APEX DIAMONDS, MUMBAI V. ITO-19(1)(1), MUMBAI

ITA 421/MUM/2023

AI Insights

Apex Diamonds, a trader and exporter of diamonds, appealed against the order of the CIT(A) which confirmed the addition of gross profit on alleged bogus purchases amounting to Rs.1,75,71,522 from two group concerns of Bhanwarlal Jain. The Income Tax Department had information that these concerns were involved in providing accommodation bills without actual supply of materials. The Assessing Officer, suspecting the purchases were from the grey market, added Rs. 14,05,722 as profit at an 8% rate on the non-genuine purchases. The CIT(A) upheld this addition. Apex Diamonds contested this decision, arguing that the gross profit rate on these purchases was higher than on other genuine purchases, referencing a decision by the Bombay High Court which supported their position. The Tribunal found that the factual aspects presented by the assessee required verification and thus remanded the matter back to the Assessing Officer.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136447 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-04-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 12-02-2023
• Other Referred Cases: PCIT Vs. M/s. Mohommad Haji Adam & Co. (IT Appeal No. 1004 of 2016 and others dated 11.2.2019)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI ‘SMC’ BENCH, MUMBAI. Before Shri B.R. Baskaran (AM) & Shri Rahul Chaudhary (JM) I.T.A. No. 421/Mum/2023 (A.Y. 2010-11) Apex Diamonds AE-4012, Bharat Diamonds Bourse, G-Block Bandra Kurla Complex Mumbai-400 051. PAN : AAOFA7813R V s. ITO-19(1)(1) Matru Mandir Building 1 st & 2 nd Floor Nana Chowk, Bhatia Hospital Lane Javji Dadaji Marg Grant Road, Mumbai-07. (Appellant) (Respondent) Assessee by Shri Sunil Hirawat Department by Ms. Naina K. Kumar D ate of He a rin g 18.04.2023 D ate of P r on ou nc em ent 18.04.2023 O R D E R Per B.R.Baskaran (AM) :- The assessee has filed this appeal challenging the order dated 06.01.2023 passed by the learned CIT(A)-National Faceless Appeal Centre, Delhi and it relates to A.Y. 2010-11. 2. The assessee is aggrieved by the decision of the learned CIT(A) in confirming the addition of gross profit on alleged bogus purchases. 3. We heard the parties and perused the record. The assessee is trader and exporter of diamonds and other precious/non-precious stones. The Income Tax Department received information that Shri Bhanwarlal Jain Group, which was subjected to search operations, has been indulging in providing accommodation bills without actually supplying the materials. It was noticed that the two group concerns belonging to Bhanwarlal Jain, viz., M/s Rajan Diamonds and M/s Navkar Diamonds have issued bills to the Apex Diamonds 2 assessee for an amount aggregating to Rs.1,75,71,522/-. Hence, the Assessing Officer reopened the assessment of the assessee for A.Y. 2010-11 by issuing notice under section 148 of the Act. 4. Before the Assessing Officer, the assessee submitted the financial statements, purchase and sale registers, confirmation obtained from the above said two concerns, bank statements of the above said two concerns etc. in order to prove genuineness of purchases. However, the Assessing Officer took the view that the assessee might have procured diamonds from the grey market and obtained bills from the above said parties. Accordingly, the AO held that the profit element involved in purchasing diamonds from grey markets should be assessed to tax. The Assessing Officer estimated the profit rate at 8% and accordingly made the addition of Rs. 14,05,722/- computed @ 8% on the value of non-genuine purchase of Rs. 1.75 crores referred above. The learned CIT(A) also confirmed the same. 5. Before us learned AR placed reliance on the decision rendered by Hon'ble High Court of Bombay in the case of PCIT Vs. M/s. Mohommad Haji Adam & Co. (IT Appeal No. 1004 of 2016 and others dated 11.2.2019). He submitted that Hon'ble Jurisdictional High Court has upheld the addition to the extent of GP rate declared on other genuine purchases. He submitted that in the instant case the GP rate declared on alleged bogus purchases was more than the GP rate declared on other genuine purchases. Accordingly, he submitted that no addition is warranted in the facts and circumstances of the case. 6. On the contrary, learned DR submitted that the matter may be restored to the file of the Assessing Officer for examining the above said contentions of the assessee. Apex Diamonds 3 7. We heard rival contentions and perused the record. There should not be any dispute that the decision rendered by Hon'ble Jurisdictional High Court is binding upon the Assessing Officer. It is the contention of the assessee that the GP rate declared in the alleged non-genuine purchase is more than the GP rate declared on other genuine purchase and hence, as per the decision rendered by Hon'ble Jurisdictional Bombay High Court, no addition is called for. In this regard learned AR invited our attention to the letter dated 4.5.2019 furnished to the learned CIT(A). However, as rightly pointed out by learned DR, these factual aspects require verification at the end of the Assessing Officer. Accordingly, we set aside the order passed by the learned CIT(A) and restore this issue to the file of the Assessing Officer with the direction to examine the issue afresh duly following the decision rendered by Hon'ble Bombay High Court in the case of Mohommad Haji Adam & Co. (cited supra). 8. In the result, appeal filed by the assessee is treated as allowed. Pronounced in the open court on 18.4.2023. Sd/- Sd/- (RAHUL CHAUDHARY) (B.R. BASAKARAN) Judicial Member Accountant Member Mumbai; Dated : 18/04/2023 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(Judicial) 4. PCIT 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai