COMMON ORAL ORDER

(PER : HONOURABLE MR. JUSTICE NIRAL R. MEHTA)

[1] The present Tax Appeals under Section 260A of the Income Tax Act, 1961 (for short, “the Act”) are directed against the common order dated 28^th June 2022 passed by the Income Tax Appellate Tribunal, Surat in ITA No.917/AHD/2017 (for short, “the Tribunal”) for the Assessment Year 2008-09 and ITA No.761/SRT/ 2018 for the Assessment Year 2010-11 at the instance of the appellant - Revenue by raising the following substantial questions of law:

“1. Whether on the facts and circumstances of the case and in law, the Hon’ble ITAT has justified in restricting the addition made by the AO from Rs.14,39,42,707/- being 100% to 6% of the bogus purchase without appreciating the facts that the assessee had failed to prove the genuineness of the transaction made with the concerns which was identified as bogus entities completely run by Shri Bhanwarlal Jain.

2. Whether on the facts and circumstances of the case and in law, the Hon’ble ITAT has justified in restricting the addition from 100% to 6% made by the AO ignoring the fact that Shri Bhanwarlal Jain is engaged in the business of accommodation entries and hence AO was correct in concluding that the assessee was a beneficiary of the accommodation entry in guise of purchase.

3. Whether the facts and circumstances of the case in law, the Hon'ble Tribunal is right in giving decision by restricting the addition to 6% without considering the judgment of Gujarat High Court in the case of N.K. Industries Ltd. vs. DCIT in TA No. 240 to 242 of 2003 which has been upheld by the Hon'ble Apex Court in Special Leave to Appeal No. 769 of 2017 dated 16.01.2017, wherein the Hon'ble High Court decided that 100% of purchases from bogus parties was liable to be added in the hands of the Assessee, reversing the decision of Hon'ble ITAT to restrict the addition to 25%.

4. Whether on the facts and circumstances of the case in law, the Hon'bes ITAT has justified in restricting the addition to 6% without considering the judgment of Calcutta High Court of in the case of PCTT vs. Premlata Tekriwal (143 taxmann.com 173) involving similar use of purchase of bogus concern to suppress profits wherein the court held that "since it was established that expenditure was unexplained / bogus, entire amount of bogus expenditure was to be added to income of Assessee.

5. Whether on the facts and circumstances of the case in law, the Hon’ble Tribunal is right in deleting the addition made by the AO on account of bogus purchase even though in the case of Mayank Diamonds Pvt Ltd [2014(11) TMI 812], the Hon'ble High Court has directed to make addition at the rate of 5% of the total turnover.”

[2] The brief facts of the case can be stated as under:

[2.1] The assessee firm engaged in the business of import, processing, trading and export of diamond, had filed its return of income for the relevant assessment year on 24^th September 2008 and the regular assessment was completed on 22^nd December 2010 under Section 143(3) of the Act determining total income at Rs.2,42,77,633/-.

[2.2] Subsequently, certain information from the Investigation Wing, Mumbai was received and the case was re- opened under Section 147 of the Act and thus, the scrutiny assessment under Section 143(3) read with Section 147 of the Act was completed determining the total income at Rs.16,82,20,340/- on 21^st March 2016 by making addition of Rs.14,39,42,707/- on account of unverifiable purchase. The assessee has shown purchases of Rs.15,39,42,707/- taken from the following parties which are managed by Bhanwarlal Jain Group:

[2.3] On the basis of information available on about the accommodation entries provided by Bhanwarlal Jain Group, the Assessing Officer finally concluded after rejecting the book result of the assessee firm attracting the provisions of Section 145(3) of the Act and made addition of 100% of the alleged bogus purchases.

[2.4] Being aggrieved by the aforesaid, the assessee preferred appeal before the C