TaxTMI 
TaxTMI 
2017 (11) TMI 1816
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....nce additions of Rs. 53,54,962/- confirmed by the learned CIT(A) be deleted and assessed income he reduced accordingly. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above ground of appeal at any time before or at the time of hearing, of the appeal, so as to enable to learned Commissioner (Appeals) to decide the appeals according to law. The appellant craves leave to add, amend or alter the grounds of appeal at or before the time of hearing. (2) The learned CIT(A) erred in dismissing ground of Appeal related to initial Penalty proceedings. 2. Briefly stated, the facts of the case are that the assessee firm which is engaged in the business of trading in diamonds had filed its return of income for A.Y. 2012-13 on 28.09.2012, declaring total income of Rs. 3,34,38,570/-. The return of income filed by the assessee was processed as such u/s 143(1) of the 'Act'. The case of the assessee was thereafter taken up for scrutiny assessment u/s 143(2). 3. That during the course of the assessment proceedings the A.O was in receipt of information from the DGIT (Inv.), Mumbai that as per the facts which had emerged during the course o....
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.... "a. That the physical delivery of the goods were obtained from the party based in grey market and to give it colour of being a genuine purchase, the bogus bill/accommodation bill was obtained from the supplier. b. Though the purchases alleged as genuine are shown to have been made by making payment thereof by an account payee cheques, the cheques have been deposited in bank accounts ostensibly in the name of the apparent sellers. c. The assessee could not produce any delivery challan to prove that the delivery of these goods have been actually received by them from these alleged suppliers. d. The Director/Partner/proprietor of above party has no knowledge of diamond business. e. The Director/ Partner/ proprietor of above party had only receipt of salary, mostly in cash. At times the salary is disbursed to them on need basis, as and when required. It has been observed that the profit of the concerns in which such employees are shown as directors, partners or proprietors are maintained more or less equivalent to their annual salary. In the regular books of the said concern, the profit is shown to be appropriated by the concerned director/par....
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....extent of the profit which the assessee must have earned by purchasing the diamonds from the open/grey market, rather then from the regular dealers. The A.O adverting to the quantification of the profit, therein concluded that the same could fairly be taken at 8% of the aggregate value of the purchases which were claimed by the assessee to have been made from the aforesaid dummy concerns of Bhanwarlal Jain Group. The A.O in order to support his estimation of the profit element, took support of the Benign assessment procedure (BAP) which was applicable to the diamond merchants who were showing a profit margin of 8% of their turnover. Thus, on the basis of his aforesaid observations, the A.O made a total addition of Rs. 1,28,85,566/- (Rs.16,10,69,569/- x 8%) towards profit which the assessee would had generated from making the purchases of the goods under consideration from the open/grey market. 5. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) observed that the A.O while making the addition in the hands of the assessee had merely acted on the information so received by him, and had neither made any independent verification, nor was there any at....
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....cause the documentation part in respect of the aforesaid purchase transactions was found to be in order, the same would not conclusively prove the genuineness of the purchase transactions claimed by the assessee to have been made from the aforementioned parties. The CIT(A) deliberating on the facts of the case, observed, that in the backdrop of the fact that the supplier parties had themselves admitted that they were not carrying on any genuine business, but were merely name lenders acting as per the dictates of Shri Bhanwarlal Jain, therefore, a very heavy onus was cast upon the assessee to dislodge the aforesaid alleged state of affairs as was claimed by the said parties, and therein prove the genuineness and veracity of the purchase transactions on the basis of irrefutable documentary evidence. The CIT(A) observed that as the assessee had failed to prove the authenticity of the purchase transactions, therefore, it could safely be concluded that the assessee had made purchases of the goods under consideration from the open/grey market. The CIT(A) considering the fact that the sales of the assessee had not been doubted by the A.O, therefore, concluded that the addition in the hand....
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....up concerns could fairly be estimated @ 3% of the total purchases of Rs. 17,84,98,737/-. The CIT(A) on the basis of his aforesaid observations restricted the addition/disallowance in the hands of the assessee at Rs. 53,54,962/-. 6. That both the assessee and the revenue being aggrieved with the order of the CIT(A) had carried the matter by way of cross-appeals before us. The ld. Authorized Representative (for short A.R) for the assessee at the very outset took us through the facts of the case. The ld. A.R submitted that the A.O had estimated the profit element embedded in the purchases which were claimed by the assessee to have been made from the aforementioned parties @ 8% of the aggregate value of purchases made from the aforementioned parties, which thereafter was scaled down by the CIT(A) to 3%. The ld. A.R took us through the observations recorded by the CIT(A) at Page 16- Para 6.15 of his order. It was submitted by the ld. A.R that now when the CIT(A) had taken cognizance of the fact that the task force group for diamond industry constituted by the Government of India, Ministry of Commerce and Industry had after considering the BAP scheme, recommended presumptive tax for n....
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.... to the facts before us and are of the considered view that the A.O had rightly concluded that the purchases claimed by the assessee to have been made from the aforesaid dummy concerns could safely be characterized as bogus. We are of the considered view that the CIT(A) had rightly appreciated that now when the assessee had absolutely failed to lead any primary evidence to substantiate the genuineness and veracity of the purchases transactions under consideration, therefore, there remained no occasion for the A.O to have held the purchase transactions under consideration as genuine. We are further persuaded to be in agreement with the CIT(A) that now when the sales of the assessee had not been doubted and dislodged by the A.O, therefore, it could safely be gathered that the assessee had purchased the goods under consideration, though not from the aforementioned dummy concerns from whom bogus bills have been taken, but from certain unidentified parties operating in the open/grey market. We are further of the view that the CIT(A) had rightly appreciated that the addition in the hands of the assessee was liable to be restricted only to the extent of the profit element which was embedd....