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TMI Blog2022 (2) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... ute the disallowances accordingly. In the result, the grounds of appeal raised by the revenue are partly allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... elieve that the purchases bills of four concerns, received by assessee are bogus and the income of the income of assessee to that extent has escaped assessment due to failure on the part of the assessee who has not disclosed fully and truly all the material fact necessary for the purpose of assessment. Notice under section 148 was issued to the assessee on 30.03.2015. The assessee in response to notice under section 148 filed his reply dated 22.07.2015 and stated that original return of income filed on 29.09.2008 may be treated as return in response to notice under section 148 of the Act. The assessee required reasons recorded. The reasons recorded were provided to the assessee. The Assessing Officer thereafter processed for assessment and served notice under section 143(2) r.w.s 142(1) respectively. During re-assessment proceedings, the Assessing Officer issued show cause notice dated 08.03.2016 as to why the purchase shown to the tune of ₹ 3.40 crores from the said parties should not be added to the income of assessee. The assessee filed its reply dated 18.03.2016. In the reply, the assessee stated that the entire sales and purchases of assessee are genuine and can be verif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03 dated 07.11.2011. Aggrieved by the decisions of Ld. CIT(A) Revenue has filed present appeal before the Tribunal. 5. We have heard the submissions of learned Commissioner of Income Tax Departmental-Representative (CIT-DR) for the Revenue and learned Authorized Representative (AR) for the assessee and have gone through the orders of authorities below. The Ld. CIT-DR for the Revenue supported the order of Assessing Officer and submits that the Investigation Wing of Department made full-fledged investigation in case of P.K. Jain, who was engaged in providing accommodation entries of sale and purchases of diamonds without actual delivery of goods. P.K. Jain was not engaged in actual business except providing bogus bills. The assessee is one of the beneficiaries of such accommodation entries provided by different concerns managed by 'P.K. Jain. The accommodation entry is received by the assessee to inflate the expenses and to reduce the profit. The Assessing Officer rejected the books of account. The claim of assessee that payments were made through account payee cheques is not sufficient to prove the genuineness of the purchases. The Assessing Officer made 100% of disallowance, howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring and trading. On the basis of aforesaid report, the Ld.AR submits that the profit in case of trader is not more than 2%, therefore the profit element embedded in disputed purchases should not exceed the disallowance @ 2%. 9. The assessee has also filed following documents on record with the declaration by way of certificate that all these documents were filed before the lower authorities; 1. Report of task group for diamond sector, prepared by Government of India, Ministry of Commerce and Industry, Department of Commerce, New Delhi, (filed first time before Tribunal) 2. Name, address & PAN of disputed parties 3. Ansh Merchandise Pvt. Ltd. * PAN Card * CIN Master Data * Certificate of Incorporation * Ledger account * Confirmation of account * Purchase bills * Own bank statement * IT acknowledgement receipt * Bank statement of the supplier 4. Kunal Gems * PAN Card * Ledger account * Confirmation of account * Purchase bills * Own bank statement * IT acknowledgement receipt * Bank statement of the supplier 5. Mohit International * PAN card * Ledger account * Confirmation of account * Purchase bills * Own bank statement * IT ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred various decision of Tribunal and Jurisdictional High Court. Before us, the ld CIT- DR for the revenue vehemently argued that the disallowances restricted by ld CIT(A) is very low and it should be at least be restricted to 25% of the disputed purchases. We have examined the facts of the case independently and find that the AO while making 100% disallowances of the disputed purchases solely relied on the report of the investigation wing. No independent investigation was carried out by the AO. No specific findings were given on the documentary evidences filed by the assessee. The sale of the assessee was not disputed by the AO. As recorded above the ld CIT(A) restricted the disallowances to the extent of 5% of the disputed purchase on the basis of theory evolved in various decision that disallowance may be restricted to the extent of profit embedded in such purchases. It is also a matter of fact that such purchases are shown to inflate the expenses and to reduce the profit. The AO made addition of 100% of the disputed/ impugned purchase. In our view, the AO is not justified in disallowing the 100% of purchases in absence of proper investigation of such purchases. No doubt the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus purchases to 5%. (ii) On the facts and circumstances of the case and in Law, the Ld. CIT(A) has failed to appreciate the fact that the entire purchase from alleged concerns were bogus and was only to suppress the profit of the beneficiaries which is substantiated by the statement on oath given by the entry provider. (iii) On the facts and circumstances of the case and in Law, the Ld. CIT(A), Surat ought to have upheld the order of the Assessing Officer. It is, therefore, prayed that the order of the Ld. CIT(A)-1 Surat may be set-aside and that of the Assessing Officer's order maybe restored." 15. We find that the grounds of appeal raised by assessee as well as Revenue are inter-connected. The assessee has challenged the action of Ld. CIT(A) in sustaining the addition to the extent of 5% of bogus purchases, on the other hand, the Revenue has challenged the action of Ld. CIT(A) that entire purchases from parties who are entry provider and order of Assessing Officer may by upheld. 16. We on perusal of record, we find that the facts of the year under consideration are almost similar except the fact for the year under consideration the assessee has shown the purchases from M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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