SOBHAGMULL GOKAL CHAND JEWEL, Jaipur V. ACIT, Jaipur

ITA 1011/JPR/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 47974 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 10-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ARVIND DHA DDA; T C JAIN
• Keywords: Bogus purchase; Rejection of books of accounts

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.1011/ JP/2010 ASSESSMENT YEAR 2006-07 PAN: AAKFS 9735 L M/S. SOBHAGMULL GOKAL CHAND JEWELLERS VS. THE DCIT MSB KA RASTA, JOHRI BAZAR CIRCLE- 2 JAIPUR JAIPUR (APPELLANT ) (RESPONDENT) ITA NO.1116/ JP/2010 ASSESSMENT YEAR 2006-07 PAN: AAKFS 9735 L THE DCIT VS. M/S. SOBHAGMULL GOKAL CHAND JEWELLE RS CIRCLE- 2 MSB KA RASTA, JOHRI BAZAR JAIPUR JAIPUR (APPELLANT ) (RESPONDENT) ASSESSEE BY : SHRI T.C. JAIN AND SHRI ARVIND DHA DDA DEPARTMENT BY : SHRI SUNIL MATHUR ORDER PER N.L. KALRA, AM:- THE ASSESSEE AS WELL AS REVENUE HAS FILED THE AP PEALS AGAINST THE ORDER OF THE LD. CIT(A)-I, JAIPUR DATED 10-06-2010 FOR THE ASSESSMENT YEAR 2006-07. 2 2.1 THE REVENUE IS AGGRIEVED AGAINST DIRECTING THE AO TO APPLY THE GROSS PROFIT RATE OF 7% ON THE DECLARED SALES OF RS. 10,7 5,48,511/- AS AGAINST THE TRADING ADDITION MADE BY THE AO TO THE EXTENT OF RS . 1,67,24,195/- REPRESENTING 25% OF UNVERIFIABLE PURCHASES WHILE TH E ASSESSEE IS AGGRIEVED AGAINST REJECTION OF BOOKS OF ACCOUNTS AND CONFIRMI NG THE ADDITION OF RS. 6,19,775/-IN THE TRADING ACCOUNT BY APPLYING THE GR OSS PROFIT RATE OF 7% AS AGAINST DECLARED GROSS PROFIT RATE OF 6.42%. 2.2 THE ASSESSEE DERIVES INCOME FROM MANUFACTURING, TRADING AND IMPORT AND EXPORT OF PRECIOUS AND SEMI PRECIOUS STONES. TH E TRADING RESULTS FOR THE LAST THREE YEARS ARE AS UNDER:- F.Y. SALES AMOUNT GROSS PROFIT G.P. % 2003-04 10,75,48,511 69,08,620 6.42% 2004-05 17,21,81,924 1,19,19,096 6,92% 2005-06 12,49,36,875 79,56,773 6.37% 2.3 THE AO NOTICED THAT THE ASSESSEE HAS MADE PURCH ASE FROM 05 PARTIES TO THE EXTENT OF RS. 6,68,96,780/-. THE NAMES OF TH ESE PARTIES AND THE AMOUNT OF PURCHASES MADE FROM EACH PARTY ARE AVAILABLE AT PAGE 2 OF THE ASSESSMENT ORDER. PURCHASES HAVE BEEN MADE FROM 05 PARTIES BEL ONGING TO SURAT. THE AO ISSUED THE COMMISSION U/S 131(1) (D) TO THE ADIT (INV.)-III, SURAT. THE ADIT (INV.) III, SURAT SENT HIS REPORT TO THE AO V IDE LETTER DATED 12 TH DEC. 2008 AND COPY OF THIS LETTER IS AVAILABLE AT PAGES 2 AND 3 OF THE ASSESSMENT 3 ORDER. THE ADIT (INV.)III, SURAT INTIMATED THE AO T HAT PREMISES OF THE PARTIES WERE FOUND CLOSED BY THE INSPECTOR DURING H IS VISIT. THE SUMMONS WERE SERVED THROUGH AFFIXTURE. NO REPLY WAS RECEIVE D IN RESPONSE TO THE SUMMONS SERVED THROUGH AFFIXTURES. THE CIRCUMSTANTI AL EVIDENCE SHOWS THAT THESE FIVE CONCERNS HAVE NO BUSINESS ACTIVITIES IN SURAT AND THE TRANSACTIONS OF THESE PARTIES CAN BE CONSIDERED AS SHAM. EVEN TH E NEIGHBOURERS OF THE FIVE CONCERNS WERE NOT ABLE TO GIVE IDENTITY OF THESE PA RTIES. HENCE ON OBTAINING THE INFORMATIONS FROM ADIT (INV.)