ACIT, Jaipur V. SHANTI KUMAR VIPUL KUMAR (HUF), Jaipur

ITA 826/JPR/2010

• Counselvise Citation: 82623114 RSA 2010
• Duration Of Justice: 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 24-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R C GUPTA
• Keywords: Onus to prove

Judgement Text

1 ITA 826(2)-10 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 826/JP/2010 ASSTT. YEAR : 2006-07. THE ACIT, CIRCLE-1, VS. M/S. SHANTI KUMAR VIPUL KUMAR JAIPUR. CHORDIA (HUF), 1632, SONTHLIWALON KA RASTA, CHAURA RASTA, JAIPUR. ITA NO. 827/JP/2010 ASSTT. YEAR : 2006-07. THE ACIT, CIRCLE-1, VS. M/S. VIPUL GEMS PVT. LTD ., JAIPUR. 1632, SONTHLIWALON KA RASTA, CHAURA RASTA, JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.C. GUPTA RESPONDENT BY : NONE (NOTICE RETURNED UNSERVED) ORDER DATE OF ORDER : 10/06/2011. PER R.K. GUPTA, J.M. THESE ARE TWO APPEALS BY DEPARTMENT IN CASE OF TWO DIFFERENT ASSESSES RELATING TO ASSESSMENT YEAR 2006-07. SIMILAR ISSUES ARE INVOLV ED IN BOTH THESE APPEALS, THEREFORE, THEY ARE BEING DISPOSED OFF TOGETHER. 2. THE LD. CIT D/R HAS PLACED RELIANCE ON THE ORDER OF AO. IT WAS FURTHER SUBMITTED THAT IN THESE TWO CASES HUGE UNVERIFIABLE PURCHASES WERE FOUND WHICH COULD NOT BE EXPLAINED BY THE ASSESSEE BY PRODUCING THE PARTIES. IT WAS FURTHER SUBMITTED THAT IN CASE 2 OF NAND KISHORE MEGHRAJ, THE TRIBUNAL HAS CONFIRMED THE ORDER OF THE AO WHO MADE ADDITION ON ACCOUNT OF UNVERIFIABLE PURCHASES. ACCO RDINGLY, IT WAS REQUESTED THAT ORDER OF THE AO SHOULD BE RESTORED. NONE APPEARED ON BEHALF OF THE ASSESSEE THOUGH THE NOTICES WERE SENT THROUGH REGISTERED A/D. ON EARLIER OCCAS ION ALSO THE NOTICES WERE SENT THROUGH REGISTERED A/D. HOWEVER, NONE APPEARED. THEREFORE, THESE APPEALS ARE DISPOSED OFF AFTER CONSIDERING THE SUBMISSIONS OF LD. CIT D/R AND PERU SING THE MATERIAL ON RECORD. 3. WE WILL TAKE FIRST THE APPEAL IN CASE OF SHRI SH ANTI KUMAR VIPUL KUMAR CHORDIA (HUF) LISTED AS ITA NO. 826/JP/10. 4. IN THIS CASE THE DEPARTMENT IS OBJECTING IN REST RICTING THE G.P. RATE AT 4.5% AGAINST 25% APPLIED BY AO ON UNVERIFIABLE PURCHASES OF RS. 13,48,74,838/- WITHOUT CONSIDERING THE DECISION OF THE TRIBUNAL IN CASE OF NAND KISHOR E MEGHRAJ. 5. THE BRIEF FACTS NOTED BY LD. CIT (A) ARE THAT TH E ASSESSEE CONTINUED TO BE TRADER/MANUFACTURER AND EXPORTER OF PRECIOUS AND SE MIPRECIOUS STONES. DURING THE YEAR THE AO NOTICED THAT ASSESSEE HAS SHOWN PURCHASES MA DE FROM 15 PARTIES AT RS. 13,48,74,838/- WHICH REMAINED UNVERIFIABLE. NAME O F THE PARTIES ARE NOTED AT PAGE 2 OF LD. CIT (A)S ORDER. THEY HAVE OBSERVED THAT ON TH E BASIS OF INVESTIGATION CARRIED OUT BY INVESTIGATION WING AND BCTT WING OF THE DEPARTMENT THAT THE CONCERNS MENTIONED ABOVE WERE ONLY ENTRY PROVIDER I.E. THEY ISSUED ONL Y BILLS WITHOUT ANY ACTUAL SALE OR DELIVERY OF GOODS. THE AO HELD THAT THE PURCHASES M ADE FROM ABOVE SAID PARTIES WERE NOT GENUINE. IN THIS REGARD THE AO PLACED RELIANCE ON T HE DECISION IN THE CASE OF PRECISION FINANCE LTD., 208 ITR 465, IN THE CASE OF KANCHWALA GEMS, 134 ITD (JP) AND IN CASE OF INDIAN WOOLEN CARPET MILLS, 178 CTR 420. ACCORDING LY BOOKS OF ACCOUNT WERE REJECTED BY INVOKING PROVISIONS OF SECTION 145(3). THEREAFT ER ON THE BASIS OF DECISION OF HONBLE 3 GUJARAT HIGH COURT IN THE CASE OF M/S. SANJAY OIL C AKE INDUSTRIES, 10 DTR 153 (GUJ.) AND IN THE CASE OF VIJAY PROTEINS LTD. 58 ITD 428 ( ITAT AHMEDABAD), THE AO DISALLOWED 25% OF THE PURCHASES WHICH RESULTED IN A TRADING ADDITION OF RS. 3,37,18,910/- AND WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IT WAS SUBMITTED BEFORE LD. CIT (A) THAT ASSESSEE WAS MAINTAINING PROPER BOOKS OF ACCOU NT WHICH WERE DULY AUDITED. THE ASSESSEE WAS MAINTAINING PROPER STOCK RECORD INCLUD ING DETAILS OF OPENING AND CLOSING STOCK WHICH WERE PRODUCED BEFORE THE AO FOR VERIFIC ATION. NO SPECIFIC DEFECT LAWS POINTED OUT BY THE AO. IT WAS FURTHER SUBMITTED TH AT AS REGARDS PURCHASES FROM THE LISTED PARTIES WERE CONCERNED, THE ASSESSEE HAS DISCHARGED ITS ONUS TO PROVE THE GENUINENESS BY PRODUCING ALL THE RELEVANT DOCUMENTS. IT WAS SUBMI TTED THAT MERELY BECAUSE THE PARTIES COULD NOT BE PRODUCED, THE PURCHASES COULD NOT BE H ELD TO BE BOGUS AND COULD NOT FORM BASIS FOR REJECTION OF BOOKS OF ACCOUNT. RELIANCE WAS PLACED ON VARIOUS CASE LAWS MENTIONED IN THE ORDER OF LD. CIT (A) AT PAGE 4. T HE CASES RELIED UPON BY AO WAS ALSO FOUND DISTINGUISHABLE AND THEY WERE DISTINGUISHED B EFORE LD. CIT (A). THE SUBMISSIONS OF THE LD. A/R WERE SENT TO THE AO FOR HIS COMMENTS AND IN HIS COMMENTS DATED 15.2.2010 THE AO REITERATED THE ARGUMENTS TAKEN IN THE ASSESSMENT ORDER. 6. IN RE-JOINDER, THE LD. A/R DISTINGUISHED THE CAS E LAWS RELIED UPON BY THE AO. 7. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, THE LD. CIT (A) NOTED THAT ALTHOUGH THE ASSESSEE HAD MAINTAINED SOME DETAILS OF STOCK BUT COMPLETE DETAILS CANNOT BE SAID TO HAVE BEEN MAINTAINED ESPE CIALLY WHEN QUALITATIVE DETAILS OF STOCKS HAVE NOT BEEN MAINTAINED. THE CO-RELATION B ETWEEN THE PURCHASES AND STOCKS CANNOT BE ESTABLISHED. FURTHER THE VALUATION OF CL OSING STOCK IS ONLY ON ESTIMATE BASIS WHICH IS NOT CAPABLE OF COMPLETE VERIFICATION. AS REGARDS PURCHASES FROM MENTIONED 4 PARTIES ARE CONCERNED, IT WAS SEEN BY LD. CIT (A) T HAT THE DETAILS FURNISHED BY ASSESSEE CAN AT BEST ONLY PROVE THE PAPER EXISTENCE OF THESE FIR MS. THE VERIFICATION OF THE TRANSACTIONS CANNOT BE SAID TO HAVE BEEN COMPLETELY MADE BECAUSE OF NON PRODUCTION OF PARTIES FOR EXAMINATION. IN SUPPORT OF THIS CONTENTION THE LD. CIT (A) PLACED RELIANCE ON THE VARIOUS DECISIONS MENTIONED IN HIS ORDER AT PAGES 5 & 6 AND ACCORDINGLY HELD THAT NON VERIFIABLE PURCHASES CONSTITUTED A SERIOUS DEFECT IN THE BOOKS OF ACCOUNT DUE TO WHICH THE SAME WAS LIABLE FOR REJECTION. IN VIEW OF THESE FACTS, THE REJECTION OF BOOKS OF ACCOUNT BY INVOKING PROVISIONS OF SECTION 145(3) WERE HELD CORRECT BY L D. CIT (A). 7.1. AS REGARDS THE ADDITION, THE LD. CIT (A) NOTED THAT TRADING ADDITION WAS MADE RELYING UPON DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF M/S. SANJAY OIL CAKE INDUSTRIES (SUPRA) AND IN CASE OF M/S. VIJAY PROTEI NS LTD. (SUPRA). THESE TWO DECISIONS WERE FOUND DISTINGUISHABLE BY THE JAIPUR BENCH OF T HE TRIBUNAL IN THE CASE OF M/S. GEM PARADISE IN ITA NO. 700/JP/2009 DATED 18.12.2009. ACCORDINGLY, THE LD. CIT (A) OBSERVED THAT THE ADDITION MADE @ 25% OF UNVERIFIAB LE PURCHASES IS NOT JUSTIFIED. THE LD. CIT (A) NOTED THAT THE PAST HISTORY OF THE CASE GET S PREFERENCE OVER A COMPARABLE CASE. THE PAST HISTORY OF THE CASE WAS THAT G.P. RATE OF 3.3% WAS SHOWN IN CURRENT YEAR AS AGAINST 2.81% IN THE IMMEDIATELY PRECEDING YEAR. IN EARLIER YEAR THE LD. CIT (A) HAD APPLIED G.P. RATE OF 9% WHICH WAS SUSTAINED TO THE EXTENT OF 4.06% BY THE TRIBUNAL IN ITA NO. 1350/JP/2009 DATED 28.8.2009. THE DECLINE IN G.P. RATE AS COMPARED TO THE PRECEDING YEAR BEING EXPLAINED ON ACCOUNT OF RECESS ION AND COMPETITIVE MARKET IS FOUND TO BE ONLY GENERAL IN NATURE. CONSIDERING THE FACT S OF THE CASE, THE LD. CIT (APPEAL) APPLIED A G.P. RATE OF 4.5% AND AO WAS DIRECTED TO RE-COMPUTE THE TRADING ADDITION ACCORDINGLY. 5 8. AFTER CONSIDERING THE ORDERS OF THE AO AND LD. C IT (A) AND ORDER OF TRIBUNAL FOR EARLIER YEAR, WE FIND THAT THE LD. CIT (A) HAS APPL IED A REASONABLE G.P. RATE TAKING INTO CONSIDERATION THE G.P. RATE APPLIED BY TRIBUNAL. T HE ASSESSEE HAS SHOWN G.P. RATE OF 3.3% AGAINST G.P. RATE OF 2.81% IN THE IMMEDIATELY PRECE DING YEAR. IN THE IMMEDIATELY PRECEDING YEAR THE AO MADE ADDITION @ 25% OF UNVERI FIABLE PURCHASES. HOWEVER, THE LD. CIT (A) DIRECTED THE AO TO APPLY G.P. RATE OF 9 %. ON APPEAL PREFERRED BEFORE THE TRIBUNAL, THE TRIBUNAL TAKING INTO CONSIDERATION TH E PAST HISTORY OF THE CASE, SUSTAINED G.P. RATE OF 4.06% IN EARLIER YEAR. IN THE YEAR UNDER C ONSIDERATION, THE LD. CIT (A) HAS DIRECTED TO APPLY G.P. RATE OF 4.5% WHICH IS HIGHER THAN THE G.P. RATE APPLIED EVEN BY THE TRIBUNAL FOR EARLIER YEAR. IN THIS YEAR, AS STATED ABOVE, G.P. RATE IS 3.3% WHEREAS LD. CIT (A) HAS DIRECTED TO APPLY 4.5% ON THE TOTAL TURNOVER DECLAR ED BY ASSESSEE. TOTAL TURNOVER DECLARED IS MORE THAN RS. 13 CRORES AND IN THIS WAY THE ADDITION SUSTAINED BY LD. CIT (A) ARE MORE THAN RS. 15 LACS. THEREFORE, WE FIND NO UN REASONABLENESS IN THE FINDING OF LD. CIT (A). REGARDING THE DECISION OF TRIBUNAL IN CAS E OF M/S. NAND KISHORE MEGHRAJ ON WHICH RELIANCE HAS BEEN PLACED BY DEPARTMENT, WE FI ND THAT FACTS ARE ENTIRELY DIFFERENT. IN THAT CASE THE ADDITION OF RS. 1,00,000/- OR ODD WAS SUSTAINED BY TRIBUNAL WHICH WAS MADE BY THE AO BY DISALLOWING 25% OF UNVERIFIABLE PURCHA SES. IN THAT CASE PURCHASES OF ONLY RS. 4,00,000/- OR ODD WERE FOUND UNVERIFIABLE AND T HE TRIBUNAL TAKING INTO CONSIDERATION THE G.P. RATE DECLARED AND ADDITION MADE AO, APPROV ED THE ADDITION MADE BY AO. ONE MORE REASON WAS GIVEN BY THE TRIBUNAL THAT IN EARLI ER YEAR WHERE THE TRIBUNAL HAS DELETED THE ENTIRE ADDITION ON ACCOUNT OF UNVERIFIABLE PURC HASES THAT CONFIRMATIONS INCLUDING PAN NUMBER ETC. WERE FILED, ALL THE PARTIES WERE RE GISTERED UNDER INCOME-TAX, SALES TAX AND PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUE. HO WEVER, IN THE YEAR UNDER 6 CONSIDERATION NONE OF THE SUCH DETAILS WERE FILED A ND, THEREFORE, PURCHASES REMAINED UNVERIFIABLE AND FOR THIS REASON THE ADDITION OF RS . 1,00,000/- OR ODD WAS SUSTAINED. IN THE CASE IN HAND, FACTS ARE ENTIRELY DIFFERENT AS T HE PAYMENTS ON ACCOUNT OF PURCHASES WERE MADE THROUGH ACCOUNT PAYEE CHEQUE, CONFIRMATION WAS FILED. 8.1. THE JAIPUR BENCHES OF THE TRIBUNAL ARE TAKING A CONSISTENT VIEW THAT WHERE PURCHASES REMAINED UNVERIFIABLE, ADDITION @ 25% CAN NOT BE MADE THOUGH REJECTION OF BOOKS OF ACCOUNT ARE UPHELD. IT IS FURTHER HELD BY THE BENCH THAT ADDITION CAN BE MADE ON THE BASIS OF PAST HISTORY AND TAKING INTO CONSIDERA TION THE CURRENT EVENTS OF THE CASE. IN THIS CASE PAST HISTORY HAS BEEN TAKEN INTO CONSIDER ATION AND THE LD. CIT (A) HAS APPLIED G.P. RATE ON HIGHER SIDE AS COMPARED TO G.P. RATE E ARLIER SUSTAINED BY TRIBUNAL. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE SEE NO UNREASONAB LENESS IN THE FINDING OF LD. CIT (A). ACCORDINGLY THEY ARE CONFIRMED. 9. SIMILAR FACTS ARE INVOLVED IN CASE OF M/S. VIPUL GEMS. IN THIS CASE ALSO THERE WERE HUGE UNVERIFIABLE PURCHASES. TOTAL TURNOVER S HOWN BY ASSESSEE WAS RS. 33.85 CRORES WHEREAS UNVERIFIABLE PURCHASES WERE OF RS. 9 .56 CRORES. THE G.P. RATE SHOWN BY ASSESSEE WAS 2.73% AGAINST G.P. RATE 3.27% IN THE I MMEDIATELY PRECEDING YEAR. IN THIS CASE, THE LD. CIT (A) APPLIED G.P. RATE OF 8% WHICH WAS REDUCED BY THE TRIBUNAL TO 5%. KEEPING IN MIND ALL THESE FACTORS, THE LD. CIT (A) DIRECTED TO APPLY G.P. RATE OF 6%. IN OUR CONSIDERED VIEW, LD. CIT (A) WAS REASONABLE IN APPL YING G.P. RATE OF 6% KEEPING IN MIND THE EXTENT OF UNVERIFIABLE PURCHASES OF RS. 9.56 CR ORES OR ODD. THEREFORE, WE SEE NO UNREASONABLENESS IN THE FINDING OF LD. CIT (A). AC CORDINGLY, WE CONFIRM THE FINDING OF LD. CIT (A) ON THE REASONING OF LD. CIT (A) AND THE REASONING GIVEN BY US WHILE DISPOSING THE APPEAL IN CASE OF M/S. SHANTI KUMAR VIPUL KUMAR CHORDIA HUF (SUPRA). 7 11. IN THE RESULT, APPEALS OF THE DEPARTMENT ARE DI SMISSED. 12. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 10 .6.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- THE ACIT, CIRCLE-1, JAIPUR. M/S. SHANTI KUMAR VIPUL KUMAR CHORDIA HUF,JAIPUR. M/S. VIPUL GEMS PVT. LTD., JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 826(2)/JP/2010) BY ORDER, AR ITAT JAIPUR.