LUNAWAT GEMS CORPORATION, Jaipur V. DCIT, Jaipur

ITA 879/JPR/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2157 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 03-10-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P P MEENA JCIT DR DHK
• Assessee Lawyers: G M MEHTA
• Keywords: Bogus purchase; Rejection of books of accounts; Search and seizure; Opportunity of being heard; Accommodation entries; Reason to believe; Borrowed satisfaction
• Section: 69C; 142(1); 147; 145; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,O JH HKKXPUN] YS[KK LNL; LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM VK;DJ VIHY LA-@ ITA NO. 879/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR: 2007-08 M/S. LUNAWAT GEMS CORPORATION LUNAWAT MARKET, DARRA, HALDION KA RASTA, JAIPUR CUKE VS. THE DCIT CIRCLE-2 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAAFL 9325 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI G.M. MEHTA, CA JKTLO DH VKSJ LS@ REVENUE BY:SHRI P.P. MEENA, JCIT - DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 05/02/2018 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 9 /02/2018 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A) -1, JAIPUR DATED 01-07-2016 FOR THE ASSESSMENT YE AR 2007-08 RAISING THEREIN FOLLOWING GROUNDS OF APPEAL. 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FA CTS IN SUSTAINING THE LEGALITY OF INITIATION OF THE ACTION U/S 147 OF THE I.T. ACT ON THE BASIS OF BORROWED SATISFACTION FOR WHICH OBJECTIONS WERE RAISED BY THE ASSESSEE BEFORE AO BU T WERE DISPOSED OF THROUGH A NON-SPEAKING ORDER DATED 18-0 6-2014 BY THE AO. 2. IGNORING THE BETTER G.P. RATE ACHIEVED DURING TH E YEAR THAN IMMEDIATELY PRECEDING YEAR AND EXPORT OF MAJOR GOODS ITA NO.879/JP/2016 M/S. LUNA WAT GEMS CORPORATION. VS DCIT, CIRCLE - 2, JAIPUR 2 PURCHASED FROM M/S. JPK TRADING (I) PVT LTD. LD. CI T(A) WAS NOT JUSTIFIED IN SUSTAINING ADDITION OF RS. 3,14,54 5/- WHICH IS EQUAL TO 15% OF PURCHASES OF RS. 20,96,965/- FROM S AID M/S. JPK TRADING (I) PVT. LTD. 3. THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING A DDITION OF RS. 3,14,545/- FOR WHICH THE REQUESTED OPPORTUNI TY TO CROSS EXAMINE THE SELLER M/S. JPK TRADING (I) PVT. LTD WA S NOT PROVIDED TO THE ASSESSEE (2011) 334 ITR 262 (SC) 2.1 APROPOS GROUND NO. 1 TO 3 OF THE ASSESSEE, THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) ARE AS UNDER:- 3.1.2 DETERMINATION (I) I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. IT IS EVIDENT FROM THE ASSESSMENT ORDER THA T THE AO WAS HAVING SUFFICIENT INFORMATION IN HIS POSSESSION THAT THE APPELLANT HAD TAKEN ACCOMMODATION ENTRIES FROM SHRI PRAVEEN KUMAR JAIN WHO ADMITTED HIMSELF TO WORKING AS AN ENTRY OPERATO R IN THE STATEMENT RECORDED ON OATH U/S 132(4) OF THE ACT. IT WAS DEPOSITED BY SHRI PRAVEEN KUMAR JAIN (P.K. JAIN) THAT HE WAS ISSUING BOGUS INVOICES TO T HE NEEDY PARTIES ON COMMISSION BASIS. THE APPELLANT HA D ALSO CLAIMED TO MAKE PURCHASES AMOUNTINGNTO RS. 20,96,965/- FROM M/S. JPK TRADING PVT. LTD., A COMPANY CONTROLLED AND MANAGED BY SHRI P.K. JAIN. I T IS THEREFORE, HELD THAT THE AO HAS REASON TO BELIVE THAT THE INCOME HAD ESCAPED ASSESSMENT. (II) IT MAY BE MENTIONED THAT THE COURTS CANNOT LOO K INTO THE SUFFICIENCY OF THE REASONS RECORDED BY THE AO FOR REOPENING THE ASSESSMENT U/S 147 OF THE ACT. RELIANCE IS PLACED ON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF RAYMOND WOOLLEN MILS LTD. VS ITO [1999] 236 ITR 34 (SC), WHEREIN IT WAS HELD BY THEIR LORDSHIP THAT:- ITA NO.879/JP/2016 M/S. LUNA WAT GEMS CORPORATION. VS DCIT, CIRCLE - 2, JAIPUR 3 IN THIS CASE, WE DO NOT HAVE TO GIVE A FINAL DECISI ON AS TO WHETHER THERE IS SUPPRESSION OF MATERIAL FACTS BY T HE ASSESSEE OR NOT. WE HAVE ONLY TO SEE WHETHER THERE WAS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT COULD REOPEN THE CASE. THE SUFFICIENCY OR CORRECTNESS OF THE MATERIA L IS NOT A THING TO BE CONSIDERED AT THIS STAGE. WE ARE OF THE VIEW THAT THE COURT CANNOT STRIKE DOWN THE REOPENING OF THE CASE IN THE FACTS OF THIS CASE. IT WILL BE OPEN TO THE ASSESSEE TO PR OVE THAT THE ASSUMPTION OF FACTS MADE IN THE NOTICE WAS ERRONEOU S. THE ASSESSEE MAY ALSO PROVE THAT NO NEW FACTS CAME TO T HE KNOWLEDGE OF THE INCOME TAX OFFICER AFTER COMPLETIO N OF THE ASSESSMENT PROCEEDING. WE ARE NOT EXPRESSING ANY OP INION ON THE MERITS OF THE CASE. THE QUESTIONS OF FACT AND L AW ARE LEFT OPEN TO BE INVESTIGATED AND DECIDED BY THE ASSESSIN G AUTHORITY. THE APPELLANT WILL BE ENTITLED TO TAKE ALL THE POIN TS BEFORE THE ASSESSING AUTHORITY. THE APPEALS ARE DISMISSED. (III) FURTHER, IN THE CASE OF ACIT VS RAJESH JHAVER I STOCK BROKERS PVT. LTD. [2007] 291 ITR 500 (SC), IT WAS HELD BY THE APEX COURT THAT IF THE AO, FOR WHATSOEVER REASON, HAS REASON TO BELIEVE THAT INCOM E HAS ESCAPED ASSESSMENT, IT CONFERS JURISDICTION TO RE- OPEN THE ASSESSMENT. IT IS A FACT THAT NO ASSESSMEN T WAS MADE EARLIER U/S 143(3)144 OF THE ACT IN THE CA SE OF THE APPELLANT, THEREFORE, THE RATIO IN THE CASE OF ACIT VS RAJESH JHAVERI STOCK BROKERS PVT. LTD (SUPRA) APPLIES SQUARELY TO THE FACTS OF THE INSTAN T CASE UNDER CONSIDERATION. (IV) FURTHER, THE OBJECTIONS RAISED BY THE APPELLAN T WITH RESPECT TO INITIATION OF PROCEEDINGS U/S 147 O F THE ACT WAS ALSO DEALT BY THE AO VIDE ITS ORDER DATED 1 8- 06-2014. IT MAY BE MENTIONED THAT AT THE TIME OF INITIATION OF PROCEEDINGS U/S 147 OF THE ACT, THE A O MUST HAVE SOME REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND HE IS NOT REQUIRED TO PROVE AT ALL THAT THE INCOME HAS ESCAPED ASSESSMENT. ITA NO.879/JP/2016 M/S. LUNA WAT GEMS CORPORATION. VS DCIT, CIRCLE - 2, JAIPUR 4 (V) IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD THA T THE AO WAS JUSTIFIED IN REOPENING THE CASE OF THE APPELLANT FOR THE YEAR UNDER CONSIDERATION U/S 147 OF THE ACT. HENCE, THIS GROUND OF APPEAL IS REJECTED. 3.3.2 DETERMINATION REJECTION OF BOOKS OF ACCOUNTS: (I) I HAVE DULY CONSIDERED THE ASSESSMENT ORDER, SUBMISSIONS OF THE APPELLANT AND THE MATERIAL PLACE D ON RECORD. THE APPELLANT FIRM WAS ENGAGED IN THE EXPORT OF BUSINESS OF PRECIOUS AND SEMI-PRECIOUS STONES. IT IS NOTED FROM THE ASSESSMENT ORDER THAT THE INVESTIGATION WING, MUMBAI HAD CONDUCTED SEARCH AND SEIZURE OPERATION OVER THE GROUP CONCERN OF SHR I P.K. JAIN (PRAVEEN KUMAR JAIN) AND IT WAS ESTABLISH ED BY THE INVESTIGATION WING THAT SHRI P.K JAIN WAS INDULDGED INTO PROVIDING BOGUS BILLS TO THE NEEDY PERSONS WITHOUT ACTUALLY DELIVERY OF GOODS. THIS FA CT WAS ESTABLISHED ON THE BASIS OF THE EVIDENCES RECOR DED BY THE INVESTIGATION WING. THE INVESTIGATION WING O F THE DEPARTMENT RECORDED THE STATEMENT OF SHRI P.K. JAIN WHO WAS RUNNING A NUMBER OF BOGUS CONCERNS WHEREIN IT WAS STATED BY HIM THAT HIS BUSINESS CONCERNS WERE INDULGED IN PROVIDING THE ACCOMMODATION BILLS TO NEEDY PERSONS ON COMMISSION BASIS. HE FURTHER NOTED THAT HE USED TO ISSUE BOGUS SALES INVOICES AS PER THE REQUIREMENT OF PARTIES ON PREFIXED COMMISSION ON THE BILL AMOUNT. (II) DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT CLAIMED PURCHASE OF RS. 20,96,965/- FROM M/S. JPK TRADING PVT. LTD., A COMPANY CONTROLLED BY SHRI P.K JAIN. IT IS NOTED FROM THE ASSESSMENT ORDE R THAT A SHOW CAUSE NOTICE WAS ISSUED BY THE AO TO TH E APPELLANT REQUIRING IT TO EXPLAIN WHY THE ABOVE PURCHASES AMOUNTING TO RS. 20,96,965/- MAY NOT BE ITA NO.879/JP/2016 M/S. LUNA WAT GEMS CORPORATION. VS DCIT, CIRCLE - 2, JAIPUR 5 TREATED AS BOGUS IN VIEW OF THE EVIDENCES GATHERED BY THE INVESTIGATION WING OF THE INCOME-TAX DEPARTMENT . IN THE ASSESSMENT ORDER, AO DISCUSSED THE ISSUE IN DETAIL AND IT WAS HELD BY THE AO THAT THE PURCHASES CLAIMED TO BE MADE BY THE APPELLANT FROM M/S. JPK TRADING PVT. LTD., A COMPANY CONTROLLED BY SHRI P.K . JAIN WERE BOGUS. THE AO REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT U/S 145(3) AND MADE ADDIT ION OF RS. 5,24,240/- (BEING 25% OF RS. 20,96,965/-) TO THE INCOME OF THE APPELLANT. (III) IT WAS THE CONTENTION OF THE APPELLANT THAT I TS PURCHASES WERE GENUINE AS THE PAYMENTS WERE MADE THROUGH CHEQUES AND THE AO HAS NOT DOUBTED THE SALE S AND THUS WITHOUT PURCHASES, THE SALES CANNOT BE EFFECTED. THE CLAIM OF THE APPELLANT THAT THE PAYME NTS HAVE BEEN MADE THROUGH CHEQUE HAS NO WEIGHT AS IT HAS BEEN HELD IN A NUMBER OF CASES THAT THE PAYMENT CLAIMED TO BE MADE THROUGH CHEQUES IS NOT SACROSANC T. FURTHER THE AO HAS MADE ADDITION OF ONLY 25% OF AMOUNT OF BOGUS PURCHASES ONLY AFTER TAKING INTO ACCOUNT THE FACT THAT NO SALES COULD BE EFFECTED WI THOUT MAKING THE PURCHASES. (IV) IT WAS THE CONTENTION OF THE APPELLANT THAT TH E AO RELIED ONLY ON THE STATEMENT OF CONCERNED PERSON S OF SAID PARTY TAKEN BEHIND THE BACK OF ASSESSEE BY AUTHORITIES MADE THE SAID ADDITION, WITHOUT GIVING ANY OPPORTUNITY TO CROSS-EXAMINE THESE PARTIES. IN THIS REGARD, SUFFICE IT TO SAY THAT THE PROCEEDINGS UND ER THE I.T. ACT ARE NOT STRICTLY COVERED BY THE PROVISIONS OF THE INDIAN EVIDENCE ACT. THE FACT IN THE PRESENT CA SE IS THAT THE SELLER HAD ACCEPTED THAT HE HAD NOT SOL D ANY GOODS TO THE APPELLANT AND THE APPELLANT WAS PROVID ED AN OPPORTUNITY TO REBUT THIS CLAIM OF THE SELLER. A S HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF VASANTLAL (45 ITR 206), THE ONLY REQUIREMENT IS THA T A REASONABLE OPPORTUNITY OF BEING HEARD SHOULD BE ITA NO.879/JP/2016 M/S. LUNA WAT GEMS CORPORATION. VS DCIT, CIRCLE - 2, JAIPUR 6 PROVIDED TO THE ASSESSEE BEFORE AN ADDITION IS MADE . IT IS SEEN THAT IN THE PRESENT CASE ADEQUATE OPPORTUNI TY OF BEING HEARD WAS PROVIDED TO THE APPELLANT. HENCE, T HE PLEA OF THE APPELLANT ON THIS COUNT ALSO FAILS. (V) THUS, IT IS CLEAR FROM THE ABOVE FACTS THAT THE PURCHASES SHOWN TO BE MADE BY THE APPELLANT FROM M/S. JPK TRADING PVT.LTD REMAIN UNPROVED I.E. THE TRADING RESULTS DECLARED BY THE APPELLANT REMAINED UNVERIFIABLE. IT IS THEREFORE, HELD THAT THE AO WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT U/S 145 (3) OF THE ACT AS HELD IN A NUMBER OF JUDICIAL PRONOUNCEMENTS. ESTIMATION OF INCOME (VI) IT IS NOTED THAT IN VARIOUS RECENT JUDGEMENT O F ITAT, JAIPUR BENCH, THE HON'BLE BENCH HAS UPHELD 15% DISALLOWANCE OF BOGUS / UNVERIFIABLE PURCHASES FOLLOWING ITS JUDGEMENT DATED 22-10-2014 IN BATCH O F CASES ANUJ KUMAR VARSHNEY VS ITO (ITA NO. 187/JP/2012) AND OTHERS. THE AO HAS NOT DOUBTED THE SALE OF THE APPELLANT MEANING THERE BY THE APPELLAN T MUST HAVE PURCHASED THE GOODS SOLD BY IT FROM SOME OTHER SOURCES AND IN ORDER TO INFLATE ITS EXPENSES, IT PROCURED BOGUS INVOICES FROM THE CONCERN CONTROLLED BY SHRI P.K. JAIN. RESPECTFULLY FOLLOWING THE ABOVE REFERRED DECISION OF HON'BLE ITAT JAIPUR , IT IS HE LD THT THE 15% OF UNVERIFIABLE/BOGUS PURCHASES IS TO BE ADDED TO THE INCOME OF THE APPELLANT. THEREFORE, OU T OF THE ADDITION OF RS. 5,24,240/- MADE BY THE AO THE ADDITION TO THE EXTENT OF RS. 3,14,545/- (BEING 15% OF 20,96,965/-) IS HEREBY SUSTAINED AND THE REMAINING ADDITION OF RS. 2,96,695/- IS HEREBY DELETED. ITA NO.879/JP/2016 M/S. LUNA WAT GEMS CORPORATION. VS DCIT, CIRCLE - 2, JAIPUR 7 2.2 DURING THE COURSE OF HEARING, THE LD.AR OF THE PRAYED THAT THE LD. CIT(A) IS NOT JUSTIFIED IN SUSTAINING LEGALITY OF I NITIATION OF THE ACTION U/S 147 OF THE ACT BY THE AO, NOT JUSTIFIED IN SUSTAINI NG THE ADDITION OF RS. 3,14,545/- AND NOT ALLOWING THE OPPORTUNITY TO CROS S-EXAMINE THE SELLER M/S. JPK TRADING (I) LTD. IN THIS WAY, THE LD.AR OF THE ASSESSEE OPPOSED THE ORDER OF THE LD. CIT(A). 2.3 ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ER OF THE AO AND FILED THE DETAILS OF THE VARIOUS CASE LAWS. 2.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. ON PERUSAL OF THE AVAILABLE RE CORDS, IT IS NOTED THAT THE ASSESSEE FILED THE RETURN ON 31-10-2007 DECLARI NG INCOME OF RS. 13,76,920/- WHICH WAS PROCESSED U/S 143(1) OF THE A CT. IT IS NOTED THAT THE INVESTIGATION WING, MUMBAI HAD CONDUCTED SEARCH AND SEIZURE OPERATION OVER THE GROUP CONCERN OF SHRI PRAVEEN KUMAR JAIN A ND IT WAS ESTABLISHED BY THE INVESTIGATION WING THAT SHRI PRAVEEN KUMAR J AIN WAS INDULGED IN PROVIDING BOGUS BILLS TO THE NEEDY PERSON WITHOUT A CTUAL DELIVERY OF GOODS. THIS FACT WAS ESTABLISHED ON THE BASIS OF EV IDENCES RECORDED BY THE INVESTIGATION WING. IT IS ALSO NOTED THAT THE INVES TIGATION WING OF THE DEPARTMENT RECORDED THE STATEMENT OF SHRI PRAVEEN K UMAR JAIN WHO IS ITA NO.879/JP/2016 M/S. LUNA WAT GEMS CORPORATION. VS DCIT, CIRCLE - 2, JAIPUR 8 RUNNING BOGUS CONCERN IN THE NAME AND STYLE OF M/S. JPK TRADING (I) PVT. LTD., WHO STATED THAT HIS BUSINESS CONCERNS ARE IND ULGED IN PROVIDING THE ACCOMMODATION BILLS TO NEEDY PARTIES ON COMMISSION BASIS. HE FURTHER DEPOSED THAT HE USED TO ISSUE BOGUS SALES INVOICES AS PER THE REQUIREMENT OF PARTIES ON PREFIXED COMMISSION ON THE BILL AMOUN T. HE USED TO PREPARE BOGUS TAX INVOICES ON THE BASIS OF INFORMATION PROV IDED BY THE BILL SEEKERS AND THEN BOGUS INVOICES WERE SUPPLIED TO TH E NEEDY PARTIES. THEN AS PER THE AVAILABILITY OF FUNDS, THE PARTIES WHO H AD TAKEN BOGUS INVOICES USED TO ISSUE CHEQUES HAVING CONSIDERATION AMOUNT W HICH WERE RECEIVED BY THE ASSESSEE. THUS THE CHEQUES HAVING REQUIRED A MOUNT WERE RECEIVED BY THE ASSESSEE AND THEY WERE DEPOSITED. AFTER CLEA RING THE CHEQUES, THE ASSESSEE USED TO WITHDRAW THE CASH AMOUNT AND THE C ASH WITHDRAWN WAS RETURNED BACK TO THE PARTIES WHO HAD TAKEN BOGUS IN VOICES AFTER DEDUCTING THEIR PREFIXED COMMISSION. IN THIS CASE, IT IS NOTE D THAT THE ASSESSEE HAD SHOWN PURCHASES FROM THE ABOVE COMPANY OF SHRI PRAV EEN KUMAR JAIN AMOUNTING TO RS. 20,96,965/-. THE AO ON EXAMINATION OF THE RECORDS FOUND THAT NO ACTUAL PURCHASES WERE MADE FROM THESE PARTIES BUT THEIR NAMES WERE ONLY USED TO INFLATE THE BUSINESS EXPENS ES AND THEREBY REDUCING THE INCOME CHARGEABLE TO TAX. ACCORDING TO THE AO, IT IS ITA NO.879/JP/2016 M/S. LUNA WAT GEMS CORPORATION. VS DCIT, CIRCLE - 2, JAIPUR 9 ESTABLISHED ON THE BASIS OF INFORMATION PROVIDED BY THE INVESTIGATION WING THAT PURCHASE FROM THE PARTIES ARE BOGUS AND T HE BOGUS PURCHASES PERTAINING TO THE ASSESSMENT YEAR UNDER CONSIDERATI ON REPRESENTING INCOME OF RS. 20,96,965/- HAD THEREFORE, ESCAPED AS SESSMENT. THE AO NOTED THAT IT WAS FAILURE ON THE PART OF THE ASSESS EE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. HENCE REASONS FOR REOPENING OF THE CASES WERE RECORDED AND NOTICE U/S 148 WAS ISSUED ON 24-03-2014 WHICH WAS DULY SERVED UPON THE ASSESSEE. IT IS ALSO NOTED THAT COPY OF REASONS RECORDED WERE SUPPLIED TO THE ASSES SEE ALONGWITH NOTICE U/S 142(1) AND NOTICE U/S 143(2) DATED 21-04-2014. THE AO ON EXAMINATION OF PURCHASE DETAILS NOTED THAT THE ASSE SSEE HAD SHOWN PURCHASES FROM M/S. JPK TRADING PVT. LTD AMOUNTING TO RS. 20,96,965/-. AS PER THE STATEMENT OF SHRI PRAVEEN KUMAR JAIN, IT WAS FOUND THAT M/S. JPK TRADING PVT. LTD HAD NEVER SOLD ANY GOODS AND W ERE ONLY ISSUING BOGUS SALES INVOICES AND CHARGED COMMISSION. THE ST ATEMENT OF SHRI PRAVEEN KUMAR JAIN IS RECORDED AT PAGES 2 AND 3 OF THE ASSESSMENT ORDER. ACCORDINGLY, THE ASSESSEE WAS SHOW CAUSED VIDE NOTE SHEET ENTRY DATED 24-07-2014 AS TO WHY THE PURCHASES MADE FROM M/S. J PK TRADING (I) PVT. LTD MAY NOT BE TREATED AS UNEXPLAINED BOGUS PURCHAS ES U/S 69C OF THE I.T. ITA NO.879/JP/2016 M/S. LUNA WAT GEMS CORPORATION. VS DCIT, CIRCLE - 2, JAIPUR 10 ACT, 1961. IT IS NOTED THAT THE ASSESSEE HAD REQUES TED FOR CROSS EXAMINATION OF THE ALLEGED DIRECTOR SHRI PRAVEEEN K UMAR JAIN OF M/S. JPK TRADING (I) PVT. LTD. IT IS NOTED THAT IN THIS CASE TO PROVIDE REASONABLE OPPORTUNITY A LETTER WAS AGAIN SENT TO THE ADDRESS OF M/S. JPK TRADING (I) PVT. LTD BUT IT GOT RETURNED UNSERVED WHICH SHOWED THAT THE ENTITY IS NOT GENUINE. ACCORDING TO THE AO, THE ASSESSEE WAS NOT ABLE TO PROVIDE ANY SATISFACTORY EXPLANATION FOR THE SHOW CAUSE NOTICE ISSUED TO HIM. IT IS NOTED THAT THE AO TAKING THE RESORT OF THE VARIOUS CASE LAWS AS MENTIONED IN THE ASSESSMENT ORDER HAS MADE THE TRADING ADDIT ION OF RS. 5,24,240/-BY DISALLOWING 25% OF UNVERIFIABLE PURCHASES OF RS.20, 96,965/- OBSERVING AS UNDER:- IN THE PRESENT CASE, ASSESSEE HAD CLAIMED PURCHAS ES OF RS. 20,96,965/- FROM M/S. JPK TRADING (I) PVT. LTD. AND THIS PARTY IS ONLY ISSUING BOGUS SALES INVOICES FOR THE REASONS GIVEN IN DETAIL IN ABOVE PARA. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE DECISION OF HON'BLE GUJARAT HIGH COURT (SUPR A), I DISALLOW 25% OF THE UNVERIFIABLE PURCHASES OF RS. 20,96,965/- AN D MADE TRADING ADDITION OF RS. 5,24,240/- TO THE DECLARED GROSS PR OFIT OF THE ASSESSEE . THIS WILL RESULT IN ADDITION OF RS. 5,24,240/- IN T HE DECLARED GROSS PROFIT OF THE ASSESSEE. IN FIRST APPEAL, IT IS NOTED THAT THE LD. CIT(A) HA S CONFIRMED THE ACTION OF THE AO AS TO INITIATION OF PROCEEDINGS U/S 147 OF T HE ACT BY OBSERVING AS UNDER:- (IV) FURTHER, THE OBJECTIONS RAISED BY THE APPELL ANT WITH RESPECT TO INITIATION OF PROCEEDINGS U/S 147 OF THE ACT WAS ALSO ITA NO.879/JP/2016 M/S. LUNA WAT GEMS CORPORATION. VS DCIT, CIRCLE - 2, JAIPUR 11 DEALT BY THE AO VIDE ITS ORDER DATED 18-06-2014. IT MAY BE MENTIONED THAT AT THE TIME OF INITIATION OF PROCEED INGS U/S 147 OF THE ACT, THE AO MUST HAVE SOME REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND HE IS NOT REQUIRE D TO PROVE AT ALL THAT THE INCOME HAS ESCAPED ASSESSMENT. (V) IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD THA T THE AO WAS JUSTIFIED IN REOPENING THE CASE OF THE APPELLAN T FOR THE YEAR UNDER CONSIDERATION U/S 147 OF THE ACT. HENCE, THIS GROUND OF APPEAL IS REJECTED. FURTHER THE LD. CIT(A) HAS REDUCED THE TRADING ADDI TION TO RS. 5,24,240/- IN VIEW OF THE DECISION OF ITAT JAIPUR BENCH DATED 22-10-2014 IN THE CASES OF ANUJ KUMAR VARSHNEY VS ITO (ITA NO.187/JP/ 2012) WHEREIN THE ITAT JAIPUR BENCH HAS HELD THAT 15% OF THE UNVE RIFIABLE / BOGUS PURCHASE IS TO BE ADDED TO THE INCOME OF THE ASSESS EE. THE RELEVANT OBSERVATION OF THE LD. CIT(A) IS AS UNDER:- (VI) IT IS NOTED THAT IN VARIOUS RECENT JUDGEMENT OF ITAT, JAIPUR BENCH, THE HON'BLE BENCH HAS UPHELD 15% DISA LLOWANCE OF BOGUS / UNVERIFIABLE PURCHASES FOLLOWING ITS JUD GEMENT DATED 22-10-2014 IN BATCH OF CASES ANUJ KUMAR VARSHNEY VS ITO (ITA NO. 187/JP/2012) AND OTHERS. THE AO HAS NOT DO UBTED THE SALE OF THE APPELLANT MEANING THERE BY THE APPELLAN T MUST HAVE PURCHASED THE GOODS SOLD BY IT FROM SOME OTHER SOUR CES AND IN ORDER TO INFLATE ITS EXPENSES, IT PROCURED BOGUS IN VOICES FROM THE CONCERN CONTROLLED BY SHRI P.K. JAIN. RESPECTFU LLY FOLLOWING THE ABOVE REFERRED DECISION OF HON'BLE ITAT JAIPUR , IT IS HELD THT THE 15% OF UNVERIFIABLE/BOGUS PURCHASES IS TO B E ADDED TO THE INCOME OF THE APPELLANT. THEREFORE, OUT OF THE ADDITION OF RS. 5,24,240/- MADE BY THE AO THE ADDITION TO THE E XTENT OF RS. 3,14,545/- (BEING 15% OF 20,96,965/-) IS HEREBY SUS TAINED AND THE REMAINING ADDITION OF RS. 2,96,695/- IS HEREBY DELETED. TAKING INTO CONSIDERATION THE ABOVE FACTS AND CIRCU MSTANCES OF THE CASE, WE NOTED THAT THE LD. CIT(A) HAS ELABORATELY DISCUS SED IN THE ISSUES RAISED ITA NO.879/JP/2016 M/S. LUNA WAT GEMS CORPORATION. VS DCIT, CIRCLE - 2, JAIPUR 12 BY THE ASSESSEE IN HIS ORDER WHICH DOES NOT REQUIRE ANY INTERFERENCE IN THE PRESENT SITUATION. IN THIS VIEW OF THE MATTER, WE C ONFIRM THE ORDER OF THE LD. CIT(A).THUS THE APPEAL OF THE ASSESSEE IS DISMI SSED. 3.0 IN THE RESULT, THE APPEAL THE ASSESSEE IS DISM ISSED ORDER PRONOUNCED IN THE OPEN COURT ON 9 -02-2018. SD/- SD/- FOT; IKY JKO HKKXPUN (VIJAY PAL RAO) ( BHAGCHAND) U;KF;D LNL; / JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 9 /02/ 2018 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. LUNAWAT GEMS CORPORATION, JAI PUR 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CIRCLE 2, JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 879/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR