SHRI KUMUD CHAND JAIN HUF, Jaipur V. ITO, Jaipur

ITA 245/JPR/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1544 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 15-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA
• Keywords: Rejection of books of accounts; Business income; Search and seizure; Accommodation entries
• Section: 145

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR (BEFORE SHRI B.R. MITTAL AND SHRI B.R. JAIN) ITA NO. 245/JP/2012 ASSESSMENT YEAR : 2007-08 PAN: AAEHK 0120 M SHRI KUMUD CHAND JAIN (HUF ) VS. THE ITO PROP.: M/S. K.S. EXPORTS WARD- 3(2) 63, SHOPPING CENTRE, NEAR PITAL FACTORY JAIPUR BANI PARK, JAIPUR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.C. PARWAL DEPARTMENT BY: MISS. ROSHANTA MEENA DATE OF HEARING: 21-01-2013 DATE OF PRONOUNCEMENT: 23-01-2013 ORDER PER B.R. MITTAL, JM:- THE ASSESSEE HAS FILED THIS APPEAL FOR THE ASSESS MENT YEAR 2007-08 AGAINST THE ORDER OF THE LD. CIT(A)-I, JAIPUR DATED 27-01-2010 WHEREIN THE SOLITARY GROUND OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIR MING THE ADDITION OF RS. 6,55,868/- BY ESTIMATING THE COMMISSION INCOME OF THE ASSESSEE AT RS. 8,34,488/-. 2.1 THE ASSESSEE FILED THE RETURN OF INCOME ON 31-1 0-2007 DECLARING TOTAL INCOME OF RS. 1,78,620/-. THE ASSESSEE HAS SHOWN HIMSELF TO B E ENGAGED IN THE BUSINESS OF TRADING OF PRECIOUS AND SEMI PRECIOUS GEM STONES. THE ASSES SEE HAS SHOWN TOTAL SALES OF RS. 16,68,97,578/- DECLARING PURCHASES OF RS. 20,05,04, 403/-, SHOWING OPENING STOCK OF RS. 1,96,16,344/-. THE ASSESSEE HAS SHOWN CLOSING STOCK OF RS. 6,20,57,588/-. THE ASSESSEE 2 HAS FINALLY DECLARED THE GROSS PROFIT OF RS. 14,28, 731/- WHICH COMES TO GROSS PROFIT RATE OF 0.86%. 2.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE FILED AN AFFIDAVIT STATING THAT THE BROKERS USED TO COME TO HIM AND PR OVIDED HIM WITH BILLS/ VOUCHERS OF UNREGISTERED DEALERS AND IN RETURN THE ASSESSEE USE D TO ISSUE SALE BILLS AS PER THE INSTRUCTIONS OF THE BROKERS. THE ASSESSEE WAS CHARG ING PROFIT OF RS. 100/- TO RS. 200/- PER LAKH. THE AO STATED THAT THE ASSESSEE WAS NOT INDUL GING IN ANY SALES OR PURCHASES BUT WAS SOLELY ISSUING BOGUS SALE BILLS. HENCE, THE AO DEPU TED AN INSPECTOR TO MAKE NECESSARY ENQUIRES REGARDING BUSINESS PREMISES AND THE NATURE OF THE BUSINESS BEING CONDUCTED BY HIM AT HIS PREMISES. THE INSPECTOR REPORTED THAT M/ S. K.S. EXPORTS CONCERN OF THE ASSESSEE WAS NOT DOING ANY BUSINESS OF GEMS STONES. THE AO REJECTED THE BOOKS OF ACCOUNTS ALONGWITH AUDIT REPORT SUBMITTED BY THE AS SESSEE. THE AO STATED THAT NET PROFIT RATE SHOWN BY THE ASSESSEE @ 0.16% IS VERY LOW. HE STATED THAT BCTT WING OF THE INCOME TAX DEPARTMENT CONDUCTED SURVEYS IN VARIOUS CASES IN THE YEAR 2007-08 AND IT WAS FOUND THAT NUMBERS OF PERSONS WERE INDULGED IN THE PRACTICE OF ISSUING BOGUS BILLS IN THE TRADE OF GEMS AND JEWELLERY. 2.3 ON THE OTHER HAND, THE ASSESSEE HIMSELF ADMITTE D ON OATH THAT THEY WERE ISSUING BILLS ONLY AND NO REAL TRADE WAS EVER CONDUCTED BY THEM. THE AO STATED THAT THESE PERSONS WERE CHARGING COMMISSION @ 0.20% TO 0.25% O F THE QUANTUM, FOR ISSUING THESE BOGUS SALE BILLS. IN SOME CASES, THE COMMISSION WAS HIGHER AS MUCH AS 0.50% TO 0.60%. THE AO AFTER CONSIDERING THE BANK ACCOUNT OF THE AS SESSEE AND THE FACT THAT THE ASSESSEE ISSUED TOTAL SALE BILLS OF RS. 16,68,97,578/- TO DI FFERENT PERSONS, CONSIDERED THE COMMISSION @ 0.50 PER HUNDRED RUPEE WHICH COMES TO RS. 8,34,488/-. THUS THE AO 3 ADDED THE SAID AMOUNT OF RS. 8,34,488/- TO THE INCO ME OF THE ASSESSEE. BEING AGGRIEVED, THE ASSESSEE FILED THE APPEAL BEFORE THE FIRST APPE LLATE AUTHORITY. 2.4 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE AND THE FACT THAT THE RATE OF COMMISSION VARIED BETWEEN 0.40% TO 0.60 % PER HUNDRED RUPEE AS FOUND BY THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT DURING SEARCH AND SEIZURE OPERATION IN FINANCIAL YEAR 2007-08 IN THE CASE OF NUMBER OF PEOPLE, UPHELD THE ACTION OF THE AO AS TO INVOCATION OF PROVISION OF SECTION 145 (3) OF THE ACT AND TO ESTIMATE THE COMMISSION INCOME OF THE ASSESSEE BY APPLYING RATE OF 0.50% PER RS. 100/-. THE LD. CIT(A) HAS GIVEN SET OFF OF RS. 1,78,620/- BEING TH E COMMISSION INCOME DECLARED BY THE ASSESSEE IN THE RETURN FILED. THUS THE LD. CIT(A) C ONFIRMED THE ADDITION OF RS. 6,55,86/- AS UNDISCLOSED INCOME OF THE ASSESSEE. HENCE, THE ASSE SSEE IS IN APPEAL BEFORE THE TRIBUNAL. 2.5 DURING THE COURSE OF HEARING, THE LD. AR DID NO T DISPUTE TO THE FACT THAT THE ASSESSEE WAS INDULGED IN ISSUING ACCOMMODATION ENTR IES FOR WHICH HE WAS COLLECTING COMMISSION. THE ONLY DISPUTE IS AS TO WHETHER THE R ATE OF COMMISSION 0.50% AS CONFIRMED BY THE LD. CIT(A) IS JUSTIFIED OR NOT. TH E LD. AR SUBMITTED THAT IN SIMILAR KIND OF BUSINESS, ITAT DELHI BENCH IN THE CASE OF SANJAY KUMAR GARG VS. ACIT, 134 ITD 82 DIRECTED TO ESTIMATE THE COMMISSION INCOME BY APPLY ING 0.20% ON THE TURNOVER DETERMINED AS AGAINST 1% CONSIDERED BY THE AO. HE S UBMITTED THAT THE RATE OF COMMISSION 0.50% IS EXCESSIVE. 2.6 ON THE OTHER HAND, THE LD. DR SUPPORTED THE ACT ION OF THE LD. CIT(A) AND SUBMITTED THAT AS PER ENQUIRY CONDUCTED BY THE DEPA RTMENT DURING THE COURSE OF SEARCH AND SEIZURE OPERATION, IT WAS FOUND THAT COMMISSION CHARGED BY SUCH PERSONS FOR 4 PROVIDING ACCOMMODATION ENTRIES VARIES BETWEEN 0.40 % TO 0.60% AND ACCORDINGLY THE LD. CIT(A) IS JUSTIFIED TO APPLY THE COMMISSION @ 0.50% . 2.7 CONSIDERING THE FACTS THAT THE ASSESSEE IS RUNN ING BUSINESS OF PROVIDING ACCOMMODATION ENTRIES AND THAT TOO IN THE BUSINESS RELATING TO PRECIOUS AND SEMI PRECIOUS STONES WHERE MARGIN OF THE PROFIT IS HIGH AND THE G ROSS PROFIT RATE AS DECLARED BY THE ASSESSEE AT 0.86% IN THE RETURN FILED, WE ARE OF TH E CONSIDERED VIEW THAT THERE IS NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). SINC E THE ASSESSEE IS ADMITTEDLY ENGAGED IN UNFAIR PRACTICE WHICH IS AGAINST PUBLIC POLICY AND CONTRARY TO THE PROVISION OF LAW OF THE LAND, WE THEREFORE, HOLD THAT THE AUTHORITIES BELOW ARE REASONABLE AND FAIR IN ESTIMATING THE COMMISSION @ 0.50% . HENCE, WE UPHOLD THE ADDIT ION SUSTAINED BY THE LD. CIT(A) BY REJECTING THE GROUND OF APPEAL TAKEN BY THE ASSESSE E. 3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 23-01 -2013. SD/- SD/- (B.R. JAIN) (B.R. MITTAL) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 23 JAN 2013 *MISHRA COPY FORWARDED TO:- BY ORDER 1. SHRI KUMUD CHAND JAIN (HUF ) JAIPUR 2. THE ITO, WARD- 3 (2) , JAIPUR 3.THE LD. CIT 4.THE LD. CIT(A) 5.THE LD. DR 6.THE GUARD FILE (IT NO.245/JP/12) A.R. ITAT: JA IPUR 5 6