TaxTMI 
TaxTMI 
2026 (2) TMI 1177
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.... were not genuine, and hence, the same could not have been disallowed. 2. The NFAC erred in upholding the addition on the basis of generalized statements in the assessment order without the Assessing Officer having conducted any enquiry in the matter. 3. The NFAC failed to appreciate that addition, even if any, could have been made only to the extent of the positive difference, if any, between the gross profit element in the undisputed purchases and the disputed purchases as per the ratio of the judgement of the Hon'ble Bombay High Court. 4. The NFAC failed to appreciate that the Report of the Task Group for Diamond Sector (issued by the Govt. of India) itself shows that GP rate for entities engaged in trading of diamonds was only 2%. Hence, the addition, if any, ought to have been restricted to 2% of the impugned purchases. 2.1. All the grounds raised by the assessee relate to disallowance made towards purchases, which have been alleged to be bogus by the ld. Assessing Officer. 3. Brief facts of the case are that assessee filed its original return on 04.09.2010 reporting total income at Rs. 4,74,220/-. Assessee is a partnership firm carrying on....
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....leged purchases as bogus. 3.2. In the impugned assessment order, ld. Assessing Officer has laid emphasis on the modus operandi of the Bhawarlal Jain and his syndicate about their indulgence in providing accommodation entries. Ld. Assessing Officer had asked for confirmation letters and to demonstrate as well as correlate the purchases with the sales made by the assessee, which were duly complied with. Assessment was completed by making the disallowance of the entire alleged purchases as bogus, amounting to Rs. 46,46,495/-. Ld. Assessing Officer thus, made the disallowance of the 100% of the purchase amount which was alleged to be bogus. 3.3. In the first appeal, assessee reiterated its submissions made in the course of assessment proceedings along with corroborative documentary evidences. Further, assessee also asserted that the disallowance was made on the basis of statement given by the persons in whose case, search and survey action was undertaken in the Bhawarlal Jain group. Assessee submitted that merely on the basis of statement given at the time of search and survey, such a disallowance cannot be made without any corroborative documentary evidence, pointing out and est....
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....als in is in the range of 1% to 3% as noted in the Task Force Report by the Government of India. Copy of the said report is placed on record. Based on this, he claimed that disallowance at the rate of 100% is unjustified, since assessee has already reported a much higher percentage of gross profit, details of which are already extracted above. 4.1. Ld. Counsel for the assessee also pointed to the decision of Hon'ble Jurisdictional High Court of Bombay in the case of PCIT vs. Kanak Impex India Ltd. [2025] 172 taxmann.com 283 (Bom), wherein addition to the extent of 100% of the bogus purchases u/s. 69C was upheld. Ld. Counsel made the submissions distinguishing the facts of the said decision with the case of the assessee, by pointing out the factual position and the provisions of law, details of which are extracted below: "In the case of Kanak Impex (supra), the ITAT had accepted the case of the Department that the purchases were indeed bogus. The assessee had not filed any appeal against the said finding of the ITAT, and hence, the same had become final (This is clear from the Question of Law framed by the Hon'ble High Court in para 2 r/w para 10 of the judgement....
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....s a fact on record that assessee has made detailed submissions along with corroborative documentary evidences to establish the genuineness of the purchases made by it, which have been alleged to be bogus by the ld. Assessing Officer. The details of documents furnished by the assessee to support the contentions made is listed below: i. Stock Register along with Sale & Purchase Register for Assessment Year 2010- 11 ii. Purchase bill of Nice Diamonds along with its corresponding subsequent Export Sale invoice & Shipping Bill to SR Exports HK Ltd. iii. Purchase bill of Mohit Enterprises along with its corresponding subsequent Export Sale invoice & Shipping Bill to Lotus Gems BVBA. iv. Bank statements showing payment made towards the purchases from Mohit Enterprises and Nice Diamonds & Payments received for corresponding export sales made from SR Exports HK Ltd. v. Copy of Bank Realisation advice for export receipt from SR Exports HK Ltd. vi. Copy of Bank Realisation advice for export receipt from Lotus Gems BVBA along with Copy of Bank Statement highlighting the said receipt. 6.1. Ld. Assessing Officer has not pointed out any def....