TaxTMI 
TaxTMI 
2012 (7) TMI 761
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....rvey u/s. 133A of the Act was carried out by the Revenue at the premises of different member of the RMC Group including the assessee, leading to the impugned assessments u/s. 143(3) read with sec. 153A of the Act. The facts of the case being the same in these years, the same were heard together and are being disposed of through a common, consolidated order. The Facts 3. The principal issue in these appeals is qua unverifiable purchases. While the Assessing Officer ('AO') effected addition by estimating the gross profit (G.P.) rate at 30% qua unverifiable purchases, which stood confirmed by the first appellate authority, the assessee bases its case on its better trading results, so that no disallowance or addition on that count would arise. The assessee's trading results for three years are as under:- A.Y. M/s. Akash Gems M/s. Vikas Gems Turnover G.P. G.P. Rate (%) Turnover G.P G.P. Rate (%) 2002-03 2,39,74.515 44,63,055 18.62 1,11,17,709 37,00,233 33.35 2003-04 1,73,96,613 33,60,289 19.32 98,70,775 33,25,112 33.69 2004-05 1,03,26,161 26,51,853 25.68 1,00,71,155 35,56,196 35.31 ....
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....Ltd., 227 ITR 391 (Raj.); CIT vs. La Medica, 250 ITR 575 (Del.); Beena Metals vs. CIT, 240 ITR 222 (Ker), besides by the tribunal in the case of Kanchwala Gems vs. JCIT (ITA No. 134/JP/02 dated 10-12-2003), since affirmed by the hon'ble Supreme Court in the case of Kachwala Gems vs. Jt. CIT (2007) 288 ITR 10; ACIT vs Shrikishan Malpani, 32 TW 122 (Jaipur ); and ACIT vs. Sindhuja Foods (P.) Ltd., 35 TW 67 (Jd). The test with regard to the genuineness of the transaction is with reference to the `preponderance of probabilities' and not `beyond reasonable doubt', citing the decisions in the case of Chaturbhuj Panauj, AIR 1969 (SC) 255; Sumati Dayal vs. CIT (1995) 214 ITR 801(SC); and C. Vasant Lal & Co. (1962) 45 ITR 206 (SC). The same stood confirmed by the ld. CIT(A) for the same reasons. 3.2 For assessment year 2003-04, though no unverifiable purchases were observed, yet the books were rejected in view of their being not correct or complete in the absence of the stock records, and a trading addition for Rs. 50,000/- effected. The same stood deleted in appeal by the ld. CIT(A) in the absence of any unverifiable purchases; the assessee having rather disclosed better trading results....
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....xamined and considered by us in arriving at our decision aforestated. The assessee's case is that each piece of stone bears different characteristics and composition and, therefore, it is not possible to maintain the stock register qualitywise. Firstly, therefore, it admits to its books of accounts as not bearing the quality-wise details of the goods purchased and sold and, thus, in stock at any given point of time and, therefore, not complete. The same may yield or reflect its quantity but then that by itself is of little moment or value in the absence of any indication as to its value which is an essential ingredient in determining the cost of the goods sold and thus trading profit, and which in turn is necessary to work out the net profit. The value of the stock-in-trade as at the year-end or the year of account, thus becomes an independent variable, which cannot even be approximated with reference to the books of accounts as maintained. It is not the assessee's case that stock is valued at the average (weighted) cost of purchase, and which though not a precise measure, evens out the profits when applied from year to year, so that it may be considered as a viable alternative, em....
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....one at a particular rate? In fact, a `good' is defined only in terms of its essential attributes; the assessee himself admitting to `weight' as being one such criteria, though it is admittedly a measure of quantity as well. Rather, how would one actually buy or sell without knowing the rate or cost at which he is buying, i.e., what is he buying and at what rate. A trader would buy only if he is confident about the purchase cost, and of being able to sell, after incurring additional cost, if any, at a profit. Man has, with his ingenuity, in fact been able to perceive and factorize the most intangible of criterion, even as the trade in the case of precious and semi-precious stones is a very common trade, with a history of the centuries, with the recent past witnessing the setting up of professional institutes, where knowledge in the trade, in the relevant discipline/(s), viz. Gemology, is provided. 5.3 The intractable criterion referred to earlier are mostly intangible, as (say) `taste', while we find no such intangible criteria in the instant case. One variety of mangoes tastes different than the other, which is identifiable with its type, with each variety bearing a different pr....
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.... 25.68 (2.1) 2.27 35.31 (2.2) 1.73 G.P. => Gross Profit (in percentage of sales) as disclosed; G.P.' => G.P. as estimated by the Revenue U.P. => Unverifiable purchases (1) => qua sales relatable to unverifiable purchases only (2.1) => at Rs. 50,000/-, resulting in gross profit rate at 26.67 % (2.2) => at Rs. 50,000/-, resulting in gross profit rate at 35.80% % Decision 6.1 For the assessment year 2002-03, the trading addition made by the AO is with respect to unverifiable purchases. As such, he has, for most part, accepted the assessee's trading results, i.e., except qua unverifiable purchases (Rs. 8.34 lacs), further accepting the assessee to have already disclosed a gross profit at the reflected rate of 18.62% on those purchases. In our view an additional gross profit of 5% on such purchases would be justified, so that an addition to that extent becomes sustainable. The gross profit rate is with reference to the sales, i.e., as relatable to such purchases (approximated at 75% of sales), which is worked out at Rs. 11.12 lacs (834199 x 100/75), so that the trading addition works out to Rs. 55613/- [i.e., Rs. 11.12 lacs x 5%]. We decide accordi....