ITO 22 (2)(3), MUMBAI vs. M/S LIVING GEMS, MUMBAI

The dispute in the present appeal is confined to partial relief granted by learned Commissioner (Appeals) in the matter of addition made because of alleged non-genuine purchases.

Briefly the facts are, the assessee is engaged in business of trading & manufacturing of jewellery and Indian handicrafts. For the assessment year under dispute, the assessee had filed return of income in regular course. Assessment in case of the assessee was originally completed under section 143(3) of the Income Tax Act, 1961. Subsequently, the assessing officer (AO) Assessment Year: 2008-09 received information from the DGIT (Inv.), Mumbai that the assessee is a beneficiary of accommodation entries provided by way of bogus purchases from one of the concerns related to Gautam Jain and others. Based on such information, the AO reopened the assessment for the impugned assessment year. In course of assessment proceedings, the AO called upon the assessee to produce supporting evidence to prove the purchases. In response, the assesseee furnished purchase bills, ledger account copy, bank statement copy etc. to prove the purchases. The assessee also furnished the sales bills containing stamp of customs authorities in support of export of goods. The AO however, raised doubt with regard to the source of purchase. He was of the view that the assessee must have purchased the goods from grey market or unverified sources and to regularise such transaction has obtained accommodation bills from the concerned parties. Therefore, after rejecting the books of account, the AO proceeded to disallow 25%, being the profit element on the alleged non-genuine purchases in both the assessment years under dispute. The assessee contested the aforesaid disallowances before learned Commissioner (Appeals). Partly accepting the submissions of the assessee, learned Commissioner (Appeals) restricted the disallowance to 12.5% of the alleged non-genuine purchases in both the years.

I have considered the submissions of learned Departmental Representative and perused the material on record. As could be seen, the AO has accepted the fact that the assessee is a exporter of jewellery and in fact had purchased the goods which are subject matter of dispute. He has only doubted the source of such purchases. For this reason alone, instead of disallowing the entire purchases he has restricted the disallowance to 25%, being the profit element embedded in such purchases. Learned Commissioner (Appeals) has reduced such disallowance to 12.5%. Considering the nature of business carried on by the assessee and all other relevant factors, I am of the considered opinion that disallowance made at 12.5% on the alleged non- genuine purchases is fair and reasonable, hence, deserves to be upheld. Accordingly, I do so. Grounds are dismissed. Assessment Year: 2008-09

In the result, appeal is dismissed. Order pronounced in the open court on 9th July, 2021. म ुंबई Mumbai; दिन ुंक Dated: 09/07/2021 Alindra, PS आदेश प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file.