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2018 (5) TMI 2039 - ITAT MUMBAIBogus purchases - AO received information that one Shri Praveen Kumar Jain and his group of companies were engaged in providing only accommodation bills without actually supplying materials - assessee has purchased diamonds from a concern named M/s Mohit International belonging to Praveen Kumar Jain group - HELD THAT:- In the instant case, the assessee has exported the jewellery and the AO has not doubted the said export also. In this kind of situation, what is required to be taxed is the profit element, if any, involved in the purchases and hence there is no justification in disallowing entire amount of purchases. When the assessee is able to reconcile the purchases with sales, the argument of the assessing officer that the accommodation bills have been taken by the assessee only to reduce the profits would fail. As noticed earlier, the disallowance of purchases would give a G.P ratio of 68.55%, which is unheard of in the diamond trade. This factual position also does not support the argument of the AO. Under these set of facts, we are of the view that the ld CIT(A) was not justified in confirming the disallowance of entire amount of purchases. There is no doubt that the responsibility to prove the purchases claim is placed upon the assessee. In the instant case, the assessee has not produced the supplier before the AO. AO also could not serve notice u/s 133(6) of the Act to the supplier. The proprietor of M/s Mohit International, Shri Nilesh Parmar has admitted that he has only provided accommodation entries, but the said statement was later retracted by him. All these facts show that there is a possibility that the assessee might have sourced the diamonds from some other source also. In that event, there is a possibility that the assessee might have made some profit. In that case, we are of the view that the issue agitated before us may be resolved by estimating profit element embedded in the purchases. Assessee has accepted for an addition of 5% and the Ld A.R also submitted the same as his alternative contention. We find merit in the said contentions, since the purchases and sales have been reconciled. Accordingly we set aside the order passed by Ld CIT(A) and direct the AO to restrict the addition to 5% of the value of alleged bogus purchases made from M/s Mohit International. Appeal of the assessee is partly allowed.
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