M/S.SIMONI GEMS, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2(1), MUMBAI

ITA 749/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4245 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 07-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUSUM BA NSAL
• Keywords: Reopening of assessment; Bogus purchase; Search and seizure; Principle of natural justice; Corroborative evidences; Accommodation entries; Onus to prove; Borrowed satisfaction; Set aside
• Section: 133(6); 201; 274; 208; 147; 148; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER ITA NO S . 747, 748, 749, 750, 751 & 752 /MUM/201 8 (A.Y S: 2007 - 08, 2008 - 09, 2009 - 10, 2010 - 11, 2012 - 13 & 2013 - 14) M/S. SIMONI GEMS 36, SHREEJI ARCADE, TATA ROAD NO.1 & 2, OPERA HOUSE, MUMBAI 400 004 PAN: AAKFS 8874 J V. D.C.I.T, CENTRAL CIRCLE 2(1) 8 TH FLOOR, CGO BUILDING, MUMBAI 400 0 20 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJESH SHAH DEPARTMENT BY : SHRI KUSUM BANSAL DATE OF HEARING : 20 .02.2019 DATE OF PRONOUNCEMENT : 13 .03 .2019 O R D E R PER C. N. PRASAD (JM) 1. ALL THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST DIFFERENT ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER IN SHORT LD.CIT(A)] FOR VARIOUS ASSESSMENT YEARS FROM 2007 - 08 TO 2013 - 14 , IN SUSTAINING THE ACTION OF THE ASSESSING OFFICER IN REOPENING THE ASSESSMENT MADE U/S. 143 R.W.S 147 OF THE ACT , AND SUSTAINING THE ADDITION TO THE EXTENT OF 8% OF THE PURCHASES TREATED AS NON - GENUINE. 2 ITA NOS. 747 TO 752/MUM/2018 M/S. SIMONI GEMS 2. IN ALL THESE APPEALS ASSESSEE CHALLENGED THE ORDER OF THE LD. CIT(A) IN RE - OPENING THE ASSESSMENT BY ISSUE OF NOTICE U/S. 148 AS WELL AS MAKING ADDITION TOWARDS NON - GENUINE PURCHASES. 3. LD. COUNSEL FOR THE ASSESSEE REFEREING TO REASONS FOR RE - OPENING OF ASSESSMENT FOR THE A .Y. 2007 - 08 SUBMITS THAT , ASSESSMENT WAS RE OPENED ONLY BASED ON THE INFORMATION RECEIVED FROM D IT(INV.) THAT THERE WAS A SEARCH AND SEIZURE ACTION IN THE CASE OF BHANWARLAL JAIN GROUP AND BASED ON THE SEARCH MATERIALS AND THE STATEMENTS OF VARIOUS PERSONS IN BHANWARLAL JAIN GROUP IT CAME TO LIGHT THAT THEY HAVE PROVIDED ONLY ACCOMMODATION ENTRIES TH ROUGH BENAMI CONCERNS, THEY HAVE ADMITTED IN THE STATEMENTS RECORDED U/S. 13 2( 4 ) THAT THEY HAVE O NLY PROVIDED BOGUS ENTRIES AND T HEREFORE BASED ON THIS INFORMATION THE ASSESSING OFFICER OBSERVING THAT THE LIST OF BENEFICIARIES OF ACCOMMODATION ENTRIE S PERT AINS TO THE ASSESSEE AND T HEREFORE HE BELIEVED THAT INCOME CHARGEABLE TO TAX HAD E SCAPED ASSESSMENT. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT , THERE IS NO INDEPENDENT RECORDING OF SATISFACTION BY THE ASSESSING OFFICER AND HE HAS SIMPLY RELIED ON THE INVESTIGATION REPORT AND THE STATEMENTS OF BHANWARLAL JAIN GROUP THAT THEY HAVE PROVIDED ACCOMMODATION ENTRIES AND ASSESSEE HAS OBTAINED ENTRIES FROM THOSE CONCERNS WITHOUT MAKING ANY ENQUIRY AND RECORDING ANY INDEPENDENT SATISFACTION THAT THE INCOME HAD ESCAPED 3 ITA NOS. 747 TO 752/MUM/2018 M/S. SIMONI GEMS ASSESSMENT. LD. COUNSEL FOR THE ASSESSEE FURTHER REFERRING TO PAGE NO . 16 OF THE PAPER BOOK WHICH IS THE LETTER DATED 24.02.2015 ISSUED BY THE ASSESSING OFFICER DISPOSED OF THE OBJECTIONS FOR ISSUE OF NOTICE U/S. 148 OF THE ACT SUBMITS THAT THE ASSESSING OFFICER ADMITS THAT THE INFORMATION PROVIDED BY THE INVESTIGATION WING D IT IS ENT AILED INTO INVOKING THE PROVISIONS OF SECTION 147 OF THE ACT. THEREFORE, HE SUBMITS THAT THERE IS NO FORMATION OF BEL IEF BY THE ASSESSING OFFICER THAT INCOME HAD ESCAPED ASSESSMENT EXCEPT RELYING ON THE REPORT OF D IT(INV.) . PLACING RELIANCE ON THE FOLLOWING DECISIONS THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THERE IS NO INDEPENDENT RECORDING OF SATISFACTION BY THE ASSESSING OFFICER AND THE REASONS WERE RECORDED BASED ON THE BORROWED SATISFACTION THE RE - OPENIN G OF ASSESSMENT IS BAD IN LAW. A. PCIT V. SHODIMAN INVESTMENTS (P) LTD., [93 TAXMANN.COM] B. NV POWER RENEWABLE PVT LTD, V. DCIT [ 94 TAXMANN.COM 29 (BOM)] C. HAR IKISHAN SUNDERLAL VIRMANI V. DCIT [ 394 ITR 146 (GUJ)] D. PCIT V. MEENAKSHI OVERSEAS PVT. LTD., [395 ITR 677 (DEL.)] E. ACIT V. DHARIYA CONSTRUCTION CO. [ 328 ITR 515 ] 5. COMING TO THE MERITS OF THE CASE , LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT IN THE COURSE OF THE RE - ASSESSMENT PROCEEDINGS NOTICE U/S.133(6) WERE ISSUED TO THE SUPPLIERS AND THE SUPPLIERS HAVE CONFIRMED THAT THEY HAVE SUPPLIED MATERIALS, AFFIDAVITS WERE FILED BY THE SUPPLIERS CONFIRMING T HE SUPPLY OF MATERIALS, PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES, SUPPLIERS HAVE ISSUED PROPER INVOICES, STOCKS WERE TALLIED . ALL THIS INFORMATION THOUGH FURNISHED BEFORE THE ASSESSING OFFICER 4 ITA NOS. 747 TO 752/MUM/2018 M/S. SIMONI GEMS WITHOUT MAKING ANY SORT OF ENQUIRY WITH THE SUPPLIERS, MERELY RELYING ON THE INVESTIGATION REPORT AND THE STATEMENTS OF THE PERSONS OF BHANWARLAL JAIN GROUP CAME TO THE CONCLUSION THAT ASSESSEE HAS RECEIVED ONLY ACCOMMODATION ENTRIES FROM THESE CONCERNS WITHOUT SUPPLY OF MATERIALS . THEREFORE, HE HAS ESTIMATE D THE INCOME ELEMENT FROM SUCH PURCHASES @8%. LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT , SINCE THE PARTIES HAVE CONFIRMED BY FILING ACCOUNT CONFIRMATIONS AND AFFIDAVITS, STOCKS WERE TA L LIED , PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES, SALES WERE ACC EPTED, THERE IS NO JUSTIFICATION IN TREATING THE PURCHASES AS NON - GENUINE FROM THESE PA RTIES. 6. LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ONLY REASON WHY THE ADDITION WAS MADE IS THAT THE PARTIES WERE NOT PRODUCED. HE SUBMITS THAT SIMPLY BECAUSE THE PAR TIES WERE NOT PRODUCED THE PURCHASES CANNOT BE TREATED AS NON - GENUINE. RELIANCE IS PLACED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. NIKUNJ EXIMP [216 TAXMAN.COM 171] . 7. LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT , ASSESSEE WAS NOT PROVIDED WITH THE STATEMENTS OF THE PERSONS DEPOSED FROM BHANWARLAL JAIN GROUP THAT NO SUPPLIES HAVE BEEN MADE TO THE ASSESSEE THOUGH ASKED FOR. IN THE ABSENCE OF PROVIDING STATEMENTS AND PROVIDING CROSS 5 ITA NOS. 747 TO 752/MUM/2018 M/S. SIMONI GEMS EXAMINATION THE STATEMENTS CANNOT BE USED AGAINST THE ASSESSEE FOR TREATING THE SUPPLIES AS NON - GENUINE. 8. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. IN SO FAR AS THE RE - OPENING OF ASSESSMENT IS CONCERNED , LD. DR SUBMITS THAT THE SEARCH BY INVESTIGATION AUTHORITIES IS SUBSEQUENT EVEN T WHICH CAME TO LIGHT THAT THE ASSESSEE OBTAINED ONLY ACCOMMODATION ENTRIES FROM BHANWARLAL JAIN GROUP COMPANIES AND THEREFORE THE ASSESSING OFFICER HAS RIGHTLY RE - OPENED THE AS SESSMENT. COMING TO THE MERITS OF THE CASE LD. DR SUBMITS THAT THE ASSESSEE HAS NOT PROV ED THAT THE STOCKS WERE TALLIED AND IN FACT THERE WERE NO STOCKS FOUND AND THUS LOWER AUTHORITIES HAVE RIGHTLY ESTIMATED THE PROFIT ELEMENT @8% AS THE ASSESSEE HAS OBTAINED ONLY ACCOMMODATION BILLS FROM THE CONCERNS OF BHANWARLAL JAIN GROUP AND MIGHT HAVE PURCHASED THE MATERIALS IN GREY MARKET. 9. HEARD RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW, THE MATERIALS PLACED BEFORE M E AND THE CASE LAWS RELIED ON. I FIND FROM THE MATERIAL BEFORE ME, THAT THE SUPPLIERS HAVE RESPONDED TO THE NOTICE ISSUED U/S. 133(6) OF THE ACT, FILED THE ACCOUNT CONFIRMATIONS, FILED AFFIDAVITS DEPOSING THAT THEY HAVE SUPPLIED THE MATERIALS , DELIVERY OF GOODS, PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES AND NONE OF THESE EVIDENCES WERE CONSIDERED BY THE ASSESSING OFFICER. NO FURTHER INVESTIGATION HAS BEEN MADE BY THE ASSESSING OFFICER TO VERIFY THE VERACITY 6 ITA NOS. 747 TO 752/MUM/2018 M/S. SIMONI GEMS OF THESE DOCUMENTS. THE STATEMENTS RECOR DED BY THE INVESTIGATION WING FROM THE PERSONS BELONGING TO BHANWARLAL JAIN GROUP WERE ALSO NOT PROVIDED TO THE ASSESSEE IN SPITE OF REQUEST. THEREFORE, IN THE ABSENCE OF ANY SORT OF ENQUIRY BY THE ASSESSING OFFICER IN MY OPINION THE PURCHASES MADE BY THE ASSESSEE CANNOT BE TREATED AS NON - GENUINE. THE STATEMENTS ON WHICH THE ASSESSING OFFICER RELIED ON TO MAKE THE DISALLOWANCE WERE NOT PROVIDED TO ASSESSEE AND NO OPPORTUNITY WAS GIVEN TO CROSS EXAMINE THEM AND THIS MAKES THE ASSESSMENT BAD IN LAW FOR VIOL ATION OF PRINCIPLES OF NATURAL JUSTICE. THE HON'BLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES V. CCE IN CIVIL APPEAL NO. 4228 OF 2006 DATED 02.09.2015 HELD THAT WHEN THE ASSESSMENT WAS MADE ON THE BASIS OF THE STATEMENTS RECORDED FROM THIRD PARTIES AND IF THOSE STATEMENTS WERE NOT PROVIDED NOR CROSS EXAMINATION WAS GIVEN TO THE ASSESSEE, THE ASSESSMENT ORDER MADE BASED ON THOSE STATEMENT IS BAD IN LAW. FOLLOWING THE ABOVE HON'BLE SUPREME COURT DECISION, THE AHMADABAD BENCH OF ITAT IN THE CASE OF SMT. SUNITA JAIN & SMT RACHNA SACHIN JAIN V. ITO IN ITA.NO. 501 & 502/AHD/2016 DATED 09.03.2017 QUASHED THE ASSESSMENT ON IDENTICAL SITUATION. 10. ALMOST IDENTICAL I SSUE CAME UP BEFORE THE DIVISION BENCH IN THE CASE OF M/S. SEJAL EXPORTS (INDIA) V. DCIT IN ITA.NO S . 3854, 3855, 3856, 7 ITA NOS. 747 TO 752/MUM/2018 M/S. SIMONI GEMS 3857, 3858, 3859 & 3864 /MUM/2017 DATED 04.07.2018, WHEREIN THE COORDINATE BENCH HELD AS UNDER: - 13. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ASSESSING OFFICER REQUIRED THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES, SINCE THE INFORMATION WAS RECEIVED FROM DGIT(INVESTIGATION), MUMBAI THAT ASSESSEE WAS ONE OF THE BENEFICIARIES OF BOGUS PURCHASE BILLS ISSUED BY THE COMPANIES WHICH WERE MAINTAINED BY BHANWARLAL JAIN GROUP AS THERE WAS SEARCH IN THE CASE OF BHANWARLAL JAIN GROUP. THE REVENUE CAME TO KNOW THAT THE BHANWARLAL JAIN GROUP WAS ISSUING THE ACCOMMODA TION ENTRIES TO VARIOUS PARTIES THROUGH DIFFERENT ENTITIES. ASSESSEE SUBMITTED COPIES OF INVOICES, LEDGER CONFIRMATIONS, BANK STATEMENTS ETC., AND CONTENDED THAT THE PURCHASES ARE GENUINE. HOWEVER, THE ASSESSING OFFICER REJECTING THE EXPLANATIONS AND SUB MISSIONS OF THE ASSESSEE AND IGNORING THE EVIDENCES FURNISHED IN THE FORM OF INVOICES, LEDGER CONFIRMATION, BANK STATEMENTS ESTIMATED THE PROFIT ELEMENT IN THE PURCHASES AT THE RATE AT WHICH THE ASSESSEE HAS DECLARED THE GROSS PROFIT FOR THE RELEVANT ASSES SMENT YEAR AND THE GROSS PROFIT RATE STOOD AT ABOUT 7% IN ALL ASSESSMENT YEARS. ON APPEAL THE LD.CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND EVIDENCES ON RECORD CONCLUDED THAT THE PURCHASES HAVE BEEN ACTUALLY MADE BUT NOT FROM WHOM THESE ARE CL AIMED TO HAVE BEEN MADE AND INSTEAD THEY HAVE BEEN PURCHASED FROM GRAY MARKET WITHOUT PROPER BILLING OR DOCUMENTATION. THEREFORE, ONLY THE PROFIT ELEMENT EMBEDDED THEREIN NEEDS TO BE BROUGHT TO TAX. HE CONCLUDED THAT THE PROFIT ELEMENT ESTIMATED BY THE A SSESSING OFFICER AT AROUND 7.33% WHICH IS THE GROSS PROFIT DECLARED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2007 - 08 IS EXCESSIVE AND UNREASONABLE. HE CONSIDERED FAIR AND REASONABLE TO ESTIMATE THE PROFIT MARGIN EMBEDDED IN SUCH PURCHASES @2% OBSERVING AS UNDER: - 6.3.1. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE JUDICIAL DECISIONS RELIED UPON BY THE APPELLANT. THE POINT FOR DETERMINATION IS WHETHER THE AO IS JUSTIFIED IN MAKING ADDITION OF RS.1,22,75,522/ - ON ACCOUNT OF ELEMENT OF EXTRA PROFIT OF 7.33% EMBEDDED IN THE PURCHASES MADE FROM THE AFORESAID 13 CONCERNS. AT THE OUTSET, IT IS PROPOSED TO TAKE NOTE OF COUPLE OF JUDICIAL PRECEDENTS HAVING BEARING ON THE ISSUE UNDER ADJUDICATION. I T IS NOW WELL - SETTLED THAT THE ONUS IS UPON THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES [178 CTR (RAJ) 420 AND 186 CTR (MP) 718]. IN THE CASE OF CIT V. PRECISION FINANCE PVT. LTD. 208 ITR 465 (CAL.), IT HAS BEEN HELD THAT PAYMENT MADE BY ACCOUNT PAYEE CHEQUE IS NOT SACROSANCT AND IT WOULD NOT MAKE AN OTHERWISE NON - GENUINE TRANSACTION GENUINE. THIS VIEW HAD ALSO FOUND FAVOUR WITH THE HON'BLE APEX COURT IN THE CASE OF M/S.KACHWALA GEMS, AS BROUGHT OUT IN THE IMPUGNED ORDER. IT IS NOW PROPOSED TO EX AMINE WHETHER THE APPELLANT HAS BEEN ABLE TO DISCHARGE THE ONUS OF PROVING THAT THE PURCHASES AMOUNTING TO RS.16,74,69,611/ - MADE BY IT FROM THE AFORESAID 13 CONCERNS ARE GENUINE. IT IS NOTICED FROM THE RECORD THAT THE AO TREATED THE AFORESAID PURCHASES FR OM 13 PARTIES AS BOGUS OR NON - GENUINE NOT MERELY ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING BUT ALSO BECAUSE THE APPELLANT FAILED TO FURNISH THE PURCHASE ORDERS, DELIVERY CHALLANS/ ANGADIA RECEIPTS ETC. IN RESPECT OF THE SAID PURCHASE S OF CUT AND POLISHED DIAMONDS. THE ABSENCE OF THESE SUPPORTING EVIDENCES LENT CREDENCE TO THE AO'S FINDING THAT THE PURCHASES SHOWN TO HAVE BEEN MADE BY THE APPELLANT FROM AFORESAID 13 CONCERNS WERE NOTHING BUT ACCOMMODATION ENTRIES WITHOUT ANY ACTUAL MOV EMENT OR DELIVERY OF GOODS. 8 ITA NOS. 747 TO 752/MUM/2018 M/S. SIMONI GEMS 6.3.2 A PERUSAL OF THE RELEVANT INVOICES REVEALS THAT OUT OF AFORESAID 13 CONCERNS OF BHANWARLAL JAIN GROUP, MANY CONCERNS WERE HAVING COMMON ADDRESSES, AS BROUGHT OUT IN THE TABLE BELOW: - SR.NO. NAME ADDRESS 1. ANKITA EXPORTS, 3 - M, AMBIKA DARSHAN, MOTI KADIA SHERI, SAIYADPURA, SURAT - 395 003 MILAN & CO. PARVATI EXPORTS 2 LAXMI DIAMOND 204, VAIBHAV CHAMBER, RUGHNATHPURA MAIN ROAD, SURAT - 395 003 MARVIN ENTERPRISE PRIME STAR 3. MUKTI EXPORTS 407, DEVRATNA APARTMENT, RAMPURE MAIN ROAD, SURAT - 395 003 MOHIT ENTERPRISES PAKANJ EXPORTS PUSHPAK GEMS RAJAN DIAMONDS IT IS ALSO NOTICED THAT THE INVOICES OF ALMOST ALL 13 CONCERNS WERE PREPARED ON THE COMPUTER IN THE SAME FORMAT HAVING THE SAME FONT TYPE AS WELL AS (FONT) SIZE. IT IS PERTINENT TO MENTION THAT WHILE 1% VAT IS LEVIABLE ON SUCH TRANSACTIONS IN MUMBAI/ MAHAR ASHTRA, THE DIAMOND SECTOR IN SURAT/GUJARAT IS EXEMPTED FROM PAYMENT OF VAT. THUS, THERE IS A SAVING OF 1% VAT INVOLVED IN PROCURING (ACCOMMODATION) PURCHASE BILLS OF CUT AND POLISHED DIAMONDS FROM PARTIES LIKE THE AFORESAID CONCERNS BASED IN SURAT. I AM U NABLE TO ACCEPT THE APPELLANT'S PLEA THAT THERE IS NOTHING IN SUPPORT OF CASH PURCHASES OF GOODS FROM THE GREY MARKET, BECAUSE THESE TRANSACTIONS TAKE PLACE IN SECRET AND NO DIRECT EVIDENCE IN THIS REGARD IS GENERALLY AVAILABLE. IT IS WELL - ESTABLISHED THAT SUCH MATTERS HAVE TO BE CONSIDERED IN THE LIGHT OF SURROUNDING CIRCUMSTANCES, NORMAL COURSE OF HUMAN CONDUCT AND PREPONDERANCE OF PROBABILITIES. HOWEVER, IT IS PERTINENT TO MENTION THAT THE FACT THAT THE APPELLANT WAS ONE OF THE BENEFICIARIES OF THE ACCOM MODATION ENTRIES OBTAINED FROM ENTRY PROVIDERS OPERATING IN MUMBAI CAME TO LIGHT ONLY DURING THE COURSE OF SEARCH AND SEIZURE ACTIONS CARRIED OUT IN THE CASE OF SHRI BHANWARLAL JAIN GROUP. THE PURCHASES OF CUT AND POLISHED DIAMONDS SHOWN TO HAVE BEEN MADE FROM AFORESAID 13 PARTIES CANNOT BE REGARDED AS GENUINE MERELY BECAUSE THE APPELLANT WAS NOT RELATED TO THE SUPPLIERS OR BECAUSE THE GP RATE SHOWN BY THE APPELLANT WAS REASONABLE OR SATISFACTORY AND HAD BEEN ACCEPTED IN THE PAST. HOWEVER, SINCE THE APPELLA NT HAD FURNISHED COPIES OF ACCOUNT CONFIRMATIONS, PURCHASE INVOICES, ETC. AND QUANTITATIVE DETAILS OF THE PRINCIPAL ITEMS OF RAW MATERIALS AND FINISHED GOODS IN CARAT WERE AVAILABLE IN THE TAX AUDIT REPORT, I AM IN AGREEMENT WITH THE AO'S FINDING THAT THE CUT AND POLISHED DIAMONDS WERE PURCHASED BY THE APPELLANT FROM THE GREY MARKET AND TO GIVE THIS THE COLOUR OF GENUINE PURCHASES, BOGUS ACCOMMODATION BILLS WERE OBTAINED FROM AFORESAID 13 CONCERNS. IT DESERVES TO BE NOTED THAT THE AO HAD NOT REJECTED THE B OOKS OF ACCOUNT OF THE APPELLANT BECAUSE HE HAD NO MATERIAL TO DOUBT THE GENUINENESS OF SALES/ EXPORTS MADE BY THE APPELLANT. 6.3.3 IT IS NOW WELL - ESTABLISHED THAT IN A CASE WHERE THE PURCHASES HAVE BEEN ACTUALLY MADE BUT NOT FROM THE PARTIES FROM WHOM THE SE ARE CLAIMED TO HAVE BEEN MADE AND INSTEAD MAY HAVE BEEN PURCHASED FROM GREY MARKET WITHOUT PROPER BILLING OR DOCUMENTATION, ONLY THE PROFIT ELEMENT EMBEDDED THEREIN NEEDS TO BE BROUGHT TO TAX. THE ESTIMATION OF RATE OF PROFIT MUST NECESSARILY VARY WITH THE NATURE OF BUSINESS AND NO UNIFORM YARDSTICK CAN BE ADOPTED. IT IS WELL - KNOWN THAT IF 9 ITA NOS. 747 TO 752/MUM/2018 M/S. SIMONI GEMS PURCHASES ARE MADE FROM OPEN MARKET WITHOUT INSISTING ON 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. IT IS A MATTER OF COMMON KNOWLEDGE THAT THERE IS BOUND TO BE A SUBSTANTIAL DIFFERENCE BETWEEN THE PURCHASE PRICE OF UNACCOUNTED MATERIAL AND RATE OF PURCHASE OF ACCOUNTED FOR GOODS DUE TO VARIOUS FACTORS SUCH AS SAVING ON ACCOUNT OF SALES - TAX AND OTHER TAXES AND DUTIES LEVIABLE IN RESPECT OF MANUFACTURE OR SALE OF GOODS IN QUESTION AND SUBSTANTIAL SAVING IN THE INCOME - TAX TO SUPPLI ERS IN RESPECT OF INCOME FROM SALE OF UNACCOUNTED GOODS ETC. IN THESE CIRCUMSTANCES, THE DIAMONDS IN THE GREY MARKET ARE ALWAYS CHEAPER THAN THE DIAMONDS SOURCED FROM THE GENUINE DEALER, BECAUSE THERE IS AN ELEMENT OF DISCOUNT IN CASE OF INSTANT CASH PURCH ASE. THEREFORE, THE AO HAS CORRECTLY CONCLUDED THAT AN ADDITION IS REQUIRED TO BE MADE IN CASE OF THE APPELLANT SO AS TO BRING TO TAX THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES. 6.3.4 COMING NOW TO THE ESTIMATION OF PROFIT MARGIN @7.33% BY THE AO IN THE PRESENT CASE, I FIND MERIT IN THE APPELLANT'S PLEA THAT THE EXTRA PROFIT OF 7.33% ESTIMATED BY THE AO IS EXCESSIVE AND UNREASONABLE. THIS IS SO BECAUSE THE AO HAS NOT GIVEN ANY BASIS OR JUSTIFICATION FOR ADOPTING THE PROFIT ELEMENT AT 7.33%. IN THIS CONNE CTION, IT IS PERTINENT TO NOTE THAT PURCHASE OF CUT AND POLISHED DIAMONDS FROM OPEN MARKET IS MADE MAINLY TO SAVE 1% VAT LEVIED THEREON AND IN ADDITION, THE BUYER GETS THE BENEFIT OF LOWER RATE/CASH DISCOUNT. IN THESE CIRCUMSTANCES, THE ADDITION OF EXTRA P ROFIT @7.33% OF PURCHASES FROM AFORESAID CONCERNS CANNOT AT ALL BE SAID TO BE JUSTIFIED. IN VIEW OF THIS POSITION, IT IS CONSIDERED FAIR AND REASONABLE TO ESTIMATE THE PROFIT MARGIN EMBEDDED IN SUCH PURCHASES AT 2% OF THE PURCHASE VALUE RECORDED IN THE BOO KS OF ACCOUNT. SINCE THE APPELLANT HAS SHOWN PURCHASES TO THE TUNE OF RS.16,74,69,611/ - , THE PROFIT ELEMENT INVOLVED THEREIN @2% OF THE PURCHASE VALUE WILL COME TO RS.33,49,392/ - AS AGAINST RS.1,22,75,522/ - WORKED OUT BY THE AO. THUS, THE APPELLANT GETS RE LIEF OF RS.89,26,130/ - (RS.1,22,75,522 - RS.33,49,392) ON THIS COUNT. GROUND NO.3 OF THE PRESENT APPEAL IS ACCORDINGLY ALLOWED TO THE EXTENT INDICATED ABOVE. 14. ON A PERUSAL OF THE ORDER OF THE LD.CIT(A) AND THE FINDINGS THEREON WITH REFERENCE TO THE SUBMI SSIONS AND EVIDENCES THEREON, WE FIND THAT LD.CIT(A) COMPLETELY IGNORED THE CONFIRMATIONS FILED BY THE PARTIES IN RESPONSE TO NOTICES ISSUED U/S. 133(6) OF THE ACT BY THE ASSESSING OFFICER. THE PARTIES HAVE CONFIRMED BY SUBMITTING THE COPY OF LEDGER ACCOU NT, COPY OF SALES BILLS, COPY OF BANK STATEMENT WHERE THE PAYMENTS WERE MADE THROUGH CHEQUES AND COPY OF INCOME TAX RETURNS REFLECTING THE SALE IN THEIR BOOKS OF ACCOUNTS. LD.CIT(A) LOST SIGHT OF THESE EVIDENCES WHICH IS CRUCIAL IN THESE APPEALS TO DECIDE THE GENUINENESS OF THE PURCHASES. WHEN THE PARTIES CONFIRMED THAT THEY HAVE SUPPLIED THE GOODS TO THE ASSESSEE AND RECORDED THE SALES IN THEIR BOOKS OF ACCOUNTS, WE FAIL TO UNDERSTAND HOW THE LD.CIT(A) CONCLUDED THAT THE PURCHASES HAVE BEEN ACTUALLY MADE BUT NOT FROM THESE PARTIES BUT THEY HAVE BEEN MADE FROM GRAY MARKET WITHOUT PROPER BILLING OR DOCUMENTATION. IN OUR CONSIDERED VIEW, WHEN THE PARTIES HAVE CONFIRMED THE TRANSACTION BY FILING NECESSARY DETAILS AS WAS DONE IN THIS CASE THE PURCHASES CANNOT BE TREATED AS NON - GENUINE. 15. ALMOST IDENTICAL ISSUE CAME UP IN THE CASE OF THE M/S. VAMA INTERNATIONAL V. I.T.O (SUPRA) WHEREIN THE ASSESSING OFFICER TREATED THE WHOLE PURCHASES ARE NON - GENUINE, LD.CIT(A) ESTIMATED THE PROFIT ELEMENT FROM THAT PURCHASES @12.5% THE COORDINATE BENCH CONSIDERING THE EVIDENCES ON RECORD DELETED THE ESTIMATION MADE BY THE LD.CIT(A) OBSERVING AS UNDER: - 10 ITA NOS. 747 TO 752/MUM/2018 M/S. SIMONI GEMS 16. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IN THIS CASE THE ASSESSMENTS WERE REOPENED BASED ON THE INFORMATION FROM THE DGIT(INVESTIGATIONS), MUMBAI THAT ASSESSEE IS A BENEFICIARY FROM THE ENTITIES OPERATED BY SHRI B HANWARLAL JAIN WHEREIN THE SEARCH TOOK PLACE AND IT WAS FOUND THAT SHRI BHANWARLAL JAIN IS PROVIDING ONLY ACCOMMODATION ENTRIES AND THERE WERE NO ACTUAL SALE TRANSACTIONS. ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COULD NOT PROVE THE MOVEMENT OF GOODS FROM THE SUPPLIERS TO THE ASSESSEE. IN THE ABSENCE OF DELIVERY CHALLANS AND BASED ON THE STATEMENTS OF BHANWARLAL JAIN THAT THEY HAVE PROVIDED ONLY ACCOMMODATION BILLS, THE ASSESSING OFFICER HAS CONCLUDED THAT THE ASSESSEE HAS OBTAINED ONLY BOGUS BILLS AN D ASSESSEE MIGHT HAVE PURCHASED GOODS IN GRAY MARKET. THE ASSESSING OFFICER ESTIMATED THE GROSS PROFIT MARGIN ON SUCH PURCHASES AT 12.5% FOR THE ASSESSMENT YEARS 2012 - 13 AND 2013 - 14. FOR THE ASSESSMENT YEAR 2011 - 12 THE ENTIRE PURCHASES WERE TREATED AS NO N - GENUINE. THE LD.CIT(A) TAKING NOTE OF THE SUBMISSIONS OF THE ASSESSEE AS WELL AS THE AVERMENTS OF THE ASSESSING OFFICER AND VARIOUS CASE LAWS ESTIMATED THE PROFIT ELEMENT FROM THESE PURCHASES AT 12.5% FOR ALL THE ASSESSMENT YEARS 2011 - 12 TO 2013 - 14. TH E LD.CIT(A) IN HIS ORDER OBSERVED AS UNDER: 11. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER AND THE WRITTEN SUBMISSIONS OF THE APPELLANT ON THE ISSUE. I HAVE ALSO CONSIDERED VARIOUS CASE LAWS RELIED UPON BY THE APPE LLANT. MY OBSERVATIONS ARE AS UNDER. 12. THE AO HAS FORMED HIS VIEW ABOUT THE BOGUS NATURE OF THE PURCHASE MADE BY THE APPELLANT FROM M/S.DAKSH DIAMONDS ON THE BASIS OF VARIOUS INCRIMINATING. DOCUMENTS AND EVIDENCES SEIZED DURING THE COURSE OF SEARCH & SEI ZURE ACTION IN THE CASE OF BHANWARLAL JAIN GROUP, WHICH HAS ESTABLISHED THAT THE SAID GROUP WAS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES OF BOGUS SALES/PURCHASES/LOANS TO VARIOUS BENEFICIARIES. 13. IN MY OPINION, SIMPLY RELYING UPON THE INFORMATION RECEI VED FROM THE DGIT(INV.) REGARDING THE DEFAULT COMMITTED BY M/S. DAKSH DIAMONDS CANNOT BE TAKEN AS THE SOLE BASIS TO TREAT THE ENTIRE PURCHASES MADE FROM IT AS BOGUS OR NON - GENUINE. THE ASSESSING OFFICER HAS PRIMARILY RELIED ON THE CONCLUSIONS DRAWN BY THE INVESTIGATION WING ON THE BASIS OF THE STATEMENT GIVEN BEFORE THE INCOME TAX AUTHORITIES AND HEAVY RELIANCE ON SUCH STATEMENT TO TREAT ENTIRE PURCHASES MADE FROM THE ABOVE PARTY AS BOGUS, CANNOT BE HELD TO BE JUSTIFIED. THE INFORMATION RECEIVED FROM THE D GIT(INV.) WAS A PIECE OF EVIDENCE TO INITIATE IN - DEPTH INDEPENDENT INVESTIGATION ON THE ISSUE, WHICH THE ASSESSING OFFICER HAS NOT FULLY CARRIED OUT. FURTHER FULL ENQUIRY ON THE GIVEN SET OF FACTS AND CIRCUMSTANCES AND WITHOUT APPRECIATING THE EVIDENCES SU BMITTED BY THE APPELLANT IN RESPECT OF THE PURCHASES MADE FROM THE ALLEGED BOGUS PARTY HAS REMAINED TO BE CARRIED OUT BEFORE ARRIVING AT THE CONCLUSION THAT IMPUGNED PURCHASE DEBITED IN THE BOOKS OF THE APPELLANT ARE BOGUS. 14. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ABOVE PARTY I.E. M/S. DAKSH DIAMONDS SPECIFICALLY STATED THAT IT HAD MADE BOGUS SALES TO THE APPELLANT. THE PURCHASE INVOICES, PAYMENTS TO THE PARTIES THROUGH CHEQUES AND CLOSING STOCK INVENTORY SUBMITTED BY THE APPELLANT ARE CER TAIN IMPORTANT EVIDENCES REGARDING THE PURCHASES MADE BY THE APPELLANT THAT CANNOT BE SET ASIDE SUMMARILY. THEREFORE, THE CONCLUSION DRAWN REGARDING 11 ITA NOS. 747 TO 752/MUM/2018 M/S. SIMONI GEMS THE PURCHASES MADE FROM M/S.DAKSH DIAMONDS BEING ENTIRELY BOGUS, IS NOT JUSTIFIED. 15. IN THIS REGARD, THE RATIO WAS LAID DOWN BY THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF CIT V. NIKUNJEXIMP ENTERPRISES (P.) LTD., IS VERY RELEVANT, WHEREIN IT WAS HELD THAT WHEN THE ASSESSEE HAVE FILED LETTER OF CONFIRMATIONS OF THE SUPPLIERS, BANK STATEMENTS HIGHLIGHTI NG THE PAYMENT ENTRIES THROUGH ACCOUNT PAYEE CHEQUE, COPIES OF INVOICES, STOCK RECONCILIATION STATEMENTS BEFORE THE AO; AND MERELY BECAUSE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO, ONE CANNOT CONCLUDE THAT THE PURCHASES WERE NOT MADE BY THE ASSESSES. THE AO CANNOT DISALLOW THE PURCHASES ON THE BASIS OF SUSPICION BECAUSE THE SUPPLIERS WERE NOT PRODUCED BEFORE THEM.' 16. THE FACTS AND CIRCUMSTANCES AS OUTLINED ABOVE, CLEARLY SUGGEST THAT THE PURCHASES BY THE APPELLANT FROM M/S.DAKSH DIAMONDS CANNOT BE DOUBT ED BUT A MAJOR FLAW IN THESE TRANSACTIONS IS THE UNVERIFIABLE NATURE OF TRANSACTIONS OF THESE PURCHASES FROM M/S. DAKSH DIAMONDS AS IT WAS NOT FOUND AVAILABLE AT THE GIVEN ADDRESS. THUS THE PURCHASE PRICES SHOWN ON THE INVOICES ARE NOT SUBJECTED TO VERIFIC ATION AND AS SUCH IT WAS DIFFICULT TO ESTABLISH THE CORRECTNESS OF THE PURCHASE PRICES PAID FOR THE MATERIALS PURCHASED FROM THEM. SUCH VERIFICATION OF THE SALE PRICE SHOWN ON THE INVOICES/BILLS WAS NECESSARY TO ASCERTAIN THE CORRECTNESS OF THE PROFITS SHO WN BY THE APPELLANT FOR THE PERIOD UNDER CONSIDERATION. THIS VERIFICATION WAS ALSO VITAL TO DETERMINE AS TO WHETHER THE PURCHASE PRICES SHOWN ON THE BILLS/INVOICES, ARE AS PER PREVAILING MARKET PRICES OF THE MATERIALS PURCHASED AND TO ASCERTAIN THAT THE PR ICE PAID FOR THE MATERIALS PURCHASED FROM M/S.DAKSH DIAMONDS IS NOT OVER INVOICED. IN THE ABSENCE OF ANY SUCH VERIFICATION OF THE CORRECTNESS OF THE PRICE PAID FOR THE MATERIALS PURCHASED BY THE APPELLANT, THE PURCHASE PRICE PAID AS MENTIONED ON THE INVOIC ES/BILLS CANNOT BE ACCEPTED AS THE CORRECT PRICE PAID FOR THE GOODS PURCHASED FROM M/S.DAKSH DIAMONDS. IN VIEW OF THE SAME, THE POSSIBILITY OF OVER - INVOICING OF THE MATERIALS PURCHASED TO REDUCE THE PROFIT, 'CANNOT BE RULED OUT. THEREFORE, THE GROSS PROFIT RATE SHOWN BY THE APPELLANT FOR THE YEAR UNDER CONSIDERATION CANNOT BE RELIED UPON. IN THE CIRCUMSTANCES, THE CORRECT APPROACH IN SUCH TRANSACTIONS WOULD BE TO ESTIMATE THE ADDITIONAL BENEFIT OR PROFIT EARNED ON THESE PURCHASES AND NOT TO DISALLOW THE ENT IRE PURCHASES FROM M/S. DAKSH DIAMONDS. THE DISALLOWANCE OF THE ENTIRE AMOUNT OF PURCHASES FROM M/S.DAKSH DIAMONDS WOULD NOT BE LOGICAL AND WOULD AMOUNT TO TRAVESTY OF JUSTICE. IN MY VIEW EITHER THE PURCHASES FROM ABOVE MENTIONED PARTY ARE OVER INVOICED OR THE PURCHASES WERE ACTUALLY MADE BUT NOT FROM THE SAID PARTY FROM WHICH IT WAS CLAIMED TO HAVE BEEN MADE AND INSTEAD MAY HAVE BEEN PURCHASED FROM GREY MARKET WITHOUT PROPER BILLING OR DOCUMENTATION. 17. AS OF NOW THE ISSUE OF BOGUS PURCHASES HAS BEEN MUCH DISCUSSED AND DEBATED BY THE VARIOUS COURTS AND TRIBUNALS. IN MANY JUDICIAL PRONOUNCEMENTS ON THE ISSUE, THE COURTS HAVE TAKEN A CONSISTENT VIEW THAT IN CASE OF NON - EXISTENT PARTIES FROM WHOM THE PURCHASES ARE SHOWN TO HAVE BEEN MADE, ONLY PERT OF SUCH PU RCHASES CAN BE DISALLOWED, 12 ITA NOS. 747 TO 752/MUM/2018 M/S. SIMONI GEMS PARTICULARLY IN THE CASES WHERE THE CORRESPONDING SALES ARE NOT DOUBTED. ALTERNATIVELY, THE PROFIT EMBEDDED IN SUCH SALES AGAINST THE ALLEGED BOGUS PURCHASE, CAN ONLY BE BROUGHT TO TAX. 18. IN THE CASE OF CIT - 1 VS SIMIT P. SHETH, ITA NO. 553 OF 2012, ORDER DATED 16.01.2013, WHILE DECIDING A SIMILAR ISSUE THE HON'BLE HIGH COURT OF GUJARAT HAS HELD THAT: - WE ARE BROADLY IN AGREEMENT WITH THE REASONING ADOPTED BY THE COMMISSIONER (APPEALS) WITH RESPECT TO THE NATURE OF DISPUTED PUR CHASES OF STEEL. IT MAY BE THAT THE THREE SUPPLIERS FROM WHOM THE ASSESSEE CLAIMED TO HAVE PURCHASED THE STEEL DID NOT OWN UP TO SUCH SALES. HOWEVER, VITAL QUESTION WHILE CONSIDERING WHETHER THE ENTIRE AMOUNT OF PURCHASES SHOULD BE ADDED BACK TO THE INCOME OF THE ASSESSEE OR ONLY THE PROFIT ELEMENT EMBEDDED THEREIN WAS TO ASCERTAIN WHETHER THE PURCHASES THEMSELVES WERE COMPLETELY BOGUS AND NON - EXISTENT OR THAT THE PURCHASES WERE ACTUALLY MADE BUT NOT FROM THE PARTIES FROM WHOM IT WAS CLAIMED TO HAVE BEEN MA DE AND INSTEAD MAY HAVE BEEN PURCHASED FROM GREY MARKET WITHOUT PROPER BILLING OR DOCUMENTATION. IN THE PRESENT CASE, CIT BELIEVED THAT WHEN AS A TRADER IN STEEL THE ASSESSEE SOLD CERTAIN QUANTITY OF STEEL, HE WOULD HAVE PURCHASED THE SAME QUANTITY FROM SO ME SOURCE. WHEN THE TOTAL SALE IS ACCEPTED BY THE ASSESSING OFFICER, HE COULD NOT HAVE QUESTIONED THE VERY BASIS OF THE PURCHASES. IN ESSENCE THEREFORE, THE COMMISSIONER (APPEALS) BELIEVED ASSESSEE S THEORY THAT THE PURCHASES WERE NOT BOGUS BUT WERE MADE F ROM THE PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNTS. THAT BEING THE POSITION, NOT THE ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. SO MUCH IS CLEAR BY DECISION OF THIS COURT. IN PARTICULAR, COURT HAS ALSO TAKEN A SIMILAR VIEW IN CASE OF COMMISSIONER OF INCOME TAX - IV VS. VIJAY M MISTRY CONSTRUCTION LTD. VIDE ORDER DATED 10.01.2011 PASSED IN TAX APPEAL NO. 1090 OF 2009 AND IN CASE OF COMMISSIONER OF INCOME TAX - I VS. BHOLAN ATH POLY FAB PVT. LTD. VIDE ORDER DATED 23.10.2012 PASSED IN TAX APPEAL NO. 63 OF 2012. THE VIEW TAKEN BY THE TRIBUNAL IN CASE OF VIJAY PROTEINS PVT. LTD. VS. CIT REPORTED IN 58 ITD 428 CAME TO BE APPROVED. (EMPHASIS SUPPLIED) 19. SIMILARLY WHILE DEALING WITH AN IDENTICAL ISSUE, IN THE CASE OF CIT V. BHOLANATH POLY FAB (PURCHASE) LTD. ITA.NO.NO. 63 OF 2012, IN THE ORDER DATED 23/10/2012, THE HON'BLE HIGH COURT OF GUJARAT HAS HELD AS UNDER: - WE ARE OF THE OPINION THAT THE TRIBUNAL COMMITTED NO ERROR. WHE THER THE PURCHASES THEMSELVES WERE BOGUS OR WHETHER THE PARTIES FROM WHOM SUCH PURCHASES WERE ALLEGEDLY MADE WERE BOGUS IS ESSENTIALLY A QUESTION OF FACT. THE TRIBUNAL HAVING EXAMINED THE EVIDENCE ON RECORD CAME TO THE CONCLUSION THAT THE ASSESSES DID PURC HASE THE CLOTH AND SELL THE FINISHED GOODS. IN 13 ITA NOS. 747 TO 752/MUM/2018 M/S. SIMONI GEMS THAT VIEW OF THE MATTER, AS NATURAL COROLLARY, NOT THE ENTIRE AMOUNT COVERED UNDER SUCH PURCHASE, BUT THE PROFIT ELEMENT EMBEDDED THEREIN WOULD BE SUBJECT TO TAX. THIS WAS THE VIEW OF THIS COURT IN THE CASE OF SANJAY OILCAKE INDUSTRIES V. CIT (2009] 316 ITR 274 (GUJ). SUCH DECISION IS ALSO FOLLOWED BY THIS COURT IN A JUDGMENT DATED AUGUST 16,2011, IN TAX APPEAL NO. 679 OF 2010 IN THE CASE OF CIT V. KISHORAMRUTLAL PATEL. IN THE RESULT, TAX APPEAL IS DISMISSED.' 20. IN VIEW OF THE FACTS AND CIRCUMSTANCES AND THE JUDICIAL PRONOUNCEMENTS CITED ABOVE; WHAT CAN BE DISALLOWED OR TAXED IN THE INSTANT CASE OF THE ALLEGED BOGUS PURCHASES IS ONLY THE EXCESS PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES SHOWN TO HAVE BEEN MADE FROM M/S.DAKSH DIAMONDS. THE APPELLANT HAS NOT PLACED ANY EVIDENCE ON RECORD THAT THE GOODS WERE PURCHASED FROM THE ABOVE PARTY AT ARMS' LENGTH PRICE. THE APPELLANT HAS ALSO NOT PLACED ON RECORD ANY COMPARABLE BILLS/INVOICES FOR PURCHASES OF SIMILAR ITEMS MADE FROM OTHER PARTIES TO ESTABLISH THAT THE PURCHASES FROM M/S.DAKSH DIAMONDS IN QUESTION WAS AT PAR WITH THE PURCHASES MADE FROM OTHER PARTIES DURING THE PERIOD UNDER CONSIDERATION. THE POSSIBILITY OF SUCH PURCHASES FROM UNREGISTERED DEALERS WITHOUT INV OICES CANNOT BE RULED OUT. HENCE POSSIBILITY OF SUCH PURCHASES FROM UNREGISTERED DEALERS WITHOUT INVOICES CANNOT BE RULED OUT. IN VIEW OF THE ABOVE, THE CORRECTNESS OF THE PURCHASE PRICES MENTIONED ON SUCH BILLS/INVOICES ISSUED BY M/S.DAKSH DIAMONDS IN QUE STION CANNOT BE ACCEPTED AND SOME ADDITIONAL PROFIT NEEDS TO BE ESTIMATED ON SUCH PURCHASES MADE FROM M/S.DAKSH DIAMONDS. AS THE PURCHASES INVOICES ISSUED AGAINST THE ALLEGED BOGUS PURCHASES REMAINS UNVERIFIABLE, AND PART OF THE PROFIT ELEMENT ON THE PURCH ASES MADE FROM M/S.DAKSH DIAMONDS ALREADY INCLUDED IN THE ABOVE GROSS PROFIT RATE SHOWN FOR THE YEAR UNDER CONSIDERATION, IT WOULD BE FAIR AND JUST, IF THE ADDITIONAL GROSS PROFIT @ 12.5% IS APPLIED ON SUCH TOTAL ALLEGED BOGUS PURCHASES AMOUNTING TO RS. 1, 05,18,970/ - , THE ADDITIONAL GROSS PROFIT ON SUCH PURCHASES WOULD COME TO RS. 13,14,871/ - WHICH NEED TO BE ADDED TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF ALLEGED BOGUS PURCHASES FOR THE YEAR UNDER CONSIDERATION AND THE BALANCE ADDITION MADE AMOUNTING TO RS. 92,04,099/ - IS HEREBY DELETED. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. HENCE, GROUNDS NO. 1 & 2 ARE PARTLY ALLOWED. 17. AS COULD BE SEEN FROM THE ABOVE THE LD.CIT(A) DID NOT AGREE WITH THE ASSESSING OFFICER THAT THE PURCHASES BY THE ASSESSEE ARE BOGUS/NON - GENUINE. HOWEVER, THE LD.CIT(A) OBSERVED THAT PURCHASES MADE CANNOT BE DOUBTED AND THERE IS A MAJOR FLAW IN THESE TRANSACTIONS IS THE UNVERIFIABLE NATURE OF TRANSACTIONS AS THE PARITIES ARE NOT FOUND AVAILABLE IN THE GIVEN ADDRESS. HOWEVER, WE SEE THAT THE PARTIES HAVE RESPONDED IN THESE CASES FOR THE NOTICES ISSUED U/S. 133(6) OF THE ACT, THEY HAVE FILED LEDGER ACCOUNT OF THE ASSESSEE IN THEIR BOOKS OF ACCOUNTS, COPIES OF SALES INVOICES ISSUED BY THEM, THEIR BANK STATEMENTS REFLECTING THE PAYM ENTS MADE BY THE ASSESSEE TO THEM, COPIES OF ACKNOWLEDGEMENT OF INCOME - TAX RETURNS FILED BY THEM, AUDITED PROFIT & LOSS A/C AND BALANCE SHEETS TO SHOW THAT THE TRANSACTIONS OF SALES MADE TO THE ASSESSEE ARE GENUINE. ON A CAREFUL CONSIDERATION OF THE SUBMI SSIONS MADE BY THE ASSESSEE, WE FIND CONSIDERABLE FORCE IN THE SUBMISSIONS NOT TO TREAT THE PURCHASES MADE BY THE ASSESSEE FROM THE PARTIES AS NON - GENUINE/BOGUS. 14 ITA NOS. 747 TO 752/MUM/2018 M/S. SIMONI GEMS 18. THE REASON FOR TREATING THESE PURCHASES AS NON - GENUINE /BOGUS IS THE STATEMENTS GIVEN BY B HANWARLAL JAIN GROUP AND NON - SUBMISSION OF DELIVERY INVOICES BY THE ASSESSEE. IT IS THE SUBMISSION OF THE ASSESSEE THAT THE STATEMENTS GIVEN BY BHANWARLAL JAIN GROUP HAVE BEEN RETRACTED BY THEM SUBSEQUENTLY AND THERE IS A PRACTICE OF HAND DELIVERY OF SUCH PRECIOUS AND LIGHT WEIGHING MATERIALS LIKE DIAMONDS IS PREVAILING IN THE INDUSTRY. THEREFORE, NO ADVERSE CONCLUSION CAN BE DRAWN MERELY DUE TO ABSENCE OF DOCUMENTS PROVING DELIVERIES. THE ANALYSIS FURNISHED BEFORE US ON THE GROSS PROFIT MARGIN SHOWN BY THE ASSESSEE ALSO SUGGEST THAT ASSESSEE IS CONSISTENT IN SHOWING OVERALL GROSS PROFIT AROUND 6% IN THESE ASSESSMENT YEARS. THE AVERAGE GROSS PROFIT SHOWN BY THE ASSESSEE STOOD AT 6.04% FOR THESE ASSESSMENT YEARS. THEREFORE EVEN IF WE GO BY THE SUBMISSION S OF THE LD.DR THAT THE PROFIT ELEMENT SHOULD BE ESTIMATED AT 6% AS PER THE CBDT CIRCULAR THE ASSESSEE HAS ALREADY SHOWN 6.04% OF OVERALL GROSS PROFIT DURING THESE THREE ASSESSMENT YEARS. THE DISALLOWANCE/ESTIMATION OF PROFIT ON PURCHASES BY TREATING THEM AS BOGUS CANNOT BE MADE ONLY ON THE STATEMENTS RECORDED FROM THIRD PARTIES, ESPECIALLY WHEN THOSE PARTIES HAVE RESPONDED TO THE NOTICE ISSUED U/S.133(6) OF THE ACT BY FILING ALL NECESSARY DOCUMENTS TO PROVE THAT THEY HAVE MADE SALES TO THE ASSESSEE. IT I S ALSO THE SUBMISSION OF THE ASSESSEE THAT NONE OF THE IMPUGNED PARTIES HAVE BEEN DECLARED AS HAWALA DEALERS OR SUSPICIOUS DEALERS BY THE SALES TAX DEPARTMENT AND THE GENUINENESS OF THE PURCHASES HAVE BEEN DOUBTED MERELY ON THE BASIS OF THE STATEMENT GIVEN BY THE BHANWARLAL JAIN GROUP. THE ASSESSEE HAS FURNISHED ALL NECESSARY EVIDENCE TO PROVE THE GENUINENESS OF THE PURCHASES, THE PARTIES HAVE ALSO RESPONDED TO THE NOTICES U/S. 133(6) OF THE ACT BY FILING NECESSARY EVIDENCE AS TO PROVE THAT THE PURCHASES A RE GENUINE. THUS THE ASSESSEE DISCHARGED THE ONUS TO PROVE THE GENUINENESS OF THE TRANSACTIONS MADE BY THE ASSESSEE FROM THE IMPUGNED PARTIES. THE ASSESSING OFFICER COMPLETELY FAILED TO MAKE FURTHER ENQUIRIES IN THESE CASES. THE DOCUMENTS FURNISHED BY T HE SUPPLIER OF THE GOODS HAVE NOT BEEN DISPROVED BY THE ASSESSING OFFICER IN THESE MATTERS. 19. WE ALSO FIND THAT THE COORDINATE BENCH IN THE CASE OF INDO UNIQUE TRADING PVT LTD. V. DCIT IN ITA.NO. 6341/MUM/2016 CONSIDERED ALMOST AN IDENTICAL SITUATION WHE REIN THE SUPPLIERS HAVE RESPONDED TO THE NOTICES ISSUED U/S. 133(6) OF THE ACT AND CONFIRMED THE TRANSACTION BY FILING VARIOUS DETAILS BEFORE THE ASSESSING OFFICER, IN SUCH CIRCUMSTANCES THE COORDINATE BENCH ACCEPTED THE CONTENTIONS OF THE ASSESSEE THAT TH E PURCHASES CANNOT BE TREATED AS BOGUS SIMPLY RELYING ON THE STATEMENTS IN THE CASE OF BHANWARLAL JAIN GROUP. WHILE HOLDING SO THE COORDINATE BENCH OBSERVED AS UNDER: - 10. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICE THAT THE ASSES SING OFFICER HAS REOPENED THE ASSESSMENT FOR THE SECOND TIME AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR, ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING ABOUT THE BOGUS NATURE OF TRANSACTIONS ENTERED BY SHRI BHANWARLAL JAIN GROUP. EVEN THOUGH THE AO HAS MENTIONED THE REASONS THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT, YET HE HAS NOT SPECIFIED THE MANNER OF FAILURE. 11. ON THE CONTRARY, WE NOT ICE THAT THE ASSESSEE HAS PROVED THE GENUINENESS OF PURCHASES BY OBTAINING CONFIRMATION LETTERS IN THE FORM OF AFFIDAVITS FROM ALL THE SUPPLIERS. THE AO HAS DONE INDEPENDENT ENQUIRY DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY ISSUING NOTICES U/S 15 ITA NOS. 747 TO 752/MUM/2018 M/S. SIMONI GEMS 133(6) OF THE ACT TO ALL THE SUPPLIERS. WE NOTICE THAT THE NOTICES WERE DULY SERVED UPON THE SUPPLIERS AND THEY HAVE ALSO RESPONDED BY FILING THEIR REPLIES DULY CONFIRMING THE TRANSACTIONS. THE AO HAS REJECTED THE REPLIES BY OBSERVING THAT THE REPLIES LACKED DETA ILS AND THEY DID NOT MENTION ABOUT THE NATURE OF TRANSACTIONS. IN OUR VIEW, THE SAID OBSERVATIONS ARE VAGUE IN NATURE. ON THE CONTRARY, A PERUSAL OF THE AFFIDAVITS FURNISHED BY THE SUPPLIERS WOULD SHOW THAT THEY HAVE CONFIRMED THE SALES EFFECTED BY THEM TO THE ASSESSEE. FURTHER THEY HAVE ALSO VERIFIED AND SIGNED THE LEDGER ACCOUNT COPIES AS AVAILABLE IN THE BOOKS OF ACCOUNT. WHEN THE SUPPLIERS CONFIRM THAT THE TRANSACTIONS OF SALES MADE BY THEM TO THE ASSESSEE ARE GENUINE, THAT TOO, IN RESPONSE TO THE NOTIC ES ISSUED BY THE AO U/S 133(6) OF THE ACT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IN OUR VIEW, THE SAID REPLIES CANNOT BE REJECTED WITHOUT BRINGING ON RECORD ANY MATERIAL TO SHOW THAT THEY ARE NOT TRUE. WE NOTICE THAT THE AO DID NOT BRING ANY MATERIAL ON RECORD AND HE SIMPLY RELIED UPON THE REPORT GIVEN BY THE INVESTIGATION WING. AS PER LD A.R, THE STATEMENT GIVEN BY SHRI BHANWARLAL JAIN IS A GENERAL STATEMENT ONLY. THE ASSESSEE, AS STATED EARLIER, HAS FURNISHED CONFIRMATION OF LEDGER ACCOUNTS AND ALSO AFFIDAVITS TO PROVE THE GENUINENESS OF TRANSACTIONS. WE NOTICE THAT THE AO COULD NOT CONTROVERT THOSE DOCUMENTS. 12. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE ASSESSEE HAS DULY DISCHARGED THE BURDEN TO PROVE THE GENUINENESS OF PURC HASES. ON THE CONTRARY, THE AO HAS SIMPLY RELIED UPON THE REPORT GIVEN BY THE INVESTIGATION WING. IN THIS VIEW OF THE MATTER, WE ARE OF THE VIEW THAT NO ADDITION IS CALLED FOR ON ACCOUNT OF ALLEGED BOGUS PURCHASES. ACCORDINGLY, WE SET ASIDE THE ORDER PASSE D BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE IMPUGNED ADDITION. 20. IN VIEW OF WHAT IS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS DULY DISCHARGED ITS BURDEN OF PROVING THE GENUINENESS OF THE PURCHASES AND THE ASSESSING OFFIC ER WITHOUT MAKING PROPER INVESTIGATION, SIMPLE RELIED ON THE STATEMENTS OF THIRD PARTY TO TREAT THE PURCHASES AS BOGUS. ASSESSING OFFICER COULD NOT PROVE THAT THE INFORMATION FURNISHED BY THE SUPPLIERS ARE NOT GENUINE SO AS TO TREAT THE SALES MADE BY THEM ARE ONLY BOGUS. IN THE CIRCUMSTANCES, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DELETE THE DISALLOWANCE MADE TOWARDS BOGUS PURCHASES FOR ALL THESE ASSESSMENT YEARS I.E. 2011 - 12 TO 2013 - 14 WHICH ARE UNDER APPEAL BEFORE US. 16. AS COULD BE SEEN FROM THE ABOVE, THE FACTS IN THE CASE OF THE ASSESSEE AND ALSO THE DECISION REFERRED TO ABOVE ARE ALMOST IDENTICAL. THE PARTIES HAVE CONFIRMED BY FILING REPLIES TO NOTICES U/S. 133(6) OF THE ACT ALONG WITH THE LEDGER ACCOUNT OF THE ASSESSEE IN THEIR BOOKS OF ACCOUNTS, COPIES OF SALES INVOICES ISSUED BY THEM TO THE ASSESSEE, THEREBY STATEMENTS REFLECTING PAYMENTS MADE BY THE ASSESSEE TO THEM, COPY OF ACKNOWLEDGMENT OF INCOME TAX RETURNS FILED BY THEM TO SHOW THAT THE TRANSACTION OF SALES MADE TO THE ASSESSE E ARE GENUINE. WE ALSO FIND THAT THE GROSS PROFIT MARGIN SHOWN BY THE ASSESSEE IS RANGING IN BETWEEN 7.02% TO 7.62% CONSISTENTLY. FURTHER, THE DISALLOWANCE / ESTIMATION OF PROFIT OF PURCHASES BY TREATING THEM AS BOGUS CANNOT BE MADE ONLY ON THE STATEMENT S RECORDED FROM THIRD PARTIES, ESPECIALLY WHEN THE SUPPLIERS HAVE RESPONDED TO THE NOTICE U/S. 133(6) OF THE ACT AND FILED ALL THE NECESSARY DOCUMENTS TO PROVE THE GENUINENESS OF THE PURCHASES MADE BY THE ASSESSEE. THUS THE GROUNDS RAISED BY THE ASSESSEE ON MERITS ARE ALLOWED. AS WE HAVE ALLOWED THE APPEALS 16 ITA NOS. 747 TO 752/MUM/2018 M/S. SIMONI GEMS OF THE ASSESSEE ON MERITS FOR THE REASONS AND DISCUSSIONS MADE THEREIN, THE REVENUES APPEALS ARE DISMISSED. 11. IN VIEW OF THE ABOVE DISCUSSIONS AND FOLLOWING THE ABOVE DECISION , I HOLD THAT THERE SHALL NOT BE ANY DISALLOWANCE TOWARDS NON - GENUINE PURCHASES FOR ALL THE ASSESSMENT YEARS IN APPEAL AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION/DISALLOWANCE MADE TOWARDS NON - GENUINE PURCHASES . AS I HAVE DELETED THE DISALLOWANCE/ADDITION O N MERITS THE GROUNDS RAISED CHALLENGING THE REOPENING OF ASSESSMENT IS NOT ADJUDICATED. 12. IN THE RESULT, APPEA LS OF THE ASSESSEE ARE ALLOWED AS INDICATED ABOVE . ORDER PRONOUNCED IN THE OPEN COURT ON THE 13 TH MARCH , 2019 SD / - (C.N. PRASAD) JUDICIAL MEMBER MUMBAI / DATED 13 / 0 3 / 201 9 GIRIDHAR , S R. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM