VENUS ARTS & GEMS Vs. INCOME-TAX OFFICER

JUDGEMENT

(1.) The instant appeal filed by the appellant U/Sec. 260-A of the Income Tax Act, 1961 (for short the Act) is directed against order of Income Tax Appellate Tribunal, Jaipur Bench, Jaipur (for short ITAT) dt. 27th May, 2011 passed in ITA No. 1313/JP/2010 relating to Assessment Year 2006-07.

(2.) The brief facts as emerging on the face of record are that the assessee-appellant is carrying on business of manufacturing of silver and metal beads, toggles, chains, other articles including semi precious and precious stones and is claimed to be a 100% exporter of goods. The said business is being carried on as a partnership firm. During the course of assessment proceedings it was noticed by the Assessing Officer that the assessee declared gross profit of Rs. 1,12,12,897/- on total turn over of Rs.12,74,65,482/- resulting into Gross Profit Rate (for short G.P. Rate) at the rate of 8.79% against G.P. rate declared in the immediate preceding year at 11.4%. during the course of assessment proceedings, the Assessing Officer observed that the assessee had purchased goods from various concerns and names of ten parties were given by the Assessing Officer and it was desired by the Assessing Officer from the assessee to produce these parties for examination as the assessee had purchased goods from them. It was also desired that the assessee may produce their income tax returns as well as stock registers or evidence in support of availability of goods supplied to the assessee for the financial year 1.4.2005 to 31.3.2006. However, the assessee respondent submitted that the assessee is a 100% export oriented firm and all the sales of the assessee are export sales, which are duly verified by the Custom Department. It was also submitted that all the purchases are verifiable from the fact that all the payments have been made from bank and all the goods purchased stood exported. It was further submitted that they have tried to produce the creditors for verifying the purchases, but they have refused to appear before the Income Tax authorities and it was submitted that the department in this situation can issue summons to these parties and verify the purchases made by the assessee at the addresses already available with the Department. Along with the said reply, the assessee did furnish confirmation of accounts of some of the relevant parties. It is an observation by the Assessing Officer that all the summons either received back from postal authority unserved or remained uncomplied with. Accordingly, thereafter the Assessing Officer again issued a show cause notice to the assessee on 8.12.2008 reiterating the fact that since notices (summons) have been returned back by Postal authority unserved or remained uncomplied with. Therefore, the assessee was directed again to prove genuineness of the transactions. It was also stated by the Assessing Officer that survey came to be conducted in 9 out of 10 parties from whom the assessee had purchased goods and during the course of survey one Shri Mitthu Lal Saini of M/s Royal Gems & Arts from whom the assessee had purchased goods stated that he was not doing any business but only issued sale bills. Similarly, one Shri Anil Kumar Lalwani admitted that M/s Anil Exports and M/s Puja Jewellers are not doing any business of sale & purchase of gems and jewellery but issued only sale bills to earn commission. The Assessing Officer stated that the BCTT wing of the department has covered the case of M/s Kiran Jeweller, M/s K.S. Exports, M/s Armilla Gems, M/s Samridhi Jewellers and M/s Unique Gems Trading Company for survey U/Sec.133A, but whereabouts of these firms were not found and again directed the assessee to produce the parties or to prove the genuineness of the transactions. The assessee responded and reiterated the fact that the statements if any of these persons cannot be relied upon. The Assessing Officer finding no alternative noticing the above fact as also noticing the defects in the stock register rejected the book results by invoking the provisions of Sec. 145(3) of the Act and since the assessee was unable to prove the purchases as also the defects noticed by the Assessing Officer during the course of assessment proceedings applied a G.P. rate of 14% on the declared turnover and made a trading addition of Rs.66,32,270/-.

(3.) The matter was challenged before the CIT(A) and the facts were reiterated before the CIT(A). The CIT(A) after analysing the evidence on record and noticing the defects pointed out by the Assessing Officer upheld the finding of invoking the provisions of Section 145(3) of the Act however partly allowed the appeal and directed the application of a G.P. rate of 11% as against 14% applied by the Assessing Officer after perusing the previous history of the assessee.