ITO, Jaipur V. MITHILESH AGARWAL, Jaipur

ITA 38/JPR/2011

• Counselvise Citation: 3823114 RSA 2011
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 17-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA
• Section: 131

Judgement Text

1 ITA 38-11 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 38/JP/2011 ASSTT. YEAR : 2004-05. THE INCOME-TAX OFFICER, VS. SHRI MITHILESH AGARWA L, WARD 2(1), P/O M/S. S.G.JEWELLERS, JAIPUR. KHANDAKA COMPLEX, RAMGANJ BAZAR, JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : MS. ROSHANTA MEENA RESPONDENT BY : NONE ORDER DATE OF ORDER : 14/ 07/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2004-05. 2. THE DEPARTMENT IS OBJECTING IN DELETING THE ENTI RE TRADING ADDITION OF RS. 13,66,250/- AS AGAINST 25% DISALLOWED BY THE AO ON UNVERIFIABLE PURCHASES OF RS. 54,65,000/-. 3. THE ASSESSEE DEALS IN GEMS AND JEWELLERY IN HIS PROPRIETARY CONCERN M/S. S.G. JEWELLERS. DURING THE YEAR THE ASSESSEE HAS DECLARE D GROSS PROFIT RATE OF 1.16% AGAINST GROSS PROFIT RATE OF 0.64% DECLARED IN IMMEDIATELY PRECEDING YEAR. OUT OF TOTAL PURCHASES OF RS. 9.77 CRORES, THE PURCHASES OF RS.54.65 LACS REMAINED UNVERIFIED. THE ASSESSEE WAS REQUIRED TO FILE CONFIRMATION AND TO PRODUCE THE PA RTIES. HOWEVER, PARTIES WERE NOT 2 PRODUCED. SUMMONS ISSUED UNDER SECTION 131 REMAINE D UNSERVED. THEREFORE, THE AO PLACING RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF M/S. SANJAY OIL CAKE INDUSTRIES, 10 DTR 153 (GUJ.) AND IN THE C ASE OF VIJAY PROTEINS LTD. 58 ITD 428 (ITAT AHMEDABAD) ALONG WITH DECISION OF TRIBUNAL IN THE CASE OF SHREE KISHAN MALPANI, 32 TAX WORLD 122 REJECTED THE BOOKS OF ACCOUNT AND MADE A DISALLOWANCE @ 25% OF UNVERIFIABLE PURCHASES WHICH RESULTED IN AN ADDITIO N OF RS. 13,66,250/-. IT WAS SUBMITTED BEFORE LD. CIT (A) THAT BOOKS OF ACCOUNT ARE MAINTA INED WHICH ARE SUBJECT TO AUDIT. ALL THE PURCHASES AND SALES ARE FULLY SUPPORTED BY BILL S AND VOUCHERS. QUANTITATIVE TALLY HAS BEEN MAINTAINED. ONLY ON THE BASIS OF STATEMENT OF THE PARTNER OF M/S. LAXMI DIA GOLD JEWELLERS RECORDED DURING THE COURSE OF SEARCH NO A DVERSE INFERENCE CAN BE DRAWN AGAINST THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT AO WIT HOUT MAKING FURTHER ENQUIRY TO CORROBORATE AS TO WHETHER WHAT WAS STATED BY THE PA RTNER WAS CORRECT OR NOT, DREW INFERENCE AND DOUBTED THE PURCHASES IS NOT JUSTIFIE D. ALL THE PURCHASED MATERIAL WAS SUBJECT TO EXPORT. RELIANCE WAS PLACED ON THE DECI SION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF ADINATH INDUSTRIES, 252 ITR 476 (GUJ.). IT WAS ALSO SUBMITTED THAT PURCHASES MADE FROM M/S. LAXMI DIA GOLD JEWELLERS ARE ENTERED INTO STOCK REGISTER AND NO OPPORTUNITY WAS ALLOWED TO THE ASSESSEE TO CROSS EX AMINE THE PARTNER OF M/S. LAXMI DIA GOLD JEWELLERS., THEREFORE, WITHOUT ALLOWING ANY O PPORTUNITY OF CROSS EXAMINATION, ANY ADVERSE INFERENCE DRAWN AGAINST THE ASSESSEE IS NOT JUSTIFIED. IT WAS FURTHER SUBMITTED THAT GROSS PROFIT RATE SHOWN BY ASSESSEE IS BETTER AS CO MPARED TO EARLIER YEAR. CHART SHOWING GROSS PROFIT RATE OF LAST THREE YEARS WAS ALSO FILE D. RELIANCE WAS PLACED ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF INNANI MARBLES PVT.LTD.,316 ITR 125 (RAJ.) WHEREIN IT IS HELD THAT IF THERE IS NO CHANGE IN FA CTUAL POSITION, THE RESULT DECLARED IN 3 EARLIER YEAR ARE GOOD BASIS FOR ESTIMATION OF GROSS PROFIT OF THE YEAR UNDER SCRUTINY. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERI AL ON RECORD, THE LD. CIT (A) FOUND THAT AO WAS NOT JUSTIFIED IN MAKING TRADING ADDITIO N @ 25% OF UNVERIFIABLE PURCHASES. THE CASES RELIED UPON BY THE AO WERE FOUND DISTINGU ISHABLE BY THE JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF M/S. GEMS PARADISE. THE LD . CIT (A) NOTED THAT SINCE CERTAIN PURCHASES REMAINED UNVERIFIABLE, THEREFORE, REJECTI ON OF BOOKS OF ACCOUNT IS CORRECT. HE FURTHER OBSERVED THAT GROSS PROFIT RATE DECLARED BY ASSESSEE IS MUCH BETTER AS COMPARED TO GROSS PROFIT DECLARED IN EARLIER YEAR AND YEAR BEFO RE THAT. ACCORDINGLY THE AO WAS DIRECTED TO DELETE THE ENTIRE TRADING ADDITION. 4. NOW THE DEPARTMENT IS IN APPEAL HERE BEFORE THE TRIBUNAL. 5. THE LD. D/R PLACED RELIANCE ON THE ORDER OF AO. 6. NONE APPEARED ON BEHALF OF THE ASSESSEE. THE AP PEAL IS BEING DISPOSED AFTER CONSIDERING THE ORDERS OF THE AO AND LD. CIT (A). 7. AFTER CONSIDERING THE ORDERS OF AO AND LD. CIT ( A), WE FIND THAT LD. CIT (A) WAS JUSTIFIED IN UPHOLDING THE REJECTION OF BOOKS OF AC COUNT. THE JAIPUR BENCHES OF THE TRIBUNAL ARE TAKING A CONSISTENT VIEW THAT WHERE CE RTAIN PURCHASES REMAIN UNVERIFIABLE, REJECTION OF BOOKS OF ACCOUNT IS CORRECT. HOWEVER, JAIPUR BENCHES ARE ALSO TAKING A CONSISTENT VIEW THAT IF ANY ADDITION CAN BE MADE IN TRADING ACCOUNT THAT CAN BE MADE AFTER TAKING INTO CONSIDERATION THE PAST HISTORY AND CUR4 RENT EVENTS OF THE CASE. NO DOUBT PAST HISTORY IS IN FAVOUR OF THE ASSESSEE AS GROSS PROFI T DECLARED BY ASSESSEE AT 1.16% IS BETTER THAN 0.64% DECLARED IN THE IMMEDIATELY PRECEDING YE AR AS WELL AS 0.39% DECLARED IN THE YEAR BEFORE I.E.2002-03. HOWEVER, THE FACTS REMAIN THAT PURCHASES OF RS. 50 LACS OR ODD REMAINED UNVERIFIABLE, THEREFORE, WE ARE OF THE VIE W THAT IF A TRADING ADDITION OF RS. 4 1,00,000/- IS SUSTAINED TO COVER UP THE LEAKAGE, I F ANY, THAT WILL MEET THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY. 8. IN THE RESULT, APPEAL OF THE DEPARTMENT IS ALLOW ED IN PART. 9. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 14. 07.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- THE ITO WARD 2(1), JAIPUR. SHRI MITHILESH AGARWAL, JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 38/JP/2011) BY ORDER, AR ITAT JAIPUR.