DCIT, Jaipur V. JADAU JEWELLERS & MFG (P) LTD., Jaipur

ITA 502/JPR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5563 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 06-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DR DHK
• Keywords: Bogus purchase; Unexplained cash credit; Rejection of books of accounts; Bogus Share capital; Gift; Recovery proceedings; Business income; Depreciation; Business expenditure; Income from undisclosed sources; Document seized; Principle of natural justice; Corroborative evidences; Validity of assessment; Assessment record; Block assessment; Benefit of exemption; Documents seized
• Section: 40A(3); 143(3); 153A; 234B; 131; 68; 145; 132; 144

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 HKKXPUN] YS[KK LNL; ,O JH DQY HKKJR] U;KF;D L NL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHAR AT, JM VK;DJ VIHY LA-@ ITA NO. 446/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 M/S. JADA U JEWELLERS & MANUFACTURERS (P) LTD. B-1, TRIMURTI CIRCLE, GOVIND MARG JAIPUR CUKE VS. THE DCIT CENTRAL CIRCLE-2 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABCJ 6114 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 502/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 THE DCIT CENTRAL CIRCLE-2 JAIPUR CUKE VS. M/S. JADAU JEWELLERS & MANUFACTURERS (P) LTD. B-1, TRIMURTI CIRCLE, GOVIND MARG JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABCJ 6114 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 447/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 M/S. JADA U JEWELLERS & MANUFACTURERS (P) LTD. B-1, TRIMURTI CIRCLE, GOVIND MARG JAIPUR CUKE VS. THE DCIT CENTRAL CIRCLE-2 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABCJ 6114 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 2 VK;DJ VIHY LA-@ ITA NO. 503/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 THE DCIT CENTRAL CIRCLE-2 JAIPUR CUKE VS. M/S. JADAU JEWELLERS & MANUFACTURERS (P) LTD. B-1, TRIMURTI CIRCLE, GOVIND MARG JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABCJ 6114 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI VIJAY GOYAL AND SHRI GULSHAN AGARWAL, CA JKTLO DH VKSJ LS@ REVENUE BY :SHRI R.A. VERMA, ADDL.CIT - DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 20/02/2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 28 /02/2017 VKNS'K@ ORDER PER BHAGCHAND, AM THE ABOVE APPEALS ARE THE CROSS APPEALS FILED AGAI NST SEPARATE ORDERS OF THE LD. CIT(A)-4, JAIPUR DATED 23-02-2016 AND 26-02-2016 FOR THE ASSESSMENT YEARS 2010-11 AND 2011-12 RESPECTIVE LY. 2.1 THE GROUNDS RAISED BY THE ASSESSEE AND REVENUE IN RESPECTIVE APPEALS FOR THE ASSESSMENT YEAR 2010-11 ARE AS UNDE R:- ITA NO.446/JP/2016 ASSESSEE 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD CIT(A) ERRED IN REJECTING CONTENTION OF THE ASSE SSEE THAT THE REFERENCE FOR SPECIAL AUDIT UNDER S.142(2A) OF INCOME TAX ACT IS BAD IN LAW AND INVALID AND AIMED AT GETTING EXTENDED PERIOD OF LIM ITATION AND THUS, THE LD CIT(A) ERRED IN NOT DECLARING THE ASSESSMENT ORD ER DATED 14.11.2013 ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 3 PASSED U/S 144 READ WITH SECTION 153A OF INCOME TAX ACT, 1961 AS TIME BARRED, WITHOUT JURISDICTION, VOID AB-INITIO AND BA D IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD CIT(A) ERRED IN REJECTING CONTENTION OF THE ASSE SSEE THAT THE REFERENCE TO SPECIAL AUDIT REPORT UNDER SECTION 142(2A) OF IN COME TAX ACT IS PURELY BASED ON THE RECOMMENDATION IN APPRAISAL REP ORT. THE AO HAS NOT APPLIED HIS MIND WITH REGARD TO THE NATURE AND COMPLEXITY OF THE ACCOUNTS OF THE ASSESSEE. IT IS CONTENDED THAT THE AOS OPINION CANNOT BE SUBSTITUTED BY ANOTHER OFFICERS OPINION. THUS, THE LD CIT(A) ERRED IN NOT DECLARING THE REFERENCE TO SPECIAL AUDIT REPORT UND ER SECTION 142(2A) OF INCOME TAX ACT IS BAD IN LAW AND INVALID AND ASSESS MENT ORDER DATED 14.11.2013 PASSED U/S 144 READ WITH SECTION 153A OF INCOME TAX ACT, 1961 AS BAD IN LAW AND VOID AB-INITO. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD CIT(A) ERRED IN REJECTING CONTENTION OF THE ASSE SSEE THAT THE ASSESSMENT ORDER PASSED U/S 144 R.W.S. 153A OF THE INCOME TAX ACT, 1961 IS VOID AB-INITIO AND BAD IN LAW AND DESERVES TO BE ANNULLED AS THE SPECIAL AUDITORS HAVE COMPUTED THE INCOME OF THE AS SESSEE ON THE BASIS OF CERTAIN PRESUMPTION AND ASSUMPTION, POSSIBILITIE S AND PROBABILITIES DEHORS OF MATERIAL AND THE AO HAS BORROWED THE SAME IN THE ASSESSMENT, MEANING THEREBY THE AO HAS DELEGATED THE TASK OF FR AMING AN ASSESSMENT TO THE AUDITOR. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD CIT(A) ERRED IN REJECTING CONTENTION OF THE ASSE SSEE THAT THE SPECIAL AUDITORS HAVE CONDUCTED THE AUDIT BEYOND THE SCOPE OF THE PROVISIONS OF SECTION 142(2A) BY RECASTING THE BOOKS OF ACCOUNT A ND BY APPLYING PRESUMPTION AND ASSUMPTION AND SUCH AUDIT REPORT CA NNOT BE CONSIDERED FOR THE ASSESSMENT OF THE ASSESSEE. THEREFORE AND T HUS, THE LD CIT (A) ERRED IN NOT DECLARING THE ENTIRE ASSESSMENT AS BAD IN LAW. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD CIT(A) ERRED IN REJECTING CONTENTION OF THE ASSE SSEE THAT THE LEARNED A.O. PASSED THE ASSESSMENT ORDER BASED ON NO EVIDEN CE OR ON IRRELEVANT EVIDENCE AND ON SURMISES AND CONJECTURES AND THE FA CTS OF THE CASE STATED IN ASSESSMENT ORDER ARE CONTRARY TO THE RECO RDS AND IS AGAINST THE DOCTRINE OF UDI ALTERM PARTEM, A PRINCIPLE OF NAT URAL JUSTICE. THEREFORE AND THUS THE LD CIT(A) ERRED IN NOT DECLARING THE A SSESSMENT ORDER PASSED U/S 144 READ WITH SECTION 153A, AS BAD IN LA W AND VOID AB-INITIO. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A) ERRED IN NOT DECLARING THE ENTIRE ASS ESSMENT AS PERVERSE AND VITIATED IN LAW MORE SO WHEN THE DEPARTMENT DID NOT FIND AND SEIZE ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 4 UNDISCLOSED ASSETS AFTER RUMMAGE OF ALL CORNERS OF HOUSE AND BUSINESS PREMISES OF THE ASSESSEE GROUP. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD CIT(A) ERRED IN CONFIRMING THE TRADING ADDITION OF RS.2,59,56,858/- BY ESTIMATING GP RATE @ 24% ON THE ESTIMATED SALES OF RS.26.00 CRORES OUT OF THE TRADING ADDITION OF RS.5,30,97,994/- MADE BY AO. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LOWER AUTHORITIES ERRED IN NOT ALLOWING THE BENEFIT OF TELESCOPING, RECYCLING AND ROTATION OF FUNDS. ITA NO.502/JP/2016 REVENUE 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE LD CIT(A) WAS RIGHT IN RESTRICTING THE TRADING ADDITIO N OF RS.5,30,97,994/- (I.E. 5,09,67,486/- MINUS RS.21,30,508/-) TO RS.2,5 9,56,858/- MADE BY THE AO WITHOUT APPRECIATING THE FACTS GIVEN IN SPECIAL AUDIT REPORT WHICH HAS ALSO BEEN HELD VALID. 2. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE THE LD CIT(A) WAS RIGHT IN RESTRICTING THE DISALLOWANCE FR OM RS.6,83,29,329/- TO RS.3,35,092/- MADE U/S 40A(3) OF THE ACT WITHOUT AP PRECIATING THE FACT THAT THIS VIOLATION OF THE PROVISION OF THE SECTION 40A(3) OF THE ACT HAS BEEN MENTIONED IN THE SPECIAL AUDIT REPORT. 3. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE THE LD CIT(A) WAS RIGHT IN RESTRICTING THE DISALLOWANCE FR OM RS.6,99,228/- TO RS.4,81,614/- MADE U/S 40(A)(IA) OF THE ACT WITHOUT APPRECIATING THE FACT THAT THIS VIOLATION OF THE PROVISION OF THE SECTION 40(A)(IA) OF THE ACT HAS BEEN CLEARLY MENTIONED IN THE SPECIAL AUDIT REPORT. 4. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF T HE CASE THE LD CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS.70, 00,000/- MADE ON ACCOUNT OF BOGUS SHARE CAPITAL INTRODUCED WITHOUT A PPRECIATING THE FACT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS DE SPITE VARIOUS OPPORTUNITIES OF BEING HEARD GRANTED TO THE ASSESSE E, THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE TRANSACTION AND IDENTITY AND CREDITWORTHINESS OF THE RELATED PARTIES. 5. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE THE LD CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS.5,5 16/- BEING BILL PREMIUM EXPENSES WITHOUT APPRECIATING THE FACT THAT SAME CANT BE CONSIDERED TO BE ADMISSIBLE EXPENSES SINCE THE SAME HAS BEEN INCURRED TO PROCURE BOGUS PURCHASE BILL. ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 5 6. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE THE LD CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS.1,6 6,336/- MADE BY DISALLOWING 15% OF THE TOTAL EXPENSES FOUND RECORDE D IN THE BOOKS OF ACCOUNTS NAMED JADAVJIMAINTAINED BY THE ASSESSEE. 7. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE THE LD CIT(A) WAS RIGHT IN ALLOWING THE APPEAL OF THE ASSE SSEE WITHOUT APPRECIATING THE FACT THAT AMOUNT LYING IN THE PD A CCOUNT HAS TO BE ADJUSTED AGAINST THE EXISTING LIABILITY OF THE ASSE SSEE AND AS PER EXPLANATION-2 OF THE SECTION 132B OF THE I.T. ACT, 1961. IT HAS BEEN CLARIFIED THAT THE EXISTING LIABILITY DOESNT INCL UDE ADVANCE TAX PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF PART-C OF CHAP TER XVII. 3.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURIN G AND TRADING OF STUDDED JEWELLERY. THE DEPARTMENT CARRIED OUT SEARC H & SEIZURE OPERATIONS ON ASSESSEE ON 06-05-2010 (COPY OF PANCH NANA AND INVENTORY PLACED AT PB PAGE 1-22). THE CASE OF ASSESSEE WAS C ENTRALIZED AT CENTRAL CIRCLE-2, JAIPUR. NOTICE U/S 153A WAS ISSUED ON 16. 09.2011, WHICH WAS SERVED ON ASSESSEE ON 23.03.2012 (COPY AT PB PAGE 7 5). IN PURSUANT TO NOTICE U/S 153A OF INCOME TAX ACT, THE ASSESSEE FIL ED ITS RETURN ON 31.03.2012 DECLARING THE TOTAL INCOME OF RS. 2,31,1 7,670/- ( COPY AT PB PAGE 76-122). SINCE THE DUE DATE OF FILING OF RETUR N U/S 139(1) OF INCOME TAX ACT, 1961 FOR AY 2010-11 WAS 30.09.2010 WHICH W AS NOT EXPIRED AS ON THE DATE OF SEARCH, THEREFORE NO RETURN U/S 139( 1) OF INCOME TAX ACT WAS FILED FOR AY 2010-11. THE ASSESSMENT PROCEEDING S WERE COMMENCED BY ISSUE OF NOTICE U/S 143(2) OF INCOME TAX ACT, 19 61 ON 11.06.2012 AND ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 6 LATER ON VIDE VARIOUS NOTICES/QUERY LETTERS (COPY A T PB PAGE 183, 189- 190, 215-230, 255-256, 287-288, 297-301 AND 314-318 ) CERTAIN INFORMATION WERE REQUIRED FROM ASSESSEE. THE ASSESS EE COMPLIED THE NOTICES/QUERY LETTERS BY SUBMITTING ITS REPLY ON VA RIOUS DATES COPY AT ( COPY AT PB PG 184-185, 191-214, 231-254, 257-263, 264-269, 270-275, 276-284, 285-286 289-296, 302-313, 319-324, 325-328 , 329-331, 332- 334, 335, 336-338, AND 339-343). DURING THE COURSE OF SEARCH CERTAIN DOCUMENTS WERE FOUND AND SEIZED RELATING TO THE ASS ESSEE INCLUDING A CPU CONTAINING THE BOOKS OF ACCOUNTS NAMED AS JADAVJI BEING DUPLICATE/PARALLEL BOOKS OF ACCOUNTS OF THE ASSESSE E COMPANY MAINTAINED IN THE FORM OF MEMOIRS, CONTAINING THE ENTRIES OF R ECORDED AND UNRECORDED TRANSACTIONS OF THE ASSESSEE COMPANY. HOWEVER THE B OOKS OF ACCOUNTS NAMED AS JADAVJI WERE NEITHER COMPLETE NOR CORREC T. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS OPINED BY AO THAT THE ENTRIES IN THE BOOKS OF ACCOUNTS NAMED AS JADAVJI WERE EXTREMELY COMPLEX IN NATURE THEREFORE THE AO MOVED A PROPOSAL TO LD CIT, CENTR AL, JAIPUR VIDE LETTER DATED 13.03.2013 FOR APPROVAL OF SPECIAL AUDIT OF A CCOUNTS OF THE ASSESSEE U/S 142(2A) OF INCOME TAX ACT, 1961. IN RESPONSE TO THE PROPOSAL OF AO, THE LD CIT (CENTRAL), JAIPUR ISSUED A SHOW CAUSE NO TICE DATED 15.03.2013 (COPY AT PB PAGE 176-177) TO THE ASSESSEE FOR APPROVAL OF SPECIAL AUDIT ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 7 AND IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSES SEE OBJECTED THE REFERENCE OF SPECIAL AUDIT U/S 142(2A) OF INCOME TA X ACT, 1961 VIDE ITS LETTER DATED 18.03.2013 (COPY AT PB PAGE 178-179) BUT THE PROPOSAL FOR SPECIAL AUDIT WAS APPROVED BY THE LD CIT, CENTRAL, JAIPUR AND THE AO VIDE HIS LETTER DATED 22.03.2013 (COPY AT PB PAGE 180-18 1) DIRECTED TO ASSESSEE TO GET ITS ACCOUNTS AUDITED U/S 142(2A) OF INCOME TAX ACT, 1961 AS PER THE TERMS OF REFERENCE WHICH HAS BEEN REPROD UCED BY AO AT PAGE 7 OF ASSESSMENT ORDER. THE SPECIAL AUDITORS GAVE THE REPORT VIDE THEIR REPORT DATED 14.09.2013 WHICH WAS RECEIVED TO ASSESSEE ON 17.09.2013 AND THE SAME WAS FILED TO AO ON THE SAME DATE (COPY OF LETT ER IS AT PB PAGE 182) WHEREIN THE NET PROFIT OF THE ASSESSEE COMPANY WAS COMPUTED RS. 7,45,84,379/- AS AGAINST RS. 2,36,16,893/- SHOWN BY THE ASSESSEE. THE COPY OF SPECIAL AUDIT REPORT IS SEPARATELY FILED BY THE ASSESSEE AS PAPER BOOK VOL-4 . THE AO REJECTED THE BOOKS OF ACCOUNTS OF ASSESS EE AND ESTIMATED THE PROFITS BY APPLYING THE PROVISIONS OF SECTION 145(3) OF INCOME TAX ACT, 1961 AND ASSESSMENT ORDER VIDE HIS ORDER D ATED 14.11.2013 U/S 144 R.W.S.153A OF INCOME TAX ACT, 1961 ASSESSING TH E TOTAL INCOME OF ASSESSEE RS. 15,28,93,350/- AS AGAINST RETURNED INC OME OF RS. 2,31,17,670/- BY MAKING THE FOLLOWING ADDITIONS/DIS ALLOWANCES: - S. NO. PARTICULARS AMOUNT (RS.) ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 8 1. TRADING ADDITION ON UNACCOUNTED SALES AND BY ESTIMATION OF GP @26.21% ON SALES OF RS. 26,96,46,926/- (AS WORKED OUT BY SPECIAL AUDITOR) R S. 5,09,67,486/-+21,30,508 5,30,97,994 2 . DISALLOWANCE ON A/C OF ALLEGED PERSONAL ELEMENT IN (A) ELECTRICITY EXPENSES RS. 1,322/- (B) TRAVELLING EXP ENSES RS. 51,896/-. 53,218 3. DISALLOWANCE U/S 40A(3) OF INCOME TAX ACT, 1961. 6,83,29,399 4. DISALLOWANCE U/S 40 (A) (IA) OF INCOME TAX ACT, 1961 6,99,228 5. ADDITION U/S 68 OF INCOME TAX ACT, 1961 ON ACCOU NT OF ALLEGED BOGUS SHARE CAPITAL INTRODUCED THROUGH KOLK ATA BASED COMPANIES 70,00,000 6. DISALLOWANCE OF EXPENSES NAMING BILL PREMIUM 5, 516 7. DISALLOWANCE 15% OF TOTAL EXPENSES OF RS. 11,08, 906/- (AFTER REDUCING RS. 54,57,098/- ALREADY DISALLOWED U/S 40(A)(3), 40(A)(IA) ETC.) FOUND RECORDED IN THE BOO KS OF ACCOUNTS NAMED AS JADAVJI 1,66,336 TOTAL ADDITION 12,93,51,691 3.2 AGGRIEVED BY THE AFORESAID ADDITIONS, THE ASSES SEE FILED APPEAL BEFORE LD CIT(A). IT IS NOTED THAT DURING THE COURS E OF HEARING OF THE APPEAL, THE ASSESSEE FILED PAPER BOOK AND WRITTEN S UBMISSION. THE LD CIT(A) CALLED REMAND REPORT FROM THE AO. THE AO SUB MITTED HIS REMAND REPORT. THE ASSESSEE FILED REJOINDER ON THE REMAND REPORT OF THE AO. THE LD CIT(A) PARTLY ALLOWED THE APPEAL BY DELETING/SU STAINING THE ADDITIONS AS UNDER: - S. NO. PARTICULARS ADDITIONS MADE BY AO IN DISPUTE BEFORE CIT(A) AMOUNT (RS.) DELETED BY CIT(A) AMOUNT (RS.) SUSTAINED BY CIT(A) AMOUNT (RS.) ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 9 1. TRADING ADDITION 53097994 27141136 25956858 2. DISALLOWANCE U/S 40A(3) OF INCOME TAX ACT, 1961. 68329399 67994307 335092 3. DISALLOWANCE U/S 40 (A) (IA) OF INCOME TAX ACT, 1961 699228 217614 481614 4. ADDITION U/S 68 OF INCOME TAX ACT, 1961 ON ACCOUNT OF ALLEGED BOGUS SHARE CAPITAL INTRODUCED THROUGH KOLKATA BASED COMPANIES 7000000 7000000 0 5. DISALLOWANCE OF EXPENSES NAMING BILL PREMIUM 5516 5516 0 6. DISALLOWANCE 15% OF TOTAL EXPENSES OF RS. 11,08,906/- (AFTER REDUCING RS. 54,57,098/- ALREADY DISALLOWED U/S 40(A)(3), 40(A)(IA) ETC.) FOUND RECORDED IN THE BOOKS OF ACCOUNTS NAMED AS JADAVJI 166336 166336 0 TOTAL ADDITION 129351691 102524909 26773564 FURTHER, LD CIT(A) DIRECTED THAT THE SEIZED CASH LY ING IN PD ACCOUNT BE ADJUSTED AGAINST SELF ASSESSMENT TAX LIABILITY AND INTEREST U/S 234B BE COMPUTED ACCORDINGLY. 4.1 NOW WE TAKE UP THE GROUNDS OF APPEAL OF THE ASS ESSEE AND THE REVENUE FOR ADJUDICATION OF THE RESPECTIVE GROUNDS. 5.1 GROUND NO. 1 AND 2 OF THE ASSESSEE ARE REGARDIN G CHALLENGING THE VALIDITY OF ASSESSMENT REFERENCE MADE FOR SPECIAL A UDIT AND VALIDITY OF ASSESSMENT ORDER. THE FACTS AS EMERGES FROM THE ORD ER OF THE LD. CIT(A) IS AS UNDER:- 3.1.3 I HAVE DULY CONSIDERED ASSESSEE'S SUBMISSION, REMAND REPORT AND REJOINDER FILED BY TH E ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 10 ASSESSEE. I HAVE ALSO TAKEN A NOTE OF JUDICIAL PRON OUNCEMENT RELIED UPON BY THE APPELLANT AS WELL AS THE FACTUAL MATRIX OF THE CASE. ON PLAIN READING OF SUB-SECTION (2A) OF S ECTION 142 OF THE ACT, IT SEEN THAT THE AO SHOULD FORM ON OPIN ION BEFORE ISSUING ON ORDER UNDER THE SAID SUB-SECTION. THE SAID OPINION IS TO BE FORMED HAVING REGARD TO THE NATURE AND COMPLEXITY OF THE ACCOUNTS MAINTAINED BY THE ASSESS EE AND IN THE INTEREST OF THE REVENUE. SUCH A SATISFACTION IS A CONDITION PRECEDENT TO PASSING AN ORDER U/S 142 (2A) OF THE A CT. ON PERUSAL OF ASSESSEES SUBMISSION, IT IS SEEN THAT T HE ASSESSEE ITSELF HAS ADMITTED THAT THE DEPARTMENT AS A RESULT OF SEARCH FOUND A CPU MARKED AS EXHIBIT-4 WHEREIN DUPLICATE A ND PARALLEL BOOKS ARE MAINTAINED. THE ASSESSEE HAS ALS O ADMITTED THAT THE BOOKS OF ACCOUNT MAINTAINED IN CO MPUTED ARE NOT IN COMPLETE FROM AND ALSO ENTRIES THEREIN A RE NOT MADE CORRECTLY. ALL THESE DEFECTS POINTED OUT BY AO AND ALSO ADMITTED BY THE ASSESSEE; SUGGEST COMPLEXITIES OF A CCOUNTS MAINTAINED BY THE ASSESSEE. THE LD. CIT (CENTRAL), JAIPUR HAS GIVEN AN OPPORTUNITY TO ASSESSEE TO FILE ANY OB JECTION TO THE SAID PROPOSAL FOR SPECIAL AUDIT OF ACCOUNTS U/S 142 (2A) OF ACT, IN COMPLIANCE OF WHICH THE ASSESSEE HAS SU BMITTED ITS OBJECTIONS. THE LD.CIT(CENTRAL),JAIPUR HAS DULY CONSIDERED THE OBJECTIONS OF THE ASSESSEE AND THEN APPROVED THE PROPOSAL OF AO FOR SPECIAL AUDIT OF THE CASE. T HE APPELLANT ASSESSEE HAS NOT BROUGHT ANY POSITIVE MAT ERIAL TO SHOW THAT THE APPROVAL GIVEN BY LD. CIT (CENTRAL, JAIPUR IS WITHOUT APPLICATION OF MIND. FURTHER THE OPINION OF THE AO THAT THE ACCOUNTS ARE COMPLEX IS BASED ON OBJECTIVE CONSIDERATION. THEREFORE, THE CONTENTIONS OF THE AP PELLANT ASSESSEE ARE REJECTED AND GROUND NO 1 AND 2 ARE DIS MISSED. 5.2 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE OBJECTED THE ACTION OF THE LD. CIT(A) ON THE ISSUES IN QUEST ION. THE LD. AR OF THE ASSESSEE FILED THE WRITTEN SUBMISSION WHICH HAS BEE N TAKEN INTO CONSIDERATION. ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 11 5.3 ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ER OF THE LOWER AUTHORITIES. 5.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED FROM THE ORDER OF THE LD. CIT(A) THAT ASSESSEE HAS NOT BROUGHT ANY POSITIVE MATERIAL TO S HOW THAT THE APPROVAL GIVEN BY LD. CIT (CENTRAL, JAIPUR IS WITHOUT APPLI CATION OF MIND AND THE LD. CIT(A) ALSO NOTED THAT THE OPINION OF THE AO T HAT THE ACCOUNTS OF THE ASSESSEE ARE COMPLEX AND BASED ON OBJECTIVE CONSID ERATION. THEREFORE, THE LD. CIT(A) REJECTED THE CONTENTIONS OF THE ASS ESSEE ARE REJECTED AND DISMISSED BOTH THE GROUND NOS 1 AND 2 OF THE ASSESS EE. LOOKING INTO THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE, WE CON CUR WITH THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. THUS GROUND NO. 1 AND 2 OF THE ASSESSEE ARE DISMISSED. 6.1 THE GROUND NO. 3 TO 7 OF THE ASSESSEE'S APPEAL ARE IN RESPECT OF CONFIRMING THE ADDITION OF RS. 2,59,56,858/- BY EST IMATING THE PROFIT RATE @ 24% ON ESTIMATED SALES OF RS. 26. CRORES BY THE L D. CIT(A). 6.2 THE GROUND NO. 1 OF THE DEPARTMENTAL APPEAL IS IN RESPECT OF RESTRICTING THE TRADING ADDITION OF RS. 5,30,97,994 /- TO RS. 2,59,56,858/-. ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 12 6.3 IN THESE GROUNDS, IT IS OBSERVED THAT THE LD. C IT(A) HAS UPHELD THE ADDITION TO THE EXTENT OF RS. 2,59,56,858/- BY ES TIMATING THE PROFIT RATE @ 24% ON ESTIMATED SALES OF RS. 26. CRORES BY OBSER VING AS UNDER:- AFTER CONSIDERING THE PAST HISTORY OF THE ASSESSE E AND GROSS PROFIT OF 15.30% IN COMPARABLE CASES CITED BY THE A.R. OF THE ASSESSEE, I FOUND THAT THE GROSS PROFIT RATE OF 26.21% SEEMS TO BE ON HIGHER SIDE IN THE BUSINESS OF THE A SSESSEE. THE CONSOLIDATED SALES WORKED OUT BY THE ASSESSEE AFTER THE CORRECTION COMES TO RS. 25,06,61,673/- BUT THE FACT REMAINS THE ACCOUNTS OF JADAVJI ARE INCOMPLETE AND THERE MA Y REMAIN SOME MORE UNACCOUNTED SALES. THEREFORE, I ESTIMATE THE CONSOLIDATES SALES OF THE ASSESSEE AT RS. 26.00 CRO RES. SO FAR AS THE ADDITION OF GROSS PROFIT IS CONCERNED, THE S PECIAL AUDITOR HAS COMPUTED THE GROSS PROFIT RATE OF 26.21 % ON THE BASIS OF SAMPLE SIZE SELECTED BY HIM. THE A.R. OF T HE ASSESSEE HAS CITED SOME MORE CASES WHEREIN THE GROS S PROFIT RATE IS (-) 5.67%. IF THE EXAMPLES CITED BY THE A.R . OF THE ASSESSEE ARE ADDED TO THE SAMPLE SELECTED BY SPECIA L AUDITORS, THE WEIGHTED AVERAGE GROSS PROFIT COMES TO 24.08%. CONSIDERING THIS FACT AND ASSESSED GROSS PROFIT IN PAST AND NEXT YEARS, I ESTIMATE THE GROSS PROFIT RATE OF 24% AS AGAINST 26.21% ADOPTED BY THE AO AND 16.95% SHOWN B Y THE ASSESSEE. THUS THE GROSS PROFIT COMES TO RS. 6,24,00,000/-. THE ASSESSEE HAS SHOWN GROSS PROFIT OF RS. 1,18,43,142/- IN THE RETURN FILED U/S 153A OF THE A CT. THUS THE SHORT FALL IN GROSS PROFIT IS DETERMINED AT RS. 5,05,56,858/-. THE ASSESSEE HAS DECLARED RS.2,46,00 ,000/- IN THE RETURN FILED U/S 153A OF THE ACT ON ACCOUNT OF UNDISCLOSED INCOME FROM UNACCOUNTED SALES/ PURCHASE S. IN PROFIT AND LOSS ACCOUNT, THE ASSESSEE DISCLOSED THI S INCOME BY MENTIONING THAT INCOME TAKEN INTO ACCOUNT ON THE BASIS OF STATEMENT RECORDED IN SEARCH/ DOCUMENTS FOUND DURIN G THE SEARCH BEING INCOME EARNED FROM UNACCOUNTED SALES REPRESENTED BY UNDISCLOSED ASSETS (PB PAGER 103). F URTHER IN SEARCH STATEMENT, SHRI PRATEEK KOTHARI, DIRECTOR OF ASSESSEE COMPANY ADMITTED THIS AS INCOME EARNED FROM UNACCOU NTED ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 13 PURCHASES AND SALES IN THE COMPANY (PB PAGE 34 43). FURTHER THE COMPANY BEING AN ARTIFICIAL JUDICIAL PERSON, CA NNOT ACT LIKE A LIVING PERSON. THEREFORE, WHATEVER EARNING I S THERE IN THE COMPANY, IT COMES FORM ACTIVITIES IN THE COMPAN Y. THE ASSESSEE COMPANY HAS NO ANOTHER ACTIVITY EXCEPT THE JEWELLERY BUSINESS. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED, I HOLD THAT THE ASSESSEE HAS DECLARED THIS INCOME OF RS. 2,46,00,000/- ON ACCOUNT OF PRO FIT FROM UNACCOUNTED PURCHASE AND SALES WHICH WAS UTILIZED I N UNACCOUNTED ASSET. AFTER CONSIDERING THE ABOVE FACT S AND CIRCUMSTANCES , THE ADDITION OF RS. 5,05,56,858/- - RS. 2,46,00,000 = RS. 2,59,56,858/- IS SUSTAINED AS AGA INST TRADING ADDITION OF RS. 5,09,67,486+RS. 21,30,508/- TOTALING TO RS. 5,30,97,994/- MADE BY THE AO. THUS THE ASSES SEE GETS RELIEF OF RS. 2,71,41,136/-. 6.4 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASS ESSEE PRAYED THAT THE LD. CIT(A) ERRED IN CONFIRMING THE TRADING ADDI TION OF RS.2,59,56,858/- BY ESTIMATING GP RATE @ 24% ON THE ESTIMATED SALES OF RS.26.00 CRORES OUT OF THE TRADING ADDITION OF RS.5 ,30,97,994/- MADE BY AO. THE LD. AR OF THE ASSESSEE FILED THE FOLLOWING WRITTEN SUBMISSION WHICH HAS BEEN TAKEN INTO CONSIDERATION. AT THE OUTSET, WE SUBMIT THAT LD CIT(A) HAS HELD THE REFERENCE OF SPECIAL AUDIT AS VALID. LD CIT(A) HAS CATEGORICA LLY MENTIONED THAT THERE EXIST DEFECTS IN RECASTING OF THE BOOKS OF AC COUNT BY SPECIAL AUDITORS. THE FINDINGS OF LD CIT(A) IN THIS REGARD ARE AT PG 71-82 OF HIS ORDER. THE ASSESSEE HAS POINTED OUT SEVERAL FACTUAL DEFECT S IN THE RECASTING OF BOOKS OF ACCOUNT BY SPECIAL AUDITORS S UCH AS DOUBLE /OVER RECORDING OF SALES, UNDER RECORDING OF PURCHASES AN D EXPENSES, HOLDING SOME OF PURCHASES AS BOGUS WHEREAS THE SEIZED RECOR DS SHOWS THE PURCHASES OF GOODS FROM THESE PARTIES ETC, WHICH TH E LD CIT(A) HAS REPRODUCED IN HIS ORDER AT PG 26-61 OF HIS ORDER. THE ASSESSEE HAS ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 14 POINTED OUT THESE DEFECTS TO AO IN ASSESSMENT PROCE EDINGS ALSO, WHICH WAS REJECTED BY AO ON TECHNICAL REASONS SUCH AS THE AUDIT WAS CARRIED OUT BY SPECIAL AUDITORS WHEREIN THE ASSESSEE HAD AC TIVE INVOLVEMENT, THE ASSESSEE HAS NOT POINTED OUT THESE DEFECTS TO T HE SPECIAL AUDITORS WHEN COPY OF FINAL TRAIL BALANCE WAS GIVEN TO THE A SSESSEE. THE LD AO REJECTED THE DEFECTS POINTED OUT BY THE ASSESSEE IN RECASTED BOOKS BY SAYING THAT THERE IS NO NEED TO HAVE ANY CORRECTION IN THE PURCHASE/SALES/EXPENDITURE/FIXED ASSETS IN THE FIGU RE TAKEN IN SPECIAL AUDIT REPORT. LD CIT(A) SENT THE SUBMISSION OF THE ASSESSEE TO LD AO FOR COMMENTS IN REMAND REPORT. THE LD AO HAS ALSO N OT CONTROVERTED THE DEFECTS POINTED OUT BY THE ASSESSEE IN REMAND R EPORT. THE LD CIT(A) HAS REPRODUCED THE REMAND REPORT OF THE AO AT PAGE 3-12 OF HIS ORDER. LD CIT(A) AFTER CONSIDERING THE DEFECTS POINTED OUT BY THE ASSESSEE IN RECASTED BOOKS BY SPECIAL AUDITORS, REMAND REPORT A ND REJOINDER OF ASSESSEE ON REMAND REPORT, HAS CATEGORICALLY HELD A S UNDER (PG 72-73 OF CIT(A)S ORDER) :- ALL THE ABOVE NOTES/OBSERVATION AND LIMITATIONS SH OW THAT THE BOOKS OF ACCOUNTS NAMING JADAVJI HAS BEEN WRI TTEN IN SUCH AS MANNER THAT CORRECT STATEMENT OF AFFAIRS A ND PROFIT OF THE ASSESSEE COMPANY CANNOT BE DERIVED AND ONLY SOM E ESTIMATION/GUESS WORK HAS BE DONE WITH RECASTING OF THE ACCOUNTS. WHEN THE ESTIMATION/GUESS IS MADE IN RECA STING OF THE ACCOUNT, THE TRADING RESULTS MAY DIFFER PERSON TO PERSON WHO MAKES ESTIMATION OR GUESS. THE SPECIAL AUDITORS THEMSELVES HAVE ADMITTED AT PAGE 33 OF THEIR REPORT THAT ANY CHANGE IN ESTIMATION OR ASSUMPTION MAY LEAD TO CHAN GE IN FINANCIAL STATEMENTS. I AGREE WITH THE CONTENTION OF LD AR THAT IN POINT NO II OF TERMS OF REFERENCE FOR SPECI AL AUDIT, IT HAS BEEN CLEARLY MENTIONED BY THE AO TO RECAST THE TRAD ING AND P & L A/C ON ACCOUNTING PRINCIPLES AND ON THE BASIS O F SEIZED MATERIAL. THE AO HAS NOT ASSIGNED THE TASK TO SPECI AL AUDITORS TO COMPUTE THE INCOME OR RECAST THE TRADING AND P & L A/C BY APPLYING THE PRESUMPTION AND ASSUMPTION OR ON ESTIM ATION. THERE WAS NO SCOPE OF APPLICATION OF PRESUMPTION, A SSUMPTION, ESTIMATION, PERSONAL JUDGMENT ETC IN RECASTING OF A CCOUNTS. FURTHER THE AUDITOR IS NOT A QUASI JUDICIAL AUTHORI TY AND ESTIMATION AND PRESUMPTION IS BEYOND THE SCOPE OF A UDIT. FURTHER, THE AUDITOR REPORTED THE BOGUS PURCHASES M ERELY ON ASSUMPTION MORE SO WHEN THE FULL PARTICULARS OF PUR CHASES ALONG WITH QUANTITY IS RECORDED IN THE SEIZED DOCUM ENTS. IN NO 1 BOOK, THERE MAY BE BOGUS PURCHASE BUT NO 2 BOOKS ARE ALWAYS PRESUMED TO BE TRUE AND CORRECT AND BOGUS PU RCHASES ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 15 CANNOT BE ENTERED IN NO 2 BOOKS PARTICULARLY WHEN T HE QUANTITATIVE DETAILS AND DESCRIPTION OF PURCHASE IS RECORDED IN SEIZED BOOKS. THE AMOUNT MENTIONED AGAINST HEAD BI LL PREMIUM IS NOT SUFFICIENT TO BELIEVE THAT THE PURC HASES ARE BOGUS PARTICULARLY WHEN THE ASSESSEE EXPLAINS THAT THE BILL PREMIUM IS AGAINST THE EXTRA AMOUNT CHARGES BY THE SUPPLIER AGAINST THE ISSUE OF BILL AGAINST THE PURCHASES. WH ETHER THE PARTICULAR PURCHASE IS BOGUS OR NOT IS TO BE DETERM INED BY AO AFTER CONDUCTING PROPER INQUIRES. FURTHER, THE ASS ESSEE HAS POINTED OUT THE CASES WHERE THE PURCHASES WERE UNDE RSTATED AND SALES WERE OVER STATED BY THE SPECIAL AUDITOR. THE AO HAS NOT MADE INDEPENDENT FINDINGS AND REJECTED THE ASSE SSEES CONTENTIONS ON TECHNICALITIES. THE JUSTICE ALWAYS P REVAILS OVER THE TECHNICALITIES. THE AO SHOULD INDEPENDENTLY APP LY HIS OWN MIND OVER THE OBJECTIONS RAISED BY THE ASSESSEE ON THE FIGURES ARRIVED BY SPECIAL AUDITORS IN RECASTED BOOKS OF AC COUNT. THE COPY OF SUBMISSION OF LD AR WAS SENT TO AO FOR COMM ENTS ON THE ISSUE RAISED BY LD AR ON THE RECASTING OF BOOKS OF ACCOUNT MADE BY SPECIAL AUDITORS. IN REMAND REPORT THE AO I S SILENT ON THESE ISSUES. I HAVE EXAMINED THE CONTENTION OF THE LD A/R OF ASSESSEE THAT PURCHASES WERE UNDERSTATED AND SALES WERE OVER STATED IN THE RECASTED ACCOUNT AND FOUND FORCE IN T HE CONTENTION OF AR. THEREFORE, LD CIT(A) UPHELD THE DEFECTS IN RECASTIN G OF BOOKS OF ACCOUNT BY SPECIAL AUDITORS. THE ABOVE FINDINGS OF LD CIT(A) IS NOT UNDER CHALLENGE BY THE DEPARTMENT. THE LD AO MADE T HE HIGH PITCHED ASSESSMENT ASSESSING THE TOTAL INCOME OF ASSESSEE A T RS. 15,28,93,350/- ON THE TOTAL SALES COMPUTED BY SPECIAL AUDITORS AT RS. 26,96,46,926/- AND LD CIT(A) CONFIRMED THE TRADING ADDITION OF RS. 2,59,56,858/- ON SALES ESTIMATED BY HIM AT RS. 26.00 CRORE IN COMPLE TE DISREGARD TO CONCEPT OF REAL INCOME. THE LD AO HAS REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. AFTER REJECTING THE BOOKS OF ACCOUNTS AND BY APPLYING THE PROVISIONS OF SECTION 145(3) THE LD AO ASSESSED THE INCOME OF ASSESSEE U/S 144 OF INCOME TAX ACT. AS PER PROVISIONS OF SE CTION 144 OF THE INCOME TAX ACT, 1961 THE TOTAL INCOME SHOULD BE COM PUTED AFTER TAKING INTO CONSIDERATION ALL RELEVANT MATERIAL GAT HERED AS A RESULT OF SEARCH AND ON THE BASIS OF BEST JUDGMENT. THE INCOM E TAX DEPARTMENT CARRIED OUT INTENSIVE SEARCH OVER THE ASSESSEE GROU P AND DURING THE COURSE OF SEARCH THE DEPARTMENT HAS NOT FOUND ANY E VIDENCE TO SHOW/VISUALIZE THAT THIS MUCH ADDITIONAL UNDISCLOSE D INCOME WAS UTILIZED BY THE ASSESSEE IN MAKING ANY INVESTMENT O R EXPENDITURE. IT IS RELEVANT TO MENTION HERE THAT IN THE CASE OF THE AS SESSEE THE LD AO HAS ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 16 ASSESSED HUGE INCOME IN THE HANDS OF ASSESSEE BUT T HERE IS NO EVIDENCE TO SHOW WHERE THIS INCOME WAS UTILIZED BECAUSE AS A RESULT OF SEARCH NO UNDISCLOSED INVESTMENT/EXPENSES WAS FOUND BY DEPART MENT. WE HAVE MADE DETAILED SUBMISSION SHOWING THAT THE RECASTED ACCOUNTS ARE INCOMPLETE, INCORRECT, ARBITRARY, BASED ON PRESUMPT ION AND ASSUMPTION AND ALSO NOT PREPARED ON THE BASIS OF ACCOUNTING PR INCIPLES AND WITHOUT CONSIDERING THE SEIZED DOCUMENTS PROPERLY. FURTHER THE ASSESSEE HAS MADE DETAILED SUBMISSION BEFORE THE LOWER AUTHORITI ES SHOWING THAT THE FIGURES OF PURCHASES, EXPENSES AND SALES HAVE BEEN DETERMINED BY THE SPECIAL AUDITORS IN RECASTED ACCOUNTS ARE AT WRONG FIGURE. THEY MADE CERTAIN WRONG ADJUSTMENT OR CERTAIN ADJUSTMENTS LEF T TO BE MADE. THE ADDITION OF RS. 5,09,67,486/- MADE BY THE LD AO WAS BASED ON THE DEFECTIVE RECASTED ACCOUNTS. FURTHERMORE, THE AUDIT ORS HAVE POINTED OUT IN COMMON REMARKS THAT TRUE AND CORRECT PROFIT CANN OT BE COMPUTED DUE TO INHERENT SHORTCOMING IN THE SEIZED RECORDS/ METHOD OF RECORDING ENTRIES IN JADAVJI. THE COMMON REMARKS OF THE SPECI AL AUDITORS ARE AS UNDER:- I. IN PARA 3.3 AT PAGE 2 OF COMMON NOTES ANNEXED WITH SPECIAL AUDIT REPORT ( COPY AT PAGE 27-28_OF SAR PB VOL 4 ) IT HAS BEEN MENTIONED THAT .........IT EMERGES THAT BY APPLYING THE STANDARD AUDITING PROCEDURE, NEITHE R THE STATEMENT OF AFFAIRS NOR PROFIT OR LOSS AS DESI RED CAN BE DETERMINED . THIS PROVES THAT THE WAY BY WHICH THE BOOKS OF ACCOUNTS NAMING JADAVJI HAS BEEN WRITTEN, CORRECT STATEMENT OF AFFAIRS AND PROFIT OF THE ASSESSEE COM PANY CANNOT BE DERIVED AND ONLY SOME ESTIMATION/GUESS WO RK CAN BE DONE WITH THESE. II. IN PARA 3.3.3 AT PAGE 3 OF COMMON NOTES ANNEXED WIT H SPECIAL AUDIT REPORT ( COPY AT PAGE 28 OF SAR PB VOL - 4 ) IT HAS BEEN MENTIONED THAT .........THERE MAY BE TRANSACTIONS WHICH ARE NOT ENTERED IN JADAV JI. I N ABSENCE OF SPECIFIC DETAILS OF SUCH TRANSACTIONS, STANDARD AUDITING PROCEDURE AND METHODS OF DETERMINATION OF INCOME CANNOT BE APPLY. . ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 17 III. IN PARA 3.3.6 AT PAGE 4 OF COMMON NOTES ANNEXED WIT H SPECIAL AUDIT REPORT (COPY AT PAGE 29 OF SAR PB VOL 4) IT HAS BEEN MENTIONED THAT IN THE BOOKS OF ACCOUNTS TITLED AS JADAVJI MOST OF THE PURCHASES, SALES, TRANSFERS, RETURNS HAVE BEEN ENTERED IN PIECES WHER EAS IN REGULAR BOOKS OF ACCOUNTS, THESE HAVE BEEN ENTER ED IN GMS/CTS. THEREFORE, IN ABSENCE OF COMMON UNIT OF MEASUREMENT FOR THOSE TRANSACTIONS WHICH ARE NOT ENTERED IN REGULAR BOOKS OR VICE VERSA, THE CORRECT QUANTITATIVE STOCK CANNOT BE DETERMINED BY APPLYING THE STANDARD AUDITING PROCEDURE. THUS IN THIS PARA THE SPECIAL AUDITORS THEMSELVES EXPRESSED THEIR INABILITY TO COMPUTE THE STOCK ON T HE BASIS OF BOOKS OF ACCOUNTS NAMED AS JADAV JI WHIL E AS PER TERMS OF REFERENCE OF AUDIT THEY WERE REQUIRED TO COMPUTE THE CLOSING STOCK AS ON THE DATE OF SEARCH ON THE BASIS OF THESE BOOKS OF ACCOUNTS. FURTHER THIS WAS ONE OF THE GROUND FOR WHICH THE BOOKS OF ACCOUNTS W ERE REFERRED FOR SPECIAL AUDIT. THEREFORE THE RECASTED ACCOUNTS CANNOT BE CONSIDERED AS COMPETE AND CORREC T AND CORRECT PROFIT THERE FROM CANNOT BE DEDUCED. IV. IN PARA 4 AT PAGE 5 OF COMMON NOTES ANNEXED WITH SPECIAL AUDIT REPORT (COPY AT PAGE 30 OF SAR PB VOL 4 ) IT HAS BEEN MENTIONED THAT UNDER THE FACTS AND CIRCUMSTANCES NARRATED HEREINBEFORE AND APPLYING OU R PROFESSIONAL JUDGEMENT, WE ARE OF THE OPINION THAT AUDIT PROCEDURE AND METHODS OF DETERMINATION OF INCOME OR LOSS, BELIEVED TO BE DESIRABLE, CANNOT BE APPLIED IN THE GIVEN CIRCUMSTANCES. HENCE, WE HAVE ATTEMPTED TO CARRYOUT REASONABLE ALTERNATIVE PROCED URE AND METHODS TO OBTAIN SUFFICIENT OR APPROPRIATE CONCLUSION. HOWEVER THERE MAY BE LACK OF CORROBORAT IVE EVIDENCE TO SUPPORT CERTAIN ENTRIES IN THE FINANCIA L STATEMENTS DRAWN OR THERE MAY BE ALSO EXIST CERTAIN OTHER LIMITATIONS IMPOSED BY THE CIRCUMSTANCES . ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 18 THUS IN THIS PARA THE SPECIAL AUDITORS ADMITTING TH E TRUE AND CORRECT PROFIT FROM THE BOOKS OF ACCOUNTS NAMED AS JADAV JI CANNOT BE DEDUCED. FURTHERMORE, THE LD AO HIMSELF HAS ESTIMATED THE P ROFIT BY APPLYING GP RATE OF 26.21% ON CONSOLIDATED SALES DE TERMINED BY THE SPECIAL AUDITORS IN RECASTED ACCOUNTS. THE LD AO DE TERMINED THE CONSOLIDATED SALES AT RS. 26,96,46,926/- AND APPLIE D THE GP RATE OF 26.21% TO ESTIMATE THE PROFIT. IN THIS WAY, HE ESTI MATED THE OVERALL PROFIT OF THE ASSESSEE AT RS. 7,06,74,459/-. SINCE THE PROFIT COMPUTED BY THE SPECIAL AUDITORS WAS RS. 6,85,43,951/- SO HE MA DE FURTHER ADDITION OF RS. 21,30,508/-. THIS ACTION OF THE AO SHOWS THA T HE HIMSELF DOES NOT BELIEVE THAT RECASTED ACCOUNTS BY THE AUDITORS ARE TRUE AND CORRECT. THE AO HIMSELF HELD INDIRECTLY THAT THE TRUE PROFIT CANNOT BE DEDUCED FROM THE RECASTED ACCOUNT OTHERWISE THERE WAS NO NE ED TO ESTIMATE THE PROFIT BY APPLYING GP RATE ON THE CONSOLIDATED SALE S DETERMINED BY THE SPECIAL AUDITORS IN RECASTED ACCOUNTS. FIRST OF ALL WE SUBMIT THAT WHEN THE ESTIMATION IS MADE, THE BEST METHOD OF ESTIMATI ON SHOULD BE APPLIED. THE ASSESSMENT ORDER OF THE ASSESSEE WAS F RAMED U/S 144 I.E. BEST JUDGMENT ASSESSMENT. IT MEANS THAT THE AO SHOU LD CONSIDER ALL THE CIRCUMSTANCES OF THE CASE AND INCOME SHOULD BE MEAS URED BY APPLYING BEST SUITABLE METHOD IN THE FACTS AND CIRCUMSTANCES OF THE CASE. IN THIS CASE, THE LD AO APPLIED GP RATE ON CONSOLIDATED SAL ES DETERMINED BY SPECIAL AUDITORS AT RS. 26,96,46,926/- THE ASSESSE E HAS POINTED OUT SEVERAL MISTAKES SHOWING DOUBLE ACCOUNTING OF SALES . THE DETAILED SUBMISSION IN THIS REGARD HAS BEEN SUBMITTED IN GRO UND NO 3 TO 5 ABOVE. BESIDES THAT THE SALES IN THE ACCOUNT OF BUN TIJI CA WAS DETERMINED ON PRESUMPTION AND ASSUMPTION. THE COPY OF LEDGER ACCOUNT OF BUNTIJI CA IN THE BOOKS NAMED AS JADAVJ I IS AT PB PG 349 AND RECASTED LEDGER OF THIS ACCOUNT IS AT PB PG 349A . NO ANY DESCRIPTION OR NARRATION OR QUANTITATIVE DETAIL ETC IS MENTIONED TO TREAT THE FIGURE OF RS. 1,12,20,000/- IN THIS ACCOUNT AS OF SALES. FURTHER, THE GP RATE OF 26.21% IS ALSO NOT JUSTIFIABLE. THE ASS ESSEE HAS SUBMITTED DETAILED EXPLANATION TO THE AO IN THIS REGARD OBJEC TING THE ESTIMATION OF PROFIT ON GP RATE OF 26.21%. (PAPER BOOK PAGE 342-343). THE ASSESSEE HAS OBJECTED THE ESTIMATION OF INCOME BY A PPLYING GP RATE OF 26.21% ON THE FOLLOWING GROUNDS:- A) THE ESTIMATION OF GP OF 26.21% IS BASED ON THE INSTANCES OF SALES GIVEN IN APPENDIX-9 OF THE SPECI AL ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 19 AUDITOR REPORT. THE INSTANCES ARE BASED ONLY ON THE SALES OF RS. 75,93,362/- WHILE THE TOTAL SALES OF T HE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS RS. 26,96,46,926/-, THEREFORE THE SAMPLE SIZE IN NOT COMPARABLE. B) IN THE INSTANCES GIVEN THE MOST OF THE ENTRIES O F SALES IS OF TRADING ITEMS WHILE THE ASSESSEE IS HAVING ITS O WN MANUFACTURING TOO, THEREFORE THE SAME IS NOT COMPARABLE. C) IN THE REGULAR BOOKS OF ACCOUNTS THE ASSESSEE D ECLARED GP OF 16.95% AND EXCEPT TO SOME MINOR MISTAKES POINTED OUT BY THE AUDITOR, IMPACT OF WHICH WILL NO T BE SO MUCH ON THE GP DECLARED BY THE ASSESSEE, THERE I S NO ERROR IN THE REGULAR BOOKS OF ACCOUNTS OF THE ASSES SEE, THEREFORE THE GP OF THE ASSESSEE CANNOT BE ESTIMATE D ONLY ON THE BASIS OF SOME VERY FEW AND SMALL INSTAN CES OF THE SALES. D) AS REGARD TO THE DECLARING THE GP OF 26.17% IN A Y 2009-10 THIS IS TO SUBMIT THAT IN AY 2009-10 THE SA LES OF THE ASSESSEE WAS ONLY RS. 1,28,24,830/- WHICH IS AL SO NOT COMPARABLE. FURTHER IN PREVIOUS ASSESSMENT YEAR S I.E IN AY 2006-07 TO 2008-09 AND IN AY 2011-12 THE GP OF THE ASSESSEE WAS BELOW TO 15% AND THE YEAR AY 2009-10 WAS ONLY YEAR IN WHICH THE ASSESSEE EARNED HIGHER GP. THERE IS SUBSTANTIAL CHANGE IN THE CIRCUMSTANCES IN AY 2010-11 FROM AY 2009-10. IN AY 2010-11 THE SALES OF THE ASSESSEE HAS SUBSTANTIALLY INCREASED WHICH COULD BE POSSIBLE ONLY BY LOWERING DOWN THE GP RATE. FURTHERMORE, IN MARKET, THERE ARE MANY OTHER DEALERS/PARTIES WHICH ARE DOING SAME BUSINESS AND THE GP OF THE ASSESSEE CAN BE COMPARED WITH THE OTHER COMPARABLE CASES. E) AS REGARD TO GP OF AY 2010-11 WORKED OUT ON THE BASIS OF TRADING ACCOUNT RE-CASTED BY SPECIAL AUDITOR THI S IS TO SUBMIT THAT IN VIEW OF OUR PREVIOUS SUBMISSION THE TRADING ACCOUNT IS PREPARED ON THE BASIS OF INCOMPL ETE ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 20 BOOKS OF ACCOUNTS IN WHICH THE PROPER IMPACT OF ALL THE PURCHASES AND COMMON SALES WAS NOT GIVEN, THEREFORE THIS TRADING A/C DO NOT SHOW THE REAL PICTURE OF TR ADING AFFAIRS OF THE ASSESSEE. ON THE FIRST INSTANCE AFTER RESUMING THE ASSESSMENT PROCEEDINGS AFTER COMPLETION OF SPECIAL AUDIT AND SUBMITTING TH E SPECIAL AUDIT REPORT TO LD. AO THE LD. AO ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE VIDE NOTICE DATED 03.10.2013 (COPY AT PB PAGE 300 ) WHEREIN ESTIMATION OF GROSS PROFIT BY APPLYING THE GP RATE OF 15% WAS SUGGESTED BY THE AO. THEREAFTER THE LD. AO SUDDENLY CHANGED HIS MIND AND APPLIED THE GP RATE OF 26.21% ON ENTIRE TURNOVER WITHOUT ASSIGN ING ANY REASON OF CHANGING THE OPINION. THE LD CIT(A) ESTIMATED THE S ALES OF THE ASSESSEE AT RS. 26.00 CRORE. THE SALES COULD BE WOR KED OUT ON THE BASIS OF SEIZED MATERIAL. THE LD CIT(A) HAS ACCEPTED THAT AFTER CORRECTION IN THE SALE FIGURE WORKED OUT BY SPECIAL AUDITORS, IT COMES OUT TO THE FIGURE OF RS. 25,06,61,673/- (PG 80-81 OF ORDER OF D CIT(A). THEREFORE IT IS HIGHLY UNJUSTIFIABLE TO ESTIMATE TH E SALES OF THE ASSESSEE AT RS. 26.00 CRORE. LD CIT(A) HAS ESTIMATED THE PROFIT OF THE ASSESSEE BY APPLYING GP RATE OF 24% ON THE ESTIMATE D SALES OF RS. 26.00 CRORE WHICH WAS WORKED OUT AT RS. 6,24,00,000 /-. THE ASSESSEE HAS DECLARED GROSS PROFIT OF RS. 1,18,43,142/- IN T RADING ACCOUNT FILED WITH THE RETURN. THE ASSESSEE HAS FURTHER DECLARED RS. 2,46,00,000 /- IN THE RETURN FILED U/S 153A OF THE ACT ON ACCOUNT OF UNDISCLOSED INCOME FROM UNACCOUNTED SALES/PURCHASES. THE LD CIT(A) SUS TAINED THE TRADING ADDITION OF RS. 2,59,56,858/- {RS. 6,24,00,000 MINU S (1,18,43,142+2,46,00,000)}, FOR WHICH NO CORROBORAT IVE UNDISCLOSED ASSETS/EXPENDITURE WAS FOUND AFTER RUMMAGE OF ALL C ORNERS OF PREMISES OF THE ASSESSEE AND ITS DIRECTORS. ESTIMATION OF PROFIT BY APPLYING GP RATE OF 24% (I) IT IS RELEVANT TO MENTION HERE THAT IN THE TRAD E OF THE ASSESSEE THE SALES ARE NOT MADE ON THE FIXED PROFIT MARGIN AND T HE SALES PRICE VARY DAY TO DAY ON THE BASIS OF MARKET RATE OF BULL ION, THEREFORE THE FEW INSTANCES OF THE FEW DAYS CANNOT BE COMPARE D WITH THE SALE OF WHOLE YEAR AND THE COMPARISON CAN ONLY BE M ADE FOR THE SAMPLE COLLECTED FOR WHOLE YEAR AND ALSO FOR ALL IT EMS. FROM THE PERUSAL OF CHART OF INSTANCE (PB PAGE SAR 198-200 PB VOL 4) YOUR HONOR WOULD FIND THAT THIS CHART CONTAINS THE INSTANCE OF ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 21 VARIOUS GP PERCENTAGE WHICH IS VARYING FROM 9.71% T O 57% WHICH SHOWS THE GP IN THE TRADE OF THE ASSESSEE IS HIGHLY VARYING FROM ITEM TO ITEM AND DAY TO DAY CHANGE IN RATES OF GOLD BASIS. IN THE SAMPLE, ALL THE PRODUCTS SOLD WE RE DIAMONDS OR DIAMOND STUDDED JEWELLERY WHICH WAS PURCHASED FR OM MARKET. IN DIAMOND JEWELRY MARGIN OF PROFIT REMAINS ALWAYS MORE THAN GOLD JEWELRY. FURTHER THERE IS HUGE DIFFERENCE IN THE GP OF EACH TRANSACTION, THEREFORE THE AVERAGE GP CO MPUTED BY SPECIAL AUDITORS IS NOT INDICATIVE TO REAL GP EARNE D BY THE ASSESSEE FOR ENTIRE SALES. FURTHER THE INSTANCES AR E ONLY FOR FEW DAYS. IT IS FURTHER RELEVANT TO MENTION HERE THAT T HE ASSESSEE CITING SOME MORE INSTANCES SHOWING MUCH LESSER GP, WHICH THE SPECIAL AUDITORS HAVE NOT CONSIDERED.: - S. NO. PRODUCT CODE PURCHASES AMOUNT DATE OF SALES SOLD TO SALES VALUE GP 1 MARKET ITEM 2PSCS K20788/KRNG00098/ (R0000094) & K20783/KTOP00008 (R0000098) & NOSEPIN 1PC K1165/JNP112 72,935 20.02.10 NAMRATA RAJPURPHIT 80,100 7,165 2 MARKET ITEM 1PC R000036/KLKT00023 1,58,056 13.10.09 RADHA AKAR 1,75,000 16,944 3 MARKET ITEM 2PCS K20791/KBNG00080 AND K20800/KLKT00004 2,10,977 02.02.10 VIJAY SINGH JI 1,50,000 (-) 60,977 4 R00000123/KMNG00 015 50,586 11.01.10 SMITA SHARMA 50,000 (-) 586 5 K20751/KMNG00022 RING 1PC K1607/JR818 EARRING K2330/JE887 72,892 03.02.10 K.C. SWAMI 80,000 7,108 TOTAL 5,65,446 5,35,100 (-) 30,346 ON ABOVE TRANSACTION THE GP OF THE ASSESSEE COMES ( -) 5.67%. THIS PROVES THAT MERELY ON THE BASIS OF SOME INSTAN CES OF SOME PARTICULAR PRODUCTS AND FOR SOME PARTICULAR DAYS TH E OVERALL GP OF THE ASSESSEE CANNOT BE ESTIMATE. ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 22 II) IN THE GIVEN SAMPLE ALL THE TRANSACTIONS ARE OF TRADING GOODS OF DIAMONDS WHILE THE ASSESSEE HAS ALSO SALES OF KUNDA N MEENA JEWELRY FOR SUBSTANTIAL AMOUNT I.E. ALMOST 50% OF T OTAL SALES. THEREFORE THIS SAMPLE WHICH REPRESENTS SALES OF DIA MOND JEWELRY CANNOT BE APPLIED FOR SALES OF KUNDAN MEENA JEWELRY. III) IF WE COMPARE THE TRADING RESULTS OF THE ASSES SEE FOR THE PREVIOUS HISTORY OF THE ASSESSEE THE GP CHART OF TH E ASSESSEE IS AS UNDER: - S. NO. A.Y TURNOVER G.P G.P. RATIO 1 2006-07 3531618.00 512723.00 14.52% 2 2007-08 18562148.00 2509297.00 13.52% 3 2008-09 20591252.00 3047886.00 14.80% 4 2009-10 12824830.00 3356643.00 26.17% WEIGHTED AVERAGE GP 55509848.00 9426549 16.98% THE ASSESSMENTS OF THE ASSESSEE FOR AY 2006-07 TO A Y 2009- 10 WERE COMPLETED U/S 153A OF INCOME TAX ACT, 1961 AND THE GP DECLARED BY THE ASSESSEE WAS ACCEPTED THEREIN. F ROM THE PERUSAL OF ABOVE CHART YOUR HONOR WOULD FIND THAT T HE GP RATE OF THE ASSESSEE OF ALL THE ASSESSMENT YEARS EXCEPT AY 2009-10 RANGING BETWEEN 13.52% OF 16.95%. IN THE AY 2009-10 THE SALES OF THE ASSESSEE WERE SUBSTANTIALLY REDUCED IN COMPARISON TO PREVIOUS YEARS, THEREFORE THE GP OF THIS YEAR IS NOT COMPARABLE. HOWEVER THE REASON OF HIGH GP IN AY 20 09-10 IN COMPARISON TO AY 2010-11 WAS AS FOLLOW: - I. IN AY 2009-10 THE ENTIRE SALES OF THE ASSESSEE WERE OF DIAMOND STUDDED GOLD JEWELER WHILE DURING THE YEAR THE SALES OF THE ASSESSEE CONSISTS THE SALES OF KUNDAN MEENA JEWELER AS WELL AS DIAMOND STUDDED JEWELLERY. II. FURTHER IN AY 2009-10 THE ENTIRE SALES WERE OF TRAD ED JEWELER WHILE IN AY 2010-11 THE SALES WAS OF TRADED JEWELLERY AS WELL AS OWN MANUFACTURED JEWELRY. ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 23 III. WHEN WE COMPARE THE SALES RATE AND PURCHASES/PRODUC TION RATE THE POSITION COMES AS UNDER: - DESCRIPTION AY 09-10 AY 10-11 AVERAGE SALES RATE PER GMS 3593.60 2304.04 AVERAGE COST OF SALES PER GMS 2653.05 1913.04 PROFIT MARGIN (IN RS.) 940.55 391.00 PROFIT MARGIN (IN%) 26.17% 16.95% FROM THE PERUSAL OF ABOVE CHART YOUR HONOR WILL FIN D THAT IN AY 2009-10 THE AVERAGE GROSS PROFIT EARNED BY THE ASSE SSEE WAS RS. 940.55 PER GMS WHILE IN THE AY 2010-11 THE SAME WAS RS. 391 PER GMS, THEREFORE THE SAME EFFECTED THE GROSS PROF IT OF THE ASSESSEE. THERE WAS THE REASON FOR SHARP INCREASE IN GP RATE OF AY 2009- 10 THAT THE SALES RATE OF THE ASSESSEE WAS HIGHER W HICH RESULTED TO SUBSTANTIAL DECREASE IN SALES OF THE ASSESSEE IN AY 2009-10. WHEN THE ASSESSEE LOWER DOWN THE SALES RATE IN AY 2 010-11 THE SALES OF THE ASSESSEE SUBSTANTIALLY INCREASED. IV) WHILE APPLYING THE GP RATE OF 26.21% LD. AO/24% BY LD CIT(A), LOWER AUTHORITIES HAVE NOT CITED ANY COMPAR ABLE CASE OF THE TRADER OF SAME TRADE. IN THIS REGARD WE HAVE SUBMITTED COMPARABLE CASE OF M/S RAMBHAJOS (PAN: - AAJFR4553 Q) WHO WAS ASSESSED AT CENTRAL CIRLCE-1, JAIPUR. THIS CONCERN IS ALSO ENGAGED IN THE SAME TRADE AND DEALING IN THE S AME PRODUCTS IN WHICH THE ASSESSEE IS DEALING. THE CASE OF THIS FIRM FOR THE AY 2010-11 WAS ASSESSED BY ITO WARD 1(1), JAIPUR WH EREIN THE GP OF THIS FIRM 15.30% ON DECLARED TURNOVER OF RS. 11,77,70,683/- WAS ACCEPTED. THE COPY OF ASSESSMENT ORDER OF THIS FIRM IS PB PAGE 489-490. IN VIEW OF THE ABOVE SUBMISSION, THE ESTIMATION OF INCOME BY ESTIMATING THE GP OF 24% ON ESTIMATED SALES OF RS. 26.00 CRORE IS HIGHLY UNJUSTIFIABLE AND WEIGHTED AVERAGE GP RATE O F LAST FOUR YEARS WHICH COMES TO 16.98% ON TURNOVER OF RS. 25,06,61,6 73/- SHOULD BE APPLIED WHICH GIVES GP OF RS. 4,25,62,352/-. THE AS SESSEE HAS DECLARED ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 24 GROSS PROFIT OF RS. 1,18,43,142/- IN TRADING ACCOUN T FILED WITH THE RETURN AND THE ASSESSEE HAS FURTHER DECLARED RS. 2,46,00,000 /- IN THE RETURN FILED U/S 153A OF THE ACT ON ACCOUNT OF UNDI SCLOSED INCOME FROM UNACCOUNTED SALES/PURCHASES. THEREFORE, THE TR ADING ADDITION OF RS. 61,19,210/- {RS. 4,25,62,352 MINUS (1,18,43,142 +2,46,00,000)} CAN BE SUSTAINED IF THE WEIGHTED AVERAGE GP RATE ON THE BASIS OF PAST HISTORY APPROACHED IS FOLLOWED. RELIANCE IS PLACED ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS BHAWAN VA PATH NIRMAN (BOHRA) & CO (NO. 1) 258 ITR 431 WHEREIN IT HAS BEEN HELD THAT THE PAST HISTORY OF THE ASSESSEE IS BEST GUIDING FACTOR. FURTHER, IF ASSETS AND EXPENDITURE THEORY IS APPLIED THAN NO TRADING ADDITION DESERVES TO BE SUSTAINED AS THE DEPARTMENT HAS NOT FOUND ANY UNDISCLOSED ASSETS/EXPENSES AS THE RESULT OF THE SE ARCH. THE HUMBLE ASSESSEE PRAYS YOUR HONOR KINDLY TO DISMISS THE GRO UND RAISED BY THE DEPARTMENT AND ALLOW THE GROUNDS RAISED BY THE ASSE SSEE IN THIS REGARD. 6.5 THE LD. DR RELIED ON THE ORDER OF THE LOWER AUT HORITIES 6.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED FROM THE RECORDS T HAT THE AO MADE THE ADDITION OF RS.5,30,97,994/-(I.E.RS.5,09,67,486+RS. 21,30,508 )ESTIMATING THE GROSS PROFIT @ 26.21% ON SALES OF RS. 26,96,46, 926/- (SALES AS WORKED OUT BY SPECIAL AUDITOR. IT IS NOTED THAT IN THE GIV EN SAMPLES ALL THE TRANSACTIONS WERE OF TRADING GOODS OF DIAMOND JEWEL LERY WHILE THE ASSESSEE HAS SALES OF KUNDAN MEENA JEWELLERY FOR SU BSTANTIAL AMOUNT I.E. ALMOST 50% OF TOTAL SALES. WE WOULD LIKE TO STATE T HAT THE SAMPLES WHICH REPRESENTED SALES OF DIAMOND JEWELLERY CANNOT BE AP PLIED FOR SALES OF KUNDAN MEENA JEWELLERY. MARGINS IN BOTH THESE ITEM S VARIES AND CANOT BE APPLIED TO EACH OTHER. TO REACH AT A COMPARABLE AND REASONABLE ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 25 ESTIMATED, THE AVERAGE OF PAST YEARS COULD BE THE J USTIFIED METHOD. IT IS ALSO NOTABLE TO COMPARE THE TRADING RESULTS OF THE ASSESSEE FOR THE PREVIOUS YEARS WHICH ARE AS UNDER:- S. NO. A.Y TURNOVER G.P G.P. RATIO 1 2006-07 3531618.00 512723.00 14.52% 2 2007-08 18562148.00 2509297.00 13.52% 3 2008-09 20591252.00 3047886.00 14.80% 4 2009-10 12824830.00 3356643.00 26.17% WEIGHTED AVERAGE GP 55509848.00 9426549 16.98% IT IS FURTHER NOTED THAT THE LD. CIT(A) HAS ESTIMAT ED THE HIGHER GROSS PROFIT @ 24% ON ESTIMATED SALES OF RS. 26 CRORES. THE ASSE SSEE HAD COMPUTED THE GROSS TURNOVER OF RS. 25,06,61,673/- ON THE BA SIS OF SEIZED DOCUMENTS AND BOOKS OF ACCOUNT AND HAS POINTED OUT SEVERAL MI STAKES AND INSTANCES OF DOUBLE COUNTING OF SALES COMPUTED BY THE SPECIAL AUDITOR IN THE ESTIMATES OF GROSS TURNOVER. THE LD. CIT(A) AS WELL AS AO HAVE NOT POINTED OUT ANY DEFECT IN THE CALCULATION OF GROSS TURNOVER BY THE ASSESSEE ON THE BASIS OF SEIZED RECORDS. THEREFORE, IT WILL BE IN THE INTEREST OF EQUITY AND JUSTICE THAT WEIGHTED AVERAGE GROSS PROF IT RATE OF LAST FOUR YEARS I.E. 16.98% SHOULD BE TAKEN INTO CONSIDERATION ON T URNOVER OF RS. 25,06,61,673/- WHICH GIVES GROSS PROFIT OF RS. 4,25 ,62,352/-. IT IS ALSO NOTED THAT THE ASSESSEE HAD DECLARED THE GROSS PROF IT OF RS. 1,18,43,142/- ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 26 IN THE TRADING ACCOUNT FILED WITH THE RETURN AND FU RTHER THE ASSESSEE HAD DECLARED RS. 2,46,00,000/- IN THE RETURN FILED U/S 153A OF THE ACT ON ACCOUNT OF UNDISCLOSED INCOME FROM UNACCOUNTED SAL ES/PURCHASE. THEREFORE, THE TRADING ADDITION OF RS. 61,19,120/- (RS. 4,25,62,352/- MINUS (1,18,43,142+2,46,00,000) IS SUSTAINED ON THE BASIS OF WEIGHTED AVERAGE GROSS PROFIT RATE ON THE BASIS OF PAST HIST ORY OF THE ASSESSEE. THUS THE GROUND NO. 3 TO 7 OF ASSESSEE'S APPEAL OF THE ARE PARTLY ALLOWED AND GROUND NO. 1 OF THE REVENUE IS DISMISSED. 7.1 AS REGARDS GROUND NO. 2 OF THE REVENUES APPEA L AGAINST RESTRICTING THE DISALLOWANCE U/S 40A(3) OF THE ACT FROM RS. 6,83,23,399/- TO RS. 3,35,092/-. THE FACTS AS EMERGES FROM THE O RDER OF THE LD. CIT(A) IS AS UNDER :- 3.3.3 I HAVE DULY CONSIDERED ASSESSEES SUBMISSION AND ALSO TAKEN A NOTE OF JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT AS WELL AS THE FACTUAL MATRIX OF THE CASE. IT IS SEEN THAT THE AO MADE DISALLOWANCE BY HOLDING THAT THE ASSESSEE IS INDULG ED IN ILLEGAL ACTIVITIES BY NOT RECODING THE CORRECT PURCHASES, SALES, REVENUE & CAPITAL TRANSACTION IN ITS REGULAR BOOKS OF ACCOUNTS AND PAYMENTS AGAINST THE PURCHASES AND EXPENDITURE WERE MADE IN CASH AND NO RELAXATION CAN BE GIVEN FOR THE ILLEGAL ACTIVITIES. HE FURTHER HELD THAT HE HAS NOT REJECTE D THE PARALLEL AND DUPLICATE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND JU DICIAL DECISIONS RELIED UPON BY THE ASSESSEE ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE. ON THE OTHER HAND THE LD AR SUBMITTED THAT THE ASSESSEE WA S NOT ENGAGED IN ANY ILLEGAL BUSINESS OR A BUSINESS PROHIBITED BY LAW. I T MADE ONLY SALE AND PURCHASES NOT RECORDED IN ITS REGULAR BOOKS OF ACCO UNT. THE UNACCOUNTED SALES AND PURCHASES WERE RECORDED IN PARALLEL AND D UPLICATE BOOKS OF NAMED MAINTAINED IN TALLY UNDER THE NAME JADAUJI. I INCLINED TO AGREE WITH THIS CONTENTION OF LD AR THAT THE ASSESSEE WAS NOT ENGAG ED IN ANY UNLAWFUL BUSINESS. THE FACT REMAINS THAT THE ASSESSEE WAS IN DULGED IN UNACCOUNTED SALE AND PURCHASE BUSINESS OF JEWELLERY AND THE PRO VISIONS OF SECTION 40A(3) ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 27 CANNOT BE USED AS PENAL ACTION, THE LAW PRESCRIBES SEPARATE PENAL ACTION U/S 271(1)(C)/271AAA FOR THE UNACCOUNTED INCOME. FURTHE R, THESE BOOKS WERE INCOMPLETE AND NOT MAINTAINED IN PROPER WAY THEREFO RE DEFINITE AND CORRECT PROFIT CANNOT BE DERIVED FROM THESE BOOKS OF ACCOUN T. THE LD AO REFERRED THESE BOOKS OF ACCOUNT FOR SPECIAL AUDIT. THE SPECI AL AUDITORS RECASTED THESE BOOKS OF ACCOUNT BUT IN RECASTING OF THESE BOOKS, H E POINTED OUT CERTAIN LIMITATION & REMARKS AND EXPRESSED THAT THE RECASTI NG OF THE BOOKS WERE MADE BY APPLYING CERTAIN ESTIMATION AND ASSUMPTIONS . HE ALSO EXPRESSED HIS VIEW UNDER COMMON REMARKS THAT THE TRUE AND CORRECT PROFIT CANNOT BE DETERMINED DUE TO INHERENT LIMITATION OF RECORDS AN D METHOD OF ACCOUNTING. THE RELEVANT REMARKS OF THE SPECIAL AUDITORS HAVE B EEN REPRODUCED WHILE DISPOSING THE GROUND NO 3 TO 10 OF ASSESSEE IN PARA 3.2.3. FURTHER THE ASSESSEE HAS POINTED SEVERAL ADJUSTMENTS WHICH AFFE CT THE TRADING RESULTS SHOWN BY THE RECASTED ACCOUNTS BY THE SPECIAL AUDIT ORS. THE AO MENTIONED THAT HE HAS NOT REJECTED THE PARALLEL AND DUPLICATE BOOKS OF ACCOUNT MAINTAINED IN NAME JADAVJI BUT THE FACT REMAINS T HAT THE ASSESSMENT WAS FRAMED U /S 144 OF THE ACT BY APPLYING THE PROVISIONS OF SECTION 145(3) OF THE ACT AND THE AO HIMSELF HAS ESTIMATED THE PROFIT BY APPLYING GP RATE OF 26.21% ON CONSOLIDATED SALES DETERMINED BY THE SPECIAL AU DITORS IN RECASTED ACCOUNTS. THE LD AO DETERMINED THE CONSOLIDATED SALES AT RS. 26,96,46,926/- AND APPLIED THE GP RATE OF 26.21% TO ESTIMATE THE P ROFIT. IN THIS WAY, HE ESTIMATED THE OVERALL PROFIT OF THE ASSESSEE AT RS. 7,06,74,459/-. SINCE THE PROFIT COMPUTED BY THE SPECIAL AUDITORS WAS RS. 6,85,43,951/- SO HE MADE FURTHER ADDITION OF RS. 21,30,508/-. THIS ACTION OF THE AO SHOWS THAT HE HIMSELF DOES NOT BELIEVE THAT RECASTED ACCOUNTS BY THE AUDITORS ARE TRUE AND CORRECT. THE AO HIMSELF HELD INDIRECTLY THAT THE TR UE PROFIT CANNOT BE DEDUCED FROM THE RECASTED ACCOUNT OTHERWISE THERE WAS NO NE ED TO ESTIMATE THE PROFIT BY APPLYING GP RATE ON THE CONSOLIDATED SALES DETER MINED BY THE SPECIAL AUDITORS IN RECASTED ACCOUNTS. THE ASSESSMENT U/S 144 OF I.T ACT BY APPLYING THE PROVISIONS OF SECTION 145(3) OF I.T ACT AND FURTHER ESTIMATION OF PROFIT BY APPLYING GP RATE ON CONSOLIDATED SALES OVER AND ABO VE TO THE PROFIT RECASTED FROM BOOKS OF JADAVJI CLEARLY SHOW THAT FOR ALL PRACTICABLE PURPOSES, TH E AO HAS REJECTED THE PARALLEL AND DUPLICATE BOOKS OF ACCOUNT MAINTAINED IN THE NAME JADAVJI. FURTHER, WHILE DISPOSING THE G ROUND NO 3 TO 10 OF THE ASSESSEE, I HAVE ALSO SUSTAINED THE TRADING ADDITIO N BY APPLYING THE GP RATE. VARIOUS BENCHES ON HONBLE ITAT INCLUDING THE JURIS DICTIONAL JAIPUR BENCH OF HONBLE ITAT AND VARIOUS HIGH COURT INCLUDING TH E JURISDICTIONAL HONBLE RAJASTHAN HIGH COURT HAS HELD THAT WHERE THE ESTIMA TION OF INCOME IS MADE BY APPLYING GP RATE, FURTHER DISALLOWANCE CANNOT BE MADE BY APPLYING THE PROVISIONS OF SECTION 40A(3) OF INCOME-TAX ACT, . IT WOULD BE WORTHWHILE TO REPRODUCE THE RELEVANT PARA OF DECISION OF HONBLE ITAT JAIPUR BENCH, JAIPUR ITAT IN THE CASE OF SHRI SHANKAR KHANDELWAL V/S ACIT, CENTRAL CIRCLE-1, JAIPUR IN ITA NO. 392/JP/2011 AY 2008-09 ORDER DATED 12/08/2011 AS UNDER:- ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 28 5.9 WE HAVE HEARD BOTH THE PARTIES. THE LD. AR DU RING THE COURSE OF PROCEEDINGS BEFORE US HAS ARGUED THAT NO DISALLOWAN CE U/S 40A(3) CAN BE MADE IN CASE THE BOOKS OF ACCOUNTS ARE REJECTED. OU R ATTENTION WAS DRAWN TOWARDS THE FACT THAT THE AO HAS REJECTED THE BOOKS OF ACCOUNTS AND HAS MADE THE ADDITION ON ACCOUNT OF CONSTRUCTION AND WO RK IN PROGRESS EXPENSES AND HAS ALSO MADE DISALLOWANCE OF TAXI RUNNING EXPE NSES. THE ADDITION MADE UNDER BOTH THE HEADS IS SUBSTANTIAL. THE HON'B LE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. G.K. CONTRACTORS, 19 D TR 305 HELD THAT IF THE PROFIT IS ESTIMATED BY APPLYING HIGHER NET PROFIT R ATE AFTER REJECTING THE BOOKS OF ACCOUNTS BY INVOKING THE PROVISIONS OF SEC TION 145(3)OF THE ACT THEN NO SEPARATE ADDITION CAN BE MADE ON ACCOUNT OF CASH CREDIT U/S 68 OF THE ACT. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SMT.SANTOSH JAIN, 296 ITR 324 HELD THAT SECTION 40A (3) CANNOT BE INVOKED WHEN THE INCOME IS ESTIMATED BY APPLYING THE GROSS PROFIT RATE. THE HON'BLE PUNJAB & HARYANA HIGH COURT FOLLOWED THE DECISION O F THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. BANWARI LAL BANSI DHAR, 229 ITR 229. THE JAIPUR TRIBUNAL IN THE CASE OF SINGHAL BUILDERS CONTRACTOR VS. ADDL. CIT, 133 TTJ 102 HAS ALSO HELD THAT ONCE AN I NCOME OF THE ASSESSEE IS ESTIMATED BY APPLYING THE GROSS PROFIT RATE OR NET PROFIT RATE THEN NO DISALLOWANCE CAN BE MADE U/S 40A (3) OR ANY OTHER P ROVISIONS. THE PROVISO TO SECTION 40A(3) MAKES AN EXCEPTION THAT CASH PAYM ENT IS NOT TO BE DISALLOWED IF IT IS AN ACCOUNT OF BUSINESS EXPEDIEN CY. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, WE FEEL THAT NO SEPARA TE ADDITION IS REQUIRED TO BE MADE U/S 40A(3) BECAUSE THE BOOKS OF ACCOUNTS HA S BEEN REJECTED AND THERE HAS BEEN. THE ADDITION OF RS. 3.21 LACS MADE U/S 40A(3) IS DELETED. THEREFORE, IN VIEW OF VARIOUS JUDICIAL PRONOUNCEME NTS, THE ADDITION ON ACCOUNT OF DISALLOWANCE MADE U/S 40A(3) CANNOT B E SUSTAINED WHERE THE PROFIT WAS ESTIMATED BY REJECTING THE BOOKS OF ACCO UNT AND BY APPLYING THE PROVISIONS OF SECTION 145(3) OF I.T. ACT. FURTHER, THE FACT REMAINS THAT THE ASSESSEE ITSELF HAS DISALLOWED RS. 3,07,550/- U/S 40A(3) IN THE RETURN FILED U/S 153A (REFER COPY OF COMPUTATION IS AT PB PAGE 77) AND IT HAS ALSO AGREED FOR FURTHER DISALLOWANCE OF RS. 27,542/- ON ACCOUNT OF CASH PAYMENT RECORDED IN REGULAR BOOKS OF ACCOUNT. THUS, THE DISALLOWANCE TO THE EXTENT OF RS. 3,35,092/- IS ON AGREED BASIS. THEREFORE IN VIEW OF THE ABOVE FACTS AND CIRCUMSTAN CES AND RESPECTFULLY FOLLOWING THE JUDICIAL PRONOUNCEMENTS OF HONBLE ITAT JAIPUR BENCH AND HONBLE RAJASTHAN HIGH COURT THE ADDITION OF THE REMAINING AMOUNT RS. 6,83,29,399 MINUS RS. 3,35,092/- = RS. 6 ,79,94,307/- CANNOT BE SUSTAINED. THE AO IS DIRECTED TO DELETE THE ADDITION OF RS. 6, 79,94,307/- MADE BY DISALLOWING THE CASH PAYMENT U/S 40A(3) OF I.T. ACT AND THE ADDITION FOR THE REMAINING AMOUNT RS. 3,35,092/- IS SUSTAINED AS THE SAME IS ON AGREED BASIS. ASSESSEES APPEAL IS PARTLY ALL OWED TO THAT EXTENT. ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 29 7.2 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A). THE LD. AR OF THE ASSE SSEE SUBMITTED THE FOLLOWING WRITTEN SUBMISSION WHICH HAS BEEN TAKEN I NTO CONSIDERATION. B FURTHER, WE BROUGHT TO YOUR KIND NOTICE FOLLOWI NG FACTS:- (I) THAT THE ASSESSMENT ORDER HAS BEEN PASSED U/S 1 44 OF INCOME TAX ACT, WHICH IS BEST JUDGMENT ASSESSMENT. IN THE CASE OF THE ASSESSEE ORDER U/S 144 CAN BE PASSED ONLY AFTER APPLYING THE PROVISIONS OF SECTION 145(3). (II) THE ASSESSEE HAS POINTED OUT SEVERAL SERIOUS M ISTAKES/ERRORS IN THE BOOKS MAINTAINED IN NAME JADAVJI AND RECASTED ACCOUNTS PREPARED BY THE SPECIAL AUDITORS. THE ASSESSEE HAS SUBMITTED DETAILED SUBMISSION IN THIS REGARD, WHICH HAS BEEN REPRODUCE D BY LD CIT(A) IN HIS ORDER AT PG 26-69 OF HIS ORDER. (III) THE SPECIAL AUDITORS THEMSELVES HAVE MENTIONE D UNDER COMMON REMARKS THAT THE TRUE AND CORRECT PROFIT CANNOT BE DETERMINED DUE TO INHERENT LIMITATION OF RECORDS AND METHOD OF ACCOUN TING. FOR READY REFERENCE, THE COMMON REMARKS OF THE SPECIAL AUDITO RS IN THIS REGARD ARE REPRODUCED AS UNDER:- (A) IN PARA 3.3 AT PAGE 2 OF COMMON NOTES ANNEXED W ITH SPECIAL AUDIT REPORT (COPY AT PAGE 27-28 OF SAR) IT HAS BEEN MENTIONED THAT .........IT EMERGES THAT BY APPLYING THE STANDARD AUDITING PROCEDURE, NEITHER THE STATEMENT OF AFFAIR S NOR PROFIT OR LOSS AS DESIRED CAN BE DETERMINED . THIS PROVES THAT THE WAY BY WHICH THE BOOKS OF ACCOUNTS NAMING JADAVJI HAS BEEN WRITTEN, CORRECT STATEMENT OF AFFAIRS AND PROFIT OF THE ASSESSEE COMPANY CANNO T BE DERIVED AND ONLY SOME ESTIMATION/GUESS WORK CAN BE DONE WIT H THESE. (B) IN PARA 3.3.3 AT PAGE 3 OF COMMON NOTES ANNEXED WITH SPECIAL AUDIT REPORT (COPY AT PAGE 28 OF SAR) IT HAS BEEN MENTIONED THAT .........THERE MAY BE TRANSACTIONS WHICH ARE NOT ENTERED IN JADAV JI. IN ABSENCE OF SPECIFIC DETAI LS OF SUCH TRANSACTIONS, STANDARD AUDITING PROCEDURE AND METHO DS OF DETERMINATION OF INCOME CANNOT BE APPLY. . (C) IN PARA 3.3.6 AT PAGE 4 OF COMMON NOTES ANNEXED WITH SPECIAL AUDIT REPORT (COPY AT PAGE 29 OF SAR) IT HAS BEEN ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 30 MENTIONED THAT IN THE BOOKS OF ACCOUNTS TITLED AS JADAVJI MOST OF THE PURCHASES, SALES, TRANSFERS, RETURNS HA VE BEEN ENTERED IN PIECES WHEREAS IN REGULAR BOOKS OF ACCOU NTS, THESE HAVE BEEN ENTERED IN GMS/CTS. THEREFORE, IN ABSENCE OF COMMON UNIT OF MEASUREMENT FOR THOSE TRANSACTIONS WHICH AR E NOT ENTERED IN REGULAR BOOKS OR VICE VERSA, THE CORRECT QUANTITATIVE STOCK CANNOT BE DETERMINED BY APPLYING THE STANDARD AUDITING PROCEDURE. THUS, IN THIS PARA THE SPECIAL AUDITORS THEMSELVES EXPRESSED THEIR INABILITY TO COMPUTE THE STOCK ON T HE BASIS OF BOOKS OF ACCOUNTS NAMED AS JADAV JI WHILE AS PER TERMS OF REFERENCE OF AUDIT THEY WERE REQUIRED TO COMPUTE TH E CLOSING STOCK AS ON THE DATE OF SEARCH ON THE BASIS OF THES E BOOKS OF ACCOUNTS. FURTHER THIS WAS ONE OF THE GROUND FOR WH ICH THE BOOKS OF ACCOUNTS WERE REFERRED FOR SPECIAL AUDIT. THEREFORE THE RECASTED ACCOUNTS CANNOT BE CONSIDERED AS COMPETE A ND CORRECT AND CORRECT PROFIT THERE FROM CANNOT BE DEDUCED. (D) IN PARA 4 AT PAGE 5 OF COMMON NOTES ANNEXED WIT H SPECIAL AUDIT REPORT (COPY AT PAGE 30 OF SAR) IT HAS BEEN MENTIONED THAT UNDER THE FACTS AND CIRCUMSTANCES NARRATED HEREINBEFORE AND APPLYING OUR PROFESSIONAL JUDGEME NT, WE ARE OF THE OPINION THAT AUDIT PROCEDURE AND METHODS OF DETERMINATION OF INCOME OR LOSS, BELIEVED TO BE DES IRABLE, CANNOT BE APPLIED IN THE GIVEN CIRCUMSTANCES. HENCE , WE HAVE ATTEMPTED TO CARRYOUT REASONABLE ALTERNATIVE PROCED URE AND METHODS TO OBTAIN SUFFICIENT OR APPROPRIATE CONCLUS ION. HOWEVER THERE MAY BE LACK OF CORROBORATIVE EVIDENCE TO SUPPORT CERTAIN ENTRIES IN THE FINANCIAL STATEMENTS DRAWN OR THERE MAY BE ALSO EXIST CERTAIN OTHER LIMITATIONS I MPOSED BY THE CIRCUMSTANCES . THUS IN THIS PARA THE SPECIAL AUDITORS ADMITTING TH E TRUE AND CORRECT PROFIT FROM THE BOOKS OF ACCOUNTS NAMED AS JADAV JI CANNOT BE DEDUCED. (IV) THE LD AO HIMSELF HAS ESTIMATED THE PROFIT BY APPLYING GP RATE OF 26.21% ON CONSOLIDATED SALES DETERMINED BY THE S PECIAL AUDITORS IN RECASTED ACCOUNTS. THE LD AO DETERMINED THE CONSOLI DATED SALES AT RS. 26,96,46,926/- AND APPLIED THE GP RATE OF 26.21% TO ESTIMATE THE PROFIT. IN THIS WAY, HE ESTIMATED THE OVERALL PROFI T OF THE ASSESSEE AT RS. 7,06,74,459/-. SINCE THE PROFIT COMPUTED BY THE SPE CIAL AUDITORS WAS RS. 6,85,43,951/- SO HE MADE FURTHER ADDITION OF RS . 21,30,508/-. THIS ACTION OF THE AO SHOWS THAT HE HIMSELF DOES NOT BEL IEVE THAT RECASTED ACCOUNTS BY THE AUDITORS ARE TRUE AND CORRECT. THE AO HIMSELF HELD ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 31 INDIRECTLY THAT THE TRUE PROFIT CANNOT BE DEDUCED F ROM THE RECASTED ACCOUNT OTHERWISE THERE WAS NO NEED TO ESTIMATE THE PROFIT BY APPLYING GP RATE ON THE CONSOLIDATED SALES DETERMINED BY THE SPECIAL AUDITORS IN RECASTED ACCOUNTS. C) IN ADDITION TO ABOVE SUBMISSION THE MOST IMPORTA NT CRUX OF THE CASE OF THE ASSESSEE IS TO DETERMINE WHETHER THE BOOKS OF ACCOUNTS RECASTED BY THE SPECIAL AUDITORS CAN BE CO NSIDERED AS COMPLETE AND CORRECT?. WHETHER TRUE AND CORRECT PRO FIT CAN BE DEDUCED FROM THESE RECASTED BOOKS OF ACCOUNT? IN THE INSTAN T CASE LOOKING TO THE ALL CIRCUMSTANCES, EVIDENCE AND ARGUMENTS THERE CAN BE ONLY ONE ANSWER THAT IS NO. IT IS AN ADMITTED FACT THAT THE RECASTED CONSOLIDATED BOOKS OF ACCOUNTS AND WELL AS ORIGINAL BOOKS OF ACCOUNT NAMED AS JADAVJI ARE NOT COMPLETE AND NOT CORRECT . THESE BOOKS OF ACCOUNTS ARE NOT WRITTEN IN A SYSTEMATIC AND SCIENT IFIC MANNER. FURTHER THE IN ABSENCE OF SUPPORTING OR SOURCE DOCUMENTS ON THE BASIS OF WHICH THESE BOOKS OF ACCOUNTS HAS BEEN PREPARED AND ALSO IN ABSENCE OF COMPLETE INFORMATION NO ONE CAN COMPLETELY CORRECT TO THESE BOOKS OF ACCOUNTS. THE SPECIAL AUDITORS HAVE CLEARLY ADMITT ED THAT TRUE PROFIT CANNOT BE DERIVED FROM THESE BOOKS OF ACCOUNT. FURT HER, STOCK QUANTITY IS NOT AVAILABLE. AS PER TERMS OF REFERENCE, THE SP ECIAL AUDITORS WAS REQUIRED TO COMPUTE THE CLOSING STOCK AS PER BOOKS AS ON THE DATE OF SEARCH. IN THIS REGARD THEY CLEARLY MENTIONED THAT QUANTITATIVE DETAILS OF STOCK CANNOT BE WORKED OUT IN ABSENCE OF VITAL INFO RMATION. THUS, FOR THE PURPOSE OF INCOME TAX PROCEEDINGS THE BOOKS OF ACCOUNTS NAMED AS JADAVJI CANNOT BE CONSIDERED AS BOOKS OF ACCOUNTS AND THE SAME CAN ONLY BE TREATED AS GIST OF UNACCOUNTED TRANSACTIONS OF THE ASSESSEE WHERE FROM NO TRUE PROFIT/INCOME CAN BE DETERMINED AND ONLY SOME LOGICAL ESTIMATION OF INCOME CAN BE MADE. D) IN THIS REGARD IT IS FURTHER RELEVANT TO MENTION HERE THAT THE BOOKS OF ACCOUNTS NAMED AS JADAVJI WERE INCOM PLETE AND INCORRECT THUS THE CORRECT PROFIT COULD NOT BE COMP UTE FROM THESE BOOKS OF ACCOUNTS, THEREFORE THE CASE OF THE ASSESSEE WAS REFERRED FOR SPECIAL AUDIT. HOWEVER THE SPECIAL AUDITOR MADE SOME ADJUST MENTS IN SUCH BOOKS OF ACCOUNTS AT THEIR OWN EVEN ON CERTAIN PRES UMPTION AND ASSUMPTIONS BUT STILL THE SPECIAL AUDITORS COULD NO T RECAST CONSOLIDATED ACCOUNT SHOWING THE TRUE AND CORRECT PROFIT. THIS I S THE REASON WHY THE LD AO RESORTED TO ESTIMATION BY APPLYING GP RATE ON THE CONSOLIDATED SALES. E) IT IS RELEVANT TO MENTION HERE THE FINDING OF LD . AO GIVEN ON LAST PARA OF THIS ISSUE AT PAGE 33 OF THE ASSESSMENT ORDER WHEREIN HE MENTIONED THAT:- ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 32 IT IS VERY IMPORTANT TO POINT OUT AT THIS JUNCTURE THAT EACH OF THE DEFAULT FOUND TO HAVE BEEN MADE U/S 40A (3) OF THE ACT AND DISALLOWED AS ABOVE ARE ONLY IN RESPECT OF THE TRANSACTIONS CO NTAINED IN THE DUPLICATE/PARALLEL BOOKS OF ACCOUNTS NAMED JADAVJI AND NOT IN THE REGULAR AND AUDITED BOOKS OF ACCOUNTS. IT IS ONLY T HE REGULAR AND AUDITED BOOKS OF ACCOUNTS WHICH HAVE BEEN FOUND TO BE INCORRECT AND INCOMPLETE AND HENCE REJECTED U/S 145(3) OF THE ACT . THEREFORE, ANY ARGUMENT THAT DISALLOWANCE U/S 40A(3) OF THE ACT, C ANNOT BE MADE IN RESPECT OF TRANSACTIONS CONTAINED IN SUCH BOOKS OF ACCOUNTS WHICH HAVE BEEN REJECTED, SHALL NOT BE CORRECT ON FACTS OF THI S CASE. IN THIS REGARD WE SUBMIT AS UNDER:- (I) THE LD AO WAS BIASED AND ACTED VINDICTIVELY, CA PRICIOUSLY AND PERVERSELY MENTIONED THE ABOVE FINDINGS. SECTION 14 5(3) CAN BE APPLIED WHERE THE TRUE PROFIT CANNOT BE DEDUCED FRO M THE BOOKS OF ACCOUNT. THE LD AO HAS TREATED THE REGULAR BOOKS SE PARATE BOOKS. WHEN WE TALK THE REJECTION OF REGULAR BOOKS, WE HAV E TO SEE WHETHER THE TRUE PROFIT CAN BE DEDUCED FROM BOOKS OF ACCOUN T. FURTHER, THE LD AO HIMSELF HAS ESTIMATED PROFIT BY APPLYING GP RATE ON CONSOLIDATED SALES RECASTED BY SPECIAL AUDITORS AND MADE ADDITIO N FOR THE SHORTFALL IN PROFITS DETERMINED BY THE SPECIAL AUDITORS BY RECAS TING THE ACCOUNTS. II) THEREFORE, TRUE PROFIT CANNOT BE DEDUCED FROM T HE BOOKS OF ACCOUNT MAINTAINED IN THE NAME JADVAJI AS WELL AS FROM TH E RECASTED ACCOUNTS BY THE SPECIAL AUDITORS MORE SO WHEN THE SPECIAL AU DITORS THEMSELVES HAVE ADMITTED IN COMMON REMARKS THAT THE TRUE PROFI T CANNOT BE DETERMINED BY RECASTING OF ACCOUNT AND THE RECASTIN G OF THE ACCOUNTS HAVE BEEN MADE BY APPLYING CERTAIN ASSUMPTION, PRES UMPTION, ESTIMATION AND JUDGMENTS AND ANY CHANGE THEREIN WIL L ALSO CHANGE THE RESULTS SHOWN BY THE RECASTED ACCOUNTS. THEREFORE, THE LD AO MADE A PERVERSE FINDINGS THAT TRUE PROFIT CAN BE DEDUCED F ROM THE BOOKS OF ACCOUNT MAINTAINED IN NAME JADAVJI OR FROM RECASTE D ACCOUNTS PREPARED BY THE SPECIAL AUDITORS. IN FACT FOR ALL P RACTICAL PURPOSE HE HAS REJECTED BOTH SET OF BOOKS OF ACCOUNT AS HE HAS EST IMATED PROFIT ON CONSOLIDATED TURNOVER AND ASSESSMENT ORDER WAS PASS ED U/S 144 AFTER APPLYING THE PROVISIONS OF SECTION 145(3) OF INCOME TAX ACT. IT IS SETTLED LAW THAT THE AO IS QUASI-JUDICIAL AUTHORITY AND SHOULD BE GOVERNED IN HIS FUNCTION BY JUDICIAL CONSIDERATION AND MUST CONFORM TO THE RULES OF NATURAL JUSTICE AND MUST PROCEED WITHO UT BIAS AS HELD BY HONBLE SUPREME COURT IN THE CASE OF TIN BOX CO. VS CIT 249 ITR 216 (SC) . IT IS ALSO SETTLED LAW THAT THE AO MUST ACT HONES TLY ON THE MATERIAL BEFORE HIM AND NOT VINDICTIVELY, CAPRICIOU SLY, OR ARBITRARILY AS HELD BY HONBLE SUPREME COURT IN THE CASE OF GURUMUKH SINGH VS CIT 12 ITR 393, 427 (FB), DAKESHWARI COTTON MILLS L TD VS CIT 26 ITR 775. THE TAXING AUTHORITY SHOULD NOT ACT IN A MANNER AS MIGHT ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 33 INDICATE THAT SCALES ARE WEIGHTED AGAINST THE ASSES SEE CIT VS SIMON CARVES LTD (1976) 105 ITR 212,218 (SC). BUT IN OUR CASE, THE LD AO HAS BRUSHED ASIDE ALL THE PRINCIPLES OF LAW AND MAD E THE PERVERSE FINDINGS AS STATED ABOVE. F) WE FURTHER SUBMIT THAT THE DISALLOWANCE U/S 40A( 3) IS @100% OF EXPENSES/PURCHASES, SO BY USING THIS METHO D THE LD AO ASSESSED THE GROSS SALES AS NET INCOME OF THE ASSES SEE AS HE DISALLOWED THE UNACCOUNTED PURCHASES AND EXPENSES BY APPLYING SECTION 40A(3). IT IS ESTABLISHED PRACTICE IN THE SEARCH CASES WHERE U NACCOUNTED SALES IS FOUND, ESTIMATION OF INCOME IS MADE BY ESTIMATING T HE GP. ONLY REAL INCOME FROM THE UNACCOUNTED TRANSACTIONS IS ESTIMAT ED. FURTHER, HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRESIDENT INDUSTRIES, (2002) 258 ITR 654 (GUJ.) , HELD THAT THE ENTIRE SALES COULD NOT BE ADDED AS INCOME OF THE ASSESSEE BUT ADDITION COULD BE MADE ONLY TO THE EXTENT OF ESTIMATED PROFITS EMBEDDED IN SALES. HONBLE ITAT AHMEDABAD BENCH IN THE CASE OF M/S RAMESHWAR TEXTILE MILLS LTD VS JCIT, RANGE 4, SURAT HAS 2015 (1) TMI 508 HAS TAKEN SIMILAR VIEW AND FOLLOWED THE ABOVE DECISION OF HON BLE GUJARAT HIGH COURT. BUT IN THE CASE OF THE ASSESSEE THE LD AO BE NT UPON TO ASSESS HIGH PITCHED INCOME SO HE ASSESSED THE GROSS VALUE OF THE SALES AS INCOME. G) IT IS QUITE INTERESTING TO NOTE THAT THE LD. AO WAS ASSESSING THE TOTAL INCOME OF SINGLE ASSESSEE NAMED AS JADAU JEWELLERS & MANUFACTURERS PVT LTD WHICH WAS MAINTA INING THE BOOKS OF ACCOUNTS OF REGULAR TRANSACTIONS AS WELL AS UNAC COUNTED TRANSACTIONS. FOR COMPUTING THE INCOME ON THE ONE HAND THE LD. AO REJECTING THE REGULAR BOOKS OF ACCOUNTS BUT ON THE OTHER HANDS RE LYING ON THE BOOKS OF ACCOUNTS NAMED AS JADAVJI WHICH ITSELF CONSIST ING SEVERAL DEFECTS. THUS, BY THIS ACT THE LD. AO HOLDING THAT THE ASSES SEE IS PARTLY CORRECT AND PARTY INCORRECT FOR THE SAME STATE OF TRANSACTI ONS. FOR THE SINGLE ACT EITHER A PERSON CAN BE CORRECT OR NOT CORRECT. FOR THE SAME AFFAIRS DUAL OPINION CANNOT BE FRAMED FOR THE SAME PERSON. IT IS FURTHER RELEVANT TO MENTION HERE THAT THE LD. AO ASSESSING THE TOTAL IN COME OF THE ASSESSEE ON THE BASIS OF CONSOLIDATED AFFAIRS OF ASSESSEE WH ICH CONSIST THE ACCOUNTED AND UN-ACCOUNTED BUSINESS ACTIVITIES OF T HE ASSESSEE AND FOR THIS PURPOSE HE TOOK THE FIGURE FROM CONSOLIDATED T RADING AND PROFIT & LOSS A/C PREPARED BY THE SPECIAL AUDITORS. THE CONS OLIDATED ACCOUNTS HAVE ENTRIES FOR BOTH TYPE OF TRANSACTION I.E. RECO RDED IN REGULAR BOOKS AND UNRECORDED IN REGULAR BOOKS. THEREFORE, IF REJE CTION OF PART OF THE TRANSACTIONS OF CONSOLIDATED ACCOUNT IS MADE, IT AU TOMATICALLY MAKES THE REJECTION OF OTHER PART. FURTHER, THERE ARE N O TWO SEPARATE ASSESSMENTS ONE FOR REGULAR TRANSACTION AND OTHER F OR UNRECORDED TRANSACTION. FOR BOTH THE TRANSACTIONS, SINGLE ASSE SSMENT ORDER WAS PASSED THAT TOO U/S 144 OF INCOME TAX ACT BY APPLYI NG THE PROVISIONS ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 34 OF SECTION 145(3). THEREFORE IN THE EYE OF THE LAW THE ACTION OF THE LD. AO SERVE NO MEAN THAT HE HAS REJECTED ONLY REGULAR BOOKS OF ACCOUNTS AND RELY ON BOOKS OF ACCOUNTS NAMED AS JADAVJI BE CAUSE FOR COMPUTING THE TOTAL INCOME THE CONSOLIDATED AFFAIRS WERE TAKEN INTO CONSIDERATION. IF A PART OF THE CONSOLIDATED ACCOUN T IS REJECTED, IT MEANS THE WHOLE IS REJECTED. H) THOUGH TECHNICALLY THE LD. AO NOT REJECTED THE B OOKS OF ACCOUNTS NAMED AS JADAVJI BUT WHEN WE SEE THE ASS ESSMENT ORDER IN ENTIRETY, YOUR HONOR WOULD FIND THAT HE DISBELIEVED TO SUCH BOOKS OF ACCOUNTS AND INDEED AND FOR ALL PRACTICABLE PURPOSE THE RESULTS OF SUCH BOOKS OF ACCOUNTS WERE REJECTED BY LD. AO BECAUSE H E ESTIMATED THE CONSOLIDATED PROFIT BY APPLYING GP RATE ON CONSOLID ATED SALES. THE ASSESSMENT ORDER WAS PASSED U/S 144 OF INCOME TAX A CT BY APPLYING PROVISIONS OF SECTION 145(3). THUS FOR ALL PRACTICA L PURPOSES, HE HAS REJECTED THE BOOKS OF ACCOUNTS NAMED AS JADAVJI A LSO THOUGH NOT ADMITTED BY WORDS IN THE ASSESSMENT ORDER BECAUSE H E WANTED TO MAKE HUGE ADDITION BY DISALLOWANCE U/S 40A(3) OF INCOME TAX ACT, 1961 @ 100% OF PURCHASES AND EXPENSES. I) IT IS FURTHER RELEVANT TO MENTION THAT THE ASSES SMENT OF THE ASSESSEE WAS COMPLETED U/S 144 OF INCOME TAX AC T, 1961 AND THE ASSESSMENT U/S 144 IS CALLED BEST JUDGMENT ASSESSM ENT WHICH CAN ONLY BE MADE WHERE THE INCOME CANNOT BE COMPUTED FR OM BOOKS OF ACCOUNTS OF THE ASSESSEE AND BOOKS OF ACCOUNT REJEC TED BY APPLYING SECTION 145(3) OF INCOME TAX ACT. THUS IN THE INSTA TE CASE THE LD. AO PASSING THE ORDER U/S 144 OF I. TAX ACT, 1961 PROVE S THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE REJECTED BY THE LD AO FOR ALL PRACTICAL PURPOSE. J) THUS FROM THE ABOVE SUBMISSIONS AND THE SUBMISSI ON IN THE FORGOING PARAS THIS IS TO SUBMIT THAT THE LD. A O HAS REJECTED THE BOOK OF ACCOUNT OF THE ASSESSEE FOR ALL PRACTICAL P URPOSE. IN THE CASE OF THE ASSESSEE, THE PROFIT HAS BEEN ESTIMATED THEREFO RE, FURTHER ADDITION U/S 40A(3) CANNOT BE MADE. RELIANCE IS PLACED ON FO LLOWING DECISIONS:- ITAT JAIPUR CASES:- I) THE JAIPUR ITAT IN THE CASE OF SINGHAL BUILDERS CONTRACTOR V/S. ADDL. CIT, 133 TTJ 102 HAS HELD THAT ONCE AN INCOME OF THE ASSESSEE IS ESTIMATED BY APPL YING THE GROSS PROFIT RATE OR NET PROFIT RATE THEN NO DISALLOWANCE CAN BE MADE U/S 40A(3) OR ANY OTHER PROVISIONS. II) THE SAME VIEW WAS TAKEN BY THE JAIPUR ITAT IN THE CASE OF SHRI SHANKAR KHANDELWAL V/S ACIT, CENTRAL ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 35 CIRCLE-1, JAIPUR IN ITA NO. 154/JP/2011 AY 2005- 2006; 391/JP/2011 AY 2007-08; 392/JP/2011 AY 2008- 09 ORDER DATED 12/08/2011 WHEREIN IT HAS BEEN HELD THAT WHERE THE PROFIT HAS BEEN ESTIMATED NO FURTHER DISALLOWANCE U/S 40A(3) CAN BE MADE. III) P.C. MUNDRA VS. ASSISTANT COMMISSIONER OF INCO ME TAX ITAT, JAIPUR BENCH ITA NOS. 229 & 230/JP/1999 & 1343 & 1344/JP/1997 27TH DECEMBER, 2002 (2003) 80 TTJ (JP) 945 HELD THAT WHERE TRADING ADDITION HAS BEEN MADE BY ESTIMATING GROSS PROFIT R ATE, PROVISION OF S. 40A(3) CANNOT BE INVOKED. IV) INCOME TAX OFFICER VS. SADHWANI BROTHERS ITAT, JAIPUR B BENCH (2011) 142 TTJ (JP)(UO) 26 : (201 1) 58 DTR 368 ASST. YEAR 2002-03 HELD THAT AO HAVING REJECTED THE BOOKS OF ACCOUNT AND APPLIED THE NET P ROFIT RATE FOR THE PURPOSE OF COMPUTING INCOME, NO DISALLOWANCE COULD BE MADE UNDER S. 40A(3). IN THIS CASE DECISION OF HONBLE ALLAHABAD HIGH COURT IN TH E CASE OF CIT VS. BANWARILAL BANSHIDHAR (1998) 148 CTR (ALL) 53 3 : (1998) 229 ITR 229 (ALL), DECISION OF HONBLE HIMACHAL PRADESH IN THE CASE OF AMRIT SINGH & CO. VS. ITO 2010-TIOL-832-HC-HP AND DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. G.K. CONTRACTOR (2009) 19 DTR (RAJ) 305 WERE FOLLOWED RAJASTHAN HIGH COURT CASES:- V) COMMISSIONER OF INCOME TAX VS. MOTILAL KHATRI (2008) 218 CTR (RAJ) 602 : (2008) 7 DTR 139 HONBLE RAJASTHAN HIGH COURT HELD THAT DISALLOWANCE UNDER S . 40A(3)NO CLAIM FOR DEDUCTIONSEC. 40A(3) ONLY PROHIBITS DEDUCTION OF EXPENDITUREEXPENDITURE OBVIOUSLY MEANS EXPENDITURE ADMISSIBLE AS DEDUCTION WHICH MAY INCLUDE THE EXPENDITURE ON PURCHASE AND T HE LIKEIN THE INSTANT CASE, ASSESSEE HAS NOT CLAIMED DEDUCTION OF EXPENDITURE ON PURCHASES OF GOLD BISCU ITS WHICH WERE NOT RECORDED IN HIS BOOKS OF ACCOUNT THEREFORE, NO PART OF SUCH EXPENDITURE CAN BE DISALLOWED UNDER S. 40A(3) VI) THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. G.K. CONTRACTORS, 19 DTR 305 HELD THAT IF THE PROFIT IS ESTIMATED BY APPLYING HIGHER NET PROF IT RATE AFTER REJECTING THE BOOKS OF ACCOUNTS BY INVOKING T HE ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 36 PROVISIONS OF SECTION 145(3) OF THE ACT THEN NO SEP ARATE ADDITION CAN BE MADE ON ACCOUNT OF CASH CREDIT U/S 68 OF THE ACT. ITAT THIRD MEMBER CASES:- VII) INDIA SEED HOUSE VS. ASSISTANT COMMISSIONER OF INCOME TAX ITAT, DELHI B THIRD MEMBER BENCH V. DONGZATHANG, SENIOR VICE PRESIDENT ; U.B.S. BEDI & PHOOL SINGH, J.MS. (2000) 69 TTJ (DEL) (TM) 241 BUSINESS EXPENDITUREDISALLOWANCE UNDER S. 40A(3) ASSESSMENT AFTER APPLYING GROSS PROFIT RATENO DISALLOWANCE UNDER S. 40A(3) COULD BE MADE WHEN INCOME IS ESTIMATED AFTER APPLYING GROSS PROFIT RAT E CIT VS. BANWARILAL BANSI DHAR (1998) 148 CTR (ALL) 533 : (1998) 229 ITR 229 (ALL) FOLLOWED OTHER HIGH COURT CASES:- VIII) CIT V/S BANWARI LAL BANSHIDHAR (1998) 148 CTR (ALL) 533 WHEREIN IT WAS HELD THAT WHERE INCOME IS ASSESSED AT G.P. RATE BY REJECTING THE BOOKS OF THE ASSESSEE, NO DISALLOWANCE CAN BE MADE SEPARATELY U/ S 40 A (3). IX) CIT V/S SMT. SANTOSH JAIN (2008) 296 ITR (P&H) 324 WHEREIN IT WAS HELD THAT WHEN INCOME OF THE ASSESSEE IS COMPUTED BY APPLYING GP RATE, THERE IS NO NEED TO INVOKE THE PROVISIONS OF SECTION 40A(3), AS APPLYING THE GP RATE TAKES CARE OF EXPENDITURE PAID OTHERWISE BY WAY OF CROSSED CHEQUE ALSO. X) CIT VS. PURSHOTTAMLAL TAMRAKAR UCHEHRA (2003) 184 CTR (MP) 349/270 ITR 314 (MP) BUSINESS EXPENDITUREDISALLOWANCE UNDER S. 40A(3) APPLICATION OF NET PROFIT RATESEC. 40A(3) IS NOT APPLICABLE WHEN INCOME IS DETERMINED BY THE AO BY APPLYING NET PROFIT RATE OTHER ITAT CASES X) CHHATTISGARH STEEL CASTING (P) LTD. VS. ASSISTAN T COMMISSIONER OF INCOME TAX* ITAT, BILASPUR BENCH ITA NO. 290/NAG/2007; ASST. YR. 2004-05 15TH FEBRUARY, 2008 (2008) 8 DTR (BILASPUR)(TRIB) 14 BUSINESS EXPENDITUREDISALLOWANCE UNDER S. 40A(3) ESTIMATION OF INCOMEDISALLOWANCE UNDER S. 40A(3) ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 37 MADE BY AO OUT OF UNRECORDED PURCHASES FROM THE RECORD SEIZED BY EXCISE DEPARTMENT WAS UNCALLED FOR WHERE INCOME WAS ESTIMATED AND PAYMENT ITSELF WAS N OT PROVED XI) KIRTI FOODS LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX ITAT, PUNE B BENCH ITA. NO. 208/PN/2007; (2011) 60 DTR (PUNE)(TRIB) 96 DISALLOWANCE UNDER S. 40A(3)PROVISIONS OF S. 40A(3 ) CANNOT BE INVOKED WITH RESPECT TO THE PURCHASES FOU ND AS PER THE SEIZED MATERIAL AND UNRECORDED IN THE RE GULAR BOOKS OF ACCOUNTTHEREFORE, IT WAS IMPERMISSIBLE FO R THE AO TO HAVE MADE THE DISALLOWANCE UNDER S. 40A(3 ) WHILE COMPUTING UNDISCLOSED INCOME IN A BLOCK ASSESSMENT ESPECIALLY IN THE CIRCUMSTANCES WHEREIN PROFIT FROM THE IMPUGNED UNRECORDED TRANSACTIONS HA S BEEN ESTIMATED AND DECLARED DHANVARSHA BUILDERS & DEVELOPERS (P) LTD. VS. DY. CIT (2006) 105 TTJ (PUN E) 376 : (2006) 102 ITD 375 (PUNE) AND DM CONSTRUCTION (ITA NO. 1791/PN/2005, DT. 26TH OCT., 2007) FOLLOWE D; K) WITHOUT PREJUDICE TO ABOVE WE FURTHER SUBMIT:- A) AS REGARD DISALLOWANCES ON THE BASIS OF ENTRIES REC ORDED IN BOOKS OF ACCOUNTS NAMED AS JADVAJI THIS IS TO SU BMIT THAT THE ASSESSEE HAS NOT CLAIMED THESE EXPENDITURE AS DEDUC TION IN COMPUTING THE PROFITS IN THE RETURN FILED BY THE AS SESSEE U/S 153A OF INCOME TAX ACT. THE ASSESSEE HAS SURRENDERED THE UNDISCLOSED INCOME IN THE RETURN ON THE BASIS OF DO CUMENTS FOUND IN SEARCH SHOWING AMOUNT IN FICTITIOUS NAMES AND IT CLAIMED THAT THIS REPRESENTS TO ASSESSEES UNDISCLO SED INCOME EARNED FROM UNACCOUNTED BUSINESS ACTIVITIES. B) THE ASSESSEE WAS MAINTAINING THE ACCOUNT OF UNACCOU NTED BUSINESS IN THE NAME OF JADAVJI IN THE FORM OF MEMO IRS. THE SPECIAL AUDITORS RECASTED THE CONSOLIDATED ACCOUNTS . IN THE ACCOUNT MAINTAINED IN NAME JADAVJI PAYMENTS WERE FOUND AGAINST THE EXPENSES WHICH WERE NOT RECORDED IN REG ULAR BOOKS OF ACCOUNTS I.E. UNDISCLOSED EXPENSES, WHICH THE AS SESSEE INCURRED AGAINST UNDISCLOSED INCOME. THE PAYMENT OF UNDISCLOSED EXPENSES CANNOT BE MADE THROUGH A/C PAY EE CHEQUE/BANK DRAFTS AND THE SAME CAN ONLY BE MADE BY CASH. SINCE IT IS ADMITTED FACTS THE ENTRIES IN BOOKS OF ACCOUNTS OF JADVAJI WHICH ARE NOT RECORDED IN REGULAR BOOKS O F ACCOUNTS OF THE ASSESSEE REPRESENT TO UNDISCLOSED BUSINESS ACTI VITIES OF THE ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 38 ASSESSEE, THEREFORE NO DISALLOWANCE CAN BE MADE ON A/C OF UNDISCLOSED PAYMENTS MADE IN CASH. C) FURTHER, THE PARTIES FROM WHOM THE ASSESSEE PURC HASED THE GOODS WERE NOT ACCEPTING THE PAYMENTS THROUGH THE CHEQUES OR BANK DRAFT. THE PROVISO TO SECTION 40A(3) EMPHASIZES HAVING RE GARD TO THE NATURE AND EXTEND OF BANKING FACILITIES AVAILABLE, CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. THE PROVISO TO SECTION 40A(3) IS AS UNDER:- PROVIDED THAT NO DISALLOWANCE SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFIT AND GAINS OF BUSINESS OR PROFESSION UNDER SUB-SECTION (3) AND TH IS SUB-SECTION WHERE A PAYMENT OR AGGREGATE OF PAYMENT S MADE TO A PERSON IN A DAY, OTHERWISE THAN BY ACCOUN T PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES, IN SUCH CASE AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED, HAVI NG REGARD TO THE NATURE AND EXTENT OF BANKING FACILITI ES AVAILABLE, CONSIDERATIONS OF BUSINESS EXPEDIENCY AN D OTHER RELEVANT FACTORS.' THE WORDS HAVING REGARD TO THE NATURE AND EXTENT O F BANKING FACILITIES AVAILABLE, CONSIDERATIONS OF BUSINESS EX PEDIENCY AND OTHER RELEVANT FACTORS WERE ADDED TO UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED HAVE SOME SPECI FIC MEANINGS. IF THE LEGISLATURE INTENDED TO RESTRICT T HE EXEMPTION ONLY TO THE CIRCUMSTANCES PRESCRIBED UNDER RULE 6DD THAN THERE WAS NO NEED TO ADD THESE WORDS. THE INTENTION OF TH E LAW IS TO GIVE PROPER WEIGHTAGE TO AVAILABILITY OF BANKING FA CILITIES, BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. THE RELIANCE IS PLACED ON THE FOLLOWING DECISIONS:- I) JURISDICTIONAL HIGH COURT IN THE CASE OF KANTI LAL PURSHOTTAM & CO. VS. COMMISSIONER OF INCOME TAX 155 ITR 519 (RAJ) HELD THAT INCOME-TAX IS A TAX ON THE REAL INCOME. PROVISO TO S. 40A(3) SHOWS THAT THE LEGISLATURE INTENDED NOT TO MAKE THE PROVISION OF S . 40A(3) VERY STRICT AND ABSOLUTELY MANDATORY. THE RI GOR OF THE WHOLE RESTRICTION WAS LOOSENED BY THE PROVIS O AND BY MAKING R. 6DD II) THE APPELLANT FURTHER SEEKS TO PLACE RELIAN CE ON THE JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT IN TH E CASE OF GIRDHARI LAL GOENKA VS COMMISSIONER OF ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 39 INCOME TAX, REPORTED IN 179 ITR 122, WHEREIN THEIR LORDSHIPS HELD AS UNDER : THE INCOME TAX OFFICER HAS TO TAKE A PRAGMATIC VI EW OF THE MATTER. THE INCOME- TAX OFFICER SHOULD TAKE A PRACTICAL APPROACH TO PROBLEM AND STRIKE A BALANCE BETWEEN THE DIRECTION OF LAW AND HARDSHIP TO THE ASSESSEE. HE SHOULD NOT ENMESH HIMSELF IN TECHNICALITIES. AFTER ALL, THE OBJECT IS NOT TO DEP RIVE THE ASSESSEE OF THE DEDUCTION WHICH HE IS OTHERWISE ENT ITLED TO CLAIM WHERE THE AMOUNT WAS PAID IN CASH OR RECEI VED IN CASH. THE ASSESSING OFFICER HAS TO FIND OUT WHET HER THE TRANSACTION IS GENUINE OR NOT AND IF HE FINDS T HAT THE TRANSACTION IS GENUINE, HE SHOULD ALLOW THE DEDUCTI ON, THE CIRCULAR OF THE BOARD IS NOT EXHAUSTIVE; IT IS ONLY ILLUSTRATIVE AND THE ASSESSING OFFICER HAS TO TAKE INTO ACCOUNT THE SURROUNDING CIRCUMSTANCES, CONSIDERATIO NS OF BUSINESS EXPEDIENCY AND THE FACTS OF EACH PARTI CULAR CASE IN EXERCISING HIS DISCRETION EITHER IN FAVOUR OR AGAINST THE ASSESSEE. THERE BE AN ORAL AGREEMENT BETWEEN THE ASSESSEE AND THE SELLER FOR PAYMENT IN CASH SELLER MAY NOT BE WILLING TO ACCEPT CHEQUES : CASH PAYMENT MAY BE MADE AT THE REQUEST OF THE PAYEE WHO IS ALSO AN ASSESSEE AND A CERTIFICATE TO THAT EFFECT F ILED ; ABSENCE OF BANKING FACILITIES IN PLACES WHERE CASH PAYMENTS ARE MADE. ALL SUCH CASES WOULD COME WITHIN THE PURVIEW OF EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCES. III) GUJARAT HIGH COURT DECISION IN THE CASE OF CIT V. P. PRAVIN AND CO. 274 ITR 534 : HELD THAT THE REQUIREMENT UNDER RULE 6DD OF THE INCOME-TAX RULES 1962, REGARDING PRACTICABILITY OF PAYMENT OTHERWISE THAN IN CASH AND CONSIDERATION OF BUSINESS EXPEDIEN CY HAS TO BE JUDGED FROM THE POINT OF VIEW OF THE BUSINESSMAN AND NOT OF THE REVENUE AUTHORITIES. IV) HONBLE ITAT JAIPUR BENCH IN ITS DECISION IN THE CASE OF PACL INDIA LTD. V/S ACIT CIRCLE-3, JAIPUR IN ITA NO. 944/JP/07 VIDE ORDER DATED 12.03.2010 HAS DELETED THE ADDITION MADE BY THE AO BY APPLYING THE PROVISI ONS OF SECTION 40A(3) BY CONSIDERING THE SECOND PROVISO TO SECTION 40A(3) OF INCOME TAX ACT. D) IT IS AN ADMITTED FACT THAT THE PAYMENTS SO MADE IN CASH IN THE BOOKS OF ACCOUNTS NAMED AS JADAVJI ARE IN RELATIO N TO ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 40 UNDISCLOSED BUSINESS ACTIVITIES CARRIED OUT BY THE ASSESSEE AND NO ONE WILL ACCEPT THE UNDISCLOSED PAYMENTS THROUGH A/C PAYEE CHEQUE OR BANK DRAFT. THIS WAS A PRACTICAL DIFFICUL TY WITH THE ASSESSEE, THEREFORE THE BENEFIT OF EXEMPTION ALLOWE D IN PROVISION OF SECTION 40A(3) WHEREIN IT HELD THAT ------ HAVING REGARD TO THE NATURE AND EXTENT OF BANKING FACILITI ES AVAILABLE, CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER REL EVANT FACTORS SHOULD BE ALLOWED TO THE ASSESSEE. IT IS RELEVANT T O MENTION HERE THAT WHILE CLAIMING THE EXEMPTION PROV IDED FOR APPLICABILITY OF PROVISIONS OF SECTION 40A(3) THE A SSESSEE HAS TO ESTABLISHED THAT THERE ARE EXCEPTIONAL OR UNAVOIDAB LE CIRCUMSTANCES FOR NOT PAYING CROSSED CHEQUES OR DRA FT AS REQUIRED BY THE RULE. WHEN IT WAS INTENDED BY BOTH THE PARTIES OF THE TRANSACTIONS THAT IT SHOULD BE AN UNACCOUNTE D TRANSACTIONS THAN THIS ITSELF CONSTITUTE AN EXCEPTIONAL CIRCUMST ANCE, WHERE IT IS NOT PRACTICABLE TO MAKE PAYMENTS BY CROSSED CHEQ UE HAVING REGARD TO THE NATURE OF TRANSITIONS, SO THE BENEFIT OF EXEMPTIONS PROVIDED UNDER SECTION 40A(3) SHOULD BE ALLOWED TO THE ASSESSEE. SO FAR AS PROVING THE GENUINENESS OF EXPE NSES WHICH HAS BEEN RECORDED IN BOOKS OF ACCOUNTED NAMED AS J ADAVJI THIS IS TO SUBMIT THAT ALL THE EXPENSES HAS BEEN AL LOWED BY THE LD. AO AND THE PAYMENTS OF SUCH EXPENSES WAS MADE O UT OF CORRESPONDING UNDISCLOSED INCOME, THEREFORE THE GEN UINENESS OF SUCH EXPENSES CANNOT BE DOUBT. FURTHER THESE PAY MENTS WERE RECORDED IN SEIZED DOCUMENTS. THEREFORE, IN VIEW OF THE PROVISIONS OF SECTION 132(4A) OF INCOME TAX ACT, TH E ENTRIES RECORDED IN SEIZED DOCUMENTS ARE PRESUMED TO BE TRU E AND CORRECT. THE RULE 6DD HAS TO BE READ IN THE CONTEXT OF THE S ECOND PROVISO TO SUB-S. (3) OF SECTION 40A WHERE UNDER A DISALLOWANCE IS NOT PERMISSIBLE IF ON CONSIDERATION OF BUSINESS EXPEDIENCY AN ASSESSEE IS ABLE TO SATISFY THE AO TH AT HE WAS REQUIRED TO MAKE PAYMENT IN CASH DUE TO EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCES, OR BECAUSE PAYMENT BY A CROSSED CHEQUE OR BANK DRAFT WAS NOT PRACTICABLE, AND/OR WO ULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE, HAVING REGA RD TO THE NATURE OF THE TRANSACTION AND THE NECESSITY FOR EXP EDITIOUS SETTLEMENT THEREOF. IN THE INSTANT CASE ONCE IT HAS BEEN ESTABLISHED THAT THE BUSINESS IN RELATION TO WHICH THE PAYMENTS ARE MADE WAS UNDISCLOSED BUSINESS OF THE ASSESSEE, PAYMENT BY CROSSED CHEQUE OR DRAFT WOULD NOT HAVE BEEN PRACTIC ABLE CONSIDERING THE NATURE OF THE TRANSACTION AND THE A SSESSEE IS NOT REQUIRED TO PROVE FURTHER MORE IMPRACTICABILITY OF NOT MAKING THE PAYMENTS BY A/C PAYEE CHEQUES OR BANK DRAFTS. F URTHER ALL THE EXPENSES WERE FOUND RECORDED IN UNACCOUNTED BOO KS OF ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 41 ACCOUNTS AND ACCEPTED BY LD. AO AS GENUINE, THEREFO RE IT IS NOT REQUIRED TO PROVE THE GENUINENESS OF THESE TRANSACT IONS FURTHER MORE. IN THIS REGARD THE KIND ATTENTION IS DRAWN ON THE DECISION OF H ONORABLE RAJASTHAN HIGH COURT IN THE CASE OF SMT. HARSHILA CHORDIA V/S ITO (2007) 208 CTR (RAJ) 208 WHEREIN IT WAS OPINED: - BUSINESS EXPENDITURE- DIS ALLOWANCE U/S 40A(3)- EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCE S- CIRCUMSTANCES IN WHICH THE CONDITIONS LAID DOWN IN RULE 6DD(J) COULD BE APPLICABLE CANNOT BE SPELT OUT AND THE CIRCUMSTANCES PROVIDED IN CBDT CIRCULAR ARE NOT EXH AUSTIVE BUT ILLUSTRATIVE- AS PER CIRCULAR NO. 220 DATED 31. 05-77 CLEARLY STATES THAT RULE 6DD(J) HAS TO BE LIBERALLY CONSTRU ED, AND ORDINARILY WHERE THE GENUINENESS OF THE TRANSACTION , THE REQUIREMENT OF RULE 6DD(J) MUST BE DEEMED TO HAS BE EN SATISFIED- GENUINENESS OF THE TRANSACTIONS AND THE IDENTITY OF THE PAYEE IS NOT DISPUTED THUS FROM THE ABOVE SUBMISSION THIS IS TO CLEAR THA T THE TOTAL INCOME OF THE ASSESSEE WAS ESTIMATED BY APPLYING TH E GP RATE, THEREFORE NO DISALLOWANCE U/S 40A(3) CAN BE MADE IN THE CASE OF THE ASSESSEE. IN VIEW OF THE ABOVE SUBMISSIONS AND CASES CITED BE FORE YOUR HONOR, THE HUMBLE ASSESSEE PRAYS YOUR HONOR KI ND TO CONFIRM THE FINDINGS OF LD CIT(A) AND REJECT THE GROUND RAI SED BY REVENUE. 7.3 DURING THE COURSE OF HEARING, THE LD. DR RELIED ON THE ORDER OF THE AO. 74 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED THAT THE LD. CIT(A ) HAS RESTRICTED THE DISALLOWANCE U/S 40A(3) OF THE ACT FROM RS. 6,83,23 ,399/- TO RS. 3,35,092/- BY OBSERVING AS UNDER:- THEREFORE, IN VIEW OF VARIOUS JUDICIAL PRONOUNCEMEN TS, THE ADDITION ON ACCOUNT OF DISALLOWANCE MADE U/S 40A(3) CANNOT B E SUSTAINED WHERE THE PROFIT WAS ESTIMATED BY REJECTING THE BOOKS OF ACCO UNT AND BY APPLYING THE PROVISIONS OF SECTION 145(3) OF I.T. ACT. FURTHER, THE FACT REMAINS THAT THE ASSESSEE ITSELF HAS DISALLOWED RS. 3,07,550/- U/S 40A(3) IN THE RETURN FILED U/S ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 42 153A (REFER COPY OF COMPUTATION IS AT PB PAGE 77) AND IT HAS ALSO AGREED FOR FURTHER DISALLOWANCE OF RS. 27,542/- ON ACCOUNT OF CASH PAYMENT RECORDED IN REGULAR BOOKS OF ACCOUNT. THUS, THE DISALLOWANCE TO THE EXTENT OF RS. 3,35,092/- IS ON AGREED BASIS. THEREFORE IN VIEW OF THE ABOVE FACTS AND CIRCUMSTAN CES AND RESPECTFULLY FOLLOWING THE JUDICIAL PRONOUNCEMENTS OF HONBLE ITAT JAIPUR BENCH AND HONBLE RAJASTHAN HIGH COURT THE ADDITION OF THE REMAINING AMOUNT RS. 6,83,29,399 MINUS RS. 3,35,092/- = RS. 6 ,79,94,307/- CANNOT BE SUSTAINED. THE AO IS DIRECTED TO DELETE THE ADDITION OF RS. 6, 79,94,307/- MADE BY DISALLOWING THE CASH PAYMENT U/S 40A(3) OF I.T. ACT AND THE ADDITION FOR THE REMAINING AMOUNT RS. 3,35,092/- IS SUSTAINED AS THE SAME IS ON AGREED BASIS. ASSESSEES APPEAL IS PARTLY ALL OWED TO THAT EXTENT. LOOKING THE OBSERVATION OF THE LD. CIT(A) ON THE IS SUE AN THE CASE LAWS RELIED ON BY THE LD. AR OF THE ASSESSEE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE HIS ORDER. THUS GROUND NO. 2 OF THE REVENUE IS DISMISSED. 8.1 AS REGARDS GROUND NO. 3 OF THE REVENUES APPEA L AGAINST RESTRICTING THE ADDITION OF RS. 6,99,228/- BY MAKIN G DISALLOWANCE U/S 40(A)(IA) OF THE ACT TO RS. 4,81,614/- THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) IS AS UNDER:- 3.4.3 I HAVE DULY CONSIDERED ASSESSEES SUBMISSION AND ALSO TAKEN A NOTE OF JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT AS WELL AS THE FACTUAL MATRIX OF THE CASE. I HAVE DECIDED IDENTICAL ISSUE IN RESPECT TO ADDITION MADE ON A/C OF DISALLOWANCE U/S 40A(3) IN THE GROUND NO 11 AND 12 ABOVE AND COVERED BY MY FINDINGS MADE IN GROUND NO 11 & 12 ABOVE. THEREFORE IN VIEW OF VARIOUS JUDICIAL PRONOU NCEMENTS, THE ADDITION ON ACCOUNT OF DISALLOWANCE MADE U/S 40(A)(IA) CANNOT B E SUSTAINED WHERE THE PROFIT WAS ESTIMATED BY REJECTING THE BOOKS OF ACCO UNT AND BY APPLYING THE PROVISIONS OF SECTION 145(3) OF I.T. ACT. FURTHER, THE FACT REMAINS THAT THE ASSESSEE ITSELF HAS DISALLOWED RS. 4,81,614/- U/S 4 0(A)(IA) IN THE RETURN FILED U/S 153A (COPY OF COMPUTATION IS AT PB PAGE 77). THUS, THE DISALLOWANCE TO THE EXTENT OF RS. 4,81,614/- CANNOT BE DELETED. THEREFORE IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND RESPECTFULLY FOLLOWING THE JUDICIAL ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 43 PRONOUNCEMENTS OF VARIOUS BENCHES OF HONBLE ITAT T HE ADDITION OF THE REMAINING AMOUNT RS. 6,99,228/- MINUS RS. 4,81,614/- = RS. 217614/- CANNOT BE SUSTAINED. THE AO IS DIRECTED TO DELETE THE ADDITION OF RS. 2, 17,614/- MADE BY DISALLOWING U/S 40(A)(IA) OF I.T. ACT AND T HE ADDITION FOR THE REMAINING AMOUNT RS. 4,81,614/- IS SUSTAINED AS THE SAME HAS BEEN ADDED BY THE ASSESSEE IN THE RETURN FILED U/S 153A OF TH E ACT. ASSESSEES APPEAL IS PARTLY ALLOWED. 8.2 DURING THE COURSE OF HEARING, THE LD. DR RELIED ON THE ORDER OF THE AO. 8.3 ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE S UPPORTED THE ORDER OF THE LD. CIT(A). HOWEVER, THE LD. AR OF THE ASSESSEE SUBMITTED FOLLOWING WRITTEN SUBMISSION. WE HAVE SUBMITTED THAT THE ASSESSEES BOOKS OF ACCO UNT HAVE BEEN REJECTED BY THE AO FOR ALL PRACTICAL PURPOSE A ND THE PROFIT HAS BEEN ESTIMATED BY APPLYING GP RATE. THEREFORE, NO FURTHER ADDITION CAN BE MADE ON THE BASIS OF ENTRIES IN THE BOOKS OF ACC OUNT. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS:- (I) ITAT CUTTACK BENCH IN THE CASE OF ITO V/S SAHADEV PRADHAN (2012) 18 ITR 0180. THE FINDINGS OF HONBLE ITAT ARE AS UNDER:- 7. HAVING HEARD THE RIVAL PARTIES AND GOING THROUG H THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND ALSO T HE DECISIONS CITED AT BAR, WE ARE INCLINED TO FIND THE CONTENTIO N OF THE LEARNED COUNSEL OF THE ASSESSEE APPROPRIATE TO THE EXTENT T HE LEARNED CIT(A) HAS TAKEN INTO COGNIZANCE THE FACTS LEADING TO THE DISALLOWANCE OF THE EXPENDITURE U/S.40(A)(IA) BY TH E ASSESSING OFFICER WHEN HE SOUGHT TO CONSIDER THE REJECTION OF BOOKS OF ACCOUNT TAKING RECOURSE TO SECTION 145 (3) OF THE I.T.ACT AS THE ASSESSING OFFICER WAS TO PASS THE ORDER U/S.144. HA VING ESTIMATED THE INCOME FROM BOOK PUBLISHING BY ENHANC ING THE NET PROFIT AS OTHERWISE RETURNED BY THE ASSESSEE ON THE BASIS OF FINANCIAL STATEMENTS SUBMITTED ALONG WITH THE RETUR N WITH FORM 3CD, THE ASSESSING OFFICER TRIED TO INDICATE THAT T HE RELEVANT EXPENDITURES WERE TO BE BURDENED WITH TAX DEDUCTION AT SOURCE WHICH HAD NOT BEEN DONE. THE OBSERVATION OF THE ASS ESSING OFFICER THEREFORE ONLY LED TO THE FINDING THAT THE NON-DEDUCTION ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 44 OF TAX AT SOURCE WAS TO BE CONSIDERED UNDER THE PRO VISIONS OF CHAPTER XVIIB WHICH THE LEARNED DR POINTED OUT WAS TO BE CONSIDERED U/S.201 OF THE I.T.ACT. THE VARIOUS DECI SIONS CITED AT THE BAR AND NOTED BY THE LEARNED CIT(A) THEREFORE I NDICATE THAT THE ASSESSEE WOULD HAVE NEVER TRIED TO DEDUCT TAX A T SOURCE ON THESE PAYMENTS FOR CLAIMING THESE EXPENDITURES FOR THE PURPOSE OF ITS BUSINESS INSOFAR AS THE AO HAVING ALLOWED TH ESE EXPENDITURES ON ESTIMATION OF THE INCOME AT A PERCE NTAGE INDICATED ALLOWANCE OF EXPENDITURE OF THE REMAINING RECEIPTS AS EXPENDITURE. THOSE RECEIPTS WERE SPENT BY THE ASSES SEE THEREFORE COULD NOT HAVE BEEN FURTHER CONSIDERED FOR DISALLOW ANCE AS NOTED BY THE ASSESSING OFFICER THE PROVISIONS OF SE CTION 40(A)(IA) AS PENAL IN NATURE. THE LEARNED COUNSEL F OR THE ASSESSEE SUBMITTED THAT HAVING DISCUSSED THE ISSUE FOR NON- DEDUCTION OF TAX AT SOURCE ON THESE PAYMENTS, THE A SSESSING OFFICER HIMSELF WAS OF THE CONSIDERED VIEW THAT THE Y DO NOT REQUIRE DEDUCTION OF TAX U/S.194C. THE LEARNED CIT( A) THEREFORE HAVING DEALT WITH THE FACTS IN ACCORDANCE WITH THE ASSESSING OFFICER'S DISCUSSIONS COULD ONLY REASON OUT THAT TH ERE WAS NO BINDING FOR INCURRING THE EXPENDITURE BY THE ASSESS EE SUBJECTED TO DEDUCTION OF TAX AT SOURCE. HE RIGHTLY HELD THAT SECTION 40(A)(IA) PROVIDES FOR CERTAIN DISALLOWANCES IN CER TAIN CASES NOTWITHSTANDING THAT THOSE AMOUNTS ARE GENERALLY AL LOWED UNDER THE GENERAL SECTION. THE COMPUTATION U/S.29 HAS TO BE MADE U/S. 145 ON THE BASIS OF BOOKS OF ACCOUNT REGULARLY MAINTAI NED BY THE ASSESSEE WHICH THE ASSESSING OFFICER DID BY EST IMATING THE PROFIT AT 5% OF THE SALES. THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED ON THE DECISION OF ITAT, HYDERABAD IN TH E CASE OF TEJA CONSTRUCTIONS V. ACIT, WHICH IS SQUARELY APPLI CABLE TO THE FACTS OF THE ASSESSEE'S CASE WHEN THE DECISION OF H ON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF INDWELL CONSTRUCT IONS V. CIT (1998() 232 ITR 776 WAS TAKEN NOTE OF WHEN HAVING R EJECTED THE BOOK RESULT IT WAS NOT THE CASE OF THE ASSESSING OF FICER TO GO BACK TO THOSE VERY BOOKS OF ACCOUNT WHICH INDICATED NON- DEDUCTION OF TAX AT SOURCE ON CERTAIN EXPENDITURES THAT HAD RIPENED TO BE DISALLOWED U/S.40(A)(IA). CONFINING O URSELVES TO THE ISSUE ON HAND WE ARE INCLINED TO FOLLOW THE DEC ISION OF THE ITAT, CUTTACK BENCH IN THE CASE OF SANJAY KUMAR PRA DHAN V. ACIT IN ITA NO.450/CTK/2011 DT.16.12.2011 (COPY PLA CED ON RECORD) INDICATING THAT IT CANNOT BE SAID THAT A CH ANGE OF STAND CAN BE TAKEN UP LATER WHEN THE FINDING OF FACTS REM AINS THE SAME AS WERE AVAILABLE TO THE ASSESSING OFFICER IN VIEW OF THE FACT THAT PART DEDUCTION OF TAX ON CERTAIN PAYMENTS DO NOT LE AD TO THE FINDING THAT ALL THE EXPENDITURES INCURRED WERE SUS CEPTIBLE TO BE DISALLOWED U/S.40(A)()IA) FOR WANT OF DEDUCTION OF TAX AT SOURCE. FOR THE REASONS DISCUSSED ABOVE, WE DO NOT FIND ANY INFIRMITY IN ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 45 THE IMPUGNED ORDER OF THE LEARNED CIT(A), WHICH WE UPHOLD BY DISMISSING THE APPEAL OF THE REVENUE. (II) ITAT HYDERABAD IN THE CASE OF M/S TEJA CONSTRUCTIONS V/S ACIT (2010) 36 DTR 0220 HELD THAT WHEN BOOKS OF ACCOUNT OF THE ASSESSEE WAS NOT RELIED AND IT WAS REJECTED BY THE AO. NOW BASED ON THE RELIANC E ON THE SAME BOOKS DISALLOWANCE U/S 40(A)(IA) IS NOT PROPER. THE ESTIM ATION OF INCOME TAKES CARE OF THE IRREGULARITIES COMMITTED BY THE ASSESSEE. IN VIEW OF THE ABOVE SUBMISSION THE LD CIT(A) HAS R IGHTLY DELETED THE ADDITION. THE HUMBLE ASSESSEE PRAYS YOU R HONOR KINDLY TO CONFIRM THE FINDINGS OF LD CIT(A) AND DISMISS THE G ROUND RAISED BY REVENUE. 8.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED THAT THE LD. CIT(A ) HAS RESTRICTED THE OF RS. 6,99,228/- BY MAKING DISALLOWANCE U/S 40(A)(IA) OF THE ACT TO RS. 4,81,614/- BY OBSERVING AS UNDER:- THEREFORE IN VIEW OF THE ABOVE FACTS AND CIRCUMSTAN CES AND RESPECTFULLY FOLLOWING THE JUDICIAL PRONOUNCEME NTS OF VARIOUS BENCHES OF HONBLE ITAT THE ADDITION OF THE REMAINI NG AMOUNT RS. 6,99,228/- MINUS RS. 4,81,614/- = RS. 217614/- CANNOT BE SUSTAINED. THE AO IS DIRECTED TO DELETE THE ADDITION OF RS. 2, 17,614/- MADE BY DISALLOWING U/S 40(A)(IA) OF I.T. ACT AND THE ADDIT ION FOR THE REMAINING AMOUNT RS. 4,81,614/- IS SUSTAINED AS THE SAME HAS BEEN ADDED BY THE ASSESSEE IN THE RETURN FILED U/S 153A OF THE ACT. ASSESSEES APPEAL IS PARTLY ALLOWED. LOOKING THE OBSERVATION OF THE LD. CIT(A) ON THE IS SUE AN THE CASE LAWS RELIED ON BY THE LD. AR OF THE ASSESSEE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE HIS ORDER. THUS GROUND NO. 3 OF THE REVENUE IS DISMISSED. ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 46 9.1 AS REGARDS GROUND NO. 4 OF THE REVENUE WHEREIN THE REVENUE IS AGGRIEVED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 70,00,000/- MADE BY THE AO TREATING THE SHARE CAPIT AL RECEIVED AS NON- GENUINE. THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) IS AS UNDER- 3.5.3 I HAVE DULY CONSIDERED ASSESSEES SUBMISSION AND ALSO TAKEN A NOTE OF JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT AS WELL AS THE FACTUAL MATRIX OF THE CASE. THE FACTS OF CASE ARE SIMILAR TO AY 2008-2009 WHEREIN HONBLE ITAT HAS DELETED THE ADDI TION MADE ON A/C OF BOGUS SHARE APPLICATION , RELEVANT EXTRACTS OF WHIC H ARE REPRODUCED HERE AS UNDER: .6.1 ON FACTS ALSO, THE ASSESSEE HAS PRODUCED BEF ORE THE ASSESSING OFFICER COPY OF SHARE APPLICATION, CONFIRMATION OF THE CASH CREDITORS, COPY OF PAN, COPY OF BOARD RESOLUTION, C OPY OF DIRECTORS REPORT, AUDITORS REPORT, COPY OF BALANCE SHEET, CO PY OF P&L ACCOUNT, COPY OF BANK ACCOUNT IN ALL THE CASES TO P ROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE CASH CREDIT ORS. THE LD ASSESSING OFFICER MADE ADDITION ON THE BASIS OF INV ESTIGATION CONDUCTED BY THE ITO, INVESTIGATION WING, KOLKATA B UT THE LD ASSESSING OFFICER OF THE ASSESSEE HAS NOT CLARIFIED WHAT INQUIRY HAD BEEN CONDUCTED AND WHAT EVIDENCES COLLECTED WHICH G OES AGAINST THE ASSESSEE. THE NOTICE U/S 131 ISSUED BY THE ITO, INVESTIGATION WING, KOLKATA WERE SERVED IN CASE OF VIDYA AGENCIES PVT. LTD. AND SHIVARPAN MERCANTILES PVT. LTD., BUT COMPLIANCE COU LD NOT BE MADE ON THE GIVEN DATE BECAUSE CONCERNED OFFICER WAS ON LEAVE. IN CASE OF MIDDLETON GOODS PVT. LTD. AND LACTRODRYER MARKET ING PVT. LTD., NOTICES WERE SERVED ON THE ASSESSEE AND IN COMPLIAN CE TO THE NOTICE, THE PARTY SUBMITTED ALL THE DOCUMENTS IN THE IT OFF ICE. THE CASE LAW REFERRED BY THE LD CIT(A) I.E. DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF NIPUN BUILDERS AND DEVELOPERS PVT. L TD. VS. CIT AND VIJAY POWER GENERATOR LTD. VS CIT (SUPRA) ARE NOT S QUARELY APPLICABLE ON THE FACTS OF THE CASE AS THERE WAS SH ORT TIME AVAILABLE WITH THE ASSESSING OFFICER AS WELL AS INVESTIGATION WING OF KOLKATA. THE COPY OF INQUIRY HAS NOT BEEN PROVIDED BY THE AS SESSING OFFICER TO THE ASSESSEE. AS PER FINDINGS OF THE HON'BLE DEL HI HIGH COURT IN THE CASE NIPUN BUILDERS AND DEVELOPERS PVT. LTD. VS . CIT (SUPRA), THE INVESTIGATION OFFICER AT KOLKATA HAD NOT DEPUTE D INSPECTOR TO ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 47 ENQUIRE THE WHEREABOUTS OF THE COMPANY. THE CASE LA WS REFERRED BY THE ASSESSEE ARE SQUARELY APPLICABLE ON THE FACTS A ND CIRCUMSTANCES OF THE APPELLANTS CASE, THEREFORE, WE REVERSE THE ORDER OF THE LD CIT(A) ON TECHNICAL GROUND AS WELL AS ON MERIT ALSO . RESPECTFULLY FOLLOWING THE DECISION OF HONBLE ITAT JAIPUR BENCH, JAIPUR IN THE CASE OF ASSESSEE ITSELF, I DIRECT THE AO TO DELETE THE ADDITION OF RS. 70,00,000/- MADE BY HIM ON ACCOUNT OF SHARE CAP ITAL. ASSESSEES APPEAL STANDS ALLOWED. 9.2 DURING THE COURSE OF THE LD. DR RELIED ON THE O RDER OF THE AO. 9.3 ON THE OTHER HAND, THE LD. AR SUPPORTED THE ORD ER OF THE LD. CIT(A). THE LD. AR OF THE ASSESSEE FILED THE WRITTE N SUBMISSION ALONGWITH CASE LAWS WHICH HAS BEEN TAKEN INTO CONSI DERATION. 9.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED FROM THE RECORDS T HAT THE ASSESSEE HAD RECEIVED FOLLOWING SHARE APPLICATION IN A.Y. 2006-0 7, A.Y. 2006-08 AND A.Y. 2010-11. (I) AY 2006-07 NAME OF THE PARTY NO OF SHARES ALLOTTED AMOUNT AGAINST SHARES AMOUNT AGAINST SHARE PREMIUM TOTAL HARIOM VANIJYA PVT. LTD 1,00,000 10,00,000 0.00 10,00,000 BROTHERS TRADING PVT. LTD 90,000 9,00,000 0.00 9,00,000 NUPUR FINVEST PRIVATE LIMITED (OLD NAME NUPUR COMPUTERS PVT LTD) 60,000 6,00,000 0.00 6,00,000 (II) AY 2008-09 NAME OF THE PARTY NO OF SHARES ALLOTTED AMOUNT AGAINST SHARES AMOUNT AGAINST SHARE PREMIUM TOTAL ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 48 VINDYA AGENCIES PVT LTD 25,000 2,50,000 7,50,000 10,00,000 SHIVARPAN MERCANTILES PVT LTD. 25,000 2,50,000 7,50,000 10,00,000 MIDDLETON GOODS PVT LTD 75,000 7,50,000 22,50,000 30,00,000 LACTRODRYER MARKETING PVT LTD 25,000 2,50,000 7,50,000 10,00,000 (III) AY 2010-11 NAME OF THE PARTY NO OF SHARES ALLOTTED AMOUNT AGAINST SHARES AMOUNT AGAINST SHARE PREMIUM TOTAL BAWA HIRE PURCHASES PVT LTD. 12,500 1,25,000 23,75,000 25,00,000 OMEGA SUPPLIERS PVT LTD 10,000 1,00,000 19,00,000 20,00,000 SABHYATA SUPPLIERS PVT LTD. 12,500 1,25,000 23,75,000 25,00,000 IT IS OBSERVED FROM THE RECORDS THAT THE AO MADE SI MILAR ADDITION ON SAME FACTS AND GROUND IN AY 2006-07 & 2008-09. THE APPEA L OF THE ASSESSEE FOR AY 2006-07 HAD BEEN DECIDED BY LD CIT(A) IN FAV OUR OF THE ASSESSEE AND ADDITION WAS DELETED. THE DEPARTMENT HAS NOT FI LED APPEAL IN TRIBUNAL AGAINST THE APPEAL ORDER FOR AY 2006-07. T HE ADDITION IN APPEAL FOR AY 2008-09 WAS CONFIRMED BY LD CIT (APPEAL), CE NTRAL JAIPUR. THE ASSESSEE FILED APPEAL BEFORE HONBLE ITAT, JAIPUR B ENCH, JAIPUR. THE APPEAL OF THE ASSESSEE WAS DECIDED BY HONBLE ITAT IN ITA NO. 686/JP/2014 VIDE ORDER DATED 27.11.2015 WHEREIN THE ADDITION CONFIRMED BY LD CIT(A) WAS DELETED COPY PB PG 1051-1065/ VOL -3 . THE RELEVANT PARA OF FINDINGS OF HONBLE ITAT IN THE CASE OF ASS ESSEE IS AS UNDER:- ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 49 6.1 ON FACTS ALSO, THE ASSESSEE HAS PRODUCED BEFORE THE ASSESSING OFFICER COPY OF SHARE APPLICATION, CONFIRMATION OF THE CASH CREDITORS, COPY OF PAN, COPY OF BOARD RESOLUTION, COPY OF DIRE CTORS REPORT, AUDITORS REPORT, COPY OF BALANCE SHEET, COPY OF P& L ACCOUNT, COPY OF BANK ACCOUNT IN ALL THE CASES TO PROVE THE IDENTITY , GENUINENESS AND CREDITWORTHINESS OF THE CASH CREDITORS. THE LD ASSE SSING OFFICER MADE ADDITION ON THE BASIS OF INVESTIGATION CONDUCTED BY THE ITO, INVESTIGATION WING, KOLKATA BUT THE LD ASSESSING OF FICER OF THE ASSESSEE HAS NOT CLARIFIED WHAT INQUIRY HAD BEEN CONDUCTED A ND WHAT EVIDENCES COLLECTED WHICH GOES AGAINST THE ASSESSEE. THE NOTI CE U/S 131 ISSUED BY THE ITO, INVESTIGATION WING, KOLKATA WERE SERVED IN CASE OF VIDYA AGENCIES PVT. LTD. AND SHIVARPAN MERCANTILES PVT. L TD., BUT COMPLIANCE COULD NOT BE MADE ON THE GIVEN DATE BECA USE CONCERNED OFFICER WAS ON LEAVE. IN CASE OF MIDDLETON GOODS PV T. LTD. AND LACTRODRYER MARKETING PVT. LTD., NOTICES WERE SERVE D ON THE ASSESSEE AND IN COMPLIANCE TO THE NOTICE, THE PARTY SUBMITTE D ALL THE DOCUMENTS IN THE IT OFFICE. THE CASE LAW REFERRED BY THE LD C IT(A) I.E. DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF NIPUN BUILD ERS AND DEVELOPERS PVT. LTD. VS. CIT AND VIJAY POWER GENERA TOR LTD. VS CIT (SUPRA) ARE NOT SQUARELY APPLICABLE ON THE FACTS OF THE CASE AS THERE WAS SHORT TIME AVAILABLE WITH THE ASSESSING OFFICER AS WELL AS INVESTIGATION WING OF KOLKATA. THE COPY OF INQUIRY HAS NOT BEEN PROVIDED BY THE ASSESSING OFFICER TO THE ASSESSEE. AS PER FINDINGS OF THE HON'BLE DELHI HIGH COURT IN THE CASE NIPUN BUILDERS AND DEVELOPERS PVT. LTD. VS. CIT (SUPRA), THE INVESTIGATION OFFICE R AT KOLKATA HAD NOT DEPUTED INSPECTOR TO ENQUIRE THE WH EREABOUTS OF THE COMPANY. THE CASE LAWS REFERRED BY THE ASSESSEE ARE SQUARELY APPLICABLE ON THE FACTS AND CIRCUMSTANCES OF THE AP PELLANTS CASE, THEREFORE, WE REVERSE THE ORDER OF THE LD CIT(A) ON TECHNICAL GROUND AS WELL AS ON MERIT ALSO. THE FACTS OF THIS YEAR ARE SIMILAR TO AY 2008-09. T HEREFORE, IN VIEW OF THE DECISION OF HONBLE ITAT THE ADDITION WHICH WAS MADE ON THE SAME FACTS AND CIRCUMSTANCES DESERVES TO BE DELETED AND LD CIT(A) HAS RIGHTLY FOLLOWED THE DECISION OF HONBLE ITAT. THERE IS NO MATERIAL CHANGE IN THE FACTS AND CIRCUMSTANCES IN THE YEAR UNDER CONSI DERATION, THEREFORE, THE DECISION OF HONBLE ITAT IS BINDINGS. IN VIEW OF TH E PRESENT FACTS AND ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 50 CIRCUMSTANCES OF THE CASE, WE FIND NO REASON TO INT ERFERE WITH THE ORDER OF THE LD. CIT(A). THUS GROUND NO. 4 OF THE REVENUE IS DISMISSED. 10.1 AS REGARDS GROUND NO. 5 OF THE REVENUE WHEREIN THE REVENUE IS AGGRIEVED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 5,516/- MADE BY THE AO BY MAKING DISALLOWANCE FORM EXPENSES NAMED AS BILL PREMIUM DEBITED IN BOOKS OF ACCOUNTS JADA VJI. THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) IS AS UNDE R:- 3.6.3 I HAVE CONSIDERED ASSESSEES SUBMISSION AND THE FAC TUAL MATRIX OF THE CASE . I HAVE DECIDED THE ISSUE OF TRADING ADDITION IN GRO UND NO 3 TO 10 ABOVE BY HOLDING THAT THE TRUE PROFIT CANNOT BE DE TERMINED ON THE BASIS OF RECASTED BOOKS OF ACCOUNT PREPARED BY SPECIAL AU DITORS DUE TO CERTAIN LIMITATION POINTED OUT BY SPECIAL AUDITORS IN THEIR REPORT AND THE AO HIMSELF ASSESSED THE TRADING RESULTS OF THE ASSESSEE BY EST IMATING THE GP RATE OF 26.21% ON CONSOLIDATED SALES. THEREFORE, THE SEPARA TE ADDITION ON ACCOUNT OF BILL PREMIUM CANNOT BE SUSTAINED. FURTHER THE AO MA DE A FINDING THAT THE ASSESSEE HAS NOT CHALLENGED THE REDUCTION OF CORRES PONDING PURCHASES RELATABLE TO THE BILL PREMIUM EXPENSES. THIS FINDIN G OF AO IS AGAINST THE FACTS. THE AO HAS REPRODUCED A CHART AT PAGE 46-47 OF HIS ORDER WHEREIN THE ASSESSEE CLAIMED THE PURCHASES SHOULD BE INCREASED BY RS. 3,37,50,507/-. IN THIS CHART PURCHASES FROM M/S BAHETI GEMS AND MR GIRDHARI ARE INCLUDED. FURTHER THE ASSESSEE HAS GIVEN PLAUSIBLE EXPLANATIO N FOR THE GENUINE PURCHASE FROM THESE PARTIES AND JUSTIFICATION OF BI LL PREMIUM MENTIONED IN THE SEIZED RECORDS. THE AO HAS NOT COTROVERTED THIS EXPLANATION IN HIS REMAND REPORT. THEREFORE, IN VIEW OF FACTS AND CIRCUMSTANC ES AS DISCUSSED ABOVE, ADDITION OF RS. 5,516/- MADE BY AO ON ACCOUNT OF BI LL PREMIUM CANNOT BE SUSTAINED AND AO IS DIRECTED TO DELETE THIS ADDITIO N. ASSESSEES APPEAL IN GR NO 16 STANDS ALLOWED. 10.2 DURING THE COURSE OF HEARING, THE LD. DR RELIE D ON THE ORDER OF THE AO. ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 51 10.3 ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE RELIED ON THE FINDINGS OF THE LD. CIT(A) AND ALSO FILED THE FOLLOWING WRIT TEN SUBMISSION WHICH HAS BEEN TAKEN INTO CONSIDERATION. FURTHER, WE SUBMIT THAT THERE IS NO EVIDENCE WITH LD. AO THAT THE BILL PREMIUM EXPENSES ARE INCURRED IN RELATION TO PROCURING THE BOGUS BILLS.THE COPY OF LEDGER A/C OF BILL PREMIUM IS AT PB PAGE 586. FROM EXAMINING THE BOOKS OF ACCOUNTS YOUR HONOUR WO ULD FIND THAT THERE ARE ONLY TWO ENTRIES IN THE A/C ONE OF RS. 20 00/- OF BAHETI GEMS AND SECOND OF RS. 3,516/- OF MR. GIRDHARI. THE EXPL ANATION AS REGARD THE NATURE OF THE TRANSACTION IS AS UNDER:- (I) BAHETI GEMS & JEWELS PURCHASES OF RS. 2,04,000/ - BILL PREMIUM. RS. 2000/- DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE CO MPANY MADE PURCHASES OF RS. 2,04,000/- FROM THIS PARTY WH ICH IS ENTERED IN REGULAR BOOKS AS WELL AS IN BOOKS OF ACC OUNTS NAMED AS JADAVJI. THE COPY OF LEDGER A/C OF THIS PARTY IN BOOKS OF ACCOUNTS OF JADAVJI IS AT PB PAGE 344. THE SPECIAL AUDITORS TREATED THIS PURCHASE AS BOGUS MERELY BECAUSE OF TH E REASON THAT ALONG WITH THE ENTRY OF PURCHASES THE AMOUNT PAYABL E AGAINST BILL PREMIUM WAS ALSO CREDITED IN A/C OF THE PARTY. IN THIS REGARD WE WOULD LIKE TO DRAW YOUR KIND ATTENTION TOWARDS T HE NARRATION MENTIONED IN THE ENTRY PASSED AGAINST THIS PURCHASE . IN THE NARRATION ITS HAS BEEN MENTIONED THAT THE ASSESSEE HAS PURCHASED 4 KM (KUNDAN MEENA) SET FROM THIS PARTY AND THE DESIGN NUMBERS OF THE SETS IS ALSO MENTIONED IN THE NARRATION WHICH CAN ONLY BE MENTIONED IN THE CASE OF GENUINE PURCHASES. FURTHER MOST IMPORTANTLY THESE SETS WERE SOLD ON 02 .02.2010 TO SOME SINGHANIA JI (DELHI) FOR RS. 2,30,000/- (COPY OF LEDGER A/C AT PB PAGE 345) . THEREFORE WITHOUT PURCHASING THE GOODS CANNOT BE SOLD. FURTHER NO ANY ENTRY SHOWING THE R ETURN OF CASH AGAINST THE CHEQUE GIVEN WAS FOUND ANYWHERE IN THE SEIZED DOCUMENT. THE SEIZED NO 2 BOOKS (JADAVJI) AS WELL AS REGULAR BOOKS BOTH SHOWS THE ISSUE OF CHEQUE AGAINST THE PU RCHASES. HAD THIS ENTRY WAS AGAINST THE BOGUS BILL, THAN THE RE WOULD BE ENTRY OF RECEIPT OF CASH AS AGAINST ISSUE OF CHEQUE IN NO.2 BOOKS OF ACCOUNT. THE SPECIAL AUDITORS TREATED THIS PURCH ASE AS BOGUS ONLY ON THE BASIS OF PRESUMPTION AND ASSUMPTION WIT HOUT MAKING FURTHER INQUIRES. THE SUPPLIER PARTY CHARGE D EXTRA RS. 2000/- ON ACCOUNT OF BILLING CHARGES. IT WAS PRACTI CE OF THIS PARTY TO CHARGE SOME EXTRA IF BILL IS TAKEN AGAINST THE GOODS SUPPLIED. IF THE GOODS IS TAKEN WITHOUT BILL THAN N O CHARGES OF ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 52 THE BILL. THEREFORE BILL PREMIUM IS PART AND PARTIA L AMOUNT OF GOODS PURCHASED. FURTHER THE BILLS PREMIUM WAS ONL Y CREDITED IN A/C OF THE PARTY AND AMOUNT AGAINST PURCHASES W AS PAID BY CHEQUE. LATER ON THIS ENTRY WAS W. OFF BY TRANSFERR ING THE SAME IN DISCOUNT A/C MEANING WHICH THE PAYMENT OF BILL P REMIUM WAS NOT MADE TO THIS PARTY. FURTHER, NO SHOW CAUS E NOTICE WAS GIVEN BY THE AO BEFORE ACCEPTING THE AUDIT REPORT W HICH SAYS THIS PURCHASE AS BOGUS. (II) MR. GIRDHARI PURCHASES OF RS. 5,05,992/- BILL PREMIUM RS. 3516/- DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE CO MPANY MADE PURCHASES OF RS. 5,05,992/- FROM THIS PARTY ON 27.03.2010 WHICH IS ENTERED IN BOOKS OF ACCOUNTS NAMED AS JAD AVJI. THE COPY OF LEDGER A/C OF THIS PARTY IN BOOKS OF ACCOUN TS OF JADAVJI IS AT PB PAGE 346. THE SPECIAL AUDITORS TREATED THIS PURCHASE AS BOGUS MERELY BECAUSE OF THE REASON THAT THE BILL PREMIUM WAS PAID TO THIS PARTY. IN THIS REGARD THIS IS TO SUBMIT THAT THIS PARTY CHARGED SOME EXTRA AMOUNT IF BILL I S TAKEN ALONGWITH THE GOODS. SO THE ASSESSEE CREDITED THE O RIGINAL VALUE OF THE GOODS AND CHARGES AGAINST THE BILL SEPARATEL Y IN THE ACCOUNT OF THE PARTY. THE BILL PREMIUM DOES NOT REP RESENT TO BOGUS BILL BUT EXTRA AMOUNT PAYABLE FOR BILLING. TH IS EXTRA AMOUNT IS PART AND PARTIAL AMOUNT OF VALUE OF THE G OODS. THE ASSESSEE MADE SEPARATE ENTRY AGAINST THE BILLING CH ARGES IN ORDER TO PURSUE THE PARTY TO REDUCE IT ON FINAL PAY MENT. HAD IT WAS BOGUS BILL, THERE COULD NOT BE ANY ENTRY OF CRE DIT BILLS IN NO 2 ACCOUNT. RATHER FULL DESCRIPTIONS AS REGARD DESIGN NO ETC ARE GIVEN. FURTHER NO ANY ENTRY SHOWING THE RETURN OF CASH AGAINST THE CHEQUE GIVEN WAS FOUND ANYWHERE IN THE SEIZED DOCUMENT. THE SEIZED NO 2 BOOKS (JADAVJI) AS WELL AS REGULAR BOOKS BOTH SHOWS THE ISSUE OF CHEQUE AGAINST THE PU RCHASES. HAD THIS ENTRY WAS AGAINST THE BOGUS BILL, THAN THE RE WOULD BE ENTRY OF RECEIPT OF CASH AS AGAINST ISSUE OF CHEQUE IN NO.2 BOOKS OF ACCOUNT. THE SPECIAL AUDITORS TREATED THIS PURCH ASE AS BOGUS ONLY ON THE BASIS OF PRESUMPTION AND ASSUMPTION WHI CH WAS BEYOND THE SCOPE OF TERMS OF REFERENCE OF AUDIT. TH E AUDIT COULD HAVE BEEN COMPLETED ON THE BASIS OF ACCOUNTIN G PRINCIPLES AND SEIZED DOCUMENTS. THERE WAS NO DOCUM ENT TO VISUALISE THE PURCHASE WAS BOGUS. IN VIEW OF ABOVE, THE LD CIT(A) HAS RIGHTLY DELETED THE ADDITION, AND THEREFORE, THE HUMBLE ASSESSEE PRAYS YOUR HONO UR KINDLY TO SUSTAIN THE FINDINGS OF LD CIT(A) AND DISMISS THE GROUND RA ISED BY THE REVENUE. ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 53 10.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. WE FIND FROM THE RECORD THAT T HE LD. CIT(A) HAD DELETED THIS ADDITION BY OBSERVING AS UNDER:- IN THIS CHART PURCHASES FROM M/S BAHETI GEMS AND MR GIRDHARI ARE INCLUDED. FURTHER THE ASSESSEE HAS GIVEN PLAUSI BLE EXPLANATION FOR THE GENUINE PURCHASE FROM THESE PARTIES AND JUSTIFICATI ON OF BILL PREMIUM MENTIONED IN THE SEIZED RECORDS. THE AO HAS NOT COTROVERTED THIS EXPLANATION IN HIS REMAND REPORT. THEREFORE, IN VIE W OF FACTS AND CIRCUMSTANCES AS DISCUSSED ABOVE, ADDITION OF RS. 5 ,516/- MADE BY AO ON ACCOUNT OF BILL PREMIUM CANNOT BE SUSTAINED AND AO IS DIRECTED TO DELETE THIS ADDITION. ASSESSEES APPEAL IN GR NO 16 STAN DS ALLOWED. TAKING INTO CONSIDERATION THE PRESENT FACTS AND CIR CUMSTANCES OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHICH IS SUSTAINED. THUS GROUND NO. 5 OF THE REVENUE IS DISMISSED. 11.1 AS REGARDS GROUND NO. 6 OF THE REVENUE WHEREIN THE REVENUE IS AGGRIEVED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,66,336/-MADE BY THE AO BY DISALLOWING 15% OF TOTA L EXPENSES OF RS. 11,08,906/- FOUND RECORDED IN THE BOOKS OF ACCOUNT NAMED AS JADAVJI. THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT( A) IS AS UNDER:- 3.7.3 I HAVE DULY CONSIDERED ASSESSEES SUBMISSION AND TA KEN A NOTE OF THE FACTUAL MATRIX OF THE CASE. AS I HAVE ALREADY DECIDED THE ISSUE OF TRADING ADDITION IN GROUND NO 3 TO 10 IN ABOVE PARA BY HOLDING THAT THE TRUE PROFIT CANNOT BE DETERMINED ON THE BASIS OF RE-CAST ED BOOKS OF ACCOUNT PREPARED BY SPECIAL AUDITORS DUE TO CERTAIN LIMITAT ION POINTED OUT BY SPECIAL AUDITORS IN THEIR REPORT AND THE AO HIMSELF ASSESSE D THE TRADING RESULTS OF THE ASSESSEE BY ESTIMATING THE GP RATE OF 26.21% ON CON SOLIDATED SALES. THEREFORE, THE SEPARATE ADDITION BY DISALLOWING THE EXPENSES CANNOT BE ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 54 SUSTAINED. HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS G.K. CONTRACTOR (2009) 19 DTR 0305 HAS HELD THAT:- 7. ADMITTEDLY, THE SAID AMOUNT OF RS. 38,28,086 WAS S HOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNT AS 'MARKET OUTSTAN DING'. ACCORDING TO THE ASSESSEE, THE PAYMENT WAS OUTSTANDING AGAINS T THE LABOUR AND GOODS SUPPLIED. IT IS TRUE THAT ON BEING ASKED, THE ASSESSEE WAS NOT ABLE TO EXPLAIN THESE ENTRIES BY PRODUCING THE ADEQ UATE PROOF TO THE SATISFACTION OF THE AO. HOWEVER, IN OUR CONSIDERED OPINION, EVEN IF THE ASSESSEE HAS FAILED TO DISCHARGE HIS ONUS OF PR OOF IN EXPLAINING THE CASH CREDITS SHOWN IN THE BOOKS OF ACCOUNT AS ' MARKET OUTSTANDING', THE AO HAVING ESTIMATED THE HIGHER PR OFIT RATE ON TOTAL CONTRACT RECEIPTS AFTER REJECTION OF THE BOOKS OF A CCOUNT INVOKING THE PROVISIONS OF S. 145(3), NO SEPARATE ADDITIONS CAN BE MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT UNDER S. 68 OF T HE ACT OF 1961. WE ARE IN COMPLETE AGREEMENT WITH THE VIEW TAKEN BY TH E CIT(A), CONFIRMED BY THE TRIBUNAL. THUS, NO SUBSTANTIAL QUE STION OF LAW ARISES FOR CONSIDERATION OF THIS COURT IN THIS APPE AL. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF H ONBLE RAJASTHAN HIGH COURT IN ABOVE CASE I HOLD THAT SEPARATE ADDIT ION CANNOT BE MADE WHERE THE ADDITION WAS SUSTAINED BY APPLYING THE GP RATE AND AO IS DIRECTED TO DELETE THIS ADDITION OF RS. 1,66,336/- MADE BY HIM BY DISALLOWING THE EXPENSES. ASSESSEES APPEAL IN GR NO 17 STANDS ALLOWED. 11.2 DURING THE COURSE OF HEARING, THE LD. DR RELIE D ON THE ORDER OF THE AO. 11.3 ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A). 11.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. WE FEEL THAT THE LD. CIT(A) HA S RIGHTLY DELETED THE ADDITION OF RS. 1,66,336/- IN VIEW OF THE DECISION OF HON'BLE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. G. K. CONTRACTOR (2009) ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 55 19 DTR 305. HENCE, WE FIND NO REASON TO INTERFERE W ITH THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. THUS GROUND NO. 6 OF THE REVENUE IS DISMISSED. 12.1 AS REGARDS GROUND NO. 7 OF THE REVENUE WHEREIN THE REVENUE IS AGGRIEVED THAT THE LD. CIT(A) HAS ERRED IN GIVING D IRECTION TO ADJUST THE SEIZED CASH LYING IN PD ACCOUNT AGAINST THE SELF AS SESSMENT TAX LIABILITY. THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT( A) IS AS UNDER:- 3.10.4 I HAVE CONSIDERED ASSESSEES SUBMISSION AND THE FA CTUAL MATRIX OF THE CASE. IN THIS CASE, A SEARCH & SEIZUR E OPERATIONS U/S 132(1) OF ACT WAS CARRIED. PURSUANT TO THE NOTICE ISSUED U/S 153A OF THE ACT, ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2010-11 ON 31.03.2012 DECLA RING TOTAL INCOME OF RS. 2,31,17,670/- WHICH INCLUDES THE INCOME OF RS.2,46,00,000/- SURRENDER ON ACCOUNT OF INCOME EARNED FROM UNACCOUNTED SALES. ON PERUSAL OF THE RETURN FILED ON 31.03.2012 FOR AY 2010-11 , IT IS SEEN THAT ASSESSEE ITSELF COMPUTED TOTAL TA X LIABILITY INCLUDING INTEREST TO RS. 98,17,671/- AND OUT OF THE TOTAL TAX LIABILITY, ASSESSEE HAS PAID RS. 45,00,000/- ON 31/03/2011 AND RS. 817670/- ON 30/03/2012 AND FOR THE REMAINING AMOUNT OF RS. 45,00,000/- REQUEST WAS MADE TO LD CIT CENTRAL JAIPUR FOR ADJUSTMENT AGAINST AMOUNT LYING IN PD A/C BY FILING A LETTER ON 31/03/2012 UNDER COPY TO DCIT CENTRAL CIRCLE-2 JAIPUR. AO HAS NOT ALLOWED ANY ADJUSTMENT OF CASH LYING IN THE PD A/C AGAINST SELF ASSESSMENT TAX LIABILITY TILL 17.12.2013 EVEN THOUGH ASSESSEE HAD MADE REQUEST TO LD CIT (CENTRAL) JAIPUR ON 31.03.2012. IT IS ALSO SUBMITTED THAT AO CHARGED INTEREST U/S 234B AND 234C OF ACT WITHOUT ALLOWING AND ADJUSTMENT OF CASH LYING IN TH E PD A/C TO BE TREATED AS SELF ASSESSMENT TAX PAID ON 31.03.2012 OF RS. 45,00,000/-. IN THE REPORT SUBMITTED, AO HAS STRONGLY OBJECTED TO ASSESSEE'S CONTENTION A ND OPINED THAT AS PER EXPLANATION-2 OF THE SECTION 132B OF THE ACT, THE 'EXISTING LIABILITY' DOES NOT INCLUDE SELF ASSESSMENT TAX LIABILITY. THEREFORE, CREDIT OF AMOUNT LYING IN THE PD ACCOUNT CAN'T BE ADJUSTED AGAINST THE SELF ASSESSME NT TAX LIABILITY. HOWEVER, SHRI VIJAY GOYAL AR CONTENDS THAT AS PER THE LAW AS APPL ICABLE AT THAT TIME, SECTION 132 B (1) OF THE ACT PROVIDES FOR ADJUSTMENT OF ASS ETS SEIZED AGAINST ANY EXISTING LIABILITY AND HE RELYING ON FOLLOWING JUDICIAL PRON OUNCEMENTS, HAS FURTHER SUBMITTED THAT THE LIABILITY TO PAY SELF ASSESSMENT TAX IS AN EXISTING LIABILITY AND AMOUNT LYING IN PD A/C IS ADJUSTABLE AGAINST THE EX ISTING LIABILITY: KESAR KIMAM KARYALAYA (HIGH COURT DELHI) KANISHKA PRINTS PVT LTD (ITAT AHMADABAD) SUDHAR M SHETTY (ITAT MUMBAI) ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 56 NIKKA MAL BABU RAM (SOT CHANDIGARH) IN CASE OF NIKKA MAL BABU, HON'BLE ITAT CHANDIGARH HAS OBSERVED INTER ALIA AS UNDER: '...... 8. QUITE CLEARLY, IT PRESCRIBES THAT THE ASSETS SE IZED UNDER S. 132 CAN BE ADJUSTED (A) AGAINST THE AMOUNT OF ANY EXISTING LIA BILITY UNDER THIS ACT; (B) AGAINST THE AMOUNT OF LIABILITY DETERMINED ON COMPL ETION OF ASSESSMENT UNDER S. 153A; (C) AGAINST THE AMOUNT OF LIABILITY DETERMINE D ON COMPLETION OF ASSESSMENT UNDER CHAPTER XIV-B FOR THE BLOCK PERIOD ; AND (D) AGAINST ANY PENALTY LEVIED OR INTEREST PAYABLE IN CONNECTION WI TH SUCH ASSESSMENT. IN OTHER WORDS, S. 132B(1)(I) OF THE ACT EMPOWERS THE AO TO RECOVER THE PRESCRIBED LIABILITIES OUT OF THE ASSETS SEIZED UNDER S. 132 O F THE ACT. AS PER THE CIT(A) AND WHICH HAS BEEN SUPPORTED BY LEARNED DEPARTMENTAL RE PRESENTATIVE, THE LIABILITY TOWARDS ADVANCE TAX DOES NOT FORM A PART OF THE EXP RESSION EXISTING LIABILITY APPEARING IN S. 132B(1)(I) OF THE ACT. IN OUR CONSI DERED OPINION, EVEN LIABILITY TO PAY ADVANCE TAX IS PER THE STATUTORY PROVISIONS AND WE FIND NO PLAUSIBLE REASON TO ASCRIBE A RESTRICTED MEANING TO THE EXPRE SSION EXISTING LIABILITY APPEARING IN S. 132B(1)(I) OF THE ACT, AS BEING CON TENDED BY THE REVENUE. THE ARGUMENT SET UP BY THE REVENUE IS THAT THE EXPRESSI ON EXISTING LIABILITY IS REFERRED IN THE CONTEXT OF THE IT ACT, 1961. THE WT ACT, 1957, THE EXPENDITURE TAX ACT, 1987, THE GT ACT, 1958, AND THE INTEREST-T AX ACT, 1974, AND SINCE IN THE OTHER STATUTES, THERE IS NO CONCEPT OF ADVANCE TAX, THEREFORE THE EXPRESSION EXISTING LIABILITY USED IN S. 132B(1)(I) CANNOT B E UNDERSTOOD TO MEAN ADVANCE TAX LIABILITY UNDER THE IT ACT, 1961. IN OUR CONSID ERED OPINION, INTERPRETATION PLACED BY THE REVENUE IS MISPLACED AND WOULD LEAD T O ABSURD RESULTS. 9. IT IS WELL UNDERSTOOD THAT AS PER S. 4 OF THE ACT, AN ASSESSEE IS CHARGEABLE TO INCOME-TAX IN RESPECT OF HIS TOTAL IN COME. SUB-S. (2) OF S. 4 PRESCRIBES THAT THE INCOME-TAX SO CHARGEABLE SHALL BE DEDUCTED AT SOURCE OR PAID IN ADVANCE, WHERE IT IS SO DEDUCTIBLE OR PAYABLE UN DER ANY PROVISION OF THE ACT. WE HAVE OBSERVED EARLIER THAT ADVANCE TAX LIABILITY IS GOVERNED BY SS. 208 TO 210 OF THE ACT. SIMILARLY, S. 140A PROVIDES FOR PAYMENT OF SELF-ASSESSMENT TAX ON THE BASIS OF ANY RETURN OF INCOME REQUIRED TO BE FILED BY THE ASSESSEE. THE RELEVANT PROVISIONS ALSO PRESCRIBE THE DATES AND THE AMOUNT OF TAX REQUIRED TO BE PAID BY AN ASSESSEE. THEREFORE, THE EXPRESSION EXISTING LI ABILITY IN S. 132B(1)(I) CANNOT BE READ TO EXCLUDE A PARTICULAR TAX LIABILITY, IF I T CAN BE SHOWN TO HAVE EXISTED ON A PARTICULAR DATE. IF THE LIABILITY TO PAY ADVANCE TAX HAD ARISEN, IT WOULD CERTAINLY CONSTITUTE A PART OF THE EXISTING LIABIL ITY USED IN S. 132B(1)(I) OF THE ACT. 10. IN OUR CONSIDERED OPINION, THE DOCTRIN E OF PURPOSIVE CONSTRUCTION HAS TO PREVAIL IN THIS SITUATION. IN THE PRESENT SITUAT ION, IT IS EVIDENT THAT CASH WAS SEIZED FROM THE ASSESSEE DURING SEARCH OPERATION AN D, ASSESSEE REQUESTED THE DEPARTMENT TO ADJUST A PART OF SUCH CASH RECEIPTS A GAINST THE LIABILITY OF ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 57 ADVANCE TAX WHICH AROSE ON ACCOUNT OF THE INCOME SU RRENDERED DURING THE SEARCH OPERATION. THE DEPARTMENT DOES NOT DENY POSS ESSION OF THE CASH SINCE THE TIME OF SEARCH. THUS, WE FIND NO JUSTIFICATION FOR THE REVENUE TO INTERPRET THE EXPRESSION EXISTING LIABILITY IN S. 132B(1)(I ) AS NOT REFERRING TO LIABILITY OF ADVANCE TAX. UNDER THE IT ACT, LIABILITY TOWARDS AD VANCE TAX IS A PART OF THE SCHEME OF RECOVERY OF TAXES AND SUCH LIABILITY DEFI NITELY FALLS IN THE EXPRESSION EXISTING LIABILITY USED IN S. 132B(1)(I) IN THE F ACTS AND CIRCUMSTANCES OF THE CASE. THE RELIANCE PLEADED BY THE CIT(A) ON THE JUD GMENT OF THE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF RAMJILAL J AGANNATH & ORS. VS. ASSTT. CIT (1999) 156 CTR (MP) 49 : (2000) 241 ITR 758 (MP) IS QUITE MISPLACED. AS PER THE REVENUE, IN TERMS OF THE SAID JUDGMENT, THE SEIZED CASH CANNOT BE ADJUSTED TOWARDS ADVANCE TAX LIABILITY. W E HAVE CAREFULLY PERUSED THE SAID JUDGMENT AND FIND THAT THE SAME DOES NOT PROHI BIT ADJUSTMENT OF SEIZED ASSETS TOWARDS LIABILITY TO PAY ADVANCE TAX. IN ANY CASE, WE FIND THAT JUDGMENT OF THE HONBLE MADHYA PRADESH HIGH COURT IS RELEVAN T IN A SITUATION WHEN S. 132(5) WAS ON THE STATUTE, WHICH HAS SINCE BEEN DEL ETED BY THE FINANCE ACT, 2002 W.E.F. 1ST JUNE, 2002. SEC. 132(5) OF THE ACT REQUIRED THE AO TO MAKE AN ENQUIRY AND THEREAFTER MAKE AN ORDER TO DEAL WITH T HE SEIZED ASSETS. SEC. 132(5) OF THE ACT AUTHORIZES THE AO TO RETAIN IN HIS CUSTO DY SUCH ASSETS AS IN HIS OPINION WERE SUFFICIENT TO SATISFY THE AGGREGATE AM OUNTS REFERRED TO IN CLS. (II), (IIA) AND (III) OF S. 132(5) AND OBLIGATED HIM TO R ELEASE THE REMAINING SEIZED ASSETS. IN THIS BACKGROUND, THE HONBLE HIGH COURT, ON THE FACTS OF THE CASE BEFORE IT, HELD THAT UNLESS AN ORDER UNDER S. 132(5 ) OF THE ACT IS PASSED, THE AO COULD NOT DIRECT THAT THE ASSETS SEIZED BE ADJUSTED TOWARDS ADVANCE TAX LIABILITY. THE HONBLE HIGH COURT SPECIFICALLY NOTED THAT IT I S ONLY AFTER AN ORDER UNDER S. 132(5) IS PASSED THAT THE ASSESSEE CAN MAKE A REQUE ST THAT THE SEIZED AMOUNT WHICH IS SOUGHT TO BE RELEASED IN HIS FAVOUR BE ADJ USTED OR APPROPRIATED TOWARDS THE LIABILITY TO PAY ADVANCE TAX. THOUGH, IN THE CO NTEXT OF THE PRESENT ASSESSMENT YEAR BEFORE US, THE PROVISIONS OF S. 132 (5) ARE NOT APPLICABLE AND THEREFORE, STRICTLY SPEAKING, THE RATIO OF THE JUDG MENT OF THE HONBLE MADHYA PRADESH HIGH COURT DOES NOT APPLY, SO HOWEVER IT IS PERTINENT TO OBSERVE THAT THE HONBLE HIGH COURT HAS NOT READ ANY BLANKET PRO HIBITION IN THE ACT AGAINST ADJUSTING THE SEIZED ASSETS AGAINST LIABILITY FOR P AYMENT OF ADVANCE TAX. THEREFORE, THERE IS NO JUSTIFICATION FOR THE CIT(A) TO RELY UPON THE ORDER OF THE MADHYA PRADESH HIGH COURT IN THE CASE OF RAMJILAL J AGANNATH (SUPRA) AND DENY THE CLAIM OF THE ASSESSEE. IN CASE OF ACIT CENTRAL CIRCLE-23 NEW DELHI VS. SH ARUN KUMAR GUPTA , HON'BLE ITAT NEW DELHI IN ITA NO. 4108/DEL/2010 BY RESPECTFULLY FOLLOWING THE DECISION OF NIKKA MAL BABU (SUPRA) AND K K MARKETING (DELHI HIGH COURT 278 ITR 596) HAS UPHELD THE DECISION OF CIT(A) AND FINALLY DIRE CTED THE AO TO RE- COMPUTE THE INTEREST CHARGEABLE U/S 234 B & 234C AC CORDINGLY AFTER GIVING CREDIT OF AMOUNT SEIZED AGAINST THE ADVANCE TAX LIABILITY FALLEN DUE ON 15 TH MARCH 2009. ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 58 IN CASE OF ACIT VS HANS RAJ GANDHI REPORTED IN 37 ITR 418, HON 'BLE ITAT CHANDIGARH HAS HELD THAT ASSESSEE WAS ENTITLED TO ADJUSTMENT OF SEIZED CASH AGAINST ADVANCE TAX LIABILITY AND THEREFORE NO INTEREST COULD BE CHARGED U/S 234A & 234B IN THE EVENT OF DEPARTMENT NOT RESPONDI NG TO ASSESSEE'S REQUEST FOR ADJUSTMENT OF CASH SEIZED AGAINST ADVANCE TAX LIABI LITY. HERE I WOULD LIKE TO REFER DECISION OF HON ITAT AG RA BENCH IN CASE OF ACIT VS. SUNIL C GUPTA [ITA NO. 290/AGRA/2013 DT OF PRONOUNCEMENT 28/02/2014 ] WHEREIN HON'BLE ITAT AGRA HAS HELD THAT CASH SEIZED TO BE ADJUSTED AGAINST ADVANCE TAX LIABILITY AS EXPLANATION-2 TO SECTION 1 32B OF THE ACT IS ENACTED WITH EFFECT FROM 1ST JUNE 2013. IN THIS CASE, HON'BLE IT AT HAS UPHELD THE OBSERVATIONS OF ID CIT(A) WHICH ARE AS UNDER - '.I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER AS WELL AS THE WRITTEN SUBMISSION OF THE APPELLANT, REMAND REPORT AND THE REJOINDER ON THIS ISSUE REMAND REPORT AND THE REJOINDER. IN THIS CASE SEARC H AND SEIZURE OPERATION WAS CARRIED OUT IN THE PREMISES OF SHRI SUNIL CHAND GUPTA ON 10.03.2010 WHEREIN CASH AMOUNTING TO RS.4,31,36,000/- WAS SEIZ ED FROM THE RESIDENCE AND LOCKER AND WAS DEPOSITED BY THE DEPARTMENT IN THE P D ACCOUNT ON 10.03.2010 AND 19.03.2010. DURING THE COURSE OF SEARCH THE ASS ESSEES STATEMENT WAS RECORDED U/S 134 OF THE I.T. ACT WHEREIN THE ASSESS EE OFFERED TO PAY TAX ON AN INCOME OF RS.10 CRORE FOR THE F.Y. 2009-2010. THE E STIMATED TAX LIABILITY ON AN INCOME OF RS.10 CRORE WORKED OUT TO ABOUT RS.3 CROR E APPROX. SINCE THE LIABILITY TO PAY TAX HAD ARISEN AND THE CASH BEING SEIZED BY THE DEPARTMENT, THE APPELLANT REQUESTED THE DEPARTMENT TO ADJUST RS.3 CRORE OUT O F THE RS.4,31,36,000/- SEIZED AND DEPOSITED IN THE PD ACCOUNT. IT IS SEEN THAT TH E ASSESSEE MADE A WRITTEN REQUEST ON 29.03.2010 TO THE CHIEF COMMISSIONER OF INCOME TAX WHICH WAS DULY RECEIVED AND ALSO TO THE ADDITIONAL DIRECTOR O F INCOME TAX INVESTIGATION, AGRA. IT ALSO SEEN THAT SIMILAR REQUEST FOR ADJUSTM ENT LETTERS WERE WRITTEN TO THE DCIT CIRCLE-1, AGRA ON 29.03.2010 WHICH WAS DULY RE CEIVED IN THE OFFICE ON THE SAME DAY. FURTHER, ANOTHER LETTER WAS WRITTEN TO TH E CIT-1 ON 21.03.2010. LETTER DATED 05/07/2010 WAS ALSO WRITTEN TO THE DCI T CENTRAL CIRCLE STATING THAT RETURN OF INCOME FOR A.Y. 2010-11 HAD BEEN FILED ON 30/6/10 WITH TAX PAYABLE OF RS.2,92,25,240/- AND THEREFORE REQUESTING THE AO ON CE AGAIN FOR ADJUSTMENT OF TAX LIABILITY WITH THE CASH LYING IN THE PD ACCOUNT . IN THE CIRCUMSTANCES, THE ASSESSEE HAD DONE ALL IT COULD DO SO AS TO ENSURE T HAT CASH LYING IN THE PD ACCOUNT WOULD BE ADJUSTED TOWARDS THE ADVANCE TAX L IABILITY. HOWEVER, IT SEEN THAT NO ACTION WAS WWW.TAXGURU.IN ITA NO.290 /AGRA/ 2013 A.Y. 2010-11 5 TAKEN ON THE ASSESSEES PETITION BY ANY OF THE AUTH ORITIES BEFORE WHOM THE ASSESSEE HAS FILED THE PETITION. TO MY MIND, IT IS AN APPARENT INJUSTICE TO THE APPELLANT TO HOLD ON THE CASH BELONGING IN THE ASSE SSEE IN THE GOVERNMENT ACCOUNT AND AT THE SAME TIME CHARGE INTEREST FOR NO N-PAYMENT OF ADVANCE TAX ON THE DUE DATES. IT IS CLEAR THAT THE APPELLANTS APPLICATION FOR ADJUSTMENT HAS BEEN SUBMITTED BEFORE THE VARIOUS AUTHORITIES, THE SEIZED CASH SHOULD HAVE BEEN EITHER BEEN ADJUSTED AS REQUESTED BY THE ASSESSEE T O MEET THE ADVANCE TAX ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 59 OBLIGATIONS OR THE ASSESSEE SHOULD HAVE BEEN INFORM ED THE REASONS WHY THE REQUEST MADE BY THE ASSESSEE CANNOT BE ACCEDED TO. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SHRI JYOTINDRA B. MODI IN ORDER DATED 21.09.2011 HAS CLEARLY HELD THAT ONCE THE ASSESSEE OFFICERS TO TAX THE UNDISCLOSED INCOME INCLUDING THE AMOUNT SEIZED DURING SEARCH, THAN THE LIABILITY TO PAY ADVANCE TAX IN RESPECT OF THAT AMOUNT ARISES EVEN BEFORE COMPLE TION OF THE ASSESSMENT. THE HONBLE HIGH COURT FURTHER HELD THAT SECTION 132B(1 ) OF THE ACT, THUS NOT PROHIBIT THE UTILIZATION OF AMOUNT SEIZED DURING TH E COURSE OF SEARCH TOWARDS THE ADVANCE TAX LIABILITY. THE HONBLE HIGH COURT O F PUNJAB & HARYANA IN THE CASE OF CIT VS. ASHOK KUMAR REPORTED IN 334 ITR 355 HAS ALSO HELD ON SIMILAR FACTS THAT THE ASSESSEE WAS ENTITLED TO ADJUSTMENT OF SEIZED CASH AGAINST ADVANCE TAX LIABILITY AND THEREFORE, NO INTEREST COULD BE C HARGED U/S 234A & 234B IN THE EVENT OF THE DEPARTMENT NO RESPONDING TO ASSESSEES REQUEST FOR ADJUSTMENT OF CASH SEIZED AGAINST ADVANCE TAX LIABILITY. IN VIEW OF THE FOLLOWING JUDGMENTS, THE ACTION OF THE AO IN CHARGING INTEREST UNDER 234 A, 234B & 234C IS NOT JUSTIFIED AND HENCE, DIRECTED TO BE DELETED. IN VIEW OF FACTS AND CIRCUMSTANCES OF THE CASE AS D ISCUSSED ABOVE AND RESPECTFULLY FOLLOWING THE DECISIONS OF AFOREMENTIO NED JUDICIAL PRONOUNCEMENTS AO IS DIRECTED TO RE-COMPUTE THE INTEREST CHARGEABL E U/S 234 B AFTER GIVING CREDIT OF AMOUNT OF RS. 45,00,000/- ( LYING IN PD A/C) AGAINST THE SELF ASSESSMENT TAX LIABILITY FALLEN DUE ON 31-03-2012. THE ASSESSEES APPEAL ON THIS GROUND STANDS ALLOWED. 12.2 DURING THE COURSE OF HEARING, THE LD. DR RELIE D ON THE ORDER OF THE AO. 12.3 ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A). 12.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. THE FACTS AS NOTED TO THE ISSU E IN QUESTION FROM THE ORDER OF THE LD. CIT(A) IS AS UNDER:- PURSUANT TO THE NOTICE ISSUED U/S 153A OF THE ACT , ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2010-11 ON 31.03.2012 DECLA RING TOTAL INCOME OF RS. 2,31,17,670/- WHICH INCLUDES THE INCOME OF RS.2,46,00,000/- SURRENDER ON ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 60 ACCOUNT OF INCOME EARNED FROM UNACCOUNTED SALES. ON PERUSAL OF THE RETURN FILED ON 31.03.2012 FOR AY 2010-11 , IT IS SEEN THAT ASSESSEE ITSELF COMPUTED TOTAL TAX LIABILITY INCLUDING INTEREST TO RS. 98,17,671/- AND OUT OF THE TOTAL TAX LIABILITY, ASSESSEE HAS PAID RS. 45,00,000/- ON 31/03/2011 AND RS. 817670/- ON 30/03/2012 AND FOR THE REMAINING AMOUNT OF RS. 45,00,000/- REQUEST WAS MADE TO LD CIT CENTRAL JAIPUR FOR ADJUSTMENT AGAINS T AMOUNT LYING IN PD A/C BY FILING A LETTER ON 31/03/2012 UNDER COPY TO DCIT CENTRAL CIRCLE-2 JAIPUR. AO HAS NOT ALLOWED ANY ADJUSTMENT OF CASH L YING IN THE PD A/C AGAINST SELF ASSESSMENT TAX LIABILITY TILL 17.12.2013 EVEN THOUGH ASSESSEE HAD MADE REQUEST TO LD CIT (CENTRAL) JAIPUR ON 31.03.2012 IT IS ALSO NOTED THAT THE AO HAD NOT ADJUSTED THE C REDIT OF AMOUNT LYING IN THE PD ACCOUNT AGAINST SELF TAX LIABILITY. THE LD. CIT(A) HAS ALLOWED THE SAME GIVING THE DIRECTION AS UNDER:- IN VIEW OF FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE AND RESPECTFULLY FOLLOWING THE DECISIONS OF AFOREMENTIO NED JUDICIAL PRONOUNCEMENTS AO IS DIRECTED TO RE-COMPUTE THE INTEREST CHARGEABLE U/S 234 B AFTER GIVING CREDIT OF AMOUNT OF RS. 45,00,000/- ( LYING IN PD A/C) AGAINST THE SELF ASSESSMENT TAX LIABILITY FALLEN DUE ON 31-03-2012. THE ASSESSEES APPEAL ON THIS GR OUND STANDS ALLOWED IT IS ALSO NOTED THAT SIMILAR ISSUE HAS ALSO BEEN D ECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT JAIPUR BENCH IN THE CASE OF DC IT VS. LATE SMT. SUDHA PATNI (ITA NO. 161/JP/2016 VIDE ORDER DATED 1 8-10-2016 FOR THE ASSESSMENT YEAR 2012-13). HENCE, LOOKING TO THE FA CTS, CIRCUMSTANCES OF THE CASE AND ALSO THE ORDER OF COORDINATE BENCH IN THE CASE OF DCIT VS. LATE SMT. SUDHA PATNI (SUPRA), WE CONCUR WITH THE F INDINGS OF THE LD. CIT(A) ON THIS ISSUE. THUS GROUND NO. 7 OF THE REVE NUE IS DISMISSED. 13.1 THE GROUND NO. 8 OF THE ASSESSEE IS REGARDING NOT ALLOWING THE BENEFIT OF TELESCOPING, RECYCLING AND ROTATION OF F UNDS. ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 61 13.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. THE GROUND NO. 8 OF THE ASSESS EE IS INFRUCTUOUS AS NO ADDITION HAS BEEN SUSTAINED ON THE BASIS OF UNEXPLA INED EXPENDITURE OR ASSETS. THUS GROUND NO. 8 OF THE ASSESSEE IS DISMIS SED. 14.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED AND THAT OF THE REVENUE IS DISMISSED. 15.1 NOW WE TAKE UP THE CROSS APPEALS FOR THE ASSES SMENT YEAR 2010-11. RESPECTIVE GROUNDS RAISED BY THE ASSESSEE AND REVEN UE ARE AS UNDER:- ITA NO.447/JP/2016 ASSESSEE 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD CIT(A) ERRED IN REJECTING CONTENTION OF THE ASSESSEE THAT THE REFERENCE TO SPECIAL AUDIT REPORT UNDER S. 142(2A) OF INCOME TAX ACT IS PURELY BASED ON THE RECOMMENDATIO N IN APPRAISAL REPORT AND THE AO HAS NOT APPLIED HIS MIN D WITH REGARD TO THE NATURE AND COMPLEXITY OF THE ACCOUNTS OF THE ASSESSEE. IT IS CONTENDED THAT THE AOS OPINION CANNOT BE SUBSTITUT ED BY ANOTHER OFFICERS OPINION. THUS, THE LD CIT(A) ERRED IN NOT DECLARING THE REFERENCE TO SPECIAL AUDIT REPORT UNDER S.142(2A) O F INCOME TAX ACT AS BAD IN LAW AND INVALID AND THE ASSESSMENT OR DER DATED 14.11.2013 PASSED U/S 144 READ WITH SECTION 143(3) OF INCOME TAX ACT, 1961 AS BAD IN LAW AND VOID AB-INITIO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD CIT(A) ERRED IN REJECTING CONTENTION OF THE ASSESSEE THAT THE ASSESSMENT ORDER PASSED U/S 144 R.W.S. 143 (3) OF THE INCOME TAX ACT, 1961 IS VOID AB-INITIO AND BAD IN L AW AND DESERVES TO BE ANNULLED AS THE SPECIAL AUDITORS HAVE COMPUTE D THE INCOME OF THE ASSESSEE ON THE BASIS OF CERTAIN PRESUMPTION AN D ASSUMPTION DEHORS OF MATERIAL AND THE AO HAS BORROWED THE SAME , MEANING ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 62 THEREBY THE AO HAS DELEGATED THE TASK OF FRAMING AN ASSESSMENT TO THE AUDITOR. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD CIT(A) ERRED IN REJECTING CONTENTION OF THE ASSESSEE THAT THE SPECIAL AUDITORS HAVE CONDUCTED THE AUDIT BEYOND THE SCOPE OF THE PROVISIONS OF SECTION 142(2A) BY RECASTING T HE BOOKS OF ACCOUNT BY APPLYING PRESUMPTION AND ASSUMPTION AND SUCH AUDIT REPORT CANNOT BE CONSIDERED FOR THE ASSESSMENT OF T HE ASSESSEE. THEREFORE AND THUS, THE LD CIT(A) ERRED IN NOT DECL ARING THE ENTIRE ASSESSMENT AS BAD IN LAW AND VOID AB-INITIO. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD CIT(A) ERRED IN REJECTING CONTENTION OF THE ASSESEE THAT THE LEARNED A.O. PASSED THE ASSESSMENT ORDER B ASED ON NO EVIDENCE OR ON IRRELEVANT EVIDENCE AND ON SURMISES AND CONJECTURES AND THE FACTS OF THE CASE STATED IN THE ASSESSMENT ORDER ARE CONTRARY TO THE RECORDS AND IS AGAINST THE DOCT RINE OF UDI ALTERM PARTEM, A PRINCIPLE OF NATURAL JUSTICE AND THEREFORE AND THUS THE LD CIT(A) ERRED IN NO DECLARING THE ASSESS MENT ORDER U/S 144 READ WITH SECTION 143(3), AS BAD IN LAW AND AB- INITIO VOID. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING TRADING A DDITION OF RS.58,53,506/- BY ESTIMATING GP RATE @ 20% ON THE D ECLARED SALES OF RS.12,28,29,758/- AS AGAINST GP RATE @ 14.01% DE CLARED BY THE ASSESSEE. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LOWER AUTHORITIES ERRED IN NOT ALLOWING THE BENEFIT OF TELESCOPING, RECYCLING AND ROTATION OF FUNDS. ITA NO.503/JP/2016 REVENUE 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE LD CIT(A) WAS RIGHT IN RESTRICTING THE TRADING ADDI TION OF RS.91,37,068/- (I.E. 92,89,007/- MINUS RS.1,51,939/ -) TO RS.58,70,206/- MADE BY THE AO WITHOUT APPRECIATING THE FACT THAT TOTAL SALE CONSIDERATION AND GROSS PROFIT RATE HAD BEEN DETERMINED BY THE SPECIAL AUDITOR WHICH HAS ALSO BEEN HELD VAL ID BY LD CIT(A). ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 63 2. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE THE LD CIT(A) WAS RIGHT IN RESTRICTING THE DISALLOW ANCES OF RS.2,71,50,538/- TO RS.1,20,751/- MADE U/S 40A(3) O F THE ACT WITHOUT APPRECIATING THE FACT THAT THIS VIOLATION O F THE PROVISION OF THE SECTION 40A(3) OF THE ACT HAS BEEN CLEARLY MENT IONED IN THE SPECIAL AUDIT REPORT. 3. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE THE LD CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS.3,87,948/- MADE ON ACCOUNT OF NON-GENUINE PURCHASES FROM M/S A DITYA GEMS WITHOUT APPRECIATING THE FACT THAT EVERY ASSESSMENT YEAR IS A SEPARATE YEAR AND SUBMISSIONS OF ONE YEAR CANT BE CONSIDERED AS PROOF IN ANOTHER YEAR AND FURTHER ASSESSEE FAILED T O PROVE THE CREDITWORTHINESS, GENUINENESS AND IDENTITY OF THE S AID PARTY. 16.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURIN G AND TRADING OF STUDDED JEWELLERY. THE DEPARTMENT CARRIED OUT SEARC H & SEIZURE OPERATIONS ON ASSESSEE ON 06-05-10 (COPY OF PANCHNA NA AND INVENTORY PLACED AT PB PAGE 1-22). THE CASE OF ASSESSEE WAS C ENTRALIZED AT CENTRAL CIRCLE-2, JAIPUR. THE ASSESSEE FILED ITS RETURN OF TOTAL INCOME ON 30.09.2011 DECLARING THE TOTAL INCOME OF RS. 4,23,1 50/- (COPY AT PB PAGE 125 TO 175). THE ASSESSMENT PROCEEDINGS WERE COMMEN CED BY ISSUE OF NOTICE U/S 143(2) OF INCOME TAX ACT, 1961 ON 27.02. 2012 AND LATER ON VIDE VARIOUS NOTICES (COPY AT PB PAGE 186, 187-188 , 189-190, 215-230, 255-256, 287-288, 297-301 AND 314-318) AND BY ORDER SHEET ENTRIES CERTAIN INFORMATION WERE REQUIRED FROM ASSESSEE FRO M TIME TO TIME. ALL OF ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 64 THESE WERE COMPLIED BY THE ASSESSEE VIDE REPLY ON V ARIOUS DATES (COPY AT PB PG 184-185, 187-188, 191-214, 231-254, 257-263, 264-269, 270-275, 276-284, 285-286 289-296, 302-313, 319-324, 325-328 , 329-331, 332- 334, 335, 336-338, AND 339-343) . DURING THE COURSE OF SEARCH CERTAIN DOCUMENTS WERE FOUND AND SEIZED RELATING TO THE ASS ESSEE INCLUDING A CPU CONTAINING THE BOOKS OF ACCOUNTS NAMED AS JADA VJI BEING DUPLICATE/PARALLEL BOOKS OF ACCOUNTS OF THE ASSESSE E COMPANY MAINTAINED IN THE FORM OF MEMOIRS, CONTAINING THE ENTRIES OF R ECORDED AND UNRECORDED TRANSACTIONS OF THE ASSESSEE COMPANY. HOWEVER THE B OOKS OF ACCOUNTS NAMED AS JADAVJI WERE NEITHER COMPLETE NOR CORREC T. FURTHER THESE BOOKS OF ACCOUNTS CONSISTS THE ENTRIES PERTAINING T O AY 2010-11 ONLY. NO PARALLEL/DUPLICATE BOOKS OF ACCOUNT OF ASSESSEE COM PANY FOR AT 2011-12 WAS FOUND BY THE SEARCH PARTY. . DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS OPINED BY LD. AO THAT THE ENTRIE S IN THE BOOKS OF ACCOUNTS NAMED AS JADAVJI WERE EXTREMELY COMPLEX IN NATURE THEREFORE THE LD. AO MOVED A PROPOSAL TO LD CIT, CENTRAL, JAI PUR VIDE LETTER DATED 13.03.2013 FOR APPROVAL OF SPECIAL AUDIT OF ACCOUNT S OF THE ASSESSEE U/S 142(2A) OF INCOME TAX ACT, 1961. IN RESPONSE TO TH E PROPOSAL OF LD. AO THE LD CIT (CENTRAL), JAIPUR ISSUED A SHOW CAUSE NOTICE DATED 15.03.2013 (COPY AT PB PAGE 176-177) TO THE ASSESSEE FOR APPROVAL OF ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 65 SPECIAL AUDIT AND IN RESPONSE TO THE SHOW CAUSE NOT ICE, THE ASSESSEE OBJECTED THE REFERENCE OF SPECIAL AUDIT U/S 142(2A) OF INCOME TAX ACT, 1961 VIDE ITS LETTER DATED 18.03.2013 (COPY AT PB P AGE 178-179) BUT THE PROPOSAL FOR SPECIAL AUDIT WAS APPROVED BY THE LD C IT, CENTRAL, JAIPUR AND THE AO VIDE HIS LETTER DATED 22.03.2013 (COPY AT PB PAGE 180-181) DIRECTED TO ASSESSEE TO GET ITS ACCOUNTS AUDITED U/ S 142(2A) OF INCOME TAX ACT, 1961 AS PER THE TERMS OF REFERENCE WHICH HAS B EEN REPRODUCED BY AO AT PAGE 7 OF ASSESSMENT ORDER. THE SPECIAL AUDI TORS GAVE THE REPORT VIDE THEIR REPORT DATED 14.09.2013 WHICH WAS RECEIV ED TO ASSESSEE ON 17.09.2013 AND THE SAME WAS FILED TO AO ON THE SAME DATE (COPY OF LETTER IS AT PB PAGE 182) WHEREIN THE NET PROFIT OF THE ASSESSEE COMPANY WAS COMPUTED RS. 92,89,007/- AS AGAINST RS. 1,51,939/- SHOWN BY THE ASSESSEE. THE COPY OF SPECIAL AUDIT REPORT IS SEPAR ATELY FILED AS PAPER BOOK VOL-4 . THE ASSESSMENT OF THE ASSESSEE WAS COMPLETED BY T HE AO VIDE HIS ORDER DATED 14.11.2013 PASSED U/S 144 R.W. S.143(3) OF INCOME TAX ACT, 1961 ASSESSING THE TOTAL INCOME OF ASSESSE E RS. 3,70,98,760/- AS AGAINST RETURNED INCOME OF RS. 4,23,150/- BY MAKING THE FOLLOWING ADDITIONS/DISALLOWANCES: - ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 66 S. NO PARTICULARS AMOUNT (RS.) 1. UNDISCLOSED INCOME/PROFIT 91,37,068 2. DISALLOWANCE U/S 40A(3) OF INCOME TAX ACT, 1961 2,71,50,538 3. DISALLOWING 25% OF TOTAL PURCHASES OF RS. 15,51, 792/- MADE FROM M/S ADITYA GEMS BY TREATING THE PURCHASES AS UNVERIFIABLE AND BOGUS. 3,87,948 TOTAL ADDITION 3,66,75,554 THE LD. AO REJECTED THE BOOKS OF ACCOUNTS BY APPLYI NG THE PROVISIONS OF SECTION 145(3) OF INCOME TAX ACT, 1961. 16.2 AGGRIEVED BY THE AFORESAID ADDITIONS, THE ASSE SSEE FILED APPEAL BEFORE LD CIT(A). DURING THE COURSE OF HEARING OF THE APPEAL, THE ASSESSEE FILED PAPER BOOK AND WRITTEN SUBMISSION. T HE LD CIT(A) CALLED REMAND REPORT FROM THE AO. THE AO SUBMITTED HIS REM AND REPORT. THE ASSESSEE FILED REJOINDER ON THE REMAND REPORT OF TH E AO. THE LD CIT(A) PARTLY ALLOWED THE APPEAL BY DELETING/SUSTAINING T HE ADDITIONS AS UNDER:- S. NO. PARTICULARS ADDITIONS MADE BY AO IN DISPUTE BEFORE CIT(A) AMOUNT (RS.) DELETED BY CIT(A) AMOUNT (RS.) SUSTAINED BY CIT(A) AMOUNT (RS.) 1. UNDISCLOSED INCOME/PROFIT 91,37,068 32,66,862 58,70,206 3. DISALLOWANCE U/S 40A(3) OF INCOME TAX ACT, 1961 2,71,50,538 2,70,29,587 1,20,751 4. DISALLOWING 25% OF TOTAL PURCHASES OF RS. 15,51,792/- MADE FROM M/S ADITYA GEMS BY TREATING THE PURCHASES AS UNVERIFIABLE AND BOGUS. 3,87,948 3,87,948 0 TOTAL ADDITION 3,66,75,554 30,68,4397 59,90,957 ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 67 16.3 NOW THE ASSESSEE AS WELL AS REVENUE ARE IN APP EAL BEFORE US AGAINST THE ORDER OF THE LD. CIT(A). 17.1 THE GROUND NO. 1 OF THE REVENUES APPEAL IS I N RESPECT OF RESTRICTING THE TRADING ADDITION OF RS. 91,37,068/- TO RS. 58,70,206/- 17.2 THE GROUND NO. 2 TO 5 OF THE ASSESSEE'S APPEAL ARE IN RESPECT OF CONFIRMING THE ADDITION OF RS. 58,53,506/- BY ESTIM ATING THE GROSS PROFIT RATE @ 20% ON DECLARED SALES OF RS. 12,28,29,758/- AS AGAINST 14.01% DECLARED BY THE ASSESSEE. 17.3 FROM THE ABOVE GROUNDS RAISED BY THE REVENUE AND ASSESSEE, IT IS OBSERVED THAT THE LD. CIT(A) HAS RESTRICTED THE ADD ITION OF RS. 91,37,068/- TO RS. 58,70,206/- ON THE BASIS OF HIS FINDINGS AT PAGES 48 TO 52. THE LD. CIT(A) TOOK INTO CONSIDERATION THE REJECTION OF BOO KS OF ACCOUNT AND HE ESTIMATED THE GROSS PROFIT OF THE ASSESSEE BY APPLY ING THE GROSS PROFIT RATE OF 20% ON THE DECLARED SALES OF THE ASSESSEE. THE O BSERVATION OF THE LD. CIT(A) ON THE ISSUE IN QUESTION IS AS UNDER:- 3.2.3 I HAVE CONSIDERED ASSESSEES SUBMISSION AND ALSO TAKEN A NOTE OF JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT AS WELL AS THE FACTUAL MATRIX OF THE CASE. HERE IN THIS CASE, THE SPECIAL AUDITOR HAS RE-CAST ED THE ACCOUNTS OF THE ASSESSEE AND COMPUTED THE CONSOLIDATED NET PROF IT OF RS. 2,30,22,563.45. ( PB VOL III PAGE 81-82 OF SPECIAL AUDIT REPORT). THIS PROFIT IS AFTER APPROPRIATION TO P & L; RS. 1,86,32 7/-ON ACCOUNT OF DEFERRED TAX ASSETS, RS. 1,30,753.00 ON ACCOUNT OF PROVISION FOR INCOME TAX AND RS. (CR) 1,40,50,636.50 ON ACCOUNT OF OPENI NG BALANCE (PROFIT/LOSS) A/C. THEREFORE, THE NET PROFIT BEFORE THE APPROPRIATION WAS CALCULATED BY THE SPECIAL AUDITORS AT RS. 92,89,007 /-. THIS PROFIT IS SUBJECT TO SOME COMMON NOTES/OBSERVATIONS/LIMITATIONS MENTIONED IN THE ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 68 SPECIAL AUDIT REPORT. THEREFORE, THIS PROFIT SHOULD BE SEEN ALONG-WITH THE FOLLOWING COMMON NOTES/OBSERVATIONS/LIMITATION MENT IONED BY THE SPECIAL AUDITORS. (I) IN PARA 3.3 OF HEADING BREIF FACTS AND BSERVATIONS:- ANNEXED WITH SPECIAL AUDIT REPORT (COPY AT PAGE 27-28 OF SAR) IT HAS BEEN MENTIONED THAT:- ON PERUSAL OF THE SEIZED MATERIAL, REGULAR BOOKS O F ACCOUNTS, SUPPORTING DOCUMENTS AND RESPONSES TO THE QUERIES RAISED AND EXPLANATION FURNISHED DURING OUR AUDIT A ND BEFORE AO FOR THE RELEVANT PERIOD, IT EMERGES THAT BY APPL YING THE STANDARD AUDITING PROCEDURE, NEITHER THE STATEMENT OF AFFAIRS NOR PROFIT OR LOSS AS DESIRED CAN BE DETERMINED. (II) IN PARA 3.3.3 OF HEADING BREIF FACTS AND BSERVATIONS:- ANNEXED WITH SPECIAL AUDIT REPORT (COPY AT PAGE 28 OF SAR) IT HAS BEEN MENTIONED THAT:- THE BOOKS MAINTAINED TITLED AS JADAVJI IS ONLY FOR THE FINANCIAL YEAR 2009-10. THESE BOOKS CONTAIN LARGE N UMBER OF ACCOUNTS WHICH REMAINED OUTSTANDING AT THE END O F THE YEAR. THEREFORE, THERE MAY BE TRANSACTIONS WHICH AR E NOT ENTERED IN JADAV JI. IN ABSENCE OF SPECIFIC DETAI LS OF SUCH TRANSACTIONS, STANDARD AUDITING PROCEDURE AND METHO DS OF DETERMINATION OF INCOME CANNOT BE APPLIED. (III) IN PARA 3.3.6 OF HEADING BREIF FACTS AND BSERVATIONS:- ANNEXED WITH SPECIAL AUDIT REPORT (COPY AT PAGE 29 OF SAR) IT HAS BEEN MENTIONED THAT:- IN THE BOOKS OF ACCOUNTS TITLED AS JADAVJI MOS T OF THE PURCHASES, SALES, TRANSFERS, RETURNS HAVE BEEN ENTE RED IN PIECES WHEREAS IN REGULAR BOOKS OF ACCOUNTS, THESE HAVE BEEN ENTERED IN GMS/CTS. THEREFORE, IN ABSENCE OF COMMON UNIT OF MEASUREMENT FOR THOSE TRANSACTIONS WHICH ARE NOT EN TERED IN REGULAR BOOKS OR VICE VERSA, THE CORRECT QUANTITATI VE STOCK CANNOT BE DETERMINED BY APPLYING THE STANDARD AUDIT ING PROCEDURE. SOME EXAMPLES TO THIS EFFECT ARE LISTED IN ENCLOSED APPENDIX-3. (IV) IN PARA 5.1.8 AT PAGE 8 OF COMMON NOTES ANNEXE D WITH SPECIAL AUDIT REPORT (COPY AT PB PAGE SAR-33) IT HAS BEEN MENTIONED THAT THE FIGURES OF ADJUSTMENTS HAVE BEEN DERIVED BY APPLYING PROFESSIONAL JUDGMENTS AND SURROUNDINGS MATERIALS. SIGNIFICANT ESTIMATIONS AND ASSUMPTIONS HAVE BEEN MADE, WHEREVE R ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 69 CORROBORATIVE EVIDENCES ARE NOT AVAILABLE OR CONSID ERING THE LIMITATIONS IMPOSED BY CIRCUMSTANCES, IF IT IS WARR ANTED TO DO SO. THEREFORE, ANY CHANGE, IN SUCH PROFESSIONAL JUD GEMENT OR ESTIMATION OR ASSUMPTION, MAY LEAD TO CHANGE IN FIN ANCIAL STATEMENTS, AS DISCUSSED HEREINAFTER WHILE EXPLAINI NG THE BASIS OF ADJUSTMENTS. (V) IN PARA 4 (PAGE 30 OF SPECIAL AUDIT REPORT) , THE SPECIAL AUDITOR HAS EXPRESSED THEIR LIMITATION AS UNDER:- UNDER THE FACTS AND CIRCUMSTANCES NARRATED HEREIN BEFORE AND APPLYING OUR PROFESSIONAL JUDGEMENT, WE ARE OF THE OPINION THAT AUDIT PROCEDURE AND METHODS OF DETERMI NATION OF INCOME OR LOSS, BELIEVED TO BE DESIRABLE, CANNOT BE APPLIED IN THE GIVEN CIRCUMSTANCES. HENCE, WE HAVE ATTEMPTE D TO CARRYOUT REASONABLE ALTERNATIVE PROCEDURE AND METHO DS TO OBTAIN SUFFICIENT OR APPROPRIATE CONCLUSION. HOWEVE R THERE MAY BE LACK OF CORROBORATIVE EVIDENCE TO SUPPORT CE RTAIN ENTRIES IN THE FINANCIAL STATEMENTS DRAWN OR THERE MAY BE ALSO EXIST CERTAIN OTHER LIMITATIONS IMPOSED BY THE CIRCUMSTANCES . ALL THE ABOVE NOTES/OBSERVATION AND LIMITATIONS SH OW THAT THE BOOKS OF ACCOUNTS NAMING JADAVJI HAS BEEN WRITTEN IN SUCH AS MANNER THAT CORRECT STATEMENT OF AFFAIRS AND PROFIT OF THE ASSE SSEE COMPANY CANNOT BE DERIVED AND ONLY SOME ESTIMATION/GUESS WORK HAS BE DONE WITH RECASTING OF THE ACCOUNTS. WHEN THE ESTIMATION/GUESS IS MADE IN RECASTING OF THE ACCOUNT, THE TRADING RESULTS MAY DIFFER PERSON TO P ERSON WHO MAKES ESTIMATION OR GUESS. THE SPECIAL AUDITORS THEMSELVE S HAVE ADMITTED AT PAGE 33 OF THEIR REPORT THAT ANY CHANGE IN ESTIMATION OR ASSUMPTION MAY LEAD TO CHANGE IN FINANCIAL STATEMENTS. I AGREE WI TH THE CONTENTION OF LD AR THAT IN POINT NO II OF TERMS OF REFERENCE FOR SP ECIAL AUDIT, IT HAS BEEN CLEARLY MENTIONED BY THE AO TO RECAST THE TRADING A ND P & L A/C ON ACCOUNTING PRINCIPLES AND ON THE BASIS OF SEIZED MA TERIAL . THE AO HAS NOT ASSIGNED THE TASK TO SPECIAL AUDITORS TO COMPUTE TH E INCOME OR RECAST THE TRADING AND P & L A/C BY APPLYING THE PRESUMPTION A ND ASSUMPTION OR ON ESTIMATION. THERE WAS NO SCOPE OF APPLICATION OF PR ESUMPTION, ASSUMPTION, ESTIMATION, PERSONAL JUDGMENT ETC IN RECASTING OF A CCOUNTS. FURTHER THE AUDITOR IS NOT A QUASI JUDICIAL AUTHORITY AND ESTIM ATION AND PRESUMPTION IS BEYOND THE SCOPE OF AUDIT. THE COPY OF SUBMISSION O F LD AR WAS SENT TO AO FOR COMMENTS ON THE ISSUE RAISED BY LD AR ON THE RE CASTING OF BOOKS OF ACCOUNT MADE BY SPECIAL AUDITORS. IN REMAND REPORT THE AO HAS NOT DELIBERATED THESE ISSUES . FURTHER, IT IS ALSO SEEN THAT THE ASSESSMENT ORDER AS WELL AS FROM SPECIAL AUDIT REPORT THAT NO ENTRIES PERTAINING FIN ANCIAL YEAR 2010-11 ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 70 CORRESPONDING TO AY 2011-12 WAS FOUND IN THE ACCOUN TS MAINTAINED UNDER THE NAME JADAVJI. NO ANY OTHER INCRIMINATING SEIZED DOCUMENT PERTAINING TO AY 2010-11 WAS BROUGHT ON RECORDS SHOWING UNACCOUNTED SALES OR PURCHASES OTHER UNACCOUNTED BUSINESS ACTIV ITY OF THE ASSESSEE COMPANY. THE SALES WERE ACCEPTED AT RS. 12,28,29,758.50 ON THE SAME FIGURE WHICH THE ASSESSEE DISCLOSED IN REGULAR BOOK S OF ACCOUNT. SEPARATE TRADING AND PROFIT AND LOSS ACCOUNT OF PAR ALLEL AND DUPLICATE BOOKS OF ACCOUNT IN NAME JADAVJI WAS PREPARED BY SPECIAL AUDITOR WHICH SHOWS NO TRANSACTION EXPECT OPENING STOCK OF RS. 7,60,132.17 WHICH WAS TRANSFERRED TO THE STOCK OF REGULAR BOOKS . AFTER TAKING INTO CONSIDERATION THIS BROUGHT FORWARDED STOCK, NO EXCE SS STOCK AS ON DATE OF SEARCH WAS DERIVED. THE COPY OF SUCH TRADING AND PR OFIT AND LOSS ACCOUNT IS PLACED AT PAGE 131 OF SAR (VOL-III OF PB) . THE CONSOLIDATED TRADING AND PROFIT AND LOSS ACCOUNT IS PLACED AT PA GE 81 OF SAR (VOL III OF PB), WHICH SHOWS NO TRANSACTION IN JADAVJI E XCEPT OPENING STOCK OF RS. 7,60,132.17 AND CERTAIN ADJUSTMENT ENTRIES I N THE AUDITED BOOKS OF ACCOUNT. THE ADJUSTMENT ENTRIES CARRIED OUT BY S PECIAL AUDITORS MAY BE SUMMARISED AS UNDER:- NET PROFIT INCREASED BY RS. 91,37,067.89 S.NO. PARTICULARS AMOUNT 1 GP INCREASED IN TRANSACTION OF REGULAR BOOKS 1866 349.89 2 PURCHASES OF STOCK TRANSFERRED TO INDORE OUT OF UNACCOUNTED INCOME 7204766 3 ADVERTISEMENT EXPENSES DISALLOWED 4000 4 EXTRA DEPRECIATION ALLOWED -1548 5 PACKING EXPENSES DISALLOWED 50000 6 VEHICLE EXPENSES DISALLOWED 13500 TOTAL NET PROFIT INCREASED 91,37,067.89 CLOSING STOCK INCREASED :- 1,00,99,593.06 S.NO. PARTICULARS AMOUNT 1 GP INCREASED IN TRANSACTION OF REGULAR BOOKS 1866 349.89 2. OPENING STOCK TRANSFERRED FROM PARALLEL AND DUPLICATE BOOKS JADAVJI 760132.17 3. PURCHASES OF STOCK TRANSFERRED TO INDORE OUT OF UNACCOUNTED INCOME 7204766 4. PURCHASES OF DIAMOND AGAINST NEGATIVE STOCK IN STOCK REGISTER 268345 STOCK INCREASED IN REGULAR BOOKS AS ON 31.03.2011 1,00,99,593.06 THE LD AR OF THE ASSESSEE SUBMITTED THAT THE GP OF ASSESSEE WAS INCREASED BY 18,66,349.89 AGAINST WHICH THE CORRESP ONDING INCREASE WAS MADE IN THE CLOSING STOCK. THE LD AR SUBMITTED THAT THE GP HAS BEEN INCREASED BY RS. 13,60,178.28 ON ACCOUNT OF VALUATI ON OF 60.57 CT ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 71 DIAMOND, WHICH WAS MADE AT RS. 13,60,178.28 AS AGAI NST COST TAKEN BY SPECIAL AUDITORS AT RS. 2,68,345/- FOR 63.14 CT. TH E SPECIAL AUDITOR MENTIONED IN NOTE NO (I) AT PG 40 OF SAR (VOL III OF PB), THAT THERE WAS NEGATIVE STOCK OF DIAMOND 60.57+2.57 TOTALLING TO 6 3.14 CT. THE ASSESSEE EXPLAINED THAT THERE WAS NO NEGATIVE STOCK BUT DUE TO CONSOLIDATED ONE ENTRY OF CONSUMPTION IN STOCK REGISTER FOR THE MONT H ON 01-11-2010, THE STOCK REGISTER SHOWS THE NEGATIVE STOCK OF 60.57 ON 01-11-2010 PG 179 OF SAR (VOL III OF PB). HOWEVER, THE SPECIAL AUDITOR TREATED IT AS UNACCOUNTED PURCHASES BY RS. 2,68,345/- FOR 60.57+2 .57 TOTALLING TO 63.14 CT. ON TREATING IT AS UNACCOUNTED PURCHASE, THE SAME WAS ALSO ADDED INTO CLOSING STOCK AS ON 31.03.2011. THE WORK ING IS IN PARA 6.6 PAGE 18 OF SAR (VOL III OF PB). THE STOCK OF 60.57 CT DIAMOND (TAKEN AGAINST THE NEGATIVE STOCK) WAS VALUED AS ON 31.03. 2011 AT RS. 13,60,178.28 (WORKING OF SPECIAL AUDITOR IS AT PG 44 OF SAR VOL III OF PB) AS AGAINST THE COST ESTIMATED BY SPECIAL AUDITOR AGAINST THIS STOCK AT RS. 2,57,422.50 (268345/63.14 * 60.57). THIS WORKING ALONE HAS AFFECTED THE EXCESS VALUATION OF CLOSING STOCK BY RS. 11,02,755.78 AND CONSEQUENTIALLY EXCESS GP. FURTHER, I FOUND THAT TH E DISCREPANCY IN STOCK WAS CALCULATED ON THE BASIS OF DEFECTIVE ACCOUNTS W HICH THE AO HAS REJECTED. AS REGARD THE DISCREPANCY IN STOCK ON ACC OUNT OF ENTRY OF TRANSFER OF STOCK AT INDORE, THE ASSESSEE HAS GIVEN PLAUSIBLE EXPLANATION THAT IT HAS SUFFICIENT BROUGHT FORWARDED UNDISCLOSE D INCOME FROM PREVIOUS YEAR TO COVER THE ALLEGED DISCREPANCY IN S TOCK. FURTHER I FOUND THAT THE AO HAS REJECTED THE BOOKS OF ACCOUNT AND T HEREFORE, THE PROFIT SHOULD NOT BE COMPUTED ON THE BASIS OF SAME SET OF REJECTED BOOKS OF ACCOUNT. THE AO HAS HELD THAT THE ADDITION OF RS. 9 1,37,068/- REPRESENTS THE UNDISCLOSED INCOME/PROFIT EARNED FROM SALES OF RS. 12,28,29,758/-. THEREFORE, THE LD AO HAS TREATED THE ADDITION AS BU SINESS INCOME OF THE ASSESSEE. THE GP DECLARED BY THE ASSESSEE IN REGULA R BOOKS OF ACCOUNT IS RS. 1,72,12,445.56 (PG 81 OF SAR VO; III PB ). TO THIS IF RS. 91,37,068/- IS ADDED THAN THE GP COMES TO RS. 1,72,12,445.56 +9 1,37,068= RS. 2,63,49,513.56 WHICH GIVES GP OF 21.45% ON SALES OF RS. 12,28,29,758/-. THE ASSESSEE HAS CITED AN EXAMPLE OF COMPARABLE CAS E OF M/S RAMBHAJOS. (PAN: - AAJFR4553Q) WHO WAS ASSESSED AT CENTRAL CIRLCE-1, JAIPUR U/S 153A FOR AY 2010-11 AND THE GP RATE OF 15.30% HAS BEEN ACCEPTED. HERE IN THIS CASE, ASSESSMENT WAS MADE U/S 144 OF INCOME TAX ACT AFTER APPLYING THE PROVISIONS OF SECTION 145(3) OF THE AC T AND IN VIEW OF THE OBSERVATIONS AND REMARKS OF THE SPECIAL AUDITORS AN D DISCREPANCIES POINTED OUT BY THE AR OF THE ASSESSEE THE PROFIT OF THE ASS ESSEE SHOULD BE ESTIMATED BY APPLYING APPROPRIATE GP RATE. AFTER CONSIDERING THE FACT THAT THE AO HAS MADE ADDITION OF RS. 91,37,068/- AND TREATED IT AS INCOME FROM SALES OF RS. 12,28,29,758, WHICH GIVES THE GP RATE OF 21.45% ON SALES. FURTHER NO ANY ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 72 OTHER UNDISCLOSED BUSINESS ACTIVITY OF THE ASSESSEE HAS BROUGHT TO THE NOTICE. FURTHER THE GP RATE IN MOST OF THE YEARS WAS ASSESS ED TO LESS THAN 15%. EVEN IN THE NEXT YEAR AY 2012-13 , THE GP OF RS 2,43,34,969.12 WAS ACCEPTED ON SALES OF RS. 14,41,31,286.15 WHICH GIVE S THE GP RATE OF 16.88%. THE WEIGHTED AVERAGE GP RATE FOR THE AY 2006-07 TO AY 2012-13 COMES TO 16% . I HAVE ESTIMATED THE PROFITS FOR AY 2010-11 BY AP PLYING GP RATE OF 24% ON CONSOLIDATED SALES BUT THE FACT R EMAINS THAT IN AY 2010-11, THE SUBSTANTIAL PART OF SALES WAS UNACCOUN TED SALES. IN UNACCOUNTED SALES THE PROFIT REMAINS ALWAYS HIGHER AS THE SAVING ON ACCOUNT OF TAXES ETC WHICH COMES TO AROUND 4%. CON SIDERING THIS FACT AND ASSESSED GP IN PAST AND NEXT YEAR, I ESTIMATE THE GP RATE OF 20% ON THE DECLARED SALES OF RS. 12,28,29,758/-. THUS, THE GROSS PROFIT COMES TO RS. 2,45,65,951.60/-. THE ASSESSEE HAS SHOWN GROSS PROFIT OF RS. 1,72,12,445.56 IN ITS REGULAR RETURN. THUS, THE SHORT FALL IN GP IS DETERMINED AT RS. 73,53,506.04. THE ASSESSEE HAS DECLARED RS. 15,00,000/- IN THE RETURN FILED ON ACCOUNT OF UNDISCLOSED INCO ME FROM UNACCOUNTED SALES/PURCHASES. IN PROFIT AND LOSS ACC OUNT THE ASSESSEE DISCLOSED THIS INCOME BY MENTIONING THAT INCOME TA KEN INTO ACCOUNT ON THE BASIS OF STATEMENTS RECORDED IN SEARCH/DOCUMENT S FOUND DURING INCOME TAX SEARCH BEING INCOME EARNED FROM UNACCOUN TED SALES REPRESENTED BY UNDISCLOSED ASSETS (PB PAGE 103) . FURTHER, IN THE SWORN STATEMENTS RECODED ON OATH, SHRI PRATEEK KOTHARI , DIRECTOR OF ASSESSEE COMPANY, ADMITTED THIS INCOME AS INCOME EARNED FROM UNACCOUNTED PURCHASE AND SALES IN THE COMPANY. (PB PAGE 38 AND 43). THE ASSESSEE COMPANY HAS NO ANY OTHER ACTIVITY EXCEPT THE JEWELR Y BUSINESS. THEREFORE, I HOLD THAT THE ASSESSEE HAS DECLARED THIS INCOME O F RS. 15,00,000/- ON ACCOUNT OF PROFIT FROM JEWELRY BUSINESS WHICH WAS U TILIZED IN UNACCOUNTED ASSETS. AFTER DULY CONSIDERING THESE FACTS AND CIRC UMSTANCES, THE TRADING ADDITION OF RS. 73,53,506/= MINUS RS. 15,00,000/- = RS.58,53,506/- IS SUSTAINED. FURTHER THE SPECIAL AUDITOR HAS POINTED OUT DOUBLE PAYMENT OF ADVERTISEMENT EXPENSES BY RS. 4000/- AND NON MAINTE NANCE OF PROPER VOUCHERS AGAINST PACKING EXPENSES AND VEHICLE EXPEN SES OF RS. 50000/- & RS. 13500/- . THEREFORE, I DISALLOW RS. 4000/- AGAINST ADVERTI SEMENT EXPENSES, AND 20% OUT OF PACKING AND VEHICLE EXPENS ES WHICH COMES TO RS. 10000+2700 TOTALING TO RS. 12700/-. THUS THE TOTAL ADDITION OF RS.58,53,506/- +RS. 4000/-+RS. 12700/- = RS. 587020 6/- IS SUSTAINED AS AGAINST ADDITION OF RS. 91,37,068/- MADE BY AO. THI S ADDITION WOULD COVER ALL THE DISCREPANCIES IN STOCK CALCULATED BY AO ON THE BASIS OF REJECTED BOOKS OF ACCOUNT. THUS, THE ASSESSEE GETS RELIEF OF RS. 32,66,862/-. ASSESSEES APPEAL IS PARTLY ALLOWED. ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 73 17.4 DURING THE COURSE OF HEARING, THE LD. AR OF TH E ASSESSEE PRAYED THAT THE LD. CIT(A) ERRED IN CONFIRMING THE TRADING ADD ITION OF RS.58,53,506/- BY ESTIMATING GP RATE @ 20% ON DECLARED SALES OF RS . 12,28,29,758/- AS AGAINST 14.01% DECLARED BY THE ASSESSEE. THE LD. A R OF THE ASSESSEE FILED THE FOLLOWING WRITTEN SUBMISSION WHICH HAS BEEN TAK EN INTO CONSIDERATION. AS REGARD THE ASSESSEES APPEAL WE SUBMIT THAT THE LD CIT(A) CONFIRMED THE TRADING ADDITION OF RS. 58,53,506/- B Y ESTIMATING THE GP RATE OF 20% ON THE DECLARED SALES. IT IS ADMITTED FACT THE ASSESSEE WAS NOT INDULGED IN ANY UNACCOUNTED PURCHASE SALES OR OTHER BUSINESS AC TIVITIES. WHEN THERE IS NO UNACCOUNTED BUSINESS, THAN THERE CANNOT BE UNACCOUN TED INCOME. FURTHER, THE BOOKS OF ACCOUNT OF THE ASSESSEE HAS BEEN REJECTED BUT IT DOES NOT GIVE UNFETTERED POWER TO LOWER AUTHORITIES TO ASSESSEE T HE INCOME OF THE ASSESSEE AT THEIR WHIMS AND FANCIES. ASSESSMENT FRAMED U/S 144 OF INCOME TAX ACT IS BEST JUDGMENT IT MEANS INCOME SHOULD BE ASSESSEE CONSIDE RING THE BEST AVAILABLE MATERIAL, PAST HISTORY, NATURE AND PRACTICE OF TRAD E IN SUCH MANNER WHICH GIVES A JUSTIFIABLE RESULT. THE LOWER AUTHORITIES HAVE AS SESSED HIGHER BUSINESS PROFIT BUT NO ASSET OR STOCK WAS FOUND CORRESPONDING TO EN HANCED PROFIT. FURTHER, THE ASSESSEE HAS CITED COMPARABLE CASE OF SIMILAR N ATURE TRADE OF M/S RAMBHAJOS. (PAN: - AAJFR4553Q) WHO WAS ASSESSED AT CENTRAL CIRLCE-1, JAIPUR U/S 153A FOR AY 2010-11 AND THE GP RATE OF 1 5.30% HAS BEEN ACCEPTED. FURTHER THE GP RATE IN MOST OF THE YEARS WAS ASSESS ED TO LESS THAN 15%. EVEN IN THE NEXT YEAR AY 2012-13 , THE GP OF RS 2,43,34,969.12 WAS ACCEPTED ON SALES OF RS. 14,41,31,286.15 WHICH GIVES THE GP RATE OF 16.88%. THE WEIGHTED AVERAGE GP RATE FOR THE AY 2006-07 TO AY 2012-13 COMES TO 16% . S. NO. A.Y TURNOVER G.P G.P. RATIO 1 2006-07 3531618.00 512723.00 14.52% 2 2007-08 18562148.00 2509297.00 13.52% 3 2008-09 20591252.00 3047886.00 14.80% 4 2009-10 12824830.00 3356643.00 26.17% 5 2010-11 69891003.00 11843141.55 16.95% 6 2011-12 122829758.50 17212445.56 14.01% ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 74 7. 2012-13 144131286.15 24334969.12 16.88% WEIGHTED GP 392361895.65 62817105.23 16.01% THEREFORE, THE TRADING ADDITION OF RS. 58,53,506/- CANNOT BE SUSTAINED IF THE WEIGHTED AVERAGE GP RATE ON THE BASIS OF PAS T HISTORY APPROACHED IS FOLLOWED. THE WEIGHTED AVERAGE GP COMES TO 16.01% A ND THE DECLARED GP RATE OF THE ASSESSEE IS 14.01% WHICH IS VERY CLOSE TO WEIGHTED AVERAGE GP RATE. RELIANCE IS PLACED ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS BHAWAN VA PATH NIRMAN (BOHRA) & CO (NO. 1) 258 ITR 431 WHEREIN IT HAS BEEN HELD THAT THE PAST HISTORY OF THE ASSESSEE IS BEST GUIDING FACTOR. IN VIEW F THE ABOVE SUBMISSION, THE HUMBLE ASSESSEE PRAYS YOUR HONOR KINDLY TO DELETE THE ADDITION OF RS. 58,53,506/- CONFIRMED BY LD CIT(A) AND DISMISS THE GROUND RAISED BY THE DEPARTMENT AND ALLOW THE G ROUND OF THE ASSESSEE. 17.5 DURING THE COURSE OF HEARING, THE LD. DR RELI ED ON THE ORDERS OF THE AO. 17.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. IT MAY BE MENTIONED THAT IN TH E CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2010-11, WE HAVE ADOPTED TH E METHOD OF WEIGHTED AVERAGE APPLYING THE GROSS PROFIT RATE OF 16.98%. HENCE, THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE GROSS PROFIT RATE OF 16.01% SHOULD ALSO BE ADOPTED IN THIS CASE ALSO TAKING INTO PAST HISTORY OF THE ASSESSEE BY CONSIDERING THE GROSS P ROFIT, TURNOVER FOR THE 2006-07 TO 2012-13 AS UNDER:- ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 75 S. NO. A.Y TURNOVER G.P G.P. RATIO 1 2006-07 3531618.00 512723.00 14.52% 2 2007-08 18562148.00 2509297.00 13.52% 3 2008-09 20591252.00 3047886.00 14.80% 4 2009-10 12824830.00 3356643.00 26.17% 5 2010-11 69891003.00 11843141.55 16.95% 6 2011-12 122829758.50 17212445.56 14.01% 7. 2012-13 144131286.15 24334969.12 16.88% WEIGHTED GP 392361895.65 62817105.23 16.01% ACCORDINGLY, THE GROUND NO. 2 TO 5 OF THE ASSESSEE' S ARE PARTLY ALLOWED AND THE GROUND NO. 1 OF THE REVENUE IS DISMISSED. 18.1 THE GROUND NO. 2 OF THE REVENUE IS REGARDING R ESTRICTING THE ADDITION OF RS. 2,71,50,538/- TO RS. 1,20,751/- MAD E BY THE AO BY MAKING DISALLOWANCE U/S 40A(3) OF THE ACT. THE FACT S AS EMERGES FROM THE ORDER OF THE LD. CIT(A) IS AS UNDER:- 3.3.3 I HAVE CONSIDERED ASSESSEES SUBMISSION AND ALSO TAKEN A NOTE OF JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPEL LANT AS WELL AS THE FACTUAL MATRIX OF THE CASE. I FOUND THAT THE AO MADE DISALLOWANCE BY HOLDING T HAT THE ASSESSEE IS INDULGED IN ILLEGAL ACTIVITIES BY NOT RECODING THE CORRECT PURCHASES, SALES, REVENUE & CAPITAL TRANSACTION IN ITS REGULAR BOOKS OF ACCOUNTS AND PAYMENTS AGAINST THE PURCHASES AND EXPENDITURE WERE MADE IN CASH AND NO RELAXATION CAN BE GIVEN FOR THE ILLEGAL ACTIVITIES. HE FURTHER HEL D THAT HE HAS NOT REJECTED THE PARALLEL AND DUPLICATE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND JUDICIAL DECISIONS RELIED UPON BY THE ASSESSEE ARE NOT APPLI CABLE TO THE CASE OF THE ASSESSEE. ON THE OTHER HAND THE LD AR SUBMITTED THA T THE ASSESSEE WAS NOT ENGAGED IN ANY ILLEGAL BUSINESS OR A BUSINESS PROHI BITED BY LAW. THE SALES PERTAINING TO THIS YEAR HAS BEEN ACCEPTED BY THE AO . NO ANY PARALLEL OR DUPLICATE BOOKS OF ACCOUNT FOR THE YEAR WERE FOUND BY THE SEARCH PARTY. IT IS AN ADMITTED FACT THAT NO ENTRY WAS FOUND IN THE BOOKS MAINTAINED IN NAME JADAVJI FOR THE CURRENT YEAR. THE BOOKS OF ACCOUNT AND DOCU MENTS SEIZED BY THE DEPARTMENT DO NOT SHOW ANY ENTRIES OF ALLEGED CASH PAYMENT OF RS. 2,38,345/- ON ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 76 ACCOUNT OF CASH PURCHASE OF DIAMOND. THE AR SUBMITT ED THAT THE SEIZED PAPER (PG 2 EXHIBIT 2) SHOWS THE CASH PAYMENT OF RS. 27,16,000/- IN THE NAME OF SAMEER BHAI . THE CASH PAYMENTS IN THE NAME OF DIAMOND PURCHASE S OR SAMEER BHAI WERE RECORDED BY THE SPECIAL AUDITORS IN THE BOOKS RE-CASTED BY THEM ON PRESUMPTION, ASSUMPTION POSSIBILITIES AND PROBABILI TIES WITHOUT HAVING ANY CORROBORATIVE EVIDENCE. THIS ACTION OF THE SPECIAL AUDITOR IS BEYOND THE SCOPE OF TERMS OF REFERENCE. THE TERMS OF REFERENCE OF SPECI AL AUDIT IS TO RECAST THE ACCOUNT ON THE BASIS OF SEIZED DOCUMENTS. FURTHER, THE PURCHASES RELATING TO SAMEER BHAI BELONG TO AY 2010-11 WHEREIN THE PROFIT WAS ESTIMATED BY APPLYING GP RATE. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND AFTER DULY CONSIDERING ASSESSEES SUBMISSION, I AM INCLINED TO AGREE WITH THE CONTENTION OF LD AR THAT THE ASSESSEE WAS NOT ENGAGED IN ANY UNLA WFUL BUSINESS. THE FACT REMAINS THAT THE ASSESSEE WAS INDULGED IN UNACCOUNT ED SALE AND PURCHASE BUSINESS OF JEWELLERY AND THE PROVISIONS OF SECTION 40A(3) OF THE ACT CANNOT BE USED AS PENAL ACTION, THE LAW PRESCRIBES SEPARATE P ENAL ACTION U/S 271(1)(C) OR 271AAA FOR THE UNACCOUNTED INCOME. FURTHER, FOR THI S YEAR, NO DUPLICATE SETS OF BOOKS OF ACCOUNT WERE FOUND. THE AO HAS REJECTED TH E REGULAR BOOKS OF ACCOUNT AND THE ASSESSMENT HAS BEEN MADE U/S 144 OF I.T. AC T BY APPLYING THE PROVISIONS OF SECTION 145(3) OF THE ACT. IN ABSENCE OF PARALLE L OR DUPLICATE BOOKS FOR THE YEAR UNDER CONSIDERATION, THE QUESTION OF REJECTION OR NOT REJECTION OF PARALLEL OR DUPLICATE BOOKS FOR THIS YEAR DOES NOT ARISE. THE C ASH PAYMENTS WERE RECORDED BY THE SPECIAL AUDITORS IN THE RE-CASTED BOOKS ON P RESUMPTIONS WITHOUT HAVING THE CORROBORATIVE ENTRIES SEIZED DOCUMENTS. THE SEI ZED PAPER PG 2 EXHIBIT 2 (PB PG 23) SHOWS CASH PAYMENT OF RS. 27,16,000/- ONLY AGAINST WHICH THE SPECIAL AUDITOR HAS RECORDED THE CASH PAYMENT OF RS. 2,67,91,442/- IN NAME OF SAMEER BHAI . SIMILARLY, THE SPECIAL AUDITOR PRESUMED THE CASH PURCHASES OF RS. 2,38,345/- AGAINST THE NEGATIVE STOCK OF DIAMOND CA LCULATED BY HIM ON THE BASIS OF STOCK REGISTER WHEREIN THE CONSUMPTION OF DIAMON D WAS NOT SHOWN ON DAY TO DAY BASIS BUT ON MONTHLY BASIS. THE SPECIAL AUDITORS RECASTED THESE BOOKS OF ACCOUNT BUT IN RECASTING OF THESE BOOKS, HE POINTED OUT CERTAIN LIMITATION & REMARKS AND EXPRESSED THAT THE RECASTING OF THE BOO KS WERE MADE BY APPLYING CERTAIN ESTIMATION AND ASSUMPTIONS. HE ALSO EXPRESS ED HIS VIEW UNDER COMMON REMARKS THAT THE TRUE AND CORRECT PROFIT CAN NOT BE DETERMINED DUE TO INHERENT LIMITATION OF RECORDS AND METHOD OF ACCOUN TING. FURTHER, THE PURCHASES IN RESPECT TO SEIZED DOCUMENT PAGE 2 OF EXHIBIT 2 PERTAIN TO AY 2010-11 AND THE FACT REMAINS THAT THE PROFIT OF THE ASSESS EE FOR AY 2010-11 BY APPLYING THE GP RATE OF 26.21% WAS ESTIMATED AND THE ASSESSMENT WAS FINALIZED U/S 144 OF I.T. ACT AFTER APPLYING THE PROVISIONS OF SECTION 145(3) OF ACT. VARIOUS BENCHES ON HONBLE ITAT INCLUDING THE JURISDICTIONA L JAIPUR BENCH OF HONBLE ITAT AND VARIOUS HIGH COURT INCLUDING THE JURISDICT IONAL HONBLE RAJASTHAN HIGH COURT HAS HELD THAT WHERE THE ESTIMATION OF IN COME IS MADE BY APPLYING GP RATE, FURTHER DISALLOWANCE CANNOT BE MADE BY APP LYING THE PROVISIONS OF SECTION 40A(3) OF INCOME TAX ACT . IT WOULD BE WORTHWHILE TO REPRODUCE THE ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 77 RELEVANT PARA OF DECISION OF HONBLE ITAT JAIPUR BE NCH, IN THE CASE OF SHRI SHANKAR KHANDELWAL V/S ACIT, CENTRAL CIRCLE-1, JAIP UR (SUPRA) AS UNDER:- 5.9 WE HAVE HEARD BOTH THE PARTIES. THE LD. AR D URING THE COURSE OF PROCEEDINGS BEFORE US HAS ARGUED THAT NO DISALLOWANCE U/S 40A(3) CAN BE MADE IN CASE THE BOOKS OF ACCOUNTS AR E REJECTED. OUR ATTENTION WAS DRAWN TOWARDS THE FACT THAT THE AO HA S REJECTED THE BOOKS OF ACCOUNTS AND HAS MADE THE ADDITION ON ACCO UNT OF CONSTRUCTION AND WORK IN PROGRESS EXPENSES AND HAS ALSO MADE DISALLOWANCE OF TAXI RUNNING EXPENSES. THE ADDITION MADE UNDER BOTH THE HEADS IS SUBSTANTIAL. THE HON'BLE JURISDICTIONA L HIGH COURT IN THE CASE OF CIT VS. G.K. CONTRACTORS, 19 DTR 305 HELD T HAT IF THE PROFIT IS ESTIMATED BY APPLYING HIGHER NET PROFIT RATE AFTER REJECTING THE BOOKS OF ACCOUNTS BY INVOKING THE PROVISIONS OF SECTION 1 45(3)OF THE ACT THEN NO SEPARATE ADDITION CAN BE MADE ON ACCOUNT OF CASH CREDIT U/S 68 OF THE ACT. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SMT. SANTOSH JAIN, 296 ITR 324 HELD THAT SECTIO N 40A(3) CANNOT BE INVOKED WHEN THE INCOME IS ESTIMATED BY APPLYING TH E GROSS PROFIT RATE. THE HON'BLE PUNJAB & HARYANA HIGH COURT FOLLO WED THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. BANWARI LAL BANSI DHAR, 229 ITR 229. THE JAIPUR TRI BUNAL IN THE CASE OF SINGHAL BUILDERS CONTRACTOR VS. ADDL. CIT, 133 TTJ 102 HAS ALSO HELD THAT ONCE AN INCOME OF THE ASSESSEE IS ES TIMATED BY APPLYING THE GROSS PROFIT RATE OR NET PROFIT RATE THEN NO DI SALLOWANCE CAN BE MADE U/S 40A (3) OR ANY OTHER PROVISIONS. THE PROVI SO TO SECTION 40A(3) MAKES AN EXCEPTION THAT CASH PAYMENT IS NOT TO BE DISALLOWED IF IT IS AN ACCOUNT OF BUSINESS EXPEDIENCY. AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE, WE FEEL THAT NO SEPARA TE ADDITION IS REQUIRED TO BE MADE U/S 40A(3) BECAUSE THE BOOKS OF ACCOUNTS HAS BEEN REJECTED AND THERE HAS BEEN. THE ADDITION OF R S. 3.21 LACS MADE U/S 40A(3) IS DELETED. FURTHER HONBLE ITAT IN THE CASE OF BOLLINENI CASTI NGS AND STEEL LIMITED VERSUS DCIT, CENTRAL CIRCLE 1(3), HYDERABAD (SUPRA) HAS DEALT THE ISSUE OF DISALLOWANCE OF EXPENDITURE RECORDED IN THE SEIZED MATERIAL. IT IS USEFUL TO REFER HERE THE FINDINGS OF HONBLE TRIBUNAL AS UNDER:- HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MA TERIAL ON RECORD AND THE JUDICIAL PRECEDENTS RELIED BY EACH OF THE PARTI ES, WE FIND THAT THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAS ACCEPTED THAT BOOKS FOUND AND SEIZED DURING THE COURSE OF SEARCH PERTAIN TO THE A SSESSEE AND THAT THE RECEIPTS AND PAYMENTS MENTIONED THEREIN ARE ALSO RE LATING TO THE BUSINESS OPERATIONS OF THE ASSESSEE. WHATEVER MAY B E THE REASON FOR ACCEPTING THE RECEIPTS MENTIONED IN THE BOOKS, THE LONE CONTENTION OF THE ASSESSEE BEFORE US IS THAT THE EXPENDITURE RELATING TO THE RECEIPTS SHOULD BE ALLOWED. WE AGREE WITH THE CONTENTION OF THE LD. D.R. THAT THE EXPENDITURE WHICH HAS BEEN INCURRED WHOLLY AND EXCL USIVELY FOR THE PURPOSE OF BUSINESS ALONE CAN BE ALLOWED AND IT IS NOT VERIFIABLE FROM THE SEIZED MATERIAL THAT THIS EXPENDITURE IS INCURR ED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSE SSEE. WE ALSO AGREE ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 78 WITH THE LD. D.R. THAT MOST OF THE EXPENDITURE BEIN G INCURRED IN CASH AND SOME OF WHICH MAY BE FOR ILLEGAL PURPOSES IS AL SO NOT ALLOWABLE UNDER SECTIONS 40A(3) AND 40(A)(IA) OF THE I.T. ACT . THEREFORE, THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ENTIRE PAYMENTS MENTIONED IN THE SEIZED MATERIAL IS TO BE ALLOWED W HILE TREATING THE RECEIPTS AS INCOME OF THE ASSESSEE IS NOT TENABLE. HOWEVER, WE ALSO AGREE WITH THE LD. COUNSEL FOR THE ASSESSEE THAT TH E ENTIRE RECEIPTS RECORDED IN THE REGISTERS CANNOT BE TREATED AS THE INCOME OF THE ASSESSEE. THE RELATABLE BUSINESS EXPENDITURE HAS TO BE ALLOWED FROM THE RECEIPTS TO COMPUTE THE UNDISCLOSED INCOME OF THE A SSESSEE. THEREFORE, THE ONLY COURSE OPEN TO THE REVENUE WOULD BE TO REJ ECT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND TO ESTIMATE THE BUSINESS INCOME OF THE ASSESSEE. AS THE FACTS RELATING TO THE COMPU TATION OF GROSS PROFIT OR NET PROFIT OF THE ASSESSEE FOR THE EARLIER OR SU BSEQUENT ASSESSMENT YEARS OR RELATING TO OTHER ASSESSEE IN SIMILAR BUSI NESS ARE NOT BEFORE US, WE ARE OF THE OPINION THAT THE ISSUE NEEDS RE-LOOK/ RECONSIDERATION BY THE A.O. FOR ESTIMATION OF THE ASSESSEES INCOME. IT IS NEEDLESS TO MENTION THAT ASSESSEE SHALL BE GIVEN A FAIR OPPORTUNITY OF HEARING AS REGARDS THE ESTIMATION OF THE UNDISCLOSED BUSINESS INCOME AND T HE ASSESSEE SHALL COOPERATE WITH THE A.O. BY PRODUCING ALL THE RELEVA NT MATERIAL FOR SUCH ESTIMATION. SINCE PAYMENTS MENTIONED IN THE SEIZED MATERIAL ARE NOT BEING CONSIDERED AS THE EXPENDITURE OF THE ASSESSEE , THE APPLICABILITY OR OTHERWISE OF THE PROVISIONS OF SECTIONS 40A(3) AND 40(A)(IA) OF THE I.T. ACT IS ALSO NOT RELEVANT AT THIS STAGE. THEREFORE IN VIEW OF AFOREMENTIONED JUDICIAL PRONO UNCEMENTS, THE ADDITION ON ACCOUNT OF DISALLOWANCE MADE U/S 40A(3) CANNOT BE SUSTAINED WHERE THE PROFIT WAS ESTIMATED BY REJECTING THE BOOKS OF ACCOUNT AND BY APPLYING THE PROVISIONS OF SECTION 145(3) OF ACT. FURTHER, THE FACT REMAINS THAT FESTIVAL EXPENSES RS. 39600/- + 44827/- AND GIFT EXPENSES RS . 36324/- TOTALLING TO RS. 120751/- PERTAIN TO PROFIT AND LOSS ACCOUNT AND FOR WHICH THE ASSESSEE HAS ALSO AGREED BEFORE THE AO FOR THE DISALLOWANCE. THUS, TH E DISALLOWANCE TO THE EXTENT OF RS.1,20,751/- IS ON AGREED BASIS. THEREFORE IN V IEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND RESPECTFULLY FOLLOWING THE JUDICI AL PRONOUNCEMENTS OF HONBLE ITAT JAIPUR BENCH AND HONBLE RAJASTHAN HIG H COURT THE ADDITION OF THE REMAINING AMOUNT RS. 2,71,50,538/- MINUS RS. 1,20,751/- = RS. 2,70,29,787/ - CANNOT BE SUSTAINED. THEREFORE, AO IS DIRECTED TO DELETE THE ADDITION O F RS. 2,70,29,787/- MADE BY HIM BY DISALLOWING THE CASH PAYMENT U/S 40A (3) OF I.T. ACT AND THE ADDITION FOR THE REMAINING AMOUNT RS. 1,20,751/- IS SUSTAINED AS THE SAME IS ON AGREED BASIS. 18.2 DURING THE COURSE OF HEARING, THE LD. DR RELIE D ON THE ORDER OF THE AO. ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 79 18.3 ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A). 18.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. IT MAY BE NOTED THAT IN THE AP PEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2010-11, THE ISSUE RAISED BY TH E REVENUE HAS BEEN DISMISSED CONFIRMING THE ACTION OF THE LD. CIT(A) O N THE ISSUE IN QUESTION. THUS GROUND NO. 2 OF THE REVENUE IS ALSO DISMISSED AS INDICATED IN REVENUES APPEAL (SUPRA). 19.1 THE GROUND NO. 3 OF THE REVENUE IS REGARDING D ELETION OF ADDITION OF RS. 3,87,948/- MADE BY AO BY TREATING THE PURCHA SES MADE FROM M/S. ADITYA GEMS AS UNVERIFIABLE/ NON-GENUINE. THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) IS AS UNDER:- 3.4.3 I HAVE DULY CONSIDERED ASSESSEES SUBMISSION AND AL SO TAKEN A NOTE OF THE FACTUAL MATRIX OF THE CASE AS WELL AS J UDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT. AO HAS TREATED THE PURCHASE S FROM M/S ADITYA GEMS AS NON GENUINE ON THE BASIS OF FINDING THAT NO DOCUMEN T WAS PRODUCED BY THE ASSESSEE AND THE ASSESSEE HAS NOT PRODUCED THE PART Y BEFORE HIM FOR CROSS EXAMINATION. IT IS SUBMITTED THAT VIDE THE LETTER D ATED 19.02.2013, THE ASSESSEE HAS SUBMITTED THE FOLLOWING DOCUMENTS IN RESPECT OF PUR CHASES MADE FROM ADITYA GEMS ( PROP. SHREE KANT SONI) TO SUBSTANTIATE ITS CLAIM OF GENUINENESS OF THE PURCHASES (PB PAGE 595-619): I) COPY OF LEDGER A/C OF ASSESSEE IN BOOKS OF ACCOUNTS OF THIS CONCERN. II) COPY OF SALES TAX REGISTRATION OF PARTY. III) COPY OF PAN CARD OF PARTY. IV) COPY OF BANK A/C OF PARTY SHOWING THE ENTRY OF PAYM ENT RECEIVED FROM ASSESSEE AGAINST GOODS SOLD TO ASSESS EE. V) COPY OF INCOME TAX RETURN, COMPUTATION OF TOTAL INC OME, AUDIT REPORT, AUDITED BALANCE SHEET INCLUDING PROFI T & LOSS A/C AND ITS ANNEXURE OF THE PARTY OF AY 2011-12. ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 80 FURTHER, THE ASSESSEE STATED THAT THE ASSESSEE HAS ALSO MADE PURCHASES FROM THIS PARTY IN FY 2011-12 AND FILED D OCUMENTS IN SUPPORT OF THE GENUINENESS OF THE PURCHASES AND THE PARTY ATTE NDED BEFORE THE AO AND CONFIRMED THE SALES TO THE ASSESSEE AND THEREAFTER THE PURCHASES MADE IN AY 2012-13 FROM THIS PARTY WAS TREATED AS GENUINE. THE ASSESSEE FILED THE COPY OF ASSESSMENT ORDER FOR AY 2012-13 ALONG-WITH DOCUMENT S SHOWING THE PURCHASES FROM THIS PARTY. I HAVE ALSO CALLED FOR ASSESSMENT RECORDS OF AY 2012-13 FOR NECESSARY VERIFICATION OF FACTS AND FOUND THAT THIS PARTY APPEARED BEFORE THE AO AND PURCHASES FROM THIS PARTY IN AY 2012-13 WAS TRE ATED AS GENUINE. THIS PROVES THAT THE PARTY IS GENUINE PARTY AND THE PART Y IS EXISTING ON THE GIVEN ADDRESS, FILING INCOME-TAX RECORD AND ALSO GETTING REFUNDS FROM THE DEPT. THE AFOREMENTIONED DOCUMENTS ARE PART OF CASE RECORD AN D EVEN AO HAS RECORDED THE SAME IN THE ORDER SHEET DT 25/2/2015 F OR THE SCRUTINY ASSESSMENT OF AY 2012-13. THEREFORE IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES THE ADDITION OF RS. 3,87,948/- CANNOT BE SUSTAINED. THE AO IS DIRECTED TO DELETE THE SAME. ASSESSEES APPEAL SUCC EEDS. 19.2 DURING THE COURSE OF HEARING, THE LD. DR RELIE D ON THE ORDER OF THE AO. 19.3 ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE AO. 19.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. IT MAY BE NOTED THAT THE LD. C IT(A) HAS GIVEN CLEAR FINDINGS HEREUNDER ON THE ISSUE IN QUESTION BY DELE TING THE ADDITION OF RS. 3,87,948/- I HAVE ALSO CALLED FOR ASSESSMENT RECORDS OF AY 201 2-13 FOR NECESSARY VERIFICATION OF FACTS AND FOUND THAT THIS PARTY APP EARED BEFORE THE AO AND PURCHASES FROM THIS PARTY IN AY 2012-13 WAS TREATED AS GENUIN E. THIS PROVES THAT THE PARTY IS GENUINE PARTY AND THE PARTY IS EXISTING ON THE GIVE N ADDRESS, FILING INCOME-TAX RECORD AND ALSO GETTING REFUNDS FROM THE DEPT. THE AFOREMENTIONED DOCUMENTS ARE PART OF CASE RECORD AND EVEN AO HAS RECORDED TH E SAME IN THE ORDER SHEET DT 25/2/2015 FOR THE SCRUTINY ASSESSMENT OF AY 2012-13 . THEREFORE IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES THE ADDITION OF RS. 3 ,87,948/- CANNOT BE SUSTAINED. THE AO IS DIRECTED TO DELETE THE SAME. A SSESSEES APPEAL SUCCEEDS. ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 81 IT IS NOTED THAT THE ORDER OF THE LD. CIT(A) IS WEL L REASONED AND WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A ). THUS GROUND NO. 3 OF THE REVENUE IS DISMISSED. 20.1 GROUND NO. 1 OF THE ASSESSEE IS REGARDING CHAL LENGING THE VALIDITY OF ASSESSMENT REFERENCE MADE FOR SPECIAL AUDIT AND VALIDITY OF ASSESSMENT ORDER. 20.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. IT MAY BE NOTED THAT THIS ISSU E HAS BEEN DECIDED AGAINST THE ASSESSEE CONFIRMING THE ACTION OF THE L D. CIT(A) IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2010-11 (SUPRA ). HENCE, THE DECISION TAKEN IN THE APPEAL OF THE ASSESSEE FOR THE ASSESSM ENT YEAR 2010-11 SHALL APPLY MUTATIS MUTANDIS IN THE ASSESSMENT YEAR 2011- 12 ALSO. THUS GROUND NO. 1 OF THE ASSESSEE IS DISMISSED. 21.1 THE GROUND NO. 6 OF THE ASSESSEE IS REGARDING NOT ALLOWING THE BENEFIT OF TELESCOPING, RECYCLING AND ROTATION OF F UNDS. 21.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. THE GROUND NO. 6 OF THE ASSESS EE IS INFRUCTUOUS AS NO ADDITION HAS BEEN SUSTAINED ON THE BASIS OF UNEXPLA INED EXPENDITURE OR ASSETS. THUS GROUND NO. 6 OF THE ASSESSEE IS DISMIS SED. ITA NO. 446/JP/2016 M/S. JADAU JEWELLERS & MANUFACTURERS (P ) LTD. VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 82 22.0 IN THE RESULT, THE APPEALS FILED BY THE ASSES SEE ARE PARTLY ALLOWED AND THAT OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28-02-20 17. SD/- SD/- DQY HKKJR HKKXPUN (KUL BHARAT) ( BHAGCHAND) U;KF;D LNL; / JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 28 /02/ 2017 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. JADAU JEWELLERS & MANUFACTURERS (P) LTD. , JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE DCIT, CENTRAL CIRCLE- 2, JAIPU R 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. 446/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR