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TMI Blog2019 (9) TMI 488X X X X Extracts X X X X X X X X Extracts X X X X ..... s/findings given by the Hon'ble Apex Court in case of (i) M/s. Kachwala Gems vs. Joint Commissioner of Income Tax (288 ITR 10: 2007) and (ii) N.K. Proteins Ltd. vs. DCIT order dated 16.01.2017 (SLP No. 769 of 2017) wherein it has been held that entire bogus purchases should be added as undisclosed income of the assessee? 3. The appellant craves leave to add, alter, amend, withdraw or insert any ground or grounds of appeal before or at the time of hearing of the appeal." 2. The assessee firm is engaged in the business of trading, manufacture and export of Gem Stones and Jewellery. The assessee filed its return of income on 30th September, 2011 declaring total income of Rs. 18,42,770/-. During the course of scrutiny assessment, the AO issued notice under section 133(6) of the Act to 28 parties from whom the assessee has made purchases. Out of 28 parties to whom the notices were issued by the AO, the notices issued to 13 parties were returned back by the postal authorities. The AO accordingly treated the purchases of Rs. 3,02,49,345/- made from 13 parties as unverifiable and consequently he rejected the books of account of the assessee under section 145(3) of the IT Act. The AO t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT (A) and submitted that the ld. CIT (A) has followed the decision of this Tribunal wherein it was held that once the books of account were rejected, the income of the assessee ought to have been estimated instead of making addition. He has relied upon the decision dated 26.12.2017 of Coordinate Bench of this Tribunal in case of DCIT vs. M/s. Gems Paradise in ITA No. 747/JP/2012 and C.O. No. 65/JP/2012. Thus the ld. A/R has submitted that the ld. CIT (A) has followed the binding precedent which cannot be faulted with. 5. We have considered the rival submissions as well as the relevant material on record. The AO in order to verify the purchases issued notices under section 133(6) of the Act to 28 parties. The notices issued to 13 parties were received back by postal authorities. The details of these parties are as under :- S.No. Parties Amount (Rs.) 1. Pari Exports 11,41,113/- 2. Naman Gems 30,547/- 3. Rosette India 9,80,020/- 4. Pranav Gems 1,84,509/- 5. Hardik Gems Exports 2,87,300/- 6. K.K. Bullion 2,68,02,042/- 7. Shree International 55,400/- 8. UK Gems International 1,03,281/- 9. R.S. Jewellers 1,19,818/- 10. Radhika Impex 1,09,441/- 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the detail confirming the purchases to the extent of Rs. 2,69,45,040/- (26802042-142998). However, the balance purchase of Rs. 3304305/- remained unverifiable. Therefore the provisions of section 145(3) is clearly applicable and therefore the same is confirmed. It is further find that the Hon'ble ITAT Jaipur Bench is consistently holding that wherever books of accounts is rejected by applying the provisions u/s 145(3), the Gross profit rate should be applied. Considering the past history of the appellant. The various case laws relied by the appellant also supported this case. In this case the average Gross profit rate of three years including current year is 8.66%. Further the turnover of the appellant has also increased from Rs. 15.22 crore to Rs. 22 crore this year. Therefore I find that it would be reasonable if the Gross profit rate of 8.70% is applied. On this basis the Gross profit work out of Rs. 1,91,68,395/- as against Gross profit of Rs. 1,87,42,224/- declared by the appellant resulting into final addition of Rs. 4,26,171/-. Thus the trading addition of this extent is confirmed. The appellant get relief of Rs. 71,36,165/-. These grounds are partly allowed." Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the purchases to the book results. This act of the Assessing officer itself contradicts the decision of rejecting the books of accounts and books result. The Tribunal in assessee's own case for the assessment year 2006-07 has considered this issue and upheld the order of the ld. CIT(A) in para 2.20 and 2.30 as under:- "2.20 Hence, there are certain concerns for which Revenue got evidence in the form of statement recorded in respect of such parties, opening balance is Rs. 37,06,175/- while the closing balance is Rs. 42,81,496/-. It means that there is an accretion of amount of Rs. 5.75/- lacs. It means that to this extent, accretion in purchase is without supporting the correct bills. Of course, total openting balance of all parties is Rs. 1,15,43,782/- and the closing balance is Rs. 1,33,36,193/-. However, looking to the accretion in the closing balance of the concerns for which Revenue has material, the addition confirmed by the ld. CIT(A) is reasonable................... ..................................................................... 2.30 The Hon'ble P & H High Court in the case of Uplakesh Metal Industrial V CIT 177 taxman 298 held that issue decided by this is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Revenue are dismissed." We further noted that when the corresponding sale is not in dispute then the question is only regarding the correct amount of purchases and verification of the same. The ld. DR has relied upon the various decisions of Hon'ble Gujarat High Court however, we find that in all those decisions there was a finding of facts that the assessee inflated the purchases upto 25% and therefore, it was not a case of non verification of the purchase and rejection of books of accounts but the fact was established in the investigation that the assessee inflated the purchase price and accordingly the addition of 25% being inflated purchases was made and upheld by the Tribunal which was again upheld by the Hon'ble High Court. On the contrary in the case of the assessee the AO not given any finding of inflated purchases by the assessee but doubted the very transaction of purchases due to non production of these parties before the AO. The AO has not given the finding that the prices of the goods was inflated by the assessee but the AO doubted the genuineness of the purchases on the ground that the suppliers were found to be accommodation entries providers. When the AO reject ..... X X X X Extracts X X X X X X X X Extracts X X X X
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