2017 (9) TMI 1956
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....CIT(A), having allowed certain relief, erred in conflicting the addition to the Want, of Rs. 2697,632/- made by the AC) to the income of the Appellant on account of possible profit element to the extent of 3% embedded in purchases made from alleged nongenuine panics on the basis of information received from DGIT Mumbai. of The Id- C[T(A) failed to appreciate that:- - all the purchases are genuine beyond doubt and supported by sufficient materials; every purchase is backed by corresponding sale, the gross profit ratio shown by the Appellant is quite reasonable; the payment of purchases are made by account payee cheques only and - nothing has been brought on record by the Id. AC) that money has exchanged the hands in lieu of payment made for these purchases by account payee cheque, 2.a) the Id. AD did not provide copy at materials and statements relied upon by him one allowed any opportunity to the Appellant to cross examine those parties who have been believed to have provided alleged entries of such purchases, c) in reaching to the conclusion and confirming the addition partly, the Ld. CIT(A) omitted to consider relevant factors, considerations, principles and evidences....
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....4,24,800/-. Feeling aggrieved, the assessee filed an appeals before the Commissioner of Income Tax Appeal who arrived at the conclusion that the profit element involved in the said bogus purchase is @ 2% which comes to the 33,49,392/- but the assessee was not satisfied therefore the assessee has field the present appeal before us. ISSUE NO.1:- 4. We have heard the argument advanced by the Ld. representative of the parties and perused the record. Under this issue, the assessee has raised the reopening of assessment u/s 147 of the I.T. Act, 1961. The case of the assessee was reopened on the ground of the information received from the DGIT(Inv), Mumbai vide letter dated 13.03.2014. It was mentioned that the assessee availed the accommodation/fictitious bills from the 13 parties to the tune of Rs. 16,74,69,611/-. Thereafter the legal notice as required under law was given and the assessment was completed. The assessee did not appear despite service of notice, therefore, the assessment was completed Exparte. The factual position in connection with reopening the case is not in dispute. The case of the assessee was reopened upon the information received from the DGIT(Inv), Mumbai by vi....
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....s raised or any information was sought the then AOs in regard to the purchases made from said 13. parties during the course of assessment. In other words, the issue was not under consideration at all in the course or said assessments. When the matter was not examined by the AG in such assessments, the appellant cannot say that reopening is an attempt to review or reinvestigate the same or that it amounts to change of opinion. In this connection reliance is placed on judicial precedents in the cases of EMA India Ltd v ACIT 226 CTR (All) 559 and Consolidated Photo & finvest Ltd. V. AT 281 ITR 394 (Del.) wherein it has been held that the principle that a mere change of opinion cannot be a basis for reopening completed assessment would be applicable only to situations where the Assessing Officer has applied his mind and taken a conscious decision on particular matter in issue and not where the order of assessment does not address itself to the aspect which Is the basis for reopening of the assessment. Following the same legal principle it cannot be said even in the instant case that there was any application of mind on part of the AG on this issue at the time of previous assessmen....
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....v), Mumbai dated 13.03.2014 in which it was conveyed that the assessee has availed the accommodation/fictitious bills from the 13 parties total to the tune of Rs. 16,74,69,611/-. Prima facie there is reason to believe that the income chargeable to tax has escaped assessment. The CIT(A) relied upon the case law title as Raymond Woollen Mills Ltd. V. ITO 236 ITR 34 (SC). Moreover, this issue was not under consideration at the time of assessment therefore, there is no question of change of opinion. The present case is in connection of availing of accommodation/fictitious bills entries by the assessee which was not on record at the time of the assessment of the assessee. These facts are totally new facts which came into notice before the AO through the letter dated 13.03.2014 received from the DGIT(Inv), Mumbai. Accordingly, we are of the view that the CIT(A) has rightly upheld the reopening of the proceedings u/s 147 of the I.T. Act. Accordingly, we affirm the finding of the CIT(A) on this issue. And this issue is decided in favour of the revenue. ISSUE NO.2:- 6. Under this issue the assessee has challenged the addition of the profit element to the extent of 0.25% on the bogus pur....
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...., Moti Kadia Sheri, Saiyadpura, Surat-395003 2 204, Vaibhav Chamber Rughnathpura Main Road, Surat- 395003 3 Mukti Exports 407, Devratna Apartment, Rampura main Road, Surat-395003 Mohit Enterprises Pankaj Exports Pushpak Gems Rajan Diamonds It is also noticed that invoices of almost all 13 concerns were prepared on the computer in the same format having the same font type as well as (font) size. it is pertinent to mention that while t% VAT is leviable on such transactions in Mumbai/ Maharashtra, the diamond sector in Surat/Gujarat is exempted from payment of VAT. Thus, there is a saving of VAT involved in procuring (accommodation) purchase bills of cut and polished diamonds from parties like the aforesaid concerns based in Surat. I am unable to accept the appellant's plea that there is nothing it support of cash purchases of goods from the grey market, because these transactions take place in secret and no direct evidence in this regard is generally available. it is well-established that such matters have to but considered in the light of surrounding circumstances normal course of human conduct and preponderance of probabilities. However, it is pertinent to me....
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....m sale of unaccounted goods etc In these circumstances, the diamonds in the grey market are always cheaper than the diamonds sourced from the genuine dealer, because there is an element of discount in case of instant cash purchase. Therefore: the AO has correctly concluded that an addition is required to be made in case of the appellant so as to bring to tax the profit element embedded in such purchases. 6.3.4 Coming now to the estimation of profit margin (c)7.33°/o by the P0 in the present case, I find merit In the appellants plea that the extra profit of 7.33% estimated by the P0 is excessive and unreasonable. This is so because the A0 has not given any basis or justification for adopting settlement at 7.33°fo. In this connection it is pertinent to note of cut and polished diamonds from open market is made mainly to save 1% VAT levied thereon and in addition, the buyer gets the benefit of lower rate/cash discount. In these circumstances, the addition of extra profit @ 7.3% of purchases from aforesaid concerns cannot at all be said to be justified. In view of the this position, it is considered fair and reasonable to estimate the profit margin embedded in such purch....
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....assessee is hereby ordered to be Dismissed. ITA NO.3858/M/2017:- 11. The assessee has raised the following grounds:- "The ground or grounds 01 appeal are without prejudice to one another 1 On the facts and in the circumstances of the case and in law, the Id. CITA) erred in upholding the action of the AC) in re -opening of the assessment u/s147 of the Income 'fax Act, 1951 as the prescribed conditions therein are not satisfied. 2.aJ (In the facts and in the circumstances of the case and in law, the Id. CIT(A), having allowed certain relief, erred in conflicting the addition to the Want, of Rs. 2697,632/- made by the AC) to the income of the Appellant on account of possible profit element to the extent of 3% embedded in purchases made from alleged nongenuine panics on the basis of information received from DGIT Mumbai. of The Id- C[T(A) failed to appreciate that:- - all the purchases are genuine beyond doubt and supported by sufficient materials; every purchase is backed by corresponding sale, the gross profit ratio shown by the Appellant is quite reasonable; the payment of purchases are made by account payee cheques only and - nothing has been brought on record b....