ITO WARD-15(2), NEW DELHI vs. LA SOLITAIRE JWELS PRIVATE LIMITED, NEW DELHI

Notice u/s. 148 of the Act was issued and served upon the assessee in response to which the assessee stated that the original return filed should be considered as return filed pursuant to notice u/s. 148 of the Act.

During the course of the scrutiny assessment proceedings the assessee was asked to furnish details of transactions with the aforementioned parties. The assessee was show caused why the purchases made from the aforementioned parties be not treated as bogus purchases.

The assessee furnished all the details alongwith copies of sales invoices.

The contention of the assessee were dismissed by the AO in the absence of stock register. The AO further observed that the assessee did not file the quantity and quality wise details of opening stock and closing stock of the diamond and the sales are only shown in cash. The AO was of the firm belief that the assessee failed to produce necessary purchase account and sale account of diamonds and treated the purchases from aforementioned seven entries as bogus and made the addition of Rs.25850916/-.

Assessee agitated the matter before the CIT(A) and strongly contended that assessee has maintained regular books of account which were subjected to audit u/s. 44AB of the Act and no defect has been pointed out by the AO in the books of account of the assessee. It was pointed out that the assessee has filed conformity letters from all the parties giving their complete address, PAN details alongwith their income tax returns, copy of bank statement and the notices issued by the AO u/s. 133 (6) of the Act were duly served. It was brought to the notice of the CIT(A) that the profit margin shown by the assessee is in line with the margin shown in earlier assessment years.

After considering the facts and the submissions and pursuing the details filed by the assessee the CIT(A) observed as under :- “4.3.3.12. The appellant's plea on GP rate has been considered. In the instant case, it is seen that the AO had disallowed the entire amount of purchases/ expenditure without examining the gross profit ratio or net profit ratio of the appellant for previous year and in subsequent years. The case under appeal is not about non genuineness of purchases itself, but it is about non genuineness of suppliers. The AR has submitted the ledger accounts of Nice Diamond, Nayan Gems, Nazar Impex (P) Ltd., Dharam Impex, Mihir Diamonds, Parshwanath Gems (P) Ltd., Krishma Diamond (P) Ltd. (placed on record) where it is seen that the payments have been made by cheque/RTGS. So, it cannot be held that expenses were incurred by the appellant outside the books of accounts, Under Income Tax Act only the real income can be taxed by the Revenue. It is further to be noted that even in cases where the whole transaction is not verifiable due to various reasons, the only taxable part is the taxable income component and not the entire transaction. It is held that only the profit attributable on the total unrecorded sale consideration alone can be subject to income tax. In order to fulfill the gap of revenue leakage the disallowance of reasonable percentage of impugned purchase would meet the end of justice. Therefore, the disallowance made on account of bogus purchases is restricted to 10% of the impugned/ disputed purchases.” xxxxx

No factual error has been pointed out by the DR in the aforementioned findings of the CIT(A). After giving a thoughtful consideration to the aforementioned findings of the CIT(A) we are of the considered view that the CIT(A) has considered the facts discussed here in above in their true perspective which calls for no interference.

In the result, the appeal of the revenue is dismissed.

Since the cross objection was not seriously contested the same is also dismissed.