SHAIL INTERNATIONAL ,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 19(3), MUMBAI

Per contra Ld. DR representing the Revenue submitted as under. The reassessment proceedings were triggered by search, based on Investigation wing material revealing a largescale accommodation entry racket in the diamond trade. The assessee was found to be one of the beneficiaries who had sourced goods from the grey marked while booking bills from Bhawarlal Jain Group concerns. Both the AO and the Ld. CIT(A) have sustained this finding on the basis of cogent evidence and have taxed only the embedded profit element, the rate of which has been judiciously fixed by the appellate authority. The additions are thus legally and factually sustainable.

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Revenue’s Prayer: In view of the above facts and legal position, the Revenue respectfully prays that the Hon’ble Tribunal may be pleased to dismiss the assessee’s appeal and uphold the order of the Ld. CIT(A), NFAC sustaining the addition of Rs. 17,24,626/-. 10. We have considered the rival submissions, perused the material available on record and the decisions/case laws referred to and relied upon. Admittedly the addition in present case have been made on account of bogus purchases and profit on such transaction was estimated at 5 % by the AO which was further enhanced by the CIT(A) to 6 %. On perusal of the Assessment order it can be seen that the sales/turnover of the Assessee has not been disturbed by the AO, only the GP has been estimated on the alleged bogus transactions. Similar issue has been dealt with by the Tribunal in the case of Arham Star (Supra) wherein the gross profit on the alleged purchases which are shown at rate of 4.724% on the undisputed purchases was taken as the benchmark and the difference between the GP percent of bogus purchases which was 4.566% and GP percent on undisputed purchases for 4.724% was taken as the amount to be added to the income of Assessee.In present case as the Assessing Officer has made an addition of 5%, which is enhanced and confirmed to 6% by the Ld. CIT(A), whereas the Assessee had already declared a profit of 8.48% on the alleged bogus purchasesagainst the GP ratio of 8.18% on normal transactions, which is a fact emerging from submissions of the assessee in the order of Ld. CIT(A), though has not been commented upon by the ld. CIT(A). Further, the profit ratio 1 to 3 % has been recommended by the Task Force report of Government of India, whereas,the Assessee had already shown a higher percent of GP at 8.84%, therefore, no further addition on account of estimation can be made. This view is fortified by the decisions of Hon’ble Jurisdictional High Court in the case of PCIT v. Mohammed Haji Adam & Co.

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(2019) 103 taxmann.com 459 (Bombay) and PCIT v. Dhondiram Naryan Limbhore (2023) 153 taxmann.com 539 (Bombay). 11. In view of aforesaid deliberations, facts and circumstances of the present case we are of the considered opinion that, once the Assessee had already declared a GP ratio of 8.84% on the alleged bogus purchases, no further addition is warranted. Accordingly, the addition made by the AO and confirm by the CIT(A) are liable to be set aside subject to verification of GP already offered for taxation by the assessee by the ld. AO. 12. Since, the substantive quantum addition in the present appeal has been directed to be deleted by us, in terms of our aforesaid observations, therefore, the other contentions, if any, raised by the Assessee in present appeal remains academic only, therefore, are not adjudicated separately. 13. The facts and circumstances of ITA no. 4428/Mum/2025 for the Assessment Year 2011-12 are at parity with the ITA no. 3268/Mum/2025, therefore, our decision in ITA no. 3268/Mum/2025 shall apply mutatis mutandis to the appeal for Assessment Year 2011-12 also accordingly, the addition made by the AO at 5%,whereas the Assessee had declared the GP at 4.95%.We direct to recompute the estimated addition based on GP%, following the principles as per decision of Hon’ble Bombay High Court in the case of PCIT v. Mohammed Haji Adam & Co. (2019) 103 taxmann.com 459 (Bombay). Consequently, if the profit already shown on the transaction earmarked as bogus is higher than the normal/genuine transactions,no further addition is made, but in a case inverse the difference of GP% between normal and bogus transactions would be the estimated addition on the amount of bogus purchases. Accordingly, the substantive addition made for the year 2011-12 is directed to re-workout.

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Assessee is directed to furnish necessary information before the ld. AO in set aside proceedings. 14. In result ITA no. 3268/Mum/2025 and ITA no. 4428/Mum/2025 filed by the Assessee are allowed / allowed for statistical purposes in terms of our aforesaid observations.

Order pronounced in the open court on 05.05.2026

Sd/- Sd/- (BEENA PILLAI) (ARUN KHODPIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 05/05/2026 Ankit, PS आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Assessee ��थ� / The Respondent. 2. संबंिधत आयकर आयु� / The CIT(A) 3. आयकर आयु�(अपील) / Concerned CIT 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण,मु�बई/ DR, ITAT, Mumbai 5. गाड� फाईल / Guard file. 6. आदेशानुसार/BY ORDER, स�ािपत �ित //True Copy//

उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु�बई / ITAT, Mumbai