KETVAL GEMS,MUMBAI vs. ITO-21(2)(1), MUMBAI

The dispute in the present appeal is confined to disallowance/addition of Rs. 4,23,491/- on account of alleged non-genuine purchases.

Briefly the facts are, the assessee, a partnership firm, is engaged in manufacturing, processing and export of diamonds. For the assessment year under dispute, assessee filed his return of income on 16.09.2008 declaring total income of Rs. 6,26,060/-. Subsequently, the assessing officer (AO) received information from DGIT (Inv.) that the assessee is a beneficiary of accommodation entries provided by Bhanwarlal Jain Group by way of bogus purchase bills. Based on such information, AO reopened the assessment under Assessment Year: 2008-09 section 147 of the Act. In course of assessment proceedings, though, the assessee disputed the allegations of alleged non-purchases, however, the AO rejecting the claim of the assessee concluded that the purchases are non- genuine. However, considering the fact that the assessee might have purchased the diamonds from unverified sources, the AO disallowed the profit element embedded in the alleged non-genuine purchases by estimating at 6%. Thus, he worked out the disallowance at Rs. 6,40,937/-. Assessee contested the aforesaid disallowance before first appellate authority. After considering the submissions of the assessee, learned Commissioner (Appeals) directing the AO to restrict the disallowance to the gross profit rate shown by the assessee at 3.97%. Thus, he reduced the disallowance to Rs. 4,23,491/-.

I have heard the learned Counsels appearing for the parties and perused the material on record. At the outset, learned Counsel for the assessee submitted that the issue is squarely covered by the decision of the Tribunal in assessee's own case for assessment year 2010-11 to 2013-14, wherein, the Tribunal has deleted the disallowance sustained by learned Commissioner (Appeals) by applying the gross profit rate. In this context, he drew my attention to the relevant observations of the Tribunal. Learned Departmental Representative, though, fairly agreed that the issue is covered by the decision of the Tribunal, however, he relied upon the observations of learned Commissioner (Appeals).