SMT. MAMTA HALDIA, JAIPUR V. DCIT, CIRCLE-1, JAIPUR

ITA 1349/JPR/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4250 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2003-2004
• Appeal Filed On: 10-12-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: M L BORAD
• Keywords: Bogus purchase; Rejection of books of accounts; Onus to prove; Set aside
• Section: 142(1); 153A; 143(2); 13; 145(3); 139

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC HES, 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 VIKRA M SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 1349, 1350 & 1351/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2003-04, 2004-05 & 2008-09 SMT. MAMTA HALDIA W/O SHRI RAVI HALDIA, PROPRIETOR M/S VIDHI GEMS 2 ND FLOOR, HALDIA MULTIPOINT HOUSE CORNER OF THATHERON KI GALI, CHAURA RASTA, JAIPUR CUKE VS. DCIT, CIRCLE-01, NEW CR BUILDING, STATUTE CIRCLE, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAKPH9240H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SH. M.L BORAD (ADVOCATE) JKTLO DH VKSJ LS @ REVENUE BY : MS CHANCHAL MEENA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 27/08/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 27/10/2020 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THESE ARE THREE APPEALS FILED BY THE ASSESSEE AGAI NST THE RESPECTIVE ORDERS OF LD. CIT(A)-1, JAIPUR DATED 24. 09.2019 FOR A.YS 2003-04, 2004-05 & 2008-09. 2. THE HEARING OF THE MATTER WAS SCHEDULED THROUGH VIDEO CONFERENCING IN VIEW OF ONGOING COVID-19 PANDEMIC S ITUATION IN THE COUNTRY. ALL THESE APPEALS WERE HEARD TOGETHER INVO LVING COMMON ISSUES AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORD ER. ITA NO. 1349-1351/JP/2019 SMT. MAMTA HALDIA, JAIPUR VS. DCIT, JAIPUR 2 3. WITH THE CONSENT OF THE PARTIES, THE ASSESSEES APPEAL IN ITA NO. 1349/JP/2019 FOR A.Y 2003-04 IS TAKEN AS THE LEAD C ASE FOR THE PURPOSES OF PRESENT DISCUSSIONS WHEREIN THE ASSESSE E HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN SUSTAINING 100% DISALLOWANCE OF TH E ALLEGED UNVERIFIABLE PURCHASES OF RS. 11,84,063/- AND THER EBY SUSTAINING ADDITION OF RS. 11,84,063/- MADE BY THE AO IN THE TOTAL INCOME OF ASSESSEE, WHICH SUSTENANCE OF DISALLOWANCE AND CON SEQUENTIAL ADDITION OF RS. 11,84,063/- IS MOST ARBITRARY, UNJ UST AND UNTENABLE IN FACT AND IN LAW AND IN THE ALTERNATIV E EXCESSIVE W.R.T FACTS AND CIRCUMSTANCES OF THE CASE. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LEARNED CIT(A) ERRED IN SUSTAINING TRADING ADDITION OF RS. 2,22,289/- (AS SEPARATE TRADING ADDITION SUSTAINED BY THE LEARNED CIT(A) AT RS. 11,84,063/- BY DISALLOWING 100% OF TOTAL UNVERIFIE D PURCHASES OF RS. 11,84,063/- IS MORE THAN THIS TRADING ADDITION OF RS. 2,22,289/- WORKED OUT BY HIM BY APPLYING HIGHER GP RATE OF 30% AS AGAINST DECLARED GP RATE OF 13.82% ON SALES OF RS. 13,73,963/- NO SEPARATE TRADING ADDITION OF RS. 2, 22,289/- HAS BEEN SUSTAINED BY THE LEARNED CIT(A) ON PROTECTIVE BASIS, WHICH SUSTENANCE OF TRADING ADDITION OF RS. 2,22,289/- B Y THE LEARNED CIT(A) IS MOST ARBITRARY, UNJUST, UNTENABLE AND BA D IN FACT AND IN LAW AND IN THE ALTERNATIVE EXCESSIVE WITH REFERENC E TO FACTS AND CIRCUMSTANCES OF THE CASE. 4. DURING THE COURSE OF HEARING, THE LD AR SUBMITTE D THAT THE APPELLANT ASSESSEE CARRIED ON BUSINESS OF PRECIOUS AND SEMI PRECIOUS ITA NO. 1349-1351/JP/2019 SMT. MAMTA HALDIA, JAIPUR VS. DCIT, JAIPUR 3 STONES UNDER THE NAME AND STYLE OF M/S. VIDHI GEMS. ORIGINALLY, THE ASSESSEE FILED HER RETURN OF INCOME U/S. 139 OF THE IT ACT ON 29.09.2003 DECLARING TOTAL INCOME OF RS.1,34,190/-. IN HALDIA GROUP OF CASES OF WHICH ASSESSEE IS A MEMBER, SEARCH AND SEI ZURE ACTION U/S.132 AS WELL AS SURVEY U/S.133A WAS CARRIED OUT AT THE R ESIDENTIAL AND BUSINESS PREMISES OF THE APPELLANT ON 20.04.2007. I N RESPONSE TO NOTICE U/S 153A, THE RETURN OF INCOME WAS FILED ON 26.12.2 007 DECLARING SAME TOTAL INCOME OF RS.1,34,190/-AS DECLARED IN THE ORI GINAL RETURN OF INCOME. NOTICES U/S 143(2) AND 142(1) WERE ISSUED A LONG WITH QUESTIONNAIRE. COMPLIANCES TO THESE NOTICES WERE MA DE. BOOKS OF ACCOUNTS INCLUDING BOOKS OF ASSESSEES SOLE PROPRIE TORY CONCERN M/S. VIDHI GEMS CONSISTING OF CASH BOOK, LEDGER, JOURNAL , PURCHASE AND SALE BILLS, SUBSIDIARY BOOKS AND EXPENSES VOUCHERS, STOC K REGISTER WERE EXAMINED BY THE AO. HOWEVER WHILE PASSING ASSESSMEN T ORDER U/S. 153A R.W.S 153B/143(3) OF THE IT ACT ON 30.11.2009, THE A.O. RESORTED TO SECTION 145, APPLIED A GP RATE OF 30% AND ACCORD INGLY, THE AO WORKED OUT TRADING ADDITION OF RS.2,22,208/-. SIMUL TANEOUSLY, THE AO WORKED OUT ADDITION FOR CASH PURCHASES/PURCHASES FR OM UNREGISTERED DEALERS AT RS.11,84,063/- BEING 100% OF SUCH CASH P URCHASE/PURCHASES FROM UNREGISTERED DEALERS. AS THE ADDITION FOR SUCH PURCHASES OF RS.11,84,063/- WERE MORE THAN THE TRADING ADDITION WORKED OUT BY THE AO BY APPLYING 30% GP RATE AT RS.2,22,208/-, THE AO MADE ADDITION OF RS.11,84,063/- ON SUBSTANTIVE BASIS AND SIMULTANEOU SLY MADE TRADING ADDITION OF RS.2,22,208/- ON PROTECTIVE BASIS. IN FIRST ROUND OF APPELLATE PROCEEDINGS, THE LEARNED CIT(A) UPHELD THE DISALLOW ANCE OUT OF ABOVE MENTIONED PURCHASES AT RS.2,96,016/- BEING 25% OF SUCH TOTAL PURCHASES OF RS.11,84,063/- [CASH PURCHASES RS.94,0 60/- + PURCHASES FROM UNREGISTERED DEALERS AT RS.10,90,003/-] ON SUB STANTIVE BASIS AND ITA NO. 1349-1351/JP/2019 SMT. MAMTA HALDIA, JAIPUR VS. DCIT, JAIPUR 4 RS. 2,22,208 ON PROTECTIVE BASIS. AGAINST THIS ORDE R OF THE LEARNED CIT(A), THE ASSESSEE FILED APPEAL BEFORE THE TRIBUN AL WHICH HELD THAT IF A GP RATE OF 17% IS APPLIED IT WILL MEET THE ENDS O F JUSTICE. THE TRIBUNAL FURTHER DIRECTED THE AO TO RE-CALCULATE TH E TRADING ADDITION BY TAKING THE G.P. RATE AT 17% AGAINST 13.82% DECLARED BY ASSESSEE AND AGAINST 30% APPLIED BY THE AO ON THE DECLARED SALES . BESIDES, THE TRIBUNAL OBSERVED THAT NO SEPARATE ADDITION FOR CAS H PURCHASES/ PURCHASES FROM UNREGISTERED DEALERS OF RS.11,84,063 /- IS TO BE MADE. THE DEPARTMENT FILED APPEAL BEFORE THE HONBLE HIGH COURT AGAINST THIS ORDER OF TRIBUNAL ON THE ISSUES OF EXCESS STOCK AND UNVERIFIED PURCHASES. THE HONBLE HIGH COURT ANSWERED THE QUES TION OF EXCESS STOCK IN FAVOUR OF ASSESSEE AND REMITTED BACK THE M ATTER RELATING TO UNVERIFIABLE PURCHASES TO THE AO. 5. IT WAS FURTHER SUBMITTED THAT IN THE SET-ASIDE P ROCEEDINGS, THE AO VIDE THE IMPUGNED ASSESSMENT ORDER DATED 17.10.2018 APPLIED THE GP RATE OF 30% AS AGAINST GP RATE OF 13.82% DECLARED B Y THE ASSESSEE AND GP RATE OF 17% UPHELD BY THE TRIBUNAL (IN REGARD TO APPEAL EMANATING FROM THE ASSESSMENT ORDER DATED 30.11.2009 PASSED U /S.153A R.W.S. 153B/143(3) OF THE I.T. ACT, 1961) AND