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TMI Blog2019 (3) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... this case the sales have not been doubted. It is settled law that when sales are not doubted, 100% disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported in the case of Nikunj Eximp Enterprises [2014 (7) TMI 559 - BOMBAY HIGH COURT] has upheld 100% allowance for the purchases said to be bogus when sales are not doubted. However, in that case all the supplies were to the government agency. In the present case, the facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. In su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of only 3% in view of the deicison of Hon ble Calcutta High Court in case of Precision Finance Pvt. Lts. Which stated that mere payment sustaining only an addition @ 3% profit rate on total purchases of ₹ 5.57,61,124/- made from 4 parties when in fact the assessee had failed to prove the genuineness of the said purchases ? 3. Whether on the facts and in the circumstance of the case and in law, the Learned. CIT(A) has erred in directing the AO to restrict the estimation of the profit at 3% instead of 100% of the total non-genuine purchases when he himself has accepted that these purchases are non genuine as held by AO ? 4. The appellant prays that the order of the Ld.CIT(A) on the above grounds be set aside and that o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Rajendra Kumar Jain and others. It was found that the group concerns are .all paper companies/firms, proprietorship concern with no real business activities, operating solely with the purpose of facilitating fraudulent financial transactions which includes, among others, providing accommodation entries in the form of unsecured loans to interested parties, issuing of bogus sale bills to various parties and providing a bogus front to concerns which do not want to import diamonds in their own hands/books of accounts. Post search investigation reveals that the assessee has taken accommodation entries in the form of bogus purchases from M/s Vitrag Jewels amounting to ₹ 86,74,541/-. 5. After obtaining the explanations from the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me time, the A.O. did not disturbed the sale, ignoring the fact that there will not be any sale without the purchases. He opined that there are every change that the assessee might have purchased the goods through grey market. He further observed as under: 6.8 From the above discussion, one can safely conclude that the appellant had obtained only the bills from the above-mentioned parties without actually getting the material. However, it is also a matter of fact that the purchases from these concerns have been entered into the stock register and the assessee has shown corresponding sales against the said purchases. This could only mean that the diamonds were bought by the assessee, from grey market without bills and to adjust these tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al purchases by holding as under: 6.13 Taking into consideration the above facts, the issue arrives at, is to what would be the margin, one can expect while buying the material from grey market instead of normal course of business from regular dealers. Two aspects need to be taken into consideration in such circumstances. First, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 2 to 3 percent and the taxes saved is around 1% and also on purchases made from places like Surat, there is no levy of tax, I am of the considered opinion that if the addition is sustained to the extent of 3% of the purchases made as the profit element embedded in such purchases from four parties belonging to the Rajendra Jain and others, the same will meet the ends of justice. Accordingly I direct the AO to restrict the addition @3%, on the total purchases of ₹ 5,57,61,124/~ from the four parties as the profit element embedded in such purchases. Grounds raised on this issue are treated as Partly Allowed'. 8. Against the above order, the Revenue is in appeal before us. 9. We have heard the ld. Departmental Representative ..... X X X X Extracts X X X X X X X X Extracts X X X X
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