Mehar Chand Jain And Sons v. The CIT, Jaipur & ors
[Citation -2017-LL-0529-79]

Citation 2017-LL-0529-79
Appellant Name Mehar Chand Jain And Sons
Respondent Name The CIT, Jaipur & ors
Court HIGH COURT OF RAJASTHAN
Relevant Act Income-tax
Date of Order 29/05/2017
Judgment View Judgment
Keyword Tags trading addition • total turnover • purchase price • market rate • g.p. rate • rejecting books of account • genuineness of transaction • addition on estimate basis
Bot Summary: The facts of the case are that the assessee a manufacturer and exporter of gold and silver as well as precious and semi precious stones, stated to have purchased goods worth Rs.4,63,704/- from M/s. Tanvi Gems, Rs.3,92,102/- from M/s. Laxmi Jewellers, Rs. 5,95,703/- from M/s. S.R. Gems and Rs. 20,946/- from M/s. S. Exports totaling Rs. 14,72,455/-. 2.1 Since the assessee failed to produce these parties before the AO and since the first three concerns were not found existed at the given address, the AO doubted the claimed purchases from them, the AO held the books of accounts defective. CIT after considering the submissions/contentions of the assessee has found it reasonable to apply G.P. rate of 12 on the declared turnover resulting into sustenance of trading addition of Rs.5,03,862/- against Rs. 29,68,210/- made by the AO. 3. The issues before us are ITA-191/2010 as to whether lower authorities are justified in invoking/upholding the application of provisions of section 145(3) of the Act; and secondly, as to whether the application different G.P. rates by the lower authorities against the G.P. rate shown by the assessee was just and proper. There is no doubt that we have initially given full relief on such cases on the basis that the assessee had furnished all the necessary information supported with documents which could have been expected from a prudent purchaser to establish the genuineness of the claimed purchases from the named parties thus genuineness of the same cannot be doubted merely because those parties could not be produced or not found later on during the period of assessment proceedings. At the same time we are of the view that the purpose of the AO is to verify the correctness of the claim of the assessee regarding the payment of claimed wages and it can be made possible even by furnishing details like name and full addresses of those labourers in the so called Kachha bills. CIT has already given sufficient relief by restricting the application of G.P. rate from 15 to 12 and against 11.39 shown by the assessee to cover up the possible leakage, if any, due to the defects pointed out by the AO. The first appellate ITA-191/2010 order is thus upheld.


HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 191/2010 Mehar Chand Jain And Sons Appellant Versus CIT, Jaipur & ors. Respondent For Appellant(s) : Mr. Anant Kasliwal For Respondent(s) : Mr. Aditya Vijay, Mr. N.S. Bhati for Mr. Anuroop Singhi HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHUR Judgment 29/05/2017 1. By way of this appeal, appellant has assailed judgment and order of Tribunal whereby Tribunal has dismissed appeal of assessee. 2. facts of case are that assessee manufacturer and exporter of gold and silver as well as precious and semi precious stones, stated to have purchased goods worth Rs.4,63,704/- from M/s. Tanvi Gems, Rs.3,92,102/- from M/s. Laxmi Jewellers, Rs. 5,95,703/- from M/s. S.R. Gems and Rs. 20,946/- from M/s. S. Exports totaling Rs. 14,72,455/-. 2.1 Since assessee failed to produce these parties before AO and since first three concerns were not found existed at given address, AO doubted claimed purchases from them, AO held books of accounts defective. (2 of 4) [ITA-191/2010] 2.1 AO also noted that wages claimed by assessee were not fully vouched. He accordingly rejected books of account. AO also observed that there was steep fall in G.P. rate as compared to preceding year. 2.2 During year on turnover of Rs.8,21,44,932/- G.P. rate of 11.39% was shown against G.P. rate of 17.22% on turnover of Rs. 11.27 crores during immediate preceding year. AO was not satisfied with explanation of assessee in this regard and thus he estimated profit of business of assessee by applying G.P. rate of 15% on total turnover of Rs. 8,21,44,932/- resulting into trading addition of Rs.29,68,210/-. 2.3 ld. CIT (A) after considering submissions/contentions of assessee has found it reasonable to apply G.P. rate of 12% on declared turnover resulting into sustenance of trading addition of Rs.5,03,862/- against Rs. 29,68,210/- made by AO. 3. This court while admitting appeal on 5.5.2010 framed following substantial question of law:- Whether revenue authorities are permitted to invoke Section 145(3) of Income Tax Act even in cases where veracity and correctness of books of accounts is substantially accepted by them? 4. In view of concurrent finding and more particularly tribunal while considering provision of Section 145(3) observed as under:- We have heard and considered arguments advanced by parties in view of orders of lower authorities, material available on record and decisions relied upon. issues before us are (3 of 4) [ITA-191/2010] as to whether lower authorities are justified in invoking/upholding application of provisions of section 145(3) of Act; and secondly, as to whether application different G.P. rates by lower authorities against G.P. rate shown by assessee was just and proper. Considering above submissions, we do not find reason to interfere with first appellate order so far as application of provisions of section 145(3) is concerned. There is no doubt that we have initially given full relief on such cases on basis that assessee had furnished all necessary information supported with documents which could have been expected from prudent purchaser to establish genuineness of claimed purchases from named parties thus genuineness of same cannot be doubted merely because those parties could not be produced or not found later on during period of assessment proceedings. But while dealing with several similar matters later on we were surprised to note that in most of cases parties could not be produced or found on given address during assessment proceedings, which equally does not sound bonafide on part of assessee. Under these circumstances, we are left with no option but to estimate profit on basis that undisputedly claimed purchases from stated parties remained unverified due to reasons whatsoever especially keeping in mind that sales have not been doubted nor is there any finding that purchase price shown was substantially different from prevailing market rate at that point of time under background of past/comparable instances if any. There is substance in contention of assessee that labourers being illiterate persons do not keep printed vouchers to issue same against receipt of wages made to them. But at same time we are of view that purpose of AO is to verify correctness of claim of assessee regarding payment of claimed wages and it can be made possible even by furnishing details like name and full addresses of those labourers in so called Kachha bills. In absence of these particulars, AO was justified in doubting claimed payment of wages. So far as reasons shown for decline in G.P. rate is concerned, we find substance therein and considering same, we are of view that ld. CIT (A) has already given sufficient relief by restricting application of G.P. rate from 15% to 12% and against 11.39% shown by assessee to cover up possible leakage, if any, due to defects pointed out by AO. first appellate (4 of 4) [ITA-191/2010] order is thus upheld. grounds of appeals preferred by parties are thus rejected. 4.1 observations of CIT(A) which reads as under:- contention of A/R is considered. So far as unverified purchases are concerned, by not producing suppliers appellant failed to prove purchases of precious and semi precious stones to extent of Rs.14,72,455/-. By filing confirmations and copy of accounts, TIN and PAN and RST/CST No. etc at most existence of suppliers could be proved on paper but all other evidences indicate that suppliers were not having required infrastructures and business of precious and semi precious stones at relevant time. existence of business of suppliers could not be established beyond doubt. Further as wages payments were not fully verifiable and therefore application of provisions of section 145(3) is hereby upheld. 5. We are of opinion that issue is required to be answered in favour of assessee. 5.1 However, it will not be treated as precedent for subsequent year. It will be open for department to consider assessement of subsequent year independently. appeal stands allowed. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. Brijesh 69. Mehar Chand Jain And Sons v. CIT, Jaipur & or
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