TaxTMI 
TaxTMI 
2019 (3) TMI 692
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....; ble Supreme Court in the case of N K Protein Ltd dated 16.01.2017, which is on the similar issue of bogus purchases and when the apex court order was already the law of the land when the Ld. CIT(A) has given his decision vide order dated 04.07.2017 ?" 2. "Whether on the facts and in the circumstance of the case and in law, the Learned. CIT(A) was justified in sustaining only an addition @ 3% profit rate on total purchases of Rs. 5.57,61,124/- made from 4 parties when in fact the assessee had failed to prove the genuineness of the said purchases ? 3. "Whether on the facts and in the circumstance of the case and in law, the Learned. CIT(A) has erred in directing the AO to restrict the estimation of the profit at 3% instead of 100% of th....
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....his, in the sworn statements recorded during the course of search operation and they have also admitted that were made to the position by Shri Rajendra Kumar Jain, Sanjay Choudhary and Dharmichand Jain. It was found that the group concerns are all paper / companies/firms, proprietorship concern with no real business activities, operating solely with the purpose of facilitating fraudulent financial transactions which includes, among others, providing accommodation entries in the form of unsecured loans to interested parties, issuing of bogus sale bills to various parties and providing a bogus front to concerns which do not want to import diamonds in their own hands/books of accounts. Post search investigation reveals that the assessee has ta....
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....sessee's appeal, the ld. CIT(A) noted that he was in agreement with the findings of the A.O. that the purchases are not made from these parties. However, he noted that the A.O. has added the entire amount of purchases from these four parties. But at the same time, the A.O. did not disturb the sale, ignoring the fact that there will not be any sale without the purchases. He opined that there are every chance that the assessee might have purchased the goods through grey market. He further observed as under: 6.9 From the above discussion, one can safely conclude that the appellant had obtained only the bills from the above-mentioned parties without actually getting the material. However, it is also a matter of fact that the purchases from th....
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.... 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. Thereafter, the ld. CIT(A) quoted several case laws. He proceeded to disallow 3% on the total purchases by holding as under: 6.14 Taking into consideration the above facts, the issue arrives at, is to what would be the margin, one can expect while buying the material from grey market instead of normal course of business from regular dealers. Two aspects need to be taken into consideration in such circumstances. First, these diamonds in the grey market are always cheaper than the diamonds sourced from the genuine dealer. This is because, the genuine dealer would charge his incidenta....
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....essments finalized on the similar set of facts. In view of the same and also since the profit margin is lesser in this sector, addition of the amount of entire purchases is not realistic. Considering the lesser profit margin in this sector i.e. around 2 to 3 percent and the taxes saved is around 1% and also on purchases made from places like Surat, there is no levy of tax, I am of the considered opinion that if the addition is sustained to the extent of 3% of the purchases made as the profit element embedded in such purchases from four parties belonging to the Rajendra Jain and others, the same will meet the ends of justice. Accordingly I direct the AO to restrict the addition @3%, on the total purchases of Rs. 5,57,61,124/- from the four p....