TaxTMI 
TaxTMI 
2021 (5) TMI 118
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....ntant on the strength of condonation petition dated 19/01/2021. It has been submitted that delay occurred since due to Covid-19 pandemic, the office was not functioning fully as the employees who were travelling by trains could not reach office from suburbs since travelling in local trains was not allowed. Therefore, there was no co-ordination which resulted in delay in filing the cross-objections. Though Ld. CIT-DR opposed condonation of delay, however, we find that there was reasonable cause for delayed filing of cross-objections and hence, we are inclined to condone the delay in the interest of justice. 1.3 Proceeding further, learned counsel for Assessee (AR), at the outset, submitted that issues of appeals / cross-objections i.e. addition on account of alleged bogus purchases as well as disallowance of labor charges are covered by the order of Tribunal in assessee's group / associated concern namely M/s Sur Gems. The copy of Tribunal order in ITA Nos. 2078/Mum/2019 & ors. dated 28/12/2020 has been placed on record. The Ld. AR pleaded to make estimation on similar lines. The Ld. CIT-DR, on the other hand, pleaded for restoration of assessment framed by Ld. Assessing Officer (A....
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....d the purchases of Rs. 470.66 Lacs stated to be made from 4 concerns being controlled by Shri Bhanwarlal Jain group and added the same to the income of the assessee. 4.1 Before Ld. CIT(A), the assessee, inter-alia, submitted that import of rough diamonds as well as export of polished diamonds was certified by the custom authorities. Further, complete quantitative tally was provided in Tax Audit Report in Form No.3CD and there was correlation of purchases with corresponding sales and the profits arising there-from was already offered to tax. The attention was drawn to the documentary evidences submitted during the course of assessment proceeding to establish the genuineness of the purchases transactions. The assessee also pointed out that adverse statements made by tainted group could not be used against the assessee unless an opportunity of cross-examination of persons making those statements was provided. 4.2 However, going by the findings of search team in the case of Shri Bhanwarlal Jain group that his concerns merely indulged in providing accommodation bills without doing any real business, Ld. CIT(A) opined that the assessee's claim could not be accepted in totality. Regardi....
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....ions to plug the possible leakage of revenue. Therefore, the approach of Ld. CIT(A) in estimating the profit could not be faulted with. So far as the estimation made by Ld. CIT(A) is concerned, we find that under similar facts and circumstances, the coordinate bench of this Tribunal, in the cited order of M/s Sur Gem (an associated concern of the assessee) has estimated profit rate of 6% of bogus purchases minus GP already declared by the assessee. The said estimation is in accordance with CBDT instruction no.2 of 2008 dated 22/08/2008 wherein the CBDT has directed all the AOs to accept profit of 6% in diamond business. The assessee, in the present case, has reflected GP rate in the range of 3% to 3.5% in AYs 2012-13 & 2013-14 as is evident from its financial statements. Therefore, following the cited decision of Tribunal and for ease of computations, we direct Ld. AO to make addition of 3% (net) of tainted purchases without any further benefit. The same works out to be Rs. 14,11,982/- (3% of Rs. 4,70,66,091/-) for AY 2012-13 and Rs. 4,81,103/- (3% of Rs. 1,60,36,782/-) for AY 2013-14. The addition to that extent stand confirmed in both the years. In the result, assessee's cross....
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.... and the same were exported after polishing. The same would require labour / job work. The charges for the year under consideration could be extrapolated on the basis of ratio of labour charges to value of imported diamond in the year of search i.e. AY 2016-17. Such ratio was 4.08% as against ratio of 1.41% for the year under consideration and therefore, the impugned disallowance was deleted. Aggrieved, the revenue is in further appeal before us. 7. Upon due consideration of factual matrix, it is evident that the assessee imported rough diamonds and exported polished diamonds during the year. The conversion of rough diamonds into polished diamond would certainly require certain labour / job work as rightly noted by Ld. CIT(A). In whole of the year, the assessee has claimed labour charges of Rs. 42,445/- only which has been fully disallowed. We further find that the payment to the labour contractor is though account payee cheques after deduction of tax at source. Therefore, the additions on mere suspicion, in our opinion, could not be sustained in the eyes of law. Therefore, the impugned order, though on different reasoning, would not require any interference on our part. The grou....