TMI Blog2018 (10) TMI 1489X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 - Shri Waseem Ahmed, Accountant Member And Smt Madhumita Roy, Judicial Member For the Appellant : Shri Saurabh Singh, D.R. For the Respondent : Shri S.N. Divatia, A.R. ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Revenue against the appellate order of the Commissioner of Income Tax(Appeals)-2, Ahmedabad [CIT(A) in short] vide appeal no.CIT(A)- VIII/64/Wd.4(2)/2014-15 and Now CIT(A)-2/135/Wd.4(2)/2014-15 dated 03.05.2016 arising in the assessment order passed under s.143(3) of the Income Tax Act, 1961 (here-in-after referred to as the Act ) dated 28.03.2014 relevant to Assessment Year (AY) 2011-12. 2. The grounds of appeal raised by the assessee are as under:- 1. The ld CIT(A) has erred in law and on facts in restricting the disallowance made by the AO under section 68 with regard to bogus purchases to ₹ 1,55,020/- as against ₹ 39,72,198/- without properly appreciating the facts of the case and the material brought on record. 2. On the facts and in the circumstances of the case, the ld. CIT(A) ought to have upheld the order of the AO. 3. It is therefore, prayed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of town during the relevant time, therefore, no reply to the notice issue u/s 133(6) of the Act was made to the AO before the completion of assessment u/s 143(3) of the Act. The assessee has sold 22ct Gold Ornaments to M/s. Shree Mahavir Jewellers and in exchange, it has purchased 24ct Gold bullion from M/s. Shree Mahavir Jewellers. The amount of purchase and sales with M/s. Shree Mahavir Jewellers is of the identical amount, i.e. ₹ 12,40,160/-. The assessee also claimed that the exchange of Jewellery in the business of Jewellery is very common and prevailing practice. It is done to avoid the losses such as detection of purity and cost of labor. The assessee in support of his claim filed the copy of ledger and confirmation of M/s. Shree Mahavir Jewellers during the appellate proceedings. The assessee has not only purchased 22ct Gold bullion but also has sold 22ct Gold Ornaments to M/s. Shree Mahavir Jewellers. The AO in the assessment proceedings has accepted the sales made by the assessee to M/s. Shree Mahavir Jewellers. In case the purchases are held as bogus then the sales should also be held as bogus. The ld. CIT(A) called for the remand report from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made in those years. 6. The purchases made from the A-Star Jewellers were cleared by issuing account payee cheques. The assessee in support of its claim filed the copy of ledgers, bank statements and copy of returns. There was no defect observed by the AO in reply filed by the AStar Jewellers dated 10.03.2014. 7. The AO has not issued any other notice to M/s. Shree Mahavir Jewellers for confirming the transaction of purchases shown by the assessee. 8. The VAT registration certificate of M/s. Shree Mahavir Jewellers was valid during the relevant time i.e. A.Y. 2011-12. In fact the registration certificate under VAT was canceled very recently. 9. The handwritten bills given by M/s. Shree Mahavir Jewellers do not make the transaction as illegal or bogus. 10. All the bills of M/s. Shree Mahavir Jewellers were duly signed and numbers. 11. The assessee in support of his claim has also filed a copy of PAN and copy of the return filed with VAT authorities thus the identity of M/s. Shree Mahavir Jewellers cannot be doubted. The ld. CIT(A) after considering the submission of the assessee and remand report of the AO has admitted the additional evidence filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same is deleted. 2.10. Now, with regard to the purchases shown from M/s. Shree Mahavir Jewellers, it has been noticed that the aforesaid party neither attended the office of the AO along with books of accounts nor submitted any details and evidences in support of the sales made to the appellant before completion of the assessment. In the present appellate proceedings, the appellant has submitted a hand written ledger account of the appellant on the letter pad of M/s. Shree Mahavir Jewellers in which on the debit side all the entries are made in respect of purchases by the appellant while on the credit side all the entries were made by the purchases from the appellant. In other words, in the entire ledger, the appellant has shown the purchases from the aforesaid party on one hand and at the same time, the sales have also been made resulting into the NIL closing balance on 09/09/2010. It has been submitted that the appellant has purchased the gold bars from the aforesaid party, while the appellant has sold the old ornaments. Since, the transactions in this way shown are not verifiable with the supporting evidences in the form of delivery notes / any evidence in respect of move ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed by the assessee. Ample material had been brought on record by the revenue to show that the purchases were, in fact, not made from KE. These were some of the relevant materials which had not been considered by the Tribunal. Once it was accepted that the supplies were not made by KE to whom payments were alleged to have been made, the question as to whether the purchases were made from some other source ought not to have weighed with the Tribunal as a factor in favour of the assessee. The conclusions of the Tribunal were, therefore, clearly erroneous, contrary to materials on record and had been arrived at without taking into consideration relevant material and placing reliance on irrelevant materials. A question of fact becomes a question of law if the finding is not founded on any evidence or material or if it is contrary to evidence. Similar is the position if it is perverse or there is no direct nexus or link between conclusion of fact and the primary fact upon which the conclusion is based. Where the Tribunal has acted on partly relevant and partly irrelevant materials, and it is not possible to say as to what extent latter has influenced its mind, the finding is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year under consideration as evident from the VAT report placed on Page 9 to 23 of the paper book. As per the VAT of M/s. Shree Mahavir Jewellers, we note that he has declared sales of ₹ 4,15,16,800/- and purchase was declared for ₹ 3,97,26,974/-. From the above details, we note that the amount of purchases made from M/s. Shree Mahavir Jewellers cannot be rejected. In case of purchases from A Star Jewellery, the assessee has filed the copies of the tax invoice and the details of the payment made to the party which is placed on Pages 62 to 77 of the Paper Book. We also note that the assessee has filed the details of closing stock wherein, the purchases made from aforesaid parties were duly recorded. Thus, we hold that such purchases either must have been sold or must be laying in the closing stock of the assessee. Moreover, if purchases have not been doubted from M/s. Shree Mahavir Jewellers then the profit element can be added as made by the ld. CIT(A). In this regard, we find support and guidance from the judgment of Hon ble Gujarat High court in the case of CIT vs. Sathyanarayan P. Rathi reported in 351 ITR 150. The relevant extract of the order is r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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