DCIT, Jaipur V. BHURA MAL RAJ MAL SURANA(MFRS), Jaipur

ITA 121/JPR/2011

• Counselvise Citation: 12123114 RSA 2011
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 11-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Assessee Lawyers: ARVIND KUMAR DHA DDA
• Keywords: Bogus purchase; Onus to prove

Judgement Text

1 ITA 121-11 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 121/JP/2011 ASSTT. YEAR : 2005-06. THE DCIT, CIRCLE-3, VS. M/S. BHURA MAL RAJ MAL S URANA JAIPUR. (MFRS.), LAL KATRA, HALDIYON KA RASTA, JOHARI BAZAR, JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D.K.MEENA RESPONDENT BY : SHRI ARVIND KUMAR DHA DDA ORDER DATE OF ORDER : 14/07/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2005-06. 2. THE DEPARTMENT HAS TAKEN AS MANY AS SIX GROUNDS BUT THE ISSUE IS ONLY DELETING THE TRADING ADDITION OF RS. 14,16,002/-. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE CO NTINUED TO BE EXPORTER OF GEMS AND STONES. DURING THE YEAR UNDER CONSIDERATION THE AO FOUND THAT PURCHASES MADE FROM 11 PARTIES AT RS. 79,99,188/- REMAINED UNVERIFIABLE. ON VERIFICATION IT WAS NOTICED THAT THE CONCERNS MENTIONED ABOVE WERE ONLY ENTRY PROVIDERS IE. THEY ISSUED ONLY BILLS WITHOUT ANY ACTUAL SALE OF DELIVERY OF GOODS. THE AO HELD T HAT THE PURCHASES MADE FROM THE ABOVE SAID PARTIES WERE NOT GENUINE. IN THIS REGAR D, THE AO RELIED ON THE FOLLOWING JUDICIAL DECISIONS : (1) CIT VS. PRECISION FINANCE PVT. LTD., 208 ITR 465 (CAL.) THE MERE 2 PAYMENT BY CHEDQUE DID NOT MAKE THE TRANSACTION GEN UINE, (2) M/S. KANCHWALA GEMS VS. JCIT (134 ITD)(JAIPUR) AO NOT BOUND BY TECHNICAL RULES OF EVIDENCE, (3) INDIAN WOOLLEN CARPET FACTORY VS. ITAT (178 CTR 420) (RAJ. ) AS PER SECTION 101, 102 & 106 OF THE EVIDENCED ACT THE ONUS TO PROVE ALL THE EXPE NSES INCLUDING PURCHASES TO THE SATISFACTION OF THE AO LIED UPON THE ASSESSEE, (4) SHRI KRISHAN MALPANI BOGUS PURCHASES IS A DEFECT IN THE MAINTENANCE OF ACCOUNT S AND ON THAT BASIS THE BOOKS OF ACCOUNTS CAN BE REJECTED. SINCE THE PURCHASES FROM THE ABOVE SAID PARTIES COULD NOT BE PROVED TO BE GENUINE TO THE SATISFACTION OF THE AO THE SAME WERE TREATED AS UNVERIFIABLE. ON THIS BASIS, THE BOOKS OF ACCOUNTS OF THE ASSESSE E WERE REJECTED. AFTER REJECTION THE AO ADOPTED GP OF 17.52% AS AGAINST 16.25% DECLARED BY THE ASSESSEE AND AS COMPARED TO 16.04% IN THE IMMEDIATELY PRECEDING YEAR. AFTER AD JUSTING THE GP DECLARED TRADING ADDITION OF RS. 14,16,002/- WAS MADE. 4. IT WAS SUBMITTED BEFORE LD. CIT (A) THAT ASSESSE E WAS MAINTAINING PROPER BOOKS OF ACCOUNT WHICH WERE DULY AUDITED. THE ASSESSEE WAS M AINTAINING PROPER STOCK RECORD INCLUDING DETAILS OF OPENING AND CLOSING STOCK WHIC H WERE PRODUCED BEFORE THE AO FOR VERIFICATION. NO SPECIFIC DEFECT WAS POINTED OUT B Y THE AO. REGARDING UNVERIFIABLE PURCHASES IT WAS SUBMITTED THAT ASSESSEE HAD DISCHA RGED ITS ONUS TO PROVE GENUINENESS BY PRODUCING ALL THE RELEVANT DOCUMENTS. MERELY BECAUS E THE PARTY COULD NOT BE PRODUCED THE PURCHASES COULD NOT BE HELD TO BE BOGUS AND COU LD NOT FORM THE BASIS FOR REJECTION OF BOOKS OF ACCOUNT. RELIANCE WAS PLACED ON VARIOUS C ASE LAWS. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, TH E LD. CIT (A) FOUND THAT AO WAS RIGHT IN REJECTING THE BOOKS OF ACCOUNT AS CERTAIN PURCHA SES REMAINED UNVERIFIABLE WHICH CONSTITUTED A SERIOUS DEFECT IN THE BOOKS OF ACCOUN T AND, THEREFORE, AO WAS JUSTIFIED IN 3 REJECTING THE BOOKS OF ACCOUNT. THEREAFTER THE LD. CIT (A) HELD THAT THE POSITION OF LAW IS WELL SETTLED THAT THE BEST GUIDE FOR ESTIMATION OF TRADING RESULT AFTER REJECTING BOOKS OF ACCOUNT IS EITHER PAST HISTORY OF THE CASE OR ANY O THER COMPARABLE CASE. THE PAST HISTORY OF THE ASSESSEE TAKES PREFERENCE OVER A COMPARABLE CASE ..ASSESSEE HAVING DECLARED HIGHER GP RATE THAN THE PRECEDING YEAR, ITS TRADING RESULTS REQUIRE ACCEPTANCE AND TRADING ADDITION REQUIRES DELETION. THE PAST HISTORY OF TH E ASSESSEE IS AVAILABLE IN THE INSTANT CASE. THE ASSESSEE HAD SHOWN GP OF 16.25% IN THE CURRENT YEAR AS AGAINST 16.04% IN THE IMMEDIATELY PRECEDING YEAR. IN THE DECISION OF HON BLE ITAT, JAIPUR IN THE CASE OF LAKHANI SHOES PVT. LTD. VS. ADDL. CIT (34 TW 32) AN D THE CASE OF J.C. SHARMA VS. ITO (33 TW 82) AND ITO VS. HITESH KUMAR PANCHORI (113 T TJ 357) IT WAS HELD THAT THE APPELLANT HAD SHOWN BETTER GP AS COMPARED TO LAST Y EAR, THEREFORE, NO TRADING ADDITION WAS SUSTAINABLE. THE ESTIMATION OF GP BY THE AO IS FOUND TO BE WITHOUT CONSIDERING THE PAST HISTORY OF THE ASSESSEE. KEEPING IN VIEW THE R ATIO OF THE ABOVE SAID DECISION IT IS HELD THAT THE TRADING ADDITION MADE BY THE AO, WHEN THE ASSESSEE HAD SHOWN BETTER GP THAN THE IMMEDIATELY PRECEDING YEAR, WAS NOT JUSTIFIED. CONSEQUENTLY, THE TRADING ADDITION MADE HAS TO BE DELETED. 5. NOW THE DEPARTMENT IS IN APPEAL HERE BEFORE THE TRIBUNAL. 6. THE LD. D/R PLACED RELIANCE ON THE ORDER OF AO. IT WAS FURTHER SUBMITTED THAT LD. CIT (A) HAS TAKEN INTO CONSIDERATION THE PAST HISTO RY IN RESPECT OF ONLY IMMEDIATELY PRECEDING YEAR, WHEREAS AO HAS APPLIED G.P. RATE O N THE BASIS OF AVERAGE OF 5 YEARS RESULT OF PAST. THEREFORE THE ORDER OF AO WAS CORRECT. 7. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE RELIED ON THE ORDER OF LD. CIT (A). IT WAS FURTHER STATED THAT ISSUE SQUARELY COV ERED BY THE DECISION OF TRIBUNAL IN CASE 4 OF ASSESSEE ITSELF FOR ASSESSMENT YEAR 2004-05 WHIC H IS IMMEDIATELY PRECEDING YEAR. IN THIS CASE PAST HISTORY OF THREE YEARS HAVE BEEN TAK EN INTO CONSIDERATION BY THE TRIBUNAL AND THEN ONLY THE APPEAL OF THE ASSESSEE WAS ALLOWE D. 8. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, WE FIND NO INFIRMITY IN THE FINDING OF LD. CIT (A) TO THE EXTE NT THAT G.P. RATE WAS HIGHER IN THE YEAR UNDER CONSIDERATION AS COMPARED TO EARLIER YEAR. T HEREFORE, TO THIS EXTENT THE ORDER OF LD. CIT (A) IS CORRECT. HOWEVER, WE FIND THAT CERTAIN P URCHASE REMAINED UNVERIFIABLE, THEREFORE, IN OUR VIEW IF AN ADDITION OF RS. 1,00,0 00/- IS SUSTAINED ON ACCOUNT OF UNVERIFIABLE PURCHASES TO COVER UP THE LEAKAGE OF R EVENUE, IF ANY, THAT WILL MEET THE ENDS OF JUSTICE. ACCORDINGLY, WE CONFIRM THE ADDITION O F RS. 1,00,000/- 9. IN THE RESULT, APPEAL OF THE DEPARTMENT IS ALLOW ED IN PART. 10. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 14 .07.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- THE DCIT, CIRCLE-3,JAIPUR. M/S.BHURA MAL RAJ MAL SURANA (MFRS.), JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 121/JP/2011) BY ORDER, AR ITAT JAIPUR. 5