TMI Blog2017 (12) TMI 1252X X X X Extracts X X X X X X X X Extracts X X X X ..... nflated by the assessee but the AO doubted the genuineness of the purchases on the ground that the suppliers were found to be accommodation entries providers. When the AO rejected the book results u/s 145(3) of the Act, then the AO after rejection of the books of account can proceed to make the assessment on the basis of best judgment instead of resorting make the addition to the book results. Accordingly, in the facts and circumstances of the case and in view of the decision of this Tribunal in assessee’s own case for A.Y. 2006-07 we do not find any error or illegality in the orders of the ld. CIT(A) in restricting the addition to the average GP rate based on the past history. Hence, the grounds raised in the Revenue appeals are rejected being without any substance or merits. Trading addition - Held that:- AO issued summons to the parties from whom the assessee made the purchases however, there was no response and no compliance of the notice issued by the AO to these parties. Thus, the Assessing officer has rightly pointed out that the sale to the extent of more than 60% of the assessee was not verifiable. Therefore, in these facts and circumstances of the case when the sales o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th. Accordingly the Assessing Officer rejected the books of accounts of the assessee by invoking the provisions of section 143(3) on the ground that the assessee has failed to produce the suppliers in person for examination and consequently failed to discharge the onus to prove the claim of purchases. Thus, the AO held that the purchases in question remained unverifiable and therefore, the AO not satisfied with the correctness and completeness of accounts of the assessee. The AO then proceeded to estimate the income of the assessee on the basis of the profit @ 25% on unverifiable purchases. The AO computed the profit @ 25% on the purchase of ₹ 3,86,78,985/- for the assessment year 2005-06 amounting to ₹ 96,69,746/-. The said amount was added to the income of the assessee. Similar additions were made for the other assessment years. The ld. CIT(A) though upheld the rejection of books of accounts of the assessee however, the ld. CIT(A) restricted the addition while considering the average GP rate of the past assessment years @ 13.60% applied on total sale of ₹ 560.16 lacs and consequently the addition was confirmed to the extent of ₹ 11.54 lacs as against ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of M/s Swarnganga Jewellers vs. ACIT ITA No. 833/JP/2011. 5. We have considered the rival submissions as well as relevant material on record. The Assessing Officer rejected the books of account by invoking the provisions of section 145(3). The issue of rejection of books of accounts is involved in the cross objection filed by the assessee, therefore, we deal with this issue while deciding the cross objection. Once, the books of accounts are rejected by the AO the only course of action left to the AO is to assess the income of the assessee on the basis of best judgment and GP rate is considered as proper and reasonable basis and guidance for the best judgment. Once, the books result are rejected the Assessing Officer cannot proceed to make an addition to the income offered by the assessee as per books result. However, the AO in the case of the assessee instead of applying the GP rate made on addition@ 25% of the purchases to the book results. This act of the Assessing officer itself contradicts the decision of rejecting the books of accounts and books result. The Tribunal in assessee s own case for the assessment year 2006-07 has considered this issue and upheld the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consider as to whether the purchases made by the assessee were genuine or not or to whether the assessee has inflated those purchases or not. It is also not material to consider whether the GRs from sale-tax department were verified or not, so, the CIT(A) on considering these points was not justified in deleting the impugned addition without discussing as to whether the liability of trade creditors shown by the assessee in the absence of furnishing complete addresses of trade creditors/consignors and the payment vouchers was genuine or not. While evaluating the material collected by the Revenue on the touch stone on human probability and considering the accretion in the closing balance in respect of parties for which Revenue has material in thejform of statement. We fell that the ld. CIT(A) was reasonable in confirming the addition of ₹ 5.00 lacs. Hence both the grounds of assessee as well as Revenue are dismissed. We further noted that when the corresponding sale is not in dispute then the question is only regarding the correct amount of purchases and verification of the same. The ld. DR has relied upon the various decisions of Hon ble Gujarat High Court however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record. We find that the assessee failed to substantiate the purchases recorded in the books of accounts and to that extent the purchases were not verifiable. The Assessing officer has also pointed that the inventory of closing stock has been valued on estimated basis as pointed out and specifically mentioned in the audit report and therefore, the assessee was not maintaining the stock register showing the quantity and qualitative details including the purity of the previous matters. Therefore, the valuation of the closing stock was also found to be estimated and not the actual and correct value. The AO issued summons to the parties from whom the assessee made the purchases however, there was no response and no compliance of the notice issued by the AO to these parties. Thus, the Assessing officer has rightly pointed out that the sale to the extent of more than 60% of the assessee was not verifiable. Therefore, in these facts and circumstances of the case when the sales of the assessee to the extent of more than 60% is not verifiable due to the failure of the assessee to produce the relevant evidence and the supplier then the book results of the assessee would not reflected true pi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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