AMAR DIAMOND TOOLS,MUMBAI vs. ITO WD 1(1), THANE

In all the appeals the assessee is aggrieved that learned CIT(A) erred in sustaining 12.5% disallowance out of bogus purchases. These appeals were earlier disposed by the Tribunal ex-parte vide order dated 5.12.2019. Later they were recalled vide order in Miscellaneous Application order dated 13.3.2020.

Brief facts are that the assessee is engaged in manufacturing and trading in industrial tools. The assessment was reopened pursuant to search action in the Jain group, wherein it was found that bogus accommodation entries were being provided. The Assessing Officer based his reassessment on the statement of Shri Rajendra Jain in the case of Jain group case.

Upon assessee’s appeal learned CIT(A) confirmed the addition. Against this order the assessee is in appeal before the ITAT.

I have heard both the counsel and perused the record. Learned Counsel of the assessee contended that the assessee has supplied all necessary details i.e. purchase bills, sale bills and bank statements. Learned counsel further submitted that the sales have not at all being doubted. Learned counsel claimed that no disallowance is called for, as assessee has offered adequate gross profit on these transactions. He further submitted that on identical facts this ITAT in assessee’s own case for A.Y. 2008-09 & 2009-10 has deleted the addition on same facts on finding that the assessee has already shown sufficient profit. He further submitted that the gross profit declared by the assessee for these yeas are as under :- Assessment year Gross profit 2010-11 28.61% 2011-12 17.83% 2012-13 20.77%

Upon careful consideration, I note that learned counsel claimed that the assessee has also already shown sufficient gross profit hence no disallowance is required. Upon careful consideration I find that assessee has provided the documentary evidence for the purchase. I find that in this case the sales have not been doubted. It is settled law that when sales are not doubted, hundred percent disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported from honourable jurisdictional High Court decision in the case of Nikunj

In the present case I find that all the details for purchases have been supplied. The Assessing Officer has not made any proper independent inquiry. In the assessment order in for A.Y. 2010-11 the Assessing Officer mentioned that he has issued a notice u/s. 133(6) to following parties :- 1. AADI 2. AVI 3. AVI 4. SPARSH I fail to understand how can any notice be sent to such parties. Be as it may, the addition is solely made on the basis of findings of search in the case of Rajendra Jain Group dehorse any cogent independent finding by the Assessing Officer. Moreover, assessee’s claim is that the assessee also shown sufficient gross profit much more 12.5% disallowance being done for bogus purchases and when sales have not doubted, no disallowance is called for. I find sufficient cogency in this submission. Hence, addition in this case is directed to be deleted.

In the result, all the appeals are allowed. Order has been pronounced under Rule 34(4) of the ITAT Rules on 19.10.2020.