RAVI KUMAR RAWAT , Jaipur v. ADDL. CIT, Jaipur

Date of Order :27/04/2012. PER R.K. GUPTA, J.M. This is an appeal by assessee against the order of ld. CIT (A) relating to assessment year 2006-07.

2. Only issue in appeal of the assessee is against confirming the addition of Rs. 4,79,175/- by rejecting the books of account under section 145(3) on account of unverifiable purchases.

3. Brief facts of the case are that assessee derived income from salary, house property, other sources and from business and profession, mainly from his proprietary concern, M/s. Precious Jewels. During the assessment proceedings, the AO noted that assessee had declared GP rate at 10.15% on turnover of Rs. 6,27,75,920/- against GP rate of 10.09% shown in earlier year. Survey under section 133A was conducted and excess stock of Rs. 45,24,650/- was found which was surrendered by the assessee. The AO further noted that assessee has made purchases of Rs. 19,16,700/- from M/s. Unique Gems Trading Company and M/s. Rishab International which remained unverifiable. Details of these purchases along with confirmations were filed. However, the AO was not satisfied. Therefore, he rejected the books of account by invoking provisions of section 145(3) and made a trading addition of Rs. 4,79,175/- being 25% of unverifiable purchases. It was submitted before ld. CIT (A) that accounts of the assessee are duly audited under section 44AB. Confirmations of the parties were filed. Payments were made through proper banking channel. Therefore, the AO was not justified in rejecting the books of account. It was further submitted that trading result shown by assessee are better as compared to earlier year. After considering the submissions and perusing the material on record, the ld. CIT (A) found that the Tribunal has rejected the books of account on account of purchases remained unverifiable. The ld. CIT (A) further noted that in some of the cases the Tribunal has confirmed estimation of GP @ 13% and if GP rate of 13% is applied, then addition will be more. Accordingly the ld. CIT (A) confirmed the addition made by AO.

4. After considering the submissions and orders of the authorities below on which reliance has been placed by ld. D/R, we find that assessee deserves to succeed in this ground in part. The Jaipur Benches of the Tribunal are taking a consistent view that where certain purchases remained unverifiable then rejection of books of account by invoking provisions of section 145(3) is correct. Accordingly, we confirm the applicability of provisions of section 145(3). 4.1. The Jaipur Benches of the Tribunal are also taking consistent view that where certain purchases remain unverifiable, addition by invoking section 145(3) should not be made @ 25% of unverifiable purchases but addition should be made after taking into consideration the past history of the case and current events of the case. Past history of the case is that trading result shown by assessee are better as compared to earlier year as in earlier year the GP rate was shown at 10.09% whereas during the year under consideration the GP rate is 10.15%. We further noted that whatever the excess stock was found during the course of survey that has already been offered for taxation. Therefore, there should not be any addition in trading account as held by Honble Jurisdictional High Court in case of Gottan Lime Khaniz Udyog, 246 ITR 243 (Raj.). However, the fact remains that certain purchases were remained unverifiable, therefore, we are of the considered view that if a trading addition of Rs. 50,000/- is sustained that will meet the ends of justice. We order accordingly.

5. In the result, appeal of the assessee is allowed in part.

6. The order is pronounced in the open court on 27/04/2012. Sd/- Sd/- ( SANJAY ARORA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER Jaipur, Copy forwarded to :- Shri Ravi Kumar Rawat, Jaipur. The Addl. CIT, Range-2, Jaipur. The CIT (A) The CIT The D/R Guard file (ITA No. 511/JP/2011) By Order, AR ITAT Jaipur.