Ram Gopal, Hyderabad V. ITO Ward-8(2), Hyderabad

ITA 571/Hyd/2022

AI Insights

The case involves Shri Ram Gopal, an individual engaged in trading jewelry and precious stones, who faced scrutiny over alleged bogus purchases amounting to Rs.25,63,834 from three entities linked to accommodation entries. The Income Tax Officer (ITO) re-assessed Ram Gopal's income for the assessment years 2008-09 to 2010-11, adding the amount as unvouched expenditure. The CIT (A) later reduced the addition to 25% of the bogus purchases. Ram Gopal appealed to the Tribunal, which further reduced the disallowance to 15%, citing the lack of rejection of books of account, acceptance of sales, and the nature of the business which typically involves a lower profit margin.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129534 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB-A
• Next Hearing Date: 06-03-2023
• Assessment Year: 2008-2009
• Appeal Filed On: 17-10-2022
• Other Referred Cases: CIT vs. Durga Prasad More (1971) 82 ITR 540 (S.C), Sumati Dayal vs.CIT (1995) 214 ITR 801 (S.C), NK Industries Ltd vs. DCIT 72 Taxmann.com 289, Vijay Proteins Ltd. vs. Assistant Commissioner of Income tax 58 ITD 428, M/s. Kulubi Steel vs. ACIT, Shanthivijay Jewels Ltd vs. DCIT, Ronak Gems vs. DCIT, Nitin Gupta vs. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Search and seizure; Tangible material; Wrong claim; Accommodation entries
• Section: 147; 131; 68; 148; 69C; 143(3); 142(1); 143(2); 73; 72; 13

Judgement Text

ITA Nos 514 571 and 572 of 2022 Ram Gopal Hyderabad Page 1 of 15 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A‘ Bench, Hyderabad Before Shri R.K. Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member ITA Nos. 571, 514 & 572/Hyd/2022 Assessment Years: 2008-09 to 2010-11 Shri Ram Gopal Hyderabad PAN:ACHPR8639M Vs. Income Tax Officer Ward 8(2) Hyderabad (Appellant) (Respondent) Assessee by : C.A Mrudulatha Revenue by: Shri KPRR Murthy, DR Date of hearing: 07/03/2023 Date of pronouncement: 14/03/2023 ORDER Per R.K. Panda, A.M ITA 571/Hyd/2022 is directed against the order dated 23.08.2022 of the CIT (A)-NFAC Delhi relating to A.Y 2008-09. ITA No.514/Hyd/2022 is directed against the order dated 10.08.2022 of the CIT (A)-NFAC Delhi relating to A.Y 2009-10. ITA 572/Hyd/2022 is directed against the order dated 29.8.2022 of the CIT (A)-NFAC Delhi relating to A.Y 2010-11. For the sake of convenience, all these appeals were heard together and are being disposed off by this common order. ITA 571/Hyd/2022 – A.Y 2008-09 2. Facts of the case, in brief, are that the assessee is an individual and derives income from trading in jewellery and ITA Nos 514 571 and 572 of 2022 Ram Gopal Hyderabad Page 2 of 15 precious stones. He filed his return of income on 5.9.2008 declaring total income of Rs.48,13,858/-. The assessment was completed u/s 143(3) on 27.12.2010 determining the total income of the assessee at Rs.50,69,940/- wherein an amount of Rs.2,51,080/- was added as unvouched expenditure. 2.1 Subsequently, information was received from the Investigation Wing, Hyderabad wherein it has been mentioned that during the financial year 2007-08 relevant to A.Y 2008-09, the assessee has shown purchases to the tune of Rs.25,63,834/- from three entities namely Rajendra Kumar Jain group, Dharmichand Jain Group and Sanjay Chaudhary Group, Surat which happened to be paper entities with no real business activity and provide accommodation entries to interested parties for bogus purchases. In view of the above, the Assessing Officer was of the opinion that the assessee has inflated the expenditure by claiming bogus purchases to the extent of Rs.25,63,834/- which was an accommodation entry and not a real transaction. He, therefore, initiated proceedings u/s 147 with the prior approval of the Jt. Commissioner of Income Tax, Range-8 Hyderabad. Accordingly notice u/s 148 of the Act was issued on 27.3.2015 which was served on the assessee on 30.03.2015. 2.2 The Assessing Officer thereafter issued statutory notices u/s 143(2) and 142(1) of the Act calling for certain information regarding the transaction. The assessee in response to the same filed the following details: 1. Original Affidavit from Rajendra Jain in relation to the purchases debited in our books of account of the assessee during the F.Y. 2007-08. ITA Nos 514 571 and 572 of 2022 Ram Gopal Hyderabad Page 3 of 15 2. Details of purchases invoice dated 10.04.2007 vide invoice no. PD/MIPL/APR/07/2007-08 from Mouli Mani Impex Pvt Ltd (director) amounting to Rs. 4,87,759/-. 3. Details of purchase invoice dated 12.04.2007 vide invoice no. SDS/PD/ÁPR/12/2007-08 from Sun Diam (partner) amounting to Rs. 11,60,950/- 4. Details of purchase invoice dated 12,04.2007, vide invoice no. AE/PD/APR/11/2007-08 from Avi Exports (Proprietor) amounting to Rs.9,15,125/- and also furnish purchase invoices. 2.3 During the course of assessment proceedings, the assessee filed an affidavit of Rajendra Jain according to which the goods were duly sold by him to the assessee and others and the payment of the aforesaid amounts were duly received. 3. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee. He observed that Sri Rajendra Jain, Shri Sanjay Choudary and Sri Dharmichand Jain are some of the entry providers operating in Mumbai indulging in providing accommodation entries in the nature of bogus sales and unsecured loans. He noted that a search & seizure action in these group of cases has been carried out on 3.10.2013 by Dy. CIT, CC-4 Surat. During the course of such proceedings, a statement on oath of Shri Rajendra Jain was recorded by the Dy.DIT (Inv.) Unit-I (4) Mumbai on 5.10.2013 wherein he had given the list of firms who have been engaged in the business of bills shopping, lending names and providing accommodation entries. 4. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee. He observed that the facts and circumstances of the case is different from the normal ITA Nos 514 571 and 572 of 2022 Ram Gopal Hyderabad Page 4 of 15 business activity of any businessperson. In the instant case, the entire gamut of things are to prove the bogus transactions a real transaction by doing paperwork. He summoned the assessee and his statement was recorded u/s 131 of the I.T. Act. In the said statement, the assessee Shri Ram Gopal submitted that he personally went to Surat and purchased the goods. However, the Assessing Officer noted that he could not explain as to how he went to Surat and how he purchased only from these bogus entities and the assessee could not explain with any satisfactory evidence to support his travelling to Surat. The Assessing Officer further noted that the assessee failed to produce the party-wise sales and could produce only party-wise purchases. He further noted that most of the sales are in cash and in the sale ledger, description of item is “Malkhata” which may include precious stones and diamonds. However, there is no clarity from the ledger whether that assessee sold diamonds with jewellery or loose diamonds. The Assessing Officer further noted that Shri Rajendra Jain had given a statement before the Investigation authorities that his group concern are shopping in bills trading and he had explained the modus operandi followed in this practice of providing accommodation entries. Although he had retracted from his earlier statement that his business was real, however, it was clearly established during the search and seizure operation that not a single piece of diamond was found by the survey team, though there is substantial turnover shown by the above three concerns controlled by him and it was proved beyond doubt that these concerns are engaged in bill shopping. The Assessing Officer therefore, following the decision of the Hon'ble Supreme Court in the case of CIT vs. Durga Prasad More (1971) 82 ITR 540 (S.C) and Sumati Dayal vs.CIT (1995) 214 ITR 801 (S.C) made addition of Rs.25,63,834/- being bogus purchases made by the assessee ITA Nos 514 571 and 572 of 2022 Ram Gopal Hyderabad Page 5 of 15 from the three entities namely AVI Exports, Sun Diam and Mouli Mani Impex Pvt. Ltd. 5. In appeal, the learned CIT (A) relying on the decision of the Hon'ble Gujarat High Court in the case of NK Industries Ltd vs. DCIT 72 Taxmann.com 289, which has been upheld by the Hon'ble Supreme Court, and various other decisions directed the Assessing Officer to restrict the addition to 25% of the bogus purchases of Rs.25,63,834/- i.e., Rs.6,40,958/- by observing as under: “6. Ground Nos. 1, 2 & 3: In ground No. 1, the appellant has challenged that under the facts and circumstances of the case, the learned I.T.O. erred in making an addition of Rs.25,63,834 as "Bogus Purchases". In ground No. 2, the appellant has challenged that the learned ITO failed to note that the aforesaid purchases were genuine, fully recorded in the books, payments we made through bank cheques, acknowledged by the seller. In ground No. 3, the appellant has challenged that the leaned ITO failed to note that the supplier of diamonds had filed affidavits and retracted the statement given earlier before the IT authorizes at Surat and confirmed the transactions as given and therefore the leaned ITO erred in making the addition of Rs.25,63,834/- . 6.1. The appellant has submitted that he had in response to the notice issued U/s. 143(2) in respect of the re-assessment proceedings, filed the details called for including party wise purchase and sales invoices. The appellant has submitted that the purchases are genuine and Rajender Jain had furnished affidavits stating that he had sold the diamonds to the appellant and this evidence has not been rebutted by the Assessing Officer. The appellant has argued that the mere fact that the appellant has not been able to adduce evidence for the movement of the purchases from Surat to Hyderabad which on many occasions was delivered by the seller or on other occasions personally taken by the appellant. Further, the appellant has stated that the movement of goods cannot be the ground to disbelieve the purchases made. The appellant has argued that the Assessing Officer's statement that accommodation entries by M/s. Rajender Jain and group was established by the departmental authorities ran contrary to the affidavit filed by the Rajender Jain. 6.2 A perusal of the assessment order reveals that a search & Seizure action in these group of cases - Sri Rajendra Jain, Shri Sanjay Choudary and Sri Dharmichand Jain and it was found that they are some of the entry providers operating in Mumbai indulging in providing ITA Nos 514 571 and 572 of 2022 Ram Gopal Hyderabad Page 6 of 15 accommodation entries in the nature of bogus sales and unsecured loans. A search & Seizure action in these group of cases has been carried out on 03.10.2013 by DCIT, CC-4, Surat. During the course the list of beneficiaries who have benefited from the entries obtained from these the group are collected. During proceedings Unit-I(4), Mumbai a statement on oath of Sri Rajendra Jain was recorded by DDIT(Inv). on 05.10.2013. In response to Q. No. 14, his reply is as under: Q.14 During the survey action undertaken it various office premises of yours; not a single piece of diamond has been found by respective server teams though there is substantial turnover shown by various concerns controlled by you. Please state as to where do you keep your stock in trade? Ans- Sir, in this regard, I want to admit that we are engaged in business of bills shopping response to your through all the concerns as named by me in question no, 13 due to which don't have any physical stock of diamond with us at any of place at any point of time. 1 would like to further add that we are merely lending names of our various concerns to the real imports of diamond who takes the actual delivery of diamonds, Later, the said person Rajendra Jain filed affidavits in favor of the appellant but during the assessment proceedings, the Assessing Officer had called upon Sri Ram Gopal. However, citing health reasons, he was unable to attend the proceedings Therefore, the said affidavits cannot be treated as sacrosanct. 6.3. The question which emerges is whether the entire amount of the Bogus Purchases of 3 entities, Rajender Kumar group, Dharamchand Jain group and Sanjay Chander group, Surat, to the extent of Rs.25,63,834/- which happened to be accommodation entries, should be added, as the AO has done or the percentage method is to be adopted. 6.4 All the facts of the case have been considered. Bogus Purchase are entries made in books of accounts for purchases made, when in fact, no purchases have been made, the aim being reduction of taxable income by inflating expenses on account of purchases. In the case of M/s. Lifeline Drugs and Intermediates Pvt. Ltd. (5535/Mumbai/2007), ITAT Bombay Bench held that when the assessee has no explanation to offer for the bogus purchases, the same has to be added to the total income. lt cannot be said that no addition can be made since the assessee might have made corresponding purchases from alternate sources and the assessee cannot be given an opportunity to legalize its illegal transaction through accommodation entries. In the case of N.K. Industries Ltd. Vs DCIT [2016] 72 taxmann.com 289 (Gujarat), entire purchases shown on basis of fictitious invoices was debited in trading account. Assessing Officer made addition of 25 per cent of total purchase. Tribunal came to a categorical finding that there were purchases from bogus suppliers and, thus, Tribunal made addition of total purchases. ITA Nos 514 571 and 572 of 2022 Ram Gopal Hyderabad Page 7 of 15 The Hon'ble Gujarat High Court upheld Tribunal's finding as follows: "6. The Tribunal in the case of Vijay Proteins Ltd. (supra) has observed that it would be just and proper to direct the Assessing Officer to restrict the addition in respect of the undisclosed income relating to the purchases to 25% of the total purchases. The said decision was confirmed by this Court as well. On consideration of the matter, we find that the facts of the present case are identical to those of M/s. Indian Woollen Carpet Factory (supra) or Vijay Proteins Ltd. (supra) In the present case the Tribunal has categorically observed that the assessee had shown bogus purchases amounting to Rs. 2,92,93,288/- and taxing only 25% of these bogus claim goes against the principles of Sections 68 and 69C of the Income Tax Act. The entire purchases shown on the basis of fictitious invoices have been debited in the trading account since the transaction has been found to be bogus. The Tribunal having once come to a categorical finding that the amount of Rs. 2,92,93,288/- represented alleged purchases from bogus suppliers it was not incumbent on it to restrict the disallowance to only Rs. 73,23,322/," Above case of N K Proteins Ltd (earlier N.K. Industries Ltd.) Vs CIT has been confirmed by Hon'ble Supreme Court vide SLP(C) No. 769 of 2017. Some courts have taken a different view that sales shown by taxpayers are not possible without there being purchases which are being held as bogus and hence, no addition can be made except addition on account of inflation in the price of goods if any. Therefore, the Assessing Officer has a choice to incorporate in the body assessment order alternate additions without prejudice. Amount of addition to be made on alternative basis will depend upon the nature of business undertaken by the Taxpayer. In the instant appeal, since there is information regarding the purchases being bogus, corresponding sales will be treated as ingenuine sales, and profit element will be taxed at an estimation basis, looking into the facts and circumstances of the case. 6.5. In view of the statement of the receiving end of the payments and the person who has issued the bills, the appellant could not produce any material to disbelieve the statement of the Hawala parties. A similar issue was elaborately examined in the case of Vijay Proteins Ltd. v. Assistant Commissioner of Income tax 58 ITD 428 (1TAT AHMEDABAD BENCH"C' and the observation is as under:. "It is well known that if purchases are made from open market without insisting for the genuine bills, the suppliers may be willing to sell those products at a much lower rate as compared to the rate which they may charge in case the dealer has to give a genuine sale invoice in respect of that sale and supply the goods. There may be various factors due to which there is bound to be a substantial difference between the purchase price of unaccounted material and rate of purchase of accounted for goods. There may be a saving on account of sales-tax and other taxes and duties which may be leviable in respect of manufacture or sale of goods in question. The suppliers or the ITA Nos 514 571 and 572 of 2022 Ram Gopal Hyderabad Page 8 of 15 manufacturers make a substantial saving in the income-tax in respect of income from sale of unaccounted goods produced and sold by them. This may also be one of the factors due to which the seller may be willing to charge lower rates for unaccounted goods as compared to accounted goods. Keeping all these in mind and also keeping in view the decision of the ITAT in the case of Sanjay Oil Cake Industries (supra) we hold that 25% of the purchase price accounted for in the books of accounts through such fictitious invoices in the name of 33 bogus parties should be disallowed out of the amount of purchases shown to have been made from those 33 bogus suppliers. We direct the Assessing Office to disallow 25% of the aforesaid amount on account of inflation of purchase price." The above decision was accepted by the department and the assessee. In the case of Vijay Proteins Ltd. v. Assistant Commissioner of Income (Supra) also suggested to disallow reasonable percentage of the alleged bogus purchases for the possibility of inflation of purchases by booking the purchase bills, even though payments are made through bank and the also for the reason that the contrary has not been completely ruled out. Similar view was also expressed in the case of ACIT VS M/s. Kulubi Steel in ITA NO.1568/AHD/2008 dt. 16.12.2010 AND Sumit P. Sheth Vs ITO ITA No. 3238 & 3293/Ahd/2009. 6.6. Further, as Rajendra Jain never appeared before the AO, the above cited purchases and its sources and genuineness remain unexplained. However, in view of the facts and circumstances of the case, and by applying the principle of Lex noncogit ad Impossibilia and by relying upon the decision in the case of Vijay Proteins Ltd. Vs. Assisstant Commissioner of Income-tax 58 ITD 428, the Hon. (1TAT AHMEDABAD BENCH 'C), 25% of bogus purchases Rs.25,63,834 amounting to Rs. 6.409585/- is hereby disallowed and added to the total income. In view of the above discussion, Appeal on Ground No. 1, 2 & 3 are partly allowed”. 6. Aggrieved with such order of the learned CIT (A), the assessee is in appeal before the Tribunal by raising the following grounds: “1. The order of the Ld. Commissioner of Income Tax Centre (Appeals), National Faceless Appeal ['Ld. CIT(A)'] is erroneous and unsustainable in law and on facts of the case. 2. The Ld. CIT(A) failed to note that the entire reassessment proceedings stood merely on N- the premise of "borrowed satisfaction" and that there was no other fresh or tangible evidence brought on record to prove otherwise. M 3 The Ld. CIT(A) failed to consider that the regular assessment proceedings u/s 143(3) of the 1.T. Act, 1961 was completed accepting the purchases and therefore there was no fresh tangible material ITA Nos 514 571 and 572 of 2022 Ram Gopal Hyderabad Page 9 of 15 brought on record by the Assessing Officer to prove that income had had escaped assessment. 4 The Ld. CIT(A) erred in sustaining the order of the Assessing Officer despite the fact that the entire purchases were accounted in the books of the Appellant and the same was shown in the stock register as well. 5. The Ld. CIT(A) while confirming the addition of Rs. 6,40,960/- totally ignored the documentary evidence produced by the Appellant comprising of purchase invoices, payments made by account payee cheques, entries in the stock statement, sales and the confirmation made by the supplier and therefore, the addition of Rs. 6,40,960/- is totally opposed to the law of evidence and therefore unsustainable. 6. The Ld. CIT(A) on a wrong foundation of reasoning arising from a misconception of the facts failed to appreciate the entries in the stock register which finally culminated in sales and therefore erred in disallowing 25% of the purchases. 7. The Ld. CIT(A) failed to appreciate the line of business of the Appellant that loose diamonds purchased are embedded in various forms of jewellery and then sold, and therefore erred in disallowing 25% of the purchases. 8. The Ld. CIT(A) failed to note that Rajender Kumar Jain and others who were search and subject to seizure department and operation u/s 132 of the 1.T.Act, 1961 were witnesses of the onus lay on the Department to produce them for cross examination and therefore the disclosure of 25% of purchases at Rs. 6,40,960/- is totally contrary to the facts and evidence on record. 9. The Ld. CIT(A) erred in dismissing the affidavit filed by Mr. Rajender Jain in favour of the Appellant merely because of the latter's inability to attend the proceedings in person, despite stating health concerns. 10. The Ld. CIT(A) failed to note that neither the books of accounts were rejected nor was the genuineness of the purchases questioned and therefore, the addition of Rs. 6,40,960/- is totally contrary to the facts and evidence on record and is to be deleted. 11. The Ld. CIT(A) having allowed 75% of the purchases as genuine erred in disallowing 25% at Rs. 6,40,960/- without any basis and merely relying on the Ahmedabad Tribunal concluded that 25% of the purchases ought to be disallowed. 12. Any other ground(s) that may be urged at the time of hearing.” 7. The learned Counsel for the assessee at the outset did not press the grounds relating to validity of reopening of the ITA Nos 514 571 and 572 of 2022 Ram Gopal Hyderabad Page 10 of 15 assessment for which the learned DR has no objection. Accordingly, the grounds raised by the assessee challenging the validity of re-assessment proceedings are dismissed as not pressed. 8. So far as the other grounds that remain for our adjudication is regarding estimation of profit at 25% on account of such bogus purchase. 9. The learned Counsel for the assessee referring to page 75 to 80 of the Paper Book drew the attention of the Bench to the copy of acknowledgement of the Income-Tax return of the 3 parties from whom the assessee has purchased Diamond which was treated as bogus by the Assessing Officer. Referring to page 81 of the Paper Book, he drew the attention of the Bench to the invoices raised by Mouli Mani Impex Ltd., on 10.04.2007 for an amount of Rs.4,87,759/-. Referring to various other pages he drew the attention of the Bench to the invoices raised by the same party and other parties. She submitted that the purchase of Diamond so made from the above parties have entered into the stock register and the sales have not been doubted by the Assessing Officer. Further, the books of account have also not been rejected. Referring to pages 85 to 88 of the Paper Book, she drew the attention of the Bench to the affidavit of Mr. Rajender Jain, Partner of Sun Diam confirming the sales to the assessee. Referring to page 96 to 97 of the Paper Book, she drew the attention of the Bench to the affidavit of Shri Rajendra Jain, Proprietor of AVI Exports confirming the sales to the assessee. Referring to page 73 to 74 of the Paper Book, she drew the attention of the Bench to the affidavit filed by Shri Rajendra Jain, ITA Nos 514 571 and 572 of 2022 Ram Gopal Hyderabad Page 11 of 15 Director, Mouli Mani Impex Ltd confirming the sales to the assessee. She submitted that when the books of account of the assessee are not rejected, sales has been accepted, the parties from whom assessee has purchased diamond have confirmed to have sold the goods to the assessee which has entered in the stock register and when the payments have been made through proper banking channel, then estimation of profit @ 25% is uncalled for. Referring to various decisions, she submitted that the Courts and various Benches of the Tribunal have estimated such profit at 3 to 5% which is the norm of the industry in such type of cases. She accordingly submitted that either the entire amount should be deleted or in the alternate the profit on such alleged bogus purchases be reduced to 3 to 5%. She also relied on the following decisions: 1. CIT, Hyderabad vs. Tilak Raj Kumar 6 [2015] 56 Taxmann 36 (AP & Telangana) dt. 16.09.2014. 2. Zuari Foods and Farms Pvt. Ltd. Vs ACIT Circle 1(1),Goa Bench of the Hon'ble Bombay High Court 3. Shanthivijay Jewels Ltd Vs. DCIT Rg8(3) Mumbai-ITAT for the AY 2011-12 in ITA No. 1045/Mum/2016-dt. 13.04.2018 4. M/s Fancy Wear Vs. ITO Ward24(3)(1) Mumbai – ITAT for the AY 2010-11 & 2011-12-1TA No.1596 & 1597/Mum/2016-20.09.2017 5. DCIT Central Circle 2(4) Vs. Ronak Gems, Mumbai-AY 2008-09 ITA No.-3118/Mum/2017 & CO 193/Mum/2017-dt.04.10.2017. 6. Nitin Gupta Vs. ITO Ward-47(4), New Delhi - AY 2007- 08-ITA no. 2266/Del/2017-dt. 06.04.2018. 10. The learned DR, on the other hand, while supporting the order of the Assessing Officer, strongly opposed the ITA Nos 514 571 and 572 of 2022 Ram Gopal Hyderabad Page 12 of 15 arguments advanced by the learned Counsel for the assessee. He submitted that the entire purchases are bogus as found by the search & survey party during the course of search in the premises of Rajendra Jain group. He submitted that the learned CIT (A) has already granted substantial relief to the assessee by reducing the addition to 25% of the bogus purchase which is more than sufficient and therefore, no further relief should be granted to the assessee. He accordingly submitted that the order of the CIT (A) be upheld and the grounds raised by the assessee should be dismissed. 11. We have heard the rival arguments made by both the sides, perused the orders of the AO and the CIT (A)NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the AO in the instant case, on the basis of the information received form the Investigation Wing, Hyderabad that the assessee during financial year 2007-08 relevant to A.Y 2008-09 has purchased Diamonds worth Rs.25,63,834/- from 3 entities of Rajendra Jain group which are found to be not engaged in real business activities but provide accommodation entries to interested parties for bogus purchase, reopened the assessment and in the order passed u/s 143(3) r.w.s. 147 made addition of Rs.25,63,834/- as bogus purchases. We find in appeal, the learned CIT (A) restricted such addition to 25% of the bogus purchases by relying on various decisions, reasons of which have already reproduced in the preceding paragraph. It is the submission of the learned Counsel for the assessee that Shri Rajendra Jain has already filed affidavit in respect of all the 3 concerns wherein he is either the proprietor or partner or director ITA Nos 514 571 and 572 of 2022 Ram Gopal Hyderabad Page 13 of 15 confirming the sales to the assessee and as such the transactions are genuine and he has not given any bogus bills. Further, it is her submission that the goods have entered into stock register, the sales have not been doubted by the Assessing Officer, books of account have not been rejected and the payments have made through proper banking channel and therefore, no addition should be made. It is her alternate argument that the disallowance of 25% of such bogus purchase in any case is on the higher side and considering the norm of the industry in such type of cases, the disallowances at best can be made @ 3% to 5% which is the net profit on such bogus purchase. 12. We find some force in the above argument of the learned Counsel for the assessee. Admittedly, the Assessing Officer in the instant case has accepted the sales and books of account have not been rejected. Further, the payments for the alleged bogus purchases have been made through proper banking channels and the Revenue is not in appeal against the order of the CIT (A) allowing 75% of such purchases as genuine and only 25% of the bogus purchase has been sustained by the CIT (A). In the case law compilation, the learned Counsel for the assessee has filed certain decisions, wherein in such type of cases, the additions have been sustained ranging from 3% to 5% of such purchases. Considering the totality of the facts of the case and considering the fact that the profit shown by the assessee is more than the case law cited by the learned Counsel for the assessee, we are of the considered opinion that the disallowance of 15% of such bogus purchases in the instant case will meet the ends of justice. We, therefore, modify the order of the CIT (A) and direct the Assessing Officer to restrict the addition to 15% of such bogus ITA Nos 514 571 and 572 of 2022 Ram Gopal Hyderabad Page 14 of 15 purchase as against 25% restricted by the CIT (A) being the profit on such bogus purchases. The grounds raised by the assessee are accordingly partly allowed. 13. In the result, appeal filed by the assessee is partly allowed. ITA Nos. 514 & 572/Hyd/2022 – A.Y 2009-10 14. Identical grounds have been raised by the assessee in the above two appeals. Here also, the learned Counsel for the assessee did not press the grounds challenging the validity of re- assessment proceedings for which the learned DR has no objection. Accordingly, the grounds relating to reopening of the assessment proceedings are dismissed. 14.1 So far as the grounds on merit are concerned, we have already directed the Assessing Officer to restrict 15% of such bogus purchases. Following our directions in ITA 514/Hyd/2022, here also we direct the Assessing Officer to restrict the disallowance to 15% of such bogus purchases. The grounds raised by the assessee in the above two appeals are accordingly partly allowed. 15. In the result, all the three appeals filed by the assessee are partly allowed. Order pronounced in the Open Court on 14 th March, 2023. Sd/- Sd/- (LALIET KUMAR) JUDICIAL MEMBER (R.K. PANDA) ACCOUNTANT MEMBER Hyderabad, dated 14 th March, 2023. Vinodan/sps ITA Nos 514 571 and 572 of 2022 Ram Gopal Hyderabad Page 15 of 15 Copy to: S.No Addresses 1 Shri Ram Gopal, 21-2-155 Charkaman, Hyderabad 500002 2 Income Tax Officer Ward 8(2) Hyderabad 3 CIT-Hyderabad 4 Pr. CIT- Hyderabad 5 DR, ITAT Hyderabad Benches 6 Guard File By Order