ITO WARD 13(3)(1), MUMBAI V. RADIANT DIAMOND PRIVATE LIMITED, MUMBAI

ITA 3660/MUM/2025

AI Insights

The case involves Radiant Diamond Private Limited, which was assessed for the year 2012-2013 under suspicion of making bogus purchases. The Assessing Officer initially added a sum of INR 4,38,183 to the Assessee's income, suspecting the genuineness of purchases from three parties. The CIT(A) later deleted this addition, finding that the Assessee had provided adequate evidence to substantiate the transactions. The Revenue appealed against this decision, but the Tribunal upheld the CIT(A)'s decision, noting that the Assessing Officer had not rejected the books of accounts nor provided detailed reasons for the addition.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 777656 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2012-2013
• Appeal Filed On: 23-05-2025
• Other Referred Cases: ACIT Vs Mahesh K Shah, Ashok Kumar Rungta Vs ITO, Asst. CIT vs. Sanjay Agrawal, ACIT vs. Rushab Vatika, Prem Chand vs. ITO, Swadesh I Commercial Co. Ltd. vs. CIT, CIT vs. Marg Ltd., Yamaha Motor India P. Ltd. vs. ACIT, CIT vs. Poonam Rani, DCIT vs. Hanuman Sugar Mills, Kamani Oil Industries vs. DCIT, ITO vs. Jyoti Manoj Patil, PCIT vs Suraj Infrastructure Pvt. Ltd., PCIT Vs Ashwin Purshottam Bajaj
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASSESSEE
• Keywords: Reassessment proceedings; Bogus purchase; Reopening of assessment; Accommodation entries; Bogus
• Section: 147; 148; 143(3); 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “J (SMC)” BENCH, MUMBAI SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER SHRI OMKARESHWAR CHIDARA, ACCOUNTANT MEMBER ITA No.3660/MUM/2025 (Assessment Year: 2012-2013) Income Tax Officer Ward 13(3)(1), Mumbai Room No.227, Aayakar Bhawan, M.K.Road Churchgate, Mumbai : 400 020 …………. Appellant Radiant Diamond Private Limited 804, Apranay Vidya Off. Borsapad, Kandivali (West), Mumbai - 400067 [PAN:AAECR1595E] Vs …………. Respondent Appearance For the Appellant/Department For the Respondent/Assessee : : Shri Aditya Rai Shri Vijay Joshi Date Conclusion of hearing Pronouncement of order : : 15.09.2025 29.09.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal preferred by the Revenue is directed against the order, dated 04/03/2025, passed by the Additional/Joint Commissioner of Income Tax (Appeals) – 1, Ahmedabad [hereinafter referred to as ‘the CIT(A)’] whereby the Ld. CIT(A) had allowed the appeal against the Assessment Order, dated 21/12/2016, passed under Section 143(3) read with Section 147 of the Income Tax Act, 1961 for the Assessment Year 2012-2013. 2. The Revenue has raised following grounds of appeal : “1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO to delete the addition of Rs.4,38,183/- on account of bogus purchases.” Printed from counselvise.com 2 ITA No. 3660/Mum/2025 Assessment Year 2012-2013 3. The relevant facts in brief are that the reassessment proceedings for the Assessment Year 2012-2013 were initiated in the case of the Assessee a private limited company engaged in the business of trading in the business of diamonds. During the assessment proceedings the Assessee was asked to substantiate purchases aggregating to INR.43,81,826/- from the following parties: Sr. No. Name of the Party PAN Amount in INR. 1. Karnawat AADCK1927A 1,05,000/- 2. Arihant AFLPP5405N 27,00,956/- 3. Sparsh AAKCS0761R 18,10,161/- Total 43,81,826/- 4. According to the Assessing Officer the above parties are engaged in providing accommodation entries, therefore, the Assessee was directed to establish genuiness of the said purchases. In response, the Assessee produced books of accounts containing entries of the alleged purchases and submitted the purchase bills. The Assessing Officer issued notice under Section 133(6) of the Act to the parties and in response to the said the parties submitted copies of ledger Account, Income Tax returns File and Bank statement. However, taking note of the fact that the Assessee had failed to produce the parties, the Assessing Officer concluded that genuineness of the parties should not be establish by the Assessee and therefore, disallowed 10% of purchases making an addition of INR.4,38,183/- to the return of income of INR.5,12,931/-. 5. Being aggrieved, the Assessee preferred appeal before the Ld. CIT(A) and made detailed submissions. After taking into consideration the supporting documents furnished by the Assessee, the CIT(A) deleted the addition holding as under: “7. Decision: Appellant has raised 1 grounds of appeal. 7.1. Ground no. 1: This ground relates to addition of GP @10% to the income of appellant. The appellant is engaged in trading of diamonds. The appellant has filed return of income on 29.09.2012 showing income of Rs. 512931/-. In this case, a Printed from counselvise.com 3 ITA No. 3660/Mum/2025 Assessment Year 2012-2013 notice u/s 148 was issued on 16.03.2016. The AO has mentioned briefly that the appellant has made purchases from three parties which were engaged in providing accommodation entries. Details of transactions made by the appellant with these parties are as under: xx xx During the course of assessment proceedings, the appellant has furnished requisite details called for. The appellant did not produce the parties before the AO. The AO has mentioned the appellant has produced the purchase bills and other relevant documents. The payment was made to these parties through banking channel. The AO has issued notices u/s 133(6) of IT Act to the aforesaid parties from whom the appellant has purchased diamonds. The AO has mentioned that all these parties have complied to the notice issued and filed the detailed mentioned in the assessment order. The AO has also admitted that transaction made by the appellant is admitted however, it is also mentioned that genuineness of parties not proven. Therefore, The AO has made addition @10% of Rs.4381826/- and added amount of Rs. 438183/- to the income of the appellant. During the course of appellate proceedings, the appellant has furnished detailed submission. It is claimed that the AO has admitted transactions of sellers with the appellant on the basis of submission received and verification conducted. The appellant has produced all the necessary documentary evidence such as purchase bill, payment by account payee cheque/RTGS and confirmation. It is claimed that the purchases made form this parties are also not correctly quantified by the AO. In support, the appellant has furnished accounts extracts in the books of accounts. As per the ledgers, the quantum of purchases made from this parties is as under: Name Amount (INR.) Karnavat Impex Pvt. Ltd. 1,05,000 Sparsh export pvt ltd 18,10,161 Arihant Export 24,66,665 Though, the AO has mentioned wrong figures of purchase but he has taken correct amount for the calculation purpose. In addition to this, the appellant has claimed that the appellant has exported the diamonds and export invoice are furnished. It is also claimed that export invoices have been also certified by the custom authorities. The appellant has also furnished VAT audit report. The appellant has relied on following decision. 1. ACIT Vs Mahesh K Shah Dt. 8 April 2017 2. Ashok Kumar Rungta Vs ITO Dt. 15-10-2024 AY 2009-10 The appellant is also filed confirmation of above parties. Printed from counselvise.com 4 ITA No. 3660/Mum/2025 Assessment Year 2012-2013 7.2 The reasons mentioned by the AO and the reply filed by the appellant is duly considered. It is seen that the AO has not mentioned the detailed reasons of reopening. There is no mention of source form where the appellant has received the information. The appellant has field relevant submission to establish the genuineness of transaction. Thereafter, the AO has proceeded to make addition to GP @10% of purchases. No detailed reasons are mentioned by the AO in the assessment order while making addition. The AO has not rejected books of account. It is mandatory to reject books of accounts when GP addition is made. In view of following decisions, this action is needed. i. Asst. CIT vs. Sanjay Agrawal (2022) 36 NYPTTJ 693 (Raipur) ii. ACIT vs. Rushab Vatika, ITA No. 51/RJT/2013 (Rajkot) iii. Prem Chand vs. ITO – ITA No.4126/Del/2010 iv. Hon’ble Calcutta High Court in the case of Swadesh I Commercial Co. Ltd. vs. CIT (ITA No. 219 of 2001 dt.18/12/2008) (Cal) v. CIT vs. Marg Ltd. (2017) 84 taxmann.com 52 (Madras) vi. Yamaha Motor India P. Ltd. vs. ACIT [2015] 172 TTJ 561 (Delhi - Trib.) (TM) vii. CIT vs. Poonam Rani [2010] 5 taxmann.com 76 (Delhi), DCIT vs. Hanuman Sugar Mills [2013] 38 taxmann.com 53 (All.), Kamani Oil Industries vs. DCIT (ITA No. 5465/Mum/2017. Also, it has been held by Hon’ble ITAT, Pune in ITO vs. Jyoti Manoj Patil (ITA No. 2462/PN/2012) that, as regards addition on account of fall in GP/NP, if the AO has made the addition on adhoc basis by increasing GP/NP without going into merits of the case, it is not justifiable. If the AO failed to bring any material on record which could warrant increase in GP/NP by certain percentage, he was not justified in disturbing the book results without assigning any specific defect. There are different judgments of Hon’ble Mumbai High court on this issue of hawala purchases. Following judgments are in favour of department. i. PCIT vs Suraj Infrastructure Pvt. Ltd. ITA No. 2162 of 2018 dated 06.09.2023 7NYP CTR 1296 Bombay. ii. PCIT Vs Ashwin Purshottam Bajaj 20237 NYP CTR. However, the recent decision in case of the Ashok Kumar Rungta Vs ITO Dt. 15-10- 2024 AY 2009-10 is in favour of the appellant. As the AO has not rejected books of accounts and not given any reasons for not making addition. The appellant has furnished all the possible documents. Under such circumstances, it is not possible to sustain the addition made by the AO. The ground no. Printed from counselvise.com 5 ITA No. 3660/Mum/2025 Assessment Year 2012-2013 1 is allowed and the AO is directed to delete the addition of Rs. 438183/-. 7.3. The appeal of the appellant is allowed.” 6. Being aggrieved, the Revenue has preferred the present appeal before the Tribunal challenging the relief granting by the CIT(A) vide order, dated 04/03/2025. 7. The Learned Departmental Representative appearing before us placed on record reasons recorded for the reopening of assessment and submitted that the Assessee had failed to produce parties before the Assessing Officer and therefore, the Assessing Officer was justified in arriving at a conclusion that the Assessee had failed to establish genuineness of the purchase transactions. Referring to Paragraph 7.2. of the impugned Order, the Learned Departmental Representative submitted that the Ld. CIT(A) had failed to appreciate that the Assessing Officer had recorded detailed reasons for reopening assessment and place on record a copy of the said reasons recorded for reopening assessment. 8. Per contra, Learned Authorized Representative submitted that there was no infirmity in the order passed by the Ld. CIT(A). It was submitted that CIT(A) had correctly concluded that the Assessee had proceeded to make addition @ 10% of purchases on adhoc basis without rejecting the books of accounts. The Assessee had produced all the relevant documents and details to establish genuineness of the purchase transactions. Referring to Paragraph 3.3 of the Assessment Order, the Authorized Representative appearing for the Assessee submitted that the Assessing Officer had concluded that the purchases transactions under consideration were to be admitted. However, despite concluding as aforesaid, the Assessing Officer doubted the genuineness of the purchase transactions without providing any reasoning for the same. Printed from counselvise.com 6 ITA No. 3660/Mum/2025 Assessment Year 2012-2013 9. Having given thoughtful consideration to the rival submissions and on perusal of record, we find that the Assessee had discharge the primary onus by placing before the Assessing Officer the books of accounts and supporting documents in respect of aggregate purchases of INR.43,81,826/- made from the above said three parties. Without pointing out any infirmity in the documents furnished by the Assessee; or carrying out any inquiry, the Assessing Officer rejected the contention of the Assessee. The documentary evidence furnished by the Assessee were brushed aside even thought the parties from whom purchases were made had supported the Assessee by filing response to the notice issued by the Assessing Officer under Section 133(6) of the Act and had placed before the Assessing Officer the relevant ledger confirmation, Income Tax returns and bank statements. We also find merit in the contention advance on behalf of the Assessee that the Assessing Officer had made an adhoc disallowance of 10% of purchases. The Revenue has failed to bring any material on record, warranting interference of the order passed by the Ld. CIT(A). Therefore, given the aforesaid, we decline to interfere with the order passed by the Ld.CIT(A) deleting the addition of INR.4,38,183/- made by the Assessing Officer on account of alleged bogus purchases. Accordingly, Ground No.1 raised by the Revenue is rejected. 10. In result, the present appeal preferred by the Revenue is dismissed. Order pronounced on 29.09.2025. Sd/- Sd/- (Omkareshwar Chidara) Accountant Member (Rahul Chaudhary) Judicial Member मुंबई Mumbai; िदनांक Dated : 29.09.2025 Milan, LDC Printed from counselvise.com 7 ITA No. 3660/Mum/2025 Assessment Year 2012-2013 आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. आयकर आयुƅ/ The CIT 4. Ůधान आयकर आयुƅ / Pr.CIT 5. िवभागीय Ůितिनिध ,आयकर अपीलीय अिधकरण ,मुंबई / DR, ITAT, Mumbai 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, सȑािपत Ůित //True Copy// उप/सहायक पंजीकार /(Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai Printed from counselvise.com "