2023 (6) TMI 106 - AT - Income Tax

Addition of non-genuine purchases - assessee is an individual as engaged in the business of trading in diamonds - only the purchases from M/s Krishna Diam have been disputed by the Revenue on the basis of information received from the Investigation Wing - HELD THAT - As, in the present case there is no dispute regarding the fact that the assessee is also in the business of trading in diamonds, therefore, respectfully following the case of Oopal Diamond 2022 (11) TMI 620 - ITAT MUMBAI we deem it appropriate to restrict the disallowance to 3% being the profit element in the diamond trading business. As a result, other grounds raised by the assessee are partly allowed.

Summary

Issues:
1. Challenge to the impugned order dated 27/05/2022 under section 250 of the Income Tax Act, 1961.
2. Disallowance made on account of non-genuine purchases.

Analysis:
1. The appeal challenges the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2011-12. The appellant raised several grounds questioning the validity of the order, including the rejection of claims related to the reopening of assessments and the lack of relevance of cited case laws. The appellant also contested the initiation of proceedings under section 148 of the Act without new information and the denial of the opportunity for cross-examination. The Tribunal noted that certain grounds were not pressed during the hearing, leaving the remaining issue of disallowance of non-genuine purchases for consideration.

2. The case involved an individual engaged in trading diamonds, with the Assessing Officer treating purchases from a specific entity as bogus based on information received. The Appellate Tribunal observed that while the Revenue disputed the purchases, the sales made by the assessee were not questioned. Referring to a similar case, the Tribunal upheld the estimation of profit percentage at 3% in the diamond trading business, following recommendations from the Ministry of Commerce and Industry's Task Force. Consequently, the disallowance was restricted to 3%, leading to the partial allowance of the appeal.

In conclusion, the Appellate Tribunal partly allowed the appeal, emphasizing the justification for limiting the disallowance to 3% in the diamond trading business based on industry standards and recommendations. The judgment addressed the key issues raised by the appellant regarding the validity of the order and the treatment of non-genuine purchases, providing a comprehensive analysis and resolution in line with relevant legal principles and precedents.