Sterling Jewels (P.) Ltd. v. ACIT

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The Tax Publishers2020 TaxPub(DT) 0185 (Mum-Trib)

INCOME TAX ACT, 1961

Section 69C

Various High Courts and Tribunals had considered identical issue in light of investigation carried out in case of Bhanwarlal Jain and held that in case of purchases claims to have been made from alleged hawala dealers, only profit element embedded in those purchases had to be taxed, but not total purchase from those parties. The profit element in diamond trading was around 2 to 3% depending upon nature of trade and thus CIT(A) had rightly scaled down addition made by the AO from 12.50% to 3% profit on alleged bogus purchases specially when assessee failed to file necessary evidences to rebut findings of CIT(A).

Income from undisclosed sources - Addition under section 69C - Bogus purchases - Estimation of profit on alleged purchases in case of assessee engaged in diamond trading

In case of assessee engaged in diamond trading, AO made additions under section 69C towards alleged bogus purchases @ 12.50% of such purchases, on the ground that assessee was one of the beneficiary of accommodation entries of bogus purchase bills isued by Bhanwarlal Jain Group through web of companies. CIT(A) restricted addition to 3% of alleged purchases. Assessee challenged this.Held: Various High Courts and Tribunals had considered identical issue in light of investigation carried out in case of Bhanwarlal Jain and held that in case of purchases claims to have been made from alleged hawala dealers, only profit element embedded in those purchases had to be taxed, but not total purchase from those parties. The profit element in diamond trading was around 2 to 3% depending upon nature of trade and thus CIT(A) had rightly scaled down addition made by the AO from 12.50% to 3% profit on alleged bogus purchases specially when assessee failed to file necessary evidences to rebut findings of CIT(A).

Supported by:Simith P. Sheth v. CIT (2013) 356 ITR 451 (Guj) : 2013 TaxPub(DT) 2115 (Guj-HC)

REFERRED :

FAVOUR : Partly in assessee's favour.

A.Y. : 2009-10 to 2013-14

IN THE ITAT, MUMBAI BENCH