JYPORE MANUFATURING JEWELLERS PVT. LTD., Jaipur V. JCIT(OSD), Jaipur

ITA 304/JPR/2014

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7824 (ITAT-JAIPUR)
• Duration Of Justice: 5 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 23-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B K GUPTA CIT DR DHK
• Assessee Lawyers: S L PODDAR
• Keywords: Business income; Income from undisclosed sources; Document seized; Principle of natural justice; Documents seized; Set aside
• Section: 143(3); 153A; 201; 143(2); 191; 64; 72; 13; 131; 15

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 303 & 304/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 & 2009-10 JYPORE MANUFACTURING JEWELLERS (P) LTD. PLOT NO.1 & 2, RATAN SHIKHA BUILDING, NEAR GOKHLE PARK, JANTA COLONY, JAIPUR CUKE VS. THE JCIT (OSD) CENTRAL CIRCLE- 3 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAACJ 4640 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 449 & 448/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 & 2008-00 THE ACIT CENTRAL CIRCLE- 3 JAIPUR CUKE VS. JYPORE MANUFACTURING JEWELLERS (P) LTD. PLOT NO.1 & 2, RATAN SHIKHA BUILDING, NEAR GOKHLE PARK, JANTA COLONY, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAACJ 4640 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. PODDAR, ADVOCATE JKTLO DH VKSJ LS@ REVENUE BY :SHRI B.K. GUPTA, CIT -DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 05/11/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 22/01/2016 VKNS'K@ ORDER PER R.P. TOLANI, JM THIS A SET FOUR APPEALS, REVENUE APPEAL FOR AY 2006 -07, CROSS APPEALS FOR AY 2008-09 AND ASSESSEES APPEAL FOR AY 2009-10, ARISING ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 2 OUT OF THE ORDERS OF LD. CIT(A) FOR AY 2006-07 DATE D 28-03-2014, AY 2008-09 DATED 31-03-2014 AND AY 2009-10 DATED 31-03 -2014 RESPECTIVELY FOLLOWING GROUNDS ARE RAISED: REVENUE GROUND FOR AY 2006-07 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A), AJMER HAS ERRED IN DELETING TRADING ADD ITION OF RS. 49,48,340/- DESPITE THE FACT THAT REJECTION OF BOOKS OF ACCOUNT HAS BEEN UPHELD BY HIM ON THE BASIS OF EARL IER DECISION OF LD. CIT(A) WHO SUSTAINED THE TRADING AD DITION OF RS. 50,000/- ONLY, THOUGH THE FACT IS THAT THE REJE CTION WAS UPHELD ON THE BASIS OF SEIZED DOCUMENTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A), AJMER HAS ERRED IN NOT TAKING COGNIZANC E OF VARIOUS DISCREPANCIES POINTED OUT BY THE AO. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A), AJMER HAS ERRED IN NOT APPLYING GROSS P ROFIT RATE OF EARLIER YEARS I.E. A.Y. 2004-05 TO 2005-06 WHICH FORMED A SOUND BASIS OF ADOPTING GROSS PROFIT RATE OF 30% IN THE CURRENT YEAR. ASSESSEES COMMON GROUND NO.1 FOR AY 2008-09 & 2009 -10 1. THE ASSESSMENT ORDER FRAMED BY THE LEARNED ASSESSING OFFICER HAS ERRED IN PASSING THE ORDER U/ S 153A/153C/143(3) OF THE INCOME TAX ACT, 1961 IN VOI D AB- INITIO DESERVES TO BE QUASHED BECAUSE NO INCRIMINAT ING DOCUMENTS WERE FOUND DURING THE COURSE OF SEARCH AN D NO PROPER SATISFACTION WAS RECORDED. ASSESSEE'S COMMON GROUND NO. 2 FOR AY 2008-09 AND 2009-10 ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 3 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS 1 5,63,530/- BY APPLYING GP RATE OF 30.36% AS AGAINST 15.55% FOR AY 2008-09 AND ADDITION OF RS. 1,09,37,185/- BY APPLYING GP RA TE OF 33% AS AGAINST 11.35% FOR AY 2009-10 DECLARED BY THE ASSE SSEE FOR UNACCOUNTED SALES BASED ON THE P&L ACCOUNT WHICH IS NOT CONTROVERTED. 1. REVENUE'S GROUNDS FOR AY 2008-09 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(A), AJMER HAS ERRED IN DELETING TRADING ADDITION OF RS. 21,68,172/- DESPITE THE FACT THAT REJECTION OF BOOKS OF ACCOUNT HAS BEEN UPHELD AND IGNORING THE F ACT THAT ON UNACCOUNTED SALES, G.P. RATE HAS TO BE HIGHER BE CAUSE OF EVASION OF LOCAL TAXES AND OTHER CESSES. 2.1 BRIEF FACTS ARE - A SEARCH WAS CONDUCTED ON 08-09-2009 IN BANK LOCKER NO. 1004 STANDING IN THE NAME OF ONE SHRI GO VIND DEV/SHRI RAM, WHICH WAS OWNED BY SHRI RADHA MOHAN AGARWAL (DIREC TOR) AS BELONGING TO ASSESEE COMPANY. CONSEQUENTLY, NOTICE U/S 153A W AS ACCORDINGLY ISSUED BY THE DEPUTY COMMISSIONER OF INCOME TAX, C ENTRAL CIRCLE 3. DURING THE PENDENCY OF PROCEEDINGS U/S 153A, LD. AO AGAIN DROPPED PROCEEDINGS U/S 153A AND INITIATED PROCEEDING U/S 1 53C BY ISSUE OF NOTICE DTD. 19.07.2011. THOUGH PROCEEDINGS WERE TAK EN FURTHER UNDER THE NOTICE ISSUED U/S 153C HOWEVER, THE IMPUGNED ASSESS MENTS ARE ULTIMATELY ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 4 FRAMED U/S 153A RWS 143(3) DETERMINING THE INCOME A T RESPECTIVE FIGURES. 2.2 AGGRIEVED BY THE ASSESSMENTS ORDERS, FIRST APPE ALS WERE PREFERRED, LD. CIT(A) PASSED RESPECTIVE ORDERS GIVING PART REL IEF TO ASSESSEE. AGGRIEVED ON RESPECTIVE GROUNDS BOTH THE PARTIES AR E BEFORE US AGITATING GROUNDS AS MENTIONED ABOVE. 2.3 LD. COUNSEL FOR ASSESSEE AT THE OUTSET CHALLENG ED THE LEGALITY OF PROCEEDINGS U/S 153C BY CONTENDING THAT: 1. SEARCH WAS CONDUCTED ON A LOCKER NO. 1004 DATED 08.09.2009 STANDING IN THE NAME OF SHRI GOVIND AND SHRI RAM, C ONSEQUENTLY PROCEEDING U/S 153A WAS INITIATED IN THAT NAME. THI S NOTICE U/S 153A WAS RETURNED BY THE POSTAL AUTHORITIES WITH TH E REMARK 'INCOMPLETE ADDRESS' IN VIEW OF THIS THE PROCEEDING S U/S 153A INITIATED IN THE NAME OF SHRI GOVIND RAM WERE DROPP ED. 2. LATER ON THE LOCKER WAS OWNED BY THE ASSESSEE TH ROUGH ITS DIRECTOR SHRI RADHA MOHAN AGARWAL, THUS THE NOTICE U/S 153A WAS ISSUED IN THE NAME OF THE ASSESSEE ON 29.12.2009 WI THOUT THERE BEING A WARRANT IN ITS NAME OR A SEARCH ON ITS PREM ISES. ASSESSEE FILED RETURNS IN RESPONSE TO NOTICE U/S 153A ON 22. 03.2010 DECLARING NIL INCOME, THE ASSESSMENT PROCEEDINGS U/ S 153A WERE TAKEN FORWARDED BY ISSUING NOTICE U/S 143(2) ON 22. 06.2010 AND SUBSEQUENT LETTERS DATED 21.01.2011, 12.04.2011, 2 1.04.2011. HOWEVER DURING THE PENDENCY OF THESE PROCEEDINGS TH E LEARNED ASSESSING OFFICER ISSUED NOTICE U/S 153C ON 19.07.2 011 WITHOUT THERE BEING ANY SATISFACTION RECORDED IN THE ASSESS MENTS OF MODI GROUP AND THERE WAS NO ASSESSMENT IN THE CASE OF SA ID SHRI GOVIND RAM. THE PURPORTED SATISFACTION FOR ISSUING NOTICE U/S 153C ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 5 REFERRED TO BY LD. AO IN PARA 4.2 ON PAGE 2 AND 3 OF THE ASSESSMENT ORDER IS AS UNDER 'SATISFACTION NOTE FOR INITIATING PROCEEDING U/S 15 3C OF THE IT ACT IN THE CASE OF M/S JYPORE JEWELLERY MANUFACTURING P VT. LTD.,1&2,RATAN SHIKHA, NEAR GOKKLE PARK, JANTA COLO NY, JAIPUR PAN AAACJ4640C FOR THE A.Y.2004-05 TO 2009-10. A SEARCH WAS CONDUCTED IN THE CASE OF PRIVATE VAULT S GROUP, JAIPUR ON 08/09/2009 BASED ON SEARCH IN THE CASE OF SH. DD . MODI GROUP. CERTAIN LOOKERS IN PRIVATE SAFE DEPOSIT VAULTS WERE IDENTIFIED WHICH WERE SUSPECTED TO BE BELONGING TO THIS GROUP. THE WARRANT WAS ISSUED IN THE NAME OF LOCKER OWNERS I.E. SHRI G OVIND DEV AND SHRI RAM, 26, BANI PARK, JAIPUR ON THE BASIS OF ADD RESS AVAILABLE WITH THE VAULT OPERATOR. THE D.D. MODI GROUP DISOWN ERED THESE LOCKERS. THE FOLLOWING ASSETS WERE SEIZED FROM THE LOCKER AS PER PANCHNAMA PREPARED DURING SEARCH SR.NO. ASSETS SEIZED SEIZED/IMPOUNDED DOCUMENTS 1000 $ (USA DOLLARS) JEWELLERY RS. 93,63,209 1. ANNEXURE AS-1 EXHIBIT 1 TO 42 STATEMENT OF MS. USHA RANI WAS RECORDED U/S 132(4) OF THE INCOME TAX ACT, 1961. IN THE STATEMENT SHE ADMITTED THE LO CKER WAS IN THE NAME OF SHRI GOVIND DEV AND SHRI RAM 26, BANI PARK, JAIPUR. SINCE THE ORIGINAL SEARCH WAS INITIATED IN THE NAME OF ABOVE NAMED PERSONS, THE PROCEEDING U/S 153A OF THE INCOME TAX ACT, 1961 WERE ALSO INITIATED IN THEIR NAME. NOTICE U/S 153A OF TH E INCOME TAX ACT, 1961 WAS ISSUED TO SH. GOVIND DEF AND SHRI RAM, 26, BANI PARK, JAIPUR WHICH RETURNED BY POSTAL AUTHORITIES WITH TH E REMARK 'INCOMPLETE ADDRESS'. DURING THE PERIOD FROM THE DA TE OF SERACH TO PASSING OF THIS ORDER NO PERSON NAMED SHRI RAM AND SH. GOVIND ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 6 DEV WERE FORWARD TO CLAIM THE OWNERSHIP OF CONTENTS OF THE LOCKER NO. 1004 IN GANPATI PLAZA. ON THE OTHER HAND SH. RADHA MOHAN AGARWAL, DIRECTOR OF M/S JYPURE JEWELLERY MANUFACTURING PVT LTD. 1 & 2, RATA N SHIKHA, NEAR GOKHALE PARK, JANTA COLONY, JAIPUR FILED A LET TER DATED 10.09.2009 BEFORE THE INVESTIGATION WING OF THE DEP ARTMENT CLAIMING THE OWNERSHIP OF THE CONTENTS OF THE LOCKE R OF THIS COMPANY. HIS STATEMENT WERE RECORDED DT 23.09.2009 AND 25.09.2009 U/S 131 OF THE INCOME TAX ACT, 1961 AND IN THE STATEMENT HE ADMITTED OATH THAT THE LOCKER NO. 1004 SEARCHED WAS HIRED BY HIM AND THE DOCUMENTS/ASSETS WERE ADMITTED PROPERTY OF THE COMPANY. IN VIEW OF ABOVE STATED FACT THE PROCEEDINGS INITIA TED IN THE NAME OF SHRI RAM AND SH. GOVIND DEV HAVE BEEN DROPPED BRING IN- FRUCTUOUS. ON THE OTHER HAND PROCEEDING U/S 153C OF THE ACT IS INITIATED IN THE CASE OF M/S JYPORE JEWELLERY MANUF ACTURING PVT. LTD., 1 & 2, RATAN SHIKHA, NEAR GOKHELE PARK, JANTA COLONY, JAIPUR (PAN AAACJ4640C) WHICH SATISFIED THE TERMS OF ISSUE OF NOTICE UNDER THAT SECTION.' 2.4 THE PERUSAL OF THESE FACTS RAISES MANY JURISDIC TIONAL ISSUES ABOUT THE LEGALITY OF IMPUGNED ASSESSMENTS AS UNDER:- (I) ORIGINAL NOTICE U/S 153A WAS ISSUED WITHOUT THE RE BEING ANY VALID WARRANT OR SEARCH ON ASSESSEE. THER EFORE, ANY ASSESSMENT U/S 153A IS ILLEGAL. (II) NO SATISFACTION HAS BEEN RECORDED WHILE COMPLE TING 153A ASSESSMENTS IN THE CASE OF MODI GROUP AS CONTE MPLATED BY SEC. 153C. SIMILARLY THERE WAS NO ASSESSMENT IN THE CASE OF SHRI ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 7 GOVIND DEV AS THE 153A PROCEEDINGS WERE DROPPED IN THAT CASE, CONSEQUENTLY THERE IS NO VALID SATISFACTION IN THIS CASE ALSO. (III) THE NEW SATISFACTION ABOUT INITIATING 153C SA TISFACTION IS SILENT REGARDING THE PENDING PROCEEDING INITIATE D U/S 153A WITH THE ISSUE OF NOTICE ON 29.12.2009 IN THE CASE OF TH E ASSESSEE. (IV) THE PROCEEDINGS THOUGH ARE INITIATED U/S 153C THE ASSESSMENTS HAVE BEEN COMPLETED U/S 153A RWS 143(3) AS IS CLEAR FROM THE RESPECTIVE ORDERS OF LD. AO AND CIT(A). (V) IN THESE CIRCUMSTANCES THE LEARNED ASSESSING OF FICER ERRED IN ISSUING NOTICE U/S 153C WHEN THE PROCEEDIN GS U/S 153A WERE ALREADY PENDING. BESIDES LD. AO HAS ERRED IN H OLDING THAT THE NOTICE ISSUED U/S 153C SATISFY THE TERMS LAID DOWN IN THIS BEHALF. (VI) THE PROCEEDINGS ARE CONTINUED U/S 153C BUT THE ASSESSMENT IS COMPLETED U/S 153A DESPITE CONSCIOUSL Y DROPPING THE NOTICE U/S 153A. (VII) ASSESSMENT U/S 153A AND 153C ARE TOTALLY DIFF ERENT AND MUTUALLY EXCLUSIVE, AN ASSESSMENT CANNOT BE FRA MED IN CONTINUATION OF BOTH NOTICES AND SIMILARLY CANNOT B E CONCLUDED U/S 153A IF PROCEEDINGS ARE UNDERTAKEN U/S 153C. THE RELEVANT PROVISIONS FOR SECTION 153C PRE-SUPPOS E EXISTENCE OF THE PERSON REFERRED TO IN SECTION 153A. IN OTHER WORDS THERE HAS TO BE A PERSON IN WHOSE HANDS ACTION U/S 153A IS TAKEN. IN THE CA SE OF THE ASSESSEE THERE ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 8 IS NO EXISTENCE OF SUCH PERSON. NO ASSESSMENT HAS B EEN COMPLETED U/S 153A IN WHOSE HANDS A SATISFACTION HAS BEEN RECORDE D FOR INITIATING PROCEEDINGS U/S 153C IN ASSESSEES HANDS. LD. AO HA S MADE A MESS OF THE WHOLE LEGAL PROCEEDINGS BY ISSUING NOTICE U/S 153C WHEN ALREADY PROCEEDINGS U/S 153A WERE IN PROGRESS. IN THESE CIR CUMSTANCES THE PROCEEDING OSTENSIBLY TAKEN U/S 153C AND CONCLUDED U/S 153A ARE UNTENABLE, BAD IN LAW AND IN STARK CONTRAVENTION OF RELEVANT PROVISIONS. AND THEREFORE, THE IMPUGNED ASSESSMENTS ARE VITIATE D BY LACK OF PROPER JURISDICTION AND DESERVE TO BE QUASHED. RELIANCE IS PLACED ON FOLLOWING JUDICIAL PRECEDENTS IN SUPPORT OF THESE PROPOSITION S: (I) JINDAL STAINLESS LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX (2009) 122 TTJ 902 (DEL) IT HAS BEEN HELD IN THIS CASE BY THE HONBLE TRIBUN AL THAT FRAMING OF ASSESSMENT U/S 153A IN PLACE OF 153C OR VICE VERSA IS ILLEGAL. SUCH DEFECT IN FRAMING THE ASSESS MENT IS A JURISDICTIONAL DEFECT WHICH CANNOT BE CURED AND ASS ESSMENT HAS TO BE HELD AS INVALID BECAUSE THE ASSESSING OFF ICER DIDNT HAVE ANY JURISDICTION TO ASSESS THE ASSESSEE WITHOU T ADOPTING THE PROCEDURE LAID DOWN IN THE RELEVANT SECTION. (II) CIT VS. SHITAL PRASAD KHARAG PRASAD (2005) 196 CTR 162 IT IS FURTHER SUBMITTED THAT A MISTAKE OF FRAMING A SSESSMENT U/S 153C IN PLACE OF 153A IS NOT A TECHNICAL MISTAK E RECTIFIABLE WITH REFERENCE TO SECTION 292B. THIS AC TION ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 9 CONDONES INVALIDITY WHICH ARISES MERELY BY REASON O F ANY MISTAKE, DEFECT OR OMISSION IN A NOTICE. BUT FRAMIN G OF ASSESSMENT UNDER THE WRONG SECTION GOES TO THE VERY ROOT OF THE MATTER. IT IS WELL SETTLED THAT AN ASSESSING AU THORITY GETS JURISDICTION TO REOPEN A CONCLUDED ASSESSMENT ONLY AFTER SERVING A VALID NOTICE ON THE ASSESSEE. (III) SIMILAR DECISION WAS RENDERED BY THE CALCUTTA HIGH COURT IN THE CASE OF SUN ROLLING MILLS PVT. LTD. VS. ITO 160 ITR 412 WHEREIN IT WAS HELD THAT SECTION 292B DOES NOT EMPO WER TO ITO TO TREAT A PROCEEDING TAKEN U/S 147(B) AS PROCE EDING U/S 147A. THIS IS NOT A MERE TECHNICALITY. IT IS A QUES TION OF JURISDICTION UNLESS THE CONDITIONS PRECEDENT ARE FU LFILLED NO PROCEEDING CAN BE INITIATED. THE RATIO OF THE AFORESAID CASES MAKES IT CLEAR THA T IN THE CASES WHERE CONDITIONS PRECEDENT FOR ISSUING NOTICE U/S 153A OR C ARE NOT FULFILLED, THEY ARE LIABLE TO BE QUASHED. SINCE IN ASSESSEES CASE THE LEARNED ASSESSING OFFICER ERRED IN ASSUMING VALID JURISDICT ION U/S 153A OR C, THE IMPUGNED ASSESSMENTS PURPORTING TO BE COMPLETED U/S 153A ARE AB-INITIO VOID AND DESERVE TO BE QUASHED. 2.5 APROPOS MERITS LD. COUNSEL CONTENDS THAT REGULA R RETURNS FOR ALL THE IMPUGNED YEARS WERE FILED AND REGULAR ASSESSMENTS W ERE FRAMED BY MAKING SOME ROUTINE GP ADDITIONS WHICH WERE REDUCED OR DELETED IN APPEALS. FROM THE ABOVE REFERRED LOCKER PAPERS REFL ECTING REGULAR UNACCOUNTED TRANSACTIONS MENTIONING DETAILS OF SALE S AND PURCHASES ALONG ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 10 WITH THE STOCK OF UNACCOUNTED JEWELLERY WERE FOUND. DURING THE COURSE OF IMPUGNED ASSESSMENT PROCEEDINGS IN ORDER TO DETERMI NE THE PROFITS FROM UNACCOUNTED PAPERS, ASSESSEE PREPARED COMPLETE ACCO UNTS OF SALE, PURCHASES, P &L A/C AND DETERMINED THE UNACCOUNTED BUSINESS. SAME WERE PRODUCED AND VERIFIED BY LD. AO AND NO INCONSI STENCY OR DISCREPANCY IS POINTED OUT THEREIN. THUS ON THE BAS IS OF PAPERS AND JEWELRY STOCK FOUND IN THE LOCKER YEAR WISE UNACCO UNTED PROFIT EARNED BY ASSESSEE WAS WORKED OUT AS UNDER AND OFFERED AS INC OME IN SEARCH RETURNS :- FINANCIAL YEAR INCOME DECLARED 2006-07 21396 2007-08 1231754 2008-09 4391086 2009-10 1888254 7532490 IT WAS FURTHER SUBMITTED THAT THE UNACCOUNTED PROFI TS WERE FOUND IN THE FORM OF ASSET I.E. UNACCOUNTED JEWELRY STOCK FOUND IN THE LOCKER. THE JEWELRY WAS ALSO WRONGLY VALUED BY LD. AO AT MARKET RATE AT RS. 93,63,209/- WHEREAS THE SAME SHOULD HAVE BEEN VALUE D AT COST WHOSE VALUATION WAS EXPLAINED BY THE ASSESSEE AT RS. 75,3 2,490/-. SINCE LD. AO ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 11 DID NOT OFFER ANY ADVERSE COMMENTS ON THE A/CS SUBM ITTED BY THE ASSESSEE FOR WORKING OUT UNACCOUNTED PROFITS AND STOCK, THUS ON RECORD THE WORKING OF YEAR WISE UNACCOUNTED INCOME REMAINS UNC HALLENGED. IT IS TRITE LAW THAT EVIDENCE COLLECTED DURING THE SEARCH IS TO BE GIVEN HOLISTIC EFFECT. IT CANNOT BE USED BY LD. AO ON CHERRY PICKI NG BASIS BY REFUSING TO GIVE THE BENEFIT OF EVIDENCE WHICH SUPPORTS ASSESSE ES WORKING. LD. AO WITHOUT OBJECTING TO THE A/CS OF UNACCOUNTED TRANSA CTIONS HOWEVER RAISED THE QUESTIONED ABOUT LESSER GP FROM UNDISCLOSED BUS INESS AS COMPARED TO GP ON THE SALES RECORDED IN REGULAR BOOKS. ASSESSEE CATEGORICALLY SUBMITTED THAT IT WAS HAVING TWO DISTINCT BUSINESS OPERATIONS ONE OF REGULAR SHOW ROOM INVOLVING HUGE INVESTMENT; THE HI GHER GP FROM REGULAR SHOW ROOM WAS ATTRIBUTABLE TO THE COST OF C APITAL DEPLOYMENT. WHEREAS UNACCOUNTED BUSINESS WAS CARRIED ON WITHOU T CAPITAL COST, ON EXISTING MARKET REPUTATION FOR FASTER AND QUICKER T URN OVER IN A COMPETITIVE FAST ROLLING JEWELRY TRADE. SUCH UNACCO UNTED TRANSACTIONS PRESUPPOSED LESSER GP AND FASTER TURNOVER AS THE AS SESSEE COULD NOT HAVE MAINTAINED HUGE UNACCOUNTED INVENTORY AND INDULGED IN BARGAINING. IN REGULAR JEWELRY SHOW ROOM BUSINESS NORMALLY REGULAR STOCK ROTATION BY SALES IS HARDLY 2 TIMES. WHEREAS UNRECORDED SALES R ECORD REVEALED THE ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 12 ROTATION OF STOCK FROM 10 TO 12 TIMES. THUS THE GP THOUGH APPEARED LOW IN UNACCOUNTED SALES IN REAL TERMS THE NET PROFIT W AS MORE, WHICH WAS THE REAL AIM. ASSESSEE RANDOM BASIS DEMONSTRATED THAT W HERE ON TOTAL SALES OF RS. 1,05,60,429/- THE PROFIT WAS OF RS. 16,42,616/- WHICH IS 15.55% AND IN THE SUBSEQUENT YEAR WHEN THE TURNOVER BECAME RS. 5,05,49,546/- THE GP RATE FALLS DOWN TO 11.36%. THE GP RATE FROM UNAC COUNTED BUSINESS THOUGH LOOKED LESSER THAN REGULAR BOOKS BUT THE COM PARATIVE NET PROFITS ARE MORE SINCE THERE IS NO EXPENDITURE. IT IS FURTH ER CONTENDED THAT: (A) THE UNACCOUNTED SALES DURING THE SALE PERIOD ARE MU CH HIGHER THAN THE REGULAR SALES, WHICH IS SOLELY DUE TO FACTOR OF HIGHER AND FASTER TURNOVER AND LESSER GP. (B) IT IS FURTHER NOTICED THAT ALTHOUGH GP IS BETTER IN REGULAR SALES BUT ULTIMATELY THE REGULAR SALES DISCLOSE VERY LESS NP WHEREAS UNACCOUNTED SALES THE GP IS LOWER BUT AVERA GE NET PROFIT RATE IS AROUND 8.68% WHICH SUPPORTS THE ASSE SSEES CONTENTIONS. THE GP RATE IS COMPARATIVELY LOW FIRSTLY ON THE G ROUND THAT TURNOVER IS JUST THE DOUBLE. SECONDLY THE ASSESSEE COMPROMISES IN THE PROFIT IN THE UNACCOUNTED SALES AS THE EXPENSES ON UNACCOUNTED SALES ARE ALMOST NEGLIGIBLE AND THEREFORE AT THE END NET PROFITS ARE MORE. RELIANCE IS PLACED ON: ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 13 (I) ABHISHEK CORPORATION VS. DEPUTY COMMISSIONER OF INCOME TAX 63 TEJ 651 (AHD) IT WAS HELD THAT ONLY NET PROFIT RATE CAN BE APPLIE D ON UNACCOUNTED SALES/RECEIPTS. (II) FURTHER IN THE CASE OF MOOLCHAND KUMAWAT & SONS VS. DCIT AJMER M.A. 93/JP/2008 OUT OF ITSSA NO. 24/JP/2005 DATED 20.02.2009 TAXWORLD VOL. XLII PAGE 241 THE HONBLE ITAT JAIPUR BENCH JAIPUR HELD AS UNDER (A) SALES DO NOT REPRESENT THE INCOME OF THE ASSESSEE AND ONLY THE PROFIT THEREUPON CAN BE TAXED. (B) SAME PROFIT RATE AS DISCLOSED BY THE ASSESSEE SHALL HAVE TO BE APPLIED ON UNRECORDED SALES. (III) CIT VS. S.M. OMER (1993) 201 ITR 608 (IV) INCOME TAX OFFICER VS. GURUBACHHAN SINGH J. JUNEJA (1995) 55 ITD 75 (AHD. TM) 2.6 LD. AO HOWEVER, DID NOT CONTROVERT THE BOOKS RE SULTS OF UNACCOUNTED BUSINESS HOWEVER BY AN AD HOC AND SUMMA RY APPROACH MECHANICALLY ADOPTED THE GP RATE OF REGULAR BUSINES S AS GP OF UNACCOUNTED BUSINESS. THUS THE ADDITION IS BASED NE ITHER ON ANY OBJECTIVE CONSIDERATION NOR ON THE ANALYSIS OF MATERIAL MADE AVAILABLE TO AO WHICH REMAINS UNCONTROVERTED. THE ARBITRARY APPROACH OF D EPARTMENT IS CLEAR ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 14 FROM THE FACTS THAT IN EVERY REGULAR ASSESSMENT THE GP DECLARED BY ASSESSEE WAS DISTURBED WHICH WAS APPEALED AGAINST, NOW THE SAME GP IS HELD AS SACROSANCT DESPITE ASSESSEES UNCTROVERTED JUSTIFICATIONS. THUS WHENEVER IT SUITS THE DEPARTMENT, GP IS ACCEPTED OR REJECTED ON AD HOC BASIS, ON SUMMARY ASSUMPTION AND ON FREE WILL, WHIC H IS NOT PERMISSIBLE IN LAW AS HELD BY VARIOUS JUDICIAL PRONOUNCEMENTS. 2.7 IN VIEW OF THIS ALSO THE LEARNED ASSESSING OFFI CER WAS NOT JUSTIFIED IN APPLYING OF GP RATE OF REGULAR SALES ON UNACCOUN TED SALES FOR WHICH CLEAR PROFIT WORKING WAS PROVIDED BY ASSESSEE. 2.8 IT IS A CASE WHERE SEIZED MATERIAL FOR UNACCOUN TED BUSINESS IS FOUND FROM THE LOCKER, WHICH IS DULY QUANTIFIED BY ASSESS EE AND NOT CONTROVERTED BY LD. AO, THERE IS NO ROOM IS LEFT FO R FURTHER ESTIMATION BEYOND THE INCRIMINATING MATERIAL WITHOUT POINTING OUT INCONSISTENCIES IN THE RELEVANT WORKING. THE PROFITS SO ARRIVED AT CAN NOT BE DISCARDED SUMMARILY RELYING ON HIGHER GP FROM REGULAR BUSINES S WHICH HAS TOTALLY DIFFERENT BUSINESS MODULE. IT AMOUNTS TO ASSUMING O RANGES AS APPLES IN ORDER TO LEVY MORE TAXES. LEARNED ASSESSING OFFICE R HAS NOT FOUND ANY DEFECT WHATSOEVER IN THE WORKING OF THE UNACCOUNTED PROFITS, ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 15 CONSEQUENTLY THERE IS NO CASE TO DISCARD SUCH ACCOU NTS WITHOUT ASSIGNING ANY REASON AND ARBITRARILY ADOPTING HIGHER GP FIGUR E ONLY ON PRESUMPTIONS AND CONJECTURES. THE FOLLOWING CASE LA WS ARE QUOTED IN SUPPORT OF THIS PROPOSITION:- (I) ASSISTANT COMMISSIONER OF INCOME TAX VS. RADHEY SHY AM PODDAR (HUF) (2004) 86 TTJ 558 (ASR.) (II) ASSISTANT COMMISSIONER OF INCOME TAX NITIN MUKESH MATHUR (2004) 88 TTJ 220 (MUM) (III) BAJRANG LAL BANSAL VS. DCIT (2005) CIT 94 TTJ 1071 (DEL) (IV) CIT VS. C.L. KHATRI (2005) 197 CTR 44 (MP) (V) JAGDISH DUGGAL VS. ASSISTANT COMMISSIONER OF INCOME TAX (2009) 24 DTR 174 (CHD. TRIB) (VI) SUKH RAM VS. ASSISTANT COMMISSIONER OF INCOME TAX (2006) 99 ITD 227 (AHD.) (VII) ANAND AUTORIDE LTD. VS. JT. CIT (2006) 99 ITD 227 ( AHD) (VIII) KANTILAL PRABHUDAS PATEL VS. DY. CIT (2005) 93 ITD 117) (INDORE TM) (IX) SMT. RAJRANI GUPTA VS DCIT (2000) 72 ITD 155 (MUM) (X) DR. R.M.L. MEHROTRA VS. ASSISTANT COMMISSIONER OF I NCOME TAX (1999) 64 TTJ 259 (ALL) 2.9 IT IS FURTHER SUBMITTED THAT FOLLOWING JUDICIAL PRECEDENTS HAVE HELD THAT INCRIMINATING MATERIAL SHOULD BE APPLIED IN TO TALITY AND NOT ON PIECE MEAL BASIS TO FAVOR THE REVENUE, THE SEIZED EVIDENC E IS TO BE ACCEPTED IN ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 16 TOTALITY IN THE INTEREST OF NATURAL JUSTICE. THE CO NCEPT OF HEADS I WIN AND TAILS YOU LOSE IS ALIEN TO THE PRINCIPLES OF INCOME TAX LAW. (I) CIT VS. INDIO AIRWAYS PVT LTD (2012) 79 DTR 289 (DE L) (II) VIVEK KUMAR KATHOTIA VS. DCIT (2013) 142 ITD 394 (KOL. TRIB) (III) KANTI LAL & BROTHERS VS. ASSISTANT COMMISSIO NER OF INCOME TAX 52 ITD 412 (PUNE) 2.10 APROPOS THE ESTIMATION OF GP DECLARED IN REGUL AR BOOKS, LD. COUNSEL FURTHER CONTENDS THAT THE BOOK RESULTS HAVE BEEN EXAMINED IN PAST MAKING SOME ADDITIONS, WHICH ON APPEALS HAVE BECOME FINAL. NO INCRIMINATING MATERIAL IS FOUND AS THERE WAS NO SEA RCH ON ASSESSEE. HOWEVER LD. AO AGAIN REVIEWED CONCLUDED BOOK RESULT S AND MADE GP ADDITIONS QUA THE REGULAR BOOKS. THUS WITHOUT ANY D EFECTS IN THE REGULAR BOOKS OF ACCOUNTS GP RATE HAVE BEEN RE DISTURBED. T HE ACTION OF THE LEARNED ASSESSING OFFICER IN APPLYING GP RATE OF 35 % BOTH ON ACCOUNTED AND UNACCOUNTED TURNOVER IS UNTENABLE, UNLAWFUL AND UNJUSTIFIED. IT APPEARS THAT THE LEARNED ASSESSING OFFICER WAS SOME HOW OR OTHER UNDER COMPULSION TO INCREASE THE INCOME OF THE ASSESSEE T O THE ALLEGED SURRENDER OF INCOME OF RS. 2 CRORES DURING 131 STATEMENT DTD. 23.09.2009. THE ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 17 STATEMENT WAS MADE WITHOUT QUANTIFICATION OF PAPERS AND VERIFICATION OF DETAILS. THIS UNVERIFIED STATEMENT WAS GIVEN ONLY T O AVOID THE PRESSURE OF SEARCH RELATED PROCEEDINGS, INSISTENCE OF REVENUE A UTHORITIES; ON CORRECT VERIFICATION OF PAPERS, WORKING AND ACCOUNTS REVEAL ED UNDISCLOSED INCOME TO THE EXTENT OF RS. 75,32,490/- ONLY WHICH IS OFFE RED BY ASSESSEE. LAW RECOGNIZES THE RIGHT OF THE ASSESSEE TO RETRACT AN ADMISSION MADE WITHOUT SUPPORT OF PROPER DETAILS; BY PRODUCING COGENT REAS ONS; ASSESSEE PRODUCED THE