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TMI Blog2017 (10) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... thus being of the considered view that the CIT(A) had fairly concluded that the addition in respect of the purchases which were claimed by the assessee to have been made from the aforementioned parties, viz. (i) Prime Star; (ii) Rajan Diamonds; (iii) Mayur Exports; and (iv) Parvati Exports was liable to be restricted to 3% of the aggregate value of the purchases, therefore, find no reason to dislodge the well reasoned order of the CIT(A). We thus, in the backdrop of our aforesaid observations, finding ourselves as being in agreement with the view taken by the CIT(A), therefore, uphold his order. - I.T.A. Nos.230-232/Mum/2017 - - - Dated:- 13-10-2017 - SHRI RAJENDRA, AM AND SHRI RAVISH SOOD, JM For The Assessee : Shri. Raj A. Kapadia For The Revenue : Shri. V. Jenardhanan, D.R. ORDER PER RAVISH SOOD, JUDICIAL MEMBER : The present set of appeals filed by the revenue are directed against the respective orders passed by the CIT(A)-30, Mumbai, in the case of the aforementioned assessee, viz. M/s Manek Gems Art International for A.Y 2007-08, 2009-10 2012-13, each dated 26.10.2016, which in itself arises from the respective assessment orders passed u/s147 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch and survey proceedings conducted in the case of the aforementioned persons/entities revealed that Shri. Bhanwarlal Jain and the aforesaid bogus concerns were merely engaged in the business of providing accommodation entries and were not carrying on any genuine business. 3. The A.O was in receipt of information from the office of the DGIT (Inv.), Mumbai, that the assessee had during the year under consideration taken the following accommodation entries of purchases from certain dummy concerns forming part of Bhanwarlal Jain group, as under :- Sr. No. Name of the hawala party Bill amount (in Rs.) 1. Prime Star 16,43,537/- 2. Rajan Diamonds 70,90,480/- 3. Mayur Exports 20,72,436/- 4. Parvati Exports 29,67,054/- Total 1,37,73,507/- The A.O on the basis of the aforesaid information reopened the case of the assessee under Sec. 147 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... times the salary is disbursed to them on need basis, as and when required. It has been observed that the profit of the concerns in which such employees are shown as directors, partners or proprietors are maintained more or less equivalent to their annual salary. In the regular books of the said concern, the profit is shown to be appropriated by the concerned director/partner/proprietor; however the same is actually appropriated by Bhanwarlal Jain Family. These employees merely get salary for /ending their names to various concerns and for doing miscellaneous office work looking after banking transactions and data entry of the accounts etc. In some cases, wives of these employees are shown to be receiving salary from certain concerns without rendering any services. f. The concerns in which these employees are shown as directors/ partners/ proprietors are operating premises in the name of Bhanwarlal Jain family. g. The concern is shown to be engaged in import of diamonds. However when the name sake directors/partners/proprietors were specifically asked to explain how they contacted the party from whom the imports have been made in the respective concerns, he was unabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase transactions claimed to have been made from the aforementioned entities, viz. (i) Prime Star; (ii) Rajan Diamonds; (iii) Mayur Exports; and (iv) Parvati Exports, therefore, the A.O had characterised the same as bogus purchase transactions. It was further observed by the CIT(A) that the A.O had after relying on the statements recorded under oath of the persons in charge of the aforementioned bogus concerns of Bhanwarlal Jain group, and further deliberating on the information available on record, had only thereafter concluded that the assessee had merely taken accommodation entries from the said bogus concerns and had not carried out any genuine purchases from them. It was further observed by the CIT(A) that the AO after rejecting the books of account of the assessee under Sec.145(3), had thus disallowed the entire purchases of ₹ 1,37,73,507/- which were claimed by the assessee to have been made from the aforementioned parties. The CIT(A) observed that though it remained as a matter of fact that the A.O had neither made any independent verifications, nor made any efforts to issue notices under Sec. 133(6)/131 of the Act to the aforementioned parties, but after takin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were claimed by the assessee to have been made was under serious doubts, but the genuineness of the purchases on a whole could not be doubted. It was observed by the CIT(A) that it could safely be concluded that the assessee had made purchases of the goods under consideration, though not from the aforementioned bogus parties, but from certain other parties operating in the open/grey market. That in the backdrop of the aforesaid facts, it was observed by the CIT(A) that now when the corresponding sales of the aforesaid goods was duly accounted for by the assessee in its books of account, therefore, the entire amount of the purchase consideration could not have been added to the income of the assessee. The CIT(A) deliberating on the aforesaid facts, thus concluded that addition in the hands of the assessee could only be made in respect of the profit embedded in the purchases made by the assessee from the open/grey market. 6. The CIT(A) after concluding that the addition in respect of the aforesaid bogus purchase transactions was liable to be restricted only as regards the profit element that would be involved in making of the purchases of the goods under consideration by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on genuine purchases made during the year under consideration also may be sustained to the extent of 3% of the aggregate of such purchases. The CIT(A) on a cumulative perusal of the aforesaid facts, thus concluded that the profit element involved in the trade line of the assessee could safely be taken at 2% to 3%. Thus, in the backdrop of the aforesaid facts, the CIT(A) concluded that the addition in respect of the aggregate of the purchases made by the assessee from the aforementioned four parties, viz. (i) Prime Star; (ii) Rajan Diamonds; (iii) Mayur Exports; and (iv) Parvati Exports, could fairly be taken at 3%. 7. The revenue being aggrieved with the order of the CIT(A) had carried the mater in appeal before us. We find that despite having been put to notice as regards the fixation of the hearing of the appeal vide a notice forwarded by Registered post (RPAD), the respondent assessee had neither put up an appearance before us, nor any application seeking an adjournment had been filed. We thus, in the backdrop of the aforesaid facts proceed with the hearing of the appeal as per Rule 25 of the Appellate Tribunal rules, 1963, after hearing the appellant revenue. We have heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was liable to be restricted only as regards the profit element which was embedded in making of purchases by the assessee from the open/grey market. We find that the CIT(A) though was not oblivious of the fact that in respect of bogus purchases made in a normal business, the courts had consistently estimated the profit margin involved in making of purchases from the open/grey market at 12.5% of the value of the bogus purchases, but then, not loosing sight of the fact that unlike those cases, in the trade line of diamond business the profit margin that would be involved would not exceed 3%, thus for the said reason had restricted the addition in the hands of the assessee @ 3% of the aggregate value of the bogus purchases made by the assessee. We have given a thoughtful consideration to the facts of the case and are persuaded to be in agreement with the view so taken by the CIT(A). We thus being of the considered view that the CIT(A) had fairly concluded that the addition in respect of the purchases which were claimed by the assessee to have been made from the aforementioned parties, viz. (i) Prime Star; (ii) Rajan Diamonds; (iii) Mayur Exports; and (iv) Parvati Exports was l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t carried out any genuine purchase from the bogus concern, viz. Megha Gems, but as a matter of fact had merely obtained accommodation bills from it. However, the CIT(A) being of the view that as the assessee had purchased the goods under consideration, though not from the aforementioned bogus concern, but from the open/grey market, therefore, concluded that now when the corresponding sales of the goods under consideration were not doubted by the A.O, therein the addition in the hands of the assessee was liable to be restricted only to the extent of the profit element involved in making of such purchases from the open/grey market. The CIT(A) on the basis of his aforesaid conviction restricted the addition in the hands of the assessee to the extent of 3% of the aggregate value of the purchases which were claimed by the assessee to have been made from the aforementioned bogus concern, viz. Megha gems. 12. The revenue being aggrieved with the order of the CIT(A) had carried the matter in appeal before us. We find that as the facts and the issue involved in the present appeal are the same as were there before us in appeal of the revenue for AY: 2007-08 in ITA No. 230/mum/2017, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.2015, wherein after making addition of the entire purchases aggregating to ₹ 4,24,96,885/- (supra) claimed by the assessee to have been made from the aforementioned bogus concerns, the total income of the assessee was assessed at ₹ 4,46,13,210/-. 16. The assessee assailed the assessment order before the CIT(A). The CIT(A) agreed with the observations of the A.O and concluded that the assessee had not carried out any genuine purchase from the abovementioned dummy concerns, but as a matter of fact had merely obtained accommodation bills from them. However, the CIT(A) being of the view that as the assessee had purchased the goods under consideration, though not from the aforementioned bogus concerns, but from the open/grey market, therefore, concluded that now when the corresponding sales of the goods under consideration were not doubted by the A.O, therein the addition in the hands of the assessee was liable to be restricted only to the extent of the profit element involved in making of such purchases from the open/grey market. The CIT(A) on the basis of his aforesaid conviction restricted the addition in the hands of the assessee to the extent of 3% of the aggreg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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