TaxTMI 
TaxTMI 
2018 (4) TMI 8
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....the course of assessment proceedings carried out in his hands. It was noticed that the assessee has purchased diamonds from M/s Zalak Impex to the tune of Rs. 201.28 lakhs and has sold diamonds to the tune of Rs. 10.17 lakhs to it. Based on the above said information, the Assessing Officer reopened the assessment by issuing notice u/s. 148 of the Act. The assessee was also supplied with a copy of reasons for reopening. Before the Assessing Officer, the assessee contended that purchases made from the above said party are genuine. The assessee furnished copies of purchase bills and also details of payment made to the above said concern. The assessee submitted that the diamonds so purchased have either been used in making of jewellery or exported. The assessee has also furnished a statement reconciling the purchases of diamonds made from M/s Zalak Impex with its utilization/sales. However, the assessee could not furnish any other documents such as delivery challans, stock register, outward and inward register etc. 3. The AO noticed that the assessee has purchased same quality diamonds at different rates on the very same day. Since the assessee did not furnish any stock register, the ....
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....ing statement and hence it cannot be used against the assessee. He also submitted that the assessing officer did not provide an opportunity to cross examine Shri Hiren Raval and hence his statement could not be relied upon by AO. He further submitted that the assessee has provided all details like invoices, details of payments etc., to prove the purchases. Since the assessee has stopped dealings with Shri Hiren Raval, it could not produce him before the AO. He submitted that the AO has placed his reliance on the statement given by Shri Hiren Raval disregarding various evidences furnished by the assessee. 7. The Ld A.R submitted that the SMC bench of Tribunal has considered an identical issue in the case of M/s Exim Gems (ITA No.346/M/2017 dated 31.7.2017). The SMC bench noticed that Task Force Group for diamond industry constituted by Government of India, Ministry of Commerce and industry has suggested Benign Assessment Procedure (BAP) scheme and recommended presumptive tax for net profit calculated @ 2% for trading activity and 3% for manufacturing activity or 2.5% across the board. Accordingly the SMC bench sustained the addition to the extent of 2.5% of value of alleged bogus p....
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....at the gross profit rate declared in the subsequent years was around 8% only and hence the assessee has declared highest G.P rate of 10.42% during the year under consideration. Accordingly he submitted that the assessee had no reason to enter into bogus transactions. Accordingly, the Ld A.R submitted that no addition is warranted in the facts and circumstances of the case. In the alternative he submitted that the addition may be sustained to the extent of 2.50% as held in other cases. 10. On the contrary, the ld D.R submitted that the assessing officer has reopened the assessment on the basis of statement given by Shri Hiren Raval, the proprietor of M/s Zalak Impex that he was providing only accommodation bills without actually supplying materials. He also reconfirmed the same during the course of assessment proceedings carried out in his hands. The AO has asked the assessee to produce Shri Hiren Raval, but the assessee has failed to produce him before the AO. On the contrary, the assessee has simply placed reliance on the invoices and payment details, which have been disowned by Shri Hiren Raval. He submitted that the surrounding circumstances show that the purchases made by the ....
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....ation. Hence there is merit in the contentions of the assessee that it could not have sold/utilised the diamonds without actually purchasing the same. 14. However, it cannot be said that the assessee could conclusively prove that the diamonds were purchased from M/s Zalak Impex, since the assessee did not produce the Shri Hiren Raval or could obtain confirmation from him. Hence one of the possible views is that the assessee could have purchased diamonds from some other person and could have obtained only the bills from the above said concerns. There is also a possibility; in that case, the assessee could have purchased goods at a price lower than the apparent consideration. We notice that the AO has also visualised this possibility and accordingly observed that the assessee could have made payments from undisclosed sources. In that case, the disallowance of entire amount of purchases is not warranted. Since these are all only inferences which are not supported by any material, the observation of the AO that disallowance u/s 69 of the Act is to be made cannot be upheld. 15. Since the purchases made from M/s Zalak Impex were not conclusively proved, we are of the view that the prof....