2020 (2) TMI 137 - AT - Income Tax

Bogus purchases - assessment u/s 153A - GP Estimation on bogus purchases - HELD THAT - The assessee neither appeared before us, nor filed any details to prove that findings of fact recorded by the Ld.CIT(A) is incorrect. We further noted that the findings recorded by the Ld.CIT(A) is based on the recommendation of the Task force constituted by the Ministry of Commerce and Industry, Government of India and also, the decision of co-ordinate bench of ITAT, in the case of Renisha Impex Pvt.Ltd. 2017 (10) TMI 1509 - ITAT MUMBAI . Therefore, we are of the considered view that the Ld.CIT(A) was right in estimating 6% gross profit on alleged non genuine purchases and further allowed deductions towards gross profit already declared by the assessee for the relevant period .

Summary

Issues Involved:
1. Whether the assessee engaged in accommodation transactions with Rajendra Jain Group, Sanjay Chaudhari Group, and Dharmi Chand Group.
2. The correctness of the addition of ?3,08,65,565/- made by the AO on account of alleged non-genuine purchases.
3. The appropriateness of reducing the net profit on non-genuine purchases from 8% to 5.49% by the CIT(A).

Issue-wise Detailed Analysis:

1. Accommodation Transactions with Rajendra Jain Group, Sanjay Chaudhari Group, and Dharmi Chand Group:

The assessee was accused of entering into accommodation transactions with the Rajendra Jain Group, Sanjay Chaudhari Group, and Dharmi Chand Group. This assertion was based on a search and seizure action conducted on 05/05/2014, revealing that the assessee had taken accommodation entries of bogus purchases from these groups. The investigation wing supported this with evidence from a search action on 03/10/2013 in the cases of these groups. Despite the assessee's claim that all purchases were genuine and recorded in the books of accounts, the AO concluded that the purchases were non-genuine based on the modus operandi of the entry providers and the statements recorded during the search.

2. Addition of ?3,08,65,565/- on Account of Alleged Non-Genuine Purchases:

The AO made an addition of ?4,49,77,145/- towards alleged non-genuine purchases, calculating an 8% profit on these purchases. The assessee contended that the purchases were genuine and supported by necessary evidence, including payments through proper banking channels. The CIT(A) considered the recommendation of the Task Force for the diamond industry, which suggested a net profit of 2% for trading activity, 3% for manufacturing activity, and 2.5% across the board for the diamond industry. The CIT(A) scaled down the additions to a 6% profit on non-genuine purchases, allowing relief for the gross profit already declared by the assessee. The Tribunal upheld this finding, noting that the CIT(A)’s decision was based on recommendations and judicial precedents.

3. Reduction of Net Profit on Non-Genuine Purchases from 8% to 5.49%:

The revenue challenged the CIT(A)'s decision to reduce the net profit on non-genuine purchases from 8% to 5.49%. The CIT(A) justified this reduction by relying on the Task Force's recommendations and judicial precedents, including cases where similar reductions were upheld. The Tribunal found no error in the CIT(A)'s findings, noting that the decision was based on a thorough analysis of the diamond industry's margins and the evidence collected during the search. The Tribunal upheld the CIT(A)'s estimation of a 6% gross profit on non-genuine purchases, allowing deductions for the gross profit already declared by the assessee.

Conclusion:

The Tribunal dismissed the appeals filed by both the assessee and the revenue for AY 2011-12 to 2014-15, upholding the CIT(A)'s findings and the reduced net profit estimation on non-genuine purchases. The Tribunal's decision was based on the detailed analysis and recommendations of the Task Force for the diamond industry, as well as relevant judicial precedents. The order was pronounced in the open court on 29/01/2020.