TMI Blog2014 (3) TMI 1132X X X X Extracts X X X X X X X X Extracts X X X X ..... with the documents as could have been expected from a prudent purchaser to establish the genuineness of the claimed transaction, we are of the view that the lump sum addition of ₹ 1,00,000/- will meet the ends of justice to plus the possible leakage, if any, as the claimed purchases remained unverified but sales declared has not been doubted. - ITA No. 245/JP/2013, 461 /JP/2013, 246/JP/2013, 462 /JP/2013, 247/JP/2013, 463 /JP/2013, 248/JP/2013, 464 /JP/2013, 249/JP/2013, 465 /JP/2013 - - - Dated:- 5-3-2014 - Shri Hari Om Maratha And Shri N.K. Saini, JJ. Assessee by : Shri S.L. Poddar Department by: Shri Subhash Chandra ORDER Per Bench:- This is a bunch of 10 appeals filed against the common order of the ld. CIT(A), Ajmer, dated 21-02-2013, for the assessment years 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10. All the appeals were heard together. In these appeal common facts have given rise to almost identical issues. Therefore, for the sake of congruence, convenience and brevity, we are proceeding to decide them by this common order. 2. The Ground of appeal raised in A.Y. 2005-06 will give the sample of issue (s) involved in these appeal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss and residential premises of a group to which this assessee belongs to. As a consequence of this search, notice u/s 153A of the Act was issued to the assessee company, who is carrying on the business of jewellery and gems stones. Originally, the assessee had filed its return of income u/s 139(1) of the Act on 30-10-2005 declaring its total income of ₹ 21,81,650/-. In the return, the brought forward loss of ₹ 11,44,978/- had been claimed but this loss, in fact, was of ₹ 15,11,573/- as per computation of income filed for the assessment year 2004-05. In compliance to notice issued u/s 153A of the Act, on 23-09-2009, the assessee company filed its return of income on 28-04-2011, declaring the total income of ₹ 17,86,470/- . In this return filed u/s 153A of the Act, the assessee has claimed the correct amount of loss and that is why the returned income is less as compared to return filed u/s 139 of the Act. 2.2 On the basis of the original return of income filed on 30-10-2005, the assessment had been completed u/s 143(3) on 28-12-2007 at a total income of ₹ 30,44,220/- against declared income of ₹ 21,81,650/-. In first appeal, against the order d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises of various persons entities who were allegedly issuing bogus sale bills to parties in Jaipur and other places. During enquiries conducted in this regard from alleged entry providers, it was found that these persons were issuing sale bills in different commodities, mostly in gems and jewellery but without supplying the goods mentioned in the bills. They would receive the amount mentioned in the bills through account payee cheque / draft which were then deposited in their bank account. After clearance of the cheque/ draft, the amounts were being withdrawn in cash and returned back to the concerned parties seeking entries . The entry providers were charging commission for providing such bills without passing/ transferring any commodity/ goods. They would accept the cheque and deposit the same in their bank to make believe that transactions are genuine. They would thereafter return cash to the beneficiaries. On the basis of the information so gathered from these entry providers, it was noticed by the Wing that the beneficiaries were collecting these paper bills/ bogus bills to reduce incidents of tax. The entry seekers were identified on the basis of the statements recorded on oa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific about facts in detail, we would like to incorporate para 11 at page 6 of the assessment order to the last para 33 (i.e. page 37of the assessment order) hereinasunder :- 11. Besides above documents and statements, certain crucial documents were also found at the residence premises of Shri Khishi Kumar Ameriya related to M/s. Clarity Gold P Ltd and the same were also confronted. These documents are related to certain sales and purchases made by the Company through the brokers Kalani and Paras Ji. These documents are at page No.20 to 25 of Annexure A-6 found from Residence of KK Ameriya. Details recorded on page No.20 and 24 of this Annexure are produced theein 12 Sh. Khushi Kumar Ameriya was confronted with the above seized papers and he stated at length about them. He stated that the calculation appearing on the papers were related to the bogus sales and purchases of the Gems Division of M/s. Clarity Gold Pvt. Ltd against which no exchange of goods have taken place. Regarding page 24 of Annexure A-6, he stated that the transactions are appearing under the head Summary-B. On S.No.1 the name of one of the brokers Sh. Anup Kalani was mentioned. He belongs to Jaipur an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing in the name of above parties in F.Y. 2008-09 also which is evident from the ledger accounts in the regular books which shows that similar bogus transactions continued to take place in subsequent years also. For the sake of clarity the relevant part of the statement of Shri Khushi Kumar Ameriya recorded at his residence on 21.05.2009 w.r.t the bogus sales and purchases by the Co reflected in Annexure A-6 is produced therein- 13.1 Similarly, page no. 38 to 45 of Anexure 26 seized form residence of Shri Ameriya also gives the details of brokerwise and partywise bogus sales and purchases for the period of 1-04-2008 to 4-02-2009 relevant to assessment year 2009-10 which is mentioned in the assessment order at page 11 to 14. 14. Under the other unit of company namely Silver Star the assessee company is dealing with silver jewellery. This unit was being managed by trusted employees Shri Raghu Datt Tiwari and Shri Pawn Kumar Khandelwal who were examined in details w.r.t trading activities of this unit and maintenance of accounts. These accounts were being maintained by the accountant of the Unit Sh. Raghu Dutt Tiwari in a pen drive on Tally 5.4 Software. Sh. Raghu Dutt Tiwari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the person to whom the goods were sold. In the narration, the name of the concern and the cheque number amount will be mentioned. Another interesting feature is that the Kacchi Parchi is made item wise but the bill is issued of general items i.e. stones studded silver jewellery. This is done because the buyer does not want the item wise and quantitative details in his purchase bill. 14.3Actual Undisclosed Purchases: These purchases are also made by way of Kacchi Parchi and the raw material is mainly silver and stones. These purchases are entered in the pen drive but the same are not mentioned in the regular books. 14.4Fake or Bogus Purchases: These are paper bills arranged through brokers against which no goods are actually received. These purchases are entered in regular books but not entered in the pen drive. Against these bills, cheque is paid in the name of the party in whose name the bill has been issued but equivalent cash is received back by deducting the commission of the broker or the accommodation bill provider. It is interesting to note that the brokerage expenses, on arranging these fake purchase bills is recorded in the pen drive under the head Bill Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quantitative estimates of some of the major undisclosed transactions appearing in the pen drive given below. It may be noted that all these transactions represent undisclosed income taxable in the hands of the company at mentioned at page 26 of the assessment order . 17. During the course of post search proceedings as well as in the present proceedings the assessee was required to explain the transactions recorded in pen drive found at Silver Star Unit but the assessee was not able to explain the same. Vide query number 5 6 of notice dated 11.7.2011 u/s 142(1) the assessee was specifically asked to furnish trial balance of Silver Star Unit and get it verified from the copy of trial balance obtained from pen driver and also to submit its explanation regarding facts admitted by the persons managing Silver Star Unit. The relevant queries are reproduced as below:- Furnish trial balance of Silver Star unit and get it verified from the trial balance found from the premises of this concern. During the course of search, persons dealing with the business of silver star unit have admitted that substantial part of sale and purchase in this unit are not disclosed in regular books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was submitted before the ADIT, Jaipur II, that the valuation was got done by Income-tax department personnel s which has no credence and sanctity in the eyes of the law. 2.1 The said valuation as has got done by the officers of the Income-tax Department is unauthorized, illegal, irrelevant, contrary to the provisions of section 133A of the income-tax Act and has been prepared as per own convenience and thus deserves to be ignored being void-ab-initio. 2.2 The departmental valuers were allowed access to business premises of the assessee without subjecting themselves to verification at the time of entry and at the same time there were not subject to frisking at the time when they have left the business premises. 2.3 We would like to know on what basis the valuation exercise has been done by these paid valuers prima facie it appears that these valuers have inserted the stock values as per their convenience. The valuation so made by them is biased. Faulty and before you rely on any of these figures we would request you to provide us an opportunity to cross-examine each one of them. 2.4 As submitted earlier, the assessee company is dealing in more than 100 types of preci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax department is enclosed herewith which will clarify our submission. 3.2 Before you rely upon the alleged illegal statements of Shri Khushi Kumar Ameriya, we should be allowed an opportunity to cross-examine, Shri Khushi Kumar Ameriya. Placing reliance on such illegal statements would be an illegality. 3.3 All transactions of purchase and sale have been declared in the books of accounts. Due taxes on the income is being declared from year to year. Nothing is there which is outside the books of accounts. 4 With reference to your observation with regards to submission of trading account for bogus transactions and real and genuine transactions we wish to reiterate as was submitted before the ADIT, Jaipur II, that you are kindly requested to first clarify to us as to what is meant by the term Bogus Bills, according to us a bill is a bill. 4.1 A businessman during the course of his business purchase the goods locally or from foreign parties mainly on credit. All such parties are income-tax assesses (PAN is allotted by the Income-tax Department) and Sales-tax assesses (TIN is allotted by the Sales-tax Department). As a businessman we are supposed to know the product we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no evidentiary value. 5.1 It is also submitted that the statements of Shri Raghu Dutt Tiwari were recorded under duress, he was pressured to sign on the dotted lines. He was subjected to physical harm by the officers of the department. The statements were recorded beyond the powers granted as per provisions of section 132 and section 133A. The statements so recorded have no sanctity in the eyes of the law and is illegal and deserves to be ignored. Copy of affidavit duly notarized by Shri Raghu Dutt Tiwari on 19.06.2009 and submitted before the District Magistrate and copy of which is already with the Income-tax department is enclosed herewith which will clarify our submission. 19.1 Vide letter dated 9.8.2011, the A/R further submitted his arguments as under:- Without prejudice to what has been submitted earlier and without admitting what has been stated earlier with reference to the purchases made by the assessee as well as sales made by the assessee over the years, we further submit that the employees or/and other persons clearly have stated in their statements that purchases or/and sales in the followings units are genuine, fool proof, verifiable and not tainted: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es/purchases are bogus, not genuine, not tainted. On the face of these overwhelming evidence none would say to be bogus or tained or non-genuine unless one is threatened of dire consequences or on coercion, pressurizing tactics or otherwise. We have already submitted that the same Shri K.K. Ameriya immediately after the search gave an Affidavit voluntarily duly notarized which was submitted before the Judicial Authorities that he and his family members were threateneo, he and other employees were manhandled and that whatever has been stated in the so called statements were not given by him, were written by the authorized officers on their own and without reading or writing he was asked to sign on the dotted lines at odd hours in the late night. Similar has been the Affidavit of Shri Raghu Dutt Tiwari also. We have already placed on record the Affidavits of both these persons alongwith our letter of August 5, 2011. We strongly rely on these. On the face of it, these are after the alleged statements if any and therefore whatever has been stated on oath by them has to be accepted rather than what they had stated earlier under threat, coercion or pressurizing tactics. It is in the ligh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 18.9.2009 in ITA No.4/JP/2009:- In the present case the parties from whom the assessee claimed to have purchased goods were neither produced nor found in existence in business at their given addresses. Thus the claimed purchases stated to have been made from them remained unverified. The rejection of account books of accounts invoking the provisions of section 145(3) therefore can not be treated as unwarranted and unjustified. We uphold the of the lower authorities in the regard. 21.(i) The fact of non verification of trading results and doubt regarding correctness and completeness of accounts is further proved from the unaudited/provisional balance sheet and profit and loss account found during the course of search relevant to AY 2009-10. Balance sheet dated 01.03.2009 was found from various premises of the assessee including company office at Mumbai pages 57 to 74 of Annexure A-1, residence of Shri K.K. Ameriya pages 105 to 114 of Annexure A-24 and factory at EPIP, Sitapura pages 13 to 20 of Annexure A-12. In its audited profit and loss account the assessee has declared sales of ₹ 103.06 crores and purchases are of ₹ 96.58 crores with net profit before tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n figures of audited and unaudited profit and loss account. It was submitted by the A/R that unaudited figures are only provisional figures and the effect of adjustment entries is not reflected in unaudited balance sheet. 23 The submission of the A/R may be correct as regards to claim of various expenses which might have been adjusted after verification from various branches but the differences in the figures sales and purchases is not satisfactorily explained. Since the search action was carried out just after the end of the F.Y. 2008-09, the unaudited B/S of 31.3.2009 was only found and no any other unaudited B/S of any of the earlier was found. It therefore means that earlier years unaudited balance sheets have either been destroyed or removed. Destroying the unaudited B/S after audit, proves the fact that at the time of auditing, the business affairs of the company are adjusted according to convenience of the assessee. The difference in figures of sale and purchases in two balance sheets and other documents found further proves the fact that books of accounts and trading results of the company are not correct and complete and warrant provisions of section 145(3) of the IT Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loor, Star Mansion, C-82, Shyam Marg, Jaipur 37866444 5. Mumbai Office of M/s. Clarity Gold (P) Ltd. at 2 nd Floor, Metro House, Metro Cinema Building, M.G.Road, Mumbai 18634757 6. Stock found at office of Clarity Gold (P) Ltd. at First Flor, Dilli Walon Ki Building,Gopalji Ka Rasta, Jaipur 2685847 Total 145224834 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 assessee furnished details of stock statement as on 30.04.2009 to State Bank Indore. This stock statement was obtained and it was found that on 30.04.2009 the company was having stock of ₹ 295567819. Thus as on 30.04.2009 the book stock was of ₹ 29.55 crores. Taking this stock in to consideration there was a deficiency of stock of more than ₹ 15.03 crores as on the date of search. The difference in stock has not been explained by the assessee. In post search proceedings the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the authorities under the IT Act. Whether any cognizance of deposition was taken by the Magistrate or not, is not known and even if any cognizance was taken by him it does not alter the fact that Assessee Company was indulged in high stake bogus sales and purchases. At the cost of repetition it may again be submitted that this fact stands confirmed by the highest fact finding authority under IT Act i.e. ITAT in AY 2005-06 and the search proceedings further proves this fact beyond any doubt. The statements of Shri KK Ameriya were recorded u/s 132(4) of the IT Act on behalf of the company as its director and therefore there arises no question of any cross examination of person of himself. He was not a witness of the department and statements were not taken behind the assesee or without under the knowledge of the company. Company was being represented by the person who deposed u/s 132(4) of the IT Act. There was no case on threat, duress or pressure as the statements were recorded before two independent Panchas and no such affidavit of any such Panchas furnished. Even than the assessee was allowed opportunity vide order sheet entry dated 9.8.2011 that if it wanted to get further e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber, PAN and payment through account payee cheques since assessee was not able to prove genuineness of the purchases which were found to be non existence at the given addresses rejection of accounts is justified and correct profit can not be deduced from such unverifiable books of accounts. Deepak Dalela vs ITO ITA No.13/JP/2010 dated 16.7.2010, relying on the judgement in the case of Gem Paradise and Dhadha Exports upheld rejection of account and application of provisions of section 145(3) of the IT Act. Indian Woolen Carpet Factory Vs ITAT 178 CTR 420 (Raj) holding that onus was upon the assessee ot prove genuineness of the purchases. CIT Vs Precision Finance P Ltd 208 ITR 465 (Cal)- Payment made by account payee cheques is not sacrosanct and it would not make an otherwise non genuine transaction genuine. ESTMATION OF PROFIT 28 Now since the account books and trading results stands rejected within the meaning of section 145(3) of the IT Act the profit of the assessee is required to be estimated within the meaning of section 144 of the IT Act. It may base on the past records of assessee itself, comparable cases of assessee s own group, other similar cases or other mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 It may also be mentioned here that Hon ble ITAT in the cases referred above has upheld GP rate up to 25%. For example in the case of Deepak Dalela GP rate of 25% was confirmed for AY 2006-07. In Gem Paradise case, GP rate upheld was of 25.5% for AY 2003-04. Though, the GP rate applied in those cases may be based on their specific circumstances and their own past records and on account of comparatively low turnover as compared to present assessee group, still the fact clearly proves that during the period covered under assessments in the present case, there were the other cases who have achieved gross profit rate of 25% in similar trade. It may be a point of worth importance that in AY 2003-04, the assessee company has also declared GP rate of 19% but on comparatively low turnover. Therefore, considering the particular facts of the present case I very reasonably apply a gross profit rate of 17% on total turnover by the assessee company and its other associated companies. As such the most reasonable rate may be considered at 17% which assessee has actually earned but by claiming bogus purchases and turnover, it has reduced its profit at its convenience. Therefore, this GP rate of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts are noted: A. It is seen that the A.O. in the assessment order has pointed various discrepancies in the books of accounts as under: i. Bogus purchases from Vijay Group and Lalwani Group for F.Y. 2004-05 to 2007- 08 which is evident from the chart on Page 4 of the assessment order. ii. Annexure A-6 showing bogus purchases and sales through brokers for F.Y. 2006- 07 and 2007-08 as per chart on Page 6 to 8 of the assessment order. iii. Annexure A-26 showing the broker wise and party wise bogus purchase and sales for F.Y. 2008-09 as per Page No. 11 to 14 of the assessment order. iv. The unaccounted transactions of undisclosed sale, undisclosed purchases, bogus purchases and bogus sales found in the Pen drive impounded as Annexure A-43 which have been reproduced by the A.O. on Page 16 to 21 of the assessment order and summarized at Page 26 of the assessment order. These relate to for F.Y. 2004-05 to 2008-09. This is supported by bill commission account impounded as Annexure A-45 from the business premises of Silver Star Unit at Tripolia Bazar, Jaipur. v. Balance sheet and profit and loss account for F.Y. 2008-09 as per Annexure A-l, A-24 and A-12 could not be reconc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d purchases of ₹ 99.10 crores has been noted. This is also supported by the computer generated sheet giving month wise sales as per Annexure A-3 where the sales for F.Y. 2008-09 are ₹ 1.07 crores while assessee has shown sales of ₹ 1.03 crores only. The assessee has not been able to reconcile the difference in audited and unaudited accounts as mentioned above. Further, it has been pointed out by the A.O. that assessee has not maintained quantitative stock register or regular manufacturing records or consumption records in respect of manufacturing of jewellery and trading of gem stones. The assessee has shown the book stock as on 30.04.2009 to State Bank of Indore of ₹ 29.55 crores while during search books stock was found of ₹ 14.52 crores only and books were found incomplete. Assessee has not reconciled the stock found with the stock as per books of accounts. B. As regarding the assessee's submission that audited books of account have been maintained and produced before the A.O., it may be mentioned that A.O. has pointed out various discrepancies in the books of accounts which have been listed supra. As regarding the assessee contention a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents found and seized during the search with the books of accounts in spite of repeated opportunities given to the assessee by the AO. D. Further, it has been pointed by the A.O. in the remand report that papers and documents evidences collected in the BCTT enquiry were provided and questioned in details to director, Sh. K. K. Ameriya as per Para 9 of the assessment order. The assessee was given opportunity to furnish complete details of bogus sales and purchases and real sales and purchases accounts by the ADIT vide letter dated 16.07.2009 and further opportunity was given by way of notice u/s 142(1) by the AO. The assessee did not furnish the above information without any reason. Now during appeal, assessee has merely submitted list of unverifiable purchases,sales without any address of the parties nor the confirmation by the said parties which cannot accepted at the face value as they are not open to any verification and they are not supported by the due confirmation or affidavits of the concerned parties as desired by the A.O. in the remand report mentioned in case of M/s Clarity Gold Pvt. Ltd, a sister concern of the assessee. In view of the above discussion, the rejecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the regular assessment for A.Y. 2004-05 purchases from 10 parties were found to be bogus and during scrutiny G.P. rate of 13.28% was applied by the A.O. which was reduced to 13% by the Ld. C1T(A) and to lump sum addition of ?1, 00,000 was upheld by the IT AT, thereby giving G.P. of 12.79%. Similarly, in the A.Y. 2006-07 G.P. of 7.40% was shown by the assessee and Ld. CIT(A) upheld the G.P. to the extent of 8.5% which was confirmed by the Hon'ble ITAT by order dated 23/09/2011. In view of above, the assessee's main contention that G.P. rate of 12.79% was accepted by Hon'ble ITAT in A.Y. 2005-06 by upholding addition of ₹ 1 lac, it may be mentioned that the said addition was only on account of bogus purchase bills of 10 parties and not on account of various discrepancies pointed out by the A.O. during the present proceedings. Similarly in the case for A.Y. 2006-07 where G.P. rate of 8.5% was accepted, issue involved was only bogus purchases from 22 parties only. As such, the facts of the present case are distinguishable in the regular assessment u/s 143(3) in view of discrepancies pointed out in the assessment orders u/s 143(3) in above two years only and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , unaudited book results show G.P. rate of 14.36% in the case of the assessee which has been pointed out by the A.O. in the remand report. ii. It has been pointed out by the A.O. that sister concern of the assessee, M/s Gem Mart India Pvt. Ltd. dealing in similar items and trade has disclosed G.P. of 14.91% in A.Y. 2010-31 when it was not indulging in bogus purchases. Accordingly, keeping in view the G.P. results shown by the assessee in above cases and other factors noted above, it is held reasonable to uphold the application of G.P. rate at 15%, The above G.P. rate on a turnover of ₹ 14,26,90,358 will result in gross profit of ₹ 2,14,03,553 while assessee has declared G.P, of ₹ 1,81,62,927. Thus, the trading addition of ₹ 32,40,627 is sustained and balance amount is deleted. Out of above addition, the AO is directed to give the credit of the additions already made during the proceedings u/s 143(3) on account of G.P. and sustained during appellate proceedings in respect of A.Y. 2005-06 as the same income can not be taxed twice. 7.0 The 4th ground of appeal is as under: In the fact* and circumstances of the case the Assessing Officer has erred i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rive under 'bill commission account' which is also supported by the Annexure A-45, Page 27 to 35 impounded from the business premises of the Silver Star Unit in which cheque issued and cash received back are also mentioned. The A.O. has given the year wise summary of such bogus purchase transactions from 31.03.2005 to 31.03.2009 at Page No. 16 to 21 of the assessment order. e. Fake sales: Income from fake sale bill is booked as bill commission receipt in Pen drive. Sh. R.D. Tiwari, accountant described in details the modus operandi regarding the maintenance of such account in the Pen drive which was agreed upon and confirmed by Sh. Pawan Khandelwal whose statements have been reproduced by the A.O. at page No. 21 to 26 of the assessment order. The A.O. has mentioned that actual transactions reflected in the pen drive are entirely different from those in the regular books of accounts. The purchases are made in cash from different parties but bills are received from different parties. The sales are made in cash to different parties but bills are issued to different parties. The A.O. has given the quantitative estimate of some of the major transactions appearing in Pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hu Dutt Tiwari. While making the addition following observation in para 17 of the assessment order - (a) That the transaction of purchase and sales made in cash are different than those from the regular books. (b) All the transactions represent undisclosed income. The Learned Assessing Officer has made the addition unilaterally without providing the printout from the PAN drive, without providing how the income was calculated. In the absence of these the determination of income from Silver Star is without any justification. The assessee has already challenged that all the addition made on the basis of statement of all the three person including Shri Raghu Dutt Tiwari as no cross examination was allotted. In view of this the entire exercise by the Learned Assessing Officer is without any basis. The assessee has been consistently arguing that even if the theory of Learned Assessing Officer is accepted of making bogus purchase and sales and the statement of the aforesaid persons are taken to be true even then the resultant income on account of such turnover would be nil. The commission paid for obtaining the bogus vouchers or purchase and the commission received on bogus sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books of accounts u/s 145(3) of the Income Tax Act, 1961, 3. In the facts and circumstances of the case the Assessing Officer has erred in applying a G.P. rate of 17% and thereby making trading addition of ₹ 5,12,77,2 ]//-. 4. In the facts and circumstances of the case the Assessing Officer has erred in making addition of ₹ 6.91,371/- on account of alleged undisclosed profit of Silver Star. These grounds of appeal are decided as under. 9.1 The issue raised in first ground of appeal has been decided in Appeal for A.Y. 2005-06 and this ground of appeal has been dismissed. On the same reasoning, this ground of appeal is dismissed here also. 9.2 The 2nd and 3rd grounds being regarding rejection of books of accounts u/s 145(3) and application of G.P. rate were involved in A.Y. 2005-06 where the rejection of the books of accounts u/s 145(3) has been upheld and application of G.P. rate of 15% has been sustained. Similar being the facts during the year under consideration, rejection of books of accounts u/s 145(3) and addition to the extent of application of G.P. rate of 15% is upheld. The above G.P. rate on a turnover of ₹ 54,66,42,847 will result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,76,251 is sustained and balance amount is deleted.1 1.3 The 4th ground as regarding addition on account of undisclosed profit of Silver Star Unit was involved in the A.Y. 2005-06 also where the addition on account of undisclosed income from the Silver Star Unit has been upheld. However, during the year under consideration there is a net loss of ₹ 16,36,185 which has been allowed by the A.O. as the profits earned in all the other years of ₹ 79,66,963 have been added separately in the relevant years. This allowance of the loss is based on evidences found during the search in the form of Pen drive which have been discussed in details in A.Y. 2005-06. In view of above, similar being the facts during the year under consideration, this ground of appeal is dismissed. 12.0 The 5th ground of appeal is as under: In the facts and circumstances of the case the Assessing Officer has erred in making addition by way of disallowance u/s 36(1 )(va) of ₹ 1,07,103/-. As per the assessment order, the A.O. has noted that payment of employee's contribution towards PF of ₹ 76,166 and ESI of ₹ 30,937 were not deposited within the time prescribed under the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is seen that appellant has pointed out that employees contribution of ESIC of ₹ 30,937 has already been paid within the financial year i.e. 27.09.2006 itself. Further, employees PF contribution of ₹ 76,166 was paid on 27.09.2006 ( ₹ 68,521+ ₹ 5,322) and on 25.10.2007 of ?2,323 i.e. before due date of filing the return. The said payment is allowable in view of decision of Honourable Supreme Court in the case of Vinayal Cement reported at 239 ITR 268 which has been followed in the case of P.M. Electronic l-td reported at 313 ITR 161. Accordingly, employees contribution is allowable under section 43B, if it has been paid before the date of filing the return under section 139(1) of the Act. Therefore, the disallowance of ₹ 1,07,103 is deleted. This ground of appeal is allowed. 13.0 In the result, assessee's appeal is partly allowed. A.Y. 2008-09. Appeal No. 239/2011-2012 14.0 The various grounds of appeal are as under: 1. That (he order passed by the Learned Assessing Officer u/s 143(3)/153A is void ab-initio. 2. In the facts and circumstances of the case the Assessing Officer has erred in rejecting the books of accounts u/s 145(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Silver Star. These grounds of appeal are decided as under 16.1 The issue raised in first ground of appeal has been decided in Appeal for A.Y, 2005- 06 and this ground of appeal has been dismissed. On the same reasoning this ground of appeal is dismissed here also. 16.2 The 2nd and 3rd grounds being regarding rejection of books of accounts u/s 145(3) and application of G.P. rate were involved in A.Y. 2005-06 where the rejection of the books of accounts u/s 145(3) has been upheld and application of G-P. rate of 15% has been sustained. Similar being the facts during the year under consideration, addition to the extent of application of G.P. rate of 15% is upheld. The sale figure adopted by the A.O. on the basis of monthly sales statement of all units referred to in the assessment order of ^107,20,33,904 is held to be appropriate as discussed in the assessment order. So, the above G.P. rate on a turnover of ₹ 107,20,33,904 will result in gross profit of ₹ 16,08,05,085 while assessee has declared G.P. of ₹ 14,01,29,208. Thus, the trading addition of ₹ 2,06,75,877 is sustained and balance amount is deleted. 16.3 The 4 ground as regarding addition on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uashed. 2. Principle of natural justice violated Secondly, the Learned Assessing Officer has utilized the statement of Shri K.K. Ameria, Shri Raghu Dutt Tiwari and Shri Pawan Kumar Khandelwal which were recorded during the course of search. Their statements have been quoted at length in the assessment order and the books of accounts have been rejected on that basis. During the course of assessment proceedings the assessee had requested for cross examination of these persons but the same was not allow. On the contrary the Learned Assessing Officer has stated on page 34 para 26 that Shri K.K. Ameria was a director and hence being the owner his cross examination was not necessary. In the view of the Learned Assessing Officer he was representing the company. In respect of the two other employees Shri Raghu Dutt Tiwari and Shri Pawan Kumar Khandelwal the Learned Assessing Officer has observed that it was for the assessee to produce them. Thus the Learned Assessing Officer has shifted his job to the assessee illegally and unlawfully. Shri Ameria is a director of the company but in the capacity of an employee. He is not the owner of the company and cannot be said that he was repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding while rejecting the ground of the assessee in para 5.4 on page 4 of the appellate order and he mentioned that the case law given by the assessee are not applicable. For the case of Sibu Soren Vs. ACIT reported in 47 SOT 331 the Learned CIT(A) mentioned that this was assessment u/s 158BA(2) under chapter XIV of the Income Tax Act, 1961 whereas the present assessment is under section 153A of the Income Tax Act, 1961. In this regard our submission is that the main provisions regarding search assessments are same then the decisions are applicable. The decision in the case of CIT vs S.M. Agarwal 293 ITR 43 (Del) is also not applicable because of the additions are not based on dumb document. Our case is same that the assessee is claiming all the documents seized during the course of search are dumb document. Therefore the claim of the assessee is correct and the ground deserves to be accepted. Departmental Ground No. 1 2: On the facts and in the circumstances of the case, Learned CIT(A) Ajmer, has erred in reducing the trading addition to ₹ 32,40,627/- as against addition of ₹ 60,94,433/- made by the Assessing Officer and thus allowing relief of ₹ 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted 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 of accounts were produced before the Learned Assessing Officer and no serious defect was pointed out. In view of this the Learned Assessing Officer was not justified in rejecting the books accounts. Appellate order of ITAT does not abate u/s 153A It is submitted at the outset in the case of the assessee assessment for the Assessment Year 2005-06 already stood completed u/s 143(3) and even appeal upto the stage of ITAT stood decided. The provisions of section 153A do not abate the order of appeals. In view of this only additional issues not covered in the original assessment and which arise on account of material found during search could be considered in the assessment u/s 153A. In this case the issue of bogus purchases stood considered in the original assessment and as a result of that higher GP rate was applied by the Learned Assessing Officer and finally the Hon ble ITAT confirmed an addition of ₹ 1 Lac. These facts are mentioned in the body of the assessment order on p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of no avail. There is no iota of evidence or any material brought on record by the Learned Assessing Officer which suggests that assessee earned in the aforesaid process of bogus vouchers. The Learned Assessing Officer has not conducted any post search inquiries which may also support the finding of the Learned Assessing Officer of earning higher profits by the assessee by way of obtaining bogus purchase vouchers and issuing bogus sale vouchers. Thus there was no justification of the Learned Assessing Officer for taking u/s 153 in the case and subsequently completing the assessment by making addition of ₹ 60,94,433/-. 4. Sanjay Oil Case Industries vs. CIT 10 DTR 153 (Guj) case is not applicable The 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 to applying GP rate of 8.5% as against 7.40% disclosed by the assessee. It is further su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.08% -- 2005-06 142690358 18162927 12.72% 12.79% accepted by the ITAT 2006-07 546642847 40452067 7.40% 8.5% applied by the Learned CIT(A) The perusal of the aforesaid table reveals that the result shown in Assessment Year 2005-06 stand finally decided by the Hon ble ITAT. No reconsideration was called for. During the assessment proceedings the assessee submitted detailed reply and filed additional submission in this regard. The Learned CIT(A) has specifically asked to the assessee that why the case of M/s Gupta Emerald Mines Pvt Ltd for Assessment Year 2009- 10 is not applicable for application of GP rate. Then the assessee submitted the reply that - It is submitted that the Learned Assessing Officer has elected gross profit rate of 17% disclosed in the case of M/s Gupta Emerald Mines Private Limited in Assessment Year 2009-10 and has applied the same in all the other cases of the group. In this regard the Learned Assessing Officer has not brought any material on record to establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cases are not comparable. 4. The turnover is only of ₹ 72,05,870/-. The turnover in the case of M/s Clarity Gold Private Limited for the same period is of ₹ 1,03,06,27,271/-. The turnover in the case is more than 100 times. Hence both the cases do not stand on the same footing and are therefore not comparable. Thus the above factors establish that the cases are not comparable and the Learned Assessing Officer erred in law and fact in applying GP rate of 17% of M/s Gupta Emerald Mines Private Limited in rest of the cases of the group. Such additions made on the basis of the GP rate deserve to be deleted. But the Learned CIT(A) has partly accepted the contention of the assessee and has only reduced the GP rate by 2% which is 15% but again there is no basis for applying the GP rate of 15% specially when the complete bogus purchases and bogus sales are identifiable and the actual profit of the company was found recorded in the shape of pen drive in the name of M/s Silver Star Unit. The whole addition on this account deserves to be deleted. Assessee's Ground No. 4:- In the facts and Circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit facility was available from the Bank. So in the process of increasing the turnover in the books of accounts the assessee has incurred losses and the profits shown in PEN Drive is actual profit of the whole business activities. It is further submitted that the Learned Assessing Officer has not given the details that how these transaction were not matching with the regular books and how these have been considered as genuine and not of bogus purchase and sales. In view of this also the addition made by the Learned Assessing Officer of ₹ 18,26,339/- is most unjustified specially when the assessee has already declared the profit of ₹ 17,86,474/- in the regular return and this was the real profit of the company as the books of accounts are not reflecting true and correct profit because of bogus purchase and sales and inflating the turnover by the assessee. The actual profit earned by the assessee was only ₹ 18,26,339/- out of which ₹ 17,86,474/- should be reduced as profit disclosed by the assessee. The Learned CIT(A) alleged that the assessee has not furnished the trial balance and balance sheet of Silver Star Unit. The assessee's contention is tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar circumstances initially we have given relief in certain cases on the basis that the assessee as a prudent purchaser had discharged its onus by furnishing necessary information about transaction and parties supported with documents as described above but it was surprising for us to note in most of the later cases that the parties stated to have sold the goods to the assessee were neither produced nor found at their given addresses. Thus in such cases only option left to us was to estimate the profit of the assessee upholding the rejection of books of account on the basis that admittedly the claimed purchases from the named parties remained unverifiable. Likewise, in the present case, the above named parties from whom the assessee claimed to have purchased the goods were neither produced nor found in existence in business at their given addresses. Thus the claimed purchases stated to have been made from them remained unverified. The rejection of books of account invoking the provisions of Section 145(3), therefore, cannot be treated as unwarranted and unjustified. We uphold the action of the lower authorities in this regard. However, considering these aspects that there was sub ..... X X X X Extracts X X X X X X X X Extracts X X X X
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