ROHIT OSWAL, Jaipur V. ITO, Jaipur

ITA 930/JPR/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87563 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 19-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: G M MEHTA
• Keywords: Bogus purchase; Business income; Reason to believe; Borrowed satisfaction
• Section: 147; 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 VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 930/JP/2012 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2005-06 ROHIT OSWAL, 570, THAKUR PACHEWAR KA RASTA, JOHARI BAZAR, JAIPUR. CUKE VS. I.T.O. WARD 2(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AAAPO 5230 C VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI G.M. MEHTA (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAJESH OJHA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 31/12/2014 ?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 20/03/2015 VKNS'K @ ORDER PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 07/11/2012 PASSED BY THE LEARNED CIT (A)-I, JAIPUR FOR A.Y. 2005-06 THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- I LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE LEGALITY OF ACTION U/S 147 OF IT ACT, INITIATED BY LEARNED A.O. ON BORROWED INFORMATION WITHOUT MAKING ANY INDEPENDENT INQUIRY OR WITHOUT ITA 930/JP/2012_ ROHIT OSWAL VS. ITO 2 CONFRONTING M/S VIJAY GEMS WHOSE PURCHASES WERE TREATED AS FAKE. II. LEARNED CIT(A) WAS NOT JUSTIFIED IN SUSTAINING ADDITION OF RS. 457,234/- BEING 25% OF PURCHASES FROM VIJAY GEMS BY TREATING IT AS UNVERIFIABLE AND BOGUS PURCHASES IGNORING VARIOUS DECISION OF THIS HONBLE JURISDICTIONAL TRIBUNAL SO ALSO DAY TO DAY STOCK REGISTER MAINTAINED BY THE ASSESSEE WHICH WAS ACCEPTED TO BE CORRECT AND COMPLETE RESULTING IN ACCEPTANCE OF TOTAL SALES RECORDED THEREIN AS GENUI NE (INCLUDING PURCHASED FROM M/S VIJAY GEMS.) 2. THE FIRST GROUND OF APPEAL IS AGAINST LEGALITY OF CHALLENGING THE ACTION U/S 147 OF THE INCOME TAX ACT, 1961 (HEREINAF TER REFERRED AS THE ACT), INITIATED BY THE ASSESSING OFFICER ON BORROWED INFORMATION. THE ASSESSEE IS IN TRADING OF PRECIOUS AND SEMI PRECIOU S STONES. THE ASSESSEE FILED RETURN OF INCOME ON 30/10/2005 DECLA RING TOTAL INCOME OF RS. 2,34,636/-. IN THIS CASE, NOTICE U/S 148 OF TH E ACT WAS ISSUED AFTER RECORDING THE REASONS BY THE LEARNED ASSESSING OFF ICER, THE ASSESSEE RAISED OBJECTION AGAINST THE ISSUANCE OF NOTICE U/S 148 OF THE ACT BEFORE THE ASSESSING OFFICER AND SAME WAS DECIDED AND REJEC TED VIDE HIS LETTER DATED 27/08/2010. IT WAS NOTICED THAT THE ASSESSEE H AS MADE PURCHASES OF RS. 18,28,937/- FROM M/S VIJAY GEMS IN F.Y. 2004-05. A SURVEY WAS CONDUCTED BY THE BCTT WING OF THE DEPARTME NT, JAIPUR IN VIJAY GROUP OF CASES DURING THE F.Y. 2007-08 AND IT WAS FOUND THAT M/S RESHU EXPORTS WHICH IS THE PROPRIETORSHIP CONCERN OF THE ASSESSEE WAS ITA 930/JP/2012_ ROHIT OSWAL VS. ITO 3 BENEFICIATED BY SALES OF RS. 18,28,937/- IN F.Y. 20 04-05 FROM M/S VIJAY GEMS WHICH IS A PROPRIETORSHIP CONCERN OF SHRI RAJE NDRA KUMAR VIJAY AND ENGAGED IN THE BUSINESS OF ISSUING BOGUS BILLS ONLY. STATEMENT OF SHRI RAJENDRA KUMAR VIJAY, WHO IS PROPRIETOR OF M/S VIJAY GEMS WERE RECORDED ON OATH ON 03/03/2008 AND 09/05/2008 WHEREI N HE ADMITTED THAT NO REAL SALES AND PURCHASES ARE BEING MADE BY M/S VIJAY GEMS FROM WHOM PURCHASES OF RS. 18,28,937/- HAS BEEN CLAI MED BY THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD UPHELD THE ACTION OF THE ASSESSING OFFICER BY OBSERVING TH AT THE LEARNED ASSESSING OFFICER HAD FOLLOWED ALL THE PROCEDURES RE QUIRED FOR ISSUING NOTICE U/S 147 OF THE ACT AND SINCE THERE ARE NO PR OCEDURAL LAPSE. THE INITIATION OF ACTION U/S 147 BY THE ASSESSING OFFIC ER IS UPHELD. THE LEARNED ASSESSING OFFICER HAD REASON TO BELIEVE THA T INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE LEARNED ASSESSIN G OFFICER HAD MATERIAL BEFORE HIM AND INFORMATION RECEIVED FROM T HE BCTT WING WAS NOT BORROWED SATISFACTION. THE SATISFACTION WAS RECORD ED BY THE ASSESSING OFFICER U/S 147 OF THE ACT AND HE RIGHTLY ISSUED NOTICE U/S 148 OF THE ACT. ITA 930/JP/2012_ ROHIT OSWAL VS. ITO 4 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LEARN ED A.R. FOR THE ASSESSEE CHALLENGED THE VALIDITY OF NOTICE U/S 148 OF THE ACT AND ARGUED THAT THE INFORMATION WAS RECEIVED FROM BCTT WING OF T HE DEPARTMENT WITHOUT MAKING ANY INDEPENDENT INQUIRY OR CONFRONTIN G M/S VIJAY GEMS, ON THE BASIS OF BORROWED SATISFACTION, LEARNED ASSE SSING OFFICER FORMED REASON TO BELIEVE FOR ESCAPEMENT OF INCOME AND INIT IATED ACTION U/S 147 OF THE ACT. IT IS SETTLED LAW THAT BORROWED SATISFAC TION CANNOT FORM BASIS FOR INITIATION OF ACTION U/S 147 OF THE ACT. HE RELIED ON THE FOLLOWING CASE LAWS:- (I) CIT VS. SHREE RAJASTHAN SYNTAX LTD. (2008) 217 CTR (RAJ.) 209. (II) CIT VS. PRADEEP KUMAR GUPTA (2008) 303 ITR 95 ( DEL.) (III) CIT VS. KAMDHENU STEEL & ALLOYS LTD. (2012) 2 48 CTR (DEL) 33. (IV) SIGNATURE HOTELS PVT. LTD. VS. ITO (2012) 338 ITR 51 (DEL.). 5. AT THE OUTSET, THE LEARNED D.R. SUPPORTED THE OR DER OF THE LOWER AUTHORITIES AND ARGUED THAT THE LEARNED ASSESSING O FFICER INDEPENDENTLY HAS RECORDED THE REASONS AND WAS HAVING REASON TO BE LIEVE THAT ESCAPEMENT OF INCOME WAS THERE IN THIS CASE. THEREFOR E, ACTION OF THE ASSESSING OFFICER MAY BE CONFIRMED. ITA 930/JP/2012_ ROHIT OSWAL VS. ITO 5 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESS EE HAD SHOWN PURCHASES FROM M/S VIJAY GEMS, WHICH WAS FOUND BOGUS. THE LEARNED ASSESSING OFFICER IDENTIFIED THE TRANSACTION MADE WI TH VIJAY GEMS AS BOGUS, THEREFORE, HE FORMED INFORMATION AND RECORDE D REASONS U/S 147 OF THE ACT. THE CASE LAWS CITED BY THE ASSESSEE ARE N OT SQUARELY APPLICABLE IN THIS CASE. HE INDEPENDENTLY FORMED RE ASON TO BELIEVE FOR ESCAPEMENT OF INCOME. IN THIS CASE, THE ASSESSEE R ECEIVED INFORMATION FROM BCTT WING OF THE DEPARTMENT, THEREAFTER, THE LE ARNED ASSESSING OFFICER VERIFIED THE RECORD THAT THE ASSESSEE HAD A CCEPTED THE BOGUS BILLS FROM M/S VIJAY GEMS. THE HON'BLE SUPREME COURT IN THE CASE OF KALYANJI MAVJI & COMPANY VS. CIT (1976) 102 ITR 287 HAD OBSERVED THAT THE WORD INFORMATION IS OF THE WIDEST AMPLITUD E AND COMPREHENDS A VARIETY OF FACTORS WITH REFERENCE TO I NFORMATION WITHIN THE MEANING OF SECTION 147 EXPLANATION 2(B) OF THE ACT. WHEN THE LEARNED ASSESSING OFFICER ALLOWED TO MAKE ASSESSMENT ON THE BASIS OF AMENDED PROVISIONS OF SECTION 147 EXPLANATION 2(B) OF THE ACT TO USE INFORMATION EVEN WITHOUT GIVING THE 147 NOTICE TO EX PAND THE JURISDICTION TO ASSESSEE THE INCOME ON THE BASIS OF INFORMATION. THE SUFFICIENCY OF THE REASON FOR FORMING THE BELIEVE I S NOT FOR THE COURT TO ITA 930/JP/2012_ ROHIT OSWAL VS. ITO 6 JUDGE AS HELD IN CASE OF PHOOL CHAND BAJRANG LAL & ANR. VS. ITO & ANR. (SC) 203 ITR 456 AND RAYMOND WOOLEN MILLS VS. ITO & ORS. 236 ITR 34. ACCORDINGLY, WE UPHELD THE ORDER OF THE LEARNE D CIT(A). THEREFORE, THIS GROUND OF ASSESSEES APPEAL IS DISMISSED. 7. THE SECOND GROUND OF APPEAL IS AGAINST SUSTAINING ADDITION OF RS. 4,57,234/- BEING 25% OF PURCHASES FROM M/S VIJAY GE MS BY TREATING IT AS UNVERIFIABLE AND BOGUS PURCHASES. THE ASSESSING OFFICER ANALYSED THE TRADING RESULT OF THE ASSESSEE, THE ASSESSEE HA S NOT MAINTAINED STOCK REGISTER ON THE BASIS OF QUALITY BUT MADE ON WEIGHT BASIS. THE CLOSING STOCK IS BASED PURCHASES PRICE OR MARKET PR ICE ON ESTIMATED BASIS WHICHEVER IS LOW, WHICH IS NOT SUBJECT TO VERIFI CATION. THE ASSESSEE HAS SHOWN BOGUS PURCHASES FROM VIJAY GEMS AT RS. 18 ,27,937/-, WHICH WERE FOUND DURING THE COURSE OF INVESTIGATION BY INV ESTIGATION WING OF DIT, JAIPUR IN CASE OF HALDIA GROUP, SANJIV PRAKASHA N GROUP AND SURVEY CONDUCTED BY BCTT WING OF THE DEPARTMENT. IT WAS FOUN D THAT ACTUALLY NO PHYSICAL DELIVERY OF GOODS WAS BEING GIVEN AGAINS T THESE BILLS AND AFTER RECEIVING THE CHEQUE OF EQUAL AMOUNT FROM THE INTERESTED PARTY, CASH WAS BEING REMITTED TO THEM AFTER MAKING CASH WIT HDRAWAL FROM THE BANK ACCOUNT WHERE THESE CHEQUES WERE DEPOSITED. THES E PERSONS WERE CHARGING COMMISSION @ .2% TO .25% OF QUANTUM FO R ISSUING THESE ITA 930/JP/2012_ ROHIT OSWAL VS. ITO 7 BOGUS SALES BILLS. IN SOME CASES, THE COMMISSION WAS HIGHER AS MUCH AS .5% TO .6%. SUMMONS WERE ISSUED TO VIJAY GEMS BUT NO COMPLIANCE WAS MADE. THEREFORE, SPOT INQUIRY AT THE BUSINESS PRE MISES OF THE ABOVE PARTIES WERE CONDUCTED BY THE INSPECTOR OF THE WARD AND HE REPORTED THAT NO BUSINESS ACTIVITY WAS CARRIED OUT B Y ABOVE NAMED FIRM AT THE ADDRESS GIVEN. THE STATEMENT OF SHRI RAJENDRA KUMAR VIJAY, PROPRIETOR OF M/S VIJAY GEMS WERE RECORDED ON OATH O N 03/3/2008 AND 09/5/2008 BY BCTT WING WHEREIN HE ADMITTED THAT NO R EAL SALE AND PURCHASE WAS MADE BY M/S VIJAY GEMS. THE ASSESSING OF FICER GAVE SHOW CAUSE NOTICE TO THE ASSESSEE ON 26/11/2010 AND ASKED TO PRODUCE THE ABOVE PARTIES FOR VERIFICATION BUT THE ASSESSEE FAILED TO PRODUCE ALL THE ABOVE PARTIES FOR VERIFICATION PURPOSES. THE ASS ESSEE REPLIED VIDE LETTER DATED 03 RD DECEMBER, 2010 AND ALSO RELIED ON VARIOUS DECISION S. THE LEARNED ASSESSING OFFICER CONSIDERED THE ASSESSE ES REPLY AND ALSO RELIED ON THE FOLLOWING CASE LAWS:- (I) M/S KANCHWALA GEMS VS. JCIT ITD NO. 134. (II) M/S INDIAN WOOLEN CARPET FACTORY VS. ITAT & OR S. (2202) 178 CTR 420. (III) VISP (P) LTD. VS. CIT & ANR. 186 CTR 718. (IV) CHUHAR MAL VS. CIT 172 ITR 250 (SC). ITA 930/JP/2012_ ROHIT OSWAL VS. ITO 8 FINALLY HE REJECTED THE BOOK RESULT U/S 145(3) OF T HE ACT. AFTER CONSIDERING THE DECISIONS IN THE CASE OF M/S SANJAY OILCAKE INDUSTRIES VS. CIT (2008) 10 DTR (GUJ) 153 AND M/S VIJAY PROTEIN S LTD. VS. ACIT 58 ITD 428 (AHD.), HE DISALLOWED 25% OF UNVERIFIABLE PURCHASES OF RS. 18,28,937/- AND MAKE TRADING ADDITION OF RS. 4,57,2 34/- TO THE DECLARED TRADING PROFIT OF THE ASSESSEE. 8. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT(A ), WHO HAD CONFIRMED THE ADDITION BY OBSERVING AS UNDER: I HAVE CAREFULLY PERUSED THE ORDER OF THE A.O. AND THE SUBMISSIONS OF THE A.R.. IT IS A FACT THAT PURCHASE S FROM M/S VIJAY GEMS COULD NOT BE VERIFIED TO THAT EXTENT THE ASSESSEE FAILED TO DISCHARGE ITS ONUS OF GETTING THE PURCHAS ES VERIFIED. THE HONBLE ITAT JAIPUR BENCH HAS CONSISTENTLY HELD IN T HE CASES OF GEMS AND JEWELLERY TRADERS OF JAIPUR THAT UN-VERIFIA BILITY OF PURCHASES ARE SUFFICIENT GROUND FOR INVOKING THE PR OVISIONS OF SECTION 145(3). THEREFORE, THE DECISION OF THE A.O. TO REJECT THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY INVOKING PROVI SIONS OF SECTION 145(3) IS UPHELD. THE FACTS OF THE CASE OF THE APPELLANT ARE DIFFEREN T FROM THE FACTS OF THE CASE OF SANJAY OILCAKE INDUSTRIES VS. CIT (2008) 10 DTR (GUJ.), SINCE NO EVIDENCE HAS BEEN BROUGHT ON RE CORD TO SHOW THAT THESE PURCHASES SALES WERE INFLATED. REGARD ING THE ITA 930/JP/2012_ ROHIT OSWAL VS. ITO 9 ESTIMATION OF INCOME, IT HAS CONSISTENTLY BEEN HELD BY THE HONBLE ITAT JAIPUR BENCH THAT THE PAST HISTORY OF T HE CASE IS THE BEST GUIDE FOR ESTIMATING THE G.P. RATE OF THE ASSE SSEE IN SUCH CASES. AS PER THE OBSERVATION OF THE A.O., THE G.P. RATE OF THE ASSESSEE WAS 3.25% IN THE PRECEDING ASSESSMENT YEAR WHICH HAD FALLEN TO 0.34% DURING THIS ASSESSMENT YEAR. THU S, THE A.O. IS DIRECTED TO ESTIMATE THE G.P. OF THE ASSESSEE BY TAKING THE G.P. RATE AT 0.8% DURING THIS YEAR RESULTING IN A C ONFIRMATION OF TRADING ADDITION OF RS. 5,57,235/-. 9. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LEARN ED A.R. FOR THE ASSESSEE REITERATED THE ARGUMENTS MADE BEFORE THE L OWER AUTHORITIES AND FURTHER SUBMITTED THAT THE G.P. RATE HAS INCREA SED FROM .33% TO .34% DURING THE YEAR AND HE RELIED IN THE CASE OF M /S SUN IT EXPORTS ITA NO. 920/JP/2012 FOR A.Y. 2005-06 AND ALSO CIT VS . VAIBHAV GEMS LTD. (2014) 52 TAX WORLD 159 (RAJ) DATED 21/08/2014 AND CLAIMED THAT NO ADDITION SHOULD HAVE BEEN MADE BY THE ASSESSING OFFICER. 10. AT THE OUTSET, THE LEARNED D.R. VEHEMENTLY SUPP ORTED THE ORDER OF THE LEARNED CIT(A). 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. SIMIL AR LINE OF CASES, THIS BENCH HAS DECIDED IN THE CASE OF SHRI ANUJ KUMAR VA RSHNEY VS. I.T.O. ITA 930/JP/2012_ ROHIT OSWAL VS. ITO 10 AND OTHER CASES IN ITA NO. 187/JP/2012 ORDER DATED 22/10/2014 WHERE ON UNVERIFIABLE/BOGUS PURCHASES 15% DISALLOWANCES HA S BEEN DECIDED. ACCORDINGLY, WE ALSO APPLY 15% DISALLOWANCES ON UNVER IFIABLE PURCHASES IN THIS CASE ALSO. THE ASSESSING OFFICER IS DIRECTE D TO RECALCULATE THE INCOME AS PER ABOVE DIRECTION. 12. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/03/2015. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 20 TH MARCH, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- ROHIT OSWAL, JAIPUR 2. IZR;FKHZ @ THE RESPONDENT- ITO, WARD 2(1), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 930/JP/2012) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR