DWARKA GEMS LTD., Jaipur V. ACIT, Jaipur

ITA 196/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5396 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 14-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DHK
• Keywords: Bogus purchase; Business income; Assessment record
• Section: 131; 37

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 196/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2005-06 M/S DWARKA GEMS LIMITED, G - I - 5 &6, EPIP, SITAPURA INDUSTRIAL AREA, JAIPUR CUKE VS. THE ACIT, CIRCLE - 7, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAACD 8548 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : MANISH AGARWAL (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : RAJ MEHRA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 07 .01.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 11 /03/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-III, JAIPUR DATED 17.02.2014 WHEREIN THE ASSESSEE HAS TAKEN FOL LOWING GROUNDS OF APPEAL: (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE PENALTY U/S 271(1)(C) AT RS. 2,19,555/- OF INCOME TAX ACT, 1961, ARBITRARILY. (1.1) THAT THE LD. CIT(A) HAS FURTHER ERRED IN CONFIRMIN G THE PENALTY ON ACCOUNT OF LUMP SUM TRADING ADDITION OF RS. 6,00,00 0/- UPHOLD BY THE ITA NO. 196/JP/14 M/S DWARKA GEMS LIMITED, JAIPUR VS. ACIT, CIRCLE-7, JAIPUR 2 HONBLE ITAT ON ESTIMATE BASIS WITHOUT SPECIFYING A NY EVIDENCE OF DELIBERATE CONCEALMENT OF INCOME, HENCE THE PENALTY SO LEVIED DESERVES TO BE DELETED. (1.2) THAT THE LD. CIT(A) HAS FURTHER ERRED IN IGNORING THE FACT THAT THE LD. AO HAS MADE NO INDEPENDENT ENQUIRIES IN PENALTY PROCEE DINGS BEFORE LEVY OF PENALTY U/S 271(1)(C) THOUGH PENALTY PROCEEDINGS AR E SEPARATE AND INDEPENDENT PROCEEDINGS, THUS THE AO HAS MISERABLY FAILED TO DISCHARGED THE ONUS LIES UPON HIM AND THE CONSEQUENT ORDER OF LEVY OF PENALTY WITHOUT BRINGING ON RECORD ANY EVIDENCE IS ILLEGAL AND DESERVES TO BE HOLD BAD IN LAW. (1.3) THAT THE CIT(A) AS WELL AS LD. AO HAVE GROSSLY ERR ED IN NOT FOLLOWING THE DECISION OF THE JURISDICTIONAL INCOME TAX APPELLATE TRIBUNAL PASSED IN THE CASE OF ASSESSEE ITSELF, WHEREIN UNDER SIMILAR CIRC UMSTANCES THE PENALTY LEVIED IN IMMEDIATELY PRECEDING ASSESSMENT YEAR WAS DELETED BY THE HONBLE BENCH. 2. BRIEF FACTS OF THE CASE: THE APPELLANT IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING, TRADING AND EXPORT OF GE MS AND JEWELLERY. THE RETURN OF INCOME FOR THE YEAR UNDER APPEAL WAS FIL ED U/S 139(1) OF THE ACT, DECLARING TOTAL INCOME OF RS.1,21,67,420/- AND THE ASSESSMENT WAS THEREAFTER COMPLETED AT A TOTAL INCOME OF RS. 13,18,72,682/-. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A), JAIPUR AND THEN BEFORE THE TRIBUNAL WHERE THE COORDINATE BENCH HAD DELETED ALL THE ADDI TIONS EXCEPT AN ADDITION OF RS. 6,00,000/- IN RESPECT OF BOGUS PURCHASES. T HEREAFTER, THE AO LEVIED PENALTY OF RS. 2,19,555/- U/S 271(1)(C) OF THE ACT ON THE ADDITIONS OF RS 6,00,000 SUSTAINED BY THE COORDINATE BENCH. BEING A GGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) WHO HAD UPHE LD THE PENALTY IMPOSED BY THE AO. 2.1 AT THE OUTSET, IT WAS SUBMITTED BY THE LD AR THAT FACTS OF THIS ASSESSMENT YEAR ARE SIMILAR TO THE FACTS OF THE IMMEDIATELY PR ECEDING ASSESSMENT YEAR I.E. 2004-05 WHEREIN ADDITIONS TO THE TUNE OF RS.17,51,5 2,498/- WERE MADE ON ACCOUNT OF ALLEGED UNVERIFIABLE PURCHASES FROM THE SAME PARTIES FROM WHICH PURCHASES HAVE BEEN MADE DURING THE YEAR UNDER APPE AL. THE ADDITIONS SO ITA NO. 196/JP/14 M/S DWARKA GEMS LIMITED, JAIPUR VS. ACIT, CIRCLE-7, JAIPUR 3 MADE BY THE LD. AO WERE RESTRICTED TO RS. 5,75,90,8 35/- BY THE LD. CIT(A) BY APPLYING A GROSS PROFIT RATE OF 35% ON THE AMOUNT O F PURCHASES ALLEGED AS UNVERIFIABLE. IN SECOND APPEAL, THIS HONBLE TRIBU NAL VIDE ORDER DATED 30.04.2008 IN ITA NO. 1067/JP/2007 DELETED ENTIRE A DDITION SUSTAINED BY THE LD. CIT(A) EXCEPT FOR THE LUMP SUM AMOUNT OF RS.10,00,0 00/- WHICH WAS SUSTAINED ON ESTIMATE BASIS AND TO PLUG THE LEAKAGE OF REVEN UE. THEREAFTER, PENALTY WAS IMPOSED U/S 271(1)(C) ON THE AMOUNT OF ADDITIONS SU STAINED BY THIS HONBLE TRIBUNAL, WHICH WAS DELETED BY THE LD CIT(A) BY APP RECIATING THE FACT THAT THE ADDITIONS SUSTAINED BY THE HONBLE TRIBUNAL WERE ME RELY ON ESTIMATE BASIS AND IN VIEW OF THE SETTLED LAW THAT NO PENALTY CAN BE I MPOSED ON ACCOUNT OF THE ADDITIONS MADE ON ESTIMATE BASIS, HE DELETED THE PE NALTY. IN FURTHER APPEAL, THE ORDER OF LD. CIT() WAS UPHELD BY THIS HONBLE TRI BUNAL VIDE ORDER DATED 28.04.2011 IN ITA NO. 549/JP/2010 AND THE PENALTY S O LEVIED STOOD DELETED. LD AR FURTHER SUBMITTED THAT IN THE YEAR UNDER CONS IDERATION, THE HONBLE TRIBUNAL HAD UPHELD THE ADHOC FIGURE OF RS. 6,00,0 00/- ON ACCOUNT OF TRADING ADDITION AFTER CONFIRMING THE APPLICATION OF THE PR OVISIONS OF SECTION 145(3) AND BY FOLLOWING THE PAST HISTORY OF THE ASSESSEE, AND HAS OPINED THAT IF A TRADING ADDITION OF RS. 6,00,000/- IS SUSTAINED THAT WILL M EET THE ENDS OF THE JUSTICE. THUS, IT IS CRYSTAL CLEAR THAT THIS HONBLE TRIBUN AL HAD UPHELD THE ADDITION TO THE EXTENT OF RS.6,00,000/- ONLY ON ESTIMATE BASIS WITH OUT THERE BEING ANY ADVERSE VIEW OR OBSERVATION AGAINST THE SUBMISSIONS MADE BY THE ASSESSEE NOR HAS IT BEEN HELD BY THE HONBLE ITAT THAT THE DETAILS FILE D AND SUBMISSIONS MADE BY THE ASSESSEE ARE FALSE. SINCE ACTION U/S 271(1)(C) OF THE INCOME TAX ACT, 1 961 IS PENAL IN NATURE , THEREFORE INTENTION OF THE LEGISLATURE HAS ALWAYS B EEN THAT THE ASSESSING OFFICER BEFORE IMPOSING THE PENALTY MUST SATISFY HIMSELF TH AT THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTIC ULARS OF INCOME. MERELY DUE TO THE FACT THAT SOME ADDITIONS WERE UPHELD IN QUANTUM APPELLATE PROCEEDINGS CANNOT IPSO FACTO LEAD TO THE EXISTENCE OF SATISFACTION WHICH IS REQUIRED FOR THE IMPOSITION OF PENALTY U/S 271(1)(C ). ITA NO. 196/JP/14 M/S DWARKA GEMS LIMITED, JAIPUR VS. ACIT, CIRCLE-7, JAIPUR 4 IT IS WELL SETTLED THAT NO PENALTY IS LEVIABLE U/S 271(1)(C) ON THE BASIS OF TRADING ADDITION DUE TO DISTURBANCE IN THE G.P. RATE DECLA RED BY THE ASSESSEE. IT IS FURTHER SUBMITTED THAT THE APPLICABILITY OF PROVISI ONS OF 145(3) DOES NOT MEAN THAT A TRADING ADDITION HAS NECESSARILY TO BE MADE. IN THIS REGARD, KIND ATTENTION OF THE HONBLE BENCH IS INVITED TO THE JU DGEMENT OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. GOTAN LIME KHANIJ UDHYOG (RAJ.) REPORTED IN (2002) 256 ITR 243. THEREFORE, THE ADDITIONS SUSTA INED IN THE ASSESSMENT ORDER NOT ON THE BASIS OF ANY CONCEALMENT BEING DETECTED IN ASSESSMENT BUT ONLY ON ADHOC BASIS AND BY FOLLOWING THE PAST HISTORY. WITH REGARD TO THE UNVERIFIED PURCHASES ALLEGED TO HAVE BEEN MADE BY THE ASSESSEE, IT IS SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FURNISHED COMPLETE DETAILS OF PURCHASE S WHICH INCLUDES COPIES OF PURCHASE BILLS, RST/CST NO. OF THE SUPPLIER, PAN OF THE SUPPLIER, PROOF OF PAYMENTS MADE AGAINST PURCHASES AND ALL THE POSSIBL E EVIDENCE WHICH COULD BE IN THE POSSESSION OF THE ASSESSEE. FURTHER NONE OF THE SUPPLIER ALLEGED AS UNVERIFIABLE HAS CATEGORICALLY STATED THAT NO GOODS IN PHYSICAL SHAPE WERE EVER SUPPLIED TO THE ASSESSEE AND ONLY BILLS WERE ISSUE D AND MERELY ON THE GENERAL PRESUMPTION THE CONCLUSION WAS DRAWN BY THE LD. AO WITH REGARD TO THE PURCHASES MADE FROM THESE PARTIES. SINCE THE ASSES SEE HAS FURNISHED THE COMPLETE DETAILS OF PURCHASES WHICH WERE REQUIRED T O DISCHARGE ITS ONUS TO SUBSTANTIATE THE CLAIM OF PURCHASES MADE. THIS FAC T WAS ALSO APPRECIATED BY THE HONBE ITAT AND SUSTAINED THE ADDITION ONLY ON ESTIMATED BASIS WITHOUT SPECIFYING ANY INACCURATE PARTICULARS OF INCOME FIL ED BY THE ASSESSEE OR ANY CONCEAL INCOME ON WHICH NO PENALTY IS LEVIABLE. THE FACT THAT LD. CIT(A) HAS INVOKED THE PROVISIONS OF SECTION 145(3) AND APPLIED PROFIT RATE OF 20% WHICH ACTION OF REJECTION OF BO OKS OF ACCOUNTS WAS SUSTAINED BY ITAT WHILE CONFIRMING LUMP SUM ADDITION IS GROSS LY IGNORED BY LD. CIT(A) AND ALSO BY LD. AO WHO OBSERVED THAT THE ADDITIONS WER E CONFIRMED BY THE APPELLATE AUTHORITIES SOLELY ON THE BASIS OF THE UN VERIFIABLE PURCHASES. IN THIS REGARD IT IS SUBMITTED THAT FACT OF THE UNVERIFIABL E PURCHASES MAY BE ONE OF THE REASON FOR INVOKING THE PROVISIONS OF SECTION 145(3 ) HOWEVER, NOWHERE IN THE PENALTY PROCEEDINGS LD. AO HAS MADE OUT A CASE THAT THE ASSESSE HAS ARRANGED ITA NO. 196/JP/14 M/S DWARKA GEMS LIMITED, JAIPUR VS. ACIT, CIRCLE-7, JAIPUR 5 THE BILLS BY MAKING PAYMENTS THROUGH PAYEES ACCOUNT CHEQUES AND THE MONEY HAS FLOWN BACK TO HIM IN CASH. IT IS FURTHER SUBMI TTED THAT IN PENALTY PROCEEDINGS THE LD. AO HAS MISERABLY FAILED TO ESTA BLISH CONSCIOUS CONCEALMENT AND HAVE ACTED IN DELIBERATE DEFIANCE OF LAW. ASSE SSING OFFICER HAS SIMPLY GUIDED BY THE FINDINGS AND OBSERVATIONS MADE IN QUA NTUM PROCEEDINGS AND NO NEW FACT WAS BROUGHT ON RECORD IN PENALTY PROCEEDIN GS TO HOLD THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OR CONCEALED A NY INCOME. 3. THE LD DR IS HEARD WHO HAS VEHEMENTLY ARGUED THE MATTER AND RELIED HEAVILY ON THE ORDER OF LD CIT(A). 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS RELIED HEAVILY ON THE ORDE R OF THE COORDINATE BENCH WHICH HAS BEEN PASSED IN THE CONTEXT OF THE QUANTUM PROCEEDINGS TO SUBMIT THAT THE ADDITIONS HAVE BEEN SUSTAINED BY ITAT ON AN EST IMATE BASIS AND THE ADDITIONS SO SUSTAINED ON ESTIMATE BASIS CANNOT FORM THE BASI S FOR LEVY OF PENALTY. IT WOULD THEREFORE BE RELEVANT TO NOTE THE RELEVANT OBSERVAT IONS AND FINDINGS OF THE COORDINATE BENCH AS WELL AS THAT OF LD CIT(A) IN TH E QUANTUM PROCEEDINGS. 4.1 THE LD CIT(A) OBSERVATION AT PARA 5.10 AND 5.11 OF ITS ORDER: THE DISALLOWED /BOGUS PURCHASES OF RS. 9,70,66,885 /- CONSISTS OF PURCHASES OF DIAMOND AND OTHER STONES OF RS. 6,80,97,036/- AS W ELL AS PURCHASES OF RAW GOLD OF RS. 2,25,74,859/-. AS AGAINST THIS THE TOTAL P URCHASES OF DIAMOND AND STONES IS RS. 15,03,13,299/-. IT MEANS THAT MORE THAN 45% OF DIAMOND AND STONES PURCHASES WERE BOGUS. THE AO HAS ALSO ACCEPTED TH E TOTAL SALES OF RS. 48.62 CRORES WHICH INCLUDES SALES OF STONES STUDDED JEWE LLERY OF RS. 19.28 CRORES. WHEN SALES ARE NOT DOUBTED THEN IT IS NOT POSSIBLE TO S HOW PURCHASES OF DIAMOND AND STONES TO THE TUNE OF 45% AS BOGUS. ONCE ANY PAYMENT IS HIT BY SECTION 37 IT IS IMPLIED THAT THE EXPENDITURE HAS BEEN INCURRED BU T IT WAS NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS BUT FOR SO ME OTHER PURPOSE. IN THE PRESENT CASE IT IS NOT THE FINDING OF THE AO THAT EXPENDITU RE INCURRED ON PURCHASE IS FOR ANY SPECIFIC NON BUSINESS PURPOSES. THE AO HAS FAILED TO PROVE THE NON BUSINESS PURPOSE OF THE EXPENDITURE INCURRED OR TO WHAT EXTE NT THE EXPENDITURE INCURRED FOR THE BUSINESS AND TO WHAT EXTENT IT WAS NOT FOR THE BUSINESS. IN FACT THE RIGHT ITA NO. 196/JP/14 M/S DWARKA GEMS LIMITED, JAIPUR VS. ACIT, CIRCLE-7, JAIPUR 6 APPROACH SHOULD BE TO REJECT THE BOOKS OF ACCOUNTS ON ACCOUNT OF UNPROVED PURCHASES AND ESTIMATED GROSS PROFIT. THE INTENTIO N OF THE APPELLANT TO OBTAIN PURCHASE BILLS MAY ONLY BE REDUCTION IN PROFIT. IN THE IMMEDIATE PRECEDING YEAR THE DECLARED G.P. RATE WAS 20.59% WHEREAS THIS YEAR THE APPELLANT HAS 19.45%. IN THE YEAR BEFORE, THE G.P. RATE WAS 20.42%. THUS BY SHOWING G.P. RATE OF 19.45%, THE APPELLANT HAS SHOWN REDUCED G.P.RATE AS COMPAR ED TO THE IMMEDIATE PRECEDING TWO YEARS. .IN THE YEAR UNDER CONSIDERATION ON THE SAME GROUN D BOOKS OF ACCOUNTS DESERVES TO BE REJECTED. THE AO IS FURTHER DIRECTED TO APPLY G.P.RATE OF 2 0% AS AGAINST 19.45% DECLARED ON THE TURNOVER OF RS. 48,70,61,298 /-. THIS G.P.RATE PROPOSED TO BE APPLIED IS IN CONSONANCE WITH THE PAST HISTORY O F APPELLANTS OWN CASE. VARIOUS HIGH COURTS HAVE HELD THAT FOR ESTIMATION OF GP RA TE, THE PAST HISTORY OF THE ASSESSEE IN THE BEST GUIDE. THIS GP RATE OF 20% IS BETTER THAN VARIOUS OTHER CASES OF THE SAME TRADE WHERE GP RATE IS THIS RANGE ONLY HAVE BEEN SHOWN. DISALLOWING ENTIRE IMPROVED PURCHASES GIVES ABSURD GP RATE WHI CH IS NEITHER IN CONSONANCE WITH OTHER CASES OF THE SAME TRADE, NOR IN CONSONAN CE WITH THE PAST HISTORY OF THE CASE. THUS INSTEAD OF DISALLOWING THE ENTIRE UNPROVED PUR CHASES THE ADDITION WILL BE REDUCED TO RS. 23,61,407/- (RS. 97412259/- MINUS RS . 95050852/-). THUS THE APPELLANT GETS PARTIAL RELIEF. 4.2 THE COORDINATE BENCH AFTER CONSIDERING THE ABOV E FINDINGS OF THE LD CIT(A) HAS HELD AT PARA 15 OF ITS ORDER AS UNDER: AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT ASSESSEE DESERVES TO SUCCEED IN THIS GROUND IN PART AND GROUND OF THE DEPARTMENT IS LIABLE TO BE REJECTED. THE TRIBUNAL BENCHES ARE TAKING A CONSISTENT VIEW THAT WHERE PURCHASES REMAINED UNVERIFIABLE, TH E PROVISIONS OF SECTION 145(3) ARE APPLICABLE. HOWEVER, AT THE SAME TIME, THE BENCHES ARE ALSO T AKING A CONSISTENT VIEW THAT WHERE BOOKS OF ACCOUNTS ARE RE JECTED, THE ADDITION CAN BE MADE AFTER TAKING INTO CONSIDERATION THE PAST HISTO RY OF THE CASE. THE PAST HISTORY OF THE CASE IS THAT IN IMMEDIATELY PRECEDING YEAR T HERE WERE ABOUT RS. 17,00,00,000/- PURCHASES REMAINED UNVERIFIABLE. T HE TRIBUNAL TAKING INTO ITA NO. 196/JP/14 M/S DWARKA GEMS LIMITED, JAIPUR VS. ACIT, CIRCLE-7, JAIPUR 7 CONSIDERATION THE PAST HISTORY AND CIRCUMSTANCES OF THE CASE SUSTAINED THE ADHOC ADDITION OF RS. 10,00,000/-. IN OUR CONSIDERED VIE W, NOW THE PAST HISTORY OF THE CASE IS THE ORDER OF TRIBUNAL WHO SUSTAINED AN ADDI TION OF RS. 10,00,000/- WHERE THE UNVERIFIABLE PURCHASES WERE OF RS. 17,00,00,000 . IN THE YEAR UNDER CONSIDERATION, THE UNVERIFIABLE PURCHASES ARE OF RS . 9,00,00,000/- ONLY AS AGAINST RS. 17,00,00,000/- IN IMMEDIATELY PRECEDING YEAR . THEREFORE, IN OUR CONSIDERED VIEW IF A TRADING ADDITION OF RS. 6,00,000/- IS SUS TAINED THAT WILL MEET THE ENDS OF JUSTICE AS THE TRIBUNAL HAS SUSTAINED AN ADDITION O F RS. 10,00,000/- IN IMMEDIATELY YEAR ON UNVERIFIABLE PURCHASES OF RS. 17,00,00,000/ -. WE ORDER ACCORDINGLY. 4.3 AS IT IS CLEAR FROM THE ABOVE FINDINGS OF THE C OORDINATE BENCH, THERE ARE UNVERIFIED PURCHASES WHICH HAVE BEEN CONFIRMED AND SECONDLY, THE REJECTION OF THE BOOKS OF ACCOUNTS HAVE BEEN CONFIRMED ON ACCOUN T OF UNVERIFIED PURCHASES. IN TERMS OF QUANTUM OF DISALLOWANCE, THE AO HAS DIS ALLOWED THE WHOLE OF UNVERIFIED PURCHASES AND GIVEN THE FACT THAT THE SA LES HAVE NOT BEEN DOUBTED, THE LD CIT(A) HAS HELD THAT THE RIGHT APPROACH SHOULD H AVE BEEN TO DETERMINE AN APPROPRIATE GP PROFIT PERCENTAGE AS THE INTENTION O F THE APPELLANT TO OBTAIN PURCHASE BILLS MAY ONLY BE REDUCTION IN PROFIT AND HE ACCORDINGLY ENHANCED THE G.P RATE FROM 20% AS AGAINST 19.45% BASED ON PAST H ISTORY OF THE ASSESSEE. A QUESTION THAT RAISES FOR CONSIDERATION IS WHETHER T HE ENHANCEMENT OF G.P RATE IS RESTRICTED WHOLLY TO UNVERIFIED PURCHASES OR NOT. THE COORDINATE BENCH HAS HELD THAT IN THE YEAR UNDER CONSIDERATION, THE UNVERIFIA BLE PURCHASES ARE OF RS. 9,00,00,000/- ONLY AS AGAINST RS. 17,00,00,000/- IN IMMEDIATELY PRECEDING YEAR . THEREFORE, IN OUR CONSIDERED VIEW IF A TRADING ADDI TION OF RS. 6,00,000/- IS SUSTAINED THAT WILL MEET THE ENDS OF JUSTICE AS THE TRIBUNAL HAS SUSTAINED AN ADDITION OF RS. 10,00,000/- IN IMMEDIATELY YEAR ON UNVERIFIABLE PURCHASES OF RS. 17,00,00,000/-. SO, IT IS CLEAR THAT THE TRADING AD DITION SUSTAINED BY THE TRIBUNAL RELATES TO UNVERIFIED PURCHASES ONLY. EVEN THOUGH THIS INVOLVED AN ELEMENT OF ESTIMATION, THE FACT REMAINS THAT THE SAME RELATES TO UNVERIFIED PURCHASES CANNOT BE IGNORED. 4.4 IT IS A SETTLED LAW NOW THAT THE MENS REA IS NO T TO BE PROVED TO ATTRACT LEVY THE PENALTY. AT THE SAME TIME, THE FACT OF UNVERIF IED PURCHASES HAVE BEEN CONFIRMED BY THE COORDINATE BENCH IN THE QUANTUM PR OCEEDINGS. IN THIS REGARD, ITA NO. 196/JP/14 M/S DWARKA GEMS LIMITED, JAIPUR VS. ACIT, CIRCLE-7, JAIPUR 8 THE LD AR HAS SUBMITTED THAT DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSEE HAS FURNISHED COMPLETE DETAILS OF PURCHASE S WHICH INCLUDES COPIES OF PURCHASE BILLS, RST/CST NO. OF THE SUPPLIER, PAN OF THE SUPPLIER, PROOF OF PAYMENTS MADE AGAINST PURCHASES AND ALL THE POSSIBL E EVIDENCE WHICH COULD BE IN THE POSSESSION OF THE ASSESSEE. FURTHER NONE OF TH E SUPPLIER ALLEGED AS UNVERIFIABLE HAS CATEGORICALLY STATED THAT NO GOODS IN PHYSICAL SHAPE WERE EVER SUPPLIED TO THE ASSESSEE AND ONLY BILLS WERE ISSUE D AND MERELY ON THE GENERAL PRESUMPTION THE CONCLUSION WAS DRAWN BY THE LD. AO WITH REGARD TO THE PURCHASES MADE FROM THESE PARTIES. SINCE THE ASSES SEE HAS FURNISHED THE COMPLETE DETAILS OF PURCHASES WHICH WERE REQUIRED T O DISCHARGE ITS ONUS TO SUBSTANTIATE THE CLAIM OF PURCHASES MADE, NO PENALT Y IS LEVIABLE. FROM THE PERUSAL OF ASSESSMENT RECORDS, IT IS NOTED THAT THE AO AND THE OTHER WINGS OF THE TAX DEPARTMENT HAS CARRIED OUT EXTENSIVE ENQUIRIES AND INVESTIGATION IN THE MATTER AND HAVE NOT BEEN ABLE TO ESTABLISH THE GENU INENESS OF EITHER THE SUPPLIERS OR THE PURCHASES MADE FROM THEM. THE INS PECTORS WERE DEPUTED TO MAKE ENQUIRIES AND TO ALSO SERVE SUMMONS U/S 131 AN D PARTIES WERE NOT FOUND AT THE GIVEN ADDRESSES. SOME OF THE PARTIES WERE FOUND TO HAVE BEEN ISSUING BOGUS BILLS BY WAY OF CHARGING COMMISSION AS PER ENQUIRIE S CONDUCTED BY BCCT WING AND SOME OF THE PARTIES WERE FOUND TO BE ENTRY OPERATOR S. IN VIEW OF ALL THESE FINDINGS WHICH HAVE NOT BEEN REBUTTED BY THE LD AR, THE ONUS THUS SHIFTS BACK TO THE ASSESSEE TO PROVIDE THE GENUINENESS OF THE TRANSACT IONS TO THE SATISFACTION OF THE AO AND OFFER THE NECESSARY EXPLANATION. NEITHER TH E CORRECT ADDRESSES OF THE SUPPLIERS WERE GIVEN NOR THEY WERE PRODUCED BEFORE THE ASSESSING OFFICER. THUS, THE BASIC INGREDIENTS REQUIRED FOR ACCEPTING A TRAN SACTION AS GENUINE WERE NOT FURNISHED AND THUS, THE EXPLANATION FURNISHED BY TH E ASSESSEE THAT THE PURCHASES ARE GENUINE IS NOT SUBSTANTIATED AND LACKS BONAFIDE . THUS, PENALTY IS CLEARLY LEVIABLE UNDER SECTION 271(1)(C) READ WITH THE EXPL ANATION IN RESPECT OF UNVERIFIED PURCHASES. 4.5 FOR REASONS STATED ABOVE, WE ARE IN COMPLETE AG REEMENT WITH THE FINDING OF THE LD. CIT(A) THAT THE BOGUS PURCHASES IS PROVE D BY WAY OF VARIOUS EVIDENCES GATHERED BY THE AO AND THE HONBLE ITAT (IN QUANTUM PROCEEDINGS) HAS ONLY REDUCED THE QUANTUM OF ADDITION AND NOT THE FINDING OF THE AO IN RESPECT OF ITA NO. 196/JP/14 M/S DWARKA GEMS LIMITED, JAIPUR VS. ACIT, CIRCLE-7, JAIPUR 9 BOGUS PURCHASES. IT ALSO TANTAMOUNT TO MAKING OF W RONG CLAIM OF PURCHASES TO THE EXTENT OF RS. 6 LACS AND ACCORDINGLY PENALTY OF RS. 2,19,555/- U/S 271(1)(C) OF IT ACT WAS RIGHTLY IMPOSED BY THE AO. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/03 /2016. SD/- SD/- ( R.P. TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 11 / 03 /2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S DWARKA GEMS LIMITED, SITAPUR A INDL. AREA, JAIPUR 2. THE RESPONDENT- THE ACIT, CIRCLE-7, JAIPUR 3. THE CIT(A) III, JAIPUR 4. THE CIT-III, JAIPUR 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO SA NO.196 /JP/14) VKNS'KKUQLKJ@ BY ORDER, GK;D IATHDKJ@ ASSISTANT. REGISTRAR ITA NO. 196/JP/14 M/S DWARKA GEMS LIMITED, JAIPUR VS. ACIT, CIRCLE-7, JAIPUR 10 SL. NO. DATE INITIAL 1 DATE OF DICTATION 2 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER OTHER MEMBER 3 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S 4 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 5 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. 6 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 8 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER 9. DATE OF DISPATCH OF THE ORDER