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TMI Blog2013 (7) TMI 949X X X X Extracts X X X X X X X X Extracts X X X X ..... ee against order dated 12/3/2013 of Ld. CIT(A)-II, Jaipur raises the following grounds:- 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in confirming the rejection of books of account by the Ld. AO u/s 145(3) of the I.T. Act, 1961. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in sustaining the addition of ₹ 1,52,105/- @ 25% of ₹ 6,08,414/- treating the purchases from M/s Ashu Gems (Rs. 3,82,988), M/s Century Gems (Rs. 75,000/-) and M/s Ranka Jewels and Impex (Rs. 1,50,426/-) as non genuine. 3. The assessee prays for leave to add, to amend, to delete, to modify the all or any grounds of appeal on or before the hearing of appeal. 2. Briefly the facts are that the appellant derives income from purchase and sale of handicraft items, silver and gold jewellery, in partnership of Shri Shiv Kumar Goyal and Shri Dharam Chand Kothari. During the year under consideration, the assessee has declared a gross profit rate of 18.96% on the total turnover of ₹ 76,77,454/- as against the gross profit rate of 18.29% in the immediately preceding year and 21.43% in the year prior to the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer, therefore, keeping in view the judgment rendered by the Hon'ble Calcutta High Court in the case of CIT Vs. Precision Finance (P) Ltd. 208 ITR 465(Cal.), judgment by the jurisdictional High Court in the case of Indian Woolen Carpet Factory Vs. ITAT & Others 178 CTR (Raj.) 420 and the judgment by Jaipur Bench of Tribunal in the case of M/s Kachwala Gems Vs. JCIT in ITA No. 134 in December, 2003 as well as the judgment by the Hon'ble Gujarat High Court in the case of Sanjay Oil Cake Industries Vs. CIT reported in 10 DTR Hon'ble Gujarat High Court in the case of . 153 (2008) and also the Hon'ble Apex Court in the case of CIT Vs. British Paints India Ltd. 188 ITR 44, reached a finding that the assessee has failed to discharge its burden to prove that the purchases are genuine. In the light of the fact that the purchases are unverifiable and there being serious defects in the books of account, such accounts were taken to be not found correct and complete. It was held that the true and correct profits therefrom cannot be deduced. Accordingly by application of provisions of Section 145(3) of the Act, the accounts stood rejected. After rejecting the books of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has submitted the confirmation letter of the parties besides their PAN and copy of acknowledgement of return. The Ld. AO has not material to disprove the evidences submitted by the assessee. b) Summons issued by AO were served on the parties:- Further the summons issued by the Ld. AO by registered post as well as through the inspector were served on the party, which shows that the parties were existing at the given address and these parties have not denied for making sales to the assessee. The department has vast statutory powers to enforce the compliance of the summons. c) Inquiries made by the investigation wing in other cases were not brought to notice of assessee:- Further, the inquiries made by Investigation Wing in other cases cannot be utilized against the assessee without giving opportunity of confrontation. The Ld. AO has not given the copy of material collected by him from Investigation Wing and no opportunity of confrontation was given to the assessee. Further, in all these cases, the assessee has made payment by account payee cheques. The Ld. AO could have inquired from banks of these parties. Further the Ld. AO has not brought any material to show that these part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e suppliers were not traceable. In the case of the assessee, the assessee has filed confirmation letters of the parties and copy of acknowledgement of their income tax return. Further the summons issued by the AO was served but the Ld. AO did not use his statutory powers to enforce their attendance. The entire finding of the Ld. AO is based on the report of DDIT and survey conducted by BCIT and the material collected in the investigation of other assessee which were used against this assessee without providing an opportunity of confrontation. Recently Hon'ble ITAT Jaipur Bench has decided several cases as regard the issue of addition on the basis of disallowing 25% of unverifiable purchases. One of the case is referred here is ITO Vs. M/s Agrasen Jewellers (ITA No. 861/JP/2010 dated 10.06.2011). In this case, the findings of Hon'ble ITAT Jaipur Bench on the issue of addition @ 25% of bogus/unverifiable purchases was given as page 7 of its order, reproduced as under:- "…The AO has made addition @ 25% of bogus/unverified purchases relying on the decision of Hon'ble Gujarat High Court in the case of M/s Sanjay Oil Cake Ind. (supra) and the decision of Hon'ble ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3/-. The trading addition of ₹ 1,05,58,554/- is therefore, reduced considerably. The appellant thus gets partial relief. The grounds of appeal are decided partly in favour of the appellant." Therefore, even if the books of accounts are rejected on the basis of defects pointed out by the Ld. AO, no addition deserves to be made because the trading result of the assessee for the current year is better than the last year. Reliance is placed on the following decisions: i) CIT Vs. Gotan Lime Khanij Udhog (2002) 256 ITR 243 (Raj.) ii) J.C. Sharma Vs. ITO 33 Taxworld 80 ITAT Jaipur Bench. It was, therefore, contended that there is no justification in sustenance of addition of ₹ 1,52,104/- by the Ld. CIT(A). The same, therefore, requires to be deleted. 5. On the other hand, Ld. D.R. supporting the findings and conclusion reached by the authorities below, contends that the grounds raised in appeal are required to be rejected so that the appeal is dismissed. The findings of fact reached by the authorities below are not shown to be perverse and the assessee has not discharged its burden to prove that the purchases are genuine. The assessee's plea that their income was estimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gems, M/s Century Gems and M/s Ranka Jewells and Impex are bogus was taken as one of the reason for rejecting the accounts by application of Section 145(3) of the Act. The assessee has not assailed the said finding of rejection of accounts nor there is any ground in appeal before Ld. CIT(A). Before this Appellate Tribunal also no such ground on the perversity of the facts requiring indulgence of this Tribunal thereon has been raised. The appellant was apprised of the fact of issue of summons that stood served on the aforesaid three parties but remained unresponded. He was, therefore, required to produce these three parties for verification of facts on the points mentioned in the summons. The assessee's counsel in assessment proceedings, however, has shown his inability to do so without assigning any good reason thereto. He thus did not avail opportunity nor brought any reliable material to show that the purchases entered in the books of account in the name of such three parties are genuine. The onus to prove that such purchases are genuine lay upon the assessee. This burden could not have been shifted on the revenue merely by providing their Permanent Account Number/acknowledgement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by it for suppressing its true profits. Allowing deduction of the full amount of such purchases on irrelevant considerations as are being contended through written submissions, to my mind, would tantamount to misuse, which will degenerate into an exercise of unregulated activity. It, therefore, was neither possible nor proper for the Assessing Officer to have allowed the assessee to continue with the similar activity of recording bogus purchases in the year under consideration and assess him by application of net profit rate only as was done in the immediately preceding year. The Assessing Officer thus has shown deviation and departure in not applying a net profit rate for just and reasonable cause, more so when the assessee himself was to be blamed as he did not submit proper accounts. There being no arbitrariness in estimating the income by disallowing only a percentage of bogus purchases and the estimate being honest and fair, no merit is found in disturbing such bonafide estimate. The appellants reliance to the judgments in the case of CIT Vs. Gotan Lime Khanij Udhog (2002) 256 ITR 243 (Raj.) is not found to be advancing his case inasmuch as that was not a case of suppression ..... X X X X Extracts X X X X X X X X Extracts X X X X
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