TaxTMI 
TaxTMI 
2024 (1) TMI 1514
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....bsp;147/148, merely on a statement made by Shri Rajendra Jain (who ultimately retracted his statement 2. The learned CIT(A) erred in confirming the re-opening of the assessment, without substantiating valid reasons to believe that income chargeable to tax had escaped assessment. The reasons cannot be non-existent and must be genuine and not a pretence. The reassessment proceedings are bad in law since the reasons to believe are non-existent. 3. The learned CIT(A) failed to take into consideration that information provided by the DGIT, Mumbai cannot construe as tangible material to justify the re-opening, since the concerned party has retracted the statement as the same being given under coercion/undue influence. 4. The AO has erred in reopening the assessment purely on presumption basis and to make an enquiry or verification. 5. The learned CIT(A) failed to take into consideration the cogent evidence submitted by the appellant in the course of assessment proceedings. Ground No. 2: Addition of Rs. 20,32,692/-u/s 68 1. The learned AO erred in adding a sum of Rs. 20,32,692/- u/s. 68 of the I.T. Act, 1961 being purchases of loose di....
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....polished diamonds which were purchased from them. 8. The learned AO and CIT(A) erred in not granting an opportunity to the Assessee to cross examine the Third Party, on the basis of whose statement, the Department alleged that the Assessee has made accommodation entries. Without prejudice. Ground No. 3: Addition restricted to 2% Gross profit margin 9. The learned CIT(A) erred in not restricting the addition to Rs. 40,650/- (being 2% Gross Profit ratio of the impugned Bogus Purchases), being the estimated profit element (as per the market standards) embedded in purchases." 3. The relevant facts in brief are that the Appellant, a partnership firm engaged, inter alia, in the business of processing and trading of diamonds, filed return of income for the Assessment Year 2012-13 on 27/07/2012 declaring total income of INR 50,73,358/-. The aforesaid return was processed under Section 143(1) of the Act. However, subsequently reassessment proceedings were initiated against the Appellant as noticed dated 25/03/2019 was issued to the Appellant. As per the reasons recorded a search and survey action was conducted in the case of Rajendra Jain/Dharmichand Jain/Sanja....
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....ssing Officer under Section 68 of the Act sustained by the CIT(A) holding that the Appellant had made bogus purchases of loose diamonds from M/s Kalash Enterprises. Ground No. 3 has been raised on without prejudice basis whereby the Appellant has contended that addition on account of impugned bogus purchases should be restricted to INR 40,650/- being 2% of impugned bogus purchases. Ground No. 1 6. Ground No. 1 raised by the Appellant directed against the challenging the validity of reassessment proceedings under Section 147 read with Section 148 of the Act. 6.1. We have heard the rival submissions and perused the material on record. We note that the return filed by the Appellant for Assessment Year 2012-13 was processed under Section 143(1) of the Act and it is admitted position that the regular scrutiny assessment under Section 143(3) of the Act was not framed on the Appellant. Therefore, the question of change of opinion did not arise. The notice for initiating reassessment proceedings under Section 147 of the Act was issued to the Appellant on 25/03/2019, i.e. within a period of six years from the end of relevant assessment year. Therefore, the provisions contained in P....
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....h bogus purchases and had, therefore, sustained addition only to the extent of 2% of such alleged bogus purchases after taking into account profit declared by the Appellant in the return of income. 9. Per contra, the Ld. Departmental Representative placed reliance upon the order passed by the Assessing Officer and the CIT(A) and submitted that during the assessment proceedings, the Assessing Officer has informed the Appellant that M/s Kalash Enterprises was merely a paper concern and no goods had been supplied to the Appellant. The transaction was undertaken to generate paper trail only. No stock of diamonds was found by the Investigation Wing during the search conducted in various companies/concerns. Therefore, the onus of proving the transaction was genuine was squarely upon the Appellant. The Appellant was, therefore, asked to file confirmations of the said transactions and demonstrate/correlate that the said purchases resulted in genuine sales. The documents furnished by the Appellant were self-serving documents that did not inspire confidence and were, therefore, rejected by the Assessing Officer. The CIT(A) also confirmed the findings of the Assessing Officer in this regar....
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....n the value of disputed purchases @ 2%. In the case of the assessee the Id. Counsel has filed summary of chart on 13.02.2023 showing that in the assessment year 2007-08 to 2010-11 the assessee had already declared gross profit at 5.40%, 5.24%, 5.08% and 5.08% respectively in the different assessment year. From these facts the assessee has demonstrated that they have already reported higher profit on the purchase transaction made from the group concern of Rajendra Jain as against gross profit rate adopted by the task force formed by the Government of India (Ministry of Commerce and Industry, Department of Commerce) for diamond industry. 7. Considering the above facts and the percentage of gross profit already shown by the assessee after following the decision of ITAT as referred above we consider it appropriate to restrict the addition to the extent of 2% of the impugned purchases. Accordingly, we restrict disallowance to the extent of 2% of such purchases. Therefore, the ground no. 3 of the assessee is partly allowed. 8. The ground No. 1 & 2 pertaining to reopening of assessment was not pressed, therefore, the same stand dismissed." (Emphasis Supplied) ....