ITO, Jaipur V. LAKHI GEMS, Jaipur

ITA 637/JPR/2012

• Counselvise Citation: 63723114 RSA 2012
• Duration Of Justice: 3 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 22-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS NEENA JEPH
• Keywords: Bogus purchase; Reasonable cause; Validity of assessment; Onus to prove; Condonation of delay; Reason to believe
• Section: 143(3); 147

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 VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 637/JP/2012 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2004-05 I.T.O. WARD 1(1), JAIPUR CUKE VS. M/S LAKHI GEMS, 395, II FLOOR, HANUMAN JI KA RASTA, JOHARI BAZAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AAAFL 5913 D VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT IZR;K{KSI.K @ C.O. NO. 39/JP/2013 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 637/JP/2012) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2004-05 M/S LAKHI GEMS, 395, II FLOOR, HANUMAN JI KA RASTA, JOHARI BAZAR, JAIPUR. CUKE VS. I.T.O. WARD 1(1), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA- @ PAN/GIR NO.: AAAFL 5913 D IZR;K{KSID @ OBJECTOR IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : MRS. NEENA JEPH (JCIT) FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 17/06/2015 MN?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 17/07/2015 ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 2 VKNS'K @ ORDER PER: T.R. MEENA, A.M. THE APPEAL BY REVENUE AND CROSS OBJECTION BY ASSESS EE ARISE FROM THE ORDER DATED 26/04/2012 PASSED BY THE LEARN ED CIT (A)-I, JAIPUR FOR A.Y. 2004-05. THE GROUND OF REVENUES APP EAL AND GROUNDS OF THE ASSESSEES C.O. ARE AS UNDER:- GROUND IN REVENUES APPEAL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , ESPECIALLY IN VIEW OF THE FACT THAT PURCHASES ARE NO T VERIFIABLE AND HENCE SALE PRICE IS NOT CAPABLE OF B EING LINKED TO THE PURCHASE PRICE, WHETHER THE LD. CIT(A) WAS JUST IFIED IN ORDERING TO APPLY G.P. RATE OF 17% AS AGAINST TH E DISALLOWANCE OF 45,03,020/- REPRESENTING 25% OF UNVERIFIABLE PURCHASE MADE BY THE A.O. GROUNDS IN ASSESSEES C.O. 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE VALIDITY OF ASSESSMENT FRAMED U/S 147. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION O F A.O. IN REJECTING BOOKS OF ACCOUNTS U/S 145(3). 2.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED ON FACTS AND IN LAW IN CONFIRMING TRAD ING ADDITION OF RS. 10,61,214/- BY APPLYING G.P. RATE O F 17% AS AGAINST G.P. RATE OF 12.61% DECLARED BY THE ASSE SSEE. 2. FIRSTLY WE TAKE C.O. OF THE ASSESSEE. THE ASSESSEE FILED THE PRESENT C.O. BELATED BY 293 DAYS, FOR WHICH HE ALSO FILED A CONDONATION ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 3 PETITION TO CONDONE THE DELAY ALONGWITH AFFIDAVIT OF SHRI NEERAJ LAKHI, A PARTNER OF M/S LAKHI GEMS AND SHRI GOPAL DAS GANGLA NI, EMPLOYEE OF M/S BIHARI LAL HOLA RAM (SISTER CONCERN) OF LAKHI G EMS. 3. THE LD AR OF THE ASSESSEE ARGUED THAT THIS WAS THE MISTAKE OF THE EMPLOYEE WHO GOT RECEIVED FORM NO. 36 SERVED ON HIM ON 14/07/2012, WHICH WAS MISPLACED BY SHRI GOPAL DAS GANGLANI. THEREF ORE, THE ASSESSEE HAS REASONABLE CAUSE TO FILE THE C.O. DELA YED BY 293 DAYS. 4. AT THE OUTSET, THE LD DR OPPOSED THE CONDONATION OF DELAY APPLICATION AS CLAIMED BY THE ASSESSEE THAT THIS WAS THE MISTAKE OF SHRI GOPAL DAS GANGLANI. SHE FURTHER ARGUED THAT EVEN FO RM NO. 36 WAS MISPLACED IN JULY, 2005 WHEREAS THE ASSESSEE HAS ASK ED TO SUPPLY THE COPY OF FORM NO. 36 FROM HONBLE ITAT ON 15/5/2013. THERE WAS A LAPSE OF MORE THAN 10 MONTHS. IF THE ASSERTION MADE BY THE ASSESSEE WAS CORRECT, HE MIGHT HAVE ASKED TO SUPPLY THE COPY OF FORM NO. 36 WITHIN 1 OR 2 MONTHS AFTER THE MISPLACEMENT OF FORM NO. 36 AS CLAIMED BY THE ASSESSEE. THEREFORE, THERE IS NO REASON TO CO NDONE THE DELAY IN FILING THE C.O. ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 4 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE AS SESSEE FILED THE PRESENT C.O. ON 03/6/2013. COPY OF FORM NO. 36 WAS S ERVED ON THE EMPLOYEE OF SISTER CONCERN ADMITTEDLY ON 14/7/2012. THE AR OF THE ASSESSEE HAS NOT EXPLAINED DAY TO DAY DELAY WITH REA SONS IN FILING OF THE C.O. WE FIND MERIT IN THE CONTENTIONS OF LEARNED DR . THE ASSESSEE HAS ONLY FILED A VAGUE AND GENERAL AFFIDAVIT FROM A PAR TNER OF THE ASSESSEE AND EMPLOYEE OF THE SISTER CONCERN OF THE ASSESSEE, WHICH UTTERLY LACKS ANY SPECIFIC CONTENTIONS AND FAILS TO EXPLAIN DAY T O DAY DELAY IN REASONABLE MANNER. IT DOES NOT CONFORM TO GENERAL H UMAN CONDUCT IN SUCH CIRCUMSTANCES, PREPONDERANCE OF PROBABILITIES AND SURROUNDING CIRCUMSTANCES WHICH FORM SINE QUA NON IN THE MATTER S OF CONDONATION OF DELAY. THE BURDEN IS ON THE ASSESSEE TO REASONABL Y EXPLAIN DAY TO DAY DELAY AND ESTABLISH THAT THERE EXISTED REASONAB LE AND SUFFICIENT CAUSE IN DELAYING THE FILING OF APPEALS FOR ABOUT 1 0 MONTHS. IF THE PROPER DATES OR OCCASIONS ARE NOT MENTIONED WITH PRO PER FACTS THEN THE DELAY CANNOT BE CONDONED. IN THIS BEHALF, WE RELY ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF MADHU DADH A VS. ACIT (2009) 317 ITR 458 (MAD). THE HONBLE HIGH COURT HAS HELD AS UNDER:- ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 5 HELD, DISMISSING THE APPEAL, THAT IT WAS CLEAR THA T THE ASSESSEE HAD NOT EXPLAINED THE CAUSE OF DELAY IN FILING THE APPEAL, ESPECIALLY WHEN THE AUTHORIZED REPRESENTATIVE WHO WAS GIVEN CHARGE TO FILE THE APPEAL HAD DIED EXACTLY ONE YEAR AFTER THE LAST DATE FOR FILING OF THE APPEAL. EVEN AFTER THE DEATH OF THE AUTHORIZED REPRESENTATIVE THE ASSESSEE HAD TAKEN MO RE THAN SIX MONTHS TO FILE THE APPEAL. THE ASSESSEE HAD NEITHER GIVEN ANY PARTICULAR OR DETAILS IN THE AFFIDAVIT AS TO THE DA TE ON WHICH THE PAPERS WERE HANDED OVER TO THE COUNSEL FOR PREPARING THE APPEAL AND ON WHAT OCCASION THE ASSESSEE ENQUIRED ABOUT THE PROGRESS IN PREPARING THE APPEAL AND FILING IT. THE ASSESSEE HAD NOT TAKEN A PROPER PLEA TO SHOW SUFFICIENT CAUSE GIVING EVIDEN CE AND PROOF BEYOND REASONABLE DOUBT FOR THE DELAY. THERE WAS NO N EED TO INTERFERE WITH THE ORDER OF THE TRIBUNAL. IN THIS JUDGMENT, THE HON'BLE SUPREME COURT CITATIO N I.E. COLLECTOR, LAND ACQUISITION VS. MST. KATIJI (1987) 167 ITR 471 (SC) HAS ALSO BEEN CONSIDERED. WE FIND MERIT IN THE CONTENTIONS OF LD. DR THAT LAW HELPS DILIGENT AND NOT THE INDOLENT AS WELL AS THE AXIOMAT IC DELAY DEFEATS EQUITY. IN OUR CONSIDERED VIEW THAT THE CONDONATION PETITI ON FILED BY THE ASSESSEE AND MATERIAL AVAILABLE ON THE RECORD, FAIL TO INVOKE ANY CONFIDENCE, FAIL TO EXPLAIN REASONABLE AND SUFFICIE NT CAUSE FOR ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 6 CONDONATION OF LONG DELAY OF 293 DAYS IN FILING THI S C.O. THE ASSESSEE HAS TO COME CLEAN WITH ALL THE RELEVANT FACTS, WHICH HAPPENED IN THE PERIOD OF ONE YEAR. THE ASSESSEE HAS TO EXPLAIN ALL THE EVENTS AND BE SPECIFIC IN THE DATES. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE DECLINE TO CONDONE THE DELAY OF 293 DAYS IN FILING THIS C.O. 6. NOW WE ARE DECIDING THE C.O. ON MERIT. GROUND NO. 1 OF THE C.O., THE ASSESSEE CHALLENGED THE REOPENING THE CASE U/S 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE LD AR OF THE AS SESSEE HAS DRAWN OUR ATTENTION ON REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING AS UNDER:- (I) ON THE BASIS OF ANNEXURE 25 TO 28 PROCEEDINGS U /S 147 FOR A.Y. 2003-04 WAS INITIATED. ANNEXURE 25 PERTAINS TO A.Y. 2004-05. AS PER INFORMATION GATHERED IN SURVEY AND FINDING GIVEN IN A.Y. 2006-07 AND 2003-04, INCOME CHARGEABL E TO TAX FOR THE YEAR UNDER CONSIDERATION HAS ESCAPED ASSESSMENT. (II) THE PURCHASES ARE UNVERIFIABLE, SINCE ITS NATUR E IS SAME AS IN A.Y. 2003-04, WHERE ADDITION WAS MADE. THIS ASPECT NEEDS VERIFICATION AND THE EXACT QUANTUM CAN BE ASCERTAINED ONLY AFTER VERIFICATION. ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 7 (III) THERE ARE OTHER ISSUES ARISING FROM SURVEY FOR WHICH RETURN FILED FOR A.Y. 2004-05 REQUIRED VERIFICATION FOR QU ANTIFICATION OF ESCAPED INCOME. AS PER A.R. NONE OF THE REASONS INDICATED ABOVE HAS REASON TO BELIEVE THAT ANY INCOME HAS ESCAPED ASSESSMENT.. THE REOPENI NG WAS ON THE BASIS OF ANNEXURE-25 TO 28, WHICH WAS IMPOUNDED DURIN G THE COURSE OF SURVEY IN THE CASE AND CARRIED OUT ON 18/5/2003 IN GROUP CASES OF THE FIRM. CONSEQUENTLY, ASSESSMENT FOR THE A.Y. 2006-07 WAS ALSO FRAMED BY THE ACIT, CIRCLE-1, JAIPUR WHERE THESE ANNEXURES WERE CONSIDERED BY THE ASSESSING OFFICER. ON THE BASIS OF SIMILAR INFO RMATION PERTAINED TO A.Y. 2003-04 AND 2004-05, THE REOPENING WAS MADE BY THE ASSESSING OFFICER BUT THE ASSESSING OFFICER HIMSELF VERIFIED THESE ANNEXURES AND FOUND THAT THESE ARE THE REGULAR BOOKS. THEREFORE, T HE LD ASSESSING OFFICER DID NOT HAVE REASON TO BELIEVE THAT INCOME HAS BEEN ESCAPED TO ASSESSMENT. HE RELIED ON THE DECISION IN THE CASES OF M/S GUPTA ABHUSHAN P. LTD. VS ITO (2008) TIOL 96, ITAT DELHI, BAKULBHAI RAMANLAL PATEL VS. ITO (2011) 56 DTR 212 (GUJ) (HC) A ND CIT VS. MAHESH GUM AND INDUSTRIES (2007) 292 ITR 397 (RAJ.) AND ARGUED THAT REOPENING U/S 147 IS ILLEGAL, BAD IN LAW AND SAME IS REQUIRED TO BE QUASHED. ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 8 7. AT THE OUTSET, THE LD DR SUPPORTED THE ORDER OF THE CIT(A) AS THERE WAS NO SCRUTINY U/S 143(3) OF THE ACT IN A.Y. 2004-05 AND HON'BLE SUPREME COURT DECISION IN THE CASE OF ACIT VS. RAJES H JHAWERI STOCK BROKERS (P) LTD. (2007) 291 ITR 500 (SC) AND HELD TH AT ORDER U/S 143 IS NOT AN ORDER AND NO OPINION HAS BEEN FORM BY THE A SSESSING OFFICER U/S 143(1) OF THE ACT. THERE WAS A SURVEY IN THE CASE OF GROUP CONCERN OF THE ASSESSEE WHERE THE INFORMATION WAS COLLECTED BY THE DEPARTMENT THAT THE ASSESSEE HAS TAKEN BOGUS BILLS TO INFLATE THE PURCHASES. THEREFORE, THE ASSESSEES GROUND MAY PLEASE BE DISMI SSED. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN TH IS CASE, THE ORDER U/S 143(1) WAS PASSED. THERE WAS A REASON TO BELIEVE THAT THE ASSESSEE HAS INFLATED THE PURCHASES BY ACCEPTING BOGUS BILLS FROM THE MARKET ON WHICH THIS CASE WAS REOPENED AND QUANTIFIED ADDITIONS WERE MADE BY THE ASSESSING OFFICER AFTER VERIFICATION AS THE HON 'BLE SUPREME COURT IN VARIOUS CASES HAS HELD THAT REASON TO BELIEVE DOES NOT HAVE CERTAINTY THAT ASSESSING OFFICER IN EACH AND EVERY CASE SHOUL D HAVE MADE ADDITION BUT THERE SHOULD BE PRIMA FACIE BELIEVE OF ESCAPEMENT OF INCOME. THE FINDING GIVEN BY THE LD CIT(A) HAD NOT CO NTROVERTED BY THE ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 9 AR. THE SUBSEQUENT YEAR FINDING AS HELD IN (2012) 34 3 ITR 188 (BOM) CAN BE REASON IN REOPENING WHEREIN LD ASSESSING OFFI CER HAD MADE THE ADDITION ON ACCOUNT OF BOGUS PURCHASES BY REJECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT, WHICH HAS BEEN CONFIR MED BY THE LD CIT(A), THEREFORE, WE DISMISS THIS GROUND OF APPEAL. 9. THE 2 ND GROUND OF C.O. IS AGAINST CHALLENGING THE REJECTIO N OF BOOK U/S 145(3) OF THE ACT. IT IS SUBMITTED BY THE AR THAT THE ASSESSEE HAD MAINTAINED COMPLETE DAY TO DAY BOOKS OF ACCOUNT , WHICH ARE SUBJECT TO AUDIT. ALL THE TRANSACTIONS OF PURCHASES AND SALES ARE FULLY VERIFIABLE FROM THE SUPPORTING BILLS, VOUCHERS AND DOCUMENTS MAINTAINED BY THE ASSESSEE. THE ASSESSEE MADE PURCHASES WITH FUL L VOUCHERS. THE SUPPLIER WAS REGISTERED IN THE SALES TAX DEPARTMENT. THE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUE. THE ADDRESSES OF THE SUPPLIER IS ON THE BILL. THE ASSESSEE HAD FILED THE CONFIRMATION OF THE PURCHASES. THE ASSESSEE HAS DISCHARGED HIS BURDEN OF PROOF, THE REFORE, BOOKS OF ACCOUNT REJECTED U/S 145(3) OF THE ACT IS NOT JUSTI FIABLE. 10. AT THE OUTSET, THE LD DR HAS SUPPORTED THE ORDE R OF THE LD CIT(A) AND SHE FURTHER ARGUED THAT AS PER FORM NO. 35, THE ASSESSEE HAS NOT TAKEN SPECIFIC GROUND BEFORE THE LD CIT(A) EVEN SHE HAS CONFIRMED THE ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 10 REJECTION OF BOOKS OF ACCOUNT U/S 145(3), THEREFORE , ASSESSEES GROUND IS NOT MAINTAINABLE UNDER THE LAW. 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE AS SESSEE RAISED THIS GROUND BEFORE US. ON VERIFICATION OF FORM NO. 35, T HERE WAS NO SPECIFIC GROUND ON REJECTION OF BOOKS U/S 145(3) OF THE ACT. FURTHER THE HONBLE RAJASTHAN HIGH COURT AS WELL AS THE COORDINATE BENCH OF THE ITAT, JAIPUR IN VARIOUS CASES OF GEMS AND JEWELLERY BUSIN ESS HAS HELD THAT THE BOOK RESULT IS NOT RELIABLE AND ACCORDINGLY ASS ESSING OFFICERS ACTION U/S 145(3) IS JUSTIFIED. THE DETAILED FINDINGS ON TH IS ISSUE HAS BEEN GIVEN BY THIS BENCH IN THE CASE OF SHRI ANUJ KUMAR VARSHNEY VS. ITO IN ITA NO. 187/JP/2012 ORDER DATED 22/10/2014. 12. GROUND NO. 3 OF THE C.O. AND SOLE GROUND OF THE REVENUES APPEAL ARE AGAINST CONFIRMING THE TRADING ADDITION OF RS. 10,61,214/- BY APPLYING G.P. RATE OF 17% AS AGAINST THE G.P. RATE OF 12.61% DECLARED BY THE ASSESSEE AND DELETING THE ADDITION BY APPLYI NG THE G.P. @ 17% AS AGAINST THE DISALLOWANCE OF RS. 45,03,020/- @ 25% ON UNVERIFIABLE PURCHASES MADE BY THE ASSESSING OFFICER. THE LD ASSE SSING OFFICER OBSERVED THAT THE ORIGINAL RETURN DECLARING TOTAL I NCOME AT RS. ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 11 2,93,130/- WAS FILED ON 1/11/2001. THE ASSESSEE DEALS IN THE BUSINESS OF PRECIOUS AND SEMI PRECIOUS STONES. THIS CASE WAS N OT SCRUTINIZED U/S 143(3) OF THE ACT. IN GROUP CASES OF M/S BIHARI RAM HOLA RAM, LAKHI GEMS AND KHUSHBOO JEWELLERS, SURVEY OPERATIONS U/S 1 33A WERE CARRIED OUT ON 18/08/2005. FROM THE VARIOUS ANNEXURES IMPOU NDED DURING THE COURSE OF SURVEY, IT IS REVEALED THAT THE FIRM AND ITS PARTNERS WERE BOOKING BOGUS PURCHASES FROM VARIOUS BILL PROVIDERS . SUBSEQUENT TO THE SURVEY, SCRUTINY ASSESSMENTS IN THE CASE OF ASSESSE E FOR THE A.Y. 2003- 04, 2005-06 AND 2006-07 HAD BEEN FRAMED BY THE ASSE SSING OFFICER WHEREIN FINDING WAS GIVEN THAT THE ASSESSEE HAS ALSO PROCURED BOGUS BILLS. THE LD CIT(A) ALSO CONFIRMED THE FINDINGS. THE LD ASSESSING OFFICER RECORDED THE REASONS U/S 147 OF THE ACT AND ISSUED NOTICE U/S 148, WHICH WAS RESPONDED BY THE ASSESSEE. A DETAILED QUEST IONNAIRE DATED 24/10/2011 WAS ISSUED BY THE ASSESSING OFFICER TO TH E ASSESSEE ON DECLINE IN G.P. AS WELL AS BOGUS PURCHASES MADE BY T HE ASSESSEE. THE G.P. RATE DURING THE YEAR HAD COME DONE FROM 14.75% IN PRECEDING YEAR TO 12.61% IN YEAR UNDER CONSIDERATION. THERE WAS A BOGUS PURCHASES TO THE TUNE OF RS. 1,80,12,079/- FROM THE FOLLOWING PARTIES: ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 12 S.NO. NAME OF SUPPLIER ADDRESS OF SUPPLIER PAN SCT/RST/TIN NO. AMOUNT RS. 1. A R EXPORTS 227, SUMER KARN JI KA RASTA, RAMGANJ, JAIPUR 1423/05398 2,149,076 2. ADINATH GEMS 3613, MSB KA RASTA, JOHARI BAZAR, JAIPUR AAMPJ204A 8632250994 1,726,704 3. AMBIKA IMPEX B - 20, RATNA SAGAR, MSB KA RASTA, JOHARI BAZAR, JAIPUR AHHPS3389N 1451/01301 370,521 4. CREATIVE GEMS B - 12, RATNA SAGAR, MSB KA RASTA, JOHARI BAZAR, JAIPUR 413,427 5. CREATIVE INTERNATIONAL 1145, BARKAT NAGAR, TONK ROAD, JAIPUR AAHPV1885S 8092105791 244,470 6. DJ IMPEX 1447, JADIYON KA RASTA, CHAURA RASTA, JAIPUR ABEPV9059R 8702252275 1,859,732 7. ESDIRE INTERNATIONAL 2305, CHANDRAWAT HOUSE, JOHARI BAZAR, JAIPUR ACPPV5572R 8252253531 `269,3 46 8. GV GEMS INTERNATIONAL 470, BARKAT NAGAR, TONK ROAD, JAIPUR ABOPH3714H 8762108187 528,403 9. GOVINDAM JEWELLERS 1307, KEDIA BUILDING, JOHARI BAZAR, JAIPUR ACGPV1316E 8842251994 1,392,102 10. MD EXPORTS B - 20, RATNA SAGAR, MSB KA RASTA, JOHARI BAZAR, JAIPUR AAEFM9181C 1451/10306 480,383 11. MV GEMS INTERNATIONAL 1206, KHEJRON KA RASTA, CHANDPOLE BAZAR, JAIPUR 8471705845 1,189,702 12. MANVIYA EXPORTS C - 55, AMBABARI, JAIPUR ABQPV5586M 1424/05399 782,908 ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 13 13. NIDHI GEMS 8, KESHAV VIHAR, SITABARI, TONK ROAD, JAIPUR AAQPV3502L 8691605717 470,295 14. NIKKI ENTERPRISES 3328, JAILAL MUNSHI KA RASTA, CHANDPOLE BAZAR, JAIPUR ACAPB0937B 8851705442 1,079,501 15. PUJA EXPORTS 93, MAHESH NAGAR, SHIVA COLONY, TONK ROAD, JAIPUR 8182105790 211,041 16. RAHUL EXP ORTS 2253, GHEEWALON KA RASTA, JOHARI BAAAR, JAIPUR AHAPR6059E 8642251425 1,411,504 17. RIDDHI SIDDHI GEMS 62/415, SHIPRA PATH, MANSAROVAR, JAIPUR 8441758775 1,650,153 18. SAHIL DIAMONDS P LTD. 115, VARDHMAN CHAMBER, JOHARI BAZAR, JAIPUR 8912251519 344 ,385 19. SAPNA GEMS 1/665, MALVIYA NAGAR, JAIPUR AAUPJ6771H 8581604856 1,133,389 20. TRIVENI GEMS 1538, NAGAWALA HOUSE, SONTHLIWALON KA RASTA 8641600652 305,037 TOTAL UNVERIFIABLE PURCHASES 1,80,12,079 THE LD AR SUBMITTED BEFORE THE ASSESSING OFFICER THA T THE ASSESSEE MADE THESE PURCHASES AND PAID THESE PARTIES THROUGH ACCOUNT PAYEE CHEQUES. THE ASSESSEE FURNISHED CONFIRMATION AND CL AIMED THAT THE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. THE PURCHASES MADE FROM THE RELATIVE UNDER THE PROVISIONS U/S 40A (2)(B) OF THE ACT, THE PRICE WAS REASONABLE. THE ASSESSEE ALSO FURNISHED ADDRESSES IN ALL ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 14 THE PARTIES AND PAN IN SOME OF THE CASES. AFTER CON SIDERING THE ASSESSEES REPLY, THE LD ASSESSING OFFICER OBSERVED AS UNDER:- I) THOUGH THE ASSESSEE HAS QUOTED THE PAN NO. OF THE SUPPLIERS, YET THE FACT OF TRANSFER OF GOODS MENTIO NED IN THE BILLS TO THE ASSESSEE IS NOT SUBJECT TO VERIFICATIO N; II) THE BUSINESS DOES NOT EXIST AT THE NOTIFIED ADDR ESS. NO NEW ADDRESS HAS BEEN PROVIDED BY THE ASSESSEE FOR FURTH ER VERIFICATION. THE SUMMONS ISSUED HAS BEEN RETURNED UNSERVED. III) FROM THE DAK RETURNED BY THE POSTAL AUTHORITIE S IT IS EVIDENCED THAT THE ASSESSEES DO NOT EXIST AT THE GI VEN ADDRESS. IT IS EVIDENT THAT THESE SUPPLIERS ARE MER E FAKE BILL PROVIDERS. IV) THE ASSESSEE HAS NOT MAINTAINED ANY STOCK REGIST ER ON DAY TO DAY BASIS SO AS TO VERIFY THE DAY TO DAY MOVEMEN T OF THE STOCK. V) THE ENTIRE EXERCISE IS MADE WITH A VIEW TO VERIFY T HE CORRECTNESS OF EACH OF THE ENTRIES MADE IN THE TRAD ING ACCOUNT WHICH CULMINATES IN THE DETERMINATION OF THE GROSS PROFIT. IF THE CORRECTNESS OF ANY ONE ENTRY OF THE TRADING ACCOUNT IS FOUND TO BE INCORRECT, THEN IT WILL HAVE A BEARING ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 15 ON THE GROSS PROFIT DECLARED BECAUSE IT IS ARRIVED AT BY ARITHMETICAL CALCULATIONS. VI) THE OBSERVATIONS OF FORMALITIES ON PAPER, LIKE TI N, RCST/CST NO./PAN, BANK ACCOUNT ARE PART OF THE MODUS OPERANDI TO RUN THE RACKET OF ISSUING BOGUS BILLS. ALL THE DOCUMENTS BEAR AN ADDRESS, BUT THE SUPPLIER IS NOT FOUND AT THE GIVEN ADDRESS. MOREOVER, PAYMENT BY CHEQUE IS N EITHER SACROSANCT NOR CAN IT MAKE A NON-GENUINE TRANSACTIO N AS GENUINE FOR WHICH RELIANCE IS PLACED ON THE JUDGMEN T OF CIT VS. PRECISION FINANCE (P) LTD. [208 ITR 465 (CAL)]. VII) RELIANCE IS ALSO PLACED ON THE JUDGMENT OF M/S KACHWALA GEMS VS. JCIT[ITD NO. 134, ITAT, JAIPUR BENCH (DEC. 2003)] WHEREIN IT WAS HELD THAT THE A.O. IS ENTITLED TO ACT ON MATERIAL WHICH MAY NOT EVEN BE ACCEPTED AS AN EVIDEN CE AS THE A.O. IS NOT BOUND BY THE TECHNICAL RULES OF EVI DENCE AND PLEADINGS. THE HONBLE ITAT HAS ALSO HELD THAT THE DECLARATION OF SALES UNDER SALES TAX ACT AND NON-PRO DUCTION OF BOOKS OF ACCOUNTS BY THE SELLER WILL NOT LEAD THE CONCLUSION THAT THE SALES ARE GENUINE IN A CASE WHE REIN A.O. COMES TO THE CONCLUSION THAT THE RELEVANT PURCHASES ARE NON-GENUINE IN THE CASE OF THE ASSESSEE. THE HONBLE ITAT HAS ALSO HELD THAT THE PAYMENT BY ACCOUNT PAYEE CHE QUE IS NOT SUFFICIENT TO ESTABLISH THE GENUINENESS OF THE PURCHASER. ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 16 VIII) UNDER SECTION 101, 102 AND 106 OF THE EVIDENC E ACT, ONUS LIES UPON THE ASSESSEE TO PROVE ALL THE EXPENSES IN CLUDING PURCHASES TO THE SATISFACTION OF THE ASSESSING OFFI CER, WHICH WAS NOT DISCHARGED BY THE ASSESSEE AS IT FAILED TO P RODUCE THE SUPPLIERS FROM WHOM PURCHASES HAVE BEEN CLAIMED . THE ONUS LIES UPON THE ASSESSEE TO PROVE THE GENUINENES S OF THE TRANSACTION WHEN SUCH PURCHASES ARE CLAIMED TO THE GENUINE BY IT. RELIANCE IS PLACED IN THE CASE OF INDIAN WOO LEN CARPET FACTORY VS. ITAT 178 CTR 420 (RAJ). IX) THE ASSESSEE HAS ARGUED THAT IF ANY DISCREPANCY IN THE PURCHASES IS NOTICED, THEN IT SHOULD BE TREATED TO HAVE BEEN MERGED WITH THE ASSESSMENT FOR THE SURVEY YEAR WHERE SURRENDER/ADDITION ON ACCOUNT OF UNEXPLAINED STOCK. THIS ARGUMENT HAS NO FORCE. ASSESSEE HIMSELF HAS ADMITTE D THAT HE IS NOT MAINTAINING ANY QUANTITATIVE DETAILS. THER EFORE, IT IS NOT ASCERTAINABLE THAT THE GOODS PURCHASED BEFOR E 31/3/2004 IS AVAILABLE WITH THE ASSESSEE IN SUBSEQUE NT YEARS. ASSESSEES ARGUMENT IS BASELESS. THEREAFTER HE REJECTED THE BOOK RESULT U/S 145(3) OF THE ACT AND APPLIED 25% ON BOGUS PURCHASES OF RS. 1,80,12,079/- AND RS. 45,03,020/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 13. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING O FFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WHO HAD CONFIRMED ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 17 THE ADDITION @ 17% ON TOTAL SALE TURNOVER AND NET AD DITION OF RS. 10,61,214/- WAS CONFIRMED. THE FINDING OF THE LD CIT( A) IS REPRODUCED AS UNDER:- 5.3 I HAVE CAREFULLY PERUSED THE ORDER OF THE A.O. AND THE SUBMISSIONS OF THE AR. IT IS A FACT THAT THE APPELL ANT WAS NOT ABLE TO VERIFY THE PURCHASES MADE FROM 20 PARTI ES AGAINST WHOM DEPARTMENT HAD GATHERED INFORMATION OF BEING ENTRY PROVIDERS. THUS THESE PURCHASES COULD NO T BE VERIFIED AND THE HONBLE ITAT, JAIPUR BENCH HAS CONSISTENTLY HELD IN THE CASE OF GEMS AND JEWELLERY TRADER/MANUFACTURERS THAT UNVERIFIABLE PURCHASES AR E SUFFICIENT GROUNDS FOR INVOKING PROVISIONS OF SECTI ON 145(3). THEREFORE, THE REJECTION OF THE BOOKS OF THE ACCOUNT OF THE APPELLANT AS UNRELIABLE U/S 145(3) IS UPHELD. 5.4 REGARDING THE ESTIMATION OF G.P. THE HONBLE IT AT, JAIPUR BENCH HAS CONSISTENTLY HELD THAT THE PAST HISTORY O F THE ASSESSEE IS THE MOST RELIABLE GUIDE. IN THE CASE OF THE ASSESSEE IT IS SEEN IN THE A.Y. 2003-04, THE ASSESS EE HAD SHOWN A G.P. RATE OF 14.75% ON TOTAL TURNOVER OF RS. 1,53,91,516/-. IN A.Y. 2005-06, THE HONBLE ITAT UP HELD THE G.P. OF 16.16% ON TOTAL TURNOVER OF RS. 2,55,00 ,660/-. DURING THIS ASSESSMENT YEAR, IT IS SEEN THAT THE TU RNOVER AT RS. 2,41,67,327/- IS COMPARABLE TO THAT IN A.Y. 200 5-06 IN FACT IT IS MARGINALLY LESS. THEREFORE, GIVEN THE FIN DING OF THE ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 18 HONBLE ITAT FOR A.Y. 2005-06 IT IS HELD TO BE REASO NABLE TO APPLY A G.P. RATE OF 17% DURING THIS ASSESSMENT YEA R AS THE SALES TURNOVER HAS DECLINED AND THE G.P. GENERA LLY IMPROVES WITH THE DECLINE IN TURNOVER. THIS RESULTS IN GROSS PROFIT OF RS. 41,08,446/-. AS THE ASSESSEE HAS ALRE ADY DECLARED A G.P. OF RS. 30,47,232/- THE BALANCE AMOU NT OF RS. 10,61,214/- IS CONFIRMED AS TRADING ADDITION. 14. NOW THE REVENUE IN APPEAL AND ASSESSEE IN C.O. B EFORE US. THE LD AR FOR THE ASSESSEE REITERATED THE ARGUMENTS MADE B EFORE THE LOWER AUTHORITIES AS CONFIRMATION SUBMITTED, PAN AND ADDR ESSES GIVEN, PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUE AND ASSESSEE DISCHARGED HIS BURDEN OF PROOF. THEREFORE, THE ADDI TION CONFIRMED BY THE LD CIT(A) MAY PLEASE BE DELETED. 15. AT THE OUTSET, THE LD DR DRAWN OUR ATTENTION TH AT THE HONBLE ITAT, JAIPUR HAS DECIDED THE ISSUE OF BOGUS PURCHASE S IN GEMS AND JEWELLERY IN THE CASE OF SHRI ANUJ KUMAR VARSHNEY VS . ITO & OTHERS GEMS AND JEWELLERY CASES IN I.T.A. NO. 187/JP/2012 & OTHER ITAS ORDER DATED 22/10/2014 WHEREIN NET PROFIT @ 15% AS BOGUS P URCHASES HAS BEEN CONFIRMED BY THE HONBLE BENCH, BUT THE LD ASS ESSING OFFICER HAD APPLIED NP RATE @ 25% BY CONSIDERING THE DECISION O F HONBLE ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 19 AHMADABAD TRIBUNAL IN THE CASE OF VEGETABLE PRODUCTS LTD., THEREFORE, SHE REQUESTED TO CONFIRM THE ADDITIONS MADE BY THE ASSESSING OFFICER. 16. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. SIMIL AR LINE OF CASES, THIS BENCH HAS DECIDED IN THE CASE OF SHRI ANUJ KUMAR VA RSHNEY VS. I.T.O. AND OTHER CASES IN ITA NO. 187/JP/2012 ORDER DATED 22/10/2014 WHERE ON UNVERIFIABLE/BOGUS PURCHASES 15% DISALLOWANCES HA S BEEN DECIDED. ACCORDINGLY, WE ALSO APPLY 15% DISALLOWANCES ON UNVER IFIABLE PURCHASES IN THIS CASE ALSO. THE ASSESSING OFFICER IS DIRECTE D TO RECALCULATE THE INCOME AS PER ABOVE DIRECTION. 17. IN THE RESULT, C.O. OF THE ASSESSEE IS DISMISSE D THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/07/2015. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 17 TH JULY, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ITO, WARD 1(1), JAIPUR. ITA 637/JP/2012 & CO 39/JP/2013_ ITO VS. LAKHI GEMS 20 2. IZR;FKHZ @ THE RESPONDENT- M/S LAKHI GEMS, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 637/JP/2012 & C.O. 39/JP/2013) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR