVER O F RS. 24 LACS IN A.Y. 2003-04 IN PLACE OF RS. 47,59,636/-. SHE FURTHER CO NSIDERED THE APPELLANTS OWN CASE DECIDED BY THE LEARNED CIT(A) I N A.Y. 2009-10 VIDE ORDER DATED 20/1/2012 ITA 69/10-11 WHEREIN G.P. RATE WAS APPLIED @ 16% ON RECORDED AND UNRECORDED SALES. SHE FURTHER OBSERVED THAT IT IS A GENERAL ACCEPTED PRINCIPLE THAT THE G.P. RATE INCREASES WITH DECLINE IN TURNOVER. SINCE THE TURNOVER IS HELD TO BE OF RS . 24 LACS, THE G.P. IS ESTIMATED @ 19% ON TOTAL TURNOVER. THUS, THE LEARNED CIT(A) CONFIRMED G.P. RATE @ 19% ON TOTAL RECORDED AND UNRECORDED SAL ES OF RS. 24 LACS AND GAVE THE SET OFF GROSS PROFIT DECLARED AT RS. 1 ,41,239/- AGAINST THE ESTIMATED PROFIT OF RS. 4,56,000/-. THE NET ADDITION OF RS. 3,14,761/- WAS CONFIRMED BY HER IN A.Y. 2003-04. 3.1 IN A.Y. 2004-05, SIMILAR DECISION HAS BEEN TAKE N ON PROCEEDING U/S 153A AND REJECTION OF BOOKS OF ACCOUNT U/S 145( 3) OF THE ACT ON THE BASIS OF SAME ARGUMENT GIVEN BY THE LEARNED CIT(A) IN A.Y. 2003-04, SHE ESTIMATED THE TOTAL SALE TURNOVER ON THE BASIS OF RATIO BETWEEN ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 13 RECORDED AND UNRECORDED SALES I.E. 1:2 AT RS. 36 LA CS AND APPLIED G.P. RATE @ 18% AND ALLOWED SET OFF OF GROSS PROFIT DECLA RED BY THE ASSESSEE IN ESTIMATED THE G.P. AT RS. 6,48,000/- AN D A NET ADDITION AT RS. 4,06,015/- WAS CONFIRMED IN A.Y. 2004-05. IN A.Y. 2005-06, THE G.P. RATE WAS APPLIED BY THE L EARNED CIT(A) @ 17% ON ESTIMATED TOTAL TURNOVER OF RS. 46 LACS AND GROSS PROFIT AT RS. 7,82,000/-. SHE ALLOWED THE SET OFF GROSS PROFIT OF RS. 2,54,912/- DISCLOSED BY THE ASSESSEE AND NET ADDITION OF RS. 5 ,27,088/- WAS CONFIRMED. IN A.Y. 2006-07, SHE APPLIED G.P. RATE @ 17% ON TOT AL TURN OF RS. 41,86,314/- AND CALCULATED THE G.P. AT RS. 7,11,673 /- AND ALLOWED THE SET OFF GROSS PROFIT DECLARED AT RS. 5,13,281/- AND FINAL NET ADDITION WAS CONFIRMED AT RS. 1,98,392/-. THE LEARNED CIT(A) RECTIFIED HER ORDER VIDE ORDER D ATED 23/12/2013 IN A.Y. 2003-04 AND ESTIMATED TOTAL SALE S OF RS. 35,69,727/- IN PLACE OF 24 LACS AND ESTIMATED THE GROSS PROFIT AT RS. 6,78,248/- IN PLACE OF RS. 4,56,000/-. IN A.Y. 2004-05 ESTIMATED THE TOTAL SALE AT RS. 54,88,839/- IN PLACE OF RS. 36 LACS AND ESTIMATED G .P. RATE @ 18% AT RS. 9,87,991/- IN PLACE OF RS. 6,48,000/-. IN A.Y. 2005-06 ESTIMATED THE ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 14 TOTAL SALE AT RS. 69,27,294/- IN PLACE OF RS. 46 LA CS AND ESTIMATED G.P. RATE @ 17% AT RS. 11,77,640/- IN PLACE OF RS. 7,82,0 00/-. 4. NOW THE ASSESSEE IS IN APPEALS BEFORE US. THE LEA RNED A.R. FOR THE ASSESSEE SUBMITTED AS UNDER:- SECTION 153A PROVIDES THAT IN CASE OF SEARCH, ASS ESSING OFFICER SHALL ASSESS OR RE-ASSESS THE TOTAL INCOME IN RESPE CT OF EACH OF SIX ASSESSMENT YEAR IMMEDIATELY PRECEDING THE ASSESSMEN T YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH IS CON DUCTED. THEREFORE, BEFORE APPLYING SECTION 145(3), THE AO HA S TO RECORD A FINDING AS TO HOW THIS SECTION IS APPLICABLE IN RESP ECT OF EACH OF THE ASSESSMENT YEAR. ON THE BASIS OF GENERAL OBSERV ATION IN ONE OR FEW YEARS, THE SAME CANNOT BE APPLIED FOR ALL THE SIX IMMEDIATELY PRECEDING A.Y.S. IT IS A FACT ON RECORD THAT NO UNRECORDED PURCHASE OR SALES FOR THE YEARS UNDER CONSIDERATION WERE FOUND IN SEAR CH. THEREFORE ESTIMATING THE UNRECORDED SALES AT THREE TIMES OF R ECORDED SALES ON THE BASIS OF FINDING PERTAINING TO A.Y. 2007-08 TO 2009-10 IS WITHOUT ANY BASIS. IT MAY BE NOTED THAT IN A.Y. 2006 -07 AGAINST RECORDED SALES OF RS.26.27 LACS UNACCOUNTED SALES O F RS.15.58 LACS WAS ONLY FOUND. THEREFORE THE ESTIMATION OF THE UNACCOUNTED SALES MADE BY THE AO IS DE HORES ANY MATERIAL AND S UCH ESTIMATION IS NOT ENVISAGED IN ASSESSMENT U/S 153A. THE AO HAS APPLIED HIGHER G.P. RATE BY REFERRING TO THE CASE OF M/S RAJAN FIRE WORKS AND EMPORIUM. THE APPLICATIO N OF THE G.P. RATE ON THIS BASIS IS NOT JUSTIFIED FOR THE FO LLOWING REASONS:- ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 15 (I) THE AO HAS NOT PROVIDED THE FINANCIAL DATA OF M/S R AJAN FIRE WORKS AND EMPORIUM. IN ASSESSMENT PROCEEDINGS, THE RESULT OF THIS FIRM WAS NOT CONFRONTED TO THE ASSESSEE. (II) THE G.P. RATE OF THIS CONCERN IS NOT COMPARABLE WITH THE ASSESSEE FOR THE FOLLOWING REASONS:- - RAJAN FIRE WORKS AND EMPORIUM IS A MANUFACTURER CUM WHOLESALER IN THIS BUSINESS WHILE ASSESSEE IS WHOLESALER ONLY. - RAJAN FIRE WORKS AND EMPORIUM IS WELL ESTABLISHED ENTITY IN THIS BUSINESS SINCE 35 YEARS WHILE ASSESS EE STARTED ITS BUSINESS FROM 1998. - THE SIZE OF BUSINESS OF THIS FIRM IS MUCH LARGER THA N THAT OF ASSESSEE. (III) THE COMPARATIVE POSITION OF THE GROSS PROFIT RATE DECLARED BY THE ASSESSEE AS PER BOOKS OF ACCOUNT AR E AS UNDER:- ASSESSMENT YEAR SALES GROSS PROFIT G. P. RATE (%) 2009-10 21,57,817/- 3,23,516/- 14.99 2008-09 20,56,885/- 2,67,395/- 13.00 2007-08 15,93,180/- 2,06,850/- 12.98 2006-07 26,27,528/- 3,22,211/- 12.26 2005-06 23,09,098/- 2,52,912/- 10.95 2004-05 18,29,613/- 2,41,985/- 13.22 2003-04 11,89,909/- 1,41,239/- 11.87 ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 16 FROM THE ABOVE TABLE IT CAN BE NOTED THAT THE G.P. RATE DECLARED BY THE ASSESSEE VARY FROM YEAR TO YEA R AND COMPARABLE WITH OTHER YEARS. (IV) IN A.Y. 2009-10 AO APPLIED G.P. RATE OF 18.5% WHIC H WAS REDUCED BY YOUR GOODSELF TO 16%. HE RELIED ON THE FOLLOWING CASE LAWS: (I) SINHGAD TECHNICAL EDUCATION SOCIETY VS. ACIT 57 DTR 24 1 (PUNE) (II) LMJ INTERNATIONAL LTD. VS. DCIT 22 SOT 315 (CAL.) (III) SHABBIR ALLAUDDIN LATIWALA VS. DCIT 138 TTJ 104 (ITAT) (RAJKOT) (IV) DCIT VS. ROYAL MARWAR TOBACCO PRODUCT (P) LTD 16 DTR 129/ 120 TTJ 387 (AHMADABAD) (V) ANIL KUMAR BHATIA & ORS. VS. ACIT 1 ITR 484 (TRIB) (DE L) (VI) ANIL P KHIMANI VS. DCIT 2010-TIOL-177-ITAT-MUM (VII) ACIT VS KAMAL KUMAR S. AGRAWAL (INDL.) & ORS. 41 DTR 105 (NAG) (TRIB) (VIII) JAGDISH DUGGAL VS. ACIT 24 DTR 174 (CHD.)