9911796707
TMI Blog2017 (11) TMI 1708X X X X Extracts X X X X X X X X Extracts X X X X ..... t by : Ms. N. Hemalatha ORDER The assessee has filed this appeal challenging the order dated 26-05- 2017 passed by Ld CIT(A) partially confirming the addition relating to bogus purchases made in assessment year 2009-10. 2. I heard the parties and perused the record. The assessee is a partnership firm engaged in the business of trading and export of diamonds. The assessing officer received information that the assessee has availed accommodation entries in the form of purchase of diamonds to the tune of ₹ 692.82 lakhs from concerns controlled by Shri Rajendra Jain/Sanjay Chaudhary group. Hence the AO reopened the assessment of the year under consideration by issuing notice u/s 148 of the Act. Since the assessee had reconcil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evitable conclusion to be drawn is that the assessee might have made these purchases from other parties/open markets or through broker or from any other source best known to assessee. 9. Taking into account the above facts and circumstances, the only .fair conclusion that can be arrived is that the assessee was a beneficiary of the accommodation hills issued by aforesaid hawala dealers wherein, there was not any actual/physical delivery of the goods. Since the exports/sales are claimed to be genuine as foreign revenue has been derived through business activities of the assessee, it can be reasonably inferred that the assessee was actually in possession of diamonds. This is based on the footing that there cannot be any sales without purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from grey market instead of normal course. Two aspects need to be taken into consideration in such circumstances. First is, these diamonds in the grey market are always cheaper than the diamonds sourced from the genuine dealer. This is because, the genuine dealer would charge his incidental cost including the whole administrative cost while selling the diamond in the market, whereas the petty dealers in the grey market do not carry such incidental charges on such sales, wherein they are only looking for a quick profit. Secondly, there is always an element of discount in the case of instant cash purchase. This is a common practice followed in the diamond market, and the entities operating in the market would always look for reaping such bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... centage, as explained in the instruction no. 02/2008 dated 22nd February 2008, introduced by Hon'ble .finance minister for. the assessee engaged in the business of manufacturing and or trading of diamonds as benign assessment procedure is at 6%. And hence it can be presumed that most of the traders in the market actually operate not below this level of margin in the open market. BAP was to be applicable .for those diamond merchants, who were showing profit margin of 6% of their turnover. Although, this BAP talks about the net profit margin (NP), for a petty dealer, operating without any establishment, the GP would be almost similar to NP. 10.3 In view of the fact that the bogus purchase(accommodation entries) has been recorded in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it as a percentage of turnover would be reviewed annually on the basis revenue generation and results of scrutiny assessment, searches and surveys made during the year . Thus, the benign assessment procedure (BAP) or the percentage mentioned in the instruction no. 2 of 2008 cannot be applied across the board in all cases of assessees engaged in diamond business. In diamond trade the rate of VAT is stated to be 1% and in some places like Surat the same is stated to be fully exempt. The task force group for. diamond industry constituted by the Government of India, Ministry of commerce and Industry, after considering the BAP scheme, recommended presumptive tax for net profit calculated 2% of trading activity and 3% for manufacturing activity ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
