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2019 (9) TMI 1402 - AT - Income TaxReopening of assessment u/s 147 - bogus purchases - HELD THAT:- Recorded reasons state that the assessee had availed accommodation entries on bogus bills from M/s.Nice Diamonds and M/s. Nice Diamonds is belongs to group of Shri Bhanwarlal Jain where they have admitted in the course of the search that M/s. Nice Diamonds is managed by them and they are bogus hawala dealers. AO has reason to believe that income had escaped assessment based on the above information and formed an opinion by himself and there is no borrowed satisfaction. Thus respectfully following the case of CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. [2007 (5) TMI 197 - SUPREME COURT] we uphold the reopening made by the Assessing Officer u/s. 147. Bogus purchases - estimation of profit element at 8% - CIT(A) held that only the profit element embedded in such purchases shown to have been made from the non-existing parties are to be brought to tax - HELD THAT:- We find that what advantage the assessee could have got on purchasing the diamonds in gray market was only 1% being the VAT, as the assessee made purchases in the grey market without paying VAT, but obtained only the accommodation entries. Further as per the report of the task group constituted by the Department of Commerce the margin in trading in the diamond industry was only 1 to 3%. Taking the average of the industry average i.e. 2% and the advantage which the assessee got from purchases from the gray market i.e. 1% towards VAT, in our view at best the disallowance can be made only at 3%. Therefore,profit element margin embedded in these purchase transactions should be taken @3% for these Assessment years i.e. A.Y.2011-12 & 2012-13. Accordingly, we direct the Assessing Officer to estimate the profit element @3% of the purchases treated as non-genuine and re-compute the income of the assessee for all these Assessment years.
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