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M/s. Lunawat Gems Corporation Versus The DCIT, Circle-2, Jaipur

2018 (2) TMI 970 - ITAT JAIPUR

Validity of reopening of assessment - addition u/s 69C - bogus purchases - Held that:- The assessee had shown purchases from the above company of Shri Praveen Kumar Jain amounting to ₹ 20,96,965/-. The AO on examination of the records found that no actual purchases were made from these parties but their names were only used to inflate the business expenses and thereby reducing the income chargeable to tax. According to the AO, it is established on the basis of information provided by the I .....

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so noted that copy of reasons recorded were supplied to the assessee alongwith notice u/s 142(1) and notice u/s 143(2) dated 21-04-2014. The AO on examination of purchase details noted that the assessee had shown purchases from M/s. JPK Trading Pvt. Ltd amounting to ₹ 20,96,965/-. As per the statement of Shri Praveen Kumar Jain, it was found that M/s. JPK Trading Pvt. Ltd had never sold any goods and were only issuing bogus sales invoices and charged commission. Thus AO was justified in re .....

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CIT(A) has erred in law and on facts in sustaining the legality of initiation of the action u/s 147 of the I.T. Act on the basis of borrowed satisfaction for which objections were raised by the assessee before AO but were disposed of through a non-speaking order dated 18-06-2014 by the AO. 2. Ignoring the better G.P. Rate achieved during the year than immediately preceding year and export of major goods purchased from M/s. JPK Trading (I) Pvt Ltd. ld. CIT(A) was not justified in sustaining addit .....

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ave duly considered the submissions of the appellant, assessment order and the material placed on record. It is evident from the assessment order that the AO was having sufficient information in his possession that the appellant had taken accommodation entries from Shri Praveen Kumar Jain who admitted himself to working as an entry operator in the statement recorded on oath u/s 132(4) of the Act. It was deposited by Shri Praveen Kumar Jain (P.K. Jain) that he was issuing bogus invoices to the ne .....

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e Apex Court in the case of Raymond Woollen Mils Ltd. vs ITO [1999] 236 ITR 34 (SC), wherein it was held by their lordship that:- In this case, we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not. We have only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view th .....

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pellant will be entitled to take all the points before the assessing authority. The appeals are dismissed. (iii) Further, in the case of ACIT vs Rajesh Jhaveri Stock Brokers Pvt. Ltd. [2007] 291 ITR 500 (SC), it was held by the Apex Court that if the AO, for whatsoever reason, has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment. It is a fact that no assessment was made earlier u/s 143(3)144 of the Act in the case of the appellant, therefore, .....

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equired to prove at all that the income has escaped assessment. (v) In view of the above discussion, it is held that the AO was justified in reopening the case of the appellant for the year under consideration u/s 147 of the Act. Hence, this ground of appeal is rejected. 3.3.2 Determination Rejection of books of accounts: (i) I have duly considered the assessment order, submissions of the appellant and the material placed on record. The appellant firm was engaged in the export of business of pre .....

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epartment recorded the statement of Shri P.K. Jain who was running a number of bogus concerns wherein it was stated by him that his business concerns were indulged in providing the accommodation bills to needy persons on commission basis. He further noted that he used to issue bogus sales invoices as per the requirement of parties on prefixed commission on the bill amount. (ii) During the year under consideration, the appellant claimed purchase of ₹ 20,96,965/- from M/s. JPK Trading Pvt. L .....

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ding Pvt. Ltd., a company controlled by Shri P.K. Jain were bogus. The AO rejected the books of accounts of the appellant u/s 145(3) and made addition of ₹ 5,24,240/- (being 25% of ₹ 20,96,965/-) to the income of the appellant. (iii) It was the contention of the appellant that its purchases were genuine as the payments were made through cheques and the AO has not doubted the sales and thus without purchases, the sales cannot be effected. The claim of the appellant that the payments h .....

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made the said addition, without giving any opportunity to cross-examine these parties. In this regard, suffice it to say that the proceedings under the I.T. Act are not strictly covered by the provisions of the Indian Evidence Act. The fact in the present case is that the seller had accepted that he had not sold any goods to the appellant and the appellant was provided an opportunity to rebut this claim of the seller. As held by the Hon'ble Supreme Court in the case of Vasantlal (45 ITR 206) .....

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verifiable. It is therefore, held that the AO was justified in rejecting the books of account u/s 145(3) of the Act as held in a number of judicial pronouncements. Estimation of income (vi) It is noted that in various recent judgement of ITAT, Jaipur Bench, the Hon'ble Bench has upheld 15% disallowance of bogus / unverifiable purchases following its judgement dated 22-10-2014 in batch of cases Anuj Kumar Varshney vs ITO (ITA No. 187/JP/2012) and others. The AO has not doubted the sale of the .....

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#8377; 3,14,545/- (being 15% of 20,96,965/-) is hereby sustained and the remaining addition of ₹ 2,96,695/- is hereby deleted. 2.2 During the course of hearing, the ld.AR of the prayed that the ld. CIT(A) is not justified in sustaining legality of initiation of the action u/s 147 of the Act by the AO, not justified in sustaining the addition of ₹ 3,14,545/- and not allowing the opportunity to cross-examine the seller M/s. JPK Trading (I) Ltd. In this way, the ld.AR of the assessee op .....

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ation over the group concern of Shri Praveen Kumar Jain and it was established by the Investigation Wing that Shri Praveen Kumar Jain was indulged in providing bogus bills to the needy person without actual delivery of goods. This fact was established on the basis of evidences recorded by the Investigation Wing. It is also noted that the Investigation Wing of the department recorded the statement of Shri Praveen Kumar Jain who is running bogus concern in the name and style of M/s. JPK Trading (I .....

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gus invoices used to issue cheques having consideration amount which were received by the assessee. Thus the cheques having required amount were received by the assessee and they were deposited. After clearing the cheques, the assessee used to withdraw the cash amount and the cash withdrawn was returned back to the parties who had taken bogus invoices after deducting their prefixed commission. In this case, it is noted that the assessee had shown purchases from the above company of Shri Praveen .....

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₹ 20,96,965/- had therefore, escaped assessment. The AO noted that it was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Hence reasons for reopening of the cases were recorded and notice u/s 148 was issued on 24-03-2014 which was duly served upon the assessee. It is also noted that copy of reasons recorded were supplied to the assessee alongwith notice u/s 142(1) and notice u/s 143(2) dated 21-04-2014. The AO on examination of .....

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purchases made from M/s. JPK Trading (I) Pvt. Ltd may not be treated as unexplained bogus purchases u/s 69C of the I.T. Act, 1961. It is noted that the assessee had requested for cross examination of the alleged director Shri Praveeen Kumar Jain of M/s. JPK Trading (I) Pvt. Ltd. It is noted that in this case to provide reasonable opportunity a letter was again sent to the address of M/s. JPK Trading (I) Pvt. Ltd but it got returned unserved which showed that the entity is not genuine. According .....

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uing bogus sales invoices for the reasons given in detail in above para. Therefore, in the facts and circumstances of the case and in view of the decision of Hon'ble Gujarat High Court (supra), I disallow 25% of the unverifiable purchases of ₹ 20,96,965/- and made trading addition of ₹ 5,24,240/- to the declared gross profit of the assessee . This will result in addition of ₹ 5,24,240/- in the declared gross profit of the assessee. In first appeal, it is noted that the ld. .....

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come has escaped assessment. (v) In view of the above discussion, it is held that the AO was justified in reopening the case of the appellant for the year under consideration u/s 147 of the Act. Hence, this ground of appeal is rejected. Further the ld. CIT(A) has reduced the trading addition to ₹ 5,24,240/- in view of the decision of ITAT Jaipur bench dated 22-10-2014 in the cases of Anuj Kumar Varshney vs ITO (ITA No.187/JP/2012) wherein the ITAT Jaipur bench has held that 15% of the unve .....

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