M/S DWARKA GEMS LIMITED, Jaipur V. ADD. CIT, Jaipur

ITA 980/JPR/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5297 (ITAT-JAIPUR)
• Duration Of Justice: 4 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 24-04-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 09-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G R PAREEK DCIT DH R
• Keywords: Bogus purchase; Transfer pricing; Opportunity of being heard; International transaction
• Section: 92C; 143(3); 260A; 80IB

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, 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. 980/JP/2011 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08. M/S. DWARKA GEMS LIMITED, G-1, 5 & 6, EPIP, SITAPURA INDUSTRIAL AREA, JAIPUR. CUKE VS. THE ADDL. CIT, RANGE-7, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAACD 8548 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 982/JP/2011 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09. ASSTT. COMMISSIONER OF INCOME- TAX, CIRCLE-7, JAIPUR. CUKE VS. M/S. DWARKA GEMS LIMITED, G-1, 5 & 6, EPIP, SITAPURA INDUSTRIAL AREA, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAACD 8548 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT C.O. NO. 21/JP/2013 VK;DJ VIHY LA-@ ITA NO. 982/JP/2011 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09. M/S. DWARKA GEMS LIMITED, G-1, 5 & 6, EPIP, SITAPURA INDUSTRIAL AREA, JAIPUR. CUKE VS. THE ASSTT. CIT, CIRCLE-7, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAACD 8548 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT 2 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. VK;DJ VIHY LA-@ ITA NO. 851/JP/2012 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10. ASSTT. COMMISSIONER OF INCOME- TAX, CIRCLE-7, JAIPUR. CUKE VS. M/S. DWARKA GEMS LIMITED, G-1, 5 & 6, EPIP, SITAPURA INDUSTRIAL AREA, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAACD 8548 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT C.O. NO. 74/JP/2012 VK;DJ VIHY LA-@ ITA NO. 851/JP/2012 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10. M/S. DWARKA GEMS LIMITED, G-1, 5 & 6, EPIP, SITAPURA INDUSTRIAL AREA, JAIPUR. CUKE VS. THE ASSTT. CIT, CIRCLE-7, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAACD 8548 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL (C.A) JKTLO DH VKSJ LS@ REVENUE BY : SHRI M.S. MEENA (CIT) & SHRI G.R. PAREEK (DCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 18.05.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 23/05/2016. VKNS'K@ ORDER PER BENCH : THESE ARE FIVE APPEALS AND CROSS APPEALS FILED BY THE ASSESSEE/REVENUE. THE ASSESSEES APPEAL FOR A.Y. 2007-08 IS EMANATING FROM THE ORDERS OF THE AO PASSED UNDER SECTION 143(3) READ WITH SECTIO N 144C OF THE IT ACT 3 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. DATED 24.10.2011 AND DISPUTE RESOLUTION PANEL-I, NE W DELHI ORDER DATED 02.08.2011. THE EFFECTIVE GROUNDS OF ASSESSEES AP PEAL ARE AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. AO AS WELL AS THE DISPUTE RESOLUTION PANEL (IN SHORT D RP) HAS GROSSLY ERRED IN CONSIDERING THE TRANSFER PRICE DET ERMINED BY THE LD. TPO, JAIPUR OF THE GOODS SOLD TO ASSOCIATE ENTERPRISES AT RS. 6,43,70,413/- AS AGAINST THE SALE PRICE OF R S. 5,74,25,505/- DECLARED BY THE ASSESSEE AND CONSEQUE NTLY MAKING ADDITION OF RS. 69,44,908/- ARE WITHOUT APPR ECIATING THE SUBMISSIONS AND EVIDENCES ADDUCED, THUS IN THE CIRCUMSTANCES OF THE CASE THE ADDITION OF RS 69,44, 908/- DESERVES TO BE DELETED. 1.1 THAT THE LD. AO, LD. TPO AS WELL AS THE DRP HAS FUR THER ERRED IN IGNORING THE FACT THAT ASSESSEE HAS EARNED BETTER GP ON THE GOODS SOLD TO ITS ASSOCIATE ENTERPRISES I N COMPARISON TO GROSS PROFIT EARNED ON SIMILAR GOODS EXPORTED IN SIMILAR GEOGRAPHICAL AREA THUS THE ACTI ON OF THE LD. AO, LD. TPO AND THE DRP OF DISTURBING THE TRANS FER PRICE (SALE PRICE) TO ASSOCIATE ENTERPRISES IS BASE LESS AND UNJUSTIFIED, AND THE CONSEQUENT ADDITIONS DESERVES TO BE DELETED. 1.2 THAT THE LD. TPO HAS FURTHER ERRED IN DOUBTING THE LABOUR CHARGES INCURRED ON THE GOODS EXPORTED TO ASSOCIATE ENTERPRISE WITHOUT HAVING ANY TECHNICAL EXPERTISE T O HOLD SO, THUS THE OBSERVATIONS OF THE TPO ON THIS ASPECT DESERVES TO BE IGNORED AND EXCLUDED. 