TMI Blog2021 (7) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... he profit of the assessee. It will not be proper to estimate the income of the assessee on the basis of presumption that the assessee would have sold the diamonds when the so-called diamonds said to have been purchased by the assessee never existed ab-initio. - Decided against assessee. Estimation of income - bogus purchase of diamonds at 5% of the alleged bogus purchases - HELD THAT:- This is a case where the assessee has claimed bogus purchases of diamonds as its expenditure when the diamonds did not exist at all - assessee has neither disclosed the sale of these diamonds in its P L Account nor shown the unsold diamonds as closing stock. Therefore, the corresponding revenue from sale of diamonds and the stock position is not disclosed in the P L Account. There is evidence received by the Revenue that the entire purchases made by the assessee is bogus i.e., the assessee has not received any diamonds though it has debited the purchase value of diamonds in his books of accounts. This fact is not disproved. When no diamonds are received by the assessee there is no possibility of those diamonds being sold. Hence estimation of profit on sale of diamonds which never exist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made unaccounted purchases of diamonds and there were variation in stock also. The assessee admitted the same and offered to tax and the assessment was completed u/s. 143(3) of the Act on 29/12/2009 by assessing the income of the assessee at ₹ 33,98,644/- by accepting the return of the assessee. Thereafter, information was received from DIT (Inv.)-II, Mumbai that the assessee viz., M/s. Om Karni Jewellers had obtained bogus purchase bills to the extent of ₹ 85,25,604/- from A-2 Jewells of Bhanwarlal Jain Group during the F.Y. 2006-07. Therefore, the assessment was reopened U/s. 147 of the Act and notice was issued to the assessee U/s. 148 on 27/3/2014. In response to the notice the assessee had responded stating that the return filed by him earlier wherein the assessment was completed U/s 143(3) of the Act may be treated as the return filed in response to notice U/s. 148 of the Act. The investigation wing at Mumbai informed the Ld. AO vide letter dated 13/3/2014 that Sri Bhanwarlal Jain along with his sons Sri Rajesh Banwarlal Jain and Sri Manish Banwarlal Jain are operating and managing 70 binami concerns through which they had provided accommodation entries of unsecu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. d. The applicant has not submitted any documents regarding genuineness of A2 jewels, Surat. When the A2 jewels themselves has confirmed that these accommodation entries and revealed their modus operandi, the explanation given by the applicant falls flat. The applicant has not brought any evidence to show that statement of Bhanwarlal Group were incorrect or otherwise. e. Only information that payments have been made in cheque cannot be accepted. As per the modus operandi given during the search of Bhanwarlal Group that the whole transaction would be conducted through bank entries and the amount of money will be returned in cash. Since applicant himself has submitted that his father would handle the purchase etc and would go to Surat for it by road, cash transaction at this meeting points cannot be ruled out. In view of the above, I find that the applicant has not been able to disprove the finding of this search in the Bhanwarlal Group case. When the seller himself has accepted that these are bogus entries, I find no hesitancy to confirm the addition made. This also has been proved by existence of parallel accounts containing cash transactions in the pen driv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ills to the assessee against cheque payments. From the order of the Ld. AO it is apparent that the notice U/s. 147 was issued to the assessee citing the reasons recorded for reopening the case which the Ld. AR could not seriously confront before us at the time of hearing. Therefore, the additional ground raised by the assessee is devoid of merits and accordingly disposed off. 9. Further, with respect to the issue on merits the Ld. AR reiterated the submissions made before the ld. Revenue Authorities and argued by stating that, even if the purchase to the tune of ₹ 84,25,604/- is found to be bogus, addition cannot be made on the entire amount. It is only the estimated profit arising out of the sale of those bogus purchases could be brought to tax in the hands of the assessee. The Ld. DR on the other hand relied on the order of the Ld. CIT (A) and prayed for confirming the same. 10. We have heard the rival submissions and carefully perused the materials on record. From the facts of the case, it is apparent that the assessee has made parallel entries in his books of accounts with respect to the bogus purchases identified at the time of search in the case of Bhanwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sale of diamonds 10,60,000 PB Pg.No.16,17 Total: 4,05,50,960 8.1. Against the turnover of ₹ 4,05,50,960/-, the assessee has declared net profit of ₹ 1,33,921/- only. Thus, the assessee s net profit from trading of gold jewellery and diamonds is only 0.33% of turnover which is abnormally low taking into account of the nature of business of the assessee. It apparently appears that the assessee has manipulated the accounts to arrive at a lower profit, because it had already declared ₹ 40,45,000/- as its un-accountant income in its return towards excess stock of diamonds found during the survey. In this situation, the books of account and the statement of accounts furnished by the assessee cannot be relied upon. Moreover, there is a categorical finding by the Investigation Department of the Revenue that the assessee had received bogus bills aggregating to ₹ 98,69,702/-towards its purchases wherein the payments were made through banking channels. It is also the finding of the Investigation wing of the Revenue that tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No.1984/Hyd/2018 (Revenue s Appeal) 13. The brief facts of the case are that, in the case of the assessee the Ld.AO had received information from Addl. CIT, Central Range, Surat that the assessee Shri Devaki Nandan Verma had obtained bogus purchase bills to the extent of ₹ 1,55,76,364/- during the Financial Year relevant to the assessment year 2008-09 from Sparsh Exports Private Limited, Aadi Impex, Sun Diam and Avi Exports of Rajendra Jain group. Therefore, the case of the assessee was reopened U/s. 148 of the Act and the notice was issued on 27/3/2015. In response, the assessee had filed a letter stating that the return of income filed by him earlier may be adopted as the return filed in response to the notice issued U/s. 148 of the Act. During the course of scrutiny assessment proceedings, the assessee had explained before the Ld.AO that he was maintaining stock register and other records to justify that the diamond purchased by him were genuine. He had also submitted that all the purchase of diamonds were made by way of cheque payment and he had also received invoices for the purchases. However, the Ld. AO rejected the contention of the assessee by observin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further the assessee has neither disclosed the sale of these diamonds in its P L Account nor shown the unsold diamonds as closing stock. Therefore, the corresponding revenue from sale of diamonds and the stock position is not disclosed in the P L Account. Moreover, there is evidence received by the Revenue that the entire purchases made by the assessee is bogus i.e., the assessee has not received any diamonds though it has debited the purchase value of diamonds in his books of accounts. This fact is not disproved. When no diamonds are received by the assessee there is no possibility of those diamonds being sold. Hence estimation of profit on sale of diamonds which never existed is not appropriate. For the above stated reasons, we do not find any merit in the order of the Ld. CIT (A) on this issue. Accordingly, we hereby reinstate the order of the Ld. AO. 16. In the result, appeal of the Revenue is allowed. 17. Conclusively, in the result, the assessee s appeal in ITA No. 350/Hyd/2017 is dismissed and the Revenue s appeal in ITA No. 1984/Hyd/2018 is allowed. 18. Before parting, it is worthwhile to mention that this order is pronounced after 90 days of hearing the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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