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Income Tax Appellate Tribunal, “SMC” Bench, Mumbai
This appeal by the assessee is directed against the order of learned CIT(A) dated 30.4.2019 and pertains to A.Y. 2008-09.
The issue raised is that learned CIT(A) erred in sustaining an addition of Rs. 9,46, 374/- out of the addition of Rs. 14,19,561/- done by the Assessing Officer.
Brief facts of the case are as under :- The brief facts of the case are that the assessee firm is carrying on the business of manufacturing and export of jewellery. The assessee filed its return of income originally on 30.09.2008 declaring the total Rs 2,64,876/-. The said return was processed u/s 143(1) and assessment u/s 143(3) was completed on 30.12.2010 by accepting the income returned by the assessee. Subsequent to this, a search action u/s. 132 was carried out on Bharat Shah Group (Assessee Group) on 03.03.2014 and the assessee being its flagship concern, was also covered. During the course of search action, statement on oath of Shri Bharat Shah (Main person of the Assessee Group) was recorded u/s 132(4) on 04.03.2014. In the said statement recorded on oath, Shri Bharat
2 M/s. B. Vijaykumar Jewellers Shah admitted that during the relevant year, the assessee has booked purchases of diamonds from Krishna Diams of Rs 1,57,72,904/-, which is concern of Shri Gautam Jain, entry operator. Prior to the search on the Assessee group, the Investigation Wing had carried out search on 03.10.2013 on Shri Gautam Jain who had admitted that through the concerns directly/ indirectly controlled by him, he is engaged in the dubious business of providing accommodation entries to the interested beneficiaries. Consequently, notice u/s 153A was issued to the assessee. In response, the assessee filed its return of income on 01.12.2014 declaring total income of Rs 2,64,876/-. In the assessment proceedings, the assessee was asked to furnish evidences in respect of its claim of purchases from M/s Krishna Diam. From the evidences submitted by the assessee, it was noted by the AO that the documents in respect of transportation of goods in the form of delivery challan, octroi receipts, etc are not available with the assessee. It was also noted by the AO that the assessee has not been in a position to even provide the latest address or the whereabouts of the said purchase party. The AO also noted that in the statement on oath recorded of Shri Bharat Shah during the search action, he had admitted that he does not know the said concerns and has never come in contact with them. The AO, thereafter proceeded to reject the books of the assessee and make an addition of Rs 14,19,561/- being the additional profit @ 9% of the amount of the bogus purchases of Rs 1,57, 72, 904/-.
Against the above order assessee appealed before learned CIT(A). Learned CIT(A) restricted the addition to 6% of the impugned purchase.
Against the above order assessee is in appeal before the ITAT.
I have heard both the parties and perused the record. Learned Counsel of the assessee submitted that the issue is squarely covered by the order of the ITAT in assessee’s own case for A.Y. 2007-08, wherein the ITAT on identical facts has restricted the addition to 3%.
3 M/s. B. Vijaykumar Jewellers
Per contra, learned Departmental Representative relied upon the order of learned CIT(A).
I have carefully considered the submission and perused the record. Upon careful consideration, I find that on identical facts this Tribunal in assessee’s own case for A.Y. 2007-08 vide order dated 22.8.2017 in has concluded as under :- “I notice that the assessee could not conclusively prove that the diamonds were purchased only from the concerns stated above, since the assessee did not produce those parties before the AO. Hence one of the possible views is that the assessee could have purchased the diamonds from some other person and could have obtained only the bills from the above said concerns. There is also a possibility; in that case, the assessee could have purchased goods at a price lower than the apparent consideration. The task of the tax officials was to determine the profit element embedded in the said purchase. The AO has estimated the same at 8% and the Ld CIT(A) has estimated the same at 6%. According to Ld A.R, these diamonds have been exported and hence there will not be much variation in the price as the prices of diamonds would depend upon the quality. There is merit in this submission also. The Ld A.R, in the alternative, submitted that the profit element may be estimated at a reasonable rate. I have noticed earlier that the assessee has declared transactional margin of 5.61% on the sales. Hence, considering these aspects, I am of the view that the profit estimated by Ld CIT(A) at 6% is on the higher side. Accordingly I modify the order passed by Ld CIT(A) and direct the AO to sustain the addition to 3% of the value of alleged bogus purchases and in my view, the same would meet the ends of justice. I order accordingly.”
Since the facts are identical, following the precedent, I direct that the disallowance in this case be restricted to 3% of the alleged bogus purchases.
In the result, assessee’s appeal is partly allowed. Order pronounce on 17.9.2020 under Rule 34(4) of the ITAT Rules.