TaxTMI 
TaxTMI 
2013 (7) TMI 949
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....ver and gold jewellery, in partnership of Shri Shiv Kumar Goyal and Shri Dharam Chand Kothari. During the year under consideration, the assessee has declared a gross profit rate of 18.96% on the total turnover of Rs. 76,77,454/- as against the gross profit rate of 18.29% in the immediately preceding year and 21.43% in the year prior to the immediately preceding year i.e. in the assessment year 2006-07. The Assessing Officer found that the assessee has not maintained any stock register as is evident from column No. 12B and 28A of the tax audit report. The valuation of closing stock has been certified by the partners. No quantitative details of opening stock, closing stock, purchases and sales were provided. In the course of verification of the purchases made at Rs. 64,06,723/-, the Assessing Officer found that the assessee has made purchases of Rs. 6,08,414/- from the following three parties, who were known in providing bogus bills and are not making actual sale of goods: 1. M/s Ashu Gems Rs. 3,82,988/- 2. M/s Century Gems Rs. 75,000/- 3. M/s Ranka Jewells and Impex Rs. 1,50,426 Total Rs. 6,08,414/- 2.1 The Assessing Officer, therefore, issued summons u/s 131 of ....
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....e and there being serious defects in the books of account, such accounts were taken to be not found correct and complete. It was held that the true and correct profits therefrom cannot be deduced. Accordingly by application of provisions of Section 145(3) of the Act, the accounts stood rejected. After rejecting the books of account, the Assessing Officer found that the assessee has managed the bogus bill only to suppress its profits. He, therefore, considering overall facts of this case and in fitness of things found it justified to estimate the assessed income by making addition equal to 25% of such purchases of Rs. 6,08,414/-. Accordingly an addition of Rs. 1,52,104/- has been made to the declared trading results of the assessee. The assessment stood completed at an income of Rs. 3,19,134/-. 3. The Ld. CIT(A) considering the facts and submissions and upon perusal of record found that the assessee has not maintained complete quantitative and qualitative details. Co-relation between the purchases and stock has not been established. The Valuation of closing stock has been made only on estimate basis and the same is not capable of verification. As regard, purchases from the three pa....
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....from Investigation Wing and no opportunity of confrontation was given to the assessee. Further, in all these cases, the assessee has made payment by account payee cheques. The Ld. AO could have inquired from banks of these parties. Further the Ld. AO has not brought any material to show that these parties have paid cash to the assessee against the cheques given to them by the assessee. Therefore, in absence of any positive material, the purchases cannot be held as unverifiable merely on suspicion, surmises and conjectures. d) Addition of Rs. 1,52,104/- by disallowing 25% of alleged unverifiable purchases:- In case of rejection of the books of account, Section 145 does not give unfettered power to the AO to estimate the profits at his whims and fancy. There must be some logical basis to estimate the profits. In the case of the assessee the trading results of current year was better than the last year. In AY 2007-08 the GP rate was 18.29% whereas in current year it was 18.96%. The trading results of the assessee cannot be compared with AY 2006-07 because the turnover of the assessee in AY 2008-09 is better than AY 2006-07 i.e. increased by more than 15%. The G P chart of the assess....
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....dition @ 25% of bogus/unverifiable purchases was given as page 7 of its order, reproduced as under:- "...The AO has made addition @ 25% of bogus/unverified purchases relying on the decision of Hon'ble Gujarat High Court in the case of M/s Sanjay Oil Cake Ind. (supra) and the decision of Hon'ble ITAT Ahd. Bench in the case of M/s Vijay Proteins (supra). The Hon'ble ITAT Jaipur Bench in the case of M/s Gem Paradise in ITA No. 700/JP/2009 has considered the case of Sanjay Oil Cake Ind. (supra) and held that in the case of Sanjay Oil Cake a specific finding was given by the AO that purchases were made from the alleged bogus suppliers at higher rate as compared to other parties. The Hon'ble Tribunal held that the decision of Hon'ble Gujarat High Court was not applicable in that case. Respectfully following the decision of Hon'ble ITAT Jaipur Bench it is held that without establishing that the purchases were inflated addition cannot be made @ 25% of the bogus purchases. The Hon'ble Gujarat High Court itself in the case of Sanjay Oil Cake (supra) has clearly indicated that estimate at particular rate is not a question of law and hence, legal proposition laid down by the AO fr....
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....aised in appeal are required to be rejected so that the appeal is dismissed. The findings of fact reached by the authorities below are not shown to be perverse and the assessee has not discharged its burden to prove that the purchases are genuine. The assessee's plea that their income was estimated by application of gross profit rate does not advance case as making of bogus purchases has become a regular feature of the assessee and there is increasing trend in recording of bogus purchases in order to reduce its true profits from taxation. Even the turnover of the assessee has reduced during the year under consideration. Assessment after rejection of accounts has to be made on estimation by assessing authority, which, in this case is bonafide. 6. I have heard parties with reference to material on record and case laws brought to my notice. The Assessing Officer found that the assessee has not maintained stock register nor quantitative details with respect to purchases, sales, opening and closing stock are available. That apart purchases from three parties namely M/s Ashu Gems, M/s Century Gems and M/s Ranka Jewells and Impex aggregating to Rs. 6,08,414/- are not genuine. He was, thu....
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....at the purchases entered in the books of account in the name of such three parties are genuine. The onus to prove that such purchases are genuine lay upon the assessee. This burden could not have been shifted on the revenue merely by providing their Permanent Account Number/acknowledgement of return or showing that the payments in respect of such accommodation entries were made by cheque. In order to testify as to whether the appellant can really be said to have entered into a genuine purchases. Learned counsel Shri Vijay Goyal was requested as to whether he can produce some cogent material and reliable evidence to substantiate that the goods as are entered in the books of account in the name of these three parties and that have been held as bogus are the same goods, which can be said to have been supplied by them. He was also afforded opportunity to find out this fact from the appellant and state the case on a different date for which hearing can be adjourned as per his convenience. The learned counsel, however, refused to take any opportunity and in his wisdom stated categorically that the appellant has not taken any videography of such goods received by him from the captioned pa....