DEPUTY COMMISSIONER OF INCOME-TAX vs. M/S. RAJMAL LAKHICHAND JEWELLERS PVT. LTD.,,

The assessee in appeal has assailed the order of Commissioner of Income Tax (Appeals) by raising following grounds/additional grounds of appeal : “1] G. P. Addition of Rs.5,14,78,214/-. 1.1] The learned CIT(A) erred in enhancing the assessment by Rs.5,14,78,214/- after estimating the GP at 2 % against GP rate of 1.51 % declared by the appellant though the AO had neither rejected the books of accounts nor made any addition on this score. 1.2] The learned CIT(A) while enhancing the above addition has erred in rejecting the books of accounts on the basis of possibility of purchasing the bullion and ornaments from the group concerns at higher rates and at the same time estimating the GP on the basis of sales as shown by the books of accounts. 1.3] In the alternative on the facts and in the circumstances of the case the GP margin be estimated at a reasonable percentage of turnover following IT AT order in the case of a sister concern viz. Mls. Rajmal Lakhichand, Jalgaon for AY 2009-10 and the addition be restricted accordingly, as against Rs.5,14,78,214/- which is excessive and unreasonable. 2] The appellant requests for admission of additional evidences required in support of the above grounds of appeal. 3] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.”

The Revenue in its appeal has impugned the findings of Commissioner of Income Tax (Appeals) on following grounds : “1. On facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance u/s 40A(2)(a), of Rs.l,02,08,687/- relying upon the Hon'ble ITAT, Pune's decision in the case of M/s Rajmal Lakhichand for the AY 2009-10 and has not given any reasoning for adopting the Gross Profit Ratio of 2.00% against the disclosed GP ratio of 1.51%. 2. On the facts and in the circumstances of the case, the Ld. CIT-A has erred in not appreciating the fact that the disallowance u/s 40A(2)(a) on the excess payment on purchases made from the Sister Concern was made after considering the Jalgaon(Local) rates of Gold and Silver. 3. On the facts and circumstances of the case and in law, the order of the Ld. CIT(A)-2, Nashik be cancelled on the above issue and that of the A.O be restored. 4. The appellant craves leave to add, alter, modify, delete amend any of the grounds with prior permission of the Ld. Pr. CIT, as per the circumstances of the case. 5. The appellant prays to file any of the additional evidence, with the prior permission of Ld. Pr.CIT, appropriate to the grounds taken in appeal.”

Shri Sunil Pathak appearing on behalf of the assessee submitted at the outset that the issue raised by the assessee in ground No. 1 of the appeal and by the Revenue in ground Nos. 1 and 2 of the appeal are interconnected. The ld. AR submitted that the Tribunal in assessee’s own case in immediately preceding assessment year i.e. assessment year 2010-11 has adjudicated this issue. The facts giving rise to the issue are identical to the facts in assessment year 2010-11. The ld. AR pointed that the Commissioner of Income Tax (Appeals) while applying GP rate in para 6.6 of the impugned order has observed that the Tribunal in the case of Rajmal Lakhichand had adopted GP rate of 1.58% against the GP rate of 1.51% disclosed by the assessee. However, in the very next line the Commissioner of Income Tax (Appeals) adopted GP rate of 2% of the total sales thereby increasing GP substantially. The ld. AR submitted that the

On the other hand Shri N. Ashok Babu representing the Department vehemently defended the assessment order and prayed for reversing the findings of Commissioner of Income Tax (Appeals) in deleting the addition made by Assessing Officer after invoking the provisions of section 40A(2)(a) of the Act. The ld. DR submitted that it is evident from the records that the assessee has entered into transactions of sale and purchase of gold/silver bullion and ornaments with its group concerns at a rate higher than the market rate.

We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. We observe that the issue raised by the assessee in appeal assailing estimation of GP at higher rate and the grounds raised by the Revenue against deleting of addition made after invoking the provisions of section 40A(2)(a) by the Assessing Officer have been adjudicated by the Tribunal in assessee’s own case in assessment year 2010-11. Similar grounds were raised assailing the findings of Commissioner of Income Tax (Appeals) by both the sides in the case of other group concerns viz. Rajmal Lakhichand and M/s. R.L. Gold Pvt. Ltd. Vs. JCIT. The grounds raised by the Department in deleting

In the present case facts being identical, the findings given by the Co-ordinate Bench on the above said issue would mutatis mutandis apply in the present case. Consequently, the GP declared by the assessee is enhanced by 0.13%. In the result, the ground No. 1 of the appeal by the assessee is partly allowed and corresponding ground Nos. 1 and 2 raised in the appeal by the Department are dismissed.

The assessee has taken alternate plea in additional ground of appeal, on legal issue of not allowing proper opportunity of hearing. Since, we have granted part relief to the assessee on the main ground of appeal, the alternate ground raised as additional ground is dismissed. The ground Nos. 3, 4 and 5 of the appeal by the Revenue are general in nature, hence

In the result, the appeal of assessee is partly allowed and the appeal by the Revenue is dismissed.