TaxTMI 
TaxTMI 
2024 (3) TMI 1320
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....d the return was processed u/s. 143(1) of Income-tax Act, 1961 (in short "Act"). The case was reopened u/s. 147 of the Act by issue of notice u/s. 148 of the Act after recording the reasons and obtaining the prior approval from the competent authority. Notice u/s. 142(1) of the Act was issued and served on the assessee. In response Authorised Representative of the assessee attended and submitted the relevant information as called for. 3. Assessee is engaged in the business of trading and manufacturing in diamonds. A search and survey action was conducted in the case of Shri Bhanwarlal Jain group on 03.10.2013 by DGIT (Investigation) Mumbai. Subsequently, Assessing Officer received information from the DGIT(Inv.,), Mumbai about the accommod....
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....A.Y. 2007-08 directed the Assessing Officer to restrict the addition to the G.P Rate of 7.89% while working out the profit element embedded in the non-genuine purchase amounting to Rs. 3,42,65,843/-. 6. Aggrieved with the above order, assessee is in appeal before us raising following grounds in its appeal: - 1. On the facts and in law, learned commissioner of income tax (Appeals) had erred in confirming the addition of Rs.27,03,575/- as against Rs. 92,752/- submitted by the appellant during appellate proceedings. Under the facts and circumstance, the excess addition of Rs. 26,10,823/- ought to have been deleted. 2. On facts and in law, learned commissioner of income Tax (Appeals) had erred in not following the decision of Hon'ble ITAT....
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....on be restricted only to the extent of differential gross profit. 8. On the other hand, Ld. DR supported the orders of the authorities below. 9. Considered the rival submissions and material placed on record and perused the orders of the authorities below. It is not in dispute that sales have been accepted as genuine from out of these purchases. When the sales have been accepted as genuine the entire purchases cannot be treated as non-genuine. The Hon'ble Gujarat High Court in the case of Bholanath Polyfab Pvt. Ltd [355 ITR 290] held that when the assessee made purchases and sold the finished goods as a natural corollary not the entire amount covered under such purchases would be subject to tax but only the profit element embedded the....
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....ed. 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 re....
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.... counsel of the assessee agreed that this aspect can be examined by the assessing officer. 6. I respectfully following the aforesaid judgement of the honourable High Court set aside the matter to the fife of the assessing officer with the direction to restrict the addition as regards the bogus purchases by bringing the gross profit rate on such bogus purchases at the same rate as that of the other genuine purchases. Needless to add the assessee should be granted adequate opportunity of being heard." 12. Ld. CIT(A) has followed the order of the Tribunal in assessee's own case and restricted the addition to 7.89% of Rs..3,42,65,843/-. The issue raised before us is with conclusion drawn by the Ld.CIT(A) in Para No. 10.4 at Page No. 25 of ....
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....e, partly allowed." 13. Following the decision of the Hon'ble Bombay High Court, we find merit in the submissions of the Ld. AR that the addition should be restricted only to the extent of bringing the gross profit rate on such purchases at the same rate as of other genuine purchases. For the sake of clarity, the summary of statement of purchase / sale and submitted by the assessee for the year under consideration assessee is reproduced below: - Summary of Statements of Purchase / Sales NAME OF THE PARTY QUANTITY PURCHASE SALES & CLOSING STOCK RAHUL EXPORTS 96654 12780908 13789154 PANKAJ EXPORTS 1320.51 17272996 18941312 MARVIN ENTERPRISES 123.29 4211939 4370324 TOTAL 2420.34 34265843 37100790 GROSS PROFIT (Sales ....