TMI Blog2022 (2) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed. - ITA Nos. 284, 285 And 79/SRT/2019 - - - Dated:- 28-1-2022 - Shri Pawan Singh, Judicial Member And Dr. Arjun Lal Saini, Accountant Member For the Assessee : Sh. Prakash Jhunjhunwala, C.A For the Revenue : Shri H.P. Meena, CIT-DR ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. This set of three appeals, out of which two cross-appeals for assessment year 2013-14 and one appeal by Revenue for assessment year 2008-09,are directed against the separate orders of ld. Commissioner of Income tax (Appeals)-1, Surat [ CIT(A) for short] all dated 14.03.2019, which in turn arise out of separate assessment orders passed by the Assessing Officer ( AO' for short) under section 143(3) r.w.s 147 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) dated 21.03.2016 23.03.2016 respectively. In all appeals, the parties have raised certain common grounds of appeals; facts in all appeals are almost common except variation of the addition on account of bogus purchases. Therefore, with the consent of the parties all the appeals are clubbed together, heard and are decided by consolidated order to avoid t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Sumukh Commercial Pvt. Ltd. 50,00,053/- Total 3,40,03,788/- 3. The assessee has received accommodation entries for showing purchases of total of ₹ 3.40 crores. On the basis of such information, the Assessing Officer had a reasons to believe that the purchases bills of four concerns, received by assessee are bogus and the income of the income of assessee to that extent has escaped assessment due to failure on the part of the assessee who has not disclosed fully and truly all the material fact necessary for the purpose of assessment. Notice under section 148 was issued to the assessee on 30.03.2015. The assessee in response to notice under section 148 filed his reply dated 22.07.2015 and stated that original return of income filed on 29.09.2008 may be treated as return in response to notice under section 148 of the Act. The assessee required reasons recorded. The reasons recorded were provided to the assessee. The Assessing Officer thereafter processed for assessment and served notice under section 143(2) r.w.s 142(1) respectively. During re-assessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such type of transactions. While arriving at that conclusion the Ld. CIT(A) also relied on the decisions of Hon'ble jurisdictional High Court in the case of Satyanaraya P Rathi (2013) 351 ITR 150 (Guj), CIT vs. President Industries (2002) 258 ITR 654 (Guj), CIT Vs. Simit P Seth 2013 38 taxmann.com 385 (Guj); Mayank Diamonds Pvt Ltd. Vs. ITO TA No. 200 of 2003 dated 07.11.2011. Aggrieved by the decisions of Ld. CIT(A) Revenue has filed present appeal before the Tribunal. 5. We have heard the submissions of learned Commissioner of Income Tax Departmental-Representative (CIT-DR) for the Revenue and learned Authorized Representative (AR) for the assessee and have gone through the orders of authorities below. The Ld. CIT-DR for the Revenue supported the order of Assessing Officer and submits that the Investigation Wing of Department made full-fledged investigation in case of P.K. Jain, who was engaged in providing accommodation entries of sale and purchases of diamonds without actual delivery of goods. P.K. Jain was not engaged in actual business except providing bogus bills. The assessee is one of the beneficiaries of such accommodation entries provided by different concerns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orts submits that on making comprehensive study in the diamond business, the task force suggested that net profit in trading activity is 2% and in manufacturing activity is 3%. And considering the difficulty, to segregate between manufacturing and trading from books of account suggested that rate of net profit of 2.5% across the Board would encourage compliance of both manufacturing and trading. On the basis of aforesaid report, the Ld.AR submits that the profit in case of trader is not more than 2%, therefore the profit element embedded in disputed purchases should not exceed the disallowance @ 2%. 9. The assessee has also filed following documents on record with the declaration by way of certificate that all these documents were filed before the lower authorities; 1. Report of task group for diamond sector, prepared by Government of India, Ministry of Commerce and Industry, Department of Commerce, New Delhi, (filed first time before Tribunal) 2. Name, address PAN of disputed parties 3. Ansh Merchandise Pvt. Ltd. PAN Card CIN Master Data Certificate of Incorporation Ledger account Confirmation of account Purchase bills Ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing that all the concerns from whom the assessee has shown purchases are managed by PK Jain are not genuine. The Assessing Officer made addition of 100% purchases shown from all four parties. The ld CIT(A) upheld the addition to the extent of 5% of the aggregate of purchases shown from four parties by taking view that profit element of profit embedded in such type of transactions can be added to the income of the assessee. The ld CIT(A) while restricting the addition to the extent of 5% referred various decision of Tribunal and Jurisdictional High Court. Before us, the ld CIT- DR for the revenue vehemently argued that the disallowances restricted by ld CIT(A) is very low and it should be at least be restricted to 25% of the disputed purchases. We have examined the facts of the case independently and find that the AO while making 100% disallowances of the disputed purchases solely relied on the report of the investigation wing. No independent investigation was carried out by the AO. No specific findings were given on the documentary evidences filed by the assessee. The sale of the assessee was not disputed by the AO. As recorded above the ld CIT(A) restricted the disallowances to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to adopt the concept of real income and restrict the addition @ 2% of alleged non-genuine purchase at ₹ 18,32,375/.- (2% of ₹ 9,46,18,796/-) since normal profit corresponding to dispute purchases had been offered to tax. ITA No.285/SRT/2020 A.Y. 2013-14 by Revenue 14. The Revenue in its appeal has raised the following grounds of appeal:- (i) On the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in restricted the addition made by the AO of ₹ 3,46,18,796/- on account of bogus purchases to 5%. (ii) On the facts and circumstances of the case and in Law, the Ld. CIT(A) has failed to appreciate the fact that the entire purchase from alleged concerns were bogus and was only to suppress the profit of the beneficiaries which is substantiated by the statement on oath given by the entry provider. (iii) On the facts and circumstances of the case and in Law, the Ld. CIT(A), Surat ought to have upheld the order of the Assessing Officer. It is, therefore, prayed that the order of the Ld. CIT(A)-1 Surat may be set-aside and that of the Assessing Officer s order maybe restored. 15. We find that the grounds of appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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