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TMI Blog2020 (10) TMI 1196X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Assessee : Sh. M.L Borad (Advocate) For the Revenue : Ms Chanchal Meena (JCIT) ORDER PER: VIKRAM SINGH YADAV, A.M. These are three appeals filed by the assessee against the respective orders of ld. CIT(A)-1, Jaipur dated 24.09.2019 for A.Ys 2003-04, 2004-05 2008-09. 2. The hearing of the matter was scheduled through Video Conferencing in view of ongoing COVID-19 pandemic situation in the country. All these appeals were heard together involving common issues and are being disposed off by this consolidated order. 3. With the consent of the parties, the assessee s appeal in ITA No. 1349/JP/2019 for A.Y 2003-04 is taken as the lead case for the purposes of present discussions wherein the assessee has taken the following grounds of appeal:- 1. Under the facts and circumstances of the case the learned CIT(A) erred in sustaining 100% disallowance of the alleged unverifiable purchases of ₹ 11,84,063/- and thereby sustaining addition of ₹ 11,84,063/- made by the AO in the total income of assessee, which sustenance of disallowance and consequential addition of ₹ 11,84,063/- is most arbitrary, unjust and untenable in fact and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 11,84,063/- were more than the trading addition worked out by the AO by applying 30% GP rate at ₹ 2,22,208/-, the AO made addition of ₹ 11,84,063/- on substantive basis and simultaneously made trading addition of ₹ 2,22,208/- on protective basis. In first round of appellate proceedings, the learned CIT(A) upheld the disallowance out of above mentioned purchases at ₹ 2,96,016/- being 25% of such total purchases of ₹ 11,84,063/- [cash purchases ₹ 94,060/- + purchases from unregistered dealers at ₹ 10,90,003/-] on substantive basis and ₹ 2,22,208 on protective basis. Against this order of the learned CIT(A), the assessee filed appeal before the Tribunal which held that if a GP rate of 17% is applied it will meet the ends of justice. The Tribunal further directed the AO to re-calculate the trading addition by taking the G.P. rate at 17% against 13.82% declared by assessee and against 30% applied by the AO on the declared sales. Besides, the Tribunal observed that no separate addition for cash purchases/ purchases from unregistered dealers of ₹ 11,84,063/- is to be made. The Department filed appeal before the Hon ble High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly the year under appeal is the very first assessment year of assessee s business under the name and style of M/s. Vidhi Gems 6) The A.O. has not pointed out any inherent defects in the system of accounting. Not a single item of suppression of sales nor inflation of purchases has been pin pointed by learned A.O. 7) Moreover it is a fact that neither during the course of survey/search nor otherwise there are any evidences of any unaccounted purchase/sale by the appellant. 8) The identity of the recipients of the payments was not doubted by the AO. 9) That complete quantitative details are available on the file of AO. No defect in the same was pointed out by AO. In any case, the rejection of books of accounts is also not justified especially when no significant defect has been pointed out by the AO. Reliance is placed on the judgment of Hon ble Supreme Court in the case of CIT v/s. Padam Chand Ram Gopal (1970)76 ITR 719(S.C.). 10) In this line of business various qualities of precious and semi- precious stones are required and at the same time the assessee also requires different shapes and sizes of the stones and these are never available at one single pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional High court has in a very large number of judgments like that of Sorabh Cement Ltd. Vs. ACIT in ITA No.135/2017 dated 05.12.2017 held that while considering issue of GP rate in such cases, average GP rate of preceding five years in assessee s own case should be taken into account. 20) In the case of appellant assessee, the year under appeal is the very first assessment year of assessee s business and as such there is no past history and under such circumstances GP rate of 17% as upheld by the co-ordinate Bench of the Jaipur Tribunal in assessee s own case i.e. in the case of Smt. Mamta Haldia v/s. the DCIT in IT appeal No. 726/JP/2011 for A.Y. 2003-04 itself vide their consolidated order dated 19/12/2011 in ITA No. 31,729,728,727 and 726/JP/2011 for AY 2008-09, 07-08, 05-06, 04-05 and 03-04 in the case of Smt. Mamta Haldia v/s. the DCIT and ITA No. 101/JP/2011 for AY 2008-09 in the case of the DCIT v/s. Smt. Mamta Haldia may be applied here also. 7. Regarding Ground No. 2, the ld. AR submitted that this ground of appeal is against sustenance by the learned CIT(A) of trading addition of ₹ 2,22,289/- on protective basis made by the AO by way of application of higher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nes. The assessment u/s 153A r.w.s 153B of the Act was completed on 30.11.2009. The AO noted that the appellant has made unverified purchase amounting to ₹ 11,84,063/-. The AO also rejected the books of accounts and estimated the gross profit rate @ 30% in place of GP rate of 13.82% disclosed by the appellant. By adopting GP @ 30%, excess profit was worked out at ₹ 2,22,208/-. While concluding the assessment, the AO held that as the addition on the basis of bogus purchase is more than t -he trading addition on the basis of higher GP rate adopted, the addition on account of bogus purchase is made on substantative basis and addition on account of GP rate is made on protective basis. In a nutshell, the AO made the addition of ₹ 11,84,063/- and in the computation of income and addition of ₹ 2,22,208/- was kept on protective basis. The appellant filed the appeal before the ld CIT(A). The Ld. CIT(A) upheld the addition on account of gross profit rate @ 30% and held that the addition to the extent of 25% of unverified purchase is justified. However, he further mentioned that as the addition on account of unverified purchase amounting to ₹ 2,96,016/- (25% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g bogus purchase is answered in favour of the department and the second issue is answered in favour of the assessee. Considering the directions of the Hon'ble High Court and the facts on record in first round of appellate proceedings and in present proceedings, it is seen that the addition on account of bogus purchase and GP addition for same default cannot be simultaneously made. The AO can make addition either on account of unverified purchase or on account of gross profit difference. The addition worked out on the basis of bogus purchase is ₹ 11,84,063/- while on the basis of GP, it is ₹ 2,22,289/-. Therefore, higher of the two i.e. ₹ 11,84,063/- is upheld and the balance ₹ 2,22,289/- is deleted. 9. We have heard the rival contentions and perused the material available on record. The ld CIT(A) has returned a finding that considering the directions of the Hon'ble High Court and the facts on record in first round of appellate proceedings and in present proceedings, it is seen that the addition on account of bogus purchase and GP addition for same default cannot be simultaneously made and the AO can make addition either on account of unverified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the book results have been rejected by invoking the provisions of section 145(3) of the Act and the G.P estimation @ 30% has been done and the trading addition of ₹ 2,22,289/- has been made by the Assessing officer. Regarding the challenge to the rate of G.P estimated by the AO @ 30% as against declared by the assessee @ 13.82%, we find that in the first round of appellate proceedings, the matter has been considered by the Hon ble High Court wherein in respect of appeal filed by the Revenue, the matter has been decided in favour of the assessee and the G.P rate as sustained by the Tribunal @ 17% has been confirmed and the matter has attained finality. Similar is the finding recorded by the ld CIT(A). Therefore, the AO is directed to apply G.P rate of 17% and separate addition in respect of unverified purchases of ₹ 11,84,063/- is hereby deleted. In the result, the grounds of appeal are disposed off. ITA No. 1350/JP/2019 10. In ITA No. 1350/JP/2019 for A.Y 2004-05, both the parties submitted that facts and circumstances of the case are identical with facts and circumstances of the case in ITA No. 1349/JP/2019 for A.Y 2003-04 and similar contentions may ..... 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