RAMILA DIAM PRIVATE LIMITED,MUMBAI vs. PR.CIT-5, MUMBAI

Shri M Subramanian, appearing on behalf of the assessee narrating the facts of case submitted that the assessee is a dealer in diamonds. The assessee is also engaged in import and export of diamonds. On the basis of search conducted on Bhanwarlal Jain group on 03.10.2013, the assessment for Assessment Year 2011-12 was reopened. It was alleged that the assessee has engaged in obtaining accommodation entries to the tune of ₹18,08,24,885/- for the period relevant to the Assessment Year 2011-12. The Assessing Officer estimated the Gross Profit (GP) at the rate of 12.5% on the alleged bogus purchases/ accommodation entries from Bhanwarlal Jain. However, the Assessing Officer reduced the Gross Profit (4%) already declared by the assessee and made addition of difference i.e. 8.5% on the alleged accommodation entries. Thus, the Assessing Officer made addition of ₹1,53,70,115/- on account of suppression of GP on accommodation entries.

2.1 The AR submitted that the assessment for Assessment Year 2011-12 was reopened on the basis of information received from investigation Wing regarding assessee’s alleged involvement in obtaining accommodation entries from Bhanwarlal Jain group. It was alleged that the assessee had obtained accommodation entries to the tune of ₹18,08,24,885/-. The learned AR referred to the reasons recorded for reopening of assessment under section 147 at page 41 and 42 of the paper book. The learned AR submitted that once the assessment has been reopened and the investigation has been conducted by the Assessing Officer and on the basis of such investigation Assessing Officer framed the assessment order, the PCIT

On the other hand, Shri K. Madhusudan representing the department vehemently defended the impugned order. The learned Departmental Representative submitted that the Assessing Officer while passing assessment order has not conducted investigations. The Assessing Officer merely presumed that the assessee has made purchases from grey market and has disclosed entire sales in the books. The findings of the Assessing Officer are based on assumptions and presumptions that have been rightly rejected by the PCIT.

We have heard the submissions made by the rival sides and have examined the orders of the authorities below. We have also considered the decisions on which reliance has been placed by ld. AR. The assessment in the case of assessee for Assessment Year 2011-12 was reopened on the basis of information received by Investigation Wing

The PCIT invoked revisional jurisdiction under section 263 of the Act as he did not concur with the view of Assessing Officer in estimating GP on alleged accommodation entries. The PCIT further rejected the view of Assessing Officer in assuming that the assessee had made purchases from grey market.

The provisions of section 263 of the Act can be invoked if, twin conditions mandated under the section are satisfied, i.e:

The Hon'ble Jurisdictional High court in the case of Mohommad Haji Adam & Co. (supra) and Paramshakti Distributors Pvt. Ltd. (supra) has held that in case of bogus purchases, purchases cannot be rejected without distrusting the sales in case of a trader. The addition can be restricted to the extent of GP rate on such purchases to bring it at par with genuine purchases. In other words, it is only the profit element embedded in the bogus purchase bills that is to be brought to tax and the entire bogus purchases cannot be added. The Assessing Officer was right in taxing only profit by estimating GP on alleged bogus purchases.

Thus, in the light of facts discussed above and the judicial pronouncements referred, the impugned order is quashed and the appeal of assessee is allowed. - Assessment Year 2012-13

The learned AR submitted that the facts in Assessment Year 2012-13 are identical to the facts for Assessment Year 2011-12. Assessment was reopened for similar reasons and thereafter PCIT invoked the revisional jurisdiction under section 263 of the Act for identical reasons.

Since, the facts germane to the appeal for Assessment Years 2011-12 and 2012-13 are peri-materia, the findings given by us while - Assessment Year 2013-14

The learned AR submitted that the only difference in the present appeal is that the assessment order is passed under section 143(3) of the Act. However, the reasons and manner for estimating GP on alleged accommodation entries from Bhanwarlal Jain Group concerns by the Assessing Officer are identical to the previous two years. Therefore, submissions made for previous two appeals will equally cover the present appeal. The PCIT has invoked revisional powers for identical reasons.

The facts in the impugned assessment year are similar to the facts in earlier assessment years except that the assessment order has been passed under section 143(3) of the Act. We find that the Assessing Officer in assessment proceedings has made similar observations as were made in proceeding under section 147 read with section 143(3) for Assessment Year 2011-12 and 2012-13 for making addition in respect of bogus purchases. Since, there is no material difference in the manner and nature of addition in dispute, the findings given by us while deciding the appeal of assessee for Assessment Year 2011-12 would mutatis mutandis apply to the present appeal.