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2018 (2) TMI 1760
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....h, Shri Bhanwarlal Jain has admitted in the statement taken on oath u/s. 132(4) of the Act that he has indulged in providing accommodation entries and also admitted that these are paper companies with no real business transactions. It was also admitted by him that he was engaged in business of bill shopping through all the concerns due to which they do not have any physical stock of diamond with them at any of its places at any point of time. It was also admitted that they were merely lending names of various concerns to importer of diamonds who takes actual delivery. Based on this information from DGIT(Investigation) the assessments were reopened and in the course of re-assessment proceedings assessee was required to prove the genuineness of the purchases made from the entities operated by Shri Bhanwarlal Jain. Assessee furnished its submissions along with purchase bills, copy of ledger account, copies of bank statements etc. to verify the genuineness of the purchases. The Assessing Officer issued notices u/s.133(6) of the Act to the parties and some of the parties have confirmed that the transactions from the assessee was genuine. Parties have filed their acknowledgment of Income....
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....ooks of Accounts, assessee has obtained bills from Shri Bhanwarlal Jain group concerns. Therefore, he concluded that the assessee obtained only the bogus bills without movement of goods and goods were purchased in gray market by paying cash. Therefore, taking note of all these factors into consideration the Assessing Officer in so far as the Assessment Years 2012-13 and 2013-14 treated 12.5% of the purchases as non-genuine and in so far as Assessment Year 2011-12 is concerned 100% of the purchases were treaded as bogus purchases. 5. The Ld.CIT(A) upheld the action of the Assessing Officer in treating the purchases as non-genuine as there is no movement of goods and it was admitted by Shri Bhanwarlal Jain that they are providing only accommodation entries and there was no real transaction. The Ld.CIT(A) also accepted the action of the Assessing Officer in disallowing certain percentage of impugned purchases, in view of the decision of the Hon'ble Gujarat High Court in the case of CIT v. Bholanath Polyfab Pvt. Ltd. [355 ITR 290] and CIT v. Simit P. Seth [356 ITR 451] and accordingly he estimated the profit element in the purchases at 12.5% for all the Assessment Years 2011-12 ....
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....from the impugned parties and there is a practice of hand delivery of such precious and low-weighing materials. Therefore, no adverse conclusion can be drawn merely due to absence of documents proving deliveries. 9. Ld. Counsel for the assessee submitted that, the credit period of six months is very common in the diamond industry. The AO's observation in the order for AY 2011-12 that unreasonable credit period has been granted by Daksh Diamonds is factually incorrect. The AO has mentioned that all the parties have been paid regularly except for Daksh Diamond. However, out of total purchases of Rs..9,47,27,364/- outstanding creditors at the year-end were Rs..4,49,93,630 which is almost 50%. Even the purchase made prior to purchase from Daksh Diamond was also outstanding e.g. purchase of Rs..26,54,752/- from Vaishali Gems dated 22.10.2010. 10. Ld. Counsel for the assessee further submitted that the AO has asked the assessee to produce the parties without appreciating the fact that it was beyond the control of the assessee. The AO ought to have invoked the powers given to him under the Act by issuing summons to them requiring their personal attendance. 11. Learned Counsel....
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....is 6% and therefore at least 6% is to be estimated as the profit element from these purchases following the CBDT Instructions. 16. We have heard the rival submissions, perused the orders of the authorities below. In this case the assessments were reopened based on the information from the DGIT(Investigations), Mumbai that assessee is a beneficiary from the entities operated by Shri Bhanwarlal Jain wherein the search took place and it was found that Shri Bhanwarlal Jain is providing only accommodation entries and there were no actual sale transactions. Assessing Officer observed that the assessee could not prove the movement of goods from the suppliers to the assessee. In the absence of delivery challans and based on the statements of Bhanwarlal Jain that they have provided only accommodation bills, the Assessing Officer has concluded that the assessee has obtained only bogus bills and assessee might have purchased goods in gray market. The Assessing Officer estimated the Gross Profit Margin on such purchases at 12.5% for the Assessment Years 2012-13 and 2013-14. For the Assessment Year 2011-12 the entire purchases were treated as non-genuine. The Ld.CIT(A) taking note of the sub....
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....ore, the conclusion drawn regarding the purchases made from M/s.Daksh Diamonds being entirely bogus, is not justified. 15. In this regard, the ratio was laid down by the Hon'ble High Court of Bombay in the case of CIT v. NikunjEximp Enterprises (P.) Ltd., is very relevant, wherein it was held that - "When the assessee have filed letter of confirmations of the suppliers, Bank statements highlighting the payment entries through account payee cheque, copies of invoices, stock reconciliation statements before the AO; and merely because the suppliers did not appear before the AO, one cannot conclude that the purchases were not made by the assesses. The AO cannot disallow the purchases on the basis of suspicion because the suppliers were not produced before them." 16. The facts and circumstances as outlined above, clearly suggest that the purchases by the appellant from M/s.Daksh Diamonds cannot be doubted but a major flaw in these transactions is the unverifiable nature of transactions of these purchases from M/s. Daksh Diamonds as it was not found available at the given address. Thus the purchase prices shown on the invoices are not subjected to verificat....
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.... the Hon'ble High Court of Gujarat has held that: - "We are broadly in agreement with the reasoning adopted by the Commissioner (Appeals) with respect to the nature of disputed purchases of steel. It may be that the three suppliers from whom the assessee claimed to have purchased the steel did not own up to such sales. However, vital question while considering whether the entire amount of purchases should be added back to the income of the assessee or only the profit element embedded therein was to ascertain whether the purchases themselves were completely bogus and non- existent or that the purchases were actually made but not from the parties from whom it was claimed to have been made and instead may have been purchased from grey market without proper billing or documentation. In the present case, CIT believed that when as a trader in steel the assessee sold certain quantity of steel, he would have purchased the same quantity from some source. When the total sale is accepted by the Assessing Officer, he could not have questioned the very basis of the purchases. In essence therefore, the Commissioner (Appeals) believed assessee s theory that the purchases wer....
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....establish that the purchases from M/s.Daksh Diamonds in question was at par with the purchases made from other parties during the period under consideration. The possibility of such purchases from unregistered dealers without invoices cannot be ruled out. Hence possibility of such purchases from unregistered dealers without invoices cannot be ruled out. In view of the above, the correctness of the purchase prices mentioned on such bills/invoices issued by M/s.Daksh Diamonds in question cannot be accepted and some additional profit needs to be estimated on such purchases made from M/s.Daksh Diamonds. As the purchases invoices issued against the alleged bogus purchases remains unverifiable, and part of the profit element on the purchases made from M/s.Daksh Diamonds already included in the above gross profit rate shown for the year under consideration, it would be fair and just, if the additional gross profit @ 12.5% is applied on such total alleged bogus purchases amounting to Rs. 1,05,18,970/-, the additional gross profit on such purchases would come to Rs. 13,14,871/- which need to be added to the income of the assessee on account of alleged bogus purchases for the year under cons....
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....ts recorded from third parties, especially when those parties have responded to the notice issued u/s.133(6) of the Act by filing all necessary documents to prove that they have made sales to the assessee. It is also the submission of the assessee that none of the impugned parties have been declared as Hawala dealers or suspicious dealers by the Sales Tax Department and the genuineness of the purchases have been doubted merely on the basis of the statement given by the Bhanwarlal Jain group. The assessee has furnished all necessary evidence to prove the genuineness of the purchases, the parties have also responded to the notices u/s. 133(6) of the Act by filing necessary evidence as to prove that the purchases are genuine. Thus the assessee discharged the onus to prove the genuineness of the transactions made by the assessee from the impugned parties. The Assessing Officer completely failed to make further enquiries in these cases. The documents furnished by the supplier of the goods have not been disproved by the Assessing Officer in these matters. 19. We also find that the Coordinate Bench in the case of Indo Unique Trading Pvt Ltd. v. DCIT in ITA.No. 6341/Mum/2016 considered ....