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TMI Blog2021 (5) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... sible leakage of revenue. The approach of Ld. CIT(A) in estimating the profit could not be faulted with. Estimation made by Ld. CIT(A) - As under similar facts and circumstances, the coordinate bench of this Tribunal, in the cited order of M/s Sur Gem (an associated concern of the assessee) has estimated profit rate of 6% of bogus purchases minus GP already declared by the assessee. The said estimation is in accordance with CBDT instruction no.2 of 2008 dated 22/08/2008 wherein the CBDT has directed all the AOs to accept profit of 6% in diamond business. The assessee, in the present case, has reflected GP rate in the range of 3% to 3.5% in AYs 2012-13 2013-14 as is evident from its financial statements. Therefore, following the cited decision of Tribunal and for ease of computations, we direct Ld. AO to make addition of 3% (net) of tainted purchases without any further benefit. The same works out to be ₹ 14,11,982/- (3% of ₹ 4,70,66,091/-) for AY 2012-13 and ₹ 4,81,103/- (3% of ₹ 1,60,36,782/-) for AY 2013-14. The addition to that extent stand confirmed in both the years. Disallowance of labour charges - AO, going by the material as well as ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of delay, however, we find that there was reasonable cause for delayed filing of cross-objections and hence, we are inclined to condone the delay in the interest of justice. 1.3 Proceeding further, learned counsel for Assessee (AR), at the outset, submitted that issues of appeals / cross-objections i.e. addition on account of alleged bogus purchases as well as disallowance of labor charges are covered by the order of Tribunal in assessee s group / associated concern namely M/s Sur Gems. The copy of Tribunal order in ITA Nos. 2078/Mum/2019 ors. dated 28/12/2020 has been placed on record. The Ld. AR pleaded to make estimation on similar lines. The Ld. CIT-DR, on the other hand, pleaded for restoration of assessment framed by Ld. Assessing Officer (AO). 2. We have carefully heard the rival submissions, gone through written submissions filed before us and perused relevant material on record including the cited order of the Tribunal in assessee s group concern. Our adjudication to the subject matter of appeal would be as given in succeeding paragraphs. 3.1 The material facts in AY 2012-13 are that the assessee being resident firm was subjected to an assessment u/s 143(3) r. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd there was correlation of purchases with corresponding sales and the profits arising there-from was already offered to tax. The attention was drawn to the documentary evidences submitted during the course of assessment proceeding to establish the genuineness of the purchases transactions. The assessee also pointed out that adverse statements made by tainted group could not be used against the assessee unless an opportunity of cross-examination of persons making those statements was provided. 4.2 However, going by the findings of search team in the case of Shri Bhanwarlal Jain group that his concerns merely indulged in providing accommodation bills without doing any real business, Ld. CIT(A) opined that the assessee s claim could not be accepted in totality. Regarding cross-examination, it was noted that none of the suppliers was found at the given addresses and they did not respond to notices u/s 133(6). Even the assessee failed to produce any of the suppliers and therefore, the basic onus as casted upon assessee was not discharged. 4.3 In the above background, Ld. CIT(A) opined that profit element embedded in these transactions was to be brought to tax as held by Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hases minus GP already declared by the assessee. The said estimation is in accordance with CBDT instruction no.2 of 2008 dated 22/08/2008 wherein the CBDT has directed all the AOs to accept profit of 6% in diamond business. The assessee, in the present case, has reflected GP rate in the range of 3% to 3.5% in AYs 2012-13 2013-14 as is evident from its financial statements. Therefore, following the cited decision of Tribunal and for ease of computations, we direct Ld. AO to make addition of 3% (net) of tainted purchases without any further benefit. The same works out to be ₹ 14,11,982/- (3% of ₹ 4,70,66,091/-) for AY 2012-13 and ₹ 4,81,103/- (3% of ₹ 1,60,36,782/-) for AY 2013-14. The addition to that extent stand confirmed in both the years. In the result, assessee s cross-objection stands partly allowed. The revenue s appeal for AY 2012-13 stands dismissed. This ground of revenue s appeal for AY 2013-14 stands dismissed. 6. The only surviving ground in revenue s appeal for AY 2013-14 is with respect to disallowance of labour charges. The relevant facts are that during search action, it was observed that huge labour charges were paid by assessee grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance was deleted. Aggrieved, the revenue is in further appeal before us. 7. Upon due consideration of factual matrix, it is evident that the assessee imported rough diamonds and exported polished diamonds during the year. The conversion of rough diamonds into polished diamond would certainly require certain labour / job work as rightly noted by Ld. CIT(A). In whole of the year, the assessee has claimed labour charges of ₹ 42,445/- only which has been fully disallowed. We further find that the payment to the labour contractor is though account payee cheques after deduction of tax at source. Therefore, the additions on mere suspicion, in our opinion, could not be sustained in the eyes of law. Therefore, the impugned order, though on different reasoning, would not require any interference on our part. The ground raised by the revenue stand dismissed. The revenue s appeal for AY 2013-14 stand dismissed. 8. In AY 2015-16, similar assessment has been framed against the assessee u/s 143(3) r.w.s 153A on 29/12/2017 wherein labour charges of ₹ 29.65 Lacs as claimed by the assessee were disallowed. These charges were paid to three entities viz. Diantique, Kriya Gems ..... X X X X Extracts X X X X X X X X Extracts X X X X
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