2023 (3) TMI 969 - AT - Income Tax

Estimation of income - Non-genuine purchases - HELD THAT - As per the report of the Task Force for Diamond Sector constituted by the Ministry of Commerce and Industry after considering the BAP (Benign Assessment Procedure) scheme, the Task Force recommended that the net profit prevailing in the Diamond Industry engaged in the business of trading would be in the range of 1% - 3% and those engaged in the business of manufacturing would be in the range of 1.5% - 4.5%. In the present case, there is no dispute regarding the fact that the assessee is also in the business of trading in diamonds. Considering the same, we deem it appropriate to restrict the disallowance to 3% being the estimated gross profit of the bogus purchases. As the assessee claims that it has already offered to tax gross profit of 2.75% on the aforesaid transaction. Therefore, we direct the AO to verify the aforesaid submission and grant relief to the assessee to the extent the gross profit, on the non-genuine purchases, has already been offered to tax by the assessee.Appeal by the assessee is partly allowed.

Summary

Issues involved:
1. Condonation of delay in filing the appeal.
2. Validity of re-opening the case under section 147 of the Income Tax Act.
3. Disallowance made on account of non-genuine purchases.

Condonation of delay in filing the appeal:
The appeal challenging the order dated 15/06/2022 was delayed by 101 days. The assessee sought condonation of delay, attributing it to a misunderstanding regarding online filing due to technical issues. The Tribunal noted that the appeal filing fees were paid within the limitation period, indicating the intention to file timely. Considering the submissions and affidavit, the delay was condoned, allowing the appeal to proceed on merits.

Validity of re-opening the case under section 147 of the Income Tax Act:
The appeal raised concerns about the re-opening of the case for the assessment year 2011-12 under section 147. The Assessing Officer initiated proceedings based on information from the Investigation Wing without conducting independent inquiry. The Tribunal addressed the grounds challenging the initiation of proceedings, which were not pressed during the hearing. The issue focused on the legality of re-assessment proceedings and the formation of prima facie opinion for income escapement.

Disallowance made on account of non-genuine purchases:
The dispute centered on disallowance of purchases from M/s Mayank Impex, treated as bogus by the Assessing Officer. The appeal contested the disallowance and partial relief granted by the CIT(A). The Tribunal considered the profit element based on industry standards and directed the Assessing Officer to verify the gross profit offered for taxation by the assessee. Relief was granted by restricting the disallowance to 3% of the estimated gross profit, aligning with the Task Force recommendations for the diamond industry.

In conclusion, the Tribunal partially allowed the assessee's appeal concerning the disallowance of non-genuine purchases, while addressing issues related to delay condonation and the validity of re-opening the case under section 147 of the Income Tax Act. The decision provided detailed analysis and considerations based on legal provisions and industry standards, ensuring a comprehensive resolution of the contested grounds.