Commissioner Of Income Tax Jai v. M/S Dwarka Gems Ltd

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 629 / 2008 Commissioner Of Income Tax Jai ----Appellant Versus M/S Dwarka Gems Ltd ----Respondent Connected With D.B. Income Tax Appeal No. 904 / 2008 Commissioner Of Income Tax Jai ----Appellant Versus M/S Dwarka Gems Ltd ----Respondent D.B. Income Tax Appeal No. 77 / 2011 Cit ----Appellant Versus M/S Dwarka Gems Ltd ----Respondent D.B. Income Tax Appeal No. 163 / 2011 Cit, Jaipur ----Appellant Versus M/S Dwarka Gems Limited ----Respondent D.B. Income Tax Appeal No. 460 / 2011 C I T Jaipur Iii Jaipur ----Appellant Versus M/S Dwarka Gems Ltd ----Respondent D.B. Income Tax Appeal No. 621 / 2011 C I T ----Appellant Versus M/S Dwarka Gems Pvt Ltd ----Respondent D.B. Income Tax Appeal No. 264 / 2016 Pr Commissioner Of It Jaipur ----Appellant Versus M/S Dwarka Gems Ltd ----Respondent D.B. Income Tax Appeal No. 266 / 2016 Pr Commissioner Of It-1 Jaipur ----Appellant Versus M/S Dwarka Gems Ltd ----Respondent D.B. Income Tax Appeal No. 269 / 2016 Pr Commissioner Of It Jaipur ----Appellant Versus M/S Dwarka Gems Ltd ----Respondent D.B. Income Tax Appeal No. 6 / 2017 M/S Dwarka Gems Ltd ----Appellant Versus C I T And Anr ----Respondent D.B. Income Tax Appeal No. 7 / 2017 M/S Dwarka Gems Ltd ----Appellant Versus C I T Jaipur And Anr ----Respondent D.B. Income Tax Appeal No. 8 / 2017 M/S Dwarka Gems Ltd ----Appellant Versus C I T Jaipur And Anr ----Respondents _____________________________________________________For Appellant(s) : Mr. Sameer Jain with Mr. Arjun Singh Mr. k.D. Mathur for Mr. R.B. Mathur, in Appeal Nos. 264/2016 and 266/2016 and 269/2016 Mr. Naresh Gupta, in Appeal Nos. 6/2017, 47/2017 and 8/2017 For Respondent(s) : Mr. Naresh Gupta, In Appeal Nos. 629/2008, 904/2008, 77/2011, 163/2011, 460/2011, 621/2011 264/2016, 266/2016 and 269/2016 _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHUR Judgment 23/05/2017 1.In all these appeals identical questions of law and facts areinvolved and relates to same assessee hence with the consent oflearned counsel for the parties, these appeals are decided by thiscommon judgment. 2.Application No. 17170/2017, in Appeal No. 621/2011, forframing the additional substantial question of law is allowed. 3..By way of these appeals the department has challenged thejudgment and order of the Tribunal whereby the Tribunal haspartly allowed the appeal filed by the assessee and dismissed theappeal of the Department. Appeals No. 6/2017, 7/2017 and8/2017, have been filed by the assessee whereby the Tribunal haspartly allowed the appeals. 4.While admitting these appeals, this Court has framedfollowing substantial questions of law. Appeal No. 629 / 2008 “(i) Whether in the facts and circumstances ofthe case the ITAT was right and justified in lawand has acted perversely in deleting theaddition of Rs. 336,40,070/- on account ofunexplained expenditure u/s 69C, as assessedby the assessing Officer. (ii) Whether in the facts and circumstances ofthe case the ITAT was right in law in allowingDeduction u/s 80 HHC for domestic countersales, inspite of the fact that no evidence viz aviz Customs station clearance was in record,which is a prerequisite of explanation (aa) toamended section 80 HHC (4C)?” Appeal No. 904 / 2008 4.While admitting these appeals, this Court has framedfollowing substantial questions of law. Appeal No. 629 / 2008 “(i) Whether in the facts and circumstances ofthe case the ITAT was right and justified in lawand has acted perversely in deleting theaddition of Rs. 336,40,070/- on account ofunexplained expenditure u/s 69C, as assessedby the assessing Officer. (ii) Whether in the facts and circumstances ofthe case the ITAT was right in law in allowingDeduction u/s 80 HHC for domestic countersales, inspite of the fact that no evidence viz aviz Customs station clearance was in record,which is a prerequisite of explanation (aa) toamended section 80 HHC (4C)?” Appeal No. 904 / 2008 “Whether in the facts and circumstances of thecase the learned ITAT being the last fact findingauthority was right in law in deleting the hugeadditions towards fictitious share applicationmoney to the extent of Rs. 4,90,95,500/-, bogus purchases to the tune of Rs. 17,51,52,498/-,improper gross profit margin from 35% to 20%giving effect to the tune of Rs. 5,75,90,835/-and improper closing stock valuation effectingaddition of Rs. 1,84,11,354/- by ignoringmaterial evidences on record, going contrary tolegal provisions of law and violating principles ofnatural justice by passing non-speaking,perverse and non-reasoned order?” Appeal No. 77 / 2011 “Whether in the facts and circumstances of thecase, the learned ITAT being the last factfinding authority was right in law in deleting thehuge additions towards bogus purchases to thetune of Rs. 9,70,66,885/- and improper closingstock valuation effecting addition of Rs.1,76,95,991/- by ignoring material evidenceson record, going contrary to legal provisions oflaw and violating principles of natural justice bypassing non-speaking, perverse and non-reasoned order?” Appeal No. 163 / 2011 “1. Whether in the facts and circumstances ofthe case, the learned ITAT being the last factfinding authority was right in law in deleting thehuge additions towards bogus purchases to thetune of Rs. 2,12,38,159/- and improper closingstock valuation effecting addition of Rs.1,03,85,531/- by ignoring material evidenceson record, going contrary to legal provisions oflaw and violating principles of natural justice bypassing non-speaking, perverse and non-reasoned order?” Appeal No. 460 / 2011 “That whether in the facts and circumstancesof the case the Hon. ITAT was right andjustified in law and has not acted perversely indeleting the addition of Rs. 256,27,520/- onaccount of unexplained expenditure u/s 69C,as assessed by the assessing officer? Whether in the facts and circumstances of thecase the Hon. ITAT was right in law in allowingdeduction u/s 80HHC for domestic countersales, inspite of the fact that no evidence viz aviz Customs station clearance was on record, which is a prerequisite of explanation (aa) toamended Section 80HHC(4C)?” Appeal No. 621 / 2011 “That whether in the facts and circumstancesof the case the Hon. ITAT was right and justifiedin law and has not acted perversely in deletingthe addition of Rs. 822,78,188/- on account ofunexplained expenditure u/s 69C, as assessedby the assessing officer? (ii) Whether in the facts and circumstances ofthe case the ITAT was right in law in allowingDeduction u/s 80 HHC for domestic countersales, inspite of the fact that no evidence viz aviz Customs station clearance was in record,which is a prerequisite of explanation (aa) toamended section 80 HHC (4C)?” Appeal No. 264 / 2016 “1. Whether in the facts and circumstances ofthe case, the ITAT was justified in directing theAssessing Officer to apply 15% net profit rateon unverifiable bogus purchases of Rs.47972464/- ignoring the facts that thequantum of stated purchases was notestablished and that on inquires the allegedsellers were found to be mere entry providersand nonexistent.” (ii) Whether in the facts and circumstances ofthe case the ITAT was right in law in allowingDeduction u/s 80 HHC for domestic countersales, inspite of the fact that no evidence viz aviz Customs station clearance was in record,which is a prerequisite of explanation (aa) toamended section 80 HHC (4C)?” Appeal No. 264 / 2016 “1. Whether in the facts and circumstances ofthe case, the ITAT was justified in directing theAssessing Officer to apply 15% net profit rateon unverifiable bogus purchases of Rs.47972464/- ignoring the facts that thequantum of stated purchases was notestablished and that on inquires the allegedsellers were found to be mere entry providersand nonexistent.” Appeal No. 266/ 2016, is admitted on following questionsand with the consent of the parties, and the same isdecided today itself. “(i) Whether in the facts and circumstances ofcase, the ITAT was justified in directing theAssessing Officer to apply 15% net profit rateon unverifiable bogus purchases of Rs.12715686/- ignoring the facts that thequantum of stated purchases was notestablished and that on inquiries the allegedsellers were found to be mere entry providersand non-existent. (ii) Whether in the facts and in circumstancesof case, the ITAT was justified in deleting theaddition of Rs. 86791/- made u/s. 40(A)(ia) ofthe IT Act. Appeal No. 269/ 2016 , is admitted on following questionsand with the consent of the parties, and the same isdecided today itself. “(i) Whether in the fact and circumstances ofcase, the ITAT was justified in deleting theaddition of Rs. 6944908/- made by theAssessing Officer on the basis of Arm’s LengthPrice determined by the Transfer PricingOfficer. (ii) Whether in the facts and in circumstancesof case, the ITAT was justified in directing theAssessing Officer to apply 15% net profit rateon unverifiable bogus purchases of Rs.8671276/- ignoring the facts that the quantumof stated purchase was not established andthat on inquires the alleged sellers were foundto be mere entry providers and non-existent. (iii)Whether in the facts and circumstances ofcase, the ITAT was justified in deleting theaddition of Rs. 123386/- made u/s. 40(A)(ia)of the IT Act. Appeal No. 6/ 2017 “(i)Whether on the facts and in totalityof the circumstances of the case, the Tribunalwas justified in sustaining the trading additionby disallowing alleged purchases where thebooks of accounts of the appellant have notbeen rejected u/s 145 of the Income Tax Act,1961? (v) Whether the ITAT acted perversely andagainst the settled principles of law, ignoringprovisions contained in section 33 of theEvidence Act, 1961, in sustaining the additionmade by the revenue doubting the purchaseshaving relied on general information collectedin case of IIIrs persons lacking evidentiaryvalue qua appellant’s case for want ofopportunity of cross examination to theappellant?” Appeal No.8/2017 “(i)Whether on the facts and in totality of thecircumstances of the case, the Tribunal wasjustified in sustaining the trading addition bydisallowing alleged purchases where thebooks of accounts of the appellant have notbeen rejected u/s 145 of the Income Tax Act,1961? (v) Whether the ITAT acted perversely andagainst the settled principles of law, ignoringprovisions contained in section 33 of the Evidence Act, 1961, in sustaining the additionmade by the revenue doubting the purchaseshaving relied on general information collectedin case of IIIrs persons lacking evidentiaryvalue qua appellant’s case for want ofopportunity of cross examination to theappellant?” Appeal No. 7/ 2017 Appeal No.8/2017 “(i)Whether on the facts and in totality of thecircumstances of the case, the Tribunal wasjustified in sustaining the trading addition bydisallowing alleged purchases where thebooks of accounts of the appellant have notbeen rejected u/s 145 of the Income Tax Act,1961? (v) Whether the ITAT acted perversely andagainst the settled principles of law, ignoringprovisions contained in section 33 of the Evidence Act, 1961, in sustaining the additionmade by the revenue doubting the purchaseshaving relied on general information collectedin case of IIIrs persons lacking evidentiaryvalue qua appellant’s case for want ofopportunity of cross examination to theappellant?” Appeal No. 7/ 2017 “(i)Whether on the facts and in totality of thecircumstances of the case, the Tribunal wasjustified in sustaining the trading addition bydisallowing alleged purchases where the booksof accounts of the appellant have not beenrejected u/s 145 of the Income Tax Act, 1961? (v) Whether the finding of the ITAT is perversein holding the alleged purchases to beunverifiable merely for want of presence of theconcerned sellers more particularly of RuchikaTrade Links Pvt. Ltd; moreso, wheredocumentary evidence proving such purchaseshave been placed on record; andcorresponding sale/export or receipt from suchsale or export have not been doubted?” 5.Counsel for the appellant has relied upon the decision of thisCourt in the case of Commissioner of Income Tax, Jaipur-II, Jaipur Vs. M/s Aditya Gems, K-10, Fateh Tiba, AdarshNagar, Jaipur in D.B. Income Tax Appeal no. 234/2008, decidedon 2[nd] November, 2016, wherein it has been held as under: 3. Considering the law declared by the SupremeCourt in the case of Vijay Proteins Ltd. Vs.Commissioner of Income Tax, Special Leave toAppeal (C) No.8956/2015 decided on 06.04.2015whereby the Supreme Court has dismissed theSLP and confirmed the order dated 09.12.2014passed by the Gujarat High Court and otherdecisions of the High Court of Gujarat in the caseof Sanjay Oilcake Industries Vs. Commissioner ofIncome Tax (2009) 316 ITR 274 (Guj) and N.K. Industries Ltd. Vs. Dy. C.I.T., Tax AppealNo.240/2003 decided on 20.06.2016, the partiesare bound by the principle of law pronounced inthe aforesaid three judgments. 4. We remit back the case to the AssessingOfficer for deciding afresh on the factual matrix.The authority will accept the law but thetransaction whether it is genuine or not will beverified by the Assessing Officer on the basis ofthe aforesaid three judgments. The issues areanswered accordingly. The appeal is accordinglydisposed of.” 6.Taking into consideration the above, the matters areremitted back to the AO for reconsideration. It will not be out ofplace to mention that observations which are made by this Courtin the above judgment and the other judgment which sought to berelied upon by the assessee will be considered on merits. The AOwhile considering the matter will give benefit of the law declaredby this Court and also grant opportunity for cross-examination ofthe witnesses to the assessee. 7.All these appeals stand disposed off. 8.A copy of this judgment be placed in each of the file. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. BM Gandhi/22-33