Shri Rajesh Chopra, Surat V. Income Tax Officer, Ward - 2(1)(2), Surat

ITA 373/SRT/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3266 (ITAT-SURAT)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 18-02-2024
• Assessment Year: 2012-2013
• Appeal Filed On: 24-05-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVIKANT GUPTA
• Assessee Lawyers: KETAN H SHAH
• Keywords: Reopening of assessment; Bogus purchase; Rejection of books of accounts; Opportunity of cross examination; Accommodation entries; Reassessment proceedings
• Section: 147; 148; 143(3); 133(6); 143(2); 73; 153; 145(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A.L.SAINI, AM आयकर अपील सं./ITA No.373/SRT/2023 (िनधाŊरण वषŊ / Assessment Year: (2012-13) (Hybrid Hearing) Rajesh Suresh Chopta 115, Sardarpura Complex, Mini Bazar, Varachha Road, Surat-395006 Vs. Income Tax Officer, Ward-2(1)(2), Surat, Room No.221, Aayakar Bhawan, Majura Gate, Surat-395003 ̾थायीलेखासं./जीआइआरसं./PAN/GIR No.: ABKPC 8387 R (अपीलाथŎ /Assessee) (ŮȑथŎ/Respondent) िनधाŊįरती की ओर से /Assessee by : Shri Ketan H Shah, Advocate & Shri Aman K. Shah, Advocate राजèव कȧ ओर से /Respondent by : Shri Ravi Kant Gupta, CIT-DR सुनवाई की तारीख/ Date of Hearing : 19/02/2024 घोषणा की तारीख/Date of Pronouncement : 26/03/2024 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the assessee, pertaining to assessment year 2012-13, is directed against the order passed by the National Faceless Appeal Centre, Delhi, [‘NFAC/Ld.CIT(A)’ for short] dated 29.03.2023, which in turn arises out of an assessment order passed by the Assessing Officer under section 143(3) r.w.s.147 of the Income Tax Act, 1961 (in short ‘the Act’), dated 19.11.2019. 2. The grounds of appeal raised by assessee are as follows: “1. On the facts and circumstances of the case and law, the CIT(A) erred in not adjudicating the ground of appeal on merit. 2. On the facts and circumstances of the case and law, the CIT(A) erred in not considering that the assumption of jurisdiction u/s 148 of the Act is bad in laws the conditions laid down under the Act for initiating reassessment proceeding have not been fulfilled. 3. On the facts and circumstances of the case and law, the CIT(A) erred in treating/confirming the assessee as diamond trader, without appreciating the fact that the assessee is only a commission agent and the purchase and sale was made on behalf of other parties. Page | 2 ITA No.373/SRT/2023 A.Y. 12-13Rajesh S Chopra4. On the facts and circumstances of the case and law, the CIT(A) erred in confirming the addition of Rs.116,49,88,059 on alleged bogus purchase by treating the purchase on behalf of others as assessee purchase and treated the same as accommodation entry. 5. On the facts and circumstances of the case and law, the CIT(A) erred in confirming the addition of alleged commission expenses of Rs.232,99,761, without considering the fact of the case. 6. On the facts and circumstances of the case and law, the CIT(A) erred in confirming the rejection the books of account u/s 145(3) of the Act, without considering the facts of the case. 7. On the facts and circumstances of the case and law, the CIT(A) erred in making the addition of alleged purchase without giving opportunity of cross examination with the parties. 8. On the facts and circumstances of the case and law, the CIT(A) erred in making the addition of genuine purchases solely on the basis of the statement of the third party i.e., Mr. Bhanwarlal Jain with whom the assessee had no transaction. 9. Assessee craves leave to add further grounds or to amend or alter the existing grounds of appeal on or before the date hearing.” 3. Succinct facts qua the issue are that assessee has filed his return of income for the assessment year 2012-13, on 26.07.2012, declaring total income at Rs.1,76,510/-. The assessee`s return of income was processed u/s 143(1) of the Act on 06.03.2013. Later on, assessee`s case was re-opened and notice u/s 148 of the Act was issued on 30.03.2019. In response to notice u/s 148 of the Act, the assessee was required to file return of income within 30 days of service of notice. In response to the notice issued u/s 148 on 30.03.2019, return of income was filed on 09.04.2019 declaring total income at Rs.1,76,510/-. Accordingly, notice u/s 143(2) of the Act was issued on 04.07.2019. The case of the assessee was reopened by the Assessing Officer, as per the information obtained by the Assessing Officer from DDIT(Inv.)-II, Mumbai, wherein, it has been stated that during the search conducted on 03.10.2013, in the cases of Shri Bhanwarlal Jain and his group concern, various incriminating documents were seized which proved that Shri Bhanwarlal Jain along with his accomplices, Shri Rajesh Page | 3 ITA No.373/SRT/2023 A.Y. 12-13Rajesh S ChopraBhanwarlal Jain, Shri Manish Bhanwarlal Jain were operating on providing accommodation entries against unsecured loans and bogus purchases to various beneficiaries. Shri Bhanwarlal Jain, in the statement recorded, admitted that the assessee had also availed accommodating entries during the year under consideration from following concerns which were run and controlled by him: Sr.No. Entry provider Amount 1 Nice Diamonds, PAN:AIKPK8272C Rs.33,02,63,453/- 2 Milennium Stars, PAN: AAXPJ 5538K Rs.38,63,16,376/- 3 Euro Diamonds,PAN: AJWPC4145P Rs.46,84,08,230/- Total: Rs.1,16,49,88,059/- In response to various notices issued by the assessing officer, the assessee submitted details and documents before the assessing officer. The Assessing Officer in the assessment order, has clearly mentioned that notice u/s 133(6) were issued to the alleged parties calling for information and on perusal of the same, it was observed by him that these parties, despite showing huge sales/ purchase, have shown very less profit margin. Also, the assessee could not prove the genuinity of the transactions made with the above parties. In view of this, the Assessing Officer had made addition of Rs.1,16,49,88,059/- on account of bogus accommodation entries. 4. The Assessing Officer further held that in the practice of providing accommodation entries, on an average 2% commission is being paid which has not been accounted for by the assessee, in his books of accounts. In view of this, the Assessing Officer rejected the books of accounts by invoking the provisions of section 145(3) of the Act and made addition of Rs.2,32,99,761/- on account of unaccounted cash paid in obtaining the alleged accommodation entries. 5. Aggrieved by the additions made by the Assessing Officer, the assessee carried the matter in appeal before the ld CIT(A), who has Page | 4 ITA No.373/SRT/2023 A.Y. 12-13Rajesh S Chopraconfirmed the addition made by the Assessing Officer. The assessee did not appear before ld CIT(A) and did not file any documents and details, therefore, the ld CIT(A) has reiterated the findings of the Assessing Officer and confirmed the action of the Assessing Officer. Aggrieved by the order of ld CIT(A), the assessee is in further appeal before us. 6. Shri Ketan Shah, Ld. Counsel for the assessee, argued that reasons recorded by the Assessing Officer are bad-in-law and therefore re-assessment proceedings may be quashed. The Ld. Counsel for the assessee took us through paper book page 11, wherein reasons recorded were mentioned and stated that re-opening of assessment was on the basis of wrong and incorrect information, therefore re-assessment proceedings may be quashed. The Ld.Counsel for the assessee also argued that during assessment proceedings, the assessee has requested to provide material and evidence to support his claim, the assessee has also requested to provide copy of statement, and cross examination, if any, on whose basis the false allegation were made. The Ld. Counsel also stated that during the assessment proceedings, the assessee has requested for cross-examination, however, same has not been provided to the assessee. 7. On merit, Ld. Counsel for the assessee submitted that assessee is a commission agent therefore commission income may be added in the hands of the assessee. Though the bills/invoices were issued in the name of the assessee for sale of goods by the principal but since the goods are sold at the same price what is received from the principal by the assessee and charge the commission separately on these transactions hence the assessee credit only the commission portion in the profit and loss account. The assessee does not have ownership on purchase and sale transaction, therefore, no addition should be made in the hands of assessee. Page | 5 ITA No.373/SRT/2023 A.Y. 12-13Rajesh S Chopra8. The Ld. Counsel also submitted by way of his alternative argument that if the assessee is not treated as a commission agent than 6% addition may be confirmed in the hands of the assessee, as held by the Hon’ble jurisdictional High Court of Gujarat in the case of Gyanchand S. jain Vs. ITO, Tax appeal No.131of 2023 and others dated 03.10.2023. 9. On the other hand, Ld. CIT-DR for the Revenue defended the order passed by the lower authorities and stated that reasons for reopening the assessment were recorded by the Assessing Officer, as per scheme of the Act and hence there is no infirmity in the reasons so recorded by the Assessing Officer. 10. On merit, the Ld.CIT-DR submitted that there was no need to provide opportunity of cross-examination, as the assessee has obtained the material from the same assessee/person. The Ld. CIT-DR stated that assesse is not a commission agent because entire sales were routed through cheque in his bank account. Therefore, all transactions were owned by the assessee, as all the transactions were routed through assessee`s bank account. Had the assessee been a commission agent, then all purchase and sale entries would not have been routed through profit and loss account and only commission would be reflected in the assessee`s bank account? Therefore, addition made by the Assessing Officer may be affirmed. The Ld. CIT-DR for the Revenue submitted that Assessing Officer has also added commission in the hands of the assessee, as the commission is also an income in these type of bogus purchases, addition to the regular own business of the assessee, hence commission income should also be added. The Ld. CIT-DR also stated that no books of accounts were submitted by the assessee, during the assessment proceedings. Therefore, addition made by the Assessing Officer may be affirmed. Page | 6 ITA No.373/SRT/2023 A.Y. 12-13Rajesh S Chopra11. We have heard both the parties and perused the materials available on record. We have gone through the reasons recorded by the Assessing Officer and noted that Assessing Officer has taken action u/s. 148 r.w.s 147, after recording evidence and obtaining necessary approval from the competent authority and from the assessment order, it is seen that the Assessing Officer reopened the case after following the due procedure of law. It has been held in the number of judicial pronouncements that information received can be basis for reopening the assessment. The attention is invited to the following judgments. (1). In the case of M/s. Amit Polylprints (P) Ltd. vs. DCIT 94 taxmann.com 393 [2018] (Gujarat), it was held by the Hon'ble High Court of Gujarat that: "Where reassessment proceedings were initiated on basis of information received from Investigation wing that assessee had received certain amount from shell companies working as an accommodation entry provider, reassessment could not be held unjustified". (2). In the case of M/s Jayant Security & Finance Ltd. 91 taxmann.com 181 [2018] (Gujarat), it was held by the Hon'ble High Court of Gujarat that: "Initiation of reassessment proceedings on basis of information received from Investigation wing that assessee had received certain amount as a loan from a company, working as entry operator and earning bogus funds to provide advances to various person, was justified". (3). In the case of Rakesh Gupta vs. CIT 93 taxmann.com 271 [2018] (Punjab) & Haryana), it was held by the Hon'ble Court of Punjab & Haryana that: "Where Assessing Officer received information from Principle Director of Income Tax (Investigation) that assessee had received bogus loss from his broker by client code modification, reassessment on basis of said information was justified.” Page | 7 ITA No.373/SRT/2023 A.Y. 12-13Rajesh S Chopra(4). In the case of ACIT vs. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 161 Taxman 316 (SC)/ 291 ITR 500 (SC)/ [2007] 210 CIR 30 (SC), it was held by the Hon'ble Apex Court that: "So long as the conditions of section 147 are fulfilled, the Assessing Officer is free to initiate proceedings under section 147 and failure to take steps under section 143(3) will not render Assessing Officer powerless to initiate reassessment proceedings, even when intimation under section 143(1) has been issued ADAM EXPORTS v. DCIT [1999] 240 ITR 224 (Guj) distinguished." 12. Therefore, in view of the above discussion, it is held that Assessing Officer was justified in reopening the case of the assessee for the year under consideration u/s 147 of the Act and was having reason to believe that income had escaped assessment. The assessee has placed reliance on many cases which are on their own footings and distinguishable on facts and issues. Hence, this ground of assessee`s appeal is hereby rejected. 13. On merit, the assessee`s case is covered by the judgment of Coordinate Bench of ITAT Surat in the case of Pankaj K. Choudhary, vide ITA No.1152/AHD/2017 (AY 2007-08), order dated 27.09.2021 wherein 6% of bogus purchases were added as a reasonable profit in the hands of assessee. The findings of the Co-ordinate Bench are as follows: “12. We have heard the submission of ld.CIT-DR for the Revenue and 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 Page | 8 ITA No.373/SRT/2023 A.Y. 12-13Rajesh S Chopraassessee has shown a very meagre gross profit (GP) @ 0.78% and not net profit (NP) at 0.02%. The ld. CIT(A) restricted the addition to the extent of 12.5% which is on the lower side. The ld. CIT-DR for the revenue prayed that disallowance made by the AO may be upheld or in alternative submitted that it may restricted at least @ 25%, keeping in view that the NP declared by the assessee is extremely on lower side. 13 On the validity of reopening, the ld.CIT-DR for the revenue submits that the AO received credible information about the accommodation entry provided by Bhanwarlal Jain Group. The assessee is one of the beneficiaries, who had availed accommodation entries from such hawala trader. At the time of recording reasons, the mere suspicious about the accommodation entry is sufficient as held by Hon'ble jurisdictional High Court in various cases. To support his submissions, the ld.CIT-DR relied upon the decision;  Pushpak Bullion (P) Ltd Vs DCIT [2017] 85 taxmann.com 84 (Gujarat High Court),  Peass Industrial Engineers (P) Ltd Vs DCIT [2016] 73 taxmann.com 185 (Gujarat High Court),  ITO Vs Purushttom Dass Bangur [1997} 90 Taxman 541 (SC) and  Mayank Diamond Private Limited (2014) (11) TMI 812 (Gujarat High Court).  AGR Investment Vs Additional Commissioner 197 Taxman 177 (Delhi) and  Chuharmal Vs CIT [1998] 38 Taxman 190 (SC). 14.On the other hand, the ld.AR of the assessee submits that he has challenged the validity of reopening as well as restricting the addition to the extent of 12.50% of the alleged bogus purchases. The ld.AR of the assessee submits during the assessment, the AO has not made any independent investigation. The AO reopened the case of the assessee on the basis of third party information without making any preliminary investigation. The AO received vague information about providing accommodation entry by Bhanwarlal Jain Group. No specific information about the accommodation entry obtained by assessee was received by AO. There is no live link between the reasons recorded qua the assessee. Therefore, the re-opening is invalid and all subsequent action is liable to be set aside. 15. On account of additions of bogus purchases, the ld.AR submits that in the original assessment, the assessee filed its complete details of purchases to prove the genuineness of expenses. The AO accepted the same in the assessment order passed under section 143(3) on 10.03.2009. During re-assessment, the assessee again furnished complete details 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 Page | 9 ITA No.373/SRT/2023 A.Y. 12-13Rajesh S Chopracross 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 laws: 1 M/s Andaman Timber industries VsCommissioner of Central Excise, CIVIL APPEAL NO. 4228 OF 2006 (Supreme Court) 2 CIT vs. Indrajit Singh Suri [2013] 33 taxmann.com 281 (Gujarat) 3 Albers Diamonds Pvt. Ltd. Vs ITO 1(1)(1), Surat I.T.A. No.776 &1180/AHD/2017 4 The PCIT-5 vs. M/s. Shodiman Investments Pvt. Ltd. TTANO. 1297 OF 2015 (Bombay High Court) 5 ShilpiJewellers Pvt. Ltd. vs. Union of India &Ors. WRIT PETITION NO. 3540 OF 2018 (Bombay High Court) 6 CIT in Vs. Mohmed Juned Dadani 355 ITR 172 (Gujarat) 7 Micro Inks Pvt. Ltd. Vs. ACIT [2017] 79 taxmann.com 153 (Gujarat) 8 Shakti Karnawat Vs. ITO - 2(3)(8), Surat ITA 1504/Ahd/2017 and 1381 /Ahd/2017 9 Asian Paints Ltd. Vs. DCIT, [2008] 296 ITR 90 (Bombay) 10 PCIT, Surat 1 Vs. Tejua Rohit kumar Kapadia [2018] 94 taxmann.com 325 (SC) 11 The PCIT-17 vs. M/s Mohommad Haji Adam & Co. ITA NO. 1004 OF 2016(Bombay High Court) 12 Pankaj Kanwarlal Jain HUF Vs. ITO 2(3)(8) Surat ITA.No.269/SRT/2017 16.In the rejoinder submissions the ld. CIT-DR for the revenue submits that that rigour of the rules of evidence contained in the Evidence Act is not applicable before the tax authorities. It was submitted that the ratio of various case laws relied by the ld. AR for the assessee is not applicable on the facts of the present cases. The ratio of decision of Hon’ble Gujarat High Court in Mayank Diamond Private Limited (supra) is directly applicable on the facts of the present case. 17.We have considered the submissions of the parties and have gone through the order of the lower authorities. We have also deliberated on each and every case laws relied by both the parties. We have also examined the financial statement of all the assessee(s) consisting of computation of income and audit report. We have also gone through the documentary evidences furnished in all cases. Ground No.1 in assessee’s appeal relates to the validity of reopening. The ld AR for the assessee vehemently argued that the AO reopened the case of the assessee on the basis of third party information, and without making any preliminary investigation, which was vague about the alleged accommodation entry by Bhanwarlal Jain Group. And that there was no specific information about the accommodation entry availed by the assessee. There is no live link between the Page | 10 ITA No.373/SRT/2023 A.Y. 12-13Rajesh S Choprareasons recorded qua the assessee. We find that the assessee has 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 investigation wing that well known entry operators of the country provided bogus entries to various beneficiaries, and assessee was one of such beneficiary, assessing officer was justified in re-opening assessment. Further similar view was taken by Hon’ble Jurisdictional High Court in Pushpak Bullion (P) Ltd Vs DCIT (supra). Therefore, respectfully following the order of Hon’ble High Court, we find that the assessing officer validly assumed the jurisdiction for making re-opening under section 147 on the basis of information of investigation wing Mumbai. So far as other submissions of the ld AR for the assessee that there is no live link of the reasons recorded, we find that the Hon’ble Jurisdictional High Court in Peass Industrial Engineers (P) Ltd clearly held that when assessing officer received information from the investigation wing that two well known entry operators of the country provided bogus entries to various beneficiaries, and assessee was one of such beneficiary, assessing officer was justified. Hence, the ground No. 1 in assessee’s appeal is dismissed. 19. Ground No. 2 in assessee’s appeal and the grounds of appeal raised by the revenue are interconnected, which relates to restricting the disallowance of bogus purchases to the extent of 12.5%. The AO made of 100% of purchases shown from the hawala dealers/ entry provider namely Bhanwarlal Jain. We find that the AO while making additions of 100%, of disputed purchases solely relied on the report of the investigation wing Mumbai. No independent investigation was carried by the AO. The AO has not disputed the sale of the assessee. The AO made no comment on the evidences furnished by the assessee. We further find that ld CIT(A), while considering the submissions of the assessee accepted the lapses on the part of the AO and noted that no sale is possible in absence of purchases. The Books of the assessee was not rejected by the AO. The ld CIT(A) on further examination of the facts and various legal submissions find that Ahmedabad Tribunal in Bholanath Poly Fab Private Limited (supra) held that in the such cases the addition of bogus purchases was sustained to the extent of 12%, on the observation that the assessee may have made purchases from elsewhere and obtained the bills from impugned supplier to inflate Gross Profit Rate. The ld CIT(A) by considering the overall facts, concluded that the 100% disallowance of Page | 11 ITA No.373/SRT/2023 A.Y. 12-13Rajesh S Choprapurchase 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 purchases would be reasonable to meet the end of justice. 21. We have seen that during the financial year under consideration the assessee has shown total turnover of Rs. 66,09,62,458/-. The assessee has shown Gross Profit @ .78% and net Profit @ .02% (page 11 of paper Book). The assessee while filing the return of income has declared taxable income of Rs. 1,81,840/- only. We are conscious of the facts that dispute before us is only with regard of the disputed purchases of Rs, 4.34 Crore, which was shown to have purchased from the entity managed by Bhanwarlal Jain Group. During the search action on Bhanwarlal Jain no stock of goods/ material was found to the investigation party. Bhanwarlal Jain while filing return of income has offered commission income (entry provider). Before us, the ld CIT-DR for the revenue vehemently submitted that the ratio of decision of Hon’ble Gujarat High Court in Mayank Diamond Private Limited (supra) is directly applicable on the facts of the present case. We find that in Mayank Diamonds the Hon’ble High Court restricted the additions to 5% of GP. We have seen that in Mayank Diamonds P Ltd (supra), the assessee had declared GP @ 1.03% on turnover of Rs. 1.86 Crore. The disputed transaction in the said case was Rs. 1.68 Crore. However, in the present case the assessee has declared the GP @ 0.78%. It is settled law that under Income-tax, the tax authorities are not entitled to tax the entire transaction, but only the income component of the disputed transaction, to prevent the possibility of revenue leakage. Therefore, considering overall facts and circumstances of the present case, we are of the view that disallowances @ 6% of impugned purchases / disputed purchases would be sufficient to meet the possibility of revenue leakage. In the result the ground No. 2 of appeal raised by the assessee is partly allowed and the grounds of appeal raised by revenue are dismissed. 22. In the result the appeal of revenue is dismissed and the appeal of the assessee is partly allowed.” 14. The issue on merit is also covered by the judgment of the Hon’ble jurisdictional High Court of Gujarat in the case of Gyanchand S. jain Vs. Page | 12 ITA No.373/SRT/2023 A.Y. 12-13Rajesh S ChopraITO, Tax Appeal No.131 of 2023 and others dated 03.10.2023, wherein 6% addition on bogus purchases were upheld by the Hon`ble jurisdictional High Court. Therefore, respectfully following the above binding precedents, we direct the Assessing Officer to make addition @ 6% of Bogus purchases of Rs.1,16,49,88,059/-. 15. We also upheld the addition made by the Assessing Officer on account of providing accommodation entries (@ 2% commission) of Rs.2,32,99,761/- on account of unaccounted cash paid in obtaining the alleged accommodation entries. 16. In the result, assessee`s appeal is partly allowed in above terms. Order is pronounced on 26/03/2024 by placing the result on the Notice Board. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat/िदनांक/ Date: 26/03/2024 Dkp Outsourcing Sr.P.S. Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Surat