BEAUTY TAX(EARLIER FLORALS INDIA), Jaipur V. DCIT, Jaipur

ITA 12/JPR/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5367 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 06-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Business income; Charitable institution; Opportunity of cross examination; Rule of consistency
• Section: 131

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NOS. 12/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2010-11 . M/S. BEAUTY TAX (EARLIER FLORALS INDIA), E-11, RAM PATH, SHYAM NAGAR EXTENSION, JAIPUR. CUKE VS. THE DY. CIT, CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAAFF 1950 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY S BY : SHRI MAHENDRA GARGIEYA (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SHRI AJAY MALIK (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 17.03.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 25/04/2016. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THE PRESENT APPEAL FILED BY THE ASSESSEE IS ARISIN G FROM THE ORDER DATED 20.11.2013 PASSED BY THE LEARNED CIT (A)-1, JAIPUR FOR THE A.Y. 2010-11. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I ERRED IN SUSTAINING TRADING ADDITION OF RS. 50,13,525/- MADE ON ACCOUNT OF PURCHASE FROM RAMESH CHAND CHHAJER HELD AS BOGUS PU RCHASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I ERRED IN SUSTAINING TRADING ADDITION OF RS. 38,86,481/- MADE ON ACCOUNT OF PURCHASE FROM SMT. TARA DEVI CHAJJER HELD AS BOGUS PURCHASE. 2 ITA NO. 12/JP/2014 M/S. BEAUTY TAX (EARLIER FLORALS INDIA) 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF CURTAINS, PILLOW COVERS, QUILTS ETC. WHICH INCLUDES EMBROIDERY. DURING THE YEAR THE ASSESSEE HAS SHOWN GP RATE OF 36.17% ON SALES OF RS. 4,79,23,029/- IN COMPARISON TO GP OF 35.93% ON TURNOVER OF RS. 6,48,75,683/- IN THE IMMEDIATELY PRECEDING YEAR. THE AO EXAMINED TH E BOOKS OF ACCOUNTS OF THE ASSESSEE WHICH WERE AUDITED. THE ASSESSEE IS A 100% EXPORTER OF EMBROIDERED CLOTH, CURTAIN AND MADE-UPS WITHOUT ANY OUTLET FOR LOCAL SALES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, DETAILS OF PURCHASES AND SU NDRY CREDITORS WERE REQUISITIONED FOR EXAMINATION. ON EXAMINATION IT IS NOTICED THAT SHRI RAMESH CHAND CHHAJER HAS BEEN SHOWN AS CREDITOR FOR RS. 81,19,78 5/-, COPY OF LEDGER ACCOUNT OF SHRI RAMESH CHAND CHHAJER IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE FIRM REVEALS THAT DURING THE YEAR THE ASSESSEE HAS SHOWN 31 PURC HASES AMOUNTING TO RS. 50,13,525/- FROM SHRI RAMESH CHAND CHHAJER DURING T HE YEAR IN ADDITION TO THE OPENING BALANCE OF RS. 49,59,081/-. THUS TOTAL CRED IT OF THE SAID PARTY WAS RS. 99,72,606/- BUT INSTANCES OF PAYMENTS ARE ONLY THRE E ENTRIES DURING WHOLE YEAR AMOUNTING TO RS. 18,52,821/-. IN RESPECT OF SMT. TA RA DEVI CHHAJER, ON EXAMINATION IT IS NOTICED THAT SMT. TARA DEVI CHHAJER HAS BEEN SHOWN AS CREDITOR FOR RS. 67,28,240/-, COPY OF LEDGER ACCOUNT OF SMT. TARA D EVI CHHAJER IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE FIRM REVEALS THAT DURING T HE YEAR THE ASSESSEE HAS SHOWN 23 PURCHASES AMOUNTING TO RS. 38,86,481/- FROM SMT. TARA DEVI CHHAJER DURING THE YEAR IN ADDITION TO THE OPENING BALANCE OF RS. 59,9 0,215/-. THUS TOTAL CREDIT OF THE SAID PARTY WAS RS. 98,76,969/- BUT INSTANCES OF PAY MENTS ARE ONLY FOUR ENTRIES DURING THE WHOLE YEAR AMOUNTING TO RS. 31,48,456/-. THE ISSUE OF PURCHASE HAS 3 ITA NO. 12/JP/2014 M/S. BEAUTY TAX (EARLIER FLORALS INDIA) BEEN EXAMINED IN DETAIL DURING THE SCRUTINY ASSESSM ENT IN THE ASSESSEES OWN CASE IN THE PAST ASSESSMENT YEARS AND IT WAS FOUND THAT SHRI RAMESH CHAND CHHAJER AS WELL AS SMT. TARA DEVI CHHAJER WERE NOT A GENUINE S ELLERS BUT BOGUS PURCHASES HAD BEEN SHOWN IN THEIR NAME. SHRI RAMESH CHAND CHHAJER HAS ADMITTED THAT HE WAS EMPLOYED WITH THE ASSESSEE FIRM AND HAD GIVEN THE E NTRIES OF PURCHASES IN LIEU OF CERTAIN AMOUNT OF COMMISSION. DURING ASSESSMENT PRO CEEDINGS THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 05.02.2013 WAS GIVEN OPPORT UNITY TO PRODUCE SHRI RAMESH CHAND CHHAJER ALONG WITH HIS COMPLETE BOOKS OF ACCO UNT, PURCHASE/SALE BILLS, STOCK REGISTER AND EVIDENCE TO PROVE THAT HE HAS GENUINE BUSINESS. BUT THE ASSESSEE HAS FAILED TO PRODUCE THE REQUISITE DOCUMENTS. THE LD. A/R FOR THE ASSESSEE VIDE LETTER DATED 13.02.2013 SUBMITTED THAT THE ASSESSEE HAS MA DE PURCHASES FROM SHRI RAMESH CHAND CHAJJER RS. 50,13,525/- AND SMT. TARA DEVI CHHAJER RS. 38,86,481/-. HE FURTHER SUBMITTED THE ASSESSEE HAD TO CONTACT BO TH THESE PERSONS BUT COULD NOT SUCCEED AS THEY WERE OUT OF STATION AND, THEREFORE, THEY COULD NOT BE PRODUCED BEFORE THE AO. THE LD. A/R SUBMITTED THAT THE PURC HASES FROM THESE PERSONS ARE GENUINE AS THE PAYMENTS HAVE BEEN MADE BY CHEQUE AG AINST THE BILLS ISSUED BY THEM. HE HAS ALSO SUBMITTED THAT BOTH THESE PERSO NS HAVE GIVEN CONFIRMATION OF ACCOUNT WITH THE ASSESSEE DULY SIGNED AND ALL ENTRI ES DULY ACCOUNTED IN THE AUDITED BOOKS OF ACCOUNTS, WHICH HAVE BEEN PLACED BEFORE TH E AO. THE LD. A/R OF THE ASSESSEE SUBMITTED THAT ALL GOODS PURCHASED FROM TA RA DEVI CHHAJAR AND RAMESH CHAND CHHAJER HAVE BEEN EXPORTED AND DULY ENTERED I N BOOKS OF ACCOUNTS. ENTRIES IN FINANCIAL BOOKS AND QUANTITATIVE TALLY ARE AUDITED AND VERIFIABLE. THE AO CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE, BUT HE FOUND NO