ANIL GUPTA, Jaipur V. ACIT, Jaipur

ITA 396/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5543 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 27-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Bogus purchase; Rejection of books of accounts; Onus to prove
• Section: 131

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH HKKXPAN] YS[KK L NL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA- @ ITA NO. 396/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09 SHRI ANIL GUPTA PROP. M/S GEMS TRADING CENTER, N.K. TOWER GOPINATH MARG, M.I. ROAD, JAIPUR. CUKE VS. THE ACIT, CIRCLE-1, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABEPG0362N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI MANISH AGARWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI R. A. VERMA (ADDL.CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 13/12/2017 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 23/02/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 07.04.2014 OF CIT (A), JAIPUR FOR THE ASSESSMENT YE AR 2008-09. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) IS WRONG, UNJUST AND HAS ERRED IN LAW IN CON FIRMING REJECTION OF BOOKS OF ACCOUNTS OF THE APPELLANT BY THE ASSESSING ITA NO. 396/JP/2014 SHRI ANIL GUPTA VS. ACIT 2 OFFICER ON THE GROUND THAT PURCHASES OF RS. 4876498 /- MADE BY THE APPELLANT ARE NOT GENUINE AND ARE NOT VERIFIABL E. 2. THAT THE LD. CIT(A) IS FURTHER WRONG AND HAS ERR ED IN LAW IN CONFIRMING TRADING TO THE EXTENT OF RS. 780240/- MA DE BY THE ASSESSING OFFICER ON ACCOUNT OF ALLEGED UNVERIFIABL E PURCHASES REFERRED TO IN GROUND NO. (1) ABOVE. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) IS WRONG, UNJUST AND HAS ERRED IN LAW IN CON FIRMING DISALLOWANCE OF INTEREST OF RS. 20000/- MADE BY THE ASSESSING OFFICER ALLEGEDLY ON THE GROUND THAT BORROWED MONEY WAS UTILIZED FOR PERSONAL PURPOSE OF THE APPELLANT. 4. THAT THE APPELLANT CRAVES THE PERMISSION TO ADD, OR TO AMEND TO ANY OF GROUND OF APPEAL OR TO WITHDRAWN ANY OF T HEM. 2. GROUND NOS. 1 AND 2 ARE REGARDING REJECTION OF B OOKS OF ACCOUNTS AND TRADING ADDITION CONFIRMED BY THE LD. CIT(A). T HE ASSESSEE IS AN INDIVIDUAL AND PROPRIETOR OF M/S GEMS TRADING CENTE R ENGAGED IN THE BUSINESS OF EXPORT OF GEMS STONES. THE ASSESSEE FIL ED ITS RETURN OF INCOME DECLARING INCOME OF RS. 21,32,970/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESS EE HAS MADE PURCHASES FROM M/S N.V. GEMS & JEWELLERS AND M/S RA JSHRI GEMS TOTAL AMOUNT TO RS. 48,76,498/-. THE AO ASKED THE ASSESSE E TO PRODUCE THE SUPPLIERS WITH THEIR COMPLETE BOOKS OF ACCOUNT. THE ASSESSEE SUBMITTED BEFORE THE AO THAT HE COULD NOT PRODUCE THE SUPPLIE RS WITH THE SAID ITA NO. 396/JP/2014 SHRI ANIL GUPTA VS. ACIT 3 INFORMATION AND REQUESTED TO ISSUE THE NOTICES U/S 133(6)/131 OF THE INCOME TAX ACT TO THE SAID SUPPLIERS. THE AO FURTHE R NOTED THAT IN THE COURSE OF SEARCH CONDUCTED BY THE INVESTIGATION WIN G OF THE DEPARTMENT IN CASE OF M/S HALDIA GROUP, M/S SANJEEV PRAKASHAN GROUP, MOTISON JEWELLERS ETC. IT WAS FOUND THAT A NUMBER O F FIRMS WERE INDULGED IN ISSUING OF BOGUS BILLS WITHOUT PROVIDIN G ANY ACTUAL SALE. ACCORDINGLY, AO PROPOSED TO REJECT THE BOOKS OF ACC OUNT AND MAKE THE ADDITION IN RESPECT OF UNVERIFIABLE PURCHASES MADE FROM THESE TWO PARTIES NAMELY M/S N.V. GEMS & JEWELLERS AND M/S RA JSHRI GEMS. THE ASSESSEE OBJECTED TO THE REJECTION OF BOOKS OF ACCO UNT AND PROPOSED ADDITION BY THE AO HOWEVER, THE AO INVOKED THE PROV ISIONS OF SECTION 145(3) OF THE ACT AND MADE DISALLOWANCE OF 25% UNVE RIFIABLE PURCHASES AMOUNTING TO RS. 12,19,124/-. THE AO RELIED UPON TH E DECISION IN CASE OF M/S SANJAY OIL CAKE INDUSTRIES VS. CIT 316 ITR 274 AS WELL AS M/S VIJAY PROTEIN LTD. VS. ACIT 58 TXAMANN.COM 44. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) AND THE LD. CIT(A) CONFIRMED THE REJECTION OF BOOKS OF ACCO UNTS U/S 145(3) HOWEVER, THE ADDITION MADE BY THE AO WAS RESTRICTED TO 16% OF THE UNVERIFIABLE PURCHASED AND ACCORDINGLY THE ADDITION WAS REDUCED TO RS. 7,80,240/-AS AGAINST RS. 12,19,124/-. ITA NO. 396/JP/2014 SHRI ANIL GUPTA VS. ACIT 4 3. BEFORE US, LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS MAINTAINED THE COMPLETE BOOKS OF ACCOUNTS, BILL S, VOUCHERS, STOCK REGISTER AND OTHER SUPPORTING RECORD AND EMPLOYED R EGULAR METHOD OF ACCOUNTING. THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE AUDITED U/S 44AB OF THE INCOME TAX ACT AND NOT DEFECT AS SUCH W AS POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNT. THE BOOKS OF ACCOUN TS WERE REJECTED BY THE AO ONLY ON THE GROUND THAT PURCHASES MADE BY TH E ASSESSEE FROM THESE TWO PARTIES WERE ALLEGEDLY UNVERIFIABLE. THUS , THE LD. AR HAS CONTENDED THAT THE AO WAS NOT JUSTIFIED IN REJECTIN G THE BOOKS OF ACCOUNTS MERELY ON THE BASIS OF THE PURCHASES MADE FROM THESE TWO PARTIES. HE HAS FURTHER SUBMITTED THAT DURING THE Y EAR UNDER CONSIDERATION THE ASSESSEE DECLARED GP 11.22% THERE FORE, NO FURTHER ADDITION IS REQUIRED TO BE MADE IN THE CASE OF THE ASSESSEE. 4. ON THE OTHER HAND, LD. DR HAS RELIED UPON THE OR DER OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE HONBLE GU JARAT HIGH COURT IN CASE OF M/S SANJAY OIL CAKE INDUSTRIES VS. CIT 316 ITR 274 HAS UPHELD THE ADDITION OF 25% OF BOGUS PURCHASES SIMILAR VIEW WAS TAKEN IN CASE M/S VIJAY PROTEIN LTD. VS. ACIT (SUPRA). HE HAS FUR THER SUBMITTED THAT THE HONBLE SUPREME COURT IN CASE OF N.V. PROTINS L TD. HAS UPHELD DISALLOWANCE OF 100% OF BOGUS PURCHASES THEREFORE, THE ONUS TO PROVE ITA NO. 396/JP/2014 SHRI ANIL GUPTA VS. ACIT 5 THE GENUINENESS OF THE PURCHASES IS ON THE ASSESSEE AND WHEN THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS THE DISAL LOWANCE MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) IS JUSTIFIED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS MADE A DISALLOWANCE OF 25% OF THE PURCHASES MADE BY THE ASSESSEE FROM THES E TWO PARTIES NAMELY M/S N.V. GEMS & JEWELLERS AND M/S RAJSHRI GE MS. THE ASSESSING OFFICER HAS TREATED THE PURCHASE MADE BY THE ASSESSEE FROM THESE TWO PARTIES AS UNVERIFIABLE ON THE GROUND THA T DURING THE COURSE OF INVESTIGATION IN OTHER CASES THE DEPARTMENT FOUN D THAT SOME OF THE PARTIES WERE INDULGED IN PROVIDING ACCOMMODATION EN TRIES WITHOUT ANY ACTUAL DELIVERY OF GOODS. THE ASSESSEE THOUGH PRODU CED THE CONFIRMATION FROM THE SUPPLIERS WHICH WAS NOT ACCEP TED BY THE AO BECAUSE THE NOTICE U/S 131 WERE RETURN UN-SERVED. T HE AO ACCORDINGLY TREATED THE PURCHASE AS UNVERIFIABLE AND CONSEQUENT LY, THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED. ONCE, THE AO HAS REJECTED THE BOOKS OF ACCOUNTS THEN ONLY COURSE OF ACTION AVAILA BLE WITH THE AO IS TO COMPUTE THE INCOME OF THE ASSESSEE ON THE BASIS OF SOME REASONABLE AND PROPER ESTIMATION. THE ASSESSING OFFICER INSTEA D OF PROCEED WITH THE COURSE OF ACTION PROVIDED U/S 145(3) R.W.S. 144 OF THE I.T. ACT HAS ITA NO. 396/JP/2014 SHRI ANIL GUPTA VS. ACIT 6 MADE AN ADDITION OF 25% OF THE PURCHASES FROM THESE TWO PARTIES. THE ADDITION WAS MADE TO THE RETURN INCOME OF THE ASSES SEE. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE INF LATED ITS PURCHASES UPTO 25% BUT THE AO HAS ESTIMATED THE INCOME FROM T HE UNVERIFIABLE PURCHASE AT 25%. IN OUR VIEW THERE IS NO BASIS OF M AKING THE DISALLOWANCE OF 25% OF PURCHASE MADE FROM THESE TWO PARTIES AFTER REJECTION OF BOOKS OF ACCOUNTS. IN CASE THE AO WAS SATISFIED THAT THE PURCHASE FROM THESE TWO PARTIES WERE BOGUS AND SO F OUND ON THE BASIS OF SUPPORTING MATERIAL THEN THE ENTIRE PURCHASES WE RE TO BE DISALLOWED INSTEAD OF MAKING THE ADDITION OF 25% OF THE PURCHA SE TO THE BOOKS RESULT. THUS, ONCE THE BOOKS OF ACCOUNT WERE REJECT ED U/S 145(3) OF THE ACT THE AO WAS REQUIRED TO PROCEED TO MAKE ASSESSME NT ON THE BASIS AT BEST JUDGMENT AND PROPER AND REASONABLE ESTIMATION INSTEAD OF RESORTING TO MAKE THE ADDITION TO THE BOOKS RESULTS . HENCE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE SET ASIDE THE ORDE R OF THE AUTHORITIES BELOW TO THE EXTENT MAKING THE DISALLOWANCE OF THE PURCHASE AND REMIT THE ISSUE TO THE RECORD OF THE ASSESSING OFFICER TO ESTIMATED THE INCOME OF THE ASSESSEE BY APPLYING A PROPER AND REASONABLE GP RATE BY CONSIDERED THE PAST HISTORY OF THE ASSESSEE. IT IS PERTINENT TO NOTE THAT THE ASSESSEE IS AN EXPORTER AND WHEN THE SALES ARE NOT IN DISPUTE THEN ITA NO. 396/JP/2014 SHRI ANIL GUPTA VS. ACIT 7 THE QUANTUM OF PURCHASE CANNOT BE DOUBTED THOUGH TH E INFLATION OF PURCHASES COULD HAVE BEEN VERIFIED BY THE ASSESSING OFFICER. THEREFORE, THE DECISION RELIED UPON THE LD. DR ARE NOT APPLICA BLE IN THE FACTS OF THE CASE IN HAND AS IN THOSE CASES THERE WAS A DEFINITE FINDING THAT THE PURCHASES TO THE EXTENT OF 25% WERE INFLATED AND IN THE OTHER CASE THE PURCHASE MADE BY THE ASSESSEE WERE FOUND TO BE BOGU S AND THE AO MADE THE DISALLOWANCE OF THE ENTIRE PURCHASE. THERE FORE, IN THE CASE IN HAND WHEN THE PURCHASES WERE NOT FOUND TO BE BOGUS BUT THE ASSESSING OFFICER HAS MADE ADDITION OF 25% OF PURCH ASES ON THE GROUND THAT PURCHASE COULD NOT BE VERIFIED DUE TO NON PROD UCTION OF THE SUPPLIERS FOR EXAMINATION. ONCE, THE ASSESSING OFFI CER HAS REJECTED THE BOOKS OF ACCOUNTS THEN THE ADDITION ON ACCOUNT OF P URCHASES BEING PART OF THE TRADING ACCOUNT CANNOT BE SEPARATELY MADE BU T THE AO OUGHT TO HAVE BEEN MADE ESTIMATION OF THE INCOME OF THE ASSE SSEE BY APPLYING REASONABLE AND PROPER GP RATE WHICH SUBSUMES THE DE FECT AND DISCREPANCY OF THE PURCHASE IF ANY. ACCORDINGLY, GR OUND NOS. 1 AND 2 ARE PARTLY ALLOWED. 6. GROUND NO. 3 IS REGARDING DISALLOWANCE OF INTERE ST OF RS. 20,000/- . THE AO NOTED THAT THE ASSESSEE HAS UTILIZED THE B ORROWED FUNDS OF THE BUSINESS ENTITIES FOR PURCHASE OF PLOT OF LAND AT J AGATPURA, JAIPUR AND ITA NO. 396/JP/2014 SHRI ANIL GUPTA VS. ACIT 8 ACCORDINGLY MADE THE DISALLOWANCE ON ACCOUNT OF INT EREST OF RS. 20,000/-. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. 7. BEFORE US, LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS BORROWED A SUM OF RS. 10 LACS FROM M/S ANC JEWE LLERS PVT. LTD. ON 23.12.2007. THE LD. AR HAS ASSERTED THAT THE ASSESS EE HAD INTEREST FREE FUND TO THE TUNE OF RS. 32,38,730/- IN THE SHAPE OF CAPITAL WHICH WAS UTILIZED FOR PURCHASE OF PROPERTY. THEREFORE, WHEN THE AMOUNT OF RS. 10 LACS AVAILABLE IN THE CAPITAL ACCOUNT OF THE ASSESS EE THEN NO DISALLOWANCE OF INTEREST EXPENDITURE IS CALLED FOR. HE HAS RELIED UPON THE FOLLOWING DECISIONS:- MUNGAL SALES CORPORATION VS. CIT 298 ITR 298 CIT VS. RELIANCE UTILITIES & POWER LTD. 8. ON THE OTHER HAND, LD. DR HAS RELIED UPON THE OR DERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT WHEN THERE IS NEXUS BETWEEN BORROWED MONEY AND PAYMENT MADE BY THE ASSESSEE FOR PURCHASE OF LAND THEN, IT IS CLEAR THAT THE ASSESSEE HAS UTILIZ ED THE BORROWED FUNDS FOR THE PURPOSE OF ACQUIRING THE PLOT OF LAND. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. IT IS NOT DISPUTED BY THE REVEN UE THAT THE ASSESSEE IS HAVING BALANCE OF RS. 32 LACS IN HIS CAPITAL ACC OUNT THEREFORE, TO THE ITA NO. 396/JP/2014 SHRI ANIL GUPTA VS. ACIT 9 EXTENT OF THE BALANCE IN THE CAPITAL ACCOUNT OF THE ASSESSEE, THE ASSESSEE CAN MAKE THE DRAWING FROM THE BUSINESS ENT ITIES. THUS, THE PAYMENT MADE BY THE ASSESSEE OF RS. 10.25 LACS FOR PURCHASE OF PLOT OF LAND FROM THE ACCOUNT OF THE PROPRIETY CONCERN WILL BE TREATED AS DRAWING MADE FROM THE ASSESSEES CAPITAL ACCOUNT HA VING BALANCE OF MORE THAN RS. 32 LACS. ACCORDINGLY, WE ARE OF THE C ONSIDERED VIEW THAT WHEN THE ASSESSEE IS HAVING INTEREST FREE AS WELL A S BORROWED FUND THEN THE AMOUNT UTILIZED FOR PURCHASE OF LAND WOULD BE T REATED AS TAKEN FROM INTEREST FREE FUND OF THE ASSESSEE AND BORROWED FUN D WILL BE USED FOR THE BUSINESS PURPOSE OF THE ASSESSEE. HENCE, WE DEL ETE THE DISALLOWANCE OF RS. 20,000/- ON ACCOUNT OF INTEREST . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/02/2018. SD/- SD/- HKKXPAN FOT; IKY JKO (BHAGCHAND) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 23/02/2018. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI ANIL GUPTA, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT - ACIT, CIRCLE-1, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. ITA NO. 396/JP/2014 SHRI ANIL GUPTA VS. ACIT 10 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 396/JP/2014} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR