M/S. VAIBHAV GLOBAL (GEMS) LTD.,JAIPUR vs. ACIT, CIRCLE-5, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES “A”, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 1346, 1347 & 1348/JP/2019 Assessment Years :2008-09, 2010-11 & 2011-12 M/s Vaibhav Global Ltd., cuke A.C.I.T., Vs. K-6-B, Fateh Tiba, Adarsh Nagar, Circle-5, Jaipur. Jaipur. PAN No.: AAACV 4679 F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by: Shri S.R. Sharma & Shri Rajnikant Bhatra(CAs) jktLo dh vksj ls@ Revenue by : Shri K.C. Gupta (JCIT) lquokbZ dh rkjh[k@ Date of Hearing: 24/07/2020 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 24/08/2020 vkns'k@ ORDER PER: VIJAY PAL RAO, J.M. These three appeals by the assessee are directed against the three separate orders dated 22/08/2019, 13/09/2019 and 22/08/2019 of ld. CIT(A)-2, Jaipur for the A.Ys. 2008-09, 2010-11 and 2011-12 respectively. The assessee has raised common grounds in these appeals except the quantum of addition. The grounds raised for the A.Y. 2008-09 are as under: “1. That on the facts and in the circumstances of the case, the ld. CIT(A) is wrong, unjust and has erred in law in not accepting contention of the appellant that the proceedings initiated by the Assessing Officer U/s 148 of the I.T. Act, 1961 and consequent

2 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT assessment made by him U/s 143(3) r/w Sec. 147 of the I.T. Act, 1961 is wrong and bad in law. 2. That without prejudice to the ground No. (1) above on the facts and in the circumstances of the case, the ld. CIT(A) is wrong, unjust and has erred in law in upholding the rejecting of books of accounts of the appellant company by the Assessing Officer U/s 145(3) of the I.T. Act, 1961 on account of alleged unverifiable purchases of Rs. 15024461 and in further upholding addition of Rs. 1500000 to the income of the appellant on this count as trading addition. 3. That the appellant craves the permission to add to or amend to any of the above grounds of appeal or to withdraw any of them.” 2. The hearing of the appeals was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.

3 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT 30/03/2015 by recording the reasons that the assessee has received accommodation entries of bogus purchases and consequently the income assessable to tax has escaped assessment. Similarly, for the A.Y. 2010- 11, assessment was completed U/s 143(3) of the Act and thereafter the A.O. issued notice U/s 148 of the Act on 10/11/2017 respectively. The return of income filed for the A.Y. 2011-12 was processed U/s 143(1) of the Act on 28/01/2012 and thereafter the A.O. issued notice U/s 149 of the Act on 23/3/2018. The reassessment proceeding was completed U/s 143(3) r.w.s. 147 of the Act whereby the A.O. made additions after rejecting books of account U/s 145(3) of the Act.

4 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT scrutiny assessment proceedings in response to the notice issued by the A.O. u/s 142(1) of the Act. Even otherwise, the purchases are part of books of account and during the scrutiny assessment, the A.O. has duly verified all the purchases. Further, when all the sales of the assessee are export sales then corresponding purchases cannot be doubted. The ld AR has referred to the notice issued by the A.O. U/s 142(1) of the Act and submitted that the A.O. has specifically asked the assessee to produce all the details which includes the bills and vouchers and party-wise details from whom the assessee made purchases. As per the questionnaire dated 26/08/2010, the A.O. asked the assessee, inter alia, furnished list of all the persons to whom the total sales/any receipt of above Rs. 5.00 lacs booked during the year. Similarly, list of all such persons against whom total purchases/any expenses above Rs. 5.00 lacs have been booked. These requisite information and details were duly filed by the assessee in the reply dated 15/09/2010. After verification of all the details and recording, the A.O. passed scrutiny assessment and made various additions but has not found anything wrong with the purchases and sales of the assessee. Thus, the A.O. examined all the details and the claim of purchases for these two years in the scrutiny assessment. In the reasons recorded, the A.O. has not pointed out any default on the part of the assessee to disclose fully and truly all the materials necessary for the

5 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT assessment. Thus, in absence of failure on the part of the assessee to produce fully and truly all necessary material and facts necessary for assessment, the reopening after four years in case of scrutiny, assessment was completed U/s 143(3) of the Act is not valid. He has referred to proviso to Section 147 of the Act and submitted that the A.O. is barred to invoke provisions of Section 147 of the Act after expiry of four years when the original assessment was completed U/s 143(3) as there is no failure on the part of assessee to furnish fully and truly all material facts necessary for assessment. In support of his contention, he has relied upon the decision of Hon’ble Bombay High Court in the case of OHM Stock Brokers Pvt. Ltd. Vs CIT (2013) 351 ITR 443 (Bom) as well as decision of this Tribunal dated 17/12/2019 in the case of M/s Zari Silk India Pvt. Ltd. Vs DCIT in ITA No. 1103/JP/2019. The ld. AR has also relied upon series of decisions of the Hon’ble High Court as well as Supreme Court on the point that the A.O. has no power to exercise U/s 147 of the Act to review its own decision when there was no suppression of any material facts by the assessee.

6 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT indulged in providing bogus entries of purchases and the assessee has availed bogus entries from M/s Impex Gems and M/s Jewel Diam. Thus, it is a new material came to the knowledge of the A.O. after scrutiny assessment and therefore, proviso to Section 148 of the Act cannot be invoked. The ld DR has relied upon the judgment of the Hon’ble Supreme Court in the case of Raymond Wollen Mills Vs ITO 236 ITR 34 (SC) and submitted that at the time of reopening of the assessment what is required is to form the prima facie belief that the income assessable to tax has escaped assessment in the hands of the assessee. The sufficiency and correctness of material need not be looked at this stage to initiation of the proceedings. He has relied on the order of the ld. CIT(A).

7 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT replied by the assessee. Question No. 7 is relevant for the purpose of considering whether the assessee has disclosed fully and truly all material facts necessary for the assessment. For ready reference, we reproduce question No. 7 raised by the A.O. alongwith notice U/s 142(1) of the Act dated 26/08/2010.

“7. Furnish a list of all the person to whom total sales/any other receipt of above 5 lacs has ben booked during the A.Y. 2008- 09. Similarly, furnish a list of all such persons against whom total purchase/any other expense above 5 lacs has been booked.” Thus, it is clear that the A.O. asked the assessee to furnish list of all the persons from whom the purchases were made above Rs. 5.00 lacs. The assessee vide reply dated 15/09/2016 has furnished details in the format as given by the A.O.. The reply to question No. 7 of the assessee is also reproduced as under:

“7. Details of purchases and sales exceeding Rs. 5 lacs made during the year under assessment in the given format are enclosed.” Thus, the A.O. has taken up the issue of verifying the purchases and sales both of the assessee at the time of scrutiny assessment and after satisfying himself has completed the assessment U/s 143(3) of the Act. The A.O. has reopened the assessment while recording the reasons as under:

8 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT “In this case, on the basis of information brought on record, it is noted that the assessee has taken accommodation entry of Rs. 57,60,222/- in the nature of bogus purchases from Impex Gems and Rs. 92,04,996/- from the JEWEL DIAM. The concern indulges in providing accommodation entries in lieu of cash obtained from the beneficiaries and not doing any genuine business activity as divulged during the course of search and seizure proceedings in the case of Bhanwarlal Jain, Mumbai. The assessee is a beneficiary who has taken the accommodation entries in the nature of bogus purchases which is not genuine as the seller was not carrying on any genuine business activity and was providing accommodation entries in lieu of cash obtained from the beneficiaries. Similarly it is noted that the assessee has taken accommodation entry of Rs. 59,243/- from the AADI IMPEX. The concern indulge in providing accommodation entries in lieu of cash obtained from the beneficiaries and not doing any genuine business activity as divulged during the course of search and seizure proceedings in the case of Rajendra Jain Group, Sanjay Chaudhary Group and Dharnichand Jain Group, Mumbai. The assessee is a beneficiary who has taken the accommodation entries in the nature of bogus purchases which is not genuine as the seller was not carrying on any genuine business activity and was providing accommodation entries in lieu of cash obtained from the beneficiaries. Once the assessee produced all the requisite details and record before the A.O. regarding the purchases during the scrutiny assessment, which was duly examined by the A.O. to satisfy him at the time of passing the assessment order U/s 143(3) of the Act and thereafter the A.O. has not even made any allegation that the assessee has failed to disclose fully and truly all material facts necessary for assessment while recording the reasons for reopening of the assessment, the reopening is hit by proviso to Section 147 of the Act. For ready reference, we reproduce 1st proviso to Section 147 of the Act as under: “147. Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of

9 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT the relevant assessment year8, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure8 on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts8 necessary for his assessment, for that assessment year:” Even the explanation 1 to Section 147 of the Act would not support the case of the A.O. when the A.O. has specifically called all the details and documents including purchases and verified/examined the same at the time of scrutiny assessment. All the purchases were undisputedly recorded in the books of account and also supported by the bills/vouchers as well as payment made by the assessee. Further the corresponding export of the assessee was not disputed by the A.O., therefore, when all these relevant documents were produced before the A.O. as called for by the A.O. vide notice issued U/s 142(1) of the Act then the subsequent information received by the A.O. from the Investigation Wing, Mumbai regarding some of the suppliers indulged in providing accommodation entries of bogus purchases would not change the fact that the assessee produced all the necessary details at the time of scrutiny assessment completed U/s 143(3) of the Act. Therefore, when there is no failure on the part of the assessee to disclose fully and truly all relevant material necessary for assessment and even there is no allegation by the A.O. in the reasons recorded for reopening of the assessment then the A.O. has no power to invoke provisions of Section 147 of the Act after expiry of four years from the end of the assessment year. The Coordinate Bench of

10 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT this Tribunal in the case of M/s Zari Sild India Pvt. Ltd. Vs DCIT in ITA No. 1103/JP/2019 dated 17/12/2019 has considered an identical issue in para 7 as under: “7. We have considered the rival submissions as well as the relevant material on record. There is no dispute that the original assessment under section 143(3) of the Act was completed on 14.12.2010. It is also matter of record that as recorded by the AO in the assessment passed under section 143(3) that a notice under section 142(1) of the Act along with a questionnaire was issued on 17.08.2010 seeking specific details. For ready reference, the questionnaire issued by the AO along with notice under section 142(1) dated 17.08.2010 is reproduced as under :-

Ministry of Finance OFFICE OF THE INCOME-TAX OFFICER WARD-2(2), JAIPUR [dated: - 17.08.2010 PAN-AAACZ 2642 3 M/s Zari Silk (India) P. Ltd., 10-11, Narain Singh Circle, Jaipur. Sir, Sub: - Assessment proceeding for the A.Y. 2008-09-reg. As you are aware that your case is under scrutiny assessment u/s 143(3). In this connection, you are requested to furnish following details/information:- 1. Please furnish comparative chart of turnover, G.P. rate for the last three years. Justify with reasons, for decline, if any, in G.P. rate. 2. Furnish copies of accounts in respect of addition made in fixed assets during the year under consideration. 3. Depreciation has been claimed on building constructed-44bn rented land. Please justify.

11 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT 4. Name & add. with PAN of all the shareholders from whom paid up share capital, share application money and share premium amount received during the year. The same details may also be filed in respect of all unsecured loans accepted during the year, including squared up accounts. 5. Copies of accounts of all the directors. 6. Please produce all books of account, bills/vouchers and relevant records maintained for the year under consideration. The above details should reach this office by 27.08.2010 at 11.30 A.M., the date on which your case is fixed for hearing. Notice u/s 142(1) is enclosed. Encl.: As above. Yours faithfully, Income-tax Officer Ward-2(2), Jaipur. The AO asked the assessee to furnish comparative chart of turnover, GP for last 3 years to justify the reason for decline in the GP rate, if any. In question no. 4, the AO has specifically asked the details of the shareholders from whom the paid-up share capital, share application money and premium money received during the year. The details called by the AO include name, address, PAN of all the shareholders. The AO also asked the assessee to produce all the books of account, bills/vouchers and relevant record maintained for the year under consideration. The AO has stated in the order that in response to the notice issued under section 142(1) the ld. A/R of the assessee attended from to time and furnished the requisite information/details and case was discussed with him. The AO has again stated in the assessment order regarding the necessary details produced by the assessee along with the books of account as under:-

“ The assessee was asked to furnish necessary details and to produce complete books of accounts and other records for verification of trading results declared.

12 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT In compliance thereto the details required were furnished. Books of accounts consisting of cash book, ledger, bank books, purchase & sales vouchers, bills and vouchers for expenses were produced. The details furnished and records produced were put to test check. After examination of the records produced, the trading results declared by the assessee company are accepted.” All these facts manifest that the assessee produced all requisite details as called for by the AO which include the name and address, PAN of the shareholders, books of account, purchase and sale vouchers, bills/vouchers for expenses. The details produced by the assessee were also checked by the AO and after examination of record, the AO was satisfied with the return of income as well as books of account. We further note that the assessee has also shown the share capital issued during the year in the Balance Sheet as on 31st March, 2008 which clearly indicates that the assessee has given the necessary details of increase in the share capital during the year under consideration along with the premium received by the assessee. Once all these relevant documents were produced before the AO and were subjected to the verification and examination of the AO at the time of framing the assessment under section 143(3), then the subsequent information received by the assessee from the Investigation Wing Mumbai regarding the involvement of Shri Praveen Kumar Jain in providing the bogus accommodation entries will not render the case from production of all necessary details at the time of original assessment framed under section 143(3) to a case of failure on the part of the assessee to disclose fully and truly all relevant facts necessary for assessment. The AO has reopened the assessment by recording the reasons as reproduced in the assessment order itself as under :- “In the case of assessee company the information was received from investigation Wing, Mumbai in the case of Praveen Kumar Jain group, it observed that the assessee is one of the beneficiaries and has obtained accommodation money received

13 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT amounting to Rs. 1.10 crore from the following group concerns details on which is as under:-

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The first part of the reasons recorded by the AO is nothing but the details of share capital received by the assessee from various entities which were already recorded in the books of account and also shown in the Balance Sheet as on 31st March, 2008. The second part of the reasons recorded by the AO is regarding the information received from the Investigation Wing Mumbai and thereafter a survey conducted by the AO at the premises of the assessee. We find that except the non- discovery of the share application forms, nothing was detected by the AO during the survey which can lead to belief that the transaction of share capital received by the assessee is bogus. Thus whatever the AO has

15 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT alleged in the reasons recorded and proceedings of survey all these facts and details were part of the books of account already produced before the AO during the scrutiny assessment and were subjected to verification and examination. The third part of the reasons recorded is regarding the purchases worth Rs. 21,57,500/- from the company M/s. New Planet Trading Co. Pvt. Ltd. The AO has considered the said company as shell company owned and operated by Shri Praveen Kumar Jain. This belief was formed by the AO on the basis of the information received from the Investigation Wing Mumbai. Except the Inward Register, no other incriminating material found during the survey to say that the purchases made by the assessee are bogus. It is pertinent to mention that the purchases were made by the assessee when the assessee was having its only show room at M.I. Road, Jaipur whereas the survey was conducted at the show room at Narain Singh Circle, Jaipur. Subsequently the assessee has filed this record of inventory register showing the entries of the alleged purchases. Moreover, during the assessment proceedings under section 143(3), the AO has specifically called for purchase and sales vouchers, bills along with cash book, ledger, bank book and those details were furnished by the assessee for the verification and examination of the AO. The last part of the reasons recorded by the AO is referring the information gathered during the survey as well as material impounded and information received from the Investigation Wing Mumbai. However, except the non availability of the application form at the time of survey and the purchases were not found in the Inward Register at the place of survey, nothing else was detected during the survey proceedings. Most importantly, the AO in the reasons recorded has not made any allegation of failure on the part of the assessee to disclose fully and truly all relevant facts necessary for assessment. In the absence of any allegation that the income has escaped assessment due to the failure on the part of the assessee to

16 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT disclose fully and truly all the relevant facts necessary for assessment, the reopening after 4 years from the end of the relevant assessment year is hit by the proviso to section 147 of the IT Act. Once the transaction of share capital received by the assessee as well as purchases made from the said entity are duly recorded in the books of account and were subjected to the verification and examination of the AO, then the reopening of the assessment even on the basis of information received from the Investigation Wing Mumbai after 4 years from the end of the assessment year is not permitted as it will amount to review its own order by the AO and rejecting the documentary evidence produced by the assessee which was already accepted by the AO. This Tribunal in case of ITO vs. M/s. Silver Sand Builders Pvt. Ltd. (supra) has considered an identical issue in para 6 as under :-

“6. We have considered the rival submissions as well as the relevant material on record. The original return of income filed under section 139(1) for all the three years were subjected to scrutiny assessment under section 143(3). Subsequently the AO has proposed to assess the income being notional rent in respect of the closing stock in the commercial complex, namely, Silver Square. The said space which was to be assessed as Income from House Property is at 4th Floor of the said commercial complex. The AO has recorded identical reasons for all the three years. The recorded reasons for the assessment year 2007- 08 are as under :-

“ Return of income for the A.Y. 2008-09 was filed on 20.07.2009 at an income of Rs. 1,83,170/-. During the course of assessment proceedings for A.Y. 2012- 13 it is found that the assessee is a builder and developer and has developed a commercial complex Silver Square at C-18, Bhagwan Das Road, Jaipur.

17 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT The project was started on 15.08.2003 and was completed on 10.08.2005. The assessee was requested to file the details of total area constructed and year-wise area sold. In response, the assessee filed details of opening stock as on 1.4.2011 and closing stock as on 31.03.2012. One more request was made vide letter dated 17.03.2015 to file year- wise details of area sold from the date of completion of project but no compliance was made. Assessment for A.Y. 2012-13 has been completed u/s 143(3) of the I.T. Act, treating the income from unsold portion of project under the head Income from house property keeping in view the finding of Hon’ble Delhi High Court in the case of Commissioner of Income Tax vs. M/s. Ansal Housing Finance & Leasing Co. Ltd. in ITA 18/1999 dated 31.10.2012 wherein it is held that the income from unsold portion of stock in trade is also assessable under the head Income from house property. On examination of details filed, it is found that the assessee was having 12722.82 Sq. ft. unsold area as on 1.4.2011, meaning thereby that at least this portion of stock 12722.82 sq. ft. was unsold during the F.Y. 2007-08 also. Further, as per the rent agreement dated 27.06.2006 entered by the assessee with M/s. Dominos Pizza India Ltd. as regards 447.32 sq. ft. of the ground floor of the project, rent of Rs. 70 per sq. ft. per month is shown to be receivable on the let out portion. Since no details of unsold portion for the F.Y. 2007- 08 have been filed by the assessee, and unsold portion of 12722.82 sq. ft. was available with the assessee as on 01.04.2011, it is clear that at least area of 12722.82 sq. ft. was unsold during the F.Y. 2007-08 also. Keeping in view the above facts, I have reason to believe that income to the tune of Rs. 1,06,87,168 (12722.82 sq. ft. x 70 per sq. ft. per month x 12 months) has escaped assessment to tax under the head Income from house property for the A.Y. 2008-09 within the meaning of provisions of

18 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT sec. 147 of the I.T. Act. Therefore, permission is being sought for issue of notice u/s 148 of the I.T. Act.”

Accordingly, the AO issued notices under section 148 of the IT Act for the assessment year 2008-09 on 30th March, 2015, for the assessment year 2009-10 on 22nd March, 2016 and for the assessment year 2010-11 on 29th March, 2017. Thus the notices issued under section 148 for all the three years are after the expiry of four years from the end of the respective assessment year. The revenue has not disputed this fact that the reopening in respect of all the three years is after the expiry of four years from the end of the assessment year. It is apparent from the reasons recorded by the AO that the AO proposed to assess the notional rent after determining the ALV of the unsold space at 4th Floor of the commercial complex in question in view of the decision of Hon’ble Delhi High Court in case of CIT vs. M/s. Ansal Housing Finance & Leasing Co. Ltd. (supra). The reasons do not indicate that the AO has received any fresh factual information but all the relevant facts, information and record were available with the AO at the time of framing the scrutiny assessment for all these three assessment years. Though the assessment under section 143(3) for the assessment year 2012-13 was completed prior to the reopening of these assessments and therefore, the said assessment order for the assessment year 2012-13 may constitute tangible material apart from the decision of the Hon’ble Delhi High Court in case of CIT vs. M/s. Ansal Housing Finance & Leasing Co. Ltd. (supra) for forming the belief that income assessable to tax on account of notional

19 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT rent in respect of unsold stock of the assessee escaped assessment. However, even if the decision of Hon’ble Delhi High Court and the assessment order passed under section 143(3) for the assessment year 2012-13 may constitute tangible material for forming the belief, the same shall be subject to the fulfillment of the conditions as prescribed in the first proviso to section 147 of the IT Act. There is no allegation by the Assessing Officer in the reasons recorded that the income proposed to be assessed in the reassessment proceedings has escaped assessment due to the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Even otherwise, we find that all the relevant material in respect of the issue of assessment of rental income of the unsold stock was already available with the Assessing Officer at the time of scrutiny assessment. Hence, when the original assessment was framed under section 143(3) and the reopening is after the expiry of four years from the end of the relevant assessment year then the Assessing Officer is not permitted to reopen the assessment until and unless the conditions prescribed in the proviso to section 147 are satisfied. The Assessing Officer himself has not alleged that the income proposed to assess has escaped assessment for want of disclosure of all material facts necessary for assessment. The ld. Commissioner of Income Tax (Appeals) has considered this issue in para 3.1.2 as under :-

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Thus it is clear that the ld. CIT (A) has followed various decisions including the decision of Hon’ble Jurisdictional High Court in case of CIT vs. Hindustan Zinc Ltd. 393 ITR 264 (Raj.) Accordingly, in view of the above facts and circumstances as well as the binding

33 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT precedents on the issue, we do not find any error or illegality in the impugned order of the ld. CIT (A) qua this issue.”

In the said case the ld. CIT (Appeals) as well as the Tribunal has considered the judgment of Hon’ble Jurisdictional High Court in case of CIT vs. Hindustan Zinc Ltd. 393 ITR 264 (Raj.) wherein it was held that the duty of the assessee to disclose fully and truly all material facts necessary for his assessment does not extend beyond the furnishing of all the primary facts before the assessing authority and the AO was satisfied with the said disclosure of the assessee in the original assessment. Therefore, once the assessee has disclosed all the relevant facts whatever assessee was supposed to disclose, then treating a particular transaction as bogus would not amount to non disclosure of the necessary facts by the assessee. In view of the above facts and circumstances of the case as well as the various decisions as relied upon by the ld. A/R of the assessee, we are of the considered view that when there is no allegation of the AO in the reasons recorded that income assessable to tax has escaped assessment due to failure on the part of the assessee to disclose all facts necessary for assessment, the notice issued by the AO under section 148 on 5th February, 2015 after 4 years from the end of the assessment year is hit by the first proviso to section 147 and thereby the AO cannot exercise the jurisdiction to reopen the assessment. Hence we hold that the initiation of proceedings under section 147/148 of the I.T. Act is bad in law. The same is quashed.”

There is no dispute that in the case in hand, the assessee disclosed all necessary and primary facts during the scrutiny assessment which were duly examined and verified by the A.O. while passing the assessment order. The requirement of assessee to disclose fully and truly all material

34 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT facts necessary for assessment does not extend beyond furnishing of the primary facts before the assessing authority. Hence, in absence of any failure on the part of the assessee to disclose fully and truly all relevant material facts for reopening of the assessment is not valid as the condition precedent for exercising the power of reopening of assessment as provided U/s 147 of the Act was absent and consequently the A.O. acted beyond his power while issuing notice U/s 148 of the Act. Accordingly, the reopening of the assessment for the A.Y. 2008-09 and 2010-11 are invalid and the same is quashed.

35 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT Act and thereafter made addition @ 25% of the purchases made from these two parties namely Impex Gems and Jewel Diam. Thus, the A.O. made trading addition equivalent to 25% of alleged unverifiable purchases. On appeal, the ld. CIT(A) has restricted the addition to a lump sum amount after considering the G.P. declared by the assessee for the preceding years.

(i) ITAT, Jaipur Bench, Jaipur in case of Vijay Kedia (HUF) Vs. ACIT (ITA No. 197 & 248/JP/2016) decided on 29-01-2018 (ii) ITAT, Jaipur Bench, in case of DCIT Vs. Gem Paradise (ITA No. 747 & 65/JP/12) vide order dated 26-12-2017. Thus, he has pleaded that the addition sustained by the ld. CIT(A) may be deleted when the G.P. declared by the assessee for these assessment years is better than the past history of the G.P. declared by the assessee.

36 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT which is on the basis of decision of Hon’ble Gujarat High Court as well as the Hon’ble Supreme Court in the case of Vijay Proteins Ltd. Vs CIT (2015) 58 taxmann.com 44 (Guj). However, the ld. CIT(A) has already granted a substantial relief by reducing the addition by considering the past history of the G.P. declared by the assessee. He has relied on the orders of the authorities below.

37 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT by the assessee is a reasonable and proper guidance for estimation of the income of the assessee after rejection of books of account. The ld. CIT(A), though, considered the G.P. declared by the assessee in the preceding years and also considered the decision of this Tribunal in the case of Allied Gems Corporation in ITA No. 794/JP/2011 and in the case of Rajkumar Agarwal in ITA No. 504/JP/2013, however, while restricting the addition, the ld. CIT(A) has not strictly followed the principle as laid down by the various binding precedents. For ready reference, we reproduce the finding of the ld. CIT(A) in para 3.3.2 and 3.3.4 as under:

“3.3.2 Since, certain purchases remained unverifiable and even in reopened proceedings, assessee could not get them verified by producing the parties for verification therefore books of account are not reliable. Once provision of Section 145(3) are applicable, income is to be estimated by seeing past history. The Hon’ble ITAT Jaipur Bench in various decisions as cited by ld AR of the assessee also held that the basis of estimation should be the past history of the assessee.

In the recent decision of Allied Gems Corporation ITA No. 794/JP/2011 and Rajkumar Agarwal ITA No. 504/JP/2013 the Hon’ble ITAT restricted the addition to the average GP rate based on past years.

Thus, in view of above judicial pronouncement after rejecting Books of Accounts, the past history of the assessee has to be seen for estimating the profit of the appellant.

38 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT 3.3.4 In view of these facts, the addition made by the Assessing Officer is restricted to Rs. 15,00,000/- which is upheld. The balance addition of Rs. 22,56,116/- is deleted. These grounds of appeal are partly allowed.” Thus, it is clear that the ld. CIT(A) has principally followed the decisions of this Tribunal for estimation of the income after rejection of books of account. However, the addition sustained by the ld. CIT(A) is not based on the average G.P. declared by the assessee in the preceding years. For ready reference, we reproduce the G.P. declared by the assessee in the preceding years as well as for the A.Y. 2008-09 as under: A.Y. Turnover Gross Profit Gross Profit rate 2005-06 13,82,02,480/- (-) 54,99,656/- -3.98% 2006-07 11,38,66,205/- (-) 43,30,227/- -3.80% 2007-08 38,23,48,612/- 27,77,251/- 0.73% 2008-09 51,82,95,195/- (-) 35,79,872/- - 0.69% From the above details, it is clear that for the A.Y. 2005-06 to 2007-08, the average G.P. declared by the assessee is (-2.38%) where for the A.Y. 2008-09 the G.P. declared by the assessee is (-0.69%) which is better than the average of past history of the G.P. declared by the assessee. Similarly, for the A.Y. 2010-11, the assessee has declared G.P. of (-4.64%) which is less than the average of past history and therefore, the income of the assessee is required to be estimated by taking average of G.P. declared by the assessee in the preceding year at (-2.38%). However, since we have quashed the reopening of the assessment for the

39 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT A.Y. 2008-09 and 2010-11, therefore, no consequential addition is called for.

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40 ITA 1346 to 1348/JP/2019_ M/s Vaibhav Global Ltd. Vs ACIT विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 1346, 1347 & 1348/JP/2019) 6. vkns'kkuqlkj@ By order,

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