TMI Blog2018 (8) TMI 1318X X X X Extracts X X X X X X X X Extracts X X X X ..... R. KALPESH SATYENDRA JHAVERI AND MR. VIJAY KUMAR VYAS JJ. For Appellant(s) : Mr. N.L. Agarwal Judgment 1. By way of these appeals, the appellants have assailed the judgment and order of the tribunal whereby tribunal has partly allowed the appeal of the assessee reducing the GP rate from 15% to 12%. 2. In both these appeals common question of law and facts are involved hence they are decided by this common judgment. For convenience of the court, facts are taken from ITA No.146/2018. 3. Counsel for the appellant has framed following substantial question of law:- Appeal No.146/2018 i) Whether the ld. ITAT was justified under law while confirming the enhanced addition of ₹ 14,14,80,498/- out of the enhanced addition made by ld. CIT(A) ignoring the explanation submitted by the Assessee-appellant before the search team at the time of search on 20.5.2009 as well as explained before the ld. AO as well as before the authorities? ii) Whether the ld. ITAT was justified under law while sustaining the aforesaid enhanced addition made by ld. CIT(A) at ₹ 14,14,80,498/- on account of so called unaccounted stocks based on its suspicion and surmises and wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n from which bogus purchase bill obtained Group Amount 1. M/s. Unique Jewellery Palace Vijay 581135 F.Y. 2005-06 S.No. Name Concern from which bogus purchase bill obtained Group Amount 1 M/s. Vijay Gems Vijay 438491 2 M/s. R.H. Jewellers Vijay 1965134 3 M/s. Unique Jewellery Palace Vijay 2758615 4 M/s. Ridhi Sidhi Gems Jewels Vijay 2094056 5 M/s. Jodhpur Gems Lalwani 2254825 6 M/s Vaishali Gems Lalwani 1743768 7 M/s Anil Exports Lalwani 919425 8 M/s. Mahaveer Gem Je ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3081796 7 M/s. Subh Laxmi Gems Vijay 2621980 8 M/s. Vaishali Gems Lalwani 648280 Total 21381779 6. He also taken us to the finding recorded by AO which reads as under:- 10. Answering Q.No.15, Sh. Khushi Kumar Ameriya also stated that 95% of the turnover of the Gems Unit was also bogus and the turnover was being enhanced for the purpose of obtaining higher bank finance. The bank finances upto 75% of the stock value as well as 75% of 90 days debtors. In this manner, the stock in trade of the concern has also been inflated. Sh. Khushi Kumar Ameriya also admitted this modus operandi in the statements recorded at his residence while confronted with the documents seized from his residence. Relevant part of his statement is reproduced below:- 18. In post search proceedings a detailed query letter was issued on 16.7.2009 for explaining the issues of bogus purchases in view of statements of Sh. K.K. Ameriya, bogus sales, discrepanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... semi precious stones, gold ornaments and metals and within each category of stones there are more than 500 types of qualities that are to be looked into. There are thousands of packets of stones (stones kept in packets). These valuers have without adhering to the norms of valuation, have mixed the lots of stones and valued the stones. Each category of stone may have valuation ranging from ₹ 1 per cent to more than ₹ 1.00 lacs per carat. This has also caused our business an irreparable loss as we are at loss to reclassify the stones as they were kept in the lots originally. 2.5 It is also surprising to note that the valuers have managed to value over 14 tonnes of various Raw materials kept in 89 bags in a short span of few hours, whereas it would take several man days just to open them and keep them for weighment. The volume of finished goods (cut stones) was equally huge and one cannot possibly weigh even in a few hours when packets were to be opened, seen, weighed in weighment machine and again put back in packets, etc. 2.6 It is clear that the total exercise undertaken by the paid personnel s of the department is as per dictated terms and in convenience and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are buying, the terms for which the goods are sold and also do a reasonable check on the parties who are supplying the products. Our checks are based on PAN issued by the income tax department and TIN issued by the Sales tax Department. We do not have the infrastructure nor have the power to investigate the parties who are supplying us the goods. What else are we supposed to gather from the parties? That is not the intention of the income tax Act and if that were the case then how one will conduct the business? If you as an official of the income tax Department do not own upto the parties to whom you have issued PAN then it is not the fault of the businessmen. Entire issue of bogus bill being raised by you time and again as instilled fear in the minds of the businessmen and in turn it is leading to collapse of the trade in city of Jaipur. 4.2 Even the banker has to be satisfied when one opens a bank account, identity is obtained, complete particulars are obtained, all payments are by account payee cheques and this fact can be verified from both the banks by you. 4.3 The goods and the bills are procured from the registered sellers. All the goods purchased have been entere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Jewellery Unit. . Nizami Unit. . Mumbai Division Thus, as far as these units are concerned they have to be treated to have been properly accounted for are genuine, not tainted, are fool proof and all purchases/sales in these units deserve to be accepted as such and no addition is required to be made as far as these units are concerned. For other units also, we have already explained that no addition is required to be made as all sales are vouched, detailed, verifiable and mainly on credit and all purchases so made have been made by A/c Payee Cheques and all payments relating to sales have been received by the assessee by A/c Payee Cheuqes. Further verification can be made from the income tax Assessments, Sales Tax Assessment and from Banks directly. In view of the above facts and circumstances and earlier letters, no addition is required to be made treating the purchases or/and sales as bogus/tainted in all the units. Further if you so rely on the statement of Sh. K.K. Ameriya, Sh. Raghu Dutt Tiwari or/and other persons then certainly the assessee has a right to cross examine these persons as they have stated wrongly under coercsion, under pressure and threat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the persons who say otherwise/adversely other than, what is apparent on record. One may be a Director or an employee but if coercive measures are used one may not withstand atrocities committed by the officers can write whatever one wishes sign on the dotted lines. It is on record that pressurizing tacks were used employees were manhandled, were not permitted to eat properly, meet family members, sleep properly and threatened. We again submit that it is merely a bold statement by them and deserves to be ignored or it has no evidentiary value. 25. Since books of accounts were not complete on the date of search exact stock as per books on the date of search could not be worked out neither in terms of value nor quantitatively. However, it was seen that the assessee furnished details of stock statement as on 30.4.2009 to State Bank Indore. This stock statement was obtained and it was found that on 30.4.2009 the company was having stock of ₹ 295567819. Thus as on 30.4.2009 the book stock was of ₹ 29.55 crores. Taking this stock in to consideration there was a deficiency of stock of more than ₹ 75.03 crores as one the date of search. The difference in stock has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umbai and other places in various parts of India. Separate books of accounts are maintained for these units. The four units working at Jaipur are named as Gem Unit, Silver Star Unit, Jewellery Division and Nazami Division. Complete books of accounts have been maintained during the course of business. The assessee is maintaining all the books of accounts including cash book, bank books journal book, Ledger bills voucher along with their supporting as prescribed U/s 44AA of the Income Tax Act, 1961. The books of accounts are maintained on mercantile system of accounting. The books of accounts are audited u/s 44AB of the Income Tax Act, 1961 and audit report was submitted along with the return of income. The auditors have not made any adverse remarks regarding the maintenance of the books of accounts. During the course of assessment proceedings all these books was pointed out. In view of this the Learned Assessing Officer was not justified in rejecting the books accounts. 2. BCTT survey results not provided to the assessee- In the assessment order the Learned Assessing Officer has referred to surveys conducted by BCTT wing of the department in Financial Year 2007-08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Sunjay Oil Case Industries vs. CIT 10 DTR 153 (Guj.) case is not applicableThe Learned Assessing Officer has referred the aforesaid case law on page no.36 of the assessment order. It is submitted that the ratio of this case has not been found applicable in the case of the assessee in Assessment Year 2006-07 wherein addition was made by disallowing 25% of the bogus purchases to the tune of ₹ 5.40 crores. In the first appeal itself the Learned CIT(A) directed for applying GP rate of 8.5% as against 7.40% disclosed by the assesse. It is further submitted that as mentioned by the Learned Assessing Officer in the assessment order on page no.36 that in Assessment Year 2005-06 the issue of bogus purchases cropped up and the Learned Assessing Officer has applied GP rate of 13.2% as against GP rate of 12.72% disclosed by the assessee. This GP rate was subsequently reduced by the Learned CIT(A) to 13%. The Hon'ble ITAT later on sustained addition only of ₹ 1,00,000/- against a turnover of ₹ 14,26,09,000/- meaning thereby the GP rate was increased only 0.07%. In other words as against GP rate disclosed 12.72% GP rate applied was 12.79%. In view of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009-10 1030627271 140129208 13.59% 2010-11 154038479 15893587 10.31% The persual of the aforesaid table reveals that the result shown in Assessment Year 2010-11 is better in comparison to earlier years. The GP rate disclosed is better in comparison to that upheld by the ld. CIT(A) in A.Y. 2006-07 of 8.5%. No addition is Decision of ITAT in assesses's own case in assessment year 2005-06 to 200-10. The Hon'ble ITAT in ITA No.245/JP/2013 to 249/JP/2013 has deleted the entire addition made under the similar facts and circumstances therefore the issue of the appeal is squarly covered in favour of the assessee. 9. He contended that tribunal has committed serious error in not appreciating the argument advanced by the appellant in para no.5.5 before the CIT(A) which reads as under:- 5.5 The appellant was again given a show cause u/s 251(2) of the IT Act, 1961 as to why not the income be enhanced by applying a GP rate of 15% (as upheld by Hon ble ITAT in the recent cases) on stock deficiency of ₹ 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, we are satisfied that the Tribunal was justified in rejecting the application under s. 256(1). It cannot be a matter of an argument that the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that investment by way of incurring cost in acquiring goods which have been sold have been made by the assessee and that has also not been disclosed. In the absence of such finding of fact the question whether entire sum of undisclosed sale proceeds can be treated income of the relevant assessment year answers by itself in negative. The record goes to show that there is no finding nor any material has been referred about the suppression of investment in acquiring the goods which have been found subject of undisclosed sales. 4. We are, therefore, of the opinion that no question of law which requires to be referred to this C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the premises of the assessee company, a number of incriminating documents were found pertaining to unaccounted sales, purchases and expenses of the business. It was further noted by the ld. CIT(A) that the assessee has admitted in the course of statement recorded during the course of search that total sales of all the units during FY 2008-09 was around ₹ 107 crores and the declared turnover was only around ₹ 10.36 crores. Further, ld. CIT(A) refers to the order of the AO and stated that the appellant has suppressed the turnover of the business substantially as may be seen from para 22 of the assessment order. It was further noted by the ld. CIT(A) that AO has accordingly rejected the book results declared by the appellant. It was further noted from the order of the AO that books of accounts were found to be not complete on the date of search and as per the stock statement as on 30.04.2009 filed by the appellant with the State Bank of Indore, the value of stock as on 30.04.2009 was ₹ 29,55,67,819/- and as against this, the actual stock found at the time of search on 20.05.2009 was ₹ 14,52,24,834/-. A specific show cause notice was issued to the assessee as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.36 crores in its books of accounts and the fact that the said amount of ₹ 107/- crores has been brought to tax during the FY 2008-09 relevant to assessment year 2009-10. For the year under consideration, the quantification of undisclosed turnover has been determined by comparing the value of the physical stock as on the date of search i.e, 20.05.2009 and as per the stock statement submitted by the assessee with the State Bank of Indore on 30.04.2009. Given that the books of accounts were not complete as on the date of search, exact stock as per books on the date of search could not be worked out neither in terms of value nor quantitative tally. In post search proceedings and during the assessment and appellate proceedings as well, the assessee has failed to reconcile the same and offer any satisfactory explanation. Regarding valuation of such stock at the time of search, the AO has held that the valuation was done by the experts, in the presence of assessee s employees dealing/managing the affairs on the date of search/seizure and no objection of any nature were raised by the employees at the time of search or just after the search. Now challenging the valuation on frivolo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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