SHRI HARI PRASAD VIJAY, JAIPUR V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-5, JAIPUR

ITA 1046/JPR/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5959 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 11-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MAHELA JCIT DHK
• Assessee Lawyers: S R SHARMA; R K BHATRA
• Keywords: Bogus purchase; Rejection of books of accounts; Accommodation entries
• Section: 143(1); 139(1); 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH SMC, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 1046 & 1047/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 & 10-11. SHRI HARI PRASAD VIJAY A-114, JANTA COLONY, JAIPUR. CUKE VS. THE ACIT, CIRCLE-5, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAKPV 4538 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.R. SHARMA (CA) & SHRI R.K. BHATRA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI A.K. MAHELA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 27.09.2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 03/10/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST TWO SEPARATE ORDERS OF LD. CIT (APPEALS)-2, JAIPUR BOTH DATED 20 TH JUNE, 2018 FOR THE ASSESSMENT YEARS 2009-10 & 10-11 RESPECTIVELY. THE ASSESSEE HAS RAI SED COMMON GROUNDS IN BOTH THE APPEALS EXCEPT THE QUANTUM OF ADDITION. THE GR OUNDS RAISED FOR THE ASSESSMENT YEAR 2009-10 ARE AS UNDER :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT (A) IS WRONG, UNJUST AND HAS ERRED IN LAW IN CONFIR MING REJECTION OF BOOKS OF ACCOUNTS OF THE APPELLANT BY THE ASSESS ING OFFICER U/S 145(3) OF THE I.T. ACT, 1961 ON THE GROUND THAT PURCHASE TO THE EXTENT OF RS. 36,12,484/- ARE ALLEGEDLY NOT GEN UINE AND NOT VERIFIABLE. 2 ITA NOS. 1046 & 1047/JP/2018 SHRI HARI PRASAD VIJAY, JAIPUR. 2. THAT THE LD. CIT (A) IS FURTHER WRONG AND HAS ER RED IN LAW IN DIRECTING APPLICATION OF G.P. RATE OF 19% AS AGAINS T DECLARED G.P. RATE OF 16.03% RESULTING IN CONFIRMING TRADING ADDITION TO THE EXTENT OF RS. 6,38,523/- ON ACCOUNT OF ALLEGED UNVERIFIABLE PURCHASES REFERRED TO IN GROUND NO. (1) ABOVE. 3. THE ASSESSEE CRAVES PERMISSION TO ADD TO OR AMEN D TO ANY OF GROUNDS OF APPEAL OR TO WITHDRAW ANY OF THEM. 2. THE ASSESSEE IS AN INDIVIDUAL, CARRYING ON THE B USINESS OF EXPORT OF PRECIOUS AND SEMI PRECIOUS GEMS AND STONES IN HIS PROPRIETOR SHIP CONCERN M/S. SUNNY JEWELS CORPORATION. THE ASSESSEE FILED HIS RETURN OF INCO ME UNDER SECTION 139(1) ON 30.09.2009 DECLARING TOTAL INCOME OF RS. 15,15,250/ - WHICH WAS PROCESSED UNDER SECTION 143(1) ON 05.10.2010. SUBSEQUENTLY, THE AO REOPENED THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 ON 30 TH MARCH, 2016 AND COMPLETED THE REASSESSMENT ON 14.12.2016. IN THE REASSESSMENT PR OCEEDINGS, THE AO AFTER REJECTION OF BOOKS OF ACCOUNT MADE ADDITION OF 25% OF ALLEGED UNVERIFIABLE PURCHASES AMOUNTING TO RS. 9,03,121/-. ON APPEAL, THE LD. CIT (A) HAS RESTRICTED THE ADDITION BY APPLYING GP RATE AT 19% FOR BOTH TH E ASSESSMENT YEARS. AGGRIEVED BY THE IMPUGNED ORDER OF LD. CIT (A), THE ASSESSEE FILED THESE APPEALS. 3. BEFORE THE TRIBUNAL, THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE LD. CIT (APPEALS) HAS APPLIED GP RATE AT 19% WITHOUT GIVING ANY BASIS WHEREAS THE ASSESSEES OWN PAST HISTORY WAS NOT CONSIDERED WHIL E ESTIMATING THE INCOME OF THE ASSESSEE. HE HAS FURTHER CONTENDED THAT THE ASSESSE E IS AN EXPORTER AND ONCE THE EXPORT OF GOODS ARE NOT DENIED, THEN THE CORRESPOND ING PURCHASES CANNOT BE HELD AS BOGUS. THE AO HAS NOT MADE OUT A CASE OF INFLATION OF PURCHASE PRICE BUT HAS DOUBTED THE PURCHASE ITSELF WHICH IS NOT POSSIBLE W HEN THE ASSESSEE IS IN THE 100% 3 ITA NOS. 1046 & 1047/JP/2018 SHRI HARI PRASAD VIJAY, JAIPUR. EXPORT SALE. THUS THE LD. A/R HAS CONTENDED THAT AF TER REJECTION OF BOOKS OF ACCOUNT, THE AO WAS REQUIRED TO ESTIMATE THE INCOME OF THE A SSESSEE ON THE BASIS OF SOME REASONABLE AND PROPER BASIS. HE HAS REFERRED TO VA RIOUS DECISIONS OF THIS TRIBUNAL INCLUDING THE DECISION DATED 15.12.2017 IN CASE OF ACIT VS. M/S. ALLIED GEMS CORPORATION IN ITA NO. 794/JP/2011 AS WELL AS DECIS ION DATED 29.01.2018 IN CASE OF VIJAY KEDIA (HUF) VS. ACIT IN ITA NOS. 197 & 248/JP /2016. THE LD. A/R HAS SUBMITTED THAT WHEN THE GP DECLARED BY THE ASSESSEE IS IN LINE WITH THE PAST HISTORY AS WELL AS THE GP PREVAILING IN THIS TRADE, THEN NO ADDITION IS JUSTIFIED. 4. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T IT IS A CASE OF BOGUS PURCHASE AND EVEN IN THE PRECEDING YEARS THE CASES OF THE ASSESSEE WERE REOPENED ON THE SIMILAR GROUNDS AND THE ASSESSEE APPROACHED TO THE SETTLEMENT COMMISSION. THEREFORE, THE GP DECLARED EVEN IN THE PREVIOUS YEA R CANNOT BE CONSIDERED AS REASONABLE OR PROPER BASIS FOR ESTIMATION OF INCOME FOR THE YEAR UNDER CONSIDERATION. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS REJECTED THE BOOKS OF ACCOUNT B Y INVOKING THE PROVISIONS OF SECTION 145(3) OF THE IT ACT ON THE GROUND THAT SOM E OF THE PURCHASES WEREMADE BY THE ASSESSEE FROM SUN DIAM OF RS. 36,12,484/- WHICH WAS MANAGED BY SHRI RAJENDRA S. JAIN AND SHRI DHARMICHAND JAIN GROUP WH O ARE FOUND TO BE INDULGING IN PROVIDING ACCOMMODATION ENTRIES IN THE NATURE OF BO GUS SALES ETC. THE AO AFTER REJECTION OF BOOKS OF ACCOUNT, DISALLOWED 25% OF TH OSE PURCHASES MADE FROM M/S. SUN DIAM AND CONSEQUENTLY AN ADDITION OF RS. 9,03,1 21/- WAS MADE FOR THE ASSESSMENT YEAR 2009-10 AND SIMILARLY 25% OF THE PU RCHASES MADE FROM TWO CONCERNS MANAGED BY THE SAME GROUP OF PERSONS WAS D ISALLOWED FOR THE ASSESSMENT 4 ITA NOS. 1046 & 1047/JP/2018 SHRI HARI PRASAD VIJAY, JAIPUR. YEAR 2010-11 AND CONSEQUENTLY AN ADDITION OF RS. 10 ,33,021/- WAS MADE. ON APPEAL, THE LD. CIT (A) FOUND THAT AFTER REJECTION OF BOOKS OF ACCOUNT, THE INCOME OF THE ASSESSEE IS REQUIRED TO BE ESTIMATED BY CONSIDE RING GP RATE. THE LD. CIT (A) HAS APPLIED THE GP RATE AT 19% AFTER REJECTING THE CONT ENTION OF THE ASSESSEE REGARDING THE PAST HISTORY OF GP DECLARED BY THE ASSESSEE. T HE LD. CIT (A) HAS SPECIFICALLY OBSERVED THAT EVEN FOR THE ASSESSMENT YEARS 2007-08 AND 08-09 THE ASSESSMENTS WERE REOPENED ON THE SIMILAR GROUNDS AND THE ASSESS EE APPROACHED TO SETTLEMENT COMMISSION FOR SETTLEMENT OF THE MATTER. THUS THE L D. CIT (A) HAS REJECTED THE GP DECLARED BY THE ASSESSEE OF PRECEDING YEARS. 