TaxTMI 
TaxTMI 
2020 (4) TMI 262
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.... and in the circumstances of the case Ld. CIT(A) has grossly erred in law and facts in confirming application of provisions of section 145(3) by ld. AO by alleging certain purchases to the tune of Rs. 94,23,653/- made from five parties as under - S.No. Name of the party Amount of the Purchases made in Rs. 1. M/s Shree Abhushan Rs. 25,91,381/- 2. M/s R.R.Gems Rs. 32,87,355/- 3. M/s Red Rose Enterprise Rs. 13,44,276/- 4. M/s Parvati Gems Rs. 12,63,067/- 5. M/s Anushree Diam Rs. 9,37,574/- Total 94,23,653/- Thus, the action of Ld. CIT(A) in confirming the purchases made from above parties as unverifiable deserves to be held bad in law and the consequent addition deserves to be deleted. 3. 25% Trading addition of Rs. 23,55,913/- on unverified purchases:- That on the facts and in the circumstances of the case Ld. CIT(A) has grossly erred in law and facts in confirming trading addition of Rs. 23,55,913/- being 25% of the alleged unverifiable purchases of Rs. 94,23,653/ - arbitrarily, without appreciating the facts and circumstance of the case and the submission made before him. Thus,....
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....oubted purchase made by the assessee from these six suppliers and subsequently rejected the books of accounts of the assessee by invoking the provisions of Section 145(3) of the Act. The Assessing Officer then made a disallowance of 25% of the purchases made from five parties to the tune of Rs. 94,23,653/- which amount to Rs. 23,55,913/-. Against the action of the AO the assessee filed an appeal before the ld. CIT(A) and challenged the rejection of books of accounts as well as consequent addition made by the AO. The ld. CIT(A) has confirmed the rejection of books of account U/s 145(3) of the Act. As regards the addition made by the AO being 25% of the unverifiable purchases the ld. CIT(A) has took a different approach and held that the income of the assessee is required to be estimated by applying average GP declared by the assessee in the preceding years. Since the addition would have been more than the addition made by the AO, therefore, the ld. CIT(A) has confirmed the addition made by the AO of Rs. 23,55,913/-. 3. Before us, the ld. AR of the assessee has submitted that the entire purchases have corresponding sales and therefore, when the sale is not undisputed then purchase....
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....emerging from the record supports the case of the assessee that for the year under consideration 98.77% of the turnover of the assessee is from export of bullion. Therefore, without going into the issue of rejection of books of account U/s 145(3) of the Act we first examine the issue of addition made by the AO and sustained by the ld. CIT(A) due to decline in the GP declared by the assessee for the year under consideration in comparison to the GP declared in the preceding years. At the outset we note that the ld. CIT(A) has considered this issue in para 3.1.2 (vii) & (viii) as under:- "(vii) Thus, in view of the above judicial pronouncements, after rejection of books of accounts, the past history of the appellant has to be seen, for estimating the profit of the appellant. During the appellate proceecings, the appellant submitted its trading results for Asst. Year Turnover Groos Profit GP Rate 2010-11 2,72,59,880 40,78,06.76 14.96% 2011-12 4,17,59,028.17 47,83,412.14 11.45% 2012-13 53,56,71,843.00 74,59,648.13 1.39% (viii) It may be mentioned that in the case of CIT vs. Vaibhav Gems Ltd. [2014] 112 DTR 84 (Raj), it ha....
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....two years as considered by the ld. CIT(A). For the assessment year 2010-11 the turnover of the assessee was only Rs. 2.72 Crore and for the assessment year 2011-12 it was Rs. 4.17 Cores whereas for the year under consideration the turnover has increased to Rs. 53.56 Core. Further, the ld. CIT(A) has duly noted the fact that for the year under consideration the assessee started dealing in gold jewellery in comparison to the stone jewellery for the preceding years. Apparent from the sale of gold jewellery the assessee also traded in bullion by purchasing gold from Corporation Bank and exported the same. The Revenue has not disputed that 98.77% of the total turnover of the assessee is comprising export of bullion. Once 98.77% of the total turnover represents export of bullion then the GP declared by the assessee for the year under consideration cannot be compared with the GP for the preceding years when there is very less turnover of the assessee in the trading of stone jewellery. It is undisputed that the margin in trading of bullion is very less and 1% GP is considered as a reasonable prevailing margin. Thus, 99% of the export turnover can fetch only 1% margin being trading in bu....