Tribunal directs AO to delete certain additions, re-examine Mr. Rajendra Jain's matters. Appeals allowed

The Tribunal directed the AO to delete additions related to companies where Mr. Rajendra Jain and others were partners/directors regarding bogus purchases. For other issues related to Mr. Rajendra Jain, the AO was instructed to re-examine the matter. Both the assessee and the revenue's appeals were allowed for statistical purposes, subject to the specified directions.

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Issues Involved:
1. Legitimacy of the addition towards bogus purchases.
2. Justification for the adhoc disallowance rate applied by the CIT(A).

Detailed Analysis:

1. Legitimacy of the Addition Towards Bogus Purchases:

The primary issue in the assessee’s appeal was whether the CIT(A) was justified in confirming the addition towards bogus purchases amounting to Rs. 31,09,487/-. The revenue was aggrieved by the CIT(A)'s decision to restrict the disallowance to 3% of the total value of the purchases. The case involved the assessee, a public limited company engaged in the diamond trade and manufacturing, which had its assessment reopened based on information from the DGIT Investigation, Mumbai, regarding accommodation entries for diamond purchases from the Rajendra Jain Group and associated bogus companies.

The assessee had initially declared an income of Rs. 1,77,93,630/- for A.Y. 2008-09. The assessment was reopened with a notice under Section 148 of the Income Tax Act, 1961, due to alleged bogus purchases from specified parties. Despite providing relevant purchase documents, the Assessing Officer (AO) deemed the purchases bogus and made an addition of 12.5% of the total purchase value, amounting to Rs. 1,29,56,195/-. The CIT(A) later reduced this addition to 3%.

2. Justification for the Adhoc Disallowance Rate Applied by the CIT(A):

The Tribunal considered the assessee's past cases for A.Y. 2009-10, 2010-11, 2012-13, and 2013-14, where similar issues regarding purchases from the Rajendra Jain Group were adjudicated. The Tribunal noted that in those cases, the suppliers had appeared before the AO, admitted to selling goods, and filed affidavits. The Tribunal emphasized the difference between issuing bogus bills generally and issuing accommodation bills to a specific party, especially when suppliers admitted to supplying goods and paying VAT.

The Tribunal referred to multiple precedents where similar additions were deleted due to lack of independent verification by the AO and reliance solely on information from the Sales Tax Department. The Tribunal underscored the necessity for the AO to conduct independent inquiries and provide opportunities for cross-examination.

Conclusion:

The Tribunal restored the issue of bogus purchases to the AO with directions to delete additions related to companies where Mr. Rajendra Jain and others were partners/directors. For other concerns linked to Mr. Rajendra Jain, the AO was instructed to re-examine the matter afresh. Consequently, the appeals of both the assessee and the revenue were allowed for statistical purposes, subject to the specified directions.

Order Pronouncement:

The order was pronounced in the open court on 08/03/2019.

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