ITO, Jaipur V. AMIT BHANDARI, Jaipur

ITA 869/JPR/2010

• Counselvise Citation: 86923114 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 30-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD JOHARI
• Assessee Lawyers: B P MUNDRA
• Keywords: Bogus purchase; Rejection of books of accounts
• Section: 40A(3)

Judgement Text

1 ITA 869(2)-10 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 869/JP/2010 ASSTT. YEAR : 2007-08. THE INCOME-TAX OFFICER, VS. SHRI AMIT BHANDARI, WARD 6(1), 2/248, MALVIYA NAGAR, JAIPUR. JAIPUR. NOW 80, USHA COLONY, MALVIYA NAGAR, JAIPUR. (APPELLANT) (RESPONDENT) C.O. NO. 88/JP/2010 ( ARISING OUT OF ITA NO. 869/JP/2010 ) ASSTT. YEAR : 2007-08. SHRI AMIT BHANDARI, VS. THE INCOME-TAX OFFICER, JAIPUR. WARD 6(1), JAIPUR. (CROSS OBJECTOR) (RESPONDENT) APPELLANT BY : SHRI VINOD JOHARI RESPONDENT BY : SHRI B.P. MUNDRA DATE OF HEARING : 12.08.2011 DATE OF PRONOUNCEMENT : 02.09.2011. ORDER DATE OF ORDER : 02/09/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AND A CROSS OBJECT ION BY ASSESSEE AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 20 07-08. 2. THE DEPARTMENT IS OBJECTING IN DELETING THE ADDI TION OF RS. 52,49,587/- REPLACING THE TRADING ADDITION BY RS. 2,66,145/-. 2 3. THE ASSESSEE IN HIS CROSS OBJECTION IS OBJECTING IN CONFIRMING THE DISALLOWANCE OF RS. 2,66,145 BY REJECTING BOOKS OF ACCOUNT AT THE E ND OF LD. CIT (A). 4. SINCE ALL THE GROUNDS IN THE APPEAL OF THE DEPAR TMENT AND IN THE CROSS OBJECTION OF THE ASSESSEE ARE INTER-LINKED, THEREFORE, THEY ARE BEING DISPOSED OFF TOGETHER. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E WAS ENGAGED IN MANUFACTURING AND TRADING ACTIVITY IN THE FORM OF EXPORT OF VARIOUS K INDS OF READYMADE GARMENTS AND MADE UPS. THE AO HAS NOTICED THAT THE ASSESSEE HAS SHOWN SUND RY CREDITORS AT RS. 2,89,50,917/- IN THE BALANCE SHEET. OUT OF THESE CREDITORS THE ASSESSEE WAS REQUIRED TO SUBMIT CONFIRMATION FROM VARIOUS 18 CREDITORS AS SPECIFIED IN PAGE NO. 2 OF THE ASSESSMENT ORDER. THEREAFTER, THE AO NOTICED THAT IN 13 CASES THE COMPLETE ADDRESSES OF THE CREDITORS WERE NOT MENTIONED. IN THIS CONNECTION, THE AO HAS ISSUED A LETTER TO URBAN COO PERATIVE BANK ON 17.8.2009 SEEKING INFORMATION REGARDING THE PERSON AND BANK ACCOUNT W HERE THOSE CHEQUES WERE CREDITED. SIMILAR LETTER WERE ALSO SENT AT PAGE NO. 4 OF THE ASSESSME NT ORDER. THE AO THEREAFTER HAS ISSUED CONFIRMATION LETTERS TO VARIOUS 18 CREDITORS ON THE GIVEN ADDRESS WHICH WERE SPECIFIED AT PAGE NO. 4 OF THE ASSESSMENT ORDER FROM WHOM EARLIER THE APPELLANT HAS FURNISHED THE CONFIRMATIONS. THE AO HAS GIVEN A LIST OF 12 SUCH CREDITORS TO WHO M CONFIRMATION LETTERS ISSUED WERE RETURNED BACK BY THE COMMENTS OF POSTAL AUTHORIZED LIKE NOT KNOWN, INCOMPLETE ADDRESS AND LEFT. THEREAFTER, AT PAGE NO.5 OF THE ASSESSMENT ORDER TH E AO HAS REPRODUCED THE INFORMATION RECEIVED FROM URBAN COOPERATIVE BANK REGARDING VARI OUS PAYMENTS BY CHEQUES AS CLAIMED BY THE ASSESSEE AND HE HAS OBSERVED THAT IN 10 CASES T HE PAYMENT WAS MADE BY CASH. IN CONNECTION WITH 14 CREDITORS FROM WHERE THE CONFIRMATION LETTE RS WERE RECEIVED BACK BY ASSESSING OFFICER A SHOW CAUSE WAS ISSUED TO THE ASSESSEE ON 26.8.2009 WHICH HAS BEEN REPRODUCED AT PAGE NO. 6 OF THE ASSESSMENT ORDER. THEREAFTER, THE ASSESSEE H AS FURTHER FURNISHED THE ADDRESS OF 12 PERSONS 3 AND IN RESPECT OF WHICH THE AO HAS OBSERVED THAT TH ESE WERE THE SAME ADDRESS WHICH WERE EARLIER COMMUNICATED AND THEREFORE, VIDE ORDER SHEE T ENTRY DT. 1.9.2009 THE ASSESSEE WERE REQUIRED TO PRODUCE THOSE PARTIES FOR EXAMINATION A ND OBSERVATION DT. 1.9.2..9 WERE REPRODUCED IN THE ORDER SHEET. THEREAFTER, THE EXAMINATION FUR NISHED WAS AGAIN REPRODUCED IN THE BODY OF ASSESSMENT ORDER. HOWEVER, THE AO HAS REFERRED THE REPLY RECEIVED FROM THE BANK ON 10.12.2009 ON PAGE NO. 9 OF THE ASSESSMENT ORDER AN D HAS GIVEN A LIST OF VARIOUS 10 CHEQUES INVOLVING TOTAL AMOUNT OF RS. 10,50,000/- WHERE THE CHEQUES WERE BEARER CHEQUES AND THESE WERE ENCASHED BY THE FATHER OF THE ASSESSEE. BESIDE S THAT ANOTHER PAYMENT OF RS. 1 LAC CLAIMED TO HAVE BEEN MADE BY CHEQUE TO M/S SHYAM ENTERPRISE S WAS ALSO WITHDRAWN THROUGH CASH BY ASSESSEE. FURTHER, ON PAGE NO. 9 & 10 OF THE ASSESS MENT ORDER THE AO HAS GIVEN LIST OF 12 PARTIES WHERE COMPLETE ADDRESSES WERE NOT FURNISHED AND THEREFORE, A TOTAL AMOUNT OF RS. 40,99,587/- PERTAINING TO THESE 12 SUNDRY CREDITORS WAS CONSIDERED AS NOT VERIFIABLE WHICH WAS ALSO ADDED TO THE TOTAL INCOME OF ASSESSEE ON ACCOU NT OF BOGUS PAYMENT CLAIMED TO THE SUNDRY CREDITORS AND IN THIS PROCESS THE AO HAS MADE TOTAL ADDITION OF RS. 52,49,587/-. 6. DETAILED SUBMISSIONS WERE FILED BEFORE LD. CIT ( A) WHICH HAS BEEN DISCUSSED BY LD. CIT (A) AT PAGES 3 TO 5 OF HIS ORDER ARE AS UND ER :- CHALLENGING THE SAID VIEW OF ASSESSING OFFICER SH . B.P.MUNDRA CA & AR OF APPELLANT HAS FURNISHED THE COPY OF LETTER DA TED 11.1.2010 ISSUED BY AXIS BANK JAIPUR AND THE URBAN COOPERATIVE BANK JAIPUR T O THE APPELLANT WHEREIN THEY HAVE CONFIRMED THE PAYMENT BY ACCOUNT PAYEE CH EQUE OF RS. 7,31,000/- DURING THE PERIOD OF 18.6.2007 TO 16.2.2007 WHICH WERE ISSUED IN THE NAME OF M/S RAJ EMBROIDERY. SIMILARLY, THE AXIS BANK HAS CO NFIRMED THAT VARIOUS 8 CHEQUES WHICH WERE ISSUED TO M/S STYLE DESIGN AND E MBROIDERIES PVT. LTD. INVOLVING TOTAL PAYMENT OF RS. 9,54,056/- WERE CLEA RED THROUGH CLEARING BY THEIR NEW DELHI SERVICE BRANCH. FURTHER, A COPY OF ACCOUN T OF SHYAM ENTERPRISES WAS FURNISHED IN WHICH OUT OF OPENING BALANCE OF RS . 12,48,099/- ONLY 2 4 PAYMENTS OF RS. 1 LAC EACH WERE MADE BY CHEQUE WHIL E THE AO HAS MADE THE ADDITION OF RS. 3 LAC IN THE NAME OF SAME PARTY. BE SIDES THESE DOCUMENTS SH. MUNDRA IN HIS SUBMISSION HAS RAISED FOLLOWING MAIN ARGUMENTS: I. THE APPELLANT HAS FURNISHED CONFIRMATIONS OF VARIOU S PARTIES WHICH IS ADMITTED BY ASSESSING OFFICER ALSO AS PER PAGE NO. 2 OF THE ASSESSMENT ORDER. II. ALL SUNDRY CREDITORS WERE ON ACCOUNT OF GOODS SUPPL IED AND SERVICES RENDERED BY THEM IN THE BONAFIDE MANNER FOR THE GOODS EXPORT ED BY THE APPELLANT AND THE AO IN THE ASSESSMENT ORDER HAS NOT RECORDED ANY FINDING THAT THESE PURCHASES WERE BOGUS. III. WHEN RAJ EMBROIDERY WAS HAVING ACCOUNT AT CA- 463, URBAN BANK, MALVIYA NAGAR, JAIPUR THEN THE ASSESSING OFFICER COULD HAVE ASCERTAINED THE CORRECT ADDRESS FROM THE BANKER AND THE BANKER AS PER CERTI FICATE FURNISHED HAS CONFIRMED THAT VARIOUS PAYMENT FOR THE CHEQUES ISSU ED BY THE APPELLANT TO M/S RAJ EMBROIDERY WERE MADE THROUGH CLEARING ENTRY. IV. THERE IS NO EVIDENCE TO SHOW THAT AMOUNT GIVEN BY A SSESSEE IN FAVOUR OF THE SUPPLIER BY CROSS CHEQUES HAS COME BACK TO THE ASSE SSEE IN ANY FORM. V. SIMILARLY, IN RESPECT OF M/S STYLE DESIGN EMBROIDER Y PT. LTD THE APPELLANT HAS FURNISHED PLOT NUMBER AND COMPLETE ADDRESS AND THE NAME OF M/S STYLE DESIGN EMBROIDERY PVT. LTD WAS NOT FIGURING IN THE LIST OF 14 PARTIES AS MENTIONED BY ASSESSING OFFICER IN THE ASSESSMENT OR DER. VI. EVEN URBAN COOPERATIVE BANK IN THEIR REPLY WHICH IS REPRODUCED BY ASSESSING OFFICER HAS ADMITTED THAT THE NAME CANNOT BE DECIPH ERED FOR VARIOUS 9 CHEQUES AND THE AO WITHOUT ANY BASIS JUMPED TO THE CONCLUSI ON THAT THESE 9 CHEQUES WERE ALSO ENCASHED BY SHANTILAL BHANDARI. FURTHER, THERE IS NO EVIDENCE THAT THE FATHER OF THE APPELLANT WHO HAPPENS TO BE SHANT ILAL BHANDARI HAS WITHDRAWN THE SAID AMOUNT. 5 VII. THE APPELLANT HAS SHOWN BETTER GP RATE OF 10.17% A S COMPARED TO LAST YEARS GP RATE OF 8.93% EVEN THOUGH THERE WAS INCREASE IN THE TURNOVER. VIII. RELYING UPON RAJASTHAN HIGH COURT JUDGMENTS IN THE CASE OF SMT. HARSHIL CHORADIA V/S ITO 298 ITR 349 HAS ARGUED THAT RULE 6 DD(J) HAS TO BE LIBERALLY CONSTRUED AND ORDINARILY WHERE THE GENUINESSES OF T HE TRANSACTIONS AND THE PAYMENT AND IDENTITY OF THE RECEIVER IS ESTABLISHED , THE REQUIREMENT OF RULE 6DD (J) MUST BE DEEMED TO HAVE BEEN SATISFIED. SH. MUNDRA IN THIS RESPECT CONSIDERING THE SATISFACTION OF AFORESAID CONDITION S REQUESTED TO DELETE THE ENTIRE ADDITION OF RS. 10,50,000/-. IX. WHEN THE APPELLANT HAS FURNISHED CONFIRMATION THEN NO ADDITION CAN BE MADE ON THE GROUND THAT THE APPELLANT HAS FAILED TO PROD UCE THESE PARTIES AND THE AO HAS NOT RECORDED ANY FINDING THAT THE PURCHASES WER E BOGUS BECAUSE OF WHICH THESE CREDITORS WERE SHOWN AS OUTSTANDING IN THE BA LANCE SHEET. 7. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, LD. CIT (A) FOUND THAT THE ADDITIONS MADE BY AO ARE LIABLE TO BE DELETED. HOWEVER, BY OBSERVING THAT CERTAIN PARTIES FROM WHOM PURCHASES WERE SHOWN TO HAVE BEEN MADE WERE REMAINED UNVERIFIABLE AND LOOKING TO THE QUANTUM OF PURCHASE S, HE MADE A TRADING ADDITION OF RS. 2,66,145/- BY REJECTING THE BOOKS OF ACCOUNT. FIND INGS OF LD. CIT (A) AT PAGES 5 TO 8 ARE AS UNDER :- I HAVE CONSIDERED FACTS OF THE CASE AND ARGUMEN TS TAKEN BY SH. MUNDRA QUITE CAREFULLY. THIS IS A CASE OF GARMENT M ANUFACTURER WHO WAS ENGAGED IN EXPORT ACTIVITY OF THE GARMENTS MANUFACT URED. AFTER GOING THROUGH THE ASSESSMENT ORDER NOWHERE IT IS NOTICED THAT THE EXPORT SHOWN BY THE APPELLANT AND GENUINENESS OF THE SAME WERE QUESTIONED 6 DOUBTED BY THE ASSESSING OFFICER. IN THIS CASE, ON A TURNOVER OF RS. 4,02,47,710/- THE APPELLANT HAS SHOWN GP RATE OF 8. 85% IN A.Y.2006-07 ON INCREASED TURNOVER OF RS. 4,71,22,130/- THE APPE LLANT HAS SHOWN BETTER GP 8.93% FURTHER, IN THE PRESENT A.Y ON INCREASED TURNOVER OF RS. 4,98,60,710/- THE APPELLANT HAS SHOWN EVEN BETTER G P RATE OF 10.17%. IT IS ALSO A FACT THAT AS PER LIST GIVEN BY ASSESSING OFFICER OF VARIOUS 18 CREDITORS THE APPELLANT HAS FURNISHED CONFIRMATION FROM ALL THE 18 CREDITORS. HOWEVER, IT IS ALSO A FACT THAT LETTER O F CONFIRMATION SENT BY ASSESSING OFFICER TO VARIOUS 12 CREDITORS GIVEN AT PAGE NO.4 OF THE ASSESSMENT ORDER WERE RECEIVED BACK WITHOUT SERVICE AND ONLY A FEW PAYMENTS BY CHEQUE WERE SHOWN TO HAVE BEEN MADE BY BANKER AS CASH PAYMENT. HOWEVER, AS PER CERTIFICATES DATED 11.1.20 10 ISSUED BY URBAN COOPERATIVE BANK AND AXIS BANK TO THE APPELLANT THE PAYMENTS MADE TO THE EXTENT OF RS. 7,31,000/- TO M/S RAJ EMBROIDERY WAS ACCOUNT PAYEE CHEQUE AND PAYMENT TO STYLE DESIGN AND EMBROIDERY P VT. LTD OF RS. 9,54,056/- WAS ALSO BY CLEARING WHICH MEANS THAT DE FINITELY THOSE PARTIES WERE EXISTING PARTIES AND IN THEIR BANK ACCOUNT THE PAYMENT MADE BY APPELLANT WAS CREDITED AND THEREFORE, IT CANNOT BE CONSIDERED AS BOGUS OR SHAM CREDITOR. BUT CERTAINLY, THIS IS A CASE OF UNV ERIFIABLE PURCHASES AND A CASE OF PAYMENT OTHER THAN BY ACCOUNT PAYEE CHEQU ES. IN THE ENTIRE ASSESSMENT ORDER THE PURCHASES AND THE RECEIPT OF T HE SERVICES FROM VARIOUS PERSON TOWARDS MANUFACTURING OF READYMADE G ARMENTS AND MADE UPS HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. AS ALREADY DISCUSSED THAT THE EXPORTS SHOWN BY THE APPELLANT WERE ALSO N OT DOUBTED BY THE ASSESSING OFFICER AND THERE IS NO EVIDENCE ON RECOR D THAT ANY OF THE EXPORT SHOWN WERE NOT GENUINE OR IT WAS A CASE OF I NFLATED EXPORT TURNOVER. HONBLE ITAT JAIPUR BENCH WHILE DECIDING THE JEWELLERY CASES OF THIS AREA IN CASE OF UNVERIFIABLE PURCHASES HAS UPHELD THE REJECTION OF BOOKS OF ACCOUNTS BY INVOKING PROVISIONS OF S.145(3 ) OF I.T. ACT. UNDER 7 THESE CIRCUMSTANCES DURING THE COURSE OF APPELLATE PROCEEDINGS, AN OPPORTUNITY WAS GIVEN TO SH. B.P.MUNDRA THAT WHY NO T THE BOOKS OF ACCOUNTS BE REJECTED BECAUSE OF UNVERIFIABLE PURCHA SES TO WHICH SH. MUNDRA IN HIS SUBMISSION HAS ARGUED THAT THE BOOKS OF ACCOUNTS WERE AUDITED AND PROPERLY MAINTAINED ALONG WITH QUANTITA TIVE DETAILS AND THE APPELLANT COULD NOT PRODUCE THE SUPPLIERS BECAUSE T HEY HAVE CLOSED THE SHOPS BUT THE PURCHASES WERE NOT DISPROVED AND A RE QUEST WAS MADE NOT TO REJECT BOOKS OF ACCOUNTS BY INVOKING PROVISION O F S.145(3) OF I.T ACT. HOWEVER, EVEN IN THE APPELLATE ADDRESSES OF VARIOUS CREDITORS AND SUPPLIERS AND THEREFORE, THIS IS A CLEAR CASE OF UN VERIFIED PURCHASES. CONSIDERING SUCH NON VERIFIABILITY OF THE PURCHASES THE BOOKS OF ACCOUNTS WERE REJECTED RECENTLY BY HONBLE ITAT JAI PUR BENCH IN THE CASE PF M/S JEWELS AND ARTS V/S ITO WARD 5(1), JAIP UR IN ITA NO. 1407/JP/2008 DT. 20.3.2009. SINCE, FACTS OF THE PRE SENT CASE ARE EXACTLY IDENTICAL THEREFORE, UNDER SIMILAR CIRCUMSTANCES IN MY CONSIDERED VIEW THE ASSESSING OFFICER WAS JUSTIFIED IN REJECTING BO OKS OF ACCOUNTS BY INVOKING PROVISION OF S.145(3) OF I.T ACT. AFTER GO ING THROUGH THE FACTS OF PRESENT CASE IT IS CLEAR THAT EVEN IN THE PRESEN T CASE NO SUCH FACTS EXISTS LIKE SANJAY OIL CAKE INDUSTRIES AND THEREFOR E, FOLLOWING THE ITAT JAIPUR BENCH DECISION IN THE CASE OF M/S GEMS PARAD ISE I HOLD THAT THE BOOKS OF ACCOUNTS ATE TO BE REJECTED AND CERTAIN HI GHER GP AS SHOWN BY APPELLANT IS REQUIRED TO BE ESTIMATED. THOUGH IT I S A FACT THAT AS COMPARED TO LAST YEAR THE GP RATE SHOWN WAS BETTER BUT HONBLE ITAT JAIPUR BENCH IN THE AFORESAID CASE OF GEMS PARADISE HAS UPHELD GP RATE OF 25.5% AND HONBLE ITAT HAS OBSERVED THAT BY DOIN G SO THE CIT(A) IN THEIR VIEW HAS KEPT A BALANCE BETWEEN THE UNDISPUTE D FACT THAT THE ASSESSEE HAD FURNISHED ALL THE NECESSARY INFORMATIO N ABOUT THE TRANSACTION AND THE PARTIES FROM WHOM PURCHASES CLA IMED TO HAVE BEEN MADE SUPPORTED WITH DOCUMENTS, PAYMENT TO THEM WERE MADE THROUGH CHEQUE BUT THESE PARTIES WERE NEITHER PRODUCED BEFO RE AO NOR THESE WERE FOUND VERIFIABLE. FOLLOWING THE SAME JUDGMENT IN MY CONSIDERED 8 VIEW AS AGAINST GP RATE SHOWN OF 10.17% IT SHALL BE JUSTIFIABLE TO ADOPT GP RATE OF 10.7% AND ON THIS BASIS THE GP FOR THE Y EAR COMES RS. 53,35,396/- AS AGAINST GP SHOWN BY APPELLANT OF RS. 50,68,951/- AND ACCORDINGLY, TRADING ADDITION GP SHOWN APPELLANT OF CONFIRMED. SINCE, THE AO HAS MADE AN ADDITION OF RS. 52,49,587/- WHIC H WAS IN RESPECT OF CERTAIN CREDITORS SHOWN AS OUTSTANDING AS ON 31.3.2 007 BUT PAYMENT MADE TO THESE PARTIES IN THIS YEAR AND IN EARLIER Y EAR WAS NOT DISALLOWED IN TOTALITY THEREFORE, SUCH DISALLOWANCE OF RS. 52, 49,587/- CANNOT BE APPROVED. SINCE, IN THIS APPELLATE ORDER A TRADING ADDITION OF RS. 2,66,145/- IS CONFIRMED THEREFORE, THE APPELLANT GE TS A RELIEF OF RS. 49,83,442/-. 8. NOW THE DEPARTMENT IS IN APPEAL HERE BEFORE THE TRIBUNAL. 9. THE LD. D/R PLACED STRONG RELIANCE ON THE ORDER OF A.O. IT WAS FURTHER SUBMITTED THAT MOST OF THE PURCHASES REMAINED UNVERIFIABLE. A BRIEF NOTE IN SUPPORT OF THE FINDING OF AO WAS ALSO FILED BY LD. D/R. 10. ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE PLACED RELIANCE ON THE ORDER OF LD. CIT (A). IT WAS FURTHER SUBMITTED THAT PAYMENT THR OUGH BEARER CHEQUE WERE MADE TO CERTAIN PARTIES FROM WHOM PURCHASES WERE MADE, CONF IRMATIONS FROM THE PARTIES ARE PLACED ON RECORD. IT WAS FURTHER SUBMITTED THAT CO NTENTION RAISED BEFORE LD. CIT (A) SHOULD BE TAKEN INTO CONSIDERATION. 11. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THERE IS NO INFIRMITY IN THE ORDER OF LD. CIT (A) IN DELETING THE ADDITION OF RS. 52,49,587/- MADE BY AO ON ACCOUNT OF UNVERIFIABLE P URCHASES. THE AO HAS DRAWN ADVERSE INFERENCE AS PURCHASES OF RS. 40.99 LACS RE MAINED UNVERIFIABLE + PURCHASES OF RS. 10.50 LACS WERE MADE THROUGH BEARER CHEQUE AND PAYM ENT OF RS. 1,00,000/- WAS MADE TO 9 M/S. SHYAM ENTERPRISES AND AGAINST THIS PAYMENT THE CASH WAS WITHDRAWN ON THE SAME DAY. THEREFORE, THE AO NOTED THAT THE ASSESSEE HAS NOT MADE ANY PURCHASES AND BOGUS PURCHASES HAVE BEEN SHOWN BY REDUCING THE TAX. THE REFORE, AN ADDITION OF RS. 52,49,587/- WAS MADE. THE LD. CIT (A) HAS DELETED THIS ADDITION BY OBSERVING THAT SALES AGAINST THESE VERY PURCHASES HAVE BEEN ACCEPTED BY THE AO. THEREFORE, IT CANNOT BE SAID THAT ASSESSEE HAS NOT MADE ANY PURCHASES. THEREFOR E, AFTER CONSIDERING THE DETAILED SUBMISSIONS WHICH ARE REPRODUCED SOMEWHERE ABOVE IN THIS ORDER, THE LD. CIT (A) CAME TO THE CONCLUSION THAT THE ADDITION CANNOT BE MADE ON THE BASIS OF UNVERIFIABLE PURCHASES. HOWEVER, IF ANY ADDITION CAN BE MADE THAT CAN BE MA DE TAKING INTO CONSIDERATION THE PAST HISTORY OF THE CASE. PAST HISTORY OF THE CASE WAS T HAT THE TRADING RESULT SHOWN BY ASSESSEE WAS BETTER AS COMPARED TO EARLIER YEAR. IN EARLIER YEAR THE GROSS PROFIT RATE SHOWN WAS 10.17% WHEREAS IN THIS YEAR THE GROSS PROFIT RATE S HOWN IS 8.93%. HOWEVER, LOOKING TO THE FACTS OF THE CASE THAT CERTAIN PURCHASES REMAIN ED UNVERIFIABLE, THEREFORE, TO COVER UP THE LEAKAGE, A TRADING ADDITION OF RS. 2,66,145/- W AS SUSTAINED BY LD. CIT (A) BY REJECTING THE BOOKS OF ACCOUNT SINCE ON SIMILAR FACTS IN CASE OF M/S. GEM PARADISE THE REJECTION OF BOOKS OF ACCOUNT WAS UPHELD BY THE TRIBUNAL. THE JA IPUR BENCHES OF THE TRIBUNAL ARE TAKING A CONSISTENT VIEW THAT WHERE CERTAIN PURCHAS ES REMAINED UNVERIFIABLE THEN THE REJECTION OF BOOKS OF ACCOUNT IS JUSTIFIED THOUGH T HE AO HAS NOT SPECIFICALLY MENTIONED ABOUT REJECTION OF BOOKS OF ACCOUNT BUT IT SEEMS TH AT HE HAS REJECTED THE BOOKS OF ACCOUNT AS HE HAS MADE ADDITION OF RS. 52 LACS OR ODD ON AC COUNT OF UNVERIFIABLE PURCHASES. THE LD. CIT (A) HAS SPECIFICALLY STATED THAT ON UNVERIF IABLE PURCHASES THE BOOKS OF ACCOUNTS ARE LIABLE TO BE REJECTED AND, THEREFORE, HE HAS SU STAINED A TRADING ADDITION OF RS. 2,66,145/-. THIS VIEW OF LD. CIT (A) IS IN CONSONA NCE WITH THE VIEW TAKEN BY JAIPUR 10 BENCHES OF THE TRIBUNAL WHERE IT IS HELD THAT WHERE BOOKS OF ACCOUNT IS REJECTED ON ACCOUNT OF UNVERIFIABLE PURCHASES, THEN PROFIT SHOU LD BE DEDUCED AFTER TAKING INTO CONSIDERATION THE PAST HISTORY OF THE CASE AND CURR ENT EVENTS. THE RESULT SHOWN BY ASSESSEE IN THIS YEAR IS BETTER AS COMPARED TO EARL IER YEAR, THEREFORE, NO ADDITION SHOULD HAVE BEEN MADE. HOWEVER, SINCE CERTAIN PURCHASES R EMAINED UNVERIFIABLE, THEREFORE, WE HOLD THAT REJECTION OF BOOKS OF ACCOUNT IS CORRECT. THE LD. CIT (A) HAS CONFIRMED AN ADDITION OF RS. 2.66 LACS OR ODD TO COVER UP THE LE AKAGE OF REVENUE AND WE SEE NO UNREASONABLENESS IN THIS FINDING OF LD. CIT (A) AS THERE IS NO DISPUTE ON THE PURCHASES REMAINED UNVERIFIABLE. SINCE REJECTION OF BOOKS OF ACCOUNT IS UPHELD, THEREFORE, THE CONTENTION OF THE DEPARTMENT THAT CERTAIN PAYMENTS HAVE BEEN MADE IN CASH AND PROVISIONS OF SECTION 40A(3) SHOULD HAVE BEEN INVOK ED, DOES NOT HOLD GOOD. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE CONFIRM THE ORDER OF LD. CIT (A). 12. IN THE RESULT, APPEAL OF THE DEPARTMENT AS WELL AS CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. 13. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 02 .09.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- THE ITO WARD 6(1), JAIPUR. SHRI AMIT BHANDARI, JAIPUR. THE CIT (A) THE CIT BY ORDER, THE D/R GUARD FILE (ITA NO. 869/JP/2010) AR ITAT JAIPUR. 11