JAPANWALA JEWELLERS, Jaipur V. DCIT, Jaipur

ITA 76/JPR/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5388 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 30-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PUROSHATTAM KASHYAP CIT DHK
• Assessee Lawyers: G G MUNDRA
• Keywords: Bogus purchase; Business income

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 VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 76/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 . M/S. JAPANWALA JEWELLERS, 36, KANAK BHAWAN, S.RAM SINGH ROAD, JAIPUR. CUKE VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-6, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAAFJ 8164 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI G.G. MUNDRA, CA JKTLO DH VKSJ LS@ REVENUE BY : SHRI PUROSHATTAM KASHYAP (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 09.02.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 26/04/2016. VKNS'K@ ORDER PER SHRI R.P. TOLANI, J.M. THIS IS ASSESSEES APPEAL. THE SOLE GROUND RAISED IS AS UNDER :- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) IS WRONG, UNJUST AND HAS ERRED IN LAW IN CO NFIRMING PENALTY OF RS. 2,68,255/- IMPOSED BY THE LD. ASSESS ING OFFICER U/S 271(1)(C) OF THE IT ACT. 2. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENT ION TO THE QUANTUM ORDER PASSED BY THE ITAT IN SECOND APPEAL SUSTAININ G THE IMPUGNED ADDITION VIDE ORDER DATED 26.11.2010 IN ITA NO. 146/JP/2010 AS UNDER :- 2 ITA NO. 76/JP/2014 M/S. JAPANWALA JEWELLERS VS. DCIT 11. FACTS ARE SIMILAR IN THE PRESENT CASE ALSO. T HESE PARTIES HAVE ALREADY BEEN HELD AS GENUINE BY THE TRIBUNAL. OUT OF TOTAL PURCHASES OF RS. 1.02 CRORES OR SO THE TOTAL PURCHASES FROM T HESE TWO PARTIES WERE OF RS. 92 LACS. REMAINING PURCHASES FROM M/S. RIDHI SIDHI AT RS. 1.16 LACS AND M/S. SURABHI GEMS AT RS. 9.61 LACS A ND CASH PURCHASES OF RS. 7,700/-. THE TOTAL SALES HAVE BEEN MADE BY ASSESSEE OF ABOUT RS. 4.10 CRORES AND ON THE BASIS OF MEAGER PURCHASE S OF ABOUT RS. 10 LACS THE BOOK RESULT REJECTED BY AO WHICH IS CONFIR MED BY LD. CIT (A), IN OUR CONSIDERED VIEW IS NOT JUSTIFIED. ONLY COUR SE LEFT IS TO EXAMINE THE GROSS PROFIT SHOWN BY ASSESSEE OF THE YEAR UNDE R CONSIDERATION AS COMPARED TO G.P. RATE SHOWN IN EARLIER YEAR. G.P. RATE SHOWN IN EARLIER YEAR WAS AT 17.80% AND THIS YEAR G.P. RATE SHOWN BY ASSESSEE WAS 11.06%. IN EARLIER YEAR G.P. RATE SHOWN BY ASSESSE E WAS NOT ACCEPTED AND A G.P. RATE OF 22% WAS APPLIED. ON APPEAL BEFO RE LD. CIT (A), THE G.P. RATE OF 19.50% WAS RESTRICTED AGAINST WHICH TH E ASSESSEE HAS NOT FILED ANY APPEAL BEFORE THE TRIBUNAL. IN THIS YEAR THE G.P. RATE AS SHOWN BY ASSESSEE WAS ON LOWER SIDE. THE ASSESSEE HAS EXPLAINED THE REASONS FOR DECLINE IN G.P. RATE THAT TURNOVER OF T HE ASSESSEE HAS BEEN INCREASED BY 3 TIMES AND DUE TO TOUGH COMPETITION, THE G.P. RATE HAS BEEN DECLINED. FURTHER, IT HAS BEEN STATED THAT AS SESSEE HAS EXPORTED A NEW ITEM IN THE NAME OF ALEX OVAL CUT FOR RS. 2 5,82,250/-. BESIDES THE EXPORT SALES OF THE SAID ITEM, THERE WE RE TWO MAJOR SALES OF TANZANITE AND T. SAVOURITE ITEMS. THESE ITEMS W ERE PURCHASED FROM MARKET AND THE SAME WERE EXPORTED AND ON THESE ITEMS THE MARGIN OF PROFIT WERE EARNED AT 11.26% . WORKING O F THE G.P. RATE HAS ALSO BEEN GIVEN AT PAGE 6 OF WRITTEN SUBMISSION. IT IS FURTHER EXPLAINED THAT ON REMAINING ITEM THE G.P. RATE EARNED BY ASSE SSEE AT 17.49% AND OVER ALL G.P. RATE SHOWN BY ASSESSEE IS 11.06%. IT IS ALSO EXPLAINED THAT THE GROSS PROFIT RATE IS ALSO AFFECT ED BECAUSE OF BECOMING THE INDIAN RUPEE STRONGER IN COMPARISON TO US DOLLAR IN THE YEAR UNDER CONSIDERATION. THEREFORE, THERE WAS A R EASON FOR FALL IN G.P. 3 ITA NO. 76/JP/2014 M/S. JAPANWALA JEWELLERS VS. DCIT RATE. IT IS FURTHER EXPLAINED THAT AS FAR AS FALL I N G.P. RATE ON SALE OF ASSESSEE FIRM FURNISHED PROPER EXPLANATION DULY SUP PORTED WITH DOCUMENTS. ACCORDINGLY, THE RESULT DECLARED IN THI S YEAR BEING FAR BETTER, THE SAME DESERVES TO BE ACCEPTED EVEN IF TE CHNICALLY APPLICATION OF SECTION 145(3) IS UPHELD. RELIANCE HAS BEEN PLA CED ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F GOTAN LIME KHANIZ UDYOG, 256 ITR 243 AND VARIOUS OTHER JUDGMENTS SUCH AS CIT VS. INANI MARBLES PVT. LTD., 175 TAXMAN 56 (RAJ.) AND CIT VS. SURESH MARBLES PVT. LTD., 18 DTR 118 (RAJ.) AND ALSO VARIOUS DECIS IONS OF ITAT JAIPUR. 13. AFTER TAKING INTO CONSIDERATION ALL THE FACTS, WE ARE OF THE CONSIDERED VIEW THAT INSTEAD OF DISALLOWING 25% DIS ALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, THE DISALLOWANCE IF CAN BE MADE THAT CAN BE MADE IN GROSS PROFIT. CERTAIN PURCHASES REMAINED UNVERIFIABLE, THEREFORE, TECHNICALLY PROVISIONS OF SECTION 145(3) ARE APPLICABLE. HOWEVER, TAKING INTO CONSIDERATION THE EXPLANATION OFFERED BY THE LD. COUNSEL OF THE ASSESSEE AS DISCUSSED ABOVE, WE FIND THAT IF A G.P. RTE OF 13% IS APPLIED ON THE FACTS OF THE PRESENT CASE, THEN IT WILL MEET THE ENDS OF JUSTICE. ACCORDINGLY WE DIRECT THE AO TO R E-COMPUTE THE INCOME BY TAKING G.P. RATE OF 13% INSTEAD OF 19.5%. WE ORDER ACCORDINGLY. IN THIS WAY THE GROUND NO. 3 IS ALLOW ED AND GROUND NO. 1 & 2 ARE ALLOWED IN PART. THUS RESULTED IN ADDITION OF RS. 7,96,955/-. 3. ON PERUSAL OF THE TRIBUNALS ORDER REVEALS THAT ALL THE SUPPLIERS I.E. M/S. VALENTINE JEWELLERS INDIA PVT. LTD., M/S. ABHAY INT ERNATIONAL AND M/S. RIDHI SIDHI AND M/S. SURABHI GEMS ARE GENUINE PARTIES. T HEREFORE, THE PURCHASES IN QUESTION ARE NOT BOGUS PURCHASE. THE ADDITION IN QU ESTION HAS BEEN MADE ONLY DUE TO VARIATION OF GP. THE AO AND THE LD. CIT (A) HAS HELD THAT THOUGH 4 ITA NO. 76/JP/2014 M/S. JAPANWALA JEWELLERS VS. DCIT THE ESTIMATE IS TO BE BASED ON GUESS WORK, STILL TH E PENALTY UNDER SECTION 271(1)(C) IS LEVIABLE. 4. THE LD. COUNSEL FURTHER CONTENDED THAT SIMILAR P ENALTY WAS DELETED BY ITAT JAIPUR IN THE CASE OF SMT. KAMLESH DANGAYACH I N ITA NOS. 18 & 19/JP/2012 VIDE ORDER DATED 16.05.2012 BY HOLDING T HAT THE ESTIMATION OF GP DEPENDS ON THE PERCEPTION OF THE OFFICER. THE PENAL TY SHOULD NOT BE IMPOSED MERELY BECAUSE A HIGHER GP IS ADOPTED BY THE AO. TH E TRIBUNAL WHILE DELETING THE PENALTY RELIED ON THE DECISION OF HONBLE PUNJA B & HARYANA HIGH COURT IN THE CASES OF HARIGOPAL SINGH VS. CIT, 258 ITR 85 (P &H), CIT VS. DHILLON RICE MILS, 256 ITR 209 (P&H) AND OF HONBLE DELHI HIGH C OURT IN THE CASE OF CIT VS. AERO TRADERS PVT. LTD., 322 ITR 316 (DEL.). TH IS BEING NOT A CASE OF BOGUS PURCHASE BUT VARIATION OF GP, ITAT HAVING TAKEN A V IEW ON THE SIMILAR PENALTY IN THE CASE OF SMT. KAMLESH DANGAYACH, SUPRA, THE P ENALTY MAY BE DELETED. 5. THE LD. D/R ON THE OTHER HAND CONTENDED THAT THE ISSUE IS SIMILAR TO THE CASE OF ANUJ KUMAR VARSHNEY & OTHERS VS. ITO DATED 22.10.201 4 WHERE THE ITAT ALTHOUGH ON QUANTUM HAS GIVEN SERIOUS ADVE RSE OBSERVATION ON FACTS. THEREFORE, THE PENALTY HAS BEEN RIGHTLY IMPO SED. 6. THE LD. COUNSEL IN RE-JOINDER CONTENDED THAT ITA T ITSELF HAS HELD THAT IT IS NOT A CASE OF BOGUS PURCHASE BUT VARIATION OF GP . IN THESE CIRCUMSTANCES, ANY RELIANCE ON THE OBSERVATIONS IN THE CASE OF ANUJ KUMAR VARSHNEY & 5 ITA NO. 76/JP/2014 M/S. JAPANWALA JEWELLERS VS. DCIT OTHERS VS. ITO DATED 22.10.2014 IS MISPLACED. BESIDES, THIS CASE IS ONLY ON QUANTUM ADDITION AND NOT ON PENALTY. THEREFORE, THE RE IS NO CONNECTION BETWEEN THE QUANTUM AND PENALTY. 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND MERIT IN THE CONTENTION OF LD. COUNSEL. THE TRIBUNAL BY FINDING OF FACT HAS HELD THAT THE ABOVE SUPPLIERS ARE GENUINE AND T HE ADDITION HAS BEEN SUSTAINED ON THE BASIS OF VARIATION ON ESTIMATE OF GP. THEREFORE, THE CASE IN QUESTION CANNOT BE CONSIDERED AS RELATING TO BOGUS PURCHASE CASE WHICH WERE DEALT IN THE CASE OF ANUJ KUMAR VARSHNEY, SUPRA. T HE ITAT JAIPUR ON SIMILAR FACTS AND CIRCUMSTANCES HAS DELETED THE PENALTY IN THE CASE OF SMT. KAMLESH DANGAYACH, SUPRA. IN THE GIVEN FACTS AND CIRCUMSTA NCES AND RELYING ON THE CASE OF SMT. KAMLESH DANGAYACH, WE ARE OF THE VIEW THAT THIS IS NOT A CASE OF PENALTY. THE SAME IS DELETED. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/04/201 6. SD/- SD/- FOE FLAG ;KNO VKJ-IH-RKSYKUH (VIKRAM SINGH YADAV) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 26/04/ 2016 DAS/ 6 ITA NO. 76/JP/2014 M/S. JAPANWALA JEWELLERS VS. DCIT VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S. JAPANWALA JEWELLERS, JAIPUR . 2. THE RESPONDENT- THE DCIT, CIRCLE-6, JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 76/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR