DINESH HALDIA,JAIPUR vs. DCIT CIRCLE 1, JAIPUR, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Mk0 ,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, vk;dj vihy la-@ITA No. 384/JP/2024 fu/kZkj.k o"kZ@Assessment Years : 2007-08 cuke Shri Dinesh Haldia DCIT, Vs. 150, Haldia House, Circle-01, Jaipur Johari Bazar, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAKPH 9237 Q vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Dheeraj Borad, CA jktLo dh vksj ls@ Revenue by : Sh. Arvind Kumar, CIT lquokbZ dh rkjh[k@ Date of Hearing : 18/06/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 30/07/2024 vkns'k@ ORDER

PER: RATHOD KAMLESH JAYANTBHAI, AM

This appeal filed by assessee is arising out of the order of the Commissioner of Income Tax (Appeals)-04, Jaipur dated 05/02/2024 [here in after ld. CIT(A)] for assessment year 2007-08 which in turn arise from the order dated 17.10.2018 passed under section 260A (set aside) r.w.s. 153A of the Income Tax Act, by DCIT, Circle-01, Jaipur.

2 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT

“I That the learned CIT (Appeal) erred in sustaining addition u/s. 69C of the I.T. Act made by the AO at Rs. 13,00,000/- in the total income of the assessee as unexplained expenditure and thereby disallowing the purchases made from unregistered dealers/cash purchases of Rs. 13,00,000/-, which sustaining of addition of Rs. 13,00,000/-u/s. 69C of the I.T. Act, on substantive basis as unexplained expenditure/purchases is most arbitrary, unjust and untenable in fact and in law and in the alternative excessive w.r.t. facts and circumstance of the case.

2 That the learned CIT (Appeals) erred in sustaining on protective basis the application of G.P. rate of 30 percent (as against declared G.P. rate of 11.88 percent) applied by the A.O. on the declared sales of Rs. 10,76,900/- and thereby sustaining the trading addition of Rs. 1,95,137/- (G.P. determined Rs. 3,23,070/- minus G.P. declared Rs.1,27,933/-) on protective basis made by the A.O., which sustaining of G.P. rate of 30 percent and consequential trading addition of Rs. 1,95,137/-on protective basis are most arbitrary, unjust and untenable in fact and in law and in the alternative excessive w.r.t. facts and circumstance of the case.

3 That the appellant craves leave to add, alter, amend or substitute one or more grounds of appeal as and when necessary.”

assessee had not filed his return of income u/s 139(1) of the IT Act, 1961.

Further, Survey proceedings u/s 133A & Search proceedings u/s 132(1) of

the IT. Act, 1961 were carried out on 20.04.2007 at the residential and

business premises of the assessee. Stocks, Cash, other valuables, Books

of account, incriminating documents/loose papers etc. were found,

inventoried and seized as per annexure prepared. The assessee mainly

derives income from processing and trading of Gems Stones under the

name & style of D. H. Exports for precious and semi precious Gems

3 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT stones and Commodity exchange under the name & style of M/s Ridhi

Sidhi Commodity House & Trading of equity share & debentures under the

name & style of M/s Dinesh Haldia, House, Income from other sources as

interest and gifts on estimated basis. The assessee also did business of

commodity exchange from NCDEX.

3.1 During the course of proceeding, notices u/s 153A r.w.s. 153B of the

Act were issued to the assessee. In response, the assessee filed return of

income for the AY 2007-08 on 28.03.2008 declaring total income of Rs.

83,69,090/-. Accordingly, after making complete inquiry, the assessment

order u/s 153A of the Act was passed on 24.12.2009 making certain

addition of Rs. 99,63,801/- on account of unverified purchases and on

account of disallowance of expenses of Rs. 2,94,711/-.

3.2 Against that order of the assessment the assessee instituted an

appeal before CIT(A), Central, Jaipur. Accordingly, the CIT(A), Central,

Jaipur vide order dated 03.05.2011 part relief was allowed to the assessee.

Appeal effect to the order of CIT(A) was given 10.06.2011 allowing relief so

given by the CIT(A). Against that order of the ld. CIT(A) the revenue as well

as the assessee preferred the appeal before the ITAT, Jaipur Benches,

4 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT Jaipur and accordingly, ITAT pronounced combined appellate order vide

ITA No. 721/JP/2011 dated 30.01.2012 allowing the appeal of the

assessee. The revenue filed an appeal before the Hon’ble High Court

against the order of the ITAT. Based on that appeal filed the Hon'ble High

Court pronounced the appellate order vide order bearing No. 205/2012

deciding on 24.08.2017 holding as under :

“the issue regarding unverifiable purchase is required to be answered in favour of the Department. The issue allowed in favour of the Department against the assessee. On the question of bogus purchases, the matter is remitted back to the AO. It will be open for the parties to lead their evidence including the cross- examination of the witnesses. It will also be open for both the sides to produce documents which are relevant for deciding the issue”

3.3 In pursuance to the appellate order of Hon’ble High Court, the set

aside assessment proceeding had been initiating. Accordingly, notice u/s

142(1) of the Act has been issued to the assessee on 30.08.2018,

06.10.2018 & 10.10.2018 requiring the details/information. In response, the

AR of the assessee filed his submission dated 15.10.2018 and main

content of the same is as under:-

"As regards the issue of alleged bogus/un-verifiable purchases it is respectfully submitted that in assessee's case there is no issue of bogus purchases but the issue is in regard to purchases made in the regular course of business but some of the purchases could not be got verified mainly on account of non availability of correct postal address of few sellers at that point of time. However confirmed copy of statement of account of the seller party together with copy of purchase invoice and seller's PAN, TIN etc and also bank statement of the assessee purchaser confirming the payment for the purchases by way of account payee cheque were duly filed. The assessee is enclosing herewith a common write-up for the previous years relevant to assessment years 2007-08 and 2008-09 in

5 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT relation to application of higher GP rate with reference to issue of unverifiable purchases for your kind perusal and consideration."

3.4 The ld. AO noted that the assessee had made purchases of precious

and semi-precious stones in cash without mentioning the complete, name,

address and their confirmations. The primary onus lies upon the assessee

had not been discharged. Thus, ld. AO after discussion held that the books

of account results are disbelieved and accordingly, rejected the books of

account by invoking the provision of section 145(3) of the Act. The ld. AO

thus noted that since the made unverifiable / unexplained purchases of Rs.

13,00,000/- the same was disallowed u/s. 69C of the Act.

3.5 The ld. AO since rejected the books of account, he went on adding

the difference of gross profit declared on the sale with that of the 30 %

gross profit estimated by the ld. AO and thereby a separate addition of Rs.

1,95,137/- was also made.

appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant

finding of the ld. CIT(A) is reiterated here in below:

“5.5 I have carefully considered submission of the appellant and orders passed by the Assessing officer on u/s 153A r.w.s. 153B/143(3) of the 1.T. Act, 1961 passed on 24.12.2009 and u/s 260A (Set-Aside) r.w.s. 153A of the Act on17.10.2018. I

6 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT have found that the AO passed order in light of Judgment pronounced by the Hon'ble High Court. The Ld. A.O. in para 11 of the assessment order has held the purchases of Rs. 13,00,000/- to be bogus and further that there is no quantitative reconciliation. With respect to such claimed purchases, some of the crucial observations and findings of ld. assessing officer in the initial assessment order and in the assessment order in set aside proceedings are as under:- • No name, address and confirmation have been filed from them. Thus, the parties shown do not exist. • The verification of signatures on the vouchers as recipients has not been made for want of Bills. Thus, the purchase vouchers are fabricated and purchases shown are not genuine. • It is also seen that the payment to these purchasers has been shown in cash as per purchase account at the sweet will/ convenience of the assessee as admitted by the assessee himself. • These payments intentionally have been kept below Rs. 20,000/-to avoid the applicability of provisions of Section 40A(3) of 1.T. Act. • These amounts intentionally have been shown as unpaid/sundry creditors so that payments to them can be shown in the cash book on any later date as per convenience of the assessee. • It is seen that the payments have been shown to have been made to Karigars /labourers. It is well known fact that the economic conditions of karigars/ Labourers are not sound and therefore, they prefer immediate payments of what they earn in a day and expend it on the very day. The payments have been shown after interval of 6 to 24 months as and when the assessce had cash balance in his Cash books. In fact payments to karigars are to be made at the spot as soon as the delivery of raw/finished goods is taken. It is highly unlikely that payment to karigars would be made late after a time gape of 6 to 24 months. • It is also worthwhile to mention that this is not a case where purchases have been made from one party and Bill from other party is obtained. • Vide AO's Letter Dated No. 1208 dated 17/11/2009, it was clearly asked to produce the purchase Bilis and confirmations from them, failing which, it was also asked to state reasons as to why addition should not be made for unverifiable/unexplained purchases made in cash in the above assessment years? No date wise and quantity wise details of cash

7 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT purchases for the assessment years 2007-08 and 2008-09 have been filed.

5.6 The name, identity of the sellers is unknown and unverifiable. The payments have been done in cash and the payment patterns and the credit periods are also against the principles of preponderance of human probability and further the appellant has not been able to prove the delivery of the goods ie. that the goods were actually received against such purchases and further if the goods were actually received against such purchases then the delivered quantity of such purchases matched with the quantity claimed to have been purchased. The Ld. AO observed that the assessee has made purchases for the year under consideration in Cash without mentioning the complete name, address and their confirmations. Further, no date wise and quantity wise details of cash purchases for the assessment years 2008-09 were filed by the appellant despite of clear cut notice from the Id. assessing officer. In the assessment order, the position and the clarification submitted by the appellant has been extracted which has been further extracted in this order above. The appellant has not been able to prove neither the identity of the sellers nor the delivery of the purchased articles nor the payment to the sellers also the quantitative details were not submitted. The quantitative details submitted by the appellant in present appeal proceedings are very brief/summary printout of apparently overall purchases and does not in any way show that the physical goods were actually received w.r.t. URD purchases.

The Ld. CIT(A), Central, Jaipur vide appellate order bearing No. 365/09-10 dated 03.05.2011 held as under:-

“3. Ground no. 2, 3, 8, 9 & 10 are related to the common issue hence, they are discussed together.

3.1 Ground no. 2 relates to invoking provisions of section 145(3). Ground no. 3 relates to trading addition of Rs. 1,95,137/- by taking the G.P @ 30%. Ground no. 8, 9 and 10 relate to disallowance of unverifiable purchase particularly cash purchase and URD amounting to Rs. 13,00,000/-

3.2 The aforesaid issues have come up for consideration in the appeal of the appellant himself in A.Y 2006-07, wherein after considering the decision of Hon'ble ITAT in the case of Sh. Dinesh Haldiya and brother Sh. Ravi Haldiya in A.Y. 2004-05 in regular assessment upholding G.P. @ 30%. the G.P. @ 30% was upheld (Appeal no 364/09-10 order dated 21.9.2010). Moreover, the facts revealed during the course of search and also admitted by the main person Sh. Ravi Haldiya during the course of search that Sh. Ravi Haldiya is making cash purchases on behalf of the entire group including the appellant and making cash payment and for the purpose of record, obtaining the bills from other parties and showing cheque payment to them, the cash of which is received back. Thus during the search the facts revealed in relation to trading results are further

8 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT adverse to the appellant group cases. Accordingly, G.P. @ 30% applied by the A.O. is upheld.

3.3 As regards addition on account of unverifiable purchases is concerned, this issue has also come up for consideration in the appeal for A.Y 2006-07 in the case of appellant himself. The A.O and A.R. has mentioned similar facts, reasoning and argument during the year under consideration as done in A.Y 2006-07. After considering the facts of the case, legal position related to the issue under consideration and particularly considering that complete current address of these parties were not given, parties are not traceable, payments outstanding for 6-12 months and thereafter shown to be made in cash, wide variation in the rate of the purchases of the various items shown from these parties not only in case of cash purchases or purchase from unregistered dealers but even from the purchases from some of the registered dealers which were held to be unverifiable and bogus in the regular assessment proceedings in the case of appellant and his brother namely Ravi Haldia for A.Y 2004-05 (hereinafter referred as tainted parties for the sake of convenience) on account of which the Hon'ble ITAT upheld the G.P. rate of 30% in these two cases, and after considering the decision of Hon'ble ITAT Ahemdabad in the case of Mis Vijay Protein Ltd v/s ACIT 58 ITD 428 and also the decision of Hon'ble Gujarat High Court in the case of M/s Sanjay Gil Cake Industries v/s C1T 316 ITR 274, the disallowance to the extent of 25% out of all the unverifiable purchases which include the cash and URD purchases as well as other unverifiable purchases from tainted parties was upheld in appeal order dated 21.9.10 for A.Y 2006-07 in appeal no. 364/09-10 in the case of appellant.

3.4 Considering that the facts for the year under consideration are also same, the appellant was requested to furnish details of purchases made from these tainted parties which have been noted in the original assessment order in A.Y. 2004-05 in the case of Sh. Ravi Haldia and Sh. Dinesh Haldia and was asked to show cause as to why should not these purchases be also included as part of unverifiable purchases for upholding disallowance to the extent of 25%, as done in appeal order for AY. 2004-05 in the case of appellant herself. A.R. furnished the details wherein purchase from these tainted parties was shown at Rs. nil in A.Y 2007-08. Accordingly, following the reasoning and arguments given in my appeal order for A.Y 2006-07 in the case of appellant the disallowance to the extent of 25% is upheld out of unverifiable purchases including not only the cash purchases and URD purchases. The total of such purchases in A.Y 2007-08 are Rs. 13,00,000/-. Therefore, the disallowance is upheld to the extent of Rs. 3,25,000/-

3.5 As the AC. has finally added higher of the two amount namely trading addition and disallowances out of purchases, accordingly, considering the finding of the A.O., the final addition in AY 2007-08 is upheld on account of unverifiable purchase to the extent of Rs. 3.25,000/- and appellant will get the resultant relief."

9 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT In the earlier order of the learned CIT Appeal the primary finding of the learned assessing officer that the cash URD purchases were not genuine was accepted however the addition was confirmed in terms of inflation of purchase prices on such cash URD purchases. In the order learned CIT Appeal held that, "Accordingly, following the reasoning and arguments given in my appeal order for A.Y 2006-07 in the case of appellant the disallowance to the extent of 25% is upheld out of unverifiable purchases including not only the cash purchases and URD purchases. In his submission the appellant has not submitted appeal order for AY 2006-07 in his own case. He has not submitted any decision of Tribunal for the AY 2006-07 against the appellate order of Ld. CIT(A).

Further, the appellant had filed appeal against the order passed by the Ld. CIT (Appeal). The Hon'ble ITAT vide ITA No. 30,711,723 & 719/JP/ 2011 for AY 2008-09, 2007-08, 2005-06 & 2004-05 dated 19.12.2011 held as under:

*40. Now we will take up the appeal for assessment year 2007-08 in ITA No. 711/JP/2011.

41 Ground No. 1 is rejected which is against upholding provisions of section 145(3) as we have already rejected for assessment year 2008-09.

42 Ground No. 2 is against sustaining trading addition of Rs. 1,95,137/- by applying GP rate of 30% against GP rate of 11.88%

43 We have directed to apply GP rate of 20% while disposing appeal for assessment year 2008-09. On the same reasoning, we direct the AO to apply GP rate for the year under consideration also as there are certain unverifiable purchases and trading addition will take care of leakage, if any.

44 Ground Nos. 3 & 4 are against confirming disallowance of Rs. 3,25,000/- made @ 25% unverifiable purchases

45 These grounds are allowed as we have already sustained trading addition as above."

In the earlier order of the Hon'ble Tribunal such purchases were not held to be genuine and addition was restricted to the gross profit ratio. The present order of the ld. AO also find support from the earlier order of the Hon'ble ITAT that the cash URD purchases are not genuine.

Now the only issue left for decision is whether the addition is to be sustained to address the issue of inflation of purchase prices in books vis-à-vis the actual purchase price paid by the appellant or the addition is to be sustained on the entire amount of such purchases. In this regard the crucial deciding factor is whether the quantitative details are produced by the taxpayer or not and whether these are completely tallying in other words whether the opening stock,

10 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT purchases, sales, closing stock item wise, weight wise quantitative details are matching or not.

Where an assessee is able to prove that the goods purchased have actually been sold further or has been consumed by producing the quantitative tally and reconciliation with supporting evidences in such cases the judicial view has been that the taxpayer purchased goods from one party but obtained the bills from other party however the purchases were actually made and such purchases were actually made at lower prices than the prices reflected in the bills as the seller and buyer both were able to save on taxes, various legal compliances, etc. And in such a scenario addition is done to address the issue of difference in purchase price disclosed in bills versus the lower purchase price actually paid by the assesse. However conversely where an assessee is not able to prove the quantitative reconciliation and not able to prove that the goods were actually received by him and were actually traded or consumed by him in such a case it becomes a case of not inflation of purchases prices but the case of completely bogus billing and such billing obtained to reduce the profits by the same equal amount to the amount in bills. In such a case the entire amount of such bogus bills is required to be added back to the income of the assesse.

The above is a simplistic view of the matter and there can be different variations of the above analysis. For the purposes of the present issue at hand the above analysis is relevant and sufficient.

The findings of the initial assessment order that the cash URD purchases are not verifiable neither in terms of the identity of the seller, nor in terms of the payments made to such claimed sellers and also nor in terms of whether such claimed purchases quantity were received or not have not been reversed in the appellate orders. The finding in the assessment order that the appellant did not submit the date wise quantity details as called from the appellant has also not been reversed in earlier appellate orders. The payments have been done in cash and the payment patterns and the credit periods are also against the principles of preponderance of human probability and further the appellant has not been able to prove the delivery of the goods i.e. that the goods were actually received against such purchases and further if the goods were actually received against such purchases then the delivered quantity of such purchases matched with the quantity claimed to have been purchased. The appellant has not been able to prove neither the identity of the sellers nor the delivery of the purchased articles nor the payment to the sellers also the quantitative details were not submitted. These findings in initial assessment order have not been reversed in the earlier appellate orders.

The explanation offered by the appellant has already been rejected in the first round of appeal and in the present appeal the appellant has made submissions which are not supported with evidence.

11 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT 5.7 In the case of Indian Woolen Carpet Factory V/s ITAT and Others (2002) 260 ITR 658 178 (Raj) / CTR 4420 (Raj) ( https://indiankanoon.org/doc/942953/) entire bogus purchases were disallowed and upheld. It is held that onus was upon the assessee to prove genuineness of purchases. The contention of the assessee that in case of return of notices u/s.133(6), the AO should have issued summons u/s.131 and return of notice by itself should not lead to adverse inference against the assessee. It is observed in the order as under:-

"3. The Assessing Officer was of the view that the purchases are not genuine and he added Rs. 2,75,000 in the assessment order dated March 6, 1986. Summons were issued to those parties on the given address. One or two parties appeared and considering their submissions, the addition was reduced to Rs. 2,25,000. Again the assessee went in appeal before the Commissioner of Income-tax (Appeals). ………………..

…………. 6. Considering the report of the Inspector of Income-tax and submissions of some parties, who are available, from whom wool was purchased, third time addition have been reduced to Rs. 1,12,500.

5.8 Further in the case of Commissioner of Income Tax, Jaipur-II v. Bright Future Gems [2017] 88 taxmann.com 476 (Rajasthan) [HON"BLE HIGH COURT OF RAJASTHAN], entire bogus purchases were disallowed and upheld. The assessee was not maintaining quantitative details of day to day purchases and

12 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT manufacturing of the items. Further on verification it was also noticed by the Ld. AO that purchases from two parties were bogus. The reasons like non-availability of the said two suppliers at the given addresses, non production of two suppliers by the assessee in spite of various opportunities granted. Assessee has failed to produce the owners of the two concerns. Hon'ble High Court also observed that merely voucher of the import export challans or chllans of the custom clearance will not prove physical delivery of the material (precious stones). There was nothing on record to certify the stones which were verified by any of the value. It was held it is all paper transactions for the purpose of taking benefit of the export and tax benefits.

The Hon'ble High Court observed as under:-

"3. The brief facts of the case are that the assessee firm is engaged in the business of precious and semi precious stones and it is a 100% exporter. During the course of assessment proceedings the AO has noticed that the assessee was not maintaining quantitative details of day to day purchases and manufacturing of the items. Further on verification it was also noticed by him that the purchases was made from M/s. Vinayak Overseas and M/s IVIH Gems. The purchases from above parties were established to be bogus after making in depth enquiries by the AO. During the course of assessment the AO has recorded Statements of concerned parties were established to be bogus after making in depth enquiries by the AO. During the course of assessment proceeding it has been gathered that the assessee has failed to produce the owners of the two concerns. The reasons like non-availability of the said two suppliers at the given addresses, non production of two suppliers by the assessee in spite of various opportunities granted, statement of Sh. Mohan Prakash Sharma Power of Attorney holder of M/s Vinayak Overseas stating of giving accommodation entireties only and nature and volume of transaction appearing in their bank accounts leads the AD. to the conclusion that the purchases were bogus. 7. Before considering the matter, it will not be out of place to mention here that question which is posed for our consideration is whether the purchases which has been done from Vinayak Overseas is genuine or not. The Assessing Officer while observing at page 12 referred hereinabove and which was already considered by the CIT (A) has confirmed the finding and Vinayak overseas has specifically contended that they were not transfer by Vinayak overseas and they were absconding. The Tribunal only on the statement of M.P. Sharma who was power of attorney holder of Vinayak overseas has given the finding. In our view, the finding is perverse. The view taken by the Tribunal is required to be reversed.

13 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT were verified by any of the value. In our view it is all paper transactions for the purpose of taking benefit of the export and tax benefits.

In [2019] 101 taxmann.com 162 (Punjab & Haryana) Shree Krishana Kripa Feeds v. Commissioner of Income Tax, Karnal entire bogus purchases were disallowed and upheld. Purchases from the specified parties could not be established. The bills of the parties did not have Sales Tax No., TIN No. or CIN No. Further, on physical verification of the addresses these parties were not found to be existing, which was also supported by certificate from local authority.

Further the argument of the assessee that the purchases were part of the sale reflected in the sale tax return was rejected as on going through the sale tax return there is no evidence to show that these purchases had been included in the details in the sale tax return and that the value of goods as per the VAT return for the year ending 31.3.2012 has been shown at Rs. 53,53,28,987. The addition was done by the Ld. AO without rejecting books of accounts. Hon'ble ITAT noted in that order that it appears that these purchases from have been used for suppressing the profits of the business.

The Hon'ble P&H High Court while upholding the judgement of the Hon'ble ITAT observed as under:-

The Tribunal while affirming the addition of Rs. 21,46,261/- had noticed as under:- "With regard to addition of Rs. 21,46,261/ relating to unverified purchases is concerned, I find that AD has conducted detailed enquiries regarding the details of purchases from M/s Haryana Trading Company and M/s Vishal Traders and had come to logically conclude that these purchases from the parties could not be established. The bills of the parties did not have Sales Tax No, TIN No, or CIN No. Further, on physical verification of the addresses these parties were not found to be existing, which was also supported by certificate from local authority. I further find that the AR of the assessee has submitted that these purchases were part of the sale reflected in the sale tax return. However, on going through the sale tax return there is no evidence to show that these purchases had been included in the details in the sale tax return. It is worthwhile to note that such modus operandi is used by some business person to book bogus purchases for suppressing the profits of business. In the present case the argument of the AR that these purchases were the basis of the sales made, is not established by facts and evidences. The value of goods as

14 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT per the VAT return for the year ending 31.3.2012 has been shown at Rs. 53,53,28,987/. Accordingly, it appears that these purchases from M/s Haryana Trading Company and M/s Vishal Traders have been used for suppressing the profits of the business. Even though the books of account have not been rejected, since the AO has clearly established that the purchases were bogus, there is no justification for accepting the contentions of the AR that only part of the purchase should be disallowed. In view of the above observations this addition made by the AD was rightly upheld by the Ld. CIT(A), which does not need any interference on my part, hence, I uphold the order of the Ld. CIT(A) on the issue in dispute and dismiss the issue in dispute raised by the Revenue." 11. in view of the findings recorded above, questions (c) and (d) would not arise."

In [2007] 294 ITR 316 (Allahabad) Sri Ganesh Rice Mills v. Commissioner of Income-tax entire bogus purchases were disallowed and upheld. In this case the assessee is a manufacturer and he claimed to have purchased the same item from open market as well. The assessee did not purchase the item from parties other than the parties found to have provided bogus bills to assessee. The Hon'ble High Court rejected the contention of other transactions with such parties and noted that merely because the applicant had been dealing with the firm that will not make the purchases of chuni-bhusi genuine when there was sufficient evidence to the contrary.

The argument to claim deduction of purchases from the corresponding sales was rejected inter-alia on the ground that the assessee is manufacturer of the same item.

The Hon'ble High Court observed as under:-

"We find that it is not the case of the applicant that he is a trader. On the other hand, the applicant is a manufacturer and in the manufacturing process, chuni-bhusi also gets manufactured as a by-product. It is not the case of the applicant that it had made the purchases of chuni-bhusi from other persons also. The Assessing Officer had recorded a finding that in order to lower down the profits, the bogus purchases have been introduced. Taking into consideration the entire facts and circumstances of the case, we are of the considered opinion that the findings recorded by the Tribunal cannot be said to be based on irrelevant material and consideration. The applicant being a manufacturer of chuni-bhusi has not been able to establish the purchases in question which have been made from the non-existent firms. Further, the two firms owned by the brothers of the partners of the applicant-firm are said to have purchased the goods form the non-existent firm and even the invoices/bills have been prepared by the munim of the applicant Merely because the applicant had been dealing with the firm that will not make the purchases of chuni-bhusi genuine when there was sufficient evidence to the contrary.

15 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT

So far as the question of deduction of purchases from the corresponding sales are concerned, we may mention that the applicant being a manufacturer of chuni-bhusi and purchases having been found to be bogus and there is no other purchases of chuni-bhusi, the benefit of deduction of such purchases has rightly been disallowed".

In [2015] 55 taxmann.com 371 (Punjab & Haryana) Commissioner of Income- tax- II, Chandigarh v. Narender Kumar Gupta, entire bogus purchases were disallowed and upheld. The Assessing Officer referred to failure of the assessee to prove the existence of these parties and while doing so he did not merely rely upon absence of a sales tax registration number/or absence of registration with the Pollution Control Board (as held by the Tribunal) but also sought a report from an inspector who found that these parties did not exist at the addresses mentioned in the bills. Evidence further relied by the Assessing Officer particularly the reference to variation in the name of the party on the voucher and the corresponding bill, variation in description of purchases on the voucher and the corresponding bill, variation in rates of the same item of purchase etc.

The Hon'ble Tribunal held that the Assessing Officer did not make any inquiries as to the status of the assessee as at best he made general inquiries regarding the non-registration of the supplier with the Sales Tax Authorities and the Pollution Control Board and thereafter directed the Assessing Officer to apply a net profit rate of 6 per cent to workout the income of the assessee and deleted all additions.

The Hon'ble High Court set aside the matter to the Hon'ble ITAT and observed as under:-

"10. The Tribunal, however, has not dealt with this aspect nor has it chosen to record any opinion on the failure of the assessee to produce these parties or to prove their existence or to rebut the report prepared by the Inspector but abruptly directed the assessing officer to apply a net profit rate of 6%, without assigning any ostensible reason. The Tribunal having ignored relevant facts, in our considered opinion, has committed an error of jurisdiction. We would like to clarify that we are not recording any opinion as to the legality or otherwise of the bills, the vouchers and the expenses etc. particularly as the assessee who is a contractor must have purchased some material but as the Tribunal has directed assessment at a net profit rate without examining the material on record, referred to in detail by the assessing officer particularly the paragraphs extracted hereinbefore, the questions of law have to be answered in favour of the revenue by holding that the Tribunal has erred in applying a net profit rate without considering the material collected by the assessing officer and by ignoring relevant facts and factors referred to by the assessing officer, thereby

16 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT leading to miscarriage of justice and an error of jurisdiction that must necessarily be rectified by the Tribunal itself.

In [2016] 72 taxmann.com 289 (Gujarat) N.K. Industries Ltd. v. Deputy Commissioner of Income-tax, entire bogus purchases were disallowed and upheld. The Hon'ble High Court observed as under:-

"3. The assessee company also popularly known as N.K. Group of companies is involved in trading and speculation of castor seed and also engaged in export of castor oil and castor oil derivatives. During the course of search proceedings at the office premises of NKPL, blank signed cheque books and vouchers of number of concerns were found. Endorsed blank cheques of NKPL by these concerns were also found from the office premises of NKPL wherein the endorsement was on the back of the cheques. Blank bill books, letter heads and vouchers of these concerns were found and seized from the factory premises of NKPL. Purchases made from these concerns have been treated by the Assessing Officer as bogus purchases in view of elaborate reasons recorded in the assessment order. The entire deposits in the bank accounts of these parties were treated as assessee's income on protective basis.

4.2 Mr. Shah further submitted that the Tribunal committed a grievous mistake in presuming that there was excise duty and sales tax and other taxes on oil purchased by the assessee and on the basis of such grievous error coming to the conclusion that the purchase price of the appellant would be 25% less than the market price. He submitted that the fact of the matter is there are no such taxes on oil. ………………. ………………

4.6 Mr. Shah submitted that the case of Vijay Proteins Ltd. v. CIT [2015] 58 taxmann.com 44 (Guj.) is not applicable on the facts of the present case. Drawing attention to para no. 16 of the order in the case of Vijay Proteins, he submitted that this Court decided the said case by placing reliance on Sanjay Oilcake Industries v. CIT [2009] 316 ITR 274 in which it is held that there is no substantial question of law since there is inflation in purchase

17 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT price. He submitted that there is distinction in facts of the present case and Vijay Proteins Ltd. (supra) inasmuch as in the case of Vijay Proteins Ltd. (supra) there is inflation in purchase price whereas in the present case the remand report clearly states that the purchases were at prevailing market rate. He submitted that even the GP and the yield is better. ……………… ………………..

(Emphasis Supplied)

The honourable jurisdictional High Court has in number of cases leg Commissioner of Income Tax, Jaipur-1, Jaipur vs. M/s Gems Paradise, Jaipur in D.B. Income Tax Appeal NO. 201/2010 decided on 2nd November, 2016 and C1 T Jaipur vs. Govindam Export D.B. Income Tax Appeal No. 934/2008, 157/2009, 165/2009, 197/2009, 199/2009, 414/2011 etc.) inter-alia referred and relied upon the judgement in the case of [2016] 72 taxmann.com 289 (Gujarat) N.K. Industries Ltd. v. Deputy Commissioner of Income-tax, and thus this judgement is also binding in nature.

In view of the this discussion in the present case the appellant has not been able to prove the purchases neither the party nor the payment nor the goods and also the appellant has not been able to prove the receipt of actual delivery of goods and thus it is a case of complete bogus purchases and such purchases need to be added back to the income of the appellant in entirety. Same approach has been adopted in the assessment order under appeal and the no fault can be found in the same. Accordingly this ground of appeal of the appellant is hereby dismissed.

18 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT

6.3 I have carefully considered submission of the appellant and orders passed by the Assessing officer on u/s 153A r.w.s. 153B/143(3) of the I.T. Act, 1961 passed on 24.12.2009 and u/s 260A (Set-Aside) r.w.s. 153A of the Act on17.10.2018. In pursuance to the appellate order of Hon'ble High Court, the set-aside assessment proceedings has been intiated and finally, AO completed the assessment u/s 260A (Set-Aside) r.w.s. 153A of the Act vide order dated 17.10.2018 at a total income of Rs. 1,00,76,738/-.

In the initial / original assessment order ld. AO made trading addition of Rs. 1,95,137/ on protective basis but in the assessment order which was passed after u/s 260A(Set-Aside) r.w.s. 153A on 17.10.2018, Id. AO made addition of Rs. 1,95,137/- on substantive basis.

A relevant part of assessment order dated 17.10.2018 are reproduced as under:

"12. Moreover, it is mentioned here that the books of accounts are incomplete and incorrect and trading results declared by the assessee are not relied upon. Neither the cash books of any concerns were complete on the date of search on 20.04.2007, as balance was not drawn at the end of the day nor purchases are fully vouched. During search, excess stock and cash have been found. Various entries in seized loose papers/documents/Diaries suggest that the assesses of this group are indulged in unaccounted purchases so much so that wages for processing of Gems stones claimed by the assesses are not supported by proper vouchers. As per seized Annexures AA- 22. pages 16 to 22 are manual vouchers were prepared dully paid in cash without mentioning the month and year. It is also noticed that as held above the purchases are unexplained and unverifiable. It is also noticed that in AY 2005-06 the assessee had shown purchases from Registered Dealers, ie. M/s Girish Diam Jaipur of Rs. 22.25,626/- and M/s Abhay International Jaipur of Rs. 22.95.357/- and in AY 2004-05 purchases of Rs. 25,07,258/- made from registered dealers namely M/s Jwels and Crafts, A. S. Exports. A. R. Exports, DJ Impex and Metro Gem House, but these dealers had been declared unverified in the case of Shri Ravi Haldia and Dinesh Haldia in AY 2004-05 as per Hon'ble ITAT'S Order dated 31.07.2008 in ITA No 320- 321/JP/2008, It is thus, held that the books of account are defective and theprovisions of section 145(3) are clearly and admittedly applicable. In this regard following case laws are relied upon: - � Kachwala Gems Vs. JCIT Tax World, Feb 2004 Pages 77 ITAT Jaipur and confirmed by Apex Court reported in 288 ITR 10 (SC) wherein it is held that: -

A. Payment made by account payee cheques are not sufficient to establish genuineness of purchases.

19 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT B. Registration under Sales tax Act does not give conclusion that purchases from such parties were genuine. � CIT Vs. Golcha Properties P. Itd. 227 ITR 391 (Raj.) � CIT Vs. La Medica 250 ITR 575 (Del.) � CIT Vs. Vaibhav Gems 13. In view of the above discussed facts, since the books of account have been rejected, therefore, the Trading Addition is made @30% on total turnover of Rs. 10,76,900/-. Since, the assessee merely declared G.P. rate @ 10.33%, therefore, remaining percentage of G.P. will be applicable in this case. Accordingly, summarized chart is as under: - (Amount in Rs.) Particulars AY 2004-05 Sales declared 10,76,900/-

G.P. rate declared 11.88%

GP rate applied 30% GP determined 3,23,070/-

GP declared 1,27,933/-

Trading Addition 1,95,137/-

Difference in Rate of G.P. 30%-11.88% 18.12% (Average rate of G.P. -Rate of G.P. claimed by the assessee)" There was only variation in rate of profitability in this regard. Once the books of accounts are rejected the same books or the results there from cannot be relied upon and in such a scenario one of the accepted principles is that the average of the gross profit ratio of the earlier year is to be applied in the current year irrespective of the disclosed profitability shown in the current year as the books of accounts have already been rejected. 6.4 The Ld. AO in the initial assessment order has held that in the cases of Shri Ravi Haldia and Dinesh Haldia, in A.Y. 2004-05, a g.p. rate of 30% has been considered reasonable and upheld by the Hon'ble ITAT Jaipur in their Order dated 31/07/2008 in ITA No. 320-321/JP/2008. Even in other similar trade cases where purchases were not verifiable, higher gross profit rate has been applied and upheld by higher courts over the years at Jaipur.

20 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT Thereafter in the appellate order passed by my Id. Predecessor vide order 365/09-10 dated 03.05.2011 held that as under:

“3.2 The aforesaid issues have come up for consideration in the appeal of the appellant himself in A.Y 2006-07, wherein after considering the decision of Hon'ble ITAT in the case of Sh. Dinesh Haldiya and brother Sh. Ravi Haldiya in A.Y. 2004-05 in regular assessment upholding GP @ 30%. the G.P. 30% was upheld (Appeal no 364/09-10 order dated 21.9.2010). Moreover, the facts revealed during the course of search and also admitted by the main person Sh. Ravi Haldiya during the course of search that Sh. Ravi Haldiya is making cash purchases on behalf of the entire group including the appellant and making cash payment and for the purpose of record, obtaining the bills from other parties and showing cheque payment to them, the cash of which is received back. Thus during the search the facts revealed in relation to trading results are further adverse to the appellant group cases. Accordingly, G.P. @ 30% applied by the A.O. is upheld."

Hon'ble ITAT, Jaipur Bench vide appellate order bearing ITA No. 721/JP/2011 dated 30.01.2012 has held as under:

“6. After going through the orders of the AO, Id. CIT (A) and the submissions of the parties mentioned above, we find that this issue has already been decided by the Tribunal while deciding the appeal of the assessee in ITA No. 711/JP/2011. Through ground nos. 3 & 4, the assessee has objected confirming disallowance of Rs. 3,25,000/- out of total addition made by AO on account of unverifiable purchases. The grounds of the assessee were allowed by observing that a separate trading addition was sustained by the Tribunal while deciding the ground in respect to trading addition made separately by applying GP rate of 30% against GP rate of 11% shown by assessee. Tribunal has directed to apply 20% GP rate against 11.88% shown by assessee. Even and otherwise, the Jaipur Benches of the Tribunal are taking a consistent view that where certain purchases remained unverifiable then invoking of provisions of section 145(3) are attracted. Therefore, Tribunal has confirmed the invocation of provisions of section 145(3) while disposing the ground of the assessee The Benches of the Tribunal are also taking a consistent view that where certain purchases remained unverifiable then the addition should be made on the basis of past history and taking into consideration the current events of the case. Taking into consideration the application of GP rate, the Tribunal has already directed to apply GP rate of 20% against 11.88% shown by assessee. Therefore, no separate addition is warranted on account of unverifiable purchases as the trading addition made will take care of leakage of revenue, if any."

Essentially the issue raised by the appellant pertains to the rate of addition to gross profit. The learned assessing officer has considered a gross profit rate of

21 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT 30% whereas the appellant has claimed that the rate of gross profit should be restricted to 20% and has relied upon the order of on Hon'ble ITAT in his own case. However it is noted that the said order of Hon'ble ITAT was challenged by the revenue before the Hon'ble High Court and Hon'ble high court has given a ruling in favor of the revenue. It is important to note that the issue was not completely allowed by honorable Tribunal against the initial assessment and only the rate of gross profit was reduced by honourable Tribunal which was challenged by the revenue before the honorable High Court and honorable High Court has allowed this ground of appeal on the issue of rate of gross profit in favor of the revenue. The issue has been decided by the Hon'ble High Court in the favor of the revenue and nothing further remains in this regard. In the order passed by the assessing officer as per the directions of the Hon'ble High Court the learned assessing officer has considered gross profit rate of 30% the issue has been discussed in detail in the above paragraphs. Accordingly, the order of the Learned assessing officer is upheld on the issue and the ground of Appeal raised by the appellant is dismissed.”

CIT(A), the assessee has preferred the present appeal before this Tribunal

on the ground as reproduced hereinabove. To support the various grounds

so raised by the ld. AR of the assessee, he has filed the written

submissions and the same is reproduced herein below:

With reference to above and in continuation to grounds of appeal taken while filing the abovementioned appeal it is respectfully submitted as under:- A. That before making submissions in regard to grounds of appeal, the appellant craves leave to give the facts of the case in brief which form part of the paper book. B. Submissions for each ground of appeal. GROUND OF APPEAL NO.1

22 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT 1. This ground of appeal is against sustaining by the ld. CIT(A) addition made by the AO u/s. 69C of Rs.13,00,000/- on substantive basis. In support of this ground of appeal it is humbly submitted as under:- i. The assessee has kept and maintained full record in terms of weight of the rough purchased, rough put to manufacturing, finished goods manufactured out of manufacturing operations, wastage occurred during manufacturing, yield, labour charges paid to various karigars and all this record was produced before the A.O. more than once. ii. That the assessee has kept and maintained trading and manufacturing accounts of different precious and semi precious stones in terms of weight in cts. Quantitative details of manufacturing and trading activities of different commodities form part of the paper book being separately and simultaneously filed. In other words detailed exhaustive stock register has been maintained for each and every item traded and manufactured and the same was duly produced before the A.O. iii. That the assessee has kept and maintained full receipts and vouchers for payments made to Karigars in respect of labour charges and there is no leakage of any kind at any stage so much so there is a full proof record maintained at the end of the assessee. iv. Full record of purchases including vouchers for purchases of Rs.13,00,000/- made in cash as well as from unregistered dealers have been maintained. In other words all these purchases of Rs.13,00,000/- made in cash as well as from unregistered dealers are duly supported with purchase vouchers duly signed by the sellers. v. That not a single instance of bogus or excessive payment in cash or to unregistered dealers have been pointed out by the AO . Likewise the identity of the unregistered dealer was not doubted nor the genuineness of such payments. It is further submitted that the appellant did not make any payment exceeding the prescribed limit of Rs 20000/- U/s 40A(3) and that the appellant’s case was covered by the Board’s Circular No 220 [F. 206/17/76/IT(A-II) dated 31.05.1977] vi. In the year under appeal the assessee has maintained complete quantitative records of goods purchased and sold including cash purchases/purchases from unregistered dealers. vii. Moreover day to day sale invoices have duly been maintainedby the assessee and the same were produced before the A.O. from time to time. viii. Moreover the A.O. has not doubted the sales of the assessee. In other worlds the AO has treated the declared sales as genuine. It is submitted that when the sales are genuine then why would any person indulge in unverifiable purchases. ix. The assessee has regularly kept and maintained books of accounts consisting of Cash Book, ledger, Journal, stock registers, manufacturing record, export realization register, purchase and sales bills, subsidiary books and expenses vouchers and other relevant records. x. The books of accounts of the assessee are audited by a Chartered Accountant. Tax Audit Report on form No.3CB & 3CD stands filed.

23 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT xi. There is no change in the method of accounting nor in the method of valuation of closing stock. xii. The A.O. has not pointed out any inherent defects in the system of accounting. Not a single item of suppression of sales nor inflation of purchases has been pin pointed by learned A.O. xiii. Moreover it is a fact that neither during the course of survey/search nor otherwise there is any evidenceof any unaccounted purchase nor of unaccounted sale by the appellant. xiv. Quantitative details of opening and closing stock as well as purchase/sale kept and maintained by assessee stand already filed in the course of assessment proceedings. xv. The identity of the recipients of the payments was not doubted by the AO nor was it observed by the A.O. that these are fabricated and false. xvi. In this line of business various qualities and in different quantities of precious and semi precious stones are required and at the same time the assessee also requires different shapes and sizes of the stones and these are never available at one single place. Further the big dealers normally do not sell the goods in little volume. In these circumstances and to fulfill the commitments with the customers, the assessee had to purchase goods in cash as well as from petty unregistered dealers. This is not a peculiar feature in this line of business, but it is a regular practice in this trade. So the cash purchase and purchases from unregistered dealers should not be viewed otherwise. xvii. That as regards payment made in cash the assessee’s explanation is that the unregistered dealers as well as other persons related to this trade are almost illiterate or little educated. Most of the same did not have Bank A/c and in order to maintain regularity of business the appellant was compelled to purchase the goods in cash and also from unregistered dealers. xviii. That business of precious and semi precious stones is not exclusively in the hands of bulls only. Lacs of unskilled labour throughout the world are in one way or the other engaged in this line of business. It is needless to say that this business of precious and semi precious stones is dependant on these unskilled labour. These unskilled labours are the back bone of this trade who prepare finished products from the rough stone. In the course of time these unskilled labour gets involved in small transactions of self manufacturing and purchase/sale of gems and stones. This class of business people is called in common parlance as unregistered dealers. They are even recognized by state government who brings from time to time welfare schemes called composition scheme for payment of nominal amount in lump sump in lieu of tax under sales tax law of the state. It is also submitted that there are hundreds and thousands of verities of colour stones in various shapes and sizes. A dealer of gems and stones has to fulfill the varying demands of his customers and to fulfill this demand of customers and for business expediency almost every dealer searches the sources of availability of these goods. If in this course of business activity the humble assessee has purchased goods in cash it should not be viewed otherwise because it is part and partial of this Gem Stone Trade. In the wake of above submissions these cash purchases are made for business expediency.

24 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT xix. That this is not the case of the A.O. that the assessee had made excessive payment while making purchases in cash. xx. That above all, the appellant can be said to have been guided by business expediency for purchases in cash and from unregistered dealers who are mostly illiterate / little educated. xxi. That the burden of proof of non-accepting the apparent as real lies on the AO but he has failed to discharge this burden of proof. So much so the AO has not given a single instance of layering of funds or circulation of funds. xxii. That for every sale there has to be a purchase and without purchase there cannot be sales. When sales are admitted there is no reason to suspect the purchases made by the assessee. 2. Moreover in the appeal of the assessee himself emanating from the original assessment order passed on 24.12.2009 u/s.153A r.w.s. 153B/143(3) of the I.T. Act the Hon’ble ITAT Jaipur Bench vide its consolidated appellate order dated 19.12.2011in ITA No. 30, 711, 723 and 719/JP/2011 for assessment years 2008- 09, 07-08, 05-06 and 04-05respectively in the case of appellant himself i.e. in case of Dinesh Haldia Vs. DCIT Central Circle-3 reduced the application of GP rate from 30% to 20% and consequentially reduced the trading addition of Rs.1,95,137/- to Rs.87,447/-. In regard to additions for cash purchases/purchases from unregistered dealers the Hon’ble Tribunal held that no separate addition is warranted on account of unverifiable purchases as the trading addition sustained at Rs.87,447/- will take care of leakage of revenue, if any. The humble appellant places reliance on this judgment of Hon’ble ITAT. A copy of this judgment of Hon’ble Tribunal forms part of the paper book being filed separately and simultaneously.

25 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT Hon’ble ITAT, Jaipur Bench”B”, Jaipur emanating from the set-aside assessment order dated 16/10/2018 in the case of RaviHaldia (having same set of facts and identical issues) in ITA No. 64 and 65/JPR/2024, the appellant DineshHaldia’s present appeal for AY 2007-08 before The Hon’ble Bench against the order of CIT(A) may kindly be allowed. 5. Without prejudice to above submissions and in the alternative it is respectfully submitted that higher courts including Jurisdictional High Court and ITAT Jaipur Benches have in last 7-8 years taken a constant view that in case of unverifiable purchases, these(unverifiable purchases) should not be disallowed but keeping in view past history of the assessee, GP rate may be decided. A comparative chart of G.P. rate forms part of the paper book as Annexure A.Further a list of some of the judicial pronouncements referred to and relied upon by the appellant in addition to judgments mentioned in the written submissions forms part of these written submissions as Annexure B

GROUND OF APPEAL NO.2 This ground of appeal is against sustaining of addition by the ld. CIT(A) on account of the application of GP Rate 30% (as against declared GP rate of 11.88%) by the AO on declared sales of Rs. 10,76,900/- and thereby sustaining on protective basis trading addition of Rs. 1,95,137/-. In this regard it is respectfully submitted as under:- 1. That while sustaining trading addition of Rs.1,95,137/- [GP determined Rs.3,23,070/- minus GP declared by assessee Rs.1,27,933/-] by way of application of higher GP rate of 30% as against declared GP rate of 11.88% on sales of Rs.10,76,900/-, the ld. CIT(A) failed to appreciate various facts, and circumstances of the case and submissions mentioned in clauses no. i to xxii under para no. 1 of ground of appeal no.1 and the record maintained by the appellant assessee. To avoid multiplicity and repetition of same submissions the assessee is not making again such submissions under this ground of appeal no. 2 and craves leave to refer to and rely upon the submissions mentioned under ground of appeal no.1. 2. The learned CIT(A)failed to take into consideration the fact that the Hon’ble Tribunal in regard to appeal emanating from the assessment order u/s.153A r.w.s. 153B/143(3) of the I.T. Act, 1961 dated 24.12.2009 in assessee’s own case for this very assessment year upheld the GP rate of 20% only as against declared GP rate of 11.88%. Copy of this judgment of Hon’ble ITAT Jaipur Bench in assessee’s own case arising from order u/s. 153A r.w.s. 153B/143(3) of the I.T. Act, 1961 dated 24.12.2009 is enclosed. 3. That while applying GP rate of 30% as against the declared GP rate of 11.88% on the basis of order of Tribunal in assessment year 2004-05 learned lower authoritiesfailed to appreciate that this rate of 30% was applied by Tribunal

26 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT

against GP rate declared by assessee himself in assessment year 2004-05 at 28.69%. Further in the previous year relevant to A.Y. 2004-05 there were only export sales where GP is normally higher. As against this in the year under appeal there are no export sales but only local sales wherein GP rate is normally low.

GROUND OF APPEAL NO.3

This ground of appeal is general in nature and may kindly be decided accordingly.”

was placed on the following evidence / records / decisions:

S. No. Nature of Paper Document Page No. 1. Written submissions along with Annexure A and Annexure B 1-8 2. Brief facts of the case 9-10 3. Quantitative stock details of F.Y. 06-07(relevant to 11 A.Y. 2007-08) 4. Copy of original assessment order u/s.153A r.w.s. 153B/143(3) of I.T. 12-22 Act, 1961 dated 24/12/2009 for A.Y. 2007-08 in the case of assessee, namely, Dinesh Haldia himself 5. Copy of consolidated order dated 15/04/2024 passed by The Hon’ble 23-44 Income Tax Appellate Tribunal, Jaipur Bench, Jaipur in regard to two appeals of Ravi Haldia (brother and co-member of Ravi Haldia group) bearing ITA No. 64 and 65/JPR/2024 for AY 2005-06and 2007-08 respectively having arisen from the same set of facts and identical issues as that of appellant Dinesh Haldia 6. Copy of the consolidated appellate order dated 19.12.2011(relevant 45-72 paras of this appellate order in regard to A.Y. 2007-08 are Para no. 40 to 49 on page no. 25 and 26) in I.T. Appeal Numbers 30,711,723 & 719/JP/2011 for Assessment years 2008-09, 07-08, 05-06 & 04-05 respectively in the case of Shri Dinesh Haldia v/s. The DCIT, Central

27 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT Circle 3, Jaipur and IT Appeals numbers 100/JP/2011 in the case of The DCIT, Central Circle 3, Jaipur v/s. Sh. Dinesh Haldia. Relevant paras of this appellate order in regard to the issue of GP rate and unverifiable purchases for A.Y. 2007-08 are Para no. 40 to 49 on page no. 25 and 26 of the ITAT order

the assessee also argued that there is no basis for estimating the profit @

30 %. But as stated herein above in case of his brother the tribunal has

reduced the rate of G.P. based on the decision of the jurisdictional high

court in the case of “Clairty Gold” the Rajasthan High Court also held profit

in such case not be estimated more than 12 %. He also relied on the

decision of the bench in the case of his brother shri Ravi Haldia and the

decision of the bench filed in the paper book filed by him.

findings of the lower authority and more particularly advanced the similar

contentions as recorded in the order of the ld. CIT(A) and that of the ld.AO.

on record. As it is clear from the facts that this is the second round of

litigation and issue was that of the purchases made from unverified / bogus

28 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT dealers but the corresponding sales was not doubted. On the similar issue

the bench has decided the case of the brother of the assessee having same

set of facts and circumstances. The relevant finding of the bench on that

case of Shri Ravi Haldia is reproduced here in below :

“10. We have heard the rival contentions and perused the material placed on record. The bench noted that the apple of discord in this case is that in the first round of litigation the ld. AO completed the assessment order u/s. 153A of the Act on 24.12.2019 making addition of Rs. 1,30,67,878/- on account of unexplained trading addition. Thereafter the matter travelled up to the Hon’ble jurisdictional high wherein the court so far as regarding the bogus purchases of the held that “On the question of bogus purchase, the matter is remitted back to the A.O. It will be open for the parties to lead their evidence including the cross- examination of the witnesses. It will be open for the parties to produce documents which are relevant for deciding the issue.” Thus, in this case the in the remand proceeding the ld. AO repeated the same addition by estimating 30% being the gross profit as estimated in the first round of litigation as against the gross profit declared by the assessee @ 11.60 %. The bench noted that recently the jurisdictional Hon’ble Rajasthan High court while dealing the estimation of gross profit on account of bogus purchase while dealing with the case of COMMISSIONER OF INCOME TAX (CENTRAL), JAIPUR vs. M/S CLARITY GOLD (P) LTD. [100 CCH 0396 RajHC ] held as under: 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. 5. We have heard Mr. Mehta counsel for the appellant and Mr. Gupta counsel for the respondents.

29 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT

A.Y. 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2009-10 2010-11 unaudited Sales 198490 1426903 5466428 68749794 97777586 10306287 1072033 1540384 Stock Dif. 144657 5147868 0 71450573 6769267 83951400 83334242 5750095 Total 2129557 1941690 5466428 75894851 1054510 11145801 11553681 2115394 Purchases 181023 1698878 4962283 68670235 9376682 96584379 99103051 1S74824 Direct Cost 0 6118276 9962436 1409772 1312092 8607118 10319346 8163403 Total 181023 1760061 5061907 70080007 9507891 97445091 10013498 1956458 Grow 3193228 1816292 4045206 5S14844 9466185 14012920 15401828 1589358 G. P. rate 16.08% 12.72% 7.40% 8.45% 9.68% 13.59% 14.36% 10.31%

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.

Since, in these the average rate of gross profit was directed to apply and the assessee has submitted the details of the gross profit of the last four year before the ld. CIT(A) by way of chart and said chart reads as under : A.Y Sales Purchase Stock G.P G.P % Net Profit 05-06 19132770/- 42740333/- 36301125/- 2172925/- 11.36% 9987110/- 06-07 142135/- 11159105/- 48001224/- 23879/- 16.80% (-)1430019 07-08 3644240 13541232/- 58606809/- 401922/- 11.02% (-)776631 08-09 1299794 3095168/- 60558903/- 156720 12.06% 19,16,671/-

The average of gross profit from the above chart comes to 12.81 % and therefore, the same is directed to be applied as against the 30 % applied by the lower authority which will end the justice on the issue. Based on these observations the appeal of the assessee is partly allowed.”

30 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT On being consistent to the finding so recorded herein above. We direct the

ld. AO to delete the substantive addition of Rs. 13,00,000 made u/s. 69C of

the Act and consequently the ground no. 1 raised by the assessee is

allowed.

bench noted that the case of brother of the assessee G. P. Rate was

estimated at 12.81 % whereas the Jurisdictional High Court in the case of

Clarity Gold estimated the profit @ 12 %. Considering the profit rate of his

brother being based on the average of his business and to put end to the

justice on the issue in the case of the assessee we direct the ld. AO to

estimate the profit @ 13 % as against the 11.88 % declared by the

assessee. Thus, addition sustained is calculated as under:

Sales made by the assessee Rs. 10,76,900/- Profit @ 13 % (A) Rs. 1,39,997/- Profit already declared (B) Rs. 1,27,933/- Addition confirmed (A)-(B) Rs. 12,064/-

Based on these observations, ground no. 2 raised by the assessee is partly

allowed.

31 ITA No. 384/JP/2024 Dinesh Haldia vs. DCIT In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 30/07/2024.

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Tk;iqj@Jaipur fnukad@Dated:- 30/07/2024 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Dinesh Haldia, Jaipur 2. izR;FkhZ@ The Respondent- DCIT, Circle-01, Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. 6. xkMZ QkbZy@ Guard File (ITA No. 384/JP/2024) vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत