The main legal point established in the judgment is the determination of a fair and reasonable percentage for the addition in respect of bogus purchases, based on previous judgments and legal provisions.

ORDER :

BHARGAV D. KARIA, J.

1. Heard learned advocate Mr.Rudram Trivedi for learned advocate Mrs.Kalpana K. Raval for the appellant.

2. This Tax Appeal is filed under Section 260A of the Income Tax Act, 1961 (for short ‘the Act’) raising following substantial questions of law arising out of the judgment and order dated 28.01.2022 passed by the Income Tax Appellate Tribunal, Surat (for short ‘the Tribunal’) in ITA No.284/SRT/2019 for the Assessment Year 2008-2009:-

“(i) “Whether on the facts and in the circumstances of the case and in law, the Ld. Tribunal was justified in estimating the addition in respect of bogus purchases @6% of such purchases as against disallowance made by the Assessing Officer @100% of such purchases amounting to Rs.3,40,03,788/- ignoring the fact that these purchases are sham transactions fabricated through bogus paper concerns of Pravin Kumar Jain Group companies which were engaged in providing accommodation entries?”

(ii) “Whether on the facts and in the circumstances of the case and in law, the Ld. Tribunal was justified in estimating the addition in respect of bogus purchases @ 6% of such purchases by relying on the decision of Hon’ble Gujarat High Court in the case of Mayank Diamonds Pvt. Ltd. (2014)(11) TMI 812 as against the direction of the Hon'ble High Court in that case to make addition @ 5% of the total turnover? ”

3. Brief facts of the case are that:

3.1 The respondent-assessee is engaged in the business of import, export and trading of diamonds. The return of income for Assessment Year 2008-09 was filed on 29.09.2008 declaring total income at Rs. 6,10,770/-.

3.2 On the basis of the information received from Director of Income Tax (Inv.)-II, Mumbai that during search proceedings in case of Pravin Kumar Jain Group it was found that the said group was engaged in the business of issuing non-genuine purchase bills, unsecured loans and accommodation entries to various parties and the assessee was found to have obtained non-genuine purchase bills from the said group amounting to Rs.3,40,03,788/-.

3.2 The case of the assessee was therefore reopened and the assessment proceedings under Section 143(3) read with section 147 of the Act was completed on 21.03.2016 determining total assessed income at Rs. 3,46,14,559/- after making addition of Rs. 3,40,03,788/- on account of bogus purchase bills.

3.3. Being aggrieved, the assessee preferred an appeal before the CIT (Appeals), Surat, who, vide order dated 14.03.2019, partly allowed the appeal of the assessee confirming the addition @ 5% of the unexplained purchases of Rs. 3,40,03,788/-.

3.5. Feeling aggrieved, the Revenue preferred an appeal before the Tribunal. The Tribunal, by the impugned order dated 28.01.2022, partly allowed the appeal of the Revenue and restricted the disallowance at 6% of the amount of the unexplained purchases.

4. At the outset, learned advocate Mr. Rudram Trivedi for the appellant-Revenue submitted that the Tribunal has relied upon the judgment of the Co-ordinate Bench of this Court (Coram: Hon’ble Mr.Justice N.V.Anjaria and Hon’ble Mr.Justice Niral R. Mehta) in case of Principal Commissioner of Income Tax Versus Pankaj K. Choudhary rendered in Tax Appeal No.617 of 2022 for partly allowing the appeal of the Revenue wherein it was held that in respect of bogus purchases, the addition at the rate of 6% of bogus purchases is fair and reasonable.

4.1. Learned advocate Mr. Rudram Trivedi submitted that this Court has dismissed the Tax Appeal No.617 of 2022 in case of Pankaj K. Choudhary (Supra) wherein, similar questions of law raised by the Revenue.

5. Considering the above submissions, the relevant extract from the order of the Tribunal is reproduced herein below:

“24. As the issue is squarely covered by judgment of the Co-ordinate Bench in the case of Pankaj K. Chaudhary (supra) wherein Tribunal held that in respect of bogus purchases, the addition @ 6% of bogus purchases is fair and reasonable. There is no change in facts and law and Ld. DR fo