TMI Blog2013 (7) TMI 949X X X X Extracts X X X X X X X X Extracts X X X X ..... 013 of Ld. CIT(A)-II, Jaipur raises the following grounds:- 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has grossly erred in confirming the rejection of books of account by the Ld. AO u/s 145(3) of the I.T. Act, 1961. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in sustaining the addition of ₹ 1,52,105/- @ 25% of ₹ 6,08,414/- treating the purchases from M/s Ashu Gems (Rs. 3,82,988), M/s Century Gems (Rs. 75,000/-) and M/s Ranka Jewels and Impex (Rs. 1,50,426/-) as non genuine. 3. The assessee prays for leave to add, to amend, to delete, to modify the all or any grounds of appeal on or before the hearing of appeal. 2. Briefly the facts are that the appellant derives income from purchase and sale of handicraft items, silver and gold jewellery, in partnership of Shri Shiv Kumar Goyal and Shri Dharam Chand Kothari. During the year under consideration, the assessee has declared a gross profit rate of 18.96% on the total turnover of ₹ 76,77,454/- as against the gross profit rate of 18.29% in the immediately preceding year and 21.43% in the year prior to the immediately prec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. Merely because the payment was made through cheques or the persons are income tax payees do not discharge the burden to prove genuineness. Still the assessee did not produce either of the parties. The Assessing Officer, therefore, keeping in view the judgment rendered by the Hon'ble Calcutta High Court in the case of CIT Vs. Precision Finance (P) Ltd. 208 ITR 465(Cal.), judgment by the jurisdictional High Court in the case of Indian Woolen Carpet Factory Vs. ITAT Others 178 CTR (Raj.) 420 and the judgment by Jaipur Bench of Tribunal in the case of M/s Kachwala Gems Vs. JCIT in ITA No. 134 in December, 2003 as well as the judgment by the Hon'ble Gujarat High Court in the case of Sanjay Oil Cake Industries Vs. CIT reported in 10 DTR Hon'ble Gujarat High Court in the case of . 153 (2008) and also the Hon'ble Apex Court in the case of CIT Vs. British Paints India Ltd. 188 ITR 44, reached a finding that the assessee has failed to discharge its burden to prove that the purchases are genuine. In the light of the fact that the purchases are unverifiable and there being serious defects in the books of account, such accounts were taken to be not found correct a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surmises and conjectures. The ld. AO has not material to hold that the above said purchases are unverifiable. In this regard, we submit as under:- a) Confirmation, PAN and acknowledgment of return was furnished: - The assessee has submitted the confirmation letter of the parties besides their PAN and copy of acknowledgement of return. The Ld. AO has not material to disprove the evidences submitted by the assessee. b) Summons issued by AO were served on the parties:- Further the summons issued by the Ld. AO by registered post as well as through the inspector were served on the party, which shows that the parties were existing at the given address and these parties have not denied for making sales to the assessee. The department has vast statutory powers to enforce the compliance of the summons. c) Inquiries made by the investigation wing in other cases were not brought to notice of assessee:- Further, the inquiries made by Investigation Wing in other cases cannot be utilized against the assessee without giving opportunity of confrontation. The Ld. AO has not given the copy of material collected by him from Investigation Wing and no opportunity of confrontation was gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Indian Woolen Carpet Factory Vs. ITAT Ors 178 CTR 420 In this case the payments were not made but in the case of the assessee payment was made by account payee cheques. Further in the case of the assessee parties were existing at the given address and summons issued by the Ld. AO were served on the parties. In the case of the assessee, the assessee has filed confirmation letters, copy of acknowledgement of their Income Tax return. Sanjay Oil cake Industries Vs. CIT 10 DTR 153 (Guj) In this case, it was held by the AO that the supplies were creation of the assessee and the suppliers were not traceable. In the case of the assessee, the assessee has filed confirmation letters of the parties and copy of acknowledgement of their income tax return. Further the summons issued by the AO was served but the Ld. AO did not use his statutory powers to enforce their attendance. The entire finding of the Ld. AO is based on the report of DDIT and survey conducted by BCIT and the material collected in the investigation of other assessee which were used against this assessee without providing an opportunity of confrontation. Recently Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there were only retail sales whereas in the year under consideration there are wholesale sales, the fall in G.P. rate to some extent is accepted. Further, the turnover is not comparable as the turnover has increased by 4436%. The G.P. has also increased by 333%. However, considering the fact that in the accepted purchases the declared G.P. rate comes to 2.62%. Whereas in the case of unverifiable purchases the G.P. rate comes to only 1.44% overall G.P. rate of 3% will be more reasonable. The AO is therefore, directed to apply G.P. rate of 3% as against 1.95% declared by the appellant on the declared turnover of ₹ 6,99,90,493/-. The trading addition of ₹ 1,05,58,554/- is therefore, reduced considerably. The appellant thus gets partial relief. The grounds of appeal are decided partly in favour of the appellant. Therefore, even if the books of accounts are rejected on the basis of defects pointed out by the Ld. AO, no addition deserves to be made because the trading result of the assessee for the current year is better than the last year. Reliance is placed on the following decisions: i) CIT Vs. Gotan Lime Khanij Udhog (2002) 256 ITR 243 (Raj.) ii) J.C. Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Assessing Officer acted beyond the scope of powers contained u/s 145(3) of the Act. His case is that he had brought on record the Permanent Account Number and acknowledgement of return filed by the parties and summons on them also stood served, therefore, the Assessing Officer ought to have enforced his statutory power for compliance of summons by such parties. Without doing that the finding of bogus purchases being unverifiable is wrong, without basis and on surmises and conjectures. I, however, do not agree with the contentions of the appellant, inasmuch as the finding that the purchases from the aforesaid three parties namely M/s Ashu Gems, M/s Century Gems and M/s Ranka Jewells and Impex are bogus was taken as one of the reason for rejecting the accounts by application of Section 145(3) of the Act. The assessee has not assailed the said finding of rejection of accounts nor there is any ground in appeal before Ld. CIT(A). Before this Appellate Tribunal also no such ground on the perversity of the facts requiring indulgence of this Tribunal thereon has been raised. The appellant was apprised of the fact of issue of summons that stood served on the aforesaid three parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e estimation of profits from business of the assessee. The estimate so made, therefore, is found rested on relevant basis in the circumstances when the appellant despite opportunity failed to prove that the purchases as aforesaid are genuine. The Assessing Officer is not shown to have acted with bias neither vindictive nor capricious. The estimate made by him is a bonafide as he is found to have acted on relevant materials and considerations only. There is an imminent danger to allow sanction of such fictitious arrangement as the entries of purchase as are appearing in the books of account of the appellant are merely the accommodation entries carried by it for suppressing its true profits. Allowing deduction of the full amount of such purchases on irrelevant considerations as are being contended through written submissions, to my mind, would tantamount to misuse, which will degenerate into an exercise of unregulated activity. It, therefore, was neither possible nor proper for the Assessing Officer to have allowed the assessee to continue with the similar activity of recording bogus purchases in the year under consideration and assess him by application of net profit rate only as wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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