6. THERE IS NO DISPUTE THAT AFTER REJECTION OF BOOK S OF ACCOUNT, THE AO IS REQUIRED TO ESTIMATE THE INCOME ON THE BEST JUDGMEN T AND CONSEQUENTLY SOME REASONABLE AND PROPER BASIS SHOULD HAVE BEEN APPLIE D FOR ESTIMATION OF THE INCOME AFTER REJECTION OF BOOKS OF ACCOUNT. THE LD. CIT ( A) HAS RIGHTLY MODIFIED THE ORDER OF THE AO BY ESTIMATING THE INCOME. HOWEVER, THE ESTIM ATION HAS BEEN MADE BY APPLYING A GP RATE AT 19%. IT IS PERTINENT TO NOTE THAT THE PAST HISTORY OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2006-07 TO 2008-0 9 DECLARING THE GP RATE IS AS UNDER :- A.Y. TURNOVER GROSS PROFIT GROSS PROFIT RATE 2006-07 1,78,11,666/- 28,20,480.00 15.83% 2007-08 1,51,41,518/- 20,69,175.00 13.66% 2008-09 1,06,59,507/- 17,33,545.56 16.26% THOUGH THE GP DECLARED FOR THE ASSESSMENT YEARS 200 7-08 AND 08-09 WAS NOT ACCEPTED BY THE REVENUE AND EVEN THE MATTER WAS SET TLED BEFORE THE SETTLEMENT 5 ITA NOS. 1046 & 1047/JP/2018 SHRI HARI PRASAD VIJAY, JAIPUR. COMMISSION, THEREFORE, IN SUCH CIRCUMSTANCES THE GP DECLARED BY THE ASSESSEE FOR THOSE ASSESSMENT YEARS I.E. 2007-08 AND 08-09 CANNO T BE CONSIDERED AS A PROPER BASIS FOR ESTIMATION OF THE CURRENT YEARS INCOME. HOWEVER, WHEN THERE IS NO DISPUTE REGARDING GP DECLARED BY THE ASSESSEE FOR T HE ASSESSMENT YEAR 2006-07, THEN THE GP FOR THAT YEAR SHOULD HAVE BEEN TAKEN AS A REASONABLE AND PROPER BASIS FOR ESTIMATION OF INCOME OF THE ASSESSEE FOR THE YE AR UNDER CONSIDERATION. THE ASSESSEE HAS DECLARED THE GP FOR THE YEAR UNDER CON SIDERATION AT 16.11% WHICH IS MORE THAN THE GP DECLARED FOR THE ASSESSMENT YEAR 2 006-07. SIMILARLY THE GP DECLARED BY THE ASSESSMENT YEAR 2010-11 IS 16.03% W HICH IS ALSO IN LINE WITH THE GP DECLARED FOR THE ASSESSMENT YEAR 2006-07 AT 15.83%. THUS DESPITE THE REJECTION OF BOOKS OF ACCOUNT AS THE GP DECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS IN LINE WITH OR MORE THAN THE NORM AL GP DECLARED IN THE PRECEDING YEARS OR THE PROFIT PREVAILING IN THE TRADE, THEN N O ADDITION IS CALLED FOR. REJECTION OF BOOKS OF ACCOUNT WOULD NOT IPSO FACTO LEAD TO THE A DDITION IF THE GP DECLARED BY THE ASSESSEE IS HIGHER OR IN LINE WITH THE REASONABLE B ASIS TO BE APPLIED FOR ESTIMATION OF INCOME. HENCE, IN VIEW OF THE FACTS AND CIRCUMSTANC ES OF THE CASE, THE ADDITION SUSTAINED BY THE LD. CIT (A) IS NOT JUSTIFIED AND T HE SAME IS DELETED. 7. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE A LLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 03/10/201 9. SD/- ( FOT; IKY JKWO (VIJAY PAL RAO) U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 03/10/2019. DAS/ 6 ITA NOS. 1046 & 1047/JP/2018 SHRI HARI PRASAD VIJAY, JAIPUR. VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI HARI PRASAD VIJAY, JAIPUR. 2. THE RESPONDENT THE ACIT CIRCLE-5, JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 1046 & 1047/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR