TMI Blog2022 (4) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... l raised by the Revenue is partly allowed resultantly, the ground No. 2 of assessee s appeal is dismissed - ITA No. 533/SRT/2019 And ITA No. 555/SRT/2019 - - - Dated:- 6-4-2022 - Shri Pawan Singh, Judicial Member And Dr. Arjun Lal Saini, Accountant Member For the Department : Ms. Anupama Singla, Sr. DR For the Assessee : Shri Rohit Vijayvargiya, CA ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: The appeal filed by the Revenue and the cross appeal filed by the assessee are directed against the order of the Commissioner of Income Tax (Appeals)-3, Surat [in short ld. CIT(A)] dated 12/09/2019 for the Assessment Year (AY) 2008-09. The Revenue in its appeal has raised the following grounds of appeal: 1. Whether, on the facts and in law, the ld. CIT(A) was not justified in partly allowing the appeal of the assessee and estimating disallowance at @5% of bogus purchases, as against 25% made by the Assessing Officer. 2. Whether, on the facts and in law the ld. CIT(A) was justified in partly allowing the appeal of the assessee upon the decision in the case of M/s Mayank Diamonds Pvt. Ltd. and estimating di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions of both the parties and considering the fact that there is delay of only 3 days, therefore, keeping in view the fact that when technical consideration are petted against the cause of substantial justice, the cause of substantial justice may be prevailed. Therefore, the delay of three days in filing the appeal by the assessee is condoned. Now adverting to the adjudication of the appeal. 6. Brief facts of the present case are that the assessee is the proprietor of M/s Kanchan Corporation and engaged in the business of trading of rough and polished diamonds and commission agent, filed his return of income for the Assessment Year 2008-09 on 30/09/2008 declaring total income of ₹ 1,14,580/-. The return was processed under section 143(1) of the Income Tax Act, 1961 (in short, the Act). The case of the assessee was reopened under section 147 of the Act. Notice under section 148 dated 30/3/2015 was served upon the assessee. 7. The case was reopened on the basis of information received from DGIT (Investigation) Mumbai. In the information received from Investigation Wing, Mumbai it was informed that a search and seizure action was carried out by Investigation wing- Mum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted then there should be debit and credit entries of equal amount in the bank statement of assessee and each debit/credit entry should be related to any of purchase/sale transaction. However, on verification of the bank account produced by the assessee, it was noticed that there are several other entries in the bank statement/ledgers of the parties in addition to the sale and purchase transaction. On confronting such fact, the assessee stated that he has also carried out certain sale and purchase on which the assessee had not earned any commission income. Besides that the Assessing Officer noted that the assesse is also engaged in financial transaction with other parties. On confronting such fact, the assessee explained that these transactions are of loans and advances given/received from several other parties to meet out the short term financial commitment. The Assessing Officer noted that these financial transactions were in the nature of loans and advances were required to be a part of audit report. The assessee failed to prove that he is earning commission income only. The Assessing officer on the basis of discrepancies in the audit report, noted that the assessee has given su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected during the search action on Gautam Jain Group, treated the purchases as non-genuine. The A.O. in para 10.2 of assessment order held that, it is likely that the assessee has purchased the goods of ₹ 7.66 crores from open market in cash and had sold the same in cash as well and to adjust these entries of cash purchases and to suppress the profit, the assessee must have taken accommodation bills from M/s Rajan Gems. The assessee failed to produce exact details regarding stock of these purchases and subsequent sales, the parties are not ascertained. On the basis of decision of Ahmedabad Tribunal in the case of Vijay Proteins reported in 55 TTJ 76 wherein the Tribunal has sustained 25% of the disputed purchases. The Assessing Officer, accordingly, disallowed 25% of purchases of ₹ 7.66 crores and worked out the disallowance of ₹ 1.91 crores. 10. On appeal before the ld. CIT(A), the assessee challenged the validity of reopening as well as additions on merit. The assessee filed detailed written submission before the ld. CIT(A). The submission of assessee are recorded in para 5 of the order of the ld. CIT(A). Besides filing of detailed written submission on reop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance of bogus purchase at 25% of aggregate purchases shown from M/s Rajan Gems. M/s Rajan Gems was managed by Gautam Jain and Rajendra Jain group which were engaged in providing bogus entry of purchases without actual delivery of goods. The A.O. after giving full opportunity to the assessee, disallowed 25% of purchases on the basis of decision of the Ahmedabad Tribunal in the case of Vijay Proteins (Supra). The assessee is a trader in diamond business and have shown purchases only to inflate the expenses and to reduce the profit. The investigation wing during the search action on Gautam Jain gathered sufficient evidence which proved that the said group was indulging in providing the bogus entry without actual delivery of goods. The disallowance made by the A.O. was quite reasonable. The ld. CIT(A) restricted the addition to the extent of 5% on the basis of decisions of the various Tribunals including the decision of the Hon ble Jurisdictional High Court in the case of Mayank Diamond Pvt. Ltd. Vs ITO (Tax Appeal No. 200 of 2003) dated 17/11/2014, decision of this Tribunal in the case of DCIT Vs J.B. Brothers, Surat in ITA No. 3661/Ahd/2015 and C.O. No. 22/Ahd/2016 order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of Mayank Diamond (supra) is not applicable on the facts of the present case. It is a settled law that in case of disputed purchases shown from such hawala dealer s only profit element embedded in such transaction is to be disallowed, to avoid the possibility of revenue leakage and not the substantial part of transaction. No doubt, the Assessing Officer identified the purchases of ₹ 7.66 crores shown from hawala dealers, the assessee may have shown other transaction with some other parties. However, the assessee has offered a meagre income of ₹ 1,14,580/- for taxation, thus the assessee was shown an extremely low profit. This combination in other similar cases wherein the purchases are shown from Bhanwarlal Jain or Rajendra Jain or Gautam Jain group have restricted or enhanced the addition to the extent of 6% of such amount or disputed purchases. Therefore, taking a consistent view, the disallowance which was restricted to the extent of 5% by ld. CIT(A) are increased to 6% of the impugned purchases of ₹ 7.66 Crores. 17. In the result, the grounds of appeal raised by the Revenue is partly allowed resultantly, the ground No. 2 of assessee s appeal is dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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