2023 (9) TMI 623 - HC - Income Tax

Estimation of income - bogus purchases -Tribunal estimating the addition in respect of bogus purchases @ 6% - assessee is an individual engaged in the business of trading activity of diamonds - HELD THAT - As decided in 2023 (3) TMI 1402 - GUJARAT HIGH COURT the view taken and the conclusion arrived at by the appellant Tribunal are based on material before it and after analysing the facts and figure available before it. When the Tribunal has thought it fit to reduce the disallowance at 6% Tribunal had before it the facts which were duly analysed by it. No interference is called for in the said conclusion and findings of the Tribunal in the present appeal by this court. No substantial question of law.

Summary

Issues involved:
The judgment deals with the estimation of addition in respect of bogus purchases by the Income Tax Appellate Tribunal, considering the discrepancies in the amounts and the legal justifications provided.

Issue 1: Estimation of addition in respect of bogus purchases
The appeals arose from a common order passed by the Income Tax Appellate Tribunal regarding the estimation of the addition in respect of bogus purchases. The Tribunal estimated the addition at 6% of such purchases, deviating from the disallowance made by the Assessing Officer at 100%. The Tribunal justified this estimation despite the purchases being sham transactions fabricated through bogus paper concerns of Gautam Jain Group entities providing accommodation entries.

Issue 2: Application of precedent in estimating addition
The Tribunal relied on the decision of the Hon'ble Gujarat High Court in the case of Mayank Diamonds Pvt. Ltd. to estimate the addition in respect of bogus purchases at 6% instead of the direction of the High Court in that case to make the addition at the rate of 5% of the total turnover. This discrepancy in application of precedent was a key point of contention in the judgment.

Summary of Judgment:
The assessee, engaged in diamond trading, faced scrutiny due to involvement with Gautam Jain group's non-genuine transactions. The CIT(A) partially allowed the appeals, confirming 5% of the impugned purchase. The Tribunal, however, restricted the disallowance to 6% of the purchases, citing the precedent set by a coordinate bench in a similar case. The Tribunal considered the submissions regarding bills, vouchers, and banking transactions but upheld the 6% estimation based on the nature of the purchases.

During the hearing, the Tribunal's decision in a related case was referenced, where the Tribunal reduced the disallowance to 6% based on the facts presented. This reduction was deemed justified to prevent revenue leakage. Another case involving the same group providing accommodation entries resulted in a decision favoring the assessee, further influencing the judgment.

Ultimately, the High Court dismissed the appeals, stating that no substantial question of law arose based on the facts and the precedent applied. The judgment highlighted the importance of analyzing the facts and figures before making estimations regarding bogus purchases to prevent revenue leakage.