JAIPUR GEMS CRAFTS, Jaipur V. INCOME TAX OFFICER, WARD-5-1, Jaipur

ITA 628/JPR/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9148 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 02-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Business income
• Section: 133(6); 44AB; 9(1); 9(1); 9(1); 13; 145(3); 22; 131

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC HES A JAIPUR JH LAANHI XKSLKBZ] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA- @ ITA NO. 628/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2013-14 JAIPUR GEM CRAFTS JAIPUR BEHIND GOLIMAR GARDEN, AMER ROAD, JAIPUR CUKE VS. ITO, WARD 5(1), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AABFJ4618E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : NONE (WRITTEN SUBMISSION) JKTLO DH VKSJ LS @ REVENUE BY : SMT. MONISHA CHOUDHARY (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 02/08/2021 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 03/08/2021 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)- 02, JAIPUR DATED 25.01.2019 FOR ASSESSMENT YEAR 2013-14. 2. NONE HAS APPEARED ON BEHALF OF THE ASSESSEE. HOW EVER, AN APPLICATION HAS BEEN RECEIVED FROM LD. AR, SH. H. M . SINGHVI STATING THAT THE CASE MAY BE DECIDED ON THE BASIS OF WRITTEN SUB MISSION AS HE IS UNABLE TO ARGUE THE CASE ON VIDEO CONFERENCING. IT WAS THEREFORE DECIDED TO DISPOSE OFF THE MATTER AFTER TAKING INTO CONSIDERATION THE WRITTEN SUBMISSION SO FILED BY THE ASSESSEE AND OTH ER MATERIAL AVAILABLE ON RECORD. ITA NO. 628/JP/2019 JAIPUR GEM CRAFTS JAIPUR VS. ITO, WARD 5(1), JAIPUR 2 3. AT THE OUTSET, IT IS NOTED THAT THERE IS A DELA Y IN FILING THE PRESENT APPEAL. TAKING INTO CONSIDERATION THE AFFIDAVIT FI LED BY THE ASSESSEE, THE DELAY OF 22 DAYS IS HEREBY CONDONED AND THE APP EAL IS ADMITTED FOR ADJUDICATION. 4. IN ITS APPEAL, THE ASSESSEE HAS TAKEN A SOLE GR OUND OF APPEAL WHICH READS AS UNDER:- THAT THE LEARNED CIT APPEAL-II WENT WRONG IN CONFI RMING THE ADDITION OF RS. 7,06,008/- BEING 25% G.P. ON TOTAL TURNOVER OF RS. 5,04,29,116/- AGAINST GP 23.60% DECLARED BY THE ASS ESSEE IS ARBITRARY SHOULD BE DELETED. 5. IN THIS REGARD, THE LD. AR IN HIS WRITTEN SUBMIS SION HAS SUBMITTED AS UNDER:- THE ASSESSEE FIRM IS ENGAGED AS EXPORTER OF CARPET S. COTTON DURREIS, HANDICRAFT ITEMS, READYMADE GARMENTS, WOOD WARES AND PAINTING, ETC. THE ASSESSEE FIRM FILED ITS RETURN OF INCOME U/S 13 9(1) AND FILED THE AUDITED FINANCIAL STATEMENTS AND AUDIT REPORT U/S 4 4AB. THERE WAS NO QUALIFICATION IN THE AUDIT REPORT. DURING THE YEAR ASSESSEE FIRM DECLARED G.P. OF RS. 1,18,97,200/- ON SALES OF RS. 5,04,70,716/- GIVING A G.P RATE OF 23. 60% AGAINST G.P. RATE OF 17.04% ON THE TOTAL SALES OF 4,77,78,214/- IN THE IMMEDIATELY PRECEDING YEAR. THE AO BY REFERRING TO 4 PARTIES FROM WHOM PURCHASES OF RS. 1,63,24,540/- WAS MADE HELD T HAT THESE PURCHASES ARE UNVERIFIABLE. THE AO, THEREFORE, INVO KED THE PROVISION ITA NO. 628/JP/2019 JAIPUR GEM CRAFTS JAIPUR VS. ITO, WARD 5(1), JAIPUR 3 OF SEC. 145(3) AND DISALLOWED 25% OF THESE PURCHASE S RESULTING WITH TRADING ADDITION OF RS. 21,00,246/-. THE LEARNED CIT(A) BY FOLLOWING THE DECISION OF ITA T UPHELD THE APPLICATION OF PROVISION OF SEC. 145(3) BUT RESTRIC TING THE ADDITION TO RS. 7,06,008/-. HOWEVER, THE LEARNED CIT(A) MENTION ING THAT THE PAST HISTORY OF THE ASSESSEE IS THE BEST GUIDE TO E STIMATE THE INCOME AS HELD BY VARIOUS HIGH COURTS. . AS MENTIONED SUPRA THE ADDITION WAS RESTRICTED TO R S. 7,06,008/- WHICH RESULTED THE G.P. RATE OF THE YEAR UNDER CONS IDERATION TO 24.98% WHICH IS IN EXCESS BY 1%. THE LEARNED CIT(A) HAS NOT CONSIDERED THAT THE TURNOVER HAS INCREASED BY RS. 2 6,52,000/- WHEREAS THE DIFFERENCE OF G.P RATE OF THE LAST YEAR AND CURRENT YEAR IS ONLY 0.35%. THERE WAS NO JUSTIFICATION TO RESTRICT THE G.P ADDITION OF RS. 7,06,008/- HON'BLE ITAT JAIPUR IN THE CASE OF M/S GEM PARADISE HAS HELD THAT THE G.P RATE APPLIED BY ITAT WAS NOT JUSTIFIED CONSIDER ING THE JUDGEMENT OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF GOT AN LIME KHANIZ UDYOG AND OTHER DECISION RESTRICTED THE ADDITION TO RS. 4,00,000/- AS AGAINST THE G.P. OF RS. 10,92,695/-. HON'BLE ITAT JAIPUR IN THE CASE OF SHANKER EXPORTER S V. ADDITIONAL COMMISSIONER OF INCOME TAX HAS HELD THAT WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING OTHER MATE RIALS ON RECORD, WE FIND THAT ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNT AND THEY WERE AUDITED UNDER S. 44AB ALSO. DAY-TO-DA Y STOCK REGISTER, PRODUCTION AND MANUFACTURING RECORD WERE MAINTAINED ITA NO. 628/JP/2019 JAIPUR GEM CRAFTS JAIPUR VS. ITO, WARD 5(1), JAIPUR 4 AND WERE PRODUCED BEFORE THE AO. TOTAL TURNOVER OF THE ASSESSEE WAS RS. 3,73,81,375 AND OUT OF THIS TURNOVER, PURCH ASES TO THE TUNE OF RS. 15,83,000 REMAINED UNVERIFIED BECAUSE O F THE REASON THAT SUMMONS ISSUED UNDER S. 131 TO THESE PARTIES W ERE EITHER RETURNED UNSERVED OR NO COMPLIANCE WAS MADE BY THE RESPECTIVE PARTY. THEREFORE, AO DREW AN ADVERSE INFERENCE AGAI NST THE ASSESSEE AND REJECTED THE BOOKS OF ACCOUNT. IN OUR CONSIDERED VIEW ONLY ON ACCOUNT OF NON-VERIFYING OF FEW PURCHA SES THE REJECTION OF BOOKS OF ACCOUNT WAS NOT JUSTIFIED AS THERE WAS NO OTHER DEFECT FOUND BY THE AO IN MAINTAINING BOOKS O F ACCOUNT. IT IS ALSO NOT THE CASE OF THE DEPARTMENT THAT THERE I S ANY MATERIAL OUTSIDE THE BOOKS WHICH INDICATES THAT THESE PURCHA SES ARE BOGUS. PAYMENTS WERE MADE THROUGH PROPER BANKING CH ANNEL. THERE IS A POSSIBILITY THAT SOMETIMES AFTER A GAP O F 1 / 2 YEARS THE PARTY MAY NOT BE AVAILABLE AT THE ADDRESS GIVEN OR THAT THEY DID NOT BOTHER TO REPLY THE SUMMONS ISSUED BY THE DEPAR TMENT. OTHERWISE, ALL OTHER DETAILS ALONG WITH PURCHASES A ND SALES VOUCHERS, DAY-TO-DAY STOCK REGISTER ETC., WERE MAIN TAINED BY THE ASSESSEE AND THEY WERE NOT FOUND INCORRECT. IT IS A LSO A MATTER OF FACT THAT SALES MADE AGAINST THOSE PURCHASES HAVE B EEN ACCEPTED BY THE AO HIMSELF THEREFORE, IN OUR CONSIDERED VIEW REJECTION OF BOOKS OF ACCOUNT WERE NOT JUSTIFIED. ACCORDINGLY, W E ALLOW THIS GROUND OF THE ASSESSEE.' HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF MALANI RAMJIVAN JAGANATH V. ASSISTANT COMMISSIONER OF INCOME TAX (2 007) 316 ITR 120 (RAJ.) HAS HELD THAT MERELY ON ACCOUNT OF DEVIA TION IN G.P. RATE BOOKS OF ACCOUNTS CANNOT BE REJECTED. ITA NO. 628/JP/2019 JAIPUR GEM CRAFTS JAIPUR VS. ITO, WARD 5(1), JAIPUR 5 IT IS THEREFORE, PRAYED THAT THE ADDITION OF RS. 7, 06,008/- SUSTAINED BY CIT(A) BE DELETED OR BE REDUCED AS WORKED BY APP LYING RATE OF 23.95% IN THE IMMEDIATELY PREVIOUS YEAR. 6. PER CONTRA, THE LD. DR RELIED ON THE ORDER OF TH E LOWER AUTHORITIES AND OUR REFERENCE WAS DRAWN TO THE FINDINGS OF THE LD. CIT(A) CONTAINED AT PARA 2.3 TO 2.3.2 OF THE APPELLATE ORDER WHICH R EAD AS UNDER:- 2.3 I HAVE PERUSED THE FACTS OF THE CASE, THE ASSE SSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. IT IS SEEN TH AT NOTICES UNDER SECTION 133(6) WERE ISSUED TO 4 PARTIES FROM WHOM P URCHASES OF RS. 1,63,24,545/- WAS MADE. HOWEVER, THE SAME RETUR NED UNSERVED WITH THE REMARK NOT KNOWN' OR 'LEFT'. IN R ESPECT OF 2 PARTIES, THE INVESTIGATION WING INFORMED THAT THESE SELLERS ARE NOT GENUINE. THE ASSESSEE HAS ALSO NOT PRODUCED THESE S UPPLIERS TO PROVE THE GENUINENESS OF PURCHASES. THEREFORE, THE PURCHASES CANNOT BE SAID TO BE VERIFIABLE FORM BOOKS OF ACCOU NTS. ACCORDINGLY, THE ASSESSING OFFICER RIGHTLY APPLIED PROVISION OF SECTION 145(3) OF THE I.T. ACT, 1961. 2.3.1 IN THE YEAR, ASSESSEE'S GP IS 23.60% ON TURN OVER OF RS. 5,04,29,116/- AGAINST GP RATE OF 23.83% ON TURNOVER OF RS. 2,52,34,453/-LAST YEAR. AS SEEN ABOVE, AFTER APPLIC ATION OF SECTION 145(3), THE BEST RECOURSE IS TO ESTIMATE THE INCOME ON BASIS OF PAST HISTORY OF ASSESSEE. THIS VIEW IS SUPPORTED BY VARIOUS HIGH COURT DECISION ALSO. ASSESSING OFFICER ALLEGED PURCHASED OF RS. 1,63,24, 545/- MADE FROM 4 PARTIES AS UNVERIFIABLE AND BOGUS AND MADE A DDITION OF 25% OF SUCH PURCHASE I.E. RS. 21,00,246/-. THE ACTI ON OF THE ITA NO. 628/JP/2019 JAIPUR GEM CRAFTS JAIPUR VS. ITO, WARD 5(1), JAIPUR 6 ASSESSING OFFICER IS NOT PROPER. AS OBSERVED ABOVE, PAST HISTORY IS TO BE CONSIDERED FOR MAKING ESTIMATION OF INCOME. 2.3.2 KEEPING IN MIND, THE SUBSTANTIALLY HIGH UNVE RIFIABLE PURCHASE AND FALL IN GP COMPARED TO LAST YEAR, IN MY VIEW GP RATE OF 25% ON TOTAL TURNOVER OF RS. 5,04,29,116/- WILL MEET THE E ND OF JUSTICE. ACCORDINGLY ADDITION OF RS. 7,06,008/- IS UPHELD. T HIS GROUND OF APPEAL IS PARTLY ALLOWED. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD CIT(A) HAS UPHELD THE REJECTION OF BOOKS OF ACCOUNTS BY INVOKING PROVISIONS OF SECTION 145(3) A ND HAS ESTIMATED GROSS PROFIT RATE OF 25% AS AGAINST GROSS PROFIT RATE OF 23.60% DECLARED BY THE ASSESSEE. THE REJECTION OF BOOKS OF ACCOUNTS IS NO T UNDER CHALLENGE BEFORE AND HENCE, THE LIMITED ISSUE UNDER CONSIDERA TION IS ESTIMATING OF GROSS PROFIT RATE ONCE THE BOOKS OF ACCOUNTS HAVE B EEN REJECTED AND IN THIS REGARD, AS RIGHTLY HELD BY THE LD CIT(A), THE PAST HISTORY OF THE ASSESSEE PROVIDES A REASONABLE AND RATIONALE BASIS FOR SUCH ESTIMATION OR COMPARABLE THIRD PARTY DATA WHICH IS ABSENT IN THE INSTANT CASE. IN THE PAST, ON PERUSAL OF ASSESSEES SUBMISSION BEFORE TH E LD CIT(A), WE NOTE THAT THE ASSESSEE HAS DISCLOSED A GROSS PROFIT OF 2 7.05% IN A.Y 10-11, 26.16% IN A.Y 2011-12 AND 17.04% IN A.Y 2012-13 AND THESE PAST YEARS RESULTS HAVE APPARENTLY NOT ATTAINED FINALITY AS TH E MATTERS ARE PENDING BEFORE THE AO IN THE SET-ASIDE PROCEEDINGS BEFORE T HE AO FOR A.Y 2010-11 AND BEFORE THE LD CIT(A) IN OTHER YEARS. NOTHING HA S BEEN BROUGHT ON RECORD IN TERMS OF FINALITY OF PAST YEAR RESULTS. THEREFORE, IN SUCH PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE WHERE THE PAST YEARS RESULTS HAVE NOT ATTAINED FINALITY AND EVEN THIRD PARTY COMPARABLE D ATA IS NOT ON RECORD, WE ARE CONSTRAINED TO REMAND TO THE FILE OF THE AO FOR THE LIMITED PURPOSES OF DETERMINING THE PAST YEARS GROSS PROFIT RATE AS HAV E ATTAINED FINALITY AND ITA NO. 628/JP/2019 JAIPUR GEM CRAFTS JAIPUR VS. ITO, WARD 5(1), JAIPUR 7 APPLY THE AVERAGE OF SUCH GROSS PROFIT RATE WHICH H AVE ATTAINED FINALITY TO THE YEAR UNDER CONSIDERATION. IN THE RESULT, THE GR OUND IS ALLOWED FOR STATISTICAL PURPOSES. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 03/08/2021. SD/- SD/- LANHI XKSLKBZ FOE FLAG ;KNO ( SANDEEP GOSAIN ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 03/08/2021 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- JAIPUR GEM CRAFTS JAIPUR, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD 5(1), JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 628/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR