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TMI Blog2019 (4) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... and what is required to be proved is genuineness of transactions. In this case, the AO has brought out number of reasons to doubt transactions between the parties, but the assessee failed to file any evidence to contradict the facts brought out by the AO while making addition towards unsecured loan. Therefore, we are of the considered view that the lower authorities were right in making addition towards unsecured loan taken from three companies belonging to Shri Bhanwarlal Jain and hence, we are not inclined to deviate from the findings recorded by the Ld.CIT(A). Accordingly, the ground of appeal taken by the assessee is rejected. Disallowance of interest u/s 14A r.w.r. 8D(2)(ii) - assessee claims that no interest bearing funds have been used for investment - HELD THAT:- We find that the assessee’s capital is more than the amount of investments in shares which yielded exempt income. Therefore, AO was erred in quantifying disallowance of interest u/r 8D(2)(ii) of I.T. Rules, 1962. Accordingly, we direct the AO to delete addition towards interest expenditure. Disallowance of expenditure u/r 8D(2)(iii) we find that the assessee has incurred various common expenditure including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirming and treating ₹ 42,05,6507- being 12.5 percent of the total purchases of ₹ 3,36,45,1977- as bogus non-genuine expenditure and thereby erred in adding the same to the total income of the assessee in view of section 69C of the Income Tax Act, 1961. 6. The Ld. CIT(A) erred in confirming the disallowance of unsecured loans taken of ₹ 1,50.00,000/- and thereby erred in confirming and treating the same as unexplained cash credits in view of section 68 of the Income Tax Act, 1961. 7. The Ld. CIT(A) erred in confirming the disallowance of unsecured loans taken of ₹ 20,958/- and thereby erred in confirming and treating the same as unexplained cash credits in view of section 68 of the Income Tax Act, 1961. 8. The Ld. CIT(A) erred in confirming the disallowance of genuine commission/ brokerage of ₹ 3.50,0007- and thereby erred in treating the same as unexplained expenditure and added the same in view of section 69C of the Income Tax Act, 1961. 9. The Ld. CIT(A) erred in confirming the disallowance of the expenses of ₹ 2,24,3987- attributed for exempt income as per section 14A r. w.r 8D of the Income Tax, 1961. 10. The Ld. CIT(A) er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies. During the course of assessment proceedings, the AO noticed that the assessee is one of the beneficiaries of accommodation entries provided by two firms, viz. M/s Daksha Diamonds M/s Money Diam. In order to ascertain correctness of purchases claimed to have made from above two concerns, the AO called upon the assessee to furnish necessary details including supporting evidence to justify purchases. In response, the assessee has filed complete details of purchases including purchase bills and payment proof for which purchases through proper banking channel. The assessee also filed co-relation of purchases of rough diamonds and sales of cut and polished diamonds manufactured for the year. The AO, after considering relevant submissions of the assessee and also on the basis of information received from DGIT(Inv) held that although the assessee has filed certain primary evidences like purchase bills and payment proof, but failed to file further evidence to contradict the finding of fact brought out by the department during search operations in the case of Shri Bhanwarlal Jain group where it was unearthed that Shri Bhanwarlal Jain was involved in providing accommodation entrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, who gave the statement. In this regard, he has relied upon various judicial precedents including the decision of ITAT, Mumbai Bench in the case of Shri Ganpatrai A Sanghvi vs ACIT in ITA No.2826/Mum/2013. 7. The Ld.DR, on the other hand, strongly supported the orders of Ld.CIT(A) and submitted that the assessee failed to contradict the findings of facts recorded by the AO as well as the Ld.CIT(A) in light of facts brought out by department during search in Shri Bhanwarlal Jain group where it was unearthed that he was involved in providing accommodation entries and assesse is one of the beneficiary of such entries provided by companies / firms controlled by Shri Bhanwarlal Jain. Therefore, there is no reason to interfere with the findings of the Ld.CIT(A) in confirming addition made by the AO towards alleged bogus purchases. 8. We have heard both the parties, perused materials available on record and gone through the orders of authorities below. The assessee never disputed the fact that he had purchased goods from two firms discussed by the AO in his assessment order. The AO has brought out clear facts to the effect that the assessee is one of the beneficiary of bogus purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit needs to be estimated because the assessee has made out a case of correctness in books of account by filing complete stock details. Therefore, considering the fact that sales are not doubted and also there is no mismatch between quantity of goods purchased and sold, the AO has estimated fair amount of profit by considering various parameters including amount of VAT applicable to the goods and also the probable percentage of amount saved by the assessee by obtaining accommodation entries. Keeping these facts in mind, if you examine percentage of profit applied by the AO, i.e. 12.5% on alleged bogus purchases, we find that the AO was fair enough to adopt a reasonable percentage of profit on alleged bogus purchases which is further supported by various judicial precedents including number of decisions of co-ordinate benches of ITAT, Mumbai where the Tribunal has consistently applied 12.5% profit on alleged bogus purchases. Hence, we are of the considered view that there is no error in the finding recorded by the AO in arriving at 12.5% profit on alleged bogus purchases. Therefore, we are of the view that the Ld.CIT(A) was right in concurring with the finding of fact recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the AO has brought out number of reasons to doubt transactions between the parties, but the assessee failed to file any evidence to contradict the facts brought out by the AO while making addition towards unsecured loan. Therefore, we are of the considered view that the lower authorities were right in making addition towards unsecured loan taken from three companies belonging to Shri Bhanwarlal Jain and hence, we are not inclined to deviate from the findings recorded by the Ld.CIT(A). Accordingly, the ground of appeal taken by the assessee is rejected. 12. The next issue that came up for our consideration is disallowance of expenditure incurred in relation to exempt income u/ 14A of the I.T. Act, 1961. The AO has determined disallowance of ₹ 2,24,398 u/s 14A r.w.r. 8D. According to the AO, although the assessee has exempt income but, failed to disallow expenditure incurred in relation to exempt income. Therefore, he has quantified the amount of expenditure by invoking prescribed method provided under rule 8D. It is the contention of the assessee that it has own funds in form of capital account which is more than the amount of investments. Therefore, the que ..... 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