Db Income Tax Appeal v. Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR DB Income Tax Appeal No.129/2015Arvind Gupta Vs. Commissioner of Income Tax Date of Order :::: 06/05/2016 Hon'ble Mr. Justice M.N. BhandariHon'ble Mr. Justice J.K. Ranka Mr. NL Agrawal, counsel for the appellant BY THE COURT (Per: Hon'ble J.K. Ranka, J.) 1.Instant appeal under Section 260A of the IncomeTax Act, 1961 (for short, 'Act') is directed against theorder dt. 05/06/2015 passed by the Income TaxAppellate Tribunal, Jaipur Bench, Jaipur (for short,'Tribunal') in ITA No.644/JP/2012. It relates to theassessment year 2007-08 2.Brief facts noticed for disposal of the appeal arethat the appellant-assessee is engaged in the business ofmanufacturing and export of silver jewellery and alsotrading of semi-precious stones. On perusal of the booksof accounts, it was noticed by the Assessing Officer (forshort, 'AO') that the assessee has shown total purchasesof Rs.4,19,29,991/- out of which on random basis, theAO directed to provide further details and to producethe parties from whom the assessee had purchasedgoods to the extent of Rs.57,48,691/-. The AO duringthe course of proceedings observed that information hadbeen gathered by the Revenue that no such concerns exists on the given address at least in the followingcases from whom purchases were made by theassessee:- 3.The AO also noticed that since the concerns do notexist on the given address, as such they were providingaccommodation entries and were not doing any genuinesale/purchase of the gems & jewels and the exporterslike this, though may be having unexplained stock toregularize such unaccounted stock used to take sale billsfrom concerns like this on a nominal charge to regularizesuch unaccounted stock. The AO accordingly desired theassessee to produce the parties alongwith their books ofaccounts and other supporting material. However, theappellant contended that all the parties are genuine andgenuine purchases had been effected, confirmation hadbeen filed wherein complete address alongwith Permanent Account Number was placed. However, itwas contended that they are unable to produce theparties because it was beyond their control and after theaforesaid transactions, there was no business relationand requested the AO to make independent enquiry. TheAO noticed that as per the investigation carried out bythe Revenue on receipt of data in respect of BankingCash Transaction Tax, it was found that “no suchconcern exist on the given address”. The AO on theabove premise was not satisfied and that the books ofaccounts were not reliable as other discrepancy inmaintenance of stock register was also noticed byrejecting books of accounts and by invoking provisions ofSection 145(3), made an addition of Rs.14,37,171/- bydisallowing 25% of the unverifiable purchases ofRs.57,48,691/- based on the judgment of this Court incase of Indian Woolen Carpet Factory Vs. ITAT andothers: (2002) 178 CTR 420 and so also the judgment ofGujarat High Court in the case of M/s Sanjay Oil CakeIndustries Vs. Commissioner of Income Tax:(2008)10 DTR(Guj.)153 and other judgments made aforesaid additions.4.The matter was carried in appeal before theCommissioner of Income Tax (Appeals) (for short,'CIT(A)') who though was satisfied that the books ofaccounts are to be rejected under Section 145(3),however, on the issue of reasonableness of the gross profit rate, the trading addition of Rs.14,37,173/- wasreduced to Rs.67409/-. 5.The Revenue carried the matter in appeal beforethe Tribunal and the Tribunal, following the judgment inthe case of Shri Anuj Kumar Varshney Vs. I.T.O. andother cases in ITA No.187/JP/2012 order dt.22/10/2014,taking into consideration the overall discrepancies andthe facts noticed, made disallowance of 15% out ofunverifiable purchases and accordingly directed formaking addition to this extent. profit rate, the trading addition of Rs.14,37,173/- wasreduced to Rs.67409/-. 5.The Revenue carried the matter in appeal beforethe Tribunal and the Tribunal, following the judgment inthe case of Shri Anuj Kumar Varshney Vs. I.T.O. andother cases in ITA No.187/JP/2012 order dt.22/10/2014,taking into consideration the overall discrepancies andthe facts noticed, made disallowance of 15% out ofunverifiable purchases and accordingly directed formaking addition to this extent. 6.Learned counsel for the appellant contended thatthe purchases were genuine and no material has beenplaced on record by the authorities to hold that thepurchases were not genuine. He contended that all thepurchases are duly vouched, they contained completenames and addresses with permanent account numbersand are assessed to income tax as well as sales tax andall the payments are by account payee cheques andtherefore, there was no justification for holding thesame to be non-genuine. He further contended that thepayments having been made, the assessee was not in aposition to produce the parties and adverse inferencedrawn by the Revenue was uncalled for. He furthercontended that the addition cannot be made onestimation, on assumptions & presumptions and it wasbrought to the notice of the Court that all the transactions are through brokers and the buyer does notcome in picture with the seller. He contended thatsubstantial questions of law arise out of the order of theTribunal. He relied upon the judgments rendered in thecase of Commissioner of Income Tax, Orissa Vs. OrissaCorporation (P) Ltd.: 1986 (Supp) Supreme Court Cases110; Commissioner of Income-Tax Vs. Inani Marbles P.Ltd. : (2009) 316 ITR 125; Commissioner of Income-TaxVs. Gotan Lime Khanij Udhyog : (2002) 256 ITR 243. 7.We have heard learned counsel for the appellant,perused the order impugned as well as the orderspassed by the lower authorities. 8.During the course of one of the hearing on26/11/2015, the court on arguments of the counsel thatthe sellers do exist at the given address and purchasesare genuine, the Court was keen to consider the issueraised and passed following order directing the counselfor the appellant to furnish further details to examineveracity of the contentions of the appellant:- “We find that the Assessing Officerin its assessment order dt.12/11/2009after examining genuineness of thepurchases indicated by the assesseein its books of account, has givencogent reasons in holding that theseare not genuine purchases. Before we may proceed in the matterany further consider it appropriateto direct counsel for appellant-assessee to furnish complete detailsregarding each of the following firmsfrom whom purchases were made so asto examine veracity of the statementsmade regarding genuineness of thepurchases made by the assessee:- However, the defence of the assesseethroughout is that they made purchasethrough broker. He may also place on record as to whoare the brokers along with name,address and amount of brokerage paidby the assessee and as claimed by thecounsel of which reference has beenmade by the Assessing Officer andCIT(A) in its assessment orderdt.12/11/2009 and appellate orderdt.12/04/2012. List on 08/01/2016.” 9.The counsel for the appellant despite severalopportunities granted has furnished certain detailsthereafter bringing on record the documents as directedby this Court. Though we need not go into furtherdetail, suffice it to say that we have noticed severaldiscrepancies in the documents provided by counsel forthe appellant during the course of hearing in as much asin the case of Aayush Enterprises, while the addressshown in the confirmation of accounts, is HouseNo.5324, Phuta Khura, Ramganj Bazar, Jaipur whereasthe address shown in the additional affidavit is B-92, Vardhman Nagar, Ajmer Road, Jaipur and there is noexplanation in this regard. List on 08/01/2016.” 9.The counsel for the appellant despite severalopportunities granted has furnished certain detailsthereafter bringing on record the documents as directedby this Court. Though we need not go into furtherdetail, suffice it to say that we have noticed severaldiscrepancies in the documents provided by counsel forthe appellant during the course of hearing in as much asin the case of Aayush Enterprises, while the addressshown in the confirmation of accounts, is HouseNo.5324, Phuta Khura, Ramganj Bazar, Jaipur whereasthe address shown in the additional affidavit is B-92, Vardhman Nagar, Ajmer Road, Jaipur and there is noexplanation in this regard. 10.It may also be observed that in the case of M/sTouch Stone, the confirmation of account does notmention any address so also in the case of M/s AnilExporters, the confirmation does not mention anyaddress while the affidavit simply states “Ghee WalonKa Rasta, Jaipur” which is incomplete and possibly onecould not reach with the address provided by theappellant. These are just a few discrepancies noticed ontest check. 11.On perusal of the query of the Court, it is alsonoticed that the assessee has furnished someconfirmations but for the reasons best known to it, noneof the sale bills have been placed on record thoughdirected. On reading of the order of CIT(A) andTribunal, it is apparent that even sale bills have notbeen produced before the said appellate authorites. It isalso a matter of fact that though the claim of theassessee before the authorities and before this Courtwith vehemence was that all the transactions arethrough brokers and the parties do not come in picture.However, on a specific query raised earlier, which isreproduced herein before, not a single name andaddress of any broker and as to how much amount waspaid as brokerage has been placed on record to substantiate the claim made before the lowerauthorities as well as before this Court. 12.During the course of hearing, learned counsel forthe assessee has chosen not to place on record copy ofthe sale bills and vouchers as aforesaid from therespective parties for the reasons best known to him,except to mention that the purchase bills etc. werefurnished to the AO and the CIT(A) and tried to satisfyon the basis of the arguments itself about the fact thatthe transactions were genuine. The paper book placedon record is the one filed before CIT(A) which showsenclosures as:- Certified that papers at Sr. No.1 to 4 and page no.1 to 44were before the Learned Assessing Officer. Sd/-(Counsel for the assessee)”13.The said does not contain copies of the purchasebills and certificate annexed which makes it clear thateven purchase bills were not submitted even before thelearned A.O. 14.We may also add that the order in this context waspassed by this Court on 26/11/2015 for hearing on08/01/2016 but the counsel sought time on 08/01/2016,25/01/2016, 19/02/2016, 01/04/2016 23/04/2016 and it was only when this Court made it clear on 23/04/2016that if the compliance of the order is not made,presumption can be drawn against the assessee, theadditional affidavit alongwith the so-called incompletedetails was filed. The above make us to believe thatsomething fishy is there as when even before this Courtthe appellant can try to sidetrack the issue as argumentsand written submissions in Additional Affidavit beforethis Court and lower authorities is something else whilereality is something else and not brought on record.Therefore, apparent is not real and the lowerauthorities were well justified in drawing adverseinference by holding the purchases to be non-genuineand for the reasons which we have additionally noticed. was only when this Court made it clear on 23/04/2016that if the compliance of the order is not made,presumption can be drawn against the assessee, theadditional affidavit alongwith the so-called incompletedetails was filed. The above make us to believe thatsomething fishy is there as when even before this Courtthe appellant can try to sidetrack the issue as argumentsand written submissions in Additional Affidavit beforethis Court and lower authorities is something else whilereality is something else and not brought on record.Therefore, apparent is not real and the lowerauthorities were well justified in drawing adverseinference by holding the purchases to be non-genuineand for the reasons which we have additionally noticed. 15.Be that as it may, the AO noticed that on aninvestigation by the department on receipt of data inrespect of banking cash transactions tax and books, itwas found that none of the above concerns exist at thegiven addresses. On the contrary, if some of the partieswere found, they were only giving accommodationentries and not doing any genuine sale/purchase of thegems and jewels and on a specific query that the partieseither do not exist or have given accommodation entriesand to produce the same, the assessee informed that heis unable to produce and the learned AO to takeappropriate action at his level. 16.All the three authorities in unison have found thisto be a major defect and rejected the books ofaccounts. 17.Having noticed the above facts, we find that theassessee has not discharged the onus which was castedon him once the parties either were not found existingor the information was received that the parties areproviding accommodation entries only. This Court in thecase of Venus Arts & Gems Vs. The Income Tax Officer(DB Income Tax Appeal No.582/2011) vide judgment dt.20/08/2014 has observed that once there is a findingthat the parties are non-existent, this by itself is aserious discrepancy and adverse inference can be drawnand it would be appropriate to quote Para 7 of the saidjudgment which reads ad-infra:- “7.We have already noticed the fact thatthe A.O. rejected the trading results andinvoked the provisions of Sec. 145(3) on thedefects noticed by the assessee and inaddition to that he came to the conclusionthat despite the assessee having beendirected to produce the parties from whomthe assessee purchased goods forverification, but despite ample opportunitieshaving been granted, the parties were notproduced, particularly in view of the factthat the summons at the addresses given bythe assessee himself either came backunserved and returned unserved by postalauthorities or if served none of thempresented before the A.O. It is the primeduty of an assessee to produce the sellersfrom whom he has purchased the goods inview of the fact that notices came backunserved. On perusal of the copies of theaccounts of the firms as also the other details, it is noticed that from some of theparties, the goods purchased were to theextent of Rs.12 to Rs.20 Lacs. Merelybecause the parties are assessed to incometax and the transactions being by accountpayee cheques will not prove thegenuineness of the transactions in view ofthe fact that in case of sellers as observedby the A.O. some of the parties denied thesale and stated that they did not sell thegoods and merely issued bills withouteffecting actual delivery. Once this fact hascome on record that the notice could not beserved for one or the other reasons and theparties did not turn up then in ourconsidered view the onus and burden shiftson the assessee which has to be dischargedappropriately by the assessee and we havenoticed in this case that the assessee has notbeen able to lead any evidence infurtherance of filing of confirmatory lettersor merely showing that the amounts arebeing paid by account payee cheques. If theassessee was able to file confirmatoryletters from the sellers than the assesseewas certainly aware of the whereabouts andought to have taken further steps inproducing the parties and proving thegenuineness of the purchases made by it, inview of what we have observed hereinabove.We are also of the view that making exportsof such goods purchased by the assessee ishardly of any consequence. Major deficiencyhas been noticed by the A.O. and in our viewthe Tribunal has rightly reached to theconclusion.” 18.The Tribunal, in our view, has taken intoconsideration the overall view and the nature ofdiscrepancies noticed in the case by the AO and noticedby this Court, at least on perusal of the information nowprovided during the course of hearing by the appellant-assessee and only few discrepancies on test check havebeen highlighted herein before. 19.This Court in the case of M/s G.B. Impex Vs. Income Tax Officer (DB Income Tax Appeal No.43/2015),decided on 28/04/2016, has taken into considerationvarious judgments of this Court and other courts in thecase of Indian Woolen Carpet Factory Vs. Income TaxAppellate Tribunal & ors.: 2002 CTR 178 (Raj.) 420;Commissioner of Income-Tax Vs. Golecha Properties(Pvt.) Ltd. (In Liquidation): 1997 ITR 227 (Raj.) 391;Commissioner of Income-Tax Vs. Precision Finance Pvt.Ltd.: 1994 ITR 208 (Cal.) 465; V.I.S.P. (P) Ltd. Vs.Commissioner of Income Tax & Anr.: 2004 CTR 186 (MP)718; Commissioner of Income-Tax Vs. La Medica :2001ITR 250 (Delhi) 575, has dismissed the appeal of theassessee in that case on the self same controversyinvolved where also the Tribunal disallowed 15% of theunverifiable purchases. 20.Since the self same controversy as involved in theinstant case has already been decided by this Court inthe case of M/s G.B. Impex Vs. Income Tax Officer(supra) where this Court has found that no substantialquestion arise out of the order of the Tribunal and it is afinding of fact which is based on the material on record.In fact, learned Tribunal in the instant appeal hasfollowed the judgment passed by it in the case of ShriAnuj Kumar Varshney Vs. I.T.O. and other cases in ITANo.187/JP/2012 dt.22/10/2014, where the case of G.B.Impex Vs. Income Tax Officer was also part of the appeals decided by the Tribunal. 21.We may also deal with the judgments relied uponby counsel for the appellant. 20.Since the self same controversy as involved in theinstant case has already been decided by this Court inthe case of M/s G.B. Impex Vs. Income Tax Officer(supra) where this Court has found that no substantialquestion arise out of the order of the Tribunal and it is afinding of fact which is based on the material on record.In fact, learned Tribunal in the instant appeal hasfollowed the judgment passed by it in the case of ShriAnuj Kumar Varshney Vs. I.T.O. and other cases in ITANo.187/JP/2012 dt.22/10/2014, where the case of G.B.Impex Vs. Income Tax Officer was also part of the appeals decided by the Tribunal. 21.We may also deal with the judgments relied uponby counsel for the appellant. 22.In the case of Commissioner of Income Tax, OrissaVs. Orissa Corporation (P) Ltd. (supra), the facts noticedby the Apex Court were that the assessee has givennames and addresses of the alleged creditors, it was inthe notice of the Revenue that the said creditors wereincome tax assessees, their index number was in the fileof the Revenue, still the Revenue apart from issuingnotices under Section 131 at the instance of theassessee did not pursue the matter further. TheRevenue did not examine the source of income of thesaid alleged creditors to find out whether they werecredit worthy or were such who could advance thealleged loan, there was no averment to pursue the so-called alleged creditors and on such finding, it came tothe opinion that the assessee has discharged the burdenand found no question of law to be involved. However,the facts in the instant case are entirely distinguishablein as much as at the instance of the assessee, noticeswere issued under Section 131 and the notices cameback duly unserved, the Revenue again desired theassessee appellant to produce the parties forverification. However, though the appellant was in touch with the respective parties as confirmation wasfiled but was unable to produce the parties and onlyafter verification it could be known whether the partieshad creditworthiness or genuineness of the transaction.On the contrary, the evidence available with theinvestigation wing of the Revenue and which was passedon to the AO clearly was brought on record that eitherthe parties are not existing on the given addresses or iffound, they denied of actual purchase or sale of theprecious stone and jewellery and accommodated theassessee's but had obtained a paper bill withouteffecting actual purchases. Thus the judgment in thecase of Commissioner of Income Tax, Orissa Vs. OrissaCorporation (P) Ltd. (supra) is inapplicable. 23.The other two judgments relied upon by counselfor the appellant in the case of Commissioner ofIncome-Tax Vs. Inani Marbles P. Ltd. (supra) andCommissioner of Income-Tax Vs. Gotan Lime KhanijUdhyog (supra) were on account of applying abnormalgross profit rate and this court found that abnormalfanciful additions cannot be made and assessees ownresults of the previous year were required to be lookedinto whereas the present case is entirely distinguishableand the AO has not touched upon the gross profit raterather has held the very purchases doubtful and non-verifiable which fact is now apparent and as discussed hereinbefore. Thus these judgments are distinguishable. 24.Accordingly, in our view, no question of law muchless substantial question of law can be said to arise outof the order passed by the Tribunal so as to call forinterference of this Court as it is essentially a finding offact on the basis of evidence on record. 25.Consequently, the appeal, being devoid of merit, is accordingly dismissed. [J.K. Ranka],J. [M.N. Bhandari],J. Raghu/p.15/ Certificate:All corrections made in the judgment/order have beenincorporated in the judgment/order being e-mailed.Raghu, Sr. PA.