(TRIB) (IX) ACIT VS. M/S ROCHEM SEPARATION SYSTEMS (I) PVT LTD. 2011-TIOL-334-ITAT-MUM LD. COUNSEL FURTHER CONTENDS THAT IN RESPECT OF 3 A SSESSMENT YEARS I.E. 03-04 TO 05-06 NO INCRIMINATING MATERIAL WAS RECOVERED, THEREFORE, NO NOTICE FOR THESE ASSESSMENT YEARS COU LD HAVE BEEN ISSUED. IN VIEW OF ABOVE CITED JUDGMENTS, CONSEQUENT LY THE ASSESSMENT BEING UNABETTED AND NO INCRIMINATING MAT ERIAL HAVING BEEN FOUND; CANNOT BE FRAMED U/S 153A. 5. THE D.R. VEHEMENTLY SUPPORTED THE ORDER OF THE LE ARNED CIT(A) AND ARGUED THAT VIDE STATEMENT DTD. 21-10-08 ASSESS EE HAS HIMSELF ADMITTED THAT HE WAS ENGAGED IN THE BUSINESS OF CARR YING OUT PURCHASES ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 17 AND SALES OUTSIDE THE BOOKS OF ACCOUNTS. HE HAS NOWH ERE REFERRED TO ANY YEAR AS EXCEPTION IN WHICH SUCH ACTIVITIES ARE N OT INDULGED IN. THUS LOOKING AT THE ENTIRETY OF STATEMENT, SEIZED MATERI AL, THERE EXIST ENOUGH EVIDENCE ADMITTED BY THE ASSESSEE HIMSELF; ESTABLIS HING THAT MATERIAL WAS FOUND TO ISSUE NOTICES U/S 153A FOR ALL THE SIX ASSESSMENT YEARS. THIS STATUTORY PROCESS HAS BEEN DILIGENTLY FOLLOWED B Y LD. AO AND CONFIRMED BY LD. CIT(A). LEARNED CIT(A) WAS MORE THAN REASONABLE IN ESTIMATING THE TURNOVER AND G.P. RATE AND ALLOWING P ART RELIEF TO ASSESSEE, THEREFORE, HE PRAYED TO CONFIRM THE ORDER OF THE LEARNED CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE CASE LAW OF JAI S TEEL INDIA VS. ACIT (SUPRA) RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE ON 153A PROCEEDING IS NOT SQUARELY APPLICABLE AS THE HONBL E RAJASTHAN HIGH COURT HAS DECIDED IN THIS CASE THE ISSUE OF ANY WHET HER DEDUCTION CAN BE CLAIMED U/S 153A OF THE ACT OR NOT. AS MENTIONED BY THE LEARNED CIT(A) IN HER ORDER THAT THE ASSESSMENT WAS COMPLETED U/S 143(1) OF THE ACT, WHICH HAS BEEN HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD. (S UPRA) THAT THE PROCEEDING COMPLETED U/S 143(1)(A) OF THE ACT ARE N OT SAME AS AN ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 18 ASSESSMENT U/S 143(2) OF THE ACT. BESIDES THESE CAS ES WILL BE APPLICABLE WHEN NO MATERIAL IS FOUND DURING THE COURSE OF SEARC H. WE FIND MERIT IN THE CONTENTIONS OF LD DR THAT CONSIDERING THE STATE MENT OF ASSESSEE DTD. 21-10-2008 IT HAS BEEN ADMITTED THAT ASSESSEE WAS REGULARLY ENGAGED IN UNRECORDED PURCHASES AND SALES; NO EXCEP TION OF ANY YEAR HAS BEEN CLAIMED. CONSEQUENTLY THE STATEMENT AND TH E SEIZED RECORD FOR OTHER YEAR UNAMBIGUOUSLY BECOME INCRIMINATING M ATERIAL FOR VALID ISSUE OF NOTICES U/S 153A. THE GROUND RAISED CHALLEN GING THE VALIDITY OF NOTICES U/S 153A ARE DISMISSED 6.1 IN THESE CIRCUMSTANCE THE CASE LAWS RELIED ON B Y THE ASSESSEE BECOME INAPPLICABLE AS THE INCRIMINATING MATERIAL A S A RESULT OF SEARCH EXISTS ON THE RECORD. DURING THE COURSE OF SEARCH, INCRIMINATING DOCUMENTS WERE FOUND. ON THE BASIS OF THESE DOCUMENT S, THE ASSESSING OFFICER HAS TABULATED UNRECORDED SALES FROM A.Y. 20 06-07 TO 2009-10 AND ALSO CONSIDERED THE PREPONDERANCE OF POSSIBILIT Y FOR A.Y. 2003-04 TO 2005-06 ALONGWITH STATEMENT U/S 132(4) OF THE ACT BY THE PARTNERS AND ON ADMISSION OF UNRECORDED SALES IN THE LINE OF FIR EWORKS BUSINESS WITHOUT QUOTING A PARTICULAR YEAR. IT IS ADMITTED BY THE APPELLANT IN HIS STATEMENT DATED 21/10/2008 THAT IT HAS BEEN INDULGI NG IN UNRECORDED PURCHASE AND SALES; NO YEAR OF EXCEPTION IS STATED. THIS LEADS TO A CLEAR ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 19 INDICATION THE ASSESSEE AS A REGULAR POLICY INDULGE D IN SUCH CLANDESTINE MAINTENANCE OF BOOKS AND AVOIDED TAXES. THEREFORE, T HE NOTICES ISSUED U/S 153A FOR ALL THE YEARS BY THE ASSESSING OFFICER ARE VALID AND CIT(A) HAS RIGHTLY UPHELD THEM. FURTHER REASSESSMENT PROCE EDINGS WERE ABATED IN A.Y. 2003-04, 2004-05 AND 2005-06 AS THE ASSESSEES CASE WERE ONLY PROCESSED U/S 143(1) OF THE ACT. THEREFORE, WE CONFIRM THE ORDER OF THE LEARNED CIT(A) ON ISSUANCE OF NOTICE U /S 153A OF THE ACT IN ALL THE YEARS. 7. THE LEARNED A.R. ALSO CHALLENGED THE G.P. RATE AS WELL AS TOTAL SALES TURNOVER ESTIMATED. THE FACTS AND FIGURES ARE AS UNDER:- A.Y. GP RATE DECLARED GP RATE APPLIED BY A.O. GP RATE APPLIED BY CIT(A) TOTAL TURNOVER ESTIMATED BY THE A.O. TOTAL TURNOVER ESTIMATED BY THE CIT(A) 2003-04 11.87% 17% 19% 47,59,636/- 35,69,727/- 2004-05 13.23% 17.25% 18% 73,18,452/- 54,88,839/- 2005-06 11.04% 17.50% 17% 92,36,392/- 69,29,294/- 2006-07 12.26% 17.75% 17% 41,86,314/- 41,86,314/- THE LEARNED ASSESSING OFFICER APPLIED COMPARABLE CAS E OF M/S RAJAN FIREWORKS AND EMPORIUM PROP. M/S SUNDER DASS HASANI HUF, WHO IS WHOLESALERS/RETAILERS OF FIREWORKS, WHO HAS SHOWN G.P. RATE RANGING G.P. FROM 17% TO 18%. THE LEARNED AR ARGUED THAT THE CASE OF M/S RAJAN FIREWORKS AND EMPORIUM PROP. M/S SUNDER DASS H ASANI HUF IS ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 20 NOT A COMPARABLE CASE HENCE DISTINGUISHED ON VARIOU S FACTS AND FIGURES AND NATURE OF TRADING ACTIVITY IN QUANTUM AND EXPER IENCE. THE ASSESSEE HAS SHOWN G.P. IN 2009-10 @ 14.99% ON RECORDED SALES OF RS. 21,57,817/-, THEREFORE, WE APPLY G.P. RATE IN A.Y. 2 003-04 @ 13%, IN A.Y. 2004-05 @ 14%, IN A.Y. 2005-06 @ 13% AND IN A.Y. 2006-07 @ 13.5% IN THE INTEREST OF JUSTICE. THE ASSESSING OFF ICER IS DIRECTED TO RECALCULATE THE INCOME OF THE ASSESSEE ON THE BASIS OF G.P. RATE DECIDED BY THIS COURT IN YEAR WISE ON ESTIMATED TOTAL TURNOV ER BY THE LEARNED CIT(A). 8. IN THE RESULT, THE ASSESSEES APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/02/2015. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 19 TH FEBRUARY, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S POORNIMA FIRE WORKS, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE A.C.I.T., CENTRAL CIRCLE-1, JAIPU R. 3. VK;DJ VK;QDR @ CIT ITA 1004 TO 1007/JP/2013, M/S PURNIMA FIRE WORKS VS. ACIT 21 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 1004 TO 1007/JP/2013) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR