TaxTMI 
TaxTMI 
2017 (9) TMI 1401
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.... 3. The appellant prays that the order of the Learned CTT(A) of the above grounds be set aside and that of the AO be restored. 4. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary," 3. Rival contentions have been heard and record perused. 4. Facts in brief are that the assessee is a Partnership Firm, engaged in the business of 'Manufacturing and Trading of Precious and Semi-precious Stones and Jewelllery. The return of income for the year under appeal was filed on 07-11-2007, declaring total income of Rs. 72,69,010/-. The case was reopened u/s 147 of the Act, by issuing notice u/s 148 of the Act on 27-03-2014. The reasons for reopening of the assessment is based on the information that Search & Seizure operations as well as Survey operations were conducted on 01-10-2013 by the DGU, Investigation Wing, Mumbai, in the case of Shri Praveen Kumar Jain and also in the group cases of Shri Rajendra Kumar Jain, Sanjay Choudhary and Dharimchand Jain and others. During the course of the operation, it was found that several name lending dummy directors, partners/ proprietors of various concerns which were literally controlled, operate....
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....should not ignore that there is clear cut evidence in the form of sworn depositions given in the search operations by the suppliers that they have not supplied the goods and only provided accommodation entries. In these circumstances I am in support of the views of the AO that there is every chance that the appellant might have purchased goods from the grey market. A person who procures the material from the grey market and sells the same and receives the sale proceeds through proper banking channels, to complete the chain of transaction i.e. to book the purchases against the sale proceeds received, he obtains the bills from entry providers, -like Shri Shri Pravin Jain, Rajendra Jain entities in the present case-issues cheque to them and most probably receives the amount back in cash. In this background the appellant has no other option but to take bills from the entry providers as they needs to complete the trading activity in respect of the diamonds sold in the books of accounts. From these findings, it can thus be safely presumed that the appellant has grossly failed in its duty to mitigate the burden cast upon it in so far as proving the genuineness of the transaction, from the....
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....of black money, causing inflation. Thus, there is "the large hidden loss" to the community, by some of the members in the country being involved in the perpetual war waged between the tax payer and his expert team of advisors, and accountants on the one side and the tax gatherer and his perhaps not so successful advisors on the other side. 7.7 The onus to prove that apparent, is not the real one, is on the party who claims it to be so, as held by the Hon'ble Supreme Court in the case of CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 and CIT v. Durga Prasad More (supra). It is also a settled legal proposition that if no evidence is given by the party on whom the burden is cast, the issue must be found against him. However, in the instant case, the appellant has miserably failed to lead evidence. 7.8 The Hon'ble Supreme Court, in the case of Chuharmal v. CIT [1988] 172 ITR 250 / 38 Taxman 190 highlighted the fact that the principle of evidence law are not to be ignored by the authorities, but at the same time, human probability has to be the guiding principle, since the AO is not fettered, by technical rules of evidence, as held by the Hon'ble Supreme Court in the ca....
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....hase to the total income is not correct because it will give a distorted picture of the profit margin. In my considered opinion, which is supported by several judicial forums, estimating the profit percentage on such purchases is the correct way to bring the income to tax. Thus, the issue would boil down to finding out what is the correct element of profit embedded in bogus purchases which the appellant would have made from such unknown entities. 7.11 In this regard, it is apt to refer certain decisions dealing the similar issue. The decision of Gujarat High Court in the case of Bholanath Poly Fab Pvt. Ltd. 355 ITR 290 (Guj) where the Hon'ble Court was battling with the finding of Hon'ble HAT that purchases were made from bogus parties. The Tribunal had held that though purchases were made from bogus parties, nevertheless, the purchases themselves were not bogus as the entire quantity of opening stock, purchases and sales were tallying and hence, only the profit margin embedded in such amount would be subjected to tax. The Hon'ble Gujarat High Court taking cognizance of the fact held that whether purchases themselves were bogus or whether parties from whom such purch....
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....uthorities does not warrant interference. Even otherwise, whether the estimate should be at a particular sum or at a different sum, can never be an issue of law." 7.13 Similarly, in yet another decision of Hon'ble Gujarat High Court in the case of CIT vs. Simit Sheth (2013) 38 Taxmann.com 385 (Guj), Hon'ble Court was seized with a similar issue where the A.O. had found that some of the alleged suppliers of steel to the assessee had not supplied any goods but had only provided sale bills and hence, purchases from the said parties were held to be bogus. The A.O. in that case added the entire amount of purchases to gross profit of the assessee. Ld. CIT(A) having found that the assessee had indeed purchased though not from named parties but other parties from grey market, partially sustained the addition as probable profit of the assessee. The Tribunal however, sustained the addition to the extent of 12.5%. Taking into account the above facts, the Hon'ble Gujarat High Court held that since the purchases were not bogus, but were made from parties other than those mentioned in books of accounts, only the profit element embedded in such purchases could be added to the assess....