DHADDA GEM N JEWELS ,MUMBAI vs. ITO, WARD-19(1), MUMBAI

Date of Hearing : 21.02.2024 Date of Pronouncement : 23.02.2024 O R D E R

Per Padmavathy S, AM:

“3.1. We have heard rival submissions and perused the materials available on record. The assessee is an importer, exporter and manufacturer of diamonds and dealer in diamonds, precious stones and jewellery. During the course of assessment

Dhadda Gem N Jewels proceedings, the assessee produced the books of accounts and records containing details of purchases, sales, bank statements and creditors before the Id. AO. The confirmation from all the creditors were called for which were also duly filed before the Id. AO. The Id. AO observed that assessee had made certain purchases from certain parties belonging to Shri Rajendra Jain group and that during the course of search conducted in the case of Shri Rajendra Jain Group on 3/10 / 2013 it revealed that certain parties were indulged in providing accommodation entries of purchases at the behest of Shri Rajendra Jain group. Since, the assessee had made certain purchases from those parties, the Id. Ao proceeded to examine the veracity of the purchases made thereon. It is not in dispute that assessee had indeed made payments for those purchases to the concerned suppliers by account payee cheques. It is not in dispute that assessee had furnished the details of corresponding sales made out of disputed purchases by producing the relevant sale invoices, ledger copy of the parties, bank statement showing payments made through account payee cheques, stock register, copy of affidavits of persons confirming the transactions with the assessee, confirmation from parties confirming sales made to assessee alongwith their copy of ITR, their bank statements, PAN, their affidavit confirming the genuineness of transactions etc., Despite all these facts, the Id. AO observed that the purchases made by the assessee were not proved beyond reasonable doubt as the suppliers belong to Shri Rajendra Jain group. Accordingly, the Id. AO proceeded to estimate the profit element embedded in the value of such disputed purchases at 5% and brought the same to tax in both the years under consideration. This profit percentage was reduced to 3% by the Id. CIT(A) for both the years. It is only an estimation of profit that had been made by both the lower authorities in the instant case. The report of the task group for diamond sector submitted to Department of Commerce suggested that the net profit that could be derived in the diamond manufacturing ranges from 1.5% to 4.5% and in trading activity thereof, the profitability range is 1% to 3%. Considering the same, we deem it fit to estimate the profit percentage embedded in the value of disputed purchases @2% which, in our considered opinion, would meet the ends of justice. Accordingly, the grounds raised by the assessee in this regard for both the years are partly allowed.”

Dhadda Gem N Jewels 6. We heard the parties and perused the material on records. From the perusal of facts of the present case, and the nature of business in which the Assessee is engaged in, we are of the considered view that the ratio laid on by the coordinate bench in the case of M/s. Star Brillian (supra) is applicable to Assessee's case also. Therefore, respectfully following the above decision of the coordinate bench, we are of the considered view that it could be justified if the profit elements embedded in the impugned purchases are estimated at 2%. Accordingly, we direct the AO to estimate the profit from non-genuine purchases at 2% and make the addition accordingly.