ITO, Jaipur V. M/S ASHISH HANDICRAFTS ENTERPRISES, Jaipur

ITA 1094/JPR/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7767 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-05-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 14-12-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: MUKESH GOYAL
• Keywords: Opportunity of being heard
• Section: 131

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 1094/JP/2011 ASSTT. YEAR- 2008-09 PAN NO. AALFA 4547 P THE I.T.O. M/S ASHISH HANDICRAFTS ENTERPRISES WARD 1(3), JAIPUR. VRS. 1817, MANIHARON KA RASTA, RADIO, MARKET, NEHRU BAZAR, JAIPUR. (APPELLANT) (RESPONDENT) DEPARTMENT BY :- SHRI D.C. SHARMA. ASSESSEE BY :- SHRI MUKESH GOYAL DATE OF HEARING : 16/09/2014 DATE OF PRONOUNCEMENT : 01/10/2014 O R D E R PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 05/10/2011 OF THE LEARNED C.I.T.(A)-I, JAIPUR FOR TH E A.Y. 2008-09. THE SOLE GROUND OF APPEAL IS AGAINST DELETING THE TRADI NG ADDITION OF RS. 29,82,207/- 2. THE ASSESSEE DEALS IN BUSINESS OF GEMS AND JEWELLE RY. THE LEARNED ASSESSING OFFICER ISSUED NOTICE U/S 131 OF THE INCO ME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) TO ALL THE 26 SUPPLIERS. IN CASE OF 17 SUPPLIERS, THE SUMMONS WAS RETURNED UNSERVED AS THEY WERE NOT ITA NO. 1094/JP/2011 ITO VS. M/S ASHISH HANDICRAFTS ENTERPRISES 2 AVAILABLE AT THE GIVE ADDRESS. IN CASE OF 9 SUPPLIE RS, SUMMONS WERE SERVED BUT ONLY 5 SUPPLIERS ATTENDED THE OFFICE AND AFFIRMED THE FACT OF SUPPLY OF GOODS TO THE ASSESSEE. IN OTHER FOUR CASE S, NO BODY ATTENDED. THE ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, WHICH WAS AVAILED BY HIM. THE ASSESSEE SUBMI TTED BEFORE THE ASSESSING OFFICER THAT IT EXPORTED GOODS. NO LOCAL SALES MADE DURING THE YEAR. THE ASSESSEE MADE PURCHASE FROM LOCAL PARTIES AND MADE CHEQUE PAYMENT TO THEM. HE FURNISHED COPY OF PURCHASED BIL LS AND GOODS HAVE BEEN RECORDED IN THE STOCK REGISTER ON DAY TO DAY B ASIS. HE FURNISHED PAN NUMBER, SALES TAX REGISTRATION NUMBER TO ESTABL ISH THE IDENTITY OF THE SUPPLIER. HE ALSO SUPPLIED COPY OF BANK ACCOUNT AND CLAIMED THAT THERE IS NO EVIDENCE THAT CHEQUE AMOUNT HAD COME BACK TO THE ASSESSEE. AFTER CONSIDERING THE ASSESSEES REPLY, THE ASSESSING OFF ICER REJECTED THE BOOK RESULT ON THE BASIS OF ALL POINTS RAISED IN COMBINE D ORDER OF JEMS AND JEWELLERY CASES AS PURCHASE IS NOT UNVERIFIABLE. AFT ER RELYING ON THE VARIOUS DECISIONS, THE LEARNED ASSESSING OFFICER AS MENTIONED IN ASSESSMENT ORDER, HAS REJECTED THE BOOK RESULT AND ESTIMATED THE INCOME ON THE BASIS OF INFORMATION AVAILABLE WITH HIM. HE A LSO ANALYSED THE STOCK POSITION ITEM WISE ON PAGES 9 AND 10 OF THE ASSESSME NT ORDER. THE RATE OF PROFIT IN PRECIOUS AND SEMI PRECIOUS STONES WAS WO RKED OUT @ 30%. OVER ALL G.P. WAS DECLARED @ 10.59% ON TOTAL TURNOVER OF RS. 4.05 CRORES ITA NO. 1094/JP/2011 ITO VS. M/S ASHISH HANDICRAFTS ENTERPRISES 3 AS AGAINST 8.10% DECLARED IN LAST YEAR ON TURNOVER OF RS. 3.35 CRORES. HE FURTHER HELD THAT DURING THE YEAR, SILVER PRICE HAS INCREASED BY 21% AFTER REDUCING THE PRICE, THE NET G.P. RATE HAS BEEN WORKE D OUT AT 1.11%. THE PURCHASE OF THE ASSESSEE WAS NOT DIRECTLY VERIFIABLE FROM THE STOCK REGISTER AS WELL AS FROM THE SUPPLIER. THERE WAS A RIS E IN THE PRICES OF SILVER, COPPER AND BRASS. PROFIT MARGIN IN CASE OF PRECIOUS AND SEMI PRECIOUS STONES IS MORE THAN 30%. THE PURCHASE OF A LL ITEMS EXCLUDING SILVER, COPPER AND BRASS COMES TO 6% APPROXIMATELY. AFTER CONSIDERING ALL THE FACTS OF THE CASE, THE LEARNED ASSESSING OFFICE R APPLIED GROSS PROFIT RATE @ 16.59% AS AGAINST 10.59% DECLARED BY THE ASSE SSEE AND TRADING ADDITION OF RS. 29,82,207/- WAS MADE. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A), WHO HAD ALLOWED THE APPEAL BY OBSERVING AS UNDER:- 4.3 I HAVE CAREFULLY PERUSED THE ORDER OF THE A.O. , THE SUBMISSIONS OF THE AR, ORDER OF THE LEARNED CIT(A) AND ORDER OF THE HONBLE ITAT JAIPUR BENCH IN THE ASSESS EES CASE ON THE SAME FACTS FOR A.Y. 2006-07. IT IS SEEN THAT ON SIMILAR FACTS THE HONBLE ITAT JAIPUR BENCH VIDE IT S AFOREMENTIONED ORDER IN THE CASE OF THE ASSESSEE AF TER A DETAILED DISCUSSION FROM PAGE 2 TO 3 HAVE UPHELD TH E A.OS DECISION FOR REJECTING THE BOOKS ACCOUNT. IN THIS A SSESSMENT YEAR ALSO IT IS SEEN THAT THE ASSESSEE HAS ALLEGEDL Y MADE ITA NO. 1094/JP/2011 ITO VS. M/S ASHISH HANDICRAFTS ENTERPRISES 4 PURCHASES FROM TWO OF THE PARTIES THAT WERE HELD TO B E NONEXISTENT IN A.Y. 2006-07. SINCE THE ASSESSEE FAI LED TO CONTROVERT THE FINDINGS OF THE HONBLE ITAT JAIPUR B ENCH ON SIMILAR FACTS IN ITS CASE IN A.Y. 2006-07, I UPHOLD THE DECISION OF THE A.O. FOR REJECTING THE BOOKS OF ACCOUNTS U/S 145(3). 4.4 REGARDING ESTIMATION OF INCOME, IT IS SEEN THAT IN A.Y. 2007- 08, THE ASSESSEE HAS SHOWN G.P. RATE AT 8.10% ON TOT AL TURNOVER OF RS. 4,05,66,577/- AFTER INCLUDING EXCHA NGE RATE DIFFERENCE WHEREAS DURING THIS ASSESSMENT YEAR THE A SSESSEE HAS SHOWN HIGHER G.P. RATE AT 10.59% ON TOTAL TURNOV ER OF RS. 4,97,03,456/- AFTER INCLUDING EXCHANGE RATE DIF FERENCE. THE HONBLE ITAT JAIPUR BENCH HAS CONSISTENTLY HELD THAT IN THE CASE OF UNVERIFIABLE PURCHASES, THE PAST HISTOR Y OF THE CASE IS THE BEST GUIDE FOR ESTIMATION OF G.P. IN TH IS PARTICULAR CASE SINCE THE ASSESSEE HAS SHOWN BETTER G.P. THAN PREVIOUS YEAR, NO TRADING ADDITION IS MERITED. THEREFORE, THE IMPUGNED ADDITION OF RS. 29,82,207/- IS DIRECTED TO BE DELETED. 4. NOW THE REVENUE IS IN APPEAL BEFORE US. 5. THE LEARNED D.R. VEHEMENTLY SUPPORTED THE ORDER O F THE LEARNED ASSESSING OFFICER AND ARGUED THAT THE ASSESSEE COUL D NOT PRODUCE THE PARTIES FOR VERIFICATION. THE LEARNED ASSESSING OFFI CER ISSUED SUMMONS U/S 131 TO ALL THE PARTIES BUT FIVE PARTIES WERE ATT ENDED THE PROCEEDINGS. ALTHOUGH, THE REQUISITE INFORMATION SUPPLIED BY THE ASSESSEE DURING THE ITA NO. 1094/JP/2011 ITO VS. M/S ASHISH HANDICRAFTS ENTERPRISES 5 COURSE OF ASSESSMENT PROCEEDINGS, THE BURDEN LIES O N THE ASSESSEE TO PROVE THE PURCHASES GENUINE, WHICH HAS NOT BEEN DIS CHARGED BY IT. THEREFORE, THE ADDITION MADE BE CONFIRMED. HE FURTHE R ARGUED THAT IN THIS CASE, IN PRECEDING YEAR, BOOKS WERE REJECTED, HAD B EEN CONFIRMED BY THE ITAT IN ASSESSEES OWN CASE WHEREIN ONLY TWO PARTIES WER E HELD TO BE NONEXISTENT. DURING THE YEAR, TOTAL 17 PARTIES WERE NONEXISTENCE. HE FURTHER ARGUED THAT THE RETURNED INCOME IS ONLY ONE LAKH ON SALE OF 4.05 CRORES. 6. AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT G.P. IS BETTER COMPARE TO PRECEDING YEAR. ALL EVIDENCES HAVE BEEN SUBMITTED DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE WAS M AINTAINING STOCK REGISTER ON THE BASIS OF QUANTITY AND EXPORTED GOOD S NEAR ABOUT 96.63% AND HELD VERY NEGLIGIBLE BUSINESS IN DIAMOND, PRECI OUS AND SEMI PRECIOUS STONES. IT IS FURTHER ARGUED THAT HONBLE ITAT IN MA NY CASES CONSISTENTLY VIEWED ON THE BASIS OF SUPPLIED COPY OF PURCHASED BI LLS. SALES TAX REGISTER, PAN NUMBER, COPY OF ACCOUNT, DISCHARGED T HE INITIAL BURDEN, WHICH LAYS UPON THE ASSESSEE. HE ENCLOSED COPY OF TH E ORDER IN THIS CASE OF THE HONBLE ITAT IN ITA NO. 1258/JP/2010 A.Y. 200 6-07 DATED 05/8/2012 FOR HIS ARGUMENT. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN PRECEDING YEAR, CERTAIN PURCHASES ITA NO. 1094/JP/2011 ITO VS. M/S ASHISH HANDICRAFTS ENTERPRISES 6 WERE FOUND UNVERIFIABLE ON WHICH, BOOK RESULTS WERE RE JECTED BY THE ASSESSING OFFICER WHICH HAS BEEN CONFIRMED BY THE C OORDINATE BENCH IN A.Y. 2006-07. SIMILARLY, DURING THE YEAR, WE FIND TH AT ASSESSING OFFICER HAD MADE OUT HIS CASE FOR REJECTION OF BOOK AS IN C ASE OF 17 PURCHASE PARTIES, SUMMONS WERE RETURNED BACK UNSERVED EVEN F OUR PARTIES WERE NOT ATTENDED THE PROCEEDING. THE ASSESSEE COULD NOT PRODUCE THEM FOR VERIFICATION BEFORE THE ASSESSING OFFICER, THEREFOR E, REJECTION U/S 145(3) OF THE ACT IS JUSTIFIED. THE LEARNED ASSESSING OFFIC ER ANALYZED THE WHOLE CASE THOROUGHLY AND ALSO FOUND INCREASE IN METAL P RICE DURING THE YEAR UNDER CONSIDERATION, AFTER REDUCING THE INCREASE OF METAL PRICE, THE ASSESSEE HAS NOMINAL NET PROFIT. IT IS EVIDENT FROM THE RECORD THAT ON SALE OF 4.05 CRORES, HE HAD DISCLOSED RETURNED INCOME MO RE THAN ONE LAKH RUPEES. THE LEARNED CIT(A) HAD DELETED THE ADDITION B Y COMPARING THE PRECEDING YEARS G.P. BUT NO FINDINGS ON UNVERIFIAB LE PURCHASES HAS BEEN GIVEN BY HER. EVEN AMOUNT INVOLVED IN UNVERIFIABLE PURCHASES HAS ALSO NOT BEEN QUANTIFIED. SHE SIMPLY FOLLOWED THE PAST HI STORY OF THE CASE BUT IN JAIPUR, AS DISCUSSED IN COMBINED ORDER IN THE CA SE OF GEMS AND JEWELLERY I.E. DEEPAK DALELA & OTHERS, IN THIS LINE OF BUSINESS, IT IS RAMPANT PRACTICE TO GET THE ACCOMMODATION ENTRY FRO M THE MARKET TO REDUCE THE TAXABLE INCOME AND NOT TO PAY LEGAL TAX ON IT. IN THIS CASE, THE ASSESSING OFFICER HAS APPLIED GROSS PROFIT RATE @ 16 .59% AS AGAINST ITA NO. 1094/JP/2011 ITO VS. M/S ASHISH HANDICRAFTS ENTERPRISES 7 10.59% DECLARED BY THE ASSESSEE EVEN THEN NET PROFI T RATE IS WORKED OUT @ 7.6% ONLY. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTA NCES, THE LEARNED CIT(A) IS DIRECTED TO QUANTIFY THE PURCHASE OF 17 U NVERIFIABLE PURCHASERS AND GIVE SPECIFIC FINDING ON IT. ACCORDINGLY, WE SET ASIDE THIS ISSUE TO THE LEARNED CIT(A) FOR DE NOVO. NEED NOT TO MENTION HERE THAT A REASONABLE OPPORTUNITY OF BEING HEARD IS TO BE ALLOWED TO THE A SSESSEE BEFORE DECIDING THE ISSUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED F OR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 01/10/2014. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 01 ST OCTOBER, 2014 * RANJAN COPY FORWARDED TO :- 1. THE ITO, WARD 1(3), JAIPUR. 2. M/S ASHISH HANDICRAFTS ENTERPRISES, JAIPUR. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 1094/JP/2011) BY ORDER, AR ITAT JAIPUR.