MEGHA JEWELLERY, JAIPUR V. INCOME TAX OFFICER, WARD-5-4, JAIPUR

ITA 497/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8530 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 12-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHOK KHANNA JCIT DHK
• Assessee Lawyers: S L PODDAR
• Keywords: Bogus purchase
• Section: 143(3); 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES A, JAIPUR JH JES'K LH 'KEKZ] YS[KK LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C SHARMA, AM & SHRI VIJAY PAL RAO, JM VK;DJ VIHY LA -@ ITA NO. 496/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2007-08 MEGHA JEWELLERY, 6 TH FLOOR, APEX MALL, TONK ROAD, JAIPUR-302015. CUKE VS. I.T.O. (T&J), O/O- PR. CIT-2 JAIPUR. LFKK;H YS[KK LA -@THVKBZVKJ LA-@ PAN/GIR NO.: AALFM 1632 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA -@ ITA NO. 497/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2008-09 MEGHA JEWELLERY, 6 TH FLOOR, APEX MALL, TONK ROAD, JAIPUR-302015. CUKE VS. I.T.O., WARD 5(4), JAIPUR. LFKK;H YS[KK LA -@THVKBZVKJ LA-@ PAN/GIR NO.: AALFM 1632 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA -@ ITA NO. 498/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2009-10 MEGHA JEWELLERY, 6 TH FLOOR, APEX MALL, TONK ROAD, JAIPUR-302015. CUKE VS. I.T.O., WARD 6(2), JAIPUR. LFKK;H YS[KK LA -@THVKBZVKJ LA-@ PAN/GIR NO.: AALFM 1632 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA -@ ITA NO. 499/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2010-11 MEGHA JEWELLERY, 6 TH FLOOR, APEX MALL, TONK ROAD, JAIPUR-302015. CUKE VS. I.T.O., WARD 5(5), JAIPUR. LFKK;H YS[KK LA -@THVKBZVKJ LA-@ PAN/GIR NO.: AALFM 1632 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT ITA 496 TO 499/JP/2018_ MEGHA JEWELLERY VS ITO 2 FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI S.L. PODDAR (ADV) JKTLO DH VKSJ LS @ REVENUE BY : SHRI ASHOK KHANNA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 27/03/2019 MN?KKS 'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 10/04/2019 VKNS'K@ ORDER PER: R.C. SHARMA, A.M. THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDERS OF LD.CIT(A)-2, JAIPUR DATED 26/03/2018 FOR THE A.Y. 2007-08 TO 2010-11 IN THE MATTER OF ORDER PASSED U/S 143(3) READ WITH SECTION 148 OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). 2. IN ALL THESE APPEALS, COMMON GRIEVANCE OF THE ASSESSEE RELATE TO ADDITION UPHELD BY THE LD. CIT(A) IN RESPECT OF BOGUS PURCHASES. 3. RIVAL CONTENTIONS HAVE BEEN HEARD THE RECORD PERUSED. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN MANUFACTURING, TRADING AND EXPORT OF GEMS AND JEWELLERY. THERE WAS A SEARCH IN THE CASE OF SHRI RAJENDRA JAIN GROUP ON 03/10/2013 WHEREIN STATEMENT OF SHRI RAJENDRA JAIN WAS RECORDED AND AS PER INCRIMINATING DOCUMENTS FOUND DURING THE SEARCH, THE A.O. REACHED TO THE CONCLUSION THAT THE ASSESSEE HAD MADE BOGUS PURCHASES FROM THIS GROUP, ACCORDINGLY THE ASSESSMENT WAS REOPENED BY ISSUING NOTICE U/S 148 OF THE ACT AND THE A.O. AFTER REJECTING THE BOOK RESULTS U/S 145(3) OF THE ACT ITA 496 TO 499/JP/2018_ MEGHA JEWELLERY VS ITO 3 AND ADDED 25% OF SUCH BOGUS PURCHASES IN ASSESSEES INCOME. BY THE IMPUGNED ORDER FOR THE A.Y. 2007-08 AND 2008-09, THE LD. CIT(A) DIRECTED THE A.O. TO RESTRICT THE ADDITION BY APPLYING G.P. RATE @ 22% AFTER INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. HOWEVER, IN THE A.Y. 2009-10 AND 2010-11, THE LD. CIT(A) RESTRICTED THE ADDITION TO THE EXTENT OF 15% OF UNVERIFIABLE PURCHASES. 4. AGAINST THE ABOVE ORDERS OF THE LD. CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE ITAT. 5. AT THE OUTSET, THE LD AR OF THE ASSESSEE PLACED ON RECORD THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT(CENTRAL), JAIPUR VS M/S CLARITY GOLD (P) LTD. IN DBIT NO. 125/2014 JUDGMENT DATED 19/09/2017 WHEREIN UNDER SIMILAR FACTS AND CIRCUMSTANCES, THE HONBLE HIGH COURT HAS DIRECTED FOR RESTRICTING THE ADDITION BY TAKING GROSS PROFIT AT 12%. 6. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF GEMS AND JEWELLERY. ON THE BASIS OF SEARCH CONDUCTED AT ITA 496 TO 499/JP/2018_ MEGHA JEWELLERY VS ITO 4 RAJENDRA JAIN GROUP, THE A.O. FOUND THAT THE ASSESSEE HAS MADE BOGUS PURCHASES FROM THE CONCERNS MANAGED BY SHRI RAJENDRA JAIN. ACCORDINGLY, THE ASSESSMENT WAS REOPENED AND AFTER REJECTION OF BOOKS RESULTS U/S 145(3), THE A.O. ADDED 25% OF ALLEGED BOGUS PURCHASES FROM THESE CONCERNS IN ASSESSEES INCOME. BY THE IMPUGNED ORDER, THE LD. CIT(A) HAS UPHELD THE ACTION OF THE A.O. FOR REJECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT, HOWEVER, BY CONSIDERING THE G.P. DECLARED BY THE ASSESSEE IN EARLIER YEAR, THE LD. CIT(A) DIRECTED FOR RESTRICTING THE ADDITION FOR THE A.Y. 2007-08 AND 2008-09 BY ESTIMATING THE G.P. AT 22%. IN THE A.Y. 2009-10 AND 2010-11, THE LD. CIT(A) HAS DIRECTED FOR UPHOLDING ADDITION OF 15% OF THE BOGUS PURCHASES SO MADE BY THE ASSESSEE. AGAINST UPHOLDING THESE ADDITIONS, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 8. THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. M/S CLARITY GOLD (P) LTD. (SUPRA) VIDE ORDER DATED 19/09/2017, WHEREIN THE ASSESSEE WAS ENGAGED IN BUSINESS OF MANUFACTURING OF JEWELLERY AND TRADING OF GEMS STONES AND WAS FOUND TO HAVE OBTAINED BOGUS PURCHASES BILLS. THE ADDITION MADE BY THE A.O. ON ACCOUNT OF BOGUS BILLS WERE DELETED BY THE TRIBUNAL. IN AN APPEAL FILED BY THE REVENUE IN THE HONBLE HIGH COURT, THE HONBLE HIGH COURT HAS DIRECTED FOR RESTRICTING THE ADDITION BY COMPUTING G.P. OF OVERALL SALES AT 12%. IN THIS CASE, THE TRIBUNAL HAVE DELETED THE ITA 496 TO 499/JP/2018_ MEGHA JEWELLERY VS ITO 5 ENTIRE ADDITION AND THE HONBLE HIGH COURT AFTER CONSIDERING THE G.P. SHOWN BY THE ASSESSEE IN EARLIER 5-6 YEARS CAME TO THE CONCLUSION THAT THE ADDITION SHOULD BE RESTRICTED FOR ANY SHORT FALL IN THE G.P. DECLARED BY THE ASSESSEE BY COMPUTING THE SAME AT 12% OF TURNOVER. THE HONBLE HIGH COURT HAS FURTHER DIRECTED THAT WHEREVER PROFIT IS MORE THAN 12% THE SAME WILL NOT BE REFUNDED TO THE ASSESSEE BUT WHERE IT IS LESS THAN 12%, THE INCOME WILL BE ASSESSED ON THE BASIS OF 12% G.P.. THE PRECISE OBSERVATION OF THE HONBLE HIGH COURT AT PARA 7 OF ITS JUDGMENT WAS AS UNDER: 7. TAKING INTO ACCOUNT THE AVERAGE GP RATE WHICH WILL BE APPLIED IN THE PRESENT CASE WILL BE 12 PER CENT. IT IS MADE CLEAR THAT WHERE EVER THE PROFIT IS MORE THAN 12 PERCENT, THE SAME WILL NOT BE REFUNDED TO THE ASSESSEE BUT WHERE IT IS LESS THAN 12 PER CENT, THE INCOME WILL BE ASSESSED ON THE BASIS OF 12 PER CENT GP. IN VIEW OF ABOVE ALL THE APPEALS STAND ALLOWED TO THE AFORESAID EXTENT. 9. IT IS CLEAR THAT THE ASSESSEE BEFORE US IS ALSO INVOLVED IN THE SIMILAR BUSINESS OF MANUFACTURING AND EXPORT OF GEMS AND JEWELLERY AS DISCUSSED BY THE HONBLE HIGH COURT. HERE ALSO THE A.O. ADDED CERTAIN PERCENTAGE OF BOGUS PURCHASES IN ASSESSEES INCOME. THE LD. CIT(A) HAS DIRECTED TO UPHOLD ADDITION BY COMPUTING G.P. AT 22% IN THE A.Y. 2007-08 AND 2008- 09, HOWEVER, IN THE A.Y. 2009-10 AND 2010-11, THE LD. CIT(A) HAS RESTRICTED ADDITION AT 15% OF BOGUS PURCHASES. AS THE FACTS AND ITA 496 TO 499/JP/2018_ MEGHA JEWELLERY VS ITO 6 CIRCUMSTANCES OF THE CASE IS PARI MATERIA, RESPECTFULLY FOLLOWING THE ORDER OF THE HONBLE HIGH COURT, WE DIRECT THE A.O. TO COMPUTE THE AVERAGE G.P. OF THE ASSESSEE BY TAKING INTO ACCOUNT G.P. DECLARED BY ASSESSEE DURING THE A.Y. 2005-06 TO 2010-11. AS PER RECORDS FOLLOWING G.P. HAD BEEN DECLARED BY THE ASSESSEE: A.Y. G.P. RATE 2005-06 14.31% 2006-07 20.24% 2007-08 20.27% 2008-09 20.61% 2009-10 19.43% 2010-11 27.32% AVERAGE G.P. WORKS OUT TO BE 20.36%. KEEPING INTO VIEW AVERAGE G.P. OF 20.36%, WE DIRECT FOR UPHOLDING FOLLOWING ADDITIONS IN THE RESPECTIVE YEARS: A.Y. G.P. DECLARED BY ASSESSEE AVERAGE GP ADDITION TO BE UPHELD 2007-08 20.27 20.36 0.09% 2008-09 20.61 20.36 - 2009-10 19.43 20.36 0.93% 2010-11 27.32 20.36 - IT IS CLEAR FROM THE ABOVE TABLE THAT IN THE A.Y. 2007-08, THE G.P. DECLARED BY THE ASSESSEE WAS LOWERED BY 0.09% AND IN THE A.Y. 2009-10 IT WAS LOWERED BY 0.93% AS COMPARED TO THE AVERAGE G.P. OF 20.36%. HOWEVER, IN THE A.Y. 2008-09 AND 2010-11, THE G.P. DECLARED BY THE ASSESSEE WAS MORE THAN THE AVERAGE G.P., ACCORDINGLY, NO ADDITION IS WARRANTED IN TERMS OF DECISION OF THE HONBLE HIGH COURT, HOWEVER, IF THE ITA 496 TO 499/JP/2018_ MEGHA JEWELLERY VS ITO 7 G.P. DECLARED BY THE ASSESSEE IS MORE THAN THE AVERAGE G.P., THE SAME WILL NOT BE REFUNDED TO THE ASSESSEE. THE A.O. IS ALSO DIRECTED TO VERIFY THE CORRECTNESS OF THE G.P. RATE SO DECLARED BY THE ASSESSEE BEFORE ARRIVING AT THE FINAL FIGURE OF ADDITION TO BE MADE, IN TERMS OF OUR ABOVE DIRECTIONS. WE DIRECT ACCORDINGLY. 10. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH APRIL, 2019. SD/- SD/- FOT; IKY JKO JES'K LH 'KEKZ (VIJAY PAL RAO) (RAMESH C SHARMA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 10 TH APRIL, 2019 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- MEGHA JEWELLERY, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- (I) THE I.T.O., (T&J), JAIPUR. (II) THE I.T.O., WARD 5(4), JAIPUR. (III) THE ITO, WARD 6(2), JAIPUR. (IV) THE ITO, WARD 5(5), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 496 TO 499/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR