HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 673 / 2011 COMMISSIONER OF INCOME TAX-I, New Central Revenue Building, Statue Circle, Jaipur(Raj). Appellant Versus M/s. Mohan and Company, 197, Johari Bazar, Jaipur. Respondent Connected With D.B. Income Tax Appeal No. 668 / 2011 Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur(Raj). Appellant Versus M/S Agrasen Jewellers, 223, Johari Bazar, Jaipur. Respondent For Appellant(s) : Mr. Anuroop Singhi For Respondent(s) : Mr. Naresh Gupta HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment Per Hon ble Jhaveri, J. 24/04/2017 1. By way of these appeals, department has challenged judgment and order of Tribunal whereby Tribunal has dismissed appeal preferred by department and partly allowed cross objections preferred by assessee modifying order of CIT(A) in favour of assessee. (2 of 13) [ ITA-673/2011] 2. This Court while admitting appeal No.673/2011, on 29.11.2012 has framed following substantial question of law: Whether in facts and circumstances of case, Tribunal was justified on one hand in confirming finding of unverified purchases shown by assessee of Rs.6,97,48,643/- and consequent rejection of books of accounts u/s.145 (3) of Act and on other hand reducing addition of Rs.1,74,37,160/- made by Assessing Officer, to merely Rs.5,00,000/- only without giving any justification for same? 2.1 This Court while admitting appeal No.668/2011, on 26.04.2017 has framed following substantial question of law: Whether in facts and circumstances of case, Tribunal was justified on one hand in confirming finding of unverified purchases shown by assessee of Rs.4,22,34,219/- and consequent rejection of books of accounts u/s.145(3) of Act and on other hand reducing addition of Rs.1,05,58,554/- made by Assessing Officer, to merely Rs.4,00,000/- only without giving any justification for same? FACTS IN APPEAL NO.673/2011. 3. brief facts are that assessee is engaged in business of jewellery and gem stones. During course of assessment proceedings it was revealed that assessee has made purchases of Rs.6,97,48,643/- from different parties, which in spite of ample opportunities could not be proved and assessee failed to discharge primary onus of providing genuineness of said purchase. Names of all parties were given but (3 of 13) [ ITA-673/2011] books of accounts of other parties were not given. Thus, after considering all facts and circumstances of case, Assessing Officer has rejected books of accounts relying upon Gujarat High Court judgment on basis of 25% of bogus purchase and assessed that unverifiable purchase was Rs.1,74,37,160/- which has been partly modified by Tribunal to extent of 2.19% and Tribunal has totally reversing finding has rightly given Rs.5,00,000/-, without justifying record. FACTS IN APPEAL NO.668/2011. 3.1. brief facts are that assessee is engaged in business of jewellery and gem stones. During course of assessment proceedings it was revealed that assessee has made purchases of Rs.4,22,34,219/- from different parties, which in spite of ample opportunities could not be proved and assessee failed to discharge primary onus of providing genuineness of said purchase. Names of all parties were given but books of accounts of other parties were not given. Thus, after considering all facts and circumstances of case, Assessing Officer has rejected books of accounts relying upon Gujarat High Court judgment on basis of 25% of bogus purchase and assessed that unverifiable purchase was Rs.1,05,58,554/- which has been partly modified by Tribunal to extent of 2.19% and Tribunal has totally reversing finding has rightly given Rs.4,00,000/-, without justifying record. (4 of 13) [ ITA-673/2011] 4. Counsel for appellant-department has fairly contended that issue is squarely covered by decision of this Court in case of Commissioner of Income Tax, Jaipur vs. M/s Gems Paradise, Gulab Niwas, Jaipur in DB Income Tax Appeal No.201/2010, decided on 02.11.2016 which was also relied upon by CIT(A) in its judgment in ITA No.700/JP/2009 and considered judgment in case of Sanjay Oil Cake Ind. vs. CIT (2009) 316 ITR 274 (Guj.) which has been modified as under: 3. Considering law declared by Supreme Court in case of Vijay Proteins Ltd. Vs. Commissioner of Income Tax, Special Leave to Appeal (C) No.8956/2015 decided on 06.04.2015 whereby Supreme Court has dismissed SLP and confirmed order dated 09.12.2014 passed by Gujarat High Court and other decisions of High Court of Gujarat in case of Sanjay Oilcake Industries Vs. Commissioner of Income Tax (2009) 316 ITR 274 (Guj) and N.K. Industries Ltd. Vs. Dy. C.I.T., Tax Appeal No.240/2003 decided on 20.06.2016, parties are bound by principle of law pronounced in aforesaid three judgments. 4. We remit back case to Assessing Officer for deciding afresh on factual matrix. authority will accept law but transaction whether it is genuine or not will be verified by Assessing Officer on basis of aforesaid three judgments. issues are answered accordingly. appeal is accordingly disposed of. 5. Counsel for respondent Mr. Naresh Gupta has taken us to detailed facts of case and tried to justify judgment on facts considering that books of accounts and other things were (5 of 13) [ ITA-673/2011] not found to be bogus. He has relied upon decision of Gujarat High Court in case of Vijay Proteins Ltd. vs. CIT in Income Tax Reference No.139/1996, decided on 09.12.2014 wherein it has been held as under: 12. We have heard learned counsel for both sides. Having appreciated material on record, Tribunal recorded finding that transactions in respect of oil cakes shown as purchases by assessee from 33 parties were not genuine transactions and that all those 33 parties were bogus parties. Sale Invoices claimed to have been issued by them were also found to be fictitious and bank account in name of M/s. Pooja Traders was found to have been opened and operated mainly with view to accommodate these fictitious transactions carried out by assessee in respect of oil cakes shown as purchases from such bogus suppliers. above findings were recorded on basis of material on record of Tribunal. 6. Supreme Court in case of Municipal Corporation of Delhi vs. Gurnam Kaur, AIR 1989 Supreme Court 38, it has been observed as under: 11. . Pronouncements of law, which are not part of ratio decidendi are classed as obiter dicta and are not authoritative. With all respect to learned Judge who passed order in Jamna Das' case and to learned Judge who agreed with him, we cannot concede that this Court is bound to follow it. It was delivered without argument, without reference to relevant provisions of Act conferring express power on Municipal Corporation to direct removal of encroachments from any public place like pavement or public streets, and without any citation of authority. Accordingly, we do not propose to uphold decision of High Court because, it seems to us that it is wrong in principle and cannot be justified by (6 of 13) [ ITA-673/2011] terms of relevant provisions. decision should be treated as given per incur am when it is given in ignorance of terms of statute or of rule having force of statute. So far as order shows, no argument was addressed to Court on question or not whether any direction could properly be made compelling Municipal Corporation to construct stall at pitching site of pavement squatter. Professor P.J. Fitzgerald, editor of Salmond on Jurisprudence, 12th edn. explains concept of sub silentio at p. 153 in these words: decision passes sub silentio, in technical sense that has come to be attached to that phrase, when particular point of law involved in decision is not perceived by court or present to its mind. Court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown, however, that logically court should not have decided in favour of particular party unless it also decided point B in his favour; but point B was not argued or considered by court. In such circumstances, although point B was logically involved in facts and although case had specific outcome, decision is not authority on point B. Point B is said to pass sub silentio. 7. Counsel for respondent has also relied upon decision of this Court in case of Commissioner of Income Tax. vs. Shri Sindhuja Foods (P) Ltd. (2008) 16 DTR (Raj.) 278 wherein para 4 & 5 has observed as under: 4. For purpose of satisfying question as formulated, learned counsel for Revenue could not show as to what material has not been considered by learned Tribunal, and what irrelevant material has been considered in reducing additions made. Rather overall consideration of orders of AO, CIT(A) and learned Tribunal does show, (7 of 13) [ ITA-673/2011] that on account of assessee having shown bogus purchases, books of accounts had been rejected, and matter was proceeded under s. 145. Then, question remained of determining income on basis of best judgment assessment. At this point, it is significant to note, that gross sales figure for relevant year is not in controversy, in sense, that whatever bogus sales have been found by AO, if they were to be considered literally, they would have reduced figure of sale, and there is no material or finding, or any indication, to show that gross sale was shown by assessee at any deflated figure. 5. In that view of matter for making best judgment assessment only relevant thing, required to be considered was, application of particular GP rate, which has been applied by learned Tribunal, and learned CIT(A), on relevant consideration, being GP rate applied in last year. 8. In case of Saraswathi Oil Traders vs. Commissioner of Income Tax [2002] 254 ITR 0259, Supreme Court has observed as under: Tribunal declined to make reference because, in its view, question was not question of law. High Court found it necessary to record that careful assessment of record would indicate that there was definite point of law involved and that tribunal s conclusion was incorrect. As we read question, it does not involve any question of law and High Court has not recorded what definite point of law it found was involved. We must record that, with fairness, learned Attorney-General has not supported order of High Court. 9. In case of Commissioner of Income Tax vs. Leader Valves P. Ltd. [2006] 285 ITR 0435, it has been held as (8 of 13) [ ITA-673/2011] under: As regards question No. (i) Shri Patwalia, learned Counsel for Revenue, has vehemently argued that findings of Tribunal pertaining to deletion of addition of Rs. 1,48,93,286 in income of assessee on account of bogus purchases, are totally perverse. We are, however, unable to persuade ourselves to agree with learned Counsel. We find from Tribunal's order that analysis and conclusions drawn by Commissioner of Income Tax (Appeals) on appreciation of material on record, have been concurred with Tribunal after taking notice of fact that trading results of assessee had all along been accepted and purchases of scrap from seven parties could also be not termed as bogus for reason that in subsequent assessment year, i.e., 1987-88, purchases from these very parties stood accepted by Department to very substantial extent. Tribunal, as matter of fact, noticed that no sale invoices were found to be undervalued or purchases inflated, yet extraordinary profit in respect of goods sold to M/s. Mazagoan Dock Ltd., Bombay, and as recorded in books of account which ought to have been taken favourably qua assessee, was considered "adverse" by Assessing Officer by adopting erroneous approach. Tribunal also affirmed conclusion drawn by Commissioner of Income Tax (Appeals) that M/s. Kohinoor Enterprises and M/s. Swami Enterprises are existing parties doing business of scrap metal and had vast financial resources at their disposal. Similar conclusion was drawn by it in respect of M/s. S.P. Metal Works and M/s. A.S. Metal Company also. assessee's contention that out of total purchases of non-ferrous metal of Rs. 2.44 crores, Assessing Officer had treated purchases worth Rs. 1.49 crores only as bogus and it was impossible to manufacture goods shown to have been manufactured by it out of remaining purchases if Assessing Officer's conclusion is accepted, also found favour with Tribunal. This in our view, is (9 of 13) [ ITA-673/2011] simply finding of fact based upon appreciation of material on record and, thus, hardly gives rise to any question of law. 10. In case of CIT vs. M.K. Brother [1987] 163 ITR 0249, it has been held as under: On perusal of order of Tribunal, it clearly appears that whether said transactions were bogus or not was question of fact. Tribunal has also pointed out that nothing is shown to indicate that any part of fund given by assessee to these parties came back to assessee in any form. It is further observed by Tribunal that there is no evidence anywhere that these concerns gave vouchers to assessee in any way. With these observations, Tribunal ultimately has observed that there are certain doubtful features, but evidence is not adequate to conclude that purchases made by assessee from these parties were bogus. It may be stated that assessee was given credit facilities for short duration and payments were given by cheques. When that is so, it cannot be said that entries for purchases of goods made in books of account were bogus entries. We, therefore, do not find that conclusion arrived at by Tribunal against weight of evidence. In that view of matter, we answer that question in affirmative, that is, in favour of assessee and against Revenue. Accordingly, reference stands disposed of with no order as to costs. 11. In case of CIT vs. Jagdishchandra Vishwakarma [2011] 59 DTR (MP) 415, it has been held as under: 4. Having considered submissions made by learned senior counsel for appellant and after going through order (10 of 13) [ ITA-673/2011] passed by AO, order passed by CIT(A) and order passed by Tribunal, we find that orders passed by CIT(A) and Tribunal are based on sound appreciation of evidence. CIT(A) has exhaustively dealt with finding recorded by AO about holding purchase shown from M/s Pooja Steel Sales and M/s Ashirwad Steels to be bogus and has rigfhtly set aside order of AO. CIT(A) in order has observed thus: I have carefully considered facts and circumstances of case and complete evidence recorded by AO during course of assessment proceedings and further remand report of present AO as discussed hereinabove and I am of opinion that appellant s onus to prove genuineness of purchases is discharged soon after receipt of regular purchase bills followed delivery of goods and payment of sale consideration by Dds/cheques and utilization of raw material purchased by appellant in process of manufacture of threshers and evidenced by chart of page No.34 of assessment order, giving money-wise consumption of various inputs. genuineness has to be examined at time of purchases and not years thereafter. report of Dy. Director of IT, Indore, which is quite as sketchy does not prove thing in favour of Department/does not disprove genuineness of purchases. Such report of Dy. Director of IT, Indore in respect of M/s Pooja Steel Sales deserves to be rejected. As far as report of Dy. Director of IT with M/s Ashirwad Steels is concerned, existence of concerns, few years before date of completion has not been denied. transaction of purchases by way of regular sale bills and subsequent payments etc. discharged onus of genuineness of purchases as far as appellant is concerned. investigation by purchaser as to who operates bank account of seller or group of sellers is not in domain of purchasers (appellant). rules regarding onus of proof laid down in statute/case law, are quite flexible. payment through banking channel is essence of transaction so as to (11 of 13) [ ITA-673/2011] decide genuineness while deciding upon question of onus of proof. On careful consideration, I am o opinion that purchases from above said parties could not be trated as not genuineness and hence purchases made from them (abovesaid to parties) are to be treated as allowable deduction. deduction made of Rs.33,13,706 is hereby deleted. 12. In case of CIT vs. Amrapali Jewels (P) Ltd. (2012) 65 DTR (Raj.) 196, it has been held as under: 6. In first place, what is involved in case is pure question of fact and not any question of law much less substantial question of law. Secondly, this Court cannot again in this appeal undertake examination of factual issues nor can draw any factual inferences on basis of explanation offered by assessee. Thirdly, once explanation is accepted by appellate court on facts, then in such event, finding recorded on such explanation is binding on High Court being finding of fact. 7. In out opinion, it is essentially for taxing authorities to decide as to what should be % rate of G.P. that should be applied on particular yearly turnover of assessee. It is matter of discretion to be exercised on settled practice applicable to business standards and which is prevalent in commercial world. There is no hard and fast rule that is applicable in such case and it depends upon facts of each case. In this case, CIT (Appeals) did go into factual aspects of case and after evaluating whole factual scenario of assessee's case came to conclusion that higher rate of 17.27% appears to be proper. In so applying, assessee got partial relief to extent of Rs. 15,55,990/-. In case of this nature, we find no case to interfere because it is neither unreasoned, nor perverse and nor de hors to any provision of law. It is finding which is capable of being recorded on facts of this case. 8. Perusal of impugned finding would (12 of 13) [ ITA-673/2011] go to show that Tribunal did examine issue in detail and then recorded finding. Such finding when challenge does not constitute any substantial question of law within meaning of Section 260A ibid in appeal arising out of such order. 13. Therefore, counsel for respondent submits that this appeal deserves to be dismissed. 14. We have heard Mr. Singhi counsel for department and Mr. Gupta counsel for assessee. 15. Before proceeding further, it will not be out of place to mention here that one of partner of assessee firm was brother of assessee and even he himself has not produced books of accounts before Additional Commissioner which has been one of finding arrived at by both authorities below. We were inclined to remit case back in view of settled law of this Court, however, counsel for assessee insisted us at behest of respondent to hear appeals on merits and therefore, we have heard both these appeals on merits. 16. It is well settled that Tribunal while considering case and reversing view taken by CIT(A) has to justify reasons for reversing order of CIT(A). CIT(A) while considering case has relied upon judgment of M/s Gem Paradise in IT No.700/JP/2009 which has not been referred by Tribunal. 17. Apart from that, in our considered opinion, decision of Gujarat High Court was rightly relied by Assessing Officer and (13 of 13) [ ITA-673/2011] will apply in facts of case. 18. In that view of matter, we are of considered opinion that Tribunal has seriously committed error in reversing view taken by CIT(A). No doubt, contention raised by Mr. Singhi counsel for department, that view taken by CIT(A) also requires to be modified, but while framing issues this court has framed only one issue. We are of opinion that view taken by CIT(A) is required to be reversed but looking to our limitation we are going back to order of CIT(A) and order of Tribunal is reversed and view taken by CIT(A) is confirmed. 19. In that view of matter, issue is answered in favour of department and against assessee. 20. appeals stand allowed. 21. As special case, we impose cost of Rs.5,000/- in each of appeal which assessee will deposit with Library of Rajasthan High Court Bar Association. 22. copy of this judgment be placed in each of file. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Asheesh Kr. Yadav/133-134 Commissioner of Income-tax-I, Jaipur(Raj) v. Mohan and Company