CLARITY GOLD PVT LTD., Jaipur V. ACIT, Jaipur

ITA 245/JPR/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74859 (ITAT-JAIPUR)
• 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: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 07-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHASH CHANDRA
• Assessee Lawyers: S L PODDAR
• Keywords: Bogus purchase; Rejection of books of accounts; Business income; Depreciation; Income from undisclosed sources; Search and seizure; Document seized; Principle of natural justice; Opportunity of cross examination; Additional evidence; Wrong claim; Corroborative evidences; Documents seized; Unabsorbed depreciation
• Section: 43B; 143(3); 142(1); 133A; 153A; 132; 144; 139

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH, JAIPUR (BEFORE SHRI HARI OM MARATHA AND SHRI N.K. SAINI) ITA NO. 245/JP/2013 ASSESSMENT YEAR : 2005-06 PAN: AACCC 3671 Q M/S. CLARITY GOLD (P) LTD. VS. THE ACIT 4,GANGA VIHAR, SARDAR PATEL MARG CENTRAL CIRCLE- 1 C-SCHEME, JAIPUR JAIPUR (APPELLANT) (RESPONDENT) ITA NO.461 /JP/2013 ASSESSMENT YEAR : 2005-06 PAN: AACCC 4671 Q THE ACIT VS. M/S. CLARITY GOLD (P) LTD. CENTRAL CIRCLE- 1 4,GANGA VIHAR, SARDAR PATEL MARG JAIPUR C-SCHEME, JAIPUR (APPELLANT) (RESPONDENT) ITA NO. 246/JP/2013 ASSESSMENT YEAR : 2006-07 PAN: AACCC 3671 Q M/S. CLARITY GOLD (P) LTD. VS. THE ACIT 4,GANGA VIHAR, SARDAR PATEL MARG CENTRAL CIRCLE- 1 C-SCHEME, JAIPUR JAIPUR (APPELLANT) (RESPONDENT) ITA NO.462 /JP/2013 ASSESSMENT YEAR : 2006-07 PAN: AACCC 4671 Q THE ACIT VS. M/S. CLARITY GOLD (P) LTD. CENTRAL CIRCLE- 1 4,GANGA VIHAR, SARDAR PATEL MARG JAIPUR C-SCHEME, JAIPUR (APPELLANT) (RESPONDENT) ITA NO. 247/JP/2013 ASSESSMENT YEAR : 2007-08 PAN: AACCC 3671 Q M/S. CLARITY GOLD (P) LTD. VS. THE ACIT 4,GANGA VIHAR, SARDAR PATEL MARG CENTRAL CIRCLE- 1 C-SCHEME, JAIPUR JAIPUR (APPELLANT) (RESPONDENT) 2 ITA NO.463 /JP/2013 ASSESSMENT YEAR : 2007-08 PAN: AACCC 4671 Q THE ACIT VS. M/S. CLARITY GOLD (P) LTD. CENTRAL CIRCLE- 1 4,GANGA VIHAR, SARDAR PATEL MARG JAIPUR C-SCHEME, JAIPUR (APPELLANT) (RESPONDENT) ITA NO. 248/JP/2013 ASSESSMENT YEAR : 2008-09 PAN: AACCC 3671 Q M/S. CLARITY GOLD (P) LTD. VS. THE ACIT 4,GANGA VIHAR, SARDAR PATEL MARG CENTRAL CIRCLE- 1 C-SCHEME, JAIPUR JAIPUR (APPELLANT) (RESPONDENT) ITA NO.464 /JP/2013 ASSESSMENT YEAR : 2008-09 PAN: AACCC 4671 Q THE ACIT VS. M/S. CLARITY GOLD (P) LTD. CENTRAL CIRCLE- 1 4,GANGA VIHAR, SARDAR PATEL MARG JAIPUR C-SCHEME, JAIPUR (APPELLANT) (RESPONDENT) ITA NO. 249/JP/2013 ASSESSMENT YEAR : 2009-10 PAN: AACCC 3671 Q M/S. CLARITY GOLD (P) LTD. VS. THE ACIT 4,GANGA VIHAR, SARDAR PATEL MARG CENTRAL CIRCLE- 1 C-SCHEME, JAIPUR JAIPUR (APPELLANT) (RESPONDENT) ITA NO.465 /JP/2013 ASSESSMENT YEAR : 2009-10 PAN: AACCC 4671 Q THE ACIT VS. M/S. CLARITY GOLD (P) LTD. CENTRAL CIRCLE- 1 4,GANGA VIHAR, SARDAR PATEL MARG JAIPUR C-SCHEME, JAIPUR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.L. PODDAR DEPARTMENT BY: SHRI SUBHASH CHANDRA DATE OF HEARING : 21-01-2014 DATE OF PRONOUNCEMENT : 05-03-2014 3 ORDER PER BENCH:- THIS IS A BUNCH OF 10 APPEALS FILED AGAINST THE C OMMON ORDER OF THE LD. CIT(A), AJMER, DATED 21-02-2013, FOR THE ASSESSMENT YEARS 2005-06, 2006-07, 2007-08, 2008-09 AND 2009-10. ALL THE APPEALS WERE HEARD TOGETHER. I N THESE APPEAL COMMON FACTS HAVE GIVEN RISE TO ALMOST IDENTICAL ISSUES. THEREFORE, FOR TH E SAKE OF CONGRUENCE, CONVENIENCE AND BREVITY, WE ARE PROCEEDING TO DECIDE THEM BY THIS COMMON ORDER. 2. THE GROUND OF APPEAL RAISED IN A.Y. 2005-06 WILL GIVE THE SAMPLE OF ISSUE (S) INVOLVED IN THESE APPEAL. THEREFORE THE GROUNDS RAI SED IN APPEALS FOR A.Y. 2005-06 ARE INCORPORATED AS UNDER:- THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN IT A NO.245/JP/2013. 1. THAT THE ORDER PASSED BY THE LD. A.O. U/S 14 3(3)/ 153A IS VOID AB INITO. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD CIT(A) HAS ERRED IN UPHOLDING THE ACTION OF LD. A.O. IN REJECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE INCOME-TAX AC T, 1961. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD CIT(A) HAS ERRED IN SUSTAINING THE TRADING ADDITION OF RS. 32,40,627/- BY APPLYING THE GROSS PROFIT RATE OF 15%. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 18,2 6,339/- ON ACCOUNT OF ALLEGED UNDISCLOSED PROFIT OF SILVER STAR. 5. THE ASSESSEE CRAVES YOUR INDULGENCE TO ADD AME ND OR ALTER ALL OR ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. THE GROUNDS RAISED BY THE DEPARTMENT IN ITA NO.461/ JP/2013 READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A), AJMER HAS ERRED IN REDUCING THE TRADING ADDITION TO RS. 32,40,627/- AS AGAINST ADDITION OF RS. 60,94,433 /- MADE BY THE A.O. AND THUS ALLOWING RELIEF OF RS. 28,53,806/- THROUGH THE REJECTION OF BOOKS OF ACCOUNT U/S 145(3) HAS BEE N CONFIRMED BY HIM. 4 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A), AJMER HAS ERRED IN NOT APPRECIATING THE REASONAB LENESS OF GROSS PROFIT RATE OF 17% ADOPTED BY THE A.O. BASED ON THE PECULIAR MODUS OPERANDI OF OBTAINING BOGUS PURCHASE BILLS BEING ADOPTED BY THE ASSESSEE, WH ICH HAS BEEN CONFIRMED BY SHRI KHUSHI KUMAR AMERIYA, ONE OF THE DIRECTORS FROM WHOSE CUSTODY LIST OF 271 PAR TIES INDULGED IN ISSUING BOGUS SALE BILLS TO VARIOUS CONCERNS WERE FOUND COUPLED WITH THE FACT THAT ONE OF THE GROUP CONCERNS M/S. GUPTA EMERALD MINES (P) LTD. (GEMP L) DOING SAME BUSINESS HAS DECLARED G.P. RATE OF 17 .98% IN A.Y.2009- 10 3. THE APPELLANT CRAVES THE RIGHT TO AMEND ALTER OR ADD TO ANY OF THE GROUNDS OF APPEAL GIVEN ABOVE. 2.1 TO START WITH, WE ARE NARRATING THE FACTS OBTA INING IN THE APPEAL IN ITA NO.245/JP/2013 PERTAINING TO THE ASSESSMENT YEAR 2 005-06 FILED BY THE ASSESSEE. THE ASSESSEE IS A COMPANY INCORPORATED UNDER THE COMPAN IES ACT. A SEARCH AND SEIZURE OPERATION U/S 132(4) OF THE I.T. ACT, 1961 (THE AC T FOR SHORT) WAS CARRIED OUT ON 20-05- 2009 AT THE BUSINESS AND RESIDENTIAL PREMISES OF A GROUP TO WHICH THIS ASSESSEE BELONGS TO. AS A CONSEQUENCE OF THIS SEARCH, NOTICE U/S 153A OF THE ACT WAS ISSUED TO THE ASSESSEE COMPANY, WHO IS CARRYING ON THE BUSINESS OF JEWELL ERY AND GEMS STONES. ORIGINALLY, THE ASSESSEE HAD FILED ITS RETURN OF INCOME U/S 139(1) OF THE ACT ON 30-10-2005 DECLARING ITS TOTAL INCOME OF RS. 21,81,650/-. IN THE RETURN, TH E BROUGHT FORWARD LOSS OF RS. 11,44,978/- HAD BEEN CLAIMED BUT THIS LOSS, IN FACT, WAS OF RS . 15,11,573/- AS PER COMPUTATION OF INCOME FILED FOR THE ASSESSMENT YEAR 2004-05. IN CO MPLIANCE TO NOTICE ISSUED U/S 153A OF THE ACT, ON 23-09-2009, THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 28-04-2011, DECLARING THE TOTAL INCOME OF RS. 17,86,470/- . IN THIS RETURN FILED U/S 153A OF THE ACT, THE ASSESSEE HAS CLAIMED THE CORRECT AMOUNT OF LOSS AND THAT IS WHY THE RETURNED INCOME IS LESS AS COMPARED TO RETURN FILED U/S 139 OF THE ACT. 2.2 ON THE BASIS OF THE ORIGINAL RETURN OF INCOME F ILED ON 30-10-2005, THE ASSESSMENT HAD BEEN COMPLETED U/S 143(3) ON 28-12-2007 AT A TO TAL INCOME OF RS. 30,44,220/- AGAINST DECLARED INCOME OF RS. 21,81,650/-. IN FIRST APPEA L, AGAINST THE ORDER DATED 28/12/2007 THE 5 LD. CIT(A) CONFIRMED THE TRADING ADDITION OF RS. 7, 91,855/-. IN FURTHER APPEAL THE TRIBUNAL HAS SUSTAINED TRADING ADDITION AT RS. 1.00 LACS VID E ITS ORDER DATED 18-09-2009 PASSED IN (ITA NO.04/JP/2009 FOR THE ASSESSMENT YEAR 2005-06. 2.3 IN THE PROCEEDINGS, U/S 153A OF THE ACT, THE AS SESSMENT WAS MADE AND COMPLETED ON 23-08-2011. THE ASSESSEE COMPANY DERIVES ITS INCOM E FROM BUSINESS OF MANUFACTURING OF JEWELLERY AND TRADING IN GEM STONES. THIS COMPANY H AS FOUR SEPARATE MAIN UNITS SITUATED AT DIFFERENT LOCATIONS IN JAIPUR CARRYING ON BUSINESS FROM THESE FOUR DIFFERENT LOCATIONS IN THE CITY OF JAIPUR BESIDES HAVING OTHER BRANCHES AT MUM BAI AND OTHER PLACES ACROSS THE COUNTRY. THE ASSESSEE MAINTAINS SEPARATE BOOKS OF ACCOUNT FO R ALL THESE UNITS. THESE SEPARATE UNITS ARE TREATED AS SEPARATE BUSINESS DIVISIONS FOR THE PURPOSE OF ACCOUNTING. THE FOUR UNITS AT JAIPUR ARE GIVEN FOUR DIFFERENT NAMES, LIKE, GEM UN IT, SILVER STAR UNIT, JEWELLERY DIVISION AND NIZAMI DIVISION. THE GEM UNIT OPERATED FROM THE SARDAR PATEL MARG, JAIPUR IS THE REGISTERED OFFICE OF THE ASSESSEE-COMPANY WHEREAS I TS HEAD OFFICE IS SITUATED AT METRO HOUSE (2 ND FLOOR) IN MUMBAI WHICH IS ALSO A SEPARATE DIVISION FOR THE PURPOSE OF ACCOUNTING. MUMBAI BRANCH IS BEING MANAGED BY THE M AIN DIRECTOR NAMELY SHRI S.S. GUPTA WITH THE HELP OF SHRI KHUSHI KUMAR AMERIYA, THE OTHER DIRECTOR. THE JAIPUR BRANCHES ARE BEING MANAGED UNDER OVERALL SUPERVISIO N AND CONTROL OF SHRI KHUSHI KUMAR AMERIYA WHO RESIDES AT JAIPUR AND IS THE MOST IMPOR TANT PERSON OF THE GROUP. HE IS LOOKING AFTER THE OPERATION OF ALL CONCERNS SITUATED IN JA IPUR. HE IS A DIRECTOR OF ALL THE IMPORTANT COMPANIES OF THE GROUP. HE IS ALSO AN AUTHORIZED PE RSON AND SIGNATORY FOR ALL IMPORTANT ACTIVITIES ON BEHALF OF THE ASSESSEE COMPANY. HE HO LD THE POSITION OF DIRECTOR IN THE 05 GROUP CONCERNS NAMED AS UNDER:- 1. M/S. CLARITY SALT (P) LTD. 2. M/S. MARINE MINERAL AND HERBAL REMEDIES (P) LTD. 3. M/S. CLARITY GOLD (P) LTD. (CGPL) 4. M/S. GEM MART (INDIA) (P) LTD. 5. M/S. CLARITY GOLD MINT LTD. 6 2.4 DURING F.Y. 2007-08, THE BCTT WING OF THE (INVE STIGATION) DIRECTORATE, AT JAIPUR, HAD FOUND THAT ACCOMMODATION ENTRY PROVIDERS WERE O PERATING AT A LARGE SCALE AND WERE INDULGING IN ARRANGING BOGUS PURCHASES BILLS FOR DI FFERENT TAX PAYERS. BCTT WING HAD CONDUCTED SURVEYS U/S 133A OF THE ACT AT THE BUSINE SS PREMISES OF VARIOUS PERSONS ENTITIES WHO WERE ALLEGEDLY ISSUING BOGUS SALE BILLS TO PAR TIES IN JAIPUR AND OTHER PLACES. DURING ENQUIRIES CONDUCTED IN THIS REGARD FROM ALLEGED ENT RY PROVIDERS, IT WAS FOUND THAT THESE PERSONS WERE ISSUING SALE BILLS IN DIFFERENT COMMOD ITIES, MOSTLY IN GEMS AND JEWELLERY BUT WITHOUT SUPPLYING THE GOODS MENTIONED IN THE BILLS. THEY WOULD RECEIVE THE AMOUNT MENTIONED IN THE BILLS THROUGH ACCOUNT PAYEE CHEQUE / DRAFT WHICH WERE THEN DEPOSITED IN THEIR BANK ACCOUNT. AFTER CLEARANCE OF THE CHEQUE/ DRAFT, THE AMOUNTS WERE BEING WITHDRAWN IN CASH AND RETURNED BACK TO THE CONCERNED PARTIES SEEKING ENTRIES . THE ENTRY PROVIDERS WERE CHARGING COMMISSION FOR PROVIDING SUCH BILLS W ITHOUT PASSING/ TRANSFERRING ANY COMMODITY/ GOODS. THEY WOULD ACCEPT THE CHEQUE AND DEPOSIT THE SAME IN THEIR BANK TO MAKE BELIEVE THAT TRANSACTIONS ARE GENUINE. THEY W OULD THEREAFTER RETURN CASH TO THE BENEFICIARIES. ON THE BASIS OF THE INFORMATION SO G ATHERED FROM THESE ENTRY PROVIDERS, IT WAS NOTICED BY THE WING THAT THE BENEFICIARIES WERE COL LECTING THESE PAPER BILLS/ BOGUS BILLS TO REDUCE INCIDENTS OF TAX. THE ENTRY SEEKERS WERE IDE NTIFIED ON THE BASIS OF THE STATEMENTS RECORDED ON OATH BY THE WING FROM THE ENTRY PROVIDE RS. THE ASSESSEE BEFORE US WAS FOUND TO BE ONE OF SUCH BENEFICIARIES. THE ASSESSEE AND I TS SISTER CONCERNS NAMELY M/S. MARINE MINERAL & HERBAL REMEDIES (P) LTD. ARE STATED TO HA VE OBTAINED BOGUS PURCHASE BILLS TOTALING TO RS. 13.59 CRORES FROM TWO SUCH ENTRY PR OVIDERS OF THIS GROUP. SHRI KHUSHI KUMAR AMERIYA ADMITTED IN HIS STATEMENT THAT MOST O F THE TURNOVER APPEARING IN THE BOOKS OF GEM UNITS OF M/S. CLARITY GOLD (P) LTD. WERE BOG US AND HAVE BEEN ARRANGED THROUGH BROKERS BY PAYING COMMISSION TO INFLATE THE STOCK I N TRADE AND TURNOVER OF THE COMPANY SO THAT IT CAN OBTAIN HIGHER CREDIT LIMIT FROM THE BA NK. IT WAS NOTICED THAT THE ASSESSEE HAS BEEN OBTAINING SUCH BOGUS PURCHASE BILLS FROM VIJAY GROUP AND LALWANI GROUP FOR THE LAST 7 04 YEARS I.E. FROM FINANCIAL YEAR 2005-06 ONWARDS. SHRI KHUSHI KUMAR AMERIYA ADMITTED THAT THE COMMISSION BETWEEN 0.25% TO 0.60% WAS BEI NG CHARGED BY THE ABOVE BILL PROVIDERS FOR GIVING THESE PURCHASE BILLS. HE ALSO ENUMERATED THE LIST OF CONCERNS OF LALWANI GROUP AND VIJAY GROUP IN WHOSE NAMES THE BO GUS BILLS HAD BEEN OBTAINED. HE ALSO CONFIRMED THE MODUS OPERANDI OF ISSUING THE BOGUS B ILLS AGAINST COMMISSION BY DEPOSITING CHEQUE AND THEREAFTER DEDUCTING COMMISSION AS STATE D ABOVE, WITHDRAWING CASH AND PAYING BACK THE CASH TO THE BENEFICIARIES. IT WAS FOUND TH AT THE ASSESSEE HAS ALSO OBTAINED SUCH BOGUS PURCHASE BILLS FROM OTHER GROUPS. WHILE ANSWE RING TO Q.NO.15, SHRI KHUSHI KUMAR AMERIYA STATED THAT 95% OF THE TURNOVER OF THE GEM S UNIT WAS BOGUS AND THE TURNOVER WAS BEING ENHANCED FOR THE PURPOSE OF OBTAINING HIGHER BANK FINANCE. THE BANK WOULD FINANCE UPTO 75% OF THE STOCK VALUE AS WELL AS 75% OF 90 DA YS DEBTORS. IN THIS MANNER, THE STOCK IN TRADE OF THE CONCERN HAS ALSO BEEN INFLATED. SHRI K HUSHI KUMAR AMERIYA ALSO ADMITTED THAT THIS MODUS OPERANDI IN THE STATEMENTS RECORDED AT H IS RESIDENCE WHILE CONFRONTING WITH THE DOCUMENTS SEIZED FROM HIS RESIDENCE. APART FROM ABO VE, CERTAIN IMPORTANT DOCUMENTS WERE ALSO FOUND FROM THE RESIDENTIAL PREMISES OF SHRI KH USHI KUMAR AMERIYA RELATING TO M/S. CLARITY GOLD (P) LTD.. THESE DOCUMENTS WERE CONFRON TED TO THE ASSESSEE. IT WAS FOUND THAT THESE DOCUMENTS RELATED TO CERTAIN SALES AND PURCHA SES MADE BY THE ASSESSEE-COMPANY THROUGH A BROKER BY NAME KALANI AND PARAS JI. COP IES OF ALL THESE DOCUMENTS ARE ENCLOSED AT PAGES OF THE PAPER BOOK. TO BE VERY SPECIFIC ABO UT FACTS IN DETAIL, WE WOULD LIKE TO INCORPORATE PARA 11 AT PAGE 6 OF THE ASSESSMENT ORD ER TO THE LAST PARA 33 (I.E. PAGE 37OF THE ASSESSMENT ORDER) HEREINASUNDER :- 11. BESIDES ABOVE DOCUMENTS AND STATEMENTS, CERTA IN CRUCIAL DOCUMENTS WERE ALSO FOUND AT THE RESIDENCE PREMISES OF SHRI KHISHI KUMA R AMERIYA RELATED TO M/S. CLARITY GOLD P LTD AND THE SAME WERE ALSO CONFRONTED. THESE DOCU MENTS ARE RELATED TO CERTAIN SALES AND PURCHASES MADE BY THE COMPANY THROUGH THE BROKERS K ALANI AND PARAS JI. THESE DOCUMENTS ARE AT PAGE NO.20 TO 25 OF ANNEXURE A-6 FOUND FROM RESIDENCE OF KK AMERIYA. DETAILS RECORDED ON PAGE NO.20 AND 24 OF THIS ANNEXURE ARE PRODUCED THEEIN 12 SH. KHUSHI KUMAR AMERIYA WAS CONFRONTED WITH THE ABOVE SEIZED PAPERS AND HE STATED AT LENGTH ABOUT THEM. HE STATED THAT THE CAL CULATION APPEARING ON THE PAPERS WERE 8 RELATED TO THE BOGUS SALES AND PURCHASES OF THE GEM S DIVISION OF M/S. CLARITY GOLD PVT. LTD AGAINST WHICH NO EXCHANGE OF GOODS HAVE TAKEN PLACE . REGARDING PAGE 24 OF ANNEXURE A-6, HE STATED THAT THE TRANSACTIONS ARE APPEARING UNDER THE HEAD SUMMARY-B. ON S.NO.1 THE NAME OF ONE OF THE BROKERS SH. ANUP KALANI WAS MENT IONED. HE BELONGS TO JAIPUR AND THE CONTACT IS BY WAY OF TELEPHONE AS WELL AS BY PERSON AL MEETING. SUCH AGENTS ARRANGE THE BOGUS TURNOVER FOR THE COMPANY. SUCH DEAL IS CALLED TURNOVER DEAL BECAUSE BOTH SALES AS WELL AS PURCHASES ARE ARRANGED BY THE SAME BROKER. THE AGENTS GETS COMMISSION FOR ARRANGING THE TURNOVER WHICH IS SHOWN IN THE TABLE UNDER THE HEAD % OF PREMIUM. THE COMMISSION IS CALCULATED ON THE BASIS OF AMOUNT OF BOGUS PURCHASES. ACCORDING TO SUMMARY-B, THE BROKER SH. ANUP KALANI HAD ARRANGED BOGUS PURCHASE AMOUNTING TO RS.5,27,70,390/- IN F.Y. 2006-07 AND RS.6,28,89,135 /- IN F.Y. 2007-08. THE COMMISSION WAS WORKED OUT @ 0.65% AT RS.7,51,787/- OF RS.11365 9525. SIMILARLY, ON S.NO.2, SH. RAM SHYAM ARRANGED THE BOGUS PURCHASES AMOUNTING TO RS. 16,88,54,539/- DURING F.Y. 2007-08. THE DEAL OF SH. RAM SHYAM WAS ALSO ARRANGED THROUGH SH. ANUP KALANI BUT SINCE SH. RAM SHYAM DID NOT GET HIS BROKERAGE, HE CAME IN DIRECT TOUCH WITH THE ASSESSEE. ON THE BASIS OF DIRECT DEALING WITH SH. RAM SHYAM, IT WAS DECIDED T HAT THE BROKERAGE WILL BE PAID @ 0.40% BECAUSE THE REMAINING 0.25% WAS THE SHARE OF SH. ANUP KALANI. ON THE BASIS OF NEW RATE, THE ASSESSEES LIABILITY TOWARDS SH. RAM SHYA M WAS DETERMINED AT RS.6,75,412/- AND CHEQUES OF DIFFERENT DATES WERE GIVEN TO SH. RAM SH YAM AGAINST THAT LIABILITY. HOWEVER, THE CHEQUES WERE DISHONORED OR INSTRUCTION FOR STOP PAY MENT WAS ISSUED. ALL THESE CHEQUES ARE STILL LYING WITH THE BROKERS AND IN SEVERAL CASES, NOTICES U/S 138 OF NEGOTIABLE INSTRUMENTS HAVE BEEN RECEIVED. SIMILARLY, AT S.NO.3 OF SUMMARY -B, THE CALCULATION OF COMMISSION ON ACCOUNT OF THE BOGUS TURNOVER ARRANGED FOR F.A. 200 6-07 AND 2007-08. ON THE PAPER THE FINAL LIABILITY OUTSTANDING IN THE NAME OF SH. ANUP KALANI, SH. RAM SHYAM AND SH. PARAS JAIN IS SHOWN AT RS.7,51,787/-, RS.6,75,418/- AND R S.17,01,114/- RESPECTIVELY. SH. KHUSHI KUMAR AMERIYA ALSO STATED THAT IN F.Y. 2008-09 ALSO , BOGUS TURNOVER ON WHICH COMMISSION PAYMENTS COME TO RS.15.00 LACS HAS ALSO TAKEN PLACE AND THE PAYMENT OF THAT COMMISSION IS ALSO PENDING. 