ADDL CIT RG 1, MUMBAI V. EXIM GEMS, MUMBAI

ITA 4649/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62661 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 05-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 04-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M RAJAN
• Keywords: Bogus purchase

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI .. , ! ' #$ %& , ' ', ( BEFORE SHRI R.S.SYAL, AM AND SHRI AMIT SHUKLA, JM ./ ITA NO.4649/MUM/2010 ( '* + '* + '* + '* + / / / / ASSESSMENT YEAR : 2006-2007) THE INCOME TAX OFFICER WARD 16(3)(1) MUMBAI. M/S.EXIM GEMS 236 PANCHRATNA, OPERA HOUSE MUMBAI 400 004. PAN : AAAFE8527G. ( ,- / // / APPELLANT) * * * * / VS. ( ./,-/ RESPONDENT) ,- 0 00 0 1 1 1 1 / APPELLANT BY : SHRI M.RAJAN ./,- 0 1 0 1 0 1 0 1 / RESPONDENT BY : SHRI RAKESH JOSHI * 0 $! / / / / DATE OF HEARING : 05.07.2012 23+ 0 $! / DATE OF PRONOUNCEMENT : 11.07.2012 ' % ' % ' % ' % / / / / O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 26.03.2010 IN RELATION TO ASSESSMENT YEAR 2006-2007. 2. THE ONLY ISSUE RAISED THROUGH VARIOUS GROUNDS IS AGAINST THE DELETION OF ADDITION TO THE EXTENT OF 25% OF BOGUS PURCHASES, M ADE BY THE ASSESSING OFFICER. BRIEFLY STATED THE FACTS OF THE CASE ARE T HAT THE ASSESSEE AT THE MATERIAL TIME WAS ENGAGED IN THE MANUFACTURING AND EXPORT OF PRECIOUS AND SEMI- PRECIOUS GEMS STONES. DURING THE YEAR IN QUESTION, THE ASSESSEE SHOWED TOTAL TURNOVER OF ` 12.28 CRORE WITH GROSS PROFIT RATE OF 5.75% AS AGAI NST LAST YEARS TURNOVER OF ` 9.27 CRORE WITH GROSS PROFIT RATE OF 5.33%. THE ASS ESSING OFFICER ITA NO.4649/MUM/2010 M/S.EXIM GEMS. 2 OBSERVED THAT THE ASSESSEE MAINTAINED STOCK REGISTE R ON THE BASIS OF QUANTITY OF STONES. IN HIS OPINION SUCH STOCK REGISTER OUGHT T O HAVE BEEN MAINTAINED ON THE BASIS OF QUALITY AS WELL. FURTHER HE OBSERVED THAT THE ASSESSEE HAD SHOWN PURCHASES FROM THE FOLLOWING FIVE PARTIES TOTALING ` 2.90 CRORE AS UNDER:- SR. NO. NAME OF PARTIES FROM WHOM PURCHASES MADE AMOUNT IN ` 1. M/S.ANAMIKA GEMS 59,75,037 2. KRISHNA DIAM 26,65,593 3. M/S.UTTAM GMES 44,28,803 4. M/S S.S.DIAMOND 72,23,757 5. M/S.MEENAKSHI GEMS PVT.LTD. 87,91,580 TOTAL 2,90,84,770 3. THE ASSESSING OFFICER NOTICED THAT IN THE YEAR 2 003 A SEARCH OPERATION WAS CARRIED OUT IN THE CASE OF M/S.SANJEEV PRAKASHA N GROUP AND THEREAFTER DETAILED INVESTIGATION WAS MADE IN WHICH IT WAS FOU ND THAT SOME OF THE PARTIES WERE INVOLVED IN THE RACKET OF PROVIDING BOGUS BILL S WITHOUT ANY ACTUAL SALES TO DIFFERENT PARTIES IN THE TRADE OF GEMS AND JEWELLER Y. THE ASSESSING OFFICER RECEIVED INFORMATION FROM THE DIRECTOR OF INCOME TA X (INVESTIGATION) JAIPUR VIDE LETTER DATED 26.07.2007 STATING THAT THE SEARC H AT HALDIA GROUP ON 20.04.2007 TRANSPIRED A RACKET OF ISSUANCE OF BILLS IN RESPECT OF PRECIOUS AND SEMI-PRECIOUS ON CERTAIN PERCENTAGE OF COMMISSION O NLY. THE ASSESSING OFFICER GOT CONDUCTED INQUIRIES IN RESPECT OF CERTA IN CONCERNS AT SURAT. AS PER THE REPORT OF ADIT (INV.)-III, SURAT THESE PARTIES WERE NOT EXISTING AT THE GIVEN ADDRESSES. THE ASSESSING OFFICER OBSERVED THAT IN R ESPECT OF THE PARTIES OF SURAT FROM WHOM THE ASSESSEE HAD SHOWN TO HAVE MADE PURCH ASES, WERE NOT AVAILABLE ON THE GIVEN ADDRESSES. HE TOOK INTO CONSIDERATION THE FACT THAT FOR THE ASSESSMENT YEAR 2005-2006 ALSO, THERE WERE SIMILAR DEFECTS IN THE BOOKS OF ACCOUNT WHICH WERE REJECTED BY HIM. DRAWING ASSISTA NCE FROM THE VIEW TAKEN ITA NO.4649/MUM/2010 M/S.EXIM GEMS. 3 BY HIM FOR ASSESSMENT YEAR 2005-2006, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT FOR THE CURRENT YEAR AS WELL AND T HEREAFTER MADE ADDITION OF ` 72.71 LAKH BY DISALLOWING 25% OF SUCH UNVERIFIABLE PURCHASES OF ` 2.90 CRORE. THE LEARNED CIT(A) DELETED THE ADDITION. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS OBSERVED THAT THE ASSESSIN G OFFICER HAS REJECTED THE BOOKS OF ACCOUNT FOR THE CURRENT YEAR BY MAINLY FOC USING ON THE SUCH REJECTION OF ACCOUNT BOOKS FOR THE ASSESSMENT YEAR 2005-2006. ON A SPECIFIC ENQUIRY, THE LEARNED AR HAS PLACED ON RECORD A COPY OF THE ORDER DATED 31.07.2009 PASSED BY THE TRIBUNAL FOR ASSESSMENT YEAR 2005-2006 IN IT A NO.1386/JP/08 HOLDING THAT THE BOOKS OF ACCOUNT WERE CORRECTLY MAINTAINED . RESULTANTLY THE SIMILAR ADDITION SO MADE BY THE AO WAS FINALLY DELETED. IN REACHING THIS CONCLUSION THE TRIBUNAL OBSERVED THAT THE GROSS PROFIT RATE DECLAR ED IN SUCH PRECEDING YEAR WAS BETTER THAN THAT OF THE EARLIER YEAR. SINCE THE FAC TS AND CIRCUMSTANCES FOR THE CURRENT ARE SIMILAR AND FURTHER THE ASSESSING OFFIC ER HAS RELIED ON THE VIEW TAKEN BY HIM FOR ASSESSMENT YEAR 2005-2006, WE ARE OF THE CONSIDERED OPINION THAT THE BOOKS OF ACCOUNT FOR THE CURRENT YEAR CANN OT BE REJECTED. IT IS FURTHER BORNE OUT FROM THE ASSESSMENT ORDER ITSELF THAT THE ASSESSEE NOT ONLY REGISTERED INCREASE IN THE AMOUNT OF TURNOVER BUT ALSO IN THE GROSS PROFIT RATE FROM 5.33% OF THE PRECEDING YEAR TO 5.75% FOR THE CURRENT YEAR . EVEN IN A HYPOTHETICAL CASE OF A VALID REJECTION OF BOOKS OF ACCOUNT, IT IS ALW AYS THE TRADING RESULTS OF THE PRECEDING YEAR WHICH CONSTITUTE A BASIS FOR ADOPTIO N IN THE SUCCEEDING YEAR UNLESS THE FACTS AND CIRCUMSTANCES JUSTIFY DEPARTUR E THERE FROM. IN THE INSTANT CASE IT IS OBSERVED THAT THE GROSS PROFIT RATE OF T HE ASSESSEE IS SHOWING A PROGRESSING TREND OVER THE PRECEDING YEAR. IN THE L IGHT OF THE ABOVE FACTS WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED CIT(A) W AS JUSTIFIED IN DELETING THE ADDITION BY THE IMPUGNED ORDER. ITA NO.4649/MUM/2010 M/S.EXIM GEMS. 4 5. 4 $5 6 0 7 !46 0 6$ 89 IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JULY, 2012. . ' % 0 23+ ! 7 :'*5 3 0 ; SD/- SD/- (AMIT SHUKLA) (R.S.SYAL) ' ' ' ' ' ' ' ' / JUDICIAL MEMBER ! ' ! ' ! ' ! ' / ACCOUNTANT MEMBER MUMBAI ; :'* DATED 11 TH JULY, 2012. DEVDAS* ' % 0 .'$#< = <+$ ' % 0 .'$#< = <+$ ' % 0 .'$#< = <+$ ' % 0 .'$#< = <+$/ COPY OF THE ORDER FORWARDED TO : 1. ,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. > () / THE CIT(A)-I, JAIPUR 4. > / CIT 5.