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TMI Blog2015 (4) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... 144 - ITAT AHMEDABAD-C ). In our view the 25% disallowance appears to be higher side, therefore, keeping in view of the facts of the assessee's case as well as other cases as discussed above, we feel that 15% disallowance out of bogus purchases is reasonable on unverifiable purchases and will meet the ends of justice. The rejection of books of account is justified. The assessee gets relief partly. - Decided partly in favour of assessee. Disallowance of business expenses @ 20% - Held that:- There is no past history in this case that such disallowance was made by the Assessing Officer on estimation basis but it is a fact that these expenditures were incurred mostly in cash and it is difficult to collect the third party evidence in each and every item of expenses. Therefore, we confirm this disallowance @ 10%. The assessee gets relief partly on this ground. - Decided partly in favour of assessee. Trading addition - CIT(A) deleted part addition - Held that:- Filing of some confirmation with PAN and TIN number are not sufficient to prove the purchases are genuine as they are to be supported by other facts including delivery of goods, as held by the various courts. The appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spread over its business, a scheme is floated by bank i.e. issuance of credit cards. Therefore, in our considered view, there is no such relation between the bank and the shop keeper which establishes the relationship of a Principal and Commission Agent. Technically it may be written that bank will charge certain percentage of commission but this is not a commission because assessee sells its goods against credit cards, and on presentation of bills, the bank has to make the payment. It is not the case that bank has advised the assessee to sell their goods to its customers then he will pay the commission. It is reversed in a situation as bank issued credit cards to the credit card holders on certain fees or whatever the case may be and the card holder purchases material from the market through his credit card without making any payment and that shop keeper presents the bill to the bank against whose credit card the goods were sold and on presentation of bill as stated above the bank makes the payment. Therefore, in our considered view, provisions of section 194H are not attracted in this type of transaction. - Decided in favour of assessee. Disallowance of telephone expenses - He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be used but it cannot be conclusive evidence against the assessee. The A.O. has not collected any material from the purchaser of the shops to show that the assessee has received on money. The sale of shop is evidenced by the sale deed. There is no documentary evidence in respect of sale price of the shops . according to the provisions of the Indian Evidence Act, 1872 when terms of a contract, grant or other disposition of property have been reduced to the form of a document then no evidence is permissible to be given in proof of any such term or such grant or disposition of the property except the document itself and no oral agreement contradicting/varying the terms of a document could be offered. Once the assessee contended before the A.O. during the course of assessment proceedings that he has not received on money then the A.O. should have collected evidence to hold that assessee has received on money - Decided against revenue. Disallowance of traveling expenses - Held that:- The total turnover was ₹ 12,14,550/- as compared to preceding year. The assessee's sale has gone down substantially from ₹ 2.88 crores to 12 lacs. In absence of any evidence, foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ems and jewellery market. It also disheartens the honest tax payers who do not resort to such mal practices and paid their legitimate taxes. On the other side, it emboldens the dishonest tax payers who resort to such practice. Numerous instances came to light through search and survey actions carried out by the department from time to time to reveal that the assessees have shown purchases of gems and jewellery from certain parties, which were involved in racket of providing only sale bills without any actual sales to dealers in the trade of gems and jewellery. 2. In the year 2003, a search and seizure operation was carried out by the department in the case of M/s Sanjeev Prakashan Group, Motisons and others thereafter detailed investigation was carried out by the Investigation Wing of the Department about the affairs and activities of some of the parties and it was found that some of the parties are involved in the racket of providing bills without actual delivery of goods to different parties in their trade of gems and jewellery. The modus operandi of these parties was that the sale bills were issues and the cheques received against the bills were immediately withdrawn from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er:- :- No quantitative day to day stock register is maintained with item wise specification. :- Valuation of stock was done lot wise on estimate basis whereas in case of semi precious stones value varies according to shape, colour, cut, size, transparency, etc. :- Bogus bills were obtained and claimed as purchase expenses. :- Bogus bill providers were either not produced, or not found existent at the address provided by the assessee. Those, who appeared, admitted to the fact of issuance of bogus bills against charging some nominal commission. :- Payments, though, shown to be made by A/c Payee cheques, in some cases payees accepted that after deducting commission, remainder was refunded by cash. :- Assessees are generally not traders but engaged in business of manufacturing of Gems and Jewellery. :- Name, address, PAN (in some cases) and confirmations of such parties were given- Assessee claimed it as sufficient compliance and discharge of onus of proving the expenditure. :- Assessees were asked to produce the so-called sellers from whom bills were obtained- However, failed to do so despite sufficient opportunities. :- Summons issued u/s 131 remained unc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. CIT (2007) 294 ITR 316 (All) 3. Khandelwal Trading Co. Vs. ACIT (1996) 55 TTJ (JP) 261. (b) 25% disallowance out of bogus/unverifiable purchases: 1. Sanjay Oil Cake Industries Vs. CIT (2008) 316 ITR 274 (Guj) 2. Vijay Proteins Ltd. Vs. ACIT 58 ITD 428 (Abad). 3. M/s Nand Kishore Meghraj Jewellers, Jaipur CO No. 105/JP/2009 arising out of ITA No. 433/JP/2009 by ITAT Jaipur. 4. M/s Trident Jewellers ITAT Jaipur ITA No. 552/JP/2013. (c) Estimation of GP based on past history: 1. CIT Vs. Amrapali Jewels (P) Ltd. (2012) 65 DTR (Raj) 196 for A.Y. 2005-06. 2. CIT Vs. Inani Marble Pvt. Ltd. 316 ITR 125 (Raj) 3. CIT Vs. Gotan Lime Khanij Udyog 256 ITR 243 (Raj) 4. ITO Vs M/s GB Impex (A.Y. 2007-08) ITA No. 1263/JP/2010 and CO No. 5/JP/2011. 5. DCIT Vs M/s Gems paradise (A.Y. 2006-07) ITA No. 700/JP/2009 and CO No. 144/JP/2009. (d) Lump sum disallowance 1. ITO Vs. M/s Agrasem Jewellers (A.Y. 2007-08) ITA No. 861/JP/2010 and CO No. 68/JP/2010 and ITO Vs. M/s Mohan Co. (A.Y. 2007-08) ITA No. 860/JP/2010 and CO No. 67/JP/2010. 2. M/s Padmawati Vs ITO (A.Y. 2007-08) ITA No. 809/JP/2011. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision in the case of CIT Vs. Laxmi Narayan Badridas 5 ITR 170, 180 (PC). It is argued that the learned AR supported 25% disallowance out of the unverifiable purchases on the basis of decision in the case of Sanjay Oil Cake Industries (supra) and Vijay Protein Ltd. (supra). Both these decisions have been considered and distinguished by the Hon'ble ITAT in the case of Gems Paradise in ITA No. 700/JP/2009 dated 18/12/2009 for A.Y. 2006-07 and held that in case of Sanjay Oil Cake Industries, a specific finding was given by the Assessing Officer that purchases were made from the alleged bogus suppliers at higher rate as compared to the other parties. In the case of Vijay Proteins Ltd., after examining the bank account, it was established that cheques issued to various parties were deposited in one of the account, which were found to be owned by the assessee himself but there are no such circumstances in these cases. 6.1 The learned DR also referred the decision in the case of Nand Kishore Meghraj Jewellers in ITA No. 433/JP/2009 for A.Y. 2006-07 dated 09/09/2009 wherein disallowance at 25% was confirmed on the ground that the payments made against these purchases had come back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Impex ITA No. 1263/JP/2010 dated 11/02/2011 for A.Y. 2006-07. (iii) Shankar Exports Vs. ACIT 42 DTR 441 dated 01/6/2010. (iv) ITO Vs. Neeraj Lakhi ITA No. 822/JP/2010 dated 30/12/2010 for A.Y. 2006-07. (v) DCIT Vs. M/s Oriental Gemco Pvt. Ltd. ITA No. 1368 1369/JP/2010 dated 10/03/2011 for A.Y. 2006-07 and 2007-08. (vi) Jewells Emporium ITA No. 251/JP/2011 dated 16/09/2011 for A.Y. 2006-07. (vii) Praveen Nigotia ITA No. 1117/JP/2010 dated 29/04/2011 for A.Y. 2007-08. (viii) DCIT Vs. Sh. Jitendra Kumar Nigam ITA No. 881 838/JP/2011 dated 30/01/2014 for A.Y. 2008-09. (ix) Smt. Usha Modi Vs. ACIT ITA No. 200/JP/2012 dated 30/01/2014 for A.Y. 2008-09. He also opposed the arguments made by the learned D.R. that the past history is doctored as these parties were indulging in such type of unverifiable purchases in past also but the same were not supported with any evidence. These arguments made by the learned D.R. are contended to be theoretical in nature. It is submitted that in case, overall G.P. rate is better, no addition qua on unverifiable purchases would be called for but if it is found otherwise, the addition would be restricted by applying the differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation was found by the Assessing Officer that the stock register was maintained on the basis of only quantity of the gems/stones, no qualitative wise details were maintained. It has been observed that in the gems and jewellery trade, quality, shape of the stones and the purity of metal always have a great importance in valuation and cut has been undisputed by the assessee before the Assessing Officer that the value of closing stock was arrived at on purchased price or market price on estimated basis, whichever is lower. The Assessing Officer held that closing stock of assessee had been shown on estimate basis, which partly included cost mentioned in bogus bills also and as such no realistic verification could be possible. The assessee had shown purchases from 2 parties namely Roshan Gems at ₹ 7,88,026/- and Millennium Enterprises at ₹ 3,75,300/-. The learned Assessing Officer asked to produce these parties for verification vide letter dated 14/12/2009, which assessee failed to produce. Thereafter independent inquiries were also conducted to find out existence of such vendor and the genuineness of the transactions. As discussed in various other cases of gems and jeweller ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in gems and jewellery market it is a rampant practice to provide and use the accommodation bills of purchases to reduce the profitability. The learned CIT(A) relied on the decisions in the case of Deepak Dalela, Shanti Kumar Chordia and Kanchwala Gems (supra), Shri Sindhuja Foods Pvt. Ltd. (2008) 16 DTR 278 (Raj), Amar Mining Company (supra), ITO Vs. Sunsteel, 92 TTJ 1126 (Ahmadabad ITAT), Uniword Telecom Ltd. Vs. Addl. CIT 45 DTR 433 (Del. ITAT). It is held that the assessee had not maintained qualitative details of goods and had shown closing stock on estimate basis. The amount outstanding as on 31/3/2007 also exceeds the addition of ₹ 2,90,832/- made by the Assessing Officer. Apropos such notorious facts, no credence can be given to pleas that the payments were made through account payee cheque as immediately amount has been withdrawn in cash from the bank account. Therefore, he confirmed the disallowance made by the Assessing Officer @ 25% on unverifiable purchases. 8.3 Now the assessee is in appeal before us. 8.4 The learned A.R. Shri G.M. Mehta for the assessee reiterated the facts mentioned before the lower authorities and it was claimed that the assessee has su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with proper vouchers and bills. Most of the expenses were incurred in cash in which self made vouchers have been maintained, therefore, genuineness of the expenses has not been proved by the assessee beyond doubt. Thus, he disallowed 20% expenses for possible leakage of the revenue. The learned CIT(A) confirmed the addition by relying various decisions wherein identical disallowance has been confirmed @ 20%. 8.8 The learned AR for the assessee argued that there is hardly any personal use of these facilities and disallowance made higher side by the learned Assessing Officer. It is difficult to get 100% vouchers of these expenses from the market. Therefore, a reasonable disallowance may please be confirmed. At the outset, the D.R. supported the order of the learned CIT(A). 8.9 We have heard the rival contentions of both the parties and perused the material available on the record. There is no past history in this case that such disallowance was made by the Assessing Officer on estimation basis but it is a fact that these expenditures were incurred mostly in cash and it is difficult to collect the third party evidence in each and every item of expenses. Therefore, we confirm this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was being run by Ravi Haldia Group, which also was identified as an entry operator as a result of search and seizure operation conducted by the department. Summons U/s 131 of the Act were also issued to the above said parties at the address given by the assessee. Thus, summons issued were not complied and the summons issued to M/s S.P. Jewllers, M/s Gems Ocean, M/s Swapn Sh. Jewels were returned unserved. The postal remark that no such person or business existed on the addresses given. The assessee was asked to produce these parties for verification on 07/9/2009 and 14/9/2009 and on 2/12/2009. The Assessing Officer gave show cause notice in absence of non production of the parties for verification as to why these purchases of ₹ 69,71,080/- in Unit-I and ₹ 2,07,73,625/- in Unit-II should be treated as unverifiable purchases. The assessee replied on 10/12/2009, which had been reproduced by the Assessing Officer on page 4 of the assessment order. After considering the assessee's reply, the learned Assessing Officer concluded that these aforesaid parties had given only accommodation bills and were not doing any actual sale and purchase of gems and jewellery, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e book result. After rejecting the book, the Assessing Officer can estimate the income U/s 144 of the Act. After considering the decision in the case of Sanjay Oil Cake Industries and Vijay Protein (supra), he estimated the income @ 25% on unverifiable purchases of ₹ 69,71,080/- in Unit-I and ₹ 2,07,73,625/- in Unit-II. Accordingly, he made the addition of ₹ 17,42,717/- in Unit-1 and ₹ 51,93,406/- in Unit-2. The learned Assessing Officer allowed the 10B deduction in Unit-2. However, the taxable income of Unit-1 was calculated at ₹ 22,51,840/-. 9.1 Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the learned CIT(A), who had partly confirmed the addition by observing that the assessee had submitted the confirmation for purchases made in both the units with PAN number and TIN number. He also filed complete list of purchases of both the units as per direction of the Assessing Officer. He also submitted before the learned CIT(A) that he was maintaining day to day stock register, production record and finished stock register of both the units. The assessee also filed complete stock chart for both the units show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produce these parties by the Assessing Officer for verification, which has not been produced before him. It is also not clear from the order of the Assessing Officer that the assessee had filed these details before the Assessing Officer, which has been claimed before the learned CIT(A). Even for sake of brevity, it can be assumed that these evidences were filed before the Assessing Officer even the primary onus is on the assessee. The learned CIT(A) also not segregated the addition made in Units 1 and 2 even the Assessing Officer allowed 100% exemption on enhanced income in Unit-2 only addition was made in Unit-1. Therefore, he prayed to confirm the order of the learned Assessing Officer by applying the decision in the case of Sanjay Oil Cake Industries and Vijay Protein Ltd. (supra). Later on the learned CIT(A) passed order U/s 154 of the Act and apportioned disallowance in the ratio of 2:3 and accordingly be bifurcated addition of ₹ 5 lacs in Unit-1 at ₹ 2 lacs and in Unit-2, ₹ 3 lacs vide order dated 26/3/2012. 9.3 At the outset, the A.R. Shri H.M. Singhvi for the assessee submitted that he maintained complete books of account for both the units including m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doing any purchase and sale of gems and jewellery. Even then Assessing Officer asked to produce these parties for verification which could not be produced by it. The Assessing Officer also issued summons U/s 131 of the Act, which was partly served and partly returned back unserved. The assessee's argument that case laws applied by the Assessing Officer i.e. Sanjay Oil Cake Industries and Vijay Protein are not squarely applicable, is not accepted as such because primary onus is on the assessee to produce these parties for verification before the Assessing Officer. In the assessment, the Assessing Officer has a right to estimate the profits on a reasonable basis, adopting the base provided by ITAT judgments cannot to be termed as unscientific, unreasonable or arbitrary. Filing of some confirmation with PAN and TIN number are not sufficient to prove the purchases are genuine as they are to be supported by other facts including delivery of goods, as held by the various courts. The appellant cannot directly or indirectly put blinkers on investigations of the Assessing Officer to compel him to do it as per sweet will of the assessee. It is not permissible that the assessee will direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was able to file confirmatory letters from the sellers than the assessee was certainly aware of the whereabouts and ought to have taken further steps in producing the parties and proving the genuineness of the purchases made by it, in view of what we have observed hereinabove. We are also of the view that making exports of such goods purchased by the assessee is hardly of any consequence. Major deficiency has been noticed by the A.O. and in our view the Tribunal has rightly reached to the conclusion. The Assessing Officer disallowed 25% of bogus purchases in Unit-1. However, looking at the entirety of facts, competition in trade, possibility of advantage, derived a lenient view as plead by lawyers by alternate please, deserves to be considered while arriving at the estimate. We are of the conscious view that 15% disallowance out of unverifiable purchase is reasonable in keeping in view the facts and circumstances of the case for both the units on unverifiable purchases of ₹ 69,71,080/- in Unit-I and ₹ 2,07,73,625/- in Unit-II. Accordingly, the revenue's appeal is partly allowed. (3) Shri Deepak Dalela I.T.A. No. 13/JP/2010 A.Y. 2006-07 10. This is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipur bench dated 16/7/2010. The assessee's case was refixed. The factum of the case is that the assessee is dealing in manufacturing, trading and exporter of gems and jewellery. The returned income declared at ₹ 3,86,500/- and exempted income ₹ 1,29,751/- had been filed on 31/10/2006. During the year under consideration, total turnover of ₹ 1,32,56,929/- giving G.P. rate of 11.88%, which was immediate preceding year, sale of ₹ 92,82,238/- and G.P. rate was 8.82%. The auditor had given following observations in the tax audit report in form No. 3CD against the column mentioned below. (i) Column No. 28(a):- The assessee's bills in large number of small items, therefore, it is very difficult to adduce the same here. (ii) Column No. 28(b):- No details were provided to us. However, the stock has