TMI Blog2019 (9) TMI 488X X X X Extracts X X X X X X X X Extracts X X X X ..... AM SINGH YADAV, AM Revenue by: Shri A.S. Nehra (Addl. CIT) Assessee by: Shri P.C. Parwal (CA) ORDER PER VIJAY PAL RAO, JM : This appeal by the Revenue is directed against the order dated 09.10.2018 of ld. CIT (A)-3, Jaipur for the assessment year 2011-12. The revenue has raised the following grounds :- 1. On the facts and in the circumstances of the case, whether the ld. CIT (A) was justified in applying average GP rate of 8.70% thereby restricting the addition to ₹ 4,26,171/- as against the addition of ₹ 75,62,336/- made by the AO on account of unverifiable purchases from URD suppliers (25% of total ₹ 3,02,49,345/-) ignoring the facts that the assessee firm failed to provide details/complete address of the URD suppliers during the course of assessment as well as in remand proceedings? 2. On the facts and in the circumstances of the case, whether the ld. CIT (A) was justified in applying average GP rate ignoring the decisions/findings given by the Hon ble Apex Court in case of (i) M/s. Kachwala Gems vs. Joint Commissioner of Income Tax (288 ITR 10: 2007) and (ii) N.K. Proteins Ltd. vs. DCIT order dated 16.01.2017 (SLP No. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 13 parties as unregistered dealers whereas the assessee furnished all the details of these suppliers which include PAN, TIN, CST and RST numbers. He has referred to the remand report of the AO reproduced at pages 10 11 of the order of ld. CIT (A) and submitted that the AO has admitted that the assessee has furnished all the details in respect of these 13 parties and, therefore, the order of the AO is based on assumption and wrong facts and rather contrary to the facts. He has further contended that the assessee furnished all the details of these parties including PAN, TIN and complete address. Once PAN and TIN was provided by the assessee, then the existence of suppliers cannot be questioned. He has further submitted that once the books of account were rejected by the AO, then the only option available with the AO was to estimate the income of the assessee on some reasonable basis and not to make any disallowance and addition to the returned income of the assessee. He has referred to the order of the ld. CIT (A) and submitted that the ld. CIT (A) has followed the decision of this Tribunal wherein it was held that once the books of account were rejected, the income of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, once the AO has rejected the books of account by invoking the provisions of section 145(3), then the only course of action available under the provisions of section 145(3) read with section 144 of the Act is to estimate the income on some proper and reasonable basis. There is no quarrel that the past history of the GP declared by the assessee is a reasonable basis for estimation of income. The ld. CIT (A) has considered this issue in ara 4.3 as under :- 4.3. I have carefully considered the observation made by the Assessing Officer in the assessment order, submission and additional evidences filed by the A/R of the appellant, remand report of the Assessing Officer and rejoinder filed by the A/R of the appellant. I find that only issue involved in these grounds is that the Assessing Officer treated the purchases made from 13 parties as non verifiable and made disallowance of 25% of the purchases of ₹ 3,02,49,345/-. In the appellant proceeding the A/R submitted that appellant is maintaining day to day books of accounts along with stock register. Before the Assessing Officer complete tally was produced. The Assessing Officer examined the books in tally and identified the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le purchase was restricted by applying the GP addition @ 25.50%. We are of the considered view that once the books of account are rejected by the AO then, the only course of action left with the AO is to assess the income of the assessee on the basis of estimate and best judgment. The Assessing Officer after rejection of books of account has further made addition of 25% of tainted sales to the books result which is not permissible when the AO resorted invoke the provisions of section 145(3) of the Act. Thus, this action of the AO is contrary to the decision of rejecting the books of accounts. Accordingly, we do concur with the view of the ld. CIT(A) in applying the GP rate for assessment of the income of the assessee after the rejection of books of account. This Tribunal comprising the same combination in case of CIT vs. Allied Gems Corporation in ITA No. 794/JP/2011 vide order dated 15.12.2017 considering then an identical issue has held in para 5 as under:- 5. We have considered the rival submissions as well as relevant material on record. The Assessing Officer rejected the books of account by invoking the provisions of section 145(3). The issue of rejection of books of acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the identity of the trade creditors as well as the genuineness of the transaction. In this case, admittedly the assessee has neither been able to disclose the complete addresses of the trade creditors nor is able to give the complete addresses of the consignors nor the name has been mentioned on the challan forms, so the verification of the same by the Assessing Officer became totally impracticable on account of lack of this complete information supplied by the assessee. It means that the assessee failed in establishing the genuineness of the so called trade creditors appearing in its books of account. We are further of the opinion that since in the instant case of the assessee, the point under consideration before us is regarding the genuineness of the liability amounting to ₹ 1,75,26,586 shown by the assessee in its balance-sheet as trade creditors, so it was not relevant for us to consider as to whether the purchases made by the assessee were genuine or not or to whether the assessee has inflated those purchases or not. It is also not material to consider whether the GRs from sale-tax department were verified or not, so, the CIT(A) on considering these points was not jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng without any substance or merits. Accordingly, in view of the above facts and circumstances of the case and the decision of this Tribunal in case of ACIT vs. M/s Allied Gems Corporation (Supra) the grounds raised by the Revenue in this appeal are without any substance or merits. As regards the decisions relied upon by the ld. D/R, we note that in case of M/s. Kanchwala Gems vs. JCIT (supra), the income was estimated by taking the GP on the entire sales and not an addition was made to the returned income by making the disallowance of unverifiable purchases. Further, in case of M/s. N.K. Proteins Ltd. vs. DCIT (supra), it was a case of addition based on inflated purchases and not the estimation of income by rejecting the books of account. Therefore, those decisions relied upon by the Revenue would not help in the present case when the AO has rejected the books of account of the assessee. Accordingly, following the earlier order of this Tribunal, we do not find any error or illegality in the impugned order of the ld. CIT (A). 6. In the result, appeal of the revenue is dismissed. Order is pronounced in the open court on 22/05/2019. - - TaxTMI - TMITax - Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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