Income Tax Appellate Tribunal - Chandigarh
M/S Ramesh Jewellers, Khanna vs Ito, Khanna on 22 February, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH'B', CHANDIGARH
BEFORE MS. DIVA SINGH, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No. 172/Chd/2016
Assessment Year: 2012-13
M/s Ramesh Jewellers Vs. The I TO
Sarafa Bazar, Khanna Ward-3, Khanna
PAN No. AAIFR0998L
(Appellant) (Respondent)
Assessee By : Shri Tej Mohan Singh
Revenue By : Shri Manjit Singh
Date of hearing : 04/01/2018
Date of Pronouncement : 22.02.2018
ORDER
PER DIVA SINGH, J.M.
The present appeal has been filed by the assessee assailing the correctness of the order dated 27/01/2016 of CIT-A to Ludhiana pertaining to 2012 - 13 assessment year on the following grounds:
1. That the Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in upholding the addition of Rs. 36,05,206/- made in respect of alleged bogus purchases which is illegal, arbitrary and unjustified.
2. That the addition made is just based on a report of a finger print expert without going into the merits of the explanation rendered in respect of purchases which is illegal, arbitrary and unjustified.
3. That the Commissioner of Income Tax (Appeals) has even failed to appreciate that besides cash payments for purchases, payments have been made through account payee cheques also which have been considered bogus without bringing any material on record and as such the order passed is arbitrary, illegal, unjustified and without application of mind.
2. The relevant facts of the case are that the AO in the scrutiny proceedings required the assessee to justify its G.P. rate and considering the withdrawals made from its banks required the assessee to explain them. The assessee a Goldsmith also engaged in resale of Gold, jewellery etc. explained that gold ornaments etc. from different person had been purchased. The AO rejected the explanation relying upon the handwriting and finger print experts' report which despite opportunities ITA 172/CHD/2016 A.Y. 2012-13 Page 2 of 19 to the assessee to cross examine him were not availed. The assessee in its challenge before the CIT(A) also failed. Aggrieved by the order of the CIT(A) the present appeal has been filed by the assessee.
3. Ld. AR referring to the assessment order submitted that the assessee was a Goldsmith engaged in the business of resale of gold ornaments, jewellery etc. Inviting attention to page 2 specially last line of para 1 of the assessment order, it was submitted that books of accounts have been produced and test checked and these have not been rejected by the AO or the CIT(A). Reading from the order it was submitted that the AO required the assessee to explain withdrawals from its bank account during specific dates from November 2011 to March 2012 totaling to Rs. 25,45,000/-. The assessee, it was submitted explained that these withdrawals were for purchases of gold ornaments etc. from different parties. The said explanation, it was submitted, has been reiterated before the CIT(A) also and the tax authorities incorrectly relying upon the hand writing and finger expert's Report rejected the explanation. Reading from the order it was submitted that the Assessing Officer was adamant to make addition for some reason or the other, accordingly going through the entire gamut of possibilities from questioning why despite availability of gold in its stock the assessee still purchased gold. The AO, thereafter proceeded to consider the possibility of rejecting the books of accounts on the suspicion that there was decline in GP rate, since the presumption was incorrect on facts as infact there was increase in GP rate the book results were accepted. It was submitted that the assessee is engaged in this business in a relatively small town where at times the people make distress sales of their ornaments due to financial compulsions for which purposes they come to a jeweler as opposed to money lenders so as to tide over their financial needs. Thus, if due to distress sales the rate is viable for the assessee, then why should the assessee decline to buy even if he has sufficient stock. It was submitted that the AO cannot dictate the business decisions of the assessee. The incorrect allegation that there was decline in GP it was submitted also had to be taken back by the AO.
3.1 Reverting to the facts of the case on record it was submitted that all the doubts of the AO were replied to by the assessee and the assessee's version has been recorded in para-3.4 and has been extracted ITA 172/CHD/2016 A.Y. 2012-13 Page 3 of 19 from pages 8 to 14 of the order. Heavy reliance was placed thereon. Carrying us through the reply and the show cause notice it was submitted that the mindset of the assessing officer would be evident as he was adamant to make addition for one reason or the other. It was re- iterated that it can be seen from the order itself that initially he proposed to make additions by show causing the assessee to show why books of account should not be rejected; the GP rate was alleged to be declining and when confronted with the facts that the GP rate was in fact increasing and there was no defect in the books maintained thus ultimately the books of accounts were not rejected. The assessing officer thereafter proceeded to consider the possibility of making additions on account of withdrawals from the bank in cash and after considering this aspect also does not make any addition on this account, thereafter he proposed to consider the applicability of section 40 A (3) as would be evident from Page 14 para-4 of his order and proceeds to issue summons under section 131 to the partner of the firm. The partner also appeared as would be evident from para 4.1 of the assessment order and thereafter the AO proceeded to come to a very strange conclusion that the original bills have been produced after a delay of 2 months and goes on in para-5 to conclude that the evidence produced is not genuine. Thereafter he referred those evidences to the handwriting Experts and including the copy of the Report of the Expert, he issued a show cause notice to the assessee to explain why adverse view should not be taken. For ready reference the relevant extract which includes t6he Show Cause Notice and the contents of the handwriting Expert's Report is reproduced from the assessment order itself hereunder :
5. A bare perusal of the purchase bills revealed that the same were not made in the relevant financial year being the bills fresh and also the handwriting, pen used, colour of ink of pen used were the same.In the interest of the Revenue and in the interest of natural justice, to be fair with the assessee, before taking any adverse view, the undersigned, in executing the Income Tax Act, 1961 sought a report from the Handwriting & Finger Prints Expert, Forensic Science Consultant, Patiala. The Handwriting & Finger Prints Expert, Forensic. Science Consultant, furnished his report Ref. No. 08/Khanna dated 24th January, 2015. The report submitted by the Handwriting & Finger Prints Expert, Forensic Science Consultant, is reproduced hereunder:-
To, Shri Davinder K. Wadhwa Income Tax Officer Ward No. 3, Khanna Subject: Assessment Proceedings for the A. Y. 2012-13 of M/s Ramesh Jewellers, Khanna.
Sir, ITA 172/CHD/2016 A.Y. 2012-13 Page 4 of 19 In the above matter, with reference to your letter no. lfO/W- 3/Khanna/20l4-l5/89?'dated'09-01-2015,1 have minutely and thoroughly examined the four purchase bill books of M/s Ramesh Jewellers, Khanna pertaining to the period from 01-04-2011to 31-03-2012 (bill no. 174 dated 23-03-2012), with regard to the following point of view: I. Carbon copy of bills issued may please be examined with a view that whether the date of issue of the same is fresh or old? Also please intimate that these are written in two/thrcu sittings or more?
2. On the reverse of every bill a Revenue Stamp is pasted and signed, fhe same may be examined with a view:-
(a) these are old or fresh?
(b) Approximate age/period may kindly be intimated.
(c) Whether sign and writing are by different persons or two / three persons.
(d) Whether same pen and ink has been used for writing/signing the same.
I examined and compared the writings written in carbon on the front side of the bills, signatures in the name of different persons, in original, on the backside of the bills, the revenue stamps, as well as the ink of the signatures on the backside of the bills with the help of microscopic lenses of various powers, falmer magnifiers, illuminous magnifier, coloured filters, in transmitted and oblique lights, 0. V. light and other necessary instruments.
The inks of the signatures, in original, on the backside of all the bills in all the four bill books for the period01-04-2011 to 31-03-2012have been physically examined and compared with regard to the depth or strength of colour, ranoe of colour and contrast between various parts variations in the tint of the ink as a whole, in secondary colour by oblique reflected light, in margin of the stroke whether clear-cut or feathered, in qloss or sheen.
I. REGARDING THE CARBON COPY OF THE BILLS The writings written in carbon an all the carbon copies of the bills have been examined and compared inter-se with regard to the general as well as individual writing characteristics and I have noted that all these writings have been written by three persons.
In the Annexure 'A-l'. the writings on bill nos. I to II, 23 to 33, in Annexure A-2', the writings on bill nos. 51 to 72, 90 to 100, in Annexure A-3'. the writings on bill nos. 101 to 105, 126 to 150 and in Annexure A-4' the writings on bill nos. 151 to 107 have been written by one and the same person.
In Annexure 'A-I', the writings on bill nos. 12 to 22, 34to 50, in Annexure A- 2', the writings on bill nos. 73 to 73 and in Annexure A-3'. the writings on bill nos. 100 to 125 have been written by another one and the same person.
In Annexure 'A-4', the writings on bill nos. 168 to 174 have been written by another one and the same person.
The further careful examination shows that these writings have been written at the same time in only two-three sittings as there are no natural variations in these writings, which generally, occurs with the passage of time in the writings or signatures of a person. The writings written by one person on these bills are showing the same alignment and similarly the writings written by another person are showing the same alignment, which cannot remain exactly the same manner and direction when the writings are written at different times by the same person. The examination of the paper of all the bill book appears to be fresh and not older of about two to three years old.
REGARDING THE REVENUE STAMPS AFFIXED ON THE BACKSIDE OF THE BILLS AND SIGNATURES ON THEM The revenue stamps have been physically examined with the help of magnifying glasses of different powers and I have noted that all the revenue stamps affixed on the backside of the bills bearing sr. nos. I to ITA 172/CHD/2016 A.Y. 2012-13 Page 5 of 19 174 in Annexure 'A-l' to Annexure 'A-4'i.e. these revenue stamps have been affixed from the same lot and are also appearing to be fresh one and are not older of about two to three years.
The signatures including the writings i.e. the name or the village/city/town written on the backside of the bills bearing sr. nos. I to 174 in Annexure 'A- l' to Annexure A-4' have been examined and compared with regard to the general as well as individual writing characteristics i.e. the movement of writing, speed of writing, size of letters, spacing between them, general writing slant of the letters, manner of lifting the writing instrument and connections of the strokes in the common words/letters, skill of writing, pen pressure and shading, writing alignment, relative position of the letters in the common words, line quality, muscular coordination, general ratio proportion of the letters and their pictorial appearance. The individual common letters and strokes present in these signatures and writings have also been examined and compared with regard to their beginnings, turnings, curves, junctions, eyelets, and connections of the strokes, retracings, staffs, lines, loops and terminals. I have noted that the letters and matras present in the signatures and writings of different persons written in Gurmukhi on the backside of the bills have been written only by two persons ' having natural variations. The signatures in the names of "Neelam Rani" on the backside of bill no. I, "Surjit Singh" on the backside of bill no. 2 "Jasmeet Kaur" on the backside of bill no. 3, "Karamjit Singh" on the backside of bill no. 10, "Ma dur" on the backside of bill no. II, "Amarbir" on the backside of bill no. 16, "Bhushan Kumar" on the backside of bill no. 18, "Meenu" on the backside of bill no. 27, "Davinder Kaur" on the backside of bill no. 34, "Tirath Ram" on the backside of bill no. 36 "Jagtar Singh"on the backside of billno. 38, "Ajay Kumar" on the backside of bill no. 48, "Rattan Singh" on the backside of bill no. 87, "Jaspal Singh" on the backside of bill no. 83, "Nirmal Singh" on the backside of bill no. 75, "Isher Singh" on the backside of bill no. 83, "Harminder Singh" on the backside of bill no. 187, "Madan Lai" on the backside of bill no. 113, "Meen a Rani" on the backside of bill no. 115.
"Tara Singh" on the backside of bill no. 122, "Leela Rani" on the backside of bill no. 123, "Rumi" on the backside of bill no. 127, "Rajan Singh" on the backside of bill no. 128, "Rupinder Singh" on the backside of bill no. 132, "Swaran Singh" on the backside of bill no. 133, "Bharmal" on the backside of bill no. 137, "Ponnam" on the backside of bill no. 138, "Sukhjit Singh" on the backside of bill no. 142, "Parminder Singh" on the backside of bill no. 145, "Kuldeep Singh" on the backside of bill no. 158, "Parminder Kaur" on the backside of bill no. 151, "Baljinder Singh" on the backside of bill no. 152, "Ponja Rani" on the backside of bill no. 157, "Anjana Devi" on the backside of bill no. I88, "Harnek Singh" DO the backside of bill no. IBB, "Baljinder Singh" on the backside of bill no. 171.
The signatures in the names of "Gobind Lal"'on the backside of bill no. 8, "Harpreet Singh "on the backside of bill no. 19, Rajwant Kaur on the backside at bill no. 24, "Jagronp Kaur" on the backside of bill no. 30, "Jyoti Rani" an the backside of bill no. 39, "Kamla Rani" on the backside of bill no. 51, "Parminder Kaur"on the backside ofbillno. SB. Similarly, the letters and matras present in the signatures and writings of different persons written in Devnagri/Hindi on the backside of the bills have been written only by two persons having natural variations. The signatures in the names of "Jasbir Singh" on the backside of bill no. 6. "Jeet" on the backside of bill no. 7, "Renu" on the backside of bill no. 14. "Ashok Kumar" on the backside of bill no. 22, "Sheela Rani" on the backside of bill no. 23, "Gopa I Singh" on the backside d bill no. 25, "Manoj Kumar" on the backside of bill no. 29, "Rekha Rani" on the backside of bill no. 37, "Kamlesh Rani" on the backside of bill no. 40, "Jasbir Kumar" on the backside of bill no. 43, "Mohinder Pal" on the backside of bill no. 45, "Manpreet Kaur" on the backside of bill no. 57, "Usha Rani" on ihe backside of bill no. 61, "Renu Rani" on the backside of bill no. 65, "Jagtar Singh" on the backside of bill no. 7B, "Seema Rani" on the backside of bill no. 78, 'Vinod'Kumar" on the backside of bill no. 106, "Mela Ram" on the backside of bill no. 117, signatures on the backside of bill no. 118, "Amarjit Singh" an the backside of bill no. 124, "Reema Rani" on the . backside of bill no. 130, "Usha Rani"on the backside of bill no. 134. "Mandeep" on the ITA 172/CHD/2016 A.Y. 2012-13 Page 6 of 19 backside of bill no. 143, "Neelam Rani" on the backside of bill no. 144, "Suman Sharma"on the backside of bill no. 147, "Ram Lal''on the backside of bill no. 149, "Rajni"on the backside of bill no. 161. The signatures and writings of different persons written in English on the backside of the bills have also been written by two persons only having natural variations.
The signatures written in English in the names of "Gurmit Singh" on the backside of bill no. 5. "MALLA RAM" on the backside of bill no. 9, "Sunil Kumar" on the backside of bill no. 15, "Inderjeet" on the backside of bill no. 26, "Rani __ "on the backside of bill no. 28, the sigoature on the backside of bill no. 33, the signature on the backside of bill no. 74 "Ashok Kumar" on the backside of bill no.81, "Meena Rani" on the backside of bill no. 83, "Rakesh Kumar" on the backside of bill no. 99, the signature on the backside of bill no. IB2, "Kuldeep Singh" on the backside of bill on. 105, "Ashok Kumar" on the backside of bill no. 108, signature on the backside of bill no. 109, "Amarjit Singh" on the backside of bill no. 110, "Rajinder Kumar" on the backside of bill no. 112 "Lalit Kumar" on the backside of bill no. I26, "Ram Singh" on the backside of bill no. 129, "Kamla Rani" on the backside of bill no. 136, "SunilKumar"on the backside of bill no.146, "Mamta Rani" on the backside of bill no. 148. "Kiran "on the backside of bill' no.183.
The further careful examination of the signatures and writings on the backside of the bills shims that at some places the writer wrote some part/letter of the signature in Gurmukhi and another part in Devnagri but are written by one and the same person. For instance, on the backside of the bill no. 1, the word "Rani" is written in Devnagri and on the backside of bill no. 2, the letter 'ta' is written in Devnagri In the signature "Surjit Singh"but both these are written by one and the same person. It is also noted that at many places the signatures written in Gurmukhi and Devnagri have been written by one and the same person, showing the consistent writing characteristics with natural variations. The signature on the backside of bill nos. 170 and 172 have been written by one and the same person in the same name, The names of the city/town/village have also been written below majority of the alleged signatures said to be of the concerned persons, showing the similar tendency on the backside of all the bills and it is suspicious as the person never wrote the name of his city/town/village below his or her signature.
The signatures and writings on the backside of all the bills bearing nos. 01 to 174 in Annexure 'A-I' to Annexure A-4'have been written with ballpen and inks.
The signatures and writings on the backside of bill nos. I to 12,14 to IB, 18, 20, 22 to 28, S3, 34, 37, 40, 41,43, 52,54 to 07, 73 to 78, 83 to 85, 89,30. 98103 to 130,133 to 135,138 to 142,151, 152,155 to 157,102 to 100 and 171 have been written with one and the same ball pen ink having dark blue colour with violet tint.
The signatures and writings on the backside of bill nos. 13, 21, 31, 42, 48, 53, GO, 72,114.153 and 154 have been written with one and the same ball pen ink having blue black colour with less sheen and strength, There are also present similar striations in the strokes of these signatures. The signatures on the backside of bill nos. 17,13,29 to 39, 44 to 51,59, 03, 88to 82, 89to 88, 31 to 35, 97 to 102,105,115,115,125 to 127,131,132,139,137143 to 150,158 to 181187 to 174 have been written by another ball pen ink having comparatively much dark violet colour ink and the strokes ere also comparatively thicker.
OPINIONS: After Considering the above observations and reasons collectively. I am of the following considered and firm opinions:
1. That the carbon copy of the bills, nos. 01 to 174 in Annexure A-1' to Annexure A-4' are not appearing older but are freshly written/prepared in two/three sittings only.
ITA 172/CHD/2016 A.Y. 2012-13 Page 7 of 19
2. That the revenue stamps affixed on the backside of bill nos 01 to 174 in Annexure 'A-1' to Annexure 'A-4' are also appearing fresh and not older and are also of one and the same lot.
3. That the signatures in the names of different persons on the backside of the bills and the writing of the names of city/town/village have been written by three persons only with three different ball pen inks.
(Emphasis Supplied) 3.2 Carrying us through the assessment order it was submitted that the assessee was provided an opportunity to cross examine the expert as noted in para 7 of his order at page 21 and thereafter the report is reproduced again at pages 22 to 29 of his order thereafter the AO lays emphasis on the fact that the assessee does not wish to cross examine the expert which offer is repeated and then he rejected the explanation ignoring the fact that the Report of the Handwriting Expert infact supports the assesses case.
3.3 It was submitted that the assessee addressed the Report of the Expert and the conclusion of the Assessing Officer were assailed before the Ld. CIT(A) citing various decisions which he would not want to address at this point of time and merely address the reasoning of the AO which was challenged in appeal before the CIT(A). The AO it was submitted relied on the decision of Hon'ble Supreme Court in case of Kachwala Gems Vs. JCIT. The said decision, it was submitted, was also relied upon by the assessee. Referring to the order, it was submitted, the Assessing Officer questions the purchases of gold made in cash and holds them to be bogus. He holds that the courts have repeatedly held that when purchases are non-verifiable; the AO is justified to make addition. The Ld. AR submitted that it had been argued that in the circumstances the AO could have rejected the books of account which has not been done. It was submitted, that after minutely inspecting the total sales and purchases of the assessee and without rejecting the books and the addition could not have been made as without upsetting the sales and purchases for which books had to be rejected, the AO could not have made the addition. This argument has been recorded by the CIT(A) who has, however, failed to address it. It was submitted it had been argued and the argument is being reiterated vehemently that if the purchases on presumptions are to be held to be bogus then they would go to reduce the expenses of the assessee which would result in an impossibly high G.P rate of over 100% which is an impossible G.P. ITA 172/CHD/2016 A.Y. 2012-13 Page 8 of 19 in any business let alone in the business of the assessee where the margin of profit is anyway not very high. The AO ignoring all these facts accepting the trading results has come to an incorrect conclusion and further objected that the relevant bills have not been produced for two months by holding that "The recalcitrant attitude in non-production of original purchase bills/vouchers for about two months established that the assessee has not maintained any records during the year of business. It prepared the same in the compelling circumstances for want of completion of its assessment by the undersigned".
3.4 Reverting to the impugned order it was submitted that the assessee challenged the order of the AO on merits as well as on the jurisdiction of the assessing officer exercising his powers in contravention to the provisions of section 138 (2) of the Income Tax Act. It was his submission that the said issue is not agitated by the assessee in the present proceedings, consequently no ground on the said issue has been raised by the assessee, however, reference to this fact was being made only to highlight that the said challenge prejudiced,the mindset of the CIT(A) to the extent that despite these arguments on merits of the addition i.e. addition in the peculiar facts without rejecting books of account, the CIT(A) failed to grant necessary relief ignoring the patent and glaring fact that as a result of the addition, an impossibly high G.P. rate was resulting. These arguments were brushed aside without assigning any reasons. Attention was invited to the bulky order where upto page 28 of the impugned order, the pages are devoted to the discussion/ reproduction of the assessment order. Submissions of the assessee are recorded there from on the issues agitated in the present proceedings. Carrying us through the same it was submitted that the submissions of the assessee on the merits of the addition made which are challenged in the present proceedings have been addressed in Para 6 to Para 8 on which heavy reliance is being placed in the present proceedings also. Carrying us through the observations made by CIT(A) in para-3.5 where after summing up some of the submissions of the assessee, he without assigning any reasons why they cannot be accepted proceeds to address the objections posed by the assessee in regard to the scope of section 138 (2) in para-3.6 to para-3.9 which issue, it was re-
ITA 172/CHD/2016 A.Y. 2012-13 Page 9 of 19 iterated was not challenged in the present proceedings by the assessee, however the fact that the CIT(A) was prejudiced, it was submitted, is evident from the intermingling of these facts on merits also with the jurisdictional facts and thus while considering the submissions on merits it was submitted, the CIT(A) proceeded to reject the assessee's submissions also and has more or less relied upon the view taken by the assessing officer. The specific finding under challenge in para-3.10 is reproduced hereunder :
3.10 Coming to merit of the addition made by AO. w.r.t. purchase of Rs. 36,05,206/- on account of bogus purchases of the Income Tax Act, 1961, I have gone through the written submission filed by appellant, assessment order, assessment record, remand report and rejoinder filed by appellant during the course of assessment proceedings. I am not inclined to agree with the contention of appellant. During the course of assessment proceeding, the AO after giving various opportunity got to examine purchase bills submitted by appellant. After having received a report after initiating a reference u/s 133(6), from the hand writing and fingerprint expert, the AO has duly impounded the documents, after getting due approval from Pr. CIT-2, Ludhiana, in well within limitation period.
The appellant has alleged during course of appellate proceedings that the AO has impounded the records of appellant beyond its jurisdiction and without approval from requisite authority. After careful perusal of assessment records and report of AO, the due approval of Pr. CIT-2, Ludhiana has been found to be placed on record, and the same has been given to the appellant during the course of appellate proceedings for rebuttal of its submission. In the report the handwriting expert Sh. Navneet gupta, has very explicitly opined that the purchase bills are freshly prepared, in continuous sitting and are in handwriting of one or two persons. The relevant part of remand report have been reproduced in subsequent paragraphs, as part of showcause issued by appellant.
(emphasis provided) 3.5 Addressing the impugned order it was submitted that in subsequent Paras the CIT(A) has referred to the show cause notice issued by the Assessing Officer in the remand proceedings in para-3.11 of his order which is more or less a reproduction of the original show cause notice issued and reference was made to the opportunity provided to cross-examine the handwriting and finger print expert which was declined by the assessee. The fact that the assessee chose not to cross examine the Expert again was held as a fact which was against the assessee. It was submitted when the findings of the Expert supported the assessee's case why should he further cross examine him. Referring to para 3.11 and 3.12 at page 46 of his order, it was submitted that the conclusion of the CIT(A) on the jurisdiction issue under section 138(2) addressed by the assessee again colours the mind of the CIT(A). The said issue is not under challenge in the present proceedings it is referred to highlighting that the order was passed with a prejudicial mindset. In the background of this fact it was submitted that the CIT(A) came to the conclusion that the claim of the assessee was not allowable. The specific ITA 172/CHD/2016 A.Y. 2012-13 Page 10 of 19 finding under challenge in the present proceedings in para-3.13 and 3.14 is extracted hereunder 3.13 Now coming to the core issue wrt to Rs. addition of Rs.36,05,206/- on account of bogus purchases of the Income Tax Act, 1961. I have carefully considered the rival contention. I am in complete agreement with the contention of AO. The AO has rightly treated the purchases amounting to Rs.36,05,206/- as bogus purchases in view of explicit finding of handwriting and finger print expert Sh. Navdeep Gupta. The appellant has completely failed to controvert the finding of Sh. Navdeep Gupta, Handwriting & Finger Prints Experts. From the perusal of records it emerges that the appellant has failed to maintain requisite stock register in support of its contention that sale during the year consisted gold purchased during the year also. The opening stock reflected by the appellant is much more than the entire sale shown by the appellant. The appellant had sufficient opening stock for making sales which have been shown in the trading results. The total sale of gold has been shown at Rs. 30,06,517.35 1211.700 grams of gold as against the opening stock of gold as on 31.03.2011 weighing 4,240.572 grams. The / appellant has admitted that it has failed to keep and maintain item-wise stock register. In the absence of the item-wise stock register, it is not possible to arrive at the profit that what has been sold from opening stock and what has been sold from purchases made during the year.
3.14 The establishment of purchases to be bogus has been supported by scientific evidence which has been obtained from the Handwriting & Finger Print Expert which remained uncontroverted by the appellant. From the reasons discussed above, it has been established by materials on record that the appellant knew that the whole thing was a fictitious arrangement that's why it has categorically denied to cross examine the Handwriting & Finger Print Expert and has failed to comment upon the report of the Handwriting & Finger Print Expert in response to show cause notice dated 30.01.2015.
(emphasis provided) 3.6 Addressing the impugned order, it was submitted that the CIT(A) relied upon the decision of the Hon'ble jurisdictional High Court of Punjab & Haryana in the case of J.R. Solvent Industries (P.) Ltd. V. CITIT Ref. No. 105 of 1997 dt. 16/04/2012. The said decision, it was submitted, was not applicable to the facts of the assessee's case. Inviting attention to page 49 of the impugned order it was submitted that the facts of the said decision have been discussed by the CIT(A) in the very same order and a perusal of the same it was submitted would show that the facts are entirely distinguishable. On a reading of the extract from the impugned order itself it was submitted it would be evident that detailed investigation on facts of the said decision demonstrated that the evidences by way of sale bills filed by the said assessee did not inspire any confidence. For ready reference para-9 of the said decision extracted in the impugned order illustrates this fact. The said extract of the aforesaid decision reproduced from the impugned order is extracted hereunder:
9. We have carefully considered the rival submissions as also the facts on record. We must compliment the Assessing Officer for having ITA 172/CHD/2016 A.Y. 2012-13 Page 11 of 19 made such detailed investigation into the case. It appears that the assessee company showed purchases of Rs. 5,76,645/-for assessment year 1987-88 and of Rs. 17,25,300/- for assessment year 1988-89 from M/s Raj kumar Raghbir Kumar. Copies of sale bills issued by M/s Raj Kumar Raghbir Kumar do not inspire any confidence because they do not indicate any Sales-tax/Central Sales-tax number nor the telephone number. The said party was not found to be in existence when enquiries were made by the Assessing Officer in 1989. The address of the said party was not known to the postal authorities either. The said party was not an existing assessee. The assessee failed to produce the said party as also the books of account The Assessing Officer made enquiries from the transport authorities and found that some of the truck numbers given by the assessee were not trucks at all but were scooters, motor-cycles and mopeds. Some of the registration numbers quoted by the company were found to be non-existent because no such numbers had been allotted by the transport authorities. It is true that the head-cashier of Union Bank of India in a statement given to the Id. CIT(A) tried to explain the narration given at the back of cheque No. 073353 dated 4.10.1986. It will, however, be straining human intelligence to believe that two parties would come to the bank at the same time when one would be desiring to withdraw a sum of Rs. 69,145/- and the other to purchase a draft of Rs. 34,579/- and that there would be only one clerk looking after two counters of payment and receipt simultaneously. This appears to be more than a coincidence and there is something more than meets the eye.......'. 3.6.1 In view of these material differences it was his submission that on facts the said decision is inapplicable as the facts of the present case are entirely distinguishable.
3.7 Addressing the impugned order it was submitted that the CIT(A) has also relied on the decision of the ITAT in the case of ACIT Vs. Amar Mining Co. (ITAT Ahmedabad), ITA No. 1841/Ahd/2002, decided on 29/01/2009. Referring to the said case it was his submission that the facts of the said case were also distinguishable. Accordingly it was his submission that on account of these distinguishable reasons on facts the decisions relied upon were not applicable and the appeal of the assessee was dismissed by the CIT(A) was contrary to facts and law. The specific finding assailed reads as under :
3.16 In view of factual position and position of law as laid down by various courts, I am inclined to agree with the contention of assessing officer. The various decisions as relied upon by the appellant are on different ground therefore are not applicable on the facts of the case of appellant. Since the appellant has grossly failed to adduce evidence to negate the report of Handwriting & Finger Print Expert. At the same time the appellant, in absence of proper stock register which could have reflected quantitative detail of gold issued for manufacturing , wastage and net weight of ornament made out of it, has also failed to effectively explain, the sale as claimed by it, is from the purchases made during the year. The quantity of gold issued for sale also cannot be bifurcated from the stock register. Similarly since all the sale is in cash which is very unlikely in this kind of trade, it is also not verifiable from stock register. Accordingly, the AO has rightly treated the unverified purchase which is also in cash only below 20,000/- amounting to Rs.36,05,206/- on account purchases of the Income Tax Act, 1961.
Therefore, the addition made on account of bogus purchases amounting to Rs.36,05,206/- is confirmed. Accordingly these grounds of appeal are dismissed.
(emphasis provided) ITA 172/CHD/2016 A.Y. 2012-13 Page 12 of 19 3.8. In the said background it was his submission that the CIT(A), has also been guided by the fact that merely because the assessee chose not to cross examine the Finger print Expert despite opportunities accordingly the conclusion drawn on the basis of the findings in the Report were sufficient evidence to hold that the assessee had no claim. Carrying us through the Report of the Finger Print Expert it was submitted that the findings of the Expert infact supports the assessee's claim. On a reading of the Report which has been extracted in the impugned order it was submitted that there was no need for the assessee to cross-examine him as repeatedly the said expert himself observes that the paper used is more than 2- 3 years old; the said fact, it was submitted, supports assessee's claim. Similarly the Revenue stamps appended to the vouchers the Expert holds after carrying out forensic examination are also said 2 - 3 years old which is also as it should be; it was submitted, the Expert also holds that those are from the same lot which is also as it should be as the assessee first exhausts one lot and then starts with the fresh lot. Similarly the findings that the handwriting is also of 2 or 3 people and all the 3 people have maintained their respective slants etc. which finding it was submitted also supports the assessee's versions as these were prepared by the assessee's three employees in regular course of business they necessarily will have the same slant which cannot change within a few months. Thus it was argued since all the basic facts supported the assessee's claims the conclusions based on those facts cannot be said to be detrimental to the case of the assessee consequently there was no need for the assessee to cross examine the Expert. It was submitted the assessee itself is maintaining that the documents have been maintained in the regular course of his business because of this they are 2-3 years old the vouchers are in the handwriting of the three employees of the assessee and accordingly every time they will write in the same slant or alignment. The casual observation of the Expert that the slant generally varies it was submitted is neither here nor there. Similarly the use of revenue stamps appended would be from the same lot as the assessee would purchase a lot and then append them till the lot is exhausted and since the expert himself agrees that they are 2-3 years older thus where is the need for the assessee to cross examine him. Thus it was his submission that the suspicion that the vouchers were created is entirely in the arena of ITA 172/CHD/2016 A.Y. 2012-13 Page 13 of 19 suspicions of the tax authorities accordingly it was his submission that the addition may not be sustained.
4. The Ld. CITDR on the other hand inviting attention to the assessment order page 4 para 3.3 submitted that the arguments of the Ld. AR are incorrect as more then sufficient time was given by the assessing officer to the assessee to produce the original bills which fact would be evident from the said para. The AO vide show cause notice dated 25/11/2014 required the assessee to produce the original bills. Referring to the record, it was submitted that the assessee produced photocopies which cannot be said to be production of original bills and thus the delayed production of original bills created doubts in the mind of the AO that the bills were not readily available and these were created for the purposes of addressing the show cause notice of the assessing officer. For the said purposes attention was invited to page 7 and 14 of the assessment order wherein finally the assessing officer referred to the fact that there was a delay of 2 months from 31/10/2014 which may have been a date prior to the issuance of show cause notice dated 25/11/2014 to 29/12/2014 when ultimately the original bills were produced which is why the assessing officer observes "it was the job of one day to produce the same whereas the assessee took a period of about 2 months and number of opportunities to produce the same that too without rendering any explanation for nonproduction of the same. The purchase bills so produced, wide order sheet entry dated 29/12/2014 and by passing a separate impounding, were impounded"
4.1 It was his submission that the AO was empowered to impound the documents and send them for forensic examination and since the issue has not been challenged in the present proceedings it was his strong objection that why should the ld. AR need to emphasise this aspect in the course of his arguments because if the issue has been given up then the assessee in good grace should not make any reference to those speaking findings of the CIT(A). Heavy reliance on the said findings of the CIT(A), it was submitted, was being placed by the Revenue. The Ld. AR responded that he has not challenged those findings and he had only made a reference to these repeated findings in the impugned order so as to demonstrate how deciding the issue even on merits the jurisdictional challenge posed by the assessee had prejudiced the mind of the CIT(A).
ITA 172/CHD/2016 A.Y. 2012-13 Page 14 of 19 4.2 The Ld. CIT-DR reverting to the orders submitted that the assessing officer repeatedly has been offering opportunities to the assessee in all fairness to cross-examine the handwriting and fingerprint expert which the assessee has chosen not to avail the said finding of the CIT(A) was heavily relied upon. It was his submission that once the assessee chooses not to cross examine the fingerprint expert despite repeated opportunities then when the report is read alongwith the opinion of the handwriting and fingerprint expert which also have been reproduced in the show cause notice by the assessing officer the assessee does not have any case to argue. It was his submission that the argument of the Ld. AR that the books have not been rejected do not have any relevance as it should be noted that the assessing officer has not resorted to making any estimates . Referring to the report of the handwriting and fingerprint expert it was his submission that it is not the normal practice that an assessing officer would send the bills and vouchers to a handwriting and fingerprint expert it has been made for specific reasons as the assessee deliberately for almost 2 months refused to produce the original bills thus it was incumbent upon the assessing officer who is alert and alive to verify the correctness of the same. Similarly it was his submission that the arguments on behalf of the assessee by the Ld. AR that the assessing officer has inquired into the applicability of 40 A (3) and the GP rate etc there is nothing wrong as the assessing officer is required to look into the issues and is expected to be alive to all possible angles in the scrutiny proceedings. Addressing the claim of the assessee that the GP rate would be an aberration and abnormal and impossibly high beyond hundred percent the Ld. CITDR chose to remain silent. Inviting attention to the impugned order it was submitted that the assessee's attitude before the CIT-A would be evident from page 38 para 3.6 to show that the assessee completely did not understand the provision thus even though the issue has not been agitated a perusal of the same it was submitted would show this aspect. For ready reference the relevant extract is reproduced from the impugned order :
"3.6 I have gone through the detailed written submission of the appellant filed from time to time, remand report of the assessing officer, the rejoinder filed by the appellant at different time of appellate proceedings. I have also gone through the assessment record minutely during the course of appellate proceedings. After careful consideration of all the facts of the case and the relevant case laws as relied upon the appellant, I am not inclined to agree with the contention of appellant. It is seen that the appellant has gone beyond the common legal practice, several time in its ITA 172/CHD/2016 A.Y. 2012-13 Page 15 of 19 written submission during appellate proceedings, without going into detail of the facts and without understanding the correct position of law pertaining to the facts of the case of the appellant. Firstly, the appellant has badly misunderstood the very scope of section 138(2) of the I.T. Act and alleged, in its ground of appeal, that AO has contravened section 138(2) and is liable to be punished. A simple reading of section 138 of Income Tax Act, 1961 which is reproduced as under
shows, that the appellant has completely misunderstood the provision of section 138, which has taken the argument of the appellant at very different level which is not at all the relevant to the fact of the appellant's case and some time lacks the common respectful unwritten practice of submission and advocating its case."
(emphasis provided)
4.3 Inviting attention to the impugned order para-3.13 it was his submission that only after considering the report of the handwriting and fingerprint expert the assessing officer had drawn the conclusion that despite having sufficient opening stock the occasion to purchase gold became questionable and in the facts where the assessee was not maintaining item wise stock register the CIT-A considering these observations of the assessing officer was justified in coming to the conclusion that the assessee's version could not be accepted. Accordingly it was his submission that in the peculiar facts and circumstances of the present case the addition on facts was fully justified.
5. The Ld. AR in reply submitted that the assessing officer after examining the issue from all angles ultimately chose to justify his action by alleging that the photocopies of the original bills produced were deliberately delayed. It was his submission that before referring to the fingerprint or handwriting expert for the purposes of forensic examination the assessing officer should have at least pointed out whether there were any differences in the photocopy of the bills of purchase and sale vis-a-vis the original bills. No such allegation has been made by the tax authorities because there was no difference in the original bills and the photocopied appeals. It was also his submission that there is no delay in regard to the production because after the assessee produced the photocopies the assessing officer went on to examine various other issues including the GP rate the applicability of section 40A(3) etc. and the assessee continuously remained busy in replying to the said queries and finally when the assessing officer required that the original bills also be reproduced these had been produced and thus since the assessing officer failed to justify the addition on account of any other reason after exploring all possible angles he ultimately came to finding that there was a delay of 2 months ITA 172/CHD/2016 A.Y. 2012-13 Page 16 of 19 in the production of the bills and vouchers ignoring the fact that the photocopies were always available to him and there was no difference in the photocopies and what was originally produced thus vindictively he referred these to the handwriting and fingerprint expert after impounding the bills/vouchers. It was his submission that the assessee has not objected to the said action in the present proceedings and had chosen repeatedly not to cross-examine the fingerprint expert because the repeated findings in the said report fully support the case of the assessee namely that these were recorded in due course by the employees of the assessee which argument has not been upset by the Revenue. The biased approach of the assessing officer it was submitted is evident from paragraph 5 of the assessment order where despite the fact that he was not an expert even before referring to the fingerprint and handwriting expert his observations show that he had already made up his mind and come to conclusions where he holds that "a bare perusal of the purchase bills revealed that the same were not made in the relevant financial year being the bills fresh and also the handwriting, Pen used, colour of ink of Pen used were the same"
6. We have heard the rival submissions and perused the material available on record . The decisions relied upon by the tax authorities have also been taken into consideration. On a perusal of the assessment order and the detailed show cause notice issued to the assessee by the assessing officer we find that ultimately the addition was made on the basis of bills and vouchers produced to justify the purchase of gold ornaments made under distressed circumstances etc. by different persons to the assessee. We find that the assessing officer as well as the CIT-A has questioned the need and necessity for the assessee to make purchases of gold when the assessee admittedly had a much higher quantity of gold in its stock and thus could not be said to be in need of purchasing the gold ornaments. Infact considering the record the assessing officer has recorded that the sales of the assessee were far less as compared to its available stock which factual positions are not in dispute. The said aspect may be an area of enquiry however it is not for the tax authority to dictate at what stage or price the traded goods at a point of time be purchased or not. The decisions are solely in the domain of the businessman and the issue is well settled that the authority cannot sit in the armchair of the businessman to dictate his business ITA 172/CHD/2016 A.Y. 2012-13 Page 17 of 19 decisions/how the business is to be run. Having said this, it may also not be out of place to consider that in the particular line of business of the assessee, it is a fact that the commodity being purchased admittedly did not have a limited shelf life or became outdated/obsolete. The purchase of gold ornaments by an assessee engaged in sale of gold jewellery continues to remain valuable irrespective of style or design. The prudence of the decision to make further purchases despite having adequate stocks where GP has also been increasing over the years cannot be dictated by the taxman. Thus purchase of gold ornaments at prices which are considered viable do not become questionable merely because the AO feels that the assessee has adequate stock of gold ornaments. What to buy and when to buy are decisions best left to a businessman. The assessee has also put forth the argument that the wisdom to make a purchase when a customer is making a distress sale gives him an advantage in price etc which cannot be outrightly discarded. We further note that if the said addition is sustained the resultant GP rate would be an impossibly high and abnormal GP rate attained by any taxpayer which fact has not been addressed by the t6ax authorities or by the CIT-DR who instead despite a specific query chose to remain silent. Addressing the evidences on record which have been considered by the tax authority as fool proof scientific evidence described as "appearing to be fresh" we note is repeatedly qualified by the Finger Expert himself by the time period described as "two to three years old". The tax authorities on facts are found to have been overwhelmingly persuaded by the assessee's wrong doing on account of the fact that the assessee despite opportunities, chose not to cross examine the Expert. This undue reliance placed upon the assessee's decision to not cross examine the Expert seems to have been the deciding criteria for the tax authorities to discard the assessee's explanation. This is not withstanding the fact that admittedly in the original and the photocopied vouchers, there was no distinction. We note that on going through the Report of the Expert which has also been extracted in this order that ultimately the report only states that the bills and vouchers have been made by three persons and these 3 persons have maintained their respective alignment/slants. The Ld.AR has argued that why would the assessee cross-examine the forensic expert when the assessee himself maintains that the bills and vouchers have been made by his employees who necessarily have specific ITA 172/CHD/2016 A.Y. 2012-13 Page 18 of 19 styles of writing. The observation in the said report that these have been prepared in 2 or 3 sittings as they don't have any natural variations which generally occur with the passage of time it was submitted is an opinion based on no scientific report and thus would have no relevance. The ultimate conclusion drawn by the handwriting and fingerprint expert that the paper and the Revenue Stamps are about 2 to 3 years old is also supportive of the assessee's claim. The further conclusion that they appear to be fresh is vague as after giving a time line of 2-3 years the conclusion that 'it is fresh' becomes redundant and the specific time line set out in the report becomes supportive. It has been argued that the report has been made before 29/12/2014 and as it is dated 24th of January 2015 the assessment year under consideration is 2011-12 thus the time lag of 2-3 years is fully supportive of assessee's claim. The said argument has not been rebutted by the Revenue. For ready reference the relevant finding of the handwriting and fingerprint expert though fully extracted in the earlier part of this order is partly again reproduced herein below :
The further careful examination shows that these writings have been written at the same time in only two-three sittings as there are no natural variations in these writings, which generally, occurs with the passage of time in the writings or signatures of a person. The writings written by one person on these bills are showing the same alignment and similarly the writings written by another person are showing the same alignment, which cannot remain exactly the same manner and direction when the writings are written at different times bv the same person. The examination of the paper of all the bill book appears to be fresh and not older of about two to three years old.
(emphasis supplied) 6.1. We find on a reading from the above that the adverse inference drawn by the tax authorities that the assessee despite opportunity chose not to cross examine the fingerprint expert on facts was not justified as admittedly the report supports the case of the assessee. We further find that the handwriting and fingerprint expert has examined the revenue stamps appended to the bills and vouchers and has also concluded that these are also about 2 to 3 years old. For ready reference relevant extract is reduced hereunder though it has been reproduced in the earlier part of this order The revenue stamps have been physically examined with the help of magnifying glasses of different powers and I have noted that all the revenue stamps affixed on the backside of the bills bearing sr. nos. I to 174 in Annexure 'A-/' to Annexure A-4'i.e. these revenue stamps have been affixed from the same lot and are also appearing to be fresh one and are not older of about two to three years.
(emphasis supplied) ITA 172/CHD/2016 A.Y. 2012-13 Page 19 of 19 6.2 Accordingly we find that in the peculiar facts and circumstances of the present case the tax authorities have proceeded to make and sustain the addition on suspicions and surmises being satisfied by the consistent explanation offered by the assessee and considering the facts of the present case and the decisions relied upon by the parties alongwith the Report of the Handwriting Expert, we hold that the addition on facts cannot be sustained. The same is directed to be deleted. The grounds raised by the assessee accordingly are allowed
7. In the result the appeal of the assessee is allowed Order pronounced in the Open Court.
Sd/- Sd/- (ANNAPURNA GUPTA) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : AG/Poonam
Copy to: The Appellant, The Respondent, The CIT, The CIT(A), The DR