Income Tax Appellate Tribunal - Jaipur
Acit, Jaipur vs Vijay Kedia (Huf), Jaipur on 29 January, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 197/JP/2016
fu/kZkj.k o"kZ@Assessment Year : 2007-08
M/s Vijay Kedia (HUF) cuke The ACIT,
1307, Kedia House, Vs. Circle-1,
Gopalji Ka Rasta, Jaipur. Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABHV6449M
vihykFkhZ@Appellant izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 248/JP/2016
fu/kZkj.k o"kZ@Assessment Year : 2007-08
The ACIT, cuke M/s Vijay Kedia (HUF)
Circle-1, Vs. 1307, Kedia House,
Jaipur. Gopalji Ka Rasta, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABHV6449M
vihykFkhZ@Appellant izR;FkhZ@Respondent
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s Assessee by : Shri S.R. Sharma &
Shri R.K. Bhatra (C.A.)
jktLo dh vksj ls@ Revenue by : Shri Ajay Malik (Addl. CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 24/01/2018
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 29/01/2018
vkns'k@ ORDER
ITA No. 197& 248/JP/2016 M/s Vijay kedia (HUF) vs. ACIT Jaipur.
PER: VIJAY PAL RAO, J.M. These cross appeals are directed against the order dated 22.01.2016 of CIT(A), Jaipur for the assessment year 2007-08. The assessee has raised the following grounds:-
"1. That on the facts and in the circumstances of the case the Ld. CIT(A) is wrong, unjust and has erred in law in confirming finding recorded by the assessing officer that purchase aggregating to Rs. 92,60,035/- (wrongly computed by the assessing officer at Rs. 85,64,509/-) made by the appellant from M/s Avi Exports, M/s Sun Dian and M/s Vitrag Jewells are not genuine and bogus.
2. The ld. CIT(A) is further wrong and has erred in law in confirming rejection of books of accounts of the appellant by the assessing officer u/s 145(3) of the I.T. Act, 1961 and in upholding addition to the extent of Rs. 13,89,005/- being 15% of above said alleged unverifiable purchases, as trading addition u/s 69C of the I.T.Act, 1961.
3. The appellant craves leave to add to, amend or modify the above grounds of appeal or to withdraw any of them."
2. At the time hearing, the learned counsel for the assessee has stated at bar that the assessee does not press ground no. 1 and therefore the same may be dismissed as not pressed. The ld. DR has raised no objection ground No. 1 of the assessee's appeal is dismissed as not pressed. Accordingly the ground no. 1 of the assessee's appeal is dismissed being not pressed.
2
ITA No. 197& 248/JP/2016 M/s Vijay kedia (HUF) vs. ACIT Jaipur.
3. Ground No. 2 is regarding the rejection of books of accounts u/s 145(3) of the Act and sustaining the addition to the extent of 15% of the unverifiable purchases.
4. We have heard ld. AR as well as DR and considered the relevant material on record. The AO noted that the assessee has shown the purchase from some of the parties who are indulged in providing bogus bills without actual delivery of goods. The AO has considered the facts as it came out during the investigation made by the Investigation Wing in case of Shri R.K. Jain who was running M/s Avi Exports, M/s Sun Dian and M/s Vitrag Jewells. After rejecting the books of accounts, the Assessing Officer has made an addition of unverifiable/bogus purchase of Rs. 85,64,509/- from these three parties namely M/s Avi Exports, M/s Sun Dian and M/s Vitrag Jewells. The assessee challenged the action of the AO before the ld. CIT(A), the ld. CIT(A) though confirmed the rejection of books of accounts u/s 145(3) of the Act however, restricted the addition to 15% of the alleged bogus purchase.
5. Having considered the rival submissions as well as relevant material on record we note that the Assessing Officer has not disputed the sale of the assessee which is corresponding to the purchase howeve, the books of accounts were rejected because of the reasons 3 ITA No. 197& 248/JP/2016 M/s Vijay kedia (HUF) vs. ACIT Jaipur.
that that assessee has made purchase from these three parties who were indulged for providing bogus bills without any actual delivery of goods. Therefore, once the books of accounts are rejected by the AO the income of the assessee is required to be computed on estimated basis and best decision of the AO. The AO cannot make an addition to the book result on account of purchase which is part of the trading account and therefore, after rejection of books of accounts only the course of action left with the AO assessee is to estimate the income by applying proper GP or NP rate. The ld. AR has placed reliance on the decision of Coordinate Bench of this Tribunal dated 26.12.2017 in case of DCIT vs. M/s Gems Paradies in ITA No. 747/JP2012. We find that the Tribunal said case while considering an identical issue has held in para 5 as under:-
"5. We have considered the rival submissions as well as relevant material on record. The revenue is aggrieved by the impugned order by the ld. CIT(A) whereby the addition made by the AO equivalent to 25% of the unverifiable purchase was restricted by applying the GP addition @ 25.50%. We are of the considered view that once the books of account are rejected by the AO then, the only course of action left with the AO is to assess the income of the assessee on the basis of estimate and best judgment. The Assessing Officer after rejection of books of account has further made addition of 25% of tainted sales to the books result which is not permissible when the AO resorted invoke the provisions of section 145(3) of the Act. Thus, this 4 ITA No. 197& 248/JP/2016 M/s Vijay kedia (HUF) vs. ACIT Jaipur.
action of the AO is contrary to the decision of rejecting the books of accounts. Accordingly, we do concur with the view of the ld. CIT(A) in applying the GP rate for assessment of the income of the assessee after the rejection of books of account. This Tribunal comprising the same combination in case of CIT vs. Allied Gems Corporation in ITA No. 794/JP/2011 vide order dated 15.12.2017 considering then an identical issue has held in para 5 as under:-
" 5. We have considered the rival submissions as well as relevant material on record. The Assessing Officer rejected the books of account by invoking the provisions of section 145(3). The issue of rejection of books of accounts is involved in the cross objection filed by the assessee, therefore, we deal with this issue while deciding the cross objection. Once, the books of accounts are rejected by the AO the only course of action left to the AO is to assess the income of the assessee on the basis of best judgment and GP rate is considered as proper and reasonable basis and guidance for the best judgment. Once, the books result are rejected the Assessing Officer cannot proceed to make an addition to the income offered by the assessee as per books result. However, the AO in the case of the assessee instead of applying the GP rate made on addition@ 25% of the purchases to the book results. This act of the Assessing officer itself contradicts the decision of rejecting the books of accounts and books result. The Tribunal in assessee's own case for the assessment year 2006-07 has considered this issue and upheld the order of the ld. CIT(A) in para 2.20 and 2.30 as under:- "2.20 Hence, there are certain concerns for which Revenue got evidence in the form of statement recorded in respect of such parties, opening balance is Rs. 37,06,175/- while the closing balance is Rs. 42,81,496/-. It means that there is an accretion of amount of Rs. 5.75/- lacs. It means that to this extent, accretion in purchase is without supporting the correct bills. Of course, total openting balance of all parties is Rs. 1,15,43,782/- and the closing balance is Rs. 1,33,36,193/-. However, looking to the accretion in the closing balance of the concerns for which 5 ITA No. 197& 248/JP/2016 M/s Vijay kedia (HUF) vs. ACIT Jaipur.
Revenue has material, the addition confirmed by the ld. CIT(A) is reasonable...................
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2.30 The Hon'ble P & H High Court in the case of Uplakesh Metal Industrial V CIT 177 taxman 298 held that issue decided by this is in the realm of appreciation evidence. The find of Tribunal as mentioned in this judgment is as under:-
"However, in our opinion the observation of the Assessing Officer that the assessee was prima facie required to prove the genuineness of the transaction and identity of the creditors is not misplaced because there is no distinction laid between the trade creditor and the non-trade creditor and we are further of the opinion that in case the assessee claims liability of payment to the trade creditors shown in the balance-sheet, the assessee is definitely required to prima facie prove the identity of the trade creditors as well as the genuineness of the transaction. In this case, admittedly the assessee has neither been able to disclose the complete addresses of the trade creditors nor is able to give the complete addresses of the consignors nor the name has been mentioned on the challan forms, so the verification of the same by the Assessing Officer became totally impracticable on account of lack of this complete information supplied by the assessee. It means that the assessee failed in establishing the genuineness of the so called trade creditors appearing in its books of account. We are further of the opinion that since in the instant case of the assessee, the point under consideration before us is regarding the genuineness of the liability amounting to Rs. 1,75,26,586 shown by the assessee in its balance-sheet as trade creditors, so it was not relevant for us to consider as to whether the purchases made by the assessee were genuine or not or to whether the assessee has inflated those purchases or not. It is also not material to consider whether the GRs from sale-tax department were verified or not, so, the CIT(A) on considering these points was not 6 ITA No. 197& 248/JP/2016 M/s Vijay kedia (HUF) vs. ACIT Jaipur.
justified in deleting the impugned addition without discussing as to whether the liability of trade creditors shown by the assessee in the absence of furnishing complete addresses of trade creditors/consignors and the payment vouchers was genuine or not."
While evaluating the material collected by the Revenue on the touch stone on human probability and considering the accretion in the closing balance in respect of parties for which Revenue has material in the form of statement. We fell that the ld. CIT(A) was reasonable in confirming the addition of Rs. 5.00 lacs. Hence both the grounds of assessee as well as Revenue are dismissed." We further noted that when the corresponding sale is not in dispute then the question is only regarding the correct amount of purchases and verification of the same. The ld. DR has relied upon the various decisions of Hon'ble Gujarat High Court however, we find that in all those decisions there was a finding of facts that the assessee inflated the purchases upto 25% and therefore, it was not a case of non verification of the purchase and rejection of books of accounts but the fact was established in the investigation that the assessee inflated the purchase price and accordingly the addition of 25% being inflated purchases was made and upheld by the Tribunal which was again upheld by the Hon'ble High Court. On the contrary in the case of the assessee the AO not given any finding of inflated purchases by the assessee but doubted the very transaction of purchases due to non production of these parties before the AO. The AO has not given the finding that the prices of the goods was inflated by the assessee but the AO doubted the genuineness of the purchases on the ground that the suppliers were found to be accommodation entries providers. When the AO rejected the book results u/s 145(3) of the Act, then the AO after rejection of the books of account can proceed to make the assessment on the basis of best judgment instead of resorting make the addition to the book results. Accordingly, in the facts and circumstances of 7 ITA No. 197& 248/JP/2016 M/s Vijay kedia (HUF) vs. ACIT Jaipur.
the case and in view of the decision of this Tribunal in assessee's own case for A.Y. 2006-07 we do not find any error or illegality in the orders of the ld. CIT(A) in restricting the addition to the average GP rate based on the past history. Hence, the grounds raised in the Revenue appeals are rejected being without any substance or merits."
Accordingly, in view of the above facts and circumstances of the case and the decision of this Tribunal in case of ACIT vs. M/s Allied Gems Corporation (Supra) the grounds raised by the Revenue in this appeal are without any substance or merits." Accordingly, we set aside the orders of the authorities below qua this issue and direct the AO to assessee the income of the assessee on the basis of the average gross profit, declared and admitted by the AO or attained finality. The AO to consider the past history of the GP of the assessee for arriving to the average rate of GP.
6. The Revenue in the cross appeal has raised the following ground:-
"Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in substituting the addition of Rs. 85,64,509/- made u/s 69C on a/c of unverifiable purchases by disallowance @ 15% of account of unverifiable purchases."
Thus, it is clear that the Revenue is aggrieved by the order of the ld. CIT(A) to the extent of the addition restricted from the total purchase to 15%. This issue is common to the ground No. 2 of the assessee's appeal and accordingly, in view of our findings on this issue in 8 ITA No. 197& 248/JP/2016 M/s Vijay kedia (HUF) vs. ACIT Jaipur.
assessee's appeal the Ground raised by the Revenue stands disposed of in same terms.
In the result, the appeal of the assessee is partly allowed for statistical purpose and appeal of the Revenue is dismissed.
Order pronounced in the open court on 29/01/2018 Sd/- Sd/-
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(Vikram Singh Yadav) (Vijay Pal Rao)
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Tk;iqj@Jaipur
fnukad@Dated:- 29/01/2018.
*Santosh.
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- M/s Vijay Kedia (HUF), Jaipur.
2. izR;FkhZ@ The Respondent- ACIT, Circle-1, Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur.
6. xkMZ QkbZy@ Guard File {ITA No. 197 & 248/JP/2016} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar 9