DCIT, Jaipur V. DHARMENDRA TANK, Jaipur

ITA 1119/JPR/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 47923 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 03-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A K MATHU R
• Section: 131

Judgement Text

1 ITA 1119(2)-10 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ) ITA NO. 1119/JP/2010 ASSTT. YEAR : 2007-08. THE DCIT, CIRCLE-2, VS. SHRI DHARMENDRA TANK, JAIPUR. P/O HEERALAL CHAGANLAL TANK BUILDING, 2333, MSB KA RASTA JAIPUR. (APPELLANT) (RESPONDENT) C.O.NO. 98/JP/2010 ( ARISING OUT OF ITA NO. 1119/JP/2010) ASSTT. YEAR : 2007-08. SHRI DHARMENDRA TANK, VS. THE DCIT, CIRCLE-2, JAIPUR. JAIPUR. (CROSS OBJECTOR) (RESPONDENT) APPELLANT BY : SHRI SANJAY KUMAR RESPONDENT BY : SHRI A.K. MATHUR ORDER DATED : 24/06/2011. PER SHRI R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AND A CROSS OBJECT ION BY ASSESSEE AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 20 07-08. 2. THE DEPARTMENT IS OBJECTING IN DIRECTING TO APPL Y G.P. RATE OF 18% ON DECLARED SALES OF RS. 8,48,93,746/- AGAINST TRADING ADDITION OF RS. 32,96,104 MADE BY AO BY APPLYING 25% OF UNVERIFIABLE PURCHASES. 2 3. IN CROSS OBJECTION THE ASSESSEE IS OBJECTING IN DIRECTING TO APPLY 18% OF G.P. RATE ON CONSOLIDATED SALES AND IN NOT CONSIDERING TRADIN G RESULT OF TWO TRADING ACCOUNT SEPARATELY. 4. SINCE THE GROUNDS ARE COMMON, THEREFORE, THEY AR E BEING DISPOSED OFF TOGETHER. 5. THE ASSESSEE DEALS IN PRECIOUS AND SEMI PRECIOUS STONES. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION THE GROSS PROFIT RATE DECL ARED IS 16.33% WHICH IS LOWER THAN 22.40% DECLARED IN THE IMMEDIATELY PRECEDING YEAR. THE AO REJECTED THE BOOKS OF ACCOUNT ON THE GROUND THAT PURCHASES OF RS. 1.31 CR ORES OR ODD MADE FROM 5 PARTIES VIZ. M/S. CLARITY GOLD PVT. LTD., M/S. S. GUPTA & CO., M /S. MARINE MINERAL & HERBAL REMEDIES PVT. LTD., M/S. SILVER N SILVER AND M/S. R OSHAN GEMS REMAINED UNVERIFIABLE AND STOCK REGISTER HAS NOT BEEN MAINTAINED QUALITY- WISE. REGARDING THE PURCHASES MADE FROM FIRST THREE PARTIES, CONFIRMATIONS WERE FILED. THE AO, HOWEVER, FOUND THAT DURING SEPARATE SEARCH OPERATION, STATEMENT OF SHRI KHUSHI KUMAR AMERIYA, WHO IS DIRECTOR IN M/S. CLARITY GOLD PVT. LTD. WAS RECORDED. HE STATE D THAT 95% OF SALES OF GEMS UNIT WERE BOGUS. SUMMONS WERE ISSUED TO THESE PARTIES WHICH WERE SERVED AND COPY OF LEDGER ACCOUNT ALONG WITH CONFIRMATIONS WERE FILED BUT NO ONE ATTENDED ON BEHALF OF THE PARTIES. REGARDING M/S. SILVER N SILVER, THE AO HAS OBSERVED THAT DURING SURVEY CONDUCTED BY BCTT WING OF THE DEPARTMENT, SHRI S.C. JAIN ADMITTE D THAT BOGUS SUPPLIES WERE MADE BY HIM. SIMILARLY, PROPRIETOR OF M/S. ROSHAN GEMS IN SEPARATE ENQUIRY ADMITTED THAT THE CONCERNS WERE ONLY NAME LENDERS. AS THE PURCHASES FROM THESE CONCERNS REMAINED UNVERIFIABLE, THEREFORE, THE AO REJECTED THE BOOKS OF ACCOUNT INVOKING PROVISIONS OF SECTION 145(3). THEREAFTER ADDITION OF RS. 32,96,1 04/- WAS MADE @ 25% OF UNVERIFIABLE PURCHASES. PLACING RELIANCE IN CASE OF M/S. SANJAY OIL CAKE INDUSTRIES, 10 DTR 153 3 (GUJ.) AND IN CASE OF M/S.VIJAY PROTEINS LTD., 58 I TD 4528 (ITAT AHMEDABAD). IT WAS CONTENDED BEFORE LD. CIT (A) THAT THE ONLY DISCREPA NCY POINTED OUT BY THE AO IN STOCK REGISTER IS THAT THE ASSESSEE DOES NOT MAINTAIN QUA LITY-WISE DETAILS. IN THIS LINE OF TRADE IT IS JUST IMPOSSIBLE TO MAINTAIN SUCH DETAILS. THE AS SESSEE SINCE LAST SEVERAL YEARS HAS MAINTAINED TWO SEPARATE TRADING ACCOUNTS. THE GROSS PROFIT RATE IN MAL KHATA ACCOUNT IS 24% WHICH IS THE SAME AS WHAT WAS DECLARED IN THE I MMEDIATELY PRECEDING YEAR, THOUGH THE TURNOVER HAS INCREASED FROM RS. 2.97 CRORES TO RS. 4.28 CRORES. IN LOCAL PURCHASE ACCOUNT THE GROSS PROFIT RATE HAS SLIGHTLY FALLEN D OWN FROM 8.9% TO 8.53% THOUGH THERE IS QUANTUM JUMP IN SALES WHICH HAS GONE UP FROM RS. 35 .06 LACS TO RS. 4.20 CRORES. REGARDING 5 SUPPLIERS, COMPLETE DETAILS INCLUDING P AN, TIN, CONFIRMATIONS, COMPLETE ADDRESSES AND PURCHASE BILLS WERE SUPPLIED. PAYMEN TS WERE MADE BY ACCOUNT PAYEE CHEQUE. SUMMONS ISSUED UNDER SECTION 131 WERE DULY SERVED ON ALL THE PARTIES WHO HAVE RESPONDED BY SENDING CONFIRMATIONS. THUS ALL THE PA RTIES ARE IN EXISTENCE. REGARDING STATEMENT OF SHRI KHUSHI KUMAR AMERIYA, DIRECTOR OF M/S. CLARITY GOLD PVT. LTD., HIS REPLY TO VARIOUS QUESTIONS ASKED WERE CONTRADICTORY TO EACH OTHER AND THUS HIS STATEMENT WAS NOT WORTHY OR RELIABLE. HE HAS SPECIFICALLY NA MED 3 BROKERS WHEREAS THE ASSESSEES BROKER IS TOTALLY DIFFERENT. SHRI KHUSHI KUMAR AME RIYA WAS NEITHER A PROPRIETOR/OWNER/PARTNER NOR A DIRECTOR IN M/S. S. GUPTA & CO. AND M/S. MARINE MINERAL & HERBAL REMEDIES PVT. LTD. IN CASE OF M/S. SILVER N SILVER AND M/S. ROSHAN GEMS, THE AO SIMPLY RELIED ON THE STATEMENT MADE BY THEM BEFO RE BCGTT WING AND NO INDEPENDENT ENQUIRY WAS MADE. IT WAS FURTHER SUBMI TTED THAT THE DECISION ON WHICH RELIANCE HAS BEEN PLACED BY AO HAS BEEN FOUND DISTI NGUISHABLE BY THE JAIPUR BENCH OF THE TRIBUNAL IN CASE OF M/S. GEMS PARASDISE IN ITA NO. 700/JP/2009. 4 6. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, THE LD. CIT (A) FOUND THAT THOUGH ASSESSEE HAS FILED CONFIRMATI ONS AND HAS SUBMITTED TIN AND PAN AND HAS TRIED TO ESTABLISH THE EXISTENCE OF SUPPLIE RS, HOWEVER, NONE HAS BEEN PRODUCED BEFORE THE AO FOR VERIFICATION. THEREFORE, THE AO WAS JUSTIFIED IN INVOKING PROVISIONS OF SECTION 145(3) AS HELD BY THE TRIBUNAL IN VARIOUS C ASES. ACCORDINGLY, REJECTION OF BOOKS OF ACCOUNT WAS UPHELD. HOWEVER, THE LD. CIT (A) FO UND THAT THE AO WAS NOT JUSTIFIED IN MAKING ADDITION @ 25% OF UNVERIFIABLE PURCHASES. T HE DECISIONS ON WHICH RELIANCE HAS BEEN PLACED WERE FOUND DISTINGUISHABLE BY THE JAIPU R BENCH OF THE TRIBUNAL IN CASE OF M/S. GEMS PARADISE (SUPRA). ACCORDINGLY, THE LD. CI T (A) HELD THAT ADDITION @ 25% CANNOT BE MADE. HOWEVER, AFTER CONSIDERING GROSS P ROFIT RATE OF IMMEDIATELY PRECEDING YEAR, THE LD. CIT (A) FOUND THAT GROSS PROFIT RATE SHOWN BY ASSESSEE HAS FALLEN. LOOKING TO THESE FACTS, THE AO WAS DIRECTED TO APPLY G.P. R ATE OF 18% ON TOTAL TURNOVER DECLARED BY ASSESSEE AND RECOMPUTED THE PROFIT OF ASSESSEE ACCO RDINGLY. 7. NOW BOTH ARE IN APPEAL HERE BEFORE THE TRIBUNAL. 8. THE LD. D/R STRONGLY PLACED RELIANCE ON THE ORD ER OF AO AND LD. CIT (A) TO THE EXTENT THE ADDITION HAS BEEN SUSTAINED. 9. ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE R EITERATED THE CONTENTIONS RAISED BEFORE LD. CIT (A). ATTENTION OF THE BENCH WAS DRA WN ON COPY OF WRITTEN SUBMISSIONS PLACED ON RECORD. RELIANCE HAS BEEN PLACED ON VARI OUS CASE LAWS OF THE TRIBUNAL WHICH ARE MENTIONED IN THE WRITTEN SUBMISSIONS. THE CONT ENTIONS MADE BEFORE LD. CIT (A) WERE EXPLAINED ALSO. 10. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THERE IS NO SUBSTANCE IN THE APPEAL OF THE DEP ARTMENT. HOWEVER, THE ASSESSEE 5 DESERVES TO SUCCEED IN HIS CROSS OBJECTION IN PART. THE JAIPUR BENCHES OF THE TRIBUNAL ARE TAKING A CONSISTENT VIEW THAT WHERE CERTAIN PURCHAS ES REMAINED UNVERIFIABLE THE REJECTION OF BOOKS OF ACCOUNT BY INVOKING PROVISIONS OF SECTI ON 145(3) IS JUSTIFIED. HOWEVER, THE JAIPUR BENCHES ARE TAKING A CONSISTENT VIEW ALSO TH AT WHERE BOOKS OF ACCOUNT ARE REJECTED ON ACCOUNT OF UNVERIFIABLE PURCHASES, THEN IN THAT CASE THE ADDITION SHOULD BE MADE AFTER TAKING INTO CONSIDERATION THE PAST HISTORY OF THE C ASE AND ALSO CURRENT EVENTS OF THE CASE. 10.1. IN THE PRESENT CASE IT IS SEEN THAT THE ASSES SEE IS MAINTAINING TWO TRADING ACCOUNTS I.E. ONE IN MAL KHATA ACCOUNT AND ANOTHER FOR LOCAL PURCHASES & SALES. IN MAL KHATA ACCOUNT THE GROSS PROFIT RATE HAS BEEN SHOWN BY ASS ESSEE AT 24% WHICH IS SIMILAR AS SHOWN IN THE EARLIER YEAR WHEREAS TURNOVER OF THE A SSESSEE HAS BEEN INCREASED SUBSTANTIALLY I.E. FROM RS. 2.97 CRORES TO RS. 4.28 CRORES. IN LOCAL PURCHASE ACCOUNT THE GROSS PROFIT RATE HAS BEEN SLIGHTLY FALLEN DOWN FRO M 8.9% TO 8.53%. HOWEVER, THERE IS INCREASE IN SALES MANIFOLD AS FROM RS. 35 LACS OR O DD SALES HAVE BEEN INCREASED TO RS. 4.20 CRORES OR ODD EXCEPT UNVERIFIABLE PURCHASES. NO DEFECTS IN THE BOOKS OF ACCOUNT WERE FOUND. THEREFORE, IF ANY ADVERSE INFERENCE CA N BE DRAWN THAT CAN BE DRAWN ON ACCOUNT OF UNVERIFIABLE PURCHASE. IT IS SEEN THAT O N ACCOUNT OF UNVERIFIABLE PURCHASES, THE PARTIES WHO ISSUED BILLS ARE CHARGING COMMISSION FR OM 0.20% TO 0.60%. IF THIS ASPECT IS TAKEN INTO CONSIDERATION THEN IT CANNOT BE SAID THA T THERE IS A MUCH REVENUE EFFECT ON ACCOUNT OF TAKING BILLS FROM THE PARTIES. SALES MA DE BY THE ASSESSEE HAS BEEN ACCEPTED. THEREFORE, THIS IS NOT A CASE THAT ASSESSEE HAS NOT MADE PURCHASES. KEEPING IN MIND ALL THESE FACTS AND TAKING INTO ACCOUNT CERTAIN PURCHAS ES REMAINED UNVERIFIABLE, WE CONFIRM THE REJECTION OF BOOKS OF ACCOUNT BY INVOKING PROVI SIONS OF SECTION 145(3). HOWEVER, WE ARE OF THE VIEW THAT IF AN ADDITION OF RS. 2,00,000 /- IS SUSTAINED ON ACCOUNT OF UNVERIFIABLE 6 PURCHASES WHICH WILL TAKE CARE OF LEAKAGE OF REVENU E, IF ANY, WILL MEET THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY. 11. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED IN PART. 12. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 24 .6.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- THE DCIT, CIRCLE-2, JAIPUR. SHRI DHARMENDRA TANK, JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 1119(2)/JP/2010) BY ORDER, AR ITAT JAIPUR