RAM SHARAN GUPTA, Jaipur V. ITO, Jaipur

ITA 732/JPR/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4906 (ITAT-JAIPUR)
• Duration Of Justice: 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 12-09-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: C M BATWARA
• Keywords: Bogus purchase; Rejection of books of accounts; Depreciation; Opportunity of being heard
• Section: 131

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH SMC JAIPUR BEFORE SHRI B.R. JAIN, ACCOUNTANT MEMBER ITA NO. 732/JP/2013 ASSESSMENT YEAR: 2007-08 PAN NO. AARPG2178E RAM SHARAN GUPTA, VS. INCOME TAX OFFICER 2414, THOLIA BHAWAN, WARD 2(1), JAIPUR GHEEWALON KA RASTA, JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI C.M. BATWARA RESPONDENT BY : SHRI D.C. SHARMA. DATE OF HEARING : 10.10.2013 DATE OF PRONOUNCEMENT : 10.10.2013 ORAL ORDER PER B.R. JAIN, A.M. THIS APPEAL BY ASSESSEE AGAINST THE ORDER DATED 25 TH JULY, 2013 OF LD. CIT (APPEALS)-1, CENTRAL, JAIPUR RAISES THE FOLLOWING G ROUNDS :- 1. THAT THE IMPUGNED ORDER OF THE LEARNED CIT APPE ALS (1), JAIPUR IS AGAINST LAW AND FACTS OF THE CASE. 2. THAT THE LEARNED CIT APPEALS-1, JAIPUR ERRED IN CONFIRMING THE TRADING ADDITION OF RS. 1,58,832/- ON THE BASIS OF BCTT INFORMATION REGARDING BOGUS TRADERS OF GEMS AND STONES. 3. THAT THE LEARNED CIT APPEALS-1, JAIPUR ERRED IN CONFIRMING THE TRADING ADDITION OF RS. 1,58,832/- ON THE BASIS OF PRESUMPTION AND SURMISES WITHOUT HAVING ANY CORRELATED OR SUPPORTIN G EVIDENCE FOR THE SAME WHILE THE ASSESSEE SUBMITTED CONFIRMATORY STATEMENT OF ACCOUNT WITH RELEVANT DOCUMENTS AND INFORMATIONS F OR JUSTIFICATION OF TRANSACTIONS. 2 4. THAT THE LEARNED CIT APPEALS-1, JAIPUR ERRED IN CONFIRMING THE TRADING ADDITIONS ON THE BASIS OF STATEMENT GIVEN B Y THIRD PERSON IN OTHER MATTERS WITHOUT PROVIDING OPPORTUNITY TO THE ASSESSEE CROSS EXAMINE THEM. 5. THAT THE LEARNED CIT APPEALS-1, JAIPUR ERRED IN CONFIRMING THE REJECTION OF BOOKS OF ACCOUNTS AND ITS RESULTS WITH OUT ANY REASON AND BASIS FOR THE SAME AND NO DISCREPANCY WAS FOUND IN BOOKS OF ACCOUNT. 6. THAT THE LEARNED CIT APPEALS-1, JAIPUR ERRED IN CONFIRMING THE TRADING ADDITION OF RS. 25% ON PURCHASES RS. 6,35,3 28/- WITHOUT GIVING EFFECT OF GROSS PROFIT DECLARED 12.61% BY TH E ASSESSEE ON TOTAL TURNOVER. 7. THAT THE LEARNED CIT APPEALS-1, JAIPUR ERRED IN CONFIRMING THE ADHOC ADDITION 20% OF TELEPHONE EXPENSES WITHOUT CO NSIDERING NATURE OF BUSINESS AND HAVING REPEATED TELEPHONE AT RESIDENCE. 8. THAT THE LEARNED CIT APPEALS-1, JAIPUR ERRED IN CONFIRMING THE ADHOC ADDITION 20% OF THE VEHICLE DEPRECIATION WITH OUT ANY BASIS AGAINST THE STATUTORY PROVISION. 9. THAT THE ASSESSEE CRAVES RIGHT TO AMEND, ALTER O R ADD ANY GROUND BEFORE HEARING OF THE APPEAL. 2. BRIEFLY THE FACTS ARE THAT THE ASSESSEE IS A DEA LER OF PRECIOUS AND SEMI PRECIOUS STONES AND RETURNED INCOME OF RS. 54,860/- . THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS NOT MAINTAINED ANY STOCK REGI STER NOR THE CLOSING STOCK DISCLOSED WAS VERIFIABLE. HE ALSO FOUND THAT THE AS SESSEE HAS MADE NON-GENUINE PURCHASES OF RS. 6,35,328/- FROM THREE PARTIES NAME LY M/S ASHU GEMS, ANUPAM EXPORTS AND IMPORTS AND GEMS CREATION. GENUINENESS OF THESE PURCHASES WAS NOT VERIFIABLE. THE ASSESSING OFFICER, THUS, WAS SATISF IED THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ARE NOT CORRECT AND COMP LETE AND TRUE PROFITS OF 3 BUSINESS UNDER THE CIRCUMSTANCES CANNOT BE DEDUCED. HE, THEREFORE, AFTER AFFORDING OPPORTUNITY AND CONSIDERING EXPLANATION TENDERED BY THE ASSESSEE, REJECTED THE ACCOUNTS BY APPLICATION OF PROVISIONS OF SECTION 14 5(3) OF THE INCOME TAX ACT AND FOLLOWING THE JUDGMENT BY THE HON'BLE APEX COURT IN THE CASE OF KACHWALA GEMS VS. JCIT 288 ITR 10 (SC) AS WELL AS THIS TRIBUNAL J UDGMENT AND IN A JUDGMENT BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF M/S SANJA Y OILCAKE INDUSTRIES VS. CIT REPORTED IN (2008) 10 DTR (GUJ.) 153 PROCEEDED TO E STIMATE THE INCOME BY MAKING 25% DISALLOWANCE OF UNVERIFIABLE PURCHASES O F RS. 6,35,328/- INTRODUCED IN ACCOUNTS TO REDUCE ITS TRUE PROFITS AND THUS MAD E TRADING ADDITION OF RS. 1,58,832/- TO DECLARED PROFITS. 3. THE LD. CIT(APPEALS) UPHELD THE DECISION TO REJE CT THE ACCOUNTS, WHICH WAS MADE ON TENABLE GROUNDS. HE ALSO FOUND THAT THE ASSESSEE WAS REQUIRED TO PRODUCE THE PARTIES TO SUBSTANTIATE THAT THE PURCHA SES MADE BY HIM FOR RS. 6,35,328/- ARE GENUINE. THE ASSESSEE DID NOT PRODUC E PARTIES WHEREAS THE SURVEY CONDUCTED BY BCTT AUTHORITIES OF THE INCOME TAX DEP ARTMENT REVEALED THAT AT THE GIVEN ADDRESSES OF THESE PARTIES, NO BUSINESS ACTIV ITIES WERE CARRIED BY THEM. THEIR STATEMENTS IN SURVEY PROCEEDINGS REVEALED THA T THEY WERE ONLY GIVING BOGUS ENTRIES/BOGUS SALE BILLS. AFTER CONSIDERING THESE M ATERIALS AND THE PAST HISTORY OF THE CASE, IT WAS REVEALED THAT THE ASSESSEE HAD DEC LARED GROSS PROFIT RATES OF 12.61% AND AFTER MAKING ADDITION OF RS. 1,58,832/-, THE GR OSS PROFIT RATE OF THE APPELLANT COMES TO ABOUT 14% ONLY. HE, THEREFORE, FOUND NO RE ASON TO INTERFERE WITH THE 4 ORDER OF THE ASSESSING OFFICER IN ESTIMATING THE IN COME BY MAKING ADDITION OF RS. 1,58,832/- FOR DISALLOWANCE TO THE EXTENT OF 25% OF SUCH PURCHASES. 4. SHRI C.M. BATWARA, LEARNED ADVOCATE FOR THE ASSE SSEE ASSAILED THE IMPUGNED ORDER AND ALSO PRODUCED THE COPIES OF CONF IRMATIONS THAT WERE LAID ON RECORD DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER. IT WAS CONTENDED THAT THE AUTHORITIES BELOW HAVE PR OCEEDED ARBITRARILY IN REJECTING THE BOOKS OF ACCOUNT AND HOLDING THAT THE PURCHASES FROM THREE PARTIES ARE NON- GENUINE. THE SUBSEQUENT SURVEY PROCEEDINGS AT THE P REMISES OF THIRD PARTIES OR STATEMENT RECORDED BEHIND THE BACK OF THE ASSESSEE WAS NEITHER RELEVANT NOR COULD HAVE BEEN TAKEN AS AN EVIDENCE AGAINST THE ASSESSEE . THE APPELLANT HAD REQUIRED THE ASSESSING OFFICER TO ACCOMPANY HIM TO THE PREMI SES OF THESE THREE SUPPLIERS AND MAKE VERIFICATION OF THE SUPPLY OF GOODS BY THE M TO THE APPELLANT AS THE ASSESSEE IN FACT HAD MADE PURCHASES AND CARRIED OUT SALES THEREOF GENUINELY. EVEN THE ENQUIRIES MADE BY THE ASSESSING OFFICER WERE NO T FROM THE ADDRESS AS WAS CONTAINED IN THE CONFIRMATIONS FILED BEFORE HIM. IF THE ASSESSING OFFICER CARRIED ENQUIRIES OR GOT A REPORT FROM THE INSPECTOR FROM A DIFFERENT ADDRESS, THAT FACT ALONE DOES NOT GIVE JURISDICTION TO DISBELIEVE THE APPELLANTS VERACITY. IT, THEREFORE, HAS BEEN CONTENDED THAT THE ACCOUNTS, WHICH ARE AUD ITED AND THE PURCHASES WHICH ARE GENUINE, NEED TO HAVE BEEN ACCEPTED AND ASSESSM ENT MADE ACCORDINGLY. 5. ON THE OTHER HAND, THE LD. D.R. CONTENDS THAT TH E COPIES OF ACCOUNTS PRODUCED IN ASSESSMENT PROCEEDINGS DID NOT BEAR DAT E OF CONFIRMATION BY THE SUPPLIERS. THE ASSESSEE DID NOT PRODUCE THE SUPPLIE RS FOR VERIFICATION OF 5 GENUINENESS OF PURCHASES DESPITE EFFECTIVE OPPORTUN ITY HAVING BEEN AFFORDED TO HIM. SOME OLD CONFIRMATION LYING ON RECORD ARE SOUG HT TO HAVE BEEN USED AND THE FACT REMAINS THAT THE THREE SUPPLIERS OF APPELLANT ARE ENGAGED IN MONEY LAUNDERING TRANSACTIONS AND PROVIDING ONLY ACCOMMODATION SALE BILLS. THE ASSESSING OFFICER HAS SUFFICIENT MATERIAL ON RECORD IN THIS REGARD AN D THE SAME WAS CONFRONTED TO THE ASSESSEE. THE BURDEN, THEREFORE, TO PROVE THAT THE PURCHASES RECORDED IN THE BOOKS OF ACCOUNT ARE GENUINE IS ON THE ASSESSEE. THIS HAS , HOWEVER, NOT BEEN DONE. HIS BOOKS OF ACCOUNT DO NOT REVEAL TRUE AND CORRECT PRO FIT AND STOOD REJECTED FOR VALID REASONS. AFTER REJECTING THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER HAS MADE A REASONABLE ESTIMATE OF INCOME BY MAKING DISALLOWANC E OF BOGUS PURCHASES TO THE EXTENT OF 25% ONLY. IT, THEREFORE, REQUIRES NO INTE RFERENCE BY THE APPELLATE TRIBUNAL. 6. I HAVE HEARD PARTIES WITH REFERENCE TO THE MATER IAL ON RECORD. PERUSAL OF AUDIT REPORT OBTAINED U/S 44AB OF THE ACT LAID ON T HE RECORD REVEALS THAT THE ASSESSEE IS NOT MAINTAINING ANY STOCK REGISTER. APP ELLANTS COUNSEL SHRI C.M. BATWARA ADMITS THE FACT THAT NEITHER THE STOCK REGI STER HAS BEEN MAINTAINED NOR VALUE OF CLOSING STOCK IS VERIFIABLE. IT, THEREFORE , FOLLOWS THAT THE BOOKS OF ACCOUNT ARE NOT CORRECT AND COMPLETE NOR TRUE PROFITS OF TH E BUSINESS CAN BE DEDUCED THEREFROM. THE LD. CIT(A) IS THUS, JUSTIFIED IN REJ ECTING THE ACCOUNTS FOR VALID REASONS. THE SAME, THEREFORE, DOES NOT REQUIRE ANY INTERFERENCE BY THIS TRIBUNAL. GROUND NO. 5 IN APPEAL BEING DEVOID OF ANY MERIT, S TANDS REJECTED. 6 7. AS REGARDS GROUNDS NO. 1,2,3,4 AND 6 IN APPEAL, THE ASSESSING OFFICER IS FOUND TO HAVE RESTED THE DECISION AND CAME TO THE C ONCLUSION THAT THE PURCHASES AGGREGATING TO RS. 6,35,328/- MADE FROM THREE PARTI ES NAMELY ASHU GEMS, ANUPAM EXPORTS AND IMPORTS AND GEMS CREATIONS ARE N ON-GENUINE ON THE GROUND THAT THE SAID THREE PARTIES ARE INDULGED IN MONEY L AUNDERING TRANSACTIONS AND ARE PROVIDING ACCOMMODATION SALE BILLS IN ORDER TO REDU CE APPELLANTS TRUE PROFITS. THE BASIS TAKEN IN REACHING THIS CONCLUSION ARE THE INF ORMATION RECEIVED FROM DIRECTOR OF INCOME TAX, INVESTIGATION, JAIPUR AND THE SURVEY PROCEEDINGS CARRIED BY BCCT WING OF INCOME TAX DEPARTMENT IN VARIOUS CASES AS W ELL AS ENQUIRIES CONDUCTED THROUGH THE AREA INSPECTOR OF THE INCOME TAX DEPART MENT. HE ALSO REQUIRED THE APPELLANT TO PRODUCE THESE PARTIES AS THEY HAD NOT RESPONDED TO THE SUMMONS ISSUED TO THEM U/S 131 OF THE I.T. ACT. THE APPELLA NT, HOWEVER, HAD SHOWN HIS INABILITY TO ENFORCE ATTENDANCE OF SUCH THREE SUPPL IERS AS IT WAS BEYOND HIS CAPACITY AND CONTROL AFTER HE HAD RECEIVED THE GOOD S AND MADE PAYMENT THEREOF BY ACCOUNT PAYEE CHEQUES TO THEM. HE, THEREFORE, HAD O FFERED THE ASSESSING OFFICER TO ACCOMPANY HIM TO THE PREMISES OF SUCH PARTIES AND V ERIFY THE GENUINENESS OF THE PURCHASES AS THE INSPECTOR SENT BY THE ASSESSING OF FICER WAS SHOWN TO HAVE MADE ENQUIRIES AT A DIFFERENT ADDRESS THAN THAT WAS GIVE N IN THE CONFIRMATIONS OF ACCOUNT FILED IN HIS EXPLANATION BEFORE THE ASSESSING OFFIC ER. SINCE THE APPELLANT OBJECTED TO THE PRESUMPTION BEING DRAWN BY THE ASSESSING OFF ICER AND HAD LAID ON RECORD, CONFIRMATIONS OF ACCOUNT FROM SUCH PARTIES AND EVEN HAD OFFERED TO ACCOMPANY THE ASSESSING OFFICER TO THE PREMISES OF SUCH SUPPLIERS , THE ASSESSING OFFICER 7 REMAINED SILENT ON FACE OF IT AND MADE NO EFFORT TO SHOW THAT THE CONFIRMATIONS OF ACCOUNT OR DOCUMENTS LAID ON RECORD BY THE APPELLAN T ARE UNTRUSTWORTHY OR LACKED CREDIBILITY. NO FINDING OF FACT IN THIS REGARD HAS BEEN RECORDED BY THE LD. CIT(A) WHEN HE CONSIDERED THE ENTIRE GAMUT OF THE MATTER A ND CONFIRMED THE ASSESSMENT MADE BY THE ASSESSING OFFICER. HE HAS ALSO NOT RECO RDED A FINDING THAT THE ESTIMATE OF INCOME MADE BY THE ASSESSING OFFICER IS BONAFIDE. I, THEREFORE, SET ASIDE THE ADDITION AND REMIT THE MATTER BACK TO THE ASSESSING OFFICER FOR MAKING VERIFICATION OF GENUINENESS OF THE PURCHASES MADE B Y THE ASSESSEE ON THE ADDRESSEES PROVIDED BY HIM AND RECORD FINDING AS TO WHETHER THE MATERIAL LAID BY THE APPELLANT BEFORE HIM IS UNTRUSTWORTHY OR HAS NO CREDIBILITY OR OTHERWISE THE CLAIM MADE BY HIM IS NEITHER BONAFIDE NOR TENABLE. AFTER REJECTING THE ACCOUNTS HE IS SUPPOSED TO MAKE A BONAFIDE ESTIMATE OF INCOME O R MAKE APPROPRIATE DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES IF SO FO UND BY HIM FOR BRINGING TO TAX THE CORRECT INCOME OF THE ASSESSEE. NEEDLESS TO ADD REASONABLE AND EFFECTIVE OPPORTUNITY OF BEING HEARD SHALL BE AFFORDED TO THE APPELLANT. 8. IN GROUND NO. 7 IN APPEAL, THE ASSESSEE HAS ASSA ILED THE DISALLOWANCE OF 20% OF TELEPHONE EXPENSES TO THE EXTENT OF RS. 12,1 50/- FOR THE REASON THAT NO LOG BOOK HAS BEEN MAINTAINED TO SHOW THE USE OF TELEPHO NE AND IT HAS AN ELEMENT OF PERSONAL USE. 9. HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECO RD. THE APPELLANT DERIVES INCOME FROM EXPORT OF GOODS AND HAS DISCLOSED TURNO VER OF RS. 1,02,03,068/- AND CLAIMS TO HAVE INCURRED EXPENSES ON TELEPHONE TO TH E EXTENT OF RS. 60,753/- ONLY. 8 THE ASSESSING OFFICER HAS NOT SET OUT ON RECORD AS TO WHETHER THE APPELLANT MAINTAINED ANY PERSONAL TELEPHONE OR MOBILE PHONE. IT HAS ALSO NOT BEEN SHOWN THAT THE TELEPHONE EXPENSES ANY, RESIDENTIAL PHONE HAVE BEEN CHARGED TO THE PROFIT AND LOSS ACCOUNT. KEEPING IN VIEW THE NATURE OF BUS INESS, IT IS IMPLICIT THAT THE EXPENSES ON TELEPHONE HAVE BEEN LAID WHOLLY AND EXC LUSIVELY FOR THE PURPOSE OF BUSINESS. I, THEREFORE, FIND NO JUSTIFICATION IN MA KING DISALLOWANCE OF RS. 12,150/-. THE SAME IS THEREFORE, DIRECTED TO BE DELETED. 10. IN GROUND NO. 8 IN APPEAL, THE LD. CIT(A) HAS C ONFIRMED THE DISALLOWANCE OF RS. 7,300/- BEING 1/5 TH OF DEPRECIATION OF MOTOR CAR SANTRO AND DEPRECIATI ON OF CAR FOR RS. 36,506/- CLAIMED BY THE ASSESSEE. 11. I HAVE HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD. THE ASSESSING OFFICER IS NOT SHOWN TO HAVE MADE ANY DISALLOWANCE FOR RUNNING EXPENSES OF THE VEHICLES. WITHOUT DOING THAT IT IS NEITHER PROPER N OR JUSTIFIED TO HAVE MADE DISALLOWANCE FOR DEPRECIATION ALONE. THE SAME IS TH EREFORE, DIRECTED TO BE DELETED. 12. IN THE RESULT, THE APPEAL BY THE ASSESSEE STAND S ALLOWED PARTLY FOR STATISTICAL PURPOSES AS ANNOUNCED IN THE OPEN COURT IN PRESENCE OF PARTIES ON 10 TH OCTOBER, 2013. SD/- (B.R. JAIN) ACCOUNTANT MEMBER JAIPUR, DATED : 10/10/2013 * RANJAN 9 COPY FORWARDED TO :- 1. RAM SHARAN GUPTA, JAIPUR. 2. THE ITO, WARD 2(1), JAIPUR. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (ITA NO. 732/JP/2013) BY ORDER, AR ITAT JAIPUR.