SAME IN THE FORM OF PROPER ACCOUNTS AND P & L A /C OF UNACCOUNTED RECORD FOUND FROM THE LOCKER WHICH HAS NOT AT ALL B EEN CONTROVERTED BY ANY AUTHORITY BELOW. THE FOLLOWING CASE LAWS ARE QU OTED FOR THE PROPOSITION THAT ASSESSEE BASED ON COGENT REASONS A ND MATERIAL CAN AMEND, RETRACT OR WITHDRAW ANY SURRENDER OF INCOME: - (A) PULLANGUEGODE RUBBER & PRODUCE CO. LTD. VS. STATE O F KERALA 91 ITR 18 (SUPREME COURT) AN ADMISSION IS AN IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE AND IT IS OPEN BASED ON EVIDENCE FOR THE PERSON WHO MADE THE ADMISSION TO SHOW THAT IT IS INCORRECT. (B) JAIN TRADING CO. V/S ITO (2007) 17 SOT 574 (MUM) ADDITION ON THE BASIS OF ADMISSION MADE DURING SURV EY RETRACTED DURING ASSESSMENT. AN ASSESSEE OFFERING A DDITIONAL ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 18 INCOME DURING THE COURSE OF SURVEY IS NOT BOUND BY THE SAID OFFER FOR ALL TIMES TO COME ---- DURING SURVEY ASSE SSES OFFERED AN ADDITIONAL INCOME OF RS/- 25 LAC ON BEIN G POINTED BY THE SURVEY PARTY THAT THERE WAS UNDER STATEMENT OF STOCK. ASSESSES DID NOT DECLARE SUCH INCOME IN THE IT RETU RN A.O. MADE ADDITION OF RS. 25 LAC. NOT JUSTIFIED . (C) KAILASH BEN MOHANLAL CHOKSI V/S CIT (2008) 14 DTR (GUJ) 257 IT IS TOO MUCH TO GIVE CREDIT TO A STATEMENT RECORD ED AT MIDNIGHT WHERE A PERSON MAY NOT BE IN A POSITION TO MAKE ANY CORRECT AND CONSCIOUS DISCLOSES DISCLOSURE STA TEMENT RECORDED AT ODD HOURS CANNOT BE CONSIDERED TO BE A VOLUNTARY STATEMENT. . (D) CONTECH TRANSPORT SERVICE (P) LTD ORS V/S ACIT (2009) 19 DTR 191 (MUMBAI) 28-11-08 NO ADDITION CAN BE MADE ONLY ON THE BASIS OF ADMISS ION IN STATEMENT V/S 132 (4) (E) CHITRA DEVI V/S ACIT (JODHPUR BRANCH) (2002) 77 TTJ (JD) 640 STATEMENTS RECORDED DURING SEARCH ARE NOT EVIDENCES FOUND DURING SEARCH. ADDITION CANNOT BE MADE ON THE BASIS OF STATEMENT ALONE. (F) AJIT CHINTAMAN KARVE V/S I.T.O. (2009) 311 ITR (AT) 66 (PUNA) ITAT BRANCH . THAT MERELY BECAUSE AN OFFER WAS MADE HAVING NO COGENT BASIS OR APPROVAL OF LAW THAT SHOULD NOT STOP A TAX PAYER FROM CORRECTING HIS MISTAKE. IT WAS THE DULY OF THE A.O. TO TAX ONLY THE LEGITIMATE AMOUNT FROM A TAXPAYER. ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 19 2.11 AS REGARDS THE GP RATE APPLICATION ON REGULAR TURNOVER, HAT THE ASSESSEE IS MAINTAINING ALL THE BOOKS OF ACCOUNTS I NCLUDING CASH BOOK, BANK BOOKS, JOURNAL BOOK, LEDGER, BILLS & VOUCHER A ND STOCK REGISTER ALONG WITH THEIR SUPPORTING AS PRESCRIBED U/S 44AA OF THE INCOME TAX ACT, 1961. THE BOOKS OF ACCOUNTS ARE MAINTAINED ON MERCANTILE SYSTEM OF ACCOUNTING. THE BOOKS OF ACCOUNTS ARE AUDITED. THE AUDITORS HAVE NOT MADE ANY ADVERSE REMARKS REGARDING THE MAINTENANCE OF THE BOOKS OF ACCOUNTS. THE TRADING RESULTS OF THE ASSESSEE ARE R EFLECTED IN THE FOLLOWING TABLE A.Y. TURNOVER GROSS PROFIT G.P. RATE 2008-09 63176638 10983115 30.36% 2007-08 35823089 13216344 36.89% 2006-07 40047615 7015945 17.52% 2005-06 20996585 6268319 29.85% 2004-05 25826192 7418021 28.72% 2003-04 14135008 32.02% 2.12 THE PERUSAL OF THE AFORESAID TABLE REVEALS THE FOLLOWING (A) THE TURNOVER DURING THE YEAR HAS INCREASED BY A LMOST 100% IN COMPARISON TO ASSESSMENT YEAR 2007-08. THEREFORE LEARNED ASSESSING OFFICER WAS WRONG IN COMPARING TH E TRADING RESULTS WITH ASSESSMENT YEAR 2007-08. IT IS COMMON ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 20 KNOWLEDGE THAT INCREASE TURNOVER IS ACHIEVED WITH D ECREASE IN MARGIN OF PROFIT. HENCE THE GP RATE WAS LOW. (B) IT WOULD BE SEEN FROM THE AFORESAID TABLE THAT TRADING RESULTS VARY FROM YEAR TO YEAR. THIS IS BECAUSE THE JEWELLE RY MARKET IS GLOBALLY GOVERNED. HENCE THE MARGINS OF PROFITS VARY AS THE SAME ARE NOT IN THE HANDS OF THE ASSESSEE. IT IS ALSO WORTH NOTICING THAT THE GP RATE DISCLOSED DURING THE YEAR IS BETTER THAN ASSESSMENT YEAR 2004-05 TO 2006-07 AND IT IS O NLY LOWER IN COMPARISON TO ASSESSMENT YEAR 2007-08 THE SAME IS BECAUSE OF THE INCREASE OF TURNOVER. (C) THE LEARNED ASSESSING OFFICER IS NOT JUSTIFYING IN REJECTING THE BOOKS AND ESTIMATING THE PROFITS ON THE GROUND THAT UNACCOUNTED TURNOVER WAS FOUND IN THE PAPERS AND LO CKER. SEPARATE WORKING OF THE PROFITS ON SUCH PAPERS HAS BEEN DONE AND INCOME HAS BEEN SURRENDERED ACCORDINGLY. SO FAR AS REGULAR TURNOVER IS CONCERNED THERE WAS NO CASE EIT HER FOR REJECTING THE TRADING RESULTS OR FOR ESTIMATING THE SAME WITHOUT ANY BASIS. DURING THE COURSE OF IMPUGNED ASSESSMENT PROCEEDING S ALL THESE BOOKS OF ACCOUNTS WERE PRODUCED BEFORE THE LEARNED ASSESSING OFFICER AND NO SERIOUS DEFECT WAS POINTED OUT. THE LEARNED ASSESSI NG OFFICER IS WRONG IN OBSERVING THAT NO STOCK REGISTER WAS MAINTAINED. THE ASSESSEE HAS MAINTAINED QUANTITATIVE DETAILS OF STOCK, WHICH WAS ALSO PRODUCED. WHEN QUANTITATIVE DETAILS HAVE BEEN MAINTAINED, NO INCRI MINATING MATERIAL WAS ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 21 FOUND AND NO SERIOUS DEFECT ARE POINTED OUT LD. AO WAS NOT JUSTIFIED IN REVIEWING THE TRADING RESULT AND ESTIMATE THE REGUL AR GP WHICH WAS ALREADY SUBJECT MATTER OF APPEALS. THE DEFECTS POIN TED OUT BY THE LEARNED ASSESSING OFFICER ARE SUPERFICIAL AND HAVE NO SIGNI FICANCE ON PROFIT EARNING. IN THE ABSENCE OF SPECIFIC DEFECT THERE WA S NO JUSTIFICATION WITH THE LEARNED ASSESSING OFFICER FOR REJECTING THE BOO KS OF ACCOUNTS. THE PROVISIONS OF SECTION 145(3) HAVE THEREFORE BEEN WR ONGLY INVOKED. 2.13 IT IS FURTHER CONTENDED THAT R EJECTION OF ACCOUNTS IS NO GROUND FOR APPLICATION OF HIGHER GP WITHOUT ANY BASIS AS REJEC TION OF BOOKS DOES NOT GIVE A LICENSE FOR MAKING PRESUMPTIVE TRADING ADDIT ION UNLESS SOMETHING SPECIFIC IS POINTED OUT. THE LEARNED ASSESSING OFFI CER NEITHER POINTED OUT ANY SERIOUS DEFECT IN THE BOOKS OF ACCOUNTS NOR ANY COMPARABLE CASE FOR APPLYING GP RATE OF 35%. RELIANCE IS PLACED ON THE FOLLOWING CASE LAWS: I. S. SARABHAIAH SETTY & SONS V. CIT[1967] 64 ITR 1 75 (AP). ASSESSEE MUST BE GIVEN OPPORTUNITY TO REBUT ESTIM ATE. WHERE THE ITO DID NOT STATE THE BASIS OF THE ESTIMATE AND NO OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO REBUT THAT BASIS, HIS ORDE R WAS LIABLE TO BE SET ASIDE. II. YAGGINA VEERARAGHAVULU & MAVULETI SANARAJU & C O. V. CIT[1966] 62 ITR 528 (AP). ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 22 WHERE AFTER REJECTING THE ACCOUNTS OF THE ASSESSEE , AN ESTIMATE OF THE TURNOVER AND GROSS PROFIT IS FIXED TO THE DETRI MENT OF THE ASSESSEE, THE ASSESSEE IS ENTITLED TO KNOW THE BASI S AND ALSO TO AN OPPORTUNITY TO REBUT THE SAME. III. SETH NATHURAM MUNNALAL V. CIT 25 ITR 216 (NAG.) IF THE ASSESSEE FAILS TO SATISFY THE ITO AS TO THE CORRECTNESS OF THE PROFITS RETURNED BY HIM, IT IS OPEN TO THE ITO TO T AKE A HIGHER PERCENTAGE CONSISTENT WITH THE STATE OF TRADE IN TH E LOCALITY OR WITH ANY SPECIAL CIRCUMSTANCES OF THE ASSESSEE WHICH WAR RANT HIGHER RATE OF PROFITS. HOWEVER, THE ITO MUST DISCLOSE THE BASIS AND MANNER OF COMPUTATION AND MAKE HIS ORDER A SPEAKING ORDER. IV. MYSORE FERTILIZER CO. V. CIT 59 ITR 268 (MAD.) THE LAW SAYS THAT THE ITO SHALL MAKE THE ASSESSMENT TO THE BEST OF HIS JUDGMENT; IT MEANS THAT HE MUST MAKE IT ACCORD ING TO THE RULES OF REASON AND JUSTICE AND NOT ACCORDING TO PRIVATE OPINION, BUT ACCORDING TO LAW AND HUMOUR, AND THAT THE ASSESSMEN T IS TO BE NOT ARBITRARY, VAGUE AND FANCIFUL BUT LEGAL AND REGULAR . 2.14 IN VIEW OF THESE SUBMISSIONS IT IS CONTENDED T HAT THE ABOVE ADDITIONS DESERVES TO BE DELETED ON MERITS ALSO. 2.15 LD. DR ON THE OTHER HAND SUPPORTED THE ORDERS OF AO AND CONTENDS THAT:- I. LOOKING AT THE FACTS ABOUT COMPLEXITIES OF LOCKERS OWNERSHIP, LD. AO RECOURSE TO LEGAL PROVISIONS AS AND WHEN THE FACTS UNFOLDED. THEREFORE, THE ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 23 IMPUGNED ASSESSMENTS CANNOT BE HELD AS BAD IN LAW. II. ASSESSEE BY A VALID STATEMENT U/S 131 SURRENDERED THE INCOME OF RS. 2 CRORES TO BE OFFERED, THE DOCTRINE OF PROMISSORY ESTOPPELS APPLIES TO IT. III. LD. AO HAS POWERS TO ESTIMATE THE GP OF UNACCOUNTED BUSINESS. HIS ESTIMATE IS REASONABLE IN AS MUCH AS FOR UNACCOUNTED TURNOVER THE GP RATE OF REGULAR BUSINESS HAS BEEN APPLIED. IV. APROPOS THE ESTIMATION OF GP FROM REGULAR BOOKS, IT IS CONTENDED THAT IN SEARCH ASSESSMENT AO HAS PLENARY POWERS OF ASSESSMENT WHICH INCLUDES REJECTION THEREOF AND ESTIMATION OF GP. 2.16 LD. COUNSEL IN REJOINDER CONTENDS THAT ALL THE FACTS WERE IN THE KNOWLEDGE OF LD. AO, ASSESSEE CANNOT GUIDE HIM IN A DOPTING A PARTICULAR PROVISION AS NEITHER IT IS UNDER OBLIGATION TO DO S O, NOR THE AO WILL COMPLY WITH ASSESSEES GUIDANCE. THEREFORE, IT WAS THE STATUTORY DUTY OF LD. AO TO ADOPT PROPER LEGAL PROVISIONS. HIS ONUS O F CHOOSING APPROPRIATE LEGAL PROVISIONS FOR INITIATION, CONTINUATION AND C ONCLUDING OF ASSESSMENTS CANNOT BE SHIFTED ON ASSESSEE. BESIDES IF THE PROCE EDINGS ARE CONDUCTED ON WRONG JURISDICTIONAL PREMISE, THEY ARE UNTENABLE AND VOID PROCEEDINGS, AS HELD BY CATENA OF JUDICIAL PROCEEDINGS. IN THE N AME OF SEARCH PROCEEDINGS AO CANNOT REVIEW HIS OWN ORDERS WHEN NO INCRIMINATING MATERIAL QUA THE ASSESSEES REGULAR BOOKS IS FOUND AS THERE WAS NO SEARCH ON ASSESSEE. QUA UNACCOUNTED TURNOVER WHEN ON THE B ASIS OF ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 24 INCRIMINATING MATERIAL ITSELF, ACCOUNTS ARE PREPARE D AND PROFITS ARE DETERMINED, IT CANNOT BE SUMMARILY DISCARDED AND AD DITIONS MADE ON WRONG COMPARISON BASED ON GROSS PRESUMPTIONS. 2.17 APROPOS SURRENDER, ASSESSEE HAS CITED VARIOUS CASE LAWS TO THE EFFECT THAT AN UNVERIFIED SURRENDER CAN BE AMENDED BASED ON COGENT MATERIAL. IT HAS BEEN DULY DISCHARGED BY THE ASSESS EE AND THE COGENT EVIDENCE HAS NOT BEEN CONTROVERTED AT ALL BY AUTHOR ITIES BELOW. IN THESE CIRCUMSTANCES THE PROMISSORY ESTOPPELS IS NOT APPLI CABLE TO ASSESSEE AS ITS ACCOUNTS REMAIN UNREBUTTED AS MENTIONED ABOVE. 2.18 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. APROPOS THE VALIDITY OF ASSESS MENTS WE FIND THAT ORIGINAL NOTICE WAS ISSUED U/S 153A AND THERE AS NE ITHER ANY WARRANT OR SEARCH ON ASSESSEE. SIMILARLY WHILE ISSUING NOTIC E U/S 153C NO SATISFACTION IN THIS BEHALF IN THE CASE OF MODI GRO UP NOR THERE WAS ANY ASSESSMENT IN THE CASE OF SHRI GOVIND DEV AS THE 15 3A PROCEEDINGS WERE DROPPED IN THAT CASE. THE SATISFACTION RECORDED BY AO INITIATING 153C IS SILENT REGARDING THE PENDING PROCEEDING INITIATED U /S 153A BY NOTICE DTD. 29.12.2009 IN THE CASE OF THE ASSESSEE. THE PROCEED INGS THOUGH PURPORTED ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 25 TO BE INITIATED U/S 153C THE ASSESSMENTS ARE COMPLE TED U/S 153A RWS 143(3) AS EVIDENCED BY THE RESPECTIVE ORDERS OF LD. AO AND CIT(A). THIS LEADS TO A LEGAL SITUATION WHERE DURING THE PENDENC Y OF 153A PROCEEDINGS NOTICE U/S 153C IS ISSUED. TO FURTHER CONFOUND THE SITUATION THE PROCEEDINGS ARE PURPORTED TO BE CONTINUED U/S 153C BUT THE ASSESSMENTS ARE COMPLETED U/S 153A DESPITE CONSCIOUSLY DROPPING THE NOTICE U/S 153A. WE FIND MERIT IN THE ARGUMENT OF LD. COUNSEL THAT ASSESSMENTS U/S 153A AND 153C ARE INDEPENDENT AND MUTUALLY EXCLUSIV E, AN ASSESSMENT CANNOT BE FRAMED IN CONTINUATION OF BOTH NOTICES AN D SIMILARLY CANNOT BE CONCLUDED U/S 153A IF PROCEEDINGS ARE UNDERTAKEN U/ S 153C. IN VIEW OF THE FACTS, CIRCUMSTANCES AND JUDICIAL PRECEDENTS CI TED ABOVE WE HOLD THAT IMPUGNED ASSESSMENTS ARE UNTENABLE AND BAD IN LAW. OUR VIEW IS FORTIFIED BY JINDAL STAINLESS STEEL LTD. AND SHITAL PRASAD KH ARAG PRASAD (SUPRA). 2.19 APROPOS MERITS ALSO WE ARE OF THE VIEW THAT RE GULAR TRADING RESULTS OF THE ASSESSEES BUSINESS WERE ALREADY SUBJECT MAT TER OF APPEALS, THERE WAS NO SEARCH ON HIS SHOW ROOM, AND THEREFORE, NO I NCRIMINATING MATERIAL WAS FOUND. BY ESTIMATING THE GP FROM REGULAR BUSINE SS LD AO HAS REVIEWED SETTLED POSITION WITHOUT ANY INCRIMINATING MATERIAL IN THIS BEHALF, WHICH IS NOT PERMISSIBLE IN SEARCH ASSESSME NTS. IN VIEW THEREOF WE ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 26 DELETE THE ADDITIONS MADE IN RESPECT OF ESTIMATION OF GP FROM REGULAR BUSINESS. 2.20 APROPOS THE INCOME DECLARED FROM UNACCOUNTED B USINESS IT HAS NOT BEEN DISPUTED THAT ASSESSEE FILED COMPLETE RECORD O F YEAR WISE AND TRANSACTION WISE ACCOUNTS OF MATERIAL FOUND IN THE LOCKER. NO ADVERSE COMMENTS HAVE BEEN OFFERED BY LD. AO IN THIS BEHALF . REGARDING COMPARATIVELY LESSER GP FROM UNACCOUNTED BUSINESS T HAN REGULAR BUSINESS ASSESSEE OFFERED PROPER REASONS WHICH HAVE NOT BEEN EVEN CONSIDERED BY AO. THE GP HAS BEEN ENHANCED NOT BASED ON ANY OBJEC TIVE CONSIDERATIONS BUT BY SUMMARILY RELYING ON ESTIMATE D GP OF REGULAR BUSINESS. IN OUR CONSIDERED VIEW THE INCRIMINATING MATERIAL SHOULD BE CONSIDERED IN TOTALITY AND WHEN ASSESSEE HAS SUBMIT TED COPIOUS ACCOUNTS FOR INCRIMINATING MATERIAL IT CANNOT BE DISCARDED S UMMARILY AS DONE BY LD. AO. SINCE THERE IS NO REBUTTAL IN RESPECTS OF ACCOU NTS OF UNACCOUNTED INCOME FURNISHED BY THE ASSESSEE, THE PROFITS DECLA RED DESERVE TO BE ACCEPTED IN GIVEN FACTS AND CIRCUMSTANCES. SIMILARL Y IT IS NOT DISPUTED THAT VALUE OF STOCK OF JEWELRY FOUND FROM LOCKER WAS TAK EN BY LD. AO ON MARKET PRICE WHEREAS AS PER SETTLED ACCOUNTING PRIN CIPLES SME SHOULD HAVE BEEN VALUED AT COST. CONSEQUENTLY VALUATION AD OPTED BY ASSESSEE IS ITA NO.303/JP/2014 M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD. VS. JCIT (OSD), CENTRAL CIRCLE- 3 JAIPUR . 27 TO BE ADOPTED. THUS THE ADDITIONS IN QUESTION DESER VE TO BE DELETED ON MERITS ALSO. 3.0 IN THE RESULT APPEALS FILED BY ASSESSEE ARE ALL OWED AND THAT OF REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 /01/2016. SD/- SD/- FOE FLAG ;KNO VKJ-IH-RKSYKUH (VIKRAM SINGH YADAV) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 22 /01/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO:- 1. VIHYKFKHZ@ THE APPELLANT- M/S. JYPORE MANUFACTURING JEWELLERS (P) LTD., JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE JCIT (OSD), CENTRAL CIRCLE- 3, JAIPUR / ACIT, CENTRAL CIRCLE- 3, JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 303/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR