INDIRA DEVI PATODIA ,KOLKATA vs. ITO, WARD - 44(1), KOLKATA , KOLKATA

4. I have heard rival submissions and gone through the facts and circumstances of the case. I note that the assessee is a lady who carries on the business of sale of diamond and jewellery made of gold, gold coins and precious stones in the capacity as proprietor of M/s. Indira Jewels. During the year under consideration, the assessee had conducted total sale of Rs.45,55,541/- and the total purchases during the year was to the tune of Rs.72,79,841/-. It was brought to my notice that the transactions in respect of purchase as well as sale has been duly accounted for by proper invoices which is subjected to VAT. I note that the assessment of the assessee was reopened by the AO after getting some information on the search conducted on 03.10.2014 in the case of Bhawanlal Jain Group at Mumbai. Since the assessee had purchased some goods from M/s. Mayur Exports of the group which was searched and it was found that they were involved in providing accommodation entries, the AO reopened the assessment and issued notice u/s.133(6) of the Act which was duly replied by M/s. Mayur Exports confirming the transaction and also giving the ledger copy of M/s. Indira Jewels in its books and the relevant bank statement in respect to the transaction. Despite the confirmation from M/s. Mayur Exports, the AO did not accept the transaction as genuine and treated the entire expenses claimed by assessee as purchase was held to be bogus and entire amount was added in the hands of assessee. I am unable to countenance such an action of the AO for the simple reason that though the AO doubted the purchase he has accepted the sales. I note that all the purchases and sales are recorded regularly in the Indira Devi Patodia, AY:2011-12 books and the purchases were taken into account and charged to the P&L Account. Therefore, the only inference that can be drawn is that the goods purchased from M/s. Mayur Exports has also formed part of the goods which have been sold or lying in the stock. The AO cannot disallow the purchases without reducing either the sales or the stock by a matching sum. I note that M/s. Mayur Exports has confirmed that the assessee having purchased the goods from it for Rs.8,48,400/-. So, it cannot be held as bogus only on the strength of the investigation wing report after search on Bhanwarilal Jain Group. In case if the AO was not satisfied with the confirmation from M/s. Mayur Exports, then AO ought to have provided the adverse material if any in his posession to the assessee and in case AO was relying on Sec. 132(4) statement of third party, then assessee should have been given an opportunity to cross-examine. Moreover, when the AO has accepted the sale figure shown by the assessee, then AO cannot unilaterally disallow the expenses incurred by the assessee for purchases. So, the entire purchase cannot be added and only the profit embedded in the sale can at the best be added. I note that the assessee has shown the gross profit @ 10.25%. Relying on the decision of the Hon’ble Gujarat High Court in a similar case reported in CIT Vs. Bholanath Poly Fab Pvt. Ltd. 355 ITR 290 (Guj.) and CIT Vs. Simit P. Sheth 356 ITR 451 (Guj.), I consider the GP @ 15% would be reasonable on the facts and circumstances of the case. Therefore, I direct the AO to delete the addition and to compute GP @ 15% thus, this ground of appeal of assessee is partly allowed.

Order is pronounced in the open court on 1st March, 2019. Sd/- (Aby. T. Varkey) Judicial Member Dated : 1st March, 2019 Jd.(Sr.P.S.) Indira Devi Patodia, AY:2011-12 Copy of the order forwarded to:

5. DR, ITAT, Kolkata. (sent through e-mail)