Trustar Diamond Vs ACIT (ITAT Mumbai)
These cross-appeals were filed by the assessee, Trustar Diamond, and the Revenue against a common appellate order dated February 24, 2023, passed by the National Faceless Appeal Centre (NFAC), Delhi, for the Assessment Year (A.Y.) 2012-13. The appeals concerned an addition made on account of alleged bogus purchases.
Factual Background
The assessee, a partnership firm engaged in the business and export of diamonds, declared a total income of ₹70,23,920/- for A.Y. 2012-13.
The case originated from a search and survey action conducted on October 3, 2013, in the case of Bhanwarlal Jain. The Investigation Wing, Mumbai, found that various concerns were being managed, controlled, and operated by Bhanwarlal Jain & Family, using name-sake/dummy directors, partners, or proprietors who were merely employees or their wives. These dummy individuals, mostly from the native place of Bhanwarlal Jain in Rajasthan, admitted in their statements that they were acting at the direction of the Jain family.
Information received from the Directorate General of Income Tax (Inv.), Mumbai, indicated that the assessee had taken accommodation entries of purchases amounting to ₹6,62,48,443/- from eight entities belonging to the Bhanwarlal Jain group for A.Y. 2012-13.
Assessment and Appellate Proceedings
The case was reopened under Section 147 of the Income Tax Act. The Assessing Officer (AO), discussing the modus operandi of the Bhanwarlal Jain Group and the assessee’s alleged dealings with them, reproduced the statement of Bhanwarlal Jain which confessed to the use of these entities for bogus purchases. The AO disallowed the entire amount of purchases (₹6,62,48,443/-) and added it to the assessee’s income.
