SHRI RADHA MOHAN VIJAY, JAIPUR V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-5, JAIPUR

ITA 1172/JPR/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5968 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 10-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MAHELA JCIT DHK
• Assessee Lawyers: S R SHARMA; R K BHATRA
• Keywords: 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. 1171 & 1172/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 & 10-11. SHRI RADHA MOHAN VIJAY B-268, JANTA COLONY, JAIPUR. CUKE VS. THE ACIT, CIRCLE-5, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAIPV 2573 P 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 (A)-2, JAIPUR BOTH DATED 16.07.2018 FOR THE ASSESSMENT YEARS 2009-10 & 10-11 RESPECTIVELY. THE ASSESSEE HAS RAISED COMMON GROUNDS IN BOTH THE APPEALS EXCEPT THE QUANTUM OF ADDITION. THE GROUNDS 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. 53,36,995/- ALLEGEDLY NOT GENUINE AND NOT VERIFIABLE. 2 ITA NOS. 1171 & 1172/JP/2018 SHRI RADHA MOHAN 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 20% AS AGAINS T DECLARED G.P. RATE OF 14.74% RESULTING IN CONFIRMING TRADING ADDITION TO THE EXTENT OF RS. 5,82,245/- 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 AND CARRYING ON TH E BUSINESS OF EXPORT OF PRECIOUS AND SEMI PRECIOUS GEMS AND STONES IN HIS P ROPRIETORSHIP CONCERN M/S. GIRIRAJ ENTERPRISES. THE ASSESSEE FILED HIS RETURN OF INCOME UNDER SECTION 139(1) ON 30.09.2009 DECLARING TOTAL INCOME OF RS. 10,49,320/ - WHICH WAS PROCESSED UNDER SECTION 143(1) ON 09.05.2011. SUBSEQUENTLY, THE AO REOPENED THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 ON 22 ND MARCH, 2016. THE REASSESSMENT WAS COMPLETED AFTER REJECTION OF BOOKS OF ACCOUNT FOR A N ADDITION EQUIVALENT TO 25% OF THE PURCHASES MADE BY THE ASSESSEE FROM SOME OF THE ENTITIES ALLEGEDLY CONTROLLED AND MANAGED BY SHRI RAJENDRA JAIN GROUP, SANJAY CH AUDHARY GROUP AND DHARMICHAND JAIN GROUP, MUMBAI IN PROVIDING THE ACC OMMODATION ENTRIES OF BOGUS SALE BILLS ETC. CONSEQUENTLY, THE AO MADE THE ADDI TIONS OF RS. 13,34,249/- FOR THE ASSESSMENT YEAR 2009-10 AND RS. 7,94,481/- FOR THE ASSESSMENT YEAR 2010-11. ON APPEAL, THE LD. CIT (A) HAS RESTRICTED THE ADDITION BY ESTIMATING THE INCOME OF THE ASSESSEE AT 20% GP FOR BOTH THE ASSESSMENT YEARS. AGGRIEVED BY THE IMPUGNED ORDER OF LD. CIT (A), THE ASSESSEE FILED THESE APPE ALS. 3. I HAVE HEARD THE LD. A/R AS WELL AS THE LD. D/R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE FACTS AND ISSUE INVOLVED I N THESE APPEALS ARE IDENTICAL TO THE FACTS AND ISSUE INVOLVED IN THE CASE OF SHRI HARI P RASAD VIJAY VS. ACIT IN ITA NOS. 3 ITA NOS. 1171 & 1172/JP/2018 SHRI RADHA MOHAN VIJAY, JAIPUR. 1046 & 1047/JP/2018, A SISTER CONCERN OF THE ASSESS EE, WHEREIN THE TRIBUNAL HAS DECIDED THIS ISSUE VIDE EVEN DATE ORDER AS UNDER :- 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS REJECTED THE BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE IT ACT ON THE GROUND THAT SOME OF THE PURCHASES WERE MADE BY THE ASSESSE E FROM SUN DIAM OF RS. 36,12,484/- WHICH WAS MANAGED BY SHRI RAJEND RA S. JAIN AND SHRI DHARMICHAND JAIN GROUP WHO ARE FOUND TO BE IND ULGING IN PROVIDING ACCOMMODATION ENTRIES IN THE NATURE OF BO GUS SALES ETC. THE AO AFTER REJECTION OF BOOKS OF ACCOUNT, DISALLOWED 25% OF THOSE PURCHASES MADE FROM M/S. SUN DIAM AND CONSEQUENTLY AN ADDITION OF RS. 9,03,121/- WAS MADE FOR THE ASSESSMENT YEAR 200 9-10 AND SIMILARLY 25% OF THE PURCHASES MADE FROM TWO CONCER NS MANAGED BY THE SAME GROUP OF PERSONS WAS DISALLOWED FOR THE AS SESSMENT YEAR 2010-11 AND CONSEQUENTLY AN ADDITION OF RS. 10,33,0 21/- WAS MADE. ON APPEAL, THE LD. CIT (A) FOUND THAT AFTER REJECTI ON OF BOOKS OF ACCOUNT, THE INCOME OF THE ASSESSEE IS REQUIRED TO BE ESTIMATED BY CONSIDERING GP RATE. THE LD. CIT (A) HAS APPLIED T HE GP RATE AT 19% AFTER REJECTING THE CONTENTION OF THE ASSESSEE REGA RDING THE PAST HISTORY OF GP DECLARED BY THE ASSESSEE. THE LD. CI T (A) HAS SPECIFICALLY OBSERVED THAT EVEN FOR THE ASSESSMENT YEARS 2007-08 AND 08-09 THE ASSESSMENTS WERE REOPENED ON THE SIMILAR GROUNDS AN D THE ASSESSEE APPROACHED TO SETTLEMENT COMMISSION FOR SETTLEMENT OF THE MATTER. THUS THE LD. CIT (A) HAS REJECTED THE GP DECLARED B Y 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 J UDGMENT AND CONSEQUENTLY SOME REASONABLE AND PROPER BASIS SHOUL D HAVE BEEN APPLIED FOR ESTIMATION OF THE INCOME AFTER REJECTIO N OF BOOKS OF ACCOUNT. THE LD. CIT (A) HAS RIGHTLY MODIFIED THE ORDER OF THE AO BY 4 ITA NOS. 1171 & 1172/JP/2018 SHRI RADHA MOHAN VIJAY, JAIPUR. ESTIMATING THE INCOME. HOWEVER, THE ESTIMATION 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 2008-09 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 SETTLED BEFORE THE SETTLEMENT COMMISSION, THEREFORE, IN SUC H CIRCUMSTANCES THE GP DECLARED BY THE ASSESSEE FOR THOSE ASSESSMEN T YEARS I.E. 2007- 08 AND 08-09 CANNOT 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 THE ASSES SMENT YEAR 2006- 07, THEN THE GP FOR THAT YEAR SHOULD HAVE BEEN TAKE N AS A REASONABLE AND PROPER BASIS FOR ESTIMATION OF INCOME OF THE AS SESSEE FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS DECLARED THE GP FOR THE YEAR UNDER CONSIDERATION AT 16.11% WHICH IS MORE THAN TH E GP DECLARED FOR THE ASSESSMENT YEAR 2006-07. SIMILARLY THE GP DECL ARED BY THE ASSESSMENT YEAR 2010-11 IS 16.03% WHICH 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 DECLARE D BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS IN LINE WITH OR MORE THAN THE NORMAL GP DECLARED IN THE PRECEDING YEARS OR THE PROFIT PR EVAILING IN THE TRADE, THEN NO ADDITION IS CALLED FOR. REJECTION OF BOOKS OF ACCOUNT WOULD NOT IPSO FACTO LEAD TO THE ADDITION IF THE GP DECLARED BY THE ASSESSEE IS HIGHER OR IN LINE WITH THE REASONABLE BASIS TO BE A PPLIED FOR ESTIMATION OF INCOME. HENCE, IN VIEW OF THE FACTS AND CIRCUMST ANCES OF THE CASE, 5 ITA NOS. 1171 & 1172/JP/2018 SHRI RADHA MOHAN VIJAY, JAIPUR. THE ADDITION SUSTAINED BY THE LD. CIT (A) IS NOT JU STIFIED AND THE SAME IS DELETED. IN THE CASE OF THE ASSESSEE THE GP DECLARED FOR THE ASSESSMENT YEARS 2009-10 AND 10-11 ARE AT 14.74% AND 15.64% RESPECTIVELY. THUS THE GP DECLARED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2010-11 IS IN LINE WITH THE GP DECLARED BY THE SISTER CONCERN WHICH WAS FOUND TO BE PROPER AND REA SONABLE AND HENCE NO ADDITION IS CALLED FOR. AS REGARDS THE ASSESSMENT YEAR 2009 -10, THE GP DECLARED BY THE ASSESSEE IS 14.74% AND , THEREFORE, THE INCOME OF T HE ASSESSEE IS REQUIRED TO BE ESTIMATED BY CONSIDERING THE REASONABLE AND PROPER GP RATE AT 16%. ACCORDINGLY, THE AO IS DIRECTED TO ESTIMATE THE INCOME FOR THE A SSESSMENT YEAR 2009-10 BY APPLYING A GP RATE OF 16%. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 1171/JP/2018 IS PARTLY ALLOWED AND APPEAL OF THE ASSESSEE IN ITA NO. 1172/ JP/2018 IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 03/10/20 19. SD/- ( FOT; IKY JKWO (VIJAY PAL RAO) U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 03/10/2019. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI RADHA MOHAN 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. 1171 & 1172/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 6 ITA NOS. 1171 & 1172/JP/2018 SHRI RADHA MOHAN VIJAY, JAIPUR.