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Income Tax Officer Ward-1 (1) , Jaipur Versus M/s Lakhi Gems

Reopening of assessment - assessee has inflated the purchases by accepting bogus bills from the market - Held that:- In this case, the order U/s 143(1) was passed. There was a reason to believe that the assessee has inflated the purchases by accepting bogus bills from the market on which this case was reopened and quantified additions were made by the Assessing Officer after verification as the Hon'ble Supreme Court in various cases has held that reason to believe does not have certainty that As .....

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confirmed by the ld CIT(A), therefore, we dismiss this ground of appeal. - Decided against assessee.

Rejection of books of accounts - Held that:- The assessee raised this ground before us. On verification of form No. 35, there was no specific ground on rejection of books U/s 145(3) of the Act. Further the Hon'ble Rajasthan High Court as well as the Coordinate Bench of the ITAT, Jaipur in various cases of gems and jewellery business has held that the book result is not reliable and acc .....

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the Assessing Officer - Held that:- Similar line of cases, this Bench has decided in the case of Shri Anuj Kumar Varshney Vs. I.T.O. and other cases [2015 (4) TMI 533 - ITAT JAIPUR] where on unverifiable/bogus purchases 15% disallowances has been decided. Accordingly, we also apply 15% disallowances on unverifiable purchases in this case also. The Assessing Officer is directed to recalculate the income as per above direction. - Decided partly in favour of revenue. - ITA No. 637/JP/2012, CO No. .....

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f the case, especially in view of the fact that purchases are not verifiable and hence sale price is not capable of being linked to the purchase price, whether the ld. CIT(A) was justified in ordering to apply g.p. rate of 17% as against the disallowance of 45,03,020/- representing 25% of unverifiable purchase made by the A.O." Grounds in Assessee's C.O. "1. The learned Commissioner of Income Tax (Appeals) has erred on facts and in law in upholding the validity of assessment framed .....

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s, for which he also filed a condonation petition to condone the delay alongwith affidavit of Shri Neeraj Lakhi, a partner of M/s Lakhi Gems and Shri Gopal Das Ganglani, employee of M/s Bihari Lal Hola Ram (sister concern) of Lakhi Gems. 3. The ld AR of the assessee argued that this was the mistake of the employee who got received form NO. 36 served on him on 14/07/2012, which was misplaced by Shri Gopal Das Ganglani. Therefore, the assessee has reasonable cause to file the C.O. delayed by 293 d .....

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er the misplacement of form No. 36 as claimed by the assessee. Therefore, there is no reason to condone the delay in filing the C.O. 5. We have heard the rival contentions of both the parties and perused the material available on the record. The assessee filed the present C.O. on 03/6/2013. Copy of form No. 36 was served on the employee of sister concern admittedly on 14/7/2012. The AR of the assessee has not explained day to day delay with reasons in filing of the C.O. We find merit in the cont .....

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nably explain day to day delay and establish that there existed reasonable and sufficient cause in delaying the filing of appeals for about 10 months. If the proper dates or occasions are not mentioned with proper facts then the delay cannot be condoned. In this behalf, we rely on the decision of the Hon'ble Madras High Court in the case of Madhu Dadha Vs. ACIT (2009) 317 ITR 458 (Mad). The Hon'ble High Court has held as under:- "Held, dismissing the appeal, that it was clear that t .....

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g the appeal and on what occasion the assessee enquired about the progress in preparing the appeal and filing it. The assessee had not taken a proper plea to show sufficient cause giving evidence and proof beyond reasonable doubt for the delay. There was no need to interfere with the order of the Tribunal." In this judgment, the Hon'ble Supreme Court citation i.e. Collector, Land Acquisition Vs. Mst. Katiji (1987) 167 ITR 471 (SC) has also been considered. We find merit in the contentio .....

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nts and be specific in the dates. In the entirety of facts and circumstances of the case, we decline to condone the delay of 293 days in filing this C.O. 6. Now we are deciding the C.O. on merit. Ground No. 1 of the C.O., the assessee challenged the reopening the case U/s 147 of the Income Tax Act, 1961 (in short the Act). The ld AR of the assessee has drawn our attention on reasons recorded by the Assessing Officer for reopening as under:- (i) On the basis of annexure 25 to 28 proceedings u/s 1 .....

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ch return filed for A.Y. 2004-05 required verification for quantification of escaped income. As per A.R. none of the reasons indicated above has reason to believe that any income has escaped assessment.. The reopening was on the basis of annexure-25 to 28, which was impounded during the course of survey in the case and carried out on 18/5/2003 in group cases of the firm. Consequently, assessment for the A.Y. 2006-07 was also framed by the ACIT, Circle-1, Jaipur where these annexures were conside .....

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ITO (2011) 56 DTR 212 (Guj) (HC) and CIT Vs. Mahesh Gum and Industries (2007) 292 ITR 397 (Raj.) and argued that reopening U/s 147 is illegal, bad in law and same is required to be quashed. 7. At the outset, the ld DR supported the order of the CIT(A) as there was no scrutiny U/s 143(3) of the Act in A.Y. 2004-05 and Hon'ble Supreme Court decision in the case of ACIT Vs. Rajesh Jhaweri Stock Brokers (P) Ltd. (2007) 291 ITR 500 (SC) and held that order U/s 143 is not an order and no opinion h .....

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e assessee has inflated the purchases by accepting bogus bills from the market on which this case was reopened and quantified additions were made by the Assessing Officer after verification as the Hon'ble Supreme Court in various cases has held that reason to believe does not have certainty that Assessing Officer in each and every case should have made addition but there should be prima facie believe of escapement of income. The finding given by the ld CIT(A) had not controverted by the AR. .....

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ccount, which are subject to audit. All the transactions of purchases and sales are fully verifiable from the supporting bills, vouchers and documents maintained by the assessee. The assessee made purchases with full vouchers. The supplier was registered in the sales tax department. The payments were made through account payee cheque. The addresses of the supplier is on the bill. The assessee had filed the confirmation of the purchases. The assessee has discharged his burden of proof, therefore, .....

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e assessee raised this ground before us. On verification of form No. 35, there was no specific ground on rejection of books U/s 145(3) of the Act. Further the Hon'ble Rajasthan High Court as well as the Coordinate Bench of the ITAT, Jaipur in various cases of gems and jewellery business has held that the book result is not reliable and accordingly Assessing Officer's action U/s 145(3) is justified. The detailed findings on this issue has been given by this Bench in the case of Shri Anuj .....

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that the original return declaring total income at ₹ 2,93,130/- was filed on 1/11/2001. The assessee deals in the business of precious and semi precious stones. This case was not scrutinized U/s 143(3) of the Act. In group cases of M/s Bihari Ram Hola Ram, Lakhi Gems and Khushboo Jewellers, survey operations U/s 133A were carried out on 18/08/2005. From the various annexures impounded during the course of survey, it is revealed that the firm and its partners were booking bogus purchases fr .....

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fficer to the assessee on decline in G.P. as well as bogus purchases made by the assessee. The G.P. rate during the year had come done from 14.75% in preceding year to 12.61% in year under consideration. There was a bogus purchases to the tune of ₹ 1,80,12,079/- from the following parties: S.No. Name of supplier Address of supplier PAN SCT/RST/TIN No. Amount Rs. 1. A R Exports 227, Sumer Karn Ji Ka Rasta, Ramganj, Jaipur 1423/05398 2,149,076 2. Adinath Gems 3613, MSB Ka Rasta, Johari Bazar .....

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8. GV Gems International 470, Barkat Nagar, Tonk Road, Jaipur ABOPH3714H 8762108187 528,403 9. Govindam Jewellers 1307, Kedia Building, Johari Bazar, Jaipur ACGPV1316E 8842251994 1,392,102 10. MD Exports B-20, Ratna Sagar, MSB Ka Rasta, Johari Bazar, Jaipur AAEFM9181C 1451/10306 480,383 11. MV Gems International 1206, Khejron Ka Rasta, Chandpole Bazar, Jaipur 8471705845 1,189,702 12. Manviya Exports C-55, Ambabari, Jaipur ABQPV5586M 1424/05399 782,908 13. Nidhi Gems 8, Keshav Vihar, Sitabari, T .....

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19 344,385 19. Sapna gems 1/665, Malviya Nagar, Jaipur AAUPJ6771H 8581604856 1,133,389 20. Triveni Gems 1538, Nagawala House, Sonthliwalon Ka Rasta 8641600652 305,037 Total Unverifiable Purchases 1,80,12,079 The ld AR submitted before the Assessing Officer that the assessee made these purchases and paid these parties through account payee cheques. The assessee furnished confirmation and claimed that the payments were made through account payee cheques. The purchases made from the relative under .....

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d by the assessee for further verification. The summons issued has been returned unserved. iii) From the Dak returned by the postal authorities it is evidenced that the assessees do not exist at the given address. It is evident that these suppliers are mere fake bill providers. iv) The assessee has not maintained any stock register on day to day basis so as to verify the day to day movement of the stock. v) The entire exercise is made with a view to verify the correctness of each of the entries .....

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ot found at the given address. Moreover, payment by cheque is neither sacrosanct nor can it make a non-genuine transaction as genuine for which reliance is placed on the judgment of CIT vs. Precision Finance (P) Ltd. [208 ITR 465 (Cal)]. vii) Reliance is also placed on the judgment of M/s Kachwala Gems Vs. JCIT [ITD No. 134, ITAT, Jaipur Bench (Dec. 2003)] wherein it was held that the A.O. is entitled to act on material which may not even be accepted as an evidence as the A.O. is not bound by th .....

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viii) Under section 101, 102 and 106 of the Evidence Act, onus lies upon the assessee to prove all the expenses including purchases to the satisfaction of the Assessing Officer, which was not discharged by the assessee as it failed to produce the suppliers from whom purchases have been claimed. The onus lies upon the assessee to prove the genuineness of the transaction when such purchases are claimed to the genuine by it. Reliance is placed in the case of Indian Woolen Carpet Factory Vs. ITAT 1 .....

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gument is baseless. Thereafter he rejected the book result U/s 145(3) of the Act and applied 25% on bogus purchases of ₹ 1,80,12,079/- and ₹ 45,03,020/- was added to the total income of the assessee. 13. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had confirmed the addition @ 17% on total sale turnover and net addition of ₹ 10,61,214/- was confirmed. The finding of the ld CIT(A) is reproduced as under:- " .....

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Therefore, the rejection of the books of the account of the appellant as unreliable u/s 145(3) is upheld. 5.4 Regarding the estimation of G.P. the Hon'ble ITAT, Jaipur Bench has consistently held that the past history of the assessee is the most reliable guide. In the case of the assessee it is seen in the A.Y. 2003-04, the assessee had shown a G.P. rate of 14.75% on total turnover of ₹ 1,53,91,516/-. In A.Y. 2005-06, the Hon'ble ITAT upheld the G.P. of 16.16% on total turnover of .....

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