TaxTMI 
TaxTMI 
2021 (3) TMI 1388
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....% of bogus purchases without appreciating the fact that during the course or search & Seizure operations at the premises of Shri Gautam Jain and other related persons, while recording his statements on oath, Shri Gautam Jain has admitted that they used to operate and manage bogus concerns like, among others, M/s. Krishna Diam Pvt. Ltd. and M/s. Mihir Diamond, through which they provided bogus purchase bills to, among others, the assessee. Therefore, CIT(A) should have treated whole amount of these purchases as income of the assessee as assessee reduced his income to this extent by inflating his purchases by this amount in his P & L account. 3.On the facts and in the circumstances of the case and in Law, Ld. CIT(A) has erred in accepting the retraction of entry operator Shri Gautam Jain as genuine retraction without appreciating the fact that retraction of his original statement after lapse of nearly 8 months, from the date when it was originally made by him is not a valid retraction as it was done after lapse of a long period without any valid reason. The retraction was duly rebutted by the Department as evidences of parallel books and benami concerns were detected during search ....
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....essing officer was of the view that there is no other prudent use of bogus purchase bills. Such transactions are bogus and therefore, have been incurred to curb the incidence of tax by diminishing the total income of the assessee for the period under consideration relevant to such transactions. On examination of the above information, it was noticed by the assessing officer that the assessee is a beneficiary of non-genuine transactions of Rs.4,07,69,950/- during F.Y. 2006-07 from M/s. Mihir Diamond, M/s. Krishna Diam P. Ltd. 6. Therefore, as per the above information, the assessee`s case was reopened under section 147 of the Income Tax Act. Accordingly, notice under section 148 of the Income Tax Act, 1961 was issued on 05/3/2014. The assessing officer observed that the proprietors/ directors of all these concerns admitted on oath that the concerns are nothing but paper companies with no genuine business. It was established that the concerns import rough diamond/ in their hands at the behest of a third person /interested parties. The diamonds once cleared from customs are immediately taken away by the interested parties. The assessee concerns are thus left with no physical stock ho....
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....Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has partly allowed the appeal of the assessee. Aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us. 10. Shri O. P. Vaishnav, Learned CIT(DR) submits before us that during the assessment stage, assessee was treating himself as a trader whereas during the appellate proceedings, the ld. CIT(A) has converted the assessee from trader to commission agent which is without any base and substantial evidence. Therefore, during the appellate stage the assessee has submitted new information / documents in respect of stand taken for "commission agent" which has not been examined by the Assessing Officer. The assessee does the transactions through the banking channels, the assessee does purchases and sales and maintains quantitative details of stock, therefore transactions done by the assessee are its own behalf, that is, assessee has ownership of purchase and sale transactions therefore order of the Assessing Officer may be upheld. Alternatively, the ld. DR prayed the Bench that the matter may be remitted back to the file of the Assessing Officer to examine the fact that whether asse....
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....numerous benami concerns was run by them. On verification of facts and evidence, the ld CIT(A) noticed that during the year under consideration, the assessee had purchased goods worth Rs.4,07,69,950/- from two of such concerns of Gautam Jain and others Group namely, M/s. Mihir Diamodns and M/s. Krishna Diam. Apart from the information there is no positive evidence brought on record by the AO to substantiate his findings that actually assessee received only bills without actually receiving any goods shown as purchases. The Ld. AO has simply narrated the entire alleged "modus oparendi" in very generic terms which seems a "copy & paste" work and seemingly copied from report received from DGIT (Inv), Mumbai. The ld CIT(A) noted that assessing officer has passed the orders in a very routine and stereo-typed manner. The ld CIT(A) had come across many such orders passed by Smt. Rajashree Sureshan, the then ITO, Ward 2(3)(7), Surat where in numerous cases she has used similar language identical para by para and word by word. As a quasi-judicial authority, it speaks volumes about non-application of mind and shows routine manner in which such assessment order were passed. 14. The ld CIT(A) ....
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....ales and purchases on behalf of some diamond trades for which he was receiving commission. Though sales and purchases were recorded in books of accounts but they are for inventory purpose and no trading account is made for that". Having reproduced this contention raised by the assessee, Id. AO has given her findings which totally in contrast to the claim of the assessee. She has observed on Pg. 5 of assessment order as under: "Since last many years he has been filing return of income as trader in rough and polished diamonds and has been filing return of income as trader only by mentioning the nature of business as trader in ITR form 4." Before us, ld Counsel for the assessee has referred to CBDT Circular No 452 [F. No 201/3/85-IT(A-ll) dt 17.03.1986] mandating that Audit of Accounts under section 44AB of the Act for "commission agent" is mandatory. It has been clarified that commission agents do not have to prepare "Trading Account" and only commission earned on such purchases and sales is to be shown as income earned. Purchases and sales are recorded in the books of accounts for the purpose of maintaining inventory. It is contended by ld Counsel that relationship between asses....
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....r sold to principals after addition up the commission ranging from 0.12% to 0.15%, thus difference of sales and purchase is commission earned by the assessee which is shown as gross receipts in Audited Income and Expenditure account at Rs.5,24,221/- during the year. During appellate hearings, the assessee has also submitted party wise break up which duly found corroborated with the contention of the assessee. On the basis of above submission it has been established beyond doubt that assessee's case is of a "commission agent" where only mark up (profit margin) on purchases have been shown as income, therefore, question of disallowance of "bogus purchases" does not arise especially when assessee has maintained quantitative tally purchases have not been claimed as expense and sales have not been doubted by the Id. Assessing officer. In view of this, ld CIT(A) has rejected the finding of the Id. Assessing Officer of treating the entire purchases of Rs. 4,07,69,9507- from two parties namely M/s Krishna Diam (erroneously mentioned by AO as M/s Krishna Diam Pvt. Ltd) and M/s Mihir Diamonds because finding of the AO is without any positive evidence and contrary to the evidence because ....
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.... CIT(A) wanted to reject the books of accounts of the assessee and for that he relied on the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Me Millan & Co. (33 ITR 182) (SC) wherein, Hon`ble Supreme Court held that CIT(A) has power to reject the books of accounts accepted by the Assessing officer. In view of this, ld CIT(A) proceeded to estimate the commission income on the impugned purchases amounting to Rs.4,07,69,950/-. Therefore, ld CIT(A) observed that the entire carats of diamonds purchased from impugned two parties have been sold during the year, so entire purchases could not be disallowed. Further, the action of the Assessing Officer making disallowance of entire purchases from said parties by treating the same as bogus is not sustainable, on the ground that purchases have not been claimed as expenses, hence rejected. It has been claimed that assessee has earned commission income of Rs.5,24,221/- on all such transactions by keeping mark up (profit margin) in the range of 0.12% to 0.15%. From the details filed by the assessee, it was noticed by ld CIT(A) that on the total purchases (Polished Diamond) made during the year of Rs.15,75,49,302/- and Rough Diam....