TMI Blog2023 (2) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. Although the net profit declared falls within the range recommended, in our considered opinion, the interest of justice would be served if the rate of net profit is taken at 2% of sales, Hence bringing to tax, difference between 1.24% net profit shown and the 2% net profit recommended by the above Task Force will, in our considered opinion, serve the ends of justice - Appeal of revenue partly allowed. - ITA No.6408/Del./2016 ITA No.6409/Del./2016 ITA No.6691/Del./2016 ITA No.6692/Del./2016 - - - Dated:- 3-2-2023 - SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER And MS. ASTHA CHANDRA , JUDICIAL MEMBER FOR THE ASSESSEE : SHRI K. SAMPATH , ADVOCATE SHRI V. RAJAKUMAR , ADVOCATE FOR THE REVENUE : SHRI VIPUL KASHYAP , SR. DR ORDER PER SHAMIM YAHYA , ACCOUNTANT MEMBER : These are appeals by the assessee and Revenue against the respective orders of ld. CIT (A) for the concerned assessment years. 2. Since the facts are common and the appeals were heard together, these are disposed off by this common order. REVENUE S APPEAL 3. Grounds are common except for the difference of figures, hence we are referring facts and grounds for AY 2007-08. 4. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.46,06,910/- 5 Mohit Enterprises ACRPK1211G 2007-08 Rs.27,35,720/- 6 Parvati Exports AAEFP2530Q 2007-08 Rs.77,03,755/- Total Rs.2,87,58,745/- 6. AO further observed that Investigation Wing further informed that bogus unsecured loans and sales were being routed in benami concerns. Assessee in response responded that these are genuine transactions of the purchases which have been then sold to customers on which assessee has paid the tax. Further, it was submitted that all the payments made against these purchases were through account payee cheques which were duly reflected in the bank account of the assessee. Assessee further challenged the reopening of the assessment merely on the basis of the information gathered during the search and seizure and that too at a third party s premises. However, AO was not convinced and passed a very laconic order as under :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so the satisfaction note and other related issues I am of the view that the saving as devised in terms of the first proviso to section 147 would not be available to the assessee in the subject case because it will be neutralised by the Explanation to that section. The normal limitation of six years would, therefore, apply. Besides the subject case is not a simple case of change of opinion. There is fresh material to stoke the change of opinion. In such circumstances, I am constrained to dismiss the additional ground as raised. 8. As regards merits of the case, ld. CIT (A) noted the submissions of the assessee. Assessee s submissions were summarized by the ld. CIT(A) as under :- 1. Further, whatever has the third Party said, on the basis of which this case has been reopened, is behind the assessee, thus for a fair justice, an opportunity should have been provided to the assessee to cross-examine that party. 2. Without prejudice to the above, It is once again confirmed that all purchases made during the relevant previous year, were genuine and duly recorded in the books of accounts and are reflected in the stock register, and all the payments against such purchases, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchases as bogus, as held in the case of G. C. Diamond International Vs Dy CIT (2006) 104 ITJ 809 (Mum.) (Trib.) Copy of the judgment, already submitted. 8 Your kind attention is also drawn to the recent judgment of the Hon'ble Gujarat High Court In the case of CIT vs Nangalia Fabrics Private Ltd, (2014) 220 Taxmann 17 (Mag.) (Guj)(HC.), wherein, it has been decided that - In case where purchases were supported by bills, entries were made in the books of account and payment was made by cheques, said purchases could not be held as bogus purchase. Copy of the judgment, has already been filed. Under these circumstances it is once again prayed that the purchases made, should be treated as genuine purchase and no disallowance should be made on the basis of declaration made by a third party. (A. R. of the Assessee) AO can no treat purchase as Bogus merely because Supplier is declared Hawala dealer by Sales tax Department - Ramesh Kumar Co vs. ACIT (ITAT Mumbai). 9. Ld. CIT (A) further noted the assessee s submissions as under:- 14. The entire business of the assessee in diamonds has been seen to with the stock tally by the auditor, the VAT authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em Private Limited held that in any case when sales declared by the assessee have not been doubted, it was not proper on the part of the AO to deny the claimed purchases on the basis of which sales were made. The Ld. ITAT D Bench, Ahemdabad in the case of Avishkaar Processing Mills (P) Ltd vs. ACIT, Central Circle-d, Surat relying on the decision of Akruti Dyeing Printing Mills Pvt. Ltd. in ITA No.2551 2752/AI-ID/2006heidas that merely on the basis of the third party statement the genuineness of the purchase cannot be questioned. The Ld. ITAT D Bench, Mumbai in the case of Ramesh Kumar Co., Ville Parle, Mumbai vs. The ACIT 21 (1) D Bench, (A Y 2010-11)held that the purchases are supported by proper invoices duly reflected in the books of account. The payments have been made by account payee cheque which is duly reflected in the bank statement of the assessee. There is no evidence to show that the assessee has received cash back from the suppliers. The additions have been made merely on the report of the Sales tax Department but at the same time it cannot be said that purchases are bogus. We, therefore, set aside the findings of the Ld. CIT (A) and direct the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stituted by Ministry of Commerce Industry, after considering capital BAP (Benign Assessment Procedure), net profit was prevalent at 1% to 3% in case of trading of diamonds and 1.5% to 4% for those who engaged in manufacturing of diamonds. In a similar case reported in 144 taxman.com 184 (Mumbai-ITAT) in case of Uppal Diamonds vs. ACIT, wherein assessee was engaged both in trading and manufacturing of diamonds and the allegation was sourcing from Bhanwar Lal Jain, the ITAT held that 3% estimate of profit percentage by the CIT (A) was correct estimate, hence, ITAT upheld the order of ld. CIT (A) and dismissed the assessee s appeal. 16. As per the facts of the present case, it is clear that this is a case of trading in diamonds and sales have not been doubted. Moreover, AO has made no enquiry whatsoever. The prevalent net profit as noted above was at 1% to 3%. The net profit declared by the assessee as per tax audit report is 1.24% for both the years. Although the net profit declared falls within the range recommended, in our considered opinion, the interest of justice would be served if the rate of net profit is taken at 2% of sales, Hence bringing to tax, difference between 1.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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