M/s. Clarity Gold Pvt. Ltd @APPELLANT@Hash Pr. Commissioner Of Income Tax

S.No.,"Name & Concern from which

bogus purchase bill obtained",Group,Amount,

1,M/s. Vijay Gems,Vijay,438491,

2,M/s. R.H. Jewellers,Vijay,1965134,

3,M/s. Unique Jewellery Palace,Vijay,2758615,

4,M/s. Ridhi Sidhi Gems & Jewels,Vijay,2094056,

5,M/s. Jodhpur Gems,Lalwani,2254825,

6,M/s Vaishali Gems,Lalwani,1743768,

7,M/s Anil Exports,Lalwani,919425,

8,M/s. Mahaveer Gem & Jewels,Lalwani,2076050,

,Total,,14250364,

S.N.,"Name & Concern from which bogus purchase

bill obtained",Group,Amount,

1.,M/s. Anshu Gems,Vijay,7750984,

2,M/s. Vijay Gems,Vijay,7379967,

3,M/s R.H. Jewellers,Vijay,11947561,

4,M/s. Unique Jewellery Palace,Vijay,7874702,

5,M/s. Ridhi SidhiGems & Jewels,Vijay,8361659,

6,M/s. Saloni Exports,Vijay,5712692,

7,M/s. Subh Laxmi Gems,Vijay,6175128,

8,M/s. Jodhpur Gems,Lalwani,7908345,

9,M/s. Vaishali Gems,Lalwani,5390000,

10,M/s. Anil Exports,Lalwani,1700000,

11,M/s. Mahaveer Gems & Jewels,Lalwani,1520000,

,Total,,71721038,

mRrj % ;g lHkh fu.kZ; gekjh dEiuh ds chairmen â€" Managing Director Jh f’ko’kadj xqIrk dk gS rFkk mUghs ds dgus ij ;g lHkh dk;Z fd;s x;s,,,,

gSA izâ€u 20 Ã'i;k crk;s fd vkidh M/s Clarity Gold Pvt. Ltd .dh lHkh Units/state officers ds F.Y. 2008&09 dh dqy sales fdruh gS ftlesa ls Actual ,oa",,,,

Bogus sales fdruh gSaA mRrj % gekjh mijksDr dEiuh dh F.Y. 2008&09 dh dqy sales yxHkx 107 djksM gS ftlesa ls yxHkx Rs. 25 djksM dh actual,,,,

sales gS rFkk ckdh yxHkx Rs. 82 djksM dh Bogus sales gS tks fd okLro esa gqbZ gh ugha gS rFkk dsoy Turnover ciz’u 21 Ã'i;k crk;sa fd vkidh dEiuh esa Bogus Purchase ,oa sales dk dk;Z fdls izdkj fd;k tkrk gS] vFkkZr dgk¡ ij o dSls nyky ls eqykdkr gksrh gS]",,,,

dkSu ;g ckr@eqykdkr djrk gS Ã'i;k foLrkj ls ;g lkjh izfØ;k crk;saA mRrj % bl fo""k; esa eSa ;g crkuk pkgrk gw¡ fd dqN rks gekjs Regular broker gS",,,,

tSls fd Jh lqHkk""k tSu] t;iqj] Jh ikjl tSu eqEcbZ] Jh vuqi dkykuh t;iqj ftuls dh Regular Basis ij gekjh dEiuh dks A Bogus sales ,oa Purchase ds bill izkIr",,,,

gksrs jgrs gSA blds vykok tc dHkh vf/kd Bogus purchase ;k sales ds bill dh t:jr gksrh gS rks esa Brokers dks gekjh dEiuh ds Regal Office 4] ljnkj iVsy,,,,

ekxZ] lh&Ldhe] t;iqj ij cqykrk gw¡ ,oa gekjh dEiuh ds CMD Jh fâ€ko 'kadj xqIrk ls Discusses ,oa approval ysdj ml Brokers dks Bogus",,,,

sales/Purchase bill arrange djus dh ekSf[kd funsZâ€k ns nsrk gw¡ ftlds ckn og Broker gekjh dEiuh ds fy, bl izdkj ds Bils ns nsrk gS bl izdkj ds",,,,

