TMI Blog2019 (3) TMI 1544X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to be interfere with - Decided against revenue. - I.T.A. No.2552/M/2017 - - - Dated:- 27-3-2019 - Shri Rajesh Kumar, AM And Shri Amarjit Singh, JM For the Assessee : Shri K.A. Vaidyalingan (AR) For the Department : Shri Abi Rama Kartikiyen (DR) ORDER PER AMARJIT SINGH, JM: The present appeal has been filed by the revenue against the order dated 31.01.2017 passed by the Commissioner of Income Tax (Appeals)-30, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the assessment year 207-08. 2. The revenue has raised the following grounds: - 1. Whether on the facts and in the circumstances of the case and in law, the La. CIT(A) justified in restricting the disallowance of purchases @ 2% made by the AO on account of bogus purchases of rough diamonds of ₹ 4,34,15,667/- made by the assessee from bogus parties viz M/s Moulimani impex Pvt. Ltd, when during the search and seizure operation it was conclusively provedbeyond doubt that these parties are only into providing accommodation entries and do not do any real business. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) justified in not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was assessed to the tune of ₹ 8,05,69,124/-. Thereafter, the assessee filed an appeal before the CIT(A) who restricted the addition to the extent of 2% of the bogus purchase. Feeling aggrieved, the revenue has filed the present appeal before us. ISSUE NO.1 2 4. Issue nos. 1 to 2 are inter-connected, therefore, are being taken up together for adjudication. Under these issues the revenue is challenging the restriction of the addition to the extent of 2% of total bogus purchase in sum of ₹ 4,34,15,667/- from M/s.Moulimani Impex Pvt. Ltd. The AO raised the full addition in connection with the alleged bogus purchase i.e. to the tune of ₹ 4,34,15,667/-. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record.: - 7.3 1 have carefully considered the rival contentions on the issue. On perusal of the rival contentions and the material on record, I have found that in the appellant's case, Ld. AO has not made independent verifications nor he has attempted to issue notice u/s. 133(6)/ 131 of the I.T. Act, but the fact remains that there was an overwhelming evidencein the form of sworn statements recorded from the alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t falls within exemption provided by the Act, lies upon the assessee. In the case of Durgaprasad More (Supra), the Hon'ble Court went on to add that a party who relies on a recital in a Deed has to establish the truth of this recital, otherwise it will be very easy to make self serving statements in documents either executed or taken by a party who relied on those recitals. If all that anassessee who wants to evade tax has to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. The Hon'ble Court further held that the Taxing Authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look in to the surrounding circumstances to find out the reality of the recital made in those documents. 7.6 Reliance is also placed on the judgement of Hon'ble Supreme Court in the case of Sri Meenakshi Mills Ltd 63 ITR 609 where it was held that the I.T. Authorities are entitled to pierce the veil of Corporate Entity and to look into reality of transaction. In the case of McDowell Co. 154 ITR 148(SC) it was stated that implications of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uiries on his own. However in this case the investigation wing of the Income Tax Department conducted several inquiries in the post search investigation after the search action in the Shri Rajendra Jam! Sanjay Choudary/ Dharmichand Jain Group cases and intimated to the assessment wing with clear cut findings that accommodation entries were provided to several parties by the group and the appellant is one among the beneficiaries from such accommodation entries. The appellant also argues that the said party is assessed with different authorities and the books of accounts are also audited. Just because the documentation part is perfect, the transaction cannot become genuine. In the present case the supplier clearly admitted that they have not done any business and given only accommodation entries and also they are only name lenders to Shri Rajendra Jain/ Sanjay Choudary/ Dharmichand Jain and there is no chance of real purchases made by them from these parties. In these circumstances, Ld. A.O. held that the transaction is not genuine but added the total amount of purchase made from MIs Moulimani Impex Pvt. Ltd of ₹ 4,34,15,667/-. 7.9 Coming to the addition made, in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gus bills thus, appears to be inflation of purchase price so as to suppress to profits. Considering the facts of the case as well as the various case laws cited supra especially the profit element embedded in such purchases instead adding the entire amount of purchases considered as bogus. The estimation in the above case is made based on the benefit in the form of taxes and the profit margin the line of business. 7.12 In the light of the above, one has to see in the present case, which is in the line of manufacturing and trading of diamonds, what is the correct profit element embedded or the additional benefit the appellant got in resorting to such purchases from some unknown entities. In the case of diamond trade, generally the rate of VAT is stated to be levied at 1% on the purchases made from Mumbai and on the purchases made under Form 'H' no VAT is payable due to export commitment and purchases made from Surat there is no VAT chargable. Coming to theprofit margin in the trade, the task force group for diamond industry constituted by the Government of India, Ministry of Commerce and Industry, after considering the BAP scheme, recommended presumptive tax for net pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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