ITO, Jaipur V. RAJ KUMAR AGARWAL, Jaipur

ITA 517/JPR/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1987 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 11-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SEEMA MEENA
• Keywords: Rejection of books of accounts

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH FOE FLAG ;K NO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA NO. 517/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10. THE INCOME TAX OFFICER, WARD 5(5), JAIPUR. CUKE VS. SHRI RAJ KUMAR AGARWAL, 18-B, NARVAR PURI COLONY, GANGAPOLE, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AEUPA 9861 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SMT. SEEMA MEENA (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : NONE (ADJOURNMENT APPLICATION REJECTED) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 20.03.2018 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 22 /03.2018. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 29 TH FEBRUARY, 2016 OF LD. CIT (A)-2, JAIPUR FOR THE ASSESSMENT Y EAR 2009-10. NONE HAS APPEARED ON BEHALF OF THE ASSESSEE WHEN THIS APPEAL WAS CALL ED FOR HEARING. A LETTER SEEKING ADJOURNMENT IS ON RECORD BY ONE SHRI ROHAN SOGANI F ROM M/S. R. SOGANI & ASSOCIATES, CHARTERED ACCOUNTANTS. HOWEVER, THERE I S NO POWER OR AUTHORITY IN FAVOUR OF SHRI ROHAN SOGANI AS THERE IS NO AUTHORIT Y LETTER FILED ON RECORD. WE FURTHER NOTE THAT ON THE LAST DATE OF HEARING, THE HEARING OF THE APPEAL WAS ADJOURNED ON THE REQUEST OF THE ASSESSEE AND LAST O PPORTUNITY WAS GRANTED BY THIS BENCH. ACCORDINGLY, IN VIEW OF THESE FACTS AND CIRC UMSTANCES, THE REQUEST FOR ADJOURNMENT WAS REJECTED BY THE BENCH AND THE MATTE R WAS TAKEN UP FOR HEARING AND ADJUDICATION EX PARTE. THE REVENUE HAS RAISED T HE FOLLOWING GROUND :- 2 ITA NO. 517/JP/2016 SHRI RAJ KUMAR AGARWAL, JAIPUR. 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN CANCELLI NG THE PENALTY OF RS. 26,00,000/- IMPOSED U/W 271(1)(C) IN VIEW OF JUDGEMENT OF HONBLE ITAT IN ITA NO. 504/JP/2013 DATED 12.11. 2015 VIDE WHICH HONBLE ITAT HAS SET ASIDE THE ASSESSEES QUA NTUM APPEAL TO THE AO TO DECIDE THE ISSUE AFRESH, WHEN T HE DEPARTMENT HAS FILED M.A. AGAINST THE ABOVE ORDER O F THE HONBLE ITAT. 2. THE APPELLANT CRAVES ITS RIGHTS TO ADD, AMEND OR ALTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. 2. WE HAVE HEARD THE LD. D/R AND CAREFULLY PERUSED THE RELEVANT RECORD. THE LD. CIT (A) HAS DELETED THE PENALTY IN VIEW OF THE ORDE R OF THIS TRIBUNAL DATED 12.11.2015 WHEREBY THE QUANTUM APPEAL WAS SET ASIDE TO THE RECORD OF THE AO. HOWEVER, SUBSEQUENTLY THE SAID ORDER OF THE TRIBUNA L DATED 12.11.2015 WAS RECALLED BY THE TRIBUNAL VIDE ORDER DATED 11 TH JANUARY, 2017 IN M.A. NO. 35/JP/2016. WE FURTHER NOTE THAT THEREAFTER THE TRIBUNAL HAS FINAL LY DECIDED THE QUANTUM APPEAL VIDE ORDER DATED 26 TH DECEMBER, 2017 IN ITA NO. 504/JP/2013 IN PARA 5 AS UNDER :- 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL IN CAS E OF ACIT VS. M/S ALLIED GEMS CORPORATION VIDE ORDER DATED 15.12.2017 IN ITA NO. 794/JP/2011 AND CO NO. 76/JP/2011 AND HAS HELD IN P ARAS 5 AND 8 AS UNDER:- 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECT ION 145(3). THE ISSUE OF REJECTION OF BOOKS OF ACCOUNTS IS INVO LVED IN THE CROSS OBJECTION FILED BY THE ASSESSEE, THEREFORE, W E DEAL WITH 3 ITA NO. 517/JP/2016 SHRI RAJ KUMAR AGARWAL, JAIPUR. THIS ISSUE WHILE DECIDING THE CROSS OBJECTION. ONCE , THE BOOKS OF ACCOUNTS ARE REJECTED BY THE AO THE ONLY COURSE OF ACTION LEFT TO THE AO IS TO ASSESS THE INCOME OF THE ASSESSEE O N THE BASIS OF BEST JUDGMENT AND GP RATE IS CONSIDERED AS PRO PER AND REASONABLE BASIS AND GUIDANCE FOR THE BEST JUDGMENT . ONCE, THE BOOKS RESULT ARE REJECTED THE ASSESSING OFFICER CAN NOT PROCEED TO MAKE AN ADDITION TO THE INCOME OFFERED BY THE AS SESSEE AS PER BOOKS RESULT. HOWEVER, THE AO IN THE CASE OF TH E ASSESSEE INSTEAD OF APPLYING THE GP RATE MADE ON ADDITION@ 2 5% OF THE PURCHASES TO THE BOOK RESULTS. THIS ACT OF THE ASSE SSING OFFICER ITSELF CONTRADICTS THE DECISION OF REJECTING THE BO OKS OF ACCOUNTS AND BOOKS RESULT. THE TRIBUNAL IN ASSESSEES OWN CA SE FOR THE ASSESSMENT YEAR 2006-07 HAS CONSIDERED THIS ISSUE A ND UPHELD THE ORDER OF THE LD. CIT(A) IN PARA 2.20 AND 2.30 A S UNDER:- 2.20 HENCE, THERE ARE CERTAIN CONCERNS FOR WHICH R EVENUE GOT EVIDENCE IN THE FORM OF STATEMENT RECORDED IN RESPE CT OF SUCH PARTIES, OPENING BALANCE IS RS. 37,06,175/- WHILE T HE CLOSING BALANCE IS RS. 42,81,496/-. IT MEANS THAT THERE IS AN ACCRETION OF AMOUNT OF RS. 5.75/- LACS. IT MEANS THAT TO THIS EXTENT, ACCRETION IN PURCHASE IS WITHOUT SUPPORTING THE COR RECT BILLS. OF COURSE, TOTAL OPENTING BALANCE OF ALL PARTIES IS RS . 1,15,43,782/- AND THE CLOSING BALANCE IS RS. 1,33,36,193/-. HOWEV ER, LOOKING TO THE ACCRETION IN THE CLOSING BALANCE OF THE CONC ERNS FOR WHICH REVENUE HAS MATERIAL, THE ADDITION CONFIRMED BY THE LD. CIT(A) IS REASONABLE. 2.30 THE HONBLE P & H HIGH COURT IN THE CASE OF UP LAKESH METAL INDUSTRIAL V CIT 177 TAXMAN 298 HELD THAT ISS UE DECIDED BY THIS IS IN THE REALM OF APPRECIATION EVIDENCE. T HE FIND OF TRIBUNAL AS MENTIONED IN THIS JUDGMENT IS AS UNDER: - 'HOWEVER, IN OUR OPINION THE OBSERVATION OF THE ASS ESSING OFFICER THAT THE ASSESSEE WAS PRIMA FACIE REQUIRED TO PROVE THE GENUINENESS OF THE TRANSACTION AND IDENTITY OF THE CREDITORS IS NOT MISPLACED BECAUSE THERE IS NO DISTINCTION LAID BETWEEN THE TRADE CREDITOR AND THE NON-TRADE CREDITOR AND WE AR E FURTHER OF THE OPINION THAT IN CASE THE ASSESSEE CLAIMS LIABIL ITY OF PAYMENT TO THE TRADE CREDITORS SHOWN IN THE BALANCE-SHEET, THE ASSESSEE IS DEFINITELY REQUIRED TO PRIMA FACIE PROVE THE IDE NTITY OF THE 4 ITA NO. 517/JP/2016 SHRI RAJ KUMAR AGARWAL, JAIPUR. TRADE CREDITORS AS WELL AS THE GENUINENESS OF THE T RANSACTION. IN THIS CASE, ADMITTEDLY THE ASSESSEE HAS NEITHER BEEN ABLE TO DISCLOSE THE COMPLETE ADDRESSES OF THE TRADE CREDIT ORS NOR IS ABLE TO GIVE THE COMPLETE ADDRESSES OF THE CONSIGNO RS NOR THE NAME HAS BEEN MENTIONED ON THE CHALLAN FORMS, SO TH E VERIFICATION OF THE SAME BY THE ASSESSING OFFICER B ECAME TOTALLY IMPRACTICABLE ON ACCOUNT OF LACK OF THIS COMPLETE I NFORMATION SUPPLIED BY THE ASSESSEE. IT MEANS THAT THE ASSESSE E FAILED IN ESTABLISHING THE GENUINENESS OF THE SO CALLED TRADE CREDITORS APPEARING IN ITS BOOKS OF ACCOUNT. WE ARE FURTHER O F THE OPINION THAT SINCE IN THE INSTANT CASE OF THE ASSESSEE, THE POINT UNDER CONSIDERATION BEFORE US IS REGARDING THE GENUINENES S OF THE LIABILITY AMOUNTING TO RS. 1,75,26,586 SHOWN BY THE ASSESSEE IN ITS BALANCE-SHEET AS TRADE CREDITORS, SO IT WAS NOT RELEVANT FOR US TO CONSIDER AS TO WHETHER THE PURCHASES MADE BY THE ASSESSEE WERE GENUINE OR NOT OR TO WHETHER THE ASSESSEE HAS INFLATED THOSE PURCHASES OR NOT. IT IS ALSO NOT MATERIAL TO CONSIDER WHETHER THE GRS FROM SALE-TAX DEPARTMENT WERE VERIF IED OR NOT, SO, THE CIT(A) ON CONSIDERING THESE POINTS WAS NOT JUSTIFIED IN DELETING THE IMPUGNED ADDITION WITHOUT DISCUSSING A S TO WHETHER THE LIABILITY OF TRADE CREDITORS SHOWN BY THE ASSES SEE IN THE ABSENCE OF FURNISHING COMPLETE ADDRESSES OF TRADE CREDITORS/CONSIGNORS AND THE PAYMENT VOUCHERS WAS G ENUINE OR NOT.' WHILE EVALUATING THE MATERIAL COLLECTED BY THE REVE NUE ON THE TOUCH STONE ON HUMAN PROBABILITY AND CONSIDERING TH E ACCRETION IN THE CLOSING BALANCE IN RESPECT OF PARTIES FOR WH ICH REVENUE HAS MATERIAL IN THEJFORM OF STATEMENT. WE FELL THAT THE LD. CIT(A) WAS REASONABLE IN CONFIRMING THE ADDITION OF RS. 5. 00 LACS. HENCE BOTH THE GROUNDS OF ASSESSEE AS WELL AS REVEN UE ARE DISMISSED. WE FURTHER NOTED THAT WHEN THE CORRESPONDING SALE I S NOT IN DISPUTE THEN THE QUESTION IS ONLY REGARDING THE CORRECT AMO UNT OF PURCHASES AND VERIFICATION OF THE SAME. THE LD. DR HAS RELIED UPON THE VARIOUS DECISIONS OF HONBLE GUJARAT HIGH COURT HOWEVER, WE FIND THAT IN ALL THOSE DECISIONS THERE WAS A FINDING OF FACTS THAT T HE ASSESSEE INFLATED THE PURCHASES UPTO 25% AND THEREFORE, IT WAS NOT A CASE OF NON VERIFICATION OF THE PURCHASE AND REJECTION OF BOOK S OF ACCOUNTS BUT THE FACT WAS ESTABLISHED IN THE INVESTIGATION THAT THE ASSESSEE INFLATED THE 5 ITA NO. 517/JP/2016 SHRI RAJ KUMAR AGARWAL, JAIPUR. PURCHASE PRICE AND ACCORDINGLY THE ADDITION OF 25% BEING INFLATED PURCHASES WAS MADE AND UPHELD BY THE TRIBUNAL WHICH WAS AGAIN UPHELD BY THE HONBLE HIGH COURT. ON THE CONTRARY I N THE CASE OF THE ASSESSEE THE AO NOT GIVEN ANY FINDING OF INFLATED P URCHASES BY THE ASSESSEE BUT DOUBTED THE VERY TRANSACTION OF PURCHA SES DUE TO NON PRODUCTION OF THESE PARTIES BEFORE THE AO. THE AO H AS NOT GIVEN THE FINDING THAT THE PRICES OF THE GOODS WAS INFLATED B Y THE ASSESSEE BUT THE AO DOUBTED THE GENUINENESS OF THE PURCHASES ON THE GROUND THAT THE SUPPLIERS WERE FOUND TO BE ACCOMMODATION ENTRIE S PROVIDERS. WHEN THE AO REJECTED THE BOOK RESULTS U/S 145(3) OF THE ACT, THEN THE AO AFTER REJECTION OF THE BOOKS OF ACCOUNT CAN PROC EED TO MAKE THE ASSESSMENT ON THE BASIS OF BEST JUDGMENT INSTEAD OF RESORTING MAKE THE ADDITION TO THE BOOK RESULTS. ACCORDINGLY, IN T HE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE DECISI ON OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07 WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDERS OF THE LD. CIT(A) IN RESTR ICTING THE ADDITION TO THE AVERAGE GP RATE BASED ON THE PAST HISTORY. HENCE, T HE GROUNDS RAISED IN THE REVENUE APPEALS ARE REJECTED BEING WITHOUT A NY SUBSTANCE OR MERITS.--------------- --------------------------------------- 8. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND C ONSIDERED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSES SEE FAILED TO SUBSTANTIATE THE PURCHASES RECORDED IN THE BOOKS OF ACCOUNTS AND TO THAT EXTENT THE PURCHASES WERE NOT VERIFIABLE. THE ASSESSING OFFICER HAS ALSO POINTED THAT THE INVENTORY OF CLOSING STOCK HA S BEEN VALUED ON ESTIMATED BASIS AS POINTED OUT AND SPECIFICALLY MEN TIONED IN THE AUDIT REPORT AND THEREFORE, THE ASSESSEE WAS NOT MAINTAIN ING THE STOCK REGISTER SHOWING THE QUANTITY AND QUALITATIVE DETAI LS INCLUDING THE PURITY OF THE PREVIOUS MATTERS. THEREFORE, THE VALU ATION OF THE CLOSING STOCK WAS ALSO FOUND TO BE ESTIMATED AND NOT THE AC TUAL AND CORRECT VALUE. THE AO ISSUED SUMMONS TO THE PARTIES FROM WH OM THE ASSESSEE MADE THE PURCHASES HOWEVER, THERE WAS NO RESPONSE A ND NO COMPLIANCE OF THE NOTICE ISSUED BY THE AO TO THESE PARTIES. THUS, THE ASSESSING OFFICER HAS RIGHTLY POINTED OUT THAT THE SALE TO THE EXTENT OF MORE THAN 60% OF THE ASSESSEE WAS NOT VERIFIABLE. T HEREFORE, IN THESE FACTS AND CIRCUMSTANCES OF THE CASE WHEN THE SALES OF THE ASSESSEE TO THE EXTENT OF MORE THAN 60% IS NOT VERIFIABLE DUE T O THE FAILURE OF THE ASSESSEE TO PRODUCE THE RELEVANT EVIDENCE AND THE S UPPLIER THEN THE BOOK RESULTS OF THE ASSESSEE WOULD NOT REFLECTED TR UE PICTURE AND 6 ITA NO. 517/JP/2016 SHRI RAJ KUMAR AGARWAL, JAIPUR. CONSEQUENTLY IT WAS A SUFFICIENT AND PROPER GROUND FOR REJECTION OF BOOKS OF ACCOUNTS BY THE AO. THE LD. CIT(A) HAS DEA LT WITH THIS ISSUE IN PARA 4.3 AS UNDER- 4.3 I HAVE CAREFULLY PERUSED THE ORDER OF THE AO A ND THE EXTENSIVE SUBMISSIONS OF THE AR. THE MOST PERTINENT POINT IN THE CASE OF THE ASSESSEE IS THAT THE HONBLE ITAT, JAIP UR BENCH HAS ALREADY ADJUDICATED IN IDENTICAL FACTS IN THE CASE OF THE ASSESSEE FOR A.Y. 2006-07 VIDE ITS ORDER ITA NO. 603/JP/2010 DATED 10.06.2011. SIMILAR DISALLOWANCES WERE MADE BY THE AO UNDER SIMILAR FACTS AND CIRCUMSTANCES AS ARE INVOLVED IN THE APPELLANTS PRESENT APPEAL FOR A.Y. 2005-06. ON PERUSAL OF THE SAME I FIND THAT THE HONBLE ITAT JAIPUR IN THE APPELLANTS CAS E FOR A.Y. 2006-07 BASED ON A DETAILED DISCUSSION FROM PAGES 2 TO 9 HAS UPHELD THE REJECTION OF BOOKS OF ACCOUNT BY INVOKIN G THE PROVISIONS OF S. 145(3) IN THE CASE OF THE ASSESSEE DUE TO UNVERIFIABLE PURCHASES. THEREFORE, AS THE FACTS AND CIRCUMSTANCES ARE THE SAME IN THIS YEAR I UPHOLD TH E DECISION OF THE AO TO REJECT THE BOOKS OF ACCOUNTS OF THE ASSES SEE AND ESTIMATE HIS INCOME. THUS, THE LD. CIT(A) HAS DECIDED THIS ISSUE BY FOLL OWING DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FO R THE ASSESSMENT YEAR 2006-07. HENCE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDERS OF THE LD. CIT(A) QUA THIS ISSUE. ACCORDINGLY, THE ADDITION MADE BY THE AUTHORITIES B ELOW ON ACCOUNT OF UNVERIFIABLE PURCHASES IS RESTRICTED TO GP RATE ADD ITION TO BE COMPUTED BY THE AO ON THE BASIS OF PAST HISTORY OF THE ASSES EE COMPRISING THE G.P. RATE DECLARED AND ACCEPTED BY THE AO AS WELL A S GP RATE WHICH HAS ATTAINED FINALITY. THEREFORE, FOR LIMITED PURPO SES COMPUTING THE INCOME BY APPLYING THE AVERAGE GP RATE OF THE PAST HISTORY AT MINIMUM 3 YEARS. NEEDLESS TO SAY THAT THE ASSESSEE BE GIVEN AN APPROPRIATE OPPORTUNITY OF HEARING. AS REGARDS THE REJECTION OF BOOKS OF ACCOUNTS FOLLOWING THE EARLIER DECISION OF THE TRIBUNAL CITE D (SUPRA), WE UPHOLD THE ACTION OF THE AO. 7 ITA NO. 517/JP/2016 SHRI RAJ KUMAR AGARWAL, JAIPUR. THUS IT IS CLEAR THAT THE ISSUE OF ADDITION MADE BY THE AO IN RESPECT OF UNVERIFIABLE PURCHASES AFTER REJECTION OF BOOKS HAS BEEN SET ASI DE TO THE RECORD OF THE AO FOR COMPUTING THE INCOME OF THE ASSESSEE BY APPLYING AV ERAGE GP RATE OF PAST HISTORY FOR A MINIMUM 3 YEARS. SINCE THE MATTER IN QUANTUM APPEAL HAS BEEN SET ASIDE TO THE RECORD OF THE AO, THEREFORE, THE PRESENT PENALT Y WOULD NOT SURVIVE AND ACCORDINGLY WE SET ASIDE THE ORDERS OF THE AUTHORIT IES BELOW IN RESPECT OF LEVY OF PENALTY UNDER SECTION 271(1)(C). HOWEVER, THE AO I S AT LIBERTY TO TAKE NECESSARY STEPS AS PER THE OUTCOME OF THE QUANTUM SET ASIDE P ROCEEDINGS. 5. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 22/03/2 018. SD/- SD/- ( FOE FLAG ;KNO ) ( FOT; IKY JKWO (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 22/03/2018. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE ITO WARD 5(5), JAIPUR. 2. THE RESPONDENT SHRI RAJ KUMAR AGARWAL, JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 517/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 8 ITA NO. 517/JP/2016 SHRI RAJ KUMAR AGARWAL, JAIPUR.