TMI Blog2022 (11) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... chases - In the result, the grounds of appeal raised by the Revenue is partly allowed resultantly, - ITA No. 199/SRT/2019 - - - Dated:- 31-10-2022 - Shri Pawan Singh, Judicial Member And Dr. Arjun Lal Saini, Accountant Member For the Assessee : Shri Sapnesh Sheth, CA For the Department : Shri H.P. Meena, CIT-DR ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. These cross appeals by the revenue as well as by the assessee are directed against the order of the learned Commissioner of Income Tax (Appeals)-1, Surat [in short ld. CIT(A)] dated 16/01/2019 for the Assessment Year (AY) 2008-09. The Revenue in its appeal has raised the following grounds of appeal: 1. 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 Rs. 3,88,21,441/- on account of bogus purchases to 5%. 2. 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 the suppress the profit of the beneficiaries which is substantiated by the statement on oath given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee is one of the beneficiary of the accommodation entry and that Gautam Jain Group provided accommodation entries of purchases of Rs. 4,08,64,674/-. The statement of Gautam Jain group and its associates under section 132(4) of the Act was recorded, wherein they had admitted that their associate members are managing various entities which are providing accommodation entries. During the course of search, blank cheque book signed by dummy partners / directors /proprietor of entities were found and seized. It was informed that assessee is one of the beneficiaries of bogus purchase managed by Gautam Jain Group. On the basis of such information, the Assessing Officer formed opinion that income of the assessee of Rs. 4,08,64,674/-has escaped from assessment and that he was satisfied that it is a fit case for reopening under section 147 of the Act. The assessee in response to notice under section 148, filed his reply vide his letter dated 17/03/2016 to treat the original return as return in response to notice under section 148. The reasons of reopening was asked by the assessee. The assessee filed his objections against the reopening. The objections of the assessee was rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss profit. The assessee submits that he is in trading activity, and made sales when stock is available. During FY 2008-09 the assessee has no closing stock as on 31st March 2008, i.e. entire stock was sold during the year. The assessing officer grossly erred in making addition of entire aggregate of purchases, which has already been sold. The assessee furnished the details of impugned purchases and revised closing stock at the end of financial year and bills of purchases, confirmation of suppliers and bank statement showing payment through cheques. The assessee also relied on certain case laws. 6. The ld. CIT(A) after considering the submission of assessee, has restricted the addition to the extent of 5% of the amount/bogus purchases by taking view that in identical issues in his earlier order in Gagnani Impex (AY 20013-14) in Appeal No. CAS-3/512//2015-16 dated 24.11.2016 by referring various decisions of the Tribunal and decision of Jurisdictional High Court including in Mayank Diamonds Pvt Ltd Vs ITO (Tax appeal No. 200 of 2003) he has restricted the addition to the extent of 5% , which is reasonable to tax the profit. 7. Being aggrieved by the order of the ld. CIT(A), bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, the ld. AR for the assessee submits that he is not pressing the grounds of appeal related with validity of reopening and supporting the order of ld. CIT(A) on merit that 5% disallowance is quite reasonable keeping in view the profit margin in the diamond industry is very low. 10. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities carefully. As noted above, the ld. AR of the assessee, at the outset supporting his submission and has submitted that he is not pressing the grounds of appeal relating to reopening and other grounds except the disallowance of 5% of the purchases. Considering this submission of the ld. AR of the assessee, grounds No. 1 of the appeal of assessee is dismissed as not pressed. 11. Now adverting to the interconnected grounds of appeal which relates to restricting the addition to the extent of 5%. The assessee has shown purchases from three parties namely Karishma Diamond P. Ltd., Krishna Diam Pvt. Ltd. and Parshwanath Gems Pvt. Ltd. which are managed by Gautam Jain and his group. It is a known fact that Gautam Jain and Rajendra Jain group and his associates were engaged in providing acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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