A/S BRO'S,MUMBAI vs. ITO - 30(1)(1), MUMBAI

Aforesaid appeal by assessee for Assessment Year 2007-08 contest the order of Ld. Commissioner of Income-Tax (Appeals)-41, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-41/IT-280/15-16 dated 2 M/s. A.S. Bro’s Assessment Year-2007-08 05/07/2016. The appeal was earlier disposed-off vide order dated 24/05/2018, however, the order was recalled vide MA No.589/Mum/2018 and accordingly, the appeal has come up for fresh hearing before this bench. The only ground urged by Ld. Authorized Representative for assessee is quantum of estimation on account of alleged bogus purchases.

We have heard rival submissions, perused relevant material on record and applied our mind to judicial decisions cited before us. 3.1 The assessee, being resident firm, stated to be engaged in trading of diamonds was assessed for year under consideration u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 on 31/03/2015 wherein the income was determined at Rs.105.11 Lacs after sole addition of alleged bogus purchases for Rs.98.29 Lacs as against returned income of Rs.6.82 Lacs filed by the assessee on 02/10/2007. The original return of income was processed u/s 143(1). 3.2 Pursuant to receipt of certain information from investigation arm of the department, it transpired that the assessee made aggregate purchases of Rs.98.29 Lacs from 4 suspicious entities viz. Rutuja Gems, Hiren Gems, Neelam Gems and Gaurang Enterprises. Accordingly, the case was reopened as per due process of law vide issuance of notice u/s 148 on 31/03/2014 followed by statutory notices u/s 143(2) & 142(1) wherein the assessee was directed to substantiate the purchase transactions. 3.2 The investigation carried out by the investigation wing brought to light 19 Bank accounts which were reported as suspicious. The amounts were transferred from 6 (level-1) accounts to remaining 9 (level-2) accounts and 3 M/s. A.S. Bro’s Assessment Year-2007-08 cash was immediately withdrawn from level-2 accounts. Accordingly, summons was issued to various persons holding these accounts to make further inquiries. Although these persons asserted that they were carrying out trading of diamonds, but failed to fully substantiate the same. 3.3 In the above background, Ld. AO formed an opinion that these persons could not produce any verifiable evidence to prove that they have actually conducted any business. The suppliers from the whom the purchases were shown to have been made by the assessee could not identify the brokers through which the trades were carried out and also could not produce evidence for transfer of diamonds to the assessee. Therefore, it was concluded that the purchase of Rs.98.29 Lacs made by the assessee were bogus bills entries in the nature of accommodation entries. No actual business was carried out by the assessee and therefore, the purchases were disallowed and added to the income of the assessee.