Rajasthan High Court - Jaipur
Commissioner Of Income Tax Jai vs Shri Prakash Chand Vijay Jaipu on 18 January, 2017
Bench: K.S. Jhaveri, Vinit Kumar Mathur
HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT
JAIPUR
D.B. Income Tax Appeal No. 301 / 2008
Commissioner Of Income Tax, Jaipur-II, Jaipur.
----Appellant
Versus
Shri Prakash Chand Vijay, A-132, Janta Colony, Jaipur.
----Respondent
_____________________________________________________ For Appellant(s) : Mr. K.D. Mathur on behalf of Mr. R.B. Mathur. For Respondent(s) : Ms. Ishita Rawat on behalf of Mr. Gunjan Pathak.
_____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VINIT KUMAR MATHUR Judgment Per Hon'ble Jhaveri J.
18/01/2017
1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal preferred by the assessee and reversing the order of the CIT(A) and the Assessing Officer.
2. This Court while admitting the appeal on 03.11.2008, has framed the following substantial questions of law:
"(i) Whether in the facts and circumstances of the case the ITAT was justified in law and has not acted perversely in deleting the additions of Rs.11947958/- on account of unexplained expenditure under Section 69C made by the Assessing Officer?
(ii) Whether in the facts and circumstances of the case, the ITAT has not acted perversely and illegally in coming to the conclusion that the rejection of the books under Section 145(3) of the Act by (2 of 5) [ITA-301/2008] the Assessing Officer as unjustified?"
3. The facts of the case are that the return of income for the assessment year 2001-02 was filed by the assessee on 31.10.2001 declaring a total income of Rs.22,80,360/-. The case was selected for scrutiny u/s. 143(3) by issue of notice u/s.
143(2) on 21.10.2002. A fresh notice 142(2) dated 07.07.2003 was issued to the assessee on change in the office of the incumbent. Books of accounts consisting of cash book, ledger, bank statement, stock register along with related bills and vouchers etc. were produced before the Assessing Officer. The main source of income of the Assessee was from salary and partly from commission and brokerage. During the year under consideration the assessee started export business in gems and stones and has earned income only from Export business and bank interests. During the year under consideration the assessee has declared total export turnover of Rs.2,35,10,077/- upon which gross profit of 1,15,62,119/- was shown thereby giving a G.P. rate of 49.8%. This is the first year of business of the assessee.
During the next financial year 2001-02 the assessee has declared total export turnover at Rs.32,71,097/- upon which gross profit of Rs.18,01,075/- is shown thereby giving a GP Rate of 55%. On perusal of the return filed for the assessment year 2003-04 i.e. financial year 2002-03, it is seen that the assessee has declared Nil export and has declared income from salary as was done previously before he started his export business. It appears that this is an isolated case of export by the assessee in past several (3 of 5) [ITA-301/2008] years. In view of the above facts, it is clear that the assessee had done the business of export mainly for one fyear i.e. for the fyear under consideration. It is not understood as to how there was such a huge export turnover in one year. That too in the first year of business and then there was substantial fall in the next year and subsequently there was no business of export in any of the years. This shows that this is not the regular business of the assessee.
4. Counsel for the appellant has contended that the identical issue was decided by the Court in the case of Commissioner of Income Tax vs. M/s. Bright Future Gems in DB Income Tax Appeal No.305/2008, decided on 02.11.2016 more particularly in para 5.1 to para 10 which reads as under:
"5.1 He also relied on Commissioner Of Income-Tax vs M/S. La Medica, Delhi, 250 ITR 575 wherein it has been held as under:-
"The fact that the alleged sellers have been found to be persons with no means to effect purchases or to carry on business is a factor which does not appear to have been considered by the Tribunal in its proper perspective. Materials on record clearly establish that Chedi Lal was a petty employee of a concern of which Satya Pal Jain was a partner. In fact Satya Pal Jain was partner of M/s Medipac, one of the sister concerns of the assessed firm. On enquiries conducted by the authorities after due notice to the assessed it was found that there was no such concern called M/s Kalpana Enterprises at either 71, Canning Street, Calcutta or 479, Bartan Market, Sadar Bazar, Delhi. Additionally Chedi Lal opened the bank account with the introduction of Satya Pal Jain and the amounts were withdrawn. If the purchases were really effected from M/s Kalpana Enterprises it is not understood as to how some other person namely Inder Sain Jain (HUF) accepted that the materials were (4 of 5) [ITA-301/2008] supplied by it. The question before the Tribunal was not whether purchases were made from another concern. What was under consideration was whether the purchases were made from M/s Kalpana Enterprises as was claimed by the assessed.
Ample material has been brought on record by the Revenue to show that the purchases were in fact not made from M/s Kalpana Enterprises. These are some of the relevant materials which have not been considered by the Tribunal. Tribunal's conclusion that even if it is accepted that Chedi Lal was only an instrument used by Satya Pal Jain, assessed was not involved in it, is a conclusion arrived at without any foundation. On the contrary it has been established by materials on record that assessed knew that the whole thing was a fictitious arrangement. Once it is accepted that the supplies were not made by Kalpana Enterprises to whom payments were alleged to have been made, the question whether the purchases were made from some other source ougth not to have weighed with the Tribunal as a factor in favor of the assessed. The conclusions of the Tribunal are, therefore, clearly erroneous, contrary to materials on record and have been arrived at without taking into consideration relevant material and placing reliance on irrelevant materials. It is to be noted that assessed's stand was not that it had effected purchases from anybody else. Its stand throughout was that it had effected purchases from M/s Kalpana Enterprises. It was not open to the Tribunal to make out a third case, which was not even the case of the assessed, to hold that the transactions were real and not fictitious as claimed by the Revenue."
6. We have heard the counsel for the appellant.
7. Before considering the matter, it will not be out of place to mention here that question which is posed for our consideration is whether the purchases which has been done from Vinayak Overseas is genuine or not. The Assessing Officer while observing at page 12 referred hereinabove and which was already considered by the CIT (A) has confirmed the finding and Vinayak Overseas has (5 of 5) [ITA-301/2008] specifically contended that they were not transfer by Vinayak Overseas and they were absconding. The Tribunal only on the statement of M.P. Sharma who was power of attorney holder of Vinayak Overseas has given the finding. In our view, the finding is perverse. The view taken by the Tribunal is required to be reversed.
8. Apart from that merely voucher of the import export chanals or chanals of the custom clearance will not prove physical delivery of the material (precious stones). There is nothing on record to certify the stones which were verified by any of the valuer. In our view it is all paper transactions for the purpose of taking benefit of the export and tax benefits.
9. In that view of the matter, we are of the opinion that the view taken by the CIT (A) is required to be upheld and view taken by the Tribunal is required to be reversed. In that view of the matter, we are of the opinion that it is a bogus purchase and in our opinion, the finding which has been arrived by the Tribunal is not in consonance with the provisions of law, therefore, it is required to be reversed.
10. The issue is required to be answered in favour of Department against the assessee. The appeal is accordingly allowed."
5. In that view of the matter, the issues are answered in favour of the department and against the assessee.
6. The appeal is accordingly allowed.
(VINIT KUMAR MATHUR)J. (K.S. JHAVERI)J. Asheesh Kr. Yadav/103