1.3 THAT THE DRP HAS FURTHER ERRED IN NOT FOLLOWING THE ORDERS OF HONBLE ITAT IN RESPECT OF THE SAME ISSUE IN ASS ESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YEAR MERELY F OR THE REASON THAT THE REVENUE IS BEFORE THE HIGH COURT ON THIS ISSUE, WHICH IS A SERIOUS DISRESPECT TO THE ORDERS OF HIGHER APPELLATE FORUM. 4 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. ASSESSING OFFICER AND THE DRP HAS GROSSLY ERRED IN MAKING AN ADDITION OF RS. 86,71,276/- BY HOLDING THE PURCHASE S MADE FROM VARIOUS DEALERS AS UNVERIFIABLE & BOGUS AND HA VE FURTHER ERRED IN IGNORING THE EVIDENCES ADDUCED AND SUBMISS IONS MADE, THUS THE ADDITIONS AS MADE DESERVES TO BE DEL ETED IN TOTO MORE PARTICULARLY WHEN THE TRADING RESULTS DEC LARED BY THE ASSESSEE HAVE BEEN ACCEPTED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. AO HAS GROSSLY ERRED IN DISALLOWING AN AMOUNT OF RS. 1 ,23,386/- U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961 ARBITRARI LY. THE SAID DISALLOWANCE BEING MADE WITHOUT CONSIDERING THE SUB MISSIONS MADE AND THE EVIDENCES ADDUCED DESERVES TO BE DELET ED. REVENUES APPEAL IN ITA NO. 982/JP/2011 AND ASSESSE ES CROSS OBJECTION NO. 21/JP/2013 ARISE AGAINST THE ORDER OF LD. CIT (A) DATED 19.08.2011 FOR A.Y. 2008-09. GROUNDS RAISED BY REVENUE ARE AS UNDER :- 1. THE CIT (A) HAS ERRED ON FACTS AND IN LAW BY PASSIN G A PERVERSE ORDER TO THE EFFECT THAT THE ADDITION OF R S. 3 LACS WOULD SUFFICE TO COVER UNVERIFIED/UNPROVED PURCHASE S OF RS. 1,27,15,686/- NOTWITHSTANDING THE FACT THAT THE FACTUM/QUANTUM OF STATED PURCHASES WAS NOT ESTABLIS HED AND THAT ON INQUIRIES, THE ALLEGED SELLERS WERE FOUND T O MERE ENTRY PROVIDERS AND/OR NON-EXISTENT. GROUNDS RAISED BY ASSESSEE IN CROSS OBJECTION ARE A S UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT (A) HAS GROSSLY ERRED IN UPHOLDING THE ADHOC ADDITI ON OF RS. 3,00,000/- ON ACCOUNT OF ALLEGED UNVERIFIABLE PURCH ASES BY IGNORING THE FACT THAT THE ASSESSEE HAS DECLARED BE TTER TRADING RESULTS AS COMPARED TO PRECEDING ASSESSMENT YEARS A ND THE TRADING RESULTS HAVE BEEN ACCEPTED BY LD.AO, THUS T HE ADDITION SUSTAINED DESERVES TO BE DELETED. 5 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT (A) HAS GROSSLY ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 86,791/- U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961 ARBITRARILY. 2.1. THAT THE LD. CIT (A) HAS FURTHER ERRED IN IGNORING THE SUBMISSION MADE MORE PARTICULARLY WHEN THE ASSESSEE IS NOT PAYING THE COMMISSION FROM HIS INCOME AND IS RA THER COLLECTING THE SAME ON BEHALF OF THE BANK AND FURTH ER NO AMOUNT REMAINED PAYABLE AT THE END THE FINANCIAL YE AR. THEREFORE THE DISALLOWANCE OF RS. 86,791/- SO SUSTA INED DESERVES TO BE DELETED. REVENUES APPEAL IN ITA NO. 851/JP/2012 AND ASSESSE ES CROSS OBJECTION NO. 74/JP/2012 ARISE AGAINST THE ORDER OF LD. CIT (A)-III, JAIPUR DATED 09.08.2012 FOR A.Y. 2009-10. GROUNDS RAISED BY REVENUE ARE AS UNDER :- I. THE CIT (A) HAS ERRED ON FACTS AND IN LAW BY PASSIN G A PERVERSE ORDER TO THE EFFECT THAT THE ADDITION OF R S. 10 LAKHS WOULD SUFFICE TO COVER/UNVERIFIED/UNPROVED PU RCHASES OF RS. 4,79,72,462/- NOTWITHSTANDING THE FACT THAT THE FACTUM/QUANTUM OF STATED PURCHASES WAS NOT ESTABLIS HED AND THAT ON INQUIRIES, MOST OF THE ALLEGED SELLERS WERE FOUND TO BE MERE ENTRY PROVIDERS AND/OR NON EXIST ENT. II. THE CIT (A) HAS ERRED IN HOLDING THAT G.P. RATE OF 27.34% DISCLOSED AS COMPARED TO THE G.P. OF 25.16% IN THE EARLIER YEAR, WAS COMPARATIVE, EVEN WHEN THE BOGUS PURCHASE S IN THE CURRENT YEAR WERE ALMOST 4 TIMES I.E. RS. 4.79 CRORES, AS COMPARED TO THE BOGUS PURCHASES OF RS. 1.27 CROR ES IN THE EARLIER YEARS. III. THE CIT (A) HAS ERRED IN PLACING RELIANCE ON DECISI ONS CITED BY HIM, EVEN WITHOUT POINTING THE FEATURES COMMON/CONGRUENT WITH THE CASE OF THE ASSESSEE. 6 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. IV. THE CIT (A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80IB ON THE INC OME FROM BUSINESS. V. THE CIT (A) HAS ERRED IN DIRECTING THE DELETION OF THE ADDITION OF RS. 4,00,537/- MADE BY THE AO FOR PAYME NT TO UNAPPROVED GRATUITY FUND. VI. THE CIT (A) HAS PASSED A PERVERSE ORDER IN PREMATUR E DELETION OF PROCEEDINGS INITIATED UNDER SECTION 271 (1)(C) OF THE I.T. ACT, 1961. GROUNDS RAISED BY ASSESSEE IN CROSS OBJECTION ARE A S UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE, T HE LD. CIT (A) HAS GROSSLY ERRED IN MAKING LUMP SUM ADDITION O F RS. 10,00,000/- BY HOLDING THAT THE PURCHASES OF RS. 4,79,72,464/- IS UNVERIFIABLE WITHOUT PROPERLY APPR ECIATING THE SUBMISSIONS MADE AND EVIDENCE ADDUCED, THEREBY THE TRADING ADDITION OF RS. 10,00,000/- DESERVES TO BE DELETED. 1.1 THAT THE LD. CIT (A) HAS FURTHER ERRED IN IGNORING THE FACT THAT THE ASSESSEE HAS DECLARED BETTER TRADING RESUL TS AS COMPARED TO PRECEDING ASSESSMENT YEAR AND THE TRADI NG RESULTS HAVE BEEN ACCEPTED BY THE LD. AO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT (A) HAS GROSSLY ERRED IN SUSTAINING A ADDITION OF R S. 1,01,326/- OUT OF EMPLOYEES CONTRIBUTION TO PF AND ESI WITHOU T PROPERLY APPRECIATING THE SUBMISSIONS MADE, THUS THE ADDITIO N OF RS. 1,01,326/- DESERVE TO BE DELETED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT (A) HAS GROSSLY ERRED IN SUSTAINING THE ADDITION OF RS. 96,287/- U/S 40(A)(IA) OF THE INCOME TAX ACT 1961, WITHOUT C ONSIDERING THE FACT THAT ASSESSEE IS NOT PAYING THE COMMISSION FROM HIS INCOME AND IS RATHER COLLECTING THE SAME ON BEHAL F OF THE BANK, THEREBY THE ADDITION OF RS. 96,287/- DESERVE TO BE DELETED. 7 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. 2. ASSESSEES GROUND NO. 1 IN A.Y. 2007-08 IS AGAINST MAKING ADDITION OF RS. 69,44,908/- BY THE AO/TPO. THE ASS ESSEE FILED RETURN FOR A.Y. 2007-08 ON 14.11.2007 DECLARING INCOME OF RS. 23,94 ,190/-. THE CASE WAS SCRUTINIZED UNDER SECTION 143(3) READ WITH SECTION 144C OF THE IT ACT. THE AO OBSERVED THAT THE ASSESSEE COMPANY DERIVES INCOM E FROM TRADING, MANUFACTURING AND EXPORT OF GEMS AND JEWELLERY. IN THIS CASE, THE TPO PASSED ORDER ON 29.10.2010 BY OBSERVING THAT THE AS SESSEE HAS TWO ASSOCIATED ENTERPRISES (AES), NAMELY, M/S. DWARKA G EMS INC. NEW YORK (USA) AND M/S. DWARKA GEMS (EUROPE) LTD., UK, WHICH ARE 1 00% SUBSIDIARY OF THE ASSESSEE COMPANY AND ARE ENGAGED IN TRADING OF JEWE LLERY. THE TRANSACTION WITH M/S. DWARKA GEMS (EUROPE) LTD., UK HAS BEEN UN DERTAKEN FOR THE FIRST TIME, DURING THE YEAR. THE COMPANY HAD A TOTAL TUR NOVER OF RS. 32.20 CRORE DURING THE YEAR OUT OF WHICH EXPORT SALE AMOUNTED T O RS. 11.31 CRORE. THE ASSESSEE ENTERED INTO INTERNATIONAL TRANSACTIONS WI TH ITS ASSOCIATED ENTERPRISES (AES) AS UNDER :- DESCRIPTION OF TRANSACTION AS PER BOOKS ALP AS PER ASSESSEE DIFFERENCE (IN RS.) SALE OF JEWELLERY TO DWARKA INC., USA RS. 3,38,64,084/- RS. 3,31,33,960/- 7,30,124/- SALE OF JEWELLERY TO DWARKA GEMS (EUROPE) LTD., UK RS.2,35,61,421/- RS. 2.47,04,229/- 11,42,808/- TOTAL RS. 5,74,25,505/- 8 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. THE ASSESSEE, AS PER FORM 3CEB/TP STUDY REPORT, HAD APPLIED COST PLUS METHOD TO ANALYZE THE INTERNATIONAL TRANSACTIONS TO DETERMINE THE ALP. IT HAD COMPARED THE GP RATES ON SALES MADE BY IT IN VARIOU S SEGMENTS/GEOGRAPHICAL AREAS. THE GP RATE ON EXPORTS OTHER THAN UK WAS 18 .69% WHICH WAS THE HIGHEST GP RATE. THE ASSESSEE HAS APPLIED THE HIGH EST GP RATE ON THE EXPORT TRANSACTIONS MADE TO THE AES AND DETERMINED THE ALP . THE ASSESSEE DETERMINED THE PRICE OF EXPORTS MADE TO DWARKA INC. , USA AT RS. 3,31,33,960/- AS AGAINST ACTUAL SALE VALUE OF RS. 3 ,38,64,084/- AND THE SAME WAS CONSIDERED AT ARMS LENGTH BY IT. IN RESPECT O F EXPORT OF JEWELLERY TO DWARKA GEMS (EUROPE) LTD., UK, THE ALP WAS DETERMI NED AT RS. 2,47,04,229/- AS AGAINST ACTUAL VALUE OF SALES OF R S. 2,35,61,421/-. THE ASSESSEE HAD NOT OFFERED THE DIFFERENCE OF RS. 11,4 2,808/- IN RESPECT OF SALES TO DWARKA GEMS (EUROPE) LTD., UK IN ITS RETURN OF I NCOME. THE TPO GAVE SHOW CAUSE NOTICE TO THE ASSESSEE DURING THE COURSE OF TRANSFER PRICING PROCEEDINGS UNDER SECTION 92CA(2) AND 92D(3) OF THE I.T. ACT, 1961 AND ASKED TO FURNISH THE TRANSFER PRICING REPORT ALONG WITH COPIES OF INFORMATION AND DOCUMENTS MAINTAINED U/S 92D(1). THE ASSESSEE SUBMITTED THAT GOODS WERE ALWAYS TRANSFERRED ON SALE BASIS AT THE PREVAI LING MARKET CONDITION AND FURTHER CLAIMED THAT PRICE OF PRECIOUS MATERIAL IS GOVERNED BY INTERNATIONAL COMMODITY RATES AND THE PRICE OF GEMS AND STONES AR E FULLY DEPENDENT UPON EACH AND EVERY SINGLE PIECE FOR WHICH THERE COULD B E NO COMPARISON. AS PER 9 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. TP STUDY REPORT OF THE ASSESSEE, THE DIFFERENCE OF RS. 11,42,808/- WAS OFFERED FOR TAXATION BY THE ASSESSEE. THE AO/TPO F OUND THAT ALP CALCULATED BY THE AO IS NOT CORRECT WHICH WAS BASED ON COST PL US METHOD. THEREAFTER HE ANALYZED THE COST PLUS METHOD AND HELD THAT APPROPR IATE METHOD IS TNMM METHOD IN CASE OF ASSESSEE. HE SELECTED 7 COMPARAB LE COMPANIES ON THE BASIS OF ECONOMIC ACTIVITY, FILTERS AND FUNCTIONAL ANALYSIS MADE BY HIM, WHICH HAS BEEN REPRODUCED AT PAGE 7 OF THE TPOS ORDER. THE MEAN OF 7 COMPARABLES CALCULATED @ 10.63%. ON THAT BASIS, HE CALCULATED THE ALP AT RS.3,41,01,236/- WHEREAS ASSESSEE HAS SHOWN OPERATI NG PROFIT AT RS. 2,29,73,194/-. THERE WAS A DIFFERENCE BETWEEN ALP OPERATING PROFIT AND OPERATING PROFIT SHOWN BY THE ASSESSEE AT RS. 1,11, 28,042/- WHICH WAS PROPOSED TO BE ADDED IN THE INCOME OF THE ASSESSEE. THE ASSESSEE ALSO AVAILED THE REASONABLE OPPORTUNITY OF BEING HEARD. THE ASSESSEES REPLY HAS BEEN REPRODUCED BY THE TPO AT PAGES 9, 10, 11 & 12 OF HIS ORDER. THE LD. TPO HELD THAT ASSESSEE HAD MAINTAINED DETAILS OF TH E DIRECT COST BUT INDIRECT COST HAD BEEN APPORTIONED ON THE BASIS OF TURNOVER. THE MEAN OPERATING PROFIT MARGIN OF THE COMPARABLES @ 10.63% WAS APPLI ED BY THE TPO ON COST IN RESPECT OF THE SALES TO THE ASSOCIATED ENTERPRIS ES TO DETERMINE THE ARMS LENGTH OPERATING PROFIT. THEREFORE, HE DETERMINED T HE ADJUSTMENT IN THE INCOME OF THE ASSESSEE AT RS. 69,44,908/-. 10 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. 3. THE ASSESSEE CHALLENGED THIS PROPOSED ORDER OF T HE TPO BEFORE THE DISPUTE RESOLUTION PANEL (DRP), NEW DELHI, WHO HAS REJECTED THE ASSESSEES GROUND OF OBJECTION AND HELD THAT TNM METHOD IS MOS T APPROPRIATE METHOD IN ASSESSEES CASE AND TPO HAS RIGHTLY CONSIDERED THE COMPARABLE CASES ON BORROWED FUNDS ISSUE OR ANALYSIS. THE HONBLE DRP FINALLY HELD THAT HOWEVER, JAIPUR ITAT IN THE CASE OF ASSESSEE FOR AY 2006-07 HAS HELD THAT MAM IS RESALE PRICE METHOD AND NOT TN MM AS APPLIED BY TPO. BOTH IN THE AY 2005-06 AND 2006-07 ITAT HELD THE FOR THE PURPOSE OF APPLYING ALP THE SALE PRICE AT RETURNS OF SUPPLYING THE GOODS HAS TO BE TAKEN INTO CONSIDERAT ION NOT THE AMOUNT OF OUTSTANDING. THEY HAVE ACCEPTED GP RATE AS THE BASIS OF COMPUTATION OF ALP. 3.3.1. WE ARE NOT AWARE IF THE ISSUE HAS BEEN CHA LLENGED BEFORE THE HIGH COURT. IF NOT THEN THE ITAT ORDER IS FINAL AND TPO IS DIRECTED TO FOLLOW THE SAME. IF THIS GROUND IS IN A PPEAL BEFORE HIGH COURT THEN STATUS QUO IS TO BE MAINTAINED. THE ORDER OF TPO IS UPHELD BY DRP. THE TPO/AO IS DIRECTED TO GIVE A CLEAR FINDING ON THE APPELLATE STATUS OF THE ASSESSEE IN THE DRAF T ORDER AND TAKEN ACTION ACCORDINGLY. THE AO CONSIDERED THE DRP DECISION DATED 02.08.2011 AND PASSED THE ORDER ON 24.10.2011 BY OBSERVING THAT DEPARTMENT HAS FILE D APPEAL UNDER SECTION 260A ON THIS ISSUE FOR A.Y. 2005-06 AND 06-07 BEFOR E THE HONBLE RAJASTHAN HIGH COURT CHALLENGING THE ORDER OF ITAT. THEREFO RE, HE MADE THE ADDITION OF RS. 69,44,908/- ON THE BASIS OF ARMS LENGTH PRI CE DETERMINED BY THE TPO. 4. THE ASSESSEE IS IN APPEAL BEFORE US. 4.1. IT HAS BEEN SUBMITTED THAT THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE ITAT IN ASSESSEES OWN CASE FOR A.Y. 2005-06 & 06-0 7 IN FAVOUR OF THE 11 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. ASSESSEE WHICH WAS CHALLENGED BY THE REVENUE BEFORE HONBLE RAJASTHAN HIGH COURT AND THE COURT HAD NOT ADMITTED THE APPEAL. TH EREFORE, THIS ISSUE IS IDENTICAL AND SETTLED BY THE ITAT IN ASSESSEES OWN CASE. THE ASSESSEE HAD COMPUTED ALP BY TAKING THE COST PLUS METHOD AS MOST APPROPRIATE METHOD WHEREAS THE TPO HAS APPLIED THE TNM METHOD. THE AS SESSEE MADE TP STUDY REPORT ALONG WITH INFORMATION AND CAME TO THE CONCL USION THAT ADJUSTMENT IS REQUIRED UPTO RS. 11,42,808/- IN EXPORT TRANSACTION MADE TO DWARKA GEMS (EUROPE) LTD., UK. THE ITAT IN A.Y. 2005-06 AND 06 -07 HAS DELETED THE ADJUSTMENT MADE BY THE TPO BY HOLDING THAT FACTS AN D CIRCUMSTANCES ARE IDENTICAL TO A.Y. 2005-06. THEREFORE, TO MAINTAIN THE CONSISTENCY, IT DELETED THE ADJUSTMENT MADE IN THE ALP IN A.Y. 2006-07. AC CORDINGLY HE REQUESTED TO DELETE THE ADDITION MADE BY THE AO. 4.2. THE LD. D/R VEHEMENTLY SUPPORTED THE ORDER OF AO/TPO. 4.3. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAD FOLLOWED THE COST PLUS ME THOD WHEREAS THE AO APPLIED TNM METHOD AND MADE ADJUSTMENT IN ALP. IN A.Y. 2005-06 AND 2006-07 THE ASSESSEE EXPORTED GOODS TO ITS SUBSIDIA RY COMPANIES. THE NATURE OF ITEMS AND TRADING MADE TO THEM ARE IDENTICAL TO THE YEAR UNDER CONSIDERATION. THE COORDINATE BENCH HAD DECIDED TH IS ISSUE IN ITA NO. 607/JP/2009 FOR A.Y. 2005-06 AND IN ITA NO. 1372/JP /2010 FOR A.Y. 2006-07. 12 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. THE COORDINATE BENCH IN ITA NO. 607/JP/2009 FOR A.Y . 2005-06 HAS HELD AS UNDER :- 28. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDER ED THEM CAREFULLY. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT LD. CIT (A) HAS ANALYZED THE FACTS OF THE CASE IN DETAIL. THE LD. CIT (A) HAS SEEN THAT MUCH HIGHER JOB CHARG ES WERE PAID FOR MAKING SILVER JEWELLERY AS COMPARED TO GOLD STUDDED JEWELLERY. IT WAS FURTHER FOUND THAT SALES TO ASSOCIATED ENTERPRISES COMPRISES OF GOLD STUDDED JEWELLERY AS AGAINST EXPORT SALES TO THE UN RELATED PARTIES WHICH CONSISTED OF SUBSTANTIAL AMOUNT OF SILVERY JE WELLERY. THIS FACT HAS BEEN NOTED BY THE TPO ALSO. THE TPO HAS ALSO O BSERVED IN HIS REPORT THAT ON THE BASIS OF AUDITED ACCOUNT FURTHER SEGMENTAL REPORT OTHER THAN REPORT GIVEN CANNOT BE PREPARED, THEREFO RE, THE REPORT PREPARED WAS ARTIFICIALLY CREATED AND HENCE DESERVE S TO BE REJECTED. UNDER THESE CIRCUMSTANCES IT WAS PRESUMED THAT LABO UR CHARGES WOULD BE COMPARABLE TO THE COST OF MATERIAL USED AND THAT THE PROFIT MARGIN OF ON COST NEEDS TO BE COMPARED. THE COMPARISON HA S BEEN MADE BY THE TPO ALSO. THEREAFTER PROFIT EARNED ON TRANSACT IONS MADE TO ASSOCIATED ENTERPRISES AND UNRELATED PARTIES WERE R E-WORKED AT 13.45% AS AGAINST 24.73% IN CASE OF UNRELATED PARTI ES IN USA. IN THIS WAY THE TPO WORKED OUT THE PROFIT OF THE ASSESSEE A ND FOUND THAT DIFFERENCE ON ACCOUNT OF PERCENTAGE OF ADJUSTMENT O F ALP WAS 7 TO 1% WHICH IS MORE THAN 5% AND, THEREFORE, BENEFIT OF PR OVISIONS OF SECTION 92C WAS DENIED. THE LD. CIT (A) HAS EXAMINED THIS FACT AND FOUND THAT THE PROFIT WORKED OUT BY THE TPO WAS NOT CORRECT. N EITHER THERE WAS ANY COMPARABLE CASE WERE FOUND AS EVEN TPO HAS ACCE PTED THIS FACT AND HAS STATED THAT BEST COMPARABLE IS THE INTERNAL PROFIT OF THE ASSESSEE. THEREAFTER TPO HAS OBSERVED THAT IN ASS ESSEES CASE BETTER INDICATOR WILL BE PROFIT MARGIN AFTER TAKING INTO A CCOUNT THE COST OF MATERIAL AS WELL AS LABOUR COST. HOWEVER, WHILE CON SIDERING THE PROFIT 13 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. MARGIN AFTER REDUCING COST OF MATERIAL AND LABOUR C HARGES IN CASE OF ASSOCIATED ENTERPRISES, THE PERCENTAGE TAKEN IS 14. 95% BUT PROFIT MARGIN IN RESPECT OF SALES TO UNRELATED PARTIES IN USA WAS TAKEN AT 14.88% THOUGH THE SALES TO THE OTHER PARTIES INCLUD ED SALE OF SILVER JEWELLERY AS WELL. THESE FACTS HAVE BEEN EXAMINED B Y LD. CIT (A) AND FOUND THAT PROFIT SHOWN BY ASSESSEE IS BETTER IN CA SE OF ASSOCIATED ENTERPRISES AS COMPARED TO PROFIT EARNED ON UNRELAT ED PARTIES. THE LD. CIT (A) HAS TAKEN INTO CONSIDERATION THE VITAL ASPE CT THAT ASSESSEE DEALS IN GEM AND JEWELLERY AND, THEREFORE, NO OTHER SEGMENT REPORT IS AVAILABLE. HOWEVER, SEGMENTAL ACCOUNT IN RESPECT O F GOLD, SILVER AND STONE ETC. WAS PREPARED ON THE BASIS OF INFORMATION AVAILABLE IN THE CASE OF STUDY CHART, THE REQUIRED REGISTER/DOCUMEN T AS PER SECTION 92D. FURTHER, TPO WHILE CALCULATING UNCONTROLLED C OMPARABLE PROFIT OF 24.73% HAS TAKEN FIGURE OF EXPORT TO OTHER PARTIES, WHICH INCLUDES GOLD STUDDED JEWELLERY AS WELL AS SILVER. IF THESE FIGU RES ARE REPLACED BY THE FIGURES GIVEN IN COLUMN NO. 10 AT PAGE 24 OF THE PA PER BOOK WHICH GIVE EXPORT TO OTHER PARTIES IN USA OTHER THAN GOLD STUD DED JEWELLERY, THE PERCENTAGE COMES TO 12.92%. AS THE PERCENTAGE COME S TO LESS THAN PROFIT MARGIN IN CASE OF EXPORT TO ASSOCIATED ENTER PRISES, NO ADJUSTMENT IS POSSIBLE AND TAKING INTO CONSIDERATIO N THIS ASPECT THE LD. CIT (A) HAS DELETED THE ADDITION MADE BY AO. THE F INDING OF LD. CIT (A) NEITHER COULD BE CONTROVERTED NOR ANY MATERIAL WAS BROUGHT ON RECORD TO HOLD OTHERWISE EXCEPT MENTIONING THAT INT EREST COMPONENT ON ACCOUNT OF OUTSTANDING AGAINST ASSOCIATED ENTERPRIS E HAS NOT BEEN TAKEN INTO CONSIDERATION EITHER BY TPO OR BY LD. CI T (A). IN OUR CONSIDERED VIEW THIS CONTENTION OF THE LD. CIT D/R DOES NOT HAVE MUCH WEIGHT BECAUSE FOR THE PURPOSE OF APPLYING ALP THE SALE PRICE AT THE TIME OF SUPPLYING THE GOODS HAS TO BE TAKEN INTO CO NSIDERATION NOT THE AMOUNT OF OUTSTANDING. FOR OUTSTANDING AMOUNT, THE RE MAY BE SO MANY REASONS. THERE MAY BE OUTSTANDING OF EARLIER YEAR WHICH MAY HAVE RECEIVED DURING THE CURRENT YEAR AND CURRENT Y EARS OUTSTANDING 14 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. MAY HAVE RECEIVED IN NEXT YEAR, THEREFORE, NO MUCH IMPACT WILL BE ON THE COST OF THE MATERIAL PURCHASED. A BUSINESSMAN KNOWS HOW TO DEAL WITH HIS CLIENTS. IN VIEW OF THESE FACTS AND CIR CUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 41,29,775/-. ACCORDINGLY WE CONFIR M HIS ORDER ON THIS ISSUE ALSO. RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE B ENCH IN ASSESSEES OWN CASE, WE HAVE VERIFIED THE ADJUSTMENT MADE BY THE A SSESSEE ON THE BASIS OF GP @ 18.69% OF UNRELATED PARTIES, WHICH IS FOUND CO RRECT. THEREFORE, WE DELETE THE ADDITION MADE BY THE AO/TPO BY FOLLOWING THE TNM METHOD. ON THIS GROUND ASSESSEES APPEAL IS ALLOWED. 5. SECOND GROUND OF ASSESSEES APPEAL IS AGAINST UN VERIFIABLE AND BOGUS PURCHASES OF RS. 86,71,276/- IN A.Y. 2007-08, REVEN UES APPEAL IN A.Y. 2008- 09 ON UNVERIFIABLE PURCHASES OF RS. 1,27,15,686/- A ND CROSS OBJECTION OF THE ASSESSEE IN A.Y. 2008-09 FOR CONFIRMING THE ADDITIO N MADE ON ACCOUNT OF UNVERIFIABLE PURCHASES AND REVENUES APPEAL ON UNVE RIFIABLE PURCHASES OF RS. 4,79,72,462/- IN A.Y. 2009-10 AND ASSESSEES CROSS OBJECTION IN A.Y. 2009-10 FOR CONFIRMING THE ADDITION OF RS. 10,00,000/- AGAI NST THE UNVERIFIABLE PURCHASES OF RS. 4,79,72,462/-. THE AO IN ALL THES E YEARS HAS FOUND THAT ASSESSEE HAD MADE PURCHASES FROM THE VARIOUS PARTIE S. ON VERIFICATION FROM THESE PARTIES, ON THE BASIS OF SURVEY/SEARCH CONDUC TED AND ENQUIRIES MADE THEREAFTER BY THE INCOME TAX DEPARTMENT, IT WAS FOU ND THAT THE ASSESSEE HAD UNVERIFIABLE/BOGUS PURCHASES IN A.Y. 2007-08 OF RS. 86,71,276/-, IN A.Y. 15 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. 2008-09 AT RS. 1,27,15,686/- AND IN A.Y. 2009-10 AT RS. 4,79,72,462/-. THE AO MADE THE ADDITION OF FULL AMOUNT OF UNVERIFIABLE PURCHASES IN THE INCOME OF THE ASSESSEE IN RESPECTIVE ASSESSMENT YEARS WHIC H WAS CHALLENGED BY THE ASSESSEE IN A.Y. 2008-09 AND 09-10 BEFORE LD. CIT ( A) WHO HAD GIVEN SUBSTANTIAL RELIEF BY CONFIRMING NOMINAL ADDITION O N ACCOUNT OF UNVERIFIABLE PURCHASES. THE ADDITION MADE IN A.Y. 2007-08 HAS DI RECTLY BEEN CHALLENGED BY THE ASSESSEE BEFORE US. THE LD. A/R SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED BY THE JAIPUR BENCH OF THE TRIBUNAL IN DETA IL IN CASE OF ANUJ KUMAR VERSHNEY IN ITA NO. 187/JP/2012 DATED 22 ND OCTOBER, 2014 WHEREIN ALL THE FACTS AND FIGURES AND FINDINGS OF THE LOWER AUTHORI TIES AS WELL AS DECISIONS OF ITAT/HIGH COURT ON UNVERIFIABLE /BOGUS PURCHASES H AVE BEEN CONSIDERED AND HELD THAT 15% NP RATE ON UNVERIFIABLE PURCHASES IS TO BE APPLIED. THE CASES REFERRED HAS BEEN CHALLENGED IN APPEAL BY THE ASSES SEE AS WELL AS BY THE DEPARTMENT BEFORE THE HONBLE HIGH COURT AND THE IS SUE IS PENDING BEFORE THE HIGH COURT. THEREFORE, HE REQUESTED TO SET ASIDE T HIS ISSUE TO THE AO AND APPLY THE FINDING OF THE HONBLE HIGH COURT AS AND WHEN DECIDED. BUT THE LD. CIT D/R AS WELL AS SENIOR D/R OBJECTED THAT THE DEP ARTMENT IS UNABLE TO KEEP TRACK ON SUCH TYPE OF PENDING ISSUES BEFORE THE AO AND THERE IS A POSSIBILITY TO LEAVE THE MATTERS WITHOUT APPLYING THE DECISION OF THE HIGH COURT. THEREFORE, THEY URGED TO PASS THE ORDER ON MERIT AN D NOT TO SET ASIDE THE ISSUE TO THE AO. 16 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. TO REDUCE THE LITIGATION BEFORE THE HONBLE HIGH CO URT ON IDENTICAL ISSUE, WE PREFER THAT MATTER IS REQUIRED TO BE SET ASIDE TO T HE AO AND THE AO HAS AMPLE POWER UNDER SECTION 150 AS WELL AS UNDER SEC. 153(3 ) OF THE IT ACT AND THERE IS NO LIMITATION PRESCRIBED ON SET ASIDE ISSUE UNDE R BOTH THE SECTIONS. BUT IN VIEW OF THE ARGUMENT MADE BY THE REVENUE, WE DIRECT THE AO TO APPLY 15% NET PROFIT RATE ON UNVERIFIABLE/BOGUS PURCHASE BY C ONSIDERING THE COORDINATE BENCH DECISION IN CASE OF ANUJ KUMAR VARSHNEY (SUPR A). ACCORDINGLY THE ASSESSEES CROSS OBJECTION ON THIS GROUND IS DISMIS SED AND REVENUES APPEALS ARE PARTLY ALLOWED. 7. IN A.Y. 2007-08 THE AO HAS DISALLOWED RS. 1,23,3 86/-, IN A.Y. 2008-09 RS. 86,791/- AND IN A.Y. 2009-10 RS. 96,287/- UNDER SECTION 40(A)(IA) ON ACCOUNT OF NON-DEDUCTION OF TDS ON PAYMENT RECEIVED THROUGH CREDIT CARD AND DEBIT BANK CHARGES IN THE PROFIT & LOSS ACCOUNT . AS PER THE AO, THE ASSESSEE IS LIABLE TO DEDUCT TDS UNDER SECTION 194H AS PAYMENT MADE TO BANK WAS COMMISSION. THE ASSESSEE HAS NOT DEDUCTED TDS ON THIS PAYMENT, THEREFORE, THESE ADDITIONS WERE MADE U/S 40(A)(IA) OF IT ACT, 1961. 8. THE LD. CIT (A) IN A.Y. 2008-09 AND 2009-10 HAD CONFIRMED THE ADDITION BY OBSERVING THAT APPELLANT IS NOT AN INDIVIDUAL OF HUF AND COMMISSION PAID TO THE BANK TOWARDS TRANSACTIONS ENTERED THROUGH CR EDIT CARD IS ABOVE RS.2500/-, THEREFORE, THE TDS @ 2% ON SUCH TRANSACT ION ARE DEDUCTED UNDER 17 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. EXPLANATION OF 194H OF THE ACT. IN A.Y. 2007-08, T HE ASSESSEE IS DIRECTLY BEFORE US AND ARGUED THAT THIS ISSUE IS IDENTICAL I N ALL THE YEARS AND SUBMITTED THAT THE ASSESSEE HAD MADE THE PAYMENT OF SERVICE C HARGES TO VARIOUS BANKS ON SWAPPING CREDIT CARD AT THE MACHINE INSTALLED AT THE BUSINESS PLACES TOWARDS THE PAYMENT OF GOODS SOLD TO THE CUSTOMERS. AS AND WHEN CREDIT CARD OF THE BUYER IS SWAPPED ON CREDIT CARD MACHIN E FOR RECEIVING THE PAYMENT OF THE GOODS SOLD TO IT, THE BANKER WHO PRO VIDED THE CREDIT CARD MACHINE AT THE PLACE OF THE VENDER, HAS CHARGED A S UM TOWARDS THE SERVICES RENDERED WHICH AMOUNT IS PAYABLE BY THE PERSON WHO OWNED THE CREDIT CARD AND SUCH CHARGES WHICH IN OUR COUNTRY IS 2% ON THE TOTAL SALE VALUE AND IS LIKELY TO BE ADDED TO THE AMOUNT OF SALE VALUE PAYA BLE TO THE VENDER. THE LD. AO RELIED ON THE DECISION OF HONBLE DELHI HIGH COU RT IN THE CASE OF SINGAPORE AIRLINES WHICH IS TOTALLY DISTINGUISHABLE. HOWEVER, THIS ISSUE HAS BEEN CONSIDERED BY THE BANGALORE BENCH OF THE TRIBUNAL I N THE CASE OF TATA TELESERVICES LTD. VS. DCIT, 154 TTJ 480 (2013) WHER E IT HAS BEEN HELD THAT PAYMENT MADE TO THE BANKS ON ACCOUNT OF UTILIZATION OF CREDIT CARD FACILITIES WOULD BE IN NATURE OF BANK CHARGES AND NOT IN THE N ATURE OF COMMISSION/BROKERAGE COVERED UNDER SECTION 194H OF THE IT ACT. HE FURTHER RELIED ON THE FOLLOWING DECISIONS :- JAIPUR VIDHYUT VITRAN NIGAM LTD. VS. DCIT 123 TTJ 888 (ITAT JAIPUR ) 18 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. M/S. HERBIDIDES INDIA) LTD. VS. ACIT ITA NO. 391/JP/2013 (ITAT JAIPUR) CIT VS. CRESCENT EXPORT SYNDICATE 94 DTR 81 (CAL.HC) ACIT VS. M/S. C.K. MOTORS ITA NO. 122/JU/2014 (ITAT JODHPUR) HE ALTERNATIVELY ARGUED THAT ASSESSEE HAD ALREADY P AID THIS AMOUNT TO THE RESPECTIVE BANK, THEREFORE, THERE IS NO AMOUNT PAYA BLE ON THE RESPECTIVE CLOSING YEAR OF THE ASSESSMENT. THIS ISSUE HAS BEE N CONSIDERED BY THE SPECIAL BENCH OF THE ITAT VISHAKHAPATNAM IN THE CASE OF MER ILYN SHIPPING & TRANSPORT VS. ADDL. CIT, 136 ITD 23, WHICH HAS BEEN FOLLOWED BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VECTOR SHIPPING SERVICES (P) LTD AND DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE. SLP FILED BY THE DEPARTMENT BEFORE THE HONBLE SUPREME COURT HAS BEEN DISMISSED . HE FURTHER CLARIFIED THAT THIS ISSUE HAS DECIDED BY VARIOUS COURTS AGAIN ST THE ASSESSEE BUT IT IS SETTLED LAW THAT WHEN THERE ARE TWO VIEWS ON AN ISS UE, VIEW FAVOURABLE TO THE ASSESSEE IS TO BE APPLIED AS HELD BY THE HONBLE SU PREME COURT IN THE CASE OF VEGETABLE PRODUCTS LTD., 88 ITR 192 (SC), WHICH HAS BEEN UPHELD BY THE HONBLE SUPREME COURT IN THE CASE OF VATIKA TOWNSHI P. THEREFORE, HE REQUESTED THAT ADDITION MADE BY THE AO AND CONFIRME D BY LD. CIT (A) BE DELETED. 9. AT THE OUTSET, THE LD. D/R VEHEMENTLY SUPPORTED THE ORDER OF THE AO. 19 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. 10. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THIS ISSUE HAS BEEN CONSIDERED BY THE VARI OUS ITAT BENCHES THAT WHETHER SERVICE TAX PAID TO THE BANK IS COVERED UND ER SECTION 194H AS COMMISSION OR BROKERAGE AND HELD THAT THESE PAYMENT S ARE SERVICE CHARGES AND NOT BROKERAGE OR COMMISSION AND NOT LIABLE TO D EDUCT TDS UNDER SEC. 194H. THE CASE LAWS CITED BY THE ASSESSEE IN THE C ASE OF TATA TELESERVICES LTD. VS. DCIT (SUPRA), JAIPUR VIDHYUT VITARAN NIGAM LTD. (SUPRA) AND M/S. HERBIDIDES INDIA) LTD. VS. ACIT (SUPRA) ARE SQUAREL Y APPLICABLE. THE ASSESSEE ALSO MADE ALTERNATIVE CLAIM ON PAYMENT BASIS THAT H ONBLE ALLAHABAD HIGH COURT DECISION IN CASE OF VECTOR SHIPPING SERVICES PVT. LTD. (SUPRA) IS SQUARELY APPLICABLE AS ASSESSEE HAS ALREADY PAID THESE AMOUN TS TO THE BANKS AND THERE IS NO AMOUNT PAYABLE AS ON 31 ST MARCH OF RESPECTIVE YEAR. THEREFORE, WE ALLOW THE GROUND IN FAVOUR OF THE ASSESSEE. 11. THE ASSESSEES CROSS OBJECTION FOR A.Y. 2008-09 IS DELAYED BY 442 DAYS FOR WHICH ASSESSEE HAS FILED CONDONATION APPLICATIO N AND THE DELAY WAS ON ACCOUNT OF APPEAL PAPERS MISPLACED BY THE COUNSEL O F THE ASSESSEE. ON PERUSAL OF THE CONDONATION APPLICATION, IT IS FOUND THAT NO AFFIDAVIT FROM THE COUNSEL HAS BEEN FILED BY THE ASSESSEE. THEREFORE, WE DO NOT FIND ANY REASON TO CONDONE THE DELAY IN FILING THE CROSS OBJECTION BELATEDLY. THE ASSESSEE RAISED TWO GROUNDS THROUGH THIS CROSS OBJECTION ONE FOR CONFIRMATION OF RS. 20 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. 3,00,000/- ON ACCOUNT OF UNVERIFIABLE PURCHASES AND DISALLOWANCE UNDER SECTION 40(A)(IA) AT RS. 86,791/-. 12. AS WE HAVE ALREADY HELD THAT ON UNVERIFIABLE PU RCHASES, THE NET PROFIT RATE IS TO BE APPLIED @ 15% WHICH IS MORE THAN THE ADDITION CONFIRMED BY THE LD. CIT (A), THEREFORE, ON THIS GROUND ASSESSEES C ROSS OBJECTION HAS BECOME INFRUCTUOUS. BUT SECOND GROUND RELATING TO DISALLO WANCE U/S 40(A)(IA) AT RS. 86,791/- CANNOT BE DECIDED AS ASSESSEES CROSS OBJE CTION HAD BELATEDLY FILED AND THE DELAY CANNOT BE CONDONED ON THE BASIS OF CO NDONATION APPLICATION FILED BY THE ASSESSEE. ACCORDINGLY THE CROSS OBJECT ION FILED IN A.Y. 2008-09 IS DISMISSED. 13. GROUND NO. 4 OF THE REVENUE FOR A.Y. 2009-10 IS AGAINST ALLOWING DEDUCTION TO THE ASSESSEE UNDER SECTION 80IB OF THE IT ACT. THE LD. CIT (A) HAD CONSIDERED THE DECISIONS GIVEN BY DRP AS WELL A S ITAT IN PRECEDING YEAR. THE FACTS AND FINDINGS ARE IDENTICAL TO A.Y. 2005-0 6, THEREFORE, WE DO NOT HAVE ANY REASON TO DEVIATE FROM THE ORDER OF THE CO ORDINATE BENCH OF THE TRIBUNAL ON THIS ISSUE. ACCORDINGLY WE UPHELD THE ORDER OF LD. CIT (A) ON THIS ISSUE. 14. GROUND NO. 5 OF REVENUE FOR A.Y. 2009-10 IS AGA INST ALLOWING THE PAYMENT MADE TO UNAPPROVED GRATUITY FUND AT RS. 4,0 0,537/-. THE AO OBSERVED THAT THE ASSESSEE HAD PAID THIS AMOUNT TO GRATUITY FUND WHICH HAS NOT BEEN APPROVED BY CIT. THE ASSESSEE HAD APPLIED IN PRESCRIBED FORM 21 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. BEFORE THE CIT FOR APPROVAL BUT SAME IS PENDING BEF ORE HIM. THEREFORE, HE MADE THE ADDITION. THE LD. CIT (A) ALLOWED THE APP EAL BY OBSERVING THAT SIMILAR ISSUE HAS ALREADY BEEN DECIDED BY THE ITAT IN A.Y. 2004-05. THEREFORE, FOLLOWING THE PRINCIPLE OF JUDICIAL DISC IPLINE, HE DELETED THE ADDITION MADE BY THE AO. WE ALSO DO NOT HAVE ANY REASON TO D EVIATE FROM THE COORDINATE BENCH DECISION FOR A.Y. 2004-05. ACCORDI NGLY WE UPHELD THE ORDER OF LD. CIT (A). 15. GROUND NO. 2 IN CROSS OBJECTION FOR A.Y. 2009-1 0 IS AGAINST CONFIRMING THE ADDITION OF RS. 1,01,326/- OUT OF EMPLOYEES CO NTRIBUTION TO PF AND ESI. THE AO OBSERVED THAT ASSESSEE HAD DEPOSITED EMPLOYE ES CONTRIBUTION TO PF IN THE MONTH OF APRIL, 2008 OF RS. 44,613/- AND OF NOVEMBER, 2008 OF RS. 36,065/- AND ESI CONTRIBUTION FOR THE MONTH OF APRI L 2008 OF RS. 12,366/- AND OF NOVEMBER, 2008 OF RS. 9,282/- LATER THAN THE DU E DATE. AS PER THE AO, THIS WAS IN VIOLATION OF PROVISIONS OF SECTION 36(1 )(VA) READ WITH SECTION 2(24)(X) OF THE IT ACT. THEREFORE, HE MADE THE ADD ITION. THE LD. CIT (A) ALSO CONFIRMED THIS ADDITION BY OBSERVING THAT THESE PAY MENTS WERE DEPOSITED LATE BUT BEFORE THE DUE DATE OF FILING THE RETURN. THE LD. CIT (A) PLACED RELIANCE ON THE DECISION OF ITAT PUNE IN THE CASE OF INDIAN CAR D CLOTHING CO. LTD. IN ITA NO. 214/PN/98 AND ACCORDINGLY HE CONFIRMED THE ADDI TION. 16. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAD PAID THIS AMOUNT BEFORE DUE DATE OF FILING OF RETURN AND REITERATED THE SUBMISSIONS 22 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. AS MADE BEFORE LD. CIT (A). WHEREAS THE LD. D/R SU PPORTED THE ORDER OF LD. CIT (A). 17. THIS ISSUE HAS BEEN CONSIDERED BY THE HONBLE R AJASTHAN HIGH COURT IN THE CASE OF SBBJ AND JVVNL (2014) 363 ITR 70 AND H ELD THAT IF THE PAYMENTS WERE MADE BEFORE THE DUE DATE OF FILING THE RETURN BY THE ASSESSEE, THEN THE SAME ARE ALLOWABLE DEDUCTION. THEREFORE, THE ADDITI ON CONFIRMED BY LD. CIT (A) IS DELETED AND ON THIS GROUND, CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. 18. IN THE RESULT, ASSESSEES APPEAL IN A.Y. 2007-0 8 IS PARTLY ALLOWED, REVENUES APPEALS IN A.Y. 2008-09 AND 2009-10 ARE P ARTLY ALLOWED, ASSESSEES CROSS OBJECTIONS IN A.Y. 2008-09 IS DISMISSED AND T HAT OF A.Y. 2009-10 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.05.201 6. 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:- 23/05/2016. DAS/ 23 ITA NO. 980(5)/JP/2011 M/S. DWARKA GEMS LTD. VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S. DWARKA GEMS LTD., JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT-THE ADDL.CIT RANGE-7, 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. 980/JP/2011) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR