The ITO, Ward-2(1)(2), Ahmedabad V. M/s. Johri Sons Jewellers Pvt.Ltd., Ahmedabad

ITA 1914/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7908 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 20-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH SINGH
• Assessee Lawyers: S N DIVATIA
• Keywords: Bogus purchase; Unexplained cash credit; Additional evidence; Question of law
• Section: 143(3); 133(6); 68

Judgement Text

, , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD LOZJH LOZJH LOZJH LOZJH OLHE OLHE OLHE OLHE VGEN VGEN VGEN VGEN] YS[KK LNL; , ] YS[KK LNL; , ] YS[KK LNL; , ] YS[KK LNL; ,OA OAOA OA EK/ EK/EK/ EK/KQFERK KQFERK KQFERK KQFERK JKW; JKW;JKW; JKW;] U; ] U;] U; ] U;KF KFKF KF;D LNL; DS ;D LNL; DS ;D LNL; DS ;D LNL; DS LE{KA LE{KA LE{KA LE{KA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SMT MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO.1914/AHD/2016 ( / ASSESSMENT YEAR : 2011-12) INCOME TAX OFFICER, WARD 2(1)(2), AHMEDABAD, 1 ST FLOOR, NAVJIVAN TRUST BUILDING AHMEDABAD 380 009. / VS. M/S. JOHRI SONS JEWELLERS PVT. LTD., GROUND FLOOR, GENERAL BANK CHAMBER BUILDING, OPP. MUNICIPAL MARKET, C.G. ROAD, AHMEDABAD. ./ ./ PAN/GIR NO. : AAACJ 3808 L ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SAURABH SINGH, D.R. / RESPONDENT BY : SHRI S.N. DIVATIA, A.R. / DATE OF HEARING 21/06/2018 !'# / DATE OF PRONOUNCEMENT 11/07/2018 $% / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE APPELLATE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-2, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)- VIII/64/WD.4(2)/2014-15 AND NOW CIT(A)-2/135/WD.4(2 )/2014-15 DATED 03.05.2016 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOME TAX ACT, 1961 (HERE-IN-AFTER REFERRED TO AS 'THE ACT') DATED 28.03.2014 RELEVANT TO ASSESSMENT YEAR (AY) 2011-12 . ITA NO.1914/AHD/2016 ITO VS. JOHRI SONS JEWELLERS PVT. LTD. ASST.YEAR 2011-12 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER:- 1. THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE DISALLOWANCE MADE BY THE AO UNDER SECTION 68 WITH R EGARD TO BOGUS PURCHASES TO RS.1,55,020/- AS AGAINST RS.39,7 2,198/- WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 3. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD . CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE REST ORED TO THE ABOVE EXTENT. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND, WHICH MAY BE NECESSARY. 3. THE SOLITARY ISSUE RAISED BY THE REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN REDUCING THE ADDITION MADE BY THE A O FOR RS.39,72,198/- TO RS.1,55,020/-. 4. THE BRIEF FACTS AS CULLED OUT FROM THE RECORDS A RE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUS INESS OF BUYING AND SELLING GOLD, SILVER, DIAMOND, AND ORNAMENTS MADE O UT OF IT. THE ASSESSEE DURING THE YEAR INTER ALIA HAS PURCHASED GOLD/DIAMOND FROM THE FOLLOWING PARTIES: SR. NO. NAME OF THE PARTY ADDRESS PURCHASE AMOUNT RS. RESULT OF 133(6) ISSUED 1. SHREE MAHAVIR JEWELLERS MANEK CHOWK AHMEDABAD 12,40,160/- NOT SERVED 2. A STAR JEWELLERY 803, KALASH ENCLAVE, NR. LADIES HOSTEL, NAVRANGPURA, AHMEDABAD. 