TMI Blog2012 (5) TMI 816X X X X Extracts X X X X X X X X Extracts X X X X ..... thin his rights to investigate not only the rate and the quantity of the sales, but also the rate and quantity of the purchases, and to examine and compare the same with the market rate. AO has not doubted the sale value declared by the assessee. Rather, he has accepted the same to be genuine. Even so, after having done so, he applied the GP rate of 14 per cent without any basis and computed the value of the alleged unaccounted purchase, without even first ascertaining the market value of such purchases and without discharging his onus to establish that the assessee had paid anything over and above what had been stated in its books of account. The GP rate of 14 per cent was applied ignoring that of 50 per cent applied by himself in the cases noted in the preceding para. He did not even venture to differentiate those cases from the present one. CIT(A), while deciding this issue in favour of the assessee, in our considered opinion, has correctly appreciated the full factual as well as legal matrix, as discussed above. We find no error in the findings of the learned CIT(A) in this regard and we hereby confirm the same. - ITA No. 229/Del/2011 - - - Dated:- 4-5-2012 - G. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing cash credit the assessee has to establish three things : (i) Genuineness of the entry of credit, (ii) Identity of the creditors, and (iii) The creditworthiness of the creditor. The burden to show that all the three conditions/characteristics are satisfied is on the assessee. But in every case of application of section 68, the nature and source of sum found credited has first to be examined. In the present case, the AO has not said anything on the nature of the credit appearing in the books of account. It (sic) has also not recorded any finding as to source of these credits. In the view of the AO and of learned CIT(A), the purchases were bogus and, therefore, there is no question of any sale or export. The credit entries have, therefore, been taken to be bogus for the purposes of section 68. Above approach of the Revenue authorities cannot be accepted. In our considered opinion, it was necessary to examine nature of the entries and thereafter explanation of the assessee, if any, furnished relating to the credit entries. It appears to us that without examining above important aspect and without recording a proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee have been relied upon without putting those statements to the assessee and without considering his request to cross-examine those witnesses used by the Revenue. 13. In the light of above discussion, we are of view that this case should be remitted back to the AO for re-examination and application of s. 68 of the IT Act in the light of our observations made above. During the course of re-examination, it may be necessary to again calf witnesses connected with the purchases shown by the assessee. Having regard to the finding that whereabouts of such witnesses are not known, the Revenue authorities will do well to handover Dasti summons to the assessee, if request is made by the assessee to call the witnesses for his examination. The complaint of the assessee relating to observation of violation of principle of natural justice should also be examined during the course of fresh hearing by the Revenue authorities. Other grounds are linked with the main addition discussed above. Therefore, orders on those grounds are also remanded to the AO for re-examination and for fresh considerations in accordance with law. For the aforesaid reasons, impugned orders are s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted the submission of the assessee. 6. The Revenue is in appeal against the deletion of the addition by the CIT(A), raising the following grounds of appeal : 1. The order of the learned CIT(A) is erroneous and contrary to facts and law. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in deleting the addition made of ₹ 3,69,58,000 made under section 69C of the IT Act being the unexplained expenditure incurred on purchase. 2.1 The learned CIT(A) ignored the findings recorded by the AO and the fact that the assessee is involved in the business of receiving bogus purchase entries to inflate profit for claiming deduction under section 80HHC of the Act. 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in deleting the addition made of ₹ 3,85,752 made under section 69C of the IT Act being the unaccounted cash paid as commission for obtaining bogus purchase bills. 3.1 The learned CIT(A) ignored the findings recorded by the AO and the fact that the assessee is involved in the business of rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the order passed by the AO is barred by limitation. 8. Regarding the cross-objections filed by the assessee, it was argued by the learned counsel for the assessee that the AO has set up an entirely new case in the proceedings after the order passed by the Tribunal under s. 254 of the Act, whereby he has made an addition under section 69C of the Act in respect of unaccounted purchases, as against the addition made in the original assessment under section 68 of the Act, in respect of unexplained credits on account of export sales. In this regard, our attention was invited to the assessment order passed in the original proceedings and the directions given by the Tribunal, wherein the issue was regarding the nature of receipts which the assessee has claimed to be export sales, whereas the AO had treated the same as unexplained receipts and added the same as income of the assessee, by invoking the provisions of section 68 of the Act. Para 12 of the Tribunal order was referred to, wherein, it has been observed that : The sale receipts have been treated as bogus as purchases were bogus and assessee was dealing with people indulging in giving Hawala en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made, is incorrect; that the CIT(A) has not correctly read the order of the Tribunal; that in para 11 of the Tribunal order, at p. 254 of the assessees paper book, the Tribunal has analyzed the provisions of section 68 of the Act; that on pp. 11-12 (assessees paper book 255-256), the Tribunal has observed that: In our considered opinion, it was necessary to examine nature of the entries and thereafter explanation of the assessee, if any, furnished relating to the credit entries. It appears to us that without examining above important aspect and without recording a proper finding thereon, provision of section 68 has not been properly applied. There is no gainsaying that credit in books can be treated as deemed income of the assessee and, therefore, it is necessary to concentrate on the credit, its nature and source. We are unable to say that inference of no sale or export cannot be drawn if the purchases are held to be bogus. But if assessee has shown sales and sale consideration is claimed to have been received through the banking channels with names and addresses of parties who purchased goods and remitted the amount, it will not be proper to hold credits as b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly gone beyond the mandate of the order of the Tribunal; that the scope of the derivative jurisdiction has been illegally enlarged by the AO by entering in a totally new realm, which was not permissible in law; that hence, the addition made by the AO deserves to be deleted at the very threshold, because it was not permissible for the AO to exceed his derivative jurisdiction beyond the directions given by the Tribunal; and that it is settled law that in proceedings under section 254 of the Act, the AO cannot set up a new source and accordingly, the action of the AO in setting up a new case was legally untenable. 13. The learned Departmental Representative, on the other hand, supported the order of the CIT(A). As per the learned Departmental Representative, once the matter has been set aside by the Tribunal and no restrictions have been placed, the AO will be within his rights to examine the issue from his own perspective afresh and in the present case, having found that the exports were genuine, the AO was well within his rights, thereafter, to find out the source of such exports; that in this view of the matter, he was justified in going beyond the requirements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, the AO added this amount to the income of the assessee under the provisions of section 69C of the Act. 19. While in the first round, no deduction had been allowed by the AO to the assessee under the provisions of section 80HHC of the Act, in the second round, recomputing the profit of the assessee at ₹ 59,52,434, rather than that computed by the assessee at ₹ 2,35,22,830, the AO, ignoring the purchases declared by the assessee at ₹ 1,92,87,608, allowed a deduction of ₹ 47,48,494 to the assessee under section 80HHC of the Act. 20. The CIT(A), by virtue of the impugned order, did not accept the assessees challenge that the AO, while passing the assessment order dated 31-12-2009, had transgressed the directions issued by the Tribunal. He, however, accepted the assessees grievance against the addition under section 69C of the Act, made on account of alleged undisclosed purchases. 21. Respectively aggrieved thereby, both the parties are before us by way of the Departments appeal and the assessees cross-objections. 22. The first issue up for determination is that raised in the assessees CO. Nos. 1 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks can be treated as deemed income of the assessee and, therefore, it is necessary to concentrate on the credit, its nature and source. We are unable to say that inference of no sale or export cannot be drawn if the purchases are held to be bogus. But if assessee has also shown sales and sale consideration is claimed to have been received through the banking channels with names and addresses of parties who purchased goods and remitted the amount, it will be proper to hold credits as bogus without examining the credit entries and the background of the creditors. The genuineness or otherwise of the credit entries has to be examined. It is not uncommon to see that trading accounts of the assessees (sic) (are) rejected with (sic) part or whole of purchases are found as ingenuine. In those cases, disallowance is made out of the purchases. If purchases partly or wholly are not genuine, then appropriate disallowance is to be made. Entire ingenuine purchases can be disallowed and sales can be subjected to tax depending upon the facts and the circumstances of the case. In other cases some reasonable amount may have to be allowed as deduction towards purchases. The present case where purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal shows that the directions handed down by the Tribunal are clearly very specific to the effect that in the remanded assessment proceedings, the AO was to restrict the examination to be conducted, to the credit entries of the assessee. If the AO found that these credit entries were genuine, no addition was to be made and the AO was to rest at that and proceed no further. His jurisdiction in the remand proceedings, in compliance of the directions of the Tribunal, was confined to this only, and to no more. The role of the AO was circumscribed by these precise directions given by the Tribunal. 25. That in remand proceedings, the function of the AO is confined to and restricted within the Diktat of the prescription by way of the directions ordering the remand, is judicially well-settled. 26. In Kartar Singh (supra), it has been held that where an assessment is set aside by the Tribunal to the ITO, it is not open to him to introduce into the assessment new sources of income so as to enhance the assessment; and that any power to enhance is confined to the old sources of income which were the subject-matter of appeal before the Tribunal. Sri Gajal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to whether it is open to the ITO to consider the entire matter afresh, notwithstanding the terms of the order of remand. It is, however, not necessary in the instant case to enter into that controversy, because there is another aspect of the matter which arises in this case. In CIT v. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC), the Supreme Court has held that while deciding an appeal from an order passed by the ITO, the AAC has no jurisdiction to assess a source of income which has not been assessed by the ITO and which is not disclosed either in the return filed by the assessee or in the assessment order and the AAC, therefore, cannot travel beyond the subject-matter of the assessment. From this decision, it follows that the AAC cannot, while setting aside the assessment, empower the ITO to go into points which he himself could not have investigated in exercise of his power of enhancement. Now, if the AAC could not have empowered the ITO to assess a source of income not processed by the ITO in the original order of assessment and not disclosed either in the return or in the assessment order, it is difficult to appreciate as to how the ITO could assume jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and making addition under the said section, whereas in the original assessment proceedings, addition had been made under section 68 of the Act, rather than under any other section, much less under section 69C, the AO has clearly transgressed the limits set by the order of remand. This, as held in Basudeo Prasad Agarwalla (supra), is unsustainable in the eye of law. 32. As in the aforementioned cases, in Mahtndra Co. (supra), it has been held, inter alia, that the jurisdiction of the ITO as well as the IAC in respect of a matter where the assessment order has been set aside by the appellate authority is limited to the extent of the directions given by such an authority. Therein, reference was made to CIT v. Fundilal Rikhabchand (1994) 208 ITR 348 (Raj), in which case, it was held that where the AAC has set aside the assessment, a fresh assessment has to be made in accordance with the directions given by the appellate authority and the ITO is bound by those directions. Reference was also made to Cawnpore Chemical Works (P) Ltd. v. CIT (1992) 197 ITR 296 (All), wherein, it was held that where the order of the AAC is specific, it is not open to the ITO to conduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be gainsaid that an order needs to be read in its entirety and bits and pieces thereof cannot be just picked up and read out of context, divorced from the other observations contained in the order. 36. On the basis of the above discussion, CO. Nos. 1 to 4 raised by the assessee are accepted. We hold that the AO has erred in passing the assessment order by going beyond the specific directions issued by the Tribunal while remanding the matter to him and the learned CIT(A) has erroneously upheld this action of the AO. 37. The last cross-objection raised by the assessee, i.e., CO. No. 5 states that the learned CIT(A) has erred in rejecting the contention of the assessee that the order passed by the AO is barred by limitation. 38. No argument regarding this cross-objection was addressed before us on behalf of the assessee. Moreover, no such challenge is seen to have been raised before the learned CIT(A) too. Therefore, CO. No. 5 is rejected. 39. Turning to the Departments appeal, ground Nos. 1 and 5 are general. 40. Apropos ground Nos. 2 and 3, the Department contends that the learned CIT(A) has erred in de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hases of ₹ 3,69,58,004, the learned Departmental Representative clarified that this was done by the AO probably for the reason that the purchases accounted for by the assessee in its books of account were not found to be genuine and the assessee would obviously have made purchases of ₹ 3,69,58,004 from other sources, which had not been accounted for by the assessee in its books of account. He further submitted that at best, credit of the expenditure of ₹ 1,92,87,608, as accounted for in the assessees books of account, could be given, but even if it were to be so done, an unaccounted expenditure of ₹ 1,76,70,396 would still remain, which would, again, be liable for addition under s. 69C of the Act. 43. As regards the evidence of such alleged unaccounted purchases, the learned Departmental Representative submitted that in such type of cases, it is difficult for the Department to collect direct evidence. Concerning the basis for applying the GP rate of 14 per cent, it was submitted that though in the assessment order, the AO has not given any comparable instance, it is just and proper to apply a reasonable rate of profit, which the AO has rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and had carried out import of ₹ 9,47,10,437. He also referred to assessees paper book 149 to 152, which are copies of invoices issued by M/s Mine-O-Gems and to assessees paper book 182, which is a copy of bank statement showing payment made by cheque to M/s Mine-O-Gems. He also referred to the copy of letter dated 5-11-2009 at assessees paper book 318, submitted by Mr. Sanjay Parekh, proprietor of Mine-O-Gems on his personal appearance before the AO, along with copy of the account of the assessee, copies of the invoices and copy of the audited balance sheet. 47. The learned counsel for the assessee also invited our attention to the order passed by the Tribunal, Jaipur Bench in the case of M/s Sambhav Gems Ltd., where also, an issue had come up regarding purchases made by M/s Sambhav Gems Ltd. from M/s Mine-O-Gems. On the basis of the abovesaid order, it was argued that having produced the parties before the AO and such parties having admitted the transactions, it had to be accepted that the obligation of the assessee stood discharged, particularly in view of the facts which had come on record regarding the import and sale by these parties to other different par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not only as to whom payment of such expenditure has been made, but also as to how it was paid; that the GP rate is the difference between the sale value and the purchase value; that in case the AO has any doubt on the GP rate earned by the assessee, he would be well within his rights to investigate not only the rate and the quantity of the sales, but also the rate and quantity of the purchases; that he would be well within his rights to examine and compare the same with the market rate in case of any variation which may raise a doubt about the value of the purchase or the value of the sales; that in case the AO has any such doubt about the purchase value or the sales value, the onus would be on him first to establish that the purchase rate or the sale rate is different from the market rate or value, and also to further establish that the assessee has actually paid money over and above that stated in the books of account in respect of purchases, or has received any amount over and above the sale price stated in the books of account; that in the present case, pertinently, the AO has not doubted the sale value and he has accepted the same as genuine; that having done so, he has simply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; that in the absence of any finding that either the purchase rate, or the quantity stated was incorrect, the AO was not justified in estimating the purchases at a fantastic figure of ₹ 4,29,74,424, as against the actual value of such purchases at ₹ 1,92,87,608; and that the directors of the company are quite experienced in this trade and they have very good connections. In this regard, the learned counsel for the assessee invited our attention to assessees paper book 40 to 44, which is a copy of the audited P L a/c of M/s Kishan Lal Sons, of which, Mr. Ajay Gupta was the proprietor and M/s S.R. Jewels, of which, Mr. Rajeev Gupta was the proprietor from assessment year 1998-99 to assessment year 2001-02. He submitted that both of them are directors of the assessee company and so, the allegation of the AO that the company is new and that the GP rate is too high, is not sustainable. 51. Having heard the parties on this issue and having gone through the material brought on record with regard thereto, it is seen that to enable invocation of the provisions of section 69C of the Act, the AO needs to be in possession of some material indicating that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28-7-2006, in ITA No. 26/Jp/2005, where a GP rate of 55 per cent has been considered to be a reasonable GP rate. In the case of Prakash Chand Vijay (supra), as also in the cases of Jaipur Gem Exports Badhalias of Jaipur, the very same AO had, pertinently, himself accepted the gross profit of 50 per cent under similar circumstances. The learned CIT(A) has taken note of this fact in para 6.7 of the impugned order. 54. The GP rate is the difference between the sale value and the purchase value. In the present case, if the AO harboured any doubt concerning the GP rate earned by the assessee, it was well within his rights to investigate not only the rate and the quantity of the sales, but also the rate and quantity of the purchases, and to examine and compare the same with the market rate. In case he had any doubt about the purchase value or the sales value, it was for him to first establish that the purchase rate or the sale rate was different from the market rate or value, and further that the assessee had actually paid any amount over and above the amount stated in the books of account in respect of purchases, or that the assessee had received any amount over and abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoices and the items exported by the assessee. The AO also does not say that the stated rates of these items, as per the purchase invoices, are lower than the market rates. And that being the case, the AO was, obviously, not justified in arbitrarily applying a GP rate of 14 per cent on the export sales. Further, in the absence of any finding that either the purchase rate, or the quantity stated was incorrect, there was nothing prompting the AO to estimate the purchases at ₹ 4,29,74,424 (sic-- ₹ 3,69,58,004) as against the value of such purchases declared by the assessee at ₹ 1,92,87,608. 58. Then, the copies of the audited P L a/c of M/s Kishan Lal Sons, of which Mr. Ajay Gupta was the proprietor and M/s S.R. Jewels, of which Mr. Rajeev Gupta was the proprietor from assessment year 1998-99 to assessment year 2001-02 (assessees paper book 40 to 44). Both, Ajay Gupta and Rajeev Gupta are directors of the assessee company and so, the observation of the AO that the assessee company was a new company and that the GP rate was too high, was wrong. 59. Then, it is seen that the finding recorded by the AO to the effect that the two supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proprietor of M/s Mine-O-Gems to the AO, which letter he submitted to the AO when he personally appeared before him, along with a copy of the account of the assessee, copies of the invoices issued by the concern and copy of the audited balance sheet of the concern. 62. Still further, the order passed by the Tribunal, Jaipur Bench in the case of M/s Sambhav Gems Ltd. shows that therein also, the matter regarding purchases made by the said M/s Sambhav Gems from M/s Mine-O-Gems was at issue. The assessee had produced the parties before the AO and they had unambiguously admitted the transaction. 63. Therefore, it can, in no manner, be disputed that the assessee had duly discharged its onus, particularly by duly bringing on record the facts regarding the import by these parties and sale to other different parties. 64. The observations of the learned CIT(A) on this issue are as under : 6.5 Now coming to the issue of addition made by the AO under s. 69C of the Act. The appellant has submitted that on merits no addition under section 69C is called for. Adverting to the provisions of section 69C, it has been contended that it app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e normal GP rate varies between 10 per cent to 15 per cent. However, in spite of specific query by the under-signed, no instances of comparable cases have been made available. On the other hand, the appellant has filed copies of assessment orders in the cases of Prakash Chand Vijay, Jaipur Gem Exports and Badhalias of Jaipur where gross profit of more than 50 per cent has been accepted by the AO himself/Tribunal. 6.8 As stated earlier, the AO, while completing the original assessment has made reference to some inquires made by the Investigation Wing, Jaipur in the cases of M/s Mine-O-Gems and M/s Vinayak Overseas. Therefore, an attempt was made to find out as to what compliance has been made by the appellant company in relation to the directions given by the Hon'ble Tribunal regarding making the aforesaid two parties available for examination by the AO. It has been pointed out by the learned counsel for the appellant that the proprietor of M/s Mine-O-Gems, Shri Sanjay Pareek has appeared twice before the AO and has confirmed the transactions entered into with the appellant company. It is also stated that the learned AO has recorded his statement in the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found to ascertain that assessee was issuing bogus bills only. The allegation of the AO that the assessee was only issuing bogus bills without supplying of the goods is totally based on the statement of Shri Mohan Prakash Sharma who worked with the assessee for the two years only. Undisputedly, Shri Mohan Prakash Sharma was not employee or power of attorney holder at the time of giving his statement. He had left the services of the assessee much before the date of search. Under these circumstances, there is no reason to doubt the contention of the assessee that he was not having good relation with Shri Mohan Prakash Sharma and he had made false statement due to his business rivalry and jealousness with the assessee. It is also worth noting that statement of Shri Mohan Prakash Sharma was recorded behind the assessee and no opportunity of confrontation was afforded to the assessee which was required on the part of the AO to meet out the well established principle of natural justice. In his affidavit Shri Mohan Prakash Sharma has given the period he was working with the assessee i.e. 1-4-1997 to 30-11-1999. The search was however, conducted at the premises of Naman Gems (P) Ltd. and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004-05 0 TOTAL 49,69,91,671/- Para 15. Under the above facts and circumstances, we are of the view that there was no sufficient material or evidence before the AO to come to the conclusion that the assessee was only issuing bogus bills on commission basis without delivering the goods. The learned CIT(A) was thus not justified in upholding the said finding of the AO. We thus while setting aside order of the lower authorities in this regard decide the issue in favour of the assessee with direction to delete the addition made and sustained by the lower authorities on account of estimation of the alleged income earned on commission for supplying the bogus bills. The ground No. 2 of the appeals preferred by the assessee is thus decided in favour of the assessee by allowing the same. As regards purchases from Shri Sanjay Pareek, proprietor of Mine-O-Gems, it has been pointed by the learned counsel for the appellant that in the case of Scunbhav Gems Ltd., the Hon'ble Tribunal, Jaipur has recorded the following findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tence at the time when the assessee claimed to have made purchases of goods from them. There is also no direct evidence that the amount paid by the assessee through account payee cheques to the aforesaid parties was withdrawn by these parties to return these amounts after deducting commission by these parties to the assessee. This submission of the learned Authorised Representative also carries substance that after completion of a transaction it is beyond control of a purchaser to secure the presence of sellers before the AO to establish the genuineness of the transaction. Considering the totality of aforesaid facts and circumstances and material available on record we are of the view that the Department could not succeed in establishing beyond doubt that the claim of the assessee that the goods were purchased from the aforesaid five parties are false specially when there are several materials including sales-tax registration, PAN, bank statement etc., and the very conduction of search under s. 132 on the premises of some of them and recording of statements of some related persons to nurture the belief that the assessee had purchased the goods from the aforesaid parties only. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o evidence suggesting any purchase from the so-called unknown parties was found in the course of search operation at the business premises of the appellant company and the residential premises of its directors. Therefore, the finding of the learned AO that the appellant has made unexplained purchases of ₹ 3,69,58,004 from unknown parties and made payment thereof out of undisclosed sources is without any material/evidence. 6.13 As stated earlier, the appellant company had come into existence only in the month of December, 2000 and its first business activity had commenced only in the month of February, 2001. Therefore, it is practically impossible that even before the appellant could start any business activities, it had generated huge unaccounted income of ₹ 3,69,58,004 for making payment against purchases from the unknown parties. Therefore, in my view, the finding of the learned AO is based only on conjectures and surmises and is not sustainable in law. The Hon'ble Supreme Court, in the case of CIT v. Smt P.K. Noorjahan (1999) 237 ITR 570 (SC), has considered a somewhat identical fact situation and recorded the following finding : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of investments could not be treated as income of the assessee. The High Court has agreed with the said view of the Tribunal. We also do not find any error in the said finding recorded by the Tribunal. There is thus no merit in these appeals and the same are accordingly dismissed. 6.14 As regards purchases from Shri Sanjay Pareek, proprietor of M/s Mine-O-Gems, it is stated that in the case of Sambhav Gems Ltd. v. Asstt. CIT, the Hon'ble Tribunal has held that both Shri G.S. Pareek and Shri Sanjay Pareek were engaged in import, export and trading of precious and semi-precious stones and there was no material/evidence with the IT Department to substantiate the allegation that these two persons were only issuing bogus bills without actual bills without actual delivery of goods. In the case of Sambhav Gems Ltd. also the facts were that it has purchased precious and semi-precious stones from five parties of Jaipur including Shri G.S. Pareek and Shri Sanjay Pareek and in the assessment all the purchases from the aforesaid persons were held to be bogus. Though in the first appeal the action of the Department was upheld by the CIT(A), the Hon'ble Tribunal, Jaipur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue of genuineness of the claim of the purchase. 6.15 The AO has also made an observation that the exorbitant rate of profit of 55.12 per cent is just impractical and impossible and the assessee has shown the higher rate of profit only to book maximum export profit and claim deduction under s. 80HHC of the IT Act, 1961. Further the AO has also observed that in the export trade the prevailing GP rate ranges between 10-15 per cent and has therefore applied rate of 14 per cent to the case of the appellant. In this regard, as stated earlier, the learned counsel for the appellant has pointed out that the AO has not mentioned any comparable cases nor has he disclosed the basis on which he has come to the conclusion that the profit in this line of business ranges between 10-15 per cent. Therefore, according to the learned counsel the observation of the AO is nothing but conjectures and surmises and has no evidentiary value in taxation matters. Further, it has been pointed out by him that in the case of Prakash Chand Vijay v. Dy. CIT, Circle-5, Jaipur, assessment year 2001-02, the Hon'ble Tribunal has held in identical facts and circumstances that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GP rates of 58.46 per cent and 45 per cent respectively have been held to be reasonable by the AO himself. 6.17 In view of the above facts and under the circumstances, there is no merit in the claim of the learned AO that the GP rate in the cases of the assessees dealing in this line of business ranges only between 10-15 per cent as the AO himself has not substantiated this claim with any material. On the other hand, the appellant company has substantiated a higher rate of gross profit with specific instances as discussed above. In view of the above facts and looking to the submissions made by the appellant that it had discharged its primary onus by furnishing purchase bills, sales-tax registration number, PAN details, confirmation letters and bank statements of the two suppliers and both of them being existing assessees, I have no hesitation in holding that the appellant has duly explained the purchases made from M/s Mine-O-Gems and M/s Vinayak Overseas and the AO has no evidence, let alone credible evidence, to support his case that the purchases in question were not made from the aforesaid parties and the same were made from somewhere else for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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