M/S KUNDALI JEWEL (INDIA) PRIVATE LIMITED,MUMBAI vs. ITO - 12(3)(1), MUMBAI

O R D E R PER AMARJIT SINGH (JM) The assessee as well as revenue have filed the above mentioned appeals against the order dated 29.03.2019 passed by the Commissioner of Income Tax (Appeals) -21, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y. 2012-13. 4337/Mum/2019 A.Y. 2012-13 2. The assessee has filed the present appeal against the order dated 29.03.2019 passed by the Commissioner of Income Tax (Appeals) -21, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2012- 13.

2. On facts and in the circumstances of the case, the Appellant submits that the Learned Commissioner of Income Tax (Appeals). Mumbai erred in upholding the disallowance of advertisement expenditure of Rs. 10,36,872/- made by the Learned Assessing Officer u/s 40(a)(ia) of The Income Tax Act, 1961 for non- deduction of TDS. The Appellant submits that the disallowance of advertisement expenditure of Rs.10,36,872/- be deleted.

3. On facts and in the circumstances of the case, the Appellant submits that the Learned Commissioner of Income Tax (Appeals), Mumbai erred in upholding the disallowance of Other expenditure of Rs.11,87,074/- made by the Learned Assessing Officer. The Appellant submits that the disallowance of other expenditure of Rs. 11,78,074/-be deleted.

4. Without prejudice to the above Ground of Appeal numbered 2.

1. On facts and in the circumstances of the case, the Appellant submits that the Learned Commissioner of Income Tax (Appeals), Mumbai erred in not granting depreciation u/s 32 of The Income Tax Act,1961 on expenditure of Rs.3,43,029/- out of the total disallowance other expenses of Rs.11,78,074/, disallowed by treating it as Capital Expenditure by the Learned Assessing Officer and upheld by the learned Commissioner of Income Tax (Appeals), Mumbai. The Appellant submits that the depreciation u/s 32 of The Income Tax Act, 1961 be allowed on the capital expenditure of Rs.3,43,029/-.

2 4337/Mum/2019 A.Y. 2012-13 5. Each Ground of Appeal hereinabove is independent and without prejudice to each other

6. The appellant craves leave to reserve to itself the right to add, after, amend or annual any of the grounds of appeal at or before the time of hearing and to produce such further evidence, documents and papers as may be necessary.”

4. The brief facts of the case are that the assessee filed its return of income on 27.09.2012 declaring total income to the tune of Rs.2,67,990/-. The return was processed u/s 143(1) of the I. T. Act, 1961. Thereafter, the case of the assessee was reopened u/s 147 of the I. T. Act, 1961 after recording the reasons to believe that income chargeable to tax has escaped assessment. Notice u/s 148 of the I. T. Act, 1961 was issued and served upon the assessee. Thereafter, notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. The reasons for reopening the assessment were also served upon the assessee. The assessee company is engaged in the business of Designing, Manufacturing and Marketing of Jewellery. The assessee company claimed advertisement expenditure in sum of Rs.11,38,657/-. The notice was issued to prove the genuineness of the claim. The assessee also failed to deduct the TDS. The details are hereby mentioned as under.:-

Sr. No. Name PAN Amount TDS 1 4 colour Graphics N. Digital - 80,057 - 2 A Ad Agency - 84,000 - 3 Adea Advertising AARFA5592L 1,58,065 - 4 Appolo Advertising Themes - 3,61750 - 5 Corporation Bank/Savti Publication - 50,000 - 6 ICICI Bank Ltd./A Ad Agency - 50,000 - 7 Saraswati Advertising Service AACPP8500A 1,00,000 - 8 The Begining - 1,53,000 - Total 10,36,872 3 4337/Mum/2019 A.Y. 2012-13

Sr. No. Name Transactions Amount 1 Josh Trading Co. Pvt. Ltd. 1,02,01,480 2 Nakshatra Business Pvt. Ltd. (Hema 1,00,00,000 Trading Co. Pvt. Ltd.) 3 Olive Overseas Pvt. Ltd. (Realgold 1,00,00,000 Trading Co. Pvt. Ltd) 4 Rangoli Commerce Pvt. Ltd. 500,000 5 Kavya Share & Securities Pvt. Ltd. 50,00,000 6 Arawali Stock Broking Pvt. Ltd. 1,00,00,000 Total 5,02,01,480

ISSUE No. 1 7. Under this issue the assessee has challenged the notice issued u/s 148 of the I. T. Act, 1961. The assessee did not press this issue, therefore, this issue is being decided in favour of the revenue against the assessee being not pressed.

ISSUE No. 2 8. Under this issue the assessee has challenged the disallowance of advertisement expenditure of Rs.10,36,872/- u/s 40(a)(ia) of the I. T. Act, 1961 for non-deduction of TDS. The Ld. Representative of the assessee has argued that the AO declined the claim of Rs.10,36,872/- on account of non- deduction of TDS wrongly and illegally which is not justifiable, hence, the claim of the assessee is liable to be allowed in the interest of justice. It is also argued that the case of the assessee falls with the second proviso of Section 40(a)(ia) of the Act r.w. Section 201(1) as inserted by the Finance Act, 2012 dated 01.04.2013 in which it has been specified that the TDS has not been deducted but payee has filed the return and offered sum received from the assessee to tax, therefore, the claim of the assessee was liable to be allowed. In support of these contentions, the Ld. Representative of the 5 4337/Mum/2019 A.Y. 2012-13 assessee has placed reliance upon the decision of Hon‟ble ITAT Mumbai Bench in the case of Mahindra & Mahindra Ltd. Vs. DCIT, Range-2(2) dated 14.05.2019, CIT Vs. Ansal Land Mark Township Pvt. Ltd. (2015) 61 Taxmann.com 45 (Delhi High Court) and M/s. Hindustan Coca Cola Beverage Vs. CIT dated 16.08.2007. However, on the other hand, the Ld. Representative of the Department has strongly relied upon the finding of the CIT(A). The basic contention of the assessee is that the payee has paid the tax. It is not in dispute that the second proviso of Section 40(a)(ia) of the Act r.w. Section 201(1) as inserted by the Finance Act, 2012 dated 01.04.2013 allows the claim of the non-deduction of TDS where the payee has filed the return of income and offered sum received from the assessee to tax. The said amendment was effected retrospectively w.e.f. A.Y. 2005-06. The issue in question has been dealt with by the Hon‟ble ITAT Mumbai „D‟ Bench in the case of Mahindra & Mahindra Ltd. Vs. DCIT, Range- 2(2) (supra). The relevant finding is hereby reproduced as under.:-

“12. We shall now deliberate on the aspect that now when the assessee has not been held to be an assessee in default under the first proviso to sub-section (1) of Sec.201, then, as to whether the disallowance under Sec. 40(a)(ia) can be made in its case, or not. We find that as per the second proviso of Sec. 40(a)(ia), where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum, but is not deemed to be an assessee in default under the first proviso to sub-section (1) of Sec.201, then, for the purpose of Sec. 40(a)(ia) it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee, subject to the condition that the said resident payee satisfies certain conditions viz. (i) has furnished his return of income under Sec.139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income. Further, the assessee shall furnish a certificate to the said effect from an accountant in such form as may be prescribed. As a matter of fact, the second proviso to Sec. 40(a)(ia) provides for an exception wherein the amount 6 4337/Mum/2019 A.Y. 2012-13 on which the assessee has failed to deduct tax at source would not call for any disallowance under Sec.40(a)(ia). In our considered view, the aforesaid second proviso had been made available on the statute to give effect to the judgment of the Hon‟ble Supreme Court in the case of Hindustan Coca Cola Beverage Pvt. Ltd. Vs. CIT (2007) 293 ITR 226 (SC). In the aforesaid judgment, it was observed by the Hon„ble Apex Court that where the payee has already paid the tax, the same would discharge the assessee from the obligation to deduct the same. At this stage, we may herein observe that though the second proviso had been made available on the statute vide the Finance Act, 2012 w.e.f 01.04.2013, however, the same as held by the Hon‟ble High Court of Delhi in the case of CIT Vs. Ansal Land Mark Township (P) Ltd. (2015) 377 ITR 635 (Del) shall be applicable retrospectively, i.e even for the years prior to A.Y 2013-14. Further, we find that a similar view had also recently been taken by the Hon‟ble High Court of Punjab & Haryana in the case of PCIT Vs. Mobisoft Telesolutions Pvt. Ltd. (2019) 411 ITR 607 (P&H) while disposing off the appeal of the assessee before them for A.Y 2011-12. Be that as it may, we are of the considered view that in case the assessee satisfies the conditions envisaged in sub-section (1) of Sec.201, then it cannot be held to be an assessee in default, and as per the second proviso of Sec. 40(a)(ia) no disallowance would be called for in its hands. We thus for the said limited purpose restore the matter to the file of the A.O for making necessary verifications. In case the assessee is able to demonstrate before the A.O that it had duly complied with the conditions envisaged in the second proviso of Sec.40(a)(ia) r.w.s 201(1) of the I.T Act, then the disallowance to the said extent made under Sec. 40(a)(ia) in its hands shall stand vacated.

ISSUE No. 3 10. Under this issue the assessee has challenged the confirmation of the disallowance of expenses of Rs.11,78,074/-. The details of expenses have been filed at page no. 200 of the paper book. The assessee has furnished the detail of expenses of Rs.23,00,000/-. Some expenses have been incurred with the name of erstwhile company i.e. the earlier name of the assessee. The contention of Ld. Representative of the assessee is that the claim was not properly examined by the AO and the expenses incurred with the name of the erstwhile company were actually the expenses of the assessee which should be allowable. Actually facts need to be verified at the end of the AO before the allowance of the claim of the assesse, therefore, we set aside the finding of the CIT(A) on this issue and restore the issue before the AO to decide the matter of controversy afresh after going through the relevant 8 4337/Mum/2019 A.Y. 2012-13 record/verification of the evidence produced in this regard. Needless to say that an opportunity of being heard is required to be given to the assessee in accordance with law. Accordingly, this issue is being decided in favour of the assessee against the revenue for statistical purposes.

ISSUE No. 4 11. Under this issue the assessee has challenged non-granting of depreciation on capital expenses. Since the issue no. 3 has been restored before the AO to verify the claim of the assessee, therefore, capital expenses are in question and yet to be decided in accordance with law. Anyhow upon the capital expenses, the depreciation is required to be allowable u/s 32 of the Act. Accordingly, we set aside the finding of the CIT(A) on this issue and restore the issue before the AO to verify the claim of the assessee in accordance with law. Needless to say that an opportunity of being heard is liable to be given to the assessee in accordance with law. Accordingly, this issue is decided in favour of the assessee against the revenue.

ISSUE No. 5 12. Issue no. 5 is formal in nature which is nowhere required for adjudication.

In the result, the appeal filed by the assessee is hereby partly allowed.

9 4337/Mum/2019 A.Y. 2012-13 The revenue has filed the present appeal against the order dated 29.03.2019 passed by the Commissioner of Income Tax (Appeals) -21, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2012- 13. 13. The revenue has raised the following grounds.:-

“1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.4,00,00,000/- made by the AO u/s 68 of the I T Act without appreciating the facts that the assessee has availed accommodation entries in the form of share premium money from the companies operated and managed by known hawala operator Shri Pravin Kumar Jain" 2. "Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in restricting the disallowance on account of bogus purchases at 5% of Rs.2,02,01,480/- as against 100% made by the AO without appreciating the fact that assessee failed to establish the genuineness of the purchases." 3. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in restricting the addition to 5% of bogus purchases without taking into consideration the decision of the Hon'ble Supreme Court in the case of M/s N.K. Proteins Ltd. V/s Dy. CIT no. 769 of 2027 dated 26.02.2017 (SC) wherein it was held that addition on the basis of undisclosed income could not be restricted to certain percentage when the entire transaction was found to be bogus?" 4. "On the facts and in the circumstances of the case and in law, the ld CIT(A) erred in treating differently the sum received in the form of share premium money and expenses claimed as bogus purchases without appreciating the facts that the assessee has availed accommodation entries whether in the form of share premium money or bogus purchases both from the companies operated and managed by known hawala operator Shri Pravin Kumar Jain and with respect to share application money the ld CIT(A) treated it genuine and on purchases the ld CIT(A) treated the same as bogus."

10 4337/Mum/2019 A.Y. 2012-13 5. "The appellant prays that the order of the ld CIT(A) on the grounds be set aside and that of the Assessing Officer be restored". 6. "The appellant craves leave to amend or alter any grounds or add ground which may be necessary".” 14. The facts of the present case are quite similar to the facts of the case as narrated above bearing , therefore, there is no need to repeat the same.

ISSUE NO. 1

“10. I have considered the facts of the case and submission of the appellant and findings by the AO. On the merits, the issue is of unexplained credits u/s 68, to which my findings are as under. The legal position is very well settled i.e. where any credits are found in the books of the assessee, the onus is on the assessee to prove the genuineness of the same and on failure of the assessee, the presumption u/s 68 becomes absolute and the credits are treated as income of the assessee. The assessee can discharge the onus by producing confirmation from the share applicants, and proving the source of the credits. It is submitted by the AR that, when the share applicants accept/own the share application money paid the assessee is deemed to have discharged his onus and no further responsibility lies on the assessee to prove the source from where the share applicants have acquired the amounts advanced to the assessee and in this regard, the AR placed reliance upon the decision of the Hon'ble Bombay High Court in the case of Orient Trading Co. Ltd. V/s. (1963) 49 ITR 723 (Bom).

11 4337/Mum/2019 A.Y. 2012-13 10.2 When share application money is received through normal banking channels, the identity of the share applicant stands proved. However, it is to be mentioned that merely because amounts have been received through banking channels, it is not sufficient to prove the genuineness of the credits. But the existence of a bank account of the share applicant itself proves the existence of the share applicants. For this proposition, the appellant referred to the decision of the Hon‟ble Patna High Court in the case of Sarogi Credit Corporation V/s. CIT{1976 }103 ITR 344 (Pat). The AR further referred to these following decisions in support of its contention. In the case of Shantilal Jain ITXA/687/2004 decided on31.7.2007, the Hon‟ble jurisdictional High Court held that merely because the creditors are not assessed to tax, it does not follow that the amounts should be assessed as assessee's income. Where the amounts are owned by the creditors, then even if it be presumed that the creditors had advanced the amounts from his undisclosed sources, still it would become the income of the said creditor and not that of the debtor (the assessee). In the case of Nemi Chand Kothari V/s. CIT (2003) 264 ITR 254 (Gau.). the Hon'ble Gauhati High Court held that the assessee cannot be called upon to prove the source-of-source. In CIT V/s. Arunanda Textiles P. Ltd. {2011} 333 ITR 116 (Kar.). the Hon'ble Karnataka High Court held that where the assessee has submitted confirmations & affidavits from the creditors, the onus is not on the assessee to prove the creditworthiness of the creditors. 10.3 A further cue for this proposition can be had from the proviso inserted in sec 68 by Finance Act, 2012 from A.Y. 2013-14. Under this proviso, where the assessee receives share application monies/premium, the assessee is expected to prove source-of-source as well. Firstly, in the case in hand, the amounts received were in the F.Y. i.e. A.Y.2012-13 and further this proviso would apply only from AN. 2013-14. {Ref: decision of the Bombay High Court in Gangadeep Infrastructure 394 ITR 680 (Born.)). The Hon‟ble jurisdictional High Court reiterated the said position in PCIT V/s. Veedhata Tower Pvt. Ltd. ITXA/819 of 2015 dated 17th April 2018. However, the said proviso was inserted because, sec.68 (unamended) was incapable of obliging the assessee to prove the source- of-source and hence the proviso was required to inserted. It follows that where the proviso doesn‟t apply, the sec.68 does not put the burden on the assessee to prove the source-of-source. 10.4 From the above, as submitted by the AR, it follows that it is not the business of the assessee to find out the source of the money of his creditors {CIT V/s. Daulat Ram Rawaltmull 87 ITR 349 (SC). Reference can also be made to the decision of the Apex Court in CIT vs Orissa Corporation Pvt Ltd. 158 ITR 78 (SC). It is also possible that a creditor may have advanced funds from out of his exempted income. For eg. If the creditor has agricultural income which is exempt, then merely because the creditor is not assessed to tax, it does not follow that the credits are assessee's income.

12 4337/Mum/2019 A.Y. 2012-13 10.5 I have considered the above contentions raised and it is seen from the record that, the assessee has produced before the AO as well as before me the following documents:

1. 1. PAN 2. Complete Name and Address of the Applicants 3. Copy of Board Resolution for making Share Application 4. Copy of Board Resolution for making Share Application in the Appellant Company.

5. Copy of Bank Statement of the applicant reflecting payment of Share Application Money and Source thereof.

6. Copy of Acknowledgement of Return of Income filed by the Appellant companies for the year under consideration.

7. Audited Financial Statements of the applicants for the year under consideration. For the following Share Applicants 1. Nakshatra Business Pvt. Ltd. (Hema Trading Co. Pvt. Ltd) 2. Olive Overseas Pvt. Ltd. (Real gold Trading Pvt. Ltd) 3. Rangoli Commerce Pvt. Ltd.

4. Kavya Shares and Securities Pvt. Ltd.

5. Arawali Stock Braking Pvt. Ltd. 10.6 As is evident, the assessee has produced all evidences to prove the identity, source and the genuineness and credit worthiness. It is submitted that the assessee has done everything in its control to establish the bonafides. It is also submitted that, even if it proved that the creditor has advanced funds from undisclosed sources, still it would be the income of the creditor. 10.7 The assessee has produced all the details, confirmation with PAN, even the return of income of the share applicants. When such material is produced the assessee can be said to have discharged his onus and the onus would shift to the AO to bring some material on record which would prove that the material's produced by the assessee is either not genuine or are insufficient. The AO's response to the assessee's material is simply that the assessee has not proved the source of funds in the hands of the share applicants viz. 1] Nakshatra Business Pvt. Ltd. (Hema Trading Co. Pvt. Ltd), 2] Olive Overseas Pvt. Ltd. (Real gold Trading Pvt Ltd), 3 Rangoli Commerce Pvt. Ltd., 4] Kavya Shares and Securities 13 4337/Mum/2019 A.Y. 2012-13 Pvt. Ltd. & 5) Arawali Stock braking Pvt. Ltd. The AR also submitted and referred that, in the case of CIT V/s. U.M. Shah, Proprietor, Shrenik Trading Co. 90 ITR 396 (Bom.)). the Hon'ble jurisdictional High Court held that once credible material is produced before the AO, the AO is expected to make efforts to dislodge the explanation given by the assessee. No such thing has been done by the AO. The AO cannot simply reject explanation/materials produced by the assessee without bringing any contrary findings on record. In this regard. I find that the decision referred by the appellant's AR on the issue of company is managed and controlled by Praveen Kumar Jain/Bhawarlal Jain and also other Jurisdictional ITAT/High Court cases decided on similar facts in favour of the assessee which are binding on the undersigned, the case laws are as under: 1 ITO-4(3)(1) Mumbai Vs. Nityanand Industries Pvt. Ltd. & 4278/M/2017 2 Komal Agrotech Pvt. Ltd. Hyderabad Vs. The ITO, ward 2(1) Hyderabad ITA. No.437/Hyd/2016 3 Arceli Realty Ltd. Vs. ITO 15(1)(1), Mumbia 4 Shri Naresh Hiran VS. ITO 30(2)(4), Mumbai ITA 1236/M/2017, ITAT Mumbai 5 ITO 25(3)(5), Mumbai VS. M/s. Vikram Kuktilal Vora, ITA. 842/Mum/2017 6 M/s. Reliance Corporation Vs. ITO IRA. NO.1069 to 1071/M/2017 7 Sanghvi Realty P. Ltd. V DCIT Cirlce 5(3)(1) 3018/M/2017, 3019/M/2017, 3020/M/2017 8 ITO 32(1)(5) Vs. Gujarat Construction 9 ACIT VS. M/s. Gujarat Estate ITA.6990/M/2016 order dated 18.05.2018 10 Sunshine Metals & Alloys Industries Pvt. Ltd. Vs. ITO 4(3)(4 ITA. 3213/M/2014 11 DCIT VS. M/s. Rohini Builders (2002) 256 ITR Gujarat HC 12 CIT VS. M/s. Orchid Industries P. Ltd. ITA. 1433 of 2014 13 Rohini Builders Vs. DCIT ITAT Ahmedabad (2001) 117 Taxmann.25 14 CIT Vs. M/s. Gagandeep Infrastructure Pvt. Ltd. 15 DCIT, Surat Vs. M/s. Rohini Builders SLP 16 CIT Vs. Lovely Exports 2016 CTR 195 10.8 In view of the above, facts and circumstances of the case and also in view of the decision of the Hon'ble ITAT in the cases of M/s. Nityanand Industries (P) Ltd. and Komal Agrotech (P) Ltd. and Arceli Realty Ltd. wherein the investor companies are controlled by Praveen Kumar Jain.

14 4337/Mum/2019 A.Y. 2012-13 Similar to the appellant's case and the Hon'ble ITAT after appreciating the facts on record, accepted that the transaction with these investor companies are genuine. Thus, the addition of Rs 4,00,00.000/- u/s. 68 is not justified. The AO is. therefore, directed to delete the said addition of Rs.4,00,00,000/-. Accordingly, this ground is allowed.”

ISSUE Nos. 2 to 4

“4. I have considered the facts of the case and submission of the appellant and findings by A.O. It is seen from the details available on record that the following details have been produced before the AO as well as before me, to substantiate the purchase made from Josh Trading Pvt. Ltd:

1. 1. Copy of invoice cum delivery challan of Josh Trading Private Limited.

2. Bank Statement of Josh Trading Private Limited reflecting the amount received from Kundali Jewels Private Limited the Appellant of Rs.1,02,01,480/-.

3. Copy of Bank Statement of Kundali Jewels Private Limited reflecting payment of Rs.1,02,01,4801- to Josh Trading Private Limited.

16 4337/Mum/2019 A.Y. 2012-13 4. Copy of ledger account of the Appellant in the Books of Accounts of Josh Trading Private Limited 14.2 The facts and circumstances outlined above leads to the conclusion that all the above referred evidences such as invoices/bills, ledger accounts, details of payments made through banking channel placed on record by the assessee during the course of assessment proceedings cannot be set aside summarily by the A.O. without making further investigations in the matter to prove that these are not genuine purchases. However, at the same time it is difficult to accept that the purchases shown on the invoices/bills issued by these parties are as per the prevailing market price of those materials or have actually been made from such parties and might have been purchased in the grey market. As the Appellant has not placed any evidence on record that the goods were purchased from the above parties at arm‟s length price, this would indicate that the purchases were made from the open market without insisting for genuine bills and in such cases the suppliers would be willing to sell at a much less rate as compared to the rate that they would have charged otherwise, certainly goods must have been purchased from the grey market therefore the profit made by the assessee would be equal to the difference in price of bogus purchases and the rate at which goods are obtained from the grey markets. At the same time, it is an undisputed fact that the assessee failed to prove the delivery of material by producing transport receipts etc. and failed to produce any suppliers before the AO to prove the transactions. It is pertinent to visit the decisions of Hon'ble ITAT, Ahmedabad and Hon'ble Gujarat High Court in the case of CIT Vs Simit P Sheth (2013) on the issue. Hon'ble ITAT held the following in the referred case.: "Having heard the submissions of both sides, we have been informed that the malpractice of bogus purchase is mainly to save 10% sales tax etc. It has also been informed that in this industry about 2.5% is the profit margin. Therefore, respectfully following the decisions of the co-ordinate bench pronounced on identical circumstances, we hereby direct that the & 3293/Ahd/2009 A. Y. 2006-07 Sh. Simit P sheth V ITO WD -2(2), brd Page 6 disallowance is required to be sustained at 12.5% of the purchases from those parties. With these directions, we hereby decide the grounds of the rival parties which are partly allowed." 14.3 The Hon'ble Gujarat High Court held the following in the case: "This being the position the only question that survives is what should be the fair profit rate out of the bogus purchases which should be added back to the income of the assessee. The Commissioner adopted ratio of 30% of such total sales. The tribunal, however, scaled down to 12.5%. We may notice that in the immediately preceding year to the assessment year under consideration the assessee had declared gross profit @ 3.56% of the total turnover. If the yardstick of 30%, as adopted by the Commissioner, is accepted GP rate will be much higher. In essence, the 17 4337/Mum/2019 A.Y. 2012-13 Tribunal only estimated the possible profit out of purchases made through non-genuine parties. No question of law in such estimation would arise. The estimation of rate of profit return must necessarily vary with the nature of business and no uniform yardstick can be adopted." 14.4 Further, the AR submitted, with respect to the similar trade in diamonds in the case of M/s. Har-gobind and Sons, Hon'ble ITAT No.1108/Mum12017, AY.2007-08, the Hon'ble ITAT had restricted the addition @ 5% of the value of alleged bogus purchases. Respectfully following the judgements and considering the totality of facts, the addition @ 100°/0 of purchase amount is considered excessive and estimation of profit at 5% would meet the ends of justice. Thus, the A.O. is directed to restrict the addition to 5% of the alleged bogus purchase amount. Therefore, these grounds of appeal are partly allowed.”

18. On appraisal of the above mentioned finding, we find that the CIT(A) has decided the issue by considering the each and every facts of the case. The CIT(A) has relied upon the various decisions mentioned in the order. In the trade of diamonds, the addition has been restricted by the decision of Hon‟ble ITAT Delhi Bench bearing ITA. No.1108/Mum/2017 for the A.Y. 2007-08 @ 5% of the bogus purchase. The CIT(A) has also took into notice of gross profit of the assessee in the relevant year. Taking into account all the facts and circumstances and considering the fact that the assessee is not in appeal against this issue and also considering the task force report of Gems and Jewellery Industry, we are of the view that the finding of the CIT(A) is not liable to be interfered with at this appellate stage in the peculiar facts and circumstances of the instant case. Therefore, we affirm the finding of the CIT(A) on this issue and decide this issue in favour of the assessee against the revenue.

18 4337/Mum/2019 A.Y. 2012-13 ISSUE Nos. 5 & 6