TaxTMI 
TaxTMI 
2022 (6) TMI 509
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.... of profit on alleged bogus purchase @ 4%. 3. The Ld.CIT(A) has erred in, not following the order of Hon'ble Bombay High Court without even considering the judgement in his order. 4. The appellant reserves the right to add, alter or withdraw any grounds of appeal." 4. At the time of hearing, Ld. Counsel for the assessee submitted that Ground No.1 is not pressed, accordingly, the same stand dismissed. 5. Briefly stated the facts are that, the assessee engaged in the business of import, export and manufacturing of diamonds and filed its return of income on 28.09.2009 declaring income of Rs..64,22,154/- for the A.Y. 2009-10 and the return was processed u/s. 143(1) of the Act. Subsequently, Assessing Officer received information from the DGIT (Investigation), Mumbai about the accommodation entries provided by various dealers and assessee was also one of the beneficiary from those dealers. The assessment was reopened U/s. 147 of the Act based on the information received from DGIT (Investigation), Mumbai that the assessee has availed accommodation entries from Impex Gems, Daksha Diamonds and M/s. Jewel Diam who are appeared as hawala dealers in the website of the DGIT (Investigatio....
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....ve case is that the assessee is a trader whereas in the given case assessee is involved in processing of the diamonds. He relied on the finding of the Ld.CIT(A) and analysis given in Para No. 5.1.10 of the order. 9. In the rejoinder Ld. AR submitted that assessee also deals in diamond trading and it purchases from the market and exports the diamonds without processing. Therefore, the case of the Pr.CIT v. M/s. Mohommad Haji Adam & Co. (supra) is applicable in the assessee's case. 10. Considered the rival submissions and material placed on record, perused the orders of the authorities below. Assessing Officer treated profit margin @5% of alleged bogus purchases made from various concerns which appeared as hawala dealers and the Ld.CIT(A) restricted the same to 4% of the alleged bogus purchases. The Hon'ble Bombay High Court in the case of Pr.CIT v. M/s. Mohommad Haji Adam & Co. (supra) held that the Tribunal correctly restricted the addition limited to the extent of bringing the Gross Profit rate on purchases at the same rate of other genuine purchases. While holding so, the Hon'ble High Court observed as under: All these appeals arise out of common Judgment of the Incom....
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....reject the purchases, because without purchases there cannot be sales. He, therefore, held that under these circumstances A.O. was not correct in adding the entire amount of purchases as the assessee's income. He, therefore, deleted the addition refreshing it to 10% of the purchase amount. He also directed the A.O. to make addition to the extent of difference between the gross profit rate as per the books of accounts on undisputed purchases and gross profit on sales relating to the purchases made from the said three parties. 4 The assessee carried the matter before the Tribunal. The Revenue also carried the issue before the Tribunal. The Tribunal in the impugned Judgment allowed the appeal of the assessee partly and dismissed that of the Revenue. The Tribunal noted that the CIT(A) had not given any reasons for retaining 10% of the purchases by way of ad hoc additions. The Tribunal, therefore, deleted such additions, but retained the portion of the order of the CIT(A) to that extent he permitted the A.O. to tax the assessee on the basis of difference in the GP rates. 5 Learned counsel Mr Chhotaray for the Revenue strenuously contended that the CIT(A) and the Tribunal committ....
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....hould be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sales declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trader. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. The decision of the Gujarat High Court in the case of N.K. Industries Ltd. (supra) cannot be applied without reference to the facts. In fact in paragraph 8 of the same Judgment the Court held and observed as under- "So far as the question regarding addition of Rs.3,70,78,125/- as gross profit on sales of Rs.37.08 Crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the assessee....