27,32,038/- NOT SERVED 39,72,198/- ITA NO.1914/AHD/2016 ITO VS. JOHRI SONS JEWELLERS PVT. LTD. ASST.YEAR 2011-12 - 3 - AS THERE WAS NO RESPONSE OF THE NOTICE ISSUED TO TH E ABOVE STATED PARTIES U/S 133(6) OF THE ACT, THE AO SOUGHT AN EXPLANATION FROM THE ASSESSEE. IN COMPLIANCE THERETO, THE ASSESSEE VIDE LETTER DATED 07.03.2014 SUBMITTED THAT BOTH THE ABOVE PARTIES HAVE ASSURED TO MAKE A REPLY WITHIN THE SHORT PERIOD. HOWEVER, THE AO OPINED THAT THE ASSESSEE HAS SHOWN BOGUS PURCHASES FROM THE ABOVE-STATED PARTIES AND ACCORDINGLY TREAT ED THE SAME AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. ACCORDIN GLY, THE AO DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME O F THE ASSESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. C IT(A). THE REPLY OF THE ASSESSEE BEFORE THE LD. CIT(A) CAN BE CATEGO RIZED AS UNDER: PURCHASES FROM A STAR JEWELLERY: A STAR JEWELLERY HAS FILED ITS REPLY IN RESPONSE TO THE NOTICE ISSUED U/S 133(6) OF THE ACT ON 10.03.2014. THE REPLY FILED BY THE A-STAR JEWELLERY WAS DULY ACKNOWLEDGED BY THE AO. PURCHASES FROM M/S. MAHAVIR JEWELLERS: THE ASSESSEE SUBMITTED THAT THE PROPRIETOR OF M/S S HRI MAHAVIR JEWELLERS WAS OUT OF TOWN DURING THE RELEVANT TIME, THEREFORE , NO REPLY TO THE NOTICE ISSUE U/S 133(6) OF THE ACT WAS MADE TO THE AO BEFO RE THE COMPLETION OF ASSESSMENT U/S 143(3) OF THE ACT. ITA NO.1914/AHD/2016 ITO VS. JOHRI SONS JEWELLERS PVT. LTD. ASST.YEAR 2011-12 - 4 - THE ASSESSEE HAS SOLD 22CT GOLD ORNAMENTS TO M/S. S HREE MAHAVIR JEWELLERS AND IN EXCHANGE, IT HAS PURCHASED 24CT GO LD BULLION FROM M/S. SHREE MAHAVIR JEWELLERS. THE AMOUNT OF PURCHASE AND SALES WITH M/S. SHREE MA HAVIR JEWELLERS IS OF THE IDENTICAL AMOUNT, I.E. RS.12,40,160/-. THE A SSESSEE ALSO CLAIMED THAT THE EXCHANGE OF JEWELLERY IN THE BUSINESS OF J EWELLERY IS VERY COMMON AND PREVAILING PRACTICE. IT IS DONE TO AVOID THE LOSSES SUCH AS DETECTION OF PURITY AND COST OF LABOR. THE ASSESSEE IN SUPPORT OF HIS CLAIM FILED THE COPY OF LEDGER AND CONFIRMATION OF M/S. SHREE MAHAVIR JEWELLERS DURING THE APPELLATE PROCEEDINGS. THE ASSESSEE HAS NOT ONLY PURCHASED 22CT GOLD BULLI ON BUT ALSO HAS SOLD 22CT GOLD ORNAMENTS TO M/S. SHREE MAHAVIR JEWELLERS . THE AO IN THE ASSESSMENT PROCEEDINGS HAS ACCEPTED THE SALES MADE BY THE ASSESSEE TO M/S. SHREE MAHAVIR JEWELLERS. IN CASE THE PURCHASES ARE HELD AS BOGUS THEN THE SALES SHOULD ALSO BE HELD AS BOGUS. THE LD. CIT(A) CALLED FOR THE REMAND REPORT FROM TH E AO ON THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE VIDE LETT ER DATED 01.05.2015. ITA NO.1914/AHD/2016 ITO VS. JOHRI SONS JEWELLERS PVT. LTD. ASST.YEAR 2011-12 - 5 - THE AO FILED THE REMAND REPORT VIDE OFFICE LETTER N O.ITO/WARD- 2(1)(2)/REMAND REPORT/JOHRISONS/2015-16 DATED 06/05 /2015, AS DETAILED UNDER: 1. THE AO CONSIDERED THE FACTS OF FILING THE REPLY OF M/S A STAR JEWELLERY VIDE LETTER DATED 10.03.2014 IN RESPONSE TO THE NOTICE ISSUED U/S 133(6) OF THE ACT. BUT THE SAME WAS DISR EGARDED ON THE GROUND THAT SAME HAS ALREADY BEEN CONSIDERED DURING THE ASSESSMENT PROCEEDINGS. 2. THE PURCHASES SHOWN BY THE ASSESSEE FROM M/S. SHREE MAHAVIR JEWELLERS ARE BOGUS DUE TO THE FACT THAT THE VAT RE GISTRATION OF M/S. SHREE MAHAVIR JEWELLERS HAS ALREADY BEEN CANCE LLED AS EVIDENT FROM THE WEBSITE OF GUJARAT COMMERCIAL TAX DEPARTMENT. 3. THE BILLS ISSUED BY M/S. SHREE MAHAVIR JEWELLERS AR E HANDWRITTEN, AND WITHOUT ANY SIGNATURE, THEREFORE, SAME CANNOT B E TREATED AS GENUINE. 4. THERE IS NO SIGNATURE ON THE BILLS ISSUED BY THE M/ S. SHREE MAHAVIR JEWELLERS EVIDENCING THE PERSON WHO HAS RECEIVED TH E GOODS. 5. THERE WAS NO MENTION IN THE BILLS OF M/S. SHREE MAH AVIR JEWELLERS DESCRIBING THE GOODS PURCHASED AND SOLD. 6. THERE WAS NO STOCK REGISTER PRODUCED BY THE ASSESSE E DURING THE REMAND PROCEEDING. HOWEVER, THE ASSESSEE IN HIS REJOINDER DATED 19.05. 2015 SUBMITTED AS UNDER: 1. THE BOOKS OF ACCOUNTS WERE DULY AUDITED UNDER THE C OMPANIES ACT AS WELL AS U/S 44AB OF THE ACT, AND NO DISCREPANCY OF WHATSOEVER WAS POINTED OUT IN THE BOOKS OF ACCOUNTS OF THE ASS ESSEE. ITA NO.1914/AHD/2016 ITO VS. JOHRI SONS JEWELLERS PVT. LTD. ASST.YEAR 2011-12 - 6 - 2. THE STOCK RECORDS SHOWING THE QUANTITY OF ALL THE I TEMS WERE DULY FURNISHED DURING THE REMAND PROCEEDINGS, BUT NO DEF ECT WAS OBSERVED BY THE AO. 3. THE AO HAS ACCEPTED THE SALES MADE TO M/S. SHREE MA HAVIR JEWELLERS, WHICH WAS ADJUSTED AGAINST THE PURCHASES MADE BY THE ASSESSEE FROM M/S. SHREE MAHAVIR JEWELLERS. IN CAS E THE PURCHASES ARE REJECTED THEN THE SALE SHOULD ALSO BE HELD AS B OGUS. 4. THERE IS NO EVIDENCE SUGGESTING THAT THE BOGUS PURC HASES HAVE BEEN SOLD BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCO UNTS. THE PURCHASES FROM M/S. SHREE MAHAVIR JEWELLERS EITHER HAVE BEEN SOLD TO THE PARTIES, WHICH HAS BEEN DULY REFLECTED IN THE BOOKS OF ACCOUNTS OR IT IS LYING AS CLOSING STOCK AT THE END OF THE YEAR. 5. THE ASSESSEE HAS MADE A SIMILAR TRANSACTION WITH M/ S. SHREE MAHAVIR JEWELLERS AS WELL AS WITH M/S A STAR JEWELL ERS IN THE EARLIER YEAR ALSO BUT NO DISALLOWANCE WAS MADE IN T HOSE YEARS. 6. THE PURCHASES MADE FROM THE A-STAR JEWELLERS WERE C LEARED BY ISSUING ACCOUNT PAYEE CHEQUES. THE ASSESSEE IN SUPP ORT OF ITS CLAIM FILED THE COPY OF LEDGERS, BANK STATEMENTS AND COPY OF RETURNS. THERE WAS NO DEFECT OBSERVED BY THE AO IN REPLY FIL ED BY THE A- STAR JEWELLERS DATED 10.03.2014. 7. THE AO HAS NOT ISSUED ANY OTHER NOTICE TO M/S. SHRE E MAHAVIR JEWELLERS FOR CONFIRMING THE TRANSACTION OF PURCHAS ES SHOWN BY THE ASSESSEE. 8. THE VAT REGISTRATION CERTIFICATE OF M/S. SHREE MAHA VIR JEWELLERS WAS VALID DURING THE RELEVANT TIME I.E. A.Y. 2011-1 2. IN FACT THE REGISTRATION CERTIFICATE UNDER VAT WAS CANCELED VER Y RECENTLY. 9. THE HANDWRITTEN BILLS GIVEN BY M/S. SHREE MAHAVIR J EWELLERS DO NOT MAKE THE TRANSACTION AS ILLEGAL OR BOGUS. 10. ALL THE BILLS OF M/S. SHREE MAHAVIR JEWELLERS WERE DULY SIGNED AND NUMBERS. ITA NO.1914/AHD/2016 ITO VS. JOHRI SONS JEWELLERS PVT. LTD. ASST.YEAR 2011-12 - 7 - 11. THE ASSESSEE IN SUPPORT OF HIS CLAIM HAS ALSO FILE D A COPY OF PAN AND COPY OF THE RETURN FILED WITH VAT AUTHORITIES T HUS THE IDENTITY OF M/S. SHREE MAHAVIR JEWELLERS CANNOT BE DOUBTED. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND REMAND REPORT OF THE AO HAS ADMITTED THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE UNDER THE RULE 46A OF THE IT RULE. THE LD. CIT(A) WHILE ATTEMPTING THE ADDITIONAL EVIDENCES FILE BY THE ASS ESSEE HAS PUT HIS RELIANCE ON THE JUDGMENT OF HONBLE GUJARAT HIGH CO URT IN THE CASE OF CIT VS. KAMLABEN SURESHCHANDRA BHATI REPORTED IN 44 TAXAMNN.COM 459, WHEREIN IT WAS HELD AS UNDER: 4. IN OUR VIEW, CIT [A] COMMITTED NO ERROR NOR THE AD MISSION OF ADDITIONAL EVIDENCE CAN BE STATED TO BE IN BREACH O F THE REQUIREMENT OF RULE 46A OF THE RULES. PARTICULARLY WHEN THE INTERE ST OF THE REVENUE WAS SAFEGUARDED BY CALLING FOR THE REMAND REPORT AN D PERMITTING THE ASSESSING OFFICER TO COMMENT ON SUCH ADDITIONAL EVI DENCE, WE SEE NO REASON TO INTERFERE. THE LD CIT(A) AFTER CONSIDERING THE SUBMISSION OF T HE ASSESSEE AND REMAND REPORT OF THE AO HAS GRANTED RELIEF TO THE A SSESSEE IN PART BY OBSERVING AS UNDER: 2.9. IT HAS BEEN NOTICED THAT FROM M/S. A STAR JE WELLERY THE APPELLANT HAS MADE THE PURCHASES OF RS.27,32,038/- ON THE VAR IOUS DATES STARTING FROM 02/04/2010 TO 19/01/2011. LIKEWISE, THE APPELL ANT HAS ALSO MADE THE PAYMENT TO THE AFORESAID PARTY STARTING FROM 12 /04/2010 TO 01/03/2011 THROUGH CHEQUES. FURTHER, THERE WAS OPEN ING BALANCE PAYABLE BY THE APPELLANT AS ON 01/04/2010 AT RS.8,8 4,688/- WITH THE CLOSING BALANCE PAYABLE AS ON 31/03/2011 AT RS.14,9 9,059/-. IT HAS BEEN NOTICED THAT THE APPELLANT HAS MADE THE PAYMENT THR OUGH ACCOUNT PAYEE CHEQUES AT 15 OCCASIONS ON DIFFERENT DATES DURING T HE YEAR WHICH GOES TO SHOW THAT IT WAS NOT AN YEAR END ADJUSTMENT BY W AY OF BOOKING THE BOGUS PURCHASES IN ITS NAME MADE BY THE APPELLANT T O REDUCE THE PROFITS. ON GOING THROUGH THE BILLS, IT HAS BEEN NOTICED THA T THE SUPPLIER PARTY ITA NO.1914/AHD/2016 ITO VS. JOHRI SONS JEWELLERS PVT. LTD. ASST.YEAR 2011-12 - 8 - WAS HAVING VAT TIN NUMBER AND CST TIN NUMBER. FURTH ER, THE BILLS PRODUCED DID NOT INDICATE ANY SUSPICION OVER THE NA TURE OF TRANSACTIONS. IT HAS BEEN NOTICED THAT MERELY THE AFORESAID PARTY DID NOT ATTEND THE OFFICE ALTHOUGH IT SUBMITTED THE REQUISITE DETAILS AND EVIDENCES TO THE AO IN HIS OFFICE ON 10/03/2014 I.E. BEFORE COMPLETI ON OF THE ASSESSMENT AND THE AO DID NOT CONTROVERT THE SAME, THUS, THERE IS NO CASE TO TREAT THE PURCHASES FROM M/S. A STAR JEWELLERY AS BOGUS. NO DISCREPANCY IN RESPECT OF THE PAYMENTS OR RECEIPT OF THE GOODS HAV E BEEN OBSERVED BY THE AO. THUS, THE DISALLOWANCE MADE BY THE AO IN RE SPECT OF THE PURCHASES MADE FROM M/S. A STAR JEWELLERY IS NOT CO RRECT, AND HENCE, THE SAME IS DELETED. 2.10. NOW, WITH REGARD TO THE PURCHASES SHOWN FROM M/S. SHREE MAHAVIR JEWELLERS, IT HAS BEEN NOTICED THAT THE AFO RESAID PARTY NEITHER ATTENDED THE OFFICE OF THE AO ALONG WITH BOOKS OF A CCOUNTS NOR SUBMITTED ANY DETAILS AND EVIDENCES IN SUPPORT OF T HE SALES MADE TO THE APPELLANT BEFORE COMPLETION OF THE ASSESSMENT. IN T HE PRESENT APPELLATE PROCEEDINGS, THE APPELLANT HAS SUBMITTED A HAND WRI TTEN LEDGER ACCOUNT OF THE APPELLANT ON THE LETTER PAD OF M/S. SHREE MA HAVIR JEWELLERS IN WHICH ON THE DEBIT SIDE ALL THE ENTRIES ARE MADE IN RESPECT OF PURCHASES BY THE APPELLANT WHILE ON THE CREDIT SIDE ALL THE E NTRIES WERE MADE BY THE PURCHASES FROM THE APPELLANT. IN OTHER WORDS, I N THE ENTIRE LEDGER, THE APPELLANT HAS SHOWN THE PURCHASES FROM THE AFOR ESAID PARTY ON ONE HAND AND AT THE SAME TIME, THE SALES HAVE ALSO BEEN MADE RESULTING INTO THE NIL CLOSING BALANCE ON 09/09/2010. IT HAS BEEN SUBMITTED THAT THE APPELLANT HAS PURCHASED THE GOLD BARS FROM THE AFOR ESAID PARTY, WHILE THE APPELLANT HAS SOLD THE OLD ORNAMENTS. SINCE, TH E TRANSACTIONS IN THIS WAY SHOWN ARE NOT VERIFIABLE WITH THE SUPPORTING EV IDENCES IN THE FORM OF DELIVERY NOTES / ANY EVIDENCE IN RESPECT OF MOVE MENT OF THE GOODS ETC. THUS, THE CLAIM OF THE APPELLANT IS NOT VERIFIABLE. THE AO IN THE REMAND REPORT HAS ALSO OBSERVED THAT THE VAT REGISTRATION OF THE AFORESAID PARTY WAS ALREADY CANCELLED BY THE GUJARAT COMMERCI AL TAX DEPARTMENT WHICH ALSO CREATES SUSPICION OVER THE VE RACITY OF THE TRANSACTIONS HAVING CARRIED OUT BY THE AFORESAID PA RTY. IT HAS ALSO BEEN NOTICED THAT THE SALES BILL ISSUED BY M/S. SHREE MA HAVEER JEWELLERS DID NOT BEAR THE SIGNATURE OF THE SUPPLIER PARTY, THUS, THESE PURCHASES COULD NOT BE SAID TO BE FULLY VERIFIABLE AS THE PURCHASE BILLS DID NOT AUTHENTICATE THE ACTUAL PURCHASES. EVEN THE SIGNATU RE OF THE PERSON TO WHOM DELIVERY OF THE AFORESAID GOODS MADE DID NOT A PPEAR ON THE BILLS. THERE WAS NOT A SINGLE RUPEE TRANSACTION THROUGH CH EQUES / BANK ITA NO.1914/AHD/2016 ITO VS. JOHRI SONS JEWELLERS PVT. LTD. ASST.YEAR 2011-12 - 9 - ACCOUNT WHICH COULD AT LEAST AUTHENTICATE THE TRANS ACTIONS HAVING BEEN CARRIED OUT BETWEEN THE APPELLANT AND THE AFORESAID PARTY. 2.11. IN VIEW OF THE AFORESAID DISCUSSION, THE P URCHASES SHOWN BY THE APPELLANT FROM M/S. SHREE MAHAVIR JEWELLERS COULD N OT BE SAID TO BE FULLY VERIFIABLE, AND THEREFORE, IN VIEW OF THE JUD GMENTS / DECISIONS OF THE HON'BLE COURTS CITED BELOW, THE DISALLOWANCE OF THE PURCHASES TO THE EXTENT OF 12.5% IS FOUND CORRECT AND JUSTIFIED AND THE SAME IS CONFIRMED WHICH COMES TO RS.1,55,020/-. RELIEF IS GRANTED FOR THE BALANCE AMOUNT. BEING AGGRIEVED BY ORDER OF LD. CIT(A) REVENUE IS I N APPEAL BEFORE US. THE LD. DR BEFORE US SUBMITTED THAT THE RELIEF HAS BEEN GRANTED BY THE AO ON THE BASIS OF ADDITIONAL EVIDENCES AND WITHOUT CALLING FOR THE REMAND REPORT ON THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE. THEREFORE, THERE IS A CONTRAVENTION OF RULE 46A OF INCOME TAX RULES. THE LD. DR RELIED ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS LA MEDICA REPORTED IN 250 ITR 575 WHEREIN IT WAS HELD AS UNDER: THOUGH ESSENTIALLY THE CONCLUSIONS OF THE TRIBUNAL HAD THE COLOUR OF FACTUAL FINDINGS, STILL IT WAS FOUND THAT THE TRIBU NAL HAD NOT TAKEN INTO CONSIDERATION RELEVANT MATERIALS AND HAD ALSO ACTED ON IRRELEVANT MATERIALS. THE FACT THAT THE ALLEGED SELLERS HAD BE EN FOUND TO BE PERSONS WITH NO MEANS TO EFFECT PURCHASES OR TO CARRY ON BU SINESS WAS A FACTOR WHICH DID NOT APPEAR TO HAVE BEEN CONSIDERED BY THE TRIBUNAL IN ITS PROPER PERSPECTIVE. WHAT WAS UNDER CONSIDERATION WA S WHETHER THE PURCHASES WERE MADE FROM KE AS WAS CLAIMED BY THE A SSESSEE. AMPLE MATERIAL HAD BEEN BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE PURCHASES WERE, IN FACT, NOT MADE FROM KE. THESE WE RE SOME OF THE RELEVANT MATERIALS WHICH HAD NOT BEEN CONSIDERED BY THE TRIBUNAL. ONCE IT WAS ACCEPTED THAT THE SUPPLIES WERE NOT MADE BY KE TO WHOM PAYMENTS WERE ALLEGED TO HAVE BEEN MADE, THE QUESTI ON AS TO WHETHER THE PURCHASES WERE MADE FROM SOME OTHER SOURCE OUGH T NOT TO HAVE WEIGHED WITH THE TRIBUNAL AS A FACTOR IN FAVOUR OF THE ASSESSEE. THE CONCLUSIONS OF THE TRIBUNAL WERE, THEREFORE, CLEARL Y ERRONEOUS, CONTRARY TO MATERIALS ON RECORD AND HAD BEEN ARRIVED AT WITH OUT TAKING INTO ITA NO.1914/AHD/2016 ITO VS. JOHRI SONS JEWELLERS PVT. LTD. ASST.YEAR 2011-12 - 10 - CONSIDERATION RELEVANT MATERIAL AND PLACING RELIANC E ON IRRELEVANT MATERIALS. A QUESTION OF FACT BECOMES A QUESTION OF LAW IF THE FINDING IS NOT FOUNDED ON ANY EVIDENCE OR MATERIAL OR IF IT IS CON TRARY TO EVIDENCE. SIMILAR IS THE POSITION IF IT IS PERVERSE OR THERE IS NO DIRECT NEXUS OR LINK BETWEEN CONCLUSION OF FACT AND THE PRIMARY FACT UPO N WHICH THE CONCLUSION IS BASED. WHERE THE TRIBUNAL HAS ACTED O N PARTLY RELEVANT AND PARTLY IRRELEVANT MATERIALS, AND IT IS NOT POSS IBLE TO SAY AS TO WHAT EXTENT LATTER HAS INFLUENCED ITS MIND, THE FINDING IS VITIATED BECAUSE OF USE OF IRRELEVANT MATERIAL. THAT GIVES RISE TO A QU ESTION OF LAW. HENCE, THE TRIBUNAL HAD NO MATERIAL TO COME TO THE CONCLUSION THAT THE IMPUGNED SUM COULD NOT BE TREATED AS THE ASSESSEES INCOME FROM UNDISCLOSED SOURCE. THE LD. DR ALSO RELIED ON THE ORDER JAIPUR TRIBUNAL IN THE CASE OF KHANDELWAL TRADING COMPANY VS. ACIT REPORTED IN 55 TTJ 261. ON THE OTHER HAND, LD. AR BEFORE US FILED A PAPER B OOK, WHICH IS RUNNING FROM PAGES 1 TO 87 AND REITERATED THE SUBMISSION AS MADE BEFORE THE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ADDIT ION WAS MADE BY THE AO ON ACCOUNT OF PURCHASES MADE FROM THE PARTIES AS DI SCUSSED ABOVE. IN FACT, THE NOTICE U/S 133(6) WERE ISSUED TO THE ABOV E-STATED PARTIES FOR CONFIRMATION, BUT NONE OF THE PARTY HAS REPLIED IN RESPONSE TO THE NOTICE U/S 133(6) OF THE ACT. HOWEVER, WE NOTE THAT THE REPLY FROM M/S A STAR JEW ELLERY DATED 10.03.2015 WAS DULY FILED BEFORE THE AO PRIOR TO TH E COMPLETION OF THE ITA NO.1914/AHD/2016 ITO VS. JOHRI SONS JEWELLERS PVT. LTD. ASST.YEAR 2011-12 - 11 - ASSESSMENT U/S 143(3) OF THE ACT. BUT THE AO HAS NO T CONSIDERED THE SAME DURING THE ASSESSMENT PROCEEDINGS. SIMILARLY, THE AO HAS NOT COMMENTED ANYTHING NEGATIVE ABOUT THE REPLY FILED B Y THE A-STAR JEWELLERY DURING THE REMAND PROCEEDINGS. THEREFORE, IN THE ABSENCE OF ANY DEFECT AS POINTED OUT BY THE AO, WE ARE INCLINE D NOT TO INTERFERE IN THE ORDER OF LD. CIT(A). SIMILARLY, WE NOTE THAT THE ASSESSEE HAS SHOWN PURC HASES AND SALES FROM M/S. SHREE MAHAVIR JEWELLERS AS EVIDENT FROM THE SU BMISSION OF THE ASSESSEE DISCUSSED IN THE PRECEDING PARAGRAPH. THE AO HAS NOT POINTED OUT ANY DEFECT IN THE SALES MADE BY THE ASSESSEE TO M/S. SHREE MAHAVIR JEWELLERS BUT THE PURCHASES FROM M/S. SHREE MAHAVIR JEWELLERS WAS REJECTED ON THE GROUND THAT THE PARTY FAILED TO CON FIRM THE TRANSACTION IN RESPONSE TO THE NOTICE U/S 133(6) OF THE ACT. THE A O DURING THE REMAND PROCEEDINGS POINTED OUT THE DEFECTS IN THE DETAILS FILED BY THE ASSESSEE IN SUPPORT OF PURCHASE TRANSACTION FROM M/S. SHREE MAH AVIR JEWELLERS SUCH AS THE BILLS ARE HANDWRITTEN OF M/S. SHREE MAHAVIR JEWELLERS AND THESE ARE NOT SERIAL NUMBERED AS WELL AS THERE IS NO SIGNATUR E. HOWEVER, WE NOTE THAT THE SALES MADE BY THE ASSESSEE TO M/S. SHREE M AHAVIR JEWELLERS HAVE BEEN DULY ACCEPTED. BESIDES THE ABOVE, WE NOTE THAT VAT REGISTRATION OF M/S. SHREE MAHAVIR JEWELLERS WAS VALID DURING THE YEAR UNDER CONSIDERA TION AS EVIDENT FROM THE VAT REPORT PLACED ON PAGE 9 TO 23 OF THE PAPER BOOK. AS PER THE VAT OF M/S. SHREE MAHAVIR JEWELLERS, WE NOTE THAT H E HAS DECLARED SALES ITA NO.1914/AHD/2016 ITO VS. JOHRI SONS JEWELLERS PVT. LTD. ASST.YEAR 2011-12 - 12 - OF RS.4,15,16,800/- AND PURCHASE WAS DECLARED FOR R S.3,97,26,974/-. FROM THE ABOVE DETAILS, WE NOTE THAT THE AMOUNT OF PURCHASES MADE FROM M/S. SHREE MAHAVIR JEWELLERS CANNOT BE REJECTED. IN CASE OF PURCHASES FROM A STAR JEWELLERY, THE ASS ESSEE HAS FILED THE COPIES OF THE TAX INVOICE AND THE DETAILS OF THE PA YMENT MADE TO THE PARTY WHICH IS PLACED ON PAGES 62 TO 77 OF THE PAPER BOOK . WE ALSO NOTE THAT THE ASSESSEE HAS FILED THE DETAIL S OF CLOSING STOCK WHEREIN, THE PURCHASES MADE FROM AFORESAID PARTIES WERE DULY RECORDED. THUS, WE HOLD THAT SUCH PURCHASES EITHER MUST HAVE BEEN SOLD OR MUST BE LAYING IN THE CLOSING STOCK OF THE ASSESSEE. MOREOV ER, IF PURCHASES HAVE NOT BEEN DOUBTED FROM M/S. SHREE MAHAVIR JEWELLERS THEN THE PROFIT ELEMENT CAN BE ADDED AS MADE BY THE LD. CIT(A). IN THIS REGARD, WE FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HONBLE G UJARAT HIGH COURT IN THE CASE OF CIT VS. SATHYANARAYAN P. RATHI REPOR TED IN 351 ITR 150. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED BEL OW: 6. THE PRESENT CASE, THUS, BEING ONE OF ONLY PURCHAS E BUT NOT FROM DISCLOSED SOURCES, IT WOULD BE ONLY PROFIT ELEMENT EMBODIED IN SUCH PURCHASE WHICH COULD BE ADDED IN THE INCOME OF THE ASSESSEE AND THUS, RIGHTLY SO DONE BY THE COMMISSIONER (APPEALS) AND T HE TRIBUNAL. 7. IF THIS BE OUR CONCLUSION, ONLY QUESTION ARISES W HETHER SUCH PROFIT ELEMENT SHOULD BE ESTIMATED AT THE RATE OF 30% OR 1 2%. WHENEVER SUCH A QUESTION ARISES, SOME REASONABLE ESTIMATION IS ALWAYS PERMISSIBLE. HARDLY ANY QUESTION OF LAW ON SUCH ASP ECT WOULD ARISE. MERELY, IT IS POINTED OUT THAT THE ASSESSEE WAS A T RADER AND THAT THE TRIBUNAL RETAINED 12% OF THE PURCHASE TOWARDS ITS POSSIBLE PROFIT, WE DO NOT FIND ANY REASON TO ENTERTAIN THE APPEAL. IN THE RESULT, TAX APPEAL IS DISMISSED. ITA NO.1914/AHD/2016 ITO VS. JOHRI SONS JEWELLERS PVT. LTD. ASST.YEAR 2011-12 - 13 - BESIDES THE ABOVE, WE ALSO FIND IMPORTANT AND RELEV ANT TO REPRODUCE THE PROVISION OF SECTION 68 OF THE ACT WHICH READS AS U NDER: CASH CREDITS. 56 68. 57 WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS 58 OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE 59 [ASSESSING] OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE PROVISION OF SECTION 68 CAN BE ATTRACTED IF THE RE IS ANY SUM FOUND CREDITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE TERM SUM DENOTES TO THE CASH RECEIVED BY THE ASSESSEE AS HELD BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. PANCHAM DASS JAIN REPORTED IN 205 CTR 444 WHEREIN IT WAS HELD AS UNDER : THE TRIBUNAL HAS RECORDED A CATEGORICAL FINDING OF FACT BASED ON APPRECIATION OF MATERIALS AND EVIDENCE ON RECORD TH AT THE ASSESSING OFFICER HAD ACCEPTED THE PURCHASES, SALES AS ALSO T HE TRADING RESULT DISCLOSED BY THE RESPONDENT-ASSESSEE. IT HAD RECORD ED A FINDING THAT THE AFORESAID TWO AMOUNTS REPRESENTED THE PURCHASES MAD E BY THE ASSESSEE ON CREDIT AND, THEREFORE, THE PROVISIONS OF SECTION 68 OF THE ACT COULD NOT BE ATTRACTED IN THE PRESENT CASE. WE FULLY AGRE E WITH THE VIEW TAKEN BY THE TRIBUNAL ON THIS ISSUE, INASMUCH AS, ON THE BASIS OF THE FINDINGS RECORDED BY IT THAT THESE TWO AMOUNTS REPRESENTED P URCHASES MADE BY THE RESPONDENT-ASSESSEE ON CREDIT AND THE PURCHASES AND SALES HAVING BEEN ACCEPTED BY THE DEPARTMENT, THE QUESTION OF AD DITION OF THE AFORESAID TWO AMOUNTS UNDER SECTION 68 OF THE ACT D ID NOT ARISE INASMUCH AS THE PROVISIONS OF SECTION 68 OF THE ACT WOULD NOT BE ATTRACTED ON THE PURCHASES MADE ON CREDIT. IN THE INSTANT CASE, THERE WAS NO CASH RECEIVED BY THE ASSESSEE FROM THE AFORESAID PARTIES. THE ACCOUNTS OF THE PARTIES WERE CREDITED BY THE ITA NO.1914/AHD/2016 ITO VS. JOHRI SONS JEWELLERS PVT. LTD. ASST.YEAR 2011-12 - 14 - ASSESSEE FOR PURCHASES MADE FROM THEM. THEREFORE, I N OUR CONSIDERED VIEW THE PROVISION OF SECTION 68 CANNOT BE APPLIED TO THE CASE ON HAND. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) HENCE GROUND OF APPEAL OF THE REVENUE IS DIS MISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. THIS ORDER PRONOUNCED IN OPEN COURT ON 11/07/2018 SD/- SD/- E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LN L; L; L; L; (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 11/07/2018 PRITI YADAV, SR.PS !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-2, AHMEDABAD. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD 6. .34 5 / GUARD FILE. % & / BY ORDER, , / //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD