MARINE MINERAL AND HERBAL REMEDIES P LTD, Jaipur V. ACIT, Jaipur

ITA 241/JPR/2013

• Counselvise Citation: 24123114 RSA 2013
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 07-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K KHANDELWAL
• Assessee Lawyers: S L PODDAR
• Keywords: Bogus purchase; Rejection of books of accounts; Search and seizure; Principle of natural justice
• Section: 143(3); 133A; 153A; 131

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR ( BEFORE SHRI HARI OM MARATHA AND SHRI N.K. SAINI ) ITA NOS. 241 TO 244/JP/2013 ASSESSMENT YEARS: 2004-05TO 2007-08 PAN: AACM 2301 B M/S. MARINE MINERAL AND HERBAL REMEDIES VS. THE A CIT (P) LTD.,4 , GANGA VIHAR, SARDAR PATEL MARG CENTRAL CIRCLE-1 C- SCHEME, JAIPUR JAIPUR (APPELLANT) (RESPONDENT) ITA NOS. 466 TO 469/JP/2013 ASSESSMENT YEARS: 2004-05TO 2007-08 PAN: AACM 2301 B THE ACIT VS. M/S. MARINE MINERAL AND HERBAL REME DIES CENTRAL CIRCLE-3 (P) LTD., 4 GANGA VIHAR, SARDAR PATEL MARG JAIPUR C- SCHEME, JAIPUR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.L. PODDAR DEPARTMENT BY : SHRI A.K. KHANDELWAL DATE OF HEARING : 29.01.2014. DATE OF PRONOUNCEMENT : 05.03.2014 ORDER PER BENCH THE ABOVE CAPTIONED APPEALS COMPRISED OF CROSS APP EALS FOR THE ASSESSMENT YEARS 2004-05 TO 2007-08 ARE DIRECTED AG AINST THE COMMON ORDER 2 OF THE LD CIT(A), AJMER DATED 21-02-2013. ALL THESE APPEALS WERE HEARD TOGETHER. THEREFORE, FOR THE SAKE CONGRUENCE, CONVE NIENCE AND BREVITY, WE ARE PROCEEDING TO DECIDE THEM BY A COMMON ORDER. ITA NO. 241/JP/2013 A.Y.2004-05 2.1 BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE OPERATION U/S 132(1) OF THE INCOME-TAX ACT, 1961(T HE ACT FOR SHORT) WAS CARRIED OUT ON 20-05-2009 AT THE BUSINESS AND RESID ENCE PREMISES OF THE ASSESSEE GROUP BY THE BCTT WING OF INVESTIGATION DI RECTORATE AT JAIPUR IN F.Y. 2007-08. THE ASSESSEE COMPANY WAS INCORPORATED ON 4-5-1999 AND IT DEALS IN TRADING OF GEM STONES. THE COMPANYS DIREC TORS ARE SHRI SHIV SHANKAR LAL GUPTA AND SHRI KHUSHI KUMAR AMERIYA AND SMT. GANGA DEVI GUPTA. SHRI KHUSHI KUMAR AMERIYA RESIDES AT JAIPUR IS THE MOST IMPORTANT PERSON OF THE GROUP WHO LOOKS AFTER THE OVERALL OPE RATIONS OF AGRICULTURAL LAND THE UNITS AND CONCERNS AT JAIPUR. HE IS THE DI RECTOR IN ALL THE IMPORTANT COMPANIES OF THIS GROUP. THE MAIN GROUP COMPANIES/ CONCERNS ARE ENUMERATED AS UNDER:- 1. M/S. CLARITY SALT (P) LTD. 2. M/S. MARINE MINERAL AND HERBAL REMEDIES (P) LT D. (MMHRPL). 3. M/S. CLARITY GOLD (P) LTD. 4. M/S. GEM MART (INDIA) (P) LTD. 5. M/S. CLARITY GOLD MINT LTD. 3 ON THE BASIS OF THE SEARCH AS STATED ABOVE, THE ALL EGED ACCOMMODATION ENTRY OPERATORS WERE INDULGED IN ARRANGEMENT OF BOGUS PUR CHASE BILLS FOR DIFFERENT TAX PAYERS AT A VERY LARGE SCALE. THE BCTT WING HAD CONDUCTED SURVEY OPERATIONS U/S 133A OF THE ACT AT THE BUSINESS PREM ISES OF THESE PERSONS WHO WERE ISSUING BOGUS SALE BILLS TO CERTAIN PARTIES IN JAIPUR AND OTHER PLACES. DURING ENQUIRIES CONDUCTED IN THE CASES OF BOGUS EN TRY PROVIDERS, IT WAS FOUND THAT THESE PERSONS WERE ENGAGED IN ISSUING SA LE BILLS FOR DIFFERENT COMMODITIES, MOSTLY GEMS AND JEWELLERY WITHOUT SUPP LYING THE GOODS MENTIONED IN THE BILLS. THESE PERSONS WOULD RECEIVE THE AMOUNT MENTIONED IN THE BILLS THROUGH ACCOUNT PAYEE CHEQUES/ DRAFTS AND WOULD DEPOSIT IN THEIR BANK ACCOUNTS. AFTER CLEARANCE OF THE CHEQUES/ DRAF TS, THE AMOUNT WERE WITHDRAWN IN CASH AND RETURNED BACK TO THE PARTIES. IN LIEU THEREOF, THEY WOULD CHARGE COMMISSION FROM THE BENEFICIARIES. FRO M THE DETAILS SO COLLECTED, VARIOUS BENEFICIARIES WERE IDENTIFIED. M /S. CLARITY GOLD (P) LTD. A SISTER CONCERN OF THE ASSESSEE COMPANY WAS ALSO FOU ND TO BE INCLUDED IN THAT LIST OF IDENTIFIED BENEFICIARIES INCLUDING THIS ASS ESSEE COMPANY. THE ASSESSEE COMPANY IS ALLEGED TO HAVE OBTAINED BOGUS PURCHASE BILLS AMOUNTING TO RS. 13.59 CRORS FROM VARIOUS ENTRY PROVIDERS. IN HIS ST ATEMENT RECORDED DURING SEARCH, SHRI KHUSHI KUMAR AMERIYA ADMITTED IN DETA IL THAT MOST OF THE TURNOVER APPEARING IN THE BOOKS OF VARIOUS CONCERNS OF THIS GROUP WERE 4 BOGUS AND WERE ARRANGED THROUGH BROKERS BY PAYING C OMMISSION TO INFLATE THE STOCK IN TRADE AND TURNOVER OF THE COMPANY TO O BTAIN HIGHER CREDIT LIMITS FROM THE BANKS. IN THE INVESTIGATION DONE BY THE WI NG IN F.Y. 2007-08, THE STATEMENTS OF SHRI ANIL KUMAR LALWANI AND VIJAY GRO UP WHO WERE FOUND TO BE ONLY ENTRY PROVIDERS FOR BOGUS SALE/PURCHASE BIL LS OF GEMS/ JEWELLERY. SHRI KHUSHI KUMAR AMERIYA ADMITTED THAT SUCH BOGUS DETAI LS WERE OBTAINED FROM VARIOUS FIRMS AGAINST WHICH NO PHYSICAL DELIVERY OF GOODS TOOK PLACE. HE STATED THAT THESE BILLS WERE OBTAINED FROM VIJAY GR OUP AND LALWANI GROUP AND THESE BILLS WERE OBTAINED FOR THE LAST 4 YEARS I.E. SINCE F.Y. 2005-06. HE FURTHER STATED THAT THE COMMISSION OF 0.25% TO 0.60 % WAS BEING CHARGED BY THE BOGUS BILLS PROVIDERS. HE PROVIDED YEARWISE AND PARTYWISE BREAK UP OF BOGUS PURCHASES MADE BY DIFFERENT GROUP CONCERNS. T HE RELEVANT PORTION OF HIS STATEMENT HAS BEEN INCORPORATED IN THE ORDER OF THE A.O.. FROM THE ABOVE, THE A.O. NOTED THAT ONE OF THE DIRECTORS OF THIS COMPANY HAS ADMITTED THAT THE GROUP WAS INVOLVED IN BOGUS PURCHASES BY W AY OF OBTAINING FAKE SALE BILLS WITHOUT ACTUAL DELIVERY OF GOODS AND FRO M THE RESIDENCE OF SHRI KHUSHI KUMAR AMERIYA LIST OF 271 PARTIES WAS FOUND WHO WERE ALLEGEDLY INDULGING IN ISSUING BOGUS SALE BILLS. THE A.O. HAS FOUND THAT DURING THE YEAR UNDER CONSIDERATION, 09 PARTIES WERE PROVIDING FAKE BILLS WHICH ARE AS UNDER:- 5 S.N. NAME OF THE PARTY AMOUNT OF CREDIT BALANCE 1. ABHAY INTERNATIONAL 4306841 2. ANIL EXPORTS 2904993 3. ARMILLA GEMS 52490 4. GIRISH DIAM 789233 5. HITECH EXPORTS 411575 6. JODHPUR GEMS 831600 7. MAHAVEER GEMS AND JEWELS 2355562 8. PUJA JEWELLERS 1946060 9. TOUCH STONES 1247237 WHEN ASKED TO PRODUCE THE ABOVE PARTIES, THE ASSESS EE FAILED TO DO SO. THESE PARTIES WERE NOT FOUND EXISTING DURING THE ASSESSME NT PROCEEDINGS CARRIED OUT IN THE CASE OF CLARITY GOLD (P) LTD. HOWEVER, N O PHYSICAL STOCK OR BOOKS OF ACCOUNT WERE FOUND DURING THE COURSE SEARCH. ACC ORDINGLY, THE A.O. REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE U/S 1 45(3) OF THE ACT AND ESTIMATE THE ASSESSEES INCOME FOR THESE YEARS. 2.2 AGGRIEVED, THE ASSESSEE FILED APPEAL BY RAISING LEGAL AS WELL AS MERITORIOUS GROUNDS. IT WAS VEHEMENTLY ARGUED THAT IN THE CASE OF THE ASSESSEE SEARCH AND SEIZURE OPERATION WAS CONDUCTED ON 20-05-2009. DURING SURVEY CONDUCTED IN F.Y. 2006-07 BY BCTT WING OF TH E DEPARTMENT IN VIJAY GROUP AND LALWANI GROUP, IT WAS ARGUED THAT N OTHING WAS FOUND DURING SEARCH CONDUCTED IN ASSESSEES CASE AND WHAT WAS FOUND WAS ALREADY IN THE KNOWLEDGE OF THE DEPARTMENT. THE FACTS OF RE CEIVING AND ISSUING BOGUS VOUCHERS OF PURCHASE AND SALES WERE ALREADY I N THE KNOWLEDGE OF THE 6 DEPARTMENT. IT WAS ALSO ARGUED THAT IN A.Y. 2005-0 6 AND 2006-07 IN THE CASE OF THE ASSESSEE THE ISSUE OF BOGUS PURCHASE HA D CROPPED UP AND THESE ASSESSMENTS WERE BEFORE THE CONDUCT OF SEARCH. THER EFORE, IT WAS FEROCIOUSLY ARGUED THAT NO INCRIMINATING DOCUMENTS/ EVIDENCES W ERE FOUND AGAINST THE ASSESSEE DURING SEARCH. THEREFORE, ACTION U/S 153A OF THE ACT IS NOT WARRANTED. IT WAS ARGUED THAT THE STATEMENT OF THE SO CALLED ENTRY PROVIDERS WERE NEVER CONFRONTED TO THE ASSESSEE AND IT WAS A VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. IT WAS ARGUED THAT THE ADDITION MA DE BY THE A.O. HAVE NO RELATION WITH THE MATERIALS FOUND DURING SEARCH. TH E ASSESSEE RAISED SUCH TYPE OF ARGUMENTS BEFORE THE LD CIT(A) WHO AFTER CO NSIDERING THE SAME HAS GIVEN FOLLOWING CONCLUSION AT PAGE 6 OF HIS ORDER. (I) IT IS SEEN THAT ASSESSEES CONTENTION THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE SEARCH AND ASSESSMENT ORDER IS BASED ONLY ON STATEMENT OF SHRI K.K.AMERIYA IS NOT ACCEPTABLE AS IT IS EVIDENT THAT VARIOUS INCRIMINATING MATERIALS WAS FOUND IN THE FORM OF LI ST OF 271 PARTIES WHO INDULGED IN ISSUING BOGUS SALE BILLS FROM THE RESID ENCE OF SHRI K.K. AMERIYA, DIRECTOR OF THE COMPANY. DURING STATEMENT, IT HAS BEEN MENTIONED THAT BOGUS PURCHASE BILS OF RS. 4,82,928/- WERE OBTAINED DURING F.Y. 2005-06, RS. 1,53,05,473/- DURING F.Y. 2006-07 AND RS. 3,03, 510/- DURING F.Y. 2007- 08 AS PER PAGE 4 OF THE ASSESSMENT ORDER. THE NAMES OF 9 SUNDRY CREDITOR PARTIES FOR THE PURCHASES HAVE BEEN MENTIONED BY TH E A.O. WHICH WERE BELONGING TO LALWANI GROUP (ACCOMMODATION ENTRY PRO VIDER) OR WHICH WERE FOUND TO BE NON-EXISTENT DURING ENQUIRY IN REGULAR ASSESSMENT IN THE CASE OF M/S. CLARITY GOD (P) LTD. , A SISTER CONCERN OF THE ASSESSEE. NO PHYSICAL STOCK OR BOOKS OF ACCOUNT WERE FOUND AT THE TIME OF SEARCH. (II) IT IS SEEN THAT THE APPELLANT CONTENTION IS TH AT THE ISSUES REGARDING BOGUS PURCHASES WAS ALREADY IN THE KNOWLEDGE OF DEP ARTMENT AS A RESULT OF 7 SURVEY AND NO ADDITIONAL DOCUMENTS WERE FOUND IN TH E SEARCH WARRANTING JUSTIFYING ACTION U/S 153A OF THE I.T. ACT. FURTHE R, THE STATEMENT OF SHRI K.K. AMERIYA WERE RECORDED DURING SEARCH WHO HAVE RETRAC TED THE STATEMENT AND NO OPPORTUNITY FOR CROSS EXAMINATION WAS GIVEN. 2.3 REGARDING REJECTION OF BOOKS OF ACCOUNT AND APP LICATION OF PROVISIONS OF SEC 145(3) OF THE ACT, IT WAS ARGUED THAT THE A. O. HAS NOT POINTED OUT ANY DEFECT IN THE MAINTENANCE OF BOOKS OF ACCOUNT. AFTE R CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD CIT(A) HAS ALSO CONFIRMED THE REJECTION OF BOOKS OF ACCOUNT BUT AFTER KEEPING IN VIEW VARIO US FACTORS, HE HAS ADOPTED THE GROSS PROFIT RATE OF 15% AS AGAINST 17% ADOPTED BY THE A.O. WHICH HAS RESULTED IN REDUCTION OF TRADING RESULT. THAT IS WH Y, BOTH THE PARTIES ARE AGGRIEVED FOR ALL THE ASSESSMENT YEARS, APART FROM NUMBER OF BOGUS ENTRY PROVIDERS AND OTHER FIGURES OF VALUE OF TRANSACTION . THE FACTS AND ARGUMENTS OF THE PARTIES ARE IDENTICAL. 2.4 THE ORDER OF THE LD CIT(A) HAS MUTATIS MUTANDIS ARRIVED AT REDUCTION IN THE TRADING RESULT BY APPLICATION OF GROSS PROFI T RATE OF 15%. FOR READY REFERENCE, WE WOULD LIKE TO EXTRACT PARA 8.0 AT PAG E 14 TO 12.3 AT PAGE 19 OF LD CIT(A)S ORDER. 8.0 THE VARIOUS GROUNDS OF APPEAL ARE AS UNDER:- ' 1. THAT THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER U/S 113(3)/153A IS VOID AB- INITIO.' '2. THE LEARNED ASSESSING OFFICER HAS ERRED IN INIT IATING PROCEEDING U/S L53A DESPITE THAT NO MATERIAL WAS FOUND DURING THE SEARCH. ' 8 '3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER HAS ERRED IN REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) OF THE INCOME TAX ACT, 1961.' '4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER HAS ERRED IN APPLYING A G.P. RATE OF 17% AND THEREBY MAKING TRADING ADDITIO N OF RS. 5 I ,97,639/- ' THESE GROUNDS OF APPEAL ARE DECIDED AS UNDER. 8.1 IT IS SEEN THAT DURING THE YEAR UNDER CONSIDERA TION THE FACTS ARE SIMILAR TO A.Y. 2004-05. THE ONLY DIFFERENTIATING FEATURE IS THAT I NSTEAD OF 9 BOGUS CASH CREDITORS FOR THE PURCHASES MENTIONED IN THE A.Y. 2004-05, THE A.O. H AS LISTED ON PAGE NO. 5 OF THE ASSESSMENT ORDER, LIST OF 24 PARTIES AS UNDER WHO A RE ONLY BILL PROVIDER PARTIES: S.NO. NAME OF THE PARTY PURCHASE AMOUNT 1 ABSHISHEK EXPORTS 516087 2 AJAMERA GEMS 730687 3 ANIL EXPORTS 1378682 4 ARMILLA GEMS 367876 5 D.J. IMPEX 1113154 6 GLORIOUS GEMS 654698 7 HITECH EXPORTS 414667 8 JODHPUR GEMS 895702 9 KHANDELWAL BEADS 2733606 10 MAHAVEER GEMS AND JEWELS 1385195 11 NATRAJ LAPIDARY 362142 12 PUJA JEWELLERS 1702454 13 RAHUL EXPORTS 492975 14 RIDDI SIDDI GEMS 759985 15 RUBY IMPEX 1519902 16 SEVORITE EXPORTS 941220 17 SHRI GANAPATI IMPEX 755610 18 SHRI LAXMI ENTERPRISES 1083724 19 SHRI NATH EMPORIUM 2697348 20 TANVI GEMS 4101291 21 TIRUPATI JEWELLERS 227246 22 TOUCH STONES 1220475 23 VAISHALI GEMS 798866 24 VIJAY IMPEX 528000 THE A.O. HAS MENTIONED THAT OUT OF ABOVE PARTIES TH OSE AT SERIAL NO. 3,8,12,22 AND 23 ARE THE PARTIES OF LALWANI GROUP, PARTIES AT SR. NO. 14 AND 24 ARE OF VIJAY GROUP WHICH HAVE BEEN ADMITTED BY THE DIRECTOR, SHRI KHUSHI KUMAR AM ERIYA AS BOGUS. FURTHER, PARTIES AT SR. NO. 1,5,14,75,76,17,19 AND 20 WERE FOUND ISSUIN G BOGUS BILLS AND WERE NOT FOUND TO BE EXISTING AT THE GIVEN ADDRESSES DURING THE ENQUI RIES BY WAY OF NOTICES U/S 131 AND ASSESSEE ITSELF HAD FAILED TO PRODUCE THESE PARTIES DURING THE PROCEEDINGS U/S 143(3) OF THE LT. ACT FOR A.Y. 2005-06 AND 2006-07 IN THE CASE OF M/S CLARITY GOLD PVT LTD, A SISTER CONCERN OF THE ASSESSEE. IN THE ASSESSMENT PROCEEDI NGS ALSO THE A/R EXPRESSED HIS INABILITY TO PRODUCE THE ABOVE PARTIES AS PER ORDER SHEET ENTRY DATED 03.08.2011. 9 EXCEPT ABOVE FACTS, ALL THE OTHER FACTS AS PER ASSE SSMENT ORDER AND THE ASSESSEE'S CONTENTIONS ARE SIMILAR TO EARLIER YEAR I.E. A.Y.20 04-05. SO, THE ISSUES ARE DECIDED AFTER CONSIDERING THE ASSESSMENT ORDER AND SUBMISSIONS AS UNDER: 8.2 THE ISSUE RAISED IN FIRST AND SECOND GROUND OF APPEAL HAS BEEN DECIDED IN APPEAL FOR A.Y. 2004-05 AND THIS GROUND OF APPEAL HAS BEEN DISMISSED. ON THE SAME REASONING, THIS GROUND OF APPEAL IS DISMISSED HERE ALSO. 8.3 THE 3 RD AND 4 TH GROUNDS BEING REGARDING REJECTION OF BOOKS OF ACC OUNTS U/S 145(3) AND APPLICATION OF G.P. RATE WERE INVOLVED IN A.Y. 2004-05 WHERE THE REJECTION OF THE BOOKS OF ACCOUNTS U/S 145(3) HAS BEEN UPHELD AND AP PLICATION OF G.P. RATE OF 15% HAS BEEN SUSTAINED. SIMILAR BEING THE FACTS DURING THE YEAR UNDER CONSIDERATION, REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) AND ADDITION TO THE EX TENT OF APPLICATION OF G.P. RATE OF L5%O IS UPHELD. THE ABOVE G.P. RATE ON A TURNOVER O F RS. 4,39,23,183 WILL RESULT IN GROSS PROFIT OF RS. 65,88,477 WHILE ASSESSEE HAS DECLARE D G.P. OF RS. 22,69,302. THUS, THE TRADING ADDITION OF RS. 43,19,175 IS SUSTAINED AND BALANCE AMOUNT IS DELETED. 9.0 IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. A.Y.2006-07, APPEAL NO. 244/11-12 10.0 THE VARIOUS GROUNDS OF APPEAL ARE AS UNDER: ' 1 . THAT THE ORDER PASSED BY THE LEARNED ASSESSIN G OFFICER U/S 143 (3)/ 153A IS VOID AB- INITIO. ' '2. THE LEARNED ASSESSING OFFICER HAS ERRED IN INIT IATING PROCEEDING U/S L53A DESPITE THAT NO MATERIAL WAS FOUND DURING THE SEARCH.' '3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER HAS ERRED IN REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) OF THE INCOME TAX ACT, 1961.' '4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER HAS ERRED IN APPLYING A G.P. RATE OF 17% AND THEREBY MAKING TRADING ADDITIO N OF RS. 73,39,883/-. ' 10.1 IT IS SEEN THAT DURING THE YEAR UNDER CONSIDER ATION THE FACTS ARE SIMILAR TO A.Y. 2004-05. THE ONLY DIFFERENTIATING FEATURE IS THAT I NSTEAD OF 9 BOGUS CASH CREDITORS FOR THE PURCHASES MENTIONED IN THE A.Y. 2004-05, THE A.O. H AS LISTED ON PAGE NO. 5 OF THE ASSESSMENT ORDER, LIST OF 27 PARTIES AS UNDER WHO A RE ONLY BILL PROVIDER PARTIES: S.NO. NAME OF THE PARTY PURCHASE AMOUNT 1 ADINATH TRADERS 1196550 2 AJAMERA GEMS 416304 3 BEAUTIFUL DIAMS 5591226 4 CARTIER GEMS 3182535 5 CREATIVE INTERNATIONAL 1048599 6 D.J. IMPEX 2564979 7 GLOBAL EXPORTS 567704 8 HARIOM EXPORTS 859571 9 JAIPUR INTERNATIONAL 1724029 10 JODHPUR GEMS 230000 11 KHANDELWAL BEADS 312887 12 MANDOLI GEMS 358404 13 RAHUL GEMS 348490 14 RIDDI SIDDI GEMS 375757 10 15 RISING GEM AND JEWELLERY 381040 16 RUBY IMPEX 1275466 17 SEVORITE EXPORTS 2143478 18 SHRI GANPATI IMPEX 273292 19 SHRI LAXMI ENTERPRISES 1147200 20 SHRI NATH EMPORIUM 1452238 21 SHRIYAM CREATIONS 684024 22 TANVI GEMS 3836587 23 TIRUPATI JEWELLERS 293590 24 UNIALMAZ 1015700 25 VIJAY GEM IMPEX 605328 26 VIJAY GEMS 482928 27 VIKAS GEMS 389232 THE A.O. HAS MENTIONED THAT OUT OF ABOVE PARTIES TH OSE AT SERIAL NO. 10 IS OF LALWANI GROUP, PARTIES AT SR. NO. 14, 25 AND 26 ARE OF VIJA Y GROUP WHICH HAVE BEEN ADMITTED BY THE DIRECTOR, SHRI KHUSHI KUMAR AMERIYA AS BOGUS. F URTHER, PARTIES AT SR. NO. 5,6,9,10,14,15,16,17,18,20 AND22 WERE FOUND ISSUING BOGUS BILLS AND WERE NOT FOUND TO BE EXISTING AT THE GIVEN ADDRESSES DURING THE ENQUI RIES BY WAY OF NOTICES U/S 13 I AND ASSESSEE ITSELF HAD FAILED TO PRODUCE THESE PARTIES DURING THE PROCEEDINGS U/S 143(3) OF THE I.T. ACT FOR A.Y. 2005-06 AND 2006-07 IN THE CASE O F M/S CLARITY GOLD PVT LTD, A SISTER CONCERN OF THE ASSESSEE. IN THE ASSESSMENT PROCEEDI NGS ALSO THE A/R EXPRESSED HIS INABILITY TO PRODUCE THE ABOVE PARTIES AS PER ORDER SHEET ENTRY DATED 03.08.201 L. EXCEPT ABOVE FACTS, ALL THE OTHER FACTS AS PER ASSE SSMENT ORDER AND THE ASSESSEE'S CONTENTIONS ARE SIMILAR TO EARLIER YEAR I.E. A.Y.20 04-05. SO, THE ISSUES ARE DECIDED AFTER CONSIDERING THE ASSESSMENT ORDER AND SUBMISSIONS AS UNDER: 10.2 THE ISSUE RAISED IN FIRST AND SECOND GROUND OF APPEAL HAS BEEN DECIDED IN APPEAL FOR A.Y. 2004-05 AND THIS GROUND OF APPEAL HAS BEEN DISMISSED. ON THE SAME REASONING, THIS GROUND OF APPEAL IS DISMISSED HERE ALSO. 10.3 THE 3 RD AND 4TH GROUNDS BEING REGARDING REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) AND APPLICATION OF G.P. RATE WERE INVOLVED IN A.Y. 2004-05 WHERE THE REJECTION OF THE BOOKS OF ACCOUNTS U/S 145(3) HAS BEEN UPHELD AND AP PLICATION OF G.P. RATE OF 15% HAS BEEN SUSTAINED. SIMILAR BEING THE FACTS DURING THE YEAR UNDER CONSIDERATION, REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) AND ADDITION TO THE EX TENT OF APPLICATION OF G.P. RATE OF 15%IS UPHELD. THE ABOVE G.P. RATE ON A TURNOVER OF RS. 5,77,42,931 WILL RESULT IN GROSS PROFIT OF RS. 96,61,440 WHILE ASSESSEE HAS DECLARED G.P. OF RS. 24,76,415. THUS, THE TRADING ADDITION OF RS. 61,85,025 IS SUSTAINED AND BALANCE AMOUNT IS DELETED. 11.0 IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. A.Y.2007-08. APPEAL NO. 245/11-12 12.0 THE VARIOUS GROUNDS OF APPEAL ARE AS UNDER: ' 1. THAT THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER U/S 143(3)/153A IS VOID AB- INITIO. ' '2. THE LEARNED ASSESSING OFFICER HAS ERRED IN INIT IATING PROCEEDING U/S L53A DESPITE THAT NO MATERIAL WAS FOUND DURING THE SEARCH. '3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER HAS ERRED IN REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) OF THE INCOME TAX ACT, L96L., 11 '4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER HAS ERRED IN APPLYING A G.P. RATE OF 17% AND THEREBY MAKING TRADING ADDIT ION OF RS. I,04,83.89B/- ' 12.1 IT IS SEEN THAT DURING THE YEAR UNDER CONSIDE RATION THE FACTS ARE SIMILAR TO A.Y. 2004-05. THE ONLY DIFFERENTIATING FEATURE IS THAT I NSTEAD OF 9 BOGUS CASH CREDITORS FOR THE PURCHASES MENTIONED IN THE A.Y. 2004-05,THE A.O. HA S MENTIONED AS UNDER IN PARA 11(II) AND (III) ON PAGE NO. 5 OF THE ASSESSMENT ORDER REG ARDING THE BOGUS PURCHASES: 'THE A/R HAS FURNISHED LIST OF PARTIES FROM WHOM PU RCHASES OF MORE THAN RS. I LAC MADE DURING THE YEAR. TOTAL OF SUCH PURCHASES IS OF RS.6 4578561 FROM 37 PARTIES. ALL THE 37 PARTIES ARE THOSE WHICH WERE FOUND TO BE ISSUING BO GUS BILLS OF SALES. AS SUCH THE ENTIRE PURCHASES ARE UNVERIFIABLE FOR THE YEAR UNDER CONSI DERATION. THESE INCLUDED PARTIES OF VIJAY GROUP NAMELY ANSHU GEMS RS. 4964252, RIDHI SI DHI GEMS RS. 725422, SALONI EXPORTS RS. 2348417, SHUBHTAXMI GEMS RS. 2799548 AN D VIJAY GEMS RS. 4003116. (III) IT MAY BE A POINT OF WORTH IMPORTANCE THAT VA RIOUS PARTIES INCLUDED IN THE LIST OF PURCHASES FOR THE YEAR UNDER CONSIDERATION WERE FOU ND TO BE ISSUING BOGUS BILLS DURING THE COURSE OF REGULAR ASSESSMENT U/S 143(3) OF THE IT A CT FOR A.Y 2OO5-O6 AND 2006-07 IN THE CASE OF SISTER CONCERN M/S CLARITY GOLD P LID. DETAILED AND VERY ELABORATE ENQUIRIES WERE CONDUCTED AT THE TIME OF REGULAR ASSESSMENT IN THE CASE OF CLARITY GOLD P LTD. SUMMONS AND NOTICES U/S 131 WERE ISSUED AT THE GIVE N ADDRESSES BUT IN ALMOST ALL CASES THE SAID PARTIES WERE NOT FOUND EXISTING IT THE GIV EN ADDRESSES. ASSESSEE ITSELF WAS FAILED TO PRODUCE THE PARTIES BEFORE THE AO. ' IN THE ASSESSMENT PROCEEDINGS ALSO THE A,/R EXPRESS ED HIS INABILITY TO PRODUCE THE PARTIES AS PER ORDER SHEET ENTRY DATED 03.08.2011. EXCEPT ABOVE FACTS, ALL THE OTHER FACTS AS PER ASSE SSMENT ORDER AND THE ASSESSEE'S CONTENTIONS ARE ON SIMILAR LINES AS IN EARLIER YEAR I.E. A.Y.2004-05. SO, THE ISSUES ARE DECIDED AFTER CONSIDERING THE ASSESSMENT ORDER AND SUBMISSIONS AS UNDER: 12.2 THE ISSUE RAISED IN FIRST AND SECOND GROUND OF APPEAL HAS BEEN DECIDED IN APPEAL FOR A.Y. 2004-05 AND THIS GROUND OF APPEAL HAS BEEN DIS MISSED. ON THE SAME REASONING, THIS GROUND OF APPEAL IS DISMISSED HERE ALSO. 12.3 THE 3 RD AND 4 TH GROUNDS BEING REGARDING REJECTION OF BOOKS OF ACC OUNTS U/S 145(3) AND APPLICATION OF G.P. RATE WERE INVOLVED IN A.Y. 2OO4-05 WHERE THE REJECTION OF THE BOOKS OF ACCOUNTS U/S 145(3) HAS BEEN UPHELD AND AP PLICATION OF G.P. RATE OF 15% HAS BEEN SUSTAINED. SIMILAR BEING THE FACTS DURING THE YEAR UNDER CONSIDERATION, REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) AND ADDITION TO THE EX TENT OF APPLICATION OF G.P. RATE OF L5% IS UPHELD. THE ABOVE G.P. RATE ON A TURNOVER OF RS . 7,14,72,710 WILL RESULT IN GROSS PROFIT OF RS. 1,07,20,907 WHILE ASSESSEE HAS DECLARED G.P. OF RS. 16,66,462. THUS, THE TRADING ADDITION OF RS. 90,54,445 IS SUSTAINED AND BALANCE AMOUNT IS DELETED. 2.5 AGAINST THIS ORDER, BOTH ASSESSEE AS WELL AS R EVENUE HAVE COME IN APPEAL BEFORE US. 12 2.6 IN ALL THE APPEALS, ALMOST IDENTICAL GROUNDS HA VE BEEN RAISED. THE GROUND RAISED IN ONE ASSESSMENT YEAR WOULD BE A SAMPLE GROUNDS OF ALL THE ASSESSMENT YEARS IN APPEAL BEFORE US. THEREFORE, WE EXTRACT THE GROUNDS OF APPEAL FROM FILE FOLDERS APPEAL PERTAINING TO A.Y. 2004-05 FILED BY THE ASSESSEE. 1. THAT THE ORDER PASSED BY THE LD. A.O. U/S 14 3(3)/153A IS VOID AB-INITIO. 2. THE LD. A.O. HAS ERRED IN INITIATING PROCEEDIN GS U/S 153A DESPITE THAT NO MATERIAL WAS FOUND DURING THE SEA RCH. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. IN REJECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE INCOME-TAX ACT , 1961. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD CIT(A) HAS ERRED IN SUSTAINING THE TRADING ADDITION OF R S. 53,58,002/- BY APPLYING THE GROSS PROFIT RATE OF 15%. SIMILARLY, THE GROUNDS RAISED BY THE REVENUE ARE IN RELATION TO RELIEF GIVEN U/S 145(3) OF THE ACT. THE GROUND FOR ONE A.Y. NAME LY 2004-05 HAS ALSO TO BE TAKEN AS SAMPLE GROUNDS FOR ALL OTHER ASSESSMENT YEARS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A), AJMER HAS ERRED IN REDUCING THE TRADING A DDITION TO RS. 53,58,002/- AS AGAINST ADDITION OF RS. 63,32,819/ - MADE BY THE A.O. AND THUS ALLOWING RELIEF OF RS. 974,817/- TH OUGH THE REJECTION OF BOOKS OF ACCOUNT U/S 145(3) HAS BEEN CONFIRMED BY HIM. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A), AJMER HAS ERRED IN NOT APPRECIATING THE R EASONABLENESS 13 OF GROSS PROFIT RATE OF 17% ADOPTED BY THE A.O. O N THE PECULIAR MODUS OPERANDI OF OBTAINING BOGUS PURCHASES BILLS ADOPTED BY THE ASSESSEE, WHICH HAS BEEN CONFIRMED BY SHRI KH USHI RAM AMERIYA, ONE OF THE DIRECTORS FROM WHOSE CUSTODY LIST OF 271 PARTIES INDULGED IN ISSUING BOGUS SALE BILLS TO V ARIOUS CONCERNS WERE COUPLED WITH THE FACT THAT ONE OF THE GROUP CONCERNS M/S. GUPTA EMERALD MINES (P) LTD. (GEMP) DOING SAME BU SINESS HAS DECLARED GROSS PROFIT RATE OF17.98% IN A.Y. 2 009-10. 2.7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE MATERIAL ON RECORD INCLUDING THE WRITTEN SUB MISSIONS FILED BY THE PARTIES FOR ALL THE YEAR UNDER CONSIDERATION. THE L D. AR OF THE ASSESSEE REITERATED THE ARGUMENTS TAKEN BEFORE THE LD CIT(A) AND GIST OF WHICH IS AS UNDER:- 1. BUSINESS OF THE ASSESSEE THE ASSESSEE IS A COMPANY AND ENGAGED IN THE BUSINE SS OF MANUFACTURING AND TRADING OF GEM STONES. COMPLETE B OOKS OF ACCOUNTS HAVE BEEN MAINTAINED DURING THE COURSE OF BUSINESS. THE ASSESSEE IS MAINTAINING ALL THE BOOKS OF ACCOUNTS I NCLUDING CASH BOOK, BANK BOOKS, JOURNAL BOOK, LEDGER, BILLS & VOU CHER ALONG WITH THEIR SUPPORTING AS PRESCRIBED U/S 44AA OF THE INCO ME TAX ACT,1961. THE BOOKS OF ACCOUNTS ARE MAINTAINED ON MERCANTILE SYSTEM OF ACCOUNTING. THE BOOKS OF ACCOUNTS ARE AUDITED U/S 4 4AB OF THE INCOME TAX ACT, 1961 AND AUDIT REPORT WAS SUBMITTED ALONG WITH THE RETURN OF INCOME. THE AUDITORS HAVE NOT MADE AN Y ADVERSE REMARKS REGARDING THE MAINTENANCE OF THE BOOKS OF A CCOUNTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALL THE SE BOOKS OF ACCOUNTS WERE PRODUCED BEFORE THE LEARNED ASSESSING OFFICER AND NO SERIOUS DEFECT WAS POINTED OUT. IN VIEW OF THIS THE LEARNED ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING TH E BOOKS ACCOUNTS. 14 2. BCTT SURVEY RESULTS NOT PROVIDED TO THE ASSESSEE IN THE ASSESSMENT ORDER THE LEARNED ASSESSING OFFICER HAS REFERRED TO SURVEYS CONDUCTED BY BCTT WING OF THE DEPARTMENT IN FINANCIAL YEAR 2007-08 IT IS MENTIONED IN THE ASSESSMENT ORDER THAT DURING THE COURSE OF SURVEYS IT WAS GATHERED THAT ASSESSEE WAS OBTAINING BOGUS BILLS AND VIJAY GROUP AND LALWANI GROUP. BEFORE COMPLETING ASSESSMENT THE ASSESSING OFFICER HAS NOT PROVIDED EIT HER THE RESULTS OF SURVEYS OR THE STATEMENT OF SHRI ANI L KUMAR LALWANI AND OTHERS SO THAT ASSESSEE COULD FURNISH HI S DEFENSE. HENCE WHEN THE MATERIAL USED BY THE ASSESSIN G OFFICER WAS NOT PROVIDED TO BE ASSESSEE, THE ASSESSME NT PROCEEDINGS BECOME BAD IN LAW. 3. IN TURNOVER OF BOGUS PURCHASE AND SALES THE MARGIN IS NIL IN THE ENTIRE ASSESSMENT ORDER THE MAIN THRUST OF T HE LEARNED ASSESSING OFFICER IS ON THE ISSUE OF BOGUS VOUCHER OF PURCHASE AND SALE. IN THIS REGARD STATEMENTS OF SHRI K.K. AMERIA , HAS BEEN QUOTED AT LENGTH. THE ASSESSEE HAS ALREADY CHALLENGED THE VERACITY OF THESE STATEMENTS IN AS MUCH AS THESE WERE RECORDED UNDER THREAT AND DURESS. IN ANY CASE THE GIST OF THE STATEMENTS IS THAT BILLS OF PURCHASES (BOGUS) WERE OBTAINED AFTER MAKING PAYMEN T OF COMMISSION). SIMILARLY THE ASSESSEE ALSO GOT A SIMI LAR COMMISSION ON ISSUING SUCH BOGUS SALE BILLS. IN OTHER WORDS TH E ASSESSEE WAS NOT EARNING ANYTHING IN THE PROCESS OF OBTAINING BOGUS PURCHASE VOUCHERS AND ISSUING SALE VOUCHERS. THE ONLY BENEFI T WHICH THE ASSESSEE DERIVED WAS BANKING CREDIT FACILITY ON THE BASIS OF INCREASE TURNOVER. THIS FINDS SUPPORT FROM THE STATEMENT OF SHRI K.K. AMERIA RELIED UPON BY THE LEARNED ASSESSING OFFICER. THE A SSESSEE COULD INCREASE HIS TURNOVER IN THE PROCESS OF ALLEGED BOG US PURCHASE VOUCHERS AND BOGUS SALE VOUCHERS. THEREFORE THE ENT IRE EXERCISE OF THE LEARNED ASSESSING OFFICER IS OF NO AVAIL. THERE IS NO IOTA OF EVIDENCE OR ANY MATERIAL BROUGHT ON RECORD BY THE L EARNED ASSESSING OFFICER WHICH SUGGESTS THAT ASSESSEE EARNED IN THE AFORESAID PROCESS OF BOGUS VOUCHERS. THE LEARNED ASSESSING OFFICER HAS NOT CONDUCTED ANY POST SEARCH INQUIRIES WHICH MAY ALSO SUPPORT THE FINDING OF THE LE ARNED ASSESSING OFFICER OF EARNING HIGHER PROFITS BY THE ASSESSEE BY 15 WAY OF OBTAINING BOGUS PURCHASE VOUCHERS AND ISSUIN G BOGUS SALE VOUCHERS. THUS THERE WAS NO JUSTIFICATION OF THE LE ARNED ASSESSING OFFICER FOR TAKING U/S 153 IN THE CASE AND SUBSEQUE NTLY COMPLETING THE ASSESSMENT BY MAKING ADDITION. 4. SANJAY OIL CAKE INDUSTRIES VS. CIT 10 DTR 153 (GUJ) CA SE IS NOT APPLICABLE THE LEARNED ASSESSING OFFICER HAS REFERRED IN THE A SSESSMENT ORDER IN PARA 13 TO THE SISTER CONCERN M/S CLARITY GOLD PVT. LTD. WHEREIN ALSO GP RATE 17% WAS APPLIED. IN THE CASE OF M/S CLARITY GOLD PVT. LTD. THE LEARNED ASSESSING OFFICER HAS REFERRED TO THE C ASE OF M/S SANJAY OIL CAKE INDUSTRIES. THE RATIO OF THIS CASE IS NOT APPLICABLE TO THE FACTS OF THE CASE. IT IS SUBMITTED THAT THE RATIO O F THIS CASE HAS NOT BEEN FOUND APPLICABLE IN THE CASE OF M/S CLARITY GO LD PVT. LTD. FOR THE ASSESSMENT YEAR 2006-07. IN THE ASSESSMENT YEAR 2006-07 WHEREIN ADDITION WAS MADE BY DISALLOWING 25% OF THE BOGUS PURCHASES TO THE TUNE OF RS. 5.40 CRORES, IN THE FI RST APPEAL ITSELF THE LEARNED CIT(A) DIRECTED TO APPLYING GP RATE OF 8.5% AS AGAINST 7.40% DISCLOSED BY THE ASSESSEE. IT IS FURTHER SUBM ITTED THAT IN THE CASE OF M/S CLARITY GOLD PVT. LTD. IN ASSESSMENT YE AR 2005-06 THE ISSUE OF BOGUS PURCHASES CROPPED UP AND THE LEARNED ASSESSING OFFICER HAS APPLIED GP RATE OF 13.28% AS AGAINST GP RATE OF 12.72% DISCLOSED BY THE ASSESSEE. THIS GP RATE WAS SUBSEQU ENTLY REDUCED BY THE LEARNED CIT(A) TO 13%. THE HONBLE ITAT LATE R ON SUSTAINED ADDITION ONLY OF RS. 1,00,000/- AGAINST A TURNOVER OF RS. 14,26,09,000/- MEANING THEREBY THE GP RATE WAS INCREASED ONLY BY 0 .07%. IN OTHER WORDS AS AGAINST GP RATE DISCLOSED 12.72% GP RATE A PPLIED WAS 12.79%. THUS THE GP RATE FOR THE ASSESSMENT YEAR 2005-06 VI RTUALLY STOOD ACCEPTED BY THE HONBLE ITAT DESPITE REJECTION OF B OOKS OF ACCOUNTS. IN VIEW OF THE APPELLATE DECISION FOR THE ASSESSMENT YEAR 2005-06 AND 2006-07 THE LEARNED ASSESSING OFFICER H AD NO CASE FOR APPLYING GP RATE OF 17% 5. NO BASIS OF APPLICATION OF GP RATE OF 17% IT IS FURTHER SUBMITTED THE ENTIRE FACTS OF M/S CLA RITY GOLD PVT. LTD. FOR THE ASSESSMENT YEAR 2005-06 AND 2006-07 HAVE BEEN D ISCUSSED BY 16 THE LEARNED ASSESSING OFFICER IN THE BODY OF THE AS SESSMENT ORDER ON PAGE 5 OF THAT CASE. IN THESE ASSESSMENT YEARS T HE GP RATE ACCEPTED BY THE DEPARTMENT IS 12.79% IN ASSESSMENT YEAR 2005-06 AND 8.5% IN ASSESSMENT YEAR 2006-07. DESPITE ALL TH IS THE LEARNED ASSESSING OFFICER HAS APPLIED GP RATE OF 17% WITHOU T BRINGING ANY ADDITIONAL MATERIAL ON RECORD. NO COMPARABLE CASE H AS BEEN CITED. IN VIEW OF THIS THE TRADING ADDITION MADE BY THE LEARNED ASSESSING OFFICER DESERVES TO BE KNOCKED DOWN. THE FOLLOWING TABLE REFLECTS THE TRADING RESULTS OF THE ASSESSEE IN ASS ESSMENT YEAR 2004- 05, 2005-06 & 2007-08 A.Y. TURNOVER GROSS PROFIT G.P. RATE 2004-05 48740868 1953128 4.01% 2005-06 43923183 2269302 5.17% 2006-07 57742931 2476415 4.29% 2007-08 71472710 1666462 2.33% 2008-09 20284958 103226 4.95% THE PERUSAL OF THE AFORESAID TABLE REVEALS THAT THE SALES SHOWN IN ASSESSMENT YEAR 2007-08 ARE ALL TIME HIGH. THE SALE S ARE ALMOST 100% MORE IN COMPARISON TO ASSESSMENT YEAR 2004-05 AND 2 005-06. THE SALES ARE 50% MORE IN COMPARISON TO ASSESSMENT YEAR 2006-07. THESE ARE FOUR TIMES MORE IN COMPARISON TO ASSESSME NT YEAR 2008- 09. THE GP RATE DISCLOSED IN ASSESSMENT YEAR 2004-0 5, 2005-06, 2006- 07 AND 2008-09 IS FROM 4 TO 5% WHEREAS DURING THE Y EAR UNDER CONSIDERATION THE SAME IS 2.33%. THE MAIN REASON OF THE FALL IN GP RATE IS INCREASED IN THE TURNOVER. THE ASSESSEE COM PENSATED THE LOSS IN GP BY INCREASING SALES. IT IS ALSO A KNOWN FACT THAT FOR THE PERIOD OF SEVERAL YEARS THE COMPETITION IN THE FIELD OF JE WELLERY HAS BECOME TOUGH. WHEREAS THERE IS NO INCREASE IN THE S ALE PRICE, THE COST OF PRODUCTION HAS INCREASED. ALL THESE FACTORS HAVE CONTRIBUTED IN THE FALL OF THE GP RATE. IT IS SETTLED POSITION OF LAW THAT THE HISTORY OF THE CASE IS THE BEST GUIDE. THE HISTORY OF THE CASE DID NOT WARRANT ANY ADDITION. THE FOLLOWING CASE LAW IS QUOTED IN S UPPORT CIT VS. INANI MARBLES (P) LTD. (2009) 316 ITR 125 (RA J) 17 IN THE ABSENCE OF ANY CHANGE IN THE FACTUAL POSITIO N NORMALLY THE PROFIT RATE DECLARED AND ACCEPTED IN THE PRECEDING YEAR, CUSTOMERS A GOOD BASIS FOR WORKING O UT THE GROSS PROFIT, ACCORDINGLY, SINCE IN THE EARLIER YEAR THE GROSS PROFIT. ACCORDINGLY, SINCE IN THE EARLIER YEAR THE GROSS PROFIT RATE DECLARED AND ACCEPTED WAS 2.51%, THE SAME RATE WOULD BE APPLICABLE FOR THE YEAR IN QUESTION. 2.8 ON THE OTHER HAND, THE LD DR REPEATED THE REASO NS GIVEN BY THE A.O. FOR MAKING THE IMPUGNED ADDITION. 2.9 BEFORE US, THE LEGAL ISSUE WAS NOT PRESSED AND IT WAS FURTHER SUBMITTED THAT THE ISSUE INVOLVED ON MERITS STAND COVERED BY THE VIEW TAKEN IN THE CASE OF CLARITY GOLD (P) LTD., WHICH IS A GROUP COMPANY. 2.10 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND H AVE FOUND THAT NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE. THE DECISION TAKEN IN THE CASE OF M/S. CLARITY GOLD (P) LTD. (IN ITA NOS.245/ JP/13,461/JP/13, 246/JP/13, 467/JP/13, 247/JP/13, 463/JP/13, 248/JP/ 13, 464/JP/13, 249/JP/13 &465/JP/13 ) SHALL APPLY MUTATIS MUTANDIS TO THE FACTS OF THE APPEALS BEFORE US FOR ALL THE ASSESSMENT YEARS. THE FACTS IN THAT CASE ARE EXACTLY IDENTICAL AND THE ADDITIONS HAVE BEEN MADE BY REJECTING THE BOOKS OF ACCOUNT. BASED ON IDENTICAL FACTS IN THAT CASE, WE HAVE HELD AS UNDER:- 2.8 AFTER CONSIDERING THE RIVAL SUBMISSIONS AND GOI NG THROUGH THE RECORDS, WE HAVE FOUND THAT THE IMPUGNED ISSUE RE GARDING GOLD JEWELLERY STANDS COVERED BY THE DECISION OF THE TRIBUNAL RE NDERED IN ASSESSEE'S OWN 18 CASE ( IN ITA NO. 04/JP/2009 DATED 18-09-2009) ON IDENTICAL FACTS AND THE COPY OF THIS ORDER IS ENCLOSED AT PAGES 272 TO 27 6 OF THE ASSESSEE'S PAPER BOOK. WE HAVE GONE THROUGH THIS TRIBUNAL ORDER DA TED 18-09-2009 (SUPRA) AND WE ARE CONVINCED THAT THE FACTS OF THIS CASE ARE EXACTLY IDENTICAL TO THE FACTS IN THE PRESENT APPEAL. THE TRIBUNAL HAS TAK EN THE FOLLOWING VIEW IN ITS ORDER. 4. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND S UBSTANCE IN THE CONTENTION OF THE LD. A/R TO THIS EXTENT THAT A FTER FURNISHING ALL THE NECESSARY INFORMATION AND DETAILS ABOUT THE TRANSAC TION AND THE ABOVE NAMED PARTIES SUPPORTED WITH DOCUMENTS LIKE PURCHAS E BILLS ISSUED BY THEM, THEIR REGISTRATION WITH SALES TAX DEPARTMENT AND PANS ISSUED TO THEM BESIDES THIS FACT THAT THE PAYMENT AGAINST THE PURCHASES HAS BEEN MADE TO THEM THROUGH ACCOUNT PAYEE CHEQUES, THE ASS ESSEE HAD TRIED TO ESTABLISH THE GENUINENESS OF THE CLAIMED TRANSACTIO NS AS IT COULD HAVE BEEN EXPECTED FROM A PRUDENT PURCHASER. HAD THE ASSESSEE BEEN ABLE TO PRODUCE THE ABOVE NAMED PARTIES BEFORE THE A.O. OR THEY WOU LD HAVE BEEN FOUND IN EXISTENCE IN THE CLAIMED BUSINESS ON THEIR GIVEN AD DRESS, THE ASSESSEE WOULD HAVE CERTAINLY A GOOD CASE TO SAY THAT IT HAD ESTABLISHED THE GENUINENESS OF THE CLAIMED PURCHASES FROM THE ABOVE NAMED 10 PARTIES AS IT IS NOTEWORTHY THAT NONE OUT OF THE SAID 10 PARTI ES WAS PRODUCED BEFORE THE A.O. OR FOUND IN EXISTENCE AT THE GIVEN ADDRESS . UNDER SIMILAR CIRCUMSTANCES INITIALLY WE HAVE GIVEN RELIEF IN CER TAIN CASES ON THE BASIS THAT THE ASSESSEE AS A PRUDENT PURCHASER HAD DISCHA RGED ITS ONUS BY FURNISHING NECESSARY INFORMATION ABOUT TRANSACTION AND PARTIES SUPPORTED WITH DOCUMENTS AS DESCRIBED ABOVE BUT IT WAS SURPRI SING FOR US TO NOTE IN MOST OF THE LATER CASES THAT THE PARTIES STATED TO HAVE SOLD THE GOODS TO THE ASSESSEE WERE NEITHER PRODUCED NOR FOUND AT THEIR G IVEN ADDRESSES. THUS IN SUCH CASES ONLY OPTION LEFT TO US WAS TO ESTIMATE T HE PROFIT OF THE ASSESSEE UPHOLDING THE REJECTION OF BOOKS OF ACCOUNT ON THE BASIS THAT ADMITTEDLY THE CLAIMED PURCHASES FROM THE NAMED PARTIES REMAIN ED UNVERIFIABLE. LIKEWISE, IN THE PRESENT CASE, THE ABOVE NAMED PART IES FROM WHOM THE ASSESSEE CLAIMED TO HAVE PURCHASED THE GOODS WERE N EITHER PRODUCED NOR FOUND IN EXISTENCE IN BUSINESS AT THEIR GIVEN ADDRE SSES. THUS THE CLAIMED PURCHASES STATED TO HAVE BEEN MADE FROM THEM REMAIN ED UNVERIFIED. THE REJECTION OF BOOKS OF ACCOUNT INVOKING THE PROVISIO NS OF SECTION 145(3), THEREFORE, CANNOT BE TREATED AS UNWARRANTED AND UNJ USTIFIED. WE UPHOLD THE ACTION OF THE LOWER AUTHORITIES IN THIS REGARD. HOW EVER, CONSIDERING THESE ASPECTS THAT THERE WAS SUBSTANTIAL GROWTH OF 13.88% IN THE TURNOVER IN COMPARISON TO LAST YEAR, IT CANNOT BE SAID THAT THE G.P. RATE SHOWN AT 12.73% DURING THE YEAR ON DECLARED SALES OF RS. 14, 26,90,358/- AGAINST G.P. RATE OF 13.97% ON THE TURNOVER OF RS. 2.92 CRO RES SHOWN DURING THE 19 LAST YEAR WAS UNREASONABLE TO JUSTIFY THE TRADING A DDITION MADE BY THE A.O. AT RS. 7,91,855/- BY APPLYING G.P. RATE OF 13.28% A ND APPLICATION OF G.P. RATE OF 13% BY THE LD. CIT(A) SUSTAINING THE TRADIN G ADDITION OF RS. 3,99,533/- IN QUESTION. THE A.O. HAD APPLIED G.P. R ATE OF 13.28% ON THE DECLARED SALES ON THE BASIS OF WEIGHTED AVERAGE WHI CH HAS BEEN CORRECTED BY THE LD. CIT(A) WITH THIS OBSERVATION THAT THE CO RRECT WEIGHTED AVERAGE RATE OF G.P. ACTUALLY COMES TO 13.01% INSTEAD OF 13 .28%. CONSIDERING ALL THESE FACTS IN TOTALITY, ESPECIALLY THE OVER ALL RE SULT OF THE ASSESSEE IN COMPARISON TO THE LAST YEAR AND THAT THE ASSESSEE H AD FURNISHED ALL THE NECESSARY INFORMATION/DETAILS ABOUT THE TRANSACTION AND THE PARTIES SUPPORTED WITH THE DOCUMENTS AS COULD HAVE BEEN EXP ECTED FROM A PRUDENT PURCHASER TO ESTABLISH THE GENUINENESS OF THE CLAI MED TRANSACTION, WE ARE OF THE VIEW THAT THE LUMP SUM ADDITION OF RS. 1,00, 000/- WILL MEET THE ENDS OF JUSTICE TO PLUS THE POSSIBLE LEAKAGE, IF AN Y, AS THE CLAIMED PURCHASES REMAINED UNVERIFIED BUT SALES DECLARED HA S NOT BEEN DOUBTED. THE GROUND NO. 1 IS REJECTED AND GROUND NO. 2 IS PA RTLY ALLOWED. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE TRIBUNAL O RDER. BY RESPECTFULLY FOLLOWING THE ABOVE TRIBUNAL ORDER, WE ALLOW THE APPEAL OF THE ASSESSEE AND DISMISS THE APPEAL OF THE REVENUE ON THIS ISS UE. 3.0 IN ALL THE OTHER YEARS ON SIMILAR FACTS EXACT LY IDENTICAL ISSUES HAVE BEEN RAISED. WITH THE FORCE OF SAME AND SIMILAR R EASONINGS, WE HAVE MENTIONED IN THE ASSESSMENT YEAR 2005-06, WE ALLO W ALL THE APPEALS FILED BY THE ASSESSEE AND DISMISS ALL THE APPEALS FILED BY THE REVENUE. WE MAY MENTION THAT IN THIS CASE THERE IS NO REASON TO S USTAIN RS. 1.00 LAC ON ACCOUNT OF ANY SORT OF PILFERAGE. THEREFORE, BY RESPECTFULLY FOLLOWING THE ABOVE ORDE R IN THE CASE OF CLARITY GOLD (P) LTD. (SUPRA), WE ORDER TO DELETE THE ENTIR E TRADING ADDITION IN ALL THE FOUR YEARS. OUR THIS FINDING RESULTS IN PARTLY ALLO WING THE APPEALS OF THE ASSESSEE AND DISMISS ALL THE APPEALS OF THE REVENUE . 20 3.0 IN THE RESULT, APPEALS OF THE ASSESSEE ARE PART LY ALLOWED AND THAT OF THE REVENUE ARE DISMISSED THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 05-0 3-2014. SD/- SD/- ( N.K. SAINI ) (HARI OM MARATHA ) ACCOUNTANT MEMBER JUDICIAL MEMBER *MISHRA COPY FORWARDED TO :- 1. M/S. MARINE MINERAL AND HERBAL REMEDIES (P) LTD. , JAIPUR 2. THE ACIT, CENTRAL CIRCLE-1, JAIPUR 3. THE LD.CIT(A) 4. THE LD CIT 5. THE D/R 6. GUARD FILE (ITA NO.241/JP/2013) BY ORDER, AR ITAT, JAIPUR 21