ITO Vs Rajat Diamond Exim Private Limited (ITAT Mumbai)
Bogus Purchases Can’t Mean Bogus Sales Too: ITAT Mumbai Upholds 6% GP Estimation, Rejects s.68 Double Taxation in Diamond Trade
ITAT Mumbai (D Bench) in ITO vs Rajat Diamond Exim Pvt. Ltd. & cross-appeals (ITA Nos. 1458 to 1460/Mum/2025, 1478/Mum/2025 & 1527 to 1529/Mum/2025; AYs 2013-14 to 2016-17; order dated 23.12.2025) has dismissed both Revenue & Assessee appeals, affirming CIT(A)’s balanced approach of taxing only the profit element at 6% on alleged bogus purchases/sales.
The case arose from reassessments u/s 147 r.w.s. 144 based on Investigation Wing inputs in the Praveen Jain accommodation-entry group. AO alleged that purchases of rough diamonds were non-genuine. While in AY 2013-14 AO himself estimated 6% GP, in later years he disallowed entire purchases and also taxed corresponding sales u/s 68, leading to contradictory treatment.
CIT(A) recorded a clear finding that sales were duly recorded, credited to P&L, and formed part of declared turnover. Once sales are accepted, the same receipts cannot again be taxed as unexplained cash credits u/s 68 merely because suppliers did not respond to notices u/s 133(6). At the same time, since the Assessee failed to conclusively prove genuineness of purchases, estimation of profit embedded in accommodation bills was justified. Accordingly, CIT(A) applied a uniform GP rate of 6% on alleged non-genuine transactions and deleted excessive additions.
ITAT concurred, holding that:
