Case Law Details
DCIT Vs Asian Star Company Ltd (ITAT Mumbai)
ITAT Mumbai held that addition towards bogus purchases unsustainable if the alleged bogus purchases show gross profit higher than the regular gross profit.
Facts- This appeal is filed by The Deputy Commissioner Of Income Tax, Central Circle 2 (3, Mumbai (The Learned AO) against the appellate order dated 1/8/2022 passed by the Commissioner Of Income Tax (Appeals) – 48, Mumbai (The Learned CIT – A) wherein the addition made by the learned assessing officer of ₹ 116,624,231/– on account of accommodation entries and consequent commission of ₹ 8,315,211 was deleted.
Conclusion- Hon’ble Bombay High Court in case of Sundram gems Private Limited has categorically held that in case of Diamond trade, carrat wise stock maintenance would be the sufficient compliance; therefore, the assessee cannot be further burdened to show the colour and number of diamonds. When bills of purchases from other parties and from the same parties where part of the purchase consideration is accepted as genuine, no such details are available in the sale bill, we do not find any reason to deviate from the finding of the learned CIT – A.
We find that the learned CIT – A has correctly considered that the purchases from these parties is genuine when part of purchases from the same parties is not disputed, even otherwise, even if it is held that the purchases from these parties are bogus, then also, the proper course would be to determine the profit arising from the purchases by looking at corresponding sales and what amount of gross profit is earned on alleged bogus purchases. If the alleged bogus purchases show gross profit higher than the regular gross profit shown by the assessee, no further addition is required to be made in the hands of the assessee.
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