TaxTMI 
TaxTMI 
2026 (6) TMI 1401
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....see. 3. These Tax Appeals were heard analogously in view of the common issue regarding non-estimating profitability on sales booked from bogus parties by the Tribunal despite sustaining addition @6% of bogus purchases made with the same parties. 4. The following substantial question of law is proposed by the revenue in Tax Appeal No. 419 of 2026, which is treated as a lead matter: (i) Whether the Appellate Tribunal has erred on facts and in law in not estimating profitability @6% on sales of Rs. 29,26,32,236/- booked from bogus parties despite sustaining addition @6% of bogus purchases made with the same parties? 5. The remaining Tax Appeals are also having the same issue and, therefore, the above question of law will take care of the remaining Tax Appeals also and accordingly following common substantial question of law is framed for the remaining Tax Appeals as under: "(i) Whether the Income Tax Appellate Tribunal has erred in facts and law in not estimating profitability @6% on sales booked from bogus parties despite sustaining addition @6% of bogus purchases made with the same parties?" 6. The brief facts of the case are that the respondents-assessees ar....
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....Rs.1,67,517 cannot be made for the sale transaction incurred with M/s Rhiday Gems Pvt. Ltd, in para 7.8 above. Thus, out of bogus purchases brought to tax by the AO of Rs. 49,98,58,018/-, the total amount from these 3 entities comes to Rs. 36,33,67,517/- which is held to be not bogus purchase as no such purchases are debited by the appellant in its books. The bogus purchases are to the tune of Rs. 13,64,90,501/- from 2 entities namely M/s Metro International and M/s Franklin International. There was a Task Group for Diamond Sector which submitted a Report to the Department of Commerce in which it was reported that the net profit in diamond manufacturing is in the range of 1.5% to 4.5% and in trading in the range of 1% to 3%. The appellant's business is of trading in rough and polished diamonds and the purchases debited are for rough and polished diamonds. Thus, in the facts and circumstances of the appellant's case, if the profit element from the purchases treated as non-genuine @2% would meet the ends of justice. The 2% of the same works out to Rs. 27,29,810/-, which is sustained and the appellant gets relief of Rs. 49,71,28,208/-. Ground No.2 is treated to have b....
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....see. We further find that ld CIT(A), while considering the submissions of the assessee accepted the lapses on the part of the AO and noted that no sale is possible in absence of purchases. The Books of the assessee was not rejected by the AO. The ld CIT(A) on further examination of the facts and various legal submissions find that Ahmedabad Tribunal in Bholanath Poly Fab Private Limited (supra) held that in the such cases the addition of bogus purchases was sustained to the extent of 12%, on the observation that the assessee may have made purchases from elsewhere and obtained the bills from impugned supplier to inflate Gross Profit Rate. The Id CIT(A) hy considering the overall facts, concluded that the 100% disallowance of purchase is not justified. We also find that the ld. CIT(A) also considered the decision of jurisdictional High Court in Mayank Diamonds Pvt. Ltd. (supra) and compared the fact of the present case with the facts in Mayank Diamonds Pvt. Ltd. (supra) and compared the fact of the present case with the facts in Mayank Diamonds Pvt Ltd (supra) and noted that assessee in that case was also engaged in the trading of polished diamonds. The ld ....
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....ssibility of revenue leakage. Therefore, considering overall facts and circumstances of the present case, we are of the view that disallowances @6% of impugned purchases / disputed purchases would be sufficient to meet the possibility of revenue leakage. In the result the ground No. 2 of appeal raised by the assessee is partly allowed and the grounds of appeal raised by revenue are dismissed. 22. In the result the appeal of revenue is dismissed and the appeal of the assessee is partly allowed." 9.5 Thus, it is clear that the issue is squarely covered by the decision of the Co-ordinate Bench in the case of Pankaj K. Chaudhary (supra) and there is no change in facts and law and since Revenue is unable to produce any material to controvert the aforesaid findings of the Co-ordinate Bench (supra), we find no reason to deviate from the findings in the above order of Co-ordinate Bench. Therefore, following the order of Co-ordinate Bench in the case of Pankaj K. Chaudhary (supra), we dismiss the appeal of Revenue and also CO of the assessee and sustain addition @ 6% of the bogus purchase of the appellant. appellant." 13. The decision of the Tribunal in case of Pankaj K....