J.K. JEWELLERS INTERNATIONAL, Jaipur V. INCOME TAX OFFICER, WARD-6-2, Jaipur

ITA 29/JPR/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9364 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 07-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI JCIT DHK
• Assessee Lawyers: S L PODDAR
• Keywords: Search and seizure
• Section: 69C

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH B, JAIPUR JH JES'K LH- 'KEKZ] YS[KK LNL; ,O A H JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C. SHARMA, AM & SHRI VIJAY PAL RAO, JM VK;DJ VIHY LA-@ ITA NO. 29/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11. M/S. J.K. JEWELLERS INTERNATIONAL, A-36, GOVINDI, TAKHTESHAHI ROAD, JAWAHAR LAL NEHRU MARG, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 6(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAEFJ 9839 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. PODDAR (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SHRI J.C. KULHARI (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 01.07.2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 02/07/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 26 TH DECEMBER, 2018 OF LD. CIT (A) FOR THE ASSESSMENT YE AR 2010-11. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARN ED AO IN PASSING THE ORDER U/S 148/143(3) OF THE INCOME TAX ACT, 1961. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED CIT (A) HAS ERRED IN SUSTAINING THE LUMP SUM ADDITION O F RS. 10,00,000/- OUT OF RS. 60,79,802/- MADE BY THE LEAR NED AO BY DISALLOWING 25 PERCENT OF TOTAL ALLEGED BOGUS PURCH ASES OF RS. 2,43,19,210/- WITHOUT CONSIDERING THE SUBMISSION OF THE ASSESSEE. 3. THE ASSESSEE CRAVES YOUR INDULGENCE TO ADD AMEND OR ALTER ALL OR ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF H EARING. 2 ITA NO. 29/JP/2019 M/S. JK JEWELLERS INTERNATIONAL, JAIPUR. 2 2. THE ASSESSEE IS A PARTNERSHIP FIRM AND DEALING I N PRECIOUS AND SEMI-PRECIOUS STONES. DURING THE YEAR UNDER CONSIDERATION, THE A O NOTED THAT THE ASSESSEE HAS SHOWN THE PURCHASES FROM 5 (FIVE) PARTIES WHICH WER E SUBJECTED TO SEARCH AND SEIZURE ACTION BY THE INVESTIGATION WING, MUMBAI AN D FOUND TO BE INVOLVED IN PROVIDING BOGUS ENTRY. ACCORDINGLY, THE AO CONSIDE RED THE PURCHASES MADE BY THE ASSESSEE FROM THOSE ENTITIES AS BOGUS/UNVERIFIABLE PURCHASES AND CONSEQUENTLY MADE ADDITION OF 25% OF SUCH PURCHASES AFTER REJECT ION OF BOOKS OF ACCOUNT. THE LD. CIT (A) RESTRICTED THE ADDITION MADE BY THE AO TO L UMP SUM OF RS. 10,00,000/- AS AGAINST THE DISALLOWANCE/ADDITION MADE BY THE AO OF RS. 60,79,802/- ALONG WITH UNACCOUNTED COMMISSION OF RS. 48,638/-. 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL FOR THE ASSESS MENT YEARS 2008-09 AND 2009-10 & 2014-15 VIDE ORDERS DATED 28 TH MARCH, 2018 AND 06.06.2019 RESPECTIVELY. THUS THE LD. A/R HAS SUBMITTED THAT THE TRIBUNAL HAS HEL D THAT ONCE THE BOOKS OF ACCOUNT ARE REJECTED BY THE AO, THEN THE ONLY OPTION WITH T HE AO TO MAKE THE BEST JUDGMENT ASSESSMENT BY ESTIMATING THE INCOME OF THE ASSESSEE ON THE BASIS OF THE AVERAGE GP OF PAST YEARS. THUS THE LD. A/R HAS SUBMITTED THAT THE TRIBUNAL HAS DELETED THE IDENTICAL ADDITION MADE BY THE AO AND PARTLY SUSTAI NED BY THE LD. CIT (A) IN THOSE YEARS. 4. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THE EARLIER DECISIONS OF THIS TRIBUNAL ARE NOT APPLICABLE FOR THE YEAR UNDER CONS IDERATION WHEN THE GP AS WELL AS THE NP DECLARED BY THE ASSESSEE ARE DECLINED DURING THE YEAR UNDER CONSIDERATION. HE HAS FURTHER SUBMITTED THAT THERE WAS NO ISSUE OF DECLINING OF GP AND NP IN THE 3 ITA NO. 29/JP/2019 M/S. JK JEWELLERS INTERNATIONAL, JAIPUR. 3 EARLIER YEARS WHERE THE TRIBUNAL HAS DELETED THE AD DITION MADE BY THE AO. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. IN REJOINDER, THE LD. A/R HAS SUBMITTED THAT THE TRIBUNAL HAS HELD THAT AVERAGE GP OF PAST YEARS IS A PROPER AND REASONABLE BASIS FOR ESTIMATION OF INCOME. THEREFORE, BY CONSIDERING THE GP DECLARED BY THE AS SESSEE IN THE YEAR UNDER CONSIDERATION, NO ADDITION IS REQUIRED EVEN AFTER R EJECTION OF BOOKS OF ACCOUNT. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. SO FAR AS THE ISSUE OF ESTIMATION OF THE I NCOME OF THE ASSESSEE AFTER REJECTION OF BOOKS OF ACCOUNT IS CONCERNED, WE FIND THAT THE SAME HAS BEEN CONSIDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 IN PARA 4 AS UNDER :- 4. WE HAVE HEARD THE LD. DR AS WELL AS THE LD. AR A ND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE REVENUE IS AGGRIEVED BY THE ORDER OF THE LD. CIT(A) IN THE FIRST ROUND OF ASSESSMENT WHEREBY THE ASSESSEE IS A GGRIEVED THE ORDER OF THE LD. CIT(A) IN THE REOPENING OF THE ASSESSMENT. THE ASSE SSEE FIRM IS DERIVING INCOME FROM EXPORT OF PRECIOUS AND SEMI PRECIOUS STONES INCLUDI NG EXPORT OF GOLD AND SILVER JEWELLERY. IN THE ORIGINAL ASSESSMENT PASSED U/S 14 3(3) THE AO DOUBTED THE PURCHASES MADE FROM 12 PARTIES AND WHEN THE ASSESSE E COULD NOT PRODUCE THE SUPPLIERS FOR EXAMINATION, THE AO TREATED THE PURCH ASES TO THE EXTENT OF RS. 1,33,94,163/- AS NOT GENUINE AND DISALLOWANCE THE S AME. ON APPEAL, THE LD. CIT(A) AFTER CONSIDERING THE RELEVANT FACTS AS WELL AS EVI DENCES PRODUCED BY THE ASSESSEE BEFORE THE AO IN SUPPORT OF THE PURCHASES MADE FROM THESE 12 PARTIES HAS ADJUDICATED THE ISSUES IN PARA 2.3 AS UNDER:- 2.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE ISSUE UNDER CONSIDERATION, OBSERVATIONS OF THE AO AND ALSO THE SUBMISSIONS MAD E BY LD. AR IN THIS REGARD. BEFORE GOING INTO THE MERITS OF THE RIVAL S TANDS, THE PRIMARY CLAIM OF THE APPEAL THAT THE PRESENT ISSUE HAS ALREADY BEEN DEALT AND DECIDED BY THE HON'BLE ITAT, JAIPUR BENCH, IN THEIR FAVOUR, IN THE PAST, WAS EXAMINED. ON 4 ITA NO. 29/JP/2019 M/S. JK JEWELLERS INTERNATIONAL, JAIPUR. 4 PERUSAL OF THE RELEVANT ORDERS OF A.Y. 2006-07 & 20 07-08, IT IS TRANSPIRED THAT THE HON'BLE ITAT HAS DELETED THE ADDITION MADE BY THE AO OF ENTIRE OR PART OF SUCH PURCHASES, MADE ALMOST FROM SAME SUPPL IERS, WHICH ARE INVOLVED IN CURRENT YEAR. WHILE GIVING THE RELIEF T O THE APPELLANT, THE HON'BLE BENCH HAS HELD THAT ONCE THE-SALES ARE ACCEPTED THE N THE ADDITION CANNOT BE MADE WHILE TERMING THE CORRESPONDING PURCHASES AS B OGUS IN NATURE. UNDER SUCH CIRCUMSTANCES, THE HON'BLE BENCH HAS LAID DOWN THE PRINCIPLE THAT ANY ADDITION CAN BE MADE, ONLY ON THE BASIS OF THE ADEQ UACY OF THE TRADING RESULTS SHOWN OF CURRENT YEAR VIZ. SHOWN IN THE PAS T PERIOD. WHILE DISPOSING THE APPEAL FOR A.Y. 2006-07, THE HON'BLE ITAT DELET ED THE ADDITION OF ENTIRE PURCHASES MADE U/S 69C OF THE ACT AND RESTRICTED TH E SAME, UP TO THE GAP OF THE HIGHER GP RATIO SHOWN IN THE PAST THEN SHOWN IS THE RELEVANT YEAR. SIMILARLY WHILE DECIDING THE APPEAL OF A.Y. 2007-08 , THE HON'BLE BENCH HAS DELETED THE ADDITION MADE OF 25% OF SUCH PURCHASES. SIMILARLY IN VIEW OF THE FACT THAT THE GP IN THE RELEVANT YEAR WAS OFFERED A T HIGHER SIDE THEN THE PREVIOUS YEAR, THE HON'BLE ITAT MADE ADHOC ADDITION OF RS. 1,00,000/- TO COVER-UP THE DISCREPANCIES FOUND I.R.O. RELEVANT PU RCHASES. WITH THE ABOVE BACKGROUND, IT THE FACTS AND CIRCUMS TANCE OF THE CURRENT YEAR ARE MATCH WITH THE A.Y. 2006-07 & 2007-08, THE Y WOULD BE FOUND IDENTICAL IN ALL MANNERS. SO MUCH, SO THAT MOST OF THE SUPPLIERS OF GOODS ARE COMMON IN BOTH THE ASSESSMENT YEARS AND ALSO THAT T HE GP THE CURRENT YEAR IS BETTER THEN THE LAST YEAR. ACCORDINGLY, WHILE RE SPECTFULLY FOLLOWING THE GUIDELINES AND VERDICT OF THE HON'BLE TRIBUNAL, IT IS HELD THAT THE AO WAS NOT REASONABLE AND JUSTIFIED, WHILE DISALLOWING THE ENT IRE PURCHASES OF THE APPELLANT, WHICH WERE INDISPUTABILITY UTILIZED FOR MAKING EXPORT SALES OF THE RELEVANT PERIOD. ACCORDINGLY THE ADDITION OF RS. 1, 19,58,445/- IS FOUND UNTENABLE ON THE FACTS AND MERITS ALSO AND THUS FOU ND DISSERVES TO BE DELETED. SIMILARLY IN VIEW OF THE FACT THAT THE GP RATE OF THE CURRENT YEAR (I.E.18.55%) IS BETTER THEN THE PREVIOUS YEAR (17.3 6%), THEREFORE, WHILE FOLLOWING THE FOOT PRINTS OF THE DECISION OF THE HO NBLE ITAT BENCH, IN THE APPELLANT CASE FOR A.Y. 2007-08 AND ALSO THE FACT O F THE INCREASED TURNOVER OF THE CURRENT YEAR, AN ADHOC ACTION OF RS. 3,00,00 0/- IS SUSTAINED TO TAKE CARE OF ALL THE INCREMENTING ASPECTS, RELATED TO TH E ISSUE UNDER CONSIDERATION, IF ANY CONSEQUENTLY, THIS GROUND OF APPEAL IS PARTLY UPHELD. THUS, IT IS CLEAR THAT THE LD. CIT(A) WHILE DELETIN G THE ADDITION MADE BY THE AO HAS FOLLOWED THE DECISION OF THIS TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2007-08. IT IS ALSO NOT DISPUTED THAT THE ASSESSEE IS AN EXPORTER OF PRECIOUS AND SEMI PRECIOUS STONES AS WELL JEWELLERY THEREFORE, WHEN T HE EXPORT OF GOODS IS NOT IN DISPUTE THEN THE PURCHASES OF THE CORRESPONDING QUA NTITY CANNOT BE DOUBTED EXCEPT THE COST OF PURCHASE WHICH MIGHT HAVE BEEN INFLATED BY THE ASSESSEE. HOWEVER, IT IS NOT THE CASE OF THE A.O. THAT THE ASSESSEE HAS INFL ATED THE PURCHASES IN COMPARISON TO THE PREVAILING MARKET PRICE OF THE GOODS. THEREF ORE, WHEN THE GP RATE OF THE CURRENT YEAR DECLARED BY THE ASSESSEE AT 18.55% IS BETTER THAN THE EARLIER ASSESSMENT YEAR AT 17.36% WHICH HAS BEEN ACCEPTED A S FINALLY DECIDED BY THIS 5 ITA NO. 29/JP/2019 M/S. JK JEWELLERS INTERNATIONAL, JAIPUR. 5 TRIBUNAL IN DELETING THE ADDITION MADE BY THE AO TH EN NO ADDITION IS CALLED FOR ON THIS ACCOUNT. HENCE, AS FAR AS THE REVENUES APPEAL IS CONCERNED IN THE ABSENCE OF ANY CONTRARY MATERIAL OR FACT WE DO NOT FIND ANY ER ROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE LD. CIT(A). THUS THE TRIBUNAL HAS DELETED THE ADDITION MADE BY THE AO AND SUSTAINED BY THE LD. CIT (A) BY CONSIDERING THE FACT THAT THE GP DECLARE D BY THE ASSESSEE FOR THE SAID YEAR WAS MORE THAN THE PREVIOUS ASSESSMENT YEARS. S IMILARLY FOR THE ASSESSMENT YEARS 2009-10 AND 14-15, THE TRIBUNAL DELETED THE A DDITION BY NOTING THE FACT THAT AFTER REJECTION OF BOOKS OF ACCOUNT BEST JUDGMENT A SSESSMENT OUGHT TO HAVE BEEN FRAMED BY THE AO BY ESTIMATING THE INCOME ON SOME R EASONABLE AND PROPER BASIS. THE AVERAGE GP DECLARED BY THE ASSESSEE IN THE PAST YEARS WAS CONSIDERED A AS PROPER CRITERIA FOR ESTIMATION OF INCOME. ACCORDIN GLY, WHEN THE GP DECLARED BY THE ASSESSEE FOR THOSE YEARS WERE FOUND TO BE IN LINE O R MORE THAN THE AVERAGE OF THE GP DECLARED IN THE PRECEDING YEARS, THE TRIBUNAL DE LETED THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A). THUS IT IS CLE AR FROM THE EARLIER ORDERS OF THIS TRIBUNAL THAT THERE WAS NO ISSUE OF DECLINING OF GP AND NP DECLARED BY THE ASSESSEE IN THOSE YEARS. THE AUTHORITIES BELOW HAVE CONSIDE RED THE FACT THAT THERE WAS DECLINE IN GP AS WELL AS NP DECLARED BY THE ASSESSE E FOR THE YEAR UNDER CONSIDERATION. THE DETAILS OF THE GP AND NP FOR THE YEAR UNDER CONSIDERATION AS WELL AS IN THE PRECEDING YEARS AS REPRODUCED AT PAGE 12 OF THE ORDER OF THE LD. CIT (A) ARE AS UNDER :- A.Y. TURNOVER GROSS PROFIT GP RATE NET PROFIT NP RATE 2010 - 11 46751902.00 8598887.00 18.39% 607263.05 1.30% 2009 - 10 87369875.00 16499885.00 18.89% 9352554.00 10.70% 2008 - 09 69102064.00 12818695.00 18.55% 7661894.11 11.09% 6 ITA NO. 29/JP/2019 M/S. JK JEWELLERS INTERNATIONAL, JAIPUR. 6 THE ASSESSEE HAS NOT DISPUTED THESE FACTUAL DETAILS . FURTHER, THE LD. CIT (A) HAS DECIDED THIS ISSUE IN PARA 3.3 TO 3.3.2 AS UNDER :- 3.3. I HAVE PERUSED THE FACTS OF THE CASE, THE AS SESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. ASSESSEE HAS NOT CHALLENGED THE INVOCATION OF SECTION 145(3) AND MERELY CONTEND ED THAT ITS TRADING RESULTS ARE BETTER THEREFORE NO ADDITIONS S HOULD BE MADE. HE PLACED RELIANCE ON ITAT ORDER FOR ASSESSME NT YEAR 2008-09 IN APPELLANTS OWN CASE. 3.3.1. ON GOING THROUGH RESULTS, IT IS SEEN THAT GP FELL DOWN FROM 18.89% TO 18.39% AND NP FELL DOWN SHARPLY FROM 10.7 0% TO 1.30%. NO PLAUSIBLE EXPLANATION WAS GIVEN FOR SHARP DECREASE IN NP BY APPELLANT. 3.3.2. ONCE BOOKS ARE REJECTED, ESTIMATION IS TO BE MADE BASED ON PAST HISTORY. RECORDS OF ASSESSEE SHOW DECLINE IN P ROFITS THEREFORE A LUMP SUM ADDITION OF RS. 10,00,000/- IS UPHELD IN PLACE OF ADDITION MADE BY ASSESSING OFFICER OF RS. 60,79,802/-. THIS GROUND OF APPEAL IS PARTLY ALLOWED. IT IS CLEAR THAT THE LD. CIT (A) HAS CONSIDERED THE FACT THAT GP DECLARED BY THE ASSESSEE FELL DOWN FROM THE EARLIER YEARS AND NP DE CLARED BY THE ASSESSEE FELL DOWN SHARPLY FROM 10.70% TO 1.30%. IT WAS ALSO NOTED BY THE LD. CIT (A) THAT NO PLAUSIBLE EXPLANATION WAS GIVEN FOR SHARP DECLINE I N NP BY THE ASSESSEE. SO FAR AS THE ADDITION MADE BY THE AO AND SUSTAINED BY THE LD . CIT (A), WE FIND THAT IN VIEW OF THE EARLIER DECISIONS OF THIS TRIBUNAL, THE SAME IS NOT SUSTAINABLE AS IT IS NOT BASED ON SOME REASONABLE OR PROPER CRITERIA BEING THE AVE RAGE GP OR NP DECLARED BY THE ASSESSEE IN PRECEDING YEARS. ACCORDINGLY, WE SET AS IDE THE ORDERS OF THE AUTHORITIES 7 ITA NO. 29/JP/2019 M/S. JK JEWELLERS INTERNATIONAL, JAIPUR. 7 BELOW AND REMIT THE ISSUE TO THE RECORD OF THE AO T O ESTIMATE THE INCOME OF THE ASSESSEE BY APPLYING THE AVERAGE OF PAST GP DECLARE D IN THE PRECEDING YEARS BY THE ASSESSEE AND THEREAFTER THE AO MAY EXAMINE THE ALLO WABILITY OF EXPENDITURE INDEPENDENTLY TO FIND OUT THE CAUSE OF SHARP DECLIN E IN NP. THE ASSESSEE BE GIVEN A PROPER OPPORTUNITY OF HEARING BEFORE PASSING THE FR ESH ORDER. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 02/07/20 19. SD/- SD/- ( JES'K LH- 'KEKZ ) ( FOT; IKY JKWO (RAMESH C. SHARMA ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 02/07/2019. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S. J.K. JEWELLERS INTERNATIONA L, JAIPUR. 2. THE RESPONDENT THE ITO WARD 6(2), JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 29/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR