DAKSH JEWELLERY PVT. LTD., JAIPUR V. INCOME TAX OFFICER, WARD-5-2, JAIPUR

ITA 92/JPR/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6845 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 25-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Rejection of books of accounts; Opportunity of cross examination; Accommodation entries
• Section: 133(6); 44AB; 145(3); 131; 6

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC HES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRA M SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 92/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2013-14 DAKSH JEWELLERY PVT. LTD. B-252, JANTA COLONY, JAIPUR CUKE VS. INCOME TAX OFFICER, WARD-5(2), NCRB, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAECD0793Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : NONE JKTLO DH VKSJ LS @ REVENUE BY : MS CHANCHAL MEENA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 03/09/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 11/09/2020 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-2, JAIPUR DATED 19.11.2018 WHEREIN THE ASSES SEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LEARNED ASSESSING OFFICER HAD ERRED AT LAW AS WELL AS ON FACTS IN TAKING THE PURCHASES MADE FROM MAXIM US GEMS OF RS. 88,89,075/- AND SURYA DIAM OF RS. 45,88,920/- I N TOTAL OF RS. 134,77,995/- AS BOGUS PURCHASES AND THE LEARNED CIT(A) FURTHER ERRED IN CONFIRMING THE ACTION OF THE A.O B Y TREATING THE SAME AS BOGUS PURCHASE. ITA NO. 92/JP/2019 DAKSH JEWELLERY PVT. LTD., JAIPUR VS. ITO, JAIPUR 2 2. THAT THE LEARNED CIT(A) HAD ERRED AT LAW AS WELL AS ON FACTS IN INVOKING THE PROVISIONS OF SECTION 145(3) WITHOUT POINTING OUT ANY DEFECTS, BUT FOR CONFIRMING THE TRADING ADD ITION WHEN PROVISIONS OF SECTION 145(3) WERE NOT INVOKED BY TH E A.O. 3. THAT THE LEARNED ASSESSING OFFICER HAD ERRED AT LAW AS WELL AS ON FACTS IN TAKING 25% OF THE TOTAL AMOUNT OF PU RCHASE VALUE BEING AMOUNT OF RS. 33,69,498/- AS INCOME IN THE NA TURE OF TRADING ADDITIONS WHICH THE LEARNED CIT(APPEALS) HA S REDUCED TO RS. 17,87,916/-. 2. THE HEARING OF THE MATTER WAS SCHEDULED THROUGH VIDEO CONFERENCING IN VIEW OF THE ONGOING COVID-19 PANDEM IC SITUATION PREVAILING IN THE COUNTRY. NONE HAS APPEARED ON BE HALF OF THE ASSESSEE, HOWEVER, A LETTER DATED 29.08.2020 WAS FI LED WITH THE REGISTRY WHEREIN THE LD. A/R SHRI S.C JAIN HAS STAT ED THAT THE WRITTEN SUBMISSION FILED ON BEHALF OF THE ASSESSEE MAY BE C ONSIDERED AND MATTER MAY BE DECIDED. IT WAS ACCORDINGLY DECIDED T O HEAR THE MATTER CONSIDERING THE WRITTEN SUBMISSIONS AND OTHER MATER IAL AVAILABLE ON RECORD. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADIN G OF JEWELLERY STUDDED WITH DIAMOND AND OTHER PRECIOUS STONES ITEM S. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER ISSUED A SHOW- CAUSE NOTICE DATED 13.01.2016 STATING THAT PURCHASE S MADE BY THE ASSESSEE FROM M/S SURYA DIAM AND M/S MAXIMUS GEMS A RE IN THE NATURE OF BOGUS PURCHASES BEING MADE FROM CONCERNS WHICH ARE RELATED TO M/S BHANWAR LAL JAIN GROUP ON WHOM THE INVESTIGA TION WING OF THE ITA NO. 92/JP/2019 DAKSH JEWELLERY PVT. LTD., JAIPUR VS. ITO, JAIPUR 3 DEPARTMENT HAS CARRIED OUT SEARCH OPERATIONS ON 03. 10.2013 AND HIS STATEMENTS WERE RECORDED WHEREIN HE HAS ADMITTED TH AT HE IS NOT SELLING THE GOODS BUT PROVIDING THE BILLS AND AFTER RECEIPT OF THE PAYMENT OF THE BILL, THE SAME IS REFUNDED BACK IN CASH. THE REFORE, TO SHOW-CAUSE WHY PURCHASES SO MADE BY THE ASSESSEE FROM THESE TW O CONCERNS SHOULD NOT BE CONSIDERED AS NON-GENUINE PURCHASES. IN RESPONSE, THE ASSESSEE FILED ITS SUBMISSIONS WHICH WERE CONSIDERE D BUT NOT ACCEPTED BY THE ASSESSING OFFICER AND HE PROCEEDED TO MAKE A DDITION BY DISALLOWING 25% OF SUCH PURCHASES AMOUNTING TO RS 3 3,69,498/-. ON APPEAL, THE LD CIT(A) HELD THAT THE TRADING RESULTS ARE NOT ACCEPTABLE AND THE BOOKS OF ACCOUNTS WERE REJECTED U/S 145(3) AND NET LOSS OF RS. 18,02,566/- CLAIMED BY THE ASSESSEE WAS REDUCED AND ASSESSED AT NIL AND PART RELIEF OF RS. 15,81,582/- WAS ALLOWED AND REMAINING ADDITION OF RS 17,87,916/- WAS SUSTAINED. AGAINST THE SAID FINDINGS, THE ASSESSEE IS NOW IN APPEAL BEFORE US. 4. IN ITS WRITTEN SUBMISSION, THE ASSESSEE HAS SUBM ITTED THAT THE BOOKS OF ACCOUNTS WERE DULY MAINTAINED AND AUDITED U/S 44AB AND THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DEFECTS I N THE BOOKS OF ACCOUNTS SO MAINTAINED BY THE ASSESSEE EXCEPT THAT THE ASSESSING OFFICER WAS INFLUENCED FROM THE FINDINGS OF THE SEA RCH OPERATIONS ON M/S BHANWAR LAL JAIN GROUP WITH WHOM M/S SURYA DIAM AND MAXIMUS GEMS WERE HAVING RELATIONSHIP. IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS NOT INVOKED THE PROVISIONS OF SECTION 145(3) FO R REJECTING THE BOOK RESULTS BUT HAVE ARBITRARILY APPLIED HIS OWN OPINIO N FOR MAKING THE TRADING ADDITION. IT WAS SUBMITTED THAT COMPLETE DE TAILS OF THE PARTIES AND TRANSACTIONS CONSISTING OF THE FIRMS ACCOUNT, PURCHASE BILL COPIES AND BANK ACCOUNTS VIDE WHICH THE PAYMENTS OF PURCHA SES WERE MADE ITA NO. 92/JP/2019 DAKSH JEWELLERY PVT. LTD., JAIPUR VS. ITO, JAIPUR 4 WERE FILED DURING THE COURSE OF ASSESSMENT PROCEEDI NGS. IT WAS SUBMITTED THAT IT IS ONLY THE PRESUMPTION OF THE AO AS HE HAS NOT BROUGHT ANY EVIDENCE ON RECORD WHICH INDICATES THAT THE MONEY PAID TO BOTH THESE PARTIES AGAINST THE PURCHASES MADE WAS R ETURNED BACK IN CASH OR BY OTHER MODE TO THE ASSESSEE COMPANY. IT W AS SUBMITTED THAT THE ASSESSING OFFICER HAS NOT ISSUED ANY NOTICE U/S 133(6) AND ISSUED SUMMONS U/S 131 AND THEREBY DENYING THE OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE. IT WAS FURTHER SUBMITT ED THAT THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF M/S SA NJAY OIL CAKE INDUSTRIES IS DISTINGUISHABLE ON FACTS AND HAS BEEN WRONGLY INVOKED BY THE ASSESSING OFFICER. 5. IT WAS FURTHER SUBMITTED THAT ACTION OF THE LD. CIT(A) IN REJECTION OF BOOKS OF ACCOUNTS IS AGAINST THE PROVISIONS OF L AW AS ALL THE COMPONENTS OF TRADING ACCOUNT I.E. OPENING STOCK, P URCHASES, SALES AND CLOSING STOCK ARE ACCEPTED AND NO SPECIFIC DEFECT H AS BEEN POINTED OUT BY THE LD. CIT(A). FURTHER, RELIANCE WAS PLACED ON THE HONBLE RAJASTHAN HIGH COURTS DECISION IN CASE OF GOTAN LIME KHANIJ UDYOG VS. CIT (2002) 256 ITR 243 AND MALANI RAMJIVAN JAGANNATH VS. ACIT (2009) 316 ITR 120. IT WAS ACCORDINGLY SUBMITTED THAT THE ACTION O F REJECTING THE BOOKS OF ACCOUNTS AND INVOKING THE PROVISIONS OF SECTION 145(3) SIMPLY FOR THE TWO PURCHASES BY THE LD. CIT(A) THUS MAY BE QUASHED AND TRADING ADDITION SO CONFIRMED BE ORDERED TO BE DELETED. 6. PER CONTRA, LD. DR IS HEARD WHO HAS RELIED ON TH E FINDING OF THE LOWER AUTHORITIES. IT WAS SUBMITTED THAT IT IS A CL EAR CASE OF ACCOMMODATION ENTRIES WHICH HAS BEEN OBTAINED BY TH E ASSESSEE AS CLEAR FROM THE REPORT OF THE INVESTIGATION WING WHI CH HAS CARRIED OUT ITA NO. 92/JP/2019 DAKSH JEWELLERY PVT. LTD., JAIPUR VS. ITO, JAIPUR 5 SEARCH ON M/S BHANWAR LAL JAIN GROUP WHEREIN STATEM ENTS WERE ALSO RECORDED THAT THESE ARE CONCERNS WHICH ARE CONTROLL ED AND MANAGED BY THE SAID GROUP AND THE PURCHASES SO MADE ARE BOGUS. IT WAS FURTHER SUBMITTED THAT THOUGH THE AO HAS MADE ADDITION OF 2 5% OF SUCH PURCHASES, THE LD CIT(A) HAS INVOKED THE PROVISIONS OF SECTION 145(3) AND HELD THAT THESE ARE UNVERIFIED PURCHASES AND TH E PROFIT HAS BEEN INFLATED BY THE ASSESSEE AND ACCORDINGLY, SHE HAS R EDUCED THE LOSS CLAIMED BY THE ASSESSEE AND TO THAT EXTENT, THE ADD ITION HAS BEEN CONFIRMED. IT WAS ACCORDINGLY SUBMITTED THAT THE O RDER SO PASSED BY THE LD CIT(A) MAY ACCORDINGLY BE CONFIRMED. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IT IS A CASE WHER E THE AO BASED ON INVESTIGATION CARRIED OUT DURING THE COURSE OF SEAR CH IN CASE OF BHANWAR LAL JAIN GROUP HAS COME TO BE CONCLUSION THAT THE A SSESSEE HAS TAKEN ACCOMMODATION ENTRY OF BOGUS PURCHASES FROM TWO CON CERNS TO THE EXTENT OF RS. 1,34,77,995/- AND THE ADDITIONS HAVE BEEN MADE TO THE EXTENT OF 25% OF THE UNVERIFIABLE BOGUS PURCHASES. THE LD CIT(A) HAS GIVEN A FINDING THAT THE ASSESSEE FILED COPIES OF P URCHASE BILLS AND BANK STATEMENT REFLECTING THE PAYMENT THROUGH CHEQUE, HO WEVER, FAILED TO CONTROVERT THE SPECIFIC ADMISSION MADE BY THE SELLE R ENTITIES THAT THEY HAVE GIVEN BOGUS BILLS THROUGH THEIR PAPER CONCERNS AND NO CONFIRMATION WAS FILED FROM THESE CONCERNS IN SUPPORT OF ACTUAL DELIVERY OF GOODS. WE THEREFORE FIND THAT WHERE THE PURCHASES SO MADE CONSTITUTE ALMOST 40% OF TOTAL PURCHASES MADE BY THE ASSESSEE WHICH R EMAIN UNVERIFIED AND UNSUBSTANTIATED IN THE SENSE THAT THE ACTUAL PU RCHASES WERE MADE FROM THESE CONCERNS OR NOT IS NOT CONCLUSIVELY ESTA BLISHED AND THE ASSESSEE HAS THUS FAILED TO DISCHARGE THE INITIAL O NUS CAST ON IT, THE ITA NO. 92/JP/2019 DAKSH JEWELLERY PVT. LTD., JAIPUR VS. ITO, JAIPUR 6 RESULTS SO DECLARED BY THE ASSESSEE CANNOT BE HELD TO REPRESENT TRUE AND FAIR RESULTS AND THUS, THE BOOKS RESULTS SO DECLARE D AND THE BOOKS OF ACCOUNT SO MAINTAINED CANNOT BE HELD RELIABLE AND H AVE BEEN RIGHTLY REJECTED U/S 145(3) BY LD. CIT(A) AND WE DONOT FIND ANY INFIRMITY IN THE SAID DECISION OF THE LD CIT(A) AND TO THAT EXTENT, THE FINDINGS OF THE LD CIT(A) ARE SUSTAINED. HOWEVER, ONCE THE BOOKS OF A CCOUNTS HAVE BEEN REJECTED, THE ASSESSING OFFICER IS REQUIRED TO MAKE THE ASSESSMENT ON THE BASIS OF HIS BEST JUDGMENT AND A FAIR ESTIMATE OF INCOME HAS TO BE MADE INSTEAD OF RESORTING TO MAKING THE ADDITION TO THE BOOK RESULTS WHICH ALREADY STAND REJECTED OR ANY ALTERATION IN T HE BOOK RESULTS AS IN THE INSTANT CASE, WHERE THE LOSS CLAIMED HAS BEEN D ISALLOWED BY THE LD CIT(A) EXERCISING ITS CO-TERMINUS POWERS WITH THAT OF THE ASSESSING OFFICER. THE ASSESSING OFFICER WHILE EXERCISING HIS JURISDICTION CANNOT ACT ARBITRARILY OR CAPRICIOUSLY. THE ASSESSMENT MUST PR OCEED ON JUDICIAL CONSIDERATIONS IN LIGHT OF RELEVANT MATERIAL AVAILA BLE ON RECORD. IN OTHER WORDS, IN ANY CASE OF BEST JUDGMENT, THOUGH THE ELE MENT OF GUESS WORK IS INVOLVED, HOWEVER THE GUESS WORK SHOULD HAVE NEX US WITH THE MATERIAL ON RECORD AND DISCRETION MUST NOT BE EXERC ISED ARBITRARILY OR CAPRICIOUSLY. FOR THE PURPOSES OF MAKING THE BEST JUDGMENT ASSESSMENT, PAST HISTORY OF THE ASSESSEE HAS BEEN H ELD AS RELIABLE AND REASONABLE BASIS FOR ESTIMATION OF PROFITS. IN THE INSTANT CASE, THOUGH THE ASSESSEE WAS INCORPORATED ON 15.12.2011, NO BUS INESS WAS CARRIED OUT IN THE SAID YEAR AND THE CURRENT FINANCIAL YEAR 2011-12 IS THE EFFECTIVE FIRST YEAR OF OPERATIONS AND THE QUESTION OF APPLYING ASSESSEES PAST HISTORY THEREFORE DOESNT ARISE FOR CONSIDERAT ION AS NOT RELEVANT. ALTERNATIVELY, COMPARABLE CASES IN THE SIMILAR LINE OF BUSINESS SHOULD BE CONSIDERED BY THE AUTHORITIES. HOWEVER, WE FIND TH AT THERE IS NOTHING ON RECORD IN RESPECT OF ANY COMPARABLE THIRD PARTY DATA AND THEREFORE, ITA NO. 92/JP/2019 DAKSH JEWELLERY PVT. LTD., JAIPUR VS. ITO, JAIPUR 7 WE DEEM IT APPROPRIATE TO SET-ASIDE THE MATTER TO T HE FILE OF THE AO FOR THE LIMITED PURPOSES OF IDENTIFYING THE COMPARABLE THIRD PARTY DATA AND THE COMPARISON THEREOF WITH GROSS PROFIT OF 8.5% SO DECLARED BY THE ASSESSEE AND THEN DECIDE, THE QUANTUM OF ADDITION B ASIS SUCH VARIATION, IF ANY. THE ASSESSEE IS ALSO DIRECTED TO IDENTIFY SUCH COMPARABLE DATA AND BRING IT TO THE NOTICE OF THE ASSESSING OFFICER FOR HIS EXAMINATION AND VERIFICATION. THE MATTER IS ACCORDINGLY SET-ASI DE TO THE FILE OF THE AO WITH THE AFORESAID DIRECTIONS. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISPOSED O FF IN LIGHT OF AFORESAID DIRECTIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 11/09/2020. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 11/09/2020 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- DAKSH JEWELLERY PVT. LTD., JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-5(2), JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 92/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR