Income Tax Appellate Tribunal - Jaipur
Amrapali Jewels Pvt. Ltd., Jaipur vs Department Of Income Tax on 24 November, 2015
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 670/JP/2013
fu/kZkj.k o"kZ@Assessment Year : 2008-09
Deputy Commissioner cuke M/s Amprapali Jewels Pvt. Ltd.,
of Income Tax, Vs. Panch Batti, M.I. Road, Jaipur.
Circle-2, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCA 3277 F
vihykFkhZ@Appellant izR;FkhZ@Respondent
izR;k{[email protected]. No. 53/JP/2013
(Arising out of vk;dj vihy la- 670/JP/2013)
fu/kZkj.k o"kZ@Assessment Year : 2008-09
M/s Amprapali Jewels Pvt. Ltd., cuke Deputy Commissioner of
Panch Batti, M.I. Road, Jaipur. Vs. Income Tax,
Circle-2, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCA 3277 F
izR;k{ksid@Objector izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by : Shri Raj Mehra (CIT)
fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA)
lquokbZ dh rkjh[k@ Date of Hearing : 23/11/2015
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 24/11/2015
2 ITA 670/JP/2013 & CO 53/JP/2013_
DCIT Vs. M/s Amrapali Jewels P Ltd.
vkns'k@ ORDER
PER: R.P. TOLANI, J.M. The appeal by revenue and cross objection by assessee arise from the order dated 14/05/2013 of Ld. CIT (A)-1, Jaipur for A.Y. 2008-09 concerning bogus purchases of precious and semi precious stones.
Respective grounds are as under:-
Grounds in Revenue Appeal.
"1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) was not justified in restricting the trading addition of Rs. 17,25,190/- to Rs. 50,000/- despite upholding the rejection of books of account.
2. On the facts and in the circumstances of the case and in law the ld CIT(A) has passed a perverse order in not considering the undisclosed investment made in the stated purchases from the specific parties."
Ground in Cross Objection
1. The ld. CIT(A) has erred on facts and in law in confirming the action of the A.O. in rejecting the books of account U/s 145(3).
1.1 The ld CIT(A) has further erred on facts and in law in confirming the ad hoc trading addition of Rs. 50,000/-.
2. The ld counsel for the assessee contends that in assessee's own case for A.Y. 2005-06, the Hon'ble Rajasthan High Court has adopted a different method of estimation of income in respect of unverifiable purchases by following observations:
3 ITA 670/JP/2013 & CO 53/JP/2013_ DCIT Vs. M/s Amrapali Jewels P Ltd.
"Considering the above submissions, we find substance in the contention of the learned Departmental Representative that the defects pointed out in the books of account by the AO that there was no basis for valuation of stock at the end of the year and closing stock was valued on estimated basis hence stock was not subject to verification remained unexplained by the assessee even before the Tribunal. Thus on the basis of unexplained defects in the books of account, the AO was also justified in rejecting the books of account. We thus uphold the application of the provisions of s. 145(3) of the Act in the present case. So far as restriction of the application of reduced GP rate on Rs. 26 lacs (i.e. round figure of alleged bogus purchases worth Rs. 25,00,556) is concerned, we do not find substance in the argument of the learned Departmental Representative especially when sales declared by the assessee have not been doubted and interfered. For ready reference the relevant finding of the learned CIT(A) at p. 5 in this regard is being reproduced hereunder :
'So far as addition is concerned the GP rate of 16.06 per cent declared in the year under consideration is certainly less than GP rate of 21 per cent in the immediate preceding year as well as less than 17.45 per cent and 17.22 per cent in asst. yr. 2003-04 and asst. yr. 2002-03. Once books of account are rejected the only option left with the AO is to estimate GP rate. The AO has taken weighted average of 5 years. However, the contention of the Authorized Representative is considered that fall in GP rate was explained to the AO vide their letter dt. 18th Dec., 2007 which is at page No. 64 of the paper book. It
4 ITA 670/JP/2013 & CO 53/JP/2013_ DCIT Vs. M/s Amrapali Jewels P Ltd.
was explained that sales have increased substantially from Rs. 7.79 crores to Rs. 13.07 crores and thus there is a growth of 68 per cent in sales. The increase in sale was attributed to the opening of new outlet at New Delhi. To boost sale in Delhi special discount was given which resulted in deduction in GP ratio. Also that there was steep competition in the jewellery trade and there was heavy fluctuation in gold bullion rates in the year under consideration. Also that the alleged bogus purchases of Rs. 25,00,556 out of total purchases of Rs. 1,326.16 lacs come to only 1.89 per cent. Thus the alleged bogus purchases are less than 2 per cent of the total purchases. The AO except the alleged bogus purchases has not pointed out any specific defect in maintenance of books of accounts and therefore whatever addition is to be made it should be with reference of the alleged bogus purchases only. The fact that there is a quantum jump in turnover and in the years except immediate preceding year the GP rates were 13.70 per cent, 17.22 per cent and 17.45 per cent and only because the GP rate of the immediate preceding year is also taken into account then the weighted average comes to 17.27 per cent. After considering the reasons for fall in GP rate and the fact that the alleged bogus purchases are less than 2 per cent of the total turnover the AO is directed to apply the GP rate of 17.27 per cent only on the sales corresponding to the bogus purchases. As the bogus purchases are 1.89 per cent of the total purchases considering the corresponding sales at 2 per cent of the turnover which comes around Rs. 26 lacs and therefore AO is directed to apply higher GP rate of 17.27 per cent on sales of Rs. 26 lacs corresponding to the bogus purchases. As a result, 5 ITA 670/JP/2013 & CO 53/JP/2013_ DCIT Vs. M/s Amrapali Jewels P Ltd.
trading addition is made by applying the difference of GP rates which comes 1.21 per cent on sales of Rs. 26 lacs. The trading addition is thus reduced to Rs. 31,460 as against Rs. 15,87,450. As a result, the appellant gets relief of Rs. 15,55,990. The grounds of appeal are partly decided in favour of the appellant.' The first appellate order on the issue as discussed above is comprehensive and reasoned one hence we are not inclined to interfere therewith. The same is upheld. The ground and objection are rejected.
Therefore, the ratio of this decision may be applied to present appeal.
3. The ld DR, on the other hand, contends that the ratio of this decision cannot be applied to assessee's case, inasmuch as the Hon'ble High Court has decided the issue in A.Y. 2005-06 whereas the year in question is 2008-09. Further, in respect of unverifiable purchases, consequent to discovery of systematic operations of indulging in unverifiable purchases of precious and semi precious stone in jewellery trade have been elaborately decided by the ITAT, Jaipur Bench in the cases of Anuj Kumar Varshney & ors. Vs. ITO (ITA No. 187/JP/2012) dated 20/10/2014 by following observations:
"We have heard the rival contentions of both the parties and perused the material available on the record. As discussed in above cases, the material available on record established that in Jaipur, a 6 ITA 670/JP/2013 & CO 53/JP/2013_ DCIT Vs. M/s Amrapali Jewels P Ltd.
rampant practice is in vogue to get and issue accommodation bills of purchases to deflate the profit. The learned Assessing Officer made disallowance @ 25% of such bogus purchases on the basis of decision in the case of Sanjay Oil Cake Industries and Vijay Protein Ltd. (supra). In our view the 25% disallowance appears to be higher side, therefore, keeping in view of the facts of the assessee's case as well as other cases as discussed above, we feel that 15% disallowance out of bogus purchases is reasonable on unverifiable purchases and will meet the ends of justice. The rejection of books of account is justified. The assessee gets relief partly."
4. We have heard the rival contentions of both the parties and perused the material available on the record. In our view, the issue about unverifiable purchases of precious and semi precious stone has been decided in the case of Anuj Kumar Varshney & ors. (Supra) besides in this case for A.Y. 2005-06 the Hon'ble Rajasthan High Court has adopted an estimate in view of the particular facts and circumstances for A.Y. 2005-06.
In the entirety of the facts and circumstances, following our orders in other appeals on the same issue, we are inclined to set aside the matter back to the file of the Assessing Officer to decide the issue afresh after considering the assessee case to be decided by the Hon'ble High Court for A.Y. 2005- 06 and outcome of Hon'ble Rajasthan High Court in the cases of Anuj Kumar Varshney & ors. On appeals filed by assessee's and revenue.
7 ITA 670/JP/2013 & CO 53/JP/2013_ DCIT Vs. M/s Amrapali Jewels P Ltd.
5. The grounds raised in the assessee's C.O. will also be affected by the outcome of such decision. In view thereof, the revenue's as well as assessee's C.O. grounds are accordingly set aside to ld. AO.
6. In the result, revenue's appeal as well as the C.O. of the assessee are allowed for statistical purposes only.
Order pronounced in the open court on 24/11/2015.
Sd/- Sd/-
¼foØe flag ;kno½ ¼vkj-ih-rksykuh½
(Vikram Singh Yadav) (R.P.Tolani)
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Tk;iqj@Jaipur
fnukad@Dated:- 24th November, 2015
*Ranjan
vkns'k dh izfrfyfi vxzsf'kr@Copy of the Order forwarded to:
1. vihykFkhZ@The Appellant- The DCIT, Circle-2, Jaipur.
2. izR;FkhZ@ The Respondent- M/s Amprapali Jewels Pvt. Ltd., Jaipur
3. vk;dj vk;qDr@ CIT-
4. vk;dj vk;qDr¼vihy½@The CIT(A)-
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 670/JP/2013 & C.O. 53/JP/2013) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar