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2023 (11) TMI 1151 - HC - Income TaxEstimation of income - bogus purchases - CIT(A) restricted the disallowance to the extent of 12.5% impugned purchase / disputed purchase - ITAT taking the consistent the disallowance of purchase in the present case restricted to 6% of the disputed purchases - HELD THAT - On an identical question of law 2023 (1) TMI 835 - GUJARAT HIGH COURT and held with the case of Shri Bhanwarlal Jain and others involved therein, if addition directed of 6% of the disputed purchases by noting that the profit margin in the said industry is 5% to 7% without even going by the estimation of the possible profit margin in the industry, suffice to note that in all cases relating to Shri Bhanwarlal Jain, both, the Assessing Officer and the CIT (Appeals), Mumbai, have chosen to make addition @ 3% to 5% of the bogus purchases. That view of the matter, no purpose is going to be served in interference. There are concurrent findings with sound reasons. Also decided in Mayank Diamonds Pvt. Ltd. 2014 (11) TMI 812 - GUJARAT HIGH COURT Court allowed the gross profit rate of 5% holding that 12.5% is drastically higher. In N.K. Industries Pvt. Ltd. 2016 (6) TMI 1139 - GUJARAT HIGH COURT where the Court had considered the addition of entire amount on the ground that the fictitious purchases is a factually different than what was already held at M/s. Mayank Diamonds Pvt. Ltd., (supra). In the other cases of Shri Bhanwarlal Jain also, addition rates are 3% to 5% where no further challenge possibly is there or it has not been processed further. Thus no substantial question of law arises for consideration of this court.
Issues Involved:
1. Validity of reopening under section 148 of the Income Tax Act. 2. Sustaining the 6% Gross Profit (GP) rate on purchases. 3. Addition of 6% in absence of rejection of audited books of accounts. 4. Confirmation of addition despite evidence provided by the appellant. 5. Confirmation of addition without cross-examination of Mr. Bhanwarlal Jain. Summary: 1. Validity of Reopening under Section 148: The court addressed whether the Income Tax Appellate Tribunal (ITAT) erred in confirming the validity of reopening under section 148. The reopening was based on information from the DGIT (Investigation) Mumbai regarding the Bhanwarlal Jain Group's involvement in providing bogus accommodation entries. The assessee's objections to the reopening were rejected by the Assessing Officer (AO), who relied on the investigation report and recorded reasons for reopening. 2. Sustaining the 6% Gross Profit Rate: The court examined the Tribunal's decision to sustain a 6% GP rate on purchases amounting to Rs. 19,53,98,343/-. The AO had identified bogus purchases from entities managed by the Bhanwarlal Jain Group and issued a show cause notice to the assessee. The assessee's reply, which included various documentary evidences, was not accepted by the AO, who relied solely on the investigation report to make the disallowance. 3. Addition of 6% in Absence of Rejection of Audited Books: The court considered whether the Tribunal was right in confirming the addition of 6% without rejecting the audited books of accounts. The AO did not examine or point out any defects in the books of accounts, stock register, or sale register provided by the assessee. The CIT(A) and Tribunal noted that the AO made additions based on third-party information without rejecting the books of accounts. 4. Confirmation of Addition Despite Evidence Provided: The court evaluated the Tribunal's decision to confirm the addition despite the appellant proving that all disputed parties were assessed to tax and stock tally was provided. The CIT(A) and Tribunal observed that the AO did not consider the detailed evidences furnished by the assessee, including purchase bills, bank statements, and stock registers, which showed no irregularities. 5. Confirmation of Addition Without Cross-Examination: The court reviewed the Tribunal's decision to confirm the addition without providing the statement of Mr. Bhanwarlal Jain or allowing his cross-examination. The Tribunal found that the AO made additions based on the investigation report without providing the assessee an opportunity for cross-examination, which was a significant procedural lapse. Conclusion: The court dismissed the tax appeals, stating that no substantial question of law arose for consideration. The Tribunal's decision to restrict the disallowance to 6% of the disputed purchases was upheld, aligning with the profit margins in the industry and previous cases involving the Bhanwarlal Jain Group. The court emphasized the importance of providing cross-examination and considering all documentary evidences before making additions.
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