MUDRA EXIM PVT. LTD.,MUMBAI vs. ITO - 5(2)(3), MUMBAI

The assessee is engaged in the business of import and export of diamonds. During the course of scrutiny assessment proceedings, the Assessing Officer observed that the assessee has indulged in obtaining accommodation entries from Marc Gems (amounting to Rs.3,35,06,028/-), one of Bhanwarlal Jain Group concerns. The Assessing Officer made addition of 8% of such non-genuine purchase i.e. Rs.26,80,482/-. Aggrieved against the assessment order dated 17/03/2016 passed under section 143(3) of the Income Tax Act, 1961 (in short ‘ the Act’), the assessee filed an appeal before the CIT(A). The first appellate authority vide impugned order confirmed the addition made by Assessing Officer and dismissed the appeal of assessee.

Shri Himanshu Gandhi appearing on behalf of the assessee submitted that the authorities below have erred in estimating addition of 8% on alleged bogus purchases by the assessee from Bhanwarlal Jain Group concern. The ld.Authorized Representative of the assessee submitted that assessee had furnished tax invoices and bank statements to the lower authorities, however, the documents furnished by the assessee were not taken into consideration. The ld. Authorized Representative for the assessee prayed that if at all addition is to be made it should be restricted only to the extent of the difference in gross profit not disclosed by the assessee on the alleged bogus purchases. The ld. Authorized Representative for the assessee prayed for restoring the issue back to the file of Assessing Officer in the light of decision of Hon'ble Bombay High Court in the case of PCIT vs. Mohammed Haji Adam & Co in Income Tax Appeal No.1004 of 2016 decided on 11/02/2019.

Both sides heard, orders of lower authorities perused. The assessee is engaged in the business of import and export of diamonds. It is alleged that the assessee has procured bogus bills to the tune of Rs.3,35,06,028/- from M/s. Marc Gems, one of Bhanwarlal Jain Group concern. Consequently, the Assessing Officer estimated gross profit @8% of such alleged bogus purchases. The CIT(A) has upheld the addition made by Assessing Officer. The contention of the assessee is that the addition may be restricted to the extent of difference between actual gross profit and G.P declared on non-genuine purchases from hawala dealers. Taking into consideration entirety of facts, I deem it proper to restore this issue back to the file of Assessing Officer for fresh adjudication in the light of the decision of Hon’ble Jurisdictional High Court in the case of PCIT vs. Mohammed Haji Adam & Co (supra). Needless to say that while deciding the issue afresh, the Assessing Officer shall grant reasonable opportunity of hearing to the assessee, in accordance with law.

The impugned order is set aside and the appeal of assessee is allowed for statistical purpose, in the terms aforesaid.

Both sides are unanimous in stating that the facts in assessment year 2009-10 are similar to assessment year 2013-14. I find that the addition on account of accommodation entries in the assessment year

In the result, both appeals by the assessee are allowed for statistical purposes.