ACIT, MUMBAI vs. RAMCHANDRA KESHAV AND COMPANY, MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER;

The learned Senior Departmental Representative (ld. Sr. DR) for the revenue submits that assessment in case of assessee was completed under section143(3) rws 147 on 30.12.2017. The assessing officer while passing the assessment order made addition by disallowing certain purchases shown from Rajendra Jain and others. On Rajendra Jain and others, a search action was carried out by Investigation Wing on 03.10.2013 wherein it was found that Rajendra Jain and his associate were indulging in providing accommodation entry. During search action it was conclusively proved that Rajinder Jain was proving accommodation entry through various entity managed by his associates or family members. The assessee has shown purchases of diamonds from Aadi Impex, which was managed by Rajendra Jain and his associate. Aadi Impex was used for providing accommodation entry. The assessing officer on the basis of report of Investigation Wing made addition by disallowing 100% of purchases shown from Aadi Impex. Though, the assessee made his claim before assessing officer by showing purchase and sale register, and invoices and claimed that payments were made through banking channel. However, fact remains the same that department was having sufficient material to prove that purchases shown from Aadi Impex is nothing but accommodation entry to inflate the expenses. The ld CIT(A) restricted such disallowances to the extent of 12.50% only. The ld SR DR for the revenue prayed to restore the additions made by assessing officer and to reverse the finding of ld CIT(A).

The payments of purchases were made through banking transaction. The assessing officer has not examined, if sale consideration paid by assessee was returned back in circular transaction or not. Similarly, the sale of assessee was not disputed. Thus, in such circumstances when the assessee has discharged his primary onus to prove the purchases, the assessing officer is not justified in making 100% disallowance, without bringing adverse material. I find that ld. CIT(A) restricted the addition to the extent of 12.5% of the purchase expenditure shown against purchases from Aadi Impex. The ld. CIT(A) also relied on the decision of Hon’ble Jurisdictional High Court in PCIT vs Mohammad Haji Adam & Co. (2019) 103 taxmann.com 459 (Bombay). I find that order of ld. CIT(A) in restricting the addition to the extent of 12.5%, is reasonable and sufficient to avoid the possibility of revenue leakage on such disputed purchases. I have independently examined the facts of the case and find that once, the assessee has given evidence to substantiate the expenses of purchase, the assessing officer was under obligation to at least examine such evidences. Thus, I do not find any reason to interfere with the finding of ld. CIT(A). No contrary facts or law is brought to my notice to take other view. In the result, grounds of appeal of revenue are dismissed.