Tribunal affirms partial disallowance of purchases in diamond industry due to lack of invoice details.

The tribunal upheld the decision of Ld. CIT(A) to disallow only 3% of purchases made by the assessee from alleged parties in the diamond industry due to lack of essential details on invoices. Despite the revenue's challenge, citing a Supreme Court decision to add the entire amount of bogus purchases to the assessee's income, the tribunal affirmed the partial disallowance. Emphasizing the onus on the assessee to prove the genuineness of transactions, the tribunal found no doubt on sales but indicated possible unethical practices, ultimately dismissing the revenue's appeal.

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Issues:
1. Reopening of assessment based on information received from DGIT(Inv.), Mumbai.
2. Disallowance of purchases made from alleged parties.
3. Appeal against the order of Ld. CIT(A) restricting the disallowance of bogus purchases.
4. Onus on the assessee to explain and substantiate the genuineness of purchase transactions.

Analysis:
1. The appeal was filed by the revenue against the order of Ld. CIT(A) for Assessment Year 2012-13, based on the reopening of assessment under section 147 due to information received regarding inflated purchases by the assessee from hawala parties without delivery of goods. The AO issued notices under sections 143(2) and 142(1) of the Act, and after objections raised by the assessee, disallowed purchases made from alleged parties amounting to Rs. 1,25,97,090.

2. The assessee, a trader in cut and polished diamonds, contested the disallowance before Ld. CIT(A), who observed that the purchase invoices lacked essential details about the diamonds, making them questionable. While the AO did not doubt the sales component, Ld. CIT(A) found the purchases not genuine. Referring to relevant case laws, Ld. CIT(A) partially allowed the appeal, disallowing 3% of the purchases, considering the industry standards and unethical practices.

3. The revenue challenged the Ld. CIT(A)'s decision, arguing that the entire amount of bogus purchases should be added to the assessee's income as per a Supreme Court decision. However, ITAT upheld Ld. CIT(A)'s findings, noting the margins in the diamond industry and the absence of doubt on sales declared by the assessee. The tribunal dismissed the revenue's grounds, affirming the partial disallowance of purchases.

4. The tribunal emphasized the onus on the assessee to substantiate the genuineness of purchase transactions. Considering the industry standards and the lack of doubt on sales, the tribunal concurred with Ld. CIT(A)'s decision to disallow only 3% of the purchases, indicating possible unethical practices by the assessee. Consequently, the revenue's appeal was dismissed, upholding the partial disallowance of purchases made by the assessee.

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