Pinkal Dilip Bhansali Vs ITO (ITAT Mumbai)
Bogus Diamond Purchases Fully Disallowed: ITAT Mumbai Upholds 100% Addition u/s 69C Based on Jain–Choudhary Accommodation Entry Racket
ITAT Mumbai (C Bench) in Pinkal Dilip Bhansali vs ITO (ITA No. 1701/Mum/2025, AY 2011-12, order dated 23.12.2025) has dismissed the assessee’s appeal, upholding reopening u/s 148 and 100% disallowance of ₹2.24 crore u/s 69C towards alleged bogus diamond purchases from M/s Nazar Impex Pvt. Ltd., an entity found to be part of the Rajendra Jain / Sanjay Choudhary accommodation-entry group.
The reassessment was initiated on the basis of specific information from the Investigation Wing, pursuant to search & survey actions u/s 132/133A in the Jain–Choudhary group, wherein directors admitted on oath that their concerns were paper entities engaged only in issuing accommodation bills without any actual movement of diamonds.
The AO treated purchases of ₹2,24,75,072 as unexplained expenditure u/s 69C, rejected books u/s 145(3), and made 100% addition, which was confirmed by CIT(A).
Upholding the additions, ITAT held that:
- Supplier was conclusively proved to be a paper concern with no stock, no real business & only commission income
- Categorical statements u/s 132(4) of supplier’s director admitting “bill shopping” were supplied to the assessee
- Assessee did not seek cross-examination nor rebut the statements
- Mere production of purchase bills, bank payments & stock registers does not discharge the burden, when overwhelming search material proves sham transactions
- Banking channels are not conclusive, when surrounding circumstances & human probabilities indicate a façade
- Serious financial inconsistencies existed—abysmally low capital, delayed payments of crores, abnormal price variations per carat, and unexplained fund inflows
- Reliance placed on McDowell & Co. Ltd. and N.K. Proteins Ltd. (SC) — once purchases are bogus, entire amount is disallowable, not a percentage
On reopening, the Tribunal held that:
