JAI HIND AGARWAL, Jaipur V. ITO, Jaipur

ITA 620/JPR/2013

• Counselvise Citation: 62023114 RSA 2013
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 16-07-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 12-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA; ANITA RINES H
• Keywords: Bogus purchase; Accommodation entries
• Section: 144

Judgement Text

1 ITA 620-13 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH SMC JAIPUR BEFORE SHRI B.R. JAIN, ACCOUNTANT MEMBER ITA NO. 620/JP/2013 ASSTT. YEAR : 2007-08. SHRI JAI HIND AGARWAL, VS. THE INCOME-TAX OFFICER , PROP. M/S. MOLTO BELLO GEMS ENTERPRISES, WARD 5(4) , 70A, GUPTA GARDEN, NEAR VALMIKI JAIPUR. BHAWAN, AMER ROAD, JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI DC SHARMA & MS ANITA RINES H DATE OF HEARING : 12.08.2013 DATE OF PRONOUNCEMENT : 12.08.2013. ORDER THIS APPEAL BY ASSESSEE AGAINST THE ORDER DATED 30 .04.2013 OF LD. CIT (APPEALS)- II, JAIPUR RAISES THE FOLLOWING GROUNDS :- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD. AO IN REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY INVOKING THE P ROVISION OF SECTION 145(3) AND THEREAFTER MAKING A TRADING ADDI TION OF RS. 87,583/-. THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE REJECTION OF BOOKS OF ACCOU NTS AND DELETING THE TRADING ADDITION OF RS. 87,583/-. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD. AO IN MAKING FOLLOWING DISALLOWANCES ALTHOUGH ALLOWED TELESCOPIN G:- 2 PARTICULARS EXPENSES 20% DISALLOWED TELEPHONE EXPENSES 37,719/- 7,544/- OFFICE EXPENSES 24,486/- 4,897/- TRAVELING EXPENSES 12,980/- 2,596/- TOTAL 75,185/- 15,037/- THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIE D, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE CONFIRMATION OF DISALLOWANCE OF RS. 15,703/-. 2. BRIEFLY THE FACTS ARE THAT THE ASSESSEE CARRIED BUSINESS IN TRADING OF PRECIOUS AND SEMI PRECIOUS STONES IN THE NAME OF M/S. MOLTO BELL O GEMS ENTERPRISES AND RETURNED INCOME OF RS. 3,60,820/- ON THE TURNOVER OF RS. 1,2 8,39,208/- YIELDING GP RATE OF 15.50% AS AGAINST THE SALES OF RS. 86,20,527/- YIELDING GP RATE OF 15.94% IN THE IMMEDIATELY PRECEDING YEAR. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS MAINTAINED STOCK REGIST ER ON THE BASIS OF WEIGHT ONLY, BUT QUALITY-WISE STOCK REGISTER HAS NOT BEEN MAINTAINED . THUS THE STOCK WAS NOT FOUND DULY ACCOUNTED FOR. THE VALUATION OF STOCK WAS ALSO MAD E ON ESTIMATE BASIS AND WAS NOT SUBJECT TO VERIFICATION. HE ALSO FOUND THAT THE AS SESSEE HAD MADE PURCHASES FROM EIGHT PARTIES AS UNDER :- S.NO. NAME OF PARTIES FROM WHOM PURCHASES MADE AMOUNT 1. M/S. ARMILLA GEMS 91,700/- 2. M/S. GOVINDAM JEWELERS 1,08,716/- 3. M/S. MAHAVIR GEMS & JEWELS 52,972/- 4. M/S. NAMAN GEMS 14,469/- 5. M/S. NIDHI GEMS 56,564/- 6. M/S. RISHAB JEWELERS 12,254/- 7. M/S. SELECTIVE GEMS 1,610/- 8. M/S. TOUCH STONES 12,048/- TOTAL : 3,50,333/- 3 THE AFORESAID PURCHASES WERE NOT VERIFIABLE. THE S POT ENQUIRIES AT THE BUSINESS PREMISES MENTIONED IN THE INVOICES REVEAL THAT NO BUSINESS A CTIVITIES ARE CARRIED OUT BY THE ABOVE NAMED FIRMS AT THE GIVEN ADDRESS. THE INVESTIGATIO N BY INVESTIGATION WING ALSO REVEALED THAT MOST OF THESE PARTIES ARE ONLY NAME LENDERS. T HE ASSESSING OFFICER, THEREFORE, REQUESTED THE ASSESSEE TO PRODUCE THE ABOVE PARTIES FOR VERIFICATION OF GENUINENESS OF PURCHASES. THE ASSESSEE, HOWEVER, SHOWED HIS INABI LITY TO PRODUCE THEM. IN THIS VIEW OF THE MATTER, THE ASSESSING OFFICER CONSIDERING THE F ACT THAT PURCHASES ARE ALSO NOT VERIFIABLE, THE ONUS THAT LAY UPON ASSESSEE TO PROV E GENUINENESS THEREOF HAVING NOT BEEN DISCHARGED, PROCEEDED TO RECORD A FINDING THAT THE ACCOUNTS OF THE ASSESSEE ARE NOT CORRECT AND COMPLETE AND CORRECT PROFITS OF THE ASSESSEE CA NNOT BE DEDUCED THEREFROM. HE, THEREFORE, REJECTED THE ACCOUNTS BY APPLICATION OF PROVISIONS OF SECTION 145(3) OF THE ACT. 3. AS THE ASSESSEE HAS BEEN FOUND TO HAVE INTRODUCE D NON GENUINE PURCHASES IN ORDER TO REDUCE ITS PROFITS, THE ASSESSING OFFICER HAVING REGARD TO THE JUDGMENT BY HON'BLE APEX COURT IN THE CASE OF KANCHWALA GEMS VS. JCIT, 288 ITR 10 (SC) AND ALSO JUDGMENT BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF SANJAY OIL CAKE INDUSTRIES VS. CIT, (2008) 10 DTR 153 (GUJ.), PROCEEDED TO ESTIMAT E THE INCOME BY MAKING DISALLOWANCE OF 25% OF SUCH UNVERIFIABLE PURCHASES AND MADE ADDITION OF RS. 87,583/- AS A TRADING ADDITION IN THE RETURNED INCOME. 4. THE LD. CIT (A) FOUND THAT THE ASSESSEE HAS NOT MADE ANY PAYMENT FOR SUCH PURCHASES INTRODUCED IN THE BOOKS OF ACCOUNT. THE PARTIES FROM WHOM THE PURCHASES ARE TAKEN AS NON-GENUINE BY THE ASSESSING OFFICER HAVE ONLY PROVIDED ACCOMMODATION ENTRIES AS THE APPELLANT OBTAINED ENTRIES BY PROCUR ING INVOICES FROM THESE PARTIES WHICH DID NOT EXISTS AT THE ADDRESSES GIVEN IN THE INVOIC E. DESPITE SHOW CAUSE NOTICE, THE LATEST 4 ADDRESSES OF THE PARTIES WERE NOT PROVIDED TO THE A SSESSING AUTHORITY. THE ASSESSEE DID NOT DISCHARGE ITS ONUS OF PROVING GENUINENESS OF TH E PURCHASES. SHE, THEREFORE, UPHOLDING THE REJECTION OF ACCOUNTS ALSO UPHELD THE ADDITION EQUIVALENT TO 25% OF SUCH PURCHASES AND REJECTED THE GROUND IN APPEAL. 5. ASSESSEES COUNSEL SHRI RAJEEV SOGANI HAS BEEN S EEKING REPEATED ADJOURNMENTS AND LAID NO MATERIAL ON RECORD IN SUPPORT OF GROUND S RAISED IN APPEAL. 6. THE LD. D/R HAS PLACED RELIANCE ON THE ORDER DAT ED 10.7.2013 BY SMC BENCH OF JAIPUR TRIBUNAL IN THE CASE OF M/S. TRIDENT JEWELER S VS. ITO IN ITA NO. 552/JP/2013 AND SOUGHT TO APPLY THE SAME RATIO BOTH IN RESPECT OF R EJECTION OF ACCOUNTS AS WELL AS SUSTENANCE OF ADDITION. 7. HAVING HEARD LD. D/R EX PARTE QUA ASSESSEE WITH REFERENCE TO MATERIAL ON RECORD, I FIND THAT THE ASSESSEE HAS MADE FOLLOWING PURCHAS ES FROM THE PARTIES TO WHOM EVEN THE PAYMENTS ARE NOT SHOWN TO HAVE BEEN MADE :- S.NO. NAME OF PARTIES FROM WHOM PURCHASES MADE AMOUNT 1. M/S. ARMILLA GEMS 91,700/- 2. M/S. GOVINDAM JEWELERS 1,08,716/- 3. M/S. MAHAVIR GEMS & JEWELS 52,972/- 4. M/S. NAMAN GEMS 14,469/- 5. M/S. NIDHI GEMS 56,564/- 6. M/S. RISHAB JEWELERS 12,254/- 7. M/S. SELECTIVE GEMS 1,610/- 8. M/S. TOUCH STONES 12,048/- TOTAL : 3,50,333/- THE LD. CIT (A) HAS APPENDED A LIST OF AMOUNT PAYAB LE IN ASSESSEES BOOKS OF ACCOUNT TO EACH OF SUCH PARTIES. THE CREDIT OUTSTANDING APPEA RS TO BE MUCH MORE THAN THE AMOUNT OF PURCHASES INTRODUCED IN THE BOOKS OF ACCOUNT. THIS APPEARS TO BE A BROUGHT FORWARD 5 BALANCE OF PURCHASES MADE IN THE EARLIER YEARS. THE OUTSTANDING CREDITS IN EACH OF SUCH AMOUNT ARE REPORTED AS UNDER :- S.NO. NAME OF PARTIES FROM WHOM PURCHASES MADE AMOUNT PAY ABLE AS ON 31.3.2007. 1. M/S. ARMILLA GEMS 2,66,700/- 2. M/S. GOVINDAM JEWELERS 12,86,216/- 3. M/S. MAHAVIR GEMS & JEWELS 3,02,972/- 4. M/S. NAMAN GEMS 6,14,469/- 5. M/S. NIDHI GEMS 9,56,564/- 6. M/S. RISHAB JEWELERS 12,254/- 7. M/S. SELECTIVE GEMS 1,610/- 8. M/S. TOUCH STONES 1,12,048/- 7.1. THE GENUINENESS OF PURCHASES HAS NOT BEEN ESTA BLISHED. GROSS PROFIT RATE HAS ALSO DECLINED. THE ASSESSING OFFICER HAS RECORDED A FIND ING OF FACT THAT THE APPELLANT HAD INTRODUCED BOGUS PURCHASES TO REDUCE ITS PROFIT. TH IS FINDING HAS NOT BEEN SHOWN AS PERVERSE ON FACTS. BOTH QUALITY-WISE STOCK AND VAL UATION THEREOF ARE ALSO NOT VERIFIABLE. NO MATERIAL HAS BEEN LAID TO SHOW AS TO HOW THE AUT HORITIES BELOW HAVE ERRED IN RECORDING A FINDING THAT THE ACCOUNTS OF THE ASSESSEE ON THE GIVEN FACTS ARE NOT CORRECT AND COMPLETE AND THAT PROVISIONS OF SECTION 145(3) OF THE ACT AR E NOT APPLICABLE. UPON APPRECIATION OF ENTIRE MATERIAL ON RECORD AND FOR THE REASONS STATE D HEREIN ABOVE, I FIND NO REASON TO INTERFERE WITH THE REJECTION OF ACCOUNTS MADE BY AP PLICATION OF PROVISIONS OF SECTION 145(3) OF THE ACT. 8. AFTER REJECTING BOOKS OF ACCOUNT, THE ASSESSING OFFICER IS FOUND TO HAVE ACTED WITHIN THE SCOPE OF HIS POWERS AS ARE CONTAINED UND ER SECTION 145(3) OF THE ACT IN ESTIMATING THE INCOME IN THE MANNER AS PROVIDED UND ER SECTION 144 OF THE ACT. THE ASSESSING OFFICER IS FOUND TO HAVE RECORDED A FINDI NG THAT THE ASSESSEE HAS INTRODUCED NON-GENUINE PURCHASES IN THE BOOKS OF ACCOUNT ONLY TO REDUCE ITS GROSS PROFIT. HE, 6 THEREFORE, TOOK OVERALL FACTS AND CIRCUMSTANCES INT O CONSIDERATION IN ESTIMATING THE INCOME AND MERELY DISALLOWED 25% OF SUCH PURCHASES OF RS. 3,50,333/- IN MAKING ESTIMATION OF INCOME. THE ESTIMATE SO MADE IS FOUN D RESTED ON RELEVANT BASIS MORE PARTICULARLY WHEN THE APPELLANT IS FOUND TO HAVE IN FLATED THE PURCHASES WITH THE PURPOSE TO REDUCE ITS PROFITS. NO PAYMENT HAS BEEN MADE FOR SU CH PURCHASES MADE BY HIM AND THE SAME ARE OUTSTANDING ALONG WITH THE BALANCES OF EAR LIER YEARS. THE ASSESSING OFFICER IS NOT SHOWN TO HAVE ACTED WITH BIAS NEITHER VINDICTIV E NOR CAPRICIOUS. THE ESTIMATE MADE BY HIM IS A BONAFIDE ESTIMATE OF INCOME AS HE IS FO UND TO HAVE ACTED ON RELEVANT MATERIALS AND CONSIDERATIONS ONLY. THERE IS AN IMMINENT DANG ER TO ALLOW SANCTION OF SUCH FICTITIOUS ARRANGEMENT IN RESPECT OF ACCOMMODATION ENTRIES MAD E IN THE BOOKS OF ACCOUNT TO SUPPRESS ITS TRUE PROFITS. ANY INTERFERENCE, IF MA DE WOULD TANTAMOUNT TO MISUSE, WHICH WILL DEGENERATE INTO AN EXERCISE OF UNREGULATED ACT IVITY IN THE HANDS OF THE APPELLANT FROM YEAR TO YEAR. I FIND NO REASON TO INTERFERE IN THE BONAFIDE ESTIMATE MADE BY THE ASSESSING OFFICER. THE RELIANCE PLACED IN THE JUDGMENT BY HON 'BLE APEX COURT IN THE CASE OF KANCHWALA GEMS VS. JCIT, (2007) 288 ITR 10 (SC) BY THE ASSESSING OFFICER IN SUPPORT OF HIS ESTIMATION IS WELL FOUNDED. IN THE ENTIRE C ONSPECTUS OF THE CASE, I FIND NO REASON TO INTERFERE IN THE ESTIMATED ADDITION SUSTAINED BY LD . CIT (A). FINDING NO MERIT IN GROUND NO. 1 RAISED IN THE APPEAL, THE SAME STANDS REJECTE D. 9. THE GROUND NO. 2 IN APPEAL, THE LD. CIT (A) HAS SUSTAINED DISALLOWANCE OF THE FOLLOWING EXPENSES :- PARTICULARS EXPENSES 20% DISALLOWED TELEPHONE EXPENSES 37,719/- 7,544/- OFFICE EXPENSES 24,486/- 4,897/- TRAVELING EXPENSES 12,980/- 2,596/- TOTAL 75,185/- 15,037/- 7 10. HAVING HEARD LD. D/R EX PARTE QUA ASSESSEE AND CONSIDERING ENTIRE MATERIAL ON RECORD, THE DISALLOWANCE MADE IS FOUND REASONABLE. THE LD. CIT (A), HOWEVER, HAVE TELESCOPED THE DISALLOWANCE AGAINST TRADING ADDITIO N SUSTAINED IN APPEAL DUE TO THE REASON THAT THE ASSESSMENT HAS BEEN MADE BY REJECTION OF B OOKS OF ACCOUNT. I AM CONSTRAINED TO COMMENT AS TO WHETHER THERE WAS ANY NEXUS REQUIRING TELESCOPING AS THE REVENUE IS NOT IN APPEAL. IN VIEW OF THE RELIEF ALREADY HAVING BEEN GRANTED BY LD. CIT (A) AND THERE BEING NO MERIT IN THE GROUND RAISED IN APPEAL, THE SAME S TANDS REJECTED. 11. IN THE RESULT, APPEAL STANDS DISMISSED AS ANNOU NCED IN THE OPEN COURT IMMEDIATELY AFTER CONCLUSION OF HEARING ON 12.08.2013. SD/- ( B.R. JAIN ) ACCOUNTANT MEMBER JAIPUR, DATED : 12/08/2013. D/- COPY FORWARDED TO :- SHRI JAI HIND AGARWAL, JAIPUR. THE ITO WARD 5(4), JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 620/JP/2013) BY ORDER, AR ITAT JAIPUR.