NAITIK GEMS, MUMBAI V. INCOME TAX OFFICER-32(2)(4), MUMBAI

ITA 4761/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8199 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 05-07-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Accommodation entries

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE HONBLE SH. SANDEEP GOSAIN , JM & HONBLE SH. G. MANJUNATHA , AM ./ I.T.A. NO . 4761, 4762, 4763 & 4764 /MUM/2017 ( / ASSESSMENT YEAR: 2010 - 11, 2011 - 12, 2012 - 13 & 2013 - 14 ) NAITIK GEMS, 1103A, ADITYA TOWER, HANDAVARKAR ROAD, MUMBAI - 400092 . / VS. ITO WARD 32(2)(4 ) PRATYAKSHKAR BHAVAN, BKC, MUMBAI - 400 051 ./ ./ PAN NO. AA EFN5488M ( / APPELLANT ) : ( / RESPONDENT ) & ./ I.T.A. NO . 5037 /MUM/2017 ( / ASSESSMENT YEAR: 2012 - 13 ) ACIT CIRCLE 32(2), R. NO. 308, 3 RD FLOOR, C - 11, PRATYAKSHKAR BHAVAN, BKC, MUMBAI - 400 051 / VS. NAITIK GEMS, 1103A, ADITYA TOWER, HANDAVARKAR ROAD, MUMBAI - 400092. ./ ./ PAN NO. AA EFN5488M ( / APPELLANT ) : ( / RESPONDENT ) 2 I.T.A. NO. 4761, 4762, 4763, 4764 & 5037/MUM/2017 M/S NAITIK GEMS / APPELLANT BY : SHRI BHARAT KUMAR, AR / RESPONDENTBY : SHRI ARVIND KUMAR , DR / DATE OF HEARING : 10.01 .201 9 / DATE OF PRONOUNCEMENT : 27.03.2019 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE PRESENT FIVE (5) APPEAL S HAVE BEEN FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF COMMIS S IONER OF INCOME TAX (APPEALS) - 44, MUMBAI, DATED 26.05.17 FOR AY 2010 - 11 TO 2013 - 14 RESPECTIVE LY. 2. SINC E THE ISSUES RAISED IN THESE APPEALS ARE IDENTICAL, THEREFORE, FOR TH E SAKE OF CONVENIENCE, THESE APPEALS ARE CLUBBED, HEARD AND DISPOSED OF BY THIS CONSOLIDATED ORDE R. 3 . FIRST OF ALL WE TAKE UP ASSESSEE S APPEAL IN I.T.A. NO. 4761 /MUM/201 7 (AY 2010 - 11 ) . 3 I.T.A. NO. 4761, 4762, 4763, 4764 & 5037/MUM/2017 M/S NAITIK GEMS 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF DIAMOND TRADING & EXPORT. THE RETURN OF INCOME WAS FILED ON 08.09.2010 DECLARING TOTAL INCOME OF RS.2,90,786 / - . THEREAFTER A SEARCH & SEIZURE ACTION WAS CONDUCTED IN THE RAJENDRA JAIN GROUP OF CASES BY INVESTIGATION WING, MUMBAI. AS A RESULT OF SEARCH, IT WAS FOUND BY THE INVESTIGATION WING THAT THIS GROUP IS A LEADING ENTRY PROVIDER OF MUMBAI AND T HERE ARE MA NY CONCERNS FLOATED BY THE GROUP WHICH PROVIDE ACCOMMODATION ENTRIES OF BOGUS SALES AND PURCHASES. THE AO RECEIVED A N INFORMATION THAT ASSESSEE HAD ALSO SHOWN PURCHASES FROM FIVE CONCERNS FOUND IN THE LIST OF ENTRY PROVIDERS RELATED WITH RAJENDRA JAIN GROU P OF CASES. THE NAME OF THE CONCERNS AS MENTIONED IN THE ASSESSMENT ORDER ARE M/S ADI IMPEX, M/S KALASH ENTERPRISES, M/S MAYANK IMPEX, M/S NAYAN AND M/S SPARSH