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Income Tax Appellate Tribunal, “SMC” Bench, Mumbai
The assessee has filed this appeal challenging the order dated 30.5.2022 passed by learned CIT(A), National Faceless Appeal Centre, Delhi and it relates to A.Y. 2011-12. The assessee is aggrieved by the decision of learned CIT(A) in confirming the addition of alleged bogus purchases made from M/s. Krishna Diam.
The Learned AR submitted that the assessee has purchased diamonds from M/s. Krishna Diam to the tune of Rs.11,64,066/- and the said concern belonged to M/s Guatam Jain Group. Search action was conducted in the hand of Gautam Jain group and during the course of search it was found that the said group has not carried out any real business activity and was providing only accommodation entries. Based on the above said information, the Assessing Officer treated purchase amount of Rs. 11,64,066/- as bogus
2 Navinchand Amarchand Shrimal purchase and added the same to the total income of the assessee. The Learned CIT(A) also confirmed the same.
The Learned AR submitted that the assessee has maintained stock register and purchases made from M/s. Krishna Diam has actually been sold. Hence the Assessing Officer was not justified in assessing the entire purchases as income of the assessee, when he has accepted the sales. The Learned AR further placed reliance on the decision rendered by Hon'ble Bombay High Court in the case of M/s. Mohommad Haji Adam & Company (ITA No.1004 of 2016 dated 11.2.2019) and submitted that the Hon'ble High Court has upheld the view taken by the Tribunal that the addition should be restricted to the extent of gross profit computed on the alleged bogus purchases by adopting same gross profit rate declared in other genuine purchases. The Learned AR submitted that the gross profit rate declared on the sale of diamonds purchased from M/s Krishna Diam was more than the gross profit rate declared in other genuine purchases. Accordingly, he submitted that the disallowance made by AO should be deleted.
The Learned DR on the contrary supported the order passed by learned CIT(A). Alternatively, he submitted that the submissions made by the assessee with regard to working of gross profit requires verification at the end of AO.
We have heard the rival contentions and perused the record. It is the submission of the assessee that the assessee has maintained stock register and diamonds purchased from M/s. Krishna Diam has been sold. The Learned AR submitted that the relevant sales could be linked with the purchases made from M/s. Krishna Diam. According to Ld A.R, the gross profit rate declared on the sale of diamonds purchased from M/s Krishna Diam was more than the gross profit rate declared in other genuine purchases. By placing reliance on the decision rendered by Hon’ble Bombay
3 Navinchand Amarchand Shrimal High Court (referred supra), the Ld A.R has contended that no addition is called for. However, as rightly pointed out by Ld D.R, the workings furnished by the assessee requires verification at the end of AO.
Under these set of facts, we are of the view that the decision rendered by Hon'ble Bombay High Court in the case of M/s. Mohommad Haji Adam & Company (supra) should be applied to the facts of the present case. Accordingly, we set aside the order passed by learned CIT(A) and restore the issue of making any addition, if any, to the file of the Assessing Officer for the limited purpose of verifying the workings of gross profit rate furnished by the assessee and deciding the issue following the decision of Hon'ble Bombay High Court referred (supra).
The assessee has also raised ground relating to the validity of reopening of the assessment. At the time of hearing learned AR did not press the same.
In the result, appeal filed by the assessee is treated as allowed. 8. Order pronounced in the open court on 25.08.2022.