BHAKATI ENTERPRISES,MUMBAI vs. ACIT 30(1)(1), MUMBAI

आदेश / O R D E R PER M. BALAGANESH (A.M):

7150/Mum/2019 M/s. Bhakti Enterprises

4.1. We have heard ld. DR and perused the materials available on record. We find that assessee is a partnership firm engaged in the business of trading in rough and polished diamonds. The return of income for the A.Y.2013-14 had been filed by the assessee on 20/09/2013 declaring total income of Rs.32,35,610/- which was duly processed u/s.143(1) of the Act. Subsequently, based on information received from DGIT (Investigation) Mumbai that assessee firm was involved in bogus transactions amounting to Rs.5,16,21,489/- which constituted tangible material on record to suggest that the assessee had not disclosed true and correct particulars of income, the assessment for the A.Y.2013-14

7150/Mum/2019 M/s. Bhakti Enterprises was sought to be reopened by the ld. AO by issuance of notice u/s.148 of the Act on 16/03/2015. In response thereto, the assessee vide letter dated 06/04/2015, submitted that the return filed for A.Y.2013-14 already may be treated as a return filed in response to notice u/s.148 of the Act. The reasons recorded for reopening the assessment were also provided to the assessee. The ld. AO observed that assessee is one of the beneficiaries operated and controlled by Shri Sanjay Choudhary group. Based on the information gathered from DGIT (Investigation) Mumbai that Sanjay Choudhary group persons had floated various companies which are engaged in the business of providing accommodation entries in the form of bogus unsecured loans, bogus purchases, bogus capital gains and since assessee also was one of the beneficiaries by obtaining bogus purchases to the tune of Rs.5,16,21,489/-, the assessment was validly reopened in the case of the assessee. Admittedly this information was obtained by the ld AO based on search and seizure action carried out in the case of Shri Sanjay Choudhary group wherein it was found that the said group was engaged in providing accommodation entries without actual supply of goods, which had ultimately triggered the reopening of assessment in the case of the assessee. We find that the ld. CIT(A) had observed in para 4.1.1 of his order that from the information so received, the assessee’s name appeared in the list of beneficiaries who had taken accommodation entries. Obviously this would result in formation of belief in the mind of the Assessing Officer that income of the assessee had escaped the assessment as the said information constituted tangible material. We find that the ld. CIT(A) had also placed reliance on the decision of the Hon’ble Gujarat High Court in the case of Peass Industrial Engineers Pvt. Ltd., vs. DCIT reported in 72 Taxmann.com 302 in support of its contentions, while upholding the validity of reopening. Hence, we do not find any infirmity in the order of the ld. CIT(A) upholding the 7150/Mum/2019 M/s. Bhakti Enterprises validity of reopening of the assessment in the instant case. Accordingly, the ground No.1 raised by the assessee for both the years is hereby dismissed.

5.1. We have heard ld. DR and perused the material available on record as stated earlier. The ld. AO observed that assessee has made purchases from three parties amounting to Rs.5,16,21,489/- as under:-

AADI - Rs.2,18,77,866/- KALASH - Rs.2,46,99,937/- SPARSH - Rs.50,43,686/- ========== TOTAL Rs.5,16,21,489/- ========== 5.2. During the course of assessment proceedings, assessee was asked to prove the genuineness of the purchases made from aforesaid parties. The assessee merely replied that purchases made from aforesaid parties have been duly accounted for its books of accounts and the payments for the same have been made by account payee cheques. The ld. AO issued summons u/s. 131 of the Act on 29/02/2016 to all the parties which remained unresponded by the parties. However, the parties had sent the ledger extracts, bank statement, copy of confirmation etc., which they had already stated as bogus while giving statements u/s.132(4) of the Act during the course of search proceedings in the case of Shri Sanjay Choudhary group. The assessee had also furnished stock register, custom appraisal report in respect of export together with bank statement

7150/Mum/2019 M/s. Bhakti Enterprises evidencing the payments made to suppliers by account payee cheques. The ld. AO however, observed that delivery challans were not furnished by the assessee and since the stock statement furnished by the assessee contain the purchases made from aforesaid parties together with the details of corresponding sales made thereof, the ld. AO concluded that assessee could have made purchases from grey market in order to have savings in indirect taxes and accordingly, estimated the profit percentage embedded in the value of such disputed purchases at 4% and proceeded to make an addition of Rs.20,64,860/- (Rs.5,16,21,489 x 4%) in the assessment. This action of the ld. AO was upheld by the ld. CIT(A).

5.3. We find that in the instant case, the sales made by the assessee within the disputed purchases had not been doubted by the Revenue. Hence, it could be safely concluded that assessee could have made purchases from grey market in order to have some savings in indirect taxes and incidental profit element thereon by making cash purchases. Hence, it would be just and fair to bring to tax only profit element embedded in the value of such disputed purchases. We find based on the report of the task group for diamond sector published by the Government of India, Ministry of Commerce and Industry, in this regard, wherein the benign / presumptive taxation threshold was set at 2.5%. We hold that profit percentage embedded in the value of disputed purchases estimated at 2.5% thereon, would meet the ends of justice. The ld. AO is directed accordingly.

7150/Mum/2019 M/s. Bhakti Enterprises

Order pronounced on 19/07/2021 by way of proper mentioning in the notice board.