DCIT Circle-19(1), New Delhi V. R C Jewellers Pvt Ltd, New Delhi

ITA 1607/DEL/2020

AI Insights

The case involves the Revenue's appeal against the order of the CIT(A) which had deleted the addition made by the AO to the income of M/s R. C. Jewellers Pvt. Ltd. The AO had rejected the books of account under section 145(3) of the Income Tax Act, 1961, and made an addition of Rs.8,19,15,444/- to the income of the assessee, determining the net profit at 8% of the total turnover. The CIT(A) found that the books of account were properly maintained and the additions were unjustified, leading to the Revenue's appeal to the Tribunal. The Tribunal agreed with the CIT(A), noting that the books of account were impounded by the department and that the assessee had declared all transactions in their VAT returns.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131635 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 06-06-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 20-09-2020
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus
• Section: 144; 44AD; 143(3); 145(3)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member Sh. Yogesh Kumar US, Judicial Member ITA No. 1607/Del/2020 : Asstt. Year: 2016-17 DCIT, Circle-19(1), New Delhi-110002 Vs. M/s R. C. Jewellers Pvt. Ltd., 2719, Bank Street, Karol Bagh, New Delhi-110005 (APPELLANT) (RESPONDENT) PAN No. AACCR7113A Assessee by : Sh. P. C. Yadav, Adv. Revenue by : Sh. Rajesh Kr. Dhaneja, Sr. DR Date of Hearing: 07.06.2023 Date of Pronouncement: 27.06.2023 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the Revenue against the order of ld. CIT(A)-7, New Delhi dated 09.03.2020. 2. Following grounds have been raised by the Revenue: “1. Whether on the facts and circumstances of the case, ld. CIT(A) erred in directing the AO to accept the result of books of account without examining/verifying the books and without considering discrepancies pointed out by the AO. 2. Whether the ld. CIT(A) erred in law and on facts and in circumstances of the case, in deleting assessed income of Rs.8,19,15,444/- and accepting the returned income of Rs.68,03,666/- only without verifying the discrepancies on the basis of which books of accounts have been rejected.” ITA No. 1607/Del/2020 R C Jewellers Pvt. Ltd. 2 3. Brief facts of the case are that the company is engaged in the business of manufacturing, trading and export of jewellery items. The assessee filed return of income on 17.10.2016 declaring income of Rs.68,03,070/-. The order u/s 143(3) of the Income Tax Act, 1961 has been passed u/s 144 after rejection of books of account u/s 145(3) and making addition of Rs.8,19,15,444/- determining the net profit @8% of the total turnover of Rs.102,39,43,000/-. 4. Aggrieved, the assessee filed appeal before the ld. CIT(A). The ld. CIT(A) deleted the addition. Aggrieved, the Revenue filed appeal before us. 5. At the outset, the ld. AR argued that the provisions of Section 44AD are not applicable to the case of the assessee as the assessee is in the business of manufacture and sale of jewellery and hence determination of 8% of the turnover as the net profit is not according to the provisions of the Act. We find that the revenue authorities have not invoked the provisions of Section 44AD while determining the profits but only took a cue from the intention of the legislative enactment. 6. Heard the arguments of both the parties and perused the material available on record. 7. Notwithstanding the technicality raised by the ld. AR, we have examined the merits of the case. 8. The facts of the case are that a survey has been conducted on 18.03.2017. As per the survey report, the assessee has shown purchases of Rs.58,03,940/- out of which purchases of Rs.54,70,440/- was treated as bogus purchases as only 4 ITA No. 1607/Del/2020 R C Jewellers Pvt. Ltd. 3 parties have admitted that they have sold the old jewellery to the assessee company. The AO has also held that the purchases to the tune of Rs.3,33,500/- only would be verified. The AO held that the remaining purchases could not be verified as the assessee has not provided the required details such as complete name, address and PAN number. Hence, the AO rejected the books of account and determined net profit @ 8%. It is also a fact on record that the total turnover of the assessee considered by the AO was to the tune of Rs.102.39 Cr. which proves that the unverifiable purchases of the old jewellery amounts to 0.6% of the total purchases. Owing to non- submission of details of 0.6% of the total purchases, the books of account have been rejected and estimation of the profit has been resorted to. 9. From the record, we find that the books of account have been impounded by the ADIT(Inv.), Unit-3(iii), New Delhi vide impounding order u/s 133A(3)(ia) of the Income Tax Act, 1961 dated 13.12.2017. It was submitted that the books of account are still in the custody of the revenue department itself and thus the assessee was unable to provide the complete details. Further, we find from the record that the ld. CIT(A) has duly gone through the monthly VAT returns filed by the assessee for various quarters relevant to the Assessment Year. These returns have been filed for all the four quarters even before the date of survey. These VAT returns have been duly examined by the ld. CIT(A) and copies have been filed before us. The ld. CIT(A) has held that the entire sales and purchases have been duly declared in the VAT returns and the complete details have been ITA No. 1607/Del/2020 R C Jewellers Pvt. Ltd. 4 tallied and no adverse inference could be drawn in respect of purchases made by the assessee. 10. In view of the entire facts and circumstances, we hold that there was no basis on which the books of account have been rejected. No discrepancies have been brought out. The entire books of accounts are in the custody of the department. The ld. CIT(A) has examined the details exhaustively and hence, we decline to interfere with the order of the ld. CIT(A). 11. In the result, the appeal of the Revenue is dismissed. Order Pronounced in the Open Court on 27/06/2023. Sd/- Sd/- (Yogesh Kumar US) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 27/06/2023 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR