TaxTMI 
TaxTMI 
2007 (7) TMI 647
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....one through while considering the arguments advanced by the parties. 3. The relevant facts are that during the year under consideration the assessee had exported gems and jewellery and material were claimed to have been purchased from M/s Adinath Traders, M/s Om Shree Jewellers, M/s Ambika Impex and M/s M.D. Exports. The AO doubted the purchases made from the claimed four parties since in her view the said four parties had only issued accommodation bills without physical delivery of the goods. She accordingly made addition of Rs. 15,19,724 under s. 69C of the Act and consequent to that the expenditure equal to purchase was considered non-genuine and Rs. 15,19,724 were also disallowed in view of proviso to s. 69C of the Act. The AO also denied the claim of export and deduction under s. 80HHC on the claimed profit stated to have been earned from the export of the goods purchased from the abovenamed four parties. The sales credited in the books of account in respect of export consignment were treated as unexplained and added under s. 68 of the Act. The learned CIT(A) has upheld the assessment sustaining addition of Rs. 15,19,724 under s. 69C and addition of the same amount under pr....
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....nd (4) the sale to the assessee was at half of the silver rate. The AO even did not consider that the purity of silver in pendant which was just 50 per cent, called white metal in export sale, and, therefore, these were purchased at low rates, the nature of payment was as per the prevailing practice in the market so also the understanding in between the buyer and the seller. The assessee could not be blamed for the inability of the supplier to produce the vouchers for the manufacturing of silver pendant though the genuineness of sale of goods by these sellers was doubted by the AO but no enquiry whatsoever was made from any of the sellers for their past and present purchases nor their bank accounts were checked by the AO to know the position of payment made by the assessee through account payee cheques nor the AO had proved the return of cash to the assessee by the sellers to whom payments were made by account payee cheques for the purchases. 6. The AO without making any comments on the export of goods by the assessee which involved customs clearance, receipt of sale consideration in convertible foreign exchange through banking channel for which the assessee was allowed the dedu....
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....nts were sent when the foreign buyers visited Jaipur at Johari Bazar, Jaipur where the partner has his office at Ratnasagar, MSB Ka Rasta, Johari Bazar, Jaipur. Afterwards, the appellant had incurred telephone expenses of Rs. 10,305 in contacting the foreign buyer and for payments. There was no need of visiting foreign country. Had the partner visited foreign country, the taxable profit would have reduced. (v) Export of white metal pendents which are of silver : From the export invoice (paper book 25), the items exported containing silver were exported by the name white metal. The total purchases of pendent was of Rs. 6,367 containing less than 50 per cent purity of silver therefore silver rates for 999 tonch cannot be applied as alleged by the learned AO. (vi) High GP and NP rate : The quality of goods exported was short supply and rare. The assessee was in know of the suppliers and the importer therefore it took benefit of exporting the goods. If the GP or NP is high, the same has been disclosed by the assessee. Quantity tally was also submitted to the learned AO. The learned AO, in order to give colours of bogus purchases and export, has wrongly alleged that it....
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....ibunal has held that where the seller accepts the transaction, an assessee has exported the goods, there is heavy burden on the Department for making any addition under s. 69C of IT Act. (d) In the business of precious and semi-precious stones, the purchase and sale of same items are repeated generally when margin of profit is foreseen therefore there was no abnormality in such purchases. (e) The proprietor of M/s Adinath Traders, Shri Sanjay Kothari is not related to Shri Dwarka Prasad Vijay and keeping margin of profit by him in selling the goods to assessee firm is a clear proof that the transaction was genuine and actual. (3) M/s M.D. Exports : The purchases from M/s M.D. Exports have been held to be genuine in the cases of Prakash Chand Vijay vs. Dy. CIT (ITA No. 26/Jp/2005, dt. 28th July, 2006) and in the case of Vaibhav Gems Ltd. vs. Asstt. CIT (ITA Nos. 654/Jp/2004 and 33/Jp/2004), therefore no need to discuss it further. (4) M/s Om Shree Jewellers : In response to summons under s. 131, the manager Shri Ashok Kumar Agrawal attended and admitted having sold the goods. The total purchases from M/s Om Shree Jewellers was of Rs. 6,367 which w....
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....ontravention to the provisions of s. 142(3) of Act. Even in this case of M/s Prakash Gems (Prop. Shri Prakash Chand Vijay (ITA No. 26/Jp/2005, dt. 28th July, 2006), the purchases from M/s M.D. Exports (where Shri D. Vijay is a partner) was held to be genuine. Therefore, there is no need to comment on the wrong and misleading conclusion arrived at by the learned AO for Shri Dwarka Prasad Vijay and others (page Nos. 9 to 22). The learned Authorised Representative submitted further that from page No. 9 to page No. 21 of the order under s. 143(3) of IT Act, the learned AO had repeated the comments made by the learned AO (Dy. CIT, Circle-5, Jaipur) in case of Shri Prakash Chand Vijay (supra) on the working, bank account and other internal matters of suppliers like Manviya Exports, M/s M.D. Exports, M/s Payal Gems, M/s Ambika Impex, M/s Shikha Gems and M/s Prakash Gems out of which the assessee firm had dealings with M/s M.D. Exports and M/s Ambika Impex only. In this respect we submit as under : (i) Sellers being existing assessees and registered with Sales-tax Department : All the sellers are existing income-tax assessees and are registered with the Sales-tax Department. Th....
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....ustoms authorities : The total goods were exported after verification of the contents of the parcel by the Central customs authorities. (vii) Maintenance of stock register : The assessee has maintained stock register (paper book 19 to 23), a copy of which was also submitted to the learned AO. (viii) Provisions of s. 145(3) not applied : The book results were not rejected. It has been held by this Hon'ble Tribunal in the case of Asstt. CIT vs. Gem Stones (2001) 26 Tax World 511 (Jp) that addition for bogus purchases cannot be made without rejecting the account books. The learned Authorised Representative placed reliance on the following judgments/orders that the action of the learned AO was unjustified in treating the genuine purchases made by the assessee firm as bogus : (i) CIT vs. Orissa Corporation (P) Ltd. (1986) 52 CTR (SC) 138 : (1986) 159 ITR 78 (SC); (ii) Dy. CIT vs. Adinath Industries (2001) 170 CTR (Guj) 262 : (2001) 252 ITR 476 (Guj); (iii) CIT vs. M.K. Brothers (1986) 52 CTR (Guj) 228 : (1987) 163 ITR 249 (Guj); (iv) Shiv Trading Co. vs. ITO (2003) 30 Tax World 117 (Jp); (v) Radha Mohan Agrawal vs. IT....
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....he learned Departmental Representative justified the first appellate order. 11. After considering the arguments advanced by the parties, we find substance in the above contentions of the learned Authorised Representative. The AO has treated the claimed purchases of goods at Rs. 15,19,724 from the four parties M/s Adinath Traders, M/s Om Shree Jewellers, M/s Ambica Impex and M/s M.D. Exports as bogus doubting the physical delivery of the goods for the said amount to the assessee against the bills issued by them which as per the AO is only accommodation bills. The AO has made detailed observations to justify the allegation made by her that the abovenamed four parties had not delivered the goods for the said amount of Rs. 15,19,724. The goods were actually not purchased from them. The assessee had claimed to have purchased stones/material worth Rs. 5,20,880 from M/s Ambika Impex, Rs. 6,41,326 from M/s Adinath Traders, Rs. 3,51,053 from M/s M.D. Exports and Rs. 6,367 from M/s Om Shree Jewellers. On the basis of information received and enquiry, conducted by her, the AO has tried to establish that the abovenamed four parties out of whom only M/s Adinath Traders and M/s Om Shree Jewel....
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....inference would be that those goods were purchased by the assessee. Thus, the question before us is as to wherefrom those goods were purchased by the assessee if not from the abovenamed four parties. Even if we accept the version of the AO for a moment that the abovenamed four parties had only issued accommodation bills to the assessee against the goods purchased without physical delivery of the goods as those parties either are not in existence or not in the same business, the implication would be that goods have been purchased from others. Now, there are two possibilities in this regard. Firstly, some small suppliers who have no any regular establishment had actually supplied the goods to the assessee through the abovenamed four parties on payment of commission to them for utilizing their purchase bills having CST/RST numbers, PANs, address, etc. The other possibility is that those four parties to avoid payment of due tax have now denied the sale and that they had only issued bills without physical delivery of goods by charging commission only or they are not coming forward before the AO to disclose the truth. Undisputedly, it is not always within the control of a purchaser to pr....
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.... proviso to s. 69C of the Act without appreciating the aforesaid facts and circumstances properly. Thus, there was no occasion before the AO to invoke provisions of s. 145(3) of the Act and making additions in question i.e. Rs. 15,19,724 under s. 69C of the Act and Rs. 15,19,724 under proviso to s. 69C of the Act. Both the additions are directed to be deleted. Ground Nos. 1 and 2 are thus allowed in favour of the assessee. 13. In the result, appeal is allowed. ITA No. 365/Jp/2005 : 14. The Revenue has questioned first appellate order deleting an addition of Rs. 34,35,390 made by the AO to the total income of the assessee on account of unexplained cash credit under s. 68 on account of non-genuine export. 15. The learned Departmental Representative placed reliance on the assessment order. The learned Authorised Representative on the other hand submitted that the AO had made addition under s. 68 of IT Act apparently on account of receipt of money in convertible foreign exchange through banking channel by treating it as unexplained income. The learned AO, without application of her mind had treated the export consideration received through banking channel as bogus whereas t....
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....he help of genuine documentary evidence and also from bank confirmation, the burden now shifts on the learned AO to disprove it or to prove that it was undisclosed income of the appellant. The learned AO could not prove except that it was export sales proceeds nor the learned AO had taken any care to verify from the bank account through which the export papers were sent and money received though banking channel. (ii) That after agreeing to the explanation of the assessee and the export documents submitted, the learned AO had allowed deduction under s. 80HHC of IT Act amounting to Rs. 13,75,098 as claimed by the appellant. The deduction under s. 80HHC can only be allowed when the export was made and proved to be genuine export in the eye of law. On the facts, allowing the deduction under s. 80HHC of the IT Act itself is sufficient proof for the export made for which the export receipt was entered in the books of accounts and therefore provisions of s. 68 of the IT Act cannot be applied by treating it as unexplained credit in the books of accounts. (iii) The learned AO had allowed the indirect cost incurred by the assessee in the export of the goods as claimed by th....