ITO, Jaipur V. GEM CRAFT ENTERPRISES P LTD., Jaipur

ITA 89/JPR/2011

• Counselvise Citation: 8923114 RSA 2011
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 02-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Keywords: Rejection of books of accounts

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.89/ JP/2011 ASSESSMENT YEAR 2006-07 PAN: AACCG 3517 H THE ITO VS. M/S. GEM CRAFT ENTERPRISES (P) LTD. WARD- 2 (2) 957, MOOKIM HOUSE, DARIBA PAN JAIPUR SUBHASH CHOWK, JAIPUR (APPELLANT ) (RESPONDENT) DEPARTMENT BY : SHRI D.K. MEENA ASSESSEE BY : NONE ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-1, JAIPUR DATED 29-11-2010 FOR THE ASSESSMENT YEAR 20 06-07. 2.1 THE FIRST GROUND OF APPEAL OF THE REVENUE IS T HAT THE LD. CIT(A) HAS ERRED IN DELETING THE TRADING ADDITION OF RS. 8,19, 922/-. 2.2 THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING AND EXPORTS OF PRECIOUS AND SEMI PRECIOUS GEM STONES. D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO REQUIRED THE ASSESSE E TO FILE THE QUALITATIVE AND QUANTITATIVE DETAILS OF THE CLOSING STOCK BUT S UCH DETAILS WERE NOT FILED. THE AO THEREFORE, HELD THAT THE CLOSING STOCK OF TH E ASSESSEE IS ON ESTIMATE BASIS AND IS NOT SUBJECT TO VERIFICATION. THE AO NO TICED THAT THE ASSESSEE HAS 2 MADE PURCHASES TO THE EXTENT OF RS. 32,79,689/- FRO M SEVEN PARTIES. SUCH PARTIES HAVE BEEN NOTICED BY THE INVESTIGATION WING FOR PROVIDING BOGUS BILLS. THE AO FROM PAGES 2 TO 4 IN HIS ORDER HAS RE FERRED TO THE INFORMATIONS/ EVIDENCES AVAILABLE WITH THE DEPARTMENT FOR COMING TO THE CONCLUSION THAT THE SEVEN PARTIES FROM WHOM THE ASSESSEE HAS SHOWN PURCHASES WERE INDULGING IN ISSUING BOGUS BILLS. THE ASSESSEE WAS REQUIRED TO PRODUCE THE PARTIES ALONGWITH THEIR BOOKS OF ACCOUNTS. HOWEVER, THESE PARTIES WERE NOT PRODUCED. THE AO THEREFORE, ISSUED A SHOW CAUSE LET TER DATED 16 TH DEC. 2008 AND THIS SHOW CAUSE IS AVAILABLE AT PAGES 4 TO 7 OF THE ASSESSMENT ORDER. THE ASSESSEE FILED THE REPLY VIDE LETTER DATED 22 ND DEC. 208 AND THE REPLY HAS BEEN REPRODUCED BY THE AO AT PAGE 7OF THE ASSESSMENT ORD ER. THE REPLY OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE. THE AO ACCORDING LY REJECTED THE BOOKS OF ACCOUNTS. FOR REJECTION OF BOOKS OF ACCOUNTS, TH E AO HAS REFERRED TO THE DECISIONS OF JAIPUR BENCH AS WELL AS RAJASTHAN HIGH COURT. AFTER REJECTING THE BOOKS OF ACCOUNTS, THE AO MADE THE TRADING ADDI TION OF RS. 8,19,922/- WHICH REPRESENTED 25% OF THE UNVERIFIABLE PURCHASES . 2.3 THE LD. CIT(A) HAS REFERRED TO VARIOUS DECISION S OF JAIPUR TRIBUNAL IN WHICH IT HAS BEEN HELD THAT NON-VERIFIABLE PURCHASE S CONSTITUTED A SERIOUS DEFECT IN THE BOOKS OF ACCOUNTS. THUS REJECTION OF BOOKS OF ACCOUNTS WAS UPHELD BY THE LD. CIT(A). THE LD. CIT(A) NOTICED TH AT THE ASSESSEE HAS 3 SHOWN GROSS PROFIT RATE OF 19.97% AS AGAINST 19.92% IN THE IMMEDIATELY PRECEDING YEAR. SINCE THE GROSS PROFIT RATE DISCLOS ED DURING THE YEAR IS BETTER AS COMPARED TO LAST YEAR, THEREFORE, THE LD. CIT(A) DELETED THE TRADING ADDITION OF RS. 8,19,922/-. 2.4 WE HAVE HEARD THE LD. DR AND PERUSED THE MATERI ALS AVAILABLE ON RECORD. THE JAIPUR BENCH IS CONSISTENTLY HOLDING TH AT BOOKS OF ACCOUNTS ARE TO BE REJECTED IN CASE THERE ARE NON-VERIFIABLE PUR CHASES. IT HAS BEEN NOTICED THAT THE PARTIES WHICH ARE ISSUING BOGUS BILLS ARE CHARGING COMMISSION AND SUCH COMMISSION IS NOT BEING REFLECTED IN THE BOOKS OF ACCOUNTS. WE ARE NOT AWARE TO THE QUANTUM OF NON-VERIFIABLE PURCHASES OF THE IMMEDIATELY PRECEDING YEAR. HOWEVER, LOOKING TO THE QUANTUM OF NON-VERIFIABLE PURCHASES, WE FEEL THAT IT WILL BE FAIR AND REASONA BLE TO RESTRICT THE TRADING ADDITION TO THE EXTENT OF RS. 50,000/- AS AGAINST T HE TRADING ADDITION OF RS. 8,19,922/- MADE BY THE AO. 3.1 THE SECOND GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN REDUCING THE ADDITION OF RS. 50,000/- TO R S. 17,681/- ON ACCOUNT OF DISALLOWANCE OUT OF PRINTING AND STATIONARY AND EXH IBITION EXPENSES. 3.2 BEFORE THE LD. CIT(A), IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT DISALLOWANCE MADE BY THE AO IS UNJUST AND EXCE SSIVE. HENCE A REQUEST 4 WAS MADE EITHER TO DELETE OR TO REDUCE THE ADDITION . THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO 1/10 TH OF THE EXPENSES. 3.3 AFTER HEARING THE LD. DR AND ON PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, WE FEEL THAT THE LD. CIT(A) WAS JUSTIFIED I N RESTRICTING THE DISALLOWANCE TO RS. 17,681/-. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 05-08 -2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 05 /08/2011 *MISHRA COPY FORWARDED TO :- 1. THE ITO- 2(2), JAIPUR 2. M/S. GEM CRAFT ENTERPRISES (P) LTD., JAIPUR 3 THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5 THE LD.DR 6 THE GUARD FILE (ITA NO.89/JP /11) A.R, ITAT, JAIPUR