INCOME TAX OFFICER -19(2)(2), MUMBAI, MUMBAI vs. KHODIYAR IMPEX, MUMBAI

1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in reducing gross profit @ 3% as against the 100% addition made by the Assessing office on account of bogus purchases of Rs. 1,86,50,000/, by Ignoring the fact that the DGIT (Inv.), had proved beyond doubt that Mr. Bhawarlal Jain & his Group concerns were involved in providing accommodation entry of sales & purchases without actual delivery of goods and the assessee was one of the beneficiary who accepting accommodation entries for the purchases of goods?"

Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in reducing gross profit 3% as against the 100% addition made by the Assessing office on account of bogus purchases of Rs. 1,86,50,000/, by ignoring the fact that assessee had not responded to the Notices of Assessing officer during the assessment proceedings and failed to establish the genuineness of the purchase parties from whom purchases is claimed to have been made during the year?" 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in reducing gross profit @3% as against the 100% addition made by the Assessing office on account of bogus purchases of Rs. 1,86,50,000/-, by ignoring the fact that during the assessment proceedings, the assessee could neither produce any documents or evidences such as the delivery challans or the transport bills/invoices nor could produce the alleged parties from whom purchases is claimed to have made during the year ?" 5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the gross profit @ 3% as against the 100% addition made by the Assessing office on account of bogus purchases of Rs.1,86,50,000/-, by ignoring the fact that, the DGIT Inv.) Mumbai during their course of investigation found that the assessee had made purchases aggregating to Rs. 1,86,50,000/- from two alleged parties ie. Jewel Diam Rs. 80,50,000/- and Mr. Daksh Diamonds Rs. 1,06,00,000/-, which were belong to Bhanwarlal Jain group, engaged in providing only accommodation/bogus purchase bills?" 6. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that the assessee has opted for DTVSV for A.Y. 2010-11 & 2011-12, which implies that the assessee has accepted in principle about non-genuineness of the purchase?" 7. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary?”

Fact in brief is that assessee has filed return of income on 30.10.2007 declaring total income at Rs.16,44,320/-. The return was processed u/s 143(1) of the Act. Subsequently, the case was reopened by issuing of notice u/s 148 of the Act on 27.03.2014. The assessing officer received information from the Investigation wing Mumbai that P a g e | Income Tax Officer-19(2)(2) Vs. Khodiyar Impex search and survey action was carried out by the Investigation Wing, Mumbai on 03.10.2013 in the case of Bhanwarlal Jain Group who were involved in providing accommodation entries in the forms of issuing of bogus sales/purchase bills without supplying any goods. As per the list of the parties forwarded by the DGIT(Investigation) details of accommodation entries availed by the assessee for the year under consideration is as under:

Heard both the sides and perused the material on record. During the course of assessment on the basis of information received from the Investigation Wing Mumbai that assessee has obtained accommodation bills of Rs.1,86,50,000/- from the two entities relating to Bhanwarlal Jain Group the assessing officer has disallowed the entire purchases shown to have been made from the aforesaid two entities. The ld. CIT(A) had considered the report of the task group for diamond sector which reported that the net profit in diamond manufacturing was in the rate 1.5% to 4.5% and in trading in the range of 1% to 3%. Before the ld. CIT(A) the assessee submitted that in the subsequent assessment years for assessment year 2009-10 to 2011-12 on identical issue the assessing officer had made addition of gross profit @ 3% of the non- genuine purchases in the case of the assessee. The ld.CIT(A) has taken into consideration the prevailing rate of profit element found in the case of diamond business and also considered the material fact that AO in the subsequent assessment years for assessment years 2009-10 to 2011-12 has made addition of gross profit @ 3% of non-genuine purchases in assessee’s own case. Further we observe that assessing officer has not disproved the corresponding sale made against the purchases by the assessee. In view of the above facts and circumstances we consider that ld. CIT(A) is justified in restricting the addition to the extent of profit element embedded in the transaction reported to have made with the two parties as discussed above which was involved in providing accommodation entries. Therefore, we don’t find any reason to interfere in the finding of ld. CIT(A). Accordingly, all the ground of appeal filed by the revenue are dismissed.