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TMI Blog2019 (11) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... is engaged in trading (export & domestic) of semi-precious stones and silver jewellery. Notice u/s 148 of the Act was issued to the assessee on 22.03.2016 and in response, the assessee submitted its return of income on 20.04.2016 showing total income of Rs. 16,50,850/-. The assessment was completed u/s 143(3) read with 147 at an assessed income of Rs. 62,42,900/-. As per the Assessing Officer, the assessee has made bogus purchases amounting to Rs. 1,83,68,232/- from five concerns which are controlled and operated by Rajendra Jain Group in respect of which search operations were carried out on 03.10.2013 and statement of the key person of the group has been recorded and it has been established that these concerns were involved in providing accommodation entries and not doing any genuine business activities. The AO thereafter enhanced the trading profits declared by the assessee by amount of Rs. 49,92,058/- which was computed @ 25% of the total unverifiable purchase amounting to Rs. 1,83,68,232/-. On appeal, the ld. CIT(A) upheld the rejection of book of accounts by the Assessing Officer. However, the addition was reduced to 15% of the unverifiable purchases. Now, the assessee is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the books of account can proceed to make the assessment on the basis of best judgment instead of resorting to making the addition to the book results. Similarly, the Co-ordinate Bench in case of ACIT vs. M/s Allied Gems Corporation (794/JP/11, 795/JP/2011 and 716/JP/2012 dated 15.12.2017 has held that where the books of accounts have been rejected, the ld. CIT(A) was correct in restricting the addition to the average G.P rate based on the past history. It was submitted that in the instant case, the assessee has declared the GP rate of 11.41% on the total sales of Rs. 4,55,26,235/- and being the first year operations, there is no previous history of the assessee and therefore, comparable case of M/s Kedia Exports Pvt. Ltd. which is engaged in trading (Export & domestic) in semi-precious stones and silver jewellery and which has declared GP rate of 10.04% for A.Y 2009-10 may be considered. It was accordingly submitted that the GP rate so declared by the assessee is better than the comparable GP rate disclosed by M/s Kedia Exports Pvt. Ltd., and even where the book of accounts are rejected u/s 145(3), no additions should be made in the hands of the assessee. 5. Per contra, ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra) wherein similar view has been taken by the Co-ordinate Bench supports the case of the assessee: "5. We have considered the rival submissions as well as relevant material on record. The Assessing Officer rejected the books of account by invoking the provisions of section 145(3). The issue of rejection of books of accounts is involved in the cross objection filed by the assessee, therefore, we deal with this issue while deciding the cross objection. Once, the books of accounts are rejected by the AO the only course of action left to the AO is to assess the income of the assessee on the basis of best judgment and GP rate is considered as proper and reasonable basis and guidance for the best judgment. Once, the books result are rejected the Assessing Officer cannot proceed to make an addition to the income offered by the assessee as per books result. However, the AO in the case of the assessee instead of applying the GP rate made on addition@ 25% of 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 cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance-sheet as trade creditors, so it was not relevant for us to consider as to whether the purchases made by the assessee were genuine or not or to whether the assessee has inflated those purchases or not. It is also not material to consider whether the GRs from sale-tax department were verified or not, so, the CIT(A) on considering these points was not justified in deleting the impugned addition without discussing as to whether the liability of trade creditors shown by the assessee in the absence of furnishing complete addresses of trade creditors /consignors and the payment vouchers was genuine or not." While evaluating the material collected by the Revenue on the touch stone on human probability and considering the accretion in the closing balance in respect of parties for which Revenue has material in the form of statement. We fell that the ld. CIT(A) was reasonable in confirming the addition of Rs. 5.00 lacs. Hence both the grounds of assessee as well as 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 vario ..... X X X X Extracts X X X X X X X X Extracts X X X X
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