DCIT 5(3)(1), MUMBAI vs. SILMOHAN GEMS PRIVATE LIMTED , MUMBAI

These cross appeals by the assessee These cross appeals by the assessee and Revenue are directed and Revenue are directed against two separate orders, both dated 20.12.2022 passed by the against two separate orders, both dated 20.12.2022 passed by the against two separate orders, both dated 20.12.2022 passed by the Ld. Commissioner of Income Ld. Commissioner of Income-tax (Appeals) – National Faceless National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2012-13 and 2013-14 respectively. T 14 respectively. The identical grounds have been he identical grounds have been raised permeating from same set of facts and circumstances, raised permeating from same set of facts and raised permeating from same set of facts and therefore, these appeals were heard together and disposed off by , these appeals were heard together and disposed off by , these appeals were heard together and disposed off by way this consolidated order for convenience and avoid repetition of way this consolidated order for convenience and avoid repetition of way this consolidated order for convenience and avoid repetition of facts.

by the 13. The grounds raised by the assessee and the Revenue are reproduced as under: assessee and the Revenue are reproduced as under:

Assessee’s Grounds of appeal Assessee’s Grounds of appeal

1. The learned CIT (A) has erred in law and on facts and in The learned CIT (A) has erred in law and on facts and in The learned CIT (A) has erred in law and on facts and in circumstances of circumstances of the case by partly confirming the the case by partly confirming the disallowance of Rs, 22,63,094/ disallowance of Rs, 22,63,094/- (Rs. 14, 14,434/ (Rs. 14, 14,434/- u/s 69C of the Act and Rs. 8,48,660 us 40A(3) of the Act) without of the Act and Rs. 8,48,660 us 40A(3) of the Act) without of the Act and Rs. 8,48,660 us 40A(3) of the Act) without considering the submission while the appellant has considering the submission while the appellant has considering the submission while the appellant has properly adhered to every notice and directions of Lear properly adhered to every notice and directions of Lear properly adhered to every notice and directions of Learned AO and has fully co AO and has fully co-operated during the whole assessment operated during the whole assessment proceedings. proceedings.

2. The Learned CIT(A) has erred in law and on facts and in 2. The Learned CIT(A) has erred in law and on facts and in 2. The Learned CIT(A) has erred in law and on facts and in circumstances of the case by confirming the addition made circumstances of the case by confirming the addition made circumstances of the case by confirming the addition made by the AO of Rs. 8,48,660 (being 3 percent of the alleged by the AO of Rs. 8,48,660 (being 3 percent of the alleged by the AO of Rs. 8,48,660 (being 3 percent of the alleged

Silmohan Gems Pvt. Ltd. 3 & 449 and 471 & 472/Mum/2023 ITA No. 450 & 449 and 471 & 472/Mum/2023 unexplained expenditure) u/s. 40A(3) of the Act without ined expenditure) u/s. 40A(3) of the Act without ined expenditure) u/s. 40A(3) of the Act without giving any opportunity to rebut the evidences. giving any opportunity to rebut the evidences.

3. The Learned CIT(A) has erred in law and on facts and in 3. The Learned CIT(A) has erred in law and on facts and in 3. The Learned CIT(A) has erred in law and on facts and in circumstances of the case by confirming the addition made circumstances of the case by confirming the addition made circumstances of the case by confirming the addition made by the AO just on the basis of some action by the AO just on the basis of some action carried out at carried out at third party premises without putting on record any other third party premises without putting on record any other third party premises without putting on record any other evidences to prove that the purchases are bogus, nor even evidences to prove that the purchases are bogus, nor even evidences to prove that the purchases are bogus, nor even any opportunity was given to the appellant to rebut the any opportunity was given to the appellant to rebut the any opportunity was given to the appellant to rebut the evidences AO might have evidences AO might have 4. The learned CIT(A) has erred in law and on 4. The learned CIT(A) has erred in law and on facts of the facts of the case by partly confirming the disallowance made by A by case by partly confirming the disallowance made by A by case by partly confirming the disallowance made by A by failing to appreciate the documentary evidences furnished failing to appreciate the documentary evidences furnished failing to appreciate the documentary evidences furnished by the Appellant to corroborate the genuineness of such by the Appellant to corroborate the genuineness of such by the Appellant to corroborate the genuineness of such purchases.

6. The learned CIT(A) has erred in law and on facts and in 6. The learned CIT(A) has erred in law and on facts and in 6. The learned CIT(A) has erred in law and on facts and in circumstances of the caseby partly circumstances of the caseby partly confirming the addition confirming the addition made by AO without providing opportunity of virtualhearing made by AO without providing opportunity of virtualhearing made by AO without providing opportunity of virtualhearing to the appellant despite of being specifically asked in the to the appellant despite of being specifically asked in the to the appellant despite of being specifically asked in the submission filed before CIT(A). submission filed before CIT(A).

8. Both the lower authorities have passed the order without 8. Both the lower authorities have passed the order without 8. Both the lower authorities have passed the order without appreciating the facts and they have further erred in appreciating the facts and they have further erred in appreciating the facts and they have further erred in grossly ignoring various submissions. This action of lower grossly ignoring various submissions. This action of lower grossly ignoring various submissions. This action of lower authorities is clear breach authorities is clear breach of law and principle of natural of law and principle of natural justice. Therefore, deserveto be quashed. justice. Therefore, deserveto be quashed. Revenue’s Grounds of appeal Revenue’s Grounds of appeal

Silmohan Gems Pvt. Ltd. 4 & 449 and 471 & 472/Mum/2023 ITA No. 450 & 449 and 471 & 472/Mum/2023 CIT(A)/NFAC erred in restricting the addition @ 5% of CIT(A)/NFAC erred in restricting the addition @ 5% of CIT(A)/NFAC erred in restricting the addition @ 5% of purchase amount of Rs. 2,82,88,673/ purchase amount of Rs. 2,82,88,673/- at Rs. 14,14,434/ at Rs. 14,14,434/- instead of 100% on account of unexplained bogus purchase instead of 100% on account of unexplained bogus purchase instead of 100% on account of unexplained bogus purchase without appreciating the fact that the assessee has not without appreciating the fact that the assessee has not without appreciating the fact that the assessee has not provided any documentary evidence provided any documentary evidence of Purchase Order, of Purchase Order, quotation, enquiry form or delivery challan except purchase quotation, enquiry form or delivery challan except purchase quotation, enquiry form or delivery challan except purchase invoice." 2. "On the facts and circumstances of the case and in law, 2. "On the facts and circumstances of the case and in law, 2. "On the facts and circumstances of the case and in law, Ld. CIT(A)NFAC erred in considering the submission made Ld. CIT(A)NFAC erred in considering the submission made Ld. CIT(A)NFAC erred in considering the submission made by assesee and failed to appreciate that unexplaine by assesee and failed to appreciate that unexplaine by assesee and failed to appreciate that unexplained expenditure made by assessee attract provision of section expenditure made by assessee attract provision of section expenditure made by assessee attract provision of section 69C of the Act and for which no evidence has been 69C of the Act and for which no evidence has been 69C of the Act and for which no evidence has been furnished to the contrary in the support of the claim of the furnished to the contrary in the support of the claim of the furnished to the contrary in the support of the claim of the assessee during the course of assessment proceedings." assessee during the course of assessment proceedings." assessee during the course of assessment proceedings."

3.1 Subsequently, the Ld. Subsequently, the Ld. Commissioner of Income Commissioner of Income-tax-5, Mumbai (in short ‘the CIT’) called ’) called for the assessment record for the assessment records and after examination and provi examination and providing opportunity of being heard of being heard to the assessee, passed order u/s 263 of the Act dated 26.03.2018, passed order u/s 263 of the Act dated 26.03.2018, passed order u/s 263 of the Act dated 26.03.2018, holding that the assessment order passed by the Assessing Officer holding that the assessment order passed by the Assessing Officer holding that the assessment order passed by the Assessing Officer u/s 147 of the Act dated 11.03.2016 was erroneous and prejudicial u/s 147 of the Act dated 11.03.2016 was erroneous and prejudicial u/s 147 of the Act dated 11.03.2016 was erroneous and prejudicial to the interest of the Re to the interest of the Revenue and directed the Assessing Officer venue and directed the Assessing Officer on two grounds. Firstly Firstly, to make fresh inquiries and then on the basis to make fresh inquiries and then on the basis of the inquiries and material covered of the inquiries and material covered decide the issue of addition for decide the issue of addition for whole of the bogus purchase. Secondly, directed the Assessing whole of the bogus purchase. , directed the Assessing Officer to look into the angle of the commission paid by the assessee Officer to look into the angle of the commission paid by the assessee Officer to look into the angle of the commission paid by the assessee for procuring bogus accommodation entries and examine whether for procuring bogus accommodation entries and examine whether for procuring bogus accommodation entries and examine whether section 40A(3) of the Act is of the Act is attracted. The Ld. CIT also also directed the Assessing Officer to decide t Assessing Officer to decide the issue of bogus purchase in the light he issue of bogus purchase in the light of the decision of the Hon’ble Supreme Court of N.K. Proteins Ltd. of the decision of the Hon’ble Supreme Court of N.K. Proteins Ltd. of the decision of the Hon’ble Supreme Court of N.K. Proteins Ltd. (supra).

3.2 Pursuant to the direction of the Ld. Pursuant to the direction of the Ld. CIT, the Assessing Officer Assessing Officer issued notice u/s 133(6) of the Act to the party M/s Millennium issued notice u/s 133(6) of the Act to the party M/s Millennium issued notice u/s 133(6) of the Act to the party M/s Millennium Stars. The said party complied and filed certain details before the The said party complied and filed certain details before the The said party complied and filed certain details before the Assessing Officer. Thereafter, the Assessing Officer issued summons Assessing Officer. Thereafter, the Assessing Officer issued summons Assessing Officer. Thereafter, the Assessing Officer issued summons u/s 131 of the Act to the assessee as u/s 131 of the Act to the assessee as well as to M well as to M/s Millennium

Silmohan Gems Pvt. Ltd. 6 & 449 and 471 & 472/Mum/2023 ITA No. 450 & 449 and 471 & 472/Mum/2023 Stars. Though the assessee appeared Though the assessee appeared, however, the said party however, the said party Millennium Stars did Stars did not appear before the Assessing Officer. The not appear before the Assessing Officer. The Assessing Officer after considering the material available before him Assessing Officer after considering the material available before him Assessing Officer after considering the material available before him made the addition for the entire amount of bogus purchases and made the addition for the entire amount of bogus purchases and made the addition for the entire amount of bogus purchases and further commission @ 3% for violation of the provisions of section further commission @ 3% for violation of the provisions of further commission @ 3% for violation of the provisions of 40A(3) of the Act. The relevant finding of the Assessing Officer is ) of the Act. The relevant finding of the Assessing Officer is ) of the Act. The relevant finding of the Assessing Officer is reproduced as under: reproduced as under:

7.1 From the assessee's statement and submissions it is 7.1 From the assessee's statement and submissions it is 7.1 From the assessee's statement and submissions it is evident that they do not know the above party directly and evident that they do not know the above party directly and evident that they do not know the above party directly and have just dealt with them once. They have no have just dealt with them once. They have no information whatsoever about these party since then. This proves that whatsoever about these party since then. This proves that whatsoever about these party since then. This proves that the assessee has availed the services of the bogus entities to the assessee has availed the services of the bogus entities to the assessee has availed the services of the bogus entities to get accommodation entry of bogus purchases so as to get accommodation entry of bogus purchases so as to get accommodation entry of bogus purchases so as to suppress the profit shown for the year under consideration. suppress the profit shown for the year under consideration. suppress the profit shown for the year under consideration. Such bogus entry providers and bogus purchase providers entry providers and bogus purchase providers charge a 3% commission from the party seeking such entries. charge a 3% commission from the party seeking such entries. charge a 3% commission from the party seeking such entries. This has been admitted by Shri Bhanwärlal Jain in the This has been admitted by Shri Bhanwärlal Jain in the This has been admitted by Shri Bhanwärlal Jain in the statement which was recorded on oath during the search statement which was recorded on oath during the search statement which was recorded on oath during the search proceedings. Thus, the provisions of sect proceedings. Thus, the provisions of section 40(3) are ion 40(3) are attracted. Considering the fact that the expense incurred is in attracted. Considering the fact that the expense incurred is in attracted. Considering the fact that the expense incurred is in cash, provisions of section 40A(3) is attracted. cash, provisions of section 40A(3) is attracted. Therefore, the cash commission paid @ 3% of the purchases Therefore, the cash commission paid @ 3% of the purchases Therefore, the cash commission paid @ 3% of the purchases is also added back to the total income of the assessee. is also added back to the total income of the assessee. is also added back to the total income of the assessee. Penalty proceed Penalty proceedings us.274 r.w.s.271(1)c) of the Act are ings us.274 r.w.s.271(1)c) of the Act are initiated separately for furnishing inaccurate particulars of initiated separately for furnishing inaccurate particulars of initiated separately for furnishing inaccurate particulars of income.

Silmohan Gems Pvt. Ltd. 7 & 449 and 471 & 472/Mum/2023 ITA No. 450 & 449 and 471 & 472/Mum/2023

5. Aggrieved, both the assessee and the Revenue both the assessee and the Revenue both the assessee and the Revenue are before the Tribunal by way of raising grounds reproduced above. In the Tribunal by way of raising grounds reproduced above. In the Tribunal by way of raising grounds reproduced above. In the grounds raised by the assessee, the assessee is aggrieved on two grounds raised by the assessee, the assessee is aggriev grounds raised by the assessee, the assessee is aggriev issues firstly sustaining the disallowance @ 5% on the bogus sustaining the disallowance @ 5% on the bogus sustaining the disallowance @ 5% on the bogus purchases, secondly secondly, aggrieved for sustaining the disallowance of Rs.8,48,660/- in terms of section 40A(3) of the Act. The Revenue on in terms of section 40A(3) of the Act. The Revenue on in terms of section 40A(3) of the Act. The Revenue on the other hand is aggrieved by reducing the addition of bogus the other hand is aggrieved by reducing the addition of the other hand is aggrieved by reducing the addition of purchase to the extent of 5% of the purchases amount rather than purchase to the extent of 5% of the purchases amount rather than purchase to the extent of 5% of the purchases amount rather than the entire purchase amount addition which the entire purchase amount addition which was was made by the Assessing Officer. Since, the grounds of the assessee and Revenue Assessing Officer. Since, the grounds of the assessee and Revenue Assessing Officer. Since, the grounds of the assessee and Revenue on the issue of the purchase of the bogus purchases are on the issue of the purchase of the bogus purchas on the issue of the purchase of the bogus purchas interconnected, therefore interconnected, therefore we are taking up both these grounds we are taking up both these grounds together for adjudication. together for adjudication.

Silmohan Gems Pvt. Ltd. 8 & 449 and 471 & 472/Mum/2023 ITA No. 450 & 449 and 471 & 472/Mum/2023 Stars gave an entry of sale of rough diamonds to the assessee. In Stars gave an entry of sale of rough diamonds to the assessee. In Stars gave an entry of sale of rough diamonds to the assessee. In view of the statement of Shri B view of the statement of Shri Bhanwarlal Jain, investigation wing of anwarlal Jain, investigation wing of the Income-tax Department intimated regarding bogus tax Department intimated regarding bogus nature of the tax Department intimated regarding bogus said transaction of the purchase recorded by the assessee. Identical said transaction of the purchase recorded by the assessee. Identical said transaction of the purchase recorded by the assessee. Identical transaction in the name of another entity M/s transaction in the name of another entity M/s Mahalaxmi G Mahalaxmi Gems has been observed in assessment year 2013 in assessment year 2013-14 by the investigation by the investigation wing of income-tax department tax department. The Assessing . The Assessing Officer in the impugned assessment order held the entire amount of purchase impugned assessment order held the entire amount of purchase impugned assessment order held the entire amount of purchase from said party M/s Millennium Stars M/s Millennium Stars as unexplained. Whereas as unexplained. Whereas, the Ld. CIT(A) has restricted restricted the disallowance to 5% of the purchase the disallowance to 5% of the purchase amount, observing as under: observing as under:

“4.3 The assessee The assessee has rightly placed the reference of Hon'ble has rightly placed the reference of Hon'ble jurisdictional/Tribunal casesmentioned above in SI. No. 3 & 4, jurisdictional/Tribunal casesmentioned above in SI. No. 3 & 4, jurisdictional/Tribunal casesmentioned above in SI. No. 3 & 4, which are squarely covered to the instant case. Respectfully which are squarely covered to the instant case. Respectfully which are squarely covered to the instant case. Respectfully following the principle of binding precedence and rule of following the principle of binding precedence and rule of following the principle of binding precedence and rule of consistency, it is appropria consistency, it is appropriate to restrict the addition @ 5% of te to restrict the addition @ 5% of the purchase amount of Rs.282,88,673/ the purchase amount of Rs.282,88,673/- which comes to Rs. which comes to Rs. 14, 14,434/ 14, 14,434/-. The balance addition made us.69C stands . The balance addition made us.69C stands deleted. The ground raised on this issue is partly allowed. deleted. The ground raised on this issue is partly allowed. deleted. The ground raised on this issue is partly allowed.”

7. Before us, the Ld. Counsel of the assessee s Before us, the Ld. Counsel of the assessee submitted that the ubmitted that the assessee has genuinely purchase assessee has genuinely purchased goods from M/s Millennium goods from M/s Millennium Stars and entered into the stock register Stars and entered into the stock register. She referred to the pages he referred to the pages 11 to 27 of the Paper 11 to 27 of the Paper Book, which are copies of the are copies of the stock register, purchase bills, jo work jo work issued for manufacturing, receipt of finished manufacturing, receipt of finished goods etc. The Ld. Counsel submitted that as per bill dated goods etc. The Ld. Counsel submitted that as per bill dated goods etc. The Ld. Counsel submitted that as per bill dated 15.11.2013, lots of rough diamonds of rough diamonds weighing 145.72 Carats, 394.22 Carats and 555.51 and 555.51 carats were purchased from M/s were purchased from M/s

Silmohan Gems Pvt. Ltd. 9 & 449 and 471 & 472/Mum/2023 ITA No. 450 & 449 and 471 & 472/Mum/2023 Millennium Stars and same were further issued Millennium Stars and same were further issued on 23.12.2011 (145.72 carats) ; 18.01.2012 ; 18.01.2012 (394.22 carats) to M/s to M/s Jyo Gems for manufacturing of polished diamonds. manufacturing of polished diamonds. Another lot of 555.51 carat lot of 555.51 carats was issued to M/s Jogani s Jogani Diamonds on 20.01.2012. The Ld. 20.01.2012. The Ld. Counsel further referred that after receipt of the fi Counsel further referred that after receipt of the finished/polished nished/polished diamonds, same were sold as per the stock register of the polished same were sold as per the stock register of the polished same were sold as per the stock register of the polished diamonds, a copy of which is available from page 28 to 29 of the copy of which is available from page 28 to 29 of the copy of which is available from page 28 to 29 of the Paper Book. The assessee demonstrated that Paper Book. The assessee demonstrated that majority of majority of sales have been exported and therefore, the sales cor been exported and therefore, the sales corresponding to the responding to the purchases of ‘Millennium Stars Millennium Stars’ have not been doubted by the have not been doubted by the Department. Therefore, no addition should have been made. Department. Therefore, no addition should have been made. Department. Therefore, no addition should have been made.

8. The Ld. Departmental Representative (DR) on the other hand The Ld. Departmental Representative (DR) on the other hand The Ld. Departmental Representative (DR) on the other hand submitted that assessee failed to produce said party before the submitted that assessee failed to produce said party bef submitted that assessee failed to produce said party bef Assessing Officer for verification of the purchase from said party. Assessing Officer for verification of the purchase from said party. Assessing Officer for verification of the purchase from said party. The Ld. DR further submitted that the assessee even could not give The Ld. DR further submitted that the assessee even could not give The Ld. DR further submitted that the assessee even could not give whereabouts of the said party and therefore, disallowance @ 100% of the said party and therefore, disallowance @ 100% of the said party and therefore, disallowance @ 100% of the purchase amount should have been made by the Ld. CIT(A) of the purchase amount should have been made by of the purchase amount should have been made by as against disallowance disallowance restricted at the rate of 5% of the purchase of 5% of the purchase amount.

Silmohan Gems Pvt. Ltd. 10 & 449 and 471 & 472/Mum/2023 ITA No. 450 & 449 and 471 & 472/Mum/2023 in stock register. Before us, t Before us, the assessee has demonstrated that has demonstrated that goods corresponding to the purchase were goods corresponding to the purchase were entered into the stock entered into the stock register and put to manufacturing, and manufacturing, and thereafter have been partly thereafter have been partly exported and partly sold locally. Thus exported and partly sold locally. Thus, sales are not doubtful in the sales are not doubtful in the case of the assessee. In the cir case of the assessee. In the circumstances, only presumption is that only presumption is that assessee must have purchased goods from someone else, whereas assessee must have purchased goods from someone assessee must have purchased goods from someone taken only accommodation only accommodation bill from M/s Millennium Stars. In the bill from M/s Millennium Stars. In the similar circumstances, the similar circumstances, the Hon’ble Jurisdictional High Court in Hon’ble Jurisdictional High Court in judgement dated 11/02/2019 in the case of PCIT Vs Mohommad PCIT Vs Mohommad judgement dated 11/02/2019 in Haji Adam & Co. (Bombay High Court) Appeal Number: Income Haji Adam & Co. (Bombay High Court) Appeal Number: Income Haji Adam & Co. (Bombay High Court) Appeal Number: Income Tax AppealNo.1004 of 2016, observed as under:

“8 In the present case, as noted above, the assessee 8 In the present case, as noted above, the assessee 8 In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were trader of fabrics. The A.O. found three entities who were trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the indulging in bogus billing activities. A.O. found that the indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were purchases made by the assessee from these entities were purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such bogus. This being a finding of fact, we have proceeded on such bogus. This being a finding of fact, we have proceeded on such basis. Despit basis. Despite this, the question arises whether the Revenue is e this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be correct in contending that the entire purchase amount should be correct in contending that the entire purchase amount should be added by way of assessee’s additional income or the assessee added by way of assessee’s additional income or the assessee added by way of assessee’s additional income or the assessee is correct in contending that such logic cannot be applied. The is correct in contending that such logic cannot be applied. The is correct in contending that such logic cannot be applied. The finding of the C finding of the CIT(A) and the Tribunal would suggest that the IT(A) and the Tribunal would suggest that the department had not disputed the assessee’s sales. There was department had not disputed the assessee’s sales. There was department had not disputed the assessee’s sales. There was no discrepancy between the purchases shown by the assessee no discrepancy between the purchases shown by the assessee no discrepancy between the purchases shown by the assessee and the sales declared. That being the position, the Tribunal and the sales declared. That being the position, the Tribunal and the sales declared. That being the position, the Tribunal was correct in coming to the was correct in coming to the conclusion that the purchases conclusion that the purchases cannot be rejected without disturbing the sales in case of a cannot be rejected without disturbing the sales in case of a cannot be rejected without disturbing the sales in case of a trader. The Tribunal, therefore, correctly restricted the additions trader. The Tribunal, therefore, correctly restricted the additions trader. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at limited to the extent of bringing the G.P. rate on purchases at limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine pu the same rate of other genuine purchases. The decision of the rchases. The decision of the Gujarat High Court in the case of N.K. Industries Ltd. (supra) Gujarat High Court in the case of N.K. Industries Ltd. (supra) Gujarat High Court in the case of N.K. Industries Ltd. (supra) cannot be applied without reference to the facts. In fact in cannot be applied without reference to the facts. In fact in cannot be applied without reference to the facts. In fact in paragraph 8 of the same Judgment the Court held and paragraph 8 of the same Judgment the Court held and paragraph 8 of the same Judgment the Court held and observed as under observed as under-

Silmohan Gems Pvt. Ltd. 11 & 449 and 471 & 472/Mum/2023 ITA No. 450 & 449 and 471 & 472/Mum/2023

“So far as the question regardi “So far as the question regarding addition of Rs.3,70,78,125/ ng addition of Rs.3,70,78,125/- as gross profit on sales of Rs.37.08 Crores made by the as gross profit on sales of Rs.37.08 Crores made by the as gross profit on sales of Rs.37.08 Crores made by the Assessing Officer despite the fact that the said sales had Assessing Officer despite the fact that the said sales had Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial admittedly been recorded in the regular books during Financial admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view 98 is concerned, we are of the view that the 98 is concerned, we are of the view assessee cannot be punished since sale price is accepted by assessee cannot be punished since sale price is accepted by assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6 % gross profit is taken into the revenue. Therefore, even if 6 % gross profit is taken into the revenue. Therefore, even if 6 % gross profit is taken into account, the corresponding cost price is required to be deducted account, the corresponding cost price is required to be deducted account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to redu and tax cannot be levied on the same price. We have to redu and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit comes to the selling price accordingly as a result of which profit comes to the selling price accordingly as a result of which profit comes to 5.66 %. Therefore, considering 5.66 % of Rs.3,70,78,125/ 5.66 %. Therefore, considering 5.66 % of Rs.3,70,78,125/ 5.66 %. Therefore, considering 5.66 % of Rs.3,70,78,125/- which comes to Rs.20,98,621.88 we think it fit to direct the which comes to Rs.20,98,621.88 we think it fit to direct the which comes to Rs.20,98,621.88 we think it fit to direct the revenue to add Rs.20,98,621.88 as gross profit and make revenue to add Rs.20,98,621.88 as gross profit and make revenue to add Rs.20,98,621.88 as gross profit and make necessary de necessary deductions accordingly. Accordingly, the said ductions accordingly. Accordingly, the said question is answered partially in favour of the assessee and question is answered partially in favour of the assessee and question is answered partially in favour of the assessee and partially in favour of the revenue. partially in favour of the revenue.” 9.1 Thus, the Hon’ble High Court Thus, the Hon’ble High Court held it appropriate to make appropriate to make addition for the benefit assessee has obtained by way of making addition for the benefit assessee has obtained by way addition for the benefit assessee has obtained by way purchases in cash from the market and for which a reasonable purchases in cash from the market and for which a reasonable purchases in cash from the market and for which a reasonable amount of addition could have been made. In the case of the amount of addition could have been made. In the case of the amount of addition could have been made. In the case of the assessee also the Ld. CIT(A) has made addition on the reasonable assessee also the Ld. CIT(A) has made addition on the reasonable assessee also the Ld. CIT(A) has made addition on the reasonable estimate basis @ 5 % of bogus purchase, @ 5 % of bogus purchase, which in our opinio which in our opinion is justified. The ratio in the case of N.K. Proteins Ltd.(supra) is not justified. The ratio in the case of N.K. Proteins Ltd. justified. The ratio in the case of N.K. Proteins Ltd. applicable in the case of the assessee as assessee has produced the applicable in the case of the assessee as assessee has produced the applicable in the case of the assessee as assessee has produced the stock registers to substantiate that amount of goods corresponding stock registers to substantiate that amount of goods corresponding stock registers to substantiate that amount of goods corresponding to the bills were duly entered in the stock reg duly entered in the stock reg duly entered in the stock register and after manufacturing same have been sold. In our opinion, the finding of manufacturing same have been sold. In our opinion, the finding of manufacturing same have been sold. In our opinion, the finding of the Ld. CIT(A) on the issue in dispute is justified and we accordingly the Ld. CIT(A) on the issue in dispute is justified and we accordingly the Ld. CIT(A) on the issue in dispute is justified and we accordingly uphold the same. The grounds No. 1 and 2 of the appeal of the uphold the same. The grounds No. 1 and 2 of the appeal of the uphold the same. The grounds No. 1 and 2 of the appeal of the Revenue are accordingly dismissed. The gr Revenue are accordingly dismissed. The grounds of the assessee ounds of the assessee

Silmohan Gems Pvt. Ltd. 12 & 449 and 471 & 472/Mum/2023 ITA No. 450 & 449 and 471 & 472/Mum/2023 related to the issue of the bogus purchases are also dismissed related to the issue of the bogus purchases are also dismissed related to the issue of the bogus purchases are also dismissed accordingly.

“5. The next contention is disallowance of cash commission ext contention is disallowance of cash commission ext contention is disallowance of cash commission u/s.40A(3) of Rs.848660/ u/s.40A(3) of Rs.848660/-. In the assessment order, it is . In the assessment order, it is mentioned that it was admitted by ShriBhanwarlal Jain in mentioned that it was admitted by ShriBhanwarlal Jain in mentioned that it was admitted by ShriBhanwarlal Jain in the statement recorded during the search proceedings that the statement recorded during the search proceedings that the statement recorded during the search proceedings that bogus purchase providers charge a bogus purchase providers charge a commission @ 3% from commission @ 3% from the party seeking such entries. Considering the fact that the the party seeking such entries. Considering the fact that the the party seeking such entries. Considering the fact that the expense incurred in cash, the assessing officer has added expense incurred in cash, the assessing officer has added expense incurred in cash, the assessing officer has added back the commission @ 3% of purchases. In the present case, back the commission @ 3% of purchases. In the present case, back the commission @ 3% of purchases. In the present case, the order of the assessing officer by observing that t the order of the assessing officer by observing that t the order of the assessing officer by observing that the payment in cash exceeding the limit specified us.40A(3) of payment in cash exceeding the limit specified us.40A(3) of payment in cash exceeding the limit specified us.40A(3) of the Act, can only be allowed if the assessee could establish the Act, can only be allowed if the assessee could establish the Act, can only be allowed if the assessee could establish the unavoidable circumstances necessitating the payments the unavoidable circumstances necessitating the payments the unavoidable circumstances necessitating the payments in cash. However, nothing has been done by the assessee to in cash. However, nothing has been done by the assessee to in cash. However, nothing has been done by the assessee to prove that there prove that there were practical difficulties and unavoidable were practical difficulties and unavoidable circumstance under which the payments were made in cash circumstance under which the payments were made in cash circumstance under which the payments were made in cash and covered under Rule 6DD. The appellant in the present and covered under Rule 6DD. The appellant in the present and covered under Rule 6DD. The appellant in the present case has not discharged the primary onus castupon it to case has not discharged the primary onus castupon it to case has not discharged the primary onus castupon it to substantiate the claim. The natural presump substantiate the claim. The natural presumption as per tion as per

Silmohan Gems Pvt. Ltd. 13 & 449 and 471 & 472/Mum/2023 ITA No. 450 & 449 and 471 & 472/Mum/2023 IndianEvidence Act thus goes against the appellant. In view IndianEvidence Act thus goes against the appellant. In view IndianEvidence Act thus goes against the appellant. In view of the above, the undersigned is unable to persuade self to of the above, the undersigned is unable to persuade self to of the above, the undersigned is unable to persuade self to interferewith the A's decision with respect to the addition on interferewith the A's decision with respect to the addition on interferewith the A's decision with respect to the addition on merits as well. Thus, the grounds for the appellant fail. merits as well. Thus, the grounds for the appellant fail. merits as well. Thus, the grounds for the appellant fail.”

13. The grounds raised in cross appeals by the assessee and The grounds raised in cross appeals by the assessee and The grounds raised in cross appeals by the assessee and Revenue for assessment year 2013 Revenue for assessment year 2013-14 are identical and therefore, 14 are identical and therefore, following our finding in cross appeals for assessment year 2012-13. following our finding in cross appeals for assessment year 2012 following our finding in cross appeals for assessment year 2012 The grounds in assessment year 2013 grounds in assessment year 2013-14 are deci 14 are decided mutatis mutandis.

Silmohan Gems Pvt. Ltd. 14 & 449 and 471 & 472/Mum/2023 ITA No. 450 & 449 and 471 & 472/Mum/2023