13 SH. KHUSHI KUMAR AMERIYA GOT THE FIGURES OF SALE S AND PURCHASES IN NAME OF ABOVE FIRMS VERIFIED FROM THE REGULAR BOOKS OF GEMS UNIT IN HIS LAPTOP SEIZED FROM HIS RESIDENCE AND THE FIGURES WERE FOUND TO BE MATCHING FROM THE LEDGER ACCOUNTS OF RESPECTIVE FIRMS. IT WAS FURTHER STATED BY HIM THAT THE TRANSACTIONS WER E APPEARING IN THE NAME OF ABOVE PARTIES IN F.Y. 2008-09 ALSO WHICH IS EVIDENT FROM THE LEDG ER ACCOUNTS IN THE REGULAR BOOKS WHICH SHOWS THAT SIMILAR BOGUS TRANSACTIONS CONTINUED TO TAKE PLACE IN SUBSEQUENT YEARS ALSO. FOR THE SAKE OF CLARITY THE RELEVANT PART OF THE STATEM ENT OF SHRI KHUSHI KUMAR AMERIYA RECORDED AT HIS RESIDENCE ON 21.05.2009 W.R.T THE B OGUS SALES AND PURCHASES BY THE CO REFLECTED IN ANNEXURE A-6 IS PRODUCED THEREIN- 13.1 SIMILARLY, PAGE NO. 38 TO 45 OF ANEXURE 26 SEI ZED FORM RESIDENCE OF SHRI AMERIYA ALSO GIVES THE DETAILS OF BROKERWISE AND PARTYWISE BOGUS SALES AND PURCHASES FOR THE PERIOD OF 1-04-2008 TO 4-02-2009 RELEVANT TO ASSESSMENT YE AR 2009-10 WHICH IS MENTIONED IN THE ASSESSMENT ORDER AT PAGE 11 TO 14. 14. UNDER THE OTHER UNIT OF COMPANY NAMELY SILVER S TAR THE ASSESSEE COMPANY IS DEALING WITH SILVER JEWELLERY. THIS UNIT WAS BEING MANAGED BY TRUSTED EMPLOYEES SHRI RAGHU DATT TIWARI AND SHRI PAWN KUMAR KHANDELWAL WHO WERE EXAM INED IN DETAILS W.R.T TRADING ACTIVITIES OF THIS UNIT AND MAINTENANCE OF ACCOUNT S. THESE ACCOUNTS WERE BEING MAINTAINED BY THE ACCOUNTANT OF THE UNIT SH. RAGHU DUTT TIWARI IN A PEN DRIVE ON TALLY 5.4 SOFTWARE. SH. RAGHU DUTT TIWARI WAS MAINTAINING TWO SETS OF A CCOUNTS. ONE FOR THE PURPOSE OF RECORDS AND MAY BE TERMED AS REGULAR BOOKS OF ACCOU NTS AND THE OTHER FOR THE PURPOSE OF 9 ACTUAL MONITORING OF THE TRANSACTIONS OF THE UNIT T ERMED AS NO.2 ACCOUNTS. THE NO.2 ACCOUNTS WERE BEING MAINTAINED IN A PEN DRIVE AND T HE WORKING WAS DIRECTLY DONE IN THE PEN DRIVE SO THAT NO COPY COULD BE AVAILABLE IN THE COM PUTER OF THE SAME. THE PEN DRIVE WAS IMPOUNDED AS ANNEXURE A-43 IN THE COURSE OF SURVEY FROM PREMISES OF THIS UNIT AT TRIPOLIA BAZAAR, JAIPUR. THE PEN DRIVE GIVES INSIGHT INTO TH E ACTUAL STATE OF AFFAIRS AND BUSINESS TRANSACTIONS OF THE UNIT. THE NATURES OF TRANSACTIO NS APPEARING THERE IS ARE AS UNDER. 14.1UNDISCLOSED SALE: THERE ARE THE SALES WHICH ARE ACTUALLY AFFECTED IN CASH BUT FIND NO MENTION IN THE REGULAR BOOKS OF ACCOUNTS. THESE TAK E PLACE ON KACCHI PARCHI PREPARED BY SH. PAWAN KHANDELWAL OR SH. MAHESH KHANDELWAL EMPLO YEES. THE KACCHI PARCHI IS SENT BY THEM TO THE ACCOUNTANT SH. RAGHU DUTT TIWARI WHO ENTERS THEM IN THE PEN DRIVE. THE KACCHI PARCHI IS PREPARED ITEM WISE MENTIONING THE DETAILS OF JEWELLERY ITEMS SUCH AS EARINGS, NECKLACE, BANGLES, ETC. THE PRICE OF EACH ITEM, DATE AND NAME OF THE PARTY IS ALSO MENTIONED IN THE SLIP AND IT IS IN HAND WRITING OF SH. PAWAN KHANDELWAL OR SH. MAHESH KHANDELWAL./ THE DETAILS OF CASH RECEIPT ARE ALSO R ECORDED IN THE PEN DRIVE BY SH. RAGHU DUTT TIWARI AS COMMUNICATED BY SH. PAWAN KHANDELWAL & SH. MAHESH KHANDELWAL. 14.2 ACTUAL SALES AGAINST WHICH BILL IS PARTLY ISSU ED: AS MENTIONED ABOVE, THE ACTUAL SALES TAKE PLACE BY WAY OF KACCHI PARCHI. AT THE SAME TIM E, THE BUYER IS ASKED WHETHER HE NEEDS BILL FOR THE SAME. HE IS ALSO ASKED HOW MUCH AMOUNT OF BILL IS REQUIRED AND IN WHAT NAME. AS DIRECTED BY THE BUYER, PAKKA BILL IS ISSUED IN T HE NAME OF CONCERN AS COMMUNICATED BY THE BUYER. THE COMMENSURATE PAYMENT IS RECEIVED BY CHEQUE. HERE, IT IS INTERESTING TO NOTE THAT NO ENTRY OF PAKKA BILL WILL BE MADE IN THE PEN DRIVE BECAUSE THE ACTUAL SALE AS PER KACCHI PARCHI HAS ALREADY BEEN ENTERED IN THE PEN D RIVE. FURTHER, NO ACCOUNT OF THE CONCERN IN WHOSE NAME THE BILL HAS BEEN ISSUED WILL BE FOUN D IN THE PEND RIVE BECAUSE THE SALES IN THE PEN DRIVE HAVE ALREADY BEEN ENTERED IN THE NAME OF THE PERSON (AS PER KACCHI PARCHI) TO WHOM THE GOODS WERE ACTUALLY SOLD. HOWEVER, THE PAY MENT RECEIVED BY CHEQUE WILL BE ENTERED IN THE PEN DRIVE IN THE ACCOUNT OF THE PERS ON TO WHOM THE GOODS WERE SOLD. IN THE NARRATION, THE NAME OF THE CONCERN AND THE CHEQUE N UMBER & AMOUNT WILL BE MENTIONED. ANOTHER INTERESTING FEATURE IS THAT THE KACCHI PARC HI IS MADE ITEM WISE BUT THE BILL IS ISSUED OF GENERAL ITEMS I.E. STONES STUDDED SILVER JEWELLE RY. THIS IS DONE BECAUSE THE BUYER DOES NOT WANT THE ITEM WISE AND QUANTITATIVE DETAILS IN HIS PURCHASE BILL. 14.3ACTUAL UNDISCLOSED PURCHASES: THESE PURCHASES A RE ALSO MADE BY WAY OF KACCHI PARCHI AND THE RAW MATERIAL IS MAINLY SILVER AND STONES. T HESE PURCHASES ARE ENTERED IN THE PEN DRIVE BUT THE SAME ARE NOT MENTIONED IN THE REGULAR BOOKS. 14.4FAKE OR BOGUS PURCHASES: THESE ARE PAPER BILLS ARRANGED THROUGH BROKERS AGAINST WHICH NO GOODS ARE ACTUALLY RECEIVED. THESE PURCHASES ARE ENTERED IN REGULAR BOOKS BUT NOT ENTERED IN THE PEN DRIVE. AGAINST THESE BILLS, CHEQ UE IS PAID IN THE NAME OF THE PARTY IN WHOSE NAME THE BILL HAS BEEN ISSUED BUT EQUIVALENT CASH IS RECEIVED BACK BY DEDUCTING THE COMMISSION OF THE BROKER OR THE ACCOMMODATION BILL PROVIDER. IT IS INTERESTING TO NOTE THAT THE BROKERAGE EXPENSES, ON ARRANGING THESE FAKE PUR CHASE BILLS IS RECORDED IN THE PEN DRIVE UNDER THE HEAD BILL COMMISSION ACCOUNT THIS BILL COMMISSION ACCOUNT FIND ITS PLACE ON PAGE NO.27 TO 35 OF ANNEXURE A-45 IMPOUNDED FROM PR EMISES OF SILVER STAR UNIT AT TRIPOLIA BAZZAR, JAIPUR. IN THE NARRATION OF THIS E NTRY, THE DETAILS OF THE CHEQUES ISSUED AND THE CASH RECEIVED BACK ARE ALSO MENTIONED. FURTHER, A PAYMENT VOUCHER OF ALL THESE ENTRIES IS ALSO MADE IN THE PEN DRIVE WHICH CONTAINS COMPLETE PARTICULARS OF SUCH TRANSACTIONS. THIS ACCOUNT CLEARLY PROVES BEYOND DOUBT THE FACT OF OBT AINING BOGUS BILLS OF PURCHASES AND MAKING PAYMENT THROUGH CHEQUES WHICH WERE SUBSEQUEN TLY RECEIVED BACK IN CASH AFTER DEDUCTION OF COMMISSION. THE CONCERNED PERSONS HAVE ADMITTED THIS FACT IN THEIR STATEMENTS 10 RECORDED U/S 132(4) OF THE IT ACT. YEAR WISE SUMMAR Y OF THIS ACCOUNT IS MENTIONED AT PAGES 16 TO 21 OF THE ASSESSMENT ORDER 14.5FAKE SALES: THESE ARE THE SALES AGAINST WHICH B ILL IS ISSUED BUT NO GOODS ARE SUPPLIED. THE PAYMENT RECEIVED BY CHEQUE IS PAID BACK IN CASH BY DEDUCTING THE COMMISSION. THE INCOME FROM ISSUING FAKE SALE BILLS IS BOOKED AS B ILL COMMISSION RECEIPT IN THE PEN DRIVE. COPY OF BILLS ACCOUNT ALREADY REPRODUCED ABOVE. 15 AS STATED EARLIER DETAILED EXAMINATION ON THE IS SUE, WAS MADE, OF SHRI RAGHU DUTT TIWARI ACCOUNTANT, MAINTAINING AND SUPERVISING THE ACCOUNTS. HE WAS CONFRONTED WITH ABOVE EVIDENCES, SPECIFICALLY THE ENTRIES IN PEN DR EIVE AND HE ADMITTED THE MODUS OPERANDI IN DETAIL. THE RELEVANT PART OF HIS STATEMENT IN HI NDI IS MENTIONED AT PAGES 21 TO 26 OF THE ASSESSMENT ORDER 16. THE ABOVE EVIDENCES ARE VERY CRUCIAL AND ARE CO NCLUSIVE PROOF OF LARGE SCALE TAX EVASION BEING CARRIED OUT BY THE COMPANY AND ITS AS SOCIATES. IT IS EVIDENT THAT THE ACTUAL TRANSACTIONS REFLECTED IN THE PEN DRIVE ARE ENTIREL Y DIFFERENT FROM THOSE REFLECTED IN REGULAR BOOKS OF ACCOUNTS. THE PURCHASES ARE MADE IN CASH F ROM DIFFERENT PARTIES BUT THE BILLS ARE RECEIVED FROM DIFFERENT P[ARTIES. THE SALES ARE MAD E IN CASH TO DIFFERENT PARTIES BUT THE BILLS ARE ISSUED TO DIFFERENT PARTIES. THEREFORE, THE ENT IRE VOLUME OF TRANSACTION APPEARING THE PEN DRIVE INDICATES THE UNDISCLOSED INCOME OF THE CONCE RN. FOR EXAMPLE, THE SALES ENTERED IN PEN DRIVE RESULT INTO UNDISCLOSED CASH RECEIPTS WHICH I S UNACCOUNTED INCOME IN THE HANDS OF THE CONCERN. SIMILARLY, PURCHASES APPEARING IN THE PEN DRIVE ARE UNDISCLOSED CASH EXPENSES WHICH AGAIN BECOMES UNACCOUNTED INCOME IN THE HANDS OF THE CONCERN. THE QUANTITATIVE ESTIMATES OF SOME OF THE MAJOR UNDISCLOSED TRANSACT IONS APPEARING IN THE PEN DRIVE GIVEN BELOW. IT MAY BE NOTED THAT ALL THESE TRANSACTIONS REPRESENT UNDISCLOSED INCOME TAXABLE IN THE HANDS OF THE COMPANY AT MENTIONED AT PAGE 26 OF THE ASSESSMENT ORDER . 17. DURING THE COURSE OF POST SEARCH PROCEEDINGS AS WELL AS IN THE PRESENT PROCEEDINGS THE ASSESSEE WAS REQUIRED TO EXPLAIN THE TRANSACTIO NS RECORDED IN PEN DRIVE FOUND AT SILVER STAR UNIT BUT THE ASSESSEE WAS NOT ABLE TO EXPLAIN THE SAME. VIDE QUERY NUMBER 5 & 6 OF NOTICE DATED 11.7.2011 U/S 142(1) THE ASSESSEE WAS SPECIFICALLY ASKED TO FURNISH TRIAL BALANCE OF SILVER STAR UNIT AND GET IT VERIFIED FRO M THE COPY OF TRIAL BALANCE OBTAINED FROM PEN DRIVER AND ALSO TO SUBMIT ITS EXPLANATION REGAR DING FACTS ADMITTED BY THE PERSONS MANAGING SILVER STAR UNIT. THE RELEVANT QUERIES ARE REPRODUCED AS BELOW:- FURNISH TRIAL BALANCE OF SILVER STAR UNIT AND GET IT VERIFIED FROM THE TRIAL BALANCE FOUND FROM THE PREMISES OF THIS CONCERN. DURING THE COURSE OF SEARCH, PERSONS DEALING WITH T HE BUSINESS OF SILVER STAR UNIT HAVE ADMITTED THAT SUBSTANTIAL PART OF SALE AN D PURCHASE IN THIS UNIT ARE NOT DISCLOSED IN REGULAR BOOKS AND THE DETAILS OF THE S AME ARE MAINTAINED IN A PEN DRIVE. FURNISH COMPLETE DETAILS OF THESE SALES AND PURCHAS ES AND OTHER TRANSACTIONS MAINTAINED IN PEN DRIVE. 17.1 ASSESSEE DID NOT FURNISH THE DESIRED DETAILS N OR THE ENTRIES IN PEN DRIVE WERE GOT VERIFIED FROM REGULAR ACCOUNTS. EVERY TIME THE A/R STATED THAT COMMENTS AND EXPLANATION WOULD BE SUBMITTED ON NEXT HEARING. HOWEVER, VIDE R EPLY DATED 5.8.2011 REPRODUCED BELOW IN PARA 19, THE A/R SIMPLY DENIED THE STATEMENTS OF SHRI RAGHU DATT TIWARI ON THE BASIS OF AN AFFIDAVIT FILED BY HIM BEFORE THE DISTRICT MAGIS TRATE WHILE CHALLENGING THE SEARCH PROCEEDINGS. BUT THE BASIS FACT OF UNDISCLOSED SALE S AND PROFIT OF SILVER STAR UNIT REMAINED UNDISPUTED. ON VERIFICATION OF ENTRIES OF DATA IN P EN DRIVE AND IN REGULAR ACCOUNTS, THE SAME ARE NOT FOUND MATCHING. AS SUCH THE TURNOVER AND OF THE TRANSACTIONS MAINTAINED IN PEN 11 DRIVE ARE OVER AND ABOVE REGULAR ACCOUNTS AND THE P ROFIT EARNED THEREON IS PROFIT OVER AND ABOVE REGULAR PROFIT DISCLOSED. 18. IN POST SEARCH PROCEEDINGS A DETAILED QUERY LET TER WAS ISSUED ON 16.7.2009 FOR EXPLAINING THE ISSUES OF BOGUS PURCHASES IN VIEW OF STATEMENTS OF SHRI K K AMERIYA, BOGUS SALES, DISCREPANCIES IN SILVER STAR UNIT AND SUBMIS SIONS OF SILVER STAR PERSONS BUT ASSESSEE DID NOT RESPOND AND OPTED NOT TO COMPLY THE TERMS OF TH E LETTER. THE BASIC FACTS FOUND DURING THE SEARCH THEREFORE REMAINED UNCONTROVERSIAL. 19 DURING THE COURSE OF PRESENT PROCEEDINGS THE ASS ESSEE COMPANY WAS AGAIN REQUIRED TO EXPLAIN ITS CASE ON THE VARIOUS FINDINGS OF SEAR CH ACTION AND EVIDENCES GATHERED. VIDE NOTICE U/S 142(1) OF THE IT ACT, SPECIFICALLY THE A SSESSEE WAS REQUIRED TO EXPLAIN ITS CASE ON THE SUBMISSIONS MADE BY THE KEY PERSONS U/S 132(4) DEALING WITH THE BUSINESS OF THE ASSESSEE AND IT WAS ALSO REQUIRED TO PRODUCE THE CO NCERNED PARTIES FROM WHOM BOGUS SALES AND PURCHASES ARE MADE. ASSESSEE WAS ALLOWED MORE T HAN SUFFICIENT OPPORTUNITIES VIDE ORDER SHEET ENTRIES DATED 11.7.2011, 18.7.2011, 21. 7.2011, 28.7.2011, 29.7.2011, 2.8.2011, 8.8.2011,9.8.2011,11.8.2011,16.8.2011 AND 17.8.2011 BUT MOST OF THE TIMES THE REPLY OF THE A/R REMAINED THAT RELEVANT EXPLANATION/INFORMATION WOULD BE SUBMITTED ON NEXT HEARINGS. HOWEVER, ON 5.8.2011 THE A/R OF THE ASSESSEE FILED REPLY SUBMITTING THAT:- 2. WITH REGARDS TO DIFFERENCE IN VALUATION OF S TOCK FOUND AT THE TIME OF SEARCH, WE WISH TO REITERATE AS WAS SUBMITTED BEFOR E THE ADIT, JAIPUR II, THAT THE VALUATION WAS GOT DONE BY INCOME-TAX DEPARTMENT PERSONNELS WHICH HAS NO CREDENCE AND SANCTITY IN THE EYES OF THE LAW. 2.1 THE SAID VALUATION AS HAS GOT DONE BY THE OFFIC ERS OF THE INCOME-TAX DEPARTMENT IS UNAUTHORIZED, ILLEGAL, IRRELEVANT, CO NTRARY TO THE PROVISIONS OF SECTION 133A OF THE INCOME-TAX ACT AND HAS BEEN PRE PARED AS PER OWN CONVENIENCE AND THUS DESERVES TO BE IGNORED BEING V OID-AB-INITIO. 2.2 THE DEPARTMENTAL VALUERS WERE ALLOWED ACCESS TO BUSINESS PREMISES OF THE ASSESSEE WITHOUT SUBJECTING THEMSELVES TO VE RIFICATION AT THE TIME OF ENTRY AND AT THE SAME TIME THERE WERE NOT SUBJECT T O FRISKING AT THE TIME WHEN THEY HAVE LEFT THE BUSINESS PREMISES. 2.3 WE WOULD LIKE TO KNOW ON WHAT BASIS THE VALUATI ON EXERCISE HAS BEEN DONE BY THESE PAID VALUERS PRIMA FACIE IT APPEARS T HAT THESE VALUERS HAVE INSERTED THE STOCK VALUES AS PER THEIR CONVENIENCE. THE VALUATION SO MADE BY THEM IS BIASED. FAULTY AND BEFORE YOU RELY ON ANY O F THESE FIGURES WE WOULD REQUEST YOU TO PROVIDE US AN OPPORTUNITY TO CROSS-E XAMINE EACH ONE OF THEM. 2.4 AS SUBMITTED EARLIER, THE ASSESSEE COMPANY IS D EALING IN MORE THAN 100 TYPES OF PRECIOUS, SEMI-PRECIOUS STONES, GOLD O RNAMENTS AND METALS AND WITHIN EACH CATEGORY OF STONES THERE ARE MORE THAN 500 TYPES OF QUALITIES THAT ARE TO BE LOOKED INTO. THERE ARE THOUSANDS OF PACKE TS OF STONES(STONES KEPT IN PACKETS). THESE VALUES HAVE WITHOUT ADHERING TO THE NORMS OF VALUATION, HAVE MIXED THE LOTS OF STONES AND VALUED THE STONES . EACH CATEGORY OF STONE MAY HAVE VALUATION RANGING FROM RS.1 PER CARAT TO M ORE THAN RS.1.00 LAC PER CARAT. THIS HAS ALSO CAUSED OUR BUSINESS AN IRREPAR ABLE LOSS AS WE ARE AT LOSS TO RECLASSIFY THE STONES AS THEY WERE KEPT IN THE L OTS ORIGINALLY. 12 2.5 IT IS ALSO SURPRISING TO NOTE THAT THE VALUERS HAVE MANAGED TO VALUE OVER 14 TONNES OF VARIOUS RAW-MATERIALS KEPT IN 89 BAGS IN A SHORT SPAN OF FEW HOURS, WHEREAS IT WOULD TAKE SEVERAL MAN-DAYS J UST TO OPEN THEM AND KEEP THEM FOR WEIGHMENT. THE VOLUME OF FINISHED GOO DS (CUT STONES) WAS EQUALLY HUGE AND ONE CANNOT POSSIBLY WEIGH EVEN IN A FEW HOURS WHEN PACKETS WERE TO BE OPENED, SEEN, WEIGHTED IN WEIGHM ENT MACHINE AND AGAIN PUT BACK IN PACKETS, ETC. ETC. 2.6 IT IS CLEAR THAT THE TOTAL EXERCISE UNDERTAKEN BY THE PAID PERSONNELS OF THE DEPARTMENT IS AS PER DICTATED TERMS AND IN CONN IVANCE AND IS A TOTAL FARCE AND DESERVES TO BE IGNORED. 3. WITH REGARDS TO THE ALLEGED STATEMENTS OF SHRI K HUSHI KUMAR AMERIYA, WE WISH TO REITERATE AS WAS SUBMITTED BEFORE THE ADIT, JAIPUR II, THAT WE HAVE BEEN PROVIDED COMPUTERIZED COPIES OF THE STATEMENTS RECORDED OF S HRI KHUSHI KUMAR AMERIYA. IT IS REQUESTED TO PROVIDE COMPLETE HAND-WRITTEN CERTIFIE D COPY OF THE STATEMENTS RECORDED OF SHRI KHUSHI KUMAR AMERIYA INSTEAD OF A TYPED COPY. THE PAPERS GIVEN BY YOU DO NOT EVEN BEAR SIGNATURES OF SHRI KHUSHI KUMAR AMERIYA IT HAS NO EVIDENTIARY VALUE. 3.1 IT IS ALSO SUBMITTED THAT THE ALLEGED STATEMENT S OF SHRI KHUSHI KUMAR AMERIYA WERE RECORDED UNDER DURESS, HE WAS PRESSURED TO SIGN ON THE DOTTED LINES. THE STATEMENTS WERE RECORDED BEYOND THE POWERS GRANTED AS PER PROVISION S OF SECTION 132 AND SECTION 133A. THE STATEMENTS WERE RECORDED WHEN SHRI KHUSHI KUMAR AME RIYA WAS NOT IN A PROPER PHYSICAL AND MENTAL STATE OF MIND. THE STATEMENTS SO RECORDE D HAVE NO SANCTITY IN THE EYES OF THE LAW AND IS ILLEGAL AND DESERVES TO BE IGNORED. COPY OF AFFIDAVIT DULY NOTARIZED BY SHRI KHUSHI KUMAR AMERIYA ON 19.06.2009 AND SUBMITTED BEFORE TH E DISTRICT MAGISTRATE AND COPY OF WHICH IS ALREADY WITH THE INCOME-TAX DEPARTMENT IS ENCLOSED HEREWITH WHICH WILL CLARIFY OUR SUBMISSION. 3.2 BEFORE YOU RELY UPON THE ALLEGED ILLEGAL STATEM ENTS OF SHRI KHUSHI KUMAR AMERIYA, WE SHOULD BE ALLOWED AN OPPORTUNITY TO CROSS-EXAMIN E, SHRI KHUSHI KUMAR AMERIYA. PLACING RELIANCE ON SUCH ILLEGAL STATEMENTS WOULD B E AN ILLEGALITY. 3.3 ALL TRANSACTIONS OF PURCHASE AND SALE HAVE BEEN DECLARED IN THE BOOKS OF ACCOUNTS. DUE TAXES ON THE INCOME IS BEING DECLARED FROM YEAR TO YEAR. NOTHING IS THERE WHICH IS OUTSIDE THE BOOKS OF ACCOUNTS. 4 WITH REFERENCE TO YOUR OBSERVATION WITH REGARDS T O SUBMISSION OF TRADING ACCOUNT FOR BOGUS TRANSACTIONS AND REAL AND GENUINE TRANSAC TIONS WE WISH TO REITERATE AS WAS SUBMITTED BEFORE THE ADIT, JAIPUR II, THAT YOU ARE KINDLY REQUESTED TO FIRST CLARIFY TO US AS TO WHAT IS MEANT BY THE TERM BOGUS BILLS, ACCORDING TO US A BILL IS A BILL. 4.1 A BUSINESSMAN DURING THE COURSE OF HIS BUSINESS PURCHASE THE GOODS LOCALLY OR FROM FOREIGN PARTIES MAINLY ON CREDIT. ALL SUCH PARTIES ARE INCOME-TAX ASSESSES (PAN IS ALLOTTED BY THE INCOME-TAX DEPARTMENT) AND SALES-TAX ASSESSE S (TIN IS ALLOTTED BY THE SALES-TAX DEPARTMENT). AS A BUSINESSMAN WE ARE SUPPOSED TO KN OW THE PRODUCT WE ARE BUYING, THE TERMS FOR WHICH THE GOODS ARE SOLD AND ALSO DO A RE ASONABLE CHECK ON THE PARTIES WHO ARE SUPPLYING THE PRODUCTS. OUR CHECKS ARE BASED ON PAN ISSUED BY THE INCOME-TAX DEPARTMENT AND TIN ISSUED BY THE SALES-TAX DEPARTME NT WE DO NOT HAVE THE INFRASTRUCTURE NOR HAVE THE POWER TO INVESTIGATE THE PARTIES WHO A RE SUPPLYING US THE GOODS. WHAT ELSE ARE 13 WE SUPPOSED TO GATHER FROM THE PARTIES? THAT IS NOT THE INTENTION OF THE INCOME-TAX ACT AND IF THAT WERE THE CASE THEN HOW ONE WILL CONDUCT THE BUSINESS? IF YOU AS AN OFFICIAL OF THE INCOME-TAX DEPARTMENT DO NOT OWN UPTO THE PARTIES T O WHOM YOU HAVE ISSUED PAN THEN IT IS NOT THE FAULT OF THE BUSINESSMEN. ENTIRE ISSUE O F BOGUS BILL BEING RAISED BY YOU TIME AND AGAIN HAS INSTILLED FEAR IN THE MINDS OF THE BUSINE SSMEN AND IN TURN IT IS LEADING TO COLLAPSE OF THE TRADE IN THE CITY OF JAIPUR. 4.2 EVEN THE BANKER HAS TO BE SATISFIED WHEN ONE OP ENS A BANK ACCOUNT, IDENTITY IS OBTAINED, COMPLETE PARTICULARS ARE OBTAINED, ALL PA YMENTS ARE BY ACCOUNT PAYEE CHEQUES AND THIS FACT CAN BE VERIFIED FROM BOTH THE BANKS BY YO U. 4.3 THE GOODS AND THE BILLS ARE PROCURED FROM THE R EGISTERED SELLERS. ALL THE GOODS PURCHASED HAVE BEEN ENTERED IN THE STOCK REGISTER M AINTAINED BY THE COMPANY. ENTIRE PAYMENT TOWARDS THE PURCHASE OF SUCH GOODS HAS BEEN MADE BY WAY OF AN ACCOUNT PAYEE CHEQUE ISSUED BY THE ASSESSEE TO THE CONCERNED PURC HASERS. THE GOODS ARE SUBSEQUENTLY SOLD AS IT IS IN THE SAME SHAPE, SIZE AND WEIGHT OR AFTE R MIXING IT WITH OTHER LOTS. ENTIRE GOODS THAT ARE SOLD SUBSEQUENT TO PURCHASE ARE SUPPORTED BY SALES BILLS ISSUED TO THE CUSTOMER AND GOODS SO SOLD ARE ENTERED IN THE STOCK REGISTER MAI NTAINED BY THE ASSESSEE APPELLANT. PAYMENTS TOWARDS SUCH SALES HAVE COME THROUGH PROPE R BANKING CHANNEL IN THE ACCOUNT OF THE ASSESSEE. PROFITS FROM SUCH SALE HAVE BEEN DULY DISCLOSED IN THE BOOKS OF ACCOUNTS. ALL PROVISIONS OF SALE OF GOODS ACT HAVE BEEN ACCOMPLIS HED IN THESE TRANSACTIONS. 5. WITH REGARDS TO THE ALLEGED STATEMENT OF SHRI RA GHU DUTT TIWARI, ACCOUNTANT AT SILVER STAR, WE WISH TO SUBMIT THAT WE HAVE BEEN PR OVIDED COMPUTERIZED COPIES OF THE STATEMENTS RECORDED OF SHRI RAGHU DUTT TIWARI. IT I S REQUESTED TO PROVIDE COMPLETE HAND- WRITTEN CERTIFIED COPY OF THE STATEMENTS RECORDED O F SHRI RAGHU DUTT TIWARI INSTEAD OF A TYPED COPY. THE PAPERS GIVEN BY YOU DO NOT EVEN BEA R SIGNATURES OF SHRI RAGHU DUTT TIWARI-IT HAS NO EVIDENTIARY VALUE. 5.1 IT IS ALSO SUBMITTED THAT THE STATEMENTS OF SHR I RAGHU DUTT TIWARI WERE RECORDED UNDER DURESS, HE WAS PRESSURED TO SIGN ON THE DOTTE D LINES. HE WAS SUBJECTED TO PHYSICAL HARM BY THE OFFICERS OF THE DEPARTMENT. THE STATEME NTS WERE RECORDED BEYOND THE POWERS GRANTED AS PER PROVISIONS OF SECTION 132 AND SECTIO N 133A. THE STATEMENTS SO RECORDED HAVE NO SANCTITY IN THE EYES OF THE LAW AND IS ILLEGAL A ND DESERVES TO BE IGNORED. COPY OF AFFIDAVIT DULY NOTARIZED BY SHRI RAGHU DUTT TIWARI ON 19.06.2 009 AND SUBMITTED BEFORE THE DISTRICT MAGISTRATE AND COPY OF WHICH IS ALREADY WITH THE IN COME-TAX DEPARTMENT IS ENCLOSED HEREWITH WHICH WILL CLARIFY OUR SUBMISSION. 19.1 VIDE LETTER DATED 9.8.2011, THE A/R FURTHER SU BMITTED HIS ARGUMENTS AS UNDER:- WITHOUT PREJUDICE TO WHAT HAS BEEN SUBMITTED EARL IER AND WITHOUT ADMITTING WHAT HAS BEEN STATED EARLIER WITH REFEREN CE TO THE PURCHASES MADE BY THE ASSESSEE AS WELL AS SALES MADE BY THE ASSESS EE OVER THE YEARS, WE FURTHER SUBMIT THAT THE EMPLOYEES OR/AND OTHER PERS ONS CLEARLY HAVE STATED IN THEIR STATEMENTS THAT PURCHASES OR/AND SALES IN THE FOLLOWINGS UNITS ARE GENUINE, FOOL PROOF, VERIFIABLE AND NOT TAINTED: JEWELLERY UNIT NIZAMI UNIT, MUMBAI DIVISION 14 THUS, AS FAR AS THESE UNITS ARE CONCERNED THEY HAVE TO BE TREATED TO HAVE BEEN PROPERLY ACCOUNTED FOR ARE GENUINE, NOT T AINTED, ARE FOOL PROOF AND ALL PURCHASES/SALES IN THESE UNITS DESERVE TO BE AC CEPTED AS SUCH AND NO ADDITION IS REQUIRED TO BE MADE AS FAR AS THESE THR EE UNITS ARE CONCERNED. FOR OTHER UNITS ALSO, WE HAVE ALREADY EXPLAINED THAT NO ADDITION IS REQUIRED TO BE MADE AS ALL SALES ARE VOUCHED, DETAILED, VERIFIABLE AND MAINLY ON CREDIT AND ALL PURCHASES ARE VOUCHED, DETAILED, VERIFIABLE AND MAINLY ON CREDIT AND ALL PAYMENTS OF PURCHASES SO MADE HAVE BEEN MADE BY A/C PAYEE CHEQUES AND ALL PAYMENTS RELATING TO SALES HAVE BEEN RECEIVED B Y THE ASSESSEE BY A/C PAYEE CHEQUES. FURTHER VERIFICATION CAN BE MADE FRO M THE INCOME TAX ASSESSMENTS, SALES TAX ASSESSMENT AND FROM BANKS DI RECTLY. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND EA RLIER LETTERS, NO ADDITION IS REQUIRED TO BE MADE TREATING THE PURCHA SES OR/AND SALES AS BOGUS/TAINTED IN ALL THE UNITS. FURTHER IF YOU SO RELY ON THE STATEMENTS OF SHRI K. K. AMERIYA, SHRI RAGHU DUTT TIWARI OR/AND OTHER PERSONS THEN CERTAIN LY THE ASSESSEE HAS A RIGHT TO CROSS-EXAMINE THESE PERSONS AS THEY HAVE S TATED WRONGLY UNDER COERCION, UNDER PRESSURE AND THREATENING GIVEN BY T HE VARIOUS OFFICERS DURING THE COURSE OF THE SEARCH. THE STATEMENTS WERE RECOR DED WHEN THESE, PERSONS WERE NOT IN A PROPER PHYSICAL AND MENTAL STATE OF M IND. THESE ARE SELF- STATEMENTS AND UNLESS RIGHT TO CROSS-EXAMINE IS PER MITTED, THEY CANNOT BE RELIED UPON BY ANY STRETCH OF IMAGINATION. THEY MAY STATE ALL ALONG WRONG THINGS BUT THAT WRONG THINGS CANNOT BE MADE GOOD UN LESS THEY SAY SO AT THE TIME OF CROSS-EXAMINATION. IT IS A SETTLED PROPOSIT ION OF LAW BY VARIOUS JUDGMENTS OF THE HONBLE SUPREME COURT OF INDIA WHI CH IS THE LAW OF THE LAND THAT ADDITION CANNOT BE MADE MERELY SAYING SO BY ONE PERSON AGAINST ANOTHER UNLESS IN CROSS-EXAMINATION ALSO ONE SAYS T HE SAME THING OR OTHERWISE. ONE HAS TO WEIGHT IN WHAT CIRCUMSTANCES STATEMENTS WERE GIVEN. WHEN ALL THE PURCHASES ARE BY PROPER BILLS FROM INC OME-TAX ASSESSES, SALES- TAX ASSESSES, PAYMENTS ARE BY A/C PAYEE CHEQUES, WH EN SALES ARE TOO BY PROPER BILLS TO INCOME-TAX ASSESSES, SALES-TAX ASSE SSES AND PAYMENTS ARE BY A/C PAYEE CHEQUES, THERE WAS NO OCCASION FOR SHRI K .K. AMERIYA, SHRI RAGHU DUTT TIWARI OR/AND OTHER PERSONS TO SAY THAT THE SALES/PURCHASES ARE BOGUS, NOT GENUINE, NOT TAINTED. ON THE FACE OF THE SE OVERWHELMING EVIDENCE NONE WOULD SAY TO BE BOGUS OR TAINED OR NON-GENUINE UNLESS ONE IS THREATENED OF DIRE CONSEQUENCES OR ON COERCION, PRE SSURIZING TACTICS OR OTHERWISE. WE HAVE ALREADY SUBMITTED THAT THE SAME SHRI K.K. AMERIYA IMMEDIATELY AFTER THE SEARCH GAVE AN AFFIDAVIT VOLU NTARILY DULY NOTARIZED WHICH WAS SUBMITTED BEFORE THE JUDICIAL AUTHORITIES THAT HE AND HIS FAMILY MEMBERS WERE THREATENEO, HE AND OTHER EMPLOYEES WER E MANHANDLED AND THAT WHATEVER HAS BEEN STATED IN THE SO CALLED STAT EMENTS WERE NOT GIVEN BY HIM, WERE WRITTEN BY THE AUTHORIZED OFFICERS ON THE IR OWN AND WITHOUT READING OR WRITING HE WAS ASKED TO SIGN ON THE DOTT ED LINES AT ODD HOURS IN THE LATE NIGHT. SIMILAR HAS BEEN THE AFFIDAVIT OF S HRI RAGHU DUTT TIWARI ALSO. WE HAVE ALREADY PLACED ON RECORD THE AFFIDAVITS OF BOTH THESE PERSONS ALONGWITH OUR LETTER OF AUGUST 5, 2011. WE STRONGLY RELY ON THESE. ON THE FACE OF IT, THESE ARE AFTER THE ALLEGED STATEMENTS IF ANY AND THEREFORE WHATEVER HAS BEEN STATED ON OATH BY THEM HAS TO BE ACCEPTED RATHER THAN WHAT THEY HAD STATED EARLIER UNDER THREAT, COERCION OR PRESSURIZI NG TACTICS. IT IS IN THE LIGHT OF 15 THESE FACTS THAT WE AGAIN REQUEST YOU TO PROVIDE RI GHT TO CROSS-EXAMINE OF THE PERSONS WHO SAY OTHERWISE/ADVERSELY OTHER THAN, WHA T IS APPARENT ON RECORD. ONE MAY BE A DIRECTOR OR AN EMPLOYEE BUT IF COERCIV E MEASURES ARE USED ONE MAY NOT WITHSTAND ATROCITIES COMMITTED BY THE OFFIC ERS & CAN WRITE WHATEVER ONE WISHES & SIGN ON THE DOTTED LINES. IT IS ON REC ORD THAT PRESSURIZING TACKS WERE USED EMPLOYEES WERE MAN-HANDLED, WERE NOT PERM ITTED TO EAT PROPERLY, MEET FAMILY MEMBERS, SLEEP PROPERLY & THREATENED. W E AGAIN SUBMIT THAT IT IS MERELY A BOLD STATEMENT BY THEM AND DESERVES TO BE IGNORED OR IT HAS NOT EVIDENTIARY VALUE. 20 VARIOUS SUBMISSIONS MADE BY THE A/R HAVE BEEN CO NSIDERED CAREFULLY AND THE SAME HAVE BEEN DISCUSSED BELOW. IT MAY BE SUBMITTED THAT INSPITE OF SPECIFIC REQUIREMENTS, THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE THE PARTIES F ROM WHOM IT HAS PURCHASED GOODS, SPECIFICALLY THE PARTIES REFERRED BY SHRI K.K. AMER IYA AND SHRI RAGHU DATT TIWARI IN THEIR STATEMENTS. ON ENQUIRY BY THE INSPECTOR OF THE CIRC LE MOST OF HE PARTIES WERE FOUND NON EXISTING AT THE GIVEN ADDRESSES. AS REGARDS TO THE CLAIM OF CONCERNED PARTIES HAVING VALID PAN/TIN AND PAYMENT/RECEIPT THROUGH ACCOUNT PAYEE C HEQUES IT MAY BE SUBMITTED THAT EVEN AFTER HAVING ALL THESE CAMOUFLAGE FACTORS OF G ENUINENESS, THE PARTIES WERE FOUND TO BE ISSUING OR OBTAINING FAKE SALE/PURCHASE BILLS. MERE PAYMENT THROUGH CHEQUES DOES NOT MAKE A TRANSACTION SACROSANCT. THE FACT OF PAYMENT THROU GH CHEQUES IS NOT DENIED BUT THEREAFTER THE RETURN OF THE AMOUNT IN CASH, AFTER DEDUCTION O F COMMISSION IS IMPORTANT WHICH MAKES THE ENTIRE TRANSACTION FAKE AND WITHOUT ANY DELIVER Y OF GOODS. BILL COMMISSION PAYMENT ACCOUNT FOUND DURING THE COURSE OF SEARCH WHICH HAS BEEN REPRODUCED ABOVE MAKES IT CLEAR BEYOND AND DOUBT THAT AFTER ISSUE OF CHEQUES THE AM OUNT WAS RETURNED BACK IN CASH. HERE IT MAY BE SUBMITTED THAT WHILE COMPLETING REGULAR ASSE SSMENT FOR A.Y. 2005-06 AND 2006-07, THE SAME ISSUE OF INGENUINE PURCHASES WAS AROSE AND SINCE THE ASSESSEE COULD NOT ABLE TO JUSTIFY THE CLAIM OF CORRECTNESS OF PURCHASES, ITS BOOKS OF ACCOUNTS WERE REJECTED AFTER APPLYING PROVISIONS OF SECTION 145(3) OF THE IT ACT . THE MATTER TRAVELLED UP TO THE STAGE OF ITAT IN AY 2005-06 AND THE FACT OF OBTAINING BOGUS PURCHASES BILLS BY THE ASSESSEE COMPANY WAS UPHELD BY THE HONBLE ITAT WITH THE FOL LOWING WORDS ON THEIR ORDER DATED 18.9.2009 IN ITA NO.4/JP/2009:- IN THE PRESENT CASE THE PARTIES FROM WHOM THE ASS ESSEE CLAIMED TO HAVE PURCHASED GOODS WERE NEITHER PRODUCED NOR FOUN D IN EXISTENCE IN BUSINESS AT THEIR GIVEN ADDRESSES. THUS THE CLAIMED PURCHASES STATED TO HAVE BEEN MADE FROM THEM REMAINED UNVERIFIED. THE REJECT ION OF ACCOUNT BOOKS OF ACCOUNTS INVOKING THE PROVISIONS OF SECTION 145( 3) THEREFORE CAN NOT BE TREATED AS UNWARRANTED AND UNJUSTIFIED. WE UPHOLD T HE OF THE LOWER AUTHORITIES IN THE REGARD. 21.(I) THE FACT OF NON VERIFICATION OF TRADING RESU LTS AND DOUBT REGARDING CORRECTNESS AND COMPLETENESS OF ACCOUNTS IS FURTHER PROVED FROM THE UNAUDITED/PROVISIONAL BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FOUND DURING THE COURSE OF SEARCH RELEVANT TO AY 2009-10. BALANCE SHEET DATED 01.03.2009 WAS FOUND FROM VARIO US PREMISES OF THE ASSESSEE INCLUDING COMPANY OFFICE AT MUMBAI PAGES 57 TO 74 OF ANNEXURE A-1, RESIDENCE OF SHRI K.K. AMERIYA PAGES 105 TO 114 OF ANNEXURE A-24 AND FACTO RY AT EPIP, SITAPURA PAGES 13 TO 20 OF ANNEXURE A-12. IN ITS AUDITED PROFIT AND LOSS AC COUNT THE ASSESSEE HAS DECLARED SALES OF RS.103.06 CRORES AND PURCHASES ARE OF RS.96.58 CROR ES WITH NET PROFIT BEFORE TAX RS.1.71 CRORES WHEREAS THE UNAUDITATED BALANCE SHEET FOUND DURING THE COURSE OF SEARCH SHOWS SALES OF RS.106.58 CRORES PURCHASES OF RS.99.10 CRORES AN D PROFIT OF RS.4.21 CRORES. FOR THE SAKE 16 OF CLARITY THE UNAUDITED PROFIT AND LOSS ACCOUNT ON PAGE NO.113 OF THE ANNEXURE A-24 IS MENTIONED AT PAGE 31 OF THE ASSESSMENT ORDER- 21(II) AN OTHER IMPORTANT DOCUMENT FOUND FROM BUSIN ESS PREMISES OF THE CO AT C-82, STAR MANSION SHASTRI NAGAR AT PAGE NO.1 OF ANNEXURE A-3. THIS IS A COMPUTER GENERATED SHEET GIVING DETAILS OF MONTHWISE SALES OF ALL THE UNITS OF THE COMPANY. TOTAL SALES DURING FY 2008-09 OF ALL THE UNITS WERE OF RS.1072033904 WHER EAS THE ASSESSEE HAS SHOWN SALES OF RS.103628721 ONLY IN THE AUDITED ACCOUNTS. SHRI KHU SHI KUMAR AMERIYA HAD ALSO ADMITTED SALES DURING F.Y. 2008-09 AROUND RS.107 CRORES IN H IS STATEMENTS. UNIT WISE SALES DETAILS WERE CALLED FOR BUT THE SAME ARE NOT TALLYING WITH THE FIGURES OF THE MONTH WISE SALE DETAILS FOUND ON THIS PAGE. THE A/R WAS ASKED TO EXPLAIN TH E REFERENCES AND IT WAS SUBMITTED THAT IT MAY BE ON ACCOUNT OF CERTAIN INTER UNIT STOCK TRANS FERS WHICH MIGHT HAVE BEEN CONSIDERED AS SALES IN THE CHART. HE WAS ASKED TO RECONCILE SUCH STOCK TRANSFER BUT RECONCILIATION COULD NOT BE DONE BY HIM. OTHER ARGUMENT OF THE A/R REMAINED THAT THE FIGURES ON THIS CHART ARE FOR THE PURPOSE OF GIVING SALES DETAILS TO BANKERS AND IT DOES NOT REFLECT THE CORRECT AMOUNT OF SALES. THIS ARGUMENT IS NOT SUPPORTED WITH ANY DOCU MENTARY EVIDENCE. MOREOVER THE FIGURES MENTIONED IN THE CHART ARE NOT IN THE NATURE OF ANY DOCUMENTARY EVIDENCE. MOREOVER THE FIGURES MENTIONED IN THE CHART ARE NOT IN THE NATUR E OF ANY ESTIMATED FIGURES BUT ACTUAL FIGURES OF SALES AFFECTED BY THE COMPANY. IT MAY AL SO BE NOTED THAT THE FIGURES OF STOCK TRANSFER HAVE BEEN GIVEN DUE CREDIT IN THE CHART IT SELF AS NEGATIVE FIGURES WHICH DEFINITELY REPRESENT AMOUNTS OF STOCK TRANSFER OUT INCLUDED IN SALES. SO EFFECT OF STOCK TRANSFER STANDS GIVEN IN THE CHART AND THE NET FIGURES DISCLOSED AR E ACTUAL FIGURES OF SALES OF THE ASSESSEE. CONTENTS OF THE SHEET IS MENTIONED AT PAGE 32 OF TH E ASSESSMENT ORDER 22 COMPARISON OF VARIOUS FIGURES OF EXPENSES FROM U NAUDITED AND AUDITED PROFIT AND LOSS ACCOUNT IS MENTIONED AT PAGE 32 OF THE ASSESSM ENT ORDER. ASSESSEE WAS ASKED TO RECONCILE THE FIGURES AND TO EXPLAIN AS TO WHY THERE IS A VAST DIFFERENCE IN FIGURES OF AUDITED AND UNAUDITED PROF IT AND LOSS ACCOUNT. IT WAS SUBMITTED BY THE A/R THAT UNAUDITED FIGURES ARE ONLY PROVISIONAL FIGURES AND THE EFFECT OF ADJUSTMENT ENTRIES IS NOT REFLECTED IN UNAUDITED BALANCE SHEET . 23 THE SUBMISSION OF THE A/R MAY BE CORRECT AS REGA RDS TO CLAIM OF VARIOUS EXPENSES WHICH MIGHT HAVE BEEN ADJUSTED AFTER VERIFICATION F ROM VARIOUS BRANCHES BUT THE DIFFERENCES IN THE FIGURES SALES AND PURCHASES IS NOT SATISFACT ORILY EXPLAINED. SINCE THE SEARCH ACTION WAS CARRIED OUT JUST AFTER THE END OF THE F.Y. 2008-09, THE UNAUDITED B/S OF 31.3.2009 WAS ONLY FOUND AND NO ANY OTHER UNAUDITED B/S OF ANY OF THE EARLIER WAS FOUND. IT THEREFORE MEANS THAT EARLIER YEARS UNAUDITED BALANCE SHEETS HAVE EI THER BEEN DESTROYED OR REMOVED. DESTROYING THE UNAUDITED B/S AFTER AUDIT, PROVES TH E FACT THAT AT THE TIME OF AUDITING, THE BUSINESS AFFAIRS OF THE COMPANY ARE ADJUSTED ACCORD ING TO CONVENIENCE OF THE ASSESSEE. THE DIFFERENCE IN FIGURES OF SALE AND PURCHASES IN TWO BALANCE SHEETS AND OTHER DOCUMENTS FOUND FURTHER PROVES THE FACT THAT BOOKS OF ACCOUNTS AND TRADING RESULTS OF THE COMPANY ARE NOT CORRECT AND COMPLETE AND WARRANT PROVISIONS OF SECT ION 145(3) OF THE IT ACT. 24 ANOTHER SPECIFIC ISSUE RESULTING TO CONCLUSION O F INCOMPLETE AND INCORRECT ACCOUNTS IS THE VALUE OF STOCK FOUND DURING THE COURSE OF SE ARCH. AT THE TIME OF SEARCH NO STOCK DETAILS AS PER BOOKS, WERE MADE AVAILABLE AND THERE FORE THE STOCK PHYSICALLY FOUND COULD NOT BE VERIFIED IN CORRECT MANNER. ASSESSEE IS NOT MAINTAINING ANY QUANTITATIVE STOCK REGISTER AS IS OBSERVED BY THE AUDITORS WHO HAVE CO MMENTED THAT AT THE TIME OF AUDIT ASSESSEE DID NOT PRODUCE STOCK REGISTER. NON MAINTE NANCE OF QUANTITATIVE STOCK DETAILS 17 DEFINITELY LEADS TO CONCLUSION OF APPLICATION OF SE CTION 145(3) OF THE IT ACT. IT MAY FURTHER BE SEEN THAT IN JEWELERY UNIT, NIZAMI UNIT AND PART LY IN SILVER STAR UNIT, THE ASSESSEE IS MANUFACTURING GOLD AND SILVER JEWELLERY BUT NO REGU LAR MANUFACTURING RECORDS OR CONSUMPTION RECORDS ARE MAINTAINED SO AS TO VERIFY THE CONSUMPTION OF RAW MATERIAL VIS A VIS PRODUCTION OF FINISHED GOODS. THE ASSESSEE USES SUBSTANTIAL QUANTITY OF OTHER ALLOYS SUCH AS COPPER, ZINC, CADMIUM ETC FOR MANUFACTURING OF J EWELLERY BUT THERE ARE NO RECORDS TO VERIFY THE PROPORTIONATE PART OF ALLOYS AND HOW THE SAME WAS CONSIDERED IN VALUATION OF THE FINISHED GOODS. AS SUCH NOT ONLY THE TRADING ACTIVI TIES OF GEM UNIT ARE UNVERIFIABLE BUT THE TRADING AND MANUFACTURING ACTIVITIES OF OTHER UNITS ARE ALSO NOT SUBJECT TO PROPER VERIFICATION. DURING THE COURSE OF SEARCH PHYSICAL STOCK FOUND WAS COUNTED, QUANTIFIED AND VALUED IN THE PRESENCE OF THE MANAGERS AND OTHER PE RSONS OF THE ASSESSEE. SINCE THE ITEMS OF DIFFERENT QUALITY AND SPECIFICATION WERE FOUND EXPE RT VALUATION WAS GOT DONE. FROM ALL THE PREMISES TOTAL STOCK FOUND WAS OF RS.145224834 AS D ETAILED BELOW:- S.N. PREMISES TOTAL STOCK ACTUALLY FOUND AND INVENTORISED 1. GEMS UNIT OF M/S. CLARITY GOLD (P) LTD., AT 4, SARDAR PATEL MARG, C-SCHEME, JAIPUR 2886120 2. SILVER STAR UNIT OF M/S. CLARITY GOLD (P) LTD. A T 3 RD FLOOR, NAWAB SAHIB KI HAVELI, TRIPLIYA BAZAR, JAIPUR 12360470 3. JEWELLERY DIVISION OF M/S. CLARITY GOLD (P) LTD. AT G-1-33, GEMS AND JEWELLERY ZONE, EPIP, SITAPURA INDUSTRIAL AREA, JAIPUR 70791196 4. NIZAMI DIVISION OF M/S. CLARITY GOLD (P) LTD. AT 3 RD & 4 TH FLOOR, STAR MANSION, C-82, SHYAM MARG, JAIPUR 37866444 5. MUMBAI OFFICE OF M/S. CLARITY GOLD (P) LTD. AT 2 ND FLOOR, METRO HOUSE, METRO CINEMA BUILDING, M.G.ROAD, MUMBAI 18634757 6. STOCK FOUND AT OFFICE OF CLARITY GOLD (P) LTD. A T FIRST FLOR, DILLI WALON KI BUILDING,GOPALJI KA RASTA, JAIPUR 2685847 TOTAL 145224834 25 SINCE BOOKS OF ACCOUNTS WERE NOT COMPLETE ON THE DATE OF SEARCH EXACT STOCK AS PER BOOKS ON THE DATE OF SEARCH COULD NOT BE WORKED OUT NEITHER IN TERMS OF VALUE NOR QUANTITATIVELY. HOWEVER, IT WAS SEEN THAT ASSESSEE FURNISHED DETAILS OF STOCK STATEMENT AS ON 30.04.2009 TO STATE BANK INDORE. THIS STOCK STATEME NT WAS OBTAINED AND IT WAS FOUND THAT ON 30.04.2009 THE COMPANY WAS HAVING STOCK OF RS.29 5567819. THUS AS ON 30.04.2009 THE BOOK STOCK WAS OF RS.29.55 CRORES. TAKING THIS STOC K IN TO CONSIDERATION THERE WAS A DEFICIENCY OF STOCK OF MORE THAN RS.15.03 CRORES AS ON THE DATE OF SEARCH. THE DIFFERENCE IN STOCK HAS NOT BEEN EXPLAINED BY THE ASSESSEE. IN P OST SEARCH PROCEEDINGS THE ASSESSEE WAS SPECIFICALLY ASKED VIDE LETTER DATED 16.7.2009 TO R ECONCILE THE DIFFERENCE IN STOCK FOUND AND SUBMITTED TO BANKERS BUT IT HAS TOTALLY FAILED TO R ECONCILE THE SAME. EVEN IN THE PRESENT ASSTT PROCEEDINGS IT HAS NOT BEEN SATISFACTORILY EXPLAINE D. A VERY GENERAL AND VAGUE REPLY HAS BEEN FILED BY THE A/R VIDE LETTER DATED 5.8.2011. C ONTENTIONS RAISED IN PARA 2 OF LETTER DATED 5.8.2011 REPRODUCED ABOVE ARE NOT TENABLE AS THE VA LUATION WAS DONE BY THE EXPERTS, IN THE PRESENCE OF ASSESSEES EMPLOYEES DEALING/MANAGING T HE AFFAIRS ON THE DATE OF 18 SEARCH/SEIZURE, NO OBJECTION OF ANY NATURE WERE RA ISED BY THE EMPLOYEES AT THE TIME OF SEARCH OR JUST AFTER THE SEARCH. NOW CHALLENGING TH E VALUATION ON FRIVOLOUS GROUNDS IS ONLY AN AFTER THOUGHT AND JUST TOO DEVOID THE INVESTIGAT ION. EVEN THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE CORRECT QUANTIFICATION AND VALUATION AFT ER SEARCH, IF IT WAS OF THE VIEW THAT VALUATION MADE BY THE SEARCH PARTY WAS FAULTY OR IN CORRECT. IT MAY FURTHER BE SEEN THAT ASSESSEE ITSELF ADMITS THAT THERE IS VAST DIFFERENC E IN RATE OF ITEMS OF ONE CATEGORY AND UNDER SUCH CIRCUMSTANCES IF ASSESSEE ITSELF WAS NOT POSSI BLE TO QUANTIFY AND VALUE THE GOODS, THE FIGURES OF STOCK AND SALE/PURCHASES IN TRADING ACCO UNTS ARE ADMITTEDLY NOT SUBJECT TO PROPER VERIFICATION. DEFICIENT STOCK FOUND CLEARLY PROVES THAT EITHER FAKE PURCHASE BILLS ARE INTRODUCED SO AS TO INCREASE THE STOCK OR THE SALES ARE REDUCED. THE SUBMISSION OF SHRI KK AMERIYA AGAIN COMES IN TO THE PICTURE THAT STOCK ST ATEMENTS ARE INFLATED BY WAY OF SHOWING BOGUS PURCHASES, DEBTORS AND TURNOVER. THIS FACT IS A CONCLUSIVE PROOF OF INCORRECTNESS OF BOOKS OF ACCOUNTS AND TRADING RESULTS OF THE COMPAN Y. 26 OTHER ARGUMENTS DATED 5.8.2011 AND 9.8.2011 OF T HE A/R QUOTED ABOVE REGARDING CREDENCE OF STATEMENTS OF SHRI K.K. AMERIYA AND SHR I RAGHU DATT TIWARI ARE ALSO OF NO HELP TO THE COMPANY. THE ARGUMENTS ARE ONLY FOR THE SAKE OF ARGUMENTS. IT MAY BE SUBMITTED THAT BOTH THE PERSONS WERE TRUSTED PERSON S OF MAIN DIRECTOR OF THE COMPANY SHRI SS GUPTA. SHRI K.K AMERIAY IS ONE OF THE DIRECTORS AND ALSO THE KEY PERSON MANAGING AND SUPERVISING ALL THE AFFAIRS OF THE COMPANY AT JAIPU R. THIS FACT HAS NEVER BEEN DENIED BY THE ASSESSEE. THEIR POST SEARCH AFFIDAVITS, AFTER A LAP SE OF A PERIOD OF MONTHS AND SUBMITTED BEFORE THE DISTRICT MAGISTRATE ARE ALSO OF NO HELP AS THE SAME WERE NOT DEPOSED BEFORE ANY OF THE AUTHORITIES UNDER THE IT ACT. WHETHER ANY CO GNIZANCE OF DEPOSITION WAS TAKEN BY THE MAGISTRATE OR NOT, IS NOT KNOWN AND EVEN IF ANY COG NIZANCE WAS TAKEN BY HIM IT DOES NOT ALTER THE FACT THAT ASSESSEE COMPANY WAS INDULGED I N HIGH STAKE BOGUS SALES AND PURCHASES. AT THE COST OF REPETITION IT MAY AGAIN BE SUBMITTED THAT THIS FACT STANDS CONFIRMED BY THE HIGHEST FACT FINDING AUTHORITY UNDER IT ACT I.E. IT AT IN AY 2005-06 AND THE SEARCH PROCEEDINGS FURTHER PROVES THIS FACT BEYOND ANY DOU BT. THE STATEMENTS OF SHRI KK AMERIYA WERE RECORDED U/S 132(4) OF THE IT ACT ON BEHALF OF THE COMPANY AS ITS DIRECTOR AND THEREFORE THERE ARISES NO QUESTION OF ANY CROSS EXA MINATION OF PERSON OF HIMSELF. HE WAS NOT A WITNESS OF THE DEPARTMENT AND STATEMENTS WERE NOT TAKEN BEHIND THE ASSESEE OR WITHOUT UNDER THE KNOWLEDGE OF THE COMPANY. COMPANY WAS BEI NG REPRESENTED BY THE PERSON WHO DEPOSED U/S 132(4) OF THE IT ACT. THERE WAS NO CASE ON THREAT, DURESS OR PRESSURE AS THE STATEMENTS WERE RECORDED BEFORE TWO INDEPENDENT PAN CHAS AND NO SUCH AFFIDAVIT OF ANY SUCH PANCHAS FURNISHED. EVEN THAN THE ASSESSEE WAS ALLOWED OPPORTUNITY VIDE ORDER SHEET ENTRY DATED 9.8.2011 THAT IF IT WANTED TO GET FURTH ER EXAMINATION OF SHRI KK AMERIYA ON THE ISSUE OF DURESS OR PRESSURE, AS MENTIONED IN THE AF FIDAVIT, IT MAY PRODUCE HIM WITH SUPPORTING EVIDENCES AND GET HIM RE EXAMINED. BUT A SSESSEE COMPANY FAILED TO PRODUCE ITS OWN DIRECTOR SHRI KK AMERIYA AND THE OTHER EMPLOYEE SHRI RAGHU DATT TIWARI FOR RE EXAMINATION, THERE REMAINS NO FRONT OF ANY MERIT IN THE SUBMISSION OF THE A/R AND ACCORDINGLY THE SAME IS REJECTED. THE FACTS SUBMITT ED BY THESE PERSONS ARE FURTHER SUPPORTED WITH CLEAR EVIDENCES FOUND DURING THE COURSE OF SEA RCH. THE OTHER CLAIM OF THE A/R IN HIS LETTER DATED 9.8 .2011 THAT THE TRANSACTION OF THE OTHER UNITS AS NIZAMI, JEWELLERY AND MUMBAI ARE 100 CORRECT AND FOOL PROOF AS STATED BY THE DIRECTOR AND IT SHOULD BE ACCEPTED AS SUCH, IS ALSO NOT CORRECT. IT MAY BE SEEN FROM THE STATEMENTS OF SHRI KHUSHI KUMAR AMERIYA Q.NO.15, WH EREIN HE HAD ONLY STATED THAT THE SALES OF THESE UNITS ARE 100% CORRECT AND FOOL. HE HAS NOT STATED AS TO CORRECTNESS OF PURCHASES OF THESE UNITS, MANUFACTURING ACTIVITIES OF AND STATUS OF STOCK MAINTENANCE ETC. AT THE COST OF REPETITION THE RELEVANT QUESTION AND IS MENTIONED IN HINDI AT PAGE 34& 35 OF THE ASSESSMENT ORDER . 19 27 IN VIEW OF ABOVE DETAILED DISCUSSION IT MAY BE I NFERRED THAT ACCOUNTS OF THE COMPANY ARE NOT CORRECT AND COMPLETE WITHIN THE MEA NING OF SECTION 145(3) OF THE IT ACT AND ACCORDINGLY THE ACCOUNT BOOKS AND TRADING RESUL TS OF THE ASSESSEE COMPANY ARE REJECTED. FOR THIS PURPOSE SUPPORT IS DRIVEN FROM THE JUDGMEN T OF HONBLE SUPREME COURT IN THE CASE OF KACHWALA GEMS REPORTED IN 288 ITR 10 (SC) HAVING ALMOST IDENTICAL FACTS OF BOGUS CLAIM OF PURCHASES THROUGH FAKE PURCHASE BILLS. THE RE IS AS PLETHORA OF OTHER JUDGMENT JUSTIFYING APPLICATION OF SECTION 145(3) OF THE IT ACT UNDER SUCH CIRCUMSTANCES. SOME OF THEM MAY BE REFERRED AS UNDER:- ITA NO.4/JP/2009 DATED 18.9.2009 FOR AY 2005-06 IN THE CASE OF ASSESSEE ITSELF, ACIT V/S SHRIKISHAN MALPANI 32 TAXWORLD 122 (ITAT, JPR) HOLDING THAT ALLEGED BOGUS PURCHASES IS A DEFECT IN THE MAINTENANCE OF B OOKS ACCOUNTS AND THEREFORE, THE BOOKS OF ACCOUNTS REJECTED. DHADHA EXPORTS ITA NO.823/JP/2009 DATED 16.6.2010 RELYING UPON THE ABOVE JUDGMENT IN THE CASE OF SHRI KRISHAN MALPANI UPHELD REJECTION OF ACCOUNT BOOKS OF ACCOUNT BOOKS ON ACCOUNT OF UNVERIFIABLE PURCHASES. GEM PARADISE CASE ITA NO.700/JP/2009 DATED 18.12.2 009 HOLDING THAT EVEN AFTER PROVIDING SALES TAX NUMBER, PAN AND PAYMENT THROUGH ACCOUNT PAYEE CHEQUES SINCE ASSESSEE WAS NOT ABLE TO PROVE GENUINENESS OF THE P URCHASES WHICH WERE FOUND TO BE NON EXISTENCE AT THE GIVEN ADDRESSES REJECTION OF ACCOU NTS IS JUSTIFIED AND CORRECT PROFIT CAN NOT BE DEDUCED FROM SUCH UNVERIFIABLE BOOKS OF ACCOUNTS . DEEPAK DALELA VS ITO ITA NO.13/JP/2010 DATED 16.7. 2010, RELYING ON THE JUDGEMENT IN THE CASE OF GEM PARADISE AND DHADHA EX PORTS UPHELD REJECTION OF ACCOUNT AND APPLICATION OF PROVISIONS OF SECTION 145(3) OF THE IT ACT. INDIAN WOOLEN CARPET FACTORY VS ITAT 178 CTR 420 ( RAJ) HOLDING THAT ONUS WAS UPON THE ASSESSEE OT PROVE GENUINENESS OF THE PURCH ASES. CIT VS PRECISION FINANCE P LTD 208 ITR 465 (CAL)- PAYMENT MADE BY ACCOUNT PAYEE CHEQUES IS NOT SACROSANCT AND IT WOULD NOT MA KE AN OTHERWISE NON GENUINE TRANSACTION GENUINE. ESTMATION OF PROFIT 28 NOW SINCE THE ACCOUNT BOOKS AND TRADING RESULTS STANDS REJECTED WITHIN THE MEANING OF SECTION 145(3) OF THE IT ACT THE PROFIT OF THE A SSESSEE IS REQUIRED TO BE ESTIMATED WITHIN THE MEANING OF SECTION 144 OF THE IT ACT. IT MAY BA SE ON THE PAST RECORDS OF ASSESSEE ITSELF, COMPARABLE CASES OF ASSESSEES OWN GROUP, OTHER SIM ILAR CASES OR OTHER MATERIAL AVAILABLE ON RECORDS WHICH WAS GATHERED DURING THE COURSE OF SEARCH. COMPARATIVE GROSS PROFIT RESULTS OF THE ASSESSEE FOR THE AY 2004-05 TO 2010-11 AS DE CLARED BY THE COMPANY IS MENTIONED AT PAGE 36 OF THE ASSESSMENT ORDER FROM THE ABOVE CHART IT MAY BE SEEN THAT GP IS RANG ING FROM 7.4% TO 16.08%. ASSESSMENT FOR AY 2005-06 WAS COMPLETED BY THE AO U/S 143(3) A ND THERE ALSO HE FOUND THAT PURCHASES OF RS.1,40,96,552/- FROM 10 CONCERNS WERE NOT GENUINE. THE SAID 10 PARTIES WERE FOUND TO BE BOGUS PARTIES DURING THE COURSE OF SEAR CH ON 20.04.2007 IN THE CASE OF HALDIA GROUP. IN THAT CASE OF HALDIA GROUP, SIMILAR TREND OF BUSINESS WAS FOUND AS WAS NOTICED IN THE CASE OF PRESENT ASSESSEE. THE SAID 10 PARTIES A RE SAME WHICH ARE IN THE PRESENT SEARCH WERE ADMITTED BOGUS BY THE KEY PERSON SHRI KK AMERI YA. AFTER DETAILED DISCUSSION, EXAMINATION AND ENQUIRY IT WAS CONCLUDED BY THE AO IN AY 2005-06 THAT PURCHASES FROM THE SAID 10 PARTIES WERE FAKE AND THEREFORE HE APPL IED GP RATE OF 13.28% AFTER REJECTING THE ACCOUNTS U/S 145(3) OF THE IT ACT. THE LD CIT(A) UP HELD THE GP RATE AT 13%. SUBSEQUENTLY 20 THE ITAT HAS ALSO CONFIRMED THE FINDINGS OF REJECTI ON OF ACCOUNTS FOR THE REASONS OF FAKE/BOGUS PURCHASES BUT REDUCED THE ADDITION TO LU MPSUM AMOUNT OF RS.1 LAC. 29. IN AY 2006-07, WHILE COMPLETING THE ASSESSMENT THE AO FOUND THAT PURCHASES OF RS.5.40 CRORES FROM VARIOUS PARTIES WERE NOT GENUIN E AND AFTER APPLYING THE RATIO OF JUDGMENT OF HONBLE GUJARAT HIGH COURT REPORTED IN 10 DTR 153(GUJ) IN THE CASE OF SANJAY OIL CAKE INDUSTRIES V/S CIT, HE DISALLOWED 2 5% OF SUCH BOGUS AND NON GENUINE PURCHASES. IN FIRST APPEAL, THE CIT (A) HAS UPHELD APPLICATION OF 145(3) BUT DIRECTED TO APPLY GP RATE OF 8.5%. DEPARTMENT AS WELL AS THE AS SESSEE ARE IN APPEAL AGAINST THE ORDER OF THE CIT(A) BEFORE THE ITAT. 30. IT MAY ALSO BE A POINT OF WORTH IMPORTANCE HERE THAT ONE OF THE SISTER CONCERN OF THE ASSESSEE M/S. GEM MART (INDIA) P LTD DEALING ALMOST IN SIMILAR ITEMS AND TRADE HAS DISCLOSED GP RATE OF 14.91% IN AY 2010-11 WHEN IT N OT MADE ANY ADJUSTMENT THROUGH ANY UNVERIFIABLE/BOGUS PURCHASES. IN EARLIER YEARS THAT CONCERN WAS ALSO FOUND TO HAVE TAKEN BILLS OF PURCHASES FORM THE SAME PARTIES AS IN THE CASE OF PRESENT ASSESSEE AND WAS SHOWING GP MARGIN AROUND 12 TO 13% BUT WHEN NO ADJUSTMENT W AS MADE FOR PURCHASES, THE GP RATE DISCLOSED IN AY 2010-11 WAS 14.91%. 31 IT MAY ALSO BE MENTIONED HERE THAT HONBLE ITAT IN THE CASES REFERRED ABOVE HAS UPHELD GP RATE UP TO 25%. FOR EXAMPLE IN THE CASE O F DEEPAK DALELA GP RATE OF 25% WAS CONFIRMED FOR AY 2006-07. IN GEM PARADISE CASE, GP RATE UPHELD WAS OF 25.5% FOR AY 2003-04. THOUGH, THE GP RATE APPLIED IN THOSE CASES MAY BE BASED ON THEIR SPECIFIC CIRCUMSTANCES AND THEIR OWN PAST RECORDS AND ON ACC OUNT OF COMPARATIVELY LOW TURNOVER AS COMPARED TO PRESENT ASSESSEE GROUP, STILL THE FACT CLEARLY PROVES THAT DURING THE PERIOD COVERED UNDER ASSESSMENTS IN THE PRESENT CASE, THER E WERE THE OTHER CASES WHO HAVE ACHIEVED GROSS PROFIT RATE OF 25% IN SIMILAR TRADE. IT MAY BE A POINT OF WORTH IMPORTANCE THAT IN AY 2003-04, THE ASSESSEE COMPANY HAS ALSO D ECLARED GP RATE OF 19% BUT ON COMPARATIVELY LOW TURNOVER. THEREFORE, CONSIDERING THE PARTICULAR FACTS OF THE PRESENT CASE I VERY REASONABLY APPLY A GROSS PROFIT RATE OF 17% ON TOTAL TURNOVER BY THE ASSESSEE COMPANY AND ITS OTHER ASSOCIATED COMPANIES. AS SUCH THE MOS T REASONABLE RATE MAY BE CONSIDERED AT 17% WHICH ASSESSEE HAS ACTUALLY EARNED BUT BY CLAIM ING BOGUS PURCHASES AND TURNOVER, IT HAS REDUCED ITS PROFIT AT ITS CONVENIENCE. THEREFOR E, THIS GP RATE OF 17% IS APPLIED FOR ALL THE YEARS UNDER CONSIDERATION. 32 FOR THE YEAR UNDER CONSIDERATION TURNOVER DISCLO SED IS OF RS.142690358. BY APPLYING GP RATE OF 17% ON THIS TURNOVER RESULTANT GROSS PROFIT WOULD BE OF RS.24257360 AS AGAINST DECLARED GROSS PROFIT OF RS.18162927. THUS TRADING ADDITION OF RS.6094433 IS MADE ON THIS COUNT. 33 NET PROFIT EARNED ON UNDISCLOSED TRANSACTIONS IN SILVER STAR UNIT DISCUSSED IN PARA 17 OF THE ORDER OF RS.1826339 IS SEPARATELY ADDED. WITH THE ABOVE REMARKS INCOME OF THE ASSESSEE COMP ANY IS COMPUTED AS UNDER: NET INCOME FROM BUSINESS AS PER RETURN RS.3326622 ADD:- TRADING ADDITION AS DISCUSSED RS.6094433 UNDISCLOSED PROFIT OF SILVER STAR AS DISCUSSED RS. 1826339 INCOME FROM BUSINESS AND PROFESSION RS.11247394 21 LESS:- UNABSORBED BUSINESS LOSS B/F AS PER COMPUTATION FOR AY 2004-05 (-)RS.1331 662 UNABSORBED DEPRECIATION (-) RS. 28 575 TOTAL INCOME RS.9887157 ASSESSED AT RS.98,87,160. TAX AND INTEREST PAYABLE AS PER THE PROVISIONS OF THE IT ACT HAVE BEEN CALCULATED AS PER SEPARATE CALCULATIO N SHEET WHICH IS PART OF THIS ORDER. DEMAND NOTICE U/S 156 OF THE IT ACT HAS BEEN ISSUED ACCORDINGLY. PENALTY PROCEEDINGS U/S 2711(C) OF THE IT ACT HAVE BEEN SEPARATELY INITIATE D BY ISSUE OF SHOW CAUSE NOTICE OF EVEN DATE. PRIOR APPROVAL U/S 153D OF I.T. ACT , 1961 OF THE JCIT, CENTRAL RANGE, JAIPUR HAS BEEN OBTAINED VIDE LETTER NO. JT.CIT/CR/JAIPUR/2011 -12/867 DATED 23-8-2011. 2.5 SIMILAR COMPUTATIONS OF INCOME HAVE BEEN MADE B Y THE A.O. IN OTHER FOUR ASSESSMENT YEARS NAMELY 2006-07, 2007-08, 2008-09 A ND 2009-10 ALSO. AGAINST THESE ADDITIONS THE ASSESSEE PREFERRED FIRST APPEAL AND F OR ALL THE FIVE YEARS. HE HAS PASSED A COMMON ORDER GIVING PART RELIEF TO THE ASSESSEE. NO W, BOTH THE PARTIES ARE AGGRIEVED AND HAVE FILED THEIR RESPECTIVE APPEALS. THERE ARE 10 C ROSS APPEALS FILED FOR 5 YEARS, IN WHICH EXACTLY SIMILAR AND IDENTICAL ISSUES ARE INVOLVED. 2.6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE RECORD. WE WOULD LIKE TO INCORPORATE, IN TOTO, THE LD. CIT( A)S ORDER FROM PARA 6.4 (AT PAGE 15) TO PARA PARA 17 (AT PAGE 27), AS THIS ORDER IS COMMON FOR ALL THE APPEALS, HEREIN AS BELOW :- 6.4 I HAVE CONSIDERED THE CONTENTIONS OF THE APPE LLANT AS WELL AS ASSESSMENT ORDER. (I). AS REGARDING THE BOOKS OF ACCOUNTS FOLLOW ING FACTS ARE NOTED: A. IT IS SEEN THAT THE A.O. IN THE ASSESSMENT ORDER HAS POINTED VARIOUS DISCREPANCIES IN THE BOOKS OF ACCOUNTS AS UNDER: I. BOGUS PURCHASES FROM VIJAY GROUP AND LALWANI GRO UP FOR F.Y. 2004-05 TO 2007- 08 WHICH IS EVIDENT FROM THE CHART ON PAGE 4 OF THE ASSESSMENT ORDER. II. ANNEXURE A-6 SHOWING BOGUS PURCHASES AND SALES THROUGH BROKERS FOR F.Y. 2006- 07 AND 2007-08 AS PER CHART ON PAGE 6 TO 8 OF THE A SSESSMENT ORDER. III. ANNEXURE A-26 SHOWING THE BROKER WISE AND PART Y WISE BOGUS PURCHASE AND SALES FOR F.Y. 2008-09 AS PER PAGE NO. 11 TO 14 OF THE AS SESSMENT ORDER. IV. THE UNACCOUNTED TRANSACTIONS OF UNDISCLOSED SAL E, UNDISCLOSED PURCHASES, BOGUS PURCHASES AND BOGUS SALES FOUND IN THE PEN DR IVE IMPOUNDED AS ANNEXURE A-43 WHICH HAVE BEEN REPRODUCED BY THE A.O. ON PAGE 16 TO 21 OF THE ASSESSMENT 22 ORDER AND SUMMARIZED AT PAGE 26 OF THE ASSESSMENT O RDER. THESE RELATE TO FOR F.Y. 2004-05 TO 2008-09. THIS IS SUPPORTED BY BILL COMMI SSION ACCOUNT IMPOUNDED AS ANNEXURE A-45 FROM THE BUSINESS PREMISES OF SILVER STAR UNIT AT TRIPOLIA BAZAR, JAIPUR. V. BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FOR F. Y. 2008-09 AS PER ANNEXURE A-L, A-24 AND A-12 COULD NOT BE RECONCILED WITH THE AUDI TED ACCOUNTS. VI. ANNEXURE A-3 WHICH SHOWS THE COMPUTERIZED DETAI LS OF MONTH WISE SALES FOR F.Y. 2008-09 WHICH HAVE NOT BEEN RECONCILED WITH TH E AUDITED RETURN. THESE DOCUMENTS CONTAIN THE TRANSACTIONS RELATING T O THE ASSESSEE'S COMPANY AND HAVE BEEN EXPLAINED IN DETAIL BY RECORDING THE STAT EMENTS OF VARIOUS PERSONS. THERE IS NO DENIAL OF THE FACT THAT THESE DOCUMENTS FOUND FROM THE ASSESSEE'S PREMISES AT VARIOUS SITES AND IT'S DIRECTOR'S PREMISES PERTAIN TO THE APPELLA NT. THE BOGUS PURCHASES AND SALES HAVE BEEN ENTERED INTO THE BOOKS OF ACCOUNTS AS IS EVIDE NT FROM THE ENQUIRIES CARRIED OUT FROM THE DIRECTOR AND EMPLOYEES OF THE CONCERNS. TH E ASSESSEE HAS INDULGED IN OBTAINING BOGUS PURCHASE BILLS FROM LALWANI & VIJAY GROUP AGA INST WHICH NO GOODS WERE RECEIVED AS IS EVIDENT FROM THE INVESTIGATION CARRIED OUT BY TH E BCTT WING AND ACCEPTED BY M/S K.K. AMERIYA, DIRECTOR OF THE COMPANY. THE ASSESSEE IN T HE POST SEARCH PROCEEDINGS DID NOT EXPLAIN THE ISSUE OF BOGUS PURCHASES AS REQUIRED BY LETTER DATED 16.07.2009. THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE THE PARTIES FROM WHOM THE GOODS WERE SHOWN TO HAVE BEEN PURCHASED AND AS PER ENQUIRY BY THE INSPECTOR OF TH E CIRCLE MOST OF THE PARTIES WERE FOUND NON EXISTENT AT THE GIVEN ADDRESS. THE BILL COMMISS ION ACCOUNT PAYMENT FOUND DURING THE SEARCH SHOWS THAT AFTER ISSUE OF CHEQUES FOR THE PU RCHASES, THE AMOUNT WAS RECEIVED BACK IN CASH. IN CASE OF SILVER STAR UNIT, UNDISCLOSED SALES, PAR TLY UNDISCLOSED SALES, UNDISCLOSED PURCHASES, BOGUS PURCHASES AND BOGUS SALES HAVE BEE N POINTED OUT BY THE A.O. WHICH IS EVIDENT FROM THE PEN DRIVE IMPOUNDED ANNEXURE A-3 A ND SUPPORTED BY ANNEXURE A-45 SHOWING THE BILL COMMISSION ACCOUNT. THE ASSESSEE H AS NOT BEEN ABLE TO RECONCILE THE ENTRIES IN THE PEN DRIVE FROM THE REGULAR ACCOUNTS AS NOTED BY THE A.O. AT PARA 17.1 AND 17.2 OF THE ASSESSMENT ORDER. THE A.O. HAS NOTED THAT THE TRANS ACTIONS AND TURNOVER MENTIONED IN THE PEN DRIVE ARE OVER AND ABOVE THE REGULAR ACCOUNTS. THES E TRANSACTIONS REGARDING PURCHASES AND SALES HAVE NOT BEEN RECONCILED BY THE APPELLANT WIT H THE BOOKS OF ACCOUNTS. AS PER THE AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT FOR A.Y. 2009-10 SALES OF RS. 103.06 CRORES AND PURCHASES OF RS. 96.58 CRORE S HAS BEEN NOTED WHILE AS PER UNAUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT, SALES OF RS.106.58 CORES AND PURCHASES OF RS. 99.10 CRORES HAS BEEN NOTED. THIS IS ALSO SUPPORTED BY TH E COMPUTER GENERATED SHEET GIVING MONTH WISE SALES AS PER ANNEXURE A-3 WHERE THE SALES FOR F.Y. 2008-09 ARE RS. 1.07 CRORES WHILE ASSESSEE HAS SHOWN SALES OF RS. 1.03 CRORES ONLY. THE ASSESSEE HAS NOT BEEN ABLE TO RECONCILE THE DIFFERENCE IN AUDITED AND UNAUDITED ACCOUNTS AS MENTIONED ABOVE. FURTHER, IT HAS BEEN POINTED OUT BY THE A.O. THAT A SSESSEE HAS NOT MAINTAINED QUANTITATIVE STOCK REGISTER OR REGULAR MANUFACTURIN G RECORDS OR CONSUMPTION RECORDS IN RESPECT OF MANUFACTURING OF JEWELLERY AND TRADING OF GEM ST ONES. THE ASSESSEE HAS SHOWN THE BOOK STOCK AS ON 30.04.2 009 TO STATE BANK OF INDORE OF RS. 29.55 CRORES WHILE DURING SEARCH BOOKS STOCK WA S FOUND OF RS. 14.52 CRORES ONLY AND 23 BOOKS WERE FOUND INCOMPLETE. ASSESSEE HAS NOT RECON CILED THE STOCK FOUND WITH THE STOCK AS PER BOOKS OF ACCOUNTS. B. AS REGARDING THE ASSESSEE'S SUBMISSION THAT AUDI TED BOOKS OF ACCOUNT HAVE BEEN MAINTAINED AND PRODUCED BEFORE THE A.O., IT MAY BE MENTIONED THAT A.O. HAS POINTED OUT VARIOUS DISCREPANCIES IN THE BOOKS OF ACCOUNTS WHIC H HAVE BEEN LISTED SUPRA. AS REGARDING THE ASSESSEE CONTENTION ADDITION ON ACCOUNT OF BOGU S PURCHASES HAS ALREADY BEEN MADE IN THE REGULAR ASSESSMENT WHICH HAVE TRAVELED UPTO ITA T IN A.Y. 2005-06 AND 2006-07, IT MAY BE MENTIONED THAT THE INCRIMINATING DOCUMENTS F OUND DURING THE SEARCH ARE NOT ONLY REGARDING THE BOGUS PURCHASES WHICH WAS THE ISSUE U NDER CONSIDERATION U/S 143(3) OF THE I.T. ACT AS IS EVIDENT FROM THE LIST OF INCRIMINATING DO CUMENTS STATED ABOVE. IN FACT ISSUE INVOLVED IN A.Y. 2005-06 WAS REGARDING TEN PARTIES FROM WHOM THE PURCHASES WERE CONSIDERED AS NON GENUINE AND IN A.Y. 2006-07 PURCH ASES MADE FROM 22 PARTIES AT RS. 5.04 CRORES WAS CONSIDERED. IN THE PRESENT PROCEEDI NGS, THE DOCUMENTS MENTIONED ABOVE SHOW THAT ASSESSEE HAS INDULGED IN BOGUS PURCHASES, BOGUS SALES, UNACCOUNTED SALES, PARTLY UNACCOUNTED SALES, UNDISCLOSED PURCHA SES ETC. THE UNAUDITED PURCHASE AND SALES IN THE PROFIT AND LOSS ACCOUNT ARE NOT TALLYI NG WITH THE AUDITED PURCHASE AND SALE ACCOUNT AND ASSESSEE HAS NOT MAINTAINED STOCK REGIS TER, MANUFACTURING RECORD AND CONSUMPTION RECORDS. THERE IS NO RESTRICTION TO MAK E THE ASSESSMENT U/S 153A OF THE I.T. ACT AFTER CONSIDERING THE ABOVE INCRIMINATING DOCUM ENTS FOUND DURING SEARCH. THE A.O. HAS TO DETERMINE THE TOTAL INCOME BASED ON ALL THE RELEVANT MATERIAL AVAILABLE ON THE RECORD. MOREOVER, EVEN IN THE REGULAR ASSESSMENT PROCEEDING S MADE U/S 143(3) A.Y. 2005-06 ISSUE CONSIDERED BY HON'BLE ITAT WAS REGARD ING BOGUS PURCHASES FROM 10 PARTIES ONLY WHERE THE REJECTION OF BOOK RESULTS U/ S 145(3) HAS BEEN UPHELD AS THE ASSESSEE COULD NOT PRODUCE THE ABOVE PARTIES NOR THEY WERE F OUND AT THE GIVEN ADDRESSES AND ADDITION WAS REDUCED TO LUMP SUM OF RS. 1,00,000. IN FACT DURING ASSESSMENT YEAR 2006-07, THE HON'BLE ITAT HAS UPHELD THE ADDITION OF RS. 60,13,071 ON ACCOUNT OF BOGUS PURCH ASES FROM 22 PARTIES BY UPHOLDING THE G.P. RATE OF 8.5 % APPLIED BY THE LD. CIT(A). IN THE PRESENT CASE, IT IS APPARENT THAT THERE ARE VARIOUS DEFECTS REGARDING THE UNACCOUNTED PURCHASES AS WELL AS UNACCOUNTED SALES AND STOCK FOUND WHICH HAVE NOT BEEN RECONCILED WITH THE BOOKS OF ACCOUNTS AS IS APPAREN T FROM THE ASSESSMENT ORDER. SO, PRESENT PROCEEDINGS CAN NOT BE TREATED SIMILAR TO REGULAR A SSESSMENT PROCEEDINGS IN VIEW OF DISTINGUISHABLE FEATURES POINTED ABOVE. C. IT IS WORTHWHILE TO NOTE THAT ASSESSEE AT NO STA GE BEEN ABLE TO RECONCILE THE PURCHASES, SALES AND CLOSING STOCK NO TED IN THE DOCUMENTS FOUND AND SEIZED DURING THE SEARCH WITH THE BOOKS O F ACCOUNTS IN SPITE OF REPEATED OPPORTUNITIES GIVEN TO THE ASSESSEE BY THE AO. D. FURTHER, IT HAS BEEN POINTED BY THE A.O. IN THE REMAND REPORT THAT PAPERS AND DOCUMENTS EVIDENCES COLLECTED IN THE BCTT ENQUIRY W ERE PROVIDED AND QUESTIONED IN DETAILS TO DIRECTOR, SH. K. K. AMERIYA AS PER PA RA 9 OF THE ASSESSMENT ORDER. THE ASSESSEE WAS GIVEN OPPORTUNITY TO FURNISH COMPLETE DETAILS OF BOGUS SALES AND PURCHASES AND REAL SALES AND PURCHASES ACCOUNTS BY THE ADIT VIDE LETTER DATED 16.07.2009 AND FURTHER OPPORTUNITY WAS GIVEN BY WAY OF NOTICE U/S 142(1) BY THE AO. THE ASSESSEE DID NOT FURNISH THE ABOVE INFORMATION WITHOUT ANY R EASON. NOW DURING APPEAL, ASSESSEE 24 HAS MERELY SUBMITTED LIST OF UNVERIFIABLE PURCHASES ,SALES WITHOUT ANY ADDRESS OF THE PARTIES NOR THE CONFIRMATION BY THE SAID PARTIES WH ICH CANNOT ACCEPTED AT THE FACE VALUE AS THEY ARE NOT OPEN TO ANY VERIFICATION AND THEY A RE NOT SUPPORTED BY THE DUE CONFIRMATION OR AFFIDAVITS OF THE CONCERNED PARTIES AS DESIRED BY THE A.O. IN THE REMAND REPORT MENTIONED IN CASE OF M/S CLARITY GOLD PVT. LTD, A SISTER CONCERN OF THE ASSESSEE. IN VIEW OF THE ABOVE DISCUSSION, THE REJECTION OF T HE BOOKS OF ACCOUNTS U/S 145(3) IS UPHELD. (2). AS REGARDING THE ESTIMATION OF G.P. RATE,, THE A.O. HAS MADE THE TRADING ADDITION OF T60,94,433 BY APPLYING G.P. OF 17% ON TURNOVER OF 14,24,19,358. THE A.O. HAS REPRODUCED THE CHART OF G.P. SHOWN BY THE ASSESSEE FOR THE A.Y. 20 04-05 TO 2010-11 ASUNDER: A.Y. 2004-05 2005-06 2006-07 2007-08 2008-09 2009 - 10 AUDITED 2009 - 10 UNAUDITE D 2010-11 SALES 198490 1426903 5466428 68749794 9777583 10306287 10720339 1540384 STOCK DIF. 144657 5147868 0 71450573 6769267 83951400 83334242 5750095 TOTAL 2129557 1941690 5466428 75894851 1054510 11145801 11553681 2115394 PURCHASES 181023 1698878 4962283 68670235 9376682 96584379 99103051 1S74824 DIRECT COST 0 6118276 9 962436 1409772 1312092 8607118 10319346 8163403 TOTAL 181023 1760061 5061907 70080007 9507891 97445091 10013498 1956458 GROW PROFIT 3193228 1816292 7 4045206 7 5S14844 0 9466185 0 ' 14012920 8 15401828 1 1589358 7 GP RATE 16.08% 12.72% 7.40% 8.45% 9.68% 13.59% 14.36% 10.31% A. IT HAS BEEN MENTIONED BY THE A.O. THAT FROM ABOV E CHART IT IS SEEN THAT G.P. OF THE ASSESSEE VARIES FROM 7.04% TO 16.08%. IN THE REGULAR ASSESSM ENT FOR A.Y. 2004-05 PURCHASES FROM 10 PARTIES WERE FOUND TO BE BOGUS AND DURING SCRUTINY G.P. RATE OF 13.28% WAS APPLIED BY THE A.O. WHICH WAS REDUCED TO 13% BY THE LD. C1T(A) AND TO L UMP SUM ADDITION OF ?1, 00,000 WAS UPHELD BY THE IT AT, THEREBY GIVING G.P. OF 12.79%. SIMILARLY, IN THE A.Y. 2006-07 G.P. OF 7.40% WAS SHOWN BY THE ASSESSEE AND LD. CIT(A) UPHELD THE G.P. TO THE EXTENT OF 8.5% WHICH WAS CONFIRMED BY THE HON'BLE ITAT BY ORDER DATED 23 /09/2011. IN VIEW OF ABOVE, THE ASSESSEE'S MAIN CONTENTION TH AT G.P. RATE OF 12.79% WAS ACCEPTED BY HON'BLE ITAT IN A.Y. 2005-06 BY UPHOLDING ADDITION OF RS. 1 LAC, IT MAY BE MENTIONED THAT THE SAID ADDITION WAS ONLY ON ACCOUNT OF BOGUS PURCHASE BILLS OF 10 PARTIES AND NOT ON ACCOUNT OF VARIOUS DISCREPANCIES POINTED OUT BY THE A.O. DURIN G THE PRESENT PROCEEDINGS. SIMILARLY IN THE CASE FOR A.Y. 2006-07 WHERE G.P. RATE OF 8.5% WAS A CCEPTED, ISSUE INVOLVED WAS ONLY BOGUS PURCHASES FROM 22 PARTIES ONLY. AS SUCH, THE FACTS OF THE PRESENT CAS E ARE DISTINGUISHABLE IN THE REGULAR ASSESSMENT U/S 143(3) IN VIEW OF DISCREPANC IES POINTED OUT IN THE ASSESSMENT ORDERS U/S 143(3) IN ABOVE TWO YEARS ONLY AND NO SUCH CASE HAS BEEN POINTED OUT RELATING TO OTHER ASSESSMENT YEARS. B. AS REGARDING THE A.O.' S CONTENTION IN THE REMA ND REPORT THAT G.P. RATE MAY BE ENHANCED FROM 17% TO 17.98%WHICH HAS BEEN SHOWN BY M/S GUPTA EMERALD MINES & PVT. LTD. IN A.Y. 2009-10, A GROUP CONCERN OF THE ASSESSEE WHERE IT WAS NOT A CASE OF BOGUS PURCHASES AND ONLY OPENING STOCK WAS SOLD, IT HAS BEEN MENTIONED BY TH E APPELLANT THAT IN THE CITED CASE THE OPENING STOCK IN THIS YEAR CONSISTED OF PRECIOUS STONES ONL Y I.E. TANZANITE WHILE ASSESSEE IS NOT HAVING BUSINESS OF TANZANITE. THIS CLAIM TO THIS EXTENT IS ALSO SUPPORTED BY THE SALE REGISTER AS PER WHICH 25 EXCEPT OF EMERALD OF RS. 50,000 REST OF THE SALES TOTALING TO RS. 72,05,870 ARE OF TANZANITE. SO, TH E TRADE RESULTS OF THIS PARTICULAR YEAR ARE NOT APPLI CABLE IN THE PRESENT CASE. C. IT IS SEEN FROM THE G.P. CHART REPRODUCED SUPRA THAT THERE IS NO CORRELATION IN THE INCREASE IN TURNOVER AND PROPORTIONATE DECREASE IN G.P. RATE. IT IS APPARENTTHAT IN A.Y. 2007- 08 THERE WAS SUBSTANTIALLY HIGHER TURNOVER AS COMPA RED TO A.Y.2006-07 EVEN THEN THE G.P. RATE IS BETTER IN A.Y. 2007-08. IT IS STILL BETTER IN A.Y. 2008-09 AND 2009-10 ON A TURNOVER WHICH HAS INCREASED BY MORE THAN 100%. THE APPELLAN T HAS NOT BEEN ABLE TO EXPLAIN THE GROSS VARIATION IN THE G.P. RESULTS SHOWN BY THE ASSESSEE IN DIFFERENT YEARS. D. AS REFERRED TO BY A.O. IT IS SEEN THAT IN THE CA SE OF GEM PARADISE FOR A.Y. 2003-04, THE HON'BLE ITAT HAS CONFIRMED G.P. RATE OF 25.5% O N ACCOUNT OF UNVERIFIABLE PURCHASES AS AGAINST 24.92% SHOWN BY THE ASSESSEE. ALSO, IN THE CASE OF DEEPAK DALELA FOR AY. 2006-07, ADDITION TO THE EXTENT OF G.P. RATE OF 25% ONLY IN RESPECT OF BOGUS PURCHASES WAS UPHELD BY HON'BLE ITAT. THESE DECISIONS ARE ON THEIR ON FACTS BUT GO TO SUPPORT THE VIEW OF ADDITION BEING UPHELD IN CASE OF UNVERIFIAB LE PURCHASES. E. IT IS NOTED THAT G.P. RATE OF 19% AND 16.8% WAS SHOWN BY THE ASSESSEE IN A.Y. 2003-04 AND 2004-05 RESPECTIVELY THOUGH ON THE LOW TURNOVER. THE INCRIMINATING DOCUMENTS FOUND DURING THE SEARCH MAINLY RELATE TO LATER YEARS. IN ORDER TO ASCERTAIN THE REASONABLE RATE OF G.P., APPARENTLY THE YEARS IN WH ICH NO ADJUSTMENTS BY WAY OF UNVERIFIABLE PURCHASES OR SALES OR STOCK WAS MADE FORM THE RELIA BLE BASIS. IN THIS CONTEXT THE A.O. HAS POINTED OUT FOLLOWING INSTANCES: I. FROM THE CHART ABOVE, IT IS NOTED THAT IN A.Y. 2009-10, UNAUDITED BOOK RESULTS SHOW G.P. RATE OF 14.36% IN THE CASE OF THE ASSESSE E WHICH HAS BEEN POINTED OUT BY THE A.O. IN THE REMAND REPORT. II. IT HAS BEEN POINTED OUT BY THE A.O. THAT SISTE R CONCERN OF THE ASSESSEE, M/S GEM MART INDIA PVT. LTD. DEALING IN SIMILAR ITEMS A ND TRADE HAS DISCLOSED G.P. OF 14.91% IN A.Y. 2010-31 WHEN IT WAS NOT INDULGING IN BOGUS PURCHASES. ACCORDINGLY, KEEPING IN VIEW THE G.P. RESULTS SHOWN BY THE ASSESSEE IN ABOVE CASES AND OTHER FACTORS NOTED ABOVE, IT IS HELD REASONABLE TO UPHOLD THE APPLICATION OF G.P. RATE AT 15%, THE ABOVE G.P. RATE ON A TURNOVER OF RS. 14,26,90,3 58 WILL RESULT IN GROSS PROFIT OF RS. 2,14,03,553 WHILE ASSESSEE HAS DECLARED G.P, OF RS . 1,81,62,927. THUS, THE TRADING ADDITION OF RS. 32,40,627 IS SUSTAINED AND BALANCE AMOUNT I S DELETED. OUT OF ABOVE ADDITION, THE AO IS DIRECTED TO GIVE T HE CREDIT OF THE ADDITIONS ALREADY MADE DURING THE PROCEEDINGS U/S 143(3) ON ACCOUNT OF G.P . AND SUSTAINED DURING APPELLATE PROCEEDINGS IN RESPECT OF A.Y. 2005-06 AS THE SAME INCOME CAN NOT BE TAXED TWICE. 7.0 THE 4 TH GROUND OF APPEAL IS AS UNDER: 'IN THE FACT* AND CIRCUMSTANCES OF THE CASE THE ASS ESSING OFFICER HAS ERRED IN MAKING ADDITION OF RS. 18,26,339/- ON ACCOUNT OF ALLEGED UNDISCLOSED PROFIT OF SILVER STAR.' 7.1 AS PER THE ASSESSMENT ORDER, SILVER STAR UNIT OF THE ASSESSEE COMPANY IS DEALING IN SILVER JEWELLERY AND IS MANAG ED BY TRUSTEE SH. RAGHU DUTT TIWARI AND SH. PAWAN KUMAR KHANDELWAL. A PEN DRIVE WAS FOUND FROM THE PREMISES OF ABOVE UNIT AT TRIPOLIA BAZAR JAIPUR MAINTAINED BY S H. RAGHU DUTT TIWARI CONTAINING TWO SET OF ACCOUNTS I.E. ONE FOR REGULAR BOOKS OF ACCOUNTS AND OTHER FOR PURPOSE OF ACTUAL 26 MONITORING OF TRANSACTIONS OF THE UNIT TERMED AS NU MBER TWO ACCOUNTS. THE BILL COMMISSION ACCOUNT WAS ALSO FOUN D AT THE BUSINESS PREMISES IMPOUNDED AS ANNEXURE. A-45 W HERE THE DETAILS OF CHEQUES ISSUED AND CASH RECEIVED BAC K FOR THE BOGUS PURCHASES WERE MENTIONED. THE DETAILS OF THES E UNDISCLOSED SALES, PARTLY UNACCOUNTED SALES, UNDISC LOSED PURCHASES, BOGUS PURCHASES AND BOGUS SALES HAVE BEE N DISCUSSED AT PARA 6.1(V) OF THIS ORDER AS UNDER: '(V.) THE ASSESSEE IS DEALING IN SILVER JEWELLERY IN ONE UNIT NAMED AS SILVER STAR WHICH IS MANAGED BY TRUSTED EMPLOYEE S SH. RAGHU DATT TIWARI AND .PAWAN KUMAR KHANDELWAL. THE ACCOUNTS OF THESE UNITS WERE MAINTAINED BY SH. R.D. TIWARI IN PEN DRIVE. THE TWO SETS OF THE ACCOUNTS W ERE MAINTAINED, ONE FOR THE REGULAR BOOKS OF ACCOUNTS A ND OTHER FOR NUMBER TWO ACCOUNTS. THE SAID PEN DRIVE WAS IMPOUNDED DURING SURVEY AS ANNEXURE A-3 FROM THE BUSINESS PREMISES OF THIS UNIT. THE A.O. HAS DISCUS SED IN DETAIL THE NATURE OF TRANSACTIONS APPEARING THEREIN REGARDING UNDISCLOSED SALES, ACTUAL SALES AGAINST WHICH BILL IS PARTLY ISSUED, ACTUAL UNDISCLOSED PURCHASES, BOGUS PURCHAS ES AND FAKE SALES AS UNDER: A. UNDISCLOSED SALES ARE NOTED IN THE KACHHI PARCHI AND DO NOT FIND MENTIONED INTHE REGULAR BOOKS OF ACCOUNTS WHILE RECORD IS MAINTAINED IN THE PEN DRIV E ONLY. B. ACTUAL SALES AGAINST WHICH BILL IS PARTLY ISSUED : THE ACTUAL SALES DONE THROUGHKACHI PARCHI ARE ENTERED INTO PEN DRIVE. HOWEVER, WHEN PART PAKKA BILL IS TO BE ISSUED AND PAYMENT RECEIVED BY CHEQUE, THIS IS ALSO NOTED IN THE PEN DRIVE. C. UNDISCLOSED PURCHASES: THESE PURCHASES ARE MADE THROUGH KACHI PARCHI-AND ENTERED INTO PEN DRIVE BUT ARE NOT MENTIONED IN THE REGULAR BOOKS. D. BOGUS PURCHASES: THESE PURCHASES ARE ENTERED INT O THE REGULAR BOOKS BUT NOT ENTERED INTO THE PEN DRIVE. O NLY THE BROKERAGE EXPENSES FOR ARRANGING THESE BOGUS PURCHA SE ARE RECORDED IN THE PEN DRIVE UNDER 'BILL COMMISSION AC COUNT' WHICH IS ALSO SUPPORTED BY THE ANNEXURE A-45, PAGE 27 TO 35 IMPOUNDED FROM THE BUSINESS PREMISES OF THE SILVER STAR UNIT IN WHICH CHEQUE ISSUED AND CASH RECEIVED BACK ARE ALSO MENTIONED. THE A.O. HAS GIVEN THE YEAR WISE SUMMARY OF SUCH BO GUS PURCHASE TRANSACTIONS FROM 31.03.2005 TO 31.03.2009 AT PAGE NO. 16 TO 21 OF THE ASSESSMENT ORDER. E. FAKE SALES: INCOME FROM FAKE SALE BILL IS BOOKED AS BILL COMMISSION RECEIPT IN PEN DRIVE. 27 SH. R.D. TIWARI, ACCOUNTANT DESCRIBED IN DETAILS TH E MODUS OPERANDI REGARDING THE MAINTENANCE OF SUCH ACCOUNT IN THE PE N DRIVE WHICH WAS AGREED UPON AND CONFIRMED BY SH. PAWAN KHANDELWAL W HOSE STATEMENTS HAVE BEEN REPRODUCED BY THE A.O. AT PAGE NO. 21 TO 26 OF THE ASSESSMENT ORDER. THE A.O. HAS MENTIONED THAT ACTUA L TRANSACTIONS REFLECTED IN THE PEN DRIVE ARE ENTIRELY DIFFERENT F ROM THOSE IN THE REGULAR BOOKS OF ACCOUNTS. THE PURCHASES ARE MADE I N CASH FROM DIFFERENT PARTIES BUT BILLS ARE RECEIVED FROM DIFFE RENT PARTIES. THE SALES ARE MADE IN CASH TO DIFFERENT PARTIES BUT BILLS ARE ISSUED TO DIFFERENT PARTIES. THE A.O. HAS GIVEN THE QUANTITATIVE ESTIMA TE OF SOME OF THE MAJOR TRANSACTIONS APPEARING IN PEN DRIVE FOR F.Y. 2004-05 TO 2008-09 AS UNDER: S. NO. FY/ PARTICULARS 2004-05 2005-06 2006-07 2007-08 2008-09 1 UNDISCLOSED SALES AS PER PEN DRIVE S872096 19801861 23223461 22802196 20804063 2 CLOSING STOCK 6318679 7161805 5391367 8498986 9019759 3 INDIRECT INCOME - 9593 16488 194058 805 4 PURCHASE AS PER PEN DRIVE 10164373 12839788 17075382 16193197 12683881 5 OPENING STOCK - 6318679 7161805 5391367 8498986 6 DIR ECT EXPENSES 2537506 4751364 3629943 4120542 2623106 7 INDIRECT EXPENSES 635681 1323182 2239720 2393058 3527322 8 INTEREST ON LOAN 26875 1088875 160650 227495 171660 NET PROFIT EARNED 1826339 651370 1636185 3169580 2319672 THE ASSESSEE DID NOT FURNISH THE TRIAL BALANCE OF T HE SILVER STAR UNIT TO GET IT VERIFIED FROM THE COPY OF TRIAL BALANCE O BTAINED FROM THE PEN DRIVE. ALSO, THE ASSESSEE DID NOT GET THE ENTRIES I N THE PEN DRIVE VERIFIED FROM THE REGULAR ACCOUNTS SO THE A.O. HAS HELD THAT TURNOVER AND OTHER TRANSACTIONS MAINTAINED IN THE PEN DRIVE ARE OVER AND ABOVE REGULAR ACCOUNTS AND PROFIT EARNED THEREON IS PROFI T OVER AND ABOVE THE REGULAR PROFIT DISCLOSED.' 7.2 DURING APPEAL APPELLANT HAS SUBMITTED AS U NDER: 'THE LEARNED ASSESSING OFFICER HAS MADE THE ADDITIO N WITH REFERENCE TO PAN DRIVER REPORTED TO HAVE BEEN MAINTAINED BY SHRI RAGHU DUTT TIWARI. WHILE MAKING THE ADDITION FOLLOWING OBSERVATION IN PARA 17 OF THE ASSESSMENT ORDER - (A) THAT THE TRANSACTION OF PURCHASE AND SALES MADE IN CASH ARE DIFFERENT THAN THOSE FROM THE REGULAR BOOKS. (B) ALL THE TRANSACTIONS REPRESENT UNDISCLOSED INCOME. THE LEARNED ASSESSING OFFICER HAS MADE THE ADDITION UNILATERALLY WITHOUT PROVIDING THE PRINTOUT FROM THE PAN DRIVE, WITHOUT PROVIDING HOW THE INCOME WAS CALCULATED. IN THE ABSENCE OF THESE THE DETERMI NATION OF INCOME FROM SILVER STAR IS WITHOUT ANY JUSTIFICATION. THE ASSESSEE HAS ALREADY CHALLENGED THAT ALL THE ADDITION MADE ON THE BASIS OF STATEMENT OF ALL THE THREE PERSON INCLUDING SHRI RAGHU DUTT TIWARI AS NO CROSS EXAMINATION WAS ALLOTTED. IN VIEW OF THIS THE ENTIRE EXERCISE BY THE LEARNED ASSESSING OFFICE R IS WITHOUT ANY BASIS. 28 THE ASSESSEE HAS BEEN CONSISTENTLY ARGUING THAT EVE N IF THE THEORY OF LEARNED ASSESSING OFFICER IS ACCEPTED OF MAKING BOGUS PURCH ASE AND SALES AND THE STATEMENT OF THE AFORESAID PERSONS ARE TAKEN TO BE TRUE EVEN THEN THE RESULTANT INCOME ON ACCOUNT OF SUCH TURNOVER WOULD BE NIL. TH E COMMISSION PAID FOR OBTAINING THE BOGUS VOUCHERS OR PURCHASE AND THE CO MMISSION RECEIVED ON BOGUS SALE VOUCHERS IS ALMOST THE SAME. THE ASSESSE E DID NOT GAIN ANYTHING. THE ONLY BENEFIT WAS THAT ON INCREASE TURNOVER BETT ER CREDIT FACILITY WAS AVAILABLE FROM THE BANK. I T IS FURTHER SUBMITTED THAT THE LEARNED ASSESSING O FFICER HAS NOT GIVEN THE DETAILS THAT HOW THESE TRANSACTION WERE NOT MATCHIN G WITH THE REGULAR BOOKS AND HOW THESE HAVE BEEN CONSIDERED AS GENUINE AND N OT OF BOGUS PURCHASE AND SALES. IN VIEW OF THIS ALSO THE ADDITION MADE B Y THE LEARNED ASSESSING OFFICER OF RS. 18,26,339/- IS MOST UNJUST IFIED. ' 7.3 A REMAND REPORT WAS CALLED FROM THE A.O. REGARD ING THE SUBMISSIONS MADE BY THE APPELLANT. SAME IS MENTIONED AT PAGE NO. 22 OF THE CIT (A) ORDER. 7.4 I HAVE CONSIDERED THE CONTENTIONS OF THE APPEL LANT AS WELL AS ASSESSMENT ORDER. IT IS SEEN THAT THE VARIOUS UNACC OUNTED SALES OF SILVER STAR UNIT CONTAINED IN THE PEN DRIVE WERE PR OVIDED TO THE ASSESSEE ON 10.06.2011 AS PER THE PANCHNAMA FOR PRO CEEDINGS AS PER THE REMAND REPORT. THE INCOME BASED ON THE UNAC COUNTED BUSINESS ACTIVITY RECORDED IN PEN DRIVE WAS CALCULA TED BY THEN A/R OF THE ASSESSEE HIMSELF AND PROVIDED TO THE A.O . DURING COURSE OF ASSESSMENT ON 17.08.2011 WHICH HAVE BEEN MENTIONED BY THE A.O. IN THE REMAND REPORT. IT HAS BEEN SPECI FICALLY MENTIONED IN THE REMAND REPORT AS PER ORDER SHEET E NTRY DATED 17.08.2011 THAT PEN . DRIVE DETAILS HAVE BEEN EXAMI NED VIS-A-VIS WITH REGULAR ACCOUNTS AND THEY ARE NOT COMPLETELY M ATCHING WITH THE TRANSACTIONS MENTIONED IN THE PEN DRIVE. EVEN IN RESPONSE TO REMAND REPORT OF THE A.O., THE APPELLANT HAS NOT BEEN ABLE TO PROVE THAT ALL THE TRANSACTIONS NO TED IN THE PEN DRIVE WERE DULY RECORDED IN THE REGULAR BOOKS OF AC COUNTS. THE ONUS LIES ON THE APPELLANT TO RECONCILE THE TRANSAC TIONS OF THE BUSINESS AS RECORDED IN THE PEN DRIVE FROM THE REGU LAR BOOKS OF ACCOUNTS WHICH HAS NOT BEEN DISCHARGED AS IS APPARE NT FROM THE FINDINGS OF THE A.O. IN THE ASSESSMENT ORDER AND TH E REMAND REPORT. IN VIEW OF ABOVE, THE ADDITION MADE BY THE A.O. OF ?18,26,339 IS CONFIRMED AND THIS GROUND OF APPEAL I S DISMISSED. 8,0 IN THE RESULT, ASSESSEE'S APPEAL IS PARTLY ALLOWED. A.Y.2006-07. APPEAL NO. 237/2011-2012 9.0 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. 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,' 29 '3. 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. 5,12,77,2 ]//-. ' '4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER HAS ERRED IN MAKING ADDITION OF RS. 6.91,371/- ON ACCOUNT OF ALLEGED UN DISCLOSED PROFIT OF SILVER STAR.' THESE GROUNDS OF APPEAL ARE DECIDED AS UNDER. 9.1 THE ISSUE RAISED IN FIRST GROUND OF APPEAL HAS BEEN DECIDED IN APPEAL FOR A.Y. 2005-06 AND THIS GROUND OF APPEAL HAS BEEN DISMISSE D. ON THE SAME REASONING, THIS GROUND OF APPEAL IS DISMISSED HERE ALSO. 9.2 THE 2 ND AND 3 RD GROUNDS BEING REGARDING REJECTION OF BOOKS OF ACCO UNTS U/S 145(3) AND APPLICATION OF G.P. RATE WERE INVOLVED IN A.Y. 2005-06 WHERE THE REJECTION OF THE BOOKS OF ACCOUNTS U/S 145(3) HAS BEEN UPHELD AN D APPLICATION OF G.P. RATE OF 15% HAS BEEN SUSTAINED. SIMILAR BEING THE FACTS DUR ING THE YEAR UNDER CONSIDERATION, REJECTION OF BOOKS OF ACCOUNTS U/S 1 45(3) AND ADDITION TO THE EXTENT OF APPLICATION OF G.P. RATE OF 15% IS UPHELD. THE A BOVE G.P. RATE ON A TURNOVER OF RS. 54,66,42,847 WILL RESULT IN GROSS PROFIT OF RS . 8,19,96,427 WHILE ASSESSEE HAS DECLARED G.P. OF RS. 4,04,52,067. THUS, THE TR ADING ADDITION OF RS. 4,15,44,360 IS SUSTAINED AND BALANCE AMOUNT IS DELE TED. OUT OF ABOVE ADDITION, THE AO IS DIRECTED TO GIVE T HE CREDIT OF THE ADDITIONS ALREADY MADE DURING THE PROCEEDINGS U/S 143(3) ON ACCOUNT O F G.P. AND SUSTAINED DURING APPELLATE PROCEEDINGS IN RESPECT OF A.Y. 2006-07 AS THE SAME INCOME CAN NOT BE TAXED TWICE. 9.3 THE 4 LH GROUND AS REGARDING ADDITION ON ACCOUNT OF UNDISCL OSED PROFIT OF SILVER STAR UNIT WAS INVOLVED IN THE A.Y. 2005-06 ALSO WHERE TH E ADDITION ON ACCOUNT OF UNDISCLOSED INCOME FROM THE SILVER STAR UNIT HAS B EEN UPHELD. SIMILAR BEING THE FACTS DURING THE YEAR UNDER CONSIDERATION, THE ADD ITION OF RS. 6,91,371 IS UPHELD. 10.0 IN THE RESULT, ASSESSEE'S APPEAL IS PARTLY AL LOWED. A.Y. 2007-08, APPEAL NO. 238/2011-2012 11.0 THE VARIOUS GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT THE ORDER PASSED BY THE A.O. U/S 143(3) IS VOID AUTHORITIES BELOW INITIO. 2. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN REJECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE AC T. 3. IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN APPLYING A GROSS PROFIT RATE OF 17% AND THEREBY MAK ING TRADING ADDITION OF RS. 5,87,26,210/-. 30 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN CONSIDERING LOSS OF RS. 16,36,185/- ON ACCOUNT OF A LLEGED UNDISCLOSED LOSS OF SILVER STAR. THESE GROUNDS OF APPEAL ARE DECIDED AS UNDER. 11.1 THE ISSUE RAISED IN FIRST GROUND OF APPEAL HAS BEEN DECIDED IN APPEAL FOR A.Y. 2005-06 AND THIS GROUND OF APPEAL HAS BEEN DISMISS ED. ON THE SAME REASONING THIS GROUND OF APPEAL IS DISMISSED HERE ALSO. 1 1.2 THE 2 ND AND 3 RD GROUNDS BEING REGARDING REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) AND APPLICATION OF G.P. RATE WERE INVOLVED IN A.Y. 2005-06 WHERE THE REJECTION OF THE BOOKS OF ACCOUNTS U/S 145(3) HAS BEEN UPHELD AND APPLICATION OF G.P. RATE OF 15% HAS BEEN SUSTAINED. SIMILAR BEING THE FACTS DURING THE YEAR UNDER CONSIDERATION, ADDITION TO THE EXTENT OF APPLICATION OF G.P.RATE OF 15% IS UPHELD. THE ABOVE G.P. RATE ON A TURNOVER OF RS. 68,74,97, 941 WILL RESULT IN GROSS PROFIT OF RS. 1 0,3 1,24,691 WHILE ASSESSEE HAS DECLARED G.P. OF RS. 5,8 1,48,440. THUS, THE TRADING ADDITION OF RS. 4,49,76,251 IS SUSTAINED AND BALAN CE AMOUNT IS DELETED.1 1.3 THE 4 TH GROUND AS REGARDING ADDITION ON ACCOUNT OF UNDISCL OSED PROFIT OF SILVER STAR UNIT WAS INVOLVED IN THE A.Y. 2005-06 ALSO WHERE THE ADDITIO N ON ACCOUNT OF UNDISCLOSED INCOME FROM THE SILVER STAR UNIT HAS BEEN UPHELD. HOWEVER, DURI NG THE YEAR UNDER CONSIDERATION THERE IS A NET LOSS OF RS. 16,36,185 WHICH HAS BEEN ALLOWED BY THE A.O. AS THE PROFITS EARNED IN ALL THE OTHER YEARS OF RS. 79,66,963 HAVE BEEN ADDED S EPARATELY IN THE RELEVANT YEARS. THIS ALLOWANCE OF THE LOSS IS BASED ON EVIDENCES FOUND D URING THE SEARCH IN THE FORM OF PEN DRIVE WHICH HAVE BEEN DISCUSSED IN DETAILS IN A.Y. 2005-0 6. IN VIEW OF ABOVE, SIMILAR BEING THE FACTS DURING THE YEAR UNDER CONSIDERATION, THIS GRO UND OF APPEAL IS DISMISSED. 12.0 THE 5 TH GROUND OF APPEAL IS AS UNDER: 'IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASS ESSING OFFICER HAS ERRED IN MAKING ADDITION BY WAY OF DISALLOWANCE U/S 36(1 )(V A) OF RS. 1,07,103/-. ' AS PER THE ASSESSMENT ORDER, THE A.O. HAS NOTED THA T PAYMENT OF EMPLOYEE'S CONTRIBUTION TOWARDS PF OF RS. 76,166 AND ESI OF RS. 30,937 WER E NOT DEPOSITED WITHIN THE TIME PRESCRIBED UNDER THE RELEVANT LAW. ACCORDINGLY, THE APPELLANT POINTED OUT THAT PF' OF RS. 73,843 WAS PAID WITHIN THE FINANCIAL YEAR WHICH MAY BE ALLOWED U/S 43B OF THE I.T. ACT. HOWEVER, THE A.O. DISALLOWED BOTH THE ABOVE AMOUNTS TOTALING TO RS. 1,07,103 U/S 36(L)(VA) OF THE I.T. ACT. DURING APPEAL APPELLANT HAS SUBMITTED AS UNDER: 'THE LD. AO HAS DISALLOWED THE CLAIM OF THE FOLLOWI NG PAYMENTS (I) CONTRIBUTION TOWARDS PF RS. 76,166/- (II) CONTRIBUTION TOWARDS ESIC RS. 30, 937/- THE ID AO HAS DISALLOWED THE ABOVE PAYMENTS AS THE SAME WERE NOT MADE IN TIME ALLOWED U/S 36(L)(VA). THE IDAO DID NOT AGREE WITH THE SUBMISSION OF THE ASSESSEE THAT THE PAYMENT OF ? 73,843/- AGAINST PPF CONTRIBUTION WAS MADE WITHIN THE FINANCIAL YEAR AND THE SAME REQUIRED TO BE ALLOWED U/S 43B. T HERE IS NO DELAY IN THE PAYMENT OF ESIC. WE ARE ENCLOSING AUDITED COPIES OF THE STA TEMENT FORMING PART OF AUDIT REPORT AS ANNEXURE 'D' WHICH REFLECT THE DETAILS OF PAYMENTS OF PPF AND ESIC. THE PERUSAL OF THE STATEMENTS DISCLOSES NO DELAY IN THE PAYMENT OF ESIC. THE ID AO HAS ALSO NOT GIVEN A DETAILS OF DELAY IN THE PAYMENT OF ESIC. AS REGARDS THE DELAY IN THE PAYMENT OF PF IT IS SUBMITTED THAT IT IS THE SETTLE D POSITION OF LAW THAT THESE PAYMENTS ARE GOVERNED BY THE PROVISIONS OF SECTION 43B AND T HE SAME HAVE TO BE ALLOWED IF THESE ARE PAID BEFORE FILING OF THE RETURN. THIS AM ENDMENT HAS COME INTO THE FACT 31 FROM 01.04.1988. FURTHER THE PROVISION OF SECTION 4 3B ARE OVERRIDING 'NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PR OVISION OF THIS ACT' (QUOTED FROM SECTION 43B) THE FOLLOWING CASE LAWS ARE QUOTED IN SUPPORT ALSO (I) CIT VS. VINAY CEMENT LTD. (2007) 213 CTR 268 (SUPR EME COURT) (II) CIT VS. .M. ELECTRICALS LTD. (2008) 220 CTR 635 ( DEL HC) ( III) CIT VS. NEXUS COMPUTERS PVT. LTD. 177 TAXMAN 202 (MAD) IN VIEW OF THIS IT IS REQUESTED THAT THE ADDITION M ADE IS ILLEGAL AND THE SAME DESERVES TO BE DELETED ' EVEN IN THE REMAND REPORT THE EARLIER CONTENTIONS W ERE RETREATED BY THE A.O. AND THE APPELLANT. THE ASSESSEE HAS FILED THE COPY OF ANNEXURE-D IN SU PPORT OF CONTENTION THAT ESI PAYMENT HAS BEEN MADE OF RS. 30,937 WITHIN THE F.Y . ITSELF. SIMILARLY, THE PAYMENT OF RS. 76,166 ON ACCOUNT OF PROVIDENT FUND WAS ALS O PAID BEFORE FILING THE DUE DATE OF RETURN. 12.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND T HE CONTENTIONS OF THE APPELLANT. IT IS SEEN THAT APPELLANT HAS POINTED OUT THAT EMPLOYEES CONTRIBUTION OF ESIC OF RS. 30,937 HAS ALREADY BEEN PAID WITHIN THE FINANCIAL YEAR I.E . 27.09.2006 ITSELF. FURTHER, EMPLOYEES PF CONTRIBUTION OF RS. 76,166 WAS PAID O N 27.09.2006 ( RS. 68,521+ RS. 5,322) AND ON 25.10.2007 OF ?2,323 I.E. BEFORE DUE DATE OF FILING THE RETURN. THE SAID PAYMENT IS ALLOWABLE IN VIEW OF DECISION OF HO NOURABLE SUPREME COURT IN THE CASE OF VINAYAL CEMENT REPORTED AT 239 ITR 268 WHICH HAS BEEN FOLLOWED IN THE CASE OF P.M. ELECTRONIC L-TD REPORTED AT 313 ITR 161. ACCOR DINGLY, EMPLOYEES CONTRIBUTION IS ALLOWABLE UNDER SECTION 43B, IF IT HAS BEEN PAID BE FORE THE DATE OF FILING THE RETURN UNDER SECTION 139(1) OF THE ACT. THEREFORE, THE DIS ALLOWANCE OF RS. 1,07,103 IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 13.0 IN THE RESULT, ASSESSEE'S APPEAL IS PARTLY ALLOWED. A.Y. 2008-09. APPEAL NO. 239/2011-2012 14.0 THE VARIOUS GROUNDS OF APPEAL ARE AS UNDER: ' 1. THAT (HE ORDER PASSED BY THE LEARNED ASSESSIN G OFFICER U/S 143(3)/153A IS VOID AB-INITIO. ' '2. 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 I NCOME TAX ACT, 1961. ' '3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER HAS ERRED IN APPLYING A G.P. RATE OF 17% AND THEREBY MAKING TRA DING ADDITION OF RS.7,15,57,073/-.' '4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER HAS ERRED IN MAKING ADDITION OF RS. 31,69,281/- ON ACCOUNT OF AL LEGED UNDISCLOSED PROFIT OF SILVER STAR.' THESE GROUNDS OF APPEAL ARE DECIDED AS UNDER 32 14.1 THE ISSUE RAISED IN FIRST GROUND OF APPEAL HAS BEEN DECIDED IN APPEAL FOR A.Y.2005-06 AND THIS GROUND OF APPEAL HAS BEEN DISMISSED. ON TH E SAME REASONING THIS GROUND OF APPEAL IS DISMISSED HERE ALSO. 14.2 THE 2 ND AND 3 RD GROUNDS BEING REGARDING REJECTION OF BOOKS OF ACCO UNTS U/S 145(3)AND APPLICATION OF G.P. RATE WERE INVOLVED IN A.Y. 2005 -06 WHERE THE REJECTION OF THE BOOKS OF ACCOUNTS U/S 145(3) HAS BEEN UPHELD AND APPLICAT ION OF G.P. RATE OF 15% HAS BEEN SUSTAINED. SIMILAR BEING THE FACTS D URING THE YEAR UNDER CONSIDERATION, ADDITION TO, THE EXTENT OF APPLICATI ON OF G.P. RATE OF 15% IS UPHELD. THE ABOVE G.P. RATE ON A TURNOVER OF RS. 9 7,77,58,373 WILL RESULT IN GROSS PROFIT OF RS.14,66,63,755 WHILE ASSESSEE HAS DECLAR ED G.P. OF RS. 9,46,61,850. THUS, THE TRADING ADDITION OF RS. 5.20,01,906 IS S USTAINED AND BALANCE AMOUNT IS DELETED. 14.3 THE 4 LH GROUND AS REGARDING ADDITION ON ACCOUNT OF UNDISCL OSED PROFIT OF SILVER STARUNIT WAS INVOLVED IN THE A.Y. 2005-06 ALSO WHERE THE ADDITIO N ON ACCOUNT OFUNDISCLOSED INCOME FROM THE SILVER STAR UNIT HAS BEEN UPHELD. S IMILAR BEING THE FACTS DURING THE YEAR UNDER CONSIDERATION, THE ADDI TION OF RS. 31,69,281 IS UPHELD. 15.0 IN THE RESULT, ASSESSEE'S APPEAL IS PARTLY ALLOWED. A.Y. 2009-10 . APPEAL NO. 240/2011-2012 16.0 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. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE A SSESSING OFFICER HAS ERRED IN REJECTINGTHE BOOKS OF ACCOUNTS U/S 145(3) OF THE INCOME TAX ACT, 1961. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE A SSESSING OFFICER HAS ERRED IN APPLYING AG.P. RATE OF 17% AND THEREBY MAKING TRADING ADDITION OF RS. 4,21,16,555/-. 4. IN THE. FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER HAS ERRED IN MAKINGADDITION OF RS. 23,19,672/- ON ACCOUNT OF ALL EGED UNDISCLOSED PROFIT OF SILVER STAR. ' THESE GROUNDS OF APPEAL ARE DECIDED AS UNDER 16.1 THE ISSUE RAISED IN FIRST GROUND OF APPEAL HAS BEEN DECIDED IN APPEAL FOR A.Y, 2005- 06 AND THIS GROUND OF APPEAL HAS BEEN DISMISSED. ON THE SAME REASONING THIS GROUND OF APPEAL IS DISMISSED HERE ALSO. 16.2 THE 2 ND AND 3 RD GROUNDS BEING REGARDING REJECTION OF BOOKS OF ACCO UNTS U/S 145(3) AND APPLICATION OF G.P. RATE WERE INVOLVED IN A.Y. 2005 -06 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, ADDITION TO THE EXTENT OF APPLICATION OF G.P. RATE OF 15% IS UPHELD. THE SALE FIGURE ADOPTED BY THE A.O. ON THE BASIS OF MONTHLY SALES STATEMENT OF ALL UNITS REFERRED TO IN THE ASSESSMENT ORDER OF 107,2 0,33,904 IS HELD TO BE APPROPRIATE AS DISCUSSED IN THE ASSESSMENT ORDER. S O, THE ABOVE G.P. RATE ON A TURNOVER OF RS. 107,20,33,904 WILL RESULT IN GROSS PROFIT OF RS. 16,08,05,085 WHILE 33 ASSESSEE HAS DECLARED G.P. OF RS. 14,01,29,208. TH US, THE TRADING ADDITION OF RS. 2,06,75,877 IS SUSTAINED AND BALANCE AMOUNT IS DELE TED. 16.3 THE 4 GROUND AS REGARDING ADDITION ON ACCOUNT OF UNDISCLOSED PROFIT OF SILVER STAR UNIT WAS INVOLVED IN THE A.Y. 2005-06 ALSO WHERE THE ADD ITION ON ACCOUNT OF UNDISCLOSED INCOME FROM THE SILVER STAR UNIT HAS BEEN UPHELD. S IMILAR BEING THE FACTS DURING THE YEAR UNDER CONSIDERATION, THE ADDITION OF ?23,19,67 2 IS UPHELD. 17.0 IN THE RESULT, ASSESSEE'S APPEAL IS PARTLY ALL OWED. 2.7 BEFORE US, BOTH THE PARTIES WHO ARE AGGRIEVED B Y THE ORDER OF THE LD. CIT(A) HAVE COME IN APPEAL AND HAVE REITERATED THEIR EARLIER AR GUMENTS. THE LD. AR FILED THE WRITTEN SUBMISSION IN ADDITION TO HIS PAPER BOOK. WE EXTRAC T AND INCORPORATE THE ASSESSEE'S WRITTEN SUBMISSION FROM PAGE NO 3 TO PAGE 20 AS UNDER: ASSESSEE'S GROUND NO. 1 :- THAT THE ORDER PASSED BY THE LEARNED ASSESSING OFFI CER U/S 143(3)/ 153A IS VOID AB- INITIO. 1. NO JUSTIFICATION FOR ACTION U/S 153A IN THE CASE OF THE ASSESSEE SEARCH AND SEIZURE OPER ATION TOOK PLACE U/S 132(1) ON 20.05.2009. AS MENTIONED IN THE ASSESSMENT ORDER ON PAGE 2 THE BACKGROUND OF THE SEARCH WAS THAT IN FINANCIAL YEAR 2007-08 DURING T HE COURSE OF SURVEYS CONDUCTED BY THE BCTT WING OF THE DEPARTMENT IT TRANSPIRED TH AT THE ASSESSEE WAS OBTAINING LARGE AMOUNT OF PURCHASE BILLS OF JEWELLERY FROM VI JAY GROUP AND LALWANI GROUP WITHOUT ANY ACTUAL DELIVERY OF GOODS AND SIMILARLY WAS ISSUING SALE BILLS WITHOUT ANY ACTUAL DELIVERY. IN THE COURSE OF SEARCH THE SA ME THING WAS NOTICED. THUS IN A WAY NOTHING WAS FOUND IN SEARCH AND WHAT WAS FOUND WAS ALREADY IN THE KNOWLEDGE IN THE DEPARTMENT. THE FACT OF RECEIVING AND ISSUIN G BOGUS VOUCHERS OF PURCHASE AND SALES WAS ALREADY IN THE KNOWLEDGE IN THE DEPARTMEN T AS A RESULT OF SURVEYS CONDUCTED BY THE BCTT WING . FURTHER IN THE ASSESSMENTS FOR THE ASSESSMENT YEAR 2005-06 AND 2006-07 IN THE CASE OF THE ASSESSE E THE ISSUE OF BOGUS PURCHASE HAD CROPPED UP AND THESE ASSESSMENTS WERE BEFORE THE CONDUCT OF SEARCH. IN VIEW OF THIS IN THIS CASE NOTHING ADDITIONAL WA S FOUND IN THE SEARCH WARRANTING AND JUSTIFYING ACTION U/S 153A. THIS IS SO HELD IN THE CASE OF SHIBHU SOREN VS ACIT (2011) 47 SOT 331 (DEL). IT IS FURTHER HELD IN THE CASE OF SARAYA INDUSTRIES LTD. VS. UNION OF INDIA (2008) 216 CTR 2 57 (DEL) THAT SEIZURE MUST BE OF SUCH A CHARACTER SO AS TO PERSUADE THE ASSESSING OFFICER FOR ACTION U/S 153. THUS THE FOUNDATION OF PROCEEDINGS U/S 153A IN THE CASE OF THE ASSESSEE IS BAD IN LAW. THE ASSESSMENT FRAMED DESERVES TO BE QUASHED. 2. PRINCIPLE OF NATURAL JUSTICE VIOLATED 34 SECONDLY, THE LEARNED ASSESSING OFFICER HAS UTILIZE D THE STATEMENT OF SHRI K.K. AMERIA, SHRI RAGHU DUTT TIWARI AND SHRI PAWAN KUMAR KHANDELWAL WHICH WERE RECORDED DURING THE COURSE OF SEARCH. THEIR STATEME NTS HAVE BEEN QUOTED AT LENGTH IN THE ASSESSMENT ORDER AND THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED ON THAT BASIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSEE HAD REQUESTED FOR CROSS EXAMINATION OF THESE PERSONS BUT THE SAME WAS NOT A LLOW. ON THE CONTRARY THE LEARNED ASSESSING OFFICER HAS STATED ON PAGE 34 PAR A 26 THAT SHRI K.K. AMERIA WAS A DIRECTOR AND HENCE BEING THE OWNER HIS CROSS EXAM INATION WAS NOT NECESSARY. IN THE VIEW OF THE LEARNED ASSESSING OFFICER HE WAS RE PRESENTING THE COMPANY. IN RESPECT OF THE TWO OTHER EMPLOYEES SHRI RAGHU DUTT TIWARI AND SHRI PAWAN KUMAR KHANDELWAL THE LEARNED ASSESSING OFFICER HAS OBSERV ED THAT IT WAS FOR THE ASSESSEE TO PRODUCE THEM. THUS THE LEARNED ASSESSING OFFICER HAS SHIFTED HIS JOB TO THE ASSESSEE ILLEGALLY AND UNLAWFULLY. SHRI AMERIA IS A DIRECTOR OF THE COMPANY BUT IN THE CAPACITY OF AN EMPLOYEE. HE IS NOT THE OWNER OF THE COMPANY AND CANNOT BE SAID THAT HE WAS REPRESENTING COMPANY IN TOTO. THE COMPA NY IS NOT BOUND BY THE STATEMENT UNLESS SO AUTHORIZED. MORE SO HE HIMSELF HAS RETRACTED FROM HIS STATEMENT AND AS SUCH NO RELIANCE COULD BE PLACED ON A STATEM ENT RECORDED AT THE WEE HOURS UNDER THREAT AND DURESS. IN ANY CASE HIS CROSS EXAM INATION WAS MUST. THE LEARNED ASSESSING OFFICER IS CONFUSED. EVEN IN THE CASE OF AN ASSESSEE INDIVIDUAL IF HIS STATEMENTS ARE RECORDED THE OPPORTUNITY OF CROSS EX AMINATION IS ALLOWED IN SUCH A CASE ALSO. SO EVEN IF THE LEARNED ASSESSING OFFICER TREATED SHRI AMERIA AS DIRECTOR REPRESENTING THE COMPANY EVEN THEN THE OPPORTUNITY OF CROSS EXAMINATION IS A MUST. THEREFORE IN THE ABSENCE OF CROSS EXAMINATION OF TH ESE PERSONS THE ASSESSMENT PROCEEDING STAND VITIATED. THE ASSESSEE WAS NOT ALL OWED A FAIR PLAY. THE PRINCIPLES OF NATURAL JUSTICE STAND VIOLATED. IT IS SETTLED PR INCIPLE OF LAW THAT THE ASSESSING OFFICER CANNOT UTILIZED ANY MATERIAL OR DOCUMENT WI THOUT AFFORDING ANY OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE. THEREFORE ALS O THE ASSESSMENT ORDER NEEDS TO BE QUASHED. SIMILARLY THE LEARNED ASSESSING OFFICER HAS UTILIZED THE INFORMATION GATHERED FROM BCTT WING DURING THE COURSE OF SURVEY S CONDUCTED BY IT WITHOUT SUPPLYING THE SAME TO THE ASSESSEE. THE FOLLOWING C ASE LAW IS QUOTED IN SUPPORT (A) CIT VS. S.M. AGARWAL (2007) 211 CTR 180 (DEL) 'THE SEIZED DOCUMENTS HAVE NO PROBATIVE VALUE WITHO UT EXAMINATION OF THE WRITER THEREOF. IT IS WELL SETTLED THAT THE ONL Y PERSON COMPETENT TO GIVE EVIDENCE ON THE TRUTHFULNESS OF THE CONTENTS OF THE DOCUMENTS IS THE WRITER THEREOF. SO UNLESS AND UNTIL THE CONTENTS OF THE DO CUMENT ARE PROVED AGAINST A PERSON THE POSSESSION OF THE DOCUMENT BY ITSELF CANNOT PROVE THE CONTENT OF THE DOCUMENT.' IN THIS CASE THE ADDITIONS WERE DELETED ON THE GROU ND THAT THE WRITER OF THE DOCUMENT WAS NOT SUBJECTED TO THE EXAMINATION. THE RATIO OF THIS CASE IS FULLY APPLICABLE TO THE FACTS OF THE CASE. THE LEAR NED ASSESSING OFFICER HAS NOT MADE ANY EFFORT TO VERIFY THE CONTENTS OF THE D OCUMENTS AND ALSO NOT TRIED TO FIND OUT THE WRITER THEREOF OR EXAMINED HI M. (B) MOHD. USIF AIR 1968 BOMBAY 112; (C) RAMJI DAS DAYA WALA & SONS VS. INVERT IMPORT AIR 19 81 SUPREME COURT 2085 35 THE RATIO OF THE AFORESAID CASES IS FULLY APPLICABL E TO THE FACTS OF THE CASE. IN VIEW OF THIS THE ASSESSMENT FRAMED DESERVES TO BE QUASHED. THE LEARNED ASSESSING OFFICER HAS GIVEN HIS FINDING WHILE REJECTING THE GROUND OF THE ASSESSEE IN PARA 5.4 ON PAGE 4 OF THE APPELLATE ORD ER AND HE MENTIONED THAT THE CASE LAW GIVEN BY THE ASSESSEE ARE NOT APPLICABLE. FOR THE C ASE OF SIBU SOREN VS. ACIT REPORTED IN 47 SOT 331 THE LEARNED CIT(A) MENTIONED THAT THIS W AS ASSESSMENT U/S 158BA(2) UNDER CHAPTER XIV OF THE INCOME TAX ACT, 1961 WHEREAS THE PRESENT ASSESSMENT IS UNDER SECTION 153A OF THE INCOME TAX ACT, 1961. IN THIS REGARD OU R SUBMISSION IS THAT THE MAIN PROVISIONS REGARDING SEARCH ASSESSMENTS ARE SAME TH EN THE DECISIONS ARE APPLICABLE. THE DECISION IN THE CASE OF CIT VS S.M. AGARWAL 293 ITR 43 (DEL) IS ALSO NOT APPLICABLE BECAUSE OF THE ADDITIONS ARE NOT BASED ON DUMB DOCU MENT. OUR CASE IS SAME THAT THE ASSESSEE IS CLAIMING ALL THE DOCUMENTS SEIZED DURIN G THE COURSE OF SEARCH ARE DUMB DOCUMENT. THEREFORE THE CLAIM OF THE ASSESSEE IS CORRECT AND THE GROUND DESERVES TO BE ACCEPTED. DEPARTMENTAL GROUND NO. 1 & 2: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) AJMER, HAS ERRED IN REDUCING THE TRADING ADDITION TO RS. 32,40,627/- AS AGAINST ADDITION OF RS. 60,94,433/- MADE BY THE ASSESSING OFFICER AND THUS ALLOWING RELIEF O F RS. 28,53,806/- THROUGH THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) HAS BEEN CONFIRMED BY HIM. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) AJMER, HAS ERRED IN NOT APPRECIATING THE REASONABLENESS OF GP RATE OF 17% A DOPTED BY THE ASSESSING OFFICER BASED ON THE PECULIAR MODUS OPERANDI OF OBTAINING BOGUS P URCHASES BILLS BEING ADOPTED BY THE ASSESSEE, WHICH HAS BEEN CONFIRMED BY SHRI KHUSHI K UMAR AMERIYA, ONE OF THE DIRECTORS FROM WHOSE CUSTODY LISTS OF 271 PARTIES INDULGED IN ISSUING BOGUS SALE BILLS TO VARIOUS CONCERNS WERE FOUND COUPLED WITH THE FACT THAT ON T HE GROUP CONCERNS M/S GUPTA EMERALD MINES PVT LTD (GEMPL) DOING SAME BUSINESS HAS DECLA RED GP RATE OF 17.98% IN ASSESSMENT YEAR 2009-10. ASSESSEE'S GROUND NO. 2 & 3:- IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEAR NED CIT(A) HAS ERRED IN UPHELD THE ACTION OF THE LEARNED ASSESSING OFFICER IN REJECTIN G THE BOOKS OF ACCOUNTS U/S 145(3) OF THE INCOME TAX ACT, 1961. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEAR NED CIT(A) HAS ERRED IN SUSTAINING THE TRADING ADDITION OF RS. 32,40,627/- BY APPLYING GP RATE OF 15%. THE LEARNED ASSESSING OFFICER HAS ESTIMATED THE GP RATE OF THE ASSESSEE AT 17% AGAINST DECLARED GP RATE ON THE BASIS OF GP RATE DECLARED B Y THE ONE OF THE ASSESSEE GROUP COMPANY M/S GUPTA EMERALD MINES PVT LTD. FOR ASSESSMENT YEA R 2009-10 WHICH WAS NOT 36 COMPARABLE WITH THE ASSESSEE'S COMPANY'S CASE. HOWE VER THE DETAILED SUBMISSION 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. THE COMPANY HAS SEPARATE MAI N FOUR UNITS WORKING AT DIFFERENT LOCATIONS IN JAIPUR BESIDES OTHER BRANCHE S AT MUMBAI AND OTHER PLACES IN VARIOUS PARTS OF INDIA. SEPARATE BOOKS OF ACCOUNTS ARE MAINTAINED FOR THESE UNITS. THE FOUR UNITS WORKING AT JAIPUR ARE NAMED AS GEM U NIT, SILVER STAR UNIT, JEWELLERY DIVISION AND NAZAMI DIVISION. COMPLETE BOOKS OF ACC OUNTS HAVE BEEN MAINTAINED DURING THE COURSE OF BUSINESS. THE ASSESSEE IS MAIN TAINING ALL THE BOOKS OF ACCOUNTS INCLUDING CASH BOOK, BANK BOOKS, JOURNAL BOOK, LEDG ER, BILLS & VOUCHER 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 ACC OUNTING. THE BOOKS OF ACCOUNTS ARE AUDITED U/S 44AB OF THE INCOME TAX ACT, 1961 AN D AUDIT REPORT WAS SUBMITTED ALONG WITH THE RETURN OF INCOME. THE AUDITORS HAVE NOT MADE ANY ADVERSE REMARKS REGARDING THE MAINTENANCE OF THE BOOKS OF ACCOUNTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALL THESE 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 REJE CTING THE BOOKS ACCOUNTS. APPELLATE ORDER OF ITAT DOES NOT ABATE U/S 153A IT IS SUBMITTED AT THE OUTSET IN THE CASE OF THE AS SESSEE ASSESSMENT FOR THE ASSESSMENT YEAR 2005-06 ALREADY STOOD COMPLETED U/S 143(3) AND EVEN APPEAL UPTO THE STAGE OF ITAT STOOD DECIDED. THE PROVISIONS OF SECTION 153A DO NOT ABATE THE ORDER OF APPEALS. IN VIEW OF THIS ONLY ADDITIONAL I SSUES NOT COVERED IN THE ORIGINAL ASSESSMENT AND WHICH ARISE ON ACCOUNT OF MATERIAL F OUND DURING SEARCH COULD BE CONSIDERED IN THE ASSESSMENT U/S 153A. IN THIS CASE THE ISSUE OF BOGUS PURCHASES STOOD CONSIDERED IN THE ORIGINAL ASSESSMENT AND AS A RESULT OF THAT HIGHER GP RATE WAS APPLIED BY THE LEARNED ASSESSING OFFICER AND FI NALLY THE HONBLE ITAT CONFIRMED AN ADDITION OF RS. 1 LAC. THESE FACTS ARE MENTIONED IN THE BODY OF THE ASSESSMENT ORDER ON PAGE 36. HENCE THE SAME ISSUE C OULD NOT BE RECONSIDERED WHILE FRAMING THE ASSESSMENT U/S 153A. TO THAT EXTENT THE ORDER FRAMED BY THE LEARNED ASSESSING OFFICER IS VITIATED AND TRADING ADDITIONS MADE ARE ILLEGAL, UNLAWFUL AND UNJUSTIFIED. NOTWITHSTANDING THIS SUBMISSION THE AD DITION IS CHALLENGED ON THE FOLLOWING GROUND ALSO. 2. BCTT SURVEY RESULTS NOT PROVIDED TO THE ASSESSEE IN THE ASSESSMENT ORDER THE LEARNED ASSESSING OFFIC ER HAS REFERRED TO SURVEYS CONDUCTED BY BCTT WING OF THE DEPARTMENT IN FINANCI AL YEAR 2007-08 IT IS MENTIONED IN THE ASSESSMENT ORDER THAT DURING THE C OURSE OF SURVEYS IT WAS GATHERED THAT ASSESSEE WAS OBTAINING BOGUS BILLS AND VIJAY G ROUP AND LALWANI GROUP. BEFORE COMPLETING ASSESSMENT THE ASSESSING OFFICER HAS NOT PROVIDED EITHER THE RESULTS OF SURVEYS OR THE STATEMENT OF SHRI ANIL KUMAR LALWANI AND OTHERS SO THAT ASSESSEE COULD FURNISH HIS DEFENSE. HENCE WHEN THE MATERIAL USED BY THE ASSESSING OFFICER WAS NOT PROVIDED TO BE ASSESSEE, THE ASSESSMENT PRO CEEDINGS BECOME BAD IN LAW. 37 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, SHRI RAGHU DUTT TIWARI AND SHRI PAWAN KUMAR KHANDELWAL HAVE BEEN QUOTED AT LENGTH. THE ASSESSEE HAS ALREADY CHA LLENGED 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 PURCHAS ES (BOGUS) WERE OBTAINED AFTER MAKING PAYMENT OF COMMISSION FROM 65 PAISA TO RUPEE 1. (PAGE 22 OF THE ASSESSMENT ORDER WHERE STATEMENT OF SHRI RAGHU DUTT TIWARI IS REPRODUCED). SIMILARLY THE ASSESSEE ALSO GOT A SIMILAR COMMISSIO N ON ISSUING SUCH BOGUS SALE BILLS. IN OTHER WORDS THE ASSESSEE WAS NOT EARNING ANYTHING IN THE PROCESS OF OBTAINING BOGUS PURCHASE VOUCHERS AND ISSUING SALE VOUCHERS. THE ONLY BENEFIT WHICH THE ASSESSEE DERIVED WAS BANKING CREDIT FACIL ITY ON THE BASIS OF INCREASE TURNOVER. THIS FINDS SUPPORT FROM THE STATEMENT OF SHRI K.K. AMERIA RELIED UPON BY THE LEARNED ASSESSING OFFICER. THIS IS QUOTED IN PA RA 7 ON PAGE 2 OF THE ASSESSMENT ORDER. THE ASSESSEE COULD INCREASE HIS TURNOVER IN THE PROCESS OF ALLEGED BOGUS PURCHASE VOUCHERS AND BOGUS SALE VOUCHERS. THEREFOR E THE ENTIRE EXERCISE OF THE LEARNED ASSESSING OFFICER IS OF NO AVAIL. THERE IS NO IOTA OF EVIDENCE OR ANY MATERIAL BROUGHT ON RECORD BY THE LEARNED ASSESSING OFFICER WHICH SUGGESTS THAT ASSESSEE EARNED IN THE AFORESAID PROCESS OF BOGUS V OUCHERS. THE LEARNED ASSESSING OFFICER HAS NOT CONDUCTED ANY POST SEARCH INQUIRIES WHICH MAY ALSO SUPPORT THE FINDING OF THE LEARNED ASSESSING OFFICER OF EARNING HIGHER PROFITS BY THE ASSESSEE BY WAY OF OBTAINING BOGUS PURCHASE VOUCHERS AND ISS UING BOGUS SALE VOUCHERS. THUS THERE WAS NO JUSTIFICATION OF THE LEARNED ASSE SSING OFFICER FOR TAKING U/S 153 IN THE CASE AND SUBSEQUENTLY COMPLETING THE ASSESSM ENT BY MAKING ADDITION OF RS. 60,94,433/-. 4. SANJAY OIL CASE INDUSTRIES VS. CIT 10 DTR 153 (GUJ) CASE IS NOT APPLICABLE THE LEARNED ASSESSING OFFICER HAS REFERRED THE AFOR ESAID CASE LAW ON PAGE NO. 36 OF THE ASSESSMENT ORDER. IT IS SUBMITTED THAT THE RATI O OF THIS CASE HAS NOT BEEN FOUND APPLICABLE IN THE CASE OF THE ASSESSEE IN ASSESSMEN T YEAR 2006-07 WHEREIN ADDITION WAS MADE BY DISALLOWING 25% OF THE BOGUS PURCHASES TO THE TUNE OF RS. 5.40 CRORES. IN THE FIRST APPEAL ITSELF THE LEARNED CIT(A) DIREC TED TO APPLYING GP RATE OF 8.5% AS AGAINST 7.40% DISCLOSED BY THE ASSESSEE. IT IS FURT HER SUBMITTED THAT AS MENTIONED BY THE LEARNED ASSESSING OFFICER IN THE ASSESSMENT ORD ER ON PAGE NO. 36 THAT IN ASSESSMENT YEAR 2005-06 THE ISSUE OF BOGUS PURCHASE S 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 LATER 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 APPLIED WAS 12.79%. THE ABOVE FACTS THE GP RATE FOR THE ASSESSMENT YEAR 2005-06 VIRTUALLY STOOD ACCEPTED BY THE HONBLE ITAT DESPITE REJECTION OF B OOKS OF ACCOUNTS. IN THESE CIRCUMSTANCES NO ADDITION WAS WARRANTED DURING THE YEAR UNDER CONSIDERATION ALSO. THE SAME ISSUE COULD NOT BE RECONSIDERED BY THE LEA RNED ASSESSING OFFICER IN THE ABSENCE OF ANY ADDITIONAL EVIDENCE. 38 5. HISTORY OF THE CASE IS THE BEST GUIDANCE SINCE THE ASSESSMENT YEAR 2005-06 ALREADY STOOD COM PLETED U/S 143(3) AND ISSUE OF GP RATE ON ACCOUNT OF BOGUS PURCHASE VOUCHERS STOOD FINALLY DECIDED BY THE HONBLE ITAT THE LEARNED ASSESSING OFFICER WAS NOT WITHIN HIS POWERS TO THE RECONSIDER AND RE-DECIDE THE ISSUE. THE ORDER OF TH E HONBLE ITAT DOES NOT ABATE U/S 153. HENCE THE ADDITION MADE BY THE LEARNED ASS ESSING OFFICER IS ILLEGAL AND UNJUSTIFIED. 6. NO BASIS OF APPLICATION OF GP RATE OF 17% IT IS FURTHER SUBMITTED THE ENTIRE FACTS FOR THE AS SESSMENT YEAR 2005-06 AND 2006-07 HAVE BEEN DISCUSSED BY THE LEARNED ASSESSING OFFICE R IN THE BODY OF THE ASSESSMENT ORDER ON PAGE 36. IN THESE ASSESSMENT YEARS THE GP RATE ACCEPTED BY THE DEPARTMENT IS 12.79% IN ASSESSMENT YEAR 2005-06 AND 8.5% IN ASSESSMENT YEAR 2006-07. DESPITE ALL THIS THE LEARNED ASSESSING OFF ICER HAS APPLIED GP RATE OF 17% WITHOUT BRINGING ANY ADDITIONAL MATERIAL ON RECORD. NO COMPARABLE CASE HAS BEEN CITED. IN VIEW OF THIS THE TRADING ADDITION MADE BY THE LEARNED ASSESSING OFFICER DESERVES TO BE KNOCKED DOWN. THE FOLLOWING TABLE RE FLECTS THE TRADING RESULTS OF THE ASSESSEE IN ASSESSMENT YEAR 2004-05, 2005-06 & 2007 -08 A.Y. TURNOVER GROSS PROFIT G.P. RATE REMARKS 2004-05 19849007 3193228 16.08% -- 2005-06 142690358 18162927 12.72% 12.79% ACCEPTED BY THE ITAT 2006-07 546642847 40452067 7.40% 8.5% APPLIED BY THE LEARNED CIT(A) THE PERUSAL OF THE AFORESAID TABLE REVEALS THAT THE RESULT SHOWN IN ASSESSMENT YEAR 2005-06 STAND FINALLY DECIDED BY THE HONBLE ITAT. NO RECONSIDERATION WAS CALLED FOR. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE SUBM ITTED DETAILED REPLY AND FILED ADDITIONAL SUBMISSION IN THIS REGARD. THE LEARNED C IT(A) HAS SPECIFICALLY ASKED TO THE ASSESSEE THAT WHY THE CASE OF M/S GUPTA EMERALD MIN ES PVT LTD FOR ASSESSMENT YEAR 2009- 10 IS NOT APPLICABLE FOR APPLICATION OF GP RATE. TH EN THE ASSESSEE SUBMITTED THE REPLY THAT - 'IT IS SUBMITTED THAT THE LEARNED ASSESSING OFFICER HAS ELECTED GROSS PROFIT RATE OF 17% DISCLOSED IN THE CASE OF M/S GUPTA EMERALD MINES PR IVATE LIMITED IN ASSESSMENT YEAR 2009-10 AND HAS APPLIED THE SAME IN ALL THE OTHER C ASES OF THE GROUP. IN THIS REGARD THE LEARNED ASSESSING OFFICER HAS NOT BROUGHT ANY MATER IAL ON RECORD TO ESTABLISH THAT ALL THE CASES ARE COMPARABLE WITH THE CASE OF M/S GUPTA EME RALD MINES PRIVATE LIMITED. THE LEARNED ASSESSING OFFICER HAS MORE OR LESS ACTED IN A MECHANICAL MANNER IN APPLYING THE GP RATE OF 17% IN ALL THE OTHER CASES. THE ACTION O F THE LEARNED ASSESSING OFFICER IS TOTALLY 39 ARBITRARY. THE FOLLOWING TABLE WILL HIGHLIGHT THAT THE CASE OF M/S GUPTA EMERALD MINES PRIVATE LIMITED IS NOT COMPARABLE WITH THAT OF M/S CLARITY GOLD PRIVATE LIMITED. THE FACTS ARE DIFFERENT AS HIGHLIGHTED TABLE BELOW SR.NO. FACTS OF M/S GUPTA EMERALD MINES PRIVATE LIMITED FACT OF M/S CLARITY GOLD PRIVATE LIMITED AND OTHER CASES OF THE GROUP 1. THE GP RATE DISCLOSED FOR ASSESSMENT YEAR 2009-10 OF 17.98% IS AN EXCEPTION, NO SUCH GP RATE WAS DISCLOSED IN EARLIER YEARS. THE GP RATE IN EARLIER YEARS IN ASSESSMENT YEAR 2007-08 & 2008- 09 IS OF 4.39% AND 4.66%. DURING THE ASSESSMENT YEAR 2009-10 HIGHER GP RATE WAS A RESULT OF ABNORMAL INCREASE IN THE PRICE OF TANZANITE WHICH IS NOT A COMPARABLE FEATURE WITH OTHER CASES. IN THIS CASE AND OTHER CASES OF THE GROUP THERE IS NO BUSINESS OF TANZANITE, HENCE THE GP RATE OF 17% WAS NOT APPLICABLE. 2. THE PARTICULAR EXAMPLE TAKEN BY THE DEPARTMENT FOR ASSESSMENT YEAR 2009-10 IS NOT COMPARABLE WITH THE OTHER GROUP CASES BECAUSE M/S GUPTA EMERALD MINES PRIVATE LIMITED HAS DECLARED LOSSES IN EARLIER YEARS AND GP RATE OF 4.39% AND 4.66% HAS BEEN DECLARED IN ASSESSMENT YEAR 2007-08 & 2008- 09 RESPECTIVELY WHEN THE BUSINESS ACTIVITIES WERE VERY NORMAL. THIS ESTABLISHES THAT THE ABNORMAL GP RATE IN ASSESSMENT YEAR 2009-10 WAS ONLY DUE TO SUDDEN AND UNEXPECTED ABNORMAL PRICE HIKE OF TANZANITE. IN THE CASE OF M/S CLARITY GOLD THE GP RATE IN EARLIER YEARS IS 8.45% & 9.68% FOR ASSESSMENT YEAR 2007-08 & 2008-09 RESPECTIVELY. THE GP RATE DISCLOSED HERE ARE BETTER IN COMPARISON TO M/S GUPTA EMERALD MINES PRIVATE LIMITED. THIS ESTABLISHES THE FACT THAT THE COMPANIES HAVE DISTINCT CHARACTER AND BUSINESS ACTIVITY AND ARE NOT COMPARABLE AT ALL. THE COMPARISON MADE BY THE LEARNED ASSESSING OFFICER WAS MOST UNFORTUNATE AND UNCALLED FOR. 3. THE MAIN BUSINESS IN THIS CASE IS OF PRECIOUS STONES. IN THESE CASES THE BUSINESS HAS BEEN OF SEMI PRECIOUS STONES. HENCE THE CASES ARE NOT COMPARABLE. 4. THE TURNOVER IS ONLY OF RS. 72,05,870/-. THE TURNOVER IN THE CASE OF M/S CLARITY GOLD PRIVATE LIMITED FOR THE SAME PERIOD IS OF RS. 1,03,06,27,271/-. THE TURNOVER IN THE CASE IS MORE THAN 100 TIMES. HENCE BOTH THE CASES DO NOT STAND ON THE SAME FOOTING AND ARE THEREFORE NOT COMPARABLE. THUS THE ABOVE FACTORS ESTABLISH THAT THE CASES ARE NOT COMPARABLE AND THE LEARNED ASSESSING OFFICER ERRED IN LAW AND FACT IN APPLYING GP RATE OF 17% OF M/S GUPTA EMERALD 40 MINES PRIVATE LIMITED IN REST OF THE CASES OF THE G ROUP. SUCH ADDITIONS MADE ON THE BASIS OF THE GP RATE DESERVE TO BE DELETED.' BUT THE LEARNED CIT(A) HAS PARTLY ACCEPTED THE CONT ENTION OF THE ASSESSEE AND HAS ONLY REDUCED THE GP RATE BY 2% WHICH IS 15% BUT AGAIN TH ERE IS NO BASIS FOR APPLYING THE GP RATE OF 15% SPECIALLY WHEN THE COMPLETE BOGUS PURCH ASES AND BOGUS SALES ARE IDENTIFIABLE AND THE ACTUAL PROFIT OF THE COMPANY WAS FOUND RECO RDED IN THE SHAPE OF PEN DRIVE IN THE NAME OF M/S SILVER STAR UNIT. THE WHOLE ADDITION ON THIS ACCOUNT DESERVES TO BE DELETED. ASSESSEE'S GROUND NO. 4:- IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEAR NED CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 18,26,339/- ON ACCOUNT OF ALLEGED U NDISCLOSED PROFIT OF SILVER STAR. THE LEARNED ASSESSING OFFICER HAS MADE THE ADDITION WITH REFERENCE TO PAN DRIVER REPORTED TO HAVE BEEN MAINTAINED BY SHRI RAGHU DUTT TIWARI. WHILE MAKING THE ADDITION FOLLOWING OBSERVATION IN PARA 17 OF THE ASSESSMENT ORDER (A) THAT THE TRANSACTION OF PURCHASE AND SALES MADE IN CASH ARE DIFFERENT THAN THOSE FROM THE REGULAR BOOKS. (B) ALL THE TRANSACTIONS REPRESENT UNDISCLOSED INCO ME. THE LEARNED ASSESSING OFFICER HAS MADE THE ADDITION UNILATERALLY WITHOUT PROVIDING THE PRINTOUT FROM THE PAN DRIVE, WITHOUT PROVIDING HOW THE INCOME WAS CALCULATED. IN THE ABSENCE OF THESE THE DETERMINATION OF INCOME FROM S ILVER STAR IS WITHOUT ANY JUSTIFICATION. THE ASSESSEE HAS ALREADY CHALLENGED THAT ALL THE AD DITION MADE ON THE BASIS OF STATEMENT OF ALL THE THREE PERSONS INCLUDING SHRI RAGHU DUTT TIW ARI AS NO CROSS EXAMINATION WAS ALLOWED. IN VIEW OF THIS THE ENTIRE EXERCISE BY THE LEARNED ASSESSING OFFICER IS WITHOUT ANY BASIS. THE MOST SURPRISING THING IS THAT THE LEARNE D ASSESSING OFFICER HAS CHOOSE THE BENEFICIAL PART OF THE STATEMENT IN FAVOUR OF REVEN UE AND THE OTHER PART OF THE STATEMENT WAS NOT CONSIDERED BY THE DEPARTMENT. THE STATEMENT REG ARDING PROFITS OF SILVER STAR UNIT IS DISCUSSED IN PARA 17 ON PAGE 26 OF THE ASSESSMENT O RDER. THE LEARNED ASSESSING OFFICER DID NOT GIVEN ANY CONSIDERATION TO THE STATEMENT OF SHR I RAGHU DUTT TIWARI ACCOUNTANT OF THE ASSESSEE. IN REPLY TO QUESTION NO. 14 SHRI RAGHU DU TT TIAWARI HAS STATED HIS REPLY WHICH IS REPRODUCED ON PAGE NO. 22 OF THE ASSESSMENT ORDER. THEREFORE WHEN THE PROFIT OF ACTUAL BUSINESS IS AVAILABLE AND THE DECLARED PROFIT IS EQ UAL TO ACTUAL PROFIT NO ADDITION SHOULD BE MADE SEPARATELY ON THIS ACCOUNT OR SET OFF OF DECLA RED PROFIT SHOULD BE GIVEN. 41 THE ASSESSEE HAS BEEN CONSISTENTLY ARGUING THAT EVE N IF THE THEORY OF LEARNED ASSESSING OFFICER IS ACCEPTED OF MAKING BOGUS PURCHASE AND SA LES AND THE STATEMENT OF THE AFORESAID PERSONS ARE TAKEN TO BE TRUE EVEN THEN THE RESULTAN T INCOME ON ACCOUNT OF SUCH TURNOVER WOULD BE NIL. THE COMMISSION PAID FOR OBTAINING THE BOGUS VOUCHERS OR PURCHASE AND THE COMMISSION RECEIVED ON BOGUS SALE VOUCHERS IS ALMOS T THE SAME. THE ASSESSEE DID NOT GAIN ANYTHING. THE ONLY BENEFIT WAS THAT ON INCREASE TUR NOVER BETTER CREDIT FACILITY WAS AVAILABLE FROM THE BANK. SO IN THE PROCESS OF INCREASING THE TURNOVER IN THE BOOKS OF ACCOUNTS THE ASSESSEE HAS INCURRED LOSSES AND THE PROFITS SHOWN IN PEN DRIVE IS ACTUAL PROFIT OF THE WHOLE BUSINESS ACTIVITIES. IT IS FURTHER SUBMITTED THAT THE LEARNED ASSESSING OFFICER HAS NOT GIVEN THE DETAILS THAT HOW THESE TRANSACTION WERE NOT MATCHING WITH THE REGULA R BOOKS AND HOW THESE HAVE BEEN CONSIDERED AS GENUINE AND NOT OF BOGUS PURCHASE AND SALES. IN VIEW OF THIS ALSO THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER OF RS. 18,26, 339/- IS MOST UNJUSTIFIED SPECIALLY WHEN THE ASSESSEE HAS ALREADY DECLARED THE PROFIT O F RS. 17,86,474/- IN THE REGULAR RETURN AND THIS WAS THE REAL PROFIT OF THE COMPANY AS THE BOOKS OF ACCOUNTS ARE NOT REFLECTING TRUE AND CORRECT PROFIT BECAUSE OF BOGUS PURCHASE AND SA LES AND INFLATING THE TURNOVER BY THE ASSESSEE. THE ACTUAL PROFIT EARNED BY THE ASSESSEE WAS ONLY RS. 18,26,339/- OUT OF WHICH RS. 17,86,474/- SHOULD BE REDUCED AS PROFIT DISCLOSED B Y THE ASSESSEE. THE LEARNED CIT(A) ALLEGED THAT THE ASSESSEE HAS NOT FURNISHED THE TRI AL BALANCE AND BALANCE SHEET OF SILVER STAR UNIT. THE ASSESSEE'S CONTENTION IS THAT THE ACTUAL TRANSACTIONS ARE KEPT AND RECORDED IN PEN DRIVE IN THE NAME OF SILVER STAR AND THE PROFIT EAR NED IN SILVER STAR UNIT ARE ACTUAL PROFIT. THEREFORE NO ADDITION SHOULD BE MADE ON THIS ACCOUN T. DEPARTMENTAL GROUND NO. 3:- THE APPELLANT CRAVES THE RIGHT TO AMEND ALTER OR AD D TO ANY OF THE GROUNDS OF APPEAL GIVEN ABOVE. ASSESSEE'S GROUND NO. 5:- THE ASSESSEE CRAVES YOUR INDULGENCE TO ADD AMEND OR ALTER ALL OR ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. NOT PRESSED. YOUR HONOR IS REQUESTED TO DECIDE THE APPEAL IN FAV OUR OF THE ASSESSEE BY CONSIDERING THE ABOVE SUBMISSION AND OBLIGE. 2.7 PER CONTRA, THE LD DR HAS REPEATED ALL THE REA SONS GIVEN BY THE AO TO MAKE THE IMPUGNED ADDITION. 2.8 AFTER CONSIDERING THE RIVAL SUBMISSIONS AND GOI NG THROUGH THE RECORDS, WE HAVE FOUND THAT THE IMPUGNED ISSUE REGARDING GOLD JEWELL ERY STANDS COVERED BY THE DECISION OF THE TRIBUNAL RENDERED IN ASSESSEE'S OWN CASE ( IN I TA NO. 04/JP/2009 DATED 18-09-2009) ON 42 IDENTICAL FACTS AND THE COPY OF THIS ORDER IS ENCLO SED AT PAGES 272 TO 276 OF THE ASSESSEE'S PAPER BOOK. WE HAVE GONE THROUGH THIS TRIBUNAL ORDE R DATED 18-09-2009 (SUPRA) AND WE ARE CONVINCED THAT THE FACTS OF THIS CASE ARE EXACTLY I DENTICAL TO THE FACTS IN THE PRESENT APPEAL. THE TRIBUNAL HAS TAKEN THE FOLLOWING VIEW IN ITS OR DER. 4. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND SUB STANCE IN THE CONTENTION OF THE LD. A/R TO THIS EXTENT THAT AFTER FURNISHING ALL THE NECESSARY INFORMATION AND DETAILS ABOUT THE TRANSACTION AND T HE ABOVE NAMED PARTIES SUPPORTED WITH DOCUMENTS LIKE PURCHASE BILLS ISSUED BY THEM, THEIR REGISTRATION WITH SALES TAX DEPARTMENT AND PANS ISS UED TO THEM BESIDES THIS FACT THAT THE PAYMENT AGAINST THE PURCHASES H AS BEEN MADE TO THEM THROUGH ACCOUNT PAYEE CHEQUES, THE ASSESSEE HAD TRI ED TO ESTABLISH THE GENUINENESS OF THE CLAIMED TRANSACTIONS 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 WOULD HAVE BEEN FOU ND IN EXISTENCE IN THE CLAIMED BUSINESS ON THEIR GIVEN ADDRESS, THE ASSESS EE WOULD HAVE CERTAINLY A GOOD CASE TO SAY THAT IT HAD ESTABLISHED THE GENUIN ENESS OF THE CLAIMED PURCHASES FROM THE ABOVE NAMED 10 PARTIES AS IT IS NOTEWORTHY THAT NONE OUT OF THE SAID 10 PARTIES WAS PRODUCED BEFORE THE A.O. OR FOUND IN EXISTENCE AT THE GIVEN ADDRESS. UNDER SIMILAR CIRCUMSTANCES INIT IALLY WE HAVE GIVEN RELIEF IN CERTAIN CASES ON THE BASIS THAT THE ASSESSEE AS A PRUDENT PURCHASER HAD DISCHARGED ITS ONUS BY FURNISHING NECESSARY INFORMA TION ABOUT TRANSACTION AND PARTIES SUPPORTED WITH DOCUMENTS AS DESCRIBED A BOVE BUT IT WAS SURPRISING FOR US TO NOTE IN MOST OF THE LATER CASE S THAT THE PARTIES STATED TO HAVE SOLD THE GOODS TO THE ASSESSEE WERE NEITHER PR ODUCED NOR FOUND AT THEIR GIVEN ADDRESSES. THUS IN SUCH CASES ONLY OPTION LEF T TO US WAS TO ESTIMATE THE PROFIT OF THE ASSESSEE UPHOLDING THE REJECTION OF B OOKS OF ACCOUNT ON THE BASIS THAT ADMITTEDLY THE CLAIMED PURCHASES FROM TH E NAMED PARTIES REMAINED UNVERIFIABLE. LIKEWISE, IN THE PRESENT CASE, THE AB OVE NAMED PARTIES FROM WHOM THE ASSESSEE CLAIMED TO HAVE PURCHASED THE GOO DS WERE NEITHER PRODUCED NOR FOUND IN EXISTENCE IN BUSINESS AT THEI R GIVEN ADDRESSES. THUS THE CLAIMED PURCHASES STATED TO HAVE BEEN MADE FRO M THEM REMAINED UNVERIFIED. THE REJECTION OF BOOKS OF ACCOUNT INVOK ING THE PROVISIONS OF SECTION 145(3), THEREFORE, CANNOT BE TREATED AS UNW ARRANTED AND UNJUSTIFIED. WE UPHOLD THE ACTION OF THE LOWER AUTHORITIES IN TH IS REGARD. HOWEVER, CONSIDERING THESE ASPECTS THAT THERE WAS SUBSTANTIA L GROWTH OF 13.88% IN THE TURNOVER IN COMPARISON TO LAST YEAR, IT CANNOT BE S AID 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 LAST YEAR WAS UNREASONABLE TO JUSTIFY THE TRADING ADDITI ON MADE BY THE A.O. AT RS. 7,91,855/- BY APPLYING G.P. RATE OF 13.28% AND APPL ICATION OF G.P. RATE OF 13% BY THE LD. CIT(A) SUSTAINING THE TRADING ADDITI ON OF RS. 3,99,533/- IN QUESTION. THE A.O. HAD APPLIED G.P. RATE OF 13.28% ON THE DECLARED SALES ON THE BASIS OF WEIGHTED AVERAGE WHICH HAS BEEN CORREC TED BY THE LD. CIT(A) WITH THIS OBSERVATION THAT THE CORRECT WEIGHTED AVE RAGE RATE OF G.P. ACTUALLY COMES TO 13.01% INSTEAD OF 13.28%. CONSIDERING ALL THESE FACTS IN TOTALITY, ESPECIALLY THE OVER ALL RESULT OF THE ASSESSEE IN C OMPARISON TO THE LAST YEAR AND THAT THE ASSESSEE HAD FURNISHED ALL THE NECESSA RY INFORMATION/DETAILS ABOUT THE TRANSACTION AND THE PARTIES SUPPORTED WIT H THE DOCUMENTS AS COULD 43 HAVE BEEN EXPECTED FROM A PRUDENT PURCHASER TO ESTA BLISH THE GENUINENESS OF THE CLAIMED TRANSACTION, WE ARE OF THE VIEW THAT THE LUMP SUM ADDITION OF RS. 1,00,000/- WILL MEET THE ENDS OF JUSTICE TO PLU S THE POSSIBLE LEAKAGE, IF ANY, AS THE CLAIMED PURCHASES REMAINED UNVERIFIED B UT SALES DECLARED HAS NOT BEEN DOUBTED. THE GROUND NO. 1 IS REJECTED AND GROU ND NO. 2 IS PARTLY ALLOWED. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT TH IS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE TRIBUNAL ORDER. BY RESPECTFUL LY FOLLOWING THE ABOVE TRIBUNAL ORDER, WE ALLOW THE APPEAL OF THE ASSESSEE AND DISMISS THE APPEAL OF THE REVENUE ON THIS ISSUE 3.0 IN ALL THE OTHER YEARS ON SIMILAR FACTS EXACTLY IDENTICAL ISSUES HAVE BEEN RAISED. WITH THE FORCE OF SAME AND SIMILAR REASONINGS, WE HAVE M ENTIONED IN THE ASSESSMENT YEAR 2005- 06, WE ALLOW 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 SUSTAIN RS. 1.00 LAC ON ACCOUNT OF ANY SORT OF PILFERAGE. 4.0 IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED AND THAT OF THE REVENUE ARE DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 05-03-2014. SD/- SD/- (N.K. SAINI) (HARI OM MARATHA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 5 TH MARCH 2014 *MISHRA COPY FORWARDED TO:- BY ORDER 1. M/S. CLARITY GOLD (P) LTD., JAIPUR 2. THE ACIT, CENTRAL CIRCLE- 1, JAIPUR 3. THE LD. CIT(A) 4. THE LD. CIT 5. THE DR 6. THE GUARD FILE (IT NO.245/JP/13) A.R., ITAT, J AIPUR