TMI Blog2022 (5) TMI 837X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Order of Ld. CIT(A) is modified and the Assessing Officer is directed to restrict the disallowance of bogus purchases to the extent of 6% of aggregate purchases shown from four parties of Rs.3.09 crores. AO is further directed to work out the eligibility of exemption under section 10AA. In the result, grounds of appeal raised by Revenue are partly allowed. - ITA No. 446/SRT/2019 - - - Dated:- 13-5-2022 - Shri Pawan Singh, Judicial Member And Dr. Arjun Lal Saini, Accountant Member For the Department : Shri H.P. Meena, CIT-DR For the Assessee : Shri Kamlesh Doshi, A.R. ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. The appeal filed by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-2, Surat [in short ld. CIT(A)] dated 11/07/2019 for the Assessment Year (A.Y.) 2012-13. The Revenue in its appeal has raised the following grounds of appeal: 1. On the facts and circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income, the assessee claimed deduction under Section 10AA of the Income Tax Act, 1961 (in short, the Act) of Rs. 40,91,698/-. The case of assessee was selected for scrutiny. During the assessment, the Assessing Officer noted that the assessee has shown certain purchases from the entities managed by Bhanwarlal Jain group. Bhanwarlal Jain group were indulging in providing accommodation entries by running various bogus concerns including Kothari Company, Little Diam, Jewel Diam and Rahul Export. The assessing officer was having such information as the investigation wing of revenue made a search action on Rajendra Jain Group. The assessee has shown purchases from Kothari Company, Little Diam, Jewel Diam and Rahul Export of Rs. 3.09 crores. The Assessing Officer after referring the modus operandi of Bhanwarlal Jain and its group, issued show cause notice to the assessee as to why the aggregate amount of purchase of Rs. 3.09 crores should not be treated as unexplained expenditure and added to the income of assessee. The assessee filed its reply dated 30/03/2015 and stated that the alleged statement of Bhanwarlal Jain recorded by the Investigation Wing are general and self-contrad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer. The assessee also explained that they are in the business of manufacturing of cut and polished diamonds and rough diamonds. After manufacturing cut and polished diamond, they are exported to various parties outside the India. The unit of assessee is established in Special Economic Zone (SEZ), Sachin and the assessee complied with all conditions stipulated in Section 10AA and claimed exemption of Rs. 40,91,698/-. The assessee claimed that his case is covered by the decision of Hon'ble Gujarat High Court in the case of Sajani Jewels Vs DCIT in Civil Appeal No. 17935 of 2015. The assessee s only source of income is from business and there is no other source of income. All profits of the unit is derived from manufacturing activities and qualifies for deduction under Section 10AA of the Act. 5. The ld. CIT(A) after considering the submissions of the assessee has held that the Hon'ble Jurisdictional High Court in the case of Sajani Jewels (supra) held that there was no escapement of income for the concern eligible for Section 10AA deduction. The Hon'ble High Court also held that source of payment for purchases being duly explained from the books of account, the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempted under Section 10AA, therefore, all the allegations of bogus purchases are false. The assessee has made genuine purchases. The Assessing officer has not rejected books of account nor disputed the sales/export of assessee. The sale/export is not possible in absence of purchases. The manufacturing unit of assessee is situated in SEZ and exports are fully verifiable through custom authorities. The ld. AR further submits that the case of assessee is squarely covered by the decision of Hon'ble Jurisdictional High Court in the case of Sajani Jewels Vs DCIT (supra). 8. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities carefully. We find that the assessing officer after recording reasons that the assessee is one of the beneficiary of the accommodation entry received from Bhanwar lal Jain proceeded for assessment. The assessing officer made the disallowance of the entire purchase shown from the entity managed by Bhanwar Lal Jain and his Group. We find that the assessing officer has not disputed the sale of the assessee and merely held that the assessee has inflated expenses. The assessing officer has not rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy recorded that the disallowance of 100% of the purchases are not justified when the sales of the assessee is not disputed. No doubt, the assessee is engaged in export of cut and polished diamonds and entire profit of the assessee from eligible export is exempt. Yet, the assessee has not fully established, the fact that entire purchases from the concern managed by Bhanwarlal Jain Group is genuine. The purchases from such hawala traders are mainly made to inflate the expenses. The Assessing Officer in para-3 of his order has clearly recorded the modus operandi disclosed by Bhanwarlal Jain and his associates during the search action. The payments in such transaction is made through banking transaction to show the sham transaction as genuine transaction. The combination of this bench 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 consistent view, the order of Ld. CIT(A) is modified and the Assessing Officer is directed to restrict the disallowance of bogus purchases to the extent of 6% of aggregate purch ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
