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TaxTMI 
TaxTMI 
TaxTMI 
2023 (11) TMI 1151
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....e facts and in the circumstances of the case as well as on law the Tribunal was right in law in confirming the addition of 6% in absence of rejection of books of audited books of accounts? (iv) Whether on facts as well as law, the Tribunal was right in law to confirm the addition since the appellant proved that all the disputed parties are assessed to tax and stock tally has also been provided? (v) Whether on facts as well as law, the Tribunal was right in law to confirm the addition since no such statement of Mr.Bhanwarlal and cross examination has been provided and therefore, the Tribunal has erred in applying 6% GP rate to the disputed purchase?" 3 Facts in brief are as under: 3.1 The petitioner - assessee is engaged in trading of diamonds. The assessee filed its return of income for Assessment Year 2007-08 declaring total income at Rs. 1,03,375/- on 23.10.2007. The case of assessee was reopened under section 147 of the Income Tax Act, 1961 (in short "the Act"). Notice under sec.148 of the Act was issued on 29.03.2014 and served on the assessee. 3.2 The case of the petitioner- assessee was reopened on the basis of information received from DGIT (Invest....
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....ection of evidences and other findings, which conclusively proved that the said Shri Bhanwarlal Jain was providing accommodation entries. The investigation team also provided the list of beneficiary of such accommodation entry. From the list of purchase provided to the Assessing Officer, the Assessing Officer identified such three bogus entities from which the assessee has shown purchase of 25,29,70,993/-. On the above observation the Assessing Officer issued show cause notice as to why the purchased should not be disallowed and added to the income of the assessee. 3.6 The assessee filed its reply dated 18.03.2015 to the said show cause notice. In the reply, the assessee submitted that he is not aware that in which capacity Bhanwarlal Jain is connected with the parties. The assessee is a commission agent. There is no purchase and sale in assessee's. The bills were issued in the name of assessee for sales of goods by the principal but the goods were sold at the same price and the assessee charged commission which was credited to the profit and loss account. TDS was deducted on the commission by principal. There is no corroborative evidence to prove that the assessee has taken acc....
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....o day stock register of purchase and sale. There is nil opening and closing stock. This means the purchase made during the year are sold during the year itself. If salres are treated as genuine and impugned purchases are treated as bogus then the stock will go into negative to the extent of impugned purchases. The day to day stock register shows the receipts and issue of diamonds and stock in hand along with the name of party to whom purchase and sales is made. The Assessing Officer whilemaking addition relied on the statement of Bhanwarlal jain and report of investigation wing. No comments on the purchase bills, copy of bank statement and day to day registers was made. No deficiency or irregularity in the stock or sale is pointed out. The Ld. CIT(A) further observed that from the statement of Bhanwarlal Jain and from modus operandi recorded by the investigation wing, Mumbai has created sufficient suspicion regarding the purchase made by the assessee. It is also observed that the said suppliers are assessed with Central Circle, Mumbai, wherein they are being treated as entry providers and assessed accordingly. 3.10 The Ld.CIT(A) by referring the decision of Tribunal in Bholanath....
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.... Assessing Officer on the documentary evidence furnished by assessee. The sales of assessee was not disputed. The books of accounts of assessee was not rejected. The Assessing Officer made disallowance of 25% purchases without rejecting books of accounts. The ld.CIT(A) restricted to addition to the extent of 12.5% of the total purchase shown from said disputed parties. The transaction of assessee from all the parties are genuine. The ld.AR prayed for deleting the entire addition. In the alternative submission, the ld.AR of the assessee would submit that to avoid protracted litigation some token disallowance may be made. To support his various submission, the ld. AR for the assessee is relied upon case laws: 1 M/s. Andaman Timber Industries Vs. Commissioner of Central Exicse, CIVIL Appeal No. 4228 of 2006 (Supreme Court) 2 CIT vs. Indrajit Singh Suri [2013] 33 taxmann.com 281 (Gujarat) 3 Albers Diamonds Pvt Ltd Vs. ITO 1(1)(1), Surat I.T.A. No. 776 & 1180/AHD/2017 4 The PCIT-5 vs. M/s. Shodiman Investments Pvt Ltd. TTANO 1297 of 2015 (Bombay High Court) 5 Shilpi Jewellers Pvt Ltd vs. Union of India & Ors., Writ Petition No. 3540 of 2018 (....
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....owhere rejected the demand of assessee. We find that the assessee filed certain evidence to claim that the assessee acted as commission agent. No comment was made by Assessing Officer on the documentary evidence furnished by assessee. The sale of assessee was not disputed. No sale is possible in absence of purchase. The Assessing Officer estimated addition on account of purchases without rejecting books of accounts of assessee to the extent of 25% shown from the various bogus entity / business concern managed by Bhanwar Lal Jain and his group. The ld. CIT(A) restricted to addition to the extent of 12.5% of the total purchase shown from all parties on the basis of magnitude of benefits derived by the assessee. 21. In our view the profit margin in the trade and business of assessee is ranging from 5% to 7% and the disallowances restricted by the assessing officer are at 12.5% of the disputed / impugned purchase shown from the entry provider. Considering overall facts and circumstances of the case, we are of the view the disallowance restricted by Ld. CIT(A) is on higher side, keeping in view of the profit margin in the industry. It is settled law that in case of disputed pur....
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....report of the Investigation Wing was much relied upon. As against that, the CIT (Appeals) noticed the copies of purchase bills, copy of bank statements showing the payment, day to day stock registers showing incoming and outgoing diamonds and the daily stock tally, confirmation of the party from whom the said purchases were made. Thus, having noticed that all payments were made from bank accounts and all these evidences had not been discussed by the Assessing Officer, with no word as to why these documentary evidences were not acceptable by the Assessing Officer, the CIT (Appeals) chose to follow the cases of beneficiaries of accommodation entries of said Bhanwarlal Group cases, where the Assessing Officer (ACIT / ITOs) have not made 100% disallowances, but the disallowances ranging from 3% to 5% of the impugned purchases. The relevant observations made by the CIT (Appeals), Surat in relation to the same in paragraph 0.7 to 0.9 as under : "0.7 The AR has brough to my notice that on identical facts, there is a binding decision of Hon'ble Gujarat High Court in the case of M/s. Mayank Diamond Pvt. Ltd., reported in 2014 (11) TMI 812 (Guj) in Tax Appeal No.200 of 2003 dated 07....
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....cross examination, copy of such statement was not provided to the assessee. The Assessing Offcier, nowhere rejected the demand of assessee. We find that the assessee filed detailed evidence consisting details of purchase, PAN and addresses of parties, purchase invoice, stock register, day to day register and sales register. No comment was made by Assessing Officer on the documentary evidence furnished by assessee. The sales of assessee was not disputed. No sale is possible in absence of purchase. The Assessing Officer estimated addition on account of purchases without rejecting books of accounts of assessee. The learned CIT(A) restricted to addition to the extent of 12.5% of the total purchased shown by taking view that the assessee shown G.P of less than 1.15%. In our view the disallowance restricted by Ld. CIT(A) is on higher side. The profit margine in the industry is 5% to 7%. It is settled law in case of disputed purchases shown from such hawala dealers on the profit element embedded to avoid the possibility of revenue leakage is to be disallowed. No doubt made the assessee has shown extremely low G.P i.e. 1.15% only, yet the disallowance at rate of 12.5% is on higher side. Th....