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2019 (2) TMI 1459 - AT - Income TaxEstimation of profit on bogus purchases - profit element was directed to be computed @ 8% by CIT-A - HELD THAT - The statement of Shri Bhavarlal jain was recorded during the course of search, wherein, he admitted that he provided accommodation entries of bogus purchases including the present assessee. The assessee was asked to produce necessary details. No details were filed by the assessee nor the party was produced for verification in spite of repeated opportunities. Considering the factual matrix, the profit on such bogus purchases was calculated @ 12.5% by the ld. Assessing Officer. On appeal before the CIT (Appeal), various decisions were considered and finally, the profit element was directed to be computed @ 8%, which is under challenged before this Tribunal. No infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal), because, he has already taken a reasonable view considering various decisions, including the decision M/s Dhadda Gems Ltd. 2017 (6) TMI 65 - ITAT MUMBAI - Decided against assessee.
Issues Involved:
1. Treatment of purchase of diamonds as bogus purchases. 2. Reliance on the statement of Shri Bhavarlal Jain. 3. Determination of profit margin on alleged bogus purchases. 4. Opportunity to cross-examine the witness. 5. Concurrent findings of appellate authorities. Detailed Analysis: 1. Treatment of Purchase of Diamonds as Bogus Purchases The primary issue revolves around the treatment of diamond purchases amounting to ?89,93,902/- as bogus. The assessee contended that these purchases were genuine, while the Revenue relied on the statement of Shri Bhavarlal Jain, who claimed to provide accommodation entries for bogus purchases. The Tribunal referenced multiple judgments, including the Hon'ble Gujarat High Court's decision in Sanjay Oilcakes Industries vs. CIT, which upheld the disallowance of 25% of purchase amounts when sellers were untraceable, suggesting the possibility of inflated purchase prices. 2. Reliance on the Statement of Shri Bhavarlal Jain The Revenue's case was significantly based on the statement of Shri Bhavarlal Jain, who admitted to providing accommodation entries. However, the Tribunal noted that Shri Bhavarlal Jain was neither the proprietor of M/s Mayur Exports nor related to Mr. Arvind Jain, the actual proprietor. This raised questions about the reliability of his statement as the sole basis for treating the purchases as bogus. 3. Determination of Profit Margin on Alleged Bogus Purchases The Assessing Officer initially calculated the profit on the bogus purchases at 12.5%, which was later reduced to 8% by the Commissioner of Income Tax (Appeal). The Tribunal upheld this reduction, referencing the Hon'ble Gujarat High Court's decision in CIT vs Bholanath Poly Fab. Pvt. Ltd., which held that only the profit margin embedded in the purchase amount should be subject to tax, not the entire purchase amount. 4. Opportunity to Cross-Examine the Witness The Tribunal emphasized the importance of cross-examination, referencing the Hon'ble jurisdictional High Court's decision in CIT vs Ashish International Ltd., where it was held that the assessee must be given an opportunity to cross-examine the witness whose statement is being relied upon. In this case, the assessee was not given such an opportunity, weakening the Revenue's position. 5. Concurrent Findings of Appellate Authorities The Tribunal noted that both the Commissioner (Appeals) and the Tribunal had concurrently accepted the findings of the Assessing Officer regarding the untraceability of the sellers and the likelihood of inflated purchase prices. This was consistent with the Hon'ble Gujarat High Court's decisions in Sanjay Oilcakes Industries and Vijay M. Mistry Construction Ltd., which upheld the appellate authorities' estimates based on the evidence available. Conclusion: The Tribunal concluded that there was no infirmity in the Ld. Commissioner of Income Tax (Appeal)'s decision to compute the profit element at 8%. The appeal of the assessee was dismissed, affirming the lower authorities' findings that the purchases were not genuine and involved inflated prices. The judgment emphasized the need for fair estimation and the importance of cross-examination in such cases.
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