C I T CENTRAL JAIPUR vs. M/S CLARITY GOLD PVT LTD

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ITA/125/2014HC RajasthanRJHC02063213201419 September 20175 pages
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What did the High Court hold?

The High Court, while acknowledging the ITAT's deletion of the entire trading addition, found that the addition made by the revenue was based on the Gross Profit (GP) rate. The court considered the GP rates of the industry for previous years, which ranged from 7.40% to 16.08%. The court determined that an average GP rate of 12% would be applied to the present case. It was clarified that if the profit shown by the assessee was more than 12%, it would not be refunded, but if it was less than 12%, the income would be assessed at 12% GP. The court allowed the appeals to the extent of applying this 12% GP rate.

What were the facts?

The appeals were filed by the Commissioner of Income Tax (Central), Jaipur, against the Income Tax Appellate Tribunal (ITAT) orders that allowed the assessee's appeals. The assessee, M/s Clarity Gold (P) Ltd., is engaged in manufacturing jewellery and trading gemstones. A survey under Section 133A in FY 2007-08 revealed that the assessee and its sister concerns obtained bogus purchase bills totaling Rs. 13.59 crores. Following a search on May 20, 2009, the assessee filed a return declaring an income of Rs. 17,86,470. The Assessing Officer (ACIT, Central Circle-1, Jaipur) completed the assessment under Section 143(3) r.w.s. 153A on August 23, 2011, at Rs. 98,87,157. The ITAT deleted the entire trading additions made by the revenue.

What were the issues?

1. Whether the ITAT order is perverse in deleting the entire trading addition of Rs. 7,15,57,073/- ignoring admitted facts in the statement of Shri Khushi Kumar Ameriya (Director) under Section 132(4) of the Income Tax Act, 1961, as well as evidences gathered during search confirming bogus purchase bills obtained? 2. Whether the ITAT order is perverse in deleting the entire trading addition of Rs. 60,94,433/- ignoring admitted facts in the statement of Shri Khushi Kumar Ameriya (Director) under Section 132(4) of the IT Act, as well as evidences gathered during search confirming bogus purchase bills obtained? 3. Whether the ITAT order is perverse in deleting the entire trading addition of Rs. 5,12,77,217/- ignoring admitted facts in the statement of Shri Khushi Kumar Ameriya (Director) under Section 132(4) of the IT Act, as well as evidences gathered during search confirming bogus purchase bills obtained? 4. Whether the ITAT order is perverse in deleting the entire trading addition of Rs. 4,21,16,555/- ignoring admitted facts in the statement of Shri Khushi Kumar Ameriya (Director) under Section 132(4) of the IT Act, as well as evidences gathered during search confirming bogus purchase bills obtained? Assessee's Contention: The ITAT deleted the entire trading additions. (No specific arguments recorded for the assessee in the provided text). Revenue's Contention: The ITAT order is perverse as it ignored admitted facts under Section 132(4) and evidence of bogus purchase bills.

Which sections of the Income-tax Act were involved?

Section 132(4),Section 153A,Section 143(3)

AI-generated summary — verify with the full judgment below

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 125 / 2014

Commissioner of Income Tax (Central) Jaipur ----Appellant Versus M/S Clarity Gold (P) Ltd., 4, Ganga Vihar, Sardar Patal Marg, C-Scheme, Jaipur (Rajasthan) ----Respondent D.B. Income Tax Appeal No. 126 / 2014 Commissioner of Income Tax (Central) Jaipur ----Appellant Versus M/S Clarity Gold (P) Ltd., 4, Ganga Vihar, Sardar Patal Marg, C-Scheme, Jaipur (Rajasthan) ----Respondent D.B. Income Tax Appeal No. 127 / 2014 Commissioner of Income Tax (Central) Jaipur ----Appellant Versus M/S Clarity Gold (P) Ltd., 4, Ganga Vihar, Sardar Patal Marg, C-Scheme, Jaipur (Rajasthan) ----Respondent D.B. Income Tax Appeal No. 128 / 2014 Commissioner of Income Tax (Central) Jaipur ----Appellant Versus M/S Clarity Gold (P) Ltd., 4, Ganga Vihar, Sardar Patal Marg,

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C-Scheme, Jaipur (Rajasthan) ----Respondent _____________________________________________________ For Appellant(s) : Mr. Anil Mehta with Mr. Sameer Sharma and Mr. Gaurav Gaur For Respondent(s) : Mr. N.L. Agarwal with Mr. S. L. Poddar _____________________________________________________ HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 19/09/2017 1. In all these appeals since identical questions of law and facts are involved, they are decided by this common judgment. 2. By way of these appeals, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has allowed the appeal of the assessee. 3. This court while admitting the appeals framed the following question of law:- 1. D.B. Income Tax Appeal No. 125/2014 “Whether the ITAT order is perverse in deleting the entire trading addition of Rs. 7,15,57,073/- ignoring admitted facts in the statement of Shri Khushi Kumar Ameriya (Director) u/s 132(4) of the IT Act as well as the evidences gathered during search confirming bogus purchase bills obtained?” 2. D.B. Income Tax Appeal No. 126/ 2014 “Whether the ITAT order is perverse in deleting the entire trading addition of Rs. 60,94,433/- ignoring admitted facts in the statement of Shri Khushi Kumar Ameriya (Director) u/s 132(4) of the IT Act as well as the evidences gathered during search confirming bogus

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purchase bills obtained?” 3. D.B. Income Tax Appeal No. 127/ 2014 “Whether the ITAT order is perverse in deleting the entire trading addition of Rs. 5,12,77,217/- ignoring admitted facts in the statement of Shri Khushi Kumar Ameriya (Director) u/s 132(4) of the IT Act as well as the evidences gathered during search confirming bogus purchase bills obtained?” 4. D.B. Income Tax Appeal No. 128/2014 “Whether the ITAT order is perverse in deleting the entire trading addition of Rs. 4,21,16,555/- ignoring admitted facts in the statement of Shri Khushi Kumar Ameriya (Director) u/s 132(4) of the IT Act as well as the evidences gathered during search confirming bogus purchase bills obtained?” 4. Facts of the case are that the assessee company derives its income from business of manufacturing of jewellery and in trading of gems stones. The background of search action on the Clarity Group was survey under Section-133A conducted in FY2007-08 by the BCTT Wing of the Investigation Directorate of Jaipur which revealed that Clarity Gold Pvt Ltd. And its sister concerns M/s Marine Minerals and Herbal Remedies Pvt. Ltd. Jaipur had obtained bogus purchase bills amounting to Rs. 13.59 crores from various entry providers, who provided bogus sale bills without supplying the goods mentioned in the bills. After search (20.05.2009) the case of the assesssee was centralized with ACIT, Central Circle-1, Jaipur, who issued notice under Section-153A to the assessee company on 23.09.2009. In response the return was filed on 28.04.2011, declaring income of Rs. 17,86,470. Assessment was completed at Rs. 98,87,157 through order dated 23.08.2011 passed under Section-143(3) r.w.s.153A by the ACIT, Central Circle-1, Jaipur.

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5.

We have heard Mr. Mehta counsel for the appellant and Mr. Gupta counsel for the respondents. 6. Taking into consideration the evidence on record, the Tribunal while considering the matter has totally deleted the amount of addition. In our considered opinion, taking into account the industry which is running the business, the addition which has been made on the bases of GP which has been shown of the identical industry whose case is also heard together. The GP rate of previous years reads as under:- A.Y. 2004-05 2005-06 2006-07 2007-08 2008- 09 2009-10 2009-10 unaudite 2010-11 Sales 198490 1426903 5466428 6874979 4 977775 86 10306287 1072033 1540384 Stock Dif. 144657 5147868 0 7145057 3 676926 7 83951400 83334242 5750095 Total 2129557 1941690 5466428 7589485 1 105451 0 11145801 11553681 2115394 Purchases 181023 1698878 4962283 6867023 5 937668 2 96584379 99103051 1S74824 Direct Cost 0 6118276 9962436 1409772 131209 2 8607118 10319346 8163403 Total 181023 1760061 5061907 7008000 7 950789 1 97445091 10013498 1956458 Grow 3193228 1816292 4045206 5S14844 946618 5 14012920 15401828 1589358 G. P. rate 16.08% 12.72% 7.40% 8.45% 9.68% 13.59% 14.36% 10.31%

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7.

Taking into account the average GP rate which will be applied in the present case will be 12 per cent. It is made clear that where ever the profit is more than 12 per cent, the same will not be refunded to the assessee but where it is less than 12 per cent, the income will be assessed on the basis of 12 per cent GP. 08. In view of above, all the appeals stand allowed to the aforesaid extent. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. B.M. G. /Gourav-69-72

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