M/S POLAR JEWELLERY,MUMBAI vs. ITO 23 (2)(5), MUMBAI

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ITA 6845/MUM/2019Status: DisposedITAT Mumbai16 December 2021AY 2012-134 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal, following its decision for the earlier assessment year, restricted the disallowance on non-genuine purchases to 3%. This was based on the understanding of profit margins in the diamond industry and the report of a task group.

What were the facts?

The assessee, a diamond trading firm, was found to have received accommodation bills amounting to Rs. 1,64,37,350/- from certain parties. The Assessing Officer treated the entire purchases as non-genuine and made an addition. The CIT(A) partly allowed the appeal.

What were the issues?

The primary issue was the extent of disallowance for non-genuine purchases when the sales were accepted. The Tribunal considered the profit margins in the industry to determine a reasonable disallowance.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 133(6),Section 131(1),Section 143(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI

Before: MS. SUCHITRA RAGHUNATH KAMBLE & SHRI PRASHANT MAHARISHI

For Appellant: Shri Rahul Sarda, A.R
For Respondent: Shri Ashish Kumar, D.R
Hearing: 16/12/2021Pronounced: 16/12/2021

PAN No. AAGFP9757M (Assessee) (Revenue) Assessee by : Shri Rahul Sarda, A.R Revenue by : Shri Ashish Kumar, D.R Date of Hearing : 16/12/2021 Date of pronouncement : 16/12/2021 ORDER PER SUCHITRA RAGHUNATH KAMBLE, J.M:

This appeal is filed by the assessee against the order dated 27.09.2019 passed by the CIT(A)-33, Mumbai, for A.Y. 2012-13. The assessee has raised the following grounds before us:

“1. The CIT(Appeals) has erred in law by making an addition of Rs.41,09,338/- which constitutes 25% of the alleged bogus purchases of Rs.1,64,37,350/-. 2. The appellant craves leave to add, amend, delete or alter any grounds of appeal on or before the hearing of this appeal.”

2.

The assessee is a partnership firm engaged in the business of import, export resale manufacturing of diamonds. During the year, the assessee booked a total turnover of Rs.336.19 lacs and declared a gross profit of Rs.39.11 lacs. The assessee filed return of income on 31.08.2012 declaring total income at Rs.6,55,370/-. The return was processed u/s 143(1) of the Income Tax Act. The 2 M/s Polar Jewellery Vs. The ITO-23(2)(5)

case was reopened u/s 147 of the Income Tax Act vide notice u/s 148 dated 17.11.2014 on the receipt of information in respect of search and seizure action carried out by the DIT(Inv.)-II, Mumbai, in the case of Shri Bhanwerlal Jain Group on 03.10.2013 wherein findings based on evidences collected show that the assessee had received accommodation bills to the extent of Rs.1,64,37,350/- from M/s Prime Star and M/s Mayur Exports which were termed as benami concerns controlled by Shri Jain. The Assessing Officer observed that the list of 70 such concerns admitted by Shri Jain. The assessee never denied transactions with the hawala parties nor asked for cross-examination as per the observations of the Assessing Officer. Notice u/s 133(6), 131(1) were issued to the said parties. They have filed confirmations followed by an affidavit from the directors/owners of Bhanwerlal Jain Group. The assessing officer made an addition of Rs.1,64,37,350/- treating the entire purchases as non-genuine purchases.

3.

Being aggrieved by the assessment order the asesssee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

4.

The ld. A.R submitted that the issue is identical to the earlier assessment year i.e. assessment year 2011-12, the Tribunal being ITA 5002/Mum/2019 has partly allowed the appeal of the assessee. The ld. A.R further submitted that purely on the basis of information obtained in the search and seizure action the assessing officer treated the purchases as non-genuine but at the same time te Assessing Officer has accepted the sale of the assessee. The ld. A.R submitted that the disallowance should be restricted to 3% as regards to non-genuine purchases as held in various coordinate benches decision as well as in assessee’s case for A.Y. 2011-12.

3 M/s Polar Jewellery Vs. The ITO-23(2)(5)

5.

The ld. D.R relied upon the assessment order and the order of the CIT(A). The ld. D.R further submitted the disallowance made at 5% is a proper disallowance.

6.

We have heard both the parties and perused all the material available on record. It is pertinent to note for A.Y. 2011-12 in assessee’s own case the Tribunal has taken disallowance at 3% for the non-genuine purchases thereby taking cognizance of the report of task group in diamond sector under the aegis of Ministry of Commerce & Industry, Department of Commerce, Government of India, New Delhi in the year 2013, and observed that the rate of 6% so fixed is known whether reflective of the reality of the manufacturing and trading industry which operates on profit margin in the range of 1% to 3% only. No distinguishing facts were pointed out either by the ld. A.R or by the D.R in the present assessment year to that of earlier assessment year. Thus, following the decision of the Tribunal in assessee’s own case for earlier assessment year, we are also restricting the disallowance @ 3%. The appeal of the assessee is partly allowed.

7.

In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 16.12.2021

Sd/- Sd/- (Prashant Maharishi) (Suchitra Raghunath Kamble) Accountant Member Judicial Member Place: Mumbai Date 16.12.2021 PS. Rohit आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. 6. गार्ड फाईल / Guard file.

4 M/s Polar Jewellery Vs. The ITO-23(2)(5)

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