DCIT 19 1 MUMBAI, MUMBAI vs. OOPAL DIAMOND, MUMBAI

The aforesaid appeals pertain to same assessee, having identical facts, circumstances and issues, thus for the sake of brevity, are heard together and decided under this consolidated order.

First, we shall be taking the appeal of assessee for AY 2008-09 in ITA No.352/Mum/2026 wherein the assessee has raised following grounds of appeal: “1. On the facts and circumstances of the case and law, the Ld CIT(A) erred in confirming the action of Ld AO in charging interest under section 234B of the Income Tax Act, 1961. 2. On the facts and circumstances of the case and law, the Ld CIT(A) erred in confirming the action of Ld AO in initiating penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961. 3. Appellant craves leave to add further grounds OR to amend OR 3 alter the existing grounds of appeal on OR before the date of hearing. 4. On the facts and circumstances of the case and law, the Ld. CT(A) erred in confirming the action of Ld AO of initiating reassessment proceeding under section 147 of Income Tax Act, 1961 which is bad in law and require to be quashed. 5. On the facts and circumstances of the case and law, the Ld CIT(A) failed to appreciate that entire reassessment proceedings are invalid and bad in law ab initio as apart from information received from the DGIT (Inv), no other material was available with Ld. AO to form an opinion that income has escaped assessment. 6. On the facts and circumstances of the case and law, the Ld CIT(A) failed to consider that proceedings conducted under provision of section 147 of Income Tax Act, 1961 instead of section 153C of the Income Tax Act, 1961 is bad in law as the basis of 2

In AY 2008-09, the Revenue is also in appeal vide Appeal No.2451/Mum/2026 raising the following grounds of appeal: “1. Whether, on the facts and in the circumstances of the case and in law, the Ld. CITYA) was justified in restricting the addition from 5% (ie. Rs. 8,31,781/- of the alleged bogus purchases of Rs. 1,66,35,622/-) to 3%, when credible information. received from DGIT(Inv.) Mumbai, clearly established the assessee's involvement in obtaining accommodation entries ?” 2 "Whether, on the facts and in the circumstances of the case and in law, the Ld. CITIA) while deciding the appeal has erred in ignoring the fact that action of Assessing Officer was based on the information & discreet report of the DGIT (Investigation Wing) Mumbai, who has proved beyond doubt with the evidences & recorded statements of Mr. Bhanwarlal Jain that M/s. Nice Diamonds, was one of the paper company out of many concerns, managed & controlled with a sole purpose of providing accommodation entries of bogus purchases/sales & loans and the assessee firm was found to be one of beneficiary who has obtained accommodation entries of bogus purchases of diamonds without actual delivery and this transaction were undertaken to generate paper tail only ?" 3. "Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has not appreciated the fact that during the Search operations conducted at the premises of Bhanwarlal Jain and its groups, no stock of diamonds or related materials pertaining to business was found and during the re-assessment proceedings and also the assessee has also failed to prove genuineness and creditworthiness of transactions as well as party vindication, by not producing any documents/evidences/delivery challans, stock registers etc. before Assessing officer." 4. "Whether on the facts and in the circumstances of the case and in law, the Ld. CITIA) has ignored that even during the Re-assessment Proceedings, the assessee could neither produce the quantity tally of day to day purchases, Sales, Stocks, Delivery Challans and corresponding values nor could produce the parties for

Brief facts of the case are, that the assessee has filed its return of income for AY 2008-09 on 19.09.2008, declaring total income of Rs.34,62,580/-. Subsequently, the case was re-opened u/s 147/148. Accordingly, notice u/s

Being aggrieved, the assessee preferred an appeal before the Ld. CIT(A), wherein Ld. CIT(A) was convinced with the submissions of the assessee who referred to the report of Task Force for Diamond Sector constituted by the Ministry of Commerce and Industry after considering the BAP (Benign Assessment Procedure) scheme, the Task Force recommended that the net profit 5

Since the Ld. CIT(A) has granted part relief to the assessee, the Department is in appeal before us, whereas the assessee is in appeal to challenge the validity of proceedings u/s 147 on account of its legality, borrowed satisfaction, initiation of proceedings u/s 147 instead of u/s 143C of the Act. The restriction of addition to 3% without mentioning any provision of the Act by Ld. CIT(A) to establish that the transactions are genuine and the addition made on the alleged bogus purchase was passed on suspicion, surmises, conjectures despite the relevant documents in support of the genuineness of the purchases, have been filed before the Authorities.

At the outset, Ld. Counsel of the assessee submitted that the issue herein is squarely covered by the assessee’s own case for AY 2010-11, 2011-12 and 2013- 14 in ITA No.1499, 1500 and 1501/Mum/2020 vide order dated 26.10.2022, wherein the identical issue has been decided by the Tribunal by dismissing the appeal of the assessee considering the decision of Ld. CIT(A) to be justified in estimating the profit percentage at 3%, which was not disturbed by the Hon’ble Tribunal and therefore, the estimation of 3% was considered to be reasonable,

Per contra, Ld. DR vehemently supported the orders of Revenue Authorities.

We have considered the rival submissions, perused the material available on record and the decision relied upon by the assessee. In the facts and circumstances of the present case which is identical to the cases referred to by the assessee, we find that the Ld. Assessing Officers have taken/adopted different stands in the case of assessee for different AYs. There is no dispute that the assessee’s books of accounts are not rejected, also the stock / quantitative details furnished by the assessee are not inferred adversely. While the returned income of the assessee emerging from the books of accounts, having arrived at considering the sales connected with the alleged purchases are accepted by the Ld. AO, even if the alleged transactions are considered to be bogus which apparently seems so, only the profit element embedded in such purchases would be liable to be treated as income.

It is also relevant fact that the Revenue has not brought on record any contrary evidence to show that the actual transactions of sale which were supported by corroborative evidence by the assessee had not taken place. It can therefore be contemplated that if the assessee has taken accommodation bills for 7

On a careful perusal of the material available on record and on analysis of the judicial precedents relied upon by the assessee, in absence of any adverse finding towards the discrepancies in the books of accounts of the assessee and quantities sold by the assessee while the purchases are also undertaken by making payments through proper banking channel, the allegation of the Ld. AO gave rise to suspicion. Therefore, we are of the considered view that the entire purchase amount cannot be disallowed instead the profit embedded on account of alleged bogus purchases can be brought to tax which the Ld. CIT(A) has rightly adjudicated in the present case and accordingly, the percentage of profit is decided at 3% which is consistently done by the Ld. CIT(A) for AYs 2008-09, 2009-10, 2010-11 and 2011-12 and the same has been approved by the Tribunal vide order dated 26.10.2022 in assessee’s own case for AYs 2009-10, 2010-11 and 2011-12.

In the absence of any distinguishing facts, circumstances or material having been brought on record for A.Y. 2008-09 so as to warrant a different view from that taken in the assessee’s cases for A.Ys. 2009-10, 2010-11 and 2011-12, we find no infirmity in the approach adopted by the Ld. CIT(A) in estimating the profit element embedded in the alleged bogus purchases at 3% thereof. The said

In result, we uphold the order of Ld. CIT(A) and accordingly, the contentions of the Revenue against the said order stands dismissed. The appeal of assessee challenging the legal aspects or on merits is also disposed of in terms of our aforesaid findings hereinabove and therefore stands addressed.

In result, the appeal of Assessee as well as Revenue for AY 2008-09 stands dismissed, in terms of our aforesaid observations.

The assessee has challenged the disallowance made by the Ld. Assessing Officer under section 69C of the Act in respect of the alleged bogus purchases aggregating to ₹12,02,61,206/-, stated to have been made from the same parties and arising under identical transactions facts and circumstances, as were there in the earlier years. However, the entire amount of such purchases, as disallowed by the Ld. Assessing Officer, has been sustained in entirety by the Ld. CIT(A).

Accordingly, respectfully following the decisions of the Co-ordinate Bench in the assessee’s own case for A.Ys. 2009-10, 2010-11 and 2011-12, and further following our findings recorded in the aforesaid appeals for A.Y. 2008- 09, the same shall apply mutatis mutandis to the present appeal for A.Y. 2012-13. Consequently, the order of the Ld. CIT(A), sustaining the entire disallowance, is set aside and the Ld. Assessing Officer is directed to restrict the addition in respect of the alleged bogus purchases to 3% of the amount of such purchases. The grounds raised by the assessee are, accordingly, allowed in the aforesaid terms.

In result, the appeal of assessee for AY 2012-13 is partly allowed.