M/S SILVEX & CO.,JAIPUR vs. INCOME TAX OFFICER, WARD-7-2, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR MkWa- ,l-lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 1003/JP/2018 fu/kZkj.k o"kZ@Assessment Years : 2006-07 M/s Silvex & Company (India) cuke Income Tax Officer, Vs. Ltd., Ward-7(2), G1-35 to 37, 47 & 48 EPIP, Jaipur. Jewellery Zone, Sitapura Industrial Area, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAQFS 3979 N vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Manish Agarwal (C.A.) jktLo dh vksj ls@ Revenue by : Shri P.K. Meena (CIT) lquokbZ dh rkjh[k@ Date of Hearing 14/09/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 28/10/2022 vkns'k@ ORDER

PER: DR. S. SEETHALAKSHMI, J.M.

This is an appeal filed by the assessee against the order of the learned Commissioner of Income Tax (Appeals)-1 Jodhpur (camp at Jaipur) [hereinafter referred to as “CIT(A)”] dated 12.06.2018 for the assessment years 2006-07.

2 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. 2. The assessee has raised the following grounds:- “1. On the facts and in the circumstances of the case and in law, ld. CIT(A) erred in confirming disallowance of Rs. 5,00,000/- on adhoc basis out of disallowance made by ld. AO u/s 69C of the Income Tax Act. Appellant prays disallowance has been confirmed solely on the presumption that assessee has inflated the purchases to save taxes. Appellant prays disallowance has been confirmed without any basis and deserves to be deleted. 2. On the facts and in the circumstances of the case and in law, ld. CIT(A) erred in confirming disallowance of Rs.35,133/-, being 10% of office maintenance, Staff welfare and Telephone Expenses. Appellant prays that no disallowance can be made for personal use as assessee is a company, thus disallowance confirmed by ld. CIT(A) deserves to be deleted. 3. That the appellant craves the right to add, deleted, amend or abandone of any of the grounds of appeal either before or at the time of hearing of appeal.”

3 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. made were “design based” which differed from piece to piece. The firm has declared progressive turnover and the gross profit declared would also indicate a logical co-relation between the sales and gross profit. 4. Originally in the assessment made u/s 143(3) of the I.T. Act on 29.12.2008, an addition of Rs. 50,37,792/- was made u/s 69C of the Act by alleging purchase from certain parties as being bogus based on statements of certain people stated to be persons belonging to the concerns from whom the assessee had made purchases, as being concerns engaged in providing accommodation entries without involving actual delivery of goods. Further disallowance of Rs.70,266/- being 20% of expenses claimed at Rs. 3,51,330/- were disallowed by alleging element of personal use. The appeal before the first appellate authority was decided ex-parte and consequently the Hon’ble ITAT, Jaipur bench, set aside the matter to the file of Ld. CIT(A) with instructions to pass a speaking order after affording adequate opportunity of being heard to the assessee. During the set aside proceedings the Ld. CIT(A) confirmed an adhoc addition of Rs. 5 Lacs out of the total addition of Rs. 50,37,792/- made by ld.AO by observing that since the sales are not doubted, this is a case where at the most the purchase amount would have been inflated. The present appeal arises from the said order of Ld. CIT(A) confirming the addition of Rs. 5,00,000/- out of the total addition made u/s 69C by ld.AO and

4 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. further confirming disallowance of expenses at 10% against 20% disallowed by ld.AO. The present appeal is against the additions so confirmed by Ld. CIT(A).

5 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. 6. Being aggrieved by the AO the assessee preferred an appeal before the ld. CIT(A) and the findings are reproduced as under:-

“4.4 In view of these facts, this is not a case where the entire cash has been siphoned off by debiting the bogus purchases. This is a case, where at the most, the purchase amount would have been inflated. As indicated by the surrounding circumstances viz. information received from BCTT and Investigation Wing, non- existence of these parties and their failure to respond to notices issued by the Assessing Officer. It is a settled law that Income Tax authorities are entitled to look into the surrounding circumstances to find out the reality of the recitals made in documents. It is the duty of the court to go behind the smoke-screen and discover the true state of affairs. The court is not to be satisfied with the form but with the substance of the transactions. Though the transactions in the present case were through banking channel but these were ultimately settled in cash. Merely because a paper trail had been created, that would not by itself make the transaction genuine. It was held by Honourable Punjab & Haryana High Court in the case of Mittal Belting and Machinery Stores Vs. CIT (253ITR 341) that if on the examination of the evidences, it is found that there was no genuine transaction between the parties, a pure paper transaction could not have entitled the assessee to claim benefit under the law. Similarly the Hon'ble Mumbai Tribunal held in the case of Balaji Textiles Industries Pvt. Ltd Vs. ITO (49 LTD 177) that issue of bills by the alleged supplier was not a conclusive proof. In the instant case, it may be noted that purchases are made to inflate the purchases prices and to save the taxes on such purchases, thus to cover those hidden

6 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. income, a reasonable disallowance is required to be made in the light of judicial decisions discussed above. In the present case, in my considered opinion, a disallowance of Rs. 5,00,000/- would be reasonable to cover up hidden profit in these purchases. The AO is directed to make addition of Rs. 5,00,000/- instead of Rs. 50,37,792/- (Rs. 15,95,403/- + Rs. 34,42,389/-). The appellant gets partial relief in respect of ground nos. 1 and 2 raised by it. 5. Since I have already granted substantial relief on the issue of bogus purchases, the ground no. 3 becomes infructuous. 6. Ground No. 4 & 5 relates to the disallowances of Rs. 31,272/-, Rs. 8,453/- and Rs. 30,541/- out of expenses claimed at Rs. 1,56,361/-, Rs. 42,265/- and Rs. 1,52,707/- under the head office maintenance expenses & office expenses, Staff Welfare expenses and Telephone expenses respectively. From the assessment order, it is seen that for want of proper vouchers and to cover personal element in these expenses and considering the mode of payment in cash, the AO disallowed 20% out of aforesaid expenses, which resulted in an addition of Rs. 70,266/-. 6.1. In the written submissions filed before me, the appellant stated that these expenses were incurred wholly and exclusively for the business purpose and also tried to explain the defects as pointed out by the AO. It was contended that the AO has not pointed out any specific defect while making the disallowance. It was pointed out that all the expenses had already suffered FBT and due tax had been paid, hence, no disallowance should be

7 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. made. Alternatively, the appellant claimed that disallowance made @ 20% is excessive looking to the nature of appellant's business. On overall appreciation of facts of the case and also looking to the nature of business, the disallowance at the rate of 20% appears to be excessive. In the interest of natural justice, I find it would be appropriate to restrict the disallowance to 10% only as against 20% made by the Assessing Officer in his assessment order. The appellant gets partial relief. The grounds raised by the appellant regarding this issue are partly allowed.”

The ld. AR for assessee submitted a detailed written submissions which 7. are as under:- “ Ground of Appeal No. 1: In this ground the assessee has challenged the addition of Rs. 5 Lac confirmed by Ld. CIT(A) by alleging inflation of purchases debited by the assessee, out of Rs. 50,37,792/- made u/s 69C by ld.AO by treating the purchases to that extent as bogus.

As stated above purchase to the extent of Rs. 50,37,792/- were alleged as being bogus, based merely on information received by the AO from BCTT and Investigation Wing without appreciating the evidence produced before him and also without making any independent enquiries in the case of the assessee in respect of the purchases made from 24parties.It is stated that out of above, purchases to the extent of Rs. 15,95,403/- was alleged as bogus for the reason that from the information received from BCCT & investigation, the parties were those who had allegedly accepted to have provided accommodation entries, though the name of the assessee was never shown under the list of

8 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. beneficiaries (if any). Further, purchases to the extent of Rs. 34,42,389/- (15 parties) were alleged to be bogus by stating that the concerns from whom such purchases were made by the assessee had made purchases from parties who had accepted to have provided accommodation entries. The Ld. AO on the basis of the information received from the BCTT and Investigation Wing had framed his opinion that from the enquiries conducted by such Wing it revealed that various persons were indulged in the practice of issuing bogus bills and had categorically admitted in their statements recorded on oath that they were simply issuing bills and no trade was conducted.

It was submitted that the above allegations were misleading in as much as not a single statement of such persons were ever made available during the course of assessment proceedings nor any opportunity of cross examination was ever provided nor any independent enquiries whatsoever were made during the course of assessment proceedings from the supplier parties. It is thus clearly evident that no proper opportunity was provided to explain the case in its right prospective. Further the ld.AO had neither invoked sec 145(3) of the Act nor doubted the declared Sales of the assessee. The trading results of the assessee have been accepted as declared. Moreover as submitted during the original proceedings, the assessee had maintained complete day-to-day stock register having both quantitative and value-wise details. This action of the ld.AO clearly shows that the purchases declared by the assessee were more than genuine as, the assessee sold goods after processing the material purchased, and thus there could not have been genuine sales without there being genuine purchases.

Further, all documentary evidences were filed to prove the identity and genuineness of the purchases made by the assessee. The ld.AO had not pointed

9 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. a single discrepancy/ dissatisfaction in the documents so filed by the assessee. The sole reason to make such huge additions was that the assessee had made purchases from the parties regarding whom, as was stated by the AO in the assessment order, there was information that they were indulged in providing accommodation entries. The ld.AO did not provide copies of any such statements to the assessee, nor was it shown that the name of assessee was mentioned as beneficiary in any of such statements relied upon so heavily by the ld.AO. Further no opportunity of cross examination was afforded to the assessee to rebut the allegations of the ld.AO. As against this the assessee had filed complete documentary evidences like confirmations, bank statements, copy of ITR of the suppliers, copy of purchase bills with RST/CST nos. All these documents were duly appraised by the Ld.CIT(A) during the appellate proceedings, and the following observation was made at page 5 para 4.3 of the appellate order: “ 4.3 On overall appreciation of the facts and submissions of the appellant, I find that the Assessing Officer was not justified I making addition of Rs. 50,37,792/- (Rs. 15,95,403/- + Rs. 34,42,389/-) treating it as bogus purchases and further not justified in treating it as income of the assessee. Since the corresponding sales and profit thereon has been accepted by the AO as genuine therefore, in view of various judicial pronouncements on this issue, AO’s action in adding entire amount of Rs. 50,37,792/- cannot be sustained”

After accepting the contentions of the assessee and duly considering the evidences adduced, though the purchases made by the assessee were held genuine by the Ld.CIT(A), an addition of Rs. 5 Lacs was confirmed arbitrarily, by quoting certain cases, which on facts do not apply to the assessee.

10 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. The first case so quoted by Ld.CIT(A) is ACIT Vs. Arya Texturisers& Twisters (ITAT MUM dated 30.12.2005). In this case, though the sales were not doubted and documentary evidences were filed, the parties were not traceable at the addresses given by the assessee. Therefore in such circumstances the Hon’ble bench confirmed addition to the tune of 3.2% of the alleged unverifiable purchases. In the case of the assessee there was no such exercise carried out by the ld.AO to verify the complete chunk of documents filed by the assessee, and the additions sustained were merely on imaginary grounds without bringing on record a single allegation against the documentary evidences filed by the assessee. Thus this case does not apply to the facts of the assessee.

The second case quoted by Ld.CIT(A) is DCIT Vs. Shri Jitendra S Motani (ITA Nos. 3024 to 3028 “J” bench dated 30.11.2011 ITAT MUM) In this case an addition of 3% of tainted purchases were confirmed by the Hon’ble bench, for the reason that only a few parties had filed confirmations, regarding sales made to the assessee, though the assessee had contended that the payments were made through banking channels. Whereas in the case of the assessee complete documentary evidences were filed both before the AO as well as Ld.CIT(A). And the same were duly appreciated at para 4.3 of the appellate order as quoted above. No further verification was carried out by ld.AO and the additions were sustained merely on presumptions with no ground to hold. Thus the above case is also not applicable to the facts of the assessee.

Similarly all the various pronouncements quoted by Ld. CIT(A) do not apply on facts of the assessee, as in the case of the assessee the initial onus cast upon the assessee to establish the identity and genuineness of the transactions made by the assessee was duly discharged by filing all the documentary evidences,

11 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. which fact is not disputed and clearly inscribed in the appellate order. It is thus submitted that once the initial onus cast upon the assessee is duly discharged the burden shifts upon the revenue to establish with evidence that the documents so filed or the explanation so given is not satisfactory or not acceptable/ verifiable by the AO, before proceeding to treat the alleged purchases as unverifiable and sustain such adhoc additions.

The assessee derives support from the following judicial pronouncements to substantiate its submissions:

CIT vs. Orissa Corporation 159 ITR 78 (SC) Held, “In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises.”

Hon’ble Bombay High Court in the case of Pr. CIT vs M/s Paradise Inland Shipping Pvt. Ltd. The matter though was on issue of share capital raised by

12 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. assessee, the observation applies to this case as well. It had been categorically held that companies which invest share capital cannot be treated as bogus if they are registered and have been assessed. Once the assessee has produced documentary evidence to establish the existence of such companies, the burden shifts to the Revenue to establish their case. Reliance on statements of third parties who have not been subjected to cross examination is not permissible. Voluminous documents produced by the assessee cannot be discarded merely on the basis of statements of individuals contrary to such public documents

The results declared for the year under consideration and for the preceding two years is as under: S.No. A.Y. Turnover G.P. G.P.% Net Profit N.P.% 1. 2004-05 1,44,89,847 11,58,839 8.00 (8,09,162) E 2. 2005-06 16,59,07,398 83,40,998 5.03 10,67,251 0.64 3. 2006-07 13,40,62,042 80,51,207 6.01 21,60,609 1.61 (upto 13.11.05)* * The assessee firm stood converted from partnership to limited company w.e.f. 14.11.2005, the figure for sales and G.P. have been taken upto 13.11.2005. From the above it is evident that the assessee has declared better results as compared to earlier years. Further neither the ld.AO nor the ld. CIT(A) has doubted the trading results and not invoked the provisions of section 145(3) than making the adhoc addition is bad in law.

Reliance is also placed on the following cases:

252 ITR 476 DCIT Vs. Adinath Industries (Guj.)

13 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. Held, that the Assessing Officer could have unearthed the fact that the seller was a bogus party by recording the statement of the bank manager, accountant or cashier or the party who introduced the seller to the bank but without any evidence and merely on the basis of withdrawal of amounts from the account of the seller the Assessing Officer had drawn a presumption that the amount had come back in the assessee’s hands. The assessee had furnished details about purchase and for further verification the assessee had also produced the gate pass, receipt note, weight note, laboratory report and sample report. The assessee produced evidence of purchase of raw materials and submitted the details about the transaction, truck number, etc. Therefore, the assessee had produced relevant materials to show purchase of materials and their use in production. The Assessing Officer had accepted the existence of the seller in the case of assessee for the assessment year 1985-86. The Tribunal appreciated all these facts in arriving at a conclusion in favour of the assessee. When the matter had been decided by the Tribunal on appreciation of evidence, no interference was called for in the matter.

The Supreme Court dismissed the special leave petition filed by the Revenue against this judgment : [2001] 247 ITR (St.) 35.

163 ITR 249 CIT Vs. M.K. Brothers (Guj.) Income from undisclosed sources – Purchases made by assessee – Subsequent statements by sellers in sales tax proceedings that they had issued bogus vouchers – No evidence that bogus vouchers had been given to assessee – Assessee’s payments made by cheque – Amounts represented by purchases cannot be assessed as income from undisclosed sources.

26 TW 511 ACIT Vs. Gem Stones ((ITAT, Jaipur Bench)

14 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. In this case AO made additions of Rs. 1,05,595/- on account of bogus purchases and unexplained cash credits of Rs. 23,056/- - Both these additions have been deleted in appeal by CIT(A) – Now the tribunal has agreed with the findings of CIT(A) and dismissed the appeal by the revenue – Whether purchases can be held to be bogus without rejecting the account books ? – Held No Whether payments made to parties by account payee cheques can justifiably be held to be fictitious without bringing any adverse material on record ? – Held No 30 TW 190 RadhaMohaAgarwal Vs. ITO (ITAT, Jaipur Bench) Whether a purchase can be treated as bogus simply because the party was not found at the given address during enquiry? – Held No Further held that facts regarding payments made by account payee cheque, sales tax registration etc. cannot be overlooked. 32 TW 54 M/s Om Metals & Minerals Ltd. Vs. JCIT (ITAT, Jaipur Bench) Whether the onus to prove the purchases as bogus is on the AO, once the assessee has discharged its burden? – Held Yes Further held that AO failed to bring sufficient material on record to prove the purchases as bogus. Based on above and the judicial pronouncements, it is submitted that, sales of the assessee were not doubted at any stage, also books of accounts maintained and results declared by the assessee were duly accepted. The fact that assessee had furnished entire chunk of documentary evidences is not in dispute, moreover the same is clearly observed by Ld.CIT(A) in the appellate order. Thus, when the documentary evidences available with the department were not rebutted/ refused, the purchases declared by the assessee cannot be held unverifiable, merely on the basis of statements of third parties, which were never provided to the assessee, nor an opportunity to cross examine was

15 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. afforded. Hence it is humbly prayed that the adhoc addition of Rs. 5 Lac sustained arbitrarily without any material on record deserves to be fully deleted and the same may kindly be held so. Ground of Appeal No. 2: In this ground the assessee has challenged the disallowance of Rs. 35,133/- (10% of expenses claimed) sustained by Ld.CIT(A) by alleging element of personal use in certain expenditures claimed by the assessee The disallowances were made out of the below mentioned expenses by alleging that the same were not incurred wholly and exclusively for the purpose of business which were reduced by ld.CIT(A).

S.No. Head of expense Amount of % of % of disallowance disallowance disallowance by AO by CIT(A) 1. Office Maintenance Exp. 31272.00 20% 10% And office expenses 2. Staff Welfare Exp. 8453.00 20% 10% 3. Telephone Exp. 30541.00 20% 10%

During the appellate proceedings the Ld.CIT(A) upheld disallowance to the extent of 10% of expenses claimed, without fully appreciating the submissions of the assessee. In this regard the assessee humbly submits that, during the course of assessment proceedings, books of accounts and vouchers were produced before the Ld. AO for examination who has not pointed out any specific instance where the respective expenses were not incurred for the purposes of business. The Ld. AO has casually mentioned that expenses have an element of personal use. The Ld. AO has not pointed out any specific defect and made the disallowance for sake of making addition without bringing on

16 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. record any material. All the expenditures were incurred wholly and exclusively for the purpose of business and under the business expediency and AO cannot walk into the shoe of the businessman to look into the necessity and purpose. It is further submitted that the ld. AO has made thedisallowancewithout considering the fact that all the expenses doubted have already suffered Fringe Benefit Tax and the said tax has been paid to the treasury of the Government thus no disallowance should be called for in this regard Further this arbitrary disallowance made by the ld.AO has been confirmed by Ld.CIT(A) to the extent of 10% of expenses claimed. Thus, in the view of above facts and in the circumstances of case it is submitted that the disallowance sustained on mere assumption and presumption without any material on record deserves to be deleted and the assessee pays accordingly Reliance is placed on the case of Empire Jute Co. Ltd. Vs. CIT 124 ITR 1 wherein the Hon’ble Supreme Court of India has held as under: “What is an outgoing of capital and what is an outgoing on account of revenue depends on what the expenditure is calculated to effect from a practical and business point of view rather than upon the juristic classification of the legal rights, if any, secured, employed or exhausted in the process. The question must be viewed in the larger context of business necessity or expediency.”

Further Hon’ble Supreme Court in the case of S.A. Builders Vs. CIT, 158 Taxman 74 has held that: “Section 37(1) of the Income Tax Act, 1961 – Business expenditure – Allowability of – Assessment years 1990-91 and 1991-92 – Whether expenditure may not have been incurred under any legal obligation, yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency – Held, yes.”

17 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. Note distinguishing the case laws relied upon by the department in the case of M/s Silvex& Co. in ITA No. 1003/JP/2018 for A.Y. 2006-07 and in the case of M/s Silvex & Co. (I) Pvt. Ltd. for AY 2012-13 in ITA No. 834 & 845/JP/2019

Caselaw Held in the Judgment Factor distinguishing the same Kanchwala Gems 145(3) applied and GP In our case, for AY 2006-07, provisions 288 ITR 10 rate of 30% was upheld of section 145(3) were not invoked. The by Hon’ble Supreme assessee company deals into silver Court in case where jewellery studded with precious and semi- purchases are alleged as precious stones and since the major bogus component is silver, the GP rate is ranging between 5 to 7%. Whereas M/s Kanchwala Gems was dealing in precious and semi precious stones where GP rate is very high. Clarity Gold Pvt. In this case after invoking In our case, for AY 2006-07, provisions Ltd. DB ITA No. 145(3) for the reasons of of section 145(3) were not invoked. The 125/14 dated unverifiable purchases, assessee company deals into silver 19.07.2017 of Hon’ble High Court has jewellery studded with precious and semi- Rajasthan High held the average GP of precious stones and since the major Court past 7 years as reasonable component is silver, the GP rate is ranging which was worked out at between 5 to 7%. Whereas M/s Clarity 12%. Gold Pvt. Ltd. was dealing in precious and semi precious stones where GP rate is very high. N.K. Proteins Ltd. In this case, the Hon’ble In AY 2006-07, provisions of section (SC) 84 Gujrat High Court has 145(3) were not invoked. Moreover, the taxmann.com 95 intimated profit at 25% nature of business is entirely different which was upheld by the where assessee is dealing in silver Hon’ble SC by jewellery having very low GP whereas dismissing the SLP filed M/s N.K. Proteins Ltd. was dealing in by the assessee. The 25% caster oil and derivatives and evidences of unverifiable purchases were found in their premises of the bogus was upheld by invoking suppliers such as their cheque books, the provisions of section vouchers etc. and there was clear cut 145(3). suppression of purchase by 25% however in the case of the assessee, no such allegation is there and assessee has declared better GP as compared to past years which was also admitted by the ld.

18 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd.

AO. Jawari La Lunia In this case, the Hon’ble In our case, for AY 2012-13, the (Raj. High Court) High Court has upheld assessment was already completed u/s 139 Taxmann.com the reassessment 143(3) by invoking section 145(3) and GP 406 proceedings on the rate was applied. Thereafter based on the information received informations supplied by Investigation from the Investigation Wing with respect to unverifiable Wing that assessee has purchases. obtained bogus LTCG Since the assessment was already whereas the assessee was completed u/s 143(3) therefore, the facts dealing in handicraft of the case are totally distinguishable items and the return was where no assessment was carried out prior processed u/s 143(1) to issue of 148, moreover the information before issue of notice u/s is not related to their business activity but 148. of bogus LTCG and in our case the information related to the purchases which has already been accepted in the assessment completed u/s 143(3). A. Varshit& Co. Addition was made u/s In our case, reassessment proceedings Mumbai ITAT 143(3) for unverifiable were initiated after completion of purchases by applying NP assessment u/s 143(3) by invoking section rate of 12.5% on bogus 145(3) and GP rate was applied. Since the purchases. assessment was already completed u/s 143(3) therefore, the facts of the case are totally distinguishable from the case relied upon by revenue where additions were made in the assessment completed u/s 143(3). Moreover the nature of trade was also different and that party deals in diamond whereas the assessee deals into the silver jewellery. Lypsa Diamond Addition was made u/s In our case, reassessment proceedings Mumbai ITAT 143(3) for unverifiable were initiated after completion of purchases by applying NP assessment u/s 143(3) by invoking section rate of 12.5% on bogus 145(3) and GP rate was applied. Since the purchases. assessment was already completed u/s 143(3) therefore, the facts of the case are totally distinguishable from the case relied upon by revenue where additions for unverifiable purchases were made in the assessment completed u/s 143(3).

19 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. Moreover the nature of trade was also different and that party deals in diamond whereas the assessee deals into the silver jewellery. Mukesh C Sanghvi Addition was made u/s In our case, reassessment proceedings 143(3) for unverifiable were initiated after completion of purchases by applying NP assessment u/s 143(3) by invoking section rate of 12.5% on bogus 145(3) and GP rate was applied. Since the purchases. assessment was already completed u/s 143(3) therefore, the facts of the case are totally distinguishable from the case relied upon by revenue the where no assessment was completed u/s 143(3) and reassessment proceedings were initiated for unverifiable purchases in the order passed u/s 148. Moreover the nature of trade was also different and that party deals in ferrous and non-ferrous metal whereas the assessee deals into the silver jewellery.

extent as bogus which was reduced by ld. CIT(A) to Rs. 5,00,000/- as a

disallowance to cover up hidden profits in these purchases. Before us, the

AR submitted that the trading results declared were accepted and provisions of section 145(3) were not invoked. The Assessing Officer has

20 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. information received from BCTT and Investigation Wing from the department and no opportunity for cross examination the parties were provided. He further stated that, once the sales is accepted, it cannot be said that the purchases for making such sale was bogus. The judgements relied upon by AO and CIT(A) were also distinguished on the facts as all the evidences with respect to purchases were submitted to establish the existence of the supplier parties. He further contended that the assessee has declared better results as compared to preceding year, therefore, no addition is required to be made.

21 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. hold that the assessee has inflated the purchase price. The action of the CIT(A) in confirming the disallowance out of the purchases on account of such hidden profits cannot be accepted under these circumstances. Once the assessee has declared the better results which remained accepted, therefore, no further disallowance could be made on account of purchases. Accordingly, we direct to delete the addition of Rs. 5,00,000/- uphold by the ld. CIT(A) in this account. As a result, this ground of appeal is allowed.

Ground of appeal No. 2:

22 ITA No. 1003/JP/2018 M/s Silvex & Co. (India) Ltd. expenses and assessee has suffered FBT therefore any further disallowance out of the expenses would be contrary to the provisions of law and accordingly disallowance upheld is hereby deleted. As a result this ground of appeal is allowed.

In the result, the appeal of the assessee is allowed.

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