ITO 22 (2)(3), MUMBAI vs. M/S LISTA JEWELS, MUMBAI

Ms. Smita Verma representing the Department submitted that the assessee is engaged in manufacturing and retail trading of Gold and Diamond Jewellery. As per information received from DGIT (Investigation), Mumbai, the assessee had obtained accommodation entries from concerns belonging to Bhanwarlal Jain Group. Shri Bhanwarlal Jain is a leading entry provider. During the course of search and seizure action on the group, he admitted that he has floated various concerns solely for the purpose of providing accommodation entries on commission basis. The assessee has obtained bogus purchase bills aggregating to Rs. 45,09,746/- from bogus concerns belonging to Bhanwarlal Jain group. During assessment proceedings, the Assessing Officer (AO) has rejected the books of assessee and thereafter estimated Gross Profit (GP) @ 25% on bogus purchase entries obtained by assessee from the concerns belonging to Bhanwarlal Jain. In first appellate proceedings, the CIT(A) has restricted the addition to 12.5%. The ld. DR prayed for reversing the findings of CIT(A) and uphold the addition made in assessment order.

Per contra, Shri Nirav Mehta appearing on behalf of the assessee supporting the order of CIT(A) submitted that the assessee had furnished various documents before the AO to substantiate genuineness of purchases. The assessee furnished copies of purchase bills, bank statements, ledger accounts and even affidavit of the vendors confirming transactions. The notices under section 133(6) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] were issued to the parties from whom the assessee had made purchases. All the parties responded to the notices and filed their acknowledgement of return of income, copies of invoices, ledger accounts of आअसं. 5704/मुं/2019 (िन.व.2012-13) (A.Y.2012-13)

Both sides heard, orders of authorities below examined. The assessee has allegedly obtained bogus purchase bills from the concerns belonging to Bhanwarlal Jain group. The AO after rejecting the books of assessee has made addition by estimating profit margin on bogus purchases at 25%. In first appellate proceedings, the CIT(A) has upheld the findings of AO in so far as assessee’s involvement in bogus purchase is concerned, however, the CIT(A) allowed part relief to assessee by restricting quantum addition to 12.5. Keeping in view the nature of assessee’s business, estimation of profit margin at 25% is very much on the higher side. The estimation of profit margin by CIT(A) has been accepted by the assessee which seems to be reasonable. I see no infirmity in the impugned order, hence, the same is upheld and appeal of the Revenue is dismissed, sans merit.