Richa Gems & Jewellery, Jaipur vs Assessee
- CitationITA No. 630/JP/2012
Ratio decidendi
The rule this decision rests on
The Tribunal holds that where the assessee has failed to produce or verify the parties from whom purchases were made, and summonses issued through the ward inspector were not served because the purchasers could not be found at the given addresses, un-verifiability of those purchases is a sufficient ground for invoking section 145(3) to reject the books of account. Where purchases are shown to be unverifiable, the Assessing Officer may disallow a portion of them as an addition to income, and the Tribunal in this case applies a 15% net profit estimate to the unverifiable purchases, following its earlier decision in Anuj Kumar Varshney, and directs recalculation of income accordingly.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
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. 630/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2007-08
M/s Richa Gems & Jewellery, cuke I.T.O. A-114, Bhan Nagar, Queens Vs. Ward 3(1), Jaipur. Road, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAFFR 0470 C vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : None (Notice returned unserved) jktLo dh vksj ls@ Revenue by : Smt. Neena Jeph (JCIT)
lquokbZ dh rkjh[k@ Date of Hearing : 16/03/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 10/04/2015
vkns'k@ ORDER
PER: T.R. MEENA, A.M.
This is an appeal filed by the assessee against the order dated
14/03/2012 passed by the learned CIT (A)-I, Jaipur for A.Y. 2007-08
The effective grounds of appeal are as under:-
"1 the ld. A.O. erred in law and on facts in rejecting the books of accounts and the ld. CIT(A) erred in law and on facts in confirming the rejection of books of 2 ITA 630/JP/2012_ Richa Gems Vs. ITO
account on the basis of alleged bogus purchases from following parties.
S.No. Name of Supplier Purchases 1. M/s Anshu Gems 20,36,292/- 2. M/s Ocean Gems 9,80,304/- 3. M/s Glorious Gems 4,96,830/- 4. M/s Subhlaxmi Gems 5,66,008/- 5. M/s Vijay Gems 20,40,485/- Total 61,19,919/-
2. The ld. A.O. erred in law and on facts in disallowing and the ld. CIT(A) erred in law and on facts in confirming the disallowances of Rs. 15,29,980/- being 25% of the alleged amount of bogus purchases of Rs. 61,19,919/-."
2. Both the grounds of the assessee's appeal are against rejection of
books of account and confirming the disallowance of Rs. 15,29,980/-
being 25% of alleged bogus purchases of Rs. 61,19,919/-. The Ld.
Assessing Officer observed that the assessee company is engaged in
the business of manufacturing and trading of Gems stones. The
assessee has filed its return of income on 01/11/2007 declaring total
income of Rs. 98,520/-. The case was scrutinized U/s 143(3) of the
Income Tax Act, 1961 (hereinafter referred as the Act). During the year
under consideration, the assessee had disclosed gross profit of Rs.
17,03,161/- total sales and other income of Rs. 1,33,06,245/- which
gave a G.P. rate of 12.80%. He further observed that during the course
of assessment proceedings, it was noticed that the assessee had made 3 ITA 630/JP/2012_ Richa Gems Vs. ITO
total purchases of Rs. 1,30,76,103/- out of which the assessee firm has
made purchased of 61,19,919/- from the parties mentioned in the
grounds. The ld Assessing Officer asked to produce these parties for
verification, which assessee failed to produce. He further observed that
he deputed ward Inspector to get the information vide letter dated
08/12/2009, but he reported that no such parties existed on the given
addresses. The Inspector's report was confronted and the Assessing
Officer asked the assessee to produce these parties for verification. The
assessee replied that he has not been able to produce the said seller
parties. The learned Assessing Officer after considering the assessee's
reply and relying upon the decision in the case of Chuharmal Vs. CIT
172 ITR 250 (SC) and CIT Vs. British Paints India Ltd. 188 ITR 44, 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 160 {10 DTR
(Guj)153 and M/s Vijay Proteins Ltd. Vs. ACIT 58 ITD 426 (Ahd.), he
disallowed 25% of unverifiable purchases of Rs. 61,19,919/- and made
addition of Rs. 15,29,980/- to the income of the assessee.
3. Being aggrieved by the order of the learned Assessing
Officer, the assessee carried the matter before the learned CIT(A), who
had dismissed the assessee's appeal by observing that the assessee 4 ITA 630/JP/2012_ Richa Gems Vs. ITO
failed to establish such purchases, summons issued U/s 131 of the Act
through ward Inspector remained uncomplied as due to non existence,
they could not be served on the purchasers. The Hon'ble ITAT Jaipur
Bench has consistently held in the cases of gems and jewellery traders
of Jaipur that un-verifiability of purchases are sufficient ground for
invoking the provisions of section 145(3). Therefore, the decision of the
A.O. to reject the books of accounts of the assessee by invoking
provisions of section 145(3) is upheld and the ld CIT(A) also confirmed
the disallowance made by the Assessing Officer @ 25% on unverifiable
purchases.
4. Now the assessee is in appeal before us.
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). At
the outset, the Ld. DR supported the order of the learned CIT(A) and
argued that the learned CIT(A) 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 5 ITA 630/JP/2012_ Richa Gems Vs. ITO
by assessee nor were found on given addresses, therefore, disallowance
of 25% on unverifiable purchases may please be confirmed.
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 where
on unverifiable/bogus purchases 15% net income has been decided.
Accordingly, we also apply 15% on unverifiable purchases in this case
also as net income. The Assessing Officer is directed to recalculate the
income as per above direction.
7. In the result, the assessee's appeal is partly allowed.
Order pronounced in the open court on 10/04/2015.
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:- 10th April, 2015
*Ranjan
vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- M/s Richa Gems & Jewellery, Jaipur 6 ITA 630/JP/2012_ Richa Gems Vs. ITO
2. izR;FkhZ@ The Respondent- ITO, Ward 3(1), 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. 630/JP/2012)
vkns'kkuqlkj@ By order,
lgk;d iathdkj@Asst. Registrar
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