Addition on account of unproved purchases under the Income Tax Act

This case involves an appeal by a diamond trading company regarding an income tax addition made for the assessment year 2007-08. The Assessing Officer reopened the assessment based on information about suspicious dealers. The company failed to provide sufficient evidence for purchases made from a specific dealer, only offering stock registers and cheque payment details. Consequently, the officer added 8% of the unproved purchase value to the assessee's income, estimating suppressed profit. The appeal against this addition was dismissed by the CIT(A), leading to the current appeal.

IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH “SMC ”, MUMBAI
BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER

ITA NO.7747/MUM/2019(A.Y 2007-08)
M/s. Sun Moon Enterprises,
FC-8160A,FC-8161, FC-8162,
Bharat Diamond Bourse,
Bandra Kurla Complex, Bandra (E),
Mumbai 400 051
PAN:AACFS-2954-D

Appellant

Vs.
Asstt. Commissioner of Income Tax 19(3),
Income Tax Office, Matru Mandir,
Mumbai 400 007

Respondent

Appellant by : None

Respondent by : Shri Sanjay J. Sethi

Date of hearing : 02/06/2021

Date of pronouncement : 26/07/2021

ORDER

This appeal by the assessee is directed against the order Commissioner of Income Tax(Appeals)-3, Mumbai [in short 'the CIT(A)’] dated 30/09/2019 for the assessment year 2007-08.

2. The brief facts of the case as emanating from records are: The assessee is engaged in trading of diamonds. On the basis of information received from DGIT(Inv), Mumbai, the assessment in the case of assessee for assessment year 2007-08 was reopened.

3. During assessment proceedings the assessee failed to produce cogent evidence of delivery of goods purchased from suspicious dealer. Except from stock register and details of the cheque payments, no other documents were produced by the assessee. The Assessing Officer accepted the sales turnover declared by the assessee and made addition of Rs.7,68,485/- by estimating suppressed profit margin on unproved purchases at 8%. Aggrieved by the assessment order dated 23/03/2015 passed under section 143(3) r.w.s. 147 of the Income Tax Act,1961 ( in short 'the Act'), the assessee filed appeal before the CIT(A) inter-alia challenging reopening of assessment and estimated addition made on alleged bogus purchases. The CIT(A) dismissed the appeal of assessee and upheld the assessment order. Hence, the present appeal by the assessee.

4. During search operation a statement of Bhanwarlal Jain and his family members were recorded, wherein they admitted that the group concern were floated only for providing accommodation entries against commission. The ld. Departmental Representative asserted that the assessee has failed to discharge his onus in proving genuineness of purchases made from M/s. Little Diam, a concern belonging to Bhanwarlal Jain Group.

5. In the result, appeal by the assessee is partly allowed in the terms aforesaid.

Order pronounced in the open Court on Monday, the 26th day of July, 2021

Please find attached the enclosed file for the full judgement