JEWELS EMPORIUM A LEGACY,JAIPUR vs. ACIT,CC-1, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR

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BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 1215/JPR/2024
fu/kZkj.k o"kZ@Assessment Years : 2009-10

Jewels Emporium A Legacy
D-7, MI Road,
Central Circle-1,
Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABFJ1456A vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Tarun Mittal, C.A.
jktLo dh vksj ls@ Revenue by : Mrs. Anita Rinesh, JCIT,Sr.-DR a lquokbZ dh rkjh[k@ Date of Hearing : 10/07/2025
mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 21/08/2025

vkns'k@ ORDER

PER: RATHOD KAMLESH JAYANTBHAI, AM

By way of present appeal the assessee – appellant challenges the order of the Commissioner of Income Tax, Appeals
– 4, Jaipur [ for short CIT(A) ] dated 31.07.2024 for Assessment
Year 2009-10. The said order of the ld. CIT(A) arises as against the order dated 30.12.2016 passed u/s 143(3) r.w.s. 153(3) of the Income Tax Act, 1961 [for short ‘Act’] by the Assistant
Jewels Emporium A Legacy, jaipur.
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Commissioner of Income Tax, Central Circle-1, Jaipur [for short
‘AO’].
2. In this appeal, the assessee has raised the following grounds:-
“1. On the facts and in the circumstances of the case, Ld. CIT(A) has grossly erred in confirming the order passed by Ld. AO u/s 143(3) r.w.s. 153(3), even though such order was passed without properly following the specific directions given by Hon’ble ITAT, Jaipur Bench vide order dated 19.10.2015. Appellant therefore prays that the order passed u/s 143(3) r.w.s. 153(3) of the Income Tax Act, 1961 is not in consonance with directions of Hon’ble ITAT and thus liable to be quashed.

Pursuant to this, ld. AO vide impugned order made trading addition of Rs. 11,11,976/- being 15% of the alleged unverifiable purchases amounting to Rs. 74,13,178/-, without affording any opportunity of being heard to the assessee nor appreciated the fact that the case of Anuj Kumar Varshney has not yet been decided by the Hon’ble juri ictional high court thus the impugned order is not in accordance with the specific directions of the Hon’ble ITAT. Thereafter, assessee preferred an appeal before the ld. CIT(A) wherein ld. CIT(A) vide his order dated 31.07.2024 dismissed the appeal of the assessee

Aggrieved the assessee has preferred this appeal. The ground wise submissions are as under:

Ground of Appeal No. 1:
In this ground of appeal, assessee has challenged the action of the ld.
AO in passing the impugned order in violation of the specific directions issued by the Hon’ble ITAT Jaipur bench (WS Page 15 to 20) and further by not allowing any opportunity to assessee which is not only against the principles of natural justice but also is gross violation of the directions issued by Hon’ble ITAT.

In this regard it is humbly submitted that, as submitted above the Hon’ble ITAT vide its order dated 19.10.2015 had issued very specific and clear directions to the ld.AO to decide the matter afresh after the judgement of Hon’ble Rajasthan High Court in the case of AnujVashney& Others Vs. ITO was delivered and also after giving adequate opportunity of being heard to the assessee. It is further submitted that there was no bar of limitation on the assessment to be made by the AO (at the time of passing of ITAT order), in pursuance of the specific directions issued by the Hon’ble ITAT and as such the matter was governed by the provisions of pre-amended sec 153(3)(ii) of the Act where no time limit is provided for completion of assessment after setting aside by ITAT u/s 254 of the Act.

Accordingly, since no judgement was delivered by the Hon’ble
Rajasthan High Court till date, it is thus submitted that the ld.AO was legally precluded from passing any order in the case of the assessee, before the order of the Hon’ble Rajasthan High Court in the case of AnujVashney (supra). Further the Hon’ble ITAT has made specific observations while setting aside the issue to the file of AO that the order should be passed afresh only after providing adequate
Jewels Emporium A Legacy, jaipur.
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opportunity to the assessee of being heard. However, from the perusal of the assessment order, it is clearly evident that no such opportunity whatsoever was provided to the assessee whereas it was incumbent upon the assessing officer to complete the proceedings after considering the details already furnished by assessee during original assessment proceedings and after making fresh enquiries, if required more particularly when Hon’ble tribunal nowhere mentioned that if appeal is not finalized by Hon’ble High Court in the case of Anuj Kumar
Varshney, rate of 15%, i.e. rate as per tribunal decision in that case should apply.

