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Facts
The assessee, engaged in diamond trading, filed its return for AY 2018-19 declaring an income of Rs. 90,632. The AO reopened the case under section 147 and made an addition of Rs. 1,26,57,724/- on account of alleged bogus purchases from two entities, Glorious Diamond Pvt. Ltd. and Blooming Star Diamond Pvt. Ltd.
Held
The tribunal noted that the AO relied on an investigation wing report stating the purchases were bogus. However, the assessee claimed the transactions were genuine and supported by evidence. The tribunal observed that the case might not have been properly adjudicated by the lower authorities.
Key Issues
Whether the purchases made by the assessee were genuine, and if not, whether the addition made by the AO was justified.
Sections Cited
147, 148, 69C, 690, 143(2), 142(1), 115BBE, 271AAC
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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI DIESH MOHAN SINHA & SHRI BIJAYANANDA PRUSETH
Appellant by : Shri Rajesh C Shah, CA Respondent by : Shri Ajay Uke, Ld. Sr. DR : 08/09/2025 Date of Hearing Date of Pronouncement : 03/12/2025 आदेश / O R D E R PER DINESH MOHAN SINHA, JM:
Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2018-19, is directed against the order passed by the Office of the commissioner of income tax, Appeal dated 08.10.2024, which in turn arises out of an assessment order dated 21.03.2023 passed by Income Tax Department / Assessing Officer under section (u/s.) 147 of the Income Tax Act, 1961.
① ITA-217/SRT/2025 MANJU GEMS 2. Grounds of appeal raised by the Assessee are as follows: The ld. AO has erred in reopening the case u/s 147 of the Act and in issuing the notice u/s 148 of the Act and also the Id CIT (A) has erred in confirming the same The ld AO has erred in applying section 69C of the Act and also the Ld. CIT(A) has erred in confirming the same The ld AO has erred in making an addition of Rs. 1,26,57,724/-being a bogus and non- genuine purchase and therefore disallowed u/s 690 of the Act and also the Ld. CIT(A) has erred in confirming the same The appellant reserves the right to add. alter, amend, or withdraw any grounds of appeal
3. Facts of the case:- The appellant is engaged in the trading of rough and polished diamonds and had filed its original return of income for A.Y 2018-19 on 31-10-2018 Vide Ack No. 370170391311018 declaring total income of Rs.90632.00. A notice under section 148 was issued on 31-03-2022 and received by the appellant. In response to which the appellant had filed its return of income and the copy of the same was submitted to AO on dated 29-04-2022. But the Learned AO refused to accept any of the submission of the appellant and issued an Assessment Order under section 147 of the Income Tax Act 1961 dated 21/03/2023 which was received by the assessee on 22/03/2023. The AO relied on the report of the Investigation wing which has stated that the purchase transaction with Blooming Star Diamond P. Ltd and Glorious Diamond P. Ltd are bogus. Further the AO has written in the order that we have not replied to the show cause notice. Further, notice u/s 143(2) & 142(1) of the Act along with questionnaire were issued to the assessee. In response to the same the assessee has filed requisite details. Further, a show cause notice dated 03.03.2023 was issued to the assessee asking it as to why the bogus purchases made by the assessee from Glorious Diamond Pvt. Ltd and Blooming Star Diamond Pvt. Ltd. amounting to Rs. 1,26,57,724/- should not be added to ② ITA-217/SRT/2025 MANJU GEMS the total income of the assessee for AY 2018-19. The assessee has duly replied to the show cause on 14/03/2023, Copy of Show cause reply is also produced on record. The learned AO without seeing my reply has made his mind for the addition of the amount as per the report of the investigation wing. In spite of the fact that in the reply to show cause has been proved that both the parties i.e Blooming Star Diamond P. Ltd and Glorious Diamond P. Ltd are not bogus However, the transaction with the party mentioned in the order are fully genuine and the same had been made through account payee cheque or RTGS only and all the details were submitted to the AO. All the confirmation of the parties were also submitted. Even after submitting proper evidences to prove the genuineness of the transactions. That the assessment was completed as under: Return income- Rs 90,630/- Addition u/s 69C- Rs 1,26,57,724/- Assessed total income- Rs 1,27,48,354/- 4. The assessee filed an appeal before the Ld. CIT (A). Ld. CIT (A) has dismissed the appeal by order dated 08.10.2024.
The assessee is in appeal before this tribunal against the impugned order dated 08.10.2024. 5.1 The Ld. AR of the assessee requested for one opportunity to be given to him to present his case before the lower authority. 5.2 The Ld. DR of the revenue relied on the order of Ld. CIT (A).
We have heard the rival contention of both the parties and perused the material available on record we note that Ld. CIT(A) has issued 6 notices to the assessee but there was a non compliance from the side of assessee. Before us the Ld. AR of the assessee submitted that assessee has submitted the elaborate statement of facts. We further note that before the assessment stage the assessee has submitted reply, the acknowledgement receipt of the same placed before us. Considering ③ ITA-217/SRT/2025 MANJU GEMS the facts and circumstances of the case it is seen that the assessee has made bogus purchases from Glorious Diamond Pvt. Ltd. and Blooming Star Diamond Pvt. Ltd. which are shell entity established to route funds as established from their financials. The assessee is not able to establish the genuineness of its transactions. It is evident that assessee has made purchases in cash from market. The source of this cash remains unexplained. Hence, the bogus purchases made by the assessee from Glorious Diamond Pvt Ltd and Blooming Star Diamond Pvt. Ltd. amounting to Rs. 1,26,57,724/- has remained unexplained and added as unexplained expenditure of the assessee u/s 69C r.w.s 115BBE of the Act. A penalty u/s 271AAC of the Income Tax Act, 1961 is initiated separately for addition made u/s 69C of the Act. We further note that before us two order were placed of Glorious Diamond Pvt. Ltd. And Blooming Star Diamond Pvt. Ltd. Whereas the peaceful assessment was completed by department of income tax. Considering the facts of this case we observe that this case was not properly adjudicated. In view of the above we are of the view that matter need proper adjudication in this case hence the order of lower authority is set aside, and we remand matter back to the file of AO for proper adjudication according to law.
In the result, the appeal of the assessee is allowed.