Commissioner Of Income Tax, Jaipur-Ii, Jaipur v. Shri Prakash Chand Vijay, A

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 301 / 2008 Commissioner Of Income Tax, Jaipur-II, Jaipur. ----Appellant Versus Shri Prakash Chand Vijay, A-132, Janta Colony, Jaipur. ----Respondent _____________________________________________________ For Appellant(s) :Mr. K.D. Mathur on behalf of Mr. R.B. Mathur.For Respondent(s) :Ms. Ishita Rawat on behalf of Mr. Gunjan Pathak. _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VINIT KUMAR MATHURJudgment Per Hon’ble Jhaveri J. 18/01/2017 1. By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal haspartly allowed the appeal preferred by the assessee and reversingthe order of the CIT(A) and the Assessing Officer. 2.This Court while admitting the appeal on 03.11.2008, has framed the following substantial questions of law: “(i)Whetherinthefactsandcircumstances of the case the ITAT wasjustified in law and has not acted perverselyin deleting the additions of Rs.11947958/-on account of unexplained expenditureunder Section 69C made by the AssessingOfficer? (ii)Whetherinthefactsandcircumstances of the case, the ITAT has notacted perversely and illegally in coming tothe conclusion that the rejection of thebooks under Section 145(3) of the Act by the Assessing Officer as unjustified?” 3.The facts of the case are that the return of income for theassessment year 2001-02 was filed by the assessee on31.10.2001 declaring a total income of Rs.22,80,360/-. The casewas selected for scrutiny u/s. 143(3) by issue of notice u/s.143(2) on 21.10.2002. A fresh notice 142(2) dated 07.07.2003was issued to the assessee on change in the office of theincumbent. Books of accounts consisting of cash book, ledger,bank statement, stock register along with related bills andvouchers etc. were produced before the Assessing Officer. Themain source of income of the Assessee was from salary and partlyfrom commission and brokerage. During the year underconsideration the assessee started export business in gems andstones and has earned income only from Export business andbank interests. During the year under consideration the assesseehas declared total export turnover of Rs.2,35,10,077/- upon whichgross profit of 1,15,62,119/- was shown thereby giving a G.P. rateof 49.8%. This is the first year of business of the assessee.During the next financial year 2001-02 the assessee has declaredtotal export turnover at Rs.32,71,097/- upon which gross profit ofRs.18,01,075/- is shown thereby giving a GP Rate of 55%. Onperusal of the return filed for the assessment year 2003-04 i.e.financial year 2002-03, it is seen that the assessee has declaredNil export and has declared income from salary as was donepreviously before he started his export business. It appears thatthis is an isolated case of export by the assessee in past several years. In view of the above facts, it is clear that the assessee haddone the business of export mainly for one fyear i.e. for the fyearunder consideration. It is not understood as to how there wassuch a huge export turnover in one year. That too in the first yearof business and then there was substantial fall in the next yearand subsequently there was no business of export in any of theyears. This shows that this is not the regular business of theassessee. 4.Counsel for the appellant has contended that the identicalissue was decided by the Court in the case of Commissioner ofIncome Tax vs. M/s. Bright Future Gems in DB Income TaxAppeal No.305/2008, decided on 02.11.2016 more particularlyin para 5.1 to para 10 which reads as under: years. In view of the above facts, it is clear that the assessee haddone the business of export mainly for one fyear i.e. for the fyearunder consideration. It is not understood as to how there wassuch a huge export turnover in one year. That too in the first yearof business and then there was substantial fall in the next yearand subsequently there was no business of export in any of theyears. This shows that this is not the regular business of theassessee. 4.Counsel for the appellant has contended that the identicalissue was decided by the Court in the case of Commissioner ofIncome Tax vs. M/s. Bright Future Gems in DB Income TaxAppeal No.305/2008, decided on 02.11.2016 more particularlyin para 5.1 to para 10 which reads as under: “5.1 He also relied on Commissioner OfIncome-Tax vs M/S. La Medica, Delhi, 250ITR 575 wherein it has been held as under:-“The fact that the alleged sellers have beenfound to be persons with no means to effectpurchases or to carry on business is a factorwhich does not appear to have beenconsidered by the Tribunal in its properperspective. Materials on record clearlyestablish that Chedi Lal was a pettyemployee of a concern of which Satya PalJain was a partner. In fact Satya Pal Jainwas partner of M/s Medipac, one of thesister concerns of the assessed firm. Onenquiries conducted by the authorities afterdue notice to the assessed it was found thatthere was no such concern called M/sKalpana Enterprises at either 71, CanningStreet, Calcutta or 479, Bartan Market,Sadar Bazar, Delhi. Additionally Chedi Lalopened the bank account with theintroduction of Satya Pal Jain and theamounts were withdrawn. If the purchaseswere really effected from M/s KalpanaEnterprises it is not understood as to howsome other person namely Inder Sain Jain(HUF) accepted that the materials were supplied by it. The question before theTribunal was not whether purchases weremade from another concern. What wasunder consideration was whether thepurchases were made from M/s KalpanaEnterprises as was claimed by the assessed.Ample material has been brought on recordby the Revenue to show that the purchaseswere in fact not made from M/s KalpanaEnterprises. These are some of the relevantmaterials which have not been consideredby the Tribunal. Tribunal's conclusion thateven if it is accepted that Chedi Lal wasonly an instrument used by Satya Pal Jain,assessed was not involved in it, is aconclusion arrived at without anyfoundation. On the contrary it has beenestablished by materials on record thatassessed knew that the whole thing was afictitious arrangement. Once it is acceptedthat the supplies were not made by KalpanaEnterprises to whom payments werealleged to have been made, the questionwhether the purchases were made fromsome other source ougth not to haveweighed with the Tribunal as a factor infavor of the assessed. The conclusions ofthe Tribunal are, therefore, clearlyerroneous, contrary to materials on recordand have been arrived at without takinginto consideration relevant material andplacing reliance on irrelevant materials. It isto be noted that assessed's stand was notthat it had effected purchases fromanybody else. Its stand throughout was thatit had effected purchases from M/s KalpanaEnterprises. It was not open to the Tribunalto make out a third case, which was noteven the case of the assessed, to hold thatthe transactions were real and not fictitiousas claimed by the Revenue.” 6. We have heard the counsel for theappellant. 7. Before considering the matter, it will not be out of place to mention here thatquestion which is posed for ourconsideration is whether the purchaseswhich has been done from VinayakOverseas is genuine or not. The AssessingOfficer while observing at page 12 referredhereinabove and which was alreadyconsidered by the CIT (A) has confirmedthe finding and Vinayak Overseas has 6. We have heard the counsel for theappellant. 7. Before considering the matter, it will not be out of place to mention here thatquestion which is posed for ourconsideration is whether the purchaseswhich has been done from VinayakOverseas is genuine or not. The AssessingOfficer while observing at page 12 referredhereinabove and which was alreadyconsidered by the CIT (A) has confirmedthe finding and Vinayak Overseas has specifically contended that they were nottransfer by Vinayak Overseas and they wereabsconding. The Tribunal only on thestatement of M.P. Sharma who was powerof attorney holder of Vinayak Overseas hasgiven the finding. In our view, the finding isperverse. The view taken by the Tribunal isrequired to be reversed. 8. Apart from that merely voucher of theimport export chanals or chanals of thecustom clearance will not prove physicaldelivery of the material (precious stones).There is nothing on record to certify thestones which were verified by any of thevaluer. In our view it is all papertransactions for the purpose of takingbenefit of the export and tax benefits. 9. In that view of the matter, we are of theopinion that the view taken by the CIT (A)is required to be upheld and view taken bythe Tribunal is required to be reversed. Inthat view of the matter, we are of theopinion that it is a bogus purchase and inour opinion, the finding which has beenarrived by the Tribunal is not in consonancewith the provisions of law, therefore, it isrequired to be reversed. 10. The issue is required to be answered infavour of Department against the assessee.The appeal is accordingly allowed.” 5.In that view of the matter, the issues are answered in favourof the department and against the assessee. 6.The appeal is accordingly allowed. (VINIT KUMAR MATHUR)J. (K.S. JHAVERI)J. Asheesh Kr. Yadav/103