EXPORTS PVT. LTD. THE TOTAL PURCHASES FROM THESE 5 PARTIES COMES TO RS.8,90,18,159/ - .DURING COUR SE OF ASSESSMENT, THE A.O. ASKED THE ASSESSEE TO SUBSTANTIATE PURCHASES FROM THE ABOVE PARTIES. IN RESPONSE CERTAIN DETAILS WERE FILED BY THE ASSESSEE. THEREAFTER THE AO AFTER DISCUSSING THE DETAIL AND MODUS OPERANDI CAME TO THE CONCLUSION THAT ASSESSEE HA S TAKEN ONLY 4 I.T.A. NO. 4761, 4762, 4763, 4764 & 5037/MUM/2017 M/S NAITIK GEMS ACCOMMODATION ENTRIES FROM THESE PARTIES. HOWEVER, IT WAS ACCEPTED BY THE AO THAT THERE CANNOT BE ANY SALES WITHOUT PURCHASES AND HENCE CONCLUDED THAT ASSESSEE HAD MADE ADDITIONAL PROFIT BY MAKING PURCHASES FROM GREY MARKET AND CONSIDERING 6% TO BE THE FAIR PROFIT MARGIN, MADE ADDITIONS TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. NOW BEFORE US, THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BY RAISING THE ABOVE GROUNDS. 6 . THE ONLY GROUND RAISED BY THE ASSESSEE IS CHALLENGING THE ORDER OF LD. CIT(A) IN CONFIRMING THE ADDITIONS MADE BY AO ON ACCOUNT OF BOGUS PURCHASES. 7 . LD. AR REITERATED THE SAME ARGUMENTS AS WERE RAISED BY HIM BEFORE LD. CIT(A) AND RELIED UPON THE FACTS CONTAINED IN PARA NO. 3.3 OF THE ORDER OF LD. CIT(A). 5 I.T.A. NO. 4761, 4762, 4763, 4764 & 5037/MUM/2017 M/S NAITIK GEMS 8 . ON THE OTHER HAND LD. DR RELIED UPON THE ORDERS PASSED BY THE REVENUE AUTHORITIES. 9 . WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AT LENGTH AND PERUSED THE MATERIAL PLACED ON RECORD, JUDGMENT CITED BY THE PARTI E S AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE REVENUE IN PARA NO. 3.4 & 3.5 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 3.4 I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE WRITTEN SUBMISSION AND DETAILS FILED BY THE APPELLANT. IT IS SEEN FROM RECORD THAT THE A.O. HAS NOT MECHANICALLY DISALLOWED THE ENTIRE DISPUTED PURCHASES AMOUNTING TO RS. 8,90,18,159/ - , RATHER HE HAS DISALLOWED 6% OF THE AMOUNT OF PURCHASE IN DISPUTE. THE AO HAS MADE THE ADDITION AFTER GIVING DETAILED REASON AND AFTER ANALYZING THE MODUS OPERAND! OF THE TRANSACTIONS OF THE DOUBTFUL PURCHASES. ON THIS ISSUE, THE AO HAS MADE THE FOLLOWING R EMARKS. 6 I.T.A. NO. 4761, 4762, 4763, 4764 & 5037/MUM/2017 M/S NAITIK GEMS '8.4 SINCE, THERE IS NO REAL PURCHASE OF DIAMONDS FROM THE AFORESAID HAWALA DEALERS, IT IMPLIES THAT THE FIRM HAS PROCURED MINIMUM 72448.51 CARATS FROM OTHER SOURCES BETTER KNOWN TO THE ASSESSEE SO AS TO MANUFACTURE AND EXPORT DURING THE YEAR, AND IN SUCH CASE THE FIRM WILL BE HAVING NIL CLOSING BALANCE. THIS SHOWS THAT DURING THE YEAR MINIMUM 72448.51 CARATS HAS COME INTO BUSINESS OF THE ASSESSEE. AND IN THESE CIRCUMSTANCES THE ONLY INEVITABLE CONCLUSION TO BE DRAWN IS THAT THE ASSESSEE MIGHT HAVE MADE THESE PURCHASES FROM OTHER PARTIES/ OPEN MARKETS OR THROUGH BROKER OR FROM ANY OTHER SOURCE BEST KNOWN TO ASSESSEE. 9. TAKING INTO ACCOUNT THE ABOVE FACTS AND CIRCUMSTANCES, THE ONLY FAIR CONCLUSION THAT CAN BE ARRIVED IS THAT THE ASSESSEE WAS A BENEF ICIARY OF THE ACCOMMODATION BILLS ISSUED BY AFORESAID HAWALA DEALERS WHEREIN, THERE WAS NOT ANY ACTUAL/PHYSICAL DELIVERY OF THE GOODS. SINCE THE EXPORTS/SALES ARE CLAIMED TO BE GENUINE AS FOREIGN REVENUE HAS BEEN DERIVED THROUGH BUSINESS ACTIVITIES OF THE ASSESSEE , IT CAN BE REASONABLY INFERRED THAT THE ASSESSEE WAS ACTUALLY IN POSSESSION OF DIAMONDS. THIS IS BASED ON THE FOOTING THAT THERE CANNOT BE ANY SALES WITHOUT PURCHASES. 7 I.T.A. NO. 4761, 4762, 4763, 4764 & 5037/MUM/2017 M/S NAITIK GEMS 9.1 HOWEVER, IT IS ALSO A MATTER OF FACT THAT THE DIAMONDS SHOWN TO BE PURCHASE D FROM AFORESAID HAWALA DEALERS HAS ENTERED INTO THE STOCK REGISTER AND THE ASSESSEE HAS SHOWN CORRESPONDING EXPORTS AGAINST THE SAID PURCHASES DEBITED. THIS COULD ONLY MEAN THAT THE - DIAMONDS WERE BROUGHT BY THE ASSESSEE FROM GREY MARKET (WHICH IS A VERY COMMON PRACTICE PREVALENT IN SURAT AND MUMBAI), WITHOUT BILL, AND TO ADJUST THIS TRANSACTION INTO THE BOOKS OF ACCOUNTS, HE MUST HAVE OBTAINED BILL FROM RAJENDRA JAIN GROUP CONCERN. AS THE ASSESSEE HAS DEMONSTRATED CORRESPONDING SALE AGAINST THE PURCHASE FROM RAJENDRA JAIN GROUP CONCERN, ONE CAN ONLY CONCLUDE THAT THAT THE PURCHASES WERE MADE BY THE ASSESSEE FROM GREY MARKET AND BILLS WERE OBTAINED FROM RAJENDRA JAIN GROUP CONCERN. IT HAS BEEN NOTICED THAT ACCOMMODATION ENTRIES OF BOGUS PURCHASES ARE ISSUE D THROUGH A COMPLEX WEB OF TRA NSACTIONS INCLUDING BANKS AND AN GARIAS. 9.2 IN SUCH SCENARIO, WHERE, ON ONE HAND THE GENUINENESS OF THE PURCHASE PARTY IS DOUBTED BUT THE GENUINENESS OF PURCHASE ON A WHOLE CANNOT BE DOUBTED, THE COURTS HAVE TAKEN A VIEW THAT ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH A TRANSACTION COULD BE TAXED. THIS IS A FAIRLY ACCEPTED PRINCIPLE AND THE SAME WOULD ALSO APPLY IN THIS CASE. 8 I.T.A. NO. 4761, 4762, 4763, 4764 & 5037/MUM/2017 M/S NAITIK GEMS HOWEVER, WHAT WOULD BE THE FAIR MARGINS IN SUCH TRANSACTION IS THE MOOT QUESTION. 9.3 TAKING INTO CONSIDE RATION ALL THESE ASPECTS, ONCE AGAIN, THE ISSUE ARRIVES, AS TO WHAT WOULD BE THE MARGIN, ONE CAN EXPECT WHILE BUYING THE MATERI AL FROM GREY MARKET INSTEAD OF NOR RMAL COURSE. TWO ASPECTS NEED TO BE TAKEN INTO CONSIDERATION IN SUCH CIRCUMSTANCES. FIRST IS, D IAMONDS IN THE GREY MARKET ARE ALWAYS CHEAPER THAN THE DIAMONDS SOURCED FROM THE ME DEALER. THIS IS BECAUSE, THE GENUINE DEALER WOULD CHARGE HIS INCIDENTAL COST INCLUDING HOLE ADMINISTRATIVE COST WHILE SELLING THE DIAMOND IN THE MARKET, WHEREAS THE PETTY D EALERS E GREY MARKET DO NOT CARRY SUCH INCIDENTAL CHARGES ON SUCH SALES, WHEREIN THEY ARE ONLY KING FOR A QUICK PROFIT. SECONDLY, THERE IS ALWAYS AN ELEMENT OF DISCOUNT IN THE CASE OF INSTANT CASH PURCHASE. THIS IS A COMMON PRACTICE FOLLOWED IN THE DIAMOND MARKET, AND THE ENTITIES OPERATING IN THE MARKET WOULD ALWAYS LOOK FOR REAPING SUCH BENEFITS. 9.4 THUS, FROM THE ABOVE ANALYSIS OF THE FACTS, IT IS CRYSTAL CLEAR THAT THE PURCHASES MADE BY THE ASSESSEE FROM THE ABOVE CONCERN AND CLAIMED AS PURCHASE EXPENS ES IN HIS PROFIT AND LOSS ACCOUNT ARE NOT GENUINE.AND THERE IS PROFIT ELEMENT EMBEDDED IN THESE TRANSACTIONS WHEREIN THE 9 I.T.A. NO. 4761, 4762, 4763, 4764 & 5037/MUM/2017 M/S NAITIK GEMS PURCHASES HAVE BEEN MADE FROM OTHER ENTITIES NOT FROM THE CLAIMED ENTITY I.E. AFORESAID HAWALA DEALERS. 10 NOW THE QUESTION ARISES WHAT SHOULD BE THE ACTUAL PROFIT ELEMENT EMBED IN THESE ACCOMMODATION ENTRIES AS THESE ENTRIES ARE HAVING SOME FIXED PERCENTAGE OF PROFIT OR COMMISSION OR ANY OTHER BENEFITS ATTACHED. EACH AND EVERY TRADING UNIT HAS ITS DIFFERENT PROFIT RATIO DEPENDING ON THE ITEMS TRANSACTED. THEREFORE, THE PROFIT ELEMENT EMBEDDED IN THESE TRANSACTIONS SHOULD DEFINITELY BE IN REAL AND CLOSE PROXIMITY TO THE NATURE OF BUSINESS AND PROFESSION. 10.1 THE NORMAL PROFIT PERCENTAGE IN CASE OF DIAMOND TRADERS/MANUFACTURES IS PREVAILIN G IN THE RANGE OF 6 - 10%. THEREFORE, THE PROFIT ELEMENT IN CASE OF ACCOMMODATION ENTRIES PERTAINING TO DIAMOND TRANSACTIONS SHOULD BE IN THE SAME RANGE. IN CASE OF METAL BUSINESS, THE QUANTUM OF PROFIT ELEMENT AS DECIDED IN VARIOUS JUDICIAL PRONOUNCEMENTS W ITH RESPECT TO THE BOGUS PURCHASES HAS BEEN CONSIDERED AT 12.5% AND IS BASED ON THE CORE FACT THAT THE SALES TAX ON THESE ITEMS IS 12.5%. IN CASE OF DIAMOND BUSINESS, THE CORRESPONDING SALES TAX IS APPLICABLE AT THE RATE OF 1%. 10 I.T.A. NO. 4761, 4762, 4763, 4764 & 5037/MUM/2017 M/S NAITIK GEMS 10.2 IT IS PERTINENT TO MEN TION HERE THAT THE MINIMUM PROFIT PERCENTAGE, AS EXPLAINED IN THE INSTRUCTION NO. 02/2008 DATED 22' FEBRUARY 2008, INTRODUCED BY HON 'BLE FINANCE MINISTER FOR THE ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING AND OR TRADING OF DIAMONDS AS BENIGN ASSESS MENT PROCEDURE IS AT 6%. AND HENCE IT CAN BE PRESUMED THAT MOST OF THE TRADERS IN THE MARKET ACTUALLY OPERATE NOT BELOW THIS LEVEL OF MARGIN IN THE OPEN MARKET. BAP WAS TO BE APPLICABLE FOR THOSE DIAMOND MERCHANTS, WHO WERE SHOWING A PROFIT MARGIN OF 6% OF THEIR TURNOVER. ALTHOUGH, THIS BAP TALKS ABOUT THE NET PROFIT MARGIN (NP), FOR A PETTY DEALER, OPERATING WITHOUT ANY ESTABLISHMENT, THE GP WOULD BE ALMOST SIMILAR TO NP. 10.3 IN VIEW OF THE FACT THAT THE BOGUS PURCHASES(ACCOMMODATION ENTRIES) HAS BEEN REC ORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, I AM OF THE CONSIDERED OPINION THAT THE PROFIT ELEMENT EMBEDDED THEREIN WITH RESPECT TO THE TRANSACTIONS ENTERED BY THE ASSESSEE WITH PAPER CONCERN LIKE AFORESAID HAWALA DEALERS DEALING IN DIAMOND WOULD BE SUB JECT TO TAX. AND I HEREBY CONSIDER THAT 6% OF THE TOTAL AMOUNT OFRS. 8,90,18,159/ - WHICH COMES TO RS. 53,41,090/ - SHOULD BE TAKEN AS ADDITIONAL PROFIT ON UNPROVED/ 11 I.T.A. NO. 4761, 4762, 4763, 4764 & 5037/MUM/2017 M/S NAITIK GEMS NON - GENUINE PURCHASE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE..' 3.5 THERE IS MERIT IN THE ARGUMENTS OF THE AO AS GIVEN ABOVE AND FOLLOWING SUCH ARGUMENTS IT IS HELD THAT THE A.O. WAS RIGHT IN ESTIMATING ADDITIONAL PROFIT ON UNPROVED/NON - GENUINE PURCHASES. THE A.O. HAS FAIRLY CONCEDED IN PARA 9.1 OF HIS ORDER THAT THE APPELLANT HAD INCURR ED EXPENDITURE ON SUCH PURCHASES, BUT SUCH EXPENDITURES REMAIN UNEXPLAINED. THUS, SOME DISALLOWANCE OUT OF THE DISPUTED PURCHASES WILL HAVE TO BE MADE, BUT THE QUESTION REMAINS WHETHER DISALLOWANCE AT THE RATE OF 6% OF THE UNPROVED PUR CHASES IS FAIR OR NOT. THE MAIN REASON FOR ADOPTING SIX PERCENT AS FAIR ADDITIONAL PROFIT WAS BECAUSE THE AO THOUGHT THAT INSTRUCTION NO. 2 OF 2008 DATED 22.02.2008 WILL BE APPLICABLE TO THIS CASE. HOWEVER, FROM A PLAIN READING OF INSTRUCTION NO. 2 OF 20 08 IT IS SEEN THAT THIS INSTRUCTION WAS MEANT TO BE APPLICABLE FOR ASSESSMENTS MADE DURING FY 2008 - 09. CLEARLY, THE ASSESSMENT OF THE APPELLANT HAS NOT BEEN MADE DURING FY 2008 - 09. FURTHER, THE CLAUSE E OF THE SAID INSTRUCTION STATES N THE RATE OF PROFIT AS A PERCENTAGE OF TURNOVER WOULD BE REVIEWED ANNUALLY ON THE BASIS OF REVENUE GENERATION AND RESULTS OF SCRUTINY ASSESSMENTS, SEARCHES AND SURVEYS MADE DURING THE YEAR'. THUS, THE BENIGN ASSESSMENT PROCEDURE (BAP) OR THE PERCENTAGE MENTIONED IN THE INSTRUCT ION NO. 2 OF 2008 CANNOT BE APPLIED ACROSS THE BOARD IN ALL CASES OF 12 I.T.A. NO. 4761, 4762, 4763, 4764 & 5037/MUM/2017 M/S NAITIK GEMS ASSESSEES ENGAGED IN DIAMOND BUSINESS. IN DIAMOND TRADE THE RATE OF VAT IS STATED TO BE 1% AND IN SOME PLACES LIKE SURAT THE SAME IS STAT ED TO BE FULLY EXEMPT. THE TASK .FORCE GROUP F OR DIAMOND INDUSTRY CONSTITUTED BY THE GOVERNMENT OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY, AFTER CONSIDERING THE BAP SCHEME, RECOMMENDED PRESUMPTIVE TAX FOR NET PROFIT CALCULATED @2% OF TRADING ACTIVITY AND 3% FOR MANUFACTURING ACTIVITY OR @ 2.5% ACRO SS THE BOARD. IT IS ALSO STATED THAT THE OPERATIVE PROFIT IN CASE OF DIAMOND TRADING FOR COMPUTATION OF ALP BY THE TP WING IS CONSISTENTLY IN THE REGION OF AROUND 1.75% TO 3%. IT IS ALSO BROUGHT TO MY NOTICE THAT IN SIMILAR CASES OF DIAMOND BUSINESS, SOME CIT(A)'S HAVE TAKEN A VIEW THAT 3% OF THE DISPUTED PURCHASES SHOULD BE CONSIDERED AS FAIR ADDITIONAL PROFIT. IN VIEW OF THE ABOVE AND ALSO SINCE THE PROFIT MARGIN IS LESSER IN THIS SECTOR, ADOPTING 6% AS THE ADDITIONAL PROFIT BY THE AO, IS NOT BASED ON COR RECT FOOTING. CONSIDERING THE FACT THAT THE PROFIT MARGIN IN THIS SECTOR IS AROUND 2 TO 3 PERCENT AND THE TAXES SAVED IS ALSO AROUND 1%, I AM OF THE CONSIDERED OPINION THAT IF THE ADDITION IS SUSTAINED TO THE EXTENT OF 3% OF THE DISPUTED PURCHASES, THE SAM E WILL MEET THE ENDS OF JUSTICE. THUS, AFTER CONSIDERING THE TOTALITY OF FACTS THE ADDITION MADE BY THE AO IS RESTRICTED TO 3%, OF THE DISPUTED PURCHASES. THUS 3% OF RS. 8,90,18,159/ - .WHICH IS RS. 26,70,545/ - TAKEN AS PROFIT OF THE APPELLANT ON PURCHASES T H AT ARE NOT 13 I.T.A. NO. 4761, 4762, 4763, 4764 & 5037/MUM/2017 M/S NAITIK GEMS FULLY AND PROPERLY EX PLAINED. ADDITION OF RS. 26,70,545/ - IS ACCORDINGLY CONFIRMED OUT OF AN ADDITION OF RS.53,41,090/ - AND THE BALANCE IS DELETED. GROUNDS OF APPEAL NO. THEREFORE PARTLY ALLOWED. 10 . AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AND HEARING THE PARTIES AT LENGTH, WE FIND AFTER ANALYZING THE RECORDS CONTAINED IN PAPER BOOKS FILED BY THE ASSESSEE, AO HAD NOT MECHANICALLY DISALLOWED THE ENTIRE DISPUTED PURCHASES . RATHER, THE AO HAD DISALLOWED 6% OF THE AMOUNT OF PURCHASES IN DISPUTE. THE MAIN REASON FOR ADOPTING 6% AS FAIR ADDITIONAL PROFIT WAS BASED ON DETAILED REASONS AND ONLY AFTER ANALYZING THE MODUS OPERANDI OF THE TRANSACTION OF DOUBTFUL PURCHASES, WHICH HAVE ALREADY BEEN MENTIONED ABOVE IN ITS ORDER. MOREOV ER, WE ALSO FOUND THAT THE AO APPRECIATED THAT INSTRUCTION NO. 2 OF 2008 DATED 22.02.2008 WAS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION AS FROM THE PLAIN READI NG OF INSTRUCTION NO. 2 OF 2008, IT WAS OBSERVED THAT THOSE INSTRUCTION S WERE MEANT TO BE A PPLICABLE FOR ASSESSMENTS MADE DURING FY 2008 - 09. AS IN CLAUSE E OF THE SAID INSTRUCTION, IT WAS CLEARLY MENTIONED THAT THE RATE OF PROFIT AS A PERCENTAGE OF TURNOVER WOULD BE REVIEWED 14 I.T.A. NO. 4761, 4762, 4763, 4764 & 5037/MUM/2017 M/S NAITIK GEMS ANNUALLY ON THE BASIS OF REVENUE GENERATION AND RESULTS OF SCRUTINY AS SESSMENTS, SEARCHES AND SURVEYS MADE DURING THE YEAR'. THUS, CONSIDERING THE ABOVE INSTRUCTIONS, WE ARE ALSO OF THE VIEW THAT THE SAME CANNOT BE APPLIED ACROSS THE BOARD IN ALL CASES OF ASSESSEE S ENGAGED IN DIAMOND BUSINESS. 11. THE LD. CIT(A) AFTER RE - APPRECIATING THE FACTUAL POSITION AND THE DOCUMENTS HAD TAKEN A P RUDENT VIEW BY CONSIDERING THAT IN THE DIAMOND TRADE, THE RATE OF VAT IS STATED TO BE 1% AND IN SOME PLACES LIKE SURAT THE SAME IS STATED TO BE FULLY EXEMPT. THEREFORE, CONSIDERED THE RECOMMENDATION OF THE TASK FORCE GROUP FOR DIAMOND INDUSTRY CONSTITUTED BY THE GOVERNMENT OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY, WHEREIN THE SAID TASK FORCE GROUP AFTER CONSIDERING THE BAP SCHEME (BENIGN ASSESSMENT PROCEDURE) , RECOMMENDED PRESUMPT IVE TAX FOR NET PROFIT CALCULATED @ 2 % OF TRADING ACTIVITY AND 3% FOR MANUFACTURING ACTIVITY OR @ 2.5% ACROSS THE BOARD. THE LD. CIT(A) HAD ALSO CONSIDERED THE OPERATIVE PROFIT IN CASE OF DIAMOND TRADING FOR CO MPUTATION OF ALP BY THE TP WING, WHICH IS CO NSISTENTLY IN THE REGION OF AROUND 1.75% TO 3%. THEREFORE 15 I.T.A. NO. 4761, 4762, 4763, 4764 & 5037/MUM/2017 M/S NAITIK GEMS CONSIDERING ALL THOSE FACTS, THE LD. CI T(A) HAD TAKEN A BALANCED VIEW AND HAD RESTRICTED THE ADDITIONS @ 3% OF THE DISPUTED PURCHASES, WHICH IN OUR VIEW, IS CORRECT. 12 . KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ALSO NOTICED THAT NO NEW FACTS HAVE BEEN PLACED ON RECORD IN ORDER TO CONTROVERT OR REBUT THE FINDINGS OF LD. CIT(A) AND THEREFORE, WE SEE NO REASON S TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS SO RECORDED BY THE LD.CIT(A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THIS GROUND RAISED BY THE ASSESSEE STANDS DISMISSED . 13 . CONSEQUENTLY, THE APPEAL F ILED BY THE ASSESSEE STANDS DISMISSED. ITA NO. 4762, 4763, 4764 /MUM/2017 (AY 2011 - 12, 2012 - 13 & 2013 - 14 ) FILED BY ASSESSEE AND ITA NO. 5037/MUM/2017 (AY 2012 - 13 ) FILED BY REVENUE. 1 4 . NOW WE TAKE UP ITA NO. 4762, 4763, 4764/MUM/2017 (AY 2011 - 12, 2012 - 13 & 2013 - 14) FILED BY ASSESSEE AND ITA NO. 5037/MUM/2017 (AY 2012 - 13) FILED BY REVENUE. SINCE WE 16 I.T.A. NO. 4761, 4762, 4763, 4764 & 5037/MUM/2017 M/S NAITIK GEMS HAVE ALREADY DECIDED THE SIMILAR G ROUNDS OF APPEAL IN ITA NO. 4761 /M UM/2017 FOR AY 2010 - 11 ON MERITS. THEREFORE , FOLLOWING OUR OWN DECISION IN ITA NO. 47 61 /MUM /17 , WE APPLY THE SAME FINDINGS IN THE SE PRESENT APPEAL S IN ORDER TO MAINTAIN JUDICIAL CONSISTENCY WHICH IS APPLICABLE MUTATIS MUTANDIS . 1 5 . IN THE NET RESULT, ALL THE APPEALS FILED BY THE ASSESSEE AND REVENUE STA NDS DISMISSED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH MARCH , 2019 . SD/ - SD/ - (G. MANJUNATHA ) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 27 . 03 .201 9 SR.PS . DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI