HAZARI LAL KESARI CHAND,NEW DELHI vs. ACIT, CIRCLE-48(1), NEW DELHI

This appeal is filed by the assessee against the order dated 14.08.2019 of the ld. Commissioner of Income Tax (Appeals)-16 (hereinafter referred to CIT (Appeals) New Delhi, for assessment year 2007-08.

“1. That the order passed by the. Ld. CIT(A) is arbitrary whimsical, bad In nature and is liable to be quashed because of:

(a) The Ld. CIT(A) has erred in ignoring the vital fact of the case that Ld. AO has assumed jurisdiction for reopening of assessment and recording of reasons simply based on the information received from investigation wing and without his independent application of mind and without making proper enquiry before assuming jurisdiction.

(b) The reasons recorded for reopening of assessment has been solely on the basis of vague information received from the Investigation Wing i.e. nature of entry whether sales/ unsecured loans. The ld. CIT(A) while passing the order, has grossly erred in ignoring this fact, as well the fact that the AO has acted mechanically & blindly on the report of the Investigation Wing.

2. That the Ld. CIT(A) has erred in confirming the addition of Rs.62,12,124/- ignoring the following vital facts/ submissions of the case those were submitted/produced before ld. AO & also to her during the course of hearing:

(a) That the assessee has submitted all the documents VIZ. Copy of Purchase bills, affidavits of the sellers, payment through account payee cheques, with bank statement showing payment made, stock records of the purchases / sale of the goods proving the genuineness of purchases made by the assessee and the Ld. CIT(A) without controverting any of these documents/affidavit, upheld the addition so made.

(b) That the ld. CIT(A) failed to appreciate the fact that while framing the assessment by the ld. AO, the ld. AO had issued notices to these suppliers u/s 133(6) of the Act. The ld. AO had also received the replies thereof, but while framing the assessment, the ld. AO ignored the results of these enquiries, the CIT(A) also failed to take a note thereof. She completely ignored the fact.

(c) That the ld. CIT(A) has relied the statement of the supplier given by him at the time of search at his premises, and she has dismissed the appeal & the submissions made before her, hugely relying upon this statement, but this statement retracted by him subsequently, stating that the statement earlier was & given because of the Coercions pressures by search team, & the circumstances under which the statement was given by him, but the ld. CIT(A) did not considered the facts & upheld the addition.

(d) The ld. CIT(A) has also erred in upholding the addition, in spite of the fact that having regards the documents,. it has been mentioned that addition based on the statement of the party, no addition could have been made, had he proved that while recording statement at the time of search, if it is proved that there was coercions & pressure on him, the statement of retraction shows that there have been coercions & pressures on him, but inspite of the fact, the additions were confirmed.

(e) That inspite of the request from the appellant before the Ld.AO and Ld. CIT(A), the opportunity of cross examination of the person, whose statement was relied for making additions, was not provided thereby denying the natural justice to the appellant.

“In the instant case, it is an undisputed fact that information was received by the AO, from Investigation Wing of the Department that the assessee was a beneficiary of sale/purchase accommodation entry from Shri Rajendra lain and his associates who are entry providers. During the course of search operation carried out on 03.10.2013 by Investigation Wing Mumbai, Shri Rajendra Jain, admitted during the course of a statement recorded on oath that all the concerns controlled and managed by him and his associates are not doing any real trading but indulged in paper transactions only. The AO ascertained that during the relevant assessment year, the assessee was a beneficiary of purchase accommodation entries of Rs 27,62,913/- from M/s Vitrag Jewellers, Rs 3,37,750/- from M/s Moulimani Impex (P) Ltd and Rs 31,11,461/- from Avi Exports (aggregating to Rs 62,12,124/-) by way of purchase of diamonds. The AO also ascertained that no scrutiny had been made in this case. On the basis of the information so received and after ascertaining the extent of purchase made from front companies of Rajendra Jain group, the AO formed a prima facie belief that income to that extent had escaped assessment. The AO accordingly, initiated re-assessment proceedings. The AO recorded reasons for reopening the assessment, and after seeking and being accorded approval by the competent authority, issued and served notice u/s 148 of the Income Tax Act. It is, thus clear that there was failure on the part of the assessee to disclose fully and truly all material facts. On the basis of cogent and tangible information received and after ascertaining the fact that no scrutiny assessment had been made and the fact that the purchases had been made from the dummy companies of Rajendra Jam group who during the course of a search unequivocally admitted that he was an entry provider, the AO formed a prima facie belief that income to the extent Of Rs 62,12,124/- had escaped income. He, therefore, rightly re-opened the case of the assessee for A.Y 2007-08.; In doing so he adhered to the “provisions of the Act and principles enunciated by the various Courts of the land Here, it is pertinent also to refer to Explanation 2 of Section 147 which deems that the following shall also be deemed to be cases where income has escaped assessment as in the case of the assessee. Explanation 2 reads as under:

For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :

{a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ;

(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ;

(c) where an assessment has been made, but— (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed;] From a perusal of Explantion2, it is clear that the case of the appellant falls within the ambit of the provisions of clause (b) of Explanation 2 to section 147 which clearly mandates that where no scrutiny assessment has been made and it is noted by the assessing officer that assessee has understated his income, will be a case of’ escapement of income'.

Here, I would like to draw strength from the order of the Hon'ble Delhi High Court in the case of Indu Lata Ranqwala Vs DCIT 384 ITR 337 (Delhi) wherein the court held that where the initial return is processed u/s 143(1), there is no necessity of even fresh tangible material. The Court held as under: where initial return of income is processed under section 143(1), it is not necessary in such a case for Assessing Officer to come across some fresh tangible material to form 'reasons to believe' that income has escaped assessment It has been similarly held by Gujrat High Court in the case of CIT Vs Kiranbhai Jamnadas Sheth (HUF) [2013] 39 taxmann.com 116 (Gujarat) where Hon'ble Gujarat High Court held that:

Assessment without scrutiny would mandate reassessment beyond 4 years even if assessee made true disclosure In the light of the clear enunciation of principles that no tangible material is required for re-opening case if the case has been processed under sectio- 143(1) but no scrutiny assessment has been made, the claim of the appellant in this regard is rejected as having no legal locus standi. That is not to say that there was no targible information-. There was definite and tangible information which was the basis of the re-opening.

My adjudication would be incomplete, if I did not refer to judgments on the concept of full and true disclosure.

New Delhi Television Ltd. Vs DCIT [2017] 84 taxmann.com 136 (Delhi) where Hon'ble Delhi High Court held that: proceedings under section 147, beyond a period of 4 years can only be initiated if the Assessing Officer has reason to believe that there has been escapement of income and this escapement is owing to the lack of true and fair disclosure by the assessee. In this regard, it is essential to understand the meaning of the phrase 'true and fair disclosure'. The Court has'Considered the meaning of this phrase in Honda Siel Power Products Ltd. v. Dy. CIT [2012] 340 ITR 53/[2011] 197 Taxman 415/10 taxmann.com 2 (Delhi) where the Court held that that the term 'failure' on the part of the assessee is not restricted to the return and the columns of the return or the tax audit report. [Para 42].

It is also pertinent to observe that reopening based on information received from the Investigation wing is a valid basis for initiating proceedings u/s 147 of the Income Tax Act. It is further observed that the Investigation wing is an indispensable arm of the Income Tax department. Information was received, consequent upon a search in the case of entry providers, Rajinder Jain group, that the aforementioned entry provider and his cohorts were operating several dummy companies which provided bogus purchase/sale bills through companies like M/s Avi Exports, Vitrag Jewels, M/s Moulimani Impex (P) Ltd. The AO examined the available records and1 ascertained that the appellant firm had made purchase of Rs 62,12,124/- from the aforementioned companies during the year under consideration. The AO also ascertained that the no scrutiny assessment had been made in this case. The AO on the basis of information received from the Investigation wing (consequent upon search) and after independently ascertaining that the appellant had indeed made purchases from the entry providers and that no scrutiny assessment had been completed, formed a prima facie belief that income to the extent of Rs 62,12,124/- had escaped assessment. The AO did not fall into any error in thus re-opening the case as the Apex Court has clearly held that information consequent upon search is 'fresh' material for purposes of re-opening.

Here, it would be appropriate to examine the stance of the Apex Court on this issue.

In the case of Yogendra kumar Gupta Vs ITO (51 taxmann.com 383) (SC)/[2014] 2.27 Taxman 374 (SC), the Hon'ble Supreme Court held that: where subsequent to completion of original assessment, Assessing Officer, or basis of search carried out in case of another person, came to know that loan transactions of assessee with a finance company were bogus as said company was engaged in providing accommodation entries, it being a fresh information, he was justified in initiating reassessment proceeding in case of assessee.

The Hon'ble Gujrat High Court similarly held in the case Ankit Financial Services Ltd. Vs DCIT [2017] 78 taxmann.com 58 (Gujarat) that: where material recovered in search of another person indicated that assessee had received bogus share applications through accommodation entries, since assessee was beneficiary, initiation of re-opening was justified.

In the case of PCIT Vs Paramount Communication (P.) Ltd. (2017- TIOL- 253-SC-IT) the Hon'ble Supreme Court dismissed SLP of assessee and held that:

Information regarding bogus purchase by assessee received by DRI from CCE which was passed on to revenue authorities was 'tangible material outside record' to initiate valid reassessment proceedings.

In the light of the detailed discussion on facts in the foregoing para as well as on the basis of the principles enunciated by the Hon'ble Apex Court, it is clear that re-opening is justified if based on information received from the Investigation Wing, especially regarding receipt of accommodation entries consequent upon search proceedings.

It is also noted that as per requirement of law, the reasons recorded were communicated to the appellant as is clearly recorded by the AO in the assessment order.

Without prejudice to my adjudication above, it is also expedient to mention that the provisions of section 148 do not require the AO to arrive at a conclusive finding about the escapement of income. At the stage of reopening, the Assessing Officer is only required to form a prima facie belief or opinion that income chargeable to tax has escaped assessment. Sufficiency and correctness of material on the basis of which a case is reopened by the department is not to be considered at the stage of commencement of reassessment proceedings.

Here I would like to draw strength from the principles enunciated by the Hon'ble Supreme Court in the case of Raymond Woollen Mills Ltd. v. ITO And Others [236 ITR 34] where Hon'ble Supreme Court held that in determining whether commencement of reassessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage Similarly, jurisdictional High court in the case of CIT Vs. Nova Promoters & Finalise Private Ltd [ITA No. 342 of 2011] dated 15-02- 2012, held that as long as there is a 'live link' between the document/information which was placed before the Assessing Officer at the time when reasons for reopening were recorded, proceedings u/s 147 would be valid. The Court also held-

We are aware of the legal position that at the stage of issuing the notice u/s148 the merits of the matter are not relevant and the Assessing Officer at that stage is required to form only a prima facie belief or opinion that income chargeable to tax has escaped assessment"

ITAT, New Delhi also held that sufficiency of information cannot be gone into while deciding the issue of validity of reopening. In the case of Jyoti Goya! vs ITO(ITA No. 1259/Del/2010), the Hon'ble ITAT Delhi held that:-

As regards the other contentions of the assessee that the reopening was done in a mechanical manner without application of mind, we find there is nothing on record to support such a contention. There is a live link between the information which was available with the Assessing Officer and his formation of belief that income has escaped assessment. Sufficiency of such information cannot be gone into while deciding the issue of validity of reopening. The Assessing Officer can also not make enquiries as no proceedings were pending before him for the relevant assessment year. In the above view of the matter, We are in agreement with finding of the Ld. CIT(A) that the reopening of assessment u/s 147 of the Act, was valid.

In the light of the .above detailed discussion I have no hesitation in holding that that there is no infirmity in the reopening of the case by the AO on any count whatsoever and the claim of the appellant that the assessment was bad in law as there was no adherence with the provisions of Section 147 has no locus standi and is rejected.”

The Ld.CIT(A) observed that the Ld. A.O. has given finding after examination of evidence on record and also found that the Ld. A.O. was not convince about credibility and authenticity of the evidences filed by the assessee during the course of the assessment proceedings hence did not consider them credible enough for the purpose of controverting the evidences marshaled by the Investigating Wing.

“It is a fact that a search was conducted at the premises of Rajinder Jain, an accommodation entry provider. It is also a fact that during the course of a statement recorded u/ s 132(4) of the Income Tax Act, at the searched premises, Rajinder Jain admitted that he was not conducting any business activity but was in fact providing bogus purchase/sale bills to interested parties. During the course of the search, he gave a detailed submission in this regard and listed out the dummy companies through which he was providing sale/purchase accommodation entries. The modus operandi charted by Rajinder Jain was recorded in the statement recorded during the course of the search. During the course of statement recorded, Rajinder Jain unequivocally admitted that the following concerns which were used to provide purchase accommodation entries without actual physical delivery:

• Kriya impex (P) Ltd • Sparsh Exports (P) Ltd. • Karnawat Impex (P) Ltd • Moulimani Impex(P) Ltd. • Vitrag Jewels The relevant extract of the statement is reproduced as under: "Ques.12. It has come to the notice that your employees are also running their independent proprietorship concerns of their own. Do you know? If yes, please explain as to how they do justice with the roles and responsibilities assigned to them by you.

Ans. Sir, in fact, the proprietary concerns in the names of our employees are not independent business activity of their own. When I was working for Sh. Ratanlal Jain, besides other concerns, he had been also operating through M/s Minar Gems, a proprietary concern in my name. So, after quitting the job, I took the idea of operating through various concerns including several proprietorship concerns in the names of our employees. In such a case, the effective control of business remains with us and the business income of such proprietorship concern get adjusted against the overall salary payable to such employee on annual basis.

Ques.13. Please furnish details of all the business concerns which are directly or indirectly controlled by you along with Sh. Surendra Jain.

Ans. Sir, we are operating through a no. of business concerns of all the three nature i.e. proprietorship firm, partnership firm as well as companies in the name of various persons including our employees. But for all practical purposes, myself and Sh. Surendra Jain are handling the entire business network on profit sharing basis. The name wise detailof all business concernsof ours is as follows:- Proorietorshio firm Name of Proprietor AVI Exports Rajendra S Jain (myself) a. Kalash Enterprises Manish Jain b. Aadi Imp Anoop Jain c. Arihant Exports Sachin Pareek d. Vitrag Jewels Mudit Karnawat (Ex-employee) e. Super Jewels Ashok Jain (Ex-employee) f.

Partnership firm Name of Partners a. Sun Diam Rajendera S. Jain(myself) & Manish Jain Companies Kriya Impex Pvt. Ltd Rajendra S Jain (myself) &Manish Jain a. Spars Exports Pvt. Ltd Rajendra S Jain (myself) &Surendra Jain b. Karnavat Impex Pvt. Ltd. Sachin Pareek and Manish Jain c. Moulimami Pvt. Ltd. Rajendra S Jain (myself) &Sachin Pareek d.

Q14. During the survey action undertaken at various office premises of yours; not a single piece of diamond has been found by respective survey teams though there is substantial turnover shown by various concern controlled by you. Please state as to where do you keep your stock in trade.

Ans. Sir, in this regard I want to admit that we are engaged in business of bills shopping through all the concerns as named by me in response to your question no. 13 due to which we don't have any physical stock of diamond with us at any of our place at any point of time. I would like to further add that we are merely lending names .of. our various concerns to the real importers of diamonds who takes the actual delivery of diamond."

Ques. 15. Please explain the modus of your business operations.

Ans. Sir, for the sake of clarity, will explain the modus by furnishing a pictorial diagram which itself will be self-explanatory.

A scanned copy of the hart reflecting the modus operandi, the names of the front companies (Including Avi Exports, Vitrag Jewels and Moulimani Implex (P) Ltd. is reproduced as under:

From the above statement and unequivocal admission of Rajendra Jain, there is not an iota of doubt that Rajinder Jain and his associates are in the business ef providing of bogus purchase/sale invoices of diamonds to interested parties. The statement is a clear admission of the modus operandi of these entry providers. A very important part of this infamous accommodation entry scam are not only the entry providers but also the beneficiaries like the appellant concern who evaded the long arm of the enforcement agencies by obtaining bogus invoices of sales/purchase of diamonds/precious stones. The AO ascertained that the appellant concern had shown a purchase of the diamonds of Rs 27,62,913/- from N/s Vitrag Jewellers, Rs 3,37,750/- from M/s Moulimani Impex (P) Ltd and Rs 31,11,461/- from Avi exports (aggregating to Rs 62,12,124/-)

A perusal of the assessment order shows that the AO has marshalled and relied on the following evidences to arrive at a conclusion regarding the culpability of the appellant:

> Statement of admission by Sh. Rajendra Jain wherein he has admitted that he along with his associates was using bogus companies to provide purchase/sale accommodation entries to parties seeking the same.

> Post-search inquiries were made and it was ascertained that the appellant was one of the beneficiaries and had received bogus purchase bills of Rs 27,62,913/- from M/s Vitrag Jewellers, Rs 3,37,750 from M/s Moulimani Impex (P) Ltd and Rs 31,11,461/- from Avi exports aggregating to Rs 62,12,124/-)

> Search 81 seizure proceedings showed that there was no stock on any of the premises searched of the front companies of Rajinder Jain and his associates including M/s Avi exports, M/s Vitrag Jewels and Molumani impex (P) Ltd. After considering the facts of the case and evidences marshalled against the appellant, the AO gave an unequivocal finding that the appellant was indeed guilty of obtaining bogus accommodation entries from the parties mentioned supra. The finding of the AO is relevant here:

After considering the submissions made by the assessee and facts of the case and further keeping in view the findings of the Investigation Wing, it is evident that the assessee has taken accommodation entry by providing cash which has not been shown in the books of accounts of the assessment for that assessment year i.e 2007-08. On account of failure on part of the assessee, income for the A.Y. 2007-08 to the extent of Rs. 59,60,461/- has escaped assessment within the meaning of section 147 of the I.T. Act, 1961. Penalty proceedings u/s 271(l)(c) has been initiated separately for concealing the true and correct facts of the income.

With these remarks, the total income of the assessee is computed as Under:

Income as per return filed by the assessee : Rs. 25,82,990/- Add: addition as discussed in Para 2 : Rs. 62,12,142/- It is observed that purported sellers, Moulimani Impex (P) Ltd, Vitrag Jewels and Avi exports, are shell companies run by the infamous accommodation entry with these remars, the total income of the assessee is computed as under:-

Income as per return filed by the assessee : Rs. 25,82,990/- Add: addition as discussed in Para 2 : Rs. 62,12,142/- Thus , the contention of the appellant that he had produced the purchase bills of the sellers, Vitrag Jewels, Moulimani impex (P) Ltd and Avi Exports, and that the transaction was through banking channels has no locus standi in the light of the evidences marshaled by the AO, the statement of Rajinder Jain and the modus operandi followed by the accommodation entry operators as admitted in the statements and reproduced supra.

Before me, the AR of the appellant insisted that the transactions were genuine and were reflected in the stock register. I will first address the claim of the appellant that the purchases were reflected in the purchase invoices of the appellant. The photocopy of the purchase invoices were examined. This document does not give the specifics of the diamonds purchased except for quantity in carat. Specifics such as size (cents), cut (Hearts & arrows, princess, cushion, marquise, emerald etc), colour (Diamonds graded D, E, and F are colorless while Diamonds graded G, H, and I are considered near-colorless) and purity (FL, IF, VS, VVS, SI etc))which are the basis of the price of the diamond are not mentioned anywhere in the invoices. This is clear from a perusal of the invoices from Vitrag Jewels, Avi Exports and Moulimani Impex (P) Ltd which are reproduced as under: provider Rajinder Jain who admitted that he was not engaged in any business activity but was simply an accommodation entry provider. In the light of such an admission, clearly all other evidences produced are in the nature of self-serving evidences that are clearly trumped up documents to give a semblance of authenticity of the transaction. The AR has relied on various judgements. As the facts are distinct and separate in each case, the principles of one case cannot be applied blindly to another case. In Union of India v. Major Bahadur Singh (2006) 1 SCC 368 (para 9 & 11) Supreme Court held that the observations made in a judgment must be read in the context in which they appear to have been stated. Their lordships of the Supreme Court further held that circumstantial flexibility, one additional or different fact, may make a world of difference between conclusions in two cases. Disposal of case by blindly placing reliance on a decision was held to be not proper. Against this prelude, I hold that the facts of the cases relied upon and principles enunciated therein are different from the facts of the instant case and hence the appellant's plea that this judgement is applicable to the appellant also has no locus standi.

It is also observed that the basic flaw in such an argument is that the accommodation entry scam is built on an edifice which is put together with the help of trumped up documents to give it a semblance of credibility so that it can escape the eagle eye of the enforcement agencies. Availability of such documents is a pre- requisite for accommodation entry scamsters. This is a case where the assessee has used a sophisticated 'colorable device' in collusion with the accommodation entry operator to circumvent law and escape the keen eye of enforcement agencies by obtaining bogus accommodation entry purchase bills. To give them a color of credibility, the payment on account of such purchases is moved through banking channels and cash is moved to square off the transaction. The case of the Revenue is not that no documents to substantiate the claim of purchase were filed but that the laundering of black money entailed creation of false documents to authenticate an accommodation entry. The appellant insistence that the transactions are supported by the documents such as sale and purchase invoices, bank statements etc, cannot be accepted in view of the fact and circumstances of the case brought on record by the AO after proper examination of the material facts and after taking into account the admission of the entry operators who have admitted that they were not doing genuine business but were only providing entries to interested parties. The fact that no stock was found at any of the searched premises of the companies run by accommodation entry operators is the final nail in the coffin. Here the observation of the AO is pertinent and is reproduced as under:

After considering the submissions made by the assessee and facts of the case and further keeping in view the findings of the Investigation Wing, it is evident that the assessee has taken accommodation entry by providing cash which has not been shown in the books of accounts of the assessment for that assessment year i.e 2007-08. On account of failure on part of the assessee, income for the A.Y. 2007-08 to the extent of Rs. 59,60,461/- has escaped assessment within the meaning of section 147 of the I.T. Act, 1961. Penalty proceedings u/s 271(l)(c) has been initiated separately for concealing the true and correct facts of the income.

No stock register is maintained by the appellant. The photocopy of the purchase ledger was produced and examined. This document does not give the specifics of the diamonds purchased either except for quantity in carat. Specifics such as size (cents), cut (Hearts & arrows, princess, cushion, marquise, emerald etc), colour (Diamonds graded D, E, and F are colorless while Diamonds graded G, H, and I are considered near-colorless) and purity (FL, IF, VS, VVS, SI etc))which are the basis of the price of the diamond are not mentioned anywhere in the stock summary or items register. This is clear from a perusal of a copy of the purchase ledger showing purported purchase from Vitrag Jewels, Avi Exports and Moulimani Impex (P) Ltd. A sample extract is reproduced as under to authenticate my observation:

The AR did not produce details of subsequent sales made.

From the detailed discussion above it is evident that the appellant was unable to establish the authenticity and genuineness of purchases made from M/s Avi Exports, Moulimani Impex (P)m Ltd or M./s Vitrag Jewels. The appellant was unable to controvert the admission of Rajendra Jain, made during the course of search wherein he admitted that he was engaged in the providing accommodation entries to interested parties through a network of concerns, including Vitrag Jewels, Moulimani impex (P) Ltd and Avi Exports. The affidavit retracting this admission subsequently has no evidentiary value as discussed at length in subsequent paras. The claim that the purchases were reflected in the purchase ledger was not established as discussed at length in the earlier part of my discussion. Also, the claim that the purchases were subsequently sold to parties could not be proved as discussed ad nauseum above. I therefore, categorically uphold the addition made by the AO in this regard.

Before I conclude, I need to address the claim of the appellant that as the statement of admission of Rajinder Jain has been retracted, the addition made based on such a statement cannot survive. Here, I would like to pause and examine the evidentiary value of a statement even if it has been retracted. There have been a slew of judgements by the Apex Court as well as the jurisdictional High Court that have clearly held that a statement recorded (even if subsequently retracted) has strong evidentiary value. I will draw strength from a few such judgements and also stress the fact that for any retraction to be valid, the person making the retraction has to prove coercion and pressure. This is not true in the case of Rajendra Jain.

Kishore Kumar Vs CIT (62 taxmann.com 215. 234 Taxman 773H where Hon'ble Supreme Court dismissed SLP against High Court's order where: it was held that since assessee himself had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents.

Bhaairath Aggarwal Vs CIT (351 ITR 143) where Hon'ble Delhi High Court held that: an addition in assessee's income relying on statements recorded during search operations cannot be deleted without proving statements to be incorrect.

Smt Dayawanti Vs CIT 390 ITR 496 (Delhi) where Hon'ble Delhi High Court held that; where inferences drawn in respect of undeclared income of assessee were premised on materials found as well as statements recorded by assessee's son in course of search operations and assessee had not been able to show as to how estimation made by Assessing Officer was arbitrary or unreasonable, additions so made by Assessing Officer by rejecting books of account was justified Greenview Restaurant Vs ACIT 185 CTR 651 (Gauhati) wherein the Hon'ble Court held that:

From facts, it was dear that there was a delay on the part of the appellant and its partner in retracting the statements recorded. The attention of the Court had also not been drawn to any material on record to establish that any made on behalf of the appellant to prove the allegation of induceme coercion through the witnesses. Having examined the impugned order by the Tribunal with the reasonings in support of its finding against th of threat, inducement or coercion, no good and sufficient reason w< differ from it. In the facts and circumstances of the case, having ret materials on record, the appellant had failed to establish that the sta its partner had been recorded in the course of the search by usint threat or inducement. Hence, the contentions advanced by the appeih regard were dismissed and the conclusion of the Tribunal on that i affirmed.

[Para 9] From an examination of the principles enunciated above, it is cleat statement recorded on oath has evidentiary value and can be relied i completing assessment. A retracted statement can be said to have no va if the person so retracting it proves it to be incorrect or establishes the f it has been recorded under coercion and pressure.

Since this has not bee, it Is clear that retraction is in the nature of a self-serving document ti been used as a tool to bail out Rajendra Jain, as well as the beneficiaries accommodation entry scam. I hold, that in the absence of any proof to es that the statement was recorded under coercion and pressure or was inci the original statement of admission has a very strong evidentiary valued at AO has rightly relied upon the statement to hold the purchase from Avi ltd is a purchase accommodation entry. I uphold this finding of the P discussed at length in foregoing paras.

The appellant has also claimed that the order is bad in law as no cross examination was not allowed. Here I would like to rely upon the following judgments wherein it has been held that a formal cross examination is mandatory if a reasonable opportunity has been allowed to the assessee:

Nokia India (P) ltd vs DDIT 59 taxmann.com 212 Hon'ble ITAT, New Delhi has relied upon the decision of Hon'ble Calcutta High Court in the case Kisanlal Aggarwaila v Collector of Land Customs AIR 1967 & Cal where court held that:

No natural justice requires that there should a kind of formal cross examination Formal cross examination is procedural justice So long as the party has a fair a: reasonable opportunity to see, comment and criticize the evidence, statement or record on which the charge is being made against him the demands and the test of natural justice are satisfied. Cross examination in that sense is not the technical cross examination in a court of law in the witness box.

CIT vs Kuwer Fibres (P.) Ltd 77 taxmann.com 345 (Del). The jurisdictional High Court held as under:

As far as the question relating to cross examination is concerned, the court notices that though the documents were furnished to the assessee, it had not sought opportunity of cross-examination: this was made at the fag end... the court finds no justification to reject the statements which merely explain the documents seized; the assessee could well have given a full explanation instead of seeking rejection of documents.

GTC Inds Ltd Vs ACIT 65 ITD 380 (Bom). The ITAT Mumbai has held that:

The principles of natural justice do not require formal cross-examination. FormaI cross-examination is a part of procedural justice. It is governed by the rules of evidence, and is the creation of court. It is a part of legal and statutory justice and not a part of natural justice., therefore, it cannot be laid down as a general proposition of law that the revenue could not rely on any evidence which has not been subjected to cross examination.

Before I conclude, I think it expedient to observe that there is no presumption in law to discharge an impossible burden to assess the tax liabilities by direct evidence only and to establish the evasion beyond doubt as in criminal proceedings. In making such an observation I draw strength from a similar enunciation by the Apex Court in the case of Dhakeshwari Cotton Mills Ltd Vs CIT 26 ITR 777 and SS Gadgil V Lai & Co 53 ITR 231 as well as the observation of the jurisdictional High Court in the case of CIT Vs Jay Engg Works Ltd 113 ITR 389.

Reference may also be made to the case of Jankinath Sarangj v. State of Orissa, wherein Hidayatullah. C.J., observed: there is no doubt that if the principles of natural justice are violated and there is a gross case this Court would interfere by striking down the order of dismissal; but there are cases and cases. We have to look to what actual prejudice has been caused to a person by the supposed denial to him of a particular right. Judged by this principle, in the background of the facts and circumstances mentioned before. I am of the opinion that there has been no real prejudice caused bv infraction of any particular rule of natural justice of which appellant complained in this case.

Also, In the case of Union of India & Anr. vs. P.K. Rov & Othrs it was held that: the doctrine of natural justice cannot be imprisoned within the strait-jacket of a rigid formula and its application depends upon the nature of the jurisdiction conferred on the administrative authority, upon the character of the rights of the persons affected, the scheme and policy of the statute and other relevant circumstances disclosed in a particular case.

The reference to the above judgements and principles enunciated therein clearly reflects the stance of the Courts towards cross- examination. Although, cross examination is important, formal cross- examination is not mandatory especially if adequate opportunity to rebut the case has been allowed to the assessee. In the instant case, all evidences/information used against the assessee and available with AO was confronted to the assessee.

Several opportunities were accorded in the interest of justice and the uaim that the addition was illegal or void as no cross examination was allowed has no locus standi. The Apex Court in the case of Pirai Choori (334 ITR,262 SC) has held that an addition cannot be deleted by the Tribunal just because cross- examination has not been made. As adequate opportunity was accorded to assessee concern, no grievance has been caused to the appellant. I, therefore, hold that there is no violation of natural justice as the addition has been made after due opportunity was accorded to appellant.

In the light of the detailed discussion in the foregoing paras, it is clear that the appellant concern was a beneficiary of the accommodation entry scam wherein it obtained bogus purchase bills from entry providers Rajendra Jain. The appellant is attempting to circumvent its culpability by taking refuge in issues like cross- examination, re-opening, retraction of statement etc. However, I have no hesitation in upholding the finding of the AO that the purchases of diamonds were in the nature of bogus purchases. The fact that the purchases have been treated as undisclosed income in the hands of the appellant concern is also guided by the following principles enunciated by the Apex Court and jurisdictional High Court:

> N K Proteins Ltd Vs CIT (2017-TIOL-23-SC-IT) where Hon'ble Supreme Court held that entire undisclosed income generated out of bogus transactions, deserves to be added to total income upholding the judgement of Gujrat High Court in N K Proteins Ltd Vs CIT (2016-TIOL- 3165-HC-AHM-IT) where Hon'ble Gujarat High Court held that addition on basis of undisclosed income cannot be restricted to a certain percentage, when the entire transaction was found as bogus.

> CIT Vs Arun Malhotra 363 ITR 195 where Hon'ble Delhi High Court held that where Assessing Officer having found that transaction of purchase and sale were bogus, made addition under section 69A, Tribunal was not justified in deleting addition without going into evidence on record.

Before I sign off, it is extremely important to look at the surrounding circumstances of the case. This observation is without prejudice to my adjudication in the foregoing paras. I am addressing this issue as the appellant has submitted before me time and again that evidences such as confirmations, PANs, bank statements etc were ignored by the AO when making the addition. On a note of resigned acceptance, I perforce have to observe that our country has become a hornet's nest of innumerable financial scams which emanate from the desire of a majority of the citizens of the country to evade tax. So, we have had a slew of scams- the Harshad Mehta Scam, the Jignesh Scam, the co- location scam, the Nirav Modi scam and a host of other scams that I will not waste time enumerating. Suffice it to say that scams have become an indispensable part of the financial eco system. Every year we see the emergence of a new set of colourable devises that are more sophisticated than the old ones and require a lot of hard work to unravel by enforcement agencies. Unfortunately, this has in no way reduced the appetite of the tax evader and his facilitators to find such colourable devices. The case of the appellant falls within the ambit of what has been loosely dubbed as the accommodation entry scam. Findings of the investigation agencies have pierced the veil of this scam and established beyond doubt the modus operandi used in this device. To add to the facts detailed above and marshalling of evidence against the appellant, it wou c be pertinent to refer to the case of Durga Prasad More (82 ITR 540), where the Apex Court has held that in certain cases apparent may not be real and that surrounding circumstances to find out reality of recitals made in documents is to be examined:

Now we shall proceed to examine the validity of those grounds that appealed to the learned judges. It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tak. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents.

It would also be appropriate to refer to the order of the Supreme Court in the case of McDowell & Co (154 ITR 148) wherein the Apex court has held as under:

The proper way to construe a taxing statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally or liberally, nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it.

It is neither fair nor desirable to expect the legislature to intervene and take care of every device and scheme to avoid taxation. It is upto the Court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of 'emerging' techniques of interpretation, to expose the devices for what they really are and to refuse to give Judicial benediction.