9911796707
TMI Blog2017 (11) TMI 1708X X X X Extracts X X X X X X X X Extracts X X X X ..... e of diamonds to the tune of Rs. 692.82 lakhs from concerns controlled by Shri Rajendra Jain/Sanjay Chaudhary group. Hence the AO reopened the assessment of the year under consideration by issuing notice u/s 148 of the Act. Since the assessee had reconciled the sales and purchases of diamonds, the AO took the view that the assessee might have purchased diamonds from some other sources and accordingly estimated the profit from such purchase of diamonds at 6% of the value of purchases and added the same to the total income of the assessee. The Ld CIT(A) adopted the rate of 3% and accordingly partially sustained the addition. Still aggrieved, the assessee has filed this appeal. 3. I notice that the Ld CIT(A) has reduced the rate of profit to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine as foreign revenue has been derived through business activities of the assessee, it can be reasonably inferred that the assessee was actually in possession of diamonds. This is based on the footing that there cannot be any sales without purchases. 9.1 However, it is also a matter of fact that the diamonds shown to he purchased from aforesaid hawala dealers has entered into the stock register and the assessee has shown corresponding exports against the said purchases debited. This could only mean that the diamonds were brought by the assessee from grey market (which is a very common practice prevalent in Surat and Mumbai), without bill, and to adjust this transaction into the books of accounts, he must have obtained bill from Rojendr J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a quick profit. Secondly, there is always an element of discount in the case of instant cash purchase. This is a common practice followed in the diamond market, and the entities operating in the market would always look for reaping such benefits. 9.4 Thus, from the above analysis of the facts, it is crystal clear that the purchases made by the assessee .from the above concern and claimed as purchase expenses in his profit and loss account are not genuine. And there is profit element embedded in these transactions wherein the purchases have been made from other entities not from the claimed entity i.e. aforesaid hawala dealers. 10. Now the question arises what should be the actual profit element embed in these accommodation entries as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BAP talks about the net profit margin (NP), for a petty dealer, operating without any establishment, the GP would be almost similar to NP. 10.3 In view of the fact that the bogus purchase(accommodation entries) has been recorded in the books of account of the assessee, I am of the considered opinion that the profit element embedded therein with respect to the transactions entered by the assessee with paper concern like aforesaid hawala dealers dealing in Diamond would be subject to tax. And I hereby consider that 6% of the total amount of Rs. 6,92,82,349/- which conies to Rs, 41,56.941/- should be taken as Additional profit on unproved/ non-genuine purchase and added to the total income of the assessee. 3.5 There is merit in the argume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd industry constituted by the Government of India, Ministry of commerce and Industry, after considering the BAP scheme, recommended presumptive tax for net profit calculated (c)2% of trading activity and 3% for manufacturing activity or @ 2.5% across the board. It is also stated that the operative profit in case of diamond trading for computation of ALP by the TP wing is consistently in the region of around 1.75% to 3%. It is also brought to my notice that in similar cases of diamond business, some CIT(A)'s have taken a view that 3% of the disputed purchases should be considered as fair additional profit. In view of the above and also since the profit margin is lesser in this sector, adopting 6% as the additional profit by the AO, is n ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