CONSEQUENTIA LLY MADE TRADING ADDITION OF RS.2,22,208/- AND ALSO MADE ADDITION OF RS.11,84,063/- BEING 100% OF CASH PURCHASE/PURCHASES FROM UNREGIS TERED DEALERS OF RS.11,84,063/-. IN THE SECOND ROUND OF APPELLATE PR OCEEDINGS, THE LEARNED CIT(APPEAL) SUSTAINED THE ADDITION OF RS.11 ,84,063/- BEING 100% OF CASH PURCHASES/PURCHASES FROM UNREGISTERED DEALERS BUT DELETED THE G.P ADDITION OF RS.2,22,208 BY OBSERVIN G THAT ADDITION ON ACCOUNT OF BOGUS PURCHASES AND G.P. ADDITION FOR SA ME DEFAULT CANNOT ITA NO. 1349-1351/JP/2019 SMT. MAMTA HALDIA, JAIPUR VS. DCIT, JAIPUR 5 BE SIMULTANEOUSLY MADE. AGAINST THE SAID FINDINGS, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. IN THE AFORESAID FACTUAL BACKGROUND, THE LD. AR SUBMITTED THAT THE GROUND OF APPEAL NO.1 IS AGAINST SUSTENANCE BY THE LEARNED CIT(A) OF 100% DISALLOWANCE AND CONSEQUENTIAL TRADING ADDITIO N OF ALLEGED UNVERIFIABLE PURCHASES OF RS.11,84,063/- AND IN THI S REGARD, THE ASSESSEES SUBMISSIONS ARE AS UNDER:- 1) THE ASSESSEE WHO IS A DEALER OF CUT STONE HAS KEPT AND MAINTAINED FULL RECORD IN TERMS OF WEIGHT OF THE CU T STONE PURCHASED AND SOLD. 2) THAT DETAILED EXHAUSTIVE STOCK REGISTER HAS BEEN MA INTAINED FOR EACH AND EVERY ITEM TRADED AND THE SAME WAS DULY PR ODUCED BEFORE THE A.O. 3) FULL RECORD OF PURCHASE AND SALE HAS DULY BEEN MAIN TAINED BY THE ASSESSEE AND THE SAME WAS PRODUCED BEFORE THE A.O. FROM TIME TO TIME. 4) THE ASSESSEE HAS REGULARLY KEPT AND MAINTAINED BOOK S OF ACCOUNTS CONSISTING OF CASH BOOK, LEDGER, JOURNAL, STOCK REGISTERS, PURCHASE AND SALES BILLS, SUBSIDIARY BOOKS AND EXPE NSES VOUCHERS AND OTHER RELEVANT RECORDS. 5) THAT THE ASSESSEE STARTED HER BUSINESS IN THE NAME OF M/S VIDHI GEMS ON 22-03-2002 AND FIRST SALE TOOK PLACE IN THE PREVIOUS YEAR RELEVANT TO YEAR UNDER APPEAL I.E. AY 2003-04. ACCO RDINGLY THE YEAR UNDER APPEAL IS THE VERY FIRST ASSESSMENT YEAR OF A SSESSEES BUSINESS UNDER THE NAME AND STYLE OF M/S. VIDHI GEMS ITA NO. 1349-1351/JP/2019 SMT. MAMTA HALDIA, JAIPUR VS. DCIT, JAIPUR 6 6) THE A.O. HAS NOT POINTED OUT ANY INHERENT DEFECTS I N THE SYSTEM OF ACCOUNTING. NOT A SINGLE ITEM OF SUPPRESSION OF SALES NOR INFLATION OF PURCHASES HAS BEEN PIN POINTED BY LEARNED A.O. 7) MOREOVER IT IS A FACT THAT NEITHER DURING THE COURS E OF SURVEY/SEARCH NOR OTHERWISE THERE ARE ANY EVIDENCES OF ANY UNACCOUNTED PURCHASE/SALE BY THE APPELLANT. 8) THE IDENTITY OF THE RECIPIENTS OF THE PAYMENTS WAS NOT DOUBTED BY THE AO. 9) THAT COMPLETE QUANTITATIVE DETAILS ARE AVAILABLE ON THE FILE OF AO. NO DEFECT IN THE SAME WAS POINTED OUT BY AO. IN ANY CASE, THE REJECTION OF BOOKS OF ACCOUNTS IS ALSO NOT JUSTIFIE D ESPECIALLY WHEN NO SIGNIFICANT DEFECT HAS BEEN POINTED OUT BY THE AO. RELIANCE IS PLACED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CAS E OF CIT V/S. PADAM CHAND RAM GOPAL (1970)76 ITR 719(S.C.). 10) IN THIS LINE OF BUSINESS VARIOUS QUALITIES OF PR ECIOUS AND SEMI- PRECIOUS STONES ARE REQUIRED AND AT THE SAME TIME T HE ASSESSEE ALSO REQUIRES DIFFERENT SHAPES AND SIZES OF THE STONES A ND THESE ARE NEVER AVAILABLE AT ONE SINGLE PLACE. FURTHER THE BIG DEAL ERS NORMALLY DO NOT SELL THE GOODS IN LITTLE VOLUME. IN THESE CIRCUMSTA NCES AND TO FULFILL THE COMMITMENTS WITH THE CUSTOMERS, THE ASSESSEE HA D TO PURCHASE GOODS FROM PETTY DEALERS. THIS IS NOT A PECULIAR FE ATURE OF THIS BUSINESS, BUT IT IS A REGULAR PRACTICE IN THIS TRAD E. SO THE PURCHASES FROM UNREGISTERED DEALERS AND IN CASH SHOULD NOT BE VIEWED OTHERWISE. 11) THAT AS REGARDS PAYMENT MADE IN CASH THE ASSESSEE S EXPLANATION IS THAT THE UNREGISTERED DEALERS AS WEL L AS OTHER PERSONS RELATED TO THIS TRADE ARE ALMOST ILLITERATE OR LITT LE EDUCATED . MOST OF ITA NO. 1349-1351/JP/2019 SMT. MAMTA HALDIA, JAIPUR VS. DCIT, JAIPUR 7 THE SAME DID NOT HAVE EVEN BANK A/C AND IN ORDER TO MAINTAIN REGULARITY OF BUSINESS THE APPELLANT WAS COMPELLED TO MAKE THE PAYMENT IN CASH. 12) THAT THIS IS NOT THE CASE OF THE A.O. THAT THE ASS ESSEE HAD MADE EXCESSIVE PAYMENT WHILE MAKING PURCHASES IN CASH. 13) THAT ABOVE ALL, THE APPELLANT CAN BE SAID TO HAVE BEEN GUIDED BY BUSINESS EXPEDIENCY FOR MAKING THE PAYMENT IN CASH TO THE ILLITERATE / LITTLE EDUCATED UNREGISTERED DEALERS. 14) THAT AS SUBMITTED ABOVE THE ASSESSEE DEALS IN GEMS AND STONES AND IN THIS LINE OF BUSINESS MULTIPLE BUSINESSES AR E STARTED EVERY YEAR WHICH GIVES A TOUGH COMPETITION IN THE MARKET. 15) MOREOVER THERE IS NO ALLEGATION OF THE AO THAT SUC H AND SUCH RECEIPTS ARE NOT ENTERED IN BOOKS OF ACCOUNT NOR IS THERE ANY ALLEGATION THAT SUCH AND SUCH AMOUNT HAVE BEEN RECE IVED BY THE ASSESSEE OUT OF BOOKS NOR IS THERE ANY ALLEGATION T HAT SUCH AND SUCH EXPENDITURE HAVE BEEN INCURRED OUT OF BOOKS AND SUC H AND SUCH EXPENDITURE IS INFLATED. 16) FOR EVERY SALE THERE HAS TO BE A PURCHASE AND WIT HOUT PURCHASE THERE CANT BE SALES. THE A.O. HAS ADMITTED THE DEC LARED TURNOVER. WHEN SALES ARE ADMITTED THERE IS NO REASON TO SUSPE CT PURCHASES WHICH TOO ARE DULY SUPPORTED BY SALE INVOICE AND DU LY RECORDED IN STOCK REGISTER. 17) THAT THE BURDEN OF PROOF OF NOT ACCEPTING THE APP ARENT AS REAL LIES ON THE A.O. BUT HE HAS FAILED TO DISCHARGE THI S BURDEN OF PROOF. 18) THAT IN INNUMERABLE DECISIONS DELIVERED BY JAIPUR BENCH OF THE TRIBUNAL AS WELL AS BY THE HONBLE JURISDICTIONAL H IGH COURT THAT IN THE MATTERS LIKE THAT OF ASSESSEE (I.E. WHERE BOOKS OF ACCOUNTS ARE ITA NO. 1349-1351/JP/2019 SMT. MAMTA HALDIA, JAIPUR VS. DCIT, JAIPUR 8 REJECTED ON ACCOUNT OF THEIR BEING UNVERIFIED PURCH ASES) PAST HISTORY OF THE ASSESSEES CASE SHOULD BE TAKEN INTO CONSIDE RATION. 19) THAT IN REGARD TO UNVERIFIABLE PURCHASES THE HON BLE JURISDICTIONAL HIGH COURT HAS IN A VERY LARGE NUMBE R OF JUDGMENTS LIKE THAT OF SORABH CEMENT LTD. VS. ACIT IN ITA NO.135/2 017 DATED 05.12.2017 HELD THAT WHILE CONSIDERING ISSUE OF GP RATE IN SUCH CASES, AVERAGE GP RATE OF PRECEDING FIVE YEARS IN ASSESSEE S OWN CASE SHOULD BE TAKEN INTO ACCOUNT. 20) IN THE CASE OF APPELLANT ASSESSEE, THE YEAR UNDER APPEAL IS THE VERY FIRST ASSESSMENT YEAR OF ASSESSEES BUSINESS A ND AS SUCH THERE IS NO PAST HISTORY AND UNDER SUCH CIRCUMSTANCES GP RAT E OF 17% AS UPHELD BY THE CO-ORDINATE BENCH OF THE JAIPUR TRIB UNAL IN ASSESSEES OWN CASE I.E. IN THE CASE OF SMT. MAMTA HALDIA V/S. THE DCIT IN IT APPEAL NO. 726/JP/2011 FOR A.Y. 2003-04 ITSELF VIDE THEIR CONSOLIDATED ORDER DATED 19/12/2011 IN ITA NO. 31,729,728,727 AN D 726/JP/2011 FOR AY 2008-09, 07-08, 05-06, 04-05 AND 03-04 IN TH E CASE OF SMT. MAMTA HALDIA V/S. THE DCIT AND ITA NO. 101/JP/2011 FOR AY 2008-09 IN THE CASE OF THE DCIT V/S. SMT. MAMTA HALDIA MAY BE APPLIED HERE ALSO. 7. REGARDING GROUND NO. 2, THE LD. AR SUBMITTED THA T THIS GROUND OF APPEAL IS AGAINST SUSTENANCE BY THE LEARNED CIT(A) OF TRADING ADDITION OF RS.2,22,289/- ON PROTECTIVE BASIS MADE BY THE AO BY WAY OF APPLICATION OF HIGHER GP RATE OF 30% AS AGAINST DEC LARED GP RATE OF 13.82% ON SALES OF RS.13,73,963/-. THE ASSESSEES S UBMISSIONS IN THIS REGARD ARE AS UNDER:- ITA NO. 1349-1351/JP/2019 SMT. MAMTA HALDIA, JAIPUR VS. DCIT, JAIPUR 9 1. TO AVOID REPETITION IT IS HUMBLY PRAYED THAT THE SU BMISSIONS MADE IN PARA NO. 1 TO 12 IN RELATION TO GROUND OF APPEAL NO.1 ABOVE MAY PLEASE BE CONSIDERED IN RESPECT OF THIS GROUND OF A PPEAL NO. 2 ALSO. 2. THAT AS SUBMITTED ABOVE THE ASSESSEE DEALS IN GEMS AND STONES AND IN THIS LINE OF BUSINESS MULTIPLE BUSINESSES AR E STARTED EVERY YEAR WHICH GIVES A TOUGH COMPETITION IN THE MARKET. 3. THAT ABOVE ALL, THE APPELLANT CAN BE SAID TO HAVE B EEN GUIDED BY BUSINESS EXPEDIENCY FOR MAKING THE PAYMENT IN CASH TO THE ILLITERATE / LITTLE EDUCATED UNREGISTERED DEALERS. 4. MOREOVER THERE IS NO ALLEGATION OF THE AO THAT SUCH AND SUCH RECEIPTS ARE NOT ENTERED IN BOOKS OF ACCOUNT NOR IS THERE ANY ALLEGATION THAT SUCH AND SUCH AMOUNT HAVE BEEN RECE IVED BY THE ASSESSEE OUT OF BOOKS NOR IS THERE ANY ALLEGATION T HAT SUCH AND SUCH EXPENDITURE HAVE BEEN INCURRED OUT OF BOOKS AND SUC H AND SUCH EXPENDITURE IS INFLATED. 5. EVEN THE JURISDICTIONAL HIGH COURT IN THE CASE OF G OTAN LIME FACTORY HAS HELD THAT IT IS NOT NECESSARY THAT AFTER REJECT ING THE BOOKS OF ACCOUNTS THE AO HAS TO MAKE ESTIMATION OF INCOME. 6. THAT THE APPLICATION OF 30% GP RATE BY THE AO AND S USTENANCE OF THE SAME BY THE LEARNED CIT(A) IS HIGHLY UN-JUSTIFI ED AND UNCALLED FOR IN VIEW OF JUDGMENT OF THE ITAT JAIPUR BENCH IN APP ELLANTS OWN CASE FOR THIS VERY YEAR I.E. A.Y. 2003-04 IN IT APPEAL N O. 726/JP/2011 WHEREIN THE BENCH VIDE ITS CONSOLIDATED ORDER DATED 19/12/2011 IN ITA NO. 31,729,728,727 AND 726/JP/2011 FOR AY 2008- 09, 07-08, 05- 06, 04-05 AND 03-04 RESPECTIVELY IN THE CASE OF SMT . MAMTA HALDIA V/S. THE DCIT AND ITA NO. 101/JP/2011 FOR AY 2008-0 9 IN THE CASE OF THE DCIT V/S. SMT. MAMTA HALDIA HELD THAT IF A GP R ATE OF 17% IS ITA NO. 1349-1351/JP/2019 SMT. MAMTA HALDIA, JAIPUR VS. DCIT, JAIPUR 10 APPLIED IT WILL MEET THE ENDS OF JUSTICE. BESIDES T HE TRIBUNAL OBSERVED THAT NO SEPARATE ADDITION FOR CASH PURCHASES/ PURCH ASES FROM UNREGISTERED DEALERS OF RS.11,84,063/- IS TO BE MADE. 8. PER CONTRA, THE LD. DR IS HEARD WHO HAS RELIED O N THE FINDINGS OF THE LOWER AUTHORITIES AND OUR REFERENCE WAS DRAWN T O THE FINDINGS OF THE LD CIT(A) WHICH READ AS UNDER:- 3.1.2 DETERMINATION (I) FROM THE FACTS OF THE CASE, IT IS SEEN THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF TRADING IN PRECIOUS A ND SEMI- PRECIOUS STONES. THE ASSESSMENT U/S 153A R.W.S 153B OF THE ACT WAS COMPLETED ON 30.11.2009. THE AO NOTED THAT THE APPELLANT HAS MADE UNVERIFIED PURCHASE AMOUNTING TO RS. 11,84,063/-. THE AO ALSO REJECTED THE BOOKS OF ACCO UNTS AND ESTIMATED THE GROSS PROFIT RATE @ 30% IN PLACE OF GP RATE OF 13.82% DISCLOSED BY THE APPELLANT. BY ADOPT ING GP @ 30%, EXCESS PROFIT WAS WORKED OUT AT RS. 2,22,208 /-. WHILE CONCLUDING THE ASSESSMENT, THE AO HELD THAT A S THE ADDITION ON THE BASIS OF BOGUS PURCHASE IS MORE THA N T - HE TRADING ADDITION ON THE BASIS OF HIGHER GP RATE ADO PTED, THE ADDITION ON ACCOUNT OF BOGUS PURCHASE IS MADE ON SUBSTANTATIVE BASIS AND ADDITION ON ACCOUNT OF GP R ATE IS MADE ON PROTECTIVE BASIS. IN A NUTSHELL, THE AO MAD E THE ADDITION OF RS. 11,84,063/- AND IN THE COMPUTATION OF INCOME AND ADDITION OF RS. 2,22,208/- WAS KEPT ON PROTECTIVE BASIS. THE APPELLANT FILED THE APPEAL BE FORE THE LD CIT(A). THE LD. CIT(A) UPHELD THE ADDITION ON ACCOU NT OF GROSS PROFIT RATE @ 30% AND HELD THAT THE ADDITION TO THE ITA NO. 1349-1351/JP/2019 SMT. MAMTA HALDIA, JAIPUR VS. DCIT, JAIPUR 11 EXTENT OF 25% OF UNVERIFIED PURCHASE IS JUSTIFIED. HOWEVER, HE FURTHER MENTIONED THAT AS THE ADDITION ON ACCOUN T OF UNVERIFIED PURCHASE AMOUNTING TO RS. 2,96,016/- (25 % OF RS. 11,84,063/-) IS HIGHER, NO FURTHER ADDITION ON ACCOUNT OF GROSS PROFIT DIFFERENCE IS REQUIRED. IN FURTHER APP EAL, THE HON'BLE ITAT DECIDED THE ABOVE ISSUE, THEREBY, THE GP RATE WAS ADOPTED @ 17% AND NO SEPARATE ADDITION ON ACCOUNT OF UNVERIFIABLE PURCHASE WAS SUSTAINED. THE DEPARTMENT PREFERRED APPEAL BEFORE THE HON'BLE HIGH COURT WHEREBY FOLLOWING QUESTIONS OF LAW WERE RAISE D: 'D.B. INCOME TAX APPEAL NO. 204/12 ADMITTED ON 03.01.2014 1 WHETHER THE TRIBUNAL WAS JUSTIFIED IN DELETING TH E ADDITION OF RS. 2,96,016/- MADE ON ACCOUNT OF UNVERIFIABLE PURCHASES BY THE ASSESSING OFFICER AND CONFIRMED BY CIT(A), DESPITE UPHOLDING THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT? 2. WHETHER THE TRIBUNAL WAS JUSTIFIED IN REVERSING THE FINDING RECORDED BY CIT(A) AS WELL AS ASSESSING OFFICER AND THEREBY, DESPITE CONFIRMING THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3), REDUCING THE TRADING ADDITION OF RS. 2,22,208/- TO MERELY RS. 43,673/- BY APPLYING GROSS PROFIT RATE O F 17% AS AGAINST 30%?' ITA NO. 1349-1351/JP/2019 SMT. MAMTA HALDIA, JAIPUR VS. DCIT, JAIPUR 12 (II) THE HON'BLE HIGH COURT DECIDED THE ABOVE ISSUE AS UNDER: 'IN THAT VIEW OF THE MATTER, THE FIRST ISSUE REGARD ING BOGUS PURCHASE IS REQUIRED TO BE ANSWERED IN FAVOUR OF THE DEPARTMENT AND THE SECOND ISSUE IS ANSWERED IN FAVOUR OF THE ASSESSEE.' (III) THE HON'BLE HIGH COURT FURTHER HELD THAT ON T HE QUESTION OF BOGUS PURCHASE, THE MATTER IS REMITTED BACK TO THE AO, IT WILL BE OPEN FOR THE PARTIES TO LEAD THEIR EVIDENCE INCLUDING THE CROSS EXAMINATION OF T HE WITNESS. IT WILL ALSO BE OPEN FOR THE SIDES TO PROD UCE DOCUMENTS WHICH ARE RELEVANT FOR DECIDING THE ISSUE . (IV) IN SET ASIDE PROCEEDINGS, THE AO COMPLETED THE ASSESSMENT ON 17.10.2018 WHEREBY HE MADE ADDITIONS ON BOTH THE GROUNDS I.E. UNVERIFIED PURCHASE TO THE EXTENT OF RS. 11,84,063/- AND DIFFERENCE IN GP BY ADOPTING GP @ 30% AMOUNTING TO RS. 2,22,289/-. (V) THE APPELLANT HAS CHALLENGED BOTH THE ADDITIONS . THE SUBMISSION OF THE APPELLANT HAS BEEN REPRODUCED IN THE EARLIER PART OF THE ORDER. IT CAN BE SEEN THAT RIGH T FROM FIRST ROUND OF ASSESSMENT PROCEEDINGS TO ALL THE AP PELLATE STAGE, A CONSISTENT VIEW WAS TAKEN THAT HIGHER OF T HE ADDITIONS ON THE BASIS OF UNVERIFIED PURCHASE OR ON THE BASIS OF GP DIFFERENCE WILL FINALLY BE UPHELD. THE HON'BLE HIGH COURT WHILE SETTING ASIDE THE ORDER HAS CLEARL Y MENTIONED THAT ISSUE REGARDING BOGUS PURCHASE IS ITA NO. 1349-1351/JP/2019 SMT. MAMTA HALDIA, JAIPUR VS. DCIT, JAIPUR 13 ANSWERED IN FAVOUR OF THE DEPARTMENT AND THE SECOND ISSUE IS ANSWERED IN FAVOUR OF THE ASSESSEE. CONSID ERING THE DIRECTIONS OF THE HON'BLE HIGH COURT AND THE FA CTS ON RECORD IN FIRST ROUND OF APPELLATE PROCEEDINGS AND IN PRESENT PROCEEDINGS, IT IS SEEN THAT THE ADDITION O N ACCOUNT OF BOGUS PURCHASE AND GP ADDITION FOR SAME DEFAULT CANNOT BE SIMULTANEOUSLY MADE. THE AO CAN M AKE ADDITION EITHER ON ACCOUNT OF UNVERIFIED PURCHASE O R ON ACCOUNT OF GROSS PROFIT DIFFERENCE. THE ADDITION WO RKED OUT ON THE BASIS OF BOGUS PURCHASE IS RS. 11,84,063 /- WHILE ON THE BASIS OF GP, IT IS RS. 2,22,289/-. THE REFORE, HIGHER OF THE TWO I.E. RS. 11,84,063/- IS UPHELD AN D THE BALANCE RS. 2,22,289/- IS DELETED. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD CIT(A) HAS RETURNED A FINDING THAT CONSIDERING THE DIRECTIONS OF THE HON'BLE HIGH COUR T AND THE FACTS ON RECORD IN FIRST ROUND OF APPELLATE PROCEED INGS AND IN PRESENT PROCEEDINGS, IT IS SEEN THAT THE ADDITION O N ACCOUNT OF BOGUS PURCHASE AND GP ADDITION FOR SAME DEFAULT CAN NOT BE SIMULTANEOUSLY MADE AND THE AO CAN MAKE ADDITION EI THER ON ACCOUNT OF UNVERIFIED PURCHASE OR ON ACCOUNT OF GRO SS PROFIT DIFFERENCE. THE SAID FINDINGS OF THE LD CIT(A) ARE NOT UNDER CHALLENGE BY THE REVENUE AND HAVE THUS BEEN ACCEPTE D AND EVEN THE ASSESSEE HAS NOT CHALLENGED THE SAME BEFOR E US. THEREAFTER, THE LD CIT(A) HAS HELD THAT THE ADDITIO N WORKED OUT ON THE BASIS OF BOGUS PURCHASE IS RS. 11,84,063/- W HILE ON THE BASIS OF GP, IT IS RS. 2,22,289/-AND THE HIGHER OF THE TWO I.E. RS. ITA NO. 1349-1351/JP/2019 SMT. MAMTA HALDIA, JAIPUR VS. DCIT, JAIPUR 14 11,84,063/- WAS UPHELD AND THE BALANCE RS. 2,22,289 /- WAS DELETED. THE BASIS OF SUSTAINING THE HIGHER OF THE TWO ADDITIONS AS STATED BY THE LD CIT(A) IS THAT RIGHT FROM FIRST ROUND OF ASSESSMENT PROCEEDINGS TO ALL THE APPELLATE STAGE, A CONSISTENT VIEW WAS TAKEN THAT HIGHER OF THE ADDITIONS ON THE BASIS OF UNVERIFIED PURCHASE OR ON THE BASIS OF GP DIFFERENC E WILL FINALLY BE UPHELD. IN THIS REGARD, WE REFER TO THE FINDINGS OF THE COORDINATE BENCH IN THE FIRST ROUND OF APPELLATE PR OCEEDINGS AND NOTE THAT THE COORDINATE BENCH VIDE ITS ORDER DATED 19.12.2011 HAS HELD THAT SINCE THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED AND TRADING ADDITION HAS BEEN SUSTAINED (BY DIRECTI NG TO APPLY G.P RATE OF 17% AS AGAINST 30% APPLIED BY THE AO), NO SEPARATE ADDITION IS REQUIRED TO BE MADE IN RESPECT OF UNVER IFIED PURCHASES. THEREFORE, THE BASIS OF ARRIVING AT THE CONCLUSION BY THE LD CIT(A) BASED ON FIRST ROUND OF APPELLATE PRO CEEDINGS THAT THE HIGHER OF TWO ADDITIONS, I.E, ADDITIONS ON THE BASIS OF UNVERIFIED PURCHASE OR ON THE BASIS OF GP DIFFERENC E IS NOT BORNE OUT OF RECORDS AND CANNOT BE ACCEPTED. RATHER, WE FIND THAT THE EMPHASIS IN THE FINDINGS OF THE TRIBUNAL IN THE FIR ST ROUND IS THAT ONCE THE BOOKS OF ACCOUNTS ARE REJECTED U/S 145(3), GROSS PROFIT RATE HAS TO BE ESTIMATED AND NO SEPARATE ADDITION I S REQUIRED TO BE MADE IN RESPECT OF UNVERIFIED PURCHASES. FURTHE R, WE DONOT FIND ANY SUCH FINDINGS/DIRECTIONS GIVEN BY THE HON BLE HIGH COURT WHICH SUPPORT THE POSITION ADOPTED BY THE LD CIT(A) . IT IS ALSO THE CONSISTENT POSITION TAKEN BY THIS BENCH WHEREIN WE HAVE HELD THAT ONCE THE BOOKS OF ACCOUNTS HAVE BEEN REJE CTED BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T, THE ASSESSING OFFICER IS REQUIRED TO MAKE THE ASSESSMEN T ON THE BASIS OF ITA NO. 1349-1351/JP/2019 SMT. MAMTA HALDIA, JAIPUR VS. DCIT, JAIPUR 15 HIS BEST JUDGMENT AND A FAIR ESTIMATE OF INCOME HAS TO BE MADE INSTEAD OF RESORTING TO MAKING THE ADDITION TO THE BOOK RES ULTS WHICH ALREADY STAND REJECTED OR ANY ALTERATION IN THE BOOK RESULT S. IN THE INSTANT CASE, THE BOOK RESULTS HAVE BEEN REJECTED BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT AND THE G.P ESTIMATION @ 30% HAS BEEN DONE AND THE TRADING ADDITION OF RS 2,22,289/- HAS BEEN MADE BY THE ASSESSING OFFICER. REGARDING THE CHALLENGE TO THE RATE OF G.P ESTIMATED BY THE AO @ 30% AS AGAINST DECLARED BY THE ASSESSEE @ 13.82%, WE FIND THAT IN THE FIRST ROUND OF APPELLATE PROCEEDIN GS, THE MATTER HAS BEEN CONSIDERED BY THE HONBLE HIGH COURT WHEREIN I N RESPECT OF APPEAL FILED BY THE REVENUE, THE MATTER HAS BEEN DECIDED I N FAVOUR OF THE ASSESSEE AND THE G.P RATE AS SUSTAINED BY THE TRIBU NAL @ 17% HAS BEEN CONFIRMED AND THE MATTER HAS ATTAINED FINALITY . SIMILAR IS THE FINDING RECORDED BY THE LD CIT(A). THEREFORE, THE A O IS DIRECTED TO APPLY G.P RATE OF 17% AND SEPARATE ADDITION IN RESPECT OF UNVERIFIED PURCHASES OF RS 11,84,063/- IS HEREBY DELETED. IN THE RESULT, THE GROUNDS OF APPEAL ARE DISPOSED OFF. ITA NO. 1350/JP/2019 10. IN ITA NO. 1350/JP/2019 FOR A.Y 2004-05, BOTH T HE PARTIES SUBMITTED THAT FACTS AND CIRCUMSTANCES OF THE CASE ARE IDENTICAL WITH FACTS AND CIRCUMSTANCES OF THE CASE IN ITA NO. 1349 /JP/2019 FOR A.Y 2003-04 AND SIMILAR CONTENTIONS MAY BE CONSIDERED. THEREFORE, AS SUBMITTED BY BOTH THE PARTIES, SINCE FACTS AND CIRC UMSTANCES OF THESE TWO CASES ARE IDENTICAL TO FACTS AND CIRCUMSTANCES OF THE CASE IN ITA NO. 1349/JP/2018, OUR FINDINGS AND DIRECTIONS CONTA INED THEREIN SHALL APPLY MUTATIS MUTANDIS TO THIS APPEAL. FOLLOWING THE SAME, FOR A.Y ITA NO. 1349-1351/JP/2019 SMT. MAMTA HALDIA, JAIPUR VS. DCIT, JAIPUR 16 2004-05, THE AO IS DIRECTED TO APPLY G.P RATE OF 15 % AND SEPARATE ADDITION IN RESPECT OF UNVERIFIED PURCHASES OF RS 1 7,23,930/- IS HEREBY DELETED. ITA NO. 1351/JP/2019 11. IN ITA NO. 1351/JP/2019 FOR A.Y 2008-09, WE FIN D THAT THE MATTER IS LIMITED TO ESTIMATION OF GROSS PROFIT RATE AFTER RE JECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT AND WHICH HAS BEEN S UBJECT MATTER OF APPEAL BEFORE THE HONBLE HIGH COURT IN THE FIRST R OUND OF APPELLATE PROCEEDINGS AND THE MATTER HAS BEEN DECIDED IN FAVO UR OF THE DEPARTMENT WHEREBY THE FINDINGS OF THE TRIBUNAL HAV E BEEN REVERSED AND THE ACTION OF THE AO IN APPLYING GROSS PROFIT R ATE OF 30% HAS BEEN UPHELD AND THE MATTER HAS THUS ATTAINED FINALITY. SIMILAR FINDING HAS BEEN RECORDED BY THE LD CIT(A) WHICH DOESNT CALL F OR ANY INTERFERENCE AND THE SAME IS UPHELD AND THE APPEAL OF THE ASSESS EE IS DISMISSED. IN THE RESULT, ALL THE THREE APPEALS OF THE ASSESSE E ARE DISPOSED OFF IN LIGHT OF AFORESAID DIRECTIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 27/10/2020. 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:- 27/10/2020 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SMT. MAMTA HALDIA, JAIPUR ITA NO. 1349-1351/JP/2019 SMT. MAMTA HALDIA, JAIPUR VS. DCIT, JAIPUR 17 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CIRCLE-1, NEW CR BUILDING, ST ATUE CIRCLE, 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 NOS. 1349, 1350 & 1351/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR