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TMI Blog2023 (2) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... direct the Assessing Officer to sustain the addition at the rate of 6% - Appeal filed by the Revenue is partly allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... details of which is given as under: Sr. No. Name of the Entry Provider Amount (Rs.) 1 M/s Karishma Diamond P. Ltd. 78,65,729/- 2 M/s Parshwanath Gems P. Ltd. 1,87,00,651/- 3 M/s Mihir Diamond 19,99,988/- 4 M/s Krishna Diam P. Ltd. (unsecured loan) 43,06,094/- Total 3,28,72,462/- 4. Thereafter, the Assessing Officer, having discussed the modus operandi of the business of Gautam Jain group, held as follows: "8.3 Considering the facts and circumstances of the case discussed above, it is clear that the assessee has obtained the bogus bill to the tune of Rs.3,28,72,462/- from M/s Karisma Diamond Pvt. Ltd., M/s Parshwanath Gems P. Ltd., M/s Mihir Diamond and M/s. Krishna Diam Pvt. Ltd. respectively, without actually getting the material (diamond). Thus, the bill issued by the said group concern is nothing but accommodation entry. Hence, the accommodation entry received from M/s. Karishma Diamond Pvt. Ltd., M/s Parshwanath Gems P. Ltd., M/s Mihir Diamond and M/s Krishna Diam Pvt. Ltd. to the tune of Rs.3,28,72,462/- is treated as bogus purchases and added to the total income of the assessee."' 5. Aggrieved by the order of Assessing Officer, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fairs of all the concerns in which the persons who were his employees are also shown as directors, partners and proprietors. The details information and evidences available as mentioned above where the assessee has received bogus accommodation entries of purchases to the tune from following bogus concerns of Gautam Jain Group: Sr. No. Name of the entry provider Amount (Rs.) 1. M/s Karishma diamonds p. ltd. 78,65,729/- 2. M/s Parshwanath Gems p. ltd. 1,87,00,651/- 3. M/s Mihir Diamond 19,99,988/- 4. M/s Krishna Diamond P. Ltd. (unsecured loan) 43,06,094/- Total 3,28,72,462/- Therefore, ld DR contended that order passed by the assessing officer may be upheld except unsecured loan of M/s Krishna Diamond P. Ltd. at Rs.43,06,094/- since this amount does not pertain to bogus purchases. However, for remaining purchases/ entries, the Ld. DR submitted that as per section 37(1) of the Act there should be 100% addition on account of bogus purchases. 8. On the other hand, Shri P. M. Jagasheth, Ld. Counsel for the assessee argues that, so far the forth number of entry provider is concerned, namely M/s Krishna Diam Pvt. Ltd. (unsecured loan) to the tune of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the ld. Authorised Representative (AR) of the assessee. We have also gone through the various documentary evidences furnished by assessee. The ld. CIT-DR for the Revenue supported the order of AO. The ld. CIT-DR submits that Investigation Wing, Mumbai made a search on Bhanwarlal Jain Group. During the search and after search, the Investigation Wing made a thorough investigation and concluded that Bhanwarlal Jain Group and his associates including his sons were indulging in managing about 70 benami concerns. The benami concerns were engaged in providing accommodation entries. The assessee is one of the beneficiaries of such accommodation entries. In the transaction of accommodation entries, the documentary evidences are created in such a way, so that the bogus transaction is looks like genuine transaction. In bogus transaction, the fabricated evidences are always maintained perfectly. The assessee has obtained accommodation entry only to inflate the expenses and to reduce the ultimate profit. No stocks of diamonds were found at the time of search on Bhanwarlal Jain Group. The assessee has shown a very meagre gross profit (GP) @ 0.78% and not net profit (NP) at 0.02%. The ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls about the genuineness of purchases. The assessee filed confirmation purchases invoices, accounts of the parties, bank statement of assessee showing transaction to the banking channel. The AO has not made any comment on the documentary evidence furnished by assessee. The AO solely relied upon the statement of third party and the report of Investigation Wing. The report of wing and the statement of Bhanwarlal Jain were not provided to the assessee. The AO has not disputed the sales of assessee. No sale is possible in absence of purchase. The books of accounts were not rejected. The AO made the disallowance of entire purchases. The assessing officer not provided cross examination of the alleged hawala dealers. The disallowances sustained by the Ld. CIT(A) @ 12.5% of the impugned purchases, is on higher side and deserve to be deleted in total. The ld.AR of the assessee submits that entire purchases shown by assessee are genuine. In without prejudice and alternative submissions, the Ld. AR for the assessee submits that in alternative submission, the disallowance may be sustained on reasonable basis. To support his various submission, the ld.AR for the assessee is relied upon case law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as raised objection against the validity of the reopening before the AO. The objections of the assessee was duly disposed by AO in his order dated 09.02.2015. The assessee raised ground of appeal before ld CIT(A) while assailing the order of AO on reopening. The ld CIT(A) while considering the ground of appeal against the reopening held that the AO has received report from investigation wing Mumbai, which indicate that the assessee is beneficiary of the accommodation entry operators. The accommodation entry provider admitted before investigation wing that he has given such entry to various persons; based on such report the AO has reason to believe that the income of the assessee has escaped assessment and thus the action of AO in reopening is justified. 18. We find that the Hon'ble Jurisdictional High Court in Peass Industrial Engineers (P) Ltd Vs DCIT (supra) while considering the validity of similar notice of reopening, which was also issued on the basis of information of investigation wing that they have searched a person who is engaged in providing accommodation entries, held that where after scrutiny assessment the assessing officer received information from the investigati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of purchase is not justified. We also find that the ld.CIT(A) also considered the decision of jurisdictional High Court in Mayank Diamonds Pvt. Ltd. (supra) and compared the fact of the present case with the facts in Mayank Diamonds Pvt Ltd (supra) and noted that assessee in that case was also engaged in the trading of polished diamonds. The ld CIT(A) noted that in that case the AO made disallowance of entire bogus purchase and on first appeal before CIT(A) the disallowances were maintained. However, the Tribunal gave partial relief to the assessee directing to sustain the addition @12% of such bogus purchases. And on further appeal, the Hon'ble High Court sustained Gross Profit Rate @ 5% being average rate of profit in industry. 20. Now adverting to the facts of the present case, the ld.CIT(A) held that in some other similar cases; though he had sustain 5% of Gross Profit Rate, considering the fact that where Gross Profit shown by those assessee's are more than 5%. However, in the present case, the assessee has merely shown Gross Profit Rate only at 0.78% of turnover, accordingly, the ld. CIT(A) was of the view that disallowance of 12.5% of impugned purchases/bogus purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vt. Ltd. 78,65,729/- 2. M/s Parshwanath Gems Pvt. Ltd. 1,87,00,651/- 3. M/s Mihir Diamond 19,99,988/- 4. M/s Krishna Diamond Pvt Ltd. (unsecured loan) 43,06,094/- Total 3,28,72,462/- We note that out of total addition of Rs.3,28,72,462/-, the amount pertaining to M/s Krishna Diamond Pvt Ltd (unsecured loan) to the tune of Rs.43,06,094/- should be excluded, as it does not pertain to bogus purchases, therefore we direct the Assessing Officer that no addition should be made on the amount pertaining to M/s Krishna Diamond Pvt. Ltd. (unsecured loan) to the tune of Rs.43,06,094/- . However in respect of remaining parties viz: M/s Karishma Diamonds Pvt. Ltd. to the tune of Rs.78,65,729/-, M/s Parshwanath Gems Pvt. Ltd. to the tune of Rs.1,87,00,651/-, and M/s. Mihir Diamond to the tune of Rs.19,99,988/-, totalling of these three parties comes to Rs.2,85,66,368/-, therefore we direct the Assessing Officer to sustain the addition at the rate of 6% on Rs.2,85,66,368/-. We partly allow the appeal of the Revenue in above terms. 13. In the result, appeal filed by the Revenue is partly allowed. Order is pronounced on 30/01/2023 by placing the result on the Notice Boar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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