MERIT IN THE SUBMISSIONS FOR 4 ITA NO. 12/JP/2014 M/S. BEAUTY TAX (EARLIER FLORALS INDIA) THE REASONS THAT BOTH THE CREDITORS IN THEIR STATEM ENT RECORDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE PRECEDING A.Y. 2009- 10 ON SUMMONS ISSUED UNDER SECTION 131 OF THE IT ACT, HAVE DENIED ANY SUCH SAL ES TO THE ASSESSEE. THE AO ALSO REFERRED ITAT DECISION IN THE CASE OF KACHWALA GEMS WHEREIN IT HAS BEEN HELD THAT PAYMENT MADE THROUGH CHEQUES DOES NOT ESTABLISH A T RANSACTIONS TO BE GENUINE. THEREFORE, THE AO MADE THE ADDITIONS OF RS. 50,13,5 25/- AND RS. 38,86,481/- BY HOLDING THAT PURCHASES MADE FROM SHRI RAMESH CHAND CHHAJER AND SMT. TARA DEVI CHHAJER AS BOGUS. 3. BEING AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE FILED APPEAL BEFORE LD. CIT (A), WHO CONFIRMED THE ADDITIONS BY OBSERVING AS UN DER :- 4. I HAVE CONSIDERED SUBMISSIONS OF THE APPELLANT AND HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER. IT IS SEEN THAT THE ADDITION HAS BEEN MADE BY THE AO ON THE GROUND THAT THE SUPPLIER S NAMELY, SHRI R.C. CHAJJER AND HIS WIFE SMT. TARA DEVI CHAJJER HA D ACCEPTED IN THEIR STATEMENT RECORDED U/S 131 THAT THEY HAD NOT SOLD ANYTHING TO THE APPELLANT. ONLY BOOK ENTRIES WERE MADE AND COMMISSI ON @ 1.5% WAS EARNED. INSPITE OF THREE OPPORTUNITIES GRANTED BY THE AO, TWO ALLEGED SELLERS WERE NOT PRODUCED BEFORE HIM FOR EXAMINATIO N. THE AO, THEREFORE, CONCLUDED THAT THE APPELLANT HAD SHOWN B OGUS PURCHASES AND ACCORDINGLY THE CLAIM OF PURCHASES FROM THESE T WO PARTIES WAS DENIED BY THE AO AND THE ADDITION WAS MADE. 4.1. IT IS FURTHER NOTICED THAT IN A.Y. 2008-09 WHE RE THE FACTS OF THE CASE WERE SIMILAR TO THOSE OF THIS YEAR, THE ADDITI ON MADE BY THE AO HAS BEEN CONFIRMED BY MY PREDECESSOR. IN THAT YEAR ALSO, THE ADDITION WAS MADE ON ACCOUNT OF CLEAR ADMISSION BY SHRI R.C. CHAJJER AND SMT. CHAJJER AND THE APPELLANTS FAILURE TO PRODUCE THEM FOR EXAMINATION. SINCE THE FACTS OF THE CASE IN THE A.Y. UNDER CONSI DERATION ARE SIMILAR TO THOSE OF THE A.Y. 2008-09, FOLLOWING THE ORDER O F MY PREDECESSOR, THE ADDITION MADE BY THE AO, IS CONFIRMED. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 5 ITA NO. 12/JP/2014 M/S. BEAUTY TAX (EARLIER FLORALS INDIA) 4.1. AT THE OUTSET, THE LD. A/R FOR THE ASSESSEE SU BMITTED THAT THE ISSUE INVOLVED IS FULLY COVERED BY THE DECISION OF THE TRIBUNAL IN IT A NO. 168/JP/2012 DATED 31.01.2014 FOR THE A.Y. 2008-09 WHEREIN THE ENTIRE ISSUE HAS BEEN DEALT WITH THE BY THE TRIBUNAL AT GREAT LENGTH AND THEREAFTER DELETED THE ADDITION. THE FACTS INVOLVED IN THE PRESENT CASE ARE EXACTLY SIMILAR TO THE FACT S INVOLVED IN THE PRECEDING ASSESSMENT YEAR. THESE FACTS ARE NOT DENIED AND AR E ADMITTED BY THE LD. CIT (A) , IN AS MUCH AS, THE LD. CIT (A) AT PAGE 5 OF HIS ORD ER WHILE DECIDING THE ISSUE AGAINST THE ASSESSEE HAS FULLY RELIED UPON THE ORDER OF HIS PREDECESSOR FOR THE A.Y. 2008-09 AND SIMILARLY, THE AO HAS ALSO REFERRED TO THE INQU IRY AND RELIED UPON THE FINDINGS RECORDED BY HIS PREDECESSOR IN A.Y. 2009-10. THE LD . A/R FURTHER SUBMITTED THAT NO NEW FACTS OR MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO / CIT RATHER, ON THE CONTRARY, HE HAS COMPLETELY RELIED UPON THE ENQUIRI ES MADE AND THE FINDINGS RECORDED BY HIS PREDECESSOR IN A.Y. 2008-09 AND 200 9-10. THEREFORE, THE AR PRAYED THAT RULE OF CONSISTENCY DEMANDS THAT THE VIEW TAKE N BY THE COORDINATE BENCH IN THE MATTER OF ASSESSEE SHOULD BE FOLLOWED IN THIS YEAR AS WELL. IN SUPPORT OF HIS CASE, HE PLACED RELIANCE ON THE FOLLOWING DECISIONS :- CIT VS. J.K. CHARITABLE TRUST (2009) 308 ITR 151 (SC) CIT VS. K.J. BUSINESS (20090 24 DTR 99 DLF UNIVERSAL LTD. VS. CIT (2008) 306 ITR 271 (DEL.) CIT VS. EXCEL INDUSTRIES LTD. (2013) 358 ITR 295 (SC) 6 ITA NO. 12/JP/2014 M/S. BEAUTY TAX (EARLIER FLORALS INDIA) THE LD. A/R IN THE ALTERNATIVELY SUBMITTED THAT NO EFFECTIVE OPPORTUNITY OF CROSS EXAMINATION WAS PROVIDED TO THE ASSESSEE FOR CROSS EXAMING BOTH THE SELLER WITNESSES. SINCE THE REVENUE WHO IS RELYING UPON T HE STATEMENT OF THE WITNESSES, THE ONUS IS ON THE REVENUE TO SUMMON AND PRODUCE TH E WITNESSES SO AS TO ENABLE THE ASSESSEE TO CROSS EXAMINE THEM . THE STATUTE HA S CONFERRED POWERS OF A CIVIL COURT U/S 131 UPON THE AO . THUS THE AO COULD HAVE ISSUED SUMMONS TO THE CREDITORS TO ATTEND THE HEARING BEFORE HIM, AND IN CASE OF FAILURE OF THE REVENUE TO PRODUCE THEM , THE ASSESSEE SHOULD NOT BE PENALIZED . HOWEVER, IN THE PRESENT CASE THE AO HAS NOT MADE ANY EFFORT TO BRING THE CORRECT FACTS ON RECORD BUT PROCEEDED MERELY ON SUSPICION. IN THIS REGARD HE PLACED RELIA NCE IN THE MATTER OF DHAKESHWARI COTTON MILLS 26 ITR 775 (SC). LASTLY, HE PRAYED TH AT ADDITIONS MADE MAY BE DELETED. 4.2. ON THE OTHER HAND, THE LD. D/R FOR THE REVENUE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND REQUESTED THAT THE ADDITIONS BE CONFIRMED. 4.3. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS ADMITTED FACT THAT ASSE SSEE WAS EARLIER KNOWN AS M/S. FLORALS INDIA. THE TRIBUNAL IN ITA NO. 168/JP/2012 FOR THE A.Y. 2008-09 IN THE CASE OF THE ASSESSEE HAS PASSED THE FOLLOWING ORDER :- 2.5 WE HAVE CAREFULLY EXAMINED THE ENTIRE RECORD IN THE LIGHT OF THE ORAL SUBMISSIONS OF THE PARTIES. IT IS A FACT T HAT THE ASSESSEE IS 100% EXPORTER AND THE PURCHASES OF CLOTH DURING THE YEAR IS RS. 4.80 CRORES AS HAVE BEEN SHOWN BY THE ASSESSEE FIRM . WE HAVE FOUND THAT THERE IS LINKAGE IN CONSUMPTION OF CLOTH AND EXPORT SALES AS THE ASSESSEE FIRM IS DOING EMBROIDERY WORK ON CLOTH. THE QUANTITY OF PURCHASE IS FOUND MENTIONED ON PURCHASE BILLS AND QUANTITY OF EXPORTS IS MENTIONED IN THE EXPORT INVO ICE. THE SILK 7 ITA NO. 12/JP/2014 M/S. BEAUTY TAX (EARLIER FLORALS INDIA) PURCHASES AMOUNTING TO RS.78,80,818/- FROM THESE TW O PARTIES CANNOT BE TREATED AS BOGUS BECAUSE EXPORT BILLS RAI SED AND APPRAISED BY THE CUSTOM AUTHORITIES CONTAINS FULL D ETAILS OF SILK EXPORTED. THE TOTAL EXPORT OF EMBROIDERED SILK CLOT H DURING THE ASSESSMENT YEAR 2008-9 WAS 77059.6 MTR. ALL THE EXP ORT INVOICES OF SILK DURING THE YEAR ARE MENTIONED AT PAGE 112-1 87 OF THE ASSESSEE'S PAPER BOOK. THE POSITION OF PURCHASE OF SILK IS AS UNDER:- PURCHASES OF SILK PURCHASES DETAILS OF SILK DURING THIS YEAR IS GIVE N AT PB 104-106. DETAILS AREAS UNDER: SUPPLIER QTY (MTR) AMOUNT. RS. AVERAGE RAT E PER MTR (RS) RAMESH CHAJJAR 14933.64 3925816.00 262.88 (PB 29 & 30-54) TARA DEVI CHAJJAR 14566.94 3955002.00 271.50 (PB 69 & 71-92) OTHER PARTIES 38722.78 10855659.00 273.28 TOTAL 69223.36 18736477.00 TOTAL EXPORTS OF SILK DURING THE YEAR IS 77059.6 MT R WHILE TOTAL PURCHASES OF SILK IS 69223.36 (INCLUDING PURCHASES OF RAMESH CHAND CHHAJAR AND TARA DEVI CHAJJAR). 8 ITA NO. 12/JP/2014 M/S. BEAUTY TAX (EARLIER FLORALS INDIA) QUANTITATIVE DETAIL OF SILK GIVEN AT PB-103 IS AS UNDER: IN MTR. OPENING STOCK OF SILK FABRIC PB 107 (A) 12199.53 PURCHASE OF SILK FROM (B) 69223.36 RAMESH CHAJJAR (PB 29) 14933.64 TARA DEVI CHAJJER (PB 69) 14566.94 OTHERS (PB 104-106) 39722.78 TOTAL SILK FABRIC (A+B) (C) 81422.89 CLOSING SILK FABRIC (RAW MATERIAL) PB 108(D) 1408 .30 WASTAGE OF SILK (E) 923.57 SILK CONSUMED DURING THE YEAR (C-D-E) 79091.02 TOTAL EXPORT OUT OF SILK CONSUMED (77059.60-622.55)-PB 111 76437.12 CLOSING FINISHED 2633.87 DIFFERENCE (20.00) 2.6 AFTER GOING THROUGH THE RECORD, WE HAVE NOTICED THAT THE AO HAS ACCEPTED THE OPENING STOCK, EXPORTS, CLOSI NG STOCK, GROSS PROFIT, QUANTITATIVE DETAILS AND OTHER TRADING RES ULTS. THE AO HAS NOT POINTED OUT ANY MATERIAL. THE PURCHASES ARE SUP PORTED BY VARIOUS DOCUMENTS WHICH INCLUDES THE COP Y OF CONFIRMATION OF ACCOUNTS BY THESE PARTIES, COPY OF PURCHASE BILLS WITH LEDGER ACCOUNT, COPY OF AFFIDAVITS GIVEN BY TH EM, INCOME TAX RETURNS FILED BY THE SUPPLIERS ALONGWITH COMPUTATIO N OF INCOME, PROFIT AND LOSS ACCOUNT AND BALANCE SHEET WHICH IS ALSO CERTIFIED BY 9 ITA NO. 12/JP/2014 M/S. BEAUTY TAX (EARLIER FLORALS INDIA) THE C.A. IN THE CASE OF SHRI RAMESH CHAJJER AND WHI CH SHOWS THE BUSINESS TRANSACTION, COPY OF BALANCE SHEET SHOWING THE CLEARANCE OF CHEQUE, COPY OF EXPORT BILLS THROUGH WHICH THE G OODS WERE EXPORTED AND RECONCILIATION OF CLOSING STOCK, QUANT ITY OF SILK ACCEPTED BY THE DEPARTMENT TAKING PURCHASES FROM AL L THE PARTIES INCLUDING SHRI RAMESH CHHAJAR AND SMT. TARA DEVI CH HAJAR AND THE EXPORTS DURING THE YEAR. ALL THESE DOCUMENTS ARE EN CLOSED IN ASSESSEE'S PAPER BOOK AND HAS BEEN PRODUCED FOR OUR PERUSAL. WE HAVE GONE THROUGH THEM AND WE ARE SATISFIED THAT TH E QUANTITATIVE DETAILS DISCUSSED ABOVE, CANNOT BE EXPORTED WITHOUT PURCHASES AND CONSIDERING THE SILK PURCHASES FROM SHRI RAMESH CHAND CHHAJAR AND SMT. TARA DEVI CHHAJAR, THE FINDINGS OF THE AO AND THE LD. CIT(A) ARE NOT CORRECT. FURTHER, THERE IS DOWN FALL AND NET INCREASE IN THE RAW MATERIAL CONSUMPTION RATIO IN C OMPARISON TO LAST YEAR. THIS FACT IS CLEARLY ESTABLISHED AND THE FOLLOWING TABLE SUPPORTS OUR ABOVE FINDINGS. A.Y. TOTAL SALES RAW MATERIAL CONSUMPTION RATIO1 2007-08 63994629.00 39846083.00 62.26% 2008-09 88161928.00 49437578.00 56.07% IN OUR CONSIDERED OPINION, THE ASSESSEE HAS CHARGED ITS BURDEN BY PRODUCING NECESSARY DOCUMENTS TO PROVE THE PURCHASE S MADE BY IT WITH THE HELP OF PURCHASE BILLS, PANS, CONFIRMAT IONS, AFFIDAVITS AND PAYMENTS MADE THROUGH ACCOUNT PAYEE CHEQUES WHI CH WERE CREDITED IN THE ACCOUNTS OF THE SELLER PARTIES. THE AO HAS NOT ACCORDED OPPORTUNITY OF CROSS EXAMINATION OF SHRI RAMESH CHAND CHAJJAR AND SMT. TARA DEVI CHHAJAR TO THE ASSESSEE BEFORE ACCEPTING THEIR TESTIMONY. THIS ACTION OF THE AO IS IN VIOLATION OF THE AO IN VIEW OF THE DECISION OF HON'BLE JURISDICT IONAL HIGH COURT RENDERED IN THE CASE OF RAUNAQ FINANCE COMPANY (200 4) 141 TAXMAN 72 WHEREIN IT HAS BEEN HELD THAT MERE STATEM ENT CANNOT BE BASIS FOR DISBELIEVING THE TRANSACTION UNLESS IT IS CORROBORATED WITH SOME OTHER MATERIAL AVAILABLE ON RECORD TO SUP PORT THE STATEMENT. WE DO NOT AGREE WITH THE OBSERVATIONS OF THE LD. CIT(A) AS THERE IS DIRECT LINKAGE OF PURCHASES AND SALES. THE 10 ITA NO. 12/JP/2014 M/S. BEAUTY TAX (EARLIER FLORALS INDIA) CALCULATION OF THE LD. CIT(A) BY HOLDING THAT ASSES SEE'S CLAIM REGARDING WASTAGE/ SHRINKAGE IS NOT POSSIBLE TO COR RELATE THE PURCHASES DIRECTLY WITH THE SALES IS NOT CORRECT CA LCULATION. IT IS NOT THE CASE OF THE DEPARTMENT THAT THE PURCHASE RATE/ QUANTITY OF SILK PURCHASES FROM THESE PARTIES IS LESS THAN THE RATE AT WHICH IT WAS PURCHASED FROM OTHER PARTIES ON DIFFERENT DATES . THE AVERAGE PURCHASE PRICE OF SILK PURCHASED FROM SHRI RAMESH C HAND CHHAJAR DURING THIS FINANCIAL YEAR IS RS. 262.88 PER MTR WH ILE FROM SMT. TARA DEVI CHHAJAR IT IS RS. 271.50 PER METRE AND LI KEWISE FROM OTHER PARTIES IT IS RS. 273.28 PER MTR WHICH IS HIG HER FROM AVERAGE PURCHASE PRICE OF SHRI RAMESH CHAND CHHAJAR AND SMT .TARA DEVI CHHAJAR. AS OBSERVED BY THE AUTHORITIES, THERE IS S HARP DECLINE IN GROSS PROFIT RATE INDICATING ANY CHANCES OF ADJUSTM ENT FOR REDUCTION IN PROFITS. THE GROSS PROFIT RATE OF THRE E ASSESSMENT YEARS NAMELY 2006-07, 2007-08 AND 208-09 ALONGWITH TURNOVER IS AS UNDER:- A.Y. TURNOVER IN LACS GROSS PROFIT IN LACS GROSS PROFIT RATE 2006-07 500.57 139.20 27.81% 2007-08 639.94 190.20 29.72% 2008-09 881.61 258.65 29.34% THUS IT IS CLEARLY VISIBLE THAT THERE IS VERY NEGLI GIBLE DOWNFALL IN GROSS PROFIT RATE BY 0.38% AS COMPARED TO LAST YEAR . WE ARE IN AGREEMENT WITH THE LD. AR THAT IN CASE THIS AMOUNT IS ADDED THEN THE GROSS PROFIT RATE FOR THIS YEAR WILL RISE TO 38 .28% WHICH SEEMS TO BE A DIFFERENT FIGURE AS COMPARED TO THE ASSESSE E PAST HISTORY. REGARDING NOT MENTIONING THE REGISTRATION NOS. ON T HE BILLS, WE AGREE THAT THERE IS NO NEED TO GET THE REGISTRATION FROM COMPETENT SALES TAX AUTHORITY FOR SALE OF SILK CLOTH WHICH IS EXEMPT UNDER THE LAW. THERE CANNOT BE A MENTION OF CST/TIN ON THE SA LE BILLS OF CLOTH BY THESE SUPPLIERS. SHRI RAMESH CHAND CHHAJAR HAS ACCEPTED THAT HE IS DOING BUSINESS OF TRADING OF CLOTH. WHIL E REPLYING TO QUESTION NOS.4 AND 2 (COPY ENCLOSED AT PB 215) SHRI RAMESH CHAND CHHAJAR HAS REPLIED THAT HE HAD LEFT SERVICES OF FLORALS INDIA 11 ITA NO. 12/JP/2014 M/S. BEAUTY TAX (EARLIER FLORALS INDIA) AND WAS DOING TRADING BUSINESS OF CLOTH. HE ALSO PR ODUCED SOME PURCHASE BILLS OF SILK FABRIC PURCHASED BY HIM AND COPY OF WHICH IS ENCLOSED AT ASSESSEE'S PAPER BOOK PAGES 216 TO 217. SHRI RAMESH CHAND CHAJJAR, UNDENIABLY, HAS ACCEPTED IN THE FORM ER PART OF THE STATEMENT THAT HE HAS BEEN SUPPLYING GOODS TO M/S. FLOARALS INDIA WHICH IS BEING PURCHASED BY HIM FROM SHRI ICHALKARA N JI. HE ALSO PRODUCED FEW BILLS OF PURCHASED MADE BY HIM ALONGW ITH INCOME TAX RETURN IN SUPPORT OF HIS BUSINESS ALONGWITH BAL ANCE SHEET CERTIFIED BY THE CHARTERED ACCOUNTANT BUT IN THE L ATER PART OF HIS STATEMENT, HE HAS MADE DIFFERENT STATEMENT. WE ARE IN AGREEMENT THAT THIS DIVERSION MAY DUE TO HIS PERSON AL REASONS AND HE MAY BE TRYING TO SAVE HIMSELF FROM ANY LEGAL CONSEQUENCES ARISING THEREFROM. THE EXPORTS OF THE ASSESSEE ARE NOT DOUBTED. MOREOVER, THE BOOKS OF ACCOUNT OF THE ASSESSEE HAVE NOT BEEN REJECTED ON ACCOUNT OF UNVERIFIABLE PURCHASES AND W ITHOUT REJECTING THE BOOKS, NO SUCH TRADING ADDITION CAN B E MADE. IN CASE ANY ADDITION IS TO BE MADE AFTER REJECTION OF THE B OOKS, ONLY PAST HISTORY HAS TO BE APPLIED. SINCE THE PAST HISTORY O F THE ASSESSEE IS ALMOST COMPARABLE WITH THIS YEAR, THERE IS NO NEED TO DISTURB THE DECLARED RESULTS. ACCORDINGLY, WE REVERSE THE FINDI NGS OF THE AUTHORITIES BELOW AND ALLOW THE APPEAL OF THE ASSES SEE. WE ORDER TO DELETE THE IMPUGNED ADDITION FROM THE HANDS OF T HE ASSESSEE FIRM. THUS THE SOLITARY GROUND OF THE ASSESSEE IS ALLOWED. THE LD. CIT (A) WHILE PASSING THE IMPUGNED ORDER HA S ALSO REFERRED TO THE ASSESSMENT ORDER PASSED FOR A.Y. 2008-09 IN PARA 4. 1 AS UNDER :- 4.1. IT IS FURTHER NOTICED THAT IN A.Y. 2008-09 WH ERE THE FACTS OF THE CASE WERE SIMILAR TO THOSE OF THIS YEAR, THE ADDITI ON MADE BY THE AO HAS BEEN CONFIRMED BY MY PREDECESSOR. IN THAT YEAR ALSO, THE ADDITION WAS MADE ON ACCOUNT OF CLEAR ADMISSION BY SHRI R.C. CHAJJER AND SMT. CHAJJER AND THE APPELLANTS FAILURE TO PRODUCE THEM FOR EXAMINATION. SINCE THE FACTS OF THE CASE IN THE A.Y. UNDER CONSI DERATION ARE SIMILAR TO THOSE OF THE A.Y. 2008-09, FOLLOWING THE ORDER O F MY PREDECESSOR, THE ADDITION MADE BY THE AO, IS CONFIRMED. 12 ITA NO. 12/JP/2014 M/S. BEAUTY TAX (EARLIER FLORALS INDIA) A PERUSAL OF THE ORDER OF THE TRIBUNAL PASSED FOR T HE A.Y. 2008-09 CLEARLY SHOWS THAT THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE SIMILAR TO THE FACTS AND CIRCUMSTANCES OF THE ASSESSMENT YEAR 2008-09. THERE FORE, FOLLOWING THE ORDER OF THE COORDINATE BENCH IN ITA NO. 168/JP/2012 DATED 31.01 .2014, WE DELETE BOTH THE ADDITIONS. 4.4. THE LD. A/R DURING THE COURSE OF HEARING HAS T AKEN ORAL GROUND/IN HIS WRITTEN SUBMISSION HAS STATED THAT OPPORTUNITY OF CROSS EXA MINATION HAS NOT BEEN GIVEN TO THE ASSESEE. AO HAS RELIED UPON THE RECORDED STATE MENT U/S 131 FOR THE ASSESSMENT YEAR 2008-09. IT WAS CONTENDED THAT SINCE THE OPPO RTUNITY OF CROSS EXAMINATION HAS NOT BEEN GIVEN TO THE ASSESSEE, THEREFORE, THE EVID ENCE BROUGHT ON RECORD UNDER SECTION 131 CANNOT BE RELIED UPON BY THE AO UNLESS THE STATEMENT RECORDED IS TESTED ON UNVEIL OF CROSS EXAMINATION. IN THIS REG ARD IT WILL BE SUFFICE TO SAY THAT THIS GROUND HAS NOT BEEN TAKEN BY THE ASSESSEE IN THE GR OUNDS OF APPEAL. THEREFORE, AT THIS JUNCTURE IT IS NOT NECESSARY FOR US TO DEAL WI TH THE SAID ARGUMENT. HOWEVER, SINCE WE ARE ALLOWING THE APPEAL ON MERIT, WE ARE N OT AVERTING TO THIS ORAL LEGAL GROUND TAKEN DURING THE COURSE OF ARGUMENT. 5. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25/04/2016. SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 25/04/2016. DAS/ 13 ITA NO. 12/JP/2014 M/S. BEAUTY TAX (EARLIER FLORALS INDIA) VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. BEAUTY TAX (EARLIER FLORALS IND IA), JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT-THE DCIT, CIRCLE-2, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 12/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR