M/s. Chordia Gems, Jaipur, Jaipur V. Deputy Commissioner Of Income Tax, Circle-2, Jaipur

ITA 116/JPR/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7200 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 01-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DHK
• Assessee Lawyers: M L BORAD
• Keywords: Bogus purchase; Rejection of books of accounts; Accommodation entries; Reassessment proceedings; Set aside
• Section: 143(3); 147; 131; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S A, JAIPUR JH FOT; IKY JKO ] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 116/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2012-13 M/S CHORDIA GEMS, 4459, KGB KA RASTA, JOHARI BAZAR, JAIPUR (PRESENT ADDRESS: 401, SIDDHA APARTMENT, OPP.- BSNL OFFICE, AGRA ROAD, JAIPUR) CUKE VS. D.C.I.T., CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAAFC 7364 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS S@ ASSESSEE BY : SHRI M.L. BORAD (ADV) JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAJ MEHRA (JCIT) LQUOKBZ DH RKJH[K @ DATE OF HEARING : 16/10/2019 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 18/10/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER DATED 28/11/2018 PASSED BY THE LD CIT(A)-I, JAIPUR FOR A. Y. 2012-13, WHEREIN THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) ERRED IN SUSTAINING THE INIT IATION OF REASSESSMENT PROCEEDINGS AGAINST THE ASSESSEE AND CONSEQUENTIAL ISSUE OF NOTICE U/S 148 OF THE IT ACT TO THE ASSESSEE, WHICH SUSTENANCE OF INITIATION OF REASSESSMENT PROCEEDINGS AND CONSEQUENTIAL ISSUING OF NOTICE U/S 148 IS MOST ARBITRARY, UNJUST AND UNTENABLE IN LAW. ITA 116/JP/2019_ M/S CHORDIA GEMS VS DCIT 2 2. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN UPHOLDIN G THE APPLICATION OF PROVISIONS OF SECTION 145(3), CONSEQUENTIAL UPHOLDI NG BY HIM OF THE REJECTION OF BOOKS OF ACCOUNTS AND THEREBY UPHOLDIN G THE DISALLOWANCE OF RS. 7,47,308/- BEING 25% OF ALLEGED UNVERIFIABLE PURCHASES OF RS. 29,89,234/-. 3. THAT THE ADDITIONS OF RS. 7,47,308/- (BEING 25% OF ALLEGED UNVERIFIABLE PURCHASES OF RS. 29,89,234/- MADE BY THE ASSESSEE F ROM M/S MARC GEMS, SURAT) SUSTAINED BY THE LD. CIT(A) IS MOST AR BITRARY AND UNJUST AND IN THE ALTERNATIVE EXCESSIVE W.R.T. FACTS AND CIRCU MSTANCES OF THE CASE. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, SUBSTITUTE ONE AND MORE GROUNDS OF APPEAL AS AND WHEN NECESSARY. 2. REGARDING GROUNDS NO. 2 AND 3 OF THE APPEAL, THE RELEVANT FACTS AND FINDINGS OF THE LD. CIT(A) ARE AS UNDER: 3.2.2 DETERMINATION: (I) IT IS NOTED THAT THE PROCEEDINGS U/S 147 OF THE ACT WERE INITIATED ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIG ATION WING OF THE DEPARTMENT THAT THE APPELLANT HAS TAKEN ACCOMMODATI ON ENTRY AMOUNTING TO RS. 29,89,284/- FROM A NUMBER OF ENTIT IES CONTROLLED AND MANAGED BY SHRI BHANWAR LAL JAIN AND OTHERS, EN TRY OPERATORS AT MUMBAI, IN WHOSE CASE A SEARCH WAS CONDUCTED BY THE INCOME TAX DEPARTMENT, WHEREIN, IT WAS ADMITTED BY HIM THA T HE WAS IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES. IN THE ASSESSMENT ORDER, IT WAS CONCLUDED BY THE AO THAT THE APPELLAN T HAS TRIED TO DEFLATE ITS PROFITS BY ARRANGING BOGUS PURCHASE BIL LS WITHOUT ACTUAL DELIVERY OF GOODS AND CONSEQUENTLY, THE AO HAS MADE TRADING ADDITION OF RS. 7,47,308/- TO THE INCOME OF THE APP ELLANT, BEING 25% OF BOGUS PURCHASES OF RS. 29,89,284/-. (II) IT IS NOTED FROM THE MATERIAL PLACED ON RECORD THAT DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAS DECLARE D TOTAL ITA 116/JP/2019_ M/S CHORDIA GEMS VS DCIT 3 TURNOVER OF RS. 13,93,10,263/- AND THE AO HAS NOT DISPUTED THE SALES MADE BY THE APPELLANT AND THUS, THE PURCHASES MUST HAVE BEEN MADE FOR MAKING THE SALES. THE AO HAS DOUBTED THE GENUINENESS OF THE PURCHASES ON THE GROUND THAT THE SUPPLIERS WERE FOUND TO BE ACCOMMODATION ENTRIE S PROVIDERS AND THE PURCHASES FROM ENTITIES CONTROLLED BY SHRI BHAN WAR LAL JAIN COULD NOT BE VERIFIED DURING THE ASSESSMENT PROCEEDINGS. (III) IT IS NOTED THAT THE BOOKS OF ACCOUNTS OF THE APPELLANT HAVE BEEN REJECTED BY THE AO U/S 145(3) OF THE ACT AS THE APP ELLANT COULD NOT SUBSTANTIATE THE REAL DELIVERY OF GOODS FROM THE EN TITIES CONTROLLED BY ENTRY PROVIDERS PROVIDING ACCOMMODATION PURCHASE BILLS AND THUS, THE TRADING RESULTS OF THE APPELLANT WERE NOT VERIFIABLE. THUS, THE REJECTION OF BOOKS OF ACCOUNTS BY THE AO IS HEREBY UPHELD. NOW, THE ISSUE COMES, WHAT GP RATE IS TO BE APPLIED IN ORDER TO ESTIMATE THE INCOME OF THE APPELLANT. (IV) IT MAY BE MENTIONED THAT THE SIMILAR ISSUE WAS BEFORE THE HON'BLE ITAT, JAIPUR IN ITA NO. 409, 407/JP/2012 AND 499/62 6/JP/2012 FOR THE AY 2007-08 AND 2008-09 RESPECTIVELY IN THE CASE OF M/S BHURA MAL RAJ MAL SURANA VS. DCIT AND VIDE CONSOLIDATED J UDGEMENT DATED 15.12.2017, IT WAS HELD BY THE HON'BLE ITAT THAT: '6.6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE ASSESSING OFF ICER REJECTED THE BOOKS OF ACCOUNTS BY INVOKING THE PROV ISIONS OF SECTION 145(3). ONCE, THE BOOKS OF ACCOUNTS ARE REJ ECTED BY THE AO, THEN ONLY COURSE, OF ACTION LEFT TO THE AO IS TO ASSESS THE INCOME OF THE ASSESSEE ON THE BASIS OF BEST JUD GMENT AND GP RATE, WHICH IS CONSIDERED AS PROPER AND REASONAB LE BASIS AND GUIDANCE FOR THE BEST JUDGMENT. ONCE, THE BOOKS RESULT ITA 116/JP/2019_ M/S CHORDIA GEMS VS DCIT 4 ARE REJECTED THE ASSESSING OFFICER CANNOT PROCEED T O MAKE AN ADDITION TO THE INCOME OFFERED BY THE ASSES SEE AS PER BOOKS RESULT. HOWEVER, THE AO IN THE CASE THE ASSES SEE INSTEAD OF APPLYING THE GP RATE MADE ON ADDITION @ 25% OF THE PURCHASES TO THE BOOK RESULTS. THIS ACT OF THE ASSESSING OFFI CER ITSELF CONTRADICTS THE DECISION OF REJECTING THE BOOKS OF ACCOUNTS AND BOOKS RESULT. WE NOTE THAT THE HONBLE P & H HIGH COURT IN THE CA SE OF UPLAKESH METAL INDUSTRIAL V CIT 177 TAXMAN 298 HELD THAT ISSUE DECIDED BY THIS IS IN THE REALM OF APPRECIATI ON EVIDENCE. THE FINDING OF TRIBUNAL AS MENTIONED IN T HIS JUDGMENT IS AS UNDER:- 'HOWEVER, IN OUR OPINION THE OBSERVATION OF THE ASS ESSING OFFICER THAT THE ASSESSEE WAS PRIMA FADE REQUIRED T O PROVE THE GENUINENESS OF THE TRANSACTION AND IDENTI TY OF THE CREDITORS IS NOT MISPLACED BECAUSE THERE IS NO DISTINCTION LAID BETWEEN THE TRADE CREDITOR AND THE NON- TRADE CREDITOR AND WE ARE FURTHER OF THE OPINION TH AT IN CASE THE ASSESSEE CLAIMS LIABILITY OF PAYMENT TO TH E TRADE CREDITORS SHOWN IN THE BALANCE-SHEET, THE ASSESSEE IS DEFINITELY REQUIRED TO PRIMA FACIE PROVE THE IDENTI TY OF THE TRADE CREDITORS AS WELL AS THE GENUINENESS OF THE TRANSACTION. IN THIS CASE, ADMITTEDLY THE ASSESSEE HAS NEITHER BEEN ABLE TO DISCLOSE THE COMPLETE ADDRESSE S OF THE TRADE CREDITORS NOR IS ABLE TO GIVE THE COMPLET E ADDRESSES OF THE CONSIGNORS NOR THE NAME HAS BEEN MENTIONED ON THE CHALLAN FORMS, SO THE VERIFICATION OF THE SAME BY THE ASSESSING OFFICER BECAME TOTALLY IMPRACTICABLE ON ACCOUNT OF LACK OF THIS COMPLETE ITA 116/JP/2019_ M/S CHORDIA GEMS VS DCIT 5 INFORMATION SUPPLIED BY THE ASSESSEE. IT MEANS THAT THE ASSESSEE FAILED IN ESTABLISHING THE GENUIN ENESS OF THE SO CALLED TRADE CREDITORS APPEARING IN ITS BOOK S OF ACCOUNT. WE ARE FURTHER OF THE OPINION THAT SINCE I N THE INSTANT CASE OF THE ASSESSES, THE POINT UNDER CONSI DERATION BEFORE US IS REGARDING THE GENUINENESS OF THE LIABI LITY AMOUNTING TO RS. 1,75,26,586 SHOWN BY THE ASSESSES IN ITS BALANCE-SHEET AS TRADE CREDITORS, SO IT WAS NOT REL EVANT FOR US TO CONSIDER AS TO WHETHER THE PURCHASES MADE BY THE ASSESSEE WERE GENUINE OR NOT OR TO WHETHER THE ASSE SSEE HAS INFLATED THOSE PURCHASES OR NOT. IT IS ALSO NOT MATERIAL TO CONSIDER WHETHER THE GRS FROM SALE-TAX DEPARTMEN T WERE VERIFIED OR NOT, SO, THE CIT(A) ON CONSIDERING THES E POINTS WAS NOT JUSTIFIED IN DELETING THE IMPUGNED ADDITION WITHOUT DISCUSSING AS TO WHETHER THE LIABILITY OF TRADE CRE DITORS SHOWN BY THE ASSESSEE IN THE ABSENCE OF FURNISHING COMPLETE ADDRESSES OF TRADE CREDITORS/CONSIGNORS AN D THE PAYMENT VOUCHERS WAS GENUINE OR NOT.' WE FURTHER NOTED THAT WHEN THE CORRESPONDING SALE I S NOT IN DISPUTE THEN THE QUESTION IS ONLY REGARDING THE COR RECT AMOUNT OF PURCHASES AND VERIFICATION OF THE SAME. THE ID. DR HAS RELIED UPON THE VARIOUS DECISIONS OF HON'BLE GUJARAT HIGH COURT HOWEVER, WE FIND THAT IN ALL THOSE DECISIONS THERE WAS A FINDING OF FACTS THAT THE ASSESSEE INFLATED THE PURCHASES U PTO 25% AND THEREFORE, IT WAS NOT A CASE OF NON VERIFICATION OF THE PURCHASE AND REJECTION OF BOOKS OF ACCOUNTS BUT THE FACT WAS ESTABLISHED IN THE INVESTIGATION THAT THE ASSESSEE INFLATED THE PURCHASE PRICE AND ACCORDINGLY THE ADDITION OF 25% BEING INF LATED PURCHASES WAS MADE AND UPHELD BY THE TRIBUNAL WHICH WAS ITA 116/JP/2019_ M/S CHORDIA GEMS VS DCIT 6 AGAIN UPHELD BY THE HON'BLE HIGH COURT. ON THE CONT RARY IN THE CASE OF THE ASSESSEE THE AO NOT GIVEN ANY FINDI NG OF INFLATED PURCHASES BY THE ASSESSEE BUT DOUBTED THE VERY TRANSACTION OF PURCHASES DUE TO NON PRODUCTION OF T HESE PARTIES BEFORE THE AO. THE AO HAS NOT GIVEN THE FINDING THA T THE PRICES OF THE GOODS WAS INFLATED BY THE ASSESSEE BUT THE A O DOUBTED THE GENUINENESS OF THE PURCHASES ON THE GROUND THAT THE SUPPLIERS WERE FOUND TO BE ACCOMMODATION PROVIDERS. WHEN THE ASSESSING OFFICER REJECTED THE BOOK RESULTS UND ER SECTION 145(3) OF THE ACT, THEN THE AO AFTER REJECTION OF THE BOOK S OF ACCOUNT CAN PROCEED TO MAKE THE ASSESSMENT ON THE BASIS OF BEST JUDGMENT INSTEAD OF RESORTING MAKE THE ADDITION TO THE BOOK RESULTS. WE NOTE THAT THE ASSESSING OFFICER HAS BASED HIS CO NCLUSION PURELY ON THE BASIS OF THE INFORMATION RECEIVED FRO M THE DIRECTOR OF INCOME TAX (INVESTIGATION) JAIPUR, ABOU T SEARCH ACTION IN THE CASE OF M/S HALDIA GROUP ON 20.04.200 7. IN THE CASE OF HALDIA GROUP, CERTAIN INCRIMINATING DOCUMEN TS REGARDING PURCHASES WERE FOUND. THE HALDIA GROUP IS ALSO IN THE BUSINESS OF TRADING IN PRECIOUS AND SEMI-PRECIO US STONES. IN THE CASE OF HALDIA GROUP, THEY ADMITTED IN THE C OURSE OF SEARCH THAT THEY USED TO MAKE PURCHASES IN CASH. TO REGULARIZE SUCH PURCHASES THEY USED TO OBTAIN BOGUS BILLS FROM DIFFERENT PARTIES. THE PAYMENTS TO THESE PARTI ES WOULD BE MADE BY CHEQUE. THE AMOUNT WILL BE WITHDRAWN FRO M BANK ACCOUNT BY CASH AND PAID BACK TO THE HALDIA GROUP. WE NOTE THAT THE ASSESSEE IN THE PRESENT CASE, HAS PURCHASED FROM SEVEN PARTIES LISTED IN THE ORDER OF ASSESSMEN T. THE ASSESSING OFFICER ISSUED SUMMONED UNDER SECTION 131 TO THESE SEVEN PARTIES, BUT THE SUMMONS WERE RETURNED UNSERV ED, WITH ITA 116/JP/2019_ M/S CHORDIA GEMS VS DCIT 7 THE POSTAL REMARK 'LEFT'. THE ASSESSING OFFICER DEP UTED INSPECTOR TO MAKE INQUIRY FROM SEVEN PARTIES. THE I NSPECTOR REPORTED THAT PARTIES ARE NOT TRACEABLE ON THE ADDR ESSES GIVEN BY THE ASSESSEE. THESE FACTS CAN LEAD TO A CONCLUSI ON THAT THE PURCHASES MADE BY THE ASSESSEE FROM THE AFORESAID S EVEN PARTIES ARE BOGUS. WE NOTE THAT THERE IS NO FINDING S IN THE ASSESSMENT ORDER THAT SALES DECLARED ARE BOGUS. WE ALSO NOTE THAT ASSESSEE DID NOT MAINTAIN STOCK QUALITATIVE -W ISE. IN THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT CONCLUS ION OF THE ASSESSING OFFICER THAT 25% OF PURCHASES ARE BOGUS C ANNOT BE SUSTAINED. THE CIT(A), IN OUR VIEW, HAS RIGHTLY HEL D THAT THERE IS NO MATERIAL TO CONCLUDE THAT 25% OF PURCHASES OF THE ASSESSEE ARE BOGUS. AS FAR AS REJECTION OF BOOKS OF ACCOUNTS ARE CONCER NED, IN OUR VIEW, THE CIT(A) HAS RIGHTLY UPHELD THE REJECTION O F BOOKS OF ACCOUNTS BY THE ASSESSING OFFICER BASED ON THE ORDE R OF THE ITAT ON SIMILAR FACTS IN THE CASE OF ASSESSEE IN AS SESSMENT YEAR 2006-07. AS FAR AS ESTIMATION OF PROFIT OF THE ASSESSEE IS C ONCERNED, THE CIT(A) HAS RIGHTLY BASED HIS ESTIMATION ON THE BASI S OF PAST HISTORY IN ASSESSEE'S OWN CASE. THIS IS A PROPER YA RDSTICK TO ESTIMATE PROFIT, WHEN BOOKS OF ACCOUNTS ARE REJECTE D, WE THEREFORE UPHELD THE ORDER OF CIT(A) AND DISMISS TH E APPEAL OF THE REVENUE AS WELL AS ASSESSEE. 6.7 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE AND REVENUE, ON THIS ISSUE, IS DISMISSED. '(EMPHASIS SUPPLIED) (V) THE SAME VIEW WAS ALSO TAKEN BY THE HONIBLE ITA T, JAIPUR IN FOLLOWING RECENT JUDGEMENTS: ITA 116/JP/2019_ M/S CHORDIA GEMS VS DCIT 8 ALLIED GEMS CORPORATION ITA NO. 794/JP/2011 FACTS OF THE CASE: BOOKS OF ACCOUNTS WERE REJECTED BY ID. AO ON THE GROUND THAT ASSESSEE HAS MADE SOME BOGUS PURCHASE. AFTER R EJECTING, ID. AO MADE ADDITION OF 25% OF UNVERIFIED PURCHASE. HELD: ONCE BOOKS OF ACCOUNT ARE REJECTED, THE ONLY COURSE OF ACTION AVAILABLE WITH AO IS TO ASSESS THE INCOME OF ASSESS EE ON THE BASIS OF BEST JUDGMENT AND GP RATE IS CONSIDERED AS PROPER & REASONABLE BASIS AND GUIDANCE FOR THE BEST JUDGMENT. THE ACTIO N OF ID. AO IN MAKING ADDITION OF 25% OF PURCHASE ITSELF CONTRADIC TS THE DECISION OF REJECTING BOOKS OF ACCOUNTS. IT WAS FURTHER HELD THAT THE ADDITION OF 25%, MADE AFTER RELYING ON VARIOUS DECISIONS OF HON'BLE GUJARAT HIGH COURT, IS UNJUSTI FIED AS IN THOSE CASES THERE WAS A CLEAR CUT FINDING THAT ASSESSEE HAS INF LATED PURCHASES UP TO 25%, HOWEVER, THERE IS NO SUCH FINDING IN THE CASE OF ASSESSEE. AO WAS HAVING ANY DOUBT ABOUT THE GENUINENESS OF PURCHASES , SHOULD HAVE MADE BEST JUDGMENT INSTEAD OF MAKING ADDITION OF 25% OF UNVERIFIED PURCHASES. LD. CIT(A) HAS CORRECTLY RESTRICTED THE ADDITION TO THE AVERAGE GP RATE BASED ON PAST HISTORY. RAJ KUMAR AGARWAL ITA NO. 504/JP/2013 FACTS OF THE CASE: BOOKS OF ACCOUNTS WERE REJECTED BY ID. AO ON THE GROUND THAT ASSESSEE HAS MADE SOME BOGUS PURCHASES. AFTER REJECTING, ID. AO MADE THE ADDITION OF 25% OF UNVERIFIED PURCHASES. HELD: BY FOLLOWING THE DECISION OF ALLIED GEMS CORP ORATION ITA NO. 794/JP/201 I, IT WAS HELD THAT WHEN BOOKS OF ACCOUN T ARE REJECTED ON ACCOUNT OF UNVERIFIED PURCHASES, ADDITION HAS TO BE RESTRICTED TO ITA 116/JP/2019_ M/S CHORDIA GEMS VS DCIT 9 AVERAGE GP RATE ON THE BASIS OF HISTORY OF MINIMUM 3 YEARS (DECLARED AND ACCEPTED BY AO). ALKA JAIN ITA NO. 798/JP/2011 FACTS OF THE CASE: BOOKS OF ACCOUNTS WERE ACCEPTED BY ID. AO, HOWEVER, ADDITION OF 25% OF UNVERIFIED PURCHASES WAS MADE BY ID. AO. HELD: WHERE AO HAS NOT GIVEN ANY FINDING AS TO HOW MUCH OF THE PURCHASES ARE INFLATED/BOGUS AND THE ASSESSEE HAS A LSO NOT PRODUCED THE PARTIES FROM WHOM THE PURCHASES WERE MADE, THER E WAS FAILURE ON PART OF ASSESSEE AS WELL AS ON THE PART OF AO TO DI SCHARGE THEIR RESPECTIVE BURDEN AND ONUS IN RESPECT OF THE PURCHA SES TRANSACTION. THUS, DISALLOWANCE OF 25% OF UNVERIFIED PURCHASE IS ON THE HIGHER SIDE AND, ACCORDING, THE DISALLOWANCE IS RESTRICTED TO 1 5% OF THE PURCHASES. VI) THUS, IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEME NTS, AFTER REJECTION OF BOOKS OF ACCOUNTS, THE PAST HISTORY OF THE APPEL LANT HAS TO BE SEEN, FOR ESTIMATING THE PROFIT OF THE APPELLANT. D URING THE APPELLATE PROCEEDINGS, THE APPELLANT WAS REQUIRED TO SUBMIT I TS TRADING RESULTS FOR THE LAST FEW YEARS, WHICH WERE SUBMITTED AND RE PRODUCED AS UNDER: ASSTT YEAR GROSS TURNOVER GROSS PROFIT GP RATE 2009-10 97981849 7561473 7.7% 2010-11 62599031 7040459 11.2% 2011-12 75369489 9283217 12.3% 2012-13 139310263 13952071 10.00% TOTAL 37,52,60,632 3,78,37,220 10.10% (VII) IT MAY BE MENTIONED THAT IN THE CASE OF CIT V S VAIBHAV GEMS LTD. [2014] 112 DTR 84 (RAJ), IT HAS BEEN HELD BY THE HO N'BLE HIGH COURT OF RAJASTHAN THAT WHILE THE PAST HISTORY BECOMES THE R ELEVANT BASIS BUT IF THE AO WISHES TO TINKER WITH THE BASIS OF PAST R ECORDS, THEN SOME ITA 116/JP/2019_ M/S CHORDIA GEMS VS DCIT 10 FLAW HAS TO BE FOUND BY THE AO IN MAKING SOME ADDIT ION AND, IN THE INSTANT CASE UNDER CONSIDERATION, THE PURCHASES TO THE TUNE OF RS. 29,89,284/- WAS FOUND TO BE BOGUS/UNVERIFIABLE, WHI CH IS ABOUT 2.3% OF THE TOTAL PURCHASES OF RS. 12,95,15,688/- DECLAR ED BY THE APPELLANT. THE AVERAGE GROSS PROFIT RATE OF THE APPELLANT FOR PAST THREE YEARS IS 10.10% WHILE THE GP RATE OF THE CURRENT YEAR IS 10% AND IMMEDIATE PRECEDING TWO YEARS IS 12.3% AND 11.2% RESPECTIVELY . THE AO HAS MADE AN ADDITION OF RS. 7,47,308/- ON ACCOUNT OF BO GUS PURCHASE (25% OF RS. 29,89,284/-). AFTER CONSIDERING THE ABO VE TRADING ADDITION, THE GROSS PROFIT OF THE APPELLANT FOR THE YEAR UNDER CONSIDERATION BECOMES RS. 1,46,99,379/- WHICH IN TE RMS OF PERCENTAGE IS 10.55% ONLY. THUS, EVEN AFTER CONSIDERING THE ADDITION MAD E BY THE AO, THE GROSS PROFIT RATIO FOR THE YEAR REMAINS IN THE RANG E OF GROSS PROFIT RATIO SHOWN BY THE APPELLANT IN PRECEDING TWO YEARS. CONSIDERIN G THE ABOVE FACTS, NO INTERFERENCE IS CALLED FOR AND THE ADDITION MADE BY THE AO IS HEREBY SUSTAINED. 3. IN THIS REGARD, THE LD AR OF THE ASSESSEE HAS SU BMITTED THAT THE LD. CIT(A) HAS TAKEN INTO ACCOUNT THE GP RATE OF IMMEDI ATELY PRECEDING 2 YEARS ONLY WHICH IS UNJUSTIFIED PARTICULARLY IN VIE W OF THE FACT THAT THE HONBLE RAJASTHAN HIGH COURT IN NUMBER OF DECISIONS HAS HELD THAT WHILE CONSIDERING ISSUE OF GP RATE IN A CASE, AVERAGE GP RATE OF PRECEDING FIVE YEARS IN ASSESSEES OWN CASE SHOULD BE TAKEN INTO C ONSIDERATION. OUR REFERENCE WAS DRAWN BY SUBMITTING GP CHART OF PRECE DING FIVE YEARS AND IT WAS SUBMITTED THAT THE AVERAGE G.P. RATE OF THE ASS ESSEE OF PRECEDING FIVE YEARS COMES TO 8.86% AS AGAINST THE G.P. RATE DECLA RED @ 10% WHICH IS ITA 116/JP/2019_ M/S CHORDIA GEMS VS DCIT 11 HIGHER BY 1.14% AND THEREFORE, NO ADDITION SHOULD B E MADE IN THE HANDS OF THE ASSESSEE. 4. ON THE OTHER HAND, THE LD DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE MATERIAL AVAILABLE ON THE RECORD. WE HAVE GONE THRO UGH THE FINDINGS OF THE LD. CIT(A) AND WE DO NOT SEE ANY INFIRMITY IN T HE IMPUGNED ORDER AS FAR AS UPHOLDING THE REJECTION OF BOOKS OF ACCOUNT U/S 145(3) OF THE ACT IS CONCERNED. ONCE THE BOOK RESULTS ARE REJECTED, THE ASSESSING OFFICER CANNOT PROCEED TO MAKE AN ADDITION TO THE INCOME OF FERED BY THE ASSESSEE AS PER BOOK RESULTS. THE ASSESSING OFFICE R HAS TO ASSESS THE INCOME OF THE ASSESSEE ON THE BASIS OF BEST JUDGMEN T AND GP RATE WHICH IS CONSIDERED AS PROPER AND REASONABLE BASIS FOR BE ST JUDGMENT. AS FAR AS ESTIMATION OF GP RATE IS CONCERNED, PAST HISTORY OF THE ASSESSEE IS A RELIABLE BASIS FOR ESTIMATION OF THE GP RATE. FURTH ER, WE AGREE WITH THE CONTENTION OF THE LD AR THAT WHERE THE PAST HISTORY OF THE ASSESSEE IS AVAILABLE ON RECORD THEN A PERIOD OF FIVE YEARS WIL L PROVIDE A MORE REALISTIC BASIS OF G.P. ESTIMATION AS AGAINST THE PAST THREE YEARS AND THE SAID VIEW HAS ALSO BEEN ACCEPTED BY THE HONBLE RAJASTHAN HIG H COURT. IN THE INSTANT CASE, THE ASSESSEE HAS CONTENDED THAT THE A VERAGE G.P. RATE FOR ITA 116/JP/2019_ M/S CHORDIA GEMS VS DCIT 12 THE PAST FIVE YEARS COME TO 8.86% AS AGAINST THE DE CLARED G.P. RATE OF 10% FOR THE YEAR UNDER CONSIDERATION. HOWEVER, WE N OTE THAT FOR THE A.Y. 2010-11 AND 2011-12, ASSESSMENTS WERE COMPLETED U/S 143(3) OF THE ACT WHEREIN CERTAIN ADDITIONS WERE MADE BY THE A.O. WHI CH HAVE BEEN UPHELD BY THE LD. CIT(A), THEREFORE, THE GP RATE SO DISCLO SED BY THE ASSESSEE NEEDS TO BE MODIFIED/ADJUSTED TO TAKE INTO CONSIDER ATION THE ADDITION SO MADE AND CONFIRMED BY THE LD. CIT(A). THEREFORE, IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WE HEREBY DIRECT THE A.O . TO CONSIDER THE LAST FIVE YEARS G.P. RATE OF THE ASSESSEE WHICH HAS ATTA INED FINALITY AND WHERE THE AVERAGE G.P. RATE SO DETERMINED IS LOWER THAN T HE GP SO DECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, THER E SHOULD NOT BE ANY ADDITION MADE IN THE HANDS OF THE ASSESSEE. ACCORDI NGLY, THE MATTER IS SET ASIDE TO THE FILE OF THE A.O. FOR THE LIMITED PURPO SES OF VERIFYING AND COMPUTING THE AVERAGE G.P. RATE OF LAST FIVE YEARS WHICH HAS ATTAINED FINALITY AND COMPARING THE SAME WITH THE DECLARED G .P. BY THE ASSESSEE AND DECIDED ACCORDINGLY. IN THE RESULT, GROUNDS NO. 2 OF THE ASSESSEES APPEAL IS DISMISSED AND GROUND NO. 3 OF THE ASSESSE ES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES ONLY. 6. HAVING DECIDED THE ISSUE ON MERIT, WE FIND THAT THE GROUND NO. 1 CHALLENGING THE LEGALITY OF THE PROCEEDINGS BY ISSU ING NOTICE U/S 148 OF THE ITA 116/JP/2019_ M/S CHORDIA GEMS VS DCIT 13 ACT BECOME ACADEMIC IN NATURE AND THEREFORE, THE SA ME BEING DISMISSED AS INFRUCTUOUS. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH OCTOBER, 2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV ) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 18 TH OCTOBER, 2019 * RANJAN VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S CHORDIA GEMS, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- THE D.C.I.T., CIRCLE-2, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 116/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR