TaxTMI 
TaxTMI 
2015 (3) TMI 1020
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....ssment made is bad in law and in facts. ii) The Ld. CIT(A) willfully and wrongly added a sum of Rs. 4,57,340/- on account of undisclosed profit. iii) That the assessee reserve the right to add, alter, modify and subtract the any of the above and additional ground. 2. Ld. A.R. first took up the appeal of assessee and invited our attention to last para of assessment order and submitted that A.O. has made addition of Rs. 4,57,340/.- holding that the assessee had in earlier years had inflated the purchases made from M/s. Mehra Jewels Pvt. Ltd. and, therefore it must have inflated purchases in this year also and therefore, he rejected trading results and applied GP rate of 15% and made the addition of difference between such GP and declared G.P. Ld. A.R. submitted that in earlier years, the assessee had earned commission/rental income from leased properties of assessee and it was the allegation of A.O. that such income has been set off against losses managed by assessee by making purchases from related parties whereas in the year under consideration, no such income was earned by the assessee and, therefore, the facts of the present case are distinguishable from the facts in ear....
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....ubmitted by assessee, has decided the issue in favour of the assessee and he heavily placed reliance on the order of Ld. CIT(A). 5. We have hard rival parties and have gone through the material placed on record. We first take up appeal filed by assessee. We find that similar issue arose in Assessment Year 2000-01 and 2001-02 and the Tribunal vide its order dated 07.02.2014 had remitted back the issue to the office of Ld. CIT(A) to carry out verification of purchase rates from related parties with the market rates. However, in the year under consideration, the assessee had filed the details regarding purchase rates and market rates and had also filed copies of Hindustan Times depicting gold rates on 13.08.2002 and 22.10.2002. The said copies are placed at paper book page 119 to 120. The assessee vide letter dated 26.12.2005 addressed to A.O. placed at paper book page 29-30 had filed explanations for the purchase prices for purchases made from related party. For the sake of convenience a part of relevance reply is reproduced below: "2. In the earlier years, the department has disallowed trading loss on the ground that it has been set off against the commission income, to which ....
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.... of assessee is also rejected a assessee company having history of entering into purchases and sale of gold and diamonds in convenience of its own associated company wherein directors or relatives of directors have substantial interest and earned huge losses in the earlier years mainly to set off the commission/rental income earned in respect of assessee's lease property which is possesses on lease basis. In the past also due to these discrepancies, the transactions are consequently losses were disallowed and the same has been even confirmed by appellate authority in respect of its own case for the earlier Assessment Year. Accordingly, it has been observed the assessee following similar practice to earned losses as to set off its other business income earned from retail trading activities from other parties, by showing purchases from M/s. Mehrasons Jewellers Pvt. Ltd. at the inflated prices which attracted the provision of Section 40A(2b) of the I. T. Act, 1961. Therefore, the trading result of assessee company is rejected and by taking a lenient view, the G.P. rate is taken at 15% which worked out to Rs. 10,21,220/- form the already declared gross profit of Rs. 5,63,880/- is reduc....
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.... alleging that neither any evidence was produced for 5043gms of gold jewellery taken on approval from M/s Mehrasons Jewellers (P) Ltd. on 12-8-2002 nor for the purchase of 3195.720gms of 22ct. gold from the said concern on 22-10-2002. It has been alleged that no bills were produced for the purchases so made, stating that the said purchased were un-vouched and have been acquired from undisclosed sources of the company. 4.3 The Id. ARs contented that the reasons given by the Id. AO in the assessment order in making the aforesaid disallowance on account of undisclosed stock are based on misapplication of facts. His conclusion that the appellant company had failed to produce evidence at the time of examining the books of accounts in respect of purchase or receipt of stock claimed to have been received on approval, is totally incorrect, contradictory to the facts and goes on to show that the order was passed mechanically in an arbitrary manner by completely ignoring the detailed reply of the appellant as reproduced below:- "It has been noted that the company received goods on approval weighing 5043.72 grms on 12-8-02 from M/s Mehrasons Jewellers (P) Ltd. and out of the said goods,....
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....d purchase the said gold at the later date. It is therefore submitted that there were no undisclosed purchases and that there was no shortage of stock and therefore there is no ground for any addition on this ground." 4.4 The appellant submitted that the receipt of stock of 5043.72 gms of 22 ct. gold on 12.08.2002 from M/s. Mehrasons Jewellers (P) Ltd. on approval is fully explained and is verifiable form he following documents: i) Receipt voucher of Mehrasons Jewellers (P) Ltd. and the corresponding issue voucher of Ms. Mehrasons Jewellers (P) Ltd. and duly confirmed stock ledgers of the parties. ii) The purchase of 3195.72gms gold from M/s Mehrasons Jewellers (P) Ltd. is explained from the corresponding sale bill issued by it, the purchase voucher of Mehra Jewel Palace (P) Ltd., the stock records of both the companies, the relevant STI form issued by Sales Tax Department for registered dealer purchase etc. 4.5 The appellant further submitted that the purchase of 3195.72gms of 22ct gold was for goods that had already been received on approval/consignment by the company. This has incorrectly been termed as accommodation entry by the AO. The receipt of the goods was a....
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....Mehrasons Jewellers (P) Ltd. dt. 22-10-2002 and corresponding purchase bill of MIs Mehra Jewel Palace (P) Ltd. alongwith corresponding STI Form of Sales Tax Department. " (iv) Confirmed copy of stock account of Mehrasons Jewellers (P) Ltd. in respect of 22ct Gold. (v) Copy of stock ledger 22ct for A.Y. 2002-03 of MIs Mehra Jewel Palace (P) Ltd. 4.7.2 The appellant has also submitted a copy of its sales tax assessment order for the F.Y.2002-03. Based on the aforesaid documents, the appellant has vehemently argued that the allegation of sale of unaccounted stock is without any basis. 4.8 I have considered the findings recorded by the Id. AO as per the assessment order, detailed submission made by the Id. AR and the facts of the case available on record. I have perused copies of various documentary evidences filed by the appellant in support of the purchase of goods from MIs Mehrasons Jewellers (P) Ltd. and sale of goods to M/s Swarn Gems (P) Ltd. All the said documents support the contention of appellant that there is no unaccounted sale of stock as alleged by the Ld. AO. It has been submitted by the appellant that all these documents were produced during the assessmen....