TMI Blog2017 (9) TMI 1956X X X X Extracts X X X X X X X X Extracts X X X X ..... he view that the CIT(A) has rightly upheld the reopening of the proceedings u/s 147 of the I.T. Act. - Decided in favour of the revenue. Estimation of income - bogus purchases - addition of the profit element to the extent of 0.25% on the bogus purchase of 13 parties - contention of the assessee is that the addition should not be more than 1% specifically in view of the nature of the business of diamond of the assessee - HELD THAT:- As per CIT-A purchase of cut and polished diamond from the open market was made mainly to save 1% vet levied thereon and in addition the buyer get the benefit of lower rate/ cash discount. In the said circumstances, the CIT(A) was of the view that the addition of extra profit @ 7.3% of purchases was not held to be justified and reduced the profit embedded in the transaction @ of 2% of purchase value record in the books of accounts. No distinguishable material has been placed on record even after service of the notice to assessee to the contradict the finding of the CIT(A) on record. Nothing came into notice that the assessee produced some material earlier which was not considered by the CIT(A). Taking into account all the facts and circumstances we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hases, c) in reaching to the conclusion and confirming the addition partly, the Ld. CIT(A) omitted to consider relevant factors, considerations, principles and evidences white he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors as well as making certain assumptions contrary to the facts of the case. Without prejudice, the addition made to the income of the appellant on account of so called possible profit element embedded in such purchases is quite excessive and unreasonable. 3. The ld. CIT(A) erred in holding that levy of interest u/s 234B, 234C and 234D of the I.T. Act, 1961 is mandatory. The appellant denies its liability for such interest. The Ld. CIT(A) erred in holding that the ground raised disputing initiation of penalty proceedings u/s 271(1)(c) is premature. The appellant denies its liability for such penalty. The appellant craves leave to add, alter, amend or delete any or all of the above grounds of appeal. 3. The brief facts of the case are that the search and seizure action u/s 132 of the Income Tax Act, 1961,(hereinafter, the Act ) was conducted in the case of assessee firm, its group concerns, partners and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the assessment was completed Exparte. The factual position in connection with reopening the case is not in dispute. The case of the assessee was reopened upon the information received from the DGIT(Inv), Mumbai by virtue of letter dated 13.03.2014. It was explained that the assessee has availed the accommodation/fictitious bills to the tune of ₹ 16,74,69,611/-. It is necessary to advert the finding of the CIT(A) in this regard.:- I haveconsidered the submissions of the appellant and perused the materials available on record including copies of the judicial decisions relied upon by the appellant. The issue for adjudication is whether the AO was justified in reopening the assessment u/s 147 of the Act beyond four years of the end of the relevant A.Y. and whether, while doing so he had complied with the terms of the firs proviso to section 147 of the Act. It is a matter of record that the assessment of the appellant was reopened on the basis fo the information received from the DGIT(Inv), Mumbai vide letter dated 13.03. 2014 that the appellant had ibtained fictitious purchase bills or accommodation entries to the tuen of ₹ 16,74,69,611/- purchase bills or accomm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Is the basis for reopening of the assessment. Following the same legal principle it cannot be said even in the instant case that there was any application of mind on part of the AG on this issue at the time of previous assessments and, therefore, the reopening of said assessment in these circumstances cannot be said to be based on change of opinion. 4.3.3Finaly, it is found that the AC. had proceeded to reopen the assessment because there was a failure on part of the appellant to disclose fully and truly facts necessary for its assessment. In this connection, it would be pertinent to refer to the judgment of Hon'ble(Supreme Court in the case of Phoolchand Oajran p/al 203 ITR 456 (SC) wherein it has been held that where on the basis of subsequent information, the transaction itself is found to be a bogus transaction, mere disclosure of that transaction at the time of original assessment proceedings cannot be said to be disclosure of true' and full' facts of the case and the ZIG would have jurisdiction to reopen the concluded assessment in that case. Since In the instant case, the purchases (rain the above 13 parties were not genuine purchases but in the nature of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm the finding of the CIT(A) on this issue. And this issue is decided in favour of the revenue. ISSUE NO.2:- 6. Under this issue the assessee has challenged the addition of the profit element to the extent of 0.25% on the bogus purchase of 13 parties to the tune of ₹ 16,74,69,611/-. The contention of the assessee is that the addition should not be more than 1% specifically in view of the nature of the business of diamond of the assessee. Before going further it is necessary to advert the finding of the CIT(A) on record.:- I have considered the submissions of the appellant and perused the materials available on record including copies of judicial decisions relied upon the appellant. The point for determination is whether the AO is justified in making addition of ₹ 1,22,75,522/- on account of element of extra profit of 7.33% embedded in the purchases made from the aforesaid 13 concerns. At the outset, it is proposed to take note of couple of Judicial al precedents having bearing on the Issue under adjudication. It is now well-settled that the onus is upon the assessee to prove the genuineness of the purchases (178 CTR (Raj) 420 and 186 CTR (HP) 718). In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (accommodation) purchase bills of cut and polished diamonds from parties like the aforesaid concerns based in Surat. I am unable to accept the appellant's plea that there is nothing it support of cash purchases of goods from the grey market, because these transactions take place in secret and no direct evidence in this regard is generally available. it is well-established that such matters have to but considered in the light of surrounding circumstances normal course of human conduct and preponderance of probabilities. However, it is pertinent to mention that the fact that the appellant was one of the beneficiaries of the accommodation entries obtained from entry providers operating in Mumbai came to Fight only during the course of search and seizure actions carried out in the case of Shri Bhanwarlal lain Group. The purchases of cut and polished diamonds shown to have been made from aforesaid 13 parties cannot be regarded as genuine merely because the appellant was not related to the suppliers or because the GP rate shown by the appellant was reasonable or satisfactory and had been accepted in the past. However, since the appellant had furnished copies of account confirmations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 has not given any basis or justification for adopting settlement at 7.33 fo. In this connection it is pertinent to note of cut and polished diamonds from open market is made mainly to save 1% VAT levied thereon and in addition, the buyer gets the benefit of lower rate/cash discount. In these circumstances, the addition of extra profit @ 7.3% of purchases from aforesaid concerns cannot at all be said to be justified. In view of the this position, it is considered fair and reasonable to estimate the profit margin embedded in such purchases at 2% of the purchase value recorded in the books of account. Since, the appellant has shown purchases to the tune of ₹ 16,74,69,611/-, the profit element involved therein @ 2% of the purchase value will come to ₹ 33,49,392/- as against ₹ 1,22,75,522/- worked out by the AO. Thus, the appellant gets relief of ₹ 89,26,130/- (1,22,75,522/- ₹ 33,49,392/- on this count. Ground no. 3 of the present appeal is accordingly allowed to the extent indicated above. 7. Assessing Officer estimated the gross profit upon the bogus purchase/accommodation entries @ 7.3%. The CIT(A) assessed the profit ratio on gross profit @ of 2% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 2697,632/- made by the AC) to the income of the Appellant on account of possible profit element to the extent of 3% embedded in purchases made from alleged nongenuine panics on the basis of information received from DGIT Mumbai. of The Id- C[T(A) failed to appreciate that:- - all the purchases are genuine beyond doubt and supported by sufficient materials; every purchase is backed by corresponding sale, the gross profit ratio shown by the Appellant is quite reasonable; the payment of purchases are made by account payee cheques only and - nothing has been brought on record by the Id. AC) that money has exchanged the hands in lieu of payment made for these purchases by account payee cheque, 2.a) the Id. AD did not provide copy at materials and statements relied upon by him one allowed any opportunity to the Appellant to cross examine those parties who have been believed to have provided alleged entries of such purchases, c) in reaching to the conclusion and confirming the addition partly, the Ld. CIT(A) omitted to consider relevant factors, considerations, principles and evidences white he was overwhelmed, influenced and prejudiced by irrelevant c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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