Brokers dks gekjs }kjk 0-25% ls ysdj 0-65% rd dehâ€​ku nsuk r; gksrk gSA,,,,

In post search proceedings a detailed query letter was issued on 16.7.2009 for explaining the issues of bogus purchases inview of statements of,,,,

Sh. K.K. Ameriya, bogus sales, discrepancies in silver star unit and submissions of silver star persons but assessee did not respond and opted not to",,,,

comply the terms of the letter. The basic facts found during the search therefore remained uncontroversial.,,,,

During the course of presentproceedings the assessee company was given required to explain its case on the various finding of search action and,,,,

evidence gathered. Vide notice u/s 142(1) of the IT Act, specifically the assessee was required to explain its case on the submissions made by the key",,,,

persons u/s 132(4) dealing with the business of the assessee and it was also required to produce the concerned parties from whom bogus sales and,,,,

purchase are made. Assessee was allowed more than sufficient opportunities vide order sheet entries dated 11.7.2011, 18.7.2011,",,,,

21.7.2011, 28.7.2011, 29.7.2011, 2.8.2011, 8.8.2011, 9.8.2011, 11.8.2011, 16.8.2011 and 17.8.2011 but most of the times the reply of A/R remained",,,,

that relevant explanation/informations would be submitted on next hearings. However, on 5.8.2011 the A/R of the assessee filed reply submitting that:-",,,,

With regards to difference in valuation of stock found at the time of search; we wish to reiterate as was submitted before the ADIT, Jaipur-II; that",,,,

the valuation was got done by Income tax department personnel’s which has no credence and sanctity in the eyes of law.,,,,

2.1 The said valuation as has got done bythe office of the income tax Department is unauthorized, illegal, irrelevant, contrary to the provisions of",,,,

section 133A of the income tax Act and has been prepared as per own convenience and thus deserves to be ignored being void ab initio.,,,,

2.2 The departmental valuers were allowedaccess to business premises of the assessee without subjecting themselves to verification at the time of,,,,

entry and at the same time there were not subject to frisking at the time when they have left the business premises.,,,,

2.3 We would like to know on what basis thevaluation exercise has been done by these valuers. Prima facie it appears that these valuers have,,,,

inserted the stock values as per their convenience. The valuation so made by them is biased, faulty and before you rely on any of these figures we",,,,

would request you to provide us an opportunity to cross examine each one of them.,,,,

2.4 As submitted earlier, the assesseecompany is dealing in more than 100 types of precious, semi precious stones, gold ornaments and metals and",,,,

within each category of stones there are more than 500 types of qualities that are to be looked into. There are thousands of packets of stones (stones,,,,

kept in packets). These valuers have without adhering to the norms of valuation, have mixed the lots of stones and valued the stones. Each category",,,,

of stone may have valuation ranging from Rs. 1 per cent to more than Rs.1.00 lacs per carat. This has also caused our business an irreparable loss as,,,,

we are at loss to reclassify the stones as they were kept in the lots originally.,,,,

2.5 It is also surprising to note that thevaluers have managed to value over 14 tonnes of various Raw materials kept in 89 bags in a short span of few,,,,

hours, whereas it would take several man days just to open them and keep them for weighment. The volume of finished goods (cut stones) was",,,,

equally huge and one cannot possibly weigh even in a few hours when packets were to be opened, seen, weighed in weighment machine and again put",,,,

back in packets, etc.",,,,

2.6 It is clear that the total exerciseundertaken by the paid personnel’s of the department is as per dictated terms and in convenience and is a total,,,,

farce and deserves to be ignored.,,,,

With regards to the alleged statements ofSh. Khushi Kumar Ameriya, we wish to reiterate as was submitted before the ADIT, Jaipur-II; that we",,,,

have been provided computerized copies of the statement recorded of Sh. Khushi Kumar Ameriya. It is requested to provice complete hand written,,,,

certified copy of the statements recorded of Sh. Khushi Kumar Ameriya instead of a typed copy. The papers given by you do not even bear,,,,

signatures of Sh. Khushi Kumar Ameriya- it also no evidentiary value.,,,,

3.1 It is also submitted that the allegedstatements of Sh. Khushi Kumar Ameriya were recorded under duress; he was pressured to sign on the dotted,,,,

lines. The statements were recorded beyond the powers granted as per provisions of section 132 and section 133A. The statements were recorded,,,,

when Sh. Khushi Kumar Ameriya was not in a proper physical and mental state of mind. The statements so recorded have no sanctity in the eyes of,,,,

law and is illegal and deserves to be ignored. Copy of affidavit duly notarized by Sh. Khushi Kumar Amerioya on 19.6.2009 and submitted before the,,,,

District Magistrate and copy of which is already with the income tax department is enclosed herewith which will clarify our submission.,,,,

3.2 Before you rely upon the alleged illegalstatements of Sh. Khushi Kumar Ameriya; we should be allowed an opportunity to cross examine, Sh.",,,,

Kushi Kumar Ameriya. Placing reliance on such illegal statements would be in illegality.,,,,

3.3 All transactions of purchase and salehave been declared in the books of accounts. Due taxes on the income is being declared from year to year.,,,,

Nothing is there which is outside the books of accounts.,,,,

With reference to your observation withregards to submission of trading account for bogus transactions and real and genuine transactions we wish,,,,

to reiterate as was submitted before the ADIT, Jaipur II; that you are kindly requested to first clarify to us as to what is meant by the term Bogus",,,,

Bills, according to use a bill is a bill.",,,,

4.1 A business man during the course of hisbusiness purchase the goods locally or from,,,,

Â,,,,

foreign parties mainly on credit. All such parties are income tax assessee (PAN is allotted by the income tax Department) and Sales tax assessee,,,,

(TIN is allotted by the Sales tax Department). As a businessman we are supposed to know the products we are buying, the terms for which the goods",,,,

are sold and also do a reasonable check on the parties who are supplying the products. Our checks are based on PAN issued by the income tax,,,,

department and TIN issued by the Sales tax Department. We do not have the infrastructure nor have the power to investigate the parties who are,,,,

supplying us the goods. What else are we supposed to gather from the parties? That is not the intention of the income tax Act and if that were the,,,,

case then how one will conduct the business? If you as an official of the income tax Department do not own upto the parties to whom you have issued,,,,

PAN then it is not the fault of the businessmen. Entire issue of bogus bill being raised by you time and again as instilled fear in the minds of the,,,,

businessmen and in turn it is leading to collapse of the trade in city of Jaipur.,,,,

4.2 Even the banker has to be satisfiedwhen one opens a bank account, identity is obtained, complete particulars are obtained, all payments are by",,,,

account payee cheques and this fact can be verified from both the banks by you.,,,,

4.3 The goods and the bills are procured fromthe registered sellers. All the goods purchased have been entered in the stock register maintained by the,,,,

company. Entire payment towards the purchase of such goods have been made by way of an account payee cheque issud by the assessee to the,,,,

concerned purchasers. The gods are subseqently sold as it is in the same shape, size and weight or after mixing it with other lots. Entire goods that are",,,,

sold subsequent to purchase are supported by the sales bills issued to the customer and gods so sold are entered in the stock register maintained by the,,,,

assessee appellant. Payments towards such sales have come from through proper banking channel in the account of the assessee. Profits from such,,,,

sale have been duly disclosed in the books of accounts. All provisions of Sale of Goods Act have been accomplished in these transactions.,,,,

With regards to the alleged statement ofSh. Raghu Dutt Tiwari; accountant at Silver Star, we wish to submit that we have been provided",,,,

computerized copies of the statements goods of Sh. Raghu Dutt Tiwari. It is requested to provide complete hand written certified copy of the,,,,

statements recorded of Sh. Raghu Dutt Tiwari instead of a typed copy. The papers given by you do not even bear signatures of Sh. Raghu Dutt,,,,

Tiwari-it has no evidentiary value.,,,,

5.1 It is also submitted that the statements ofSh. Raghu Dutt Tiwari were recorded under duress; he was pressured to sign on the dotted lines. He,,,,

was subjected to physical harm by the officers of the department. The statements were recorded beyond the powers granted as per provisions of,,,,

section 132 and section 133A. The statements so recorded have no sanctity in the eyes of law and is illegal and deserves to be ignored. Copy of,,,,

affidavit duly notarized by Sh. Raghu Dutt Tiwari on 19.6.2009 and submitted before the District Magistrate and copy of which is already with the,,,,

income tax Department is enclosed herewith which will clarify our submission.â€​,,,,

19.1 Vide letter dt. 9.8.2011, the A/R further submitted his arguments as under:-",,,,

Without prejudice to what has been submitted earlier and without admitting what has been stated earlier with reference to the purchase made by the,,,,

assessee as well as sales made by the assessee over the years, we further submit that the employees or/and other persons clearly have stated in their",,,,

statements that purchases or/and sales in the following units are genuine, fool proof, verifiable and not tainted:",,,,

. Jewellery Unit.,,,,

. Nizami Unit.,,,,

. Mumbai Division,,,,

Thus, as far as these units are concerned they have to be treated to have been properly accounted for are genuine, not tainted, are fool proof and all",,,,

purchases/sales in these units deserve to be accepted as such and no addition is required to be made as far as these units are concerned. For other,,,,

units also, we have already explained that no addition is required to be made as all sales are vouched, detailed, verifiable and mainly on credit and all",,,,

purchases so made have been made by A/c Payee Cheques and all payments relating to sales have been received by the assessee by A/c Payee,,,,

Cheuqes. Further verification can be made from the income tax Assessments, Sales Tax Assessment and from Banks directly.",,,,

In view of the above facts and circumstances and earlier letters, no addition is required to be made treating the purchases or/and sales as",,,,

bogus/tainted in all the units. Further if you so rely on the statement of Sh. K.K. Ameriya, Sh. Raghu Dutt Tiwari or/and other persons then certainly",,,,

the assessee has a right to cross examine these persons as they have stated wrongly under coercsion, under pressure and threatening given by the",,,,

various officers during the course of the search. The statements were recorded when these persons were not in a proper physical and mental state of,,,,

mind. These are self statements and unless right to cross examine is permitted, they cannot be relied upon by any stretch of imagination. They may",,,,

state all along wrong things but that wrong things cannot be made good unless they so so at the time of cross examination. It is settled opposition of,,,,

law by various judgments of the Hon’ble Supreme Court of India which is the Law of the land that addition cannot be made merely saying so by,,,,

one person against another unless in cross examination also one says the same thing or otherwise. One has to weight in what circumstances,,,,

statements were given. When all the purchases are by proper bills from income tax assessees, Sales tax assesses, payments are by A/c Payee",,,,

Cheques, when sales are too by proper bills to income tax assessees, Sales tax assessees and payments are by A/c Payee Cheques, there was no",,,,

occasion for Sh. K.K. Ameriya, Sh. Raghu Dutt Tiwari or/and other persons to say that the sales/purchases are bogus, not genuine, not tainted. On",,,,

the face of these overwhelming evidence none would say to be bogus or tainted or non genuine unless one is threatened of dire consequences or on,,,,

coercion, pressurizing tactics or otherwise. We have already submitted that the same Sh. K.K. Ameriya immediately after the search gave an",,,,

affidavit voluntarily duly notarized which was submitted before the Judicial Authorities that he had and his family members were threatened, he and",,,,

other employees were manhandled and that whatever has been stated in the so called statements were not given by him, were written by the",,,,

authorized officers on their own and without reading or writing he was asked to sign on the dotted lines at odd hours in the late night. Similar has been,,,,

the Affidavit of Sh. Raghu Dutt Tiwari also. We have already placed on record the Affidavits of both these persons alongwith our letter of August 5,",,,,

2011. We strongly rely on these. On the face of it, these are after the alleged statements if any and therefore whatever has been stated on oath by",,,,

them has to be accepted rather than what they had stated earlier under threat, coercion or pressurizing tactics. It is in the light of these facts that we",,,,

again request you to provide right to cross examine of the persons who say otherwise/adversely other than, what is apparent on record. One may be a",,,,

Director or an employee but if coercive measures are used one may not withstand atrocities committed by the officers & can write whatever one,,,,

wishes & sign on the dotted lines. It is on record that pressurizing tacks were used employees were manhandled, were not permitted to eat properly,",,,,

meet family members, sleep properly and threatened. We again submit that it is merely a bold statement by them and deserves to be ignored or it has",,,,

no evidentiary value.,,,,

Since books of accounts were not complete on the date of search exact stock as per books on the date of search could not be worked out neither,,,,

in terms of value nor quantitatively. However, it was seen that the assessee furnished details of stock statement as on 30.4.2009 to State Bank Indore.",,,,

This stock statement was obtained and it was found that on 30.4.2009 the company was having stock of Rs.295567819. Thus as on 30.4.2009 the,,,,

book stock was of Rs.29.55 crores. Taking this stock in to consideration there was a deficiency of stock of more than Rs.75.03 crores as one the date,,,,

of search. The difference in stock has not been explained by the assessee. In post search proceedings the assessee was specifically asked vide letter,,,,

dt. 16.7.2009 to reconcile the difference in stock found and submitted to bankers but it has totally failed to reconcile the same. Even in the present,,,,

asstt. Proceedings and it has not bear satisfactorily explained. A very general and vague reply has been filed by the A/R vide letter dt. 5.8.2011.,,,,

Contentions raised in para 12 of letter dt. 5.8.2011 reproduced above are not tenable as the valuation was done by the experts, in the presence of",,,,

assessee’s employees dealing/managing the affiars on the date of search/seizure, no objection of any nature were raised by the employees at",,,,

the time of search or just after the search. Now challenging the valuation on frivolous grounds is only an after though and just too devoid the,,,,

investigation. Even the assessee has not been able to produce correct quantification and valuation after search, if it was of the view that valuation",,,,

made by the search prty was faulty or incorrect. It may further be seen that assessee itself admits that there is vast different in rate of items of one,,,,

category and under such circumstances if assessee itself was not possible to quantify and value the goods, the figures of stock and sale/purchases in",,,,

trading accounts are admittedly not subject to proper verification deficient stock found clearly proves that either fake purchase bills are introduced so,,,,

as to increase the stock or the sales are reduced. The submission of Sh. K.K. Ameriya again comes in to the picture that stock statements are inflated,,,,

A.Y.,Turnover,Gross Profit,G.P. Rate,Remarks

2006-07,546642847,40452067,7.40%,"8.5% applied by the

Learned

CIT(A)

2007-08,687479941,58148440,8.45%,

2008-09,977758373,94661850,9.68%,

2009-10,1030627271,140129208,13.59%,

2010-11,154038479,15893587,10.31%,

actual stock found at the time of search on 20.05.2009 was Rs. 14,52,24,834/-. A specific show cause notice was issued to the assessee as to why the",,,,

GP rate of 15% as held by the Tribunal in case of Anuj Kumar Varshney and others should not be applied on the above undisclosed turnover of Rs.,,,,

15,03,42,985/-. It was held by the ld. CIT(A) that inspite of appropriate opportunity given to the assessee at the stage of assessment and even during",,,,

the course of appellate proceedings, the assessee has failed to reconcile the differences in the value of stock found at the time of search and the stock",,,,

as per books a copy of which had been filed with the bank. It was further held by the ld. CIT(A) in the absence of any tangible evidence being filed,,,,

by the assessee, the only logical and rational course of action available would be to treat the differences in the value of stock of Rs. 15,03,42,985/- as",,,,

turnover which has not been accounted for in the regular books of accounts. It was held by the ld. CIT(A) that the said position would be consistent,,,,

with the statement given by the appellant at the time of search and also with the documents found at the time of search relating to concealment of,,,,

turnover, purchases etc. It was further held by the ld. CIT(A) that where the explanation of the assessee is accepted that the stock found at the time",,,,

of search was correct and was in accordance with the books of accounts, then it means that the statement of stock filed with the bank was not",,,,

correct. It also leads to believe the value of stock shown in the statement was inflated and the appellant become liable for perpetrating a financial,,,,

fraud on the bank. Accordingly, it was held by the ld CIT(A) that the only conclusion which emerges out of the above discussion is that the",,,,

unaccounted turnover of Rs. 15,03,42,985/- has been made by the assessee during the period under consideration. The ld. CIT(A) thereafter applied",,,,

GP rate of 15% on such unaccounted turnover following the decision of the Co-ordinate Bench in case of Anuj Kumar Varshney and others.,,,,

It is not in dispute that the assessee is foundinvolved in accounting for both bogus purchases and bogus sales as well as there are unaccounted,,,,

purchases and unaccounted sales as per the documents found and seized during the course of search. In the statement recorded during the course of,,,,

search, the director of the assessee company has admitted that during the FY 200809, total sales are of Rs. 107/- crores as against recorded sales of",,,,

Rs. 10.36 crores in its books of accounts and the fact that the said amount of Rs. 107/- crores has been brought to tax during the FY 2008-09 relevant,,,,

to assessment year 2009-10. For the year under consideration, the quantification of undisclosed turnover has been determined by comparing the value",,,,

of the physical stock as on the date of search i.e, 20.05.2009 and as per the stock statement submitted by the assessee with the State Bank of Indore",,,,

on 30.04.2009. Given that the books of accounts were not complete as on the date of search, exact stock as per books on the date of search could not",,,,

be worked out neither in terms of value nor quantitative tally. In post search proceedings and during the assessment and appellate proceedings as well,",,,,

the assessee has failed to reconcile the same and offer any satisfactory explanation. Regarding valuation of such stock at the time of search, the AO",,,,

has held that “the valuation was done by the experts, in the presence of assessee’s employees dealing/managing the affairs on the date of",,,,

search/seizure and no objection of any nature were raised by the employees at the time of search or just after the search. Now challenging the,,,,

valuation on frivolous grounds is only an afterthought and just too devoid the investigation. Even the assessee has not been able to produce correct,,,,

quantification and valuation after search, if it was of the view that valuation made by the search party was faulty or incorrect.†The said findings of",,,,

the AO remain uncontroverted before us and we donot see any justifiable reason to interfere with the same. Hence, it was held by the AO that there",,,,

was deficiency of stock of Rs. 15.03 crores. As per Assessing Officer, deficiency of stock so found clearly proved that either fake purchase bills are",,,,

introduced so as to increase stock or the sales are reduced. The AO also referred to the statement of Shri K. K. Ameriya wherein he has stated that,,,,

stock statements are inflated by way of showing bogus purchases, debtors and turnover. As per the Assessing Officer, it is conclusive proof of",,,,

incorrectness of books of accounts and trading results of company. Hence the books of accounts and trading results were rejected by the AO. The,,,,

AO thereafter applied G.P rate of 17% on declared turnover of Rs 15,40,38,479. It is here that the ld CIT(A) has stepped in and in our view, rightly",,,,

so, where he figured out a seemingly apparent mistake in the final determination of quantum of turnover by the AO for the purposes of estimating the",,,,

gross profits. As per ld. CIT(A), in absence of necessary reconciliation and any credible evidence filed by the assessee, the only logical and rational",,,,

course of action would be treat the difference in the value of stock as unaccounted turnover which has not been accounted in the regular books of,,,,

accounts. Based on material available on record, we agree with the findings of the ld CIT(A) that there is an unaccounted turnover which has not",,,,

been disclosed by the assessee. However, we find that the ld CIT(A) has determined the unaccounted turnover by comparing the stock statement as",,,,

on 30.04.2009 filed by the appellant company with the State Bank of Indore which discloses the value of Rs. 29,55,67,819 and the actual stock of Rs.",,,,

14,52,24,834/- found at the time of search on 20.05.2009. For the period April 2009 to March 2010 which includes the period starting 30.04.2009 and",,,,

ending 20.5.2009, the assessee has disclosed a turnover of Rs 15,40,38,479. Accordingly, the assessee shall be eligible for credit of disclosed turnover",,,,

for the period starting 30.04.2009 and ending 20.5.2009 which comes to Rs 88,62,487 by evenly distributing the declared turnover over a period of 12",,,,

months. Accordingly, the undisclosed turnover in the hands of the assessee company comes to Rs 14,14,80,498 (Rs 15,03,42,985 less 88,62,487).",,,,

In our considered opinion, the tribunal while considering the matter has rightly observed that either the bills are mainpulated so as to increase stock",,,,

or the sales has been reduced.,,,,

In that view of the matter, the view taken by the authorities is just and proper. Therefore, no substantial question of law arises.",,,,

Hence, the appeals stand dismissed.",,,,