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TMI Blog2017 (11) TMI 1816X X X X Extracts X X X X X X X X Extracts X X X X ..... he purchases which were claimed by the assessee to have been made from the aforementioned bogus concerns, viz. (i) Mohit Enterprise; (ii) Mayur Exports; and (iii) Prime Star, were liable to be restricted to 3% of the aggregate value of the purchases, therefore, find no reason to dislodge his well reasoned order. We thus, in the backdrop of our aforesaid observations, finding ourselves as being in agreement with the view taken by the CIT(A), dismiss the appeal of the assessee. - ITA No. 5939/Mum/2016, ITA No. 6726/Mum/2016 - - - Dated:- 8-11-2017 - SHRI B.R. BASKARAN, AM AND SHRI RAVISH SOOD, JM For the Appellant : Mrs. Aarti Visangi, A.R For the Respondent : Ms. Pooja Swaroop, D.R ORDER PER RAVISH SOOD, JUDICIAL MEMBER: The present set of cross appeals filed by the assessee and the revenue are directed against the order passed by the CIT(A)-30, Mumbai, dated 10.08.2016, which in itself arises from the assessment order passed by the A.O under Sec. 143(3) of the Income tax Act , 1961, (for short Act ), dated 27.03.2015. We shall first take up the appeal of the assessee, wherein the latter assailing the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 731825 3. PRIME STAR 74673899 Total 161069569 The A.O acting on the aforesaid information called upon the assessee to substantiate the genuineness and veracity of the purchases which were claimed to have been made from the aforesaid parties. The assessee in its reply submitted before the A.O that it had made genuine purchases from the aforesaid concerns, which had duly been recorded in the books of account. The assessee further in order to fortify the veracity of the purchase transactions, stressed on the fact that the payment of the purchase consideration was made to the aforementioned parties through cheques. However, the A.O did not find favour with the aforesaid submissions of the assessee and observed that barring the entries in the stock register, payment through cheques and custom appraisal report in respect of export sales, no other document such as delivery challans etc, which could irrefutably prove the genuineness of the purchase transactions was placed on record by the assessee during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. f. The concerns in which these employees are shown as directors/partners/proprietors are operating from the premises which are 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 parties from whom the imports have been made in the respective concerns, he was unable to comment on the same. He admitted of not having any personal contact with any of the importers either through phone or email. He also admitted of not having visited any foreign country for the purpose of business. h. The assessee was also asked to produce the above suppliers for verification but he failed to produce them before the undersigned. When expenditure (Purchase) is claimed to have been incurred, the initial burden will be on the assessee to prove the genuineness of the purchase. In case the parties have shifted, the assessee is expected to know their current address as the onus is on the assessee (legal heir) to prove that the purchases were genuine. Reliance is placed on judgment of the Gujarat High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irectors of the concerns and were providing accommodation entries at the dictates and directions of Shri Bhanwarlal Jain and his family members. That in the backdrop of the aforesaid facts, the CIT(A) found himself to be in agreement with the view of the A.O that the assessee had made the purchases of the goods under consideration, though not from the aforementioned hawala parties, but from the open/grey market. The CIT(A) agreed with the view taken by the A.O that the assessee had merely obtained bogus bills from the aforesaid parties, while for the purchase of the goods were made from unidentified parties operating in the open/grey market. The CIT(A) was not impressed by the contention of the assessee that the payments to the respective parties had been made vide cheques, being of the view that the same would not conclusively prove the genuineness and veracity of the purchase transactions. That as regards the contention of the assessee that the cross examination of the aforementioned parties had not been afforded to him, the CIT(A) observed that right to cross examination was not automatic, but the same would be incumbent only in a situation where the assessee was able to prima f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee to have been made from the aforementioned parties. The CIT(A) taking support of the judgment of the Hon ble High Court of Gujrat in the case of CIT Vs. Simit P. Sheth (2013) 38 taxmann.com 385 (Guj), therein concluded that the estimation of the profit element was to be worked out by considering the benefit that was derived by the assessee by saving on taxes, and the additional profit that it would have generated from making the purchases from the open/grey market. The CIT(A) being of the view that as VAT involved in the business of manufacturing and trading of diamonds was 1%, while for in places like Surat the same was fully exempt, therefore, the estimation of the profit element involved in making of the purchases of diamonds from the open/grey market could not be worked out by applying an exorbitant rate of 8%. The CIT(A) taking cognizance of the BAP scheme, therein observed that the task force group for diamond industry constituted by the Government of India, Ministry of Commerce and Industry, after considering the BAP scheme had recommended presumptive tax for the same, viz. @ 2% for trading activity and @ 3% for manufacturing activity or @ 2.5% across the board. The CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ives (for short D.R) submitted that the A.O had rightly estimated the profit element involved in making of purchases by the assessee from the open/grey market @ 8%, and the CIT(A) had erred in restricting the same to 3%. It was thus submitted by the ld. D.R that the order of the CIT(A) may be set aside and that of the A.O be restored. 7. We have heard the ld. Departmental representative (for short D.R ), perused the orders of the lower authorities and the material available on record. We have given a thoughtful consideration to the facts of the case and are of the considered view that the CIT(A) had by way of a very well reasoned order 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 dummy concerns, viz. (i) Mohit Enterprise; (ii) Mayur Exports; and (iii) Prime Star. We find that it remains as a matter of fact borne from record that the assessee had failed to substantiate the genuineness and veracity of the purchases which were claimed to have been made from the aforementioned bogus suppliers. We further find that the A.O while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, but then, not loosing sight of the fact that unlike those cases, in the trade line of diamond business the profit margin did not exceed 3%, had thus in all fairness restricted the addition in the hands of the assessee to 3% of the aggregate value of the bogus purchases which were claimed to have been made from the aforesaid parties. We have given a thoughtful consideration to the facts of the case and are persuaded to be in agreement with the view 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 bogus concerns, viz. (i) Mohit Enterprise; (ii) Mayur Exports; and (iii) Prime Star, were liable to be restricted to 3% of the aggregate value of the purchases, therefore, find no reason to dislodge his well reasoned order. We thus, in the backdrop of our aforesaid observations, finding ourselves as being in agreement with the view taken by the CIT(A), dismiss the appeal of the assessee. ITA No.6726/Mum/2016 A.Y. 2012-13 8. We shall now take up the appeal of the revenue, where ..... X X X X Extracts X X X X X X X X Extracts X X X X
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