9911796707
TMI Blog2014 (3) TMI 1132X X X X Extracts X X X X X X X X Extracts X X X X ..... er all result of the assessee in comparison to the last year and that the assessee had furnished all the necessary information/details about the transaction and the parties supported with the documents as could have been expected from a prudent purchaser to establish the genuineness of the claimed transaction, we are of the view that the lump sum addition of 1,00,000/- will meet the ends of justice to plus the possible leakage, if any, as the claimed purchases remained unverified but sales declared has not been doubted. X X X X Extracts X X X X X X X X Extracts X X X X ..... a group to which this assessee belongs to. As a consequence of this search, notice u/s 153A of the Act was issued to the assessee company, who is carrying on the business of jewellery and gems stones. Originally, the assessee had filed its return of income u/s 139(1) of the Act on 30-10-2005 declaring its total income of ₹ 21,81,650/-. In the return, the brought forward loss of ₹ 11,44,978/- had been claimed but this loss, in fact, was of ₹ 15,11,573/- as per computation of income filed for the assessment year 2004-05. In compliance to notice issued u/s 153A of the Act, on 23-09-2009, the assessee company filed its return of income on 28-04-2011, declaring the total income of ₹ 17,86,470/- . In this return filed u/s 153A of the Act, the assessee has claimed the correct amount of loss and that is why the returned income is less as compared to return filed u/s 139 of the Act. 2.2 On the basis of the original return of income filed on 30-10-2005, the assessment had been completed u/s 143(3) on 28-12-2007 at a total income of ₹ 30,44,220/- against declared income of ₹ 21,81,650/-. In first appeal, against the order dated 28/12/2007 the ld. CIT(A) c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allegedly issuing bogus sale bills to parties in Jaipur and other places. During enquiries conducted in this regard from alleged entry providers, it was found that these persons were issuing sale bills in different commodities, mostly in gems and jewellery but without supplying the goods mentioned in the bills. They would receive the amount mentioned in the bills through account payee cheque / draft which were then deposited in their bank account. After clearance of the cheque/ draft, the amounts were being withdrawn in cash and returned back to the concerned parties seeking entries . The entry providers were charging commission for providing such bills without passing/ transferring any commodity/ goods. They would accept the cheque and deposit the same in their bank to make believe that transactions are genuine. They would thereafter return cash to the beneficiaries. On the basis of the information so gathered from these entry providers, it was noticed by the Wing that the beneficiaries were collecting these paper bills/ bogus bills to reduce incidents of tax. The entry seekers were identified on the basis of the statements recorded on oath by the wing from the entry providers. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like to incorporate para 11 at page 6 of the assessment order to the last para 33 (i.e. page 37of the assessment order) hereinasunder :- ''11. Besides above documents and statements, certain crucial documents were also found at the residence premises of Shri Khishi Kumar Ameriya related to M/s. Clarity Gold P Ltd and the same were also confronted. These documents are related to certain sales and purchases made by the Company through the brokers Kalani and Paras Ji. These documents are at page No.20 to 25 of Annexure A-6 found from Residence of KK Ameriya. Details recorded on page No.20 and 24 of this Annexure are produced theein 12 Sh. Khushi Kumar Ameriya was confronted with the above seized papers and he stated at length about them. He stated that the calculation appearing on the papers were related to the bogus sales and purchases of the Gems Division of M/s. Clarity Gold Pvt. Ltd against which no exchange of goods have taken place. Regarding page 24 of Annexure A-6, he stated that the transactions are appearing under the head Summary-B. On S.No.1 the name of one of the brokers Sh. Anup Kalani was mentioned. He belongs to Jaipur and the contact is by way of telephone as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 008-09 also which is evident from the ledger accounts in the regular books which shows that similar bogus transactions continued to take place in subsequent years also. For the sake of clarity the relevant part of the statement of Shri Khushi Kumar Ameriya recorded at his residence on 21.05.2009 w.r.t the bogus sales and purchases by the Co reflected in Annexure A-6 is produced therein- 13.1 Similarly, page no. 38 to 45 of Anexure 26 seized form residence of Shri Ameriya also gives the details of brokerwise and partywise bogus sales and purchases for the period of 1-04-2008 to 4-02-2009 relevant to assessment year 2009-10 which is mentioned in the assessment order at page 11 to 14. 14. Under the other unit of company namely Silver Star the assessee company is dealing with silver jewellery. This unit was being managed by trusted employees Shri Raghu Datt Tiwari and Shri Pawn Kumar Khandelwal who were examined in details w.r.t trading activities of this unit and maintenance of accounts. These accounts were being maintained by the accountant of the Unit Sh. Raghu Dutt Tiwari in a pen drive on Tally 5.4 Software. Sh. Raghu Dutt Tiwari was maintaining two sets of accounts. One for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... narration, the name of the concern and the cheque number & amount will be mentioned. Another interesting feature is that the Kacchi Parchi is made item wise but the bill is issued of general items i.e. stones studded silver jewellery. This is done because the buyer does not want the item wise and quantitative details in his purchase bill. 14.3Actual Undisclosed Purchases: These purchases are also made by way of Kacchi Parchi and the raw material is mainly silver and stones. These purchases are entered in the pen drive but the same are not mentioned in the regular books. 14.4Fake or Bogus Purchases: These are paper bills arranged through brokers against which no goods are actually received. These purchases are entered in regular books but not entered in the pen drive. Against these bills, cheque is paid in the name of the party in whose name the bill has been issued but equivalent cash is received back by deducting the commission of the broker or the accommodation bill provider. It is interesting to note that the brokerage expenses, on arranging these fake purchase bills is recorded in the pen drive under the head "Bill Commission" account This bill commission account find its p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions appearing in the pen drive given below. It may be noted that all these transactions represent undisclosed income taxable in the hands of the company at mentioned at page 26 of the assessment order . 17. During the course of post search proceedings as well as in the present proceedings the assessee was required to explain the transactions recorded in pen drive found at Silver Star Unit but the assessee was not able to explain the same. Vide query number 5 & 6 of notice dated 11.7.2011 u/s 142(1) the assessee was specifically asked to furnish trial balance of Silver Star Unit and get it verified from the copy of trial balance obtained from pen driver and also to submit its explanation regarding facts admitted by the persons managing Silver Star Unit. The relevant queries are reproduced as below:- ''Furnish trial balance of Silver Star unit and get it verified from the trial balance found from the premises of this concern. During the course of search, persons dealing with the business of silver star unit have admitted that substantial part of sale and purchase in this unit are not disclosed in regular books and the details of the same are maintained in a pen drive. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t done by Income-tax department personnel's which has no credence and sanctity in the eyes of the law. 2.1 The said valuation as has got done by the officers of the Income-tax Department is unauthorized, illegal, irrelevant, contrary to the provisions of section 133A of the income-tax Act and has been prepared as per own convenience and thus deserves to be ignored being void-ab-initio. 2.2 The departmental valuers were allowed access to business premises of the assessee without subjecting themselves to verification at the time of entry and at the same time there were not subject to frisking at the time when they have left the business premises. 2.3 We would like to know on what basis the valuation exercise has been done by these paid valuers prima facie it appears that these valuers have inserted the stock values as per their convenience. The valuation so made by them is biased. Faulty and before you rely on any of these figures we would request you to provide us an opportunity to cross-examine each one of them.'' 2.4 As submitted earlier, the assessee company is dealing in more than 100 types of precious, semi-precious stones, gold ornaments and metals and within each cate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Before you rely upon the alleged illegal statements of Shri Khushi Kumar Ameriya, we should be allowed an opportunity to cross-examine, Shri Khushi Kumar Ameriya. Placing reliance on such illegal statements would be an illegality. 3.3 All transactions of purchase and sale have been declared in the books of accounts. Due taxes on the income is being declared from year to year. Nothing is there which is outside the books of accounts. 4 With reference to your observation with regards to submission of trading account for bogus transactions and real and genuine transactions we wish to reiterate as was submitted before the ADIT, Jaipur II, that you are kindly requested to first clarify to us as to what is meant by the term Bogus Bills, according to us a bill is a bill. 4.1 A businessman during the course of his business purchase the goods locally or from foreign parties mainly on credit. All such parties are income-tax assesses (PAN is allotted by the Income-tax Department) and Sales-tax assesses (TIN is allotted by the Sales-tax Department). As a businessman we are supposed to know the product we are buying, the terms for which the goods are sold and also do a reasonable check on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utt Tiwari were recorded under duress, he was pressured to sign on the dotted lines. He was subjected to physical harm by the officers of the department. The statements were recorded beyond the powers granted as per provisions of section 132 and section 133A. The statements so recorded have no sanctity in the eyes of the law and is illegal and deserves to be ignored. Copy of affidavit duly notarized by Shri Raghu Dutt Tiwari on 19.06.2009 and submitted before the District Magistrate and copy of which is already with the Income-tax department is enclosed herewith which will clarify our submission." 19.1 Vide letter dated 9.8.2011, the A/R further submitted his arguments as under:- ''Without prejudice to what has been submitted earlier and without admitting what has been stated earlier with reference to the purchases made by the assessee as well as sales made by the assessee over the years, we further submit that the employees or/and other persons clearly have stated in their statements that purchases or/and sales in the followings units are genuine, fool proof, verifiable and not tainted: Jewellery Unit Nizami Unit, Mumbai Division Thus, as far as these units are concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would say to be bogus or tained or non-genuine unless one is threatened of dire consequences or on coercion, pressurizing tactics or otherwise. We have already submitted that the same Shri K.K. Ameriya immediately after the search gave an Affidavit voluntarily duly notarized which was submitted before the Judicial Authorities that he and his family members were threateneo, he and other employees were manhandled and that whatever has been stated in the so called statements were not given by him, were written by the authorized officers on their own and without reading or writing he was asked to sign on the dotted lines at odd hours in the late night. Similar has been the Affidavit of Shri Raghu Dutt Tiwari also. We have already placed on record the Affidavits of both these persons alongwith our letter of August 5, 2011. We strongly rely on these. On the face of it, these are after the alleged statements if any and therefore whatever has been stated on oath by them has to be accepted rather than what they had stated earlier under threat, coercion or pressurizing tactics. It is in the light of these facts that we again request you to provide right to cross-examine of the persons who sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have purchased goods were neither produced nor found in existence in business at their given addresses. Thus the claimed purchases stated to have been made from them remained unverified. The rejection of account books of accounts invoking the provisions of section 145(3) therefore can not be treated as unwarranted and unjustified. We uphold the of the lower authorities in the regard.'' 21.(i) The fact of non verification of trading results and doubt regarding correctness and completeness of accounts is further proved from the unaudited/provisional balance sheet and profit and loss account found during the course of search relevant to AY 2009-10. Balance sheet dated 01.03.2009 was found from various premises of the assessee including company office at Mumbai pages 57 to 74 of Annexure A-1, residence of Shri K.K. Ameriya pages 105 to 114 of Annexure A-24 and factory at EPIP, Sitapura pages 13 to 20 of Annexure A-12. In its audited profit and loss account the assessee has declared sales of ₹ 103.06 crores and purchases are of ₹ 96.58 crores with net profit before tax ₹ 1.71 crores whereas the unauditated balance sheet found during the course of search shows sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res are only provisional figures and the effect of adjustment entries is not reflected in unaudited balance sheet. 23 The submission of the A/R may be correct as regards to claim of various expenses which might have been adjusted after verification from various branches but the differences in the figures sales and purchases is not satisfactorily explained. Since the search action was carried out just after the end of the F.Y. 2008-09, the unaudited B/S of 31.3.2009 was only found and no any other unaudited B/S of any of the earlier was found. It therefore means that earlier years unaudited balance sheets have either been destroyed or removed. Destroying the unaudited B/S after audit, proves the fact that at the time of auditing, the business affairs of the company are adjusted according to convenience of the assessee. The difference in figures of sale and purchases in two balance sheets and other documents found further proves the fact that books of accounts and trading results of the company are not correct and complete and warrant provisions of section 145(3) of the IT Act. 24 Another specific issue resulting to conclusion of incomplete and incorrect accounts is the value of st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts were not complete on the date of search exact stock as per books on the date of search could not be worked out neither in terms of value nor quantitatively. However, it was seen that assessee furnished details of stock statement as on 30.04.2009 to State Bank Indore. This stock statement was obtained and it was found that on 30.04.2009 the company was having stock of ₹ 295567819. Thus as on 30.04.2009 the book stock was of ₹ 29.55 crores. Taking this stock in to consideration there was a deficiency of stock of more than ₹ 15.03 crores as on the date of search. The difference in stock has not been explained by the assessee. In post search proceedings the assessee was specifically asked vide letter dated 16.7.2009 to reconcile the difference in stock found and submitted to bankers but it has totally failed to reconcile the same. Even in the present asstt proceedings it has not been satisfactorily explained. A very general and vague reply has been filed by the A/R vide letter dated 5.8.2011. Contentions raised in para 2 of letter dated 5.8.2011 reproduced above are not tenable as the valuation was done by the experts, in the presence of assessee's employees deali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri KK Ameriya were recorded u/s 132(4) of the IT Act on behalf of the company as its director and therefore there arises no question of any cross examination of person of himself. He was not a witness of the department and statements were not taken behind the assesee or without under the knowledge of the company. Company was being represented by the person who deposed u/s 132(4) of the IT Act. There was no case on threat, duress or pressure as the statements were recorded before two independent Panchas and no such affidavit of any such Panchas furnished. Even than the assessee was allowed opportunity vide order sheet entry dated 9.8.2011 that if it wanted to get further examination of Shri KK Ameriya on the issue of duress or pressure, as mentioned in the affidavit, it may produce him with supporting evidences and get him re examined. But Assessee Company failed to produce its own director Shri KK Ameriya and the other employee Shri Raghu Datt Tiwari for re examination, there remains no front of any merit in the submission of the A/R and accordingly the same is rejected. The facts submitted by these persons are further supported with clear evidences found during the course of sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Carpet Factory Vs ITAT 178 CTR 420 (Raj) holding that onus was upon the assessee ot prove genuineness of the purchases. CIT Vs Precision Finance P Ltd 208 ITR 465 (Cal)- Payment made by account payee cheques is not sacrosanct and it would not make an otherwise non genuine transaction genuine. ESTMATION OF PROFIT 28 Now since the account books and trading results stands rejected within the meaning of section 145(3) of the IT Act the profit of the assessee is required to be estimated within the meaning of section 144 of the IT Act. It may base on the past records of assessee itself, comparable cases of assessee's own group, other similar cases or other material available on records which was gathered during the course of search. Comparative gross profit results of the assessee for the AY 2004-05 to 2010-11 as declared by the company is mentioned at page 36 of the assessment order From the above chart it may be seen that GP is ranging from 7.4% to 16.08%. Assessment for AY 2005-06 was completed by the AO u/s 143(3) and there also he found that purchases of ₹ 1,40,96,552/- from 10 concerns were not genuine. The said 10 parties were found to be bogus parties during the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the present case, there were the other cases who have achieved gross profit rate of 25% in similar trade. It may be a point of worth importance that in AY 2003-04, the assessee company has also declared GP rate of 19% but on comparatively low turnover. Therefore, considering the particular facts of the present case I very reasonably apply a gross profit rate of 17% on total turnover by the assessee company and its other associated companies. As such the most reasonable rate may be considered at 17% which assessee has actually earned but by claiming bogus purchases and turnover, it has reduced its profit at its convenience. Therefore, this GP rate of 17% is applied for all the years under consideration. 32 For the year under consideration turnover disclosed is of ₹ 142690358. By applying GP rate of 17% on this turnover resultant gross profit would be of ₹ 24257360 as against declared gross profit of ₹ 18162927. Thus trading addition of ₹ 6094433 is made on this count. 33 Net profit earned on undisclosed transactions in Silver Star unit discussed in para 17 of the order of ₹ 1826339 is separately added. With the above remarks income of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 14 of the assessment order. iv. The unaccounted transactions of undisclosed sale, undisclosed purchases, bogus purchases and bogus sales found in the Pen drive impounded as Annexure A-43 which have been reproduced by the A.O. on Page 16 to 21 of the assessment order and summarized at Page 26 of the assessment order. These relate to for F.Y. 2004-05 to 2008-09. This is supported by bill commission account impounded as Annexure A-45 from the business premises of Silver Star Unit at Tripolia Bazar, Jaipur. v. Balance sheet and profit and loss account for F.Y. 2008-09 as per Annexure A-l, A-24 and A-12 could not be reconciled with the audited accounts. vi. Annexure A-3 which shows the computerized details of month wise sales for F.Y. 2008-09 which have not been reconciled with the audited return. These documents contain the transactions relating to the assessee's company and have been explained in detail by recording the statements of various persons. There is no denial of the fact that these documents found from the assessee's premises at various sites and it's Director's premises pertain to the appellant. The bogus purchases and sales have been entered int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of jewellery and trading of gem stones. The assessee has shown the book stock as on 30.04.2009 to State Bank of Indore of ₹ 29.55 crores while during search books stock was found of ₹ 14.52 crores only and books were found incomplete. Assessee has not reconciled the stock found with the stock as per books of accounts. B. As regarding the assessee's submission that audited books of account have been maintained and produced before the A.O., it may be mentioned that A.O. has pointed out various discrepancies in the books of accounts which have been listed supra. As regarding the assessee contention addition on account of bogus purchases has already been made in the regular assessment which have traveled upto ITAT in A.Y. 2005-06 and 2006-07, it may be mentioned that the incriminating documents found during the search are not only regarding the bogus purchases which was the issue under consideration u/s 143(3) of the I.T. Act as is evident from the list of incriminating documents stated above. In fact issue involved in A.Y. 2005-06 was regarding ten parties from whom the purchases were considered as non genuine and in A.Y. 2006-07 purchases made from 22 parties at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given by way of notice u/s 142(1) by the AO. The assessee did not furnish the above information without any reason. Now during appeal, assessee has merely submitted list of unverifiable purchases,sales without any address of the parties nor the confirmation by the said parties which cannot accepted at the face value as they are not open to any verification and they are not supported by the due confirmation or affidavits of the concerned parties as desired by the A.O. in the remand report mentioned in case of M/s Clarity Gold Pvt. Ltd, a sister concern of the assessee. In view of the above discussion, the rejection of the books of accounts u/s 145(3) is upheld. (2). As regarding the estimation of G.P. rate,, the A.O. has made the trading addition of t60,94,433 by applying G.P. of 17% on turnover of ^14,24,19,358. The A.O. has reproduced the chart of G.P. shown by the assessee for the A.Y. 2004-05 to 2010-11 asunder: A.Y. 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 audited 2009-10 unaudited 2010-11 Sales 198490 1426903 5466428 68749794 9777583 10306287 10720339 1540384 Stock Dif. 144657 5147868 0 71450573 6769267 83951400 83334242 5750095 Total 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported by the sale register as per which except of emerald of ₹ 50,000 rest of the sales totaling to ₹ 72,05,870 are of tanzanite. So, the trade results of this particular year are not applicable in the present case. C. It is seen from the G.P. chart reproduced supra that there is no correlation in the increase in turnover and proportionate decrease in G.P. rate. It is apparentthat in A.Y. 2007- 08 there was substantially higher turnover as compared to A.Y.2006-07 even then the G.P. rate is better in A.Y. 2007-08. It is still better in A.Y. 2008-09 and 2009-10 on a turnover which has increased by more than 100%. The appellant has not been able to explain the gross variation in the G.P. results shown by the assessee in different years. D. As referred to by A.O. it is seen that in the case of Gem Paradise for A.Y. 2003-04, the Hon'ble ITAT has confirmed G.P. rate of 25.5% on account of unverifiable purchases as against 24.92% shown by the assessee. Also, in the case of Deepak Dalela for AY. 2006-07, addition to the extent of G.P. rate of 25% only in respect of bogus purchases was upheld by Hon'ble ITAT. These decisions are on their on facts but go to support t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was also found at the business premises impounded as Annexure. A-45 where the details of cheques issued and cash received back for the bogus purchases were mentioned. The details of these undisclosed sales, partly unaccounted sales, undisclosed purchases, bogus purchases and bogus sales have been discussed at Para 6.1(v) of this order as under: "(v.) The assessee is dealing in Silver Jewellery in one unit named as Silver Star which is managed by trusted employees Sh. Raghu Datt Tiwari and .Pawan Kumar Khandelwal. The accounts of these units were maintained by Sh. R.D. Tiwari in Pen drive. The two sets of the accounts were maintained, one for the regular books of accounts and other for number two accounts. The said Pen drive was impounded during survey as Annexure A-3 from the business premises of this unit. The A.O. has discussed in detail the nature of transactions appearing therein regarding undisclosed sales, actual sales against which bill is partly issued, actual undisclosed purchases, bogus purchases and fake sales as under: a. Undisclosed sales are noted in the kachhi parchi and do not find mentioned inthe regular books of accounts while record is maintained in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 26875 1088875 160650 227495 171660 Net Profit earned 1826339 651370 1636185 3169580 2319672 The assessee did not furnish the trial balance of the Silver Star Unit to get it verified from the copy of trial balance obtained from the Pen drive. Also, the assessee did not get the entries in the pen drive verified from the regular accounts so the A.O. has held that turnover and other transactions maintained in the Pen drive are over and above regular accounts and profit earned thereon is profit over and above the regular profit disclosed." 7.2 During appeal appellant has submitted as under: "The Learned Assessing Officer has made the addition with reference to PAN driver reported to have been maintained by Shri Raghu Dutt Tiwari. While making the addition following observation in para 17 of the assessment order - (a) That the transaction of purchase and sales made in cash are different than those from the regular books. (b) All the transactions represent undisclosed income. The Learned Assessing Officer has made the addition unilaterally without providing the printout from the PAN drive, without providing how the income was calculated. In the absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f accounts. The onus lies on the appellant to reconcile the transactions of the business as recorded in the Pen drive from the regular books of accounts which has not been discharged as is apparent from the findings of the A.O. in the assessment order and the remand report. In view of above, the addition made by the A.O. of ?18,26,339 is confirmed and this ground of appeal is dismissed. 8,0 In the result, assessee's appeal is partly allowed. A.Y.2006-07. Appeal No. 237/2011-2012 9.0 The various grounds of appeal are as under: "1. That the order passed by the Learned Assessing Officer u/s 143(3)/153A is void ab-initio. " "2. In the facts and circumstances of the case the Assessing Officer has erred in rejecting the books of accounts u/s 145(3) of the Income Tax Act, 1961," "3. In the facts and circumstances of the case the Assessing Officer has erred in applying a G.P. rate of 17% and thereby making trading addition of ₹ 5,12,77,2 ]//-. " "4. In the facts and circumstances of the case the Assessing Officer has erred in making addition of ₹ 6.91,371/- on account of alleged undisclosed profit of Silver Star." These gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal for A.Y. 2005-06 and this ground of appeal has been dismissed. On the same reasoning this ground of appeal is dismissed here also. 1 1.2 The 2nd and 3rd grounds being regarding rejection of books of accounts u/s 145(3) and application of G.P. rate were involved in A.Y. 2005-06 where the rejection of the books of accounts u/s 145(3) has been upheld and application of G.P. rate of 15% has been sustained. Similar being the facts during the year under consideration, addition to the extent of application of G.P.rate of 15% is upheld. The above G.P. rate on a turnover of ₹ 68,74,97,941 will result in gross profit of ₹ 1 0,3 1,24,691 while assessee has declared G.P. of ₹ 5,8 1,48,440. Thus, the trading addition of ₹ 4,49,76,251 is sustained and balance amount is deleted.1 1.3 The 4th ground as regarding addition on account of undisclosed profit of Silver Star Unit was involved in the A.Y. 2005-06 also where the addition on account of undisclosed income from the Silver Star Unit has been upheld. However, during the year under consideration there is a net loss of ₹ 16,36,185 which has been allowed by the A.O. as the profits earned in all the other years of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) CIT Vs. Vinay Cement Ltd. (2007) 213 CTR 268 (Supreme Court) (ii) CIT Vs. .M. Electricals Ltd. (2008) 220 CTR 635 (Del HC) ( iii) CIT Vs. Nexus Computers Pvt. Ltd. 177 Taxman 202 (Mad) In view of this it is requested that the addition made is illegal and the same deserves to be deleted " Even in the remand report the earlier contentions were retreated by the A.O. and the appellant. The assessee has filed the copy of Annexure-D in support of contention that ESI payment has been made of ₹ 30,937 within the F.Y. itself. Similarly, the payment of ₹ 76,166 on account of provident fund was also paid before filing the due date of return. 12.3 I have gone through the assessment order and the contentions of the appellant. It is seen that appellant has pointed out that employees contribution of ESIC of ₹ 30,937 has already been paid within the financial year i.e. 27.09.2006 itself. Further, employees PF contribution of ₹ 76,166 was paid on 27.09.2006 ( ₹ 68,521+ ₹ 5,322) and on 25.10.2007 of ?2,323 i.e. before due date of filing the return. The said payment is allowable in view of decision of Honourable Supreme Court in the case of Vinaya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 31,69,281 is upheld. 15.0 In the result, assessee's appeal is partly allowed. A.Y. 2009-10 . Appeal No. 240/2011-2012 16.0 The various grounds of appeal are as under: "1. That the order passed by the Learned Assessing Officer u/s 143(3)/153A is void ab-initio. 2. In the facts and circumstances of the case the Assessing Officer has erred in rejectingthe books of accounts u/s 145(3) of the Income Tax Act, 1961. 3. In the facts and circumstances of the case the Assessing Officer has erred in applying aG.P. rate of 17% and thereby making trading addition of ₹ 4,21,16,555/-. 4. In the. facts and circumstances of the case the Assessing Officer has erred in makingaddition of ₹ 23,19,672/- on account of alleged undisclosed profit of Silver Star. " These grounds of appeal are decided as under 16.1 The issue raised in first ground of appeal has been decided in Appeal for A.Y, 2005- 06 and this ground of appeal has been dismissed. On the same reasoning this ground of appeal is dismissed here also. 16.2 The 2nd and 3rd grounds being regarding rejection of books of accounts u/s 145(3) and application of G.P. rate were involved in A.Y. 2005-06 where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of surveys conducted by the BCTT Wing. Further in the assessments for the Assessment Year 2005-06 and 2006-07 in the case of the assessee the issue of bogus purchase had cropped up and these assessments were before the conduct of search. In view of this in this case nothing additional was found in the search warranting and justifying action u/s 153A. This is so held in the case of Shibhu Soren vs ACIT (2011) 47 SOT 331 (Del). It is further held in the case of Saraya Industries Ltd. vs. Union of India (2008) 216 CTR 257 (Del) that seizure must be of such a character so as to persuade the Assessing Officer for action u/s 153. Thus the foundation of proceedings u/s 153A in the case of the assessee is bad in law. The assessment framed deserves to be quashed. 2. Principle of natural justice violated - Secondly, the Learned Assessing Officer has utilized the statement of Shri K.K. Ameria, Shri Raghu Dutt Tiwari and Shri Pawan Kumar Khandelwal which were recorded during the course of search. Their statements have been quoted at length in the assessment order and the books of accounts have been rejected on that basis. During the course of assessment proceedings the assessee had reque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a person the possession of the document by itself cannot prove the content of the document." In this case the additions were deleted on the ground that the writer of the document was not subjected to the examination. The ratio of this case is fully applicable to the facts of the case. The Learned Assessing Officer has not made any effort to verify the contents of the documents and also not tried to find out the writer thereof or examined him. (b) Mohd. Usif AIR 1968 Bombay 112; (c) Ramji Das Daya Wala & Sons Vs. Invert Import AIR 1981 Supreme Court 2085 The ratio of the aforesaid cases is fully applicable to the facts of the case. In view of this the assessment framed deserves to be quashed. The Learned Assessing Officer has given his finding while rejecting the ground of the assessee in para 5.4 on page 4 of the appellate order and he mentioned that the case law given by the assessee are not applicable. For the case of Sibu Soren Vs. ACIT reported in 47 SOT 331 the Learned CIT(A) mentioned that this was assessment u/s 158BA(2) under chapter XIV of the Income Tax Act, 1961 whereas the present assessment is under section 153A of the Income Tax Act, 1961. In this regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orking at different locations in Jaipur besides other branches at Mumbai and other places in various parts of India. Separate books of accounts are maintained for these units. The four units working at Jaipur are named as Gem Unit, Silver Star Unit, Jewellery Division and Nazami Division. Complete books of accounts have been maintained during the course of business. The assessee is maintaining all the books of accounts including cash book, bank books, journal book, Ledger, bills & voucher along with their supporting as prescribed U/s 44AA of the Income Tax Act, 1961. The books of accounts are maintained on mercantile system of accounting. The books of accounts are audited u/s 44AB of the Income Tax Act, 1961 and audit report was submitted along with the return of income. The auditors have not made any adverse remarks regarding the maintenance of the books of accounts. During the course of assessment proceedings all these books of accounts were produced before the Learned Assessing Officer and no serious defect was pointed out. In view of this the Learned Assessing Officer was not justified in rejecting the books accounts. Appellate order of ITAT does not abate u/s 153A - It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order where statement of Shri Raghu Dutt Tiwari is reproduced). Similarly the assessee also got a similar COMMISSION on issuing such bogus sale bills. In other words the assessee was not earning anything in the process of obtaining bogus purchase vouchers and issuing sale vouchers. The only benefit which the assessee derived was banking credit facility on the basis of increase turnover. This finds support from the statement of Shri K.K. Ameria relied upon by the Learned Assessing Officer. This is quoted in para 7 on page 2 of the assessment order. The assessee could increase his turnover in the process of alleged bogus purchase vouchers and bogus sale vouchers. Therefore the entire exercise of the Learned Assessing Officer is of no avail. There is no iota of evidence or any material brought on record by the Learned Assessing Officer which suggests that assessee earned in the aforesaid process of bogus vouchers. The Learned Assessing Officer has not conducted any post search inquiries which may also support the finding of the Learned Assessing Officer of earning higher profits by the assessee by way of obtaining bogus purchase vouchers and issuing bogus sale vouchers. Thus there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese Assessment Years the GP rate accepted by the department is 12.79% in Assessment Year 2005-06 and 8.5% in Assessment Year 2006-07. Despite all this the Learned Assessing Officer has applied GP rate of 17% without bringing any additional material on record. No comparable case has been cited. In view of this the trading addition made by the Learned Assessing Officer deserves to be knocked down. The following table reflects the trading results of the assessee in Assessment Year 2004-05, 2005-06 & 2007-08 A.Y. Turnover Gross Profit G.P. Rate Remarks 2004-05 19849007 3193228 16.08% -- 2005-06 142690358 18162927 12.72% 12.79% accepted by the ITAT 2006-07 546642847 40452067 7.40% 8.5% applied by the Learned CIT(A) The perusal of the aforesaid table reveals that the result shown in Assessment Year 2005-06 stand finally decided by the Hon'ble ITAT. No reconsideration was called for. During the assessment proceedings the assessee submitted detailed reply and filed additional submission in this regard. The Learned CIT(A) has specifically asked to the assessee that why the case of M/s Gupta Emerald Mines Pvt Ltd for Assessment Year 2009- 10 is not applicable for appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ison made by the Learned Assessing Officer was most unfortunate and uncalled for. 3. The main business in this case is of precious stones. In these cases the business has been of semi precious stones. Hence the cases are not comparable. 4. The turnover is only of ₹ 72,05,870/-. The turnover in the case of M/s Clarity Gold Private Limited for the same period is of ₹ 1,03,06,27,271/-. The turnover in the case is more than 100 times. Hence both the cases do not stand on the same footing and are therefore not comparable. Thus the above factors establish that the cases are not comparable and the Learned Assessing Officer erred in law and fact in applying GP rate of 17% of M/s Gupta Emerald Mines Private Limited in rest of the cases of the group. Such additions made on the basis of the GP rate deserve to be deleted." But the Learned CIT(A) has partly accepted the contention of the assessee and has only reduced the GP rate by 2% which is 15% but again there is no basis for applying the GP rate of 15% specially when the complete bogus purchases and bogus sales are identifiable and the actual profit of the company was found recorded in the shape of pen drive in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on bogus sale vouchers is almost the same. The assessee did not gain anything. The only benefit was that on increase turnover better credit facility was available from the Bank. So in the process of increasing the turnover in the books of accounts the assessee has incurred losses and the profits shown in PEN Drive is actual profit of the whole business activities. It is further submitted that the Learned Assessing Officer has not given the details that how these transaction were not matching with the regular books and how these have been considered as genuine and not of bogus purchase and sales. In view of this also the addition made by the Learned Assessing Officer of ₹ 18,26,339/- is most unjustified specially when the assessee has already declared the profit of ₹ 17,86,474/- in the regular return and this was the real profit of the company as the books of accounts are not reflecting true and correct profit because of bogus purchase and sales and inflating the turnover by the assessee. The actual profit earned by the assessee was only ₹ 18,26,339/- out of which ₹ 17,86,474/- should be reduced as profit disclosed by the assessee. The Learned CIT(A) alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t none out of the said 10 parties was produced before the A.O. or found in existence at the given address. Under similar circumstances initially we have given relief in certain cases on the basis that the assessee as a prudent purchaser had discharged its onus by furnishing necessary information about transaction and parties supported with documents as described above but it was surprising for us to note in most of the later cases that the parties stated to have sold the goods to the assessee were neither produced nor found at their given addresses. Thus in such cases only option left to us was to estimate the profit of the assessee upholding the rejection of books of account on the basis that admittedly the claimed purchases from the named parties remained unverifiable. Likewise, in the present case, the above named parties from whom the assessee claimed to have purchased the goods were neither produced nor found in existence in business at their given addresses. Thus the claimed purchases stated to have been made from them remained unverified. The rejection of books of account invoking the provisions of Section 145(3), therefore, cannot be treated as unwarranted and unjustified. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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