ITO, Jaipur V. M/S ASHISH HANDICRAFT ENTERPRISES, Jaipur

ITA 1258/JPR/2010

• Counselvise Citation: 125823114 RSA 2010
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 27-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD JOHARI
• Assessee Lawyers: MUKESH GOYAL
• Keywords: Bogus purchase; Onus to prove
• Section: 131

Judgement Text

1 ITA 1258-10 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 1258/JP/2010 ASSTT. YEAR : 2006-07. THE INCOME-TAX OFFICER, VS. M/S. ASHISH HANDICRAF T ENTERPRISES, WARD 1(3), 1817, MANIHARON KA RASTA, JAIPUR. RADIO MARKET, NEHRU BAZAR, JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VINOD JOHARI RESPONDENT BY : SHRI MUKESH GOYAL ORDER DATE OF ORDER : 05/08/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2006-07. 2. THE DEPARTMENT IS OBJECTING IN DELETING THE TRAD ING ADDITION OF RS. 51,49,023/-. 3. THE ASSESSEE DEALS IN TRADING, EXPORT AND IMPORT S BUSINESS OF SILVER ARTICLES AND ORNAMENTS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN SALES OF RS. 3,35,21,707/- WHICH ARE OF EXPORT SALES AND G.P. HA S BEEN SHOWN AT 7.67%. THE AO NOTICED THAT ASSESSEE HAS MADE PURCHASES FROM M/S. PARASMANI, M/S. SILVER N SILVER, RANKA JEWELS & IMPEX AND K.S. EXPORTS WHICH REMAINE D UNVERIFIABLE THOUGH PURCHASE VOUCHERS AS WELL AS COMPLETE ADDRESS OF THE PARTIES AND ALSO RST/CST NUMBERS WERE FILED. HOWEVER, SUMMONS ISSUED UNDER SECTION 131 T O THESE PARTIES REMAINED UNSERVED OR UNCOMPLIED WITH. THE AO NOTED THAT DURING THE CO URSE OF SURVEY CONDUCTED BY 2 BCTT WING OF THE DEPARTMENT, THE PARTIES FROM WHOM THE PURCHASES WERE SHOWN TO HAVE MADE, FOUND THAT THEY WERE INVOLVED IN ISSUE BOGUS BILLS WITHOUT SUPPLYING ANY MATERIAL. THEREFORE, HE INVOKED PROVISIONS OF SECTION 145(3) BY RELYING ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SANJAY OIL CAKE INDUSTRIES, 10 DTR 153 (GUJ.) AND IN CASE OF VIJAY PROTEINS LTD., 58 ITD 428 (ITAT AHMED ABAD). THEREAFTER HE MADE AN ADDITION OF 25% OF UNVERIFIABLE PURCHASES. IT WAS CONTENDED BEFORE LD. CIT (A) THAT ALL THE PURCHASES AND SALES WERE FULLY VOUCHED AND PAYM ENTS WERE MADE BY CROSS CHEQUE WHICH WERE DULY CREDITED IN THE PARTYS BANK ACCOUN T. ALL THE PARTIES ARE ASSESSED TO SALES-TAX AND INCOME-TAX. CONFIRMATIONS AND PAN NU MBERS WERE DULY FURNISHED. THEREFORE, THE ASSESSEE HAS DISCHARGED ITS ONUS/INI TIAL BURDEN TO PROVE THE PURCHASES. THE ASSESSEE IS A 100% EXPORTER AND SALES SHOWN BY THE ASSESSEE HAVE BEEN ACCEPTED BY THE AO. IT WAS FURTHER SUBMITTED THAT NO CROSS EXAMINA TION OF SHRI SUBHASH JAIN WAS ALLOWED TO THE ASSESSEE. THEREFORE, NO MUCH CREDENCE SHOUL D BE GIVEN TO THE STATEMENT OF SHRI SUBHASH JAIN, RECORDED BY BCTT WING. RELIANCE WAS PLACED ON THE DECISION OF CIT VS. HI LUX AUTOMATIVE PVT. LTD., 183 TAXMAN 260 (DEL.). REGARDING THE DECISION OF HONBLE GUJARAT HIGH COURT AND THE AHMEDABAD BENCH OF THE TRIBUNAL, IT WAS STATED THAT THE DECISIONS HAVE BEEN FOUND DISTINGUISHABLE BY TH E JAIPUR BENCH OF TRIBUNAL IN THE CASE OF GEM PARADISE DECIDED IN ITA NO. 700/JP/2009. FU RTHER RELIANCE WAS PLACED ON VARIOUS OTHER CASE LAWS AND IT WAS SUBMITTED THAT G ROSS PROFIT RATE SHOWN BY ASSESSEE IS BETTER AS COMPARED TO EARLIER YEAR. THEREFORE, NO DISALLOWANCE CAN BE MADE. AFTER CONSIDERING THE CONTENTION OF THE ASSESSEE AND THE ORDER OF THE AO, THE LD. CIT (A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. THE LD. CIT (A ) NOTED THAT IN ASSESSMENT YEAR 2007- 08, THE GROSS PROFIT RATE SHOWN BY ASSESSEE AT 8.01 % WAS ACCEPTED BY THE AO HIMSELF AND 3 IN THE YEAR UNDER CONSIDERATION THE GROSS PROFIT RA TE SHOWN BY ASSESSEE IS 7.67%. THEREFORE, KEEPING IN MIND CERTAIN UNVERIFIABLE PUR CHASES, THE AO WAS DIRECTED TO APPLY GROSS PROFIT RATE OF 8% AND THE AO WAS DIRECTED TO RE-COMPUTE THE INCOME. 4. NOW THE DEPARTMENT IS IN APPEAL HERE BEFORE THE TRIBUNAL. 5. THE LD. D/R FIRSTLY PLACED RELIANCE ON THE ORDER OF AO. IT WAS FURTHER SUBMITTED THAT VARIOUS LD. COMMISSIONERS OF INCOME-TAX (APPEA LS) HAVE CONFIRMED THE RATE OF 25% IN CERTAIN CASES. THERE IS NO DISPUTE THAT THERE W ERE BOGUS PURCHASES MADE BY THE ASSESSEE. ONUS ON THE ASSESSEE REMAINED UNDISCHARG ED AS NO PARTY COULD BE PRODUCED FOR VERIFYING THE PURCHASES. SUBSTANTIAL PURCHASES HAV E BEEN MADE WHICH REMAINED UNVERIFIABLE. ONLY ENTRIES OF PURCHASES HAVE BEEN MENTIONED IN THE PURCHASE ACCOUNT. SUMMONS ISSUED TO VARIOUS PARTIES REMAINED UNCOMPLI ED. THEREFORE, THERE IS EVERY LIKELIHOOD THAT ASSESSEE HAS MANEUVERED THE GROSS P ROFIT. ACCORDINGLY IT WAS SUBMITTED THAT THE AO WAS JUSTIFIED IN DISALLOWING 25% OF UNV ERIFIABLE PURCHASES. ACCORDINGLY IT WAS SUBMITTED THAT THE AO WAS JUSTIFIED IN DISALLOW ING 25% OF UNVERIFIABLE PURCHASES. RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF KANCHWALA GEMS, 280 ITR 10 (SC) AND IN CASE OF 55 TTJ 261, 26 0 ITR 658 AND 17 ITR 355. 6. ON THE OTHER HAND, LD. A/R OF THE ASSESSEE PLACE D RELIANCE ON THE ORDER OF LD. CIT (APPEALS). 7. AFTER CONSIDERING THE SUBMISSIONS AND MATERIAL O N RECORD, WE FIND THAT ORDER OF LD. CIT (A) IS LIABLE TO BE CONFIRMED. THE JAIPUR BENC HES OF THE TRIBUNAL ARE TAKING A CONSISTENT VIEW THAT WHERE CERTAIN PURCHASES REMAIN UNVERIFIABLE, REJECTION OF BOOKS OF ACCOUNT IS JUSTIFIED. ACCORDINGLY WE HOLD THAT AO WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT WHICH HAS BEEN CONFIRMED BY LD. CIT (A) ALS O. 4 7.1. HOWEVER, THE JAIPUR BENCHES ARE ALSO TAKING A CONSISTENT VIEW THAT WHERE CERTAIN PURCHASES REMAIN UNVERIFIABLE, ADDITION CAN BE MADE IN TRADING ACCOUNT BY TAKING INTO CONSIDERATION THE PAST HISTORY OF THE CASE AND THE CURRENT EVENTS OF THE CASE. PAST HISTORY OF THE CASE THAT ASSESSEE HAS SHOWN GROSS PROFIT RA TE OF 7.67% IN THIS YEAR. IN SUBSEQUENT YEAR THE ASSESSEE HAS SHOWN GROSS PROFIT AT 8.01% W HICH HAS BEEN ACCEPTED BY THE AO HIMSELF. ALL THE SALES MADE BY THE ASSESSEE ARE OF EXPORT SALES WHICH HAS BEEN ACCEPTED BY THE AO HIMSELF, AND IF THE TRADING ADDITION MADE BY THE AO IS TAKEN INTO CONSIDERATION THEN GROSS PROFIT RATE WILL INCREASE TO 33% APPROXI MATELY WHICH IS NOT POSSIBLE ON THE FACTS OF THE PRESENT CASE. THEREFORE KEEPING IN MI ND THE GROSS PROFIT RATE SHOWN BY ASSESSEE IN THE YEAR AND IN THE SUBSEQUENT YEAR WHI CH HAS BEEN ACCEPTED BY THE AO, THE LD. CIT (A) APPLIED THE RATE OF GROSS PROFIT AT 8% FOR THE YEAR UNDER CONSIDERATION, IN OUR CONSIDERED VIEW IS REASONABLE GROSS PROFIT APPLIED BY LD. CIT (A). CERTAIN ADDITIONS HAVE BEEN SUSTAINED BY LD. CIT (A) WHICH WILL TAKE CARE OF LEAKAGE OF REVENUE, IF ANY, I.E. ON ACCOUNT OF UNVERIFIABLE PURCHASES. ACCORDINGLY, WE ARE OF THE VIEW THAT LD. CIT (A) HAS TAKEN A REASONABLE VIEW BY APPLYING GROSS PROFIT R ATE OF 8% ON DECLARED SALES. // WE HAVE ALSO TAKEN INTO CONSIDERATION THE CASES ON WHICH RE LIANCE HAS BEEN PLACED BY LD. D/R AND FOUND THAT NONE OF THE DECISION IS APPLICABLE ON TH E FACTS OF THE PRESENT CASE AS EACH CASE HAS ITS OWN FACTS. IN THE CASE OF KANCHWALA GEMS ( SUPRA) ALSO THE HONBLE SUPEMECOURT HAS HELD THAT WHERE CERTAIN PURCHASES REMAIN UNVERI FIABLE THE REJECTION OF BOOKS OF ACCOUNT WAS JUSTIFIED. AFTER TAKING INTO CONSIDERA TION THE ASPECT OF GROSS PROFIT RATE OF EARLIER YEAR AS WELL AS SUBSEQUENT YEAR, THE GROSS PROFIT RATE TAKEN BY THE BENCH WAS CONFIRMED BY HONBLE SUPREME COURT IN THIS CASE. T HEREFORE, GROSS PROFIT RATE HAS TO BE APPLIED ON THE BASIS OF PAST HISTORY OR SUBSEQUENT AS WELL AS OF CURRENT EVENTS WHICH HAVE 5 ALREADY BEEN TAKEN INTO CONSIDERATION BY LD. CIT (A ) WHILE DIRECTING TO APPLY GROSS PROFIT RATE OF 8% ON THE TURNOVER DECLARED BY ASSESSEE. T HEREFORE, WE CONFIRM THE ORDER OF LD. CIT (A). 8. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMI SSED. 9. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 05. 08.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- THE ITO WARD 1(3), JAIPUR. M/S. ASHISH HANDICRAFT ENTERPRISES, JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 1258/JP/2010) BY ORDER, AR ITAT JAIPUR.