Arvind Gupta, Jaipur vs Department Of Income Tax

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. 644/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2007-08

Assistant Commissioner of cuke Arvind Gupta, Income Tax, Vs. Prop- M/s Pioneer Creations, Circle-2, Jaipur. 2197, Fatehpuria Bhawan, Haldiyon Ka Rasta, Jaipur.

LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABQPG 6211 L vihykFkhZ@Appellant izR;FkhZ@Respondent

jktLo dh vksj ls@ Revenue by : Shri Rajesh Ojha (JCIT) fu/kZkfjrh dh vksj ls@ Assessee by : None (date was noted)

lquokbZ dh rkjh[k@ Date of Hearing : 21/04/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 05/06/2015

vkns'k@ ORDER

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

This is an appeal filed by the revenue against the order dated

12/04/2012 passed by the learned CIT (A)-I, Jaipur for A.Y. 2007-08

The effective grounds of appeal are as under:-

"Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) is justified in:-

2 ITA 644/JP/2012_ ACIT Vs. ARvind Gupta

"1 directing to applying g.p. rate of 6.50% and thereby reducing the trading addition to Rs. 13,69,762/-

made by the A.O. by disallowing @ 25% unverifiable purchases of Rs. 57,48,691/- though the rejection of books of accounts U/s 145(3) of the I.T. Act, 1961 was upheld.

2. Reducing the addition keeping in view the decision of ld. CIT(A) in the case of M/s Nand Kishore Meghraj in ITA No. 433/JP/2009 and confirmed by Hon'ble ITAT, Jaipur Bench, Jaipur."

2. Both the grounds of appeal are interlinked and against reducing

the trading addition of Rs. 13,69,762/- made by the A.O. by disallowing

@ 25% unverifiable purchases of Rs. 57,48,691/- though the rejection

of books of accounts U/s 145(3) of the IT Act, 1961 was upheld. The ld

Assessing Officer observed that the assessee is running a proprietory

concern M/s Pioneer Creations and engaged in the business of

wholesale manufacturing and export of silver jewellery and trading of

semi precious stones. The assessee filed its return for assessment year

2007-08 on 31/10/2007 declaring income of Rs. 5,94,670/-. The case

was scrutinized U/s 143(3) of the income Tax Act, 1961 (in short the

Act). The ld Assessing Officer observed that the assessee claimed that

on total sales of Rs. 4,54,16,803/- gross profit of Rs. 28,84,683/- has

been declared giving a G.P. rate of 6.35%. In the immediately

preceding year assessee has shown total sales of Rs. 2,70,32,636/-

3 ITA 644/JP/2012_ ACIT Vs. ARvind Gupta

gross profit of Rs. 15,97,817/- giving G.P. rate of 5.91%. The assessee

had shown total purchases of Rs. 4,19,29,991/- during the year under

consideration. On examination of purchases details, it was found that

the assessee had shown purchases from the following parties:

S. No. Name Amount 1. M/s Selective Gems 5,64,701/- 2. M/s Aayush Jewellers 2,65,415/- 3. M/s Govindam Jewellers 13,28,897/- 4. M/s Gaurav Exports 6,86,130/- 5. M/s Touch Jewels 10,14,794/- 6. M/s Anil Exporters 6,82,664/- 7. M/s Mahaveer Gems & Jewels 3,93,680/- 8. M/s Brigh Jewels 8,12,410/- Total 57,48,691/-

He further observed that the aforesaid parties were investigated by the

department on receipt of data in respect of banking cash transaction tax

and it was found that no such concern exist on the given address. The

above parties were only giving accommodation entries and not doing

any genuine sale purchase of the gems & jewels. The assessee was

asked to produce the above parties alongwith books of account in order

to prove the genuineness of transaction. In response to this, the

assessee submitted its reply, which was not found convincing and

acceptable by the ld Assessing Officer. He relied on the various case

laws i.e.:

4 ITA 644/JP/2012_ ACIT Vs. ARvind Gupta

(a) M/s Indian Woolen Carpet Factory Vs. ITAT & Ors. (2002) 178 CTR 420 (Raj) and M.P. High Court in the case of VISP (P) Ltd. Vs. CIT 186 CTR 718 (MP)

(b) CIT Vs. Precision Finance P Ltd. 208 ITR 465 (Cal).

(c) CIT Vs. Golcha Prop Pvt. Ltd. 227 ITR 391 (Raj)

(d) CIT Vs. La Medica 250 ITR 575 (Del).

He also relied on the other case laws, which is reproduced on page No.

4 of the assessment order. The ld Assessing Officer observed that from

the above case laws and discussion, it is crystal clear that the primary

onus is on the assessee to establish the genuineness of the purchases

claimed by it. Since the primary facts are in the knowledge of the

assessee it is his duty to provide the correct address or contact modes

of the alleged suppliers. Payment of account payee cheque is not

sacrosanct. The learned Assessing Officer after considering the

assessee's reply and relying upon the decision in the case of Kachwala

Gems Vs. JCIT 288 ITR 10 (SC), ACIT Vs. Shrikishan Malpani 32

Taxworld 122 (Jpr Trib) and ACIT Vs. Sh. Sindhuja Foods Pvt. Ltd. 35

Taxworld 67 (JU Trib), he rejected the book result U/s 145(3) of the Act

and after following the decision in the case of Sanjay Oil Cake

Industries Vs. CIT (2008) 10 DTR (Guj)153 and M/s Vijay Proteins Ltd.

Vs. ACIT 58 ITD 426 (Ahd.), he disallowed 25% of unverifiable

purchases of Rs. 57,48,691/- and made addition of Rs. 14,37,171/- to

the income of the assessee.

5 ITA 644/JP/2012_ ACIT Vs. ARvind Gupta

3. Being aggrieved by the order of the learned Assessing

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

had allowed the assessee's appeal partly by observing as under:-

"I have carefully perused the order of the A.O. and submissions of the A.R.. The fact of the matter is that during the year the appellant has sown purchases from 8 parties that were found to be non-existent as business entities. Thus, these purchases remained unproved. The Hon'ble ITAT Jaipur Bench has consistently held unverifiable purchases in the case of gem stone traders to be a sufficient justification for rejection of books of accounts u/s 145(3). Therefore, the decision of the A.O. to reject the books of account by invoking provisions of Sec. 145(3) is upheld. Regarding estimation of income, I concur with the submissions of the A.R. regarding past history being the best guide for estimating the income. Reliance is placed on the case of Gotan Lime Khanij Udhyog 256 ITR 243 (Raj.). The appellant has shown a G.P. of 6.53% in A.Y. 2005-06, 5.91% in A.Y. 2006-07 and 6.35% in A.Y. 2007-08. The G.P. rate is estimated at 6.50% during this A.Y. since the turnover of the appellant has increased from that in A.Y. 2005-06. This gives gross profit of Rs. 29,52,092/-. The impugned trading addition of Rs. 14,37,171/- is reduced to 6 ITA 644/JP/2012_ ACIT Vs. ARvind Gupta

Rs. 67,409/- (after giving set off of declared gross profit of Rs. 28,84,683/- by the appellant."

4. Now the revenue is in appeal before us. The Ld. DR supported

the order of the ld. Assessing Officer and argued that the Assessing

Officer had given detailed findings on facts and legal proposition on this

issue. He also confirmed the addition reasonable on the basis of overall

surrounding circumstances of the case. The assessee could not produce

these parties for verification. Notices were issued by the Assessing

Officer, were neither got served by assessee nor were found on given

addresses, therefore, disallowance of 25% on unverifiable purchases

may please be confirmed.

5. No one appeared on behalf of the assessee to defend their case

but we have considered the submissions made before the ld. CIT(A).

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

perused the material available on the record. Similar line of cases, this

Bench has decided in the case of Shri Anuj Kumar Varshney Vs. I.T.O.

and other cases in ITA No. 187/JP/2012 order dated 22/10/2014

wherein 15% disallowances has been held reasonable on considering

the detail discussion on facts and legal position on unverifiable 7 ITA 644/JP/2012_ ACIT Vs. ARvind Gupta

purchases/bogus purchases. Accordingly, we also apply 15%

disallowances on unverifiable purchases in this case also. The Assessing

Officer is directed to recalculate the income as per above direction.

7. In the result, the revenue's appeal is partly allowed.

Order pronounced in the open court on 05/06/2015.

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:- 05th June, 2015

*Ranjan

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

1. vihykFkhZ@The Appellant- The ACIT, Circle-2, Jaipur

2. izR;FkhZ@ The Respondent- Arvind Gupta, Jaipur.

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDr¼vihy½@The CIT(A)

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

6. xkMZ QkbZy@ Guard File (ITA No. 644/JP/2011)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@Asst. Registrar