2024 (3) TMI 1198

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.... reopening of assessment. 2. The facts relating to the case are stated in brief. The assessee is in diamond business. The assessee had filed return of income for the year under consideration on 29.9.2012 declaring a total income of Rs. 8,97,530/-. Subsequently the Assessing Officer received information from DGIT(Investigation), Mumbai that the assessee has availed accommodation entries in the form of bogus purchases from a concern named M/s. Mayank belonging to Rajendra Jain Group. The Investigation report stated that Rajendra Jain Group is involved in providing accommodation entries without actually supplying goods. Hence the AO re-opened the assessment by issuing notice u/s 148 of the Act. 3. During the year under consideration, the ass....

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....ses, since the assessee could not have sold the goods without purchasing them. For this proposition, the Ld A.R placed his reliance on the decision rendered by Hon'ble Bombay High Court in the case of Nitin Ramdeoji Lohia (145 taxmann.com 546)(Bom). He submitted that the learned CIT(A) was in principle right in holding that only the profit element involved in the alleged bogus purchases should be assessed to tax. He submitted that the Ld CIT(A) was not justified in adopting average rate of profit of three years in determining the rate of gross profit at 16.45%, which is very much on the higher side. The Learned AR submitted that the gross profit in diamond business has been estimated by the Tribunal @ 3%. He submitted that the assessee has ....

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.... not be possible for assessee to complete the transaction by way of sale, unless it could be shown from the record that the corresponding sale was also a sham transaction. We are in agreement with the view expressed by the CIT (Appeals) that, if the purchases are bogus, it would be impossible for the assessee to complete the business transaction and that if the purchase is bogus, the corresponding sale also must be bogus or else the transaction would be impossible to complete and as a necessary corollary, unless the corresponding sale is held to be bogus, the purchase also cannot be held to be bogus, rather it would be a case of purchase from bogus entities/parties. That view has been upheld by the Tribunal in principal while dismissing t....