-III, SURAT, THE A SSESSEE WAS CONFRONTED WITH THE DEVELOPMENT ALONGWITH A COPY OF THE ENQUIR Y REPORT GIVEN BY THE ADIT (INV.)III, SURAT. THE ASSESSEE WAS REQUIRED TO SHOW CAUSE AS TO WHY THE PROVISIONS OF SECTION 145(3) BE NOT APPLIED. TH E ASSESSEE FILED THE REPLY WHICH IS AVAILABLE AT PAGES 4 AND 5 OF THE ASSESSME NT ORDER. THE ASSESSEE HAS RELIED ON THE FACTS THAT PURCHASES HAVE BEEN MADE T HROUGH BILLS ISSUED BY THE PARTIES AND THE PAYMENTS HAVE BEEN MADE THROUGH CHE QUES. THE AO HAS REFERRED TO VARIOUS CASE LAWS AT PAGES 7 AND 8 OF T HE ASSESSMENT ORDER. THE AO HAS ALSO MADE OBSERVATIONS THAT CLOSING STOCK IS ALSO NOT SUBJECT TO VERIFICATION. ACCORDINGLY THE AO REJECTED THE BOOKS OF ACCOUNTS AND MADE THE TRADING ADDITION WHICH IS 25% OF THE UNVERIFIAB LE PURCHASES. 2.4 THE LD. CIT(A) AFTER CONSIDERING THE DECISION O F THE ITAT JAIPUR BENCH HELD THAT BOOKS OF ACCOUNTS HAVE RIGHTLY BEEN REJECTED BY THE AO. THE 4 LD. CIT(A) NOTICED THAT THE GROSS PROFIT RATE DURIN G THE YEAR WAS 6.42% AS COMPARED TO 6.92% DECLARED IN THE IN THE IMMEDIATEL Y PRECEDING YEAR. THEREFORE, THE LD. CIT(A) DIRECTED THE AO TO APPLY GROSS PROFIT RATE OF 7% ON THE DECLARED SALES. 2.5 WE HAVE HEARD BOTH THE PARTIES. THE ITAT JAIPUR BENCH IS CONSISTENTLY HOLDING THAT IN CASE THERE ARE UNVERIF IABLE PURCHASES THEN BOOKS OF ACCOUNTS ARE TO BE REJECTED AS PER PROVISIONS OF SECTION 145(3) OF THE ACT. THE HON'BLE APEX COURT IN THE CASE OF IN THE CASE OF KANCHWALA GEMS VS JCIT , 288 ITR 10 (SC) HAS ALSO HELD THAT THE BOOKS OF ACCOUNTS CAN BE REJECTED IF THE PURCHASES ARE UNVERIFIABLE. THE TUR NOVER IN THE IMMEDIATELY PRECEDING YEAR WAS TO THE EXTENT OF RS. 17.21 CRORE S AS AGAINST RS. 12.49 CRORES IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THE GROSS PROFIT RATE IN SPITE OF DECREASE IN TURNOVER HAS ALSO DECREASED. H OWEVER, LOOKING TO THE QUANTUM OF UNVERIFIABLE PURCHASES, WE FEEL THAT THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO APPLY THE GROSS PROFIT RATE OF 7%, IN RESPECT OF BOGUS PURCHASES NOTICED AT JAIPUR, IT WAS FOUND THAT SUCH PARTIES WERE CHARGING COMMISSION @ 0.5% TO 0.6%. CONSIDERING THESE FACTS, WE HOLD THAT THE LD. CIT(A) HAS RIGHTLY UPHELD THE TRADING ADDITION TO T HE EXTENT OF RS. 6,19,775/- . 5 3. IN THE RESULT, THE APPEALS OF THE REVENUE AS WEL L AS OF THE ASSESSEE ARE DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30-06 -2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 30/06/2011 *MISHRA COPY FORWARDED TO :- 1. M/S. SOBHAGMULL GOKAL CHAND JEWELLERS, JAIPUR 2. THE DCIT, CIRCLE- 2, JAIPUR 3. THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5. THE LD.DR 6. THE GUARD FILE (ITA NO.1011/JP /10) A.R, ITAT, JAIPUR 6 7