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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 ..... h. While doing so the Hon ble High Court has followed the finding so given in the case of M/s. Gems Paradise [ 2016 (11) TMI 1400 - RAJASTHAN HIGH COURT] directing the assessing officer to verify the transactions are genuine or not. The bench noted that in that set aside proceeding the ld. AO did not verify the issue which was set aside by the High Court and the same addition which was done in the first round of litigation was done. Even the ld. CIT(A) also given the same finding that was recorded in the earlier order issued in the first round. Rejection of books of account - Section 145(3) can be invoked when the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, when the method of accounting provided in Section 145 (1) has not been regularly followed by the assessee and when the accounting standards notified u/s 145 (2) have not been regularly followed by the assessee. From the observations recorded in the order of the lower authority none of the condition is satisfied and same is also not evident from the finding of the lower authority. Not only that the bench also observed that when the provision of section 145(3) is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 3 raised by the assessee is allowed. - Dr. S. Seethalakshmi, JM And Shri Rathod Kamlesh Jayantbhai AM For the Assessee : Sh. Vijay Agarwal, CA And Sh. Gulsan Agarwal,CA For the Revenue : Sh. Arvind Kumar, CIT-DR ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM All these bunch of five appeals filed by the assessee, against the order Commissioner of Income tax (Appeals)-4, Jaipur [hereinafter referred to as CIT(A) ] dated 24.01.2024 for A.Y. 1998-99 and AY 1999-2000 and order dated 15-01-2024 for AY 2000-01, A.Y. 2001-02, and AY 2003-04 which in turn arise from the orders dated 31-10-2018 for all these assessments years passed u/s. 260A (set Aside) r.w.s. 153A of the Act by the Dy Commissioner of Income Tax, Circle-1, Jaipur. 2. Since the issues involved in these appeals are almost identical on facts and are almost common, except the difference in figure disputed / added in each year. Therefore, these appeals were heard together with the agreement of both the parties and are being 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69,638/- being 25% of alleged unverifiable purchases of Rs. 2,78,552/- (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. (ii) AY 1999-2000 (ITA No. 430/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 completed assessment in absence of any incriminating material. (ii) The assessment order was passed without complying the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Vinayak Overseas solely on the statement of Shri Mohan Prakash Sharma, (ii) holding that the purchases of Rs. 3,56,250/- 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 assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed 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. (v) AY 2003-04 (ITA No. 433/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) The assessment order was passed without complying the provisions of section 153D of the Act. (ii) 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 proprietor/directors of M/s Shruti Gems M/s Naman Gems private Limited were dumm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 6. Pursuant to the search assessments of the assessee the year mentioned herein below were completed u/s 153A read with section 143(3) of Income Tax Act 1961 on 22.03.2006 wherein the total income of the assessee was computed tabulated here in below :- Assessment Year Income declared in return u/s 139(1) (Rs.) Income Assessed u/s 153A (Rs.) 1998-1999 1690 4,56,069 1999-2000 0 5,38,911 2000-2001 0 60,57,063 2001-2002 13,15,817 47,44,200 2003-2004 35,82,887 1,31,02,491 The issue taken up for all these years are on similar contention holding that the purchases made by the assessee are tainted / bogus / unverifiable. The details of the amount considered as tainted or bogus with respect to the each of the parties considered in each of the year is also tabulated here in below : Astt Year Purchases held by AO in original 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. Ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,070/- 1,45,58,323/- Less :- 10% Expenses to achieve bogus export remittance 59,878/- 6,73,007/- 14,55,832/- Export sales treated as bogus (after allowing expenses @10% of turnover) 5,38,911 60,57,063 1,31,02,491 Total Addition by AO 5,38,911 60,57,063 1,31,02,491 First appellate proceeding / First round of litigation 9. The assessee challenged the finding of the ld. AO for all these years before the ld. CIT(A). While dealing with these appeals of the assessee he confirmed the action of the ld. AO in rejecting the books of accounts of the assessee. But at the same time, he holds that the export sales made by the assessee cannot be considered as not genuine. In that appeal finding the ld. CIT(A) considered the purchases of the parties listed in the table herein below 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de and sustained by the lower authorities and direct the A.O. to delete the addition of Rs. 65,347/- sustained by CIT (A) in this regard while allowing objection No. 1 2 of the cross objection preferred by the assessee and reject the grounds of appeal preferred by the revenue as not maintainable. For AY 2000-2001 para 20 at Page 22 of its order dated 30.05.2008 Under these circumstances, we are of the view that the A.O. was not justified in doubting the correctness of claimed purchases made from M/s Vinayak Overseas and M/s Meena Gems and export of the said goods and in invoking the provisions of section 145(3) of the Act to estimate the income of the assessee. Under these circumstances, we while setting aside the 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 furnishi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 remanded matter back to the file of the ld. Assessing Officer. The relevant finding of the jurisdictional high court is reproduced here in below for the sake of brevity: 3. Counsel for the appellant contended that the issue is squarely covered by the decision of this court in the case of Commissioner of Income Tax, Jaipur-I, New Central Revenue Building, Statute Circle, Jaipur Vs. M/s. Gems Paradise, Gulab Niwas, M. I. Road, Jaipur in D. B. Income Tax Appeal no. 201/2010 decided on 2nd November, which reads as under: 3. Considering the law declared by the Supreme Court in the case of Vijay Proteins Ltd. Vs. Commissioner of Income Tax, Special leave to Appeal (C) No. 8956/2015 decided 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 Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quence to the directions of the Hon ble High Court. 2. The requirement of 153D of the Act did not comply i.e. the approval of Joint Commissioner was not obtained Decided against the assessee The CIT (A) held that it cannot be presumed that the approval was not granted or not obtained merely on the basis that there is no express mention of the same in the assessment order. It is not the case of the appellant that inquiries were done from the assessing officer and as per the information provided it was found that whether the approval was obtained or not. The issue has been raised in the ground of Appeal without exact factual basis for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e years the same is decided all together based on the ground disputed in each year. 15. Ground no. 1 raised by the assessee in A. Y. 1998-99 to 2001-2002 and A. Y. 2003-04 challenges the validity of the assessment orders and the additions made therein. In support of the arguments the ld. AR of the assessee submitted that for AY 1998-99 to AY 2001-02 no addition can be made in completed assessment without any incriminating material relying on decision of Hon ble Supreme Court in the case of PCIT Central-3 V/s Abhisar Buildwell Private Limited [149 Taxmann. 399 (SC)]. He submitted that it is admitted 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 18-07-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent under Section 158BG of the Act. The only difference being that the latter provision occurs in Chapter-XIV-B relating to special procedure for assessment of search cases whereas Section 153D is part of Chapter-XIV. A plain reading of Section 153D itself makes it abundantly clear that the legislative intent was to obtain prior approval by the ld. AO when he is below the rank of a Joint Commissioner, before he passes an assessment order or reassessment order under Section 153A(1)(b) or 153B(2)(b) of the Act. Ld. AR of the assessee relied upon the decision of Hon ble Orissa High Court 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 subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2010 directing the assessing officer to verify the transactions are genuine or not. The bench noted that in that set aside proceeding the ld. AO did not verify the issue which was set aside by the High Court and the same addition which was done in the first round of litigation was done. Even the ld. CIT(A) also given the same finding that was recorded in the earlier order issued in the first round. 22. Ground No 2 raised by the assessee for the A.Y. 1998-99, A.Y. 1999- 2000, A.Y. 2000-01, A.Y. 2001-2002 and A.Y. 2003-04 is as regard the rejection of books of account. 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 comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be invoked in the following circumstances: When the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee. When the method of accounting provided in Section 145 (1) has not been regularly followed by the assessee. When the accounting standards notified under Section 145 (2) have not been regularly followed by the assessee. 26. From the observations recorded in the order of the lower authority none of the condition is satisfied and same is also not evident from the finding of the lower 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Prop. of Tirupati Balaji Gems), Shri Gauri Shankar Pareek (Prop. of Vinayak Overseas, Shri Umesh Kumar Saboo (Prop. of M/s Shruti Gems) and Naman Gems Pvt Ltd., the issue of their being genuine or not were travelled up to ITAT, Jaipur Bench, Jaipur. That order of the bench for that assessee was placed before us in Paper Book filed for AY 1999-2000 as under;- Name of alleged bogus supplier PB Page No. Shri Umesh Kumar Saboo (Proprietor of M/s Shruti Gems) 159 to 181 Shri Mahesh Kumar Sharma (Proprietor 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 du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h has also been dismissed by Hon ble Rajasthan High Court. The copy of the order of ITAT and Rajasthan High Court has been filed in paper Book for AY 1999-2000 as under: - Copy of Orders of Hon ble ITAT, Jaipur Bench Jaipur given in the cases of: - Shri Rakesh R. Purohit, 248 to 259 Shri Ramesh Chand Maheshwari 260 to 281 Shri Manmohan Krishan Bagla. 282 to 304 Copy of Order of Hon ble Rajasthan High Court in the cases of Shri Rakesh R. Purohit, Shri Ramesh Chand 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also noted that in the second round of litigation no fresh enquiries or no new material brought on record no enquiries said to have been made which the revenue pleaded before the Hon ble High Court. Even the order of the ld. AO as well as of the ld. CIT(A) remained on the same finding as that of in the first round. 31. The bench also noted from the assessment order it does not appear that the ld. AO has made any fresh inquiries to controvert 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01828 1589358 G. P. rate 16.08% 12.72% 7.40% 8.45% 9.68% 13.59% 14.36% 10.31% Taking into account the average GP rate which will be applied in the present case will be 12 per cent. It is made clear that where ever the profit is more than 12 per cent, the same will not be refunded to the assessee but where it is less than 12 per cent, the income 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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