been valued as per physical verification taken by the assessee at the end of the previous year. From the above observation, the Assessing Officer concluded that the assessee was not maintaining proper stock details. It has been also stated in the audit report that books of account of assessee include stock register maintained in computer system. Therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. Nisha Exports 75,359/- 14. Jaipur International 5,62,600/- Total 38,81984 It is further observed that the department had conducted survey/search particularly in case of Haldia Group wherein during the course of search, certain incriminating documents relating to purchases of goods were found on confronting with the assessee Shri Ravi Haldia, admitted that to regularize the purchases made in cash, he had obtained bogus bills from different parties. He mentioned that payments made to all these parties were shown through cheques but immediately all amounts were received back in cash. The list of parties, during the course of search, who were engaged in supplying bills without actual delivery of goods, was submitted before the investigating authorities. The Assessing Officer verified from the list provided by Shri Ravi Haldia, aforesaid 14 parties were listed in the list of accommodation bills/bogus bills providers. Thereafter he vide his ordersheet entry dated 07/8/2008 asked to produce all the above 14 parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dian Woolen Carpet Factory Vs. ITAT (supra) for genuineness of the purchases. (b) CIT Vs. Precision Finance Pvt. Ltd. (supra) for payment made by account payee cheque is not sacrosanct. (c) CIT Vs. Golcha Prop. Pvt. Ltd. (supra) for genuineness of the transactions. (d) CIT Vs. La Medica (supra) for sellers found nonexistent, the purchase price was treated as income from undisclosed sources. (e) Beena Metals Vs. CIT (supra) for brokers through whom the purchases were made lead to conclusion of bogus purchases. (f) Chaturbhuj Panauj(supra). (g) Sumati Dayal (supra). (h) C. Vasant Lal Co. (supra). (i) M/s Kanchwala Gems Vs. JCIT (supra) for payment by account payee cheque is not sufficient to establish the genuineness of purchase. The onus is on the assessee to prove the purchases are genuine, which was not discharged even after several opportunities provided by the Assessing Officer. Payments made through account payee cheque are not sacrosanct. The department also made effort to obtain the bank account and account opening form of these concerns wherein it was noticed that the operation of these accounts were by person of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifiable purchases. He also found that the said purchases are relating to buying of different quantities of various items such as Ruby Cut Mix, Yellow Sapphire Mix, Garnet Mix Cut etc. and these items were shown in the purchased bills as well as in sales bills. The learned Assessing Officer has not doubted the sales made by the assessee. Therefore, these facts indicate that the assessee must have made the purchases of those items from some parties other than those 14 parties from whom purchases are shown in assessee's books of account. In these circumstances, the possibility of the assessee making those purchases in cash (thereby violating the provisions of Section 40A(3) of the Act wherein disallowance of 20% of such expenditure is prescribed) and inflating the cost of purchases to some extent, could not be ruled out, in absence of actual details, such as quantity, quality, rate etc. of those purchases. Therefore, the learned CIT(A) held that the learned Assessing Officer was justified in disallowing 25% of the unverifiable purchases of ₹ 38,81,984/- on estimate basis, leading to an addition of ₹ 9,70,496/- but similar defects have not been pointed out by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs. He drawn our attention on page Nos. 17 to 68 of the paper book and claimed that burden of proof in case of unverifiable purchases is not the same as burden of proof required U/s 68 of the Act. There is no law requiring the assessee to produce the parties from whom it had made purchases. If these parties are not appearing before the Assessing Officer in response to summons U/s 131, the Assessing Officer has other power under the Act to enforce the attendance. Why the department has not imposed the penalty on them. All these parties are assessed to tax at Jaipur and therefore, how the assessment had been completed on alleged non-existing persons. All these facts show that shelter has been given on the alleged parties. This proves that all the purchases made by the assessee were genuine. During the course of survey/search, these parties were found on given addresses, therefore, observation of the Assessing Officer that no concern was traced at the given address is without basis. Statement of various persons relied by the Assessing Officer in assessment order, cannot be a basis for holding that the purchases made by the assessee are non-genuine. Since in those statements, no questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 (Raj). (vii) CIT Vs. Gotan Lime Khaniz Udyog (supra). (viii) CIT Vs. Leader Valves P Ltd. 285 ITR 0435 (P H) (2006). Thus, he prayed to delete the addition confirmed by the learned CIT(A). 10.5 At the outset, the learned CIT D.R. reiterated the arguments made in introductory paragraphs of this order and submitted that as per audit report, the auditor had not given details of stock, which will also not submitted before the Assessing Officer as claimed by the assessee before the Hon'ble Bench. There is no evidence with the assessee that he was maintaining opening and closing stock of the jewellery. He further argued that now closing and opening entry referred in page Nos. 105 and 106 of the paper book is not bulky as claimed by the assessee at the time of assessment. Hardly, 16 items were shown in the opening stock and 21 items in closing stock, which was shown in both the entries on the basis of quantitative not qualitative as required by the Assessing Officer. Further the learned CIT(A) also referred about the closing stock but no specific findings given by the learned CIT(A) in the appellate order. The department has conducted enquiry through surv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jaipur for A.Y. 2008-09. The effective grounds of appeal are as under:- 1. The learned CIT(A) has erred on facts and in law in confirming the action of the A.O. in disallowing 25% of the alleged unverifiable purchases of ₹ 3,28,40,664/- from four parties resulting into addition of ₹ 82,10,166/-. 1.1 The learned CIT(A) has erred on facts and in law in confirming the said disallowance ignoring the consistent view of the Hon'ble ITAT Jaipur Bench in applying a reasonable G.P. rate considering past history, where purchases are held unverifiable. 1.2 The learned CIT(A) has erred on facts and in law in relying on various case laws which are distinguishable on facts. 2. The assessee craves to amend, alter and modify any of the grounds of appeal. 3. The appropriate cost be awarded to the assessee. 11.1 All the three grounds of assessee's appeal are against confirming the action of the Assessing Officer in disallowing 25% of alleged unverifiable purchases of ₹ 3,28,40,664/- from four parties resulting into addition of ₹ 82,10,116/-. The learned Assessing Officer observed that the assessee is engaged in trading and export of precious a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and also why not 25% disallowance should be made on these unverifiable purchases. It has been submitted before the Assessing Officer that the assessee already submitted copy of purchase bills of all the parties containing complete address, telephone number, RST/CST number and PAN and payments to these parties were made through account payee cheques. The goods so purchased by the assessee had been exported. He also asked that onus to prove the purchase genuine is different than onus required to prove the cash credit U/s 68 of the Act. Accordingly, the assessee claimed that he discharged his onus to prove these purchases as genuine. The assessee further asked to provide material available with the department against the assessee so that reply can be filed on it. The goods purchased from these parties were exported, which were under strict control of the custom department and Reserve Bank of India, therefore, purchases cannot be considered as bogus. After considering the assessee's reply, the learned Assessing Officer held that the purchases made from four parties were bogus. He further relied on the decision in the case of CIT Vs. Precision Finance Pvt. Ltd. (supra) for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 128 TTJ (JP) 708, which has been recalled by the Hon'ble ITAT. The learned CIT again relied upon the case laws referred by the Assessing Officer particular decision in the case of Kanchwala Gems where Hon'ble ITAT had confirmed the G.P. rate of 30% whereas the Assessing Officer applied 40% G.P. rate. He further relied on the decision in the case of CIT Vs. Sindhuja Foods (P) Ltd. (supra), ACIT Vs. Amar Mining Co. (supra), Mittal Belting and Machinery Stores Vs. CIT (253 ITR 341), Balaji textiles Industries Pvt. Ltd. Vs. ITO 49 ITD 177 (Mum Trib), ITO Vs. Sunsteel (92 TTJ 1126) (A.bad Trib), Uniword Telecom Ltd. Vs. Addl.CIT (45 DTR 433) and confirmed the addition of ₹ 82,10,166/-. 11.3 Now the assessee is in appeal before us. The learned A.R. Shri P.C. Parwal for the assessee submitted that the assessee is engaged in the business of trading and export of Gem stones, Diamond, Rough etc. and had maintained day to day books of account, which is subject to audit. These books are duly supported with bills and vouchers. All the transactions of purchases and sales is fully verifiable from the supporting bills, vouchers and documents maintained by assessee. Export sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter than the G.P. @ 4.38% on turnover of ₹ 17,40,37,587/- in the immediate preceding year. He further distinguished case law relied by the Assessing Officer i.e. decisions in the cases of Shanti Kumar Chordia, Uniword Telecom Ltd. Vs. Addl. CIT, Kanchwala Gems (supra), Shri Sindhuja Foods Pvt. Ltd. (supra). He also placed reliance on the following case laws: (i) CIT Vs. Amarpali Jewels (P) Ltd. (supra) (ii) CIT Vs. Precious Jewels Corporation (supra). (iii) Diagnostics Vs. CIT Anr. 56 DTR 317 (Cal) (HC). (iv) Shankar Export Vs. ACIT (supra) (v) CIT Vs. Leader Valves P Ltd. (supra). Therefore, he prayed to delete the addition confirmed by the learned CIT(A). 11.4 The learned CIT D.R. reiterated the arguments made in introductory para of this case and submitted that the facts of this case also identical with other cases of unverifiable purchases as during the course of search and survey operation conducted by the department on various parties, which has been referred by the Assessing Officer in the assessment order that these parties had provided only bills, no delivery of goods were made. The Assessing Officer had given sufficien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e department, these parties were figured in the list of entry provides and they had admitted that they only provided bills no any real business with delivery of goods. The learned Assessing Officer applied Hon'ble Gujarat High court decision in the case of Sanjay Oil Cake Industries (supra) and ITAT Ahmadabad Bench decision in the case of Vijay Proteins wherein 25% disallowance held reasonable on unverifiable purchases. The A.R. of the assessee tried to distinguish this case with facts and circumstances and argued to apply past history of the case. The onus is on the assessee to prove these purchases as genuine and sufficient purchases from these parties have been claimed to be made by him. The assessee also could not be able be lead any evidence in furtherance of filing of confirmatory letter or merely showing that the payments were made by account payee cheques. The assessee was aware of the whereabouts of the parties and he should have produced these parties before the Assessing Officer for verification of purchases, which could not be done at the stage of assessment proceedings. The addition on account of unverifiable purchases were made in A.Y. 2006-07. Thus, past history ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing certain amount named as service fees/discount/merchant discount rate/commission makes the payment to the assessee. During the year the amount commission retained by different banks in respect of credit card slips sent to the banks for collection was as under:- Name of the bank Amount American Express Bank 10,32,045/- Citi Bank 2,33,554.18 Bank of Baroda 10,45,320.98 Standard Chartered Bank 1,82,791.08 Total 24,93,717.24 The Assessing Officer further observed that the nature of payment is commission and liable to be deducted TDS U/s 40(a)(ia) of the Act. He gave reasonable opportunity of being heard to the assessee, which was replied by it vide letter dated 29/11/2010, which has been reproduced by the Assessing Officer on pages 11 and 12 of the assessment order. The appellant submitted that the relation between the assessee and bank is on principal to principal basis. The banks are not acting as agent of the assessee. Therefore, it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. She further relied upon the decision of Hon'ble Kerela High Court in the case of Vodafone Essar Cellular Ltd. Vs. ACIT (2010) 235 CTR (Ker) 393 wherein TDS is liable on commission or discount paid to distributor of SIM cards and recharge coupons U/s 194H of the Act. She further relied in the case of CIT Vs. Idea Cellular Ltd. (2010) 230 CTR (Del.) 43 wherein issue was distribution commission paid to distributors is liable to deduction for TDS. Further she relied on the case of CIT Vs. Singapore Airlines Ltd. Ors. (supra). The assessee case laws i.e. CIT Vs. Cargil Global Trading P. Ltd. (2011) 335 ITR 94 (Delhi) and ABD International Inc. (2011) 55 DTR (AAR) 393 are not found squarely applicable in assessee's case. Finally she held as under:- 1. Full legal and equitable title on the payment to be received against sales made by the assessee remains with him and at no stage passes to the bank. 2. The bank i.e. the agent cannot give any discount or alter in any way the nature of transaction or the sale price decided by the seller i.e. the assessee. 3. The bank is allowed to collect the payments only after authorization by the assessee on submission of the valid s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale. Therefore, Section 194H is not applicable in case of goods sold through the credit cards. He further relied in case of (i) DCIT Vs. M/s Vah Magna retain (P) Ltd. ITA No. 905 /Hyd/2011 and (ii) ITO Vs. Jet Airways (2013) 28 ITR (Trib) 582 (Mumbai). Therefore, he prayed to delete the addition. 12.5 At the outset, the learned CIT DR supported the order of the learned CIT(A). 12.6 We have heard the rival contentions of both the parties and perused the material available on the record. The assessee is selling the goods through credit cards which is swapped in the machine provided by the bank, thereafter it is cleared after verification of the data of the credit card by the bank, who provided the card after charging of certain fees for making payment to the assessee. It goes directly in the account of the assessee's bank after reducing the charges. Therefore, there is no control on mechanical transfer of money from one account to another account. The assessee knows that he would receive less amount to that extent. The Coordinate Bench in case of Gems paradise (supra) had analysed and held the Section 194H and payment through credit cards as under:- Section 194H is app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction. Similar views have been held by the various ITATs on credit cards payments. Therefore, we delete the addition confirmed by the learned CIT(A). 12.7 In the result, the assessee's appeal is allowed. 12.8 The cross appeal filed by the Revenue is against deleting the addition of ₹ 47,72,031/- @ 25% on unverifiable purchase of ₹ 1,90,88,142/-. The learned Assessing Officer observed that the assessee has declared gross profit of ₹ 6,59,45,825/- on sale of ₹ 18,82,88,100/- giving a G.P. rate of 35.02% as against the G.P. rate of 32.99% declared on sale of ₹ 17,54,76,309/- in previous assessment year. The assessee has shown following purchases. Sl. No. Name of the Party(s) Amount 1 Annu Exports ₹ 6,70,100/- 2. Century Gems ₹ 43,38,151/- 3. Millenium Enterprises ₹ 4,05,050/- 4. M/s Mohan and Company ₹ 31,65,015/- 5. M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer, the assessee carried the matter before the learned CIT(A), who had deleted the addition by observing as under:- 4.3 I have carefully perused the order of the A.O. and the submissions of the A.R.. I find that the Hon'ble ITAT Jaipur Bench A , Jaipur has already given a finding on similar facts in the case of the assessee in A.Y. 2005-06. Since, there is no divergence of facts on this issue during this year, from the previous year adjudicated upon by the Hon'ble ITAT in the case of the assessee, the decision of the A.O. to reject the books of account and invoke the provisions of S. 145(3) is upheld. 4.4 The subsequent estimation of income is required to be made by taking into consideration the past history of the assessee as per the observations of the Hon'ble ITAT Jaipur Bench. The assessee has declared a g.p. rate of 35.02% as compared to a g.p. rate of 32.02% in the previous assessment year on an increased turnover of ₹ 18,82,88,100/- as compared to turnover of ₹ 17,54,76,039/- in previous assessment year, the A.O. has not brought on record any new facts or evidence to controvert the findings of the ITAT in the case of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... history of the case is doctored and can be relied upon. The learned A.R. for the assessee accepted that the books of account rejected by the Assessing Officer is justified on the basis of unverifiable purchases. After considering both sides arguments, we feel that some reasonable net profit should be applied for deterrent effect, thus we disallowed 15% as net profit on the unverifiable purchases. 12.14 In the result, the Revenue's appeal is partly allowed. (6) Shri Hemant Shrivastava (ITA No. 891/JP/2011 for A.Y. 2007-08 13. This is an appeal filed by the assessee against the order dated 11/08/2011 of the learned CIT(A)-II, Jaipur for A.Y. 2007-08. The effective grounds of appeal are as under:- 1. In the facts and circumstances of the case and in law the learned CIT(A) has erred in confirming the action of the learned A.O. in not providing opportunity of cross examination of the persons whose statements have been used against the assessee. The action of learned CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire assessment order which is passed in gross violation of principles of natura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to add, amend or alter any of the grounds on or before the hearing. 13.1 The grounds No. 1,2, and 3 of the appeal are against making addition of ₹ 17,24,798/- on account of unverifiable purchases of ₹ 68,99,193/- without providing cross examination of the persons, whose statement had been used against the assessee. The learned Assessing Officer observed that the assessee is in the business of manufacturing and trading of precious and semi precious stones. The assessee is running his business in the name and style of T.G.L. Group. During the year under consideration, the assessee had shown total sales of ₹ 2,65,63,549/- and gross profit of ₹ 10,07,812/- giving G.P. rate of 3.93%. In immediate preceding year, the total sales was ₹ 20,26,817/- and gross profit at ₹ 3,30,553/- G.P. rate @ 16.31%. The Assessing Officer gave reasonable opportunity of being heard on decline of G.P., which was submitted by the assessee. The learned Assessing Officer asked to furnish the confirmation of purchases in following cases, (i) M/s Anshu Gems, (ii) M/s Vijay Gems, (iii) M/s Savorite Exports, (iv) M/s Pooja Jewellers, (v) M/s Subh Laxmi gems (vi) M/s Aashta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kanchwala Gems Vs. JCIT (supra) and held that in absence of qualitative details of stock, the rejection of book result is justified. Thereafter, he made best assessment on the basis of evidences available with him. The purchases to the tune of ₹ 68,99,193/- is not verifiable, G.P. has gone down heavily. It proves that the assessee had taken accommodation bills from these parties to reduce the profit of the assessee. Thus, he applied 25% income on unverifiable purchased of ₹ 68,99,193/- at ₹ 17,24,798/- by relying the decision in the case of Sanjay Oil Cake Industries and Vijay Protein Limited (supra). 13.2 Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the learned CIT(A), who had confirmed the addition by observing that the assessee had not produced M/s Anshu Gems, M/s Vijay Gems, M/s Savorite Exports, M/s Jodhpur Gems and M/s Subh Laxmi gems before the Assessing Officer for verification from whom total unverifiable purchases were at ₹ 68,99,194/-. He further stated that during the course of survey and search by the department, it was found that these parties are not in real business but providing accommodati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e confirmed the addition made by the Assessing Officer @ 25% on unverifiable/bogus purchases. 13.3 Now the assessee is in appeal before us. 13.4 The learned A.R. Shri Rajiv Sogani for the assessee submitted that detailed submissions were made before the learned CIT(A) for rejection of books of account. The learned CIT(A) relied upon in confirming the trading addition in case of Deepak Dalela, which has been recalled by the Hon'ble ITAT. Thus, it is not relevant to the proceeding. He further relied upon the decision in the case of Amrapali Jewellers (supra) wherein Hon'ble Rajasthan High Court as confirmed the findings of the Hon'ble ITAT and held that on the basis of unverifiable purchases, rejection of book result is justified and also net profit should be estimated on the basis of past history of the case. In case of Swarnaganga Jewellers Vs. ACIT ITA No. 833/JP/2011, the Hon'ble ITAT had followed the decision in the case of Amrapali Jewellers Pvt. Ltd. In following cases, the Hon'ble ITAT disallowed a suitable percentage of net profit on the basis of past history. In case of P.R. Gems Vs. ITO in ITA No. 514/JP/2011 and M/s Amrapali Jewellers (supra). It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The effective grounds of both the appeals are as under:- Ground of ITA 342/JP/2012 Whether on the facts and in the circumstances of the case and in law the learned CIT(A) is justified in restricting the trading addition of ₹ 1,00,000/- as against ₹ 12,48,080/- made by the A.O. @ 25% of unverifiable purchases without considering the fact that assessee failed to discharge its onus to produce the sellers for verification of purchase claimed to have been made from them. Ground of ITA 322/JP/2012 1 The learned Commissioner of Income Tax (Appeals) has erred in facts and in law in making a lump sum addition ₹ 1,00,000/-. 2.The learned Commissioner of Income Tax (Appeals) has erred in facts and in law in confirming the Telephone Expenses of ₹ 18,687/-. 3.The assessee craves to amend, alter and modify any of the grounds of appeal. 4.The appropriate cost be awarded to the assessee. 14.1 Ground No. 1 of both the appeals are against restricting and confirming the addition as against the Assessing Officer made addition of ₹ 12,48,080/- @ 25% on unverifiable purchases. The learned Assessing Officer observed that the assessee is in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd found that various persons were indulged in practice of issuing bogus bills in the trade of gems and jewellery. Here also, the parties had admitted that they provided only bills, no real trade was ever conducted by them. These persons were charging commission @ .2% to .25% on the quantum of bills issued. In case of M/s Umrao Exports, the BCTT Wing found during the course of survey that no stock, cash, books of account were found with the assessee. The firm was not doing any gems and jewellery business and only giving bills without actual delivery of goods. Further spot enquiry by the Ward Inspector at the business premises of M/s Ganpati Traders and Ratnam Jewellery was conducted and he was found that no business activity was carried out by the above parties. The learned Assessing Officer on the basis of evidence collected through various channels, gave reasonable opportunity of being heard to the assessee vide letter dated 17/11/2009 and 07/12/2009, which was responded by the assessee vide letter dated 26/11/2009 and 14/12/2009 respectively, which has been reproduced by the Assessing Officer on page No. 6 of the assessment order. After considering the both the replies of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Gems Paradise, Suresh Chand Nahata and Rajendra Kumar Jain (supra) wherein the Hon'ble ITAT has considered the past history and current event of the case for estimation of income. After considering the above decisions, the learned CIT(A) had not found the Assessing Officer's addition @ 25% justified and considered the assessee's past history and relied the decision in the case of CIT Vs. Gotan Lime Khanij Udyog (supra) and he confirmed the ad hoc addition of ₹ 1,00,000/- to take care all possible discrepancies and leakage of profit towards the adverse finding given by the Assessing Officer. 14.3 Now both the parties are in appeal before us. The learned CIT D.R. reiterated the arguments made in introductory para of this case and submitted that the facts of this case also identical with other cases of unverifiable purchases as during the course of search and survey operation conducted by the department on various parties, which has been referred by the Assessing Officer in the assessment order that these parties had provided only bills, no delivery of goods were made. The Assessing Officer had given sufficient opportunities to the assessee to produce the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee were genuine. He also submitted that during the course of survey/search, these parties were found on given addresses, therefore, observation of the Assessing Officer that no concern was traced at the given address is without basis. Statement of various persons relied by the Assessing Officer in assessment order, cannot be a basis for holding that the purchases made by the assessee are non-genuine. Since in those statements, no question has been asked with reference to assessee. The parties providing the bills as per the statement cannot be universally applied in all other cases. Once the Assessing Officer relied on the statements, it is his duty to provide opportunity of cross examination to the assessee. It is not the case of the department that the purchases rate/quantity of various items purchased from alleged unverifiable parties on different dates was less than the rate on which it was purchased on the date from other parties. The learned CIT(A) has accepted that the purchases of goods as per the bills raised by these parties has been made by the assessee but he presumed that purchases has not been made from these parties but from some other parties to whom payments migh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modation bills. The sufficient opportunities have been given by the Assessing Officer to prove the genuineness of the purchases. The Assessing Officer himself issued the notices to these parties but either notices were not served or not returned back. The assessee could not produce these parties for verification during the course of assessment proceedings. Even the Assessing Officer provides reasonable opportunity of being heard to the assessee. The learned Assessing Officer applied Hon'ble Gujarat High court decision in the case of Sanjay Oil Cake Industries (supra) and ITAT Ahmadabad Bench decision in the case of Vijay Proteins where 25% disallowance held reasonable on unverifiable purchases. The A.R. of the assessee tried to distinguish this case with facts and circumstances and argued to apply past history of the case. The onus is on the assessee to prove these purchases genuine. The assessee also could not be able be lead any evidence in furtherance of filing of confirmatory letter or merely showing that the payments were made by account payee cheques. The assessee was aware of the whereabouts of the parties and he should have produced these parties before the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses unvouched, therefore, no disallowance can be made from the telephone expenses. He relied upon the decision in the case of CIT Vs. Oracle Indina (P) Ltd. 199 Taxman 181 (Del.) (HC) and Arthur Anderson Co. Vs. ACIT (2010 TION 416 ITAT) and further argued that the disallowance made by the Assessing Officer is excessive and it should be restricted @ 10% by relying upon the decision passed by the Special Bench in the case of Topman Exports Vs. ITO 124 ITD 1 (Mum). At the outset, the learned CIT DR argued that a reasonable disallowance may please be confirmed. 14.7 After considering both the sides, we find 10% disallowance reasonable out of total telephone expenses at ₹ 93,433/-. Thus, the assessee gets part relief. 14.8 In the result revenue's appeal as well as assessee's appeal are partly allowed. (8) M/s Kinu Baba Jewellery Pvt. Ltd., Jaipur (ITA No. 1053/JP/2011 and C.O. No. 13/JP/2012) for A.Y. 2008-09 (Transferee Company) 15. The cross objection filed by the assessee is not pressed at the time of hearing of the appeal, therefore, we dismiss the cross objection as not pressed. 15.1 In Revenue's appeal the learned Assessing Officer observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st history of the assessee. 15.4 At the outset, the learned A.R. Shri Rajiv Sogani for the assessee took the same line of arguments and vehemently argued that the assessee has provided copies of bills, payments were made through account payee cheques. The appellant was maintaining quantity wise details of stock in stock register. The closing stock could be valued from the supporting bills. The disallowance @ 25% was not just because the Assessing Officer has not brought on record any evidence to prove that these purchases were inflated by 25% as compared to purchases from other parties and case laws relied by the Assessing Officer are not squarely applicable. Therefore, it is prayed to confirm the order of the learned CIT(A). 15.5 We have heard the rival contentions of both the parties, perused the material available on the record and above discussion made in this order, it is evident that during the course of investigation made by the department, number of parties were not found in existence on given addresses. No goods, cash, even books of account were found during the course of survey at the business premises of Ashish Jewellers by BCTT wing of the IT Department. The summo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of consideration received by the assessee on transfer of going concern, which was availed by the assessee vide letter dated 24/12/2010. The fair value of unquoted equity share of M/s Kinu baba Jewellery India Pvt. Ltd. was calculated @ 8.5 rupees per share as on 31/3/2007 as per Rule 11U(B) of the Income Tax Rules, 1962 (hereafter referred as the Rules. The learned Assessing Officer was not satisfied with the calculation made by the assessee company per share of transferee company. It is further found that shares was allotted in November, 2007 and February, 2008 whereas value was calculated by the assessee as on 31/3/2007. There was a survey on transferee company, who surrendered undisclosed investment in stock at ₹ 2.29 crores. This stock was accumulated in a day or two but it was representing investment of money earned over a period of time. There was reserved and surplus credited at ₹ 1,81,04,041/- on 31/3/2008 in transferee company, which represents profit earned during the year. This surplus was Nil as on 31/3/2007. The learned Assessing Officer recalculated the per share value after considering the accumulated profit as on 31/3/2008 and number of shares held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2007 whereas learned Assessing Officer had concluded that date of allotment of the shares was November, 2007 and February, 2008 and value has been taken by the assessee as on 31/3/2007. The learned CIT(A) has not given specific finding why she has accepted date of transfer i.e. 21/8/2007. It has not been come out from the order of the learned CIT(A) and submission made before her that Rule 11U(a) of the Rules has been applied meticulously. The valuation date defines in Rule 11U(j) of the Rules i.e. valuation date means the date on which the property or consideration as the case may received by the assessee, which was amended w.e.f. 29/11/2012 prior to its substitution clause (j) read as under:- Valuation date means the date on which the respective property is received by the assessee. It is immaterial whether transferee company has supported its business or not or having any income from the trading of gems and jewellery, which has not been excluded or explained in rule itself. Therefore, this issue is set aside to the Assessing Officer and he is directed to compute fair market value of unquoted share as per the Rule 11U(a) of the I.T. Rules on the valuation date. 15.11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Exports, M/s S.V. Enterprises, M/s M.V. Gems International, M/s Rahul Exports, M/s M.D. Exports and M/s Ambika Impex. The learned Assessing Officer reproduced the statement of Shri Ravi Haldia at pages 4 to 9 of the assessment order. The learned Assessing Officer concluded that statement of Shri Ravi Haldia clearly corroborates the other findings in this order to show that the purchases claimed by the assessee are not genuine. In case of M/s Nidhi gems, M/s A.R. Exports, M/s Adinath Gems and M/s Govindam Jewellers, a survey operation was conducted by the BCTT authority of the department and it was found that at the given address of these parties, no business activities were conducted. There was no cash, stock, books or other relevant documents were found therefrom. They merely provided accommodation entries to interested parties in the garb of sale/purchase. In case of M/s Sapna Gems, M/s Pragati Gems and M/s pooja Exports, enquiry was conducted by the department and found these parties were merely providing accommodation entries to other persons in the garb of sale/purchase. The Assessing Officer gave reasonable opportunity of being heard to the assessee on unverifiable purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Hon'ble ITAT Jaipur Bench in assessee's own case on similar facts in subsequent A.Y. Regarding estimation of income it has also been the consistent view of the Hon'ble ITAT Jaipur Bench that past history is the best guide for estimating the income of the assessee, however, the assessee has not submitted any record of its past history. It is the consistent view of the Hon'ble ITAT Jaipur Bench that the GP is always better on lower sales since the GP of the assessee has been accepted at 16.16% on sales of ₹ 25500660/- in A.Y. 2005-06 a GP of 20% is held to be justifiable on the sales of ₹ 15391516/- during the year. As the assessee has declared GP of ₹ 22,70,660/- an addition of ₹ 8,07,643/- is sustained. 16.3 Now the assessee as well as the revenue are in appeal before us. 16.4 The learned A.R. Shri P.C. Parwal for the assessee submitted that the assessee is maintaining complete day to day books of account, which is subject to audit. These books of accounts are supported by bills and vouchers. The observation of Assessing Officer that closing stock of assessee is on estimate basis and not subject to verification is incorrect inasm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the case laws referred in assessment order and disallowance @ 25%. The learned AR has not pressed the rejection of books of account U/s 145(3) of the Act in this also. It appears from the assessment order that the assessee is doing this business from past but figures are not available in assessment order and paper book submitted by the assessee as per Hon'ble ITAT order for A.Y. 2005-06, the assessee always has unverifiable purchases. In A.Y. 2004-05 unverifiable purchases was at ₹ 1,80,12,079/-, in A.Y. 2005-06 (in the order), in A.Y. 2006-07 at ₹ 78,45,505/- and in A.Y. 2007-08 at ₹ 1.27 crores. Therefore, the assessee's past history is totally doctored, which is not best guide for deciding the income of the assessee as held by the Hon'ble Rajasthan High Court that the past history can be applied where the assessee. has occasionally found fault of unverifiable purchases. In this case, the assessee always getting accommodation bills. Therefore, addition made by the Assessing Officer should be confirmed. He also reiterated the facts mentioned by the Assessing Officer in assessment order. 16.6 We have heard the rival contentions of both the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ival contentions of both the parties and perused the material available on the record. The assessee has not claimed deduction U/s 80HHC of the Act before the Assessing Officer in prescribed proforma as mentioned by the learned DR alongwith the return. There is no evidence alongwith paper book, which shows that the assessee calculated deduction U/s 80HHC of the Act in computation of income. Even there is no note in the computation in case of addition made on account of any reasons, the deduction would be allowed. The case law relied by the assessee are not squarely applicable on the facts of the case. Those assessees claimed this deduction in originally alongwith return in prescribed proforma. Recently the Hon'ble Rajasthan High Court in the case of Venus Arts Gems Vs. ITO vide order dated 20th August, 2014 has held in identical case of unverifiable purchases that the assessee is 100% exporter but that does not mean that the Assessing Officer is precluded from enquiring into the purchases, which were made by the assessee from the said sellers. The Hon'ble High Court in case of unverifiable purchases has held that, it is purely a finding of fact by the two appellate authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry. The modus operandi of these parties were that bills were issued and cheques received against the bills, were immediately withdrawn from the bank in cash in the next few days and purchases against the bills were shown in the cash. There was survey by BCTT wherein in the year 2007-08 similar racket was also discovered by the department and it was found that commission @ .20% to .25% was charged for issuing these bogus sales bills. In some cases, the commission was higher as much as .5% to 6%. In case of assessee, survey authorization issued by BCTT Wing could not be executed as the assessee was non-existent at the given address. Similar information was also received by the Assessing Officer from DIT investigation Jaipur pursuant to search conducted in case of Haldia Group on 20/4/2007 wherein it has been categorically admitted that they have obtained bogus bills from different parties in F.Y. 2004-05 and further subsequent years. He also admitted that payments made to all these parties were shown through cheque but immediately amount was received back in cash. In A.Y. 2007-08, the learned Assessing Officer assessed the assessee's income @ .5% at ₹ 8,34,488/- on total bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the learned CIT(A) and argued that a detailed order had been passed by the learned CIT(A) after considering the affidavit of the assessee, in past also in the assessee's case, income on the basis of .5% had been assessed in A.Y. 2007-08. There is no evidence before the Hon'ble Bench that these additions have been challenged by the assessee or not before any appellate authority. Therefore, addition may be confirmed. 17.5 We have heard the rival contentions of both the parties and perused the material available on the record. It is undisputed facts that that on given address, no firm was found inexistence, therefore, survey authorization could not be executed. The assessee did not furnish any audit report, copy of bank account during the course of assessment proceedings before the Assessing Officer, which was also not produced before the learned CIT(A), only an affidavit was filed before her, wherein it has been admitted by the assessee that he was earning commission @ ₹ 100 to 200 per lac. The learned CIT(A) gave the opportunity to the assessee during the appellate proceeding why the assessee charged lesser commission compared to others in the line of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for commercial purposes. The Assessing Officer gave reasonable opportunity of being heard on this issue, which was availed by the assessee. After considering the assessee's reply it has been held that the assessee systematically is planning and constructing of commercial complex and then had been selling it in a planned way like a prudent business mind with a profit motive, would be treated as income from business or profession or income from capital gain as claimed by the assessee. He thoroughly examined concept of business on page Nos. 4 to 7 and held that the assessee had purchased the land not inherited. The construction activity was in planned way and intention of the assessee was clear to make profit by indulging in trade adventure. The building on plot purchased was already there, which was utilized for commercial purposes. The learned Assessing Officer after considering the various facts and circumstances of the case and statement recorded U/s 133A of the Act during the course of survey wherein it was accepted by the assessee that this construction was made to earn the profit. The appellant had accepted the booking of shops, which were shown as a sundry creditors in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has treated the investment in construction or building as cost of improvement. The old building has been demolished. Thus the building which was earlier a capital assets with the assessee stands demolished and therefore, there cannot be any improvement to that building. It is, therefore, held that cost of the building in respect of shops sold is to be taken as cost of acquisition of building and capital gain on building will be determined on the basis of sale of building included in the sale of shops. We therefore, hold that the profit from the sale of shops during the year will be apportioned between the profit on the sale of land and building. The capital gain arising from sale of land will be long term. The profit on sale of building will be short term because the building was stated for construction from June 2005 and therefore, the period of holding of building will be less than three years for sales made during the year. After respectfully following the decisions of the Coordinate Bench, we confirm the order of the learned CIT(A) on this ground of revenue's appeal. 18.5 The second ground of appeal is against deleting the addition of ₹ 32,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been deleted by the Hon'ble ITAT. Facts and circumstances of the case are identical, therefore, learned CIT(A) was right to delete the addition. 18.9 We have heard the rival contentions of both the parties and perused the material available on the record. The Coordinate Bench in assessee's own case for A.Y. 2007-08 ITA No. 939/JP/2010 order dated 24/6/2011 had decided issue of on money . The relevant portion of the order is as under:- 4.7 Hence the information contained in the statement recorded during the course of survey can be used but it cannot be conclusive evidence against the assessee. The A.O. has not collected any material from the purchaser of the shops to show that the assessee has received on money. The sale of shop is evidenced by the sale deed. There is no documentary evidence in respect of sale price of the shops. The Hon'ble Punjab Haryana High Court in the case of Paramjit Singh Vs. ITO, 323 ITR 588 had an occasion to consider as to whether the oral evidence is admissible once the document contains all the terms and conditions. Hon'ble High Court held that according to the provisions of the Indian Evidence Act, 1872 when terms of a contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome on unverifiable purchases @ 14.5% on declared total turnover and resulting in a trading addition of ₹ 77,800/-. 18.12 Now the Revenue is in appeal before us. The learned CIT DR's arguments already summarized in preceding paras on unverifiable purchases. It is further argued that in assessee's case, the parties, who had supplied the bills, had been searched and statement U/s 132(4) of the Act had been recorded, who had categorically admitted that these are the only bills, no goods were supplied by the suppliers. Therefore, Assessing Officer's order should be confirmed. 18.13 Learned A.R. Shri Manish Agarwal for the assessee argued that during the course of assessment proceedings , every possible details were submitted to the Assessing Officer in form of copy of purchase bills, TIN number, P.A. number, proof of payment and confirmation from the supplier and payments were made through account payee cheques. The assessee has discharged his burden by submitting these evidences during the course of assessment proceedings. It is further argued that the assessment U/s 153A of the Act in case of Clarity Gold Pvt. Ltd. has been completed without disturbing sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the order dated 18/10/2011 passed by the learned CIT(A)-II, Jaipur for A.Y. 2007-08. The effective grounds of appeal are as under:- 1. In the facts and circumstances of the case and in law, the learned CIT(A) has erred in justifying the action of the learned A.O. in not providing opportunity of cross examination of the persons whose statements have been used against the assessee and has further erred in justifying the action of the learned A.O. in not making the evidences which have been used against the assessee. Therefore, the action of the learned CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire assessment order which is passed in gross violation of principles of natural justice. 2. In the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned A.O. in holding the purchases from the following parties as bogus:- Sl. No Name of the parties from whom purchases made Amount (in Rs.) 1. M/s Imperial Jewels 6,39,475/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of M/s Unique Palace. The Assessing Officer observed that in the year 2003, there was a search carried out by the department in the case of Sanjiv Prakashan group and on 20/4/2007 in case of Haldia Group. It was admitted that to regulairse the purchases made in cash, the assessee had to obtain bogus bills from different parties. The bills were made to the parties, who provided bill were shown through account payee cheque but immediately whole amount was received back in cash. The parties were provided bills only without actual delivery of goods. Survey by BCTT wing of the department was also conducted in the year 2007-08 and found that various persons were indulged in practice of issuing bogus bills in the trade of gems and jewellery. The learned Assessing Officer further observed that he compared the G.P. rate from A.Y. 2005-06, 2006-07 to the year under consideration. He found that the assessee made purchases from following parties at ₹ 9,51,125/- Sl. No. Name of the parties from whom purchases made Amount (in Rs.) 1. M/s Imperial Jewels 6,39,475/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from business and profession. The assessee purchased goods and he has primary knowledge about the whereabouts of the parties and onus on him to prove the purchases genuine, for which it required to lead the evidence. He held that the filing copy of details of purchases, sales tax number, PAN number, payments through account payee cheques are not enough to prove the genuineness of the transactions. These concerns were found to him, who had indulged in issuing bogus bills. He further relied in following case laws: (a) CIT Vs. Precision Finance Pvt. Ltd. (supra) for payment made by account payee cheque is not sacrosanct. (b) M/s Kanchwala Gems Vs. JCIT (supra) for payment by account payee cheque is not sufficient to establish the genuineness of purchase. (c) M/s Indian Woolen Carpet Factory Vs. ITAT (supra) for genuineness of the purchases. (d) VISP (P) Ltd. Vs. CIT (supra) for genuineness of purchases. (e) Chuhar Mal Vs. CIT (supra) for Evidence Act. (f) Golcha Properties Pvt. Ltd. for genuineness of transactions. On the basis of unverifiable purchases in case of two parties , the learned Assessing Officer rejected the book result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned CIT(A) for rejection of books of account. The learned CIT(A) relied upon in confirming the trading addition in case of Deepak Dalela, which has been recalled by the Hon'ble ITAT. Thus, it is not relevant to the proceeding. He further relied upon the decision in the case of Amrapali Jewellers (supra) wherein Hon'ble Rajasthan High Court as confirmed the findings of the Hon'ble ITAT and held that on the basis of unverifiable purchases, rejection of book result is justified and also net profit should be estimated on the basis of past history of the case. In case of Swarnaganga Jewellers Vs. ACIT ITA No. 833/JP/2011, the Hon'ble ITAT had followed the decision in the case of Amrapali Jewellers Pvt. Ltd. In following cases, the Hon'ble ITAT disallowed a suitable percentage of net profit on the basis of past history example P.R. Gems Vs. ITO in ITA No. 514/JP/2011 and M/s Amrapali Jewellers (supra). It is further argued that G.P. rate declined had been explained before the Assessing Officer, which was due to increase in the sale, substantially which was due to change of strategy adopted by the assessee. Therefore, he prayed to delete the addition. 19.6 The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or verification whatever evidences were produced by the assessee are not sufficient to prove the purchase genuine even payments through account payee cheques is not sacrosanct and had not discharged on him. During the course of investigation conducted by the department, these parties were figured in the list of entry provider and they had admitted that they only provided bills, no real business with delivery of goods. The learned Assessing Officer applied Hon'ble Gujarat High court decision in the case of Sanjay Oil Cake Industries (supra) and ITAT Ahmadabad Bench decision in the case of Vijay Proteins where 25% disallowance held reasonable on unverifiable purchases. The A.R. of the assessee tried to distinguish this case with facts and circumstances and argued to apply past history of the case. The assessee also could not be able be lead any evidence in furtherance of filing of confirmatory letter or merely showing that the payments were made by account payee cheques. The assessee was aware of the whereabouts of the parties and he should have produced these parties before the Assessing Officer for verification of purchases, which could not be done at the stage of assessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of export business, he requires foreign visit. During the year, he incurred ₹ 2,65,899/- for travelling expenses. The Assessing Officer disallowed the expenditure to the extent of 50% for the alleged reasons for personal element. The learned CIT(A) also confirmed the same. He drawn our attention for disallowance made in A.Y. 2004-05 @ 10% under the head travelling expenses and out of other expenses also 10%, therefore, a reasonable disallowance can be made from the above expenses. The learned CIT DR supported the order of the learned CIT(A). 19.10 After considering the facts and circumstances of the case, the disallowance under the various head confirmed by the learned CIT(A) is reasonable, which is only 10% but travelling expenses confirmed on the basis of, there is no business expediency shown by the assessee before the learned CIT(A). Before us also, the learned A.R. had not brought any evidence to justify the foreign travelling for business purposes. The findings given by the learned CIT(A) has not been controverted by the assessee. As during the year, the total turnover was ₹ 12,14,550/- as compared to preceding year. The assessee's sale has gone down subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e at ₹ 81,90,583/- and shown gross profit of ₹ 4,61,331/- giving gross profit rate of ₹ 5.63%. During the year under consideration, the assessee had made total purchase of ₹ 2,23,52,969/-. The learned Assessing Officer was asked the assessee to furnish the confirmation of purchases. Simultaneously, letter U/s 133(6) were also issued to the following parties. 1. M/s Shubham Gems 2. M/s Lotus Impex. 3. M/s Ashish Jewellers 4. M/s B.L. Enterprises. 5. M/s Aayush Enterprises. 6. M/s Sumit Gems. 7. M/s Bright Jewells. 8. M/s Anshu Gems. 9. M/s Shree Ganpati Impex. 10. M/s Creative International. 11. M/s Touch Stone. Letters in case of parties shown in serial No. 2 to 11, which were returned back by the postal authority with the comments that no such person is residing at given addresses. The learned Assessing Officer further observed that department had conducted survey/searches in various cases namely search in Ravi Haldia Group. They have categorically admitted that they provided bogus bills and no goods were purchased from these parties. The BCTT Wing of the department conducted survey U/s 133A and search U/s 132 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) Thereafter he estimated the income @ 25% on unverifiable purchases of ₹ 24,56,451/- by relying upon the decision passed by the Hon'ble Gujarat High Court in the case of Sanjay Oil Cake Industries (supra) and the decision of Hon'ble ITAT Ahmadabad Bench in the case of Vijay Proteins Ltd. (supra) and made the addition of ₹ 6,64,112/- in the income of the assessee. 20.3 Being aggrieved by the order of the learned Assessing Officer, the assessee carried the matter before the learned CIT(A), who had dismissed the appeal and observed that the Investigation Wing of the department had conducted surveys on various entries providers and all the above mentioned suppliers were found to be non-exist entity which were providing accommodation bills. It was also admitted that no real business was conducted and no physical delivery of goods were ever given. After receipt of cheques, equal cash was given back after deducting commission varying between .20% to .25%. The learned Assessing Officer had issued notice and no such parties were found on given addresses. In case of Suman gems, there was no compliance by the alleged suppliers. The assessee also failed to produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Udyog (supra) wherein the Hon'ble Court has taken the view that no trading addition is justified if declared results are better. Thus, the learned A.R. for the assessee prayed to delete the addition of ₹ 6,64,112/- confirmed by the learned CIT(A). 20.5 At the outset, the learned CIT D.R. again reiterated the arguments raised in introductory paragraphs in cases of gems and jewellery that in course of survey and search conducted by the department, it was found that these parties were involved in providing accommodation bills without delivery of goods on which they were getting commission. Particularly in assessee's case, notices were issued which were not served on some of the parties and where it had not returned back, the parties had not been complied with it. The assessee was asked to produce these parties for verification of purchases, which could not be complied by her. The assessee could not provide the quantitative and qualitative details of jewellery with respect to opening purchases, sales and closing stock, therefore, closing stock thus was not subject to verification. All arguments of this case, also to be considered as written reply submitted for these ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee may be 100% exporter which does not preclude the Assessing Officer from enquiring into the genuineness of the purchases. Therefore, we have considered view that 15% N.P. on unverifiable purchases is genuine in this case. Accordingly, the assessee's appeal is partly allowed. 20.7 In the result, the assessee's appeal is partly allowed. (14) M/s Silvex Images I.T.A. No. 1030/JP/2011 A.Y. 2007-08 21. This is an appeal filed by the assessee against the order of the learned CIT(A)-1, Jaipur dated 11-10-12011 for the assessment year 2007-08. 21.1 During the course of hearing the learned AR has not pressed the Ground No 1 Hence, the same is dismissed being not pressed. 21.2 The ground No. 2 and 2.1 raised by the assessee are as under:- '2.1 On the facts and in the circumstances of the case the ld. CIT(A) has grossly erred in not accepting the purchases of ₹ 16,17,011/-as genuine and thereby sustaining an addition of Rs,.2,50,836/- arbitrarily. 2.2 On the facts and in the circumstances of the case the ld. CIT(A) has further erred in sustaining an addition of ₹ 2,50,836/- by applying g.p. rate of 8.3% instead of 8.15% declared by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16,17,011 It has been held that the Department had investigated the above said parties in respect of banking cash transaction tax and it was found that no such concern exists on the given addressees. The above parties were only giving accommodation entries and not doing any genuine purchase and sale of gems and jewellery. These facts were intimated to the assessee and the assessee was asked to produce the above parties alongwith the books of accounts to prove the genuineness of the transactions. The assessee submitted before the AO that the assessee had made the purchases from these parties and submitted details thereof. The assessee submitted that the above said parties were duly recorded in the books of accounts and the payments had been made by account payee cheque. Further confirmation of copy of account alongiwth purchase bills were enclosed with the submissions. The assessee could not produce these parties for verification of the purchases made. The AO concluded that these purchases cannot be allowed in Part 'D' of Chapter IV of the Income Tax Act, 1961. The genuineness of these transactions had not been proved. Thus the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the ITAT, Jaipur Bench decision wherein the past history of the case is the best guide for estimation of g.p. rate. The ld. CIT(A) further found that the case of Sanjay Oilcake Industries (supra) is not applicable to the facts in the case of the assessee because nowhere the AO has brought on record that the bills of purchases were inflated by 25% from these five parties. Pursuant to consistent decision taken by this Bench of ITAT in the case of unverifiable purchases, the past history of the assessee is taken to be the basis to estimate the income of the assessee. The assessee has declared the g.p. rate of 8.48% on total turnover of ₹ 1749.34 lacs whereas for this assessment year the assessee has shown g.p. rate of 8.15% on decreased turnover of ₹ 1672.24 lacs. Thus the ld. CIT(A) applied the g.p. rate of 8.3% on declared turnover of ₹ 1672.24 lacs and confirmed the addition of ₹ 2,50,836/-. 21.5 The assessee being aggrieved by the order of the ld CIT(A) is before us. 21.6 During the course of hearing, the ld. AR submitted that the addition of ₹ 250,836/- confirmed by the ld. CIT(A) out of total addition of ₹ 4,04,253/- made by the AO wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has directed the AO as to how investigate the case and collect the evidence in favour of the assessee for not making any addition. The Investigation Wing as well as BCTT Survey had established that these parties are providing accommodation entries only. There is no purchase and sale of goods. Whatever the evidence produced by the assessee before the Assessing Officer prove that the assessee had not discharged the onus. The assessee tried to shift it on the Revenue. Therefore, the ld.DR requested to confirm the order of the ld. CIT(A). 21.8 We have heard both the parties and perused the materials available on record. The AO made addition of ₹ 4,04,253/- on unverifiable purchases of ₹ 16,17,011/- whereas the ld. CIT(A) confirmed the addition of ₹ 2,50,836/- on the basis of the past history of the assessee. After examining of the facts and circumstances of the case, we hold reasonable 15% net profit rate on unverifiable purchases. The learned CIT(A) has confirmed the addition near about 15% on unverifiable purchase. Thus we do not find any reason to interfere in the order of the learned CIT(A), which is confirmed on this issue. 21.9 The third ground of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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