TaxTMI 
TaxTMI 
2015 (4) TMI 533
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....mi precious gems and stones. In all these cases one of the common ground is in respect of unverifiable purchases. Consequently many of such appeals are heard together and disposed of by this common order. Jaipur city is well known in India and abroad for the business of gems and jewellery. Various types of jewellery are being traded as well as exported out of India. Consequent to the Income Tax Department, received information that larger number of gems and jewellery dealers have been indulging in obtaining fake purchase bills to inflate their purchases. Consequently, the Income Tax Department had conducted search/survey from time to time to stop the mal practices of bogus/unverifiable purchases. There are number of parties from both the sides i.e. obtaining the fake bills and providing the fake bills, engaged in the business of gems and jewellery, who promote such practices for reducing their tax liabilities. It created aberrations in the whole system of trading as well as exporting business system of Jaipur gems and jewellery market. It also disheartens the honest tax payers who do not resort to such mal practices and paid their legitimate taxes. On the other side, it emboldens t....
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.....Y. 2004- 05 to regularize the purchases made in cash. He listed out the names of such parties, who were issuing bogus bills. In various cases, the statement of Shri Haldia was used as an evidence against the assessee, who have obtained the bogus/unverifiable purchase bills on similar pattern. (iv) A search seizure action was carried out on M/s Clarity Gold Group, Jaipur on 20/5/2009. Shri Khushi Kumar Ameriya, Director (Main person) of the group admitted that more than 95% of the total sales and purchases of M/s Clarity Gold Pvt. Ltd. and M/s Marine Minerals & Herbal Remedies Pvt. Ltd. were bogus. Shri Ameriya also explained that such bogus purchase and sale bills were obtained on commission basis through a set of brokers operating in Jaipur namely Lalwani Group, Vijay Group etc. 3. This resulted in books trading results and taxable income being unverifiable. During the course of assessment proceedings, general defects pointed by the learned Assessing Officer for rejecting the books of account are as under:- :- No quantitative day to day stock register is maintained with item wise specification. :- Valuation of stock was done lot wise on estimate basis whereas in....
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....owered to make assessment in the manner provided in Section 144 of the Act i.e. best judgment assessment. Obviously, the estimation should not be arbitrary and based on material available on record and should be made after providing opportunity of being heard to the assessee. It should not be biased, unscientific and capricious. Learned D.R. relied upon the decisions of Hon'ble Supreme Court in the case of HM Esufali HM Abdulla 90 ITR 271 (SC) and M/s Kanchwala Gems Pvt. Ltd. Vs. JCIT 288 ITR 10 (SC). It is further argued that the Hon'ble courts had estimated income in such type of cases ranging from 100% to 25% of net profit. In some of the cases, lump sum additions were also confirmed by the Hon'ble Courts. The learned Assessing Officer more or less had estimated the income @ 25% of bogus/unverifiable purchases. He further relied upon following case laws: (a) 100% disallowance out of bogus/unverifiable purchases: 1. CIT Vs. La Medica (2001) 250 ITR 575 (Del.) 2. Sri Ganesh Rice Mills Vs. CIT (2007) 294 ITR 316 (All) 3. Khandelwal Trading Co. Vs. ACIT (1996) 55 TTJ (JP) 261. (b) 25% disallowance ou....
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....in profits or consistency in profit earnings. As the gems and jewellery business has international linkage, fluctuation of profits are bound to be happened. A domestic market also gets affected by such changes happening outside the country and also socio economic political changes affect the probability of the trade of gems and jewellery. He assailed the lump sum additions confirmed in some of the cases by the higher courts as it is not based on any material on record. He contends to apply most reasonable 25% disallowance of bogus purchases, which has been confirmed by the Hon'ble ITAT in the case of Vijay Proteins Ltd. Vs. JCIT (supra) wherein even 25% disallowance of purchases was held justified. In case of Trident Jewellers Vs. ITO ITA No. 552/JP/2013, disallowance of 25% net profit on purchases has held the estimate being honest and fair. General written submissions of the A.Rs 6. At the outset, the learned A.Rs argued that in estimating the income after rejecting the books U/s 145(3) of the Act, the Assessing Officer does not possess any arbitrary authority to assess at any figure he likes. Although he is not bound by the strict judicial principles in making the esti....
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....6 DTR 278 has held that where the assessee's books of account are rejected as it has shown bogus purchases but gross sale figure is not disturbed and the CIT(A) and Tribunal applied G.P. rate of last year for making the best judgment assessment. It cannot be said that relevant material evidence has not been considered by the ITAT or any irrelevant consideration has been taken into account by the Tribunal in reducing the addition made by the Assessing Officer in this behalf. Thus, estimating the income based on the past history has the approval of the ITAT as well as higher courts. 6.3 In case of CIT Vs. Amrapali Jewellers Pvt. Ltd. 65 DTR 196 ande CIT Vs. Precious Jewels Corporation 205 Taxman 22, wherein the Assessing Officer disallowed 20% of unverifiable purchases but such addition was reduced by the Hon'ble ITAT by applying G.P. rate considering the past history and on departmental appeal no substantial questions of law was found by the Hon'ble Court. In following cases, the Hon'ble ITAT has consistently held that in cases of unverifiable purchases that the income should be estimated by applying G.P. rate considering the past history of the case. (i) DCIT ....
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....ons of section 145(3) of IT Act ignoring audited statements of accounts so also day to day stock register which were produced and examined by the learned A.O. during the course of hearing. (2) That the learned CIT(A) was not justified in sustaining the addition of Rs. 2,90,832/- on account of disallowance of 25% of total purchases of Rs. 11,63,326/- from who different sellers, treated as bogus, the purchases of which are duly entered in stock register, the sales of which were accepted as genuine. (3) That the learned CIT(A) has erred in sustaining disallowance of Rs. 32,421/- being 20% of day to day business expenses out of telephone expenses, vehicle fuel expenses, traveling expenses and office expenses." 8.1 Grounds No. 1 and 2 of the assessee's appeal are interlinked, therefore, we decide both the issues as under:- The assessee is in trading of the precious and semi precious stones. The assessee filed return on 20/10/2007 at Rs. 2,04,140/-. The assessee's on the total turnover of Rs. 52,94,174/- declared gross profit of Rs. 9,05,528/- G.P. @ 17.10%,. In immediate preceding year on sale of Rs. 39,85,826/- gross profit of R....
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.... decision of the Hon'ble Rajasthan High Court in the case of Golcha Properties Pvt. Ltd. (supra) held that the primary onus is on the assessee to prove that the purchases were genuine. The party is known to the assessee who failed to establish their existence and purchase and investigations conducted by the department goes against the assessee, therefore, 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, Vijay Protein (Supra) and Kishore Meghraj Jewellers, he disallowed 25% of unverifiable purchases of Rs. 11,63,326/- and made addition of Rs. 2,90,832/- to the income of the assessee. 8.2 Being aggrieved by the order of the learned Assessing Officer, the assessee carried the matter before the learned CIT(A), who dismissed the assessee's appeal by observing that the assessee 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 learned Assessing Officer rightly applied the decision of Sanjay Oil Cake Industries and Vijay Protein in case of the assessee. The department ....
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....ficer, were neither got served by assessee nor were found on given addresses, therefore, disallowance of 25% on unverifiable purchases may please be confirmed. 8.6 We have heard the rival contentions of both the parties and perused the material available on the record. As discussed in above cases, the material available on record established that in Jaipur, a rampant practice is in vogue to get and issue accommodation bills of purchases to deflate the profit. The learned Assessing Officer made disallowance @ 25% of such bogus purchases on the basis of decision in the case of Sanjay Oil Cake Industries and Vijay Protein Ltd. (supra). In our view the 25% disallowance appears to be higher side, therefore, keeping in view of the facts of the assessee's case as well as other cases as discussed above, we feel that 15% disallowance out of bogus purchases is reasonable on unverifiable purchases and will meet the ends of justice. The rejection of books of account is justified. The assessee gets relief partly. 8.7 The last ground of assessee's appeal is against disallowance of business expenses @ 20%. The learned Assessing Officer found that the assessee used telephone, mobile ....
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....ediate preceding year. Similarly, G.P. rate in Unit-2 was 19.24% as against 13.87% in immediate preceding year. The learned Assessing Officer found that closing stock declared by the assessee on the basis of average lot wise costing. The audit report showed that inventory of stocks was valued as certified by the partner of the firm. The mean value of the stock had been taken as certified by the management. He asked to give the quantitative as well as qualitative details of stock which could not be provided by the assessee before him. Closing stock is thus valued on estimate basis as pointed out by the auditor. The learned Assessing Officer concluded that closing stock cannot be verified in absence of required detail. He further found that the assessee has shown total purchase of Rs. 3,01,67,046/- in Unit-I, Rs. 7,19,50,253/- in Unit-2 during the year under consideration. The Assessing Officer gave the details of unit wise purchase page 3 of the assessment order. He further observed that all these above parties had been covered by BCTT Wing of the department U/s 133A of the Act, it was found that these parties were indulged in providing entries and not any genuine business transacti....
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....28 to 44DB of the Act to compute the business profit. The assessee could not establish the genuineness of the parties to whom the payments were made through cheque. Therefore, purchases were found non-genuine and both results were unreliable. He further relied on following case laws:- (a) M/s Indian Woolen Carpet Factory Vs. ITAT (supra) for genuineness of the purchases, (b) CIT Vs. Precision Finance Pvt. Ltd. (supra) for payment made by account payee cheque is not sacrosanct. (c) CIT Vs. Golcha Prop. Pvt. Ltd. (supra) for genuineness of the transactions. (d) CIT Vs. La Medica (supra) for sellers found non existent, the purchase price was treated as income from undisclosed sources. (e) Beena Metals Vs. CIT 240 ITR 222 (Ker) for brokers through whom the purchases were made lead to conclusion of bogus purchases. (f) Chaturbhuj Panauj AIR 1969 (SC) 255. (g) Sumati Dayal (supra). (h) C. Vasant Lal & Co. 45 ITR 206 (SC) (i) M/s Kanchwala Gems Vs. JCIT (supra) for payment by account payee cheque is not sufficient to establish the genuineness of purchase. After considering the facts and circumstances of the case, the learned Assessing Officer invoked the p....
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....essing Officer has established that alleged bogus suppliers at higher rate compared to other parties and in case of Vijay Protein, the Assessing Officer established that the purchases were inflated and there was a suppression of production and even raw material was not received. In case of Rajendra Kumar Jain, the Hon'ble ITAT has held that past history of the case is to be taken for deciding the G.P. rate which is best guide. The learned CIT(A) also relied the decision in the case of Gotan Lime Khanij Udoyog (256 ITR 243) and finally uphold the addition of Rs. 5 lacs in place of addition made at Rs. 69,36,176/-. 9.2 Now the Revenue is in appeal before us. The learned CIT DR vehemently supported the order of the learned Assessing Officer and argued that in both the units, the assessee could not produce the parties for verification even repeated notices were given to the parties. Evidence furnished by the party as claimed before the learned CIT(A) that the assessee had filed confirmation with PAN and other details and tried to shift the onus on the Assessing Officer. However, the Assessing Officer had issued the summons which were not responded, partly returned back unserved.....
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....il Cake Industries and Vijay Protein (supra) are not squarely applicable in the case of the assessee as held by the ITAT in various cases. He further relied on the following case laws:- (a) Sagar Mal Daga & Co. (b) G.N. Gems XLII IW 10 (c) M.K. Jain & Sons. (d) Vaibhav Gems Vs. Addl. CIT & ACIT Circle-5 Vs. Vaibhav Gems. (e) Subhash Chand Nahata XLVTW 164 (JP) (f) Sambhav Gems 36 TW 254 (g) Ravi Kumar Rawat 134 TTJ 634 (JP) (h) Chordia gems XL TW 111 (JP) (i) Rajendra Kumar Jain (ITA No. 573/JP/2010) order dated 13/01/2011. (j) CIT Vs. Amrapali Jewels (P) Ltd. 65 DTR 196 (Raj) (k) CIT Vs. Nangalia Fabrics Private Limited dated of order 22/07/2013 (Guj.) Therefore, he prayed to confirm the order of the learned CIT(A). 9.4 We have heard the rival contentions of both the parties and perused the material available on the record. The learned Assessing Officer found unverifiable purchases in Unit-1 at Rs. 69,71,080/- wherein 10 parties we....
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....been directed to produce the parties from whom the assessee purchased the goods for verification, but despite ample opportunities having been granted, the parties were not produced, particularly in view of the fact that the summons at the addresses given by the assessee himself either came back unserved and returned unserved by postal authorities or if served none of them presented before the A.O. It is the prime duty of an assessee to produce the sellers from whom he has purchased the goods in view of the fact that notices came back unserved. Merely because the parties are assessed to income tax and the transactions being by account payee cheques will not prove the genuineness of the transactions in view of the fact that in case of sellers as observed by the A.O. some of the parties denied the sale and stated that they did not sell the goods and merely issued bills without effecting actual delivery. Once this fact has come on record that the notice could not be served for one or the other reasons and the parties did not turn up then in our considered view the onus and burden shifts on the assessee which has to be discharged appropriately by the assessee and we have noticed in this....
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.... in this case, assessment U/s 143(3) of the Act was concluded by the Assessing Officer on 31/12/2008 as against returned income of Rs. 3,86,500/- at Rs. 37,00,740, in which trading addition of Rs. 33,14,223/- was made. In appeal, the learned CIT(A) had reduced this addition from Rs. 17,38,813/- to Rs. 9,70,496/-. The assessee challenged the order of the learned CIT(A) before the ITAT, Jaipur Bench, jaipur, which was decided by the Coordinate Bench on 16/7/2010 by observing as under:- "7. We have also noticed that the assessee has failed to produce the quantitative details and stock register and the assessee was also not able to get the closing stock verified and hence the books of account have correctly been rejected. Considering the discussion as contained in earlier paras, we feel that the addition as confirmed by the learned CIT(A) is proper as the amounts were still payable to the trade creditors from whom purchases could not be established and such amount exceeds the addition confirmed by the learned CIT(A). Accordingly, we uphold the order of the learned CIT(A) and the appeal of the assessee is dismissed." The assessee filed M.A. in this case. There w....
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....furnish this information. He further concluded that closing stock estimated and not subject to verification. The assessee had shown total purchases of Rs. 1,06,39,642/- during the year under consideration. The assessee had shown purchases from following parties at Rs. 38,81,984/-. Sl. No. Name of the parties from whom purchases made Purchase amount 1. Ruby Impex 2,36,004/- 2. Sevorite Exports 5,42,907/- 3. D.J. Impex (830711 + 201750) 2,34,414 4. Rahul Exports 1,84,080/- 5. Shree Laxmi Enterprises 4,70,642/- 6. N.V. International 1,06,000/- 7. Annu Enterprises 2,17,440/- 8. S.P. Jewellersa 4,11,075/- 9. G.R. Enterprises 2,55,063/- 10. Bhawana Gems 1,52,680/- 11. Muskan Gems 99,500/- 12. Shri Ceations 3,34,220/- 13. Nisha Exports 75,359/- 14. Jaipur International 5,62,600/- Total 38,81984 It is further observed that the department had conducted survey/search particularly in case of Haldia Group wherein during the course of search, certain incriminating documents relating to purchases of goods were found on confronting wit....
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....eiving the cheques of equal amount from interested party, cash was being remitted back to them after making cash withdrawals from the bank account where these cheques were deposited. These persons were charging commission as charged in other cases also. These 14 parties also were listed in the BCTT survey who had provided accommodation bills to the assessee also. He further observed that as per part-D of Chapter 4 of Income Tax Act, these purchases are not allowable from Sections 28 to 44DB of the Act. The assessee had knowledge about these parties and onus on him to prove that purchases were genuine and allowable U/s 37 of the IT Act. He further relied upon following case laws:- (a) M/s Indian Woolen Carpet Factory Vs. ITAT (supra) for genuineness of the purchases. (b) CIT Vs. Precision Finance Pvt. Ltd. (supra) for payment made by account payee cheque is not sacrosanct. (c) CIT Vs. Golcha Prop. Pvt. Ltd. (supra) for genuineness of the transactions. (d) CIT Vs. La Medica (supra) for sellers found nonexistent, the purchase price was treated as income from undisclosed sources. &nbs....
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....was made by the Assessing Officer at Rs. 33,14,232/- and no separate addition on account of unverifiable purchases were made in the income of the assessee as telescopic benefit was given to the assessee. 10.3 Being aggrieved by the order of the learned Assessing Officer, the assessee carried the matter before the learned CIT(A), who had reiterated the findings given by the learned Assessing Officer on pages 11 to 13 of its order and confirmed the rejection of book U/s 145(3) of the Act. Thereafter he considered the various factors of business to estimate the income such as nature of business, turnover, past history, comparable cases and quantum of unverifiable purchases involved. The learned Assessing Officer undisputedly accepted the turnover at Rs. 1,32,56,929/- except unverifiable purchases of Rs. 38,81,984/-. There are no details available about the actual cost of those unverifiable purchases. He also found that the said purchases are relating to buying of different quantities of various items such as Ruby Cut Mix, Yellow Sapphire Mix, Garnet Mix Cut etc. and these items were shown in the purchased bills as well as in sales bills. The learned Assessing Officer has not doubte....
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....the list of opening stock inventory and closing stock inventory was furnished. For this, he drew our attention on page Nos. 105 and 106 of the paper book. The same was also produced before the Assessing Officer, which was not filed due to bulky. He also drawn our attention on page Nos. 8 and9 of the paper book, which is only reply before the learned CIT(A) wherein it is also claimed that copy of letters and the inventory submitted to him are enclosed before the CIT(A) during the appellate proceedings. Therefore, it has been argued that complete quantitative details are available and the list of opening and closing stock is furnished, the rejection of books of account U/s 145(3) of the Act is not justified. For unverifiable purchases in case of 14 parties, the complete details of these parties were submitted during the course of assessment proceedings. He drawn our attention on page Nos. 17 to 68 of the paper book and claimed that burden of proof in case of unverifiable purchases is not the same as burden of proof required U/s 68 of the Act. There is no law requiring the assessee to produce the parties from whom it had made purchases. If these parties are not appearing before the As....
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....bles Pvt. Ltd. (supra) wherein it has been held that proper rate declared and accepted in preceding year constitute a good basis for working out gross profit. He further distinguished case law relied by the Assessing Officer i.e. Kanchwala Gems (Supra), CIT Vs. Golcha Properties (Pvt.) Ltd. (supra), VISP (P) Ltd. vs. CIT & Anr. 265 ITR 202 (MP) (HC), Indian Woolen Carpet Factory Vs. ITAT & Ors. (supra), M/s Sanjay Oil Cake Industries Vs. CIT (supra). He also relied on the following case laws. (i) CIT Vs. Shri Sindhuja Foods (P) Ltd. (supra) (ii) CIT Vs. Amarpali Jewels (P) Ltd. (supra) (iii) CIT Vs. Precious Jewels Corporation (supra). (iv) Diagnostics Vs. CIT & Anr. 56 DTR 317 (Cal) (HC). (v) Shankar Export Vs. ACIT 42 DTR 441 (Jpr) (2010). (vi) Malani Ramjivan Jagannath Vs. ACIT 207 CTR 19 (Raj). (vii) CIT Vs. Gotan Lime Khaniz Udyog (supra). (viii) CIT Vs. Leader V....
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....therefore, the same cannot be applied. We are of the considered view that 15% N.P. rate is reasonable on unverifiable purchases. This view also got support from the recent decision of Hon'ble Rajasthan High Court in the case of Venus Arts & Gems order dated 20/8/2014 wherein G.P. addition was confirmed by the ITAT, had found factual and not question of law involved in it. It is immaterial whether the assessee is 100% exporter. The Assessing Officer cannot be precluded from enquiring into the genuineness of the unverifiable purchases. Whereabouts of the parties from whom the purchases were made are known to the assessee. He should have produced these parties before the Assessing Officer for verification. Therefore, we have considered view that 15% N.P. on unverifiable purchases is reasonable in this case. Accordingly, the assessee's appeal is partly allowed. 10.7 In the result the assessee's appeal is partly allowed. (4) G.B. Impex I.T.A. No. 241/JP/2012 A.Y. 2007-08 11. This is an assessee's appeal against the order dated 12/12/2011 passed by the learned CIT(A)-II, Jaipur for A.Y. 2008-09. The effective grounds of appeal are as under:- "1. Th....
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....tion before the Assessing Officer. The learned AR before the Assessing Officer had expressed his inability to produce these persons personally for verification as the parties were not ready to attend the office on the request of the assessee. Accordingly, summons U/s 131 of the Act were issued to aforesaid four parties to verify the genuineness of the purchases but these summons were returned back with the remark that "no entity exist on the given address". These Facts were put in the knowledge of the AR of the assessee and asked to produce these parties for cross examination but the A.R. of the assessee filed only confirmation of accounts of these parties. Accordingly, the learned Assessing Officer gave show cause notice as to why on the basis of unverifiable purchases, their books of account should not be rejected U/s 145(3) of the Act and also why not 25% disallowance should be made on these unverifiable purchases. It has been submitted before the Assessing Officer that the assessee already submitted copy of purchase bills of all the parties containing complete address, telephone number, RST/CST number and PAN and payments to these parties were made through account payee cheques....
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....ng accommodation bills without any actual business and physical delivery of goods. After receipt of the cheque, equivalent cash was given back after deducting commission varying between .20% to .25%. The Assessing Officer also issued summons U/s 131 of the Act to the alleged suppliers but these were returned back unserved by the postal department with remarks that "no such party exists at the given address". The Assessing Officer also directed the assessee to produce these parties, but the assessee expressed its inability to produce them. He further relied on the decision of Hon'ble ITAT Jaipur Bench in the case of Deepak Dalela where the Hon'ble Bench had confirmed the addition made by the Assessing Officer. After considering the ITAT Jaipur Bench's decision in the case of Shanti Kumar Chordia Vs. ACIT (2010) 128 TTJ (JP) 708, which has been recalled by the Hon'ble ITAT. The learned CIT again relied upon the case laws referred by the Assessing Officer particular decision in the case of Kanchwala Gems where Hon'ble ITAT had confirmed the G.P. rate of 30% whereas the Assessing Officer applied 40% G.P. rate. He further relied on the decision in the case of CIT Vs.....
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.... (iii) ACIT Vs. M/s KLF Enterprises Pvt. Ltd. ITA No. 421/JP/2010 dated 10/12/2010. (iv) ACIT Vs. M/s Jaipur Gem Crafts ITA No. 804/JP/2009 dated 21/09/2010. (v) ACIT Vs. Royal India Jewellery ITA No. 424/JP/2010 dated 24/09/2010. The learned A.R. further argued that the Hon'ble ITAT has not confirmed 25% disallowance in above following cases on the basis of unverifiable purchases but confirmed on the basis of past history of the case. It is further submitted that similar additions were made in A.Y. 2006-07 where also disallowance @ 25% was made but the Hon'ble ITAT had reduced this addition at 9.5% on declared turnover of Rs. 64,57,290/- as G.P. rate @ 8.54% declared by the assessee. That was the first year of the assessee. In the present case, the G.P. rate is 5.42% on turnover of Rs. 19,71,89,378/-, which is better than the G.P. @ 4.38% on turnover of Rs. 17,40,37,587/- in the immediate preceding year. He further distinguished case law relied by the Assessing Officer i.e. decisions in the cases of Shanti Kumar Chordia, Uniword Telecom Ltd. Vs. Addl. CIT, Kanchwala Gems (supra), Shri Sindhuja Foods Pvt. L....
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....ification during the course of assessment proceedings. Even the Assessing Officer provided sufficient time to the assessee. The unverifiable purchases were Rs. 3,28,40,664/- whereas the assessee exported the goods during the year at Rs. 93,42,720/- during the year under consideration. Therefore, the assessee's claim that all the goods were exported during the year is not correct. Further the learned Assessing Officer had not precluded by the law if the assessee even exported the goods 100% to investigate the unverifiable purchases. The learned Assessing Officer sent notices to these parties which were returned back unserved with remark "party is not existent". The assessee was also produced these parties for verification whatever evidence were produced by the assessee are not sufficient to prove the purchase genuine even payments through account payee cheques is not sacrosanct and had not discharged onus on it. During the course of investigation conducted by the department, these parties were figured in the list of entry provides and they had admitted that they only provided bills no any real business with delivery of goods. The learned Assessing Officer applied Hon'ble Guj....
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....handicrafts. He has a show room wherein different customers mainly foreign customers visit and purchased precious and semi precious jewellery. These customers make the payment to the assessee by different credit cards like Master card, Visa Card, Diners Card, Amercian Express Card etc.. For this purpose, they install an electronic capture terminal at the premises of the assessee where the card is swapped alongwith amount of deal. The electronic data capturing machine picks the data which is provided in electronic magnetic chip fixed at the back of the credit card and then tally with the basic data provided at the main Visa/Master/Amex/JCB/Diners/Mestro Bank. In case, it tallies in total, it generates "Approval Code" if it does not tally at any step, it declines the transaction. At the end of the day, batch total of all the transactions on the specific card swap machine is taken out. This alongwith signed credit slip is sent to bank for collection. The bank after deducting certain amount named as service fees/discount/merchant discount rate/commission makes the payment to the assessee. During the year the amount commission retained by different banks in respect of credit card slips ....
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....assessee and payment made to it are clearly covered under explanation of 194H of the Act. From the agreement entered by the assessee with ICICI bank, which clearly established that the assessee made commission payment to it. Further even the agreement of the assessee with HSBC state that merchant will be paid within the time frame set out on the merchant application for the gross amount of the card transactions submitted less the amount of any discount, fees and other charges. The learned CIT(A) finally held that these payments are nothing but commission as defined in Section 194H. The learned CIT(A) further referred CBDT circular No. 65 dated 02/09/1971 on Hundi discounted by the bank and such discount cannot be termed as interest and therefore no TDS is liable to be deducted. She further relied upon the decision of Hon'ble Kerela High Court in the case of Vodafone Essar Cellular Ltd. Vs. ACIT (2010) 235 CTR (Ker) 393 wherein TDS is liable on commission or discount paid to distributor of SIM cards and recharge coupons U/s 194H of the Act. She further relied in the case of CIT Vs. Idea Cellular Ltd. (2010) 230 CTR (Del.) 43 wherein issue was distribution commission paid to dist....
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....Addl. CIT, ITA No. 511/JP/2011. (iii) M/s Amprapali Jewells, ITA No. 416/JP/2011. He further drawn our attention on the decision of Hon'ble ITAT Jaipur Bench, Jaipur in the case of Gems Paradise Vs. ACIT (Supra) wherein it has been held that Section 194H is applicable where any commission has been paid by the principal to the commission agent. The assessee sold its goods through credit cards and on presentation of bills, issued against the credit card, the bank makes payment to the assessee after deducting agreed fees as per terms and conditions in case of credit card. This is not a commission payment but a fees deducted by the bank. In this situation, the bank is principal, the bank is not advised to sell the goods to the customer and getting the commission on this sale. Therefore, Section 194H is not applicable in case of goods sold through the credit cards. He further relied in case of (i) DCIT Vs. M/s Vah Magna retain (P) Ltd. ITA No. 905 /Hyd/2011 and (ii) ITO Vs. Jet Airways (2013) 28 ITR (Trib) 582 (Mumbai). Therefore, he prayed to delete the addition. 12.5 At the outset, the learned CIT DR supported the order of the learned CIT(A). 12.6 We have heard the riv....
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....commission but this is not a commission because assessee sells its goods against credit cards, and on presentation of bills, the bank has to make the payment. It is not the case that bank has advised the assessee to sell their goods to its customers then he will pay the commission. It is reversed in a situation as bank issued credit cards to the credit card holders on certain fees or whatever the case may be and the card holder purchases material from the market through his credit card without making any payment and that shop keeper presents the bill to the bank against whose credit card the goods were sold and on presentation of bill as stated above the bank makes the payment. Therefore, in our considered view, provisions of section 194H are not attracted in this type of transaction. Similar views have been held by the various ITATs on credit cards payments. Therefore, we delete the addition confirmed by the learned CIT(A). 12.7 In the result, the assessee's appeal is allowed. 12.8 The cross appeal filed by the Revenue is against deleting the addition of Rs. 47,72,031/- @ 25% on unverifiable purchase of Rs. 1,90,88,142/-. The learned Assessing Officer observed that th....
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....is. Thereafter, he rejected the book result on the basis of unverifiable purchases of Rs. 1,90,88,124/-. After considering the assessee's reply, he estimated the income @ 25% of unverifiable purchases at Rs. 1,90,88,124/- after relying on the decision in the case of Sanjay Oil Cake Industries (supra) and other cases also. 12.9 Being aggrieved by the order of the learned Assessing Officer, the assessee carried the matter before the learned CIT(A), who had deleted the addition by observing as under:- "4.3 I have carefully perused the order of the A.O. and the submissions of the A.R.. I find that the Hon'ble ITAT Jaipur Bench "A", Jaipur has already given a finding on similar facts in the case of the assessee in A.Y. 2005-06. Since, there is no divergence of facts on this issue during this year, from the previous year adjudicated upon by the Hon'ble ITAT in the case of the assessee, the decision of the A.O. to reject the books of account and invoke the provisions of S. 145(3) is upheld. 4.4 The subsequent estimation of income is required to be made by taking into consideration the past history of the assessee as per the observations of the Hon'ble ITAT J....
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....respectfully follow the Hon'ble Rajasthan High Court's finding on this issue that past history is the best guide but these guidelines are applicable on those assessees who occasionally found to indulge in such type of practices but as discussed above, the assessee in every year getting accommodation bill and deflating the profit by these accommodation entries. The past history of the case is doctored and can be relied upon. The learned A.R. for the assessee accepted that the books of account rejected by the Assessing Officer is justified on the basis of unverifiable purchases. After considering both sides arguments, we feel that some reasonable net profit should be applied for deterrent effect, thus we disallowed 15% as net profit on the unverifiable purchases. 12.14 In the result, the Revenue's appeal is partly allowed. (6) Shri Hemant Shrivastava (ITA No. 891/JP/2011 for A.Y. 2007-08 13. This is an appeal filed by the assessee against the order dated 11/08/2011 of the learned CIT(A)-II, Jaipur for A.Y. 2007-08. The effective grounds of appeal are as under:- "1. In the facts and circumstances of the case and in law the learned CIT(A) has e....
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....wance of Rs. 4,392/-. 6. The assessee craves his right to add, amend or alter any of the grounds on or before the hearing." 13.1 The grounds No. 1,2, and 3 of the appeal are against making addition of Rs. 17,24,798/- on account of unverifiable purchases of Rs. 68,99,193/- without providing cross examination of the persons, whose statement had been used against the assessee. The learned Assessing Officer observed that the assessee is in the business of manufacturing and trading of precious and semi precious stones. The assessee is running his business in the name and style of T.G.L. Group. During the year under consideration, the assessee had shown total sales of Rs. 2,65,63,549/- and gross profit of Rs. 10,07,812/- giving G.P. rate of 3.93%. In immediate preceding year, the total sales was Rs. 20,26,817/- and gross profit at Rs. 3,30,553/- G.P. rate @ 16.31%. The Assessing Officer gave reasonable opportunity of being heard on decline of G.P., which was submitted by the assessee. The learned Assessing Officer asked to furnish the confirmation of purchases in following cases, (i) M/s Anshu Gems, (ii) M/s Vijay Gems, (iii) M/s Savorite Exports, (iv) M/s Pooja Jewellers, (v) M/s ....
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....JP/1997) order dated 29/6/2004 and M/s Kanchwala Gems Vs. JCIT (supra) and held that in absence of qualitative details of stock, the rejection of book result is justified. Thereafter, he made best assessment on the basis of evidences available with him. The purchases to the tune of Rs. 68,99,193/- is not verifiable, G.P. has gone down heavily. It proves that the assessee had taken accommodation bills from these parties to reduce the profit of the assessee. Thus, he applied 25% income on unverifiable purchased of Rs. 68,99,193/- at Rs. 17,24,798/- by relying the decision in the case of Sanjay Oil Cake Industries and Vijay Protein Limited (supra). 13.2 Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the learned CIT(A), who had confirmed the addition by observing that the assessee had not produced M/s Anshu Gems, M/s Vijay Gems, M/s Savorite Exports, M/s Jodhpur Gems and M/s Subh Laxmi gems before the Assessing Officer for verification from whom total unverifiable purchases were at Rs. 68,99,194/-. He further stated that during the course of survey and search by the department, it was found that these parties are not in real business bu....
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.... Subh Laxmi Gems and he confirmed the addition made by the Assessing Officer @ 25% on unverifiable/bogus purchases. 13.3 Now the assessee is in appeal before us. 13.4 The learned A.R. Shri Rajiv Sogani for the assessee submitted that detailed submissions were made before the learned CIT(A) for rejection of books of account. The learned CIT(A) relied upon in confirming the trading addition in case of Deepak Dalela, which has been recalled by the Hon'ble ITAT. Thus, it is not relevant to the proceeding. He further relied upon the decision in the case of Amrapali Jewellers (supra) wherein Hon'ble Rajasthan High Court as confirmed the findings of the Hon'ble ITAT and held that on the basis of unverifiable purchases, rejection of book result is justified and also net profit should be estimated on the basis of past history of the case. In case of Swarnaganga Jewellers Vs. ACIT ITA No. 833/JP/2011, the Hon'ble ITAT had followed the decision in the case of Amrapali Jewellers Pvt. Ltd. In following cases, the Hon'ble ITAT disallowed a suitable percentage of net profit on the basis of past history. In case of P.R. Gems Vs. ITO in ITA No. 514/JP/2011 and M/s Amrapali....
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....CIT(A)-III dated 09/01/2012. The effective grounds of both the appeals are as under:- Ground of ITA 342/JP/2012 "Whether on the facts and in the circumstances of the case and in law the learned CIT(A) is justified in restricting the trading addition of Rs. 1,00,000/- as against Rs. 12,48,080/- made by the A.O. @ 25% of unverifiable purchases without considering the fact that assessee failed to discharge its onus to produce the sellers for verification of purchase claimed to have been made from them." Ground of ITA 322/JP/2012 " 1 The learned Commissioner of Income Tax (Appeals) has erred in facts and in law in making a lump sum addition Rs. 1,00,000/-. 2.The learned Commissioner of Income Tax (Appeals) has erred in facts and in law in confirming the Telephone Expenses of Rs. 18,687/-. 3.The assessee craves to amend, alter and modify any of the grounds of appeal. 4.The appropriate cost be awarded to the assessee." 14.1 Ground No. 1 of both the appeals are against restricting and confirming the addition as against the Assessing Officer made addition of Rs. 12,48,080/- @ 25% on unverifiable purchases. The learned Assessing Officer observed that the assessee is ....
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..... These persons were charging commission @ .2% to .25% on the quantum of bills issued. In case of M/s Umrao Exports, the BCTT Wing found during the course of survey that no stock, cash, books of account were found with the assessee. The firm was not doing any gems and jewellery business and only giving bills without actual delivery of goods. Further spot enquiry by the Ward Inspector at the business premises of M/s Ganpati Traders and Ratnam Jewellery was conducted and he was found that no business activity was carried out by the above parties. The learned Assessing Officer on the basis of evidence collected through various channels, gave reasonable opportunity of being heard to the assessee vide letter dated 17/11/2009 and 07/12/2009, which was responded by the assessee vide letter dated 26/11/2009 and 14/12/2009 respectively, which has been reproduced by the Assessing Officer on page No. 6 of the assessment order. After considering the both the replies of the assessee, he considered the Hon'ble Supreme Court decision in the case of Kanchwala Gems (supra), Indian Woolen Carpet Factory (supra), VISP (P) Ltd. (supra), Chuhar Mal Vs. CIT (supra), CIT Vs. Golcha Properties Pvt. Lt....
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....arned CIT(A) had not found the Assessing Officer's addition @ 25% justified and considered the assessee's past history and relied the decision in the case of CIT Vs. Gotan Lime Khanij Udyog (supra) and he confirmed the ad hoc addition of Rs. 1,00,000/- to take care all possible discrepancies and leakage of profit towards the adverse finding given by the Assessing Officer. 14.3 Now both the parties are in appeal before us. The learned CIT D.R. reiterated the arguments made in introductory para of this case and submitted that the facts of this case also identical with other cases of unverifiable purchases as during the course of search and survey operation conducted by the department on various parties, which has been referred by the Assessing Officer in the assessment order that these parties had provided only bills, no delivery of goods were made. The Assessing Officer had given sufficient opportunities to the assessee to produce these parties for verification, which has not been produced by the assessee. He only filed confirmation, PAN and TIN number, which cannot be verified in absence of suppliers. The learned Assessing Officer reasonably disallowed on account of unve....
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....ement of various persons relied by the Assessing Officer in assessment order, cannot be a basis for holding that the purchases made by the assessee are non-genuine. Since in those statements, no question has been asked with reference to assessee. The parties providing the bills as per the statement cannot be universally applied in all other cases. Once the Assessing Officer relied on the statements, it is his duty to provide opportunity of cross examination to the assessee. It is not the case of the department that the purchases rate/quantity of various items purchased from alleged unverifiable parties on different dates was less than the rate on which it was purchased on the date from other parties. The learned CIT(A) has accepted that the purchases of goods as per the bills raised by these parties has been made by the assessee but he presumed that purchases has not been made from these parties but from some other parties to whom payments might have been made in cash. This is only a presumption of CIT(A). The learned CIT(A)'s finding is without any basis. The Hon'ble ITAT has taken a consistent view that where purchases are unverifiable, books of account are to be rejected....
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....ion, it is found that three parties were also indulged in providing accommodation bills. The sufficient opportunities have been given by the Assessing Officer to prove the genuineness of the purchases. The Assessing Officer himself issued the notices to these parties but either notices were not served or not returned back. The assessee could not produce these parties for verification during the course of assessment proceedings. Even the Assessing Officer provides reasonable opportunity of being heard to the assessee. The learned Assessing Officer applied Hon'ble Gujarat High court decision in the case of Sanjay Oil Cake Industries (supra) and ITAT Ahmadabad Bench decision in the case of Vijay Proteins where 25% disallowance held reasonable on unverifiable purchases. The A.R. of the assessee tried to distinguish this case with facts and circumstances and argued to apply past history of the case. The onus is on the assessee to prove these purchases genuine. The assessee also could not be able be lead any evidence in furtherance of filing of confirmatory letter or merely showing that the payments were made by account payee cheques. The assessee was aware of the whereabouts of the ....
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..... The lower authority has not mentioned any particular expenses unvouched, therefore, no disallowance can be made from the telephone expenses. He relied upon the decision in the case of CIT Vs. Oracle Indina (P) Ltd. 199 Taxman 181 (Del.) (HC) and Arthur & Anderson & Co. Vs. ACIT (2010 TION 416 ITAT) and further argued that the disallowance made by the Assessing Officer is excessive and it should be restricted @ 10% by relying upon the decision passed by the Special Bench in the case of Topman Exports Vs. ITO 124 ITD 1 (Mum). At the outset, the learned CIT DR argued that a reasonable disallowance may please be confirmed. 14.7 After considering both the sides, we find 10% disallowance reasonable out of total telephone expenses at Rs. 93,433/-. Thus, the assessee gets part relief. 14.8 In the result revenue's appeal as well as assessee's appeal are partly allowed. (8) M/s Kinu Baba Jewellery Pvt. Ltd., Jaipur (ITA No. 1053/JP/2011 and C.O. No. 13/JP/2012) for A.Y. 2008-09 (Transferee Company) 15. The cross objection filed by the assessee is not pressed at the time of hearing of the appeal, therefore, we dismiss the cross objection as not pressed. 15.1 In Revenu....
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....nsidering the G.P. as well as past history of the assessee. 15.4 At the outset, the learned A.R. Shri Rajiv Sogani for the assessee took the same line of arguments and vehemently argued that the assessee has provided copies of bills, payments were made through account payee cheques. The appellant was maintaining quantity wise details of stock in stock register. The closing stock could be valued from the supporting bills. The disallowance @ 25% was not just because the Assessing Officer has not brought on record any evidence to prove that these purchases were inflated by 25% as compared to purchases from other parties and case laws relied by the Assessing Officer are not squarely applicable. Therefore, it is prayed to confirm the order of the learned CIT(A). 15.5 We have heard the rival contentions of both the parties, perused the material available on the record and above discussion made in this order, it is evident that during the course of investigation made by the department, number of parties were not found in existence on given addresses. No goods, cash, even books of account were found during the course of survey at the business premises of Ashish Jewellers by BCTT wing....
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....ssue of correct valuation of consideration received by the assessee on transfer of going concern, which was availed by the assessee vide letter dated 24/12/2010. The fair value of unquoted equity share of M/s Kinu baba Jewellery India Pvt. Ltd. was calculated @ 8.5 rupees per share as on 31/3/2007 as per Rule 11U(B) of the Income Tax Rules, 1962 (hereafter referred as the Rules. The learned Assessing Officer was not satisfied with the calculation made by the assessee company per share of transferee company. It is further found that shares was allotted in November, 2007 and February, 2008 whereas value was calculated by the assessee as on 31/3/2007. There was a survey on transferee company, who surrendered undisclosed investment in stock at Rs. 2.29 crores. This stock was accumulated in a day or two but it was representing investment of money earned over a period of time. There was reserved and surplus credited at Rs. 1,81,04,041/- on 31/3/2008 in transferee company, which represents profit earned during the year. This surplus was Nil as on 31/3/2007. The learned Assessing Officer recalculated the per share value after considering the accumulated profit as on 31/3/2008 and number of....
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....ed Assessing Officer had concluded that date of allotment of the shares was November, 2007 and February, 2008 and value has been taken by the assessee as on 31/3/2007. The learned CIT(A) has not given specific finding why she has accepted date of transfer i.e. 21/8/2007. It has not been come out from the order of the learned CIT(A) and submission made before her that Rule 11U(a) of the Rules has been applied meticulously. The valuation date defines in Rule 11U(j) of the Rules i.e. valuation date means the date on which the property or consideration as the case may received by the assessee, which was amended w.e.f. 29/11/2012 prior to its substitution clause (j) read as under:- "Valuation date means the date on which the respective property is received by the assessee." It is immaterial whether transferee company has supported its business or not or having any income from the trading of gems and jewellery, which has not been excluded or explained in rule itself. Therefore, this issue is set aside to the Assessing Officer and he is directed to compute fair market value of unquoted share as per the Rule 11U(a) of the I.T. Rules on the valuation date. 15.11 In the result, the ....
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....ems International, M/s Rahul Exports, M/s M.D. Exports and M/s Ambika Impex. The learned Assessing Officer reproduced the statement of Shri Ravi Haldia at pages 4 to 9 of the assessment order. The learned Assessing Officer concluded that statement of Shri Ravi Haldia clearly corroborates the other findings in this order to show that the purchases claimed by the assessee are not genuine. In case of M/s Nidhi gems, M/s A.R. Exports, M/s Adinath Gems and M/s Govindam Jewellers, a survey operation was conducted by the BCTT authority of the department and it was found that at the given address of these parties, no business activities were conducted. There was no cash, stock, books or other relevant documents were found therefrom. They merely provided accommodation entries to interested parties in the garb of sale/purchase. In case of M/s Sapna Gems, M/s Pragati Gems and M/s pooja Exports, enquiry was conducted by the department and found these parties were merely providing accommodation entries to other persons in the garb of sale/purchase. The Assessing Officer gave reasonable opportunity of being heard to the assessee on unverifiable purchases from above said parties. The Assessing Of....
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....e's own case on similar facts in subsequent A.Y. Regarding estimation of income it has also been the consistent view of the Hon'ble ITAT Jaipur Bench that past history is the best guide for estimating the income of the assessee, however, the assessee has not submitted any record of its past history. It is the consistent view of the Hon'ble ITAT Jaipur Bench that the GP is always better on lower sales since the GP of the assessee has been accepted at 16.16% on sales of Rs. 25500660/- in A.Y. 2005-06 a GP of 20% is held to be justifiable on the sales of Rs. 15391516/- during the year. As the assessee has declared GP of Rs. 22,70,660/- an addition of Rs. 8,07,643/- is sustained." 16.3 Now the assessee as well as the revenue are in appeal before us. 16.4 The learned A.R. Shri P.C. Parwal for the assessee submitted that the assessee is maintaining complete day to day books of account, which is subject to audit. These books of accounts are supported by bills and vouchers. The observation of Assessing Officer that closing stock of assessee is on estimate basis and not subject to verification is incorrect inasmuch as the year at the year end and stock is physically verifi....
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....@ 25%. The learned AR has not pressed the rejection of books of account U/s 145(3) of the Act in this also. It appears from the assessment order that the assessee is doing this business from past but figures are not available in assessment order and paper book submitted by the assessee as per Hon'ble ITAT order for A.Y. 2005-06, the assessee always has unverifiable purchases. In A.Y. 2004-05 unverifiable purchases was at Rs. 1,80,12,079/-, in A.Y. 2005-06 (in the order), in A.Y. 2006-07 at Rs. 78,45,505/- and in A.Y. 2007-08 at Rs. 1.27 crores. Therefore, the assessee's past history is totally doctored, which is not best guide for deciding the income of the assessee as held by the Hon'ble Rajasthan High Court that the past history can be applied where the assessee. has occasionally found fault of unverifiable purchases. In this case, the assessee always getting accommodation bills. Therefore, addition made by the Assessing Officer should be confirmed. He also reiterated the facts mentioned by the Assessing Officer in assessment order. 16.6 We have heard the rival contentions of both the parties and perused the material available on the record. The Income Tax Departme....
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.... The assessee has not claimed deduction U/s 80HHC of the Act before the Assessing Officer in prescribed proforma as mentioned by the learned DR alongwith the return. There is no evidence alongwith paper book, which shows that the assessee calculated deduction U/s 80HHC of the Act in computation of income. Even there is no note in the computation in case of addition made on account of any reasons, the deduction would be allowed. The case law relied by the assessee are not squarely applicable on the facts of the case. Those assessees claimed this deduction in originally alongwith return in prescribed proforma. Recently the Hon'ble Rajasthan High Court in the case of Venus Arts & Gems Vs. ITO vide order dated 20th August, 2014 has held in identical case of unverifiable purchases that the assessee is 100% exporter but that does not mean that the Assessing Officer is precluded from enquiring into the purchases, which were made by the assessee from the said sellers. The Hon'ble High Court in case of unverifiable purchases has held that, it is purely a finding of fact by the two appellate authorities as to what should be a reasonable G.P. rate after rejection of books of account a....
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....iately withdrawn from the bank in cash in the next few days and purchases against the bills were shown in the cash. There was survey by BCTT wherein in the year 2007-08 similar racket was also discovered by the department and it was found that commission @ .20% to .25% was charged for issuing these bogus sales bills. In some cases, the commission was higher as much as .5% to 6%. In case of assessee, survey authorization issued by BCTT Wing could not be executed as the assessee was non-existent at the given address. Similar information was also received by the Assessing Officer from DIT investigation Jaipur pursuant to search conducted in case of Haldia Group on 20/4/2007 wherein it has been categorically admitted that they have obtained bogus bills from different parties in F.Y. 2004-05 and further subsequent years. He also admitted that payments made to all these parties were shown through cheque but immediately amount was received back in cash. In A.Y. 2007-08, the learned Assessing Officer assessed the assessee's income @ .5% at Rs. 8,34,488/- on total bogus bills of Rs. 16,68,97,578/-. The learned Assessing Officer in the year under consideration has also calculated income ....
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.... in the assessee's case, income on the basis of .5% had been assessed in A.Y. 2007-08. There is no evidence before the Hon'ble Bench that these additions have been challenged by the assessee or not before any appellate authority. Therefore, addition may be confirmed. 17.5 We have heard the rival contentions of both the parties and perused the material available on the record. It is undisputed facts that that on given address, no firm was found inexistence, therefore, survey authorization could not be executed. The assessee did not furnish any audit report, copy of bank account during the course of assessment proceedings before the Assessing Officer, which was also not produced before the learned CIT(A), only an affidavit was filed before her, wherein it has been admitted by the assessee that he was earning commission @ Rs. 100 to 200 per lac. The learned CIT(A) gave the opportunity to the assessee during the appellate proceeding why the assessee charged lesser commission compared to others in the line of accommodation entry. There was no submission with evidence. In past in A.Y. 2007-08, the learned Assessing Officer computed the assessee's income @ .5% on bogus bill....
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....it has been held that the assessee systematically is planning and constructing of commercial complex and then had been selling it in a planned way like a prudent business mind with a profit motive, would be treated as income from business or profession or income from capital gain as claimed by the assessee. He thoroughly examined concept of business on page Nos. 4 to 7 and held that the assessee had purchased the land not inherited. The construction activity was in planned way and intention of the assessee was clear to make profit by indulging in trade adventure. The building on plot purchased was already there, which was utilized for commercial purposes. The learned Assessing Officer after considering the various facts and circumstances of the case and statement recorded U/s 133A of the Act during the course of survey wherein it was accepted by the assessee that this construction was made to earn the profit. The appellant had accepted the booking of shops, which were shown as a sundry creditors in the books of account of M/s Inter Continental Gems. He has used the fund from one business to another. The assessee's business was trade and adventure in nature. Accordingly, he held....
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....e assessee stands demolished and therefore, there cannot be any improvement to that building. It is, therefore, held that cost of the building in respect of shops sold is to be taken as cost of acquisition of building and capital gain on building will be determined on the basis of sale of building included in the sale of shops. We therefore, hold that the profit from the sale of shops during the year will be apportioned between the profit on the sale of land and building. The capital gain arising from sale of land will be long term. The profit on sale of building will be short term because the building was stated for construction from June 2005 and therefore, the period of holding of building will be less than three years for sales made during the year." After respectfully following the decisions of the Coordinate Bench, we confirm the order of the learned CIT(A) on this ground of revenue's appeal. 18.5 The second ground of appeal is against deleting the addition of Rs. 32,00,000/- made U/s 69B on account of "on money" interest earned on it. The Assessing Officer observed that there was a survey U/s 133A of the Act on 10/9/2008. Statement of the assessee was recorde....
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....perused the material available on the record. The Coordinate Bench in assessee's own case for A.Y. 2007-08 ITA No. 939/JP/2010 order dated 24/6/2011 had decided issue of "on money". The relevant portion of the order is as under:- "4.7 Hence the information contained in the statement recorded during the course of survey can be used but it cannot be conclusive evidence against the assessee. The A.O. has not collected any material from the purchaser of the shops to show that the assessee has received on money. The sale of shop is evidenced by the sale deed. There is no documentary evidence in respect of sale price of the shops. The Hon'ble Punjab & Haryana High Court in the case of Paramjit Singh Vs. ITO, 323 ITR 588 had an occasion to consider as to whether the oral evidence is admissible once the document contains all the terms and conditions. Hon'ble High Court held that according to the provisions of the Indian Evidence Act, 1872 when terms of a contract, grant or other disposition of property have been reduced to the form of a document then no evidence is permissible to be given in proof of any such term or such grant or disposition of the property except the docum....
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....aras on unverifiable purchases. It is further argued that in assessee's case, the parties, who had supplied the bills, had been searched and statement U/s 132(4) of the Act had been recorded, who had categorically admitted that these are the only bills, no goods were supplied by the suppliers. Therefore, Assessing Officer's order should be confirmed. 18.13 Learned A.R. Shri Manish Agarwal for the assessee argued that during the course of assessment proceedings , every possible details were submitted to the Assessing Officer in form of copy of purchase bills, TIN number, P.A. number, proof of payment and confirmation from the supplier and payments were made through account payee cheques. The assessee has discharged his burden by submitting these evidences during the course of assessment proceedings. It is further argued that the assessment U/s 153A of the Act in case of Clarity Gold Pvt. Ltd. has been completed without disturbing sale of the party. Without purchase no sales could be made by the assessee. In case of Century gems, summon issued by the learned Assessing Officer was served on the assessee. Merely for the reason that the party has not complied with the summon,....
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....ying the action of the learned A.O. in not providing opportunity of cross examination of the persons whose statements have been used against the assessee and has further erred in justifying the action of the learned A.O. in not making the evidences which have been used against the assessee. Therefore, the action of the learned CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire assessment order which is passed in gross violation of principles of natural justice. 2. In the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned A.O. in holding the purchases from the following parties as bogus:- Sl. No Name of the parties from whom purchases made Amount (in Rs.) 1. M/s Imperial Jewels 6,39,475/- 2. M/s Govindam Gems 3,11,650/- Total 9,51,125/- The action of the learned CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by holding the above purchases as genuine. 3. In the facts and circumstances o....
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....was also conducted in the year 2007-08 and found that various persons were indulged in practice of issuing bogus bills in the trade of gems and jewellery. The learned Assessing Officer further observed that he compared the G.P. rate from A.Y. 2005-06, 2006-07 to the year under consideration. He found that the assessee made purchases from following parties at Rs. 9,51,125/- Sl. No. Name of the parties from whom purchases made Amount (in Rs.) 1. M/s Imperial Jewels 6,39,475/- 2. M/s Govindam Gems 3,11,650/- Total 9,51,125/- To verify the purchases made from M/s Imperial Jewels and M/s Govindam Gems, the enqiry was conducted through ward Inspector, who has reported to the Assessing Officer that on give address no such party was found. There was no sign board of any such party there. He also enquired from the local people about the whereabouts of these parties, which was come in the knowledge of the Inspector that no such parties were there. The summons issued U/s 131 of the Act were also not served on it. Further summon U/s 131 of the Act were also sent through registered post, which were returned back as there were n....
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....fficient to establish the genuineness of purchase. (c) M/s Indian Woolen Carpet Factory Vs. ITAT (supra) for genuineness of the purchases. (d) VISP (P) Ltd. Vs. CIT (supra) for genuineness of purchases. (e) Chuhar Mal Vs. CIT (supra) for Evidence Act. (f) Golcha Properties Pvt. Ltd. for genuineness of transactions. On the basis of unverifiable purchases in case of two parties , the learned Assessing Officer rejected the book result U/s 145(3) of the Act and estimated the income U/s 144 of the Act by relying on the decisions of Hon'ble Gujarat High Court in the case of Sanjay Oil Cake Industries (supra) and the decision of Hon'ble ITAT Ahmadabad Bench in the case of Vijay Proteins Ltd. (supra) @ 25% on unverifiable purchases of Rs. 9,51,125/-at Rs. 2,37,781/-. 19.4 Being aggrieved by the order of the learned Assessing Officer, the assessee carried the matter before the learned CIT(A), who had confirmed the addition by observing that investigation wing of the department had conducted survey on the various entry providers and all the above mentioned supplies were found to be suc....
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.... decision in the case of Amrapali Jewellers Pvt. Ltd. In following cases, the Hon'ble ITAT disallowed a suitable percentage of net profit on the basis of past history example P.R. Gems Vs. ITO in ITA No. 514/JP/2011 and M/s Amrapali Jewellers (supra). It is further argued that G.P. rate declined had been explained before the Assessing Officer, which was due to increase in the sale, substantially which was due to change of strategy adopted by the assessee. Therefore, he prayed to delete the addition. 19.6 The learned CIT D.R. reiterated the arguments made in introductory para of this case and submitted that the facts of this case also identical with other cases of unverifiable purchases as during the course of search and survey operation conducted by the department on various parties, which has been referred by the Assessing Officer in the assessment order that these parties had provided only bills, no delivery of goods were made. The Assessing Officer had given sufficient opportunities to the assessee to produce these parties for verification, which has not been produced by the assessee. He only filed confirmation, PAN and TIN number, which cannot be verified in absence of supp....
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....ses. The A.R. of the assessee tried to distinguish this case with facts and circumstances and argued to apply past history of the case. The assessee also could not be able be lead any evidence in furtherance of filing of confirmatory letter or merely showing that the payments were made by account payee cheques. The assessee was aware of the whereabouts of the parties and he should have produced these parties before the Assessing Officer for verification of purchases, which could not be done at the stage of assessment proceedings. It has been established that these parties were providing accommodation bills, no goods were supplied by them. The assessee only produced confirmation, PAN and TIN number and claimed that payments were made through account payee cheques whereas in investigation, the cash has been withdrawn from the sellers from the immediately after clearance of the cheques in cash. This finding is also got support from the recent decision of Hon'ble Rajasthan High Court in the case of Venus Arts & Gems order dated 20/8/2014 wherein it has been held that order passed by the ITAT for confirming G.P. after rejection of books of accounts on the basis of various discrepanc....
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.... only 10% but travelling expenses confirmed on the basis of, there is no business expediency shown by the assessee before the learned CIT(A). Before us also, the learned A.R. had not brought any evidence to justify the foreign travelling for business purposes. The findings given by the learned CIT(A) has not been controverted by the assessee. As during the year, the total turnover was Rs. 12,14,550/- as compared to preceding year. The assessee's sale has gone down substantially from Rs. 2.88 crores to 12 lacs. In absence of any evidence, foreign travelling expenses cannot be allowed. Therefore, we confirm the order of the learned CIT(A) for disallowance made on travelling expenses. This ground of appeal is dismissed. 19.11 In the result, the appeal of the assessee is partly allowed. Smt. Sharmila Jain ITA No. 871/JP/2011 for A.Y. 2007-08 20. This is an appeal filed by the assessee against the order dated 11/07/2011 passed by the learned CIT(A)-II, Jaipur for A.Y. 2007-08. The effective grounds of appeal are as under:- "1. In the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned A.O....
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....ial No. 2 to 11, which were returned back by the postal authority with the comments that no such person is residing at given addresses. The learned Assessing Officer further observed that department had conducted survey/searches in various cases namely search in Ravi Haldia Group. They have categorically admitted that they provided bogus bills and no goods were purchased from these parties. The BCTT Wing of the department conducted survey U/s 133A and search U/s 132 of the Act in cases of Moti Sons and Sanjiv Prakashan Group, it was found that these parties are indulged in issuing bogus sales bills without actual delivery of goods. From all above parties, enquiries were got conducted but they denied any physical transaction with her. They only provided the bills after getting commission on it. No goods were sold by these parties. He gave a show cause notice to the assessee on the basis of investigation made by the department and enquiry made by him that book result should not rejected U/s 145(3) of the Act. The assessee replied vide letter dated 15/12/2009 she filed copy of accounts of 11 parties from her book. The finding given by the postal authorities were also challenged and as....
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....t entity which were providing accommodation bills. It was also admitted that no real business was conducted and no physical delivery of goods were ever given. After receipt of cheques, equal cash was given back after deducting commission varying between .20% to .25%. The learned Assessing Officer had issued notice and no such parties were found on given addresses. In case of Suman gems, there was no compliance by the alleged suppliers. The assessee also failed to produce these parties to the Assessing Officer. He further relied upon the decision in the case of Deepak Dalela Vs. ITO (Supra), Shanti Kumar Chordia Vs. ACIT (2010) 128 TTJ (JP) 708. Kanchwala Gems Vs. JCIT (supra), CIT Vs. Sindhuja Foods (P) Ltd. (2008) 16 DTR 278 (Raj.), G.G. diamond International Vs. DCIT (supra), CIT Vs. JMD Computers & Communications (P) Ltd. (2009) 20 DTR 317 (Del.), CIT Vs. Amr Mining Co. (supra), Eland International (P) Ltd. Vs. Dy.CIT (2009) 124 TTJ 554, Mittal Belting and Machinery Stores Vs. CIT (253 ITR 341) (P&H) (HC), Smt. Kusum Lata Thukral (supra), Tirath Ram Gupta Vs. CIT (2008) (204 ITR 145) and finally dismissed the assessee's appeal. It is further held that the assessee had shown ....
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....urned back, the parties had not been complied with it. The assessee was asked to produce these parties for verification of purchases, which could not be complied by her. The assessee could not provide the quantitative and qualitative details of jewellery with respect to opening purchases, sales and closing stock, therefore, closing stock thus was not subject to verification. All arguments of this case, also to be considered as written reply submitted for these cases and also prayed to confirm the addition made by the Assessing Officer and confirmed by the learned CIT(A). 20.6 We have heard the rival contentions of both the parties and perused the material available on the record. The assessee has not challenged the rejection of book result as defects pointed out by the Assessing Officer are sufficient to reject the book result U/s 145(3) of the Act. The department had conducted survey and search in various cases as mentioned by the Assessing Officer as well as the learned CIT(A). On investigation, it is found that these 11 parties were also indulged in providing accommodation bills. The sufficient opportunities have been given by the Assessing Officer to prove the genuineness of....
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....and 2.1 raised by the assessee are as under:- '2.1 On the facts and in the circumstances of the case the ld. CIT(A) has grossly erred in not accepting the purchases of Rs. 16,17,011/-as genuine and thereby sustaining an addition of Rs,.2,50,836/- arbitrarily. 2.2 On the facts and in the circumstances of the case the ld. CIT(A) has further erred in sustaining an addition of Rs. 2,50,836/- by applying g.p. rate of 8.3% instead of 8.15% declared by the assessee. Hence, the addition so upheld deserves to be deleted. 21.3 The brief facts of the case are that the AO observed that the assessee company is engaged in the business of manufacturing and export of silver, precious and semi precious ornaments and also capital gain on sale of immovable properties. The assessee has shown total sales of Rs. 1672.24 lacs and gross profit of Rs. 136.94 lacs has been declared by giving a g.p. rate of 8.15%. In the immediately preceding year, the assessee has shown total sales of Rs. 1794.35 lacs and gross profit of Rs. 148.26 lacs by giving a g.p. rate of 8.48%. Thus the g.p. rate of the assessee has been declined as compared to immediately preceding year. The AO further obser....
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....llowed in Part 'D' of Chapter IV of the Income Tax Act, 1961. The genuineness of these transactions had not been proved. Thus the expenses were not incurred wholly and exclusively for the purpose of business u/s 37 of the Act. The AO relied on the following case laws in his assessment order. 1. M/s Indian Woolen Carpet Factory vs ITAT and Others (2002) 178 CTR 420 (Raj.) regarding genuineness of the purchases. 2. CIT Vs Precision Finance (P)Ltd. 208 ITR 465 (Cal.) regarding payment of cheuqe which is not sacrosanct. 3. CIT Vs Golcha Properties Pvt. Ltd.227 ITR 391 (Raj.).The Department is not required lead a clinching evidence to prove that purchases are bogus. 4. CIT vs La Medica, 250ITR 575 (Del.) regarding non- existent of seller. 5. Beena Metals vs CIT, 240ITR 222 (Ker) regarding bonus purchases. 6. Chaturbhuj Panauj AIR , 1969 (SC) 25, Sumati Dayal vs CIT,214 ITR 10 (SC) and C. Vasant Lal & Co. 45 ITR 206(SC) regarding pre-ponderance of probabilities 7. Kanchwala Gems vs JCIT (ITA No.134/JP/02 dated 10-12- 2003) regarding payment by cheque is not sufficient to establish the genuineness of the purchasers. The AO on the basis of the above observat....
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....he addition of Rs. 250,836/- confirmed by the ld. CIT(A) out of total addition of Rs. 4,04,253/- made by the AO was by applying 36% rate on alleged unverifiable purchases of Rs. 16,17,011/- .The ld. CIT(A) applied the g.p. rate of 8.3% as against the g.p. rate of 8.15% declared by the assessee. He further submitted that in Assessment Year 2005-06, ITAT confirmed the lumpsum addition of Rs. 70,000/- on account of g.p. addition. In assessment year 2006-07, the case was not scrutinized u/s 143(1) of the Act. He further argued that the alleged unverifiable purchases are 1.27% of total purchases of Rs. 12.70 crores. He further relied on the decision of ITAT Calcutta Bench in the case of Sagar Bose vs ITO 56 ITD 561. The assessee furnished the copy of Purchase Bills, RST/CST No. of suppliers, PAN, Proof of payment made against purchases through account payee cheque and confirmation from the above suppliers during the course of assessment proceedings. The AO totally relied on the information collected and supplied by the Investigation Wing. The AO has ignored the evidence and details filed by the assessee to prove the genuineness of purchases. The AO had not found any defect in it. The AO....