PR COMMISSIONER OF INCOME TAX-I vs. M/S N N JEWELLERS

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 236 / 2017 Principal Commissioner of Income Tax-I, New Central Revenue Building Statue Circle, Jaipur Raj. ----Appellant Versus M/s N.N. Jewellers, 3261-62 Majid Mansion, Nawab Ka Chouraha, Ghat Gate, Jaipur. ----Respondent Connected With D.B. Income Tax Appeal No. 238 / 2017 Principal Commissioner of Income Tax-I, New Central Revenue Building Statue Circle, Jaipur Raj. ----Appellant Versus M/s N.N. Jewellers, 3261-62, Majid Mansion Nawab Ka Chouraha, Ghat Gate, Jaipur. ----Respondent D.B. Income Tax Appeal No. 239 / 2017 Principal Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Appellant Versus M/s. N.N. Jewellers, 3261-62, Majid Mansion, Nawab Ka Chouraha, Ghatgate, Jaipur ----Respondent D.B. Income Tax Appeal No. 240 / 2017 Principal Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Appellant Versus M/s. N.N. Jewellers, 3261-62, Majid Mansion, Nawab Ka Chouraha, Ghatgate, Jaipur ----Respondent

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D.B. Income Tax Appeal No. 242 / 2017 Principal Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Appellant Versus M/s. N.N. Jewellers, 3261-62, Majid Mansion, Nawab Ka Chouraha, Ghatgate, Jaipur ----Respondent D.B. Income Tax Appeal No. 255 / 2017 Principal Commissioner of Income Tax- I New Central Revenue Building Statue Circle, Jaipur Raj. ----Appellant Versus M/s N.N. Jewellers, 3261-62 Majid Mansion, Nawab Ka Chouraha, Ghat Gate, Jaipur. ----Respondent D.B. Income Tax Appeal No. 256 / 2017 Principal Commissioner of Income Tax-I, New Central Revenue Building Statue Circle, Jaipur Raj. ----Appellant Versus M/s N.N. Jewellers, 3261-62, Majjd Mansion, Nawab Ka Chouraha, Ghat Gate, Jaipur. ----Respondent _____________________________________________________ For Appellant(s) : Mr. Anuroop Singhi with Mr. Aditya Vijay For Respondent(s) : Mr. Siddharth Ranka with Mr. M. Iqbal _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE DEEPAK MAHESHWARI Judgment

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22/11/2017 In these appeals common questions of law and facts are involved, hence, they are decided by this common judgment. By way of these appeals, the appellant has assailed the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal of the assessee. This Court while admitting the matters framed following questions of law:- In DBITA No. 236/2017, 238/2017, 239/2017, 240/2017, 242/2017, 256/2017 “i) Whether on the facts and circumstances of the case and in law the Tribunal has erred in restricting the turnover of the assessee to the amount which is higher of three figures viz sales as per trading account, sales as per export invoices and sales as per seized annexures? ii) Whether on the facts and circumstances of the case and in law the Hon’ble ITAT has erred in reducing the GP rate from 25% to 14.22% ignoring that seized documents proved undisclosed sales on which average GP rate shown earlier than search could not have been applied?” In DBITA No. 255/2017 “i) Whether on the facts and circumstances of the case and in law the Tribunal has erred in restricting the turnover of the assessee to the amount which is higher of three figures viz sales as per trading account, sales as per export invoices and sales as per seized annexures? ii) Whether on the facts and circumstances of the case and in law the Hon’ble ITAT has erred in reducing the GP rate from 25% to 14.22% ignoring that seized documents proved undisclosed sales on which average GP rate shown earlier than search could not have been applied?” iii) Whether on the facts and circumstances of the case and in law the Hon’ble Tribunal has erred in deleting the addition of Rs. 72,34,217/- made by the AO treating the outstanding creditors as fictitious liability?”

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The issues involved in these appeals are purely based on finding of the Tribunal which reads as under:- “We have heard the rival contentions and perused the materials available on record. Brief facts of the case are that the assessee during the year under consideration has shown liability on account of creditors as under:- Assessment Year Creditors as per return 2005-06 19733396/- 2006-07 18257824/- 2007-08 18592944/- 2008-09 14131131/- 2009-10 12202231/- 2010-11 10874486/- 2011-12 7234217/- The AO asked the assessee to prove the liability appearing in the balance sheet as above by furnishing name and address of the creditors and their confirmations. The assessee failed to furnish the name and address of the creditors submitting that the books of account have been misplaced. The AO did not find the plea of the assessee reasonable in view of the fact that liability on account of payments due to the creditors at least for the A.Y. 2011-12 must be existing as on date. The AO observed that the business of the assessee was continuing and in spite of that the assessee was not having the names of the parties, their telephone numbers etc. from whom purchase had been made in credit. The AO thus observed that the assessee had failed to furnish any documentary evidence to prove the liability on account of sundry creditors and he simply stated that books of account have misplaced. The AO thus noted that the assessee is having a huger creditor liability of Rs. 72,34,217/- for the assessment year 2011-12 and could not name a single creditor although the business of the assessee is still continuing. The outstanding liability was stated to be on account of goods imported but no names could be furnished by the

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assessee. Therefore, as per the AO, the creditor liability of Rs. 72,34,217/- for A.Y. 2011-12 remained unexplained and is treated as fictitious liability which has been added to the total income of the assessee by the AO. In first appeal, the ld. CIT(A) confirmed the action of the AO. It is noted from the records that the assessee was having outstanding creditors since 2003- 04 and the highest creditors outstanding in the assessment year 2004-05 is at Rs. 1,98,59,510/-. the AO has made addition in the assessment year 2011-12 for outstanding creditors amounting to Rs. 72,34,217/- treating the same non-genuine. The opening liability as on 01.04.2010 of Rs. 1,08,74,486/- have been accepted by the AO as genuine. It is observed that without establishing all these liabilities as extinguished, no addition can be made by invoking the provisions of Section 41(1) of the Act. Moreover, the books of account of the assessee have been rejected. The profit has been estimated by applying the gross profit rate on total receipts. Therefore, in such a situation, no addition should have been made by invoking the provisions of Section 41(1) of the Act in view of the decision of Hon’ble Jurisdictional High Court in the case of CIT vs. G.K. Contractor 19 ld. DR 305 (Raj.) and also the decision of Amitabh Construction (P) Ltd. vs. Addl. CIT (2011) 335 ITR 523 (Jharkhand). Thus Ground no. 4 of the assessee is allowed. In assessment year 2011-12, the Ground No. 5 of the assessee is regarding not allowing the benefit of telescoping, recycling and rotation of fund of trading against alleged unexplained sundry creditors. We have heard the rival contentions and perused the materials available on record. The Ground No. 5 of the assessee is infructuous as no addition has been sustained on the basis of unexplained sundry creditors. Thus Ground No. 5 of the assessee is allowed.” We are in complete agreement with the finding recorded by the Tribunal, hence, all the issues are answered in favour of the assessee against the department. The appeals stand dismissed. (DEEPAK MAHESHWARI) J. (K.S. JHAVERI)J.

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A.Sharma/195-201