ACIT Vs Parul Diamond (ITAT Mumbai)
Bogus Purchase Saga Ends With 6% GP — Once Sales Accepted, Only Profit Element Taxable -ITAT Mumbai Rejects 100% Disallowance
Revenue challenged restriction of addition to 6% of alleged bogus purchases of Rs. 6,66,602 from Mohit Enterprises, stated to be a Bhawarlal Jain accommodation entry concern, while Assessee (a diamond trader) filed CO seeking full deletion and attacking reopening u/s 148.
Assessee had filed purchase bills, sales register, stock book, bank statements, export realisation certificates, confirmation from supplier, and an affidavit of proprietor of Mohit Enterprises. AO however disallowed 100% purchases relying on Investigation Wing findings that the supplier was a shell entity of Jain group.
CIT(A) held purchases to be non-genuine but followed Sai Diamond (sister concern in same line of business) and restricted addition to 6% GP, as sales were accepted and no contrary material was brought by AO.
ITAT noted that—
- AO had issued s.133(6) notice & supplier confirmed purchases.
- When sales are accepted & basic evidences exist, entire disallowance is unjustified.
- Consistency with Sai Diamond warranted 6% addition only.
Accordingly, both Revenue’s appeal & Assessee’s cross-objection were dismissed, thereby sustaining GP addition of only Rs. 39,996 and rejecting plea for 100% disallowance as well as CO claims.
