Full Judgment Text
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CASE NO.:
Appeal (civil) 5809 of 2006
PETITIONER:
M/s. Kachwala Gems, Jaipur
RESPONDENT:
Joint Commissioner of Income Tax, Jaipur
DATE OF JUDGMENT: 14/12/2006
BENCH:
S. B. Sinha & Markandey Katju
JUDGMENT:
J U DG M E N T
(Arising out of Special Leave Petition (Civil) No.1779/2005)
MARKANDEY KATJU, J.
Leave granted.
This appeal has been filed against the impugned judgment of
the Rajasthan High Court dated 25.8.2004 in Income Tax Appeal
No.80 of 2004.
Heard learned counsel for the parties and perused the record.
The facts of the case are in a short compass. The appellant
assessee deals in precious and semi precious stones. In the course
of assessment the Assessing Officer noticed the following defects
in the books of accounts of the assessee :
"1. The assessee has not maintained and kept any
quantitative details/stock register for the goods
traded in by the assessee.
2. There is no evidence on record or document
to verify the basis of the valuation of the closing
stock shown by the assessee. The assessee is not
able to prepare such details even with the help of
books of accounts maintained, purchase bills &
Sale Invoices.
3. Provisions of Section 145(3) are clearly
attracted in this case.
4. The genuineness of purchases to the extent
of Rs.42 lakhs (approx.) is not proved without any
doubt.
5. The GP rate declared by the assessee at
13.49% during the assessment year is not a match
to the result declared by the itself in the previous
assessment years.
6. M/s. Gem Plaza, engaged in local sales of
similar goods declared voluntarily rate of 35% in
its assessment for the assessment year 1997098.
7. M/s. Dhadda Exports, another assessee
dealing in same items, but doing export business
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declared GP rate of 43.8% (even without
considering the value of export incentives) in
assessment year 1997-98."
Thereafter the books of accounts of the assessee were rejected
by the Assessing Officer and he resorted to best judgment
assessment under Section 144 of the Income Tax Act. The
Assessing Officer in the assessment order mentioned some
comparable cases and was of the view that the case of the assessee
is more or less having similar facts as that of M/s. Gem Plaza
where the Gross Profit has been taken as 35.48%. The Assessing
Officer estimated the Gross Profit of the assessee as 40%.
The Assessing Officer further held that the assessee has
shown bogus purchases in order to reduce the Gross Profits.
In appeal, the Commissioner of Income Tax (Appeals)
upheld most of the findings of the Assessing Officer, but reduced
the Gross Profit from 40% to 35%.
In further appeal, the Tribunal had given further relief to the
assessee and reduced the Gross Profit rate to 30%.
The counsel for the assessee has submitted before us that the
Income Tax Authorities wrongly held that appellant has shown
bogus purchases, and the books of accounts were wrongly rejected.
In our opinion, whether there were bogus purchases or not, is
a finding of fact, and we cannot interfere with the same in this
appeal. As regards the rejection of the books of accounts, cogent
reasons have been given by the Income Tax Authorities for doing
so, and we see no reason to take a different view.
It is well settled that in a best judgment assessment there is
always a certain degree of guess work. No doubt the authorities
concerned should try to make an honest and fair estimate of the
income even in a best judgment assessment, and should not act
totally arbitrarily, but there is necessarily some amount of guess
work involved in a best judgment assessment, and it is the assessee
himself who is to blame as he did not submit proper accounts. In
our opinion there was no arbitrariness in the present case on the
part of the Income Tax Authorities. Thus, there is no force in this
appeal, and it is dismissed accordingly. No costs.