DCIT CIRCLE-19(1), NEW DELHI vs. R C JEWELLERS PVT LTD, NEW DELHI

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ITA 1607/DEL/2020Status: DisposedITAT Delhi27 June 2023AY 2016-174 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the rejection of books of account was not justified as the entire books were in the custody of the revenue department. The CIT(A) had exhaustively examined the VAT returns, which showed all sales and purchases declared, and found no discrepancies.

What were the facts?

The Assessing Officer (AO) rejected the assessee's books of account and made an addition of Rs. 8,19,15,444/- by estimating net profit at 8% of turnover. This rejection was based on the AO's finding that a small portion of purchases could not be verified due to incomplete details provided by the assessee.

What were the issues?

Whether the rejection of books of account by the AO was justified without proper verification and considering that the books were impounded by the revenue. Whether the CIT(A) erred in deleting the addition made by the AO.

Which sections of the Income-tax Act were involved?

Section 145(3),Section 143(3),Section 133A(3)(ia)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI

Before: Dr. B. R. R. KumarSh. Yogesh Kumar US

Hearing: 07.06.2023Pronounced: 27.06.2023

ORDER

Per Dr. B. R. R. Kumar, Accountant Member:

1.

The present appeal has been filed by the Revenue against the order of ld. CIT(A)-7, New Delhi dated 09.03.2020.

2.

Following grounds have been raised by the Revenue:

“1. Whether on the facts and circumstances of the case, ld. CIT(A) erred in directing the AO to accept the result of books of account without examining/verifying the books and without considering discrepancies pointed out by the AO.

2. Whether the ld. CIT(A) erred in law and on facts and in circumstances of the case, in deleting assessed income of Rs.8,19,15,444/- and accepting the returned income of Rs.68,03,666/- only without verifying the discrepancies on the basis of which books of accounts have been rejected.”

R C Jewellers Pvt. Ltd. 3. Brief facts of the case are that the company is engaged in the business of manufacturing, trading and export of jewellery items. The assessee filed return of income on 17.10.2016 declaring income of Rs.68,03,070/-. The order u/s 143(3) of the Income Tax Act, 1961 has been passed u/s 144 after rejection of books of account u/s 145(3) and making addition of Rs.8,19,15,444/- determining the net profit @8% of the total turnover of Rs.102,39,43,000/-.

4.

Aggrieved, the assessee filed appeal before the ld. CIT(A). The ld. CIT(A) deleted the addition. Aggrieved, the Revenue filed appeal before us.

5.

At the outset, the ld. AR argued that the provisions of Section 44AD are not applicable to the case of the assessee as the assessee is in the business of manufacture and sale of jewellery and hence determination of 8% of the turnover as the net profit is not according to the provisions of the Act. We find that the revenue authorities have not invoked the provisions of Section 44AD while determining the profits but only took a cue from the intention of the legislative enactment.

6.

Heard the arguments of both the parties and perused the material available on record.

7.

Notwithstanding the technicality raised by the ld. AR, we have examined the merits of the case.

8.

The facts of the case are that a survey has been conducted on 18.03.2017. As per the survey report, the assessee has shown purchases of Rs.58,03,940/- out of which purchases of Rs.54,70,440/- was treated as bogus purchases as only 4

R C Jewellers Pvt. Ltd. parties have admitted that they have sold the old jewellery to the assessee company. The AO has also held that the purchases to the tune of Rs.3,33,500/- only would be verified. The AO held that the remaining purchases could not be verified as the assessee has not provided the required details such as complete name, address and PAN number. Hence, the AO rejected the books of account and determined net profit @ 8%. It is also a fact on record that the total turnover of the assessee considered by the AO was to the tune of Rs.102.39 Cr. which proves that the unverifiable purchases of the old jewellery amounts to 0.6% of the total purchases. Owing to non- submission of details of 0.6% of the total purchases, the books of account have been rejected and estimation of the profit has been resorted to.

9.

From the record, we find that the books of account have been impounded by the ADIT(Inv.), Unit-3(iii), New Delhi vide impounding order u/s 133A(3)(ia) of the Income Tax Act, 1961 dated 13.12.2017. It was submitted that the books of account are still in the custody of the revenue department itself and thus the assessee was unable to provide the complete details. Further, we find from the record that the ld. CIT(A) has duly gone through the monthly VAT returns filed by the assessee for various quarters relevant to the Assessment Year. These returns have been filed for all the four quarters even before the date of survey. These VAT returns have been duly examined by the ld. CIT(A) and copies have been filed before us. The ld. CIT(A) has held that the entire sales and purchases have been duly declared in the VAT returns and the complete details have been R C Jewellers Pvt. Ltd. tallied and no adverse inference could be drawn in respect of purchases made by the assessee.

10.

In view of the entire facts and circumstances, we hold that there was no basis on which the books of account have been rejected. No discrepancies have been brought out. The entire books of accounts are in the custody of the department. The ld. CIT(A) has examined the details exhaustively and hence, we decline to interfere with the order of the ld. CIT(A).

11.

In the result, the appeal of the Revenue is dismissed. Order Pronounced in the Open Court on 27/06/2023.

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