ROYAL GEMS & ARTS, Jaipur V. ITO, Jaipur

ITA 659/JPR/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5095 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2004-2005
• Appeal Filed On: 21-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Assessee Lawyers: K L MOOLCHANDAN I
• Keywords: Bogus purchase
• Section: 143(3)

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 HKKXPUN] YS[KK LNL; ,OA JH DQY HKKJR] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 659/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2004-05. M/S. ROYAL GEMS & ART, SARAS SADAN, GANGORI BAZAR, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 5(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABFR 5273 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI K.L. MOOLCHANDANI (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 17.08.2016. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 05/09/2016. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT (A)-2, JAIPUR DATED 18.05.2015 PERTAINING TO A.Y. 2004-05. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED AUTHORITIES BELOW HAVE LEGALLY AND FACTUALLY ERRED IN TURNING DOWN THE OBJECTIONS RAISED TO THE INITIATION OF THE RE-A SSESSMENT PROCEEDINGS U/S 147/148 OF THE ACT WITHOUT APPRECIA TING THE FACTS OF THE CASE IN RIGHT PERSPECTIVE. THE INITIATION OF THE RE-ASSESSMENT PROCEEDINGS WAS WITHOUT JURISDICTION AND IS NOT LEG ALLY MAINTAINABLE TO BE QUASHED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS LEGALLY AND FACTUALLY ERRED IN CONFIRMING T HE ACTION OF THE AO TO REJECT THE BOOKS U/S 145(3) OF THE ACT ON THE BASIS OF GENERAL AND ROUTINE FINDINGS, WHICH ARE NOT LEGALLY MAINTAI NABLE IN ABSENCE OF SPECIFIC AND GLARING MISTAKE/DISCREPANCY. 2 ITA NO. 659/JP/2015 ROYAL GEMS & ART 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE L4EARNED CIT (A) HAS LEGALLY AND FACTUALLY ERRED IN TREATING THE UN-VERIFIABLE PURCHASES AS BOGUS PURCHASES AND RESTRICTING THE GP ADDITION TO 15% AS AGAINST 25% APPLIED BY THE AO FOLLOWING THE JUDGMENT OF HONBLE ITAT, JAIPUR BENCH, JAIPUR IN THE CASES OF BOGUS PURCHASES. THE FACTS OF THE CASES OF BOGUS PURCHASES AS DECIDE D BY THE HONOURABLE ITAT, JAIPUR BENCH, JAIPUR ARE ENTIRELY DIFFERENT FROM THE FACTS OF THE PRESENT CASE. THUS, THE ADDITION S O MADE AND CONFIRMED ON THE WRONG PREMISES IS FACTUALLY AND LE GALLY INCORRECT AND DESERVES TO BE DELETED. 2. BRIEFLY STATED THE FACTS ARE THAT THE CASE OF TH E ASSESSEE WAS REOPENED FOR SCRUTINY AND THE ASSESSMENT UNDER SECTION 147/143(3 ) OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VID E ORDER DATED 29 TH DECEMBER, 2011. WHILE FRAMING THE ASSESSMENT, THE AO REJECTED THE BOOKS OF ACCOUNT AND MADE ADDITION @ 25% OF THE BOGUS PURCHASES AMOUNTIN G TO RS. 9,24,334/-. THE ASSESSEE AGGRIEVED BY THIS ORDER PREFERRED AN APPEA L BEFORE LD. CIT (A), WHO REDUCED THE ADDITION TO RS. 5,54,600/- BY APPLYING THE NET PROFIT RATE OF 15% ON UNVERIFIABLE PURCHASES. 3. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFOR E US. 4. FIRST GROUND OF THE ASSESSEE IS IN RESPECT OF RE OPENING OF ASSESSMENT. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT REOPENING O F THE PROCEEDINGS WAS WITHOUT ANY JURISDICTION AND WAS NOT LEGALLY MAINTAINABLE. THE LD. COUNSEL REITERATED THE SUBMISSIONS AS ARE MADE IN THE WRITTEN BRIEF. THE L D. COUNSEL SUBMITTED THAT THE OBJECTION REGARDING REOPENING WAS NOT DISPOSED OFF BY WAY OF A SEPARATE SPEAKING 3 ITA NO. 659/JP/2015 ROYAL GEMS & ART ORDER. THE LD. COUNSEL SUBMITTED THAT THIS HAS VITI ATED THE ENTIRE PROCEEDINGS. HE SUBMITTED THAT THE PRIMARY FACTS OF THE SALES AND P URCHASES AS FURNISHED AT THE TIME OF REGULAR ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT REMAINED SAME AND UN- CONTROVERTIBLE IN ABSENCE OF ANY MATERIAL BROUGHT O N RECORD BY CAUSING FRESH ENQUIRIES TO PROVE THE CORRECTNESS OF THE REPORT RE CEIVED FROM THE INVESTIGATION WING. 4.1. ON THE CONTRARY, THE LD. D/R SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 4.2. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. THE CONTENTION OF THE LD. A/R THAT THE OBJE CTION OF THE ASSESSEE FOR REOPENING OF THE ASSESSMENT WAS NOT DISPOSED OFF BY WAY OF A SEPARATE ORDER. IT IS CONTENDED THAT THE FACTS REMAINS THE SAME. AS PER T HE REPORT, M/S. LAXMI DIA GOLD JEWELLERS HAD SHOWN ALLEGED SALES TO THE PARTIES FO R CREATING THE BOGUS PROFITS AND CLAIMING FALSE DEDUCTION. M/S. ROYAL GEMS & ARTS, S ARAS SADAN, GANGORI BAZAR, JAIPUR WAS ONE SUCH ASSESSEE OUT OF THE LIST OF 153 PURCHASES TO WHOM THE ABOVE M/S. LAXMI DIA GOLD JEWELLERS MADE THE BOGUS SALE T O THE TUNE OF RS. 36,97,336/- DURING THE AY 2004-05. THEREFORE, THE INFORMATION BEFORE THE AO WAS THAT THE PURCHASES MADE BY THE ASSESSEE WERE NOT GENUINE. T HE ASSESSEE HAS NOT PLACED ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS O F THE AO. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT (A). IN OUR CONSIDERED VIEW, THE REOPENING IS JUSTIFIED. THE GROUND IS REJECTED. 5. GROUND NO. 2 & 3 RELATED TO REJECTION OF BOOKS O F ACCOUNTS AND ESTIMATION OF GROSS PROFIT @ 15%. 4 ITA NO. 659/JP/2015 ROYAL GEMS & ART 5.1. THE LD. COUNSEL FOR THE ASSESSEE HAS REITERATE D THE SUBMISSIONS AS ARE MADE IN THE WRITTEN BRIEF. HE SUBMITTED THAT THE ESTIMA TION OF PROFIT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE ARE HIGHLY UNJUSTIFIED AS GP DECLARED ON THE TURNOVER INCLUDING UNVERIFIABLE PURCHASES IS 26.56%. LD. CO UNSEL SUBMITTED THAT NO ADDITION IS CALLED FOR IN THE PRESENT CASE AS IN THIS CASE T HE GP RESULTS ARE FAR BETTER AS COMPARED TO THE PAST HISTORY OF THE ASSESSEE, THERE FORE, NO ADDITION IS WARRANTED EVEN IF THE BOOK RESULTS ARE REJECTED. 5.2. ON THE CONTRARY, THE LD. D/R SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 5.3. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. THE LAW IS WELL SETTLED THAT WHEN THE BOOK S OF ACCOUNTS ARE REJECTED, THE AO HAS TO ESTIMATE THE PROFIT. THE AO HAS OBSERVED THA T THE ASSESSEE HAD MADE UNVERIFIABLE PURCHASES. WE FIND THAT AS PER THE IN FORMATION RECEIVED FROM THE INVESTIGATION WING, M/S. LAXMI DIA GOLD JEWELLERS H AD MADE BOGUS SALES TO THE TUNE OF RS. 36,97,336/-, THEREFORE, THE AO WAS REQUIRED TO FIND OUT THE IMPACT OF THESE BOGUS PURCHASES ON THE GROSS PROFIT OF THE ASSESSEE . THE AO OUGHT TO HAVE COMPARED THE TOTAL PURCHASES AND SALES EFFECTED BY THE ASSESSEE. THE AO HAD ESTIMATED THE BOGUS PURCHASES @ 25% AND THE LD. CIT (A) REDUCED IT TO 15%. IT TRANSPIRED FROM THE RECORD THAT THE ASSESSEE HAD DE CLARED GROSS PROFIT OF RS. 1,92,42,264/- ON THE SALES OF RS. 7,24,42,827/-. A SSUMING THAT THE PURCHASES OF RS. 36,97,336/- WERE BOGUS, THE AO OUGHT TO HAVE GIVEN THE IMPACT ON THE PROFIT OF SUCH PURCHASES. AFTER CONSIDERING THE TOTALITY OF THE FACTS AND MATERIAL BEFORE US, WE ARE OF THE CONSIDERED VIEW THAT IT WILL BE REASO NABLE TO SUSTAIN THE ADDITION OF RS. 5 ITA NO. 659/JP/2015 ROYAL GEMS & ART 2,50,000/- KEEPING IN VIEW THE FACT THAT THE G.P. R ATE IS BETTER THAN THE EARLIER YEAR. THUS THE ASSESSEE GETS RELIEF OF RS. 3,04,600/-. T HIS GROUND OF ASSESSEES APPEAL IS PARTLY ALLOWED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 05/09/ 2016. SD/- SD/- ( HKKXPUN ( DQY HKKJR ) ( BHAGCHAND) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 05/09/2016. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S. ROYAL GEMS & ART, JAIPUR. 2. THE RESPONDENT THE INCOME-TAX OFFICER, WARD 5( 1), JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 659/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 6 ITA NO. 659/JP/2015 ROYAL GEMS & ART