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TMI Blog2024 (10) TMI 351X X X X Extracts X X X X X X X X Extracts X X X X ..... ing disposed off by this consolidated order. 3. In this case the registry pointed out that the appeal in these bunch of cases are delayed by 13 days. At the time of hearing of the appeal the ld. AR of the assessee submitted that though the order of the ld. CIT(A) is dated 24.01.2024, but the impugned orders were served on the assessee by speed post by on 15.02.2024 and if that fact is considered there is no delay as such. 3.1 The ld. DR representing the revenue did not raise any objection to the factual aspect of the matter. 3.2 We have considered the facts of the case that the date of communication of the order is not under dispute and the same is 15.02.2024 if that is considered then there is no delay as such and thus all these appeals are admitted for disposal on its merits. 4. The Grounds taken by the assessee in each appeal are as under: - (i) AY 1998-99 (ITA No. 429/JPR/2024), 1. On the facts and in the circumstances of the case and in law the assessment order passed by Ld. Assessing Officer on 31.10.2018 is bad in law, void-ab-initio, and deserves to be annulled for various reasons including following: - (i) During the course of search over the assessee no incrimin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of PCIT Central-3 V/s Abhisar Buildwell Private Limited 2023 (4) TMI) 1056 no addition can be made in respect of completed assessment in absence of any incriminating material. (ii) The assessment order was passed without complying the provisions of section 153D of the Act. (iii) That the order of the ld. Assessing Officer is arbitrary, whimsical, capricious, perverse and against the law and facts of the case. The CIT (A) erred in not annulling the assessment order and also not deleting the additions so made in toto. 2 On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in confirming the action of Ld. A.O. of rejecting the books of accounts by applying the provisions of section 145(3) of Income Tax Act, 1961. 3 On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in (i) holding that there is no evidence that business of trading in precious and semi-precious conducted by M/s Tirupati Balaji Gems and further erred in holding that Shri Lallu Ji and their partners were real owners and beneficiary of this concern which is contrary to findings of fact as held by Hon'ble ITAT Jaipur in the case of Shri Rakesh R Puroh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is unverifiable and under invoiced to show more profit to claim the deduction u/s 80HHC, (iii) confirming the addition of Rs. 3,56,250/- being 25% of purchases of Rs. 14,25,000/- (iv) directing to tax the same as income from other sources and (iv) holding that assessee paid 25% of doubtful purchases through undisclosed cash/undisclosed source. 4 The appellant prays for leave to Add, to amend, to delete, or modify the all or any grounds of appeal on or before the hearing of appeal. (iv) AY 2001-2002 (ITA No. 432/JPR/2024) 1. On the facts and in the circumstances of the case and in law the assessment order passed by Ld. Assessing Officer on 31.10.2018 is bad in law, void-ab-initio, and deserves to be annulled for various reasons including following: - (i) During the course of search over the assessee no incriminating material of whatsoever nature was found from the premises of the assessee to prove that the purchases made by the assessee is not genuine, therefore, in view of various judgement of including latest Judgment of Hon'ble Supreme Court in the case of PCIT Central-3 V/s Abhisar Buildwell Private Limited 2023 (4) TMI) 1056 no addition can be made in respect of complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. A.O. of rejecting the books of accounts by applying the provisions of section 145(3) of Income Tax Act, 1961. 3 On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in (i) holding that proprietor/directors of M/s Shruti Gems & M/s Naman Gems private Limited were dummy proprietor/director and these firms had involved in supplying bogus bills and the finding is solely based on the self-serving statements/affidavits of proprietor/director of respective concern which is contrary to the findings of facts as held by Hon'ble ITAT Jaipur Bench in the case of Shri Umesh Saboo prop of Shruti Gems and in the case of M/s Naman Gems Pvt Ltd (ii) holding that the purchases to tune of Rs. 15,28,323/-, made from above named concerns, is unverifiable and under invoiced to show more profit to claim the deduction u/s 80HHC, (iii) confirming the addition of Rs. 15,28,328/- being 25% of alleged unverifiable purchases of Rs. 61,13,313/- (iv) directing to tax the same as income from other sources and (iv) holding that assessee paid 25% of doubtful purchases through undisclosed cash/undisclosed source. 4 The appellant prays for leave to Add, to amend, to delete, or mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment proceedings as bogus/unverifiable 1998-1999 a) Shree Nath Impex Rs. 2,77,128/- b) From various unregistered dealers Rs. 2,78,552/- 1999-2000 M/s Tirupati Balaji Gems Rs. 2,61,387/- 2000-2001 a) M/s Meena Gems Rs. 16,55,104/- b) M/s Vinayak Overseas. Rs. 14,25,000 2001-2002 a) M/s Ganpati Export, Rs. 5,25,000/- b) M/s Arham Gems, Rs. 7,29,375/- c) M/s S.V. Enterprises, Rs. 14,20,290/- and Rs. 5,81,360/- d) M/s Agarwal Gems Centre, Rs. 4,21,800/-and e) M/s Vinayak Overseas. Rs. 2,19,834 2003-04 a) M/s Shruti Gems Rs. 47,87,521/- b) M/s Naman Gems Pvt Ltd Rs. 13,25,792/ c) Real Gems INC Rs. 7,15,465/- d) Bright Gems Rs, 2,42,500/- While making the addition for all these purchases, the ld. AO rejected the books of accounts for all these years by resorting to the provision of section 145(3) of the Act. 7. In respect of the assessment year 1998-99 and AY 2001-2002 ld. AO estimated the net profit of the assessee @ 20% of total turnover declared by the assessee and calculated the net profit of the assessee at Rs. 2,77,840/- and Rs. 23,37,099/- respectively as against net profit of Rs. 7,33,909/- for AY 1998-99 and Rs. 64,14,944/- for AY 2001-2002 declared b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow are not verifiable and held that the genuineness of purchases made from other then these parties cannot be doubted as there is nothing incriminating against such parties in the assessment order. Then CIT (A) confirmed the addition of income being 25% of unverifiable purchases treating the same made to inflate the export profit and directed to treat the same as Income from other sources. This impacted to the addition in total income of the assessee resulted the following figures : Astt Year Purchases held by AO in original Assessment proceedings as bogus/unverifiable Amount of unverifiable purchases (Rs.) Addition confirmed @ 25% of unverifiable purchases (Rs.) 1998-1999 From various unregistered dealers 2,78,552/- 69,638/- 1999-2000 M/s Tirupati Balaji Gems 2,61,387/- 65,347/- 2000-2001 M/s Vinayak Overseas. 14,25,000 3,56,250/- 2001-2002 a) M/s Ganpati Exports Rs. 5,25,000/- b) M/s Vinayak Overseas. Rs. 2,19,834/- 7,44,834/- 1,86,209/- AY 2003-2004 a) M/s Shruti Gems Rs. 47,87,521/- b) M/s Naman Gems Pvt Ltd Rs. 13,25,792/- 61,13,313/- 15,28,328/- Second appellate proceeding / First round of litigation 10. Aggrieved from the order of the ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e adverse finding of the lower authorities against the genuineness of the claimed purchases and exports direct the A.O. To delete the addition of Rs. 3,56,250/- sustained by the Ld. CIT (A). The grounds of the appeal preferred by the department are thus rejected and objection Nos. 1 &2 of the cross objection are allowed." For AY 2001-2002 para 22-24 at Page 27 of its order dated 30.05.2008 "We are of the view that when the assessee has discharged its initial burden by furnishing the necessary information supported with evidence to establish the genuineness of the claimed purchases made form the above named two parties i.e. M/s Vinayak Overseas and M/s Ganpati exports, there was no reason before the Ld. CIT (A) to disbelieve the same in absence of better evidence filed by the A.O. to rebut the claim of the assessee. We thus while setting aside adverse finding of the lower authorities on the issue direct the A.O. to delete the addition of Rs. 1,86,209/- sustained by the Ld. CIT (A) and the action of the lower authorities in upholding the application of S. 145(3) of the Act on account of unverifiable purchases made from the above partis. The grounds of the appeal preferred by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on 06.04.2015 whereby the supreme court has dismissed the SLP and confirmed the order dated 09.12.2014 passed by the Gujrat High Court and other decisions of the High Court of Gujarat in the case of Sanjay Oilcake Industries Vs Commissioner of Income Tax (2009) 316 ITR 274 (Guj) and N. K. Industries Ltd Vs Dy. C.I.T. Tax Appeal No. 240/2003 decided on 20.06.2016, the parties are bound by the principal of law pronounced in the aforesaid three judgement. 4. We remit back the case to the Assessing Officer for deciding afresh on the factual matrix. The authority will accept the law but the transaction whether it is genuine or not will be verified by the Assessing Officer on the basis of the aforesaid three judgements. The issues are answered accordingly. The appeal is accordingly disposed of." 4. Counsel for the respondent was not in a position to assail the aforesaid factual position. 5. In that view of the matter, the issue is covered by the aforesaid judgement and the matter is remitted back to the Assessing Officer who will look in the matter afresh. 6. In view of the decision rendered hereinabove, the appeals are disposed off." Second round litigation proceeding before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the same and is based on the inference only. The CIT (A) further held that the present proceedings being arising the set aside proceedings as per the directions, no fresh ground can be raised which is not emanating from the/in consequence to the directions of the Hon'ble High Court. 2. Genuineness of Export Sales Decided in favour of assessee The CIT (A) held that export of the goods cannot be treated as fictitious looking into several documentary proofs submitted by the assessee only on a single ground that the purchases have been treated as bogus. The only presumption in such circumstances available is that the assessee might have purchased the goods from the others. 3. Rejection of books of accounts Decided against the assessee Confirmed the rejection of books of accounts, which rejected by applying the provisions of section 145(3) of Income Tax Act, 1961 solely on the ground of alleged not verifiable/bogus purchases. 4. Genuineness of purchases made Partly decided in favour of assessee Summarized in below para. The bench noted that in the second round of litigation even the ld. CIT(A) also given the same finding as it was in the first round of litigation and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmitted fact that the department has carried out search operations over the assessee and has not discovered any incriminating material in possession of the assessee, to support that it had made bogus purchase bills or inflated export profit or export profit of the assessee is not genuine. He submitted that return of income filed by the assessee as per provision of section u/s 139 of Act for A.Y. 1998-99 filed on 16-11-1998 and time limit for issue of notice u/s 143(2) of the Act was 30-11-1999 for this year. Similarly, it filed return for A.Y. 1999-2000 on 15-06-1999, for AY 2000-2001 on 18-07-2000 and for AY 2001-2002 on 11-09-2001 and time limit for issue of notice u/s 143(2) for these years was 30-06-2000, 31-07- 2001, and 30-09-2002 respectively. The Ld. AO issued notice on 08-12- 2004 in all the above said assessments years. Therefore, the completed assessments can be assessed qua the incriminating material and in the absence of the incriminating documents / material found from the possession of the assessee, the addition made merely on the ground that the assessee is accounted bogus purchases. He further submitted that the approval of higher authorities as required u/s 153D w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of ACIT, Circle- 1 (2) Vs. Serajuddin and Co. In para 23 of the order of Hon'ble Orissa High Court held that:- 23. In the present case, it is an admitted position that the assessment orders are totally silent about the AO having written to the Additional CIT seeking his approval or of the Additional CIT having granted such approval. Interestingly, the assessment orders were passed on 30th December 2010 without mentioning the above fact. These two orders were therefore not in compliance with the requirement spelt out in para 9 of the Manual of Official Procedure. 17. The ld. AR further submitted that Hon'ble Orissa High Court had quashed the Assessment Order on the basis of finding recorded in para 25 of its order as under:- 25. For all of the aforementioned reasons, the Court finds that the ITAT has correctly set out the legal position while holding that the requirement of prior approval of the superior officer before an order of assessment or reassessment is passed pursuant to a search operation is a mandatory requirement of Section 153D of the Act and that such approval is not meant to be given mechanically. The Court also concurs with the finding of the ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The ld. AR of the assessee submitted that the lower authorities have not made any findings as regard that the accounts are incomplete or not correct or the assessee is not following the proper method of accounting regularly or not following the accounting standards notified by Central Government. Therefore, merely on allegation of unverifiable purchases books of account cannot be rejected in toto. The Ld. AR further submitted that no show cause notice as required u/s 145 was given to the assessee before rejecting the books results. Further if the books of account are rejected then the assessment is required to be completed u/s 144 of the Act. 23. On the other hand, the ld. SR. DR relied upon the findings of CIT(A) and that of the AO. The ld. DR vehemently argued that based on the detailed reasons mentioned in the order of the assessment the books of accounts of the assessee has rightly been rejected by the ld. AO and also confirmed by the ld. CIT(A). 24. We have heard the rival contentions and perused the material placed on record. As it is clear from the finding so recorded in the order of the assessment that assessment order does not deal any show cause notice showing defect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority. Not only that the bench also observed that when the provision of section 145(3) is to be invoked the assessment is to be completed as per the manner provided in section 144 of the Act and the proper opportunity is required to be given by pointing out the defects in the books of account which we observe that the same is not followed and thus the order is not correct. To drive home to this contention we get strength to support our view based on the provision of the Act and decision of the Hon'ble Jurisdiction Rajasthan high court in the case of CIT Vs. Pink City Developers [99 taxmann.com 422 (Rajasthan) ]. In that case the Hon'ble High court held that; 7. The counsel for the respondent contended that the Tribunal while considering the objection of section 145(3) of the Income-tax Act has rightly observed as under : "(3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etor of M/s Tirupati Balaji Gems) 56 to 63 M/s Naman Gems Private Limited 224 to 233 Shri Gauri Shankar Pareek (Prop. of M/s Vinayak Overseas) 234 to 244 Out of the parties for which the ld. AO as well as ld. CIT(A) held that these parties were engaged in providing bogus bills. The finding of the ld. ITAT in the case of Shri Umesh Kumar Saboo(Proprietor of M/s. Shruti Gems) is reproduced here in below : 18. Now, the other issue involved in the grounds raised by the revenue and assessee is in respect of issue of bogus purchase bills and estimation of commission income thereon. We found that the AO has no material except the self-serving affidavit/ statements of the assessee before the AO during the course of assessment proceedings. We have already held that the affidavit and statements of the assessee filed/made during the course of assessment proceedings is self-serving and it cannot be relied upon for the reasons mentioned above. The AO has not brought on record any positive material to show beyond doubt that the assessee has issued bagus purchase bills and earned commission on issue of bogus purchase bills On the other hand the assessee has made detailed statements before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand Maheshwari and Shri Manmohan Krishan Bagla. 305 to 316 The statements recorded by search party u/s 132(4) of Shri Umesh Saboo prop of M/s Shruti Gems confirms that he was actual supplier of goods. Statement recorded by Custom Authorities further confirms the fact of supply of goods. The copy of statements of these persons are as under in the paper book for AY 1999-2000; Copy of statement of Shri Umesh Kumar Saboo recorded by search party on 30.06.2003 95 to 115 Copy of statement of Shri Umesh Kumar Saboo recorded by Custom Authorities under Section 108 of Custom Act, 1962 116 to 125 Copy of affidavit filed by Shri Gauri Shankar Pareek, Prop. M/s. Vinayak Overseas before the Assessing Officer 126 to 127 Copy of statement of Shri Gauri Shankar Pareek, Prop. M/s. Vinayak Overseas recorded by Custom Authority under Section 108 of Custom Act 128 to 146 Thus, bench noted that revenue has no material to support that the assessee has made any bogus or unverifiable purchases. Further, the assessee filed confirmation letter of M/s Ganpati Exports which was rejected not on the basis of material but on surmises and conjectures. 29. Per contra, the ld. DR representing revenue h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrovert the findings of ITAT made in the case of Shri Gauri Shanker Pareek (Prop M/s Vinayak Overseas), Shri Mahesh Kumar Sharma (Proprietor of M/s Tirupati Balaji Gems), M/s Naman Gems Private Limited and Shri Umesh Kumar Saboo (Proprietor of M/s Shruti Gems) and in absence of any further inquiry to controvert the findings of ITAT in these cases, these persons cannot be held as bogus entry providers as per finding of the ITAT in those parties whose purchases are disputed by the revenue in this case. 32. Now, the limited issue in the second round of litigation as emerges from the order of the ld. CIT(A) is to decide whether the estimation of profit @ 25 % decided by the ld. CIT(A) is correct or not in respect of the bogus purchases made by the assessee. The bench noted that recently the jurisdictional Hon'ble Rajasthan High court while dealing the estimation of gross profit on account of bogus purchase while dealing with the case of COMMISSIONER OF INCOME TAX (CENTRAL), JAIPUR vs. M/S CLARITY GOLD (P) LTD. [100 CCH 0396 RajHC ] held as under: 4. Facts of the case are that the assessee company derives its income from business of manufacturing of jewellery and in trading of gems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be assessed on the basis of 12 per cent GP. 8. In view of above, all the appeals stand allowed to the aforesaid extent. The assessee relying on the judgment submitted that the profit rate disclosed by the assessee. The ld. CIT(A) over and above profit already disclosed applied the profit rate @ 25 % on the unverifiable purchases over and above the profit already disclosed. The bench noted that the assessee for the year under consideration disclosed the gross profit as tabulated here in below: Assessment Year Turnover Gross Profit GP rate 1998-1999 13,89,201 8,33,521 60% 1999-2000 5,98,789 3,37,402 56.34% 2000-2001 67,30,870 35,88,537 53.32% 2001-2002 1,04,42,157 62,65,989 60.01% 2003-2004 1,45,58,323 73,53,296 50.51% As it is evident from the above chart that in all the years under consideration the Gross Profit declared by the Assessee is more than 12% as decided by the jurisdictional high court. The ld. DR did not controvert this finding of the jurisdictional high court. Respectfully, following the rate of gross profit to be estimated in case where the issue of bogus purchase are involved and the estimation of profit we noted that in all the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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