Gems, Jaipur Vs. Joint Commissioner of Income Tax, Jaipur  Insc 966 (14 December 2006)
B. Sinha & Markandey Katju
J U DG
M E N T (Arising out of Special Leave Petition (Civil) No.1779/2005) MARKANDEY
has been filed against the impugned judgment of the Rajasthan High Court dated
25.8.2004 in Income Tax Appeal No.80 of 2004.
learned counsel for the parties and perused the record.
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
The assessee has not maintained and kept any quantitative details/stock register
for the goods traded in by the assessee.
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.
Provisions of Section 145(3) are clearly attracted in this case.
genuineness of purchases to the extent of Rs.42 lakhs (approx.) is not proved
without any doubt.
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.
M/s. Gem Plaza, engaged in local sales of similar goods declared voluntarily
rate of 35% in its assessment for the assessment year 1997098.
M/s. Dhadda Exports, another assessee dealing in same items, but doing export
business 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
Assessing Officer further held that the assessee has shown bogus purchases in
order to reduce the Gross Profits.
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%.
further appeal, the Tribunal had given further relief to the assessee and
reduced the Gross Profit rate to 30%.
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.
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.
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.