Antiquariat, Jaipur vs Assessee

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 13 & 14/JP/2013 fu/kZkj.k o"kZ@Assessment Years : 2004-05 & 2005-06

M/s Antiquariat cuke D.C.I.T. Deshera Kothi, Amer Road, Vs. Central Circle-2, Jaipur. Jaipur.

LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABFA 7989 B vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri G.G. Mundra (C.A.) jktLo dh vksj ls@ Revenue by : Mrs. Neena Jeph (JCIT)

lquokbZ dh rkjh[k@ Date of Hearing : 16/01/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 27/03/2015

vkns'k@ ORDER

PER: T.R. MEENA, A.M.

These are the appeals filed by the assessee against two different

orders dated 01/10/2012 passed by the learned CIT (A) (Central),

Jaipur for A.Y. 2004-05 and 2005-06. The ground of appeals for both

the assessment years is as under:-

"1 That on the facts and in the circumstances of the case the Ld. CIT(A) is wrong, unjust and has erred in law in confirming penalty of Rs. 179375/- for A.Y. 2 ITA 13 & 14/JP/2013_ M/s Antiquariat Vs. DCIT

2004-05 and Rs. 73,185/- for A.Y. 2005-06 imposed by the Assessing Officer U/s 271(1)(c) of the I.T. Act, 1961."

2. The sole ground of appeal in each year is against confirming the

penalty at Rs. 1,79,375/- in A.Y. 2004-05 and Rs. 73,185/- in A.Y. 2005-

06. The assessee is in retail sale of handicraft /gems/stones etc. In this

case, scrutiny U/s 143(3) of the Income Tax Act, 1961 (in short the Act)

was made by the Assessing Officer. The assessee filed the returned

income for A.Y. 2004-05 on 23/3/2005 and 31/10/2005 for A.Y. 2005-

06 at Rs. 49,49,630/- and 63,56,854/- respectively. The ld. Assessing

Officer found that there were unverifiable purchases in both the years.

Therefore, he made detailed investigation regarding these purchases

and he has given detailed findings and also reproduced the statement

recorded during the course of search and seizure operation at Newai,

district- Tonk of Shri Nemi chand Jain, Smt. Shakuntala Devi, Shri

Shikhar Chand Jain, Shri Satyanarayan Jain, Shri Bimal Kumar Jain, Shri

Kailash Chand Yogi, Shri Sandip Chabra, Shri Bhagchand Khandelwal,

Shri Sanjay Bairathi and Shri Raj Kumar Khandelwal. The Ld. Assessing

Officer held on the basis of evidence collected and statement recorded

in the case of M/s Laxmi Diagold Jewellers, Newai, Tonk and it was held

by him that there was no business of that concern except giving the 3 ITA 13 & 14/JP/2013_ M/s Antiquariat Vs. DCIT

bogus bills to the assessee. Similar findings were also given in respect

of other parties namely Mine-o-Gems, Manvi Export, R.H. Jewellers,

Shri Ji Jewellers, R.K. Gems and Arihant Export. He also relied upon

various cases i.e. Assam Pesticides and Agro Chemicals Vs. CIT (1997)

227 ITR 846 (Gau), M/s India Woolen Carpet Factory Vs. ITAT & Ors.

(2002) CTR 178 (Raj) 420, Kachwala Gems Vs. JCIT reported in Tax

World, Feb. 2004 page No. 77, CIT Vs. La Medica, 250 ITR 575 (Delhi)

and disallowed bogus purchases of Rs. 2,05,14,654 for A.Y. 2004-05

and Rs. 72,20,347/- for A.Y. 2005-06. The ld. CIT(A) confirmed these

additions. The assessee challenged the order of the ld. CIT(A) before

the ITAT in quantum for both the years. The Hon'ble ITAT has held in

A.Y. 2004-05 as under:-

"We are of the view that sustaining of addition of Rs. 5,00,000/- would be justifiable to plug the leakage, if any caused due to possibility of claimed purchases in question from someone else as the A.O. has not doubted the sales and due to the non maintenance of quantitative details of purchases and sales as well as of opening and closing stock while upholding the rejection of books of account under section 145(3) of the Act. We, thus, while setting aside orders of the lower 4 ITA 13 & 14/JP/2013_ M/s Antiquariat Vs. DCIT

authorities, direct the A.O. to sustain addition of Rs. 5,00,000/-."

Similar finding has been given by the Hon'ble ITAT for A.Y. 2005-06,

which is reproduced as under:-

" Considering all these facts and circumstances of the case, as discussed above in totality, we are of the view that instead of denial of total purchases in question, especially when sales have not been denied by the A.O. and that the quantitative details of purchases and sales as well as of opening and closing stock have not been maintained, it would be just and proper to sustain addition of Rs. 2,00,000/- during the year to plus the leakage, if any, caused by the above discrepancies. We thus while setting aside orders of the lower authorities, direct the A.O. to sustain addition of Rs. 2,00,000/- only."

The ld. Assessing Officer before imposing penalty U/s 271(1)(c) has

given reasonable opportunity of being heard to the assessee. After

considering the assessee's reply, the ld Assessing Officer reproduced

Section 271(1)(c) of the Act in both the years and held as under:-

"7. The above provisions of section 271(1)(c) read with its Explanation-1 make it clear that if the Assessing Officer is satisfied that any person has concealed the particulars of his 5 ITA 13 & 14/JP/2013_ M/s Antiquariat Vs. DCIT

income or furnished inaccurate particulars of such income or where in respect of any facts material to the computation of the total income of any person under this Act, such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer to be false, or such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to be computation of his total income have been disclosed by him, then the case of the assessee comes within the purview of section 271(1)(c). IN this case the books of account of the assessee were not found complete and errorless which has also been approved by the ld. CIT(A) and the profit shown from these defective books cannot be true profit of the business and as such assessee has shown lesser business profit which was detected by the Assessing Officer and was duly approved by the CIT(A). For rejection of books, positive material evidences were brought on record by the A.O. to disprove the explanation of the assessee and it was established that the purchases are genuine. Hence, having defects in the books of account and furnishing of inaccurate particulars of income by disclosing lesser business profit leads to attract penal provisions by virtue of section 271(1)(c). further, the explanation put forth by the assessee in his defence during course of assessment proceedings and appellant proceedings have not been found satisfactory and 6 ITA 13 & 14/JP/2013_ M/s Antiquariat Vs. DCIT

in this way also the case of the assessee falls in the category of Explanation-1 to section 271(1)(c).

8. By disclosing incorrect profit of the business assessee has tried to hide his correct particulars of income to be furnished before taxing authorities so as to conceal the taxable income and this act of assessee attract the penal provisions of section 271(1)(c) read with its Explanation."

He finally held that the assessee has furnished inaccurate particulars of

income to the extent of Rs. 5 lacs for A.Y. 2004-05 and Rs. 2 lacs for

A.Y. 2005-06 within the meaning of Section 271(1)(c) of the Act.

Therefore, he imposed penalty at Rs. 1,79,375/- for A.Y. 2004-05 and

Rs. 73,185/- for A.Y. 2005-06, which is 100% tax sought to be evaded.

3. Being aggrieved by the order of the Assessing Officer in both the

years, the assessee carried the matter before the learned CIT(A), who

had submitted before him that no penalty U/s 271(1)(c) of the Act can

be levied in this case as the addition had been made on estimate basis

but the ld. CIT(A) decided as under:-

"The appellant has contended that no penalty U/s 271(1)(c) of IT Act can be levied in this case as the addition has been made on estimate basis. Such contention appears to be factually incorrect in as much as in this case the addition has not been made on estimate basis and specific addition on account of bogus purchases was made 7 ITA 13 & 14/JP/2013_ M/s Antiquariat Vs. DCIT

which was restricted to Rs. 5 lacs by Hon'ble ITAT. The appellant has also placed reliance on the case laws reported in CIT Vs. Aero Traders Pvt. Ltd. (2010) 322 ITR

316. In this case the A.O. has rejected the books of accounts and accordingly estimated the profit and penalty was imposed on account of such addition made on estimate basis. However, the facts of the appellant's case are different in as much as it is not a case where profit has been estimated by way of applying any particular GP or NP rate and in the appellant's case addition was made specifically on account of bogus purchases. The appellant has also placed reliance on the decision of Hon'ble ITAT Jaipur in the case of Kamlesh Dangayach Prop. M/s Green Fire Vs. ACIT, circle-1 in ITA No. 18 or 19/JP/2012 dated 16/05/2w012. On perusal of the order of the Hon'ble ITAT it is noted, that in this case the A.O. has applied GP rate of 11% keeping in view the past history of GP at 14% the worthy CIT(A) reduced such GP rate to 8% and the A.O. has accordingly imposed penalty on account of such GP addition. The Hon'ble Tribunal has accordingly held that sustaining of high GP rate to plug leakage of income will not constitute concealment of income and accordingly penalty imposed by A.O. was deleted. Again the facts and circumstances of the appellant's case are different with the case of M/s Kamlesh Dangayach discussed above in as much as in appellant's case there is no such application of 8 ITA 13 & 14/JP/2013_ M/s Antiquariat Vs. DCIT

GP rate and whatever addition was made by the A.O. was specifically on account of bogus purchases. Therefore, even the case laws relied upon by the appellant are not applicable to the facts and circumstances of the appellant's case.

He further held that in these circumstances it is a case where the appellant was essentially concealed its income by way of wrong claim of bogus purchases amounting to Rs. 5 lacs. In this context reliance is also placed on the decision of Hon'ble High Court of Gujarat in the case of A.M. Shah & Co. Vs. CIT (1999) 238 ITR 415 wherein it has been held that where there are discrepancies in books of accounts and if the disclosure and particulars of income is incorrect such a default attract penalty u/s 271(1)(c) of IT Act. In this case there was clear finding of the A.O. that is in respect of A.Y. 1971-72, the assessee has not entered all sales and purchases in the books of accounts and that bogus purchase were shown. The A.O. has also pointed out serious discrepancies in the stock books etc. and the A.O. also reported that the assessee had resorted to claim bogus purchases/ as also non-recording of purchases. In the background of such findings penalty u/s 271(1)(c) of IT Act was imposed which was confirmed by the Hon'ble Court. The facts and circumstances of the appellant's case are also broadly similar to the facts and circumstances of the above 9 ITA 13 & 14/JP/2013_ M/s Antiquariat Vs. DCIT

mentioned case in as much as the appellant has also made claim for bogus purchases which were sustained to the extent of Rs. 5 lacs.

Ld. CIT(A) has further held that the reliance is also placed on the decision of Hon'ble Delhi High Court in the case of CIT Vs. Zoom Communication Pvt. Ltd. reported in (2010) 327 ITR 510. In this case, the Hon'ble Court has essentially held that if the assessee has made a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be of bonafide nature, then it will be definitely a case of penalty u/s 271(1)(c) of IT Act.

The facts and circumstances of the appellant's case also indicate the appellant has made absolutely incorrect claim on account of bogus purchases to the extent of Rs. 5 lacs and therefore imposition of penalty was justified, keeping in view the proposition of law laid down by the Hon'ble High Courts as discussed above.

Having considered all the facts and circumstances as discussed above, I am of the considered view the assessee concealed his income to the extent of Rs. 5 lacs by way of bogus claim/wrong claim on account of bogus purchases and therefore penalty u/s 271(1)(c) of IT Act amounting to Rs. 1,79,375/- was rightly imposed by the A.O.. the action of the A.O. is accordingly confirmed."

10 ITA 13 & 14/JP/2013_ M/s Antiquariat Vs. DCIT

Similar finding has been given by the ld CIT(A) for A.Y. 2005-06.

4. Now the assessee is in appeals before us. The learned A.R. for

the assessee has submitted that the Hon'ble ITAT sustained the

estimated addition of Rs. 5,00,000/- on probability only i.e. to "plug the

leakage, if any caused by the above discrepancy". This does not

amount to concealment of furnishing of inaccurate particulars within the

meaning of Section 271(1)(c). The Ld. A.O. in penalty order made

discussion based on his findings on assessment order or that of CIT(A)

in appeal order without taking into consideration the findings of Hon'ble

ITAT in its appeal order. The Ld. CIT(A) wrongly rejected submissions

of assessee and legal precedents cited by assessee. The judgment of

A.M. Shah & Co. Vs. CIT (1999) 238 ITR 415 is not applicable because

in that case finding of A.O. was that assessee has not entered all sales

and purchases in the books of accounts which facts are not in the case

of assessee. In case of CIT Vs. Zoom Communication P. Ltd. (2010) 327

ITR 510 it was held that "if the assessee has made a claim which is not

only incorrect in law but is also wholly without basis and explanation

furnished for making such a claim is not found bonafide' then it will be

definitely a case of penalty u/s 271(1)(c) of I.T. Act which facts also are

not in case of assessee firm. Thus Ld. CIT(A) has by wrongly applying 11 ITA 13 & 14/JP/2013_ M/s Antiquariat Vs. DCIT

these judgments has wrongly upheld the penalty. He further submitted

that it is settled law that unless there is conclusive evidence to prove

that assessee had, in fact, concealed income to the extent of addition

made no penalty can be levied U/s 271(1)(c). Merely because addition

had been made in the assessment, the penalty cannot be levied u/s

271(1)(c) by simply invoking explanation-I. The addition is on estimate

and so there is no justification in imposing penalty especially when

necessary information/particulars were furnished by assessee. In case

of assessee addition has been made after rejection of books of accounts

and in appeal substantial relief was allowed by ITAT and addition of Rs.

5,00,000/- sustained by ITAT to plug the leakage, if any, caused due to

possibility of claimed purchases in question from someone else as the

A.O. has not doubted the sales and due to non-maintenance of

quantitative details of purchases and sales as well as opening and

closing stock while upholding the rejection of books of accounts u/s

145(3) of the Act and on such facts of case imposition of penalty for

furnishing inaccurate particulars is not justified. Reliance is placed on

the judgment in case of CIT Vs. Aero traders P. Ltd. (2010) 322 ITR

316 and Naresh Chand Agarwal Vs. CIT (2014) 265 CTR 306 where it is

held no penalty U/s 271(1)(c) can be imposed where addition is made 12 ITA 13 & 14/JP/2013_ M/s Antiquariat Vs. DCIT

on estimate basis. The Hon'ble ITAT, Jaipur Bench, Jaipur in case of

Kamlesh Dangayach Vs. ACIT (ITA No. 18 & 19/JP/2012 order dated

16/05/2012)- copy annexed exactly on similar facts deleted the penalty

U/s 271(1)(c) which judgment squarely applies in the case. In view of

above submissions penalty of Rs. 1,79,375 confirmed by Ld CIT(A)

deserves to be deleted. Similar arguments were advanced by the ld. AR

for A.Y. 2005-06.

5. At the outset, the learned D.R. supported the order of the Ld.

CIT(A).

6. We have heard the rival contentions of both the parties and

perused the material available on record. It is fact that the additions

were confirmed by the lower authorities as well as ITAT on the basis of

unverifiable/bogus purchases, for which department had collected

number of evidences including statement during the course of search

and seizure at M/s Laxmi Diagold Jewellers and also in case of other

suppliers. The Ld. Assessing Officer had reproduced the statements of

these parties in the assessment order and came to conclusion that

these transactions were bogus. The Coordinate Bench has confirmed

the quantum addition of Rs. 5 lacs in A.Y. 2004-05 and Rs. 2 lacs in A.Y. 13 ITA 13 & 14/JP/2013_ M/s Antiquariat Vs. DCIT

2005-06 on the basis of findings given by the lower authorities. The AR

of the assessee claimed that these additions were made on estimate

basis, is not acceptable in view of the fact that the additions were made

and confirmed on the basis of bogus purchases detected by the

department in search/investigation made by the various authorities

including the Assessing Officer. The Ld. CIT(A) has considered the

decision of Hon'ble Gujarat High Court in the case of A.M. Shah & CO.

Vs. CIT (supra) and decision of Hon'ble Delhi High Court in the case of

CIT Vs. Zoom Communication Pvt. Ltd. (supra), which has been

objected by the ld AR on the ground that the facts of both the cases are

not similar and case laws cited by him are in favour of the assessee, is

not correct as in both the cases the Hon'ble courts had found both the

element of 271(1)(c) i.e. inaccurate particulars of income and

concealment of income. The case laws referred by the assessee are not

squarely applicable on facts. The explanation submitted by the assessee

was not bonafide. The assessee has not correlated any sale with

reference to bogus purchases made in the books of account from the

various parties. The Hon'ble Supreme Court in the case of Mak Data P.

Ltd. Vs. CIT (2013) 358 ITR 593 (SC) has held that the assessee fails to

offer an explanation which is bonafide and proved that all the material 14 ITA 13 & 14/JP/2013_ M/s Antiquariat Vs. DCIT

facts have been disclosed, penalty proceeding is justified. In the case of

CIT Vs. Kalindi Rail Nirman Engineering Ltd.(2014) 365 ITR 304 (Delhi)

has held that even imposition of penalty on estimate is justified, are

squarely applicable. Therefore, we confirm the order of the ld. CIT(A) in

both the assessment years.

7. In the result, the assessee's appeals for both the assessment

years are dismissed.

Order pronounced in the open court on 27/03/2015.

Sd/- Sd/- ¼vkj-ih-rksykuh½ ¼Vh-vkj-ehuk½ (R.P.Tolani) (T.R. Meena) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur

fnukad@Dated:- 27th March, 2015

*Ranjan

vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- M/s Antiquariat, Jaipur

2. izR;FkhZ@ The Respondent- DCIT, Central Circle-2, Jaipur.

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDr¼vihy½@The CIT(A) 15 ITA 13 & 14/JP/2013_ M/s Antiquariat Vs. DCIT

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No. 13 & 14/JP/2013)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@Asst. Registrar