MS CLARITY GOLD PVT LTD vs. PR COMMISSIONER OF INCOME TAX

ITA/146/2018HC RajasthanRJHC02036888201825 July 2018Author: KALPESH SATYENDRA JHAVERI,VIJAY KUMAR VYAS24 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the ITAT was justified in its findings. The court agreed with the ITAT's observation that either bills were manipulated to increase stock or sales were reduced. The court found that the assessee was involved in accounting for both bogus purchases and bogus sales, as well as unaccounted purchases and sales. The director's admission of inflated turnover and stock during the FY 2008-09 was noted. The quantification of undisclosed turnover was based on comparing the physical stock at the time of search with the stock statement submitted to the bank. The court found that the assessee failed to reconcile the stock and offer a satisfactory explanation. The valuation of stock by experts during the search was not objected to by the assessee's employees. The court upheld the ITAT's decision to treat the difference in stock value as unaccounted turnover. The calculation of undisclosed turnover for Clarity Gold Pvt. Ltd. was Rs. 14,14,80,498/-. The court found no substantial question of law arising from the ITAT's order.

What were the facts?

The assessee, M/s. Clarity Gold Pvt. Ltd. and M/s Gem Mart India Pvt. Ltd., are in appeal before the High Court against the Income Tax Appellate Tribunal's (ITAT) order. The assessment years are not explicitly stated but the search operation was conducted on May 20, 2009. The ITAT had partly allowed the assessee's appeal, reducing the Gross Profit (GP) rate from 15% to 12%. The background to the search was a survey in FY 2007-08 which indicated bogus purchase bills from entry providers, leading to inflated sales bills without goods. The assessee group deals in manufacturing jewellery and trading gemstones. The dispute revolves around additions made on account of alleged unaccounted stocks.

What were the issues?

1. Whether the ITAT was justified in confirming the enhanced addition of Rs. 14,14,80,498/- (for Clarity Gold Pvt. Ltd.) and Rs. 4,23,56,186/- (for Gem Mart India Pvt. Ltd.) based on alleged unaccounted stocks, ignoring explanations provided by the assessee during search and assessment proceedings? 2. Whether the ITAT was justified in sustaining these additions based on suspicion and surmises without concrete evidence? 3. Whether the ITAT was justified in sustaining the addition by comparing the stock statement submitted to the bank with the actual stock found, especially when the books of accounts were rejected under Section 145(3)? 4. For Gem Mart India Pvt. Ltd., whether the ITAT was justified in sustaining the addition by relying on findings in the case of M/s. Clarity Gold, despite differences in their business nature (gold trading vs. cutting and polishing raw material)? Assessee's Contentions: The assessee argued that the ITAT confirmed enhanced additions based on suspicion and surmises, without sufficient evidence. They contended that their explanations were ignored and that the comparison of bank stock statements with actual stock was flawed, particularly as their books were rejected. For Gem Mart India Pvt. Ltd., it was argued that the business of Clarity Gold was not similar enough to justify relying on its findings. Revenue's Contentions: The judgment does not explicitly record the revenue's contentions, but it implies their stance was in favor of the additions made by the lower authorities.

Which sections of the Income-tax Act were involved?

Section 132(1),Section 145(3)

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HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 146/2018 M/s. Clarity Gold Pvt. Ltd. , 4, Ganga Vihar, Sardar Patel Marg, C-Scheme, Jaipur Presently At C-82, Star Mansion, 2Nd Floor Shyam Marg, Shastri Nagar, Jaipur Through Its Director Sh. Shiv Shankar Lal Gupta. ----Appellant Versus Pr. Commissioner Of Income Tax, Central Circle 1 , Central Revenue Building, Department Of Income Tax, Statue Circle, C- Scheme, Jaipur. ----Respondent D.B. Income Tax Appeal No. 148/2018 M/s Gem Mart India Pvt. Ltd., 1, Ganpati Building Shopping Centre, Shastri Nagar, Jaipur , Through Its Director Sh. Shiv Shankar Lal Gupta ----Appellant Versus Pr. Commissioner Of Income Tax , Central Circle1, Central Revenue Building Department Of Income Tax, Statue Circle C- Scheme, Jaipur Rajasthan ----Respondent For Appellant(s) : Mr. N.L. Agarwal HON'BLE MR. JUSTICE KALPESH SATYENDRA JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 25/07/2018

1.

By way of these appeals, the appellants have assailed the judgment and order of the tribunal whereby tribunal has partly

(2 of 24) [ITA-146/2018] allowed the appeal of the assessee reducing the GP rate from 15% to 12%

The order continues below.

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