TaxTMI 
TaxTMI 
2026 (4) TMI 36
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.... 2. The CIT(A) failed to understand that onus of proving the genuineness of purchase is on the assessee. 3. The CIT(A) erred in estimating the income based on weighted average gross profit despite accepting that there is possibility of the assessee availing accommodation entries. 4. The CIT(A) erred in not considering the decision of the Gujarat High Court in the case of N.K. Industries Ltd. Vs. Deputy Commissioner of Income Tax, (2016) 72 taxmann.com 289 since the Special Leave Petition against the said decision was dismissed by the Hon'ble Supreme Court in case of N. K. Proteins Ltd. Vs. Deputy Commissioner of Income Tax, on 16 January 2017, (2017) 84 taxmann.com 195 (SC). 5. The CIT(A) erred in restricting the disallowance to profit margin on unproven purchases without considering the position of law established by the Hon'ble Apex Court in the case of N. K. Proteins Ltd (Supra), that 100 % disallowances on bogus purchases is upheld. 6. The CIT(A) erred in considering the ratio laid down by the Hon'ble Bombay High Court in the case of PCIT Vs Kanak Impex (India) Ltd [2025] 172 taxmann.com 283 (Bombay), wherein the Hon'bl....
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....se the assessee filed ROI by declaring the same taxable income of Rs. 92,24,654/- on 05/11/2020. Thereafter notices u/s. 143(2) as well as 142(1) of the Act were issued. The AO after considering the requisite details as called for completed the assessment proceeding by passing the assessment order u/s. 144(3) r.ws. 153C of the Act for the AY 2018- 19 on 27/07/2021 accepting the returned income. 4.1 As per the suspicious transaction report (STR) available with the Income Tax Department, and individual named Mr. Bhanwar Lal Gurjar transacted with M/s. Tanman Jewels Pvt Ltd. among several other entities, and engaged in covering unaccounted money through layering of funds. On the basis of above STR report the DDIT(Inv.), Surat formulated a report categorically concluding all business entities with whom M/s. Tanman Jewels Pvt Ltd. has financial transactions, to be accommodation entry providers/ beneficiaries. The assessee's name also reflected in the report as given below:- PAN Name Aggregated Transaction Value (Rs.) AAJFM7227J M/s. Raj Diamonds 1,29,19,964 The assessee M/s. Raj Diamonds, reportedly had bogus purchases to the tune of Rs. 1,29,19,964/- from the en....
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....abh Diamonds Pvt Ltd amounting to Rs. 1,20,03,330/- by holding that the two entities are conclusively proved as bogus that performs accommodation entry operations to bring unaccounted money into the books of its beneficiaries. 5. Aggrieved by the assessment order passed u/s.147 of the Act dated 31/03/2023, the assessee preferred an appeal before the ld. CIT(A)-2, Panaji, Goa. 6. Before the ld.CIT(A), the assessee contended its transactions to be genuine. Further, the assessee contended that the AO had treated purchases as bogus but had not commented on corresponding sales made of these goods. Before the ld.CIT(A), the assessee by way of filing the copy of purchase register, GST returns, details of sales, bank statements, stock register claimed that since the payments were also made through proper banking channel, therefore the underlined transactions are genuine. Further, the assessee also submitted that during the course of assessment proceeding, the assessee had filed various documentary evidences in support of its claim. However, the AO did not give any findings on such evidences. The assessee had contended that the AO had not questioned the sales made by the assessee and ....
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....rict the addition to such gross profit % only. 6.3 Considering the various judicial precedents pronounced by Hon'ble High Courts and ITAT, the ld. CIT(A) restricted the addition to the tune of weighted average gross profit for past three years i.e. 7.37% of the amount disallowed by the AO instead of disallowing the entire alleged bogus purchases and accordingly directed the AO to restrict addition to Rs. 18,37,995/- (Rs.2,49,23,294 x 7.37%) and accordingly, the ld CIT(A) partly allowed the appeal of the assessee. 7. Aggrieved by the order of ld.CIT(A)-2, Panaji, Goa, the Revenue has filed the present appeal before this Tribunal and the assessee has filed the cross objection. The assessee has also filed a paper book comprising 159 pages containing therein as detailed below:- Sl. No Particulars 1 Copy of the ITR acknowledgment along with computation of total income, financials and Audit report filed for the AY 2018-19 2 Copy of the following details filed before A.O. in support of purchases from M/s. Vallab Diamonds Pvt Ltd. 2.1 Copy of the ledger account of M/s. Diamonds Pvt Ltd from 01/04/2017 to 31/03/2021 2.2 Copies of the confirmation of accou....
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....tio instead of disallowing the entire bogus purchases. Lastly, the ld. Dr heavily relied on the ratio laid down by the Hon'ble Bombay High Court in the case of PCIT Vs. Kanak Impex (India) Ltd [2025] 172 taxmann.com 283 (Bombay) wherein the Hon'ble Court upheld the addition made by the AO on account of entire bogus purchases due to the failure of the assessee to prove the genuineness of the purchases made and struck down the profit estimation made by the CIT(A) & ITAT. 9. The ld. AR on the other hand vehemently submitted that the assessment for the AY 2018-19 was already concluded by the AO by passing the order u/s. 143(3) r.w.s. 153C of the Act on 27/07/2021 accepting the returned income. The case was reopened by the AO only on the basis of Suspicious Transaction Report(STR) concerning transaction between an individual named Bhanwar Lal Gurjar with M/s Tanman Jewels Pvt Ltd. Further, the ld. Submitted that the entire reassessment proceedings are purely based on guess & surmises and the Authorities below did not find out any defects in the evidences produced before them establishing the genuineness of the purchases made. Lastly, the ld. AR submitted that the ld. CIT(A) is not ju....
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....ped assessment. Further, the information with AO which suggests that income has escaped assessment means:- (i) Any information in accordance with RMS formulated by the Board (ii) Any Audit objection (iii) Any information received under an agreement u/s. 90 or 90A of the Act (iv) Any information made available under scheme notified u/s. 135A of the Act (v) Any information in consequence of order of Tribunal or court In the present case, on the basis of the suspicious transaction report (STR), the DDIT (Inv.), Surat formulated a report and on that basis, the case of the assessee was reopened to verify the financial transactions of the assessee firm with M/s Tanman Jewel Pvt Ltd. and M/s Vallabh Diamonds Pvt. Ltd. On this count only, the reopening of the concluded assessment proceedings is bad in law. 10.1 Further, in the present case the Revenue is challenging the restriction of disallowances by the ld. CIT(A) to Rs. 18,37,995/- being weighted average of gross profit for the past three A.Ys, whereas the assessee by way of cross objection is also challenging the addition of Rs. 18,37,995/- sustained by the ld. CIT(A) on the ground tha....
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....as learnt from the neighbors that the said premises is shut for more than 3 years. To add credence, a 131(1)(d) commission was issued to DDIT(inv), Unit-1, Surat. Based on this, the address of M/s Tanman Jewels Pvt Ltd was verified. The inspector thereafter submitted his report that office had been closed with no business activity being undertaken in this premises for at least the last 5-6 years. The ld CIT(A) however observed that since the AO himself had contended that both the parties i.e. M/s Tanman Jewels Pvt Ltd and M/s Vallabh Diamonds Pvt Ltd. were importing at higher price, which indicates that at least these parties do exist and carry out business Activity. We are of the considered opinion that before both the Authorities below, the assessee had submitted the copy of the master data of both the companies as per the Ministry of Corporate Affairs as well as GST website. Further, the assessee firm also filed confirmation letter received from both the creditors. During the course of the assessment proceedings also a reply from M/s Tanman Jewels Pvt Ltd was received by the AO through email confirming the transaction with M/s Raj Diamonds (assessee) by furnishing evidences in t....
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....need to be ignored but the AO has not done so. Therefore, in the opinion of ld. CIT(A), this leaves with one sided adjustment in case of the assessee which is not justified. We are of the considered opinion that this is not a case of inflating the purchase value or quantity in order to reduce the profit of the assessee firm so as to see the corresponding sales. In fact, in the present case, on the basis of suspicious transaction report (STR),the DDIT(Inv.), Surat formulated a report categorically concluding all business entities with whom M/s. Tanman Jewels Pvt Ltd. has financial transactions alleged to be accommodation entry providers/ beneficiaries. Thus, the allegation is that the assessee firm without making actual purchases had obtained an accommodation entry in order to reduce its profit. Therefore, the adoption of GP rate by the ld. CIT(A) is not at all justified. In our opinion, the AO had no option but to add the entire bogus purchases to the income of the assessee if the AO with cogent material/evidences able to establish that it is not an actual purchases but merely an accommodation entry. However, if the AO failed to establish with cogent material/evidences of the same,....