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Income Tax Officer, Ward 2 (1) , Jaipur Versus M/s Five Star Corporation

2015 (8) TMI 651 - ITAT JAIPUR

Unverifiable purchases - CIT(A) deleted part addition - Held that:- The matter has been set aside by the ITAT twice and the assessee was not able to correlate the purchases made from M/s Anmol Ratan and M/s Shruti Gems to the tune of ₹ 57,50,000/- with export bills. The ld CIT(A) partly accepted the correlation between the purchases made from both the parties and export bills but she confirmed that the purchases made from both the parties are bogus and the assessee might have purchased the .....

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net profit on unverifiable purchases of ₹ 57,50,000/-, which comes to ₹ 8,62,500/-. Thus we confirm addition of ₹ 8,62,500/-. The burden lies on the assessee, which has not been discharged rightly that purchases were made are genuine and same has been exported. - Decided partly in favour of assessee.

Disallowance of deduction U/s 80HHC - Held that:- AR has not been able established connection between the purchases made from both the parties and export made by it. Wh .....

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17/01/2013 passed by the learned C.I.T.(A)-I, Jaipur for the A.Y. 2002-03. The grounds of revenue s as well as assessee s are as under:- Ground of ITA No. 325/JP/2013 Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) is justified in giving credit of ₹ 33,73,226/- of unverifiable purchases when only a few items of purchases bill were tallying with the items of export invoices. Ground of ITA No. 336/JP/2013 1 In the facts and circumstances of the case and i .....

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U/s 80HHC on the addition of ₹ 23,76,774/- confirmed by her. The action of the ld CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by allowing the deduction U/s 80HHC on ₹ 23,76,774/-. 2. Ground No. 1 of the revenue s appeal and assessee s appeal is against the addition made by the Assessing Officer on account of unverifiable purchases at ₹ 57,50,000/-, which was partly deleted by the ld CIT(A) at ₹ 33,73,226/-. Th .....

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ases of ₹ 47,50,000/- claimed to have been made from M/s Anmol Ratal and purchases of ₹ 10,00,000/- claimed to have been made from M/s Shruti Gems (Totaling to ₹ 57,50,000/-) were bogus purchases and hence made additions as under:- :- Addition of ₹ 57,50,000/- by disallowing purchases of goods in view of proviso to Section 69C. :- Addition of ₹ 57,50,000/- as income from other sources by treating the purchases of goods being unaccounted expenditure and deemed income .....

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uction U/s 80HHC of the I.T. Act by treating ₹ 255950/- as income from other sources on account of deflation of cost of goods purchased thereby deleting the addition to the extent of ₹ 5494050/- (5750000-255950) holding that the provisions of section 69C are not attracted. (2) Deleted the addition of ₹ 57,50,000/- made by the A.O. U/s 69C of the I.T. Act, (as income from other sources made on account of purchases of goods as being unaccounted expenditure and considering it as d .....

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afford adequate opportunity of being heard to the assessee to establish that the same goods worth ₹ 57,50,000/- stated to have been purchased from M/s Anmol Ratna and M/s Shruti Gems were exported to claim the benefit thereon U/s 80HHC of the Act and decide the issue afresh as per the law. The issue raised in grounds No. 1 and 2 hereinabove are inter connected and need fresh consideration in view of finding of the A.O. on the above question that the same goods worth ₹ 57,50,000/- cla .....

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portunities to the assessee, assessment was completed U/s 144 vide order dated 30/12/2008. Complete details of notices issued u/s 142(1) and U/s 143(2) before completing the assessment U/s 144, were given in the assessment order dated 30/12/2008, hence not required to repeat the same here again. The assessee again filed appeal against the assessment order before CIT(A) who vide order in appeal in ITA No. 900/08-09 dated 28/10/2009, directed the Assessing Officer to apply GP rate of 15% on export .....

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dition to the extent of ₹ 54,94,050/- (5750,000/-2,55,950/-) holding that the provisions of Section 69C are not attracted in his case. (ii) Deleting the addition of ₹ 57,50,000/- treating it as income from other sources made on account of purchases of goods as being unaccounted expenditure and considering it as deemed income of the assessee U/s 69C and further deleting the addition of similar amount alternatively made U/s 68 thereby treating the amount of export sales as income from .....

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parties taken by the investigation wing. We thus in the interest of the justice remand the matter to the file of the A.O. to afford adequate opportunity of being heard to the assessee to establish that the same goods worth ₹ 57,50,000/- stated to have been purchases from M/s Anmol Ratan and M/s Shruti Gems were exported to claim the benefit thereon U/s 80HHC of the I.T. Act and the decided the issue afresh as per the law. The ld Assessing Officer further observed that in view of the direc .....

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6/2011 which was adjourned to 02/07/2011 on the request of the assessee but again none appeared nor asked for adjournment. Thereafter notice U/s 142(1) dated 05/07/2011 was issued whereby hearing was fixed on 15/07/2011 but like in past, the assessee did not make any compliance this time also. In view of these facts, a final show cause notice alongwith notice U/s 142(1) dated 21/09/2011 was given and the case was fixed for hearing on 07/10/2011. No one appeared on the given date of hearing but o .....

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hri Ikram Ahmed, partner of the assessee firm appeared alongwith Shri Krishan Natiya, C.A. and his A.R., filed copies of purchase bills of M/s Anmol Ratan and M/s Shruti Gems and also produced invoices of export which were produced by the assessee during the original assessment proceedings and were not considered to be genuine for the reasons which were discussed in details in assessment order passed U/s 143(3) dated 30/03/2005 by the then Assessing Officer and the reasons have been reproduced b .....

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and provisions of section 69C be not attracted the entries of this expenditure on purchases of goods in its books of account remained unexplained. H. For claiming the purchases from M/s Anmol Ratan and M/s Shruti Gems as genuine, the assessee file a reply before the then Assessing Officer on 21/3/2005 wherein it was stated that:- a. Payments were made through cheques. b. On the purchases bills, quantity of goods. Value etc. were mentioned. c. Provisions of section 69C are not applicable. I. The .....

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e assessee that quantity of goods purchased was mentioned on the bills is also incorrect. On perusal of bills issued, it was found that there was no mention about the unit of qty. that whether it was Gms. Or Carat. Only qty. was mentioned and no specification of the unit was mentioned against the goods sold. c) No satisfactory explanation about the two contradictory statements given by the so called proprietors of this concerns and other three named persons was given by the assessee to rebut the .....

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r as the claim of the assessee that these parties have RST/CST number and amount was paid by cheques does not make the transaction genuine. Mere furnishing of particular is not enough, moreover the payment of cheques is not sacrosanct nor can it make a non genuine transaction as genuine for which reliance was placed on the judgment of the Cit Vs. Precision Finance (P) Ltd. 208 ITR 465 (Cal) wherein it was held that the payment made by account payee cheques would not make it sacrosanct. The facts .....

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cepted as on evidence as the A.O. is not bound by the Technical rules of evidence and pleadings. The Hon ble ITAT has also held that the declaration of sales under sales Tax Act and non production of books of accounts by the seller will not lead to the conclusion that the sales were genuine in a case where the A.O. comes to the conclusion that the relevant purchases are not genuine. The Hon ble ITAT also held that the payment by account payee cheque is not sufficient to establish the genuineness .....

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icer, which was not discharged by the assessee as if failed to produce the owners of M/s Anmol Ratna and M/s Shruti Gems. h) In the case of Chuhar Mal Vs. CIT 172 ITR 250 (SC) the Hon ble Supreme Court held that the Evidence Act did not apply to the proceedings under I.T. Act, 1961 and that the rigiours of the rules of evidence contained in the Evidence Act was not applicable but, this did not mean that when taxing authorities were desirous of invoking the principles of the Evidence Act in proce .....

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nexistent parties and hence are not genuine. The Hon ble Rajasthan High Court has also decided in the case of CIT Vs. Golcha Properties (PVT) Ltd. 227 ITR 391 that the genuineness of the transaction could be decided on the basis of primary facts on record and in the present case, the fact of nonexistent/non cooperative parties leads to the non-genuine transaction of sale to the assessee. Other aspects as claimed by the assessee relating to sales tax registration No., PAN and payments by cheque m .....

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r concern of the assessee M/s La Medica. Shri Chandi Lal and Shri Chunni Lal were not produced before the A.O. and the Hon ble High Court held that the purchases were in fact not made from K and the whole thing is fictitious arrangement and the payments were alleged to have been made to K were treated as income from other sources. In the present case the facts were more or less similar as that of the case referred herein above. j) The onus was on the assessee to prove the purchases made by it we .....

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ogus and the books of accounts of the assessee were in-genuine and therefore applied…… i. Provisions of section 69C ii. Proviso to section 69C iii. Provisions of section 68 In view of the decision of the Hon ble ITAT, Jaipur Bench, Jaipur in order No. ITA No. 916/JP/2009 dated 16/07/2010, the assessee was provided ample opportunities as discussed in the beginning of this assessment order and assessee attended the assessment proceedings once and produced same purchase bills which we .....

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claimed to have been made from both these concerns are not found subject to verification. K. On the basis of various facts as discussed in the above order, there is no doubt that the purchases of ₹ 57,50,000/- claimed to have been made from M/s Anmol Ratna and M/s Shruti Gems were not genuine. The assessee was provided more than adequate opportunities vide notices issue U/s 142(1) to prove the genuineness of these purchases and to establish that the same goods worth ₹ 57,50,000/- we .....

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d by the assessee from above mentioned two concerns are held to be non genuine. Alos the assessee could not furnish any evidence in support of the fact that the goods purchased by it were exported to claim the benefit U/s 80HHC of the Act. L. In view of the facts, since the purchases are held as non genuine, it could lead to only the following two inferences:- a. If on the strength of evidence in support of sales recorded in the books of accounts of the assessee, the sales are accepted as genuin .....

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d from such nonexistent parties is bogus and deserves to be added as unexplained income within the meaning of section 68. Application of provisions of section 69C. M. As per the first inference if on the strength of evidences in support of sales recorded in the books of accounts of assessee, the sale are accepted as genuine, then assessee ought to have made purchases from parties other than those from whom purchases have been shown in the books of accounts because they have already proved nongen .....

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ods was same as debited in assessee s book then to make purchase of goods, for exporting them, assessee had to incur an expenditure of ₹ 57,50,000/-. The source of such expenditure on purchases corresponding to export have not been recorded in the assessee s book. Therefore, an amount of ₹ 57,50,000/- is treated as unaccounted expenditure and deemed income of assessee U/s 69C of the I.T. Act and the same is added to the income of the assessee under the head income from other sources .....

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ted as bogus purchases hence not an allowable direct expenses in view of proviso to section 69C of the I.T. Act and disallowed accordingly. Unexplained income u/s 68 (Second Inference):- O. Alternatively, it is a fact that no sales could be effected without purchases and purchases, recorded in the books of accounts are proved non genuine, following evidence and material also goes on to prove that the export of the assessee was bogus and therefore the amount of corresponding sale consideration cr .....

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f Section 68 which are reproduced as below:- Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not him is not in the opinion of A.O. satisfactory, the sum so credited may be charged to income-tax as the time of the assessee of that previous year. P. The explanation of the above referred sums credited in the books of account of assessee is tho .....

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sale proceeds of export consignments. Thus, in this case, the provisions of section 68 are squarely applicable on the above sum credited in the books of accounts of the assessee as sale proceeds. Accordingly, the Assessing Officer made addition under the head disallowance of bogus purchases in view of proviso to Section 69C as discussed at ₹ 57,50,000/- and income from other sources on account of addition U/s 69C being unexplained expenditure as discussed above at ₹ 57,50,000/-. 3. .....

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these export invoices. On verification done by the A.O. while submission of the remand report, part of these purchases were correlated with the export invoices in the case of M/s Anmol Ratan and in the case of M/s Shruti Gems the entire purchases could be correlated with the export invoice. On examination of the trading a/c filed by the appellant it is seen that during the year it has shown total export sales of ₹ 1,65,12,669/- and closing stock of ₹ 2,32,00,000/-. No local sales ha .....

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00,011/- 21/05/2001 (only part of the bill could be co-related to export invoice) Tanzanite ₹ 39,161/- ₹ 1,92,483/- ₹ 2,45,130/- Total ₹ 23,76,774/- The A.O. may have strong views regarding the addition required to be made on account of unverified purchases on the basis of the evidence gathered by the Investigation Wing of the Dept., but while finalizing the assessment order in the set aside case these views cannot supersede the specific directions given by a higher judic .....

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e appellant because they have to be verified/cleared by another Govt. Dept. that is the Custom Authorities. Thus sales as per these export invoices could be correlated to these manipulated purchase bills to the extent of ₹ 10,00,000/- (alleged purchases from M/s Shruti Gems) and ₹ 23,73,226/- (alleged purchases from M/s Anmol Ratan) and the appellant can avail of the benefit of section 80HHC on these exports. For the balance of the alleged purchases of ₹ 23,76,774/- the appella .....

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ssessee should be rejected and a GP rate should be estimated as per the finding of the jurisdictional High Court in the case of Amarpali Gems and the other cases passed by the Hon ble ITAT, Jaipur Bench, because the facts of the case of the appellant are completely different from the facts of the cases relied on by the AR. In the case of the appellant in spite of repeated opportunity the appellant was not able to correlate the payments made for alleged purchases with any exports unlike the other .....

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ed that this issue has been decided by this Bench in the case of Shri Anuj Kumar Varshney Vs. I.T.O. and other gems and jewellery cases in ITA No. 187/JP/2012 order dated 22/10/2014 wherein this identical issue has been considered by the Hon ble Bench and detailed findings have been given in it. 5. At the outset, the learned A.R. of the assessee has submitted that the Hon ble ITAT in the first round of assessment proceedings, set aside the order of the ld CIT(A) to the file of the Assessing Offi .....

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orders and instead of making enquiries and verifying the facts in accordance with the directions of the Hon ble ITAT the ld Assessing Officer ignoring the directions proceeded to complete the assessment in the manner as earlier. The purchases from the above two parties can be correlated with the exports. The ld AR has drawn our attention on paper book page No. 1 and page No. 2 to 15 and argued that the purchases from both the parties are verifiable from the export bills. Out of total alleged bog .....

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of purchases of Tanzanite and Emerald in such quantities involves large amount of tiny pieces and can be sold in different quantities without necessarily being always directly correlated. Thus, the co-relationship was established with very small variation in quantity. The ld CIT(A) had not accepted this co-relationship. He has further drawn our attention on submission at page Nos. 9, 10 and 11 and tried to convince the Bench that purchases made from both the parties are verifiable from the expo .....

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