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TMI Blog2015 (4) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... ases one of the common ground is in respect of unverifiable purchases. Consequently many of such appeals are heard together and disposed of by this common order. Jaipur city is well known in India and abroad for the business of gems and jewellery. Various types of jewellery are being traded as well as exported out of India. Consequent to the Income Tax Department, received information that larger number of gems and jewellery dealers have been indulging in obtaining fake purchase bills to inflate their purchases. Consequently, the Income Tax Department had conducted search/survey from time to time to stop the mal practices of bogus/unverifiable purchases. There are number of parties from both the sides i.e. obtaining the fake bills and providing the fake bills, engaged in the business of gems and jewellery, who promote such practices for reducing their tax liabilities. It created aberrations in the whole system of trading as well as exporting business system of Jaipur gems and jewellery market. It also disheartens the honest tax payers who do not resort to such mal practices and paid their legitimate taxes. On the other side, it emboldens the dishonest tax payers who resort to such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash. He listed out the names of such parties, who were issuing bogus bills. In various cases, the statement of Shri Haldia was used as an evidence against the assessee, who have obtained the bogus/unverifiable purchase bills on similar pattern. (iv) A search seizure action was carried out on M/s Clarity Gold Group, Jaipur on 20/5/2009. Shri Khushi Kumar Ameriya, Director (Main person) of the group admitted that more than 95% of the total sales and purchases of M/s Clarity Gold Pvt. Ltd. and M/s Marine Minerals & Herbal Remedies Pvt. Ltd. were bogus. Shri Ameriya also explained that such bogus purchase and sale bills were obtained on commission basis through a set of brokers operating in Jaipur namely Lalwani Group, Vijay Group etc. 3. This resulted in books trading results and taxable income being unverifiable. During the course of assessment proceedings, general defects pointed by the learned Assessing Officer for rejecting the books of account are as under:- :- No quantitative day to day stock register is maintained with item wise specification. :- Valuation of stock was done lot wise on estimate basis whereas in case of semi precious stones value varies according to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. best judgment assessment. Obviously, the estimation should not be arbitrary and based on material available on record and should be made after providing opportunity of being heard to the assessee. It should not be biased, unscientific and capricious. Learned D.R. relied upon the decisions of Hon'ble Supreme Court in the case of HM Esufali HM Abdulla 90 ITR 271 (SC) and M/s Kanchwala Gems Pvt. Ltd. Vs. JCIT 288 ITR 10 (SC). It is further argued that the Hon'ble courts had estimated income in such type of cases ranging from 100% to 25% of net profit. In some of the cases, lump sum additions were also confirmed by the Hon'ble Courts. The learned Assessing Officer more or less had estimated the income @ 25% of bogus/unverifiable purchases. He further relied upon following case laws: (a) 100% disallowance out of bogus/unverifiable purchases: 1. CIT Vs. La Medica (2001) 250 ITR 575 (Del.) 2. Sri Ganesh Rice Mills Vs. CIT (2007) 294 ITR 316 (All) 3. Khandelwal Trading Co. Vs. ACIT (1996) 55 TTJ (JP) 261. (b) 25% disallowance out of bogus/unverifiable purchases: 1. Sanjay Oil Cake Industries Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f profits are bound to be happened. A domestic market also gets affected by such changes happening outside the country and also socio economic political changes affect the probability of the trade of gems and jewellery. He assailed the lump sum additions confirmed in some of the cases by the higher courts as it is not based on any material on record. He contends to apply most reasonable 25% disallowance of bogus purchases, which has been confirmed by the Hon'ble ITAT in the case of Vijay Proteins Ltd. Vs. JCIT (supra) wherein even 25% disallowance of purchases was held justified. In case of Trident Jewellers Vs. ITO ITA No. 552/JP/2013, disallowance of 25% net profit on purchases has held the estimate being honest and fair. General written submissions of the A.Rs 6. At the outset, the learned A.Rs argued that in estimating the income after rejecting the books U/s 145(3) of the Act, the Assessing Officer does not possess any arbitrary authority to assess at any figure he likes. Although he is not bound by the strict judicial principles in making the estimate, it should be guided by rules of justice, equity and good conscience. He relied upon the decision in the case of CIT Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure is not disturbed and the CIT(A) and Tribunal applied G.P. rate of last year for making the best judgment assessment. It cannot be said that relevant material evidence has not been considered by the ITAT or any irrelevant consideration has been taken into account by the Tribunal in reducing the addition made by the Assessing Officer in this behalf. Thus, estimating the income based on the past history has the approval of the ITAT as well as higher courts. 6.3 In case of CIT Vs. Amrapali Jewellers Pvt. Ltd. 65 DTR 196 ande CIT Vs. Precious Jewels Corporation 205 Taxman 22, wherein the Assessing Officer disallowed 20% of unverifiable purchases but such addition was reduced by the Hon'ble ITAT by applying G.P. rate considering the past history and on departmental appeal no substantial questions of law was found by the Hon'ble Court. In following cases, the Hon'ble ITAT has consistently held that in cases of unverifiable purchases that the income should be estimated by applying G.P. rate considering the past history of the case. (i) DCIT vs. Gems Paradise ITA No. 700/JP/2009 dated 18/12/2009 for A.Y. 2006-07. (ii) ITO Vs. G.B. Impex ITA No. 1263/JP/2010 dated 11/02/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the course of hearing. (2) That the learned CIT(A) was not justified in sustaining the addition of Rs. 2,90,832/- on account of disallowance of 25% of total purchases of Rs. 11,63,326/- from who different sellers, treated as bogus, the purchases of which are duly entered in stock register, the sales of which were accepted as genuine. (3) That the learned CIT(A) has erred in sustaining disallowance of Rs. 32,421/- being 20% of day to day business expenses out of telephone expenses, vehicle fuel expenses, traveling expenses and office expenses." 8.1 Grounds No. 1 and 2 of the assessee's appeal are interlinked, therefore, we decide both the issues as under:- The assessee is in trading of the precious and semi precious stones. The assessee filed return on 20/10/2007 at Rs. 2,04,140/-. The assessee's on the total turnover of Rs. 52,94,174/- declared gross profit of Rs. 9,05,528/- G.P. @ 17.10%,. In immediate preceding year on sale of Rs. 39,85,826/- gross profit of Rs. 6,23,115/- and G.P. rate @ 15.63% is reported. The assessee produced stock register which on verification was found by the Assessing Officer that the stock register was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses were genuine. The party is known to the assessee who failed to establish their existence and purchase and investigations conducted by the department goes against the assessee, therefore, he rejected the book result U/s 145(3) of the Act and after following the decision in the case of Sanjay Oil Cake Industries, Vijay Protein (Supra) and Kishore Meghraj Jewellers, he disallowed 25% of unverifiable purchases of Rs. 11,63,326/- and made addition of Rs. 2,90,832/- to the income of the assessee. 8.2 Being aggrieved by the order of the learned Assessing Officer, the assessee carried the matter before the learned CIT(A), who dismissed the assessee's appeal by observing that the assessee failed to establish such purchases, summons issued U/s 131 of the Act through ward Inspector remained uncomplied as due to non existence, they could not be served on the purchasers. The learned Assessing Officer rightly applied the decision of Sanjay Oil Cake Industries and Vijay Protein in case of the assessee. The department has conducted various enquiries through search and survey which lead to conclusion that in gems and jewellery market it is a rampant practice to provide and use the accommod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rival contentions of both the parties and perused the material available on the record. As discussed in above cases, the material available on record established that in Jaipur, a rampant practice is in vogue to get and issue accommodation bills of purchases to deflate the profit. The learned Assessing Officer made disallowance @ 25% of such bogus purchases on the basis of decision in the case of Sanjay Oil Cake Industries and Vijay Protein Ltd. (supra). In our view the 25% disallowance appears to be higher side, therefore, keeping in view of the facts of the assessee's case as well as other cases as discussed above, we feel that 15% disallowance out of bogus purchases is reasonable on unverifiable purchases and will meet the ends of justice. The rejection of books of account is justified. The assessee gets relief partly. 8.7 The last ground of assessee's appeal is against disallowance of business expenses @ 20%. The learned Assessing Officer found that the assessee used telephone, mobile and vehicles for personal and non-business purposes. The expenses were not supported with proper vouchers and bills. Most of the expenses were incurred in cash in which self made vouc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of average lot wise costing. The audit report showed that inventory of stocks was valued as certified by the partner of the firm. The mean value of the stock had been taken as certified by the management. He asked to give the quantitative as well as qualitative details of stock which could not be provided by the assessee before him. Closing stock is thus valued on estimate basis as pointed out by the auditor. The learned Assessing Officer concluded that closing stock cannot be verified in absence of required detail. He further found that the assessee has shown total purchase of Rs. 3,01,67,046/- in Unit-I, Rs. 7,19,50,253/- in Unit-2 during the year under consideration. The Assessing Officer gave the details of unit wise purchase page 3 of the assessment order. He further observed that all these above parties had been covered by BCTT Wing of the department U/s 133A of the Act, it was found that these parties were indulged in providing entries and not any genuine business transaction. M/s Gaurav Exports and S.P. jewellers are the party, which was being run by Ravi Haldia Group, which also was identified as an entry operator as a result of search and seizure operation c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found non-genuine and both results were unreliable. He further relied on following case laws:- (a) M/s Indian Woolen Carpet Factory Vs. ITAT (supra) for genuineness of the purchases, (b) CIT Vs. Precision Finance Pvt. Ltd. (supra) for payment made by account payee cheque is not sacrosanct. (c) CIT Vs. Golcha Prop. Pvt. Ltd. (supra) for genuineness of the transactions. (d) CIT Vs. La Medica (supra) for sellers found non existent, the purchase price was treated as income from undisclosed sources. (e) Beena Metals Vs. CIT 240 ITR 222 (Ker) for brokers through whom the purchases were made lead to conclusion of bogus purchases. (f) Chaturbhuj Panauj AIR 1969 (SC) 255. (g) Sumati Dayal (supra). (h) C. Vasant Lal & Co. 45 ITR 206 (SC) (i) M/s Kanchwala Gems Vs. JCIT (supra) for payment by account payee cheque is not sufficient to establish the genuineness of purchase. After considering the facts and circumstances of the case, the learned Assessing Officer invoked the provisions of Section 145(3) of the Act and rejected the book result. After rejecting the book, the Assessing Officer can estimate the income U/s 144 of the Act. After considering the decision in the case of Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a suppression of production and even raw material was not received. In case of Rajendra Kumar Jain, the Hon'ble ITAT has held that past history of the case is to be taken for deciding the G.P. rate which is best guide. The learned CIT(A) also relied the decision in the case of Gotan Lime Khanij Udoyog (256 ITR 243) and finally uphold the addition of Rs. 5 lacs in place of addition made at Rs. 69,36,176/-. 9.2 Now the Revenue is in appeal before us. The learned CIT DR vehemently supported the order of the learned Assessing Officer and argued that in both the units, the assessee could not produce the parties for verification even repeated notices were given to the parties. Evidence furnished by the party as claimed before the learned CIT(A) that the assessee had filed confirmation with PAN and other details and tried to shift the onus on the Assessing Officer. However, the Assessing Officer had issued the summons which were not responded, partly returned back unserved. The assessee was asked to produce these parties by the Assessing Officer for verification, which has not been produced before him. It is also not clear from the order of the Assessing Officer that the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mal Daga & Co. (b) G.N. Gems XLII IW 10 (c) M.K. Jain & Sons. (d) Vaibhav Gems Vs. Addl. CIT & ACIT Circle-5 Vs. Vaibhav Gems. (e) Subhash Chand Nahata XLVTW 164 (JP) (f) Sambhav Gems 36 TW 254 (g) Ravi Kumar Rawat 134 TTJ 634 (JP) (h) Chordia gems XL TW 111 (JP) (i) Rajendra Kumar Jain (ITA No. 573/JP/2010) order dated 13/01/2011. (j) CIT Vs. Amrapali Jewels (P) Ltd. 65 DTR 196 (Raj) (k) CIT Vs. Nangalia Fabrics Private Limited dated of order 22/07/2013 (Guj.) Therefore, he prayed to confirm the order of the learned CIT(A). 9.4 We have heard the rival contentions of both the parties and perused the material available on the record. The learned Assessing Officer found unverifiable purchases in Unit-1 at Rs. 69,71,080/- wherein 10 parties were involved. The department had gathered the information through survey and search seizure in above parties and they categorically admitted that they have provided entries and not doing any purchase and sale of gems and jewellery. Even then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esses given by the assessee himself either came back unserved and returned unserved by postal authorities or if served none of them presented before the A.O. It is the prime duty of an assessee to produce the sellers from whom he has purchased the goods in view of the fact that notices came back unserved. Merely because the parties are assessed to income tax and the transactions being by account payee cheques will not prove the genuineness of the transactions in view of the fact that in case of sellers as observed by the A.O. some of the parties denied the sale and stated that they did not sell the goods and merely issued bills without effecting actual delivery. Once this fact has come on record that the notice could not be served for one or the other reasons and the parties did not turn up then in our considered view the onus and burden shifts on the assessee which has to be discharged appropriately by the assessee and we have noticed in this case that the assessee has not been able to lead any evidence in furtherance of filing of confirmatory letters or merely showing that the amounts are being paid by account payee cheques. If the assessee was able to file confirmatory letters f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d this addition from Rs. 17,38,813/- to Rs. 9,70,496/-. The assessee challenged the order of the learned CIT(A) before the ITAT, Jaipur Bench, jaipur, which was decided by the Coordinate Bench on 16/7/2010 by observing as under:- "7. We have also noticed that the assessee has failed to produce the quantitative details and stock register and the assessee was also not able to get the closing stock verified and hence the books of account have correctly been rejected. Considering the discussion as contained in earlier paras, we feel that the addition as confirmed by the learned CIT(A) is proper as the amounts were still payable to the trade creditors from whom purchases could not be established and such amount exceeds the addition confirmed by the learned CIT(A). Accordingly, we uphold the order of the learned CIT(A) and the appeal of the assessee is dismissed." The assessee filed M.A. in this case. There was a difference of opinion between the Hon'ble Members, therefore, the assessee's M.A. was referred to Hon'ble Third Member. The Hon'ble Third Member had allowed the assessee's M.A. and recalled the order of the ITAT Jaipur bench dated 16/7/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 38,81,984/-. Sl. No. Name of the parties from whom purchases made Purchase amount 1. Ruby Impex 2,36,004/- 2. Sevorite Exports 5,42,907/- 3. D.J. Impex (830711 + 201750) 2,34,414 4. Rahul Exports 1,84,080/- 5. Shree Laxmi Enterprises 4,70,642/- 6. N.V. International 1,06,000/- 7. Annu Enterprises 2,17,440/- 8. S.P. Jewellersa 4,11,075/- 9. G.R. Enterprises 2,55,063/- 10. Bhawana Gems 1,52,680/- 11. Muskan Gems 99,500/- 12. Shri Ceations 3,34,220/- 13. Nisha Exports 75,359/- 14. Jaipur International 5,62,600/- Total 38,81984 It is further observed that the department had conducted survey/search particularly in case of Haldia Group wherein during the course of search, certain incriminating documents relating to purchases of goods were found on confronting with the assessee Shri Ravi Haldia, admitted that to regularize the purchases made in cash, he had obtained bogus bills from different parties. He mentioned that payments made to all these parties were shown through cheques but immediately all amounts were received back in cash. The list of parties, during the course of search, who were engaged in supplying bills with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further observed that as per part-D of Chapter 4 of Income Tax Act, these purchases are not allowable from Sections 28 to 44DB of the Act. The assessee had knowledge about these parties and onus on him to prove that purchases were genuine and allowable U/s 37 of the IT Act. He further relied upon following case laws:- (a) M/s Indian Woolen Carpet Factory Vs. ITAT (supra) for genuineness of the purchases. (b) CIT Vs. Precision Finance Pvt. Ltd. (supra) for payment made by account payee cheque is not sacrosanct. (c) CIT Vs. Golcha Prop. Pvt. Ltd. (supra) for genuineness of the transactions. (d) CIT Vs. La Medica (supra) for sellers found nonexistent, the purchase price was treated as income from undisclosed sources. (e) Beena Metals Vs. CIT (supra) for brokers through whom the purchases were made lead to conclusion of bogus purchases. (f) Chaturbhuj Panauj(supra). (g) Sumati Dayal (supra). (h) C. Vasant Lal & Co. (supra). (i) M/s Kanchwala Gems Vs. JCIT (supra) for payment by account payee cheque is not suf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on pages 11 to 13 of its order and confirmed the rejection of book U/s 145(3) of the Act. Thereafter he considered the various factors of business to estimate the income such as nature of business, turnover, past history, comparable cases and quantum of unverifiable purchases involved. The learned Assessing Officer undisputedly accepted the turnover at Rs. 1,32,56,929/- except unverifiable purchases of Rs. 38,81,984/-. There are no details available about the actual cost of those unverifiable purchases. He also found that the said purchases are relating to buying of different quantities of various items such as Ruby Cut Mix, Yellow Sapphire Mix, Garnet Mix Cut etc. and these items were shown in the purchased bills as well as in sales bills. The learned Assessing Officer has not doubted the sales made by the assessee. Therefore, these facts indicate that the assessee must have made the purchases of those items from some parties other than those 14 parties from whom purchases are shown in assessee's books of account. In these circumstances, the possibility of the assessee making those purchases in cash (thereby violating the provisions of Section 40A(3) of the Act wherein disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the inventory submitted to him are enclosed before the CIT(A) during the appellate proceedings. Therefore, it has been argued that complete quantitative details are available and the list of opening and closing stock is furnished, the rejection of books of account U/s 145(3) of the Act is not justified. For unverifiable purchases in case of 14 parties, the complete details of these parties were submitted during the course of assessment proceedings. He drawn our attention on page Nos. 17 to 68 of the paper book and claimed that burden of proof in case of unverifiable purchases is not the same as burden of proof required U/s 68 of the Act. There is no law requiring the assessee to produce the parties from whom it had made purchases. If these parties are not appearing before the Assessing Officer in response to summons U/s 131, the Assessing Officer has other power under the Act to enforce the attendance. Why the department has not imposed the penalty on them. All these parties are assessed to tax at Jaipur and therefore, how the assessment had been completed on alleged non-existing persons. All these facts show that shelter has been given on the alleged parties. This proves tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , M/s Sanjay Oil Cake Industries Vs. CIT (supra). He also relied on the following case laws. (i) CIT Vs. Shri Sindhuja Foods (P) Ltd. (supra) (ii) CIT Vs. Amarpali Jewels (P) Ltd. (supra) (iii) CIT Vs. Precious Jewels Corporation (supra). (iv) Diagnostics Vs. CIT & Anr. 56 DTR 317 (Cal) (HC). (v) Shankar Export Vs. ACIT 42 DTR 441 (Jpr) (2010). (vi) Malani Ramjivan Jagannath Vs. ACIT 207 CTR 19 (Raj). (vii) CIT Vs. Gotan Lime Khaniz Udyog (supra). (viii) CIT Vs. Leader Valves P Ltd. 285 ITR 0435 (P&H) (2006). Thus, he prayed to delete the addition confirmed by the learned CIT(A). 10.5 At the outset, the learned CIT D.R. reiterated the arguments made in introductory paragraphs of this order and submitted that as per audit report, the auditor had not given details of stock, which will also not submitted before the Assessing Officer as claimed by the assessee before the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porter. The Assessing Officer cannot be precluded from enquiring into the genuineness of the unverifiable purchases. Whereabouts of the parties from whom the purchases were made are known to the assessee. He should have produced these parties before the Assessing Officer for verification. Therefore, we have considered view that 15% N.P. on unverifiable purchases is reasonable in this case. Accordingly, the assessee's appeal is partly allowed. 10.7 In the result the assessee's appeal is partly allowed. (4) G.B. Impex I.T.A. No. 241/JP/2012 A.Y. 2007-08 11. This is an assessee's appeal against the order dated 12/12/2011 passed by the learned CIT(A)-II, Jaipur for A.Y. 2008-09. The effective grounds of appeal are as under:- "1. The learned CIT(A) has erred on facts and in law in confirming the action of the A.O. in disallowing 25% of the alleged unverifiable purchases of Rs. 3,28,40,664/- from four parties resulting into addition of Rs. 82,10,166/-. 1.1 The learned CIT(A) has erred on facts and in law in confirming the said disallowance ignoring the consistent view of the Hon'ble ITAT Jaipur Bench in applying a reasonable G.P. rate considering pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the knowledge of the AR of the assessee and asked to produce these parties for cross examination but the A.R. of the assessee filed only confirmation of accounts of these parties. Accordingly, the learned Assessing Officer gave show cause notice as to why on the basis of unverifiable purchases, their books of account should not be rejected U/s 145(3) of the Act and also why not 25% disallowance should be made on these unverifiable purchases. It has been submitted before the Assessing Officer that the assessee already submitted copy of purchase bills of all the parties containing complete address, telephone number, RST/CST number and PAN and payments to these parties were made through account payee cheques. The goods so purchased by the assessee had been exported. He also asked that onus to prove the purchase genuine is different than onus required to prove the cash credit U/s 68 of the Act. Accordingly, the assessee claimed that he discharged his onus to prove these purchases as genuine. The assessee further asked to provide material available with the department against the assessee so that reply can be filed on it. The goods purchased from these parties were exported, which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but the assessee expressed its inability to produce them. He further relied on the decision of Hon'ble ITAT Jaipur Bench in the case of Deepak Dalela where the Hon'ble Bench had confirmed the addition made by the Assessing Officer. After considering the ITAT Jaipur Bench's decision in the case of Shanti Kumar Chordia Vs. ACIT (2010) 128 TTJ (JP) 708, which has been recalled by the Hon'ble ITAT. The learned CIT again relied upon the case laws referred by the Assessing Officer particular decision in the case of Kanchwala Gems where Hon'ble ITAT had confirmed the G.P. rate of 30% whereas the Assessing Officer applied 40% G.P. rate. He further relied on the decision in the case of CIT Vs. Sindhuja Foods (P) Ltd. (supra), ACIT Vs. Amar Mining Co. (supra), Mittal Belting and Machinery Stores Vs. CIT (253 ITR 341), Balaji textiles Industries Pvt. Ltd. Vs. ITO 49 ITD 177 (Mum Trib), ITO Vs. Sunsteel (92 TTJ 1126) (A.bad Trib), Uniword Telecom Ltd. Vs. Addl.CIT (45 DTR 433) and confirmed the addition of Rs. 82,10,166/-. 11.3 Now the assessee is in appeal before us. The learned A.R. Shri P.C. Parwal for the assessee submitted that the assessee is engaged in the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case. It is further submitted that similar additions were made in A.Y. 2006-07 where also disallowance @ 25% was made but the Hon'ble ITAT had reduced this addition at 9.5% on declared turnover of Rs. 64,57,290/- as G.P. rate @ 8.54% declared by the assessee. That was the first year of the assessee. In the present case, the G.P. rate is 5.42% on turnover of Rs. 19,71,89,378/-, which is better than the G.P. @ 4.38% on turnover of Rs. 17,40,37,587/- in the immediate preceding year. He further distinguished case law relied by the Assessing Officer i.e. decisions in the cases of Shanti Kumar Chordia, Uniword Telecom Ltd. Vs. Addl. CIT, Kanchwala Gems (supra), Shri Sindhuja Foods Pvt. Ltd. (supra). He also placed reliance on the following case laws: (i) CIT Vs. Amarpali Jewels (P) Ltd. (supra) (ii) CIT Vs. Precious Jewels Corporation (supra). (iii) Diagnostics Vs. CIT & Anr. 56 DTR 317 (Cal) (HC). (iv) Shankar Export Vs. ACIT (supra) (v) CIT Vs. Leader Valves P Ltd. (supra). Therefore, he prayed to delete the addition confirmed by the learned CIT(A). 11.4 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unverifiable purchases. The learned Assessing Officer sent notices to these parties which were returned back unserved with remark "party is not existent". The assessee was also produced these parties for verification whatever evidence were produced by the assessee are not sufficient to prove the purchase genuine even payments through account payee cheques is not sacrosanct and had not discharged onus on it. During the course of investigation conducted by the department, these parties were figured in the list of entry provides and they had admitted that they only provided bills no any real business with delivery of goods. The learned Assessing Officer applied Hon'ble Gujarat High court decision in the case of Sanjay Oil Cake Industries (supra) and ITAT Ahmadabad Bench decision in the case of Vijay Proteins wherein 25% disallowance held reasonable on unverifiable purchases. The A.R. of the assessee tried to distinguish this case with facts and circumstances and argued to apply past history of the case. The onus is on the assessee to prove these purchases as genuine and sufficient purchases from these parties have been claimed to be made by him. The assessee also could not be abl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic chip fixed at the back of the credit card and then tally with the basic data provided at the main Visa/Master/Amex/JCB/Diners/Mestro Bank. In case, it tallies in total, it generates "Approval Code" if it does not tally at any step, it declines the transaction. At the end of the day, batch total of all the transactions on the specific card swap machine is taken out. This alongwith signed credit slip is sent to bank for collection. The bank after deducting certain amount named as service fees/discount/merchant discount rate/commission makes the payment to the assessee. During the year the amount commission retained by different banks in respect of credit card slips sent to the banks for collection was as under:- Name of the bank Amount American Express Bank 10,32,045/- Citi Bank 2,33,554.18 Bank of Baroda 10,45,320.98 Standard & Chartered Bank 1,82,791.08 Total 24,93,717.24 The Assessing Officer further observed that the nature of payment is commission and liable to be deducted TDS U/s 40(a)(ia) of the Act. He gave reasonable opportunity of being heard to the assessee, which was replied by it vide letter dated 29/11/2010, which has been reproduced by the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion as defined in Section 194H. The learned CIT(A) further referred CBDT circular No. 65 dated 02/09/1971 on Hundi discounted by the bank and such discount cannot be termed as interest and therefore no TDS is liable to be deducted. She further relied upon the decision of Hon'ble Kerela High Court in the case of Vodafone Essar Cellular Ltd. Vs. ACIT (2010) 235 CTR (Ker) 393 wherein TDS is liable on commission or discount paid to distributor of SIM cards and recharge coupons U/s 194H of the Act. She further relied in the case of CIT Vs. Idea Cellular Ltd. (2010) 230 CTR (Del.) 43 wherein issue was distribution commission paid to distributors is liable to deduction for TDS. Further she relied on the case of CIT Vs. Singapore Airlines Ltd. & Ors. (supra). The assessee case laws i.e. CIT Vs. Cargil Global Trading P. Ltd. (2011) 335 ITR 94 (Delhi) and ABD International Inc. (2011) 55 DTR (AAR) 393 are not found squarely applicable in assessee's case. Finally she held as under:- 1. Full legal and equitable title on the payment to be received against sales made by the assessee remains with him and at no stage passes to the bank. 2. The bank i.e. the agent cannot give any discou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard. This is not a commission payment but a fees deducted by the bank. In this situation, the bank is principal, the bank is not advised to sell the goods to the customer and getting the commission on this sale. Therefore, Section 194H is not applicable in case of goods sold through the credit cards. He further relied in case of (i) DCIT Vs. M/s Vah Magna retain (P) Ltd. ITA No. 905 /Hyd/2011 and (ii) ITO Vs. Jet Airways (2013) 28 ITR (Trib) 582 (Mumbai). Therefore, he prayed to delete the addition. 12.5 At the outset, the learned CIT DR supported the order of the learned CIT(A). 12.6 We have heard the rival contentions of both the parties and perused the material available on the record. The assessee is selling the goods through credit cards which is swapped in the machine provided by the bank, thereafter it is cleared after verification of the data of the credit card by the bank, who provided the card after charging of certain fees for making payment to the assessee. It goes directly in the account of the assessee's bank after reducing the charges. Therefore, there is no control on mechanical transfer of money from one account to another account. The assessee knows that he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it card the goods were sold and on presentation of bill as stated above the bank makes the payment. Therefore, in our considered view, provisions of section 194H are not attracted in this type of transaction. Similar views have been held by the various ITATs on credit cards payments. Therefore, we delete the addition confirmed by the learned CIT(A). 12.7 In the result, the assessee's appeal is allowed. 12.8 The cross appeal filed by the Revenue is against deleting the addition of Rs. 47,72,031/- @ 25% on unverifiable purchase of Rs. 1,90,88,142/-. The learned Assessing Officer observed that the assessee has declared gross profit of Rs. 6,59,45,825/- on sale of Rs. 18,82,88,100/- giving a G.P. rate of 35.02% as against the G.P. rate of 32.99% declared on sale of Rs. 17,54,76,309/- in previous assessment year. The assessee has shown following purchases. Sl. No. Name of the Party(s) Amount 1 Annu Exports Rs. 6,70,100/- 2. Century Gems Rs. 43,38,151/- 3. Millenium Enterprises Rs. 4,05,050/- 4. M/s Mohan and Company Rs. 31,65,015/- 5. M/s Clarity Gold Pvt. Ltd. Rs. 99,98,298/- 6. Ashu Gems Rs. 5,11,510/- Total Rs. 1,90,88,124/- The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jaipur has already given a finding on similar facts in the case of the assessee in A.Y. 2005-06. Since, there is no divergence of facts on this issue during this year, from the previous year adjudicated upon by the Hon'ble ITAT in the case of the assessee, the decision of the A.O. to reject the books of account and invoke the provisions of S. 145(3) is upheld. 4.4 The subsequent estimation of income is required to be made by taking into consideration the past history of the assessee as per the observations of the Hon'ble ITAT Jaipur Bench. The assessee has declared a g.p. rate of 35.02% as compared to a g.p. rate of 32.02% in the previous assessment year on an increased turnover of Rs. 18,82,88,100/- as compared to turnover of Rs. 17,54,76,039/- in previous assessment year, the A.O. has not brought on record any new facts or evidence to controvert the findings of the ITAT in the case of the assessee on similar facts in A.Y. 2005-06. The impugned addition of Rs. 47,72,031/- is directed to be deleted." 12.10 Now the Revenue is in appeal before us. 12.11 The learned CIT DR vehemently supported the order of the Assessing Officer as the learned Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net profit should be applied for deterrent effect, thus we disallowed 15% as net profit on the unverifiable purchases. 12.14 In the result, the Revenue's appeal is partly allowed. (6) Shri Hemant Shrivastava (ITA No. 891/JP/2011 for A.Y. 2007-08 13. This is an appeal filed by the assessee against the order dated 11/08/2011 of the learned CIT(A)-II, Jaipur for A.Y. 2007-08. The effective grounds of appeal are as under:- "1. In the facts and circumstances of the case and in law the learned CIT(A) has erred in confirming the action of the learned A.O. in not providing opportunity of cross examination of the persons whose statements have been used against the assessee. The action of learned CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire assessment order which is passed in gross violation of principles of natural justice. 2. In the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned A.O. in holding the purchases from the following parties as bogus:- S.No. Name of parties from whom purchases made Amount (in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 812/- giving G.P. rate of 3.93%. In immediate preceding year, the total sales was Rs. 20,26,817/- and gross profit at Rs. 3,30,553/- G.P. rate @ 16.31%. The Assessing Officer gave reasonable opportunity of being heard on decline of G.P., which was submitted by the assessee. The learned Assessing Officer asked to furnish the confirmation of purchases in following cases, (i) M/s Anshu Gems, (ii) M/s Vijay Gems, (iii) M/s Savorite Exports, (iv) M/s Pooja Jewellers, (v) M/s Subh Laxmi gems & (vi) M/s Aashta Enterprises. Simultaneously, letters U/s 133(6) of the Act had also issued to parties from serial nos. 1 to 6 and also to M/s Jodhpur Gems. The letters were returned back by the postal authority with comment that no such person is residing at given address in case of Anshu gems, Vijay gems, Savorite Exports and Pooja Jewellers. In case of Jodhpur Gems and Subh Laxmi Gems, no replies were received by him. The learned Assessing Officer further observed that during the course of search, Shri Ravi Haldia, who stated that these parties were issuing bogus bills and no goods are supplied by these parties. The learned Assessing Officer again asked to produce these parties to the assessee bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried the matter before the learned CIT(A), who had confirmed the addition by observing that the assessee had not produced M/s Anshu Gems, M/s Vijay Gems, M/s Savorite Exports, M/s Jodhpur Gems and M/s Subh Laxmi gems before the Assessing Officer for verification from whom total unverifiable purchases were at Rs. 68,99,194/-. He further stated that during the course of survey and search by the department, it was found that these parties are not in real business but providing accommodation bills without any delivery of goods. They received cheque and after withdrawing the cash they deduct commission varying between .2% to .25%. He further supported the findings given by the Assessing Officer. He further held that it is well settled law that as per rules of evidence had been applied to income tax proceeding and conclusive proof is also not necessary to arrive at any conclusion or to establish a fact. He further relied upon the decision of the Hon'ble ITAT, Jaipur Bench in the case of Deepak Dalela Vs. ITO 50 DTR 502 wherein Hon'ble ITAT held that "Looking to the circumstantial evidence, the A.O. held that purchases from few parties were not genuine and such purchases were made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, rejection of book result is justified and also net profit should be estimated on the basis of past history of the case. In case of Swarnaganga Jewellers Vs. ACIT ITA No. 833/JP/2011, the Hon'ble ITAT had followed the decision in the case of Amrapali Jewellers Pvt. Ltd. In following cases, the Hon'ble ITAT disallowed a suitable percentage of net profit on the basis of past history. In case of P.R. Gems Vs. ITO in ITA No. 514/JP/2011 and M/s Amrapali Jewellers (supra). It is further argued that G.P. rate declined had been explained before the Assessing Officer, which was due to increase in the sale, substantially which was due to change of strategy adopted by the assessee. Therefore, he prayed to delete the addition. 13.5 At the outset, the learned CIT D.R. vehemently reiterated all the arguments made for all the cases of unverifiable purchases i.e. evidences were found during the survey, search proceeding and also on various enquiries that these parties have been providing accommodation bills in the gems and jewellery market in Jaipur to reduce the profitability. It is rampant practice in Jaipur market to take accommodation bill by incurring nominal expenses on it. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirming the Telephone Expenses of Rs. 18,687/-. 3.The assessee craves to amend, alter and modify any of the grounds of appeal. 4.The appropriate cost be awarded to the assessee." 14.1 Ground No. 1 of both the appeals are against restricting and confirming the addition as against the Assessing Officer made addition of Rs. 12,48,080/- @ 25% on unverifiable purchases. The learned Assessing Officer observed that the assessee is in the business of Gems stones as manufacturer and wholesaler. During the year under consideration, the assessee had shown gross profit of Rs. 7,49,320/- on total sale of Rs. 34,18,548/- giving G.P. @ 21.91%. The assessee produced stock register during the assessment proceeding but was maintained on the basis of quantity not on the quality. The learned Assessing Officer observed that in gems and jewellery, the valuation of stock is to be made on the basis of carat, clarity, cut and colour and purity of metal is always have a great importance in valuing the closing stock. The learned Assessing Officer concluded that it is undisputed fact that the assessee has not maintained details of stock. In absence of details of stock, value of closing stock was based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26/11/2009 and 14/12/2009 respectively, which has been reproduced by the Assessing Officer on page No. 6 of the assessment order. After considering the both the replies of the assessee, he considered the Hon'ble Supreme Court decision in the case of Kanchwala Gems (supra), Indian Woolen Carpet Factory (supra), VISP (P) Ltd. (supra), Chuhar Mal Vs. CIT (supra), CIT Vs. Golcha Properties Pvt. Ltd. had concluded that primary onus is on the assessee to prove the genuineness of the purchases claimed. From primary facts of the purchases, the parties were in the knowledge of the assessee. It was his duty to provide the correct address or contact mode of the alleged suppliers. The investigation made by the department goes against the assessee and claim of the cheque payment to these parties was not sacrosanct. On this deficiency, found in the books of account of the assessee, he rejected the book result U/s 145(3) of the Act by relying on various decisions. When books are rejected, the Assessing Officer is to estimate the income reasonably U/s 144 of the Act on the basis of facts and circumstances of the case. Thus, after relying on the decisions in the case of Sanjay Oil Cake Industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se parties had provided only bills, no delivery of goods were made. The Assessing Officer had given sufficient opportunities to the assessee to produce these parties for verification, which has not been produced by the assessee. He only filed confirmation, PAN and TIN number, which cannot be verified in absence of suppliers. The learned Assessing Officer reasonably disallowed on account of unverifiable purchases by following the Hon'ble Gujarat High court decision in the case of Sanjay Oil Cake Industries (supra) and decision in the case of Vijay Proteins (supra), therefore, he prayed to confirm the addition made by the learned Assessing Officer and reversed the order of the learned CIT(A). 14.4 At the outset, the learned A.R. Shri P.C. Parwal for the assessee submitted that the assessee had maintained day to day books of account, which is subject to audit. These books are duly supported with bills and vouchers. The assessee has submitted the tax audit report alongiwth the complete quantitative/qualitative details of closing stock of raw material and finished goods. The same was also submitted during the course of assessment proceedings vide letter dated 14/12/2009. All the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties has been made by the assessee but he presumed that purchases has not been made from these parties but from some other parties to whom payments might have been made in cash. This is only a presumption of CIT(A). The learned CIT(A)'s finding is without any basis. The Hon'ble ITAT has taken a consistent view that where purchases are unverifiable, books of account are to be rejected but the addition cannot be made by disallowance of 25% of purchases rather appropriate G.P. rate is to be applied considering the past history of the case and other surrounding circumstances. He also gave the G.P. rate for A.Y. 2005-06, 2006-07 and 2007-08 in his submissions. It is argued that during the year under consideration, the G.P. rate was 21.91%, which is better from immediate preceding year i.e. 16.42% and comparable to G.P. rate @ 10.34% in A.Y. 2005-06. He further relied upon the decision in the case of CIT Vs. Inani Marbles Pvt. Ltd. (supra) wherein it has been held that proper rate declared and accepted in preceding year constitute a good basis for working out gross profit. He further distinguished case law relied by the Assessing Officer i.e. Kanchwala Gems (Supra), Chuhar Mal V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guish this case with facts and circumstances and argued to apply past history of the case. The onus is on the assessee to prove these purchases genuine. The assessee also could not be able be lead any evidence in furtherance of filing of confirmatory letter or merely showing that the payments were made by account payee cheques. The assessee was aware of the whereabouts of the parties and he should have produced these parties before the Assessing Officer for verification of purchases, which could not be done at the stage of assessment proceedings. It has been established that these parties were providing accommodation bills, no goods were supplied bythem. The assessee only produced confirmation, PAN and TIN number and claimed that payments were made through account payee cheques whereas in investigation, the cash has been withdrawn from the sellers account immediately after clearance of the cheques. The past history of the assessee is also not reliable. This finding is also got support from the decision of Hon'ble Rajasthan High Court in the case of Venus Arts & Gems order dated 20/8/2014 wherein it has been held that order passed by the ITAT for confirming G.P. after rejection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appeal as well as assessee's appeal are partly allowed. (8) M/s Kinu Baba Jewellery Pvt. Ltd., Jaipur (ITA No. 1053/JP/2011 and C.O. No. 13/JP/2012) for A.Y. 2008-09 (Transferee Company) 15. The cross objection filed by the assessee is not pressed at the time of hearing of the appeal, therefore, we dismiss the cross objection as not pressed. 15.1 In Revenue's appeal the learned Assessing Officer observed that the assessee deals in the business of manufacturing and trading of gold and silver jewellery studded with diamond and colour stones. During the year under consideration the assessee had shown gross profit of Rs. 76,19,995/- on total sales of Rs. 1,33,81,777/- giving G.P. rate of 56.94%but declaring loss at Rs. 20,65,885/-. The learned Assessing Officer observed that the assessee was maintained closing stock on quantity wise not quality wise and closing stock has been maintained on estimate basis. As mentioned above, there were two unverifiable parties in this case for non-genuine purchases of Rs. 15,50,097/-, which assessee failed to produce. One of the party involved in this racket namely M/s Ashish Jewellers was covered U/s 133A of the Act by the BCTT authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the material available on the record and above discussion made in this order, it is evident that during the course of investigation made by the department, number of parties were not found in existence on given addresses. No goods, cash, even books of account were found during the course of survey at the business premises of Ashish Jewellers by BCTT wing of the IT Department. The summons/notices were issued by the Assessing Officer, which were returned unserved. Even the assessee could not produce these parties for verification before the Assessing Officer, therefore, it is undisputed fact that these parties had provided only bills, no goods were supplied by them. As discussed above, it is rampant practice in the gems and jewellery trading to arrange the accommodation bills to reduce the profit which were taken by the assessee from the aforesaid two parties The learned AR had disallowed 25% from the unverifiable purchases which have been deleted by the learned CIT(A) on the basis of G.P. but fact is that the transactions made with two parties are unverifiable. If these purchases reduced from the total purchases of the assessee, the profit of the assessee automatically increased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of money earned over a period of time. There was reserved and surplus credited at Rs. 1,81,04,041/- on 31/3/2008 in transferee company, which represents profit earned during the year. This surplus was Nil as on 31/3/2007. The learned Assessing Officer recalculated the per share value after considering the accumulated profit as on 31/3/2008 and number of shares held by the transferee company. He found the fair market value of the share allotted at Rs. 64,26,100/- as against Rs. 25,00,000/- shown by the assessee. The difference of Rs. 39,26,100/- was assessed as short term capital gain on account slump sale. 15.7 Being aggrieved by the order of the learned Assessing Officer , the assessee carried the matter before the learned CIT(A), who had confirmed only addition of Rs. 29,000/- and deleting the addition of Rs. 39,26,100/- by observing that the assessee company received 250000 shares @ Rs. 10 per share in lieu of the transfer on 21/8/2007 of running business. The balance of Rs. 1029.49 lacs was converted into interest free loan. Subsequently, 240000 shares were allotted on 30/11/2007 and 10000 on 20/2/2008 to appellant. Excess stock found in case of transferee company as on 3/3/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or not or having any income from the trading of gems and jewellery, which has not been excluded or explained in rule itself. Therefore, this issue is set aside to the Assessing Officer and he is directed to compute fair market value of unquoted share as per the Rule 11U(a) of the I.T. Rules on the valuation date. 15.11 In the result, the appeal of the revenue is partly allowed. (9) M/s Lakhi Gems ITA No. 831/JP/2011 and ITA No.892/JP/2011 for A.Y. 2003-04 16. Both appeals i.e. ITA No. 831/JP/2011 filed by the assessee and cross appeal i.e. ITA No. 892/JP/2011 by the department are against the order dated 03/08/2011 passed by the learned CIT(A)-I, Jaipur for the A.Y. 2003-04. 16.1 The ground No. 1 of the assessee's appeal is against confirming the trading addition of Rs. 8,07,643/- by applying G.P. rate of 20% as against G.P. rate of 14.75% declared by the assessee. Whereas the Revenue's appeal is against deleting the addition from Rs. 28,01,897/- to Rs. 8,07,643/- and reducing G.P. rate from 25% to 20% by the learned CIT(A). The learned Assessing Officer observed that the assessee is in the business of trading and export of precious and semi precious stones. During th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agati Gems and M/s pooja Exports, enquiry was conducted by the department and found these parties were merely providing accommodation entries to other persons in the garb of sale/purchase. The Assessing Officer gave reasonable opportunity of being heard to the assessee on unverifiable purchases from above said parties. The Assessing Officer also issued summon to all 15 parties for appearing with books of account on 02/12/2010 but summons were returned unserved in all cases except M/s Nidhi Gems and M/s Manviya Exports where no compliance was made. The assessee was also requested to produce these parties for verification but it failed to produce the same. The Assessing Officer concluded that no stock register is maintained by the assessee and further the assessee has accepted that no inventory of opening and closing stock were kept. Accordingly, he found closing stock unverifiable. When number of defects had been found by the Assessing Officer, he gave show cause notice as to why, book result should not be rejected U/s 145(3) of the Act and also relied various decisions particularly decision in the case of M/s Kanchwala Gems (supra), Indian Woolen Carpet Factory (supra), Chuharmal V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g complete day to day books of account, which is subject to audit. These books of accounts are supported by bills and vouchers. The observation of Assessing Officer that closing stock of assessee is on estimate basis and not subject to verification is incorrect inasmuch as the year at the year end and stock is physically verified and valued at lower of cost or market price. The assessee is engaged in 100% export and there are no local sales. Export sales are also subject to control of custom authorities and Reserve Bank of India. The Assessing Officer has accepted the sales. There cannot be sale without purchase. In these circumstances, even if some of the purchases as per the A.O. are unverifiable, there cannot be a disallowance of 25% of such purchases. It is further argued that burden of proof on the assessee is not the same as the burden of proof required U/s 68 of the Act. There is no law requiring the assessee to produce the parties from whom it has made purchases. If these purchases were not responded in response to notice U/s 131 of the Act, the Assessing Officer has another power under the Income Tax Act to enforce the attendance. All these parties are assessed to tax at J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ways getting accommodation bills. Therefore, addition made by the Assessing Officer should be confirmed. He also reiterated the facts mentioned by the Assessing Officer in assessment order. 16.6 We have heard the rival contentions of both the parties and perused the material available on the record. The Income Tax Department had investigated through survey and search for unverifiable purchases. Number of parties involved, who provide the accommodation bills and came to conclusion that on the basis of evidences collected and statement recorded during the course of search/survey that the parties not existed on the given addresses and they do not have any goods to supply. They are only providing accommodation entries to reduce the profitability of the recipients of the bills. It is rampant practice in Jaipur gems and jewellery business as number of parties were found indulged in accommodation entry business as mentioned above in introduction paras of this order. The assessee neither asked to cross examine the parties before the lower authorities. Further the learned A.R. alleged that department had given shelter to these parties, are baseless and found beyond the imagination. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... precluded from enquiring into the purchases, which were made by the assessee from the said sellers. The Hon'ble High Court in case of unverifiable purchases has held that, it is purely a finding of fact by the two appellate authorities as to what should be a reasonable G.P. rate after rejection of books of account and various infirmities noticed by the lower authorities and in their view no question of law much less substantial question of law can be said to emerge out of the order of the Tribunal. Therefore, we do not find any reason to intervene in the order of the lower authorities. This ground of appeal is dismissed. 16.9 In the result, appeal of the assessee is dismissed and revenue's appeal is allowed. (10) Shri Kumud Chand Jain HUF (ITA No. 52/JP/2011 for A.Y. 2008-09 17. This is an appeal filed by the assessee against the order dated 24/11/2011 passed by the learned CIT(A)-I, Jaipur for A.Y. 2008-09. The sole ground of appeal is against confirming the addition of Rs. 7,05,215/- by estimating the commission income of the assessee at Rs. 8,40,338/-. The assessee filed return on 23/9/2008 at Rs. 1,53,813/- in the status of HUF. The assessee HUF was engaged in issuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were shown through cheque but immediately amount was received back in cash. In A.Y. 2007-08, the learned Assessing Officer assessed the assessee's income @ .5% at Rs. 8,34,488/- on total bogus bills of Rs. 16,68,97,578/-. The learned Assessing Officer in the year under consideration has also calculated income @ .5% on total bogus bills of Rs. 16,80,47,697/- and addition under the head "other income" at Rs. 24,98,119/- was made. 17.1 Being aggrieved by the order of the learned Assessing Officer, the assessee carried the matter before the learned CIT(A), who had confirmed the addition of Rs. 7,05,215/- on account of undisclosed commission income but deleted the addition of Rs. 24,98,119/- on account of addition made under the head "other income". 17.2 Now the assessee is in appeal before us. 17.3 Learned A.R. Shri P.C. Parwal for the assessee argued that only issue in the present appeal whether the Assessing Officer was justified in assessing the business income by applying net commission rate of .5% on sale bills issued by the assessee. The Assessing Officer himself admitted that persons issuing the bills in this trade charged commission @ .2% to .25% only, in some cases, hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pportunity to the assessee during the appellate proceeding why the assessee charged lesser commission compared to others in the line of accommodation entry. There was no submission with evidence. In past in A.Y. 2007-08, the learned Assessing Officer computed the assessee's income @ .5% on bogus bills supplied. There is no evidence that the assessee has challenged the addition made in A.Y. 2007-08. The case laws relied by the assessee is not applicable as there was a survey operation on entry provider, who had admitted during the course of survey proceedings that there was a further expenses to be incurred for providing the accommodation of bills. No such admission had been made by the assessee before the lower authorities. Need not to mention here that the assessee has provided accommodation entry in the year under consideration more than Rs. 16 crores and also in preceding year more than Rs. 16 crores, it means more than 32 crores income had been concealed through these accommodation entries by the recipient of these accommodation bills. Therefore, we confirm the order of the learned CIT(A). 17.6 In the result, assessee's appeal is dismissed. (11) Shri Ravi Sancheti (IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to earn the profit. The appellant had accepted the booking of shops, which were shown as a sundry creditors in the books of account of M/s Inter Continental Gems. He has used the fund from one business to another. The assessee's business was trade and adventure in nature. Accordingly, he held that gross profit of Rs. 28,09,602/- is an income from business and profession. 18.1 Being aggrieved by the order of the learned Assessing Officer, the assessee carried the matter before the learned CIT(A), who had allowed the appeal by following the decision in assessee's own case for A.Y. 2007-08 in ITA No. 939/JP/2010 order dated 24/6/2011 and allowed the appeal in favour of the assessee. 18.2 Now the Revenue is in appeal before us. Learned D.R. vehemently supported the order of the Assessing Officer and it was argued that the facts of the case shows that the assessee was constructing systematically commercial complex and motive behind the construction was to earn profit, which has been discussed by the Assessing Officer in length in his assessment order. 18.3 At the outset, the learned A.R. Shri Manish Agarwal for the assessee relied upon the decision of the Hon'ble ITAT, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal. 18.5 The second ground of appeal is against deleting the addition of Rs. 32,00,000/- made U/s 69B on account of "on money" interest earned on it. The Assessing Officer observed that there was a survey U/s 133A of the Act on 10/9/2008. Statement of the assessee was recorded during the course of survey. In answer to question No. 27, it has been admitted Rs. 32,00,000/- had been received "on money" on sale of shops in F.Y. 2007-08 and total receipts of Rs. 72 lacs including "on money" . He admitted that he will pay the tax on "on money" and surrendered for taxation. He further admitted that this disclosure is besides disclosure made at Rs. 78 lacs for A.Y. 2006-07 on account of "on money" and clarified that "on money" received in F.Y. 2006-07 at Rs. 78 lacs and in F.Y. 2007-08 at Rs. 32 lacs, which has been advanced in marked. During the assessment proceedings, the assessee retracted the admission made during the course of survey, which was not supported with any evidence. After considering the assessee's reply, it was held that these surrenders were made during the course of survey. There is no retraction in formal way after date of survey. He has not only accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the Indian Evidence Act, 1872 when terms of a contract, grant or other disposition of property have been reduced to the form of a document then no evidence is permissible to be given in proof of any such term or such grant or disposition of the property except the document itself and no oral agreement contradicting/varying the terms of a document could be offered. Once the assessee contended before the A.O. during the course of assessment proceedings that he has not received on money then the A.O. should have collected evidence to hold that assessee has received on money." After respectfully following the decisions of the Coordinate Bench, we confirm the order of the learned CIT(A) on this ground of revenue's appeal. 18.10 The third ground of the Revenue's appeal is against reducing the trading addition of Rs. 4,73,814/- to Rs. 77,800/- made on account of 25% on unverifiable purchases. In this case, the total unverifiable purchase as mentioned above at Rs. 18,95,259/-. The learned Assessing Officer rejected the books result U/s 145(3) of the Act by quoting various reasons as discussed above. He reproduced statement of Shri Khushi Kumar America, who is Director of Cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted without disturbing sale of the party. Without purchase no sales could be made by the assessee. In case of Century gems, summon issued by the learned Assessing Officer was served on the assessee. Merely for the reason that the party has not complied with the summon, it cannot be held that the supplier as non-existent. He further relied various decisions in his submission and argued that case laws relied by the learned Assessing Officer are not squarely applicable in case of the assessee. Accordingly he prayed to confirm the order of the learned CIT(A). 18.14 We have heard the rival contentions of both the parties, perused the material available on the record and above discussion made in this order, it is evident that during the course of investigation made by the department, number of parties were not found in existence on given addresses. No goods, cash, even books of account were found during the course of survey at the business premises of Ashish Jewellers by BCTT wing of the IT Department. The summons/notices were issued by the Assessing Officer, which were returned unserved. Even the assessee could not produce these parties for verification before the Assessing Officer, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; The action of the learned CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by holding the above purchases as genuine. 3. In the facts and circumstances of the case, the learned CIT(A) has erred in confirming the action of the learned A.O. in rejecting the books of account of the assessee by invoking the provisions of Section 145(3) and thereafter making a trading addition of Rs. 2,37,781/-. The action of the learned CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the rejection of books and deleting the trading addition of Rs. 2,37,781/-. 4. In the facts and circumstances of the case and in law the learned CIT(A) has erred in confirming the action of the learned A.O. in making following disallowances. Particulars Disallowed (Rs.) Travelling Expenses 1,32,950/- Telephone Expenses 2,913/- Car Running, Insurance, Depreciation Expenses 1,966/- Electricity Expenses 14,205/- Total Rs. 1,52,034/- The action of the learned CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U/s 131 of the Act were also not served on it. Further summon U/s 131 of the Act were also sent through registered post, which were returned back as there were no such party there. The Assessing Officer also requested to the assessee to produce these parties to verify the purchases. The assessee replied vide letter dated 18/11/2009 and claimed that there is no control over these parties. As claimed by the assessee, he made best efforts to produce these parties before the Assessing Officer. He further requested to the Assessing Officer to enforce the attendance of these parties by using his power. He filed photo copy of the purchased bills. The payments were made through account payee cheques maintained with HSBC bank. The photo copy of the bank account was also filed to demonstrate the cheque cleared from the bank account. These purchases had been duly recorded in the books of account and also filed the copy of the stock register maintained by the assessee before him. He also filed copy of export bill and details of the export proceed realized by the assessee. After considering the assessee's reply, the learned Assessing Officer concluded that both the parties were not in exist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigation wing of the department had conducted survey on the various entry providers and all the above mentioned supplies were found to be such entries, which were providing accommodation bills without any actual business and physical delivery of goods. After receipt of the cheque, equivalent cash was given back after deducting commission varying between .20% to .25%. The Assessing Officer also issued summons U/s 131 of the Act to the alleged suppliers but these were returned back unserved by the postal department with remarks that "no such party exists at the given address". The Assessing Officer also directed the assessee to produce these parties, but the assessee expressed its inability to produce them. He further relied on the decision of Hon'ble ITAT Jaipur Bench in the case of Deepak Dalela where the Hon'ble Bench had confirmed the addition made by the Assessing Officer. After considering the ITAT Jaipur Bench's decision in the case of Shanti Kumar Chordia Vs. ACIT (2010) 128 TTJ (JP) 708, which has been recalled by the Hon'ble ITAT. The learned CIT again relied upon the case laws referred by the Assessing Officer particularly decision in the case of Kanchw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, which has not been produced by the assessee. He only filed confirmation, PAN and TIN number, which cannot be verified in absence of suppliers. The learned Assessing Officer reasonably disallowed on account of unverifiable purchases by following the Hon'ble Gujarat High court decision in the case of Sanjay Oil Cake Industries (supra) and ITAT Ahmadabad Bench decision in the case of Vijay Proteins (supra), therefore, he prayed to confirm the order of the learned CIT(A). 19.7 We have heard the rival contentions of both the parties and perused the material available on the record. The assessee has not challenged the rejection of book result as defects pointed out by the Assessing Officer are sufficient to reject the book result U/s 145(3) of the Act. The department had conducted survey and search in various cases as mentioned by the Assessing Officer as well as the learned CIT(A). On investigation, it is found that two parties were also indulged in providing accommodation bills. The sufficient opportunities have been given by the Assessing Officer to prove the genuineness of the purchases. The Assessing Officer himself issued the notices to these parties but either no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in it has been held that order passed by the ITAT for confirming G.P. after rejection of books of accounts on the basis of various discrepancies found by the Assessing Officer. The Hon'ble court's viewed, there is no question of law. Even the assessee may be 100% exporter which does not preclude the Assessing Officer from enquiring into the genuineness of the purchases. Therefore, we have considered view that 15% N.P. on unverifiable purchases is reasonable. Accordingly, the assessee's appeal is partly allowed. 19.8 Ground No. 4 of the assessee's appeal is against confirming the addition out of various expenses claimed by the assessee at Rs. 1,52,034/-. The Assessing Officer found that the assessee had claimed under the head travelling expenses at Rs. 2,65,899/-, telephone expenses at Rs. 29,132/-, car expenses at Rs. 61,537/- and electricity expenses at Rs. 14,205/-, which was not supported with evidence as well as the personal use/non-business purposes was also found. He made addition of Rs. 1,52,034/- in total. In appeal, the learned CIT(A) restricted the addition from 20% to 10% on car running expenses at Rs. 1,966/-, telephone expenses at Rs. 2,913/- and confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned A.O. in not providing opportunity of cross examination of the persons whose statements have been used against the assessee. The action of the learned CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire assessment order which is passed in gross violation of principles of natural justice. 2. In the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned A.O. in rejecting the books of accounts of the assessee by invoking the provisions of Section 145(3) and thereafter making a trading addition of Rs. 6,64,112/-. The action of the learned CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the rejection of books and deleting the trading addition of Rs. 6,64,112/-. 3. The assessee craves her right to add, amend or alter any of the grounds on or before the hearing. 20.1 Ground No. 1 of the assessee's appeal is not pressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties from her book. The finding given by the postal authorities were also challenged and asked that some of the purchaser parties had confirmed the notice given to them. These parties were registered with sales tax department. Their record can be verified from there. Payments were made through account payee cheques and all the parties were assessed to income tax and filing the income tax return regularly. He also filed confirmation from all relevant parties. The purchases as well as sales had been entered in the books of account. After considering the assessee's reply, the learned Assessing Officer observed that the assessee had not produced the aforesaid parties for verification of purchases made. In eight cases, letters had returned back. Only in three cases, letters were not returned. It is further found that all these parties were covered by the DIT Investigation, Jaipur, in which, enquiries were conducted and found that they issued bogus bills without any physical delivery. The total purchases from these parties were Rs. 26,56,451/-. The assessee was also asked to furnish the quantitative inventory of the closing stock, which has not been furnished by her. Thus,valuati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly dismissed the assessee's appeal. It is further held that the assessee had shown outstanding liability of Rs. 11,10,385/- as on 31/3/2007 in respect of these alleged suppliers, which exceeds and the addition made by the Assessing Officer. The stock of the assessee admittedly valued on estimate basis in audit report. The balances of credit had been shown subject to confirmation. The appellant had failed to prove the genuineness of the purchases made from above 11 parties. 20.4 Now the assessee is in appeal before us. The learned A.R. Shri Rajiv Sogani for the assessee has not challenged the rejection of books of account U/s 145(3) of the Act. He reiterated the arguments made before the learned CIT(A), which has been reproduced by the him at pages 4 to 6 of its order. It is argued that decision in the case of Deepak Dalela Vs. ITO cited by the learned CIT(A) has been recalled by the Hon'ble ITAT, Jaipur Bench, therefore, it does not subsist and is of no relevance. In case of Amrapali Jewels Pvt. Ltd. (supra), the Hon'ble Rajasthan High Court has held that profit estimation should be based on appropriate application of G.P. rate taking into consideration the past histor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pportunities have been given by the Assessing Officer to prove the genuineness of the purchases. The Assessing Officer himself issued the notices to these parties but either notices were not served or not returned back. The assessee could not produce these parties for verification during the course of assessment proceedings. Even the Assessing Officer provides reasonable opportunity of being heard to the assessee. The learned Assessing Officer applied Hon'ble Gujarat High court decision in the case of Sanjay Oil Cake Industries (supra) and ITAT Ahmadabad Bench decision in the case of Vijay Proteins where 25% disallowance held reasonable on unverifiable purchases. The A.R. of the assessee tried to distinguish this case with facts and circumstances and argued to apply past history of the case. The onus is on the assessee to prove these purchases genuine and sufficient purchases from these 11 parties have been claimed to be made by him. The assessee also could not be able be lead any evidence in furtherance of filing of confirmatory letter or merely showing that the payments were made by account payee cheques. The assessee was aware of the whereabouts of the parties and he should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as compared to immediately preceding year. The AO further observed that the assessee has shown closing stock valued at cost as certified by the partners. Thus the auditor has not given the required quantitative tally. The same had not been filed during the course of assessment proceedings. Therefore, it is an undisputed fact that the assessee is not maintaining any details of stock. The assessee had declared the closing stock of Rs. 1,11,77,912/-. In audit report, the method of valuation of closing stock had been shown 'At cost' but in column 28 of the audit report, there was no details of quantitative tally of the items manufactured or traded. During the course of assessment proceedings, the assessee had not submitted the quantitative and qualitative details of the closing stock. The AO concluded that the closing stock had been shown by the assessee on estimate basis which is not subject to verification. He further found that the assessee has shown total purchases of Rs. 82,29,768/- during the year under consideration. On examination of the purchase details, the AO found that the assessee has shown purchases from the following parties. Sl.No. Name Amount 1. M/s. Uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vations rejected the book result of the assessee u/s 145(3) of the Act which has not been pressed by the assessee. When the book results were rejected u/s 145(3) of the Act, the AO has assessed the income of the assessee u/s 144 of the Act. In this case, the total unverifiable purchases of Rs. 16,17,011/- was detected by the AO and he applied the decision of Hon'ble Gujarat High Court in the case of Sanjay Oilcake Industries v/s CIT (2008) 10 DTR 153 and ITAT Ahemdabad decision in the case of Vijay Proteins Ltd vs ACIT, 58ITD 428 and estimated the income @ 25% on unverifiable purchases of the assessee at Rs. 4,04,253/-. 21.4 Being aggrieved by the order of the AO, the assessee carried the matter before the ld. CIT(A) who allowed the appeal partially by observing that ITAT, Jaipur Bench has consistently held that where the purchases were made by the assessee from parties that were covered under the survey operations conducted by the BCTT Wing of the Department, the genuineness of purchases was unverifiable and this was not a serious defect in computing the income of the assessee and was a legitimate ground for rejecting the books of accounts of the assessee u/s 145(3)of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not made any effort to compare the inventory content price with the price charged by other suppliers. The AO has not conducted any enquiry from the Sales Tax Department to verify the existence of the suppliers. The onus in relation to purchases is not as is casted on assessee u/s 68 of the Act. The bank statements of the alleged suppliers were available to the AO. The AR submitted that without having any material or evidence in possession, the AO has not only doubted the all plausible evidence filed in the shape of confirmation, PAN, TIN etc but also held the suppliers non-existent. The AO had also not brought on record that bills of purchases were inflated by 25% from these parties. The AR submitted that the ld. CIT(A) also applied the g.p. rate of 8.3% without any basis on mere assumption and presumption. He further relied on the case of CIT vs Inani Marbles Pvt. Ltd. 316 ITR 125 (Raj.) and requested to delete the addition confirmed by the ld. CIT(A). 21.7 The ld. DR vehemently supported the order of the AO and argued that in past the assessee's g.p. rate is doctored as unverifiable purchases were found in A.Y. 2005-06 in the case of the assessee. The AO had asked th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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