SHRI JITENDRA KUMAR NIGAM, Jaipur V. DCIT, Jaipur

ITA 881/JPR/2011

• Counselvise Citation: 88123114 RSA 2011
• Duration Of Justice: 2 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 14-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Rejection of books of accounts
• Section: 131

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JAIPUR BENCH JAIPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 881/JP/2011 (A.Y. 2008-09) PAN NO. ABQPN 9470 J JITENDRA KUMAR NIGAM, VS. DCIT, CIRCLE-2, 3571, NIGAM HOUSE, KGB KA RASTA, JAIPUR. JOHARI BAZAR, JAIPUR. (APPELLANT) (RESPONDENT) ITA NO. 838/JP/2011 (A.Y. 2008-09) PAN NO. ABQPN 9470 J ACIT, CIRCLE-2, VS. SHRI JITENDRA KUMAR NIGAM, JAIPUR. NIGAM HOUSE, KGB KA RASTA, JOHARI BAZAR, JAIPUR. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.C. PARWAL DEPARTMENT BY : SHRI D.C. SHARMA - D.R. DATE OF HEARING : 28/01/2014. DATE OF PRONOUNCEMENT : 30/01/2014. O R D E R 2 PER N.K.SAINI, A.M THESE CROSS APPEALS BY THE ASSESSEE AND THE DEPART MENT ARE DIRECTED AGAINST THE ORDER DATED 18/07/2011 OF CIT( A)-I, JAIPUR. THE ONLY EFFECTIVE GROUND RAISED IN THE ASSESSEES APPEAL READS AS UNDER:- 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE TRADING ADDITION OF RS. 13,24,130/- BY APPLYING G.P . RATE OF 9% AS AGAINST G.P. RATE OF 7.18% DECLARED BY THE AS SESSEE. 2. THE ASSESSEE CRAVES TO ALTER, AMEND, AND MODIFY ANY OF THE GROUNDS OF APPEAL. 3. NECESSARY COST BE ALLOWED TO THE ASSESSEE. THE GROUND RAISED IN THE DEPARTMENTAL APPEAL, READ S AS UNDER:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE OF TH E CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN DIRECTING TO MAK E TRADING ADDITION OF RS. 13,24,130/- BY APPLYING G.P. RATE OF 9% AS AGAI NST THE TRADING ADDITION OF RS. 27,42,651/- MADE BY THE AO BY DISAL LOWING @ 25% OF UNVERIFIABLE PURCHASES OF RS. 1,09,70,605/- THOU GH THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE IT ACT, 1961 WAS UPHELD, KEEPING IN VIEW THE DECISION OF LD. CIT(A) IN THE C ASE OF M/S. NAND KISHORE MEGHRAJ IN ITA NO. 43/JP/2009 AND CONFIRMED BY THE HONBLE ITAT, JAIPUR BENCH, JAIPUR. 2 FROM THE ABOVE GROUNDS, IT IS CLEAR THAT THE GRIEV ANCE OF BOTH THE PARTIES RELATES TO THE CONFIRMATION/DELETI ON OF THE TRADING ADDITION MADE BY THE AO. 3 3. THE ASSESSEE DERIVED INCOME FROM MANUFACTURING AN D EXPORT OF PRECIOUS AND SEMI PRECIOUS STONES, GOLD A ND SILVER JEWELLERY AND FILED HIS RETURN OF INCOME ON 30/09/2 008 DECLARING AN INCOME OF RS. 20,55,450/-. LATER ON, CASE WAS SE LECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE AO NOTICED THAT THE ASSESSEE HAD MADE PURCHASES OF RS. 1,09,70,605/- FROM 12 PARTIES, WHICH HAD BEEN IDENTIFIED AS ENTRY OPERATORS AS PER THE INVESTIGATIONS MADE BY THE DEPARTMENT. THE AO ALSO CONDUCTED AN INDEPENDENT ENQUIRY AND ASKED THE ASSE SSEE TO PRODUCE THOSE PARTIES, WHICH HE FAILED TO DO, THE A O ISSUED SUMMONS UNDER SECTION 131 OF THE I.T. ACT, 1961 (HE REINAFTER REFERRED TO AS ACT, IN SHORT), BUT THOSE SUMMONS WERE RETURNED UNSERVED. THEREAFTER, AN INSPECTOR WAS DEPUTED TO SERVE THE SUMMONS, WHO REPORTED THAT THE CONCERNED PARTIES D ID NOT EXIST AT THE GIVEN ADDRESSES. THE ASSESSEE WAS CONFRONT ED WITH ALL THE INVESTIGATIONS DONE BY THE OFFICE OF THE AO. HOWEVE R, THE ASSESSEE AGAIN FAILED THE PRODUCE THE PARTIES. THEREAFTER, AO REJECTED THE BOOKS OF ACCOUNTS BY INVOKING THE PROVISIONS OF SEC TION 145(3) OF THE ACT. RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF KANCHWALA GEMS VS. JCIT 288 ITR 10 (SC) . THE AO ESTIMATED INCOME OF THE ASSESSEE BY DISAL LOWING 25% OF THE PURCHASES FROM THE UNVERIFIABLE PARTIES BY R ELYING ON THE 4 DECISION OF HONBLE GUJRAT HIGH COURT IN THE CASE O F SANJAY OILCAKE INDUSTRIES VS.CIT (2008) 10 DTR 153 . ACCORDINGLY, THE ADDITION OF RS. 27,42,651/- WAS MADE TO THE DECLARED PROFIT OF THE ASSESSEE. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER T O THE LD. CIT(A) AND SUBMITTED THAT THE G.P. DECLARED DURING THE YEAR WAS COMPARABLE WITH THE EARLIER YEARS AND THE SLIGHT DE CLINE IN G.P. RATE WAS ON ACCOUNT OF TOUGH COMPETITION. IT WAS F URTHER STATED THAT THE ASSESSEE HAD BEEN ABLE TO MAINTAIN THE G.P . AND SALES BY REDUCING THE PRICES, HENCE, THE RESULT DECLARED BY THE ASSESSEE BE ACCEPTED. IT WAS FURTHER STATED THAT THE SIMILAR A DDITION WAS MADE IN THE A.YS. 2006-07 & 2007-08, WHEREIN THE IT AT, JAIPUR BENCH VIDE ITS ORDER DATED 10/03/2011 IN I.T.A.NO. 1370 & 1371/JP/2010, DELETED THE DISALLOWANCE MADE @ 25% O F THE PURCHASES AND UPHELD THE APPLICATION OF G.P. RATE A T 8.11%. THE ASSESSEE ALSO FURNISHED THE POSITION OF THE G.P. DE CLARED DURING THE YEAR AS WELL AS IN THE EARLIER YEARS AS UNDER:- ASSESSMENT YEAR SALES GROSS PROFIT G.P. RATE 2006-07 10,82,65,564/- 87,77,546/- 8.11% 2007-08 8,99,95,783/- 68,64,340/- 7.63% 2008-09 7,27,78,920/- 52,25,973/- 7.18% 5 5. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE OBSERVED THAT THE AO CONDUCTED INDEPENDENT ENQUIRIE S, BUT THE ASSESSEE IN SPITE OF REPEATED OPPORTUNITIES, WAS UN ABLE TO REBUT THE EVIDENCE BROUGHT ON RECORD BY THE DEPARTMENT RE GARDING UN- VERIFIABILITY OF THE PURCHASES, CLAIMED TO HAVE BEE N MADE BY HIM, THEREFORE, BOOKS OF ASSESSEE WERE UNRELIABLE. ACCO RDINGLY, THE ACTION OF THE AO IN REJECTING THE BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE ACT WAS UPHELD. HOWEVER, THE LD. CIT( A) BY FOLLOWING THE ORDER OF THE ITAT, JAIPUR BENCH IN AS SESSEES OWN CASE AND CONSIDERING THE PAST HISTORY OF THE CASE, DIRECTED THE AO TO APPLY G.P. RATE OF 9% BY OBSERVING IN PARA 4 OF THE IMPUGNED ORDER AS UNDER:- REGARDING THE ESTIMATION OF INCOME THE CONSISTENT VIEW OF THE HONBLE ITAT JAIPUR BENCH HAS BEEN THAT THE PAST HI STORY OF THE CASE IS THE BEST GUIDE FOR ESTIMATING INCOME OF THE ASSESSEE AFTER REJECTION OF BOOKS OF ACCOUNTS. ON PERUSAL OF THE DETAILS SUBMISSIONS OF THE AR, IT IS SEEN THAT THE G.P. HAS DECLINED THIS YEAR FROM 7.63% IN A.Y. 2007-08 TO 7.18% IN THIS A.Y. O N SALES FROM RS. 8,99,95,783/- TO RS. 7,27,78,920/- IN THE PRESENT A SSESSMENT YEAR. IT WAS ALSO SUBMITTED BY THE AR THAT THE HONBLE IT AT JAIPUR BENCH HAD UPHELD THE APPLICATION OF G.P. AT 8.11% IN THE CASE OF THE ASSESSEE FOR AY 2006-07 ON TOTAL TURNOVER OF RS. 10 ,82,65,564/-. IT HAS BEEN CONSISTENTLY HELD BY THE HONBLE ITAT JAIP UR BENCH THAT G.P. IMPROVES WITH THE DECLINE IN TURNOVER. SINCE THE SALES HAVE DECLINED DURING THIS A.Y. FROM RS. 10,82,65,564/- F OR AY 2006-07 TO RS. 7,27,78,920/- AND THE HONBLE ITAT JAIPUR BENCH HAS HELD 8.11% AS REASONABLE G.P. RATE ON THE TURNOVER OF RS. 10,8 2,65,564/- G.P. OF 9% IS HELD TO BE REASONABLE GIVEN THE DECLINE IN TU RNOVER. THIS GIVES GROSS PROFIT OF RS. 65,50,103/- BUT SINCE THE ASSESSEE HAS 6 ALREADY SHOWN G.P. OF RS. 52,25,973/-, TRADING ADDI TION OF RS. 13,24,130/- IS CONFIRMED DURING THIS YEAR. NOW BOTH THE PARTIES ARE IN APPEAL. 6 . LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE S UBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND ALSO SUBMITTE D THAT THE ISSUE IS COVERED BY THE EARLIER DECISION DATED 10/0 3/2011 OF THE ITAT, JAIPUR BENCH A, JAIPUR IN I.T.A.NO. 1370 & 1371/JP/2010 FOR THE A.Y. 2006-07 & 2007-08 RESPECTIVELY IN ASSE SSEES OWN CASE. COPY OF THE SAID ORDER WAS FURNISHED. 7 . IN HIS RIVAL SUBMISSIONS, LD. D.R. STRONGLY SUPPO RTED THE ORDER OF THE AO AND REITERATED THE OBSERVATIONS MAD E IN THE ASSESSMENT ORDER. 8 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON TH E RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS HAS ALREADY BEEN ADJUDICATED BY THE ITAT, JAI PUR BENCH A, JAIPUR IN ASSESSEES OWN CASE IN I.T.A.NO. 1370 & 1 371/JP/2010 (SUPRA), WHEREIN THE RELEVANT FINDINGS HAVE BEEN GI VEN IN PARA 7 & 8, WHICH ARE REPRODUCED VERBATIM AS UNDER:- 7. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, WE FIND THAT DEPARTMENT DESERVE S TO 7 SUCCEED IN ITS APPEAL IN PART. THE JAIPUR BENCHES OF THE TRIBUNAL ARE TAKING A CONSISTENT VIEW THAT WHERE PURCHASES R EMAINED UNVERIFIABLE, THE REJECTION OF BOOKS OF ACCOUNT ARE CORRECT. HOWEVER, SIMULTANEOUSLY THE JAIPUR BENCHES ARE ALSO TAKING A VIEW THAT ADDITION MADE @ 25% OF THE UNVERIFIABLE P URCHASES ARE ALSO NOT JUSTIFIED AS, IF ANY ADDITION CAN BE M ADE THAT CAN BE MADE TAKING INTO CONSIDERATION THE PAST HISTORY OF THE CASE AND TAKING INTO CONSIDERATION THE CURRENT EVENTS OF THE CASE. SINCE THE TRADING RESULTS SHOWN BY ASSESSEE ARE MARGINALL Y LOW AS COMPARED TO EARLIER YEAR, THE LD. CIT (A) MADE AN A DDITION OF RS. 1,00,000/-. HOWEVER, WE FIND THAT TRADING ADDITION SUSTAINED BY LD. CIT (A) AT RS. 1,00,000/- IS ON LOWER SIDE TAKI NG ACCOUNT THE UNVERIFIABLE PURCHASES OF RS. 3,51,76,910/- AND TAK ING INTO ACCOUNT THAT THE PARTIES WHO ISSUED BILLS CHARGES C OMMISSION @ 0.20% TO 0.60%. WE FEEL THAT IF A TRADING ADDITION IS SUSTAINED AT RS. 3 LACS FOR A.Y. 2006-07 THAT WILL MEET THE E NDS OF JUSTICE. 8. REGARDING SUBSEQUENT YEAR, THE FACTS ARE SIMILAR . THE ADDITION WAS MADE @ 25%. THE LD. CIT (A) TAKING INT O CONSIDERATION THE PAST HISTORY DIRECTED THE AO TO A PPLY G.P. RATE AT 8.11% AGAINST DECLARED G.P. RATE OF 7.62% WHICH WAS LOWER THAN THE G.P. RATE DECLARED IN THE IMMEDIATELY PREC EDING YEAR. THEREFORE, THE AO DIRECTED TO APPLY G.P. RATE AT 8. 11% ON DECLARED TURNOVER OF RS. 899.96 LACS. THE LD. CIT (A) HAS ALREADY MADE A FAIR ADDITION BY DIRECTING THE AO TO APPLY G .P. RATE OF 8.11% AS AGAINST DECLARED G.P.RATE OF 7.62%. SINCE WE ARE TAKING A CONSISTENT VIEW THAT WHERE CERTAIN PURCHAS ES REMAIN UNVERIFIABLE, THEN THE ADDITION CAN BE MADE TAKING INTO CONSIDERATION THE PAST HISTORY AND THE CURRENT EVEN TS OF THE CASE. CURRENT EVENTS OF THE CASE ARE THAT G.P. DEC LARED BY ASSESSEE IS MUCH LOWER THAN THE G.P. DECLARED IN TH E EARLIER YEAR. THE FACTS AND CIRCUMSTANCES ARE SIMILAR IN BO TH THE YEARS. THEREFORE, WE HOLD THAT LD. CIT (A) WAS JUSTIFIED I N DIRECTING THE AO TO RECALCULATE THE TRADING ADDITION BY APPLYING G.P. RATE OF 8.11% AS AGAINST 7.62% DECLARED BY ASSESSEE. ACCOR DINGLY THE ORDER OF LD. CIT (A) IN THIS RESPECT IS CONFIRMED. 9. SINCE THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS INVOLVED IN THE EARLIER YEARS, THE ONLY DIFFERENCE IS THAT THE 8 TURNOVER FOR THE YEAR UNDER CONSIDERATION IS LOWER AT RS. 7,27,78,920/- IN COMPARISON TO RS. 8,99,95,783/- IN THE PRECEDING YEAR. IT IS ALSO NOTICED THAT THE G.P. R ATE DECLARED BY THE ASSESSEE IS ALSO DECLINING YEAR AFTER YEAR AND THE REASON FOR THE SAME AS GIVEN BY THE ASSESSEE IS THAT THERE IS A TOUGH COMPETITION AND TO MAINTAIN THE SALES, THE ASSESSEE REDUCED THE PRICE. WE, THEREFORE, CONSIDERING THAT FACT, ARE O F THE VIEW THAT IT WOULD BE FAIR AND REASONABLE IF THE G.P. RATE OF 8% IS APPLIED FOR THE YEAR UNDER CONSIDERATION AS AGAINST 8.11% DIREC TED TO BE APPLIED BY THE ITAT FOR THE EARLIER A.YS. 2006-07 & 2007-08. ACCORDINGLY, WE MODIFY THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO WORK OUT THE INCOME OF THE ASSESSEE BY APPLYI NG THE G.P. RATE OF 8% INSTEAD OF 9% DIRECTED TO BE APPLIED BY THE LD. CIT(A). 10 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY A LLOWED AND THAT OF THE DEPARTMENT IS DISMISSED. (ORDER PRONOUNCED IN THE COURT ON 30 TH JANUARY, 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30 TH JANUARY, 2014. VR/- 9 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R BY ORDER ASSISTANT REGISTRAR, ITAT, JAIPUR.