Thus, ld.AO has not appreciate the directions of hon’ble tribunal in its true sense and has completed the proceedings u/s 143(3) r.w.s. 254 in a summary manner, by not even appreciating the information and evidences available on record which were filed by the assessee in support of the purchases claimed in the Profit & Loss account.

It is further submitted that the ld. CIT(A) has confirmed the order passed by ld.AO stating that the approach followed by ld. AO is correct in view of the time barring limitation, however the same is also misplaced in view of facts narrated above.

It is submitted that while dismissing the appeal, ld.CIT(A), has observed that:

“Thus apparently and as understood the issue of verifiability of the purchases stood held against the appellant by the honourable Tribunal.
Accordingly the scope of the set aside proceedings before the learned
AO was limited.

It is also hereby directed that whenever the order of Hon’ble High Court in the above referred Anuj Kumar Varshney cases (supra) is pronounced, the learned AO will give effect to the same in the case of the appellant for this year in view of the directions of honourable ITAT in order dated 19.10.2015 in ITA No. 271/JP/2014.”

It is thus evident that ld.CIT(A) also has erroneously held that scope of proceedings before ld.AO was limited , whereas as per directions of hon’ble ITAT, proceedings were to be completed afresh, after considering the outcome of appeal in the case of Anuj Kumar
Varshney. In no way, hon’ble ITAT has held that AO had to simply apply the rate finalized in the decision in the case of Anuj Kumar
Varshney. Had that been the intention, hon’ble ITAT could have given directions to apply such rate, as the same was available at the time of passing of order by hon’ble ITAT.

In the circumstances, it is humbly submitted that the order so passed is not only in violation of the specific directions of the Hon’ble ITAT, Jaipur
Jewels Emporium A Legacy, jaipur.
9
bench but also against the principles of natural justice and accordingly void-ab-initio that truly deserves to be quashed and the assessee prays accordingly.

Without prejudice and in the alternate the submissions on merit are detailed hereunder, presuming the allegations for treating certain purchases as unverifiable and bogus by the ld. AO to be the same as contended in the original order passed u/s 143(3) of the Act, for the reason that in the second round (after set aside) the ld. AO has not discussed the matter on merits, and simply applied the GP Rate of 15%
on the alleged purchases by relying on the decision of the Hon’ble ITAT in the case of AnujVarshney& others.

Ground of Appeal No. 2 :

In this ground the assessee has challenged the invoking the provisions of sec 145(3) of the Act, and making the impugned addition by alleging purchases from the following two parties as unverifiable without considering the documentary evidences filed in support of genuineness of the purchases claimed by the assessee:
S.No.
Name of Party
Amount (In Rupees)
1. Clarity Gold Pvt. Ltd.
69,08,828/-
2. Century Gems
5,04,350/-
Total
74,13,178/-

The assessee had filed following documents to substantiate purchases from the above parties:

 Detailed Purchase invoices containing complete description of goods sold to the assessee, and their sales-tax nos.(APB 87-88 & 92-103)
 Copy of bank statements of the assessee duly reflecting the payments made against such purchases (APB 74-81)
 Copy of confirmations of the above parties duly mentioning the PAN nos. and addresses of the above parties (APB 85-86 & 89-91)

Ld.AO has invoked the provisions of sec 145(3) of the act and held the above purchases as unverified, for the following reason:
 The assessee could not produce the concerned parties before the AO
 The closing stock of the assessee is not subject to verification, as qualitative and value-wise details were not maintained
 No details were received from M/s Century Gems, nor the summons had returned unserved
 Director of M/s Clarity Gold (P) ltd had given a statement saying 95% of sales of the company were bogus.
Jewels Emporium A Legacy, jaipur.
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In this regard it is humbly submitted that, it had produced all the requisite details regarding purchases made from the above two entities.
Further both entities were registered under the sales-tax and Income
Tax Act. Also summon u/s 131 issued by ld.AO to M/s Century Gems
(P) ltd was duly served. Thus the identity of the purchaser stood duly established. At this juncture it is pertinent to mention that while rejecting the books of the assessee ld.AO has alleged that no stock register has been maintained by the assessee. It is submitted that, the assessee very well has maintained complete stock register, which contains complete quantitative details of the items bought, consumed, sold and remaining in stock at the end of year. And this fact is derivable from the assessment order itself. Further the books of the assessee regularly maintained and are audited without any adverse remarks.

Now as regards the summons issued to M/s Century Gems (P) Ltd, it is submitted that, the fact that summons were not returned as unserved, itself proves the identity of the purchaser. And when the summons were duly served, ld.AO could have ensured compliance, as being a quasi- judicial authority he had vast powers, and further that all documentary evidences were already on the files of ld.AO. Thus merely because the party was not produced before ld.AO the same cannot be held to be a bogus transaction, especially when all the details were filed by the assessee. Non availability of the parties cannot constitute a reason for rejection of books.

The Hon’ble Jaipur Bench of the ITAT has consistently held that non availability of the parties at a given address or inability of the assessee to produce the parties from whom goods are purchased cannot constitute a reason for rejection of books and invoking the provisions of section 145(3), particularly when other ingredients of the transactions are undisputed.

Next allegation to treat the purchases as bogus is that, the director of one of the concerns, M/s Clarity Gold (P) Ltd had admitted in a statement recorded u/s 132(4) that 95% of its sales were bogus. In this regard the assessee humbly submits that, there was no specific mention of the assessee in the statements, so as to infer that assessee was amongst the 95% beneficiaries who had made bogus purchases form M/s Clarity Gold (P) ltd, nor that the said entity had denied supply of goods to the assessee. Further the said statements relied upon so heavily by ld.AO bear neither any date nor there was mention as to the period for which such revelation was made by the Director of the company. Thus genuine purchases made by the assessee cannot be termed unverifiable merely on the basis of such vague revelations made by the director of the supplier company, without any corroborative material on records. Also, during the course of assessment proceedings, assessee requested to provide opportunity to cross-examine director of supplier company, whose statements were Jewels Emporium A Legacy, jaipur.
11
heavily relied upon, however no such opportunity was afforded to the assessee. Moreover, complete documentary evidences to substantiate the purchases made were duly filed by the assessee, which included copies of purchase invoices (APB 87-88 & 92-103), Bank statements
(APB 74-81), Sales Tax returns etc. It is also a matter of fact that no discrepancy whatsoever was pointed out by ld.AO or ld.CIT(A) in respect of such documentary evidences.

It is further submitted that the case of M/s Clarity Gold (P) ltd has been decided by the Hon’ble Rajasthan High Court vide its order dated
19.09.2017 in D.B Appeal Nos. 125-128/2014 (APB 118-122), wherein though the invoking of provisions of sec 145(3) has been upheld, a trading addition to the extent of 12% of unverifiable purchases have been confirmed. Thus, the sales of the said entity have been completely accepted by the High Court, and when sales of M/s Clarity
Gold (P) Ltd are fully accepted, there is no question to doubt the purchases made by assessee and further related to identity of the party from whom purchases has been made, which is duly substantiated and along with Purchase Invoice & Confirmation of supplier the purchases to the extent of Rs. 69,08,828/- no longer remained unverified.
However, it is observed from the order passed by ld.CIT(A) that genuineness of purchases has been doubted by stating that the same has to be seen from the perspective of the information and evidences placed on record by the assessee in his own assessment proceedings.
It has been further observed by ld.CIT(A) that onus was on the assessee to provide the relevant details to prove genuineness of the purchases and produce the parties if required alongwith the documents of transportation and delivery of goods. In this regard, it is submitted that assessee has furnished not only purchase invoices but also confirmations from the said parties, which prove the genuineness of transaction beyond doubt. Also, so far as documents of transportation are concerned, assessee is trading in jewellery, viz. precious commodity and is thus delivered personally and there cannot be any documentation regarding transportation thereof. It is thus submitted that assessee has proved genuineness of purchases by providing all the plausible evidences. Accordingly addition to the extent of Rs.
10,36,324/- (i.e. 15% of Purchases) deserves to be deleted.

It is further submitted that it is settled law that in cases where certain purchases is alleged as bogus only the inflated expenses can at best be disallowed which is reflected by Gross profit shown by the assessee. In the instant case the GP rate declared by the assessee is better as compared to preceding three assessment years average, which is summarized as under—

Particulars
A.Y.
2006-07
A.Y. 2007-
08
A.Y. 2008-
09
A.Y. 2009-10
(Under consideration)
Jewels Emporium A Legacy, jaipur.
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G.P. Ratio
34.81
32.99
35.02
35.65
G.P.Averag e
34.27

N.P. Ratio
1.89
1.90
6.04
4.72
N.P.Averag e
3.27

In this regard, reliance is placed on:
S. 69 Bogus Purchases: Purchases cannot be treated as Bogus if (a) they are duly supported by bills, (b) all payments are made by account payee cheques, (c) the supplier has confirmed the transactions, (d) there is no evidence to show that the purchase consideration has come back to the assessee in cash, (e) the sales out of purchases have been accepted & (f) the supplier has accounted for the purchases made by the assessee and paid taxes thereon.

In our case, all the conditions as stated by the hon’ble Apex court in the above case of TejuaRohit Kumar are established and assessee has filed all the necessary evidence and thus discharged its burden. The ld.
AO without bringing on record any concrete evidence to establish that the same were not true simply followed the decision of hon’ble ITAT which is against the direction given by the ITAT. It is thus submitted that the purchases made cannot be held as bogus and the addition made deserves to be deleted.

PCIT vs. RishabhdevTachnocable Ltd (Bombay H/C) ITA (IT) NO.1330
OF 2017
S. 68 Bogus Purchases: Though the assessee has not proved the genuineness of the purchases and sales, yet if the AO has accepted the sales, the entire purchases cannot be disallowed. Only the profit element embedded in purchases would be subjected to tax and not the entire amount (BholanathPolyfab 355 ITR 290 (Guj) followed, Kaveri
Rice Mills 157 Taxman 376 (All) & La Medica 250 ITR 575 (Del) referred)
S. 68/ 69C Bogus purchases: Even if the purchases made by the assessee are to be treated as bogus, it does not mean that entire amount can be disallowed. As the AO did not dispute the consumption of the raw materials and completion of work, only a percentage of net profit on total turnover can be estimated (Mohommad Haji Adam
&Paramshakti Distributors followed)

PCIT vs. Paramshakti Distributors Pvt. Ltd (Bombay H/C) ITA NO.413
OF 2017
Jewels Emporium A Legacy, jaipur.
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S. 68 Bogus Purchases: Despite admission by the assessee that the purchases were mere accommodation entries, the entire expenditure cannot be disallowed. Only the profit embedded in the purchases covered by the bogus bills can be taxed. The GP rate disclosed by the assessee cannot be disturbed in the absence of incriminating material to discard the book results
S. 68/ 69C: In case of bogus purchases where sales are accepted, the addition can be made only to the extent of difference between the GP declared by the assessee on normal purchases vis a vis bogus purchases. The AO is directed to restrict the addition to the extent of lower GP declared by the assessee in respect of bogus purchases as compared to G.P. on normal purchases

V.R.Enterprises vs. ITO (ITAT Mumbai) I .T.A. No.4650/Mum/2018
Bogus Purchases: The CIT(A) is not justified in enhancing the assessment to disallow 100% of the bogus purchases. The only addition which can be made is to account for profit element embedded in the purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases (PCIT vs. Mohommad
S. 68/69 Bogus Purchases: Even if the purchases are bogus, the entire purchase amount cannot be added. As the department had not disputed the assessee's sales & there was no discrepancy between the purchases and the sales, the purchases cannot be rejected without disturbing the sales in case of a trader. The addition has to be restricted to the extent of the G.P. rate on purchases at the same rate of other genuine purchases (N.K .Industries 292 CTR 354 (Guj), N. K.
Proteins 250 TM 22 (SC) distinguished)
[2013] 355 ITR 290 (Guj) CIT v. BHOLANATH POLY FAB PVT. LTD.
Income from undisclosed sources — assessment — assessee trading in finished fabrics — whether purchases themselves bogus — whether parties from whom such purchases were made bogus — questions of fact — tribunal finding assessee did purchase cloth and sell finished fabrics — not entire purchase price but profit element embedded in purchases liable to tax — Income-Tax Act, 1961

In this case, of BholanathPolyfab Limited (supra), Tribunal was of the opinion that the purchases might have been made from bogus parties but the purchases themselves were not bogus. Considering the fact situation, Tribunal was of the opinion that not the entire amount of Jewels Emporium A Legacy, jaipur.
14
purchases but the profit margin embedded in such amount would be subjected to tax.

The hon’ble ITAT, Jaipur bench in the case of BhuramalRajmalSurana
Vs. DCIT in ITA No. 4091/JP/12) vide order dt. 15.12.17 held that there is no material that 25% of purchases of assessee are bogus and even in case because books of accounts are rejected as estimation of profit is made then that has to be based on the past history of assessee’s own case. This is proper yard stick to estimate profits, when books of accounts are rejected.

Similar view is expressed by the hon’ble ITAT, Jaipur bench in the case of Vijay Kedia (HUF) vs. ACIT in ITA No. 197 & 249/JP/2016 vide order dt. 29.1.2018 and also in the case of DCIT Vs. Gem Paradise ITA No.
747/JP/2012 vide order dt. 26.12.2017. Based on above, it is humbly submitted that the entire purchases of Rs.
74,13,178/- from the above two entities stands fully verified and the addition of 15% of such purchases made by alleging the same as unverifiable deserves to be deleted and the assessee prays accordingly.

Without prejudice to above, it is submitted that so far as purchases from two parties i.e. M/s Clarity Gold Pvt. Ltd and M/s Century Gems is concerned:
On the basis of the submission made above, it can be concluded that the identity and genuineness of the party M/s Clarity Gold Pvt. Ltd is established in view of the Order from Hon’ble High Court of Rajasthan and the evidences adduced by assessee in the shape of purchase invoices along with confirmations from party and bank statement reflecting payment made. Thus, it is humbly prayed that the trading addition pertaining to the purchases made from M/s Clarity Gold Pvt.
Ltd. may kindly be deleted as the assessee has already declared GP of 35.65% on the sales made in the year under consideration.

Ground of Appeal No. 2.1
In these grounds the assessee has challenged the addition of Rs.
11,11,976/- made by the ld. AO being 15% of the alleged unverifiable purchases.

Brief facts as stated above are that during the original assessment proceedings the ld. AO had alleged purchases made from two parties to the tune of Rs. 74,13,178/- as unverifiable, without considering the documentary evidences and explanations accorded by the assessee, and made addition of 25% of such alleged unverifiable purchases. This addition was reduced to Rs. 2 lacs by the Ld. CIT(A) by appreciating the past history of assessee. Against the said order of Ld. CIT(A), appeal was filed by ld.AO before the Hon’ble ITAT, Jaipur bench and Jewels Emporium A Legacy, jaipur.
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the assessee had preferred a cross objection, wherein vide order dated
19.10.2015, the matter was set aside to the file of the AO in view of the fact that in case of AnujVarshney and bunch of other appeals, both the department and the assessee were in appeal before the Hon’ble
Rajasthan High Court. But, the ld. AO overlooking the specific directions of the Hon’ble ITAT, passed the set aside order by once again presuming the said purchases from two parties as unverifiable and further estimating inflation in purchases claimed by the assessee and made addition of 15% of alleged unverifiable purchases by simply observing that since the case of AnujVarshey& others was not disposed-off by the Hon’ble Rajasthan High Court, 15% of unverifiable purchases are added in accordance with the last order in the case dated 22.10.2014 by the Hon’ble ITAT.

In this regard at the outset it is submitted that the last order of the Hon’ble ITAT (AnujVashney) has been challenged by both the revenue as well as the assessee before the Hon’ble high court and not attained finality, thus the same cannot be applied in the case of the assessee, in view of the fact that in the assessee’s own case in preceding assessment years i.e. prior to AY 2009-10 and AY 2008-09 (which is pending before the Hon’ble High court along with AnujVarshney). The Hon’ble ITAT, Jaipur bench in the case of the assessee in AYs prior to 2008-09 has restricted the trading additions made by alleging the purchases as unverifiable and accepted about similar GP rates as declared by the assessee. The position of which is summarized as under:

A.Y.
Turnover (Rs.)
Gross Profit
(Rs.) &
Percentage
A.O.
CIT(A)
ITAT
2004-05
10,92,67,625/-
3,75,92,901/-
34.40%
Disallowance of expenses
Rs. 1,25,000/- (Revised G.P.
Rate 34.52%)
Disallowance quashed
(Declared G.P. rate of 34.40% accepted)
No appeal by department
2005-06
16,73,29,853/-
5,78,70,599/-
34.58%
Trading addition on account of bogus purchases of Rs.
8,13,678/- by applying G.P.
Rate of 35.09%
Entire trading addition deleted on account of past history (Declared G.P. rate of 34.58% accepted)
Order of CIT(A) confirmed
2006-07
13,21,90,472/-
4,60,24,603/-
(34.82%
Trading addition on account on bogus purchases of Rs.
10,19,728/- (Disallowance of 25% of Bogus purchases)
(Revised G.P. Rate 35.59%)
Addition confirmed – Rs.
2,00,000/- after considering past history (Upheld G.P.
Rate 34.97%)
Addition restricted to Rs. 1,25,000/- after considering the quantum of unverifiable purchases
(Upheld G.P. rate of 34.91%)
2008-09
18,82,88,100/-
6,59,45,825/-
(35.02%)
Trading addition on account of bogus purchases of Rs.
42,72,031/- (Disallowance of 25% of Bogus purchases)
(Revised G.P. Rate 37.56%)
Entire trading addition is deleted after considering past history (Declared G.P.
rate of 35.02% accepted)
Appeal by department disposed off in view of tax effect being lower than Jewels Emporium A Legacy, jaipur.
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monetary limit.

The assessee submits that, it is a well-established preposition of law, based also on juri ictional pronouncements that, once the provisions of sec 145(3) of the Act are invoked, the estimation of income has to be made on best judgement, and past history is the best guide to estimate such income, as has been held by the juri ictional high court in the case of CIT Vs. Inani Marbles (P) ltd (316 ITR 125). Further your kind attention is also invited to the judgment of Hon’ble Rajasthan High
Reliance is also placed on:

Collector Ram Sharma Vs. DCIT [ITAT (JPR) in ITA no. 771/Jp/2012
dated 10.11.2016
Relying on various juri ictional decisions and decisions of this ITAT, held that when the books of the assessee have been rejected u/s 145(3) of the Act, then the past history of the assessee is the best guide to estimate the profits.

Prashant Oil mill Vs. ITO [72 Taxmann.com 136 (Guj)]
Accounts – Rejection – GP rate – Best guide for estimation of the trading results after rejecting the books is either the past history of the assessee or any other comparable case – The past history of the assessee takes preference over a comparable case – Assessee having declared higher GP rate than the preceding year, its trading results require acceptance and trading addition requires deletion.

The GP rate declared by the assessee in the past and accepted by the Hon’ble ITAT is evidenced from the table above. As against that the assessee has declared a GP Rate of 35.65% on a turnover of Rs. 16
cr. which is higher than the GP rate of earlier year, in spite of a marginal decline in the turnover. Any addition made to the declared profits would now result in absurd GP rate, not achievable in this line of Jewels Emporium A Legacy, jaipur.
17
business, thus the declared GP rate deserves to be accepted, and the addition so made by the ld.AO ignoring the results of past years accepted by the Hon’ble ITAT, in the assessee’s own case, deserves to be deleted and the assessee prays accordingly.

Thus, considering the facts and arguments placed on record we considered to decide the issue based on the prevailing finding placed on record on the merits of the disputes. So far, the ground no. 2 and 2.1 raised by the assessee record reveals that there were addition made on account of unverifiable purchases by the ld.
AO and same was subject matter of litigation.
The ld. AR of the assessee submitted details in tabular form about the position of preceding years. As is seen that in AY 2005-
06 trading addition on account of bogus purchase of Rs. 8,13,678/- was made, making the consequent GP rate at 35.09% from 34.58% shown by the assessee. The trading addition was deleted by ld. CIT(A) and this order of ld. CIT(A) was confirmed by ITAT.
Thus, after considering the order of ITAT, GP rate shown by assessee of 34.58% became final in AY 2005-06. In AY 2006-07,
Jewels Emporium A Legacy, jaipur.
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the assessee has shown GP rate of 34.82% and the trading addition on account of bogus purchases of Rs. 10,19,728/-
[disallowance of 25% of bogus purchase] was made. The ld.
CIT(A) reduced the addition to Rs. 2,00,000/-. On appeal filed by the assessee, the addition was restricted to Rs. 1,25,000/- by the ITAT after considering the overall facts and quantum of unverifiable purchases.
Considering the addition finally sustained, the resultant GP rate is 34.91% in AY 2006-07. In A.Y. 2008-09, trading addition was made on account of bogus purchases. However, ld. CIT(A) deleted the addition. Appeal filed by the revenue before the ITAT was disposed off in view of tax effect being lower than monetary limit. Thus, GP rate of 35.02% so declared by the assessee became final in AY 2008-09. It is seen by us that in the year under consideration the GP rate declared by the assessee is 35.65% on turnover of Rs. 16 crores, which is higher than the GP rate declared by assessee preceding years and also higher than the resultant GP rate finally arrived at after considering the order of the co-ordinate bench of Jaipur bench of ITAT in these preceding years. We get strength to support the view that G. P. Ratio of the Jewels Emporium A Legacy, jaipur.
23
past year is the guidance while estimating the profit as held by our
Hon’ble Rajasthan High Court in the case of CIT Vs. Inani Marbles
Pvt. Ltd. [316 ITR 125] held that past history of the assessee is the best guide to estimate the income. The relevant findings reads as under:-

“For the assessment year 2000-01, the Assessing Officer rejected the asses-see's books of account for valid reasons and invoked the provisions of section 145 of the Income-tax Act, 1961, and made assessment by applying the gross profit rate of 15 per cent. on the sales disclosed by the assessee. The Tribunal held that in the absence of any change in the factual position normally the profit rate declared and accepted in the preceding year, constitutes a good basis for working out the gross profit. Accordingly, since in the earlier year the gross profit rate declared and accepted was 2.51 per cent. the same rate would be applicable for the year in question.

On appeal to the High Court:

Held, dismissing the appeal, that the gross profit rate of 2.51 per cent.
having been applied for the assessment year 1999-2000 and that having been upheld by the Tribunal the order of the Tribunal for 2000-
01 was justified.”

Similarly, view is also taken by our Hon’ble Rajasthan High Court in the case of Kansara Bearing Pvt. Ltd. Vs. ACIT reported in 270
ITR 235 where in High Court held that the addition made on the basis of material on record including past history of the assessee is justified and no interference was called for in the order of the co- ordinate bench of ITAT.
Jewels Emporium A Legacy, jaipur.
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Even in the case law cited by the ld. DR suggests to estimate the book profit in such case as held by the apex court in the case
Kachwala Gems (Supra) and ld. AR of the assessee has elaborately mentioned that facts of the afore-cited case are different and distinguishable and therefore, the decision of Hon’ble
Supreme Court in the case of Kachwala Gems, Jaipur is not applicable in the case of assessee and furnished the note distinguishing the facts of the case. The note reads as under:-
In this regard, it is submitted that facts of said case and that of assessee are different, which are as under:

Sl. No.
Facts in Hon’bleSupreme
Court decision in the case of Kachwala Gems
Facts of Assessee
1. Hon’bleSupreme Court has not decided the issue, if purchases alleged as bogus was actually genuine or not and in fact clearly held that the same being finding of fact and decision of ITAT was not interfered with.
Purchases made by assessee is completely genuine as the one of the parties, i.e. M/s Clarity Gold (P) Ltd., from whom major purchases was made, furnished response to notice issued u/s 133(6). Also, in statements of director of such company as referred by ld.AO in Assessment
Order, nowhere name of assessee is mentioned as taking bogus bills.
2. GP rate declared by assessee was 13.49%
which neither matched the results declared by it in previous Assessment Years and was much below the rate voluntarily declared by another assessees in similar business,
Ld.AO brought two cases from similar line of trade, where GP was GP rate declared by assessee was 35.27% as against Average GP rate
(of past 3 years) of 34.27%. Also, gross profit declared was in line with preceding years nor is there allegation that the same is below industry standards
Jewels Emporium A Legacy, jaipur.
25
declared at 35% and 43.8%
3. It was held by the hon’ble
Court that in Best judgement
Assessment, some degree of guess work is unavoidable, whereas estimate has to be fair and honest and not arbitrary.
In the present case, assessee has already declared GP rate of 35.27%, thus there is no need to make any further addition, as doing so will result into a unrealistic GP rate and would be absolutely arbitrary and thus against the decision of Hon’ble
Supreme Court relied upon by ld. D/R

Having noted on these facts of the case and this being the second round of litigation the bench noted that the business of the assessee is related to Gems and Jewellery. Ground no. 2 & 2.1
raised by the assessee pertains to the estimation of profit on the alleged bogus purchases. Record reveals that in the case law cited the Gross Profit declared was 13.49% which was much below the GP rate shown by other assessee’s in the similar business and ld.
AO of the afore-cited case brought two cases on record from similar line of trade where GP was declared as 35% and 43.8%.
Moreover, declared during the year being 13.49% was also not matching with the GP declared in preceding years.
On the other hand, in the instant case of assessee, GP declared during the year is 35.27% as against the average GP of last three years of 34.27%. Moreover, GP declared was in line with the preceding years and it has not been brought on record by the ld. AO by way of giving comparative cases that GP so declared is Jewels Emporium A Legacy, jaipur.
26
below the industry standards. Accordingly, we are of the view that decision in the case of Kachwala Gems, Jaipur is on different set of facts and is not applicable to the facts of instant case of assessee.
Even the decision so cited in the case of M/s Clarity Gold
Pvt. Ltd. which was before the Hon’ble Rajasthan High Court and the Hon’ble Court vide its order dated 19.09.2017 in DB appeal No.
125-128/2014 has upheld the invoking of provisions of section 145(3) and GP rate of 12% was upheld with the direction that wherever GP shown is more than 12%, same will not be reduced to 12% but where it is less than 12% the income will be assessed on the basis of 12% GP. In the present case, GP shown by the assessee is quite more than in the case of Clarity Gold Pvt. Ltd. so decided by Hon’ble High Court.
Considering the facts of the case, particularly the past history of the assessee itself and the trading results finally upheld in those years vis-à-vis the trading results of the year, which are better than preceding years and also considering the legal position on the issue under consideration, we direct the ld. AO to delete the Jewels Emporium A Legacy, jaipur.
27
trading addition of Rs. 11,11,976/-. In the light of the discussion so recorded herein the ground No. 2 and 2.1 are allowed.
9. Ground No. 1 raised by the assessee is a technical ground challenging the manner of passing the order. Since we have allowed the appeal of the assessee on merits of the case, the technical ground raised by the assessee becomes educative in nature.
In the result, the appeal of the assessee stands allowed.
Order pronounced in the open Court on 21/08/2025. ¼ Mk0 ,l- lhrky{eh ½
¼ jkBkSM+ deys'k t;UrHkkbZ ½
(Dr. S. Seethalakshmi)
(Rathod Kamlesh Jayantbhai)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur fnukad@Dated:- 21/08/2025
*Santosh
आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू
1. vihykFkhZ@The Appellant- Jewels Emporium A legacy, Jaipur.
2. izR;FkhZ@ The Respondent- ACIT, Central Circle-1, Jaipur.
2. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत.
6. xkMZ QkbZy@ Guard File { ITA No. 1215/JPR/2024 }

vkns'kkuqlkj@ By order

सहायक पंजीकार@Aेेज. त्महपेजतंत