TMI Blog2011 (6) TMI 781X X X X Extracts X X X X X X X X Extracts X X X X ..... t High Court in case of M/s. Sanjay Oil Cake Industries, 10 DTR 153 (Guj.). 5. The brief facts of the case are that assessee deals in jewellery and gem stones. During the year under consideration on sales of ₹ 6,99,90,493/- the declared GP rate is 1.95%. The assessee has shown purchases of ₹ 42234219/- from M/s. K.M. Exports, Jaipur. The assessee was asked to produce the parties for examination but the assessee failed to do so. The AO issued show cause notice informing that Sh.Mahendra Kumar Agarwal brother of one of the partner of the assessee firm was also one of the partner in M/s K.M. Exports alongwith Shri Kewal Chand Jain. In the assessment proceedings of Shri Mahendra Kumar Agarwal was asked to produce the books of accounts of M/s K.M. Exports but the same was not done. The assessee's sister concern M/s Mohanlal Mahendra Kumar Jewellers has made sales of bullion ₹ 149545500/- to M/s K.M. Exports. This jewellery manufactured out of the bullion was sold to the assessee. In absence of books of accounts of M/s K.M. Exports the purchases of ₹ 4,22,34,219/- remained unverifiable and it was proposed that why books of accounts should not be rejected. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits The AO has also observed that sales are nowhere in doubt. When the sales are genuine then why would any person indulge in arranging bogus bills. The AO himself has replied that it was done only to suppress the actual profits. With this observation the AO made addition @ 25% of unverifiable purchases which resulted into addition of ₹ 1,05,58,554/-. For this reliance was placed by AO in the following case laws : 1. M/s Sanjay Oil Cake Ind. v/s CIT 10 DTR (Guj.) 153 2. M/s Vijay Proteins Ltd. V/s ACIT 58 ITD 428 (ITAT Ahd. - C Bench) 8. It was contended before ld. CIT (A) that the AO has rejected books of accounts on the ground of unverifiable purchases of ₹ 4,22,34,219/- from M/s K.M. Exports. Affidavit of partners of M/s K.M. Exports verifying the purchases was filed though the books of account could not be produced. The AO has made grate efforts to prove that M/s Amit Agency was a bogus billing firm. That the assessee has made purchases from M/s K.M. Exports and this firm has transactions with M/s Amit Agencies. Also that the books of accounts of M/s K.M. Exports were not produced and therefore, on these grounds purchases from M/s K.M. Exports were hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,90,493/-. As against this in the immediate preceding year on sale of ₹ 1542995/- the declared GP rate was 20.41%. The GP rate was down as in A.Y.2006-07 the assessee was doing retail sale of gold jewellery but in A.Y.2007-08 the sale of the assessee represents wholesale sales only. The turnover has increased by 4436% and overall GP in absolute term has increased by 333%. With this it was submitted that the addition made by the AO may be deleted. 13. After considering the submissions and perusing the material on record, the ld. CIT (A) gave the following finding :- Contention of the AR is considered. The appellant has made purchases from M/s K.M. Exports and K.M. Exports books of accounts could not be produced for verification. The affidavit filed by the partners of K.M. Exports has no meaning as the veracity of the affidavit could not be verified in absence of the books of accounts. The contention of the AR that M/s K.M. Export is an existing assessee has also not much significance as the partner of the concern has expressed his inability to produce the books of accounts. Close connection of the appellant with M/s K.M. Exports may be there. In the present case the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate preceding year there were only retail sales whereas in the year under consideration there are wholesale sales, the fall in GP rate to some extent is accepted. Further, the turnover is not comparable as the turnover has increased by 4436%. The GP has also increased by 333%. However, considering the fact that in the accepted purchases the declared GP rate comes to 2.62% whereas in the case of unverifiable purchases the GP rate comes to only 1.44%, overall GP rate of 3% will be more reasonable. The AO is therefore, directed to apply GP rate of 3% as against 1.95% declared by the appellant on the declared turnover of ₹ 6,99,90,493/-. The trading addition of ₹ 10558554/- is therefore, reduced considerably. The appellant thus gets partial relief. The grounds of appeal are decided partly in favour of the appellant. 14. Now the department and assessees are in appeal here before the Tribunal against reducing the addition and against upholding the rejection of books of account and confirming the part addition respectively. 15. The ld. CIT D/R has placed reliance on the order of AO. He further placed reliance on the decision of Hon ble Apex Court in case of M/s. Kanchwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n purchases remained unverifiable. Quantity of stock was not verifiable and there was no evidence to verify the closing stock. Therefore, the AO rejected the books of account and applied a g.p. rate of 35.48% against 13.49% shown by he assessee. Thereafter on appeal before ld. CIT (A), the ld. CIT (A) applied g.p. rate of 30%. Tribunal also confirmed the action of ld. CIT (a). Assessee preferred appeal before Hon ble High Court and Hon ble High Court also confirmed the order of Tribunal. On appeal before Hon ble Supreme Court, the Hon ble Supreme Court has held that there was no arbitrariness in this case in resorting to best judgment assessment. It was the assessee himself who was to blame as he did not submit proper account. After considering the ratio of this decision it is noticed that the Hon ble Supreme Court has decided the matter on the facts of that case and the order of Tribunal was sustained. Now, here the Benches of the Tribunal are taking a consistent view that where certain purchases remain unverifiable the addition can be made on the basis of past history or taking into account the current events of the case. Past history has been taken into consideration by ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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